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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

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 000-54284

MANAGED FUTURES PREMIER MACRO L.P.

 

(Exact name of registrant as specified in its charter)

 

Delaware   27-3371689

(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)

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 this 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, 2016, 98,681.350 Limited Partnership Units Class A were outstanding, 15.414 Limited Partnership Units Class D were outstanding and 800.030 Limited Partnership Units Class Z were outstanding.


Table of Contents

MANAGED FUTURES PREMIER MACRO L.P.

FORM 10-Q

INDEX

 

        

Page

 Number 

PART   I — Financial Information:

  

    Item 1.

 

Financial Statements:

  
 

Statements of Financial Condition at September 30, 2016 and December 31, 2015 (unaudited)

   3
  Statements of Income and Expenses for the three and nine months ended September 30, 2016 and 2015 (unaudited)    4
  Statements of Changes in Partners’ Capital for the nine months ended September 30, 2016 and 2015 (unaudited)    5
  Notes to Financial Statements, including the Financial Statements of CMF Willowbridge Master
Fund L.P. (unaudited)
   6 – 23

    Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   24 – 27

    Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

   27 – 28

    Item 4.

 

Controls and Procedures

   29

PART II — Other Information

  

    Item 1.

 

Legal Proceedings

   30 – 37

    Item 1A.

 

Risk Factors

   38

    Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

   38

    Item 3.

 

Defaults Upon Senior Securities

   38

    Item 4.

 

Mine Safety Disclosures

   38

    Item 5.

 

Other Information

   38

    Item 6.

 

Exhibits

   39

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Managed Futures Premier Macro L.P.

Statements of Financial Condition

(Unaudited)

 

     September 30,
2016
     December 31,
2015
 

Assets:

     

Investment in the Master(1), at fair value

     $ 49,979,293           $ 71,951,672     

Expense reimbursement

     960           -          

Cash at bank

     994           -          
  

 

 

    

 

 

 

Total assets

     $ 49,981,247           $ 71,951,672     
  

 

 

    

 

 

 

Liabilities and Partners’ Capital:

     

Liabilities:

     

Accrued Expenses:

     

Management fees

     $ 63,173           $ -          

Redemptions payable to Limited Partners

     1,694,675           4,204,000     
  

 

 

    

 

 

 

Total liabilities

     1,757,848           4,204,000     
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, Class Z, 1,010.185 and 1,643.718 Units outstanding at September 30, 2016 and December 31, 2015, respectively

     526,287           1,006,167     

Limited Partner, Class A, 100,604.306 and 118,342.550 Units outstanding at September 30, 2016 and December 31, 2015, respectively

     47,273,068           66,343,350     

Limited Partner, Class D, 15.414 Units outstanding at September 30, 2016 and December 31, 2015

     7,243           8,560     

Limited Partner, Class Z, 800.030 and 636.459 Units outstanding at September 30, 2016 and December 31, 2015, respectively

     416,801           389,595     
  

 

 

    

 

 

 

Total partners’ capital (net asset value)

     48,223,399           67,747,672     
  

 

 

    

 

 

 

Total liabilities and partners’ capital

     $       49,981,247           $       71,951,672     
  

 

 

    

 

 

 

Net asset value per Unit:

     

Class A

     $ 469.89           $ 560.60     
  

 

 

    

 

 

 

Class D

     $ 469.94           $ 555.33     
  

 

 

    

 

 

 

Class Z

     $ 520.98           $ 612.13     
  

 

 

    

 

 

 

(1)    Defined in Note 1.

 

See accompanying notes to financial statements.

 

3


Table of Contents

Managed Futures Premier Macro L.P.

Statements of Income and Expenses

(Unaudited)

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2016     2015     2016     2015  

Investment Income:

       

Interest income allocated from the Master

    $ 29,609          $ -               $ 73,748          $ -          
 

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

       

Expenses allocated from the Master

    38,379          710,668          261,319          2,626,681     

Management fees

    198,724          -               538,897          -          

Ongoing placement agent fees

    260,103          513,765          817,196          2,075,213     

General Partner fees

    132,483          264,538          416,200          1,071,710     

Professional fees

    65,095          86,109          197,917          192,916     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Total expenses

    694,784          1,575,080          2,231,529          5,966,520     

Expenses borne by the General Partner

    (34,734)         (19,975)         (101,306)         (19,975)    
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Net expenses

    660,050          1,555,105          2,130,223          5,946,545     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Net investment loss

    (630,441)         (1,555,105)         (2,056,475)         (5,946,545)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Trading Results:

       

Net gains (losses) on investment in the Master:

       

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

    (1,171,475)         (20,016,783)         (8,520,021)         (34,180,360)    

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

    48,213          16,674,268          100,831          10,230,296     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Total trading results allocated from the Master

    (1,123,262)         (3,342,515)         (8,419,190)         (23,950,064)    
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Net income (loss)

    $ (1,753,703)         $ (4,897,620)         $ (10,475,665)         $ (29,896,609)    
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Net income (loss) allocation by Class:

       

Class A

    $ (1,725,948)         $ (4,757,373)         $ (10,289,415)         $ (28,692,461)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Class D

    $ (225)         $ (52,131)         $ (1,317)         $ (664,017)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

    $ (27,530)         $ (88,116)         $ (184,933)         $ (540,131)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per Unit:

       

Class A

    $ 469.89          $ 579.07          $ 469.89          $ 579.07     
 

 

 

   

 

 

   

 

 

   

 

 

 

Class D

    $ 469.94          $ 571.76          $ 469.94          $ 571.76     
 

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

    $ 520.98          $ 629.11          $ 520.98          $ 629.11     
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per Unit: *

       

Class A

    $ (16.12)         $ (27.11)         $ (90.71)         $ (138.53)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Class D

    $ (14.59)         $ (24.87)         $ (85.39)         $ (130.01)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

    $ (15.16)         $ (26.11)         $ (91.15)         $ (138.61)    
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average Units outstanding:

       

Class A

    107,879.467          171,990.912          108,283.095          208,116.926     
 

 

 

   

 

 

   

 

 

   

 

 

 

Class D

    15.414          2,401.554          15.414          4,680.440     
 

 

 

   

 

 

   

 

 

   

 

 

 

Class Z

    1,817.027          3,376.500          1,821.450          3,712.928     
 

 

 

   

 

 

   

 

 

   

 

 

 

*    Represents the change in net asset per Unit during the period.

See accompanying notes to financial statements.

 

4


Table of Contents

Managed Futures Premier Macro L.P.

Statements of Changes in Partners’ Capital

For the Nine Months Ended September 30, 2016 and 2015

(Unaudited)

 

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

Partners’ Capital at December 31, 2015

     $ 66,343,350           118,342.550           $ 8,560           15.414           $ 1,395,762           2,280.177           $ 67,747,672           120,638.141     

Subscriptions - Limited Partners

     9,633,917           19,381.198           -               -               210,390           386.994           9,844,307           19,768.192     

Net income (loss)

     (10,289,415)          -               (1,317)          -               (184,933)          -               (10,475,665)          -         

Redemptions - Limited Partners

     (18,414,784)          (37,119.442)          -               -               (123,067)          (223.423)          (18,537,851)          (37,342.865)    

Redemptions - General Partner

     -               -               -               -               (355,064)          (633.533)          (355,064)          (633.533)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Partners’ Capital at September 30, 2016

     $ 47,273,068           100,604.306           $ 7,243           15.414           $ 943,088           1,810.215           $ 48,223,399           102,429.935     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Partners’ Capital at December 31, 2014

     $  178,254,779           248,403.999           $ 4,084,197           5,819.883           $ 3,786,921           4,932.716           $ 186,125,897           259,156.598     

Subscriptions - Limited Partners

     3,870,972           5,856.042           -               -               71,818           101.458           3,942,790           5,957.500     

Net income (loss)

     (28,692,461)          -               (664,017)          -               (540,131)          -               (29,896,609)          -         

Redemptions - Limited Partners

     (63,070,444)          (98,212.008)              (3,024,298)          (5,127.494)          (815,899)          (1,156.454)          (66,910,641)              (104,495.956)    

Redemptions - General Partner

     -               -               -               -               (835,169)              (1,227.069)          (835,169)          (1,227.069)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Partners’ Capital at September 30, 2015

     $ 90,362,846               156,048.033           $ 395,882                 692.389           $     1,667,540           2,650.651           $ 92,426,268           159,391.073     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

See accompanying notes to financial statements.

