Attached files
file | filename |
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EX-32.2 - EX-32.2 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y04567exv32w2.htm |
EX-32.1 - EX-32.1 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y04567exv32w1.htm |
EX-31.2 - EX-31.2 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y04567exv31w2.htm |
EX-31.1 - EX-31.1 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y04567exv31w1.htm |
EX-10.1.B - EX-10.1.B - MANAGED FUTURES PREMIER WARRINGTON L.P. | y04567exv10w1wb.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
OF THE SECURITIES EXCHANGE ACT of 1934
For the fiscal year ended December 31, 2010
OR
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from
to
Commission File Number 000-52603
WARRINGTON FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 20-3845577 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue, 14th floor
New York, New York 10036
522 Fifth Avenue, 14th floor
New York, New York 10036
(Address and Zip Code of principal executive offices)
(212) 296-1999
(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 the 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 a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
Accelerated filer | Non-accelerated filer X | Smaller reporting company | |||
(Do not check if a 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 $200,339,684 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, 2011,
197,025.0899 Limited Partnership Redeemable Units were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
[None]
Table of Contents
PART I
Item 1. | Business. |
(a) General
Development of Business. Warrington Fund L.P. (the
Partnership) is a limited partnership organized on November 28, 2005 under the
partnership laws of the State of New York to engage in the speculative trading of commodity interests including futures and options contracts. The
commodity interests that are traded by the Partnership are volatile and involve a high degree of
market risk. The Partnership privately and continuously offers up to 500,000 Redeemable Units in
the Partnership to qualified investors. There is no maximum number of Redeemable Units that may be
sold by the Partnership.
During the initial offering period (January 17, 2006 to February 21, 2006), the Partnership
sold 108,279 redeemable units of limited partnership interest (Redeemable Units) at $1,000 per
Redeemable Unit, as well as 300 units of special limited partnership interest at $1,000 per Redeemable Unit.
In order to form the Partnership, the General Partner and an initial limited partner, each
contributed $1,000 to the Partnership for one unit of general partnership interest and limited
partnership interest, respectively. The Partnership commenced its operations on February 21, 2006.
No securities which represent an equity interest or any other interest in the Partnership trade on
any public market. Subscriptions and redemptions of Redeemable Units and General Partner contributions and
redemptions for the years ended December 31, 2010, 2009 and 2008 are reported in the Statements of
Changes in Partners Capital on page 28 under Item 8. Financial Statements and Supplementary
Data.
Ceres 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). Morgan Stanley, indirectly through various subsidiaries,
owns a majority equity interest in MSSB Holdings. Citigroup Global Markets Inc. (CGM), the commodity broker and a
selling agent for the Partnership, owns a minority equity interest in 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, 2010, all of the trading decisions for the Partnership are made by the Advisor
(defined below). A description of the trading activities and focus of
the Advisor is included on page 7 under
Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operation.
The Partnerships trading of futures and options contracts, if applicable, on
commodities is done primarily on United States of America and foreign commodity exchanges. It
engages in such trading through a commodity brokerage account maintained with CGM.
The
General Partner and each limited partner of the Partnership (each, a Limited Partner) share in the profits
and losses of the Partnership, after the allocation to the Special Limited Partner (defined below), in proportion to the amount
of Partnership interest owned by each
except that no Limited Partner shall be liable for obligations of the Partnership in excess of
their capital contribution and profits, if any, net of distributions.
The Partnership will be liquidated upon the first to occur of the following: December 31,
2025; when the net asset value per Redeemable Unit decreases to less than $400 per Redeemable Unit
as of the close of business on any business day; a decline in net assets after trading commences to
less than $1,000,000; or under certain circumstances as defined in the Limited Partnership
Agreement of the Partnership (the Limited Partnership Agreement).
For
the period January 1, 2010 through December 31, 2010, the approximate
average market sector allocation for the Partnership was 100% indices.
The General Partner administers the business and affairs of the Partnership. The Partnership pays a monthly administrative fee equal to 1/24 of 1% (1/2 of 1% per year)
of month-end Net Assets of the Partnership. 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 management fee, profit share allocation accrual, the General Partners
administrative fee and any redemptions or distributions as of the end of such month.
This fee may be increased or decreased at the
discretion of the General Partner.
The General Partner has entered into a management agreement (the Management Agreement) with
Warrington Advisors, LLC (Warrington, the Special
Limited Partner, or the Advisor), a registered
commodity trading advisor. Scott C. Kimple, the sole principal of
Warrington, is currently employed by Morgan Stanley Smith Barney LLC and a selling agent for the Partnership. The Advisor
will make all commodity trading decisions for the
2
Table of Contents
Partnership
and is not affiliated with the General Partner or CGM. The Advisor is not
responsible for the organization of the Partnership. Pursuant to the terms of the Management
Agreement, the Partnership pays the Advisor a monthly management fee equal to 1/6 of 1% (2% per
year) of month-end adjusted Net Assets managed by 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 management fee, profit share allocation accrual, 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 Advisor is a Special Limited Partner of the Partnership and receives a
quarterly profit share allocation to its capital account in the Partnership in the form of units of
the Partnership, the value of which shall be equal to 20% of new trading profits, as defined in the
Management Agreement, earned by the Advisor on behalf of the Partnership during each calendar quarter and are
issued as Special Limited Partner Units. The Advisor will not receive
a profit share allocation until the
Advisor recovers the net loss incurred and earn additional new trading profits for the Partnership.
The Partnership has entered into a customer agreement (the Customer Agreement)
with CGM which provides that the Partnership will pay CGM a monthly brokerage fee equal to 5/16 of 1%
(3.75% per year) of month-end Net Assets. Month-end Net Assets, for
the purpose of calculating brokerage
fees are Net Assets, as defined in the Limited Partnership
Agreement, prior to the reduction of the current months brokerage fee, management fee, profit share allocation accrual, the
General Partners administrative fee, other expenses and any redemptions or distributions as of
the end of such month.
CGM will pay a portion
of its brokerage fees to other properly registered selling agents and to
financial advisors who have sold Redeemable Units.
Brokerage fees will be paid for the life of the Partnership, although the rate at which such
fees are paid may be changed. This fee may be increased or decreased at any time at CGMs discretion
upon written notice to the Partnership. This fee does not include
exchange, give-up, user, clearing, floor brokerage and National
Futures Association (NFA) fees (collectively, the clearing fees)
which are borne by the Partnership. The Partnerships cash is deposited by CGM in segregated
bank
accounts to the extent required by Commodity Futures Trading Commission (CFTC)
regulations. CGM
will pay the Partnership interest on 80% of the average daily equity maintained in cash in its
account during each month at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the
average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date on
which such weekly rate is determined. CGM 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.
The Customer Agreement between the Partnership and CGM 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 Segments. The Partnerships business
consists of only one segment, speculative trading of commodity interests. The Partnership does not
engage in sales of goods or services. The Partnerships net income (loss) from operations for the
years ended December 31, 2010, 2009, 2008 and 2007 and for the period from February 21, 2006
(commencement of trading operations) to December 31, 2006, is set forth under Item 6. Selected
Financial Data. The Partnerships capital as of December 31, 2010 was $222,241,881.
(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.
(h) Smaller Reporting Companies. Not applicable.
Item 1A. | Risk Factors. |
3
Table of Contents
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.
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 fees and management fees. Fees will be paid to the Advisor even if the Partnership experiences
a net loss for the full year.
An investors ability to redeem units is limited.
An
investors ability to redeem Redeemable 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:
1. | The General Partner and the Partnerships commodity broker are affiliates; | ||
2. | The Advisor, the Partnerships commodity broker and their principals and affiliates may trade in commodity interests for their own accounts; and | ||
3. | 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
Advisor has 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.
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.
Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
signed into law on July 21, 2010, the CFTC
and the Securities and Exchange Commission (the SEC) may promulgate rules to
regulate swaps dealers, require that swaps be traded on an exchange or swap execution
facilities, mandate additional reporting and disclosure requirements and require that
derivatives (such as those traded by the Partnership) be moved into central clearinghouses.
These rules, if promulgated, may negatively 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.
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 MSSB Holdings.
4
Table of Contents
Item 3. | Legal Proceedings. |
This section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which CGM or its subsidiaries 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 or any of its
individual principals and no such actions are currently pending, except as follows.
Credit-Crisis-Related Litigation and Other Matters
Citigroup and CGM continue to
cooperate fully in response to subpoenas and requests for information from the SEC, FINRA, the
Federal Housing Finance Agency, state attorneys general, the Department of Justice and
subdivisions thereof, bank regulators, and other government agencies and authorities,
in connection with various formal and informal inquiries concerning Citigroups
subprime and other mortgage-related conduct and business activities, as well as
other business activities affected by the credit crisis. These business activities
include, but are not limited to, Citigroups sponsorship, packaging, issuance, marketing,
servicing and underwriting of MBS and CDOs and its origination, sale or other transfer,
servicing, and foreclosure of residential mortgages.
Subprime Mortgage-Related Litigation and Other Matters
The SEC, among other regulators, is investigating Citigroups subprime
and other mortgage-related conduct and business activities, as well as other business activities
affected by the credit crisis, including an ongoing inquiry into Citigroups
structuring and sale of CDOs. Citigroup is cooperating fully with the
SECs inquiries.
On July 29, 2010, the SEC announced the settlement
of an investigation into certain of Citigroups 2007 disclosures
concerning its subprime-related business activities. On October 19, 2010, the
United States District Court for the District of Columbia entered a Final Judgment
approving the settlement, pursuant to which Citigroup agreed to pay a $75 million civil
penalty and to maintain certain disclosure policies, practices and procedures for a three-year
period. Additional information relating to this action is publicly available in court filings under
the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the OCC and the FDIC, among other federal and state
authorities, are investigating issues related to the conduct of certain mortgage servicing
companies, including Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is
cooperating fully with these inquiries.
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] |
5
Table of Contents
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities. |
(a) Market Information. The Partnership has issued no stock. There is no public
market for the Redeemable Units of limited partnership interest.
(b) Holders. The number of holders of Redeemable Units of Limited Partnership
Interest as of December 31, 2010 was 1,736.
(c) Dividends.
The Partnership did not declare a distribution in 2010 or 2009. The
Partnership does not intend to declare distributions in the foreseeable future.
(d) Securities Authorized for Issuance Under Equity Compensation Plans. None
(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.
For the twelve months
ended December 31, 2010, there were additional subscriptions of 62,812.7486 Redeemable Units
totaling $69,739,000 and
General Partner contributions representing 213.4599 unit equivalents totaling $250,000.
