Attached files
file | filename |
---|---|
EX-10.6 - EX-10.6 - CERES ORION L.P. | y02405exv10w6.htm |
EX-32.1 - EX-32.1 - CERES ORION L.P. | y02405exv32w1.htm |
EX-10.5 - EX-10.5 - CERES ORION L.P. | y02405exv10w5.htm |
EX-10.7 - EX-10.7 - CERES ORION L.P. | y02405exv10w7.htm |
EX-31.2 - EX-31.2 - CERES ORION L.P. | y02405exv31w2.htm |
EX-31.1 - EX-31.1 - CERES ORION L.P. | y02405exv31w1.htm |
EX-3.2.B - EX-3.2.B - CERES ORION L.P. | y02405exv3w2wb.htm |
EX-3.2.C - EX-3.2.C - CERES ORION L.P. | y02405exv3w2wc.htm |
EX-3.2.G - EX-3.2.G - CERES ORION L.P. | y02405exv3w2wg.htm |
EX-3.2.E - EX-3.2.G - CERES ORION L.P. | y02405exv3w2we.htm |
EX-32.2 - EX-32.2 - CERES ORION L.P. | y02405exv32w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2009
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 0-50271
ORION FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 22-3644546 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres
Managed Futures LLC
55 East 59th Street 10th Floor
New York, New York 10022
55 East 59th Street 10th Floor
New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 559-2011
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | Non-accelerated filer X | Smaller reporting company |
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
Yes No X
As of October 31, 2009, 281,480.3142 Limited Partnership
Redeemable Units were outstanding.
ORION FUTURES FUND L.P.
FORM 10-Q
INDEX
Page |
||||||||
Number | ||||||||
Item 1. | Financial Statements: | |||||||
Statements of Financial Condition at September 30, 2009 and December 31, 2008 (unaudited) |
3 | |||||||
Schedules of Investments at September 30, 2009 and December 31, 2008 (unaudited) |
4 5 | |||||||
Statements of Income and Expenses and Changes in Partners Capital for the three and nine months ended September 30, 2009 and 2008 (unaudited) |
6 | |||||||
Notes to Financial Statements (unaudited) | 7 16 | |||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
17 20 | ||||||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
21 22 | ||||||
Item 4. | Controls and Procedures | 23 | ||||||
PART II - Other Information | 24 27 | |||||||
Exhibits | ||||||||
3.2(b) Certificate of Amendment to the Certificate of Limited
Partnership, dated May 21, 2003
|
||||||||
3.2(c) Certificate of Amendment to the Certificate of Limited
Partnership, dated September 21, 2005
|
||||||||
3.2(e) Certificate of Amendment to the Certificate of Limited
Partnership, dated September 19, 2008
|
||||||||
3.2(g) Certificate
of Change to the Certificate of Limited
Partnership, dated January 31, 2000
|
||||||||
10.5 Second
Amended and Restated Agency Agreement
|
||||||||
10.6 Form of Subscription Agreement
|
||||||||
10.7 Form
of Third-Party Subscription Agreement
|
||||||||
31.1 Certification
|
||||||||
31.2 Certification
|
||||||||
32.1 Certification
|
||||||||
32.2 Certification
|
2
Table of Contents
PART I
Item 1. Financial Statements
Orion Futures Fund L.P.
Statements of Financial Condition
(Unaudited)
Statements of Financial Condition
(Unaudited)
September 30, |
December 31, |
|||||||
2009 | 2008 | |||||||
Assets: |
||||||||
Investment in Partnerships, at fair value |
$ | 688,746,400 | $ | 610,171,060 | ||||
Equity in trading account: |
||||||||
Cash |
71,533,862 | 70,898,968 | ||||||
Cash margin |
8,689,124 | 2,972,978 | ||||||
Net unrealized appreciation on open futures contracts |
1,469,672 | 1,526,317 | ||||||
Net unrealized appreciation on open forward contracts |
106,348 | 144,156 | ||||||
770,545,406 | 685,713,479 | |||||||
Interest receivable |
4,399 | 1,397 | ||||||
Total assets |
$ | 770,549,805 | $ | 685,714,876 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Accrued expenses: |
||||||||
Brokerage commissions |
$ | 2,125,855 | $ | 1,380,827 | ||||
Management fees |
1,178,758 | 1,053,913 | ||||||
Administrative fees |
320,165 | 285,090 | ||||||
Incentive fees |
1,035,966 | 10,922,554 | ||||||
Other |
29,174 | 117,207 | ||||||
Redemptions payable |
10,254,527 | 23,068,432 | ||||||
Total liabilities |
14,944,445 | 36,828,023 | ||||||
Partners Capital: |
||||||||
General Partner, 1,281.5595 Unit equivalents
outstanding at September 30, 2009 and December 31, 2008, respectively |
3,523,673 | 3,635,695 | ||||||
Limited Partners, 273,531.9430 and 227,446.9882 Redeemable Units
of Limited Partnership Interest outstanding at September 30, 2009 and December 31, 2008,
respectively |
752,081,687 | 645,251,158 | ||||||
Total partners capital |
755,605,360 | 648,886,853 | ||||||
Total liabilities and partners capital |
$ | 770,549,805 | $ | 685,714,876 | ||||
See accompanying notes to financial statements.
3
Table of Contents
Number of | % of Partners | |||||||||||
contracts | Fair Value | Capital | ||||||||||
Futures
Contracts Purchased |
||||||||||||
Currencies |
388 | $ | 1,026,937 | 0.14 | % | |||||||
Grains |
122 | 13,725 | 0.00 | * | ||||||||
Interest Rates U.S. |
388 | 310,969 | 0.04 | |||||||||
Interest Rates Non-U.S. |
412 | 196,233 | 0.02 | |||||||||
Metals |
254 | 529,525 | 0.07 | |||||||||
Softs |
234 | 146,896 | 0.02 | |||||||||
Total futures contracts purchased |
2,224,285 | 0.29 | ||||||||||
Futures Contracts Sold |
||||||||||||
Currencies |
194 | 95,234 | 0.01 | |||||||||
Energy |
252 | (974,941 | ) | (0.13 | ) | |||||||
Grains |
223 | 306,838 | 0.04 | |||||||||
Interest Rates U.S. |
97 | (9,150 | ) | (0.00 | )* | |||||||
Interest Rates Non-U.S. |
97 | (4,674 | ) | (0.00 | )* | |||||||
Livestock |
55 | (20,070 | ) | (0.00 | )* | |||||||
Metals |
143 | (147,850 | ) | (0.02 | ) | |||||||
Total futures contracts sold |
(754,613 | ) | (0.10 | ) | ||||||||
Unrealized Appreciation on Open Forward Contracts |
||||||||||||
Metals |
92 | 2,467,781 | 0.33 | |||||||||
Total unrealized appreciation on open forward contracts |
2,467,781 | 0.33 | ||||||||||
Unrealized Depreciation on Open Forward Contracts |
||||||||||||
Metals |
110 | (2,361,433 | ) | (0.31 | ) | |||||||
Total unrealized depreciation on open forward contracts |
(2,361,433 | ) | (0.31 | ) | ||||||||
Investment in Partnerships |
||||||||||||
AAA Master Fund LLC |
305,713,895 | 40.46 | ||||||||||
CMF Willowbridge Argo Master Fund LP |
138,253,880 | 18.30 | ||||||||||
CMF Winton Master LP |
244,778,625 | 32.39 | ||||||||||
Total investment in Partnerships |
688,746,400 | 91.15 | ||||||||||
Total fair value |
$ | 690,322,420 | 91.36 | % | ||||||||
* | Due to rounding |
See accompanying notes to financial statements.
4
Table of Contents
Orion Futures Fund L.P.
Schedule of Investments
December 31, 2008
(Unaudited)
Schedule of Investments
December 31, 2008
(Unaudited)
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased
|
||||||||||||
Currencies
|
114 | $ | 127,205 | 0.02 | % | |||||||
Energy
|
19 | (55,290 | ) | (0.01 | ) | |||||||
Grains
|
190 | 260,336 | 0.04 | |||||||||
Metals
|
19 | 44,650 | 0.01 | |||||||||
Interest Rates U.S.
|
190 | 607,238 | 0.09 | |||||||||
Interest Rates Non-U.S.
|
161 | 567,778 | 0.09 | |||||||||
Softs
|
38 | 90,950 | 0.01 | |||||||||
Total futures contracts purchased
|
1,642,867 | 0.25 | ||||||||||
Futures Contracts Sold
|
||||||||||||
Metals
|
38 | (116,550 | ) | (0.02 | ) | |||||||
Total futures contracts sold
|
(116,550 | ) | (0.02 | ) | ||||||||
Unrealized Appreciation on Open Forward Contracts
|
||||||||||||
Metals
|
214 | 3,283,299 | 0.50 | |||||||||
Total unrealized appreciation on open forward contracts
|
3,283,299 | 0.50 | ||||||||||
Unrealized Depreciation on Open Forward Contracts
|
||||||||||||
Metals
|
184 | (3,139,143 | ) | (0.48 | ) | |||||||
Total unrealized depreciation on open forward contracts
|
(3,139,143 | ) | (0.48 | ) | ||||||||
Investment in Partnerships
|
||||||||||||
AAA Master Fund LLC
|
265,560,308 | 40.93 | ||||||||||
CMF Willowbridge Argo Master Fund LP
|
137,021,864 | 21.12 | ||||||||||
CMF Winton Master LP
|
207,588,888 | 31.99 | ||||||||||
Total investment in Partnerships
|
610,171,060 | 94.04 | ||||||||||
Total fair value
|
$ | 611,841,533 | 94.29 | % | ||||||||
See accompanying notes to financial statements.
