MANAGED FUTURES PREMIER WARRINGTON L.P. - FORM 10-Q/A - October 8, 2015

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

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 000-52603

MANAGED FUTURES PREMIER WARRINGTON L.P.

 

(Exact name of registrant as specified in its charter)

 

New York   20-3845577
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)

c/o Warrington GP, LLC

200 Crescent Court,

Suite 520

Dallas, Texas 75201

 

(Address of principal executive offices) (Zip Code)

(214) 230-2100

 

(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 this 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 August 31, 2015, 76,487.7639 Limited Partnership Class A Redeemable Units were outstanding and 754.6927 Limited Partnership Class D Redeemable Units were outstanding.

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Explanatory Note

This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) amends and restates the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2015, as originally filed with the Securities and Exchange Commission on August 19, 2015 (the “Original Filing”). The interim period financial statements included in the Original Filing had not yet been reviewed by an independent public accountant. The accountant has completed its review of the interim period financial statements and this Amendment No. 1 amends and restates the following items of the Original Filing to reflect the accountant’s review: (i) Part I, Item 1. “Financial Statements” and accompanying notes to financial statements and (ii) Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The registrant has also updated: (a) the cover page to indicate the number of redeemable units outstanding of each class of redeemable units as of the latest practicable date, (b) the signature page, (c) the certifications of the registrant’s Sole Manager in Exhibits 31.1 and 32.1 and (d) the financial statements formatted in eXtensible Business Reporting Language (XBRL) in Exhibits 101. No other sections were affected, but for the convenience of the reader this Amendment No. 1 restates the Original Filing in its entirety, as amended. This Amendment No. 1 otherwise describes conditions as of the date of the Original Filing and has not been updated to disclose events that may have occurred at a later date.

 

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MANAGED FUTURES PREMIER WARRINGTON FUND L.P.

FORM 10-Q

INDEX

 

          Page
  Number  

PART I — Financial Information:

   
   Item 1.    Financial Statements:   
      Statements of Financial Condition at
June 30, 2015 (unaudited) and December 31, 2014		    4
      Condensed Schedules of Investments at
June 30, 2015 (unaudited) and December 31, 2014		    5
      Statements of Income and Expenses for the three and six months ended June 30, 2015 and 2014 (unaudited)    6
      Statements of Changes in Partners’ Capital for the six months ended
June 30, 2015 and 2014 (unaudited) 		   7
      Notes to Financial Statements (unaudited)    8-18
   Item 2.    Management’s Discussion and Analysis
of Financial Condition and Results of
Operations		    19-20
   Item 3.    Quantitative and Qualitative Disclosures about Market Risk    21-22
   Item 4.    Controls and Procedures    23

PART II — Other Information

  
   Item 1.    Legal Proceedings    24
   Item 1A.    Risk Factors    24
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    25
   Item 5.    Other Information    25
   Item 6.    Exhibits    26

 

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PART I

Item 1. Financial Statements

Managed Futures Premier Warrington L.P.

Statements of Financial Condition

 

     (Unaudited)
June 30,
2015		      December 31,
2014		  

Assets:

      

Equity in trading account:

      

Cash

    $ 85,670,297       $ 122,188,891   

Cash Margin

      12,872,901         18,102,669   

Due from Broker

      1,449,736         —     

Options purchased, at fair value (cost $865,178 and $921,500 at June 30, 2015 and December 31, 2014, respectively)

      1,045,000         1,724,250   
  

 

 

     

 

 

  

Total trading equity

      101,037,934         142,015,810   

Interest receivable

      172         664   
  

 

 

     

 

 

  

Total assets

    $ 101,038,106       $ 142,016,474   
  

 

 

     

 

 

  

Liabilities and Partners’ Capital:

      

Liabilities:

      

Options premium received, at fair value (premium $1,025,467 and $1,415,498 at June 30, 2015 and December 31, 2014, respectively)

    $ 1,347,825       $ 2,544,813   

Accrued expenses:

      

Ongoing Selling Agent fees

      164,612         224,533   

Management fees

      164,991         231,830   

Administrative fees

      82,495         115,915   

Clearing fees due

      —           6,979   

Other

      200,415         142,203   

Redemptions payable

      2,142,093         5,452,830   
  

 

 

     

 

 

  

Total liabilities

      4,102,431         8,719,103   
  

 

 

     

 

 

  

Partners’ Capital:

      

General Partner, Class A 0.0000 unit equivalents outstanding at June 30, 2015 and December 31, 2014, respectively

      —           —     

General Partner, Class D 0.0000 and 1,235.7397 unit equivalents outstanding at June 30, 2015 and December 31, 2014, respectively

      —           1,484,135   

General Partner, Class GP 325.0000 and 0.0000 unit equivalents outstanding at June 30, 2015 and December 31, 2014, respectively

      330,683         —     

Limited Partners, Class A 79,952.0278 and 108,542.7439 Redeemable Units outstanding at June 30, 2015 and December 31, 2014, respectively

      95,662,968         125,736,962   

Limited Partners, Class D 754.6927 and 5,059.3053 Redeemable Units outstanding at June 30, 2015 and December 31, 2014, respectively

      942,024         6,076,274   
  

 

 

     

 

 

  

Total partners’ capital

      96,935,675         133,297,371   
  

 

 

     

 

 

  

Total liabilities and partners’ capital

    $ 101,038,106       $ 142,016,474   
  

 

 

     

 

 

  

Class A, net asset value per unit

    $ 1,196.50       $ 1,158.41   
  

 

 

     

 

 

  

Class D, net asset value per unit

    $ 1,248.22       $ 1,201.01   
  

 

 

     

 

 

  

Class GP, net asset value per unit

    $ 1,017.49         —     
  

 

 

     

 

 

  

See accompanying notes to financial statements.