 

5


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

1.

Organization:

Managed Futures Premier Macro L.P. (formerly, Managed Futures Premier BHM L.P.) (the “Partnership”) is a limited partnership organized under the partnership laws of the State of Delaware on August 23, 2010, to engage in the speculative trading of a diversified portfolio of commodity interests, including futures, option, swap and forward contracts. The Partnership commenced trading on November 1, 2010. The commodity interests that are traded by the Partnership, through its investment in the Master (as defined below), are volatile and involve a high degree of market risk. The General Partner (defined below) may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. The Partnership is authorized to sell an unlimited number of units of limited partnership interest (“Units”) on a continuous basis.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (“Ceres” or 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”). MSSB 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. Prior to June 28, 2013, Morgan Stanley indirectly owned a majority equity interest and Citigroup Inc. indirectly owned a minority equity interest in MSSB Holdings.

On November 1, 2010, the Partnership allocated substantially all of its capital to Morgan Stanley Smith Barney BHM I, LLC (“BHM Master”), a limited liability company organized under the limited liability company law of the State of Delaware. On February 1, 2016, the Partnership re-allocated substantially all of its capital to CMF Willowbridge Master Fund L.P. (“Willowbridge Master” or the “Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased an interest in Willowbridge Master with cash equal to $56,358,832. References herein to the “Master” may include, as relevant, BHM Master. The General Partner is also the general partner of the Master.

Prior to January 31, 2016, all trading decisions for the Partnership were made by Blenheim Capital Management L.L.C. (“Blenheim”) using Blenheim’s Global Markets Strategy-Futures/FX program, a proprietary, discretionary trading program. Effective February 1, 2016, all trading decisions for the Partnership are made by Willowbridge Associates Inc. (“Willowbridge” or the “Advisor”) using Willowbridge’s wPraxis Futures Trading Approach, a proprietary discretionary trading program. Blenheim was terminated as advisor to the Partnership as of January 31, 2016, and the Partnership redeemed its entire investment in BHM Master for cash equal to $62,206,339. References herein to the “Advisor” may include, as relevant, Blenheim.

Effective February 1, 2016, Willowbridge receives a monthly management fee equal to 1.5% per year of the net assets of the Partnership as of the first day of each month. The Partnership will pay Willowbridge an incentive fee payable quarterly equal to 20% of the new trading profits. Willowbridge will not be paid incentive fee until it recovers the net loss incurred by Blenheim and earns additional new trading profits for the Partnership.

Prior to its termination, the Partnership directly paid BHM Master for its pro-rata portion of incentive and management fees. Effective February 1, 2016, the Partnership does not directly pay Willowbridge Master for its pro-rata portion of management or incentive fees. Such fees are directly paid by the Partnership to Willowbridge.

On February 1, 2011, the Units offered pursuant to the Partnership’s limited partnership agreement, as amended from time to time (the “Limited Partnership Agreement”), were deemed “Class A Units.” The rights, liabilities, risks, and fees associated with investment in the Class A Units were not changed. In addition, beginning on February 1, 2011, Class D Units were offered. Beginning August 1, 2011, Class Z Units were offered to certain employees of Morgan Stanley Smith Barney LLC and its affiliates (and their family members). Class A, Class D and Class Z will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Units that a limited partner of the Partnership (each a “Limited Partner” or collectively the “Limited Partners”) 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.

Morgan Stanley Smith Barney LLC is doing business as Morgan Stanley Wealth Management. This entity currently serves as the placement agent to the Partnership (the “Placement Agent”). The clearing commodity broker for the Master is Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. The Partnership/Master also deposit a portion of their cash in a non-trading account at JP Morgan Chase Bank, N.A.

 

6


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

At September 30, 2016, the Partnership owned approximately 13.5% of Willowbridge Master. At December 31, 2015, the Partnership owned approximately 91.5% of BHM Master. The Partnership intends to continue to invest substantially all of its assets in Willowbridge Master. The performance of the Partnership is directly affected by the performance of Willowbridge Master and prior to January 31, 2016, was directly affected by the performance of BHM Master. Willowbridge Master’s trading of futures, forward and option contracts, as applicable, is done primarily on U.S. and foreign commodity exchanges. Willowbridge Master’s Statements of Financial Condition, including Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partners’ Capital are included herein.

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.

 

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 September 30, 2016, the results of its operations for the three and nine months ended September 30, 2016 and 2015, and changes in partners’ capital for the nine months ended September 30, 2016, and 2015. These financial statements present the results of 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 (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2015. The December 31, 2015 information has been derived from the audited financial statements as of and for the year ended December 31, 2015.

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, revenues 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.

Profit Allocation. The General Partner and each Limited Partner of the Partnership 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 or losses, if any.

Statement of Cash Flows. The Partnership is not required to provide a Statement of Cash Flows.

Partnership’s Investment. The Partnership carried its investment in BHM Master based on the Partnership’s (1) net contribution to the Partnership and (2) its allocated share of the undistributed profits and losses, including realized gains (losses) and net change in unrealized gains (losses), of the Partnership. The Partnership carries its investment in Willowbridge Master based on Willowbridge Master’s net asset value per Redeemable Unit as calculated by Willowbridge 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.”

 

7


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

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 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 by first-in, first-out method. Unrealized gains or losses on open contracts are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

Master’s Cash. Willowbridge Master’s cash includes cash denominated in foreign currencies of ($1,360,371) and $8 as of September 30, 2016 and December 31, 2015, respectively. The cost of foreign currencies was ($1,367,245) and $8 as of September 30, 2016 and December 31, 2015, respectively. BHM Master’s restricted and unrestricted cash included cash denominated in foreign currencies of $18,209,976 (cost of $18,977,804) as of December 31, 2015. Willowbridge Master’s margin requirement of $82,435,014 as of December 31, 2015, was met from a combination of 1) U.S. Treasury bills held at MS&Co. and 2) cash margin held at MS&Co. of $67,800,303 as of December 31, 2015.

Fair Value of Financial Instruments. The carrying value of the assets and liabilities presented in the Statements of Financial Condition that qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825, “Financial Instruments,” approximates the fair value due to the short term nature of such balances.

Investment Company Status. Effective January 1, 2014, the Partnership adopted Accounting Standards Update (“ASU”) 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.

Income Taxes. Income taxes have not been listed as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The General Partner has concluded that no provision for income tax is required in the Partnership’s financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2012 through 2015 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.

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

Recent Accounting Pronouncement. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments for all entities that hold financial assets or owe financial liabilities. One of the amendments in this update eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet or a description of changes in the methods and significant assumptions. Additionally, the update eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. Investment companies are specifically exempted from ASU 2016-01’s equity investment accounting provisions and will continue to follow the industry specific guidance for investment accounting under Topic 946. For public business entities, this update is effective for fiscal years beginning after December 15, 2017, and interim periods therein. For other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The General Partner is currently evaluating the impact this guidance will have on the Partnership’s financial statements and related disclosures.

