New York | 13-4224248 | |
| (State or other jurisdiction of | ||
incorporation or organization) | (I.R.S. Employer Identification No.) |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Large accelerated filer | Accelerated filer | Non-accelerated filer | X | |||
Smaller reporting company | Emerging growth company |
March 31, 2023 (Unaudited) | December 31, 2022 | June 30, 2023 (Unaudited) | December 31, 2022 | |||||||||||||
Assets: | ||||||||||||||||
| Equity in trading account: | ||||||||||||||||
| Unrestricted cash | $ | 53,074,140 | $ | 50,058,379 | $ | 45,747,419 | $ | 50,058,379 | ||||||||
| Restricted cash | 7,541,960 | 12,210,997 | 14,273,015 | 12,210,997 | ||||||||||||
Foreign cash (cost $320,285 and $1,917,654 at March 31, 2023 and December 31, 2022, | 318,469 | 1,924,402 | ||||||||||||||
| Foreign cash (cost $0 and $1,917,654 at June 30, 2023 and December 31, 2022, respectively) | - | 1,924,402 | ||||||||||||||
| Net unrealized appreciation on open futures contracts | - | 2,445,391 | 1,659,642 | 2,445,391 | ||||||||||||
| Net unrealized appreciation on open forward contracts | 19,430 | - | ||||||||||||||
| Total equity in trading account | 60,934,569 | 66,639,169 | 61,699,506 | 66,639,169 | ||||||||||||
| Interest receivable | 190,149 | 174,983 | 203,047 | 174,983 | ||||||||||||
| Total assets | $ | 61,124,718 | $ | 66,814,152 | $ | 61,902,553 | $ | 66,814,152 | ||||||||
Liabilities and Partners’ Capital: | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Net unrealized depreciation on open futures contracts | $ | 307,487 | $ | - | ||||||||||||
| Net unrealized depreciation on open forward contracts | 190,206 | 39,323 | $ | - | $ | 39,323 | ||||||||||
| Foreign cash overdraft (proceeds $630,887 and $0 at June 30, 2023 and December 31, 2022, respectively) | 629,551 | - | ||||||||||||||
| Accrued expenses: | ||||||||||||||||
| Ongoing selling agent fees | 37,393 | 41,122 | 37,793 | 41,122 | ||||||||||||
| Management fees | 34,024 | 43,440 | 32,484 | 43,440 | ||||||||||||
| Incentive fees | - | 714,301 | 68,347 | 714,301 | ||||||||||||
| General Partner fees | 44,044 | 48,582 | 44,533 | 48,582 | ||||||||||||
| Professional fees | 186,997 | 107,005 | 160,957 | 107,005 | ||||||||||||
| Redemptions payable to General Partner | - | 125,000 | - | 125,000 | ||||||||||||
| Redemptions payable to Limited Partners | 304,500 | 307,681 | 925,037 | 307,681 | ||||||||||||
| Total liabilities | 1,104,651 | 1,426,454 | 1,898,702 | 1,426,454 | ||||||||||||
| Partners’ Capital: | ||||||||||||||||
| General Partner, Class Z, 597.9290 Redeemable Units outstanding at March 31, 2023 and December 31, 2022 | 654,526 | 700,959 | ||||||||||||||
| Limited Partners, Class A, 66,129.7838 and 67,227.6148 Redeemable Units outstanding at March 31, 2023 and December 31, 2022, respectively | 55,590,215 | 60,636,182 | ||||||||||||||
| Limited Partners, Class D, 3,489.3280 Redeemable Units outstanding at March 31, 2023 and December 31, 2022 | 3,670,910 | 3,938,734 | ||||||||||||||
| Limited Partners, Class Z, 95.3870 Redeemable Units outstanding at March 31, 2023 and December 31, 2022 | 104,416 | 111,823 | ||||||||||||||
| General Partner, Class Z, 597.9290 Redeemable Units outstanding at June 30, 2023 and December 31, 2022 | 678,209 | 700,959 | ||||||||||||||
| Limited Partners, Class A, 64,120.4118 and 67,227.6148 Redeemable Units outstanding at June 30, 2023 and December 31, 2022, respectively | 55,746,303 | 60,636,182 | ||||||||||||||
| Limited Partners, Class D, 3,190.2310 and 3,489.3280 Redeemable Units outstanding at June 30, 2023 and December 31, 2022, respectively | 3,471,145 | 3,938,734 | ||||||||||||||
| Limited Partners, Class Z, 95.3870 Redeemable Units outstanding at June 30, 2023 and December 31, 2022 | 108,194 | 111,823 | ||||||||||||||
| Total partners’ capital (net asset value) | 60,020,067 | 65,387,698 | 60,003,851 | 65,387,698 | ||||||||||||
| Total liabilities and partners’ capital | $ | 61,124,718 | $ | 66,814,152 | $ | 61,902,553 | $ | 66,814,152 | ||||||||
| Net asset value per Redeemable Unit: | ||||||||||||||||
| Class A | $ | 840.62 | $ | 901.95 | $ | 869.40 | $ | 901.95 | ||||||||
| Class D | $ | 1,052.04 | $ | 1,128.79 | $ | 1,088.05 | $ | 1,128.79 | ||||||||
| Class Z | $ | 1,094.66 | $ | 1,172.31 | $ | 1,134.26 | $ | 1,172.31 | ||||||||
Notional ($)/ Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Currencies | 227 | $ | 177,835 | 0.29 | % | |||||||
Energy | 235 | 244,464 | 0.41 | |||||||||
Grains | 105 | (60,663 | ) | (0.10) | ||||||||
Indices | 362 | 175,540 | 0.29 | |||||||||
Interest Rates U.S. | 74 | 13,525 | 0.02 | |||||||||
Interest Rates Non-U.S. | 208 | (62,537 | ) | (0.10) | ||||||||
Metals | 37 | 71,282 | 0.12 | |||||||||
Softs | 210 | 317,268 | 0.53 | |||||||||
Total futures contracts purchased | 876,714 | 1.46 | ||||||||||
Futures Contracts Sold | ||||||||||||
Currencies | 233 | (132,781 | ) | (0.22) | ||||||||
Energy | 252 | (302,628 | ) | (0.50) | ||||||||
Grains | 144 | 112,383 | 0.19 | |||||||||
Indices | 173 | (32,994 | ) | (0.06) | ||||||||
Interest Rates U.S. | 145 | (216,435 | ) | (0.36) | ||||||||
Interest Rates Non-U.S. | 334 | (359,637 | ) | (0.60) | ||||||||
Livestock | 2 | 1,080 | 0.00 | * | ||||||||
Metals | 32 | (238,774 | ) | (0.40) | ||||||||
Softs | 19 | (14,415 | ) | (0.02) | ||||||||
Total futures contracts sold | (1,184,201 | ) | (1.97) | |||||||||
Net unrealized depreciation on open futures contracts | $ | (307,487 | ) | (0.51) | % | |||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 72,379,876 | $ | 923,256 | 1.54 | % | ||||||
Metals | 52 | 138,591 | 0.23 | |||||||||
Total unrealized appreciation on open forward contracts | 1,061,847 | 1.77 | ||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 101,578,073 | (1,076,304 | ) | (1.80) | |||||||
Metals | 65 | (175,749 | ) | (0.29) | ||||||||
Total unrealized depreciation on open forward contracts | (1,252,053 | ) | (2.09) | |||||||||
Net unrealized depreciation on open forward contracts | $ | (190,206 | ) | (0.32) | % | |||||||
Notional ($)/ Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Currencies | 205 | $ | 224,798 | 0.34 | % | |||||||
Energy | 239 | 539,597 | 0.83 | |||||||||
Grains | 237 | 429,927 | 0.66 | |||||||||
Indices | 293 | (428,762 | ) | (0.66) | ||||||||
Interest Rates U.S. | 85 | (135,594 | ) | (0.21) | ||||||||
Interest Rates Non-U.S. | 174 | (401,257 | ) | (0.61) | ||||||||
Livestock | 2 | (890 | ) | (0.00) | * | |||||||
Metals | 68 | 116,110 | 0.18 | |||||||||
Softs | 60 | 53,603 | 0.08 | |||||||||
Total futures contracts purchased | 397,532 | 0.61 | ||||||||||
Futures Contracts Sold | ||||||||||||
Currencies | 129 | (17,562 | ) | (0.03) | ||||||||
Energy | 225 | (254,040 | ) | (0.39) | ||||||||
Grains | 90 | (144,992 | ) | (0.22) | ||||||||
Indices | 357 | 262,132 | 0.40 | |||||||||
Interest Rates U.S. | 207 | 82,672 | 0.13 | |||||||||
Interest Rates Non-U.S. | 922 | 2,252,519 | 3.45 | |||||||||
Metals | 33 | (96,587 | ) | (0.15) | ||||||||
Softs | 65 | (36,283 | ) | (0.06) | ||||||||
Total futures contracts sold | 2,047,859 | 3.13 | ||||||||||
Net unrealized appreciation on open futures contracts | $ | 2,445,391 | 3.74 | % | ||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 56,648,446 | $ | 713,033 | 1.09 | % | ||||||
Metals | 22 | 54,836 | 0.08 | |||||||||
Total unrealized appreciation on open forward contracts | 767,869 | 1.17 | ||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 58,456,926 | (729,014 | ) | (1.11) | |||||||
Metals | 35 | (78,178 | ) | (0.12) | ||||||||
Total unrealized depreciation on open forward contracts | (807,192 | ) | (1.23) | |||||||||
Net unrealized depreciation on open forward contracts | $ | (39,323 | ) | (0.06) | % | |||||||
Notional ($)/ Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