 

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Managed Futures Premier Warrington L.P.

Condensed Schedule of Investments

 

June 30, 2015 (Unaudited)

    Number of
Contracts		      Fair Value     % of Partners’
Capital		  

Options Purchased

        

Indices

        

Puts

      190       $ 1,045,000        1.08 % 
     

 

 

    

 

 

  

Total options purchased

         1,045,000        1.08   
     

 

 

    

 

 

  

Option Premium Received

        

Indices

        

Calls

      1,556         (44,575 )      (0.05 ) 

Puts

      802         (1,303,250 )      (1.34 ) 
     

 

 

    

 

 

  

Total option premiums received

         (1,347,825 )      (1.39 ) 
     

 

 

    

 

 

  

Net fair value

       $ (302,825 )      (0.31 )% 
     

 

 

    

 

 

  

 

December 31, 2014

    Number of
Contracts		      Fair Value     % of Partners’
Capital		  

Options Purchased

        

Indices

        

Puts

      190       $ 1,724,250        1.29 % 
     

 

 

    

 

 

  

Total options purchased

         1,724,250        1.29   
     

 

 

    

 

 

  

Option Premium Received

        

Indices

        

Calls

      475         (5,938 )      (0.00 ) 

Puts

      1,235         (2,538,875 )      (1.91 ) 
     

 

 

    

 

 

  

Total option premiums received

         (2,544,813 )      (1.91 ) 
     

 

 

    

 

 

  

Net fair value

       $ (820,563 )      (0.62 )% 
     

 

 

    

 

 

  

See accompanying notes to financial statements.

 

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Managed Futures Premier Warrington L.P.

Statements of Income and Expenses

(Unaudited)

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2015     2014     2015     2014  

Investment Income:

         

Interest income

    $ 1,730      $ 5,352      $ 3,964      $ 15,855   
  

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

         

Ongoing selling agent fees

      513,171        985,073        1,132,484        2,514,570   

Clearing fees

      134,884        350,590        338,397        743,088   

Management fees

      514,500        806,222        1,155,841        1,642,097   

Administrative fees

      257,250        201,556        577,920        410,523   

Other

      98,426        86,664        151,861        105,533   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

      1,518,231        2,430,105        3,356,503        5,415,811   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (1,516,501 )      (2,424,753 )      (3,352,539 )      (5,399,956 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Trading Results:

         

Net gains (losses) on trading of commodity interests:

         

Net realized gains (losses) on closed contracts

      2,267,046        3,220,265        7,091,111        7,061,687   

Change in net unrealized gains (losses) on open contracts

      (142,537 )      (435,249 )      184,029        (528,891 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total trading results

      2,124,509        2,785,016        7,275,140        6,532,796   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

      608,008        360,263        3,922,601        1,132,840   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) allocation by class:

         

Class A

    $ 593,409      $ 322,261      $ 3,688,650      $ 1,016,741   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class D

    $ 8,916      $ 38,002      $ 228,268      $ 116,099   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class GP

    $ 5,683        —        $ 5,683        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value per unit

         

Class A (79,952.0278 and 120,573.9259 units outstanding at June 30, 2015 and 2014, respectively)

    $ 1,196.50      $ 1,186.30      $ 1,196.50      $ 1,186.30   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class D (754.6927 and 6,524.6940 units outstanding at June 30, 2015 and 2014, respectively)

    $ 1,248.22      $ 1,222.24      $ 1,248.22      $ 1,222.24   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class GP (325.0000 and 0.0000 units outstanding at June 30, 2015 and 2014, respectively)

    $ 1,017.49        —        $ 1,017.49        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) per unit

         

Class A*

    $ 7.91      $ 1.95      $ 38.09      $ 7.29   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class D*

    $ 12.05      $ 5.82      $ 47.21      $ 18.11   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class GP**

    $ 17.48        —        $ 17.48        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average units outstanding

         

Class A

      85,693.0664        128,104.0136        93,934.5685        131,693.9866   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class D

      805.5365        6,524.6940        3,509.3161        6,449.2678   
  

 

 

    

 

 

    

 

 

    

 

 

  

Class GP**

      325.0000        —          325.0000        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

 

* Based on change in net asset value per unit.
** Class GP commenced on May 1, 2015 (325.0000 shares).

See accompanying notes to financial statements.

 

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Managed Futures Premier Warrington L.P.

