| ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership Altegris QIM Futures Fund, L.P. (the “Partnership”)
was organized as a Delaware limited partnership in June 2009. The Partnership's general partner is Altegris Advisors, L.L.C. (the
“General Partner”). The General Partner has overall responsibility for the management, operation and administration
of the Partnership, including the selection of its commodity trading adviser. The Partnership’s trading activities are conducted
pursuant to an advisory contract with Quantitative Investment Management LLC (the “Advisor”). The Partnership speculatively
trades commodity futures contracts, and may trade options on futures contracts, forward currency contracts and other commodity
interests. The objective of the Partnership’s business is appreciation of its assets. It is subject to the regulations of
the Commodity Futures Trading Commission (the “CFTC”), an agency of the United States (“U.S.”) government
that regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory
organization; and the requirements of commodity exchanges and futures commission merchants (brokers) through which the Partnership
trades. The General Partner is registered with the
U.S. Securities and Exchange Commission under the U.S. Investment Advisers Act of 1940, as amended, as an investment adviser and
is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator, and is a member
of the National Futures Association, an industry self-regulatory organization.
B. Method of Reporting The Partnership’s financial statements
are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Therefore, the Partnership
follows the accounting and reporting guidelines for investment companies. The preparation of the financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported fair value of assets and liabilities,
disclosures of contingent assets and liabilities as of September 30, 2020 and December 31, 2019, and reported amounts of income
and expenses for the three and nine months ended September 30, 2020 and 2019, respectively. Management believes that the estimates
utilized in preparing the Partnership’s financial statements are reasonable; however, actual results could differ from these
estimates and it is reasonably possible that the differences could be material. The financial information included herein is
unaudited; however, such financial information reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the financial statements for the interim period.
C. Fair Value In accordance with the authoritative guidance
under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e.
the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Partnership
uses various valuation approaches. The authoritative guidance under U.S. GAAP establishes a fair value hierarchy for inputs used
in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that
the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the
asset or liability based on market data obtained from sources independent of the Partnership. Unobservable inputs reflect the Partnership’s
assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information
available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 – Unadjusted quoted
prices in active markets for identical, unrestricted assets or liabilities that the Partnership has the ability to access at the
measurement date; Level 2 – Quoted prices which
are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability;
and Level 3 – Prices, inputs or
exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no
market activity). The availability of valuation techniques and
observable inputs can vary among assets and liabilities and is affected by a wide variety of factors, including the type of asset
or liability, whether the asset or liability is new and not yet established in the marketplace, and other characteristics particular
to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market,
the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may
be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent
uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had
a ready market for the asset or liability existed. Accordingly, the degree of judgment exercised by the Partnership in determining
fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value
may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value
hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant
to the fair value measurement. Fair value is a market-based measure considered
from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, the Partnership’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The Partnership uses prices and inputs that are current as of the measurement date,
including prices and inputs during periods of market dislocation. In periods of market dislocation, the observability of prices
and inputs may be reduced for many assets and liabilities. This condition could cause an asset or liability to be reclassified
to a lower level within the fair value hierarchy. The Partnership values futures contracts at the closing price of the contract’s
primary exchange. The Partnership includes futures contracts in Level 1 of the fair value hierarchy, as they are exchange traded
derivatives. The fair value of U.S. government agency bonds
and notes is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined
based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country
credit spreads similar to the bond in terms of issue, maturity and seniority. U.S. government agency bonds and notes are generally
categorized in Level I or Level 2 of the fair value hierarchy. As of September 30, 2020 and December 31, 2019, none of the Partnership’s
holdings in U.S. government agency bonds and notes were fair valued using valuation models. The fair value of corporate notes is determined
using recently executed transactions, market price quotations (where observable), notes spreads or credit default swap spreads.
The spread data used are for the same maturity as that of the notes. If the spread data does not reference the issuer, data that
references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash
flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates based on collateral values as
key inputs. These valuation methods represent both a market and income approach to fair value measurement. Corporate notes are
categorized in Level 2 of the fair value hierarchy; however, in instances where significant inputs are unobservable, they are categorized
in Level 3 of the hierarchy. As of September 30, 2020 and December 31, 2019, none of the Partnership’s holdings in corporate
notes were fair valued using valuation models. The fair value of certificates of deposit is
determined based on a constant maturity curve for comparable instruments denominated in USD. This valuation method represents both
a market and income approach to fair value measurement. Certificates of deposit are categorized in Level 2 of the fair value hierarchy. The inputs or methodology used for valuing
securities are not necessarily an indication of the risk associated with investing in those securities. There were no changes in the Partnership’s
valuation methodology during period ended September 30, 2020 and the year ended December 31, 2019. The following table presents information about
the Partnership’s assets and liabilities measured at fair value as of September 30, 2020 and December 31, 2019:
Balance as of
September 30, 2020 Level 1 Level 2 Level 3 September 30, 2020
Assets
Futures contracts (1) $ 28,453 $ – $ – $ 28,453
Liabilities
Futures contracts (1) $ (14,588 ) $ – $ – $ (14,588 )
Balance as of
December 31, 2019 Level 1 Level 2 Level 3 December 31, 2019
Assets
Futures contracts (1) $ 282,964 $ – $ – $ 282,964
U.S. Government agency bonds and notes – 7,084,900 – 7,084,900
Certificates of deposit – 180,998 – 180,998
Corporate notes – 1,779,183 – 1,779,183
Total Assets $ 282,964 $ 9,045,081 $ – $ 9,328,045
Liabilities
Futures contracts (1) $ (137,232 ) $ – $ – $ (137,232 ) (1) See Note 7. “Financial Derivative
Instruments” for the fair value in each type of contracts within this category. For the period ended September 30, 2020 and
the year ended December 31, 2019, there were no Level 3 securities. D. Investment Transactions and Investment Income Security transactions are recorded on the trade
date for financial reporting purposes. Realized gains and losses from security transactions are determined using the specific identification
cost method. Change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage
commissions on securities and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction.
