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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2014

OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 0-53210

MANAGED FUTURES PREMIER ABINGDON L.P.

 

(Exact name of registrant as specified in its charter)

 

New York   20-3845005

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue

New York, New York 10036

 

(Address of principal executive offices) (Zip Code)

(855) 672-4468

 

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X  No   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X  No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer       Accelerated filer       Non-accelerated filer X    Smaller reporting company    

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes     No X

As of October 31, 2014, there were 133,306.8682 Limited Partnership Redeemable Units of Class A outstanding, 8,284.6446 Limited Partnership Redeemable Units of Class D outstanding and 393.4672 Limited Partnership Redeemable Units of Class Z outstanding.


Table of Contents

MANAGED FUTURES PREMIER ABINGDON L.P.

FORM 10-Q

INDEX

 

               

Page
Number

PART I - Financial Information:

  
  Item 1.      Financial Statements:   
       Statements of Financial Condition at
September 30, 2014 (unaudited) and December 31, 2013
   3
       Statements of Income and Expenses
for the three and nine months ended September 30, 2014 and 2013 (unaudited)
   4
       Statements of Changes in Partners’ Capital for the
nine months ended September 30, 2014 and 2013 (unaudited)
   5
       Notes to Financial Statements, including the Financial
Statements of CMF Winton Master L.P. (unaudited)
   6–19
  Item 2.      Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
   20–22
  Item 3.      Quantitative and Qualitative
Disclosures about Market Risk
   23–24
  Item 4.      Controls and Procedures    25

PART II - Other Information

  
  Item 1.      Legal Proceedings    26–32
  Item 1A.      Risk Factors    33
  Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds    33
  Item 5.      Other Information    33
  Item 6.      Exhibits    34

 

2


Table of Contents

PART I

Item 1. Financial Statements

Managed Futures Premier Abingdon L.P.

Statements of Financial Condition

 

     (Unaudited)         
     September 30,
2014
     December 31,
2013
 

Assets:

     

Investment in Master, at fair value

   $ 174,875,430       $ 210,999,080   

Cash

     288,945         244,482   
  

 

 

    

 

 

 

Total assets

   $ 175,164,375       $ 211,243,562   
  

 

 

    

 

 

 

Liabilities and Partners’ Capital

     

Liabilities:

     

Accrued expenses:

     

Ongoing selling agent fees

   $ 350,354       $ 752,273   

Management fees

     217,949         262,923   

Administrative fees

     72,650         87,641   

Incentive fees

     268,488         —     

Other

     186,344         152,755   

Redemptions payable to General Partner

     201,137         —     

Redemptions payable to Limited Partners

     3,050,634         6,586,491   
  

 

 

    

 

 

 

Total liabilities

     4,347,556         7,842,083   
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, Class A, 0.0000 unit equivalents outstanding at September 30, 2014 and December 31, 2013

     —           —     

General Partner, Class D, 0.0000 unit equivalents outstanding at September 30, 2014 and December 31, 2013

     —           —     

General Partner, Class Z, 1,692.8140 and 2,308.9070 unit equivalents outstanding at September 30, 2014 and December 31, 2013, respectively

     1,912,987         2,446,264   

Limited Partners, Class A, 131,073.6252 and 160,634.8682 Redeemable Units outstanding at September 30, 2014 and December 31, 2013, respectively

     159,149,018         186,273,315   

Limited Partners, Class D, 8,284.6446 and 13,318.4176 Redeemable Units outstanding at September 30, 2014 and December 31, 2013, respectively

     9,310,171         14,111,594   

Limited Partners, Class Z, 393.4672 and 538.2952 Redeemable Units outstanding at September 30, 2014 and December 31, 2013, respectively

     444,643         570,306   
  

 

 

    

 

 

 

Total partners’ capital

     170,816,819         203,401,479   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 175,164,375       $ 211,243,562   
  

 

 

    

 

 

 

Class A, net asset value per unit

   $ 1,214.20       $ 1,159.61   
  

 

 

    

 

 

 

Class D, net asset value per unit

   $ 1,123.79       $ 1,059.55   
  

 

 

    

 

 

 

Class Z, net asset value per unit

   $ 1,130.06       $ 1,059.49   
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

3


Table of Contents

Managed Futures Premier Abingdon L.P.

Statements of Income and Expenses

(Unaudited)

 

     Three Months
Ended September 30,
    Nine Months
Ended September 30,
 
     2014     2013     2014     2013  

Income:

        

Interest income allocated from Master

   $ 4,568      $ 7,667      $ 22,656      $ 43,527   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Expenses allocated from Master

     69,484        66,043        209,007        231,417   

Ongoing selling agent fees

     1,063,735        2,190,048        4,266,198        6,846,583   

Management fees

     662,192        762,114        2,082,305        2,372,934   

Administrative fees

     220,732        254,039        694,104        790,979   

Incentive fees

     268,488        —          926,232        —     

Other

     44,530        88,807        172,213        223,505   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,329,161        3,361,051        8,350,059        10,465,418   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (2,324,593     (3,353,384     (8,327,403     (10,421,891

Trading results:

        

Net realized gains (losses) on closed contracts allocated from Master

     6,375,096        (4,338,131     24,523,504        7,362,050   

Change in net unrealized gains (losses) on open contracts allocated from Master

     (3,058,411     2,029,460        (8,051,630     1,239,222   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total trading results allocated from Master

     3,316,685        (2,308,671     16,471,874        8,601,272   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     992,092        (5,662,055     8,144,471        (1,820,619
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) allocation by class:

        

Class A

     874,858        (5,356,285     7,439,536        (1,827,987
  

 

 

   

 

 

   

 

 

   

 

 

 

Class D

     79,590        (244,946     510,214        (33,263
  

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

     37,644        (60,824     194,721        40,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per redeemable unit

        

Class A (131,073.6252 and 174,858.3402 units outstanding at September 30, 2014 and 2013, respectively)

   $ 1,214.20      $ 1,063.80      $ 1,214.20      $ 1,063.80   
  

 

 

   

 

 

   

 

 

   

 

 

 

Class D (8,284.6446 and 13,318.4176 units outstanding at September 30, 2014 and 2013, respectively)

   $ 1,123.79      $ 965.64      $ 1,123.79      $ 965.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Class Z (2,086.2812 and 3,176.7102 units outstanding at September 30, 2014 and 2013, respectively)

   $ 1,130.06      $ 963.76      $ 1,130.06      $ 963.76   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per redeemable unit*

        

Class A

   $ 6.61      $ (30.36   $ 54.59      $ (11.26
  

 

 

   

 

 

   

 

 

   

 

 

 

Class D

   $ 9.61      $ (21.03   $ 64.24      $ 8.88   
  

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

   $ 11.76      $ (19.15   $ 70.57      $ 14.22   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average units outstanding

        

Class A

     136,675.2042        178,531.7855        146,119.5687        178,144.4503   
  

 

 

   

 

 

   

 

 

   

 

 

 

Class D

     8,284.6446        12,956.7789        9,403.2608        11,440.2005   
  

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

     2,572.7939        3,176.7102        2,695.5410        3,188.6711   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* Based on change in net asset value per unit.

See accompanying notes to financial statements.

 

4


Table of Contents

Managed Futures Premier Abingdon L.P.

Statements of Changes in Partners’ Capital

For the Nine Months Ended September 30, 2014 and 2013

(Unaudited)

 

    Class A     Class D     Class Z     Total  
    Amount     Units     Amount     Units     Amount     Units     Amount     Units  

Partners’ Capital, December 31, 2013

  $ 186,273,315        160,634.8682      $ 14,111,594        13,318.4176      $ 3,016,570        2,847.2022      $ 203,401,479        176,800.4880   

Subscriptions—Limited Partners

    12,495,839        10,721.8020        —          —          —          —          12,495,839        10,721.8020   

Net income (loss)

    7,439,536        —          510,214        —          194,721        —          8,144,471        —     

Redemptions—General Partner

    —          —          —          —          (701,492     (616.0930     (701,492     (616.0930

Redemptions—Limited Partners

    (47,059,672     (40,283.0450     (5,311,637     (5,033.7730     (152,169     (144.8280     (52,523,478     (45,461.6460
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, September 30, 2014

  $ 159,149,018        131,073.6252      $ 9,310,171        8,284.6446      $ 2,357,630        2,086.2812      $ 170,816,819        141,444.5510   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, December 31, 2012

  $ 192,728,746        179,273.0292      $ 9,842,846        10,287.6586      $ 3,015,374        3,175.6222      $ 205,586,966        192,736.3100   

Subscriptions—Limited Partners

    34,774,448        31,524.7560        3,051,148        3,030.7590        60,623        57.0880        37,886,219        34,612.6030   

Net income (loss)

    (1,827,987     —          (33,263     —          40,631        —          (1,820,619     —     

Redemptions—Limited Partners

    (39,660,636     (35,939.4450     —          —          (55,043     (56.0000     (39,715,679     (35,995.4450
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, September 30, 2013

  $ 186,014,571        174,858.3402      $ 12,860,731        13,318.4176      $ 3,061,585        3,176.7102      $ 201,936,887        191,353.4680   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

5


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

1. General:

Managed Futures Premier Abingdon L.P. (formerly Abingdon Futures Fund L.P.) (the “Partnership”) is a limited partnership organized on November 8, 2005, under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options, swap and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, metals and softs. The Partnership commenced trading on February 1, 2007. The commodity interests that are traded by the Partnership through its investment in CMF Winton Master L.P. (the “Master”) are volatile and involve a high degree of market risk. The Partnership privately and continuously offers redeemable units of limited partnership interest in the Partnership (“Redeemable Units”) to qualified investors. There is no maximum number of Redeemable 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”). MSSB Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Prior to June 28, 2013, Morgan Stanley indirectly owned a majority equity interest in MSSB Holdings and Citigroup Inc. indirectly owned a minority equity interest in MSSB Holdings. 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 Inc. As of September 30, 2014, all trading decisions for the Partnership are made by Winton Capital Management Limited (the “Advisor”).