For the twelve months ended December 31,
2009, there were additional subscriptions of 52,976.2953 Redeemable Units
totaling $57,366,000 and General Partner contributions representing 2,236.9147 unit equivalents
totaling $2,455,036. For the twelve months ended December 31, 2008, there were additional subscriptions of
74,341.9316 Redeemable Units totaling $90,506,635 and 1,840.4704
an allocation of Redeemable Units of Special Limited Partnership Interest totaling $2,378,053.
The Redeemable Units were issued in reliance upon applicable exemptions from registration
under Section 4(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D
promulgated thereunder. The Redeemable Units were purchased by accredited investors as described in
Regulation D.
Proceeds from additional subscriptions of Redeemable Units are used in the trading of commodity
interests including futures contracts, options and forward contracts.
(f) Purchases
of Equity Securities by the Issuer and Affiliated Purchasers.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
(d) Maximum Number |
||||||||||||
(c) Total Number |
(or Approximate |
|||||||||||
of Shares (or |
Dollar Value) of Shares |
|||||||||||
(a) Total Number |
(b) Average |
Redeemable Units) |
(or Redeemable Units) |
|||||||||
of Shares |
Price Paid per |
Purchased as Part |
that May Yet Be |
|||||||||
(or Redeemable |
Share (or |
of Publicly Announced |
Purchased Under the |
|||||||||
Period | Units) Purchased* | Redeemable Unit)** | Plans or Programs | Plans or Programs | ||||||||
October 1, 2010
October 31, 2010 |
5,378.0489 | $1,005.52 | N/A | N/A | ||||||||
November 1, 2010
November 30, 2010 |
9,639.5267 | $1,023.23 | N/A | N/A | ||||||||
December 1, 2010
December 31, 2010 |
10,684.2792 | $1,015.78 | N/A | N/A | ||||||||
25,701.8548 | $1,016.43 | |||||||||||
* | Generally, Limited Partners are permitted to redeem their Redeemable Units as of the last day of each month on three business 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. No fee will be charged for redemptions. |
6
Table of Contents
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, 2010, 2009, 2008 and
2007, and for the period from February 21, 2006 (commencement of trading operations) to December
31, 2006 and total assets at December 31, 2010, 2009, 2008, 2007 and 2006 were as follows:
Period from February 21, | ||||||||||||||||||||
2006 (commencement of | ||||||||||||||||||||
trading operation) to | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | December 31, 2006 | ||||||||||||||||
Net realized and unrealized trading gains (losses) net
of brokerage fees (including clearing fees) of $11,051,196,
$9,983,103, $11,991,502, $12,630,719 and $9,469,977,
respectively |
$ | (24,972,220 | ) | $ | 36,618,429 | $ | (57,241,118 | ) | $ | 28,545,037 | $ | 28,205,311 | ||||||||
Interest income |
228,292 | 161,984 | 3,161,288 | 9,716,417 | 8,158,695 | |||||||||||||||
(24,743,928 | ) | $ | 36,780,413 | $ | (54,079,830 | ) | $ | 38,261,454 | $ | 36,364,006 | ||||||||||
Net income (loss) before allocation to Special Limited Partner |
$ | (31,596,289 | ) | $ | 30,558,856 | $ | (61,788,821 | ) | $ | 30,880,446 | $ | 30,918,884 | ||||||||
Allocation to Special Limited Partner |
$ | | $ | | $ | (2,378,053 | ) | $ | (5,157,469 | ) | $ | (4,552,615 | ) | |||||||
Net income (loss) after allocation to Special Limited Partner |
$ | (31,596,289 | ) | $ | 30,558,856 | $ | (64,166,874 | ) | $ | 25,722,977 | $ | 26,366,269 | ||||||||
Increase (decrease) in net asset value per unit |
$ | (117.83 | ) | $ | 138.00 | $ | (253.85 | ) | $ | 131.71 | $ | 117.75 | ||||||||
Net asset
value per unit |
$ | 1,015.78 | $ | 1,133.61 | $ | 995.61 | $ | 1,249.46 | $ | 1,117.75 | ||||||||||
Total assets |
$ | 235,854,382 | $ | 270,251,354 | $ | 242,555,912 | $ | 284,883,866 | $ | 307,889,348 | ||||||||||
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Partnership aims to achieve substantial capital appreciation through speculative trading,
directly and 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 General Partner manages all business of the Partnership. The General Partner has delegated
its responsibility for the investment of the Partnerships assets to Warrington. The General
Partner employs a team of approximately 40 professionals whose primary emphasis is to the Advisor
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
state-of-the-art 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 Advisor 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 Advisor; | ||
| selection, appointment and termination of the Advisor; | ||
| negotiation of the Management Agreement; and | ||
| monitoring the activity of the Advisor. |
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.
Warrington trades primarily futures contracts and options on futures contracts on the S&P 500
Index and the Dow Jones Index. However, Warringtons trading strategy may also include the trading
of additional commodity interests such as U.S. Treasury Bonds, currencies, gold, silver and energy
products. Currently, the Advisor limits its trading to listed futures and options on futures
contracts on U.S. futures and options exchanges.
7
Table of Contents
The strategies incorporate both directional and non-directional elements. Directional
strategies will utilize options and combinations of options with the goal of capturing specific
moves in the price of the underlying commodity interest. Non-directional strategies attempt to
capture and retain premiums on the sale of uncovered options and combinations of options. The
Advisor may employ combinations of options commonly known as spreads or straddles in
conjunction with both directional and non-directional strategies. Spreads and straddles involve
the simultaneous buying and selling of contracts on the same commodity but with different delivery
dates or markets.
The trading methods and strategies are designed to preserve original equity. Each trade is
analyzed using a mathematical pricing model to determine if its potential return justifies the
attendant risk. Risk management techniques emphasize low standard deviation trades over those that
appear to have greater risk. Warringtons Core Trading Program, the Advisors proprietary program,
attempts to limit the equity at risk on each trade and in each market. The Advisor will attempt to
minimize the risks associated with adverse moves in either price or volatility through various
hedging techniques. The specific method or extent of hedging at any time will be determined
subjectively by Warrington. There is no assurance that hedging techniques will be effective in
reducing risk.
The trading strategies have been internally researched and developed. They are primarily
technical in nature, i.e., they are developed from the research and analysis of patterns of
intra-day, daily, weekly and monthly price movements, and of proprietary indicators or standard
indicators such as volume and open interest. Warrington considers the effects of some key
fundamental factors in certain situations, especially for the purpose of risk control. The time
frame for holding a position is usually less than five weeks. The trading program also emphasizes
current and ongoing research and analysis of market behavior to continue developing the strategies.
Warrington believes that the development of a commodity trading strategy is a continual
process. As a result of further research and analysis into the performance of Warringtons methods,
changes may be made from time to time in the specific manner in which these trading methods are
employed. As a result of such modifications, the trading methods used in the future might differ
from those currently employed.
The exact nature of Warringtons methods are proprietary and confidential. The foregoing
description is of necessity general and is not intended to be exhaustive. Trading decisions require
the exercise of Warringtons judgment. The decision not to trade certain commodities or not to make
certain trades may result at times in missing price moves and profits, which other advisors who are
willing to trade these commodities may be able to capture. There is no assurance that Warringtons
trading will be profitable.
Future trading performance may be affected by the increasing amount of funds directed by
Warrington. For example, in certain commodity interests the Advisor will be unable to acquire
positions as large as its strategy might otherwise dictate because the size of speculative
positions is limited by CFTC or exchange rules. Also, skid or slippage (the difference between
ideal and actual trade execution prices, and the transaction costs resulting there from) will
increase with the execution of larger orders.
As a managed futures partnership, the Partnerships performance is dependent upon the
successful trading of the Partnerships Advisor to achieve the Partnerships objectives. It is the
business of the General Partner to monitor the Advisors performance to assure compliance with the
Partnerships trading policies and to determine if the Advisors performance is meeting the
Partnerships objectives. Based on 2010 results, the General Partner continues to believe the
Advisors program has met the Partnerships objectives and expects to continue to allocate the
Partnerships assets to the Advisor and this program unless otherwise indicated.
(a) Liquidity.
The Partnership does not engage in sales of goods or services. Its only assets are its equity
in its trading account, consisting of cash, net unrealized appreciation
(depreciation) on open futures and options contracts 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 in the year of December 31, 2010.
To minimize the risk relating to low margin deposits, the Partnership follows certain trading
policies, including:
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(i) | The Partnership invests its assets only in commodity interests that the Advisor believes 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 Advisor believes will permit it to enter and exit trades without noticeably moving the market. | ||
(ii) | The 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 the Advisor. | ||
(iii) | The Partnership 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 does 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 does not utilize borrowings other than short-term borrowings if the Partnership takes delivery of any cash commodities. | ||
(vi) | The Advisor may, from time to time, employ trading strategies such as spreads or straddles on behalf of the Partnership. 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 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, indicating the desire to generate commission income. |
From January 1, 2010 through December 31, 2010, the Partnerships average margin to equity ratio
(i.e., the percentage of assets on deposit required for margin) was approximately 40.7%.
In the normal course of business, the Partnership is party to financial instruments with
off-balance sheet risk, including derivative financial instruments and derivative commodity
instruments. These financial instruments 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, 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 option contracts. OTC
contracts are negotiated between contracting parties and include forwards, swaps and certain
options. 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.
The risk to the limited partners that have purchased interests
in the Partnership in limited the amount of their capital
contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. The limited
liability is a consequence 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 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 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 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 risk of loss is reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Partnership to offset unrealized gains and losses
and other assets and liabilities with such counterparties upon the occurrence of certain events.
The Partnership has credit risk and concentration risk as the sole counterparty or broker with
respect to the Partnerships 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 counterparty is an
exchange or clearing organization.
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As both a buyer and seller of options, the Partnership 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 Partnership 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 does
not consider these contracts to be guarantees.
The
General Partner monitors and attempts to control the Partnerships risk exposure on a daily basis
through financial, credit and risk management monitoring systems, and
accordingly, believes that it
has effective procedures for evaluating and limiting the credit and market risks to which the
Partnership 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, online monitoring systems provide account analysis of futures, forwards and options
contracts 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 the financial statements).
Other than the risks inherent in commodity futures 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 General Partner may, in its discretion,
cause the Partnership to cease trading operations and liquidate all open positions 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 Advisor 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 fees, advisory fees and administrative fees. The level of
these expenses is dependent upon the level of trading and the ability of the Advisor to identify
and take advantage of price movements in the commodity markets, in addition to 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.