| Currencies | 162 | $ | 28,356 | 0.05 | % | |||||||
| Energy | 304 | 358,668 | 0.60 | |||||||||
| Grains | 74 | 20,975 | 0.03 | |||||||||
| Indices | 639 | (167,131 | ) | (0.28 | ) | |||||||
| Interest Rates U.S. | 54 | (98,360 | ) | (0.16 | ) | |||||||
Interest Rates Non-U.S. | 230 | 20,102 | 0.03 | |||||||||
| Livestock | 2 | 5,290 | 0.01 | |||||||||
| Metals | 94 | 52,300 | 0.09 | |||||||||
| Softs | 101 | 73,837 | 0.12 | |||||||||
| Total futures contracts purchased | 294,037 | 0.49 | ||||||||||
Futures Contracts Sold | ||||||||||||
| Currencies | 408 | 408,169 | 0.68 | |||||||||
| Energy | 270 | (457,237 | ) | (0.76 | ) | |||||||
| Grains | 166 | (103,045 | ) | (0.17 | ) | |||||||
| Indices | 453 | 429,242 | 0.72 | |||||||||
| Interest Rates U.S. | 437 | 245,925 | 0.41 | |||||||||
Interest Rates Non-U.S. | 1,031 | 740,518 | 1.23 | |||||||||
| Livestock | 1 | 210 | 0.00 | * | ||||||||
| Metals | 122 | 61,532 | 0.10 | |||||||||
| Softs | 167 | 40,291 | 0.07 | |||||||||
| Total futures contracts sold | 1,365,605 | 2.28 | ||||||||||
| Net unrealized appreciation on open futures contracts | $ | 1,659,642 | 2.77 | % | ||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||
| Currencies | $ | 46,419,932 | $ | 540,287 | 0.90 | % | ||||||
| Metals | 58 | 204,202 | 0.34 | |||||||||
| Total unrealized appreciation on open forward contracts | 744,489 | 1.24 | ||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||
| Currencies | $ | 73,895,293 | (516,954 | ) | (0.86 | ) | ||||||
| Metals | 90 | (208,105 | ) | (0.35 | ) | |||||||
| Total unrealized depreciation on open forward contracts | (725,059 | ) | (1.21 | ) | ||||||||
| Net unrealized appreciation on open forward contracts | $ | 19,430 | 0.03 | % | ||||||||
Notional ($)/ Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
| Currencies | 205 | $ | 224,798 | 0.34 | % | |||||||
| Energy | 239 | 539,597 | 0.83 | |||||||||
| Grains | 237 | 429,927 | 0.66 | |||||||||
| Indices | 293 | (428,762) | (0.66) | |||||||||
| Interest Rates U.S. | 85 | (135,594) | (0.21) | |||||||||
Interest Rates Non-U.S. | 174 | (401,257) | (0.61) | |||||||||
| Livestock | 2 | (890) | (0.00) | * | ||||||||
| Metals | 68 | 116,110 | 0.18 | |||||||||
| Softs | 60 | 53,603 | 0.08 | |||||||||
| Total futures contracts purchased | 397,532 | 0.61 | ||||||||||
Futures Contracts Sold | ||||||||||||
| Currencies | 129 | (17,562) | (0.03) | |||||||||
| Energy | 225 | (254,040) | (0.39) | |||||||||
| Grains | 90 | (144,992) | (0.22) | |||||||||
| Indices | 357 | 262,132 | 0.40 | |||||||||
| Interest Rates U.S. | 207 | 82,672 | 0.13 | |||||||||
Interest Rates Non-U.S. | 922 | 2,252,519 | 3.45 | |||||||||
| Metals | 33 | (96,587) | (0.15) | |||||||||
| Softs | 65 | (36,283) | (0.06) | |||||||||
| Total futures contracts sold | 2,047,859 | 3.13 | ||||||||||
| Net unrealized appreciation on open futures contracts | $ | 2,445,391 | 3.74 | % | ||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||
| Currencies | $ | 56,648,446 | $ | 713,033 | 1.09 | % | ||||||
| Metals | 22 | 54,836 | 0.08 | |||||||||
| Total unrealized appreciation on open forward contracts | 767,869 | 1.17 | ||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||
| Currencies | $ | 58,456,926 | (729,014) | (1.11) | ||||||||
| Metals | 35 | (78,178) | (0.12) | |||||||||
| Total unrealized depreciation on open forward contracts | (807,192) | (1.23) | ||||||||||
| Net unrealized depreciation on open forward contracts | $ | (39,323) | (0.06) | % | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Investment Income: | ||||||||||||||||
| Interest income | $ | 588,873 | $ | 87,657 | $ | 1,122,973 | $ | 99,615 | ||||||||
Expenses: | ||||||||||||||||
| Clearing fees related to direct investments | 63,754 | 74,221 | 134,636 | 144,548 | ||||||||||||
| Ongoing selling agent fees | 113,906 | 135,657 | 230,712 | 261,681 | ||||||||||||
| General Partner fees | 134,167 | 160,027 | 271,789 | 308,600 | ||||||||||||
| Management fees | 99,325 | 143,029 | 205,368 | 270,326 | ||||||||||||
| Incentive fees | 68,347 | 974,502 | 68,347 | 2,268,221 | ||||||||||||
| Professional fees | 73,621 | 60,740 | 168,766 | 134,720 | ||||||||||||
| Total expenses | 553,120 | 1,548,176 | 1,079,618 | 3,388,096 | ||||||||||||
| Net investment loss | 35,753 | (1,460,519) | 43,355 | (3,288,481) | ||||||||||||
Trading Results: | ||||||||||||||||
| Net gains (losses) on trading of commodity interests: | ||||||||||||||||
| Net realized gains (losses) on closed contracts | (167,433) | 5,900,959 | (1,673,562) | 12,893,061 | ||||||||||||
| Net change in unrealized gains (losses) on open contracts | 2,179,917 | (1,390,690) | (732,408) | 684,102 | ||||||||||||
| Total trading results | 2,012,484 | 4,510,269 | (2,405,970) | 13,577,163 | ||||||||||||
| Net income (loss) | $ | 2,048,237 | $ | 3,049,750 | $ | (2,362,615) | $ | 10,288,682 | ||||||||
| Net income (loss) per Redeemable Unit*: | ||||||||||||||||
| Class A | $ | 28.78 | $ | 38.86 | $ | (32.55) | $ | 129.93 | ||||||||
| Class D | $ | 36.01 | $ | 48.63 | $ | (40.74) | $ | 162.61 | ||||||||
| Class Z | $ | 39.60 | $ | 52.50 | $ | (38.05) | $ | 172.14 | ||||||||
| Weighted average Redeemable Units outstanding: | ||||||||||||||||
| Class A | 65,497.6305 | 71,963.4235 | 66,184.2786 | 73,153.8605 | ||||||||||||
| Class D | 3,489.3280 | 3,489.3280 | 3,489.3280 | 3,515.2770 | ||||||||||||
| Class Z | 693.3160 | 843.1920 | 693.3160 | 843.1920 | ||||||||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Investment Income: | ||||||||
| Interest income | $ | 534,100 | $ | 11,958 | ||||
Expenses: | ||||||||
| Clearing fees related to direct investments | 70,882 | 70,327 | ||||||
| Ongoing selling agent fees | 116,806 | 126,024 | ||||||
| General Partner fees | 137,622 | 148,573 | ||||||
| Management fees | 106,043 | 127,297 | ||||||
| Incentive fees | - | 1,293,719 | ||||||
| Professional fees | 95,145 | 73,980 | ||||||
| Total expenses | 526,498 | 1,839,920 | ||||||
| Net investment loss | 7,602 | (1,827,962 | ) | |||||
Trading Results: | ||||||||
| Net gains (losses) on trading of commodity interests: | ||||||||
| Net realized gains (losses) on closed contracts | (1,506,129 | ) | 6,992,102 | |||||
| Net change in unrealized gains (losses) on open contracts | (2,912,325 | ) | 2,074,792 | |||||
| Total trading results | (4,418,454 | ) | 9,066,894 | |||||
| Net income (loss) | $ | (4,410,852 | ) | $ | 7,238,932 | |||
| Net income (loss) per Redeemable Unit*: | ||||||||
| Class A | $ | (61.33 | ) | $ | 91.07 | |||
| Class D | $ | (76.75 | ) | $ | 113.98 | |||
| Class Z | $ | (77.65 | ) | $ | 119.64 | |||
| Weighted average Redeemable Units outstanding: | ||||||||
| Class A | 66,870.9268 | 74,344.2975 | ||||||
| Class D | 3,489.3280 | 3,541.2260 | ||||||
| Class Z | 693.3160 | 843.1920 | ||||||
| * | Represents the change in net asset value per Redeemable Unit during the period. |
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
| Partners’ Capital, December 31, 2021 | $ | 59,765,213 | 75,391.9488 | $ | 3,616,215 | 3,645.0220 | $ | 862,193 | 843.1920 | $ | 64,243,621 | 79,880.1628 | ||||||||||||||||||||
| Redemptions - Limited Partners | (3,693,782) | (4,244.1420) | (156,748) | (155.6940) | - | - | (3,850,530) | (4,399.8360) | ||||||||||||||||||||||||
| Net income (loss) | 9,573,840 | - | 569,692 | - | 145,150 | - | 10,288,682 | - | ||||||||||||||||||||||||
| Partners’ Capital, June 30, 2022 | $ | 65,645,271 | 71,147.8068 | $ | 4,029,159 | 3,489.3280 | $ | 1,007,343 | 843.1920 | $ | 70,681,773 | 75,480.3268 | ||||||||||||||||||||
| Partners’ Capital, March 31, 2022 | $ | 64,193,977 | 72,633.9968 | $ | 3,859,462 | 3,489.3280 | $ | 963,075 | 843.1920 | $ | 69,016,514 | 76,966.5168 | ||||||||||||||||||||
| Redemptions - Limited Partners | (1,384,491) | (1,486.1900) | - | - | - | - | (1,384,491) | (1,486.1900) | ||||||||||||||||||||||||
