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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
     
to
     
Commission File Number:
000-25603
CERES CLASSIC L.P.
 
(Exact name of registrant as specified in its charter)
 
Delaware
  
13-4018068
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
c/o Ceres Managed Futures LLC
1585 Broadway
New York, New York 10036
 
(Address of principal executive offices) (Zip Code)
(855)
672-4468
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
 
Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A
   N/A   N/A
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
 
   
No
X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
 
   
No
X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
    No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
X
    No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
        Accelerated filer
 
       
Non-accelerated
filer
X
Smaller reporting company
 
     Emerging growth company
 
 
Table of Contents
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
 
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).
Yes
 
    No
X
Limited Partnership Units with an aggregate value of $159,373,539 were outstanding and held by
non-affiliates
as of the last business day of the registrant’s most recently completed second fiscal quarter.
As of February 28, 2025, 4,764,873.688 Limited Partnership Units of Class A were outstanding and 11,079.649 Limited Partnership Units of Class Z were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
[None]

PART I

Item 1. Business.

(a) General Development of Business. Ceres Classic L.P. (formerly, Managed Futures Premier Graham L.P.) (the “Partnership”) was formed on July 15, 1998 under the Delaware Revised Uniform Limited Partnership Act to engage primarily in the speculative trading of futures contracts, options on futures and forward contracts, forward contracts on physical commodities and other commodity interests, including, but not limited to, foreign currencies, financial instruments, metals, energy, and agricultural products (collectively, “Futures Interests”). The Futures Interests that are traded by the Partnership are volatile and involve a high degree of risk. The General Partner (as defined below) may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. The Partnership commenced trading operations on March 1, 1999.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (“Ceres” or the “General Partner”), commodity pool operator of the Partnership. The General Partner is a wholly-owned subsidiary of Morgan Stanley Capital Management LLC (“MSCM”). MSCM is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Morgan Stanley Smith Barney LLC, doing business as Morgan Stanley Wealth Management (“Morgan Stanley Wealth Management”), currently serves as the placement agent to the Partnership (the “Placement Agent”). Morgan Stanley Wealth Management is a principal subsidiary of MSCM.

As of December 31, 2024, all trading decisions were made for the Partnership by Graham Capital Management, L.P. (“Graham”), Winton Capital Management Limited (“WCM”), EMC Capital Advisors, LLC (“EMC”) and Campbell & Company, LP (“Campbell”), as the commodity trading advisors to the Partnership (each, a “Trading Advisor” and collectively, the “Trading Advisors”). Each Trading Advisor is allocated a portion of the Partnership’s assets to manage. Prior to January 1, 2021, Graham was the sole trading advisor to the Partnership, and managed the assets of the Partnership pursuant to its K4D-15V Program, Graham’s proprietary, trend-following trading program. Ceres is responsible for selecting additional commodity trading advisors from time to time and for replacing Trading Advisors as it deems necessary. Trading advisors can be added, removed or replaced at any time by Ceres, or Ceres may determine to adjust the allocation of assets to each Trading Advisor, without the consent of, or advance notice to, the Limited Partners. A description of the trading activities and focus of the Trading Advisors is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As of January 1, 2021, the Partnership invested a portion of its assets in CMF Winton Master L.P., organized in New York as a limited partnership (“CMF Winton” or the “Trading Company”). The Partnership and any other feeder fund investing in the Trading Company constitute the limited partners of the Trading Company. The Trading Company is managed by Ceres. CMF Winton has a single account with WCM. The Trading Company may and will, among other things, trade, buy, sell, spread, or otherwise acquire, hold or dispose of Futures Interests (as defined below).

For the period January 1, 2024 through December 31, 2024, the approximate average market sector distribution for the Partnership was as follows:

 

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LOGO

At December 31, 2024 and 2023, the Partnership owned 100% of CMF Winton. It is the Partnership’s intention to continue to invest in the Trading Company. The performance of the Partnership is directly affected by the performance of the Trading Company. Expenses to investors as a result of investment in the Trading Company are approximately the same as they would be if the Partnership traded directly and redemption rights are not affected.

During the years ended December 31, 2024, 2023 and 2022, the Partnership’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. MS&Co. also acted as the counterparty on all trading of foreign currency forward contracts. MS&Co. is a wholly-owned subsidiary of Morgan Stanley. As of January 1, 2021, JPMorgan Chase Bank, N.A. (“JPM”) acts as prime broker in connection with foreign exchange forward and swap transactions for the Trading Company.

The General Partner, on behalf of the Partnership, has entered into a management agreement (the “Management Agreement”) with Graham. The Management Agreement provides that Graham has sole discretion in determining the investments of the assets of the Partnership allocated to Graham by the General Partner. Pursuant to the Management Agreement, the Partnership pays Graham a flat-rate monthly fee. Effective as of January 1, 2021, the management fee payable by the Partnership to Graham is equal to 1/12th of 1.25% (a 1.25% annual rate) of the Partnership’s net assets as of the first day of each month.

Effective as of January 1, 2021, the Partnership pays WCM a flat-rate monthly fee equal to 1/12th of 1.5% (a 1.5% annual rate) of the Partnership’s net assets allocated to WCM as at the beginning of the relevant month, which will be equal to the prior month end net assets, net of all fees and expenses for the previous month, and decreased by any redemptions for such prior month end and increased by any subscriptions for the current month.

Effective as of January 1, 2021, the Partnership pays Campbell a flat rate monthly fee equal to 1/12th of 1.25% (a 1.25% annual rate) of the beginning of the month net asset value allocated to Campbell.

 

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Effective as of January 1, 2021, the Partnership pays EMC a flat rate monthly fee equal to 1/12th of 0.875% (a 0.875% annual rate) of the beginning of the month net asset value allocated to EMC.

In addition, the Partnership pays Graham an annual incentive fee. Effective February 1, 2019, the Partnership pays Graham an incentive fee equal to 18% of trading profits experienced by the Partnership as of the end of such period.

Effective as of January 1, 2021, the Partnership pays WCM a quarterly incentive fee equal to 20% of new trading profits (as defined in the applicable management agreement) earned by WCM in each quarterly period. Pursuant to the management agreement with WCM, no incentive fee will be paid to WCM with respect to the Partnership until it has (i) recouped a certain loss carryforward and (ii) earned new trading profits (as defined in the applicable management agreement) from and after January 1, 2021. The loss carryforward applied to the Partnership will be adjusted according to the Partnership’s assets allocated to WCM as of January 1, 2021.

Effective as of January 1, 2021, the Partnership pays Campbell a quarterly incentive fee equal to 20% of trading profits (as defined in the applicable management agreement) earned by Campbell in each quarterly period.

Effective as of January 1, 2021, the Partnership pays EMC a quarterly incentive fee equal to 20% of trading profits (as defined in the applicable management agreement) earned by EMC in each quarterly period.

Trading profits represent the amount by which profits from trading in Futures Interests exceed losses after ongoing placement agent fees, management and administrative and General Partner’s fees, as applicable, are deducted. When Graham experiences losses with respect to net assets as of the end of a calendar year or month, as applicable, Graham must recover such losses before Graham is eligible for an incentive fee in the future. Cumulative trading losses are adjusted on a pro-rated basis for the amount of each month’s net redemptions.

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

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

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

As of November 1, 2018, the Partnership entered into an alternative investment placement agent agreement (the “Harbor Selling Agreement”), by and among the Partnership, the General Partner, Morgan Stanley Distribution Inc. (“MSDI”), and Harbor Investment Advisory, LLC, a Maryland limited liability company (“Harbor”), which supersedes and replaces the alternative investment selling agent agreement, dated January 19, 2018, between the Partnership, the General Partner and Harbor. Pursuant to the Harbor Selling Agreement, MSDI and Harbor have been appointed as a non-exclusive selling agent and sub-selling agent, respectively, of the Partnership for the purpose of finding eligible investors for units of limited partnership interest (“Unit(s)”) through offerings that are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder and for Harbor to serve as an investment advisor to its customers investing in one or more of the partnerships party to the Harbor Selling Agreement; provided, that, included within such appointment, Harbor will provide certain services to certain holders of Units of the Partnership, who had acquired such Units prior to such holders becoming clients of Harbor.

 

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The Harbor Selling Agreement continues in effect until September 30, 2025 unless terminated in certain circumstances as set forth in the Harbor Selling Agreement, including by any party on thirty days’ prior written notice, after which the General Partner or the Partnership may, in its sole discretion, renew the Harbor Selling Agreement for additional one year periods. Pursuant to the Harbor Selling Agreement, effective as of January 1, 2021, the Partnership pays Harbor an ongoing placement agent fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the net asset value per Unit for certain holders of Class A Units in the Partnership.

As of December 31, 2024, units of limited partnership interest (“Unit(s)”) of the Partnership are being offered in two share classes (each, a “Class” or collectively, the “Classes”) in a private placement pursuant to Regulation D under the Securities Act. A Limited Partner will initially receive Class A Units in the Partnership, provided, that certain investors (other than ERISA/IRA investors) who subscribe for Units on a consulting basis, the General Partner and certain employees of Morgan Stanley and/or its subsidiaries (and their family members) may be designated to hold Class Z Units.

Each of Class A and Z Units of the Partnership have the same investment exposure and rights except for the amount of the ongoing placement agent fee charged to each Class of Units. Class Z Units are not subject to an ongoing placement agent fee.

The Partnership began the year at a net asset value per Class A Unit of $28.07 and increased 5.8% to $29.69 per Class A Unit and a net asset value per Class Z Unit of $12.13 and increased 6.6% to $12.93 per Class Z Unit on December 31, 2024. For a more detailed description of the Partnership’s business, see subparagraph (c).

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

(b) [Reserved.]

(c) Narrative Description of Business. For financial information reporting purposes, the Partnership is deemed to engage in one industry segment, the speculative trading of Futures Interests. The relevant financial information is presented in “Part II. Item 8. Financial Statements and Supplementary Data.” The Partnership is in the business of speculative trading of Futures Interests pursuant to trading instructions provided by the Trading Advisors. See Item 1(a) above for a complete description of the Partnership’s business. The information requested in Section 101(c)(1)(i) through (v) and Section 101(c)(2)(i) of Regulation S-K is not applicable to the Partnership. Additionally, the Partnership does not have any employees. The directors and officers of the General Partner are listed in “Part III. Item 10. Directors, Executive Officers and Corporate Governance.”

(d) [Reserved.]

(e) Available Information. The Partnership files an Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to these reports with the Securities and Exchange Commission (“SEC”). The Partnership does not maintain an internet website; however the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Partnership’s SEC filings are available to the public from the EDGAR database on the SEC’s website at http://www.sec.gov. The Partnership’s CIK number is 0001066656. As of the date hereof, the Partnership does not have an internet address.

 

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Item 1A. Risk Factors.

This section includes some of the principal risks that investors will face with an investment in the Partnership.

THE UNITS IN THE PARTNERSHIP ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THEY ARE SUITABLE ONLY FOR PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.

Risks Relating to the Partnership and the Offering of Units

You should not rely on past performance of the General Partner or the Trading Advisors in deciding to purchase Units. The past investment performance of other entities managed by the General Partner and the Trading Advisors is not necessarily indicative of the Partnership’s or a Trading Company’s future results. No assurance can be given that the General Partner will succeed in meeting the investment objectives of the Partnership. You may lose all or substantially all of your investment in the Partnership.

The Partnership and the Trading Company incur substantial charges. The Partnership and the Trading Company must pay substantial charges, and must generate profits and interest income which exceed their respective fixed costs in order to avoid depletion of the Partnership’s assets. The Partnership and the Trading Company are required to pay certain expenses and fees, including monthly management fees to the Trading Advisors, regardless of their performance. In addition, the Partnership pays each Trading Advisor an incentive fee of between 18% to 20% of Trading Profits, or New Trading Profits, as set forth in the applicable advisory agreement, if any, earned by the relevant Trading Advisor. Limited partners in the Partnership will be indirectly responsible for the expenses paid by the Partnership and the Trading Company.

Incentive fees may be paid by the Partnership even if the Partnership sustains trading losses. The Partnership pays each Trading Advisor an incentive fee based upon the Trading Profits or New Trading Profits, as set forth in the applicable advisory agreement, that it generates for the Partnership. To the extent that the Partnership pays one or more Trading Advisors an incentive fee, these trading profits include unrealized appreciation on open positions. Accordingly, it is possible that the Partnership will pay an incentive fee on trading profits that do not become realized. Also, each Trading Advisor will retain all incentive fees paid to it, even if it incurs a subsequent loss after payment of an incentive fee. Certain of the incentive fees may be paid quarterly, such that it is possible that an incentive fee may be paid to a Trading Advisor during a year in which the assets of the Partnership suffer a loss for the year. Because the Trading Advisors receive an incentive fee based on the Trading Profits or New Trading Profits, as applicable, the Trading Advisors may have an incentive to make investments that are riskier than would be the case in the absence of such an incentive fee being paid to the Trading Advisors based on Trading Profits or New Trading Profits, as applicable.

Restricted investment liquidity in the Units. There is no secondary market for the Units, and you generally may not redeem your Units other than as of the last business day of each month. Your right to receive payment for a redemption of some or all of your Units is dependent upon (a) the Partnership having sufficient assets to pay its liabilities on the redemption date, and (b) the General Partner’s receipt of your request for redemption in such manner as determined by the General Partner no later than 3:00 P.M., New York City time, on the third business day before the end of the month, although the General Partner may accept requests for redemption at other times in its sole discretion. The General Partner will not permit a transfer, sale, pledge or assignment of Units unless it is satisfied that the transfer, sale, pledge or assignment would not be in violation of Delaware law or applicable federal, state, or foreign securities laws and notwithstanding any transfer, sale, pledge or assignment, the Partnership will continue to be classified as a partnership rather than as an association or publicly traded partnership taxable as a corporation under the Internal Revenue Code of 1986, as amended (the “Code”). No transfer, sale, pledge or assignment of Units will be effective or recognized by the Partnership if the transfer, sale, pledge or assignment would result in the termination of the Partnership for U.S. federal income tax purposes. Any attempt to transfer, sell, pledge or assign Units in violation of the limited partnership agreement of the Partnership, as amended (the “Partnership Agreement”) will be ineffective.

General Partner redemptions. The General Partner is required to maintain a capital contribution at least equal to the greater of: (a) 1% of aggregate capital contributions to the Partnership (including the General Partner’s contribution) and (b) $25,000. The General Partner may otherwise redeem any portion of its investment in the Partnership at any time without notice to the limited partners. For any such redemption, the General Partner will redeem its Units at the end of the month in the same manner as any limited partner would follow to redeem Units. Additionally, the General Partner has the right to redeem Units it holds in the event redemptions for limited partners are suspended.

 

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The Partnership’s structure has conflicts of interest.

 

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The General Partner, Morgan Stanley Investment Management, the Placement Agent, MSDI and MS&Co. are affiliates. As a result, the fees and other compensation received by these parties and other terms relating to the operation of the Partnership and the sale of Units have not been negotiated independently. The officers and directors of the General Partner are also employees of Morgan Stanley or one of its subsidiaries and may have a conflict of interest between their responsibility to the General Partner and the commodity pools it operates. Some of the compensation for such officers and directors of the General Partner may be based in part on the profitability of Morgan Stanley and its managed futures business operated by the General Partner.

 

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Employees of the Placement Agent receive a significant portion of the ongoing placement agent fee paid by the Partnership (except for consulting clients, from which the Placement Agent, serving in its role as investment adviser, receives the fees and expenses described in such consulting client’s consulting agreement). Therefore, these employees have a conflict of interest in making recommendations regarding the purchase or redemption of Units.

 

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MS&Co. can benefit from bid/ask spreads to the extent that the Trading Advisors for the Partnership execute over-the-counter (“OTC”) foreign exchange trades with MS&Co. and bid/ask spreads are charged.

 

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The Trading Advisors, the General Partner, Morgan Stanley and its affiliates and subsidiaries may trade Futures Interests for their own accounts, and thereby compete with the Partnership and the Trading Company for positions. There are potential incentives for such persons and, in particular, investment personnel, to favor the proprietary accounts over the client accounts (including the Partnership’s or the Trading Company’s accounts), including, without limitation, with respect to allocation of investments, time and attention. There may be cases where certain proprietary accounts trade ahead of, or opposite, trades for the Partnership (or the Trading Company). Also, the other commodity pools managed by the General Partner and the Trading Advisors may compete with the Partnership and the Trading Company for Futures Interests. These conflicts can result in less favorable prices on the Partnership’s and the Trading Company’s transactions. These pools may also pay lower fees, including lower commodity brokerage fees and/or commissions, than the Partnership pays. The records of trading in such accounts, and any written policies relating to such trading, will not be made available to limited partners for inspection.

 

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For excess cash which is not invested, MS&Co. and the General Partner retain any interest earned on cash in the Partnership’s and the Trading Company’s account in excess of the rate specified in the Partnership’s Annual Report to Limited Partners for the year ended December 31, 2024. Depending on the current market interest rates, that could create an incentive for the General Partner to retain excess cash in cash instead of direct investments in permitted investments.

 

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The General Partner may purchase shares from money market mutual funds affiliated and/or unaffiliated with the General Partner.

No specific policies regarding conflicts of interest have been adopted by the General Partner, Morgan Stanley Wealth Management, MSDI, the Partnership, the Trading Company or any of their affiliates, and investors will be dependent on the good faith of, and legal and fiduciary obligations imposed on, the parties involved with such conflicts to resolve them equitably.

“Master-feeder” structure. Certain of the Trading Advisors may invest the assets of the Partnership through master-feeder structures which presents certain unique risks to investors. Smaller feeder funds (including the Partnership, as applicable) investing in a Trading Company may be materially affected by the actions of larger feeder funds investing in the Trading Company. For example, if a larger feeder fund withdraws from the Trading Company, the remaining feeder funds may experience higher pro rata operating expenses, thereby producing lower returns. Such Trading Company’s portfolio may become less diverse due to a withdrawal by a larger feeder fund, resulting in increased volatility and risk. In addition, advisory and other fees are charged at the level of each individual feeder fund and, therefore, such fees may differ from those of the Partnership. The Partnership may withdraw its investments in the Trading Company at any time, provided that all liabilities, contingent or otherwise, of the Trading Company, except any liability to the limited partners on account of their capital contributions, have been paid or there remains property in the Trading Company sufficient to pay them. In such event, the General Partner would consider what action might be taken, including retaining the Trading Company’s trading advisor to manage that portion of the Partnership’s assets directly.

An investment in Units may not diversify an overall portfolio. Because Futures Interests have historically performed independently of traditional investments in equities and bonds, the General Partner believes that managed futures funds like the Partnership can diversify a traditional portfolio of equities and bonds. However, the General Partner cannot assure you that the Partnership will perform with a significant degree of non- or low-correlation to your other investments in the future. You may lose your entire investment in the Partnership.

 

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Neither the Partnership nor the Trading Company is a registered investment company. The Partnership and the Trading Company are not registered investment companies. The Partnership and the Trading Company are not required to register, and are not registered, as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Accordingly, investors will not have the protections afforded by the Investment Company Act (which, among other matters, requires investment companies to have a majority of disinterested directors and regulates the relationship between the trading advisor(s) and the investment company).

Risks Related to Regulation of the Partnership and General Partner

The Federal Reserve Board’s regulation of Morgan Stanley could affect the activities of the Partnership and the Trading Company. As a bank holding company (“BHC”) that has elected financial holding company (“FHC”) status under the Bank Holding Company Act of 1956 (“BHCA”), Morgan Stanley and its affiliates are subject to comprehensive, consolidated supervision and regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Since the General Partner is a subsidiary of Morgan Stanley, the Federal Reserve will treat the Partnership as an affiliate of Morgan Stanley. As a result, the Partnership will be subject to the BHCA and the Federal Reserve’s implementing regulations and interpretations, which are subject to change.

A significant focus of the regulatory framework that applies to Morgan Stanley is to ensure that Morgan Stanley and its subsidiaries operate in a safe and sound manner, with sufficient capital, earnings and liquidity to allow Morgan Stanley to serve as a source of financial and managerial strength to Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association (the “Banks”). These Banks must remain well capitalized and well managed if Morgan Stanley is to maintain its FHC status and continue to engage in the widest range of permissible financial activities. In addition, the general exercise by the Federal Reserve of its regulatory, supervisory and enforcement authority with respect to Morgan Stanley and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) could result in the need for Morgan Stanley to change its business practices or the scope of its current lines of business, including certain limited divestitures. Although such changes could have an impact on and consequences for Morgan Stanley, the General Partner, the Partnership and the Trading Company any limited divestiture should not directly involve the Partnership.

The Units are not being offered by the Banks, and as such: (1) are not insured by the Federal Deposit Insurance Corporation (“FDIC”), (2) are not deposits or other obligations of the Banks, (3) are not guaranteed by the Banks, and (4) involve investment risks, including possible loss of principal.

Assets held in accounts at U.S. banks may not be fully insured. The assets of the Partnership and the Trading Company that are deposited with commodity brokers, FX counterparties or their affiliates may be placed in deposit accounts at U.S. banks. The FDIC insures deposits held at insured depository institutions for up to $250,000 (including principal and accrued interest) for each insurable capacity (e.g., individual accounts, joint accounts, corporate accounts, etc.), though deposits in separate branches of an insured institution are not separately insured. If the FDIC were to become receiver of insured U.S. bank holding deposit accounts that were established by a commodity broker or one of its affiliates, then it is uncertain whether the commodity broker, the affiliate involved, the Partnership, the Trading Company or the investor would be able to reclaim cash in the deposit accounts above $250,000.

Other federal agencies, including the SEC and the Commodity Futures Trading Commission (“CFTC”), regulate certain activities of the Partnership and General Partner. Regulatory changes other than banking regulations could adversely affect the Partnership by restricting its trading activities and/or increasing the costs or taxes to which the investors are subject. The Dodd-Frank Act, among other things, grants the CFTC and SEC broad rulemaking authority to implement various provisions of the Dodd-Frank Act, including comprehensive regulation of the OTC derivatives market and certain foreign exchange transactions. The implementation of the Dodd-Frank Act could adversely affect the Partnership by increasing transaction and/or regulatory compliance costs. In addition, greater regulatory scrutiny may increase the Partnership’s and the General Partner’s exposure to potential liabilities. Increased regulatory oversight can also impose administrative burdens on the General Partner, including, without limitation, responding to investigations and implementing new policies and procedures. As a result, the General Partner’s time, attention and resources may be diverted from portfolio management activities.

Other potentially adverse regulatory initiatives could develop suddenly and without notice.

 

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The General Partner may determine to invest up to all of the Partnership’s and/or the Trading Company’s assets in U.S. Treasury bills and/or money market mutual fund securities. The General Partner has, at times, invested a portion, and may determine to invest all or a portion of the Partnership’s and the Trading Company’s assets in U.S. Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. The Partnership and/or the Trading Company, as applicable, will retain all interest income earned on U.S. Treasury bills and money market mutual fund securities purchased.

In the event that the General Partner is required to liquidate U.S. Treasury bills before they mature, to meet redemption requests or otherwise, the Partnership and/or the Trading Company may incur a loss on such U.S. Treasury bills and/or may be subject to additional fees or other costs. The General Partner will endeavor to maintain sufficient cash in the Partnership’s and the Trading Company’s accounts in order to meet margin requirements and avoid early liquidation of U.S. Treasury bills.

Although a money market mutual fund currently seeks to preserve the value of each of its shares at $1.00 per share, it is possible to incur losses when investing in a money market mutual fund. An investment in a money market mutual fund is not insured or guaranteed by any government agency. A money market mutual fund may experience significant pressures from, among other things, shareholder redemptions, issuer credit downgrades and illiquid markets. Historically, there have been some money market mutual funds that have “broken the buck,” which means that, upon redemption, investors in those funds did not receive $1.00 per share for their investments in those funds. Recent rule amendments adopted by the SEC require certain money market mutual funds to implement floating net asset values that will not preserve the value of each of its shares at $1.00 per share. The implementation of these rule amendments may impact the Partnership’s use of these money market mutual funds for capital preservation purposes.

Allowing investments by benefit plan investors may result in adverse consequences under ERISA or the Code. It is the current intent of the General Partner to conduct its operations so that the assets of each class of equity interests in the Partnership should not be deemed to constitute the “plan assets” of Benefit Plan Investors. If, however, the Partnership were deemed to hold “plan assets” of Benefit Plan Investors: (i) ERISA’s fiduciary standards may apply to the Partnership and might materially affect the operations of the Partnership, and (ii) any transaction with the Partnership could be deemed a transaction with each benefit plan investor and may cause transactions into which the Partnership might enter in the ordinary course of business to constitute prohibited transactions under ERISA and/or § 4975 of the Code. In order to avoid having the assets of the Partnership treated as “plan assets,” the General Partner intends to restrict the acquisition and/or redemption of Units, and such restrictions could delay or preclude the ability to transfer or redeem Units, or cause Units to lose value. However, there can be no assurances that this strategy will be successful.