No forecast can be
made as to the level of redemptions in any given period. A Limited Partner
may require the Partnership to redeem its Redeemable Units at their net asset value as of the
last day of a month on 10 days notice to the General Partner. For the purpose of a redemption, any
accrued liability for reimbursement of offering and organization expenses for the Initial Offering
Period will not reduce net asset value per Redeemable Unit. 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, 2010,
76,284.8496 Redeemable Units were redeemed totaling $79,204,024.
For the year ended December 31, 2009, 50,314.8532
Redeemable Units were redeemed totaling $53,480,428. For the year
ended December 31, 2008, 65,710.7432 Redeemable Units were redeemed totaling $73,330,014, and
5,968.2288 Units of Special Limited Partnership Interest totaling $7,487,599 and 1,631.0000 of General
Partner unit equivalents totaling $1,973,412 were redeemed.
For the year ended December 31, 2010, there
we additional sales of 62,812.7486 Redeemable Units totaling $69,739,000 and General Partner contributions
representing 213.4599 unit equivalents totaling $250,000.
For the year ended December 31, 2009, there were additional sales of 52,976.2953 Redeemable
Units totaling $57,366,000 and General Partner contributions
representing 2,236.9147 unit equivalents totaling $2,455.036. For the year ended December 31, 2008,
there were additional sales of 74,341.9316 Redeemable Units
totaling $90,506,635 and an allocation of 1,840.4704 Redeemable Units of Special Limited Partnership Interest
totaling $2,378,053.
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(c) Results of Operations.
For the year ended December 31, 2010, the net
asset value per unit decreased 10.4% from $1,133.61 to $1,015.78.
For the year ended December 31, 2009, the net asset value per unit increased 13.9% from
$995.61 to $1,133.61. For the year ended December 31, 2008, the net asset per value unit
decreased 20.3% from $1,249.46 to $995.61.
The Partnership experienced a net trading loss of
$13,921,024 before brokerage fees and related fees in 2010. Losses were primarily attributable
to the trading of the S&P Index Calls and Puts and offset by gains in S&P Index
futures. The net trading gain or loss for the Partnership is discussed on
page 27 under Item 8. Financial Statements and Supplementary Data.
2010
proved to be a difficult year for Warrington as the market movements in the S&P 500
were quite volatile given the continued global financial calamity. During the first
quarter of the year Warrington made some gains by continuing to implement their debit
spread strategy in the S&P 500 ( by ) but as concerns grew about the financial
health of the United States as well as Europe the markets became much more volatile.
The biggest story in 2010 came during the flash crash of May 6th, 2010, which saw a 1,000
point move in the Dow Jones reverse almost to the exact valuation it opened at on that
day in May. The volatility associated with these market moves had a significant impact
on the S&P 500 and Warringtons strategy took a significant loss due to (given )
both their original portfolio positioning and subsequent decision to eliminate
exposure given how quickly the market moved against them and how quickly it corrected
itself. Despite the losses in 2010 performance was largely driven by this seismic
event in May as modest gains were made throughout the second half of 2010 but were
not enough to absorb the losses in May.
The Partnership experienced a net trading gain of $46,601,532 before fees and related fees in 2009. Gains were primarily
attributable to the trading of the S&P 500 Index futures, S&P Index Calls and Puts.
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 seen a
bottom in March, banks were seeking to return TARP bailout money and leading indicators were
recovering. The Partnership realized gains as the equity market traded within expected ranges.
During the first quarter, the portfolio captured the range bound price action in the equity
index as prices fluctuated dramatically within the range. In February, the market weakened on
economic data and showed a bearish trend. The portfolio profited by employing a fractional
position of ratio put spreads during the decline. While the weakness in the overall equity markets
continued unabated into early March, the market rallied in the later half of the month, partially
offsetting some gains for the month.
Entering
April with a partial position of ratio put spreads, the Advisor was positioned for a
decline in the stock market while also seeking to minimize the risk of losses from further rallies.
As the market steadily climbed, the Advisor adjusted the ratio put spreads that it held,
positioning the Partnership to potentially capitalize on a retracement in the S&P 500. The
beginning of May saw the rally from the March lows continue unabated. The bearish position
continued in June. Given the evidence showing that the S&P 500 had been unable to trade
meaningfully higher for two weeks after making new highs for the year at the beginning of the
month, the probability was high that a pullback in the S&P 500 would occur.
The S&P 500 posted another strong third quarter. While profitable in this market rally, the
Partnerships advisor recognized a market phenomenon that had been difficult to trade.
When stocks declined for 2 to 3 days, the VIX spiked appreciably and the anecdotal fear in the
market climbed rapidly. This rapid escalation in fear
tended to dampen market downside moves, as
the worst declines tended to come when market participants failed to fully appreciate the magnitude of
the decline until significant damage had already occurred.
The final quarter of the year finished strong with solid returns for November and December.
Within the first few days of November, the S&P 500 quickly offset the declines from the end of
October. After just eight trading days, the S&P 500 had gained 6.8%. As this rally progressed,
the Advisor reduced the portfolios holdings to realize profits. December was an
uneventful month for the S&P 500. The trading range for the market was approximately 3.6%, a range
that might have been witnessed on any given day earlier in the year. Warringtons performance has
been very positive for 2009, even though market conditions were less than optimal when compared to
the ideal trading environment for the Partnerships strategy.
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Interest income on 80% of the
Partnerships daily average equity maintained in cash in its account during each month at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average
non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days.
Interest income for the three and twelve months ended December 31,
2010 increased by $42,973 and $66,308, respectively, as compared to the corresponding periods in
2009. The increase in interest income is due to higher U.S. Treasury bill rates
during the three and twelve months ended December 31, 2010, as compared to the corresponding
periods in 2009. Interest earned by the Partnership will increase the net asset value of the Partnership.
Brokerage fees are calculated on the Partnerships adjusted net asset value on the last
day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly,
they must be analyzed in relation to the fluctuations in the monthly net asset values. Brokerage fees and clearing fees for the three months ended December 31, 2010 decreased by $82.764 due to lower average net
assets as compared to the corresponding period in 2009, and for the twelve months ended December 31, 2010
increased by $1,068,093 due to higher average net assets, as compared to the corresponding periods in 2009.
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, subscriptions and redemptions. Management
fees for three months ended December 31, 2010 decreased by $81,773 due to lower average net assets
as compared to the corresponding period in 2009, and for
the twelve months ended December 31, 2010 increased by $461,898, due to higher average net assets, as
compared to the corresponding periods in 2009.
Administrative 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, subscriptions and redemptions.
Administrative fees for the three months ended December 31, 2010 decreased $20,443 due to lower average net
assets as compared to the corresponding period in 2009, and for the twelve months ended December 31, 2010
increased by $115,476 due to higher average net assets, as compared to the corresponding periods in 2009.
Special Limited Partner profit share allocations (incentive fees) are based on the new trading
profits generated by the Advisor at the end of the quarter, as defined in the advisory agreements
between the Partnership, the General Partner and the Advisor. There were no profit share
allocations earned for the three and twelve months ended December 31, 2010 and 2009, respectively.
The Advisor will not be paid incentive fees until the Advisor recovers
the net loss incurred and earns additional new trading profits for the Partnership.
The Partnership pays professional fees, which generally
include legal and accounting expenses. Professional fees for the years ended December 31, 2010 and 2009 were $262,170 and $204,962, respectively.
The Partnership pays other expenses, which generally
include filing, reporting and data processing fees. Other expenses for the years ended December 31, 2010 and 2009 were
$40,139 and $43,917, respectively.
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The Partnership experienced a net
trading loss, before brokerage fees and related fees
in 2008 of $45,249,616. Losses were primarily attributable to the trading of S&P 500 Index Puts and
were partially offset by gains in S&P 500 Index futures and S&P 500 Index Calls.
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. High volatility across most market sectors was a manifestation of
investor fears and anxiety. Amid this backdrop, the Partnership suffered losses for the year from
trading in the S&P 500 Index.
In the General Partners opinion, the Advisor continues to employ its trading methods in a
consistent and disciplined manner and its results are consistent with the objectives of the
Partnership and expectations for the Advisors programs. The General Partner continues to monitor
the Advisors performance on a daily, weekly, monthly and annual basis to assure these objectives
are met. The General Partner may modify or terminate the allocation
of assets to the Advisor at any time.
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 Partnership depends on the
existence of major price trends and the ability of the Advisor to
identify those price trends correctly. Price trends are influenced by,
among other things, changing supply and demand relationships, weather, governmental, agricultural,
commercial and trade programs and policies, national and international political and economic
events and changes in interest rates. To the extent that the Advisor
correctly makes such
forecasts, the Partnership expects to increase capital through operations.
In allocating substantially all of the assets of the Partnership to the Advisor, the General
Partner considered the Advisors past performance, trading style, volatility of the markets
traded and fee requirements. The General Partner may modify or terminate the allocation
of assets to the Advisor 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 is 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 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.
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(g) Critical Accounting Policies.
Partnerships Investments. All commodity interests (including derivative financial
instruments and derivative commodity instruments) are held for trading purposes. The commodity
interests are recorded on trade date and open contracts are recorded at fair value (as described
below) at the measurement date. Investments in commodity interests denominated in foreign
currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement
date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on
options 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 is reported in the Statements of Income and Expenses.
Partnerships Fair Value Measurements.
Fair value is defined 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
under current market conditions. 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. Accounting principles generally accepted in the United States of America (GAAP) also requires 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. Management has concluded that based on available information in the marketplace, the Partnerships
Level 1 assets and liabilities are actively traded.
The Partnership will 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 make
disclosures 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 as required under GAAP.
The Partnership considers prices for exchange traded commodity futures and options contracts
to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of
forwards, swaps and certain options contracts for which market quotations are not readily available
are priced by broker-dealers that derive fair values for those assets from observable inputs (Level
2). As of and for the years ended December 31, 2010 and 2009, the Partnership did not hold any derivative
instruments for which market quotations were not readily available and which were priced by
broker-dealers that derive fair values for those assets from observable inputs (Level 2) or that were
priced at fair value using unobservable inputs through the application of managements assumptions
and internal valuation pricing models (Level 3).
The gross presentation of the fair value of the Partnerships derivatives by instrument type is shown
in Note 4. Trading Activities on the financial statements.
Options. The Partnership may purchase and write (sell), both exchange listed and
OTC, 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 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 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.