| Net income (loss) | 2,835,785 | - | 169,697 | - | 44,268 | - | 3,049,750 | - | ||||||||||||||||||||||||
| Partners’ Capital, June 30, 2022 | $ | 65,645,271 | 71,147.8068 | $ | 4,029,159 | 3,489.3280 | $ | 1,007,343 | 843.1920 | $ | 70,681,773 | 75,480.3268 | ||||||||||||||||||||
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
| Partners’ Capital, December 31, 2021 | $ | 59,765,213 | 75,391.9488 | $ | 3,616,215 | 3,645.0220 | $ | 862,193 | 843.1920 | $ | 64,243,621 | 79,880.1628 | ||||||||||||||||||||
| Redemptions - Limited Partners | (2,309,291 | ) | (2,757.9520 | ) | (156,748 | ) | (155.6940 | ) | - | - | (2,466,039 | ) | (2,913.6460 | ) | ||||||||||||||||||
| Net income (loss) | 6,738,055 | - | 399,995 | - | 100,882 | - | 7,238,932 | - | ||||||||||||||||||||||||
| Partners’ Capital, March 31, 2022 | $ | 64,193,977 | 72,633.9968 | $ | 3,859,462 | 3,489.3280 | $ | 963,075 | 843.1920 | $ | 69,016,514 | 76,966.5168 | ||||||||||||||||||||
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
| Partners’ Capital, December 31, 2022 | $ | 60,636,182 | 67,227.6148 | $ | 3,938,734 | 3,489.3280 | $ | 812,782 | 693.3160 | $ | 65,387,698 | 71,410.2588 | ||||||||||||||||||||
| Redemptions - Limited Partners | (956,779 | ) | (1,097.8310 | ) | - | - | - | - | (956,779 | ) | (1,097.8310 | ) | ||||||||||||||||||||
| Net income (loss) | (4,089,188 | ) | - | (267,824 | ) | - | (53,840 | ) | - | (4,410,852 | ) | - | ||||||||||||||||||||
| Partners’ Capital, March 31, 2023 | $ | 55,590,215 | 66,129.7838 | $ | 3,670,910 | 3,489.3280 | $ | 758,942 | 693.3160 | $ | 60,020,067 | 70,312.4278 | ||||||||||||||||||||
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
| Partners’ Capital, December 31, 2022 | $ | 60,636,182 | 67,227.6148 | $ | 3,938,734 | 3,489.3280 | $ | 812,782 | 693.3160 | $ | 65,387,698 | 71,410.2588 | ||||||||||||||||||||
| Redemptions - Limited Partners | (2,695,799) | (3,107.2030) | (325,433) | (299.0970) | - | - | (3,021,232) | (3,406.3000) | ||||||||||||||||||||||||
| Net income (loss) | (2,194,080) | - | (142,156) | - | (26,379) | - | (2,362,615) | - | ||||||||||||||||||||||||
| Partners’ Capital, June 30, 2023 | $ | 55,746,303 | 64,120.4118 | $ | 3,471,145 | 3,190.2310 | $ | 786,403 | 693.3160 | $ | 60,003,851 | 68,003.9588 | ||||||||||||||||||||
| Partners’ Capital, March 31, 2023 | $ | 55,590,215 | 66,129.7838 | $ | 3,670,910 | 3,489.3280 | $ | 758,942 | 693.3160 | $ | 60,020,067 | 70,312.4278 | ||||||||||||||||||||
| Redemptions - Limited Partners | (1,739,020) | (2,009.3720) | (325,433) | (299.0970) | - | - | (2,064,453) | (2,308.4690) | ||||||||||||||||||||||||
| Net income (loss) | 1,895,108 | - | 125,668 | - | 27,461 | - | 2,048,237 | - | ||||||||||||||||||||||||
| Partners’ Capital, June 30, 2023 | $ | 55,746,303 | 64,120.4118 | $ | 3,471,145 | 3,190.2310 | $ | 786,403 | 693.3160 | $ | 60,003,851 | 68,003.9588 | ||||||||||||||||||||
1. | Organization: |
2. | Basis of Presentation and Summary of Significant Accounting Policies: |
3. | Financial Highlights: |
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||
Per Redeemable Unit Performance (for a unit outstanding throughout the period):* | ||||||||||||||||||||||||
| Net realized and unrealized gains (losses) | $ | (61.41) | $ | (76.86) | $ | (79.90) | $ | 113.98 | $ | 142.57 | $ | 147.35 | ||||||||||||
| Net investment income (loss) | 0.08 | 0.11 | 2.25 | (22.91) | (28.59) | (27.71) | ||||||||||||||||||
| Increase (decrease) for the period | (61.33) | (76.75) | (77.65) | 91.07 | 113.98 | 119.64 | ||||||||||||||||||
| Net asset value per Redeemable Unit, beginning of period | 901.95 | 1,128.79 | 1,172.31 | 792.73 | 992.10 | 1,022.54 | ||||||||||||||||||
| Net asset value per Redeemable Unit, end of period | $ | 840.62 | $ | 1,052.04 | $ | 1,094.66 | $ | 883.80 | $ | 1,106.08 | $ | 1,142.18 | ||||||||||||
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||
Ratios to Average | ||||||||||||||||||||||||
Limited Partners’ Capital:** | ||||||||||||||||||||||||
| Net investment income (loss)*** | 0.0 | %**** | 0.0 | %**** | 0.8 | % | (5.3) | % | (5.2) | % | (4.5) | % | ||||||||||||
| Operating expenses | 3.4 | % | 3.4 | % | 2.6 | % | 3.4 | % | 3.4 | % | 2.6 | % | ||||||||||||
| Incentive fees | - | % | - | % | - | % | 2.0 | % | 2.0 | % | 2.0 | % | ||||||||||||
| Total expenses | 3.4 | % | 3.4 | % | 2.6 | % | 5.4 | % | 5.4 | % | 4.6 | % | ||||||||||||
| Total return: | ||||||||||||||||||||||||
| Total return before incentive fees | (6.8) | % | (6.8) | % | (6.6) | % | 13.5 | % | 13.5 | % | 13.8 | % | ||||||||||||
| Incentive fees | - | % | - | % | - | % | (2.0) | % | (2.0) | % | (2.1) | % | ||||||||||||
| Total return after incentive fees | (6.8) | % | (6.8) | % | (6.6) | % | 11.5 | % | 11.5 | % | 11.7 | % | ||||||||||||
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||||||||||||||||||||
| Per Redeemable Unit Performance (for a unit outstanding throughout the period):* | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gains (losses) | $ | 28.30 | $ | 35.40 | $ | 36.84 | $ | 57.76 | $ | 72.13 | $ | 74.47 | $ | (33.11) | $ | (41.46) | $ | (43.06) | $ | 171.81 | $ | 214.74 | $ | 221.82 | ||||||||||||||||||||||||
| Net investment income (loss) | 0.48 | 0.61 | 2.76 | (18.90) | (23.50) | (21.97) | 0.56 | 0.72 | 5.01 | (41.88) | (52.13) | (49.68) | ||||||||||||||||||||||||||||||||||||
| Increase (decrease) for the period | 28.78 | 36.01 | 39.60 | 38.86 | 48.63 | 52.50 | (32.55) | (40.74) | (38.05) | 129.93 | 162.61 | 172.14 | ||||||||||||||||||||||||||||||||||||
| Net asset value per Redeemable Unit, beginning of period | 840.62 | 1,052.04 | 1,094.66 | 883.80 | 1,106.08 | 1,142.18 | 901.95 | 1,128.79 | 1,172.31 | 792.73 | 992.10 | 1,022.54 | ||||||||||||||||||||||||||||||||||||
| Net asset value per Redeemable Unit, end of period | $ | 869.40 | $ | 1,088.05 | $ | 1,134.26 | $ | 922.66 | $ | 1,154.71 | $ | 1,194.68 | $ | 869.40 | $ | 1,088.05 | $ | 1,134.26 | $ | 922.66 | $ | 1,154.71 | $ | 1,194.68 | ||||||||||||||||||||||||
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||||||||||||||||||||
| Ratios to Average | ||||||||||||||||||||||||||||||||||||||||||||||||
| Limited Partners’ Capital:** | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income (loss)*** | 0.6 | % | 0.6 | % | 1.3 | % | (4.2) | % | (4.2) | % | (3.4) | % | 0.3 | % | 0.3 | % | 1.0 | % | (6.3) | % | (6.3) | % | (5.5) | % | ||||||||||||||||||||||||
| Operating expenses | 3.2 | % | 3.3 | % | 2.5 | % | 3.3 | % | 3.2 | % | 2.5 | % | 3.3 | % | 3.3 | % | 2.5 | % | 3.3 | % | 3.3 | % | 2.5 | % | ||||||||||||||||||||||||
| Incentive fees | 0.1 | % | 0.1 | % | 0.1 | % | 1.4 | % | 1.4 | % | 1.4 | % | 0.1 | % | 0.1 | % | 0.1 | % | 3.3 | % | 3.3 | % | 3.3 | % | ||||||||||||||||||||||||
| Total expenses | 3.3 | % | 3.4 | % | 2.6 | % | 4.7 | % | 4.6 | % | 3.9 | % | 3.4 | % | 3.4 | % | 2.6 | % | 6.6 | % | 6.6 | % | 5.8 | % | ||||||||||||||||||||||||
| Total return: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total return before incentive fees | 3.5 | % | 3.5 | % | 3.7 | % | 5.8 | % | 5.8 | % | 6.0 | % | (3.5) | % | (3.5) | % | (3.1) | % | 20.0 | % | 20.0 | % | 20.5 | % | ||||||||||||||||||||||||
| Incentive fees | (0.1) | % | (0.1) | % | (0.1) | % | (1.4) | % | (1.4) | % | (1.4) | % | (0.1) | % | (0.1) | % | (0.1) | % | (3.6) | % | (3.6) | % | (3.7) | % | ||||||||||||||||||||||||
| Total return after incentive fees | 3.4 | % | 3.4 | % | 3.6 | % | 4.4 | % | 4.4 | % | 4.6 | % | (3.6) | % | (3.6) | % | (3.2) | % | 16.4 | % | 16.4 | % | 16.8 | % | ||||||||||||||||||||||||
| * | Net investment loss per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information. |
| ** | Annualized (except for incentive fees). |
| *** | Interest income less total expenses. |
