Attached files
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EX-32.1 - EX-32.1 - GLOBAL DIVERSIFIED FUTURES FUND L.P. | y04778exv32w1.htm |
EX-31.2 - EX-31.2 - GLOBAL DIVERSIFIED FUTURES FUND L.P. | y04778exv31w2.htm |
EX-31.1 - EX-31.1 - GLOBAL DIVERSIFIED FUTURES FUND L.P. | y04778exv31w1.htm |
EX-32.2 - EX-32.2 - GLOBAL DIVERSIFIED FUTURES FUND L.P. | y04778exv32w2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2011
OR
o | 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 000-30455
GLOBAL
DIVERSIFIED FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York incorporation or organization) |
|
13-4015586 Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
522 Fifth Avenue 14th Floor
New York, New York 10036
(212) 296-1999
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ
(Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
As of April 30, 2011, 13,584.7822 Limited Partnership Redeemable Units were outstanding.
GLOBAL DIVERSIFIED FUTURES FUND L.P.
FORM 10-Q
INDEX
Page | ||||
Number | ||||
3 | ||||
4-5 | ||||
6 | ||||
7-15 | ||||
16-18 | ||||
19-24 | ||||
25 | ||||
26-31 |
Exhibits |
Exhibit 31.1 Certification |
Exhibit 31.2 Certification |
Exhibit 32.1 Certification |
Exhibit 32.2 Certification |
2
PART I
Item 1. Financial Statements
Global Diversified Futures Fund L.P.
Statements of Financial Condition
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets: |
||||||||
Investment in Funds, at fair value |
$ | 26,839,228 | $ | 28,849,787 | ||||
Equity in trading account: |
||||||||
Cash |
79,347 | 49,062 | ||||||
Total assets |
$ | 26,918,575 | $ | 28,898,849 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Accrued expenses: |
||||||||
Brokerage fees |
$ | 121,134 | $ | 130,045 | ||||
Management fees |
37,329 | 40,378 | ||||||
Incentive fees |
25,230 | 119,072 | ||||||
Other |
86,754 | 63,261 | ||||||
Redemptions payable |
193,678 | 110,030 | ||||||
Total liabilities |
464,125 | 462,786 | ||||||
Partners Capital: |
||||||||
General Partner, 157.9234 unit equilavents
outstanding at March 31, 2011 and December
31, 2010 |
301,305 | 317,576 | ||||||
Limited Partners, 13,707.6698 and 13,982.7114
Redeemable Units outstanding at March 31,
2011 and December 31, 2010, respectively |
26,153,145 | 28,118,487 | ||||||
Total partners capital |
26,454,450 | 28,436,063 | ||||||
Total liabilities and partners capital |
$ | 26,918,575 | $ | 28,898,849 | ||||
Net asset
value per unit |
$ | 1,907.92 | $ | 2,010.95 | ||||
See accompanying notes to financial statements.
3
Global Diversified Futures Fund L.P.
Schedule of Investments
March 31, 2011
(Unaudited)
(Unaudited)
% of Partners | ||||||||
Fair Value | Capital | |||||||
Investment in
Funds |
||||||||
CMF Aspect Master Fund L.P. |
$ | 5,602,563 | 21.18 | % | ||||
CMF Altis Partners Master Fund L.P. |
4,970,256 | 18.79 | ||||||
Waypoint Master Fund L.P. |
6,611,328 | 24.99 | ||||||
Blackwater Master Fund L.P. |
5,947,593 | 22.48 | ||||||
CMF Sasco Master Fund L.P. |
3,707,488 | 14.01 | ||||||
Total investment in Funds, at fair value |
$ | 26,839,228 | 101.45 | % | ||||
See accompanying notes to financial statements.
4
Global Diversified Futures Fund L.P.
Schedule of Investments
December 31, 2010
Schedule of Investments
December 31, 2010
% of Partners | ||||||||
Fair Value | Capital | |||||||
Investment in Funds |
||||||||
CMF Aspect Master Fund L.P. |
$ | 6,105,359 | 21.47 | % | ||||
CMF Altis Partners Master Fund L.P. |
5,893,177 | 20.72 | ||||||
Waypoint Master Fund L.P. |
7,080,876 | 24.90 | ||||||
Blackwater Master Fund L.P. |
5,892,624 | 20.72 | ||||||
CMF Sasco Master Fund L.P. |
3,877,751 | 13.64 | ||||||
Total investment in Funds, at fair value |
$ | 28,849,787 | 101.45 | % | ||||
See accompanying notes to financial statements.
5
Global Diversified Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Investment income: |
||||||||
Interest income |
$ | | $ | 239 | ||||
Interest income from investment in Funds |
5,368 | 3,212 | ||||||
Total investment income |
5,368 | 3,451 | ||||||
Expenses: |
||||||||
Brokerage fees including clearing fees |
404,527 | 401,602 | ||||||
Management fees |
114,559 | 125,707 | ||||||
Incentive fees |
25,230 | | ||||||
Other |
56,651 | 35,336 | ||||||
Total expenses |
600,967 | 562,645 | ||||||
Net investment income (loss) |
(595,599 | ) | (559,194 | ) | ||||
Trading Results: |
||||||||
Net gains (losses) on trading of commodity interests and investment in Funds: |
||||||||
Net realized gains (losses) on closed contracts |
| (450,734 | ) | |||||
Net realized gains (losses) on investment in Funds |
207,744 | (262,140 | ) | |||||
Change in net unrealized gains (losses) on open contracts |
| 809 | ||||||
Change in net unrealized gains (losses) on investments in Funds |
(1,061,111 | ) | 878,692 | |||||
Total trading results |
(853,367 | ) | 166,627 | |||||
Net income (loss) |
(1,448,966 | ) | (392,567 | ) | ||||
Redemptions Limited Partners |
(532,647 | ) | (699,585 | ) | ||||
Redemptions General Partner |
| (100,000 | ) | |||||
Net increase (decrease) in Partners Capital |
(1,981,613 | ) | (1,192,152 | ) | ||||
Partners Capital, beginning of period |
28,436,063 | 29,723,936 | ||||||
Partners Capital, end of period |
$ | 26,454,450 | $ | 28,531,784 | ||||
Net asset value per unit (13,865.5932 and 15,259.7522 units outstanding at
March 31, 2011 and 2010, respectively) |
$ | 1,907.92 | $ | 1,869.74 | ||||
Net income (loss) per unit* |
$ | (103.03 | ) | $ | (23.72 | ) | ||
Weighted average units outstanding |
14,047.4403 | 15,531.4181 | ||||||
* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
6
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
1. General:
Global Diversified Futures Fund L.P. (the Partnership) is a limited partnership organized
under the partnership laws of the State of New York on June 15,
1998 to engage, directly or
indirectly, in the speculative trading of a diversified portfolio of commodity interests, including
futures contracts, options, swaps and forward contracts on United States exchanges and certain foreign
exchanges. The sectors traded include currencies, energy, lumber, grains, indices, metals, softs,
livestock and U.S. and non-U.S. interest rates. The commodity
interests that are traded by the Partnership, through it investment in the
Funds (as defined in note 5 Investment in Funds) are volatile and involve a high degree of market
risk. The Partnership commenced trading on February 2,
1999.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner
(the General Partner) and commodity pool operator of the Partnership. The General Partner is
wholly owned by Morgan Stanley Smith Barney Holdings LLC (MSSB Holdings). Morgan Stanley,
indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity broker for the Partnership, owns a minority
equity interest in MSSB Holdings. Citigroup Inc. (Citigroup), indirectly through various
subsidiaries, wholly owns CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became
its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly
owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup.
As of March 31, 2011, all trading decisions are made for the Partnership by Aspect Capital
Limited (Aspect), Altis Partners (Jersey) Limited (Altis), Waypoint Capital Management LLC
(Waypoint), Blackwater Capital Management LLC (Blackwater) and Sasco Energy Partners LLC
(Sasco) (each an Advisor and collectively, the Advisors), each of which is a registered
commodity trading advisor. Campbell & Company, Inc. (Campbell) was terminated as an Advisor to
the Partnership on November 30, 2010. Each
Advisor is allocated a portion of the Partnerships assets to manage. The Partnership invests the
portion of its assets allocated to each Advisor indirectly through investments in the Funds.
The
General Partner and each limited partner of the Partnership (each, a Limited Partner)
share in the profits and losses of the Partnership in proportion to the amount of Partnership
interest owned by each except that no Limited Partner shall be liable for obligations of the
Partnership in excess of its capital contribution and profits, if any, net of distributions.