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Introduction
The Partnership is a speculative commodity pool. The market sensitive instruments held by it
are acquired for speculative trading purposes, and all or substantially all of the Partnerships
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 the Partnerships
assets and undistributed profits. This limited liability is a consequence of the organization of
the Partnership as a Limited Partnership under applicable law.
Market movements result in frequent changes in the fair value of the Partnerships open
positions and, consequently, in its earnings and cash balance. The Partnerships market risk is
influenced by a wide variety of factors, including 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 open positions and the liquidity of the markets in
which it trades.
The Partnership 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 could reasonably be
expected to lose in a given market sector. However, the inherent uncertainty of the Partnerships
speculative trading and the recurrence in the markets traded by the Partnership 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 experience to date (i.e., risk of ruin). In light of
the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the
inclusion of the quantification in this section should not be considered to constitute any
assurance or representation that the Partnerships losses in any market sector will be limited to
Value at Risk or by the Partnerships attempts to manage its market risk.
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 market sensitive instruments.
Quantifying the Partnerships Trading Value at Risk
The following quantitative disclosures regarding the Partnerships 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 risk exposure in the various market sectors traded by the Advisor is
quantified below in terms of Value at Risk. Due to the Partnerships 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 intervals. The
15
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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. 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 futures and forward contracts does not have any
optionality component. However, the Advisor may trade commodity options. The Value at Risk
associated with options is reflected in the following table as the margin requirement attributable
to the instrument underlying each option. 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 in almost all cases fluctuate to a
lesser extent than those of the underlying instruments.
In quantifying the Partnerships 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.
The Partnerships Trading Value at Risk in Different Market Sectors
Value
at Risk tables represent a probalistic assessment of the risk of loss
in market sensitive instruments. The following tables indicate the trading Value at Risk associated with the Partnerships open
positions by market category as of December 31, 2010 and 2009 and the highest, lowest and average
value at any point during the years. All open position trading risk exposures of the Partnership
have been included in calculating the figures set forth below. As of December 31, 2010, the
Partnerships total capitalization was $222,241,881.
December 31, 2010
% of Total | High | Low | Average * | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | |||||||||||||||
Indices |
$ | 35,745,980 | 16.08 | % | $ | 153,426,986 | $ | 1,694,925 | $ | 57,779,840 | ||||||||||
Total |
$ | 35,745,980 | 16.08 | % | ||||||||||||||||
As of December 31, 2009,
the Partnerships total capitalization was $263,053,194.
December 31, 2009
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Indices |
$ | 74,225,508 | 28.22 | % | $ | 205,991,318 | $ | 275,400 | $ | 82,956,269 | ||||||||||
Total |
$ | 74,225,508 | 28.22 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership 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
16
Table of Contents
capitalization of the Partnership. The magnitude of the Partnerships open positions creates a
risk of ruin not typically found in most other investment vehicles. Because of the size of its
positions, certain market conditions unusual, but historically recurring from time to time
could cause the Partnership to incur severe losses over a short period of time. The foregoing Value
at Risk table as well as the past performance of the Partnership give no indication of this
risk of ruin.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnerships 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 exposures constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The Partnerships 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 risk controls 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.
There can be no assurance that the Partnerships 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.
The following were the primary
trading risk exposures of the Partnership as of December 31, 2010, by market sector.
Indices. The Partnerships primary equity exposure is to equity price risk in the CME
S&P Index.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partner monitors and attempts to control the Partnerships risk exposure on a daily basis
through financial, credit and risk management monitoring systems and accordingly believes that it
has effective procedures for evaluating and limiting the credit and market risks to which the
Partnership may be subject.
The General Partner monitors the Partnerships performance and the concentration of open
positions, and consults with the Advisor concerning the Partnerships overall risk profile. If the
General Partner felt it necessary to do so, the General Partner could require the Advisor to close
out positions as well as enter positions traded on behalf of the Partnership.
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 market risk exposures.
The Advisor applies its own risk management policies to its trading. The Advisor often follows
diversification guidelines, margin limits and stop loss points to exit a position. The Advisors
research of risk management often suggests ongoing modifications to its trading programs.
As part of the General Partners risk management, the General Partner periodically meets with
the Advisor to discuss its risk management and to look for any material changes to the Advisors
portfolio balance and trading techniques. The Advisor is required to notify the General Partner of
any material changes to its programs.
17
Table of Contents
Item 8. | Financial Statements and Supplementary Data. |
WARRINGTON FUND L.P.
The following financial statements and related items of the Partnership are filed under this
Item 8: Oath or Affirmation, Managements Report on Internal Control over Financial Reporting,
Reports of Independent Registered Public Accounting Firms, for the years ended December 31, 2010,
2009, and 2008; Statements of Financial Condition at December 31, 2010 and 2009; Condensed
Schedules of Investments at December 31, 2010 and 2009; Statements of Income and Expenses for
the years ended December 31, 2010, 2009, and 2008; Statements of Changes in Partners Capital
for the years ended December 2010, 2009, and 2008; and Notes to Financial Statements.
18
Table of Contents
To the
Limited Partners of
Warrington Fund L.P.
Warrington Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
By: | Walter Davis |
President and Director
Ceres Managed Futures LLC
General Partner,
Warrington Fund L.P.
Ceres Managed Futures LLC
522 Fifth Avenue
14th Floor
New York, NY 10036
212-296-1999
19
TABLE OF CONTENTS
Managements Report on Internal Control Over Financial Reporting | ||||||||
EX-10.1.B | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 |
Table of Contents
Managements
Report on Internal Control Over Financial Reporting
The management of Warrington Fund L.P. (the Partnership), Ceres
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 Warrington Fund L.P. has assessed the
effectiveness of the Partnerships internal control over
financial reporting as of December 31, 2010. 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, 2010 based on the criteria
referred to above.
Walter Davis
President and Director
Ceres Managed Futures LLC
General Partner,
Warrington Fund L.P.
Jennifer Magro
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
Warrington Fund L.P.
20
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Warrington Fund L.P.:
Warrington Fund L.P.:
We have audited the accompanying statements of financial condition of Warrington Fund L.P. (the
Partnership), including the condensed schedules of investments, as of December 31, 2010 and 2009,
and the related statements of income and expenses, and changes in partners capital for the years
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 audits. The
financial statements of the Partnership for the year ended December 31, 2008 were audited by other
auditors whose report, dated March 26, 2009, expressed an unqualified opinion on those statements.
We conducted our audits 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 audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such 2010 and 2009 financial statements present fairly, in all material respects,
the financial position of Warrington Fund L.P. as of December 31, 2010 and 2009, and the results of
its operations and its changes in partners capital for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
|
||
March 23, 2011 |
21
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Partners of
Warrington Fund L.P.:
Warrington Fund L.P.:
In our opinion, the accompanying statement of income and expenses, and statement of changes in
partners capital present fairly, in all material respects, the financial position of Warrington
Fund L.P. (formerly known as Smith Barney Warrington 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.
22
Table of Contents
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
March 26, 2009
23
Table of Contents
Warrington
Fund L.P.
Statements of Financial Condition
December 31, 2010 and 2009
Statements of Financial Condition
December 31, 2010 and 2009
2010 | 2009 | |||||||
Assets:
|
||||||||
Equity in trading account:
|
||||||||
Cash (Note 3c)
|
$ | 189,733,118 | $ | 174,068,344 | ||||
Cash margin (Note 3c)
|
44,588,913 | 92,436,885 | ||||||
Options purchased, at fair value (cost $4,225,973 and $3,864,000
at December 31, 2010 and 2009, respectively)
|
1,517,063 | 3,743,250 | ||||||
235,839,094 | 270,248,479 | |||||||
Interest receivable (Note 3c)
|
15,288 | 2,875 | ||||||
Total assets
|
$ | 235,854,382 | $ | 270,251,354 | ||||
Liabilities and Partners Capital:
|
||||||||
Liabilities:
|
||||||||
Options premium received, at fair value (premium $6,851,750 and
$7,406,575 at December 31, 2010 and 2009, respectively)
|
$ | 1,423,500 | $ | 3,398,250 | ||||
Accrued expenses:
|
||||||||
Brokerage fees (Note 3c)
|
732,597 | 833,916 | ||||||
Management fees (Note 3b)
|
389,302 | 443,177 | ||||||
Administrative fees (Note 3a)
|
97,326 | 110,794 | ||||||
Professional fees
|
92,360 | 87,939 | ||||||
Other
|
24,539 | 25,149 | ||||||
Redemptions payable (Note 5)
|
10,852,877 | 2,298,935 | ||||||
Total liabilities
|
13,612,501 | 7,198,160 | ||||||
Partners Capital (Notes 1 and 5):
|
||||||||
General Partner, 2,650.4783 and 2,437.0184 unit equivalents
outstanding at December 31, 2010 and 2009, respectively
|
2,692,303 | 2,762,628 | ||||||
Special Limited Partner 0.0000 Redeemable Units outstanding at
December 31, 2010 and 2009, respectively
|
| | ||||||
Limited Partners, 216,139.5211 and 229,611.6221 Redeemable Units
outstanding at December 31, 2010 and 2009, respectively
|
219,549,578 | 260,290,566 | ||||||
Total partners capital
|
222,241,881 | 263,053,194 | ||||||
Total liabilities and partners capital
|
$ | 235,854,382 | $ | 270,251,354 | ||||
Net asset value per unit
|
$ | 1,015.78 | $ | 1,133.61 | ||||
See accompanying notes to financial statements.
24
Table of Contents
Warrington
Fund L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Options Purchased
|
||||||||||||
Indices
|
||||||||||||
Puts
|
2,465 | $ | 1,517,063 | 0.68 | % | |||||||
Total options purchased
|
1,517,063 | 0.68 | ||||||||||
Options Premium Received
|
||||||||||||
Indices
|
||||||||||||
Calls
|
4,840 | (60,500 | ) | (0.03 | ) | |||||||
Puts
|
11,020 | (1,363,000 | ) | (0.61 | ) | |||||||
Total options premium received
|
(1,423,500 | ) | (0.64 | ) | ||||||||
Total fair value
|
$ | 93,563 | 0.04 | % | ||||||||
See accompanying notes to financial statements.
25
Table of Contents
Warrington
Fund L.P.
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Options Purchased
|
||||||||||||
Indices
|
||||||||||||
Puts
|
966 | $ | 3,743,250 | 1.42 | % | |||||||
Total options purchased
|
3,743,250 | 1.42 | ||||||||||
Options Premium Received
|
||||||||||||
Indices
|
||||||||||||
Calls
|
552 | (34,500 | ) | (0.01 | ) | |||||||
Puts
|
9,246 | (3,363,750 | ) | (1.28 | ) | |||||||
Total options premium received
|
(3,398,250 | ) | (1.29 | ) | ||||||||
Total fair value
|
$ | 345,000 | 0.13 | % | ||||||||
See accompanying notes to financial statements.