Statements of Changes in Partners’ Capital

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)

 

    Class A     Class D     Class GP*     Total  
    Amount     Units     Amount     Units     Amount     Units     Amount     Units  

Partners’ capital at December 31, 2014

   $ 125,736,962        108,542.7439      $ 7,560,409        6,295.0450      $ —        $ —        $ 133,297,371        114,837.7889   

Net Income (loss)

     3,688,650        —          228,268        —          5,683        —          3,922,601        —     

Subscriptions - Limited Partners

     —          —          —          —          —          —          —          —     

Subscriptions - General Partner

     —          —          —          —          325,000        325.0000        325,000        325.0000   

Redemptions - Limited Partners

     (33,762,644 )      (28,590.7161 )      (5,321,024 )      (4,304.6126 )      —          —          (39,083,668 )      (32,895.3287 ) 

Redemptions - General Partner

     —          —          (1,525,629 )      (1,235.7397 )      —          —          (1,525,629 )      (1,235.7397 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Partners’ capital at June 30, 2015

   $ 95,662,968        79,952.0278      $ 942,024        754.6927      $ 330,683        325.0000      $ 96,935,675        81,031.7205   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    Class A     Class D                 Total  
    Amount     Units     Amount     Units                 Amount     Units  

Partners’ capital at December 31, 2013

   $ 160,520,962        136,148.6869      $ 7,683,094        6,380.6240          $ 168,204,056        142,529.3109   

Net Income (loss)

     1,016,741        —          116,099        —              1,132,840        —     

Subscriptions - Limited Partners

     3,681,696        3,104.6890        1,200,000        997.0700            4,881,696        4,101.7590   

Redemptions - Limited Partners

     (22,183,005 )      (18,679.4500 )      (1,024,436 )      (853.0000 )          (23,207,441 )      (19,532.4500 ) 
 

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Partners’ capital at June 30, 2014

   $ 143,036,394        120,573.9259      $ 7,974,757        6,524.6940          $ 151,011,151        127,098.6199   
 

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

 

* Class GP commenced on May 1, 2015

See accompanying notes to financial statements.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

1.    Organization:

Managed Futures Premier Warrington L.P. (formerly known as Warrington Fund L.P.) (the “Partnership”), is a limited partnership organized on November 28, 2005, under the partnership laws of the State of New York to engage in the speculative trading of commodity interests including futures and option contracts. The Partnership does not currently intend to, but may in the future, engage in transactions in spot and forward markets. The Partnership primarily trades futures and options in the stock indices sector. The Partnership may also trade in additional sectors including U.S. Treasury bonds, currencies, gold, silver and energy products. The Partnership commenced trading on February 21, 2006. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership privately and continuously offers redeemable units of limited partnership interest (“Redeemable Units”) in the Partnership to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.

Effective as of the close of business on March 31, 2015, Warrington GP, 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 beneficially owned by Scott C. Kimple. From inception to the close of business on March 31, 2015, Ceres Managed Futures LLC, a Delaware limited liability company, acted as the general partner (“CMF GP”) and commodity pool operator of the Partnership. On January 9, 2015, Scott C. Kimple proposed in a Proxy Statement, which was filed with the Securities and Exchange Commission (the “SEC”) and distributed to Limited Partners (defined below), that Warrington GP, LLC become the new general partner of the Partnership. The requisite number of each class of limited partnership interests approved the proposals described in the Proxy Statement, and, as a result, Warrington GP, LLC became the new general partner of the Partnership effective as of the close of business on March 31, 2015. CMF GP withdrew as the general partner of the Partnership immediately following Warrington GP, LLC becoming the Partnership’s new general partner. References to the “General Partner” herein refer to Warrington GP, LLC and/or CMF GP, as the context requires.

Effective as of the close of business on March 31, 2015, Warrington SLP, LP, a Delaware limited liability company and an affiliate of the General Partner, became a special limited partner of the Partnership (the “Special Limited Partner”) and receives a quarterly profit share allocation from the Partnership, subject to a high water mark.

All of the trading decisions for the Partnership are made by Warrington Asset Management LLC (the “Advisor”), an affiliate of the General Partner, using the Strategic Trading Program (formerly, the “Core Trading Program”), a proprietary program.

The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended June 30, 2015.

On June 15, 2011, the Partnership began offering “Class A” Redeemable Units and “Class D” Redeemable Units pursuant to the offering memorandum. All outstanding Redeemable Units on June 15, 2011 were designated Class A Redeemable Units. The rights, powers, duties and obligations associated with the investment in Class A Redeemable Units were not changed. On October 1, 2011, the first Class D Redeemable Units were issued to limited partners of the Partnership (each a “Limited Partner”). Class A Redeemable Units and Class D Redeemable Units will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Redeemable Units that a Limited Partner receives will generally depend upon the amount invested in the Partnership, although the General Partner may determine to offer Class A Redeemable Units or Class D Redeemable Units to investors in its sole discretion. On May 1, 2015 a new share class of units of general partner interest “Class GP” was initiated to accept an investment from the General Partner.

During the three months ended June 30, 2015, the Partnership’s commodity broker was Wells Fargo Securities, LLC (“Wells Fargo”), a registered futures commission merchant. Effective April 1, 2015, the Partnership entered into a futures and cleared swaps agreement with Wells Fargo (the “Wells Fargo Customer Agreement”). The Partnership pays Wells Fargo trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, Wells Fargo will pay the Partnership interest on excess cash held in the Partnership’s account at rates customarily paid by Wells Fargo and as advised to the Partnership from time to time.

During prior periods included in this report, Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant, also served as a commodity broker. The Partnership was a party to a futures brokerage account agreement with MS&Co. (the “MS&Co. Customer Agreement”). The Partnership paid MS&Co. trading fees for the clearing and, where applicable, execution of transactions. The MS&Co. Customer Agreement has been terminated.

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 monthly ongoing selling agent fee equal to (i) 5/16 of 1% (3.75% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 1.50% (1.50% per year) of month-end Net Assets for Class D Redeemable Units. The selling agent fee received by Morgan Stanley Wealth Management was shared with the properly registered/licensed financial advisers of Morgan Stanley Wealth Management who sold redeemable units in the Partnership.

