UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

TACTICAL DIVERSIFIED FUTURES FUND L.P.

 

(Exact name of registrant as specified in its charter)

New York		13-4224248
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

(Address and Zip Code of principal executive offices)

(212) 296-1999

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

		Redeemable Units of Limited Partnership Interest
Securities registered pursuant to Section 12(g) of the Act:		(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 o     No þ

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 o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

Indicate by check mark 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 registrant’s 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 þ.

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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Limited Partnership Redeemable Units with an aggregate value of $769,530,927 were outstanding and held by non-affiliates as of the last business day of the registrant’s most recently completed second calendar month.

As of February 28, 2011, 643,446.0623 Limited Partnership Redeemable Units were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

[None]

 

 

PART I

Item 1. Business.

(a) General Development of Business. Tactical Diversified Futures Fund L.P. (the “Partnership”) is a limited partnership organized under the partnership laws of the State of New York on December 3, 2002 to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options, swaps and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, lumber, metals and softs. The commodity interests that are traded by the Partnership and the Funds (as defined below) are volatile and involve a high degree of market risk.

     A Registration Statement on Form S-1 relating to the public offering of 300,000 redeemable units of limited partnership interest (“Redeemable Units”) became effective March 27, 2003. Between March 27, 2003 (commencement of the offering period) and April 30, 2003, 36,616 Redeemable Units were publicly offered at $1,000 per Redeemable Unit. The proceeds of the initial public offering were held in an escrow account until April 30, 2003, at which time they were turned over to the Partnership for trading.

     A second Registration Statement on Form S-1 relating to the public offering of 1,000,000 Redeemable Units (including the 300,000 Redeemable Units that had been previously registered) became effective on December 4, 2003. As of that date 260,732.3028 Redeemable Units had been sold.

     A third Registration Statement on Form S-1 relating to the public offering of 2,000,000 Redeemable Units (including the 1,000,000 Redeemable Units that had been previously registered) became effective on October 7, 2004. As of that date 807,449.3782 Redeemable Units had been sold.

     A fourth Registration Statement on Form S-1 relating to the public offering of 2,000,000 Redeemable Units previously registered became effective on June 30, 2005. As of that date 1,027,701.7549 Redeemable Units had been sold. The public offering of Redeemable Units terminated on November 30, 2008. The Partnership currently privately and continuously offers up to 200,000 Redeemable Units to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.

     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 41 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 Drury Capital, Inc. (“Drury”), Graham Capital Management, L.P. (“Graham”), John W. Henry & Company, Inc. (“JWH”), Willowbridge Associates Inc. (“Willowbridge”), Aspect Capital Limited (“Aspect”), Capital Fund Management S.A. (“CFM”), Winton Capital Management Limited (“Winton”), SandRidge Capital L.P. (“SandRidge”) and Sasco Energy Partners LLC (“Sasco”) (each an “Advisor” and collectively, the “Advisors”), each of which is a registered commodity trading advisor. AAA Capital Management Advisors, Ltd. (“AAA”) was terminated as of January 31, 2010. Sasco was added as an advisor to the Partnership on October 1, 2010. 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. A description of the trading activities and focus of the Advisors is included on page 10 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

     The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of partnership interest owned by each except that no limited partner shall be liable for obligations of the Partnership in excess of their initial capital contribution and profit, if any, net of distributions.

     The General Partner has agreed to make capital contributions, if necessary, so that its general partnership interest will be equal to the greater of (1) an amount that will entitle the General Partner to an interest of at least 1% in each material item of Partnership income, gain, loss, deduction or credit and (2) the greater of (i) 1% of the partners’ contributions to the Partnership or (ii) $25,000. The Partnership will be liquidated upon the first to occur of the following: December 31, 2022; the net asset value per Redeemable Unit decreases to less than $400 per Redeemable Unit as of the close of any business day; or under certain other circumstances as defined in the limited partnership agreement of the Partnership (the “Limited Partnership Agreement”).

     The assets allocated to JWH for trading are invested directly pursuant to JWH’s Global Analytics Program.

     On December 1, 2004, the assets allocated to Winton for trading were invested in the CMF Winton Master L.P. (“Winton Master”) a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 52,981.2908 units of Winton Master with cash equal to $57,471,493. Winton Master was formed in order to permit accounts managed now or in the future by Winton using the Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Winton Master. Individual and pooled accounts currently managed by Winton, including the Partnership are permitted to be limited partners of Winton Master. The General Partner and Winton believe that trading through this structure should promote efficiency and economy in the trading process.

     On March 1, 2005, the assets allocated to Aspect for trading were invested in the CMF Aspect Master Fund L.P. (“Aspect Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 131,340.8450 units of Aspect Master with cash equal to $122,786,448 and a contribution of open commodity futures and forward contracts with a fair value of $8,554,397. Aspect Master was formed in order to permit accounts managed now or in the future by Aspect using the Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Aspect Master. Individual and pooled accounts currently managed by Aspect, including the Partnership are permitted to be limited partners of Aspect Master. The General Partner and Aspect believe that trading through this structure should promote efficiency and economy in the trading process.

     On July 1, 2005, the assets allocated to Willowbridge for trading were invested in the CMF Willowbridge Argo Master Fund L.P. (“Willowbridge Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 95,795.8082 units of Willowbridge Master with cash equal to $85,442,868 and a contribution of open futures and forward contracts with a fair value of $10,352,940. Willowbridge Master was formed in order to permit accounts managed now or in the future by Willowbridge using the Argo Trading System, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Willowbridge Master. Individual and pooled accounts currently managed by Willowbridge, including the Partnership are permitted to be limited partners of Willowbridge Master. The General Partner and Willowbridge believe that trading through this structure should promote efficiency and economy in the trading process.

     On August 1, 2005, the assets allocated to Drury for trading were invested in the CMF Drury Capital Master Fund L.P. (“Drury Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 120,720.7387 units of Drury Master with cash equal to $117,943,206 and a contribution of open futures and forward contracts with a fair value of $2,777,533. Drury Master was formed in order to permit accounts managed now or in the future by Drury using the Diversified Trend-Following Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Drury Master. Individual and pooled accounts currently managed by Drury, including the Partnership are permitted to be limited partners of Drury Master. The General Partner and Drury believe that trading through this structure should promote efficiency and economy in the trading process.