26
Table of Contents
Warrington
Fund L.P.
Statements of Income and Expenses
for the years ended 2010, 2009 and 2008
Statements of Income and Expenses
for the years ended 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Income:
|
||||||||||||
Net gains (losses) on trading of commodity interests:
|
||||||||||||
Net realized gains (losses) on closed contracts
|
$ | (12,752,789 | ) | $ | 42,716,207 | $ | (44,464,116 | ) | ||||
Change in net unrealized gains (losses) on open contracts
|
(1,168,235 | ) | 3,885,325 | (785,500 | ) | |||||||
Gain (loss) from trading, net
|
(13,921,024 | ) | 46,601,532 | (45,249,616 | ) | |||||||
Interest income (Note 3c)
|
228,292 | 161,984 | 3,161,288 | |||||||||
Total income (loss)
|
(13,692,732 | ) | 46,763,516 | (42,088,328 | ) | |||||||
Expenses:
|
||||||||||||
Brokerage fees including clearing fees (Note 3c)
|
11,051,196 | 9,983,103 | 11,991,502 | |||||||||
Management fees (Note 3b)
|
5,240,041 | 4,778,143 | 5,873,616 | |||||||||
Administrative fees (Note 3a)
|
1,310,011 | 1,194,535 | 1,468,406 | |||||||||
Professional fees
|
262,170 | 204,962 | 299,959 | |||||||||
Other
|
40,139 | 43,917 | 67,010 | |||||||||
Total expenses
|
17,903,557 | 16,204,660 | 19,700,493 | |||||||||
Net income (loss) before allocation to Special Limited Partner
|
(31,596,289 | ) | 30,558,856 | (61,788,821 | ) | |||||||
Allocation to Special Limited Partner (Note 3b)
|
| | (2,378,053 | ) | ||||||||
Net income (loss) after allocation to Special Limited Partner
|
$ | (31,596,289 | ) | $ | 30,558,856 | $ | (64,166,874 | ) | ||||
Net income (loss) per unit (Note 6)
|
$ | (117.83 | ) | $ | 138.00 | $ | (253.85 | ) | ||||
Weighted average units outstanding
|
247,324.0124 | 219,931.8990 | 250,116.7518 | |||||||||
See accompanying notes to financial statements.
27
Table of Contents
Warrington
Fund L.P.
Statements of Changes in Partners Capital
for the years ended 2010, 2009 and 2008
Statements of Changes in Partners Capital
for the years ended 2010, 2009 and 2008
Special |
||||||||||||||||
Limited |
Limited |
General |
||||||||||||||
Partners | Partner | Partner | Total | |||||||||||||
Partners Capital at December 31, 2007
|
$ | 272,781,581 | $ | 5,157,469 | $ | 2,287,891 | $ | 280,226,941 | ||||||||
Subscriptions of 74,341.9316 Redeemable Units
|
90,506,635 | | | 90,506,635 | ||||||||||||
Allocation of 1,840.4704 Redeemable Units to Special Limited
Partner
|
| 2,378,053 | | 2,378,053 | ||||||||||||
Redemptions of 65,710.7432 Redeemable Units 1,631.0000 Units of
General Partner unit equivalents
|
(73,330,014 | ) | | (1,973,412 | ) | (75,303,426 | ) | |||||||||
Redemptions of 5,968.2288 Redeemable Units
|
| (7,487,599 | ) | | (7,487,599 | ) | ||||||||||
Net income (loss) available for pro rata distribution
|
(64,003,697 | ) | (47,923 | ) | (115,254 | ) | (64,166,874 | ) | ||||||||
Partners Capital at December 31, 2008
|
225,954,505 | | 199,225 | 226,153,730 | ||||||||||||
Subscriptions of 52,976.2953 Redeemable Units and 2,236.9147
Units of General Partner unit equivalents
|
57,366,000 | | 2,455,036 | 59,821,036 | ||||||||||||
Redemptions of 50,314.8532 Redeemable Units
|
(53,480,428 | ) | | | (53,480,428 | ) | ||||||||||
Net income (loss) available for pro rata distribution
|
30,450,489 | | 108,367 | 30,558,856 | ||||||||||||
Partners Capital at December 31, 2009
|
260,290,566 | | 2,762,628 | 263,053,194 | ||||||||||||
Subscriptions of 62,812.7486 Redeemable Units and 213.4599 Units
of General Partner unit equivalents
|
69,739,000 | | 250,000 | 69,989,000 | ||||||||||||
Redemptions of 76,284.8496 Redeemable Units
|
(79,204,024 | ) | | | (79,204,024 | ) | ||||||||||
Net income (loss) available for pro rata distribution
|
(31,275,964 | ) | | (320,325 | ) | (31,596,289 | ) | |||||||||
Partners Capital at December 31, 2010
|
$ | 219,549,578 | $ | | $ | 2,692,303 | $ | 222,241,881 | ||||||||
Net asset value per unit:
|
2008:
|
$ | 995.61 | ||
2009:
|
$ | 1,133.61 | ||
2010:
|
$ | 1,015.78 | ||
See accompanying notes to financial statements.
28
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
1. | Partnership Organization: |
Warrington Fund L.P., (the Partnership) is a
limited partnership organized on November 28, 2005 under
the partnership laws of the State of New York to engage in the
speculative trading of commodity interests including futures and
options contracts. The Partnership trades the stock indices
sector. The Partnership commenced trading on February 21,
2006. The commodity interests that are traded by the Partnership
are volatile and involve a high degree of market risk. The
Partnership privately and continuously offers up to 500,000
redeemable units of limited partnership interest
(Redeemable Units) in the Partnership to qualified
investors. There is no maximum number of units that may be sold
by the Partnership.
Ceres 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). Morgan Stanley, indirectly
through various subsidiaries, owns a majority equity interest in
MSSB Holdings. Citigroup Global Markets Inc. (CGM),
the commodity broker and a selling agent for the Partnership,
owns a minority equity interest in 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, 2010, all trading decisions for the
Partnership are made by the Advisor (defined below).
The General Partner and each limited partner of the Partnership
(each, a Limited Partner) share in the profits and
loss of the Partnership, after the allocation to the Special
Limited Partner (defined in Note 3c.), in proportion to the
amount of Partnership interest owned by each except that no
Limited Partner shall be liable for obligations of the
Partnership in excess of their capital contribution and profits,
if any, net of distributions.
The Partnership will be liquidated upon the first to occur of
the following: December 31, 2025; when the net asset value
per Redeemable Unit decreases to less than $400 per Redeemable
Unit as of the close of business on any business day; a decline
in net assets after trading commences to less than $1,000,000;
or under certain circumstances as defined in the Limited
Partnership Agreement of the Partnership (the Limited
Partnership Agreement).
2. | Accounting Policies: |
a. | Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates. | |
b. | Statement of Cash Flows. The Partnership is not required to provide a Statement of Cash Flows. | |
c. | Partnerships Investments. All commodity interests (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on options 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 Fair Value
Measurements. Fair value is defined 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 under current market conditions. The
fair value hierarchy gives the highest priority to
29
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
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. GAAP also requires 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. Management has concluded that based on
available information in the marketplace, the Partnerships
Level 1 assets and liabilities are actively traded.
The Partnership will 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 make
disclosures 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 as required under GAAP.
The Partnership considers prices for exchange-traded commodity
futures and options contracts to be based on unadjusted quoted
prices in active markets for identical assets (Level 1).
The values of forwards, swaps and certain options contracts for
which market quotations are not readily available are priced by
broker-dealers that derive fair values for those assets from
observable inputs (Level 2). As of and for the years ended
December 31, 2010 and 2009, the Partnership did not hold
any derivative instruments for which market quotations were not
readily available and which were priced by broker-dealers that
derive fair values for those assets from observable inputs
(Level 2) or that were priced at fair value using
unobservable inputs through the application of managements
assumptions and internal valuation pricing models
(Level 3). The gross presentation of the fair value of the
Partnerships derivatives by instrument type is shown in
Note 4, Trading Activities.
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets |
Significant Other |
Unobservable |
||||||||||||||
for Identical |
Observable Inputs |
Inputs |
||||||||||||||
12/31/2010 | Assets (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Options purchased
|
$ | 1,517,063 | $ | 1,517,063 | $ | | $ | | ||||||||
Total assets
|
1,517,063 | 1,517,063 | | | ||||||||||||
Liabilities
|
||||||||||||||||
Options premium received
|
$ | 1,423,500 | $ | 1,423,500 | $ | | $ | | ||||||||
Total liabilities
|
1,423,500 | 1,423,500 | | | ||||||||||||
Total fair value
|
$ | 93,563 | $ | 93,563 | $ | | $ | | ||||||||
30
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets |
Significant Other |
Unobservable |
||||||||||||||
for Identical |
Observable Inputs |
Inputs |
||||||||||||||
12/31/2009 | Assets (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Options purchased
|
$ | 3,743,250 | $ | 3,743,250 | $ | | $ | | ||||||||
Total assets
|
3,743,250 | 3,743,250 | | | ||||||||||||
Liabilities
|
||||||||||||||||
Options premium received
|
$ | 3,398,250 | $ | 3,398,250 | $ | | $ | | ||||||||
Total liabilities
|
3,398,250 | 3,398,250 | | | ||||||||||||
Total fair value
|
$ | 345,000 | $ | 345,000 | $ | | $ | | ||||||||
d. | Options. The Partnership may purchase and write (sell) both exchange listed and over-the-counter (OTC), 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 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 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. |
e. | 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. |
GAAP provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements and 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 Partnership files U.S. federal and various state and
local tax returns. No income tax returns are currently under
examination. Generally, the 2007 through 2010 tax years remain
subject to examination by U.S. federal and most state tax
authorities. Management does not believe that there are any
uncertain tax positions that require recognition of a tax
liability.
f. | Subsequent Events. Management of the Partnership evaluates events that occur after the balance sheet date but before financial statements are filed. Management has assessed the subsequent events through the date of filing and determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements. |
g. | Net Income (Loss) per Unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 6, Financial Highlights. |
31
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
3. | Agreements: |
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 will pay
the General Partner a monthly administrative fee in return for
its services to the Partnership equal to 1/24 of 1% (1/2 of 1%
per year) of month-end Net Assets of the Partnership. 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 management
fee, profit share allocation accrual, the General Partners
administrative fee and any redemptions or distributions as of
the end of such month. This fee may be increased or decreased at
the discretion of the General Partner.
b. | Management Agreement: |
The General Partner, on behalf of the Partnership, has entered
into a management agreement (the Management
Agreement) with Warrington Advisors, LLC (the
Special Limited Partner, or the
Advisor), a registered commodity trading advisor.
