Item 1.
Business .
(a)
General Development of Business .
Managed Futures Premier Warrington L.P. (formerly known as Warrington Fund L.P.) (the “Partnership”) is a limited partnership organized on November 28, 2005, under the partnership laws of the State of New York to engage in the speculative trading of commodity interests including futures and option contracts. The Partnership does not currently intend to, but may in the future, engage in transactions in spot and forward markets. The Partnership primarily trades futures and options in the stock indices sector. The Partnership may also hold U.S. Treasury Bills (“T-Bills”). The Partnership commenced trading on February 21, 2006. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership privately and continuously offers redeemable units of limited partnership interest (“Redeemable Units”) in the Partnership to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Subscriptions and redemptions of Redeemable Units and General Partner (as defined below) contributions and redemptions for the years ended December 31, 2018, 2017 and 2016 are reported in the Statements of Changes in Partners’ Capital on page 26 under “Item 8. Financial Statements and Supplementary Data .”
Effective as of the close of business on March 31, 2015, Warrington GP, LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is beneficially owned by Scott C. Kimple. Warrington Advisors, LLC is the Managing Member of the General Partner, which is ultimately controlled by Scott C. Kimple. From inception to the close of business on March 31, 2015, Ceres Managed Futures LLC, a Delaware limited liability company, acted as the general partner (“CMF GP”) and commodity pool operator of the Partnership. On January 9, 2015, Scott C. Kimple proposed in a Proxy Statement, which was filed with the Securities and Exchange Commission (the “SEC”) and distributed to Limited Partners (defined below), that Warrington GP, LLC become the new general partner of the Partnership. The requisite number of each class of limited partnership interests approved the proposals described in the Proxy Statement, and, as a result, Warrington GP, LLC became the new general partner of the Partnership effective as of the close of business on March 31, 2015. CMF GP withdrew as the general partner of the Partnership immediately following Warrington GP, LLC becoming the Partnership’s new general partner. References to the “General Partner” herein refer to Warrington GP, LLC and/or CMF GP, as the context requires.
Effective as of the close of business on March 31, 2015, Warrington SLP, LP, a Delaware limited liability company and an affiliate of the General Partner, became a special limited partner of the Partnership (the “Special Limited Partner”) and receives a quarterly profit share allocation from the Partnership, subject to a high water mark.
All of the trading decisions for the Partnership are made by Warrington Asset Management LLC (the “Advisor”), an affiliate of the General Partner, using the Strategic Trading Program (formerly, the “Core Trading Program”), a proprietary trading program. A description of the trading activities and focus of the Advisor is included on page 9 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .”
The General Partner is not aware of any material changes to the trading program discussed above during the fiscal year ended December 31, 2018.
On June 15, 2011, the Partnership began offering “Class A” Redeemable Units and “Class D” Redeemable Units pursuant to the offering memorandum. All outstanding Redeemable Units on June 15, 2011 were designated Class A Redeemable Units. The rights, powers, duties and obligations associated with the investment in Class A Redeemable Units were not changed. On October 1, 2011, the first Class D Redeemable Units were issued to limited partners of the Partnership (each a “Limited Partner”). Class A Redeemable Units and Class D Redeemable Units will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Redeemable Units that a Limited Partner receives will generally depend upon the amount invested in the Partnership, although the General Partner may determine to offer Class A Redeemable Units or Class D Redeemable Units to investors in its sole discretion. On May 1, 2015, a new share class of units of general partner interest “Class GP” was initiated to accept an investment from the General Partner.
During the twelve months ended December 31, 2018, the Partnership’s commodity brokers were Wells Fargo Securities, LLC (“Wells Fargo”), Wedbush Securities, Inc. (“Wedbush”) and ADM Investor Services, Inc. (“ADM”), all of which are registered futures commission merchants. Effective April 1, 2015, the Partnership entered into a futures and cleared swaps agreement with Wells Fargo (the “Wells Fargo Customer Agreement”). During the reporting period and prior periods covered by this report, the Partnership paid Wells Fargo trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, Wells Fargo paid the Partnership interest on excess cash held in the Partnership’s account at rates customarily paid by Wells Fargo and as advised to the Partnership from time to time.
Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo.
Effective April 21, 2017, the Partnership entered into a commodity futures customer agreement with Wedbush (the “Wedbush Customer Agreement”); however, the Partnership did not engage in any trading activity through Wedbush until June 26, 2017. The Partnership pays Wedbush trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, Wedbush does not pay interest on excess cash held in the Partnership’s account. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
Effective March 13, 2017, the Partnership entered into a commodity futures customer agreement with ADM (the “ADM Customer Agreement”); however, the Partnership did not engage in any trading activity through ADM until April 6, 2017. The Partnership pays ADM trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, ADM does not pay interest on excess cash held in the Partnership’s account. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
During prior periods included in this report, Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant, also served as commodity broker.
The Partnership’s trading of futures and option contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges. During the twelve months ended December 31, 2018 and 2017, the Partnership engaged in such trading through commodity brokerage accounts maintained with Wells Fargo, Wedbush and ADM. During prior periods included in this report, the Partnership engaged in such trading through commodity brokerage accounts maintained with MS&Co.
The General Partner and each Limited Partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each, except that no Limited Partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions and losses, if any.
Under the limited partnership agreement of the Partnership, as amended or restated from time to time (the “Limited Partnership Agreement”), the General Partner administers the business and affairs of the Partnership including selecting one or more advisors to make trading decisions for the Partnership. The Partnership pays the General Partner a monthly administrative fee in return for its services to the Partnership equal to 1/12 of 1.0% (1.0% per year) of month-end Net Assets per Class, for each outstanding Class, of the Partnership. Prior to October 1, 2014, the Partnership paid the General Partner a monthly administrative fee equal to 1/12 of 0.5% (0.5% per year) of month-end Net Assets per Class, for each outstanding Class, of the Partnership. Month-end Net Assets per Class, for the purpose of calculating administrative fees are Net Assets per Class, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s advisory fee, profit share allocation accrual, the administrative fee and any redemptions or distributions as of the end of such month. This fee may be increased or decreased at the discretion of the General Partner.
The Partnership will be liquidated upon the first to occur of the following: December 31, 2025; when the net asset value per Redeemable Unit of any Class decreases to less than $400 as of the close of trading on any business day; or under certain other circumstances as defined in the Limited Partnership Agreement. In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the Partnership’s aggregate net assets decline to less than $1,000,000.
For the period January 1, 2018 through December 31, 2018, the approximate average market sector allocation for the Partnership was 100% indices.
The Advisor, which is controlled by Scott C. Kimple, has served as the Partnership’s commodity trading advisor since inception. The General Partner and the Partnership have entered into an investment management agreement with the Advisor (the “Management Agreement”). The Advisor makes all commodity trading decisions for the Partnership and is not affiliated with Wells Fargo, Wedbush, ADM or MS&Co.
The Advisor is not responsible for the organization of the Partnership. Pursuant to the terms of the Management Agreement, the Partnership pays the Advisor a monthly advisory fee equal to 1/12 of 2.00% (2% per year) of month-end Net Assets per Class, for each outstanding Class, managed by the Advisor. Month-end Net Assets per Class, for each outstanding Class, for the purpose of calculating advisory fees are Net Assets per Class, for each outstanding Class, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s advisory fee, profit share allocation accrual, the administrative fee and any redemptions or distributions as of the end of such month. The Management Agreement continues in effect until the earlier of the dissolution of the Partnership or termination upon notice by any party thereunder.
In addition, the Special Limited Partner receives a quarterly profit share allocation to its capital account in the Partnership in the form of Redeemable Units of the Partnership, the value of which shall be equal to 20% of new trading profits, as defined in the Limited Partnership Agreement, earned for each outstanding Class by the Advisor on behalf of the Partnership during each calendar quarter and are issued as Special Limited Partner unit equivalents. The Special Limited Partner will not receive a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.
Under a commodity futures customer agreement with MS&Co. (the “MS&Co. Customer Agreement”), the Partnership paid trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “MS&Co. clearing fees”) directly. During the term of the MS&Co. Customer Agreement, all of the Partnership’s assets were deposited in the Partnership’s account at MS&Co. The Partnership’s cash was deposited by MS&Co. in segregated bank accounts to the extent required by CFTC regulations. MS&Co. paid the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s brokerage account at the rate equal to the monthly average of the 4-week U.S. T-Bill discount rate. The MS&Co. Customer Agreement gave the Partnership the legal right to net unrealized gains and losses on open futures and option contracts.
