UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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)
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New York
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22-3644546 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
c/o Ceres Managed Futures LLC
55 East 59th Street 10th Fl.
New York, New York 10022
(Address and Zip Code of principal executive offices)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered
pursuant to Section 12(g)
of the Act: Redeemable Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes No X
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or 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):
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer X |
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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
Limited Partnership Redeemable Units with an aggregate value of $847,800,103 were outstanding and
held by non-affiliates as of the last business day of the registrants most recently completed
second calendar month.
As of
February 28, 2010, 326,294.7792 Limited Partnership Redeemable Units were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
[None]
TABLE OF CONTENTS
PART I
Item 1. Business.
(a) General development of business. Orion Futures Fund L.P., formerly Citigroup Orion
Futures Fund L.P. (the Partnership), is a limited
partnership that was organized on March 22, 1999 under
the partnership laws of the State of New York. The objective of the Partnership is to achieve
substantial capital appreciation through direct or indirect speculative trading in U.S. and
international markets for currencies, interest rates, stock indices, agricultural, energy products,
precious and base metals. The Partnership and the Funds, (as defined below) may employ futures,
options on futures, and forward contracts in those markets. In addition, the Partnership may also
enter into swap contracts on energy related products (together with other traded futures and
options contracts, the Commodity Interests).
During the initial offering period (March 31, 1999 through June 10, 1999) the Partnership sold
10,499 redeemable units of limited partnership interest (Redeemable Units) at $1,000 per
Redeemable Unit. The Partnership commenced its Commodity Interest trading activities on June 10,
1999. No securities which represent an equity interest or any other interest in the Partnership
trade on any public market. The Partnership privately and continuously offers up to 600,000
Redeemable Units to qualified investors. There is no maximum number
of Redeemable Units that may be sold by the Partnership.
Sales and redemptions of Redeemable Units and general partner contributions and redemptions
for the years ended December 31, 2009, 2008, and 2007 are reported in the Statements of Changes in
Partners Capital on page F-14 under Item 8. Financial Statements and Supplementary Data.
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 December 31, 2009, all trading decisions are made for the Partnership by Winton Capital
Management Limited (Winton), Willowbridge Associates Inc. (Willowbridge), and AAA Capital
Management Advisors, Ltd. (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.
A description of the trading activities and focus of the Advisors are
included on Page 9 under Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations.
The Advisors are not affiliated with one another, are not affiliated with the General
Partner/managing member or CGM and are not responsible for the organization or operation of the
Partnership.
The Partnership will be liquidated upon the first to occur of the following: December 31,
2019; the net asset value per Redeemable Unit of decreases to less than $400 as of a close of any
business day; a decline in net assets after trading commences to less than $1,000,000 or under
certain other circumstances as defined in the Limited Partnership Agreement of the Partnership (the
Limited Partnership Agreement).
2
On September 1, 2001, the assets allocated to AAA for trading was invested in the AAA Master
Fund LLC, formerly Citigroup AAA Master Fund LLC (AAA Master) a limited liability company
organized under the limited liability company laws of the State of New York. 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, a
proprietary, discretionary trading system, to invest together in one trading vehicle. The General
Partner is the managing member (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 was 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 the Winton Master with cash of
$33,594,083 and a contribution of open commodity futures and forwards positions 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, a proprietary, systematic trading system, to invest together
in one trading vehicle. The General Partner is 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, a portion of 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 positions
with a fair value of $3,662,925. Willowbridge Master was formed
in order to permit commodity pools managed now or in the future
by using Willowbridges Argo Trading System, a proprietary,
systematic trading system, to invest together in one trading
vehicle. The General Partner is also the general partner of
Willowbridge Master. Individual and pooled accounts currently
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.
Additional assets allocated to Willowbridge are not invested in
a separate limited partnership established by the General
Partner, but are held and traded by Willowbridge directly in
separate managed accounts in the Partnerships name.
Willowbridge trades the Partnerships assets pursuant to
its, Argo Trading System, the Consolidated Commodities Technical
and Consolidated Commodities Fundamental Trading Programs.
The General Partner is not aware of any material changes to the trading programs discussed
above during the year ended December 31, 2009.
AAA Masters, Willowbridge Masters and Winton Masters (the Funds) and the Partnerships
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 and the Partnership engage in such trading through commodity
brokerage accounts maintained
with CGM.
A Limited Partner/non-managing member may withdraw all or part of their capital contribution
and undistributed profits, if any, from the Funds in multiples of the Net Asset Value per
Redeemable Unit of Limited Partnership Interest as of the last day of
any month (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 inform the Funds.
Management and incentive fees are are charged at the Partnership level. All exchange,
clearing, user, give-up, floor brokerage and NFA fees (collectively the clearing fees) are borne
by the Partnership and through its investments in the Funds. All other fees including CGMs direct
brokerage commissions are charged at the Partnership level.
For the period January 1, 2009 through December 31, 2009, the approximate average market sector
distribution for the Partnership was as follows:
At December 31, 2009, the Partnership owned approximately 23.2% of AAA Master, 51.1%
of Winton Master and 58.8% of Willowbridge Master. At December 31, 2008, the
Partnership had approximately 19.8% of AAA Master, 37.9% of Winton Master and 46.1% of
Willowbridge Master. It is AAAs, Willowbridges and Wintons intention to continue
to invest the assets allocated to each by the Partnership in the AAA Master, Willowbridge Master
and Winton Master, respectively. The performance of the Partnership is directly affected by the
performance of the Funds. Expenses to investors as a result of investment in the Funds are
approximately the same and the redemption rights are not affected.
The General Partner and each 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 its initial capital
contribution and profits, if any, net of distributions.
3
Under the amended and restated Limited Partnership Agreement, the General Partner has sole
responsibility for the administration of the business and affairs of the Partnership, but may
delegate trading discretion to one or more trading Advisors. The Partnership pays the General
Partner a monthly administrative fee equal to 1/24 of 1% (0.5% per year) of month-end Net Assets.
Month-end Net Assets, for the purpose of calculating administrative fees are Net Assets, as defined
in the Limited Partnership Agreement, prior to the reduction of the current months incentive fee accrual,
the monthly management fees, the General Partners administrative
fee and any redemptions or distributions as of the end of such month.
Pursuant to the terms of the management agreements (the Management Agreements), the
Partnership will pay each Advisor a monthly management fee equal to 1/6 of 1% (2% a year) of
month-end Net Assets allocated to each Advisor, except for Winton, which will receive a monthly
management fee equal to 1/8 of 1% (1.5% a year) of month-end Net Assets allocated to the Advisor.
Month-end Net Assets, for the purpose of calculating management fees are Net Assets, as defined in
the Limited Partnership Agreement, prior to the reduction of the current months incentive fee accrual,
the monthly management fees, the General Partners administrative
fee and any redemptions or distributions as of the end of such month.
The Management Agreement may be terminated upon notice by either party.
In addition, the Partnership is obligated to pay each Advisor an incentive fee payable
quarterly equal to 20% of the New Trading Profits, as defined in the Management Agreements, earned
by each Advisor for the Partnership during each calendar quarter. The
Advisors will not be paid incentive fees until the
Advisors recovers the net loss incurred and earns additional new trading profits for the
Partnership.
The General Partner, on behalf of the Partnership has entered into a customer agreement (the
Customer Agreement) with CGM which provides that the Partnership will pay CGM brokerage
commission at $18 per round turn for futures and forward transactions, $5 per round turn for swap
transaction and $9 per half turn for options. Brokerage commissions are inclusive of floor
brokerage. The Partnership directly and through its investment in the Funds will pay all clearing
fees. CGM pays a portion of its brokerage commissions to financial advisors who have sold
Redeemable Units in the Partnership. In addition, CGM pays
the Partnership interest on 100% of the average daily equity
maintained in cash in the Partnerships (or the
Partnerships allocable portion of a Funds) account
during each month at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the
non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date in which
such weekly rate is determined.
CGM will pay such interest to the Partnership out of its own funds whether or not it is able to earn the interest it has obligated itself to pay.
Alternatively, CGM may place all of the Partnerships (or a Funds) assets
in 90-day U.S. Treasury bills and pay the Partnership 100% of the interest (or the Partnerships allocable share
thereof) earned on the Treasury bills purchased for the Partnership.
The Customer Agreement gives the Partnership the legal right to net
unrealized gains and losses. The Customer Agreement may be terminated upon notice by either party.
(b) Financial information about industry segments. The Partnerships business consists
of only one segment, speculative trading of commodity interests. The Partnership does not engage in
the sale of goods or services. The Partnerships net income (loss) from operations for the years
ended December 31, 2009, 2008, 2007, 2006 and 2005 are set forth under Item 6. Selected
Financial Data. The Partnerships Capital as of December 31, 2009, was $815,786,554.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (xii) Not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information About Geographic Areas. The Partnership does not engage in
sales of goods or services or own any long lived assets, and therefore this item is not applicable.
(e) Available Information. The Partnership does not have an Internet address. The
Partnership will provide paper copies of its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and any amendments to these reports free of charge upon request.
(f) Reports to Security Holders. Not applicable.
(g) Enforceability of Civil Liabilities Against Foreign Persons. Not applicable.
4
(h) Smaller Reporting Companies. Not applicable.
Item 1A. Risk Factors
As a result of leverage, small changes in the price of the Partnerships positions may result
in major losses.
The trading of commodity interests is speculative, volatile and involves a high degree of
leverage. A small change in the market price of a commodity interest contract can produce major
losses for the Partnership.
Market prices can be influenced by, among other things, changing
supply and demand relationships, governmental, agricultural,
commercial and
trade programs and policies, national and international political and
economic events, weather and climate conditions, insects and plant
disease, purchases and sales by foreign countries and changing
interest rates.
An
investor may lose all of its investment.
Due to the speculative nature of trading commodity interests, an investor could lose all of
its investment in the Partnership.
5
The Partnership will pay substantial fees and expenses regardless of profitability.
Regardless of its trading performance, the Partnership will incur fees and expenses, including
brokerage, management and administrative fees. Substantial incentive fees may be paid to one or
more of the Advisors even if the Partnership experiences a net loss for the full year.
An investors ability to redeem or transfer Redeemable Units is limited.
An investors ability to redeem Reedeemable Units is limited and no market exists for the
Redeemable Units.
Conflicts of interest exist.
The Partnership is subject to numerous conflicts of interest including those that arise from
the facts that:
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The General Partner and commodity broker are affiliates; |
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Each of the Advisors, the commodity broker and their principals and affiliates may trade
in commodity interests for their own accounts; and |
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An investors financial advisor will receive ongoing compensation for providing services
to the investors account. |
Investing in units might not provide the desired diversification of an investors overall
portfolio.
The Partnership will not provide any benefit of diversification of an investors overall
portfolio unless it is profitable and produces returns that are independent from stock and bond
market returns.
Past performance is no assurance of future results.
The Advisors trading strategies may not perform as they have performed in the past. The
Advisors have from time to time incurred substantial losses in trading on behalf of clients.
An investors tax liability may exceed cash distributions.
Investors are taxed on their share of the Partnerships income, even though the Partnership
does not intend to make any distributions.
The General Partner may allocate the Partnerships assets to undisclosed advisors.
The General Partner at any time may select and allocate the Partnerships assets to
undisclosed advisors. Investors may not be advised of such changes in advance.
Investors must rely on the ability of the General Partner to select commodity trading advisors and
allocate assets among them.
Regulatory changes could restrict the Partnerships operations.
Regulatory changes could
adversely affect the Partnership 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; 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) in futures and over-the-counter 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.
Speculative
position and trading limits may reduce profitability.
The CFTC and U.S. exchanges have
established speculative position limits on the maximum net long or net short positions 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 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 by increasing
transaction costs to liquidate positions and foregoing potential profits.
Item 2. Properties.
The Partnership does not own or lease any properties. The General Partner operates out of
facilities provided by its affiliate, Citigroup.
6
Item 3. Legal Proceedings.
This section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which CGM is a party or to which
any of their property is subject. There are no material legal proceedings pending against the
Partnership or the General Partner.
CGM is a New York corporation with its principal place of business at 388 Greenwich St., New
York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant
(FCM), and provides futures brokerage and clearing services for institutional and retail
participants in the futures markets. CGM and its affiliates also provide investment banking and
other financial services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five
years against CGM (formerly known as Salomon Smith Barney) or any of its
individual principals and no such actions are currently pending, except as follows.
Mutual Funds
Several issues in the mutual fund industry have come under the scrutiny of federal and state
regulators. Citigroup has received subpoenas and other requests for information from various
government regulators regarding market timing, financing, fees, sales practices and other mutual
fund issues in connection with various investigations. Citigroup is cooperating with all such
reviews. Additionally, Citigroup Global Markets has entered into a settlement agreement with the
SEC with respect to revenue sharing and sales of classes of funds.
On May 31, 2005, Citigroup announced that Smith Barney Fund Management LLC and Citigroup Global
Markets completed a settlement with the SEC resolving an investigation by the SEC into matters
relating to arrangements between certain Smith Barney mutual funds, an affiliated transfer agent
and an unaffiliated sub-transfer agent. Under the terms of the settlement, Citigroup agreed to pay
fines totaling $208.1 million. The settlement, in which Citigroup neither admitted nor denied any
wrongdoing or liability, includes allegations of willful misconduct by Smith Barney Fund Management
LLC and Citigroup Global Markets in failing to disclose aspects of the transfer agent arrangements
to certain mutual fund investors.
In May 2007, Citigroup Global Markets finalized its settlement agreement with the NYSE and the New
Jersey Bureau of Securities on the matter related to its market-timing practices prior to September
2003.
FINRA Settlement
On October 12, 2009, FINRA announced its acceptance of an Award Waiver and Consent (AWC) in which
Citigroup Global Markets, without admitting or denying the findings, consented to the entry of the
AWC and a fine and censure of $600,000. The AWC includes findings that Citigroup Global Markets
failed to adequately supervise the activities of its equities trading desk in connection with swap
and related hedge trades in U.S. and Italian equities that were designed to provide certain
perceived tax advantages. Citigroup Global Markets was charged with failing to provide for
effective written procedures with respect to the implementation of the trades, failing to monitor
Bloomberg messages and failing to properly report certain of the trades to the NASDAQ.
Auction Rate Securities
On May 31, 2006, the SEC instituted and simultaneously settled proceedings against Citigroup Global
Markets and 14 other broker-dealers regarding practices in the Auction Rate Securities market. The
SEC alleged that the broker-dealers violated Section 17(a)(2) of the Securities Act of 1933. The
broker-dealers, without admitting or denying liability, consented to the entry of an SEC
cease-and-desist order providing for censures, undertakings and penalties. Citigroup
Global Markets paid a penalty of $1.5 million.
On August 7, 2008, Citigroup reached a settlement with the New York Attorney General, the SEC, and
other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par
Auction Rate Securities from all Citigroup individual investors, small institutions (as defined by
the terms of the settlement), and charities that purchased Auction Rate Securities from Citigroup
prior to February 11, 2008. In addition, Citigroup agreed to pay a $50 million fine to the State
of New York and a $50 million fine to the other state regulatory agencies.
Subprime-Mortgage Related Actions
Citigroup and certain of its affiliates are subject to formal and informal investigations, as well
as subpoenas and/or requests for information, from various governmental and self-regulatory
agencies relating to subprime mortgagerelated activities. Citigroup and its affiliates are
cooperating fully and are engaged in discussions on these matters.
Credit Crisis Related Matters
Beginning in the fourth quarter of 2007, certain of Citigroups, and Citigroup Global Markets
regulators and other state and federal government agencies commenced formal and informal
investigations and inquiries, and issued subpoenas and requested information, concerning
Citigroups subprime mortgage-related conduct and business activities. Citigroup and certain of
its affiliates, including Citigroup Global Markets, are involved in discussions with certain of its
regulators to resolve certain of these matters.
Certain of these regulatory matters assert claims for substantial or indeterminate damages. Some
of these matters already have been resolved, either through settlements or court proceedings,
including the complete dismissal of certain complaints or the rejection of certain claims following
hearings.
In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a
party to various civil actions, claims and routine regulatory investigations and proceedings that
the general partner believes do not have a material effect on the business of CGM.
Item 4.
[Removed and Reserved].
7
PART II
Item 5. Market for Registrants Common Equity Related Stockholder Matters and Issuer
Purchases of Equity Securities.
(a) Market Information. The Partnership has issued no stock. There is no public market
for the Redeemable Units.
(b) Holders. The number of holders of Redeemable Units of Partnership Interest as of
December 31, 2009, was 6,742.
(c) Dividends.
The Partnership did not declare a distribution in 2009, 2008 and 2007. The
Partnership does not intend to declare distributions in the foreseeable future.
(d) Securities Authorized for Issuance Under Equity Compensation Plans. None
(e) Performance Graph. Not applicable
(f) Recent
Sales of Unregistered Securities. For the twelve months ended December 31, 2009, there were
additional sales of 124,540.6216 Redeemable Units totaling $346,650,226 and 1,661.7798 General
Partner Units equivalents totaling $4,500,000. For the twelve months ended December 31, 2008, there
were additional sales of 73,057.0497 Redeemable Units totaling $175,479,000 and 852.6005 General
Partner Units equivalents totaling $1,973,412. For the twelve months ended December 31, 2007, there
were additional sales of 75,753.5122 Redeemable Units totaling $144,306,000. The Redeemable Units
were issued in reliance upon applicable exceptions from registration under Section 4(2) of the
Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated there under. The
Redeemable units were purchased by accredited investors as described
in Regulation D.
Proceeds from the sale of additional Redeemable Units are used in the trading of commodity
interests including futures contracts, options, swaps and forward contracts.
(g) Purchases
of Equity Securities by the Issuer and Affiliated Purchases.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
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(d) Maximum Number
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(c) Total Number of
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(or Approximate
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Redeemable
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Dollar Value) of
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(b) Average
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Units Purchased
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Redeemable Units
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(a) Total Number of
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Price Paid per
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as Part of
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that May Yet Be
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Redeemable
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Redeemable
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Publicly Announced
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Purchased Under the
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Period
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Units Purchased*
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Unit**
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Plans or Programs
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Plans or Programs
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October 1, 2009
October 31, 2009
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2,885.8835 |
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$
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2,707.94 |
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N/A
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N/A
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November 1, 2009
November 30, 2009 |
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5,241.3094 |
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$
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2,830.62 |
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N/A
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N/A
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December 1, 2009
December 31, 2009 |
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3,119.2270 |
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$
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2,693.18 |
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N/A
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N/A
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11,246.4199 |
|
|
|
$
|
2,761.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Generally, Limited Partners are permitted to redeem their Redeemable Units as of the end of
each month on 10 days notice to the General Partner. Under certain circumstances, the General
Partner can compel redemption, although 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. |
8
Item 6. Selected Financial Data.
Net
realized and unrealized trading gains (losses), interest income, net income (loss),
increase (decrease) in Net Asset Value per Unit and Net Asset
Value per Unit for the years ended December 31, 2009, 2008, 2007,
2006 and 2005 and total assets at December 31, 2009, 2008, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Net realized
and unrealized
trading gains
(losses) and
investments in
Partnerships net of
brokerage
commissions
(including clearing
fees) of $7,831,507,
$6,766,398,
$6,362,776,
$6,049,901 and
$5,235,263,
respectively |
|
$ |
(17,982,427 |
) |
|
$ |
215,756,539 |
|
|
$ |
65,513,200 |
|
|
$ |
28,869,155 |
|
|
$ |
31,783,155 |
|
Total interest income |
|
|
539,835 |
|
|
|
5,823,101 |
|
|
|
14,917,240 |
|
|
|
11,046,038 |
|
|
|
4,083,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(17,442,592 |
) |
|
$ |
221,579,640 |
|
|
$ |
80,430,440 |
|
|
$ |
39,915,193 |
|
|
$ |
35,866,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(39,246,801 |
) |
|
$ |
166,805,886 |
|
|
$ |
63,393,428 |
|
|
$ |
29,048,211 |
|
|
$ |
23,623,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in Net Asset Value
per Unit |
|
$ |
(143.75 |
) |
|
$ |
704.34 |
|
|
$ |
304.80 |
|
|
$ |
216.46 |
|
|
$ |
243.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset
Value per Unit |
|
$ |
2,693.18 |
|
|
$ |
2,836.93 |
|
|
$ |
2,132.59 |
|
|
$ |
1,827.79 |
|
|
$ |
1,611.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
827,864,934 |
|
|
$ |
685,714,876 |
|
|
$ |
469,271,467 |
|
|
$ |
313,156,339 |
|
|
$ |
174,986,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Overview
The Partnership directly and through its investment in the Funds, seeks to achieve substantial
capital appreciation through speculative trading, directly or indirectly, in U.S. and international
markets for currencies, interest rates, stock indices, agricultural and energy products and
precious and base metals. The Partnership may employ futures, options on futures, and forward
contracts in those markets. The Partnership may also enter into swap transactions relating to the
value of crude oil and other energy related products.
9
The General Partner manages all business of the Partnership. The General Partner has delegated
its responsibility for the investment of the Partnerships capital to AAA, Willowbridge, and
Winton. The General Partner employs a team of approximately 20 professionals whose primary emphasis
is on attempting to maintain quality control among the Advisors to the partnerships operated or
managed by the General Partner. A full-time staff of due diligence professionals use proprietary
technology and on-site evaluations to monitor new and existing futures money managers. The
accounting and operations staff provide processing of trading activity and reporting to limited
partners and regulatory authorities. In selecting the Advisors for the Partnership, the General
Partner considered past performance, trading style, volatility of markets traded and fee
requirements.
Responsibilities of the General Partner include:
|
|
|
due diligence examinations of the Advisors; |
|
|
|
selection, appointment and termination of the Advisors; |
|
|
|
negotiation of the Management Agreements; and |
|
|
|
monitoring the activity of the Advisors. |
In addition, the General Partner prepares the books and records and provides the
administrative and compliance services that are required by law or regulation from time to time in
connection with operation of the Partnership. These services include the preparation of required
books and records and reports to limited partners, government agencies and regulators; computation
of net asset value; calculation of fees; effecting subscriptions, redemptions and limited partner
communications; and preparation of offering documents and sales literature.
The
General Partner seeks the best prices and services available in its commodity futures
brokerage transactions.
The programs traded by each Advisor on behalf of the Partnership are: AAA Energy Program
Futures and Swaps; Willowbridge Argo; Vulcan, Consolidated Commodities Technical and
Consolidated Commodities Fundamental Trading Systems; and Winton Diversified Program. As of
December 31, 2009, the Partnerships assets were allocated among the trading Advisors in the
following approximate percentages: AAA, 35%, Willowbridge, 30%, and
Winton, 35%. The General Partner may modify or terminate the
allocation of assets among trading advisors at any time and may
allocate assets to additional advisors at any time.
AAA Capital Management Advisors, Ltd.
The portion of the Partnerships assets that are currently allocated to AAA for trading are
not invested in commodity interests directly. AAAs allocation of the Partnerships assets is
currently invested in AAA Master. AAA trades AAA Masters, and thereby the Partnerships, assets in
accordance with its Energy Program Futures and Swaps, a
discretionary trading system.
AAA Master currently trades energy futures contracts and options on energy futures contracts
on domestic and international exchanges, as well as the Goldman Sachs Commodity Index (an index
future comprised of energy and other products) traded on the Chicago Mercantile Exchange. AAA
Master also currently engages in swap transactions involving crude oil and other energy related
products. References herein to energy and energy related products include all of the foregoing.
AAA generally bases its trading decisions on fundamental factors, namely supply and demand
for a particular group or type of commodity. AAA attempts to buy undervalued commodities and sell
overvalued commodities, often but not always simultaneously. AAA uses options to attempt either to
reduce or define risks.
AAA is aware of price trends but does not trade upon trends. AAA often takes profits in
positions with specific trends even though that trend may still be intact or perhaps even strong.
AAA occasionally establishes positions that are countertrend.
Effective risk management is a crucial aspect of AAAs trading program. Account size,
expectation, volatility of the market traded and the nature of other positions taken are all
factors in determining the amount of equity committed to each trade. AAA Master is AAAs largest
account.
10
Willowbridge Associates, Inc.
The portion of the Partnerships assets that are currently allocated to Willowbridge for
trading are invested in commodity interests directly, and is also invested in Willowbridge Master.
Willowbridge trades the Partnerships assets allocated to it in accordance with its Select
Investment Program, whereby the General Partner determined the initial allocation of the
Partnerships assets among one or more of Willowbridges strategies and may determine subsequent
reallocations (if any). Of the Partnerships assets allocated to Willowbridge, 29% is currently
traded using the Vulcan Trading System (Vulcan), 55% is currently traded using the Argo Trading
System (Argo), 5% is currently traded using Consolidated Commodities Technical (CCT) and 11%
is currently traded using Consolidated Commodities Fundamental (CCF) each of which is described
below.