5
Table of Contents
Orion Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Income: |
||||||||||||||||
Net gains
(losses) on trading of commodity interests and investment in
Partnerships: |
||||||||||||||||
Net realized gains (losses) on closed contracts |
$ | (4,855,184 | ) | $ | 2,246,419 | $ | (5,606,585 | ) | $ | 9,319,273 | ||||||
Net realized gains (losses) on investment in Partnerships |
(6,668,146 | ) | 16,982,079 | 121,488,416 | 53,381,790 | |||||||||||
Change in net unrealized gains (losses) on open contracts |
1,170,075 | (1,520,879 | ) | (94,453 | ) | (240,637 | ) | |||||||||
Change in net unrealized gains (losses) on investment
in Partnerships |
7,997,677 | 9,569,011 | (115,408,975 | ) | 84,253,534 | |||||||||||
Gain (loss) from, trading net |
(2,355,578 | ) | 27,276,630 | 378,403 | 146,713,960 | |||||||||||
Interest income |
22,621 | 255,190 | 60,700 | 659,646 | ||||||||||||
Interest income from investment in Partnerships |
151,965 | 1,500,094 | 428,088 | 4,923,018 | ||||||||||||
Total income
(loss) |
(2,180,992 | ) | 29,031,914 | 867,191 | 152,296,624 | |||||||||||
Expenses: |
||||||||||||||||
Brokerage commissions including clearing fees |
2,251,687 | 1,774,020 | 5,556,620 | 5,536,372 | ||||||||||||
Management fees |
3,427,414 | 2,796,871 | 9,687,324 | 7,834,775 | ||||||||||||
Administrative fees |
928,856 | 757,089 | 2,625,301 | 2,144,949 | ||||||||||||
Incentive fees |
1,035,966 | 7,533,291 | 4,138,088 | 29,334,244 | ||||||||||||
Other |
124,495 | 168,705 | 374,447 | 413,160 | ||||||||||||
Total expenses |
7,768,418 | 13,029,976 | 22,381,780 | 45,263,500 | ||||||||||||
Net income (loss) |
(9,949,410 | ) | 16,001,938 | (21,514,589 | ) | 107,033,124 | ||||||||||
Additions Limited Partner |
107,453,226 | 39,412,000 | 242,185,226 | 133,428,000 | ||||||||||||
Additions General Partner |
| | | 1,973,412 | ||||||||||||
Redemptions Limited Partners |
(26,558,490 | ) | (35,096,381 | ) | (113,952,130 | ) | (95,505,564 | ) | ||||||||
Net increase (decrease) in Partners Capital |
70,945,326 | 20,317,557 | 106,718,507 | 146,928,972 | ||||||||||||
Partners Capital, beginning of period |
684,660,034 | 587,017,171 | 648,886,853 | 460,405,756 | ||||||||||||
Partners Capital, end of period |
$ | 755,605,360 | $ | 607,334,728 | $ | 755,605,360 | $ | 607,334,728 | ||||||||
Net Asset Value per Unit
(274,813.5025 and 234,873.9438 Units
outstanding at September 30, 2009 and 2008, respectively) |
$ | 2,749.52 | $ | 2,585.79 | $ | 2,749.52 | $ | 2,585.79 | ||||||||
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent |
$ | (37.87 | ) | $ | 66.99 | $ | (87.41 | ) | $ | 453.20 | ||||||
Weighted average units outstanding |
268,549.9973 | 239,017.5072 | 250,370.2244 | 235,808.4396 | ||||||||||||
See accompanying notes to financial statements.
6
Table of Contents
1. | General: |
Orion Futures Fund L.P., (formerly
Citigroup Orion Futures Fund L.P.), (the
Partnership), is a limited partnership which was
organized on March 22, 1999 under the partnership laws of
the State of New York to engage, directly and indirectly, in the
speculative trading of a diversified portfolio of commodity
interests, including futures contracts, options, swaps
and forward contracts on United States exchanges and certain
foreign exchanges. The sectors traded include currencies, energy,
grains, livestock, U.S. and non-U.S. interest rates, softs and metals. The Partnership commenced trading on June 10, 1999.
The Partnership and the Funds, (as defined in Note 5 Investment in Partnerships)
may trade futures, forwards and options contracts of any kind. In addition, the Partnership
may enter into swap contracts on energy-related products.
The
Partnership privately and continuosly offers up to 400,000 redeemable
units of Limited Partnership Interest (Redeemable Units)
to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership. The
commodity interests that are traded by the Partnership are
volatile and involve a high degree of market risk.
Ceres Managed Futures LLC (formerly Citigroup Managed Futures LLC), a Delaware limited
liability company, acts as the general partner (the General Partner) and commodity pool
operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith
Barney Holdings LLC (MSSB Holdings), a newly registered non-clearing futures commission
merchant and a member of the National Futures Association
(NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings. Citigroup Global Markets Inc.
(CGM), the commodity broker and a selling agent for the Partnership, owns 49% of MSSB
Holdings. Citigroup Inc. (Citigroup), indirectly through various subsidiaries, wholly
owns CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner,
the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned
subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup.
As of September 30, 2009, all trading decisions are made by
Willowbridge Associates Inc., (Willowbridge), Winton
Capital Management Limited (Winton) and AAA Capital
Management Advisors, Ltd. (successor to AAA Capital
Management, Inc.) (AAA) (each an Advisor
and, collectively, the Advisors) each of which is a
registered commodity trading advisor. Willowbridge
trades the Argo, Vulcan, Consolidated Commodities Technical and
Consolidated Commodities Fundamental trading systems for the
Partnership.
The General Partner and each limited partner of the Partnership each, a (Limited Partner) share in the profits and losses of the Partnership in proportion to the amount
of Partnership interest owned by each except that no Limited Partner shall be liable for obligations of the Partnership in
excess of their initial capital contribution and profits, if any, net of distributions.
The accompanying financial statements are unaudited but, in the
opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement
of the Partnerships financial condition at September 30, 2009
and December 31, 2008, and the results of its
operations and changes in partners capital for
the three and nine months ended September 30, 2009 and 2008.
These financial statements present the results of interim
periods and do not include all disclosures normally provided in
annual financial statements. You should read these financial
statements together with the financial statements and notes
included in the Partnerships Annual Report on
Form 10-K
filed with the Securities and Exchange Commission (the
SEC) for the year ended December 31, 2008.
The preparation of financial
statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related
disclosures of contingent assets and liabilities in the
financial statements and accompanying notes.
In making these estimates and assumptions, management has considered the effects, if any, of events occurring after the
date of the Partnerships Statements of Financial Condition
through November 16, 2009, which is the date the financial
statements were issued.
As a result, actual results
could differ from these estimates.
On July 1, 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards Codification (ASC) 105-10, Generally Accepted
Accounting Principles (ASC 105-10) (the Codification). ASC 105-10 established the exclusive authoritative
reference for U.S. GAAP for use in financial statements except for SEC rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting
standards. Codification became the single source of authoritative accounting principles generally accepted in the United
States and applies to all financial statements issued after September 15, 2009.
The Partnership is not required
to provide a Statement of Cash Flows as permitted by
ASC 230-10-15
Statement of Cash Flows
(formerly, FAS No. 102, Statement of Cash FlowsExemption of Certain Enterprises
and Classification of Cash Flows from Certain Securities Acquired for Resale).
Due to the nature of commodity trading, the results of
operations for the interim periods presented should not be
considered indicative of the results that may be expected for
the entire year.
Certain prior period amounts have been reclassified to conform to
current period presentation.
7
Table of Contents
Orion
Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
2. | Financial Highlights: |
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the three and nine months ended
September 30, 2009 and 2008 were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net realized and unrealized gains (losses) * |
$ | (17.49 | ) | $ | 106.74 | $ | (21.06 | ) | $ | 597.43 | ||||||
Interest income |
0.67 | 7.34 | 1.97 | 23.79 | ||||||||||||
Expenses ** |
(21.05 | ) | (47.09 | ) | (68.32 | ) | (168.02 | ) | ||||||||
Increase (decrease) for the period |
(37.87 | ) | 66.99 | (87.41 | ) | 453.20 | ||||||||||
Net Asset Value per Redeemable Unit
of Limited Partnership Interest, beginning of period |
2,787.39 | 2,518.80 | 2,836.93 | 2,132.59 | ||||||||||||
Net Asset
Value per Redeemable Unit of Limited Partnership Interest, end of period |
$ | 2,749.52 | $ | 2,585.79 | $ | 2,749.52 | $ | 2,585.79 | ||||||||
* | Includes brokerage commissions. | |
** | Excludes brokerage commissions. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Ratios to Average Net Assets:***
|
||||||||||||||||
Net investment income (loss) before incentive fees****
|
(3.6 | )% | (2.5 | )% | (3.5 | )% | (2.5 | )% | ||||||||
Operating expense
|
3.7 | % | 3.7 | % | 3.6 | % | 3.9 | % | ||||||||
Incentive fees
|
0.1 | % | 1.3 | % | 0.6 | % | 5.4 | % | ||||||||
Total expenses
|
3.8 | % | 5.0 | % | 4.2 | % | 9.3 | % | ||||||||
Total return:
|
||||||||||||||||
Total return before incentive fees
|
(1.2 | )% | 3.9 | % | (2.6 | )% | 27.1 | % | ||||||||
Incentive fees
|
(0.2 | )% | (1.2 | )% | (0.5 | )% | (5.8 | )% | ||||||||
Total return after incentive fees
|
(1.4 | )% | 2.7 | % | (3.1 | )% | 21.3 | % | ||||||||
*** | Annualized (other than incentive fees). |
**** | Interest income less total expenses. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the period. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
3. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity instruments. The
results of the Partnerships trading activities are shown
in the Statements of Income and Expenses and Changes in Partners
Capital.
