Attached files
file | filename |
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EX-31.1 - EX-31.1 - EMERGING CTA PORTFOLIO LP | y04599exv31w1.htm |
EX-99.3 - EX-99.3 - EMERGING CTA PORTFOLIO LP | y04599exv99w3.htm |
EX-99.5 - EX-99.5 - EMERGING CTA PORTFOLIO LP | y04599exv99w5.htm |
EX-99.4 - EX-99.4 - EMERGING CTA PORTFOLIO LP | y04599exv99w4.htm |
EX-99.2 - EX-99.2 - EMERGING CTA PORTFOLIO LP | y04599exv99w2.htm |
EX-32.1 - EX-32.1 - EMERGING CTA PORTFOLIO LP | y04599exv32w1.htm |
EX-32.2 - EX-32.2 - EMERGING CTA PORTFOLIO LP | y04599exv32w2.htm |
EX-31.2 - EX-31.2 - EMERGING CTA PORTFOLIO LP | y04599exv31w2.htm |
EX-99.1 - EX-99.1 - EMERGING CTA PORTFOLIO LP | y04599exv99w1.htm |
EX-10.3.B - EX-10.3.B - EMERGING CTA PORTFOLIO LP | y04599exv10w3wb.htm |
EX-10.6.B - EX-10.6.B - EMERGING CTA PORTFOLIO LP | y04599exv10w6wb.htm |
EX-10.1.B - EX-10.1.B - EMERGING CTA PORTFOLIO LP | y04599exv10w1wb.htm |
EX-10.2.B - EX-10.2.B - EMERGING CTA PORTFOLIO LP | y04599exv10w2wb.htm |
EX-10.4.B - EX-10.4.B - EMERGING CTA PORTFOLIO LP | y04599exv10w4wb.htm |
EX-10.10.B - EX-10.10.B - EMERGING CTA PORTFOLIO LP | y04599exv10w10wb.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
OF THE SECURITIES EXCHANGE ACT of 1934
For the fiscal year ended December 31, 2010
OR
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from
to
Commission
File Number 0-53211
EMERGING
CTA PORTFOLIO L.P.
(Exact name of registrant as specified in its charter)
New York | 04-3768983 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue 14th floor
New York, New York 10036
522 Fifth Avenue 14th floor
New York, New York 10036
(Address and Zip Code of principal executive offices)
(212) 296-1999
(Registrants telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Redeemable Units
of Limited Partnership Interest
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes
No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes
No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X
No
Indicate by check mark whether the registrant has submitted electronically 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 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):
Large accelerated filer
|
Accelerated filer | Non-accelerated filer X | Smaller reporting company | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
No X
Limited
Partnership Redeemable Units with an aggregate value of $187,872,610 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, 2011,
129,209.5354 Limited Partnership Redeemable Units were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
[None]
PART I
Item 1. Business.
(a) General Development of Business. Emerging CTA Portfolio L.P. (the Partnership) is a
limited partnership that was organized on July 7, 2003 under the partnership laws of the State of
New York. The objective of the Partnership is to achieve capital appreciation through the
allocation of assets to a blind pool of early-stage commodity trading advisors which engage,
directly and indirectly, in speculative trading of a diversified portfolio of commodity interests,
including futures contracts, options and forward contracts. The Partnership may also enter into
swap and other derivative transactions with the approval of the General Partner (defined below).
The sectors traded include currencies, livestock, energy, grains, metals, indices, softs, U.S. and
non-U.S. interest rates. The Partnership and the Funds, (as defined below) may trade futures,
forwards and option contracts of any kind. The commodity interests that are traded by the
Partnership and the Funds are volatile and involve a high degree of market risk.
Between December 1, 2003 (commencement of the offering period) and August 5, 2004, 20,872
redeemable units of limited partnership interest (Redeemable Units) were sold at $1,000 per
Redeemable Unit. The proceeds of the initial offering were held in an escrow account until August
6, 2004, at which time they were remitted to the Partnership for trading. The Partnership is
authorized to sell 300,000 units and continues to offer Redeemable Units to qualified investors.
Subscriptions of additional Redeemable Units and additional general partner contributions and
redemptions of Redeemable Units for the years ended December 31, 2010, 2009 and 2008 are reported
in the Statements of Changes in Partners Capital on page 36 under Item 8. Financial
Statements and Supplementary Data.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner
(the General Partner) and commodity pool operator of the Partnership. The General Partner is
wholly owned by Morgan Stanley Smith Barney Holdings LLC (MSSB Holdings). Morgan Stanley,
indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings.
Citigroup Global Markets Inc. (CGM), the commodity broker and a selling agent for the
Partnership, owns a minority equity interest in MSSB Holdings. Citigroup Inc. (Citigroup),
indirectly through various subsidiaries, wholly owns CGM. Prior to July 31, 2009, the date as of
which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial
Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner
of which is Citigroup.
As of December 31, 2010, all trading decisions are made for the Partnership by its eleven
trading advisors (the Advisors) either directly, through individually managed accounts, or
indirectly, through investments in other collective investment vehicles. As indicated above, the
Partnership allocates its assets to a blind pool of trading advisors which refers to the fact
that detailed information about the advisors, such as their backgrounds, individual trading
strategies and past performance records has not been and, is not expected to be, provided to
investors. The General Partner has chosen not to disclose such information because, among other
reasons, the advisors engaged to trade on behalf of the Partnership may have little or no
performance histories and the mix of advisors may change frequently as new advisors are identified
and others progress beyond the emerging stage. 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 be liquidated upon the first to occur of the following: December 31,
2023; the net asset value per Redeemable Unit decreases to less than $400 per Redeemable Unit as of
a close of any business day; a decline in net assets after trading commences to less than
$1,000,000; or under certain other circumstances as defined in the Limited Partnership Agreement of
the Partnership (the Limited Partnership Agreement).
On November 1, 2005, the assets allocated to Altis Partners Jersey Limited (Altis) for
trading were invested in CMF Altis Partners Master Fund L.P. (Altis Master), a limited
partnership organized under the partnership laws of the State of New York. The Partnership
purchased 4,898.1251 units of the Altis Master with cash equal to $4,196,275 and a contribution of
open commodity futures and forward contracts with a fair value of $701,851. Altis Master was formed
to permit commodity pools managed now or in the future by Altis using the Global Futures Portfolio
program, a proprietary, systematic trading program, to invest together in one vehicle. The General
Partner is also the general partner of Altis Master. Individual and pooled accounts currently
managed by Altis, including the Partnership are permitted to be limited partners of Altis Master.
The General Partner and Altis believe that trading through this structure should promote efficiency
and economy in the trading process.
On March 1, 2006, the assets allocated to Avant Capital Management L.P. (Avant) for trading were
invested in the CMF Avant Master Fund L.P. (Avant Master), a limited partnership organized under
the partnership laws of the State of New York. The Partnership purchased 8,177.1175 units of Avant
Master with cash equal to $6,827,887 and a contribution of open commodity futures
2
and forward contracts with a fair value of $1,349,230. Avant Master was formed in order to permit
accounts managed now or in the future by Avant using the Diversified Program, a proprietary,
systematic trading program, to invest together in one trading vehicle. The Partnership fully
redeemed its investment in Avant Master on April 30, 2010 for cash equal to $12,280,606.
On May 1, 2009, the assets allocated to Sasco Energy Partners LLC (Sasco) for trading were
invested in the CMF Sasco Master Fund L.P. (Sasco Master), a limited partnership organized under
the partnership laws of the State of New York. The Partnership purchased 16,437.9008 units of Sasco
Master with cash equal to $16,364,407 and a contribution of open commodity futures contracts with a
fair value of $(1,325,727). Sasco Master was formed in order to permit accounts managed now or in
the future by Sasco using the Energy Program, a proprietary, discretionary trading program, to invest
together in one trading vehicle. The General Partner is also the general partner of Sasco Master.
Individual and pooled accounts currently managed by Sasco, including the Partnership, are permitted
to be limited partners of Sasco Master. The General Partner and Sasco believe that trading through
this structure should promote efficiency and economy in the trading process.
On March 1, 2010, the assets allocated to Waypoint Capital Management LLC for trading were
invested in the Waypoint Master Fund L.P. (Waypoint Master), a limited partnership organized
under the partnership laws of the State of New York. The Partnership purchased 26,581.6800 units of
Waypoint Master with cash equal to $26,581,680. Waypoint Master was formed in order to permit
accounts managed now or in the future by Waypoint using its Diversified Program, a proprietary,
systematic trading program, to invest together in one trading vehicle. The General Partner is also
the general partner of Waypoint Master. Individual and pooled accounts currently managed by
Waypoint, including the Partnership, are permitted to be limited partners of Waypoint Master. The
General Partner and Waypoint believe that trading through this structure should promote efficiency
and economy in the trading process.
On November 1, 2010, the assets allocated to PGR Capital LLP (PGR) for trading were invested
in the PGR Master Fund L.P. (PGR Master), a limited partnership organized under the partnership
laws of the State of Delaware. The Partnership purchased 14,913.0290 units of PGR Master with cash
equal to $14,913,029. PGR Master was formed to permit accounts managed now or in the future by PGR
using the Mayfair Program, a proprietary, systematic trading program, to invest together in one
trading vehicle. The
General Partner is also the general partner for PGR Master. Individual and pooled accounts
currently managed by PGR, including the Partnership, are permitted to be limited partners of PGR
Master. The General Partner and PGR believe that trading through this structure should promote
efficiency and economy in the trading process.
On November 1, 2010, the assets allocated to Blackwater Capital Management LLC (Blackwater)
for trading were invested in the Blackwater Master Fund L.P. (Blackwater Master), a limited
partnership organized under the partnership laws of the State of Delaware. The Partnership
purchased 15,674.6940 units of Blackwater Master with cash equal to $15,674,694. Blackwater Master
was formed to permit accounts managed now or in the future by Blackwater using the Global Program,
a proprietary, systematic trading program, to invest together in one trading vehicle. The General
Partner is also the general partner for Blackwater Master. Individual and pooled accounts currently
managed by Blackwater, including the Partnership, are permitted to be limited partners of
Blackwater Master. The General Partner and Blackwater believe that trading through this structure
should promote efficiency and economy in the trading process.
The General Partner is not aware of any material changes to the trading programs discussed
above during the fiscal period ended December 31, 2010.
Altis Masters, Waypoint Masters, Sasco Masters, PGR Masters and Blackwater Masterss (the
Funds) trading of futures, forwards, swaps and options contracts, if applicable, on commodities
is done primarily on United States of America commodity exchanges and foreign commodity exchanges.
The Funds engage in such trading through commodity brokerage accounts maintained 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 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 partners elect to redeem and informs the Funds.
Management, administrative and incentive fees are charged at the Partnership level. All
exchange, clearing, user, give-up, floor brokerage and National Futures Association fees
(NFA) (collectively the clearing fees) are borne by the Partnership and through its investment in the
Funds. All other fees including CGMs direct brokerage fees are charged at the Partnership level.
3
For the period January 1, 2010 through December 31, 2010, the approximate average market
sector allocation for the Partnership was as follows:
At December 31, 2010, the Partnership had approximately 27.6% of Altis Master, 52.0% of
Waypoint Master, 22.8% of Sasco Master, 74.9% of PGR Master and 77.3% of Blackwater Master. At
December 31, 2009, the Partnership owned approximately 33.6% of Altis Master, 100.0% of Avant
Master and 65.1% of Sasco Master. It is the Partnerships intention to continue to invest in the
Funds. The performance of the Partnership is directly affected by the performance of the Funds.
Expenses to investors as a result of investment in the Funds are approximately the same and the
redemption rights are not affected.
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 capital
contribution and profits, if any, net of distributions.
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 Partnership pays
the General Partner a monthly administrative fee equal to 1/24 of 1% (0.5% per year) of month-end
Net Assets of the Partnership. Month-end Net Assets, for the purpose of calculating administrative
fees, are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of
the current months management fees, incentive fees accrual, the General Partners administrative
fee and any redemptions or distributions as of the end of such month.
4
Pursuant to the terms of the management agreements (the Management Agreements) with each
Advisor, the Partnership is obligated to pay the Advisors a monthly management fee ranging from 1%
to 2% per year of month-end Net Assets allocated to each Advisors. 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 management fees, incentive fee accruals,
the General Partners administrative fee and any redemptions or distributions as of the end of such
month. Each 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, ranging from 17% to 20% of the New Trading Profits, as defined in each Management
Agreement, earned by the Advisors for the Partnership during each calendar quarter.
The Partnership has entered into a customer agreement (the
Customer Agreement) with CGM which provides that the Partnership will pay CGM a brokerage fee
equal to 3.5% of month-end Net Assets, in lieu of brokerage fees on a per trade basis. Month-end
Net Assets, for the purpose of calculating brokerage fees, are Net Assets, as defined in the
Limited Partnership Agreement, prior to the reduction of the current months brokerage fee,
incentive fee accruals, management fees, the General Partners administrative fee, other expenses
and any redemptions or distributions as of the end of such month. CGM will pay a portion of its
brokerage fees to other properly registered selling agents and to financial advisors who have sold
Redeemable Units. Brokerage fees will be paid for the life of the Partnership, although the rate at
which such fees are paid may be changed. This fee may be increased or decreased at any time at
CGMs discretion upon written notice to the Partnership. The Partnership will pay clearing fees
directly and through its investment in the Funds. In addition, CGM has agreed to pay the
Partnership interest on 100% of the average daily equity maintained in cash in the Partnerships
(or the Partnerships allocable portion of a Funds) account during each month. The interest is
earned 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. The Customer
Agreement between the Partnership and CGM 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 Segments. The Partnerships business consists
of only one segment, speculative trading of commodity interests. The Partnership does not engage in
sales of goods or services. The Partnerships net income (loss) from operations for the years ended
December 31, 2010, 2009, 2008, 2007 and 2006 is set forth under Item 6. Selected Financial
Data. The Partnerships Capital as of December 31, 2010 was $183,525,601.
(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 sale 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.
(f) Reports to Security Holders. Not applicable.
(g) Enforceability of Civil Liabilities Against Foreign Persons. Not applicable.
(h) Smaller Reporting Companies. Not applicable.
5
Item 1A. Risk Factors.
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 fees 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 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:
1. | The General Partner and the Partnerships /Funds commodity broker are affiliates; | ||
2. | Each of the Advisors, the Partnerships /Funds commodity broker and their principals and affiliates may trade in commodity interests for their own accounts; and | ||
3. | 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.
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 commodity trading advisors and allocate assets
among them.
6
The backgrounds, strategies and past performance records of the Partnerships advisors will
not be known to its investors.
Because an investor will not know the backgrounds, strategies and past performance records of
the Partnerships advisors, the investor will not be able to evaluate factors such as the advisors
trading strategies, markets traded, past performance or the background of the advisors principals.
An investor must rely on the General Partners ability to select the advisors to the Partnership
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.
Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection
Act, signed into law on July 21, 2010, the Commodity Futures Trading Commission
(CFTC) and the Securities and Exchange Commission (the SEC) may promulgate
rules to regulate swaps dealers, require that swaps be traded on an exchange or swap
execution facilities, mandate additional reporting and disclosure requirements and require
that derivatives (such as those traded by the Partnership) be moved into central
clearinghouses. These rules, if promulgated, may negatively 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.
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.
Item 2. Properties.
The Partnership does not own or lease any properties. The General Partner operates out of
facilities provided by its affiliate, MSSB Holdings.
Item 3. Legal Proceedings.
This section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which CGM is a party or to which any of their property is
subject. There are no material legal proceedings pending against the Partnership or the General
Partner.
CGM is a New York corporation with its principal place of business at 388 Greenwich St., New
York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (FCM),
and provides futures brokerage and clearing services for institutional and retail participants in
the futures markets. CGM and its affiliates also provide investment banking and other financial
services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five
years against CGM or any of its individual principals and
no such actions are currently pending, except as follows.
Credit-Crisis-Related Litigation and Other Matters
Citigroup and CGM continue to
cooperate fully in response to subpoenas and requests for information from the SEC, FINRA, the
Federal Housing Finance Agency, state attorneys general, the Department of Justice and
subdivisions thereof, bank regulators, and other government agencies and authorities,
in connection with various formal and informal inquiries concerning Citigroups
subprime and other mortgage-related conduct and business activities, as well as
other business activities affected by the credit crisis. These business activities
include, but are not limited to, Citigroups sponsorship, packaging, issuance, marketing,
servicing and underwriting of MBS and CDOs and its origination, sale or other transfer,
servicing, and foreclosure of residential mortgages.
