Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - MANAGED FUTURES PREMIER WARRINGTON L.P. | Financial_Report.xls |
EX-32.2 - EX-32.2 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y05250exv32w2.htm |
EX-31.2 - EX-31.2 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y05250exv31w2.htm |
EX-32.1 - EX-32.1 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y05250exv32w1.htm |
EX-31.1 - EX-31.1 - MANAGED FUTURES PREMIER WARRINGTON L.P. | y05250exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2011
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-52603
WARRINGTON FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 20-3845577 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
522 Fifth Avenue 14th Floor
New York, New York 10036
(212) 296-1999
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No -
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes X No -
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer - | Accelerated filer - | Non-accelerated filer X |
Smaller reporting company - |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes - No X
As
of October 31, 2011, 150,582.1369 Limited Partnership Redeemable
Units of Class A were outstanding, 4,629.5010 Limited Partnership
Redeemable Units of Class D outstanding.
WARRINGTON FUND L.P.
FORM 10-Q
INDEX
FORM 10-Q
INDEX
2
Table of Contents
PART I
Item 1. Financial Statements
Warrington Fund L.P.
Statements of Financial Condition
(Unaudited) | ||||||||
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets: |
||||||||
Equity in trading account: |
||||||||
Cash |
$ | 162,490,072 | $ | 189,733,118 | ||||
Cash margin |
12,212,119 | 44,588,913 | ||||||
Options purchased, at fair value (cost
$11,086,500 and $4,225,973 at September 30, 2011 and December 31, 2010, respectively) |
15,485,000 | 1,517,063 | ||||||
Total
trading equity |
190,187,191 | 235,839,094 | ||||||
Interest receivable |
0 | 15,288 | ||||||
Total assets |
$ | 190,187,191 | $ | 235,854,382 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Options premium received, at fair value
(premium $13,415,560 and $6,851,750 at September 30, 2011 and December 31, 2010, respectively) |
$ | 14,639,312 | $ | 1,423,500 | ||||
Accrued expenses: |
||||||||
Brokerage fees |
548,587 | 732,597 | ||||||
Management fees |
291,517 | 389,302 | ||||||
Administrative fees |
72,879 | 97,326 | ||||||
Other |
88,975 | 116,899 | ||||||
Redemptions payable |
13,295,490 | 10,852,877 | ||||||
Total liabilities |
28,936,760 | 13,612,501 | ||||||
Partners Capital: |
||||||||
General
Partner, Class A, 2,463.8345 and 2,650.4783 unit equivalents
outstanding at
September 30, 2011 and December 31, 2010, respectively
|
2,538,070 | 2,692,303 | ||||||
Limited
Partners, Class A, 154,070.6176 and
216,139.5211 Redeemable Units outstanding at September 30, 2011 and December 31, 2010, respectively |
158,712,361 | 219,549,578 | ||||||
Total partners capital |
161,250,431 | 222,241,881 | ||||||
Total liabilities and partners capital |
$ | 190,187,191 | $ | 235,854,382 | ||||
Net asset
value per unit, Class A |
$ | 1,030.13 | $ | 1,015.78 | ||||
See accompanying notes to financial statements.
3
Table of Contents
Warrington Fund L.P.
Condensed Schedule of Investments
September 30, 2011
(Unaudited)
Number of | % of Partners | |||||||||||
Contracts | Fair Value | Capital | ||||||||||
Options
Purchased |
||||||||||||
Indices |
||||||||||||
Calls |
380 | $ | 4,750 | 0.00 | %* | |||||||
Puts |
2,470 | 15,480,250 | 9.60 | |||||||||
Total
options purchased |
15,485,000 | 9.60 | ||||||||||
Options Premium Received |
||||||||||||
Indices |
||||||||||||
Calls |
3,405 | (42,562 | ) | (0.03 | ) | |||||||
Puts |
7,220 | (14,596,750 | ) | (9.05 | ) | |||||||
Total options premium received |
(14,639,312 | ) | (9.08 | ) | ||||||||
Net fair value |
$ | 845,688 | 0.52 | % | ||||||||
* | Due to rounding. |
See accompanying notes to financial statements.
4
Table of Contents
Warrington Fund L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Number of | % of Partners | |||||||||||
Contracts | Fair Value | Capital | ||||||||||
Options Purchased
|
||||||||||||
Indices
|
||||||||||||
Puts
|
2,465 | $ | 1,517,063 | 0.68 | % | |||||||
Total options purchased
|
1,517,063 | 0.68 | ||||||||||
Options Premium Received
|
||||||||||||
Indices
|
||||||||||||
Calls
|
4,840 | (60,500 | ) | (0.03 | ) | |||||||
Puts
|
11,020 | (1,363,000 | ) | (0.61 | ) | |||||||
Total options premium received
|
(1,423,500 | ) | (0.64 | ) | ||||||||
Net fair value
|
$ | 93,563 | 0.04 | % | ||||||||
See accompanying notes to financial statements.