8
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
The customer agreement between the Partnership and CGM gives the
Partnership the legal right to net unrealized gains and losses
on open futures and forward contracts. The Partnership nets, for financial reporting
purposes, the unrealized gains and losses on open futures and forward contracts on the
Statements of Financial Condition as the criteria under
ASC 210-20-15, Balance Sheet (formerly, FIN No. 39, Offsetting of Amounts Related to Certain Contracts)
have been met.
All of the commodity interests owned by the Partnership are held
for trading purposes. The average fair values of these interests
during the nine and twelve months ended September 30, 2009 and
December 31, 2008, based on a monthly calculation, were
$1,889,227 and $1,886,112, respectively. The fair values of
these commodity interests, including options and swaps thereon,
if applicable, at September 30, 2009 and December 31, 2008,
were $1,576,020 and $1,670,473, respectively. Fair values for
exchange traded commodity futures and options are based on
quoted market prices for those futures and options. Fair values
for all other financial instruments for which market quotations
are not readily available are based on other measures of fair
values deemed appropriate by the General Partner.
Brokerage commissions are based on the number of trades executed
by the Advisors.
The Partnership adopted
ASC 815-10 Derivatives and Hedging
(formerly, FAS No. 161
Disclosures about Derivative Instruments and Hedging Activities) as of January 1, 2009 which requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures
about fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative agreements.
ASC 815-10 only expands the disclosure requirements for derivatives instruments and
related hedged activities and has
no impact on the Statements of Financial Condition or Statements of
Income and Expenses and Changes in Partners Capital. The contracts
outstanding at the period ended September 30, 2009 are indicative of
the volume traded during the period. See the Schedule of Investments.
The following table indicates the fair values of derivative instruments of futures and forward contracts and options owned as separate assets and liabilities.
Assets |
September 30, 2009 |
Assets | September 30, 2009 |
||||||||
Futures Contracts |
Forward Contracts | ||||||||||
Currencies |
$ | 1,155,472 | Metals | $ | 2,467,781 | ||||||
Grains |
323,013 | ||||||||||
Interest Rates U.S. |
310,969 | ||||||||||
Interest Rates Non-U.S. |
196,233 | ||||||||||
Metals |
599,362 | ||||||||||
Softs |
177,001 | ||||||||||
Total unrealized appreciation on open futures contracts |
$ | 2,762,050 | Total unrealized appreciation on open forward contracts | $ | 2,467,781 | ||||||
Liabilities |
September 30, 2009 |
Liabilities | September 30, 2009 |
||||||||
Futures Contracts |
Forward Contracts | ||||||||||
Currencies |
$ | (33,300 | ) | Metals | $ | (2,361,433 | ) | ||||
Energy |
(974,941 | ) | |||||||||
Grains |
(2,450 | ) | |||||||||
Interest Rates U.S. |
(9,150 | ) | |||||||||
Interest Rates Non-U.S. |
(4,674 | ) | |||||||||
Livestock |
(20,070 | ) | |||||||||
Metals |
(217,688 | ) | |||||||||
Softs |
(30,105 | ) | |||||||||
Total unrealized depreciation on open futures contracts |
$ | (1,292,378 | ) | Total unrealized depreciation on open forward contracts | $ | (2,361,433 | ) | ||||
Net unrealized appreciation on open futures contracts |
$ | 1,469,672 | * | Net unrealized appreciation on open forwards contract | $ | 106,348 | ** | ||||
* | This amount is included in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. | |
** | This amount is included in Net unrealized appreciation on open forward contracts on the Statements of Financial Condition. |
9
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
The
following table indicates the Partnerships trading gains and losses, by market sector, on
derivative instruments for the three and nine months ended September 30, 2009.
Three Month Ended | Nine Month Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
Sector |
Gain (loss) from trading | Gain (loss) from trading | ||||||
Currencies |
$ | (1,588,471 | ) | $ | (1,850,206 | ) | ||
Energy |
(1,080,215 | ) | (1,005,044 | ) | ||||
Grains |
60,989 | 1,097,454 | ||||||
Interest rates U.S. |
(127,718 | ) | (1,586,493 | ) | ||||
Interest rates Non-U.S. |
(334,859 | ) | (1,219,116 | ) | ||||
Metals |
(38,540 | ) | 246,275 | |||||
Softs |
(122,084 | ) | (928,467 | ) | ||||
Livestock |
(454,211 | ) | (455,441 | ) | ||||
$ | (3,685,109 | ) | $ | (5,701,038 | ) | |||
4. | Fair Value Measurements: |
Investments. All commodity interests
(including derivative financial instruments and derivative
commodity instruments) are held for trading purposes. The
commodity interests are recorded on trade date and open
contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated
in foreign currencies are translated into U.S. dollars at
the exchange rates prevailing at the measurement date. Gains or
losses are realized when contracts are liquidated. Unrealized
gains or losses on open contracts are included as a component of equity in
futures trading account on the Statements of Financial Condition.
Realized gains or losses and any change in net unrealized
gains or losses from the preceding period are reported in the
Statements of Income and Expenses and Changes in Partners Capital.
Fair Value Measurements. The Partnership and
the Funds adopted ASC 820-10
Fair Value Measurements and Disclosures (formerly FAS
No. 157, Fair Value Measurements) as of January 1, 2008, which
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
ASC 820-10 establishes a framework for measuring fair value
and expands disclosures regarding fair value measurements in
accordance with GAAP. The fair value hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the
lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within
which the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Partnership
and the Funds did not apply the deferral allowed by
ASC 820-10 for
nonfinancial assets and nonfinancial liabilities measured at
fair value on a nonrecurring basis.
10
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
The Partnership and the Funds consider prices for exchange
traded commodity futures, forwards and options contracts to be
based on unadjusted quoted prices in active markets for identical assets
(Level 1). The values of non exchange traded forwards,
swaps and certain options contracts for which market quotations
are not readily available are priced by broker-dealers who
derive fair values for those assets from observable inputs
(Level 2). Investments in partnerships (other commodity
pools) where there are no other rights or obligations inherent
within the ownership interest held by the Partnership are priced
based on the end of the day net asset value (Level 2). The
value of the Partnerships investments in partnerships
reflects its proportional interest in the partnerships. As of and for the periods ended
September 30, 2009 and December 31, 2008, the Partnership and the Funds did not
hold any derivative instruments that are priced at fair value
using unobservable inputs through the application of
managements assumptions and internal valuation pricing
models (Level 3).
Quoted Prices in |
||||||||||||||||
Active Markets |
Significant Other |
Significant |
||||||||||||||
for Identical |
Observable Inputs |
Unobservable |
||||||||||||||
9/30/2009 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Forwards
|
$ | 106,348 | $ | 106,348 | $ | | $ | | ||||||||
Futures
|
1,469,672 | 1,469,672 | | | ||||||||||||
Investment in Partnerships
|
688,746,400 | | 688,746,400 | | ||||||||||||
Total assets
|
690,322,420 | 1,576,020 | 688,746,400 | | ||||||||||||
Total fair value
|
$ | 690,322,420 | $ | 1,576,020 | $ | 688,746,400 | $ | | ||||||||
Quoted Prices in |
||||||||||||||||
Active Markets |
Significant Other |
Significant |
||||||||||||||
for Identical |
Observable Inputs |
Unobservable |
||||||||||||||
12/31/2008 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Forwards |
$ | 144,156 | $ | 144,156 | $ | | $ | | ||||||||
Futures |
1,526,317 | 1,526,317 | | | ||||||||||||
Investment in Partnerships |
610,171,060 | | 610,171,060 | | ||||||||||||
Total assets
|
611,841,533 | 1,670,473 | 610,171,060 | | ||||||||||||
Total fair value |
$ | 611,841,533 | $ | 1,670,473 | $ | 610,171,060 | $ | | ||||||||
11
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
5. | Investment in Partnerships: |
On September 1, 2001, the assets allocated to AAA for
trading were invested in AAA Master Fund LLC,
formerly Citigroup AAA Master Fund LLC, (AAA
Master), a New York limited liability company organized
under the limited liability company laws of the State of New
York (respectively). The Partnership purchased 5,173.4381 Units of AAA
Master with cash of $5,173,438. AAA Master was formed in
order to permit accounts managed now or in the future by AAA
using the Energy Program Futures and Swaps, to
invest together in one trading vehicle. The General Partner is
also the managing member of AAA Master. Individual and pooled
accounts currently managed by AAA, including the Partnership,
are permitted to be non-managing members of AAA Master. The
General Partner and AAA believe that trading through this
structure should promote efficiency and economy in the trading
process.
On November 1, 2004, the assets allocated to Winton for
trading were invested in CMF Winton Master L.P. (Winton
Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership
purchased 35,389.8399 Units of Winton Master with cash of
$33,594,083 and a contribution of open commodity futures and
forward contracts with a fair value of $1,795,757. Winton Master
was formed in order to permit accounts managed now or in the
future by Winton using the Diversified Program to invest
together in one trading vehicle. The General Partner is also the
general partner of Winton Master. Individual and pooled accounts
currently managed by Winton, including the Partnership, are
permitted to be limited partners of Winton Master. The General
Partner and Winton believe that trading through this structure
should promote efficiency and economy in the trading process.