Subprime Mortgage-Related Litigation and Other Matters
The SEC, among other regulators, is investigating Citigroups subprime
and other mortgage-related conduct and business activities, as well as other business activities
affected by the credit crisis, including an ongoing inquiry into Citigroups
structuring and sale of CDOs. Citigroup is cooperating fully with the
SECs inquiries.
On July 29, 2010, the SEC announced the settlement
of an investigation into certain of Citigroups 2007 disclosures
concerning its subprime-related business activities. On October 19, 2010, the
United States District Court for the District of Columbia entered a Final Judgment
approving the settlement, pursuant to which Citigroup agreed to pay a $75 million civil
penalty and to maintain certain disclosure policies, practices and procedures for a three-year
period. Additional information relating to this action is publicly available in court filings under
the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the OCC and the FDIC, among other federal and state
authorities, are investigating issues related to the conduct of certain mortgage servicing
companies, including Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is
cooperating fully with these inquiries.
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.
Item 4. [Removed and Reserved]
7
PART II
Item 5.
Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
(a) | Market Information. The Partnership has issued no stock. There is no public market for the Redeemable Units of limited partnership interest. | ||
(b) | Holders. The number of holders of Redeemable Units of limited partnership interest as of December 31, 2010 was 1,414. | ||
(c) | Dividends. The Partnership did not declare a distribution in 2010 or 2009. The Partnership does not intend to declare distributions in the foreseeable future. | ||
(d) | Securities Authorized for Issuance Under Equity Compensation Plans. None | ||
(e) | Performance Graph. Not applicable. | ||
(f) | Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities. For the twelve months ended December 31, 2010, there were additional subscriptions of 26,464.2572 Redeemable Units totaling $37,194,829. For the twelve months ended December 31, 2009, there were additional subscriptions of 32,652.7934 Redeemable Units totaling $47,627,000 and General Partner contribution representing 1,173.6036 unit equivalents totaling $1,700,000. For the twelve months ended December 31, 2008, there were additional subscriptions of 33,621.0347 Redeemable Units totaling $45,104,000. | ||
Proceeds from the additional subscriptions of Redeemable Units are used in the trading of commodity interests including futures contracts, swaps, options and forward contracts. | |||
(g) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following chart sets forth the purchases of Redeemable Units by the Partnership. |
(d) Maximum Number | ||||||||||||||||
(or Approximate | ||||||||||||||||
(c) Total Number | Dollar Value) of | |||||||||||||||
of Redeemable Units | Redeemable Units that | |||||||||||||||
(a) Total Number | (b) Average | Purchased as Part | May Yet Be | |||||||||||||
of Redeemable | Price Paid per | of Publicly Announced | Purchased Under the | |||||||||||||
Period | Units Purchased* | Redeemable Unit** | Plans or Programs | Plans or Programs | ||||||||||||
October 1,
2010 October 31, 2010 |
1,115.4955 | $ | 1,478.98 | N/A | N/A | |||||||||||
November 1, 2010 November 30, 2010 |
2,494.3074 | $ | 1,440.06 | N/A | N/A | |||||||||||
December 1,
2010 December 31, 2010 |
1,392.0418 | $ | 1,479.60 | N/A | N/A | |||||||||||
5,001.8447 | $ | 1,459.74 | ||||||||||||||
* | Generally, Limited Partners are permitted to redeem their Redeemable Units as of the end of each month on three business days notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the 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. |
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 thereunder. The Redeemable Units were purchased by accredited investors as
described in Regulation D.
8
Item 6. Selected Financial Data.
Net realized and unrealized trading gains (losses), interest income, net income, increase
(decrease) in net asset value per unit and net asset value per unit for the years ended December
31, 2010, 2009, 2008, 2007 and 2006 and total assets at December 31, 2010, 2009, 2008, 2007 and
2006 were as follows:
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net realized and unrealized trading gains
(losses) and investment in Funds net of
brokerage fees (including clearing fees) of
$7,138,973, $6,945,800, $6,174,578, $4,577,746
and $2,385,451, respectively |
$ | 14,772,228 | $ | (6,137,060 | ) | $ | 39,424,671 | $ | 6,386,632 | $ | 4,184,407 | |||||||||
Total interest income |
189,515 | 147,376 | 2,038,055 | 5,105,509 | 2,723,333 | |||||||||||||||
$ | 14,961,743 | $ | (5,989,684 | ) | $ | 41,462,726 | $ | 11,492,141 | $ | 6,907,740 | ||||||||||
Net income (loss) |
$ | 9,108,040 | $ | (11,927,806 | ) | $ | 29,408,855 | $ | 6,304,054 | $ | 3,940,490 | |||||||||
Increase (decrease) in net asset value per unit |
$ | 73.22 | $ | (102.13 | ) | $ | 244.45 | $ | 62.64 | $ | 122.33 | |||||||||
Net asset value per unit |
$ | 1,479.60 | $ | 1,406.38 | $ | 1,506.43 | $ | 1,261.98 | $ | 1,199.34 | ||||||||||
Total assets |
$ | 187,096,653 | $ | 171,248,643 | $ | 180,118,590 | $ | 141,636,874 | $ | 84,715,597 | ||||||||||
Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
Overview
The Partnership aims to achieve substantial capital appreciation and permit investors to
diversify a traditionally structured stock and bond portfolio. The Partnership attempts to
accomplish its objectives through speculative trading in U.S. and international markets for
currencies, interest rates, stock indices, agricultural and energy products and precious and base
metals directly, or through investments in the Funds. The Partnership/Funds may employ futures,
swaps, options on futures, and forward contracts in those markets.
The General Partner manages all business of the Partnership/Funds. 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 40 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 conducts proprietary research and considers the background of the advisors principals, as
well as the advisors trading styles, strategies and markets traded, expected volatility, trading
results (to the extent available) 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 the 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: Altis Global Futures
Portfolio Program, Waypoint Diversified Program, Sasco Energy Program, PGR Mayfair Program
and Blackwater Global Program. As of December 31, 2010, the Partnerships assets were allocated
among these Advisors in the following approximate percentages: Altis
10%, Waypoint 12%, Sasco 10%,
PGR 8% and Blackwater 11%.
9
Altis Partners (Jersey) Limited.
Altis trades its Global Futures Portfolio Program on behalf of the Partnership. It is a
systematic, automated trading program that builds on the Principals market experience and employs
a unique proprietary Advanced Asset Allocator. The Advanced Asset Allocator was specifically
developed to manage portfolios of derivative instruments in a robust and scalable manner. The
portfolio management technology combines original, traditional and contrasting investment
techniques into one complete and comprehensive trading system. Investment changes are implemented
after considering their effect on the whole portfolio, not just the individual markets concerned.
Sasco Energy Partners LLC
Sasco trades the Partnerships assets in accordance with its Energy Program. The Energy
Program currently trades futures, options and exchange-cleared swaps on U.S. and non-U.S. exchanges
and markets.
Sasco is a discretionary trader that employs a primarily fundamental analysis. Sascos investment
decisions are based on an assessment of available facts and data. Sasco has sole discretion to
trade certain markets or refrain from making certain trades. Sascos trading approach is dependent
in part on the existence of certain fundamental indicators. There have been periods in the past
where no such market indicators were evident, and such periods may recur.
Sasco utilizes outright long and short positions, exchange cleared over-the-counter instruments,
time spreads, swaps and other trading strategies. Sasco focuses on investments in long-term core
positions while simultaneously managing short-term positions, based primarily on fundamental
analysis and employing risk management principles. Sasco may also utilize options in an attempt
either to reduce or define trading risks. In making trading decisions, Sasco also employs a
technical analysis to help identify market trends.
Effective risk management is an important aspect of the Energy Program. Expectation and
volatility of the markets traded, and the overall nature of the account, are all factors in
determining the amount of equity committed to each trade.
Waypoint Capital Management LLC
Waypoint relies on technical rather than fundamental information as the basis for its trading
decisions in the Diversified Program, a proprietary, systematic
trading system. The primary objective of the trading program is to identify
and exploit medium and long-term price trends in futures and currency markets. The program is
designed to mathematically analyze recent trading characteristics of each market and compare such
characteristics to the historical trading pattern of the particular market. The program utilizes
proprietary trend identification and risk management strategies that are intended to enable it to
benefit from sustained price trends with the goal of protecting the account from high levels of
risk and volatility. Over the course of a long-term trend, times exist when the potential reward of
a market appears to be outweighed by the risk. In such circumstances, some of Waypoints trading
programs may exit the position prior to the end of the trend. While the result may be that program
is out of the market during a significant portion of a trend, Waypoint expects that the
accompanying decrease in volatility of performance is adequate reward.
While Waypoint normally
follows a disciplined systematic approach to trading, on occasion it may override the signals
generated by the programs. This may take the form of a decision not to trade a certain futures
contract or reducing the number of contracts traded and is based on such factors as past market
volatility, amount of risk, potential return and margin requirements. Such modifications may not
necessarily be beneficial to the results achieved. Waypoint applies a portfolio management strategy
to measure and manage overall portfolio risk. This strategy includes portfolio structure, capital
allocation, and risk limitation. One objective of portfolio management is to determine periods of
relatively high and low portfolio risk, and when such points are reached Waypoint may reduce or
increase position size accordingly.
Waypoint may trade any and all commodity futures contracts including financial, agricultural,
metals, energy contracts and/or foreign currency contracts. The combination of markets traded may
vary over time and from time to time. Waypoint may also trade spot and forward currency contracts
on a principal basis on behalf of clients.
PGR Capital LLP
PGRs
Mayfair Program a proprietary, systematic trading program, seeks to profit over the medium term by exploiting inefficiencies in
futures and forward markets across a broad range of asset classes and geographic regions.
Proprietary models developed by the founding partners are implemented in an inhouse trading system
which systematically processes real-time data and executes trades automatically on electronic
future exchanges and foreign exchange trading platforms.
PGRs investment strategies have a strong mathematical and statistical basis and exploit
established signal processing and econometric techniques. Current strategies are continuously being
developed and may change over the life of the investment. The strategy is primarily momentum-based.
Adaptive signal processing techniques are used to forecast both market direction and risk. The
estimates of the direction and strength of a markets price trend are combined with the estimate of
its risk to calculate a position which optimizes the risk/return profile for that market.
The strategies are primarily directional in nature meaning they identify and take advantage of
both upward and downward price momentum. The source of these trends may be sound economic
considerations, asymmetric information or behavioral patterns of
10
market participants. Persistent trends can be identified from these factors in all markets
across all sectors with varying strengths and durations. PGRs strategies have been designed to
identify the direction and strength of any trend with duration between a few days and a few months
and position the fund to take advantage of it. PGRs investment strategy employs sophisticated,
robust and already-proven computerized systems to enable the entire trading process to be
automated. The system monitors live market data from real-time feeds and continuously updates the
desired position for each market. Rigorous risk management is central to the PGRs systems and
operations. Risk management is fully integrated and systematic at all levels of the system. It
takes account of changes intra and inter-market, to ensure that volatility and drawdowns remain
under control as markets both react and evolve. The automation of trade execution and
reconciliation avoids the possibility of human errors in relation to these processes while further
processes continuously monitor and assess risk throughout all stages of the investment process.
PGRs ability to adjust positions and gearing according to the prevailing levels of market and
portfolio risk means that it can rapidly control the risk of the strategy as a whole. The PGR uses
a number of standard and non-standard measures to assess risk including correlations, value at
risk, sector exposure, entropy and stress tests.
Blackwater Capital Management LLC
Blackwater utilizes medium and long term, systematic technical models to trade global futures
and foreign exchange markets. The models are designed to establish positions when market behavior
exhibits a high probability of an emerging sustained move. Blackwater seeks to aggressively protect
open equity after profit targets have been reached, limiting sharp reversals and drawdowns. It
incorporates strict money management techniques in order to reduce volatility.
The
Global Program a proprietary, systematic trading program, was established to capture intermediate and long term trends in the global
futures and foreign exchange markets. The Global Program is based on chart and volatility patterns observed over
many years of trading and following macro markets. The Blackwater trading model is designed to
establish positions in relatively low to moderate volatility markets that are starting to show
signs of an emerging, sustained price move. Once a trade has been established, the model generates
stop levels and profit objectives. Stop levels are based on multiple volatility measurements.
Proprietary indicators are used to reduce trading in range bound, trendless markets. When
Blackwaters indicators point to a range bound market, extra confirmation is needed to enter a
trade. Excessive volatility in a particular market will cause Blackwater to exit that market. Money
management techniques are applied on the individual market level, sector level, and portfolio
level. The system analyzes how well each market has been performing. Markets that are performing
poorly, receive less risk capital. When open equity levels surpass predetermined thresholds,
partial profits will be taken on the most successful open trades.
No assurance can be given that the Advisors strategies will be successful or that they will
generate profits for the Partnership.
For the period January 1, 2010 through December 31,
2010 the average allocation by commodity market sector for each of
the Funds was as follows:
CMF Altis Partners Master Fund L.P.
Currencies |
18.5 | % | ||
Energy |
13.5 | % | ||
Grains |
5.6 | % | ||
Indices |
20.6 | % | ||
Interest Rates Non-U.S. |
11.0 | % | ||
Interest Rates U.S. |
7.5 | % | ||
Livestock |
1.0 | % | ||
Metals |
15.4 | % | ||
Softs |
6.9 | % |
CMF Sasco Master Fund L.P
Energy |
100.0 | % |
Waypoint Master Fund L.P
Currencies |
62.1 | % | ||
Energy |
1.6 | % | ||
Grains |
1.5 | % | ||
Indices |
9.8 | % | ||
Interest Rates Non-U.S. |
18.5 | % | ||
Interest Rates U.S. |
4.3 | % | ||
Metals |
1.4 | % | ||
Softs |
0.8 | % |
11
PGR Master Fund L.P
Currencies |
9.3 | % | ||
Energy |
10.8 | % | ||
Grains |
3.8 | % | ||
Indices |
27.0 | % | ||
Interest Rates Non-U.S. |
21.0 | % | ||
Interest Rates U.S. |
10.4 | % | ||
Livestock |
0.4 | % | ||
Metals |
11.7 | % | ||
Softs |
5.6 | % |
Blackwater Master Fund L.P
Currencies |
26.6 | % | ||
Energy |
11.7 | % | ||
Grains |
7.8 | % | ||
Indices |
23.0 | % | ||
Interest Rates Non-U.S. |
12.3 | % | ||
Interest Rates U.S. |
6.4 | % | ||
Livestock |
1.9 | % | ||
Metals |
10.1 | % | ||
Softs |
0.2 | % |
12
(a) Liquidity.
The Partnership does not engage in sales of goods or services. Its assets are its (i)
investments in Funds, (ii) equity in its trading account, consisting of cash and cash equivalents,
net unrealized appreciation on open futures and 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, 2010.
To
minimize the risk relating to low margin deposits, the
Partnership/Funds follow certain trading
policies, including:
(i) | The Partnership/Funds invests their assets only in commodity interests that the Advisors believe 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 Advisors believe will permit them to enter and exit trades without noticeably moving the market. | ||
(ii) | An Advisor will not initiate additional positions in any commodity 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. | ||
(iv) | The Partnership/Funds do not employ the trading technique commonly known as pyramiding, in which the speculator uses unrealized profits on existing positions as margin for the purchase or sale of additional positions in the same or related commodities. | ||
(v) | The Partnership/Funds do not utilize borrowings other than short-term borrowings if the Partnership/Funds take 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/Funds. Spreads and Straddles describe commodity futures trading strategies involving the simultaneous buying and selling of futures contracts on the same commodity but involving different delivery dates or markets. | ||
(vii) | The Partnership/Funds will not permit the churning of their commodity trading accounts. The term churning refers to the practice of entering and exiting trades with a frequency unwarranted by legitimate efforts to profit from the trades, indicating the desire to generate commission income. |
From January 1, 2010 through December 31, 2010, the Partnerships average margin to equity
ratio (i.e., the percentage of assets on deposit required for margin) was approximately 15.8%. 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.
The risk to the limited partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. The limited liability is a consequence of the
organization of the Partnership as a limited partnership under applicable law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership/Funds due to market changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
13
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
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 because 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 bears 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.
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 are may be subject. These monitoring systems generally allow the
General Partner to statistically analyze actual trading results with risk-adjusted performance
indicators and correlation statistics. In addition, online monitoring systems provide account
analysis of futures, exchange-cleared swaps, 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.)