5
Table of Contents
Warrington Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Investment Income: |
||||||||||||||||
Interest income |
$ | 5,284 | $ | 67,225 | $ | 54,439 | $ | 170,633 | ||||||||
Expenses: |
||||||||||||||||
Brokerage fees including clearing fees |
1,850,418 | 2,627,210 | 6,324,696 | 8,450,172 | ||||||||||||
Management fees |
891,110 | 1,268,577 | 2,955,446 | 4,034,809 | ||||||||||||
Administrative fees |
222,777 | 317,144 | 738,861 | 1,008,703 | ||||||||||||
Other |
33,651 | 75,128 | 149,994 | 227,465 | ||||||||||||
Total expenses |
2,997,956 | 4,288,059 | 10,168,997 | 13,721,149 | ||||||||||||
Net investment income (loss) |
(2,992,672 | ) | (4,220,834 | ) | (10,114,558 | ) | (13,550,516 | ) | ||||||||
Trading Results: |
||||||||||||||||
Net gains (losses) on trading of commodity interests: |
||||||||||||||||
Net realized gains (losses) on closed contracts |
(9,002,200 | ) | 8,753,275 | 13,349,800 | (20,178,281 | ) | ||||||||||
Change in net unrealized gains (losses) on open contracts |
1,679,623 | 1,926,400 | 455,408 | 2,002,213 | ||||||||||||
Total
trading results |
(7,322,577 | ) | 10,679,675 | 13,805,208 | (18,176,068 | ) | ||||||||||
Net income (loss) |
(10,315,249 | ) | 6,458,841 | 3,690,650 | (31,726,584 | ) | ||||||||||
Subscriptions-Limited Partners |
3,207,500 | 7,447,000 | 6,474,964 | 65,022,000 | ||||||||||||
Subscriptions-General Partner |
0 | 0 | 0 | 250,000 | ||||||||||||
Redemptions-Limited Partners |
(20,663,306 | ) | (20,710,415 | ) | (70,957,064 | ) | (53,079,958 | ) | ||||||||
Redemptions-General Partner |
0 | 0 | (200,000 | ) | 0 | |||||||||||
Net increase (decrease) in Partners Capital |
(27,771,055 | ) | (6,804,574 | ) | (60,991,450 | ) | (19,534,542 | ) | ||||||||
Partners Capital, Class A beginning of period |
189,021,486 | 250,323,226 | 222,241,881 | 263,053,194 | ||||||||||||
Partners Capital, Class A end of period |
$ | 161,250,431 | $ | 243,518,652 | $ | 161,250,431 | $ | 243,518,652 | ||||||||
Net asset
value per unit, Class A (156,534.4521 and 239,838.4977
units outstanding at September 30, 2011 and 2010, respectively) |
$ | 1,030.13 | $ | 1,015.34 | $ | 1,030.13 | $ | 1,015.34 | ||||||||
Net income (loss) per unit* |
$ | (60.13 | ) | $ | 25.53 | $ | 14.35 | $ | (118.27 | ) | ||||||
Weighted average units outstanding |
171,146.8666 | 252,023.6499 | 188,489.4886 | 250,751.1912 | ||||||||||||
* | Based on change in net asset value per unit. |
See
accompanying notes to financial statements.
6
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
1. | General: |
Warrington Fund L.P. (the Partnership) is a limited partnership organized on November 28,
2005, under the partnership laws of the State of New York to engage in the speculative trading of
commodity interests including futures and options contracts. The
Partnership trades futures in the stock indices sector. The Partnership commenced trading on February 21,
2006. The commodity interests that are traded by the Partnership are volatile and involve a high
degree of market risk. The Partnership privately and continuously offers redeemable
units of limited partnership interest (Redeemable Units) in the Partnership to qualified
investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
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
wholly owned by Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings). Morgan
Stanley, indirectly through various subsidiaries, owns a majority equity
interest in MSSB Holdings. Citigroup Global
Markets Inc. (CGM), the commodity broker and a selling
agent for the Partnership, owns a minority equity interest in
MSSB Holdings. Citigroup Inc. (Citigroup), indirectly through various subsidiaries, wholly owns
CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General
Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of
Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup.
On June 15, 2011,
the Partnership began offering Class A units and
Class D units pursuant to the offering memorandum. All
outstanding units on June 15,2011, were Class A units. The rights, powers, duties and obligations associated with the
investment in Class A units were not changed. On October 1, 2011, the
first Class D units were issued to Limited Partners Redeemable Units. Class A and Class D 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, although the General Partner may determine to offer units to investors at its discretion.
As
of September 30, 2011, all trading decisions for the Partnership are made by Warrington
Advisors, LLC (the Advisor). In addition, Warrington
Trading LLC, an affiliate of the Advisor, is a special limited partner (the Special
Limited Partner) of the Partnership.
The General Partner and each limited partner of the Partnership (each, a Limited Partner)
share in the profits and loss of the Partnership, after the allocation to the Special Limited
Partner, in proportion to the amount of Partnership interest owned by each except that no Limited
Partner shall be liable for obligations of the Partnership in excess of its capital
contribution and profits, if any, net of distributions.
The
Partnerships trading of futures and options contracts, if applicable, on
commodities is done primarily on United States of America and foreign commodity exchanges. It
engages in such trading through a commodity brokerage account maintained with CGM.
The accompanying financial statements and accompanying notes are unaudited but, in the opinion
of management, include all adjustments, consisting only of normal recurring adjustments, necessary
for a fair statement of the Partnerships financial condition at September 30, 2011 and December
31, 2010 and the results of its operations and changes in
partners capital for the three and nine
months ended September 30, 2011 and 2010. These financial statements present the results of interim
periods and do not include all disclosures normally provided in annual financial statements. You
should read these financial statements together with the financial statements and notes included in
the Partnerships Annual Report on Form 10-K filed with the Securities and Exchange Commission (the
SEC) for the year ended December 31, 2010.