     On August 1, 2005, the assets allocated to CFM for trading were invested in the CMF Capital Fund Management Master Fund L.P. (“CFM Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 159,434.0631 units of CFM Master with cash equal to $157,804,020 and a contribution of open futures and forward contracts with a fair value of $1,630,043. CFM Master was formed in order to permit accounts managed now or in the future by CFM using the Discus Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also is the general partner of CFM Master. Individual and pooled accounts currently managed by CFM, including the Partnership are permitted to be

limited partners of CFM Master. The General Partner and CFM believe that trading through this structure should promote efficiency and economy in the trading process.

     On October 1, 2005, the assets allocated to AAA for trading were invested in the AAA Master Fund LLC, (“AAA Master”) a limited liability company formed under the New York Limited Liability Company Law. The Partnership purchased 13,956.1190 units of AAA Master with cash equal to $50,000,000. AAA Master was formed in order to permit accounts managed now or in the future by AAA using the Energy Program — Futures and Swaps, a proprietary, discretionary trading system, to invest in one trading vehicle. The Partnership fully redeemed its investment in AAA Master on January 31, 2010 for cash equal to $40,267,084.

     On June 1, 2006, the assets allocated to Graham for trading were invested in the CMF Graham Capital Master Fund L.P. (“Graham Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 101,486.0491 units of Graham Master with cash equal to $103,008,482. Graham Master was formed in order to permit accounts managed now or in the futures by Graham using the K4D-12.5 Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Graham Master. Individual and pooled accounts currently managed by Graham, including the Partnership are permitted to be limited partners of Graham Master. The General Partner and Graham believe that trading through this structure should promote efficiency and economy in the trading process.

     On July 1, 2006, the assets allocated to 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 17,941.7382 units of Avant Master with cash equal to $20,000,000. 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 system, to invest together in one trading vehicle. The Partnership fully redeemed its investment in Avant Master on January 31, 2009 for cash equal to $14,145,443.

     On March 1, 2009, the assets allocated to SandRidge for trading were invested in the CMF SandRidge Master Fund L.P. (“SandRidge Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 14,408.1177 units of SandRidge Master with cash equal to $27,000,000. SandRidge Master was formed in order to permit commodity pools managed now or in the future by SandRidge using the Energy Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner of SandRidge Master. Individual and pooled accounts currently managed by SandRidge, including the Partnership, are permitted to be limited partners of SandRidge Master. The General Partner and SandRidge believe that trading through this structure should promote efficiency and economy in the trading process.

     On October 1, 2010, the assets allocated to 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 19,612.3882 units of Sasco Master with cash equal to $25,535,000. Sasco Master was formed in order to permit commodity pools managed now or in the future by Sasco using the Energy Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Sasco Master. Individual and pooled accounts currently managed by Sasco, including the Partnership, are permitted to be limited partners of Sasco Master. The General Partner and Sasco believe that trading through this structure should promote efficiency and economy in the trading process.

     The General Partner is not aware of any material changes to the trading programs discussed above during the year ended December 31, 2010.

     Winton Master’s, Aspect Master’s, Drury Master’s, Willowbridge Master’s, CFM Master’s, Graham Master’s, SandRidge Master’s and Sasco Master’s (collectively, the “Funds”) and the Partnership’s trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. The Funds and the Partnership 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 unit as of the end of any day (the “Redemption Date”) after a request for redemption has been made to the General Partner at least 3 days in advance of the Redemption Date. The units are classified as a liability when the limited partner elects to redeem and informs the Funds.

     Management and incentive fees are charged at the Partnership level. All exchange, clearing, user, give-up, floor brokerage and National Futures Association (“NFA”) fees (collectively the “clearing fees”) are borne by the Partnership directly and through its investment in the Funds. All other fees including CGM’s direct brokerage fees are charged at the Partnership level.

     For the period January 1, 2010 through December 31, 2010, the approximate average market sector distribution for the Partnership was as follows:

     At December 31, 2010, the Partnership owned approximately 87.5% of Drury Master, 21.2% of Willowbridge Master, 68.7% of Aspect Master, 76.3% of CFM Master, 14.0% of Winton Master, 62.5% of Graham Master, 13.8% of SandRidge Master and 55.3% of Sasco Master. At December 31, 2009, the Partnership owned approximately 89.2% of Drury Master, 30.8% of Willowbridge Master, 60.3% of Aspect Master, 76.3% of CFM Master, 17.2% of Winton Master, 6.6% of AAA Master, 51.1% of Graham Master and 11.7% of SandRidge 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.

     Pursuant to the terms of the management agreement (the “Management Agreement”) with each Advisor, the Partnership is obligated to pay each Advisor a monthly management fee equal to 1/6 of 1% (2% per year), except for Aspect, which will receive a monthly management fee equal to 1/12 of 1.5% (1.5% per year), of month-end Net Assets allocated to the 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 month’s incentive fee accruals, the monthly management fees 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, equal to 20% of the New Trading Profits, as defined in each Management Agreement, earned by each Advisor for the Partnership during each calender quarter.

     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 0.46% (5.5% per year) 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 month’s brokerage fees, incentive fee accruals, the monthly management fees and other expenses and any redemptions or distributions as of the end of such month. CGM will pay a portion of its brokerage 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 CGM’s discretion upon written notice to the Partnership. The Partnership directly and through its investment in the Funds will pay for the clearing fees. In addition, CGM will pay the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of a Fund’s) brokerage 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. CGM will pay such interest to the Partnership out of its own funds whether or not it is able to earn the interest it has obligated itself to pay. The Customer Agreement may be terminated upon notice by either party.

     (b) Financial Information about Segments. The Partnership’s business consists of only one segment, speculative trading of commodity interests. The Partnership does not engage in sales of goods or services. The Partnership’s 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 Partnership’s Capital as of December 31, 2010 was $763,167,489.