For each of these systems, risk is managed on a market by market level as well as on an
overall portfolio level. On the market level, risk is managed primarily by utilizing proprietary
volatility filters. When these filters detect a certain excessive level of volatility in the
markets traded, they will signal that the systems should no longer be trading in the markets in
which the filters have detected excessive volatility. In this way, the systems do not participate
in markets in which there are extremes in market action. On the portfolio level, risk is managed by
utilizing a proprietary portfolio cutback rule. When cumulative profits have reached a certain
level, this rule determines that positions should be halved across the entire portfolio. In this
way, risk is reduced while allowing the systems to continue to participate in the markets, albeit
at a reduced level. After the portfolio has been traded at half, the portfolio cutback rule will
then determine when to increase positions to again trade at the full level.
Vulcan, which commenced trading in 1988, is a computerized technical trading system. It is not
a trend-following system, but does ride a trend when the opportunity arises. Vulcan uses the
concepts of pattern recognition, support/resistance levels, and counter-trend liquidations (as
defined below) in making trading decisions. In effect, Vulcan is more akin to a systematic
technical charting system, as opposed to most computer systems which are based on pure
trend-following calculations.
Vulcan is based on general technical trading principles. It applies these principles to a
diversified portfolio of commodities and currencies. Given that the system is based on general
principles, the system parameters used are the same for all items in the portfolio and are not
optimized. In this manner, the Vulcan minimizes the problem of data-fitting.
Argo commenced trading in 1988. Argo essentially incorporates Vulcans concepts of pattern
recognition, support/resistance levels and counter-trend liquidations (as defined below) to trade a
portfolio similar to Vulcan. However, Argo has a relatively slower time horizon than Vulcan and
attempts to capture longer-term price moves.
Pattern recognition, support/resistance levels and counter-trend liquidations are defined as
follows:
Pattern recognition is the ability to identify patterns that appear to have acted as
precursors of price advances or declines in the past.
A support level is a previous lowa price level under the current market price at which point
buying interest is expected to be sufficiently strong to overcome selling pressure.
A resistance level is a previous higha price level over the current market price at which
point selling pressure is expected to overcome buying pressure and a price advance is expected to
be turned back.
A counter-trend liquidation is the closing out of a position after a significant price move on
the assumption that the market is due for a correction.
The Consolidated Commodities program is a trading approach through which Willowbridges
founder and principal trader makes discretionary decisions on a diversified portfolio of commodity
interests. These include energies, grains, tropical products, livestock, base metals and precious
metals. The trading decisions are based on reward-to risk expectations derived from the principals
experience in analyzing the fundamental outlook for the commodity markets as well as applying
anecdotal information and technical factors.
11
Winton Capital Management Limited
The portion of the Partnerships assets that are currently allocated to Winton for trading are
not invested in commodity interests directly. Wintons allocation of the Partnerships assets is
currently invested in Winton Master. Winton trades its Diversified Program on behalf of Winton
Master. The Diversified Program trades approximately 95 futures and forward contracts on U.S. and
non-U.S. exchanges and markets.
Winton employs a fully computerized, technical, trend-following trading system developed by
its principals. This system tracks the daily price movements from these markets around the world,
and carries out certain computations to determine each day how long or short the portfolio should
be in an attempt to maximize profit within a certain range of risk. If rising prices in a
particular market are anticipated, a long position will be established in that market; if prices in
a particular market are expected to fall, a short position in that market will be established.
Technical analysis refers to analysis based on data intrinsic to a market, such as price and
volume. In contrast, fundamental analysis relies on factors external to a market, such as supply
and demand. The Winton Program employs no fundamental factors.
A trend-following system is one that attempts to take advantage of the observable tendency of
the markets to trend, and to tend to make exaggerated movements in both upward and downward
directions as a result of such trends. These exaggerated movements are largely explained as a
result of the influence of crowd psychology or the herd instinct among market participants.
A trend-following system does not anticipate a trend. In fact, trend-following systems are
frequently unprofitable for long periods of time in particular markets or market groups, and
occasionally they are unprofitable for periods of more than a year. However, the principals believe
that such an approach will, in the long term, be profitable.
Trade selection is not subject to intervention by Wintons principals and therefore is not
subject to the influences of individual judgment. As a mechanical trading system, the Winton model
embodies all the expert knowledge required to analyze market data and direct trades, thus
eliminating the risk of basing a trading program on one indispensable person. Equally as important
is the fact that mechanical systems can be tested in simulation for long periods of time and the
models empirical characteristics can be measured.
The systems output is rigorously adhered to in trading the portfolio and intentionally no
importance is given to any external or fundamental factors. While it may be seen as unwise to
ignore information of obvious value, such as that pertaining to political or economic developments,
Winton believes that the disadvantage of this approach is far outweighed by the advantage of the
discipline that rigorous adherence to such a system instills. Winton believes that significant
profits may be realized by the Winton system by holding on to positions for much longer than
conventional wisdom would dictate. Winton believes that a trader who pays attention to day-to-day
events could be distracted from the chance of fully capitalizing on such trends.
The Winton system trades in all liquid U.S. and non-U.S. futures and forward contracts.
Forward markets include major currencies and precious and base metals, the latter two categories
being traded on the London Metal Exchange. Winton seeks out new opportunities to add additional
markets to the portfolio, with the goal of increasing the portfolios diversification.
Winton believes that taking positions in a variety of unrelated markets will, over time,
decrease system volatility. By employing a sophisticated and systematic method for placing orders
in a wide array of markets, Winton believes that profits can be realized over time.
No assurance can be given that Advisors strategies will be successful or that they will
generate profits for the Partnership.
12
Average
Allocation by Commodity Market Sector for the period January 1, 2009 through December
31, 2009
CMF Willowbridge Argo Master Fund L.P.
|
|
|
|
|
Currencies |
|
|
23.4 |
% |
Energy |
|
|
17.8 |
% |
Grains |
|
|
8.3 |
% |
Interest Rates Non-U.S. |
|
|
16.6 |
% |
Interest Rates U.S. |
|
|
9.5 |
% |
Livestock |
|
|
0.4 |
% |
Metals |
|
|
18.1 |
% |
Softs |
|
|
5.9 |
% |
Willowbridge Associates Inc.
|
|
|
|
|
Currencies |
|
|
18.8 |
% |
Energy |
|
|
21.1 |
% |
Grains |
|
|
11.5 |
% |
Interest Rates Non-U.S. |
|
|
13.0 |
% |
Interest Rates U.S. |
|
|
7.2 |
% |
Livestock |
|
|
0.4 |
% |
Metals |
|
|
21.9 |
% |
Softs |
|
|
6.2 |
% |
AAA Master Fund LLC
CMF Winton Master L.P.
|
|
|
|
|
Currencies |
|
|
26.1 |
% |
Energy |
|
|
4.3 |
% |
Grains |
|
|
5.6 |
% |
Interest Rates Non-U.S. |
|
|
20.5 |
% |
Interest Rates U.S. |
|
|
11.1 |
% |
Livestock |
|
|
0.8 |
% |
Metals |
|
|
9.0 |
% |
Softs |
|
|
3.0 |
% |
Stock Indices |
|
|
19.6 |
% |
(a) Liquidity.
The Partnership does not engage in the sales of goods or services. The Partnerships assets
are its (i) investment in partnerships, (ii) equity in its commodity futures trading account,
consisting of cash and cash equivalents, net unrealized appreciation on open futures contracts,
net unrealized appreciation on open forward contracts, and (iii) distribution and interest receivable.
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 illiquidity occurred during the year ended December
31, 2009.
13
To minimize this risk relating to low margin deposits, the Partnership and Funds follow
certain trading policies, including:
|
(i) |
|
The Partnership and Funds invest their assets only in commodity interests that the
Advisors believe are traded in sufficient volume to permit ease of taking and liquidating
positions. Sufficient volume, in this context, refers to a level of liquidity that the
Advisors believe will permit it to enter and exit trades without noticeably moving the
market. |
|
(ii) |
|
An Advisor will not initiate additional positions in any commodity if these positions
would result in aggregate positions requiring a margin of more than 66 2/3% of the
Partnerships net assets allocated to that Advisor. |
|
(iii) |
|
The Partnership and Funds may occasionally accept delivery of a commodity. Unless such
delivery is disposed of promptly by retendering the warehouse receipt representing the
delivery to the appropriate clearinghouse, the physical commodity position is fully hedged. |
|
(iv) |
|
The Partnership and Funds do not employ the trading technique commonly known as
pyramiding, in which the speculator uses unrealized profits on existing positions as
margin for the purchases or sale of additional positions in the same or related commodities. |
|
(v) |
|
The Partnership and Funds do not utilize borrowings other than short-term borrowings if the
Partnership/Funds take delivery of any cash commodities. |
|
(vi) |
|
The Advisors may, from time to time, employ trading strategies such as spreads or
straddles on behalf of the Partnership/Funds. Spreads
and Straddles describe commodity futures trading strategies involving the simultaneous buying and selling of futures
contracts on the same commodity but involving different delivery
dates or markets. |
|
(vii) |
|
The Partnership/Funds will not permit the churning of its commodity trading account. The
term churning refers to the practice of entering and exiting trades with a frequency
unwarranted by legitimate efforts to profit from the trades, driven by the desire to
generate commission income. |
From January 1, 2009 through December 31, 2009, the Partnerships average margin to
equity ratio (i.e., the percentage of assets on deposit required for margin) was
approximately 10.4%. The foregoing margin to equity ratio takes into account cash held
in the Partnerships name, as well as the allocable value of the positions and cash held on
behalf of the Partnership in the name of the Funds.
In
the normal course of 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 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 at specified 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
certain forwards and option contracts. OTC contracts are negotiated between contracting parties and
include swaps and certain forwards and option contracts. Each of these instruments is subject to
various risks similar to those relating 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.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership and 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 and the 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 Partnership and the Funds risk of loss in the
event of 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
Partnership 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 Partnership and the Funds assets is CGM
or a CGM affiliate. Credit risk with respect to exchange traded
14
instruments is reduced to the extent that, through CGM, the Partnership 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
Guarantees (formerly, FAS No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees).
The
General Partner/Managing Member monitors and attempts to control the Partnerships/Funds 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 may be subject. These
monitoring systems generally 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. (See also Item 8. Financial Statements and
Supplementary Data for further information on financial instrument risk included in the notes
to financial statements.)
Other
than the risks inherent in commodity futures and other derivatives trading, the Partnership knows of
no trends, demands, commitments, events or uncertainties which will result in or which are
reasonably likely to result in the Partnerships liquidity increasing or decreasing in any material
way. The Limited Partnership Agreement provides that the Partnership
shall terminate under certain
circumstances including a decrease in Net Asset Value per Redeemable Unit to less than $400 as of
the close of business on any business day.
(b) Capital Resources.
(i) The Partnership has made no material commitments for capital expenditures.
(ii) The Partnerships capital consists of the capital contributions of the partners as
increased or decreased by gains or losses on trading and by expenses, interest income, redemptions
of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be
predicted. Market movements in commodities are dependent upon fundamental and technical factors which
the Advisors may or may not be able to identify, such as changing supply and demand relationships,
weather, government agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. Partnership expenses
consist of, among other things, brokerage commissions, advisory fees and administrative fees. The level of
these expenses is dependent upon trading performance and the level of Net
Assets maintained. In addition, the amount of interest income payable by CGM is dependent upon
interest rates over which the Partnership has no control.
The Partnership continues to offer Redeemable Units at the Net Asset Value per Redeemable Unit
of Limited Partnership Interest as of the end of each month. For the year ended December 31, 2009,
there were additional sales of 124,540.6216 Redeemable Units totaling $346,650,226 and 1,661.7798
General Partner Unit equivalents totaling $4,500,000 . For the year ended December 31, 2008, there
were additional sales of 73,057.0497 Redeemable Units totaling $175,479,000 and 852.6005 General
Partner Unit equivalents totaling $1,973,412. For the year ended December 31, 2007, there were
additional sales of 75,753.5122 Redeemable Units totaling $144,306,000.
No forecast can be made as to the level of redemptions in any given period. A Limited Partner
may require the Partnership to redeem their Redeemable Units at their Net Asset Value as of the
last day of a month on 10 business days notice to the General Partner. There is no fee charged to
Limited Partners in connection with redemptions.
Redemptions generally are funded out of the Partnerships cash holdings.
For the year ended December 31, 2009, 52,022.5263
Redeemable Units were redeemed totaling $145,003,724. For the year ended December 31, 2008,
61,071.3615 Redeemable Units were redeemed totaling $155,777,201. For the year ended December 31,
2007, 28,154.4589 Redeemable Units were redeemed totaling $54,941,617 and 436.3952 General Partner
Unit equivalents were redeemed totaling $750,133
Redeemable Units of Limited Partnership Interest were sold to persons and entities who are
accredited investors as that term is defined in rule 501(a) of Regulation D under the Securities
Act of 1933 as amended (the Securities Act), as well as to those persons who are not accredited
investors but who have either a net worth (exclusive of home, furnishings and automobile) either
individually or jointly with the investors spouse of at least three times their investment in the
Partnership (the minimum investment for which was $25,000) or gross income for the two previous years and projected gross income for the current
fiscal year of not less than three times their investment in the Partnership for each year.
15
(c) Results of Operations.
For the year ended December 31, 2009 the Net Asset Value per Redeemable Unit decreased 5.1%
from $2,836.93 to $2,693.18. For the year ended December 31, 2008 the Net Asset Value per
Redeemable Unit increased 33.0% from $2,132.59 to $2,836.93. For the year ended December 31, 2007
the Net Asset Value per Redeemable Unit increased 16.7% from $1,827.79 to $2,132.59 The Partnership
experienced a net trading loss of $10,150,920 before commissions and expenses in 2009. Losses were
primarily attributable to the Partnerships/Funds trading of currencies, grains, U.S. and non-U.S.
interest rates, livestock, softs, and indices and were primarily offset by gains recognized
in energy and metals.
2009 was a volatile year for the financial markets. The U.S. stock market entered 2009 reeling
from the financial turmoil of 2008. The results of the sub-prime fallout, bank bailouts, auto
industry bankruptcies, and capitulating economic data overwhelmed not just stock prices, but fueled
extraordinarily high levels of risk aversion. The markets recovery was driven by stability in the
banking sector and a rapid recovery in global markets. By mid-year
2009, the market had hit
bottom, in March, banks were seeking to return TARP bailout money and leading indicators were
recovering. The Partnership realized losses as trends were volatile and sensitivity to news shocks
and contrary economic data.
Losses were realized in trading fixed income instruments. With the economic backdrop of 2009,
yields started to exhibit asymmetric volatility due to extreme uncertainty prevailing in the longer
time horizon. Encouraged by the continuing efforts of the Obama administration to stabilize the
U.S. economy, the markets finally began to recover a degree of risk-taking confidence in March,
resulting in the reversal of many of the trends that had driven returns in late 2008. Losses were
also taken in trading the currencies, primarily in December as the Japanese yen reversed sharply on
Japanese Prime Minister Yukio Hatoyamas dissatisfaction over the high value of the Yen. In
agricultural commodities, losses were realized primarily in corn and wheat. Prices of corn and
wheat both unexpectedly rallied in October as cold and wet weather threatened to delay harvest and
concerns over the acres likely to be seeded for the new crop. Losses were incurred in sugar after
prices hit a 28 year high, which led many countries to reduce their expected sugar imports.
The
Partnership experienced a net trading gain, before brokerage commissions and related fees,
in 2008 of $222,522,937. Gains were primarily attributable to the Partnerships/Funds trading of
currencies, energy, metals, grains, U.S. and non-U.S. interest rates, livestock, lumber and
indices and were primarily offset by losses recognized in softs.
In 2008, the liquidity crisis that began in 2007 rapidly spread to all corners of the globe,
significantly pushing down global economic growth and presenting the U.S. economy with the hardest
challenges since the Great Depression. During the year, the worlds credit markets virtually seized
up, commodity prices plunged and most major equity indices declined dramatically, while some of the
largest U.S. financial institutions were under pressure. Faced with unprecedented rapid
deterioration in economic data and outlook, and fearing a snowball adverse effect of the credit
crunch, global central banks reacted with aggressive campaigns of interest rate cuts and
coordinated capital injections. As the markets re-priced the cost of risk, several strong trends
emerged. The Partnership strongly capitalized on the trends and was profitable in almost every
sector.
Profits were primarily realized from trading in energy, fixed income, and currency. The
Partnership realized most of the profits in the energy sector by capturing both the bullish and the
bearish trends. In the earlier part of the year, crude oil pushed towards a historic high of $147
per barrel and in the latter part, the trend suddenly reversed and a strong negative trend emerged
with crude oil dropping to about $32 per barrel. Natural gas also contributed to profits as prices
plunged from $14 to about $5 per BTU. The Partnership was also profitable in interest rates as the yield on
short term notes dropped significantly. Short term U.S. Treasury bills were in such high demand due
to flight-to-quality that the yields had dropped below zero during the year. While the 10Yr T-bill
yielded on an average between 3.5%-4% most of the year, the yield dropped to 2% in December.
Non-U.S. interest rates also showed tremendous volatility as the rates dropped precipitously due to
the actions of the central banks. The Partnership also benefited from strong trends that emerged in
the currencies and realized gains for the year. U.S. Dollar was relatively strong compared with
most of the other developed economy currencies. Euro was put to its first major test since its
inception. UK, Germany and France continued to show weak growth earlier in the year and as the
situations worsened in the later part of the year, these countries officially entered a recession.
As investors sought U.S. Dollar denominated assets for relative safety, the Dollar emerged stronger
relative to other currencies. Japanese Yen remained an exception and showed extraordinary strength
as the carry trade reversed. Slightly offsetting gains were small losses in soft commodities such
as coffee.
Interest income is earned on 100% of the Partnerships average daily equity maintained in cash in the Partnerships (or the Partnerships allocable portion of a Funds) brokerage account was
earned 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 (or a Funds) assets in 90-day Treasury bills and pay the Partnership 100%
of the interest earned on the Treasury bills purchased. Interest income for the three and twelve
months ended December 31, 2009 decreased by $189,390 and $5,283,266, respectively as compared to
the corresponding periods in 2008. The decrease in interest income is primarily due to lower U.S.
Treasury Bill rates for the Partnership during the three and twelve months ended December 31, 2009,
as compared to the corresponding periods in 2008.
Interest earned by the Partnership will increase the net asset value of the Partnership.
The amount of interest income earned by the Partnership depends on the average daily equity in the Partnerships and the Funds accounts and upon interest rates over which neither the Partnership nor CGM has control.
16
Brokerage commissions are calculated as a percentage of the Partnerships adjusted net asset value
on the last day of each month and are affected by trading performance, additions and redemptions.
Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values.
Brokerage commissions and fees for the three and twelve months ended December 31, 2009 increased by
$1,044,861 and $1,065,109, respectively as compared to the corresponding periods in 2008. The
increase in brokerage commissions and fees primarily due to an increase in the number of trades
during the three and twelve months ended December 31, 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 twelve months ended December 31, 2009, increased by $639,105 and $2,491,654,
respectively as compared to the corresponding periods in 2008. The increase in management fees is
due to an increase in average net assets for the three and twelve months ended December 31, 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 twelve months ended
December 31, 2009 increased by $181,289
and $661,641, 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 twelve months ended December 31, 2009, as compared to the
corresponding periods in 2008.
Incentive fees are based on the new trading profits generated by the Advisor at the end of the year
as defined in the management agreements between the Partnership, the General Partner and each
Advisor. Trading performance for the three and twelve months ended December 31, 2009 resulted in
incentive fees of $4,138,088. Trading performance for the three and twelve months ended December
31, 2008 resulted in incentive fees of $10,922,553 and $40,256,797, respectively.
The Partnership experienced a net trading gain of $71,875,976 before commissions and expenses
in 2007. Gains were primarily attributable to the Partnerships/Funds trading of currencies,
energy, grains, U.S. and non-U.S. interest rates, livestock and lumber and were primarily offset by
losses recognized in metals, softs and indices.
In 2007, the Partnership profited from macro-economic developments that stimulated volatility
and asset price trends of a favorable duration to the underlying Advisors trading strategies.
Negative developments in the U.S. mortgage markets and the increasing probability of recession
resonated throughout the capital and commodity markets. A surge in volatility in the global equity
markets in February was driven by a tumble in Chinese stock valuations that curbed sentiment for
global risk assets and sparked a material sell-off in global stock prices. The year would go on to
be highlighted by two additional measurable equity market corrections in the summer and fall. By
mid-summer, dislocations in U.S. asset-backed and mortgage-backed credit markets emerged as the
central focal point of global capital markets shifted. The ensuing re-pricing of credit risk
resulted in a flight-to-quality driven rally in prices of sovereign debt, especially in the U.S.
Treasury markets as the Federal Open Market Committee acted rapidly to stem the negative
implications for growth. As a result of the series of rate cuts and negative economic data, the
U.S. dollar became less attractive and weakened materially against most major currencies during the
latter part of the year. Commodity markets continued to signal inflation, further clouding the
economic landscape, as global demand for most food and raw materials continued to be robust. Prices
moved rather erratically at times.
Gains were also generated by substantially rising oil prices, which reached all-time contract
highs due to robust global demand, ongoing geopolitical concerns and increased speculative
participation in the commodity. Profits were realized in fixed income trading as turbulence in
asset backed credit markets became a catalyst for significant directional moves in yields and
strong bias towards price rallies across Treasury curves. The
Partnership also benefited from persistent
trends in the currency sector, notably in Japanese Yen, New Zealand Dollar and British Pounds.
Trading gains were offset slightly by losses related to trading in metals and soft
commodities. Sporadic rallies in the U.S. dollar negatively impacted positions in certain precious
metals, which tend to demonstrate inverse price movements. Prices of industrial metals also moved
erratically during most of the year, mainly due to fluctuating estimates of Chinese and emerging
market economic growth resulting in unfavorable price action for the Advisors. Losses were also
experienced in trading soft commodities such as coffee and cocoa. Excess exports from growers in
Africa and Indonesia in the month of August resulted in a surprising fall in process driven by
increased supply.
In the General Partners opinion, the Partnerships Advisors continue to employ trading
methods consistent with the objectives of the Partnership/Funds. The General Partner/Managing
Member monitors the Advisors performance on a daily, weekly, monthly and annual basis to assure
these objectives are met.
17
It should be noted that commodity markets are highly volatile. Broad price fluctuations and
rapid inflation increase the risks involved in commodity trading, but also increase the possibility
of profit. The profitability of the Funds and the Partnership depends on the Advisors ability to
forecast changes in energy and energy related commodities. Such price changes 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 the Advisors correctly make such
forecasts, the Funds and the Partnership expect to increase capital through operations.
In allocating the assets of the Partnership among the Advisors, the General Partner considered
past performance, trading style, volatility of markets traded and fee requirements. The General
Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets
to additional advisors at any time.
(d) Off-balance
Sheet Arrangements. None
(e) Contractual
Obligations. None
(f) Operational Risk.
The Partnership is directly exposed to market risk and credit risk, which arise in the normal
course of its business activities. Slightly less direct, but of critical importance, are risks
pertaining to operational and back office support. This is particularly the case in a rapidly
changing and increasingly global environment with increasing transaction volumes and an expansion
in the number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement Risk the risk of financial and opportunity loss and legal liability
attributable to operational problems, such as inaccurate pricing of transactions, untimely trade
execution, clearance and/or settlement, or the inability to process large volumes of transactions.
The Partnership/Funds are subject to increased risks with respect to its trading activities in
emerging market securities, where clearance, settlement, and custodial risks are often greater than
in more established markets.
Technological Risk the risk of loss attributable to technological limitations or hardware
failure that constrain the Partnerships ability to gather, process, and communicate information
efficiently and securely, without interruption, to customers and in the markets where the
Partnership/Funds participates.
Legal/Documentation Risk the risk of loss attributable to deficiencies in the documentation
of transactions (such as trade confirmations) and customer relationships (such as master netting
agreements) or errors that result in noncompliance with applicable legal and regulatory
requirements.
Financial Control Risk the risk of loss attributable to limitations in financial systems
and controls. Strong financial systems and controls ensure that assets are safeguarded, that
transactions are executed in accordance with managements authorization, and that financial
information utilized by management and communicated to external parties, including the
Partnerships Redeemable Unit holders, creditors, and regulators, is free of material errors.
18
(g) 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. In making these estimates and
assumptions, management has considered the effects, if any, of events occurring after the date the
Partnerships Statements of Financial Condition through the date the
financial statements were issued. 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, Statement of Cash Flows (formerly, FAS No. 102, Statement of Cash
Flows-Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities
Acquired for Resale).
Partnerships
and the Funds Investments. All commodity interests held by
the Partnership and the Funds (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
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.
