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EX-32 - CERTIFICATION - Altegris Winton Futures Fund, L.P.altegriswin_10q-ex3200.htm
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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

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:    000-53348

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

 

COLORADO

(State or other jurisdiction

of incorporation or organization)

84-1496732

(I.R.S. Employer

Identification No.)

   

c/o ALTEGRIS ADVISORS, L.L.C.

1200 Prospect Street, Suite 400

La Jolla, California 92037

(Address of principal executive offices) (zip code)

 

(858) 459-7040

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Securities registered pursuant to Section 12(g) of the Act:  Limited Partnership Interests

 

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  ý     No  o

 

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

 

Large accelerated filer  o   Accelerated filer  o     Non-accelerated filer  o     Smaller reporting company   ý
Emerging growth company  o                

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  ý

 

 

 

   

 

 

TABLE OF CONTENTS
     
    Page
     
PART I – FINANCIAL INFORMATION 3
     
Item 1. Financial Statements 3
     
  Statements of Financial Condition 3
     
  Condensed Schedules of Investments 4
     
  Statements of Income (Loss) 8
     
  Statements of Changes in Partners’ Capital (Net Asset Value) 9
     
  Notes to Financial Statements 10
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 35
     
Item 4. Controls and Procedures 35
     
     
PART II – OTHER INFORMATION 36
     
Item 1. Legal Proceedings 36
     
Item 1A. Risk Factors 36
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
     
Item 3. Defaults Upon Senior Securities 36
     
Item 4. Mine Safety Disclosure 36
     
Item 5. Other Information 36
     
Item 6. Exhibits 37
     
Signatures 38
     
Rule 13a–14(a)/15d–14(a) Certifications  
     
Section 1350 Certifications  

 

 

 

 2 

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1: Financial Statements.

 

ALTEGRIS WINTON FUTURES FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2018 (Unaudited) and DECEMBER 31, 2017 (Audited)

_______________

       

 

   2018   2017 
ASSETS        
Equity in commodity broker account          
Cash  $2,309,113   $ 
Restricted cash   7,642,136    16,699,269 
Restricted foreign currency (cost - $1,106,217 and $2,914,270)   1,093,804    2,962,145 
Foreign currency (cost - $0 and $2,436,108)       2,476,133 
Net unrealized gain on open futures contracts   1,158,615    2,763,458 
Settled variation margin   1,739,398    449,048 
Net unrealized gain on open forward contracts       1,273,152 
           
    13,943,066    26,623,205 
           
Cash   2,170,458    4,352,558 
Investment securities at value          
(cost - $138,580,973 and $153,506,426)   138,580,712    153,506,277 
Interest receivable   15,411    7,599 
           
Total assets  $154,709,647   $184,489,639 
           
LIABILITIES          
Equity in commodity broker account          
Foreign currency due to broker          
(proceeds - $295,785 and $0)  $292,466   $ 
Net unrealized loss on open forward contracts   222,366     
           
    514,832     
           
Redemptions payable   3,487,533    9,213,668 
Commissions payable   182,493    204,909 
Service fees payable   146,427    197,719 
Management fee payable   131,282    153,808 
Advisory fee payable   119,001    138,735 
Subscriptions received in advance   50,000    197,214 
Administrative fee payable   27,215    31,500 
Incentive fee payable   435    701,597 
Other liabilities   437,450    433,216 
           
Total liabilities   5,096,668    11,272,366 
           
PARTNERS' CAPITAL (NET ASSET VALUE)          
General Partner   3,785    3,833 
Limited Partners   149,609,194    173,213,440 
           
Total partners' capital (Net Asset Value)   149,612,979    173,217,273 
           
Total liabilities and partners' capital  $154,709,647   $184,489,639 

 

See accompanying notes.

 

 3 

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

JUNE 30, 2018 (Unaudited)

_______________

     

 

INVESTMENT SECURITIES          
Face Value   Maturity Date  Description  Fair Value   % of Partners' Capital
               
Fixed Income Investments          
               
U.S. Government Agency Bonds and Notes        
$20,337,000   7/2/2018  Federal Farm Credit Bank Disc Note, 2.55%*  $20,336,039   13.59%
 30,193,000   7/2/2018  Federal Home Loan Bank Disc Note, 0.00%*   30,193,000   20.18%
 10,000,000   7/20/2018  Federal Home Loan Bank Disc Note, 1.69%*   9,990,650   6.68%
 10,000,000   7/25/2018  Federal Home Loan Bank Disc Note, 1.72%*   9,988,050   6.68%
 16,641,000   7/2/2018  Federal Home Loan Mortgage Corporation Disc Note, 2.66%*   16,640,182   11.12%
                 
 Total U.S. Government Agency Bonds and Notes (cost - $87,145,545)   87,147,921   58.25%
                 
Corporate Notes            
$2,600,000   7/2/2018  Banco del Estado de Chile, 1.91%*  $2,599,862   1.74%
 4,160,000   7/13/2018  Banco del Estado de Chile, 1.97%   4,160,025   2.78%
 4,165,000   7/13/2018  Bank of Montreal, 2.05%*   4,161,683   2.78%
 4,160,000   7/13/2018  CIBC World Markets Corp., 1.95%*   4,156,849   2.78%
 6,800,000   7/2/2018  Cedar Springs Capital Company, LLC, 2.03%*   6,799,622   4.54%
 2,770,000   7/20/2018  The Chiba Bank, Ltd., 2.15%   2,770,274   1.85%
 1,390,000   7/25/2018  DCAT, LLC, 2.05%*   1,387,933   0.93%
 4,285,000   7/3/2018  Exxon Mobil Corporation, 1.90%*   4,284,095   2.86%
 2,780,000   7/5/2018  General Electric Company, 1.91%*   2,779,115   1.86%
 1,390,000   7/24/2018  Intercontinental Exchange, Inc., 2.35%*   1,388,197   0.93%
 4,150,000   7/16/2018  MetLife Short Term Funding LLC, 2.01%*   4,146,067   2.77%
 4,160,000   7/16/2018  PACCAR Financial Corp., 1.96%*   4,156,153   2.78%
 2,843,000   7/6/2018  Sumitomo Mitsui Trust Bank Ltd., 1.95%   2,843,008   1.90%
 4,280,000   7/3/2018  Sumitomo Mitsui Banking Corporation, 1.90%   4,279,988   2.86%
 1,520,000   7/2/2018  Victory Receivables Corporation, 1.94%*   1,519,920   1.02%
                 
 Total Corporate Notes  (cost - $51,435,428)   51,432,791   34.38%
                 
 Total investment securities (cost - $138,580,973)  $138,580,712   92.63%

 

* The rate reported is the effective yield at time of purchase.  

 

See accompanying notes.

 

 4 

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS (continued)

JUNE 30, 2018 (Unaudited)

_______________

   

 

   Range of Expiration Dates  Number of Contracts   Fair Value*   % of Partners' Capital
               
LONG FUTURES CONTRACTS:              
Agriculture  Sep 18 - Mar 19   45   $(23,060)   (0.01)%
Currencies  Sep-18   152    95,905    0.06%
Energy  Jul 18 - Sep 18   358    1,035,160    0.69%
Interest Rates  Sep 18 - Jun 21   1,360    367,416    0.25%
Metals  Jul 18 - Oct 18   249    (682,229)   (0.46)%
Stock Indices  Jul 18 - Sep 18   99    (137,691)   (0.09)%
Treasury Rates  Sep-18   100    77,312    0.05%
                  
Total long futures contracts      2,363    732,813    0.49%
                  
SHORT FUTURES CONTRACTS:              
Agriculture  Jul 18 - Feb 19   918    332,948    0.22%
Currencies  Sep-18   408    388,938    0.26%
Energy  Sep-18   6    (229)   0.00%
Interest Rates  Sep 18 - Jun 21   574    339,698    0.23%
Metals  Jul 18 - Oct 18   419    1,182,185    0.79%
Stock Indices  Jul 18 - Sep 18   29    575    0.00%
Treasury Rates  Sep-18   318    (78,915)   (0.05)%
                  
Total short futures contracts      2,672    2,165,200    1.45%
                  
Total futures contracts          $2,898,013    1.94%
                  
LONG FORWARD CONTRACTS:              
Currencies  Jul 18 - Oct 18       $(457,508)   (0.31)%
                  
SHORT FORWARD CONTRACTS:              
Currencies  Jul 18 - Oct 18        235,142    0.16%
                  
Total forward currency  contracts       $(222,366)   (0.15)%

 

*Futures include settled variation margin.  

 

See accompanying notes.