Interest income is recorded on an accrual basis. Gains or losses on futures contracts are realized
when contracts are closed. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted
market price) are reflected in the Statements of Financial Condition. Any change in net unrealized gain or loss from the preceding
period is reported in the Statements of Income (Loss). Brokerage commissions on futures contracts include other trading fees and
are recognized as trading gains and losses. Net realized gains and losses from foreign
currency related transactions represent gains and losses from sales of foreign currencies, currency gains and losses realized between
trade and settlement dates on securities transactions, and the difference between the amounts of interest and foreign withholding
taxes recorded on the Partnership’s books and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized
gain (loss) on other assets and other liabilities denominated in foreign currency arise from changes in the value of assets, other
than investments in securities, and liabilities at quarter end, resulting from changes in the exchange rates. J.P. Morgan Chase Bank, N.A. (the “Custodian”)
is the Partnership’s custodian. SG Americas Securities, LLC (the “Clearing Broker”) is the Partnership’s
commodity broker. A portion of the Partnership’s assets are held as initial margin or option premiums (in cash or Treasury
securities) in the Partnership’s brokerage accounts at the Clearing Broker. The Clearing Broker may convert the Partnership’s
cash in U.S. dollar to foreign currency to facilitate the Partnership’s commodity trading activities. At times, the Partnership
may carry foreign cash on loan with the Clearing Broker. Any net foreign currency on loan will be recognized in Foreign Currency
Due from Broker/Due to Broker on the Statements of Financial Condition. The Partnership’s Clearing Broker holds margin balances
in a single currency, in which all margin requirements can be satisfied in U.S. dollars. Foreign currency balances can also be
used to satisfy margin requirements. As of September 30, 2020 and December 31, 2019, the Partnership’s Segregated cash balance
on the Statements of Financial Condition of $266,179 and $1,247,462, respectively, represents the collateral pledged by the Partnership
to satisfy the Clearing Broker’s margin requirements in US Dollars. As of September 30, 2020 and December 31, 2019, the
Partnership’s Segregated foreign currency due from/to broker balance on the Statements of Financial Condition of $12,110
and $(31,582), respectively, represents the collateral owed by the Partnership to satisfy the Clearing Broker’s margin requirements
in foreign currency. The Partnership’s assets not deposited at the Clearing Broker are deposited with either the Custodian
or held in bank cash accounts at Northern Trust Company (and used to pay Partnership operating expenses). For the Partnership’s
cash deposited at the Custodian, the Partnership receives cash management services from J.P. Morgan Investment Management Inc.
(“JPMIM”).
E. Futures Contracts The Partnership engages in futures contracts
as part of its investment strategy. Upon entering into a futures contract, the Partnership is required to deposit with the broker
an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial
margin.” Subsequent payments (“variation margin”) are made or received by the Partnership each day, depending
on the daily fluctuations in the value of the contract, and are included in unrealized gain (loss) on futures contracts. Due from/Due
to broker amounts on the Statements of Financial Condition represent receivables / payables related to the Partnership’s
required cash margin. The Partnership recognizes a realized gain or loss when the contract is closed. There are several risks in connection with
the use of futures contracts as an investment option. The change in value of futures contracts primarily corresponds with the value
of their underlying instruments. In addition, there is the risk that the Partnership may not be able to enter into a closing transaction
because of an illiquid secondary market. Open positions in futures contracts at September 30, 2020 and December 31, 2019 are reflected
within the Condensed Schedules of Investments.
F. Foreign Currency Transactions The Partnership’s functional currency
is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated
in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements
of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated
into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are
reported in the Statements of Income (Loss).
G. Cash The Partnership maintains a custody account
with JPMorgan Chase Bank, N.A. and Northern Trust Company. At times, the Partnership’s cash balance could exceed the insured
amount under the Federal Deposit Insurance Corporation (“FDIC”). The Partnership has not experienced any losses in
such accounts and believes it is not subject to any significant counterparty risk related to its cash account. Both Segregated cash and Segregated foreign
currency are held as margin collateral deposits for futures transactions.
H. Income Taxes The Partnership is treated as a partnership
for U.S. federal income tax purposes. As such, the partners are individually liable for their own distributable share of taxable
income or loss. No provision has been made in the accompanying financial statements for U.S., federal, state, or local income taxes. The Partnership is required to determine whether
its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution
of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured
as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with
the relevant taxing authority. De-recognition of a tax benefit previously recognized results in the Partnership recording a tax
liability that reduces ending partners’ capital. Based on its analysis, the Partnership has determined that it has not incurred
any liability for unrecognized tax benefits as of September 30, 2020 and December 31, 2019. However, the Partnership’s conclusions
may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and
changes to tax laws, regulations and interpretations thereof. The Partnership is subject to income tax examinations by major taxing
authorities for all tax years since 2016. The Partnership recognizes interest and penalties
related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have
been recognized for the three and nine months ended September 30, 2020 and 2019. |