Scott C. Kimple, the sole principal of Warrington, is currently
employed by Morgan Stanley Smith Barney LLC and a selling agent
for the Partnership. As compensation for services, the
Partnership pays the Advisor a monthly management fee of 1/6 of
1% (2% per year) of month-end Net Assets managed by 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
management fee, profit share allocation accrual, 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 Advisor is a Special Limited Partner of the
Partnership and receives a quarterly profit share allocation to
its capital account in the Partnership in the form of units of
the Partnership, the value of which shall be equal to 20% of new
trading profits, as defined in the Management Agreement, earned
by the Advisor on behalf of the Partnership during each calendar
quarter and are issued as Special Limited Partner Units. The
Advisor will not receive a profit share allocation until the
Advisor recovers the net loss incurred and earns additional new
trading profits for the Partnership.
In allocating substantially all of the assets of the Partnership
to the Advisor, the General Partner considered the
Advisors past performance, trading style, volatility of
the markets traded and fee requirements. The General Partner may
modify or terminate the allocation of assets to the Advisor at
any time.
c. | Customer Agreement: |
The Partnership 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 Partnerships account in accordance
with orders placed by the Advisor. The Partnership is obligated
to pay a monthly brokerage fee to CGM equal to 5/16 of 1% (3.75%
per year) of month-end Net Assets. Month-end Net Assets, for the
purpose of calculating brokerage fees are Net Assets, as defined
in the Limited Partnership Agreement, prior to the reduction of
the current months brokerage fee, management fee, profit
share allocation accrual, the General Partners
administrative fee, other expenses and any redemptions or
distributions as of the end of such month. CGM will pay a
portion of its brokerage fees to other properly registered
selling agents and to financial advisors who have sold
Redeemable Units. Brokerage fees will be paid for the life of
the Partnership, although the rate at which such fees are paid
may be changed. This fee may be increased or decreased at any
time at CGMs discretion upon written notice to the
Partnership. This fee does not include exchange,
give-up,
user, clearing, floor brokerage and National Futures Association
fees (collectively the clearing fees) which will be
borne by the Partnership. All of the Partnerships assets
are deposited in the Partnerships account at CGM. The
Partnerships cash is deposited by CGM in segregated bank
accounts to the extent required by Commodity
32
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Futures Trading Commission regulations. At December 31,
2010, and 2009, the amounts of cash held for margin requirements
were $44,588,913 and $92,436,885, respectively. CGM will pay the
Partnership interest on 80% of the average daily equity
maintained in cash in its account during each month at a
30-day
U.S. Treasury Bill rate determined weekly by CGM based on
the average non-competitive yield on
3-month
U.S. Treasury Bills maturing in 30 days from the date
on which such weekly rate is determined. The Customer Agreement
may be terminated upon notice by either party.
4. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity instruments. The
results of the Partnerships trading activities are shown
in the Statements of Income and Expenses.
The Customer Agreement between the Partnership and CGM gives the
Partnership the legal right to net unrealized gains and losses
on open futures and forward contracts on the Statements of
Financial Condition.
All of the commodity interests owned by the Partnership are held
for trading purposes. The average number of option contracts
traded for the years ended December 31, 2010 and 2009 based
on a monthly calculation were 14,568 and 12,135, respectively.
The average number of futures contracts traded for the years
ended December 31, 2010 and 2009 based on a monthly
calculation were 104 and 46, respectively. In prior year, the
average contracts were based on a quarterly and not a monthly
calculation: The amounts for the year ended December 31,
2009 have been revised accordingly.
The following tables indicate the gross fair values of
derivative instruments of option contracts as separate assets
and liabilities.
December 31, |
December 31, |
|||||||
2010 | 2009 | |||||||
Assets
|
||||||||
Options Purchased
|
||||||||
Indices
|
$ | 1,517,063 | $ | 3,743,250 | ||||
Total options purchased
|
$ | 1,517,063 | * | $ | 3,743,250 | * | ||
* | This amount is in Options purchased, at fair value on the Statements of Financial Condition. |
December 31, |
December 31, |
|||||||
2010 | 2009 | |||||||
Liabilities
|
||||||||
Options Premium Received
|
||||||||
Indices
|
$ | (1,423,500 | ) | $ | (3,398,250 | ) | ||
Total options premium received
|
$ | (1,423,500 | )** | $ | (3,398,250 | )** | ||
** | This amount is in Options premium received, at fair value on the Statements of Financial Condition. |
The following tables indicate the trading gains and losses, by
market sector, on derivative instruments for the years ended
December 31, 2010 and 2009.
2010 |
2009 |
|||||||
Sector
|
Gain (Loss) from Trading | Gain (Loss) from Trading | ||||||
Indices
|
$ | (13,921,024 | ) | $ | 46,601,532 | |||
Total
|
$ | (13,921,024 | )*** | $ | 46,601,532 | *** | ||
*** | This amount is in Gain (loss) from trading, net on the Statements of Income and Expenses. |
33
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
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. 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 its Redeemable
Units at their net asset value as of the last day of a month on
three business days notice to the General Partner. There
is no fee charged to Limited Partners in connection with
redemptions.
6. | Financial Highlights: |
Changes in the net asset value per unit for the years ended
December 31, 2010, 2009 and 2008 were as follows:
2010 | 2009 | 2008 | ||||||||||
Net realized and unrealized gains (losses)*
|
$ | (91.04 | ) | $ | 165.53 | $ | (226.09 | ) | ||||
Interest income
|
0.92 | 0.74 | 12.71 | |||||||||
Expenses and allocation to Special Limited Partner**
|
(27.71 | ) | (28.27 | ) | (40.47 | ) | ||||||
Increase (decrease) for the year
|
(117.83 | ) | 138.00 | (253.85 | ) | |||||||
Net asset value per unit, beginning of the year
|
1,133.61 | 995.61 | 1,249.46 | |||||||||
Net asset value per unit, end of the year
|
$ | 1,015.78 | $ | 1,133.61 | $ | 995.61 | ||||||
* | Includes brokerage fees. | |
** | Excludes brokerage fees. |
2010 | 2009 | 2008 | ||||||||||
Ratios to average Net Assets:***
|
||||||||||||
Net investment income (loss) before allocation to Special
Limited Partner****
|
(6.9 | )% | (6.8 | )% | (5.8 | )% | ||||||
Operating expenses
|
7.0 | % | 6.9 | % | 6.9 | % | ||||||
Allocation to Special Limited Partner
|
| % | | % | 0.8 | % | ||||||
Total expenses
|
7.0 | % | 6.9 | % | 7.7 | % | ||||||
Total return:
|
||||||||||||
Total return before allocation to Special Limited Partner
|
(10.4 | )% | 13.9 | % | (19.5 | )% | ||||||
Allocation to Special Limited Partner
|
| % | | % | (0.8 | )% | ||||||
Total return after allocation to Special Limited Partner
|
(10.4 | )% | 13.9 | % | (20.3 | )% | ||||||
*** | Ratios to Average Net Assets (except allocation to Special Limited Partner) are annualized. | |
**** | 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
Limited Partners share of income, expenses and average net
assets.
34
Table of Contents
Warrington
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
7. | Financial Instrument Risks: |
In the normal course of business, the Partnership 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, 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
OTC. Exchange traded instruments are standardized and include
futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include certain
options. 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 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 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 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 risk of loss is reduced
through the use of legally enforceable master netting agreements
with counterparties that permit the Partnership to offset
unrealized gains and losses and other assets and liabilities
with such counterparties upon the occurrence of certain events.
The Partnership has credit risk and concentration risk as the
sole counterparty or broker with respect to the
Partnerships 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 counterparty is
an exchange or clearing organization.
As both a buyer and seller of options, the Partnership 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 Partnership 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 does not consider these
contracts to be guarantees.
The General Partner monitors and attempts to control the
Partnerships risk exposure on a daily basis through
financial, credit and risk management monitoring systems, and
accordingly, believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the
Partnership 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, online monitoring systems
provide account analysis of futures forwards and options
contracts 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 business, these instruments may not be held
to maturity.
35
Table of Contents
Selected
unaudited quarterly financial data for the years ended December 31,
2010 and 2009 are Summarized below:
For the period from | For the period from | For the period | For the period from | |||||||||||||
October 1, 2010 to | July 1, 2010 to | from April 1, 2010 | January 1, 2010 to | |||||||||||||
December 31, 2010 | September 30, 2010 | to June 30, 2010 | March 31, 2010 | |||||||||||||
Net realized and unrealized trading
gains (losses) net of brokerage
fees and clearing fees
including interest income |
$ | 1,711,679 | $ | 8,119,690 | $ | (45,045,053 | ) | $ | 10,469,756 | |||||||
Net income (loss) before
allocation to Special Limited Partner |
$ | 130,295 | $ | 6,458,841 | $ | (46,828,893 | ) | $ | 8,643,468 | |||||||
Net income (loss) after allocation
to Special Limited Partner |
$ | 130,295 | $ | 6,458,841 | $ | (46,828,893 | ) | $ | 8,643,468 | |||||||
Increase (decrease) in net asset
value per unit |
$ | 0.44 | $ | 25.53 | $ | (179.77 | ) | $ | 35.97 |
For the period from | For the period from | For the period | For the period from | |||||||||||||
October 1, 2009 to | July 1, 2009 to | from April 1, 2009 | January 1, 2009 to | |||||||||||||
December 31, 2009 | September 30, 2009 | to June 30, 2009 | March 31, 2009 | |||||||||||||
Net realized and unrealized trading
gains (losses) net of brokerage
fees and clearing fees
including interest income |
$ | 7,582,506 | $ | 3,228,845 | $ | 12,287,335 | $ | 13,681,727 | ||||||||
Net income (loss) before
allocation to Special Limited Partner |
$ | 5,932,671 | $ | 1,687,508 | $ | 10,776,243 | $ | 12,162,434 | ||||||||
Net income (loss) after allocation
to Special Limited Partner |
$ | 5,932,671 | $ | 1,687,508 | $ | 10,776,243 | $ | 12,162,434 | ||||||||
Increase (decrease) in net asset
value per unit |
$ | 25.09 | $ | 7.82 | $ | 50.12 | $ | 54.97 |
36
Table of Contents
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
PricewaterhouseCoopers LLP (PwC) was previously the principal accountant for the Partnership through
July 22, 2009. 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, there
were no disagreements with PwC 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 audit report of PwC 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. | Controls and Procedures. |
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and
reported within the time periods expected in the SECs rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information required to be
disclosed by the Partnership in the reports it files is accumulated and communicated to management,
including the Chief Executive Officer (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, 2010 and, based on that evaluation, the General Partners 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).