Other than the risks inherent in commodity futures and other derivatives, 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 under certain
circumstances including a decrease in net asset value per Redeemable Unit to less than $400 as of
the close of business on any trading day.
(b) Capital Resources.
(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, additions,
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 fees, administrative fees and advisory fees. The
level of these expenses is dependent upon 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 its Redeemable Units at their net asset value as of the last
day of each month, on three business days 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, 2010, 20,961.9097 Redeemable Units were redeemed totaling $29,482,940. For the year
ended December 31, 2009, 26,312.7107 Redeemable Units were redeemed totaling $38,177,873. For the
year ended December 31, 2008, 32,691.6051 Redeemable Units were redeemed totaling $46,200,870.
14
The Partnership continues to offer Redeemable Units at the net asset value per unit as of the
end of each month. For the year ended December 31, 2010, there were additional subscriptions of
26,464.2572 Redeemable Units totaling $37,194,829. For the year ended December 31, 2009, there were
additional subscriptions of 32,652.7934 Redeemable Units totaling $47,627,000 and General Partners
contribution representing 1,173.6036 Unit equivalents totaling $1,700,000. For the year ended
December 31, 2008, there were additional subscriptions of 33,621.0347 Redeemable Units totaling
$45,104,000.
(c) Results of Operations.
For the year ended December 31, 2010, the net asset value per Redeemable Unit increased 5.2%
from $1,406.38 to $1,479.60. For the year ended December 31, 2009, the net asset value per
Redeemable Unit decreased 6.6% from $1,506.43 to $1,406.38. For the year ended December 31, 2008,
the net asset value per Redeemable Unit increased 19.4% from $1,261.98 to $1,506.43.
The Partnership experienced a net trading gain of $21,911,201 before brokerage fees and
expenses in 2010. Gains were primarily attributed to the Partnerships/Funds trading in
currencies, grains, U.S. and non-U.S. interest rates, metals and softs and were partially
offset by losses in energy, livestock and indices. The net trading gain or
loss for the Partnership/Funds are discussed on page 35 under Item 8.
Financial Statements and Supplementary Data.
In 2010, the most significant trading gains were experienced within the fixed income sector
from long positions in European, U.S., and Japanese fixed-income futures. In this sector, prices
increased during the first quarter on concerns that lending restrictions in China, possible
reductions in U.S. stimulus measures, and Greeces fiscal struggles might stifle the global
economic rebound. Prices were then pressured higher during the second quarter amid an unexpected
drop in U.S. consumer confidence, increased regulatory scrutiny of the financial industry, and the
growing European debt crisis. During the third quarter, prices continued to climb higher due to
concern that European governments may struggle to repay their debt and Chinese economic growth may
be slowing. Within the currency markets, gains were achieved primarily during May, September and
December. During May, short positions in the euro versus the U.S. dollar posted gains as the euro
continued to weaken amid concerns over the Greek debt crisis. During September, long positions in
the Australian dollar versus the U.S. dollar as the value of the Australian dollar rose against
these currencies amid speculation that the Reserve Bank of Australia may raise interest rates in
October. During December, short positions in the British pound versus the Australian dollar,
Japanese yen, and Swiss franc resulted in gains as the value of the British pound declined against
these currencies following lower-than-expected mortgage approval figures in the United Kingdom.
Additional gains were experienced from long positions in the Australian dollar, Brazilian real and
South African rand versus the U.S. dollar as the value of these currencies rose against the U.S.
dollar after better-than-expected economic data spurred speculation that global growth is gathering
momentum, boosting demand for higher-yielding and commodity-driven currencies. Within the
agricultural complex, gains were experienced from long futures positions in the soybean complex and
corn as prices increased after the U.S. Department of Agriculture said domestic and world supplies
of these crops will be smaller than forecast and adverse weather threatened crops in South America.
Further gains were recorded in October from long positions in sugar futures as prices rose amid
worries that dry weather and port delays will curb shipments from Brazil, the worlds biggest
producer of sugar.
A portion of the
Partnerships gains for the year was offset by losses recorded in the energy markets from long futures positions in crude oil and its
related products as prices declined amid speculation that Chinas slowing economic activity and European sovereign debt problems would
reduce energy demand.
The
Partnership experienced a net trading gain of $808,740 before brokerage fees and
expenses in 2009. Gains were primarily attributed to the Partnerships/Funds trading in
currencies, energy, grains, lumber and metals and were partially offset by losses in livestock,
indices, U.S. and non-U.S. interest rates and softs.
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.
Sharp reversals in the equity market resulted in losses for the Partnership. Losses were also
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.
15
Interest income is earned on 100% of the Partnerships average daily equity maintained in cash
(or the Partnerships allocable portion of a Funds) in its account during each month at the 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. Interest income for the three and twelve months ended December 31, 2010 increased by
$41,384 and $42,139, respectively, as compared to the corresponding periods in 2009. 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. The increase is due to higher U.S. Treasury bill rates as compared to the corresponding
periods in 2009.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance,
subscriptions and redemptions.
Brokerage fees and clearing fees for the three and twelve months ended December 31, 2010 increased by $102,146 and
$193,173, respectively, as compared to the corresponding periods in 2009. The increase in brokerage
fees is primarily due to higher average net assets during the three and twelve months ended
December 31, 2010, as compared to the corresponding periods in 2009.
Management fees are calculated as a percentage of the Partnerships adjusted net asset value
on the last day of each month and are affected by trading performance, subscriptions and redemptions.
Management fees for the three months ended December 31, 2010 decreased by $4,583 due to lower net
assets during the three months ended December 31, 2010 and for the twelve months ended December 31,
2010 increased by $45,117, due to higher average net assets during the twelve months ended December
31, 2010, as compared to the corresponding periods in 2009.
Administrative fees are paid to the General Partner for administering the business and affairs
of the Partnership. These fees are calculated as a percentage of the Partnerships adjusted net
asset value on the last day of each month and are affected by trading performance, subscriptions and
redemptions. Administrative fees for the three and twelve months ended December 31, 2010 increased
by $12,057 and $25,002, respectively, as compared to the corresponding periods in 2009. The
increase in administrative fees is primarily due to higher average
adjusted net assets during the three and
twelve months ended December 31, 2010, as compared to the corresponding periods in 2009.
Incentive fees are based on the new trading profits generated by each Advisor at the end of
the quarter, as defined in the management agreements between the Partnership, the General Partner
and each Advisor. Trading performance for the three and twelve months ended December 31, 2010
resulted in incentive fees accrual of $500,938 and $917,614, respectively. Trading performance for
the three and twelve months ended December 31, 2009, resulted in incentive fees accrual of $42,297
and $1,307,243, respectively.
The Partnership pays professional fees, which generally include legal and accounting expenses.
Professional fees for the years ended December 31, 2010 and 2009 were $584,021 and $370,746,
respectively.
The Partnership pays other expenses, which generally include filing, reporting and data
processing fees. Other expenses for the years ended December 31, 2010 and 2009 were $74,598 and
$52,782, respectively.
The Partnership experienced a net trading gain of $45,599,249 before brokerage fees and
expenses in 2008. Gains were primarily attributed to the Partnerships/Funds trading in
currencies, energy, grains, indices, lumber, U.S. and non-U.S. interest rates, livestock, metals
and 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 all of the
sectors.
Profits were primarily realized from trading in fixed income, equity indices, and energy. The
Partnership was 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. The Partnership also realized 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
16
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.
In the General Partners opinion, the Advisors continue to employ trading methods and produce
results consistent with their expected performance given market conditions and the objectives of
the Partnership. The General Partner continues to monitor the Advisors performance on a daily,
weekly, monthly and annual basis to ensure that these objectives are met.
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 Advisors, the General Partner considered
past performance, trading style, volatility of markets traded and fee requirements.
The General Partner may modify or terminate the
allocation of assets among the Advisors and may allocate assets to
additional advisors at any time. Each Advisors percentage
allocation and trading program is described in the over
view section of this Item 7.
(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 their 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 market securities, 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/Funds 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 unit holders, creditors, and regulators, is free of material errors.
(g) Critical Accounting Policies.
Partnerships and the Funds Investments. All commodity interests held by the Partnership and
the Funds (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
17
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.
Partnerships and the Funds Fair Value Measurements. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date under current market conditions. The fair value
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable
inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in
its entirety falls shall be determined based on the lowest level input that is significant to the
fair value measurement in its entirety. Management has concluded that based on available
information in the marketplace, the Partnerships and the Funds Level 1 assets and liabilities are
actively traded.
Accounting principles generally accepted in the United States of America (GAAP) also
requires the need to use judgment in determining if a formerly active market has become inactive
and in determining fair values when the market has become inactive. Management has concluded that
based on available information in the marketplace, there has not been a significant decrease in the
volume and level of activity in the Partnerships and the Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances, and
settlements in their reconciliation of Level 3 fair value measurements (i.e. to present such items
on a gross basis rather than on a net basis), and make disclosures regarding the level of
disaggregation and the inputs and valuation techniques used to measure fair value for measurements
that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
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 that derive
fair values for those assets from observable inputs (Level 2). Investments in funds (other
commodity pools) where there are no other rights or obligations inherent within the ownership
interest held by the Partnership are priced based on the end of the day net asset value (Level 2).
The value of the Partnerships investment in Funds reflects its proportional interest in the Funds.
As of and for the years ended December 31, 2010 and 2009, 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). The gross
presentation of the fair value of the Partnerships derivatives by instrument type is shown in Note
4, Trading Activities on the financial statements.
Futures Contracts. The Partnership and the Funds trade futures contracts and exchange cleared
swaps. 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. 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. Realized gains (losses) and changes in unrealized gains (losses) on futures
contracts are included in the Statements of Income and Expenses.
Forward Foreign Currency Contracts. Foreign currency contracts are contracts where the
Partnership and 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
Partnerships 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.
18
The Partnership and the Funds do not isolate the portion of the results of operations arising
from the effect of changes in foreign exchange rates on investments from fluctuations from changes
in market prices of investments held. Such fluctuations are included in net gain (loss) on
investments 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 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
Funds. A contract is considered offset when all long
positions have been matched with a like number of short positions settling on the same prompt date.
When the contract is closed at the prompt date, the
Partnership and
Funds record a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and the value at the
time it was closed. Transactions in LME contracts require participants to make both initial margin
deposits of cash or other assets and variation margin deposits, through the broker, directly with
the LME. Realized gains (losses) and changes in unrealized gains (losses) on metal contracts are
included in the Statements of Income and Expenses.
Options. The Partnership and the Funds may purchase and write (sell) both exchange-listed and
OTC options on commodities or financial instruments. An option is a contract allowing, but not
requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial
instrument at a specified price during a specified time period. The option premium is the total
price paid or received for the option contract. When the Partnership and 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 Partnership and the Funds purchase 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.
19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Introduction
The Partnership/Funds are speculative commodity pools. The market sensitive instruments held
by them 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 main
line of business.
The risk to the limited partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of Partnership
assets and undistributed profits. This limited liability is a consequence of the organization of
the Partnership as a limited partnership under applicable law.
Market movements result in frequent changes in the fair market value of the
Partnerships/Funds open positions and, consequently, in its 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 rapidly acquires and liquidates both long and short positions in a wide range
of different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Partnerships past performance is not necessarily
indicative of its 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 Trading Value at Risk
The following quantitative disclosures regarding the Partnerships 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 and Section 21E of the Securities Exchange
Act of 1934, as amended). 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 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 open positions including investments in
other partnerships, is directly reflected in the Partnerships earnings (realized and unrealized)
and cash balances. Exchange maintenance margin requirements have been used by the Partnership 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 intervals. 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.
20
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.
The
fair value of the Partnerships/Funds futures and forward
contracts does not have any
optionality component. However, the Advisors may 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 this instrument is a futures contract, the futures
margin, and where this 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. Some of 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. The first two trading value at risk tables
reflect the market sensitive instruments held by the Partnership directly and through its
investments in the Funds. The remaining trading Value at Risk tables reflect the market sensitive
instruments held by the Partnership directly 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, 2010 and 2009. As of December 31, 2010, the
Partnerships total capitalization was $183,525,601.
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 3,742,488 | 2.05 | % | ||||
Energy |
3,712,642 | 2.02 | % | |||||
Grains |
610,757 | 0.33 | % | |||||
Indices |
3,061,953 | 1.67 | % | |||||
Interest Rates U.S. |
653,137 | 0.36 | % | |||||
Interest Rates Non-U.S. |
1,216,750 | 0.66 | % | |||||
Livestock |
268,789 | 0.15 | % | |||||
Lumber |
1,435 | 0.00 | %* | |||||
Metals |
1,427,354 | 0.78 | % | |||||
Softs |
756,573 | 0.41 | % | |||||
Total |
$ | 15,451,878 | 8.43 | % | ||||
* | Due to rounding. |
As of December 31, 2009, the Partnerships total capitalization was $166,705,672.