Under the Wells Fargo Customer Agreement during the reporting period and prior periods covered by this report, the Partnership paid trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “Wells Fargo clearing fees”) directly. During the term of the Wells Fargo Customer Agreement, the portion of the Partnership’s cash held at Wells Fargo is in segregated bank accounts to the extent required by CFTC regulations. At December 31, 2018 and 2017 the amount of cash held for margin requirements at Wells Fargo was $0 and $8,446,588, respectively. Wells Fargo agreed to pay the Partnership interest on 90% of the average daily equity maintained in cash in the Partnership’s segregated account at the rate equal to the monthly average of the 90-day T-Bill rate. The Wells Fargo Customer Agreement gave the Partnership the legal right to net unrealized gains and losses on open futures and option contracts. Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo.
Under the Wedbush and ADM Customer Agreements, the Partnership pays trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “Wedbush, ADM clearing fees,” and together with the MS & Co. clearing fees and the Wells Fargo clearing fees, the “clearing fees”) directly. Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. The portion of the Partnership’s cash held at Wedbush and ADM are in segregated bank accounts to the extent required by CFTC regulations. At December 31, 2018 and 2017 the amount of cash held for margin requirements at Wedbush and ADM was $0, $218,362 and $0, $480,398, respectively. Wedbush and ADM do not pay interest on excess cash held in the Partnership’s accounts. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
The Partnership maintains a continuing services agreement with Morgan Stanley Smith Barney LLC (d/b/a Morgan Stanley Wealth Management). Pursuant to the continuing services agreement, Morgan Stanley Wealth Management will receive a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Morgan Stanley Wealth Management (the “MS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Morgan Stanley Wealth Management shall continue only for as long as the MS Interests remain outstanding.
The Partnership maintains a selling agreement with Robert W. Baird & Co. Incorporated (“Baird”). Pursuant to the selling agreement, Baird will receive a monthly ongoing selling agent fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. With respect to current Limited Partners that are customers of Baird, the Partnership shall pay Baird a monthly ongoing maintenance fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units for services provided to such current Limited Partners.
The Partnership maintains a continuing services agreement with Credit Suisse Securities (USA) LLC. Pursuant to the continuing services agreement, Credit Suisse Securities (USA) LLC will receive a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Credit Suisse Securities (USA) LLC (the “CS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Credit Suisse Securities (USA) LLC shall continue only for as long as the CS Interests remain outstanding.
(b)
Financial Information about Segments .
The Partnership’s business consists of only one segment, speculative trading of commodity interests. The Partnership does not engage in sales of goods or services. The Partnership’s net income (loss) from operations for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 is set forth under “Item 6. Selected Financial Data .” The Partnership’s capital as of December 31, 2018, was $45,346,263.
(c)
Narrative Description of Business .
See Paragraphs (a) and (b) above.
(i) through (xii) - Not applicable.
(xiii) - The Partnership has no employees.
(d)
Financial Information About Geographic Areas .
The Partnership does not engage in sales of goods or services or own any long-lived assets, and therefore, this item is not applicable.
(e)
Available Information .
The Partnership does not have an Internet address. The Partnership will provide paper copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports free of charge upon request.
(f)
Reports to Security Holders .
Not applicable.
(g)
Enforceability of Civil Liabilities Against Foreign Persons .
Not applicable.
(h)
Smaller Reporting Companies .
Not applicable.
Item 1A.
Item 1A.
Risk Factors .
As a result of leverage, small changes in the price of the Partnership’s positions may result in major losses.
The trading of commodity interests is speculative, volatile and involves a high degree of leverage. A small change in the market price of a commodity interest contract can produce major losses for the Partnership. Market prices can be influenced by, among other things, changing supply and demand relationships, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, weather and climate conditions, insects and plant disease, purchases and sales by foreign countries and changing interest rates.
An investor may lose all of its investment.
Due to the speculative nature of trading commodity interests, an investor could lose all of its investment in the Partnership.
The Partnership will pay substantial fees and expenses regardless of profitability.
Regardless of its trading performance, the Partnership will incur fees and expenses, including clearing, ongoing selling agent and advisory fees.
An investor’s ability to redeem Redeemable Units is limited.
An investor’s ability to redeem Redeemable Units is limited and no market exists for the Redeemable Units.
Conflicts of interest exist.
The Partnership is subject to numerous conflicts of interest including those that arise from the facts that:
1.
The General Partner and the Partnership’s Advisor are affiliates;
2.
The Advisor, the Partnership’s commodity broker and their respective principals and affiliates may trade in commodity interests for their own accounts; and
3.
An investor’s financial advisor will receive ongoing compensation for providing services to the investor’s account.
Investing in Redeemable Units might not provide the desired diversification of an investor’s overall portfolio.
Although the Partnership is an alternative investment, the Partnership’s objective is not to provide any benefit of portfolio diversification.
Past performance is no assurance of future results.
The Advisor’s trading strategies may not perform as they have performed in the past. The Advisor has from time to time incurred substantial losses in trading on behalf of clients.
The Partnership relies on the availability and services of a single trading principal, Scott C. Kimple.
The services of Scott C. Kimple, the Advisor’s sole trading principal, are essential to the business of the Advisor. If his services are no longer available, the continued ability of the Advisor to operate would be subject to substantial uncertainty. In addition, Mr. Kimple will devote to the affairs of the Partnership and will devote to the trading affairs of any particular account only such time as he in his sole discretion deems necessary.
An investor’s tax liability may exceed cash distributions.
Investors are taxed on their share of the Partnership’s income, even though the Partnership does not intend to make any distributions.
Regulatory changes could restrict the Partnership’s operations and increase its operational costs.
Regulatory changes could adversely affect the Partnership by restricting its markets or activities, limiting its trading and/or increasing costs or the taxes to which investors are subject. Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, the CFTC and the SEC have promulgated rules to regulate swaps dealers and to mandate additional reporting and disclosure requirements and continue to promulgate rules regarding capital and margin requirements to require that certain swaps be traded on an exchange or a swap execution facility, and to require that derivatives (such as those traded by the Partnership) be moved into central clearinghouses. In addition, the prudential regulators that oversee many swap dealers have also proposed rules regarding capital requirements for such swap dealers and margin requirements for derivatives. These rules may negatively impact the manner in which swap contracts are traded and/or settled, increase the costs of such trades, and limit trading by speculators (such as the Partnership) in futures and over-the-counter (“OTC”) markets.
Speculative position and trading limits may reduce profitability.
The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person or a group of persons may hold or control in particular futures, options on futures and swaps that perform a significant price discovery function. Most exchanges also limit the amount of fluctuation in commodity futures contract prices on a single trading day. The Advisor believes that established speculative position and trading limits will not materially adversely affect trading for the Partnership. The trading instructions of the Advisor, however, may have to be modified, and positions held by the Partnership may have to be liquidated, in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and limiting potential profits on the liquidated positions.
In December 2016, the CFTC re-proposed new rules regarding speculative position limits, replacing a prior proposal from November 2013. These rules, if adopted in substantially the same form, will impose position limits on certain futures and option contracts and physical commodity swaps that are “economically equivalent” to such contracts. If enacted, these rules could have an adverse effect on an Advisor’s trading for the Partnership.
Item 2.
Item 2.
Properties.
The Partnership does not own or lease any properties.
Item 3.
Item 3.
Legal Proceedings.
There are no material legal proceedings pending against the Partnership, the General Partner or its affiliates.
Item 4.
Item 4.
Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities .
(a)
Market Information . The Partnership has issued no stock. There is no public market for the Redeemable Units.
(b)
Holders . The number of holders of Redeemable Units as of February 28, 2019, was 448 for Class A Units and 4 for Class D Units.
(c)
Dividends . The Partnership did not declare any distributions in 2018 or 2017. The Partnership does not intend to declare distributions in the foreseeable future.
(d)
Securities Authorized for Issuance Under Equity Compensation Plans . None.
(e)
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities . For the twelve months ended December 31, 2018 and 2017, and 2016 there were no subscriptions of Class A or Class D Redeemable Units.
The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by accredited investors as described in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.
Proceeds from additional subscriptions of Redeemable Units are used in the trading of commodity interests including futures and option contracts.
(f)
Purchases of Equity Securities by the Issuer and Affiliated Purchasers .
The following chart sets forth the purchases of Redeemable Units for each Class by the Partnership.
*
Generally, Limited Partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for Limited Partners.
**
Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.
Item 6.
Item 6.
Selected Financial Data .
The selected historical financial data presented below has been derived in part from, and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Overview
The Partnership aims to achieve capital appreciation through speculative trading, directly and indirectly, primarily in the U.S. market for stock indices. The Partnership may also hold T-Bills. The Partnership may employ futures and option contracts in those markets. Additionally, the Partnership does not currently intend to, but may in the future, employ spot and forward contracts in those markets.