 

 5 

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

DECEMBER 31, 2017 (Audited)

_______________

     

 

INVESTMENT SECURITIES         
Face Value   Maturity Date  Description  Fair Value  % of Partners' Capital
              
Fixed Income Investments         
              
U.S. Government Agency Bonds and Notes        
$66,520,000   1/2/2018  Federal Farm Credit Bank Disc Note, 0.00%  $66,518,158   38.40%
 20,000,000   1/2/2018  Federal Home Loan Bank Disc Note, 0.00%   20,000,000   11.55%
 15,000,000   1/8/2018  Federal Home Loan Bank Disc Note, 0.99%   14,996,775   8.66%
                 
Total U.S. Government Agency Bonds and Notes (cost - $101,514,531)   101,514,933   58.61%
                 
Corporate Notes            
$4,600,000   1/11/2018  American Honda Finance Corporation, 1.43%  $4,597,611   2.65%
 4,600,000   1/26/2018  Banco del Estado de Chile, 1.55%   4,600,000   2.66%
 4,600,000   1/26/2018  Bank of Montreal, 1.50%*   4,595,208   2.65%
 4,610,000   1/26/2018  CIBC World Markets Corp., 1.48%   4,605,261   2.66%
 2,000,000   1/5/2018  The Coca-Cola Company, 1.18%   1,999,444   1.16%
 275,000   1/12/2018  The Coca-Cola Company, 1.32%   274,846   0.16%
 1,470,000   1/8/2018  DCAT, LLC, 1.39%   1,469,317   0.85%
 4,600,000   1/12/2018  MetLife Short Term Funding LLC, 1.41%   4,597,378   2.65%
 3,070,000   1/22/2018  National Rural Utilities Cooperative Finance Corp., 1.62%   3,067,188   1.77%
 4,600,000   9/1/2018  PACCAR Financial Corp., 1.48%*   4,597,913   2.65%
 4,600,000   1/5/2018  Sumitomo Mitsui Banking Corporation, 1.37%   4,599,893   2.66%
 3,070,000   1/5/2018  Sumitomo Mitsui Trust Bank Ltd., 1.37%   3,069,929   1.77%
 4,600,000   1/8/2018  3M Company, 1.49%   4,598,193   2.65%
 5,320,000   1/2/2018  Wal-Mart Stores Inc., 1.24%   5,319,163   3.07%
                 
 Total Corporate Notes (cost - $51,991,895)   51,991,344   30.01%
                 
 Total investment securities (cost - $153,506,426)  $153,506,277   88.62%

 

  * The rate reported is the effective yield at time of purchase.   

 

See accompanying notes.

 

 6 

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS (continued)

DECEMBER 31, 2017 (Audited)

_______________

   

 

   Range of Expiration Dates  Number of Contracts   Fair Value*   % of Partners' Capital  
                 
LONG FUTURES CONTRACTS:                
Agriculture  Jan 18 - May 18   189   $129,392    0.07%  
Currencies  Mar-18   434    46,959    0.03%  
Energy  Jan 18 - Mar 18   425    1,308,601    0.75%  
Interest Rates  Mar 18 - Dec 20   835    (403,855)   (0.23)%  
Metals  Jan 18 - May 18   649    3,198,253    1.85%  
Stock Indices  Jan 18 - Mar 18   1,634    685,953    0.39%  
Treasury Rates  Mar-18   218    (76,148)   (0.04)%  
                    
Total long futures contracts      4,384    4,889,155    2.82%  
                    
SHORT FUTURES CONTRACTS:                
Agriculture  Feb 18 - May 18   1,024    262,775    0.16%  
Currencies  Mar-18   667    (431,850)   (0.24)%  
Energy  Jan 18 - Feb 18   263    (491,960)   (0.28)%  
Interest Rates  Mar 18 - Dec 20   1,144    166,547    0.10%  
Metals  Jan 18 - Apr 18   268    (1,206,843)   (0.70)%  
Stock Indices  Mar-18   271    (156,708)   (0.09)%  
Treasury Rates  Mar-18   519    181,390    0.10%  
                    
Total short futures contracts      4,156    (1,676,649)   (0.95)%  
                    
Total futures contracts          $3,212,506    1.87%  
                    
LONG FORWARD CONTRACTS:                
Currencies  Jan 18 - Mar 18       $2,038,800    1.18%  
                    
SHORT FORWARD CONTRACTS:                
Currencies  Jan 18 - Mar 18        (765,648)   (0.44)%  
                    
Total forward currency contracts       $1,273,152    0.74%  

 

*Futures include settled variation margin.  

 

See accompanying notes.

 

 7 

 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

STATEMENTS OF INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (Unaudited)

_______________

   

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
TRADING GAINS (LOSSES)                    
                     
Gain (loss) on trading of derivatives contracts                    
Net realized  $3,662,525   $(1,963,689)  $2,330,282   $4,965,779 
Net change in unrealized   725,608    (3,261,485)   (1,810,011)   (6,767,062)
Brokerage commissions   (578,866)   (849,161)   (1,221,764)   (1,791,702)
                     
Net gain (loss) from trading derivatives contracts   3,809,267    (6,074,335)   (701,493)   (3,592,985)
                     
Gain (loss) on trading of securities                    
Net realized   599    116,344    599    257,679 
Net change in unrealized   2,692    2,456    (112)   5,077 
                     
Net gain (loss) from trading securities   3,291    118,800    487    262,756 
                     
Gain (loss) on trading of foreign currency                    
Net realized   (18,880)   107,415    135,575    100,324 
Net change in unrealized   (13,215)   17,905    (96,994)   186,371 
                     
Net gain (loss) from trading foreign currency   (32,095)   125,320    38,581    286,695 
Total trading gains (losses)   3,780,463    (5,830,215)   (662,425)   (3,043,534)
                     
NET INVESTMENT INCOME (LOSS)                    
Income                    
Interest income   660,010    303,908    1,212,043    492,219 
                     
Expenses                    
Management fee   405,136    595,606    856,443    1,261,281 
Service fees   401,421    576,501    845,033    1,234,395 
Advisory fee   366,487    538,514    772,794    1,134,622 
Professional fees   199,941    248,624    398,930    516,658 
Administrative fee   84,133    120,421    177,838    256,025 
Interest expense   2,580    6,533    12,049    6,533 
Incentive fee   435        29,097    3,529 
Other expenses   55,118    77,370    115,520    146,010 
                     
Total expenses   1,515,251    2,163,569    3,207,704    4,559,053 
                     
Net investment income (loss)   (855,241)   (1,859,661)   (1,995,661)   (4,066,834)
                     
NET INCOME (LOSS)  $2,925,222   $(7,689,876)  $(2,658,086)  $(7,110,368)

 

See accompanying notes.

 

 8 

 

 

ALTEGRIS WINTON FUTURES FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (Unaudited)

   

 

   Limited Partners         
                                             
          Original    Original    Special                Institutional     General  
    Total     Class A    Class B    Interests    Class A    Class B    Interests     Partner  
                                             
Balances at December 31, 2016  $256,683,259    $13,257,409   $2,258,015   $15,766,935   $122,209,260   $47,147,538   $56,040,403   $ 3,699  
                                             
Capital additions   4,678,729             2,600,000    972,145    225,302    881,282      
                                             
Capital withdrawals   (53,968,367)    (3,045,559)   (740,582)       (23,376,982)   (10,204,846)   (16,600,398)     
                                             
From operations:                                            
Net investment income (loss)   (4,066,834)    (172,380)   (17,758)   (147,195)   (2,635,446)   (591,311)   (502,691)    (53 )
Net realized gain (loss) from investments (net of brokerage commissions)   3,532,080     187,799    28,232    277,452    1,637,633    645,229    755,682     53  
Net change in unrealized gain (loss) from investments   (6,575,614)    (332,452)   (51,520)   (523,062)   (3,044,935)   (1,189,374)   (1,434,162)    (109 )
Net income (loss) for the six months ended June 30, 2017   (7,110,368)    (317,033)   (41,046)   (392,805)   (4,042,748)   (1,135,456)   (1,181,171)    (109 )
                                             
Balances at June 30, 2017  $200,283,253    $9,894,817   $1,476,387   $17,974,130   $95,761,675   $36,032,538   $39,140,116   $ 3,590  
                                             
Balances at December 31, 2017  $173,217,273    $9,601,265   $878,802   $19,260,675   $82,613,264   $32,303,700   $28,555,734   $ 3,833  
                                             
Transfers        (453,028)                   453,028      
                                             
Capital additions   651,511                 475,297    176,214          
                                             
Capital withdrawals   (21,597,719)    (1,450,075)   (258,565)       (11,799,702)   (3,869,346)   (4,220,031)     
                                             
From operations:                                            
Net investment income (loss)   (1,995,661)    (90,215)   (3,921)   (62,091)   (1,445,038)   (273,196)   (121,164)    (36 )
                                            
Net realized gain (loss) from investments (net of brokerage commissions)   1,244,621     81,240    7,176    157,447    575,385    249,898    173,444     31  
Net change in unrealized gain (loss) from investments   (1,907,046)    (54,105)   (9,869)   (216,355)   (893,053)   (368,987)   (364,634)    (43 )
Net income (loss) for the six months ended June 30, 2018   (2,658,086)    (63,080)   (6,614)   (120,999)   (1,762,706)   (392,285)   (312,354)    (48 )
                                             
Balances at June 30, 2018  $149,612,979    $7,635,082   $613,623   $19,139,676   $69,526,153   $28,218,283   $24,476,377   $ 3,785  

 

 9 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

A.General Description of the Partnership

 

Altegris Winton Futures Fund, L.P. (the “Partnership”) was organized as a limited partnership in Colorado in March 1999, and will continue until December 31, 2035, unless sooner terminated as provided for in the Agreement of Limited Partnership (the “Agreement”), as amended and restated from time to time. The Partnership's general partner is Altegris Advisors, L.L.C. (the “General Partner”). The General Partner has overall responsibility for the management, operation and administration of the Partnership, including the selection of its commodity trading adviser. The Partnership’s trading activities are conducted pursuant to an advisory contract with Winton Capital Management Limited (the “Advisor”). The Partnership speculatively trades commodity futures contracts, options on futures contracts, forward contracts and other commodity interests. The objective of the Partnership’s business is appreciation of its assets. The Partnership is subject to the regulations of the Commodity Futures Trading Commission (the “CFTC”), an agency of the United States (“U.S.”) government that regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and futures commission merchants (brokers) through which the Partnership trades.

 

B.Method of Reporting

 

The Partnership’s financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Therefore, the Partnership follows the accounting and reporting guidelines for investment companies. The Partnership’s financial statements are presented in accordance with U.S. GAAP. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported fair value of assets and liabilities, disclosures of contingent assets and liabilities as of June 30, 2018 and December 31, 2017, and reported amounts of income and expenses for the three and six months ended June 30, 2018 and 2017, respectively. Management believes that the estimates utilized in preparing the Partnership’s financial statements are reasonable; however, actual results could differ from these estimates and it is reasonably possible that differences could be material.