The preparation of financial statements and accompanying notes in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires management 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.
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.
7
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
2. | Financial Highlights: |
Changes
in net asset value per unit for Class A for the three and nine months ended
September 30, 2011 and
2010 were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net realized and unrealized gains (losses) * |
$ | (53.45 | ) | $ | 31.85 | $ | 34.50 | $ | (97.90 | ) | ||||||
Interest income |
0.03 | 0.26 | 0.27 | 0.67 | ||||||||||||
Expenses and allocation to Special Limited Partner ** |
(6.71 | ) | (6.58 | ) | (20.42 | ) | (21.04 | ) | ||||||||
Increase (decrease) for the period |
(60.13 | ) | 25.53 | 14.35 | (118.27 | ) | ||||||||||
Net asset value per unit, Class A beginning of period |
1,090.26 | 989.81 | 1,015.78 | 1,133.61 | ||||||||||||
Net Asset
value per unit, Class A end of period |
$ | 1,030.13 | $ | 1,015.34 | $ | 1,030.13 | $ | 1,015.34 | ||||||||
* | Includes brokerage fees including clearing fees. | |
** | Excludes brokerage fees including clearing fees. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Ratios to
average net assets:*** |
||||||||||||||||
Net
investment income (loss) before allocation to Special Limited
Partner **** |
(6.8) | % | (6.8 | )% | (7.0) | % | (6.9 | )% | ||||||||
Operating expense |
6.8 | % | 6.9 | % | 7.1 | % | 7.0 | % | ||||||||
Allocation to Special Limited Partner |
| % | | % | | % | | % | ||||||||
Total expenses |
6.8 | % | 6.9 | % | 7.1 | % | 7.0 | % | ||||||||
Total return : |
||||||||||||||||
Total return before allocation to Special Limited Partner |
(5.5 | )% | 2.6 | % | 1.4 | % | (10.4 | )% | ||||||||
Allocation to Special Limited Partner |
| | | | ||||||||||||
Total return after allocation to Special Limited Partner |
(5.5 | )% | 2.6 | % | 1.4 | % | (10.4 | )% | ||||||||
*** | Annualized (except allocation to Special Limited Partner, if applicable). | |
**** | Interest income less total expenses. |
The above ratios may vary for individual investors based on the timing of capital transactions
during the period. Additionally, these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average net assets.
3. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts in a variety of commodity
interests, including derivative financial instruments and derivative commodity instruments. The
results of the Partnerships trading activities are shown in the Statements of Income and Expenses
and Changes in Partners Capital.
The Customer Agreement between the Partnership and CGM gives the Partnership the legal right
to net unrealized gains and losses on open futures contracts on the Statements of Financial
Condition.
All of the commodity interests owned by the
Partnership are held for trading purposes. The average number of futures contracts traded during the three months ended
September 30, 2011 and 2010 based on a monthly calculation was 0. The average number of futures contracts
traded during the nine months ended September 30, 2011 and 2010 based
on a monthly calculation were 97 and 123, respectively.
The average number of option contracts traded during
the three months ended September 30, 2011 and 2010 based on a monthly
calculation were 13,092 and 12,354, respectively. The
average number of option contracts traded during the nine months ended September 30, 2011 and 2010 based on a monthly calculation
were 16,435 and 14,127, respectively.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance, subscriptions and redemptions.
8
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
The
following table indicates the gross fair values of derivative instruments of option contracts as
separate assets and liabilities as of September 30, 2011 and December 31, 2010.
September 30, 2011 | December 31, 2010 | |||||||
Assets
|
||||||||
Options Purchased
|
||||||||
Indices
|
$ | 15,485,000 | $ | 1,517,063 | ||||
|
||||||||
Total options purchased
|
$ | 15,485,000 | * | $ | 1,517,063 | * | ||
|
||||||||
|
||||||||
Liabilities
|
||||||||
Options Premium Received
|
||||||||
Indices
|
$ | (14,639,312 | ) | $ | (1,423,500 | ) | ||
|
||||||||
Total options premium received
|
$ | (14,639,312 | )** | $ | (1,423,500 | )** | ||
|
* | This amount is in Options purchased, at fair value on the Statements of Financial Condition. | |
** | This amount is in Options premium received, at fair value on the Statements of Financial Condition. |
The following table indicates the trading gains and losses, by market sector, on derivative
instruments for the three and nine months ended September 30, 2011 and 2010.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Sector | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Indices |
$ | (7,322,577 | ) | $ | 10,679,675 | $ | 13,805,208 | $ | (18,176,068 | ) | ||||||
Total |
$ | (7,322,577 | )*** | $ | 10,679,675 | *** | $ | 13,805,208 | *** | $ | (18,176,068 | )*** | ||||
*** | This amount is in Total trading results on the Statements of Income and Expenses and Changes in Partners Capital. |
9
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
4. | Fair Value Measurements: |
Partnerships Investments. All commodity interests (including derivative financial instruments
and derivative commodity instruments) are held for trading purposes. The commodity interests are
recorded on trade date and open contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or
losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are
included as a component of equity in trading account on the Statements of Financial Condition.