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 2,371,409 | 1.42 | % | ||||
Energy |
8,063,378 | 4.83 | % | |||||
Grains |
510,287 | 0.31 | % | |||||
Indices |
2,931,969 | 1.76 | % | |||||
Interest Rates U.S. |
1,079,007 | 0.65 | % | |||||
Interest Rates Non-U.S. |
1,723,417 | 1.03 | % | |||||
Livestock |
77,719 | 0.05 | % | |||||
Lumber |
3,696 | 0.00 | %* | |||||
Metals |
913,618 | 0.55 | % | |||||
Softs |
580,880 | 0.35 | % | |||||
Total |
$ | 18,255,380 | 10.95 | % | ||||
* | Due to rounding. |
21
The following tables indicate the trading Value at Risk associated with the Partnerships
investments and investments in other Partnerships by market category as of December 31, 2010 and
December 31, 2009, the highest and lowest value at any point and the average value during the
years. All open position trading risk exposures have been included in calculating the figures set
forth below. As of December 31, 2010, the Partnerships Value at Risk for the portion of its assets
that are traded directly was as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Currencies |
$ | 1,070,681 | 0.58 | % | $ | 8,643,224 | $ | 1,620,748 | $ | 2,949,106 | ||||||||||
Energy |
756,948 | 0.41 | % | 1,430,685 | 440,556 | 761,191 | ||||||||||||||
Grains |
318,900 | 0.17 | % | 738,061 | 180,375 | 346,994 | ||||||||||||||
Indices |
1,200,793 | 0.66 | % | 2,979,873 | 798,017 | 1,950,676 | ||||||||||||||
Interest Rates U.S. |
499,400 | 0.27 | % | 1,930,750 | 288,485 | 942,116 | ||||||||||||||
Interest Rates Non-U.S. |
571,973 | 0.31 | % | 3,055,102 | 281,406 | 1,478,558 | ||||||||||||||
Livestock |
145,900 | 0.08 | % | 268,450 | 32,850 | 111,777 | ||||||||||||||
Metals |
779,984 | 0.43 | % | 1,077,058 | 286,188 | 619,746 | ||||||||||||||
Softs |
476,838 | 0.26 | % | 690,412 | 192,635 | 402,287 | ||||||||||||||
Total |
$ | 5,821,417 | 3.17 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of December 31, 2009, the Partnerships Value at Risk for the portion of its assets that
are traded directly was as follows:
December 31, 2009
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Currencies |
$ | 1,964,328 | 1.18 | % | $ | 10,152,349 | $ | 951,436 | $ | 5,360,065 | ||||||||||
Energy |
558,730 | 0.33 | % | 14,726,004 | 352,687 | 3,201,365 | ||||||||||||||
Grains |
423,218 | 0.25 | % | 1,331,537 | 247,378 | 608,962 | ||||||||||||||
Indices |
2,445,305 | 1.47 | % | 5,381,090 | 10,000 | 2,726,142 | ||||||||||||||
Interest Rates U.S. |
985,850 | 0.59 | % | 2,930,108 | 341,125 | 1,488,257 | ||||||||||||||
Interest Rates Non-U.S. |
1,450,748 | 0.87 | % | 6,017,060 | 1,317,272 | 2,593,218 | ||||||||||||||
Livestock |
50,150 | 0.03 | % | 384,144 | 42,050 | 120,965 | ||||||||||||||
Metals |
383,493 | 0.23 | % | 1,329,686 | 226,929 | 707,811 | ||||||||||||||
Softs |
393,558 | 0.24 | % | 1,015,509 | 288,753 | 615,627 | ||||||||||||||
Total |
$ | 8,655,380 | 5.19 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of December 31, 2010, Altis Masters total capitalization was $63,685,511. The Partnership
owned approximately 27.6% of Altis Master. As of December 31, 2010, the Altis Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Altis for
trading) was as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk * | |||||||||||||||
Currencies |
$ | 3,113,522 | 4.89 | % | $ | 3,481,070 | $ | 143,363 | $ | 2,231,735 | ||||||||||
Energy |
1,077,195 | 1.69 | % | 2,479,469 | 236,868 | 1,086,124 | ||||||||||||||
Grains |
483,876 | 0.76 | % | 915,463 | 136,257 | 435,755 | ||||||||||||||
Indices |
1,251,469 | 1.97 | % | 7,740,340 | 220,942 | 2,503,689 | ||||||||||||||
Interest Rates U.S. |
191,408 | 0.30 | % | 1,193,750 | 110,116 | 570,835 | ||||||||||||||
Interest Rates Non-U.S. |
733,663 | 1.15 | % | 1,849,973 | 183,212 | 1,000,258 | ||||||||||||||
Livestock |
107,232 | 0.17 | % | 170,400 | 22,320 | 82,718 | ||||||||||||||
Lumber |
5,200 | 0.01 | % | 27,500 | 1,100 | 9,287 | ||||||||||||||
Metals |
1,079,175 | 1.69 | % | 2,589,641 | 241,177 | 1,152,447 | ||||||||||||||
Softs |
747,574 | 1.17 | % | 937,879 | 199,670 | 499,464 | ||||||||||||||
Total |
$ | 8,790,314 | 13.80 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
22
As of December 31, 2009, Altis Masters total capitalization was $84,307,758. The Partnership
owned approximately 33.6% of Altis Master. As of December 31, 2009, the Altis Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Altis for
trading) was as follows:
December 31, 2009
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk * | |||||||||||||||
Currencies |
$ | 1,211,550 | 1.44 | % | $ | 2,264,297 | $ | 598,360 | $ | 1,468,143 | ||||||||||
Energy |
247,290 | 0.29 | % | 2,143,145 | 247,290 | 1,110,020 | ||||||||||||||
Grains |
259,135 | 0.31 | % | 1,137,757 | 169,964 | 495,014 | ||||||||||||||
Indices |
1,448,404 | 1.72 | % | 3,383,400 | 38,250 | 1,540,807 | ||||||||||||||
Interest Rates U.S. |
277,254 | 0.33 | % | 1,344,800 | 265,892 | 688,612 | ||||||||||||||
Interest Rates Non-U.S. |
811,515 | 0.96 | % | 2,354,713 | 801,993 | 1,420,442 | ||||||||||||||
Livestock |
82,050 | 0.10 | % | 302,700 | 76,770 | 154,601 | ||||||||||||||
Lumber |
11,000 | 0.01 | % | 50,600 | 3,600 | 20,792 | ||||||||||||||
Metals |
1,577,754 | 1.87 | % | 1,948,265 | 507,229 | 1,335,488 | ||||||||||||||
Softs |
557,507 | 0.66 | % | 815,920 | 310,795 | 531,234 | ||||||||||||||
Total |
$ | 6,483,459 | 7.69 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of December 31, 2009, Avant Masters total capitalization was $11,500,184. The Partnership
owned approximately 100.0% of Avant Master. As of December 31, 2009, the Avant Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Avant for
trading) was as follows:
December 31, 2009
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Energy |
$ | 202,307 | 1.76 | % | $ | 3,761,786 | $ | 157,278 | $ | 1,493,392 | ||||||||||
Totals |
$ | 202,307 | 1.76 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of December 31, 2010, Sasco Masters total capitalization was $81,683,630. The Partnership
owned approximately 22.8% of Sasco Master. As of December 31, 2010, the Sasco Masters Value at
Risk for its assets (including the portion of the Partnerships assets allocated to Sasco for
trading) was as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Energy |
$ | 9,618,175 | 11.77 | % | $ | 16,002,038 | $ | 2,149,045 | $ | 10,344,808 | ||||||||||
Totals |
$ | 9,618,175 | 11.77 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
23
As of December 31, 2009, Sasco Masters total capitalization was $36,905,334. The
Partnership owned approximately 65.1% of Sasco Master. As of December 31, 2009, the Sasco Masters
Value at Risk for its assets (including the portion of the Partnerships assets allocated to Sasco
for trading) was as follows:
December 31, 2009
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Energy |
$ | 11,089,480 | 30.05 | % | $ | 14,491,728 | $ | 164,835 | $ | 6,820,042 | ||||||||||
Totals |
$ | 11,089,480 | 30.05 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of December 31, 2010, Waypoint Masters total capitalization was $41,247,646. The
Partnership owned approximately 52.0% of Waypoint Master. As of December 31, 2010, the Waypoint
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Waypoint for trading) was as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk * | |||||||||||||||
Currencies |
$ | 1,878,430 | 4.55 | % | $ | 11,817,974 | $ | 633,809 | $ | 5,198,266 | ||||||||||
Indices |
901,236 | 2.18 | % | 1,613,660 | 100,993 | 790,428 | ||||||||||||||
Metals |
80,750 | 0.20 | % | 216,436 | 31,500 | 66,207 | ||||||||||||||
Total |
$ | 2,860,416 | 6.93 | % | ||||||||||||||||
* | For the period March 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk |
As of December 31, 2010, PGR Masters total capitalization was $20,386,581. The Partnership
owned approximately 74.9% of PGR Master. As of December 31, 2010, the PGR Masters Value at Risk
for its assets (including the portion of the Partnerships assets allocated to PGR for trading) was
as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk * | |||||||||||||||
Currencies |
$ | 183,120 | 0.90 | % | $ | 183,120 | $ | 103,066 | $ | 154,058 | ||||||||||
Energy |
252,600 | 1.24 | % | 252,600 | 107,024 | 195,337 | ||||||||||||||
Grains |
111,250 | 0.54 | % | 111,250 | 43,750 | 83,625 | ||||||||||||||
Indices |
617,024 | 3.03 | % | 621,232 | 385,104 | 524,198 | ||||||||||||||
Interest Rates U.S. |
80,800 | 0.40 | % | 141,150 | 66,450 | 81,150 | ||||||||||||||
Interest Rates Non-U.S. |
180,603 | 0.89 | % | 265,434 | 135,161 | 161,976 | ||||||||||||||
Livestock |
10,000 | 0.05 | % | 11,000 | 6,000 | 9,500 | ||||||||||||||
Metals |
162,000 | 0.79 | % | 162,000 | 69,500 | 125,875 | ||||||||||||||
Softs |
98,003 | 0.48 | % | 109,657 | 57,757 | 89,793 | ||||||||||||||
Total |
$ | 1,695,400 | 8.32 | % | ||||||||||||||||
* | For the period November 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk |
24
As of December 31, 2010, Blackwater Masters total capitalization was $25,938,011. The
Partnership owned approximately 77.3% of Blackwater Master. As of December 31, 2010, the Blackwater
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Blackwater for trading) was as follows:
December 31, 2010
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk * | |||||||||||||||
Currencies |
$ | 903,667 | 3.48 | % | $ | 903,667 | $ | 577,300 | $ | 765,383 | ||||||||||
Energy |
357,370 | 1.38 | % | 508,250 | 184,174 | 350,610 | ||||||||||||||
Grains |
97,000 | 0.37 | % | 97,000 | 30,000 | 48,500 | ||||||||||||||
Indices |
756,741 | 2.92 | % | 1,256,105 | 756,741 | 941,241 | ||||||||||||||
Interest Rates U.S. |
52,250 | 0.20 | % | 171,550 | 14,700 | 33,475 | ||||||||||||||
Interest Rates Non-U.S. |
397,172 | 1.53 | % | 445,693 | 86,447 | 358,644 | ||||||||||||||
Livestock |
111,000 | 0.43 | % | 111,000 | 40,000 | 97,000 | ||||||||||||||
Metals |
240,867 | 0.93 | % | 346,947 | 240,866 | 283,148 | ||||||||||||||
Total |
$ | 2,916,067 | 11.24 | % | ||||||||||||||||
* | For the period November 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk |
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 their foreign cash balances not needed
for margin. However, these balances (as well as any market risk they represent) are immaterial.
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/Funds manage their primary market risk exposures constitute
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E
of the Securities 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/Funds 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 as of December 31,
2010 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 the value of its 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 United
States and the other G-8 countries. However, the Partnership/Funds also take futures positions on
the government debt of smaller nations.
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, 2010 the
25
Partnerships/Funds primary exposures were in the Hong Kong Futures Exchange (HKFE) and Sydney
Futures Exchange (SFE) stock indices. The General Partner anticipates little, if
any, trading in non-G-8 stock indices. 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 palladium, platinum and silver. Although the Advisors will from time to time trade
base metals such as copper, the principal market exposures of the Partnership/Funds have
consistently been in the palladium, platinum and silver.
Softs. The Partnerships/Funds primary commodities exposure is to agricultural price
movements which are often directly affected by severe or unexpected weather conditions. Coffee,
cotton and sugar accounted for the bulk of the Partnerships/Funds commodity exposure.
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, 2010.
Foreign Currency Balances. The Partnerships/Funds primary foreign currency balances
are in Japanese yen, Euro and British pounds. The Advisors regularly convert foreign currency
balances to 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 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.
The General Partner monitors the Partnerships/Funds performance and the concentration
of 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 the
Advisors to close out positions as well as enter positions traded 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.
The Advisors apply their own risk management policies to their 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.
26
Item 8. Financial Statements and Supplementary Data.
EMERGING CTA PORTFOLIO L.P.
The following financial statements and related items of the Partnership are filed under
this Item 8: Oath or Affirmation, Managements Report on Internal Control over Financial Reporting,
Reports of Independent Registered Public Accounting Firms, for the years ended December 31, 2010, 2009,
and 2008; Statements of Financial Condition at December 31, 2010 and 2009; Condensed Schedules of Investments at
December 31, 2010 and 2009; Statements of Income and Expenses for the years ended December 31, 2010, 2009, and 2008;
Statements of Changes in Partners Capital for the years ended December 2010, 2009, and 2008; and Notes to Financial
Statements. Additional financial information has been filed as Exhibits to this Form 10-K.
27
To the Limited
Partners of
Emerging CTA Portfolio L.P.
Emerging CTA Portfolio L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
By: | Walter Davis |
President and Director
Ceres Managed Futures LLC
General Partner,
Emerging CTA Portfolio L.P.
Ceres Managed Futures LLC
522 Fifth Avenue
14th Floor
New York, NY 10036
212-296-1999
522 Fifth Avenue
14th Floor
New York, NY 10036
212-296-1999
28
Managements
Report on Internal Control Over Financial Reporting
The management of Emerging CTA Portfolio L.P. (the Partnership),
Ceres 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 Emerging CTA Portfolio L.P. has assessed the
effectiveness of the Partnerships internal control over
financial reporting as of December 31, 2010. 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, 2010 based on the criteria
referred to above.
Walter Davis President and Director Ceres Managed Futures LLC General Partner, Emerging CTA Portfolio L.P. |
Jennifer Magro Chief Financial Officer and Director Ceres Managed Futures LLC General Partner, Emerging CTA Portfolio L.P. |
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Emerging CTA Portfolio L.P.:
Emerging CTA Portfolio L.P.:
We have audited the accompanying statements of financial condition of Emerging CTA Portfolio L.P.
(the Partnership), including the condensed schedules of investments, as of December 31, 2010 and
2009, and the related statements of income and expenses, and changes in partners capital for the
years 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
audits. The financial statements of the Partnership for the year ended December 31, 2008 were
audited by other auditors whose report, dated March 26, 2009, expressed an unqualified opinion on
those statements.
We conducted our audits 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 audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such 2010 and 2009 financial statements present fairly, in all material respects,
the financial position of Emerging CTA Portfolio L.P. as of December 31, 2010 and 2009, and the
results of its operations and its changes in partners capital for the years then ended, in
conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 23, 2011
New York, New York
March 23, 2011
30
Report of Independent Registered Public Accounting Firm
To the Partners of
Emerging CTA Portfolio L.P.:
Emerging CTA Portfolio L.P.:
In our opinion, the accompanying statement of income and expenses, and statement of changes in
partners capital present fairly, in all material respects, the financial position of Emerging CTA
Portfolio L.P. (formerly known as Citigroup Emerging CTA Portfolio 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.
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
March 26, 2009
31
Emerging CTA
Portfolio L.P.
Statements of Financial Condition
December 31, 2010 and 2009
Statements of Financial Condition
December 31, 2010 and 2009
2010 | 2009 | |||||||
Assets:
|
||||||||
Investment in Funds, at fair value (Note 5)
|
$ | 93,009,857 | $ | 63,868,859 | ||||
Equity in trading account:
|
||||||||
Cash (Note 3c)
|
85,698,856 | 94,883,891 | ||||||
Cash margin (Note 3c)
|
5,943,791 | 11,750,313 | ||||||
Net unrealized appreciation on open futures contracts
|
1,516,219 | 744,126 | ||||||
Net unrealized appreciation on open forward contracts
|
19,265 | | ||||||
Options purchased, at fair value (cost $854,880 at
December 31, 2010)
|
901,226 | | ||||||
187,089,214 | 171,247,189 | |||||||
Interest receivable (Note 3c)
|
7,439 | 1,454 | ||||||
Total assets
|
$ | 187,096,653 | $ | 171,248,643 | ||||
Liabilities and Partners Capital:
|
||||||||
Liabilities:
|
||||||||
Net unrealized depreciation on open forward contracts
|
$ | | $ | 1,025,915 | ||||
Accrued expenses:
|
||||||||
Brokerage fees (Note 3c)
|
545,698 | 496,483 | ||||||
Management fees (Note 3b)
|
279,142 | 282,773 | ||||||
Administrative fees (Note 3a)
|
77,685 | 70,693 | ||||||
Incentive fees (Note 3b)
|
500,939 | 42,297 | ||||||
Professional fees
|
71,978 | 50,699 | ||||||
Other
|
35,945 | 12,031 | ||||||
Redemptions payable (Note 6)
|
2,059,665 | 2,562,080 | ||||||
Total liabilities
|
3,571,052 | 4,542,971 | ||||||
Partners Capital: (Notes 1 and 6)
|
||||||||
General Partner, 1,302.6036 unit equivalents outstanding at
December 31, 2010 and 2009, respectively
|
1,927,332 | 1,831,956 | ||||||
Limited Partners, 122,734.7189 and 117,232.3714 Redeemable Units
outstanding at December 31, 2010 and 2009, respectively
|
181,598,269 | 164,873,716 | ||||||
Total partners capital
|
183,525,601 | 166,705,672 | ||||||
Total liabilities and partners capital
|
$ | 187,096,653 | $ | 171,248,643 | ||||
Net asset value per unit
|
$ | 1,479.60 | $ | 1,406.38 | ||||
See accompanying notes to financial statements.