 

The financial information included herein is unaudited; however, such financial information reflects all adjustments which are, in the opinion of the General Partner, necessary for the fair presentation of the financial statements for the interim period.

 

 

 

 

 10 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.Fair Value

 

In accordance with the authoritative guidance under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date.

 

In determining fair value, the Partnership uses various valuation approaches. The authoritative guidance under U.S. GAAP establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Partnership.

 

Unobservable inputs reflect the Partnership’s assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Partnership has the ability to access at the measurement date;

 

Level 2 - Quoted prices which are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 - Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The availability of valuation techniques and observable inputs can vary from assets and liabilities and is affected by a wide variety of factors, including the type of asset or liability, whether the asset or liability is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the asset or liability existed. Accordingly, the degree of judgment exercised by the Partnership in determining fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement.

 

 

 

 11 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C. Fair Value (continued)

 

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Partnership’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Partnership uses prices and inputs that are current as of the measurement date, including prices and inputs during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many assets and liabilities. This condition could cause an asset or liability to be reclassified to a lower level within the fair value hierarchy.

 

The Partnership values futures and options on futures contracts at the closing price of the contract’s primary exchange. The Partnership includes futures and options on futures contracts in Level 1 of the fair value hierarchy, as they are exchange traded derivatives.

 

Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. The Partnership includes forward currency contracts in Level 2 of the fair value hierarchy.

 

When available, the fair value of U.S. government agency bonds and notes is based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issue, maturity and seniority. U.S. government agency bonds and notes are generally categorized in Levels 1 or 2 of the fair value hierarchy. As of June 30, 2018 and December 31, 2017, none of the Partnership’s holdings in U.S. government agency bonds and notes were fair valued using valuation models.

 

The fair value of U.S. treasury obligations is generally based on quoted prices. U.S. treasury obligations are categorized in Level 2 of the fair value hierarchy.

 

The fair value of corporate notes is determined using recently executed transactions, market price quotations (where observable), notes spreads or credit default swap spreads. The spread data used are for the same maturity as that of the notes. If the spread data does not reference the issuer, data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. These valuation methods represent both a market and income approach to fair value measurement. Corporate notes are categorized in Level 2 of the fair value hierarchy; however, in instances where significant inputs are unobservable, they are categorized in Level 3 of the hierarchy. As of June 30, 2018 or December 31, 2017, none of the Partnership’s holdings in corporate notes were fair valued using valuation models.

 

 

 

 12 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C. Fair Value (continued)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

There were no changes to the Partnership’s valuation methodology during the six month period ended June 30, 2018 and the year ended December 31, 2017.

 

The following table presents information about the Partnership’s assets and liabilities measured at fair value as June 30, 2018 and December 31, 2017:

 

 

June 30, 2018  Level 1   Level 2   Level 3  

Balance as of

June 30, 2018

 
                 
Assets:                    
                     
Futures contracts (1)  $4,334,080   $   $   $4,334,080 
Forward currency contracts (1)       329,187        329,187 
U.S. Government agency bonds and notes       87,147,921        87,147,921 
Corporate notes       51,432,791        51,432,791 
                     
   $4,334,080   $138,909,899   $   $143,243,979 
                     
Liabilities:                    
                     
Futures contracts (1)  $(1,436,067   $   $   $(1,436,067)
Forward currency contracts (1)       (551,553)       (551,553)
                     
   $(1,436,067)  $(551,553)  $   $(1,987,620)

 

December 31, 2017  Level 1   Level 2   Level 3   Balance as of December 31, 2017 
                 
Assets:                    
                     
Futures contracts (1)  $7,042,156   $   $   $7,042,156 
Forward currency contracts (1)       2,248,858         2,248,858 
U.S. Government agency bonds and notes       101,514,933        101,514,933 
Corporate notes       51,991,344        51,991,344 
                     
   $7,042,156   $155,755,135   $   $162,797,291 
                     
Liabilities:                    
                     
Futures contracts (1)  $(3,829,650)  $   $   $(3,829,650)
Forward currency contracts (1)       (975,706)       (975,706)
   $(3,829,650)  $(975,706)  $
   $(4,805,356)

 

(1) See Note 7. "Financial Derivative Instruments" for the fair value in each type of contracts within this category.

 

Partnership’s policy is to recognize any transfers between Level 1 and Level 2 assets as of the Partnership’s fiscal year-end.

 

For the six month period ended June 30, 2018 and the year ended December 31, 2017, there were no transfers between Level 1 and Level 2 assets and liabilities. For the six month period ended June 30, 2018 and the year ended December 31, 2017, there were no Level 3 securities.

 

 

 13 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

D.Investment Transactions and Investment Income

 

Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from security transactions are determined using the specific identification cost method. Change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction. Interest income is recorded on an accrual basis.

 

Gains or losses on futures contracts, options on futures contracts and forward currency contracts are realized when contracts are closed. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the Statements of Financial Condition. Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions on futures and options on futures contracts include other trading fees and are recognized as trading gains and losses.

 

Net realized gains and losses from foreign currency related transactions represent gains and losses from sales of foreign currencies, currency gains and losses realized between trade and settlement dates on securities transactions, and the difference between the amounts of interest and foreign withholding taxes recorded on the Partnership’s books and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized gain (loss) on other assets and other liabilities denominated in foreign currency arise from changes in the value of assets, other than investments in securities, and liabilities at fiscal year-end, resulting from changes in the exchange rates.

 

J.P. Morgan Chase Bank, N.A. (the “Custodian”) is the Partnership’s custodian. SG Americas Securities, LLC (the “Clearing Broker”) is the Partnership’s commodity broker. A portion of the Partnership’s assets are held as initial margin or option premiums (in cash or Treasury securities) in the Partnership’s brokerage accounts at the Clearing Broker. The Clearing Broker may convert the Partnership’s cash in U.S. dollar to foreign currency to facilitate the Partnership’s commodity trading activities. At times, the Partnership may carry foreign cash on loan with the Clearing Broker. Any net foreign currency on loan will be recognized in Foreign Currency Due to Broker on the Statements of Financial Condition. The Partnership’s Clearing Broker holds margin balances in a single currency, in which all margin requirements can be satisfied in U.S. dollars. Foreign currency balances can also be used to satisfy margin requirements. As of June 30, 2018 and December 31, 2017, the Partnership’s restricted cash balance on the Statements of Financial Condition of $7,642,136 and $16,699,269, respectively, represents the collateral pledged by the Partnership to satisfy the Clearing Broker’s margin requirements in US Dollars. As of June 30, 2018 and December 31, 2017, the Partnership’s restricted foreign currency balance on the Statements of Financial Condition of $1,093,804 and $2,962,145, respectively, represents the collateral pledged by the Partnership to satisfy the Clearing Broker’s margin requirements in foreign currency. The Partnership’s assets not deposited at the Clearing Broker are deposited with either the Custodian or held in bank cash accounts at Northern Trust Company (and used to pay Partnership operating expenses). For the Partnership’s cash deposited at the Custodian, the Partnership receives cash management services from J.P. Morgan Investment Management Inc. (“JPMIM”).

 

 

 

 14 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E.Option Contracts

 

Generally, an option is a contract that gives the purchaser of the option, in return for the premium paid, the right to buy a specified security, currency or other instrument (an ‘‘underlying instrument’’) from the writer of the option (in the case of a call option), or to sell a specified security, currency, or other instrument to the writer of the option (in the case of put option) at a designated price. Put and call options that the Partnership may purchase or write may be traded on a national securities exchange or in the over-the-counter (OTC) market. All option positions entered into on a national securities exchange are cleared and guaranteed by the options clearing corporation, thereby reducing the risk of counterparty default. There can be no assurance that a liquid secondary market will exist for any option purchased or sold.

 

As the buyer of an option, the Partnership has a right to buy (call option) or sell (put option) the underlying instrument at the exercise price. The Partnership may enter into closing sale transactions with respect to options, exercise them, or permit them to expire unexercised. When buying options, the potential loss is limited to the cost (premium plus transaction costs) of the option.

 

As the writer of an option, the Partnership has the obligation to buy (call option) or sell (put option) the underlying instrument at the exercise price. When the Partnership writes an option, an amount equal to the premium received by the Partnership is recorded as a liability and subsequently marked to market to reflect the current value of the option written. If the written option expires unexercised, the Partnership realizes a gain in the amount of the premium received. If the Partnership enters into a closing transaction, it recognizes a gain or loss, depending on whether the cost of the purchase is less than or greater than the premium received. If the option is exercised, the Partnership will incur a loss to the extent the difference between the current market value of the underlying instrument and the exercise price exceeds the premium received.

 

As the writer of a call option, the Partnership retains the risk of loss should the underlying instrument increase in value. If the option is exercised, the Partnership will be required to buy or sell the instrument at the exercise price. Accordingly, these transactions result in off-balance sheet risk, as the Partnership’s ultimate obligation may exceed the amount indicated in the Statements of Financial Condition.

 

As of June 30, 2018 and December 31, 2017, the Partnership did not hold any option contracts.

 

F.Futures Contracts

 

The Partnership engages in futures contracts as part of its investment strategy. Upon entering into a futures contract, the Partnership is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the initial margin. Subsequent payments (“variation margin”) are made or received by the Partnership each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized gain/loss on futures contracts. Due to broker amounts on the Statements of Financial Condition represent the amount of any short fall in the Fund's required cash margin. The Partnership recognizes a realized gain or loss when the contract is closed.

 

 

 

 15 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

F.Futures Contracts (continued)

 

There are several risks in connection with the use of futures contracts as an investment option. The change in value of futures contracts primarily corresponds with the value of their underlying instruments. In addition, there is the risk that the Partnership may not be able to enter into a closing transaction because of an illiquid secondary market. Open positions in futures contracts at June 30, 2018 and December 31, 2017 are reflected within the Condensed Schedules of Investments.