Partnerships and the Funds Fair Value Measurements. The Partnership and the Funds adopted
ASC 820, 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. The Partnership did not apply the deferral allowed by ASC 820, 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 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 years ended December 31, 2009 and 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).
Futures
Contracts. The Partnership and the Funds trade futures contracts.
Exchange cleared swaps included in futures and exchange cleared swaps
and swaps that are traded as futures. 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 can not occur (such as the 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. 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 directly, 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.
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.
Options. The Partnership and the Funds 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 writes 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.
Brokerage Commissions. Commission charges to open and close 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.
19
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.
In 2007, the Partnership adopted ASC 740,
Income Taxes (formerly, FAS 48 Accounting for
Uncertainty in Income Taxes). ASC 740 provides guidance for how uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements. ASC 740 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 concluded that no
provision for income tax is required in the Partnerships financial statements.
The following is the major tax jurisdiction for the Partnership and the earliest tax year
subject to examination: United States 2006.
Subsequent Events. In 2009, the Partnership adopted ASC 855 Subsequent events (formerly,
FAS No. 165 Subsequent Events). The Objective of ASC 855 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. Management
has determined that these were no subsequent events requiring
adjustment on disclosure in the financial statements.
Recent Accounting Pronouncements. In January 2010, the FASB issued Accounting Standards Update
No. 2010-06 (ASU 2010-06), Improving Disclosures about Fair Value Measurements, which , among
other things, amends ASC 820 to require entities to separately present purchases, sales, issuances,
and settlements in their reconciliation of Level 3 fair value measurements (i.e. to present such
items on a gross basis rather than on a net basis), and which clarifies existing disclosure
requirements provided by ASC 820 regarding the level of disaggregation and the inputs and valuation
techniques used to measure fair value for measurements that fall within either Level 2 or Level 3
of the fair value hierarchy. ASU 2010-06 is effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in
the roll forward of activity in Level 3 fair value measurements (which are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption of ASU 2010-06 will have on the
Partnerships financial statements disclosures.
In February 2010,
the FASB issued Accounting Standards Update No. 2010-09 (ASU 2010-09), Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements, which among other things amended
ASC 855 to remove the requirement for an SEC filer to disclose the date through which subsequent events
have been evaluated. This change alleviates potential conflicts
between ASC 855 and the
SECs requirements. All of the amendments in this update are effective upon issuance of this
update. Management has included the provision of these amendments in the financial statements.
Certain prior period amounts have been reclassified to conform to the current year
presentation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The
Partnership/Funds are speculative commodity pools. The market sensitive instruments held
by the Partnership/Funds 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 line 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 Partnership
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
positions and, consequently, in its earnings and cash balances. The Partnerships/Funds market
risk is influenced by a wide variety of factors. These primarily include factors which affect
energy price levels, including supply factors and weather conditions, but could also include the
level and volatility of interest rates, exchange rates, equity price levels, the market value of
financial instruments and contracts, the diversification effects among the Partnerships/Funds
open positions and the liquidity of the markets in which it trades.
20
The Partnership/Funds rapidly acquires and liquidates 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 past performance is not necessarily
indicative of its 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 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 included 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 its market risk.
Materiality
as used in this section, Quantitative and Qualitative
Disclosures About Market Risk, is based on an assessment of
reasonably possible market movements and the potential losses caused
by such movements, taking into account the leverage, optionality and
multiplier features of the Partnerships/Funds market
sensitive instruments.
Quantifying the Partnerships Trading Value at Risk
The
following quantitative disclosures regarding the
Partnerships/Funds market risk exposures
contain forward-looking statements within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in
Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act)). All quantitative disclosures in
this section are deemed to be forward-looking statements for purposes of the safe harbor except for
statements of historical fact (such as the terms of particular contracts and the number of market
risk sensitive instruments held during or at the end of the reporting period).
The
Partnerships/Funds risk exposure in the various market sectors traded by the Advisors is
quantified below in terms of Value at Risk. Due to the Partnerships/Funds mark-to-market
accounting, any loss in the fair value of the Partnerships open positions is directly reflected in
the Partnerships earnings (realized or unrealized) and cash balance.
Exchange maintenance margin requirements have been used by the Partnership as the measure of
its 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. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current market volatility
(including the implied volatility of the options on a given futures contract) and economic
fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price
fluctuation. 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.
In the case of market sensitive instruments which are not exchange traded (almost exclusively
currencies in the case of the Partnership/Funds), the margin requirements for the equivalent futures
positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin
is not available, dealers margins have been used.
The
fair value of the Partnerships/Funds futures and forward positions does not have any
optionality component. However, the Advisor does trade commodity options. Where this instrument is
a futures contract, the futures margin, and where this instrument is a physical commodity, the
futures-equivalent maintenance margin has been used. This calculation is conservative in that it
assumes that the fair value of an option will decline by the same amount as the fair value of the
underlying instrument, whereas, in fact, the fair values of the options traded by the
Partnership/Funds in almost all cases fluctuate to a lesser extent than those of the underlying instruments.
In
quantifying the Partnerships/Funds Value at Risk, 100% positive correlation in the different
positions held in each market risk category has been assumed. Consequently, the margin requirements
applicable to the open contracts have simply been added to determine each trading categorys
aggregate Value at Risk. The diversification effects resulting from the fact that the
Partnerships positions are rarely, if ever, 100% positively correlated have not been reflected.
21
The Partnerships Trading Value at Risk in Different Market Sectors
Value at Risk tables represent a probabilistic assessment of
the risk of loss in market risk sensitive instruments. With the exception of Willowbridge, the Partnerships
advisor currently trade the Partnerships assets indirectly in master
fund managed accounts established in the name over which they have been granted limited authority
to make trading decisions.
Willowbridge directly trades managed accounts in the
Partnerships name.
The first two trading Value at Risk tables reflect
the market sensitive instruments held by the Partnership directly and through its
investment in the Funds.
The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e., in the managed account in the Partnerships name traded by Willowbridge)
and indirectly each Fund separately.
The following tables indicate the trading Value at Risk associated with the Partnerships
open positions by market category as of December 31, 2009 and 2008. As of December 31, 2009, the Partnerships total capitalization was $815,786,554.
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
Currencies |
|
$ |
7,775,289 |
|
|
|
0.95 |
% |
Energy |
|
|
34,037,491 |
|
|
|
4.17 |
% |
Grains |
|
|
1,725,521 |
|
|
|
0.21 |
% |
Interest Rates U.S. |
|
|
2,269,333 |
|
|
|
0.28 |
% |
Interest Rates Non-U.S. |
|
|
5,514,333 |
|
|
|
0.68 |
% |
Livestock |
|
|
153,968 |
|
|
|
0.02 |
% |
Metals |
|
|
6,828,589 |
|
|
|
0.84 |
% |
Softs |
|
|
2,686,366 |
|
|
|
0.33 |
% |
Indices |
|
|
8,476,985 |
|
|
|
1.04 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
69,467,875 |
|
|
|
8.52 |
% |
|
|
|
|
|
|
|
As of December 31, 2008 the Partnerships total capitalization was $648,886,853
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
Currencies |
|
$ |
3,282,968 |
|
|
|
0.51 |
% |
Energy |
|
|
61,632,055 |
|
|
|
9.50 |
% |
Grains |
|
|
1,650,236 |
|
|
|
0.25 |
% |
Interest Rates U.S. |
|
|
2,668,676 |
|
|
|
0.41 |
% |
Interest Rates Non-U.S. |
|
|
4,683,200 |
|
|
|
0.72 |
% |
Livestock |
|
|
33,049 |
|
|
|
0.01 |
% |
Lumber |
|
|
417 |
|
|
|
0.00 |
%* |
Metals |
|
|
2,267,938 |
|
|
|
0.35 |
% |
Softs |
|
|
736,847 |
|
|
|
0.11 |
% |
Indices |
|
|
670,166 |
|
|
|
0.10 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
77,625,552 |
|
|
|
11.96 |
% |
|
|
|
|
|
|
|
22
The following tables
indicate the trading Value at Risk associated with the
Partnerships direct investments and indirect
investments in the funds by market sector category as of December 31, 2009 and 2008, the highest,
lowest and average values at any point during the year. All open positions trading risk exposures have
been included in calculating the figures set forth below.
As of December 31,
2009, the Partnerships Value at Risk for the portion of its assets that are traded directly by
Willowbridge was as follows:
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average Value |
|
Market Sector |
|
Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
at Risk* |
|
Currencies |
|
$ |
1,913,804 |
|
|
|
0.23 |
% |
|
$ |
2,683,324 |
|
|
$ |
10,800 |
|
|
$ |
1,252,370 |
|
Energy |
|
|
1,443,000 |
|
|
|
0.18 |
% |
|
|
4,846,643 |
|
|
|
45,000 |
|
|
|
1,509,395 |
|
Grains |
|
|
542,000 |
|
|
|
0.07 |
% |
|
|
1,484,580 |
|
|
|
209,000 |
|
|
|
666,509 |
|
Interest Rates U.S. |
|
590,550 |
|
|
|
0.07 |
% |
|
|
1,174,500 |
|
|
|
92,400 |
|
|
|
476,078 |
|
Interest Rates Non-U.S. |
|
1,209,738 |
|
|
|
0.15 |
% |
|
|
2,000,036 |
|
|
|
212,338 |
|
|
|
838,430 |
|
Livestock |
|
|
67,200 |
|
|
|
0.01 |
% |
|
|
71,280 |
|
|
|
5,250 |
|
|
|
27,451 |
|
Metals |
|
|
1,910,916 |
|
|
|
0.23 |
% |
|
|
2,273,753 |
|
|
|
23,717 |
|
|
|
1,414,320 |
|
Softs |
|
|
595,900 |
|
|
|
0.07 |
% |
|
|
653,340 |
|
|
|
54,600 |
|
|
|
342,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,273,108 |
|
|
|
1.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Annual average of month-end Value at Risk |
|
As of December 31, 2008, the Partnerships Value at Risk for the portion of its assets that are traded directly by Willowbridge was as follows: |
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average Value |
|
Market Sector |
|
Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
at Risk* |
|
Currencies |
|
$ |
550,881 |
|
|
|
0.09 |
% |
|
$ |
1,999,001 |
|
|
$ |
4,860 |
|
|
$ |
491,595 |
|
Energy |
|
|
123,500 |
|
|
|
0.02 |
% |
|
|
2,147,000 |
|
|
|
7,220 |
|
|
|
700,863 |
|
Grains |
|
|
418,000 |
|
|
|
0.06 |
% |
|
|
874,000 |
|
|
|
30,000 |
|
|
|
344,210 |
|
Interest Rates U.S. |
|
353,400 |
|
|
|
0.05 |
% |
|
|
521,700 |
|
|
|
32,300 |
|
|
|
249,958 |
|
Interest Rates Non-U.S |
|
522,669 |
|
|
|
0.08 |
% |
|
|
1,193,605 |
|
|
|
27,322 |
|
|
|
474,767 |
|
Metals |
|
|
300,238 |
|
|
|
0.05 |
% |
|
|
1,634,000 |
|
|
|
109,250 |
|
|
|
344,603 |
|
Softs |
|
|
70,300 |
|
|
|
0.01 |
% |
|
|
477,200 |
|
|
|
17,100 |
|
|
|
159,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,338,988 |
|
|
|
0.36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average of month-end Value at Risk |
As of December 31, 2009, AAA Masters total capitalization was $1,229,195,192. The Partnership
owned 23.2% of AAA Master. As of December 31, 2009, the AAA Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to AAA for trading) was as follows:
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average Value |
|
Market Sector |
|
Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
at Risk* |
|
Energy |
|
$ |
133,905,240 |
|
|
|
10.89 |
% |
|
$ |
352,329,038 |
|
|
$ |
4,405,231 |
|
|
$ |
166,882,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
133,905,240 |
|
|
|
10.89 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average of month-end Values at Risk |
As of December 31, 2008, AAA Masters total capitalization was $1,338,631,099. The Partnership owned 19.8% of AAA Master.
As of December 31, 2008, the AAA Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to AAA for trading) was as follows:
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Energy |
|
$ |
306,037,030 |
|
|
|
22.86 |
% |
|
$ |
393,679,114 |
|
|
$ |
86,922,706 |
|
|
$ |
205,141,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
306,037,030 |
|
|
|
22.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average of month-end Values at Risk |
23
As of December 31, 2009, Willowbridges total capitalization was $231,105,317. The Partnership
owned 58.8% of Willowbridge Master. As of December 31, 2009, the Willowbridge Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Willowbridge
for trading) was as follows:
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average Value |
|
Market Sector |
|
Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
at Risk* |
|
Currencies |
|
$ |
5,974,364 |
|
|
|
2.58 |
% |
|
$ |
14,208,480 |
|
|
$ |
1,008,000 |
|
|
$ |
7,206,662 |
|
Energy |
|
|
2,116,000 |
|
|
|
0.92 |
% |
|
|
13,037,019 |
|
|
|
391,000 |
|
|
|
5,515,268 |
|
Grains |
|
|
1,058,000 |
|
|
|
0.46 |
% |
|
|
5,919,480 |
|
|
|
259,875 |
|
|
|
2,320,519 |
|
Interest Rates U.S. |
|
1,959,945 |
|
|
|
0.85 |
% |
|
|
9,939,105 |
|
|
|
280,500 |
|
|
|
2,836,425 |
|
Interest Rates Non-U.S. |
|
3,403,449 |
|
|
|
1.47 |
% |
|
|
14,168,324 |
|
|
|
455,649 |
|
|
|
4,852,602 |
|
Metals |
|
|
3,968,558 |
|
|
|
1.72 |
% |
|
|
8,372,754 |
|
|
|
1,909,575 |
|
|
|
3,799,612 |
|
Softs |
|
|
2,725,100 |
|
|
|
1.18 |
% |
|
|
3,202,100 |
|
|
|
237,900 |
|
|
|
1,531,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
21,205,416 |
|
|
|
9.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average of month-end Value at Risk |
As of December 31, 2008, Willowbridges total capitalization was $297,420,004. The Partnership owned 46.1% of Willowbridge Master.
As of December 31, 2008, the Willowbridge Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Willowbridge
for trading) was as follows:
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
1,945,600 |
|
|
|
0.65 |
% |
|
$ |
11,556,229 |
|
|
$ |
245,220 |
|
|
$ |
3,464,607 |
|
Energy |
|
|
816,000 |
|
|
|
0.27 |
% |
|
|
15,933,000 |
|
|
|
448,000 |
|
|
|
4,885,321 |
|
Grains |
|
|
1,100,800 |
|
|
|
0.37 |
% |
|
|
5,470,800 |
|
|
|
201,000 |
|
|
|
2,038,390 |
|
Interest Rates U.S. |
|
|
2,380,800 |
|
|
|
0.80 |
% |
|
|
4,367,200 |
|
|
|
219,300 |
|
|
|
1,272,506 |
|
Interest Rates Non-U.S. |
|
|
3,571,688 |
|
|
|
1.20 |
% |
|
|
8,375,150 |
|
|
|
387,940 |
|
|
|
3,540,377 |
|
Metals |
|
|
3,110,400 |
|
|
|
1.05 |
% |
|
|
8,742,000 |
|
|
|
764,750 |
|
|
|
4,883,083 |
|
Softs |
|
|
819,200 |
|
|
|
0.28 |
% |
|
|
2,989,200 |
|
|
|
120,600 |
|
|
|
1,077,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,744,488 |
|
|
|
4.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
As of December 31, 2009, Wintons total capitalization was $574,408,313. The Partnership owned
51.1% of Winton Master. As of December 31, 2009, the Winton Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to Winton for trading) was as
follows:
December 31. 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average Value |
|
Market Sector |
|
Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
at Risk* |
|
Currencies |
|
$ |
4,596,005 |
|
|
|
0.80 |
% |
|
$ |
10,700,900 |
|
|
$ |
3,479,307 |
|
|
$ |
6,740,750 |
|
Energy |
|
|
556,296 |
|
|
|
0.10 |
% |
|
|
2,627,998 |
|
|
|
228,335 |
|
|
|
1,092,646 |
|
Grains |
|
|
1,098,663 |
|
|
|
0.19 |
% |
|
|
1,976,399 |
|
|
|
864,083 |
|
|
|
1,388,868 |
|
Interest Rates U.S. |
|
1,030,011 |
|
|
|
0.18 |
% |
|
|
6,518,610 |
|
|
|
716,705 |
|
|
|
2,896,261 |
|
Interest Rates Non-U.S. |
|
4,507,567 |
|
|
|
0.78 |
% |
|
|
11,661,822 |
|
|
|
2,841,339 |
|
|
|
5,786,393 |
|
Livestock |
|
|
169,800 |
|
|
|
0.03 |
% |
|
|
425,655 |
|
|
|
59,475 |
|
|
|
207,937 |
|
Metals |
|
|
5,057,067 |
|
|
|
0.88 |
% |
|
|
5,057,067 |
|
|
|
849,000 |
|
|
|
2,780,563 |
|
Softs |
|
|
955,200 |
|
|
|
0.17 |
% |
|
|
1,269,508 |
|
|
|
385,375 |
|
|
|
791,384 |
|
Indices |
|
|
16,589,011 |
|
|
|
2.89 |
% |
|
|
16,589,011 |
|
|
|
1,261,608 |
|
|
|
6,511,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
34,559,620 |
|
|
|
6.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average of month-end Value at Risk |
24
As of December 31, 2008, Wintons total capitalization was $547,751,543. The Partnership owned 37.9% of Winton Master.
As of December 31, 2008, the Winton Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to Winton for trading) was as
follows:
December 31. 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
4,842,125 |
|
|
|
0.88 |
% |
|
$ |
6,844,904 |
|
|
$ |
2,234,600 |
|
|
$ |
4,333,162 |
|
Energy |
|
|
1,417,010 |
|
|
|
0.26 |
% |
|
|
6,750,850 |
|
|
|
581,600 |
|
|
|
3,815,788 |
|
Grains |
|
|
1,912,314 |
|
|
|
0.35 |
% |
|
|
4,647,430 |
|
|
|
41,072 |
|
|
|
2,278,577 |
|
Interest Rates U.S. |
|
|
3,213,000 |
|
|
|
0.59 |
% |
|
|
4,165,350 |
|
|
|
160,797 |
|
|
|
2,234,433 |
|
Interest Rates Non-U.S. |
|
|
6,633,201 |
|
|
|
1.21 |
% |
|
|
6,862,943 |
|
|
|
1,875,349 |
|
|
|
4,923,678 |
|
Livestock |
|
|
87,200 |
|
|
|
0.02 |
% |
|
|
350,900 |
|
|
|
32,205 |
|
|
|
165,842 |
|
Lumber |
|
|
1,100 |
|
|
|
0.00 |
%** |
|
|
5,400 |
|
|
|
1,100 |
|
|
|
2,500 |
|
Metals |
|
|
1,408,458 |
|
|
|
0.26 |
% |
|
|
4,997,086 |
|
|
|
797,395 |
|
|
|
2,496,016 |
|
Softs |
|
|
762,259 |
|
|
|
0.14 |
% |
|
|
2,273,575 |
|
|
|
354,777 |
|
|
|
896,692 |
|
Indices |
|
|
1,768,247 |
|
|
|
0.32 |
% |
|
|
12,018,105 |
|
|
|
1,433,950 |
|
|
|
5,538,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
22,044,914 |
|
|
|
4.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
|
** |
|
due to rounding |
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership/Funds is typically
many times the applicable maintenance margin requirement (margin requirements generally range
between 2% and 15% of contract face value) as well as many times the capitalization of the
Partnership/Funds. The magnitude of the Partnerships/Funds open positions creates a risk of
ruin not typically found in most other investment vehicles. Because of the size of its positions,
certain market conditionsunusual, but historically recurring from time to time could cause the
Partnership/Funds to incur severe losses over a short period of time. The foregoing Value at Risk
tableas well as the past performance of the Partnership/Fundsgive no indication of this risk
of ruin.
Non-Trading Risk
The Partnership/Funds have non-trading market risk on their cash balances not needed for margin. However, these balances
(as well as any market risk they represent) are immaterial.
Materiality as used in this section, Qualitative and Quantitative Disclosures About Market
Risk, is based on an assessment of reasonably possible market movements and the potential losses
caused by such movements, taking into account the leverage, optionality and multiplier features of
the Partnerships/Funds market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnerships/Funds market risk exposures
except for (i) those disclosures that are statements of historical fact and (ii) the
descriptions of how the Partnership manages its primary market risk exposuresconstitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act. The Partnerships/Funds primary market risk exposures as well as
the strategies used and to be used by the General Partner and the Advisor for managing such
exposures are subject to numerous uncertainties, contingencies and risks, any one of which could
cause the actual results of the Partnerships/Funds risk control to differ materially from the
objectives of such strategies. Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants, increased regulation and many other
factors could result in material losses as well as in material changes to the risk exposures and
the management strategies of the Partnership/Funds. There can be no assurance that the
Partnerships/Funds current market exposure and/or risk management
strategies will not change materially or that any such strategies will be effective in
either the short or long term. Investors must be prepared to lose all or substantially all of their
investment in the Partnership.
25
The following were the primary trading risk exposures of the Partnership as of December 31,
2009, by market sector.
Interest Rates. Interest rate movements directly affect the price of the futures
positions held by the Partnership/Funds and indirectly the value of its stock index and currency
positions. Interest rate movements in one country as well as relative interest rate movements
between countries materially impact the Partnerships/Funds profitability. The
Partnerships/Funds primary interest rate exposure is to interest rate fluctuations in the United
States and the other G-8 countries. However, the Partnership/Funds also take futures positions on
the government debt of smaller nations e.g., Australia.
Currencies. The Partnerships/Funds currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing relationships between
different currencies and currency pairs. These fluctuations are influenced by interest rate changes
as well as political and general economic conditions, the General Partner does not anticipate that
the risk profile of the Partnerships/Funds currency sector will change significantly in the
future. The currency trading Value at Risk figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the
dollar-based Partnership/Funds in expressing Value at Risk in functional currency other than
dollars.
Metals. The Partnerships/Funds primary metal market exposure is to fluctuations in
the price of copper. Although certain that the Advisors will from time to time trade base metals
such as silver and copper, the principal market exposures of the Partnership/Funds have
consistently been in the precious metals, including gold.
Softs. The Partnerships/Funds primary commodities exposure is to agricultural price
movements which are often directly affected by severe or unexpected weather conditions. Cocoa and
cotton accounted for the bulk of the Partnerships/Funds commodity exposure as of
December 31, 2009.
Energy. The Partnerships/Funds primary energy market exposure is to natural gas and
oil price movements, often resulting from political developments in the Middle East. Oil prices can
be volatile and substantial profits and losses have been are expected to continue to be experienced
in this market.
Grains. The Partnerships/Funds commodities exposure is to agricultural price
movements which are often directly affected by severe or unexpected weather conditions.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The
General Partner/managing member monitors and controls the
Partnerships/ Funds 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 is subject.
The
General Partner/managing member monitors the Partnerships/Funds performance and the concentration of its open
positions, and consults with the Advisors concerning the
Partnerships/Funds overall risk profile. If the
General Partner/managing member felt it necessary to do so, the General Partner could require the Advisors to close
out individual positions as well as enter programs on behalf of the
Partnership/Funds. However, any such
intervention would be a highly unusual event. The General Partner primarily relies on the Advisors
own risk control policies while maintaining a general supervisory overview of the Partnerships/Funds market risk exposures.
The Advisors apply their own risk management policies to their trading. The Advisors often
follow diversification guidelines, margin limits and stop loss points to exit a position. The
Advisors research of risk management often suggests ongoing modifications to their trading
programs.
As part of the General Partners risk management, the General Partner periodically meets with
the Advisors to discuss its risk management and to look for any material changes to the Advisors
portfolio balance and trading techniques. The Advisors are required to notify the General Partner
of any material changes to its programs.
26
ORION FUTURES FUND L.P.
