UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
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OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File Number 0-22491
DIVERSIFIED MULTI-ADVISOR FUTURES FUND L.P. II
(Exact name of registrant as specified in its charter)
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New York
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13-3769020 |
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(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
c/o Ceres Managed Futures LLC
55 East 59th Street 10th Floor
New York, New York 10022
(Address and Zip Code of principal executive offices)
(212) 559-2011
(Registrants telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None |
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Securities registered pursuant to Section 12(g) of the Act:
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Redeemable Units of Limited Partnership Interest |
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(Title of Class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes ___ No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes ___ No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant has submitted electronically 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 ___ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K [X].
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):
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Large accelerated filer ___
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Accelerated filer ___
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Non-accelerated filer X
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Smaller reporting company ___ |
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes ___ No X
Limited Partnership Redeemable Units with an aggregate value of $28,814,813 were outstanding and
held by non-affiliates as of the last business day of the registrants most recently completed
second calendar month.
As of
February 28, 2010, 17,948.3664 Limited Partnership Redeemable Units were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
[NONE]
PART I
(a) General
Development of Business. Diversified Multi-Advisor Futures Fund L.P. II (formerly, Smith
Barney Diversified Futures Fund L.P. II) (the Partnership) is a limited partnership organized on
May 10, 1994 under the partnership laws of the State of New York. The Partnership commenced trading
operations on January 17, 1996. The Partnership may engage, directly or indirectly, in the
speculative trading of a diversified portfolio of commodity interests, including futures contracts,
options, swaps and forward contracts. The sectors traded included currencies, energy, grains,
indices, metals, softs, livestock, U.S. and non-U.S. interest rates. The commodity interests that
are traded by the Partnership and the Funds are volatile and involve a high degree of market risk.
A Registration Statement on Form S-1 (File No. 033-79244) relating to the public offering
became effective on August 21, 1995. Beginning August 21, 1995, 100,000 redeemable units of Limited
Partnership Interest (Redeemable Units) were publicly
offered at $1,000 per unit for a
period of ninety days, subject to increase for up to an additional sixty days at the sole
discretion of the general partner. Between August 21, 1995 (commencement of the offering period)
and January 16, 1996, 8,529 Redeemable Units were sold at $1,000 per Redeemable Unit. Proceeds of
the offering were held in an escrow account and were transferred, along with the general partners
contribution of $87,000, to the Partnerships trading account on January 17, 1996 when the
Partnership commenced trading. An additional 100,000 Redeemable Units were registered on a
Registration Statement on Form S-1 (File No. 333-03538) effective May 29, 1996 and an additional
150,000 Redeemable Units were registered on a Registration Statement on Form S-1 (File No.
333-25239) effective April 15, 1997. The Partnership no longer offers Redeemable Units for sale.
Redemptions of Redeemable Units for the years ended December 31, 2009, 2008 and 2007 are reported
in the Statements of Changes in Partners Capital on page F-13 under Item 8. Financial
Statements and Supplementary Data.
Ceres Managed Futures LLC (formerly Citigroup 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), a newly registered non-clearing futures commission merchant and a member of the
National Futures Association (NFA). Morgan Stanley, indirectly through various subsidiaries, owns 51% of
MSSB Holdings. Citigroup Global Markets Inc. (CGM), the commodity broker and a selling agent for
the Partnership, owns 49% of 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 December 31, 2009, all trading decisions are made for the Partnership by Capital Fund
Management SA (CFM), Willowbridge Associates Inc. (Willowbridge), Graham Capital Management
L.P. (Graham), Eckhardt Trading Company (Eckhardt) and SandRidge Capital L.P. (SandRidge)
(each an Advisor and collectively, the Advisors). Campbell & Co., Inc. (Campbell) was
terminated as a trading advisor to the Partnership as of May 31,
2009. SandRidge was added as an Advisor to the Partnership on June 1,
2009. A description of the trading activities and focus of the
Advisor is included on page 8 under Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations. The Advisors are not affiliated with one another, are not affiliated with the General
Partner or CGM and are not responsible for the organization or operation of the Partnership.
The General Partner has agreed to make capital contributions, if necessary, so that its
General Partnership Interest will be equal to the greater of (i) an amount to entitle it to 1% of
each material item of Partnership income, loss, deduction or credit and (ii) the greater of (a) 1%
of the partners contributions to the Partnership or (b) $25,000. The Partnership will be
liquidated upon the first of the following to occur: December 31, 2014; the Net Asset Value per
Redeemable Unit decreases to less than $400 as of the close of any business day; or under certain
circumstances as defined in the limited partnership agreement of the Partnership (the Limited
Partnership Agreement).
On January 1, 2005, the assets allocated to Campbell for trading were invested in the 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 18,800.3931 units of Campbell
Master with cash of $18,587,905 and a contribution of open commodity futures and forward positions
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with a fair value of $212,488. Campbell Master was formed in order to permit commodity pools
managed now or in the future by Campbell using Campbells
Financial, Metal and Energy Large Portfolio
(FME), a proprietary, systematic, to invest together in one trading vehicle. The Partnership
fully redeemed its investment in Campbell Master on May 31, 2009 for cash equal to $4,740,726.
On July 1, 2005, the assets allocated to Willowbridge for trading were invested in the CMF
Willowbridge Argo Master Fund L.P. (Willowbridge Master), a limited partnership organized under
the partnership laws of the State of New York. The Partnership purchased 10,980.9796 units of
Willowbridge Master with cash of $9,895,326 and a contribution of open commodity futures and
forward positions with a fair value of $1,085,654. Willowbridge Master was formed in order to
permit commodity pools managed now or in the future by Willowbridge
using its Argo Trading System,
a proprietary, systematic trading system, to invest together in one trading vehicle. The General
Partner is also the general partner of Willowbridge Master. Individual and pooled accounts
currently managed by Willowbridge, including the Partnership are permitted to be limited partners
of Willowbridge Master. The General Partner and Willowbridge believe that trading through this
structure should promote efficiency and economy in the trading process.
On April 1, 2006, the assets allocated to Graham for trading were invested in the CMF Graham
Capital Master Fund L.P. (Graham Master), a limited partnership organized under the partnership
laws of the State of New York. The Partnership purchased 11,192.9908 units of Graham Master with
cash of $11,192,991. Graham Master was formed in order to permit commodity pools managed now or in
the future by Graham using Grahams K4D-12.5 Program, a proprietary, systematic trading system, to
invest together in one trading vehicle. The General Partner is also the general partner of Graham
Master. Individual and pooled accounts currently managed by Graham, including the Partnership are
permitted to be limited partners of Graham Master. The General Partner and Graham believe that
trading through this structure should promote efficiency and economy in the trading process.
On April 1, 2008, the assets allocated to Eckhardt for trading were invested in the CMF
Eckhardt Master Fund L.P. (Eckhardt Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership purchased 7,000.0000 units of Eckhardt
Master with cash of $7,000,000. Eckhardt Master was formed in order to permit commodity pools
managed now or in the future by Eckhardt using Eckhardts Standard Program, a proprietary,
systematic trading system, to invest together in one trading vehicle. The General Partner is also
the general partner of Eckhardt Master. Individual and pooled accounts currently managed by
Eckhardt, including the Partnership, are permitted to be limited partners of Eckhardt Master. The
General Partner and Eckhardt believe that trading through this structure should promote efficiency
and economy in the trading process.
On June 1, 2009, the assets allocated to SandRidge for trading were in invested in the CMF
SandRidge Master Fund L.P. (SandRidge Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership purchased 2,086.0213 units of SandRidge
Master with cash of $4,288,986. SandRidge Master was formed in order to permit commodity pools
managed now or in the future by using SandRidges Energy Program, a proprietary, discretionary
trading system, to invest together in one trading vehicle. The General Partner is also the general
partner of SandRidge Master. Individual and pooled accounts currently managed by SandRidge,
including the Partnership, are permitted to be limited partners of SandRidge Master. The General
Partner and SandRidge believe that trading through this structure should promote efficiency and
economy in the trading process.
Willowbridge Masters, Graham Masters, Eckhardt Masters and SandRidge Masters (collectively
the Funds) and the Partnerships 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 and the Partnership engage in such trading through a
commodity brokerage account maintained with 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 Redeemable Unit of Limited
Partnership Interest 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 NFA fees (collectively the
clearing fees) are borne by the Partnership and through its investments in the Funds. All other
fees including CGMs direct brokerage commissions are charged at the Partnership level.
For the period January 1, 2009 through December 31, 2009, the approximate market sector allocation for the Partnership was as follows:
As of December 31, 2009 the Partnership owned approximately 2.3% 4.6%, 28.5% and 0.6%, of
Willowbridge Master, Graham Master, Eckhardt Master and SandRidge Master, respectively. As of
December 31, 2008 the Partnership owned approximately 5.9%, 3.4%, 4.7% and 30.7%, of Campbell
Master, Willowbridge Master, Graham Master and Eckhardt Master, respectively. The performance of
the Partnership is directly affected by the performance of the Funds. Willowbridge, Graham,
Eckhardt and SandRidge intend to continue to invest the assets allocated to each by the Partnership
in Willowbridge Master, Graham Master, Eckhardt Master
and SandRidge Master, respectively. The performance of the Partnership is directly affected by the
performance of the Funds. Expenses to investors as a result of the investment in the Funds are
approximately the same and redemption rights are not affected.
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The General Partner and each 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 their initial
capital contribution and profit, if any, net of distributions.
Pursuant to the terms of the management agreements (the Management Agreements), the
Partnership pays each Advisor a monthly management fee equal to 1/6 of 1% (2% per year) of
month-end Net Assets allocated to the respective Advisor. Month-end Net Assets for the purpose of calculating
management fees are Net Assets, as defined in the Limited Partnership Agreement, prior to the
reduction of the current months incentive fee accruals, the monthly management fees and any redemptions or distributions as of the end of such month. The Management Agreements may be terminated upon
notice by either party.
In addition, the Partnership is obligated to pay each Advisor an incentive fee, payable
annually, equal to 20% of the New Trading Profits, as defined in the Management Agreements, earned
by each Advisor for the Partnership, except Graham, which will receive an incentive fee of 10% of
New Trading Profits on the first $5,000,000 and 20% of New Trading Profits for all such profits in
excess of $5,000,000.
The Partnership has entered into a customer agreement (the Customer Agreement) with CGM,
which provides that the Partnership pays CGM a monthly brokerage commission equal to 1/2 of 1% (6% per year) of
month-end Net Assets allocated to the Advisors, in lieu of brokerage commissions on a
per trade basis. Month-end Net Assets for the purpose of calculating commissions are Net Assets, as
defined in the Limited Partnership Agreement, prior to the reduction
of the current months brokerage commissions, incentive fee accruals,
the monthly management fees and other expenses and any redemptions
or distributions as of the end of such month. CGM will pay a portion of its brokerage commissions to financial advisors who
have sold Redeemable Units. The Partnership will pay for the clearing fees directly and
through its investment in the Funds. Brokerage commissions will be paid for the life of the
Partnership, although the rate at which such fees are paid may be changed. All of the Partnerships assets, not held in the Funds accounts at CGM, are deposited in the Partnerships account at CGM. The Partnerships cash is deposited by CGM in segregated bank accounts to the extent required by Commodity Futures Trading Commission regulations. CGM has agreed to pay
the Partnership interest on 80% of the average daily equity
maintained in cash in the Partnerships (or the
Partnerships allocable portion of a Funds) account
during each month at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average
non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date on which
such weekly rate is determined.
CGM will pay such interest to the Partnership out of its own funds
whether or not it is able to earn the interest it has obligated
itself to pay.
Alternatively, CGM may continue to maintain the Partnerships assets in cash
and/or place all the Partnerships assets in a 90-day Treasury bills and pay the Partnership 80% of
the interest (or the Partnerships allocable share of) earned on the Treasury bills purchased. Twenty percent of the interest earned on Treasury bills purchased may be retained by CGM and/or credited to the General Partner. The Customer Agreement gives the Partnership the legal right to net unrealized
gains and losses. The Customer Agreement may be terminated upon notice by either party.
(b) Financial Information about Industry Segments. The Partnerships business consists
of only one segment, speculative trading of commodity interests. The Partnership does not engage in
the sales of goods or services. The Partnerships net income (loss) from operations for the years
ended December 31, 2009, 2008, 2007, 2006 and 2005, is set forth under Item 6. Selected
Financial Data. The Partnerships Capital as of December 31, 2009, was $31,924,681.
(c) Narrative Description of Business.
See Paragraphs (a) and (b) above.
(i) through (xii) Not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information about Geographic Areas. The Partnership does not engage in
the sales of goods or services or own any long lived assets, and therefore this item is not
applicable.
(e) Available Information. The Partnership does not have an Internet address. The
Partnership will provide paper copies of its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and any amendments to these reports free of charge upon request.
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(f) Reports to Security Holders. Not applicable.
(g) Enforceability of Civil Liabilities Against Foreign Persons. Not applicable.
(h) Smaller Reporting Companies. Not applicable.
As a result of leverage, small changes in the price of the Partnerships positions may result
in major losses.
The trading of commodity interests is speculative, volatile and involves a high degree of
leverage. A small change in the market price of a commodity interest contract can produce major
losses for the Partnership. Market prices can be influenced by, among other things, changing supply and demand
relationships, governmental, agricultural, commercial and trade programs and policies,
national and international political and economic events, weather and climate conditions,
insects and plant disease, purchases and sales by foreign countries and changing interest
rates.
An
investor may lose all of its investment.
Due to the speculative nature of trading commodity interests, an investor could lose all of
its investment in the Partnership.
The Partnership will pay substantial fees and expenses regardless of profitability.
Regardless of its trading performance, the Partnership will incur fees and expenses, including
brokerage commissions and management fees. Substantial incentive fees may be paid to one or more of
the Advisors even if the Partnership experiences a net loss for the full year.
An investors ability to redeem or transfer Redeemable Units is limited.
An investors ability to redeem Redeemable Units is limited and no market exists for the
Redeemable Units.
Conflicts of interest exist.
The Partnership is subject to numerous conflicts of interest including those that arise from
the facts that:
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The General Partner and commodity broker are affiliates; |
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Each of the Advisors, the commodity broker and their principals and affiliates may
trade in commodity interests for their own accounts; and |
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An investors financial advisor will receive ongoing compensation
for providing services to the investors account. |
Investing in units might not provide the desired diversification of an investors overall
portfolio.
The Partnership will not provide any benefit of diversification of an investors overall
portfolio unless it is profitable and produces returns that are independent from stock and bond
market returns.
Past performance is no assurance of future results.
The Advisors trading strategies may not perform as they have performed in the past. The
Advisors have from time to time incurred substantial losses in trading on behalf of clients.
An investors tax liability may exceed cash distributions.
Investors are taxed on their share of the Partnerships income, even though the Partnership
does not intend to make any distributions.
The General Partner may allocate the Partnerships assets to undisclosed advisors.
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The General Partner at any time may select and allocate the Partnerships assets to
undisclosed advisors. Investors may not be advised of such changes in advance. Investors must rely
on the ability of the General Partner to select advisors and allocate assets among them.
Regulatory changes could restrict the Partnerships operations.
Regulatory changes could adversely affect the Partnership by restricting its markets or activities, limiting its trading and/or increasing the taxes to which investors are subject. The General Partner is not aware of any definitive regulatory developments that might adversely affect the Partnership; however, since June 2008, several bills have been proposed in the U.S. Congress in response to record energy and agricultural prices and the financial crisis. Some of the pending legislation, if enacted, could impact the manner in which swap contracts are traded and/or settled and limit trading by speculators (such as the Partnership) in futures and over-the-counter markets. One of the proposals would authorize the CFTC and the Commission to regulate swap transactions. Other potentially adverse regulatory initiatives could develop suddenly and without notice.
Speculative
position and trading limits may reduce profitability
The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person may hold or control in particular futures and options on futures. The trading instructions of an advisor may have to be modified, and positions held by the Partnership may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect
the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and foregoing potential profits.
The Partnership does not own or lease any properties. The General Partner operates out of
facilities provided by its affiliate, Citigroup.
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Item 3. |
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Legal Proceedings. |
This section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which CGM or its subsidiaries is a party or to which
any of their property is subject. There are no material legal proceedings pending against the
Partnership or the General Partner.
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, Citigroup Global Markets 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 Citigroup
Global Markets 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 Citigroup Global Markets in failing to disclose aspects of the transfer agent
arrangements to certain mutual fund investors.
In May 2007, Citigroup Global Markets 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 Citigroup Global Markets, 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 Citigroup Global
Markets 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. Citigroup Global Markets was charged with failing to provide for
effective written procedures with 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 Citigroup
Global Markets 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. 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. Citigroup
Global Markets 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
Citigroup and certain of its affiliates are subject to formal and informal investigations, as
well as subpoenas and/or requests for information, from various governmental and self-regulatory
agencies relating to subprime mortgagerelated activities. Citigroup and its affiliates are
cooperating fully and are engaged in discussions on these matters.
Credit Crisis Related Matters
Beginning in the fourth quarter of 2007, certain of Citigroups, and Citigroup Global Markets
regulators and other state and federal government agencies commenced formal and informal
investigations and inquiries, and issued subpoenas and requested information, concerning
Citigroups subprime mortgage-related conduct and business activities. Citigroup and certain of
its affiliates, including Citigroup Global Markets, 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 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 broker-dealer,
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.
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Item 4. |
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[Removed and Reserved] |
6
PART II
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Item 5. |
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Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities. |
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Market Information. The Partnership has issued no stock. There is no public
market for the Redeemable Units. |
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Holders. The number of holders of Redeemable Units as of December 31, 2009
was 1,244. |
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Dividends. The Partnership did not declare a distribution in 2009 or 2008.
The Partnership does not intend to declare distributions in the foreseeable future. |
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Securities Authorized for Issuance under Equity Compensation Plans. None. |
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Performance Graph. Not applicable. |
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Recent Sales of Unregistered Securities. There were no additional sales of Redeemable Units during
the twelve months ended December 31, 2009. There were no additional sales of Redeemable
Units during the twelve months ended December 31, 2008. During the twelve months ended
December 31, 2007 there were General Partner contributions representing the sale of
1,008.7668 General Partner Unit equivalents totaling $1,441,407. The Redeemable Units were
issued in reliance upon applicable exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated there
under. The Redeemable Units were purchased by accredited investors as described in
Regulation D. |
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Proceeds from the sale of additional Redeemable Units are used in the trading of commodity
interests including, if applicable, futures contracts, options and forward contracts. |
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Purchase of Equity Securities by the Issuer and Affiliated Purchasers. |
The following chart sets forth the purchases of Redeemable Units by the Partnership.
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(d) Maximum Number
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(c) Total Number
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(or Approximate Dollar
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of Redeemable Units
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Value) of Redeemable
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(a) Total Number
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(b) Average
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Purchased as Part of
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Units that May Yet Be
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of Redeemable Units
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Price Paid per
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Publicly Announced
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Purchased Under the
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Period
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Purchased*
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Redeemable Unit**
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|
Plans or Programs
|
|
|
|
Plans or Programs
|
|
October 1, 2009 October 31, 2009
|
|
|
|
103.3778 |
|
|
|
$
|
1,792.99 |
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
November 1, 2009 November 30, 2009
|
|
|
|
226.1229 |
|
|
|
$
|
1,866.74 |
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
December 1, 2009 December 31, 2009
|
|
|
|
219.0551 |
|
|
|
$
|
1,724.57 |
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
548.5558 |
|
|
|
$
|
1,796.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Generally, Limited Partners are permitted to redeem their Redeemable Units as of the last day of
each month on
10 days notice to the General Partner. Under certain circumstances, the General Partner can
compel redemption but
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 6. |
|
Selected Financial Data. |
Net
realized and unrealized trading gains, interest income, net income, increase in Net
Asset Value per Unit and Net Asset Value per Unit for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 and total
assets at December 31, 2009, 2008, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Net realized and unrealized trading gains
(losses) and investment in partnerships net of
brokerage commissions (including clearing
fees) of $2,563,903, $3,078,391, $3,463,859, $3,924,799 and
$4,178,058, respectively |
|
$ |
(1,773,665 |
) |
|
$ |
6,859,644 |
|
|
$ |
2,568,991 |
|
|
$ |
1,287,348 |
|
|
$ |
1,456,152 |
|
Total interest income |
|
|
27,089 |
|
|
|
487,555 |
|
|
|
1,744,958 |
|
|
|
2,080,286 |
|
|
|
1,356,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,746,576 |
) |
|
$ |
7,347,199 |
|
|
$ |
4,313,949 |
|
|
$ |
3,367,634 |
|
|
$ |
2,812,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(2,993,465 |
) |
|
$ |
5,721,768 |
|
|
$ |
2,911,097 |
|
|
$ |
1,567,049 |
|
|
$ |
605,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in Net Asset Value per Unit |
|
$ |
(142.43 |
) |
|
$ |
215.30 |
|
|
$ |
92.67 |
|
|
$ |
42.26 |
|
|
$ |
25.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Unit |
|
$ |
1,724.57 |
|
|
$ |
1,867.00 |
|
|
$ |
1,651.70 |
|
|
$ |
1,559.03 |
|
|
$ |
1,516.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
32,598,591 |
|
|
$ |
45,718,234 |
|
|
$ |
49,039,808 |
|
|
$ |
53,906,145 |
|
|
$ |
59,855,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Partnership, directly and through its investment in other partnerships, seeks to achieve
substantial capital appreciation through speculative trading, directly and indirectly, in U.S. and
international markets for currencies, interest rates, stock indices, agricultural and energy
products and precious and base metals. The Partnership may employ futures, swaps, options on
futures, and forward contracts in those markets.
The General Partner manages all business of the Partnership. The General Partner has delegated
its responsibility for the investment of the Partnerships assets to the Advisors. The General
Partner employs a team of approximately 20 professionals whose primary emphasis is on attempting to
maintain quality control among the advisors to the partnerships operated or managed by the General
Partner. A full-time staff of due diligence professionals use state-of-the-art technology and
on-site evaluations to monitor new and existing futures money managers. The accounting and
operations staff provide processing of trading activity and reporting to limited partners and
regulatory authorities. In selecting the Advisors for the Partnership, the General Partner
considered past performance, trading style, volatility of markets traded and fee requirements.
Responsibilities of the General Partner include:
|
|
|
due diligence examinations of the Advisors; |
|
|
|
|
selection, appointment and termination of the Advisors; |
|
|
|
|
negotiation of the Management Agreements; and |
|
|
|
|
monitoring the activity of the Advisors. |
In addition, the General Partner prepares the books and records and provides the
administrative and compliance services that are required by law or regulation from time to time in
connection with operation of the Partnership. These services include the preparation of required
books and records and reports to limited partners, government agencies and regulators; computation
of net asset value; calculation of fees; effecting subscriptions, redemptions and limited partner
communications; and preparation of offering documents and sales literature.
The General Partner seeks the best prices and services available in its commodity futures
brokerage transactions.
The programs traded by each Advisor on behalf of the Partnership are: CFM Discus Program
(Discus), Graham K4D-12.5 Program, Willowbridge
Argo Trading System, and Eckhardt
Standard Program. As of December 31, 2009, the Partnerships assets were allocated among the
Advisors in the following approximate percentages: SandRidge, 14%,
CFM, 31%, Graham, 25%,
Willowbridge, 15% and Eckhardt, 15%.
No assurance is given that an Advisors trading program
will be profitable or that it will not
experience losses.
Campbell & Company, Inc.
Campbell
traded its FME Large Portfolio for the Partnership a systematic,
proprietary trading program. Campbells trading models are
designed to detect and exploit medium-term to long-term price changes, while also applying risk
management and portfolio management principles.
Campbell believes that utilizing multiple trading models provides an important level of
diversification, and is most beneficial when multiple contracts of each market are traded. Every
trading model may not trade every market. It is possible that one trading model may signal a long
position while another trading model signals a short position in the same market. It is Campbells
intention to offset those signals to reduce unnecessary trading, but if the signals are not
simultaneous, both trades will be taken and since it is unlikely that both positions would prove
profitable, in retrospect, one or both trades will appear to have been unnecessary. It is
Campbells policy to follow trades signaled by each trading model independently of the other
models.
Campbell was
terminated as a trading advisor to the Partnership as of May 31,
2009.
Capital
Fund Management SA
CFM
will trade the Partnerships assets allocated to it in
accordance with its Discus Program, a systematic,
proprietary trading program. All of the
trading decisions result from proprietary trading and risk management programs developed by CFM.
The Discus Program is 100% statistical and systematic in nature. The only information fed into the system are
historical price statistics. The system does not use any form of qualitative information and, most
importantly, the system is never overridden by human opinion. The program continuously applies
proprietary filters to review price data in an attempt to select the most efficient trading
strategy with respect to a particular time frame (short, medium or long term), contracts traded,
contract and market sector concentration and risk exposure. The
Discus Program trades more than 50 types of
futures contracts on exchanges around the world.
Graham Capital Management, L.P.
Graham trades its K4D-12.5 Program on behalf of Graham Master. The K4D-12.5 Program allocates
assets equally among four other distinct Graham trading programs.
8
Graham trades actively in both U.S. and foreign markets, primarily in futures contracts,
forward contracts, spot contracts and associated derivative instruments such as options and swaps.
Graham engages in exchange for physical transactions, which involve the exchange of a futures
position for the underlying physical commodity without making an open competitive trade on an
exchange. Graham at times will trade certain instruments, such as forward foreign currency
contracts, as a substitute for futures or options traded on futures exchanges.
Grahams
trading systems are systematic and rely primarily on technical rather than fundamental information as
the basis for their trading decisions. Grahams systems are based on the expectation that over time
they can successfully anticipate market events using quantitative mathematical models to determine
their trading activities, as opposed to attempting to properly forecast price trends using
subjective analysis of supply and demand.
Graham trades the
Partnerships assets allocated to it in accordance with the K4D-12.5
Program, which combines
four individual Graham investment programs into one program. K4D-12.5 Program initially allocates
assets equally among other Graham programs. As market conditions or other circumstances change,
Graham may alter the weightings of the individual programs and add (or delete) other programs to
K4D-12.5 Program as it deems appropriate.
Willowbridge Associates, Inc.
Willowbridge trades the Partnerships assets allocated to it in accordance with its Select
Investment Program, whereby the General Partner determined the initial allocation of the
Partnerships assets among one or more of Willowbridges strategies and may determine subsequent
reallocations (if any). Of the Partnerships assets allocated to Willowbridge, 0% is currently
traded using the Vulcan Trading System (Vulcan) and 100% is currently traded using the Argo
Trading System (Argo), each of which is described below.
For each of these systems, risk is managed on a market by market level as well as on an
overall portfolio level. On the market level, risk is managed primarily by utilizing proprietary
volatility filters. When these filters detect a certain excessive level of volatility in the
markets traded, they will signal that the systems should no longer be trading in the markets in
which the filters have detected excessive volatility. In this way, the systems do not participate
in markets in which there are extremes in market action. On the portfolio level, risk is managed by
utilizing a proprietary portfolio cutback rule. When cumulative profits have reached a certain
level, this rule determines that positions should be halved across the entire portfolio. In this
way, risk is reduced while allowing the systems to continue to participate in the markets, albeit
at a reduced level. After the portfolio has been traded at half, the portfolio cutback rule will
then determine when to increase positions to again trade at the full level.
The Vulcan Trading System, which commenced
trading in 1988, is a computerized technical
trading system. It is not a trend-following system, but does ride a trend when the opportunity
arises. Vulcan uses the concepts of pattern recognition, support/resistance levels, and
counter-trend liquidations (as defined below) in making trading decisions. In effect, Vulcan is
more akin to a systematic technical charting system, as opposed to most computer systems which are
based on pure trend-following calculations.
Vulcan is based on general technical trading principles. It applies these principles to a
diversified portfolio of commodities and currencies. Given that the system is based on general
principles, the system parameters used are the same for all items in the portfolio and are not
optimized. In this manner, the Vulcan System minimizes the problem of data-fitting.
Argo commenced trading in 1988. Argo essentially incorporates Vulcans concepts of pattern
recognition, support/resistance levels and counter-trend liquidations (as defined below) to trade a
portfolio similar to Vulcan. However, Argo has a relatively slower time horizon than Vulcan and
attempts to capture longer-term price moves.
Pattern recognition, support/resistance levels and counter-trend liquidations are defined as
follows:
Pattern recognition is the ability to identify patterns that appear to have acted as
precursors of price advances or declines in the past.
A support level is a previous low a price level under the current market price at which
point buying interest is expected to be sufficiently strong to overcome selling pressure.
A resistance level is a previous high a price level over the current market price at which
point selling pressure is expected to overcome buying pressure and a price advance is expected to
be turned back.
9
A counter-trend liquidation is the closing out of a position after a significant price move on
the assumption that the market is due for a correction.
Eckhardt Trading Company
Eckhardt began managing accounts according to the Standard Program Higher Leveraged in
October 1991, a systematic proprietory trading program For this program, Eckhardt primarily engages in trading financial and commodity
futures contracts on U.S. and non-U.S. exchanges. Currently the
market groups of contracts traded
by Eckhardt in the Standard Program-Higher Leveraged include, but are not limited to, U.S. and
international interest rates, stock indices, currencies and cross-rates, metals, energy products,
grains and soft markets. Eckhardt may add or delete markets and/or exchanges at its discretion. In
addition, Eckhardt may trade options on futures, forward contracts on commodities and currencies,
cash currencies, and may engage in transactions in physical commodities, including EFPs (in
addition to EFPs in currencies).
Eckhardts trading approach is the product of over 28 years of intensive research on futures
price action, risk management and trading system development. Diverse systems are melded in
accordance with the modern mathematical theory of risk. The systems are technical in origin and
trend following in thrust. They are not based on the analysis of fundamental supply and demand
factors. Eckhardts trading approach is predominantly applied in an algorithmic or mechanical
manner. Occasionally, discretion and judgment may be used; such discretion is nonetheless informed
by investigations into historical price action and is often employed for risk management purposes.
Discretion also may be utilized in connection with the timing of the entry of orders in the markets
traded.
SandRidge Capital, L.P.