 

G.Forward currency contracts

 

Forward currency contracts are entered into as an economic hedge against foreign currency exchange rate risk related to portfolio positions. A forward currency contract is an obligation to purchase or sell a currency against another currency at a future date at an agreed upon price and quantity. Forward currency contracts are traded over-the-counter and not on an organized exchange. Forward currency contracts help to manage the overall exposure to the foreign currency backing some of the investments held by the Partnership. Each contract is marked-to-market daily and the change in market value is recorded by the Partnership as an unrealized gain or loss. When the contract is closed, the Partnership records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward currency contracts involves the risk that counterparties may not meet the terms of the agreement or unfavorable movements in the value of a foreign currency relative to the U.S. dollar. Open forward currency contracts at June 30, 2018 and December 31, 2017 are reflected within the Condensed Schedules of Investments.

 

H.    Foreign Currency Transactions

 

The Partnership’s functional currency is the U.S. dollar; however, it may transact business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in the Statements of Income (Loss).

 

I.Cash

 

The Partnership maintains a custody account with JPMorgan Chase Bank, N.A. At times, the Partnership’s cash balance could exceed the insured amount under the Federal Deposit Insurance Corporation (“FDIC”). The Partnership has not experienced any losses in such accounts and believes it is not subject to any significant counterparty risk related to its cash account.

 

Both restricted cash and restricted foreign currency are held as margin collateral for futures transactions.

 

 

 

 16 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

J.Offering Costs

 

Offering costs incurred in connection with the ongoing offering of the Partnership’s interests are borne by the Partnership. These costs include, but are not limited to, legal fees pertaining to updating the Partnership’s offering documents and materials, accounting and printing costs. These costs are charged as an expense when incurred. Offering costs are included in other expenses on the Statements of Income (Loss).

 

K.Income Taxes

 

The Partnership is treated as a partnership for U.S. federal income tax purposes. As such, the partners are individually liable for their own distributable share of taxable income or loss. No provision has been made in the accompanying financial statements for U.S., federal, state, or local income taxes.

 

The Partnership is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority.  De-recognition of a tax benefit previously recognized results in the Partnership recording a tax liability that reduces ending partners’ capital.  Based on its analysis, the Partnership has determined that it has not incurred any liability for unrecognized tax benefits as of June 30, 2018 or December 31, 2017. However, the Partnership’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Partnership is subject to income tax examinations by major taxing authorities for all tax years since 2014.

 

The Partnership recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of June 30, 2018 and December 31, 2017 and for the three and six months ended June 30, 2018 and 2017.

 

NOTE 2 - PARTNERS’ CAPITAL

 

A.Capital Accounts and Allocation of Income and Losses

 

The Partnership accounts for subscriptions and redemptions on a per partner capital account basis.

 

The Partnership consists of the General Partner’s Interest, Original Class A Interests, Original Class B Interests, Special Interests, Class A Interests, Class B Interests and Institutional Interests. Original Class A Interests and Original Class B Interests were issued prior to July 1, 2008 and are no longer issued to limited partners in the Partnership (each a “Limited Partner” and collectively the “Limited Partners”). Class A Interests, Class B Interests and Institutional Interests were first issued by the Partnership on July 1, 2008. Income or loss (prior to management fees, administrative fees, service fees and incentive fees) are allocated pro rata among the Limited Partners based on their respective capital accounts as of the end of each month, in which the items accrue pursuant to the terms of the Partnership’s Agreement. Original Class A Interests, Original Class B Interests, Special Interests, Class A Interests, Class B Interests and Institutional Interests are then charged with their applicable management fee, administrative fee, service fee and incentive fee in accordance with the Agreement.

 

 

 

 17 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 2 - PARTNERS’ CAPITAL (CONTINUED)

 

A.Capital Accounts and Allocation of Income and Losses (continued)

 

No Limited Partner of the Partnership shall be liable for any debts or liabilities of the Partnership or any losses thereof in excess of such Limited Partner’s capital contributions, except as may be required by law.

 

B.Subscriptions, Distributions and Redemptions

 

Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner.

 

The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of capital, subject to restrictions set forth in the Agreement. The General Partner may request and receive redemption of capital, subject to the same terms as any Limited Partner. The partners may withdraw their interests on a monthly basis upon at least 15 days’ prior written notice, subject to the discretion of the General Partner. No distributions were made for the six months ended June 30, 2018 and 2017.

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

A.General Partner Management Fee

 

The General Partner receives a monthly management fee from the Partnership equal to 0.0625% (0.75% annually) for Original Class A, 0.146% (1.75% annually) for Original Class B, and currently 0.0417% (0.50% annually) for Special Interests of the Partnership's net asset value apportioned to each Partner’s capital account at the beginning of the month, before deduction of any accrued incentive fees related to the current quarter (the “management fee net asset value”). The General Partner receives a monthly management fee from the Partnership equal to 0.104% (1.25% annually) for Class A and Class B, and 0.0625% (0.75% annually) for Institutional Interests of the Partnership's management fee net asset value. The General Partner may declare any Limited Partner a “Special Limited Partner” and the management fees or incentive fees charged to any such partner may be different than those charged to other Limited Partners.

 

Total Management Fees earned by the General Partner, for the three and six months ended June 30, 2018 and 2017 are shown on the Statements of Income (Loss).

 

B.Administrative Fee

 

The General Partner receives a monthly administrative fee from the Partnership equal to 0.0275% (0.33% annually) of the Partnership's management fee net asset value attributable to Class A and Class B Interests. For the three and six months ended June 30, 2018, administrative fees for Class A Interests were $59,631 and $126,789, respectively and administrative fees for Class B Interests were $24,502 and $51,049, respectively. For the three and six months ended June 30, 2017, administrative fees for Class A Interests were $86,876 and $184,545, respectively and administrative fees for Class B Interests were $33,545 and $71,480, respectively. General Partner’s Interest, Original Class A, Original Class B, Special Interests and Institutional Interests did not get charged the administrative fee.

 

 

 

 

 18 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)

 

C.Altegris Investments, L.L.C. and Altegris Clearing Solutions, L.L.C.

 

Altegris Investments, L.L.C. (“Altegris Investments”), an affiliate of the General Partner, is registered as a broker-dealer with the SEC and a Delaware limited liability company. Altegris Clearing Solutions, L.L.C. (Altegris Clearing Solutions), an affiliate of the General Partner and an introducing broker registered with the CFTC, is the Partnership’s introducing broker.

 

Altegris Investments has entered into a selling agreement with the Partnership whereby it receives 2% per annum as continuing compensation for Class A Interests sold by Altegris Investments that are outstanding at month end. The Partnership’s introducing broker receives a portion of the commodity brokerage commissions paid by the Partnership to the Clearing Broker and interest income retained by the Clearing Broker. Additionally, the Partnership pays to its clearing brokers and its introducing broker, at a minimum, brokerage charges at a flat rate of 0.125% (1.5% annually) of the Partnership’s management fee net asset value. Brokerage charges may exceed the flat rate described above, depending on commission and trading volume levels, which may vary.

 

At June 30, 2018 and December 31, 2017, the Partnership had commissions and brokerage fees payable to its introducing broker of $152,283 and $153,669, respectively, and service fees payable to Altegris Investments of $21,589 and $25,858, respectively. These amounts are included in commissions payable and service fees payable on the Statements of Financial Condition, respectively. The amounts shown on the Statements of Financial Condition include fees payable to non-related parties.

 

The following tables show the fees paid to Altegris Investments and Altegris Clearing Solutions for the three and six months ended June 30, 2018 and 2017, respectively:

 

   Three months ended   Six months ended   Three months ended   Six months ended 
   June 30, 2018   June 30, 2018   June 30, 2017   June 30, 2017 
Altegris Clearing Solutions - Brokerage Commission fees  $492,380   $1,030,520   $699,401   $1,471,188 
Altegris Investments- Service fees   66,139    138,789    88,980    189,001 
Total  $558,519   $1,169,309   $788,381   $1,660,189 

 

The amounts above are included in Brokerage Commissions and Service Fees on the Statements of Income (Loss), respectively. The amounts shown on the Statements of Income (Loss) include fees paid to non-related parties.

 

 

 

 19 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 4 - ADVISORY CONTRACT

 

The Partnership's trading activities are conducted pursuant to an advisory contract with Winton Capital Management, Ltd. (“Advisor”). The Partnership pays the Advisor a quarterly incentive fee of 20% of the trading profits (as defined in the Agreement). However, the quarterly incentive fee is payable only on cumulative profits achieved from commodity trading (as defined in the Agreement), calculated separately for each partner’s interest (as defined in the Agreement). The incentive fee is accrued on a monthly basis and paid quarterly. Total incentive fees earned by the Advisor for the three and six months ended June 30, 2018 and 2017 are shown on the Statements of Income (Loss).

 

All Interest holders will be assessed a monthly management fee paid to Winton of 0.083% of the management fee net asset value of each holder’s month-end capital account balance (1.00% annually), with the exception of Original Class A Interests. In addition, the General Partner has assigned a portion of its management fees earned to the Advisor. For the three and six months ended June 30, 2018, management fees for Class A Interests were $180,700 and $384,207, respectively, management fees for Class B Interests were $74,248 and $154,697, respectively, management fees for Original Class B Interests were $2,146 and $4,357, respectively, management fees for Special Interests were $47,084 and $95,567, respectively and management fees for Institutional Interests were $62,309 and $133,966, respectively. For the three and six months ended June 30, 2017, management fees for Class A Interests were $263,210 and $559,262, respectively, management fees for Class B Interests were $101,632 and $216,619, respectively, management fees for Original Class B Interests were $4,178 and $9,333, respectively, management fees for Special Interests were $46,014 and $89,747, respectively and management fees for Institutional Interests were $123,480 and $259,661, respectively. General Partner’s Interest and Original Class A Interests did not get charged the management fee.