The accompanying financial statements and accompanying notes are
unaudited but, in the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the Partnerships financial condition at
March 31, 2011 and December 31, 2010 and the results of its operations and changes in partners
capital for the three months ended March 31, 2011 and 2010. These financial statements
present the results of interim periods and do not include all disclosures normally provided in
annual financial statements. You should read these financial statements together with the financial
statements and notes included in the Partnerships Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the SEC) for the year ended December 31, 2010.
The preparation of financial statements and accompanying notes in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, income and
expenses, and related disclosure of contingent assets and liabilities in the financial statements
and accompanying notes. As a result, actual results could
differ from these estimates.
Due to the nature of commodity trading, the results of operations for the interim periods
presented should not be considered indicative of the results that may be expected for the entire
year.
7
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
2. Financial Highlights:
Changes in the net asset value per unit for the three months ended March 31, 2011 and 2010
were as follows:
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net realized and unrealized gains (losses) * |
$ | (89.45 | ) | $ | (13.56 | ) | ||
Interest income |
0.39 | 0.22 | ||||||
Expenses ** |
(13.97 | ) | (10.38 | ) | ||||
Increase (decrease) for the period |
(103.03 | ) | (23.72 | ) | ||||
Net asset value per unit, beginning of period |
2,010.95 | 1,893.46 | ||||||
Net asset value per unit, end of period |
$ | 1,907.92 | $ | 1,869.74 | ||||
* | Includes brokerage fees and clearing fees. | |
** | Excludes brokerage fees and clearing fees. |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Ratios to average net assets:*** |
||||||||
Net investment income (loss) before incentive fees**** |
(8.4 | )% | (8.0 | )% | ||||
Operating expenses |
8.5 | % | 8.0 | % | ||||
Incentive fees |
0.1 | % | | % | ||||
Total expenses |
8.6 | % | 8.0 | % | ||||
Total return: |
||||||||
Total return before incentive fees |
(5.0 | )% | (1.3 | )% | ||||
Incentive fees |
(0.1 | )% | | % | ||||
Total return after incentive fees |
(5.1 | )% | (1.3 | )% | ||||
*** | Annualized (other than incentive fees). | |
**** | Interest income less total expenses (exclusive of incentive fees). |
The above ratios may vary for individual investors based on the timing of capital transactions
during the period. Additionally, these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average net assets.
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety of commodity
interests, including derivative financial instruments and derivative commodity instruments. The
Partnerships investments are in other funds which trade these instruments. The Partnerships
trading activity are resulting from its investment in other funds
as shown in the Statements of Income and
Expenses and Changes in Partners Capital.
The customer agreements between the Partnership/Funds and CGM give the Partnership/Funds the
legal right to net unrealized gains and losses on open futures and forward contracts. The
Partnership/Funds net, for financial
reporting purposes, the unrealized gains and losses on open futures
and on open forward contracts on
the Statements of Financial Condition.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance and redemptions.
8
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
4. Fair Value Measurements:
Partnerships and the Funds Investments. All commodity interests (including derivative
financial instruments and derivative commodity instruments), through
its investment in other funds,
are held for trading purposes. The commodity interests are recorded on trade date and open
contracts are recorded at fair value (as described below) at the measurement date. Investments in
commodity interests denominated in foreign currencies are translated into U.S. dollars at the
exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are
liquidated. Unrealized gains or losses on open contracts are included as a component of equity in
trading account on the Funds Statements of Financial Condition. Net realized gains or losses and
any change in net unrealized gains or losses from the preceding period are reported in the
Funds Statements of Income and Expenses and Changes in Partners Capital.
Partnerships and the Funds Fair Value Measurements. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date under current market conditions. The fair value
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable
inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in
its entirety falls shall be determined based on the lowest level input that is significant to the
fair value measurement in its entirety. Management has concluded that based on available
information in the marketplace, the Funds Level 1 assets and liabilities
are actively traded.
GAAP requires the need to use
judgment in determining if a formerly active market has become inactive and in determining fair values when the market
has become inactive. Management has concluded that based on available information in the marketplace, there has not been a
significant decrease in the volume and level of activity in the
Partnerships and the Funds Level 2 assets.
The Partnership and the Funds will separately present purchases, sales, issuances, and
settlements in their reconciliation of Level 3 fair value measurements (i.e. to present such items
on a gross basis rather than on a net basis), and make disclosures regarding the level of
disaggregation and the inputs and valuation techniques used to measure fair value for measurements
that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Funds consider prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).
The values of non-exchange-traded forwards and certain options contracts for which market
quotations are not readily available, are priced by broker-dealers that derive fair values for
those assets from observable inputs (Level 2). Investments in funds (other commodity pools) where
there are no other rights or obligations inherent within the ownership interest held by the
Partnership are priced based on the end of the day net asset value (Level 2).
The value of the Partnerships investments in the funds reflects its proportional interest in
the Funds. As of and for the periods ended March 31, 2011 and December 31, 2010, the Funds did not
hold any derivative instruments that are priced at fair value using unobservable inputs through the
application of managements assumptions and internal valuation pricing models (Level 3).
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
March 31, 2011 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Investment in Funds |
$ | 26,839,228 | $ | | $ | 26,839,228 | $ | | ||||||||
Net fair value |
$ | 26,839,228 | | $ | 26,839,228 | | ||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
December 31, 2010 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Investment in Funds |
$ | 28,849,787 | $ | | $ | 28,849,787 | $ | | ||||||||
Net fair value |
$ | 28,849,787 | | $ | 28,849,787 | | ||||||||||
9
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
5. Investment in Funds:
On January 1, 2005, the assets allocated to Campbell for trading were invested in CMF Campbell
Master Fund L.P. (Campbell Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 17,534.8936 units of
Campbell Master with cash equal to
$17,341,826 and a contribution of open commodity futures and forward contracts with a fair value of $193,067.
Campbell Master was formed in order to permit commodity pools managed now or in the future by
Campbell using Campbells Financials, Metals and Energy (FME) Large Portfolio, Campbells
proprietary, systematic trading system, to invest together in one trading vehicle.
On November 30, 2010 the Partnership fully redeemed its investment in Campbell Master for a cash equal to $3,548,386.
On March 1, 2005, the assets allocated to Aspect for trading were invested in CMF Aspect
Master Fund L.P. (Aspect Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 16,015.3206 units of Aspect Master with cash equal
to $14,955,106 and a contribution of open commodity futures and forward contracts with a fair value of
$1,060,214. Aspect Master was formed in order to permit commodity pools managed now or in the
future by Aspect using Aspects Diversified Program, a proprietary, systematic trading system, to
invest together in one trading vehicle. The General Partner is also the general partner of Aspect
Master. Individual and pooled accounts currently managed by Aspect, including the Partnership, are
permitted to be limited partners of Aspect Master. The General Partner and Aspect believe that
trading through this structure should promote efficiency and economy in the trading process.
On November 1, 2005, the assets allocated to Altis for trading were invested in CMF Altis
Partners Master Fund L.P. (Altis Master), a limited partnership organized under the partnership
laws of the State of New York. The Partnership purchased 13,013.6283 units of the Altis Master with
cash equal to $11,227,843 and a contribution of open commodity futures and forwards contracts with a fair
value of $1,785,785. Altis Master was formed to permit commodity pools managed now and in the
future by Altis using Altiss Global Futures Portfolio Program, a proprietary, systematic trading
system, to invest together in one trading vehicle. The General Partner is also the general partner
of Altis Master. Individual and pooled accounts currently managed by Altis, including the
Partnership, are permitted to be limited partners of Altis Master. The General Partner and Altis
believe that trading through this structure should promote efficiency and economy in the trading
process.
On March 1, 2010, the assets allocated to Waypoint for trading were invested in Waypoint
Master Fund L.P. (Waypoint Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 4,959.4220 units of Waypoint Master with cash
equal to $4,959,422. Waypoint Master was formed in order to permit commodity pools managed now or
in the future by Waypoint using its Diversified Program, a proprietary, systematic trading system,
to invest together in one trading vehicle. The General Partner is also the general partner of
Waypoint Master. Individual and pooled accounts currently managed by Waypoint, including the
Partnership, are permitted to be limited partners of Waypoint Master. The General Partner and
Waypoint believe that trading through this structure should promote efficiency and economy in the
trading process.