Risks Relating to Futures Interests Trading and the Futures Interests Markets

Futures Interests trading is speculative and volatile. The rapid fluctuations in the market prices of Futures Interests make an investment in the Partnership volatile. Volatility is caused by, among other things, changes in supply and demand relationships; weather; agricultural, trade, fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; and changes in interest rates. If a Trading Advisor incorrectly predicts the direction of prices in Futures Interests, large losses may occur. The Partnership’s performance will be volatile on a monthly and an annual basis. The Partnership could lose all or substantially all of its assets.

The Partnership’s and the Trading Company’s Futures Interests trading is highly leveraged such that small changes in the price of the Partnership’s or a Trading Company’s positions may result in substantial losses. The Trading Advisors for the Partnership and the Trading Company use substantial leverage in trading. Trading Futures Interests involves substantial leverage, which could result in immediate and substantial losses. Due to the low margin deposits normally required in trading Futures Interests (typically between 1% and 15% of the value of the contract purchased or sold), an extremely high degree of leverage is typical of a Futures Interests trading account. As a result, a relatively small price movement in Futures Interests may result in immediate and substantial losses to the investor. For example, if 10% of the face value of a contract is deposited as margin for that contract, a 10% decrease in the value of the contract would cause a total loss of the margin deposit. A decrease of more than 10% in the value of the contract would cause a loss greater than the amount of the margin deposit.

The gross leverage employed by each Trading Advisor in its trading can vary substantially from month to month. This gross leverage, expressed as the underlying absolute value of the Partnership’s and the Trading Company’s positions compared to the average net assets of the Partnership, is anticipated to range from two times the Partnership’s net assets to fifteen times the Partnership’s net assets. Under certain conditions, however, the Partnership’s gross leverage could exceed (or be less than) such range. The amount of margin required to be deposited with respect to an individual futures contract is determined by the exchange upon which the contract is traded and the commodity broker or FX counterparty at which the position is held and may be changed at any time.

 

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Options trading can be more volatile than futures trading, and purchasing and writing options could result in trading losses. The Partnership and the Trading Company may trade options on futures. Although successful options trading requires many of the same skills as successful futures trading, the risks are different. Successful options trading requires a trader to assess accurately near-term market volatility because that volatility is immediately reflected in the price of outstanding options. Correct assessment of market volatility can therefore be of much greater significance in trading options than it is in many long-term futures strategies where volatility does not have as great an effect on the price of a futures contract. Specific market movements of the commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of a put option collects a premium and risks losing the difference between the strike price and the market price of the underlying commodity or futures contract (less the premium received) if the option buyer exercises its put option, as well as any commissions and fees. The writer, or seller, of a call option has unlimited risk. A call option writer collects a premium and risks losing the difference between the price it would have to pay to obtain the underlying commodity or futures contract and the strike price (less the premium received) if the option buyer exercises its call option.

Market illiquidity may cause less favorable trade prices. Although the Trading Advisors for the Partnership and the Trading Company generally will purchase and sell actively traded contracts where last trade price information and quoted prices are readily available, the price at which a sale or purchase occurs may differ from the price expected because there may be a delay between receiving a quote and executing a trade, particularly in circumstances where a market has limited trading volume and prices are often quoted for relatively limited quantities. In addition, most U.S. futures exchanges have established “daily price fluctuation limits” which preclude the execution of trades at prices outside of the limit, and, from time to time, the CFTC or the exchanges may suspend trading in market disruption circumstances. In these cases it is possible that the Partnership and the Trading Company could be required to maintain a losing position that it otherwise would execute and incur significant losses or be unable to establish a position and miss a profit opportunity.

Factors that can contribute to market illiquidity for exchange-traded contracts include:

 

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exchange-imposed price fluctuation limits;

 

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limits on the number of contracts speculative traders may hold in most commodity markets; and

 

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market disruptions.

The General Partner expects that non-exchange traded contracts will be traded for commodity interests for which there is generally a liquid underlying market. Such markets, however, may experience periods of illiquidity and are also subject to market disruptions.

Since the Trading Advisors already manage sizable assets in the commodity markets, it is possible that the Partnership may encounter illiquid situations. It is impossible to quantify the frequency or magnitude of these risks, however, especially because the conditions often occur unexpectedly.

Trading on non-U.S. exchanges presents greater risks to the Partnership than trading on U.S. exchanges. The Partnership and the Trading Company may trade on exchanges located outside the United States. Trading on U.S. exchanges is subject to CFTC regulation and oversight, including, for example, minimum capital requirements for commodity brokers, segregation of customer funds, regulation of trading practices on the exchanges, prohibitions against trading ahead of customer orders, prohibitions against filling orders off exchanges, prescribed risk disclosure statements, testing and licensing of industry sales personnel and other industry professionals, and recordkeeping requirements, and other requirements and restrictions for the purpose of preventing price manipulation and other disruptions to market integrity, avoiding systemic risk, preventing fraud and promoting innovation, competition and financial integrity of transactions. Trading on non-U.S. exchanges (other than swap execution facilities registered as such with the CFTC) is not regulated by the CFTC or any other U.S. governmental agency or instrumentality and may be subject to regulations that are different from those to which U.S. exchange trading is subject, may provide less protection to investors than trading on U.S. exchanges, and may be less vigorously enforced than regulations in the U.S.

Trading on non-U.S. exchanges involves some risks that trading on U.S. exchanges does not, such as:

Lack of Investor Protection Regulation

The rights of the Partnership and the Trading Company in the event of the insolvency or bankruptcy of a non-U.S. market, broker or bank are likely to differ from rights that the Partnership and the Trading Company would have in the United States and these rights may be more limited than in the case of failures of U.S. markets, brokers or banks.

 

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Possible Governmental Intervention

Generally, non-U.S. brokers are not subject to the jurisdiction of the CFTC or any other U.S. regulator. In addition, the Partnership’s and the Trading Company’s assets held outside of the United States to margin transactions on non-U.S. exchanges are held in accordance with the client assets protection regime and the insolvency laws of the applicable jurisdiction. A non-U.S. government might halt trading in a market and/or take possession of the Partnership’s and the Trading Company’s assets maintained in its country in which case the assets may never be recovered. The General Partner might have little or no notice that such events were happening. In such circumstances, the General Partner may not be able to obtain the Partnership’s assets.

Relatively New Markets

Some non-U.S. exchanges on which the Partnership and the Trading Company are permitted to trade may be in developmental stages so that prior price histories may not be indicative of current price patterns.

Exchange-Rate Exposure

The Partnership is valued in U.S. dollars. Contracts on non-U.S. exchanges are usually traded in the local currency. The Partnership’s and the Trading Company’s assets held in connection with contracts priced and settled in a foreign currency may be held in a non-U.S. depository in accounts denominated in a foreign currency. Changes in the value of the local currency relative to the U.S. dollar could cause losses to the Partnership even if the contract traded is profitable.

Risks Associated with Affiliates

The Partnership’s and the Trading Company’s clearing broker may use affiliates to carry and clear transactions on non-U.S. exchanges. While the use of affiliates can provide certain benefits, it can also pose certain risks. In particular, if a clearing broker or an affiliated non-U.S. broker were to fail, it is likely that all of its affiliated companies would fail or be placed in administration within a relatively brief period of time. Each of these companies would be liquidated in accordance with the bankruptcy laws of the local jurisdiction. Moreover, return of the Partnership’s or the Trading Company’s assets held at affiliated non-U.S. brokers would be delayed, perhaps for a significant period of time, and would be subject to additional administrative costs. If, on the other hand, a clearing broker had cleared its customers’ non-U.S. futures and options transactions through unaffiliated foreign brokers, such broker likely would not have failed and the clearing broker’s bankruptcy trustee could have directed the non-U.S. broker to liquidate all of the Partnership’s or the Trading Company’s positions and return the balance to the trustee for distribution to the Partnership or the Trading Company.

The percentage of the Partnership’s and the Trading Company’s positions which are traded on non-U.S. exchanges can vary significantly from month to month. The average percentage of the Partnership’s and the Trading Company’s positions which are expected to be traded on non-U.S. exchanges in any given month is anticipated to range from 35% to 50% of the Partnership’s and the Trading Company’s positions, but could be greater or less than such expected range during any time period.

The unregulated nature of uncleared trades in the OTC markets creates counterparty risks that do not exist in futures trading on exchanges or in cleared swaps. Unlike futures contracts and cleared swaps, uncleared trades, such as forward contracts, some swaps and some OTC “spot” contracts are entered into between private parties off an exchange or other trading platform and are not subject to clearing. As a result, the performance of those contracts is not guaranteed by an exchange or its clearinghouse and the Partnership and the Trading Company are at risk with respect to the ability of the counterparty to perform on the contract, including the creditworthiness of the counterparty. Trading of foreign exchange spot contracts or foreign exchange forwards and foreign exchange swaps (as such terms are defined in the Dodd-Frank Act), and of uncleared swaps is not regulated or is subject to limited regulation; therefore, there are limited or no specific standards or regulatory supervision of trade pricing and other trading activities that occur in those markets. The Partnership trades such contracts, directly and indirectly, with MS&Co. and JPM and is at risk with respect to the creditworthiness and trading practices of each of MS&Co. and JPM as the counterparty to the contracts. See “—Trading Swaps Creates Distinctive Risks” below.

The relative exposure of the Partnership to contracts that are not cleared by a registered clearing firm as of December 31, 2024 was approximately 27%, all of which represents OTC foreign exchange spot and forward transactions. As of January 1, 2025, the General Partner anticipates that the relative exposure of the Partnership to such contracts will be between approximately 20.7% and 35.1%.

 

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Forward foreign currency and spot contracts historically were not regulated when traded between certain “eligible contract participants” and are subject to credit risk. The Partnership and the Trading Company may trade forward contracts in foreign currencies and may engage in spot commodity transactions (transactions in physical commodities). These contracts, unlike futures contracts and options on futures, historically were not regulated by the CFTC when traded between certain “eligible contract participants,” as defined in the Commodity Exchange Act, as amended (the “Commodity Exchange Act”) The Partnership and the Trading Company currently are eligible swap participants. On July 21, 2010, the then President signed into law major financial services reform legislation in the form of the Dodd-Frank Act. The Dodd-Frank Act includes foreign currency forwards and foreign currency swaps (as such terms are defined in the Dodd-Frank Act) in the definition of “swap,” and therefore, contemplates that certain of these contracts may be exchange-traded, cleared by a clearinghouse and regulated by the CFTC. Currently, forward foreign currency contracts are regulated by the CFTC (although a limited category of forward foreign currency contracts have been excluded from regulation under the Dodd-Frank Act). Spot contracts generally are not included in the Dodd-Frank Act’s definition of “swap.” Regulation could entail increased costs, and among other things, result in additional recordkeeping and reporting requirements. Furthermore, although the Dodd-Frank Act contemplates that certain forward foreign currency contracts may be exchange-traded and cleared by a clearinghouse, these transactions are not currently exchange-traded so that, generally, no clearinghouse or exchange stands ready to meet the obligations of the contract. Thus, the Partnership and the Trading Company face the risk that its counterparties may not perform their obligations. This risk may cause some or all of the Partnership’s and the Trading Company’s gains, in fact, never to be realized.

The percentage of the Partnership’s and the Trading Company’s positions that are expected to constitute foreign currency forwards and foreign currency swaps can vary substantially from month to month.

Trading swaps creates distinctive risks. The Trading Advisors may trade in certain swaps. Unlike futures and options on futures contracts, most swap contracts currently are not traded on or cleared by an exchange or clearinghouse. The CFTC currently requires only a limited class of swap contracts (certain interest rate and credit default swaps) to be cleared by a clearinghouse and executed on an exchange or swap execution facility. Inter-affiliate swaps that meet certain criteria are exempt from the CFTC’s mandatory clearing and exchange trading requirements. In accordance with the Dodd-Frank Act, the CFTC will in the future determine which other classes of swap contracts will be required to be cleared by a clearinghouse and executed on an exchange or swap execution facility. Until such time as these transactions are cleared, the Partnership and the Trading Company will be subject to a greater risk of counterparty default on its swaps. Because swaps do not generally involve the delivery of underlying assets or principal, the amount payable upon default and early termination is usually calculated by reference to the current market value of the contract. Swap dealers and major swap participants require the Partnership and the Trading Company to deposit initial margin and variation margin as collateral to support the Partnership’s and the Trading Company’s obligation under the swap agreement but may not themselves provide collateral for the benefit of the Partnership and the Trading Company (except to the extent required, beginning September 1, 2016, under the rules finalized by the CFTC and the prudential regulators as described below). If the counterparty to such a swap defaults, the Partnership and the Trading Company would be a general unsecured creditor for any termination amounts owed by the counterparty to the Partnership and the Trading Company as well as for any collateral deposits in excess of the amounts owed by the Partnership and the Trading Company to the counterparty, which would likely result in losses to the Partnership and the Trading Company.

There are no limitations on daily price movements in swaps. Speculative position limits are not currently applicable to swaps, but in the future may be applicable for swaps on certain commodities. In addition, participants in the swap markets are not required to make continuous markets in the swaps they trade, and determining a market value for calculation of termination amounts can lead to uncertain results.

Trading of swaps has been and will continue to be subject to substantial change under the Dodd-Frank Act and related regulatory action. Under the Dodd-Frank Act, many commodity swaps may be required to be cleared through central clearing parties and executed on exchanges or other organized trading platforms. Security-based swaps will be subject to similar requirements. The CFTC and the prudential regulators that oversee swap dealers finalized rules regarding margin for uncleared swaps that imposed certain requirements beginning September 1, 2016 that may adversely impact the manner in which such swaps are traded and/or settled or increase the costs of such trades. Uncleared swaps will generally be subject to initial and variation margin requirements which may require the Partnership and the Trading Company to post collateral to swap dealers and collect collateral from swap dealers. Additional regulatory requirements will apply to all swaps, whether subject to mandatory clearing or not. These include collateral and capital requirements, reporting obligations, speculative position limits for certain swaps, and other regulatory requirements. Swaps which are not offered for clearing by a clearing house will continue to be traded bi-laterally. Such bi-lateral transactions will remain subject to many of the risks discussed in the preceding paragraphs.

Non-U.S. depositories are not subject to U.S. regulation. The Partnership’s and the Trading Company’s assets held in these depositories are subject to the risk that events could occur which would hinder or prevent the availability of these funds for distribution to customers including the Partnership. Such events may include actions by the government of the jurisdiction in which the depository is located including expropriation, taxation, moratoria and political or diplomatic events.

 

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Implementation of legislation is not complete. Rules implementing the Dodd-Frank Act and similar legislation in other countries are not yet complete. The impact of future rules on transactions of the type undertaken by the Partnership and the Trading Company is not certain.

Changes in regulation of swaps could lead to increased costs. As the Dodd-Frank Act and related rules, as well as analogous legislation and regulations in other countries, are implemented and market infrastructure adapts to the changes, the cost of engaging in trading of swaps and other products could increase, reducing the profits from those trades.

Central clearing parties could fail. Central clearing parties are highly capitalized. Cleared transactions are supported by initial and variation margin. As a result, failure of a central clearing party is highly unlikely. If a central clearing party were to fail, however, the impact on the financial system in general and on the Partnership’s and the Trading Company’s positions in particular is uncertain and could affect a large portion of the market.

Deregistration of the commodity pool operator or a commodity trading advisor could disrupt operations. The General Partner is a registered commodity pool operator and each Trading Advisor is registered with the CFTC as a commodity trading advisor. If the CFTC were to terminate, suspend, revoke or not renew the registration of the General Partner, the General Partner would withdraw as general partner of the Partnership. The limited partners would then determine whether to select a replacement general partner or to dissolve the Partnership. If the CFTC were to terminate, suspend, revoke or not renew the registration of any Trading Advisor, the General Partner would terminate the Trading Advisor’s advisory agreement(s) with the Partnership. The General Partner could reallocate the Partnership’s assets managed by the relevant Trading Advisor to new trading advisor(s) or terminate the Partnership. No action is currently pending or threatened against the General Partner or any Trading Advisor.

The Partnership and the Trading Company are subject to speculative position limits. The CFTC and U.S. futures exchanges have established speculative position limits (referred to as “position limits”) on the maximum net long or net short position, which any person or group of persons may hold or control in particular futures and options on futures. Most exchanges also limit the amount of fluctuation in commodity futures contract prices on a single trading day. Therefore, a Trading Advisor may have to modify its trading instructions or reduce the size of its position in one or more futures or option contracts in order to avoid exceeding such position limits, which could adversely affect the profitability of the Partnership. The futures exchange may amend or adjust these position limits or the interpretation of how such limits are applied, adversely affecting the profitability of the Partnership. In addition, in October 2011, the CFTC adopted rules governing position limits on futures (and options on futures) on a number of agricultural, energy and metals commodities, as well as on swaps that perform a significant price discovery function with respect to those futures and options. In September 2012, the CFTC’s rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. The CFTC proposed revised position limits rules late in 2013. The comment period for the rules closed in February 2014, and the CFTC subsequently reopened comment periods for comments about certain issues related to futures and options contracts on agricultural commodities only. The CFTC re-proposed revised position limits rules late in 2016, and the comment period for the rules closed in February 2017. In January 2020, the CFTC re-proposed new rules regarding speculative position limits. These rules were adopted on October 15, 2020 and will be effective 60 days after publication in the Federal Register (the “Effective Date”). These rules will impose position limits on certain futures and option contracts and physical commodity swaps that are “economically equivalent” to such contracts and may require the Trading Advisors to alter the trading strategies they employ on behalf of the Partnership or the Trading Company, and such impact may have an adverse effect on the Trading Company’s and the Partnership’s performance. Compliance with the rules is required: (i) as of the Effective Date for legacy core agricultural futures contracts, (ii) as of January 1, 2022 for certain obligations, including, among others, with respect to federal speculative position limits for non-legacy core referenced futures contracts not previously subject to federal position limits, and (iii) January 1, 2023 for certain obligations, including, among others, with respect to federal speculative position limits for economically equivalent swaps.

The Partnership and the Trading Company have credit risk to the commodity brokers and the FX counterparties. The Partnership and the Trading Company have credit risk because the commodity brokers act as the futures commission merchants for futures transactions or the FX counterparties (for the Trading Company) on OTC transactions, with respect to most of the Partnership’s and the Trading Company’s assets. The Partnership has indirect credit risk to JPM on OTC transactions, with respect to the Trading Company’s assets, to the extent that the Partnership indirectly trades foreign exchange forward contracts through the Trading Company. As such, in the event that either MS&Co., in its capacity as a commodity broker and an FX counterparty, or JPM, in its capacity as an FX counterparty (to the extent that the Partnership indirectly trades foreign exchange forward contracts through the Trading Company, is unable to perform, the Partnership’s and/or the Trading Company’s assets are at risk and, in such event, the Partnership and/or the Trading Company may only recover a portion of its investment or nothing at all. Exchange-traded futures and futures-styled option contracts are fair-valued on a daily basis, with variations in value credited or charged to the Partnership’s or the Trading Company’s account on a daily basis.

 

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The commodity brokers, as futures commission merchants for the Partnership’s and the Trading Company’s exchange-traded contracts, are required, pursuant to CFTC regulations, to segregate from their own assets, and for the sole benefit of their commodity customers, all funds held by them with respect to exchange-traded futures and futures-styled option contracts, including an amount equal to the net unrealized gain on all open futures and futures-styled option contracts. Similar requirements apply with respect to funds held in connection with cleared swap contracts. In the event of a shortfall in segregated customer funds held by the futures commission merchant, the Partnership’s and/or the Trading Company’s assets on account with the futures commission merchant may be at risk in the event of the futures commission merchant’s bankruptcy or insolvency, and in such event, the Partnership and/or the Trading Company may only recover a portion of the available customer funds. If no property is available for distribution, the Partnership and/or the Trading Company would not recover any of its assets. With respect to the Partnership’s OTC foreign exchange contracts with MS&Co. and the Partnership’s indirect trading of foreign exchange forward contracts and uncleared swaps with JPM, prior to the implementation of the Dodd-Frank Act’s provisions, there was no requirement to segregate funds held with respect to such contracts. The CFTC and the prudential regulators that oversee swap dealers finalized rules regarding margin for uncleared swaps that imposed certain requirements beginning September 1, 2016 that may adversely impact the manner in which such swaps are traded and/or settled or increase the costs of such trades. Uncleared swaps will generally be subject to initial and variation margin requirements which may require the Partnership or the Trading Company, to the extent that it trades uncleared swap contracts, to post collateral to swap dealers and collect collateral from swap dealers. Any initial margin that may be required to be posted by a swap dealer or the Partnership or the Trading Company must be segregated and held by an independent third party custodian and cannot be rehypothecated. Variation margin is not required to be segregated and may be rehypothecated. There may also be costs and delays involved in negotiating the custodial arrangement and related contractual terms.

Risks Relating to the Trading Advisors

You should not rely on the past performance of the Trading Advisors in deciding to purchase Units. Since the future performance of a Trading Advisor is unpredictable, each Trading Advisor’s past performance is not necessarily indicative of future results.

Reliance on the Trading Advisors to trade successfully. Each Trading Advisor is responsible for making all Futures Interests trading decisions on behalf of the Partnership and/or the Trading Company. The General Partner has no control over the specific trades that the Trading Advisors may make, leverage used, risks and/or concentrations assumed or whether the Trading Advisors will act in accordance with the disclosure documents or descriptive materials furnished by them to the General Partner. The General Partner can provide no assurance that the trading programs employed by the Trading Advisors will be successful. The Trading Advisors, in turn, are dependent upon the services of a limited number of persons to develop and refine their trading approaches and strategies and execute the trading transactions. The loss of the services of any Trading Advisor’s principals or key employees, or the failure of those principals or key employees to function effectively as a team, may have an adverse effect on the Trading Advisor’s ability to manage their trading activities successfully, or may cause a Trading Advisor to cease operations entirely. This, in turn, could negatively affect the Partnership’s performance.

Market factors may adversely influence the trading programs. Often, the most unprofitable market conditions for the Partnership and the Trading Company are those in which prices “whipsaw,” that is, such price moves quickly upward (or downward), then reverses, then moves upward (or downward) again, then reverses again. In such conditions, the Trading Advisors may establish positions based on incorrectly identifying both the brief upward or downward price movements as trends, whereas in fact no trends sufficient to generate profits develop.

You will not be aware of changes to the trading programs. Because of the proprietary nature of the Trading Advisor’s trading programs, you generally will not be advised if adjustments are made to trading programs in order to accommodate additional assets under management or for any other reason.

Single-advisor funds lack the diversity of multi-advisor funds. Prior to January 1, 2021, the Partnership has been managed by a single trading advisor. Therefore, the Partnership lacked the potential benefit of trading advisor diversification available in funds that are managed by more than one trading advisor.

Possible consequences of using multiple Trading Advisors. As of January 1, 2021, the Partnership will be managed by multiple trading advisors. Each Trading Advisor makes trading decisions independent of the other Trading Advisors for the Partnership. Thus, it is possible that the Partnership could hold opposite positions in the same or similar futures, forwards, and options, thereby offsetting any potential for profit from these positions. Each such position would cost the Partnership transactional expenses (such as brokerage commissions and NFA fees) but could not generate any recognized gain or loss. Moreover, the General Partner may reallocate the Partnership’s assets among the current Trading Advisors, terminate one or more or select additional Trading Advisors at any time. Any such reallocation could adversely affect the performance of the Partnership or any one Trading Advisor.

 

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Increasing the assets managed by a Trading Advisor may adversely affect performance. The rates of return achieved by a trading advisor often diminish as the assets under its management increase. This can occur for many reasons, including the inability of the trading advisor to execute larger position sizes at desired prices and because of the need to adjust the trading advisor’s trading program to avoid exceeding speculative position limits. These are limits established by the CFTC and the exchanges on the number of speculative futures and option contracts in a commodity that one trader may own or control. The Trading Advisors have not agreed to limit the amount of additional assets that they will manage.

The Partnership’s use of an increased rate of leverage could affect performance. The General Partner and certain Trading Advisors have agreed that such Trading Advisors will trade the Partnership’s and/or the Trading Company’s assets pursuant to a trading program, which will employ greater leverage than certain of the Trading Advisor’s other trading programs. This increased leverage could result in increased gain or loss and trading volatility, as compared to other accounts employing certain of the Trading Advisor’s other trading programs.

A Trading Advisor may terminate its advisory agreement. Generally, the advisory agreements with the Trading Advisors have initial one-year terms, each of which renew for additional one-year terms annually, unless terminated by the General Partner or the Trading Advisor. In the event that an advisory agreement is not renewed, the General Partner may not be able to enter into an arrangement with that Trading Advisor or another trading advisor on terms substantially similar to the advisory agreements.

Disadvantages of replacing or switching Trading Advisors. A Trading Advisor generally is required to recoup previous trading losses before it can earn performance-based compensation. However, the General Partner may elect to replace a Trading Advisor if such Trading Advisor has a “loss carry-forward.” In that case, the Partnership would lose the “free ride” of any potential recoupment of the prior losses. In addition, the new trading advisor(s) would earn performance-based compensation on the first dollars of investment profits. The effect of the replacement of, or the reallocation of assets away from, Trading Advisors therefore could be significant.