Effective April 1, 2014, the monthly ongoing selling agent fee was reduced (i) from an annual rate of 3.75% to an annual rate of 2.50% of month-end Net Assets for Class A Redeemable Units and (ii) from an annual rate of 1.50% to an annual rate of 1.25% of month-end Net Assets for Class D Redeemable 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 and (ii) reduced from an annual rate of 1.25% to an annual rate of 0.75% for Class D Redeemable Units. As of the same date, the administrative fee for each class was 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.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

As of April 1, 2015, the Partnership maintains a continuing services agreement with Morgan Stanley Wealth Management. Pursuant to the continuing services agreement, Morgan Stanley Wealth Management will receive a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Morgan Stanley Wealth Management (the “MS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Morgan Stanley Wealth Management shall continue only for as long as the MS Interests remain outstanding.

As of April 1, 2015, the Partnership maintains a selling agreement with Robert W. Baird & Co. Incorporated (“Baird”). Pursuant to the selling agreement, Baird will receive a monthly ongoing selling agent fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. With respect to current Limited Partners that are customers of Baird, the Partnership shall pay Baird a monthly ongoing maintenance fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units for services provided to such current Limited Partners.

As of April 1, 2015, the Partnership maintains a continuing services agreement with Credit Suisse Securities (USA) LLC. Pursuant to the continuing services agreement, Credit Suisse Securities (USA) LLC will receive a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Credit Suisse Securities (USA) LLC (the “CS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Credit Suisse Securities (USA) LLC shall continue only for as long as the CS Interests remain outstanding.

2.    Basis of Presentation and Summary of Significant Accounting Policies:

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Partnership’s financial condition at June 30, 2015 and December 31, 2014, the results of its operations for the three and six months ended June 30, 2015 and 2014 and changes in partners’ capital for the six months ended June 30, 2015 and 2014. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. You should read these financial statements together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2014. The December 31, 2014 information has been derived from the audited financial statements as of and for the year ended December 31, 2014.

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.

The General Partner and each Limited Partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each, except that no Limited Partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions and losses, if any.

The Partnership’s trading of futures and options contracts, if applicable, on commodities is done primarily on United States of America commodity exchanges. During the three and six months ended June 30, 2015, the Partnership engaged in such trading through commodity brokerage accounts maintained with MS&Co. and Wells Fargo.

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.

Partnership’s Investments: The fair value of exchange-traded futures and options contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period.

All commodity interests (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on option 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.

 

9

Table of Contents

Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

Investment Company Status: Effective January 1, 2014, the Partnership adopted, Accounting Standards Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on the General Partner’s assessment, the Partnership has been deemed to be an investment company since inception.

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. 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 2014 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 is calculated in accordance with investment company guidance. See Note 3, “Financial Highlights.”

There have been no material changes with respect to the Partnership’s critical accounting policies as reported in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

3.    Financial Highlights:

Changes in net asset value per unit for each Class for the three and six months ended June 30, 2015 and 2014 were as follows:

 

     Three Months
Ended
June 30, 2015		     Three Months
Ended
June 30, 2014		     Six Months
Ended
June 30, 2015		     Six Months
Ended
June 30, 2014		  
    Class A     Class D     Class A     Class D     Class A     Class D     Class A     Class D  

Net realized and unrealized gains (losses)

   $ 25.50      $ 26.56      $ 20.13      $ 20.66      $ 72.79      $ 75.66      $ 46.74      $ 47.94   

Interest Income

     0.01        0.01        0.04        0.04        0.04        0.04        0.12        0.12   

Expenses

     (17.60 )      (14.52 )      (18.22 )      (14.88 )      (34.74 )      (28.49 )      (39.57 )      (29.95 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) for the period

     7.91        12.05        1.95        5.82        38.09        47.21        7.29        18.11   

Net asset value per unit, beginning of period

     1,188.59        1,236.17        1,184.35        1,216.42        1,158.41        1,201.01        1,179.01        1,204.13   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value per unit, end of period

   $ 1,196.50      $ 1,248.22      $ 1,186.30      $ 1,222.24      $ 1,196.50      $ 1,248.22      $ 1,186.30      $ 1,222.24   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

  

 

Certain prior period amounts have been reclassified to conform to current period presentation. In the financial highlights, the ongoing selling agent fees and clearing fees which were previously included in net realized and unrealized gains (losses) per unit and excluded from expenses per unit are now excluded from net realized and unrealized gains (losses) per unit and included in expenses per unit. This information was previously included as a footnote to the financial highlights table.