On November 1, 2010, the assets allocated to Blackwater for trading were invested in Blackwater Master Fund L.P. (Blackwater Master), a limited partnership organized under the
partnership laws of the State of Delaware. The Partnership purchased 5,000.0000 units of Blackwater
Master with cash equal to $5,000,000. Blackwater Master was formed in order to permit commodity
pools managed now or in the future by Blackwater using its Global Program, a proprietary,
systematic trading system, to invest together in one trading vehicle. The General Partner is also
the general partner of Blackwater Master. Individual and pooled accounts currently managed by
Blackwater, including the Partnership, are permitted to be limited partners of Blackwater Master.
The General
Partner and Blackwater believe that trading through this structure should promote efficiency
and economy in the trading process.
10
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
On December 1, 2010, the assets allocated to Sasco for trading were invested in CMF Sasco
Master Fund L.P. (Sasco Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 3,064.6736 units of Sasco Master with cash equal
to $4,000,000. Sasco Master was formed in order to permit commodity pools managed now or in the
future by Sasco using its Energy Program, a proprietary,
discretionary trading system, to invest
together in one trading vehicle. The General Partner is also the general partner of Sasco Master.
Individual and pooled accounts currently managed by Sasco, including the Partnership, are permitted
to be limited partners of Sasco Master. The General Partner and Sasco believe that trading through
this structure should promote efficiency and economy in the trading process.
The General Partner is not aware of any material changes to the trading programs discussed
above during the fiscal quarter ended March 31, 2011.
Aspect Masters, Altis Masters, Waypoint Masters, Blackwater Masters and Sasco Masters
(collectively, the Funds) trading of futures, forwards, swaps and options
contracts, if applicable, on commodities is done primarily on United States of America commodity
exchanges and foreign commodity exchanges. The Funds engage in such trading through commodity
brokerage accounts maintained by CGM.
A limited partner may withdraw all or part of their capital contribution and undistributed
profits, if any, from the Funds in multiples of the net asset value per unit as of the
end of any day (the Redemption Date) after a request for redemption has been made to the General
Partner at least 3 days in advance of the Redemption Date. The units are classified as a liability
when the limited partner elects to redeem, and informs the Funds.
Management and incentive fees are charged at the Partnership level. All exchange, clearing,
user, give-up, floor brokerage and National Futures Asscociation fees are borne by the Partnership
through its investment in the Funds. All other fees, including CGMs direct brokerage fees are
charged at the Partnership level.
At March 31, 2011, the Partnership owned approximately 3.3%, 10.2%, 16.9%, 19.7% and 3.6% of Aspect
Master, Altis Master, Waypoint Master, Blackwater Master and Sasco Master, respectively. At
December 31, 2010, the Partnership owned approximately 3.9%, 9.2%, 17.2%, 22.7% and 4.7% of Aspect
Master, Altis Master, Waypoint Master, Blackwater Master and Sasco Master, respectively. It is the
intention of the Partnership to continue to invest in the Funds. The performance of the Partnership
is directly affected by the performance of the Funds. Expenses to the investors as a result of the
investment in the Funds are approximately the same and redemption rights are not affected.
Summarized
information reflecting the total assets, liabilities and capital of
the Funds is
shown in the following tables.
March 31, 2011 | ||||||||||||
Total | Total | |||||||||||
Total Assets | Liabilities | Capital | ||||||||||
Aspect Master |
$ | 171,917,989 | $ | 60,063 | $ | 171,857,926 | ||||||
Altis Master |
49,421,811 | 490,934 | 48,930,877 | |||||||||
Waypoint Master |
39,176,243 | 71,071 | 39,105,172 | |||||||||
Blackwater Master |
30,230,892 | 36,968 | 30,193,924 | |||||||||
Sasco Master |
109,008,174 | 6,899,009 | 102,109,165 | |||||||||
Total |
$ | 399,755,109 | $ | 7,558,045 | $ | 392,197,064 | ||||||
December 31, 2010 | ||||||||||||
Total | Total | |||||||||||
Total Assets | Liabilities | Capital | ||||||||||
Aspect Master |
$ | 157,910,582 | $ | 46,523 | $ | 157,864,059 | ||||||
Altis Master |
64,276,767 | 591,256 | 63,685,511 | |||||||||
Waypoint Master |
41,306,976 | 59,330 | 41,247,646 | |||||||||
Blackwater Master |
25,966,821 | 28,810 | 25,938,011 | |||||||||
Sasco Master |
81,882,294 | 198,664 | 81,683,630 | |||||||||
Total |
$ | 371,343,440 | $ | 924,583 | $ | 370,418,857 | ||||||
11
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Summarized information reflecting the net investment income (loss), total trading results
and net income (loss) for the Funds is shown in the following tables.
For the three months ended March 31, 2011 | ||||||||||||
Net Investment | Total Trading | Net Income | ||||||||||
Income (Loss) | Results | (Loss) | ||||||||||
Aspect Master |
$ | (28,839 | ) | $ | 1,725,970 | $ | 1,697,131 | |||||
Altis Master |
(53,257 | ) | (8,102,603 | ) | (8,155,860 | ) | ||||||
Waypoint Master |
(64,415 | ) | (1,606,979 | ) | (1,671,394 | ) | ||||||
Blackwater Master |
(27,505 | ) | 1,020,708 | 993,203 | ||||||||
Sasco Master |
(369,953 | ) | (2,250,744 | ) | (2,620,697 | ) | ||||||
Total |
$ | (543,969 | ) | $ | (9,213,648 | ) | $ | (9,757,617 | ) | |||
For the three months ended March 31, 2010 | ||||||||||||
Net Investment | Total Trading | Net Income | ||||||||||
Income (Loss) | Results | (Loss) | ||||||||||
Campbell Master |
$ | (36,184 | ) | $ | (1,562,624 | ) | $ | (1,598,808 | ) | |||
Aspect Master |
(47,890 | ) | 6,886,287 | 6,838,397 | ||||||||
Altis Master |
(39,205 | ) | 2,136,066 | 2,097,041 | ||||||||
Waypoint Master |
(11,498 | ) | 573,053 | 561,555 | ||||||||
Total |
$ | (134,777 | ) | $ | 8,032,782 | $ | 7,898,185 | |||||
Summarized information reflecting the Partnerships investment in, and the operations of the
Funds is shown in the following tables.
March 31, 2011 | For the three months ended March 31, 2011 | |||||||||||||||||||||||||||||||
% of | Net | |||||||||||||||||||||||||||||||
Partnerships | Fair | Income | Expenses | Income | Investment | Redemptions | ||||||||||||||||||||||||||
Funds | Net Assets | Value | (Loss) | Brokerage fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
Aspect Master |
21.18 | % | $ | 5,602,563 | $ | 58,575 | $ | 1,294 | $ | 874 | $ | 56,407 | Commodity Portfolio | Monthly | ||||||||||||||||||
Altis Master |
18.79 | % | 4,970,256 | (802,339 | ) | 4,836 | 1,675 | (808,850 | ) | Commodity Portfolio | Monthly | |||||||||||||||||||||
Waypoint Master |
24.99 | % | 6,611,328 | (271,031 | ) | 8,663 | 3,700 | (283,394 | ) | Commodity Portfolio | Monthly | |||||||||||||||||||||
Blackwater Master |
22.48 | % | 5,947,593 | 242,910 | 3,467 | 3,853 | 235,590 | Commodity Portfolio | Monthly | |||||||||||||||||||||||
Sasco Master |
14.01 | % | 3,707,488 | (76,114 | ) | 13,412 | 1,944 | (91,470 | ) | Energy Portfolio | Monthly | |||||||||||||||||||||
Total |
$ | 26,839,228 | $ | (847,999 | ) | $ | 31,672 | $ | 12,046 | $ | (891,717 | ) | ||||||||||||||||||||
December 31, 2010 | For the three months ended March 31, 2010 | |||||||||||||||||||||||||||||||
% of | Net | |||||||||||||||||||||||||||||||
Partnerships | Fair | Income | Expenses | Income | Investment | Redemptions | ||||||||||||||||||||||||||
Funds | Net Assets | Value | (Loss) | Brokerage fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
Campbell Master |
| $ | | $ | (114,703 | ) | $ | 2,404 | $ | 879 | $ | (117,986 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Aspect Master |
21.47 | % | 6,105,359 | 382,758 | 2,852 | 884 | 379,022 | Commodity Portfolio | Monthly | |||||||||||||||||||||||
Altis Master |
20.72 | % | 5,893,177 | 275,585 | 4,927 | 1,544 | 269,114 | Commodity Portfolio | Monthly | |||||||||||||||||||||||
Waypoint Master |
24.90 | % | 7,080,876 | 76,124 | 1,137 | 820 | 74,167 | Commodity Portfolio | Monthly | |||||||||||||||||||||||
Blackwater Master |
20.72 | % | 5,892,624 | | | | | Commodity Portfolio | Monthly | |||||||||||||||||||||||
Sasco Master |
13.64 | % | 3,877,751 | | | | | Energy Portfolio | Monthly | |||||||||||||||||||||||
Total |
$ | 28,849,787 | $ | 619,764 | $ | 11,320 | $ | 4,127 | $ | 604,317 | ||||||||||||||||||||||
12
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
6. Financial Instrument Risks:
In the normal course of business, the Partnership, through its investments in the Funds, is
party to financial instruments with off-balance sheet risk, including derivative financial
instruments and derivative commodity instruments. These financial instruments may include forwards,
futures and options, whose values are based upon an underlying asset, index, or reference rate, and
generally represent future commitments to exchange currencies or cash balances, to purchase or sell
other financial instruments at specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable possibility to be settled in cash, through
physical delivery or with another financial instrument. These instruments may be traded on an
exchange or over-the-counter (OTC). Exchange-traded instruments are standardized and include
futures and certain forwards and option contracts. OTC contracts are negotiated between contracting
parties and include certain forwards and option contracts. Each of these instruments is subject to
various risks similar to those related to the underlying financial
instruments, including market and
credit risk. In general, the risks associated with OTC contracts are greater than those associated
with exchange-traded instruments because of the greater risk of default by the counterparty to an
OTC contract.
