Company Quick10K Filing
Quick10K
Ceres Abingdon
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-23 Officers
8-K 2019-03-06 Officers
8-K 2018-09-15 Officers
8-K 2018-02-01 Sale of Shares
STAR Istar 822
BAR Graniteshares Gold Trust 535
ARDM Aradigm 22
AIKO Alternative Investment 2
INTB Intelligent Buying 0
CFT Campbell Fund Trust 0
SLDV Security Land & Development 0
DCLT Data Call Technologies 0
PEPL Panhandle Eastern Pipe Line 0
BLPG Blue Line Protection Group 0
ABFF 2019-06-30
Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities. - None.
Item 4. Mine Safety Disclosures. - Not Applicable.
Item 5. Other Information. - None.
Item 6. Exhibits.
EX-31.1 d767572dex311.htm
EX-31.2 d767572dex312.htm
EX-32.1 d767572dex321.htm
EX-32.2 d767572dex322.htm

Ceres Abingdon Earnings 2019-06-30

ABFF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d767572d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to             

Commission File Number 0-53210

CERES ABINGDON L.P.

 

(Exact name of registrant as specified in its charter)

 

New York   20-3845005

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue

New York, New York 10036

 

 

(Address of principal executive offices) (Zip Code)

(855) 672-4468

 

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class    Trading Symbol(s)    Name of each exchange on which registered
N/A    N/A    N/A

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

Yes X   No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes X   No    

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

 

Large accelerated filer    

  

Accelerated filer    

 

Non-accelerated filer  X 

  

    

Smaller reporting company    

  

Emerging growth company    

    

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

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

Yes      No X

As of July 31, 2019, there were 102,237.3917 Limited Partnership Class A Redeemable Units outstanding, 11,704.4906 Limited Partnership Class D Redeemable Units outstanding and 227.0972 Limited Partnership Class Z Redeemable Units outstanding.


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Ceres Abingdon L.P.

Statements of Financial Condition

 

     June 30,    
     2019     December 31,  
       (Unaudited)     2018

Assets:

    

Investment in the Master(1), at fair value

     $  161,167,119         $  183,004,312    

Redemptions receivable from the Master

     3,802,418       1,543,808  

Cash at MS&Co.

     295,346       333,269  
  

 

 

 

 

 

 

 

Total assets

     $ 165,264,883       $ 184,881,389  
  

 

 

 

 

 

 

 

Liabilities and Partners’ Capital:

    

Liabilities:

    

Accrued expenses:

    

Ongoing selling agent fees

     $ 246,416       $ 278,171  

Management fees

     205,996       230,423  

General Partner fees

     137,331       153,615  

Professional fees

     221,441       264,945  

Redemptions payable to Limited Partners

     3,172,934       836,276  
  

 

 

 

 

 

 

 

Total liabilities

     3,984,118       1,763,430  
  

 

 

 

 

 

 

 

Partners’ Capital:

    

General Partner, Class Z, 1,345.7280 and 1,507.7830 Redeemable Units outstanding at June 30, 2019 and December 31, 2018, respectively

     1,785,238       2,006,492  

Limited Partners, Class A, 104,471.9507 and 119,266.5507 Redeemable Units outstanding at June 30, 2019 and December 31, 2018, respectively

     135,382,989       156,601,179  

Limited Partners, Class D, 17,913.2276 Redeemable Units outstanding at June 30, 2019 and December 31, 2018

     22,802,983       22,960,575  

Limited Partners, Class Z, 987.1542 and 1,164.5352 Redeemable Units outstanding at June 30, 2019 and December 31, 2018, respectively

     1,309,555       1,549,713  
  

 

 

 

 

 

 

 

Total partners’ capital (net asset value)

     161,280,765       183,117,959  
  

 

 

 

 

 

 

 

Total liabilities and partners’ capital

     $    165,264,883       $    184,881,389  
  

 

 

 

 

 

 

 

Net asset value per Redeemable Unit:

    

Class A

     $ 1,295.88       $ 1,313.04  
  

 

 

 

 

 

 

 

Class D

     $ 1,272.97       $ 1,281.77  
  

 

 

 

 

 

 

 

Class Z

     $ 1,326.60       $ 1,330.76  
  

 

 

 

 

 

 

 

 

(1)

Defined in Note 1.

See accompanying notes to financial statements.

 

1


Ceres Abingdon L.P.

Statements of Income and Expenses

(Unaudited)

 

     Three Months Ended        Six Months Ended
     June 30,        June 30,
     2019   2018           2019   2018

Investment Income:

           

Interest income allocated from the Master

     $ 903,159         $ 761,427            $ 1,871,206         $ 1,434,573    
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Expenses:

           

Expenses allocated from the Master

     77,789       67,608          135,162       148,523  

Ongoing selling agent fees

     772,242       905,327          1,577,442       1,851,287  

Management fees

     644,809       746,824          1,313,648       1,525,647  

General Partner fees

     429,873       497,882          875,766       1,017,097  

Professional fees

     121,621       136,845          245,193       278,664  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Total expenses

     2,046,334       2,354,486          4,147,211       4,821,218  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Net investment loss

     (1,143,175     (1,593,059        (2,276,005     (3,386,645
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Trading Results:

           

Net gains (losses) on investment in the Master:

           

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

     (855,277     6,665,976          (7,997,354     4,505,536  

Net change in unrealized gains (losses) on open contracts allocated from the Master

     (798,035     1,684,920          8,248,215       (3,582,336
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Total trading results

     (1,653,312     8,350,896          250,861       923,200  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Net income (loss)

     $ (2,796,487     $ 6,757,837          $ (2,025,144     $ (2,463,445
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Net income (loss) per Redeemable Unit:*

           

Class A

     $ (23.06     $ 45.66          $ (17.16     $ (16.51
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Class D

     $ (18.60     $ 48.34          $ (8.80     $ (7.57
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Class Z

     $ (16.85     $ 52.49          $ (4.16     $ (2.62
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Weighted average Redeemable Units outstanding:

           

Class A

       109,616.2167         125,894.2447            113,315.4159         127,592.0665  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Class D

     17,913.2276       17,913.2276          17,913.2276       17,913.2276  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Class Z

     2,505.1545       2,752.6882          2,588.7364       2,795.0689  
  

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

*

Represents the change in net asset value per Redeemable Unit during the period.

See accompanying notes to financial statements.

 

2


Ceres Abingdon L.P.

Statements of Changes in Partners’ Capital

For the Three and Six Months Ended June 30, 2019 and 2018

(Unaudited)

 

 

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

Partners’ Capital, December 31, 2017

    $  179,443,770       128,698.8997       $  24,077,868       17,913.2276       $  4,164,864       3,006.9722       $  207,686,502       149,619.0995  

Subscriptions - Limited Partners

    5,046,127       3,583.3960       -           -           -           -           5,046,127       3,583.3960  

Redemptions - General Partner

    -           -           -           -           (375,000     (254.2840     (375,000     (254.2840

Redemptions - Limited Partners

    (10,839,447     (7,946.3520     -           -           -           -           (10,839,447     (7,946.3520

Net income (loss)

    (2,343,376     -           (135,656     -           15,587       -           (2,463,445     -      
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, June 30, 2018

    $ 171,307,074       124,335.9437       $ 23,942,212       17,913.2276       $ 3,805,451       2,752.6882       $ 199,054,737       145,001.8595  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, March 31, 2018

    $ 168,151,767       126,228.7137       $ 23,076,443       17,913.2276       $ 3,660,963       2,752.6882       $ 194,889,173       146,894.6295  

Subscriptions - Limited Partners

    1,862,000       1,389.9510       -           -           -           -           1,862,000       1,389.9510  

Redemptions - Limited Partners

    (4,454,273     (3,282.7210     -           -           -           -           (4,454,273     (3,282.7210

Net income (loss)

    5,747,580       -           865,769       -           144,488       -           6,757,837       -      
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, June 30, 2018

    $ 171,307,074       124,335.9437       $ 23,942,212       17,913.2276       $ 3,805,451       2,752.6882       $ 199,054,737       145,001.8595  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Partners’ Capital, December 31, 2018

    $ 156,601,179       119,266.5507       $ 22,960,575       17,913.2276       $ 3,556,205       2,672.3182       $ 183,117,959       139,852.0965  

Subscriptions - Limited Partners

    274,653       211.0500       -           -           -           -           274,653       211.0500  

Redemptions - General Partner

    -           -           -           -           (225,013     (162.0550     (225,013     (162.0550

Redemptions - Limited Partners

    (19,624,336     (15,005.6500     -           -           (237,354     (177.3810     (19,861,690     (15,183.0310

Net income (loss)

    (1,868,507     -           (157,592     -           955       -           (2,025,144     -      
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, June 30, 2019

    $ 135,382,989       104,471.9507       $ 22,802,983       17,913.2276       $ 3,094,793       2,332.8822       $ 161,280,765       124,718.0605  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, March 31, 2019

    $ 147,400,628       111,757.0047       $ 23,136,161       17,913.2276       $ 3,590,135       2,672.3182       $ 174,126,924       132,342.5505  

Subscriptions - Limited Partners

    74,653       54.8560       -           -           -           -           74,653       54.8560  

Redemptions - General Partner

    -           -           -           -           (225,013     (162.0550     (225,013     (162.0550

Redemptions - Limited Partners

    (9,661,958     (7,339.9100     -           -           (237,354     (177.3810     (9,899,312     (7,517.2910

Net income (loss)

    (2,430,334     -           (333,178     -           (32,975     -           (2,796,487     -      
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, June 30, 2019

    $    135,382,989       104,471.9507       $    22,802,983       17,913.2276       $    3,094,793       2,332.8822     $   161,280,765       124,718.0605  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

3


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

1.