Net realized gains or losses and any change in net unrealized gains or losses from the preceding period
are reported in the Statements of Income and Expenses and Changes in Partners Capital.
Partnerships Fair Value Measurements.
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1) and the lowest priority to
fair values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. GAAP also requires the need to use judgment in determining if a
formerly active market has become inactive and in determining
fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, the Partnerships
Level 1 assets and liabilities are actively traded.
The Partnership will separately present purchases, sales,
issuances and settlements in its reconciliation of
Level 3 fair value measurements (i.e., to present such items
on a gross basis rather than on a net basis), and make
disclosures regarding the level of disaggregation and the inputs
and valuation techniques used to measure fair value for
measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy as required under GAAP.
The Partnership considers prices for exchange-traded commodity futures and options contracts
to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The
values of forwards and certain options contracts for which market quotations are not readily
available are priced by broker-dealers that derive fair values for those assets from observable
inputs (Level 2). As of and for the periods ended September 30, 2011 and December 31, 2010, the
Partnership did not hold any derivative instruments for which market quotations were not readily
available and which were priced by broker-dealers that derive fair values for those assets from
observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the
application of managements assumptions and internal valuation pricing models (Level 3).
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||||||
September 30, 2011 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Options purchased |
$ | 15,485,000 | $ | 15,485,000 | $ | | $ | | ||||||||
Total assets |
15,485,000 | 15,485,000 | | | ||||||||||||
Liabilities |
||||||||||||||||
Options premium
received |
$ | 14,639,312 | $ | 14,639,312 | $ | | $ | | ||||||||
Total liabilities |
14,639,312 | 14,639,312 | | | ||||||||||||
Net fair value |
$ | 845,688 | $ | 845,688 | $ | | $ | | ||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
December 31, 2010 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Options purchased |
$ | 1,517,063 | $ | 1,517,063 | $ | | $ | | ||||||||
Total assets |
$ | 1,517,063 | $ | 1,517,063 | $ | | $ | | ||||||||
Liabilities |
||||||||||||||||
Options premium received |
$ | 1,423,500 | $ | 1,423,500 | $ | | $ | | ||||||||
Total liabilities |
1,423,500 | 1,423,500 | | | ||||||||||||
Net fair value |
$ | 93,563 | $ | 93,563 | $ | | $ | | ||||||||
10
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
5. | Financial Instrument Risks: |
In the normal course of business, the Partnership is party to financial instruments with
off-balance sheet risk, including derivative financial instruments and derivative commodity
instruments. These financial instruments may include futures and options, whose values are based
upon an underlying asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash balances, to purchase or sell other financial instruments on specific
terms at specified future dates, or, in the case of derivative commodity instruments, to have a
reasonable possibility to be settled in cash, through physical delivery or with another financial
instrument. These instruments may be traded on an exchange or over-the-counter (OTC).
Exchange-traded instruments are standardized and include futures and certain option contracts. OTC
contracts are negotiated between contracting parties and include
certain options. Specific market movements of commodities or futures
contracts underlying an option cannot accurately be predicted. Each of these
instruments is subject to various risks similar to those related to the underlying financial
instruments, including market and credit risk. In general, the risks associated with OTC contracts
are greater than those associated with exchange-traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
The risk to the Limited Partners that have purchased interests
in the Partnership is limited to the amount of their capital
contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This
limited liability is a result of the organization of the
Partnership as a limited partnership under New York law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership due to market changes, including interest and foreign exchange rate movements and
fluctuations in commodity or security prices. Market risk is directly impacted by the volatility
and liquidity in the markets in which the related underlying assets are traded. The Partnership is
exposed to market risk equal to the value of futures contracts purchased and unlimited liability on
such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to
perform according to the terms of a contract. The Partnerships 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
Partnerships risk of loss is reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Partnership to offset unrealized gains and losses
and other assets and liabilities with such counterparties upon the occurrence of certain events.
The Partnership has credit risk and concentration risk, as CGM or a
CGM affiliate is the sole counterparty or broker with
respect to the Partnerships assets. Credit risk with respect to
exchange-traded instruments is reduced to the extent that, through CGM, the Partnerships
counterparty is an exchange or clearing organization.
As both a buyer and seller of options, the Partnership pays or receives a premium at the
outset and then bears the risk of unfavorable changes in the price of the contract underlying the
option. Written options expose the Partnership to potentially unlimited liability; for purchased
options, the risk of loss is limited to the premiums paid. Certain written put options permit cash
settlement and do not require the option holder to own the reference asset. The Partnership does
not consider these contracts to be guarantees.
The General Partner monitors and attempts to control the Partnerships risk exposure on a
daily basis through financial, credit and risk management monitoring systems, and accordingly,
believes that it has effective procedures for evaluating and limiting the credit and market risks
to which the Partnership may be subject. These monitoring systems generally allow the General
Partner to statistically analyze actual trading results with risk adjusted performance indicators
and correlation statistics. In addition, online monitoring systems provide account analysis of
futures and options positions by sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of the inception date. However, due
to the nature of the Partnerships business, these instruments may not be held to maturity.
6. | Critical Accounting Policies |
Use of Estimates. The preparation of financial statements and accompanying notes in conformity
with GAAP requires management 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.
