Attached files
file | filename |
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EX-99.3 - EX-99.3 - CERES ORION L.P. | d274864dex993.htm |
EX-99.2 - EX-99.2 - CERES ORION L.P. | d274864dex992.htm |
EX-32.2 - EX-32.2 - CERES ORION L.P. | d274864dex322.htm |
EX-32.1 - EX-32.1 - CERES ORION L.P. | d274864dex321.htm |
EX-31.2 - EX-31.2 - CERES ORION L.P. | d274864dex312.htm |
EX-31.1 - EX-31.1 - CERES ORION L.P. | d274864dex311.htm |
EX-10.4.(B) - EX-10.4.(B) - CERES ORION L.P. | d274864dex104b.htm |
10-K - FORM 10-K - CERES ORION L.P. | d274864d10k.htm |
Exhibit 99.1
To the Limited Partners of
CMF Winton Master L.P.
To the best of the knowledge and belief of the undersigned, the information contained herein is accurate and complete.
By: |
Patrick T. Egan |
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President and Director |
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Ceres Managed Futures LLC |
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General Partner, |
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CMF Winton Master L.P. |
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Ceres Managed Futures LLC |
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522 Fifth Avenue |
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New York, NY 10036 |
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855-672-4468 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of CMF Winton Master L.P.:
We have audited the accompanying statements of financial condition of CMF Winton Master L.P. (the Partnership), including the condensed schedules of investments, as of December 31, 2016 and 2015, and the related statements of income and expenses and changes in partners capital for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of CMF Winton Master L.P. as of December 31, 2016 and 2015, and the results of its operations and changes in its partners capital for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 24, 2017
CMF Winton Master L.P.
Statements of Financial Condition
December 31, 2016 and 2015
December 31, | December 31, | |||||||
2016 | 2015 | |||||||
Assets: |
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Equity in trading account: |
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Investment in U.S. Treasury bills, at fair value (amortized cost $416,693,176 and $472,872,074 at December 31, 2016 and 2015, respectively) |
$ | 416,864,386 | $ | 472,950,344 | ||||
Cash at MS&Co. (Note 3c) |
- | 25,746,373 | ||||||
Cash margin (Note 3c) |
68,379,250 | 99,262,577 | ||||||
Net unrealized appreciation on open futures contracts |
10,740,072 | 5,389,377 | ||||||
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Total equity in trading account |
495,983,708 | 603,348,671 | ||||||
Cash at bank (Note 1) |
217 | - | ||||||
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Total assets |
$ | 495,983,925 | $ | 603,348,671 | ||||
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Liabilities and Partners Capital: |
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Liabilities: |
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Net unrealized depreciation on open forward contracts |
$ | 1,650,934 | $ | 269,234 | ||||
Accrued expenses: |
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Professional fees |
40,013 | 38,067 | ||||||
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Total liabilities |
1,690,947 | 307,301 | ||||||
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Partners Capital: |
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General Partner, 0.0000 Redeemable Units outstanding at December 31, 2016 and 2015 |
- | - | ||||||
Limited Partners, 130,613.6627 and 161,976.6460 Redeemable Units outstanding at December 31, 2016 and 2015, respectively |
494,292,978 | 603,041,370 | ||||||
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Total partners capital (net asset value) |
494,292,978 | 603,041,370 | ||||||
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Total liabilities and partners capital |
$ | 495,983,925 | $ | 603,348,671 | ||||
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Net asset value per Redeemable Unit |
$ | 3,784.39 | $ | 3,723.01 | ||||
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See accompanying notes to financial statements.
CMF Winton Master L.P.