On July 1, 2005, the assets allocated to Willowbridge
for trading were invested in CMF Willowbridge Argo Master
Fund L.P. (Willowbridge Master), a limited
partnership organized under the partnership laws of the State of
New York. The Partnership purchased 33,529.1186 units of
Willowbridge Master with cash of $29,866,194 and a contribution
of open commodity futures and forward contracts with a fair
value of $3,662,925. Willowbridge Master was formed in order to
permit accounts managed now or in the future by Willowbridge
using the Argo Trading Program to invest together in one trading
vehicle. The General Partner is also the general partner of
Willowbridge Master. Individual and pooled accounts managed by
Willowbridge, including the Partnership are permitted to be
limited partners of Willowbridge Master. The General Partner and
Willowbridge believe that trading through this structure should
promote efficiency and economy in the trading process.
The General Partner is not aware of any material changes to the trading programs discussed above during the fiscal quarter ended September 30, 2009.
AAA Masters, Willowbridge Masters and Winton
Masters (the Funds) trading of futures,
forwards, swaps and options contracts, if applicable, on
commodities is done primarily on United States of America
commodity exchanges and foreign commodity exchanges. The Funds
engage in such trading through commodity brokerage accounts
maintained with CGM.
A limited partner/non-managing member of the Funds may withdraw all or part
of its capital contribution and undistributed profits, if any,
from the Funds in multiples of the Net Asset Value per
Redeemable Unit of Limited Partnership
12
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
Interest as of the end of any day (the Redemption Date) after a request for
redemption has been made to the general partner/managing member
at least 3 days in advance of the Redemption Date. The units
are classified as a liability when the limited partner/non-managing
member elects to redeem and informs the Funds.
Management, administrative and incentive fees are charged at the
Partnership level. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees
are borne by the Partnership directly and through its investment in the Funds. All other fees, including CGMs direct
brokerage commission, are charged at the Partnership level.
At of September 30, 2009, the Partnership owned approximately 23.0%,
58.1% and 46.7% of AAA Master, Willowbridge Master and Winton Master,
respectively. At of December 31, 2008, the Partnership owned
approximately 19.8%, 46.1% and 37.9% of AAA Master, Willowbridge
Master and Winton Master, respectively.
It is
the Partnerships intention to continue to
invest in the Funds. The
performance of the Partnership is directly affected by the
performance of the Funds.
Expenses to investors as a result of the investment in
the Funds are approximately the same and redemption rights are
not affected.
Summarized information reflecting the Total Assets, Liabilities
and Capital of the Funds are shown in the following tables.
September 30, 2009 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
AAA Master |
$ | 1,933,729,139 | $ | 605,566,558 | $ | 1,328,162,581 | ||||||
Willowbridge Master |
238,192,320 | 30,172 | 238,162,148 | |||||||||
Winton Master |
524,755,608 | 442,584 | 524,313,024 | |||||||||
Total |
$ | 2,696,677,067 | $ | 606,039,314 | $ | 2,090,637,753 | ||||||
December 31, 2008 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
AAA Master
|
$ | 1,962,984,697 | $ | 624,353,598 | $ | 1,338,631,099 | ||||||
Willowbridge Master
|
297,439,763 | 19,759 | 297,420,004 | |||||||||
Winton Master
|
547,770,185 | 18,642 | 547,751,543 | |||||||||
Total
|
$ | 2,808,194,645 | $ | 624,391,999 | $ | 2,183,802,646 | ||||||
13
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
Summarized information reflecting the net gain (loss) from trading, total income (loss) and net
income (loss) for the Funds are shown in the following tables.
For the three months ended September 30, 2009 | ||||||||||||
Gain (Loss) from | ||||||||||||
Trading, net | Total Income (Loss) | Net Income (Loss) | ||||||||||
AAA Master |
$ | 40,194,995 | $ | 40,401,333 | $ | 39,460,830 | ||||||
Winton Master |
7,322,348 | 7,447,037 | 7,339,274 | |||||||||
Willowbridge Master |
(20,085,700 | ) | (20,026,877 | ) | (20,139,642 | ) | ||||||
Total |
$ | 27,431,643 | $ | 27,821,493 | $ | 26,660,462 | ||||||
For the nine months ended September 30, 2009 | ||||||||||||
Gain (Loss) from | ||||||||||||
Trading, net | Total Income (Loss) | Net Income (Loss) | ||||||||||
AAA Master |
$ | 143,718,324 | $ | 144,327,480 | $ | 141,598,562 | ||||||
Winton Master |
(29,310,166 | ) | (28,936,214 | ) | (29,217,064 | ) | ||||||
Willowbridge Master |
(23,802,080 | ) | (23,622,469 | ) | (23,895,630 | ) | ||||||
Total |
$ | 90,606,078 | $ | 91,768,797 | $ | 88,485,868 | ||||||
For the three months ended September 30, 2008 | ||||||||||||
Gain (Loss) from | ||||||||||||
Trading, net | Total Income (Loss) | Net Income (Loss) | ||||||||||
AAA Master |
$ | 193,315,855 | $ | 194,927,645 | $ | 193,836,326 | ||||||
Winton Master |
(39,233,959 | ) | (37,573,727 | ) | (37,692,795 | ) | ||||||
Willowbridge Master |
8,930,938 | 9,817,051 | 9,686,363 | |||||||||
Total |
$ | 163,012,834 | $ | 167,170,969 | $ | 165,829,894 | ||||||
For the nine months ended September 30, 2008 | ||||||||||||
Gain (Loss) from | ||||||||||||
Trading, net | Total Income (Loss) | Net Income (Loss) | ||||||||||
AAA Master |
$ | 395,536,118 | $ | 400,447,961 | $ | 397,460,650 | ||||||
Winton Master |
59,111,379 | 64,841,142 | 64,405,072 | |||||||||
Willowbridge Master |
87,588,256 | 90,440,613 | 90,089,941 | |||||||||
Total |
$ | 542,235,753 | $ | 555,729,716 | $ | 551,955,663 | ||||||
Summarized information reflecting the Partnerships
investments in, and the operations of, the Funds are as shown in
the following tables.
September 30, 2009 | For the three months ended September 30, 2009 | |||||||||||||||||||||||||||
% of |
Expenses | |||||||||||||||||||||||||||
Partnerships |
Fair |
Income |
Net |
Investment |
Redemption |
|||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Commissions | Other | income (loss) | Objective | Permitted | ||||||||||||||||||||
AAA Master |
40.46 | % | $ | 305,713,895 | $ | 8,683,054 | $ | 181,792 | $ | 29,699 | $ | 8,471,563 | Energy Markets | Monthly | ||||||||||||||
Willowbridge Master |
18.30 | % | 138,253,880 | (10,921,492 | ) | 53,377 | 10,614 | (10,985,483 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Winton Master |
32.39 | % | 244,778,625 | 3,719,934 | 44,820 | 3,948 | 3,671,166 | Commodity Portfolio | Monthly | |||||||||||||||||||
Total |
$ | 688,746,400 | $ | 1,481,496 | $ | 279,989 | $ | 44,261 | $ | 1,157,246 | ||||||||||||||||||
14
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
September 30, 2009 | For
the nine months ended September 30, 2009 |
|||||||||||||||||||||||||||
% of | Expenses | |||||||||||||||||||||||||||
Partnerships | Fair | Income | Net |
Investment |
Redemption |
|||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Commissions | Other | Income (loss) | Objective | Permitted | ||||||||||||||||||||
AAA Master |
40.46 | % | $ | 305,713,895 | $ | 29,137,670 | $ | 473,840 | $ | 101,679 | $ | 28,562,151 | Energy Markets | Monthly | ||||||||||||||
Willowbridge
Master |
18.30 | % | 138,253,880 | (11,263,564 | ) | 125,780 | 21,365 | (11,410,709 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Winton Master |
32.39 | % | 244,778,625 | (11,366,577 | ) | 107,240 | 11,436 | (11,485,253 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Total |
$ | 688,746,400 | $ | 6,507,529 | $ | 706,860 | $ | 134,480 | $ | 5,666,189 | ||||||||||||||||||
December 31, 2008 | For the three months ended September 30, 2008 |
|||||||||||||||||||||||||||
% of | Expenses | |||||||||||||||||||||||||||
Partnerships | Fair | Income | Net |
Investment |
Redemption |
|||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Commissions | Other | Income (loss) | Objective | Permitted | ||||||||||||||||||||
AAA Master |
40.93 | % | $ | 265,560,308 | $ | 37,472,417 | $ | 161,680 | $ | 48,070 | $ | 37,262,667 | Energy Markets | Monthly | ||||||||||||||
Willowbridge
Master |
21.12 | % | 137,021,864 | 4,516,430 | 54,124 | 4,133 | 4,458,173 | Commodity Portfolio | Monthly | |||||||||||||||||||
Winton Master |
31.99 | % | 207,588,888 | (13,937,663 | ) | 41,077 | 3,463 | (13,982,203 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Total |
$ | 610,171,060 | $ | 28,051,184 | $ | 256,881 | $ | 55,666 | $ | 27,738,637 | ||||||||||||||||||
December 31, 2008 | For the nine months ended September 30, 2008 |
|||||||||||||||||||||||||||
% of | Expenses | |||||||||||||||||||||||||||
Partnerships | Fair | Income | Net |
Investment |
Redemption |
|||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Commissions | Other | Income (loss) | Objective | Permitted | ||||||||||||||||||||
AAA Master |
40.93 | % | $ | 265,560,308 | $ | 75,635,358 | $ | 442,024 | $ | 111,949 | $ | 75,081,385 | Energy Markets | Monthly | ||||||||||||||
Willowbridge
Master |
21.12 | % | 137,021,864 | 41,096,023 | 145,113 | 12,266 | 40,938,644 | Commodity Portfolio | Monthly | |||||||||||||||||||
Winton Master |
31.99 | % | 207,588,888 | 25,826,961 | 157,302 | 10,198 | 25,659,461 | Commodity Portfolio | Monthly | |||||||||||||||||||
Total |
$ | 610,171,060 | $ | 142,558,342 | $ | 744,439 | $ | 134,413 | $ | 141,679,490 | ||||||||||||||||||
6. | Financial Instrument Risks: |
In the normal course of its business, the Partnership and the
Funds are parties to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative
commodity instruments. These financial instruments may include
forwards, futures, options and swaps, whose values are based
upon an underlying asset, index, or reference rate, and
generally represent future commitments to exchange currencies or
cash balances , or to purchase or sell other financial instruments
on specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable
possibility to be settled in cash, through physical delivery or
with another financial instrument. These instruments may be
traded on an exchange or over-the-counter (OTC).