SandRidge trades its Energy Program on behalf of the Partnership, through its investment in
SandRidge Master. SandRidge primarily attempts to achieve the Funds objective through the
speculative trading of energy-related commodity interests, including, but not limited to natural
gas, crude oil, heating oil and gasoline.
SandRidge is a discretionary trader that employs primarily fundamental analysis. Fundamental
analysis examines factors external to the trading market that affect the supply and demand for a
particular group or type of commodity in order to predict future prices. While SandRidge relies
heavily on fundamental research to develop its overall point of view, it also employs technical
analysis in its trading to help determine entry and exit points.
Effective risk management is an important aspect of SandRidges trading program. An accounts
size, volatility of the market traded and the nature of other positions taken are all factors used
in deciding whether to initiate a position and in determining the amount of equity committed to
that position.
For the period January 1, 2009 through December 31, 2009, the average allocation by commodity market sector for each of the Funds was as follows:
CMF Willowbridge Argo Master Fund
|
|
|
|
|
Currencies |
|
|
23.4 |
% |
Energy |
|
|
17.8 |
% |
Grains |
|
|
8.3 |
% |
Interest Rates Non-U.S. |
|
|
16.6 |
% |
Interest Rates U.S. |
|
|
9.5 |
% |
Livestock |
|
|
0.4 |
% |
Metals |
|
|
18.1 |
% |
Softs |
|
|
5.9 |
% |
CMF Graham Master Fund L.P.
|
|
|
|
|
Currencies |
|
|
26.1 |
% |
Energy |
|
|
6.8 |
% |
Grains |
|
|
4.0 |
% |
Interest Rates Non-U.S. |
|
|
16.9 |
% |
Interest Rates U.S. |
|
|
6.3 |
% |
Indices |
|
|
29.8 |
% |
Livestock |
|
|
0.4 |
% |
Metals |
|
|
5.2 |
% |
Softs |
|
|
4.5 |
% |
CMF SandRidge Master L.P.
CMF Eckhardt Master Fund L.P.
|
|
|
|
|
Currencies |
|
|
13.4 |
% |
Energy |
|
|
9.5 |
% |
Grains |
|
|
5.8 |
% |
Interest Rates Non-U.S. |
|
|
23.6 |
% |
Interest Rates U.S. |
|
|
14.1 |
% |
Indices |
|
|
13.6 |
% |
Metals |
|
|
12.7 |
% |
Softs |
|
|
7.3 |
% |
10
CMF Capital Fund Management Master Fund L.P.
|
|
|
|
|
Currencies |
|
|
21.1 |
% |
Energy |
|
|
8.2 |
% |
Grains |
|
|
1.8 |
% |
Interest Rates Non-U.S. |
|
|
14.2 |
% |
Interest Rates U.S. |
|
|
12.5 |
% |
Indices |
|
|
38.2 |
% |
Livestock |
|
|
0.2 |
% |
Metals |
|
|
1.6 |
% |
Softs |
|
|
2.2 |
% |
(a) Liquidity.
The Partnership does not engage in sales
of goods or services. The Partnerships assets are (i)
its investments in the Funds, (ii) equity in its trading account, consisting of cash and cash
equivalents, net unrealized appreciation on open futures contracts, net unrealized appreciation on
open forward contracts and (iii) interest receivable. Because of the low margin deposits normally
required in commodity futures trading, relatively small price movements may result in substantial
losses to the Partnership. While substantial losses could lead to a material decrease in liquidity,
no such illiquidity occurred during the year ended December 31, 2009.
To minimize the risk relating to low margin deposits, the Partnership follows certain trading
policies, including:
|
(i) |
|
The Partnership/Funds invests their assets only in commodity interests that an
Advisor believes are traded in sufficient volume to permit ease of taking and liquidating
positions. Sufficient volume, in this context, refers to a level of liquidity that the
Advisor believes will permit it to enter and exit trades without noticeably moving the
market. |
|
|
(ii) |
|
An Advisor will initiate additional positions in any commodity interest if these
positions would result in aggregate positions requiring a margin of more than 66 2/3% of
the Partnerships net assets allocated to that Advisor. |
|
|
(iii) |
|
The Partnership/Funds may occasionally accept delivery of a commodity. Unless such
delivery is disposed of promptly by retendering the warehouse receipt representing the
delivery to the appropriate clearinghouse, the physical commodity position is fully
hedged. |
11
|
(iv) |
|
The Partnership/Funds will not employ the trading technique commonly known as
pyramiding, in which the speculator uses unrealized profits on existing positions as
margin for the purchases or sale of additional positions in the same or related
commodities. |
|
|
(v) |
|
The Partnership/Funds will not utilize borrowings, other than short-term borrowings, if
the Partnership takes delivery of any cash commodities. |
|
|
(vi) |
|
The Advisors may, from time to time, employ trading strategies such as spreads or
straddles on behalf of the Partnership. Spreads
and straddles describe a
commodity futures trading strategy involving the simultaneous buying and selling of
futures contracts on the same commodity but involving different delivery dates or markets
and in which the trader expects to earn a profit from a widening or narrowing of the
difference between the prices of the two contracts. |
|
|
(vii) |
|
The Partnership/Funds will not permit the churning of its commodity trading
account. The term churning refers to the practice of entering and exiting trades with a
frequency unwarranted by legitimate efforts to profit from the trades, driven by the
desire to generate commission income. |
From January 1, 2009 through December 31, 2009, the Partnerships average margin to equity
ratio (i.e., the percentage of assets on deposit required for margin) was approximately 9.6%. The
foregoing margin to equity ratio takes into account cash held in the Partnerships name, as well as
the allocable value of the positions and cash held on behalf of the Partnership in the name of the
Funds.
In the normal course of business, the Partnership and the Funds are parties to financial
instruments with off-balance sheet risk, including derivative financial instruments and derivative
commodity instruments. These financial instruments include forwards, futures, options and swaps,
whose values are based upon an underlying asset, index or reference rate, and generally represent
future commitments to exchange currencies or cash balances, or to purchase or sell other financial
instruments at specified 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 swaps and certain forwards and option contracts. Each of these instruments is subject to
various risks similar to those relating 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.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership/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
Partnership/Funds are exposed to a market risk equal to the value of futures, options 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
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 Partnerships/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 Partnership/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 Partnership/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
Partnership/Funds do not consider these contracts to be guarantees as
described in ASC 460,
Guarantees (formerly, FAS No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees).
The
General Partner monitors and attempts to control the Partnerships/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 Partnership/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 positions by sector, margin requirements, gain and loss transactions
and
collateral positions. (See also Item 8. Financial Statements and Supplementary Data
for further information on financial instrument risk included in the Notes to Financial
Statements.)
12
Other than the risks inherent in commodity trading, the Partnership knows of no trends,
demands, commitments, events or uncertainties which will result in or which are reasonably likely
to result in the Partnerships liquidity increasing or decreasing in any material way. The Limited
Partnership Agreement provides that the General Partner may, in its discretion, cause the
Partnership to cease trading operations and liquidate all open positions upon the first to occur of
the following: (i) December 31, 2014; (ii) the vote to dissolve the Partnership by limited partners
owning more than 50% of the Redeemable Units; (iii) assignment by the General Partner of all of its
interest in the Partnership or withdrawal, removal, bankruptcy or any other event that causes the
General Partner to cease to be a General Partner under the New York Revised Limited Partnership Act
unless the Partnership is continued as described in the Limited Partnership Agreement; (iv) Net
Asset Value per Redeemable Unit falls to less than $400 as of the end of any trading day; or (v)
the occurrence of any event which shall make it unlawful for the existence of the Partnership to be
continued.
13
(i) The Partnership has made no material commitments for capital expenditures.
(ii) The Partnerships capital consists of the capital contributions of the partners as
increased or decreased by gains or losses on trading and by expenses, interest income, redemptions
of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be
predicted. Market movements in commodities are dependent upon fundamental and technical factors which
the Advisors may or may not be able to identify, such as changing supply and demand relationships,
weather, government, agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. Partnership expenses
consist of, among other things, brokerage, advisory fees. The level of these
expenses is dependent upon the trading performance and
the level of Net Assets
maintained. In addition, the amount of interest income payable by CGM is dependent upon interest
rates over which the Partnership has no control.
No forecast can be made as to the level of redemptions in any given period. A Limited Partner
may require the Partnership to redeem their Redeemable Units at their Net Asset Value as of the
last day of a month on ten days written notice to the General Partner. There is no fee charged to
Limited Partners in connection with redemptions. Redemptions
generally are funded out of the Partnerships cash holdings. For the year ended December 31, 2009, 4,791.9817
Redeemable Units were redeemed totaling $8,665,241 and 474.2765
General Partner Unit equivalents totaling $809,941. For the year ended December 31, 2008,
3,781.8183 Redeemable Units were redeemed totaling $6,739,448. For the year ended December 31,
2007, 5,971.8541 Redeemable Units were redeemed totaling $9,429,938.
(c) Results of Operations.
For the year ended December 31, 2009, the Net Asset Value per Redeemable Unit decreased 7.6%
from $1,867.00 to $1,724.57. For the year ended December 31, 2008, the Net Asset Value per
Redeemable Unit increased 13.0% from $1,651.70 to $1,867.00. For the year ended December 31, 2007,
the Net Asset Value per Redeemable Unit increased 5.9% from $1,559.03 to $1,651.70.
The Partnership experienced a net trading gain of $790,238 before brokerage commissions and related
expenses for the year ended December 31, 2009. Gains were primarily attributable to the Partnerships and
the Funds trading of currencies, indices, metals and softs and
were partially offset by the losses in energy, grains, livestock and
U.S. and non-U.S. interest rates.
2009 was a volatile year for the financial markets. The U.S. stock market entered 2009
reeling from the financial turmoil of 2008. The results of the sub-prime fallout, bank
bailouts, auto industry bankruptcies, and capitulating economic data overwhelmed not
just stock prices, but fueled extraordinarily high levels of risk aversion. The markets
recovery was driven by stability in the banking sector and a rapid recovery in global
markets. By mid-year 2009, the market had hit bottom in March, banks were seeking
to return TARP bailout money and other leading indicators were recovering. The Partnership
realized losses due to volatile trends. The volatility was due to sensitivity to news shocks and contrary
economic data.
High levels of volatility created difficult trading conditions in the energy markets. On one
hand, the weakness in the U.S. dollar is supportive of the higher prices in energy.
However, the decline in demand and excess inventories periodically push prices lower,
resulting in losses for the sector as prices whipsawed. Losses were realized in trading
fixed income instruments. With the economic backdrop of 2009, yields started to exhibit
asymmetric volatility due to extreme uncertainty prevailing in the longer time horizon.
Encouraged by the continuing efforts of the Obama administration to stabilize the U.S.
economy, the markets finally began to recover a degree of risk-taking confidence in
March, resulting in the reversal of many of the trends that had driven returns in late 2008.
In agricultural commodities, losses were realized primarily in corn and wheat. Prices of
corn and wheat both unexpectedly rallied in October as cold, wet weather threatened to
delay harvest and concerns over the acres likely to be seeded for the new crop.
The Partnership experienced a net trading gain of $9,938,035 before brokerage commissions and
related expenses for the year ended December 31, 2008. Gains were primarily attributable to the
Partnerships and the Funds trading of currencies, U.S. and non-U.S. interest rates, livestock,
energy, grains, metals and indices and were partially offset by the losses in softs.
In 2008, the liquidity crisis that began in 2007 rapidly spread to all corners of the globe,
significantly pushing down global economic growth and presenting the U.S. economy with the hardest
challenges since the Great Depression. During the year, the worlds credit markets virtually seized
up, commodity prices plunged and most major equity indices declined dramatically, while some of the
largest U.S. financial institutions were under pressure. Faced with unprecedented rapid
deterioration in economic data and outlook, and fearing a snowball adverse effect of the credit
crunch, global central banks reacted with aggressive campaigns of interest rate cuts and
coordinated capital injections. As the markets re-priced the cost of risk, several strong trends
emerged. The Partnership strongly capitalized on the trends and was profitable in almost every
sector.
Profits were primarily realized from trading in energy, fixed income and equity indices. The
Partnership realized most of the profits in the energy sector by capturing both the bullish and the
bearish trends. In the earlier part of the year, crude oil pushed towards a historic high of $147
per barrel and in the latter part, the trend suddenly reversed and a strong negative trend emerged
with crude oil dropping to about $32 per barrel. Natural gas also contributed to profits as prices
plunged from $14 to about $5 per mmbtu. The Partnership was also profitable in interest rates as the yield on
short term notes dropped significantly. Short term U.S. Treasury bills were in such high demand due
to flight-to-quality that the yields had dropped below zero during the year. While the 10Yr T-bill
yielded on an average between 3.5%-4% most of the year, the yield dropped to 2% in December.
Non-U.S. interest rates also showed tremendous volatility as the rates dropped precipitously due to
the actions of the central banks. Global equity indices also contributed to the gains as indices
continued to test multi-year lows. As financial institutions continued to write off the assets and
as bankruptcies loomed, investors lost confidence in the equity markets. Futures markets offered
greater flexibility as the SEC temporarily banned short selling in the equity markets. Slightly
offsetting gains were small losses in soft commodities such as coffee and cocoa.
Interest income on 80% of the average daily equity maintained in cash in the Partnerships (or the Partnerships allocable portion of a Funds) brokerage account was earned
at the 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive
yield on 3-month U.S. Treasury bills maturing in 30 days. CGM may continue to maintain the
Partnerships assets in cash and/or place all of the Partnerships (or a Funds) assets in 90-day Treasury bills
and pay the Partnership 80% on the interest (or the Partnerships allocable Share thereof) earned on the Treasury bills purchased. Twenty percent
of the interest earned on Treasury bills purchased may be retained by CGM and/or credited to the
General Partner. Interest income for the three and twelve months ended December 31, 2009 decreased
by $12,683 and $460,466, respectively, as compared to the corresponding periods in 2008. This
decrease was due to lower daily equity average maintained in cash and lower U.S. Treasury bill
rates during the three and twelve months ended December 31, 2009 as compared to the corresponding
periods in 2008. Interest earned by the Partnership will increase the
net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnerships and the Funds accounts and upon interest rates over which neither the Partnership nor CGM has control.
Brokerage commissions are calculated as a percentage of the Partnerships net asset value as of 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 commissions and fees for the three and twelve months ended December 31, 2009 decreased by
$172,540 and 514,488, respectively, as compared to the corresponding periods in 2008. The decrease
in brokerage commissions and fees is due to lower average net assets during the three and twelve
months ended December 31, 2009 as compared to the corresponding periods in 2008.
Management fees are calculated on the portion of the Partnerships net asset value allocated to
each Advisor at the end of the month and are affected by trading performance and
redemptions. Management fees for the three and twelve months ended December 31, 2009 decreased by
$59,051 and $176,109, respectively, as compared to the corresponding periods in 2008. The decrease
in management fees is due to lower average net assets during the three and twelve months ended
December 31, 2009 as compared to the corresponding periods in 2008.
Incentive fees are based on the new trading profits generated by each Advisor as defined in the
advisory agreements between the Partnership, the General Partner and each Advisor. Trading
performance for the three and twelve months ended December 31, 2009 resulted in incentive fees of
$0 and $331,108, respectively. Trading performance for the three and twelve months ended December
31, 2008 resulted in incentive fees of $136,374 and $527,587, respectively.
The Partnership experienced a net trading gain of $6,032,850 before brokerage commissions and
related expenses for the year ended December 31, 2007. Gains were primarily attributable to the
Partnerships/Funds trading of currencies, U.S. and non-U.S. interest rates, livestock, energy,
grains and indices and were partially offset by the losses incurred in the trading of metals and
softs.
During 2007, the Partnership profited from macro-economic developments that stimulated
volatility and asset price trends of a favorable duration to the underlying advisors trading
strategies. Negative developments in the U.S. mortgage markets and the increasing probability of
recession resonated throughout the capital and commodity markets. A surge in volatility in the
global equity markets in February was driven by a tumble in Chinese stock valuations that curbed
sentiment for global risk assets and sparked a material sell-off in global stock prices. The year
would go on to be highlighted by two additional measurable equity market corrections in the summer
and fall. By mid-summer, dislocations in U.S. asset-backed and mortgage-backed credit markets
emerged as the central focal point of global capital markets. The ensuing re-pricing of credit risk
resulted in a flight-to-quality driven rally in prices of sovereign debt, especially in the U.S.
Treasury markets as the Federal Open Market Committee acted rapidly to stem the negative
implications for growth. As a result of the series of rate cuts and negative economic data, the
U.S. dollar became less attractive and weakened materially against most major currencies during the latter part of the year. Commodity markets continued to signal
inflation, further clouding the economic landscape, as global demand for most food and raw
materials continued to be robust. Prices moved rather erratically at times.
In agricultural market trading, gains were earned in wheat and the soybean complex as prices
rallied considerably on reductions in supply expectations. Profits were realized in fixed income
trading as turbulence in asset backed credit markets became a catalyst for significant directional
moves in yields and strong bias towards price rallies across Treasury curves. Gains were also
generated by substantially rising oil prices, which reached all-time contract highs due to robust
global demand, ongoing geopolitical concerns and increased speculative participation in the
commodity.
Trading gains were offset slightly by losses related to trading in metals, equity indices, and
soft commodities. Periodic sporadic rallies in the U.S. dollar negatively impacted positions in
certain precious metals, which tend to demonstrate inverse price movements. Prices of industrial
metals also moved erratically during most of the year, mainly due to fluctuating estimates of
Chinese and emerging market economic growth resulting in unfavorable price action for the advisors.
Global equity indices, which had reached multi-year highs during mid-July, experienced sharp
reversals as investor sentiment waned and rendered losses for the sector. Losses were also
experienced in trading soft commodities such as coffee and cocoa. Excess exports from growers in
Africa and Indonesia in the month of August resulted in a surprising fall in process driven by
increased supply.
14
In the General Partners opinion, the Advisors continue to employ trading methods and produce
results consistent with the objectives of the Partnership and expectations for the Advisors
programs. The General Partner continues to monitor the Advisors performance on a daily, weekly,
monthly and annual basis to assure these objectives are met.
It should be noted that commodity markets are highly volatile. Broad price fluctuations and
rapid inflation increase the risks involved in commodity trading, but also increase the possibility
of profit. The profitability of the Partnership depends on the existence of major price trends and
the ability of the Advisors to identify those price trends correctly. 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 Partnership expects to increase capital through operations.
In allocating the assets of the Partnership among the trading 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 trading advisors and may
allocate the assets to additional advisors at any time.
(d) |
|
Off-balance Sheet Arrangements. None |
|
(e) |
|
Contractual Obligations. None |
|
(f) |
|
Operational Risk. |
The Partnership/Funds are directly exposed to market risk and credit risk, which arise in the
normal course of its business activities. Slightly less direct, but of critical importance, are
risks pertaining to operational and back office support. This is particularly the case in a rapidly
changing and increasingly global environment with increasing transaction volumes and an expansion
in the number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement Risk the risk of financial and opportunity loss and legal liability
attributable to operational problems, such as inaccurate pricing of transactions, untimely trade
execution, clearance and/or settlement, or the inability to process large volumes of transactions.
The Partnership/Funds are subject to increased risks with respect to their trading activities in
emerging markets, where clearance, settlement, and custodial risks are often greater than in more
established markets.
Technological Risk the risk of loss attributable to technological limitations or hardware
failure that constrain the Partnerships ability to gather, process, and communicate information
efficiently and securely, without interruption, to customers and in the markets where the
Partnership/Funds participate.
Legal/Documentation Risk the risk of loss attributable to deficiencies in the documentation
of transactions (such as trade confirmations) and customer relationships (such as master netting
agreements) or errors that result in noncompliance with applicable legal and regulatory
requirements.
Financial Control Risk the risk of loss attributable to limitations in financial systems
and controls. Strong financial systems and controls ensure that assets are safeguarded, that
transactions are executed in accordance with managements authorization, and that financial
information utilized by management and communicated to external parties, including the
Partnerships/Funds Redeemable Unit holders, creditors, and regulators, is free of material
errors.
(g) 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. In making these estimates and assumptions, management has considered the
effects, if any, of events occurring after the date of the Partnerships Statements of Financial
Condition through the date the financial statements were issued. As a result, actual results could
differ from these estimates.
Statement of Cash Flows. The Partnership is not required to provide a Statement of Cash Flows
as permitted by ASC 230, Statement of Cash Flows (formerly, FAS No. 102, Statement of Cash Flows
Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired
for Resale).
Partnerships
and the Funds Investments. All commodity interests (including derivative financial instruments and
derivative commodity instruments) are held for trading purposes. The commodity interests are
recorded on trade date and open contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars
15
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 commodity futures trading account on the Statements of Financial Condition. 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.
Partnerships
and the Funds Fair Value Measurements. The Partnership and the Funds adopted ASC 820, Fair Value
Measurements and Disclosures (formerly, FAS No. 157, Fair Value Measurements) as of January 1,
2008 which defines fair value 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.
The Partnership did not apply the deferral allowed by ASC 820 for nonfinancial assets and
nonfinancial liabilities measured at fair value on a nonrecurring basis.
The Partnership and 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 who derive fair
values for those assets from observable inputs (Level 2). Investments in partnerships (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 partnerships reflects its proportional interest in
the partnerships. As of and for the years ended December 31, 2009 and 2008, the Partnership and 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).
Futures Contracts. The Partnership and the Funds trade futures contracts. A futures contract
is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized
amount of a deliverable grade commodity, at a specified price on a specified future date, unless
the contract is closed before the delivery date or 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 Partnership 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 Partnership. When the contract is closed, the Partnership records
a realized gain or loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. Because transactions in futures contracts
require participants to make both initial margin deposits of cash or other assets and variation
margin deposits, through the futures brokers, directly with the exchange on which the contracts are
traded, credit exposure is limited. Realized gains (losses) and changes in unrealized gains
(losses) on futures contracts are included in the Statements of Income and Expenses.
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 Partnership and the Funds are cash
settled based on prompt dates published by the LME. Payments (variation margin) may be made or
received by the Partnership and 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
Partnership and the Funds. A contract is considered offset when all long positions have been
matched with short positions. When the contract is closed at the prompt date, the Partnership and
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. Because 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, credit exposure is limited.
Realized gains (losses) and changes in unrealized gains (losses) on metal contracts are included in
the Statements of Income and Expenses.
Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the
Funds agrees 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. Realized gains
(losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in
the period in which the contract is closed or the changes occur, respectively, and are included in
the Statements of Income and Expenses.
The
Funds do not isolate that 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 gain (loss) on investments in
the Statements of Income and Expenses and Change in Partners Capital.
Options. The Funds may purchase and write (sell) both exchange listed and overthe counter
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
16
Statements of Financial Condition and marked to market daily.Realized gains (losses) and
changes in unrealized gains (losses) on options contracts are included in the Statements of Income
and Expenses.
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on their share of the Partnerships income and expenses.
In
2007, the Partnership adopted ASC 740, Income Taxes (formerly, FAS No. 48, Accounting
for Uncertainty in Income Taxes). ASC 740 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the financial statements. ASC 740
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 pplicable 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 concluded that no
provision for income tax is required in the Partnerships financial statements.
The
following is the major tax jurisdiction for the Partnership and the earliest tax year
subject to examination: United States 2006.
Subsequent Events. In 2009, the Partnership adopted ASC 855, Subsequent Events (formerly,
FAS No. 165, Subsequent Events). The objective of ASC 855 is to establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. Management has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
Recent Accounting Pronouncements. In January 2010, the FASB issued Accounting Standards
Update No. 2010-06 (ASU 2010-06), Improving Disclosures about Fair Value Measurements, which, among other things, amends ASC 820 to require entities to 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 which clarifies existing
disclosure requirements provided by ASC 820 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. ASU 2010-06 is effective for interim and annual periods
beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15, 2010, and for interim periods within those
fiscal years). Management is currently assessing the impact that the adoption of ASU 2010-06 will
have on the Partnerships financial statements disclosures.
In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (ASU 2010-09),
Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements,
which among other things amended ASC 855 to remove the requirement for an SEC filer to disclose the
date through which subsequent events have been evaluated. This change alleviates potential
conflicts between ASC 855 and the SECs requirements. All of the amendments in this update
are effective upon issuance of this update. Management has included these amendments in the
financial statements.
Certain prior period amounts have been reclassified to conform to the current year
presentation.
17
|
|
|
Item 7A. |
|
Quantitative and Qualitative Disclosures About Market Risk. |
Introduction
The Partnership/Funds are speculative commodity pools. The market sensitive instruments held
by the Partnership/Funds are acquired for speculative trading purposes, and all or substantially
all of the Partnerships/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
Partnerships/Funds main line of business.
The risk to the Limited Partners that have purchased interests in the Partnership/Funds is
limited to the amount of their capital contributions to the Partnership/Funds and their share of
Partnership assets and undistributed profits. This limited liability is a consequence of the
organization of the Partnership/Funds as limited partnerships under applicable law.
Market movements result in frequent changes in the fair market value of the
Partnerships/Funds open positions and, consequently, in their earnings and cash balances. The
Partnerships/Funds market risk is influenced by a wide variety of factors, including the level
and volatility of interest rates, exchange rates, equity price levels, the market value of
financial instruments and contracts, the diversification effects among the Partnerships/Funds
open positions and the liquidity of the markets in which they trade.
The Partnership/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 Partnerships/Funds past performance is not
necessarily indicative of their future results.
Value at Risk is a measure of the maximum amount which the Partnership/Funds could reasonably
be expected to lose in a given market sector. However, the inherent uncertainty of the
Partnerships/Funds speculative trading and the recurrence in the markets traded by the Partnership/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 Partnerships/Funds experience to date (i.e., risk
of ruin). In light of the foregoing as well as the risks and uncertainties intrinsic to all future
projections, the inclusion of the quantification in this section should not be considered to
constitute any assurance or representation that the Partnerships/Funds losses in any market
sector will be limited to Value at Risk or by the Partnerships/Funds attempts to manage their
market risk.
Materiality as used in this section, Quantitative and Qualitative Disclosures About Market Risk,
is based on an assessment of reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features of the Partnerships/Funds market sensitive instruments.
Quantifying the Partnerships/Funds Trading Value at Risk
The following quantitative disclosures regarding the Partnerships/Funds market risk
exposures contain forward-looking statements within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set
forth in Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section
21E of the Securities Exchange Act of 1934, as amended (the Exchange Act)). All quantitative
disclosures in this section are deemed to be forward-looking statements for purposes of the safe
harbor except for statements of historical fact (such as the terms of particular contracts and the
number of market risk sensitive instruments held during or at the end of the reporting period).
The Partnerships/Funds risk exposure in the various market sectors traded by the Advisors is
quantified below in terms of Value at Risk. Due to the Partnerships/Funds mark-to-market
accounting, any loss in the fair value of the Partnerships/Funds open positions is directly
reflected in the Partnerships earnings (realized and unrealized) and cash balances. Exchange
maintenance margin requirements have been used by the Partnership/Funds as the measure of its Value
at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses
reasonably expected to be incurred in the fair value of any given contract in 95% 99% of any
one-day interval. The maintenance margin levels are established by dealers and exchanges using
historical price studies as well as an assessment of current market volatility (including the
implied volatility of the options on a given futures contract) and economic fundamentals to provide
a probabilistic estimate of the maximum expected near-term one-day price fluctuation. 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.
In the case of market sensitive instruments which are not exchange traded (almost exclusively
currencies in the case of the Partnership/Funds), the margin requirements for the equivalent
futures positions have been used as Value at Risk. In those rare cases in which a
futures-equivalent margin is not available, dealers margins have been used.
18
The fair value of the Partnerships/Funds futures and forward positions does not have any
optionality component. However, certain of the Advisors trade commodity options. The Value at Risk
associated with options is reflected in the following tables as the margin requirement attributable
to the instrument underlying each option. Where the instrument is a futures contract, the futures
margin has been used, and where the instrument is a physical commodity, the futures-equivalent maintenance margin
has been used. This calculation is conservative in that it assumes that the fair value of an option
will decline by the same amount as the fair value of the underlying instrument, whereas, in fact,
the fair values of the options traded by the Partnership/Funds in almost all cases fluctuate to a
lesser extent than those of the underlying instruments.
In quantifying the Partnerships/Funds Value at Risk, 100% positive correlation in the
different positions held in each market risk category has been assumed. Consequently, the margin
requirements applicable to the open contracts have simply been added to determine each trading
categorys aggregate Value at Risk. The diversification effects resulting from the fact that the
Partnerships/Funds positions are rarely, if ever, 100% positively correlated have not been
reflected.
The Partnerships Trading Value at Risk in Different Market Sectors
Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk
sensitive instruments. With the exception of CFM, the Partnerships advisors currently
trade the Partnerships assets indirectly in master fund managed accounts established in
the name over which they have been granted limited authority to make trading decisions.
CFM directly trades a managed account in the Partnerships name. The first two trading
Value at Risk tables reflect the market sensitive instruments held by the Partnership
directly and through its investment in the Funds. The remaining trading Value at Risk
tables reflect the market sensitive instruments held by the Partnership directly (i.e., in the
managed account in the Partnerships name traded by CFM) and
indirectly by each Fund separately.
The following tables indicate the trading Value at Risk associated with the Partnerships
open positions by market category as of December 31, 2009 and 2008.