Condensed Schedule of Investments
December 31, 2016
Notional ($)/ Number of Contracts |
Fair Value | % of Partners Capital |
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Futures Contracts Purchased |
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Energy |
436 | $ | 488,528 | 0.10 | % | |||||||||||||||
Grains |
611 | (669,759) | (0.14) | |||||||||||||||||
Indices |
6,388 | 2,488,495 | 0.51 | |||||||||||||||||
Interest Rates U.S. |
607 | 54,008 | 0.01 | |||||||||||||||||
Interest Rates Non-U.S. |
2,544 | 687,914 | 0.14 | |||||||||||||||||
Livestock |
214 | 215,568 | 0.04 | |||||||||||||||||
Metals |
5 | (28,210) | (0.01) | |||||||||||||||||
Softs |
249 | (197,243) | (0.04) | |||||||||||||||||
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Total futures contracts purchased |
3,039,301 | 0.61 | ||||||||||||||||||
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Futures Contracts Sold |
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Currencies |
3,392 | 3,433,399 | 0.69 | |||||||||||||||||
Energy |
169 | (335,387) | (0.06) | |||||||||||||||||
Grains |
1,592 | 415,561 | 0.08 | |||||||||||||||||
Indices |
227 | (37,389) | (0.01) | |||||||||||||||||
Interest Rates U.S. |
860 | (239,781) | (0.05) | |||||||||||||||||
Interest Rates Non-U.S. |
5,375 | 978,244 | 0.20 | |||||||||||||||||
Livestock |
20 | (68,990) | (0.01) | |||||||||||||||||
Metals |
678 | 1,388,583 | 0.28 | |||||||||||||||||
Softs |
448 | 2,166,531 | 0.44 | |||||||||||||||||
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Total futures contracts sold |
7,700,771 | 1.56 | ||||||||||||||||||
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Net unrealized appreciation on open futures contracts |
$ | 10,740,072 | 2.17 | % | ||||||||||||||||
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Unrealized Appreciation on Open Forward Contracts |
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Currencies |
$ | 205,499,621 | $ | 3,683,915 | 0.74 | % | ||||||||||||||
Metals |
665 | 1,925,249 | 0.39 | |||||||||||||||||
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Total unrealized appreciation on open forward contracts |
5,609,164 | 1.13 | ||||||||||||||||||
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Unrealized Depreciation on Open Forward Contracts |
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Currencies |
$ | 218,825,586 | (2,741,186) | (0.55) | ||||||||||||||||
Metals |
907 | (4,518,912) | (0.91) | |||||||||||||||||
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Total unrealized depreciation on open forward contracts |
(7,260,098) | (1.46) | ||||||||||||||||||
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Net unrealized depreciation on open forward contracts |
$ | (1,650,934) | (0.33) | % | ||||||||||||||||
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U.S. Government Securities |
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Face Amount |
Maturity Date |
Description |
Fair Value | % of Partners Capital |
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$ 350,000,000 |
1/19/2017 | U.S. Treasury bills, 0.365% * (Amortized cost of $349,772,889) |
$ | 349,922,708 | 70.79 | % | ||||||||||||||
$ 17,000,000 | 2/2/2017 | U.S. Treasury bills, 0.41% * (Amortized cost of $16,986,641) |
16,993,136 | 3.44 | ||||||||||||||||
$ 50,000,000 | 3/16/2017 | U.S. Treasury bills, 0.525% * (Amortized cost of $49,933,646) |
49,948,542 | 10.11 | ||||||||||||||||
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Total U.S. Government Securities |
$ | 416,864,386 | 84.34 | % | ||||||||||||||||
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* | Liquid non-cash held as collateral. |
See accompanying notes to financial statements.
CMF Winton Master L.P.
Condensed Schedule of Investments
December 31, 2015
Notional ($)/ Number of Contracts |
Fair Value | % of Partners Capital |
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Futures Contracts Purchased |
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Currencies |
510 | $ | 30,126 | 0.01 | % | |||||||||||||||
Energy |
75 | (7,647) | (0.00) | ** | ||||||||||||||||
Grains |
95 | (17,551) | (0.00) | ** | ||||||||||||||||
Indices |
2,628 | 1,099,760 | 0.18 | |||||||||||||||||
Interest Rates U.S. |
614 | (610,774) | (0.10) | |||||||||||||||||
Interest Rates Non-U.S. |
19,410 | (3,062,521) | (0.51) | |||||||||||||||||
Livestock |
3 | 160 | 0.00 | ** | ||||||||||||||||
Softs |
311 | 64,286 | 0.01 | |||||||||||||||||
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Total futures contracts purchased |
(2,504,161) | (0.41) | ||||||||||||||||||
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Futures Contracts Sold |
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Currencies |
4,548 | 3,922,263 | 0.65 | |||||||||||||||||
Energy |
2,317 | 1,273,340 | 0.21 | |||||||||||||||||
Grains |
2,492 | 2,035,524 | 0.34 | |||||||||||||||||
Indices |
1,710 | (453,830) | (0.08) | |||||||||||||||||
Interest Rates U.S. |
122 | (3,016) | (0.00) | ** | ||||||||||||||||
Interest Rates Non-U.S. |
556 | (29,705) | (0.00) | ** | ||||||||||||||||
Livestock |
394 | (660,400) | (0.11) | |||||||||||||||||
Metals |
1,441 | 2,011,420 | 0.33 | |||||||||||||||||
Softs |
544 | (202,058) | (0.03) | |||||||||||||||||
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Total futures contracts sold |
7,893,538 | 1.31 | ||||||||||||||||||
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Net unrealized appreciation on open futures contracts |
$ | 5,389,377 | 0.90 | % | ||||||||||||||||
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Unrealized Appreciation on Open Forward Contracts |
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Currencies |
$ 285,098,551 | $ | 3,394,312 | 0.56 | % | |||||||||||||||
Metals |
492 | 1,854,557 | 0.31 | |||||||||||||||||
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Total unrealized appreciation on open forward contracts |
5,248,869 | 0.87 | ||||||||||||||||||
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Unrealized Depreciation on Open Forward Contracts |
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Currencies |
$ 245,182,550 | (4,880,125) | (0.81) | |||||||||||||||||
Metals |
353 | (637,978) | (0.11) | |||||||||||||||||
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Total unrealized depreciation on open forward contracts |
(5,518,103) | (0.92) | ||||||||||||||||||
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Net unrealized depreciation on open forward contracts |
$ | (269,234) | (0.05) | % | ||||||||||||||||
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U.S. Government Securities |
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Face Amount | Maturity Date | Description |
Fair Value | |
% of Partners Capital |
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$ 128,000,000 | 1/21/2016 | U.S. Treasury bills, 0.19% * (Amortized cost of $127,981,084) |
$ | 127,991,600 | 21.23 | % | ||||||||||||||
$ 345,000,000 | 2/11/2016 | U.S. Treasury bills, 0.125% * (Amortized cost of $344,890,990) |
344,958,744 | 57.20 | ||||||||||||||||
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Total U.S. Government Securities |
$ | 472,950,344 | 78.43 | % | ||||||||||||||||
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* | Liquid non-cash held as collateral. |
** | Due to rounding. |
See accompanying notes to financial statements.