Exchange traded instruments are standardized and include futures
and option contracts. OTC contracts are negotiated
between contracting parties and include swaps and certain forwards and options contracts. Each of these instruments is subject to various risks
similar to those related to the underlying financial instruments
including market and credit risk. In general, the risks
associated with OTC contracts are greater than those associated
with exchange traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
15
Table of Contents
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2009
(Unaudited)
Notes to Financial Statements
September 30, 2009
(Unaudited)
Market risk is the potential for changes in the value of the
financial instruments traded by the Partnership/Funds
due to market changes, including interest and foreign exchange
rate movements and fluctuations in commodity or security prices.
Market risk is directly impacted by the volatility and liquidity
in the markets in which the related underlying assets are
traded. The Partnership/Funds are exposed to a market risk equal to the
value of futures and forward contracts purchased and unlimited
liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure
of a counterparty to perform according to the terms of a contract.
The Partnerships and the Funds risk of loss in the event of a counterparty default is typically
limited to the amounts recognized in the Statements of Financial Condition
and not represented by the contract or notional amounts of the instruments.
The Partnerships and the Funds risk of loss is reduced through the use of legally enforceable
master netting agreements with counterparties that permit the
Partnership and the Funds to offset
unrealized gains and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Partnership and the Funds have credit
risk and concentration risk because the sole counterparty or broker with respect
to the Partnerships and the Funds assets is CGM or a CGM affiliate. Credit risk with respect to
exchange-traded instruments is reduced to the extent that through CGM, the Partnerships and the
Funds counterparty is an exchange or clearing organization.
As both a buyer and seller of options, the Partnership/Funds pay or
receive a premium at the outset and then bear the risk of
unfavorable changes in the price of the contract underlying the
option. Written options expose the Partnership/Funds to potentially
unlimited liability; for purchased options the risk of loss is
limited to the premiums paid. Certain written put options permit
cash settlement and do not require the option holder to own the
reference asset. The Partnership/Funds do not consider these
contracts to be guarantees as described in ASC 460-10
Guarantees (formerly, FAS No. 45 Guarantors Accounting and Disclosure Requirements for Guarantees).
The general partner/managing member monitors and controls the Partnerships
risk exposure on a daily basis through
financial, credit and risk management monitoring systems and
accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the
Partnership/Funds are subject. These monitoring systems
allow the general partner/managing member to statistically analyze actual
trading results with risk-adjusted performance indicators and
correlation statistics. In addition, on-line monitoring systems
provide account analysis of futures, forwards and options
positions by sector, margin requirements, gain and loss
transactions and collateral positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the
Partnerships/Funds businesses, these
instruments may not be held to maturity.
16
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity
and Capital Resources
The Partnership does not engage in sales of goods or services.
Its assets are its (i) investment in Partnerships
(ii) equity in futures trading account consisting
of cash, net unrealized appreciation on open futures and forwards contracts,
and (iii) interest receivables. Because of
the low margin deposits normally required in commodity futures
trading, relatively small price movements may result in
substantial losses to the Partnership. While substantial losses
could lead to a material decrease in liquidity, no such losses
occurred in the third quarter of 2009.
The Partnerships capital consists of the capital
contributions of the partners as increased or decreased by
realized and/or unrealized gains
or losses on trading and by expenses, interest income, additions and
redemptions of Redeemable Units and distributions of profits, if
any.
For the nine months ended September 30, 2009, Partnership capital
increased 16.4% from $648,886,853 to $755,605,360. This increase
was attributable to the addition of 86,861.0612 Redeemable units of
Limited Partnership Interests totalling $242,185,226,
which was
partially offset by a net loss from operations of $21,514,589,
coupled with the redemptions of 40,776.1064 Redeemable
Units of Limited Partnership Interest totaling $113,952,130. Future redemptions can impact the amount of funds
available for investment in commodity contract positions in
subsequent periods.
Critical
Accounting Policies
Use of Estimates. The preparation of financial
statements and accompanying notes in conformity with
GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related
disclosures of contingent assets and liabilities in the
financial statements and accompanying notes. As a result, actual results
could differ from these estimates.
Statement of Cash Flows.
The Partnership is not required
to provide a Statement of Cash Flows as permitted by ASC 230-10.
Investments. All commodity interests
(including derivative financial instruments and derivative
commodity instruments) are held for trading purposes. The
commodity interests are recorded on trade date and open
contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated
in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the
measurement date. Gains or losses are realized when contracts
are liquidated. Unrealized gains or losses on open contracts are
included as a component of equity in trading
account on the Statement of Financial Condition. Realized gains
or losses and any change in net unrealized gains or losses from
the preceding period are reported in the Statements of Income
and Expenses and Changes in Partners Capital.
Fair Value Measurements. The Partnership and
the Funds (as defined in note 5 Investment in
Partnerships) adopted ASC 820-10 as of January 1, 2008, which
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Partnership and the Funds did not apply the deferral allowed by ASC 820-10 for
nonfinancial assets and nonfinancial liabilities measured at
fair value on a nonrecurring basis.
The
Partnership and the Funds consider prices for exchange traded commodity
futures, forwards and options contracts to be based on unadjusted quoted
prices in active markets for identical assets (Level 1).
The values of non exchange traded forwards, swaps and certain
options contracts for which market quotations are not readily
available are priced by broker-dealers who derive fair values
for those assets from observable inputs (Level 2).
Investments in partnerships (other commodity pools) where there
are no other rights or obligations inherent within the ownership
interest held by the Partnership are priced based on the end of
the day net asset value (Level 2). The value of the
Partnerships investments in partnerships reflects its
proportional interest in the partnerships. As of and for the period ended September 30, 2009, the Partnership and the Funds did not hold any
derivative instruments that are priced at fair value using
unobservable inputs through the application of managements
assumptions and internal valuation pricing models (Level 3).
17
Table of Contents
Futures Contracts. The Partnership and the
Funds trade futures contracts. A futures contract is a firm
commitment to buy or sell a specified quantity of investments,
currency or a standardized amount of a deliverable grade
commodity, at a specified price on a specified future date,
unless the contract is closed before the delivery date, or if
the delivery quantity is something where physical delivery
cannot occur (such as S&P 500 Index), whereby such contract
is settled in cash.
Payments (variation margin) may be made or received
by the Partnership and the Funds each business day, depending on
the daily fluctuations in the value of the underlying contracts,
and are recorded as unrealized gains or losses by the
Partnership and Funds. When the contract is closed, the Partnership and
the Funds record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and
the value at the time it was closed. Because transactions in
futures contracts require participants to make both initial
margin deposits of cash or other assets and variation margin
deposits, through the futures broker, directly with the exchange
on which the contracts are traded, credit exposure is limited.
Realized gains (losses) and changes in unrealized gains (losses)
on futures contracts are included in the Statements of Income
and Expenses and Changes in Partners Capital.
Forward Foreign Currency Contracts. Foreign currency contracts are those
contracts where the Partnership and the Funds agree to receive
or deliver a fixed quantity of foreign currency for an agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
the Partnerships net equity therein, representing unrealized gain
or loss on the contracts as measured by the difference between the forward
foreign exchange rates at the dates of entry into the contracts and the
forward rates at the reporting date, is included in
the Statements of Financial Condition. Realized gains (losses) and changes in unrealized gains
(losses) on foreign currency contracts are recognized in the period in which the
contract is closed or the changes occur, respectively, and are included
in the Statements of Income and Expenses and Changes in Partners Capital.
The Partnership does not isolate that portion of the results of operations arising from the
effect of changes in foreign exchange rates on investments from fluctuations from
changes in market prices of investments held. Such fluctuations are included in net gain
(loss) on investments in the Statements of Income and Expenses and Changes in Partners Capital.
London Metals Exchange Forward
Contracts. Metal contracts traded on the London
Metals Exchange (LME) represent a firm commitment to
buy or sell a specified quantity of Aluminum, Copper, Lead,
Nickel, Tin or Zinc. LME contracts traded by the Partnership and
the Funds are cash settled based on prompt dates published by
the LME. Payments (variation margin) may be made or
received by the Partnership and the Funds each business day,
depending on the daily fluctuations in the value of the
underlying contracts, and are recorded as unrealized gains or
losses by the Partnership and the Funds. A contract is
considered offset when all long positions have been matched with
short positions. When the contract is closed at the prompt date,
the Partnership and the Funds record a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
Because transactions in LME contracts require participants to
make both initial margin deposits of cash or other assets and
variation margin deposits, through the broker, directly with the
LME, credit exposure is limited. Realized gains (losses) and
changes in unrealized gains (losses) on metal contracts are
included in the Statements of Income and Expenses and Changes in Partners Capital.