Reclassification. Willowbridge Master’s amount previously reported as cash overdraft of $14,634,711 as of December 31, 2015 is now included with cash margin in Willowbridge Master’s Statements of Financial Condition.

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, 2015.

 

8


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of September 30, 2016 and December 31, 2015, and Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2016 and 2015, are presented below:

CMF Willowbridge Master L.P.

Statements of Financial Condition

(Unaudited)

 

          September 30,     
2016
          December 31,     
2015
 

Assets:

     

Equity in trading account:

     

Investment in U.S. Treasury bills, at fair value (amortized cost $320,816,040, and $283,418,958 at September 30, 2016 and December 31, 2015, respectively)

     $ 320,875,140           $ 283,468,837     

Cash at MS&Co.

     37,480,911           -         

Cash margin

     12,802,645           67,800,303     

Net unrealized appreciation on open forward contracts

     190,425           99,081     
  

 

 

    

 

 

 

Total equity in trading account

     371,349,121           351,368,221     

Cash at bank

     412           -         
  

 

 

    

 

 

 

Total assets

     $ 371,349,533           $ 351,368,221     
  

 

 

    

 

 

 

Liabilities and Partners’ Capital:

     

Liabilities:

     

Net unrealized depreciation on open futures contracts

     $ 732,758           $ 639,013     

Options written, at fair value (premiums received $0 and $2,896,314 at September 30, 2016 and December 31, 2015, respectively)

     -               2,004,116     

Accrued expenses:

     

Professional fees

     29,374           25,143     
  

 

 

    

 

 

 

Total liabilities

     762,132           2,668,272     
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, 0.0000 Redeemable Units outstanding at September 30, 2016 and December 31, 2015

     -               -         

Limited Partners, 134,504.8151 and 120,525.8758 Redeemable Units outstanding at September 30, 2016 and December 31, 2015, respectively

     370,587,401           348,699,949     
  

 

 

    

 

 

 

Total liabilities and partners’ capital

     $ 371,349,533           $ 351,368,221     
  

 

 

    

 

 

 

Net asset value per Redeemable Unit

     $ 2,755.20           $ 2,893.15     
  

 

 

    

 

 

 

 

9


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Willowbridge Master L.P.

Condensed Schedule of Investments

September 30, 2016

(Unaudited)

 

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

Futures Contracts Purchased

        

Interest Rates Non-U.S.

     7,056           $ (3,223,700)          (0.87)  
         

 

 

    

 

 

 

Total futures contracts purchased

        (3,223,700)          (0.87)     
         

 

 

    

 

 

 

Futures Contracts Sold

        

Interest Rates Non-U.S.

     7,056           2,490,942           0.67      
         

 

 

    

 

 

 

Total futures contracts sold

        2,490,942           0.67      
         

 

 

    

 

 

 

Net unrealized depreciation on open futures contracts

        $ (732,758)          (0.20)  
         

 

 

    

 

 

 

Unrealized Appreciation on Open Forward Contracts

        

Currencies

         $ 87,191,518           $ 750,873           0.20   

Metals

         175           661,746           0.18      
         

 

 

    

 

 

 

Total unrealized appreciation on open forward contracts

        1,412,619           0.38      
         

 

 

    

 

 

 

Unrealized Depreciation on Open Forward Contracts

        

Currencies

         $   158,446,287           (958,539)          (0.26)     

Metals

         175           (263,655)          (0.07)     
         

 

 

    

 

 

 

Total unrealized depreciation on open forward contracts

        (1,222,194)          (0.33)     
         

 

 

    

 

 

 

Net unrealized appreciation on open forward contracts

        $ 190,425           0.05   
         

 

 

    

 

 

 

U.S. Government Securities

        

Face Amount

 

Maturity Date

 

Description

     Fair Value       % of Partners’ 
Capital
 

 $          164,000,000

  11/17/2016  

U.S. Treasury bills, 0.28% * (Amortized cost of

$163,890,302)

  

  

     $   163,967,713           44.25   

 $          127,000,000

  12/29/2016  

U.S. Treasury bills, 0.215% * (Amortized cost of

$126,931,738)

  

  

     126,916,365           34.25      

 $            30,000,000

  12/8/2016  

U.S. Treasury bills, 0.10% * (Amortized cost of

$29,994,000)

  

  

     29,991,062           8.09      
         

 

 

    

 

 

 

Total U.S. Government Securities

          $ 320,875,140           86.59   
         

 

 

    

 

 

 

*   Liquid non-cash held as collateral.

 

10


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Willowbridge Master L.P.

Condensed Schedule of Investments

December 31, 2015

 

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

Futures Contracts Purchased

        

Interest Rates Non-U.S.

     4,695           $ (1,284,726)          (0.37)  
         

 

 

    

 

 

 

Total futures contracts purchased

        (1,284,726)          (0.37)     
         

 

 

    

 

 

 

Futures Contracts Sold

        

Interest Rates Non-U.S.

     2,815           645,713           0.19      
         

 

 

    

 

 

 

Total futures contracts sold

        645,713           0.19      
         

 

 

    

 

 

 

Net unrealized depreciation on open futures contracts

        $ (639,013)          (0.18)  
         

 

 

    

 

 

 

Unrealized Appreciation on Open Forward Contracts

        

Currencies

     $ 253,329,859           $ 291,647           0.08   
         

 

 

    

 

 

 

Total unrealized appreciation on open forward contracts

        291,647           0.08      
         

 

 

    

 

 

 

Unrealized Depreciation on Open Forward Contracts

        

Currencies

     $   205,291,607           (192,566)          (0.06)     
         

 

 

    

 

 

 

Total unrealized depreciation on open forward contracts

        (192,566)          (0.06)     
         

 

 

    

 

 

 

Net unrealized appreciation on open forward contracts

        $ 99,081           0.02   
         

 

 

    

 

 

 

Options Written

        

Calls

        

Energy

     522           $ (111,360)          (0.03)  

Interest Rates Non-U.S.

     1,881           (411,469)          (0.12)     

Puts

            

Interest Rates Non-U.S.

     1,881           (1,481,287)          (0.42)     
         

 

 

    

 

 

 

Total options written (premiums received $2,896,314)

        $ (2,004,116)          (0.57)  
         

 

 

    

 

 

 

U.S. Government Securities

                    

Face Amount

 

Maturity Date

 

Description

     Fair Value       % of Partners’ 
Capital
 
 $          50,750,000           1/21/2016  

U.S. Treasury bills, 0.19% * (Amortized cost of

$50,742,500)

  

  

     $     50,746,670           14.55   
 $        232,750,000           2/11/2016  

U.S. Treasury bills, 0.125% * (Amortized cost of

$232,676,458)

  

  

     232,722,167           66.74      
         

 

 

    

 

 

 

Total U.S. Government Securities

        $   283,468,837           81.29   
         

 

 

    

 

 

 

*   Liquid non-cash held as collateral.

 

11


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

CMF Willowbridge Master L.P.