Partnership performance may be hindered by increased competition for positions. Assets in managed futures have grown substantially, which has resulted in increased trading competition. Since futures are traded in an auction-like market, the more competition there is for some contracts, the more difficult it may be for the Partnership or the Trading Company to obtain the best prices.

You will not have access to the Partnership’s positions and must rely on the General Partner to monitor the Trading Advisors. As a limited partner, you will not have access to the Partnership’s or the Trading Company’s trade positions. Consequently, you will not know whether the Trading Advisors are adhering to the Partnership’s trading policies and must rely on the ability of the General Partner to monitor trading and protect your investment.

Taxation Risks

You may have tax liability attributable to your interest in the Partnership even if you have received no distributions and redeemed no Units and even if the Partnership generated a loss. If the Partnership has profit for a taxable year, the profit will be includible in your taxable income, whether or not cash or other property is actually distributed to you by the Partnership. The General Partner presently does not intend to make any distributions from the Partnership. Accordingly, it is anticipated that U.S. federal income taxes on your allocable share of the Partnership’s profits will exceed the amount of distributions to you, if any, for a taxable year, so that you must be prepared to fund any tax liability from redemptions of Units or other sources. In addition, the Partnership may have capital losses from trading activities that cannot be deducted against the Partnership’s ordinary income (e.g., interest income, periodic net swap payments) so that you may have to pay taxes on ordinary income even if the Partnership generates a net loss.

The Partnership’s tax returns could be audited. The Internal Revenue Service (“IRS”) could audit the Partnership’s U.S. federal income tax returns. If an audit results in an adjustment to the Partnership’s tax return, limited partners in the Partnership could be required to file amended returns and pay additional tax. Pursuant to newly effective legislation, audits of the Partnership generally will be conducted at the Partnership level and any adjustment that results in additional tax (including interest and penalties thereon) will be assessed and collected at the Partnership level in the current taxable year, with the current partners indirectly bearing such cost, unless the Partnership is eligible to and makes an election to issue adjusted K-1s to those partners that were partners in the taxable year subject to audit. Therefore, unless the Partnership elects otherwise, the Partnership may be directly responsible in the current taxable year for the income tax liability resulting from an audit adjustment that relates to a prior taxable year in which a current limited partner did not own an interest in the Partnership or in which the limited partner’s ownership percentage has since changed. Limited Partners should consult with their tax advisers regarding the potential implications of this audit regime.

 

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You will recognize short-term capital gain. Profits on futures contracts traded in regulated U.S. and some non-U.S. exchanges, foreign currency contracts traded in the interbank market, and U.S. and some non-U.S. exchange-traded options on commodities are generally taxed as short-term capital gain to the extent of 40% of gains with respect to Section 1256 contracts and at least 50% of the gain arising from a mixed straddle account and are currently taxed at a maximum marginal ordinary U.S. federal income tax rate of 37% for non-corporate taxpayers.

Limitations on deductions for fund expenses. Special rules apply to deductions of investment advisory expenses by non-corporate taxpayers. Under tax legislation commonly known as the Tax Cuts and Jobs Act, enacted on December 22, 2017 as Public Law 115-97, no deduction for such expenses, or for other miscellaneous itemized deductions, is permitted for tax years between 2018 and 2025.

For tax years beginning after December 31, 2025, deductions for such expenses are subject to certain limitations for U.S. federal income tax purposes, and are not allowed for alternative minimum tax purposes. The IRS could take the position that certain Partnership expenses are investment advisory expenses and thus subject Partnership investors to disallowance of, or limitations on, deductions of allocated Partnership expenses.

Prospective investors should discuss these issues with their personal tax advisors.

Tax laws are subject to change at any time. Tax laws and court and IRS interpretations thereof are subject to change at any time, possibly with retroactive effect. Prospective investors are urged to discuss scheduled and potential tax law changes with their own tax advisors.

Non-U.S. investors may face exchange rate risk and local tax consequences. Non-U.S. investors should note that Units are denominated in U.S. dollars and that changes in rates of exchange between currencies may cause the value of their investment to decrease or to increase. Non-U.S. investors should consult their own tax advisors concerning the applicable U.S. and non-U.S. tax implications of this investment.

Non-U.S. investors have reporting responsibilities and the Partnership may need to withhold taxes. The Partnership is required to impose a withholding tax of 30% on income allocable to certain non-U.S. investors that is attributable to certain U.S. investments, unless such investors satisfy certain reporting requirements. A number of non-U.S. countries have negotiated intergovernmental agreements with the U.S. Department of the Treasury regarding the implementation of this reporting and withholding regime, with some agreements potentially providing for information exchange from the U.S. authorities to non-U.S. revenue authorities regarding the U.S. financial accounts of non-U.S. persons. An investor’s failure to document appropriately its compliance with the reporting rules may cause the investor to be subject to this U.S. withholding tax.

General Risk Factors

The General Partner, the Partnership and its service providers (including the Trading Advisors) and their respective operations are potentially vulnerable to cyber-security attacks or incidents. Like other business enterprises, the use of the internet and other electronic media and technology exposes the General Partner, the Partnership and its service providers, and their respective operations, to potential risks from cyber-security attacks or incidents (collectively, “cyber events”). Cyber events may include, for example, unauthorized access to systems, networks or devices, infection from computer viruses or other malicious software code, mishandling or misuse of information and attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website access or functionality. In addition to intentional cyber events, unintentional cyber events can occur. Unintentional cyber events may include, for example, the inadvertent release of confidential information, the mishandling or misuse of information and/or technological limitations or hardware failures (in the markets or otherwise) that constrain the Partnership’s and/or the Trading Company’s ability to gather, process and communicate information efficiently and securely, without interruption.

Any cyber event could adversely affect the Partnership’s business, financial condition or results of operations and cause the Partnership to incur financial loss and expense, as well as face exposure to regulatory penalties or legal claims, reputational damage and additional costs associated with corrective measures. A cyber-security breach could also jeopardize a limited partner’s personal, confidential, proprietary or other information processed and stored in, and transmitted through, the general partner’s or a service provider’s computer systems. A cyber event may cause the Partnership or its service providers to lose proprietary information, suffer data corruption, lose operational capacity (such as, for example, the loss of the ability to process transactions, calculate the Partnership’s net asset value, or allow investors to transact business) and/or fail to comply with applicable privacy and other laws. Among other potentially harmful effects, cyber events also may result in theft, unauthorized monitoring and failures in the physical infrastructure or operating systems that support the Partnership or its service providers.

The nature of malicious cyber-attacks is becoming increasingly sophisticated and neither the General Partner nor the Partnership can control the cyber systems and cyber-security systems of the advisor or other third-party service providers.

 

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Beginning in February 2022, the United States, the United Kingdom, the European Union, and a number of other nations imposed sanctions against Russia in response to Russia’s invasion of Ukraine, and these and other governments around the world may impose additional sanctions in the future as the conflict develops. In addition, the armed conflict between Israel and Hamas and subsequent sanctions have created volatility in the price of various commodities and may lead to a deterioration in the political and trade relationships that exist between the countries involved and have a negative impact on business activity globally, and therefore could affect the performance of the Partnership’s/Trading Company’s investments. Furthermore, uncertainties regarding these conflicts and the varying involvement of the United States and other countries preclude prediction as to the ultimate impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Partnership/Trading Company and the performance of its investments or operations, and the ability of the Partnership/Trading Company to achieve its investment objectives. Additionally, to the extent that investors, service providers and/or other third parties have material operations or assets in Russia, Belarus, Ukraine or Israel, they may have their operations disrupted and/or suffer adverse consequences related to the ongoing conflicts.
Item 1B.
Unresolved Staff Comments
.
Not applicable.
Item 1C.
Cyber Security
.
Risk management and strategy
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. The General Partner is a wholly-owned subsidiary of MSCM. MSCM is ultimately owned by Morgan Stanley. Morgan Stanley, its businesses, the General Partner, the Partnership, and the broader financial services industry face an increasingly complex and evolving threat environment. Morgan Stanley has made and continues to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead its Cybersecurity and Information Security organizations and program under the oversight of the Morgan Stanley Board of Directors (the “Board”) and the Operations and Technology Committee of the Board (the “BOTC”). See “Risk Factors – The General Partner, the Partnership, the Funds and their respective service providers (including the Advisors) and operations are potentially vulnerable to cyber-security attacks or incidents” for information on risks to the Partnership from cybersecurity threats.
As part of its enterprise risk management (“ERM”) framework, Morgan Stanley has implemented and maintains a program to assess, identify and manage risks arising from the cybersecurity threats (the “Cybersecurity Program”). The Cybersecurity Program has been adopted by the General Partner, and applies to its business, as relevant. The Cybersecurity Program helps protect Morgan Stanley’s clients, customers, employees, property, products, services and reputation by seeking to preserve the confidentiality, integrity and availability of information, enable the secure delivery of financial services, and protect the business and the safe operation of Morgan Stanley’s technology systems. Morgan Stanley continually adjusts the Cybersecurity Program to address the evolving cybersecurity threat landscape and comply with extensive legal and regulatory expectations.
Processes for assessing, identifying and managing material risks from cybersecurity threats
The Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to Morgan Stanley’s network, infrastructure, computing environment and the third parties that Morgan Stanley, and its affiliates rely on. Morgan Stanley periodically assesses the design of its cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework for Improving Critical Infrastructure Cybersecurity, as well as global cybersecurity regulations, and develops improvements to those controls in response to that assessment. The Cybersecurity Program also includes cybersecurity and information security policies, procedures and technologies that are designed to address regulatory requirements and to protect clients’, employees’ and Morgan Stanley’s own data against unauthorized disclosure, modification and misuse. These policies, procedures and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning.
 
18
Table of Contents
The threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs the cybersecurity risk assessments and strategy. This information is also provided to an internal forensics team, which develops and implements technologies designed to help detect these cybersecurity threats. Where a potential threat is identified, an incident response team evaluates the potential impact, and coordinates remediation where required. These groups, as well as Morgan Stanley’s Operational Risk Department (the “Operational Risk Department”), review external cybersecurity incidents that may be relevant to Morgan Stanley and its affiliates, and the outcomes of these incidents further inform the design of the Cybersecurity Program. In addition, Morgan Stanley maintains a robust global training program on cybersecurity risks and requirements and conducts regular phishing email simulations for its employees and consultants.
The cybersecurity processes are designed to help oversee, identify and mitigate risks associated with Morgan Stanley’s use of third-party vendors. Morgan Stanley maintains a third-party risk management program that includes evaluation of, and response to, cybersecurity risks at its third-party vendors. Prior to engaging third-party vendors to provide services, Morgan Stanley conducts assessments of the third-party vendors’ cybersecurity programs to identify the impact of their services on the cybersecurity risks to Morgan Stanley. Once
on-boarded,
third-party vendors’ cybersecurity programs are subject to risk-based oversight, which may include security questionnaires, submission of independent security audit reports or an audit of the third-party vendor’s security program, and, with limited exceptions, third-party vendors are required to meet Morgan Stanley’s cybersecurity standards. Where a third-party vendor cannot meet those standards, its services, and the residual risk, are subject to review, challenge and escalation through Morgan Stanley’s risk management processes and ERM committees, which may ultimately result in requesting increased security measures or ceasing engagement with such third-party vendor.
The Cybersecurity Program is regularly assessed by Morgan Stanley’s Internal Audit Department (“IAD”) through various assurance activities, with the results reported to the Audit Committee of the Board (“BAC”) and the BOTC. Annually, certain elements of the Cybersecurity Program are subject to an audit by an independent consultant, as well as an assessment by a separate, independent third party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. The Cybersecurity Program is also examined regularly by Morgan Stanley’s prudential and conduct regulators within the scope of their jurisdiction.
 
19
Table of Contents
Governance
Morgan Stanley Management’s role in assessing and managing material risks from cybersecurity threats
The Cybersecurity Program is operated and maintained by management, including Morgan Stanley’s Chief Information Officer of Cyber, Data, Risk and Resilience (“CIO”) and Morgan Stanley’s Chief Information Security Officer (“CISO”). These senior officers are responsible for assessing and managing the Firm’s cybersecurity risks. The General Partner adheres to the Cybersecurity Program’s policies and participates in periodic testing. The Cybersecurity Program strategy, which is set by the CISO and overseen by the Head of the Operational Risk Department, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. The Cybersecurity Program also includes processes for escalating and considering the materiality of incidents that impact Morgan Stanley and its affiliates, including escalation to senior management and the Board, which are periodically tested through tabletop exercises.
The members of management that lead the Cybersecurity Program and strategy have extensive experience in technology, cybersecurity and information security. The CIO has over 30 years of experience in various engineering, IT, operations and information security roles. The CISO has over 25 years of experience leading cybersecurity teams at financial institutions, including in the areas of IT strategy, risk management and information security. The Head of the Operational Risk Department has over 20 years of experience in technology, security and compliance roles, including experience in government security agencies.
Risk levels and mitigating measures are presented to and monitored by dedicated management-level cybersecurity risk committees. These committees include representatives from management as well as business and control stakeholders who review, challenge and, where appropriate, consider exceptions to its policies and procedures. Significant cybersecurity risks are escalated from these committees to Morgan Stanley’s
non-financial
risk committee. The CIO and the Head of the Operational Risk Department report on the status of the Cybersecurity Program, including significant cybersecurity risks; review metrics related to the program; and discuss the status of regulatory and remedial actions and incidents to Morgan Stanley’s
non-financial
risk committee, the BOTC and the Board, as appropriate.
Item 2.
Properties
.
The Partnership’s executive and administrative offices are located within the offices of the General Partner. The General Partner’s offices utilized by the Partnership are located at 1585 Broadway, New York, NY 10036.
 
20

Item 3. Legal Proceedings.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which Morgan Stanley & Co. LLC 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”).

The Company 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 the Company. As a consolidated subsidiary of Morgan Stanley, the Company 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 2024, 2023, 2022, 2021, and 2020. In addition, the Company annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com. We refer you to the Commitments, Guarantees and Contingencies – Legal section of the Company’s 2023 Audited Financial Statement.

In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.

Each of Morgan Stanley and the Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental or other regulatory agencies regarding the Company’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 the Company, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.

The Company 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, the Company is registered as a futures commission merchant and is a member of the National Futures Association.

 

21

During the preceding five years, the following administrative, civil, or criminal actions pending, on appeal or concluded against the Company or any of its principals are material within the meaning of CFTC Rule 4.24(l)(2) or 4.34(k)(2):

Regulatory and Governmental Matters

On January 12, 2024, the U.S. Attorney’s Office for the Southern District of New York (“USAO”) and the SEC announced they had reached settlement agreements with the Company in connection with their investigations into the Company’s blocks business. Specifically, the Company entered into a three-year non-prosecution agreement (“NPA”) with the USAO that included the payment of forfeiture, restitution, and a criminal fine for making false statements in connection with the sale of certain block trades from 2018 through August 2021. The NPA required the Company to admit responsibility for certain acts of its employees and to continue to cooperate with and provide certain information to the USAO for the term of the agreement. Additionally, the SEC charged the Company with violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder for the disclosure of confidential information about block trades and also violations of Section 15(g) of the Exchange Act for the failure to enforce its policies concerning the misuse of material non-public information related to block trades. As part of the SEC agreement, the Company paid disgorgement and a civil penalty. After the agreed-upon credits were applied, the Company paid a total amount of approximately $249 million under both settlements.

On September 30, 2020, the SEC entered into a settlement order with the Company settling an administrative action which relates to the Company’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 Company’s equity swaps business. The order found that the Company 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 the Company willfully violated Section 200(g) of Regulation SHO. The Company 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.

Civil Litigation

On May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company 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 the 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 the Company to the plaintiff was approximately $133 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, inter alia, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to the plaintiff by the Company was approximately $116 million. On August 11, 2016, the Appellate Division affirmed the trial court’s order denying in part the Company’s motion to dismiss the complaint. On July 15, 2022, the Company filed a motion for summary judgment on all remaining claims. On March 1, 2023, the court granted in part and denied in part the Company’s motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. On March 26, 2024, the Appellate Division affirmed the trial court’s summary judgment order. On August 27, 2024, the plaintiff notified the court that in light of the court’s rulings to exclude certain evidence at trial, the plaintiff could not prove its claims at trial, and requested that the court dismiss the case, subject to its right to appeal the evidentiary rulings. On August 28, 2024, the court dismissed the case, and judgment was entered in the Company’s favor. The plaintiff has filed notices of appeal.

 

22

Beginning in February of 2016, the Company was named as a defendant in multiple purported antitrust class actions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”) styled In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants, violated U.S. and New York state antitrust laws from 2008 through December of 2016 in connection with alleged efforts to prevent the development of electronic exchange-based platforms for interest rate swaps trading. Complaints were filed both on behalf of a purported class of investors who purchased interest rate swaps from defendants, as well as on behalf of three operators of swap execution facilities that allegedly were thwarted by the defendants in their efforts to develop such platforms. The consolidated complaints seek, inter alia, certification of the investor class of plaintiffs and treble damages. On July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the complaints. On December 15, 2023, the court denied the class plaintiffs’ motion for class certification. On December 29, 2023, the class plaintiffs petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision. On February 28, 2024, the parties reached an agreement in principle to settle the class claims. On July 11, 2024, the court granted preliminary approval of the settlement.

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 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 million Viacom Class B Common Stock offering and a $1,000 million offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the “Offerings”). The complaint seeks certification of the class of plaintiffs and unspecified compensatory damages and alleges, inter alia, that the Viacom offering documents for both issuances contained material misrepresentations and omissions because they did not disclose that certain of the underwriters, including the Company, had prime brokerage relationships and/or 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 also 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 motions to dismiss as to the Company and the other underwriters, but granting the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15, 2023, the underwriters, including the Company, filed their notices of appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff appealed the dismissal of Viacom and the individual Viacom defendants. On April 4, 2024, the Appellate Division upheld the lower court’s decision as to the Company and other underwriter defendants that had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos, dismissed the remaining underwriters, and upheld the dismissal of Viacom and its officers and directors. On July 25, 2024, the Appellate Division denied the plaintiff’s and the Company’s respective motions for leave to reargue or appeal the April 4, 2024 decision. On January 4, 2024, the court granted the plaintiff’s motion for class certification, which the defendants have appealed.

The Company is a defendant in three antitrust class action complaints which have been consolidated into one proceeding in the United States District Court for the SDNY under the caption City of Philadelphia, et al. v. Bank of America Corporation, et al. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants, violated U.S. antitrust laws and relevant state laws in connection with alleged efforts to artificially inflate interest rates for Variable Rate Demand Obligations (“VRDO”). The consolidated complaint seeks, inter alia, certification of the class of plaintiffs and treble damages. The complaint was filed on behalf of a class of municipal issuers of VRDO for which defendants served as remarketing agent. On November 2, 2020, the court granted in part and denied in part the defendants’ motion to dismiss the consolidated complaint, dismissing state law claims, but denying dismissal of the U.S. antitrust claims. On September 21, 2023, the court granted plaintiffs’ motion for class certification. On February 5, 2024, the United States Court of Appeals for the Second Circuit granted leave to appeal that decision.

On February 21, 2025, the U.K. Competition and Markets Authority announced a settlement with an affiliate of the Company, as well as other financial institutions, in connection with its investigation of suspected anti-competitive arrangements in the financial services sector, specifically regarding the affiliate’s activities concerning certain liquid fixed income products between 2009 and 2012. Separately, on June 16, 2023, the affiliate and the Company, together with a number of other financial institutions, were named as defendants in a purported antitrust class action in the United States District Court for the SDNY styled Oklahoma Firefighters Pension and Retirement System v. Deutsche Bank Aktiengesellschaft, et al., alleging, inter alia, that they violated U.S. antitrust laws in connection with their alleged effort to fix prices of gilts traded in the United States between 2009 and 2013. The complaint seeks, inter alia, certification of the class of plaintiffs and treble damages. On September 16, 2024, the court granted defendants’ joint motion to dismiss, and the complaint was dismissed without prejudice. The Firm and other defendants have reached an agreement in principle to settle the U.S. litigation.

 

23

Settled 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 $6,900 million. The complaint sought, 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 $3,900 million. On August 22, 2023, the Company reached an agreement in principle to settle the litigation. The final agreement became effective on January 30, 2024.

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, 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 the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company 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.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company 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 alleged 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 the Company at issue in the action was approximately $203 million. The complaint sought, inter alia, to rescind the plaintiff’s purchase of such certificates. On November 4, 2021, the Company entered into an agreement to settle the litigation.

In August of 2017, the Company was named as a defendant in a purported antitrust class action in the United States District Court for the SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs alleged, inter alia, that the Company, 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 complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The complaint sought, inter alia, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the 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 certification and the parties’ objections to the report and recommendation are pending before the District Court. On May 20, 2023, the Company reached an agreement in principle to settle the litigation. On September 11, 2024, the court granted final approval of the settlement.

 

24

Beginning on March 25, 2019, the Company 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, inter alia, 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 the Company’s motion to dismiss. On December 15, 2019, the Company 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, the Company, 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 the Company. The Company may establish reserves from time to time in connections with such actions.

 

25

Item 4. Mine Safety Disclosures. Not applicable.

 

26

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

  (a)

Market Information. The Partnership has issued no stock. There is no public market for the Units.

 

  (b)

Holders. The number of holders of Units as of February 28, 2025 was 2,928 for Class A Units and 3 for Class Z Units.

 

  (c)

Distributions. No distributions have been made by the Partnership since it commenced trading operations on March 1, 1999. Ceres has sole discretion to decide what distributions, if any, shall be made to investors in the Partnership. Ceres does not intend to declare distributions in the foreseeable future.

 

  (d)

Securities Authorized for Issuance under Equity Compensation Plans. None.

 

  (e)

Performance Graph. Not applicable.

 

  (f)

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities. The Registrant’s Units of limited partnership interest are being offered in a private placement pursuant to Regulation D under the Securities Act, and are being sold only to persons and entities who are accredited investors as the term is defined in Rule 501(a) of Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Units were purchased by accredited investors.

The aggregate proceeds of unregistered securities sold to the limited partners through December 31, 2024 was $238,091,559. The Partnership received $627,786 in consideration from the sale of Units to the General Partner.

Proceeds of net offering were used for the trading of Futures Interests.

 

  (g)

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

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

 

Period  

Class A (a) Total
Number of

Units Purchased* 

    

Class A (b)

Average

 Price Paid per 

Unit**

    

 (c) Total Number of Units 

Purchased as Part of 

Publicly

Announced

Plans or Programs

  

(d) Maximum Number

(or Approximate Dollar

Value) of Units that May

 Yet Be Purchased Under 

the Plans or Programs

October 1, 2024 - October 31, 2024

     24,333.621       $ 28.60     N/A   N/A

November 1, 2024 - November 30, 2024

     46,949.072       $ 28.80     N/A   N/A

December 1, 2024 - December 31, 2024

     29,959.366       $ 29.69     N/A   N/A
      101,242.059       $ 29.02          

 

  *

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

 

  **

Redemptions of Units are effected as of the last day of each month at the net asset value per Unit as of that day.

Item 6. [Reserved].

 

27

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity. The Partnership/Trading Company deposits its assets with MS&Co. as its clearing commodity broker in separate Futures Interests trading accounts established for the Trading Advisors. Such assets are used as margin to engage in trading and may be used as margin solely for the Partnership’s/Trading Company’s trading. The assets are held either in non-interest bearing bank accounts or in securities and instruments permitted by the CFTC for investment of customer segregated or secured funds. Since the Partnership’s/Trading Company’s sole purpose is to trade in futures, forwards and options, it is expected that the Partnership/Trading Company will continue to own such liquid assets for margin purposes.

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

There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership/Trading Company from trading in potentially profitable markets or prevent the Partnership/Trading Company from promptly liquidating unfavorable positions in such markets, subjecting it to substantial losses. Either of these market conditions could result in restrictions on redemptions. For the periods covered by this report, illiquidity has not materially affected the Partnership’s/Trading Company’s assets. There are no known material trends, demands, commitments, events, or uncertainties at the present time that are reasonably likely to result in the Partnership’s/Trading Company’s liquidity increasing or decreasing in any material way.

Capital Resources. The Partnership does not have, nor does it expect to have, any capital assets. The Partnership’s only assets are its (i) investment in the Trading Company, (ii) redemptions receivable from the Trading Company, (iii) equity in trading account, consisting of restricted and unrestricted 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, as applicable, and (iv) interest receivable. Redemptions, exchanges and sales of Units in the future will affect the amount of funds available for investments in Futures Interests and U.S. Treasury bills in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows of Units.

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.

Results of Operations

General. The Partnership’s results depend on the Trading Advisors and the ability of the Trading Advisors’ trading programs to take advantage of price movements in the futures, forwards and options markets.