 

NOTE 5 - SERVICE FEES

 

Original Class A Interests and Class A Interests pay selling agents an ongoing monthly payment of 0.166% of the month-end net asset value (2% annually) of the value of interests sold by them which are outstanding at month-end as compensation for their continuing services to the Limited Partners. Institutional Interests may pay selling agents, if the selling agent so elects, an ongoing monthly payment of 0.0417% (0.50% annually) of the value of Institutional Interests sold by them which are outstanding at month-end as compensation for their continuing services to the Limited Partners holding Institutional Interests. For the three and six months ended June 30, 2018, service fees for General Partner’s Interest, were $19 and $38, respectively, service fees for Class A Interests were $360,732 and $760,032, respectively, service fees for Original Class A Interests were $38,815 and $81,991, respectively and service fees for Institutional Interests were $1,855 and $2,972, respectively. For the three and six months ended June 30, 2017, service fees for General Partner’s Interest, were $18 and $37, respectively, service fees for Class A Interests were $517,108 and $1,105,769, respectively, service fees for Original Class A Interests were $54,262 and $118,489, respectively and service fees for Institutional Interests were $5,113 and $10,100, respectively. Class B, Original Class B and Special Interests did not get charged the service fees.

 

 

 

 20 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 6 - BROKERAGE COMMISSIONS

 

The Partnership is subject to monthly brokerage charges equal to the greater of: (A) actual commissions and expenses paid to the Clearing Broker by the Partnership; or (B) an amount equal to 0.125% of the management fee net asset value of all Limited Partners’ month-end capital account balances (1.50% annually) (the “Minimum Amount”).

 

If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are less than the Minimum Amount, the Partnership will pay to the Introducing Broker the difference as payment for brokerage-related services, including, but not limited to, monitoring trade, execution, clearing, custodial and distribution services provided to the Partnership. If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are greater than the Minimum Amount, the Partnership pays only the amounts described in (A) above. The Partnership’s payment of brokerage commissions to the Clearing Broker for clearing trades on its behalf, and payments to the Introducing Broker for brokerage-related services, if any, are reflected on the Statements of Income (Loss) as Brokerage Commissions.

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS

 

The Partnership engages in the speculative trading of futures contracts and forward currency contracts for the purpose of achieving capital appreciation. None of the Partnership’s derivative instruments are designated as hedging instruments, as defined in the Derivatives and Hedging Topic of the Accounting Standards Codification (“ASC”), nor are they used for other risk management purposes. The Advisor and General Partner actively assess, manage and monitor risk exposure on derivatives on a contract basis, a sector basis (e.g., interest rate derivatives, agricultural derivatives, etc.), and on an overall basis in accordance with established risk parameters. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.

 

The following presents the fair value of derivatives contracts at June 30, 2018 and December 31, 2017. The fair value of derivatives contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the futures and forward contracts qualify for net presentation in the Statements of Financial Condition.

 

 

 

 21 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

June 30, 2018

 

   Asset   Liability     
Type of  Derivatives   Derivatives   Net 
Derivatives Contracts  Fair Value   Fair Value   Fair Value 
             
Futures Contracts               
Agriculture  $557,035   $(247,147)  $309,888 
Currencies   495,568    (10,725)   484,843 
Energy   1,088,570    (53,639)   1,034,931 
Interest Rates   721,488    (14,374)   707,114 
Metals   1,379,464    (879,508)   499,956 
Stock Indices   14,643    (151,759)   (137,116)
Treasury Rates   77,312    (78,915)   (1,603)
                
   $4,334,080   $(1,436,067)  $2,898,013 
                
Forward Currency Contracts  $329,187   $(551,553)  $(222,366)
                
Total Gross Fair Value of Derivatives Contracts  $4,663,267   $(1,987,620)  $2,675,647 

 

December 31, 2017

 

   Asset   Liability     
Type of  Derivatives   Derivatives   Net 
Derivatives Contracts  Fair Value   Fair Value   Fair Value 
             
Futures Contracts               
Agriculture  $596,880   $(204,713)  $392,167 
Currencies   213,479    (598,370)   (384,891)
Energy   1,359,853    (543,212)   816,641 
Interest Rates   208,188    (445,496)   (237,308)
Metals   3,200,085    (1,208,675)   1,991,410 
Stock Indices   1,262,437    (733,192)   529,245 
Treasury Rates   201,234    (95,992)   105,242 
                
   $7,042,156   $(3,829,650)  $3,212,506 
                
Forward Currency Contracts  $2,248,858   $(975,706)  $1,273,152 
                
Total Gross Fair Value of Derivatives Contracts  $9,291,014   $(4,805,356)  $4,485,658 

 

 

 

 22 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

The following presents the trading results of the Partnership’s derivative trading and information related to the volume of the Partnership’s derivative activity for the three and six months ended June 30, 2018 and 2017.

 

The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the Statements of Income (Loss) for gain (loss) on trading of derivatives contracts.

 

Three Months ended June 30, 2018    
     
Type of Derivatives Contracts  Realized  

Change in

Unrealized

  

Number of

Contracts Closed

 
             
Futures Contracts               
Agricultural  $843,741   $(194,475)     
Currencies   (422,934)   349,543      
Energy   3,762,571    (323,401)     
Interest Rates   (162,129)   118,687      
Metals   522,086    555,905      
Stock Indices   199,592    266,985      
Treasury Rates   10,516    164,538      
                
   $4,753,443   $937,782    9,158(1)
                
 Forward Currency Contracts  $(1,090,918)  $(212,174)    (2)
                
 Total gain (loss) from derivatives contracts  $3,662,525   $725,608      

 

Six Months ended June 30, 2018    
     
Type of Derivatives Contracts  Realized  

Change in

Unrealized

  

Number of

Contracts Closed

 
             
Futures Contracts               
Agricultural  $212,968   $(82,279)     
Currencies   (3,483,437)   869,734      
Energy   2,822,578    218,290      
Interest Rates   (483,490)   944,422      
Metals   1,451,215    (1,491,454)     
Stock Indices   542,051    (666,361)     
Treasury Rates   23,930    (106,845)     
                
   $1,085,815   $(314,493)   22,911(1)
                
Forward Currency Contracts  $1,244,467   $(1,495,518)    (2)
                
Total gain (loss) from derivatives contracts  $2,330,282   $(1,810,011)     

 

               
(1) These closed contract amounts are representative of the Partnership's volume of derivative activity for futures contracts during the year.
 
(2) The numbers of long contracts closed using average cost for the three and six months ended June 30, 2018 were 298,596, and 308,492, respectively. The numbers of short contracts closed using average cost for average cost for the three and six months ended June 30, 2018 were (262,510), and (289,552), respectively. These long and short numbers are representative of the Partnership's volume of derivative activity for forward currency contracts during those periods.

 

 

 

 23 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

Three Months ended June 30, 2017

 

Type of
 Derivatives Contracts
  Realized   Change in Unrealized   Number of Contracts Closed 
             
Futures Contracts               
Agricultural  $1,688,262   $(528,868)     
Currencies   (5,466,161)   1,045,138      
Energy   (1,680,617)   (428,156)     
Interest Rates   (1,612,134)   (553,967)     
Metals   (904,696)   (256,501)     
Stock Indices   5,744,212    (1,493,387)     
Treasury Rates   (852,586)   (120,267)     
   $(3,083,720)  $(2,336,008)   18,147(1)
Forward Currency Contracts  $1,120,031   $(925,477)    (2)
Total gain (loss) from derivatives contracts  $(1,963,689)  $(3,261,485)     

 

Six Months ended June 30, 2017 
  
Type of
Derivatives Contracts
  Realized   Change in Unrealized   Number of Contracts Closed 
             
Futures Contracts               
Agricultural  $1,521,234   $(696,679)     
Currencies   (7,015,620)   (1,217,650)     
Energy   (3,187,585)   (639,152)     
Interest Rates   (1,549,288)   (1,684,200)     
Metals   (2,778,473)   142,636      
Stock Indices   16,176,409    (2,008,118)     
Treasury Rates   (1,215,273)   (246,297)     
   $1,951,404   $(6,349,460)   35,737(1)
Forward Currency Contracts  $3,014,375   $(417,602)    (2)
Total gain (loss) from derivatives contracts  $4,965,779   $(6,767,062)     

 

(1) These closed contract amounts are representative of the Partnership's volume of derivative activity for futures contracts during the period.

 

(2) The numbers of long contracts closed using average cost for the three and six months ended June 30, 2017 were 427,605, and 474,708, respectively. The numbers of short contracts closed using average cost for average cost for the three and six months ended June 30, 2017 were (350,515), and (369,167), respectively. These long and short numbers are representative of the Partnership's volume of derivative activity for forward currency contracts during those periods.

 

 

 

 24 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

With respect to futures contracts and options on futures contracts, the Partnership has entered into an agreement with the Clearing Broker which grants the Clearing Broker the right to offset recognized derivative assets and derivative liabilities if certain conditions exist, which would require the Clearing Broker to liquidate the Partnership’s positions. These events include the following: (i) the Clearing Broker is directed or required by a regulatory or self-regulatory organization, (ii) the Clearing Broker determines, at its discretion, that the risk in the Partnership’s account must be reduced for protection of the Clearing Broker, (iii) upon the Partnership’s breach or failure to perform on its contractual agreements with the Clearing Broker, (iv) upon the commencement of bankruptcy, insolvency or similar proceeding for the protection of creditors against the Partnership, or (v) upon the dissolution, winding-up, liquidation or merger of the Partnership.