Statements of Income and Expenses

and Changes in Partners’ Capital

(Unaudited)

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2016      2015      2016      2015  

Investment Income:

           

Interest income

     $ 240,693           $ 27,624           $ 631,707           $ 42,297     
  

 

 

    

 

 

    

 

 

    

 

 

 

Expenses:

           

Clearing fees

     258,660           150,660           793,085           600,389     

Professional fees

     20,103           22,798           61,147           78,546     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     278,763           173,458           854,232           678,935     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Net investment loss

     (38,070)          (145,834)          (222,525)          (636,638)    
  

 

 

    

 

 

    

 

 

    

 

 

 

Trading Results:

           

Net gains (losses) on trading of commodity interests:

           

Net realized gains (losses) on closed contracts

     (8,535,720)          25,680,590           (17,853,014)          13,353,670     

Net change in unrealized gains (losses) on open contracts

     352,788           3,075,953           (887,725)          1,780,698     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Total trading results

     (8,182,932)          28,756,543           (18,740,739)          15,134,368     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

     (8,221,002)          28,610,709           (18,963,264)          14,497,730     

Subscriptions - Limited Partners

     10,732,187           30,805,215           105,545,684           138,477,736     

Redemptions - Limited Partners

     (20,949,538)          (23,460,918)          (64,587,705)          (47,657,286)    

Distribution of interest income to feeder funds

     (38,683)          (4,846)          (107,263)          (19,519)    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Net increase (decrease) in Partners’ Capital

     (18,477,036)          35,950,160           21,887,452           105,298,661     

Partners’ Capital, beginning of period

     389,064,437           384,888,864           348,699,949           315,540,363     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Partners’ Capital, end of period

     $ 370,587,401           $ 420,839,024           $ 370,587,401           $ 420,839,024     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value per Redeemable Unit (134,504.8151 and 142,164.6722 Redeemable Units outstanding at September 30, 2016 and 2015, respectively)

     $ 2,755.20           $ 2,960.22           $ 2,755.20           $ 2,960.22     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Net income (loss) per Redeemable Unit*

     $ (60.71)          $ 199.36           $ (137.17)          $ 102.34     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Weighted average Redeemable Units outstanding

     137,259.8533           146,192.1418           136,693.5434           137,010.6607     
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

12


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

3.

Financial Highlights:

Financial highlights for the Limited Partner Classes as a whole for the three and nine months ended September 30, 2016 and 2015 were as follows:

 

     Three Months Ended
September 30, 2016
     Three Months Ended
September 30, 2015
 
Per 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)

     $ (10.34)          $ (10.37)          $ (11.44)          $ (18.29)          $ (18.00)          $ (19.77)    

Net investment loss

     (5.78)          (4.22)          (3.72)          (8.82)          (6.87)          (6.34)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Increase (decrease) for the period

     (16.12)          (14.59)          (15.16)          (27.11)          (24.87)          (26.11)    

Net asset value per Unit, beginning of period

     486.01           484.53           536.14           606.18           596.63           655.22     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value per Unit, end of period

     $ 469.89           $ 469.94           $ 520.98           $ 579.07           $ 571.76           $ 629.11     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Nine Months Ended
September 30, 2016
     Nine Months Ended
September 30, 2015
 
Per 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)

     $ (71.93)          $ (71.44)          $ (78.70)          $ (110.93)          $ (108.90)          $ (119.41)    

Net investment loss

     (18.78)          (13.95)          (12.45)          (27.60)          (21.11)          (19.20)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Increase (decrease) for the period

     (90.71)          (85.39)          (91.15)          (138.53)          (130.01)          (138.61)    

Net asset value per Unit, beginning of period

     560.60           555.33           612.13           717.60           701.77           767.72     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value per Unit, end of period

     $ 469.89           $ 469.94           $ 520.98           $ 579.07           $ 571.76           $ 629.11     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

13


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

     Three Months Ended
September 30, 2016
    Three Months Ended
September 30, 2015
 
      Class A       Class D       Class Z       Class A       Class D       Class Z   

Ratio to Average Limited Partners’ Capital:**

            

Net investment loss***

     (4.9)   %      (3.5)   %      (2.8)   %      (6.1)   %      (5.6)   %      (4.3)   % 

Operating expenses before expenses borne by the General Partner and incentive fees

     5.4    %      4.0    %      3.3    %      6.2    %      5.6    %      4.3    % 

Expenses borne by the General Partner

     (0.1)   %      (0.1)   %      (0.1)   %      (0.1)   %      -        %      -        % 

Incentive fees

     -        %      -        %      -        %      -        %      -        %      -        % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses after expenses borne by the General Partner and incentive fees

     5.3    %      3.9    %      3.2    %      6.1    %      5.6    %      4.3    % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     (3.3)   %      (3.0)   %      (2.8)   %      (4.5)   %      (4.2)   %      (4.0)   % 

Incentive fees

     -        %      -        %      -        %      -        %      -        %      -        % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     (3.3)   %      (3.0)   %      (2.8)   %      (4.5)   %      (4.2)   %      (4.0)   % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Nine Months Ended
September 30, 2016
    Nine Months Ended
September 30, 2015
 
     Class A     Class D     Class Z     Class A     Class D     Class Z  

Ratio to Average Limited Partners’ Capital:**

            

Net investment loss***

     (5.1)   %      (3.7)   %      (3.2)       (5.8)   %      (4.7)   %      (3.8)   % 

Operating expenses before expenses borne by the General Partner and incentive fees

     5.6    %      4.2    %      3.7        5.9    %      4.7    %      3.8    % 

Expenses borne by the General Partner

     (0.2)   %      (0.2)   %      (0.2)       (0.1)   %      -        %      -        % 

Incentive fees

     -        %      -        %      -            -        %      -        %      -        % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses after expenses borne by the General Partner and incentive fees

     5.4    %      4.0    %      3.5        5.8    %      4.7    %      3.8    % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

            

Total return before incentive fees

     (16.2)   %      (15.4)   %      (14.9)       (19.3)   %      (18.5)   %      (18.1)   % 

Incentive fees

     -        %      -        %      -            -        %      -        %      -        % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     (16.2)    %      (15.4)   %      (14.9)       (19.3)   %      (18.5)   %      (18.1)   % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

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

 

**

Annualized (other than 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 Classes using the Limited Partners’ share of income, expenses and average partners’ capital of the Partnership and includes the income and expenses allocated from the Master.

 

14


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

Financial Highlights of Willowbridge Master:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
             2016                     2015                     2016                     2015          

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

        

Net realized and unrealized gains (losses)

     $ (60.43)         $ 200.39          $ (135.54)         $ 107.16     

Net investment loss

     (0.28)         (1.03)         (1.63)         (4.82)    
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Increase (decrease) for the period

     (60.71)         199.36          (137.17)         102.34     

Distribution of interest income to feeder funds

     (0.28)         (0.03)         (0.78)         (0.14)    

Net asset value per Redeemable Unit, beginning of period

     2,816.19          2,760.89          2,893.15          2,858.02     
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Net asset value per Redeemable Unit, end of period

     $         2,755.20          $         2,960.22          $         2,755.20          $         2,960.22     
  

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to Average Limited Partners’ Capital:**

        

Net investment loss***

     (0.0)   %      (0.1)   %      (0.1)   %      (0.2)   % 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Operating expenses

     0.3    %      0.2    %      0.3    %      0.2    % 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Total return

     (2.2)   %      7.2    %      (4.8)   %      3.6    % 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Net investment loss per Redeemable Unit is calculated by dividing the expenses net of interest income 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.

 

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Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

4.

Trading Activities:

The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The 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 is shown in the Statements of Income and Expenses and Changes in Partners’ Capital.

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

Trading and transactions fees are based on the number of trades executed by the Advisor for the Master. All clearing fees paid to MS&Co. are borne by the Master and allocated to the Partnership.

All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures contracts traded during the three months ended September 30, 2016 and 2015 were 17,326 and 1,859, respectively. The monthly average number of futures contracts traded during the nine months ended September 30, 2016 and 2015, were 9,813 and 2,872, respectively. The monthly average number of option contracts traded during the three months ended September 30, 2016 and 2015 were 96 and 15,541, respectively. The monthly average number of option contracts traded during the nine months ended September 30, 2016 and 2015 were 1,677 and 10,355, respectively. The monthly average number of metals forward contracts traded during the three months ended September 30, 2016 and 2015 were 554 and 89, respectively. The monthly average number of metals forward contracts traded during the nine months ended September 30, 2016 and 2015 were 429 and 491, respectively. The monthly average notional value of currency forward contracts held during the three months ended September 30, 2016 and 2015 were $317,465,640 and $434,233,435, respectively. The monthly average notional value of currency forward contracts held during the nine months ended September 30, 2016 and 2015 were $578,150,946 and $355,308,357, respectively.