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

As of December 31, 2024 and September 30, 2024, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:

 

Advisor

     December 31, 2024       December 31, 2024
(percentage of
 Partners’ Capital) 		       September 30, 2024        September 30, 2024 
(percentage of
Partners’ Capital)		  

Campbell

     $ 42,139,268         29%       $ 41,696,229         28%  

EMC

      10,986,631         7%        11,965,257         8%  

Graham

      31,466,058         22%        31,864,649         21%  

WCM

      52,610,195         36%        53,092,471         36%  

Unallocated

      8,438,386         6%        10,177,252         7%  

 

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Graham Capital Management L.P.

The K4D quantitative investment program has its origin in Graham’s legacy trend-following trading systems, dating as far back as 1995. Graham’s trend systems are designed to participate selectively in potential profit opportunities that can occur during periods of price trends in a diverse number of U.S. and international markets. The trend systems establish positions in markets where the price action of a particular market signals the computerized systems used by Graham that a potential trend in prices is occurring. The trend systems also employ proprietary risk management and trade filter strategies that seek to benefit from sustained price trends while reducing risk and volatility exposure. Each K4D program trades the same quantitative models in the same proportion, and differs only with respect to the annual volatility range targeted (with the K4D-10V Program targeting an annual volatility range of 8% to 12%; the K4D-15V Program targeting an annual volatility range of 12% to 18%; and the K4D-20V Program targeting an annual volatility range of 16% to 24%).

Winton Capital Management Limited

The portion of the Partnership’s assets that was allocated to Winton for trading are not invested in commodity interests directly. Winton’s allocation of the Partnership’s assets was invested in Winton Master. Winton trades the Diversified Macro Strategies (formerly, the Winton Futures Program), a proprietary, systematic trading program, on behalf of Winton Master.

The investment objective of the Diversified Macro Strategies is to achieve long-term investment growth.

The Diversified Macro Strategies (formerly, the Winton Futures Program) follows a disciplined investment process that is based on statistical analysis of historical data. The initial stage of the process involves collecting, cleaning and organizing large amounts of data. The Diversified Macro Strategies uses a wide variety of data inputs including factors that are intrinsic to markets, such as price, volume and open interest; and those that are external to markets, such as economic statistics, industrial and commodity data and public company financial data. Winton conducts statistical research into the data in an attempt to quantify the probability of particular markets rising or falling, conditional on a variety of quantifiable factors. Winton’s research is used to develop mathematical models that attempt to forecast market returns, the variability or volatility associated with such returns (often described as “risk”), and the correlation between markets and transaction costs. These forecasts are used in investment strategies that determine what positions should be held to maximize profit within a certain range of risk. As a result of Winton’s research, Winton expects that the investments made in accordance with this process will have an improved chance of being successful, which is expected to lead to profits over the long-term.

Winton’s investment programs are operated as automated, computer-based investment systems. The programs are modified over time as Winton monitors its operation and undertakes further research. Changes to the programs occur as a result of, amongst other things, the discovery of new relationships, changes in market liquidity, the availability of new data or the reinterpretation of existing data.

Most of Winton’s investment decisions are made strictly in accordance with the output of the programs. However, Winton may, in exceptional circumstances (such as the occurrence of events that fall outside the input parameters of the programs), make investment decisions based on other factors and take action to override the output of the programs to seek to protect the interests of investors.

EMC Capital Advisors, LLC

EMC will trade its Classic Program for the Partnership. EMC’s investment strategies are technical rather than fundamental in nature. In other words, they are developed from analysis of patterns of actual monthly, weekly and daily price movements and are not based on analysis of fundamental supply and demand factors, general economic factors, or anticipated world events. EMC relies on historical analysis of these price patterns to interpret current market behavior and to evaluate technical indicators for trade initiations and liquidations. EMC’s investment strategies used in its program are trend-following. This means that initiation and liquidation of positions in a particular market are generally in the direction of the price trend in that market, although at times counter-trend elements also may be employed. EMC employs an investment strategy which utilizes a blend of systems (or, stated another way, a number of systems simultaneously). The strategies are diversified in that its program follows a number of Futures Interests and often invests in more than ten different interests at one time.

Campbell & Company, LP

Campbell will trade the Partnerships assets in accordance with its Campbell Managed Futures Portfolio, a proprietary, systematic trading system. Campbell’s trading models are designed to detect and exploit medium-term to long-term price changes, while also applying risk management and portfolio management principles.

 

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Campbell believes that utilizing multiple trading models provides an important level of diversification and is most beneficial when multiple contracts of each market are traded. Every trading model may not trade every market. It is possible that one trading model may signal a long position while another trading model signals a short position in the same market. It is Campbell’s intention to offset those signals to reduce unnecessary trading, but if the signals are not simultaneous, both trades will be taken and since it is unlikely that both positions would prove profitable, in retrospect, one or both trades will appear to have been unnecessary. It is Campbell’s policy to follow trades signaled by each trading model independent of the other models.

For the period from January 1, 2024 through December 31, 2024, the average allocation by commodity market sector for CMF Winton was as follows:

 

CMF Winton  

Currencies

      20.5 % 

Energy

      9.3 % 

Grains

      6.8 % 

Indices

      20.0 % 

Interest Rates U.S.

      6.0 % 

Interest Rates Non-U.S.

      8.8 % 

Livestock

      3.1 % 

Metals

      17.6 % 

Softs

      7.9 % 

The following presents a summary of the Partnership’s operations for the years ended December 31, 2024, 2023 and 2022, and a general discussion of its trading activities during each period. It is important to note, however, that the Trading Advisors trade in various markets at different times and that prior activity in a particular market does not mean that such market will be actively traded by the Trading Advisors or will be profitable in the future. Consequently, the results of operations of the Partnership are difficult to discuss other than in the context of the Trading Advisors’ trading activities on behalf of the Partnership during the period in question. Past performance is no guarantee of future results.

The Partnership’s results of operations set forth in the financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the use of certain accounting policies that affect the amounts reported in these financial statements, including the following: the contracts the Partnership trade are accounted for on a trade-date basis and marked to market on a daily basis. The difference between their original contract value and market value is recorded in the Statements of Income and Expenses as “Net change in unrealized gains (losses) on open contracts” and recorded as “Net realized gains (losses) on closed contracts” when open positions are closed out. The sum of these amounts constitutes the Partnership’s trading results. The market value of a futures contract is the settlement price on the exchange on which that futures contract is traded on a particular day. The value of a foreign currency forward contract is based on the spot rate as of approximately 3:00 P.M. (E.T.), the close of the business day. Interest income, as well as management fees, administrative and General Partner’s fees and ongoing placement agent fees of the Partnership are recorded on an accrual basis.

The General Partner believes that, based on the nature of the operations of the Partnership, no assumptions relating to the application of critical accounting policies other than those presently used could reasonably affect reported amounts.

No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem its Units at the net asset value per Unit as of the end of any month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions are generally funded out of the Partnership’s cash holdings. For the year ended December 31, 2024, 334,352.620 limited partner Units of Class A were redeemed totaling $10,157,755 and 13,089.093 General Partner Units of Class Z were redeemed totaling $174,854. For the year ended December 31, 2023, 365,803.167 limited partner Units of Class A were redeemed totaling $10,596,272 and 6,183.017 General Partner Units of Class Z were redeemed totaling $75,000. For the year ended December 31, 2022, 536,923.121 limited partner Units of Class A were redeemed totaling $14,660,370 and 24,916.944 General Partner Units of Class Z were redeemed totaling $300,000.

The Partnership continues to offer Units for each Class at their net asset value per Unit as of the end of each month. For the year ended December 31, 2024, there were no additional subscriptions of limited partner Units of Class A, General Partner Units of Class Z and limited partner Units of Class Z. For the year ended December 31, 2023, there were no additional subscriptions of limited partner Units of Class A, General Partner Units of Class Z and limited partner Units of Class Z. For the year ended December 31, 2022, there were no additional subscriptions of limited partner Units of Class A, General Partner Units of Class Z and limited partner Units of Class Z.

 

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For the year ended December 31, 2024, the net asset value per Unit for Class A increased 5.8% from $28.07 to $29.69. For the year ended December 31, 2024, the net asset value per Unit for Class Z increased 6.6% from $12.13 to $12.93. For the year ended December 31, 2023, the net asset value per Unit for Class A decreased 0.0% (due to rounding) from $28.08 to $28.07. For the year ended December 31, 2023, the net asset value per Unit for Class Z increased 0.7% from $12.04 to $12.13. For the year ended December 31, 2022, the net asset value per Unit for Class A increased 26.4% from $22.22 to $28.08. For the year ended December 31, 2022, the net asset value per Unit for Class Z increased 27.3% from $9.46 to $12.04.

The Partnership experienced a net trading gain of $8,394,930 before fees and expenses for the year ended December 31, 2024. Gains were primarily attributable to the Partnership’s trading of Futures Interests in the currencies, grains, indices and softs sectors and were partially offset by losses in the energy, U.S. and non-U.S. interest rates, livestock and metals sectors. The net trading gain (or loss) realized from the Partnership is disclosed under “Item 8. Financial Statements and Supplementary Data.”

During the first quarter of 2024, the Partnership’s largest gains were achieved within the global stock index sector during January, February and March from long positions in Asian, European, and U.S. equity index futures as prices rallied amid investor expectations for global central banks to be aggressive in cutting interest rates. In the agricultural markets, gains were recorded during each month of the first quarter from long positions in cocoa futures as cocoa prices surged amid concern extremely hot weather conditions in West African growing regions would damage crops. In currencies, the largest gains were achieved throughout the first quarter from short positions in the Japanese yen versus the U.S. dollar as the relative value of the yen weakened versus the dollar amid an outlook Japan’s central bank would maintain easy interest rate policies relative to those of the Federal Reserve. Gains in the energies were achieved during March from long positions in crude oil and its refined products as geopolitical tensions and high shipping costs pushed prices higher. In the global fixed income sector, gains were recorded during February from short positions in U.S. fixed income futures. A portion of the Partnership’s overall gains for the first quarter was offset by losses from short positions in gold futures as prices advanced late in the quarter amid investor demand for safe-haven assets. Additional losses within the metals sector were incurred during January and February from long positions in iron ore futures.

During the second quarter of 2024, the Partnership’s largest trading losses were incurred within the energies during May from short positions in European and U.S. natural gas futures as prices rallied on tight supplies. Within global stock indices, losses were recorded during April from long positions in Asian, U.S., and European equity index futures as a “risk-off” sentiment weighed on stock prices. Additional losses for the second quarter were incurred within currencies during May from short positions in the euro, Norwegian krone, and Swiss franc versus the U.S. dollar as the relative value of the dollar dropped as the European Central Bank voiced a high commitment to cutting interest rates. A portion of the Partnership’s overall losses for the second quarter was offset by gains achieved within global fixed income sector during April from short positions in U.S. and European fixed income futures as yields advanced. Further gains were recorded in the metals markets during April from long positions in copper futures as prices surged higher on strong demand and during May from long positions in silver futures. Gains in the agricultural markets were achieved during June from short positions in corn, wheat, and soybean futures as beneficial growing weather in the U.S. Midwest pushed grain prices lower.

During the third quarter of 2024, the Partnership’s most notable losses were incurred during August within the global stock index sector from long positions in Asian, U.S., and European equity index futures as stock prices retreated as technology stocks fell under broad selling pressure. In the currencies, losses were recorded during July and August from short positions in the Japanese yen versus the U.S. dollar as the value of the yen surged higher as the Bank of Japan (“BOJ”) raised interest rates. Further losses were incurred during July and August from short positions in U.S. fixed income futures as yields fell amid rising expectations for multiple interest rate cuts by the Fed. In the energies, losses were recorded throughout the third quarter from long positions in crude oil futures as prices declined amid high global inventories. Additional losses were experienced in the metals sector during July and August from long futures positions in industrial metals as prices slid on an outlook for slowing demand from China. A portion of the Partnership’s losses for the third quarter was offset by gains achieved within the agricultural sector during July from short positions in soybeans, wheat, and corn futures as grain prices trended lower as industry reports predicted larger-than-expected crop harvests in the U.S. and South America.

During the fourth quarter of 2024, the Partnership’s most notable gains were achieved within the currencies during December from short positions in the euro, Canadian dollar, Japanese yen, and New Zealand dollar versus the U.S. dollar as the relative value of the U.S. dollar strengthened. In the agriculturals, gains were recorded during November and December from long positions in cocoa futures as prices surged higher amid global supply concerns. Additional gains in the agricultural sector were achieved during October and November from short positions in soybean and wheat futures. A majority of the fourth quarter’s gains was offset by losses incurred in the global fixed income markets from long positions in U.S., European, and Canadian fixed income futures during October as persistent inflation cast doubt regarding future central bank interest rate cuts. In the energies, losses were recorded during November and December from short positions in natural gas futures as prices advanced amid expectations for high winter consumption demand. Additional losses were incurred from long positions in global equity index futures throughout the fourth quarter, while losses in the metals were recorded during November from long positions in gold and silver futures.

 

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The Partnership experienced a net trading loss of $803,880 before fees and expenses for the year ended December 31, 2023. Losses were primarily attributable to the Partnership’s trading of Futures Interests in the currencies, grains, non-U.S. interest rates and metals sectors and were partially offset by gains in the energy, indices, U.S. interest rates, livestock and softs sectors.

During the first quarter of 2023, the Partnership’s largest losses were experienced within the global fixed income markets 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. Losses were also recorded during March from short positions in U.S. and European fixed income futures as bond buying surged. Additional losses were recorded in the metals markets primarily from positions in gold and silver futures during February and March as precious metals prices experienced short-term price volatility. In the energy markets, small losses were incurred from futures positions in Brent crude oil and heating oil amid the lack of a consistent consensus regarding oil supply/demand for the upcoming months. A portion of the Partnership’s overall losses for the first quarter was offset by gains recorded in the agricultural markets during January and March from long positions in sugar futures as sugar prices rallied amid concerns of tight global supplies. Further profits were achieved in the currency markets from long positions in the Mexican peso as the value of the peso trended considerably higher. In the global stock index sector, long positions in European equity index futures profited during January and February as investor appetite for risk assets in the region boosted stock prices.

During the second quarter of 2023, the Partnership’s largest gains were recorded within the global fixed income markets primarily during June from short positions in European and U.S. government debt futures as prices dropped on expectations the regions’ central banks needed to maintain their hawkish interest rate policies. In global stock indices, long futures positions in Asian equity indices profited as prices rose throughout the quarter on supportive economic data. 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 a majority of the second quarter on expectations the Bank of Japan would support its dovish monetary policy. In the agricultural sector, gains were recorded during April from long positions in sugar futures as prices climbed higher amid adverse weather in key growing regions. In the metals, gains were recorded from short positions in copper futures as industrial metals prices trended lower during May. A portion of the Partnership’s overall gains for the second quarter was offset by losses incurred in the energy markets from short-term volatile price movement in Brent crude oil and the distillate products during much of the quarter. Further losses were experienced from short positions in Henry Hub natural gas futures during June as prices climbed higher.

During the third quarter of 2023, the Partnership’s most notable gains were recorded in the energy markets from long futures positions in crude oil and its refined products as prices trended higher throughout the quarter amid supply related concerns. In global fixed income, short positions in European, U.S., and Canadian government debt futures profited during September as prices dropped and yields rose amid expectations the world’s major central banks will keep rates higher. In the agricultural markets, gains were achieved from short positions in wheat futures as prices dropped during August and September on weakening demand for U.S. supplies. A portion of the Partnership’s gains for the third quarter was offset by losses incurred in global stock indices from long positions in European equity index futures as prices declined on investor expectations for higher interest rates. Smaller losses were recorded from short positions in aluminum and copper futures as prices reversed higher amid a weakening in the value of the U.S. dollar during July. Net trading results in the currency sector were relatively flat for the quarter as gains from short positions in the Japanese yen and Australian dollar offset losses incurred from long positions in the British pound.

During the fourth quarter of 2023, the Partnership’s most notable losses were incurred during November and December from short positions in U.S. and European fixed income futures as bond prices moved higher amid an outlook that global central banks would soon curtail their interest rate hike policies. Further losses were experienced from short positions in the Japanese yen, Canadian dollar and euro versus the U.S. dollar as the relative value of the dollar declined against its major counterparts. Losses in the energies were primarily incurred during October from long positions in crude oil and its refined products amid concerns regarding potential demand reduction. Short positions in gold futures also experienced losses during October as prices rallied due to safe-having buying. During December, losses were recorded from long positions in sugar futures as prices reversed lower. A portion of the Partnership’s losses for the fourth quarter was offset by gains achieved within the global stock index sector during December from long positions in European and Asian equity indices as cooling inflation data increased demand for risk assets and boosted the regions’ stock prices.

The results of operations for the twelve months ended 2022 are discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

 

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The Partnership receives monthly interest on 100% of its average daily equity maintained in cash in the Partnership’s account during each month at a rate equal to 100% of the monthly average of the 4-week U.S. Treasury bill discount rate. For the avoidance of doubt, the Partnership will not receive interest on amounts in the futures brokerage account that are committed to margin. Any interest earned on the Partnership’s cash account in excess of the amounts described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market fund securities will be retained by the Partnership, as applicable. Interest income for the three and twelve months ended December 31, 2024 decreased by $422,282 and increased by $113,600, respectively, as compared to the corresponding periods in 2023. The decrease in interest income was primarily due to lower interest rates and lower average daily equity during the three months ended December 31, 2024 as compared to the corresponding period in 2023. The increase in interest income was primarily due to higher interest rates and higher average daily equity during the twelve months ended December 31, 2024 as compared to the corresponding period in 2023. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on (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. has control.

Certain clearing fees are based on the number of trades executed by the Trading Advisors for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three and twelve months ended December 31, 2024 increased by $11,459 and $186,998, respectively, as compared to the corresponding periods in 2023. The increase in these clearing fees was primarily due to an increase in the number of trades made by the Partnership during the three and twelve months ended December 31, 2024 as compared to the corresponding periods in 2023.

Ongoing placement agent fees are calculated as a percentage of the Partnership’s Class A adjusted net assets on the first 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 placement agent fees for the three and twelve months ended December 31, 2024 decreased by $28,568 and $28,183, respectively, as compared to the corresponding periods in 2023. The decrease was primarily due to a decrease in average net assets of Class A during the three and twelve months ended December 31, 2024 as compared to the corresponding periods in 2023. As of January 1, 2021, the Partnership pays Morgan Stanley Wealth Management, or any other placement agent or sub-placement agent, an annualized rate equal to 0.75% with respect to Class A Units.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership. The General Partner’s fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the beginning of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. General Partner’s fees for the three and twelve months ended December 31, 2024 decreased by $28,990 and $28,504, respectively, as compared to the corresponding periods in 2023. The decrease was primarily due to a decrease in average net assets during the three and twelve months ended December 31, 2024 as compared to the corresponding periods in 2023. Effective January 1, 2021, the Partnership pays the General Partner a monthly administrative fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the Partnership’s net assets (plus “notional” funds, if any) as of the beginning of each month. Effective January 1, 2021, the Partnership directly pays the brokerage fees and other transaction-related fees and expenses, as incurred and also pays its ongoing administrative, operating, offering and organizational expenses (including, but not limited to, periodic legal, accounting, administrative, filing, reporting and data processing fees) and its pro rata share of such expenses of any trading company to which the Partnership has allocated assets.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the beginning of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three and twelve months ended December 31, 2024 decreased by $51,988 and $35,065, respectively, as compared to the corresponding periods in 2023. The decrease was primarily due to a decrease in average net assets during the three and twelve months ended December 31, 2024 as compared to the corresponding periods in 2023.

Incentive fees are based on the new trading profits generated by the Trading Advisors at the end of the year as defined in the management agreements among the Partnership, the General Partner and the relevant Trading Advisor. Trading performance for the three and twelve months ended December 31, 2024 resulted in incentive fees of $0 and $1,081,370, respectively. Trading performance for the three and twelve months ended December 31, 2023 resulted in incentive fees of $0 and $207,613, respectively. To the extent that a Trading Advisor incurs a loss for the Partnership, the Trading Advisor will not be paid incentive fees until such Trading Advisor recovers any net loss incurred and earns additional new trading profits for the Partnership.

 

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The Partnership pays professional fees, which generally include professional fees made up of legal and accounting expenses, as well as certain offering costs and filing, administrative, reporting and data processing fees. Professional fees for the years ended December 31, 2024 and 2023 were $545,367 and $466,489, respectively.

For an analysis of unrealized gains and losses by contract type and a further description of 2024 trading results, refer to the Partnership’s Annual Report to limited partners for the year ended December 31, 2024, which is included in “Item 8. Financial Statements and Supplementary Data.” of this Form 10-K.

The Partnership’s gains and losses are allocated among its partners for income tax purposes.

Market Risk.

The Partnership is a party to financial instruments with elements of off-balance sheet market and credit risk. The Partnership trades futures contracts, options on futures contracts and forward contracts on physical commodities and other commodity interests, including, but not limited to, foreign currencies, financial instruments, metals, energy, and agricultural products. In entering into these contracts, the Partnership is subject to the market risk that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the positions held by the Partnership at the same time, and the Trading Advisors were unable to offset positions of the Partnership, the Partnership could lose all of its assets and the limited partners would realize a loss equal to 100% of their capital accounts.

In addition to the Trading Advisors’ internal controls, each Trading Advisor must comply with the Partnership’s trading policies that include standards for liquidity and leverage that must be maintained. Each Trading Advisor and Ceres monitor the Partnership’s trading activities to ensure compliance with the trading policies and Ceres can require the Trading Advisors to modify positions of the Partnership if Ceres believes they violate the Partnership’s trading policies.

Credit Risk.

In addition to market risk, in entering into futures, forward and option contracts, there is a credit risk to the Partnership that the counterparty on a contract will not be able to meet its obligations to the Partnership. The ultimate counterparty or guarantor of the Partnership for futures, forward and option contracts traded in the United States, and most foreign exchanges on which the Partnership trades, is the clearinghouse associated with such exchange. In general, a clearinghouse is backed by the membership of the exchange and will act in the event of non-performance by one of its members or one of its member’s customers, which should significantly reduce this credit risk. There is no assurance that a clearinghouse, exchange, or other exchange member will meet its obligations to the Partnership, and Ceres and the commodity broker will not indemnify the Partnership against a default by such parties. Further, the law is unclear as to whether a commodity broker has any obligation to protect its customers from loss in the event of an exchange or clearinghouse defaulting on trades effected for the broker’s customers. In cases where the Partnership trades off-exchange forward contracts with a counterparty, the sole recourse of the Partnership will be the forward contract’s counterparty.

Ceres deals with these credit risks of the Partnership in several ways. First, Ceres monitors the Partnership’s credit exposure to each exchange on a daily basis. The commodity broker informs the Partnership, as with all of their customers, of the Partnership’s net margin requirements for all of its existing open positions, and Ceres has installed a system which permits it to monitor the Partnership’s potential net credit exposure, exchange by exchange, by adding the unrealized trading gains on each exchange, if any, to the Partnership’s margin liability thereon.

Second, the Partnership’s trading policies limit the amount of its net assets that can be committed at any given time to futures contracts and require a minimum amount of diversification in the Partnership’s trading, usually over several different products and exchanges. Historically, the Partnership’s exposure to any one exchange has typically amounted to only a small percentage of its total net assets and, on those relatively few occasions where the Partnership’s credit exposure climbs above such level, Ceres deals with the situation on a case by case basis, carefully weighing whether the increased level of credit exposure remains appropriate. Material changes to the trading policies may be made only with the prior written approval of the limited partners owning more than 50% of Units then outstanding.

Third, with respect to non-exchange-traded forward contract trading, the Partnership trades with only those counterparties which Ceres, together with MS&Co., has determined to be creditworthy. The Partnership presently deals with MS&Co. as the sole counterparty on all trading of foreign currency forward contracts.

 

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For additional information, see Note 4, “Financial Instruments” under “Notes to Financial Statements” in the Partnership’s Annual Report to limited partners for the year ended December 31, 2024, which is included in “Item 8. Financial Statements and Supplementary Data.” of this Form 10-K.

Inflation has not been a major factor in the Partnership’s operations.

Critical Accounting Policies.

The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. As a result, actual results could differ from these estimates. A summary of the Partnership’s significant accounting policies is described in Note 2, “Basis of Presentation and Summary of Significant Account Policies” under “Notes to Financial Statements” in the Partnership’s Annual Report to limited partners for the year ended December 31, 2024, which is included in “Item 8. Financial Statements and Supplementary Data.” of this Form 10-K.

The Partnership’s most significant accounting policy is the valuation of its investments in Futures Interests and U.S. Treasury bills, as applicable. The fair value of exchange-traded futures, option and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as inputs the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid prices received from independent pricing services as of the close of the last business day of the reporting period.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Partnership and Trading Company are commodity pools engaged primarily in the speculative trading of Futures Interests. The market-sensitive instruments held by the Partnership are acquired for speculative trading purposes only and, as a result, all or substantially all of the Partnership’s assets are at risk of trading loss. Unlike an operating company, the risk of market-sensitive instruments is inherent to the primary business activity of the Partnership.