     (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.

Item 1A. Risk Factors.

     As a result of leverage, small changes in the price of the Partnership’s 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 their investment.

     Due to the speculative nature of trading commodity interests, an investor could lose all of their 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 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 investor’s ability to redeem or transfer units is limited.

     An investor’s ability to redeem units is limited and no market exists for the 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 Partnership’s/Funds’ commodity broker are affiliates;
2.		Each of the Advisors, the Partnership’s/Funds’ commodity broker and their principals and affiliates may trade in commodity interests for their own accounts; and
3.		An investor’s financial advisor will receive ongoing compensation for providing services to the investor’s account.

     Investing in units might not provide the desired diversification of an investor’s overall portfolio.

     The Partnership will not provide any benefit of diversification of an investor’s 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 investor’s tax liability may exceed cash distributions.

     Investors are taxed on their share of the Partnership’s income, even though the Partnership does not intend to make any distributions.

     The General Partner may allocate the Partnership’s assets to undisclosed advisors.

     The General Partner at any time may select and allocate the Partnership’s 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.

     Regulatory changes could restrict the Partnership’s 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 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 Citigroup’s 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, Citigroup’s 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 Citigroup’s subprime and other mortgage-related conduct and business activities, as well as other business activities affected by the credit crisis, including an ongoing inquiry into Citigroup’s structuring and sale of CDOs. Citigroup is cooperating fully with the SEC’s inquiries.

     On July 29, 2010, the SEC announced the settlement of an investigation into certain of Citigroup’s 2007 disclosures concerning its subprime-related business activities. On October 19, 2010, the United States District Court for the District of Columbia entered a Final Judgment approving the settlement, pursuant to which Citigroup agreed to pay a $75 million civil penalty and to maintain certain disclosure policies, practices and procedures for a three-year period. Additional information relating to this action is publicly available in court filings under the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).

     The Federal Reserve Bank, the 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].

PART II

Item 5. Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchase of Equity Securities.

	(a)		Market Information. The Partnership has issued no stock. There is no public market for the Redeemable Units.
	(b)		Holders. The number of holders of Redeemable Units as of December 31, 2010 was 18,762.
	(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. The public offering of Redeemable Units terminated on November 30, 2008. For the twelve months ended December 31, 2010, there were additional subscriptions of 87,197.4852 Redeemable Units totaling $101,745,934. For the twelve months ended December 31, 2009, there were additional subscriptions of 51,211.7956 Redeemable Units totaling $63,653,869. For the twelve months ended December 31, 2008, there were additional subscriptions of 181,317.5434 Redeemable Units totaling $206,908,278 and 902.0630 General Partner unit equivalents totaling $1,000,000. 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 promulagated thereunder. The Redeemable Units were purchased by accredited investors, as described in Regulation D. Proceeds of net offering were used for the trading of commodity interests including futures contracts, options, swaps 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

9,762.5087

$

1,160.88

N/A

N/A

November 1, 2010 — November 30, 2010

7,178.1373

$

1,127.01

N/A

N/A

December 1, 2010 — December 31, 2010

10,244.4768

$

1,165.28

N/A

N/A

27,185.1228

$

1,153.59

N/A

N/A

Item 6. Selected Financial Data.

     Net realized and unrealized trading gains (losses), interest income, net income (loss), 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 $45,910,521, $50,422,263, $54,081,006, $51,503,887 and $57,053,310, respectively		$	(16,490,363	)		$	(31,303,499	)		$	271,522,814			$	51,964,083			$	(4,575,484	)
Interest income			679,811				571,324				8,606,237				29,043,564				34,415,640
		$	(15,810,552	)		$	(30,732,175	)		$	280,129,051			$	81,007,647			$	29,840,156
Net income (loss)		$	(31,873,271	)		$	(54,332,616	)		$	229,556,006			$	59,503,224			$	3,897,198
Increase (decrease) in net asset value per unit		$	(47.43	)		$	(77.75	)		$	283.85			$	70.82			$	4.83
Net asset value per unit		$	1,165.28			$	1,212.71			$	1,290.46			$	1,006.61			$	935.79
Total assets		$	780,454,962			$	806,423,847			$	1,069,790,643			$	842,617,677			$	925,899,948

Item 7. Management’s 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 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 Partnership’s 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 considered past performance, trading style, volatility of markets traded and fee requirements.

     Responsibilities of the General Partner include:

	•		due diligence examinations of the Advisors;
	•		selection, appointment and termination of the Advisors;
	•		negotiation of the management agreements; and
	•		monitoring the activity of the Advisors.

     In addition, the General Partner prepares the books and records and provides the administrative and compliance services that are required by law or regulation from time to time in connection with 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: Drury — Diversified Trend-Following Program, Graham — K4D-12.5 Program (“K4D”), JWH — Global Analytics Program, Aspect — Diversified Program, CFM — Discus Program, Winton — Diversified Program, Willowbridge — Argo Trading System (“Argo”), SandRidge — Energy Program and Sasco — Energy Program. As of December 31, 2010, the Partnership’s assets were allocated among the Advisors in the following approximate

percentages: Drury 14%, Graham 14%, JWH 6%, Aspect 14%, CFM 16%, Winton 15%, Willowbridge 6%, SandRidge 9% and Sasco 6%. The General Partner may modify or terminate the allocation of assets among trading advisors at any time and may allocate assets to additional advisors at any time.

Drury Capital, Inc.

     Drury trades its Diversified Trend-Following Program on behalf of Drury Master. The Diversified Trend-Following program is systematic and technical. Drury may exercise judgment regarding liquidity issues. Systematic traders rely primarily on trading programs or models that generate trading signals. The systems utilized to generate trading signals are changed from time to time (although generally infrequently), but the trading instructions generated by the system being used are followed without significant additional analysis or interpretation.

     The Diversified Trend-Following Program is built on elements of trend-following and diversification. The program emphasizes diversification by trading metals, agricultural products, foreign exchange, stock indices, energy products, financial instruments and tropical products (softs).