 

16


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

The following tables summarize the gross and net amounts relating to assets and liabilities of the Master’s derivatives and their offsetting subject to master netting arrangements or similar agreements as of September 30, 2016 and December 31, 2015, respectively.

 

September 30, 2016

    Gross Amounts 
Recognized
      Gross Amounts 
Offset in the
Statements of
Financial
Condition
     Amounts
 Presented in the 
Statements of
Financial
Condition
     Gross Amounts Not Offset in the
 Statements of Financial Condition 
        
            Financial
Instruments
     Cash Collateral
Received/
Pledged*
         Net Amount      

Assets

                 

Futures

     $ 2,628,304           $ (2,628,304)          $ -               $ -               $ -               $ -         

Forwards

     1,412,619           (1,222,194)          190,425           -               -               190,425     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

     $ 4,040,923           $ (3,850,498)          $ 190,425           $ -               $ -               $ 190,425     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

                 

Futures

     $ (3,361,062)          $ 2,628,304           $ (732,758)          $ -               $ -               $ (732,758)    

Forwards

     (1,222,194)          1,222,194           -               -               -               -         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     $ (4,583,256)          $ 3,850,498           $ (732,758)          $ -               $ -               $ (732,758)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net fair value

                    $ (542,333)   * 
                 

 

 

 

December 31, 2015

   Gross Amounts
Recognized
     Gross Amounts
Offset in the
Statements of
Financial
Condition
     Amounts
Presented in the
Statements of
Financial
Condition
     Gross Amounts Not Offset in the
Statements of Financial Condition
        
            Financial
Instruments
     Cash Collateral
Received/
Pledged*
     Net Amount  

Assets

                 

Futures

     $ 645,713           $ (645,713)          $ -               $ -               $ -               $ -         

Forwards

     291,647           (192,566)          99,081           -               -               99,081     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

     $ 937,360           $ (838,279)          $ 99,081           $ -               $ -               $ 99,081     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

                 

Futures

     $ (1,284,726)          $ 645,713           $ (639,013)          $ -               $ -               $ (639,013)    

Forwards

     (192,566)          192,566           -               -               -               -         

Options written

     (2,004,116)          -               (2,004,116)          -               -               (2,004,116)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     $ (3,481,408)          $ 838,279           $ (2,643,129)          $ -               $ -               $ (2,643,129)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net fair value

                    $ (2,544,048)   * 
                 

 

 

 

 

*

In the event of default by the Master, MS&Co., the Master’s commodity futures broker and the sole counterparty to the Master’s off-exchange-traded contracts, as applicable, has the right to offset the Master’s obligation with the Master’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. There is no collateral posted by MS&Co. and as such, in the event of default by MS&Co., the Master is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the 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 fund may be available in the event of a default.

 

17


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

The following tables indicate the Master’s gross fair values of derivative instruments of futures, forward and option contracts as separate assets and liabilities as of September 30, 2016, and December 31, 2015, respectively.

 

         September 30,    
2016
 

Assets

  

Futures Contracts

  

Interest Rates Non-U.S.

     $       2,628,304     
  

 

 

 

Total unrealized appreciation on open futures contracts

     2,628,304     
  

 

 

 

Liabilities

  

Futures Contracts

  

Interest Rates Non-U.S.

     (3,361,062)    
  

 

 

 

Total unrealized depreciation on open futures contracts

     (3,361,062)    
  

 

 

 

Net unrealized depreciation on open futures contracts

     $ (732,758)   * 
  

 

 

 

Assets

  

Forward Contracts

  

Currencies

     $ 750,873     

Metals

     661,746     
  

 

 

 

Total unrealized appreciation on open forward contracts

     1,412,619     
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

     (958,539)    

Metals

     (263,655)    
  

 

 

 

Total unrealized depreciation on open forward contracts

     (1,222,194)    
  

 

 

 

Net unrealized appreciation on open forward contracts

     $ 190,425    ** 
  

 

 

 

 

*

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 appreciation on open forward contracts” in the Master’s Statements of Financial Condition.

 

18


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

         December 31,    
2015
 

Assets

  

Futures Contracts

  

Interest Rates Non-U.S.

     $ 645,713     
  

 

 

 

Total unrealized appreciation on open futures contracts

     645,713     
  

 

 

 

Liabilities

  

Futures Contracts

  

Interest Rates Non-U.S.

     (1,284,726)    
  

 

 

 

Total unrealized depreciation on open futures contracts

     (1,284,726)    
  

 

 

 

Net unrealized depreciation on open futures contracts

     $ (639,013)   * 
  

 

 

 

Assets

  

Forward Contracts

  

Currencies

     $ 291,647     
  

 

 

 

Total unrealized appreciation on open forward contracts

     291,647     
  

 

 

 

Liabilities

  

Forward Contracts

  

Currencies

     (192,566)    
  

 

 

 

Total unrealized depreciation on open forward contracts

     (192,566)    
  

 

 

 

Net unrealized appreciation on open forward contracts

     $ 99,081    ** 
  

 

 

 

Liabilities

  

Options Written

  

Energy

     $ (111,360)    

Interest Rates Non-U.S.

     (1,892,756)    
  

 

 

 

Total options written

     $         (2,004,116)   *** 
  

 

 

 

 

*

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 appreciation on open forward contracts” in the Master’s Statements of Financial Condition.

 

***

This amount is in “Options written, at fair value” in the Master’s Statements of Financial Condition.

 

19


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

The following tables indicate the trading gains and losses, by market sector, on derivative instruments for the three and nine months ended September 30, 2016 and 2015.

 

           Three Months Ended      
September 30,
          Nine Months Ended      
September 30,
 

Sector

   2016     2015     2016     2015  

Currencies

     $ (2,035,607)         $ 4,963,018          $ (7,449,941)         $ 15,509,991     

Energy

     (128,832)         24,568,450          (8,166,968)         17,490,332     

Indices

     694,760          (1,414,219)         570,217          (10,217,181)    

Interest Rates U.S.

     (4,390,819)         61,937          (1,290,032)         (12,082,255)    

Interest Rates Non-U.S.

     (2,379,306)         176,205          (4,529,597)         5,356,842     

Metals

     56,872          401,152          2,125,582          85,728     

Softs

     -               -               -               (1,009,089)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     $   (8,182,932)   *      $   28,756,543    *      $   (18,740,739)   *    $ 15,134,368    * 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*

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

 

5.

Fair Value Measurements:

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

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

The Master considers prices for exchange-traded commodity futures, forward, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills, non-exchange-traded forward, swap and certain option contracts for which market quotations are not readily available are priced by broker quotes or pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of September 30, 2016 and December 31, 2015 and for the periods ended September 30, 2016 and 2015, the Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). Transfers between levels are recognized at the end of the reporting period. During the reporting periods, there were no transfers of assets or liabilities between Level 1 and Level 2.