11
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Partnerships Investments. All commodity interests (including derivative financial instruments
and derivative commodity instruments) are held for trading purposes. The commodity interests are
recorded on trade date and open contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or
losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are
included as a component of equity in trading account on the Statements of Financial Condition.
Net realized gains or losses and any change in net unrealized gains or losses from the preceding period
are reported in the Statements of Income and Expenses and Changes in Partners Capital.
Partnerships Fair Value Measurements.
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1) and the lowest priority to
fair values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. GAAP also requires the need to use judgment in determining if a
formerly active market has become inactive and in determining
fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, the Partnerships
Level 1 assets and liabilities are actively traded.
The Partnership will separately present purchases, sales,
issuances and settlements in its reconciliation of
Level 3 fair value measurements (i.e., to present such items
on a gross basis rather than on a net basis), and make
disclosures regarding the level of disaggregation and the inputs
and valuation techniques used to measure fair value for
measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy as required under GAAP.
The Partnership considers prices for exchange-traded commodity futures and options contracts
to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The
values of forwards and certain options contracts for which market quotations are not readily
available are priced by broker-dealers that derive fair values for those assets from observable
inputs (Level 2). As of and for the periods ended September 30, 2011 and December 31, 2010, the
Partnership did not hold any derivative instruments that were priced by broker-dealers that derive
fair values for those assets from observable inputs (Level 2) or that were priced at fair value
using unobservable inputs through the application of managements assumptions and internal
valuation pricing models (Level 3).
Options. The Partnership may purchase and write (sell), both exchange listed and
OTC, options on commodities or financial instruments. An option is a contract
allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard
commodity or financial instrument at a specified price during a specified time period. The option
premium is the total price paid or received for the option contract. When the Partnership writes an
option, the premium received is recorded as a liability in the Statements of Financial Condition
and marked to market daily. When the Partnership purchases an option, the premium paid is recorded
as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains
(losses) and changes in net unrealized gains (losses) on options contracts are included in the
Statements of Income and Expenses and Changes in Partners Capital.
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements and requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the
Partnerships financial statements to determine whether the
tax positions are more-likely-than-not to be
sustained by the applicable tax authority. Tax positions with
respect to tax at the Partnership level not deemed to meet the
more-likely-than-not threshold would be recorded as
a tax benefit or expense in the current year. The General
Partner has concluded that no provision for income tax is
required in the Partnerships financial statements.
12
Table of Contents
Warrington Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
The Partnership files U.S. federal and various state and
local tax returns. No income tax returns are currently under
examination. Generally, the 2008 through 2010 tax years remain
subject to examination by U.S. federal and most state tax
authorities. Management does not believe that there are any
uncertain tax positions that require recognition of a tax
liability.
Subsequent
Events. The General Partner evaluates events that occur after the balance sheet
date but before financial statements are filed. The General Partner has assessed the subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.
Recent
Accounting Pronouncements. In May 2011, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) 2011-04,
Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and International Financial Reporting
Standards (IFRS).
The amendments within this ASU change the wording used to describe many of the
requirements in U.S. GAAP for measuring fair value and for disclosing information
about fair value measurements to eliminate unnecessary wording differences between
U.S GAAP and IFRS. However, some of the amendments clarify the FASBs intent about the
application of existing fair value measurement requirements and other amendments
change a particular principle or requirement for measuring fair value or for disclosing
information about fair value measurements. The ASU is effective for annual and interim
periods beginning after December 15, 2011 for public entities. This new guidance is not
expected to have a material impact on the Partnerships financial statements.
In October 2011, FASB issued a proposed ASU intended to
improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an
investment company. Under longstanding U.S. GAAP, investment companies carry
all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes
being proposed by the FASB relate to which entities would be considered investment companies as well as certain disclosure
and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an
investment company, the FASB also proposes that an investment company consolidate another investment company if it
holds a controlling financial interest in the entity. The Partnership is currently evaluating the impact that this
proposed update would have on the financial statements.
Net Income (Loss) per Unit. Net income (loss)
per unit is calculated in accordance with investment company
guidance. See Note 2, Financial Highlights.
13
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services. Its only assets are its equity
in its trading account, consisting of cash, cash equivalents and options contracts. Because of
the low margin deposits normally required in commodity futures trading, relatively small price
movements may result in substantial losses to the Partnership. While substantial losses could lead
to a substantial decrease in liquidity, no such illiquidity occurred
in the third quarter of 2011.
The Partnerships capital consists of capital contributions of its partners, as increased or
decreased by realized and/or unrealized gains or losses on trading and by expenses, interest
income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.
For
the nine months ended September 30, 2011, the
Partnerships capital decreased approximately 27.4% from
$222,241,881 to $161,250,431. This decrease was attributable to
the redemption of 68,323.4846 Redeemable Units of Class A totaling
$70,957,064 and 186.6438 General Partner unit equivalents of Class A totaling
$200,000, which was partially offset by the net income from
operations of $3,690,650 coupled
with subscriptions of 6,254.5811 Redeemable Units of Class A totaling $6,474,964. Future redemptions can impact the amount of funds
available for investment in commodity contract positions in subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expense during the reporting period. Management believes that the
estimates utilized in preparing the financial statements are reasonable. Actual results could
differ from those estimates. The Partnerships significant accounting policies are described in
detail in Note 6 of the Financial Statements.