 

    Three Months Ended
June 30, 2015		     Three Months Ended
June 30, 2014		     Six Months Ended
June 30, 2015		     Six Months Ended
June 30, 2014		  
    Class A     Class D     Class A     Class D     Class A     Class D     Class A     Class D  

Ratios to average net assets:***

                

Net investment income (loss)

     (6.0 )%      (4.7 )%      (6.2 )%      (4.9 )%      (6.1 )%      (5.8 )%      (6.8 )%      (5.1 )% 

Allocation to Special Limited Partner

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      —   % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss) before allocation to Special Limited Partner****

     (6.0 )%      (4.7 )%      (6.2 )%      (4.9 )%      (6.1 )%      (5.8 )%      (6.8 )%      (5.1 )% 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

     6.0 %      4.7 %      6.2 %      4.9 %      6.1 %      5.8 %      6.9 %      5.1 % 

Allocation to Special Limited Partner

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      —   % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

     6.0 %      4.7 %      6.2 %      4.9 %      6.1 %      5.8 %      6.9 %      5.1 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return:

                

Total return before allocation to Special Limited Partner

     0.7 %      1.0 %      0.2 %      0.5 %      3.3 %      3.9 %      0.6 %      1.5 % 

Allocation to Special Limited Partner

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      —   % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return after allocation to Special Limited Partner

     0.7 %      1.0 %      0.2 %      0.5 %      3.3 %      3.9 %      0.6 %      1.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

  

 

 

*** Annualized (except allocation to Special Limited Partner, if applicable).
**** Interest income less total expenses (exclusive of allocation to Special Limited Partner, if applicable).

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 Classes using each Limited Partner’s share of income, expenses and average net assets.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

4.    Trading Activities:

The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses.

The futures and cleared swaps agreement between the Partnership and Wells Fargo, and the customer agreement between the Partnership and MS&Co. gave the Partnership the legal right to net unrealized gains and losses on open futures and option contracts. The Partnership netted as applicable, for financial reporting purposes, the unrealized gains and losses on open futures and option contracts on the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet” have been met.

Ongoing selling agent fees paid to Baird, Morgan Stanley Wealth Management and Credit Suisse Securities (USA) LLC were calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and were affected by trading performance, subscriptions and redemptions.

Trading and transaction fees are based on the number of trades executed by the Advisor for the Partnership. All trading, exchange, clearing, user, give-up, floor brokerage and National Futures Association (“NFA”) fees (collectively, the “clearing fees”) paid to Wells Fargo and executing brokers, as applicable, are, and all clearing fees paid to MS&Co. were, borne by the Partnership.

All of the commodity interests owned by the Partnership are held for trading purposes. The monthly average number of option contracts held during the three months ended June 30, 2015 and 2014 were 2,646 and 8,257, respectively. The monthly average number of option contracts held during the six months ended June 30, 2015 and 2014 were 2,706 and 9,284, respectively.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

The following tables summarize the valuation of the Partnership’s investments at June 30, 2015 and December 31, 2014, respectively.

 

      Gross Amounts not
Offset in the Statement
of Financial Condition		         

June 30, 2015

    Gross Amounts
Recognized		     Gross Amounts
Offset in the
Statement of
Financial
Condition		      Net Amounts
Presented in the
Statement of
Financial
Condition		     Financial
Instruments		     Cash
Collateral
Received		      Net
Amount		  

Assets

               

Options purchased

    $ 1,045,000      $         —       $ 1,045,000      $ (1,045,000 )    $         —       $ —   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total assets

      1,045,000        —         1,045,000        (1,045,000 )      —         —   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Liabilities

               

Options premium received

    $ (1,347,825 )    $ —       $ (1,347,825 )    $ 1,045,000      $ —       $ (302,825 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total liabilities

      (1,347,825 )      —         (1,347,825 )      1,045,000        —         (302,825 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net fair value

                $ (302,825 ) 
              

 

 

  

 

      Gross Amounts not
Offset in the Statements
of Financial Condition		         

December 31, 2014

    Gross
Amounts
Recognized		     Gross Amounts
Offset in the
Statement of
Financial
Condition		      Amounts
Presented in
the
Statement of
Financial
Condition		     Financial
Instruments		     Cash
Collateral		      Net Amount  

Assets

               

Options purchased

    $ 1,724,250      $         —       $ 1,724,250      $ (1,724,250 )    $         —       $ —   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total assets

      1,724,250        —         1,724,250        (1,724,250 )      —         —   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Liabilities

               

Options premium received

    $ (2,544,813 )    $ —       $ (2,544,813 )    $ 1,724,250      $ —       $ (820,563 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total liabilities

      (2,544,813 )      —         (2,544,813 )      1,724,250        —         (820,563 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net fair value

                $ (820,563 ) 
              

 

 

  

 

13

Table of Contents

Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

The following tables indicate the gross fair values of derivative instruments of futures and option contracts as separate assets and liabilities as of June 30, 2015 and December 31, 2014.

 

     June 30, 2015  

Assets

   

Options Purchased

   

Indices

    $ 1,045,000   
  

 

 

  

Total options purchased

    $ 1,045,000 * 
  

 

 

  

Liabilities

   

Options Premium Received

   

Indices

    $ (1,347,825 ) 
  

 

 

  

Total options premium received

    $ (1,347,825 )** 
  

 

 

  

 

* This amount is in “Options purchased, at fair value” on the Statements of Financial Condition.
** This amount is in “Options premium received, at fair value” on the Statements of Financial Condition.

 

     December 31, 2014  

Assets

   

Options Purchased

   

Indices

    $ 1,724,250   
  

 

 

  

Total options purchased

    $ 1,724,250 * 
  

 

 

  

Liabilities

   

Options Premium Received

   

Indices

    $ (2,544,813 ) 
  

 

 

  

Total options premium received

    $ (2,544,813 )** 
  

 

 

  

 

* This amount is in “Options purchased, at fair value” on the Statements of Financial Condition.
** This amount is in “Options premium received, at fair value” on the Statements of Financial Condition.