The
risk to the Limited Partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the Partnership
assets and undistributed profits. This limited liability is a consequence of the organization of
the Partnership as a limited partnership under applicable law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Funds due to market changes, including interest and foreign exchange rate movements and
fluctuations in commodity or security prices. Market risk is directly impacted by the volatility
and liquidity in the markets in which the related underlying assets are traded. The Funds are
exposed to a market risk equal to the value of futures and forward contracts purchased and
unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to
perform according to the terms of a contract. The Partnerships/Funds risk of loss in the event of
a counterparty default is typically limited to the amounts recognized in the Statements of
Financial Condition and is not represented by the contract or notional amounts of the instruments. The
Partnerships/Funds risk of loss is reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Partnership/Funds to offset unrealized gains and
losses and other assets and liabilities with such counterparties upon the occurrence of certain
events. The Partnership/Funds have credit risk and concentration risk as the sole counterparty or
broker with respect to the Funds assets is CGM or a CGM affiliate. Credit risk with respect to
exchange-traded instruments is reduced to the extent, that through CGM, the Partnerships/Funds
counterparty is an exchange or clearing organization.
As both a buyer and seller of options, the Funds pay or receive a premium at the outset and
then bear the risk of unfavorable changes in the price of the contract underlying the option.
Written options expose the Funds to potentially unlimited liability; for purchased options the risk
of loss is limited to the premiums paid. Certain written put options permit cash settlement and do
not require the option holder to own the reference asset. The Funds do not consider these contracts
to be guarantees.
The General Partner monitors and attempts to control the Funds 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 Funds
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, on-line monitoring systems provide account analysis of futures, forwards
and options contracts by sector, margin requirements, gain and loss transactions and collateral
positions.
The majority of these instruments mature within one year of the inception date. However, due
to the nature of the Partnership and the Funds business, these instruments may not be held to
maturity.
13
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
7. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related disclosures of contingent assets and
liabilities in the financial statements and accompanying notes. As a result, actual results could
differ from these estimates.
Partnerships and the Funds Investments. All commodity interests (including derivative
financial instruments and derivative commodity instruments), through
its investment in other funds,
are held for trading purposes. The commodity interests are recorded on trade date and open
contracts are recorded at fair value (as described below) at the measurement date. Investments in
commodity interests denominated in foreign currencies are translated into U.S. dollars at the
exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are
liquidated. Unrealized gains or losses on open contracts are included as a component of equity in
trading account on the Statements of Financial Condition. Net realized gains or losses and
any change in net unrealized gains or losses from the preceding period are reported in the
Statements of Income and Expenses and Changes in Partners Capital.
Partnerships and the Funds Fair Value Measurements. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date under current
market conditions. The
fair value hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to fair
values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. Management has concluded that based
on available information in the marketplace, the
Funds Level 1 assets and
liabilities are actively traded.
GAAP requires the need to use judgment in determining if a
formerly active market has become inactive and in determining
fair values when the market has become inactive. Management has
concluded that based on available information in the
marketplace, there has not been a significant decrease in the
volume and level of activity in the Partnerships
and the Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases,
sales, issuances, and settlements in their reconciliation of
Level 3 fair value measurements (i.e., to present such items
on a gross basis rather than on a net basis), and make
disclosures regarding the level of disaggregation and the inputs
and valuation techniques used to measure fair value for
measurements that fall within either Level 2 or
Level 3 of the fair value hierarchy as required by GAAP.
The Funds consider prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).
The values of non-exchange-traded forwards, swaps and certain options contracts for which market
quotations are not readily available, are priced by broker-dealers that derive fair values for
those assets from observable inputs (Level 2). Investments in funds (other commodity pools) where
there are no other rights or obligations inherent within the ownership interest held by the
Partnership are priced based on the end of the day net asset value (Level 2). The value of the
Partnerships investments in the Funds reflects its proportional interest in the Funds. As of and
for the periods ended March 31, 2011 and December 31, 2010, the Funds did not hold any derivative
instruments that were priced at fair value using unobservable inputs through the application of
managements assumptions and internal valuation pricing models (Level 3).
Futures
Contracts. The Funds trade futures contracts and exchange-cleared
swaps. Exchange-cleared swaps are traded as futures. A futures contract is a firm commitment
to buy or sell a specified quantity of investments, currency or a standardized amount of a
deliverable grade commodity, at a specified price on a specified future date, unless the contract
is closed before the delivery date or if the delivery quantity is something where physical delivery
cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments
(variation margin) may be made or received by the Funds each business day, depending on the daily
fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or
losses by the Funds. When the contract is closed, the Funds record a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and the value at the
time it was closed. Transactions in futures contracts require participants to make both initial
margin deposits of cash or other assets and variation margin deposits, through the futures broker,
directly with the exchange on which the contracts are traded. Net realized gains (losses) and
changes in net unrealized gains (losses) on futures contracts are included in the Statements of
Income and Expenses and Changes in Partners Capital.
Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the
Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on
an agreed future date. Foreign currency contracts are valued daily, and the Funds net equity
therein, representing unrealized gain or loss on the contracts as measured by the difference
between the forward foreign exchange rates at the dates of entry into the contracts and the forward
rates at the reporting date, is included in the Statements of Financial Condition. Net realized
gains (losses) and changes in net unrealized gains (losses) on foreign currency contracts are
recognized in the period in which the contract is closed or the changes occur, respectively, and
are included in the Statements of Income and Expenses and Changes in Partners Capital.
14
Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
The
Funds do 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 net income (loss) on investments in the
Statements of Income and Expenses and Changes in Partners Capital.
London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange
(LME) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead,
nickel, tin or zinc. LME contracts traded by the Funds are cash settled based on prompt dates
published by the LME. Payments (variation margin) may be made or received by the Funds each
business day, depending on the daily fluctuations in the value of the underlying contracts, and are
recorded as unrealized gains or losses by the Funds. A contract is considered offset when all long
positions have been matched with a like number of short positions settling on the same prompt date.
When the contract is closed at the prompt date, the Funds record a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and the value at the
time it was closed. Transactions in LME contracts require participants to make both initial margin
deposits of cash or other assets and variation margin deposits, through the broker, directly with
the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal
contracts are included in the Statements of Income and Expenses and Changes in Partners Capital.
Options. The Funds may purchase and write (sell) both exchange listed and OTC options on
commodities or financial instruments. An option is a contract allowing, but not requiring, its
holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a
specified price during a specified time period. The option premium is the total price paid or
received for the option contract. When the Funds write an option, the premium received is recorded
as a liability in the Statements of Financial Condition and marked to market daily. When the Funds
purchase an option, the premium paid is recorded as an asset in the Statements of Financial
Condition and marked to market daily. Net realized gains
(losses) and changes in net unrealized gains
(losses) on options contracts are included in the Statements of Income and Expenses and Changes in
Partners Capital.
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements and requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Partnerships financial statements to
determine whether the tax positions are more-likely-than-not to be sustained by the applicable
tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.