CMF Winton Master L.P.
Statements of Income and Expenses
For the Years Ended December 31, 2016, 2015 and 2014
2016 | 2015 | 2014 | ||||||||||
Investment Income: |
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Interest income |
$ | 1,359,616 | $ | 152,157 | $ | 111,655 | ||||||
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Expenses: |
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Clearing fees (Note 3c) |
641,781 | 807,144 | 852,175 | |||||||||
Professional fees |
73,741 | 105,457 | 125,301 | |||||||||
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Total expenses |
715,522 | 912,601 | 977,476 | |||||||||
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Net investment income (loss) |
644,094 | (760,444) | (865,821) | |||||||||
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Trading Results: |
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Net gains (losses) on trading of commodity interests: |
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Net realized gains (losses) on closed contracts |
8,027,637 | 51,728,772 | 171,648,092 | |||||||||
Net change in unrealized gains (losses) on open contracts |
4,077,813 | (21,891,079) | (6,714,039) | |||||||||
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Total trading results |
12,105,450 | 29,837,693 | 164,934,053 | |||||||||
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Net income (loss) |
$ | 12,749,544 | $ | 29,077,249 | $ | 164,068,232 | ||||||
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Net income (loss) per Redeemable Unit (Note 7)* |
$ | 63.01 | $ | 153.12 | $ | 814.99 | ||||||
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Weighted average Redeemable Units outstanding |
142,260.9508 | 179,016.7911 | 220,902.6826 | |||||||||
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* | Represents the change in net asset value per Redeemable Unit during the year before distribution of interest income to feeder funds. |
See accompanying notes to financial statements.
CMF Winton Master L.P.
Statements of Changes in Partners Capital
For the Years Ended December 31, 2016, 2015 and 2014
Partners | ||||
Capital | ||||
Partners Capital, December 31, 2013 |
$ 700,949,432 | |||
Net income (loss) |
164,068,232 | |||
Subscriptions of 15,448.4607 Redeemable Units |
45,189,157 | |||
Redemptions of 74,354.9421 Redeemable Units |
(212,293,354) | |||
Distribution of interest income to feeder funds |
(111,655) | |||
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Partners Capital, December 31, 2014 |
697,801,812 | |||
Net income (loss) |
29,077,249 | |||
Subscriptions of 21,244.7232 Redeemable Units |
78,552,619 | |||
Redemptions of 54,714.7700 Redeemable Units |
(202,323,573) | |||
Distribution of interest income to feeder funds |
(66,737) | |||
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Partners Capital, December 31, 2015 |
603,041,370 | |||
Net income (loss) |
12,749,544 | |||
Subscriptions of 7,585.9488 Redeemable Units |
29,302,484 | |||
Redemptions of 38,948.9321 Redeemable Units |
(150,568,990) | |||
Distribution of interest income to feeder funds |
(231,430) | |||
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Partners Capital, December 31, 2016 |
$ 494,292,978 | |||
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Net asset value per Redeemable Unit: |
2014: |
$ 3,570.29 | |
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2015: |
$ 3,723.01 | |
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2016: |
$ 3,784.39 | |
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See accompanying notes to financial statements.
CMF Winton Master L.P.