The General Partner manages all business of the Partnership. The General Partner has delegated its responsibility for the investment of the Partnership’s assets to the Advisor. In conjunction with the Partnership’s third party administrator, the accounting and operations staff provides processing of subscriptions and redemptions and reporting to limited partners and regulatory authorities. The General Partner also includes staff involved in marketing and sales support. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.
In addition, the General Partner prepares the books and records and provides the administrative and compliance services that are required by law or regulation, from time to time, in connection with operation of the Partnership. These services include the preparation of required books and records and reports to limited partners, government agencies and regulators; computation of net asset value; calculation of fees; assistance in connection with subscriptions, redemptions and limited partner communications; and preparation of offering documents and sales literature.
While the Partnership has the right to seek lower commission rates and fees from other commodity brokers at any time, the General Partner believes that the futures and cleared swaps agreement and other arrangements with the commodity broker are fair, reasonable, and competitive.
The Advisor trades primarily futures contracts and options on futures contracts on the S&P 500® Index. The Advisor’s trading strategy, however, may also include the trading of additional commodity interests such as U.S. Treasury bonds and currencies. Currently, the Advisor limits its trading to listed futures and options on futures contracts on U.S. futures and option exchanges.
The strategies incorporate both directional and non-directional elements. Directional strategies will utilize options and combinations of options with the goal of capturing specific moves in the price of the underlying commodity interest. Non-directional strategies attempt to capture and retain premiums on the sale of uncovered options and combinations of options. The Advisor may employ combinations of options commonly known as “spreads” or “straddles” in conjunction with both directional and non-directional strategies. “Spreads” and “straddles” involve the simultaneous buying and selling of contracts on the same commodity, but with different delivery dates or markets.
The trading methods and strategies are designed to preserve original equity. Each trade is analyzed using a mathematical pricing model to determine if its potential return justifies the attendant risk. Risk management techniques emphasize low standard deviation trades over those that appear to have greater risk. The Advisor’s Strategic Trading Program (formerly, the “Core Trading Program”), the Advisor’s proprietary, systematic program, attempts to limit the equity at risk on each trade and in each market. The Advisor will attempt to minimize the risks associated with adverse moves in either price or volatility through various hedging techniques. The specific method or extent of hedging at any time will be determined subjectively by the Advisor. There is no assurance that hedging techniques will be effective in reducing risk.
The trading strategies have been internally researched and developed. They are primarily technical in nature, i.e., they are developed from the research and analysis of patterns of intra-day, daily, weekly and monthly price movements, and of proprietary indicators or standard indicators such as volume and open interest. The Advisor considers the effects of some key fundamental factors in certain situations, especially for the purpose of risk control. The time frame for holding a position is usually less than five weeks. The trading program also emphasizes current and ongoing research and analysis of market behavior to continue developing the strategies.
The Advisor believes that the development of a commodity trading strategy is a continual process. As a result of further research and analysis into the performance of the Advisor’s methods, changes may be made from time to time in the specific manner in which these trading methods are employed. As a result of such modifications, the trading methods used in the future might differ from those currently employed.
The exact nature of the Advisor’s methods are proprietary and confidential. The foregoing description is of necessity general and is not intended to be exhaustive. Trading decisions require the exercise of the Advisor’s judgment. The decision not to trade certain commodities or not to make certain trades may result at times in missing price moves and profits, which other advisors who are willing to trade these commodities may be able to capture. There is no assurance that the Advisor’s trading will be profitable.
Future trading performance may be affected by the increasing amount of funds directed by the Advisor. For example, in certain commodity interests the Advisor will be unable to acquire positions as large as its strategy might otherwise dictate because the size of
speculative positions is limited by legal regulations. Also, “skid” or “slippage” (the difference between ideal and actual trade execution prices, and the transaction costs resulting therefrom) will increase with the execution of larger orders.
As a managed futures partnership, the Partnership’s performance is dependent upon the successful trading of the Partnership’s Advisor to achieve the Partnership’s objectives.
Liquidity
The Partnership does not engage in sales of goods or services. Its only assets are its equity in its trading account (consisting of cash and cash margin, options purchased at fair value and U.S. government securities at fair value), and interest receivable. Because of the low margin deposits normally required in commodity trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the year ended December 31, 2018.
To minimize the risk relating to low margin deposits, the Partnership follows certain trading policies, including:
(i)
The Partnership invests its assets only in commodity interests that the Advisor believes are traded in sufficient volume to permit ease of taking and liquidating positions. Sufficient volume, in this context, refers to a level of liquidity that the Advisor believes will permit it to enter and exit trades without noticeably moving the market.
(ii)
The Advisor will not initiate additional positions in any commodity if these positions would result in aggregate positions requiring a margin of more than 66 2/3% of the Partnership’s net assets allocated to the Advisor.
(iii)
The Partnership will not employ the trading technique commonly known as “pyramiding,” in which the speculator uses unrealized profits on existing positions as margin for the purchases or sale of additional positions in the same or related commodities.
(iv)
The Partnership will not utilize borrowings other than short-term borrowings if the Partnership takes delivery of any cash commodities.
(v)
The Advisor may, from time to time, employ trading strategies such as spreads or straddles on behalf of the Partnership. The terms “spread” and “straddle” describe commodity futures trading strategies involving the simultaneous buying and selling of futures contracts on the same commodity but involving different delivery dates or markets.
(vi)
The Partnership will not permit the churning of its commodity trading account. The term “churning” refers to the practice of entering and exiting trades with a frequency unwarranted by legitimate efforts to profit from the trades, indicating the desire to generate commission income.
From January 1, 2018 through December 31, 2018, the Partnership’s average margin to equity ratio (i.e., the percentage of assets on deposit required for margin) was approximately 40.6%.
In the normal course of business, the Partnership is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures and options, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or OTC. Exchange-traded instruments include futures and certain standardized swap, forward and option contracts. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. None of the Partnership’s current contracts are traded OTC, although contracts may be traded OTC in the future.
The risk to the Limited Partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership is exposed to a market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership had credit risk and concentration risk during the reporting period and prior periods included in this report, as MS&Co., Wells Fargo, Wedbush and/or ADM, or their affiliates, were the sole counterparties or brokers with respect to the Partnership’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS&Co., Wells Fargo, Wedbush or ADM, or their affiliates, the Partnership’s counterparty is an exchange or clearing organization. Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo. The Partnership continues to be subject to such risks with respect to Wedbush and ADM.
The Partnership’s trading will be concentrated in exchange-traded futures and options on the S&P 500® Index. Concentration in a limited number of commodity interests may subject the Partnership’s account to greater volatility than if a more diversified portfolio of contracts were traded on behalf of the Partnership.
As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership does not consider these contracts to be guarantees.
The General Partner monitors and attempts to control the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions. (See also “Item 8. Financial Statements and Supplementary Data .” for further information on financial instrument risk included in the notes to the financial statements.)
Other than the risks inherent in commodity futures trading, the Partnership knows of no trends, demands, commitments, events or uncertainties which will result in or which are reasonably likely to result in the Partnership’s liquidity increasing or decreasing in any material way. The Limited Partnership Agreement provides that the Partnership will cease trading operations and liquidate all open positions under certain circumstances, including a decrease in net asset value per Redeemable Unit of any Class to less than $400 as of the close of trading on any business day. In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the Partnership’s aggregate net assets decline to less than $1,000,000.
Capital Resources
(i) The Partnership has made no material commitments for capital expenditures.
(ii) The Partnership’s capital consists of capital contributions of its partners, as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be predicted. Market movements in commodities are dependent upon fundamental and technical factors which the Advisor may or may not be able to identify, such as changing supply and demand relationships, weather, government, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. Partnership expenses consist of, among other things, clearing, ongoing selling agent, advisory and administrative fees. The level of these expenses is dependent upon the level of trading and the ability of the Advisor to identify and take advantage of price movements in the commodity markets, in addition to the level of Net Assets maintained. In addition, the amount of interest income payable by the Partnership’s commodity broker is dependent upon interest rates over which the Partnership had no control.
No forecast can be made as to the level of redemptions in any given period. A Limited Partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the end of each month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions generally are funded out of the Partnership’s cash holdings. For the year ended December 31, 2018, the Partnership’s capital decreased 23.2% from $59,045,216 to $45,346,263. This decrease was attributable to redemptions of 11,657.95 Class A Redeemable Units totaling $15,006,332, and 157.21 Class GP Redeemable Units totaling $200,000. This decrease was partially offset by net income of $1,505,615, coupled with 1.36 Class GP units from profit share allocations totaling $1,764. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.
Critical Accounting Policies
Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The General Partner believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 2, “Accounting Policies” of “Item 8. Financial Statements and Supplementary Data .”