INDEX TO FINANCIAL STATEMENTS
Item 8. Financial Statements and Supplementary Data.
|
|
|
|
|
Page |
|
|
Number |
Oath or Affirmation |
|
F-3 |
|
|
|
Managements Report on Internal Control over Financial Reporting |
|
F-4 |
|
|
|
Reports of Independent Registered Public Accounting Firms |
|
F-5 F-9 |
|
|
|
Financial Statements: |
|
|
|
|
|
Statements
of Financial Condition at December 31, 2009 and 2008 |
|
F-10 |
|
|
|
Condensed
Schedules
of Investments at December 31, 2009 and 2008 |
|
F-11 F-12 |
|
|
|
Statements
of Income and Expenses for the years ended December 31, 2009, 2008
and 2007
|
|
F-13 |
|
|
|
Statements of Changes in Partners Capital for the years ended December 31,
2009, 2008 and 2007 |
|
F-14 |
|
|
|
Notes to Financial Statements |
|
F-15 F-27 |
|
|
|
Selected Unaudited Quarterly Financial Data |
|
F-28 |
|
|
|
Financial Statements of Citigroup AAA Master Fund LLC |
|
|
|
|
|
Oath or Affirmation |
|
F-29 |
|
|
|
Reports of Independent Registered Public Accounting Firms |
|
F-30 F-32 |
|
|
|
Financial Statements: |
|
|
|
|
|
Statements
of Financial Condition at December 31, 2009 and 2008 |
|
F-33 |
|
|
|
Condensed
Schedules
of Investments at December 31, 2009 and 2008 |
|
F-34 F-35 |
|
|
|
Statements
of Income and Expenses for the years ended December 31, 2009, 2008
and 2007
|
|
F-36 |
|
|
|
Statements of Changes in Members Capital for the years ended December 31,
2009, 2008 and 2007 |
|
F-37 |
|
|
|
Notes to Financial Statements |
|
F-38 F-46 |
|
|
|
Selected Unaudited Quarterly Financial Data |
|
F-47 |
|
|
|
Financial Statements of CMF Willowbridge Argo Master Fund L.P. |
|
|
|
|
|
Oath or Affirmation |
|
F-48 |
|
|
|
Reports of Independent Registered Public Accounting Firms |
|
F-49 F-51 |
|
|
|
Financial Statements: |
|
|
|
|
|
Statements
of Financial Condition at December 31, 2009 and 2008 |
|
F-52 |
|
|
|
Condensed
Schedules
of Investments at December 31, 2009 and 2008 |
|
F-53 F-54 |
F-1
ORION FUTURES FUND L.P.
INDEX TO FINANCIAL STATEMENTS CONTINUED
|
|
|
|
|
Page |
|
|
Number |
Statements
of Income and Expenses at December 31, 2009, 2008 and 2007 |
|
F-55 |
|
|
|
Statements
of Changes in Partners Capital at December 31, 2009, 2008
and 2007 |
|
F-56 |
|
|
|
Notes to Financial Statements |
|
F-57 F-64 |
|
|
|
Selected Unaudited Quarterly Financial Data |
|
F-65 |
|
|
|
Financial Statements of CMF Winton Master L.P. |
|
|
|
|
|
Oath or Affirmation |
|
F-66 |
|
|
|
Reports of Independent Registered Public Accounting Firms |
|
F-67 F-69 |
|
|
|
Financial Statements: |
|
|
|
|
|
Statements
of Financial Condition at December 31, 2009 and 2008 |
|
F-70 |
|
|
|
Condensed
Schedules
of Investments at December 31, 2009 and 2008 |
|
F-71 F-72 |
|
|
|
Statements
of Income and Expenses for the years ended December 31, 2009, 2008
and 2007
|
|
F-73 |
|
|
|
Statements of Changes in Partners Capital for the years ended December 31,
2009, 2008 and 2007 |
|
F-74 |
|
|
|
Notes to Financial Statements |
|
F-75 F-84 |
|
|
|
Selected Unaudited Quarterly Financial Data |
|
F-85 |
F-2
To the Limited
Partners of
Orion Futures Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
Orion Futures Fund L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-3
Management
s Report on Internal Control Over Financial
Reporting
The management of Orion Futures Fund L.P., formerly
Citigroup Orion Futures Fund L.P. (the Partnership), Ceres
Managed Futures LLC, formerly Citigroup Managed Futures LLC, is
responsible for establishing and maintaining adequate internal
control over financial reporting as defined in
Rules 13a 15(f) and 15d 15(f) under
the Securities Exchange Act of 1934 and for our assessment of
internal control over financial reporting. The
Partnerships internal control over financial reporting is
a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America. The Partnerships internal control over financial
reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Partnership;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures of the Partnership are being made only in
accordance with authorizations of management and directors of
the Partnership; and
(iii) provide reasonable assurance regarding prevention or
timely detection and correction of unauthorized acquisition, use
or disposition of the Partnerships assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The management of Orion Futures Fund L.P. has assessed the
effectiveness of the Partnerships internal control over
financial reporting as of December 31, 2009. In making this
assessment, management used the criteria set forth in the
Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our assessment, management concluded that the
Partnership maintained effective internal control over financial
reporting as of December 31, 2009 based on the criteria
referred to above.
The Partnerships independent registered public accounting
firm, Deloitte & Touche LLP, has audited the effectiveness
of the Partnerships internal control over financial
reporting as of December 31, 2009, as stated in their
report dated March 19, 2010 which appears herein.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
Orion Futures Fund L.P.
F-4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Orion Futures Fund L.P.:
We have audited the accompanying statement of financial condition of Orion Futures Fund L.P. (the
Partnership), including the condensed schedule of investments, as of December 31, 2009, and the
related statements of income and expenses, and changes in partners capital for the year then
ended. We also have audited the Partnerships internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The Partnerships
management is responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Managements Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on these financial statements and
an opinion on the Partnerships internal control over financial reporting based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and
March 24, 2008, respectively, expressed unqualified opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material
respects. Our audit of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A partnerships internal control over financial reporting is a process designed by, or under the
supervision of, the partnerships principal executive and principal financial officers, or persons
performing similar functions, and effected by the partnerships general partner, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
A partnerships internal control over financial reporting includes those policies and procedures
that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the partnership; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of
the partnership are being made only in accordance with authorizations of management and general
partner of the partnership; and (3) 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.
F-5
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Orion Futures Fund L.P. as of December 31, 2009, and the
results of its operations and its changes in partners capital for the year then ended, in
conformity with accounting principles generally accepted in the United States of America. Also, in
our opinion, the Partnership maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on the criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-6
Report of Independent Registered Public Accounting Firm
To the Partners of
Orion Futures Fund L.P.:
In our opinion, the accompanying statement of financial condition, the related statement of income
and expenses, and statement of changes in partners capital present fairly, in all material
respects, the financial position of Orion Futures Fund L.P. (formerly known as Citigroup Orion
Futures Fund L.P.) at December 31, 2008 and the results of its operations for the year then ended
in conformity with accounting principles generally accepted in the United States of America. Also
in our opinion, the Partnership maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2008, based on criteria established in Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Partnerships management is responsible for these financial statements, for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying
Managements Report on Internal Control over Financial Reporting. Our responsibility is to express
opinions on these financial statements and on the Partnerships internal control over financial
reporting based on our integrated audit. We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audit of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
F-7
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-8
Report of Independent Registered Public Accounting Firm
The Partners
Orion Futures Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of Orion Futures Fund L.P. (formerly, Citigroup Orion Futures Fund L.P.) for the year ended
December 31, 2007. These financial statements are the responsibility of the Partnerships
management. Our responsibility is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of Orion Futures Fund L.P. for
the year ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-9
Orion Futures
Fund L.P.
Statements
of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investment in Partnerships, at fair value (Note 5)
|
|
$
|
714,110,396
|
|
|
$
|
610,171,060
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
|
100,683,304
|
|
|
|
70,898,968
|
|
Cash margin (Note 3c)
|
|
|
9,063,690
|
|
|
|
2,972,978
|
|
Net unrealized appreciation on open futures contracts
|
|
|
3,055,807
|
|
|
|
1,526,317
|
|
Net unrealized appreciation on open forward contracts
|
|
|
950,175
|
|
|
|
144,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
827,863,372
|
|
|
|
685,713,479
|
|
Interest receivable (Note 3c)
|
|
|
1,562
|
|
|
|
1,397
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
827,864,934
|
|
|
$
|
685,714,876
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Brokerage commissions (Note 3c)
|
|
$
|
1,986,385
|
|
|
$
|
1,380,827
|
|
Management fees (Note 3b)
|
|
|
1,254,174
|
|
|
|
1,053,913
|
|
Administrative fees (Note 3a)
|
|
|
344,078
|
|
|
|
285,090
|
|
Incentive fees (Note 3b)
|
|
|
|
|
|
|
10,922,554
|
|
Professional fees
|
|
|
79,253
|
|
|
|
95,462
|
|
Other
|
|
|
13,850
|
|
|
|
21,745
|
|
Redemptions payable (Note 6)
|
|
|
8,400,640
|
|
|
|
23,068,432
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,078,380
|
|
|
|
36,828,023
|
|
|
|
|
|
|
|
|
|
|
Partners Capital: (Notes 1 and 6)
|
|
|
|
|
|
|
|
|
General Partner, 2,943.3393 and 1,281.5595 Unit equivalents
outstanding at December 31, 2009 and 2008, respectively
|
|
|
7,926,943
|
|
|
|
3,635,695
|
|
Limited Partners, 299,965.0835 and 227,446.9882 Redeemable Units
of Limited Partnership Interest outstanding at December 31,
2009 and 2008, respectively
|
|
|
807,859,611
|
|
|
|
645,251,158
|
|
|
|
|
|
|
|
|
|
|
Total partners capital
|
|
|
815,786,554
|
|
|
|
648,886,853
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
827,864,934
|
|
|
$
|
685,714,876
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-10
Orion Futures
Fund L.P.
Condensed Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
254
|
|
|
$
|
419,773
|
|
|
|
0.05
|
%
|
Energy
|
|
|
364
|
|
|
|
129,842
|
|
|
|
0.02
|
|
Grains
|
|
|
402
|
|
|
|
91,185
|
|
|
|
0.01
|
|
Interest Rates
Non-U.S.
|
|
|
127
|
|
|
|
(21,825
|
)
|
|
|
(0.00
|
)*
|
Livestock
|
|
|
84
|
|
|
|
38,440
|
|
|
|
0.00
|
*
|
Metals
|
|
|
222
|
|
|
|
(140,327
|
)
|
|
|
(0.02
|
)
|
Softs
|
|
|
342
|
|
|
|
560,264
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
1,077,352
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
635
|
|
|
|
1,761,778
|
|
|
|
0.22
|
|
Energy
|
|
|
5
|
|
|
|
10,950
|
|
|
|
0.00
|
*
|
Interest Rates U.S.
|
|
|
381
|
|
|
|
438,625
|
|
|
|
0.05
|
|
Interest Rates Non-U.S.
|
|
|
413
|
|
|
|
61,615
|
|
|
|
0.01
|
|
Metals
|
|
|
58
|
|
|
|
(294,513
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
1,978,455
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
287
|
|
|
|
3,563,843
|
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
3,563,843
|
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
222
|
|
|
|
(2,613,668
|
)
|
|
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(2,613,668
|
)
|
|
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA Master Fund LLC
|
|
|
|
|
|
|
284,764,800
|
|
|
|
34.91
|
|
CMF Willowbridge Argo Master Fund LP
|
|
|
|
|
|
|
135,945,983
|
|
|
|
16.66
|
|
CMF Winton Master LP
|
|
|
|
|
|
|
293,399,613
|
|
|
|
35.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment in Partnerships
|
|
|
|
|
|
|
714,110,396
|
|
|
|
87.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
718,116,378
|
|
|
|
88.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Due to rounding
See accompanying notes to financial statements.
F-11
Orion Futures
Fund L.P.
Condensed
Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
F-12
Orion Futures
Fund L.P.
Statements
of Income and Expenses
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests and
investment in Partnerships:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
(12,572,238
|
)
|
|
$
|
12,376,626
|
|
|
$
|
10,458,193
|
|
Net realized gains (losses) on investment in Partnerships
|
|
|
81,850,071
|
|
|
|
177,104,310
|
|
|
|
66,069,238
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
2,335,509
|
|
|
|
1,079,599
|
|
|
|
(398,691
|
)
|
Change in net unrealized gains (losses) on investments in
Partnerships
|
|
|
(81,764,262
|
)
|
|
|
31,962,402
|
|
|
|
(4,252,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
(10,150,920
|
)
|
|
|
222,522,937
|
|
|
|
71,875,976
|
|
Interest income (Note 3c)
|
|
|
67,628
|
|
|
|
689,057
|
|
|
|
1,103,241
|
|
Interest income from investment in Partnerships
|
|
|
472,207
|
|
|
|
5,134,044
|
|
|
|
13,813,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
(9,611,085
|
)
|
|
|
228,346,038
|
|
|
|
86,793,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage commissions including clearing fees (Note 3c)
|
|
|
7,831,507
|
|
|
|
6,766,398
|
|
|
|
6,362,776
|
|
Management fees (Note 3b)
|
|
|
13,417,518
|
|
|
|
10,925,864
|
|
|
|
6,962,335
|
|
Administrative fees (Note 3a)
|
|
|
3,642,172
|
|
|
|
2,980,531
|
|
|
|
1,921,930
|
|
Incentive fees (Note 3b)
|
|
|
4,138,088
|
|
|
|
40,256,797
|
|
|
|
7,785,492
|
|
Professional fees
|
|
|
495,318
|
|
|
|
520,640
|
|
|
|
289,126
|
|
Other
|
|
|
111,113
|
|
|
|
89,922
|
|
|
|
78,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
29,635,716
|
|
|
|
61,540,152
|
|
|
|
23,399,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(39,246,801
|
)
|
|
$
|
166,805,886
|
|
|
$
|
63,393,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent (Notes 1 and 7)
|
|
$
|
(143.75
|
)
|
|
$
|
704.34
|
|
|
$
|
304.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
261,677.7144
|
|
|
|
236,302.6401
|
|
|
|
197,604.4930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-13
Orion Futures
Fund L.P.
Statements of Changes in Partners Capital
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
|
General
|
|
|
|
|
|
|
Partners
|
|
|
Partner
|
|
|
Total
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
306,816,392
|
|
|
$
|
1,581,686
|
|
|
$
|
308,398,078
|
|
Net income (loss)
|
|
|
63,310,187
|
|
|
|
83,241
|
|
|
|
63,393,428
|
|
Sale of 75,753.5122 Redeemable Units of Limited Partnership
Interest
|
|
|
144,306,000
|
|
|
|
|
|
|
|
144,306,000
|
|
Redemption of 28,154.4589 Redeemable Units of Limited
Partnership Interest and 436.3952 General Partner Unit
equivalents
|
|
|
(54,941,617
|
)
|
|
|
(750,133
|
)
|
|
|
(55,691,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
459,490,962
|
|
|
|
914,794
|
|
|
|
460,405,756
|
|
Net income (loss)
|
|
|
166,058,397
|
|
|
|
747,489
|
|
|
|
166,805,886
|
|
Sale of 73,057.0497 Redeemable Units of Limited Partnership
Interest and 852.6005 General Partner Unit equivalents
|
|
|
175,479,000
|
|
|
|
1,973,412
|
|
|
|
177,452,412
|
|
Redemption of 61,071.3615 Redeemable Units of Limited
Partnership Interest
|
|
|
(155,777,201
|
)
|
|
|
|
|
|
|
(155,777,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
645,251,158
|
|
|
|
3,635,695
|
|
|
|
648,886,853
|
|
Net income (loss)
|
|
|
(39,038,049
|
)
|
|
|
(208,752
|
)
|
|
|
(39,246,801
|
)
|
Sale of 124,540.6216 Redeemable Units of Limited Partnership
Interest and 1,661.7798 General Partner Unit equivalents
|
|
|
346,650,226
|
|
|
|
4,500,000
|
|
|
|
351,150,226
|
|
Redemption of 52,022.5263 Redeemable Units of Limited
Partnership Interest
|
|
|
(145,003,724
|
)
|
|
|
|
|
|
|
(145,003,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
807,859,611
|
|
|
$
|
7,926,943
|
|
|
$
|
815,786,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
2,132.59
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
2,836.93
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
2,693.18
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-14
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
Orion Futures Fund L.P., formerly Citigroup Orion Futures
Fund L.P. (the Partnership), is a limited
partnership that 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. The sectors traded include
currencies, energy, lumber, grains, livestock, U.S. and
non-U.S. interest
rates, softs and metals. The Partnership and the Funds, (as
defined in Note 5 Investment in Partnerships)
may trade futures, forwards and option contracts of any kind.
The commodity interests that are traded by the Partnership and
the Funds are volatile and involve a high degree of market risk.
Between March 31, 1999 (commencement of the initial
offering period) and June 10, 1999, 10,499 redeemable units
of Limited Partnership Interest (Redeemable Units)
were sold at $1,000 per Redeemable Unit. The proceeds of the
initial offering were held in an escrow account until
June 10, 1999, at which time they were turned over to the
Partnership for trading. The Partnership privately and
continuously offers up to 600,000 Redeemable Units to qualified
investors. There is no maximum number of Redeemable Units that
may be sold by the Partnership.
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.
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 its initial capital contribution and profits, if any,
net of distributions.
The Partnership will be liquidated upon the first to occur of
the following: December 31, 2019; the Net Asset Value per
Redeemable Unit decreases to less than $400 per Redeemable Unit
as of a close of any business day; a decline in net assets after
trading commences to less than $1,000,000; or under certain
other circumstances as defined in the Limited Partnership
Agreement of the Partnership (the Limited Partnership
Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. Generally
Accepted Accounting Principles (GAAP) for use in
financial statements except for Securities and Exchange
Commission (SEC) rules and interpretive releases,
which are also authoritative GAAP for SEC registrants. The
Codification supersedes all existing non-SEC accounting and
reporting standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
F-15
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
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.
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 the date the financial statements were issued. As a
result, actual results, could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Partnership is
not required to provide a Statement of Cash Flows as permitted
by ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows-Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Partnerships and the Funds
Investments. All commodity interests held by the
Partnership and the Funds (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.
|
Partnerships and the Funds Fair Value
Measurements. The Partnership and the Funds
adopted ASC 820, Fair Value Measurements and Disclosures
(formerly, FAS 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, 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
for nonfinancial assets and nonfinancial liabilities measured at
fair value on a nonrecurring basis.
In 2009, the Partnership and the Funds adopted amendments to ASC
820, Fair Value Measurements and Disclosures (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) which
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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are 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 the amendments to ASC 820 had
no effect on the Partnerships Financial Statements.
F-16
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
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 years ended
December 31, 2009 and 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
|
|
|
|
12/31/2009
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards
|
|
$
|
950,175
|
|
|
$
|
950,175
|
|
|
$
|
|
|
|
$
|
|
|
Futures
|
|
|
3,055,807
|
|
|
|
3,055,807
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
|
714,110,396
|
|
|
|
|
|
|
|
714,110,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
718,116,378
|
|
|
$
|
4,005,982
|
|
|
$
|
714,110,396
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
718,116,378
|
|
|
$
|
4,005,982
|
|
|
$
|
714,110,396
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Partnership and the
Funds trade futures contracts. Exchange cleared swaps included
in futures and exchange cleared swaps are swaps that are traded
as futures. 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 the
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 the 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.
|
F-17
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
e.
|
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.
|
|
|
|
|
f.
|
Options. The Partnership and the 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.
|
|
|
|
|
g.
|
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.
|
|
|
h.
|
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.
|
In 2007, the Partnership adopted ASC 740, Income Taxes
(formerly, FAS No. 48, Accounting for Uncertainty in
Income Taxes). ASC 740 provides guidance for how
uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements.
ASC 740 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 concluded that no provision for income tax is
required in the Partnerships financial statements.
The following is the major tax jurisdiction for the Partnership
and the earliest tax year subject to examination: United
States 2006.
|
|
|
|
i.
|
Subsequent Events. In 2009, the Partnership
adopted ASC 855 Subsequent Events (formerly,
FAS No. 165 Subsequent Events). The
objective of ASC 855 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. Management has determined that there
were no subsequent events requiring adjustment or disclosure in
the financial statements.
|
F-18
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
j.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which , among other things, amends ASC 820 to require entities
to separately present purchases, sales, issuances, and
settlements in their reconciliation of Level 3 fair value
measurements (i.e., to present such items on a gross basis
rather than on a net basis), and which clarifies existing
disclosure requirements provided by ASC 820 regarding the level
of disaggregation and the inputs and valuation techniques used
to measure fair value for measurements that fall within either
Level 2 or Level 3 of the fair value hierarchy. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Partnerships financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
k.
|
Certain prior period amounts have been reclassified to conform
to the current year presentation.
|
|
|
|
|
l.
|
Net Income (loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 7 for Financial
Highlights.
|
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Partnership including selecting one or more advisors to make
trading decisions for the Partnership. The Partnership pays the
General Partner a monthly administrative fee equal to
1/24
of 1% (0.5% per year) of month-end Net Assets. Month-end Net
Assets, for the purpose of calculating administrative fees are
Net Assets, as defined in the Limited Partnership Agreement,
prior to the reduction of the current months incentive fee
accruals, the monthly management fees, the General
Partners administrative fee and any redemptions or
distributions as of the end of such month.
The General Partner, on behalf of the Partnership, has entered
into management agreements (the Management
Agreement) with Winton Capital Management Limited
(Winton), Willowbridge Associates Inc.
(Willowbridge), 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 Advisors
are not affiliated with one another, are not affiliated with the
General Partner or CGM, and are not responsible for the
organization or operation of the Partnership. The Partnership
will pay each Advisor (except for Winton which is paid
1/8
of 1% (1.5% a year) of month-end Net Assets) a monthly
management fee equal to
1/6
of 1% (2% a year) of month-end Net Assets allocated to each
Advisor. Month-end Net Assets, for the purpose of calculating
management fees are Net Assets, as defined in the Limited
Partnership Agreement, prior to the reduction of the current
months incentive fee accruals, the monthly management
fees,
F-19
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
the General Partners administrative fee and any
redemptions or distributions as of the end of such month. The
Management Agreement may be terminated upon notice by either
party.
In addition, the Partnership is obligated to pay each Advisor an
incentive fee payable quarterly equal to 20% of the New Trading
Profits, as defined in the Management Agreements, earned by each
Advisor for the Partnership during each calendar quarter. The
Advisors will not be paid an incentive fee until the Advisors
recovers the net loss incurred and earns additional new trading
profits for the Partnership.
In allocating the assets of the Partnership to the 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 to the
Advisors and may allocate the assets to additional advisors at
any time.
The Partnership has entered into a customer agreement (the
Customer Agreement) which provides that the
Partnership will pay CGM brokerage commissions at $18 per round
turn for futures and forwards transactions, $5 per round turn
for swap transactions and $9 per half turn for options.
Brokerage commissions are inclusive of applicable floor
brokerage. In addition, the Partnership directly and through its
investment in the Funds will pay CGM for NFA fees, as well as
exchange, clearing, user and
give-up fees
(collectively the clearing fees). CGM will pay a
portion of its brokerage commissions to financial advisors who
have sold Redeemable Units in the Partnership. All of the
Partnerships assets, not held in the Funds accounts
at CGM, are deposited in the Partnerships account at CGM.
The Partnerships assets are deposited by CGM in segregated
bank accounts to the extent required by Commodity Futures
Trading Commission regulations. At December 31, 2009 and
2008, the amounts of cash held for margin requirements was
$9,063,690 and $2,972,978, respectively. CGM has agreed to pay
the Partnership interest on 100% of the average daily equity
maintained in cash in the Partnerships (or the
Partnerships allocable portion of a Funds) account
during each month at a
30-day
U.S. Treasury bill rate determined weekly by CGM based on
the average noncompetitive yield on
3-month
U.S. Treasury bills maturing in 30 days from the date
on which such weekly rate is determined. Alternatively, CGM may
place up to all of the Partnerships (or a Funds)
assets in
90-day
U.S. Treasury bills and pay the Partnership 100% of the
interest (or the Partnerships allocable share thereof)
earned on Treasury bills purchased for the Partnership. The
Customer Agreement may be terminated upon notice by
either party.
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity interests. The
results of the Partnerships trading activities are shown
in the Statements of Income and Expenses.
The Customer Agreement between the Partnership and CGM gives the
Partnership and the Funds, respectively, 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 contacts on the Statements of Financial Condition as the
criteria under ASC 210, Balance Sheet (formerly, FASB
Interpretation 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 number of futures and metal
forward contracts traded for the year ended December 31,
2009, based on a quarterly calculation was 3,217. The notional
values of currency forward contracts for the first quarter ended
March 31, 2009 was $49,989,580. There were no notional
values of currency forward contracts for the remainder of the
year.
Brokerage commissions are based on the number of trades executed
by the Advisors.
F-20
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
The Partnership adopted ASC 815 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 only expands the disclosure requirements for
derivatives instruments and related hedged activities and has no
impact on the Statements of Financial Condition, Statements of
Income and Expenses and Statements of Changes in Partners
Capital. The following table indicates the fair values of
derivative instruments of futures and forward contracts as
separate assets and liabilities.