Notes to Financial Statements
1. | Organization: |
CMF Winton Master L.P. (the Master) is a limited partnership organized under the partnership laws of the State of New York to engage in the speculative trading of a diversified portfolio of commodity interests including futures, option, swap and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, lumber, metals and softs. The commodity interests that are traded by the Master are volatile and involve a high degree of market risk. The General Partner (defined below) may also determine to invest up to all of the Masters assets in United States (U.S.) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. The Master may sell an unlimited number of redeemable units of limited partnership interest (Redeemable Units). The Redeemable Units of the Master are used solely for accounting purposes and do not represent units issued legally.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the General Partner) and commodity pool operator of the Master. At December 31, 2016, the General Partner was a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC (MSSB Holdings). MSSB Holdings was 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. All trading decisions for the Master are made by the Advisor (defined below).
On November 1, 2004 (commencement of trading operations), CMF Winton Feeder I L.P. (Winton Feeder) allocated substantially all of its capital and Orion Futures Fund L.P. (Orion) allocated a portion of its capital to the Master. Winton Feeder purchased 2,000.0000 Redeemable Units with cash equal to $2,000,000. On September 30, 2014, Winton Feeder redeemed its investment in the Master. This amounted to 372.6816 Redeemable Units with cash equal to $1,124,465. Orion purchased 35,389.8399 Redeemable Units with cash equal to $33,594,083 and a contribution of open commodity futures and forward contracts with a fair value of $1,795,757. On December 1, 2004, Tactical Diversified Futures Fund L.P. (Tactical Diversified) allocated a portion of its capital to the Master and purchased 52,981.2908 Redeemable Units with cash equal to $57,471,493. On August 31, 2011, Tactical Diversified redeemed its investment in the Master. This amounted to 12,054.4847 Redeemable Units with cash equal to $29,538,004. On July 1, 2005, Institutional Futures Portfolio L.P. (Institutional Portfolio) allocated a portion of its capital to the Master and purchased 5,741.8230 Redeemable Units with cash equal to $7,000,000. On February 1, 2007, Managed Futures Premier Abingdon L.P. (Abingdon) allocated a portion of its capital to the Master and purchased 9,017.0917 Redeemable Units with cash equal to $12,945,000. On March 1, 2007, Global Futures Fund Ltd. (Global Futures) allocated a portion of its capital to the Master and purchased 1,875.7046 Redeemable Units with cash equal to $2,500,000. On June 1, 2013, Morgan Stanley Managed Futures Custom Solutions Fund LP Series A (Custom Solutions) allocated a portion of its capital to the Master and purchased 383.1755 Redeemable Units with cash equal to $1,000,000. The Master permits commodity pools managed by Winton Capital Management Limited (the Advisor) using the Winton Futures Program (formerly, the Winton Diversified Program, as applied without equities), the Advisors proprietary, systematic trading program, to invest together in one trading vehicle.
During the periods covered by this report, the Masters commodity broker was Morgan Stanley & Co. LLC (MS&Co.), a registered futures commission merchant. The Master also deposits a portion of its cash in a non-trading account at JPMorgan Chase Bank, N.A.
At December 31, 2016, the Master operated under a structure where its investors consisted of Orion, Institutional Portfolio, Abingdon, Global Futures and Custom Solutions (each a Feeder, collectively, the Funds). Orion, Institutional Portfolio, Abingdon, Global Futures and Custom Solutions each owned approximately 51.4%, 1.0%, 45.8%, 1.1% and 0.7% of the Master at December 31, 2016, respectively. Orion, Institutional Portfolio, Abingdon, Global Futures and Custom Solutions each owned approximately 58.4%, 1.1%, 38.9%, 0.9% and 0.7% of the Master at December 31, 2015, respectively.
The Master will be liquidated upon the first to occur of the following: December 31, 2024; or under certain other circumstances as defined in the limited partnership agreement of the Master (the Limited Partnership Agreement).
CMF Winton Master L.P.
Notes to Financial Statements
In July 2015, the General Partner delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the Administrator). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Master.
2. | Basis of Presentation and Summary of Significant Accounting Policies: |
a. | Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP) requires 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. |
b. | Statement of Cash Flows. The Master is not required to provide a Statement of Cash Flows. |
c. | Masters Investments. All commodity interests of the Master, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described in Note 5, Fair Value Measurements) 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 and are determined using the first-in, first-out method. Unrealized gains or losses on open contracts are included as a component of equity in trading account in the Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses. |
Masters Cash. The Masters cash includes cash denominated in foreign currencies of $8,098,626 (cost of $ 8,082,720) and $15,762,494 (cost of $15,855,406) at December 31, 2016 and 2015, respectively. Winton Masters margin requirement of $76,293,352 as of December 31, 2016, was met from a combination of 1) U.S. Treasury bills held at MS&Co. and 2) cash margin held at MS&Co. of $68,379,250 as of December 31, 2016.