 

20


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

September 30, 2016

   Total      Level 1      Level 2      Level 3  

Assets

           

Futures

     $ 2,628,304           $ 2,628,304           $ -               $ -      

Forwards

     1,412,619           661,746           750,873           -      

U.S. Treasury bills

     320,875,140           -               320,875,140           -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     $       324,916,063           $     3,290,050           $       321,626,013           $ -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Futures

     $ 3,361,062           $ 3,361,062           $ -               $ -      

Forwards

     1,222,194           263,655           958,539           -      

Options written

     -               -               -               -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     $ 4,583,256           $ 3,624,717           $ 958,539           $ -      
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

   Total      Level 1      Level 2      Level 3  

Assets

           

Futures

     $ 645,713           $ 645,713           $ -               $ -      

Forwards

     291,647           -               291,647           -      

U.S. Treasury bills

     283,468,837           -               283,468,837           -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     $ 284,406,197           $ 645,713           $ 283,760,484           $ -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Futures

     $ 1,284,726           $ 1,284,726           $ -               $ -      

Forwards

     192,566           -               192,566           -      

Options written

     2,004,116           2,004,116           -               -      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     $ 3,481,408           $ 3,288,842           $ 192,566           $                   -      
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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 forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms on 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 forwards and option contracts. OTC contracts are negotiated between contracting parties and include certain forwards and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates at any given time approximately 1.5% to 96.2% of the Master’s contracts are traded OTC.

 

21


Table of Contents

Managed Futures Premier Macro L.P.

Notes to Financial Statements

(Unaudited)

 

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

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

Options. The Master 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 Master writes an option, the premium received is recorded as a liability in the Master’s Statements of Financial Condition and marked-to-market daily. When the Master purchases an option, the premium paid is recorded as an asset in the Master’ Statements of Financial Condition and marked-to-market daily. Net realized gains (losses) and net change in unrealized gains (losses) on option contracts are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

As both a buyer and seller of options, the Master 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/Master 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/Master does not consider these contracts to be guarantees.

The Master does not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Managed Futures Premier Macro 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 a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The 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. or an MS&Co. affiliate is the sole counterparty or broker 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 control 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, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.

The risk to the Limited Partners that have purchased Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under Delaware 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.

 

7.

Subsequent Events:

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

 

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Item 2.  Management’s 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. The Partnership’s only assets are its investment in the Master, expense reimbursement and cash. The Master does not engage in sales of goods or services. The Master’s only assets are its cash at bank and equity in trading account, consisting of cash, cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts, options purchased at fair value and U.S. Treasury bills at fair value, if applicable. Because of the low margin deposits normally required in futures 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 third quarter of 2016.

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

For the nine months ended September 30, 2016, Partnership’s capital decreased 28.8% from $67,747,672 to $48,223,399. This decrease was attributable to the redemptions of 37,119.442 Class A Limited Partner Units totaling $18,414,784, redemptions of 223.423 Class Z Limited Partner Units totaling $123,067 and redemptions of 633.533 Class Z General Partner Units totaling $355,064, coupled with a net loss of $10,475,665, which was partially offset by subscriptions of 19,381.198 Class A Limited Partner Units totaling $9,633,917 and subscriptions of 386.994 Class Z Limited Partner Units totaling $210,390. Future redemptions could impact the amount of funds available for investment in the Master in subsequent periods.

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

For the nine months ended September 30, 2016, the Master’s capital increased 6.3% from $348,699,949 to $370,587,401. This increase was attributable to the subscriptions of $105,545,684 which was partially offset by the net loss of $18,963,264, redemptions totaling $64,587,705 and distribution of interest income to feeder funds totaling $107,263. Future redemptions can impact the amount of funds available for investment in commodity positions in subsequent periods.

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 expense during the reporting period. 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) and net change in unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Results of Operations

During the Partnership’s third quarter of 2016, the net asset value per Unit for Class A decreased 3.3% from $486.01 to $469.89, as compared to a decrease of 4.5% in the third quarter of 2015. During the Partnership’s third quarter of 2016, the net asset value per Unit for Class D decreased 3.0% from $484.53 to $469.94, as compared to a decrease of 4.2% in the third quarter of 2015. During the Partnership’s third quarter of 2016, the net asset value per Unit for Class Z decreased 2.8% from $536.14 to $520.98, as compared to a decrease of 4.0% in the third quarter of 2015. The Partnership, through its investment in the Master, experienced a net trading loss in the third quarter of 2016 of $1,123,262. Losses were primarily attributable to the Master’s trading of commodity futures in currencies and U.S. and non-U.S. interest rates, and were partially offset by gains in indices, energy and metals. The Partnership, through its investment in Blenheim Master, experienced a net trading loss in the third quarter of 2015 of $3,342,515. Losses were primarily attributable to Blenheim Master’s trading in metals, global stock index, and agricultural sectors and were partially offset by gains in energy and currency markets.

The most significant losses were experienced within the global interest rate sector during July from short positions in U.S. fixed income futures as prices rallied early in the month as fallout from the “Brexit” vote spurred investors into the relative safety of government bonds. Additional losses within the interest rate markets were experienced during August and September from long positions in U.S. fixed income futures as prices declined amid speculation that the release of strong employment data in the U.S. could spur the U.S. Federal Reserve to raise interest rates. Within the currency sector, losses were recorded during September from long positions in the British pound versus the U.S. dollar as the relative value of the pound moved lower as the British economy continued to come to terms with the implications of June’s “Brexit” vote to leave the European Union. Additional losses within the currency markets were incurred during July from short positions in the euro versus the U.S. dollar as the value of the euro rebounded following the post-“Brexit” fall. A portion of the Partnership’s losses for the quarter was offset by gains achieved within the global stock index market during July from long positions in U.S. equity index futures as U.S. employers added far more jobs than expected in June, providing reassurance that the U.S. economy was growing solidly and pushing equity prices higher. Additional gains in the global equities were experienced during September from short positions in U.S. equity index futures as prices trended lower amid investor uncertainty surrounding the U.S. Federal Reserve Bank’s September policy meeting. Within the energy complex, gains were experienced primarily during July from short positions in crude oil and its related products as prices moved lower amid signs the global energy supply glut continued to grow.

During the Partnership’s nine months ended September 30, 2016, the net asset value per Unit for Class A decreased 16.2% from $560.60 to $469.89, as compared to a decrease of 19.3% during the nine months ended September 30, 2015. During the Partnership’s nine months ended September 30, 2016, the net asset value per Unit for Class D decreased 15.4% from $555.33 to $469.94, as compared to a decrease of 18.5% during the nine months ended September 30, 2015. During the Partnership’s nine months ended September 30, 2016, the net asset value per Unit for Class Z decreased 14.9% from $612.13 to $520.98, as compared to a decrease of 18.1% during the nine months ended September 30, 2015. The Partnership experienced a net trading loss in the nine months ended September 30, 2016 of $8,419,190. Losses were primarily attributable to the Master’s trading of commodity futures in currencies, energy, grains, metals, softs and U.S. and non-U.S. interest rates, and were partially offset by gains in indices. The Partnership experienced a net trading loss in the nine months ended September 30, 2015 of $23,950,064. Losses were primarily attributable to Blenheim Master’s trading in metals and global stock index markets and were partially offset by gains in currency, agricultural, and energy markets.