32
Emerging CTA
Portfolio L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Notional ($)/ |
||||||||||||
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased
|
||||||||||||
Currencies
|
200 | $ | 313,957 | 0.17 | % | |||||||
Energy
|
62 | 233,896 | 0.13 | |||||||||
Grains
|
250 | 538,738 | 0.29 | |||||||||
Indices
|
163 | 16,869 | 0.01 | |||||||||
Interest Rates U.S.
|
592 | 135,855 | 0.07 | |||||||||
Interest Rates
Non-U.S.
|
640 | 125,143 | 0.07 | |||||||||
Livestock
|
214 | 259,202 | 0.14 | |||||||||
Metals
|
75 | 315,525 | 0.17 | |||||||||
Softs
|
66 | 18,323 | 0.01 | |||||||||
Total futures contracts purchased
|
1,957,508 | 1.06 | ||||||||||
Futures Contracts Sold
|
||||||||||||
Currencies
|
114 | (56,972 | ) | (0.03 | ) | |||||||
Energy
|
159 | (55,211 | ) | (0.03 | ) | |||||||
Grains
|
75 | (191,587 | ) | (0.10 | ) | |||||||
Indices
|
97 | 156,446 | 0.09 | |||||||||
Interest Rates U.S.
|
6 | 25 | 0.00 | * | ||||||||
Interest Rates
Non-U.S.
|
22 | 7,402 | 0.00 | * | ||||||||
Livestock
|
170 | (207,591 | ) | (0.11 | ) | |||||||
Softs
|
115 | (93,801 | ) | (0.05 | ) | |||||||
Total futures contracts sold
|
(441,289 | ) | (0.23 | ) | ||||||||
Unrealized Appreciation on Forward Contracts
|
||||||||||||
Currencies
|
$ | 76,652,847 | 1,610,313 | 0.88 | ||||||||
Metals
|
92 | 805,081 | 0.44 | |||||||||
Total unrealized appreciation on forward contracts
|
2,415,394 | 1.32 | ||||||||||
Unrealized Depreciation on Forward Contracts
|
||||||||||||
Currencies
|
$ | 69,670,836 | (1,639,341 | ) | (0.89 | ) | ||||||
Metals
|
88 | (756,788 | ) | (0.41 | ) | |||||||
Total unrealized depreciation on forward contracts
|
(2,396,129 | ) | (1.30 | ) | ||||||||
Options Purchased
|
||||||||||||
Calls
|
||||||||||||
Energy
|
106 | 295,740 | 0.16 | |||||||||
Metals
|
109 | 574,070 | 0.31 | |||||||||
Softs
|
11 | 31,416 | 0.02 | |||||||||
Total options purchased
|
901,226 | 0.49 | ||||||||||
Investment in Funds
|
||||||||||||
CMF Altis Partners Master Fund L.P.
|
17,568,791 | 9.57 | ||||||||||
CMF Sasco Master Fund L.P.
|
18,664,413 | 10.17 | ||||||||||
Waypoint Master Fund L.P.
|
21,455,619 | 11.69 | ||||||||||
Blackwater Master Fund LP
|
20,047,327 | 10.92 | ||||||||||
PGR Master Fund LP
|
15,273,707 | 8.32 | ||||||||||
Total investment in Funds
|
93,009,857 | 50.67 | ||||||||||
Total fair value
|
$ | 95,446,567 | 52.01 | % | ||||||||
* Due to rounding.
See accompanying notes to financial statements.
33
Emerging CTA
Portfolio L.P.
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
Notional ($)/ |
||||||||||||
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased
|
||||||||||||
Currencies
|
559 | $ | (127,478 | ) | (0.08 | )% | ||||||
Energy
|
190 | 436,615 | 0.26 | |||||||||
Grains
|
152 | 30,308 | 0.02 | |||||||||
Indices
|
560 | 639,897 | 0.38 | |||||||||
Interest Rates U.S.
|
930 | (277,236 | ) | (0.17 | ) | |||||||
Interest Rates
Non-U.S.
|
1,027 | (103,653 | ) | (0.06 | ) | |||||||
Livestock
|
22 | (3,650 | ) | (0.00 | )* | |||||||
Metals
|
91 | 42,022 | 0.03 | |||||||||
Softs
|
194 | 253,960 | 0.15 | |||||||||
Total futures contracts purchased
|
890,785 | 0.53 | ||||||||||
Futures Contracts Sold
|
||||||||||||
Currencies
|
119 | 110,339 | 0.07 | |||||||||
Energy
|
89 | (372,022 | ) | (0.22 | ) | |||||||
Grains
|
285 | (208,494 | ) | (0.13 | ) | |||||||
Indices
|
102 | (60,061 | ) | (0.03 | ) | |||||||
Interest Rates U.S.
|
353 | 224,031 | 0.13 | |||||||||
Interest Rates
Non-U.S.
|
406 | 122,499 | 0.07 | |||||||||
Livestock
|
31 | (840 | ) | (0.00 | )* | |||||||
Metals
|
12 | 31,850 | 0.02 | |||||||||
Softs
|
28 | 6,039 | 0.00 | * | ||||||||
Total futures contracts sold
|
(146,659 | ) | (0.09 | ) | ||||||||
Unrealized Appreciation on Forward Contracts
|
||||||||||||
Currencies
|
$ | 36,468,535 | 495,276 | 0.30 | ||||||||
Metals
|
271 | 1,901,753 | 1.14 | |||||||||
Total unrealized appreciation on forward contracts
|
2,397,029 | 1.44 | ||||||||||
Unrealized Depreciation on Forward Contracts
|
||||||||||||
Currencies
|
$ | 74,168,842 | (1,420,713 | ) | (0.85 | ) | ||||||
Metals
|
273 | (2,002,231 | ) | (1.20 | ) | |||||||
Total unrealized depreciation on forward contracts
|
(3,422,944 | ) | (2.05 | ) | ||||||||
Investment in Funds
|
||||||||||||
CMF Altis Partners Master Fund LP
|
28,338,180 | 17.00 | ||||||||||
CMF Avant Master Fund LP
|
11,500,341 | 6.90 | ||||||||||
CMF Sasco Master Fund LP
|
24,030,338 | 14.41 | ||||||||||
Total investment in Funds
|
63,868,859 | 38.31 | ||||||||||
Total fair value
|
$ | 63,587,070 | 38.14 | % | ||||||||
* Due to rounding.
See accompanying notes to financial statements.
34
Emerging CTA
Portfolio L.P.
Statements of Income and Expenses
for the years ended December 31, 2010, 2009 and 2008
Statements of Income and Expenses
for the years ended December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Income:
|
||||||||||||
Net gains (losses) on trading of commodity interests and
investment in Funds:
|
||||||||||||
Net realized gains (losses) on closed contracts
|
$ | 4,932,111 | $ | 3,589,030 | $ | 23,060,216 | ||||||
Net realized gains (losses) on investment in Funds
|
6,862,477 | 3,304,237 | 19,350,420 | |||||||||
Change in net unrealized gains (losses) on open contracts
|
1,863,619 | (5,150,348 | ) | 4,099,625 | ||||||||
Change in net unrealized gains (losses) on investments in Funds
|
8,252,994 | (934,179 | ) | (911,012 | ) | |||||||
Gain (loss) from trading, net
|
21,911,201 | 808,740 | 45,599,249 | |||||||||
Interest income (Note 3c)
|
100,062 | 96,229 | 1,433,012 | |||||||||
Interest income from investment in Funds
|
89,453 | 51,147 | 605,043 | |||||||||
Total income (loss)
|
22,100,716 | 956,116 | 47,637,304 | |||||||||
Expenses:
|
||||||||||||
Brokerage fees (Note 3c)
|
7,138,973 | 6,945,800 | 6,174,578 | |||||||||
Management fees (Note 3b)
|
3,410,998 | 3,365,881 | 3,216,409 | |||||||||
Administrative fees (Note 3a)
|
866,472 | 841,470 | 809,580 | |||||||||
Incentive fees (Note 3b)
|
917,614 | 1,307,243 | 5,895,126 | |||||||||
General Partner incentive fees (Note 3a)
|
| | 1,750,838 | |||||||||
Professional fees
|
584,021 | 370,746 | 343,452 | |||||||||
Other
|
74,598 | 52,782 | 38,466 | |||||||||
Total expenses
|
12,992,676 | 12,883,922 | 18,228,449 | |||||||||
Net income (loss)
|
$ | 9,108,040 | $ | (11,927,806 | ) | $ | 29,408,855 | |||||
Net income (loss) per unit (Note 7)
|
$ | 73.22 | $ | (102.13 | ) | $ | 244.45 | |||||
Weighted average units outstanding
|
122,411.2378 | 115,611.6683 | 118,955.0099 | |||||||||
See accompanying notes to financial statements.
35
Emerging CTA
Portfolio L.P.
Statements of Changes in Partners Capital
for the years ended December 31, 2010, 2009 and 2008
Statements of Changes in Partners Capital
for the years ended December 31, 2010, 2009 and 2008
Limited |
General |
|||||||||||
Partners | Partner | Total | ||||||||||
Partners Capital at December 31, 2007
|
$ | 138,771,008 | $ | 162,796 | $ | 138,933,804 | ||||||
Net income (loss)
|
29,377,322 | 31,533 | 29,408,855 | |||||||||
Subscriptions of 33,621.0347 Redeemable Units
|
45,104,000 | | 45,104,000 | |||||||||
Redemptions of 32,691.6051 Redeemable Units
|
(46,200,870 | ) | | (46,200,870 | ) | |||||||
Partners Capital at December 31, 2008
|
167,051,460 | 194,329 | 167,245,789 | |||||||||
Net income (loss)
|
(11,865,433 | ) | (62,373 | ) | (11,927,806 | ) | ||||||
Subscriptions of 32,652.7934 Redeemable Units and 1,173.6036
General Partner unit equivalents
|
47,627,000 | 1,700,000 | 49,327,000 | |||||||||
Proceeds from Limited Partners redemption fees
|
238,562 | | 238,562 | |||||||||
Redemptions of 26,312.7107 Redeemable Units
|
(38,177,873 | ) | | (38,177,873 | ) | |||||||
Partners Capital at December 31, 2009
|
164,873,716 | 1,831,956 | 166,705,672 | |||||||||
Net income (loss)
|
9,012,664 | 95,376 | 9,108,040 | |||||||||
Subscriptions of 26,464.2572 Redeemable Units
|
37,194,829 | | 37,194,829 | |||||||||
Redemptions of 20,961.9097 Redeemable Units
|
(29,482,940 | ) | | (29,482,940 | ) | |||||||
Partners Capital at December 31, 2010
|
$ | 181,598,269 | $ | 1,927,332 | $ | 183,525,601 | ||||||
Net asset value per unit:
|
2008:
|
$ | 1,506.43 | ||
2009:
|
$ | 1,406.38 | ||
2010:
|
$ | 1,479.60 | ||
See accompanying notes to financial statements.
36
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
1. | Partnership Organization: |
Emerging CTA Portfolio L.P. (the Partnership) is a
limited partnership that was organized on July 7, 2003 under the
partnership laws of the State of New York. The objective of
the Partnership is to achieve capital appreciation through the
allocation of assets to a blind pool of early-stage
commodity trading advisors which engage, directly and
indirectly, in speculative trading of a diversified portfolio of
commodity interests, including futures contracts, options and
forward contracts. The Partnership may also enter into swap and
other derivative transactions with the approval of the General
Partner (defined below). The sectors traded include currencies,
livestock, energy, grains, metals, indices, softs, and U.S. and
non-U.S. interest rates. The Partnership and the Funds, (as
defined in Note 5 Investment in Funds) may trade
futures, forwards and option contracts of any kind. The
commodity interests that are traded by the Partnership and the
Funds are volatile and involve a high degree of market risk.
Between December 1, 2003 (commencement of the offering
period) and August 5, 2004, 20,872 redeemable units of
limited partnership interest (Redeemable Units) were
sold at $1,000 per Redeemable Unit. The proceeds of the initial
offering were held in an escrow account until August 6,
2004, at which time they were remitted to the Partnership for
trading. The Partnership is authorized to sell
300,000 units and continues to offer Redeemable Units to
qualified investors.
Ceres Managed Futures LLC, a Delaware limited liability company,
acts as the general partner (the General Partner)
and commodity pool operator of the Partnership. The General
Partner is wholly owned by Morgan Stanley Smith Barney Holdings
LLC (MSSB Holdings). Morgan Stanley, indirectly
through various subsidiaries, owns a majority equity interest in
MSSB Holdings. Citigroup Global Markets Inc. (CGM),
the commodity broker and a selling agent for the Partnership,
owns a minority equity interest in MSSB Holdings. Citigroup Inc.
(Citigroup), indirectly through various
subsidiaries, wholly owns CGM. Prior to July 31, 2009, the
date as of which MSSB Holdings became its owner, the General
Partner was wholly owned by Citigroup Financial Products Inc., a
wholly owned subsidiary of Citigroup Global Markets Holdings
Inc., the sole owner of which is Citigroup. As of
December 31, 2010, all trading decisions for the
Partnership are made by the Advisors (as defined in
note 3(b)).
The General Partner and each limited partner of the Partnership
(each a Limited Partner) share in the profits and
losses of the Partnership in proportion to the amount of
Partnership interest owned by each except that no Limited
Partner shall be liable for obligations of the Partnership in
excess of such Limited Partners capital contribution and
profits, if any, net of distributions.
The Partnership will be liquidated upon the first to occur of
the following: December 31, 2023; the net asset value per
Redeemable Unit decreases to less than $400 per Redeemable Unit
as of a close of any business day; a decline in net assets after
trading commences to less than $1,000,000; or under certain
other circumstances as defined in the Limited Partnership
Agreement of the Partnership (the Limited Partnership
Agreement).
2. | Accounting Policies: |
a. | Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates. |
37
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
b. | Statement of Cash Flows. The Partnership is not required to provide a Statement of Cash Flows. | |
c. | Partnerships and the Funds Investments. All commodity interests held by the Partnership and the Funds (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. |
Partnerships and the Funds Fair Value
Measurements. Fair value is defined as the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date under current market conditions. The
fair value hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to fair
values derived from unobservable inputs (Level 3). The
level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on
the lowest level input that is significant to the fair value
measurement in its entirety. Management has concluded that based
on available information in the marketplace, the
Partnerships and the Funds Level 1 assets and
liabilities are actively traded.
GAAP also requires the need to use judgment in determining if a
formerly active market has become inactive and in determining
fair values when the market has become inactive. Management has
concluded that based on available information in the
marketplace, there has not been a significant decrease in the
volume and level of activity in the Partnerships and the
Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases,
sales, issuances, and settlements in their reconciliation of
Level 3 fair value measurements (i.e. to present such items on a
gross basis rather than on a net basis), and make disclosures
regarding the level of disaggregation and the inputs and
valuation techniques used to measure fair value for measurements
that fall within either Level 2 or Level 3 of the fair
value hierarchy as required under GAAP.
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
that derive fair values for those assets from observable inputs
(Level 2). Investments in funds (other commodity pools)
where there are no other rights or obligations inherent within
the ownership interest held by the Partnership are priced based
on the end of the day net asset value (Level 2). The value
of the Partnerships investments in the Funds reflects its
proportional interest in the Funds. As of and for the years
ended December 31, 2010 and 2009, the Partnership and the
Funds did not hold any derivative instruments that were priced
at fair value using unobservable inputs through the application
of managements assumptions and internal valuation pricing
38
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
models (Level 3). The gross presentation of the fair value
of the Partnerships derivatives by instrument type is
shown in Note 4, Trading Activities.
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets |
Significant Other |
Unobservable |
||||||||||||||
for Identical |
Observable Inputs |
Inputs |
||||||||||||||
12/31/2010 | Assets (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Investment in Funds
|
$ | 93,009,857 | $ | | $ | 93,009,857 | $ | | ||||||||
Futures
|
1,516,219 | 1,516,219 | | | ||||||||||||
Forwards
|
48,293 | 48,293 | | | ||||||||||||
Options purchased
|
901,226 | 901,226 | | | ||||||||||||
Total assets
|
95,475,595 | 2,465,738 | 93,009,857 | | ||||||||||||
Liabilities
|
||||||||||||||||
Forwards
|
$ | 29,028 | $ | | $ | 29,028 | $ | | ||||||||
Total liabilities
|
29,028 | | 29,028 | | ||||||||||||
Total fair value
|
$ | 95,446,567 | $ | 2,465,738 | $ | 92,980,829 | $ | | ||||||||
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets |
Significant Other |
Unobservable |
||||||||||||||
for Identical |
Observable Inputs |
Inputs |
||||||||||||||
12/31/2009 | Assets (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Investment in Funds
|
$ | 63,868,859 | $ | | $ | 63,868,859 | $ | | ||||||||
Futures
|
744,126 | 744,126 | | | ||||||||||||
Total assets
|
64,612,985 | 744,126 | 63,868,859 | | ||||||||||||
Liabilities
|
||||||||||||||||
Forwards
|
$ | 1,025,915 | $ | 100,478 | $ | 925,437 | $ | | ||||||||
Total liabilities
|
1,025,915 | 100,478 | 925,437 | | ||||||||||||
Total fair value
|
$ | 63,587,070 | $ | 643,648 | $ | 62,943,422 | $ | | ||||||||
d. | Futures Contracts. The Partnership and the Funds trade futures and exchange-cleared swaps contracts. 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 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 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 Funds. When the contract is closed, the Partnership and Funds records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. 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 contracts where the Partnership and 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 Partnerships and Funds net equity therein, representing unrealized gain or loss on the |
39
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
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 Partnership and the Funds do not isolate the portion of the
results of operations arising from the effect of changes in
foreign exchange rates on investments from fluctuations from
changes in market prices of investments held. Such fluctuations
are included in net 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 a like number of short positions settling on the same prompt date. 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. 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. Realized gains (losses) and changes in unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses. | |
g. | Options. The Partnership and the Funds may purchase and write (sell) both exchange-listed and over-the-counter (OTC), options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Partnership and 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 Partnership and the Funds purchase 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. |
GAAP provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements and requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the
Partnerships financial statements to determine whether the
tax positions are more-likely-than-not to be
sustained by the applicable tax authority. Tax positions with
respect to tax at the Partnership level not deemed to meet the
more-likely-than-not threshold would be recorded as
a tax benefit or expense in the current year. The General
Partner has concluded that no provision for income tax is
required in the Partnerships financial statements.