     The Diversified Trend-Following Program trades 30 portfolio instruments and is generally positioned in 18 of these instruments on average. Positions can be short as well as long. The Diversified Trend-Following Program has no market or sector bias, as Drury believes that each instrument can produce long-term profits through the application of independent technical analysis and risk management.

     Graham Capital Management, L.P.

     Graham trades its K4D program on behalf of Graham Master. The K4D program allocates assets equally among four other distinct Graham trading programs.

     Graham trades actively in both U.S. and foreign markets, primarily in futures contracts, forward contracts, spot contracts and associated derivative instruments such as options and swaps. Graham engages in exchange for physical transactions, which involve the exchange of a futures position for the underlying physical commodity without making an open competitive trade on an exchange. Graham at times will trade certain instruments, such as forward foreign currency contracts, as a substitute for futures or options traded on futures exchanges.

     Graham’s trading systems are systematic and rely primarily on technical rather than fundamental information as the basis for their trading decisions. Graham’s systems are based on the expectation that they can over time successfully anticipate market events using quantitative mathematical models to determine their trading activities, as opposed to attempting properly to forecast price trends using subjective analysis of supply and demand.

     John W. Henry & Company, Inc.

     JWH trades its JWH Global Analytics Program on behalf of the Partnership, a proprietary, systematic trading system. Since the firm’s inception, the JWH investment philosophy has been based on the premise that market prices, rather than market fundamentals, are the key aggregators of information necessary to make investment decisions and that market prices, which may at first seem random, are actually related through time in complex, but discernable ways.

     Global Analytics invests in both long- and short-term price movements. The program invests in a broad spectrum of worldwide financial and non-financial markets, including interest rate, non-U.S. stock index, currency, metals, energy and agricultural contracts. GlobalAnalytics uses JWH’s five phase investment style (a position is maintained, long or short, in a market at all times) and JWH’s three phase investment style (positions are taken when trends are identified, but the program may take a neutral stance or liquidate open positions in non-trending markets).

Willowbridge Associates Inc.

     Willowbridge trades its Select Investment Program using the Argo Trading System on behalf of Willowbridge Master. Argo is a proprietary, computerized systematic trading system that relies on technical information. It is not a trend-following system, but does follow a trend

when the opportunity arises. Argo uses the concepts of pattern recognition, support/resistance levels and counter trend liquidations in making trading decisions. Argo determines, on a daily basis, whether to be long, short or flat the various commodities in its portfolio.

     Pattern recognition, support/resistance levels and counter-trend liquidations are defined as follows:

     Pattern recognition is the ability to identify patterns that appear to have acted as precursors of price advances or declines in the past.

     A support level is a previous low—a price level under the current market price at which point buying interest is expected to be sufficiently strong to overcome selling pressure.

     A resistance level is a previous high—a price level over the current market price at which point selling pressure is expected to overcome buying pressure and a price advance is expected to be turned back.

     A counter-trend liquidation is the closing out of a position after a significant price move on the assumption that the market is due for a correction.

     Aspect Capital Limited.

     Aspect trades its Diversified Program on behalf of Aspect Master. The Diversified Program is a proprietary, systematic global futures trading program. Its goal is the generation of significant long-term capital growth independent of stock and bond market returns. This program continuously monitors price movements in a wide range of global financial, currency and commodity markets, searching for profit opportunities over periods ranging from a few hours to several months.

     Aspect has designed the Diversified Program to have broad market diversification (subject to liquidity constraints). Aspect’s quantitative resources are sufficient to enable it to design and implement a broadly diversified portfolio with a significant allocation to numerous different markets.

     Aspect’s Diversified Program trades over 100 markets in the seven major sectors: currencies, energy, metals, stock indices, bonds, agricultural commodities and interest rates implementing momentum strategies. Aspect is constantly examining new liquid and uncorrelated markets to incorporate in the program with the aim of improving its reward/risk ratio and capacity. Aspect has no market or sector preferences, believing that allowing for liquidity effects, equal profitability can be achieved in the long-term in all markets. The key factors in determining the asset allocation are correlation and liquidity. Correlations are analyzed at the sector, sub-sector, economic block and market levels to design a portfolio which is highly diversified.

     Capital Fund Management S.A.

     CFM trades its Discus Program on behalf of CFM Master. The Discus Program is a proprietary, multi-strategy, 100% statistical and systematic program that seeks to identify prevailing market conditions and adopt the most efficient trading strategy for those conditions. The strategy at times follows medium to long term trends, and at other times establishes short term positions in the direction of or opposite a trend.

     CFM has designed the Discus Program to trade a diversified portfolio of approximately 50 futures and forward contracts among the following sectors: short, medium and long term interest rates, stock indices, currencies and commodities.

     Winton Capital Management Limited.

     Winton trades its Diversified Program on behalf of Winton Master. The Diversified Program trades approximately 95 futures and forward contracts on United States and non- United States exchanges and markets.

     Winton employs a fully systematic, computerized, technical, trend-following trading system developed by its principals. This system tracks the daily price movements from these markets around the world, and carries out certain computations to determine each day how long or short the portfolio should be in an attempt to maximize profit within a certain range of risk. If rising prices in a

particular market are anticipated, a long position will be established in that market; if prices in a particular market are expected to fall, a short position in that market will be established.

     Technical analysis refers to analysis based on data intrinsic to a market, such as price and volume. In contrast, fundamental analysis relies on factors external to a market, such as supply and demand. The Diversified Program employs no fundamental factors.

     A trend-following system is one that attempts to take advantage of the observable tendency of the markets to trend, and to tend to make exaggerated movements in both upward and downward directions as a result of such trends. These exaggerated movements are largely explained as a result of the influence of crowd psychology or the “herd instinct” among market participants.

     A trend-following system does not anticipate a trend. In fact, trend-following systems are frequently unprofitable for long periods of time in particular markets or market groups, and occasionally they are unprofitable for periods of more than a year. However, the principals believe that such an approach will, in the long term, be profitable.