Partnerships Fair Value Measurements. The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses.
Results of Operations
For the year ended December 31, 2018 the net asset value per Class A unit increased 2.5% from $1,253.14 to $1,283.90. For the year ended December 31, 2018, the net asset value per Class D unit increased 3.4% from $1,341.44 to $1,386.66. For the year ended December 31, 2017 the net asset value per Class A unit increased 1.5% from $1,234.93 to $1,253.14. For the year ended December 31, 2017, the net asset value per Class D unit increased 2.5% from $1,309.33 to $1,341.44.For the year ended December 31, 2016 the net asset value per Class A unit increased 4.4% from $1,183.23 to $1,234.93. For the year ended December 31, 2016, the net asset value per Class D unit increased 5.4% from $1,242.14 to $1,309.33.
The Partnership experienced a net trading gain of $4,722,848 before fees and expenses and interest income for the year ended December 31, 2018. Gains were primarily attributable to the trading of the S&P® Index futures and S&P® Index Puts. The net trading gain or loss for the Partnership is disclosed on page 25 under “Item 8. Financial Statements and Supplementary Data. ”
During 2018, the Partnership recorded an increase in Net Asset Value per unit as trading profits were recorded during February, March, June, July, September, October and November. These profits were partially offset by trading losses incurred in January, April, May, August and December. All loss months were minimal with the largest loss incurred in December as the strong market decline caused much of the premium spent on ratio put spreads to expire worthless. The largest gain of the year was recorded in October as a rapid decline in the markets led to profits on long ratio put spreads.
The Partnership experienced a net trading gain of $5,774,488 before fees and expenses and interest income for the year ended December 31, 2017. Gains were primarily attributable to the trading of the S&P Index futures and S&P Index Puts.
During 2017, the Partnership recorded an increase in Net Asset Value per unit as trading profits were recorded during January, March, April, May and June. These profits were partially offset by trading losses incurred in February, and July through December. All loss months were minimal with the largest loss incurred in November as the strong market rally caused much of the premium spent on ratio put spreads to expire worthless. The largest gain of the year was recorded in March as a rapid decline in the markets led to profits on long ratio put spreads.
The Partnership experienced a net trading gain of $8,034,364 before fees and expenses and interest income for the year ended December 31, 2016. Gains were primarily attributable to the trading of the S&P Index futures and S&P Index Puts. The net trading gain or loss for the partnership is discussed on page 25 under “Item 8. Financial Statements and Supplementary Data.
During 2016, the Partnership recorded an increase in Net Asset Value per unit as trading profits recorded during April, May, June, August, September, October, and December. These profits were partially offset by trading losses incurred in January, February, March, July, and November. All loss months were minimal with the largest loss incurred during November as the strong rally on the heels of the U.S. presidential election caused much of the premium spent on long ratio put spreads to expire worthless. The Partnership’s losses in other months were offset by trading gains achieved with some moderate to higher volatility. The surprise Brexit referendum result in June helped the partnership to post its strongest return of the year. Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership expects to increase capital through operations.
Interest income is earned at Wells Fargo at 90% of the 90-day T-Bill discount rate on assets maintained in cash and on a percentage of the Partnership’s assets that are directly invested in T-Bills. Wedbush and ADM do not pay interest on assets maintained in cash in the Partnership’s brokerage accounts. Interest income for the three and twelve months ended December 31, 2018 increased by $71,560 and $295,394, respectively, as compared to the corresponding periods in 2017. The increase in interest income is due to higher T-Bill
rates during the three and twelve months ended December 31, 2018, as compared to the corresponding periods in 2017. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership during the reporting period and prior periods included in this report depended on the average daily equity in the Partnership’s account and upon interest rates earned by the Partnership at Wells Fargo and MS&Co.
Ongoing selling agent fees are calculated on the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset value. Ongoing selling agent fees for the three and twelve months ended December 31, 2018 decreased by $54,697 and $233,674, respectively, as compared to the corresponding periods in 2017. This decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2018, as compared to the corresponding periods in 2017.
Clearing fees are based on the number of trades executed by the Advisor for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three and twelve months ended December 31, 2018 decreased by $6,015 and increased by $23,359, respectively, as compared to the corresponding periods in 2017. The increase or decrease in clearing fees is primarily due to an increase or decrease in the number of trades executed during the three and twelve months ended December 31, 2018, as compared to the corresponding periods in 2017. All clearing fees are borne by the Partnership.
Advisory/management fees, which are paid to the Advisor, are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Advisory/management fees for the three and twelve months ended December 31, 2018 decreased by $54,545 and $235,786, respectively, as compared to the corresponding periods in 2017. The decrease in advisory/management fees is due to lower average net assets during the three and twelve months ended December 31, 2018, as compared to the corresponding periods in 2017.
Administrative fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Administrative fees for the three and twelve months ended December 31, 2018 decreased by $27,273 and $117,894, respectively, as compared to the corresponding periods in 2017. The decrease in administrative fees for the three and twelve months ended December 31, 2018 is due to lower average net assets during the period as compared to the corresponding periods in 2017.
Special Limited Partner profit share allocations (incentive fees) are based on the new trading profits earned by the Advisor on behalf of the Partnership, at the end of the quarter, as defined in the Limited Partnership Agreement among the Partnership, the General Partner, the Special Limited Partner and the Advisor. Profit share allocations for the three and twelve months ended December 31, 2018 decreased by $0 and $452,055, respectively, as compared to the corresponding periods in 2017.
The Partnership pays professional fees, which generally include legal and accounting expenses related to the offering. Professional fees for the years ended December 31, 2018 and 2017 were $290,908 and $200,106, respectively.
The Partnership pays other expenses, which generally include certain offering costs and filing, reporting and data processing fees. Other expenses for the years ended December 31, 2018 and 2017 were $9,893 and $149,895, respectively.
In allocating substantially all of the assets of the Partnership to the Advisor, the General Partner considers the Advisor’s past performance, trading style, volatility of the markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.
Off-balance Sheet Arrangements . None.
Contractual Obligations . None.
Operational Risk
The Partnership is directly exposed to market risk and credit risk, which arise in the normal course of its business activities. Slightly less direct, but of critical importance, are risks pertaining to operational and back office support. This is particularly the case in a rapidly changing and increasingly global environment with increasing transaction volumes and an expansion in the number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement Risk - the risk of financial and opportunity loss and legal liability attributable to operational problems, such as inaccurate pricing of transactions, untimely trade execution, clearance and/or settlement, or the inability to process large volumes of transactions. The Partnership is subject to increased risks with respect to its trading activities in emerging market securities, where clearance, settlement, and custodial risks are often greater than in more established markets.
Technological Risk - the risk of loss attributable to technological limitations or hardware failure that constrain the Partnership’s ability to gather, process, and communicate information efficiently and securely, without interruption, to customers, and in the markets where the Partnership participates. Additionally, the General Partner’s computer systems may be vulnerable to unauthorized access, mishandling or misuse, computer viruses or malware, cyber-attacks and other events that could have a security impact on such systems. If one or more of such events occur, this potentially could jeopardize a limited partner’s personal, confidential, proprietary or other information processed and stored in, and transmitted through, the General Partner’s computer systems, and adversely affect the Partnership’s business, financial condition or results of operations.
Legal/Documentation Risk - the risk of loss attributable to deficiencies in the documentation of transactions (such as trade confirmations) and customer relationships (such as master netting agreements) or errors that result in noncompliance with applicable legal and regulatory requirements.
Financial Control Risk - the risk of loss attributable to limitations in financial systems and controls. Strong financial systems and controls ensure that assets are safeguarded, that transactions are executed in accordance with the General Partner’s authorization, and that financial information utilized by the General Partner and communicated to external parties, including the limited partners, creditors, and regulators, is free of material errors.
Item 7A.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk .
Introduction
The Partnership is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.
The Limited Partners will not be liable for losses exceeding the current net asset value of their investment. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
Market movements result in frequent changes in the fair value of the Partnership’s open positions and, consequently, in its earnings and cash balance. The Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s open positions and the liquidity of the markets in which it trades.
The Partnership rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s past performance is not necessarily indicative of its future results.
“Value at Risk” is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to Value at Risk or by the Partnership’s attempts to manage its market risk.
Materiality as used in this section, “Qualitative and Quantitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Partnership’s market sensitive instruments.
Quantifying the Partnership’s Trading Value at Risk
The following quantitative disclosures regarding the Partnership’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”)).
All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor except for statements of historical fact (such as the terms of particular contracts and the number of market risk sensitive instruments held during or at the end of the reporting period).