4. | Trading Activities: |
March 31, 2023 | Gross Amounts Recognized | Gross Amounts Offset in the Statements of Financial Condition | Net Amounts Presented in the Statements of Financial Condition | Gross Amounts Not Offset in the Statements of Financial Condition | Net Amount | |||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Cash Collateral Received/ Pledged* | |||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2023 | Gross Amounts Recognized | Gross Amounts Offset in the Statements of Financial Condition | Net Amounts Presented in the Statements of Financial Condition | Gross Amounts Not Offset in the Statements of Financial Condition | Net Amount | |||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Cash Collateral Received/ Pledged* | |||||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| Futures | 2,586,614 | (2,586,614) | - | - | - | - | $ | 3,940,654 | $ | (2,281,012) | $ | 1,659,642 | $ | - | $ | - | $ | 1,659,642 | ||||||||||||||||||||||||||||||
| Forwards | 1,061,847 | (1,061,847) | - | - | - | - | 744,489 | (725,059) | 19,430 | - | - | 19,430 | ||||||||||||||||||||||||||||||||||||
| Total assets | 3,648,461 | (3,648,461) | - | - | - | - | $ | 4,685,143 | $ | (3,006,071) | $ | 1,679,072 | $ | - | $ | - | $ | 1,679,072 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
| Futures | (2,894,101) | 2,586,614 | (307,487) | - | 307,487 | - | $ | (2,281,012) | $ | 2,281,012 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||||||
| Forwards | (1,252,053) | 1,061,847 | (190,206) | - | 190,206 | - | (725,059) | 725,059 | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Total liabilities | (4,146,154) | 3,648,461 | (497,693) | - | 497,693 | - | $ | (3,006,071) | $ | 3,006,071 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||||||
| Net fair value | - | * | $ | 1,679,072 | * | |||||||||||||||||||||||||||||||||||||||||||
December 31, 2022 | Gross Amounts Recognized | Gross Amounts Offset in the Statements of Financial Condition | Net Amounts Presented in the Statements of Financial Condition | Gross Amounts Not Offset in the Statements of Financial Condition | Net Amount | Gross Amounts Recognized | Gross Amounts Offset in the Statements of Financial Condition | Net Amounts Presented in the Statements of Financial Condition | Gross Amounts Not Offset in the Statements of Financial Condition | Net Amount | ||||||||||||||||||||||||||||||||||||||
Financial Instruments | Cash Collateral Received/ Pledged* | Financial Instruments | Cash Collateral Received/ Pledged* | |||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| Futures | 4,783,634 | (2,338,243) | 2,445,391 | - | - | 2,445,391 | $ | 4,783,634 | $ | (2,338,243) | $ | 2,445,391 | $ | - | $ | - | $ | 2,445,391 | ||||||||||||||||||||||||||||||
| Forwards | 767,869 | (767,869) | - | - | - | - | 767,869 | (767,869) | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Total assets | 5,551,503 | (3,106,112) | 2,445,391 | - | - | 2,445,391 | $ | 5,551,503 | $ | (3,106,112) | $ | 2,445,391 | $ | - | $ | - | $ | 2,445,391 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
| Futures | (2,338,243) | 2,338,243 | - | - | - | - | $ | (2,338,243) | $ | 2,338,243 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||||||
| Forwards | (807,192) | 767,869 | (39,323) | - | 39,323 | - | (807,192) | 767,869 | (39,323) | - | 39,323 | - | ||||||||||||||||||||||||||||||||||||
| Total liabilities | (3,145,435) | 3,106,112 | (39,323) | - | 39,323 | - | $ | (3,145,435) | $ | 3,106,112 | $ | (39,323) | $ | - | $ | 39,323 | $ | - | ||||||||||||||||||||||||||||||
| Net fair value | 2,445,391 | * | $ | 2,445,391 | * | |||||||||||||||||||||||||||||||||||||||||||
| * | In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s non-exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. In certain instances, MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default. In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
2023 | |||||
Assets | |||||
Futures Contracts | |||||
| Currencies | $ | ||||
| Energy | |||||
| Grains | |||||
| Indices | |||||
| Interest Rates U.S. | |||||
Interest Rates Non-U.S. | |||||
| Livestock | |||||
| Metals | |||||
| Softs | |||||
| Total unrealized appreciation on open futures contracts | |||||
Liabilities | |||||
Futures Contracts | |||||
| Currencies | |||||
| Energy | |||||
| Grains | |||||
| Indices | |||||
| Interest Rates U.S. | |||||
Interest Rates Non-U.S. | |||||
| Metals | |||||
| Softs | |||||
| Total unrealized depreciation on open futures contracts | |||||
| Net unrealized | $ | * | |||
Assets | |||||
Forward Contracts | |||||
| Currencies | $ | ||||
| Metals | |||||
| Total unrealized appreciation on open forward contracts | |||||
Liabilities | |||||
Forward Contracts | |||||
| Currencies | |||||
| Metals | |||||
| Total unrealized depreciation on open forward contracts | |||||
| Net unrealized | $ | ||||
| * | This amount is in “Net unrealized |
| ** | This amount is in “Net unrealized |
December 31, | ||||
2022 | ||||
Assets | ||||
Futures Contracts | ||||
| Currencies | $ | 335,390 | ||
| Energy | 1,086,847 | |||
| Grains | 454,808 | |||
| Indices | 347,516 | |||
| Interest Rates U.S. | 98,297 | |||
Interest Rates Non-U.S. | 2,262,386 | |||
| Livestock | 310 | |||
| Metals | 131,732 | |||
| Softs | 66,348 | |||
| Total unrealized appreciation on open futures contracts | 4,783,634 | |||
Liabilities | ||||
Futures Contracts | ||||
| Currencies | (128,154) | |||
| Energy | (801,290) | |||
| Grains | (169,873) | |||
| Indices | (514,146) | |||
| Interest Rates U.S. | (151,219) | |||
Interest Rates Non-U.S. | (411,124) | |||
| Livestock | (1,200) | |||
| Metals | (112,209) | |||
| Softs | (49,028) | |||
| Total unrealized depreciation on open futures contracts | (2,338,243) | |||
| Net unrealized appreciation on open futures contracts | $ | 2,445,391 | * | |
Assets | ||||
Forward Contracts | ||||
| Currencies | $ | 713,033 | ||
| Metals | 54,836 | |||
| Total unrealized appreciation on open forward contracts | 767,869 | |||
Liabilities | ||||
Forward Contracts | ||||
| Currencies | (729,014) | |||
| Metals | (78,178) | |||
| Total unrealized depreciation on open forward contracts | (807,192) | |||
| Net unrealized depreciation on open forward contracts | $ | (39,323) | ||
| * | This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition. |
| ** | This amount is in “Net unrealized depreciation on open forward contracts” in the Statements of Financial Condition. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
Sector | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Currencies | $ | 835,032 | $ | 1,070,963 | $ | 603,806 | $ | 1,301,355 | ||||||||||||
| Energy | (1,332,011) | 2,286,155 | (3,266,536) | 6,368,357 | ||||||||||||||||
| Grains | (468,230) | (645,158) | (234,666) | 1,059,783 | ||||||||||||||||
| Indices | 986,751 | (14,556) | 1,345,411 | 460,981 | ||||||||||||||||
| Interest Rates U.S. | 365,476 | (899,499) | (950,999) | (780,491) | ||||||||||||||||
Interest Rates Non-U.S. | 1,049,164 | 2,812,047 | (821,483) | 4,924,953 | ||||||||||||||||
| Livestock | 5,610 | (187,870) | 7,360 | (224,995) | ||||||||||||||||
| Metals | (228,236) | 643,757 | 1,713 | 1,176,381 | ||||||||||||||||
| Softs | 798,928 | (555,570) | 909,424 | (709,161) | ||||||||||||||||
| Total | $ | 2,012,484 | *** | $ | 4,510,269 | *** | $ | (2,405,970) | *** | $ | 13,577,163 | *** | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
Sector | 2023 | 2022 | ||||||
Currencies | $ | (231,226) | $ | 230,392 | ||||
Energy | (1,934,525) | 4,082,202 | ||||||
Grains | 233,564 | 1,704,941 | ||||||
Indices | 358,660 | 475,537 | ||||||
Interest Rates U.S. | (1,316,475) | 119,008 | ||||||
Interest Rates Non-U.S. | (1,870,647) | 2,112,906 | ||||||
Livestock | 1,750 | (37,125) | ||||||