The General Partner has concluded that no provision for income tax is required in the Partnerships
financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax
returns are currently under examination. Generally, the 2007 through 2010 tax years remain subject
to examination by U.S. federal and most state tax authorities. Management does not believe that
there are any uncertain tax positions that require recognition of a tax liability.
Subsequent Events. Management of the Partnership evaluates events that occur after the balance
sheet date but before financial statements are filed. Management has assessed the subsequent events
through the date of filing and has determined that there were no subsequent events requiring
adjustment of or disclosure in the financial statements.
Net Income (loss) per unit. Net income (loss) per unit is calculated in accordance with
investment company guidance. See Note 2, Financial Highlights.
15
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services. The Partnerships assets are
its investment in the Funds and cash. Because of the low margin deposits normally required in
commodity futures trading, relatively small price movements may result in substantial losses to the
Partnership, through its investments in the Funds. While substantial losses could lead to a
material decrease in liquidity, no such illiquidity occurred during the first quarter of 2011.
The Partnerships capital consists of the capital contributions of the partners, as increased
or decreased by net realized and/or unrealized gains or losses on trading and by expenses, interest
income and redemptions of Redeemable Units and distributions of profits, if any.
For the three months ended March 31, 2011, Partnership capital decreased 7.0% from $28,436,063
to $26,454,450. This decrease was attributable to the redemptions of 275.0416 Redeemable Units
totaling $532,647, coupled with the net loss from operations of $1,448,966. Future redemptions could
impact the amount of funds available for investment in commodity contract positions in subsequent
periods.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the
reporting period. Management believes that the estimates utilized in
preparing the financial statements are reasonable. Actual results could
differ from those estimates. The Partnerships significant accounting
policies are described in detail in Note 7 of the Financial Statements.
The Partnership records all investments at fair value in its
financial statements, with changes in fair value reported as a
component of net realized and change in net unrealized trading
gain (loss) in the Statements of Income and Expenses and Changes
in Partners Capital.
16
Results of Operations
During the Partnerships first quarter of 2011, the net asset value per unit decreased 5.1%
from $2,010.95 to $1,907.92 as compared to a decrease of 1.3% in the first quarter of 2010. The
Partnership experienced a net trading loss, before brokerage fees and related fees in the first
quarter of 2011 of $853,367. Losses were primarily attributable to
the Funds trading of commodity interests in
currencies, grains, U.S. and non-U.S. interest rates, metals and indices, and were partially offset
by gains in energy, livestock and softs. The Partnership experienced a net trading gain, before
brokerage fees and clearing fees in the first quarter of 2010 of $166,627. Gains were primarily
attributable to the Partnerships/Funds trading of
commodity interests in currencies, energy, grains,
U.S. and non-U.S. interest rates and livestock and were partially offset by losses in metals, indices
and softs.
The most significant losses were incurred within the interest rate sector throughout the majority of the quarter. In
January, long positions in short-term European fixed-income futures resulted in losses as prices declined after
European Central Bank President Jean-Claude Trichet said inflationary pressures in the euro region may increase.
During February, short positions in U.S. and European fixed-income futures resulted in losses as prices increased
mid-month amid concern over unrest in the Middle East, which spurred demand for the relative safety of
government debt. Further losses were experienced in March from both long and short positions in fixed-income
futures as prices moved without consistent direction throughout the month. Within the currency markets, losses were
experienced primarily in January from long positions in the South African rand, Australian dollar, and Canadian dollar
versus the U.S. dollar as the value of these currencies declined against the U.S. dollar following the release of minutes
from the latest U.S. Federal Reserve meeting that showed optimism about the U.S. economy and boosted demand for
the U.S. currency. Within the metals sector, losses were experienced primarily during January due to long futures
positions in gold as prices fell amid a strengthening U.S. dollar, which reduced the safe-haven appeal of the precious
metal. Further losses were recorded within this sector during March from long futures positions in copper as prices
moved lower amid concern that rising energy costs associated with mounting unrest in the Middle East may slow the
global economy. Within the global stock index markets, losses were experienced primarily during March from long
positions in European and Pacific Rim equity index futures as prices moved sharply lower after the disaster in Japan
spurred concern about global economic growth. Within the agricultural markets, modest losses were experienced in
March from long futures positions in cocoa as prices fell to a 10-week low on signs that the political turmoil that
hampered exports may be easing in the Ivory Coast, the worlds biggest producer of cocoa. Further losses were
recorded within this sector during March from long positions in corn futures as prices fell after the U.S. Department
of Agriculture report revealed increasing world stockpiles and declining U.S. exports of the crop.
A portion of the Partnerships losses for the quarter was offset by gains achieved within the energy markets, primarily
during February, from long futures positions in crude oil and its related products as prices rose after political tension
in Egypt stoked worries that protests may spread to crude-producing parts of the Middle East. Further gains were
recorded after futures prices of crude oil and its related products continued to increase as geopolitical tensions
extended to Libya.
Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation
increase the risks involved in commodity trading, but also increases the possibility of profit. The
profitability of the Funds depends on the existence of major price trends and the ability of the
Advisors to correctly identify those price trends. Price trends are influenced by, among other
things, changing supply and demand relationships, weather, governmental, agricultural, commercial
and trade programs and policies, national and international political and economic events and
changes in interest rates. To the extent that market trends exist and the Advisors are able to
identify them, the Funds expect to increase capital through operations.
Interest income on 80% of the average daily equity maintained in cash in each of the Funds
accounts was earned at the monthly average 30-day U.S. Treasury bill yield. Interest income for the
three months ended March 31, 2011 increased by $1,917, as compared to the corresponding period in
2010. The increase in interest income is due to higher U.S. Treasury bill rates during the three
months ended March 31, 2011 as compared to the corresponding period in 2010. The amount of interest
income earned by the Partnership depends on the average daily equity
in the Partnerships and the Funds accounts and upon interest rates over which neither the Partnership nor CGM has control.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance and redemptions. Accordingly,
they must be compared in relation to the fluctuations in the monthly net asset values. Brokerage
fees and related fees for the three months ended March 31, 2011 increased by $2,925, as compared to
the
17
corresponding period in 2010. The increase in brokerage fees and related fees was due to an
increase in the number of trades of trades during the three months
ended March 31, 2011, as compared to the corresponding period in 2010.
Management fees are calculated as a percentage of the Partnerships net asset value as of the
end of each month and are affected by trading performance and redemptions. Management fees for the
three months ended March 31, 2011 decreased by $11,148, as compared to the corresponding period in
2010. The decrease in management fees was due to lower average net assets as compared to the
corresponding period in 2010.
Incentive fees are based on the new trading profits generated by each Advisor as defined in
the management agreements between the Partnership, the General Partner and each Advisor and are
payable annually. Trading performance for the three months ended March 31, 2011 resulted in an
incentive fee accrual of $25,230. There was no incentive fee for the three months ended March 31,
2010.
In
allocating the assets of the Partnership among Advisors, the General Partner considers
past performance, trading style, volatility of markets traded and fee requirements. The General
Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets
to additional advisors at any time.
18
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All of the Partnerships assets are subject to the risk of trading loss through its
investments in the Funds and are speculative commodity pools. The market sensitive instruments held
by them are acquired for speculative trading purposes, and substantially all of the Funds assets
are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Funds main lines of business.
The risk to the Limited Partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited liability is a consequence of the
organization of the Partnership as a limited partnership under applicable law.
Market movements result in frequent changes in the fair value of the Funds open contracts
and, consequently in their earnings and cash balances. The Funds market risks are influenced by a
wide variety of factors, including the level and volatility of interest rates, exchange rates,
equity price levels, the value of financial instruments and contracts, the diversification effects
of the Funds open contracts and the liquidity of the market in which they trade.
The Funds rapidly acquire and liquidate both long and short positions in a wide range of
different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Funds past performances are not necessarily indicative
of their future results.
Value at Risk is a measure of the maximum amount which the Funds could reasonably be
expected to lose in a given market sector. However, the inherent uncertainty of the Funds
speculative trading and the recurrence in the markets traded by the Funds of market movements far
exceeding expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Funds experiences 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 Funds losses in any market sector will be limited to Value at Risk or by
the Funds attempts to manage their market risks.
Exchange maintenance margin requirements have been used by the Funds as the measure of their
Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum
losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any
one-day interval. Maintenance margin has been used rather than the more generally available initial
margin, because initial margin includes a credit risk component, which is not relevant to Value at
Risk.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market
risk sensitive instruments. The Partnerships Advisors currently trade the Partnerships assets
indirectly in master fund managed accounts, over which they have been granted limited authority to
make trading decisions. The first two trading Value at Risk tables reflect the market sensitive
instruments held by the Partnership indirectly, through its investment in the Funds. The remaining
trading Value at Risk tables reflect the market sensitive instruments held by each Fund,
separately.