The Partnership files U.S. federal and various state and local
tax returns. No income tax returns are currently under
examination. Generally, the 2007 through 2010 tax years remain
subject to examination by U.S. federal and most state tax
authorities. Management does not believe that there are any
uncertain tax positions that require recognition of a tax
liability.
40
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
i. | Subsequent Events. Management of the Partnership evaluates events that occur after the balance sheet date but before financial statements are filed. Management has assessed the subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements. | |
j. | Net Income (Loss) per Unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 7, Financial Highlights. |
3. | Agreements: |
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 Partnership pays the
General Partner a monthly administration fee equal to
1/24
of 1% (0.5% per year) of month-end Net Assets. Month-end Net
Assets, for the purpose of calculating administrative fees, are
Net Assets, as defined in the Limited Partnership Agreement,
prior to the reduction of the current months management
fees, incentive fee accruals, the General Partners
administrative fee and any redemptions or distributions as of
the end of such month. The Partnership will also pay the General
Partner an incentive fee payable annually equal to 5% of the
Partnerships overall New Trading Profits, as defined in
the Limited Partnership Agreement, earned in each calendar year.
For the years ended December 31, 2010, 2009 and 2008, the
General Partner earned incentive fees of $0, $0, and $1,750,838,
respectively.
b. | Management Agreement: |
The Partnership consists of individually managed accounts where
the underlying advisors will be unknown to the Limited Partners.
The General Partner, on behalf of the Partnership, has entered
into management agreements (the Management
Agreements) with eleven registered commodity trading
advisors (the Advisors). 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 pays the Advisors
a monthly management fee ranging from 1% to 2% per year of
month-end Net Assets allocated to each 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 management fees,
incentive fee accruals, the General Partners
administrative fee and any redemptions or distributions as of
the end of such month. Each Management Agreement may be
terminated by either party.
In addition, the Partnership is obligated to pay each Advisor an
incentive fee, payable quarterly, ranging from 17% to 20% of the
New Trading Profits, as defined in the Management Agreements,
earned by the Advisors for the Partnership during each calendar
quarter.
In allocating the assets of the Partnership among the trading
advisors, the General Partner conducts proprietary research and
considers the background of the advisors principals, as
well as the advisors trading styles, strategies and
markets traded, expected volatility, trading results (to the
extent available) 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.
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
c. | Customer Agreement: |
The Partnership has entered into a customer agreement (the
Customer Agreement) which provides that the
Partnership will pay CGM a monthly brokerage fee equal to
7/24
of 1% (3.5% per year) of month-end Net Assets, as defined, in
lieu of brokerage fees on a per trade basis. Month-end Net
Assets, for the purpose of calculating brokerage fees are Net
Assets, as defined in the Limited Partnership Agreement, prior
to the reduction of the current months brokerage fee,
incentive fee accruals, management fees, the General
Partners administrative fee, other expenses and any
redemptions or distributions as of the end of such month. CGM
will pay a portion of its brokerage fees to other properly
registered selling agent and to financial advisors who have sold
Redeemable Units. Brokerage fees will be paid for the life of
the Partnership, although the rate at which such fees are paid
may be changed. This fee may be increased or decreased at any
time at CGMs discretion upon written notice to the
Partnership. The Partnership will pay for National Futures
Association 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 assets
are deposited by CGM in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At
December 31, 2010 and 2009, the amounts of cash held for
margin requirements was $5,943,791 and $11,750,313,
respectively. CGM will pay the Partnership interest on 100% of
the average daily equity maintained in cash in its (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. The Customer Agreement
may be terminated upon notice by either party.
4. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity interests. The
results of the Partnerships trading activities are shown
in the Statements of Income and Expenses.
The Customer Agreements between the Partnership and CGM and the
Funds and CGM give the Partnership and the Funds the legal right
to net unrealized gains and losses on open futures and forward
contracts on the Statements of Financial Condition. The
Partnership and the Funds net, for financial reporting purposes,
the unrealized gains and losses on open futures, options,
exchange cleared swaps and forward contracts on the Statements
of Financial Condition.
All of the commodity interests owned by the Partnership are held
for trading purposes. The average number of futures contracts
traded for the years ended December 31, 2010 and 2009 based on a
monthly calculation, were 5,922 and 9,593, respectively. The
average number of metals forward contracts traded for the years
ended December 31, 2010 and 2009 based on a monthly calculation,
were 414 and 565, respectively. The average number of option
contracts for the years ended December 31, 2010 and 2009 based
on a monthly calculation, were 21 and 31, respectively. The
average notional values of currency forward contracts for the
years ended December 31, 2010 and 2009 based on a monthly
calculation, were $319,994,839 and $348,990,463, respectively.
In prior year, the average contracts and average notional values
were based on a quarterly and not a monthly calculation. The
amounts for the year ended December 31, 2009 have been revised
accordingly.
Brokerage fees are calculated as a percentage of the
Partnerships adjusted net asset value on the last day of
each month and are affected by trading performance, additions
and redemptions.
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
The following tables indicate the gross fair values of
derivative instruments of futures and forward contracts as
separate assets and liabilities as of December 31, 2010 and
2009.
Assets | December 31, 2010 | |||
Futures Contracts
|
||||
Currencies
|
$ | 423,873 | ||
Energy
|
282,296 | |||
Grains
|
552,787 | |||
Interest Rates
Non-U.S.
|
151,118 | |||
Interest Rates U.S.
|
169,390 | |||
Indices
|
223,941 | |||
Livestock
|
259,202 | |||
Metals
|
315,525 | |||
Softs
|
43,918 | |||
Total unrealized appreciation on open futures contracts
|
$ | 2,422,050 | ||
Liabilities
|
||||
Futures Contracts
|
||||
Currencies
|
$ | (166,888 | ) | |
Energy
|
(103,611 | ) | ||
Grains
|
(205,637 | ) | ||
Interest Rates
Non-U.S.
|
(18,572 | ) | ||
Interest Rates U.S.
|
(33,510 | ) | ||
Indices
|
(50,626 | ) | ||
Livestock
|
(207,591 | ) | ||
Softs
|
(119,396 | ) | ||
Total unrealized depreciation on open futures contracts
|
$ | (905,831 | ) | |
Net unrealized appreciation on open futures contracts
|
$ | 1,516,219 | * | |
* | This amount is in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. |
Assets | December 31, 2010 | |||
Forward Contracts
|
||||
Currencies
|
$ | 1,610,313 | ||
Metals
|
805,081 | |||
Total unrealized appreciation on open forward contracts
|
$ | 2,415,394 | ||
Liabilities
|
||||
Forward Contracts
|
||||
Currencies
|
$ | (1,639,341 | ) | |
Metals
|
(756,788 | ) | ||
Total unrealized depreciation on open forward contracts
|
$ | (2,396,129 | ) | |
Net unrealized appreciation on open forward contracts
|
$ | 19,265 | ** | |
** | This amount is in Net unrealized appreciation on open forward contracts on the Statements of Financial Condition. |
43
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Assets | December 31, 2010 | |||
Options Purchased
|
||||
Energy
|
$ | 295,740 | ||
Metals
|
574,070 | |||
Softs
|
31,416 | |||
Total options purchased
|
$ | 901,226 | *** | |
*** | This amount is in Options purchased, at fair value on the Statements of Financial Condition. |
Assets | December 31, 2009 | |||
Futures Contracts
|
||||
Currencies
|
$ | 454,205 | ||
Energy
|
524,031 | |||
Grains
|
89,903 | |||
Indices
|
698,928 | |||
Interest Rates U.S.
|
312,507 | |||
Interest Rates
Non-U.S.
|
320,014 | |||
Livestock
|
7,630 | |||
Metals
|
186,737 | |||
Softs
|
316,766 | |||
Total unrealized appreciation on open futures contracts
|
$ | 2,910,721 | ||
Liabilities
|
||||
Futures Contracts
|
||||
Currencies
|
$ | (471,344 | ) | |
Energy
|
(459,438 | ) | ||
Grains
|
(268,089 | ) | ||
Indices
|
(119,092 | ) | ||
Interest Rates U.S.
|
(365,712 | ) | ||
Interest Rates
Non-U.S.
|
(301,168 | ) | ||
Livestock
|
(12,120 | ) | ||
Metals
|
(112,865 | ) | ||
Softs
|
(56,767 | ) | ||
Total unrealized depreciation on open futures contracts
|
(2,166,595 | ) | ||
Net unrealized appreciation on open futures contracts
|
$ | 744,126 | * | |
* | This amount is in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. |
Assets
|
||||
Forward Contracts
|
||||
Currencies
|
$ | 495,276 | ||
Metals
|
1,901,753 | |||
Total unrealized appreciation on open forward contracts
|
$ | 2,397,029 | ||
Liabilities
|
||||
Forward Contracts
|
||||
Currencies
|
$ | (1,420,713 | ) | |
Metals
|
(2,002,231 | ) | ||
Total unrealized depreciation on open forward contracts
|
(3,422,944 | ) | ||
Net unrealized depreciation on open forward contracts
|
$ | (1,025,915 | )** | |
** | This amount is in Net unrealized depreciation on open forward contracts on the Statements of Financial Condition. |
44
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
The following tables indicate the trading gains and losses, by
market sector, on derivative instruments for the years ended
December 31, 2010 and 2009.
December 31, 2010 |
December 31, 2009 |
|||||||
Sector
|
Gain (Loss) from trading | Gain (Loss) from trading | ||||||
Currencies
|
$ | 12,820 | $ | 2,459,707 | ||||
Energy
|
(1,917,475 | ) | (1,657,789 | ) | ||||
Grains
|
1,679,962 | 1,822,876 | ||||||
Indices
|
(2,016,474 | ) | (2,244,361 | ) | ||||
Interest Rates U.S.
|
3,138,674 | 45,747 | ||||||
Interest Rates
Non-U.S.
|
2,745,405 | (1,918,698 | ) | |||||
Livestock
|
(208,703 | ) | (161,189 | ) | ||||
Softs
|
1,880,152 | (204,378 | ) | |||||
Metals
|
1,481,369 | 296,767 | ||||||
Total
|
$ | 6,795,730 | $ | (1,561,318 | ) | |||
5. | Investment in Funds: |
On November 1, 2005, the assets allocated to Altis Partners
Jersey Limited (Altis) for trading were invested in
CMF Altis Partners Master Fund L.P. (Altis
Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership
purchased 4,898.1251 units of Altis Master with cash equal to
$4,196,275 and a contribution of open commodity futures and
forward contracts with a fair value of $701,851. Altis Master
was formed to permit accounts managed now or in the future by
Altis using the Global Futures Portfolio program, a proprietary,
systematic trading program, to invest together in one vehicle.
The General Partner is also the general partner of Altis Master.
Individual and pooled accounts currently managed by Altis,
including the Partnership are permitted to be limited partners
of Altis Master. The General Partner and Altis believe that
trading through this structure should promote efficiency and
economy in the trading process.
On March 1, 2006, the assets allocated to Avant Capital
Management L.P. (Avant) for trading were invested in
the CMF Avant Master Fund L.P. (Avant Master),
a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 8,177.1175
units of Avant Master with cash equal to $6,827,887 and a
contribution of open commodity futures and forward contracts
with a fair value of $1,349,230. Avant Master was formed in
order to permit accounts managed now or in the future by Avant
using the Diversified Program, a proprietary, systematic trading
program, to invest together in one trading vehicle. The
Partnership fully redeemed its investment in Avant Master on
April 30, 2010 for cash equal to $12,280,606.
On May 1, 2009, the assets allocated to Sasco Energy
Partners LLC (Sasco) for trading were invested in
the CMF Sasco Master Fund L.P. (Sasco Master), a
limited partnership organized under the partnership laws of the
State of New York. The Partnership purchased 16,437.9008
units of Sasco Master with cash equal to $16,364,407 and a
contribution of open commodity futures contracts with a fair
value of $(1,325,727). Sasco Master was formed in order to
permit accounts managed now or in the future by Sasco using the
Energy Program, a proprietary, systematic trading program, to
invest together in one trading vehicle. The General Partner is
also the general partner of Sasco Master. Individual and pooled
accounts currently managed by Sasco, including the Partnership,
are permitted to be limited partners of Sasco Master. The
General Partner and Sasco believe that trading through this
structure should promote efficiency and economy in the trading
process.
On March 1, 2010, the assets allocated to Waypoint Capital
Management LLC for trading were invested in the Waypoint Master
Fund L.P. (Waypoint Master), a limited partnership
organized under the
45
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
partnership laws of the State of New York. The Partnership
purchased 26,581.6800 units of Waypoint Master with cash equal
to $26,581,680. Waypoint Master was formed in order to permit
accounts managed now or in the future by Waypoint using its
Diversified Program, a proprietary, systematic trading program,
to invest together in one trading vehicle. The General Partner
is also the general partner of Waypoint Master. Individual and
pooled accounts currently managed by Waypoint, including the
Partnership, are permitted to be limited partners of Waypoint
Master. The General Partner and Waypoint believe that trading
through this structure should promote efficiency and economy in
the trading process.
On November 1, 2010, the assets allocated to
PGR Capital LLP (PGR) for trading were invested
in PGR Master Fund L.P. (PGR Master),
a limited partnership organized under the partnership laws of
the State of Delaware. The Partnership purchased
14,913.0290 units of PGR Master with cash equal to
$14,913,029. PGR Master was formed to permit accounts
managed now or in the future by PGR using the Mayfair Program, a
proprietary, systematic trading program, to invest together in
one trading vehicle. The General Partner is also the general
partner for PGR Master. Individual and pooled accounts
currently managed by PGR, including the Partnership, are
permitted to be limited partners of PGR Master. The General
Partner and PGR believe that trading through this structure
should promote efficiency and economy in the trading process.
On November 1, 2010, the assets allocated to Blackwater
Capital Management LLC (Blackwater) for trading
were invested in Blackwater Master Fund L.P.
(Blackwater Master), a limited partnership organized
under the partnership laws of the State of Delaware. The
Partnership purchased 15,674.6940 units of Blackwater Master
with cash equal to $15,674,694. Blackwater Master was formed to
permit accounts managed now or in the future by Blackwater using
the Global Program, a proprietary, systematic trading program,
to invest together in one trading vehicle. The General Partner
is also the general partner for Blackwater Master. Individual
and pooled accounts currently managed by Blackwater, including
the Partnership, are permitted to be limited partners of
Blackwater Master. The General Partner and Blackwater believe
that trading through this structure should promote efficiency
and economy in the trading process.
The General Partner is not aware of any material changes to any
of the trading programs discussed above during the period year
ended December 31, 2010.
Altis Masters, Waypoint Masters, Sasco
Masters, PGR Masters and Blackwater Masters
(the Funds) trading of futures, forwards, swaps and
options contracts, if applicable, on commodities is done
primarily on United States of America commodity exchanges and
foreign commodity exchanges. The Funds engage in such trading
through commodity brokerage accounts maintained 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 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, administrative 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 fees are charged at
the Partnership level.
At December 31, 2010, the Partnership had approximately
27.6% of Altis Master, 52.0% of Waypoint Master, 22.8% of Sasco
Master, 74.9% of PGR Master and 77.3% of Blackwater Master. At
December 31, 2009, the Partnership owned approximately
33.6% of Altis Master, 65.1% of Sasco Master and 100.0% of
Avant Master. It is the intention of the Partnership to continue
to invest in the Funds. The performance of the Partnership is
directly affected by the performance of the Funds. Expenses to
investors as a result of investment in the Funds are
approximately the same and the redemption rights are not
affected.