As of December 31, 2009, Partnerships total capitalization was $31,924,681.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
Currencies |
|
$ |
451,206 |
|
|
|
1.41 |
% |
Energy |
|
|
291,723 |
|
|
|
0.92 |
% |
Grains |
|
|
96,877 |
|
|
|
0.30 |
% |
Interest Rates U.S. |
|
|
371,264 |
|
|
|
1.16 |
% |
Interest Rates Non-U.S. |
|
|
336,573 |
|
|
|
1.05 |
% |
Livestock |
|
|
2,723 |
|
|
|
0.01 |
% |
Metals |
|
|
231,949 |
|
|
|
0.73 |
% |
Softs |
|
|
159,070 |
|
|
|
0.50 |
% |
Indices |
|
|
837,049 |
|
|
|
2.62 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
2,778,434 |
|
|
|
8.70 |
% |
|
|
|
|
|
|
|
As of December 31, 2008, Partnerships total capitalization was $44,393,328.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
Currencies |
|
$ |
337,552 |
|
|
|
0.76 |
% |
Energy |
|
|
55,481 |
|
|
|
0.13 |
% |
Grains |
|
|
50,494 |
|
|
|
0.11 |
% |
Interest Rates U.S. |
|
|
499,190 |
|
|
|
1.12 |
% |
Interest Rates Non-U.S. |
|
|
406,686 |
|
|
|
0.92 |
% |
Livestock |
|
|
74,930 |
|
|
|
0.17 |
% |
Metals |
|
|
148,637 |
|
|
|
0.33 |
% |
Softs |
|
|
61,119 |
|
|
|
0.14 |
% |
Indices |
|
|
27,831 |
|
|
|
0.06 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
1,661,920 |
|
|
|
3.74 |
% |
|
|
|
|
|
|
|
The following tables indicate the trading Value at Risk associated with the Partnerships
investments and investments in the Funds by market category as of December 31, 2009 and
2008, and the highest, lowest and average value at any point during
the years. All open position trading risk exposures of the
Partnership/Funds have been included in calculating the figures set
forth below.
As of
December 31, 2009, the Partnerships total capitalization
was $31,924,681. The Partnerships Value at Risk for the portion
of its assets that are traded directly through CFMs Discus Program was as follows:
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
94,350 |
|
|
|
0.30 |
% |
|
$ |
924,240 |
|
|
$ |
48,092 |
|
|
$ |
299,825 |
|
Energy |
|
|
19,200 |
|
|
|
0.06 |
% |
|
|
468,290 |
|
|
|
10,460 |
|
|
|
128,320 |
|
Grains |
|
|
10,500 |
|
|
|
0.03 |
% |
|
|
67,500 |
|
|
|
5,500 |
|
|
|
22,427 |
|
Interest Rates U.S. |
|
|
100,650 |
|
|
|
0.32 |
% |
|
|
2,038,884 |
|
|
|
8,800 |
|
|
|
490,455 |
|
Interest Rates Non-U.S. |
|
|
111,381 |
|
|
|
0.35 |
% |
|
|
687,893 |
|
|
|
3,443 |
|
|
|
194,858 |
|
Metals |
|
|
3,500 |
|
|
|
0.01 |
% |
|
|
33,249 |
|
|
|
709 |
|
|
|
8,795 |
|
Softs |
|
|
1,500 |
|
|
|
0.00 |
%** |
|
|
118,770 |
|
|
|
1,500 |
|
|
|
35,313 |
|
Indices |
|
|
434,578 |
|
|
|
1.36 |
% |
|
|
1,192,715 |
|
|
|
6,456 |
|
|
|
222,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
775,659 |
|
|
|
2.43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk. |
|
** |
|
Due to rounding |
As of December 31, 2008, the Partnerships total capitalization was $44,393,328.
As of December 31, 2008, the Partnerships Value at Risk for the portion of its assets that are traded directly by CFM was as follows:
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
94,857 |
|
|
|
0.21 |
% |
|
$ |
427,193 |
|
|
$ |
31,435 |
|
|
|
146,876 |
|
Energy |
|
|
6,750 |
|
|
|
0.02 |
% |
|
|
327,900 |
|
|
|
395 |
|
|
|
104,415 |
|
Grains |
|
|
5,500 |
|
|
|
0.01 |
% |
|
|
30,000 |
|
|
|
1,500 |
|
|
|
13,805 |
|
Indices |
|
|
329,662 |
|
|
|
0.74 |
% |
|
|
1,058,238 |
|
|
|
15,137 |
|
|
|
407,721 |
|
Interest Rates U.S. |
|
|
71,400 |
|
|
|
0.16 |
% |
|
|
348,950 |
|
|
|
6,787 |
|
|
|
124,983 |
|
Interest Rates Non -U.S. |
|
|
74,310 |
|
|
|
0.17 |
% |
|
|
693,867 |
|
|
|
24,501 |
|
|
|
180,284 |
|
Metals |
|
|
4,302 |
|
|
|
0.01 |
% |
|
|
31,460 |
|
|
|
3,250 |
|
|
|
9,615 |
|
Softs |
|
|
12,153 |
|
|
|
0.03 |
% |
|
|
85,468 |
|
|
|
2,900 |
|
|
|
40,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
598,934 |
|
|
|
1.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk. |
19
As of December 31, 2009, Willowbridge Masters total capitalization was $231,105,317. The
Partnership owned approximately 2.3% of Willowbridge Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the Willowbridge Master as of December 31, 2009 was as follows:
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
5,974,364 |
|
|
|
2.58 |
% |
|
$ |
14,208,480 |
|
|
$ |
1,008,000 |
|
|
$ |
7,206,662 |
|
Energy |
|
|
2,116,000 |
|
|
|
0.92 |
% |
|
|
13,037,019 |
|
|
|
391,000 |
|
|
|
5,515,268 |
|
Grains |
|
|
1,058,000 |
|
|
|
0.46 |
% |
|
|
5,919,480 |
|
|
|
259,875 |
|
|
|
2,320,519 |
|
Interest Rates U.S. |
|
|
1,959,945 |
|
|
|
0.85 |
% |
|
|
9,939,105 |
|
|
|
280,500 |
|
|
|
2,836,425 |
|
Interest Rates Non-U.S. |
|
|
3,403,449 |
|
|
|
1.47 |
% |
|
|
14,168,324 |
|
|
|
455,649 |
|
|
|
4,852,602 |
|
Metals |
|
|
3,968,558 |
|
|
|
1.72 |
% |
|
|
8,372,754 |
|
|
|
1,909,575 |
|
|
|
3,799,612 |
|
Softs |
|
|
2,725,100 |
|
|
|
1.18 |
% |
|
|
3,202,100 |
|
|
|
237,900 |
|
|
|
1,531,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
21,205,416 |
|
|
|
9.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
As
of December 31, 2008, Willowbridge Masters total
capitalization was $297,420,004. The
Partnership owned approximately 3.4% of Willowbridge Master. The Partnerships Value at Risk for the portion of its assets that are traded indirectly through its investment in the Willowbridge Master as of December 31, 2008 was as follows:
December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
1,945,600 |
|
|
|
0.65 |
% |
|
$ |
11,556,229 |
|
|
$ |
245,220 |
|
|
$ |
3,464,607 |
|
Energy |
|
|
816,000 |
|
|
|
0.27 |
% |
|
|
15,933,000 |
|
|
|
448,000 |
|
|
|
4,885,321 |
|
Grains |
|
|
1,100,800 |
|
|
|
0.37 |
% |
|
|
5,470,800 |
|
|
|
201,000 |
|
|
|
2,038,390 |
|
Interest Rates U.S. |
|
|
2,380,800 |
|
|
|
0.80 |
% |
|
|
4,367,200 |
|
|
|
219,300 |
|
|
|
1,272,506 |
|
Interest Rates Non-U.S. |
|
|
3,571,688 |
|
|
|
1.20 |
% |
|
|
8,375,150 |
|
|
|
387,940 |
|
|
|
3,540,377 |
|
Metals |
|
|
3,110,400 |
|
|
|
1.05 |
% |
|
|
8,742,000 |
|
|
|
764,750 |
|
|
|
4,883,083 |
|
Softs |
|
|
819,200 |
|
|
|
0.28 |
% |
|
|
2,989,200 |
|
|
|
120,600 |
|
|
|
1,077,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,744,488 |
|
|
|
4.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
As of December 31, 2009, Graham Masters total capitalization was $171,212,260. The
Partnership owned approximately 4.6% of Graham Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the Graham Master as of December 31, 2009 was as follows:
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
2,410,532 |
|
|
|
1.41 |
% |
|
$ |
8,136,447 |
|
|
$ |
833,881 |
|
|
$ |
4,612,528 |
|
Energy |
|
|
684,083 |
|
|
|
0.40 |
% |
|
|
3,017,929 |
|
|
|
273,236 |
|
|
|
1,214,764 |
|
Grains |
|
|
549,675 |
|
|
|
0.32 |
% |
|
|
1,846,996 |
|
|
|
96,550 |
|
|
|
731,407 |
|
Interest Rates U.S. |
|
|
142,150 |
|
|
|
0.08 |
% |
|
|
2,365,808 |
|
|
|
87,777 |
|
|
|
859,990 |
|
Interest Rates Non-U.S. |
|
|
1,869,099 |
|
|
|
1.09 |
% |
|
|
8,320,518 |
|
|
|
471,498 |
|
|
|
2,867,131 |
|
Livestock |
|
|
59,200 |
|
|
|
0.04 |
% |
|
|
160,380 |
|
|
|
1,080 |
|
|
|
58,409 |
|
Metals |
|
|
1,222,254 |
|
|
|
0.71 |
% |
|
|
1,806,942 |
|
|
|
297,478 |
|
|
|
1,002,985 |
|
Softs |
|
|
1,131,557 |
|
|
|
0.66 |
% |
|
|
1,479,945 |
|
|
|
190,202 |
|
|
|
768,323 |
|
Indices |
|
|
4,809,915 |
|
|
|
2.81 |
% |
|
|
12,019,804 |
|
|
|
623,680 |
|
|
|
5,396,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12,878,465 |
|
|
|
7.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
20
As of December 31, 2008, Graham Masters total capitalization was $224,490,942. The
Partnership owned approximately 4.7% of Graham Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the Graham Master as of December 31, 2008 was as follows:
December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
1,855,003 |
|
|
|
0.83 |
% |
|
$ |
35,051,712 |
|
|
$ |
1,110,242 |
|
|
$ |
17,137,503 |
|
Energy |
|
|
446,536 |
|
|
|
0.20 |
% |
|
|
5,209,200 |
|
|
|
310,300 |
|
|
|
1,557,045 |
|
Grains |
|
|
161,000 |
|
|
|
0.07 |
% |
|
|
1,281,500 |
|
|
|
52,500 |
|
|
|
498,714 |
|
Interest Rates U.S. |
|
|
719,400 |
|
|
|
0.32 |
% |
|
|
2,381,150 |
|
|
|
24,412 |
|
|
|
619,143 |
|
Interest Rates Non-U.S. |
|
|
1,293,650 |
|
|
|
0.58 |
% |
|
|
4,718,751 |
|
|
|
461,503 |
|
|
|
1,792,563 |
|
Livestock |
|
|
13,200 |
|
|
|
0.01 |
% |
|
|
27,600 |
|
|
|
800 |
|
|
|
15,664 |
|
Metals |
|
|
680,383 |
|
|
|
0.30 |
% |
|
|
2,071,925 |
|
|
|
31,044 |
|
|
|
777,494 |
|
Softs |
|
|
201,831 |
|
|
|
0.09 |
% |
|
|
752,387 |
|
|
|
14,000 |
|
|
|
395,956 |
|
Indices |
|
|
592,157 |
|
|
|
0.26 |
% |
|
|
5,407,658 |
|
|
|
235,978 |
|
|
|
2,482,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,963,160 |
|
|
|
2.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
21
As of December 31, 2009, Eckhardt Masters total capitalization was $17,320,459. The
Partnership owned approximately 28.5% of Eckhardt Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the Eckhardt Master as of December 31, 2009 was as follows:
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Currencies |
|
$ |
380,916 |
|
|
|
2.20 |
% |
|
$ |
1,191,210 |
|
|
$ |
7,200 |
|
|
$ |
301,705 |
|
Energy |
|
|
270,400 |
|
|
|
1.56 |
% |
|
|
644,500 |
|
|
|
22,050 |
|
|
|
211,624 |
|
Grains |
|
|
128,975 |
|
|
|
0.74 |
% |
|
|
362,365 |
|
|
|
10,800 |
|
|
|
101,491 |
|
Interest Rates U.S. |
|
|
768,410 |
|
|
|
4.44 |
% |
|
|
768,410 |
|
|
|
14,550 |
|
|
|
196,272 |
|
Interest Rates Non-U.S. |
|
|
213,803 |
|
|
|
1.23 |
% |
|
|
696,839 |
|
|
|
13,213 |
|
|
|
221,520 |
|
Metals |
|
|
284,030 |
|
|
|
1.64 |
% |
|
|
535,674 |
|
|
|
16,196 |
|
|
|
234,566 |
|
Softs |
|
|
150,320 |
|
|
|
0.87 |
% |
|
|
251,705 |
|
|
|
11,784 |
|
|
|
115,206 |
|
Indices |
|
|
635,844 |
|
|
|
3.67 |
% |
|
|
879,160 |
|
|
|
22,367 |
|
|
|
304,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,832,698 |
|
|
|
16.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
As
of December 31, 2008, Eckhardt Masters total capitalization
was $20,529,435. The Partnership owned approximately 30.7% of Eckhardt Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the Eckhardt Master as of December 31, 2008 was as follows:
December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average* |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk |
|
Currencies |
|
$ |
291,072 |
|
|
|
1.42 |
% |
|
$ |
765,238 |
|
|
$ |
93,645 |
|
|
$ |
248,175 |
|
Interest Rates U.S. |
|
|
178,400 |
|
|
|
0.87 |
% |
|
|
693,100 |
|
|
|
3,300 |
|
|
|
171,494 |
|
Interest Rates Non-U.S. |
|
|
498,525 |
|
|
|
2.43 |
% |
|
|
818,628 |
|
|
|
26,782 |
|
|
|
228,987 |
|
Metals |
|
|
21,510 |
|
|
|
0.10 |
% |
|
|
142,500 |
|
|
|
8,604 |
|
|
|
34,890 |
|
Softs |
|
|
37,872 |
|
|
|
0.18 |
% |
|
|
146,081 |
|
|
|
9,238 |
|
|
|
46,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,027,379 |
|
|
|
5.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
22
As of December 31, 2009, SandRidge Masters total capitalization was $684,909,493. The
Partnership owned approximately 0.6% of SandRidge Master. The Partnerships Value at Risk for the portion
of its assets that are traded indirectly through its investment in
the SandRidge Master as of December 31, 2009 was as follows:
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
High |
|
|
Low |
|
|
Average |
|
Market Sector |
|
Value at Risk |
|
|
Capitalization |
|
|
Value at Risk |
|
|
Value at Risk |
|
|
Value at Risk* |
|
Energy |
|
$ |
19,220,494 |
|
|
|
2.81 |
% |
|
$ |
40,574,022 |
|
|
$ |
11,157,117 |
|
|
$ |
24,955,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,220,494 |
|
|
|
2.81 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Annual average based on month-end Value at Risk |
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership/Funds is typically
many times the applicable maintenance margin requirement (margin requirements generally range
between 2% and 15% of contract face value) as well as many times the capitalization of the
Partnership/Funds. The magnitude of the Partnerships/Funds open positions creates a risk of
ruin not typically found in most other investment vehicles. Because of the size of its positions,
certain market conditions unusual, but historically recurring from time to time could cause
the Partnership/Funds to incur severe losses over a short period of time. The foregoing Value at
Risk table as well as the past performance of the Partnership/Funds give no indication of
this risk of ruin.
Non-Trading Risk
The
Partnership/Funds have non-trading market risk on its foreign cash balances not needed for
margin. However, these balances (as well as any market risk they represent) are immaterial.
Materiality as used in this section, Qualitative and Quantitative Disclosures About Market
Risk, is based on an assessment of reasonably possible market movements and the potential losses
caused by such movements, taking into account the leverage, optionality and multiplier features of
the Partnerships/Funds market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnerships/Funds market risk exposures
except for (i) those disclosures that are statements of historical fact and (ii) the
descriptions of how the Partnership manages its primary market risk exposures constitute
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act. The Partnerships/Funds primary market risk exposures as well as the
strategies used and to be used by the General Partner and the Advisors for managing such exposures
are subject to numerous uncertainties, contingencies and risks, any one of which could cause the
actual results of the Partnerships risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence
of dominant fundamental factors, political upheavals, changes in historical price relationships, an
influx of new market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the management strategies
of the Partnership/Funds. There can be no assurance that the Partnerships/Funds current market
exposure and/or risk management strategies will not change materially or that any such strategies
will be effective in either the short- or long- term. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership/Funds as of December
31, 2009, by market sector.
Interest Rates. Interest rate movements directly affect the price of the futures and
forward positions held by the Partnership/Funds and indirectly affect the value of their stock
index and currency positions. Interest rate movements in one country as well as relative interest
rate movements between countries materially impact the Partnerships/Funds profitability. The
Partnerships/Funds primary interest rate exposure is to interest rate fluctuations in the U.S.
and the other G-8 countries. However, the Partnership/Funds also take futures positions on the
government debt of smaller nations e.g., Australia.
23
Currencies. The Partnerships/Funds currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing relationships between
different currencies and currency pairs. These fluctuations are influenced by interest rate changes
as well as political and general economic conditions. The General Partner does not anticipate that
the risk profile of the Partnerships/Funds currency sector will change significantly in the
future. The currency trading Value at Risk figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the U.S.
dollar-based Partnership/Funds in expressing Value at Risk in a functional currency other than U.S.
dollars.
Stock Indices. The Partnerships/Funds primary equity exposure is to equity price
risk in the G-8 countries. The stock index futures traded by the Partnership/Funds are limited to
futures on broadly based indices. As of December 31, 2009, the Partnerships/Funds primary
exposures were in stock indices on the Chicago Mercantile Exchange (U.S.) and the EUREX (Germany).
The Partnership/Funds are primarily exposed to the risk of adverse price trends or static markets
in the major U.S., European and Japanese indices. (Static markets would not cause major market
changes but would make it difficult for the Partnership/Funds to avoid being whipsawed into
numerous small losses.)
Metals. The Partnerships/Funds primary metal market exposure is to fluctuations in
the price of gold.
Softs. The Partnerships/Funds primary commodities exposure is to agricultural price
movements which are often directly affected by severe or unexpected weather conditions. Coffee,
sugar and cocoa accounted for the substantial bulk of the Partnerships/Funds commodity exposure
as of December 31, 2009.
Energy. The Partnerships/Funds primary energy market exposure is to natural gas and
oil price movements, often resulting from political developments in the Middle East. Oil prices can
be volatile and substantial profits and losses have been and are expected to continue to be
experienced in this market.
Grains. The Partnerships/Funds commodities exposure is to agricultural price
movements which are often directly affected by severe or unexpected weather conditions.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership/Funds as of December
31, 2009.
Foreign Currency Balances. The Partnerships/Funds primary foreign currency balances
are in Japanese yen, Euro dollar, British pounds and Swiss francs. The Advisors regularly convert
foreign currency balances to U.S. dollars in an attempt to control the Partnerships/Funds
non-trading risk.
Qualitative Disclosures Regarding Means of Managing Risk Exposure.
The General Partner monitors and controls the Partnerships/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 Partnership is subject.
The General Partner monitors the Partnerships/Funds performance and the concentration of
their open positions, and consults with the Advisors concerning the Partnerships/Funds overall
risk profile. If the General Partner felt it necessary to do so, the General Partner could require
certain Advisors of the Partnership/Funds to close out individual positions as well as enter into
programs on behalf of the Partnership/Funds. However, any such intervention would be a highly unusual
event. The General Partner primarily relies on the Advisors own risk control policies while
maintaining a general supervisory overview of the Partnerships/Funds market risk exposures.
Each Advisor applies its own risk management policies to its trading. The Advisors often
follow diversification guidelines, margin limits and stop loss points to exit a position. The
Advisors research of risk management often suggests ongoing modifications to their trading
programs.
As part of the General Partners risk management, the General Partner periodically meets with
the Advisors to discuss their risk management and to look for any material changes to the Advisors
portfolio balance and trading techniques. The Advisors are required to notify the General Partner
of any material changes to their programs.
24
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data. |
DIVERSIFIED
MULTI-ADVISOR FUTURES FUND L.P. II
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
|
Page |
|
|
Number |
Oath or Affirmation
|
|
F-2 |
Managements Report on Internal Control over Financial Reporting
|
|
F-3 |
Reports of Independent Registered Public Accounting Firms
|
|
F-4 F-8 |
Financial Statements: |
|
|
Statements of Financial Condition at December 31, 2009 and 2008
|
|
F-9 |
Condensed Schedules of Investments at December 31, 2009 and 2008
|
|
F-10 F-11 |
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007
|
|
F-12 |
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and 2007
|
|
F-13 |
Notes to Financial Statements
|
|
F-14 F-25 |
Selected Unaudited Quarterly Financial Data
|
|
F-26 |
Financial Statements of CMF Willowbridge Argo Master Fund L.P.
Oath or Affirmation
|
|
F-27 |
Reports of Independent Registered Public Accounting Firms
|
|
F-28 F-30 |
Statements of Financial Condition at December 31, 2009 and 2008
|
|
F-31 |
Condensed Schedules of Investments at December 31, 2009 and 2008
|
|
F-32 F-33 |
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007
|
|
F-34 |
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and 2007
|
|
F-35 |
Notes to Financial Statements
|
|
F-36 F-43 |
Selected Unaudited Quarterly Financial Data
|
|
F-44 |
Financial Statements of CMF Graham Capital Master Fund L.P.
|
|
|
Oath or Affirmation
|
|
F-45 |
Reports of Independent Registered Public Accounting Firms
|
|
F-46 F-48 |
Statements of Financial Condition at December 31, 2009 and 2008
|
|
F-49 |
Condensed Schedules of Investments at December 31, 2009 and 2008
|
|
F-50 F-51 |
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007
|
|
F-52 |
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and 2007
|
|
F-53 |
Notes to Financial Statements
|
|
F-54 F-62 |
Selected Unaudited Quarterly Financial Data
|
|
F-63 |
Financial Statements of CMF Eckhardt Master Fund L.P.
Oath or Affirmation
|
|
F-64 |
Reports of Independent Registered Public Accounting Firms
|
|
F-65 F-66 |
Statements of Financial Condition at December 31, 2009 and 2008
|
|
F-67 |
Condensed Schedules of Investments at December 31, 2009 and 2008
|
|
F-68 F-69 |
Statements of Income and Expenses for the year ended December 31, 2009 and the period from
April 1, 2008 (commencement of trading operations) to December 31, 2008
|
|
F-70 |
Statements of Changes in Partners Capital for the year ended December 31, 2009 and the period
from April 1, 2008 (commencement of trading operations) to December 31, 2008
|
|
F-71 |
Notes to Financial Statements
|
|
F-72 F-80 |
Selected Unaudited Quarterly Financial Data
|
|
F-81 |
Financial Statements of CMF SandRidge Master Fund L.P.
Oath or Affirmation
|
|
F-82 |
Reports of Independent Registered Public Accounting Firms
|
|
F-83 F-85 |
Statements of Financial Condition at December 31, 2009 and 2008
|
|
F-86 |
Condensed Schedules of Investments at December 31, 2009 and 2008
|
|
F-87 F-88 |
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007
|
|
F-89 |
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and 2007
|
|
F-90 |
Notes to Financial Statements
|
|
F-91 F-97 |
Selected Unaudited Quarterly Financial Data
|
|
F-98 |
F-1
To the Limited
Partners of
Diversified Multi-Advisor Futures Fund L.P. II
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
Diversified Multi-Advisor Futures Fund L.P. II
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-2
Managements
Report on Internal Control over
Financial Reporting
The management of Diversified Multi-Advisor Futures Fund
L.P. II (formerly Smith Barney Diversified Futures
Fund L.P. II) (the Partnership), Ceres Managed Futures LLC
(formerly, Citigroup Managed Futures LLC, is responsible for
establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a
15(f) and 15d 15(f) under the Securities Exchange
Act of 1934 and for our assessment of internal control over
financial reporting. The Partnerships internal control
over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with accounting principles
generally accepted in the United States of America. The
Partnerships internal control over financial reporting
includes those policies and procedures that:
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Partnership;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures of the Partnership are being made only in
accordance with authorizations of management and directors of
the Partnership; and
(iii) provide reasonable assurance regarding prevention or
timely detection and correction of unauthorized acquisition, use
or disposition of the Partnerships assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The management of Diversified Multi-Advisor Futures Fund
L.P. II has assessed the effectiveness of the
Partnerships internal control over financial reporting as
of December 31, 2009. In making this assessment, management
used the criteria set forth in the Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Based on our assessment, management concluded that the
Partnership maintained effective internal control over financial
reporting as of December 31, 2009 based on the criteria
referred to above.
The Partnerships independent registered public accounting
firm, Deloitte & Touche LLP, has audited the effectiveness
of the Partnerships internal control over financial
reporting as of December 31, 2009, as stated in their
report dated March 19, 2010 which appears herein.
Jennifer Magro
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
Diversified Multi-Advisor Futures Fund L.P. II
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Diversified Multi-Advisor Futures Fund L.P. II:
We have audited the accompanying statement of financial condition of Diversified Multi-Advisor
Futures Fund L.P. II (the Partnership), including the condensed schedule of investments, as of
December 31, 2009, and the related statements of income and expenses, and changes in partners
capital for the year then ended. We also have audited the Partnerships internal control over
financial reporting as of December 31, 2009, based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Partnerships management is responsible for these financial statements, for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying
Managements Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on these financial statements and an opinion on the Partnerships internal control over
financial reporting based on our audit. The financial statements of the Partnership for the years
ended December 31, 2008 and 2007 were audited by other auditors whose reports, dated March 26, 2009
and March 24, 2008, respectively, expressed unqualified opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material
respects. Our audit of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A partnerships internal control over financial reporting is a process designed by, or under the
supervision of, the partnerships principal executive and principal financial officers, or persons
performing similar functions, and effected by the partnerships general partner, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A partnerships internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the partnership; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of
the partnership are being made only in accordance with authorizations of management and general
partner of the partnership; and (3) 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.
F-4
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Diversified Multi-Advisor Futures Fund L.P. II as of December
31, 2009, and the results of its operations and its changes in partners capital for the year then
ended, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, the Partnership maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-5
Report of Independent Registered Public Accounting Firm
To the Partners of
Diversified Multi-Advisor Futures Fund L.P. II:
In our opinion, the accompanying statement of financial condition, the related statement of income
and expenses, and statement of changes in partners capital present fairly, in all material
respects, the financial position of Diversified Multi-Advisor Futures Fund L.P. II (formerly known
as Smith Barney Diversified Futures Fund II L.P.) at December 31, 2008 and the results of its
operations for the year then ended in conformity with accounting principles generally accepted in
the United States of America. Also in our opinion, the Partnership maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Partnerships management is
responsible for these financial statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on these financial statements and on the
Partnerships internal control over financial reporting based on our integrated audit. We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audit of
the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
F-6
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-7
Report of Independent Registered Public Accounting Firm
The Partners
Diversified Multi-Advisor Futures Fund L.P. II:
We have audited the accompanying statements of income and expenses and changes in partners capital
of Diversified Multi-Advisor Futures Fund L.P. II (formerly, Smith Barney Diversified Futures Fund
L.P. II) for the year ended December 31, 2007. These financial statements are the responsibility
of the Partnerships management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of its operations and changes in partners capital of Diversified
Multi-Advisor Futures Fund L.P. II for the year ended December 31, 2007, in conformity with U.S.
generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-8
Diversified
Multi-Advisor Futures Fund L.P. II
Statements
of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investment in Partnerships, at fair value (Note 5)
|
|
$
|
22,541,943
|
|
|
$
|
34,424,088
|
|
Equity in commodity futures trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
|
9,123,523
|
|
|
|
10,597,297
|
|
Cash margin (Note 3c)
|
|
|
927,261
|
|
|
|
696,680
|
|
Net unrealized appreciation on open futures contracts
|
|
|
5,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,598,479
|
|
|
|
45,718,065
|
|
Distribution receivable
|
|
|
|
|
|
|
|
|
Interest receivable (Note 3c)
|
|
|
112
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
32,598,591
|
|
|
$
|
45,718,234
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
$
|
|
|
|
$
|
449
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Brokerage commissions (Note 3c)
|
|
|
162,993
|
|
|
|
228,589
|
|
Management fees (Note 3b)
|
|
|
53,927
|
|
|
|
75,664
|
|
Incentive fees (Note 3b)
|
|
|
|
|
|
|
136,374
|
|
Professional Fees
|
|
|
26,383
|
|
|
|
28,862
|
|
Other
|
|
|
52,831
|
|
|
|
61,782
|
|
Redemptions payable (Note 6)
|
|
|
377,776
|
|
|
|
793,186
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
673,910
|
|
|
|
1,324,906
|
|
|
|
|
|
|
|
|
|
|
Partners Capital (Notes 1 and 6):
|
|
|
|
|
|
|
|
|
General Partner, 274.2452 and 748.5217 Unit equivalents at
December 31, 2009 and 2008, respectively
|
|
|
472,955
|
|
|
|
1,397,490
|
|
Limited Partners, 18,237.4420 and 23,029.4237 Redeemable Units
of Limited Partnership Interest outstanding at December 31,
2009 and 2008, respectively
|
|
|
31,451,726
|
|
|
|
42,995,838
|
|
|
|
|
|
|
|
|
|
|
Total partners capital
|
|
|
31,924,681
|
|
|
|
44,393,328
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
32,598,591
|
|
|
$
|
45,718,234
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-9
Diversified
Multi-Advisor Futures Fund L.P. II
Condensed
Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
44
|
|
|
$
|
35,744
|
|
|
|
0.11
|
%
|
Energy
|
|
|
5
|
|
|
|
(254
|
)
|
|
|
(0.00
|
)*
|
Grains
|
|
|
8
|
|
|
|
1,987
|
|
|
|
0.01
|
|
Indices
|
|
|
97
|
|
|
|
(2,324
|
)
|
|
|
(0.01
|
)
|
Interest Rates Non-U.S.
|
|
|
61
|
|
|
|
(10,546
|
)
|
|
|
(0.03
|
)
|
Interest Rates U.S.
|
|
|
81
|
|
|
|
(13,466
|
)
|
|
|
(0.04
|
)
|
Metals
|
|
|
1
|
|
|
|
3,638
|
|
|
|
0.01
|
|
Softs
|
|
|
1
|
|
|
|
(55
|
)
|
|
|
(0.00
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
14,724
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
13
|
|
|
|
(9,650
|
)
|
|
|
(0.03
|
)
|
Grains
|
|
|
1
|
|
|
|
(350
|
)
|
|
|
(0.00
|
)*
|
Indices
|
|
|
1
|
|
|
|
1,028
|
|
|
|
0.00
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(8,972
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
CMF Willowbridge Argo Master Fund L.P.