The most significant losses were incurred within the agricultural markets during January from long positions in cocoa futures as prices tumbled as funds cut bets on higher prices and signs emerged that the crop in Ghana, the world’s second-biggest cocoa producer, was recovering from a five-year low. Within the global interest rate sector, losses were experienced during July from short positions in U.S. fixed income futures as prices rallied early in the month as fallout from the “Brexit” vote spurred investors into the relative safety of government bonds. During September, losses within the global interest rate markets were recorded from long positions in U.S. fixed income futures as prices declined amid speculation that the release of strong employment data in the U.S. could spur the U.S. Federal Reserve to raise interest rates. Within the energy markets, losses were recorded during March and April from short positions in crude oil futures as prices moved higher as Saudi Arabia opened negotiations with global oil producers to curtail current production levels. Losses were also recorded in the energies during August from long positions in crude oil futures. Losses were incurred within the currency sector during June from long positions in the British pound versus the U.S. dollar as the relative value of the pound weakened significantly following the Brexit vote. Currency sector losses were also experienced during March from short positions in the euro versus the U.S. dollar as the relative value of the dollar declined following dovish comments from U.S. Federal Reserve Chair Janet Yellen that pushed out expectations for the U.S. central bank’s next interest rate hike. Within the metals sector, losses were experienced primarily from long positions in tin futures as prices fell during the first half of January after the

 

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release of a gloomy forecast for Chinese manufacturing growth. The Partnership’s trading losses for the first nine months of the year were partially offset by trading gains within the global stock index markets from short positions in U.S. equity index futures as prices declined sharply during January amid mounting investor concerns about declining oil prices and a China-led slowdown in global growth. Additional gains were recorded within the global stock index sector during April from long positions in European equity index futures as prices rallied, buoyed by increasing positive sentiment for global economic growth.

Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership (and the Master) depends on the Advisor’s ability to forecast price changes in energy and energy-related commodities. Such price changes are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs, policies, national and international political and economic events, and changes in interest rates. To the extent that the Advisor correctly makes such forecasts, the Partnership (and the Master) expects to increase capital through operations.

Interest income on 80% of the Partnership’s daily average equity allocated to it by Willowbridge Master was earned at the monthly average of the 4-week U.S. Treasury bill discount rate less 0.15% during such month. All interest earned on U.S. Treasury bills purchased will be retained by the Partnership and Willowbridge Master. Interest income allocated from Willowbridge Master for the three and nine months ended September 30, 2016 increased by $29,609 and $73,748, respectively, as compared to the corresponding periods in 2015. The increase in interest income is primarily due to higher 4-week U.S. Treasury bill discount rates along with additional interest income earned on U.S. Treasury bills during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015. 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 Willowbridge Master’s account and upon interest rates over which the Partnership, Willowbridge Master and the commodity broker have no control.

BHM Master’s cash was on deposit in commodity brokerage accounts with Morgan Stanley and was maintained in cash, U.S. Treasury bills and/or other permitted investments and segregated as customer funds, to the extent required by the Commodity Futures Trading Commission (“CFTC”) regulations. From time to time, a portion of the BHM Master’s excess cash (BHM Master’s assets not used for futures interest trading or required margin for such trading) might have been invested by MS&Co. in permitted investments chosen by the General Partner from time to time. The Master received 100% of the interest income earned on any excess cash invested in permitted investments. For excess cash which was not invested, MS&Co. credited BHM Master on 100% of the average daily equity maintained in cash in BHM Master’s account during each month at the rate equal to the monthly average of the 4-week U.S. Treasury bills discount less 0.15% during such month.

 

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Ongoing placement agent fees are calculated on a monthly basis as a percentage of the net assets (as defined in the Limited Partnership Agreement) of the Partnership as of the beginning of each month. The ongoing placement agent fees for the three and nine months ended September 30, 2016 decreased by $253,662 and $1,258,017, respectively, as compared to the corresponding periods in 2015. The decrease in ongoing placement agent fees is primarily due to lower average net assets during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015.

General Partner fees are calculated on a monthly basis as a percentage of the net assets (as defined in the Limited Partnership Agreement) of the Partnership as of the beginning of each month. General Partner fees for the three and nine months ended September 30, 2016 decreased by $132,055 and $655,510, respectively, as compared to the corresponding periods in 2015. The decrease in General Partner fees is due to lower average net assets during the three and nine months ended September 30, 2016, respectively, as compared to the corresponding periods in 2015.

Management fees were borne by Blenheim Master, prior to its termination effective January 31, 2016. Effective February 1, 2016 management fees began to be charged on the Partnership level based on the net assets of the Partnership as of the first day of each month. Accordingly, they must be analyzed in relation to the fluctuations in monthly beginning net asset values. Management fees for the three and nine months ended September 30, 2016 were $198,724 and $538,897, respectively.

Incentive fees were borne by BHM Master, prior to its termination effective January 31, 2016. Effective February 1, 2016 incentive fees began to be charged on the Partnership level. Incentive fees 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 paid for the three and nine months ended September 30, 2016 and 2015. 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.

The Partnership pays the ongoing administrative, operating, offering and organizational expenses of the Partnership and the Master as such expenses are incurred, not to exceed 0.25% annually of the net assets of 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 among the Advisors at any time and allocate assets to additional advisors at any time.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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 a speculative commodity pools. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnership’s capital is subject to the risk of trading loss, through its investment in the Master. 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 contracts and, consequently, in its earnings and cash balances. The Master’s and the Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the value of financial instruments and contracts, the diversification results among the Master’s open positions and the liquidity of the markets in which it trades.

The Master rapidly acquires and liquidates both long and short positions in a 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.

“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.

 

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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 September 30, 2016 and December 31, 2015, and the highest, lowest and average value during the three months ended September 30, 2016 and during the twelve months ended December 31, 2015. 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, 2015.

As of September 30, 2016, Willowbridge Master’s total capitalization was $370,587,401, and the Partnership owned approximately 13.5% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value Value at Risk as of September 30, 2016 was as follows:

 

     September 30, 2016              
                 Three Month Ended September 30, 2016  
Market Sector                            Value at Risk     % of Total
Capitalization
    High
Value at Risk
    Low
Value at Risk
    Average
Value at Risk*
 

Currencies

     $         8,786,325             2.37        $     22,899,369          $         147,470          $         9,328,841     

Energy

     2,464,000             0.66           6,593,467          -              2,647,703     

Interest Rates U.S.

     1,552,320             0.42           6,575,525          755,326          2,442,517     
  

 

 

   

 

 

       

Total

     $ 12,802,645                                   3.45    %       
  

 

 

   

 

 

       

 

*

Average of month-end Values at Risk.

As of December 31, 2015, BHM Master’s total capitalization was $78,671,908. The Partnership owned approximately 91.5% of BHM Master. As of December 31, 2015, BHM Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Blenheim for trading) was as follows:

 

     December 31, 2015              
                 Twelve Months Ended December 31, 2015  
Market Sector                            Value at Risk     % of Total
Capitalization
    High
Value at Risk
    Low
Value at Risk
    Average
Value at Risk*
 

Commodity

     $         6,369,443            8.10  %    $     43,569,935      $         5,462,314      $         19,190,910   

Equity

     294,019            0.37        1,990,777        53,641        565,780   

Currency

     363,989            0.46        4,636,011        194,711        1,030,885   

Interest Rate

     11,825            0.02        1,399,215        -            162,482   
  

 

 

   

 

 

       

Total

     $ 7,039,276                                    8.95  %       
  

 

 

   

 

 

       

 

*

Annual average of daily Values at Risk.

 

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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 (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 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 September 30, 2016, 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 September 30, 2016, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 2015, 2014, 2013, 2012, and 2011. In addition, MS&Co. annually prepares an Audited Consolidated Statements 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—Contingencies—Legal” section in MS&Co.’s 2015 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 

MS&Co. has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General’s Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities (“RMBS”), collateralized debt obligations (“CDOs”), structured investment vehicles (“SIVs”) and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to MS&Co.’s due diligence on the loans that it purchased for securitization, MS&Co.’s communications with ratings agencies, MS&Co.’s disclosures to investors, and MS&Co.’s handling of servicing and foreclosure related issues.

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.

 

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On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. and certain affiliates 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 alleges that MS&Co. made misrepresentations and omissions regarding RMBS and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief. On July 20, 2016, MS&Co. filed a demurrer, which was granted on September 30, 2016. On October 21, 2016, the California Attorney General filed an amended complaint.