The Futures Interests on such contracts traded by the Partnership involve varying degrees of related market risk. Market risk is often dependent upon changes in the level or volatility of held interest rates, exchange rates, and prices of financial instruments and commodities, factors that result in frequent changes in the fair value of the Partnership’s open positions, and consequently in its earnings, whether realized or unrealized, and cash flow. Gains and losses on open positions of exchange-traded futures, exchange-traded forward and exchange-traded futures-styled option contracts are settled daily through variation margin. Gains and losses on non-exchange-traded forward currency contracts and forward currency option contracts are settled upon termination of the contract. Gains and losses on non-exchange-traded forward currency option contracts are settled on an agreed-upon settlement date.

The Partnership’s total market risk may increase or decrease as it is influenced by a wide variety of factors, including, but not limited to, the diversification among the Partnership’s open positions, the volatility present within the markets, and the liquidity of the markets.

The face value of the market sector instruments held by the Partnership is typically many times the applicable margin requirements. Margin requirements generally range between 2% and 15% of contract face value. Additionally, the use of leverage causes the face value of the market sector instruments held by the Partnership typically to be many times the total capitalization of the Partnership.

The Partnership’s past performance is no guarantee of its future results. Any attempt to numerically quantify the Partnership’s market risk is limited by the uncertainty of its speculative trading. The Partnership’s speculative trading and use of leverage may cause future losses and volatility (i.e., “risk of ruin”) that far exceed the Partnership’s experience to date as discussed under the “Partnership’s and the Trading Company’s Value at Risk in Different Market Sectors” section and significantly exceed the Value at Risk tables disclosed.

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

 

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Quantifying the Partnership’s and the Trading Company’s Trading Value at Risk

The following quantitative disclosures regarding the Partnership’s/Trading Company’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

The Partnership/Trading Company 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/Trading Company’s earnings and cash flow.

The Partnership’s/Trading Company’s risk exposure in the market sectors traded by the Trading 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 Ceres or the Trading Advisors in their daily risk management activities.

Value at Risk is a measure of the maximum amount which the Partnership/Trading Company could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Trading Company’s speculative trading and the recurrence of market movements far exceeding expectations in the markets traded by the Partnership/Trading Company could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s/Trading Company’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/Trading Company’s losses in any market sector will be limited to Value at Risk or by the Partnership’s/Trading Company’s attempts to manage its market risk.

Exchange margin requirements have been used by the Partnership/Trading Company 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.

The Partnership’s and the Trading Company’s Value at Risk in Different Market Sectors

Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The first trading Value at Risk table reflects the market sensitive instruments held by the Partnership directly and through its investments in the Trading Company. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e. in the managed accounts in the Partnership’s name traded by certain Trading Advisors) and indirectly by the Trading Company separately. There have been no material changes in the trading Value at Risk information previously disclosed in the Form 10-K for the year ended December 31, 2023.

 

36

The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2024. As of December 31, 2024, the Partnership’s total capitalization was $145,640,538.

December 31, 2024

 

Market Sector

      Value at Risk        % of Total
  Capitalization  		  

Currencies

     $ 8,687,856         5.97  % 

Energy

      1,679,336         1.15   

Grains

      1,004,445         0.69   

Indices

      5,160,318         3.54   

Interest Rates U.S.

      1,427,820         0.98   

Interest Rates Non-U.S.

      2,335,063         1.60   

Livestock

      708,359         0.49   

Metals

      3,181,670         2.18   

Softs

      1,273,860         0.88   
  

 

 

     

 

 

  

Total

     $  25,458,727         17.48  % 
  

 

 

     

 

 

  

The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2023. As of December 31, 2023, the Partnership’s total capitalization was $147,258,595.

December 31, 2023

 

Market Sector

      Value at Risk        % of Total
  Capitalization  		  

Currencies

     $ 10,329,730         7.01  % 

Energy

      1,940,869         1.32   

Grains

      1,285,152         0.87   

Indices

      7,700,420         5.23   

Interest Rates U.S.

      1,357,509         0.92   

Interest Rates Non-U.S.

      1,758,231         1.19   

Livestock

      377,521         0.26   

Metals

      1,704,432         1.16   

Softs

      1,191,163         0.81   
  

 

 

     

 

 

  

Total

     $  27,645,027         18.77  % 
  

 

 

     

 

 

  

 

37

The following tables indicate the trading Value at Risk associated with the Partnership’s/Trading Company’s open positions by market category as of December 31, 2024 and 2023, and the highest, lowest and average values during the twelve months ended December 31, 2024 and 2023, as applicable. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below.

As of December 31, 2024, the Partnership’s total capitalization was $145,640,538.

December 31, 2024

                  Twelve Months Ended December 31, 2024  

Market Sector

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

Currencies

     $ 6,652,350         4.57  %     $ 9,996,999        $ 6,102,381       $ 7,909,249  

Energy

      1,330,599         0.91        2,153,964         617,343        1,331,481  

Grains

      546,359         0.38        1,348,185         541,766        926,079  

Indices

      4,081,285         2.80        6,101,737         2,093,362        4,773,863  

Interest Rates U.S.

      733,252         0.50        1,905,998         409,260        1,104,728  

Interest Rates Non-U.S.

      1,874,641         1.29        3,627,783         1,227,513        2,116,847  

Livestock

      241,574         0.17        354,448         36,778        173,714  

Metals

      1,761,295         1.21        1,931,359         587,705        1,305,043  

Softs

      808,305         0.55        1,068,763         510,019        814,107  
  

 

 

     

 

 

          

Total

     $ 18,029,660         12.38  %         
  

 

 

     

 

 

          

* Annual average of daily Values at Risk.

As of December 31, 2023, the Partnership’s total capitalization was $147,258,595.

December 31, 2023

                  Twelve Months Ended December 31, 2023  

Market Sector

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

Currencies

     $ 9,467,974         6.43  %     $ 11,379,668        $ 5,252,896        $ 8,299,264   

Energy

      1,513,171         1.03        2,641,048         786,787         1,521,765   

Grains

      994,997         0.68        1,298,420         408,491         784,169   

Indices

      5,890,513         4.00        6,277,615         2,668,807         4,475,101   

Interest Rates U.S.

      1,237,198         0.84        1,916,976         413,207         1,085,983   

Interest Rates Non-U.S.

      1,560,751         1.06        3,465,377         814,776         2,258,833   

Livestock

      180,126         0.12        204,325         29,440         116,653   

Metals

      1,048,611         0.71        2,193,239         853,351         1,539,392   

Softs

      657,910         0.44        1,071,817         533,994         771,286   
  

 

 

     

 

 

          

Total

     $ 22,551,251         15.31  %         
  

 

 

     

 

 

          

* Annual average of daily Values at Risk.

 

38

As of December 31, 2024, the Trading Company’s total capitalization was $52,438,305 and the Partnership owned 100% of the Trading Company. The Partnership invests a portion of its assets in the Trading Company. The Trading Company’s Value at Risk as of December 31, 2024 was as follows:

December 31, 2024

                  Twelve Months Ended December 31, 2024  

Market Sector

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

Currencies

     $ 2,035,506         3.88  %     $ 2,035,506        $ 848,533        $ 1,509,319   

Energy

      348,737         0.67        1,091,174         250,868         684,844   

Grains

      458,086         0.87        762,494         246,591         500,205   

Indices

      1,079,033         2.06        2,399,147         789,261         1,477,895   

Interest Rates U.S.

      694,568         1.32        991,018         23,950         466,595   

Interest Rates Non-U.S.

      460,422         0.88        1,170,906         191,699         655,404   

Livestock

      466,785         0.89        466,785         83,078         229,688   

Metals

      1,420,375         2.71        1,679,995         653,076         1,274,642   

Softs

      465,555         0.89        920,916         310,983         589,139   
  

 

 

     

 

 

          

Total

     $ 7,429,067         14.17  %         
  

 

 

     

 

 

          

* Annual average of daily Values at Risk.

As of December 31, 2023, the Trading Company’s total capitalization was $55,284,183 and the Partnership owned 100% of the Trading Company. The Partnership invests a portion of its assets in the Trading Company. The Trading Company’s Value at Risk as of December 31, 2023 was as follows:

December 31, 2023

                  Twelve Months Ended December 31, 2023  

Market Sector

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

Currencies

     $ 861,756         1.56  %     $ 2,053,848        $ 626,405        $ 1,409,839   

Energy

      427,698         0.77        1,135,638         249,179         587,868   

Grains

      290,155         0.52        735,560         158,388         385,141   

Indices

      1,809,907         3.27        1,809,907         817,707         1,202,146   

Interest Rates U.S.

      120,311         0.22        945,065         120,311         496,896   

Interest Rates Non-U.S.

      197,480         0.36        1,526,996         184,160         826,918   

Livestock

      197,395         0.36        350,185         38,400         216,072   

Metals

      655,821         1.19        1,348,571         396,133         870,550   

Softs

      533,253         0.96        912,521         412,857         654,256   
  

 

 

     

 

 

          

Total

     $ 5,093,776         9.21  %         
  

 

 

     

 

 

          

* Annual average of daily Values at Risk.

Limitations on Value at Risk as an Assessment of Market Risk

Value at Risk models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of varied market risks, reflect risk reduction due to portfolio diversification or hedging activities, and can cover a wide range of portfolio assets. However, Value at Risk measures should be viewed in light of the methodology’s limitations, which include, but may not be limited to, the following:

 

  ●  

past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements;

 

  ●  

changes in portfolio value caused by market movements may differ from those of the Value at Risk model;

 

  ●  

Value at Risk results reflect past market fluctuations applied to current trading positions while future risk depends on future positions;

 

  ●  

Value at Risk using a one-day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and

 

  ●  

the historical market risk factor data used for Value at Risk estimation may provide only limited insight into losses that could be incurred under certain unusual market movements.

 

39

Non-Trading Risk

The Partnership has non-trading market risk on its foreign cash balances not needed for margin. These balances and any market risk they may represent are immaterial.

A decline in short-term interest rates would result in a decline in the Partnership’s cash management income. This cash flow risk is not considered to be material.

Materiality, as used throughout this section, is based on an assessment of reasonably possible market movements and any associated potential losses, taking into account the leverage, optionality and multiplier features of the Partnership’s market-sensitive instruments, in relation to the Partnership’s net assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Partnership’s market risk exposures – except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Partnership manages its primary market risk exposures – constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Partnership’s primary market risk exposures, as well as the strategies used and to be used by Ceres and the Trading Advisors for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses, as well as in material changes to the risk exposures and the risk management strategies of the Partnership. Investors must be prepared to lose all or substantially all of their investment in the Partnership.

The Trading Advisors, in general, tend to utilize trading system(s) to take positions when market opportunities develop, and Ceres anticipates that the Trading Advisors will continue to do so.

The following were the primary trading risk exposures of the Partnership as of December 31, 2024, by market sector. It may be anticipated, however, that these market exposures will vary materially over time.

Stock Indices. The Partnership’s primary equity exposure is to equity price risk in the G20 countries. The stock index futures traded by the Partnership are limited to futures on broadly based indices. As of December 31, 2024, the Partnership’s primary exposures were in the NASDAQ 100 (U.S.), DAX (Germany), Nikkei 225 (Japan), Hang Seng (Hong Kong/China), FTSE 100 (United Kingdom), FTSE MIB (Italy), and S&P/TSX 60 (Canada) stock indices. Overall, the Partnership is primarily exposed to the risk of adverse price trends or static markets in the major North American, European, and Pacific Rim indices. (Static markets would not cause major market changes but would make it difficult for the Partnership to avoid being “whipsawed” into numerous small losses.)

Interest Rates. Interest rate movements directly affect the price of the futures positions held by the Partnership and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries can materially affect the Partnership’s profitability. The Partnership’s primary interest rate exposure is to interest rate fluctuations in the United States and other G7 countries. However, the Partnership may also take futures positions on the government debt of smaller economies – e.g., Australia and New Zealand.

Currencies. The Partnership’s currency exposure is to exchange rate fluctuations, primarily fluctuations that disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes, as well as political and general economic conditions. The General Partner does not anticipate that the risk profile of the Partnership’s currency sector will change significantly in the future.

Commodities:

Energy. The Partnership’s primary energy market exposure is to oil and natural gas price movements, often resulting from political developments in the Middle East, weather conditions, and other factors contributing to significant changes in supply and demand. Further energy market exposure is to prices in the carbon emission allowances markets, which are subject to movements driven by geopolitical events, climate related regulation, and other supply/demand related factors, as well as to prices in European electricity prices, which are subject to changes caused by weather related factors, availability of substitute power sources, and government imposed regulations in Europe. Energy prices can be volatile and substantial profits and losses have been experienced and are expected to continue in this market.

 

40

Metals. The Partnership’s primary metals exposure as of December 31, 2024, was to fluctuations in the prices of industrial metals (such as nickel, copper, zinc, aluminum, lead, and iron) and precious metals (such as silver, gold, platinum, and palladium). Price movement in both industrial and precious metals can be driven by fluctuation in the valuations between currency pairs, geopolitical events, economic conditions globally and regionally, trade policies, regulatory restrictions, as well as other supply and demand related factors.

Grains. The Partnership’s trading risk exposure in grains is primarily to agricultural-related price movements, which are often directly affected by severe or unexpected weather conditions. Wheat, corn, and the soybean complex accounted for the Partnership’s primary grain exposure as of December 31, 2024.

Softs. The Partnership’s trading risk exposure in soft commodities is primarily to agricultural-related price movements, which are often directly affected by severe or unexpected weather conditions, as well as geopolitical events and supply/demand factors. Cocoa, coffee, sugar, and cotton accounted for the majority of the Partnership’s soft commodity exposure as of December 31, 2024.

Livestock. The Partnership’s primary risk exposure in livestock is to fluctuations in U.S. cattle and hog prices.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

The following was the only non-trading risk exposure of the Partnership as of December 31, 2024.

Foreign Currency Balances. The Partnership may hold various foreign currency balances. The Trading Advisors regularly convert foreign currency balances to U.S. dollars in an attempt to control the Partnership’s non-trading risk.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

Ceres monitors and attempts to mitigate the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allow Ceres to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.

Ceres monitors the Partnership’s performance and the concentration of open positions, and consults with the Trading Advisors concerning the Partnership’s overall risk profile. If Ceres felt it necessary to do so, Ceres could require the Trading Advisors to close out positions as well as enter positions traded on behalf of the Partnership. However, any such intervention would be a highly unusual event. Ceres primarily relies on the Trading Advisors’ own risk control policies while maintaining a general supervisory overview of the Partnership’s market risk exposures.

The Trading Advisors apply their own risk management policies to their trading. The Trading Advisors often follow diversification guidelines, margin limits and stop loss points to exit a position. The Trading Advisors’ research of risk management often suggests ongoing modifications to their trading programs.

As part of Ceres’s risk management, Ceres periodically meets with the Trading Advisors to discuss their risk management and to look for any material changes to the Trading Advisors’ portfolio balance and trading techniques. The Trading Advisors are required to notify Ceres of any material changes to their programs.

 

41

Item 8.
Financial Statements and Supplementary Data
.
CERES CLASSIC L.P.
The following financial statements and related items of the Partnership are filed under this Item 8: Oath or Affirmation, Management’s Report on Internal Control over Financial Reporting, Report of Independent Registered Public Accounting Firm (Ernst & Young LLP, Boston, MA, PCAOB ID: 42) for the years ended December 31, 2024, 2023 and 2022; Consolidated Statements of Financial Condition at December 31, 2024 and 2023; Consolidated Condensed Schedules of Investments at December 31, 2024 and 2023; Consolidated Statements of Income and Expenses for the years ended December 31, 2024 and 2023; Statement of Income and Expenses for the year ended December 31, 2022; Consolidated Statements of Changes in Partners’ Capital for the years ended December 31, 2024 and 2023; Statement of Changes in Partners’ Capital for the year ended December 31, 2022; and Notes to Consolidated Financial Statements. Additional financial information has been filed as Exhibits to this Form
10-K.
 
42
Table of Contents
To the Limited Partners of
Ceres Classic L.P.
To the best of the knowledge and belief of the undersigned, the information contained herein is accurate and complete.
 

  
By:
  
Patrick T. Egan
 
President and Director
 
Ceres Managed Futures LLC
 
General Partner,
 
Ceres Classic L.P.
Ceres Managed Futures LLC
1585 Broadway
New York, NY 10036
(855)
672-4468
 
43
Table of Contents
Management’s Report on Internal Control Over
Financial Reporting
Ceres Managed Futures LLC (“Ceres”) is the general partner of Ceres Classic L.P. (the “Partnership”) and is responsible for the management of the Partnership.
Management of the Partnership, Ceres (“Management”), is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Securities Exchange Act of 1934, as amended, and for the assessment of internal control over financial reporting. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Partnership’s internal control over financial reporting includes those policies and procedures that:
 
  (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
 
  (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of Management and the directors of Ceres; and
 
  (iii)
provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2024. In making this assessment, Management used the criteria set forth in the
Internal Control-Integrated Framework (2013)
 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, Management concluded that the Partnership maintained effective internal control over financial reporting as of December 31, 2024, based on the criteria referred to above.
 
LOGO
  
     
LOGO
  
Patrick T. Egan
     
Brooke Lambert
President and Director
  
 
   
Chief Financial Officer
Ceres Managed Futures LLC
     
Ceres Managed Futures LLC
General Partner,
     
General Partner,
Ceres Classic L.P.
     
Ceres Classic L.P.
 
44
Table of Contents
LOGO
 
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
 
   
Tel:  +1 617 266 2000
Fax: + 1 617 266 5843
www.ey.com
 
   
Report of Independent Registered Public Accounting Firm
To the Partners of Ceres Classic L.P.,
Opinion on the Financial Statements 
We have audited the accompanying consolidated statements of financial condition of Ceres Classic L.P. (the Partnership), including the consolidated condensed schedules of investments, as of December 31, 2024 and 2023, the related consolidated statements of income and expenses and changes in partners’ capital for each of the two years in the period ended December 31, 2024, and the statement of changes in partners’ capital for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2024 and 2023, and the results of its operations and changes in its partners’ capital for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. 
Basis for Opinion 
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
 
LOGO
We have served as the auditor of the Partnership since 2017.
Boston, MA
March 20, 2025
 
45
Table of Contents
Ceres Classic L.P.
Consolidated Statements of Financial Condition
December 31, 2024 and 2023
 
    
  December 31,  

2024
   
  December 31,  

2023
Assets:
      
Equity in trading account:
      
Unrestricted cash (Note 2f)
     $ 116,041,683       $ 121,195,534  
Restricted cash (Note 2f)
      25,673,499        27,997,222  
Foreign cash (cost $1,029,782 and $1,208,212 at December 31, 2024 and 2023, respectively)
      1,025,300        1,267,931  
Net unrealized appreciation on open futures contracts
      2,269,270        -   
Net unrealized appreciation on open forward contracts
      1,672,427        -   
  
 
 
 
   
 
 
 
Total equity in trading account
      146,682,179        150,460,687  
  
 
 
 
   
 
 
 
Interest receivable (Note 2i)
      405,325        537,528  
  
 
 
 
   
 
 
 
Total assets
     $ 147,087,504       $ 150,998,215  
  
 
 
 
   
 
 
 
Liabilities and Partners’ Capital:
      
Liabilities:
      
Net unrealized depreciation on open futures contracts
     $ -        $ 519,235  
Net unrealized depreciation on open forward contracts
      -         1,853,038  
Accrued expenses:
      
Administrative and General Partner’s fees (Note 2j)
      88,886        96,193  
Management fees (Note 3)
      145,970        159,316  
Professional fees
      247,616        218,602  
Redemptions payable to General Partner (Notes 2o and 2p)
      75,000        75,000  
Redemptions payable to Limited Partners (Notes 2o and 2p)
      889,494        818,236  
  
 
 
 
   
 
 
 
Total liabilities
      1,446,966        3,739,620  
  
 
 
 
   
 
 
 
Partners’ Capital:
      
General Partner, Class Z, 119,150.531 and 132,239.624 Units outstanding at December 31, 2024 and 2023, respectively
      1,540,021        1,604,285  
Limited Partners, Class A, 4,849,003.081 and 5,183,355.701 Units outstanding at December 31, 2024 and 2023, respectively
      143,957,312        145,519,896  
Limited Partners, Class Z, 11,079.649 Units outstanding at December 31, 2024 and 2023
      143,205        134,414  
  
 
 
 
   
 
 
 
Total partners’ capital (net asset value)
      145,640,538        147,258,595  
  
 
 
 
   
 
 
 
Total liabilities and partners’ capital
     $ 147,087,504       $ 150,998,215  
  
 
 
 
   
 
 
 
Net asset value per Unit:
      
Class A
     $ 29.69       $ 28.07  
  
 
 
 
   
 
 
 
Class Z
     $ 12.93       $ 12.13  
  
 
 
 
   
 
 
 
 
See accompanying notes to consolidated financial statements.
 
46
Table of Contents
Ceres Classic L.P.
Consolidated Condensed Schedule of Investments
December 31, 2024
 
    
Notional ($)/
  Number of  
          
 % of Partners’ 
  
    
  Contracts  
   
  Fair Value  
     
Capital
  
Futures Contracts Purchased
         
Currencies
      305       $ (219,182)         (0.15)  % 
Energy
      242        370,225          0.25    
Grains
      275        197,902          0.14    
Indices
      649        (947,792)         (0.65)   
Interest Rates U.S.
      131        (24,445)         (0.02)   
Interest Rates
Non-U.S.
      1,435        (643,848)         (0.44)   
Livestock
      298        211,452          0.15    
Metals
      192        (332,012)         (0.23)   
Softs
      197        895,529          0.61    
     
 
 
     
 
 
  
Total futures contracts purchased
         (492,171)         (0.34)   
     
 
 
     
 
 
  
Futures Contracts Sold
         
Currencies
      880        1,586,795          1.09    
Energy
      157        (443,094)         (0.30)   
Grains
      588        193,157          0.13    
Indices
      261        143,452          0.10    
Interest Rates U.S.
      497        306,828          0.21    
Interest Rates
Non-U.S.
      1,753        750,066          0.51    
Livestock
      1        (3,463)         (0.00)  * 
Metals
      68        127,693          0.09    
Softs
      125        100,007          0.07    
     
 
 
     
 
 
  
Total futures contracts sold
         2,761,441          1.90    
     
 
 
     
 
 
  
Net unrealized appreciation on open futures contracts
        $ 2,269,270          1.56   % 
     
 
 
     
 
 
  
Unrealized Appreciation on Open Forward Contracts
         
Currencies
     $ 212,686,968       $ 3,566,168          2.45   % 
Metals
      247        681,918          0.47    
     
 
 
     
 
 
  
Total unrealized appreciation on open forward contracts
         4,248,086          2.92    
     
 
 
     
 
 
  
Unrealized Depreciation on Open Forward Contracts
         
Currencies
     $ 133,420,276        (1,986,002)         (1.36)   
Metals
      270        (589,657)         (0.41)   
     
 
 
     
 
 
  
Total unrealized depreciation on open forward contracts
         (2,575,659)         (1.77)   
     
 
 
     
 
 
  
Net unrealized appreciation on open forward contracts
        $ 1,672,427          1.15   % 
     
 
 
     
 
 
  
*  Due to rounding.
 
See accompanying notes to consolidated financial statements.
 
47
Table of Contents
Ceres Classic L.P.
Consolidated Condensed Schedule of Investments
December 31, 2023
 
    
Notional ($)/
            
    
  Number of  
        
 % of Partners’ 
  
    
Contracts
   
  Fair Value  
   
Capital
  
Futures Contracts Purchased
         
Currencies
      315       $ 169,284          0.11   % 
Energy
      119        (305,590)         (0.21)   
Grains
      118        (344,085)         (0.23)   
Indices
      1,144        713,669          0.48    
Interest Rates U.S.
      140        72,203          0.05    
Interest Rates
Non-U.S.
      702        628,842          0.43    
Metals
      223        184,798          0.13    
Softs
      298        683,765          0.46    
     
 
 
 
   
 
 
  
Total futures contracts purchased
         1,802,886          1.22    
     
 
 
 
   
 
 
  
Futures Contracts Sold
         
Currencies
      176        (209,309)         (0.14)   
Energy
      315        (287,610)         (0.20)   
Grains
      645        144,196          0.10    
Indices
      304        (382,949)         (0.26)   
Interest Rates U.S.
      479        (769,023)         (0.52)   
Interest Rates
Non-U.S.
      884        (829,821)         (0.56)   
Livestock
      139        64,338          0.04    
Metals
      28        (59,576)         (0.04)   
Softs
      113        7,633          0.01    
     
 
 
 
   
 
 
  
Total futures contracts sold
         (2,322,121)         (1.57)   
     
 
 
 
   
 
 
  
Net unrealized depreciation on open futures contracts
        $ (519,235)         (0.35)  % 
     
 
 
 
   
 
 
  
Unrealized Appreciation on Open Forward Contracts
         
Currencies
    $ 239,642,780       $ 3,324,371          2.26   % 
Metals
      245        819,604          0.55    
     
 
 
 
   
 
 
  
Total unrealized appreciation on open forward contracts
         4,143,975          2.81    
     
 
 
 
   
 
 
  
Unrealized Depreciation on Open Forward Contracts
         
Currencies
    $ 239,065,662        (4,651,461)         (3.16)   
Metals
      341        (1,345,552)         (0.91)   
     
 
 
 
   
 
 
  
Total unrealized depreciation on open forward contracts
         (5,997,013)         (4.07)   
     
 
 
 
   
 
 
  
Net unrealized depreciation on open forward contracts
        $ (1,853,038)         (1.26)  % 
     
 
 
 
   
 
 
  
 
See accompanying notes to consolidated financial statements.
 