19
The
following tables indicate the trading Value at Risk associated with the Partnerships
open positions by market category as of March 31, 2011 and December 31,2010. As of
March 31, 2011, the Partnerships total capitalization was $26,454,450.
March 31, 2011
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 2,040,233 | 7.71 | % | ||||
Energy |
466,997 | 1.77 | % | |||||
Grains |
68,760 | 0.26 | % | |||||
Indices |
322,083 | 1.22 | % | |||||
Interest Rates U.S. |
114,627 | 0.43 | % | |||||
Interest Rates Non-U.S. |
370,615 | 1.40 | % | |||||
Livestock |
21,357 | 0.08 | % | |||||
Lumber |
1,274 | 0.01 | % | |||||
Metals |
217,391 | 0.82 | % | |||||
Softs |
76,476 | 0.29 | % | |||||
Total |
$ | 3,699,813 | 13.99 | % | ||||
As of
December 31, 2010, the Partnerships
total capitalization was $28,436,063.
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 1,073,671 | 3.78 | % | ||||
Energy |
687,716 | 2.42 | % | |||||
Grains |
92,399 | 0.32 | % | |||||
Indices |
548,609 | 1.93 | % | |||||
Interest Rates U.S. |
34,492 | 0.12 | % | |||||
Interest Rates Non-U.S. |
213,543 | 0.75 | % | |||||
Livestock |
39,333 | 0.14 | % | |||||
Lumber |
478 | 0.00 | %* | |||||
Metals |
237,979 | 0.84 | % | |||||
Softs |
102,064 | 0.36 | % | |||||
Total |
$ | 3,030,284 | 10.66 | % | ||||
* | Due to rounding |
The following tables indicate the trading Value at Risk associated with the Partnerships
investments in the Funds by market category as of March 31, 2011
and December 31, 2010, the highest, lowest and average
values during the three months ended March 31, 2011 and during
the twelve months ended December 31, 2010. All open position trading risk exposures of the
Partnership have been included in calculating the figures set forth below. There have been no
material changes in the trading Value at Risk information previously disclosed in the Partnerships
Annual Report on Form 10-K for the year ended December 31, 2010.
As of March 31, 2011, Aspect Masters total capitalization was $171,857,926. The Partnership
owned approximately 3.3% of Aspect Master. As of March 31, 2011, the Aspect Masters Value at Risk
for its assets (including the portion of the Partnerships assets allocated to Aspect for trading)
was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 6,848,407 | 3.99 | % | $ | 8,424,651 | $ | 6,132,034 | $ | 7,404,837 | ||||||||||
Energy |
2,054,170 | 1.20 | % | 2,054,170 | 1,241,868 | 1,577,567 | ||||||||||||||
Grains |
379,656 | 0.22 | % | 736,876 | 342,613 | 543,431 | ||||||||||||||
Indices |
1,979,457 | 1.15 | % | 3,093,179 | 1,263,661 | 2,599,483 | ||||||||||||||
Interest Rates U.S. |
586,200 | 0.34 | % | 586,200 | 172,125 | 370,718 | ||||||||||||||
Interest Rates Non-U.S. |
2,531,705 | 1.47 | % | 2,531,705 | 1,273,466 | 2,101,082 | ||||||||||||||
Livestock |
118,500 | 0.07 | % | 128,500 | 76,750 | 119,217 | ||||||||||||||
Lumber |
1,500 | 0.00 | %** | 3,000 | 1,300 | 1,933 | ||||||||||||||
Metals |
1,432,783 | 0.83 | % | 1,857,539 | 1,115,572 | 1,299,324 | ||||||||||||||
Softs |
646,569 | 0.38 | % | 891,860 | 628,212 | 699,379 | ||||||||||||||
Total |
$ | 16,578,947 | 9.65 | % | ||||||||||||||||
* | Average of month-end Values at Risk. | |
** | Due to rounding |
20
As of December 31, 2010, Aspect Masters total capitalization was $157,864,059. The
Partnership owned approximately 3.9% of Aspect Master. As of December 31, 2010, Aspect Masters
Value at Risk for its assets (including the portion of the Partnerships assets allocated to Aspect
for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 6,641,142 | 4.21 | % | $ | 6,908,626 | $ | 1,960,264 | $ | 4,676,655 | ||||||||||
Energy |
1,421,450 | 0.90 | % | 1,932,150 | 351,414 | 1,223,668 | ||||||||||||||
Grains |
663,172 | 0.42 | % | 853,702 | 150,472 | 496,932 | ||||||||||||||
Indices |
2,735,405 | 1.73 | % | 15,325,500 | 832,920 | 2,830,563 | ||||||||||||||
Interest Rates U.S. |
128,755 | 0.08 | % | 2,333,350 | 128,755 | 1,185,599 | ||||||||||||||
Interest Rates Non-U.S. |
1,433,026 | 0.91 | % | 6,063,200 | 1,068,897 | 4,111,787 | ||||||||||||||
Livestock |
109,519 | 0.07 | % | 240,000 | 14,717 | 93,906 | ||||||||||||||
Metals |
1,798,174 | 1.14 | % | 2,724,717 | 539,569 | 1,434,801 | ||||||||||||||
Softs |
853,509 | 0.54 | % | 1,719,693 | 494,690 | 987,242 | ||||||||||||||
Total |
$ | 15,784,152 | 10.00 | % | ||||||||||||||||
* | Annual average of month-end Values at Risk. |
As of March 31, 2011, Altis Masters total capitalization was $48,930,877. The Partnership
owned approximately 10.2% of Altis Master. As of March 31, 2011, the Altis Masters Value at Risk
for its assets (including the portion of the Partnerships assets allocated to Altis for trading)
was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,552,902 | 3.17 | % | $ | 3,359,482 | $ | 646,682 | $ | 1,468,005 | ||||||||||
Energy |
509,312 | 1.04 | % | 1,728,561 | 454,647 | 981,848 | ||||||||||||||
Grains |
493,347 | 1.01 | % | 716,615 | 294,622 | 501,395 | ||||||||||||||
Indices |
1,475,800 | 3.03 | % | 1,470,800 | 470,802 | 1,036,164 | ||||||||||||||
Interest Rates U.S. |
290,766 | 0.59 | % | 423,005 | 220,904 | 311,558 | ||||||||||||||
Interest Rates Non-U.S. |
731,077 | 1.49 | % | 983,810 | 332,852 | 682,580 | ||||||||||||||
Livestock |
59,800 | 0.12 | % | 106,850 | 21,625 | 90,900 | ||||||||||||||
Lumber |
12,000 | 0.02 | % | 12,000 | 800 | 4,933 | ||||||||||||||
Metals |
785,441 | 1.61 | % | 1,298,785 | 729,575 | 954,265 | ||||||||||||||
Softs |
437,692 | 0.89 | % | 785,580 | 374,414 | 560,578 | ||||||||||||||
Total |
$ | 6,348,137 | 12.97 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
21
As of December 31, 2010, Altis Masters total capitalization was $63,685,511. The Partnership owned
approximately 9.2% of Altis Master. As of December 31, 2010, the Altis Masters Value at Risk for
its assets (including the portion of the Partnerships assets allocated to Altis Master for
trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 3,113,522 | 4.89 | % | $ | 3,481,070 | $ | 143,363 | $ | 2,231,735 | ||||||||||
Energy |
1,077,195 | 1.69 | % | 2,479,469 | 236,868 | 1,086,124 | ||||||||||||||
Grains |
483,876 | 0.76 | % | 915,463 | 136,257 | 435,755 | ||||||||||||||
Indices |
1,251,469 | 1.97 | % | 7,740,340 | 220,942 | 2,503,689 | ||||||||||||||
Interest Rates U.S. |
191,408 | 0.30 | % | 1,193,750 | 110,116 | 570,835 | ||||||||||||||
Interest Rates Non-U.S. |
733,663 | 1.15 | % | 1,849,973 | 183,212 | 1,000,258 | ||||||||||||||
Livestock |
107,232 | 0.17 | % | 170,400 | 22,320 | 82,718 | ||||||||||||||
Lumber |
5,200 | 0.01 | % | 27,500 | 1,100 | 9,287 | ||||||||||||||
Metals |
1,079,175 | 1.69 | % | 2,589,641 | 241,177 | 1,152,447 | ||||||||||||||
Softs |
747,574 | 1.17 | % | 937,879 | 199,670 | 499,434 | ||||||||||||||
Total |
$ | 8,790,314 | 13.80 | % | ||||||||||||||||
* | Annual average of month-end Values at Risk. |
As of March 31, 2011, Waypoint Masters total capitalization was $39,105,172. The Partnership
owned approximately 16.9% of Waypoint Master. As of March 31, 2011, the Waypoint Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Waypoint for
trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Currencies |
$ | 7,828,647 | 20.01 | % | $ | 10,064,603 | $ | 2,910,415 | $ | 6,548,633 | ||||||||||
Energy |
109,000 | 0.28 | % | 195,000 | 45,000 | 89,333 | ||||||||||||||
Interest Rates U.S. |
170,500 | 0.44 | % | 502,450 | 30,400 | 145,783 | ||||||||||||||
Interest Rates Non-U.S. |
924,273 | 2.36 | % | 1,369,739 | 330,677 | 840,248 | ||||||||||||||
Metals |
120,024 | 0.31 | % | 197,750 | 70,014 | 121,691 | ||||||||||||||
Softs |
62,100 | 0.16 | % | 89,700 | 54,000 | 68,600 | ||||||||||||||
Total |
$ | 9,214,544 | 23.56 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
22
As of December 31, 2010, Waypoint Masters total capitalization was $41,247,646. The Partnership
owned approximately 17.2% of
Waypoint Master. As of December 31, 2010, Waypoint Masters Value at Risk for its assets (including