Organization:

Ceres Abingdon L.P. (the “Partnership”) is a limited partnership organized on November 8, 2005, under the partnership laws of the State of New York, to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures, option, swap and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, metals and softs. The Partnership commenced trading on February 1, 2007. The commodity interests that are indirectly traded by the Partnership through its investment in CMF Winton Master L.P. (the “Master”) are volatile and involve a high degree of market risk. The General Partner (as defined below) may also determine to invest up to all of the Partnership’s assets (directly or indirectly through its investment in the Master) in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. The Partnership privately and continuously offers redeemable units of limited partnership interest in the Partnership (“Redeemable Units”) to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is a wholly-owned subsidiary of Morgan Stanley Domestic Holdings, Inc. (“MSD Holdings”). MSD Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. As of June 30, 2019, all trading decisions for the Partnership are made by Winton Capital Management Limited (the “Advisor”).

During the reporting periods ended June 30, 2019 and 2018, the Partnership’s and the Master’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. JPMorgan Chase Bank, N.A (“JPMorgan”) was also a foreign exchange forward contract counterparty for the Master. The Partnership and the Master deposited a portion of their cash in non-trading bank accounts at JPMorgan.

On February 1, 2007, the Partnership allocated substantially all of its capital to the Master, a limited partnership organized under the partnership laws of the State of New York, having the same investment objective as the Partnership. The Master permits accounts managed by the Advisor pursuant to Diversified Macro Strategies (formerly, the Winton Futures Program, as applied without equities), the Advisor’s proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the general partner of the Master. Individual and pooled accounts currently managed by the Advisor, including the Partnership, are permitted to be limited partners of the Master. The General Partner and the Advisor believe that trading through this master/feeder structure promotes efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same as if the Partnership traded directly, and redemption rights are not affected. The General Partner and the Advisor agreed that the Advisor will trade the Partnership’s assets allocated to the Advisor at a level that is up to 1.5 times the amount of assets allocated.

A limited partner in the Master may withdraw all or part of its capital contribution and undistributed profits, if any, from the Master as of the end of any month (the “Redemption Date”) after a request has been made to the General Partner at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner in the Master elects to redeem and informs the Master.

The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended June 30, 2019.

 

4


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

On April 1, 2011, the Partnership began offering “Class A” Redeemable Units, “Class D” Redeemable Units and “Class Z” Redeemable Units pursuant to the offering memorandum. All Redeemable Units issued prior to April 1, 2011 were deemed Class A Redeemable Units. The rights, liabilities, risks, and fees associated with investment in the Class A Redeemable Units did not change. “Class D” Redeemable Units and “Class Z” Redeemable Units were first issued on April 1, 2011 and August 1, 2011, respectively. Class A Redeemable Units, Class D Redeemable Units and Class Z 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 upon a subscription will generally depend upon the amount invested in the Partnership or the status of the limited partner, although the General Partner may determine to offer any Class of Redeemable Units to investors at its discretion. Class A Redeemable Units and Class D Redeemable Units are available to taxable U.S. individuals and institutions, U.S. tax exempt individuals and institutions and non-U.S. investors. Class Z Redeemable Units are offered to limited partners who receive advisory services from Morgan Stanley Smith Barney LLC (doing business as Morgan Stanley Wealth Management) (“Morgan Stanley Wealth Management”) and certain employees of Morgan Stanley and its subsidiaries (and their family members). Class A Redeemable Units, Class D Redeemable Units, and Class Z Redeemable Units are identical, except that Class D Redeemable Units are subject to a monthly ongoing selling agent fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the net assets of Class D as of the end of each month, which differs from the Class A monthly ongoing selling agent fee of 1/12th of 2.00% (a 2.00% annual rate) of the net assets of Class A as of the end of each month. Class Z Redeemable Units are not subject to a monthly ongoing selling agent fee.

At June 30, 2019 and December 31, 2018, the Partnership owned approximately 59.1% and 53.9%, respectively, of the Master. The Partnership intends to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Master’s trading of futures, forward, swap and option contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and non-U.S. commodity exchanges. The Master engages in such trading through a commodity brokerage account maintained with MS&Co. The Master’s Statements of Financial Condition, Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partners’ Capital are included herein.

The Master has entered into a foreign exchange brokerage account agreement and a futures brokerage account agreement with MS&Co. The Partnership has also entered into a futures brokerage account agreement with MS&Co. The Partnership, through its investment in the Master, pays MS&Co. (or will reimburse MS&Co., if previously paid) its allocable share of all trading fees for the clearing and, where applicable, execution of transactions as well as exchange, user, give-up, floor brokerage and National Futures Association fees (collectively, the “clearing fees”).

The Partnership has also entered into a selling agreement with Morgan Stanley Wealth Management (as amended, the “Selling Agreement”). Pursuant to the Selling Agreement, Morgan Stanley Wealth Management is paid a monthly ongoing selling agent fee at the rates described above. The ongoing selling agent fee received by Morgan Stanley Wealth Management is shared with the properly registered/exempted financial advisors of Morgan Stanley Wealth Management who sell Class A and/or Class D Redeemable Units.

On July 12, 2017, the Master entered into certain agreements with JPMorgan in connection with trading in forward foreign currency contracts on behalf of the Master and, indirectly, the Partnership. These agreements include a foreign exchange and bullion authorization agreement (“FX Agreement”), an International Swap Dealers Association, Inc. master agreement (“Master Agreement”), a schedule to the Master Agreement, a 2016 credit support annex for variation margin to the schedule and an institutional account agreement. Under the FX Agreement, JPMorgan charges a fee on the aggregate foreign currency transactions entered into on behalf of the Master during a month.

In July 2015, the General Partner delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership. The cost of retaining the Administrator is allocated among the pools operated by the General Partner, including the Partnership.

 

5


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

2.

Basis of Presentation and Summary of Significant Accounting Policies:

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Partnership’s financial condition at June 30, 2019, and the results of its operations and the changes in partners’ capital for the three and six months ended June 30, 2019 and 2018. These financial statements present the results for interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2018. The December 31, 2018 information has been derived from the audited financial statements as of and for the year ended December 31, 2018.

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

Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material.

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

Statement of Cash Flows. The Partnership has not provided a Statement of Cash Flows, as permitted by Accounting Standards Codification (“ASC”) 230, “Statement of Cash Flows.” The Statements of Changes in Partners’ Capital is included herein, and as of and for the periods ended June 30, 2019 and 2018, the Partnership carried no debt and substantially all of the Partnership’s and the Master’s investments were carried at fair value and classified as Level 1 and Level 2 measurements.

Partnership’s Investment. The Partnership carries its investment in the Master at fair value based on the Master’s net asset value per Redeemable Unit, as a practical expedient, as calculated by the Master. The valuation of the Master’s investments, including the classification within the fair value hierarchy of the investments held by the Master, are described in Note 5, “Fair Value Measurements.”

Master’s Investments. All commodity interests of the Master, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on the trade date and open contracts are recorded at fair value (as described in Note 5, “Fair Value Measurements”) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated and are determined using the first-in, first-out method. Net unrealized gains or losses on open contracts are included as a component of equity in trading accounts in the Master’s Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital. The Master does not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments due to fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

Master’s Cash. The Master’s restricted cash is equal to the cash portion of assets on deposit to meet margin requirements, as determined by the exchange or counterparty, and required by MS&Co and/or JPMorgan, as applicable. At June 30, 2019 and December 31, 2018, the amount of cash held for margin requirements was $29,682,545 and $40,002,084, respectively. Cash that is not classified as restricted cash is therefore classified as unrestricted cash. The Master’s restricted and unrestricted cash includes cash denominated in foreign currencies of $1,511,269 (cost of $1,491,816) and $2,271,393 (cost of $2,273,441) as of June 30, 2019 and December 31, 2018, respectively.

 

6


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

Income Taxes. Income taxes have not been recorded as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The Partnership follows the guidance of ASC 740, “Income Taxes,” which prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet the more-likely-than-not threshold would be recorded as a tax benefit or liability in the Partnership’s Statements of Financial Condition for the current year. If a tax position does not meet the minimum statutory threshold to avoid the incurring of penalties, an expense for the amount of the statutory penalty and interest, if applicable, shall be recognized in the Statements of Income and Expenses in the period in which the position is claimed or expected to be claimed. The General Partner has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2015 through 2018 tax years remain subject to examination by U.S. federal and most state tax authorities.