Metals | 229,949 | 532,624 | ||||||
Softs | 110,496 | (153,591) | ||||||
Total | $ | (4,418,454) | *** | $ | 9,066,894 | *** | ||
| *** | This amount is included in “Total trading results” in the Statements of Income and Expenses. |
5. | Fair Value Measurements: |
March 31, 2023 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
Futures | $ | 2,586,614 | $ | 2,586,614 | $ | - | $ | - | ||||||||
Forwards | 1,061,847 | - | 1,061,847 | - | ||||||||||||
Total Assets | $ | 3,648,461 | $ | 2,586,614 | $ | 1,061,847 | $ | - | ||||||||
Liabilities | ||||||||||||||||
Futures | $ | 2,894,101 | $ | 2,894,101 | $ | - | $ | - | ||||||||
Forwards | 1,252,053 | - | 1,252,053 | - | ||||||||||||
Total Liabilities | $ | 4,146,154 | $ | 2,894,101 | $ | 1,252,053 | $ | - | ||||||||
June 30, 2023 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
| Futures | $ | 3,940,654 | $ | 3,940,654 | $ | - | $ | - | ||||||||
| Forwards | 744,489 | - | 744,489 | - | ||||||||||||
| Total Assets | $ | 4,685,143 | $ | 3,940,654 | $ | 744,489 | $ | - | ||||||||
Liabilities | ||||||||||||||||
| Futures | $ | 2,281,012 | $ | 2,281,012 | $ | - | $ | - | ||||||||
| Forwards | 725,059 | - | 725,059 | - | ||||||||||||
| Total Liabilities | $ | 3,006,071 | $ | 2,281,012 | $ | 725,059 | $ | - | ||||||||
December 31, 2022 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
| Futures | $ | 4,783,634 | $ | 4,783,634 | $ | - | $ | - | ||||||||
| Forwards | 767,869 | - | 767,869 | - | ||||||||||||
| Total Assets | $ | 5,551,503 | $ | 4,783,634 | $ | 767,869 | $ | - | ||||||||
Liabilities | ||||||||||||||||
| Futures | $ | 2,338,243 | $ | 2,338,243 | $ | - | $ | - | ||||||||
| Forwards | 807,192 | - | 807,192 | - | ||||||||||||
| Total Liabilities | $ | 3,145,435 | $ | 2,338,243 | $ | 807,192 | $ | - | ||||||||
6. | Financial Instrument Risks: |
7. | Subsequent Events: |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not have, nor does it expect to have, any capital assets. The Partnership does not engage in sales of goods or services. Its assets are its (i) equity in trading account, consisting of unrestricted cash, restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and investment in U.S. Treasury bills at fair value, if applicable, and (ii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the firstsecond quarter of 2023.
The Partnership’s investment in futures, forwards and options may or could have been, from time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or option contract has increased or decreased by an amount equal to the daily limit, positions in that futures or option contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Partnership from promptly liquidating their futures or option contracts and result in restrictions on redemptions.
There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership from trading in potentially profitable markets or prevent the Partnership from promptly liquidating unfavorable positions in such markets, subjecting them to substantial losses. Either of these market conditions could result in restrictions on redemptions. For the periods covered by this report, illiquidity has not materially affected the Partnership’s assets.
Other than the risks inherent in commodity futures, forwards, options, swaps and other derivatives trading and U.S. Treasury bills and money market mutual fund securities, the Partnership knows of no trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Partnership’s liquidity increasing or decreasing in any material way.
The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any.
For the threesix months ended March 31,June 30, 2023, the Partnership’s capital decreased 8.2% from $65,387,698 to $60,020,067.$60,003,851. This decrease was attributable to redemptions of 1,097.83103,107.2030 Class A limited partner Redeemable Units totaling $956,779$2,695,799 and redemptions of 299.0970 Class D limited partner Redeemable Units totaling $325,433, and a net loss of $4,410,852.$2,362,615. Future redemptions can impact the amount of funds available for investment in subsequent periods.
Other than as discussed above, there are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s capital resource arrangements at the present time.
Off-Balance Sheet Arrangements and Contractual Obligations
The Partnership does not have any off-balance sheet arrangements, nor does it have contractual obligations or commercial commitments to make future payments, that would affect its liquidity or capital resources.
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 their 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.
18
Results of Operations
During the Partnership’s firstsecond quarter of 2023, the Partnership’s net asset value per Class A Redeemable Unit decreased 6.8%increased 3.4% from $901.95$840.62 to $840.62$869.40 as compared to an increase of 11.5%4.4% in the same period of 2022. During the Partnership’s firstsecond quarter of 2023, the Partnership’s net asset value per Class D Redeemable Unit decreased 6.8%increased 3.4% from $1,128.79$1,052.04 to $1,052.04$1,088.05 as compared to an increase of 11.5%4.4% in the same period of 2022. During the Partnership’s firstsecond quarter of 2023, the Partnership’s net asset value per Class Z Redeemable Unit decreased 6.6%increased 3.6% from $1,172.31$1,094.66 to $1,094.66$1,134.26 as compared to an increase of 11.7%4.6% in the same period of 2022. The Partnership experienced a net trading gain before fees and expenses in the second quarter of 2023 of $2,012,484. Gains were primarily attributable to the Partnership’s trading in currencies, indices, U.S. and non-U.S. interest rates, livestock and softs and were partially offset by losses in energy, grains and metals. The Partnership experienced a net trading gain before fees and expenses in the second quarter of 2022 of $4,510,269. Gains were primarily attributable to the Partnership’s trading in currencies, energy, non-U.S. interest rates and metals and were partially offset by losses in grains, indices, U.S. interest rates, livestock and softs.
During the second quarter, the Partnership’s most meaningful gains were achieved in the global fixed income markets from short positions in European, U.S., and Canadian government debt futures during May and June as prices declined and yields rose amid ongoing concerns regarding inflation and expectations for hawkish central bank policy to continue. In global stock indices, long futures positions in Asian equity indices profited during April, May, and June as prices rose amid economic data supporting investors’ “risk-on” stance. Further gains were recorded from long positions in European equity index futures during April and June. In the currency markets, gains were achieved from short positions in the Japanese yen as the value of the yen declined against the U.S. dollar throughout the quarter on expectations the Bank of Japan would support its dovish monetary policy while the U.S. Federal Reserve was expected to continue its restrictive rate policy. Smaller currency gains were recorded from long positions in the British pound versus the U.S. dollar during April and June. In the agricultural markets, gains were recorded during April from long positions in sugar futures as prices climbed to an 11-year high amid adverse weather in key growing regions and supply tightness. A portion of the Partnership’s trading gains for the second quarter was offset by losses incurred in the energy markets from positions in Brent and West Texas Intermediate crude oil futures as oil prices moved without consistent direction for a majority of the quarter. In the metals, losses were recorded from long positions in gold futures as prices reversed lower during May amid broad strength in the U.S. dollar.