There were no changes in the Partnerships internal control over financial reporting during
the fiscal quarter ended December 31, 2010 that materially affected, or are reasonably likely to
materially affect, the Partnerships internal control over financial reporting.
Item 9B. | Other Information. None. |
37
Table of Contents
PART III
Item 10. | Directors, Executive Officers and Corporate Governance. |
The Partnership has no officers, directors or employees and its affairs are
managed by its General Partner. Investment decisions are made by the Advisor.
The officers and directors of the General Partner are Walter Davis (President and Chairman of
the Board of Directors), Jennifer Magro (Chief Financial Officer and Director), Michael McGrath
(Director), Douglas J. Ketterer (Director), Ian Bernstein (Director), Harry Handler (Director),
Patrick T. Egan (Director) and Alper Daglioglu (Director). Each director of the General Partner holds office until the
earlier of his or her death, resignation or removal. Vacancies on the board of directors may be
filled by either (i) the majority vote of the remaining directors or (ii) Morgan Stanley Smith
Barney Holdings LLC, as the sole member of the General Partner. The officers of the General
Partner are designated by the General Partners board of directors. Each officer will hold office
until his or her successor is designated and qualified or until his or her death, resignation or
removal.
Walter Davis, age 46, is President and Chairman of the Board of Directors of the General Partner
(since June 2010). Mr. Davis was registered as an associated person of the General Partner and
listed as a principal in June 2010. Mr. Davis is responsible for the oversight of the General
Partners funds and accounts. Prior to the combination of Demeter Management LLC (Demeter) and the General Partner effective December 1, 2010, Mr. Davis served as Chairman of the Board of Directors and President of
Demeter, a registered commodity pool operator. Mr. Davis was a principal and associated person of
Demeter from May 2006 to December 2010 and July 2006 to December 2010, respectively. Mr. Davis was
an associated person of Morgan Stanley DW Inc., a financial services firm, from August 2006 to
April 2007, when, because of the merger of Morgan Stanley DW Inc. into Morgan Stanley & Co. Incorporated (MS & Co.), a global financial
services firm, he became an associated person of MS & Co. (due to the transfer of his original
registration as an associated person of Morgan Stanley DW Inc.). Prior to becoming an associated
person in August 2006, Mr. Davis was responsible for overseeing the sales and marketing of MS &
Co.s managed futures funds to high net worth and institutional investors on a global basis. Mr.
Davis withdrew as an associated person of MS & Co. in June 2009. Mr. Davis has been an associated
person of Morgan Stanley Smith Barney LLC since June 2009. Morgan Stanley Smith Barney LLC is
registered as a broker-dealer with FINRA, an investment adviser with the SEC and a futures
commission merchant with the CFTC. Mr. Davis is a Managing Director of Morgan Stanley Smith Barney
LLC and the Director of Morgan Stanley Smith Barney LLCs Managed Futures Department. Prior to
joining Morgan Stanley in September 1999, Mr. Davis worked for Chase Manhattan Banks Alternative
Investment Group from January 1992 until September 1999, where his principal duties included
marketing managed futures funds to high net worth investors, as well as developing and structuring
managed futures funds. Throughout his career, Mr. Davis has been involved with the development,
management and marketing of a diverse array of commodity pools, hedge funds and other alternative
investment vehicles. Mr. Davis received an MBA in Finance and International Business from the
Columbia University Graduate School of Business in 1992 and a BA in Economics from the University
of the South in 1987.
Jennifer Magro, age 39, is Chief Financial Officer and Director of the General Partner (since
October 2006 and May 2005, respectively). Ms. Magro was listed as a principal in June 2005. Ms.
Magro served as Vice President and Secretary of the General Partner from August 2001 to December
2010 and June 2010 to December 2010, respectively. She was also a Managing Director of Citi
Alternative Investments (CAI), a division of Citigroup that administered its hedge fund and fund
of funds business, and was 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 the General
Partner in January 1996, Ms. Magro was employed by Prudential Securities Inc., a securities
brokerage services company, (from July 1994) as a staff accountant whose duties included the
calculation of net asset values for commodity pools and real estate investment products. Ms. Magro
received a BS in Accounting from the State University of New York, Oswego in 1993.
Michael McGrath, age 41, has been a Director of the General Partner since June 2010. Mr. McGrath
was listed as a principal in June 2010. Mr. McGrath was a principal and Director of Demeter from
May 2006 until Demeters combination with the General Partner in December 2010. Mr. McGrath is a
Managing Director of Morgan Stanley Smith Barney LLC and currently serves as the Head of
Alternative Investments for the Global Wealth Management Group of Morgan Stanley Smith Barney LLC.
He also serves on the Management Committee of the Global Wealth Management Group. Prior to his
current role, Mr. McGrath served as the Director of Product Management for the Consulting Services
Group in Morgan Stanley as well as the Chief Operating Officer for Private Wealth Management North
America and Private Wealth Management Latin America (the Americas) and the Director of Product
Development for Morgan Stanleys Global Wealth Management Group. Mr. McGrath served as a Managing
Director of Morgan Stanley from May 2004 until May 2009, when Mr. McGrath became a Managing
Director of Morgan Stanley Smith Barney LLC. Mr. McGrath joined Morgan Stanley from Nuveen
Investments, a publicly traded investment management company headquartered in Chicago, Illinois,
where he worked from July 2001 to May 2004. At Nuveen Investments, Mr. McGrath served as a
Managing Director and oversaw the development of alternative investment products catering to high
net worth investors. Mr. McGrath received his BA degree from Saint Peters College in 1990, and
currently serves on the schools Board of Regents. He received his MBA in Finance from New York
University in 1996.
Douglas J. Ketterer, age 45, has been a Director of the General Partner since December 2010. Mr.
Ketterer was listed as a principal in December 2010. Mr. Ketterer was a principal of Demeter from
October 2003 until Demeters combination with the General Partner in December 2010. Mr. Ketterer
is a Managing Director and Head of the U.S. Private Wealth Management Group within Morgan Stanley
Smith Barney LLC. Mr. Ketterer joined MS & Co. in March 1990 and has served in many roles in the
corporate finance/investment banking, asset management, and wealth management divisions of the
firm; most recently as Chief Operating Officer, Wealth Management Group and Head of the Products
Group with responsibility for a number of departments (including, among others, the Alternative
Investments Group, Consulting Services Group, Annuities & Insurance Department and Retirement &
Equity Solutions Group) which offered products and services through MS & Co.s Global Wealth
Management Group. Mr. Ketterer received his MBA from New York Universitys Leonard N. Stern School
of Business and his BS in Finance from the University at Albanys School of Business.
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Ian Bernstein, age 48, is a Director of the General Partner. Mr. Bernstein has been a Director,
and listed as a principal of the General Partner since December 2010. Mr. Bernstein held various
positions, including Managing Director, within the Capital Markets group at Morgan Stanley DW Inc.
from October 1984 to April 2007, when Morgan Stanley DW Inc. was merged into, its institutional
affiliate, MS & Co. and became the Global Wealth Management Division of MS & Co. Mr. Bernstein
first served as a Managing Director with MS & Co. in March 2004, prior to its merger with Morgan
Stanley DW Inc. Since June 1, 2009, Mr. Bernstein has served as a Managing Director of Capital
Markets at Morgan Stanley Smith Barney LLC, a new broker-dealer formed as a result of a joint
venture between Citigroup and Morgan Stanley. The respective retail business of MS & Co. and
Citigroup (formerly known as Smith Barney) was contributed to Morgan Stanley Smith Barney LLC. Mr.
Bernstein has continued as Managing Director of both Morgan Stanley Smith Barney LLC, the retail broker-dealer, and MS & Co., the
institutional broker-dealer, up to the present. Mr. Bernstein received his MBA from New York
Universitys Leonard N. Stern School of Business in 1988, and his BA from the University of
Buckingham in 1980.
Harry Handler, age 51, has been a Director of the General Partner since December 2010. Mr. Handler
became registered as an associated person of the General Partner and listed as a principal in
December 2010. Mr. Handler was a principal and associated person of Demeter from May 2005 until
Demeters combination with the General Partner in December 2010, and from April 2006 until December
2010, respectively. He has been an associate member of the NFA since August 1985. Mr. Handler was
an associated person of Morgan Stanley DW Inc., a financial services firm, from February 1984 to
April 2007, when, because of the merger of Morgan Stanley DW Inc. into MS & Co., he became an
associated person of MS & Co. due to the transfer of his original registration as an associated
person of Morgan Stanley DW Inc. Mr. Handler withdrew as an associated person of MS & Co. in June
2009. Mr. Handler has been an associated person of Morgan Stanley Smith Barney LLC since June
2009. Mr. Handler serves as an Executive Director at Morgan Stanley Smith Barney LLC in the Global
Wealth Management Group. Mr. Handler works in the Capital Markets Division and is responsible for
Electronic Equity and Securities Lending. Additionally, Mr. Handler serves as Chairman of the
Global Wealth Management Groups Best Execution Committee. In his prior position, Mr. Handler was
a Systems Director in Information Technology, in charge of Equity and Fixed Income Trading Systems
along with the Special Products, such as Unit Trusts, Managed Futures, and Annuities. Prior to his
transfer to the Information Technology Area, Mr. Handler managed the Foreign Currency and Precious
Metals Trading Desk of Dean Witter, a financial services firm and predecessor company to Morgan
Stanley, from July 1982 until January 1984. He also held various positions in the Futures Division
where he helped to build the Precious Metals Trading Operation at Dean Witter. Before joining Dean
Witter, Mr. Handler worked at Mocatta Metals, a precious metals trading firm and futures broker
that was sold to Standard Charted Bank in the 1980s, as an Assistant to the Chairman from March
1980 until June 1982. His roles at Mocatta Metals included positions on the Futures Order Entry
Desk and the Commodities Exchange Trading Floor. Additional work included building a computerized
Futures Trading System and writing a history of the company. Mr. Handler graduated on the Deans
List from the University of Wisconsin-Madison with a BA degree and a double major in History and
Political Science.