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
2,181,550
|
|
Energy
|
|
|
199,794
|
|
Grains
|
|
|
110,773
|
|
Interest Rates U.S.
|
|
|
438,625
|
|
Interest Rates Non-U.S.
|
|
|
210,400
|
|
Livestock
|
|
|
38,440
|
|
Metals
|
|
|
181,742
|
|
Softs
|
|
|
663,038
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
4,024,362
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Energy
|
|
$
|
(59,002
|
)
|
Grains
|
|
|
(19,587
|
)
|
Interest Rates Non-U.S.
|
|
|
(170,609
|
)
|
Metals
|
|
|
(616,583
|
)
|
Softs
|
|
|
(102,774
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(968,555
|
)
|
|
|
|
|
|
Net unrealized appreciation on open futures contracts
|
|
$
|
3,055,807
|
*
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition. |
F-21
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Metals
|
|
$
|
3,563,843
|
|
Total unrealized appreciation on
|
|
|
|
|
|
|
|
|
|
open forward contracts
|
|
$
|
3,563,843
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Metals
|
|
$
|
(2,613,668
|
)
|
Total unrealized depreciation on
|
|
|
|
|
|
|
|
|
|
open forward contracts
|
|
$
|
(2,613,668
|
)
|
|
|
|
|
|
Net unrealized appreciation on open forward contracts
|
|
$
|
950,175
|
**
|
|
|
|
|
|
|
|
|
** |
|
This amount is in Net unrealized appreciation on open
forward contracts on the Statements of Financial Condition. |
The following table indicates the Partnerships trading
gains and losses, by market sector, on derivative instruments
for the year ended December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
|
Sector
|
|
Gain (loss) from trading
|
|
Currencies
|
|
$
|
(1,780,147
|
)
|
Energy
|
|
|
(2,447,142
|
)
|
Grains
|
|
|
(598,463
|
)
|
Interest Rates U.S.
|
|
|
(2,079,594
|
)
|
Interest Rates
Non-U.S.
|
|
|
(2,180,445
|
)
|
Livestock
|
|
|
(89,640
|
)
|
Metals
|
|
|
1,203,412
|
|
Softs
|
|
|
(2,264,710
|
)
|
|
|
|
|
|
Total
|
|
$
|
(10,236,729
|
)
|
|
|
|
|
|
|
|
5.
|
Investments 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
limited liability company organized under the limited liability
company laws of the State of New York. The Partnership purchased
5,173.4381 units of AAA Master at a fair value 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,
a proprietary, discretionary trading system, 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 positions with a value of $1,795,757. Winton Master was
F-22
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
formed in order to permit accounts managed now or in the future
by Winton using the Diversified Program, a proprietary,
systematic trading system, 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, a portion of 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 positions
with a fair value of $3,662,925. Willowbridge Master was formed
in order to permit commodity pools managed now or in the future
by using Willowbridges Argo Trading System, a proprietary,
systematic trading system, to invest together in one trading
vehicle. The General Partner is also the general partner of
Willowbridge Master. Individual and pooled accounts currently
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.
Additional assets allocated to Willowbridge are not invested in
a separate limited partnership established by the General
Partner, but are held and traded by Willowbridge directly in
separate managed accounts in the Partnerships name.
Willowbridge trades the Partnerships assets pursuant to
its, Argo Trading System, the Consolidated Commodities Technical
and Consolidated Commodities Fundamental Trading Programs.
The General Partner is not aware of any material changes to the
trading programs discussed above during the year ended
December 31, 2009.
AAA Masters, Willowbridge Masters and Winton
Masters (collectively, the Funds) and the
Partnerships 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 and the Partnership
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 their capital contribution and undistributed
profits, if any, from the Funds in multiples of the Net Asset
Value per Redeemable Unit of Limited Partnership 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 elect to redeem and
informs the Funds.
Management, administrative and incentive fees are charged at the
Partnership level. All clearing fees are borne by the
Partnership and through its investment in the Funds. All other
fees including CGMs direct brokerage commissions are
charged at the Partnership level.
As of December 31, 2009, the Partnership owned
approximately 23.2% of AAA Master, 51.1% of Winton Master and
58.8% of Willowbridge Master. As of December 31, 2008, the
Partnership had approximately 19.8% of AAA Master, 37.9% of
Winton Master and 46.1% of Willowbridge Master. It is
AAAs, Willowbridges and Wintons intention to
continue to invest the assets allocated to each by the
Partnership in AAA Master, Willowbridge Master and Winton
Master, respectively. The performance of the Partnership is
directly affected by the performance of the Funds. Expenses to
investors as a result of investment in the Funds are
approximately the same and redemption rights are not affected.
F-23
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
Summarized information reflecting the Total Assets, Liabilities
and Capital for the Funds are shown in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Capital
|
|
|
AAA Master
|
|
$
|
1,632,583,054
|
|
|
$
|
403,387,862
|
|
|
$
|
1,229,195,192
|
|
Willowbridge Master
|
|
|
231,147,799
|
|
|
|
42,482
|
|
|
|
231,105,317
|
|
Winton Master
|
|
|
574,479,690
|
|
|
|
71,377
|
|
|
|
574,408,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,438,210,543
|
|
|
$
|
403,501,721
|
|
|
$
|
2,034,708,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Year Ended December 31, 2009
|
|
|
|
Gain (Loss) from
|
|
|
|
|
|
|
|
|
|
Trading, net
|
|
|
Total income (Loss)
|
|
|
Net income (Loss)
|
|
|
AAA Master
|
|
$
|
154,505,739
|
|
|
$
|
155,167,589
|
|
|
$
|
151,195,430
|
|
Willowbridge Master
|
|
|
(42,016,964
|
)
|
|
|
(41,821,187
|
)
|
|
|
(42,198,191
|
)
|
Winton Master
|
|
|
(25,033,464
|
)
|
|
|
(24,623,815
|
)
|
|
|
(25,021,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
87,455,311
|
|
|
$
|
88,722,587
|
|
|
$
|
83,975,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
Gain (Loss) from
|
|
|
|
|
|
|
|
|
|
Trading, net
|
|
|
Total income (Loss)
|
|
|
Net income (Loss)
|
|
|
AAA Master
|
|
$
|
571,420,201
|
|
|
$
|
576,682,953
|
|
|
$
|
572,610,772
|
|
Willowbridge Master
|
|
|
114,625,338
|
|
|
|
117,584,985
|
|
|
|
117,208,252
|
|
Winton Master
|
|
|
123,848,030
|
|
|
|
129,757,734
|
|
|
|
129,243,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
809,893,569
|
|
|
$
|
824,025,672
|
|
|
$
|
819,062,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized information reflecting the Partnerships
investments in, and the operations of, the Funds are shown in
the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Partnerships
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
Income
|
|
|
Investment
|
|
Redemption
|
Investment
|
|
Net Assets
|
|
|
Fair Value
|
|
|
Income (Loss)
|
|
|
Commissions
|
|
|
Other
|
|
|
(loss)
|
|
|
Objective
|
|
Permitted
|
|
For the year ended December 31, 2009
|
AAA Master
|
|
|
34.91
|
%
|
|
$
|
284,764,800
|
|
|
$
|
32,116,575
|
|
|
$
|
734,680
|
|
|
$
|
135,448
|
|
|
$
|
31,246,447
|
|
|
Energy
Markets
|
|
Monthly
|
Willowbridge Master
|
|
|
16.66
|
%
|
|
|
135,945,983
|
|
|
|
(21,885,805
|
)
|
|
|
174,549
|
|
|
|
33,695
|
|
|
|
(22,094,049
|
)
|
|
Commodity
Portfolio
|
|
Monthly
|
Winton Master
|
|
|
35.97
|
%
|
|
|
293,399,613
|
|
|
|
(9,672,754
|
)
|
|
|
150,897
|
|
|
|
25,626
|
|
|
|
(9,849,277
|
)
|
|
Commodity
Portfolio
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
714,110,396
|
|
|
$
|
558,016
|
|
|
$
|
1,060,126
|
|
|
$
|
194,769
|
|
|
$
|
(696,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Partnerships
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
Income
|
|
|
Investment
|
|
Redemption
|
Investment
|
|
Net Assets
|
|
|
Fair Value
|
|
|
Income (Loss)
|
|
|
Commissions
|
|
|
Other
|
|
|
(Loss)
|
|
|
Objective
|
|
Permitted
|
|
For the year ended December 31, 2008
|
AAA Master
|
|
|
40.93
|
%
|
|
$
|
265,560,308
|
|
|
$
|
110,101,731
|
|
|
$
|
605,423
|
|
|
$
|
160,841
|
|
|
$
|
109,335,467
|
|
|
Energy
Markets
|
|
Monthly
|
Willowbridge Master
|
|
|
21.12
|
%
|
|
|
137,021,864
|
|
|
|
53,417,835
|
|
|
|
153,140
|
|
|
|
16,149
|
|
|
|
53,248,546
|
|
|
Commodity
Portfolio
|
|
Monthly
|
Winton Master
|
|
|
31.99
|
%
|
|
|
207,588,888
|
|
|
|
50,681,190
|
|
|
|
183,415
|
|
|
|
13,739
|
|
|
|
50,484,036
|
|
|
Commodity
Portfolio
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
610,171,060
|
|
|
$
|
214,200,756
|
|
|
$
|
941,978
|
|
|
$
|
190,729
|
|
|
$
|
213,068,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. Distributions of profits, if
any, will be made at the sole discretion of the General Partner
and at such times as the General Partner may decide. A Limited
Partner may require the Partnership to redeem their Redeemable
Units at the Net Asset Value per Redeemable Unit as of the last
day of any month on 10 days notice to the General Partner.
There is no fee charged to Limited Partners in connection with
redemptions.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
(60.42
|
)
|
|
$
|
910.82
|
|
|
$
|
313.50
|
|
Interest income
|
|
|
2.15
|
|
|
|
24.80
|
|
|
|
75.92
|
|
Expenses**
|
|
|
(85.48
|
)
|
|
|
(231.28
|
)
|
|
|
(84.62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
(143.75
|
)
|
|
|
704.34
|
|
|
|
304.80
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year
|
|
|
2,836.93
|
|
|
|
2,132.59
|
|
|
|
1,827.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year
|
|
$
|
2,693.18
|
|
|
$
|
2,836.93
|
|
|
$
|
2,132.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes brokerage commissions. |
|
|
** |
|
Excludes brokerage commissions. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) before incentive fees***
|
|
|
(3.5
|
)%
|
|
|
(2.7
|
)%
|
|
|
(0.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
3.6
|
%
|
|
|
3.8
|
%
|
|
|
4.2
|
%
|
Incentive fees
|
|
|
0.6
|
%
|
|
|
7.1
|
%
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
4.2
|
%
|
|
|
10.9
|
%
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return before incentive fees
|
|
|
(4.6
|
)%
|
|
|
41.3
|
%
|
|
|
18.6
|
%
|
Incentive fees
|
|
|
(0.5
|
)%
|
|
|
(8.3
|
)%
|
|
|
(1.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return after incentive fees
|
|
|
(5.1
|
)%
|
|
|
33.0
|
%
|
|
|
16.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
F-25
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
8.
|
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 at 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 certain
forwards and option 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.
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 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/Fund is 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 Guarantees (formerly, FAS No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees).
The General Partner/Managing Member monitors and attempts to
control the Partnerships/Funds risk exposure on a
daily basis through financial, credit and risk management
monitoring systems, and
F-26
Orion Futures
Fund L.P.
Notes to Financial Statements
December 31, 2009
accordingly, believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the
Partnership/Funds may be subject. These monitoring systems
generally 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 business, these instruments may
not be held to maturity.
F-27
Selected unaudited quarterly financial data for the Partnership for the years ended December 31, 2009 and 2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period |
|
|
|
|
|
|
|
|
from October 1, |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
2009 to December |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
(12,753,163 |
) |
|
$ |
(4,432,679 |
) |
|
$ |
7,069,723 |
|
|
$ |
(7,326,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
$ |
(17,732,212 |
) |
|
$ |
(9,949,410 |
) |
|
$ |
2,894,930 |
|
|
$ |
(14,460,109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in Net Asset Value
per Unit |
|
$ |
(56.34 |
) |
|
$ |
(37.87 |
) |
|
$ |
11.53 |
|
|
$ |
(61.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
April 1, 2008 to |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
74,819,388 |
|
|
$ |
27,257,894 |
|
|
$ |
76,460,557 |
|
|
$ |
43,041,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
$ |
59,772,762 |
|
|
$ |
16,001,938 |
|
|
$ |
58,633,780 |
|
|
$ |
32,397,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in Net Asset Value
per Unit |
|
$ |
251.14 |
|
|
$ |
66.99 |
|
|
$ |
243.59 |
|
|
$ |
142.62 |
|
F-28
To the Members
of
AAA Master Fund LLC
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
|
|
|
|
By:
|
Jennifer Magro
Chief Financial Officer and Director
Ceres Managed Futures LLC
Managing Member,
AAA Master Fund LLC
|
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
AAA Master Fund LLC:
We have audited the accompanying statement of financial condition of AAA Master Fund LLC
(the Company), including the condensed schedule of investments, as of December 31, 2009, and the
related statements of income and expenses, and changes in members capital for the year then ended.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. The financial
statements of the Company for the years ended December 31, 2008 and 2007 were audited by other
auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified opinions on
those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of AAA Master Fund LLC as of December 31, 2009, and the results of its operations and its
changes in members capital for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-30
Report of Independent Auditors
To the Members of
AAA Master Fund LLC:
In our opinion, the accompanying statement of
financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and statement of changes in members
capital present fairly, in all material respects, the financial position of AAA Master Fund LLC
(formerly known as Citigroup AAA Master Fund LLC) at December 31, 2008, and the results of
its operations for the year then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-31
Report of Independent Registered Public Accounting Firm
The Members
AAA Master Fund LLC:
We have
audited the accompanying statements of income and expenses and
changes in members capital
of AAA Master Fund LLC (formerly, Citigroup AAA Master Fund LLC) for the year ended December 31,
2007. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of AAA Master Fund LLC for the
year ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-32
AAA Master
Fund LLC
Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
778,736,469
|
|
|
$
|
696,338,412
|
|
Cash margin (Note 3c)
|
|
|
112,350,862
|
|
|
|
90,640,874
|
|
Net unrealized appreciation on open futures and exchange cleared
swap contracts
|
|
|
|
|
|
|
268,819,884
|
|
Options owned, at fair value (cost $885,211,273 and
$867,124,483, respectively)
|
|
|
741,495,723
|
|
|
|
906,666,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,632,583,054
|
|
|
|
1,962,465,747
|
|
Due from brokers
|
|
|
|
|
|
|
518,950
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,632,583,054
|
|
|
$
|
1,962,984,697
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Members Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures and exchange cleared
swap contracts
|
|
$
|
50,857,890
|
|
|
$
|
|
|
Options written, at fair value (premium $435,825,576 and
$600,446,669, respectively)
|
|
|
352,233,900
|
|
|
|
624,018,932
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
296,072
|
|
|
|
334,666
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
403,387,862
|
|
|
|
624,353,598
|
|
|
|
|
|
|
|
|
|
|
Members Capital:
|
|
|
|
|
|
|
|
|
Members Capital, 123,710.6078 and 150,805.9242 Units of
Member Interest outstanding at December 31, 2009 and 2008,
respectively
|
|
|
1,229,195,192
|
|
|
|
1,338,631,099
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members capital
|
|
$
|
1,632,583,054
|
|
|
$
|
1,962,984,697
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-33
AAA Master
Fund LLC
Condensed Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Members
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures and Exchange Cleared Swap Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
76,309
|
|
|
$
|
(83,380,536
|
)
|
|
|
(6.78
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts purchased
|
|
|
|
|
|
|
(83,380,536
|
)
|
|
|
(6.78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
68,230
|
|
|
|
32,522,646
|
|
|
|
2.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts sold
|
|
|
|
|
|
|
32,522,646
|
|
|
|
2.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
Call
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX LT Crude Oil Feb 10 Dec 12
|
|
|
10,366
|
|
|
|
130,224,950
|
|
|
|
10.59
|
|
NYMEX Natural Gas E Feb 10 Oct 14
|
|
|
23,072
|
|
|
|
135,333,168
|
|
|
|
11.01
|
|
Other
|
|
|
8,589
|
|
|
|
115,880,958
|
|
|
|
9.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options owned
|
|
|
|
|
|
|
381,439,076
|
|
|
|
31.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Crude Oil E Dec 10 Dec 16
|
|
|
13,074
|
|
|
|
127,745,250
|
|
|
|
10.39
|
|
NYMEX LT Crude Oil Feb 10 Dec 13
|
|
|
10,761
|
|
|
|
73,976,480
|
|
|
|
6.02
|
|
NYMEX Natural Gas E Feb 10 May 14
|
|
|
9,735
|
|
|
|
116,193,705
|
|
|
|
9.45
|
|
Other
|
|
|
8,960
|
|
|
|
42,141,212
|
|
|
|
3.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put options owned
|
|
|
|
|
|
|
360,056,647
|
|
|
|
29.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options owned
|
|
|
|
|
|
|
741,495,723
|
|
|
|
60.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Written
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
Call
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Heating Oil Feb 10 Dec 10
|
|
|
6,014
|
|
|
|
(61,856,584
|
)
|
|
|
(5.03
|
)
|
NYMEX Natural Gas E Feb 10 Oct 14
|
|
|
18,423
|
|
|
|
(77,041,748
|
)
|
|
|
(6.27
|
)
|
Other
|
|
|
19,042
|
|
|
|
(109,221,068
|
)
|
|
|
(8.89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options owned
|
|
|
|
|
|
|
(248,119,400
|
)
|
|
|
(20.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
21,738
|
|
|
|
(104,114,500
|
)
|
|
|
(8.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put options written
|
|
|
|
|
|
|
(104,114,500
|
)
|
|
|
(8.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options written
|
|
|
|
|
|
|
(352,233,900
|
)
|
|
|
(28.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
338,403,933
|
|
|
|
27.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-34
AAA Master
Fund LLC
Condensed Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Members
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures and Exchange Cleared Swap Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Heating Oil Feb 09 Aug 11
|
|
|
8,011
|
|
|
$
|
(441,745,130
|
)
|
|
|
(33.00
|
)%
|
NYMEX HH N Gas Swap Feb 09 Dec 14
|
|
|
18,654
|
|
|
|
(89,160,340
|
)
|
|
|
(6.66
|
)
|
NYMEX LS Crude Oil Feb 09 Dec 12
|
|
|
11,641
|
|
|
|
(129,427,041
|
)
|
|
|
(9.67
|
)
|
NYMEX Natural Gas May 09 Dec 13
|
|
|
8,255
|
|
|
|
(139,708,500
|
)
|
|
|
(10.44
|
)
|
NYMEX NYH RBOB Gas Feb 09 Dec 11
|
|
|
4,404
|
|
|
|
(119,810,053
|
)
|
|
|
(8.95
|
)
|
NYMEX WTI Financial Jun 09 Dec 16
|
|
|
4,936
|
|
|
|
(209,218,410
|
)
|
|
|
(15.63
|
)
|
Other
|
|
|
16,316
|
|
|
|
(151,807,029
|
)
|
|
|
(11.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts purchased
|
|
|
|
|
|
|
(1,280,876,503
|
)
|
|
|
(95.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
IPE Brent Crude Oil Mar 09 Dec 14
|
|
|
4,692
|
|
|
|
121,030,070
|
|
|
|
9.04
|
|
IPE Gas Oil Jan 09 Jun 11
|
|
|
11,819
|
|
|
|
535,126,020
|
|
|
|
39.98
|
|
NYMEX Heating Oil Feb 09 Dec 11
|
|
|
3,501
|
|
|
|
166,705,095
|
|
|
|
12.45
|
|
NYMEX HH N Gas Swap Mar 09 Dec 12
|
|
|
29,532
|
|
|
|
155,897,847
|
|
|
|
11.65
|
|
NYMEX Natural Gas Feb 09 Dec 14
|
|
|
13,299
|
|
|
|
260,526,256
|
|
|
|
19.46
|
|
NYMEX NYH RBOB Gas Apr 09 Apr 10
|
|
|
3,293
|
|
|
|
137,456,648
|
|
|
|
10.27
|
|
Other
|
|
|
16,695
|
|
|
|
172,954,451
|
|
|
|
12.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts sold
|
|
|
|
|
|
|
1,549,696,387
|
|
|
|
115.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
Call
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Natural Gas EC Feb 09 May 14
|
|
|
28,842
|
|
|
|
164,736,675
|
|
|
|
12.31
|
|
Other
|
|
|
22,190
|
|
|
|
31,922,424
|
|
|
|
2.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options owned
|
|
|
|
|
|
|
196,659,099
|
|
|
|
14.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Brent Crude EP Jun 09 Dec 10
|
|
|
2,533
|
|
|
|
73,938,930
|
|
|
|
5.52
|
|
NYMEX Crude EP Mar 09 Dec 16
|
|
|
11,958
|
|
|
|
253,787,240
|
|
|
|
18.96
|
|
NYMEX LS Crude Oil P Feb 09 Dec 12
|
|
|
6,383
|
|
|
|
205,040,500
|
|
|
|
15.32
|
|
NYMEX Natural Gas EP Mar 09 Mar 11
|
|
|
4,433
|
|
|
|
70,822,470
|
|
|
|
5.29
|
|
Other
|
|
|
3,227
|
|
|
|
106,418,338
|
|
|
|
7.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put options owned
|
|
|
|
|
|
|
710,007,478
|
|
|
|
53.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options owned
|
|
|
|
|
|
|
906,666,577
|
|
|
|
67.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Written
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
Call
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
48,267
|
|
|
|
(108,711,985
|
)
|
|
|
(8.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options written
|
|
|
|
|
|
|
(108,711,985
|
)
|
|
|
(8.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX LS Crude Oil P Feb 09 Dec 12
|
|
|
6,493
|
|
|
|
(131,792,570
|
)
|
|
|
(9.84
|
)
|
NYMEX Natural Gas EP Feb 09 May 11
|
|
|
6,340
|
|
|
|
(209,214,966
|
)
|
|
|
(15.63
|
)
|
Other
|
|
|
8,146
|
|
|
|
(174,299,411
|
)
|
|
|
(13.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put options written
|
|
|
|
|
|
|
(515,306,947
|
)
|
|
|
(38.49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options written
|
|
|
|
|
|
|
(624,018,932
|
)
|
|
|
(46.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
551,467,529
|
|
|
|
41.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-35
AAA Master
Fund LLC
Statements of Income and Expenses
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
550,277,218
|
|
|
$
|
383,464,674
|
|
|
$
|
139,780,388
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
(395,771,479
|
)
|
|
|
187,955,527
|
|
|
|
(15,598,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
154,505,739
|
|
|
|
571,420,201
|
|
|
|
124,182,151
|
|
Interest income
|
|
|
661,850
|
|
|
|
5,262,752
|
|
|
|
27,854,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
155,167,589
|
|
|
|
576,682,953
|
|
|
|
152,036,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
3,343,809
|
|
|
|
3,223,638
|
|
|
|
3,197,637
|
|
Professional fees
|
|
|
628,350
|
|
|
|
848,543
|
|
|
|
508,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
3,972,159
|
|
|
|
4,072,181
|
|
|
|
3,705,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
151,195,430
|
|
|
$
|
572,610,772
|
|
|
$
|
148,330,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Unit of Member Interest (Notes 1 and
6)
|
|
$
|
1,064.36
|
|
|
$
|
3,494.47
|
|
|
$
|
756.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
139,419.9283
|
|
|
|
172,420.9234
|
|
|
|
200,906.2331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-36
AAA Master
Fund LLC
Statements of Changes in Members Capital
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
Members
|
|
|
|
Capital
|
|
|
Members Capital at December 31, 2006
|
|
$
|
993,359,899
|
|
Net income (loss)
|
|
|
148,330,506
|
|
Sale of 28,091.0093 Units of Member Interest
|
|
|
140,284,151
|
|
Redemption of 50,568.2147 Units of Member Interest
|
|
|
(254,888,582
|
)
|
Distribution of interest income to feeder funds
|
|
|
(27,632,438
|
)
|
|
|
|
|
|
Members Capital at December 31, 2007
|
|
|
999,453,536
|
|
Net income (loss)
|
|
|
572,610,772
|
|
Sale of 26,018.8922 Units of Member Interest
|
|
|
176,599,395
|
|
Redemption of 59,881.8271 Units of Member Interest
|
|
|
(404,833,765
|
)
|
Distribution of interest income to feeder funds
|
|
|
(5,198,839
|
)
|
|
|
|
|
|
Members Capital at December 31, 2008
|
|
|
1,338,631,099
|
|
Net income (loss)
|
|
|
151,195,430
|
|
Sale of 18,789.6645 Units of Member Interest
|
|
|
178,448,063
|
|
Redemption of 45,884.9809 Units of Member Interest
|
|
|
(438,417,550
|
)
|
Distribution of interest income to feeder funds
|
|
|
(661,850
|
)
|
|
|
|
|
|
Members Capital at December 31, 2009
|
|
$
|
1,229,195,192
|
|
|
|
|
|
|
Net Asset Value per Unit of Member Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
5,412.14
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
8,876.52
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
9,936.05
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-37
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
AAA Master Fund LLC, formerly Citigroup AAA Master
Fund LLC (the Master) is a limited liability
company formed under the New York Limited Liability Company Law.