During the Partnership’s six months ended June 30, 2023, the Partnership’s net asset value per Class A Redeemable Unit decreased 3.6% from $901.95 to $869.40 as compared to an increase of 16.4% in the same period of 2022. During the Partnership’s six months ended June 30, 2023, the Partnership’s net asset value per Class D Redeemable Unit decreased 3.6% from $1,128.79 to $1,088.05 as compared to an increase of 16.4% in the same period of 2022. During the Partnership’s six months ended June 30, 2023, the Partnership’s net asset value per Class Z Redeemable Unit decreased 3.2% from $1,172.31 to $1,134.26 as compared to an increase of 16.8% in the same period of 2022. The Partnership experienced a net trading loss before fees and expenses in the first quartersix months of 2023 of $4,418,454.$2,405,970. Losses were primarily attributable to the Partnership’s trading in currencies, energy, grains and U.S. and non-U.S. interest rates and were partially offset by gains in grains,currencies, indices, livestock, metals and softs. The Partnership experienced a net trading gain before fees and expenses in the first quartersix months of 2022 of $9,066,894.$13,577,163. Gains were primarily attributable to the Partnership’s trading in currencies, energy, grains, indices, U.S. and non-U.S. interest rates and metals and were partially offset by losses in U.S. interest rates, livestock and softs.
During the first quarter,six months of the Partnership’syear, the largest trading losses for the first six months of the year occurred in the energy markets from positions in Brent and West Texas Intermediate crude oil futures as oil prices moved inconsistently for a majority of the first half of the year amid a lack of a consensus on oil supply/demand. Smaller losses were experienced within therecorded from positions in heating oil and gasoline futures for similar reasons. In global fixed income, markets during January and March. In January, losses were recorded during January from short positions in European and U.S. fixed income futures as an apparent slowing of inflation growth led many investors to believe global central banks would be less aggressive with future interest rate hikes. During March, more notable losses were recorded in the fixed income sector from short positions in U.S. and European fixed income futures as bond buying surged in a “flight-to-quality” amid contagion concerns following the collapse of two prominent regional banks in the U.S. In the energymetals markets, losses were incurredrecorded from short copper futures positions during January and June as copper prices reversed higher on forecasts for an increase in Brent crude oil, heating oil, and gasoline as prices moved inconsistently throughout a majority of the quarter amid the lack of a consistent consensus regarding oil supply/demand for the upcoming months. Further losses for the quarter were recorded in the currency markets from positions in the Euro and Swiss franc as the values of these currencies experienced short-term volatility versus the U.S. dollar amid differing expectations for future interest rate policies from the European Central Bank and Swiss National Bank as compared to those policies of the Federal Reserve.industrial demand. A portion of the Partnership’s overall trading losses for the first quartersix months of the year was offset by gains recorded in the global stock indices from long positions in European equity index futures during January, February, April, and FebruaryJune as investor appetite for risk assets in the region boosted stock prices. Further profitsgains in the sector were recorded from trading CBOE Volatility Indexlong positions in Asian equity index futures (VIX)as Asian stock prices trended higher throughout a majority of the second quarter. In the currency markets, short positions in the Japanese yen profited during much of the quarter.first half of the year as the value of the yen weakened against the U.S. dollar on expectations the Bank of Japan would continue to support its dovish monetary policy. Additional currency gains were recorded from long positions in the British pound during both the first and second quarters. In the agricultural markets, gains were achieved from long positions in sugar futures during January, February,March and MarchApril as sugar prices rallied to a multi-year high amid supply concerns. Gains in the agriculturals were also recorded from short positions in wheat futures as wheat prices declined amid easing drought conditions in key South American growing regions. Additional gains were recorded inthroughout a majority of the agricultural markets during March from long sugar futures positions as sugar prices trended upward to a multi-year high. In the metals markets, long positioning in gold futures profited during Januaryfirst and March as investors sought out precious metals as a store of value amid safe haven buying and weakness in the U.S. dollar.second quarters.
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Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increase not only the risks involved in commodity trading, but also the possibility of profit. The profitability of the Partnership depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, changes in interest rates, pandemics, epidemics and other public health crises. To the extent that market trends exist and the Advisors are able to identify them, the Partnership expects to increase capital through operations.
The Partnership receives monthly interest on 100% of the average daily equity maintained in cash in the Partnership’s brokerage account at MS&Co. during each month at a rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. For the avoidance of doubt, the Partnership did not receive interest on amounts in the futures brokerage accounts that were committed to margin. Any interest earned on the Partnership’s cash account in excess of the amounts described above, if any, was retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market mutual fund securities was retained by the Partnership as applicable. Interest income for the three and six months ended March 31,June 30, 2023 increased by $522,142$501,216 and $1,023,358, respectively, as compared to the corresponding periodperiods in 2022. The increase in interest income was primarily due to higher 4-week U.S. Treasury bill discount rates during the three and six months ended March 31,June 30, 2023 as compared to the corresponding periodperiods in 2022. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depended on (1) the average daily equity maintained in cash in the Partnership’s accounts, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and (3) interest rates over which none of the Partnership or MS&Co. had control.
Certain clearing fees are based on the number of trades executed by the Advisors for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees related to direct investments for the three and six months ended March 31,June 30, 2023 increaseddecreased by $555$10,467 and $9,912, respectively, as compared to the corresponding periodperiods in 2022. The increasedecrease in these clearing fees was primarily due to an increasea decrease in the number of direct trades made by the Partnership during the three and six months ended March 31,June 30, 2023 as compared to the corresponding periodperiods in 2022.
Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted net asset value of Class A and Class D Redeemable Units on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and six months ended March 31,June 30, 2023 decreased by $9,218$21,751 and $30,969, respectively, as compared to the corresponding periodperiods in 2022. The decrease was primarily due to a decrease in average net assets attributable to Class A and Class D Redeemable Units during the three and six months ended March 31,June 30, 2023 as compared to the corresponding periodperiods in 2022.
General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership. General Partner fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. General Partner fees for the three and six months ended March 31,June 30, 2023 decreased by $10,951$25,860 and $36,811, respectively, as compared to the corresponding periodperiods in 2022. The decrease was primarily due to a decrease in average net assets for the Partnership during the three and six months ended March 31,June 30, 2023 as compared to the corresponding periodperiods in 2022.
Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three and six months ended March 31,June 30, 2023 decreased by $21,254$43,704 and $64,958, respectively, as compared to the corresponding periodperiods in 2022. The decrease was primarily due to a decrease in average net assets for the Partnership during the three and six months ended March 31,June 30, 2023 as compared to the corresponding periodperiods in 2022.
Incentive fees are based on the new trading profits generated by each Advisor at the end of the quarter, half-year or year, as applicable, as defined in the respective management agreements between the Partnership, the General Partner and each Advisor. Trading performance for the three and six months ended March 31,June 30, 2023 resulted in incentive fees of $68,347. Trading performance for the three and six months ended June 30, 2022 resulted in incentive fees of $0$974,502 and $1,293,719,$2,268,221, respectively. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.
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In allocating the assets of the Partnership among the Advisors, the General Partner considers, among other factors, each 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 and may allocate assets to additional advisors at any time.
As of June 30, 2023 and March 31, 2023, and December 31, 2022, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:
Advisor | March 31, 2023 | March 31, 2023 (percentage of Partners’ Capital) | December 31, 2022 | December 31, 2022 (percentage of Partners’ Capital) | ||||||||||||
DCM | $ | 15,828,354 | 26% | $ | 18,156,276 | 28% | ||||||||||
Drury | $ | 9,416,730 | 16% | $ | - | 0% | ||||||||||
Episteme | $ | 18,923,897 | 32% | $ | 18,182,719 | 28% | ||||||||||
ISAM SM | $ | - | 0% | $ | 14,301,742 | 22% | ||||||||||
Millburn | $ | 13,236,411 | 22% | $ | 14,000,599 | 21% | ||||||||||
Unallocated | $ | 2,614,675 | 4% | $ | 746,362 | 1% | ||||||||||
For additional disclosures about operational and financial risk related to the COVID-19 outbreak, refer to Part II, Item 5. “Other Information.” in this Form 10-Q.
Advisor | June 30, 2023 | June 30, 2023 (percentage of Partners’ Capital) | March 31, 2023 | March 31, 2023 (percentage of Partners’ Capital) | ||||||||||||
DCM | $ | 14,512,807 | 24% | $ | 15,828,354 | 26% | ||||||||||
Drury | $ | 11,617,023 | 19% | $ | 9,416,730 | 16% | ||||||||||
Episteme | $ | 16,983,276 | 29% | $ | 18,923,897 | 32% | ||||||||||
Millburn | $ | 13,910,680 | 23% | $ | 13,236,411 | 22% | ||||||||||
Unallocated | $ | 2,980,065 | 5% | $ | 2,614,675 | 4% | ||||||||||
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Partnership is a speculative commodity pool. The market sensitive instruments held by the Partnership are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.
The limited partners will not be liable for losses exceeding the current net asset value of their investment.
Market movements result in frequent changes in the fair value of the Partnership’s open positions and, consequently, in its earnings and cash balances. The Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s open positions and the liquidity of the markets in which they trade.
The Partnership rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s past performance is not necessarily indicative of their future results.
Quantifying the Partnership’s Trading Value at Risk
The following quantitative disclosures regarding the Partnership’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Partnership accounts for open positions on the basis of fair value accounting principles. Any loss in the market value of the Partnership’s open positions is directly reflected in the Partnership’s earnings and cash flow.