The Partnership’s risk exposure in the various market sectors traded by the Advisor is quantified below in terms of Value at Risk. Due to the Partnership’s mark-to-market accounting, any loss in the fair value of the Partnership’s open positions is directly reflected in the Partnership’s earnings (realized or unrealized) and cash balance. Exchange margin requirements have been used by the Partnership as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day intervals. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded, the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.
The fair value of the Partnership’s futures and forward contracts does not have any optionality component. However, the Advisor does trade commodity options. The Value at Risk associated with options is reflected in the following table as the margin requirement attributable to the instrument underlying each option. Where this instrument is a futures contract, the futures margin has been used. This calculation is conservative in that it assumes that the fair value of an option will decline by the same amount as the fair value of the underlying instrument, whereas, in fact, the fair values of the options traded by the Partnership in almost all cases fluctuate to a lesser extent than those of the underlying instruments.
In quantifying the Partnership’s Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been added to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Partnership’s positions are rarely, if ever, 100% positively correlated have not been reflected.
The Partnership’s Trading Value at Risk in Different Market Sectors
Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2018 and 2017, and the highest, lowest and average value at any point during the two years. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below. As of December 31, 2018, the Partnership’s total capitalization was $45,346,263.
December 31, 2018
As of December 31, 2017, the Partnership’s total capitalization was $59,045,216.
December 31, 2017
*
Annual average of month-end Value at Risk.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is typically many times the applicable margin requirement (margin requirements generally range between 1% and 15% of contract face value, although an exchange may increase margin requirements on short notice) as well as many times the capitalization of the Partnership. The magnitude of the Partnership’s open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions - unusual, but historically recurring from time to time - could cause the Partnership to incur severe losses over a short period of time. The foregoing Value at Risk tables - as well as the past performance of the Partnership - give no indication of this “risk of ruin.”
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership’s market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Partnership manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Partnership’s primary market risk exposures, as well as the strategies used and to be used by the General Partner and the Advisor for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the management strategies of the Partnership. There can be no assurance that the Partnership’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership as of December 31, 2018, by market sector.
Indices . The Partnership’s primary equity exposure is to equity price risk in the CME S&P Index.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partner monitors and attempts to control the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems and accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject.
The General Partner monitors the Partnership’s performance and the concentration of open positions, and consults with the Advisor concerning the Partnership’s overall risk profile. If the General Partner felt it necessary to do so, the General Partner could require the Advisor to close out positions as well as enter positions traded on behalf of the Partnership. However, any such intervention would be a highly unusual event. The General Partner primarily relies on the Advisor’s own risk control policies while maintaining a general supervisory overview of the Partnership’s market risk exposures.
The Advisor applies its own risk management policies to its trading. The Advisor often follows diversification guidelines, margin limits and stop loss points to exit a position. The Advisor’s research of risk management often suggests ongoing modifications to its trading programs.
Item 8.
Item 8.
Financial Statements and Supplementary Data.
The following financial statements and related items of the Partnership are filed under this Item 8: Oath or Affirmation, Management’s Report on Internal Control over Financial Reporting, Report of Independent Registered Public Accounting Firm, for the years ended December 31, 2018, 2017 and 2016; Statements of Financial Condition at December 31, 2018 and 2017; Condensed Schedules of Investments at December 31, 2018 and 2017; Statements of Income and Expenses for the years ended December 31, 2018, 2017 and 2016; Statements of Changes in Partners’ Capital for the years ended December 31, 2018, 2017 and 2016; and Notes to Financial Statements.
To the Limited Partners of
Managed Futures Premier Warrington L.P.
To the best of the knowledge and belief of the undersigned, the information contained herein is accurate and complete.
Management’s Report on Internal Control Over Financial Reporting
The management of Managed Futures Premier Warrington L.P. (the “Partnership”), Warrington GP, LLC, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a - 15(f) and 15d - 15(f) under the Securities Exchange Act of 1934 and for our assessment of internal control over financial reporting. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Partnership’s internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and
(iii)
provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The management of Managed Futures Premier Warrington L.P. has assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that the Partnership maintained effective internal control over financial reporting as of December 31, 2018 based on the criteria referred to above.
Scott C. Kimple
Sole Manager
Warrington GP, LLC
General Partner,
Managed Futures Premier Warrington L.P.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Managed Futures Premier Warrington L.P.:
Opinion on the Financial Statements
We have audited the accompanying statements of financial condition, including the condensed schedules of investments, of Managed Futures Premier Warrington L.P. (the Partnership) as of December 31, 2018 and 2017, and the related statements of income and expenses and changes in partners’ capital for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion the financial statements present fairly in all material respects, the financial position of the Partnership as of December 31, 2018 and 2017, and the results of its operations and changes in its partners’ capital for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WEAVER AND TIDWELL, L.L.P.
We have served as the Partnership’s auditor since 2017.
Fort Worth, Texas
March 22, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Managed Futures Premier Warrington L.P.:
We have audited the accompanying statements of income and expenses and changes in partners’ capital of Managed Futures Premier Warrington L.P. (the “Partnership”) for the year ended December 31, 2016. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the results of operations and changes in partners’ capital of Managed Futures Premier Warrington L.P. for the year ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
March 27, 2018
Managed Futures Premier Warrington L.P.
Statements of Financial Condition
December 31, 2018 and 2017
See accompanying notes to financial statements.
Managed Futures Premier Warrington L.P.
Condensed Schedule of Investments
December 31, 2018
See accompanying notes to financial statements.
Managed Futures Premier Warrington L.P.
Condensed Schedule of Investments
December 31, 2017
See accompanying notes to financial statements.
Managed Futures Premier Warrington L.P.
Statements of Income and Expenses
for the years ended December 31, 2018, 2017 and 2016
*
Based on change in net asset value per unit.
**
Class GP commenced on May 1, 2015 (325.0000 units).
See accompanying notes to financial statements.
Managed Futures Premier Warrington L.P.
Statements of Changes in Partners’ Capital
for the years ended December 31, 2018, 2017 and 2016
Net Asset Value Per Unit:
* Class GP commenced on May 1, 2015.
See accompanying notes to financial statements.
Managed Futures Premier Warrington L.P.
Notes to Financial Statements
December 31, 2018
1.
Partnership Organization:
Managed Futures Premier Warrington L.P. (formerly known as Warrington Fund L.P.) (the “Partnership”) is a limited partnership organized on November 28, 2005, under the partnership laws of the State of New York to engage in the speculative trading of commodity interests including futures and option contracts. The Partnership does not currently intend to, but may in the future, engage in transactions in spot and forward markets. The Partnership primarily trades futures and options in the stock indices sector. The Partnership may also hold T-Bills. The Partnership commenced trading on February 21, 2006. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership privately and continuously offers redeemable units of limited partnership interest (“Redeemable Units”) in the Partnership to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Effective as of the close of business on March 31, 2015, Warrington GP, LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is beneficially owned by Scott C. Kimple. From inception to the close of business on March 31, 2015, Ceres Managed Futures LLC, a Delaware limited liability company, acted as the general partner (“CMF GP”) and commodity pool operator of the Partnership. On January 9, 2015, Scott C. Kimple proposed in a Proxy Statement, which was filed with the Securities and Exchange Commission (the “SEC”) and distributed to Limited Partners (defined below), that Warrington GP, LLC become the new general partner of the Partnership. The requisite number of each class of limited partnership interests approved the proposals described in the Proxy Statement, and, as a result, Warrington GP, LLC became the new general partner of the Partnership effective as of the close of business on March 31, 2015. CMF GP withdrew as the general partner of the Partnership immediately following Warrington GP, LLC becoming the Partnership’s new general partner. References to the “General Partner” herein refer to Warrington GP, LLC and/or CMF GP, as the context requires.
Effective as of the close of business on March 31, 2015, Warrington SLP, LP, a Delaware limited liability company and an affiliate of the General Partner, became a special limited partner of the Partnership (the “Special Limited Partner”) and receives a quarterly profit share allocation equal to 20% of new trading profits from the Partnership in the form of Redeemable Units, subject to a high water mark.
All of the trading decisions for the Partnership are made by Warrington Asset Management LLC (the “Advisor”), an affiliate of the General Partner, using the Strategic Trading Program (formerly, the “Core Trading Program”), a proprietary trading program.
The General Partner is not aware of any material changes to the trading program discussed above during the fiscal year ended December 31, 2018.
On June 15, 2011, the Partnership began offering “Class A” Redeemable Units and “Class D” Redeemable Units pursuant to the offering memorandum. All outstanding Redeemable Units on June 15, 2011 were designated Class A Redeemable Units. The rights, powers, duties and obligations associated with the investment in Class A Redeemable Units were not changed. On October 1, 2011, the first Class D Redeemable Units were issued to limited partners of the Partnership (each a “Limited Partner”). Class A Redeemable Units and Class D Redeemable Units will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Redeemable Units that a Limited Partner receives will generally depend upon the amount invested in the Partnership, although the General Partner may determine to offer Class A Redeemable Units or Class D Redeemable Units to investors in its sole discretion. On May 1, 2015, a new share class of units of general partner interest “Class GP” was initiated to accept an investment from the General Partner.