Options. The Partnership and Funds may
purchase and write (sell) both exchange listed and
over-the-counter, options on commodities or financial
instruments. An option is a contract allowing, but not
requiring, its holder to buy (call) or sell (put) a specific or
standard commodity or financial instrument at a specified price
during a specified time period. The option premium is the total
price paid or received for the option contract. When the
Partnership and the Funds write an option, the premium received is
recorded as a liability in the Statements of Financial Condition
and marked to market daily. When the Partnership and the Funds
purchase an option, the premium paid is recorded as an asset in
the Statements of Financial Condition and marked to market
daily. Realized gains (losses) and changes in unrealized gains
(losses) on options contracts are included in the Statements of
Income and Expenses and Changes in Partners Capital.
Brokerage Commissions. Commission charges to
open and closed futures and exchange traded swap contracts are
expensed at the time the positions are opened. Commission
charges on option contracts are expensed at the time the
position is established and when the option contract is closed.
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Partnerships income and
expenses.
18
Table of Contents
In 2007, the Partnership adopted ASC 740-10
Income Taxes
(formerly, FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740-10 provides guidance for how uncertain
tax positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740-10 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Partnerships financial statements to
determine whether the tax positions are
more-likely-than-not to be sustained by the
applicable tax authority. Tax positions with respect to tax at
the partnership level not deemed to meet the
more-likely-than-not threshold would be recorded as a tax
benefit or expense in the current year. The General Partner
has
continued to evaluate the application of ASC 740-10 and has
concluded that the adoption of ASC 740-10 had no impact on the
operations of the Partnership for the nine months ended
September 30, 2009 and that no provision for income tax is
required in the Partnerships financial statements.
The following is the major tax jurisdictions for the
Partnership and the earliest tax year subject to examination:
United States 2005.
Recent Accounting Pronouncements. In 2009, the Partnership adopted ASC 820-10-65 Fair Value Measurements
(formerly, FAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly). ASC 820-10-65 reaffirms
that fair value is the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date under current market conditions. ASC 820-10-65
also reaffirms the need to use judgment in determining if a formerly
active market has become inactive and in determining fair values when
the market has become inactive. The application of ASC 820-10-65 is required
for interim and annual reporting periods ending after June 15, 2009.
Management has concluded that based on available information in the
marketplace, that there has not been a decrease in the volume and
level of activity in the Partnerships level 2 assets and
liabilities. The adoption of ASC 820-10-65 had no effect
on the Partnerships Financial Statements.
Subsequent Events. In 2009, the Partnership adopted ASC 855-10
Subsequent Events (formerly FAS No. 165 Subsequent Events). The objective of ASC 855-10 is to establish general standards of accounting for
and disclosure of events that occur after the balance sheet date but before financial statements are issued or available
to be issued.
Results
of Operations
During the Partnerships
third quarter of 2009 the Net Asset Value per Redeemable Unit decreased 1.4% from
$2,787.39 to $2,749.52 as compared to an increase of 2.7% in the third quarter of 2008.
The Partnership experienced a net trading loss before brokerage commissions and related fees in the third quarter of 2009
of $2,355,578. Losses were primarily
attributable to the Partnerships / Funds
trading of currencies, energy, indices and livestock and were partially offset by gains in
grains, U.S. and non-U.S. interest rates, metals, and softs. The Partnership experienced a net
trading gain before brokerage commissions and related fees in the third quarter of 2008 of $27,276,630.
Gains were primarily attributable to the Partnerships / Funds trading of currencies,
energy, U.S. interest rates, indices and lumber and were partially offset by losses in grains non-U.S. interest rates, livestock, metals and softs.
Markets around the world rose again in the third quarter of 2009. Economic
activity in the U.S. further stabilized with many important sectors of
the economy demonstrating marked improvements over the depressed
levels reached earlier this year. The overall economy continued to
face headwinds with employment further contracting, albeit at a much
slower pace. Consumer
confidence has increased from record lows but remains well below
historical averages. The Partnership realized losses for the quarter,
primarily in energy and equity indices.
Despite upgraded demand forecasts from OPEC, petroleum prices
continued to weaken. U.S. government data showed unexpected increases
in inventories as both imports and domestic output continued to rise.
Following a period of sustained declines, natural gas prices
unexpectedly rallied, contributing to losses in the energy sector.
The combination of strong growth news, benign inflation data and
accommodative monetary policy stances from key central banks has
continued to support the price action in risky assets. Losses were also
recorded in equities as positions were slow to turn early in the
quarter.
During the Partnerships nine months ended September 30, 2009 the Net Asset Value per
Redeemable Unit decreased 3.1% from $2,836.93 to $2,749.52 as compared
to an increase of 21.3% in the same period of 2008. The Partnership experienced a net
trading gain before brokerage
commissions and related fees for the nine months ended September 30, 2009 of $378,403. Gains were
primarily attributable to the
Partnerships / Funds
trading of energy, grains, and metals and were partially offset by losses in currencies, U.S.
and non-U.S. interest rates, livestock, softs, lumber and indices. The Partnership experienced a net
trading gain before brokerage commissions and related fees for the nine months ended September 30, 2008
of $146,713,960. Gains were primarily attributable
to the Partnerships / Funds trading of currencies, energy, grains, U.S. and non-U.S.
interest rates, metals, indices and lumber and were partially offset by losses in livestock and softs
Commodity futures markets are highly volatile. The potential for
broad and rapid price fluctuations increases the risks involved
in commodity trading, but also increases the possibility of
profit. The profitability of the Partnerships/Funds depends on
the existence of major price trends and the ability of the
Advisors to correctly identify those price trends. Price trends
are influenced by, among other things, changing supply and
demand relationships, weather, governmental, agricultural,
commercial and trade programs and policies, national and
international political and economic events and changes in
interest rates. To the extent that market trends exist and the
Advisors are able to identify them, the Partnership expects to
increase capital through operations.
19
Table of Contents
Interest income is earned on 100% of the Partnerships
average daily equity maintained in cash in its account during
each month at a
30-day
U.S. Treasury bill rate determined weekly by CGM based on
the average non-competitive yield on
3-month
U.S. Treasury bills maturing in 30 days from the date
on which such weekly rate is determined. CGM may continue to
maintain the Partnerships assets in cash
and/or place
all of the Partnerships assets in
90-day
Treasury bills and pay the Partnership 100% of the interest
earned on Treasury bills purchased. Interest income for the
three and nine months ended September 30, 2009 decreased by
$1,580,698 and $5,093,876, respectively, as compared to the
corresponding periods in 2008. The decrease is due to lower
U.S. Treasury bill rates for the three and nine months ended September 30, 2009, as compared
to the corresponding periods in 2008.
Brokerage commissions are based on the number of trades executed
by the Advisors. Brokerage commissions and fees for the three and nine
months ended September 30, 2009 increased by $477,667 and $20,248, respectively as compared to the corresponding
periods in 2008. The increase in brokerage commissions and fees
is primarily due to an increase in the number of trades during
the three and nine months ended September 30, 2009, as compared to
the corresponding periods in 2008.
Management fees are calculated as a percentage of the
Partnerships net asset value as of the end of each month
and are affected by trading performance, additions and
redemptions. Management fees for the three and nine months ended
September 30, 2009 increased by $630,543 and $1,852,549, respectively as compared to the corresponding periods in 2008.
The increase of management fees is due to an increase in average net
assets during the three and nine months ended September 30, 2009,
as compared to the corresponding periods in 2008.
Administrative fees are paid to the General Partner for
administering the business and affairs of the Partnership. These
fees are calculated as a percentage of the Partnerships
net asset value as of the end of each month and are affected by
trading performance, additions and redemptions. Administrative
fees for the three and nine months ended September 30, 2009
increased by $171,767 and $480,352, respectively as compared to
the corresponding periods in 2008. The increase in
administrative fees is due to an increase in average net assets during
the three and nine months ended September 30, 2009, as compared to
the corresponding periods in 2008.
Incentive fees paid by the Partnership are based on the new
trading profits generated by each Advisor at the end of the
quarter, as defined in the management agreements between the
Partnership, the General Partner and each Advisor. Trading
performance for the three and nine months ended September 30,
2009 resulted in incentive fees of $1,035,966 and $4,138,088, respectively. Trading performance for the three and nine months
ended September 30, 2008 resulted in incentive fees of
$7,533,291 and $29,334,244, resceptively.
In allocating the assets of the Partnership among the trading advisors, the General Partner
considers past performance, trading style, volatility of markets traded and fee requirements. The
General Partner may modify or terminate the allocation of assets among the trading advisors and may
allocate assets to additional advisors at any time.
20
Table of Contents
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
The Partnership/Funds are speculative commodity pools.
The market sensitive instruments held by the them
are acquired for speculative trading purposes, and all or
substantially all of the Partnerships/Funds
assets are subject to the risk of trading loss. Unlike an
operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnerships main lines of business.
The risk to the Limited Partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited liability is a consequence of the
organization of the Partnership as a limited partnership under applicable law.
Market movements result in frequent changes in the fair value of
the Partnerships/Funds open contracts and,
consequently, in their earnings and cash balances. The
Partnerships/Funds market risk is influenced
by a wide variety of factors, including the level and volatility
of interest rates, exchange rates, equity price levels, the fair
value of financial instruments and contracts, the
diversification effects among the Partnerships/Funds
open contracts and the liquidity of the markets in which they trade.
The Partnership/Funds rapidly acquire and
liquidate both long and short positions in a wide range of
different markets. Consequently, it is not possible to predict
how a particular future market scenario will affect performance,
and the Partnerships/Funds past performances
are not necessarily indicative of their future results.