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

Net Income (Loss) per Redeemable Unit. Net income (loss) per Redeemable Unit for each Class is calculated in accordance with ASC 946, “Financial Services – Investment Companies.” See Note 3, Financial Highlights.”

There have been no material changes with respect to the Partnership’s critical accounting policies as reported in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

7


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of June 30, 2019 and December 31, 2018 and Statements of Income and Expenses and Changes in Partners’ Capital for the three and six months ended June 30, 2019 and 2018 are presented below:

CMF Winton Master L.P.

Statements of Financial Condition

 

     June 30,    
     2019       December 31,    
         (Unaudited)       2018

Assets:

    

Equity in trading accounts:

    

Unrestricted cash

     $  252,502,567        $  312,715,105   

Restricted cash

     29,682,545       40,002,084  

Net unrealized appreciation on open futures contracts

     4,482,488       -  

Net unrealized appreciation on open forward contracts

     2,588,295       -  
  

 

 

 

 

 

 

 

Total equity in trading accounts

     289,255,895       352,717,189  

Subscription receivable

     -           261,448  
  

 

 

 

 

 

 

 

Total assets

     $ 289,255,895       $ 352,978,637  
  

 

 

 

 

 

 

 

Liabilities and Partners’ Capital:

    

Liabilities:

    

Net unrealized depreciation on open futures contracts

     $ -           $ 5,670,226  

Net unrealized depreciation on open forward contracts

     -           2,569,275  

Accrued expenses:

    

Professional fees

     57,244       54,808  

Redemptions payable

     16,647,781       5,484,714  
  

 

 

 

 

 

 

 

Total liabilities

     16,705,025       13,779,023  
  

 

 

 

 

 

 

 

Partners’ Capital:

    

General Partner, 0.0000 Redeemable Units outstanding at June 30, 2019 and December 31, 2018

     -           -  

Limited Partners, 66,698.4049 and 83,051.1742 Redeemable Units outstanding at June 30, 2019 and December 31, 2018, respectively

     272,550,870       339,199,614  
  

 

 

 

 

 

 

 

Total partners’ capital (net asset value)

     272,550,870       339,199,614  
  

 

 

 

 

 

 

 

Total liabilities and partners’ capital

     $      289,255,895       $      352,978,637  
  

 

 

 

 

 

 

 

Net asset value per Redeemable Unit

     $ 4,086.32       $ 4,084.22  
  

 

 

 

 

 

 

 

 

8


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Winton Master L.P.

Condensed Schedule of Investments

June 30, 2019

(Unaudited)

 

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

Futures Contracts Purchased

       

Currencies

     728        $          103,864       0.04  

Energy

     147        175,832       0.06    

Grains

     54        (5,273     (0.00)  * 

Indices

     760        835,687       0.31    

Interest Rates U.S.

     535        1,760,438       0.65    

Interest Rates Non-U.S.

     7,195        4,919,645       1.81    

Livestock

     77        (157,161     (0.06)   

Metals

     10        173,810       0.06    

Softs

     237        (49,025     (0.02)   
     

 

 

 

 

 

 

 

Total futures contracts purchased

        7,757,817       2.85    
     

 

 

 

 

 

 

 

Futures Contracts Sold

       

Currencies

     1,562        (1,163,409     (0.43)   

Energy

     366        12,914       0.00  

Grains

     1,465        1,083,536       0.40    

Indices

     410        (473,382     (0.17)   

Interest Rates U.S.

     392        (422,688     (0.16)   

Interest Rates Non-U.S.

     115        (107,870     (0.04)   

Livestock

     15        1,448       0.00  

Metals

     493        (1,684,270     (0.62)   

Softs

     1,108        (521,608     (0.19)   
     

 

 

 

 

 

 

 

Total futures contracts sold

        (3,275,329     (1.21)   
     

 

 

 

 

 

 

 

Net unrealized appreciation on open futures contracts

        $       4,482,488       1.64  
     

 

 

 

 

 

 

 

Unrealized Appreciation on Open Forward Contracts

       

Currencies

   $  141,337,536        $       2,135,630       0.79  

Metals

     1,130        3,305,941       1.21    
     

 

 

 

 

 

 

 

Total unrealized appreciation on open forward contracts

        5,441,571       2.00    
     

 

 

 

 

 

 

 

Unrealized Depreciation on Open Forward Contracts

       

Currencies

   $ 110,229,704        (736,943     (0.27)   

Metals

     820        (2,116,333     (0.78)   
     

 

 

 

 

 

 

 

Total unrealized depreciation on open forward contracts

        (2,853,276     (1.05)   
     

 

 

 

 

 

 

 

Net unrealized appreciation on open forward contracts

        $       2,588,295       0.95  
     

 

 

 

 

 

 

 

* Due to rounding.

 

9


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Winton Master L.P.

Condensed Schedule of Investments

December 31, 2018

 

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

Futures Contracts Purchased

      

Currencies

     665        $           498,240         0.15  

Energy

     807       (7,683,693     (2.27)   

Grains

     23       1,389       0.00  

Indices

     598       (1,528,397     (0.45)   

Interest Rates U.S.

     274       511,781       0.15    

Interest Rates Non-U.S.

     6,276       3,509,049       1.04    

Livestock

     24       10,030       0.00  

Metals

     110       (167,968     (0.05)   

Softs

     78       (275,765     (0.08)   
    

 

 

 

 

 

 

 

Total futures contracts purchased

       (5,125,334     (1.51)   
    

 

 

 

 

 

 

 

Futures Contracts Sold

      

Currencies

     2,903       (2,494,808     (0.74)   

Energy

     833       3,839,606       1.13    

Grains

     1,819       698,944       0.21    

Indices

     459       721,056       0.21    

Interest Rates U.S.

     356       (418,226     (0.12)   

Interest Rates Non-U.S.

     612       (946,029     (0.28)   

Livestock

     182       119,878       0.04    

Metals

     602       (2,647,825     (0.78)   

Softs

     1,888       582,512       0.17    
    

 

 

 

 

 

 

 

Total futures contracts sold

       (544,892     (0.16)   
    

 

 

 

 

 

 

 

Net unrealized depreciation on open futures contracts

       $ (5,670,226     (1.67) 
    

 

 

 

 

 

 

 

Unrealized Appreciation on Open Forward Contracts

      

Currencies

     $        77,973,985       $ 1,063,380       0.31  

Metals

     754       1,571,426       0.46    
    

 

 

 

 

 

 

 

Total unrealized appreciation on open forward contracts

       2,634,806       0.77    
    

 

 

 

 

 

 

 

Unrealized Depreciation on Open Forward Contracts

      

Currencies

     $ 59,643,530       (813,774     (0.24)   

Metals

     875       (4,390,307     (1.29)   
    

 

 

 

 

 

 

 

Total unrealized depreciation on open forward contracts

       (5,204,081     (1.53)   
    

 

 

 

 

 

 

 

Net unrealized depreciation on open forward contracts

       $ (2,569,275               (0.76)   % 
    

 

 

 

 

 

 

 

* Due to rounding.

 

10


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Winton Master L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2019   2018   2019   2018

Investment Income:

       

Interest income

    $ 1,574,760       $ 1,395,806       $ 3,345,646       $ 2,642,141  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

       

Clearing fees

    120,263       107,262       209,545       239,651  

Professional fees

    15,750       17,000       31,500       34,195  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

    136,013       124,262       241,045       273,846  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

    1,438,747       1,271,544       3,104,601       2,368,295  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading Results:

       

Net gains (losses) on trading of commodity interests:

       

Net realized gains (losses) on closed contracts

    (1,525,395     12,243,034       (14,912,740     8,904,567  

Net change in unrealized gains (losses) on open contracts

    (1,292,893     3,103,086       15,331,785       (5,294,958
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total trading results

    (2,818,288     15,346,120       419,045       3,609,609  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

    (1,379,541     16,617,664       3,523,646       5,977,904  

Subscriptions - Limited Partners

    74,653       1,870,255       1,007,617       9,442,828  

Redemptions - Limited Partners

    (33,092,661     (7,006,232     (67,958,233     (43,498,491

Distribution of interest income to feeder funds

    (1,503,035     (1,233,818     (3,221,774     (2,359,302
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in Partners’ Capital

    (35,900,584     10,247,869       (66,648,744     (30,437,061

Partners’ Capital, beginning of period

    308,451,454       356,963,377       339,199,614       397,648,307  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital, end of period

    $      272,550,870       $     367,211,246       $      272,550,870       $     367,211,246  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value per Redeemable Unit (66,698.4049 and 86,957.1873 Redeemable Units outstanding at June 30, 2019 and 2018, respectively)

    $ 4,086.32       $ 4,222.90       $ 4,086.32       $ 4,222.90  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per Redeemable Unit*

    $ (23.03     $ 188.92       $ 44.26       $ 50.19  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average Redeemable Units outstanding

    72,169.6521       87,980.0004       76,416.7073       89,860.1294  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Represents the change in net asset value per Redeemable Unit during the period before distribution of interest income to feeder funds.