During the three and nine months ended September 30, 2014, the Partnership’s/Master’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. During prior periods included in this report, Citigroup Global Markets Inc. (“CGM”) also served as a commodity broker.

On February 1, 2007, the Partnership allocated substantially all of its capital to the Master, a limited partnership organized under the partnership laws of the state of New York, having the same investment objective as the Partnership. The Partnership purchased 9,017.0917 units of the Master with cash equal to $12,945,000. The Master permits accounts managed by the Advisor using the Diversified Trading Program Without Equities (formerly the Diversified Program), the Advisor’s proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the general partner of the Master. Individual and pooled accounts currently managed by the Advisor, including the Partnership, are permitted to be limited partners of the Master. The General Partner and the Advisor believe that trading through this master/feeder structure promotes efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same as they would be if the Partnership traded directly and redemption rights are not affected. The General Partner and the Advisor agreed that the Advisor will trade the Partnership’s assets allocated to the Advisor at a level that is up to 1.5 times the amount of assets allocated.

On April 1, 2011, the Partnership began offering “Class A” Redeemable Units, “Class D” Redeemable Units and “Class Z” Redeemable Units pursuant to the offering memorandum. All Redeemable Units issued prior to April 1, 2011 were deemed Class A Redeemable Units. The rights, liabilities, risks, and fees associated with investment in the Class A Units did not change. “Class D” Redeemable Units and “Class Z” Redeemable Units were first issued on April 1, 2011 and August 1, 2011, respectively. Class A, Class D and Class Z will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Units that a Limited Partner receives upon a subscription will generally depend upon the amount invested in the Partnership or the status of the Limited Partner, although the General Partner may determine to offer Redeemable Units to investors at its discretion. Class Z Units were offered to certain employees of Morgan Stanley Smith Barney and its affiliates (and their family members). Class A Units, Class D Units, and Class Z Units are identical, except that Class D Units are subject to a monthly ongoing selling agent fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the Net Assets of Class D as of the ending of each month, which differs from the Class A monthly ongoing selling agent fee of 1/12th of 2.00% (a 2.00% annual rate) of the net assets of Class A. Class Z Units are not subject to a monthly ongoing selling agent fee.

The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended September 30, 2014.

        During the second quarter of 2013, the Master entered into a foreign exchange brokerage account agreement with MS&Co. The Master commenced foreign exchange trading through an account at MS&Co. on or about May 1, 2013. During the third quarter of 2013, the Master also entered into a futures brokerage account agreement with MS&Co. The Master commenced futures trading through an account at MS&Co. on or about July 22, 2013. Effective October 29, 2013, the Partnership entered into a futures brokerage account agreement with MS&Co. and began transferring the brokerage account of the Partnership from CGM to MS&Co. The Partnership, through its investment in the Master, pays MS&Co. trading fees for the clearing and, where applicable, execution of transactions.

Effective October 1, 2013, the Partnership ceased paying a brokerage fee to CGM. Also effective October 1, 2013, the Partnership entered into a selling agreement with Morgan Stanley Smith Barney LLC (d/b/a Morgan Stanley Wealth Management). Pursuant to the selling agreement, Morgan Stanley Wealth Management received a selling agent fee equal to an annual rate of (i) 4.5% of the Partnership’s month-end net assets for Class A Units, (ii) 1.875% of the Partnership’s month-end net assets for Class D Units and (iii) 1.125% of the Partnership’s month-end net assets for Class Z Units. The selling agent fee received by Morgan Stanley Wealth Management will be shared with other properly licensed and/or registered selling agents and to financial advisers who have sold Redeemable Units in the Partnership.

Effective April 1, 2014, the monthly ongoing selling agent fee was reduced from (i) an annual rate of 4.5% to an annual rate of 2.5% of month-end Net Assets for Class A Units, (ii) an annual rate of 1.875% to an annual rate of 1.25% of month-end Net Assets for Class D Units and (iii) an annual rate of 1.125% to an annual rate of 0.5% of month-end Net Assets for Class Z Units.

Effective October 1, 2014, the monthly ongoing selling agent fee was (i) reduced from an annual rate of 2.50% to an annual rate of 2.00% for Class A Redeemable Units, (ii) reduced from an annual rate of 1.25% to an annual rate of 0.75% for Class D Redeemable Units and (iii) eliminated for Class Z Redeemable Units. As of the same date, the administrative fee increased from an annual rate of 0.50% to an annual rate of 1.00%. The October 1, 2014 fee changes offset each other and, accordingly, there was no change to the aggregate fees incurred by the Partnership.

Certain prior period amounts have been reclassified to conform to current year presentation. Amounts reported on the Statements of Income and Expenses as ongoing selling agent fees were previously presented as brokerage fees.

        At September 30, 2014 and December 31, 2013, the Partnership owned approximately 29.1% and 29.9%, respectively, of the Master. The Partnership intends to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Master’s trading of futures, forwards, swap and option contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. During the three and nine months ended September 30, 2014, the Master engaged in such trading through a commodity brokerage account maintained with MS&Co. During prior periods covered by this report, the Master engaged in such trading through commodity brokerage accounts maintained with CGM. The Master’s Statements of Financial Condition, Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partners’ Capital are included herein.

The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of their capital contribution and profits, if any, net of distributions and losses, if any.

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at September 30, 2014 and December 31, 2013, and the results of its operations and changes in partners’ capital for the three and nine months ended September 30, 2014 and 2013. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2013.

The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner 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.

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

 

6


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of September 30, 2014 and December 31, 2013 and Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2014 and 2013 are presented below:

CMF Winton Master L.P.

Statements of Financial Condition

 

     (Unaudited)
September  30,
2014
     December 31,
2013
 

Assets:

     

Equity in trading account:

     

Cash

   $ 469,738,632       $ 564,039,261   

Cash margin

     125,147,653         107,350,321   

Net unrealized appreciation on open futures contracts

     15,361,156         33,840,928   
  

 

 

    

 

 

 

Total assets

   $ 610,247,441       $ 705,230,510   
  

 

 

    

 

 

 
     

Liabilities and Partners’ Capital:

     

Liabilities:

     

Net unrealized depreciation on open forward contracts

   $ 9,243,601       $ 115,667   

Accrued expenses:

     

Professional fees

     19,942         42,089   

Clearing fees due to MS&Co.

     23,053         24,849   

Redemptions payable

     1,124,465         4,098,473   
  

 

 

    

 

 

 

Total liabilities

     10,411,061         4,281,078   
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, 0.0000 unit equivalents at September 30, 2014 and December 31, 2013

     —           —     

Limited Partners, 198,803.7967 and 254,353.1742 Redeemable Units outstanding at September 30, 2014 and December 31, 2013, respectively

     599,836,380         700,949,432   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 610,247,441       $ 705,230,510   
  

 

 

    

 

 

 

Net asset value per unit

   $ 3,017.23       $ 2,755.81   
  

 

 

    

 

 

 

 

7


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

CMF Winton Master L.P.

Condensed Schedule of Investments

September 30, 2014

(Unaudited)

 

     Notional ($)/
Number of
Contracts
     Fair Value     % of Partners’
Capital
 

Futures Contracts Purchased

       

Currencies

     1,947       $ (1,498,906     (0.25 )% 

Energy

     437         519,183        0.09   

Grains

     2,345         (13,167,241     (2.20

Indices

     7,755         (4,922,084     (0.82

Interest Rates U.S.

     15,024         (5,765,016     (0.96

Interest Rates Non-U.S.

     17,720         10,064,785        1.67   

Livestock

     392         871,635        0.15   

Metals

     5         (54,620     (0.01

Softs

     506         305,125        0.05   
     

 

 

   

 

 

 

Total futures contracts purchased

        (13,647,139     (2.28
     

 

 

   

 

 

 

Futures Contracts Sold

       

Currencies

     3,740         12,048,142        2.01   

Energy

     1,539         6,479,566        1.08   

Grains

     560         1,673,658        0.28   

Indices

     227         1,057,800        0.18   

Interest Rates U.S.

     2         50        0.00 * 

Interest Rates Non-U.S.