48
Table of Contents
Ceres Classic L.P.
Consolidated Statements of Income and Expenses
For the Years Ended December 31, 2024, 2023 and 2022
 
    
2024
   
2023
  
2022
(1)
Investment Income:
        
Interest income (Note 2i)
     $ 6,752,437       $ 5,103,663      $ 1,578,766  
Interest income allocated from the Trading Company (Note 2i)
      -         1,535,174       620,422  
  
 
 
 
   
 
 
 
  
 
 
 
Total investment income
      6,752,437        6,638,837       2,199,188  
  
 
 
 
   
 
 
 
  
 
 
 
Expenses:
        
Expenses allocated from the Trading Company
      -         161,204       218,139  
Clearing fees
      591,856        404,858       225,124  
Administrative and General Partner’s fees (Note 2j)
      1,160,108        1,188,612       1,200,220  
Ongoing placement agent fees (Note 2k)
      1,146,343        1,174,526       1,184,946  
Management fees (Note 3)
      1,907,771        1,942,836       1,928,192  
Incentive fees (Note 3)
      1,081,370        207,613       3,536,416  
Professional fees
      545,367        466,489       400,174  
  
 
 
 
   
 
 
 
  
 
 
 
Total expenses
      6,432,815        5,546,138       8,693,211  
  
 
 
 
   
 
 
 
  
 
 
 
Net investment income (loss)
      319,622        1,092,699       (6,494,023 ) 
  
 
 
 
   
 
 
 
  
 
 
 
Trading Results:
        
Net gains (losses) on trading of commodity interests:
        
Net realized gains (losses) on closed contracts
      2,145,161        (2,943,777 )      29,411,384  
Net realized gains (losses) on closed contracts allocated from the Trading Company
      -         6,274,943       11,294,485  
Net change in unrealized gains (losses) on open contracts
      6,249,769        (5,864,346 )      329,007  
Net change in unrealized gains (losses) on open contracts allocated from the Trading Company
      -         1,729,300       1,149,903  
  
 
 
 
   
 
 
 
  
 
 
 
Total trading results
      8,394,930        (803,880 )      42,184,779  
  
 
 
 
   
 
 
 
  
 
 
 
Net income
     $ 8,714,552       $ 288,819      $ 35,690,756  
  
 
 
 
   
 
 
 
  
 
 
 
Net income (loss) per Unit (Note 8)*:
        
Class A
     $ 1.62       $ (0.01 )     $ 5.86  
  
 
 
 
   
 
 
 
  
 
 
 
Class Z
     $ 0.80       $ 0.09      $ 2.58  
  
 
 
 
   
 
 
 
  
 
 
 
Weighted average Units outstanding:
        
Class A
      5,044,215.888        5,367,197.436       5,794,885.155  
  
 
 
 
   
 
 
 
  
 
 
 
Class Z
      139,674.959        149,502.290       174,419.234  
  
 
 
 
   
 
 
 
  
 
 
 
 
(1)
 
Not consolidated.
*
Represents the change in net asset value per Unit.
 
See accompanying notes to consolidated financial statements.
 
49
Table of Contents
Ceres Classic L.P.
Consolidated Statements of Changes in Partners’ Capital
For the Years Ended December 31, 2024, 2023 and 2022
 
    
Class A
  
Class Z
  
Total
    
Amount
  
Units
  
Amount
  
Units
  
Amount
  
Units
Partners’ Capital, December 31, 2021
(1)
    $ 135,260,404       6,086,081.989      $ 1,650,258       174,419.234      $ 136,910,662       6,260,501.223  
Redemptions - General Partner
      -        -        (300,000 )      (24,916.944 )      (300,000 )      (24,916.944 ) 
Redemptions - Limited Partners
      (14,660,370 )      (536,923.121 )      -        -        (14,660,370 )      (536,923.121 ) 
Net income (loss)
      35,240,291       -        450,465       -        35,690,756       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Partners’ Capital, December 31, 2022
(1)
     155,840,325       5,549,158.868       1,800,723       149,502.290       157,641,048       5,698,661.158  
Redemptions - General Partner
      -        -        (75,000 )      (6,183.017 )      (75,000 )      (6,183.017 ) 
Redemptions - Limited Partners
      (10,596,272 )      (365,803.167 )      -        -        (10,596,272 )      (365,803.167 ) 
Net income (loss)
      275,843       -        12,976       -        288,819       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Partners’ Capital, December 31, 2023
      145,519,896       5,183,355.701       1,738,699       143,319.273       147,258,595       5,326,674.974  
Redemptions - General Partner
      -        -        (174,854 )      (13,089.093 )      (174,854 )      (13,089.093 ) 
Redemptions - Limited Partners
      (10,157,755 )      (334,352.620 )      -        -        (10,157,755 )      (334,352.620 ) 
Net income (loss)
      8,595,171       -        119,381       -        8,714,552       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Partners’ Capital, December 31, 2024
     $  143,957,312        4,849,003.081      $  1,683,226        130,230.180      $  145,640,538        4,979,233.261  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
(1)
 
Not consolidated.
 
See accompanying notes to consolidated financial statements.
 
50
Table of Contents
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
1.
Organization:
Ceres Classic L.P. (the “Partnership”) is a Delaware limited partnership organized in 1998 to engage primarily in the speculative trading of futures contracts, options on futures and forward contracts, forward contracts on physical commodities and other commodity interests, including, but not limited to, foreign currencies, financial instruments, metals, energy and agricultural products (collectively, “Futures Interests”) (refer to Note 4, “Financial Instrument Risks”). The General Partner (as defined below) may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (“Ceres” or the “General Partner”) and commodity pool operator of the Partnership. The General Partner is a wholly-owned subsidiary of Morgan Stanley Capital Management LLC (“MSCM”). MSCM is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Morgan Stanley Smith Barney LLC, doing business as Morgan Stanley Wealth Management (“Morgan Stanley Wealth Management”), currently acts as the placement agent (the “Placement Agent”) for the Partnership. Morgan Stanley Wealth Management is a principal subsidiary of MSCM.
As of December 31, 2024, all trading decisions were made for the Partnership by Graham Capital Management, L.P. (“Graham”), Winton Capital Management Limited (“WCM”), EMC Capital Advisors, LLC (“EMC”) and Campbell & Company, LP (“Campbell”), as the commodity trading advisors to the Partnership (each, a “Trading Advisor” and collectively, the “Trading Advisors”). Each Trading Advisor is allocated a portion of the Partnership’s assets to manage. Ceres is responsible for selecting additional commodity trading advisors from time to time and for replacing Trading Advisors as it deems necessary. Trading advisors can be added, removed, or replaced at any time by Ceres, or Ceres may determine to adjust the allocation of assets to each Trading Advisor, without the consent of, or advance notice to, the limited partners.
As of January 1, 2021, the Partnership invested a portion of its assets in CMF Winton Master L.P., organized in New York as a limited partnership (“CMF Winton” or the “Trading Company”). The Partnership and any other feeder fund investing in the Trading Company constitute the limited partners of the Trading Company. The Trading Company is managed by Ceres. CMF Winton has a single account with WCM. The Trading Company may and will, among other things, trade, buy, sell, spread, or otherwise acquire, hold, or dispose of Futures Interests.
During the periods covered by this report, the Partnership’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. MS&Co. also acts as the counterparty on all trading of foreign currency forward contracts. MS&Co. is a wholly-owned subsidiary of Morgan Stanley. As of January 1, 2021, JPMorgan Chase Bank, N.A. (“JPM”) acts as prime broker in connection with foreign exchange forward and swap transactions for the Trading Company.
As of December 31, 2024, units of limited partnership interest (“Unit(s)”) of the Partnership are being offered in two share classes (each, a “Class” or collectively, the “Classes”). A Limited Partner will initially receive Class A Units in the Partnership, provided, that certain investors (other than ERISA/IRA investors) who subscribe for Units on a consulting basis, the General Partner, and certain employees of Morgan Stanley and/or its subsidiaries (and their family members) may be designated to hold Class Z Units.
 
51
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
Each of Class A and Z Units of the Partnership have the same investment exposure and rights except for the amount of the ongoing placement agent fee charged to each Class of Units; Class Z Units are not subject to an ongoing placement agent fee.
The General Partner may, at its discretion, offer additional Classes of Units as described in the private placement memorandum of the Partnership, as amended from time to time (the “Memorandum”).
Ceres is required to maintain a 1% minimum interest in the equity of the Partnership and income (losses) are shared by Ceres and the limited partners based on their proportional ownership interest.
The Trading Company has entered into a foreign exchange brokerage account agreement and a futures brokerage account agreement with MS&Co. The Partnership has also entered into a futures brokerage account agreement with MS&Co. Pursuant to these agreements, the Partnership, directly or indirectly through its investment in the Trading Company, pays MS&Co. (or will reimburse MS&Co., if previously paid) its allocable share of all trading fees for the clearing and, where applicable, execution of transactions as well as exchange, user,
give-up,
floor brokerage and National Futures Association fees (collectively, the “clearing fees”).
The Partnership has also entered into a selling agreement with Morgan Stanley Wealth Management (as amended, the “Selling Agreement”). Pursuant to the Selling Agreement, Morgan Stanley Wealth Management is paid a monthly ongoing selling agent fee at the rates described below. The ongoing selling agent fee received by Morgan Stanley Wealth Management is shared with the properly registered/exempted financial advisors of Morgan Stanley Wealth Management who sell Class A Units.
The Trading Company entered into certain agreements with JPMorgan in connection with trading in forward foreign currency contracts on behalf of the Trading Company and, indirectly, the Partnership. These agreements include a foreign exchange and bullion authorization agreement (“FX Agreement”), an International Swap Dealers Association, Inc. master agreement (“Master Agreement”), a schedule to the Master Agreement, a 2016 credit support annex for variation margin to the schedule and an institutional account agreement. Under the FX Agreement, JPMorgan charges a fee on the aggregate foreign currency transactions entered into on behalf of the Trading Company during a month.
The General Partner has delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership.
 
52
Table of Contents
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
2.
Basis of Presentation and Summary of Significant Accounting Policies:
 
  a.
Use of Estimates.
The preparation of consolidated financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material.
 
  b.
Profit Allocation.
The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contributions and profits, if any, net of distributions or redemptions and losses, if any.
 
  c.
Statement of Cash Flows.
The Partnership has not provided a Consolidated Statement of Cash Flows, as permitted by Accounting Standards Codification (“ASC”) 230,
“Statement of Cash Flows.”
The Consolidated Statements of Changes in Partners’ Capital are included herein, and as of and for the years ended December 31, 2024, 2023 and 2022, the Partnership carried no debt and all of the Partnership’s investments were carried at fair value and classified as Level 1 or Level 2 measurements.
 
  d.
Consolidation/Partnership’s Investment in the Trading Company.
Effective October 1, 2023, the Partnership has consolidated its wholly owned investment in the Trading Company. Accordingly, the Partnership’s consolidated condensed schedule of investments as of December 31, 2024 and December 31, 2023 includes the portfolio holdings of the Trading Company. The consolidated financial statements for the year ended December 31, 2024, for the period from October 1, 2023 to December 31, 2023 and as of December 31, 2023 and December 31, 2024, include the accounts of the Partnership and the Trading Company. All inter-company transactions and balances have been eliminated. As of and for the year ended December 31, 2022, the Partnership carried its investment in the Trading Company based on the Partnership’s (1) net contribution to the Trading Company and (2) its allocated share of the undistributed profits and losses, including realized gains or losses and net change in unrealized gains or losses, of the Trading Company.
 
  e.
Partnership’s Investments.
All Futures Interests held by the Partnership, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The Futures Interests are recorded on trade date and open contracts are recorded at fair value (as described in Note 6, “Fair Value Measurements”) at the measurement date. Investments in Futures Interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated and are determined using the
first-in,
first-out
method. Net unrealized gains or losses on open contracts are included as a component of equity in trading account in the Consolidated Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Consolidated Statements of Income and Expenses. The Partnership does not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Consolidated Statements of Income and Expenses.
 
  f.
Partnership’s Cash.
The cash held by the Partnership that is available for Futures Interests trading is on deposit in a commodity brokerage account with MS&Co. The Partnership’s restricted cash is equal to the cash portion of assets on deposit to meet margin requirements, as determined by the exchange or counterparty, and required by MS&Co. All of these amounts are maintained separately. At December 31, 2024 and 2023, the amount of cash held for margin requirements was $25,673,499 and $27,997,222, respectively. Cash that is not classified as restricted cash is therefore classified as unrestricted cash. Restricted and unrestricted cash includes cash denominated in foreign currencies of $1,025,300 (cost of $1,029,782) and $1,267,931 (cost of $1,208,212) as of December 31, 2024 and 2023, respectively.
 
53
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
  g.
Foreign Currency Transactions and Translation.
The Partnership’s functional currency is the U.S. dollar; however, the Partnership may transact business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rate in effect at the date of the Consolidated Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rate in effect during the period.
 
  h.
Income Taxes.
Income taxes have not been recorded as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The Partnership follows the guidance of ASC 740,
“Income Taxes,”
which prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are
“more-likely-than-not”
of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet the
more-likely-than-not
threshold would be recorded as a tax benefit or liability in the Consolidated Statements of Financial Condition for the current year. If a tax position does not meet the minimum statutory threshold to avoid the incurring of penalties, an expense for the amount of the statutory penalty and interest, if applicable, shall be recognized in the Partnership’s Consolidated Statements of Income and Expenses in the years in which the position is claimed or expected to be claimed. The General Partner has concluded that there are no significant uncertain tax positions that would require recognition in the consolidated financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2021 through 2024 tax years remain subject to examination by U.S. federal and most state tax authorities.
 
  i.
Revenue Recognition.
For excess cash which is not invested by the General Partner in U.S. Treasury bills and/or other permitted investments, monthly, MS&Co. credits the Partnership with interest income on 100% of the average daily equity maintained in cash in the Partnership’s account during each month at a rate equal to 80% of the monthly average of the
4-week
U.S. Treasury bill discount rate. The Partnership will receive monthly interest on 100% of the average daily equity maintained in cash in the Partnership’s account during each month at a rate equal to 100% of the monthly average of the
4-week
U.S. Treasury bill discount rate. MS&Co. and Ceres retain any interest earned on such uninvested cash in excess of the interest paid to the Partnership. For purposes of these interest credits, daily funds do not include monies due to the Partnership on or with respect to futures, forward, or option contracts that have not been received.
 
  j.
General Partner’s Fee.
The Partnership pays the General Partner a monthly administrative fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the Partnership’s net assets (plus “notional” funds, if any) as of the beginning of each month, as described in the Partnership’s Memorandum.
 
   
The Partnership directly pays the brokerage fees and other transaction-related fees and expenses, as incurred and also pays its ongoing administrative, operating, offering and organizational expenses (including, but not limited to, periodic legal, accounting, administrative, filing, reporting and data processing fees) and its pro rata share of such expenses of any trading company to which the Partnership has allocated assets.
 
  k.
Placement Agent Fees.
The Partnership pays the Placement Agent ongoing compensation on a monthly basis equal to a percentage of the net asset value (as defined in the Memorandum) of a limited partner’s Unit as of the beginning of each month. The Partnership pays Morgan Stanley Wealth Management, or any other placement agent or
sub-placement
agent, an annualized rate equal to 0.75% with respect to Class A Units.
 
54
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The Placement Agent pays a portion of the ongoing placement agent fees it receives from the Partnership to the Morgan Stanley Financial Advisor or Private Wealth Advisor responsible for selling the Units to the relevant limited partners. Certain limited partners (other than ERISA/IRA investors) may be deemed to hold Class Z Units. Class Z Units are not subject to ongoing placement agent fees.
As of November 1, 2018, the Partnership entered into an alternative investment placement agent agreement (the “Harbor Selling Agreement”), by and among the Partnership, the General Partner, Morgan Stanley Distribution Inc. (“MSDI”), and Harbor Investment Advisory, LLC, a Maryland limited liability company (“Harbor”), which supersedes and replaces the alternative investment selling agent agreement, dated January 19, 2018, between the Partnership, the General Partner and Harbor. Pursuant to the Harbor Selling Agreement, MSDI and Harbor have been appointed as a
non-exclusive
selling agent and
sub-selling
agent, respectively, of the Partnership for the purpose of finding eligible investors for units of limited partnership interest (“Unit(s)”) through offerings that are exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder and for Harbor to serve as an investment advisor to its customers investing in one or more of the partnerships party to the Harbor Selling Agreement; provided, that, included within such appointment, Harbor will provide certain services to certain holders of Units of the Partnership, who had acquired such Units prior to such holders becoming clients of Harbor. The Harbor Selling Agreement continues in effect until September 30, 2025 unless terminated in certain circumstances as set forth in the Harbor Selling Agreement, including by any party on thirty days’ prior written notice, after which the General Partner or the Partnership may, in its sole discretion, renew the Harbor Selling Agreement for additional one year periods. Pursuant to the Harbor Selling Agreement, effective as of January 1, 2021, the Partnership pays Harbor an ongoing placement agent fee equal to 1/12th of 0.75% (a 0.75% annual rate) of the net asset value per Unit for certain holders of Class A Units in the Partnership, as set forth in the Harbor Selling Agreement.
 
  l.
Continuing Offering.
Units of the Partnership are offered at a price equal to 100% of the net asset value per Unit as of the first day of each month at the final net asset value per Unit as of the last day of the immediately preceding month. The minimum subscription amount in Class A Units in the Partnership is $25,000 ($10,000 for ERISA/IRA investors), subject to the discretion of Ceres to accept a lower amount. A Limited Partner will initially receive Class A Units in the Partnership, provided, that certain investors (other than ERISA/IRA investors) who subscribe for Units on a consulting basis, the General Partner and certain employees of Morgan Stanley and/or its subsidiaries (and their family members) may be designated to hold Class Z Units. Additional subscriptions can be made in a minimum amount of $10,000, subject to the discretion of Ceres to accept a lower amount. The request for subscriptions must be delivered to a limited partner’s Morgan Stanley Wealth Management Branch Office in time for it to be forwarded to and received by Ceres no later than 3:00 P.M., New York City time, on the third business day before the end of the month.
No selling commissions or charges related to the initial offering of Units are paid by the limited partners or the Partnership. MS&Co. pays all such costs.
 
  m.
Equity in Trading Account.
The Partnership’s asset “Equity in trading account” reflected in the Consolidated Statements of Financial Condition consists of cash on deposit with MS&Co., a portion of which is to be used as margin for trading and net unrealized appreciation on open futures and forward contracts, which are calculated as the difference between the original contract value and fair value.
 
55
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The Partnership, in its normal course of business, enters into various contracts with MS&Co. acting as its commodity broker. Pursuant to the brokerage agreement with MS&Co., to the extent that such trading results in unrealized gains or losses, these amounts are offset for the Partnership and are reported on a net basis in the Consolidated Statements of Financial Condition.
The Partnership has offset its unrealized gains or losses executed with the same counterparty as allowable under the terms of its master netting agreement with MS&Co., the counterparty on such contracts. The Partnership has consistently applied its right to offset.
 
  n.
Investment Company Status.
The Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Accounting Standards Update
2013-08,
“Financial Services—Investment Companies (Topic 946):
Amendments to the Scope, Measurement and Disclosure Requirements,”
and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Consolidated Statements of Income and Expenses.
 
  o.
Redemptions.
Limited partners may redeem some or all of their Units at 100% of the net asset value per Unit. The request for redemptions must be delivered to a limited partner’s local Morgan Stanley Branch Office in time for it to be forwarded and received by Ceres no later than 3:00 P.M., New York City time, on the third business day before the end of the month in which the redemption is to be effective.
 
  p.
Exchanges.
Limited partners may redeem some or all of their Units at 100% of the net asset value per Unit of the Partnership on the Redemption Date and use the proceeds to purchase units in any other commodity pool operated by Ceres that is open to investment. Limited partners may also redeem units in any other commodity pool operated by Ceres and use the proceeds to purchase Units in the Partnership. The request for exchanges must be delivered to a limited partner’s Morgan Stanley Wealth Management Branch Office in time for it to be forwarded and received by Ceres no later than 3:00 P.M., New York City time, on the third business day before the end of the month.
 
  q.
Distributions.
Distributions, other than redemptions of Units, are made on a
pro-rata
basis at the sole discretion of Ceres. No distributions have been made to date. Ceres does not intend to make any distributions of the Partnership’s profits.
 
  r.
Dissolution of the Partnership.
The Partnership will terminate on December 31, 2035, or at an earlier date if certain conditions occur as defined in the Memorandum.
 
  s.
Net Income (Loss) per Unit.
Net income (loss) per Unit is calculated in accordance with ASC 946,
“Financial Services – Investment Companies.”
See Note 8, “Financial Highlights.”
 
  t.
Segment Reporting.
During the year ended December 31, 2024, the Partnership adopted FASB Accounting Standards Update
No. 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures,
(ASU
2023-07),
which requires incremental disclosures related to a public entity’s reportable segments. The Partnership operates as a single reportable segment, as the Chief Operating Decision Maker (CODM) monitors the operating results of the partnership as a whole against its investment objective, which is included in Note 1. The Partnership’s President acts as the Partnership’s CODM and is responsible for assessing the performance of the Partnership’s single segment and deciding how to allocate the segment’s resources. To perform this function, the CODM reviews the total trading results as reflected in the accompanying statements of income and expenses and total return as reflected in the financial highlights as included in the notes to the Partnership’s consolidated financial statements. Additionally, segment assets are presented in the accompanying Consolidated Statements of Financial Condition and significant segment expenses are reported in the accompanying Consolidated Statements of Income and Expenses.
 
56
Table of Contents
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
3.
Trading Advisors:
Ceres, on behalf of the Partnership, has retained Graham to make all trading decisions for the Partnership, provided that, as of January 1, 2021, Ceres has retained Graham, WCM, EMC and Campbell as the commodity trading advisors to the Partnership. Ceres is responsible for selecting additional commodity trading advisors from time to time and for replacing Trading Advisors as it deems necessary. Trading advisors can be added, removed or replaced at any time by Ceres, or Ceres may determine to adjust the allocation of assets to each Trading Advisor, without the consent of, or advance notice to, the Limited Partners.
Compensation to the Trading Advisors by the Partnership consists of a management fee and an incentive fee as follows:
Management Fee
—
Effective as of January 1, 2021, the Partnership pays Graham a flat-rate monthly fee equal to 1/12th of 1.25% (a 1.25% annual rate) of the Partnership’s net assets as of the first day of each month.
Effective as of January 1, 2021, the Partnership pays WCM a flat-rate monthly fee equal to 1/12th of 1.5% (a 1.5% annual rate) of the Partnership’s net assets allocated to WCM as at the beginning of the relevant month, which will be equal to the prior month end net assets, net of all fees and expenses for the previous month, and decreased by any redemptions for such prior month end and increased by any subscriptions for the current month.
Effective as of January 1, 2021, the Partnership pays Campbell a flat rate monthly fee equal to 1/12th of 1.25% (a 1.25% annual rate) of the beginning of the month net asset value allocated to Campbell.
Effective as of January 1, 2021, the Partnership pays EMC a flat rate monthly fee equal to 1/12th of 0.875% (a 0.875% annual rate) of the beginning of the month net asset value allocated to EMC.
Incentive Fee
—
Effective February 1, 2019, the Partnership pays Graham an annual incentive fee equal to 18% of trading profits experienced by the Partnership as of the end of such period.
Effective as of January 1, 2021, the Partnership pays WCM a quarterly incentive fee equal to 20% of new trading profits (as defined in the applicable management agreement) earned by WCM in each quarterly period. Pursuant to the management agreement with WCM, no incentive fee will be paid to WCM with respect to the Partnership until it has (i) recouped a certain loss carryforward and (ii) earned new trading profits (as defined in the applicable management agreement) from and after January 1, 2021. The loss carryforward applied to the Partnership will be adjusted according to the Partnership’s assets allocated to WCM as of January 1, 2021.
Effective as of January 1, 2021, the Partnership pays Campbell a quarterly incentive fee equal to 20% of trading profits (as defined in the applicable management agreement) earned by Campbell in each quarterly period.
Effective as of January 1, 2021, the Partnership pays EMC a quarterly incentive fee equal to 20% of trading profits (as defined in the applicable management agreement) earned by EMC in each quarterly period.
Trading profits represent the amount by which profits from trading in Futures Interests exceed losses after ongoing placement agent, management and administrative and General Partner’s fees are deducted. When the Trading Advisor experiences losses with respect to net assets as of the end of such period, the Trading Advisor must recover such losses before the Trading Advisor is eligible for an incentive fee in the future. Cumulative trading losses are adjusted on a
pro-rated
basis for the amount of each month’s net redemptions.
 