 

14

Table of Contents

Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

The following table indicates the trading gains and losses, by market sector, on derivative instruments for the three and six months ended June 30, 2015 and 2014.

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  

Sector

    2015     2014     2015     2014  

Indices

    $ 608,008      $ 360,263      $ 3,922,601      $ 1,132,840   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 608,008 ***    $ 360,263 ***    $ 3,922,601 ***    $ 1,132,840 *** 
  

 

 

    

 

 

    

 

 

    

 

 

  

  

 

*** This amount is in “Total trading results” on the Statements of Income and Expenses.

5.    Fair Value Measurements:

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, the Partnership’s Level 1 assets and liabilities are actively traded.

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.

 

15

Table of Contents

Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

The Partnership considers prices for exchange-traded commodity futures and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of forwards and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended June 30, 2015 and December 31, 2014, the Partnership did not hold any derivative instruments for which market quotations were not readily available and which were priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). Any transfers between levels are recognized at the beginning of the period. During the six months ended June 30, 2015 and the twelve months ended December 31, 2014, there were no transfers of assets or liabilities between Level 1 and Level 2.

 

     Total
June 30, 2015		     Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)		     Significant Other
Observable Inputs
(Level 2)		      Significant
Unobservable Inputs
(Level 3)		  

Assets

          

Options purchased

    $ 1,045,000      $ 1,045,000      $ —       $ —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total assets

      1,045,000        1,045,000        —         —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Liabilities

          

Options premium received

    $ 1,347,825      $ 1,347,825      $ —       $ —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total liabilities

      1,347,825        1,347,825        —         —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Net fair value

    $ (302,825 )    $ (302,825 )    $ —       $ —   
  

 

 

    

 

 

    

 

 

     

 

 

  
     Total
December 31,  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

          

Options purchased

    $ 1,724,250      $ 1,724,250      $         —       $         —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total assets

      1,724,250        1,724,250        —         —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Liabilities

          

Options premium received

    $ 2,544,813      $ 2,544,813      $ —       $ —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total liabilities

      2,544,813        2,544,813        —         —   
  

 

 

    

 

 

    

 

 

     

 

 

  

Net fair value

    $ (820,563 )    $ (820,563 )    $ —       $ —   
  

 

 

    

 

 

    

 

 

     

 

 

  

 

16

Table of Contents

Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

6.    Financial Instrument Risks:

In the normal course of business, the Partnership is party to financial instruments with off-balance-sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures and options, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments on specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forward and option contracts. OTC contracts are negotiated between contracting parties and 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 instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. None of the Partnership’s current contracts are traded OTC, although contracts may be traded OTC in the future.

Futures Contracts. The Partnership 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 Partnership on each business day, depending on the daily fluctuations in the value of the underlying instruments, and are recorded as unrealized gains or losses by the Partnership. When the contract is closed, the Partnership 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 Statements of Income and Expenses.

Options. The Partnership may purchase and write (sell), both exchange listed and OTC, options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Partnership writes an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Partnership purchases an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in net unrealized gains (losses) on option contracts are included in the Statements of Income and Expenses.

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

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’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 risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership had credit risk and concentration risk during the reporting period and prior periods included in this report, as MS&Co. and/or Wells Fargo or their affiliates were the sole counterparties or brokers with respect to the Partnership’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS&Co. or Wells Fargo or their affiliates, the Partnership’s counterparty is an exchange or clearing organization. The Partnership continues to be subject to such risks with respect to Wells Fargo.

 

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Managed Futures Premier Warrington L.P.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

The Partnership’s trading will be concentrated in exchange-traded futures and options on the S&P 500® Index. Concentration in a limited number of commodity interests may subject the Partnership’s account to greater volatility than if a more diversified portfolio of contracts were traded on behalf of the Partnership.

As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership does not consider these contracts to be guarantees.

The General Partner monitors and attempts to control the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it had effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allowed the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provided account analysis of futures, forward and option contracts 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 business, these instruments may not be held to maturity.

7.     Subsequent Events:

The General Partner evaluated 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 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 equity in its trading account, consisting of cash and cash margin, options purchased at fair value and interest receivable. Because of the low margin deposits normally required in commodity trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the second quarter of 2015.

The Partnership’s capital consists of capital contributions of its partners, as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.

For the six months ended June 30, 2015, the Partnership’s capital decreased 27.3% from $133,297,371 to $96,935,675. This decrease was attributable to redemptions of 28,590.7161 Class A Redeemable Units totaling $33,762,644 and redemptions of 5540.3523 Class D Redeemable Units totaling $6,846,653. This decrease was partially offset by a net gain of $3,922,601, coupled with subscriptions of 325.0000 Class GP Units totaling $325,000. 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 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 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. The General Partner believes that the estimates 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 2 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.

Results of Operations

During the Partnership’s second quarter of 2015, the net asset value per Class A unit increased 0.7% from $1,188.59 to $1,196.50, as compared to an increase of 0.2% in the second quarter of 2014. During the Partnership’s second quarter of 2015, the net asset value per Class D unit increased 1.0% from $1,236.17 to $1,248.22, as compared to an increase of 0.5% in the second quarter of 2014. The Partnership experienced a net trading gain before fees and expenses in the second quarter of 2015 of $2,124,509. Gains were primarily attributable to the trading of commodity futures in the S&P 500® Index Calls and the S&P 500® Index Puts. The Partnership experienced a net trading gain before fees and expenses in the second quarter of 2014 of $2,785,016. Gains were primarily attributable to the trading of commodity futures in the S&P 500® Index Calls and the S&P 500® Index Puts.