     Trade selection is not subject to intervention by Winton’s principals and therefore is not subject to the influences of individual judgment. As a mechanical trading system, the Winton model embodies all the expert knowledge required to analyze market data and direct trades, thus eliminating the risk of basing a trading program on one indispensable person. Equally as important is the fact that mechanical systems can be tested in simulation for long periods of time and the model’s empirical characteristics can be measured.

     The system’s output is rigorously adhered to in trading the portfolio and intentionally no importance is given to any external or fundamental factors. While it may be seen as unwise to ignore information of obvious value, such as that pertaining to political or economic developments, Winton believes that the disadvantage of this approach is far outweighed by the advantage of the discipline that rigorous adherence to such a system instills. Winton believes that significant profits may be realized by the Winton system by holding on to positions for much longer than conventional wisdom would dictate. Winton believes that a trader who pays attention to day-to-day events could be distracted from the chance of fully capitalizing on such trends.

     The Winton system trades in all liquid U.S. and non-U.S. futures and forward contracts. Forward markets include major currencies and precious and base metals, the latter two categories being traded on the London Metal Exchange. Winton seeks out new opportunities to add additional markets to the portfolio, with the goal of increasing the portfolio’s diversification.

     Winton believes that taking positions in a variety of unrelated markets will, over time, decrease system volatility. By employing a sophisticated and systematic method for placing orders in a wide array of markets, Winton believes that profits can be realized over time.

     SandRidge Capital, L.P.

     SandRidge trades the Partnership’s assets in accordance with its Energy Program, a proprietary, discretionary trading system. SandRidge primarily attempts to achieve the Partnership’s objective through the speculative trading of energy-related commodity interests, including, but not limited to, natural gas, crude oil, heating oil and gasoline. With the prior approval of the General Partner, SandRidge may trade in other commodity interests that are now traded, or may be traded in the future, on exchanges and markets located in the United States and abroad.

     SandRidge is a discretionary trader that employs primarily fundamental analysis. Fundamental analysis examines factors external to the trading market that affect the supply and demand for a particular group or type of commodity in order to predict future prices. Effective risk management is an important aspect of SandRidge’s trading program. An account’s size, volatility of the market traded and the nature of other positions taken are all factors used in deciding whether to initiate a position and in determining the amount of equity committed to that position. While SandRidge relies heavily on fundamental research to develop its overall point of view, it also employs technical analysis in its trading to help determine entry and exit points. Technical analysis includes moving averages, index rolls and Stochastic/relative strength indicators. Technical analysis is based on the theory that the study of the markets themselves provides a means of anticipating price movements. SandRidge may employ various strategies for phasing an account in and out of the markets. Entry points are based on a number of price breakout and retracement indicators. Position exits are based on multiple strategies including trailing stops, target prices and technical reversals. If SandRidge believes that the markets traded are unstable, SandRidge may temporarily reduce positions or exit the markets entirely and therefore hold no open positions for a period of time. SandRidge estimates that, generally, 10% to 15% of the Partnership’s assets allocated to SandRidge will be committed to margin at

any one time. The actual amount committed as such may be substantially more. Trading decisions will require the exercise of judgment by SandRidge.

     SandRidge’s success depends to a great extent upon the occurrence of market conditions favorable to its trading strategy. Factors such as lack of major price trends or increased governmental control of, or participation in, the markets, may reduce SandRidge’s ability to trade profitably in the future.

     Sasco Energy Partners LLC

     Sasco trades the Partnership’s assets in accordance with its Energy Program, a proprietary, discretionary trading system. 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. Sasco’s 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. Sasco’s 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.

     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 Drury Capital Master Fund L.P.

Currencies			25.8	%
Energy			6.3	%
Grains			6.2	%
Interest Rates Non-U.S.			17.9	%
Interest Rates U.S.			6.0	%
Metals			9.5	%
Softs			5.8	%
Stock Indices			22.5	%

CMF Graham Capital Master Fund L.P.

Currencies			35.9	%
Energy			6.4	%
Grains			3.1	%
Interest Rates Non-U.S.			13.5	%
Interest Rates U.S.			7.5	%
Livestock			0.4	%
Metals			6.8	%
Softs			3.5	%
Stock Indices			22.9	%

CMF Willowbridge Argo Master Fund L.P.

Currencies			17.8	%
Energy			18.7	%
Grains			8.9	%
Interest Rates Non-U.S.			16.7	%
Interest Rates U.S.			8.1	%
Livestock			0.6	%
Metals			18.3	%
Softs			10.9	%

CMF Aspect Master Fund L.P.

Currencies			24.7	%
Energy			8.3	%
Grains			3.7	%
Interest Rates Non-U.S.			26.1	%
Interest Rates U.S.			9.2	%
Livestock			0.6	%
Metals			9.0	%
Softs			6.8	%
Stock Indices			11.6	%

CMF Capital Fund Management Master Fund L.P.

Currencies			21.3	%
Energy			5.8	%
Grains			2.5	%
Interest Rates Non-U.S.			16.3	%
Interest Rates U.S.			12.9	%
Livestock			0.3	%
Metals			3.4	%
Softs			2.3	%
Stock Indices			35.2	%

CMF Winton Master L.P.

Currencies			21.0	%
Energy			4.7	%
Grains			5.3	%
Interest Rates Non-U.S.			16.1	%
Interest Rates U.S.			12.6	%
Livestock			0.6	%
Metals			13.3	%
Softs			2.5	%
Stock Indices			23.9	%

CMF SandRidge Master Fund L.P.

Energy			100.0	%

CMF Sasco Master Fund L.P.

Energy			100.0	%

     For the period January 1, 2010 through December 31, 2010, the average allocation by commodity market sector for the portion of the Partnership’s assets traded directly by JWH was as follows:

Currencies			19.2	%
Energy			12.4	%
Grains			12.3	%
Interest Rates Non-U.S.			12.0	%
Interest Rates U.S.			10.0	%
Metals			16.6	%
Softs			15.3	%
Stock Index			2.2	%

     (a) Liquidity.