 

11


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

3.

Financial Highlights:

Financial highlights for the limited partner classes as a whole for the three and six months ended June 30, 2019 and 2018 were as follows:

 

     Three Months Ended
June 30,
     2019   2018

Per Redeemable Unit Performance (for a unit outstanding throughout the period):*

     Class A       Class D       Class Z       Class A       Class D       Class Z  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses)

     $ (13.56     $ (13.34     $ (13.93     $ 57.21       $ 55.39       $ 57.21  

Net investment loss

     (9.50     (5.26     (2.92     (11.55     (7.05     (4.72
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) for the period

     (23.06     (18.60     (16.85     45.66       48.34       52.49  

Net asset value per Redeemable Unit, beginning of period

     1,318.94       1,291.57       1,343.45       1,332.12       1,288.23       1,329.96  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value per Redeemable Unit, end of period

     $        1,295.88       $        1,272.97       $        1,326.60       $       1,377.78       $        1,336.57       $        1,382.45  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Six Months Ended
June 30,
     2019   2018

Per Redeemable Unit Performance (for a unit outstanding throughout the period):*

     Class A       Class D       Class Z       Class A       Class D       Class Z  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses)

     $ 1.22       $ 1.19       $ 1.18       $ 7.68       $ 7.48       $ 8.12  

Net investment loss

     (18.38     (9.99     (5.34     (24.19     (15.05     (10.74
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) for the period

     (17.16     (8.80     (4.16     (16.51     (7.57     (2.62

Net asset value per Redeemable Unit, beginning of period

     1,313.04       1,281.77       1,330.76       1,394.29       1,344.14       1,385.07  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value per Redeemable Unit, end of period

     $ 1,295.88       $ 1,272.97       $ 1,326.60       $ 1,377.78       $ 1,336.57       $ 1,382.45  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

     Three Months Ended
June 30,
 
     2019     2018  
           Class A                 Class D                 Class Z                 Class A                 Class D                 Class Z        

Ratios to Average Limited Partners’ Capital:**

            

Net investment loss***

     (2.9 )  %      (1.6 ) %      (0.9 ) %      (3.4 ) %      (2.2 ) %      (1.4 ) % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     5.1        3.7       3.1       5.0       3.7       2.9  

Incentive fees

     -           -           -           -           -          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     5.1        3.7       3.1       5.0       3.7       2.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     (1.7 )  %      (1.4 ) %      (1.3 ) %      3.4       3.8       3.9  

Incentive fees

     -           -           -           -           -           -      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     (1.7 )  %      (1.4 ) %      (1.3 ) %      3.4       3.8       3.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Six Months Ended
June 30,
 
     2019     2018  
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Ratios to Average Limited Partners’ Capital:**

            

Net investment loss***

     (2.9 ) %      (1.6 ) %      (0.8 ) %      (3.6 ) %      (2.3 ) %      (1.5 ) % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     5.0       3.7       3.0       5.0       3.7       2.9  

Incentive fees

     -           -           -           -           -           -     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     5.0       3.7       3.0       5.0       3.7       2.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     (1.3 ) %      (0.7 ) %      (0.3 ) %      (1.2 ) %      (0.6 ) %      (0.2 ) % 

Incentive fees

     -           -           -           -           -           -        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     (1.3 ) %      (0.7 ) %      (0.3 ) %      (1.2 ) %      (0.6 ) %      (0.2 ) % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Net investment loss per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information.

**

Annualized (except for incentive fees).

***

Interest income allocated from the Master less total expenses.

The above ratios and total return may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class for the Classes using the limited partners’ share of income, expenses and average partners’ capital of the Partnership and include the income and expenses allocated from the Master.

 

13


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

Financial Highlights of the Master:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  

Per Redeemable Unit Performance (for a unit outstanding throughout the period):*

        

Net realized and unrealized gains (losses)

     $ (42.97)        $ 174.47         $ 3.63         $ 23.83    

Net investment income (loss)

     19.94         14.45         40.63         26.36    
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) for the period

     (23.03)        188.92         44.26         50.19    

Distribution of interest income to feeder funds

     (20.83)        (14.02)        (42.16)        (26.26)   

Net asset value per Redeemable Unit, beginning of period

     4,130.18         4,048.00         4,084.22         4,198.97    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per Redeemable Unit, end of period

     $      4,086.32         $     4,222.90         $      4,086.32         $     4,222.90    
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  

Ratios to Average Limited Partners’ Capital:**

        

Net investment income (loss)***

     1.9       1.4       2.0       1.3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     0.2       0.1       0.2       0.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return

     (0.6)      4.7       1.1       1.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Net investment income (loss) per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information.

 

**

Annualized.

 

***

Interest income less total expenses.

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

 

14


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

 

4.

Trading Activities:

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

The futures brokerage account agreements with MS&Co. give the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures and open forward contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts in the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” have been met.

Trading and transaction fees are based on the number of trades executed by the Advisor for the Master and the Partnership’s percentage ownership of the Master. All clearing fees paid to MS&Co. are borne by the Master and allocated to the Master’s limited partners, including the Partnership.

All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures contracts traded by the Master during the three months ended June 30, 2019 and 2018 was 17,671 and 16,114, respectively. The monthly average number of futures contracts traded by the Master during the six months ended June 30, 2019 and 2018 was 16,789 and 18,319, respectively The monthly average number of metals forward contracts traded by the Master during the three months ended June 30, 2019 and 2018 was 1,790 and 1,512, respectively. The monthly average number of metals forward contracts traded by the Master during the six months ended June 30, 2019 and 2018 was 1,717 and 1,877, respectively. The monthly average notional value of currency forward contracts traded by the Master during the three months ended June 30, 2019 and 2018 was $255,895,851 and $165,460,310, respectively. The monthly average notional value of currency forward contracts traded by the Master during the six months ended June 30, 2019 and 2018 was $226,536,278 and $301,094,292, respectively.

 

15


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Master’s derivatives and their offsetting subject to master netting agreements or similar arrangements as of June 30, 2019 and December 31, 2018, respectively.

 

                                                                                                                                                                       
         Gross Amounts   Amounts   Gross Amounts Not Offset in the       
         Offset in the   Presented in the   Statements of Financial Condition       
         Statements of   Statements of        Cash Collateral       
     Gross Amounts   Financial   Financial   Financial    Received/    Net  

June 30, 2019                        

   Recognized   Condition   Condition   Instruments    Pledged*    Amount  

Assets

              

MS&Co.

              

Futures

     $ 9,770,839       $  (5,288,351     $ 4,482,488       $ -              $ -              $ 4,482,488    

Forwards

     3,305,941       (2,116,333     1,189,608       -              -              1,189,608    
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 
     13,076,780       (7,404,684     5,672,096       -              -              5,672,096    

JPMorgan

              

Forwards

     2,135,630       (736,943     1,398,687       -              -              1,398,687    
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Total assets

     $ 15,212,410       $ (8,141,627     $ 7,070,783       $ -              $ -              $ 7,070,783    
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Liabilities

              

MS&Co.

              

Futures

     $ (5,288,351     $ 5,288,351       $ -             $ -              $ -              $ -        

Forwards

     (2,116,333     2,116,333       -             -              -              -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 
     (7,404,684     7,404,684       -             -              -              -        

JPMorgan

              

Forwards

     (736,943     736,943       -             -              -              -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Total liabilities

     $ (8,141,627     $ 8,141,627       $ -             $ -              $ -              $ -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Net fair value

                 $ 7,070,783  
              

 

 

 
         Gross Amounts   Amounts   Gross Amounts Not Offset in the       
         Offset in the   Presented in the   Statements of Financial Condition       
         Statements of   Statements of        Cash Collateral       
     Gross Amounts   Financial   Financial   Financial    Received/    Net  

December 31, 2018            

   Recognized   Condition   Condition   Instruments    Pledged*    Amount  

Assets

              

MS&Co.

              

Futures

     $        12,642,665       $  (12,642,665     $ -             $ -              $ -              $ -        

Forwards

     1,579,370       (1,579,370     -             -              -              -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 
     14,222,035       (14,222,035     -             -              -              -        

JPMorgan

              

Forwards

     1,055,436       (813,774     241,662       -              -              241,662    
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Total assets

     $ 15,277,471       $  (15,035,809     $ 241,662       $ -              $ -              $ 241,662    
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Liabilities

              

MS&Co.