During the twelve months ended December 31, 2018, the Partnership’s commodity brokers were Wells Fargo Securities, LLC (“Wells Fargo”), Wedbush Securities, Inc. (“Wedbush”) and ADM Investor Services, Inc. (“ADM”), all of which are registered futures commission merchants. Effective April 1, 2015, the Partnership entered into a futures and cleared swaps agreement with Wells Fargo (the “Wells Fargo Customer Agreement”). Under the Wells Fargo Customer Agreement, during the reporting period and prior periods included in this report, the Partnership paid Wells Fargo trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, Wells Fargo paid the Partnership interest on excess cash held in the Partnership’s account at rates customarily paid by Wells Fargo and as advised to the Partnership from time to time. Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo.
Effective April 21, 2017, the Partnership entered into a commodity futures customer agreement with Wedbush (the “Wedbush Customer Agreement”); however, the Partnership did not engage in any trading activity through Wedbush until June 26, 2017. The Partnership pays Wedbush trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, Wedbush does not pay interest on excess cash held in the Partnership’s account. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
Effective March 13, 2017, the Partnership entered into a commodity futures customer agreement with ADM (the “ADM Customer Agreement”); however, the Partnership did not engage in any trading activity through ADM until April 6, 2017. The Partnership pays ADM trading fees for the clearing and, if applicable, execution of transactions. In addition, with respect to excess cash, ADM does not pay interest on excess cash held in the Partnership’s account. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
The General Partner and each Limited Partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each, except that no Limited Partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions and losses, if any.
The Partnership’s trading of futures and option contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges. During the twelve months ended December 31, 2018, the Partnership engaged in such trading through commodity brokerage accounts maintained with Wells Fargo, Wedbush and ADM. Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo. The Partnership continues to engage in such trading through commodity brokerage accounts at Wedbush and ADM.
The Partnership will be liquidated upon the first to occur of the following: December 31, 2025; when the net asset value per Redeemable Unit of any Class decreases to less than $400 as of the close of trading on any business day; or under certain other circumstances as defined in the limited partnership agreement of the Partnership, as amended or restated from time to time (the “Limited Partnership Agreement”). In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the Partnership’s aggregate net assets decline to less than $1,000,000.
2.
Accounting Policies:
a.
Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates. The General Partner believes that the estimates utilized in preparing the financial statements are reasonable.
b.
Partnership’s Investments. All commodity interests (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on the trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on options are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are included in the Statements of Income and Expenses. The Partnership’s investments in U.S. government securities as of December 31, 2018 consist of short-term T-Bills. The T-Bills are reported at cost plus accrued interest, which approximates fair value.
c.
Partnership’s Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. The General Partner has concluded that based on available information in the marketplace, the Partnership’s Level 1 assets and liabilities are actively traded.
The Partnership will separately present purchases, sales, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Partnership considers prices for exchange-traded commodity futures and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of futures and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the years ended December 31, 2018 and 2017, the Partnership did not hold any derivative instruments for which market quotations were not readily available and which were priced by broker-dealers that derive fair values for those assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). As such a rollforward of Level 3 derivative instruments was not presented, nor was a table presenting unobservable inputs used by management in the fair value measurement process. During the years ended December 31, 2018 and 2017, there were no transfers of assets or liabilities between Level 1 and Level 2.
d.
Futures Contracts. The Partnership trades futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500® Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Partnership each business day, depending on the daily fluctuations in the value of the underlying instruments, and are recorded as unrealized gains or losses by the Partnership. When the contract is closed, the Partnership records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both
initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses.
e.
Options. The Partnership may purchase and write (sell) both exchange listed and over-the-counter (“OTC”) options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Partnership writes an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Partnership purchases an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in net unrealized gains (losses) on option contracts are included in the Statements of Income and Expenses.
f.
Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on their share of the Partnership’s income and expenses.
GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. The General Partner has concluded that no provision for income tax is required in the Partnership’s financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2014 through 2018 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.
g.
United States Treasury Bills. The fair value of T-Bills is determined monthly based on the T-Bills’ cost plus accrued interest, which approximates fair value.
h.
Investment Company Status . Based on the General Partner’s assessment, the Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Topic 946 and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses.
3.
Agreements:
a.
Limited Partnership Agreement:
The General Partner administers the business and affairs of the Partnership including selecting one or more advisors to make trading decisions for the Partnership. The Partnership pays the General Partner a monthly administrative fee in return for its services to the Partnership equal to 1/12 of 1% (1% per year) of month-end Net Assets per Class, for each outstanding Class, of the Partnership. Prior to October 1, 2014, the Partnership paid the General Partner a monthly administrative fee equal to 1/12 of 0.5% (0.5% per year) of month-end Net Assets per Class, for each outstanding Class, of the Partnership. Month-end Net Assets per Class, for the purpose of calculating administrative fees are Net Assets per Class, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s advisory fee, profit share allocation accrual, the administrative fee and any redemptions or distributions as of the end of such month. This fee may be increased or decreased at the discretion of the General Partner.
b.
Management Agreement:
The Advisor or one of its affiliates, all of which are controlled by Scott C. Kimple, has served as the Partnership’s commodity trading advisor since inception. The General Partner and the Partnership have entered into a management agreement (the “Management Agreement”) with the Advisor. As compensation for services, the Partnership pays the Advisor a monthly advisory fee equal to 1/12 of 2% (2% per year) of month-end Net Assets per Class, for each outstanding Class, managed by the Advisor. Month-end Net Assets per Class, for each outstanding Class, for the purpose of calculating advisory fees are Net Assets per Class, for each outstanding Class, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s advisory fee, profit share allocation accrual, the administrative fee and any redemptions or distributions as of the end of such month. The Management Agreement may be terminated upon notice by any party thereunder.
In addition, the Special Limited Partner receives a quarterly profit share allocation to its capital account in the Partnership in the form of Redeemable Units of the Partnership, the value of which shall be equal to 20% of new trading profits, as defined in the Limited Partnership Agreement, earned for each outstanding Class by the Advisor on behalf of the Partnership during each calendar quarter and are issued as Special Limited Partner unit equivalents. The Special Limited Partner will not receive a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.
In allocating substantially all of the assets of the Partnership to the Advisor, the General Partner considers the Advisor’s past performance, trading style, volatility of the markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.
c.
Customer Agreement/Selling Agent Agreement:
During the fourth quarter of 2013, the Partnership entered into a Selling Agent Agreement with Morgan Stanley Wealth Management (the “Selling Agreement”). Effective April 1, 2015, the Partnership entered into the Wells Fargo Customer Agreement, continuing services agreements with each of Morgan Stanley Wealth Management and Credit Suisse Securities (USA) LLC and a selling agreement with Robert W. Baird & Co. Incorporated (“Baird”). The MS&Co. Customer Agreement and the Wells Fargo Customer Agreement have been terminated.
Under the Wells Fargo Customer Agreement, during the reporting period and prior periods included in this report, the Partnership paid trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “Wells Fargo clearing fees”) directly. During the term of the Wells Fargo Customer Agreement, all of the Partnership’s assets were deposited in the Partnership’s account at Wells Fargo. The portion of the Partnership’s cash held at Wells Fargo was deposited in segregated bank accounts to the extent required by CFTC regulations. At December 31, 2018 and 2017 the amount of cash held for margin requirements at Wells Fargo was $0 and $8,446,588, respectively. Wells Fargo agreed to pay the Partnership interest on 90% of the average daily equity maintained in cash in the Partnership’s segregated account at the rate equal to the monthly average of the 90-day T-Bill rate. Effective March 26, 2018, the Wells Fargo Customer Agreement was terminated. The Wells Fargo Customer Agreement was terminated because the Partnership is no longer engaged in such trading through accounts at Wells Fargo.
Under the MS&Co. Customer Agreement, the Partnership paid trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “MS&Co. clearing fees”) directly. During the term of the MS&Co. Customer Agreement, all of the Partnership’s assets were deposited in the Partnership’s account at MS&Co. The Partnership’s cash was deposited by MS&Co. in segregated bank accounts to the extent required by CFTC regulations. MS&Co. paid the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s brokerage account at the rate equal to the monthly average of the 4-week T-Bill discount rate. Effective March 31, 2015, the MS&Co. Customer Agreement was terminated.