     The Partnership does not engage in the sales of goods or services. The Partnership’s assets are its (i) investment in Funds, (ii) equity in its trading account, consisting of cash and cash equivalents, net unrealized appreciation on open futures 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 believes are traded in sufficient volume to permit ease of taking and liquidating positions. Sufficient volume, in this context, refers to a level of liquidity that the Advisor believes will permit it to enter and exit trades without noticeably moving the market.
	(ii)		An Advisor will 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 Partnership’s 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 purchases 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 its commodity trading account. The term “churning” refers to the practice of entering and exiting trades with a frequency unwarranted by legitimate efforts to profit from the trades, indicating the desire to generate commission income.

     From January 1, 2010 through December 31, 2010, the Partnership’s average margin to equity ratio (i.e., the percentage of assets on deposit required for margin) was approximately 12.2%. The foregoing margin to equity ratio takes into account cash held in the Partnership’s 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 Partnership’s assets and undistributed profits. This limited liability is a consequence of the organization of the Partnership as a limited partnership under applicable law.

     Market risk is the potential for changes in the value of the financial instruments traded by the 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 Partnership’s/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 Partnership’s/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 Partnership’s/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 Partnership’s/Funds’ counterparty is an exchange or clearing organization.

     As both a buyer and seller of options, the Funds pay or receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Funds to potentially unlimited liability; for purchased options the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Funds do not consider these contracts to be guarantees.

     The General Partner monitors and attempts to control the Partnership’s/Funds’ risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership/Funds may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, on-line monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions. (See also “Item 8. Financial Statements and Supplementary Data” for further information on financial instrument risk included in the notes to financial statements.)

     Other than the risks inherent in commodity futures and other derivatives trading, the Partnership knows of no trends, demands, commitments, events or uncertainties which will result in or which are reasonably likely to result in the Partnership’s 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 Partnership’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be predicted. Market movements in commodities are dependent upon fundamental and technical factors which the Advisors may or may not be able to identify, such as changing supply and demand relationships, weather, government, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. Partnership expenses consist of, among other things, brokerage commissions 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 their Redeemable Units at the net asset value per Redeemable Unit as of the last day of any month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions generally are funded out of the Partnership’s cash holdings. For the year ended December 31, 2010, 83,328.4812 Redeemable Units were redeemed totaling $96,244,456. For the year ended December 31, 2009, 186,428.5326 Redeemable Units were redeemed totaling $234,571,753 and 2,188.2548 General Partner unit equivalents totaling $2,681,072. For the year ended December 31, 2008, 207,556.2917 Redeemable Units were redeemed totaling $239,169,501.

     For the year ended December 31, 2010, there were additional subscriptions of 87,197.4852 Redeemable Units totaling $101,745,934. For the year ended December 31, 2009, there were additional subscriptions of 51,211.7956 Redeemable Units totaling $63,653,869. For the year ended December 31, 2008, there were additional subscriptions of 181,317.5434 Redeemable Units totaling $206,908,278 and 902.0630 General Partner unit equivalents totaling $1,000,000.

     (c) Results of Operations.

     For the year ended December 31, 2010, the net asset value per unit decreased 3.9% from $1,212.71 to $1,165.28. For the year ended December 31, 2009, the net asset value per unit decreased 6.0% from $1,290.46 to $1,212.71. For the year ended December 31, 2008, the net asset value per unit increased 28.2% from $1,006.61 to $1,290.46.

     The Partnership experienced a net trading gain of $29,420,158 before brokerage fees and expenses in 2010. Gains were primarily attributed to the Partnership’s/Funds’ trading in currencies, grains, U.S. and non-U.S. interest rates, metals and softs and were partially offset by losses in energy, indices and livestock. The net trading gain (or loss) realized from the Partnership and the Funds is disclosed on page 40 under “Item 8. Financial Statements and Supplementary Data.”

     Losses were experienced within the energy markets from long futures positions in crude oil and its related products as prices declined amid speculation that China’s economic activity and energy demand may ease. Throughout May, long futures positions in crude oil and its related products resulted in additional losses as prices declined on continued worries that Europe’s debt troubles might slow down the global economic recovery and thereby weaken energy demand. Losses were also recorded in short positions in natural gas as prices unexpectedly rallied due to higher demand for electricity in the summer on higher temperature. Within the global stock index sector, losses were incurred in January from long positions in European, U.S., and Pacific Rim equity index futures as prices moved lower amid disappointing U.S. corporate earnings reports and mounting concerns over sovereign debt defaults from a number of European countries. During May and June, further losses were incurred from long positions in European, U.S., and Japanese equity-index futures as prices moved lower on growing concerns that Greece’s sovereign debt crisis might spread throughout Europe.

     A portion of the Partnership’s losses for the year was offset by gains recorded in 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 Greece’s 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. In the metals markets, gains were recorded throughout September, October, November, and December as long futures positions in silver and gold resulted in additional gains for the metals sector as prices rose amid increased demand for the precious metals due to a drop in the value of the U.S. dollar, with silver futures rallying to a 30-year high and gold prices reaching a new all-time high. 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 weakened amid concerns over the Greek debt crisis. During September, long positions in the Australian dollar versus the U.S. dollar resulted in gains as the value of the Australian dollar rose against the U.S. dollar amid speculation that the Reserve Bank of Australia may raise interest rates in October. During December, gains were achieved due to long positions in the Australian dollar, Canadian dollar, South African rand, and New Zealand dollar versus the U.S. dollar as the value of these “commodity currencies” moved higher against the U.S. dollar in tandem with rising commodity prices.

     The Partnership experienced a net trading gain of $19,118,764 before brokerage fees and expenses in 2009. Gains were primarily attributed to the Partnership’s/Funds’ trading in indices, livestock and metals and were partially offset by losses in currencies, energy, grains, U.S. and non-U.S. interest rates, lumber 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 market’s 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.