|
|
|
|
|
|
|
5,353,814
|
|
|
|
16.77
|
|
CMF Graham Master Fund L.P.
|
|
|
|
|
|
|
7,889,836
|
|
|
|
24.71
|
|
CMF Eckhardt Master Fund L.P.
|
|
|
|
|
|
|
4,935,342
|
|
|
|
15.46
|
|
CMF Sandridge Master Fund L.P.
|
|
|
|
|
|
|
4,362,951
|
|
|
|
13.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment in Partnerships
|
|
|
|
|
|
|
22,541,943
|
|
|
|
70.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
22,547,695
|
|
|
|
70.63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-10
Diversified
Multi-Advisor Futures Fund L.P. II
Condensed
Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
23
|
|
|
$
|
(21,305
|
)
|
|
|
(0.05
|
)%
|
Indices
|
|
|
57
|
|
|
|
45,056
|
|
|
|
0.10
|
|
Interest Rates Non-U.S.
|
|
|
33
|
|
|
|
7,783
|
|
|
|
0.02
|
|
Interest Rates U.S.
|
|
|
47
|
|
|
|
(25,794
|
)
|
|
|
(0.06
|
)
|
Metals
|
|
|
1
|
|
|
|
(110
|
)
|
|
|
(0.00
|
)*
|
Softs
|
|
|
2
|
|
|
|
5,033
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
10,663
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
9
|
|
|
|
(797
|
)
|
|
|
(0.00
|
)*
|
Energy
|
|
|
1
|
|
|
|
(5,450
|
)
|
|
|
(0.01
|
)
|
Grains
|
|
|
3
|
|
|
|
(3,924
|
)
|
|
|
(0.01
|
)
|
Softs
|
|
|
5
|
|
|
|
(941
|
)
|
|
|
(0.00
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(11,112
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
CMF Willowbridge Argo Master Fund L.P.
|
|
|
|
|
|
|
10,048,176
|
|
|
|
22.63
|
|
CMF Campbell Master Fund L.P.
|
|
|
|
|
|
|
7,553,372
|
|
|
|
17.01
|
|
CMF Graham Capital Master Fund L.P.
|
|
|
|
|
|
|
10,523,350
|
|
|
|
23.71
|
|
CMF Eckhardt Master Fund L.P.
|
|
|
|
|
|
|
6,299,190
|
|
|
|
14.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment in Partnerships
|
|
|
|
|
|
|
34,424,088
|
|
|
|
77.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
34,423,639
|
|
|
|
77.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-11
Diversified
Multi-Advisor Futures Fund L.P. II
Statements
of Income and Expenses
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests and
investment in Partnerships:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
1,541,253
|
|
|
$
|
2,365,379
|
|
|
$
|
4,520,389
|
|
Net realized gains (losses) on investment in Partnerships
|
|
|
(521,371
|
)
|
|
|
7,659,594
|
|
|
|
3,122,817
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
6,201
|
|
|
|
(7,994
|
)
|
|
|
(147,866
|
)
|
Change in net unrealized gains (losses) on investments in
Partnerships
|
|
|
(235,845
|
)
|
|
|
(78,944
|
)
|
|
|
(1,462,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
790,238
|
|
|
|
9,938,035
|
|
|
|
6,032,850
|
|
Interest income (Note 3c)
|
|
|
7,527
|
|
|
|
137,547
|
|
|
|
581,078
|
|
Interest income from investment in Partnerships
|
|
|
19,562
|
|
|
|
350,008
|
|
|
|
1,163,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
817,327
|
|
|
|
10,425,590
|
|
|
|
7,777,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage commissions including clearing fees (Note 3c)
|
|
|
2,563,903
|
|
|
|
3,078,391
|
|
|
|
3,463,859
|
|
Management fees (Note 3b)
|
|
|
758,357
|
|
|
|
934,466
|
|
|
|
1,003,243
|
|
Incentive fees (Note 3b)
|
|
|
331,108
|
|
|
|
527,587
|
|
|
|
285,594
|
|
Professional fees
|
|
|
107,412
|
|
|
|
85,812
|
|
|
|
44,975
|
|
Other
|
|
|
50,012
|
|
|
|
77,566
|
|
|
|
69,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
3,810,792
|
|
|
|
4,703,822
|
|
|
|
4,866,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,993,465
|
)
|
|
$
|
5,721,768
|
|
|
$
|
2,911,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent (Notes 1 and 7)
|
|
$
|
(142.43
|
)
|
|
$
|
215.30
|
|
|
$
|
92.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
20,862.3615
|
|
|
|
26,356.7995
|
|
|
|
32,004.9288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-12
Diversified
Multi-Advisor Futures Fund L.P. II
Statements of Changes in Partners Capital
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
|
General
|
|
|
|
|
|
|
Partners
|
|
|
Partner
|
|
|
Total
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
51,109,773
|
|
|
$
|
1,378,669
|
|
|
$
|
52,488,442
|
|
Net income (loss)
|
|
|
2,604,375
|
|
|
|
306,722
|
|
|
|
2,911,097
|
|
Sale of 1,008.7668 General Partner Unit equivalents
|
|
|
|
|
|
|
1,441,407
|
|
|
|
1,441,407
|
|
Redemption of 5,971.8541 Redeemable Units of Limited Partnership
Interest
|
|
|
(9,429,938
|
)
|
|
|
|
|
|
|
(9,429,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
44,284,210
|
|
|
|
3,126,798
|
|
|
|
47,411,008
|
|
Net income (loss)
|
|
|
5,451,076
|
|
|
|
270,692
|
|
|
|
5,721,768
|
|
Redemption of 1,144.5571 General Partner Unit equivalents
|
|
|
|
|
|
|
(2,000,000
|
)
|
|
|
(2,000,000
|
)
|
Redemption of 3,781.8183 Redeemable Units of Limited Partnership
Interest
|
|
|
(6,739,448
|
)
|
|
|
|
|
|
|
(6,739,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
42,995,838
|
|
|
|
1,397,490
|
|
|
|
44,393,328
|
|
Net income (loss)
|
|
|
(2,878,871
|
)
|
|
|
(114,594
|
)
|
|
|
(2,993,465
|
)
|
Redemption of 474.2765 General Partner Unit equivalents
|
|
|
|
|
|
|
(809,941
|
)
|
|
|
(809,941
|
)
|
Redemption of 4,791.9817 Redeemable Units of Limited Partnership
Interest
|
|
|
(8,665,241
|
)
|
|
|
|
|
|
|
(8,665,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
31,451,726
|
|
|
$
|
472,955
|
|
|
$
|
31,924,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,651.70
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
1,867.00
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
1,724.57
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-13
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to
Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
Diversified Multi-Advisor Futures Fund L.P. II (formerly,
Smith Barney Diversified Futures Fund L.P. II) (the
Partnership) is a limited partnership organized
under the partnership laws of the State of New York on
May 10, 1994 to engage, directly or indirectly, in the
speculative trading of a diversified portfolio of commodity
interests including futures contracts, options, swaps and
forward contracts. The sectors traded included currencies,
energy, grains, indices, metals, softs, livestock, U.S. and
non-U.S. interest
rates. The commodity interests that are traded by the
Partnership and the Funds (as defined in Note 5 Investment
in Partnerships) are volatile and involve a high degree of
market risk. The Partnership was authorized to sell 100,000
redeemable units of Limited Partnership Interest
(Redeemable Units) during its initial offering
period. The Partnership no longer offers Redeemable Units for
sale.
Ceres Managed Futures LLC (formerly Citigroup 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), a newly registered non-clearing futures
commission merchant and a member of the National Futures
Association (NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity
broker and a selling agent for the Partnership, owns 49% of 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.
The General Partner and each 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 their initial capital contribution and
profits, if any, net of distributions.
The Partnership will be liquidated upon the first to occur of
the following: December 31, 2014; the Net Asset Value per
Redeemable Unit decreases to less than $400 per Redeemable Unit
as of a close of any business day; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Partnership (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. generally
accepted accounting principles (GAAP) for use in
financial statements except for Securities and Exchange
Commission (SEC) rules and interpretive releases,
which are also authoritative GAAP for SEC registrants. The
Codification supersedes all existing non-SEC accounting and
reporting standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Partnerships Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
F-14
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
|
|
|
|
b.
|
Statement of Cash Flows. The Partnership is
not required to provide a Statement of Cash Flows as permitted
by ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Partnerships and the Funds
Investments. All commodity interests (including
derivative financial instruments and derivative commodity
instruments) are held for trading purposes. The commodity
interests are recorded on trade date and open contracts are
recorded at fair value (as described below) at the measurement
date. Investments in commodity interests denominated in foreign
currencies are translated into U.S. dollars at the exchange
rates prevailing at the measurement date. Gains or losses are
realized when contracts are liquidated. Unrealized gains or
losses on open contracts are included as a component of equity
in commodity futures trading account on the Statements of
Financial Condition. 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.
|
Partnerships and the Funds Fair Value
Measurements. The Partnership and the Funds (as
defined in note 5 Investment in Partnerships)
adopted ASC 820, Fair Value Measurements and Disclosures
(formerly, FAS No. 157, Fair Value
Measurements) as of January 1, 2008 which defines
fair value 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. ASC 820
establishes a framework for measuring fair value and expands
disclosures regarding fair value measurements in accordance with
GAAP. The fair value hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1) and the lowest priority to
fair values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. The Partnership did not apply the
deferral allowed by ASC 820 for non financial assets and non
financial liabilities measured at fair value on a nonrecurring
basis.
In 2009, the Partnership adopted amendments to ASC 820, Fair
Value Measurements and Disclosures (formerly,
FAS No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly) which
reaffirms that fair value is 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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Partnerships Level 2 assets
and liabilities. The adoption of the amendments to ASC 820 had
no effect on the Partnerships Financial Statements.
The Partnership and 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 who derive fair values for those assets from
observable inputs (Level 2). Investments in partnerships
(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 partnerships reflects its proportional interest
in the partnerships. As of and for the years ended
December 31, 2009 and 2008, the Partnership and the Funds
did not hold any derivative instruments that are priced at fair
value
F-15
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
using unobservable inputs through the application of
managements assumptions and internal valuation pricing
models (Level 3).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
$
|
22,541,943
|
|
|
$
|
|
|
|
$
|
22,541,943
|
|
|
$
|
|
|
Futures
|
|
|
5,752
|
|
|
|
5,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
22,547,695
|
|
|
|
5,752
|
|
|
|
22,541,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
22,547,695
|
|
|
$
|
5,752
|
|
|
$
|
22,541,943
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Partnerships
|
|
$
|
34,424,088
|
|
|
$
|
|
|
|
$
|
34,424,088
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
34,424,088
|
|
|
|
|
|
|
|
34,424,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
449
|
|
|
$
|
449
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
449
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
34,423,639
|
|
|
$
|
(449
|
)
|
|
$
|
34,424,088
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Partnership and the
Funds trade futures contracts. Exchange cleared swaps included
in futures and exchange cleared swaps are swaps that 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 Partnership and 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
Partnership and the Funds. When the contract is closed, the
Partnership and 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. Because
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, credit
exposure is limited. Realized gains (losses) and changes in
unrealized gains (losses) on futures contracts are included in
the Statements of Income and Expenses.
|
|
|
e.
|
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. Realized gains (losses) and changes in
unrealized gains (losses) on foreign currency contracts are
|
F-16
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
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.
|
The Funds do not isolate that 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 gain (loss) on investments in the Statements of
Income and Expenses.
|
|
|
|
f.
|
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 Partnership and
the Funds are cash settled based on prompt dates published by
the LME. Payments (variation margin) may be made or
received by the Partnership and 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 Partnership and the Funds. A contract is
considered offset when all long positions have been matched with
short positions. When the contract is closed at the prompt date,
the Partnership and 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.
Because 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, credit exposure is limited. Realized gains (losses) and
changes in unrealized gains (losses) on metal contracts are
included in the Statements of Income and Expenses.
|
|
|
|
|
g.
|
Options. The Funds may purchase and write
(sell) both exchange listed and
over-the-counter
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 writes an option, the premium
received is recorded as a liability in the Statements of
Financial Condition and marked to market daily. When the Funds
purchases an option, the premium paid is recorded as an asset in
the Statements of Financial Condition and marked to market
daily. Realized gains (losses) and changes in unrealized gains
(losses) on options contracts are included in the Statements of
Income and Expenses.
|
|
|
h.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Partnerships income and
expenses.
|
In 2007, the Partnership adopted adopted ASC 740, Income Taxes
(formerly, FAS No. 48, Accounting for
Uncertainty in Income Taxes). ASC 740 provides guidance
for how uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740
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 concluded that no provision for income tax is required
in the Partnerships financial statements.
The following is the major tax jurisdiction for the Partnership
and the earliest tax year subject to examination: United
States 2006.
|
|
|
|
i.
|
Subsequent Events. In 2009, the Partnership
adopted ASC
855-10,
Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC
855-10 is to
establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but
|
F-17
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
before financial statements are issued or available to be
issued. Management has determined that there were no subsequent
events requiring adjustment or disclosure in the financial
statements.
|
|
|
|
j.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which, among other things, amends ASC 820 to require entities to
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 which clarifies existing disclosure requirements
provided by ASC 820 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. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Partnerships financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
k.
|
Certain prior period amounts have been reclassified to conform
to the current year presentation.
|
|
|
|
|
l.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Partnership including selecting one or more advisors to make
trading decisions for the Partnership. The General Partner has
agreed to make capital contributions, if necessary, so that its
General Partnership Interest will be equal to the greater of
(i) an amount to entitle it to 1% of each material item of
Partnership income, loss, deduction or credit and (ii) the
greater of (a) 1% of the partners contributions to
the Partnership or (b) $25,000.
|
|
|
|
b.
|
Management Agreements:
|
The General Partner, on behalf of the Partnership, has entered
into management agreements (the Management
Agreements) with Graham Capital Management L.P.
(Graham), Capital Fund Management SA
(CFM), Campbell & Company, Inc.
(Campbell), Willowbridge Associates Inc.
(Willowbridge), Eckhardt Trading Company
(Eckhardt) and SandRidge Capital L.P.
(SandRidge) (each an Advisor and
collectively, the Advisors), each of which is a
registered commodity trading advisor. The Management Agreement
with Campbell was terminated as of May 31,2009. SandRidge
was added as an advisor to the Partnership on June 1, 2009.
The Advisors are not affiliated with one another, are not
affiliated with the General Partner or CGM and are not
responsible for the organization or operation of the
Partnership. The Partnership will pay each Advisor a monthly
management fee equal to 1/6 of 1% (2% per year) of month-end Net
Assets allocated to the respective Advisor. Month-end Net
Assets, for the purpose of calculating management fees are Net
Assets, as defined in the Limited Partnership Agreement, prior
to the reduction of the current months
F-18
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
incentive fee accruals, the monthly management fees and any
redemptions or distributions as of the end of such month. The
Management Agreement may be terminated upon notice by either
party.
In addition, the Partnership is obligated to pay each Advisor an
incentive fee, payable quarterly, equal to 20% of the New
Trading Profits, as defined in the Management Agreements, earned
by each Advisor for the Partnership during each calender
quarter, except Graham, which will receive an incentive fee of
10% of New Trading Profits on the first $5,000,000 and 20% of
New Trading Profits for all such profits in excess of $5,000,000.
In allocating the assets of the Partnership among the trading
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 trading advisors and may allocate
assets to additional advisors at any time.
The Partnership has entered into a customer agreement (the
Customer Agreement) which provides that the
Partnership will pay CGM a monthly brokerage commission equal to
1/2 of 1% (6% per year) of month-end Net Assets, in lieu of
brokerage commissions on a per trade basis. CGM will pay a
portion of its brokerage commissions to its financial advisors
who have sold Redeemable Units in the Partnership. Month-end Net
Assets, for the purpose of calculating commissions are Net
Assets, as defined in the Limited Partnership Agreement, prior
to the reduction of the current months brokerage
commissions incentive fee accruals, the monthly management fees
and other expenses and any redemptions or distributions as of
the end of such month. Brokerage commissions will be paid for
the life of the Partnership, although the rate at which such
fees are paid may be changed. The Partnership will pay for NFA
fees as well as exchange, clearing, user,
give-up and
floor brokerage fees (collectively the clearing
fees) directly and through its investment in the Funds.
All of the Partnerships assets, not held in the
Funds accounts at CGM, are deposited in the
Partnerships account at CGM. The Partnerships cash
is deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amount of cash held for
margin requirements were $927,261 and $696,680, respectively.
CGM has agreed to pay the Partnership interest on 80% of the
average daily equity maintained in cash in the
Partnerships (or the Partnerships allocable portion
of a Funds) during each month at a
30-day
U.S. Treasury bill rate determined weekly by CGM based on
the average noncompetitive yield on
3-month
U.S. Treasury bills maturing in 30 days from the date
on which such weekly rate is determined. Alternatively, CGM may
place up to all of the Partnerships (or a Funds)
assets in
90-day
U.S. Treasury bills and pay the Partnership 80% of the
interest (or the Partnerships allocable share thereof)
earned on Treasury bills purchased. Twenty percent of the
interest earned on Treasury bills purchased may be retained by
CGM and/or credited to the General Partner. The Customer
Agreement may be terminated upon notice by either party.
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity interests. The
results of the Partnerships trading activities are shown
in the Statements of Income and Expenses.
The Customer Agreement between the Partnership and CGM gives the
Partnership the legal right to net unrealized gains and losses
on open futures contracts. The Partnership nets, for financial
reporting purposes, the unrealized gains and losses on open
futures and forward contracts on the Statements of Financial
Condition as the criteria under ASC 210, Balance Sheet
(formerly, FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts)
have been met.
F-19
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
All of the commodity interests owned by the Partnership are held
for trading purposes. The average number of futures contracts
traded for the year ended December 31, 2009, based on a
quarterly calculation, was 570.
Brokerage commissions 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, additions
and redemptions.
The Partnership adopted ASC 815, Derivatives and Hedging
(formerly, FAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities) as of
January 1, 2009 which requires qualitative disclosures
about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains
and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative
agreements. ASC 815 only expands the disclosure requirements for
derivative instruments and related hedging activities and has no
impact on the Statements of Financial Condition, Statements of
Income and Expenses and Statements of Changes in Partners
Capital. The following table indicates the fair values of
derivative instruments of futures contracts as separate assets
and liabilities.
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
45,491
|
|
Energy
|
|
|
1,040
|
|
Grains
|
|
|
2,037
|
|
Indices
|
|
|
29,186
|
|
Interest Rates U.S.
|
|
|
450
|
|
Interest Rates Non-U.S.
|
|
|
2,416
|
|
Metals
|
|
|
3,638
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
84,258
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
(19,397
|
)
|
Energy
|
|
|
(1,294
|
)
|
Grains
|
|
|
(400
|
)
|
Indices
|
|
|
(30,482
|
)
|
Interest Rates U.S.
|
|
|
(13,916
|
)
|
Interest Rates Non-U.S.
|
|
|
(12,962
|
)
|
Softs
|
|
|
(55
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(78,506
|
)
|
|
|
|
|
|
Net unrealized appreciation on open futures contracts
|
|
$
|
5,752
|
*
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition. |
F-20
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
December 31, 2009
|
|
Sector
|
|
Gain (loss) from trading
|
|
|
Currencies
|
|
$
|
534,378
|
|
Energy
|
|
|
(1,129,076
|
)
|
Grains
|
|
|
(17,021
|
)
|
Indices
|
|
|
1,917,690
|
|
Interest Rates U.S.
|
|
|
329,328
|
|
Interest Rates Non-U.S.
|
|
|
(94,185
|
)
|
Livestock
|
|
|
(2,700
|
)
|
Softs
|
|
|
(17,475
|
)
|
Metals
|
|
|
26,515
|
|
|
|
|
|
|
Total
|
|
$
|
1,547,454
|
|
|
|
|
|
|
|
|
5.
|
Investment in
Partnerships
|
The assets allocated to CFM for trading are invested directly
pursuant to CFMs Discus (1.5x Leverage) Program, a
proprietary, systematic trading system.
On January 1, 2005, the assets allocated to Campbell for
trading were invested in the 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 18,800.3931 units of Campbell Master
with cash of $18,587,905 and a contribution of open commodity
futures and forward positions with a fair value of $212,488.
Campbell Master was formed in order to permit commodity pools
managed now or in the future by Campbell using Campbells
Financial, Metal and Energy Large Portfolio (FME), a
proprietary, systematic trading system, to invest together in
one trading vehicle. The Partnership fully redeemed its
investment in Campbell Master on May 31, 2009 for cash
equal to $4,740,726.
On July 1, 2005, the assets allocated to Willowbridge for
trading were invested in the CMF Willowbridge Argo Master
Fund L.P. (Willowbridge Master), a limited
partnership organized under the partnership laws of the State of
New York. The partnership purchased 10,980.9796 units of
Willowbridge Master with cash of $9,895,326 and a contribution
of open commodity futures and forward positions with a fair
value of $1,085,654. Willowbridge Master was formed in order to
permit commodity pools managed now or in the future by using
Willowbridges Argo Trading System, a proprietary,
systematic trading system, to invest together in one trading
vehicle. The General Partner is also the general partner of
Willowbridge Master. Individual and pooled accounts currently
managed by Willowbridge, including the Partnership are permitted
to be limited partners of Willowbridge Master. The General
Partner and Willowbridge believe that trading through this
structure should promote efficiency and economy in the trading
process.
On April 1, 2006, the assets allocated to Graham for
trading were invested in the CMF Graham Capital Master
Fund L.P. (Graham Master), a limited
partnership organized under the partnership laws of the State of
New York. The Partnership purchased 11,192.9908 units of
Graham Master with cash of $11,192,991. Graham Master was formed
in order to permit commodity pools managed now or in the future
by using Grahams K4D-12.5 Program, a proprietary,
systematic trading system to invest together in one trading
vehicle. The General Partner is also the general partner of
Graham Master. Individual and pooled accounts currently managed
by Graham, including the Partnership, are permitted to be
limited partners of Graham Master. The General Partner and
Graham believe that trading through this structure should
promote efficiency and economy in the trading process.
On April 1, 2008, the assets allocated to Eckhardt for
trading were invested in CMF Eckhardt Master Fund L.P.
(Eckhardt Master), a limited partnership organized
under the partnership laws of the State of
F-21
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
New York. The Partnership purchased 7,000.0000 Units of Eckhardt
Master with cash of $7,000,000. Eckhardt Master was formed in
order to permit commodity pools managed now or in the future by
Eckhardts Standard Program, a proprietary, systematic
trading system, to invest together in one trading vehicle. The
General Partner is also the general partner of Eckhardt Master.
Individual and pooled accounts currently managed by Eckhardt,
including the Partnership, are permitted to be limited partners
of Eckhardt Master. The General Partner and Eckhardt believe
that trading through this structure should promote efficiency
and economy in the trading process.
On June 1, 2009, the assets allocated to SandRidge for
trading were in invested in the CMF SandRidge Master
Fund L.P. (SandRidge Master), a limited
partnership organized under the partnership laws of the State of
New York. The Partnership purchased 2,086.0213 units of
SandRidge Master with cash of $4,288,986. SandRidge Master was
formed in order to permit commodity pools managed now or in the
future by using SandRidges Energy Program, a proprietary,
discretionary trading system, to invest together in one trading
vehicle. The General Partner is also the general partner of
SandRidge Master. Individual and pooled accounts currently
managed by SandRidge, including the Partnership, are permitted
to be limited partners of SandRidge Master. The General Partner
and SandRidge believe that trading through this structure should
promote efficiency and economy in the trading process.
Graham Masters, Willowbridge Masters, Eckhardt
Masters and SandRidge Masters (collectively the
Funds) and the Partnerships trading of
futures, forwards, swaps and options contracts, if applicable,
on commodities is done primarily on United States of America
commodity exchange and foreign commodity exchanges. The Funds
and the Partnership engage in such trading through a commodity
brokerage account maintained with 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 Redeemable Unit of
Limited Partnership Interest 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 inform
the Funds.
Management and incentive fees are charged at the Partnership
level. All clearing fees are borne by the Partnership and
through its investment in the Funds. All other fees including
CGMs direct brokerage commissions are charged at the
Partnership level.
As of December 31, 2009, the Partnership owned
approximately 2.3%, 4.6%, 28.5% and 0.6%, of Willowbridge
Master, Graham Master, Eckhardt Master and SandRidge Master,
respectively. As of December 31, 2008, the Partnership
owned approximately 5.9%, 3.4%, 4.7% and 30.7%, of
Campbell Master, Willowbridge Master, Graham Master and
Eckhardt Master, respectively. Willowbridge, Graham, Eckhardt
and SandRidge intend to continue to invest the assets allocated
to each by the Partnership in Willowbridge Master, Graham
Master, Eckhardt Master and SandRidge Master, respectively. The
performance of the Partnership is directly affected by the
performance of the Funds. Expenses to 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 for the Funds are shown in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Capital
|
|
|
Willowbridge Master
|
|
$
|
231,147,799
|
|
|
$
|
42,482
|
|
|
$
|
231,105,317
|
|
Graham Master
|
|
|
171,238,199
|
|
|
|
25,939
|
|
|
|
171,212,260
|
|
Eckhardt Master
|
|
|
17,383,619
|
|
|
|
63,160
|
|
|
|
17,320,459
|
|
SandRidge Master
|
|
|
715,621,327
|
|
|
|
30,711,834
|
|
|
|
684,909,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,135,390,944
|
|
|
$
|
30,843,415
|
|
|
$
|
1,104,547,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Capital
|
|
|
Willowbridge Master
|
|
$
|
297,439,763
|
|
|
$
|
19,759
|
|
|
$
|
297,420,004
|
|
Campbell Master
|
|
|
127,587,225
|
|
|
|
112,263
|
|
|
|
127,474,962
|
|
Graham Master
|
|
|
224,787,639
|
|
|
|
296,697
|
|
|
|
224,490,942
|
|
Eckhardt Master
|
|
|
20,544,954
|
|
|
|
15,519
|
|
|
|
20,529,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
670,359,581
|
|
|
$
|
444,238
|
|
|
$
|
669,915,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized information reflecting the net gain (loss) from
trading, total income (loss) and net income (loss) for the Funds
are shown in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2009
|
|
|
|
Gain (Loss) from
|
|
|
Total Income
|
|
|
Net Income
|
|
|
|
Trading, net
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
Willowbridge Master
|
|
$
|
(42,016,964
|
)
|
|
$
|
(41,821,187
|
)
|
|
$
|
(42,198,191
|
)
|
Graham Master
|
|
|
12,468,065
|
|
|
|
12,593,321
|
|
|
|
11,932,221
|
|
Eckhardt Master
|
|
|
(617,648
|
)
|
|
|
(604,361
|
)
|
|
|
(743,158
|
)
|
SandRidge Master
|
|
|
99,192,706
|
|
|
|
99,581,610
|
|
|
|
98,747,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
69,026,159
|
|
|
$
|
69,749,383
|
|
|
$
|
67,738,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2008
|
|
|
|
Gain (Loss) from
|
|
|
Total Income
|
|
|
Net Income
|
|
|
|
Trading, net
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
Willowbridge Master
|
|
$
|
114,625,338
|
|
|
$
|
117,584,985
|
|
|
$
|
117,208,252
|
|
Campbell Master
|
|
|
6,817,650
|
|
|
|
8,716,578
|
|
|
|
8,555,470
|
|
Graham Master
|
|
|
63,129,714
|
|
|
|
65,332,335
|
|
|
|
64,361,901
|
|
Eckhardt Master
|
|
|
848,562
|
|
|
|
999,083
|
|
|
|
904,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
185,421,264
|
|
|
$
|
192,632,981
|
|
|
$
|
191,030,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized information reflecting the Partnerships
investment in, and the operations of, the Funds are shown in the
following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Partnerships
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
Income
|
|
|
Investment
|
|
Redemptions
|
Investment
|
|
Net Assets
|
|
|
Fair Value
|
|
|
Income (Loss)
|
|
|
Commissions
|
|
|
Other
|
|
|
(Loss)
|
|
|
Objective
|
|
Permitted
|
|
For the year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willowbridge Master
|
|
|
16.77
|
%
|
|
$
|
5,353,814
|
|
|
$
|
(1,222,403
|
)
|
|
$
|
8,992
|
|
|
$
|
1,693
|
|
|
$
|
(1,233,088
|
)
|
|
Commodity
Portfolio
|
|
Monthly
|
Campbell Master
|
|
|
0.00
|
%
|
|
|
|
|
|
|
(272,274
|
)
|
|
|
1,386
|
|
|
|
1,144
|
|
|
|
(274,804
|
)
|
|
Financial,
Metal &
Energy Large
Portfolio
|
|
Monthly
|
Graham Master
|
|
|
24.71
|
%
|
|
|
7,889,836
|
|
|
|
623,451
|
|
|
|
31,816
|
|
|
|
2,357
|
|
|
|
589,278
|
|
|
Commodity
Portfolio
|
|
Monthly
|
Eckhardt Master
|
|
|
15.46
|
%
|
|
|
4,935,342
|
|
|
|
(175,801
|
)
|
|
|
14,260
|
|
|
|
26,096
|
|
|
|
(216,157
|
)
|
|
Commodity
Portfolio
|
|
Monthly
|
SandRidge Master
|
|
|
13.67
|
%
|
|
|
4,362,951
|
|
|
|
309,373
|
|
|
|
2,363
|
|
|
|
738
|
|
|
|
306,272
|
|
|
Energy
Portfolio
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
22,541,943
|
|
|
$
|
(737,654
|
)
|
|
$
|
58,817
|
|
|
$
|
32,028
|
|
|
$
|
(828,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Partnerships
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
Income
|
|
|
Investment
|
|
Redemptions
|
Funds
|
|
Net Assets
|
|
|
Fair Value
|
|
|
Income (Loss)
|
|
|
Commissions
|
|
|
Other
|
|
|
(Loss)
|
|
|
Objective
|
|
Permitted
|
|
For the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willowbridge Master
|
|
|
22.63
|
%
|
|
$
|
10,048,176
|
|
|
$
|
4,121,243
|
|
|
$
|
12,208
|
|
|
$
|
1,264
|
|
|
$
|
4,107,771
|
|
|
Commodity
Portfolio
|
|
Monthly
|
Campbell Master
|
|
|
17.01
|
%
|
|
|
7,553,372
|
|
|
|
395,828
|
|
|
|
6,404
|
|
|
|
2,649
|
|
|
|
386,775
|
|
|
Financial,
Metal &
Energy Large
Portfolio
|
|
Monthly
|
Graham Master
|
|
|
23.71
|
%
|
|
|
10,523,350
|
|
|
|
3,112,416
|
|
|
|
44,774
|
|
|
|
1,428
|
|
|
|
3,066,214
|
|
|
Commodity
Portfolio
|
|
Monthly
|
Eckhardt Master
|
|
|
14.19
|
%
|
|
|
6,299,190
|
|
|
|
301,171
|
|
|
|
6,712
|
|
|
|
20,769
|
|
|
|
273,690
|
|
|
Commodity
Portfolio
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
34,424,088
|
|
|
$
|
7,930,658
|
|
|
$
|
70,098
|
|
|
$
|
26,110
|
|
|
$
|
7,834,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Distributions and
Redemptions:
|
Distributions of profits, if any, will be made at the sole
discretion of the General Partner; however, a Limited Partner
may require the Partnership to redeem their Redeemable Units at
their Net Asset Value as of the last day of any month on
10 days notice to the General Partner provided that no
redemption may result in the Limited Partner holding fewer than
3 Redeemable Units after the redemption is effected. There is no
fee charged to Limited Partners in connection with redemptions.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
(83.99
|
)
|
|
$
|
259.03
|
|
|
$
|
82.52
|
|
Interest income
|
|
|
1.28
|
|
|
|
18.06
|
|
|
|
54.17
|
|
Expenses**
|
|
|
(59.72
|
)
|
|
|
(61.79
|
)
|
|
|
(44.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
(142.43
|
)
|
|
|
215.30
|
|
|
|
92.67
|
|
Net Asset Value per Redeemable Unit, beginning of year
|
|
|
1,867.00
|
|
|
|
1,651.70
|
|
|
|
1,559.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit, end of year
|
|
$
|
1,724.57
|
|
|
$
|
1,867.00
|
|
|
$
|
1,651.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) before incentive fees***
|
|
|
(9.2
|
)%
|
|
|
(8.1
|
)%
|
|
|
(5.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
9.3
|
%
|
|
|
9.2
|
%
|
|
|
9.1
|
%
|
Incentive fees
|
|
|
0.9
|
|
|
|
1.2
|
%
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
10.2
|
%
|
|
|
10.4
|
%
|
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return before incentive fees
|
|
|
(6.7
|
)%
|
|
|
14.4
|
%
|
|
|
6.6
|
%
|
Incentive fees
|
|
|
(0.9
|
)
|
|
|
(1.4
|
)%
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return after incentive fees
|
|
|
(7.6
|
)%
|
|
|
13.0
|
%
|
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes brokerage commissions. |
|
** |
|
Excludes brokerage commissions. |
|
*** |
|
Interest income less total expenses. |
F-24
Diversified
Multi-Advisor Futures Fund L.P. II
Notes to Financial Statements
December 31, 2009
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
8.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Partnership and the
Funds are parties to financial instruments with off-balance
sheet risk, including derivative financial instruments and
derivative commodity instruments. These financial instruments
may include forwards, futures, options and swaps, whose values
are based upon an underlying asset, index, or reference rate,
and generally represent future commitments to exchange
currencies or cash balances, or to purchase or sell other
financial instruments at specific terms 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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Partnership/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 Partnership/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
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 Partnerships/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 Partnership/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 Partnership/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 Partnership/Funds do not
consider these contracts to be guarantees as described in ASC
460, Guarantees (formerly, FAS No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees).