The Partnership’s risk exposure in the market sectors traded by the Advisors is estimated below in terms of Value at Risk. Please note that the Value at Risk model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either the General Partner or the Advisors in their daily risk management activities.
“Value at Risk” is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to Values at Risk or by the Partnership’s attempt to manage its market risk.
Exchange margin requirements have been used by the Partnership as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day 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 risk sensitive instruments. As of March 31,June 30, 2023, DCM, Drury, Episteme and Millburn each traded managed accounts in the name of the Partnership. Prior to its termination effective December 31, 2022, ISAM SM traded managed accounts in the name of the Partnership. The trading Value at Risk tables reflect the market sensitive instruments held by the Partnership as of March 31,June 30, 2023 and December 31, 2022. There have been no material changes 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, 2022.
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The following tables indicate the trading Value at Risk associated with the Partnership’s investments by market category as of March 31,June 30, 2023 and December 31, 2022, and the highest, lowest and average values during the three months ended March 31,June 30, 2023 and the twelve months ended December 31, 2022. All open contracts trading risk exposures have been included in calculating the figures set forth below.
As of March 31,June 30, 2023, the Partnership’s total capitalization was $60,020,067.$60,003,851.
| March 31, 2023 | June 30, 2023 | |||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | ||||||||||||||||||||||||||||||
Currencies | $ | 862,406 | 1.44 | % | $ | 4,391,514 | $ | 862,406 | $ | 2,864,741 | $ | 1,098,920 | 1.83 | % | $ | 1,637,455 | $ | 810,320 | $ | 1,221,413 | ||||||||||||||||||||
Energy | 1,399,663 | 2.33 | 3,554,367 | 1,070,431 | 2,595,915 | 1,794,336 | 2.99 | 2,489,056 | 975,590 | 1,953,716 | ||||||||||||||||||||||||||||||
Grains | 307,069 | 0.51 | 984,221 | 268,114 | 694,880 | 340,263 | 0.57 | 651,030 | 136,835 | 462,579 | ||||||||||||||||||||||||||||||
Indices | 2,290,447 | 3.82 | 5,919,444 | 1,977,652 | 3,403,555 | 5,132,494 | 8.55 | 5,132,494 | 2,052,975 | 3,295,032 | ||||||||||||||||||||||||||||||
Interest Rates U.S. | 310,393 | 0.52 | 1,000,056 | 232,186 | 518,863 | 1,028,935 | 1.71 | 1,061,993 | 302,771 | 703,173 | ||||||||||||||||||||||||||||||
Interest Rates Non-U.S. | 1,444,006 | 2.41 | 3,669,229 | 1,270,029 | 2,431,889 | 2,992,743 | 4.99 | 3,200,934 | 1,307,750 | 2,343,539 | ||||||||||||||||||||||||||||||
Livestock | 3,850 | 0.01 | 11,220 | - | 4,480 | 5,995 | 0.01 | 9,955 | - | 3,839 | ||||||||||||||||||||||||||||||
Metals | 469,979 | 0.78 | 1,158,604 | 386,729 | 861,873 | 1,423,166 | 2.37 | 1,423,166 | 502,109 | 952,720 | ||||||||||||||||||||||||||||||
Softs | 417,290 | 0.70 | 544,927 | 176,895 | 386,427 | 452,099 | 0.75 | 619,237 | 333,907 | 519,352 | ||||||||||||||||||||||||||||||
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Total | $ | 7,505,103 | 12.52 | % | $ | 14,268,951 | 23.77 | % | ||||||||||||||||||||||||||||||||
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| * | Average of daily Values at Risk. |
As of December 31, 2022, the Partnership’s total capitalization was $65,387,698.
| December 31, 2022 | ||||||||||||||||||||
| Twelve Months Ended December 31, 2022 | ||||||||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | |||||||||||||||
Currencies | $ | 2,396,130 | 3.66 | % | $ | 5,174,957 | $ | 2,168,466 | $ | 3,766,373 | ||||||||||
Energy | 1,479,619 | 2.26 | 2,759,364 | 170,243 | 1,567,593 | |||||||||||||||
Grains | 736,575 | 1.13 | 1,288,345 | 280,376 | 773,384 | |||||||||||||||
Indices | 2,853,573 | 4.36 | 4,150,965 | 429,670 | 2,636,612 | |||||||||||||||
Interest Rates U.S. | 608,173 | 0.93 | 1,250,386 | 169,738 | 698,859 | |||||||||||||||
Interest Rates Non-U.S. | 3,036,414 | 4.64 | 3,236,617 | 873,360 | 2,101,574 | |||||||||||||||
Livestock | 3,685 | 0.01 | 115,528 | 3,685 | 54,943 | |||||||||||||||
Metals | 653,539 | 1.00 | 1,549,990 | 270,436 | 940,266 | |||||||||||||||
Softs | 422,396 | 0.65 | 1,266,142 | 266,254 | 553,715 | |||||||||||||||
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|
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Total | $ | 12,190,104 | 18.64 | % | ||||||||||||||||
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| * | 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 (“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 March 31,June 30, 2023 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 March 31,June 30, 2023 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.” or “the Company”).
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 2022, 2021, 2020, 2019, and 2018. In addition, MS&Co. annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com.www.morganstanley.com. We refer you to the Commitments, Guarantees and Contingencies – Legal section of MS&Co.’s 2022 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, as well as being subject to regulatory investigations arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions or regulatory investigations include claims for substantial penalties, compensatory and/or punitive damages or claims for indeterminate amounts of penalties or damages.
Each of Morgan Stanley and MS&Co. is also involved, from time to time, other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding MS&Co.’s business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital market activities, financial products or offerings sponsored, underwritten or sold by MS&Co., wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions, limitations on our ability to conduct certain business, or other relief.
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.
During the preceding five years, the following administrative, civil, or criminal actions pending, on appeal or concluded against MS&Co. or any of its principals are material within the meaning of CFTC Rule 4.24(l)(2) or 4.34(k)(2):
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Regulatory and Governmental Matters.
The Company has been responding to subpoenas and other requests for information from the Enforcement Division of the U.S. Securities and Exchange Commission and the United States Attorney’s Office for the Southern District of New York in connection with their investigations into various aspects of the Company’s blocks business, certain related sales and trading practices, and applicable controls (the “Investigations”). The Investigations are focused on whether the Company and/or its employees shared and/or used information regarding impending block transactions in violation of federal securities laws and regulations. The Company is continuingcontinues to cooperate with, and remains engaged in discussions regarding the Investigationspotential resolution of, the Investigations. There can be no assurance that these discussions and is respondingcontinuing engagement will lead to the requests.resolution of either matter. The Company also faces potential civil liability arising from claims that have been or may be asserted by, among others, block transaction participants who contend they were harmed or disadvantaged including, among other things, as a result of a share price decline allegedly caused by the activities of the Company and/or its employees, or as a result of the Company’s and/or its employees’ failure to adhere to applicable laws and regulations. In addition, the Company has responded to demands from shareholders under Section 220 of the Delaware General Corporation Law for books and records concerning the Investigations.
On September 30, 2020, the SEC entered into a settlement order with MS&Co. settling an administrative action which relates to MS&Co.’s violations of the order marking requirements of Regulation SHO of the Exchange Act resulting from its improper use of aggregation units in structuring the Firm’s equity swaps business. The order found that MS&Co. improperly operated its equity swaps business without netting certain “long” and “short” positions as required by Rule 200(c) of Regulation SHO. The order found that the long exposure to an equity security (the “Long Unit”) and the short exposure to an equity security (the “Short Unit”) were not independent from one another and did not have separate trading strategies or objectives without regard to each other, and that the Long and Short Units were not eligible for the exception in Rule 200(f) of Regulation SHO. The order found that MS&Co. willfully violated Section 200(g) of Regulation SHO. MS&Co. consented, without admitting or denying the findings and without adjudication of any issue of law or fact, to a censure; to cease and desist from committing or causing future violations; to pay a civil penalty of $5 million; and to comply with the undertaking enumerated in the order.
The Firm has reached agreements in principle with two regulatory agencies—the SEC for $125 million and the CFTC for $75 million— to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm. The Company was one of the entities involved in these investigations, and has recognized a provision of $63 million in anticipation of concluding the settlement with the SEC. On September 27, 2022, the Firm’s settlements with the SEC and the CFTC became effective.
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Civil Litigation
On August 18, 2009, Relators Roger Hayes and C. Talbot Heppenstall, Jr., filed a qui tam action in New Jersey state court styled State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al. The complaint, filed under seal pursuant to the New Jersey False Claims Act, alleged that the Company and several other underwriters of municipal bonds had defrauded New Jersey issuers by misrepresenting that they would achieve the best price or lowest cost of capital in connection with certain municipal bond issuances. On March 17, 2016, the court entered an order unsealing the complaint. On November 17, 2017, Relators filed an amended complaint to allege the Company mispriced certain bonds issued in twenty-three bond offerings between 2008 and 2017, having a total par amount of $6,946 million. The complaint seeks, among other relief, treble damages. On February 22, 2018, the Company moved to dismiss the amended complaint, and on July 17, 2018, the court denied the Company’s motion. On October 13, 2021, following a series of voluntary and involuntary dismissals, Relators limited their claims to certain bonds issued in five offerings the Company underwrote between 2008 and 2011, having a total par amount of $3,856 million.