     Losses were realized in trading fixed income instruments. With the economic backdrop of 2009, yields started to exhibit asymmetric volatility due to extreme uncertainty prevailing in the longer time horizon. Encouraged by the continuing efforts of the Obama administration to stabilize the U.S. economy, the markets finally began to recover a degree of risk-taking confidence in March, resulting in the reversal of many of the trends that had driven returns in late 2008. In agricultural commodities, losses were realized primarily in corn and wheat. Prices of corn and wheat both unexpectedly rallied in October as cold, wet weather threatened to delay

harvest and concerns over the acres likely to be seeded for the new crop. Losses were also taken in trading of currencies, primarily in December as the Japanese Yen reversed sharply on the Japanese government’s dissatisfaction over the high value of the Yen.

     Interest income on 80% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of a Fund’s) brokerage account was earned at the monthly average 30-day U.S. Treasury bill yield. Interest income for the three and twelve months ended December 31, 2010 increased by $140,310 and $108,487, respectively, as compared to the corresponding periods in 2009. The increase is due to an increase in the average interest rate over the corresponding periods. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s and the Funds’ accounts and upon interest rates over which neither the Partnership nor CGM has control.

     Brokerage fees are calculated on the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Brokerage fees for the three and twelve months ended December 31, 2010 decreased by $479,327 and $4,511,742, respectively, as compared to the corresponding periods in 2009. The decrease in brokerage fees is primarily due to a decrease in 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 Partnership’s net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Management fees for the three and twelve months ended December 31, 2010 decreased by $167,824 and $1,519,621, respectively, as compared to the corresponding periods in 2009. The decrease in management fees is due to a decrease in average 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 an incentive fees accrual of $364,790. Trading performance for the three and twelve months ended December 31, 2009 resulted in an incentive fees accrual of $643,364 and $6,244,781, 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 $686,498 and $557,048, 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 $36,830 and $304,390, respectively.

     The Partnership experienced a net trading gain of $325,603,820 before brokerage fees and expenses in 2008. Gains were primarily attributed to the Partnership’s/Funds’ trading in currencies, energy, grains, indices, U.S. and non-U.S. interest rates, lumber, 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 world’s 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 the sectors.

     Profits were primarily realized from trading in energy, fixed income and equity indices. The Partnership realized most of the profits in the energy sector by capturing both the bullish and the bearish trends. In the earlier part of the year, crude oil pushed towards a historic high of $147 per barrel and in the latter part, the trend suddenly reversed and a strong negative trend emerged with crude oil dropping to about $32 per barrel. Natural gas also contributed to profits as prices plunged from $14 to about $5 per MMBtu. The Partnership was also profitable in interest rates as the yield on short term notes dropped significantly. Short term U.S. Treasury bills were in such high demand due to flight-to-quality that the yields had dropped below zero during the year. While the 10-year U.S. Treasury bill yielded on an average between 3.5%-4% for 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.

     In the General Partner’s 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 assure 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, other than SandRidge and Sasco, to identify those price trends correctly. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Partnership expects to increase capital through operations.

     In allocating the assets of the Partnership among the trading advisors, the General Partner considers past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among the trading advisors and may allocate assets to additional advisors at any time. Each Advisor’s percentage allocation and trading program is described in the “overview” section of this Item 7.

     (d) Off-Balance Sheet Arrangements. None.

     (e) Contractual Obligations. None

     (f) Operational Risk.

     The Partnership is directly exposed to market risk and credit risk, which arise in the normal course of its business activities. Slightly less direct, but of critical importance, are risks pertaining to operational and back office support. This is particularly the case in a rapidly changing and increasingly global environment with increasing transaction volumes and an expansion in the number and complexity of products in the marketplace.

     Such risks include:

     Operational/Settlement Risk — the risk of financial and opportunity loss and legal liability attributable to operational problems, such as inaccurate pricing of transactions, untimely trade execution, clearance and/or settlement, or the inability to process large volumes of transactions. The Partnership is subject to increased risks with respect to its 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 Partnership’s/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 management’s authorization, and that financial information utilized by management and communicated to external parties, including the Partnership’s unit holders, creditors, and regulators, is free of material errors.

     (g) Critical Accounting Policies.

     Partnership’s and the Funds’ Investments. All commodity interests (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are

recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in 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.

     Partnership’s 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 Partnership’s 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 Partnership’s 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 who 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 Partnership’s investment 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 are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

     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 those contracts where the Funds agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the Funds’ net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Income and Expenses.

     The Funds do not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net gain (loss) on investments in the Statements of Income and Expenses.

     London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Funds are

cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Funds. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Realized gains (losses) and changes in unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses.

     Options. The Funds may purchase and write (sell) both exchange-listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Funds write an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Funds purchase an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Realized gains (losses) and changes in unrealized gains (losses) on options contracts are included in the Statements of Income and Expenses.

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 Partnership’s/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 Partnership’s 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 the Partnership’s 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 Partnership’s/Funds’ open positions and, consequently, in its earnings and cash balances. The Partnership’s/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 Partnership’s/Funds’ open positions and the liquidity of the markets in which it trades.

     The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s/Funds’ past performance is not necessarily indicative of their future results.

     “Value at Risk” is a measure of the maximum amount which the Partnership/Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/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 Partnership’s/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 Partnership’s/Funds’ losses in any market sector will be limited to Value at Risk or by the Partnership’s/Funds’ attempts to manage their market risk.

     Materiality as used in this section, “Qualitative and Quantitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Partnership’s/Funds’ market sensitive instruments.

Quantifying the Partnership’s Trading Value at Risk

     The following quantitative disclosures regarding the Partnership’s/Funds’ market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended 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 Partnership’s/Funds’ risk exposure in the various market sectors traded by the Advisors is quantified below in terms of Value at Risk. Due to the Partnership’s/Funds’ mark-to-market accounting, any loss in the fair value of the Partnership’s open positions including investments in the Funds, is directly reflected in the Partnership’s earnings (realized and unrealized) and cash balances. Exchange maintenance margin requirements have been used by the Partnership/Funds as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%—99% of any one-day interval. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component which is not relevant to Value at Risk.