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 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 June 5, 2012, MS&Co. consented to and became the subject of an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, as amended, Making Findings and Imposing Remedial Sanctions by The Commodity Futures Trading Commission (CFTC) to resolve allegations related to the failure of a salesperson to comply with exchange rules that prohibit off-exchange futures transactions unless there is an Exchange for Related Position (“EFRP”). Specifically, the CFTC found that from April 2008 through October 2009, MS&Co. violated Section 4c(a) of the Commodity Exchange Act, as amended (the “CEA”) and CFTC Regulation 1.38 by executing, processing and reporting numerous off-exchange futures trades to the Chicago Mercantile Exchange (“CME”) and Chicago Board of Trade (“CBOT”) as EFRPs in violation of CME and CBOT rules because those trades lacked the corresponding and related cash, OTC swap, OTC option, or other OTC derivative position. In addition, the CFTC found that MS&Co. violated CFTC Regulation 166.3 by failing to supervise the handling of the trades at issue and failing to have adequate policies and procedures designed to detect and deter the violations of the CEA and CFTC Regulations. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, MS&Co. accepted and consented to entry of findings and the imposition of a cease and desist order, a fine of $5,000,000, and undertakings related to public statements, cooperation and payment of the fine. MS&Co. entered into corresponding and related settlements with the CME and CBOT in which the CME found that MS&Co. violated CME Rules 432.Q and 538 and fined MS&Co. $750,000 and CBOT found that MS&Co. violated CBOT Rules 432.Q and 538 and fined MS&Co. $1,000,000.

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, as amended (the “Securities Act”), 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 June 28, 2016 without any findings of fraud.

 

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On June 18, 2015, MS&Co. entered into a settlement with the SEC and paid a fine of $500,000 as part of the MCDC 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 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 CFTC Regulation 166.3 by failing to have in place adequate procedures to ensure that it complied with CFTC 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.

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, alleges 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 raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates By orders dated June 23, 2011 and July 18, 2011, the court denied defendants’ omnibus motion to dismiss plaintiff’s amended complaint and on August 15, 2011, the court denied MS&Co.’s individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants’ motion to strike plaintiff’s demand for a jury trial. The defendants’ joint motions for partial summary judgment were denied on November 9, 2015. At September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $43 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 $43 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 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, alleges 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 raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On August 11, 2011, plaintiff’s federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants’ demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiff’s negligent misrepresentation claims were dismissed with prejudice. At September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $52 million, and the certificates had incurred actual losses of approximately $2 million. Based on currently available information, MS&Co. believes it could incur a loss for this action up to the difference between the $55 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.

 

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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. Based on currently available information, MS&Co. believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

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. After that dismissal, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $78 million. At September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $48 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 $48 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 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 alleges 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 issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants’ motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. 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. At September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $52 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 $52 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.

 

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On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges 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 MS&Co. to plaintiff currently at issue in this action was approximately $644 million. The complaint alleges causes of action against MS&Co. 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 10, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss the complaint. MS&Co. perfected its appeal from that decision on June 12, 2015. At September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $252 million, and the certificates had incurred actual losses of approximately $85 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $252 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.

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 $132 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 26, 2015, MS&Co. perfected its appeal from the court’s October 29, 2014 decision. 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 September 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $26 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 $26 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.

Settled Civil Litigation

On August 25, 2008, MS&Co. and two ratings agencies were named as defendants in a purported class action related to securities issued by a structured investment vehicle called Cheyne Finance PLC and Cheyne Finance LLC (together, the “Cheyne SIV”). The case was styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. The complaint alleged, among other things, that the ratings assigned to the securities issued by the Cheyne SIV were false and misleading, including because the ratings did not accurately reflect the risks associated with the subprime RMBS held by the Cheyne SIV. The plaintiffs asserted allegations of aiding and abetting fraud and negligent misrepresentation relating to approximately $852 million of securities issued by the Cheyne SIV. On April 24, 2013, the parties reached an agreement to settle the case, and on April 26, 2013, the court dismissed the action with prejudice.

 

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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 July 9, 2010 and February 11, 2011, Cambridge Place Investment Management Inc. filed two separate complaints against MS&Co. and/or its affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts, both styled Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc., et al. The complaints asserted claims on behalf of certain clients of plaintiff’s affiliates and allege that defendants made untrue statements and material omissions in the sale of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. and/or its affiliates or sold to plaintiff’s affiliates’ clients by MS&Co. and/or its affiliates in the two matters was approximately $263 million. On February 11, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

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 alleges 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 seeks, 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 alleges 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.

 

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On September 2, 2011, the Federal Housing Finance Agency (“FHFA”), as conservator for Fannie Mae and Freddie Mac, filed 17 complaints against numerous financial services companies, including MS&Co. and certain affiliates. A complaint against MS&Co. and certain affiliates and other defendants was filed in the Supreme Court of NY, styled Federal Housing Finance Agency, as Conservator v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to Fannie Mae and Freddie Mac of residential mortgage pass-through certificates with an original unpaid balance of approximately $11 billion. The complaint raised claims under federal and state securities laws and common law and seeks, among other things, rescission and compensatory and punitive damages. On February 7, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on June 29, 2012, and alleges 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 sponsored, underwritten, and/or sold by MS&Co. was approximately $758 million. The amended complaint raised common law claims of fraud, fraudulent inducement, and aiding and abetting fraud and seeks, among other things, rescission, compensatory, and/or rescissionary damages, as well as punitive damages, associated with the plaintiffs’ purchases of such certificates. On April 11, 2014, the parties entered into a settlement agreement.

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 raises 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 includes 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, 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 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 $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.

 

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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 asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, 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.

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 connection with such actions.

 

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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, 2015 and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016.

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

For the three months ended September 30, 2016, there were subscriptions of 3,613.966 Units of Class A totaling $1,754,509 and 58.161 Units of Class Z totaling $31,134. The 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 Units were purchased by accredited investors as described in Regulation D.

Proceeds from the sale of Units are used in the trading of commodity interests including futures, swaps, options and forward contracts.

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

 

Period    Class A (a)
Total Number of
Units
Purchased*
     Class A (b)
Average
 Price Paid per 
Unit**
   Class Z (a)
Total Number of
Units
Purchased*
     Class Z (b)
Average
 Price Paid per 
Unit**
  

(c) Total
Number of

Units

Purchased as
Part of Publicly
Announced
Plans or Programs

    

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

that May Yet be

Purchased Under the

Plans or Programs

 

July 1, 2016 - July 31, 2016

     3,142.740       $484.45      59.943       $535.31      N/A           N/A     

August 1, 2016 - August 31, 2016

     4,188.902       $475.74      9.327       $526.58      N/A           N/A     

September 1, 2016 - September 30, 2016

     3,606.535       $469.89      -           $520.98      N/A           N/A     
       10,938.177       $476.31      69.270       $534.13                  

 

*

Generally, limited partners are permitted to redeem their Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner may compel redemption but to date the General Partner has not exercised this right. Purchases of 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 Units are effected as of the last day of each month at the net asset value per 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.

 

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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.DEF*

  

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

  

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

  

XBRL Taxonomy Extension Presentation Linkbase Document.

Notes to Exhibits List

* Submitted electronically herewith.

 

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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.

 

MANAGED FUTURES PREMIER MACRO L.P.  

By:

 

Ceres Managed Futures LLC

     
 

(General Partner)

     

By:

 

/s/ Patrick T. Egan

     
 

Patrick T. Egan

     
 

President and Director

     

Date: November 10, 2016

     

By:

 

/s/ Steven Ross

     
 

Steven Ross

     
 

Chief Financial Officer and Director

     
 

(Principal Accounting Officer)

     

Date: November 10, 2016

     

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 had no Board of Directors.

 

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