46
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Summarized information reflecting the Total Assets, Liabilities
and Capital for the Funds are shown in the following tables:
December 31, 2010 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Altis Master
|
$ | 64,276,767 | $ | 591,256 | $ | 63,685,511 | ||||||
Sasco Master
|
81,882,294 | 198,664 | 81,683,630 | |||||||||
Waypoint Master
|
41,306,976 | 59,330 | 41,247,646 | |||||||||
Blackwater Master
|
25,966,821 | 28,810 | 25,938,011 | |||||||||
PGR Master
|
20,415,391 | 28,810 | 20,386,581 | |||||||||
Total
|
$ | 233,848,249 | $ | 906,870 | $ | 232,941,379 | ||||||
December 31, 2009 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Altis Master
|
$ | 84,341,762 | $ | 34,004 | $ | 84,307,758 | ||||||
Avant Master
|
13,259,355 | 1,759,171 | 11,500,184 | |||||||||
Sasco Master
|
37,621,540 | 716,206 | 36,905,334 | |||||||||
Total
|
$ | 135,222,657 | $ | 2,509,381 | $ | 132,713,276 | ||||||
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 Period Ended December 31, 2010 | ||||||||||||
Gain (Loss) from |
Total Income |
Net Income |
||||||||||
trading, net | (Loss) | (Loss) | ||||||||||
Altis Master
|
$ | 8,818,344 | $ | 8,891,888 | $ | 8,600,743 | ||||||
Sasco Master
|
5,217,225 | 5,267,342 | 4,347,440 | |||||||||
Waypoint Master
|
7,879,774 | 7,918,225 | 7,746,492 | |||||||||
Blackwater Master
|
1,965,203 | 1,969,257 | 1,928,404 | |||||||||
PGR Master
|
592,832 | 596,397 | 562,135 | |||||||||
Total
|
$ | 24,473,378 | $ | 24,643,109 | $ | 23,185,214 | ||||||
For the Year Ended December 31, 2009 | ||||||||||||
Gain (Loss) from |
Total Income |
Net Income |
||||||||||
trading, net | (Loss) | (Loss) | ||||||||||
Altis Master
|
$ | (4,037,646 | ) | $ | (3,970,425 | ) | $ | (4,128,406 | ) | |||
Avant Master
|
2,261,358 | 2,278,567 | 2,181,987 | |||||||||
Sasco Master
|
3,282,459 | 3,299,341 | 2,690,111 | |||||||||
Total
|
$ | 1,506,171 | $ | 1,607,483 | $ | 743,692 | ||||||
47
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Summarized information reflecting the Partnerships
investments in, and the operations of, the Funds are shown in
the following tables:
% of |
Net |
|||||||||||||||||||||||||||
Partnerships |
Expenses |
Income |
Investment |
Redemptions |
||||||||||||||||||||||||
Net Assets | Fair Value | Income (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | |||||||||||||||||||||
For the period ended December 31, 2010
|
||||||||||||||||||||||||||||
Altis Master
|
9.57 | % | $ | 17,568,791 | $ | 2,853,731 | $ | 58,825 | $ | 35,490 | $ | 2,759,416 |
Commodity Portfolio |
Monthly | ||||||||||||||
Avant Master
|
| | 1,066,892 | 20,335 | 28,036 | 1,018,521 |
Commodity Portfolio |
Monthly | ||||||||||||||||||||
Sasco Master
|
10.17 | % | 18,664,413 | 4,228,129 | 345,024 | 175,986 | 3,707,119 |
Energy Portfolio |
Monthly | |||||||||||||||||||
Waypoint Master
|
11.69 | % | 21,455,619 | 5,069,609 | 71,872 | 43,126 | 4,954,611 |
Commodity Portfolio |
Monthly | |||||||||||||||||||
Blackwater Master
|
10.92 | % | 20,047,327 | 1,539,470 | 9,056 | 22,199 | 1,508,215 |
Commodity Portfolio |
Monthly | |||||||||||||||||||
PGR Master
|
8.32 | % | 15,273,707 | 447,093 | 3,941 | 21,722 | 421,430 |
Commodity Portfolio |
Monthly | |||||||||||||||||||
Total
|
$ | 93,009,857 | $ | 15,204,924 | $ | 509,053 | $ | 326,559 | $ | 14,369,312 | ||||||||||||||||||
% of |
Net |
|||||||||||||||||||||||||||
Partnerships |
Expenses |
Income |
Investment |
Redemptions |
||||||||||||||||||||||||
Funds
|
Net Assets | Fair Value | Income (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||
For the year ended December 31, 2009
|
||||||||||||||||||||||||||||
Altis Master
|
17.00 | % | $ | 28,338,180 | $ | (1,527,679 | ) | $ | 34,231 | $ | 20,605 | $ | (1,582,515 | ) |
Commodity Portfolio |
Monthly | ||||||||||||
Avant Master
|
6.90 | % | 11,500,341 | 1,866,969 | 42,105 | 42,302 | 1,782,562 |
Commodity Portfolio |
Monthly | |||||||||||||||||||
Sasco Master
|
14.41 | % | 24,030,338 | 2,081,915 | 321,983 | 71,659 | 1,688,273 |
Energy Portfolio |
Monthly | |||||||||||||||||||
Total
|
$ | 63,868,859 | $ | 2,421,205 | $ | 398,319 | $ | 134,566 | $ | 1,888,320 | ||||||||||||||||||
6. | 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. Distributions of profits, if
any, will be made at the sole discretion of the General Partner
and at such times as the General Partner may decide. 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 three business days notice to the General Partner.
Redemption fees shall be for the benefit of the Partnership.
48
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
7. | Financial Highlights: |
Changes in the net asset value per unit for the years ended
December 31, 2010, 2009 and 2008 were as follows:
2010 | 2009 | 2008 | ||||||||||
Net realized and unrealized gains (losses)*
|
$ | 119.38 | $ | (51.90 | ) | $ | 328.34 | |||||
Interest income
|
1.55 | 1.30 | 17.22 | |||||||||
Expenses**
|
(47.71 | ) | (51.53 | ) | (101.11 | ) | ||||||
Increase (decrease) for the year
|
73.22 | (102.13 | ) | 244.45 | ||||||||
Proceeds from Limited Partner redemption fees
|
| 2.08 | | |||||||||
Net asset value per unit, beginning of year
|
1,406.38 | 1,506.43 | 1,261.98 | |||||||||
Net asset value per unit, end of year
|
$ | 1,479.60 | $ | 1,406.38 | $ | 1,506.43 | ||||||
* | Includes brokerage fees. | |
** | Excludes brokerage fees. |
2010 | 2009 | 2008 | ||||||||||
Ratios to average net assets:
|
||||||||||||
Net investment income (loss) before incentive fees***
|
(7.0 | )% | (6.9 | )% | (5.4 | )% | ||||||
Operating expenses
|
7.1 | % | 7.0 | % | 6.7 | % | ||||||
Incentive fees
|
0.5 | % | 0.8 | % | 4.8 | % | ||||||
Total expenses
|
7.6 | % | 7.8 | % | 11.5 | % | ||||||
Total return:
|
||||||||||||
Total return before incentive fees
|
5.7 | % | (5.9 | )% | 24.8 | % | ||||||
Incentive fees
|
(0.5 | )% | (0.7 | )% | (5.4 | )% | ||||||
Total return after incentive fees
|
5.2 | % | (6.6 | )% | 19.4 | % | ||||||
*** | 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.
8. | Financial Instrument Risks: |
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 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 OTC. Exchange-traded instruments are
standardized and include futures and certain forwards and option
contracts. OTC contracts are negotiated between contracting
parties and include certain forwards and option contracts. Each
of these instruments is subject to various risks similar to
those related to the underlying financial instruments, including
market and credit risk. In general, the risks associated with
OTC contracts are greater than those associated with
exchange-traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
The risk to the Limited Partners that have purchased interests
in the Partnership is limited to the amount of their capital
contributions to the Partnership and their share of the
Partnerships assets and
49
Emerging CTA
Portfolio L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
undistributed profits. This limited liability is a consequence
of the organization of the Partnership as a limited partnership
under applicable law.
Market risk is the potential for changes in the value of the
financial instruments traded by the 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 bears 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.
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,
online monitoring systems provide account analysis of futures,
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.
50
Selected unaudited quarterly financial data for the Partnership of the years ended December 31,
2010 and 2009 are summarized below:
For the period from | For the period | For the period | For the period from | |||||||||||||
October 1, 2010 to | from July 1, 2010 | from April 1, 2010 | January 1, 2010 to | |||||||||||||
December 31, 2010 | to September 30, 2010 | to June 30, 2010 | March 31, 2010 | |||||||||||||
Net realized and
unrealized trading
gains (losses) net
of brokerage fees
and clearing fees
including interest
income |
$ | 5,319,161 | $ | 11,405,095 | $ | (3,454,489 | ) | $ | 1,691,976 | |||||||
Net income (loss) |
$ | 3,601,393 | $ | 9,816,731 | $ | (4,674,606 | ) | $ | 364,522 | |||||||
Increase (decrease)
in net asset value
per unit |
$ | 28.89 | $ | 79.59 | $ | (38.29 | ) | $ | 3.03 |
For the period from | For the period | For the period | For the period from | |||||||||||||
October 1, 2009 to | from July 1, 2009 | from April 1, 2009 | January 1, 2009 to | |||||||||||||
December 31, 2009 | to September 30, 2009 | to June 30, 2009 | March 31, 2009 | |||||||||||||
Net realized and
unrealized trading
gains (losses) net
of brokerage fees
and clearing fees
including interest
income |
$ | (5,954,444 | ) | $ | 3,874,342 | $ | 973,019 | $ | (4,882,601 | ) | ||||||
Net income (loss) |
$ | (7,133,081 | ) | $ | 2,368,105 | $ | (827,973 | ) | $ | (6,334,857 | ) | |||||
Increase (decrease)
in net asset value
per unit |
$ | (59.86 | ) | $ | 20.55 | $ | (7.26 | ) | $ | (55.56 | ) |
51
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
PricewaterhouseCoopers LLP (PwC) was previously the principal accountant for the Partnership
through July 22, 2009. 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, there were no disagreements with PwC, 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 its report on the financial statements for the corresponding year.
The audit report of PwC on the financial statements of the Partnership as of and
for the year ended December 31, 2008, 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. Controls and Procedures.
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and
reported within the time periods expected in the SECs rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information required to be
disclosed by the Partnership in the reports it files is accumulated and communicated to management,
including the Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO) of the
General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC
filings.
Management is responsible for ensuring that there is an adequate and effective process for
establishing, maintaining and evaluating disclosure controls and procedures for the Partnerships
external disclosures.
The General Partners CEO and CFO have evaluated the effectiveness of the Partnerships
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of December 31, 2010 and, based on that evaluation, the General Partners CEO and CFO have
concluded that at that date the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision
of the General Partners CEO and CFO to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. These
controls include policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; | ||
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP , and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | ||
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
The report included in Item 8. Financial Statements and Supplementary Data. includes
managements report on internal control over financial reporting (Managements Report).
There were no changes in the Partnerships internal control over financial reporting during
the fiscal quarter ended December 31, 2010 that materially affected, or are reasonably likely to
materially affect, the Partnerships internal control over financial reporting.
Item 9B. Other Information. None.
52
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The
Partnership has no officers, directors or employees and its affairs are managed by its General
Partner. Investment decisions are made by the Advisors.
The officers and directors of the General Partner are Walter Davis (President and Chairman of
the Board of Directors), Jennifer Magro (Chief Financial Officer and Director), Michael McGrath
(Director), Douglas J. Ketterer (Director), Ian Bernstein (Director), Harry Handler (Director),
Patrick T. Egan (Director) and Alper Daglioglu (Director). Each
director of the General Partner holds office until the
earlier of his or her death, resignation or removal. Vacancies on the board of directors may be
filled by either (i) the majority vote of the remaining directors or (ii) Morgan Stanley Smith
Barney Holdings LLC, as the sole member of the General Partner. The officers of the General
Partner are designated by the General Partners board of directors. Each officer will hold office
until his or her successor is designated and qualified or until his or her death, resignation or
removal.
Walter
Davis, age 46, is President and Chairman of the Board of Directors of the General
Partner (since June 2010). Mr. Davis was registered as an associated person of the General Partner
and listed as a principal in June 2010. Mr. Davis is responsible for the oversight of the General
Partners funds and accounts. Prior to the combination of
Demeter Management LLC (Demeter) and the General Partner
effective December 1, 2010, Mr. Davis served as Chairman of the Board of Directors and President of
Demeter, a registered commodity pool operator. Mr. Davis was a principal and associated person of
Demeter from May 2006 to December 2010 and July 2006 to December 2010, respectively. Mr. Davis was
an associated person of Morgan Stanley DW Inc., a financial services firm, from August 2006 to
April 2007, when, because of the merger of Morgan Stanley DW
Inc. into Morgan Stanley & Co. Incorporated (MS &
Co.), a global financial
services firm, he became an associated person of MS & Co. (due to the transfer of his original
registration as an associated person of Morgan Stanley DW Inc.). Prior to becoming an associated
person in August 2006, Mr. Davis was responsible for overseeing the sales and marketing of MS &
Co.s managed futures funds to high net worth and institutional investors on a global basis. Mr.
Davis withdrew as an associated person of MS & Co. in June 2009. Mr. Davis has been an associated
person of Morgan Stanley Smith Barney LLC since June 2009. Morgan Stanley Smith Barney LLC is
registered as a broker-dealer with FINRA, an investment adviser with the SEC and a futures
commission merchant with the CFTC. Mr. Davis is a Managing Director of Morgan Stanley Smith Barney
LLC and the Director of Morgan Stanley Smith Barney LLCs Managed Futures Department. Prior to
joining Morgan Stanley in September 1999, Mr. Davis worked for Chase Manhattan Banks Alternative
Investment Group from January 1992 until September 1999, where his principal duties included
marketing managed futures funds to high net worth investors, as well as developing and structuring
managed futures funds. Throughout his career, Mr. Davis has been involved with the development,
management and marketing of a diverse array of commodity pools, hedge funds and other alternative
investment vehicles. Mr. Davis received an MBA in Finance and International Business from the
Columbia University Graduate School of Business in 1992 and a BA in Economics from the University
of the South in 1987.
Jennifer Magro, age 39, is Chief Financial Officer and Director of the General Partner (since
October 2006 and May 2005, respectively). Ms. Magro was listed as a principal in June 2005. Ms.
Magro served as Vice President and Secretary of the General Partner from August 2001 to December
2010 and June 2010 to December 2010, respectively. She was also a Managing Director of Citi
Alternative Investments (CAI), a division of Citigroup that administered its hedge fund and fund
of funds business, and was 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 the General Partner in January
1996, Ms. Magro was employed by Prudential Securities Inc., a securities brokerage services
company, (from July 1994) as a staff accountant whose duties included the calculation of net asset
values for commodity pools and real estate investment products. Ms. Magro received a BS in
Accounting from the State University of New York, Oswego in 1993.
Michael McGrath, age 41, has been a Director of the General Partner since June 2010. Mr.
McGrath was listed as a principal in June 2010. Mr. McGrath was a principal and Director of
Demeter from May 2006 until Demeters combination with the General Partner in December 2010. Mr.
McGrath is a Managing Director of Morgan Stanley Smith Barney LLC and currently serves as the
53
Head of Alternative Investments for the Global Wealth Management Group of Morgan Stanley Smith
Barney LLC. He also serves on the Management Committee of the Global Wealth Management Group.
Prior to his current role, Mr. McGrath served as the Director of Product Management for the
Consulting Services Group in Morgan Stanley as well as the Chief Operating Officer for Private
Wealth Management North America and Private Wealth Management Latin America (the Americas) and the
Director of Product Development for Morgan Stanleys Global Wealth Management Group. Mr. McGrath
served as a Managing Director of Morgan Stanley from May 2004 until May 2009, when Mr. McGrath
became a Managing Director of Morgan Stanley Smith Barney LLC. Mr. McGrath joined Morgan Stanley
from Nuveen Investments, a publicly traded investment management company headquartered in Chicago,
Illinois, where he worked from July 2001 to May 2004. At Nuveen Investments, Mr. McGrath served as
a Managing Director and oversaw the development of alternative investment products catering to high
net worth investors. Mr. McGrath received his BA degree from Saint Peters College in 1990, and
currently serves on the schools Board of Regents. He received his MBA in Finance from New York
University in 1996.
Douglas J. Ketterer, age 45, has been a Director of the General Partner since December 2010.
Mr. Ketterer was listed as a principal in December 2010. Mr. Ketterer was a principal of Demeter
from October 2003 until Demeters combination with the General Partner in December 2010. Mr.