The Partnership records all investments at fair value in its financial statements, with
changes in fair value reported as a component of net realized
gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners Capital.
14
Table of Contents
Results of Operations
During the Partnerships
third quarter of 2011, the net asset value per unit of Class A decreased 5.5% from $1,090.26 to
$1,030.13 as compared to an increase of 2.6% in the third quarter of 2010. The Partnership
experienced a net trading loss before brokerage fees and related fees in the third quarter of 2011
of $7,322,577. Losses were primarily attributable to the trading of commodity futures in the S&P 500
Index Calls and the S&P 500 Index Puts, and were partially offset by gains in the S&P 500 Index futures.
The Partnership experienced a net trading gain before brokerage fees and related fees in the third quarter
of 2010 of $10,679,675. Gains were primarily attributable to the trading of commodity futures in the S&P 500
Index futures, and were partially offset by losses in the S&P 500 Index Calls and the S&P 500 Index Puts.
The Partnership recorded losses during the third quarter from ratio put spread
positions in the S&P 500 Index. Losses were incurred from trading in the S&P 500
Index during July and August from ratio put spread positions as the S&P 500 Index
declined on concerns regarding the financial health of the United States. Losses
in July were incurred as the S&P 500 Index experienced significant volatility
as the market rallied approximately 3% in the first six trading days followed by
a decline of 5.1% at the end of the month, thus the Partnerships ratio put spread
positions were negatively impacted. Further losses were incurred as the S&P 500 Index
declined by over 16% during the first six trading days of August forcing the Partnership
to incur losses and hedge existing positions. A portion of the losses during the third
quarter was offset by gains in September from trading ratio put spread positions in the S&P 500 Index.
Further gains were recorded in September as continued volatility in the S&P 500 Index generated several
significant market moves during the month enabling the Partnership to profit from spread positions in the
S&P 500 Index. Gains during September were driven by the increased uncertainty in the financial markets
as concerns about the U.S. economy, as well as the Greece crisis, weighed on investor confidence in U.S. equities.
During the Partnerships nine months
ended September 30, 2011, the net asset value per unit of Class A increased 1.4% from $1,015.78 to $1,030.13 as compared to
a decrease of 10.4% for the nine months ended September 30, 2010. The Partnership experienced a net trading gain
before brokerage fees and related fees in the nine months ended September 30, 2011 of $13,805,208. Gains were primarily
attributable to the trading of commodity futures in the S&P 500 Index futures and were partially offset by losses in
the S&P 500 Index Calls and the S&P 500 Index Puts. The Partnership experienced a net trading loss before brokerage fees
and related fees in the nine months ended September 30, 2010 of $18,176,068. Losses were primarily attributable to the
trading of commodity futures in the S&P 500 Index Calls and the S&P 500 Index Puts and were partially offset by gains
in the S&P 500 Index futures.
Performance in January was slightly positive, though more significant gains were recorded trading S&P 500
Index futures and options in February and March. Gains were recorded in February and March as the overall
market moved more in accordance with the good and bad news about the U.S. economy and companies earnings
announcements. Further gains were recorded in April and May as the Partnership's
ratio put spread positions benefited from a price decline in equities as poor economic data and concerns
about a global growth slowdown weighed on the S&P 500 Index. Lastly, the Partnership recorded gains in
September as continued volatility in the S&P 500 Index benefited ratio put spread positions as growing concerns
about the global economy continued to weigh on the markets. A portion of these gains was offset by losses from trading ratio put spread positions in August as the S&P 500 index in August as ratio put spread positions suffered as the S&P 500 Index declined approximately 16% during the first 6 trading days of the month on growing concerns about the United States financial health, as well as the Greek debt crisis. Smaller losses were incurred by the Partnership in July.
Commodity futures markets are highly volatile. Broad price
fluctuations and rapid inflation increase the risks involved in commodity trading, but also increases the potential
profit or loss. The profitability of the Partnership depends on the existence of major price trends
and the ability of the Advisor to correctly identify those price trends. Price trends are
influenced by, among other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and international political and
economic events, and changes in interest rates. To the extent that market trends exist and the
Advisor is able to identify them, the Partnership expects to increase capital through operations.
Interest income on 80% of the
Partnerships daily average equity maintained in cash in its account during each month at a 30-day U.S. Treasury
bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing
in 30 days is paid to the Partnership. Interest income for the
three and nine months ended
September 30, 2011 decreased by $61,941 and $116,194, respectively, as compared to the
corresponding periods in 2010. The decrease in interest income is
due to lower U.S. Treasury bill rates and lower average net assets during the
three and nine months ended September 30, 2011, as compared to the
corresponding periods in 2010. Interest earned by the
Partnership will increase the net asset value of the Partnership.
The amount of interest income earned by the Partnership depends on the average daily equity in the Partnerships
account and upon interest rates over which neither the Partnership nor CGM has control.
15
Table of Contents
Brokerage fees are calculated on the Partnerships adjusted net asset value on the last day of
each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they
must be analyzed in relation to the fluctuations in the monthly net asset values. Brokerage fees
for the three and nine months ended September 30, 2011 decreased by
$776,792, and $2,125,476, respectively, as compared to the
corresponding periods in 2010. The decrease in brokerage fees is
due to lower average net assets during the three and nine months ended
September 30, 2011, as
compared to the corresponding periods in 2010.