Patrick T. Egan, age 41, has been a Director of the General Partner since December 2010. Mr. Egan
became registered as an associated person of the General Partner and listed as a principal in
December 2010. Mr. Egan has been an associate member of the NFA since December 1997. He has been
an associated person of Morgan Stanley Smith Barney LLC since November 2010. Mr. Egan was an
associated person of Morgan Stanley DW Inc., a financial services firm, from February 1998 to April
2007, when, because of the merger of Morgan Stanley DW Inc. into MS & Co., he became an associated
person of MS & Co. due to the transfer of his original registration as an associated person of
Morgan Stanley DW Inc. Mr. Egan withdrew as an associated person of MS & Co. in November 2010.
Mr. Egan is an Executive Director at Morgan Stanley Smith Barney LLC and currently serves as the
Co- Chief Investment Officer for Morgan Stanley Smith Barney LLCs Managed Futures Department.
Prior to his current role, Mr. Egan served as the Head of Due Diligence & Manager Research for
Morgan Stanleys Managed Futures Department from October 2003 until the formation of Morgan Stanley
Smith Barney LLC in June 2009. From March 1993 through September 2003, Mr. Egan was an analyst and
manager within the Managed Futures Department for Morgan Stanley DW Inc., and its predecessor firm,
Dean Witter Reynolds, Inc., a financial services firm, with his primary responsibilities being
dedicated to the product development, due diligence, investment analysis and risk management of the firms commodity pools. Mr. Egan began his career in August 1991,
joining Dean Witter Intercapital, the asset management arm of Dean Witter Reynolds, Inc., until
March 1993 when he joined the firms Managed Futures Department. Mr. Egan received a Bachelor of
Business Administration with a concentration in Finance from the University of Notre Dame in May
1991. Mr. Egan is a former Director to the Managed Funds Associations Board of Directors, a
position he was elected to by industry peers for two consecutive two-year terms, from November 2004
to October 2006 and November 2006 to October 2008.
Alper Daglioglu, age 33, has been a Director, and listed as a principal of the General Partner
since December 2010. Mr. Daglioglu is an Executive Director at Morgan Stanley Smith Barney LLC and
the Co-Chief Investment Officer for Morgan Stanley Smith Barney LLCs Managed Futures Department.
Mr. Daglioglu also serves on the Alternative Investments Product Review Committee of Morgan Stanley
Smith Barney LLCs Alternative Investments Group. Prior to his current role, Mr. Daglioglu was a
Senior Analyst at the Product Origination Group within Morgan Stanley Managed Futures Department
from December 2003 until the formation of Morgan Stanley Smith Barney LLC in June 2009. In
addition to his responsibilities within Managed Futures Department, Mr. Daglioglu was also the lead
investment analyst for Global Macro and Managed Futures strategies within Morgan Stanley Graystone
Research Group from February 2007 to June 2009. Mr. Daglioglu served as a consultant at the
Product Origination Group within Morgan Stanley Managed Futures Department from June 2003 to
November 2003. Mr. Daglioglu received a BS degree in Industrial Engineering from Galatasaray
University in June 2000 and a MBA degree in Finance from the University of Massachusetts-Amhersts
Isenberg School of Management in May 2003. Mr. Daglioglu was awarded a full merit scholarship and
research assistantship at the Center for International Securities and Derivatives Markets during
his graduate studies. In this capacity, he worked with various major financial institutions in
performance monitoring, asset allocation and statistical analysis projects and specialized on
alternative approaches to risk assessment for hedge funds and managed futures. Mr. Daglioglu wrote
and published numerous research papers on alternative investments. Mr. Daglioglu is a Chartered
Alternative Investment Analyst charterholder.
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.
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Item 11. | Executive Compensation. |
The Partnership has no directors or officers. Its affairs are managed by the General Partner. CGM,
an affiliate of the General Partner, is the commodity broker for the Partnership and receives
brokerage fees for such services, as described under Item 1. Business. Brokerage
fees and clearing fees of $11,051,196 were earned for the year ended December 31, 2010.
Management fees of $5,240,041 were earned by the Advisor for the year ended December 31, 2010. The
General Partner earned $1,310,011 in administrative fees for the year ended December 31, 2010.
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, 2011, the
Partnership knows of no person who beneficially owns more than 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 following table indicates securities owned by management as of December 31, 2010:
(1) Title of Class
|
(2) Name of Beneficial Owner |
(3) Amount and Nature of Beneficial Ownership |
(4) Percent of Class |
|||
General Partner unit equivalents
|
General Partner | 2,650.4783 | 1.2% |
(c) Changes in control. None.
Item 13. | Certain Relationship and Related Transactions, and Director Independence. |
(a) Transactions with related persons. None.
(b) Review, approval or ratification of transactions with related persons. Not applicable.
(c) Promoters and certain control persons.
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, if any, from
the Partnership are set forth under Item 1. Business 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 for the year ended December 31, 2010 and for the period from July 23,
2009 through December 31, 2009, PwC for the period from January 1, 2009 through July 22, 2009 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 |
PwC |
|||||||
2010 |
$ | 50,000 | $ | N/A | ||||
2009 |
$ | 76,800 | (1) | $ | 76,400 | (2) |
(1) For the period July 23, 2009 to December 31, 2009
(2) For the period January 1, 2009 to July 22, 2009
(2) Audit-Related Fees. None
(3) Tax
Fees. In the last two fiscal years, Deloitte did not provide any
professional service 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:
2010 $26,250
2009 $25,000
2009 $25,000
(4) All Other Fees. None.
(5) Not Applicable.
(6) Not Applicable.
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PART IV
Item 15. | Exhibits and Financial Statement Schedules. |
(a)(1) | Financial Statements: | ||
Statements of Financial Condition at December 31, 2010 and 2009. | |||
Condensed Schedules of Investments at December 31, 2010 and 2009. | |||
Statements of Income and Expenses for the years ended December 31, 2010, 2009 and 2008. | |||
Statements of Changes in Partners Capital for the years ended December 31, 2010, 2009 and 2008. | |||
Notes to Financial Statements. | |||
(2) | Exhibits: |
3.1
|
(a) | Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York on November 21, 2005 (filed as Exhibit 3.1 to general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | ||
(b) | Certificate of Amendment of 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 3.1(b) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
(c) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as exhibit 99.1 to the current report on Form 8-K filed on September 30, 2009). | |||
(d) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 30, 2010 (filed as Exhibit 3.1 (d) to the current report on Form 8-K filed on July 2, 2010 And incorporated herein by reference). | |||
3.2
|
(a) | Second Amended and Restated Limited Partnership Agreement, dated June 30, 2009 (filed as Exhibit 3.2 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(b) | Third Amended and Restated Limited Partnership Agreement, dated December 21, 2009 (filed as Exhibit 3.2 to the current report on Form 8-K filed on December 21, 2009 and incorporated herein by reference). | |||
10.1
|
(a) | Management Agreement among the Partnership, the General Partner and Warrington, dated December 31, 2005 (filed as Exhibit 10.1 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | ||
(b) | Letter from the General Partner to Warrington extending Management Agreement for 2010 (dated June 1, 2010 and filed herein). | |||
10.2
|
Customer Agreement between the Partnership, the General Partner and CGM, dated February 17, 2005 (filed as Exhibit 10.2 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.3
|
Amended and Restated Agency Agreement between the Partnership, the General Partner and CGM, dated April 26, 2007 (filed as Exhibit 10.3 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.4
|
Selling Agreement between the Partnership, the General Partner, CGM and Credit Suisse Securities (USA) LLC, dated September 30, 2008 (filed as Exhibit 10.4 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.5
|
Form of Subscription Agreement (filed as Exhibit 10.5 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.6
|
Form of Third Party Subscription Agreement. (filed as Exhibit 10.6 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.9
|
Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as exhibit 10 to the quarterly report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference). | |||
10.10
|
Escrow Agreement among the Partnership, the General Partner, CGM and JPMorgan Chase Bank, N.A., dated December 23, 2005 (filed as Exhibit 10.9 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
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Table of Contents
10.11
|
Selling Agreement dated January 6, 2011 by and among the Registrant, the General Partner, CGM and Baird (filed as Exhibit 10.11 to current report on Form 8-K filed on January 7, 2011). | |||
10.12
|
Services Agreement dated January 6, 2011 by and among the Registrant, the General Partner, CGM and Baird (filed as Exhibit 10.12 to current report on Form 8-K filed on January 7, 2011). | |||
16.1
|
(a) | Letter Regarding Change of Certifying Accountant (filed as Exhibit 16 to the current report 8-K filed on July 24, 2009 and incorporated herein by reference). | ||
(b) | Letter Regarding Change of Certifying Accountant (filed as Exhibit 16.1 to current report 8-K filed on July 1, 2008 and incorporated herein by reference). | |||
The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference |
(a) | Exhibit 31.1 Rule 13a-14(a)/15d-15(a) Certification (Certification of President and Director) | ||
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director) | |||
Exhibit 32.1 Section 1350 Certification (Certification of President and Director) | |||
Exhibit 32.2 Section 1350 Certification (Certification of Chief Financial Officer and Director) |
42
Table of Contents
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.
WARRINGTON FUND L.P.
By:
|
Ceres Managed Futures LLC
|
|||
By:
|
/s/ Walter Davis
President & Director |
|||
Date: March 31, 2011 |
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.
/s/ Walter Davis
|
/s/ Michael McGrath
|
/s/ Patrick T. Egan
|
|||
President
and Director Ceres Managed Futures LLC |
Director Ceres Managed Futures LLC |
Director Ceres Managed Futures LLC |
|||
Date:
March 31, 2011
|
Date: March 31, 2011 | Date: March 31, 2011 | |||
/s/ Jennifer Magro
|
/s/ Douglas J. Ketterer | /s/ Alper Daglioglu | |||
Jennifer Magro
|
Douglas J. Ketterer | Alper Daglioglu | |||
Chief
Financial Officer and Director (Principal Accounting Officer) Ceres Managed Futures LLC |
Director Ceres Managed Futures LLC Date: March 31, 2011 |
Director Ceres Managed Futures LLC Date: March 31, 2011 |
|||
Date:
March 31, 2011
|
|||||
/s/ Ian Bernstein
|
/s/ Harry Handler | ||||
Ian Bernstein
|
Harry Handler | ||||
Director Ceres Managed Futures LLC |
Director Ceres Managed Futures LLC |
||||
Date:
March 31, 2011
|
Date: March 31, 2011 | ||||
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.
43