Under the Wedbush and ADM Customer Agreements, the Partnership pays trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, clearing, user, give-up, floor brokerage and NFA fees (collectively, the “Wedbush, ADM clearing fees,” and together the Wells Fargo clearing fees, the “clearing fees”) directly. Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. The portion of the Partnership’s cash held at Wedbush and ADM are in segregated bank accounts to the extent required by CFTC regulations. At December 31, 2018 and 2017 the amount of cash held for margin requirements at Wedbush and ADM was $0 and $218,362, and $0 and $480,398, respectively. Wedbush and ADM do not pay interest on excess cash held in the Partnership’s accounts. The excess cash balances will be monitored and are expected to have an immaterial impact on the interest earned.
Under the Selling Agreement with Morgan Stanley Wealth Management, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to (i) 1/6 of 1% (2% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. For the period from April 1, 2014 to September 30, 2014, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to (i) 5/24 of 1% (2.5% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 1.25% (1.25% per year) of month-end Net Assets for Class D Redeemable Units. Prior to April 1, 2014, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to (i) 5/16 of 1% (3.75% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 1.50% (1.50% per year) of month-end Net Assets for Class D Redeemable Units. The selling agent fee received by Morgan Stanley Wealth Management was shared with the properly registered/licensed financial advisors of Morgan Stanley Wealth Management who sold Redeemable Units. Month-end Net Assets, for the purpose of calculating ongoing selling agent fees were Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fee, Advisory fee, profit share allocation accrual, the administrative fee and other expenses and any redemptions or distributions as of the end of such month.
Under the continuing services agreement with Morgan Stanley Wealth Management, the Partnership pays Morgan Stanley Wealth Management a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Morgan Stanley Wealth Management (the “MS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Morgan Stanley Wealth Management shall continue only for as long as the MS Interests remain outstanding.
Under the continuing services agreement with Credit Suisse Securities (USA) LLC, the Partnership pays Credit Suisse Securities (USA) LLC a monthly fee in respect of certain partnership interests which have been sold to certain individuals and entities with an ongoing relationship with Credit Suisse Securities (USA) LLC (the “CS Interests”) equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. The fees paid to Credit Suisse Securities (USA) LLC shall continue only for as long as the CS Interests remain outstanding.
Under the selling agreement with Baird, the Partnership pays Baird a monthly ongoing selling agent fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units. With respect to current Limited Partners that are customers of Baird, the Partnership shall pay Baird a monthly ongoing maintenance fee equal to (i) 1/12 of 2.00% (2.00% per year) of month-end Net Assets for Class A Redeemable Units and (ii) 1/12 of 0.75% (0.75% per year) of month-end Net Assets for Class D Redeemable Units for services provided to such current Limited Partners.
4.
Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses.
The Wedbush Customer Agreement and the ADM Customer Agreement give, and the Wells Fargo Customer Agreement gave the Partnership the legal right to net unrealized gains and losses on open futures and option contracts. The Partnership netted as applicable, for financial reporting purposes, the unrealized gains and losses on open futures and option contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification 210-20, “Balance Sheet,” have been met.
Ongoing selling agent fees paid to Baird, Morgan Stanley Wealth Management and Credit Suisse Securities (USA) LLC were calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and were affected by trading performance, subscriptions and redemptions.
Trading and transaction fees are based on the number of trades executed by the Advisor for the Partnership. All clearing fees paid to Wedbush, ADM and executing brokers, as applicable, are and all clearing fees paid to Wells Fargo, were, borne by the Partnership.
All of the commodity interests owned by the Partnership are held for trading purposes. The monthly average number of option contracts held during the years ended December 31, 2018 and 2017 were 1,280 and 3,506, respectively.
The following tables summarize the valuation of the Partnership’s investments as of December 31, 2018 and 2017:
The following table indicates the gross fair values of derivative instruments of option contracts as separate assets and liabilities as of December 31, 2018 and 2017:
*This amount is included in “Options purchased, at fair value” on the Statements of Financial Condition.
**
This amount is included in “Written options, at fair value” on the Statements of Financial Condition.
The following table indicates the trading gains and losses, by market sector, on derivative instruments for the years ended December 31, 2018, 2017 and 2016:
***
This amount is included in “Total trading results” on the Statements of Income and Expenses.
The following table rolls forward the transactions in Options Written for the year ended December 31, 2018:
5.
Subscriptions, Distributions and Redemptions:
Subscriptions are accepted monthly from investors and they become Limited Partners on the first day of the month after their subscription is processed. Distributions of profits, if any, will be made at the sole discretion of the General Partner and at such times as the General Partner may decide. A Limited Partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the end of a month on three business days’ notice to the General Partner. There is no fee charged to Limited Partners in connection with redemptions.
6.
Financial Highlights:
Changes in the net asset value per Unit for the years ended December 31, 2018, 2017 and 2016 were as follows:
Certain prior period amounts have been reclassified to conform to current period presentation. In the financial highlights, the ongoing selling agent fees and clearing fees which were previously included in net realized and unrealized gains (losses) per unit and excluded
from expenses per unit are now excluded from net realized and unrealized gains (losses) per unit and included in expenses per unit. This information was previously included as a footnote to the financial highlights table.
**
Interest income less total expenses (exclusive of allocation to Special Limited Partner, if applicable).
The above ratios may vary for individual investors based on the timing of capital transactions during the year. Additionally, these ratios are calculated for the Limited Partner Classes using the Limited Partners’ share of income, expenses and average net assets.
7.
Financial Instrument Risks:
In the normal course of business, the Partnership is party to financial instruments with off-balance-sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures and options, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments on specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forward and option contracts. OTC contracts are negotiated between contracting parties and include certain forward and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. None of the Partnership’s current contracts are traded OTC, although contracts may be traded OTC in the future.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership is exposed to market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership had credit risk and concentration risk during the reporting period and prior periods included in this report, as Wells Fargo, Wedbush and ADM, or their affiliates, were the sole counterparties or brokers with respect to the Partnership’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through Wells Fargo, Wedbush or ADM, or their affiliates, the Partnership’s counterparty is an exchange or clearing organization. The Partnership continues to be subject to such risks with respect to Wedbush and ADM.
The Partnership’s trading will be concentrated in exchange-traded futures and options on the S&P 500® Index. Concentration in a limited number of commodity interests may subject the Partnership’s account to greater volatility than if a more diversified portfolio of contracts were traded on behalf of the Partnership.
As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership does not consider these contracts to be guarantees.
The General Partner monitors and attempts to control the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.
The risk to the Limited Partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s business, these instruments may not be held to maturity.
8.
Subsequent Events:
The General Partner evaluated events that occurred after the balance sheet date but before financial statements were issued. The General Partner has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.
Selected unaudited quarterly financial data for the years ended December 31, 2018 and 2017 are summarized below:
Item 9.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .
Not applicable.
Item 9A.
Item 9A.
Controls and Procedures .
The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to the General Partner, including the Sole Manager of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
The General Partner’s Sole Manager has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2018, and, based on that evaluation, the General Partner’s Sole Manager has concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.
The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s Sole Manager to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
•
provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and
•
provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.
The report included in “Item 8. Financial Statements and Supplementary Data .” includes management’s report on internal control over financial reporting (“Management’s Report”).
There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended December 31, 2018, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B.
Item 9B.
Other Information .
None.
PART III
Item 10.
Item 10.
Directors, Executive Officers and Corporate Governance.
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. Investment decisions are made by the Advisor.
The executive officer of the General Partner is Scott C. Kimple (Sole Manager of the General Partner).
Scott C. Kimple, age 53, is the Founder, Principal, Sole Manager and Portfolio Manager of the Advisor. Mr. Kimple manages the Partnership’s portfolio. Mr. Kimple has been listed as a principal and registered as an associated person of the General Partner since December 15, 2014 and December 23, 2014, respectively, and listed as a principal and registered as an associated person of the Advisor since January 27, 2012 and January 30, 2012, respectively. Mr. Kimple also was registered as an associated person and listed as a principal of Warrington Mgt., L.P., a commodity trading advisor (“CTA”), from July 1995 until October 1996 and again from April 30, 1999 until April 24, 2013. Mr. Kimple also was a principal and an associated person of Warrington Advisors LLC, a CTA and commodity pool operator, from June 2008 through July 2011.