d. | Income and Expenses Recognition. All of the income and expenses and realized and unrealized gains and losses on trading of commodity interests are determined on each valuation day and allocated pro-rata among the Funds at the time of such determination. |
e. | Income Taxes. Income taxes have not been listed as each partner is individually liable for the taxes, if any, on its share of the Masters income and expenses. The General Partner has concluded that no provision for income tax is required in the Masters financial statements. The Master files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2013 through 2016 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. |
f. | Investment Company Status. Effective January 1, 2014, the Master adopted Accounting Standards Update (ASU) 2013-08, Financial ServicesInvestment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements and based on the General Partners assessment, the Master has been deemed to be an investment company since inception. Accordingly, the Master follows the investment company accounting and reporting guidance of Topic 946 and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses. |
g. | Net Income (Loss) per Redeemable Unit. Net income (loss) per Redeemable Unit is calculated in accordance with Accounting Standards Codification (ASC) 946, Financial Services Investment Companies. See Note 7, Financial Highlights. |
CMF Winton Master L.P.
Notes to Financial Statements
h. | Fair Value of Financial Instruments. The carrying value of the Masters assets and liabilities presented in the Statements of Financial Condition that qualify as financial instruments under the Financial Accounting Standards Board (FASB) ASC 825, Financial Instruments, approximates the fair value due to the short term nature of such balances. |
i. | Recent Accounting Pronouncement. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments for all entities that hold financial assets or owe financial liabilities. One of the amendments in this update eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet or a description of changes in the methods and significant assumptions. Additionally, the update eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. Investment companies are specifically exempted from ASU 2016-01s equity investment accounting provisions and will continue to follow the industry specific guidance for investment accounting under Topic 946. For public business entities, this update is effective for fiscal years beginning after December 15, 2017, and interim periods therein. For other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The General Partner is currently evaluating the impact this guidance will have on the Masters financial statements and related disclosures. |
3. | Agreements: |
a. | Limited Partnership Agreement: |
The General Partner administers the business and affairs of the Master, including selecting one or more advisors to make trading decisions for the Master.
b. | Management Agreement: |
The General Partner, on behalf of the Master, has entered into a management agreement (the Management Agreement) with the Advisor, a registered commodity trading advisor. The Advisor is not affiliated with the General Partner or MS&Co. and is not responsible for the organization or operation of the Master. The Management Agreement provides that the Advisor has sole discretion in determining the investment of the assets of the Master. All management fees in connection with the Management Agreement are borne by the Funds. The Management Agreement may be terminated upon notice by either party.
c. | Customer Agreement: |
The Master has entered into a customer agreement with MS&Co. (the Customer Agreement) and a foreign exchange brokerage account agreement with MS&Co.
Under the Customer Agreement and the foreign exchange brokerage account agreement, the Master pays MS&Co. trading fees for the clearing and, where applicable, the execution of transactions. Further, 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 the Funds. All other fees are borne by the Funds. All of the Masters assets available for trading in commodity interests are deposited in the Masters brokerage account at MS&Co. The Masters cash deposited with MS&Co. is held in segregated bank accounts to the extent required by Commodity Futures Trading Commission regulations. At December 31, 2016 and 2015, the amount of cash held by the Master for margin requirements was $68,379,250 and $99,262,577, respectively. The Customer Agreement may generally be terminated upon notice by either party.
CMF Winton Master L.P.
Notes to Financial Statements
4. | Trading Activities: |
The Master was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity interests. The results of the Masters trading activities are shown in the Statements of Income and Expenses.
The Customer Agreement gives the Master the legal right to net unrealized gains and losses on open futures and forward contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and forward contracts in the Statements of Financial Condition as the criteria under ASC 210-20, Balance Sheet, have been met.
All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures contracts traded during the years ended December 31, 2016 and 2015 were 32,581 and 47,772, respectively. The monthly average number of metals forward contracts traded during the years ended December 31, 2016 and 2015 were 936 and 1,040, respectively. The monthly average notional values of currency forward contracts traded during the years ended December 31, 2016 and 2015 were $568,484,980 and $625,854,119, respectively.
The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Masters derivatives and their offsetting subject to master netting agreements or similar arrangements as of December 31, 2016 and 2015, respectively.