 

With respect to foreign currency forward contracts, the Partnership has entered into an agreement with the Clearing Broker, whereby the party having the greater obligation (either the Partnership or the Clearing Broker) shall deliver to the other party at the settlement date the net amount of recognized derivative assets and liabilities.

 

The following table summarizes the disclosure requirements for offsetting assets and liabilities:

 

Offsetting the Financial Assets and Derivative Assets

As of June 30, 2018            

Gross Amounts Not

Offset in the Statements

of Financial Condition

     
Description  Gross Amounts of Recognized Assets   Gross Amounts Offset in the Statements of Financial Condition   Net Amounts of Assets Presented in the Statements of Financial Condition   Financial Instruments   Cash Collateral Received (1)   Net Amount 
Forward contracts   329,187    (329,187)                
Futures contracts   2,218,872    (1,060,257)   1,158,615            1,158,615 
Total   2,548,059    (1,389,444)   1,158,615            1,158,615 

 

Offsetting the Financial Liabilities and Derivative Liabilities

As of June 30, 2018             

Gross Amounts Not

Offset in the Statements

of Financial Condition

     
Description  Gross Amounts of Recognized Liabilities   Gross Amounts Offset in the Statements of Financial Condition   Net Amounts of Liabilities Presented in the Statements of Financial Condition   Financial  Instruments   Cash Collateral Pledged (1)   Net Amount 
Forward contracts   (551,553)   329,187    (222,366)       222,366     
Futures contracts   (1,060,257)   1,060,257                 
Total   (1,611,810)   1,389,444    (222,366)       222,366     

 

 

 

 

 25 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

Offsetting the Financial Assets and Derivative Assets

As of December 31, 2017             Gross Amounts Not Offset in the Statements of Financial Condition     
Description  Gross Amounts of Recognized Assets   Gross Amounts Offset in the Statements of Financial Condition   Net Amounts of Assets Presented in the Statements of Financial Condition   Financial Instruments   Cash Collateral Received (1)   Net Amount 
Forward contracts   2,248,858    (975,706)   1,273,152            1,273,152 
Futures contracts   5,145,538    (2,382,080)   2,763,458            2,763,458 
Total   7,394,396    (3,357,786)   4,036,610            4,036,610 

 

Offsetting the Financial Liabilities and Derivative Liabilities

As of December 31, 2017              Gross Amounts Not Offset in the Statements of Financial Condition     
Description  Gross Amounts of Recognized Liabilities   Gross Amounts Offset in the Statements of Financial Condition   Net Amounts of Liabilities Presented in the Statements of Financial Condition   Financial Instruments   Cash Collateral Pledged (1)   Net Amount 
Forward contracts   (975,706)   975,706                 
Futures contracts   (2,382,080)   2,382,080                 
Total   (3,357,786)   3,357,786                 

 

(1) The Partnership posted additional collateral of $8,513,574 for 2018 and $19,661,414 for 2017 with the Clearing Broker. The Partnership may post collateral due to a variety of factors that may include, without limitation, initial margin or other requirements that are based on notional amounts which may exceed the fair value of the derivative contract.

 

NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND UNCERTAINTIES

 

The Partnership participates in the speculative trading of commodity futures contracts and forward currency contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges and interbank market makers. Further for futures contracts and options on futures contracts, the Clearing Broker has the right to require margin in excess of the minimum exchange requirement. Risk arises from changes in the value of these contracts (market risk) and the potential inability of brokers or interbank market makers to perform under the terms of their contracts (credit risk).

 

 

 

 26 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND UNCERTAINTIES (CONTINUED)

 

All of the contracts, with the exception of forward currency contracts, currently traded by the Partnership are exchange traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its respective individual counterparties. For forward currency contracts, the Partnership is subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain on forward currency contracts.

 

The Partnership also has credit risk since the sole counterparty to all domestic futures contracts is the exchange clearing corporation. In addition, the Partnership bears the risk of financial failure by the Clearing Broker. The Partnership's policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting and control procedures. In addition, the Partnership has a policy of reviewing the credit standing of each clearing broker or counterparty with which it conducts business.

 

The Partnership has a substantial portion of its assets on deposit with the Custodian in U.S. government agency bonds and notes and corporate notes.  Risks arise from investments in bonds and notes due to possible illiquidity and the potential for default by the issuer or counterparty.  Such instruments are also sensitive to changes in interest rates and economic conditions.

 

NOTE 9 - INDEMNIFICATIONS

 

In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.

 

NOTE 10 - FINANCIAL HIGHLIGHTS

 

The following information presents the financial highlights of the Partnership for the three and six months ended June 30, 2018 and 2017. This information has been derived from information presented in the financial statements.

 

 

 

 27 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS (CONTINUED)

 

   Three months ended June 30, 2018     
   Original   Original   Special           Institutional 
   Class A   Class B   Interests   Class A   Class B   Interests 
                         
Total return for Limited Partners (3)                              
  Return prior to incentive fees   2.04%    2.29%    2.36%    1.58%    2.08%    2.28% 
  Incentive fees   (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)% 
                               
Total return after incentive fees   2.04%    2.29%    2.36%    1.58%    2.08%    2.28% 
                               
Ratio to average net asset value                              
  Expenses prior to incentive fees (2)   3.37%    2.41%    2.16%    5.15%    3.21%    2.37% 
  Incentive fees (3)   0.00%    0.00%    0.00%    0.00%    0.00%    0.00% 
                               
    Total expenses   3.37%    2.41%    2.16%    5.15%    3.21%    2.37% 
                               
  Net investment (loss) (1) (2)   (1.69)%    (0.70)%    (0.45)%    (3.47)%    (1.52)%    (0.72)% 

 

   Six months ended June 30, 2018             
   Original   Original   Special           Institutional 
   Class A   Class B   Interests   Class A   Class B   Interests 
                         
Total return for Limited Partners (3)                              
  Return prior to incentive fees   (1.23)%    (0.75)%    (0.63)%    (2.14)%    (1.16)%    (0.76)% 
  Incentive fees   (0.01)%    (0.00)%    (0.00)%    (0.00)%    (0.01)%    (0.00)% 
                               
Total return after incentive fees   (1.24)%    (0.75)%    (0.63)%    (2.14)%    (1.17)%    (0.76)% 
                               
Ratio to average net asset value                              
  Expenses prior to incentive fees (2)   3.31%    2.40%    2.15%    5.17%    3.22%    2.40% 
  Incentive fees (3)   0. 14%    0.00%    0.00%    0.02%    0.01%    (0.01)% 
                               
    Total expenses   3.45%    2.40%    2.15%    5.19%    3.23%    2.39% 
                               
  Net investment (loss) (1) (2)   (1.86)%    (0.90)%    (0.65)%   (3.70)%   (1.73)%    (0.93)% 

 

 

 

 

 28 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS (CONTINUED)

 

   Three months ended June 30, 2017     
   Original   Original   Special           Institutional 
   Class A   Class B   Interests   Class A   Class B   Interests 
                         
Total return for Limited Partners (3)                              
  Return prior to incentive fees   (3.28)%    (3.04)%    (2.98)%    (3.73)%    (3.25)%    (3.05)% 
  Incentive fees   (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)% 
                               
Total return after incentive fees   (3.28)%    (3.04)%    (2.98)%    (3.73)%    (3.25)%    (3.05)% 
                               
Ratio to average net asset value                              
  Expenses prior to incentive fees (2)   3.22%    2.26%    2.10%    5.07%    3.11%    2.36% 
  Incentive fees (3)   0.00%    0.00%    0.00%    0.00%    0.00%    0.00% 
                               
    Total expenses   3.22%    2.26%    2.10%    5.07%    3.11%    2.36% 
                               
  Net investment (loss) (1) (2)   (2.69)%    (1.74)%    (1.56)%    (4.54)%    (2.58)%    (1.83)% 

 

   Six months ended June 30, 2017     
   Original   Original   Special           Institutional 
   Class A   Class B   Interests   Class A   Class B   Interests 
                         
Total return for Limited Partners (3)                              
  Return prior to incentive fees   (2.92)%    (2.45)%    (2.32)%    (3.81)%    (2.85)%    (2.46)% 
  Incentive fees   (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)%    (0.00)% 
                               
Total return after incentive fees   (2.92)%    (2.45)%    (2.32)%    (3.81)%    (2.85)%    (2.46)% 
                               
Ratio to average net asset value                              
  Expenses prior to incentive fees (2)   3.25%    2.25%    2.11%    5.08%    3.11%    2.33% 
  Incentive fees (3)   0.00%    0.00%    0.00%    0.00%    0.00%    0.00% 
                               
    Total expenses   3.25%    2.25%    2.11%    5.08%    3.11%    2.33% 
                               
  Net investment (loss) (1) (2)   (2.85)%    (1.85)%    (1.67)%    (4.68)%    (2.71)%    (1.92)% 
                               

 

Total return and the ratios to average net asset value are calculated for each class of Limited Partners’ capital taken as a whole. An individual Limited Partner’s total return and ratios may vary from the above returns and ratios due to the timing of their contributions and withdrawals and differing fee structures.

__________

(1)Excludes incentive fee.
(2)Annualized.
(3)Not annualized.

 

 

 

 

 29 

 

 

ALTEGRIS Winton Futures Fund, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 11 - SUBSEQUENT EVENTS

 

Management of the Partnership evaluated subsequent events through the date these financial statements issued, and concluded that no events subsequent to June 30, 2018 have occurred that would require recognition or disclosure, except as noted below.

 

From July 1, 2018 through August 10, 2018, the Partnership had subscriptions of $49,000 and redemptions of $2,377,803. Management has determined there are no additional matters requiring disclosure.

 

 

 

 

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PART I - FINANCIAL INFORMATION (continued)

 

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

 

Reference is made to “Item 1: Financial Statements.”  The information contained therein is essential to, and should be read in conjunction with, the following analysis.