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 the State of New York, New York County (“Supreme Court of NY”). The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $133 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $116 million. On August 11, 2016, the Appellate Division, First Department (“First Department”) affirmed the trial court’s decision denying in part MS&Co.’s motion to dismiss the complaint. On July 15, 2022, MS&Co. filed a motion for summary judgment. On March 1, 2023, the court granted in part and denied in part MS&Co.’s motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. In March 2023, both parties appealed the decision. At December 25, 2019, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $22 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 $22 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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In AugustBeginning in February of 2017, MS&Co.2016, the Firm was named as a defendant in amultiple purported antitrust class actionactions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”)SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al.In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that MS&Co.,the Firm, together with a number of other financial institution defendants violated U.S. antitrust laws and New York state lawantitrust laws from 2008 through December of 2016 in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint wasinterest rate swaps trading. Complaints were filed both on behalf of a purported class of borrowers and lendersinvestors who entered into stock loan transactions withpurchased interest rate swaps from defendants, as well as on behalf of two swap execution facilities that
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allegedly were thwarted by the defendants.defendants in their efforts to develop such platforms. The class action complaint seeks,consolidated complaints seek, among other relief, certification of the investor class of plaintiffs and treble damages. On September 27, 2018,July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the class action complaint. Plaintiffs’complaints. A decision on plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. The motion for class certification and the parties’ objections to the report and recommendation are pending before the District Court.is pending.
On August 13, 2021, the plaintiff in Camelot Event Driven Fund, a Series of Frank Funds Trust v. Morgan Stanley & Co. LLC, et al. filed in the Supreme Court of NY a purported class action complaint alleging violations of the federal securities laws against ViacomCBS (“Viacom”), certain of its officers and directors, and the underwriters, including the Company, of two March 2021 Viacom offerings: a $1,700 Viacom Class B Common Stock offering and a $1,000 offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the “Offerings”). The complaint alleges, inter alia, that the Viacom offering documents for both issuances contained material omissions because they did not disclose that certain of the underwriters, including the Company, had prime brokerage relationships and served as counterparties to certain derivative transactions with Archegos Capital Management LP, (“Archegos”), a fund with significant exposure to Viacom securities across multiple prime brokers. The complaint, which seeks, among other things, unspecified compensatory damages, alleges that the offering documents did not adequately disclose the risks associated with Archegos’s concentrated Viacom positions at the various prime brokers, including that the unwind of those positions could have a deleterious impact on the stock price of Viacom. On November 5, 2021, the complaint was amended to add allegations that defendants failed to disclose that certain underwriters, including the Company, had intended to unwind Archegos’s Viacom positions while simultaneously distributing the Offerings. On February 6, 2023, the court issued a decision denying the motions to dismiss as to the Company and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15,2023, the underwriters, including the Firm, filed their Notices of Appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff filed a Notice of Appeal of the dismissal of Viacom and the individual Viacom defendants.
Settled Civil Litigation
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against MS&Co., styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., in the Supreme Court of NY. The complaint related to a $275 million credit default swap (“CDS”) referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserted 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 CDS with CDIB. On March 22, 2021, the parties entered into a settlement agreement. On April 16, 2021, the court entered a stipulation of voluntary discontinuance, with prejudice.
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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
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plaintiff’s purchase of such certificates. On November 4, 2021, the Firm entered into an agreement to settle the litigation.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raised claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against MS&Co. with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $332 million. On July 13, 2018, the parties reached an agreement in principle to settle the litigation.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $634 million. The complaint alleged causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and sought, among other things, compensatory and punitive damages. On June 26, 2018, the parties entered into an agreement to settle the litigation.
On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleged that MS&Co. made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserted violations of the California False Claims Act and other state laws and sought treble damages, civil penalties, disgorgement, and injunctive relief. On April 24, 2019, the parties reached an agreement to settle the litigation.
In August of 2017, MS&Co. was named as a defendant in a purported antitrust class action in the United States District Court for the Southern District of New York (“SDNY”) styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that MS&Co., together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. Plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. The motion for class
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certification and the parties’ objections to the report and recommendation are pending before the District Court. On May 20, 2023, the Firm reached an agreement in principle to settle the litigation.
Beginning on March 25, 2019, MS&Co. was named as a defendant in a series of putative class action complaints filed in the United States District Court for the SDNY, the first of which is styled Alaska Electrical Pension Fund v. BofA Secs., Inc., et al. Each complaint alleged a conspiracy to fix prices and restrain competition in the market for unsecured bonds issued by the following Government-Sponsored Enterprises: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Farm Credit Banks Funding Corporation; and the Federal Home Loan Banks. The purported class period for each suit is from January 1, 2012 to June 1, 2018. Each complaint raised a claim under Section 1 of the Sherman Act and sought, among other things, injunctive relief and treble compensatory damages. On May 23, 2019, plaintiffs filed a consolidated amended class action complaint styled In re GSE Bonds Antitrust Litigation, with a purported class period from January 1, 2009 to January 1, 2016. On June 13, 2019, the defendants filed a joint motion to dismiss the consolidated amended complaint. On August 29, 2019, the court denied MS&Co.’s motion to dismiss. On December 15, 2019, MS&Co. and certain other defendants entered into a stipulation of settlement to resolve the action as against each of them in its entirety. On June 16, 2020, the court granted final approval of the settlement.
Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.
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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, 2022 and under Part II, Item 1A. “Risk Factors.” in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 other than as disclosed in Note 6, “Financial Instrument Risks”, of the Financial Statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For the three months ended March 31,June 30, 2023, there were no additional subscriptions. Redeemable Units are 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. Redeemable Units are purchased by accredited investors, as defined in Regulation D. In determining the applicability of the exemption, the General Partner relies on the fact that the Redeemable Units are purchased by accredited investors in a private offering.
Proceeds from the sale of Redeemable Units are used for the trading of commodity interests including futures and forward contracts.
The following chart sets forth the purchases of limited partner Redeemable Units for each Class by the Partnership.
Period
| Class A
(a) Total
Number of
Redeemable
Units
Purchased*
| Class A
(b) Average
Price Paid
per
Redeemable
Unit**
| (c) Total
Number of
Redeemable
Units
Purchased
as Part of
Publicly
Announced
Plans or
Programs
| (d) Maximum
Number (or
Approximate
Dollar Value)
of Redeemable
Units that
May Yet Be
Purchased
Under the
Plans or
Programs
| ||||||
January 1, 2023 - January 31, 2023 | 334.4660 | $ | 874.13 | N/A | N/A | |||||
February 1, 2023 - February 28, 2023 | 401.1320 | $ | 897.24 | N/A | N/A | |||||
March 1, 2023 - March 31, 2023 | 362.2330 | $ | 840.62 | N/A | N/A | |||||
| 1,097.8310 | $ | 871.52 | ||||||||
| Period | Class A (a) Total Redeemable Units | Class A (b) Average Price Paid per Redeemable Unit** | Class D (a) Total Redeemable Units | Class D (b) Average Price Paid per Redeemable | (c) Total Number of Redeemable Purchased as Part of | (d) Maximum Number (or May Yet Be Under the Plans or Programs | ||||||||||||||||||
April 1, 2023 - April 30, 2023 | 576.7640 | $ | 858.94 | N/A | N/A | N/A | N/A | |||||||||||||||||
May 1, 2023 - May 31, 2023 | 742.9320 | $ | 866.85 | N/A | N/A | N/A | N/A | |||||||||||||||||
June 1, 2023 - June 30, 2023 | 689.6760 | $ | 869.40 | 299.0970 | $ | 1,088.05 | N/A | N/A | ||||||||||||||||
| 2,009.3720 | $ | 865.45 | 299.0970 | $ | 1,088.05 | |||||||||||||||||||
| * | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners. |
| ** | Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions. |
Item 3. Defaults Upon Senior Securities. None.
Item 4. Mine Safety Disclosures. Not applicable.
Item 5. Other Information.
Certain impacts to public health conditions particular to the coronavirus (COVID-19) outbreak that occurred after December 31, 2019 could impact the operations and financial performance of the Partnership’s investments subsequent to March 31, 2023. The extent of the impact to the financial performance of the Partnership’s investments will depend on future developments, including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. If the financial performance of the Partnership’s investments is impacted because of these factors for an extended period, the Partnership’s performance may be adversely affected.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) (filed herewith).
32.1 — Section 1350 Certification (Certification of President and Director) (filed herewith).
32.2 — Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith).
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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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.
| CERES TACTICAL SYSTEMATIC L.P. | ||
By: | Ceres Managed Futures LLC | |
| (General Partner) | ||
By: | /s/ Patrick T. Egan | |
Patrick T. Egan | ||
President and Director | ||
Date: | ||
By: | /s/ Brooke Lambert | |
| Brooke Lambert | ||
| Chief Financial Officer | ||
| (Principal Accounting Officer) | ||
Date: | ||
The General Partner which signed the above is the only party authorized to act for the registrant. The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.
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