     348         4,970        0.00 * 

Livestock

     135         (336,470     (0.06

Metals

     1,190         7,258,048        1.21   

Softs

     766         822,531        0.14   
     

 

 

   

 

 

 

Total futures contracts sold

        29,008,295        4.84   
     

 

 

   

 

 

 

Net unrealized appreciation on open futures contracts

        15,361,156        2.56   

Unrealized Appreciation on Open Forward Contracts

       

Currencies

   $ 237,874,662         2,336,973        0.39   

Metals

     239         624,430        0.10   
     

 

 

   

 

 

 

Total unrealized appreciation on open forward contracts

        2,961,403        0.49   
     

 

 

   

 

 

 

Unrealized Depreciation on Open Forward Contracts

       

Currencies

   $ 371,163,371         (10,132,823     (1.69

Metals

     653         (2,072,181     (0.34
     

 

 

   

 

 

 

Total unrealized depreciation on open forward contracts

        (12,205,004     (2.03
     

 

 

   

 

 

 

Net unrealized depreciation on open forward contracts

        (9,243,601 )      (1.54
     

 

 

   

 

 

 

Net fair value

      $ 6,117,555        1.02
     

 

 

   

 

 

 

 

* Due to rounding.

 

8


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

CMF Winton Master L.P.

Condensed Schedule of Investments

December 31, 2013

 

    Notional ($)/
Number of
Contracts
    Fair Value     % of Partners’
Capital
 

Futures Contracts Purchased

     

Currencies

    5,373      $ 3,425,223        0.49

Energy

    746        576,160        0.08   

Grains

    1,016        (786,962     (0.11

Indices

    8,741        24,136,220        3.44   

Interest Rates U.S.

    12,228        (645,879     (0.09

Interest Rates Non-U.S.

    8,735        (4,849,383     (0.69

Livestock

    289        (289,625     (0.04

Metals

    11        3,818        0.00

Softs

    468        151,075        0.02   
   

 

 

   

 

 

 

Total futures contracts purchased

      21,720,647        3.10   
   

 

 

   

 

 

 

Futures Contracts Sold

     

Currencies

    3,983        4,415,774        0.63   

Energy

    325        (738,808     (0.11

Grains

    2,677        4,043,353        0.58   

Indices

    44        (3,185     (0.00 )* 

Interest Rates U.S.

    380        493,922        0.07   

Interest Rates Non-U.S.

    1,347        172,152        0.02   

Livestock

    159        (94,560     (0.01

Metals

    767        3,636,285        0.52   

Softs

    943        195,348        0.03   
   

 

 

   

 

 

 

Total futures contracts sold

      12,120,281        1.73   
   

 

 

   

 

 

 

Net unrealized appreciation on open futures contracts

      33,840,928        4.83   

Unrealized Appreciation on Open Forward Contracts

     

Currencies

  $ 308,684,628        3,159,694        0.45   

Metals

    409        772,295        0.11   
   

 

 

   

 

 

 

Total unrealized appreciation on open forward contracts

      3,931,989        0.56   
   

 

 

   

 

 

 

Unrealized Depreciation on Open Forward Contracts

     

Currencies

  $ 244,487,457        (2,888,671     (0.41

Metals

    682        (1,158,985     (0.17
   

 

 

   

 

 

 

Total unrealized depreciation on open forward contracts

      (4,047,656     (0.58
   

 

 

   

 

 

 

Net unrealized depreciation on open forward contracts

      (115,667     (0.02

Net fair value

    $ 33,725,261        4.81
   

 

 

   

 

 

 

 

 

* Due to rounding.

 

9


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

CMF Winton Master L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2014     2013     2014     2013  

Investment Income:

       

Interest income

  $ 18,438      $ 29,965      $ 90,832      $ 178,877   
 

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

       

Clearing fees

    210,288        200,134        635,131        696,601   

Professional fees

    28,108        20,012        79,037        103,844   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    238,396        220,146        714,168        800,445   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

    (219,958     (190,181     (623,336     (621,568
 

 

 

   

 

 

   

 

 

   

 

 

 

Trading results:

       

Net gains (losses) on trading of commodity interests:

       

Net realized gains (losses) on closed contracts

    21,903,870        (14,427,092     84,545,935        27,076,668   

Change in net unrealized gains (losses) on open contracts

    (10,648,710     6,880,389        (27,607,706     6,275,520   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total trading results

    11,255,160        (7,546,703     56,938,229        33,352,188   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    11,035,202        (7,736,884     56,314,893        32,730,620   

Subscriptions — Limited Partners

    5,653,778        20,436,264        31,366,440        62,576,124   

Redemptions — Limited Partners

    (48,178,285     (31,020,251     (188,703,553     (161,000,827

Distribution of interest income to feeder funds

    (18,438     (29,965     (90,832     (178,877
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in Partners’ Capital

    (31,507,743     (18,350,836     (101,113,052     (65,872,960

Partners’ Capital, beginning of period

    631,344,123        712,388,389        700,949,432        759,910,513   
 

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, end of period

  $ 599,836,380      $ 694,037,553      $ 599,836,380      $ 694,037,553   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit
(198,803.7967 and 279,126.5355 units outstanding
at September 30, 2014 and 2013, respectively)

  $ 3,017.23      $ 2,486.46      $ 3,017.23      $ 2,486.46   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per unit *

  $ 54.95      $ (28.55   $ 261.82      $ 96.21   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average units outstanding

    209,591.9401        282,400.1480        228,644.9867        297,956.3380   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* Based on changes in net asset value per unit before distribution of interest income to feeder funds.

 

10


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

2. Financial Highlights:

Changes in the net asset value per unit for each Class for the three and nine months ended September 30, 2014 and 2013 were as follows:

 

     Three Months Ended
September 30,
 
     2014     2013  
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Net realized and unrealized gains (losses)*

   $ 14.67      $ 17.06      $ 19.24      $ (24.65   $ (15.86   $ (13.99

Interest Income allocated from Master

     0.02        0.02        0.02        0.04        0.04        0.03   

Expenses **

     (8.08     (7.47     (7.50     (5.75     (5.21     (5.19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) for the period

     6.61        9.61        11.76        (30.36     (21.03     (19.15

Net Asset Value per Redeemable Unit, beginning of period

     1,207.59        1,114.18        1,118.30        1,094.16        986.67        982.91   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Asset Value per Redeemable Unit, end of period

   $ 1,214.20      $ 1,123.79      $ 1,130.06      $ 1,063.80      $ 965.64      $ 963.76   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Includes ongoing selling agent fees and clearing fees allocated from the Master.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class A Redeemable Units for the three months ended September 30, 2014 and 2013 were $22.64 and $(12.45), respectively.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class D Redeemable Units for the three months ended September 30, 2014 and 2013 were $20.93 and $(11.10), respectively.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class Z Redeemable Units for the three months ended September 30, 2014 and 2013 were $21.02 and $(11.03), respectively.

 

** Excludes ongoing selling agent fees and clearing fees allocated from the Master.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class A Redeemable Units for the three months ended September 30, 2014 and 2013 were $(16.05) and $(17.95), respectively.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class D Redeemable Units for the three months ended September 30, 2014 and 2013 were $(11.34) and $(9.97), respectively.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class Z Redeemable Units for the three months ended September 30, 2014 and 2013 were $(9.28) and $(8.15), respectively.

 

     Nine Months Ended
September 30,
 
     2014     2013  
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Net realized and unrealized gains (losses)*

   $ 79.41      $ 87.09      $ 93.50      $ 6.37      $ 24.76      $ 30.01   

Interest Income allocated from Master

     0.13        0.13        0.11        0.23        0.22        0.21   

Expenses **

     (24.95     (22.98     (23.04     (17.86     (16.10     (16.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) for the period

     54.59        64.24        70.57        (11.26     8.88        14.22   

Net Asset Value per Redeemable Unit, beginning of period

     1,159.61        1,059.55        1,059.49        1,075.06        956.76        949.54   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Asset Value per Redeemable Unit, end of period

   $ 1,214.20      $ 1,123.79      $ 1,130.06      $ 1,063.80      $ 965.64      $ 963.76   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Includes ongoing selling agent fees and clearing fees allocated from the Master.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class A Redeemable Units for the nine months ended September 30, 2014 and 2013 were $108.50 and $44.82, respectively.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class D Redeemable Units for the nine months ended September 30, 2014 and 2013 were $100.03 and $39.70, respectively.

Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees allocated from the Master for Class Z Redeemable Units for the nine months ended September 30, 2014 and 2013 were $100.32 and $39.30, respectively.

 

** Excludes ongoing selling agent fees and clearing fees allocated from the Master.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class A Redeemable Units for the nine months ended September 30, 2014 and 2013 were $(54.04) and $(56.31), respectively.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class D Redeemable Units for the nine months ended September 30, 2014 and 2013 were $(35.92) and $(31.04), respectively.

Total expenses including ongoing selling agent fees and clearing fees allocated from the Master for Class Z Redeemable Units for the nine months ended September 30, 2014 and 2013 were $(29.86) and $(25.29), respectively.