Gross Amounts | Amounts | Gross Amounts Not Offset in the | ||||||||||||||||||||||
Offset in the | Presented in the | Statements of Financial Condition | ||||||||||||||||||||||
December 31, 2016 |
Gross Amounts Recognized |
Statements of Financial Condition |
Statements of Financial Condition |
Financial Instruments |
Cash Collateral Received/ Pledged* |
Net Amount |
||||||||||||||||||
Assets |
||||||||||||||||||||||||
Futures |
$ | 16,580,686 | $ | (5,840,614) | $ | 10,740,072 | $ | - | $ | - | $ | 10,740,072 | ||||||||||||
Forwards |
5,609,164 | (5,609,164) | - | - | - | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 22,189,850 | $ | (11,449,778) | $ | 10,740,072 | $ | - | $ | - | $ | 10,740,072 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||||||||||
Futures |
$ | (5,840,614) | $ | 5,840,614 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Forwards |
(7,260,098) | 5,609,164 | (1,650,934) | - | - | (1,650,934) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
$ | (13,100,712) | $ | 11,449,778 | $ | (1,650,934) | $ | - | $ | - | $ | (1,650,934) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net fair value |
$ | 9,089,138 | * | |||||||||||||||||||||
|
|
|||||||||||||||||||||||
Gross Amounts | Amounts | Gross Amounts Not Offset in the | ||||||||||||||||||||||
Offset in the | Presented in the | Statements of Financial Condition | ||||||||||||||||||||||
December 31, 2015 |
Gross Amounts Recognized |
Statements of Financial Condition |
Statements of Financial Condition |
Financial Instruments |
Cash Collateral Received/ Pledged* |
Net Amount |
||||||||||||||||||
Assets |
||||||||||||||||||||||||
Futures |
$ | 17,800,660 | $ | (12,411,283) | $ | 5,389,377 | $ | - | $ | - | $ | 5,389,377 | ||||||||||||
Forwards |
5,248,869 | (5,248,869) | - | - | - | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 23,049,529 | $ | (17,660,152) | $ | 5,389,377 | $ | - | $ | - | $ | 5,389,377 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||||||||||
Futures |
$ | (12,411,283) | $ | 12,411,283 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Forwards |
(5,518,103) | 5,248,869 | (269,234) | - | - | (269,234) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
$ | (17,929,386) | $ | 17,660,152 | $ | (269,234) | $ | - | $ | - | $ | (269,234) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net fair value |
$ | 5,120,143 | * | |||||||||||||||||||||
|
|
* | In the event of default by the Master, MS&Co., the Masters commodity futures broker and the sole counterparty to the Masters off-exchange-traded contracts, as applicable, has the right to offset the Masters obligation with the Masters cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.s risk of loss. There is no collateral posted by MS&Co. and as such, in the event of default by MS&Co., the Master is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Masters exposure to counterparty risk may be reduced since the exchanges clearinghouse interposes its credit between buyer and seller and the clearinghouses guarantee fund may be available in the event of a default. |
CMF Winton Master L.P.
Notes to Financial Statements
The following tables indicate the gross fair values of derivative instruments of futures and forward contracts as separate assets and liabilities as of December 31, 2016 and 2015, respectively.
December 31, 2016 |
||||
Assets |
||||
Futures Contracts |
||||
Currencies |
$ | 3,749,363 | ||
Energy |
551,720 | |||
Grains |
617,396 | |||
Indices |
5,061,697 | |||
Interest Rates U.S. |
367,071 | |||
Interest Rates Non-U.S. |
2,095,184 | |||
Livestock |
230,256 | |||
Metals |
1,590,193 | |||
Softs |
2,317,806 | |||
|
|
|||
Total unrealized appreciation on open futures contracts |
16,580,686 | |||
|
|
|||
Liabilities |
||||
Futures Contracts |
||||
Currencies |
(315,964) | |||
Energy |
(398,579) | |||
Grains |
(871,594) | |||
Indices |
(2,610,591) | |||
Interest Rates U.S. |
(552,844) | |||
Interest Rates Non-U.S. |
(429,026) | |||
Livestock |
(83,678) | |||
Metals |
(229,820) | |||
Softs |
(348,518) | |||
|
|
|||
Total unrealized depreciation on open futures contracts |
(5,840,614) | |||
|
|
|||
Net unrealized appreciation on open futures contracts |
$ | 10,740,072 | * | |
|
|
|||
Assets |
||||
Forward Contracts |
||||
Currencies |
$ | 3,683,915 | ||
Metals |
1,925,249 | |||
|
|
|||
Total unrealized appreciation on open forward contracts |
5,609,164 | |||
|
|
|||
Liabilities |
||||
Forward Contracts |
||||
Currencies |
(2,741,186) | |||
Metals |
(4,518,912) | |||
|
|
|||
Total unrealized depreciation on open forward contracts |
(7,260,098) | |||
|
|
|||
Net unrealized depreciation on open forward contracts |
$ | (1,650,934) | ** | |
|
|
* | This amount is in Net unrealized appreciation on open futures contracts in the Statements of Financial Condition. |
** | This amount is in Net unrealized depreciation on open forward contracts in the Statements of Financial Condition. |
CMF Winton Master L.P.