Ketterer is a Managing Director and Head of the U.S. Private Wealth Management Group within Morgan
Stanley Smith Barney LLC. Mr. Ketterer joined MS & Co. in March 1990 and has served in many roles
in the corporate finance/investment banking, asset management, and wealth management divisions of
the firm; most recently as Chief Operating Officer, Wealth Management Group and Head of the
Products Group with responsibility for a number of departments (including, among others, the
Alternative Investments Group, Consulting Services Group, Annuities & Insurance Department and
Retirement & Equity Solutions Group) which offered products and services through MS & Co.s Global
Wealth Management Group. Mr. Ketterer received his MBA from New York Universitys Leonard N. Stern
School of Business and his BS in Finance from the University at Albanys School of Business.
Ian Bernstein, age 48, is a Director of the General Partner. Mr. Bernstein has been a
Director, and listed as a principal of the General Partner since December 2010. Mr. Bernstein held
various positions, including Managing Director, within the Capital Markets group at Morgan Stanley
DW Inc. from October 1984 to April 2007, when Morgan Stanley DW Inc. was merged into, its
institutional affiliate, MS & Co. and became the Global Wealth Management Division of MS & Co. Mr.
Bernstein first served as a Managing Director with MS & Co. in March 2004, prior to its merger with
Morgan Stanley DW Inc. Since June 1, 2009, Mr. Bernstein has served as a Managing Director of
Capital Markets at Morgan Stanley Smith Barney LLC, a new broker-dealer formed as a result of a
joint venture between Citigroup and Morgan Stanley. The respective retail business of MS & Co. and
Citigroup (formerly known as Smith Barney) was contributed to Morgan Stanley Smith Barney LLC. Mr.
Bernstein has continued as Managing Director of both Morgan Stanley Smith Barney LLC, the retail
broker-dealer, and MS & Co., the institutional broker-dealer, up to the present. Mr. Bernstein
received his MBA from New York Universitys Leonard N. Stern School of Business in 1988, and his BA
from the University of Buckingham in 1980.
Harry Handler, age 51, has been a Director of the General Partner since December 2010. Mr.
Handler became registered as an associated person of the General Partner and listed as a principal
in December 2010. Mr. Handler was a principal and associated person of Demeter from May 2005 until
Demeters combination with the General Partner in December 2010, and from April 2006 until December
2010, respectively. He has been an associate member of the NFA since August 1985. Mr. Handler was
an associated person of Morgan Stanley DW Inc., a financial services firm, from February 1984 to
April 2007, when, because of the merger of Morgan Stanley DW Inc. into MS & Co., he became an
associated person of MS & Co. due to the transfer of his original registration as an associated
person of Morgan Stanley DW Inc. Mr. Handler withdrew as an associated person of MS & Co. in June
2009. Mr. Handler has been an associated person of Morgan Stanley Smith Barney LLC since June
2009. Mr. Handler serves as an Executive Director at Morgan Stanley Smith Barney LLC in the Global
Wealth Management Group. Mr. Handler works in the Capital Markets Division and is responsible for
Electronic Equity and Securities Lending. Additionally, Mr. Handler serves as Chairman of the
Global Wealth Management Groups Best Execution Committee. In his prior position, Mr. Handler was
a Systems Director in Information Technology, in charge of Equity and Fixed Income Trading Systems
along with the Special Products, such as Unit Trusts, Managed Futures, and Annuities. Prior to his
transfer to the Information Technology Area, Mr. Handler managed the Foreign Currency and Precious
Metals Trading Desk of Dean Witter, a financial services firm and predecessor company to Morgan
Stanley, from July 1982 until January 1984. He also held various positions in the Futures Division
where he helped to build the Precious Metals Trading Operation at Dean Witter. Before joining Dean
Witter, Mr. Handler worked at Mocatta Metals, a precious metals trading firm and futures broker
that was sold to Standard Charted Bank in the 1980s, as an Assistant to the Chairman from March
1980 until June 1982. His roles at Mocatta Metals included positions on the Futures Order Entry
Desk and the Commodities Exchange Trading Floor. Additional work included building a computerized
Futures Trading System and writing a history of the company. Mr. Handler graduated on the Deans
List from the University of Wisconsin-Madison with a BA degree and a double major in History and
Political Science.
54
Patrick T. Egan, age 41, has been a Director of the General Partner since December 2010. Mr.
Egan became registered as an associated person of the General Partner and listed as a principal in
December 2010. Mr. Egan has been an associate member of the NFA since December 1997. He has been
an associated person of Morgan Stanley Smith Barney LLC since November 2010. Mr. Egan was an
associated person of Morgan Stanley DW Inc., a financial services firm, from February 1998 to April
2007, when, because of the merger of Morgan Stanley DW Inc. into MS & Co., he became an associated
person of MS & Co. due to the transfer of his original registration as an associated person of
Morgan Stanley DW Inc. Mr. Egan withdrew as an associated person of MS & Co. in November 2010.
Mr. Egan is an Executive Director at Morgan Stanley Smith Barney LLC and currently serves as the
Co- Chief Investment Officer for Morgan Stanley Smith Barney LLCs Managed Futures Department.
Prior to his current role, Mr. Egan served as the Head of Due Diligence & Manager Research for
Morgan Stanleys Managed Futures Department from October 2003 until the formation of Morgan Stanley
Smith Barney LLC in June 2009. From March 1993 through September 2003, Mr. Egan was an analyst and
manager within the Managed Futures Department for Morgan Stanley DW Inc., and its predecessor firm,
Dean Witter Reynolds, Inc., a financial services firm, with his primary responsibilities being
dedicated to the product development, due diligence, investment analysis and risk management of the
firms commodity pools. Mr. Egan began his career in August 1991, joining Dean Witter
Intercapital, the asset management arm of Dean Witter Reynolds, Inc., until March 1993 when he
joined the firms Managed Futures Department. Mr. Egan received a Bachelor of Business
Administration with a concentration in Finance from the University of Notre Dame in May 1991. Mr.
Egan is a former Director to the Managed Funds Associations Board of Directors, a position he was
elected to by industry peers for two consecutive two-year terms, from November 2004 to October 2006
and November 2006 to October 2008.
Alper Daglioglu, age 33, has been a Director, and listed as a principal of the General Partner
since December 2010. Mr. Daglioglu is an Executive Director at Morgan Stanley Smith Barney LLC and
the Co-Chief Investment Officer for Morgan Stanley Smith Barney LLCs Managed Futures Department.
Mr. Daglioglu also serves on the Alternative Investments Product Review Committee of Morgan Stanley
Smith Barney LLCs Alternative Investments Group. Prior to his current role, Mr. Daglioglu was a
Senior Analyst at the Product Origination Group within Morgan Stanley Managed Futures Department
from December 2003 until the formation of Morgan Stanley Smith Barney LLC in June 2009. In
addition to his responsibilities within Managed Futures Department, Mr. Daglioglu was also the lead
investment analyst for Global Macro and Managed Futures strategies within Morgan Stanley Graystone
Research Group from February 2007 to June 2009. Mr. Daglioglu served as a consultant at the
Product Origination Group within Morgan Stanley Managed Futures Department from June 2003 to
November 2003. Mr. Daglioglu received a BS degree in Industrial Engineering from Galatasaray
University in June 2000 and a MBA degree in Finance from the University of Massachusetts-Amhersts
Isenberg School of Management in May 2003. Mr. Daglioglu was awarded a full merit scholarship and
research assistantship at the Center for International Securities and Derivatives Markets during
his graduate studies. In this capacity, he worked with various major financial institutions in
performance monitoring, asset allocation and statistical analysis projects and specialized on
alternative approaches to risk assessment for hedge funds and managed futures. Mr. Daglioglu wrote
and published numerous research papers on alternative investments. Mr. Daglioglu is a Chartered
Alternative Investment Analyst charterholder.
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.
55
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are managed by its General Partner.
CGM, an affiliate of the General Partner, is the commodity broker for the Partnership and receives
brokerage fees for such services, as described under Item 1. Business. Brokerage
fees and clearing fees of $7,138,973 were earned by CGM for the year ended December 31, 2010.
Management fees and incentive fees of $3,410,998 and $917,614, respectively, were earned by the
Advisors for the year ended December 31, 2010. Administrative fees of $866,472 were earned by the
General Partner for the year ended December 31, 2010.
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, 2011, 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 following table indicates securities owned by management as of December 31, 2010:
(1) Title of Class
|
(2) Name of Beneficial Owner |
(3) Amount and Nature of Beneficial Ownership |
(4) Percent of Class |
|||
General Partner unit equivalents
|
General Partner | 1,302.6036 | 1.1% |
(c) Changes in control. None.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
(a) | Transactions with related persons. None. | ||
(b) | Review, approval or ratification of transactions with related persons. Not applicable. | ||
(c) | Promoters and certain control persons. 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, if any, from the Partnership are set forth under Item 1. Business, Item 8. Financial Statements and Supplementary Data. and Item 11. Executive Compensation. |
Item 14. Principal Accountant Fees and Services.
(1) Audit Fees. The aggregate fees billed for each of the last two fiscal years for
professional services rendered by Deloitte for the year ended December 31,
2010 and the period from July 23, 2009 through December 31,
2009, PwC for the period from January 1, 2009 through July 22, 2009 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 | PwC | |||||||
2010 |
$ | 156,200 | $ | N/A | ||||
2009 |
$ | 143,000 | (1) | $ | 75,600 | (2) |
(1)
For the period July 23, 2009 to December 31, 2009.
(2)
For the period January 1, 2009 to July 22, 2009.
(2) Audit-Related Fees. None
(3) Tax Fees. In the last two fiscal years, Deloitte did not provide any professional
service 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:
2010 |
$ | 26,250 | ||||||
2009 |
$ | 25,000 |
(4) All Other Fees. None.
(5) Not Applicable.
(6) Not Applicable.
56
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)(1)
|
Financial Statements: | |
Statements of Financial Condition at December 31, 2010 and 2009. | ||
Condensed Schedules of Investments at December 31, 2010 and 2009 | ||
Statements of Income and Expenses for the years ended December 31, 2010, 2009 and 2008. | ||
Statements of Changes in Partners Capital for the years ended December 31, 2010, 2009 and 2008. | ||
Notes to Financial Statements. |
(2) |
Exhibits: | |
3.1(a) |
Certificate of Limited Partnership dated June 30, 2003 (filed as Exhibit 3.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Certificate of Amendment of the Certificate of Limited Partnership dated September 21, 2005 (filed as Exhibit 3.1(a) to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(c) |
Certificate of Amendment of the Certificate of Limited Partnership dated September 19, 2008 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |
(d) |
Certificate of Amendment of the Certificate of Limited Partnership dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report of Form 8-K filed on September 30, 2009 and incorporated herein by reference). | |
(e) |
Certificate of Amendment of the Certificate of Limited Partnership dated June 30, 2010 (filed as Exhibit 3.1(e) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference). | |
3.2 |
Second Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.2 to the Current Report on Form 8-K filed on November 1, 2010 and incorporated herein by reference). | |
10.1(a) |
Management Agreement among the Partnership, the General Partner and Altis (filed as Exhibit 10.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Altis extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.2(a) |
Management Agreement among the Partnership, the General Partner and Fall River Capital LLC (filed as Exhibit 10.2 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Fall River Capital LLC extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.3(a) |
Management Agreement among the Partnership, the General Partner and Waypoint Capital Management LLC (filed as Exhibit 10.4 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Waypoint Capital Management LLC extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.4(a) |
Management Agreement among the Partnership, the General Partner and Xplor Capital Management, LLC (filed as Exhibit 10.5 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Xplor Capital Management, LLC extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.5(a) |
Management Agreement among the Partnership the General Partner and Avant (filed as Exhibit 10.6 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). |
57
(b) |
Letter from the General Partner to Avant extending the Management Agreement from June 30, 2009 to June 30, 2010 (filed as Exhibit 10.5(b) on Form 10-K filed on March 31, 2010 and incorporated herein by reference). | |
10.6(a) |
Management Agreement among the Partnership, the General Partner and Cantab Capital Partners LLP (filed as Exhibit 10.7 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Cantab Capital Partners LLP extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.7 |
Customer Agreement between the Partnership, the General Partner and CGM (filed as Exhibit 10.9 to the General Form for Registration of Securities on Form 10 filed on April 30, 2008 and incorporated herein by reference). | |
10.8 |
Amended and Restated Agency Agreement between the Partnership, the General Partner, CGM and MSSB (filed as Exhibit 10.8 to the Current Report on Form 8-K filed on August 4, 2010 and incorporated herein by reference). | |
10.9 |
Form of Subscription Agreement (filed as Exhibit 10.11 to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |
10.10 (a) |
Management Agreement among the Partnership, the General Partner and Sasco (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 21, 2009 and incorporated herein by reference). | |
(b) |
Letter from the General Partner to Sasco extending the Management Agreement from June 30, 2010 to June 30, 2011 (filed herein). | |
10.11 |
Joinder Agreement among the Partnership, the General Partner, CGM and MSSB (filed as Exhibit 10 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009 and incorporated herein by reference). | |
10.12 |
Amended and Restated Management Agreement among the Partnership, the General Partner and PGR Capital LLP (filed as Exhibit 10.12 to the Current Report on Form 8-K filed on November 4, 2010 and incorporated herein by reference). | |
10.13 |
Amended and Restated Management Agreement among the Partnership, the General Partner and Blackwater Capital Management LLC (filed as Exhibit 10.13 to the Current Report on Form 8-K filed on November 4, 2010 and incorporated herein by reference). | |
10.14 |
Amended and Restated Management Agreement among the Partnership, the General Partner and J E Moody & Company LLC (filed as Exhibit 10.14 on Form 8-K filed on January 3, 2011 and incorporated herein by reference) | |
10.15 |
Amended and Restated Management Agreement among the Partnership, the General Partner and Cirrus Capital Management LLC (filed as Exhibit 10.1 on Form 8-K filed on January 3, 2011 and incorporated herein by reference). | |
10.16 |
Management Agreement among the Partnership, the General Partner and Flintlock Capital Asset Management, LLC (filed as Exhibit 10.16 on Form 8-K filed on December 1, 2010 and incorporated herein by reference). | |
16.1(a) |
Letter Regarding Change of Certifying Accountant (filed as Exhibit 16.1 on Form 8-K filed on July 24, 2009 and incorporated herein by reference). | |
(b) |
Letter Regarding Change of Certifying Accountant (filed as Exhibit 16.1 on Form 8-K filed on July 1, 2008 and incorporated herein by reference). |
99.1 Financial Statements of CMF Altis Partners Master Fund L.P.
99.2 Financial Statements of CMF Sasco Master Fund L.P.
99.3 Financial Statements of Waypoint Master Fund L.P.
99.4 Financial Statements of Blackwater Master Fund L.P.
99.5 Financial Statements of PGR Master Fund L.P.
99.2 Financial Statements of CMF Sasco Master Fund L.P.
99.3 Financial Statements of Waypoint Master Fund L.P.
99.4 Financial Statements of Blackwater Master Fund L.P.
99.5 Financial Statements of PGR Master Fund L.P.
The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by
reference
(a) |
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) |
58
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.
Emerging CTA Portfolio L.P. |
||||
By: | Ceres Managed Futures LLC | |||
(General Partner) | ||||
By: | /s/ Walter Davis | |||
Walter Davis | ||||
President & Director | ||||
Date: March 31, 2011 | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/ Walter Davis
|
/s/ Ian Bernstein | /s/ Patrick T. Egan | ||
Walter Davis
|
Ian Bernstein | Patrick T. Egan | ||
President and Director
|
Director | Director | ||
Ceres Managed Futures LLC
|
Ceres Managed Futures LLC | Ceres Managed Futures LLC | ||
Date: March 31, 2011 | Date: March 31, 2011 | Date: March 31, 2011 | ||
/s/ Jennifer Magro
|
/s/ Michael McGrath | /s/ Alper Daglioglu | ||
Jennifer Magro
|
Michael McGrath | Alper Daglioglu | ||
Chief Financial Officer and Director
|
Director | Director | ||
(Principal Accounting Officer)
|
Ceres Managed Futures LLC | Ceres Managed Futures LLC | ||
Ceres Managed Futures LLC |
Date: March 31, 2011 | Date: March 31, 2011 | ||
Date: March 31, 2011 | ||||
/s/ Douglas J. Ketterer
|
/s/ Harry Handler | |||
Douglas J. Ketterer
|
Harry Handler | |||
Director
|
Director | |||
Ceres Managed Futures LLC
|
Ceres Managed Futures LLC | |||
Date: March 31, 2011 | Date: March 31, 2011 |
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.
59