Management fees are calculated as a percentage of the Partnerships adjusted net asset value as of the
end of each month and are affected by trading performance, subscriptions and redemptions. Management
fees for the three and nine months ended September 30, 2011 decreased by
$377,467 and $1,079,363, respectively, as compared to the corresponding
periods in 2010. The decrease in management fees is
due to lower average net assets during the three and nine months ended September 30, 2011, as
compared to the corresponding periods in 2010.
Administrative fees are calculated as a percentage of the Partnerships adjusted net asset value as of
the end of each month and are affected by trading performance, subscriptions and redemptions.
Administrative fees for the three and nine months ended
September 30, 2011 decreased by $94,367, and $269,842, respectively, as
compared to the corresponding periods in 2010. The decrease in
administrative fees is due to lower average net assets during the
three and nine months ended
September 30, 2011, as compared to the corresponding periods in 2010.
Special Limited Partner profit share allocations (incentive fees) are based on the new trading
profits earned by the Advisor on behalf of the Partnership, at the end of the quarter, as defined in the advisory agreement
among the Partnership, the General Partner and the Advisor. There were no profit share allocations
made for the three and nine months ended September 30, 2011 and 2010, respectively. The Special Limited Partner
will not receive a profit share allocation until the Advisor recovers the net loss incurred and
earns additional new trading profits for the Partnership.
In allocating the assets of the Partnership to the Advisor, the General Partner considers the
Advisors past performance, trading style, volatility of markets traded and fee requirements. The
General Partner may modify or terminate the allocation of assets to the Advisor at any time.
16
Table of Contents
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is a speculative commodity pool. The market sensitive instruments held by it
are acquired for speculative trading purposes, and all or substantially all of the Partnerships
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 Partnerships main line of business.
The risk to the Limited Partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited
liability is a result of the
organization of the Partnership as a limited partnership under New
York law.
Market movements result in frequent changes in the fair value of the Partnerships open
positions and, consequently, in its earnings and cash balances. The Partnerships 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 Partnerships open contracts and the liquidity of the markets in
which it trades.
The Partnership rapidly acquires and liquidates both long and short positions in a wide range
of different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Partnerships past performance is not necessarily
indicative of its future results.
Value at Risk is a measure of the maximum amount which the Partnership could reasonably be
expected to lose in a given market sector. However, the inherent uncertainty of the Partnerships
speculative trading and the recurrence in the markets traded by the Partnership of market movements
far exceeding expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnerships 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 Partnerships losses in any market sector will be limited to
Value at Risk or by the Partnerships attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Partnership as the measure of
its Value at Risk. Maintenance 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. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk component, which is not
relevant to Value at Risk.
17
Table of Contents
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
Partnerships open contracts by market category as of September 30, 2011 and December 31, 2010 and the highest, lowest
and average values during the three months ended September 30, 2011,
and twelve months ended December 31, 2010. All open contracts trading
risk exposures of the Partnership have been included in calculating the figures set forth below.
There has been no material change in the trading Value at Risk information previously disclosed in
the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2010. As of
September 30, 2011, the Partnerships total capital was
$161,250,431.
September 30, 2011
Three months ended September 30, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capital | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Indices |
$ | 10,446,245 | 6.48 | % | $ | 86,626,240 | $ | 5,101,770 | $ | 31,334,250 | ||||||||||
Total |
$ | 10,446,245 | 6.48 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As of December 31, 2010, the
Partnerships total capitalization was $222,241,881.
December 31, 2010
Twelve months ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average * | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | |||||||||||||||
Indices |
$ | 35,745,980 | 16.08 | % | $ | 153,426,986 | $ | 1,694,925 | $ | 57,779,840 | ||||||||||
Total |
$ | 35,745,980 | 16.08 | % | ||||||||||||||||
* | Annual average of month-end Values at Risk. |
18
Table of Contents
Item 4. Controls and Procedures
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934, as amended (the Exchange
Act), is recorded, processed, summarized and
reported within the time periods expected in the SECs 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 Chief Executive Officer (the CEO) and Chief Financial Officer (the 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 Partnerships
external disclosures.
The General Partners CEO and CFO have evaluated the effectiveness of the Partnerships
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of September 30, 2011 and, based on that evaluation, the General Partners CEO and CFO have
concluded that, at that date, the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision
of the General Partners CEO 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 Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control over financial reporting process
during the fiscal quarter ended September 30, 2011 that materially affected, or are reasonably
likely to materially affect, the Partnerships internal control over financial reporting.
19
Table of Contents
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
The following information supplements and amends the discussion set
forth under Part I, Item 3 Legal Proceedings
in the Partnerships Annual Report on Form 10-K for the fiscal year ended December 31, 2010,
as updated by the Partnerships
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
Subprime-Mortgage Related Actions
On October 19, 2011, the SEC and Citigroup announced a settlement, subject to
judicial approval, in connection with the SECs investigation into the structuring
and sale of CDOs. Pursuant to the proposed settlement, CGM agreed to pay $160 million in
disgorgement, $30 million in prejudgment interest, and a civil penalty of $95 million relating
to CGMs role in the structuring and sale of the
Class V Funding III CDO transaction. Additional information relating to this matter is publicly
available in court filings under the docket number 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.).