 

Liquidity

 

The Partnership’s assets are generally held as cash or cash equivalents, which are used to margin the Partnership’s futures positions and are sold to pay redemptions and expenses as needed. Other than any potential market-imposed limitations on liquidity, the Partnership’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Partnership’s futures trading. A portion of the Partnership’s assets not used for margin and held with the Custodian are invested in liquid, high quality securities. Through June 30, 2018 the Partnership experienced no meaningful periods of illiquidity in any of the markets traded by the Advisor on behalf of the Partnership.

 

Capital Resources

 

The Partnership raises additional capital only through the sale of Interests and capital is increased through trading profits (if any) and interest income. The Partnership does not engage in borrowing.

 

The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership has no significant capital expenditure or working capital requirements other than for capital to pay trading losses, brokerage commissions and expenses. Within broad ranges of capitalization, the Partnership’s trading positions should increase or decrease in approximate proportion to the size of the Partnership.

 

The Partnership participates in the speculative trading of commodity futures contracts, options on futures contracts and forward contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges. Further, the Partnership’s futures commission merchants and brokers may require margin in excess of minimum exchange requirements.

 

Contracts currently traded by the Advisor on behalf of the Partnership include exchange-traded futures contracts and over-the-counter forward currency contracts. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its trading counterparties, whereas exchange-traded contracts are generally, but not universally, backed by the collective credit of the members of the exchange. The credit risk from counterparty non-performance associated with the Partnership’s over-the-counter forward currency transactions is the net unrealized gain on such contracts plus related collateral held by the counterparty.

 

The Partnership bears the risk of financial failure by the Clearing Broker and Newedge Alternative Strategies, Inc. (which may from time to time execute spot and other over-the-counter foreign exchange transactions as a counterparty to the Partnership) and/or other clearing brokers or counterparties with which the Partnership trades.

 

Results of Operations

 

The Partnership’s success depends primarily upon the Advisor’s ability to recognize and capitalize on market trends in the sectors of the global commodity futures markets in which it trades. The Partnership seeks to produce long-term capital appreciation through growth, and not current income.  The past performance of the Partnership is not necessarily indicative of future results.

 

Due to the nature of the Partnership’s trading, the results of operations for the interim period presented should not be considered indicative of the results that may be expected for the entire year.

 

 

 

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Performance Summary

 

Three Months Ended June 30, 2018

 

During the second quarter of 2018, the Partnership achieved net realized and unrealized gains of $3,780,463 from its trading activities, net of brokerage commissions of $578,866. The Partnership accrued total expenses of $1,515,251, including $405,136 in management fees paid to the General Partner, $435 in incentive fees, and $601,362 in service and professional fees. The Partnership earned $660,010 in interest income during the second quarter of 2018. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the second quarter of 2018 is set forth below.

 

Second Quarter 2018. In April 2018, the Partnership’s positive return was driven by long positioning in the energies and base metals sectors, with crude oil, heating oil and aluminum among the biggest contributors. Crude oil prices hit their highest levels since 2014 which helped boost shares of energy stocks. Net short exposure to short-term interest rates and government bonds also contributed to the Partnership’s positive return as profits accrued from Eurodollar and US Treasury futures. The Partnership’s performance in currencies and crop sectors was mixed. Returns from a short position in sugar were cancelled out by losses in wheat. In May 2018, the Partnership sustained negative performance which was driven by the currencies, crops and fixed income sectors. Currency returns were hindered by a weakening euro and a short position in the Swedish krona versus the euro. Losses in crops were led by trend reversals in sugar and cocoa, while gains from short positions in interest rates and bonds were erased as yields retreated later in the month. The Partnership’s positive return was driven primarily by energies. In June 2018, the Partnership’s positive return was driven largely by commodities, with profits from crops, precious metals and energies. The Partnership’s short positioning in crops and precious metals benefited the Partnership, particularly in soybeans, corn and gold while long positions in crude oil drove returns in energies. The Partnership’s short exposure to short-term interest rates and short-dated US government bonds in the fixed income sector also added to the Partnership’s positive performance. The Partnership’s losses for the month were largely due to short exposure to outperforming consumer discretionary stocks and a reversal in an aluminum uptrend.

 

Three Months Ended June 30, 2017

 

During the second quarter of 2017, the Partnership incurred net realized and unrealized losses of $5,830,215 from its trading activities, net of brokerage commissions of $849,161. The Partnership accrued total expenses of $2,163,569, including $595,606 in management fees paid to the General Partner, $0 in incentive fees, and $825,125 in service and professional fees. The Partnership earned $303,908 in interest income during the second quarter of 2017. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the second quarter of 2017 is set forth below.

 

Second Quarter 2017. In April 2017, the Partnership sustained negative performance which was driven by losses in currencies and fixed income. A short position in the euro was the largest individual detractor from returns, with the euro-US dollar exchange rate reaching its highest level since the beginning of November 2016. The appreciating British pound also cost some performance. In fixed income, losses were led by short positions in Eurodollar futures and longer-dated US government bonds against a backdrop of easing US inflation expectations. The Partnership was net long in the fixed income sectors, having been short since November. Other detractors from returns included positions in the energies and metals sectors, most notably gasoline, aluminum and gold. In terms of positive contributors to performance, positioning in stock indices and soft commodities were profitable. Equity markets maintaining their upward trend benefited the Partnership’s long exposure to stock indices, particularly the S&P 500, NASDAQ and Euro Stoxx 50. Meanwhile in soft commodities, profits were driven by short positions in falling crops markets and long positions in rising livestock markets. In May 2017, The Partnership’s positive return was driven by long positions in stock indices, most notably the S&P 500 and the NASDAQ. Outside of indices, crops were the only sector to make a noteworthy contribution to returns, with profits coming from short positions in soybeans and sugar. Currencies, energies and precious metals reduced the Partnership’s gains during the month. Losses in currencies were driven by short positions in the euro and the Japanese yen. The Partnership reduced the euro position during the month but increased short exposure to the yen. In energies, the Partnership’s mostly long positions detracted from performance, particularly in natural gas and heating oil, whereas rising gold and silver prices weighed on the Partnership’s short positions in precious metals. The volatile last week of June 2017 reversed all of the Partnership’s profits and resulted in negative performance for June 2017, with all sectors down, except for precious metals. The rise in global bond yields weighed on long positions in European and longer-dated US government bonds. The continued rally in the euro means that the Partnership’s longstanding short position in the shared currency is now much reduced, having decreased steadily since mid-April. The energies sector also detracted from returns, mostly due to the Partnership’s initial net long positions being whipsawed, by the intra-month selloff and subsequent rebound in energy prices. Losses in crops were driven by grain positions – most notably in wheat – while the Partnership gave back yearly profits from its long exposure in stock indices, with the exception of positive contributions from Asian positions.

 

 

 

 32 

 

 

Six Months Ended June 30, 2018

 

During the six months ended June 30, 2018, the Partnership incurred net realized and unrealized losses of $662,425 from its trading activities, net of brokerage commissions of $1,221,764. The Partnership accrued total expenses of $3,207,704, including $856,443 in management fees paid to the General Partner, $29,097 in incentive fees, and $1,243,963 in service and professional fees. The Partnership earned $1,212,043 in interest income during the six months ended June 30, 2018. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the six months ended June 30, 2018 is set forth below.

 

Second Quarter 2018.  In April 2018, the Partnership’s positive return was driven by long positioning in the energies and base metals sectors, with crude oil, heating oil and aluminum among the biggest contributors. Crude oil prices hit their highest levels since 2014 which helped boost shares of energy stocks. Net short exposure to short-term interest rates and government bonds also contributed to the Partnership’s positive return as profits accrued from Eurodollar and US Treasury futures. The Partnership’s performance in currencies and crop sectors was mixed. Returns from a short position in sugar were cancelled out by losses in wheat. In May 2018, the Partnership sustained negative performance which was driven by the currencies, crops and fixed income sectors. Currency returns were hindered by a weakening euro and a short position in the Swedish krona versus the euro. Losses in crops were led by trend reversals in sugar and cocoa, while gains from short positions in interest rates and bonds were erased as yields retreated later in the month. The Partnership’s positive return was driven primarily by energies. In June 2018, the Partnership’s positive return was driven largely by commodities, with profits from crops, precious metals and energies. The Partnership’s short positioning in crops and precious metals benefited the Partnership, particularly in soybeans, corn and gold while long positions in crude oil drove returns in energies. The Partnership’s short exposure to short-term interest rates and short-dated US government bonds in the fixed income sector also added to the Partnership’s positive performance. The Partnership’s losses for the month were largely due to short exposure to outperforming consumer discretionary stocks and a reversal in an aluminum uptrend.

 

First Quarter 2018. In January 2018, the Partnership experienced net positive returns which were driven primarily by positioning across the portfolio. Stock indices were the largest contributors to returns with the S&P 500, Nasdaq, and Hang Seng leading the way. Currencies, commodities and fixed income were positive for performance. For currencies, long positions in the euro and emerging-market currencies generated profits which cancelled losses from a short position in the Japanese yen. For commodities, positive performance from energies offset the negative performance from precious metals. Fixed income benefited from positioning in short-term interest rates. In February 2018, the Partnership sustained negative performance as a result of losses from stock indices, commodities and currencies. Although long positions in stock indices drove the Partnership’s positive performance over the past year, they proved to be particularly challenging. Long exposure to crude and heating oil resulted in a holdback for returns in energies, while falling aluminum prices led the losses in base metals. The Partnership’s short exposure to the Japanese yen versus the US dollar was the largest detractor from returns on currencies. The Partnership’s negative return for the month was offset by profits from short exposure to interest rate futures and short silver positioning within precious metals. In March 2018, the Partnership sustained a net loss driven primarily by long positions in stock indices and base metals. US and Japanese markets led the losses in stock indices, while aluminum, zinc and nickel were the biggest detractors from performance in base metals. Falling yields weighed on net short exposure to fixed income markets, most notably positions in Eurodollar and German government bond futures. Losses sustained by the Partnership were offset by positive contributions to returns from the energies and currencies sectors. The Partnership’s largest profits were driven by the recovery in crude oil markets. Positive returns in currencies were led by the euro appreciating against the Swedish Krona and the Swiss franc weakening against the US dollar.