Notes to Financial Statements
December 31, 2015 |
||||
Assets |
||||
Futures Contracts |
||||
Currencies |
$ | 4,375,005 | ||
Energy |
3,059,034 | |||
Grains |
2,067,358 | |||
Indices |
2,758,533 | |||
Interest Rates U.S. |
7,546 | |||
Interest Rates Non-U.S. |
3,038,265 | |||
Livestock |
31,455 | |||
Metals |
2,228,435 | |||
Softs |
235,029 | |||
|
|
|||
Total unrealized appreciation on open futures contracts |
17,800,660 | |||
|
|
|||
Liabilities |
||||
Futures Contracts |
||||
Currencies |
(422,616) | |||
Energy |
(1,793,341) | |||
Grains |
(49,385) | |||
Indices |
(2,112,603) | |||
Interest Rates U.S. |
(621,336) | |||
Interest Rates Non-U.S. |
(6,130,491) | |||
Livestock |
(691,695) | |||
Metals |
(217,015) | |||
Softs |
(372,801) | |||
|
|
|||
Total unrealized depreciation on open futures contracts |
(12,411,283) | |||
|
|
|||
Net unrealized appreciation on open futures contracts |
$ | 5,389,377 | * | |
|
|
|||
Assets |
||||
Forward Contracts |
||||
Currencies |
$ | 3,394,312 | ||
Metals |
1,854,557 | |||
|
|
|||
Total unrealized appreciation on open forward contracts |
5,248,869 | |||
|
|
|||
Liabilities |
||||
Forward Contracts |
||||
Currencies |
(4,880,125) | |||
Metals |
(637,978) | |||
|
|
|||
Total unrealized depreciation on open forward contracts |
(5,518,103) | |||
|
|
|||
Net unrealized depreciation on open forward contracts |
$ | (269,234) | ** | |
|
|
* | This amount is in Net unrealized appreciation on open futures contracts in the Statements of Financial Condition. |
** | This amount is in Net unrealized depreciation on open forward contracts in the Statements of Financial Condition. |
CMF Winton Master L.P.
Notes to Financial Statements
The following table indicates the trading gains and losses, by market sector, on derivative instruments for the years ended December 31, 2016, 2015 and 2014.
2016 | 2015 | 2014 | ||||||||||
Sector |
||||||||||||
Currencies |
$ | 19,150,065 | $ | (7,215,757) | $ | 22,002,118 | ||||||
Energy |
(17,414,694) | 31,038,579 | 48,086,222 | |||||||||
Grains |
(5,876,807) | (3,427,761) | (16,897,203) | |||||||||
Indices |
(792,804) | (22,507,686) | (4,416,908) | |||||||||
Interest Rates U.S. |
5,069,108 | 3,171,758 | 21,903,430 | |||||||||
Interest Rates Non-U.S. |
36,333,655 | 15,738,906 | 90,216,048 | |||||||||
Livestock |
398,145 | 2,295,247 | 8,264,282 | |||||||||
Metals |
(25,923,637) | 6,882,258 | (2,002,323) | |||||||||
Softs |
1,162,419 | 3,862,149 | (2,221,613) | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 12,105,450 | *** | $ | 29,837,693 | *** | $ | 164,934,053 | *** | |||
|
|
|
|
|
|
*** | This amount is in Total trading results in the Statements of Income and Expenses. |
5. | Fair Value Measurements: |
Masters 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.
The fair value of exchange-traded futures, option and forward 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. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as input the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.
The Master considers prices for exchange-traded commodity futures, forward, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills, non-exchange-traded forward, swap and certain option contracts for which market quotations are not readily available are priced by broker quotes or pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the years ended December 31, 2016 and 2015, the Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partners assumptions and internal valuation pricing models (Level 3). Transfers between levels are recognized at the end of the reporting period. For the years ended December 31, 2016 and 2015, there were no transfers of assets or liabilities between Level 1 and Level 2.
CMF Winton Master L.P.
Notes to Financial Statements
December 31, 2016 |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets |
||||||||||||||||
U.S. Treasury bills |
$ | 416,864,386 | $ | - | $ | 416,864,386 | $ | - | ||||||||
Futures |
16,580,686 | 16,580,686 | - | - | ||||||||||||
Forwards |
5,609,164 | 1,925,249 | 3,683,915 | - | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 439,054,236 | $ | 18,505,935 | $ | 420,548,301 | $ | - | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Futures |
$ | 5,840,614 | $ | 5,840,614 | $ | - | $ | - | ||||||||
Forwards |
7,260,098 | 4,518,912 | 2,741,186 | - | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | 13,100,712 | $ | 10,359,526 | $ | 2,741,186 | $ | - | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2015 |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets |
||||||||||||||||
U.S. Treasury bills |
$ | 472,950,344 | $ | - | $ | 472,950,344 | $ | - | ||||||||
Futures |
17,800,660 | 17,800,660 | - | - | ||||||||||||
Forwards |
5,248,869 | 1,854,557 | 3,394,312 | - | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 495,999,873 | $ | 19,655,217 | $ | 476,344,656 | $ | - | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Futures |
$ | 12,411,283 | $ | 12,411,283 | $ | - | $ | - | ||||||||
Forwards |
5,518,103 | 637,978 | 4,880,125 | - | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | 17,929,386 | $ | 13,049,261 | $ | 4,880,125 | $ | - | ||||||||
|
|
|
|
|
|
|
|
6. | Subscriptions, Distributions and Redemptions: |
Subscriptions are accepted monthly from investors who become limited partners on the first day of the month after their subscriptions are processed. Distributions are made on a pro-rata basis at the sole discretion of the General Partner. No distributions have been made to date. The General Partner does not intend to make any distributions of the Masters profits, except for distribution of interest income to feeder funds, as applicable. A limited partner may withdraw all or part of its capital contribution and undistributed profits, if any, from the Master as of the end of any month (the Redemption Date) after a request for redemption has been made to the General Partner at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner elects to redeem and informs the Master.