              

Futures

     $  (18,312,891     $ 12,642,665       $ (5,670,226     $ -              $ 5,670,226        $ -        

Forwards

     (4,390,307     1,579,370       (2,810,937     -              2,810,937        -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 
     (22,703,198     14,222,035       (8,481,163     -              8,481,163        -        

JPMorgan

              

Forwards

     (813,774     813,774       -             -              -              -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Total liabilities

     $  (23,516,972     $        15,035,809       $       (8,481,163     $       -              $       8,481,163        $ -        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Net fair value

                 $       241,662  
              

 

 

 

 

  *

In the event of default by the Master, MS&Co., the Master’s commodity futures broker and a counterparty to certain of the Master’s non-exchange-traded contracts, as applicable, and JPMorgan, as a counterparty to certain of the Master’s non-exchange-traded contracts, has the right to offset the Master’s obligation with the Master’s cash and/or U.S. Treasury bills held by MS&Co. or JPMorgan, as applicable, thereby minimizing MS&Co.’s and JPMorgan’s risk of loss. In certain instances, a counterparty may not post collateral and as such, in the event of default by such counterparty, the Master is exposed to the amount shown in the Master’s Statements of Financial Condition. In the case of exchange-traded contracts, the Master’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default.

 

16


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

The following tables indicate the gross fair values of the Master’s derivative instruments of futures and forward contracts as separate assets and liabilities as of June 30, 2019 and December 31, 2018, respectively.

 

         June 30,    
2019
 

Assets

  

Futures Contracts

  

Currencies

     $ 164,983    

Energy

     498,505    

Grains

     1,156,967    

Indices

     842,813    

Interest Rates U.S.

     1,761,438    

Interest Rates Non-U.S.

     4,949,836    

Livestock

     4,980    

Metals

     221,180    

Softs

     170,137    
  

 

 

 

Total unrealized appreciation on open futures contracts

     9,770,839    
  

 

 

 

Liabilities

  

Futures Contracts

  

Currencies

     (1,224,528)   

Energy

     (309,759)   

Grains

     (78,704)   

Indices

     (480,508)   

Interest Rates U.S.

     (423,688)   

Interest Rates Non-U.S.

     (138,061)   

Livestock

     (160,693)   

Metals

     (1,731,640)   

Softs

     (740,770)   
  

 

 

 

Total unrealized depreciation on open futures contracts

     (5,288,351)   
  

 

 

 

Net unrealized appreciation on open futures contracts

     $       4,482,488  
  

 

 

 

Assets

  

Forward Contracts

  

Currencies

     $ 2,135,630    

Metals

     3,305,941    
  

 

 

 

Total unrealized appreciation on open forward contracts

     5,441,571    
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

     (736,943)   

Metals

     (2,116,333)   
  

 

 

 

Total unrealized depreciation on open forward contracts

     (2,853,276)   
  

 

 

 

Net unrealized appreciation on open forward contracts

     $ 2,588,295   ** 
  

 

 

 

 

*

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

 

**

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

 

17


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

         December 31,    
2018
 

Assets

  

Futures Contracts

  

Currencies

     $ 1,121,770    

Energy

     3,883,716    

Grains

     763,198    

Indices

     755,310    

Interest Rates U.S.

     517,969    

Interest Rates Non-U.S.

     3,526,064    

Livestock

     198,893    

Metals

     171,670    

Softs

     1,704,075    
  

 

 

 

Total unrealized appreciation on open futures contracts

     12,642,665    
  

 

 

 

Liabilities

  

Futures Contracts

  

Currencies

     (3,118,338)   

Energy

     (7,727,803)   

Grains

     (62,865)   

Indices

     (1,562,651)   

Interest Rates U.S.

     (424,414)   

Interest Rates Non-U.S.

     (963,044)   

Livestock

     (68,985)   

Metals

     (2,987,463)   

Softs

     (1,397,328)   
  

 

 

 

Total unrealized depreciation on open futures contracts

     (18,312,891)   
  

 

 

 

Net unrealized depreciation on open futures contracts

     $ (5,670,226) 
  

 

 

 

Assets

  

Forward Contracts

  

Currencies

     $       1,063,380    

Metals

     1,571,426    
  

 

 

 

Total unrealized appreciation on open forward contracts

     2,634,806    
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

     (813,774)   

Metals

     (4,390,307)   
  

 

 

 

Total unrealized depreciation on open forward contracts

     (5,204,081)   
  

 

 

 

Net unrealized depreciation on open forward contracts

     $ (2,569,275)  ** 
  

 

 

 

 

*

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

 

**

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

 

18


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

The following table indicates the Master’s total trading gains and losses, by market sector, on derivative instruments for the three and six months ended June 30, 2019 and 2018, respectively.

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2019     2018     2019     2018  

Sector

        

Currencies

     $ 9,265         $ (4,991,977)        $ 1,037,470         $ (9,778,245)   

Energy

     (6,204,826)        12,003,059         (13,038,523)        10,680,376    

Grains

     (3,127,999)        2,787,227         292,568         (284,604)   

Indices

     1,861,069         (500,914)        5,428,425         (1,551,637)   

Interest Rates U.S.

             2,635,101         598,680         2,872,217         (275,530)   

Interest Rates Non-U.S.

     7,731,667         2,115,996         11,051,597         3,881,424    

Livestock

     (2,449,355)        (821,235)        (3,432,815)        (1,033,923)   

Metals

     (2,749,020)        3,724,674         (3,925,625)        (5,946)   

Softs

     (524,190)        430,610         133,731         1,977,694    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     $ (2,818,288)  ***      $            15,346,120   ***      $              419,045   ***      $             3,609,609   *** 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

***

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

 

19


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

5.

Fair Value Measurements:

Master’s Fair Value Measurements. Fair value is defined as the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The fair value of exchange-traded futures and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as input the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.

The Master considers prices for commodity futures contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills and non-exchange-traded forward contracts for which market quotations are not readily available are priced by pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of June 30, 2019 and December 31, 2018 and for the periods ended June 30, 2019 and 2018, the Master did not hold any derivative instruments 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).

 

      June 30, 2019      

       Total              Level 1              Level 2              Level 3      

Assets

           

Futures

     $ 9,770,839          $ 9,770,839          $ -              $ -        

Forwards

     5,441,571          -              5,441,571            -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     $       15,212,410          $ 9,770,839          $ 5,441,571          $ -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Futures

     $ 5,288,351          $ 5,288,351          $ -              $ -        

Forwards

     2,853,276          -              2,853,276            -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     $ 8,141,627          $ 5,288,351          $ 2,853,276          $ -        
  

 

 

    

 

 

    

 

 

    

 

 

 

  December 31, 2018  

   Total      Level 1      Level 2      Level 3  

Assets

           

Futures

     $ 12,642,665          $       12,642,665          $ -              $ -        

Forwards

     2,634,806          -              2,634,806            -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     $ 15,277,471          $ 12,642,665          $ 2,634,806          $ -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Futures

     $ 18,312,891          $ 18,312,891          $ -              $ -        

Forwards

     5,204,081          -              5,204,081            -        
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     $ 23,516,972          $ 18,312,891          $     5,204,081          $ -        
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

6.

Financial Instrument Risks:

In the normal course of business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures, forwards, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forward, option and swap contracts. Certain swap contracts may also be traded on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Each of these instruments is subject to various risks similar to those relating to the underlying financial instrument, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that, at any given time, approximately 16.1% to 33.6% of the Master’s contracts are traded OTC.

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

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

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

 

21


Ceres Abingdon L.P.

Notes to Financial Statements

(Unaudited)

 

Market risk is the potential for changes in the value of the financial instruments traded by the Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Master is exposed to market risk equal to the value of futures and forward contracts held 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/Master’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Master’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Master has credit risk and concentration risk, as MS&Co., an MS&Co. affiliate or JPMorgan are counterparties or brokers with respect to the Partnership’s/Master’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS&Co. or an MS&Co. affiliate, the Partnership’s/Master’s counterparty is an exchange or clearing organization.

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

In the ordinary course of business, the Master enters into contracts and agreements that contain various representations and warranties and which provide general indemnifications. The Master’s maximum exposure under these arrangements cannot be determined, as this could include future claims that have not yet been made against the Master. The Master considers the risk of any future obligation relating to these indemnifications to be remote.

 

7.

Subsequent Events:

The General Partner evaluates events that occur after the balance sheet date but before and up until financial statements are available to be issued. The General Partner has assessed the subsequent events through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment to or disclosure in the financial statements.

 

22


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

Liquidity and Capital Resources

The Partnership does not have, nor does it expect to have, any capital assets. The Partnership does not engage in sales of goods or services. The Partnership’s only assets are its investment in the Master, redemptions receivable from the Master and cash. The Master does not engage in sales of goods or services. The Master’s only assets are its subscriptions receivable and equity in trading accounts, consisting of unrestricted cash, restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and investment in U.S. Treasury bills at fair value, if applicable. Because of the low margin deposits normally required in commodity trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the second quarter of 2019.

The Master’s investment in futures, forwards and options may, from time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or option contract has increased or decreased by an amount equal to the daily limit, positions in that futures or option contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Master from promptly liquidating its futures or option contracts and result in restrictions on redemptions.