57
Table of Contents
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
4.
Financial Instrument Risks:
The Partnership trades Futures Interests. Futures and forwards represent contracts for delayed delivery of an instrument at a specified date and price.
The fair value of an exchange-traded contract is based on the settlement price quoted by the exchange on the day with respect to which fair value is being determined. If an exchange-traded contract could not have been liquidated on such day due to the operation of daily limits or other rules of the exchange, the settlement price will be equal to the settlement price on the first subsequent day on which the contract could be liquidated.
The General Partner estimates that, at any given time, approximately 20.7% to 35.1% of the Partnership’s contracts are traded
over-the-counter.
In general, the risks associated with
non-exchange-traded
contracts are greater than those associated with exchange-traded contracts because of the greater risk of default by the counterparty to a
non-exchange-traded
contract. The Partnership has credit risk associated with counterparty nonperformance. As of the date of the consolidated financial statements, the credit risk associated with the instruments in which the Partnership trades is limited to the unrealized gain amounts reflected in the Consolidated Statements of Financial Condition.
The Partnership also has credit risk because MS&Co. acts as the commodity futures broker, or the counterparty, with respect to most of the Partnership’s assets. Exchange-traded futures and exchange-traded forward contracts are fair valued on a daily basis, with variations in value settled on a daily basis. With respect to the Partnership’s
non-exchange-traded
forward currency contracts, there are no daily settlements of variation in value, nor is there any requirement that an amount equal to the net unrealized gains (losses) on such contracts be segregated. However, the Partnership is required to meet margin requirements with the counterparty, which is accomplished by daily maintenance of the cash balance in a custody account and U.S. Treasury bills held at MS&Co., for the benefit of MS&Co. With respect to those
non-exchange-traded
forward currency contracts, the Partnership is dependent upon the ability of MS&Co., the sole counterparty on all such contracts, to perform. The Partnership has a netting agreement with MS&Co. The primary terms are based on industry standard master netting agreements. This agreement, which seeks to reduce both the Partnership’s and MS&Co.’s exposure on
non-exchange-traded
forward currency contracts, should materially decrease the Partnership’s credit risk in the event of MS&Co.’s bankruptcy or insolvency.
The General Partner monitors and attempts to mitigate the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of U.S. Treasury bills, futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.
 
58
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The Futures Interests traded, and the U.S. Treasury bills held, by the Partnership involve varying degrees of related market risk. Market risk is often dependent upon changes in the level or volatility of interest rates, exchange rates, and prices of financial instruments and commodities, factors that result in frequent changes in the fair value of the Partnership’s open positions, and consequently, in its earnings, whether realized or unrealized, and cash flow. Gains and losses on open positions of exchange-traded futures and exchange-traded forward contracts are settled daily through variation margin. Gains and losses on
non-exchange-traded
forward currency contracts are settled upon termination of the contract.
In the ordinary course of business, the Partnership enters into contracts and agreements that contain various representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements cannot be determined, as this could include future claims that have not yet been made against the Partnership. The General Partner considers the risk of any future obligation relating to these indemnifications to be remote.
Beginning in February 2022, the United States, the United Kingdom, the European Union, and a number of other nations imposed sanctions against Russia in response to Russia’s invasion of Ukraine, and these and other governments around the world may impose additional sanctions in the future as the conflict develops. In addition, the armed conflict between Israel and Hamas and subsequent sanctions have created volatility in the price of various commodities and may lead to a deterioration in the political and trade relationships that exist between the countries involved and have a negative impact on business activity globally, and therefore could affect the performance of the Partnership’s/Trading Company’s investments. Furthermore, uncertainties regarding these conflicts and the varying involvement of the United States and other countries preclude prediction as to the ultimate impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Partnership/Trading Company and the performance of its investments or operations, and the ability of the Partnership/Trading Company to achieve its investment objectives. Additionally, to the extent that investors, service providers and/or other third parties have material operations or assets in Russia, Belarus, Ukraine or Israel, they may have their operations disrupted and/or suffer adverse consequences related to the ongoing conflicts.
 
5.
Trading Activities:
The Partnership’s objective is to profit from speculative trading in Futures Interests. Therefore, the Trading Advisors will take speculative positions in Futures Interests where it feels the best profit opportunities exist for its trading strategy. As such, the average number of contracts outstanding in absolute quantities (the total of the open long and open short positions) has been presented as a part of the volume disclosure, as position direction is not an indicative factor in such volume disclosures.
All of the Futures Interests owned by the Partnership are held for trading purposes. The monthly average number of futures contracts traded during the years ended December 31, 2024 and 2023 were 7,918 and 7,222, respectively. The monthly average number of metals forward contracts traded during the years ended December 31, 2024 and 2023 were 969 and 873, respectively. The monthly average notional values of currency forward contracts traded during the years ended December 31, 2024 and 2023 were $890,546,651 and $851,893,924, respectively.
 
59
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The following tables summarize the gross and net amounts recognized relating to the assets and liabilities of the Partnership’s derivative instruments and transactions eligible for offset subject to master netting agreements or similar arrangements as of December 31, 2024 and 2023, respectively.
 
    
Gross

Amounts

Recognized
     
Gross Amounts

Offset in the

Consolidated

Statements of

Financial

Condition
     
Amounts

Presented in the
Consolidated

Statements of

Financial

Condition
     
Gross Amounts Not Offset in the

Consolidated Statements of

Financial Condition
     
 Net Amount 
  
December 31, 2024
   
Financial

Instruments
     
Cash Collateral
Received/

Pledged*
  
Assets
                  
MS&Co.
                  
Futures
     $ 6,264,672       $ (3,995,402)       $ 2,269,270        $ -        $ -        $ 2,269,270   
Forwards
      4,173,747        (2,328,677)        1,845,070         -         -         1,845,070   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
     10,438,419        (6,324,079)        4,114,340         -         -         4,114,340   
JPMorgan
                  
Forwards
      74,339        (74,339)        -         -         -         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
     $ 10,512,758       $ (6,398,418)       $ 4,114,340        $ -        $ -        $ 4,114,340   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                  
MS&Co.
                  
Futures
     $ (3,995,402)       $ 3,995,402       $ -        $ -        $ -        $ -   
Forwards
      (2,328,677)        2,328,677        -         -         -         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
     (6,324,079)        6,324,079        -         -         -         -   
JPMorgan
                  
Forwards
      (246,982)        74,339        (172,643)        -         172,643         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities
     $ (6,571,061)       $ 6,398,418       $ (172,643)       $ -        $ 172,643        $ -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Net fair value
                    $ 4,114,340  * 
                 
 
 
  
    
Gross

Amounts
 Recognized 
     
Gross Amounts

Offset in the
Consolidated

Statements of
Financial
Condition
     
Amounts

 Presented in the 
Consolidated

Statements of
Financial
Condition
     
 Gross Amounts Not Offset in the 

Consolidated Statements of

Financial Condition
     
 Net Amount 
  
December 31, 2023
   
Financial
Instruments
     
Cash Collateral
Received/

Pledged*
  
Assets
                  
MS&Co.
                  
Futures
     $ 4,050,808        $ (4,050,808)       $ -        $ -        $ -        $ -   
Forwards
      4,092,756         (4,092,756)        -         -         -         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
     8,143,564         (8,143,564)        -         -         -         -   
JPMorgan
                  
Forwards
      51,219         (51,219)        -         -         -         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
     $ 8,194,783        $ (8,194,783)       $ -        $ -        $ -        $ -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                  
MS&Co.
                  
Futures
     $ (4,570,043)       $ 4,050,808        $ (519,235)       $ -        $ 519,235        $ -   
Forwards
      (5,868,972)        4,092,756         (1,776,216)        -         1,776,216         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
     (10,439,015)        8,143,564         (2,295,451)        -         2,295,451         -   
JPMorgan
                  
Forwards
      (128,041)        51,219         (76,822)        -         76,822         -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total liabilities
     $ (10,567,056)       $ 8,194,783        $ (2,372,273)       $ -        $ 2,372,273        $ -   
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Net fair value
                    $ -  * 
                 
 
 
  
 
*
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 Consolidated 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.
 
60
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The following tables indicate the gross fair values of derivative instruments of futures and forward contracts as separate assets and liabilities as of December 31, 2024 and 2023, respectively.
 
    
December 31, 2024
    
Assets
     
Futures Contracts
     
Currencies
     $ 1,699,357    
Energy
      389,655    
Grains
      653,953    
Indices
      395,900    
Interest Rates U.S.
      335,383    
Interest Rates
Non-U.S.
      973,618    
Livestock
      328,742    
Metals
      154,495    
Softs
      1,333,569    
  
 
 
 
  
Total unrealized appreciation on open futures contracts
      6,264,672    
  
 
 
 
  
Liabilities
     
Futures Contracts
     
Currencies
      (331,744 )   
Energy
      (462,524 )   
Grains
      (262,894 )   
Indices
      (1,200,240 )   
Interest Rates U.S.
      (53,000 )   
Interest Rates
Non-U.S.
      (867,400 )   
Livestock
      (120,753 )   
Metals
      (358,814 )   
Softs
      (338,033 )   
  
 
 
 
  
Total unrealized depreciation on open futures contracts
      (3,995,402 )   
  
 
 
 
  
Net unrealized appreciation on open futures contracts
     $ 2,269,270     *
  
 
 
 
  
Assets
     
Forward Contracts
     
Currencies
     $ 3,566,168    
Metals
      681,918    
  
 
 
 
  
Total unrealized appreciation on open forward contracts
      4,248,086    
  
 
 
 
  
Liabilities
     
Forward Contracts
     
Currencies
      (1,986,002 )   
Metals
      (589,657 )   
  
 
 
 
  
Total unrealized depreciation on open forward contracts
      (2,575,659 )   
  
 
 
 
  
Net unrealized appreciation on open forward contracts
     $ 1,672,427     **
  
 
 
 
  
 
*
This amount is in “Net unrealized appreciation on open futures contracts” in the Consolidated Statements of Financial Condition.
 
**
This amount is in “Net unrealized appreciation on open forward contracts” in the Consolidated Statements of Financial Condition.
 
61
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
    
December 31, 2023
    
Assets
     
Futures Contracts
     
Currencies
     $ 213,492    
Energy
      161,745    
Grains
      375,418    
Indices
      991,165    
Interest Rates U.S.
      93,101    
Interest Rates
Non-U.S.
      726,694    
Livestock
      122,423    
Metals
      254,138    
Softs
      1,112,632    
  
 
 
 
  
Total unrealized appreciation on open futures contracts
      4,050,808    
  
 
 
 
  
Liabilities
     
Futures Contracts
     
Currencies
      (253,517 )   
Energy
      (754,945 )   
Grains
      (575,307 )   
Indices
      (660,445 )   
Interest Rates U.S.
      (789,921 )   
Interest Rates
Non-U.S.
      (927,673 )   
Livestock
      (58,085 )   
Metals
      (128,916 )   
Softs
      (421,234 )   
  
 
 
 
  
Total unrealized depreciation on open futures contracts
      (4,570,043 )   
  
 
 
 
  
Net unrealized depreciation on open futures contracts
     $ (519,235 )    *
  
 
 
 
  
Assets
     
Forward Contracts
     
Currencies
     $ 3,324,371    
Metals
      819,604    
  
 
 
 
  
Total unrealized appreciation on open forward contracts
      4,143,975    
  
 
 
 
  
Liabilities
     
Forward Contracts
     
Currencies
      (4,651,461 )   
Metals
      (1,345,552 )   
  
 
 
 
  
Total unrealized depreciation on open forward contracts
      (5,997,013 )   
  
 
 
 
  
Net unrealized depreciation on open forward contracts
     $ (1,853,038 )    **
  
 
 
 
  
 
*
This amount is in “Net unrealized depreciation on open futures contracts” in the Consolidated Statements of Financial Condition.
 
**
This amount is in “Net unrealized depreciation on open forward contracts” in the Consolidated Statements of Financial Condition.
 
62
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
The following table indicates the trading gains and losses, by market sector, on derivative instruments for the years ended December 31, 2024, 2023 and 2022, respectively.
 
Sector
   
    2024    
       
    2023    
       
    2022
(1)
    
    
Currencies
     $ 3,290,483          $ (4,518,431 )        $ 10,675,253     
Energy
      (4,355,744 )         (100,763 )         8,460,214    
Grains
      2,184,698          (1,074,796 )         1,189,266    
Indices
      5,040,789          2,380,229           (2,499,428 )   
Interest Rates U.S.
      (416,157 )         73,432          5,425,496    
Interest Rates
Non-U.S.
      (2,821,417 )         (3,909,061 )         7,026,148    
Livestock
      (1,223,546 )         298,085          (209,595 )   
Metals
      (2,672,437 )         (3,128,072 )         267,087    
Softs
      9,368,261          1,171,254          (594,050 )   
  
 
 
 
     
 
 
 
     
 
 
 
  
Total
     $   8,394,930     ***     $  (8,808,123 )    ***     $  29,740,391     ***
  
 
 
 
     
 
 
 
     
 
 
 
  
 
(1)
 
Not consolidated.
***
This amount is in “Total trading results” in the Consolidated Statements of Income and Expenses.
 
6.
Fair Value Measurements:
Partnership’s and the Trading Company’s Fair Value Measurements.
Fair value is defined as the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The fair value of exchange-traded futures, forward and option contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of
non-exchange-traded
foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as input the spot prices, interest rates and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.
The Partnership and the Trading Company consider prices for commodity futures, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills,
non-exchange-traded
forward, swap and certain option contracts for which market quotations are not readily available are priced by pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the years ended December 31, 2024 and 2023, the Partnership and the Trading Company did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3).
 
63
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
December 31, 2024
   
Total
  
Level 1
  
Level 2
  
Level 3
Assets
         
Futures
     $ 6,264,672       $ 6,264,672       $ -       $
       - 
   
Forwards
      4,248,086       -        4,248,086        -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total assets
     $ 10,512,758      $ 6,264,672      $ 4,248,086      $ -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Liabilities
         
Futures
     $ 3,995,402      $ 3,995,402      $ -       $ -   
Forwards
      2,575,659       -        2,575,659       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total liabilities
     $ 6,571,061      $ 3,995,402      $ 2,575,659      $ -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
December 31, 2023
   
Total
  
Level 1
  
Level 2
  
Level 3
Assets
         
Futures
     $ 4,050,808      $ 4,050,808      $ -       $ -   
Forwards
      4,143,975       -        4,143,975       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total assets
     $ 8,194,783      $ 4,050,808      $ 4,143,975      $ -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Liabilities
         
Futures
     $ 4,570,043      $ 4,570,043      $ -       $ -   
Forwards
      5,997,013       -        5,997,013       -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total liabilities
     $    10,567,056      $   4,570,043      $    5,997,013      $ -   
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
7.
Investment in the Trading Company:
On January 1, 2021, the assets allocated to WCM for trading were invested in CMF Winton, a limited partnership organized under the partnership laws of the State of New York. CMF Winton permits accounts managed by WCM using the Winton Futures Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of CMF Winton. Individual and pooled accounts currently managed by WCM, including the Partnership, are permitted to be limited partners of CMF Winton. The General Partner and WCM believe that trading through this structure promotes efficiency and economy in the trading process. The General Partner and WCM have agreed that WCM will trade the Partnership’s assets allocated to WCM at a level that is up to 1.5 times the amount of assets allocated, provided that the General Partner may instruct WCM to change such level in accordance with the investment management agreement from time to time.
The General Partner is not aware of any material changes to the trading program discussed above during the year ended December 31, 2024.
The Partnership’s/Trading Company’s trading of futures, forward, swap, and option contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. The Partnership/Trading Company engage in such trading through commodity brokerage accounts maintained with MS&Co.
Generally, a limited partner in the Trading Company may withdraw all or part of its capital contribution and undistributed profits, if any, from the Trading Company as of the end of any month (the “Redemption Date”) after a request has been made to the Trading Manager at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner elects to redeem and informs the Trading Company. However, a limited partner may request a withdrawal as of the end of any day if such request is received by the Trading Manager at least three days in advance of the proposed withdrawal date.
Management fees, General Partner fees, ongoing selling fees and incentive fees are charged at the Partnership level. All clearing fees paid to MS&Co. are borne directly by the Partnership for its direct trading. In addition, clearing fees are borne by the Trading Company and allocated to the Trading Company’s limited partners, including the Partnership. Professional fees are borne by the Trading Company and allocated to the Partnership, and also charged directly at the Partnership level.
 
64
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
At December 31, 2024 and 2023, the Partnership owned 100% of CMF Winton. It is the Partnership’s intention to continue to invest in the Trading Company. The performance of the Partnership is directly affected by the performance of the Trading Company. Effective October 1, 2023, the Partnership has consolidated its wholly owned investment in the Trading Company. Expenses to investors as a result of investment in the Trading Company are approximately the same as they would be if the Partnership traded directly and redemption rights are not affected.
Summarized information reflecting the total assets, liabilities and partners’ capital of the Trading Company is shown in the following tables:
 
    
December 31, 2024
    
  Total Assets  
  
  Toal Liabilities  
  
  Total Capital  
CMF Winton
     $ 52,656,503       $ 218,198       $ 52,438,305   
    
December 31, 2023
    
Total Assets
  
Toal Liabilities
  
Total Capital
CMF Winton
     $ 56,626,728      $ 1,342,545      $ 55,284,183  
Summarized information reflecting the net investment income (loss), total trading results and net income (loss) of the Trading Company is shown in the following tables:
 
    
For the year ended December 31, 2024
    
 Net Investment 

Income (Loss)
  
Total Trading

Results
  
 Net Income (Loss) 
CMF Winton
     $ 2,104,638       $ 2,889,334       $ 4,993,972   
    
For the year ended December 31, 2023
    
Net Investment

Income (Loss)
  
Total Trading

Results
  
Net Income (Loss)
CMF Winton
     $ 1,961,795      $ 5,553,897      $ 7,515,692  
    
For the year ended December 31, 2022
    
Net Investment

Income (Loss)
  
Total Trading

Results
  
Net Income (Loss)
CMF Winton
     $ 402,283      $ 12,444,388      $ 12,846,671  
Summarized information reflecting the Partnership’s investment in and the Partnership’s
pro-rata
share of the results of operations of the Trading Company is shown in the following tables:
 
    
December 31, 2024
     
For the year ended December 31, 2024
          
    
% of
               
Expenses
   
Net
          
Funds
   
Partners’

Capital
     
Fair

Value
   
Income

(Loss)
   
Clearing

Fees
   
Professional

Fees
   
Income

(Loss)
   
Investment

Objective
   
Redemptions

Permitted
CMF Winton
      36.10%       $ 52,570,193       $ 5,277,435       $ 205,003       $ 78,460       $ 4,993,972       Commodity Portfolio     Monthly
    
       December 31, 2023       
     
For the year ended December 31, 2023
          
    
% of
               
         Expenses         
   
Net
          
Funds
   
Partners’

Capital
     
Fair

Value
   
Income

(Loss)
   
Clearing

Fees
   
Professional

Fees
   
Income

(Loss)
   
Investment

Objective
   
Redemptions

Permitted
CMF Winton
      37.67%       $ 55,472,926       $ 7,738,283       $ 151,973       $ 70,618       $ 7,515,692      Commodity Portfolio    Monthly
    
December 31, 2022
     
For the year ended December 31, 2022
          
    
% of
               
Expenses
   
Net
          
Funds
   
Partners’

Capital
     
Fair

Value
   
Income

(Loss)
   
Clearing

Fees
   
Professional

Fees
   
Income

(Loss)
   
Investment

Objective
   
Redemptions
Permitted
CMF Winton
      31.41%       $ 49,515,860       $  13,064,810       $ 150,054       $ 68,085       $  12,846,671      Commodity Portfolio    Monthly
 
65
Table of Contents
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
8.
Financial Highlights:
Financial highlights for the limited partner class as a whole for the years ended December 31, were as follows:
 
    
2024
    
2023
    
2022
(1)
  
    
Class A
    
Class Z
    
Class A
    
Class Z
    
Class A
    
Class Z
  
Per Unit Performance
             
(for a unit outstanding throughout the year):*
             
Net realized and unrealized gains (losses)
    $ 1.56       $ 0.67       $ (0.21)       $ (0.09 )      $ 6.97       $ 2.96    
Net investment income (loss)
      0.06         0.13         0.20         0.18         (1.11)         (0.38)    
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Increase (decrease) for the year
      1.62         0.80         (0.01)         0.09         5.86         2.58    
Net asset value per Unit, beginning of year
      28.07         12.13         28.08         12.04         22.22         9.46    
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Net asset value per Unit, end of year
    $ 29.69       $ 12.93       $ 28.07       $ 12.13       $ 28.08       $ 12.04    
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
    
2024
    
2023
    
2022
(1)
  
    
  Class A  
    
  Class Z  
    
  Class A  
    
  Class Z  
    
  Class A  
    
  Class Z  
  
Ratios to Average Limited Partners’ Capital:
             
Net investment income (loss) **
      0.2   %      1.0   %      0.7   %      1.4   %      (4.1)   %      (3.2)   % 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Operating expenses
      3.5   %      2.7   %      3.4   %      2.6   %      3.2   %      2.5   % 
Incentive fees
      0.7   %      0.7   %      0.1   %      0.1   %      2.2   %      2.2   % 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total expenses
      4.2   %      3.4   %      3.5   %      2.7   %      5.4   %      4.7   % 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total return:
             
Total return before incentive fees
      6.5   %      7.3   %      0.1   %      0.9   %      29.1   %      29.9   % 
Incentive fees
      (0.7)  %      (0.7)  %      (0.1)   %      (0.2)   %      (2.7)   %      (2.6)   % 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total return after incentive fees
      5.8   %      6.6   %      -    %      0.7   %      26.4   %      27.3   % 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
(1)
 
Not consolidated.
 
*
Net investment income (loss) per Unit is calculated by dividing the interest income less total expenses by the average number of Units outstanding during the year. The net realized and unrealized gains (losses) per Unit is a balancing amount necessary to reconcile the change in net asset value per Unit with the other per unit information.
 
**
Interest income less total expenses.
The above ratios and total return may vary for individual investors based on the timing of capital transactions during the year. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average partners’ capital of the Partnership and include the income and expenses allocated from the Trading Company for the year ended 2022. Financial highlights for the years ended December 31, 2024 and 2023 were based on consolidated income and expenses.
 
9.
Subsequent Events:
The General Partner evaluates events that occur after the balance sheet date but before and up until consolidated financial statements are issued. The General Partner has assessed the subsequent events through the date the consolidated financial statements were issued and has determined that there were no subsequent events requiring adjustment to or
disclosure
in the consolidated financial statements.
 
66
Ceres Classic L.P.
Notes to Consolidated Financial Statements
 
Selected unaudited quarterly financial data for the Partnership for the years ended December 31, 2024 and 2023 are summarized below:
 
    
  For the period from  

October 1, 2024 to

December 31, 2024
  
  For the period from  

July 1, 2024 to

September 30, 2024
  
  For the period from  

April 1, 2024 to

June 30, 2024
  
  For the period from  

January 1, 2024 to

March 31, 2024
Total investment income
     $ 1,401,682      $ 1,722,118      $ 1,854,301      $ 1,774,336  
Total expenses
      (1,247,186 )      (1,364,496 )      (1,344,920 )      (2,476,213 ) 
Total trading results
      (297,248 )      (9,943,247 )      (3,544,431 )      22,179,856  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Net income (loss)
     $ (142,752 )     $ (9,585,625 )     $ (3,035,050 )     $ 21,477,979  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Increase (decrease) in net asset value per Unit:
         
Class A
     $ (0.01 )     $ (1.89 )     $ (0.59 )     $ 4.11  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Class Z
     $ 0.02      $ (0.79 )     $ (0.23 )     $ 1.80  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
    
For the period from

October 1, 2023 to

December 31, 2023
  
For the period from

July 1, 2023 to

September 30, 2023
(1)
  
For the period from

April 1, 2023 to

June 30, 2023
(1)
 
For the period from

January 1, 2023 to

March 31, 2023
(1)
Total investment income
     $ 1,823,964      $ 1,821,741      $ 1,599,022      $ 1,394,110  
Total expenses
      (1,351,137 )      (1,543,540 )      (1,333,429 )      (1,318,032 ) 
Total trading results
      (15,337,641 )      5,877,947       10,353,264       (1,697,450 ) 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Net income (loss)
     $ (14,864,814 )     $ 6,156,148      $ 10,618,857      $ (1,621,372 ) 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Increase (decrease) in net asset value per Unit:
         
Class A
     $ (2.81 )     $ 1.15      $ 1.95      $ (0.30 ) 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Class Z
     $ (1.19 )     $ 0.52      $ 0.86      $ (0.10 ) 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
(1)
 
Not consolidated.
 