The Masters purpose is to engage in the speculative
trading of a diversified portfolio of commodity interests
including futures contracts, options, swaps and forward
contracts. The Master may trade commodity futures and option
contracts of any kind but intends initially to trade solely
energy and energy related products. The commodity interests that
are traded by the Master are volatile and involve a high degree
of market risk. The Master is authorized to sell an unlimited
number of units of member interest (Units).
Ceres Managed Futures LLC (formerly Citigroup Managed Futures
LLC), a Delaware limited liability company, acts as the managing
member (the Managing Member) and commodity pool
operator of the Master. The Managing Member 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 Master, 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 Managing Member 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.
On September 1, 2001 (date Master commenced trading), AAA
Capital Energy Fund L.P. (formerly Smith Barney AAA Energy
Fund L.P.) (AAA) allocated substantially all of
its capital and Orion Futures Fund L.P. (formerly Citigroup
Orion Futures Fund L.P.) (Orion) allocated a
portion of its capital to the Master. The partnerships purchased
133,712.5867 Units of the Master with a fair value of
$133,712,587 (including unrealized appreciation of $7,755,035).
On July 1, 2002, AAA Capital Energy Fund L.P. II
(formerly Citigroup AAA Energy Fund L.P. II) (AAA
II) allocated substantially all of its capital to the
Master and purchased 64,945.0387 Units with a fair value of
$94,925,000. On November 1, 2003, Pinnacle Natural
Resources, L.P. (Pinnacle) allocated a portion of
its capital to the Master and purchased 1,104.9839 Units with a
fair value of $1,500,000. On October 1, 2005, Tactical
Diversified Futures Fund L.P. (formerly Citigroup
Diversified Futures Fund L.P.) (Tactical
Diversified) allocated a portion of its capital to the
Master and purchased 13,956.1190 Units with a fair value of
$50,000,000. On July 1, 2005, Institutional Futures
Portfolio L.P. (formerly CMF Institutional Futures Portfolio
L.P.) (Institutional Portfolio) allocated a portion
of its capital to the Master and purchased 2,386.2338 Units with
a fair value of $7,000,000. On November 1, 2005, a private
investor (Private Investor) purchased 1,196.6879
Units with a fair value of $4,000,000. On February 28,
2006, Pinnacle redeemed its entire investment in the Master.
This redemption amounted to 2,662.7928 Units with a fair
value of $11,982,967. On June 1, 2006, Legion Strategies
LLC (Legion LLC) allocated a portion of its capital
to the Master and purchased 827.0580 Units with a fair value of
$4,000,000. On June 30, 2006, a Private investor redeemed
its entire investment in the Master. This redemption amounted to
951.9315 Units with a fair value of $4,795,926. On
July 1, 2006, Legion Strategies, LTD (Legion
LTD) allocated a portion of its capital to the Master and
purchased 793.9501 Units with a fair value of $4,000,000. On
October 1, 2006, Energy Advisors Portfolio L.P. (formerly
Citigroup Energy Advisors Portfolio L.P.) (Energy
Advisors) allocated a portion of its capital to the Master
and purchased 723.8213 Units with a fair value of $3,315,000. On
March 1, 2007, Global Futures Fund Ltd. (formerly Citigroup
Global Futures Fund Ltd.) (Global Futures) allocated
a portion of its capital to the Master and purchased 344.5961
Units with a fair value of $1,614,644. On December 31,
2007, Legion LLC redeemed its entire investment in the Master.
This redemption amounted to 761.6691 units with a fair
value of $4,129,086, which includes interest income of $6,187.
On April 1, 2009, Orion Futures Fund (Cayman) Ltd.
(formerly Citigroup Orion Futures Fund (Cayman) Ltd.)
(Orion Cayman) allocated a portion of its capital to the
Master and purchased 84.1311 Units with a fair value of
$800,000. The Master was formed to permit commodity pools
managed now or in the future by AAA Capital Management Advisors,
Ltd (successor to AAA Capital Management, Inc.) (the
Advisor) using the Energy Program
Futures and Swaps, the Advisors proprietary, discretionary
trading program, to invest together in one vehicle.
F-38
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
The Master operates under a structure where its investors
consist of AAA, AAA II, Tactical Diversified, Institutional
Portfolio, Energy Advisors, Global Futures, Legion LTD, Orion
and Orion Cayman (each a Member, collectively the
Funds) owned approximately 23.3%, 40.3%, 6.6%, 2.1%,
0.8%, 2.3%, 1.1%, 23.2% and 0.3% investments in the Master at
December 31, 2009, respectively. AAA, AAA II, Tactical
Diversified, Institutional Portfolio, Energy Advisors, Global
Futures, Legion LTD and Orion had approximately 23.2% 40.6%,
10.2%, 2.0%, 1.2%, 2.0%, 1.0% and 19.8% investments in the
Master at December 31, 2008, respectively.
The Master will be liquidated under certain circumstances as
defined in the Limited Liability Company Agreement of the Master
(the Limited Liability Company Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. generally accepted
accounting principles (GAAP) for use in financial
statements except for Securities and Exchange Commission
(SEC) rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification
supersedes all existing non-SEC accounting and reporting
standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (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
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.
|
|
|
|
Masters Fair Value Measurements. The
Master adopted ASC 820, 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 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
|
F-39
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
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 Master did not apply the
deferral allowed by ASC 820 for nonfinancial assets and
nonfinancial liabilities measured at fair value on a
nonrecurring basis.
|
|
|
|
|
|
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (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) which
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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Masters Level 2 assets and
liabilities. The adoption of the amendments to ASC 820 had no
effect on the Masters Financial Statements.
|
|
|
|
The Master considers 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).
As of and for the years ended December 31, 2009 and
December 31, 2008, the Master did not hold any derivative
instruments for which market quotations are not readily
available and which are priced by broker-dealers who derive fair
values for those assets from observable inputs
(Level 2) or that are priced at fair value using
unobservable inputs through the application of managements
assumptions and internal valuation pricing models (Level 3).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options owned
|
|
$
|
741,495,723
|
|
|
$
|
741,495,723
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
741,495,723
|
|
|
|
741,495,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swaps
|
|
$
|
50,857,890
|
|
|
$
|
50,857,890
|
|
|
$
|
|
|
|
$
|
|
|
Options written
|
|
|
352,233,900
|
|
|
|
352,233,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
403,091,790
|
|
|
|
403,091,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
338,403,933
|
|
|
$
|
338,403,933
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swaps
|
|
$
|
268,819,884
|
|
|
$
|
268,819,884
|
|
|
$
|
|
|
|
$
|
|
|
Options owned
|
|
|
906,666,577
|
|
|
|
906,666,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,175,486,461
|
|
|
|
1,175,486,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options written
|
|
$
|
624,018,932
|
|
|
$
|
624,018,932
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
624,018,932
|
|
|
|
624,018,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
551,467,529
|
|
|
$
|
551,467,529
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades futures
contracts. Exchange cleared swaps included in futures and
exchange cleared swaps are swaps that are traded as futures. 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 the S&P 500 Index), whereby
such contract is settled in cash. Payments (variation
margin) may be made or received by the Master 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 Master. When the contract is closed, the
Master records 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.
|
|
|
e.
|
Options. The Master 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 Master writes an option, the premium
received is recorded as a liability in the Statements of
Financial Condition and marked to market daily. When the Master
purchases 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.
|
|
|
|
|
f.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
|
|
g.
|
Income Taxes. Income taxes have not been
provided as each member is individually liable for the taxes, if
any, on their share of the Masters income and expenses.
|
|
|
|
In 2007, the Master adopted ASC 740, Income Taxes (formerly,
FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the
|
F-41
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
Masters 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 Master 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 Managing
Member concluded that no provision for income tax is required in
the Masters financial statements.
|
|
|
|
|
|
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2006.
|
|
|
h.
|
Subsequent Events. In 2009, the Master adopted
ASC 855, Subsequent Events (formerly,
FAS No. 165, Subsequent Events). The
objective of ASC 855 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. Management has determined that there
were no subsequent events requiring adjustment or disclosure in
the financial statements.
|
|
|
|
|
i.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which, among other things, amends ASC 820 to require entities to
separately present purchases, sales, issuances, and settlements
in their reconciliation of Level 3 fair value measurements
(i.e. to present such items on a gross basis rather than on a
net basis), and which clarifies existing disclosure requirements
provided by ASC 820 regarding the level of disaggregation and
the inputs and valuation techniques used to measure fair value
for measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Masters financial statements disclosures.
|
|
|
|
|
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
|
j.
|
Certain prior period amounts have been reclassified to conform
to current period presentation.
|
|
|
|
|
k.
|
Net Income (Loss) per Unit. Net income (loss)
per Unit of Member Interest is calculated in accordance with
investment company guidance. See footnote 6 for Financial
Highlights.
|
|
|
|
|
a.
|
Limited Liability Company Agreement:
|
|
|
|
The Managing Member administers the business affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
|
|
|
b.
|
Management Agreement:
|
|
|
|
The Managing Member, on behalf of the Master has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is affiliated with the Managing Member and CGM but is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in
|
F-42
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
connection with the Management Agreement shall be borne by the
Funds. The Management Agreement may be terminated upon notice by
either party.
|
|
|
|
|
c.
|
Customer Agreement:
|
|
|
|
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All floor brokerage, exchange,
clearing, user,
give-up and
NFA fees (collectively the clearing fees) are borne
by the Master consistent with contractual agreements. All other
fees (management fees, administrative fees, incentive fees,
brokerage commissions and offering costs) shall be borne by the
Funds. All of the Masters cash is deposited by CGM in
segregated bank accounts, to the extent required by Commodity
Futures Trading Commission regulations. At December 31,
2009 and 2008, the amounts of cash held by the Master for margin
requirements was $112,350,862 and $90,640,874, respectively. The
Customer Agreement may be terminated by either party. All
commissions in connection with the Customer Agreement shall be
borne by the Funds.
|
The Master 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 Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master, respectively, the legal right to net unrealized gains
and losses on open futures and exchange cleared swap contracts.
The Master nets, for financial reporting purposes, the
unrealized gains and losses on open futures and exchange cleared
swap contracts on the Statements of Financial Condition as the
criteria under ASC 210, Balance Sheet (formerly,
FASB Interpretation No. 39, Offsetting of
Amounts Related to Certain Contracts) have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures and exchange
cleared swap contracts and options contracts traded for the year
ended December 31, 2009 based on a quarterly calculation,
was 312,729.
The Master adopted ASC 815, 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 only expands the disclosure
requirements for derivative instruments and related hedging
activities and has no impact on the Statements of Financial
Condition, Statements of Income and Expenses and Statements of
Changes in Members Capital.
F-43
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
The following table indicates the fair values of derivative
instruments of futures and options contracts as separate assets
and liabilities.
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts
|
|
|
|
|
Energy
|
|
$
|
274,140,959
|
|
|
|
|
|
|
Total unrealized appreciation on open futures and exchange
cleared swap contracts
|
|
$
|
274,140,959
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts
|
|
|
|
|
Energy
|
|
$
|
(324,998,849
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures and exchange
cleared swap contracts
|
|
$
|
(324,998,849
|
)
|
|
|
|
|
|
Net unrealized depreciation on open futures and exchange cleared
swap contracts
|
|
$
|
(50,857,890
|
)*
|
|
|
|
|
|
Assets
|
|
|
|
|
Options Owned
|
|
|
|
|
Energy
|
|
$
|
741,495,723
|
|
|
|
|
|
|
Options owned
|
|
$
|
741,495,723
|
**
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Options Written
|
|
|
|
|
Energy
|
|
$
|
352,233,900
|
|
|
|
|
|
|
Options written
|
|
$
|
352,233,900
|
***
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized depreciation on open
futures and exchange cleared swap contracts on the
Statements of Financial Condition. |
|
** |
|
This amount is in Options owned, at fair value on
the Statements of Financial Condition. |
|
*** |
|
This amount is in Options written, at fair value on
the Statements of Financial Condition. |
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31,2009
|
Sector
|
|
Gain (loss) from trading
|
|
Energy
|
|
$
|
154,505,739
|
|
|
|
|
|
|
Total
|
|
$
|
154,505,739
|
****
|
|
|
|
|
|
|
|
|
**** |
|
This amount is in Gain (loss) from trading, net on
the Statements of Income and Expenses. |
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become non-managing members on the first day of the month after
their subscription is processed. A non-managing member may
withdraw all or part of their capital contribution and
undistributed profits, if any, from the Master in multiples of
the Net Asset Value per Unit of Member Interest as of the end of
any day (the Redemption Date) after a request
for redemption has been made to the Managing Member at least
3 days in advance of the Redemption Date. The Units
are classified as a liability when the non-managing member
elects to redeem and informs the Master.
F-44
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
Changes in the Net Asset Value per Unit of Member Interest for
the years ended December 31, 2009, 2008 and 2007 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
1,064.16
|
|
|
$
|
3,469.13
|
|
|
$
|
618.16
|
|
Interest income
|
|
|
4.82
|
|
|
|
30.48
|
|
|
|
140.84
|
|
Expenses**
|
|
|
(4.62
|
)
|
|
|
(5.14
|
)
|
|
|
(2.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
1,064.36
|
|
|
|
3,494.47
|
|
|
|
756.40
|
|
Distribution of interest income to feeder funds
|
|
|
(4.83
|
)
|
|
|
(30.09
|
)
|
|
|
(139.72
|
)
|
Net Asset Value per Unit of Member Interest, beginning of year
|
|
|
8,876.52
|
|
|
|
5,412.14
|
|
|
|
4,795.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Unit of Member Interest, end of year
|
|
$
|
9,936.05
|
|
|
$
|
8,876.52
|
|
|
$
|
5,412.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes brokerage commissions. |
|
** |
|
Excludes brokerage commissions. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
(0.3
|
)%
|
|
|
0.1
|
%
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.3
|
%
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
12.0
|
%
|
|
|
64.6
|
%
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the non-managing member class
using the non-managing members share of income, expenses
and average net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party 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, to purchase or sell other financial instruments at
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 certain forwards and option contracts.
OTC contracts are negotiated between contracting parties and
include certain forwards and option 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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master 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 Master is
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 Masters risk of loss in the event of
counterparty default is typically
F-45
AAA Master
Fund LLC
Notes to Financial Statements
December 31, 2009
limited to the amounts recognized in the Statements of Financial
Condition and not represented by the contract or notional
amounts of the instruments. The Masters risk of loss is
reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Master to offset
unrealized gains and losses and other assets and liabilities
with such counterparties upon the occurrence of certain events.
The Master has credit risk and concentration risk as the sole
counterparty or broker with respect to the Masters assets
is CGM or a CGM affiliate. Credit risk with respect to
exchange-traded instruments is reduced to the extent that
through CGM, the Masters counterparty is an exchange or
clearing organization. As of December 31, 2009, there are
no OTC swap contracts the Master is a party to.
As both a buyer and seller of options, the Master pays or
receives a premium at the outset and then bears the risk of
unfavorable changes in the price of the contract underlying the
option. Written options expose the Master 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 Master does not consider these contracts to
be guarantees as described in ASC 460, Guarantees (formerly
FAS Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees).
The Managing Member monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the 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, options and swaps 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 Masters
business, these instruments may not be held to maturity.
F-46
Selected unaudited quarterly financial data for AAA Master for the years ended December 31, 2009
and 2008 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and unrealized trading gains (losses) net of brokerage commissions and clearing fees including interest income |
|
$ |
9,738,633 |
|
|
$ |
39,593,130 |
|
|
$ |
11,578,159 |
|
|
$ |
90,913,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
9,596,868 |
|
|
$ |
39,460,830 |
|
|
$ |
11,401,249 |
|
|
$ |
90,736,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in Net Asset Value per Unit
of Member Interest |
|
$ |
61.37 |
|
|
$ |
289.49 |
|
|
$ |
79.60 |
|
|
$ |
633.90 |
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
April 1, 2008 to |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
March 31, 2008 |
Net realized and unrealized trading gains (losses) net of brokerage commissions and clearing fees including interest income |
|
$ |
175,399,992 |
|
|
$ |
194,086,196 |
|
|
$ |
163,785,949 |
|
|
$ |
40,187,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
175,150,122 |
|
|
$ |
193,836,326 |
|
|
$ |
163,573,146 |
|
|
$ |
40,051,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in Net Asset Value per Unit of Member Interest |
|
$ |
1,134.53 |
|
|
$ |
1,182.02 |
|
|
$ |
954.68 |
|
|
$ |
223.24 |
|
F-47
To the Limited
Partners of
CMF Willowbridge Argo Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
CMF Willowbridge Argo Master Fund L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF Willowbridge Argo Master Fund L.P.:
We have audited the accompanying statement of financial condition of CMF Willowbridge Argo Master
Fund L.P. (the Partnership), including the condensed schedule of investments, as of December 31, 2009, and
the related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified
opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF Willowbridge Argo Master Fund L.P. as of December 31, 2009, and the results of its
operations and its changes in partners capital for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-49
Report of Independent Auditors
To the
Partners of
CMF Willowbridge Argo Master Fund L.P.:
In our opinion, the accompanying statement of
financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and
statement of changes in partners
capital present fairly, in all material respects, the financial position of CMF Willowbridge Argo
Master Fund L.P. at December 31, 2008, and the results of its operations for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-50
Report of Independent Registered Public Accounting Firm
The Partners
CMF Willowbridge Argo Master Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of CMF Willowbridge Argo Master Fund L.P. for the year ended December 31, 2007. These financial
statements are the responsibility of the Partnerships management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of CMF Willowbridge Argo
Master Fund L.P. for the year ended December 31, 2007, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-51
CMF Willowbridge
Argo Master Fund L.P.
Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
198,540,524
|
|
|
$
|
275,579,764
|
|
Cash margin (Note 3c)
|
|
|
27,540,310
|
|
|
|
17,345,935
|
|
Net unrealized appreciation on open futures contracts
|
|
|
5,066,965
|
|
|
|
4,514,064
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
231,147,799
|
|
|
$
|
297,439,763
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
$
|
42,482
|
|
|
$
|
19,759
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
42,482
|
|
|
|
19,759
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 127,352.9656 and 137,871.4938
Redeemable Units of Limited Partnership Interest outstanding at
December 31, in 2009 and 2008, respectively
|
|
|
231,105,317
|
|
|
|
297,420,004
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
231,147,799
|
|
|
$
|
297,439,763
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-52
CMF Willowbridge
Argo Master Fund L.P.
Condensed Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
1,058
|
|
|
$
|
(796,145
|
)
|
|
|
(0.35
|
)%
|
Energy
|
|
|
529
|
|
|
|
339,318
|
|
|
|
0.14
|
|
Grains
|
|
|
1,058
|
|
|
|
710,221
|
|
|
|
0.31
|
|
Interest Rates U.S.
|
|
|
529
|
|
|
|
385,800
|
|
|
|
0.17
|
|
Interest Rates
Non-U.S.
|
|
|
1,190
|
|
|
|
362,833
|
|
|
|
0.16
|
|
Metals
|
|
|
1,058
|
|
|
|
2,163
|
|
|
|
0.00
|
*
|
Softs
|
|
|
794
|
|
|
|
1,702,259
|
|
|
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
2,706,449
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
2,116
|
|
|
|
946,561
|
|
|
|
0.41
|
|
Interest Rates U.S.
|
|
|
1,058
|
|
|
|
1,250,420
|
|
|
|
0.54
|
|
Interest Rates
Non-U.S.
|
|
|
529
|
|
|
|
89,416
|
|
|
|
0.04
|
|
Softs
|
|
|
529
|
|
|
|
74,119
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
2,360,516
|
|
|
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
5,066,965
|
|
|
|
2.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-53
CMF Willowbridge
Argo Master Fund L.P.
Condensed Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
512
|
|
|
$
|
521,823
|
|
|
|
0.17
|
%
|
Grains
|
|
|
640
|
|
|
|
496,363
|
|
|
|
0.17
|
|
Interest Rates U.S.
|
|
|
1,280
|
|
|
|
1,365,961
|
|
|
|
0.46
|
|
Interest Rates
Non-U.S.
|
|
|
1,088
|
|
|
|
1,847,392
|
|
|
|
0.62
|
|
Metals
|
|
|
256
|
|
|
|
711,975
|
|
|
|
0.24
|
|
Softs
|
|
|
384
|
|
|
|
(99,463
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
4,844,051
|
|
|
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
128
|
|
|
|
694,880
|
|
|
|
0.23
|
|
Grains
|
|
|
384
|
|
|
|
(294,592
|
)
|
|
|
(0.10
|
)
|
Metals
|
|
|
256
|
|
|
|
(730,275
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(329,987
|
)
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
4,514,064
|
|
|
|
1.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-54
CMF Willowbridge
Argo Master Fund L.P.
Statements of Income and Expenses
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
(42,569,865
|
)
|
|
$
|
120,270,941
|
|
|
$
|
45,753,249
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
552,901
|
|
|
|
(5,645,603
|
)
|
|
|
(875,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
(42,016,964
|
)
|
|
|
114,625,338
|
|
|
|
44,878,233
|
|
Interest income
|
|
|
195,777
|
|
|
|
2,959,647
|
|
|
|
6,365,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
(41,821,187
|
)
|
|
|
117,584,985
|
|
|
|
51,244,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
316,442
|
|
|
|
340,947
|
|
|
|
437,674
|
|
Professional fees
|
|
|
60,562
|
|
|
|
35,786
|
|
|
|
29,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
377,004
|
|
|
|
376,733
|
|
|
|
467,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(42,198,191
|
)
|
|
$
|
117,208,252
|
|
|
$
|
50,776,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest (Notes 1 and 6)
|
|
$
|
(340.95
|
)
|
|
$
|
771.84
|
|
|
$
|
352.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
126,508.0368
|
|
|
|
156,458.0988
|
|
|
|
153,606.6990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-55
CMF Willowbridge
Argo Master Fund L.P.
Statements of Changes in Partners Capital
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
183,568,130
|
|
Net income (loss)
|
|
|
50,776,550
|
|
Sale of 27,402.5153 Redeemable Units of Limited Partnership
Interest
|
|
|
30,563,510
|
|
Redemption of 43,441.2969 Redeemable Units of Limited
Partnership Interest
|
|
|
(45,487,314
|
)
|
Distribution of interest income to feeder funds
|
|
|
(6,365,854
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
213,055,022
|
|
Net income (loss)
|
|
|
117,208,252
|
|
Sale of 60,036.9500 Redeemable Units of Limited Partnership
Interest
|
|
|
106,466,700
|
|
Redemption of 73,835.2095 Redeemable Units of Limited
Partnership Interest
|
|
|
(136,350,323
|
)
|
Distribution of interest income to feeder funds
|
|
|
(2,959,647
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
297,420,004
|
|
Net income (loss)
|
|
|
(42,198,191
|
)
|
Sale of 28,958.2689 Redeemable Units of Limited Partnership
Interest
|
|
|
55,363,938
|
|
Redemption of 39,476.7971 Redeemable Units of Limited
Partnership Interest
|
|
|
(79,284,657
|
)
|
Distribution of interest income to feeder funds
|
|
|
(195,777
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
231,105,317
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,404.73
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
2,157.23
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
1,814.68
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-56
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF Willowbridge Argo Master Fund L.P. (the
Master) is a limited partnership which was organized
under the partnership laws of the State of New York to engage in
the speculative trading of a diversified portfolio of commodity
interests including futures contracts, options, swaps and
forward contracts. The sectors traded include currencies,
energy, grains, U.S. and non-U.S. interest rates, metals and
softs. The commodity interests that are traded by the Master are
volatile and involve a high degree of market risk. The Master is
authorized to sell an unlimited number of redeemable units of
Limited Partnership Interest (Redeemable Units).
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 Master. 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 Master, 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.
On July 1, 2005, (commencement of trading operations),
Diversified Multi-Advisor Futures Fund L.P. (formerly,
Smith Barney Diversified Futures Fund L.P.)