During the second quarter, the Partnership recorded trading gains in S&P 500® Index options. The most significant gains were achieved during June as choppy trading behavior in the S&P 500® Index during the month stemming from issues in Greece and China allowed the Partnership to record gains on its ratio put spread positions. April and May saw slight trading losses as the nominal volatility in the S&P 500® Index over that period did not provide adequate movement for the positions held in the portfolio to be profitable.

During the Partnership’s six months ended June 30, 2015, the net asset value per Class A unit increased 3.3% from $1,158.41 to $1,196.50, as compared to an increase of 0.6% in the six months ended June 30, 2014. During the Partnership’s six months ended June 30, 2015, the net asset value per Class D unit increased 3.9% from $1,201.01 to $1,248.22, as compared to an increase of 1.5% in the second quarter of 2014. The Partnership experienced a net trading gain before fees and expenses in the six months ended June 30, 2015 of $7,275,140. Gains were primarily attributable to the trading of commodity futures in the S&P 500® Index Calls and the S&P 500® Index Puts. The Partnership experienced a net trading gain before fees and expenses in the six months ended June 30, 2014 of $6,532,796. Gains were primarily attributable to the trading of commodity futures in the S&P 500® Index Calls and the S&P 500® Index Puts.

During the first six months of the year the Partnership recorded trading gains in S&P 500® Index options. The most significant gains were achieved during June as the Partnership was able to profitably close out its ratio put spreads due to volatility in domestic markets caused by problems in China and Greece. Gains were also recorded during March as the value of the S&P 500® Index declining in the middle of the month benefitted the Partnership’s ratio put spread positions. Similarly, trading gains were recorded during January from the Partnership’s ratio put spread positions. February, April, and May saw nominal losses for the fund due to minimal intra-month volatility.

 

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Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership depends on the existence of major price trends and the ability of the Advisor to 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 expects to increase capital through operations.

Interest income beginning April 1, 2015 is earned at Wells Fargo at 90% of the 90 day U.S. treasury rate on assets maintained in cash. Prior to that date interest income was earned on 80% of the Partnership’s daily average equity maintained in cash in its account during each month was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days or at the monthly average of the 4-week U.S. Treasury bill discount rate, as applicable. Interest income for the three and six months ended June 30, 2015 decreased by $3,622 and $11,891, respectively, as compared to the corresponding periods in 2014. The decrease in interest income is due to lower net assets during the three and six months ended June 30, 2015, as compared to the corresponding periods in 2014. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership during the reporting period depended on the average daily equity in the Partnership’s account, and upon interest rates over which the Partnership has no control.

Ongoing selling agent fees are calculated on the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset value. Ongoing selling agent fees for the three and six months ended June 30, 2015 decreased by $471,902 and $1,382,086, respectively, as compared to the corresponding periods in 2014. This decrease is primarily due to lower average net assets during the six months ended June 30, 2015, as compared to the corresponding periods in 2014, as well as reductions in ongoing selling agent fees (i) from an annual rate of 3.75% to an annual rate of 2.50% and further reduced to an annual rate of 2.00% for Class A Redeemable Units and (ii) from an annual rate of 1.50% to an annual rate of 1.25% and further reduced to an annual rate of 0.75% for Class D Redeemable Units effective April 1, 2014 and October 1, 2014, respectively, as disclosed in Note 1 of the Financial Statements.

Clearing fees are based on the number of trades executed by the Advisor for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three months ended June 30, 2015 decreased by $215,706, as compared to the corresponding period in 2014. The decrease in clearing fees is primarily due to a decrease in the number of trades executed during the three months ended June 30, 2015, as compared to the corresponding period in 2014. Clearing fees for the six months ended June 30, 2015 decreased by $404,691, as compared to the corresponding period in 2014. The decrease in clearing fees is primarily due to a decrease in the number of trades executed during the six months ended June 30, 2015, as compared to the corresponding period in 2014. All clearing fees are borne by the Partnership.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value 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 six months ended June 30, 2015 decreased by $291,722 and $486,256, respectively, as compared to the corresponding periods in 2014. The decrease in management fees is due to lower average net assets during the three and six months ended June 30, 2015, as compared to the corresponding periods in 2014.

Administrative fees are calculated as a percentage of the Partnership’s adjusted net asset value 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 six months ended June 30, 2015 increased by $55,694 and $167,397, respectively, as compared to the corresponding periods in 2014. The increase in administrative fees is due to an increase in administrative fees from an annual rate of 0.50% to an annual rate of 1.00% effective October 1, 2014, as disclosed in Note 1 of the Financial Statements.

Special Limited Partner profit share allocations (incentive fees) are based on the new trading profits earned by the Advisor on behalf of the Partnership, at the end of the quarter, as defined in the Limited Partnership Agreement among the Partnership, the General Partner, the Special Limited Partner and the Advisor. There were no profit share allocations made for the three and six months ended June 30, 2015 and 2014. The Special Limited Partner will not receive a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

In allocating the assets of the Partnership to the Advisor, 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.

The Partnership is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the 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 Partnership’s open positions and, consequently, in its earnings and cash balances. The Partnership’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 Partnership’s open contracts and the liquidity of the markets in which it trades.