There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Master from trading in potentially profitable markets or prevent the Master from promptly liquidating unfavorable positions in such markets, subjecting it to substantial losses. Either of these market conditions could result in restrictions on redemptions. For the periods covered by this report, illiquidity has not materially affected the Partnership’s or the Master’s assets.

Other than the risks inherent in commodity futures, forwards, options, swaps and other derivatives trading and U.S. Treasury bills and money market mutual fund securities, the Partnership and the Master know of no trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Partnership’s or the Master’s liquidity increasing or decreasing in any material way.

The Partnership’s capital consists of capital contributions, as increased or decreased by income (loss) from its investment in the Master, expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any.

For the six months ended June 30, 2019, Partnership capital decreased 11.9% from $183,117,959 to $161,280,765. This decrease was attributable to redemptions of 15,005.6500 Redeemable Units of Class A totaling $19,624,336, redemptions of 177.3810 Redeemable Units of Class Z totaling $237,354, redemptions of 162.0550 General Partner Redeemable Units of Class Z totaling $225,013 and a net loss of $2,025,144. This decrease was partially offset by subscriptions for 211.0500 Redeemable Units of Class A totaling $274,653.

The Master’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, subscriptions, redemptions of units and distributions of profits, if any.

For the six months ended June 30, 2019, the Master’s capital decreased 19.6% from $339,199,614 to $272,550,870. This decrease was attributable to redemptions of 16,599.8186 units totaling $67,958,233 and distributions of interest income to feeder funds totaling $3,221,774. This decrease was partially offset by subscriptions of 247.0493 units totaling $1,007,617 and a net gain of $3,523,646. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.

Other than as discussed above, there are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s or the Master’s capital resource arrangements at the present time.

Off-Balance Sheet Arrangements and Contractual Obligations

The Partnership does not have any off-balance sheet arrangements, nor does it have contractual obligations or commercial commitments to make future payments, that would affect its liquidity or capital resources.

 

23


Critical Accounting Policies

The preparation of financial statements 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 expenses during the reporting periods. The General Partner believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Financial Statements.

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

Results of Operations

During the Partnership’s second quarter of 2019, the net asset value per Redeemable Unit for Class A decreased 1.7% from $1,318.94 to $1,295.88, as compared to an increase of 3.4% in the second quarter of 2018. During the Partnership’s second quarter of 2019, the net asset value per Redeemable Unit for Class D decreased 1.4% from $1,291.57 to $1,272.97, as compared to an increase of 3.8% in the second quarter of 2018. During the Partnership’s second quarter of 2019, the net asset value per Redeemable Unit for Class Z decreased 1.3% from $1,343.45 to $1,326.60, as compared to an increase of 3.9% in the second quarter of 2018. The Partnership, through its investment in the Master, experienced a net trading loss before fees and expenses in the second quarter of 2019 of $1,653,312. Losses were primarily attributable to the Master’s trading of commodity futures in energy, grains, livestock, metals and softs and were partially offset by gains in currencies, indices and U.S. and non-U.S. interest rates. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the second quarter of 2018 of $8,350,896. Gains were primarily attributable to the Master’s trading of commodity futures in energy, grains, U.S. and non-U.S. interest rates, metals and softs and were partially offset by losses in currencies, indices and livestock.

During the second quarter, the most notable losses were recorded during May from long positions in Brent crude oil and refined oil products as prices reversed lower on an outlook for weakening fuel demand. Within the agricultural complex, losses were incurred during May and June from short futures positions in the grain markets as prices rose after excessive rains in the U.S. Midwest reduced yield projections. Additional losses were incurred within the agricultural sector from positions in cattle and hog futures. Within the metals sector, losses were incurred during June from short positions in gold futures as prices rose amid U.S. dollar weakness and as new U.S. sanctions on Iran added to uncertainty in the global markets. Within the currency markets, losses were incurred during June from short positions in the euro versus the U.S. dollar following calls for the Fed to weaken the dollar to boost the U.S. economy. Further losses in the currencies were experienced during May from positions in the Japanese yen. A portion of the Partnership’s losses for the quarter was offset by gains experienced within the global interest rate sector during May and June from long positions in non-U.S. and U.S. fixed income futures as prices rose amid safe-haven demand and increased speculation that the U.S. Federal Reserve will cut interest rates. Within the global stock indices, gains were recorded during April and June from long U.S. and European equity index futures positions as prices increased on signs that major central banks are prepared to provide new stimulus to slowing economies.

During the Partnership’s six months ended June 30, 2019, the net asset value per Redeemable Unit for Class A decreased 1.3% from $1,313.04 to $1,295.88, as compared to a decrease of 1.2% in the six months ended June 30, 2018. During the Partnership’s six months ended June 30, 2019, the net asset value per Redeemable Unit for Class D decreased 0.7% from $1,281.77 to $1,272.97, as compared to a decrease of 0.6% in the six months ended June 30, 2018. During the Partnership’s six months ended June 30, 2019, the net asset value per Redeemable Unit for Class Z decreased 0.3% from $1,330.76 to $1,326.60, as compared to a decrease of 0.2% in the six months ended June 30, 2018. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the six months ended June 30, 2019 of $250,861. Gains were primarily attributable to the Master’s trading of commodity futures in currencies, grains, indices, U.S. and non-U.S. interest rates and softs and were partially offset by losses in energy, livestock and metals. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the six months ended June 30, 2018 of $923,200. Gains were primarily attributable to the Master’s trading of commodity futures in energy, non-U.S. interest rates and softs and were partially offset by losses in currencies, grains, indices, U.S. interest rates, livestock and metals.

 

24


During the first six months of the most significant losses were incurred within the energy sector during January and February from short positions in crude oil futures as global oil prices moved higher. Additional losses were incurred during May in the energy sector from futures positions in gas oil and gasoline. Within the metals sector, losses were incurred during June from short positions in gold futures as prices rose amid U.S. dollar weakness and as new U.S. sanctions on Iran added to uncertainty in the global markets. Within the agricultural complex, losses were incurred during May and June from short futures positions in the grain markets as prices rose after excessive rains in the U.S. Midwest reduced yield projections. Additional losses were incurred within the agricultural sector from positions in cattle and hog futures. A majority of the Partnership’s losses for the first six months of the year was offset by trading gains within the global interest rate sector during January, March, May, and June from long positions in non-U.S. and U.S. fixed income futures as prices rose as global economic concerns pushed central banks to looser monetary policy globally. Within the global stock index markets, gains were primarily recorded during January through April, as well as in June, from long positions in European, U.S., and Asian equity index futures as positive consumer sentiment and the promise of dovish monetary policy pushed stock prices higher. Additional gains were achieved within the currency sector during February, March, and April from short positions in the euro as the relative value of the Eurozone’s currency weakened on speculation of stagnating economic growth in Europe.

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

Interest income on 100% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the Master’s) brokerage account at MS&Co. during each month is earned at a monthly average of the 4-week U.S. Treasury bill discount rate. For the avoidance of doubt, the Partnership/Master will not receive interest on amounts in the futures brokerage account that are committed to margin. Any interest earned on the Partnership’s and/or the Master’s account in excess of the amounts described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market mutual fund securities will be retained by the Partnership and/or the Master, as applicable. Any interest income earned on collateral deposited by the Master and held by JPMorgan in its capacity as the Master’s forward foreign currency counterparty will be retained by the Master, and the Partnership will receive its allocable portion of such interest from the Master. Interest income allocated from the Master for the three and six months ended June 30, 2019 increased by $141,732 and $436,633, respectively, as compared to the corresponding periods in 2018. The increase in interest income was primarily due to higher U.S. Treasury bill rates during the three and six months ended June 30, 2019 as compared to the corresponding periods in 2018. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends upon (1) the average daily equity maintained in cash in the Partnership’s and/or the Master’s account, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and/or the Master and (3) interest rates over which none of the Partnership, the Master, MS&Co. or JPMorgan has control.

Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted net asset value of Class A Redeemable Units and Class D Redeemable Units as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and six months ended June 30, 2019 decreased by $133,085 and $273,845, respectively, as compared to the corresponding periods in 2018. The decrease in ongoing selling agent fees was due to lower average net assets attributable to Class A Redeemable Units and Class D Redeemable Units during the three and six months ended June 30, 2019 as compared to the corresponding periods in 2018.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value per Class as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Management fees for the three and six months ended June 30, 2019 decreased by $102,015 and $211,999, respectively, as compared to the corresponding periods in 2018. The decrease in management fees was due to lower average net assets per Class during the three and six months ended June 30, 2019 as compared to the corresponding periods in 2018.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership including, among other things, (i) selecting, appointing and terminating the Partnership’s commodity trading advisor and (ii) monitoring the activities of the commodity trading advisor. These fees are calculated as a percentage of the Partnership’s adjusted net asset value per Class as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. General Partner fees for the three and six months ended June 30, 2019 decreased by $68,009 and $141,331, respectively, as compared to the corresponding periods in 2018. The decrease in General Partner fees was due to lower average net assets per Class during the three and six months ended June 30, 2019 as compared to the corresponding periods in 2018.