CMF Winton Master L.P.
Notes to Financial Statements
7. | Financial Highlights: |
Financial highlights for the limited partner class as a whole for the years ended December 31, 2016, 2015 and 2014 were as follows:
2016 | 2015 | 2014 | ||||||||||
Per Redeemable Unit Performance (for a unit outstanding throughout the year):* |
||||||||||||
Net realized and unrealized gains (losses) |
$ | 58.48 | $ | 157.43 | $ | 819.10 | ||||||
Net investment income (loss) |
4.53 | (4.31) | (4.11) | |||||||||
|
|
|
|
|
|
|||||||
Increase (decrease) for the year |
63.01 | 153.12 | 814.99 | |||||||||
Distribution of interest income to feeder funds |
(1.63) | (0.40) | (0.51) | |||||||||
Net asset value per Redeemable Unit, beginning of year |
3,723.01 | 3,570.29 | 2,755.81 | |||||||||
|
|
|
|
|
|
|||||||
Net asset value per Redeemable Unit, end of year |
$ | 3,784.39 | $ | 3,723.01 | $ | 3,570.29 | ||||||
|
|
|
|
|
|
|||||||
Ratios to Average Limited Partners Capital: |
||||||||||||
Net investment income (loss)** |
0.1 | % | (0.1) | % | (0.1) | % | ||||||
|
|
|
|
|
|
|||||||
Operating expenses |
0.1 | % | 0.1 | % | 0.2 | % | ||||||
|
|
|
|
|
|
|||||||
Total return |
1.7 | % | 4.3 | % | 29.6 | % | ||||||
|
|
|
|
|
|
* | Net investment income (loss) per Redeemable Unit is calculated by dividing the expenses net of interest income by the average number of Redeemable Units outstanding during the year. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information. |
** | Interest income less total expenses. |
The above ratios and total return may vary for individual investors based on the timing of capital transactions during the year. Additionally, these ratios are calculated for the limited partner class using the limited partners share of income, expenses and average partners capital.
CMF Winton Master L.P.
Notes to Financial Statements
8. | Financial Instrument Risks: |
In the normal course of business, the Master is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, 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. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that at any given time approximately 20.7% to 42.8% of the Masters contracts are traded OTC.
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 the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (variation margin) may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. 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 net change in unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses.
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-upon future date. Forward foreign currency contracts are valued daily, and the Masters 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 net change in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses.
The Master does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Statements of Income and Expenses.
CMF Winton Master L.P.
Notes to Financial Statements
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. Variation margin may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. A contract is considered offset when all long positions have been matched with 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 net change in unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses.
Market risk is the potential for changes in the value of the financial instruments traded by the Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Master is exposed to market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Masters risk of loss in the event of 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 Masters risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Master has credit risk and concentration risk, as MS&Co. or an MS&Co. affiliate is the sole counterparty or broker with respect to the Masters assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS&Co. or an MS&Co. affiliate, the Masters counterparty is an exchange or clearing organization.
The General Partner monitors and attempts to control the Masters risk exposure on a daily basis through financial, credit and risk management monitoring systems and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.
The majority of these instruments mature within one year of the inception date. However, due to the nature of the Masters business, these instruments may not be held to maturity.
9. | Subsequent Events: |
As of January 1, 2017, the General Partner became a wholly-owned subsidiary of Morgan Stanley Domestic Holdings, Inc. (MSD Holdings). Prior to January 1, 2017, the General Partner was a wholly-owned subsidiary of MSSB Holdings. MSD Holdings is ultimately owned by Morgan Stanley.
Effective February 27, 2017, Custom Solutions changed its name from Morgan Stanley Managed Futures Custom Solutions Fund LP - Series A to Managed Futures Custom Solutions Fund LP - Series A.
The General Partner has evaluated the subsequent events through the date the financial statements are issued and has determined that there were no additional subsequent events requiring adjustment to or disclosure in the financial statements.