20
Table of Contents
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 Partnerships Annual Report on Form 10-K for the fiscal year ended December 31,
2010 and under Part II, Item 1A. Risk Factors in the
Partnerships Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the three months
ended September 30, 2011, there were subscriptions of 3,078.9546
Redeemable Units totaling $3,207,500. The Redeemable Units were issued in reliance upon applicable
exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and
Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by
accredited investors as defined in Regulation D.
Proceeds of net offering were used in the trading of commodity
interests including futures contracts and options.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
(d) Maximum Number | ||||||||||||||||||||||
(c) Total Number | (or Approximate | |||||||||||||||||||||
Class A | Class A | of Shares (or | Dollar Value) of Shares | |||||||||||||||||||
(a) Total Number | (b) Average | Redeemable Units) | (or Redeemable Units) | |||||||||||||||||||
of Shares | Price Paid per | Purchased as Part | that May Yet Be | |||||||||||||||||||
(or Redeemable | Share (or | of Publicly Announced | Purchased Under the | |||||||||||||||||||
Period | Units) Purchased* | Redeemable Unit)** | Plans or Programs | Plans or Programs | ||||||||||||||||||
July 1,
2011 July 31, 2011 |
4,517.1750 | $1,069.30 | N/A | N/A | ||||||||||||||||||
August 1, 2011 August 31, 2011 |
2,494.2756 | $ | 1,017.37 | N/A | N/A | |||||||||||||||||
September 1,
2011 September 30, 2011 |
12,906.6133 | $ | 1,030.13 | N/A | N/A | |||||||||||||||||
19,918.0639 | $ | 1,037.42 | ||||||||||||||||||||
* | Generally, Limited Partners are permitted to redeem their Redeemable Units as of the last day 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 Partnerships business in connection with effecting redemptions for Limited Partners. | |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions. |
Item 3. Defaults Upon Senior Securities None
Item 4. [Removed and Reserved]
Item 5. Other Information None
21
Table of Contents
Item 6. Exhibits
3.1
|
(a) | Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York on November 21, 2005 (filed as Exhibit 3.1 to general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | ||
(b) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(b) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
(c) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the current report on Form 8-K filed on September 30, 2009 and incorporated herein by reference). | |||
(d) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated June 30, 2010 (filed as Exhibit 3.1(d) to the Form 8-K filed on July 2, 2010 and incorporated herein by reference). | |||
(e) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the Form 8-K on September 7, 2011 and incorporated herein by reference). | |||
3.2
|
(a) | Third Amended and Restated Limited Partnership Agreement, dated December 21, 2009 (filed as Exhibit 3.2 to the current report on Form 8-K filed on December 21, 2009 and incorporated herein by reference). | ||
(b) | Fourth Amended and Restated Limited Partnership Agreement, dated June 15, 2011 (filed herein by reference) | |||
10.1
|
(a) | Management Agreement among the Partnership, the General Partner and Warrington, dated December 31, 2005 (filed as Exhibit 10.1 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | ||
(b) | Letter from the General Partner to Warrington extending Management Agreement for 2011 (filed as Exhibit 10.1(b) to the annual report on Form 10-K filed on March 31, 2011 and incorporated herein by reference). | |||
10.2
|
Customer Agreement between the Partnership, the General Partner and CGM, dated February 17, 2005 (filed as Exhibit 10.2 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.3
|
Amended and Restated Agency Agreement between the Partnership, the General Partner and CGM, dated April 26, 2007 (filed as Exhibit 10.3 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.4
|
Selling Agreement between the Partnership, the General Partner, CGM and Credit Suisse Securities (USA) LLC, dated September 30, 2008 (filed as Exhibit 10.4 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.5
|
Form of Subscription Agreement (filed as Exhibit 10.5 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.6
|
Form of Third Party Subscription Agreement (filed as Exhibit 10.6 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.9
|
Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as Exhibit 10 to the quarterly report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference). |
22
Table of Contents
10.10
|
Escrow Agreement among the Partnership, the General Partner, CGM and JPMorgan Chase Bank, N.A., dated December 23, 2005 (filed as Exhibit 10.9 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.11
|
Selling Agreement dated January 6, 2011 by and among the Registrant, the General Partner, CGM and Baird (filed as Exhibit 10.11 to current report on Form 8-K filed on January 7, 2011). | |||
10.12
|
Services Agreement dated January 6, 2011 by and among the Registrant, the General Partner, CGM and Baird (filed as Exhibit 10.12 to current report on Form 8-K filed on January 7, 2011). |
31.1 | Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director). | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer). | |
32.1 | Section 1350 Certification (Certification of President and Director). | |
32.2 | Section 1350 Certification (Certification of Chief Financial Officer). | |
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. |
23
Table of Contents
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.
WARRINGTON FUND L.P.
By:
|
Ceres Managed Futures LLC | |||
(General Partner) | ||||
By:
|
/s/ Walter Davis | |||
Walter Davis | ||||
President and Director | ||||
Date:
|
November 14, 2011
|
|||
By:
|
/s/ Brian Centner | |||
Brian Centner | ||||
Chief Financial Officer | ||||
(Principal Accounting Officer) | ||||
Date:
|
November 14, 2011
|
24