The General Partner monitors and attempts to control the
Partnerships/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 Partnership/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
and exchange cleared swaps, forwards and options positions by
sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the
Partnerships/Funds business, these instruments may
not be held to maturity.
F-25
Selected unaudited quarterly financial data for the Partnership for the years ended
December 31, 2009 and 2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and unrealized trading
gains (losses) net of brokerage
commissions and clearing fees
including interest income |
|
$ |
(2,111,451 |
) |
|
$ |
1,674,965 |
|
|
$ |
(367,041 |
) |
|
$ |
(943,049 |
) |
Net income (loss) |
|
$ |
(2,331,061 |
) |
|
$ |
1,247,328 |
|
|
$ |
(604,963 |
) |
|
$ |
(1,304,769 |
) |
Increase (decrease) in Net Asset
Value per Redeemable Unit |
|
$ |
(124.36 |
) |
|
$ |
63.22 |
|
|
$ |
(24.52 |
) |
|
$ |
(56.77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
April 1, 2008 to |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
March 31, 2008 |
Net realized and unrealized trading gains (losses) and
investment in Partnerships net of brokerage commissions
and clearing fees including interest income |
|
$ |
3,572,399 |
|
|
$ |
(2,896,235 |
) |
|
$ |
4,863,658 |
|
|
$ |
1,807,377 |
|
Net income (loss) |
|
$ |
3,162,223 |
|
|
$ |
(3,184,461 |
) |
|
$ |
4,247,206 |
|
|
$ |
1,496,800 |
|
Increase (decrease) in Net Asset Value per Unit |
|
$ |
127.32 |
|
|
$ |
(124.22 |
) |
|
$ |
159.81 |
|
|
$ |
52.39 |
|
F-26
To the Limited
Partners of
CMF Willowbridge Argo Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
CMF Willowbridge Argo Master Fund L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF Willowbridge Argo Master Fund L.P.:
We have audited the accompanying statement of financial condition of CMF Willowbridge Argo Master
Fund L.P. (the Partnership), including the condensed schedule of investments, as of December 31, 2009, and
the related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified
opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF Willowbridge Argo Master Fund L.P. as of December 31, 2009, and the results of its
operations and its changes in partners capital for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-28
Report of Independent Auditors
To the
Partners of
CMF Willowbridge Argo Master Fund L.P.:
In our opinion, the
accompanying statement of financial condition, including the
condensed schedule of
investments, and the related statement of income and expenses, and
statement of changes in partners
capital present fairly, in all material respects, the financial position of CMF Willowbridge Argo
Master Fund L.P. at December 31, 2008, and the results of its operations for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-29
Report of Independent Registered Public Accounting Firm
The Partners
CMF Willowbridge Argo Master Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of CMF Willowbridge Argo Master Fund L.P. for the year ended December 31, 2007. These financial
statements are the responsibility of the Partnerships management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of CMF Willowbridge Argo
Master Fund L.P. for the year ended December 31, 2007, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-30
CMF Willowbridge
Argo Master Fund L.P.
Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
198,540,524
|
|
|
$
|
275,579,764
|
|
Cash margin (Note 3c)
|
|
|
27,540,310
|
|
|
|
17,345,935
|
|
Net unrealized appreciation on open futures contracts
|
|
|
5,066,965
|
|
|
|
4,514,064
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
231,147,799
|
|
|
$
|
297,439,763
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
$
|
42,482
|
|
|
$
|
19,759
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
42,482
|
|
|
|
19,759
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 127,352.9656 and 137,871.4938
Redeemable Units of Limited Partnership Interest outstanding at
December 31, in 2009 and 2008, respectively
|
|
|
231,105,317
|
|
|
|
297,420,004
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
231,147,799
|
|
|
$
|
297,439,763
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-31
CMF Willowbridge
Argo Master Fund L.P.
Condensed Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
1,058
|
|
|
$
|
(796,145
|
)
|
|
|
(0.35
|
)%
|
Energy
|
|
|
529
|
|
|
|
339,318
|
|
|
|
0.14
|
|
Grains
|
|
|
1,058
|
|
|
|
710,221
|
|
|
|
0.31
|
|
Interest Rates U.S.
|
|
|
529
|
|
|
|
385,800
|
|
|
|
0.17
|
|
Interest Rates
Non-U.S.
|
|
|
1,190
|
|
|
|
362,833
|
|
|
|
0.16
|
|
Metals
|
|
|
1,058
|
|
|
|
2,163
|
|
|
|
0.00
|
*
|
Softs
|
|
|
794
|
|
|
|
1,702,259
|
|
|
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
2,706,449
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
2,116
|
|
|
|
946,561
|
|
|
|
0.41
|
|
Interest Rates U.S.
|
|
|
1,058
|
|
|
|
1,250,420
|
|
|
|
0.54
|
|
Interest Rates
Non-U.S.
|
|
|
529
|
|
|
|
89,416
|
|
|
|
0.04
|
|
Softs
|
|
|
529
|
|
|
|
74,119
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
2,360,516
|
|
|
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
5,066,965
|
|
|
|
2.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-32
CMF Willowbridge
Argo Master Fund L.P.
Condensed Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
512
|
|
|
$
|
521,823
|
|
|
|
0.17
|
%
|
Grains
|
|
|
640
|
|
|
|
496,363
|
|
|
|
0.17
|
|
Interest Rates U.S.
|
|
|
1,280
|
|
|
|
1,365,961
|
|
|
|
0.46
|
|
Interest Rates
Non-U.S.
|
|
|
1,088
|
|
|
|
1,847,392
|
|
|
|
0.62
|
|
Metals
|
|
|
256
|
|
|
|
711,975
|
|
|
|
0.24
|
|
Softs
|
|
|
384
|
|
|
|
(99,463
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
4,844,051
|
|
|
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
128
|
|
|
|
694,880
|
|
|
|
0.23
|
|
Grains
|
|
|
384
|
|
|
|
(294,592
|
)
|
|
|
(0.10
|
)
|
Metals
|
|
|
256
|
|
|
|
(730,275
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(329,987
|
)
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
4,514,064
|
|
|
|
1.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-33
CMF Willowbridge
Argo Master Fund L.P.
Statements of Income and Expenses
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
(42,569,865
|
)
|
|
$
|
120,270,941
|
|
|
$
|
45,753,249
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
552,901
|
|
|
|
(5,645,603
|
)
|
|
|
(875,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
(42,016,964
|
)
|
|
|
114,625,338
|
|
|
|
44,878,233
|
|
Interest income
|
|
|
195,777
|
|
|
|
2,959,647
|
|
|
|
6,365,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
(41,821,187
|
)
|
|
|
117,584,985
|
|
|
|
51,244,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
316,442
|
|
|
|
340,947
|
|
|
|
437,674
|
|
Professional fees
|
|
|
60,562
|
|
|
|
35,786
|
|
|
|
29,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
377,004
|
|
|
|
376,733
|
|
|
|
467,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(42,198,191
|
)
|
|
$
|
117,208,252
|
|
|
$
|
50,776,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest (Notes 1 and 6)
|
|
$
|
(340.95
|
)
|
|
$
|
771.84
|
|
|
$
|
352.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
126,508.0368
|
|
|
|
156,458.0988
|
|
|
|
153,606.6990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-34
CMF Willowbridge
Argo Master Fund L.P.
Statements of Changes in Partners Capital
for the years ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
183,568,130
|
|
Net income (loss)
|
|
|
50,776,550
|
|
Sale of 27,402.5153 Redeemable Units of Limited Partnership
Interest
|
|
|
30,563,510
|
|
Redemption of 43,441.2969 Redeemable Units of Limited
Partnership Interest
|
|
|
(45,487,314
|
)
|
Distribution of interest income to feeder funds
|
|
|
(6,365,854
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
213,055,022
|
|
Net income (loss)
|
|
|
117,208,252
|
|
Sale of 60,036.9500 Redeemable Units of Limited Partnership
Interest
|
|
|
106,466,700
|
|
Redemption of 73,835.2095 Redeemable Units of Limited
Partnership Interest
|
|
|
(136,350,323
|
)
|
Distribution of interest income to feeder funds
|
|
|
(2,959,647
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
297,420,004
|
|
Net income (loss)
|
|
|
(42,198,191
|
)
|
Sale of 28,958.2689 Redeemable Units of Limited Partnership
Interest
|
|
|
55,363,938
|
|
Redemption of 39,476.7971 Redeemable Units of Limited
Partnership Interest
|
|
|
(79,284,657
|
)
|
Distribution of interest income to feeder funds
|
|
|
(195,777
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
231,105,317
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,404.73
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
2,157.23
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
1,814.68
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-35
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF Willowbridge Argo Master Fund L.P. (the
Master) is a limited partnership which was organized
under the partnership laws of the State of New York to engage in
the speculative trading of a diversified portfolio of commodity
interests including futures contracts, options, swaps and
forward contracts. The sectors traded include currencies,
energy, grains, U.S. and non-U.S. interest rates, metals and
softs. The commodity interests that are traded by the Master are
volatile and involve a high degree of market risk. The Master is
authorized to sell an unlimited number of redeemable units of
Limited Partnership Interest (Redeemable Units).
Ceres Managed Futures LLC (formerly Citigroup Managed Futures
LLC), a Delaware limited liability company, acts as the general
partner (the General Partner) and commodity pool
operator of the Master. The General Partner is wholly owned by
Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings), a newly registered non-clearing futures
commission merchant and a member of the National Futures
Association (NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity
broker and a selling agent for the Master, owns 49% of MSSB
Holdings. Citigroup Inc. (Citigroup), indirectly
through various subsidiaries, wholly owns CGM. Prior to
July 31, 2009, the date as of which MSSB Holdings became
its owner, the General Partner was wholly owned by Citigroup
Financial Products Inc., a wholly owned subsidiary of Citigroup
Global Markets Holdings Inc., the sole owner of which is
Citigroup.
On July 1, 2005, (commencement of trading operations),
Diversified Multi-Advisor Futures Fund L.P. (formerly,
Smith Barney Diversified Futures Fund L.P.)
(Diversified), Diversified Multi-Advisor Futures
Fund L.P. II (formerly, Smith Barney Diversified Futures
Fund L.P. II) (Diversified II), Orion Futures
Fund L.P. (formerly, Citigroup Orion Futures
Fund L.P.) (Orion), Institutional Futures
Portfolio L.P. (formerly, CMF Institutional Futures Portfolio
L.P.) (Institutional Portfolio) and Tactical
Diversified Futures Fund L.P. (formerly, Citigroup
Diversified Futures Fund L.P.) (Tactical
Diversified) allocated a portion of their capital to the
Master. Diversified purchased 12,259.3490 Redeemable Units with
cash of $11,118,119 and a contribution of open commodity futures
and forwards positions with a fair value of $1,141,230,
Diversified II purchased 10,980.9796 Redeemable Units with
cash of $9,895,326 and a contribution of open commodity futures
and forwards positions of $1,085,654, Orion purchased
33,529.1186 Redeemable Units with cash of $29,866,194 and a
contribution of open commodity futures and forwards positions
with a fair value of $3,662,925, Institutional Portfolio
invested $7,000,000 of its initial capital and purchased
7,000.0000 Redeemable Units with cash of 16,242,748 and Tactical
Diversified purchased 95,795.8082 Redeemable Units with cash of
$85,442,868 and a contribution of open commodity futures and
forwards positions with a fair value of $10,352,940. On April 1,
2009, Orion Futures Fund (Cayman) (formerly, Citigroup Orion
Futures Fund (Cayman) Ltd.) (Orion Cayman) purchased
299.0681 Redeemable Units with cash of $560,000. The Master was
formed to permit commodity pools managed now and in the future
by Willowbridge Associates Inc. (the Advisor) using
the Argo Trading System, the Advisors proprietary
systematic trading program, to invest together in one trading
vehicle.
The Master operates under a structure where its investors
consist of Diversified, Diversified II, Orion, Tactical
Diversified, Institutional Portfolio and Orion Cayman (each a
Feeder, collectively the Funds) with
approximately 2.7%, 2.3%, 58.8%, 30.8%, 4.4% 1.0% investments in
the Master at December 31, 2009, respectively and with
approximately 3.6%, 3.4%, 46.1%, 42.5% and 4.4% investments in
the Master at December 31, 2008, respectively.
The Master will be liquidated upon the first to occur of the
following: December 31, 2025; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification
F-36
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
(ASC) 105, Generally Accepted Accounting
Principles (ASC 105) (the
Codification). ASC 105 established the exclusive
authoritative reference for U.S. Generally Accepted
Accounting Principles (GAAP) for use in financial
statements except for Securities and Exchange Commission
(SEC) rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification
supersedes all existing non-SEC accounting and reporting
standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (including derivative financial
instruments and derivative commodity instruments) are held for
trading purposes. The commodity interests are recorded on trade
date and open contracts are recorded at fair value (as described
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. 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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, Fair Value Measurements and Disclosures
(formerly, FAS No. 157, Fair Value
Measurements) as of January 1, 2008 which defines
fair value 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. ASC 820
establishes a framework for measuring fair value and expands
disclosures regarding fair value measurements in accordance with
GAAP. The fair value hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1) and the lowest priority to
fair values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. The Master did not apply the
deferral allowed by ASC 820 for nonfinancial assets and
nonfinancial liabilities measured at fair value on a
nonrecurring basis.
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (formerly,
FAS No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly) which
reaffirms that fair value is 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. These amendments to
ASC 820 also reaffirm the need to
F-37
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
use judgment in determining if a formerly active market has
become inactive and in determining fair values when the market
has become inactive. These amendments to ASC 820 are required
for interim and annual reporting periods ending after
June 15, 2009. Management has concluded that based on
available information in the marketplace, there has not been a
decrease in the volume and level of activity in the
Masters Level 2 assets and liabilities. The adoption
of the amendments to ASC 820 had no effect on the
Masters Financial Statements.
The Master considers 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 who
derive fair values for those assets from observable inputs
(Level 2). As of and for the years ended December 31,
2009 and December 31, 2008, the Master did not hold any
derivative instruments for which market quotations are not
readily available and which are priced by broker-dealers who
derive fair values for those assets from observable inputs
(Level 2) or 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
|
|
|
|
12/31/2009
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
5,066,965
|
|
|
$
|
5,066,965
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
5,066,965
|
|
|
|
5,066,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
5,066,965
|
|
|
$
|
5,066,965
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable Inputs
|
|
|
Unobservable
|
|
|
|
12/31/2008
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
4,514,064
|
|
|
$
|
4,514,064
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,514,064
|
|
|
|
4,514,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
4,514,064
|
|
|
$
|
4,514,064
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades futures
contracts. A futures contract is a firm commitment to buy or
sell a specified quantity of investments, currency or a
standardized amount of a deliverable grade commodity, at a
specified price on a specified future date, unless the contract
is closed before the delivery date or if the delivery quantity
is something where physical delivery can not occur (such as the
S&P 500 Index), whereby such contract is settled in cash.
Payments (variation margin) may be made or received
by the Master each business day, depending on the daily
fluctuations in the value of the underlying contracts, and are
recorded as unrealized gains or losses by the Master. When the
contract is closed, the Master records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
Because 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, credit
exposure is limited. Realized gains (losses) and changes in
unrealized gains (losses) on futures contracts are included in
the Statements of Income and Expenses.
|
F-38
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
e.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
f.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Masters income and expenses.
|
In 2007, the Master adopted ASC 740, Income Taxes (formerly,
FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Masters 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 Master 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 concluded that no provision for income tax is required
in the Masters financial statements.
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2006.
|
|
|
|
g.
|
Subsequent Events. In 2009, the Master adopted
ASC 855, Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC 855 is to
establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before
financial statements are issued or available to be issued.
Management has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
|
|
|
h.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which, among other things, amends ASC 820 to require entities to
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 which clarifies existing disclosure requirements
provided by ASC 820 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. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of
ASU 2010-06
will have on the Masters financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
i.
|
Certain prior period amounts have been reclassified to conform
to current period presentation.
|
|
|
j.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
F-39
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees including
CGMs direct brokerage commission shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amount of cash held by the
Master for margin requirements were $27,540,310 and $17,345,935,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures contracts. The Master nets, for financial reporting
purposes, the unrealized gains and losses on open futures
contracts on the Statements of Financial Condition as the
criteria under ASC 210, Balance Sheet (formerly, FASB
Interpretation No. 39, Offsetting of Amounts
Related to Certain Contracts) have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures contracts traded
for the year ended December 31, 2009 based on a quarterly
calculation, was 10,295.
The Master adopted ASC 815, Derivatives and Hedging (formerly,
FAS No. 161 Disclosures about Derivative
Instruments and Hedging Activities) as of January 1,
2009 which requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. ASC 815 only
expands the disclosure requirements for derivative instruments
and related hedging activities and has no impact on the
Statements of Financial Condition, Statements of Income and
Expenses and Statements of Changes in Partners Capital.
F-40
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the fair values of derivative
instruments of futures contracts as separate assets and
liabilities.
|
|
|
|
|
Assets
|
|
December 31, 2009
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
3,436,175
|
|
Energy
|
|
|
339,318
|
|
Grains
|
|
|
768,108
|
|
Interest Rates U.S.
|
|
|
1,640,270
|
|
Interest Rates
Non-U.S.
|
|
|
603,534
|
|
Softs
|
|
|
1,776,378
|
|
Metals
|
|
|
2,786,063
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
11,349,846
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
(3,285,759
|
)
|
Grains
|
|
|
(57,887
|
)
|
Interest Rates U.S.
|
|
|
(4,050
|
)
|
Interest Rates
Non-U.S.
|
|
|
(151,285
|
)
|
Metals
|
|
|
(2,783,900
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(6,282,881
|
)
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
$
|
5,066,965
|
*
|
|
|
|
|
|
|
|
|
|
|
*This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition.
|
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
Sector
|
|
Gain (Loss) from Trading
|
|
Currencies
|
|
$
|
(1,870,971
|
)
|
Energy
|
|
|
(28,874,531
|
)
|
Grains
|
|
|
(8,605,911
|
)
|
INT Rate US
|
|
|
(10,397,322
|
)
|
INT Rate Non-US
|
|
|
(7,737,846
|
)
|
Livestock
|
|
|
(1,213,180
|
)
|
Metals
|
|
|
19,790,113
|
|
Softs
|
|
|
(3,107,316
|
)
|
|
|
|
|
|
Total
|
|
$
|
(42,016,964
|
)**
|
|
|
|
|
|
|
|
|
|
|
**This amount is in Gain (loss) from trading, net on
the Statements of Income and Expenses.
|
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the Net Asset
Value per
F-41
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
Redeemable Unit of Limited Partnership Interest 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
Redeemable Units are classified as a liability when the Limited
Partner elects to redeem and informs the Master.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and change in unrealized gains (losses)*
|
|
$
|
(342.04
|
)
|
|
$
|
752.74
|
|
|
$
|
310.35
|
|
Interest income
|
|
|
1.60
|
|
|
|
19.34
|
|
|
|
42.42
|
|
Expenses**
|
|
|
(0.51
|
)
|
|
|
(0.24
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
(340.95
|
)
|
|
|
771.84
|
|
|
|
352.58
|
|
Distribution of interest income to feeder funds
|
|
|
(1.60
|
)
|
|
|
(19.34
|
)
|
|
|
(42.42
|
)
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year
|
|
|
2,157.23
|
|
|
|
1,404.73
|
|
|
|
1,094.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year
|
|
$
|
1,814.68
|
|
|
$
|
2,157.23
|
|
|
$
|
1,404.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
** |
|
Excludes clearing fees. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
(0.1
|
)%
|
|
|
1.0
|
%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
(15.8
|
)%
|
|
|
54.9
|
%
|
|
|
32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures 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, or 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.
F-42
CMF Willowbridge
Argo Master Fund L.P.
Notes to Financial Statements
December 31, 2009
Market risk is the potential for changes in the value of the
financial instruments traded by the Master due to market
changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
directly impacted by the volatility and liquidity in the markets
in which the related underlying assets are traded. The Master is
exposed to a market risk equal to the value of futures and
forward contracts purchased and unlimited liability on such
contracts sold short.
Credit risk is the possibility that a loss may occur due to the
failure of a counterparty to perform according to the terms of a
contract. The Masters risk of loss in the event of
counterparty default is typically limited to the amounts
recognized in the Statements of Financial Condition and not
represented by the contract or notional amounts of the
instruments. The Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
The General Partner monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the General
Partner to analyze statistically 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 positions by
sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the Masters
business, these instruments may not be held to maturity.
F-43
Selected unaudited quarterly financial data for Willowbridge Master for the years ended
December 31, 2009 and 2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
|
For the period from |
|
|
For the period from |
|
|
For the period from |
|
|
|
October 1, 2009 to |
|
|
July 1, 2009 to |
|
|
April 1, 2009 to |
|
|
January 1, 2009 to |
|
|
|
December 31, 2009 |
|
|
September 30, 2009 |
|
|
June 30, 2009 |
|
|
March 31, 2009 |
|
Net realized
and unrealized
trading gains
(losses) net of
brokerage
commissions and
clearing fees
including interest
income |
|
$ |
(18,281,605 |
) |
|
$ |
(20,120,888 |
) |
|
$ |
32,038,173 |
|
|
$ |
(35,773,309 |
) |
Net income (loss) |
|
$ |
(18,302,561 |
) |
|
$ |
(20,139,642 |
) |
|
$ |
32,025,897 |
|
|
$ |
(35,781,885 |
) |
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
(150.43 |
) |
|
$ |
(172.65 |
) |
|
$ |
266.37 |
|
|
$ |
(284.24 |
) |
|
|
|
For the period from |
|
|
For the period from |
|
|
For the period from |
|
|
For the period from |
|
|
|
October 1, 2008 to |
|
|
July 1, 2008 to |
|
|
April 1, 2008 to |
|
|
January 1, 2008 to |
|
|
|
December 31, 2008 |
|
|
September 30, 2008 |
|
|
June 30, 2008 |
|
|
March 31, 2008 |
|
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
27,126,788 |
|
|
$ |
9,695,635 |
|
|
$ |
61,112,070 |
|
|
$ |
19,309,545 |
|
Net income (loss) |
|
$ |
27,118,311 |
|
|
$ |
9,686,363 |
|
|
$ |
61,102,423 |
|
|
$ |
19,301,155 |
|
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
190.01 |
|
|
$ |
68.64 |
|
|
$ |
389.12 |
|
|
$ |
124.07 |
|
F-44
To the Limited
Partners of
CMF
Graham Capital Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
|
|
|
|
By:
|
Jennifer Magro
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
CMF Graham Capital Master Fund L.P.
|
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF Graham Capital Master Fund L.P.:
We have audited the accompanying
statement of financial condition of CMF Graham Capital Master Fund
L.P. (the Partnership), including the condensed schedule of investments, as of December 31, 2009, and the
related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified
opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF Graham Capital Master Fund L.P. as of December 31, 2009, and the results of its
operations and its changes in partners capital for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-46
Report of Independent Auditors
To the
Partners of
CMF Graham Capital Master Fund L.P.:
In our opinion, the accompanying statement
of financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and
statement of changes in partners
capital present fairly, in all material respects, the financial position of CMF Graham Capital
Master Fund L.P. at December 31, 2008, and the results of its operations for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-47
Report of Independent Registered Public Accounting Firm
The Partners
CMF Graham Capital Master Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of CMF Graham Capital Master Fund L.P. for the year ended December 31, 2007. These financial
statements are the responsibility of the Partnerships management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of CMF Graham Capital Master
Fund L.P. for the year ended December 31, 2007, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-48
CMF Graham
Capital Master Fund L.P.
Statements
of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in commodity futures trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
153,765,196
|
|
|
$
|
214,551,266
|
|
Cash margin (Note 3c)
|
|
|
15,503,558
|
|
|
|
9,073,580
|
|
Net unrealized appreciation on open futures contracts
|
|
|
406,652
|
|
|
|
1,162,793
|
|
Net unrealized appreciation on open forward contracts
|
|
|
1,562,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
171,238,199
|
|
|
$
|
224,787,639
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open forward contracts
|
|
$
|
|
|
|
$
|
279,957
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
25,939
|
|
|
|
16,740
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
25,939
|
|
|
|
296,697
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 104,371.4673 and 146,784.8652
Redeemable Units of Limited Partnership Interest outstanding at
December 31, 2009 and 2008, respectively
|
|
|
171,212,260
|
|
|
|
224,490,942
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
171,238,199
|
|
|
$
|
224,787,639
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-49
CMF Graham
Capital Master Fund L.P.
Condensed
Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ($)/
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
2
|
|
|
$
|
360
|
|
|
|
0.00
|
%*
|
Energy
|
|
|
449
|
|
|
|
242,192
|
|
|
|
0.14
|
|
Grains
|
|
|
286
|
|
|
|
34,342
|
|
|
|
0.02
|
|
Indices
|
|
|
1,065
|
|
|
|
633,603
|
|
|
|
0.37
|
|
Interest Rates U.S.
|
|
|
233
|
|
|
|
(94,262
|
)
|
|
|
(0.06
|
)
|
Interest Rates
Non-U.S.
|
|
|
1,523
|
|
|
|
(996,822
|
)
|
|
|
(0.58
|
)
|
Livestock
|
|
|
74
|
|
|
|
20,482
|
|
|
|
0.01
|
|
Metals
|
|
|
78
|
|
|
|
(100,473
|
)
|
|
|
(0.06
|
)
|
Softs
|
|
|
589
|
|
|
|
556,321
|
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
295,743
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
69
|
|
|
|
11,480
|
|
|
|
0.01
|
|
Energy
|
|
|
308
|
|
|
|
(40,301
|
)
|
|
|
(0.02
|
)
|
Grains
|
|
|
275
|
|
|
|
57,491
|
|
|
|
0.03
|
|
Indices
|
|
|
7
|
|
|
|
6,437
|
|
|
|
0.00
|
*
|
Interest Rates U.S.
|
|
|
50
|
|
|
|
(406
|
)
|
|
|
(0.00
|
)*
|
Interest Rates
Non-U.S.
|
|
|
451
|
|
|
|
57,808
|
|
|
|
0.03
|
|
Metals
|
|
|
10
|
|
|
|
18,400
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
110,909
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
$
|
550,199,867
|
|
|
|
7,739,782
|
|
|
|
4.52
|
|
Metals
|
|
|
429
|
|
|
|
2,324,147
|
|
|
|
1.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
10,063,929
|
|
|
|
5.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
$
|
551,949,465
|
|
|
|
(7,486,471
|
)
|
|
|
(4.37
|
)
|
Metals
|
|
|
285
|
|
|
|
(1,014,665
|
)
|
|
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(8,501,136
|
)
|
|
|
(4.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
1,969,445
|
|
|
|
1.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Due to rounding.