     Three Months Ended
September 30,
 
     2014     2013  
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Ratios to Average Net Assets:***

            

Net investment income (loss)

     (5.4 )%      (4.0 )%      (4.2 )%      (6.9 )%      (4.1 )%      (3.4 )% 

Incentive fees

     0.2     0.1     0.2     —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss before incentive fees ****

     (5.2 )%      (3.9 )%      (4.0 )%      (6.9 )%      (4.1 )%      (3.4 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     4.8     3.5     3.3     6.9     4.1     3.4

Incentive fees

     0.2     0.1     0.2     —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses and incentive fees

     5.0     3.6     3.5     6.9     4.1     3.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     0.7     1.0     1.3     (2.8 )%      (2.1 )%      (1.9 )% 

Incentive fees

     (0.2 )%      (0.1 )%      (0.2 )%      —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     0.5     0.9     1.1     (2.8 )%      (2.1 )%      (1.9 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*** Annualized (other than incentive fees).

 

**** Interest income allocated from Master less total expenses.

 

     Nine Months Ended
September 30,
 
     2014     2013  
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Ratios to Average Net Assets:***

            

Net investment income ( loss)

     (6.3 )%      (4.4 )%      (4.4 )%      (7.0 )%      (4.2 )%      (3.4 )% 

Incentive fees

     0.5     0.5     0.7     —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss before incentive fees ****

     (5.8 )%      (3.9 )%      (3.7 )%      (7.0 )%      (4.2 )%      (3.4 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     5.6     3.8     3.5     7.0     4.2     3.4

Incentive fees

     0.5     0.5     0.7     —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses and incentive fees

     6.1     4.3     4.2     7.0     4.2     3.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     5.3     6.6     7.4     (1.0 )%      0.9     1.5

Incentive fees

     (0.5 )%      (0.5 )%      (0.7 )%      —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     4.8     6.1     6.7     (1.0 )%      0.9     1.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*** Annualized (other than incentive fees).

 

**** Interest income allocated from Master less total expenses.

The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class for the Classes using each limited partner’s share of income, expenses and average net assets.

 

11


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Financial Highlights of the Master:

 

               Three Months Ended           
September 30,
    Nine Months Ended
September 30,
 
             2014                     2013                     2014                     2013          

Net realized and unrealized gains (losses) *

   $ 55.00      $ (28.60   $ 261.79      $ 95.93   

Interest income

     0.09        0.11        0.40        0.61   

Expenses **

     (0.14     (0.06     (0.37     (0.33
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) for the period

     54.95        (28.55     261.82        96.21   

Distribution

     (0.09     (0.11     (0.40     (0.61

Net asset Value per Redeemable Unit, beginning of period

     2,962.37        2,515.12        2,755.81        2,390.86   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset Value per Redeemable Unit, end of period

   $ 3,017.23      $ 2,486.46      $ 3,017.23      $ 2,486.46   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Includes clearing fees.

 

** Excludes clearing fees .

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
         2014             2013             2014             2013      

Ratios to Average Net Assets:****

        

Net investment income (loss)***

     (0.1)     (0.1)     (0.1)     (0.1)
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     0.2     0.1     0.1     0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return

     1.8     (1.1)     9.5     4.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*** Interest income less total expenses (exclusive of incentive fees).

 

**** Annualized.

The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using each limited partner’s share of income, expenses and average net assets.

 

3. Trading Activities:

The Partnership was formed for the purpose of trading commodity interests, including derivative financial instruments and derivative commodity instruments. The Partnership invests substantially all of its assets through a “master/feeder” structure. The Partnership’s pro rata share of the results of the Master’s trading activities are shown in the Statements of Income and Expenses.

The customer agreement among the Partnership, the Master and MS&Co. gives, and the customer agreements between the Partnership and CGM and the Master and CGM each gave, the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures and open forward contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet,” have been met.

Brokerage fees previously paid to CGM were calculated as a percentage of the adjusted net asset value per class on the last day of each month and are affected by trading performance, subscriptions and redemptions.

Trading and transaction fees are based on the number of trades executed by the Advisor and the Partnership’s percentage ownership in the Master.

All trading, exchange, clearing, user, give-up, floor brokerage and National Futures Association fees (collectively, the “clearing fees”) are borne by the Master and allocated to its limited partners, including the Partnership.

All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures contracts traded during the three months ended September 30, 2014 and 2013 was 53,426 and 35,193, respectively. The monthly average number of futures contracts traded during the nine months ended September 30, 2014 and 2013 was 50,789 and 40,409, respectively. The monthly average number of metals forward contracts traded during the three months ended September 30, 2014 and 2013 was 1,220 and 2,361, respectively. The monthly average number of metals forward contracts traded during the nine months ended September 30, 2014 and 2013 was 1,002 and 1,539, respectively. The average notional value of currency forward contracts during the three months ended September 30, 2014 and 2013 was $658,593,023 and $709,823,043, respectively. The average notional value of currency forward contracts during the nine months ended September 2014 and 2013 was $635,073,223 and $735,828,725, respectively.

 

12


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

On January 1, 2013, the Partnership adopted Accounting Standards Update (“ASU”) 2011-11, “Disclosure about Offsetting Assets and Liabilities” and ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 created a new disclosure requirement about the nature of an entity’s rights to setoff and the related arrangements associated with its financial instruments and derivative instruments, while ASU 2013-01 clarified the types of instruments and transactions that are subject to the offsetting disclosure requirements established by ASU 2011-11. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of these disclosures is to facilitate comparison between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards (“IFRS”). The new guidance did not have a significant impact on the Partnership’s financial statements.

The following tables summarize the valuation of the Master’s investments as of September 30, 2014 and December 31, 2013, respectively.

 

September 30, 2014

   Gross Amounts
Recognized
    Gross Amounts
Offset in the
Statement of
Financial
Condition
    Net Amounts Presented
in the Statement of
Financial Condition
 

Assets

      

Futures

   $ 44,656,665      $ (29,295,509   $ 15,361,156   

Forwards

     2,961,403        (2,961,403     —     
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 47,618,068      $ (32,256,912   $ 15,361,156   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Futures

   $ (29,295,509   $ 29,295,509      $ —     

Forwards

     (12,205,004     2,961,403        (9,243,601
  

 

 

   

 

 

   

 

 

 

Total liabilities

   $ (41,500,513   $ 32,256,912      $ (9,243,601
  

 

 

   

 

 

   

 

 

 

Net fair value

       $ 6,117,555   
      

 

 

 

December 31, 2013

   Gross Amounts
Recognized
    Gross Amounts
Offset in the
Statement of
Financial
Condition
    Net Amounts Presented
in the Statement of
Financial Condition
 

Assets

      

Futures

   $ 45,516,541      $ (11,675,613   $ 33,840,928   

Forwards

     3,931,988        (3,931,988     —     
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 49,448,529      $ (15,607,601   $ 33,840,928   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Futures

   $ (11,675,613   $ 11,675,613      $ —     

Forwards

     (4,047,655     3,931,988        (115,667
  

 

 

   

 

 

   

 

 

 

Total liabilities

   $ (15,723,268   $ 15,607,601      $ (115,667
  

 

 

   

 

 

   

 

 

 

Net fair value

       $ 33,725,261   
      

 

 

 

The following tables indicate the gross fair values of derivative instruments of futures and forward contracts as separate assets and liabilities as of September 30, 2014 and December 31, 2013.

 

     September 30, 2014  

Assets

  

Futures Contracts

  

Currencies

   $ 12,536,375   

Energy

     7,089,371   

Grains

     1,677,673   

Indices

     3,433,262   

Interest Rates U.S.

     224,609   

Interest Rates Non-U.S.

     10,293,969   

Livestock

     892,695   

Metals

     7,261,108   

Softs

     1,247,603   
  

 

 

 

Total unrealized appreciation on open futures contracts

   $ 44,656,665   
  

 

 

 

Liabilities

  

Futures Contracts

  

Currencies

   $ (1,987,139

Energy

     (90,622

Grains

     (13,171,256

Indices

     (7,297,546

Interest Rates U.S.

     (5,989,575

Interest Rates Non-U.S.

     (224,214

Livestock

     (357,530

Metals

     (57,680

Softs

     (119,947
  

 

 

 

Total unrealized depreciation on open futures contracts

   $ (29,295,509
  

 

 

 

Net unrealized appreciation on open futures contracts

   $ 15,361,156
  

 

 

 
     September 30, 2014  

Assets

  

Forward Contracts

  

Currencies

   $ 2,336,973   

Metals

     624,430   
  

 

 

 

Total unrealized appreciation on open forward contracts

   $ 2,961,403   
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

   $ (10,132,823

Metals

     (2,072,181
  

 

 

 

Total unrealized depreciation on open forward contracts

   $ (12,205,004
  

 

 

 

Net unrealized depreciation on open forward contracts

   $ (9,243,601 )** 
  

 

 

 

 

 

 

* This amount is in “Net unrealized appreciation on open futures contracts” on the Master’s Statements of Financial Condition.

 

** This amount is in “Net unrealized depreciation on open forward contracts” on the Master’s Statements of Financial Condition.

 

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Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

    

December 31, 2013

 

Assets

  

Futures Contracts

  

Currencies

   $ 8,324,459   

Energy

     940,914   

Grains

     4,228,107   

Indices

     24,218,539   

Interest Rates U.S.

     2,146,216   

Interest Rates Non-U.S.

     1,094,740   

Livestock

     16,200   

Metals

     3,683,040   

Softs

     864,325   
  

 

 

 

Total unrealized appreciation on open futures contracts

   $ 45,516,540   
  

 

 

 

Liabilities

  

Futures Contracts

  

Currencies

   $ (483,462

Energy

     (1,103,562

Grains

     (971,716

Indices

     (85,504

Interest Rates U.S.