 

25


Incentive fees paid by the Partnership are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the management agreement among the Partnership, the General Partner and the Advisor. There were no incentive fees earned for the three and six months ended June 30, 2019 and 2018. The Advisor will not be paid incentive fees until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

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

 

26


Item 3. Quantitative and Qualitative Disclosures about Market Risk.

All or substantially all of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. The Partnership and the Master are speculative commodity pools. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Master’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 Master’s and the Partnership’s main line of business.

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

Market movements result in frequent changes in the fair value of the Master’s open positions and, consequently, in its earnings and cash balances. The Master’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master’s open contracts and the liquidity of the markets in which it trades.

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

Quantifying the Master’s Trading Value at Risk

The following quantitative disclosures regarding the Master’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 of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (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.

The Master accounts for open positions on the basis of fair value accounting principles. Any loss in the market value of the Master’s open positions are directly reflected in the Master’s earnings and cash flow.

The Master’s risk exposure in the market sectors traded by the Advisor is estimated below in terms of Value at Risk. Please note that the Value at Risk model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either the General Partner or the Advisor in their daily risk management activities.

“Value at Risk” is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master’s speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master’s experience to date (i.e., “risk of ruin”). In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Master’s losses in any market sector will be limited to Value at Risk or by the Master’s attempts to manage its market risk.

Exchange margin requirements have been used by the Master as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master’s open positions by market category as of June 30, 2019 and December 31, 2018, and the highest, lowest and average values during the three months ended June 30, 2019 and for the twelve months ended December 31, 2018. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

27


As of June 30, 2019, the Master’s total capitalization was $272,550,870 and the Partnership owned approximately 59.1% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of June 30, 2019 was as follows:

June 30, 2019

 

                  Three Months Ended June 30, 2019  

Market Sector

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

Currencies

     $ 8,860,325          3.25       $ 17,755,291          $ 8,860,325          $ 14,924,273    

Energy

     900,072          0.33         4,695,659          844,457          3,240,994    

Grains

     1,835,924          0.67         2,784,536          1,835,924          2,576,780    

Indices

     3,372,406          1.24         5,150,525          2,274,571          4,182,943    

Interest Rates U.S.

     1,487,207          0.55         1,487,207          315,000          711,326    

Interest Rates Non-U.S.

     3,443,749          1.26         3,988,801          -               2,573,362    

Livestock

     190,914          0.07         772,200          190,914          563,762    

Metals

     6,198,894          2.27         7,898,365          2,974,463          7,113,791    

Softs

     2,204,491          0.81             2,733,704                  2,204,491              2,497,758    
  

 

 

    

 

 

         

Total

     $     28,493,982                      10.45          
  

 

 

    

 

 

         

* Average of daily Values at Risk.

As of December 31, 2018, the Master’s total capitalization was $339,199,614 and the Partnership owned approximately 53.9% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of December 31, 2018 was as follows:

December 31, 2018

 

                  Twelve Months Ended December 31, 2018  

Market Sector

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

Currencies

     $ 14,022,930          4.13       $ 40,819,997          $ 8,567,370          $ 16,973,741    

Energy

     8,028,684          2.37         8,036,912          829,228          4,157,377    

Grains

     2,334,001          0.69         2,334,001          1,061,131          1,716,066    

Indices

     2,227,828          0.66         20,796,191          1,604,411          4,148,554    

Interest Rates U.S.

     254,895          0.08         2,463,087          231,014          1,064,575    

Interest Rates Non-U.S.

     3,164,144          0.93         4,678,955          563,863          2,628,833    

Livestock

     275,880          0.08         608,080          53,482          353,539    

Metals

     3,821,887          1.13         10,784,203          3,821,887          6,988,060    

Softs

     3,145,874          0.93         3,315,733                  1,909,209              2,622,981    
  

 

 

    

 

 

         

Total

     $     37,276,123                          11.00          
  

 

 

    

 

 

         

* Annual average of month-end Values at Risk.

 

28


Item 4. Controls and Procedures.

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

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

The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2019 and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:

 

   

pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;

 

   

provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and

 

   

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

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended June 30, 2019 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

29


PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which MS&Co. or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

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

MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Exchange Act of 1934, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, we refer you to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2018, 2017, 2016, 2015 and 2014. In addition, MS&Co. annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com. We refer you to the Commitments, Guarantees and Contingencies – Legal section of MS&Co.’s 2018 Audited Financial Statement.

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

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

Regulatory and Governmental Matters.    

On February 25, 2015, MS&Co. reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney’s Office for the Northern District of California, Civil Division (collectively, the “Civil Division”) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against MS&Co. That settlement was finalized on February 10, 2016.

In October 2014, the Illinois Attorney General’s Office (“ILAG”) sent a letter to MS&Co. alleging that MS&Co. knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that MS&Co. pay

 

30


ILAG approximately $88 million. MS&Co. and ILAG reached an agreement to resolve the matter on February 10, 2016.

On January 13, 2015, the New York Attorney General’s Office (“NYAG”), which is also a member of the RMBS Working Group, indicated that it intended to file a lawsuit related to approximately 30 subprime securitizations sponsored by MS&Co. NYAG indicated that the lawsuit would allege that MS&Co. misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. MS&Co. and NYAG reached an agreement to resolve the matter on February 10, 2016.

On July 23, 2014, the SEC approved a settlement by MS&Co. and certain affiliates to resolve an investigation related to certain subprime RMBS transactions sponsored and underwritten by those entities in 2007. Pursuant to the settlement, MS&Co. and certain affiliates were charged with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, agreed to pay disgorgement and penalties in an amount of $275 million and neither admitted nor denied the SEC’s findings.

On April 21, 2015, the Chicago Board Options Exchange, Incorporated (CBOE) and the CBOE Futures Exchange, LLC (CFE) filed statements of charges against MS&Co. in connection with trading by one of MS&Co.’s former traders of EEM options contracts that allegedly disrupted the final settlement price of the November 2012 VXEM futures. CBOE alleged that MS&Co. violated CBOE Rules 4.1, 4.2 and 4.7, Sections 9(a) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder. CFE alleged that MS&Co. violated CFE Rules 608, 609 and 620. The matters were resolved on July 12, 2016 and June 28, 2016, respectively, without any findings of fraud. Pursuant to the settlements, MS&Co. was required to pay a $750,000 penalty to the CBOE (for which MS&Co. and an individual were jointly and severally liable) and a $400,000 penalty to the CFE (for which MS&Co. and an individual were jointly and severally liable) and $152,664 in disgorgement.

On June 18, 2015, MS&Co. entered into a settlement with the SEC and paid a fine of $500,000 as part of the Municipalities Continuing Disclosure Corporation Initiative to resolve allegations that MS&Co. failed to form a reasonable basis through adequate due diligence for believing the truthfulness of the assertions by issuers and/or obligors regarding their compliance with previous continuing disclosure undertakings pursuant to Rule 15c2-12 under the Exchange Act in connection with offerings in which MS&Co. acted as senior or sole underwriter.

On August 6, 2015, MS&Co. consented to and became the subject of an order by the CFTC to resolve allegations that MS&Co. violated CFTC Regulation 22.9(a) by failing to hold sufficient US Dollars in cleared swap segregated accounts in the United States to meet all US dollar obligations to cleared swaps customers. Specifically, the CFTC found that while MS&Co. at all times held sufficient funds in segregation to cover its obligations to its customers, on certain days during 2013 and 2014, it held currencies, such as euros, instead of US dollars, to meet its US dollar obligations. In addition, the CFTC found that MS&Co. violated Regulation 166.3 by failing to have in place adequate procedures to ensure that it complied with Regulation 22.9(a). Without admitting or denying the findings or conclusions and without adjudication of any issue of law or fact, MS&Co. accepted and consented to the entry of findings, the imposition of a cease and desist order, a civil monetary penalty of $300,000, and undertakings related to public statements, cooperation, and payment of the monetary penalty.

 

31


On December 20, 2016, MS&Co. consented to and became the subject of an order by the SEC in connection with allegations that MS&Co. willfully violated Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-3(e), 17a-5(a), and 17a-5(d) thereunder, by inaccurately calculating its Reserve Account requirement under Rule 15c3-3 by including margin loans to an affiliate in its calculations, which resulted in making inaccurate records and submitting inaccurate reports to the SEC. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, MS&Co. consented to a cease and desist order, a censure, and a civil monetary penalty of $7,500,000.

On September 28, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. regarding violations of CFTC Rule 166.3 by failing to diligently supervise the reconciliation of exchange and clearing fees with the amounts it ultimately charged customers for certain transactions on multiple exchanges. The order and settlement required MS&Co. to pay a $500,000 penalty and cease and desist from violating Rule 166.3.

On November 2, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. for non-compliance with applicable rules governing Part 17 Large Trader reports to the CFTC. The order requires MS&Co. to pay a $350,000 penalty and cease and desist from further violations of the Commodity Exchange Act.