Value at Risk is a measure of the maximum amount which the
Partnership/Funds could reasonably be expected to lose
in a given market sector. However, the inherent uncertainty of
the Partnerships/Funds speculative trading
and the recurrence in the markets traded by the Partnership/Funds
of market movements far exceeding expectations could
result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnerships/Funds experience to date (i.e., risk of ruin).
In light of the foregoing, as well as the risks and
uncertainties intrinsic to all future projections, the inclusion
of the quantification in this section should not be considered
to constitute any assurance or representation that the
Partnerships/Funds losses in any market sector will be limited to Value at Risk or by the
Partnerships/Funds attempts to manage their
market risk.
Exchange maintenance margin requirements have been used by the
Partnership/Funds as the measure of their Value at Risk.
Maintenance margin requirements are set by exchanges to equal or
exceed the maximum losses reasonably expected to be incurred in
the fair value of any given contract in 95%-99% of any
one-day
interval. Maintenance margin has been used rather than the more
generally available initial margin, because initial margin
includes a credit risk component, which is not relevant to Value
at Risk.
The following tables indicate the trading Value at Risk
associated with the Partnerships direct investments and its indirect
investments in the Funds by market category as of
September 30, 2009 and the highest, lowest and average value
during the three months ended September 30, 2009. All open
position trading risk exposures of the Partnership and the Funds
have been included in calculating the figures set forth below.
There has been no material change in the
trading Value at Risk information previously disclosed in the
Partnerships Annual Report on
Form 10-K
for the year ended December 31, 2008.
As of September 30, 2009, the Partnerships total capital
was $755,605,360. As of September 30, 2009, the Partnerships Value at Risk for the portion of its assets that are traded directly was as follows:
September 30, 2009
(Unaudited)
(Unaudited)
Three Months Ended September 30, 2009 | ||||||||||||||||||||
Value at |
% of Total |
High |
Low |
Average Value |
||||||||||||||||
Market Sector | Risk | Capitalization | Value at Risk | Value at Risk | at Risk* | |||||||||||||||
Currencies |
$ | 1,441,066 | 0.19 | % | $ | 2,683,324 | $ | 412,155 | $ | 1,214,880 | ||||||||||
Energy |
1,534,013 | 0.20 | % | 4,112,876 | 45,000 | 1,639,231 | ||||||||||||||
Grains |
431,866 | 0.06 | % | 1,484,580 | 339,470 | 840,044 | ||||||||||||||
Interest Rates U.S. |
824,985 | 0.11 | % | 1,008,315 | 103,275 | 509,885 | ||||||||||||||
Interest Rates Non-U.S. |
1,620,591 | 0.21 | % | 2,000,036 | 401,344 | 1,051,417 | ||||||||||||||
Livestock |
57,720 | 0.01 | % | 64,060 | 6,000 | 39,369 | ||||||||||||||
Metals |
2,134,462 | 0.28 | % | 2,273,753 | 388,216 | 1,513,345 | ||||||||||||||
Softs |
531,300 | 0.07 | % | 534,300 | 136,320 | 320,262 | ||||||||||||||
Total |
$ | 8,576,003 | 1.13 | % | ||||||||||||||||
* | Average month-end Values at Risk. |
21
Table of Contents
As of September 30, 2009, AAA Masters total capitalization
was $1,328,162,581. The Partnership owned approximately 23.0% of AAA Master.
The Partnerships Value at Risk for the portion of its assets that are
traded indirectly through its investment in AAA Master as of September 30, 2009, was as follows:
September 30, 2009
(Unaudited)
(Unaudited)
Three months ended September 30, 2009 | ||||||||||||||||||||
% of Total |
High |
Low |
Average |
|||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 156,850,602 | 11.81 | % | $ | 188,797,618 | $ | 153,049,427 | $ | 171,524,611 | ||||||||||
Total |
$ | 156,850,602 | 11.81 | % | ||||||||||||||||
* | Average month-end Values at Risk. |
As of September 30, 2009, Willowbridge Masters total
capitalization was $238,162,148. The Partnership owned
approximately 58.1% of
Willowbridge Master. The Partnerships Value at Risk for the portion of its assets that are traded indirectly through its investment in Willowbridge Master as of September 30, 2009, was as follows:
September 30, 2009
(Unaudited)
(Unaudited)
Three months ended September 30, 2009 | ||||||||||||||||||||
Value at | % of Total | High | Low | Average | ||||||||||||||||
Market Sector | Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 7,855,650 | 3.30 | % | $ | 14,208,480 | $ | 2,908,305 | $ | 8,695,042 | ||||||||||
Energy |
1,451,588 | 0.61 | % | 13,037,019 | 685,800 | 6,087,536 | ||||||||||||||
Grains |
3,415,500 | 1.44 | % | 3,415,500 | 1,723,410 | 2,429,356 | ||||||||||||||
Interest Rates U.S. |
5,191,560 | 2.18 | % | 9,939,105 | 507,263 | 3,052,277 | ||||||||||||||
Interest Rates Non-U.S. |
10,084,707 | 4.23 | % | 14,168,324 | 455,649 | 7,346,189 | ||||||||||||||
Livestock |
273,240 | 0.12 | % | 410,400 | 133,110 | 209,851 | ||||||||||||||
Metals |
8,083,122 | 3.39 | % | 8,372,754 | 1,909,575 | 5,660,365 | ||||||||||||||
Softs |
1,841,840 | 0.77 | % | 2,445,100 | 981,960 | 1,607,183 | ||||||||||||||
Total |
$ | 38,197,207 | 16.04 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As of September 30, 2009, Winton Masters total capitalization was
$524,313,024. The Partnership owned approximately 46.7% of Winton Master.
The Partnerships Value at Risk for the portion of its assets that are traded indirectly through its investment in Winton Master as of September 30, 2009, was as follows:
September 30, 2009
(Unaudited)
(Unaudited)
Three months ended September 30, 2009 | ||||||||||||||||||||
% of Total |
High |
Low |
Average |
|||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 9,333,591 | 1.78 | % | $ | 10,700,900 | $ | 8,478,938 | $ | 9,504,427 | ||||||||||
Energy |
1,240,349 | 0.24 | % | 2,549,525 | 703,862 | 1,440,952 | ||||||||||||||
Grains |
1,718,287 | 0.33 | % | 1,718,287 | 1,133,559 | 1,432,359 | ||||||||||||||
Interest Rates U.S. |
6,173,010 | 1.18 | % | 6,518,610 | 2,078,339 | 4,522,123 | ||||||||||||||
Interest Rates Non-U.S. |
10,044,891 | 1.92 | % | 11,661,822 | 4,837,528 | 7,726,635 | ||||||||||||||
Livestock |
111,186 | 0.02 | % | 227,651 | 102,533 | 161,785 | ||||||||||||||
Metals |
3,879,776 | 0.74 | % | 3,998,291 | 1,589,099 | 2,918,296 | ||||||||||||||
Softs |
585,138 | 0.11 | % | 1,035,185 | 385,375 | 606,465 | ||||||||||||||
Indices |
10,676,526 | 2.04 | % | 10,676,526 | 1,905,983 | 5,639,298 | ||||||||||||||
Total |
$ | 43,762,754 | 8.36 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
22
Table of Contents
Item 4. | Controls and Procedures |
The Partnerships disclosure controls and procedures are
designed to ensure that information required to be disclosed
by the Partnership on the reports that it files or submits under the Securities Exchange Act of
1934 (the Exchange Act) is recorded, processed, summarized and reported within the time periods
expected in the Commissions rules and forms. Disclosed controls and procedures include controls
and procedures designed to ensure that information required to be disclosed by the Partnership in
the reports it files
is accumulated and communicated to management,
including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO) of the General Partner, to allow for timely
decisions regarding required disclosure and appropriate SEC
filings.
Management is responsible for ensuring that there is an adequate
and effective process for establishing, maintaining and
evaluating disclosure controls and procedures for the
Partnerships external disclosures.
The General Partners CEO and CFO have evaluated the
effectiveness of the Partnerships disclosure controls and
procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act) as of September 30, 2009 and, based on
that evaluation, the CEO and CFO have concluded that at that
date the Partnerships disclosure controls and procedures
were effective.
The Partnerships internal control over financial
reporting is a process under the supervision of the General
Partners CEO and CFO to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements in accordance with
GAAP. These controls include policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; | |
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP. and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control
over financial reporting process during the fiscal quarter ended
September 30, 2009 that materially affected, or are reasonably
likely to materially affect, the Partnerships internal
control over financial reporting.
23
Table of Contents
Item 1. | Legal Proceedings. |
The following information supplements and amends the discussion
set forth under Part I, Item 3 Legal
Proceedings in the Partnerships Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, as updated by
the Partnerships Quarterly Report on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009. There are no
material legal proceedings pending against the Partnership or the
General Partner.
Subprime Mortgage-Related Litigation
On August 31, 2009, Asher, et al. v. Citigroup Inc., et al. and Pellegrini v. Citigroup Inc.,
et al. were consolidated with In re Citigroup Inc. Bond Litigation.
On July 27, 2009, Utah Retirement Systems v. Strauss, et al. was filed in the United States
District Court for the Eastern District of New York asserting, among other claims, claims under the
Securities Act of 1933 and Utah state law arising out of an offering of American Home Mortgage
common stock underwritten by CGM.
On July 31, 2009, the United States District Court for the Eastern District of New York
entered an order preliminarily approving settlements reached with all defendants (including
Citigroup and CGM) in In Re American Home Mortgage Securities Litigation.
On August 5, 2009, the underwriter defendants, including CGM, moved to dismiss the
consolidated amended complaint in In Re American International Group, Inc. 2008 Securities
Litigation.