 
67
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
.
Not applicable.
Item 9A.
Controls and Procedures
.
The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President (the General Partner’s principal executive officer) and Chief Financial Officer (“CFO”) (the General Partner’s principal financial officer) 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 December 31, 2024 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.
The Annual Report for the year ended December 31, 2024, included in “Item 8.
Financial Statements and Supplementary Data
.”, includes the General Partner’s report on internal control over financial reporting.
There were no changes in the Partnership’s internal control over financial reporting during the fiscal quarter ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B.
Other Information
.
10b5-1
Trading Plans
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. The General Partner is managed by a board of directors. During the fiscal quarter ended December 31, 2024, no officers or directors of the General Partner adopted, modified or terminated a “Rule
10b5-1
trading arrangement” (as defined in Item 408 of Regulation
S-K
of the Exchange Act).
There were no
“non-Rule
10b5-1
trading arrangements” (as defined in Item 408 of Regulation
S-K
of the Exchange Act) adopted, modified or terminated during the fiscal quarter ended December 31, 2024 by the directors and officers of the General Partner.
 
68
Table of Contents
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
.
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. Investment decisions are made by the Trading Advisors.
The directors and executive officers of the General Partner are Patrick T. Egan (President and Chairman of the Board of Directors of the General Partner), Brooke Lambert (Chief Financial Officer), Victoria Eckstein (Director) and Tatiana Segal (Director). Each director holds office until the earlier of his or her death, resignation or removal. Vacancies on the board of directors may be filled by either (i) the majority vote of the remaining directors or (ii) MSCM, as the sole member of the General Partner. The officers of the General Partner are designated by the General Partner’s board of directors. Each officer will hold office until his or her successor is designated and qualified or until his or her death, resignation or removal.
Directors of the General Partner are responsible for overall corporate governance of the General Partner and meet periodically to consider strategic decisions regarding the General Partner’s activities. Under CFTC rules, each Director of the General Partner is deemed to be a principal of the General Partner and, as a result, is listed as such with the NFA. Patrick T. Egan serves on the General Partner’s Investment Committee and is the trading principal responsible for allocation decisions (or responsible for supervising those who are).
Patrick T. Egan
, age 55, has been a Director of the General Partner since December 2010. Since December 2010, Mr. Egan has been a principal and registered as an associated person of the General Partner, and is an associate member of NFA. Since October 2014, Mr. Egan has served as President of the General Partner and Chairman of the Board of Directors. Since August 2013, Mr. Egan has been registered as a swap associated person of the General Partner. In addition, from May 2021 to February 2022, Mr. Egan was a branch manager, principal and registered as an associated person of Morgan Stanley Investment Manager Inc., (“MSIM”), and was an associate member of the NFA. From September 2013 to May 2014, Mr. Egan served as a Vice President of Morgan Stanley Strategies LLC (formerly, Morgan Stanley GWM Feeder Strategies LLC), which acts as a general partner to multiple alternative investment entities, and Morgan Stanley AI GP LLC (formerly, Morgan Stanley HedgePremier GP LLC), which acts as a general partner and administrative agent to numerous hedge fund feeder funds. From September 2013 to May 2014, Mr. Egan was registered as an associated person and listed as a principal of each such entity. Since January 2013, each such entity has been registered as a commodity pool operator with the CFTC. Mr. Egan was responsible for overseeing the implementation of certain CFTC and NFA regulatory requirements applicable to such entities. From June 2009 to December 2014, Mr. Egan was employed by Morgan Stanley Smith Barney LLC, a financial services firm, where his responsibilities included serving as Executive Director and as
Co-Chief
Investment Officer for Morgan Stanley Managed Futures from June 2009 through June 2011 and as Chief Risk Officer for Morgan Stanley Managed Futures from June 2011 through October 2014. Since October 2014, Mr. Egan has been responsible for management of the
day-to-day
operations of Morgan Stanley Managed Futures. Since January 2015, Mr. Egan has been employed by the General Partner. From November 2010 to October 2014, Mr. Egan was registered as an associated person of Morgan Stanley Smith Barney LLC. From April 2007 through June 2009, Mr. Egan was employed by MS & Co., a financial services firm, where his responsibilities included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From April 2007 through June 2009, Mr. Egan was registered as an associated person of MS & Co. From March 1993 through April 2007, Mr. Egan was employed by Morgan Stanley DW Inc., a financial services firm, where his initial responsibilities included serving as an analyst and manager within the Managed Futures Department (with primary responsibilities for product development, due diligence, investment analysis and risk management of the firm’s commodity pools) and later included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From February 1998 through April 2007, Mr. Egan was registered as an associated person of Morgan Stanley DW Inc. From August 1991 through March 1993, Mr. Egan was employed by Dean Witter Intercapital, the asset management arm of Dean Witter Reynolds, Inc., where his responsibilities included serving as a mutual fund administration associate. Mr. Egan also served as a Director from November 2004 through October 2006, and from November 2006 through October 2008 of the Managed Funds Association’s Board of Directors, a position he was elected to by industry peers for two consecutive
two-year
terms. Mr. Egan earned his Bachelor of Business Administration degree with a concentration in Finance in May 1991 from the University of Notre Dame.
Brooke Lambert,
age 41, has been the Chief Financial Officer, Treasurer and a principal of the General Partner since May 2022. Ms. Lambert has been employed by Morgan Stanley Investment Management, a financial services firm, since July 2014, where her responsibilities include serving as a Vice President and managing the accounting, financial reporting and regulatory reporting of the commodity pools operated by the General Partner. From July 2009 to July 2014, Ms. Lambert was employed by Morgan Stanley Smith Barney, a financial services firm, where her responsibilities included serving as a Vice President responsible for the accounting, financial reporting and regulatory reporting of the commodity pools operated by the General Partner. Before joining Morgan Stanley, Ms. Lambert was employed by Citigroup Alternative Investments, a financial services firm, from January 2006 through July 2009, where her responsibilities included serving as an Assistant Vice President responsible for the accounting, financial reporting and regulatory reporting of Citigroup Alternative Investments’ managed futures funds. Ms. Lambert earned her Bachelor of Science in Finance in May 2005 from Towson University.
 
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Table of Contents
Victoria Eckstein,
age 43, has been a Director of the General Partner since June 30, 2022, and a principal of the General Partner since July 14, 2022. Since November 2022, Ms. Eckstein has served as Chief Operating Officer of Calvert Research and Management, an investment management company focused on responsible investments. Calvert is a wholly-owned subsidiary of Morgan Stanley and an affiliate of the General Partner. Since December 2020, Ms. Eckstein has served as a Managing Director of Morgan Stanley Investment Management Inc. (“MSIM”), and from December 2020 to November 2022 served as Chief Operating Officer of the Solutions & Multi-Asset Group at MSIM, a collection of business units offering alpha-centric, multi-asset or multi-manager investment solutions. From December 2016 to December 2020, Ms. Eckstein served as an Executive Director of MSIM and from April 2010 to December 2016, Ms. Eckstein served as a Vice President of MSIM. From April 2010 to December 2020, Ms. Eckstein primarily managed the
day-to-day
non-investment
functions of the Portfolio Solutions Group, a business unit offering multi-asset, multi-manager managed portfolios. From January 2007 to April 2010, Ms. Eckstein was employed by Morgan Stanley Smith Barney LLC, a financial services firm, where her responsibilities included trade execution, portfolio analysis, external manager selection and research coverage. Ms. Eckstein received her Juris Doctorate from the Benjamin N. Cardozo School of Law in 2006 and her Bachelor of Arts, magna cum laude, from Brandeis University in 2003.
Tatiana Segal,
age 56, has been a Director of the General Partner since June 30, 2022, and a principal of the General Partner since July 1, 2022. She has also been a principal of MSIM since October 31, 2019. Ms. Segal joined MSIM as a Managing Director and Head of Risk Management in August 2019. She is responsible for risk management across MSIM business units and risk categories, including investment, operational, and franchise risk, and is a member of the Investment Management Operating Committee and a chair of the Investment Management Risk Committee. In June 2022, in addition to her original role, Ms. Segal was appointed as Global Head of
Non-Financial
Risk for Investment Management to manage existing and emergent
non-financial
risks across the division. She has since been appointed a member of Morgan Stanley’s NFR Steering Committee and Enterprise Controls Committee. From August 2011 to August 2019, Ms. Segal was a partner and Head of Risk Management at SkyBridge Capital Management, a global alternative investments firm, where she was also a member of the Manager Selection, Portfolio Allocation and Real Estate Investment Committees. Prior to joining SkyBridge in August 2011, she was a Managing Director and Chief Risk Officer at Cerberus Capital Management, LLC from January 2009 through July 2011. Before joining Cerberus, Ms. Segal was Managing Director and Chief Risk Officer for Diamond Lake Investment Group from February 2008 through September 2008. From May 2006 through January 2008, Ms. Segal was a Senior Risk Manager at Citigroup Alternative Investments, where she was responsible for independent risk oversight of a multi-billion hedge fund and fund of funds portfolio. From October 2000 through April 2006, Ms. Segal was a Director of Market Risk at Nomura Securities, Inc. Prior to joining Nomura Securities, she was Risk Manager at BNP Paribas from January 1999 through October 2000 and a Risk Manager at Goldman, Sachs & Co., Ltd. from October 1995 through January 1999. Ms. Segal started her career at BlackRock Financial Management, Inc. from January 1993 through September 1995, as a portfolio analyst within BlackRock’s Institutional Accounts Division. Ms. Segal graduated from Columbia University in January 1993 with a Bachelor’s Degree in Economics. Ms. Segal is a
Co-Chair
of Risk Peer Advisory Group NY for 100 Women in Finance, as well as a contributing member of the council of The Directors and Chief Risk Officers. She serves as a board member of the Tenement Museum.
The Partnership has not adopted a code of ethics that applies to officers because it has no officers. In addition, the Partnership has not adopted any procedures by which investors may recommend nominees to the Partnership’s board of directors and has not established an audit committee because it has no board of directors.
Item 10.
Regulation
S-K
408(b) Rider
.
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. The General Partner is managed by a board of directors. The General Partner is a wholly-owned subsidiary of Morgan Stanley Capital Management LLC (“MSCM”). MSCM is ultimately owned by Morgan Stanley. Morgan Stanley has adopted insider trading policies and procedures applicable to its investment affiliates, including the General Partner, that it believes are reasonably designed to promote compliance with insider trading laws, rules and regulations. Morgan Stanley’s insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form
10-K.
 
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Table of Contents
Item 11.
Executive Compensation
.
The Partnership has no directors and executive officers. As a limited partnership, the business of the Partnership is managed by Ceres, which is responsible for the administration of the business affairs of the Partnership. Effective January 1, 2021, the Partnership pays the General Partner a monthly administrative fee equal to 1/12 of 0.75% (a 0.75% annual rate) of the Partnership’s net assets (plus “notional” funds, if any) as of the beginning of each month. Effective January 1, 2021, the Partnership directly pays the brokerage fees and other transaction-related fees and expenses, as incurred and also pays its ongoing administrative, operating, offering and organizational expenses (including, but not limited to, periodic legal, accounting, administrative, filing, reporting and data processing fees) and its pro rata share of such expenses of any trading company to which the Partnership has allocated assets.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
.
 
  (a)
Security Ownership of Certain Beneficial Owners
– As of February 28, 2025, the Partnership knows of one person who beneficially owns more than 5% of the Units outstanding.
 
(1) Title of Class
   
(2) Name of
Beneficial
Owner
   
(3) Amount and
Nature of
Beneficial
Ownership
   
(4) Percent of
Class
Class A Units
   
Ashley B. Coolidge TTEE
11701 Forest Glen Street,
Houston, TX 77024-6433
    279,142.172    5.9%
 
  (b)
Security Ownership of Management
– Under the terms of the Partnership Agreement, the Partnership’s affairs are managed by the General Partner. The following table indicates securities owned by management as of December 31, 2024:
 
(1) Title of Class
   
(2) Name of
Beneficial
Owner
   
(3) Amount and
Nature of
Beneficial
Ownership
   
(4) Percent of 
Class 
Class Z Units
    General Partner    119,150.531    91.5%
 
  (c)
Changes in Control
– None.
 
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Table of Contents
Item 13.
Certain Relationships and Related Transactions, and Director Independence
.
 
  (a)
Transactions with Related Persons.
None.
 
  (b)
Review, Approval or Ratification of Transactions with Related Persons.
Not applicable.
 
  (c)
Promoters and Certain Control Persons.
MS&Co., Morgan Stanley Wealth Management and the General Partner could be considered promoters for purposes of Item 404(c) of Regulation
S-K.
The nature and the amounts of compensation each promoter received or will receive, if any, from the Partnership are set forth under “Item 1.
Business
.”, “Item 8.
Financial Statements and Supplementary Data
.” and “Item 11.
Executive Compensation
.”
Item 14.
Principal Accountant Fees and Services
.
Effective January 1, 2021, the Partnership directly pays all of its accounting fees, as incurred, and its pro rata share of such expenses of any trading company to which the Partnership has allocated assets. Prior to January 1, 2021, the General Partner paid or reimbursed the Partnership for all accounting fees.
(1)
Audit Fees
. The aggregate fees billed for each of the last two fiscal years for professional services rendered by Ernst & Young LLP (“EY”) for the years ended December 31, 2024 and 2023 for the audit of the Partnership’s annual financial statements, review of financial statements included in the Partnership’s Forms 10-Q and 10-K and other services normally provided in connection with regulatory filings or engagements were:
 
2024
    $ 146,492  
2023
    $ 143,100  
(2)
Audit-Related Fees
. None.
(3)
Tax Fees
. The Partnership did not pay EY any amounts in 2024 and 2023 for professional services in connection with tax compliance, tax advice, and tax planning.
(4)
All Other Fees
. None.
(5) Not Applicable.
(6) Not Applicable.
 
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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

(1) Financial Statements:

Consolidated Statements of Financial Condition at December 31, 2024 and 2023.

Consolidated Condensed Schedules of Investments at December 31, 2024 and 2023.

Consolidated Statements of Income and Expenses for the years ended December 31, 2024, 2023 and 2022.

Consolidated Statements of Changes in Partners’ Capital for the years ended December 31, 2024, 2023 and 2022.

Notes to Consolidated Financial Statements.

(2) Exhibits:

 

3.01

  

Ninth Amended and Restated Limited Partnership Agreement, dated as of November 23, 2020, is incorporated by reference from Exhibit 3.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on November 25, 2020.

3.02

  

Certificate of Limited Partnership, dated July 15, 1998, is incorporated by reference from Exhibit 3.02 of the Partnership’s Registration Statement on Form S-1 (File No. 333-60115) filed with the Securities and Exchange Commission on July 29, 1998.

3.03

  

Certificate of Amendment of Certificate of Limited Partnership, dated as of November 1, 2001 (changing its name from Morgan Stanley Dean Witter Charter Graham L.P. to Morgan Stanley Charter Graham L.P.), is incorporated by reference from Exhibit 3.01 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on November 6, 2001.

3.04

  

Certificate of Amendment of Certificate of Limited Partnership, dated June 1, 2009 (changing the name and mailing address of the general partner of the Partnership), is incorporated by reference from Exhibit 3.04 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on June 4, 2009.

3.05

  

Certificate of Amendment of Certificate of Limited Partnership, dated September 29, 2009 (changing its name from Morgan Stanley Charter Graham L.P. to Morgan Stanley Smith Barney Charter Graham L.P.), is incorporated by reference from Exhibit 3.05 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on October 5, 2009.

3.06

  

Certificate of Amendment of Certificate of Limited Partnership, dated August 23, 2010 (changing its name from Morgan Stanley Smith Barney Charter Graham L.P. to Managed Futures Charter Graham L.P.), is incorporated by reference from Exhibit 99.3.1 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on August 31, 2010.

3.07

  

Certificate of Amendment of Certificate of Limited Partnership, dated as of November 20, 2012 and effective November 30, 2012 (changing its name from Managed Futures Charter Graham L.P. to Managed Futures Premier Graham L.P.) is incorporated by reference from Exhibit 3.1 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on December 5, 2012.

3.08

  

Certificate of Amendment of Certificate of Limited Partnership, dated October 2, 2020 (changing its name from Managed Futures Premier Graham L.P. to Ceres Classic L.P.), is incorporated by reference from Exhibit 3.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on October 13, 2020.

4.01

  

Description of Securities, is incorporated by reference from Exhibit 4.01 of the Partnership’s Form 10-K (File No. 000-25603) filed with the Securities and Exchange Commission on March 25, 2021.

10.01

  

Management Agreement, dated as of November 6, 1998, among the Partnership, the General Partner, and Graham Capital Management, L.P., is incorporated by reference from Exhibit 10.01 of the Partnership’s Quarterly Report on Form 10-Q (File No. 000-25603) filed with the Securities and Exchange Commission on May 17, 1999.

10.01(a)

  

Amendment No. 1 to Management Agreement, dated as of April 1, 2014, among the Partnership, the General Partner and Graham Capital Management, L.P., is incorporated by reference from Exhibit 10.01 of the Partnership’s Quarterly Report on Form 10-Q (File No. 000-25603) filed with the Securities and Exchange Commission on May 13, 2014.

 

73

10.01(b)  

Amendment No. 2 to Management Agreement, dated January 29, 2019 and effective as of February 1, 2019, among the Partnership, the General Partner and Graham Capital Management, L.P., is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on February 7, 2019.

10.01(c)  

Amendment No. 3 to Management Agreement, dated December 16, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner and Graham, is incorporated by reference from Exhibit 10.4 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.02  

Form of Subscription and Exchange Agreement and Power of Attorney to be expected by each purchaser of Units is incorporated by reference from Exhibit B of the Partnership’s Prospectus, dated May 1, 2008, as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, on May 6, 2008.

10.03  

Escrow Agreement, dated as of July 25, 2007, among The Bank of New York, the General Partner, and Morgan Stanley & Co. Incorporated is incorporated by reference to Exhibit 10.04 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on July 31, 2007.

10.04  

Amended and Restated Customer Agreement between the Partnership and Dean Witter Reynolds Inc., dated as of November 13, 2000, is incorporated by reference from Exhibit 10.01 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on November 6, 2001.

10.04(a)  

Amendment No. 1 to the Amended and Restated Customer Agreement between the Partnership and Morgan Stanley DW Inc., dated as of July 31, 2003 and effective August 1, 2003, is incorporated by reference from Exhibit 10.05(a) of the Partnership’s Form 10-Q (File No. 0-25603) filed with the Securities and Exchange Commission on November 10, 2005.

10.04(b)  

Amendment No. 2 to the Amended and Restated Customer Agreement between the Partnership and Morgan Stanley DW Inc., dated as of July 1, 2005, is incorporated by reference from Exhibit 10.05(b) of the Partnership’s Form 10-Q (File No. 0-25603) filed with the Securities and Exchange Commission on August 12, 2005.

10.05  

Amended and Restated Commodity Futures Customer Agreement, between MS&Co. and the Funds listed on Appendix A thereto, dated as of November 12, 2013, is incorporated by reference from Exhibit 10.01 of the Partnership’s Form 10-Q (File No. 000-25603) filed with the Securities and Exchange Commission on November 13, 2013.

10.05(a)  

Supplement, dated as of July 25, 2017, to the Amended and Restated Commodity Futures Customer Agreement, between MS&Co. and the Funds listed on Appendix A thereto, dated as of November 12, 2013, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on July 31, 2017.

10.06  

Customer Agreement, by and among the Partnership and Morgan Stanley & Co. International Limited, dated as of November 6, 2000, is incorporated by reference from Exhibit 10.04 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on November 6, 2001.

10.07  

Foreign Exchange and Options Master Agreement between MS&Co. and the Partnership, dated as of August 30, 1999, is incorporated by reference from Exhibit 10.05 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on November 6, 2001.

10.08  

Securities Account Control Agreement, among the Partnership, MS&Co. and Dean Witter Reynolds Inc., dated as of May 1, 2000, is incorporated by reference from Exhibit 10.03 of the Partnership’s Form 8-K (File No. 0-25603) filed with the Securities and Exchange Commission on November 6, 2001.

10.09  

Amended and Restated Alternative Investment Selling Agent Agreement, dated as of March 3, 2016, by and among the General Partner, Morgan Stanley Wealth Management and the partnerships listed on Schedule 1 thereto, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on March 8, 2016.

10.09(a)  

Amendment to the Amended and Restated Alternative Investment Selling Agreement, dated as of July 1, 2020, by and among the Partnership, the General Partner, Morgan Stanley Wealth Management and the other partnerships listed on Schedule 1 thereto, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on July 8, 2020.

 

74

10.09(b)  

Amendment to the Amended and Restated Alternative Investment Selling Agent Agreement, dated as of December 31, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner, Morgan Stanley Wealth Management and the other partnerships listed on Schedule 1 thereto, is incorporated by reference from Exhibit 10.5 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.10  

U.S. Treasury Securities Purchase Authorization Agreement, effective as of June 1, 2015, by and among MS&Co. and the Partnership, is incorporated by reference to Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on November 4, 2015.

10.11  

Amended and Restated Master Services Agreement, effective as of March 31, 2015, by and among SS&C Technologies, Inc., the General Partner and each of the collective investment vehicles listed in Schedule C thereto, is incorporated by reference to Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on August 6, 2015.

10.12  

Escrow Agreement, dated August 17, 2017, by and among Ceres Managed Futures LLC, the funds listed on Schedule A thereto, UMB Fund Services, Inc., and UMB Bank, N.A., as amended, dated September 5, 2017, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on September 8, 2017.

10.13  

Transfer Agency Agreement, dated as of August 17, 2017, by and between Ceres Managed Futures LLC, the funds listed on Schedule A thereto, and UMB Fund Services, Inc., as amended, dated September 5, 2017, is incorporated by reference from Exhibit 10.2 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on September 8, 2017.

10.14  

Alternative Investment Selling Agent Agreement, dated as of November 1, 2018, by and among Ceres Managed Futures LLC, Harbor Investment Advisory, LLC, Morgan Stanley Distribution Inc., and the limited partnerships listed on Schedule 1 thereto, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 10-Q (File No. 000-25603) filed with the Securities and Exchange Commission on November 8, 2018.

10.14(a)  

Amendment to the Alternative Investment Selling Agent Agreement, dated as of July 1, 2020, by and among the Partnership, the General Partner, MSDI and Harbor, is incorporated by reference from Exhibit 10.2 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on July 8, 2020.

10.14(b)  

Amendment to the Alternative Investment Selling Agent Agreement, dated as of December 31, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner, MSDI and Harbor, is incorporated by reference from Exhibit 10.6 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.15  

Management Agreement, dated as of December 18, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner and Campbell, is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.16  

Management Agreement, dated as of December 16, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner and EMC, is incorporated by reference from Exhibit 10.2 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.17  

Amended and Restated Management Agreement, dated as of July 3, 2014, among the Partnership, the General Partner, Winton Capital Management Limited and CMF Winton Master L.P., is incorporated by reference from Exhibit 10.17 of the Partnership’s Form 10-K (File No. 000-25603) filed with the Securities and Exchange Commission on March 25, 2021.

10.17(a)  

Amendment No. 1 to Management Agreement, dated as of December 22, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner, Winton Capital Management Limited and CMF Winton Master L.P., is incorporated by reference from Exhibit 10.3 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 7, 2021.

10.17(b)  

Amendment No. 2 to Management Agreement, dated as of December 31, 2020 and effective as of January 1, 2021, by and among the Partnership, the General Partner, Winton Capital Management Limited and CMF Winton Master L.P., is incorporated by reference from Exhibit 10.1 of the Partnership’s Form 8-K (File No. 000-25603) filed with the Securities and Exchange Commission on January 8, 2021.

19.1  

Investment Manager Insider Trading Policy (filed herewith).

 

75

The exhibits required to be filed by Item 601 of Regulations S-K are incorporated herein by reference.

 

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

31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer).

32.1 — Section 1350 Certification (Certification of President and Director).

32.2 — Section 1350 Certification (Certification of Chief Financial Officer).

99.1 Financial Statements of CMF Winton Master L.P.

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 Label Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Document.

104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CERES CLASSIC L.P.

By:

  

Ceres Managed Futures LLC

 

(General Partner)

By:

  

/s/ Patrick T. Egan             

 

Patrick T. Egan

 

President and Director

 

Date: March 20, 2025

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

/s/ Patrick T. Egan

     

/s/ Tatiana Segal

   

Patrick T. Egan

     

Tatiana Segal

   

President and Director

     

Director

   

Ceres Managed Futures LLC

     

Ceres Managed Futures LLC

   

Date: March 20, 2025

     

Date: March 20, 2025

   

/s/ Brooke Lambert

     

/s/ Victoria Eckstein

   

Brooke Lambert

     

Victoria Eckstein

   

Chief Financial Officer

     

Director

   

(Principal Accounting Officer)

     

Ceres Managed Futures LLC

   

Ceres Managed Futures LLC

     

Date: March 20, 2025

   

Date: March 20, 2025

        

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.

Annual Report to limited partners.

No proxy material has been sent to limited partners.

 

77