Mr. Kimple first traded commodity futures and options for his own account in July 1989 until April 1991. From April 1991 until June 2009, Mr. Kimple was employed by Citigroup Global Markets, Inc. (“CGM”), a futures commission merchant (“FCM”) and its predecessor firms, beginning as a trading assistant trading speculative positions in multiple futures and options markets. In July 1995, he was appointed Vice President/Financial Advisor. Mr. Kimple was registered as an associated person of CGM from July 1993 until June 2009. As of June 1, 2009, Mr. Kimple ended his registration as an associated person with CGM and became registered as an associated person of Morgan Stanley Smith Barney LLC (“MSSB”), also a FCM. Mr. Kimple was employed by MSSB from June 2009 until December 31, 2014. On December 31, 2014, Mr. Kimple withdrew as an associated person of MSSB, but will continue to be an associated person of both the Advisor and General Partner. As of January 1, 2015, Mr. Kimple has been employed by the Advisor, a CTA.
In May 1989, Mr. Kimple graduated from Southern Methodist University, Dallas, Texas, with a B.B.A. in Finance. In August 1990, he completed the MBA program at SMU’s Cox School of Business, with course emphasis in finance and derivative securities. During the third trimester, he pursued a credited, directed study with a Dallas-based CTA in derivative securities trading. This research provided the theoretical foundations for his current trading strategies. Mr. Kimple holds a Series 3 license and has previously held Series 7 and 63 licenses.
The Sole Manager of the General Partner is responsible for overall corporate governance of the General Partner. Under CFTC rules, the Sole Manager of the General Partner is deemed to be a principal of the General Partner and, as a result, is listed as such with the NFA.
The Partnership has not adopted a code of ethics that applies to officers because it has no officers. In addition, the Partnership has not adopted any procedures by which investors may recommend nominees to the Partnership’s board of directors and has not established an audit committee because it has no board of directors.
Item 11.
Item 11.
Executive Compensation .
The Partnership has no directors or officers. Its affairs are managed by the General Partner. As compensation for its services, the Partnership pays the General Partner administrative fees, as described under “Item 1. Business .” During the year ended December 31, 2018, the General Partner earned $537,601 in administrative fees. As compensation for its services, the Partnership pays the Advisor advisory fees and the Special Limited Partner earns a profit share allocation as described under “Item 1. Business .” For the year ended December 31, 2018, the Advisor earned $1,075,203 in advisory fees. There was a profit share allocation earned by the Special Limited Partner of $1,764.
Item 12.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .
(a)
Security ownership of certain beneficial owners. As of February 28, 2019, the Partnership knows of no person who beneficially owns more than 5% of the Redeemable Units outstanding.
(b)
Security ownership of management. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner.
The following table indicates securities owned by the General Partner as of December 31, 2018:
(c)
Changes in control.
None.
Item 13.
Item 13.
Certain Relationship and Related Transactions, and Director Independence.
(a)
Transactions with related persons . None.
(b)
Review, approval or ratification of transactions with related persons . Not applicable.
(c)
Promoters and certain control persons. Wells Fargo, Baird, Credit Suisse Securities (USA) LLC, MS&Co., Morgan Stanley Wealth Management and the General Partner could be considered promoters for purposes of item 404 (c) of Regulation S-K. The nature and the amounts of compensation each promoter will receive, if any, from the Partnership are set forth under “Item 1. Business ” and “Item 11. Executive Compensation. ”
Item 14.
Item 14.
Principal Accountant Fees and Services.
(1)
Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by Weaver and Tidwell LLP (“Weaver”) and Deloitte & Touche LLP for the years ended December 31, 2018 and 2017, respectively, for the audits of the Partnership’s annual financial statements, reviews of financial statements included in the Partnership’s Forms 10-Q and 10-K and other services normally provided in connection with regulatory filings or engagements were:
(2)
Audit-Related Fees. None.
(3)
Tax Fees . The aggregate fees billed for each of the last two fiscal years for professional services rendered by Weaver for the years ended December 31, 2018 and 2017, respectively, for tax compliance and tax advice given in the preparation of the Partnership’s Schedules K-1, the preparation of the Partnership’s Form 1065 and preparation of all State Tax Returns were:
(4)
All Other Fees. None.
(5)
Not Applicable.
(6)
Not Applicable.
PART IV
Item 15.
Item 15.
Exhibits and Financial Statement Schedules .
(a)
(1)
Financial Statements:
Statements of Financial Condition at December 31, 2018 and 2017.
Condensed Schedules of Investments at December 31, 2018 and 2017.
Statements of Income and Expenses for the years ended December 31, 2018, 2017 and 2016.
Statements of Changes in Partners’ Capital for the years ended December 31, 2018, 2017 and 2016.
Notes to Financial Statements.
(2)
Exhibits:
3.1
(a)
Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated November 21, 2005 (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
(b)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(b) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
(c)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 25, 2009 (filed as Exhibit 99.1 to the current report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).
(d)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 29, 2010 (filed as Exhibit 3.1(d) to the current report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).
(e)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the current report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).
(f)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated November 27, 2012 (filed as Exhibit 3.1 to the current report on Form 8-K filed on January 3, 2013 and incorporated herein by reference).
(g)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 7, 2013 (filed as Exhibit 3.1(g) to the quarterly report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).
(h)
Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 8, 2015 (filed as Exhibit 3.1(h) to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
3.2
Sixth Amended and Restated Limited Partnership Agreement, effective as of the close of business on March 31, 2015 (filed as Exhibit 3.2 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.1
Management Agreement among the Partnership, Warrington GP, LLC and Warrington Asset Management LLC effective as of the close of business on March 31, 2015 (filed as Exhibit 10.1 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.2
Futures and Cleared Swaps Agreement between the Partnership and Wells Fargo Securities, LLC, dated March 16, 2015 (filed as Exhibit 10.2 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.3
Continuing Services Agreement among the Partnership, Warrington GP, LLC, Warrington Asset Management LLC and Morgan Stanley Wealth Management, dated March 31, 2015 (filed as Exhibit 10.3 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.4
Form of Subscription Agreement (filed as Exhibit 10.4 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.5
Selling Agreement among the Partnership, Warrington GP, LLC and Robert W. Baird & Co. Incorporated, dated March 31, 2015 (filed as Exhibit 10.5 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.6
Continuing Services Agreement among the Partnership, Warrington GP, LLC, Warrington Asset Management LLC and Credit Suisse Securities (USA) LLC, dated March 31, 2015 (filed as Exhibit 10.6 to the quarterly report on Form 10-Q filed on May 14, 2015 and incorporated herein by reference).
10.7
Commodity Futures Contracts Customer Agreement between the Partnership and Wedbush Securities, Inc., dated April 21, 2017 (filed as Exhibit 10.7 to the quarterly report on Form 10-Q filed on August 14, 2017 and incorporated herein by reference).
10.8
Commodity Futures Contracts Customer Agreement between the Partnership and ADM Investor Services, Inc., dated March 13, 2017 (filed as Exhibit 10.8 to the quarterly report on Form 10-Q filed on August 14, 2017 and incorporated herein by reference).
10.9
(a) Customer Agreement between the Partnership and CGM, dated February 17, 2005 (filed as Exhibit 10.2 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
(b) Amended and Restated Commodity Futures Customer Agreement between the Partnership and MS&Co., effective August 15, 2013 (filed as Exhibit 10.2(b) to the quarterly report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
10.10
(a) Amended and Restated Agency Agreement among the Partnership, the General Partner and CGM, dated April 26, 2007 (filed as Exhibit 10.3 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
(b) Alternative Investment Selling Agent Agreement among the Partnership, the General Partner and Morgan Stanley Wealth Management, effective October 1, 2013 (filed as Exhibit 10.3(b) to the quarterly report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
(c) Letter Amendment to the Alternative Investment Selling Agent Agreement among the Partnership, the General Partner and Morgan Stanley Wealth Management, effective April 1, 2014 (filed as Exhibit 10.3(c) to the quarterly report on Form 10-Q filed on May 15, 2014 and incorporated herein by reference).
(d) Letter amending the Alternative Investment Selling Agent Agreement among the Partnership, the General Partner and Morgan Stanley Wealth Management, effective October 1, 2014 (filed as Exhibit 10.3(d) to the quarterly report on Form 10-Q filed on August 13, 2014 and incorporated herein by reference).
The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference.
31.1
Rule 13a-14(a)/15d-14(a) Certification (Certification of Sole Manager)(filed herewith).
32.1
Section 1350 Certification (Certification of Sole Manager)(filed herewith).
101. INS
XBRL Instance Document.
101. SCH
XBRL Taxonomy Extension Schema Document.
101. CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB
XBRL Taxonomy Extension Label Linkbase Document.
101. PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101. DEF
XBRL Taxonomy Extension Definition Document.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MANAGED FUTURES PREMIER WARRINGTON L.P.
By: Warrington GP, LLC (General Partner)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on the date indicated.
/s/ Scott C. Kimple
Scott C. Kimple
Sole Manager
(Principal Executive Officer)
(Principal Financial Officer)
Warrington GP, LLC
Date: March 22, 2019