Auction Rate SecuritiesRelated Litigation and Other Matters
On July 23, 2009, the Judicial Panel on Multidistrict Litigation issued an order transferring
K-V Pharmaceutical Co. v. CGMI from the United States District Court for the Eastern District of
Missouri to the United States District Court for the Southern District of New York for coordination
with In Re Citigroup Auction Rate Securities Litigation. On August 24, 2009, CGM moved to dismiss
the complaint.
On September 11, 2009, the United States District Court for the Southern District of New York
dismissed without prejudice the complaint in In Re Citigroup Auction Rate Securities Litigation. On
October 15, 2009, lead plaintiff filed a second consolidated amended complaint asserting claims
under Sections 10 and 20 of the Securities Exchange Act of 1934.
On October 2, 2009, the Judicial Panel on Multidistrict Litigation transferred Ocwen Financial
Corp., et al. v. CGMI to the United States District Court for the Southern District of New York for
coordination with In Re Citigroup Auction Rate Securities Litigation.
Other Matters
On September 14, 2009, defendants filed a motion to dismiss the amended complaint in ECA
Acquisitions, Inc., et al. v. MAT Three LLC, et al..
Adelphia Communications Corporation
Trial of the Adelphia Recovery Trusts claims against Citigroup and numerous other defendants
is scheduled to begin in April 2010.
IPO Securities Litigation
In October 2009, the District Court entered an order granting final approval of the
settlement.
Other Matters
Investors in municipal bonds and other instruments affected by the collapse of the credit
markets have sued Citigroup on a variety of theories. On August 10, 2009, certain such investors, a
Norwegian securities firm and seven Norwegian municipalities, filed an actionTerra Securities Asa
Konkursbo, et al. v.
Citigroup Inc., et al.in the United States District Court for the Southern District of New
York against Citigroup, CGM and Citigroup Alternative Investments LLC, asserting claims under
Sections 10 and 20 of the Securities Exchange Act of 1934 and state law arising out of the
municipalities investment in certain notes. On October 7, 2009, defendants filed a motion to
dismiss.
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Item 1A. | Risk Factors |
The following disclosure supplements and amends the risk factors set forth
under Part I, Item 1A. Risk Factors
in the Partnerships Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and under Part II, Item 1A,
Risk Factors in the Partnerships Quarterly Report on Form
10-Q for the quarters ended March 31, 2009 and June 30, 2009.
Speculative position and trading limits may reduce profitability. The Commodity Futures Trading
Commission (CFTC) and U.S. exchanges have established speculative position limits on the maximum
net long or net short position which any person may hold or control in particular futures and
options on futures. The trading instructions of an advisor may have to be modified, and positions
held by the Partnership and the Funds may have to be liquidated in order to avoid exceeding these
limits. Such modification or liquidation could adversely affect the operations and profitability
of the Partnership and the Funds by increasing transaction costs to liquidate positions and
foregoing potential profits.
Regulatory changes could restrict the Partnerships operations. Regulatory changes could adversely
affect the Partnership and the Funds by restricting its markets or activities, limiting its trading
and/or increasing the taxes to which investors are subject. The General Partner is not aware of
any definitive regulatory developments that might adversely affect the Partnership and the Funds;
however, since June 2008, several bills have been proposed in the U.S. Congress in response to
record energy and agricultural prices and the financial crisis. Some of the pending legislation,
if enacted, could impact the manner in which swap contracts are traded and/or settled and limit
trading by speculators (such as the Partnership and the Funds) in futures and OTC
markets. One of the proposals would authorize the CFTC and the Commission to regulate swap
transactions. Other potentially adverse regulatory initiatives could develop suddenly and without
notice.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
For the three months ended September 30, 2009 there were
additional sales to Limited Partners of 38,824.2872 Redeemable
Units of Limited Partnership totaling $107,453,226. The
Redeemable Units were issued in reliance upon applicable
exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended, and Section 506 of
Regulation D promulgated there under.
Net proceeds from the sale of additional Redeemable Units are used
in the trading of commodity interests including futures
contracts, options, forwards and swap contracts.
These Redeemable Units were purchased by accredited investors as defined in
Regulation D as well as to a small number of persons who are
non-accredited investors. The following chart sets forth the purchases
of Redeemable Units by the Partnership.
(d) Maximum Number |
||||||||||||||||||||
(c) Total Number of |
(or Approximate |
|||||||||||||||||||
Redeemable |
Dollar Value) of |
|||||||||||||||||||
(b) Average |
Units Purchased |
Redeemable Units |
||||||||||||||||||
(a) Total Number of |
Price Paid per |
as Part of |
that May Yet Be |
|||||||||||||||||
Redeemable |
Redeemable |
Publicly Announced |
Purchased Under the |
|||||||||||||||||
Period | Units Purchased* | Unit** | Plans or Programs | Plans or Programs | ||||||||||||||||
July 1, 2009 July 31, 2009 |
3,429.6868 | $ | 2,767.52 | N/A | N/A | |||||||||||||||
August 1, 2009 August 31, 2009 |
2,479.4941 | $ | 2,747.43 | N/A | N/A | |||||||||||||||
September 1, 2009 September 30, 2009 |
3,729.5700 | $ | 2,749.52 | N/A | N/A | |||||||||||||||
Total | 9,638.7509 | $ | 2,755.39 | |||||||||||||||||
* Generally, Limited Partners are permitted to redeem their
Redeemable Units as of the last day of each month on
10 days notice to the General Partner. Under certain
circumstances, the General Partner can compel redemption but to
date the General Partner has not exercised this right. Purchases
of Redeemable Units by the Partnership reflected in the chart
above were made in the ordinary course of the Partnerships
business in connection with effecting redemptions for Limited
Partners.
** Redemptions of Redeemable Units are effected as of the
last day of each month at the Net Asset Value per Redeemable
Unit as of that day. No fee will be charged for redemptions.
Item 3. | Defaults Upon Senior Securities. None. |
Item 4. | Submission of Matters to a Vote of Security Holders. None. |
Item 5. | Other Information. None. |
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Table of Contents
Item 6. | Exhibits |
3.1 |
Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.(I) to the general form for registration of securities on Form 10 filed on December 9, 2003 and incorporated herein by reference). | |||
3.2 |
Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of the State of New York (filed as Exhibit 3.(I) to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | |||
(a) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated April 3, 2001 (filed as Exhibit 3.(I) to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | |||
(b) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 21, 2003 (filed herein). | |||
(c) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 21, 2005 (filed herein). | |||
(d) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to current report on Form 8-K filed on September 2, 2008 and incorporated herein by reference). | |||
(e) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed herein). | |||
(f) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 30, 2009 (filed as Exhibit 99.1(a) to current report on Form 8-K filed on September 30, 2009 and incorporated herein by reference). | |||
(g) | Certificate of Change to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated January 31, 2000 (filed herein). | |||
10.1 |
Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and AAA Capital Management Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | |||
10.1 |
(a) | First Amendment to the Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and AAA Capital Management Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | ||
10.1 |
(b) | Second Amendment to the Management Agreement among Citigroup Managed Futures LLC and AAA Capital Management Inc. (filed as Exhibit 33 to the quarterly report on Form 10-Q filed on August 14, 2006 and incorporated herein by reference). |
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Table of Contents
10.1 |
(c) | Letter extending the Management Agreements between the General Partner and AAA Capital Management Inc. for 2009 (filed as Exhibit 10.25 to the annual report on Form 10-K filed March 31, 2009 and incorporated herein by reference). | ||
10.2 |
Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and Willowbridge Associates Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | |||
10.2 |
(a) | First Amendment to the Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and Willowbridge Associates Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | ||
10.2 |
(b) | Letter extending the Management Agreements between the General Partner and Willowbridge Associates Inc. for 2009 (filed as Exhibit 10.25 to the annual report on Form 10-K filed March 31, 2009 and incorporated herein by reference). | ||
10.3 |
Management Agreement among the Partnership, Citigroup Managed Futures LLC and Winton Capital Management Limited (filed as Exhibit 10 to the annual report on Form 10-K filed on March 15, 2004 and incorporated herein by reference). | |||
10.3 |
(a) | Letter extending the Management Agreements between the General Partner and Winton Capital Management Limited for 2009 (filed as Exhibit 10.25 to the annual report on Form 10-K filed March 31, 2009 and incorporated herein by reference). | ||
10.4 |
Amended and Restated Customer Agreement between the Partnership and Salomon Smith Barney Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference). | |||
10.5 |
Second Amended and Restated Agency Agreement between the Partnership, Ceres Managed Futures LLC, Morgan Stanley Smith Barney LLC and Citigroup Global Markets Inc. (filed herein). | |||
10.6 |
Form of Subscription Agreement (filed herein). | |||
10.7 |
Form of Third-Party Subscription Agreement (filed herein). | |||
10.8 |
Joinder Agreement among Citigroup Managed Futures LLC, Citigroup Global Markets Inc. and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the quarterly report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference). |
Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and
Director)
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial
Officer and Director)
Exhibit 32.1 Section 1350 Certification (Certification of President and Director)
Exhibit 32.2 Section 1350 Certification (Certification of Chief Financial Officer and
Director)
27
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ORION FUTURES FUND L.P.
By: | Ceres Managed Futures LLC |
(General Partner)
By: | /s/ Jerry
Pascucci
|
Jerry Pascucci
President and Director
Date: | November 16, 2009 |
By: |
/s/ Jennifer
Magro
|
Jennifer Magro
Chief Financial Officer and Director
(Principal Accounting Officer)
Date: | November 16, 2009 |
28