See accompanying notes to financial statements.
F-50
CMF Graham
Capital Master Fund L.P.
Condensed
Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ($)/
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
14
|
|
|
$
|
1,840
|
|
|
|
0.00
|
%*
|
Energy
|
|
|
96
|
|
|
|
325,615
|
|
|
|
0.15
|
|
Grains
|
|
|
52
|
|
|
|
13,370
|
|
|
|
0.01
|
|
Indices
|
|
|
5
|
|
|
|
(19,645
|
)
|
|
|
(0.01
|
)
|
Interest Rates
Non-U.S.
|
|
|
1,235
|
|
|
|
947,609
|
|
|
|
0.42
|
|
Interest Rates U.S.
|
|
|
564
|
|
|
|
507,653
|
|
|
|
0.23
|
|
Metals
|
|
|
52
|
|
|
|
33,132
|
|
|
|
0.01
|
|
Softs
|
|
|
13
|
|
|
|
3,251
|
|
|
|
0.00
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
1,812,825
|
|
|
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
14
|
|
|
|
8,038
|
|
|
|
0.00
|
*
|
Energy
|
|
|
159
|
|
|
|
(266,237
|
)
|
|
|
(0.12
|
)
|
Grains
|
|
|
53
|
|
|
|
(207,227
|
)
|
|
|
(0.09
|
)
|
Indices
|
|
|
87
|
|
|
|
(86,831
|
)
|
|
|
(0.04
|
)
|
Interest Rates
Non-U.S.
|
|
|
17
|
|
|
|
(9,163
|
)
|
|
|
(0.00
|
)*
|
Livestock
|
|
|
11
|
|
|
|
25,220
|
|
|
|
0.01
|
|
Metals
|
|
|
16
|
|
|
|
(35,970
|
)
|
|
|
(0.02
|
)
|
Softs
|
|
|
99
|
|
|
|
(77,862
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(650,032
|
)
|
|
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
$
|
87,112,212
|
|
|
|
2,398,640
|
|
|
|
1.07
|
|
Metals
|
|
|
59
|
|
|
|
297,268
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
2,695,908
|
|
|
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
$
|
86,429,816
|
|
|
|
(2,764,819
|
)
|
|
|
(1.23
|
)
|
Metals
|
|
|
96
|
|
|
|
(211,046
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(2,975,865
|
)
|
|
|
(1.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
882,836
|
|
|
|
0.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Due to rounding.
See accompanying notes to financial statements.
F-51
CMF Graham
Capital Master Fund L.P.
Statements
of Income and Expenses
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (loss) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
11,381,456
|
|
|
$
|
61,878,532
|
|
|
$
|
37,612,230
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
1,086,609
|
|
|
|
1,251,182
|
|
|
|
(7,303,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
12,468,065
|
|
|
|
63,129,714
|
|
|
|
30,308,631
|
|
Interest income
|
|
|
125,256
|
|
|
|
2,202,621
|
|
|
|
7,463,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
12,593,321
|
|
|
|
65,332,335
|
|
|
|
37,771,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
614,452
|
|
|
|
940,378
|
|
|
|
857,460
|
|
Professional fees
|
|
|
46,648
|
|
|
|
30,056
|
|
|
|
29,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
661,100
|
|
|
|
970,434
|
|
|
|
886,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
11,932,221
|
|
|
$
|
64,361,901
|
|
|
$
|
36,884,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest (Notes 1 and 6)
|
|
$
|
112.10
|
|
|
$
|
396.07
|
|
|
$
|
187.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
118,814.5765
|
|
|
|
167,979.9211
|
|
|
|
208,730.7408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-52
CMF Graham
Capital Master Fund L.P.
Statements of Changes in Partners Capital
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
226,673,516
|
|
Net income (loss)
|
|
|
36,884,725
|
|
Sale of 20,875.4865 Redeemable Units of Limited Partnership
Interest
|
|
|
21,067,811
|
|
Redemption of 62,214.7369 Redeemable Units of Limited
Partnership Interest
|
|
|
(63,568,645
|
)
|
Distribution of interest income to feeder funds
|
|
|
(7,463,020
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
213,594,387
|
|
Net income (loss)
|
|
|
64,361,901
|
|
Sale of 3,998.1810 Redeemable Units of Limited Partnership
Interest
|
|
|
5,096,496
|
|
Redemption of 43,548.1379 Redeemable Units of Limited
Partnership Interest
|
|
|
(56,359,221
|
)
|
Distribution of interest income to feeder funds
|
|
|
(2,202,621
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
224,490,942
|
|
Net income (loss)
|
|
|
11,932,221
|
|
Sale of 7,455.9216 Redeemable Units of Limited Partnership
Interest
|
|
|
11,912,177
|
|
Redemption of 49,869.3195 Redeemable Units of Limited
Partnership Interest
|
|
|
(76,997,824
|
)
|
Distribution of interest income to feeder funds
|
|
|
(125,256
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
171,212,260
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,146.29
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
1,529.39
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
1,640.41
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-53
CMF Graham
Capital Master Fund L.P.
Notes to
Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF Graham Capital Master Fund L.P. (the
Master) is a limited partnership which was organized
under the partnership laws of the State of New York to engage in
the speculative trading of a diversified portfolio of commodity
interests including futures contracts, options, swaps and
forward contracts. The sectors traded include currencies,
energy, grains, indices, livestock, metals, softs, U.S. and
non-U.S. interest rates. The commodity interests that are traded
by the Master are volatile and involve a high degree of market
risk. The Master is authorized to sell an unlimited number of
redeemable units of Limited Partnership Interest
(Redeemable Units).
Ceres Managed Futures LLC (formerly Citigroup Managed Futures
LLC), a Delaware limited liability company, acts as the general
partner (the General Partner) and commodity pool
operator of the Master. The General Partner is wholly owned by
Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings), a newly registered non-clearing futures
commission merchant and a member of the National Futures
Association (NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity
broker and a selling agent for the Master, owns 49% of MSSB
Holdings. Citigroup Inc. (Citigroup), indirectly
through various subsidiaries, wholly owns CGM. Prior to
July 31, 2009, the date as of which MSSB Holdings became
its owner, the General Partner was wholly owned by Citigroup
Financial Products Inc., a wholly owned subsidiary of Citigroup
Global Markets Holdings Inc., the sole owner of which is
Citigroup.
On April 1, 2006 (commencement of trading operations),
Diversified 2000 Futures Fund L.P. (formerly Citigroup
Diversified 2000 Futures Fund L.P.) (Diversified
2000), Smith Barney Global Markets Futures Fund
(Global Markets), Diversified Multi-Advisor Futures
Fund L.P. (formerly Smith Barney Diversified Futures
Fund L.P.) (Diversified I) and Diversified
Multi-Advisor Futures Fund L.P. II (formerly Smith Barney
Diversified Futures Fund L.P. II) (Diversified
II) each allocated a portion of its capital to the Master.
Diversified 2000 purchased 41,952.2380 Redeemable Units with
cash equal to $41,952,238. Global Markets purchased 2,355.5550
Redeemable Units with cash equal to $2,355,555. Diversified I
purchased 14,741.1555 Redeemable Units with cash equal to
$14,741,156. Diversified II purchased 11,192.9908
Redeemable Units with cash equal to $11,192,991. On May 1,
2006, Alera Portfolios SPC. (Alera SPC) allocated a
portion of its capital to the Master and purchased 4,592.0784
Redeemable Units with cash equal to $4,801,938. On June 1,
2006, Fairfield Futures Fund L.P. II (formerly Citigroup
Fairfield Futures Fund L.P. II) (Fairfield II)
allocated substantially all of its capital and Tactical
Diversified Futures Fund L.P. (formerly Citigroup
Diversified Futures Fund L.P.) (Tactical
Diversified) allocated a portion of its capital to the
Master. Fairfield II purchased 74,569.3761 Redeemable Units
with cash equal to $75,688,021. Tactical Diversified purchased
101,486.0491 Redeemable Units with cash equal to $103,008,482.
As of March 31, 2007, Alera SPC fully redeemed its
investment of 1,805.5482 Redeemable Units with a fair value of
$1,661,443, which includes interest income of $7,289. As of
December 31, 2007, Global Markets fully redeemed its
investment of 1,566.2278 Redeemable Units with a fair value of
$1,799,772, which includes interest income of $4,415. The Master
was formed to permit commodity pools managed now or in the
future by Graham Capital Management, L.P. (the
Advisor), using the K4D 12.5 program,
the Advisors proprietary, systematic trading program, to
invest together in one trading vehicle.
The Master operates under a structure where its investors
consist of Diversified 2000, Diversified I, Diversified II,
Fairfield II and Tactical Diversified (each a
Feeder, collectively the Funds) with
approximately 13.2%, 5.4%, 4.6%, 25.7% and 51.1% investments in
the Master at December 31, 2009, respectively. Diversified
2000, Diversified I, Diversified II, Fairfield II and
Tactical Diversified had approximately 12.6%, 5.0%, 4.7%, 27.1%
and 50.6% investments in the Master at December 31, 2008,
respectively.
F-54
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The Master will be liquidated upon the first to occur of the
following: December 31, 2025; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the exclusive
authoritative reference for U.S. generally accepted
accounting principles (GAAP) for use in financial
statements except for Securities and Exchange Commission
(SEC) rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification
supersedes all existing non-SEC accounting and reporting
standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly,
FAS No. 102, Statement of Cash Flows Exemption
of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (including derivative financial
instruments and derivative commodity instruments) are held for
trading purposes. The commodity interests are recorded on trade
date and open contracts are recorded at fair value (as described
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 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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, Fair Value Measurements and Disclosures
(formerly, FAS No. 157, Fair Value
Measurements) as of January 1, 2008 which
defines fair value 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.
ASC 820 establishes a framework for measuring fair value and
expands disclosures regarding fair value measurements in
accordance with GAAP. The fair value hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the
lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within
which the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Master did
not apply the deferral allowed by ASC 820 for nonfinancial
assets and nonfinancial liabilities measured at fair value on a
nonrecurring basis.
F-55
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (formerly,
FAS No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly) which
reaffirms that fair value is 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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Masters Level 2 assets and
liabilities. The adoption of the amendments to ASC 820 had no
effect on the Masters Financial Statements.
The Master considers 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 who
derive fair values for those assets from observable inputs
(Level 2). As of and for the years ended December 31,
2009 and 2008, the Master 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 for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
406,652
|
|
|
$
|
406,652
|
|
|
$
|
|
|
|
$
|
|
|
Forwards
|
|
|
1,562,793
|
|
|
|
1,309,482
|
|
|
|
253,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,969,445
|
|
|
|
1,716,134
|
|
|
|
253,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
1,969,445
|
|
|
$
|
1,716,134
|
|
|
$
|
253,311
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
1,162,793
|
|
|
$
|
1,162,793
|
|
|
$
|
|
|
|
$
|
|
|
Forwards
|
|
|
86,222
|
|
|
|
86,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,249,015
|
|
|
|
1,249,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards
|
|
$
|
366,179
|
|
|
$
|
|
|
|
$
|
366,179
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
366,179
|
|
|
|
|
|
|
|
366,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
882,836
|
|
|
$
|
1,249,015
|
|
|
$
|
(366,179
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades futures
contracts. A futures contract is a firm commitment to buy or
sell a specified quantity of investments, currency or a
standardized amount of a deliverable grade commodity, at a
specified price on a specified future date, unless the contract
is closed before the delivery date or 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 Master each business day, depending on the
|
F-56
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
daily fluctuations in the value of the underlying contracts, and
are recorded as unrealized gains or losses by the Master. When
the contract is closed, the Master records a realized gain or
loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was
closed. Because 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, credit exposure is limited. Realized gains (losses) and
changes in unrealized gains (losses) on futures contracts are
included in the Statements of Income and Expenses.
|
|
|
|
|
e.
|
Forward Foreign Currency Contracts. Foreign
currency contracts are those contracts where the Master agrees
to receive or deliver a fixed quantity of foreign currency for
an
agreed-upon
price on an agreed future date. Foreign currency contracts are
valued daily, and the Masters 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. Realized gains (losses) and changes in
unrealized gains (losses) on foreign currency contracts are
recognized in the period in which the contract is closed or the
changes occur, respectively, and are included in the Statements
of Income and Expenses.
|
The Master does not isolate that 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 gain (loss) on investments in the Statements of
Income and Expenses.
|
|
|
|
f.
|
London Metals Exchange Forward
Contracts. Metal contracts traded on the London
Metals Exchange (LME) represent a firm commitment to
buy or sell a specified quantity of aluminum, copper, lead,
nickel, tin or zinc. LME contracts traded by the Master are cash
settled based on prompt dates published by the LME. Payments
(variation margin) may be made or received by the
Master each business day, depending on the daily fluctuations in
the value of the underlying contracts, and are recorded as
unrealized gains or losses by the Master. A contract is
considered offset when all long positions have been matched with
short positions. When the contract is closed at the prompt date,
the Master records a realized gain or loss equal to the
difference between the value of the contract at the time it was
opened and the value at the time it was closed. Because
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,
credit exposure is limited. Realized gains (losses) and changes
in unrealized gains (losses) on metal contracts are included in
the Statements of Income and Expenses.
|
|
|
g.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
h.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Masters income and expenses.
|
In 2007, the Master adopted ASC 740, Income Taxes (formerly,
FAS No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Masters 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 Master 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 concluded that no provision for income tax is required
in the Masters financial statements.
F-57
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2006.
|
|
|
|
i.
|
Subsequent Events. In 2009, the Master adopted ASC
855, Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC 855 is to
establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before
financial statements are issued or available to be issued.
Management has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
|
|
|
j.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which, among other things, amends ASC 820 to require entities to
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 which clarifies existing disclosure requirements
provided by ASC 820 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. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Masters financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
k.
|
Certain prior period amounts have been reclassified to conform
to current year presentation.
|
|
|
l.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
F-58
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees including
CGMs direct brokerage commission shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amounts of cash held by the
Master for margin requirements was $15,503,558 and $9,073,580,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures and forward contracts. The Master nets, for
financial reporting purposes, the unrealized gains and losses on
open futures and forward contracts on the Statements of
Financial Condition as the criteria under ASC 210, Balance Sheet
(formerly, FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts)
have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures and metal
forward contracts traded for the year ended December 31,
2009 based on a quarterly calculation, was 6,966. The average
notional values of currency forward contracts for the year ended
December 31, 2009 based on a quarterly calculation, was
$944,178,446.
The Master adopted ASC 815, Derivatives and Hedging (formerly,
FAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities) as of January 1,
2009 which requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. ASC 815 only
expands the disclosure requirements for derivative instruments
and related hedging activities and has no impact on the
Statements of Financial Condition, Statements of Income and
Expenses and Statements of Changes in Partners Capital.
The following table indicates the fair values of derivative
instruments of futures and forward contracts as separate assets
and liabilities.
F-59
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
29,498
|
|
Energy
|
|
|
357,695
|
|
Grains
|
|
|
223,296
|
|
Indices
|
|
|
871,966
|
|
Interest Rates U.S.
|
|
|
10,273
|
|
Interest Rates
Non-U.S.
|
|
|
169,828
|
|
Livestock
|
|
|
20,482
|
|
Metals
|
|
|
93,687
|
|
Softs
|
|
|
810,673
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
2,587,398
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
(17,658
|
)
|
Energy
|
|
|
(155,804
|
)
|
Grains
|
|
|
(131,463
|
)
|
Indices
|
|
|
(231,926
|
)
|
Interest Rates U.S.
|
|
|
(104,941
|
)
|
Interest Rates
Non-U.S.
|
|
|
(1,108,842
|
)
|
Metals
|
|
|
(175,760
|
)
|
Softs
|
|
|
(254,352
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(2,180,746
|
)
|
|
|
|
|
|
Net unrealized appreciation on open futures contracts
|
|
$
|
406,652
|
*
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Currencies
|
|
$
|
7,739,782
|
|
Metals
|
|
|
2,324,147
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
$
|
10,063,929
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Currencies
|
|
$
|
(7,486,471
|
)
|
Metals
|
|
|
(1,014,665
|
)
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
$
|
(8,501,136
|
)
|
|
|
|
|
|
Net unrealized appreciation on open forward contracts
|
|
$
|
1,562,793
|
**
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized appreciation on open
futures contracts on the Statements of Financial Condition. |
|
** |
|
This amount is in Net unrealized appreciation on open
forward contracts on the Statements of Financial Condition. |
F-60
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the period ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Sector
|
|
Gain (loss) from Trading
|
|
|
|
|
|
Currencies
|
|
$
|
3,111,674
|
|
|
|
|
|
Energy
|
|
|
(3,297,102
|
)
|
|
|
|
|
Grains
|
|
|
(1,460,464
|
)
|
|
|
|
|
Indices
|
|
|
15,480,005
|
|
|
|
|
|
Interest Rates U.S.
|
|
|
(3,698,764
|
)
|
|
|
|
|
Interest Rates
Non-U.S.
|
|
|
(2,767,757
|
)
|
|
|
|
|
Livestock
|
|
|
21,968
|
|
|
|
|
|
Softs
|
|
|
1,832,133
|
|
|
|
|
|
Metals
|
|
|
3,246,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,468,065
|
***
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
This amount is in Gain (loss) from trading, net on
the Statements of Income and Expenses. |
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the Net Asset
Value per Redeemable Unit of Limited Partnership Interest 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
Redeemable Units are classified as a liability when the Limited
Partner elects to redeem and informs the Master.
Changes in the Net Asset Value per Redeemable Unit of
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
111.45
|
|
|
$
|
383.27
|
|
|
$
|
150.83
|
|
Interest income
|
|
|
1.08
|
|
|
|
12.97
|
|
|
|
36.54
|
|
Expenses**
|
|
|
(0.43
|
)
|
|
|
(0.17
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the period
|
|
|
112.10
|
|
|
|
396.07
|
|
|
|
187.22
|
|
Distribution of interest income to feeder funds
|
|
|
(1.08
|
)
|
|
|
(12.97
|
)
|
|
|
(36.54
|
)
|
Net Asset Value per Redeemable Unit, beginning of year
|
|
|
1,529.39
|
|
|
|
1,146.29
|
|
|
|
995.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit, end of year
|
|
$
|
1,640.41
|
|
|
$
|
1,529.39
|
|
|
$
|
1,146.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
(0.3
|
)%
|
|
|
0.6
|
%
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
7.3
|
%
|
|
|
34.6
|
%
|
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
** |
|
Excludes clearing fees. |
|
*** |
|
Interest income less total expenses. |
F-61
CMF Graham
Capital Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures, options, and swaps, whose values are based upon an
underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash
balances, or to purchase or sell other financial instruments at
specific terms 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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master due to market
changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
directly impacted by the volatility and liquidity in the markets
in which the related underlying assets are traded. The Master is
exposed to a market risk equal to the value of futures and
forward contracts purchased and unlimited liability on such
contracts sold short.
Credit risk is the possibility that a loss may occur due to the
failure of a counterparty to perform according to the terms of a
contract. The Masters risk of loss in the event of
counterparty default is typically limited to the amounts
recognized in the Statements of Financial Condition and not
represented by the contract or notional amounts of the
instruments. The Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
The General Partner monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the General
Partner to statistically analyze actual trading results with
risk adjusted performance indicators and correlation statistics.
In addition, on-line monitoring systems provide account analysis
of futures, forwards and options positions by sector, margin
requirements, gain and loss transactions and collateral
positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the Masters
business, these instruments may not be held to maturity.
F-62
Selected unaudited quarterly financial data for Graham Master for the years ended December 31,
2009 and 2008 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period |
|
|
For the period |
|
|
|
|
|
|
|
|
|
from |
|
|
from |
|
|
For the period |
|
|
For the period |
|
|
|
October 1, 2009 to |
|
|
July 1, 2009 to |
|
|
from |
|
|
from |
|
|
|
December 31, |
|
|
September 30, |
|
|
April 1, 2009 to |
|
|
January 1, 2009 to |
|
|
|
2009 |
|
|
2009 |
|
|
June 30, 2009 |
|
|
March 31, 2009 |
|
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
1,522,383 |
|
|
$ |
14,250,196 |
|
|
$ |
(2,335,820 |
) |
|
$ |
(1,457,890 |
) |
Net income
(loss) |
|
$ |
1,502,514 |
|
|
$ |
14,240,193 |
|
|
$ |
(2,344,541 |
) |
|
$ |
(1,465,945 |
) |
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
13.91 |
|
|
$ |
135.03 |
|
|
$ |
(21.43 |
) |
|
$ |
(15.41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period |
|
|
For the period |
|
|
|
|
|
|
|
|
|
from |
|
|
from |
|
|
For the period |
|
|
For the period |
|
|
|
October 1, 2008 to |
|
|
July 1, 2008 to |
|
|
from |
|
|
from |
|
|
|
December 31, |
|
|
September 30, |
|
|
April 1, 2008 to |
|
|
January 1, 2008 to |
|
|
|
2008 |
|
|
2008 |
|
|
June 30, 2008 |
|
|
March 31, 2008 |
|
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees including
interest income |
|
$ |
34,035,718 |
|
|
$ |
(8,466,890 |
) |
|
$ |
18,680,824 |
|
|
$ |
20,142,305 |
|
Net income (loss) |
|
$ |
34,029,127 |
|
|
$ |
(8,473,481 |
) |
|
$ |
18,672,387 |
|
|
$ |
20,133,868 |
|
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
224.58 |
|
|
$ |
(52.04 |
) |
|
$ |
112.99 |
|
|
$ |
110.54 |
|
F-63
To the Limited
Partners of
CMF Eckhardt Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
CMF Eckhardt Master Fund L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-64
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF Eckhardt Master Fund L.P.:
We have audited the accompanying statement of financial condition of CMF Eckhardt Master Fund L.P.
(the Partnership), including the condensed schedule of investments, as of December 31, 2009, and
the related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the period April 1, 2008 (commencement of trading
operations) to December 31, 2008 were audited by other auditors whose report, dated March 26, 2009,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF Eckhardt Master Fund L.P. as of December 31, 2009, and the results of its
operations and its changes in partners capital for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-65
Report of Independent Auditors
To the Partners of
CMF Eckhardt Master Fund L.P.:
In our opinion, the accompanying statement of
financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and statement of changes in partners
capital present fairly, in all material respects, the financial position of CMF Eckhardt Master
Fund L.P. at December 31, 2008, and the results of its operations for the period April 1,
2008 to December 31, 2008 in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-66
CMF Eckhardt
Master Fund L.P.
Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
13,288,028
|
|
|
$
|
19,322,653
|
|
Cash margin (Note 3c)
|
|
|
3,204,078
|
|
|
|
1,194,988
|
|
Net unrealized appreciation on open futures contracts
|
|
|
600,831
|
|
|
|
27,313
|
|
Net unrealized appreciation on open forward contracts
|
|
|
290,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,383,619
|
|
|
$
|
20,544,954
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
$
|
63,160
|
|
|
$
|
15,519
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
63,160
|
|
|
|
15,519
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 17,448.6548 and
19,854.0401 Redeemable Units of Limited Partnership
Interest outstanding at December 31, 2009 and 2008
|
|
|
17,320,459
|
|
|
|
20,529,435
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
17,383,619
|
|
|
$
|
20,544,954
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-67
CMF Eckhardt
Master Fund L.P.
Condensed Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
78
|
|
|
$
|
58,547
|
|
|
|
0.34
|
%
|
Energy
|
|
|
67
|
|
|
|
158,876
|
|
|
|
0.92
|
|
Grains
|
|
|
37
|
|
|
|
16,280
|
|
|
|
0.09
|
|
Indices
|
|
|
120
|
|
|
|
195,792
|
|
|
|
1.13
|
|
Interest Rates U.S.
|
|
|
6
|
|
|
|
(4,425
|
)
|
|
|
(0.03
|
)
|
Interest Rates
Non-U.S.
|
|
|
14
|
|
|
|
12,150
|
|
|
|
0.07
|
|
Metals
|
|
|
17
|
|
|
|
21,710
|
|
|
|
0.13
|
|
Softs
|
|
|
59
|
|
|
|
169,950
|
|
|
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
628,880
|
|
|
|
3.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
77
|
|
|
|
44,809
|
|
|
|
0.26
|
|
Energy
|
|
|
8
|
|
|
|
(480
|
)
|
|
|
(0.00
|
)*
|
Grains
|
|
|
68
|
|
|
|
(32,075
|
)
|
|
|
(0.18
|
)
|
Interest Rates U.S.
|
|
|
684
|
|
|
|
(26,821
|
)
|
|
|
(0.16
|
)
|
Interest Rates
Non-U.S.
|
|
|
195
|
|
|
|
(8,802
|
)
|
|
|
(0.05
|
)
|
Softs
|
|
|
24
|
|
|
|
(4,680
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(28,049
|
)
|
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Appreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
43
|
|
|
|
341,017
|
|
|
|
1.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
|
|
|
|
|
341,017
|
|
|
|
1.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Depreciation on Open Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
11
|
|
|
|
(50,335
|
)
|
|
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
|
|
|
|
|
(50,335
|
)
|
|
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
891,513
|
|
|
|
5.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-68
CMF Eckhardt
Master Fund L.P.
Condensed Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
22
|
|
|
$
|
(30,425
|
)
|
|
|
(0.15
|
)%
|
Interest Rates U.S.
|
|
|
115
|
|
|
|
(90,041
|
)
|
|
|
(0.44
|
)
|
Interest Rates Non-U.S.
|
|
|
210
|
|
|
|
117,578
|
|
|
|
0.57
|
|
Metals
|
|
|
5
|
|
|
|
3,730
|
|
|
|
0.02
|
|
Softs
|
|
|
7
|
|
|
|
31,088
|
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts purchased
|
|
|
|
|
|
|
31,930
|
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies
|
|
|
16
|
|
|
|
(9,807
|
)
|
|
|
(0.05
|
)
|
Softs
|
|
|
16
|
|
|
|
5,190
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures contracts sold
|
|
|
|
|
|
|
(4,617
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
27,313
|
|
|
|
0.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-69
CMF Eckhardt
Master Fund L.P.
Statements of Income and Expenses
for the year ended December 31, 2009
and for the period April 1, 2008
(commencement of trading operations)
to December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Income:
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
(1,481,848
|
)
|
|
$
|
821,249
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
864,200
|
|
|
|
27,313
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
(617,648
|
)
|
|
|
848,562
|
|
Interest income
|
|
|
13,287
|
|
|
|
150,521
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) (Note 3c)
|
|
|
(604,361
|
)
|
|
|
999,083
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
49,325
|
|
|
|
23,298
|
|
Professional fees
|
|
|
89,472
|
|
|
|
71,050
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
138,797
|
|
|
|
94,348
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(743,158
|
)
|
|
$
|
904,735
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
Interest (Notes 1 and 6)
|
|
$
|
(40.67
|
)
|
|
$
|
40.34
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
18,748.0136
|
|
|
|
23,511.0343
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-70
CMF Eckhardt
Master Fund L.P.
Statements of Changes in Partners
Capital
for the year ended December 31, 2009
and for the period April 1, 2008
(commencement of trading operations)
to December 31, 2008
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Initial capital contribution from Limited Partners at
April 1, 2008 representing 24,000.0000 Redeemable Units of
Limited Partnership Interest
|
|
$
|
24,000,000
|
|
Net income (loss)
|
|
|
904,735
|
|
Sale of 964.0322 Redeemable Units of Limited Partnership Interest
|
|
|
1,000,000
|
|
Redemption of 5,109.9921 Redeemable Units of Limited Partnership
Interest
|
|
|
(5,224,779
|
)
|
Distribution of interest income to feeder funds
|
|
|
(150,521
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
20,529,435
|
|
Net income (loss)
|
|
|
(743,158
|
)
|
Redemption of 2,405.3853 Redeemable Units of Limited Partnership
Interest
|
|
|
(2,452,531
|
)
|
Distribution of interest income to feeder funds
|
|
|
(13,287
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
17,320,459
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
1,034.02
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
992.65
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-71
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF Eckhardt Master Fund L.P. (the Master) is a
limited partnership which was organized under the partnership
laws of the State of New York on February 13, 2008, to
engage in the speculative trading of a diversified portfolio of
commodity interests including futures contracts, options, swaps
and forward contracts. The sectors traded include currencies,
energy, grains, U.S. and
non-U.S. interest
rates, softs and metals. The commodity interests that are traded
by the Master are volatile and involve a high degree of market
risk. The Master is authorized to sell an unlimited number of
redeemable units of Limited Partnership Interest
(Redeemable Units).
Ceres Managed Futures LLC (formerly Citigroup Managed Futures
LLC), a Delaware limited liability company, acts as the general
partner (the General Partner) and commodity pool
operator of the Master. The General Partner is wholly owned by
Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings), a newly registered non-clearing futures
commission merchant and a member of the National Futures
Association (NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity
broker and a selling agent for the Partnership, owns 49% of MSSB
Holdings. Citigroup Inc. (Citigroup), indirectly
through various subsidiaries, wholly owns CGM. Prior to
July 31, 2009, the date as of which MSSB Holdings became
its owner, the General Partner was wholly owned by Citigroup
Financial Products Inc., a wholly owned subsidiary of Citigroup
Global Markets Holdings Inc., the sole owner of which is
Citigroup.
On April 1, 2008 (commencement of trading operations),
Diversified 2000 Futures Fund L.P., formerly Citigroup
Diversified 2000 Futures Fund L.P. (Diversified
2000), Diversified Multi-Advisor Futures Fund L.P,
formerly Smith Barney Diversified Futures Fund L.P.