Civil Litigation

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against MS&Co., styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that MS&Co. misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that MS&Co. knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied MS&Co.’s motion to dismiss the complaint. On June 27, 2018, MS&Co. filed a motion for summary judgment and spoliation sanctions against CDIB. On December 21, 2018, the court denied MS&Co.’s motion for summary judgment and granted in part MS&Co,’s motion for sanctions relating to the spoliation of evidence. On January 18, 2019, CDIB filed a motion to clarify and resettle the portion of the court’s December 21, 2018 order granting spoliation sanctions. On January 24, 2019, CDIB filed a notice of appeal from the court’s December 21, 2018 order, and on January 25, 2019, MS&Co. filed a notice of appeal from the same order. On March 7, 2019, the court denied the relief that CDIB sought in a motion to clarify and resettle the portion of the court’s December 21, 2018 order granting spoliation sanctions. Based on currently available information, MS&Co. believes it could incur a loss in this action of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

 

32


On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011, which alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by MS&Co. at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiff’s purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. On January 18, 2017, the court entered an order dismissing all claims related to an additional securitization at issue. After those dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $65 million. At March 25, 2019, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $36 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $36 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On May 17, 2013, plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $133 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $116 million. On August 11, 2016, the Appellate Division, First Department affirmed the trial court’s decision denying in part MS&Co.’s motion to dismiss the complaint. At March 25, 2019, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $23 million, and the certificates had incurred actual losses of $58 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $23 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

In August of 2017, MS&Co. was named as a defendant in a purported antitrust class action in the United States District Court for the United States District Court for the Southern District of New York styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that MS&Co., together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported

 

33


class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint.

Beginning on March 25, 2019, MS&Co. was named as a defendant in a series of putative class action complaints filed in the Southern District of New York, the first of which was styled Alaska Electrical Pension Fund v. BofA Secs., Inc., et al. Each complaint alleges a conspiracy to fix prices and restrain competition in the market for unsecured bonds issued by the following Government-Sponsored Enterprises: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Farm Credit Banks Funding Corporation; and the Federal Home Loan Banks. Each complaint raises a claim under Section 1 of the Sherman Act and seeks, among other things, injunctive relief and treble compensatory damages. On May 23, 2019, plaintiffs filed a consolidated amended class action complaint, now styled In re GSE Bonds Antitrust Litigation. The purported class period in the consolidated amended complaint is now from January 1, 2009 to January 1, 2016. On June 13, 2019, the defendants filed a joint motion to dismiss the consolidated amended complaint.

Settled Civil Litigation

On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against MS&Co. and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleged that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $233 million. The complaint raised claims under the Washington State Securities Act and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On January 23, 2017, the parties reached an agreement to settle the litigation.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against MS&Co. and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. An amended complaint filed on June 10, 2010 alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $704 million. The complaint raised claims under both the federal securities laws and California law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On January 26, 2015, as a result of a settlement with certain other defendants, the plaintiff requested and the court subsequently entered a dismissal with prejudice of certain of the plaintiff’s claims, including all remaining claims against MS&Co.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against MS&Co. and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $276 million. The complaint raised

 

34


claims under both the federal securities laws and California law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On December 21, 2016, the parties reached an agreement to settle the litigation.

On October 25, 2010, MS&Co., certain affiliates and Pinnacle Performance Limited, a special purpose vehicle (“SPV”), were named as defendants in a purported class action in the United States District Court for the Southern District of New York (“SDNY”), styled Ge Dandong, et al. v. Pinnacle Performance Ltd., et al. On January 31, 2014, the plaintiffs in the action, which related to securities issued by the SPV in Singapore, filed a second amended complaint, which asserted common law claims of fraud, aiding and abetting fraud, fraudulent inducement, aiding and abetting fraudulent inducement, and breach of the implied covenant of good faith and fair dealing.    On July 17, 2014, the parties reached an agreement to settle the litigation, which received final court approval on July 2, 2015.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against MS&Co. in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011, and alleged that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to the plaintiffs by MS&Co. was approximately $104 million. The complaint raised common law claims of fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation and sought, among other things, compensatory and/or recessionary damages associated with the plaintiffs’ purchases of such certificates. On January 16, 2015, the parties reached an agreement to settle the litigation.

On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against MS&Co. and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by MS&Co. was approximately $153 million. On June 8, 2015, the parties reached an agreement to settle the litigation.

On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. was approximately $1.073 billion. The amended complaint raised claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey RICO statute, and included a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.

In re Morgan Stanley Mortgage Pass-Through Certificates Litigation, which had been pending in the SDNY, was a putative class action involving allegations that, among other things,

 

35


the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 and 2007 contained false and misleading information concerning the pools of residential loans that backed these securitizations. On December 18, 2014, the parties’ agreement to settle the litigation received final court approval, and on December 19, 2014, the court entered an order dismissing the action.

On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank S.S.B, filed two complaints against MS&Co. in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that MS&Co. made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to plaintiff by MS&Co. in these cases was approximately $67 million and $35 million, respectively. On July 2, 2015, the parties reached an agreement to settle the litigation.

On February 14, 2013, Bank Hapoalim B.M. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $141 million. On July 28, 2015, the parties reached an agreement to settle the litigation, and on August 12, 2015, the plaintiff filed a stipulation of discontinuance with prejudice.

On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against MS&Co. and certain affiliates in the SDNY. The complaint alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiffs in the matter was approximately $417 million. The complaint alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle the matter.

On September 16, 2014, the Virginia Attorney General’s Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against MS&Co. and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that MS&Co. and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserted claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and sought, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.

On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through

 

36


certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raised claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against MS&Co. with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $332 million. On July 13, 2018, the parties reached an agreement in principle to settle the litigation.

On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against the Firm, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Firm to plaintiff was approximately $634 million. The complaint alleged causes of action against the Firm for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 26, 2018, the parties entered into an agreement to settle the litigation.

On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleged that MS&Co. made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other state laws and sought treble damages, civil penalties, disgorgement, and injunctive relief. On April 24, 2019, the parties reached an agreement to settle the litigation.

Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.

 

37


Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth under Part I, Item 1A. “Risk Factors.” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and under Part II, Item 1A. “Risk Factors.” in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

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

For the three months ended June 30, 2019, there were subscriptions for 54.8560 Redeemable Units of Class A totaling $74,653. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by accredited investors as defined in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

Proceeds from the sale of Redeemable Units are used for the trading of commodity interests, including futures and forward contracts.

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

 

                                                                                                                                                                                                                                                           
Period   

Class A (a)

Total

Number of

    Redeemable    
Units
Purchased*

     Class A (b)
Average
Price Paid
per
  Redeemable Unit**  
    

Class Z (a)

Total

Number of
    Redeemable    
Units
Purchased*

    

Class Z (b)

Average

Price Paid

per
  Redeemable Unit**  

    

(c) Total
Number of

    Redeemable    

Units

Purchased

as Part of

Publicly

Announced

Plans or

Programs

    

(d) Maximum
Number (or
Approximate
    Dollar Value)    
of

Redeemable

Units that

May Yet Be

Purchased Under
the Plans or
Programs

 

April 1, 2019 - April 30, 2019

     1,640.6440        $ 1,360.89          N/A        N/A        N/A        N/A  

May 1, 2019 - May 31, 2019

     3,250.7880        $ 1,309.31            177.3810          $ 1,338.10          N/A        N/A  

June 1, 2019 - June 30, 2019

     2,448.4780        $ 1,295.88          N/A        N/A        N/A        N/A  
       7,339.9100        $ 1,316.36            177.3810          $ 1,338.10                      

 

*

Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners.

 

**

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

Item 3. Defaults Upon Senior Securities. – None.

Item 4. Mine Safety Disclosures. – Not applicable.

Item 5. Other Information. – None.

 

38


Item 6. Exhibits.

 

31.1 —

 

Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director) (filed herewith).

31.2 —

 

Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director) (filed herewith).

32.1 —

 

Section 1350 Certification (Certification of President and Director) (filed herewith).

32.2 —

 

Section 1350 Certification (Certification of Chief Financial Officer and Director) (filed herewith).

 

101.INS

    

XBRL Instance Document.

101.SCH

    

XBRL Taxonomy Extension Schema Document.

101.CAL

    

XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

 

    

  

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

    

XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF

    

XBRL Taxonomy Extension Definition Linkbase Document.

 

39


SIGNATURES

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

 

CERES ABINGDON L.P.

By:

 

Ceres Managed Futures LLC

 

(General Partner)

By:

 

/s/ Patrick T. Egan                                             

 

Patrick T. Egan

 

President and Director

Date: August 8, 2019

By:

 

/s/ Steven Ross                                                   

 

Steven Ross

 

Chief Financial Officer and Director

 

(Principal Accounting Officer)

Date: August 8, 2019

The General Partner which signed the above is the only party authorized to act for the registrant. The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.

 

 

40