The Partnership rapidly acquires and liquidates both long and short positions. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s past performance is not necessarily indicative of its future results.

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

Exchange margin requirements have been used by the Partnership 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 a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

 

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Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of June 30, 2015 and December 31, 2014, and the highest, lowest and average values during the three months ended June 30, 2015 and the twelve months ended December 31, 2014. All open contracts trading risk exposures of the Partnership 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 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2014.

As of June 30, 2015, the Partnership’s total capital was 96,935,675.

As of December 31, 2014, the Partnership’s total capitalization was $133,297,371.

June 30, 2015

 

                  Three months ended June 30, 2015**  

Market Sector

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

Indices

    $ 12,872,901         13.28 %    $ 43,145,770       $ 8,062,107       $ 15,932,987   
  

 

 

     

 

 

          

Total

    $ 12,872,901         13.28 %         
  

 

 

     

 

 

          

December 31, 2014

 

                  Twelve months ended December 31, 2014  

Market Sector

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

Indices

    $ 18,102,669         13.58 %    $ 60,906,507       $ 763,829       $ 24,496,155   
  

 

 

     

 

 

          

Total

    $ 18,102,669         13.58 %         
  

 

 

     

 

 

          

 

* Annual average of month-end Values at Risk.
** Based upon daily Values 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 the General Partner, including the Sole Manager 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 Sole Manager has 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 June 30, 2015, and, based on that evaluation, the General Partner’s Sole Manager has 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 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 June 30, 2015, 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.

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, 2014 and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

 

 

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

For the three months ended June 30, 2015, there were no subscriptions of Class A or Class D Redeemable Units. A new Share Class was initiated on May 1, 2015 to accept an investment from the General Partner (“Class GP”). The subscription was for 325.0000 units at $1,000.00 per unit.

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

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

 

Period

    Class A (a)
Total Number
of Shares (or
Redeemable
Units)
Purchased*		      Class A (b)
Average
Price Paid
per Share (or
Redeemable
Unit)**		      Class D (a)
Total
Number of
Shares (or
Redeemable
Units)
Purchased*		      Class D (b)
Average
Price Paid
per Share
(or
Redeemable
Unit)**		      (c) Total
Number of
Shares (or
Redeemable
Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs		      (d)
Maximum
Number (or
Approximate
Dollar
Value) of
Shares (or
Redeemable
Units) that
May Yet Be
Purchased
Under the
Plans or
Programs		  

April 1, 2015 – April 30, 2015

      5,410.7364       $ 1,185.80         152.5313       $ 1,234.47         N/A         N/A   

May 1, 2015 – May 31, 2015

      3,220.7517       $ 1,176.64         —         $ 1,226.22         N/A         N/A   

June 1, 2015 – June 30, 2015

      1,790.2920       $ 1,196.50         —         $ 1,248.22         N/A         N/A   

Total

      10,421.7801       $ 1,184.80         152.5313       $ 1,234.47         

 

* 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 last day of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.

 

Item 3.    Defaults Upon Senior Securities – None

Item 4.     Mine Safety Disclosures – Not Applicable

Item 5.    Other Information – None

 

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Item 6.    Exhibits

 

3.1   (a) Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated November 21, 2005 (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).

 

  (b) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(b) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

 

  (c) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 25, 2009 (filed as Exhibit 99.1 to the current report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).

 

  (d) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 30, 2010 (filed as Exhibit 3.1(d) to the current report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).

 

  (e) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the current report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).

 

  (f) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated November 27, 2012 (filed as Exhibit 3.1 to the current report on Form 8-K filed on January 3, 2013 and incorporated herein by reference).

 

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

 

  (h) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 8, 2015 (filed as Exhibit 3.1(h) to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

3.2    Sixth Amended and Restated Limited Partnership Agreement, effective as of the close of business on March 31, 2015 (filed as Exhibit 3.2 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.1  Management Agreement among the Partnership, Warrington GP, LLC and Warrington Asset Management LLC effective as of the close of business on March 31, 2015 (filed as Exhibit 10.1 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.2  Futures and Cleared Swaps Agreement between the Partnership and Wells Fargo Securities, LLC, dated March 16, 2015 (filed as Exhibit 10.2 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.3  Continuing Services Agreement among the Partnership, Warrington GP, LLC, Warrington Asset Management LLC and Morgan Stanley Wealth Management, dated March 31, 2015 (filed as Exhibit 10.3 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.4 Form of Subscription Agreement (filed as Exhibit 10.4 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.5 Selling Agreement among the Partnership, Warrington GP, LLC and Robert W. Baird & Co. Incorporated, dated March 31, 2015 (filed as Exhibit 10.5 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

 

10.6  Continuing Services Agreement among the Partnership, Warrington GP, LLC, Warrington Asset Management LLC and Credit Suisse Securities (USA) LLC, dated March 31, 2015 (filed as Exhibit 10.6 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).

Exhibit 31.1 — Rule 13a-14(a)/15d-15(a) Certification (Certification of Sole Manager).

Exhibit 32.1 — Section 1350 Certification (Certification of Sole Manager).

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 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 WARRINGTON L.P.
By:   Warrington GP, LLC
  (General Partner)
 
By:   /s/ Scott C. Kimple
  Scott C. Kimple
  Sole Manager
  (Principal Executive Officer)
  (Principal Financial Officer)
Date:   October 8, 2015

 

27

MANAGED FUTURES PREMIER WARRINGTON L.P. Reports