the portion of the Partnerships assets allocated to Waypoint for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Currencies |
$ | 1,878,430 | 4.55 | % | $ | 11,817,794 | $ | 633,809 | $ | 5,198,266 | ||||||||||
Indices |
901,236 | 2.18 | % | 1,613,660 | 100,993 | 790,428 | ||||||||||||||
Metals |
80,750 | 0.20 | % | 216,436 | 31,500 | 66,207 | ||||||||||||||
Total |
$ | 2,860,416 | 6.93 | % | ||||||||||||||||
* | For the period March 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk. |
As of March 31, 2011, Blackwater Masters total capitalization was $30,193,924. The
Partnership owned approximately 19.7% of Blackwater Master. As of March 31, 2011, the Blackwater
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Blackwater for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,689,331 | 5.59 | % | $ | 1,689,331 | $ | 511,332 | $ | 1,014,939 | ||||||||||
Energy |
17,500 | 0.06 | % | 401,280 | 16,250 | 202,557 | ||||||||||||||
Grains |
30,000 | 0.10 | % | 223,000 | 30,000 | 95,667 | ||||||||||||||
Indices |
539,237 | 1.79 | % | 965,504 | 312,761 | 665,640 | ||||||||||||||
Interest Rates U.S. |
186,850 | 0.62 | % | 186,850 | 168,549 | 174,649 | ||||||||||||||
Interest Rates Non-U.S. |
285,767 | 0.95 | % | 482,249 | 284,602 | 385,830 | ||||||||||||||
Livestock |
57,600 | 0.19 | % | 125,000 | 42,000 | 74,867 | ||||||||||||||
Metals |
353,858 | 1.17 | % | 432,707 | 86,599 | 291,907 | ||||||||||||||
Total |
$ | 3,160,143 | 10.47 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
23
As of December 31, 2010, Blackwater Masters total capitalization was $25,938,011. The
Partnership owned approximately 22.7% of Blackwater Master. As of December 31, 2010, the Blackwater
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Blackwater for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 903,667 | 3.48 | % | $ | 903,667 | $ | 577,300 | $ | 765,383 | ||||||||||
Energy |
357,370 | 1.38 | % | 508,250 | 184,174 | 350,610 | ||||||||||||||
Grains |
97,000 | 0.37 | % | 97,000 | 30,000 | 48,500 | ||||||||||||||
Indices |
756,741 | 2.92 | % | 1,256,105 | 756,741 | 941,241 | ||||||||||||||
Interest Rates U.S. |
52,250 | 0.20 | % | 171,550 | 14,700 | 33,475 | ||||||||||||||
Interest Rates Non-U.S. |
397,172 | 1.53 | % | 445,693 | 86,447 | 358,644 | ||||||||||||||
Livestock |
111,000 | 0.43 | % | 111,000 | 40,000 | 97,000 | ||||||||||||||
Metals |
240,867 | 0.93 | % | 346,947 | 240,866 | 283,148 | ||||||||||||||
Total |
$ | 2,916,067 | 11.24 | % | ||||||||||||||||
* | For the period November 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk. |
As of March 31, 2011, Sasco Masters total capitalization was $102,109,165. The Partnership
owned approximately 3.6% of Sasco Master. As of March 31, 2011, Sasco Masters Value at Risk for
its assets (including the portion of the Partnerships assets allocated to Sasco for trading) was
as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 9,038,644 | 8.85 | % | $ | 23,105,575 | $ | 9,038,644 | $ | 17,056,663 | ||||||||||
Total |
$ | 9,038,644 | 8.85 | % | ||||||||||||||||
* | Annual average of month-end Values at Risk. |
As of December 31, 2010, Sasco Masters total capitalization was $81,683,630. The Partnership owned
approximately 4.7% of Sasco Master. As of December 31, 2010, Sasco Masters Value at Risk for its
assets (including the portion of the Partnerships assets allocated to Sasco for trading) was as
follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 9,618,175 | 11.77 | % | $ | 16,002,038 | $ | 2,149,045 | $ | 10,344,808 | ||||||||||
Total |
$ | 9,618,175 | 11.77 | % | ||||||||||||||||
* | For the period December 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk. |
24
Item 4. Controls
and Procedures.
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and
reported within the time periods expected in the SECs rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information required to be
disclosed by the Partnership in the reports it files is accumulated and communicated to management,
including the Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO) of the
General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC
filings.
Management is responsible for ensuring that there is an adequate and effective process for
establishing, maintaining and evaluating disclosure controls and procedures for the Partnerships
external disclosures.
The General Partners CEO and CFO have evaluated the effectiveness of the Partnerships
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of March 31, 2011, and, based on that evaluation, the General Partners CEO and CFO have
concluded that at that date the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision
of the General Partners CEO and CFO to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. These
controls include policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; |
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control over financial reporting process
during the fiscal quarter ended March 31, 2011 that materially affected, or are reasonably likely
to materially affect, the Partnerships internal control over financial reporting.
25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
This section describes the major pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which CGM 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.
CGM is a New York corporation with its principal place of business at 388 Greenwich St., New York,
New York 10013. CGM is registered as a broker-dealer and futures commission merchant (FCM), and
provides futures brokerage and clearing services for institutional and retail participants in the
futures markets. CGM and its affiliates also provide investment banking and other financial
services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five years
against CGM (formerly known as Salomon Smith Barney) or any of its individual principals and no
such actions are currently pending, except as follows.
Mutual Funds
Several issues in the mutual fund industry have come under the scrutiny of federal and state
regulators. Citigroup has received subpoenas and other requests for information from various
government regulators regarding market timing, financing, fees, sales practices and other mutual
fund issues in connection with various investigations. Citigroup is cooperating with all such
reviews. Additionally, CGM has entered into a settlement agreement with the SEC with respect to
revenue sharing and sales of classes of funds.
On May 31, 2005, Citigroup announced that Smith Barney Fund Management LLC and CGM completed a
settlement with the SEC resolving an investigation by the SEC into matters relating to arrangements
between certain Smith Barney mutual funds, an affiliated transfer agent and an unaffiliated
sub-transfer agent. Under the terms of the settlement, Citigroup agreed to pay fines totaling
$208.1 million. The settlement, in which Citigroup neither admitted nor denied any wrongdoing or
liability, includes allegations of willful misconduct by Smith Barney Fund Management LLC and CGM
in failing to disclose aspects of the transfer agent arrangements to certain mutual fund investors.
In May 2007, CGM finalized its settlement agreement with the NYSE and the New Jersey Bureau of
Securities on the matter related to its market-timing practices prior to September 2003.
FINRA Settlement
On October 12, 2009, FINRA announced its acceptance of an Award Waiver and Consent (AWC) in which
CGM, without admitting or denying the findings, consented to the entry of the AWC and a fine and
censure of $600,000. The AWC includes findings
that CGM failed to adequately supervise the activities of its equities trading desk in connection
with swap and related hedge trades in U.S. and Italian equities that were designed to provide
certain perceived tax advantages. CGM was charged with failing to provide for effective written
procedures with
26
respect to the implementation of the trades, failing to monitor Bloomberg messages and failing to
properly report certain of the trades to the NASDAQ.