(Diversified I), Diversified Multi-Advisor
Futures Fund L.P. II, formerly Smith Barney Diversified Futures
Fund L.P. II (Diversified II) each allocated a
portion of their capital to the Master. Diversified 2000
purchased 10,000.0000 Units of the Master with cash equal to
$10,000,000. Diversified I purchased 7,000.0000 Units of
the Master with cash equal to $7,000,000. Diversified II
purchased 7,000.0000 Units of the Master with cash equal to
$7,000,000. The Master was formed to permit commodity pools
managed now or in the future by Eckhardt Trading Company (the
Advisor) using the Standard Program, the
Advisors proprietary systematic trading program, to invest
together in one vehicle.
The Master operates under a structure where its investors
consist of Diversified 2000, Diversified I,
Diversified II (each a Feeder, collectively the
Funds) with approximately 40.4%, 31.1% and 28.5%
investments in the Master at December 31, 2009,
respectively. Diversified 2000, Diversified I and
Diversified II owned approximately 38.3%, 31.0% and 30.7%
investments in the Master at December 31, 2008,
respectively.
The Master will be liquidated upon the first to occur of the
following: December 31, 2030; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. Generally
Accepted Accounting Principles (GAAP) for use in
financial statements except for Securities and Exchange
Commission (SEC) rules and interpretive releases,
which are also authoritative GAAP for SEC registrants. The
Codification supersedes all existing non-SEC accounting and
reporting standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
F-72
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly, FAS
No. 102 Statement of Cash Flows-Exemption of Certain
Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (including derivative financial
instruments and derivative commodity instruments) are held for
trading purposes. The commodity interests are recorded on trade
date and open contracts are recorded at fair value (as described
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. 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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, Fair Value Measurements and
Disclosures (formerly, FAS No. 157, Fair Value
Measurements) as of January 1, 2008, which defines
fair value 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.
ASC 820 establishes a framework for measuring fair value
and expands disclosures regarding fair value measurements in
accordance with GAAP. The fair value hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the
lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within which
the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Master did
not apply the deferral allowed by ASC 820 for nonfinancial
assets and nonfinancial liabilities measured at fair value on a
nonrecurring basis.
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosures (formerly,
FAS No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly) which
reaffirms that fair value is 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. These amendments to
ASC 820 also reaffirm 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.
These amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Masters Level 2 assets and
liabilities. The adoption of the amendments to ASC 820 had no
effect on the Masters Financial Statements.
The Master considers 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).
F-73
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
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 who derive fair values
for those assets from observable inputs (Level 2). As of
and for the years ended December 31, 2009 and 2008, the
Master did not hold any derivative instruments for which market
quotations are not readily available and which are priced by
broker-dealer who derive fair values for those assets from
observable inputs (Level 2) or 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
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
for Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
600,831
|
|
|
$
|
600,831
|
|
|
$
|
|
|
|
$
|
|
|
Forwards
|
|
|
290,682
|
|
|
|
290,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
891,513
|
|
|
$
|
891,513
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
for Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
$
|
27,313
|
|
|
$
|
27,313
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
27,313
|
|
|
$
|
27,313
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d.
|
Futures Contracts. The Master trades futures
contracts. A futures contract is a firm commitment to buy or
sell a specified quantity of investments, currency or a
standardized amount of a deliverable grade commodity, at a
specified price on a specified future date, unless the contract
is closed before the delivery date or if the delivery quantity
is something where physical delivery can not occur (such as the
S&P 500 Index), whereby such contract is settled in cash.
Payments (variation margin) may be made or received
by the Master each business day, depending on the daily
fluctuations in the value of the underlying contracts, and are
recorded as unrealized gains or losses by the Master. When the
contract is closed, the Master records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
Because 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, credit
exposure is limited. Realized gains (losses) and changes in
unrealized gains (losses) on futures contracts are included in
the Statements of Income and Expenses.
|
|
|
|
|
e.
|
London Metals Exchange Forward
Contracts. Metal contracts traded on the London
Metals Exchange (LME) represent a firm commitment to
buy or sell a specified quantity of aluminum, copper, lead,
nickel, tin or zinc. LME contracts traded by the Master are cash
settled based on prompt dates published by the LME. Payments
(variation margin) may be made or received by the
Master each business day, depending on the daily fluctuations in
the value of the underlying contracts, and are recorded as
unrealized gains or losses by the Master. A contract is
considered offset when all long positions have been matched with
short positions. When the contract is closed at the prompt date,
the Master records a realized gain or loss equal to the
difference between the value of the contract at the time it was
opened and the value at the time it was closed. Because
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,
credit
|
F-74
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
exposure is limited. Realized gains (losses) and changes in
unrealized gains (losses) on metal contracts are included in the
Statements of Income and Expenses.
|
|
|
|
|
f.
|
Income and Expenses Recognition. All of the
income and expenses and realized and unrealized gains and losses
on trading of commodity interests are determined on each
valuation day and allocated pro rata among the Funds at the time
of such determination.
|
|
|
|
|
g.
|
Income Taxes. Income taxes have not been
provided as each partner is individually liable for the taxes,
if any, on their share of the Masters income and expenses.
|
|
|
|
|
|
In 2008, the Master adopted ASC 740, Income Taxes (formerly, FAS
No. 48, Accounting for Uncertainty in Income
Taxes). ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and
disclosed in the financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Masters 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 Master 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 Masters financial statements.
|
The following is the major tax jurisdiction for the Master and
the earliest tax year subject to examination: United
States 2008.
|
|
|
|
h.
|
Subsequent Events. In 2009, the Master adopted
ASC 855, Subsequent Events (formerly, FAS No. 165,
Subsequent Events). The objective of ASC 855 is to
establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before
financial statements are issued or available to be issued.
Management has determined that there were no subsequent events
requiring adjustment or disclosure in the financial statements.
|
|
|
|
|
i.
|
Recent Accounting Pronouncements. In January
2010, the FASB issued Accounting Standards Update
No. 2010-06
(ASU
2010-06),
Improving Disclosures about Fair Value Measurements,
which , among other things, amends ASC 820 to require entities
to 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 which clarifies existing disclosure
requirements provided by ASC 820 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. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Masters financial statements disclosures.
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU 2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
|
j.
|
Certain prior period amounts have been reclassified to conform
to current years presentation.
|
|
|
|
|
k.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
F-75
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees, including
CGMs direct brokerage commission, shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amounts of cash held by the
Master for margin requirements was $3,204,078 and $1,194,988,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures and forwards contracts. The Master nets, for
financial reporting purposes, the unrealized gains and losses on
open futures and forward contracts on the Statement of Financial
Condition as the criteria under ASC 210, Balance Sheet
(formerly, FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain contracts)
have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures and metal
forward contracts traded for the year ended December 31,
2009 based on a quarterly calculation was 887. The average
notional values of currency forward contracts for the year ended
December 31, 2009, based on a quarterly calculation was
$85,375.
The Master adopted ASC 815 Derivatives and Hedging (formerly,
FAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities) as of January 1, 2009, which requires
qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in
derivative agreements. ASC 815 only expands the disclosure
requirements for derivative instruments and related hedging
activities and has no impact on the Statements of Financial
Condition, Statements of Income and Expenses and Statements of
Changes in Partners Capital.
F-76
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the fair values of derivative
instruments of futures contracts as separate assets and
liabilities.
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
137,351
|
|
Energy
|
|
|
159,874
|
|
Grains
|
|
|
26,855
|
|
Indices
|
|
|
195,792
|
|
Interest Rates U.S.
|
|
|
19,352
|
|
Interest Rates
Non-U.S.
|
|
|
28,140
|
|
Metals
|
|
|
44,650
|
|
Softs
|
|
|
178,261
|
|
|
|
|
|
|
Total unrealized appreciation on open futures contracts
|
|
$
|
790,275
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures Contracts
|
|
|
|
|
Currencies
|
|
$
|
(33,995
|
)
|
Energy
|
|
|
(1,478
|
)
|
Grains
|
|
|
(42,650
|
)
|
Interest Rates U.S.
|
|
|
(50,597
|
)
|
Interest Rates
Non-U.S.
|
|
|
(24,793
|
)
|
Metals
|
|
|
(22,940
|
)
|
Softs
|
|
|
(12,991
|
)
|
|
|
|
|
|
Total unrealized depreciation on open futures contracts
|
|
$
|
(189,444
|
)
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
$
|
600,831
|
*
|
|
|
|
|
|
Assets
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Metals
|
|
$
|
341,017
|
|
|
|
|
|
|
Total unrealized appreciation on open forward contracts
|
|
$
|
341,017
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Forward Contracts
|
|
|
|
|
Metals
|
|
$
|
(50,335
|
)
|
|
|
|
|
|
Total unrealized depreciation on open forward contracts
|
|
$
|
(50,335
|
)
|
|
|
|
|
|
Net unrealized appreciation on open forward contracts
|
|
$
|
290,682
|
**
|
|
|
|
|
|
|
|
|
* |
|
This amount is included in Net unrealized appreciation on
open futures contracts on the Statements of Financial
Condition. |
|
** |
|
This amount is included in Net unrealized appreciation on
open forward contracts on the Statements of Financial
Condition. |
F-77
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
|
Sector
|
|
Gain (Loss) from trading
|
|
|
Currencies
|
|
$
|
(933,134
|
)
|
Energy
|
|
|
(1,166,899
|
)
|
Grains
|
|
|
(500,805
|
)
|
Indices
|
|
|
248,635
|
|
Interest Rates U.S.
|
|
|
(299,085
|
)
|
Interest Rates
Non-U.S.
|
|
|
110,249
|
|
Metals
|
|
|
1,358,927
|
|
Softs
|
|
|
564,464
|
|
|
|
|
|
|
Total
|
|
$
|
(617,648
|
)***
|
|
|
|
|
|
|
|
|
*** |
|
This amount is included in Net gain (loss) from
trading on the Statements of Income and Expenses. |
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the Net Asset
Value per Redeemable Unit of Limited Partnership Interest 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 Master.
6. Financial
Highlights:
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the year ended December 31, 2009
and for the period from April 1, 2008 (commencement of
trading operations) to December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
(36.49
|
)
|
|
$
|
37.11
|
|
Interest income
|
|
|
0.70
|
|
|
|
6.32
|
|
Expenses**
|
|
|
(4.88
|
)
|
|
|
(3.09
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year/period
|
|
|
(40.67
|
)
|
|
|
40.34
|
|
Distribution of interest income to feeder funds
|
|
|
(0.70
|
)
|
|
|
(6.32
|
)
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year/period
|
|
|
1,034.02
|
|
|
|
1,000.00
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year/period
|
|
$
|
992.65
|
|
|
$
|
1,034.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
** |
|
Excludes clearing fees. |
F-78
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
Net investment income***
|
|
|
(0.7
|
)%
|
|
|
0.3
|
%****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.7
|
%
|
|
|
0.4
|
%****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
(4.0
|
)%
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
|
**** |
|
Annualized. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures, options and swaps whose values are based upon an
underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash
balances, 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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master due to market
changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
directly impacted by the volatility and liquidity in the markets
in which the related underlying assets are traded. The Master is
exposed to a market risk equal to the value of futures and
forward contracts purchased and unlimited liability on such
contracts sold short.
Credit risk is the possibility that a loss may occur due to the
failure of a counterparty to perform according to the terms of a
contract. The Masters risk of loss in the event of
counterparty default is typically limited to the amounts
recognized in the Statements of Financial Condition and not
represented by the contract or notional amounts of the
instruments. The Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
F-79
CMF Eckhardt
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The General Partner monitors and controls the Masters 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 Master is subject. These
monitoring systems 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 positions by sector, margin requirements, gain and
loss transactions and collateral positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the Masters
business, these instruments may not be held to maturity.
F-80
Selected
unaudited quarterly financial data for Eckhardt Master for the years ended December 31,
2009 and the period April 1, 2008 (commencement of trading operations)
to December 31, 2008 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and
unrealized trading
gains (losses) net
of brokerage
commissions and
clearing fees
including interest
income |
|
$ |
(750,993 |
) |
|
$ |
879,516 |
|
|
$ |
(688,673 |
) |
|
$ |
(93,536 |
) |
Net income (loss) |
|
$ |
(781,496 |
) |
|
$ |
858,478 |
|
|
$ |
(708,340 |
) |
|
$ |
(111,800 |
) |
Increase (decrease)
in Net Asset Value
per Redeemable Unit |
|
$ |
(44.58 |
) |
|
$ |
47.42 |
|
|
$ |
(37.98 |
) |
|
$ |
(5.53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
|
|
|
|
|
|
|
April 1, 2008 |
|
|
|
|
For the period from |
|
For the period from |
|
(commencement of |
|
|
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
trading
operations) to |
|
|
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
|
Net realized and
unrealized trading
gains (losses) net of
brokerage
commissions and
clearing fees
including interest
income |
|
$ |
421,041 |
|
|
$ |
(1,628,764 |
) |
|
$ |
2,183,508 |
|
|
|
|
|
Net income (loss) |
|
$ |
404,056 |
|
|
$ |
(1,641,549 |
) |
|
$ |
2,142,228 |
|
|
|
|
|
Increase
(decrease) in Net
Asset Value per
Redeemable Unit |
|
$ |
19.88 |
|
|
$ |
(68.62 |
) |
|
$ |
89.08 |
|
|
|
|
|
F-81
To the Limited
Partners of
CMF SandRidge Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
Chief Financial Officer and Director
Ceres Managed Futures LLC
General Partner,
CMF SandRidge Master Fund L.P.
Ceres Managed Futures LLC
55 East 59th Street
10th Floor
New York, N.Y. 10022
212-559-2011
F-82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
CMF SandRidge Master Fund L.P.:
We have audited the accompanying statement of financial condition of CMF SandRidge Master Fund L.P.
(the Partnership), including the condensed schedule of investments, as of December 31, 2009, and the
related statements of income and expenses, and changes in partners capital for the year then
ended. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of the Partnership for the years ended December 31, 2008 and 2007 were audited
by other auditors whose reports, dated March 26, 2009 and March 24, 2008, expressed unqualified
opinions on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of CMF SandRidge Master Fund L.P. as of December 31, 2009, and the results of its
operations and its changes in partners capital for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2010
F-83
Report of Independent Auditors
To the Partners of
CMF SandRidge Master Fund L.P.:
In our opinion, the accompanying statement of
financial condition, including the condensed schedule of
investments, and the related statement of income and expenses, and statement of changes in
partners capital present fairly, in all material respects, the financial position of CMF SandRidge
Master Fund L.P. at December 31, 2008, and the results of its operations for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 26, 2009
F-84
Report of Independent Registered Public Accounting Firm
The Partners
CMF SandRidge Master Fund L.P.:
We have audited the accompanying statements of income and expenses and changes in partners capital
of CMF SandRidge Master Fund L.P. for the year ended December 31, 2007. These financial statements
are the responsibility of the Partnerships management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the results of operations and changes in partners capital of CMF SandRidge Master Fund
L.P. for the year ended December 31, 2007, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
New York, New York
March 24, 2008
F-85
CMF SandRidge
Master Fund L.P.
Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Equity in trading account:
|
|
|
|
|
|
|
|
|
Cash (Note 3c)
|
|
$
|
691,877,329
|
|
|
$
|
530,398,527
|
|
Cash margin (Note 3c)
|
|
|
22,651,198
|
|
|
|
29,705,022
|
|
Options owned, at fair value (cost $1,392,000 and $3,510,375 at
December 31, 2009 and 2008, respectively)
|
|
|
1,092,800
|
|
|
|
4,987,535
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
715,621,327
|
|
|
$
|
565,091,084
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures and exchange cleared
swap contracts
|
|
$
|
29,412,753
|
|
|
$
|
110,973,333
|
|
Options written, at fair value (premium $994,000 and $3,103,510
at December 31, 2009 and 2008, respectively)
|
|
|
1,249,600
|
|
|
|
4,282,963
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
49,481
|
|
|
|
116,342
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,711,834
|
|
|
|
115,372,638
|
|
|
|
|
|
|
|
|
|
|
Partners Capital:
|
|
|
|
|
|
|
|
|
General Partner, 0.0000 Unit equivalents at December 31,
2009 and 2008
|
|
|
|
|
|
|
|
|
Limited Partners Capital, 311,109.5773 and 247,850.0335
Redeemable Units of Limited Partnership Interest outstanding at
December 31, 2009 and 2008, respectively
|
|
|
684,909,493
|
|
|
|
449,718,446
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
715,621,327
|
|
|
$
|
565,091,084
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-86
CMF SandRidge
Master Fund L.P.
Condensed
Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures and Exchange Cleared Swap Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Henry Hub Natural Gas Swap Apr. 10 Dec. 14
|
|
|
33,801
|
|
|
$
|
(11,509,797
|
)
|
|
|
(1.68
|
)%
|
NYMEX Henry Hub Natural Gas Swap Mar. 10 Dec. 14
|
|
|
14,452
|
|
|
|
(7,309,750
|
)
|
|
|
(1.07
|
)
|
NYMEX Henry Hub Natural Gas May 10 May 11
|
|
|
4,825
|
|
|
|
(5,954,147
|
)
|
|
|
(0.87
|
)
|
NYMEX Henry Hub Penultimate Mar. 10
|
|
|
524
|
|
|
|
495,220
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts purchased
|
|
|
|
|
|
|
(24,278,474
|
)
|
|
|
(3.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Henry Hub Natural Gas Swap Mar. 10 March 11
|
|
|
22,040
|
|
|
|
(6,466,193
|
)
|
|
|
(0.94
|
)
|
NYMEX Henry Hub Natural Gas Swap May 10 Dec. 13
|
|
|
10,108
|
|
|
|
5,801,850
|
|
|
|
0.84
|
|
NYMEX Henry Hub Natural Gas Mar. 10 Sept. 10
|
|
|
6,621
|
|
|
|
(4,469,936
|
)
|
|
|
(0.65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts sold
|
|
|
|
|
|
|
(5,134,279
|
)
|
|
|
(0.75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Puts
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
240
|
|
|
|
1,092,800
|
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options owned
|
|
|
|
|
|
|
1,092,800
|
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Written
|
|
|
|
|
|
|
|
|
|
|
|
|
Calls
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
240
|
|
|
|
(1,249,600
|
)
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options written
|
|
|
|
|
|
|
(1,249,600
|
)
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
(29,569,553
|
)
|
|
|
(4.32
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-87
CMF SandRidge
Master Fund L.P.
Condensed
Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Partners
|
|
|
|
Contracts
|
|
|
Fair Value
|
|
|
Capital
|
|
|
Futures and Exchange Cleared Swap Contracts Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Henry Hub Natural Gas Swap April 09 Dec. 14
|
|
|
30,555
|
|
|
$
|
(72,012,250
|
)
|
|
|
(16.01
|
)%
|
NYMEX Natural Gas Swap Oct. 09 Dec. 14
|
|
|
10,464
|
|
|
|
(43,628,900
|
)
|
|
|
(9.70
|
)
|
NYMEX Natural Gas Aug. 09 Oct. 10
|
|
|
6,052
|
|
|
|
(113,269,862
|
)
|
|
|
(25.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts purchased
|
|
|
|
|
|
|
(228,911,012
|
)
|
|
|
(50.90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Henry Hub Natural Gas Swap Feb. 09 Oct. 10
|
|
|
25,108
|
|
|
|
34,592,590
|
|
|
|
7.69
|
|
NYMEX Henry Hub Natural Gas Feb. 09 Dec. 12
|
|
|
10,624
|
|
|
|
42,565,560
|
|
|
|
9.46
|
|
NYMEX Natural Gas Feb. 09 Sep. 09
|
|
|
6,572
|
|
|
|
40,779,529
|
|
|
|
9.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures and exchange cleared swap contracts sold
|
|
|
|
|
|
|
117,937,679
|
|
|
|
26.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Puts
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
730
|
|
|
|
4,987,535
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options owned
|
|
|
|
|
|
|
4,987,535
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Written
|
|
|
|
|
|
|
|
|
|
|
|
|
Calls
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
15
|
|
|
|
(4,380
|
)
|
|
|
(0.00
|
)*
|
Puts
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
1,675
|
|
|
|
(4,278,583
|
)
|
|
|
(0.95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options written
|
|
|
|
|
|
|
(4,282,963
|
)
|
|
|
(0.95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
|
|
|
|
$
|
(110,268,761
|
)
|
|
|
(24.52
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-88
CMF SandRidge
Master Fund L.P.
Statements of Income and Expenses
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on trading of commodity interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed contracts
|
|
$
|
18,484,633
|
|
|
$
|
209,086,188
|
|
|
$
|
40,099,593
|
|
Change in net unrealized gains (losses) on open contracts
|
|
|
80,708,073
|
|
|
|
(109,479,479
|
)
|
|
|
634,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from trading, net
|
|
|
99,192,706
|
|
|
|
99,606,709
|
|
|
|
40,734,389
|
|
Interest Income
|
|
|
388,904
|
|
|
|
4,119,717
|
|
|
|
9,737,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss)
|
|
|
99,581,610
|
|
|
|
103,726,426
|
|
|
|
50,471,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearing fees
|
|
|
623,298
|
|
|
|
390,792
|
|
|
|
677,706
|
|
Professional fees
|
|
|
210,642
|
|
|
|
269,306
|
|
|
|
261,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
833,940
|
|
|
|
660,098
|
|
|
|
939,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
98,747,670
|
|
|
$
|
103,066,328
|
|
|
$
|
49,532,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Redeemable Unit of Limited Partnership
interest (Notes 1 and 6)
|
|
$
|
388.51
|
|
|
$
|
468.42
|
|
|
$
|
242.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding
|
|
|
275,661.9324
|
|
|
|
241,781.3550
|
|
|
|
212,935.2422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-89
CMF SandRidge
Master Fund L.P.
Statements of Changes in Partners Capital
for the years ended
December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
Partners
|
|
|
|
Capital
|
|
|
Partners Capital at December 31, 2006
|
|
$
|
215,065,486
|
|
Net income (loss)
|
|
|
49,532,251
|
|
Sale of 69,725.8292 Redeemable Units of Limited Partnership
Interest
|
|
|
89,474,602
|
|
Redemption of 24,714.6195 Redeemable Units of Limited
Partnership Interest
|
|
|
(31,803,576
|
)
|
Distribution of interest income to feeder funds
|
|
|
(9,737,038
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2007
|
|
|
312,531,725
|
|
Net income (loss)
|
|
|
103,066,328
|
|
Sale of 80,081.4747 Redeemable Units of Limited Partnership
Interest
|
|
|
141,534,374
|
|
Redemption of 61,402.1561 Redeemable Units of Limited
Partnership Interest
|
|
|
(103,294,264
|
)
|
Distribution of interest income to feeder funds
|
|
|
(4,119,717
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2008
|
|
|
449,718,446
|
|
Net income (loss)
|
|
|
98,747,670
|
|
Sale of 127,771.5856 Redeemable Units of Limited Partnership
Interest
|
|
|
270,602,300
|
|
Redemption of 64,512.0418 Redeemable Units of Limited
Partnership Interest
|
|
|
(133,770,019
|
)
|
Distribution of interest income to feeder funds
|
|
|
(388,904
|
)
|
|
|
|
|
|
Partners Capital at December 31, 2009
|
|
$
|
684,909,493
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest:
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$
|
1,363.75
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
$
|
1,814.48
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
$
|
2,201.51
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-90
CMF SandRidge
Master Fund L.P.
Notes to
Financial Statements
December 31, 2009
|
|
1.
|
Partnership
Organization:
|
CMF SandRidge Master Fund L.P. (the Master) is
a limited partnership that was organized under the partnership
laws of the State of New York to engage in the speculative
trading of a diversified portfolio of commodity interests
including futures contracts, options, swaps and forward
contracts. The commodity interests that are traded by the Master
are volatile and involve a high degree of market risk. The
Master may trade commodity futures and option contracts of any
kind but intends initially to trade solely energy and energy
related products. The Master is authorized to sell an unlimited
number of redeemable units of Limited Partnership Interest
(Redeemable Units).
Ceres Managed Futures LLC (formerly Citigroup Managed Futures
LLC), a Delaware limited liability company, acts as the general
partner (the General Partner) and commodity pool
operator of the Master. The General Partner is wholly owned by
Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings), a newly registered non-clearing futures
commission merchant and a member of the National Futures
Association (NFA). Morgan Stanley, indirectly
through various subsidiaries, owns 51% of MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity
broker and a selling agent for the Master, owns 49% of MSSB
Holdings. Citigroup Inc. (Citigroup), indirectly
through various subsidiaries, wholly owns CGM. Prior to
July 31, 2009, the date as of which MSSB Holdings became
its owner, the General Partner was wholly owned by Citigroup
Financial Products Inc., a wholly owned subsidiary of Citigroup
Global Markets Holdings Inc., the sole owner of which is
Citigroup.
On December 1, 2005 (commencement of trading operations),
Bristol Energy Fund L.P., (formerly Smith Barney Bristol Energy
Fund L.P.) (Bristol) allocated substantially
all of its capital to the Master. Bristol purchased 14,461.8400
Redeemable Units with cash equal to $14,477,858 and a
contribution of open commodity futures and options positions
with a fair value of $(16,018). On May 1, 2006, two
separate private investors (Private Investor I and
Private Investor II) each allocated substantially
all of their capital to the Master. Private Investor I purchased
23,073.5521 Redeemable Units with cash equal to $28,000,000 and
Private Investor II purchased 4,944.3326 Redeemable Units
with cash equal to $6,000,000. On October 1, 2006, CMF
SandRidge Feeder (Cayman) Ltd. (SandRidge Feeder)
and Energy Advisors Portfolio L.P., (formerly Citigroup Energy
Advisors Portfolio L.P.) (Energy Advisors) each
allocated substantially all of their capital to the Master.
SandRidge Feeder purchased 22,075.2638 Redeemable Units with
cash equal to $25,000,000. Energy Advisors purchased 2,092.7350
Redeemable Units with cash equal to $2,370,000. On April 1,
2007, Diversified 2000 Futures Fund L.P., (formerly
Citigroup Diversified 2000 Futures Fund L.P.)
(Diversified 2000) purchased 7,659.0734 Redeemable
Units with cash equal to $9,635,703. On March 1, 2009,
Tactical Diversified Futures Fund L.P., (formerly Citigroup
Diversified Futures Fund L.P.) (Tactical Diversified),
purchased 14,408.1177 Redeemable Units with cash equal to
$27,000,000. On June 1, 2009, Diversified Multi-Advisor
Futures Fund L.P., (Diversified), (formerly
Smith Barney Diversified Futures Fund L.P.) and Diversified
Multi-Advisors Futures Fund L.P. II, (Diversified
II), (formerly Smith Barney Diversified Futures Fund L.P.
II) each allocated a portion of their capital to the Master.
Diversified purchased 1,370.9885 Redeemable Units with cash
equal to $2,818,836. Diversified II purchased 2,086.0213
Redeemable Units with cash equal to 4,288,986. The Master was
formed to permit commodity pools managed now and in the future
by SandRidge Capital, L.P. (the Advisor) using the
Energy Program, the Advisors proprietary systematic
trading program, to invest together in one trading vehicle.
The Master operates under a structure where its investors are
Bristol, Private Investor I, Private Investor II, SandRidge
Feeder, Energy Advisors, Diversified 2000, Tactical Diversified,
Diversified and Diversified II (each a Feeder,
collectively the Funds) with approximately 70.1%,
4.2%, 0.7%, 9.0%, 1.3%, 2.0%, 11.7%, 0.4% and 0.6% investments
in the Master at December 31, 2009, respectively. Bristol,
Private Investor I, Private Investor II, SandRidge Feeder,
Energy Advisors and Diversified 2000 had approximately 75.3%,
5.2%, 0.9%, 13.7%, 2.1% and 2.8% investments in the Master at
December 31, 2008, respectively.
F-91
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The Master will be liquidated upon the first to occur of the
following: December 31, 2025; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
On July 1, 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (FAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards
Codification (ASC) 105, Generally Accepted
Accounting Principles (ASC 105) (the
Codification). ASC 105 established the
exclusive authoritative reference for U.S. Generally Accepted
Accounting Principles (GAAP) for use in financial
statements except for Securities Exchange Commission
(SEC) rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The Codification
supersedes all existing non-SEC accounting and reporting
standards. The Codification is the single source of
authoritative accounting principles generally accepted in the
United States and applies to all financial statements issued
after September 15, 2009.
|
|
|
|
a.
|
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.
In making these estimates and assumptions, management has
considered the effects, if any, of events occurring after the
date of the Masters Statements of Financial Condition
through the date the financial statements were issued. As a
result, actual results could differ from these estimates.
|
|
|
b.
|
Statement of Cash Flows. The Master is not
required to provide a Statement of Cash Flows as permitted by
ASC 230, Statement of Cash Flows (formerly, FAS No. 102
Statement of Cash Flows-Exemption of Certain Enterprises
and Classification of Cash Flows from Certain Securities
Acquired for Resale).
|
|
|
c.
|
Masters Investments. All commodity
interests of the Master (including derivative financial
instruments and derivative commodity instruments) are held for
trading purposes. The commodity interests are recorded on trade
date and open contracts are recorded at fair value (as described
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. 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.
|
Masters Fair Value Measurements. The
Master adopted ASC 820, Fair Value Measurements and Disclosures
(formerly, FAS No. 157, Fair Value
Measurements) as of January 1, 2008, which defines
fair value 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.
ASC 820 establishes a framework for measuring fair value
and expands disclosures regarding fair value measurements in
accordance with GAAP. The fair value hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the
lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within
which the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Master did
not apply the deferral allowed by ASC 820 for nonfinancial
assets and nonfinancial liabilities measured at fair value on a
nonrecurring basis.
F-92
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
In 2009, the Master adopted amendments to ASC 820, Fair Value
Measurements and Disclosure (formerly,
FAS No. 157-4.
Determining Fair Value when the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly) which
reaffirms that fair value is 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. These amendments to ASC 820
also reaffirm 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. These
amendments to ASC 820 are required for interim and annual
reporting periods ending after June 15, 2009. Management
has concluded that based on available information in the
marketplace, there has not been a decrease in the volume and
level of activity in the Masters Level 2 assets and
liabilities. The adoption of the amendments to ASC 820 had
no effect on the Masters Financial Statements.