     (2,298,173

Interest Rates Non-U.S.

     (5,771,971

Livestock

     (400,385

Metals

     (42,937

Softs

     (517,902
  

 

 

 

Total unrealized depreciation on open futures contracts

   $ (11,675,612
  

 

 

 

Net unrealized appreciation on open futures contracts

   $ 33,840,928
  

 

 

 
     December 31, 2013  

Assets

  

Forward Contracts

  

Currencies

   $ 3,159,694   

Metals

     772,295   
  

 

 

 

Total unrealized appreciation on open forward contracts

   $ 3,931,989   
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

   $ (2,888,671

Metals

     (1,158,985
  

 

 

 

Total unrealized depreciation on open forward contracts

   $ (4,047,656
  

 

 

 

Net unrealized depreciation on open forward contracts

   $ (115,667 )** 
  

 

 

 

 

     * This amount is in “Net unrealized appreciation on open futures contracts” on the Master’s Statements of Financial Condition.

 

   ** This amount is in “Net unrealized depreciation on open forward contracts” on the Master’s Statements of Financial Condition.

 

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Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

The following tables indicate the trading gains and losses, by market sector, on derivative instruments for the three and nine months ended September 30, 2014 and 2013.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

Sector

   2014     2013     2014     2013  

Currencies

   $ (3,810,061   $ (1,329,027   $ 928,119      $ 1,056,038   

Energy

     3,469,379        (11,673,226   $ 5,043,221        (18,190,452

Grains

     (14,151,517     2,238,967      $ (19,382,354     6,497,387   

Indices

     (1,766,372     21,466,424      $ 3,589,445        71,855,560   

Interest Rates U.S.

     (4,068,164     (647,860   $ 3,170,055        (25,731,363

Interest Rates Non-U.S.

     20,061,189        (402,883   $ 62,827,565        (26,537,728

Livestock

     682,574        358,455      $ 7,477,037        2,291,269   

Metals

     7,863,367        (18,901,963   $ (4,697,107     17,581,871   

Softs

     2,974,765        1,344,410      $ (2,017,752     4,529,606   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 11,255,160 ***    $ (7,546,703 )***    $ 56,938,229 ***    $ 33,352,188 *** 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

*** This amount is in “Total trading results” on the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

4. Fair Value Measurements:

Partnership’s Investments. The Partnership values its investment in the Master at the Master’s net asset value per unit per Class as calculated by the Master. The Master values its investments as described in Note 2 of the Master’s notes to the annual financial statements as of December 31, 2013.

Partnership’s 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.

GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. The General Partner has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s Level 2 assets and liabilities.

The Partnership will separately present purchases, sales, issuances and settlements in its 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.

On October 1, 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-04, “Technical Corrections and Improvements,” which makes minor technical corrections and clarifications to ASC 820, “Fair Value Measurements and Disclosures.” When the FASB issued Statement 157 (codified in ASC 820), it conformed the use of the term “fair value” in certain pre-Codification standards but not others. ASU 2012-04 conforms the term’s use throughout the ASC “to fully reflect the fair value measurement and disclosure requirements” of ASC 820. ASU 2012-04 also amends the requirements that must be met for an investment company to qualify for the exemption from presenting a statement of cash flows. Specifically, it eliminates the requirements that substantially all of an entity’s investments be carried at “market value” and that the investments be highly liquid. Instead, it requires substantially all of the entity’s investments to be carried at “fair value” and classified as Level 1 or Level 2 measurements under ASC 820.

The Partnership values its investment in the Master with no rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2014 and December 31, 2013, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and for the year ended December 31, 2013, there were no transfers of assets and liabilities between Level 1 and Level 2.

 

     September 30, 2014     Quoted Prices
in Active Markets
for Identical Assets
and Liabilities

(Level 1)
     Significant Other
Observable Inputs

(Level 2)
     Significant
Unobservable
Inputs (Level 3)
 
Assets           

Investment in Master

   $ 174,875,430      $       $ 174,875,430       $   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net fair value

   $ 174,875,430      $       $ 174,875,430       $   
  

 

 

   

 

 

    

 

 

    

 

 

 
     December 31, 2013     Quoted Prices
in Active Markets
for Identical Assets
and Liabilities

(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs (Level 3)
 
Assets           

Investment in Master

   $ 210,999,080      $       $ 210,999,080       $   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net fair value

   $ 210,999,080      $       $ 210,999,080       $   
  

 

 

   

 

 

    

 

 

    

 

 

 

Master’s Investments. All commodity interests of the Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Master’s 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. Management has concluded that based on available information in the marketplace, the Master’s Level 1 assets and liabilities are actively traded.

GAAP also requires the use of 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, there has not been a significant decrease in the volume and level of activity in the Master’s Level 2 assets and liabilities.

The Master will separately present purchases, sales, issuances and settlements in its 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 Master considers prices for exchange-traded commodity futures, forwards, options and swaps contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2014 and December 31, 2013, the Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and for the year ended December 31, 2013, there were no transfers of assets or liabilities between Level 1 and Level 2.

 

     September 30,
2014
     Quoted Prices in
Active Markets for
Identical Assets
and Liabilities

(Level 1)
     Significant Other
Observable Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 
Assets           

Futures

   $ 44,656,665       $ 44,656,665       $ —        $ —     

Forwards

     2,961,403         624,430         2,336,973        —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Assets

   $ 47,618,068       $ 45,281,095       $ 2,336,973      $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities

          

Futures

   $ 29,295,509       $ 29,295,509       $ —        $ —     

Forwards

     12,205,004         2,072,181         10,132,823        —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Liabilities

   $ 41,500,513       $ 31,367,690       $ 10,132,823      $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Net fair value

   $ 6,117,555       $ 13,913,405       $ (7,795,850   $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 

 

      December 31,
2013
     Quoted Prices in
Active Markets for

Identical Assets
and Liabilities

(Level 1)
     Significant Other
Observable  Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
Assets            

Futures

   $ 45,516,541       $ 45,516,541       $ —         $ —     

Forwards

     3,931,989         772,295         3,159,694         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 49,448,530       $ 46,288,836       $ 3,159,694       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
Liabilities            

Futures

  

 

$

 

11,675,613

 

  

   $ 11,675,613       $ —         $ —     

Forwards

     4,047,656         1,158,985         2,888,671         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

   $ 15,723,269       $ 12,834,598       $ 2,888,671       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net fair value

   $ 33,725,261       $ 33,454,238       $ 271,023       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

5. Financial Instrument Risks:

In the normal course of business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forward, option and swap contracts. Certain swap contracts may also be traded on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those relating to the underlying financial instrument, 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 General Partner estimates that at any given time approximately 24.4% to 31.2% of the Partnership’s/Master’s contracts are traded OTC.

The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a consequence of the organization of the Partnership as a limited partnership under New York law.

Market risk is the potential for changes in the value of the financial instruments traded by the Partnership/Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership/Master is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

 

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Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s/Master’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Master’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Master had credit risk and concentration risk during the reporting period and prior periods included in this report, as CGM and/or MS&Co. or their affiliates were the sole counterparties or brokers with respect to the Partnership’s/Master’s assets. Credit risk during the reporting period with respect to exchange-traded instruments was reduced to the extent that, through CGM or MS&Co. or their affiliates, the Partnership’s/Master’s counterparty was an exchange or clearing organization. The Partnership/Master continue to be subject to such risks with respect to MS&Co.

The General Partner monitors and attempts to control the Partnership’s/Master’s 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/Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions.

The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s/Master’s business, these instruments may not be held to maturity.

 

6. Critical Accounting Policies:

Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Partnership’s Investments. The Partnership values its investment in the Master at the Master’s net asset value per unit per Class as calculated by the Master. The Master values its investments as described in Note 2 of the Master’s notes to the annual financial statements as of December 31, 2013.

Partnership’s and the Master’s 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. Management has concluded that based on available information in the marketplace, the Master’s Level 1 assets and liabilities are actively traded.

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, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Master’s Level 2 assets and liabilities.

The Partnership and the Master 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 values investments in the Master with no rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2014 and December 31, 2013, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and for the year ended December 31, 2013, there were no transfers of assets or liabilities between Level 1 and Level 2.

The Master considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2014 and December 31, 2013, the Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and for the year ended December 31, 2013, there were no transfers of assets or liabilities between Level 1 and Level 2.

Futures Contracts. The Master trades futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Master on each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

 

18


Table of Contents

Managed Futures Premier Abingdon L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Forward Foreign Currency Contracts. Forward foreign currency contracts are those contracts where the Master agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Forward foreign currency contracts are valued daily, and the Master’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Net realized gains (losses) and changes in net unrealized gains (losses) on forward foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

The Master does not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net gain (loss) on investments in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Master are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Master on each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

Investment Company Status. Effective January 1, 2014, the Partnership adopted ASU 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements.” ASU 2013-08 changes the approach to the investment company assessment, requires non-controlling ownership interests in other investment companies to be measured at fair value, and requires additional disclosures about the investment company’s status as an investment company. ASU 2013-08 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Partnership’s financial statements. Based on management’s assessment, the Partnership has been deemed to be an investment company since inception. It has all of the fundamental characteristics of an investment company. Although the Partnership does not possess all of the typical characteristics of an investment company, its activities are consistent with those of an investment company.

Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s 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 Partnership’s 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 concluded that no provision for income tax is required in the Partnership’s financial statements.

The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2011 through 2013 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.

Net Income (Loss) per unit. Net income (loss) per unit for each Class is calculated in accordance with investment company guidance. See Note 2 “Financial Highlights.”

Subsequent Events. The General Partner evaluates events that occur after the balance sheet date but before financial statements are issued. The General Partner has assessed the subsequent events through the date of issuance and has determined that other than as referenced in Note 1 to the financial statements, there were no subsequent events requiring adjustment of or disclosure in the financial statements.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Master and cash. The Master does not engage in sales of goods or services. The Master’s only assets are its equity in its trading accounts, consisting of cash, cash margin, net unrealized appreciation on open futures contracts and net unrealized appreciation on forward contracts. Because of the low margin deposits normally required in commodity trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2014.

The Partnership’s capital consists of capital contributions, as increased or decreased by income (loss) from its investment in the Master, expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any. For the nine months ended September 30, 2014, Partnership capital decreased 16.0% from $203,401,479 to $170,816,819. This decrease was attributable to redemptions of 40,283.0450 Redeemable Units of Class A totaling $47,059,672, redemptions of 5,033.7730 Redeemable Units of Class D totaling $5,311,637, redemptions of 144.8280 Redeemable Units of Class Z totaling $152,169 and redemptions of 616.0930 General Partner unit equivalents of Class Z totaling $701,492. This decrease was partially offset by net income of $8,144,471, coupled with subscriptions for 10,721.8020 Redeemable Units of Class A totaling $12,495,839.

The Master’s 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 units and distributions of profits, if any.

For the nine months ended September 30, 2014, the Master’s capital decreased 14.4% from $700,949,432 to $599,836,380. This decrease was attributable to redemptions for 66,799.707 units totaling $188,703,553 and distributions of interest income to feeder funds totaling $90,832. This decrease was partially offset by net income of $56,314,893 and subscriptions for 11,250.3295 units totaling $31,366,440. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 6 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses.

 

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Results of Operations

 

During the Partnership’s third quarter of 2014, the net asset value per unit for Class A increased 0.5% from $1,207.59 to $1,214.20, as compared to a decrease of 2.8% in the third quarter of 2013. During the Partnership’s third quarter of 2014, the net asset value per unit for Class D increased 0.9% from $1,114.18 to $1,123.79, as compared to a decrease of 2.1% in the third quarter of 2013. During the Partnership’s third quarter of 2014, the net asset value per unit for Class Z increased 1.1% from $1,118.30 to $1,130.06, as compared to a decrease of 1.9% in the third quarter of 2013. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the third quarter of 2014 of $3,316,685. Gains were primarily attributable to the Master’s trading of commodity futures in energy, non-U.S. interest rates, livestock, metals and softs, and were partially offset by losses in currencies, grains, indices, and U.S. interest rates. The Partnership, through its investment in the Master, experienced a net trading loss before fees and expenses in the third quarter of 2013 of $2,308,671. Losses were primarily attributable to the Master’s trading of commodity futures in currencies, energy, U.S. and non-U.S. interest rates and metals, and were partially offset by gains in grains, livestock, softs and indices.

The most significant gains were achieved within the global interest rate sector primarily during August from long positions in European fixed income futures as prices advanced over investor speculation that the European Central Bank would continue stimulus measures after reports showed that euro-area manufacturing expanded less than previously estimated during July. Within the metals markets, gains were recorded during September from short positions in gold and silver futures as prices declined as a strengthening U.S. dollar eroded investor demand for the precious metals. Within the energy markets, gains were experienced during September from short positions in crude oil and its related products as prices moved lower on news that U.S. fuel inventory levels were higher than previous estimates predicted during the third quarter. A portion of the Partnership’s gains for the quarter was offset by losses incurred within the agricultural markets during July and September from long positions in corn and soybean futures as prices declined as mild weather throughout much of the Midwest reinforced analysts’ predictions that U.S. grain harvests would reach near record levels in 2014. Within the currency markets, losses were experienced primarily during July from long positions in the British pound versus the U.S. dollar as the relative value of the pound declined after government reports indicated that the U.S. economic recovery was proceeding at a faster rate than its European counterparts. Within the global stock index sector, losses were recorded during September from long positions in Asian and U.S. equity index futures as prices moved lower amid reports of weaker-than-expected economic growth in Asia.

During the Partnership’s nine months ended September 30, 2014, the Partnership’s net asset value per Class A Redeemable Unit increased 4.7% from $1,159.61 to $1,214.20, as compared to a decrease of 1.0% in the nine months ended September 30, 2013. During the Partnership’s nine months ended September 30, 2014, the Partnership’s net asset value per Class D Redeemable Unit increased 6.1% from $1,059.55 to $1,123.79, as compared to an increase of 0.9% in the nine months ended September 30, 2013. During the Partnership’s nine months ended September 30, 2014, the Partnership’s net asset value per Class Z Redeemable Unit increased 6.7% from $1,059.49 to $1,130.06, as compared to an increase of 1.5% in the nine months ended September 30, 2013. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the nine months ended September 30, 2014 of $16,471,874. Gains were primarily attributable to the Master’s trading of commodity futures in currencies, energy, indices, U.S. and non-U.S. interest rates and livestock, and were partially offset by losses in grains, metals and softs. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the nine months ended September 30, 2013 of $8,601,272. Gains were primarily attributable to the Master’s trading of commodity futures in currencies, grains, livestock, metals, softs and indices, and were partially offset by losses in energy and non-U.S. and U.S. interest rates.

        The most significant gains were achieved within the global interest rate sector during August from long positions in European fixed income futures as prices advanced over investor speculation that the European Central Bank would continue stimulus measures after reports showed that euro-area manufacturing expanded less than previously estimated during July. Additional gains in the global interest rates sector were experienced during May from long positions in European fixed income futures as prices advanced as German unemployment unexpectedly increased and euro-area lending contracted, boosting demand for the relative “safety” of government debt. During May gains were also recorded from long positions in U.S. Treasury bond and Treasury note futures as prices increased amid easing investor concern that the U.S. Federal Reserve would raise borrowing costs. Within the energy markets, gains were achieved during September from short positions in crude oil and its related products as prices moved lower on news that fuel inventory levels in the U.S. were higher than previous estimates predicted during the third quarter. Additional gains were recorded during January from long positions in natural gas futures as prices advanced after a U.S. government report showed a record drop in U.S. inventories. Within the global stock index sector, gains were recorded during February from long positions in U.S. and European equity index futures as prices advanced amid improving U.S. and European consumer confidence. Gains within the currency sector were experienced during February from long positions in the British pound versus the U.S. dollar as the relative value of the pound increased after Bank of England policy makers expressed little concern that the strength of the currency would harm the British economy. Additional gains in the currency sector were experienced during June from long positions in the British pound versus the U.S. dollar as the relative value of the pound advanced. The Partnership’s gains for the first nine months of the year were partially offset by losses incurred within the agricultural sector during June and July from long positions in corn and soybean futures as prices declined as mild weather throughout much of the Midwest reinforced analysts’ predictions that U.S. grain harvests would reach near record levels in 2014. Within the metals markets, losses were incurred during June from short positions in gold and silver futures as precious metals prices rallied as increased turmoil in the Ukraine and Iraq caused investors to seek the relative safety of the precious metals. Additional losses were incurred during February from short positions in silver and gold futures as prices moved higher as increased geo-political tensions and discouraging U.S. economic data spurred investor demand.

 

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Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership (and the Master) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership (and the Master) expects to increase capital through operations.

Interest income on 80% of the Partnership’s average daily equity allocated to it by the Master during each month was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average noncompetitive yield on 3-month Treasury bills maturing in 30 days or at the monthly average of the 4-week U.S. Treasury bill discount rate, as applicable. Interest income allocated from the Master for the three and nine months ended September 30, 2014 decreased by $3,099 and $20,871, respectively, as compared to the corresponding periods in 2013. The decrease in interest income is primarily due to lower U.S. Treasury bill rates during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s (or the Partnership’s allocable portion of the Master’s) account and upon interest rates over which the Partnership, the Master and MS&Co. have no control.

Ongoing selling agent/brokerage fees are calculated as a percentage of the adjusted net asset value per class as of the end 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. Ongoing selling agent/brokerage fees for the three and nine months ended September 30, 2014 decreased by $1,126,313 and $2,580,385, respectively, as compared to the corresponding periods in 2013. The decrease in ongoing selling agent/brokerage fees is due to lower ongoing selling agent/brokerage fee rates, as well as lower net assets per class during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013.

Management fees are calculated as a percentage of the net asset value per class as of the end 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. Management fees for the three and nine months ended September 30, 2014 decreased by $99,922 and $290,629, respectively, as compared to the corresponding periods in 2013. The decrease in management fees is due to lower net assets per class during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013.

Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the net asset value per class as of the end 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. Administrative fees for the three and nine months ended September 30, 2014 decreased by $33,307 and $96,875, respectively, as compared to the corresponding periods in 2013. The decrease in administrative fees is due to lower net assets per class during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013.

Incentive fees paid by the Partnership are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the management agreements among the Partnership, the General Partner and the Advisor. Incentive fees borne by the Partnership for the three and nine months ended September 30, 2014 were $268,488 and $926,232, respectively. There were no incentive fees for the three and nine months ended September 30, 2013. 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.

In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

All of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. The Master is a speculative commodity pool. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master’s and the Partnership’s main line of business.

The limited partners will not be liable for losses exceeding the current net asset value of their investment.

Market movements result in frequent changes in the fair value of the Master’s open positions and, consequently, in its earnings and cash flow. The Master’s 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 Master’s open contracts and the liquidity of the markets in which it trades.

The Master 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 Master’s past performance is not necessarily indicative of its future results.

“Value at Risk” is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master’s speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master’s 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 Master’s losses in any market sector will be limited to Value at Risk or by the Master’s attempts to manage its market risk.

Exchange margin requirements have been used by the Master as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. The 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 given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master’s open positions by market category as of September 30, 2014 and December 31, 2013, and the highest, lowest and average values during the three months ended September 30, 2014 and for the twelve months ended December 31, 2013. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2013.

As of September 30, 2014, the Master’s total capitalization was $599,836,380 and the Partnership owned approximately 29.1% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of September 30, 2014 was as follows:

September 30, 2014

 

                   Three Months Ended September 30, 2014  

Market Sector

   Value at Risk      % of Total
Capitalization
    High
Value at Risk
     Low
Value at Risk
     Average
Value at Risk*
 

Currencies

   $ 44,393,957         7.40   $ 46,206,758       $ 39,273,456       $ 43,701,292   

Energy

     5,660,091         0.94     5,660,091         2,948,878         4,678,506   

Grains

     4,205,890         0.70     5,125,342         3,943,543         4,595,554   

Indices

     33,242,011         5.54     37,510,960         26,319,539         33,413,147   

Interest Rates U.S.

     9,928,139         1.66     13,373,014         9,550,564         11,450,947   

Interest Rates Non-U.S.

     15,570,661         2.60     15,570,661         13,959,190         14,920,483   

Livestock

     675,840         0.11     743,160         578,655         652,153   

Metals

     10,026,791         1.67     10,026,791         5,014,250         7,011,836   

Softs

     1,185,140         0.20     1,951,338         1,135,915         1,516,468   
  

 

 

    

 

 

         

Total

   $ 124,888,520         20.82        
  

 

 

    

 

 

         

 

* Average of month-end Values at Risk.

             

 

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As of December 31, 2013, the Master’s total capitalization was $700,949,432 and the Partnership owned approximately 29.9% of the Master. The Partnership invests substaintially all of its assets in the Master. The Master’s Value at Risk as of December 31, 2013 was as follows:

December 31, 2013

 

                  Twelve Months Ended December 31, 2013  

Market Sector

   Value at Risk      % of Total
Capitalization
    High
Value at  Risk
     Low
Value at
Risk
     Average
Value  at

Risk*
 

Currencies

   $ 40,074,908         5.72   $ 53,282,510       $ 9,219,914       $ 35,805,300   

Energy

     2,872,198         0.41     6,779,740         1,102,060         3,240,209   

Grains

     5,279,340         0.75     5,815,140         132,268         4,554,349   

Indices

     38,072,737         5.43     38,378,719         15,347,959         31,596,652   

Interest Rates U.S.

     4,620,256         0.66     15,396,649         589,442         4,984,234   

Interest Rates Non-U.S.

     7,956,794         1.14     15,292,772         3,303,641         8,302,908   

Livestock

     421,487         0.06     673,961         306,526         434,267   

Metals

     7,063,365         1.01     15,870,129         3,251,406         8,046,324   

Softs

     1,503,158         0.21     2,445,348         1,145,513         1,855,849   
  

 

 

    

 

 

         

Total

   $ 107,864,243         15.39        
  

 

 

    

 

 

         

 

 

* Annual average of month-end Value at Risk.

 

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Item 4. Controls and Procedures

The Partnership’s 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 SEC’s 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 President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.

The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2014 and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s President 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 Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and

 

   

provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended September 30, 2014 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings pending against the Partnership nor the General Partner.

The following information supplements and amends the discussion set forth under Part I, Item 3 “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014.

On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC.

MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the Securities and Exchange Commission as required by the Exchange Act, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, please refer to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2013, 2012, 2011, 2010, and 2009.

In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and MS&Co. has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Each of Morgan Stanley and MS&Co. is also involved, from time to time, in investigations and proceedings by governmental and/or regulatory agencies or self-regulatory organizations, certain of which may result in adverse judgments, fines or penalties. The number of these investigations and proceedings has increased in recent years with regard to many financial services institutions, including Morgan Stanley and MS&Co.

MS&Co. is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, MS&Co. is registered as a futures commission merchant and is a member of NFA.

On May 7, 2009, MS&Co. was named as a defendant in a purported class action lawsuit brought under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, which is now styled In re Morgan Stanley Mortgage Pass-Through Certificates Litigation and is pending in the United States District Court for the Southern District of New York (“SDNY”). The third amended complaint, filed on September 30, 2011, alleges, among other things, that the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 contained false and misleading information concerning the pools of

 

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residential loans that backed these securitizations. The plaintiffs seek, among other relief, class certification, unspecified compensatory and rescissionary damages, costs, interest and fees. On July 22, 2014, the parties reached an agreement in principle to settle the litigation. The settlement is subject to approval by the court, which has set a final approval hearing for December 18, 2014.

On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against MS&Co. and an affiliate and other defendants in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On October 18, 2010, defendants filed a motion to dismiss the action. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants’ omnibus motion to dismiss plaintiff’s amended complaint and on August 15, 2011, the court denied MS&Co.’s individual motion to dismiss the amended complaint. At June 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $54 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss for this action up to the difference between the $54 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against MS&Co. and other defendants in the Superior Court of the State of California. These actions are styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints filed on June 10, 2010 allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. in these cases was approximately $704 million and $276 million, respectively. The complaints raise claims under both the federal securities laws and California law and seek, among other things, to rescind the plaintiff’s purchase of such certificates. On August 11, 2011, plaintiff’s Securities Act of 1933, as amended, claims were dismissed with prejudice. The defendants filed answers to the amended complaints on October 7, 2011. On February 9, 2012, defendants’ demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiff’s negligent misrepresentation claims were dismissed with prejudice. A bellwether trial is currently scheduled to begin in January 2015. MS&Co. is not a defendant in connection with the securitizations at issue in that trial. On May 23, 2014, plaintiff and the defendants in the bellwether trial filed motions for summary adjudication, which were denied. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $291 million, and the certificates had incurred actual losses of approximately $6 million. Based on currently available information, MS&Co. believes it could incur a loss for this

 

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action up to the difference between the $291 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and its affiliates and other defendants in the Circuit Court of the State of Illinois styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. and/or its affiliates in this action was approximately $203 million. The complaint raises claims under Illinois law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On March 24, 2011, the court granted plaintiff leave to file an amended complaint. MS&Co. and its affiliates filed an answer on December 21, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $55 million and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $55 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against MS&Co. and certain of its affiliates in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to plaintiffs by MS&Co. and/or its affiliates was approximately $104 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud and negligent misrepresentation and seeks, among other things, compensatory and/or recessionary damages associated with plaintiffs’ purchases of such certificates. On March 15, 2013, the court denied in substantial part the defendants’ motion to dismiss the amended complaint, which order MS&Co. and its affiliates appealed on April 11, 2013. On May 3, 2013, MS&Co. and its affiliates filed an answer to the amended complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $82 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $82 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to an offset for interest received by the plaintiff prior to a judgment.

 

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On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against MS&Co. and certain affiliates and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by MS&Co. and/or its affiliates was approximately $153 million. The amended complaint raises claims under the Ohio Securities Act, federal securities laws, and common law and seeks, among other things, to rescind the plaintiffs’ purchases of such certificates. MS&Co. and its affiliates filed an answer on August 17, 2012. Trial is currently scheduled to begin in July 2015. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $111 million, and the certificates had incurred actual losses of approximately $2 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $111 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to an offset for interest received by the plaintiff prior to a judgment.