 

Six Months Ended June 30, 2017

 

During the six months ended June 30, 2017, the Partnership incurred net realized and unrealized losses of $3,043,534 from its trading activities, net of brokerage commissions of $1,791,702. The Partnership accrued total expenses of $4,559,053, including $1,261,281 in management fees paid to the General Partner, $3,529 in incentive fees, and $1,751,053 in service and professional fees. The Partnership earned $492,219 in interest income during the six months ended June 30, 2017.  An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the six months ended June 30, 2017 is set forth below.

 

 

 

 33 

 

 

Second Quarter 2017.   In April 2017, The Partnership sustained negative performance which was driven by losses in currencies and fixed income. A short position in the euro was the largest individual detractor from returns, with the euro-US dollar exchange rate reaching its highest level since the beginning of November 2016. The appreciating British pound also cost some performance. In fixed income, losses were led by short positions in Eurodollar futures and longer-dated US government bonds against a backdrop of easing US inflation expectations. The Partnership was net long in the fixed income sectors, having been short since November. Other detractors from returns included positions in the energies and metals sectors, most notably gasoline, aluminum and gold. In terms of positive contributors to performance, positioning in stock indices and soft commodities were profitable. Equity markets maintaining their upward trend benefited the Partnership’s long exposure to stock indices, particularly the S&P 500, NASDAQ and Euro Stoxx 50. Meanwhile in soft commodities, profits were driven by short positions in falling crops markets and long positions in rising livestock markets. In May 2017, The Partnership’s positive return was driven by long positions in stock indices, most notably the S&P 500 and the NASDAQ. Outside of indices, crops were the only sector to make a noteworthy contribution to returns, with profits coming from short positions in soybeans and sugar. Currencies, energies and precious metals reduced the Partnership’s gains during the month. Losses in currencies were driven by short positions in the euro and the Japanese yen. The Partnership reduced the euro position during the month but increased short exposure to the yen. In energies, the Partnership’s mostly long positions detracted from performance, particularly in natural gas and heating oil, whereas rising gold and silver prices weighed on the Partnership’s short positions in precious metals. The volatile last week of June 2017 reversed all of the Partnership’s profits and resulted in negative performance for June 2017, with all sectors down, except for precious metals. The rise in global bond yields weighed on long positions in European and longer-dated US government bonds. The continued rally in the euro means that the Partnership’s longstanding short position in the shared currency is now much reduced, having decreased steadily since mid-April. The energies sector also detracted from returns, mostly due to the Partnership’s initial net long positions being whipsawed, by the intra-month selloff and subsequent rebound in energy prices. Losses in crops were driven by grain positions – most notably in wheat – while the Partnership gave back yearly profits from its long exposure in stock indices, with the exception of positive contributions from Asian positions.

 

First Quarter 2017.  In January 2017, the Partnership sustained a net loss as profits from stock indices were undone by losses in the currency, commodity and fixed income sectors. Long positions in most stock indices added value over the course of the month, with the NASDAQ driving the positive contribution to returns as information technology stocks outperformed the wider US market. Short positions in the euro and the Japanese yen led the losses in currencies, but were partly offset by long positions in appreciating emerging market currencies. In commodities, the Partnership’s exposure to precious metals and energies, particularly gold and natural gas, detracted from returns, although base metals were profitable due to a long position in copper. In February 2017, the Partnership experienced net positive returns driven by stock indices and currencies. Long positions in the S&P 500 and NASDAQ led the profits in stock indices which posted gains across the board. Currencies recovered the majority of their January losses with the Partnership’s short position in the euro benefitting from the euro-US dollar exchange rate falling back to near where it started the year. Profits also came from long positions in emerging market currencies such as the Indian rupee and the Chinese yuan, where increasing positions during the month reduced the Partnership’s long exposure to the US dollar. For February 2017, the detractors from returns were concentrated in the precious metals and energies sectors. Price gains weighed on the Partnership’s short position in gold, which reduced over the course of the month, while falling natural gas prices resulted in losses from the Partnership’s long position in the market. In March 2017, the Partnership’s portfolio performance was flat, as it began the month on a positive note but gave back early profits as the dollar and US equity markets weakened. Performance overall was driven by stock indices, with European markets leading the sector to make a positive contribution to performance for the fifth consecutive month. The gains in stock indices were offset by losses in the fixed income, commodities and currencies sectors.

 

Long positioning in German government bonds weighed on returns in fixed income, while losses in commodities were led by the energies sector, where an initial long position in Brent crude detracted from returns. Performance in the currencies sector was mixed: long positions in a number of emerging markets currencies added value, most notably the Indian rupee, but these gains were overshadowed by short exposure to the appreciating Japanese yen and euro.

 

 

 

 34 

 

 

Off-Balance Sheet Arrangements

 

The Partnership does not engage in off-balance sheet arrangements with other entities.

 

Contractual Obligations

 

The Partnership does not enter into contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business is trading futures, related option and forward currency contracts, both long (contracts to buy) and short (contracts to sell). All such contracts are settled by offset, not delivery. Substantially all such contracts are for settlement within four months of the trade date and substantially all such contracts are held by the Partnership for less than four months before being offset or rolled over into new contracts with similar maturities. The Partnership’s financial statements present a Condensed Schedule of Investments setting forth net unrealized appreciation (depreciation) of the Partnership’s open futures and forward currency contracts, both long and short, at June 30, 2017.

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk.

 

Due to the nature of the Partnership as a speculative commodity pool, changes from December 31, 2016 are not material.

 

Item 4: Controls and Procedures.

 

The General Partner, with the participation of the General Partner’s principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this quarterly report, and, based on their evaluation, has concluded that these disclosure controls and procedures are effective.  There were no significant changes in the General Partner’s internal controls over financial reporting with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of the evaluation.

 

 

 

 

 

 

 

 

 

 35 

 

 

PART II – OTHER INFORMATION

 

Item 1:  Legal Proceedings.

 

None.

 

Item 1A:  Risk Factors.

 

There have been no material changes to the Partnership’s risk factors since the Partnership filed its annual report on Form 10-K with the Securities and Exchange Commission on March 31, 2017.

 

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

 

(a) The requested information has been previously reported on Form 8-K.

 

(b) Not applicable.

 

(c) Limited Partners may redeem some or all of their Interest in the Partnership as of the end of any calendar month upon fifteen (15) days’ prior written notice to the General Partner. The Partnership may declare additional redemption dates upon notice to the Limited Partners. The redemption by a Limited Partner has no impact on the value of the capital accounts of the remaining Limited Partners.  The following table summarizes the redemptions by Limited Partners during the second calendar quarter of 2018:

 

Month Amount Redeemed
April 30, 2018     $ 3,940,827
May 31, 2018     $ 3,524,569
June 30, 2018     $ 3,187,337

 

Item 3:  Defaults Upon Senior Securities.

 

(a) None.

 

(b) None.

 

Item 4:  Mine Safety Disclosure.

 

Not applicable.

 

Item 5:  Other Information.

 

(a) None.

 

(b) Not applicable.

 

 

 

 

 36 

 

 

Item 6:  Exhibits.

 

The following exhibits are incorporated herein by reference from the exhibits of the same numbers and descriptions filed with the registrant’s Registration Statement on Form 10 (File No. 000-53348) filed on July 30, 2008.

 

Exhibit Number Description of Document
3.1 Certificate of Formation of Winton Futures Fund, L.P. (US)
10.1 Advisory Contract between Winton Futures Fund, L.P. (US), Rockwell Futures Management, Inc.** and Winton Capital Management Limited and Amendment thereto dated June 1, 2008
10.2 Introducing Broker Clearing Agreement between Fimat USA, LLC*** and Altegris Investments, Inc.
10.3 Form of Selling Agency Agreement

 

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Current Report on Form 8-K (File No. 000-53348) filed on April 18, 2011.

 

Exhibit Number Description of Document
3.01 Amendment to the Certificate of Formation of Winton Futures Fund, L.P. (US), changing the registrant’s name to Altegris Winton Futures Fund, L.P.
   

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Quarterly Report on Form 10-Q (File No. 000-53348) filed on November 14, 2014.

 

Exhibit Number Description of Document  
10.04 Amendment dated July 1, 2014 to Advisory Contract
     

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Annual Report on Form 10-K (File No. 000-53348) filed on March 31, 2015.

 

Exhibit Number Description of Document  
4.1 Third Amended and Restated Agreement of Limited Partnership of Altegris Winton Futures Fund, L.P.

 

The following exhibits are included herewith.

 

Exhibit Number Description of Document
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32 Section 1350 Certification of Principal Executive Officer and Principal Financial Officer

 

** Rockwell Futures Management, Inc. became Altegris Portfolio Management, Inc., which merged with and into Altegris Advisors, L.L.C.

*** Fimat USA, LLC became Newedge USA, LLC, which merged with and into SG Americas Securities, LLC.

 

 

 

 37 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: August 13, 2018

 

ALTEGRIS WINTON FUTURES FUND, L.P.

 

By:  ALTEGRIS ADVISORS, L.L.C.,
    its general partner
 
 

/s/ Martin Beaulieu                                                     

Martin Beaulieu, Principal Executive Officer and Principal Financial Officer
RULE 13a-14(a)/15d-14(a) 

 

 

 

 

 

 

 

 

 

 

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