The Master considers 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 who
derive fair values for those assets from observable inputs
(Level 2). As of and for the years ended December 31,
2009 and 2008, the Master did not hold any derivative
instruments for which market quotations are not available and
which are priced by broker-dealer who derive fair values for
those assets from observable inputs (Level 2) or 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
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Sets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
|
12/31/2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options owned
|
|
$
|
1,092,800
|
|
|
$
|
1,092,800
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,092,800
|
|
|
$
|
1,092,800
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swaps
|
|
$
|
29,412,753
|
|
|
$
|
29,412,753
|
|
|
$
|
|
|
|
$
|
|
|
Options written
|
|
|
1,249,600
|
|
|
|
1,249,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,662,353
|
|
|
|
30,662,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
(29,569,553
|
)
|
|
$
|
(29,569,553
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
|
12/31/2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options owned
|
|
$
|
4,987,535
|
|
|
$
|
4,987,535
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,987,535
|
|
|
$
|
4,987,535
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and Exchange Cleared Swaps
|
|
$
|
110,973,333
|
|
|
$
|
110,973,333
|
|
|
$
|
|
|
|
$
|
|
|
Options written
|
|
|
4,282,963
|
|
|
|
4,282,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
115,256,296
|
|
|
|
115,256,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
(110,268,761
|
)
|
|
$
|
(110,268,761
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-93
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
|
|
|
present such items on a gross basis rather than on a net basis),
and which clarifies existing disclosure requirements provided by
ASC 820 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. ASU
2010-06 is
effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements (which are
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years).
Management is currently assessing the impact that the adoption
of ASU
2010-06 will
have on the Masters financial statements disclosures.
|
|
|
|
|
|
In February 2010, the FASB issued Accounting Standards Update
No. 2010-09
(ASU
2010-09),
Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements, which among other
things amended ASC 855 to remove the requirement for an SEC
filer to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts
between ASC 855 and the SECs requirements. All of the
amendments in this update are effective upon issuance of this
update. Management has included the provisions of these
amendments in the financial statements.
|
|
|
j.
|
Certain prior period amounts have been reclassified to conform
to current year presentation.
|
|
|
k.
|
Net Income (Loss) per Redeemable Unit. Net
income (loss) per Redeemable Unit is calculated in accordance
with investment company guidance. See footnote 6 for Financial
Highlights.
|
|
|
|
|
a.
|
Limited Partnership Agreement:
|
The General Partner administers the business and affairs of the
Master including selecting one or more advisors to make trading
decisions for the Master.
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and NFA fees (collectively the clearing
fees) are borne by the Master. All other fees including
CGMs direct brokerage commission shall be borne by the
Funds. All of the Masters assets are deposited in the
Masters account at CGM. The Masters cash is
deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2009 and 2008, the amounts of cash held by the
Master for margin requirements were $22,651,198 and $29,705,022,
respectively. The Customer Agreement may be terminated upon
notice by either party.
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statements
of Income and Expenses.
F-94
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures and exchange cleared swap contracts. The Master
nets, for financial reporting purposes, the unrealized gains and
losses on open futures and forward contracts on the Statements
of Financial Condition as the criteria under ASC 210, Balance
Sheet (formerly, FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain contracts)
have been met.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures, exchange
cleared swap and option contracts traded for the year ended
December 31, 2009, based on a quarterly calculation was
68,224.
The Master adopted ASC 815, Derivatives and Hedging
(formerly, FAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities) as of January 1,
2009 which requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. ASC 815 only
expands the disclosure requirements for derivative instruments
and related hedging activities and has no impact on the
Statements of Financial Condition, Statements of Income and
Expenses and Statements of Changes in Partners Capital.
The following table indicates the fair values of derivative
instruments of futures, exchange cleared swap and option
contracts as separate assets and liabilities for the year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
|
Assets
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts
|
|
|
|
|
|
Options Owned
|
|
|
|
|
Energy
|
|
$
|
37,079,802
|
|
|
Energy
|
|
$
|
1,092,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized appreciation on open futures and exchange
cleared swap contracts
|
|
$
|
37,079,802
|
|
|
Options owned
|
|
$
|
1,092,800
|
**
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Futures and Exchange Cleared Swap Contracts
|
|
|
|
|
|
Options Written
|
|
|
|
|
Energy
|
|
$
|
(66,492,555
|
)
|
|
Energy
|
|
$
|
(1,249,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized depreciation on open futures and exchange
cleared swap contracts
|
|
$
|
(66,492,555
|
)
|
|
Options written
|
|
$
|
(1,249,600
|
)***
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
$
|
(29,412,753
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
This amount is in Net unrealized depreciation on open
futures and exchange cleared swap contracts on the
Statements of Financial Condition. |
|
** |
|
This amount is in Options owned at fair value on the
Statements of Financial Condition. |
|
*** |
|
This amount is in Options written at fair value on
the Statements of Financial Condition. |
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the year ended
December 31, 2009.
|
|
|
|
|
|
|
December 31, 2009
|
Sector
|
|
Gain (loss) from trading
|
|
Energy
|
|
$
|
99,192,706
|
|
|
|
|
|
|
Total
|
|
$
|
99,192,706
|
****
|
|
|
|
|
|
|
|
|
**** |
|
This amount is in Gain(loss) from trading, net on
the Statements of Income and Expenses. |
F-95
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
|
|
5.
|
Subscriptions,
Distributions and Redemptions:
|
Subscriptions are accepted monthly from investors and they
become Limited Partners on the first day of the month after
their subscription is processed. A Limited Partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Masters in multiples of the Net Asset
Value per Redeemable Unit of Limited Partnership Interest as of
the end day 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
Redeemable Units are classified as a liability when the Limited
Partner elects to redeem and informs the Master.
Changes in the Net Asset Value per Redeemable Unit of Limited
Partnership Interest for the years ended December 31, 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net realized and unrealized gains (losses)*
|
|
$
|
387.81
|
|
|
$
|
451.86
|
|
|
$
|
197.11
|
|
Interest income
|
|
|
1.48
|
|
|
|
17.69
|
|
|
|
46.35
|
|
Expenses**
|
|
|
(0.78
|
)
|
|
|
(1.13
|
)
|
|
|
(1.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) for the year
|
|
|
388.51
|
|
|
|
468.42
|
|
|
|
242.28
|
|
Distribution of interest income to feeder funds
|
|
|
(1.48
|
)
|
|
|
(17.69
|
)
|
|
|
(46.35
|
)
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, beginning of year
|
|
|
1,814.48
|
|
|
|
1,363.75
|
|
|
|
1,167.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Redeemable Unit of Limited Partnership
Interest, end of year
|
|
$
|
2,201.51
|
|
|
$
|
1,814.48
|
|
|
$
|
1,363.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes clearing fees. |
|
|
** |
|
Excludes clearing fees. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)***
|
|
|
(0.1
|
)%
|
|
|
0.9
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
21.3
|
%
|
|
|
34.3
|
%
|
|
|
20.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** |
|
Interest income less total expenses. |
The above ratios may vary for individual investors based on the
timing of capital transactions during the year. Additionally,
these ratios are calculated for the Limited Partner class using
the Limited Partners share of income, expenses and average
net assets.
|
|
7.
|
Financial
Instrument Risks:
|
In the normal course of its business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures, options and swaps whose values are based upon an
underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash
balances, 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
F-96
CMF SandRidge
Master Fund L.P.
Notes to Financial Statements
December 31, 2009
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.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master due to market
changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
directly impacted by the volatility and liquidity in the markets
in which the related underlying assets are traded. The Master is
exposed to a market risk equal to the value of futures and
forward contracts purchased and unlimited liability on such
contracts sold short.
Credit risk is the possibility that a loss may occur due to the
failure of a counterparty to perform according to the terms of a
contract. The Masters risk of loss in the event of
counterparty default is typically limited to the amounts
recognized in the Statements of Financial Condition and not
represented by the contract or notional amounts of the
instruments. The Masters risk of loss is reduced through
the use of legally enforceable master netting agreements with
counterparties that permit the Master to offset unrealized gains
and losses and other assets and liabilities with such
counterparties upon the occurrence of certain events. The Master
has credit risk and concentration risk as the sole counterparty
or broker with respect to the Masters assets is CGM or a
CGM affiliate. Credit risk with respect to exchange-traded
instruments is reduced to the extent that through CGM, the
Masters counterparty is an exchange or clearing
organization.
The Advisor will concentrate the Masters trading in energy
related markets. Concentration in a limited number of commodity
interests may subject the Masters account to greater
volatility than if a more diversified portfolio of contracts.
As both a buyer and seller of options, the Master pays or
receives a premium at the outset and then bears the risk of
unfavorable changes in the price of the contract underlying the
option. Written options expose the Master to potentially
unlimited liability; for purchased options the risk of loss is
limited to the premiums paid. Certain written put options permit
cash settlement and do not require the option holder to own the
reference asset. The Master does not consider these contracts to
be guarantees as described in ASC 460 Guarantees (formerly, FAS
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees).
The General Partner monitors and attempts to control the
Masters 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 Master may be
subject. These monitoring systems generally allow the General
Partner to statistically analyze actual trading results with
risk adjusted performance indicators and correlation statistics.
In addition, on-line monitoring systems provide account analysis
of futures, exchange cleared swaps and options positions by
sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the Masters
business, these instruments may not be held to maturity.
F-97
Selected
unaudited quarterly financial data for SandRidge Master for the years ended December 31,
2009 and 2008 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2009 to |
|
July 1, 2009 to |
|
April 1, 2009 to |
|
January 1, 2009 to |
|
|
December 31, 2009 |
|
September 30, 2009 |
|
June 30, 2009 |
|
March 31, 2009 |
Net realized and unrealized trading
gains (losses) net of brokerage
commissions and clearing fees
including interest income |
|
$ |
(7,776,936 |
) |
|
$ |
34,084,889 |
|
|
$ |
31,810,672 |
|
|
$ |
40,839,687 |
|
Net income (loss) |
|
$ |
(7,833,376 |
) |
|
$ |
34,047,914 |
|
|
$ |
31,760,955 |
|
|
$ |
40,772,177 |
|
Increase (decrease) in Net Asset
Value per Redeemable Unit |
|
$ |
(21.17 |
) |
|
$ |
125.50 |
|
|
$ |
122.39 |
|
|
$ |
161.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period from |
|
For the period from |
|
For the period from |
|
For the period from |
|
|
October 1, 2008 to |
|
July 1, 2008 to |
|
April 1, 2008 to |
|
January 1, 2008 to |
|
|
December 31, 2008 |
|
September 30, 2008 |
|
June 30, 2008 |
|
March 31, 2008 |
Net realized and
unrealized trading
gains (losses) net of
brokerage
commissions and
clearing fees
including interest
income |
|
$ |
10,020,345 |
|
|
$ |
(31,305,268 |
) |
|
$ |
66,997,344 |
|
|
$ |
57,623,213 |
|
Net income (loss) |
|
$ |
9,955,370 |
|
|
$ |
(31,370,244 |
) |
|
$ |
66,929,871 |
|
|
$ |
57,551,331 |
|
Increase
(decrease) in Net
Asset Value per
Redeemable Unit |
|
$ |
39.67 |
|
|
$ |
(131.21 |
) |
|
$ |
297.96 |
|
|
$ |
262.00 |
|
F-98
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.
KPMG LLP (KPMG) was previously the principal accountant for the Partnership through June 26,
2008. On June 27, 2008, KPMG was dismissed as principal accountant and PricewaterhouseCoopers LLP
(PwC) was engaged as the independent registered public accounting firm. From June 27, 2008
through July 22, 2009, PwC was the principal accountant for the Partnership. On July 22, 2009, PWC
was dismissed as principal accountant and on July 23, 2009 Deloitte & Touche LLP (Deloitte) was
engaged as the independent registered public accounting firm. The decision to change accountants
was approved by the General Partner of the Partnership.
In connection with the audit of the fiscal year ended December 31, 2008, and through July 22,
2009, and the audit of the fiscal year ended December 31, 2007, and through June 26, 2008, there
were no disagreements with PwC or KPMG, respectively, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction would have caused them to make reference thereto in their report
on the financial statements for the corresponding year.
The respective audit report of PwC and KPMG on the financial statements of the Partnership as
of and for the years ended December 31, 2008 and 2007, respectively, did not contain any adverse
opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope,
or accounting principle.
Item 9A(T). Controls and Procedures.
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership
on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
expected in the Commissions rules and forms. Disclosed controls and procedures include controls and procedures 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 (CEO) and
Chief Financial Officer (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 December 31, 2009 and, based on that evaluation, the 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:
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|
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pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Partnership; |
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|
|
|
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 |
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|
|
|
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. |
The
report included in Item 8. Financial Statements and Supplementary
Data. includes managements report on internal control over financial reporting (Managements Report) and an attestation report of the Partnerships registered public accounting firm regarding internal control
over financial reporting.
Managements Report was not required to be audited by the
Partnerships registered public accounting firm pursuant to temporary rules of the Securities Exchange Commission that permit the Partnership to provide only managements report in this annual report. Management elected to have its
internal control over financial reporting audited.
There were no changes in the Partnerships internal control over financial reporting during
the fiscal quarter ended December 31, 2009 that materially affected, or are reasonably likely to
materially affect, the Partnerships internal control over financial reporting.
Item 9B. Other Information.
None
25
PART III
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|
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Item 10. |
|
Directors, Executive Officers and Corporate Governance. |
The Partnership has no officers or directors and its affairs are managed by its General
Partner. As of December 31, 2009, investment decisions were being made by the Advisors.
The officers and directors of the General Partner are Jerry Pascucci (President, Chief
Investment Officer and Director), Jennifer Magro (Chief Financial Officer, Vice President and
Director), Daryl Dewbrey (Secretary and Director), Shelley Deavitt Ullman (Senior Vice President
and Director) and Raymond Nolte (Director). Each director holds office until his or her successor
is elected, or until his or her earlier death, resignation or removal. Vacancies on the board of
directors may be filled by appointment by the sole member of the General Partner, Morgan Stanley
Smith Barney Holdings LLC which wholly owns the General Partner, or by unanimous vote of the
remaining directors, depending on the circumstances of the vacancy. The officers of the General
Partner are designated by the General Partners board of directors. Each officer holds office
until his or her death, resignation or removal.
Mr. Pascucci, age 40, is President, Chief Investment Officer and Director of the General
Partner (since March 2007, May 2005 and June 2005, respectively). Mr. Pascuccis principal status
was approved by the National Futures Association (NFA) in June 2005. He is also registered as an
associated person of the General Partner (since June 2009) and of Morgan Stanley Smith Barney LLC
(Morgan Stanley Smith Barney) (since August 2009). From March 2007 to July 2009, Mr. Pascucci
was a Managing Director of Citigroup Alternative Investments LLC (CAI), a division of Citigroup
Inc. (Citigroup) that administers its hedge fund and fund of funds businesses, and until July
2009, its commodity pool business. He was also Chief Investment Officer of CAIs Hedge Fund
Management Group from March 2007 to July 2009. He was registered as an associated person of
Citigroup Global Markets Inc. (Citigroup Global Markets) from February 2006 to July 2009. Mr.
Pascucci has been responsible for trading advisor selection, due diligence and portfolio
construction for managed futures funds and accounts since May 1999. Between May 1996 and May 1999,
Mr. Pascucci served as a Senior Credit Risk Officer for Citigroup Global Markets, focused primarily
on market and counterparty risks associated with Citigroup Global Markets commodity pool and hedge
fund clients. Prior to joining Citigroup Global Markets in May 1996, Mr. Pascucci was employed
(from October 1992) by ABN AMRO North America at its European American Bank subsidiary as a
corporate banking officer where he facilitated the establishment of credit lines and other loan
facilities for corporate clients.
Ms. Magro, age 38, is Chief Financial Officer, Director and Vice President of the General
Partner (since October 2006, May 2005 and August 2001, respectively). Ms. Magros principal status
was approved by the NFA in June 2005. She was also a Managing Director of CAI and Chief Operating
Officer of CAIs Hedge Fund Management Group from October 2006 to July 2009. Ms. Magro is
responsible for the financial, administrative and operational functions of the General Partner.
She is also responsible for the accounting and financial and regulatory reporting of the General
Partners managed futures funds. From March 1999 to July 2009, Ms. Magro was responsible for the
accounting and financial and regulatory reporting of Citigroups managed futures funds. She had
similar responsibilities with CAIs Hedge Fund Management Group (from October 2006 to July 2009).
Prior to joining Citigroup Global Markets in January 1996, Ms. Magro was employed by Prudential
Securities Inc. (from July 1994) as a staff accountant
whose duties included the calculation of net asset values for commodity pools and real estate
investment products.
Mr. Dewbrey, age 39, is Secretary and Director of the General Partner (since July 2009 and
March 2007, respectively). He registered as an associated person of the General Partner in January
2004 and became a principal of the General Partner in March 2007. He is also registered as an
associated person of Morgan Stanley Smith Barney (since August 2009). He was registered as an
associated person of Citigroup Global Markets from March 1998 to July 2009. Mr. Dewbrey has worked
with the General Partner in varying capacities since April 2001, and, since May 2005, Mr. Dewbrey
has been head of managed futures product development. Mr. Dewbrey was a director of CAI
responsible for marketing and client services for CAIs Hedge Fund Management Group from February
2007 to July 2009. From October 1997 to September 2000, Mr. Dewbrey was head of Citigroup Global
Markets managed futures trading desk. In September 2000, Mr. Dewbrey was selected for the Salomon
Smith Barney Sales and Trading Training Program. Mr. Dewbrey began his career in the futures
markets with Rosenthal Collins Group, a futures brokerage firm, where he worked from May 1990 to
October 1997 in varying capacities on the trading floors of the Chicago Board of Trade, COMEX and
the New York Mercantile Exchange. Mr. Dewbrey is a member of the Managed Funds Association and the
Futures Industry Association.
Ms. Ullman, age 51, is a Managing Director of Citigroup Global Markets Futures Division and a
Senior Vice President and Director of the General Partner (since May 1997 and April 1994,
respectively). Ms. Ullmans principal status was approved by the NFA in June 1994. She was
registered as an associated person of the General Partner from January 2004 to July 2009. Ms.
Ullman is registered as an associated person of Citigroup Global Markets (since July 1993). She is
also the branch manager of the Citigroup Global Markets branch that supports the General Partner
(since January 2002). Previously, Ms. Ullman was a Vice President of Lehman Brothers (October 1985
to July 1993), with responsibility for execution, administration, operations and performance
analysis for managed futures funds and accounts. She was registered as an associated person of
Lehman Brothers Inc. (from February 1983 to July 1993) and was principal of Lehman Brothers Capital
Management Corp. (from April 1989 to July 1993).
Mr. Nolte, age 48, is the Chief Executive Officer and the Chairman of the Investment Committee
of CAIs Hedge Fund Management Group. He registered as an associated person and became a principal
of the General Partner in March 2007. He was appointed a Director of the General Partner in March
2007. He is also registered as an associated person of Citigroup Global Markets (since October
2005). He registered as an associated person and became a principal of CAI in March 2007. Prior
to joining CAI in September 2005, Mr. Nolte worked at Deutsche Bank and its affiliate Deutsche
Asset Management (from June 1999 to September 2005). He was registered as an associated person and
was a principal of DB Capital Advisors Inc. (from July 2000 to May 2005) and DB Investment Managers
Inc. (from May 2002 to June 2005). Prior to that, Mr. Nolte worked for Bankers Trust (from May
1983 until the firm was acquired by Deutsche Bank in June 1999). During his employment at Deutsche
Asset Management, Mr. Nolte served as the Global Head and Chief Investment Officer of the DB
Absolute Return Strategies (DB ARS) Fund of Funds business, the Chairman of the DB ARS Fund of
Funds Investment Committee, the Vice Chairman of DB ARS and Head of the Single Manager Hedge Fund
business. While employed at Deutsche Bank and Deutsche Asset Management, Mr.
Noltes duties included overseeing the firms fund of funds and hedge fund businesses. Mr.
Nolte was the founder and head of the Investment Committee for the Topiary Fund, Deutsche Banks
first fund of hedge funds. The DB ARS Fund of Hedge Funds platform grew to $7 billion in assets
under management during Mr. Noltes tenure. That business was comprised of several multi-manager,
multi-strategy funds as well as single strategy funds and separate accounts.
The Partnership has not adopted a code of ethics that applies to officers because it has no
officers. In addition, the Partnership has not adopted any procedures by which investors may
recommend nominees to the Partnerships board of directors, and has not established an audit
committee because it has no board of directors.
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|
|
Item 11. |
|
Executive Compensation. |
The Partnership has no directors or officers. Its affairs are managed by the General Partner.
CGM, an affiliate of the General Partner, is the commodity broker for the Partnership and receives
brokerage commissions for such services, as described under Item 1. Business. Brokerage
commissions including clearing fees of $2,563,903 were earned by CGM for the year ended December
31, 2009. Management fees and incentive fees of $758,357 and $331,108, respectively, were earned by
the Advisors for the year ended December 31, 2009.
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|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
(a) Security ownership of certain beneficial owners. As of February 28, 2010, the
Partnership knows of no person who beneficially owns more than 5% of the Redeemable Units
outstanding.
(b) Security ownership of management. Under the terms of the Limited Partnership
Agreement, the Partnerships affairs are managed by the General Partner. The General Partner owns
units of general partnership interest equivalent to 274.2452 (1.5%) Redeemable Unit equivalents as
of December 31, 2009.
Principles of the General Partner who own Redeemable Units. None
(c) Changes in control. None.
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Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence. |
CGM and the General Partner would be considered promoters for purposes of item 404(c) of
Regulation S-K. The nature and the amounts of compensation each promoter will receive from the
Partnership are set forth under Item 1. Business, Item 8. Financial Statements and
Supplementary Data and Item 11. Executive Compensation.
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|
Item 14. |
|
Principal Accountant Fees and Services. |
(1)
Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional
services rendered by Deloitte in the period from July 23, 2009
through December 31, 2009, PwC in the period from June 27,
2008 through July 22, 2009 and KPMG in the period from January 1, 2008 through
June 26, 2008 for the audit of the
Partnerships annual financial statements, review of financial statements included in the
Partnerships Forms 10-Q and 10-K and other services normally provided in connection with
regulatory filings or engagements were:
|
|
|
|
|
Deloitte |
|
$ |
59,500 |
|
PwC |
|
$ |
37,200 |
|
KPMG |
|
$ |
4,900 |
|
(2) Audit-Related Fees. None
(3) Tax
Fees. In the last two fiscal years, Deloitte did not provide any
professional services for tax compliance, tax advice or tax planning. The aggregate fees billed for each of the last two fiscal years for
professional services rendered by PwC for tax compliance and tax advice
given in the preparation of the Partnerships Schedule K1s, the preparation of the Partnerships
Form 1065 and preparation of all State Tax Returns were:
|
|
|
|
|
2009 |
|
$ |
20,000 |
|
2008 |
|
$ |
21,200 |
|
(4) All Other Fees. None.
(5) Not Applicable.
(6) Not Applicable.
26
PART IV
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|
Item 15. |
|
Exhibits, Financial Statement Schedules. |
(a)(1) Financial Statements:
Statements of Financial Condition at December 31, 2009 and 2008.
Condensed
Schedules of Investments at December 31, 2009 and 2008.
Statements of Income and Expenses for the years ended December 31, 2009, 2008 and 2007.
Statements of Changes in Partners Capital for the years ended December 31, 2009, 2008 and
2007.
Notes to Financial Statements
(2) Exhibits:
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3.1
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(a)
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|
Certificate of Limited Partnership dated May 10,
1994 (filed as Exhibit 3.1(a) to the Quarterly
Report on Form 10-Q for the quarterly period
ended September 30, 2009 filed on November 16,
2009 and incorporated herein by reference). |
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(b)
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|
Certificate of Amendment of the Certificate of
Limited Partnership dated July 31, 1995 (filed
as Exhibit 3.1(b) to the Quarterly Report on
Form 10-Q for the quarterly period ended
September 30, 2009 filed on November 16, 2009
and incorporated herein by reference). |
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(c)
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|
Certificate of Amendment of the Certificate of
Limited Partnership dated October 1, 1999 (filed
as Exhibit 3.1(c) to the Quarterly Report on
Form 10-Q for the quarterly period ended
September 30, 2009 filed on November 16, 2009
and incorporated herein by reference). |
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(d)
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|
Certificate of Change of the Certificate of
Limited Partnership effective January 31, 2000
(filed as Exhibit 3.1(d) to the Quarterly Report
on Form 10-Q for the quarterly period ended
September 30, 2009 filed on November 16, 2009
and incorporated herein by reference). |
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(e)
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|
Certificate of Amendment of the Certificate of
Limited Partnership dated May 21, 2003 (filed as
Exhibit 3.1(e) to the Quarterly Report on Form
10-Q for the quarterly period ended September
30, 2009 filed on November 16, 2009 and
incorporated herein by reference). |
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|
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(f)
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|
Certificate of Amendment of the Certificate of
Limited Partnership dated September 21, 2005
(filed as Exhibit 3.1(f) to the Quarterly Report
on Form 10-Q for the quarterly period ended
September 30, 2009 filed on November 16, 2009
and incorporated herein by reference). |
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(g)
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Certificate of Amendment of the Certificate of
Limited Partnership dated September 19, 2008
(filed as Exhibit 3.1(g) to the Quarterly Report
on Form 10-Q for the quarterly period ended
September 30, 2009 filed on November 16, 2009
and incorporated herein by reference). |
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(h)
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Certificate of Amendment of the Certificate of
Limited Partnership dated September 28, 2009
(filed as Exhibit 99.1 to the Current Report on
Form 8-K filed on September 30, 2009). |
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3.2
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Limited Partnership Agreement (attached as
Exhibit A to the Registration Statement on Form
S-1 filed on May 29, 1996 and incorporated
herein by reference). |
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10.1
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Customer Agreement between the Partnership and
Smith Barney (filed as Exhibit 10.1 to the
Registration Statement on Form S-1 filed on May
29, 1996 and incorporated herein by reference). |
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10.2
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Form of Subscription Agreement (attached as
Exhibit B to the Registration Statement on Form
S-1 filed on May 29, 1996 and incorporated
herein by reference). |
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|
10.3
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Form of Escrow Agreement (filed as Exhibit 10.3
to the Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2009 filed
on November 16, 2009 and incorporated herein by
reference). |
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10.4
|
(a)
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Management Agreement among the Partnership, the
General Partner and Willowbridge Associates Inc.
(filed as Exhibit 10.7 to the Annual Report on
Form 10-K for the fiscal year ended December 31,
1997 filed on March 30, 1998 and incorporated
herein by reference). |
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(b)
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|
Letter extending Management Agreement with
Willowbridge Associates Inc. for 2009 (dated
June 9, 2009 and filed herein). |
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10.6
|
(a)
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|
Management Agreement among the Partnership, the
General Partner and Graham Capital Management
L.P. (filed as Exhibit 10.21 to the Annual
Report on Form 10-K for the fiscal year ended
December 31, 2000 filed on March 29, 2001 and
incorporated herein by reference). |
27
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(b)
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Letter extending Management Agreement with
Graham Management L.P. for 2009 (dated June 9,
2009 and filed herein). |
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10.7
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(a)
|
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Management Agreement among the Partnership, the
General Partner and Capital Fund Management
(filed as Exhibit 10.24 to the Annual Report on
Form 10-K for the fiscal year ended December 31,
2001 filed on March 28, 2002 and incorporated
herein by reference). |
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10.8
|
(a)
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Management Agreement among the Partnership, the
General Partner and Eckhardt Trading Company
(filed as Exhibit 10 to the Quarterly Report on
Form 10-Q for the quarterly period ended June
30, 2008 filed on August 14, 2008 and
incorporated herein by reference). |
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(b)
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Letter extending Management Agreement with
Eckhardt Trading Company for 2009 (dated June 9,
2009 and filed herein). |
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10.9
|
(a)
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Management Agreement among the Partnership, the
General Partner and SandRidge Capital, LP (filed
as Exhibit 10.1 to the Current Report on Form
8-K filed on June 2, 2009 incorporated herein by
reference). |
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(b)
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|
Letter extending Management Agreement with
SandRidge Capital, LP for 2009 (dated June 9,
2009 and filed herein). |
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10.10
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Joinder Agreement among the Partnership,
Citigroup Managed Futures LLC, Citigroup Global
Markets Inc. and Morgan Stanley Smith Barney LLC
(filed as Exhibit 10 to the Quarterly Report on
Form 10-Q for the quarterly period ended June
30, 2009 filed August 14, 2009 and incorporated
herein by reference). |
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16.1
|
(a)
|
|
Letter Regarding Change of Certifying Accountant
(filed as Exhibit 16 to the Current Report on
Form 8-K filed on July 24, 2009 and incorporated
herein by reference). |
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(b)
|
|
Letter Regarding Change of Certifying Accountant
(filed as Exhibit 16.1 to Current Report on Form
8-K filed on July 1, 2008 and incorporated
herein by reference). |
28
The exhibits required to be filed by Item 601 of Regulation S-K are incorporated herein by
reference.
31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director).
31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer
and Director).
32.1 Section 1350 Certification (Certification of President and Director).
32.2 Section 1350 Certification (Certification of Chief Financial Officer and
Director).
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 31st day of March 2010.
Diversified Multi-Advisor Futures Fund L.P. II
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By: |
Ceres Managed Futures LLC
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(General Partner) |
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By |
/s/ Jerry Pascucci
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Jerry Pascucci, |
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President and Director |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons in the capacities and on the dates indicated.
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/s/ Jerry Pascucci
Jerry Pascucci
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/s/ Shelley Deavitt Ullman
Shelley Deavitt Ullman
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President and Director Ceres Managed Futures LLC
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Director Ceres Managed Futures LLC |
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/s/ Jennifer Magro
Jennifer Magro
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/s/ Daryl Dewbrey
Daryl Dewbrey
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Chief Financial Officer and Director
(Principal Accounting Officer) Ceres Managed Futures LLC
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Director Ceres Managed Futures LLC |
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/s/ Raymond Nolte
Raymond Nolte
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Director Ceres Managed Futures LLC |
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Supplemental Information To Be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by
Registrants Which Have Not Registered Securities Pursuant To Section 12 of the Act.
Annual Report to Limited Partners
No proxy material has been sent to Limited Partners.
30