On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank S.S.B., filed two complaints against MS&Co. in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation, as Receiver for Franklin Bank S.S.B. v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that MS&Co. made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to the plaintiff by MS&Co. in these cases was approximately $67 million and $35 million, respectively. The complaints each raised claims under both federal securities law and the Texas Securities Act and each seeks, among other things, compensatory damages associated with plaintiff’s purchase of such certificates. On March 20, 2012, MS&Co. filed answers to the complaints in both cases. On June 7, 2012, the two cases were consolidated. On January 10, 2013, MS&Co. filed a motion for summary judgment and special exceptions with respect to plaintiff’s claims. On February 6, 2013, the FDIC filed an amended consolidated complaint. On February 25, 2013, MS&Co. filed a motion for summary judgment and special exceptions, which motion was denied in substantial part on April 26, 2013. On May 3, 2013, the FDIC filed a second amended consolidated complaint. On October 7, 2014, the court denied MS&Co.’s motion for reconsideration of the court’s order denying its motion for summary judgment and granted its motion for reconsideration of the court’s order denying permission for interlocutory appeal. On October 22, 2014, MS&Co. filed a petition for permissive interlocutory appeal with the appellate court. Trial is currently scheduled to begin in March 2015. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $44 million, and the certificates had incurred actual losses of approximately $5 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $44 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

 

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On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Superior Court of the State of New Jersey styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. is approximately $1 billion. The complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud and tortious interference with contract and seeks, among other things, compensatory damages, punitive damages, rescission and rescissionary damages associated with plaintiffs’ purchases of such certificates. On October 16, 2012, plaintiffs filed an amended complaint which, among other things, increases the total amount of the certificates at issue by approximately $80 million, adds causes of action for fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act, and includes a claim for treble damages. On March 15, 2013, the court denied the defendants’ motion to dismiss the amended complaint. On April 26, 2013, the defendants filed an answer to the amended complaint. On June 5, 2014, the defendants filed a renewed motion to dismiss the amended complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $613 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $613 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and certain affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 19, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. and/or its affiliates or sold to plaintiff by MS&Co. and/or its affiliates was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. On October 11, 2012, defendants filed motions to dismiss the amended complaint, which was granted in part and denied in part on September 30, 2013. The defendants filed an answer to the amended complaint on December 16, 2013. Plaintiff voluntarily dismissed its claims against MS&Co. and its affiliates with respect to two of the securitizations at issue. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $66 million, and the certificates had

 

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not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $66 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On February 14, 2013, Bank Hapoalim B.M. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiff was approximately $141 million. The complaint alleges causes of action against MS&Co. and its affiliates for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On April 22, 2014, the defendants’ motion to dismiss was denied in substantial part. On August 29, 2014, the defendants filed an answer to the complaint, and on September 18, 2014, the defendants filed a notice of appeal from the ruling denying their motion to dismiss. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $73 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $73 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs.

On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiff was approximately $694 million. The complaint alleges causes of action against MS&Co. and its affiliates for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court denied defendants’ motion to dismiss. On July 10, 2014, MS&Co. and its affiliates filed a renewed motion to dismiss with respect to two certificates at issue in the case. On October 13, 2014, MS&Co. filed its answer to the complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $300 million, and the certificates had incurred actual losses of approximately $78 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $300 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses.

 

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On September 23, 2013, plaintiffs in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against MS&Co. and certain affiliates in the United States District Court for the Southern District of New York. The complaint alleges that defendants made untrue statements of material fact or omitted to state material facts in the sale to plaintiffs of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiffs was approximately $417 million. The complaint alleges causes of action against MS&Co. and its affiliates for violations of Section 11 and Section 12(a)(2) of the Securities Act of 1933, as amended, violations of the Texas Securities Act, and violations of the Illinois Securities Law of 1953 and seeks, among other things, rescissionary and compensatory damages. The defendants filed a motion to dismiss the complaint on November 13, 2013. On January 22, 2014, the court granted defendants’ motion to dismiss with respect to claims arising under the Securities Act of 1933, as amended, and denied defendants’ motion to dismiss with respect to claims arising under Texas Securities Act and the Illinois Securities Law of 1953. On April 28, 2014, the court granted in part and denied in part plaintiff’s motion to strike certain of the defendants’ affirmative defenses. On July 11, 2014, the defendants filed a motion for reconsideration of the court’s order on the motion to dismiss the complaint or, in the alternative, for certification of interlocutory appeal and a stay of all proceedings, which was denied on September 30, 2014. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $211 million, and the certificates had incurred actual losses of approximately $27 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $211 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is 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 MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.

 

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Item 1A. Risk Factors

There have been no material changes to the risk factors set forth under Part 1, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

For the three months ended September 30, 2014, there were subscriptions of 3,095.2220 Redeemable Units of Class A totaling $3,726,522. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(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 defined in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable units were purchased by accredited investors in a private offering.

Proceeds of net offering were used for the trading of commodity interests, including futures contracts, options and forwards contracts.

The following chart sets forth the purchases of Redeemable Units by the Partnership.

 

Period  

Class A

(a) Total

Number

of Redeemable
Units

Purchased*

   

Class A

(b) Average

Price Paid per

Redeemable
Unit**

   

Class Z

(a) Total

Number

of Redeemable
Units

Purchased*

   

Class Z

(b) Average

Price Paid per

Redeemable
Unit**

   

(c) Total Number

of Redeemable Units

Purchased

as Part

of Publicly

Announced

Plans or

Programs

 

(d) Maximum

Number

(or Approximate

Dollar Value) of
Redeemable Units that

May Yet Be

Purchased

Under the

Plans or

Programs

July 1, 2014 -
July 31, 2014

    2,692.9070      $ 1,161.99        —          N/A      N/A   N/A

August 1, 2014 -
August 31, 2014

    4,841.4570      $ 1,229.17        24.6820      $ 1,142.09      N/A   N/A

September 1, 2014 -
September 30, 2014

    2,512.4640      $ 1,214.20        —          N/A      N/A   N/A
      10,046.8280      $ 1,207.42        24.6820      $ 1,142.09           

* Generally, limited partners are permitted to redeem their Redeemable Units as of the end 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 Partnership’s business in connection with effecting redemptions for limited partners.

** Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.

Item 3. Defaults Upon Senior Securities – None

Item 4. Mine Safety Disclosures – Not Applicable

Item 5. Other Information – None

 

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Item 6. Exhibits

 

  3.1

  (a)    Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York, dated November 1, 2005 (filed as Exhibit 3.1 to the Registration on Form 10-12G filed on April 30, 2008 and incorporated herein by reference).
  (b)    Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(b) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
  (c)    Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on September 29, 2009 and incorporated herein by reference).
  (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 29, 2010 (filed as Exhibit 3.1(d) to the Form 8-K filed on June 30, 2010 and incorporated herein by reference).
  (e)    Certificate of Amendment to Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the Form 8-K filed on September 7, 2011 and incorporated herein by reference).
  (f)   

Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 7, 2013 (filed as Exhibit 3.1(f) to the quarterly report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).

  3.2

  (a)    Third Amended and Restated Agreement of Limited Partnership, dated March 1, 2011 (filed as Exhibit 3.3(a) to the Form 10-Q filed on May 16, 2011 and incorporated herein by reference).

10.1

  (a)    Customer Agreement between the Partnership, the General Partner and CGM, dated April 29, 2008 (filed as Exhibit 10.2 to the Registration on Form 10-12G filed on April 30, 2008 and incorporated herein by reference).

10.1

  (b)    Commodity Futures Customer Agreement between the Partnership and MS&Co., effective October 29, 2013 (filed as Exhibit 10.1(b) to the quarterly report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).

10.2

  (a)    Amended and Restated Management Agreement between the Partnership, the General Partner and the Advisor, dated July 3, 2014 (filed as Exhibit 10.2 to the Form 8-K filed on July 9, 2014 and incorporated herein by reference).

10.3

  (a)    Agency Agreement between the Partnership, the General Partner and CGM, dated May 27, 2007 (filed as Exhibit 10.3 to the Registration on Form 10-12G filed on April 30, 2008 and incorporated herein by reference).
  (b)    Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective October 1, 2013 (filed as Exhibit 10.3(b) to the quarterly report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
  (c)    Letter amending the Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective April 1, 2014 (filed as Exhibit 10.3(c) to the quarterly report 10-Q filed on May 14, 2014 and incorporated herein by reference).
  (d)    Letter amending the Alternative Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective October 1, 2014 (filed as Exhibit 10.3(d) to the Quarterly Report on Form 10-Q filed on August 13, 2014 and incorporated herein by reference).

10.4

     Form of Selling Agreement between the Partnership, Citigroup Managed Futures LLC, Citigroup Global Markets Inc. and Credit Suisse Securities, (USA) LLC, dated September 30, 2008 (filed as Exhibit 10.4 to the Form 10-Q, filed on November 14, 2011 and incorporated herein by reference).

10.5

     Form of Third Party Subscription Agreement (filed as Exhibit 10.4 to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

10.6

     Form of Subscription Agreement (filed as Exhibit 10.6 to the Form 10-Q filed on November 14, 2012 and incorporated herein by reference).

 

31.1        Rule 13a-14(a)/15d-14(a) Certification (Certification of Director) (filed herewith).
31.2        Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer) (filed herewith).
32.1        Section 1350 Certification (Certification of Director) (filed herewith).
32.2        Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith).

 

101.INS      XBRL Instance Document.
101.SCH      XBRL Taxonomy Extension Schema Document.
101.CAL      XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB      XBRL Taxonomy Extension Label Linkbase Document.
101.PRE      XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF      XBRL Taxonomy Extension Definition Linkbase Document.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MANAGED FUTURES PREMIER ABINGDON L.P.

 

By:   Ceres Managed Futures LLC
  (General Partner)
By:  

/s/ Patrick T. Egan

 

Patrick T. Egan

  Director
Date: November 13, 2014
By:  

/s/ Steven Ross

  Steven Ross
 

Chief Financial Officer

(Principal Accounting Officer)

Date: November 13, 2014

 

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