(Diversified), Diversified Multi-Advisor Futures
Fund L.P. II (formerly, Smith Barney Diversified Futures
Fund L.P. II) (Diversified II), Orion Futures
Fund L.P. (formerly, Citigroup Orion Futures
Fund L.P.) (Orion), Institutional Futures
Portfolio L.P. (formerly, CMF Institutional Futures Portfolio
L.P.) (Institutional Portfolio) and Tactical
Diversified Futures Fund L.P. (formerly, Citigroup
Diversified Futures Fund L.P.) (Tactical
Diversified) allocated a portion of their capital to the
Master. Diversified purchased 12,259.3490 Redeemable Units with
cash of $11,118,119 and a contribution of open commodity futures
and forwards positions with a fair value of $1,141,230,
Diversified II purchased 10,980.9796 Redeemable Units with
cash of $9,895,326 and a contribution of open commodity futures
and forwards positions of $1,085,654, Orion purchased
33,529.1186 Redeemable Units with cash of $29,866,194 and a
contribution of open commodity futures and forwards positions
with a fair value of $3,662,925, Institutional Portfolio
invested $7,000,000 of its initial capital and purchased
7,000.0000 Redeemable Units with cash of 16,242,748 and Tactical
Diversified purchased 95,795.8082 Redeemable Units with cash of
$85,442,868 and a contribution of open commodity futures and
forwards positions with a fair value of $10,352,940. On April 1,
2009, Orion Futures Fund (Cayman) (formerly, Citigroup Orion
Futures Fund (Cayman) Ltd.) (Orion Cayman) purchased
299.0681 Redeemable Units with cash of $560,000. The Master was
formed to permit commodity pools managed now and in the future
by Willowbridge Associates Inc. (the Advisor) using
the Argo Trading System, the Advisors proprietary
systematic trading program, to invest together in one trading
vehicle.
The Master operates under a structure where its investors
consist of Diversified, Diversified II, Orion, Tactical
Diversified, Institutional Portfolio and Orion Cayman (each a
Feeder, collectively the Funds) with
approximately 2.7%, 2.3%, 58.8%, 30.8%, 4.4% 1.0% investments in
the Master at December 31, 2009, respectively and with
approximately 3.6%, 3.4%, 46.1%, 42.5% and 4.4% investments in
the Master at December 31, 2008, respectively.
The Master will be liquidated upon the first to occur of the
following: December 31, 2025; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification
F-57
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
(ASC) 105, Generally Accepted Accounting
Principles (ASC 105) (the
Codification). ASC 105 established the exclusive
authoritative reference for U.S. Generally Accepted
Accounting Principles (GAAP) for use in financial
statements except for Securities and Exchange Commission
(SEC) rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification
supersedes all existing non-SEC accounting and reporting
standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (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
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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, 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
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 Master did not apply the
deferral allowed by ASC 820 for nonfinancial assets and
nonfinancial liabilities measured at fair value on a
nonrecurring basis.
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (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) which
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. These amendments to
ASC 820 also reaffirm the need to
F-58
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
use judgment in determining if a formerly active market has
become inactive and in determining fair values when the market
has become inactive. These amendments to ASC 820 are required
for interim and annual reporting periods ending after
June 15, 2009. Management has concluded that based on
available information in the marketplace, there has not been a
decrease in the volume and level of activity in the
Masters Level 2 assets and liabilities. The adoption
of the amendments to ASC 820 had no effect on the
Masters Financial Statements.
The Master considers 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). As of and for the years ended December 31,
2009 and December 31, 2008, the Master did not hold any
derivative instruments for which market quotations are not
readily available and which are priced by broker-dealers who
derive fair values for those assets from observable inputs
(Level 2) or 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
|
|
|
|
12/31/2009
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
5,066,965
|
|
|
$
|
5,066,965
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
5,066,965
|
|
|
|
5,066,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
5,066,965
|
|
|
$
|
5,066,965
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
4,514,064
|
|
|
$
|
4,514,064
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,514,064
|
|
|
|
4,514,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
4,514,064
|
|
|
$
|
4,514,064
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades 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 can not occur (such as the
S&P 500 Index), whereby such contract is settled in cash.
Payments (variation margin) may be made or received
by the Master 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 Master. When the
contract is closed, the Master records 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.
|
F-59
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
e.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
f.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Masters income and expenses.
|
In 2007, the Master adopted ASC 740, Income Taxes (formerly,
FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Masters 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 Master 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 concluded that no provision for income tax is required
in the Masters financial statements.
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2006.
|
|
|
|
g.
|
Subsequent Events. In 2009, the Master adopted
ASC 855, Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC 855 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.
Management has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
|
|
|
h.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which, among other things, amends ASC 820 to require entities to
separately present purchases, sales, issuances, and settlements
in their reconciliation of Level 3 fair value measurements
(i.e. to present such items on a gross basis rather than on a
net basis), and which clarifies existing disclosure requirements
provided by ASC 820 regarding the level of disaggregation and
the inputs and valuation techniques used to measure fair value
for measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of
ASU 2010-06
will have on the Masters financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
i.
|
Certain prior period amounts have been reclassified to conform
to current period presentation.
|
|
|
j.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
F-60
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees including
CGMs direct brokerage commission shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amount of cash held by the
Master for margin requirements were $27,540,310 and $17,345,935,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures contracts. The Master nets, for financial reporting
purposes, the unrealized gains and losses on open futures
contracts on the Statements of Financial Condition as the
criteria under ASC 210, Balance Sheet (formerly, FASB
Interpretation No. 39, Offsetting of Amounts
Related to Certain Contracts) have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures contracts traded
for the year ended December 31, 2009 based on a quarterly
calculation, was 10,295.
The Master adopted ASC 815, 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 only
expands the disclosure requirements for derivative instruments
and related hedging activities and has no impact on the
Statements of Financial Condition, Statements of Income and
Expenses and Statements of Changes in Partners Capital.
F-61
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the fair values of derivative
instruments of futures contracts as separate assets and
liabilities.
|
|
|
|
|
Assets
|
|
December 31, 2009
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
3,436,175
|
|
Energy
|
|
|
339,318
|
|
Grains
|
|
|
768,108
|
|
Interest Rates U.S.
|
|
|
1,640,270
|
|
Interest Rates
Non-U.S.
|
|
|
603,534
|
|
Softs
|
|
|
1,776,378
|
|
Metals
|
|
|
2,786,063
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
11,349,846
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
(3,285,759
|
)
|
Grains
|
|
|
(57,887
|
)
|
Interest Rates U.S.
|
|
|
(4,050
|
)
|
Interest Rates
Non-U.S.
|
|
|
(151,285
|
)
|
Metals
|
|
|
(2,783,900
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(6,282,881
|
)
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
$
|
5,066,965
|
*
|
|
|
|
|
|
|
|
|
|
|
*This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition.
|
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
Sector
|
|
Gain (Loss) from Trading
|
|
Currencies
|
|
$
|
(1,870,971
|
)
|
Energy
|
|
|
(28,874,531
|
)
|
Grains
|
|
|
(8,605,911
|
)
|
INT Rate US
|
|
|
(10,397,322
|
)
|
INT Rate Non-US
|
|
|
(7,737,846
|
)
|
Livestock
|
|
|
(1,213,180
|
)
|
Metals
|
|
|
19,790,113
|
|
Softs
|
|
|
(3,107,316
|
)
|
|
|
|
|
|
Total
|
|
$
|
(42,016,964
|
)**
|
|
|
|
|
|
|
|
|
|
|
**This amount is in Gain (loss) from trading, net on
the Statements of Income and Expenses.
|
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the Net Asset
Value per
F-62
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
Redeemable Unit of Limited Partnership Interest as of the end of
any day (the Redemption Date) after a request
for redemption has been made to the General Partner at least
3 days in advance of the Redemption Date. The
Redeemable Units are classified as a liability when the Limited
Partner elects to redeem and informs the Master.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and change in unrealized gains (losses)*
|
|
$
|
(342.04
|
)
|
|
$
|
752.74
|
|
|
$
|
310.35
|
|
Interest income
|
|
|
1.60
|
|
|
|
19.34
|
|
|
|
42.42
|
|
Expenses**
|
|
|
(0.51
|
)
|
|
|
(0.24
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
(340.95
|
)
|
|
|
771.84
|
|
|
|
352.58
|
|
Distribution of interest income to feeder funds
|
|
|
(1.60
|
)
|
|
|
(19.34
|
)
|
|
|
(42.42
|
)
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year
|
|
|
2,157.23
|
|
|
|
1,404.73
|
|
|
|
1,094.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year
|
|
$
|
1,814.68
|
|
|
$
|
2,157.23
|
|
|
$
|
1,404.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
** |
|
Excludes clearing fees. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
(0.1
|
)%
|
|
|
1.0
|
%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
(15.8
|
)%
|
|
|
54.9
|
%
|
|
|
32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures and options, 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 at 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 certain forwards and option contracts.
OTC contracts are negotiated between contracting parties and
include certain forwards and option 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.
F-63
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
Market risk is the potential for changes in the value of the
financial instruments traded by the Master 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 Master is
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 Masters risk of loss in the event of
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 Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
The General Partner monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the General
Partner to analyze statistically 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 Masters
business, these instruments may not be held to maturity.
F-64
Selected unaudited quarterly financial data for Willowbridge Master for the years ended December 31, 2009 and 2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and unrealized
trading gains (losses) net
of brokerage commissions
and clearing fees including
interest income |
|
$ |
(18,281,605 |
) |
|
$ |
(20,120,888 |
) |
|
$ |
32,038,173 |
|
|
$ |
(35,773,309 |
) |
Net income (loss) |
|
$ |
(18,302,561 |
) |
|
$ |
(20,139,642 |
) |
|
$ |
32,025,897 |
|
|
$ |
(35,781,885 |
) |
Increase (decrease) in Net
Asset Value per Redeemable
Unit |
|
$ |
(150.43 |
) |
|
$ |
(172.65 |
) |
|
$ |
266.37 |
|
|
$ |
(284.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
April 1, 2008 to |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
March 31, 2008 |
Net realized and unrealized
trading gains (losses) net
of brokerage commissions
and clearing fees including
interest income |
|
$ |
27,126,788 |
|
|
$ |
9,695,635 |
|
|
$ |
61,112,070 |
|
|
$ |
19,309,545 |
|
Net income (loss) |
|
$ |
27,118,311 |
|
|
$ |
9,686,363 |
|
|
$ |
61,102,423 |
|
|
$ |
19,301,155 |
|
Increase (decrease) in Net
Asset Value per Redeemable
Unit |
|
$ |
190.01 |
|
|
$ |
68.64 |
|
|
$ |
389.12 |
|
|
$ |
124.07 |
|
F-65
To the Limited
Partners of
CMF Winton Master L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
|
|
|
|
By:
|
Jennifer Magro
Chief Financial Officer and Director
|
Ceres Managed Futures LLC
General Partner,
CMF Winton Master L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF Winton Master L.P.:
We have audited the accompanying statement of financial condition of CMF Winton Master L.P.
(the Partnership), including the condensed schedule of investments, as of December 31, 2009, and
the related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified
opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF Winton Master L.P. as of December 31, 2009, and the results of its operations and
its changes in partners capital for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-67
Report of Independent Auditors
To the Partners of
CMF Winton Master L.P.:
In our opinion, the accompanying statement of
financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and
statement of changes in partners
capital present fairly, in all material respects, the financial position of CMF Winton Master L.P.
at December 31, 2008, and the results of its operations for the year then ended in
conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audit. We conducted our audit of
these statements in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-68
Report of Independent Registered Public Accounting Firm
The Partners
CMF Winton Master Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of CMF Winton Master Fund L.P. for the year ended December 31, 2007. These financial statements
are the responsibility of the Partnerships management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of CMF Winton Master Fund L.P.
for the year ended December 31, 2007, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-69
CMF Winton Master
L.P.
Statements
of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
533,704,028
|
|
|
$
|
512,248,576
|
|
Cash margin (Note 3c)
|
|
|
38,915,256
|
|
|
|
26,405,684
|
|
Net unrealized appreciation on open futures contracts
|
|
|
144,283
|
|
|
|
6,936,356
|
|
Net unrealized appreciation on open forward contracts
|
|
|
1,698,400
|
|
|
|
2,179,569
|
|
Options owned, at fair value (cost $34,613 at December 31,
2009)
|
|
|
17,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
574,479,690
|
|
|
$
|
547,770,185
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Options written, at fair value (premium $77,101 at December 31,
2009)
|
|
$
|
40,733
|
|
|
$
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
30,644
|
|
|
|
18,642
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
71,377
|
|
|
|
18,642
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 298,540.2381 and 270,994.4921
Redeemable Units of Limited Partnership Interest outstanding at
December 31, 2009 and 2008, respectively
|
|
|
574,408,313
|
|
|
|
547,751,543
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
574,479,690
|
|
|
$
|
547,770,185
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-70
CMF Winton Master
L.P.
Condensed
Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
2,173
|
|
|
$
|
(1,932,735
|
)
|
|
|
(0.34
|
)%
|
Energy
|
|
|
81
|
|
|
|
105,489
|
|
|
|
0.02
|
|
Grains
|
|
|
396
|
|
|
|
285,441
|
|
|
|
0.05
|
|
Indices
|
|
|
3,920
|
|
|
|
2,883,282
|
|
|
|
0.50
|
|
Interest Rates U.S.
|
|
|
1,552
|
|
|
|
(374,223
|
)
|
|
|
(0.06
|
)
|
Interest Rates
Non-U.S.
|
|
|
4,180
|
|
|
|
(115,797
|
)
|
|
|
(0.02
|
)
|
Livestock
|
|
|
76
|
|
|
|
38,000
|
|
|
|
0.01
|
|
Metals
|
|
|
664
|
|
|
|
(417,248
|
)
|
|
|
(0.07
|
)
|
Softs
|
|
|
356
|
|
|
|
476,861
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
949,070
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
227
|
|
|
|
(127,300
|
)
|
|
|
(0.02
|
)
|
Energy
|
|
|
192
|
|
|
|
(494,271
|
)
|
|
|
(0.09
|
)
|
Grains
|
|
|
501
|
|
|
|
(17,304
|
)
|
|
|
(0.00
|
)*
|
Indices
|
|
|
12
|
|
|
|
(10,333
|
)
|
|
|
(0.00
|
)*
|
Interest Rates U.S.
|
|
|
180
|
|
|
|
44,187
|
|
|
|
0.01
|
|
Interest Rates
Non-U.S.
|
|
|
166
|
|
|
|
(31,275
|
)
|
|
|
(0.01
|
)
|
Livestock
|
|
|
111
|
|
|
|
(56,000
|
)
|
|
|
(0.01
|
)
|
Softs
|
|
|
129
|
|
|
|
(112,491
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(804,787
|
)
|
|
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
310
|
|
|
|
2,433,189
|
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
2,433,189
|
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
163
|
|
|
|
(734,789
|
)
|
|
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(734,789
|
)
|
|
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Puts
|
|
|
|
|
|
|
|
|
|
|
|
|
Indices
|
|
|
65
|
|
|
|
17,723
|
|
|
|
0.00
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options owned
|
|
|
|
|
|
|
17,723
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Written
|
|
|
|
|
|
|
|
|
|
|
|
|
Puts
|
|
|
|
|
|
|
|
|
|
|
|
|
Indices
|
|
|
65
|
|
|
|
(40,733
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options written
|
|
|
|
|
|
|
(40,733
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
1,819,673
|
|
|
|
0.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Due to rounding
See accompanying notes to financial statements.
F-71
CMF Winton Master
L.P.
Condensed
Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
496
|
|
|
$
|
928,233
|
|
|
|
0.17
|
%
|
Indices
|
|
|
5
|
|
|
|
1,935
|
|
|
|
0.00
|
*
|
Interest Rates U.S.
|
|
|
2,417
|
|
|
|
4,977,464
|
|
|
|
0.91
|
|
Interest Rates
Non-U.S.
|
|
|
4,453
|
|
|
|
6,479,517
|
|
|
|
1.18
|
|
Livestock
|
|
|
30
|
|
|
|
30,960
|
|
|
|
0.01
|
|
Softs
|
|
|
97
|
|
|
|
218,297
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
12,636,406
|
|
|
|
2.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
896
|
|
|
|
(3,144,184
|
)
|
|
|
(0.57
|
)
|
Energy
|
|
|
208
|
|
|
|
727,901
|
|
|
|
0.13
|
|
Grains
|
|
|
891
|
|
|
|
(2,623,430
|
)
|
|
|
(0.48
|
)
|
Indices
|
|
|
252
|
|
|
|
(239,475
|
)
|
|
|
(0.05
|
)
|
Interest Rates U.S.
|
|
|
58
|
|
|
|
(13,766
|
)
|
|
|
(0.00
|
)*
|
Livestock
|
|
|
71
|
|
|
|
86,500
|
|
|
|
0.02
|
|
Lumber
|
|
|
1
|
|
|
|
3,806
|
|
|
|
0.00
|
*
|
Metals
|
|
|
90
|
|
|
|
(478,272
|
)
|
|
|
(0.09
|
)
|
Softs
|
|
|
426
|
|
|
|
(19,130
|
)
|
|
|
(0.00
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(5,700,050
|
)
|
|
|
(1.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
276
|
|
|
|
2,996,261
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
2,996,261
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
138
|
|
|
|
(816,692
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(816,692
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
9,115,925
|
|
|
|
1.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Due to rounding.
See accompanying notes to financial statements.
F-72
CMF Winton Master
L.P.
Statements
of Income and Expenses
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
(17,779,700
|
)
|
|
$
|
121,322,866
|
|
|
$
|
67,378,983
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
(7,253,764
|
)
|
|
|
2,525,164
|
|
|
|
(3,420,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
(25,033,464
|
)
|
|
|
123,848,030
|
|
|
|
63,958,043
|
|
Interest income
|
|
|
409,649
|
|
|
|
5,909,704
|
|
|
|
14,456,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
(24,623,815
|
)
|
|
|
129,757,734
|
|
|
|
78,414,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
341,844
|
|
|
|
478,086
|
|
|
|
861,888
|
|
Professional fees
|
|
|
55,604
|
|
|
|
35,866
|
|
|
|
33,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
397,448
|
|
|
|
513,952
|
|
|
|
895,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(25,021,263
|
)
|
|
$
|
129,243,782
|
|
|
$
|
77,518,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest (Notes 1 and 6)
|
|
$
|
(95.69
|
)
|
|
$
|
453.53
|
|
|
$
|
276.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
282,761.8879
|
|
|
|
291,655.3789
|
|
|
|
262,984.3411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-73
CMF Winton Master
L.P.
Statements of Changes in Partners Capital
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
272,883,158
|
|
Net income (loss)
|
|
|
77,518,969
|
|
Sale of 123,458.3915 Redeemable Units of Limited Partnership
Interest
|
|
|
172,636,530
|
|
Redemption of 35,253.7082 Redeemable Units of Limited
Partnership Interest
|
|
|
(51,537,242
|
)
|
Distribution of interest income to feeder funds
|
|
|
(14,456,282
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
457,045,133
|
|
Net income (loss)
|
|
|
129,243,782
|
|
Sale of 85,029.5477 Redeemable Units of Limited Partnership
Interest
|
|
|
154,723,207
|
|
Redemption of 101,798.8498 Redeemable Units of Limited
Partnership Interest
|
|
|
(187,350,875
|
)
|
Distribution of interest income to feeder funds
|
|
|
(5,909,704
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
547,751,543
|
|
Net income (loss)
|
|
|
(25,021,263
|
)
|
Sale of 144,987.2822 Redeemable Units of Limited Partnership
Interest
|
|
|
282,055,852
|
|
Redemption of 117,441.5362 Redeemable Units of Limited
Partnership Interest
|
|
|
(229,968,170
|
)
|
Distribution of interest income to feeder funds
|
|
|
(409,649
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
574,408,313
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,588.26
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
2,021.26
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
1,924.06
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-74
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF Winton Master L.P. (the Master) is a limited
partnership which was organized under the partnership laws of
the State of New York to engage in the speculative trading of a
diversified portfolio of commodity interests including futures
contracts, options, swaps and forward contracts. The sectors
traded include currencies, energy, grains, indices, U.S. and
non-U.S. interest rates, livestock, lumber, metals and softs.
The commodity interests that are traded by the Master are
volatile and involve a high degree of market risk. The Master is
authorized to sell an unlimited number of redeemable units of
Limited Partnership Interest (Redeemable Units).
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 Master. 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 Master, 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.
On November 1, 2004 (commencement of trading operations),
CMF Winton Feeder I L.P. (Winton Feeder) allocated
substantially all of its capital, and Diversified Multi-Advisor
Futures Fund L.P. (formerly, Smith Barney Diversified
Futures Fund L.P.) (Diversified) and Orion
Futures Fund L.P. (formerly, Citigroup Orion Futures
Fund L.P.) (Orion) allocated a portion of their
capital to the Master. Winton Feeder purchased 2,000.0000
Redeemable Units with cash equal to $2,000,000. Orion purchased
35,389.8399 Redeemable Units with cash equal to $33,594,083 and
a contribution of open commodity futures and forward positions
with a fair value of $1,795,757. Diversified purchased
15,054.1946 Redeemable Units with cash equal to $14,251,586 and
a contribution of open commodity futures and forward positions
with a fair value of $802,609. On December 1, 2004,
Tactical Diversified Futures Fund L.P. (formerly, Citigroup
Diversified Futures Fund L.P.) (Tactical
Diversified) allocated a portion of its capital to the
Master and purchased 52,981.2908 Redeemable Units with cash
equal to $57,471,493. On July 1, 2005, Institutional
Futures Portfolio L.P. (formerly, CMF Institutional Futures
Portfolio L.P. (Institutional Portfolio) allocated a
portion of its capital to the Master and purchased 5,741.8230
Redeemable Units with cash equal to $7,000,000. On May 1,
2006, Alera Portfolios SPC. (Alera SPC) allocated a
portion of its capital to the Master and purchased 3,711.7321
Redeemable Units with cash equal to $4,909,537. On June 1,
2006 Legion Strategies LLC (Winton Legion) allocated
a portion of its capital to the Master and purchased 2,355.4605
Redeemable Units with cash equal to $3,000,000. On
February 1, 2007 Abingdon Futures Fund L.P. (formerly,
Citigroup Abingdon Futures Fund L.P.)
(Abingdon) allocated a portion of its capital to the
Master and purchased 9,017.0917 Redeemable Units with cash equal
to $12,945,000. On March 1, 2007, Global Futures
Fund Ltd. (formerly, Citigroup Global Futures
Fund Ltd.) (Global Futures) allocated a portion
of its capital to the Master and purchased 1,875.7046 Redeemable
Units with cash equal to $2,500,000. On April 1, 2009,
Orion Futures Fund (Cayman) Ltd. (formerly, Citigroup Orion
Futures Fund (Cayman) Ltd.) (Orion Cayman) allocated
a portion of its capital to the Master and purchased 319.5126
Redeemable Units with cash equal to $640,000. On March 31,
2007, Alera SPC redeemed its entire investment in the Master.
This amounted to 1,446.6172 Redeemable Units with a fair
value of $1,850,255, which includes interest income of $7,907.
On December 31, 2007, Winton Legion redeemed its entire
investment in the Master. This amounted to
2,182.2006 Redeemable Units with a fair value of
$3,474,547, which includes interest income of $8,634. The Master
was formed to permit commodity pools managed now or in the
future by Winton Capital Management Limited (the
Advisor)
F-75
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
using the Diversified Program, the Advisors proprietary
systematic trading program, to invest together in one vehicle.
The Masters investors consist of Diversified, Orion,
Winton Feeder, Tactical Diversified, Institutional Portfolio,
Abingdon, Global Futures and Orion Cayman (each a
Feeder, collectively the Funds) with
approximately 1.7%, 51.1%, 0.8%, 17.2%, 3.2%, 21.4%, 4.0%, and
0.6% investments in the Master at December 31, 2009,
respectively. Diversified, Orion, Winton Feeder, Tactical
Diversified, Institutional Portfolio, Abingdon, and Global
Futures had approximately 2.6%, 37.9%, 4.1%, 27.4%, 2.7%, 21.7%,
and 3.6% investments in the Master at December 31, 2008,
respectively.
The Master will be liquidated upon the first to occur of the
following: December 31, 2024: or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. Generally
Accepted Accounting Principles (GAAP) for use in
financial statements except for Securities and Exchange
Commission (SEC) rules and interpretive releases,
which are also authoritative GAAP for SEC registrants. The
Codification supersedes all existing non-SEC accounting and
reporting standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (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
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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, 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
F-76
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
an orderly transaction between market participants at the
measurement date. ASC 820 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 Master did not apply the deferral allowed by
ASC 820 for nonfinancial assets and nonfinancial liabilities
measured at fair value on a nonrecurring basis.
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (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) which
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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Masters Level 2 assets and
liabilities. The adoption of the amendments to ASC 820 had no
effect on the Masters Financial Statements.
The Master considers 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). As of and for the years ended December 31,
2009 and December 31, 2008, the Master did not hold any
derivative instruments for which market quotations are not
readily available and which are priced by broker-dealers who
derive fair values for those assets from observable inputs
(Level 2) or that are priced at fair value using
unobservable inputs through the application of managements
assumptions and internal valuation pricing models (Level 3).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
144,283
|
|
|
$
|
144,283
|
|
|
$
|
|
|
|
$
|
|
|
Forwards
|
|
|
1,698,400
|
|
|
|
1,698,400
|
|
|
|
|
|
|
|
|
|
Options owned
|
|
|
17,723
|
|
|
|
17,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
1,860,406
|
|
|
|
1,860,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options written
|
|
|
40,733
|
|
|
|
40,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
40,733
|
|
|
|
40,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
1,819,673
|
|
|
$
|
1,819,673
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-77
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
6,936,356
|
|
|
$
|
6,936,356
|
|
|
$
|
|
|
|
$
|
|
|
Forwards
|
|
|
2,179,569
|
|
|
|
2,179,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
9,115,925
|
|
|
|
9,115,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
9,115,925
|
|
|
$
|
9,115,925
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades 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 can not occur (such as the
S&P 500 Index), whereby such contract is settled in cash.