Auction Rate Securities
On May 31, 2006, the SEC instituted and simultaneously settled proceedings against CGM and 14 other
broker-dealers regarding practices in the auction rate securities market. The SEC alleged that the
broker-dealers violated Section 17(a)(2) of the Securities Act of 1933, as amended. The
broker-dealers, without admitting or denying liability, consented to the entry of an SEC
cease-and-desist order providing for censures, undertakings and penalties. CGM paid a penalty of
$1.5 million.
On August 7, 2008, Citigroup reached a settlement with the New York Attorney General, the SEC, and
other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par
auction rate securities from all Citigroup individual investors, small institutions (as defined by
the terms of the settlement), and charities that purchased auction rate securities from Citigroup
prior to February 11, 2008. In addition, Citigroup agreed to pay a $50 million fine to the State of
New York and a $50 million fine to the other state regulatory agencies.
Subprime Mortgage-Related Actions
The SEC, among other regulators, is investigating Citigroup s subprime and other mortgage- related
conduct and business activities, as well as other business activities affected by the credit
crisis, including an ongoing inquiry into Citigroups structuring and sale of collateralized debt
obligations. Citigroup is cooperating fully with the SECs inquiries.
On July 29, 2010, the SEC announced the settlement of an investigation into certain of Citigroup s
2007 disclosures concerning its subprime-related business activities. On October 19, 2010, the
United States District Court for the District of Columbia entered a final judgment approving the
settlement, pursuant to which Citigroup agreed to pay a $75 million civil penalty and to maintain
certain disclosure policies, practices and procedures for a three-year period. Additional
information relating to this action is publicly available in court filings under the docket number
10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the 0CC and the FDIC, among other federal and state authorities, are
investigating issues related to the conduct of certain mortgage servicing companies, including
Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is cooperating fully with
these inquiries.
Credit Crisis Related Matters
Beginning in the fourth quarter of 2007, certain of Citigroups, and CGM regulators and other
state and federal government agencies commenced formal and informal investigations and inquiries,
and issued subpoenas and requested information, concerning
Citigroup S subprime mortgage-related conduct and business activities. Citigroup and certain of
its affiliates, including CGM, are involved in discussions with certain of its regulators to
resolve certain of these matters.
Certain of these regulatory matters assert claims for substantial or indeterminate damages. Some of
these matters already have been resolved, either through settlements or court
27
proceedings, including the complete dismissal of certain complaints or the rejection of certain
claims following hearings.
In the course of its business, CGM, as a major futures commission merchant and brokerdealer, is a
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
CGM.
Item 1A.
Risk Factors.
There have been no material changes to the risk factors set forth under Part I, Item 1A. Risk
Factors in the Partnerships Annual Report on Form 10-K for the fiscal year ended December 31,
2010.
28
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
The Redeemable Units were issued to accredited investors in reliance upon applicable
exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and
Section 506 of Regulation D promulgated thereunder.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
(d) Maximum Number | ||||||||||||||||||||||
(c) Total Number | (or Approximate | |||||||||||||||||||||
of Redeemable Units | Dollar Value) of | |||||||||||||||||||||
Purchased as Part | Redeemable Units that | |||||||||||||||||||||
(a) Total Number | (b) Average | of Publicly | May Yet Be | |||||||||||||||||||
of Redeemable | Price Paid per | Announced | Purchased Under the | |||||||||||||||||||
Period | Units Purchased* | Redeemable Unit** | Plans or Programs | Plans or Programs | ||||||||||||||||||
January 1,
2011 January 31, 2011 |
106.0546 | $ | 1,952.16 | N/A | N/A | |||||||||||||||||
February 1,
2011 February 28, 2011 |
67.4744 | $ | 1,955.31 | N/A | N/A | |||||||||||||||||
March 1,
2011 March 31, 2011 |
101.5126 | $ | 1,907.92 | N/A | N/A | |||||||||||||||||
275.0416 | $ | 1,936.60 | ||||||||||||||||||||
* | Generally, Limited Partners are permitted to redeem their Redeemable Units as of the last day of each month on three business days notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnerships business in connection with effecting redemptions for Limited Partners. | |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions. |
Item 3.
Defaults Upon Senior Securities None
Item 4. [Removed and Reserved]
Item 5.
Other Information. None
29
Item 6.
Exhibits
Exhibits:
3.1 Certificate of Limited Partnership of the Partnership as filed in the office of the
Secretary of State of the State of New York, dated June 12, 1998 (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference).
(a) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 30, 1998 (filed as Exhibit 3.2 to the Registration Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference). | ||
(b) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated October 1, 1999 (filed as Exhibit 3.1(b) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(c) | Certificate of Change to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, effective January 31, 2000 (filed as Exhibit 3.1(c) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(d) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 3.1(d) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(e) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 3.1(e) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(f) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to the Form 8-K filed on September 2, 2008 and incorporated herein by reference). | ||
(g) | Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(g) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | ||
(h) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on September 30, 2009 and incorporated herein by reference). | ||
(i) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated June 30, 2010 (filed as Exhibit 3.1(i) to the Form 8-K filed on July 2, 2010 and incorporated herein by reference). |
3.2 Limited Partnership Agreement, dated June 15, 1998 (filed as Exhibit A to the Registration
Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference).
10.1 Customer Agreement between the Partnership and Salomon Smith Barney Inc., dated October 21,
1998 (filed as Exhibit 10.1 to the Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-1 filed on October 22, 1998 and incorporated herein by reference).
10.2
Escrow Agreement among the Partnership, Smith Barney Inc., and European American Bank, dated
October 21, 1998 (filed as Exhibit 10.3 to the Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-1 filed on October 22, 1998 and incorporated herein by reference).
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10.3 Selling Agreement among the Partnership, Smith Barney Futures Management Inc., and Smith
Barney Inc., dated October 21, 1998 (filed as Exhibit 1.1 to the Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-1 filed on October 22, 1998 and incorporated herein by
reference).
10.4 Joinder Agreement among the Partnership, Citigroup Managed Futures LLC, Citigroup Global
Markets Inc. and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as Exhibit 10 to the
Form 10-Q filed on August 14, 2009 and incorporated herein by reference).
10.5 Management Agreement among the Partnership, the General Partner and Aspect Capital
Management Limited, dated April 17, 2001 (filed as Exhibit 10.12 to the Form 10-K filed on March
28, 2002 and incorporated herein by reference).
(a) | Letter from the General Partner extending Management Agreement with Aspect Capital Management Limited for 2010, dated June 1, 2010 (filed as Exhibit 10.6(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). |
10.6 Management Agreement among the Partnership, the General Partner and Altis Partners (Jersey)
Limited, dated October 1, 2005 (filed as Exhibit 33.1 to the Form 10-Q/A filed on November 16, 2005
and incorporated herein by reference).
(a) | Letter from the General Partner extending Management Agreement with Altis Partners (Jersey) Limited for 2010, dated June 1, 2010 (filed as Exhibit 10.7(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). |
10.7 Management Agreement among the Partnership, the General Partner and Waypoint Capital
Management LLC, dated September 29, 2008 (filed as Exhibit 10.23 to the Form 10-K filed on March
31, 2009 and incorporated herein by reference).
(a) | Letter from the General Partner extending Management Agreement with Waypoint Capital Management LLC for 2010, dated June 1, 2010 (filed as Exhibit 10.8(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). |
10.8
Management Agreement among the Partnership, the General Partner and Blackwater Capital
Management LLC, dated October 29, 2010 (filed as Exhibit 10.9 to the Form 8-K filed on November 4,
2010 and incorporated herein be reference).
10.9
Management Agreement among the Partnership, the General
Partner and Sasco Energy Partners LLC, dated November 30, 2010 (filed
as Exhibit 10.1 to the Form 8-K filed on December 1, 2010
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
and Director).
32.1 Section 1350 Certification (Certification of President and Director).
32.2 Section 1350 Certification (Certification of Chief Financial Officer and
Director).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GLOBAL DIVERSIFIED FUTURES FUND L.P. By: Ceres Managed Futures LLC (General Partner) |
||||
By: | /s/ Walter Davis | |||
Walter Davis | ||||
President and Director |
Date:
May 16, 2011
By: | /s/ Jennifer Magro | |||
Jennifer Magro | ||||
Chief Financial Officer and Director (Principal Accounting Officer) |
Date: May 16, 2011
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