Payments (variation margin) may be made or received
by the Master 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 Master. When the
contract is closed, the Master records 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.
|
|
|
e.
|
Options. The Master 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 Master writes an option, the premium
received is recorded as a liability in the Statements of
Financial Condition and marked to market daily. When the Master
purchases 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.
|
|
|
|
|
f.
|
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 Master are cash
settled based on prompt dates published by the LME. Payments
(variation margin) may be made or received by the
Master 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 Master. 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 Master records 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.
|
F-78
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
g.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
h.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Masters income and expenses.
|
In 2007, the Master adopted ASC 740, Income Taxes (formerly,
FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Masters 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 Master 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 concluded that no provision for income tax is required
in the Masters financial statements.
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2006.
|
|
|
|
i.
|
Subsequent Events. In 2009, the Master adopted
ASC 855, Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC 855 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.
Management has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
|
|
|
j.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements, which
, among other things, amends ASC 820 to require entities to
separately present purchases, sales, issuances, and settlements
in their reconciliation of Level 3 fair value measurements
(i.e. to present such items on a gross basis rather than on a
net basis), and which clarifies existing disclosure requirements
provided by ASC 820 regarding the level of disaggregation and
the inputs and valuation techniques used to measure fair value
for measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Masters financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
k.
|
Certain prior period amounts have been reclassified to conform
to current period presentation.
|
|
|
|
|
l.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
F-79
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees including
CGMs direct brokerage commission shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amount of cash held by the
Master for margin requirements was $38,915,256 and $26,405,684,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures and forward contracts. The Master 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, Balance
Sheet (formerly, FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts)
have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures, metal forward
and options contracts traded for the year ended
December 31, 2009 based on a quarterly calculation, was
15,248.
The Master adopted ASC 815, 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 only
expands the disclosure requirements for derivative instruments
and related hedging activities and has no impact on the
Statements of Financial Condition, Statements of Income and
Expenses and Statements of Changes in Partners Capital.
The following table indicates the fair values of derivative
instruments of futures, forward and options contracts as
separate assets and liabilities.
F-80
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Currencies
|
|
$
|
410,679
|
|
|
Metals
|
|
$
|
2,433,189
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
128,203
|
|
|
Total unrealized appreciation on open
|
|
|
|
|
Grains
|
|
|
629,534
|
|
|
forward contracts
|
|
$
|
2,433,189
|
|
|
|
|
|
|
|
|
|
|
|
|
Indices
|
|
|
3,222,389
|
|
|
Liabilities
|
|
|
|
|
Interest Rates U.S.
|
|
|
639,524
|
|
|
Forward Contracts
|
|
|
|
|
Interest Rates
Non-U.S.
|
|
|
1,473,596
|
|
|
Metals
|
|
$
|
(734,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
53,810
|
|
|
Total unrealized depreciation on open
|
|
|
|
|
Metals
|
|
|
771,738
|
|
|
forward contracts
|
|
$
|
(734,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Softs
|
|
|
598,000
|
|
|
Net unrealized appreciation on open
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
forward contracts
|
|
$
|
1,698,400
|
**
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
7,927,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
|
Options Owned
|
|
|
|
|
Currencies
|
|
$
|
(2,470,714
|
)
|
|
Indices
|
|
$
|
17,723
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
(516,987
|
)
|
|
Total options owned
|
|
$
|
17,723
|
***
|
|
|
|
|
|
|
|
|
|
|
|
Grains
|
|
|
(361,398
|
)
|
|
|
|
|
|
|
Indices
|
|
|
(349,439
|
)
|
|
|
|
|
|
|
Interest Rates U.S.
|
|
|
(969,559
|
)
|
|
Liabilities
|
|
|
|
|
Interest Rates
Non-U.S.
|
|
|
(1,620,668
|
)
|
|
Options Written
|
|
|
|
|
Livestock
|
|
|
(71,810
|
)
|
|
Indices
|
|
$
|
(40,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
(1,188,985
|
)
|
|
Total options written
|
|
$
|
(40,733
|
)****
|
|
|
|
|
|
|
|
|
|
|
|
Softs
|
|
|
(233,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(7,783,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation on open futures contracts
|
|
$
|
144,283
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition. |
|
** |
|
This amount is in Net unrealized appreciation on open
forward contracts on the Statements of Financial Condition. |
|
*** |
|
This amount is in Options owned, at fair value on
the Statements of Financial Condition. |
|
**** |
|
This amount is in Options written, at fair value on
the Statements of Financial Condition. |
F-81
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
|
Sector
|
|
Gain (Loss) from Trading
|
|
|
Currencies
|
|
$
|
(3,376,768
|
)
|
Energy
|
|
|
(8,697,471
|
)
|
Grains
|
|
|
1,313,879
|
|
Indices
|
|
|
(11,148,536
|
)
|
Interest Rates U.S.
|
|
|
(3,881,924
|
)
|
Interest Rates
Non-U.S.
|
|
|
(1,931,326
|
)
|
Livestock
|
|
|
1,189,446
|
|
Softs
|
|
|
(1,068,956
|
)
|
Lumber
|
|
|
(4,378
|
)
|
Metals
|
|
|
2,572,570
|
|
|
|
|
|
|
Total
|
|
$
|
(25,033,464
|
)*****
|
|
|
|
|
|
|
|
|
***** |
|
This amount is in Gain (loss) from trading, net on
the Statements of Income and Expenses.
|
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the Net Asset
Value per Redeemable Unit of Limited Partnership Interest as of
the end of any day (the Redemption Date) after
a request for redemption has been made to the General Partner at
least 3 days in advance of the Redemption Date. The
Redeemable Units are classified as a liability when the Limited
Partner elects to redeem and informs the Master.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
(97.03
|
)
|
|
$
|
433.13
|
|
|
$
|
220.96
|
|
Interest income
|
|
|
1.51
|
|
|
|
20.53
|
|
|
|
55.98
|
|
Expenses**
|
|
|
(0.17
|
)
|
|
|
(0.13
|
)
|
|
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
(95.69
|
)
|
|
|
453.53
|
|
|
|
276.81
|
|
Distribution of interest income to feeder funds
|
|
|
(1.51
|
)
|
|
|
(20.53
|
)
|
|
|
(55.98
|
)
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year
|
|
|
2,021.26
|
|
|
|
1,588.26
|
|
|
|
1,367.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year
|
|
$
|
1,924.06
|
|
|
$
|
2,021.26
|
|
|
$
|
1,588.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
** |
|
Excludes clearing fees. |
F-82
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
0.0
|
%****
|
|
|
1.0
|
%
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
(4.7
|
)%
|
|
|
28.6
|
%
|
|
|
20.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
**** |
|
Due to rounding. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party 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 at
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 certain forwards and option contracts.
OTC contracts are negotiated between contracting parties and
include certain forwards and option 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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master 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 Master is
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 Masters risk of loss in the event of
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 Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
As both a buyer and seller of options, the Master pays or
receives a premium at the outset and then bears the risk of
unfavorable changes in the price of the contract underlying the
option. Written options expose the Master 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 Master does not consider these contracts to
be guarantees as described in
F-83
CMF Winton Master
L.P.
Notes to Financial Statements
December 31, 2009
ASC 460, Guarantees (formerly,
FAS No. 45,Guarantors Accounting and
Disclosure Requirements for Guarantees).
The General Partner monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the General
Partner 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 Masters
business, these instruments may not be held to maturity.
F-84
Selected
unaudited quarterly financial data for Winton Master for the years ended December 31,
2009 and 2008 are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and unrealized trading
gains (losses) net of brokerage
commissions and clearing fees
including interest income |
|
$ |
4,223,995 |
|
|
$ |
7,348,002 |
|
|
$ |
(31,808,843 |
) |
|
$ |
(4,728,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
4,195,801 |
|
|
$ |
7,339,274 |
|
|
$ |
(31,818,295 |
) |
|
$ |
(4,738,043 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in Net Asset
Value per Redeemable Unit |
|
$ |
16.77 |
|
|
$ |
26.25 |
|
|
$ |
(120.99 |
) |
|
$ |
(17.72 |
) |
|
|
|
For the period |
|
For the period |
|
|
|
|
|
For the period |
|
|
from |
|
from |
|
For the period |
|
from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
from April 1, 2008 |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
to June 30, 2008 |
|
March 31, 2008 |
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
64,847,978 |
|
|
$ |
(37,683,528 |
) |
|
$ |
38,151,732 |
|
|
$ |
63,963,466 |
|
Net income (loss) |
|
$ |
64,838,710 |
|
|
$ |
(37,692,795 |
) |
|
$ |
38,142,296 |
|
|
$ |
63,955,571 |
|
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
241.14 |
|
|
$ |
(136.12 |
) |
|
$ |
129.68 |
|
|
$ |
218.83 |
|
F-85
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
KPMG LLP (KPMG) was previously the principal accountant for
the Partnership through June 26, 2008.
On July 27, 2008, KPMG was dismissed as principal accountant and
PricewaterhouseCoopers LLP (PwC) was engaged as the independent registered public accounting firm.
From July 27, 2008 through July 22, 2009, PwC was the principal accountant for
the Partnership. On July 22, 2009, PWC was dismissed as principal accountant and on July 23, 2009
Deloitte & Touche LLP (Deloitte) was engaged as the independent registered
public accounting firm. The decision to change accountants was approved by the General Partner of the Partnership.
In connection with the audit of the fiscal year ended December 31, 2008, and through July 22, 2009,
and the audit of the fiscal year ended December 31, 2007,
and through June 26, 2008, there were no disagreements with PwC or KPMG, respectively, on any matter
of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have
caused them to make reference thereto in their report on the financial statements for the corresponding year.
The respective audit report of PwC and KPMG on the financial statements of the Partnership as of and
for the years ended December 31, 2008 and 2007,
respectively, did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope, or accounting principle.
Item 9A(T). Controls and Procedures.
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed under the Exchange Act is accumulated and communicated to management,
including the Chief Executive Officer (the CEO) and Chief Financial Officer (the 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 December 31, 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. |
The report included in Item 8. Financial Statements and Supplementary Data. includes
managements report on internal control over financial reporting (Managements Report) and an
attestation report of the Partnerships registered public accounting firm regarding internal
control over financial reporting. Managements report was not required to be audited by the
Partnerships registered public accounting firm pursuant to temporary rules of the SEC that permit the Partnership to provide only managements report in this annual
report. Management elected to have its internal control over financial reporting audited.
There were no changes in the Partnerships internal control over financial reporting during
the fiscal quarter ended December 31, 2009 that materially affected, or are reasonably likely to
materially affect, the Partnerships internal control over financial reporting.
Item 9B: Other Information. None.
27
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The Partnership has no officers or directors and its affairs are managed by its General
Partner. Investment decisions are made by the Advisors.
The officers and directors of the General Partner are Jerry Pascucci (President, Chief Investment Officer and Director),
Jennifer Magro (Chief Financial Officer, Vice President and Director), Daryl Dewbrey (Secretary and
Director), Shelley Deavitt Ullman (Senior Vice President and Director) and Raymond Nolte
(Director). Each director holds office until his or her successor is elected, or until his or her
earlier death, resignation or removal. Vacancies on the board of directors may be filled by
appointment by the sole member of the General Partner, Morgan Stanley Smith Barney Holdings LLC
which wholly owns the General Partner, or by unanimous vote of the remaining directors, depending
on the circumstances of the vacancy. The officers of the General Partner are designated by the
General Partners board of directors. Each officer holds office until his or her death,
resignation or removal.
Mr. Pascucci, age 40, is President, Chief Investment Officer and Director of the General
Partner (since March 2007, May 2005 and June 2005, respectively). Mr. Pascuccis principal status
was approved by the National Futures Association (NFA) in June 2005. He is also registered as an
associated person of the General Partner (since June 2009) and of Morgan Stanley Smith Barney LLC
(Morgan Stanley Smith Barney) (since August 2009). From March 2007 to July 2009, Mr. Pascucci
was a Managing Director of Citigroup Alternative Investments LLC (CAI), a division of Citigroup
Inc. (Citigroup) that administers its hedge fund and fund of funds businesses, and until July
2009, its commodity pool business. He was also Chief Investment Officer of CAIs Hedge Fund
Management Group from March 2007 to July 2009. He was registered as an associated person of
Citigroup Global Markets Inc. (Citigroup Global Markets) from February 2006 to July 2009. Mr.
Pascucci has been responsible for trading advisor selection, due diligence and portfolio
construction for managed futures funds and accounts since May 1999. Between May 1996 and May 1999,
Mr. Pascucci served as a Senior Credit Risk Officer for Citigroup Global Markets, focused primarily
on market and counterparty risks associated with Citigroup Global Markets commodity pool and hedge
fund clients. Prior to joining Citigroup Global Markets in May 1996, Mr. Pascucci was employed
(from October 1992) by ABN AMRO North America at its European American Bank subsidiary as a
corporate banking officer where he facilitated the establishment of credit lines and other loan
facilities for corporate clients.
Ms. Magro, age 38, is Chief Financial Officer, Director and Vice President of the General
Partner (since October 2006, May 2005 and August 2001, respectively). Ms. Magros principal status
was approved by the NFA in June 2005. She was also a Managing Director of CAI and Chief Operating
Officer of CAIs Hedge Fund Management Group from October 2006 to July 2009. Ms. Magro is
responsible for the financial, administrative and operational functions of the General Partner.
She is also responsible for the accounting and financial and regulatory reporting of the General
Partners managed futures funds. From March 1999 to July 2009, Ms. Magro was responsible for the
accounting and financial and regulatory reporting of Citigroups managed futures funds. She had
similar responsibilities with CAIs Hedge Fund Management Group (from October 2006 to July 2009).
Prior to joining Citigroup Global Markets in January 1996, Ms. Magro was employed by Prudential Securities Inc. (from July 1994) as a staff accountant whose duties included the calculation of net asset values for
commodity pools and real estate investment products.
Mr. Dewbrey, age 39, is Secretary and Director of the General Partner (since July 2009 and
March 2007, respectively). He registered as an associated person of the General Partner in January
2004 and became a principal of the General Partner in March 2007. He is also registered as an
associated person of Morgan Stanley Smith Barney (since August 2009). He was registered as an
associated person of Citigroup Global Markets from March 1998 to July 2009. Mr. Dewbrey has worked
with the General Partner in varying capacities since April 2001, and, since May 2005, Mr. Dewbrey
has been head of managed futures product development. Mr. Dewbrey was a director of CAI
responsible for marketing and client services for CAIs Hedge Fund Management Group from February
2007 to July 2009. From October 1997 to September 2000, Mr. Dewbrey was head of Citigroup Global
Markets managed futures trading desk. In September 2000, Mr. Dewbrey was selected for the Salomon
Smith Barney Sales and Trading Training Program. Mr. Dewbrey began his career in the futures
markets with Rosenthal Collins Group, a futures brokerage firm, where he worked from May 1990 to
October 1997 in varying capacities on the trading floors of the Chicago Board of Trade, COMEX and
the New York Mercantile Exchange. Mr. Dewbrey is a member of the Managed Funds Association and the
Futures Industry Association.
Ms. Ullman, age 51, is a Managing Director of Citigroup Global Markets Futures Division and a
Senior Vice President and Director of the General Partner (since May 1997 and April 1994,
respectively). Ms. Ullmans principal status was approved by the NFA in June 1994. She was
registered as an associated person of the General Partner from January 2004 to July 2009. Ms.
Ullman is registered as an associated person of Citigroup Global Markets (since July 1993). She is
also the branch manager of the Citigroup Global Markets branch that supports the General Partner
(since January 2002). Previously, Ms. Ullman was a Vice President of Lehman Brothers (October 1985
to July 1993), with responsibility for execution, administration, operations and performance
analysis for managed futures funds and accounts. She was registered as an associated person of
Lehman Brothers Inc. (from February 1983 to July 1993) and was principal of Lehman Brothers Capital
Management Corp. (from April 1989 to July 1993).
28
Mr. Nolte, age 48, is the Chief Executive Officer and the Chairman of the Investment Committee
of CAIs Hedge Fund Management Group. He registered as an associated person and became a principal
of the General Partner in March 2007. He was appointed a Director of the General Partner in March
2007. He is also registered as an associated person of Citigroup Global Markets (since October
2005). He registered as an associated person and became a principal of CAI in March 2007. Prior
to joining CAI in September 2005, Mr. Nolte worked at Deutsche Bank and its affiliate Deutsche
Asset Management (from June 1999 to September 2005). He was registered as an associated person and
was a principal of DB Capital Advisors Inc. (from July 2000 to May 2005) and DB Investment Managers
Inc. (from May 2002 to June 2005). Prior to that, Mr. Nolte worked for Bankers Trust (from May
1983 until the firm was acquired by Deutsche Bank in June 1999). During his employment at Deutsche
Asset Management, Mr. Nolte served as the Global Head and Chief Investment Officer of the DB
Absolute Return Strategies (DB ARS) Fund of Funds business, the Chairman of the DB ARS Fund of Funds
Investment Committee, the Vice Chairman of DB ARS and Head of the Single Manager Hedge Fund
business. While employed at Deutsche Bank and Deutsche Asset Management, Mr. Noltes duties
included overseeing the firms fund of funds and hedge fund businesses. Mr. Nolte was the founder
and head of the Investment Committee for the Topiary Fund, Deutsche Banks first fund of hedge
funds. The DB ARS Fund of Hedge Funds platform grew to $7 billion in assets under management
during Mr. Noltes tenure. That business was comprised of several multi-manager, multi-strategy
funds as well as single strategy funds and separate accounts.
The Partnership has not adopted a code of ethics that applies to officers because it has no
officers. In addition, the Partnership has not adopted any procedures by which investors may
recommend nominees to the Partnerships board of directors, and has not established an audit
committee because it has no board of directors.
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are managed by the General Partner,
which receives compensation for its services, as set forth under Item 1. Business. CGM,
an affiliate of the General Partner, is the commodity broker for the Partnership and receives
brokerage commissions for such services, as described under Item 1. Business. During the
year ended December 31, 2009, CGM earned $7,831,507 in brokerage commissions and clearing fees from
the Partnership. The Advisors earned $13,417,518 in management fees during 2009. The General
Partner earned $3,642,172 in administrative fees during 2009. The Advisors earned $4,138,088 in
incentive fees during 2009.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) Security ownership of certain beneficial owners. As of February 28, 2010, the
Partnership knows of no person who beneficially owns more than five percent (5%) of the Redeemable
Units outstanding.
(b) Security ownership of management. Under the terms of the Limited Partnership
Agreement, the Partnerships, affairs are managed by the General Partner. The General Partner owns
Units of general partnership interest equivalent to 2,943.3393 Redeemable Units of Limited
Partnership Interest (1.0%) as of December 31, 2009.
Principals
who own Redeemable Units.*
*Jerry
Pascucci 10.7954
Redeemable Units
* No
one principal owns more than 1% of Redeemable Units.
(c) Changes in control. None.
Item 13. Certain Relationships and Related Transactions and Director Independence.
CGM and the General Partner would be considered promoters for purposes of item 404(c) of
Regulation S-K. The nature and the amounts of compensation each promoter will receive from the
Partnership are set forth under Item 1. Business., Item 8. Financial Statements and
Supplementary Data. and Item 11. Executive Compensation.
Item 14. Principal Accountant Fees and Services.
(1) Audit Fees. The aggregate fees billed for each of the last two fiscal years for
professional services rendered by Deloitte in the period from July 23, 2009 through
December 31, 2009, PwC in the period from June 27, 2008 through
December 31, 2008 and KPMG in the period from January 1, 2008 through June 26, 2008 for the audit of the Partnerships annual financial statements, review of
financial statements included in the Partnerships Forms 10-Q and 10-K and other services normally
provided in connection with regulatory filings or engagements were:
|
|
|
|
|
|
|
Deloitte |
|
$ |
129,126 |
|
|
PwC |
|
$ |
185,919 |
|
|
KPMG |
|
$ |
48,000 |
|
(2) Audit-Related Fees. None
(3) Tax Fees.
In the last two fiscal years, Deloitte did not provide any
professional services for tax compliance, tax advice or tax planning.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by PwC for tax compliance and tax
advice given in the preparation of the Partnerships Schedule K1s, the preparation of the
Partnerships Form 1065 and preparation of all State Tax Returns were:
|
|
|
|
|
|
|
2009 |
|
$ |
42,000 |
|
|
2008 |
|
$ |
29,000 |
|
(4) All Other Fees. None.
(5) Not Applicable.
(6) Not Applicable.
29
PART IV
Item 15. Exhibits, Financial Statement Schedules.
|
|
|
|
|
|
(a |
) (1) |
|
Financial Statements: |
|
|
|
|
|
|
|
|
|
Statements of Financial Condition at December 31, 2009 and 2008. |
|
|
|
|
|
|
|
|
|
Condensed Schedules of Investments at December 31, 2009 and 2008 |
|
|
|
|
|
|
|
|
|
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007. |
|
|
|
|
|
|
|
|
|
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and
2007. |
|
|
|
|
|
|
|
|
|
Notes to Financial Statements |
|
|
|
|
|
|
|
(2) |
|
Exhibits: |
3.1 |
|
Second Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.1 to
current report on Form 8-K filed on December 21, 2009). |
|
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). |
(a) |
|
1st 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). |
|
(b) |
|
2nd 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 as Exhibit 3.2(b) to the Form 10-Q filed on
November 16, 2009). |
|
(c) |
|
3rd 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 as Exhibit 3.2(c) to the Form 10-Q filed on
November 16, 2009). |
|
(d) |
|
4th 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). |
|
(e) |
|
5th 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 as Exhibit 3.2(e) to the Form 10-Q filed on
November 16, 2009). |
|
(f) |
|
6th 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). |
|
(g) |
|
1st 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 as Exhibit 3.2(g) to the Form 10-Q filed on
November 16, 2009). |
|
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). |
|
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). |
|
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). |
30
10.1(c) |
|
Letter extending the Management Agreements between the General Partner and AAA
Capital Management Inc. for 2009 (filed herein). |
|
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). |
|
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). |
|
10.2(b) |
|
Letter extending the Management Agreement between the General Partner and
Willowbridge Associates Inc. for 2009 (filed herein). |
|
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). |
|
10.3(a) |
|
Letter extending the Management Agreement between the General Partner and Winton
Capital Management Limited for 2009 (filed herein). |
|
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). |
|
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 as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009). |
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10.6 |
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Form of Subscription Agreement (filed as Exhibit 10.5 to the Form 10-Q filed
on November 16, 2009). |
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10.7 |
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Form of Third-Party Subscription Agreement (filed as Exhibit 10.5 to the Form
10-Q filed on November 16, 2009). |
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10.8 |
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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). |
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16.1 |
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Letter dated July 23, 2009 from PricewaterhouseCoopers LLP regarding Change
in Certifying Accountant (filed as Exhibit 16.1 to the Form 8-K filed on July 24,
2009). |
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16.2 |
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Letter dated June 26, 2008 from KPMG LLP regarding Change in Certifying
Accountant (filed as Exhibit 16.1 to the Form 8-K filed on July 1, 2008). |
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The exhibits required to be filed by Item 601 of Regulations S-K are incorporated herein by
reference. |
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31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director). |
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31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and
Director). |
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32.1 Section 1350 Certification (Certification of President and Director). |
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32.2 Section 1350 Certification (Certification of Chief Financial Officer and Director). |
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 31st day of March 2010.
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ORION FUTURES FUND L.P.
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By: |
Ceres Managed Futures LLC
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(General Partner) |
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By: |
/s/ Jerry Pascucci
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Jerry Pascucci, President & Director |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
date indicated.
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/s/ Jerry Pascucci
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/s/ Shelley Deavitt Ullman |
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Jerry Pascucci
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Shelley Deavitt Ullman |
President and Director
Ceres Managed Futures LLC
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Director
Ceres Managed Futures LLC |
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/s/ Jennifer Magro
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/s/ Daryl Dewbrey |
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Jennifer Magro
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Daryl Dewbrey |
Chief Financial Officer and Director
(Principal Accounting Officer)
Ceres Managed Futures LLC
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Director
Ceres Managed Futures LLC |
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Raymond Nolte |
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Director Ceres Managed Futures LLC |
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Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the
Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.
Annual Report to Limited Partners
No proxy material has been sent to Limited Partners.
32