     In the case of market sensitive instruments which are not exchange traded (almost exclusively currencies in the case of the Partnership/Funds), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

     The fair value of the Partnership’s/Funds’ futures and forward positions 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 Partnership’s/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 category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Partnership’s/Funds’ positions are rarely, if ever, 100% positively correlated have not been reflected.

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

     Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. With the exception of JWH, the Partnership’s advisors currently trade the Partnership’s assets indirectly in master fund managed accounts over which they have been granted limited authority to make trading decisions. JWH directly trades a managed account in the Partnership’s name. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly and through its investment in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e., in the managed account in the Partnership’s name traded by JWH) and indirectly by each Fund separately.

     The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2010 and 2009. As of December 31, 2010, the Partnership’s total capitalization was $763,167,489.

		December 31, 2010
						% of Total
Market Sector		Value at Risk				Capitalization
Currencies		$	17,027,277				2.23	%
Energy			18,382,741				2.41	%
Grains			3,360,398				0.44	%
Indices			13,933,328				1.83	%
Interest Rates U.S.			8,649,152				1.13	%
Interest Rates Non-U.S.			7,377,323				0.97	%
Livestock			1,844,941				0.24	%
Metals			6,948,426				0.91	%
Softs			3,734,248				0.49	%
Total		$	81,257,834				10.65	%

     As of December 31, 2009, the Partnership’s total capitalization was $789,539,282.

		December 31, 2009
						% of Total
Market Sector		Value at Risk				Capitalization
Currencies		$	8,520,217				1.08	%
Energy			13,769,720				1.74	%
Grains			2,034,508				0.26	%
Indices			16,677,937				2.11	%
Interest Rates U.S.			2,927,000				0.37	%
Interest Rates Non-U.S.			8,929,362				1.13	%
Livestock			162,582				0.02	%
Metals			6,119,563				0.78	%
Softs			4,477,500				0.57	%
Total		$	63,618,389				8.06	%

     The following tables indicate the trading Value at Risk associated with the Partnership’s direct investments and indirect investments in the Funds 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 Partnership’s Value at Risk for the portion of its assets that are traded directly by JWH was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	700,600				0.09	%		$	1,005,600			$	28,800			$	596,618
Energy			494,420				0.06	%			600,500				36,500				431,918
Grains			587,000				0.08	%			664,000				13,875				342,870
Indices			133,361				0.02	%			204,731				48,781				123,711
Interest Rates U.S.			361,250				0.05	%			411,200				40,000				276,068
Interest Rates Non -U.S.			575,201				0.07	%			615,037				102,218				425,813
Metals			822,000				0.11	%			822,000				39,984				475,734
Softs			1,121,800				0.15	%			1,121,800				176,000				507,714
Total		$	4,795,632				0.63	%

     As of December 31, 2009, the Partnership’s Value at Risk for the portion of its assets that are traded directly by JWH 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		$	291,750				0.04	%		$	1,093,705			$	81,090			$	578,832
Energy			194,500				0.03	%			702,680				116,500				352,111
Grains			175,000				0.02	%			706,320				16,230				299,210
Indices			185,058				0.02	%			231,803				6,400				146,211
Interest Rates U.S.			122,400				0.02	%			498,150				16,500				211,148
Interest Rates Non-U.S.			322,880				0.04	%			632,703				86,804				315,408
Softs			575,600				0.07	%			575,600				14,400				264,769
Total		$	1,867,188				0.24	%

     As of December 31, 2010, Drury Master’s total capitalization was $123,074,679. The Partnership owned approximately 87.5% of Drury Master. As of December 31, 2010, Drury Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Drury for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average *
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk
Currencies		$	5,021,338				4.08	%		$	5,021,338			$	1,706,188			$	4,123,793
Energy			1,328,630				1.08	%			1,790,100				543,799				1,050,228
Grains			982,250				0.80	%			1,650,750				165,550				982,525
Indices			7,109,978				5.78	%			9,597,332				1,667,730				5,958,055
Interest Rates U.S.			458,036				0.37	%			1,358,000				457,621				933,366
Interest Rates Non-U.S.			3,594,971				2.92	%			5,511,448				1,657,132				3,464,645
Metals			3,849,377				3.13	%			3,849,377				502,003				1,958,430
Softs			1,071,845				0.87	%			1,393,499				278,418				939,629
Total		$	23,416,425				19.03	%

     As of December 31, 2009, Drury Master’s total capitalization was $115,243,532. The Partnership owned approximately 89.2% of Drury Master. As of December 31, 2009, Drury Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Drury for trading) was as follows:

		December 31, 2009
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	1,805,531				1.56	%		$	6,643,389			$	1,699,038			$	3,381,473
Energy			689,202				0.60	%			2,550,600				634,893				1,401,082
Grains			816,125				0.71	%			1,502,215				534,516				1,052,253
Indices			5,057,873				4.39	%			6,313,897				1,430,190				4,940,095
Interest Rates U.S.			538,125				0.47	%			1,494,200				96,903				704,978
Interest Rates Non-U.S.			1,694,307				1.47	%			3,761,422				1,089,172				2,207,261
Metals			1,969,687				1.71	%			3,475,587				842,023				2,328,903
Softs			1,305,960				1.13	%			1,305,960				442,173				802,681
Total		$	13,876,810				12.04	%

     As of December 31, 2010, Willowbridge Master’s total capitalization was $216,298,633. The Partnership owned approximately 21.2% of Willowbridge Master. As of December 31, 2010, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	2,232,591				1.03	%		$	7,096,121			$	940,854				3,547,819
Energy			2,742,900				1.27	%			6,539,400				460,750				2,570,821
Grains			2,062,750				0.95	%			3,762,750				207,200				1,238,276
Interest Rates U.S.			774,255				0.36	%			3,269,700				243,600				1,143,161
Interest Rates Non-U.S.			1,908,692				0.88	%			5,489,653				289,858				2,700,503
Livestock			112,000				0.05	%			171,200				44,800				92,018
Metals			3,791,000				1.75	%			5,643,396				710,500				2,729,785
Softs			2,024,400				0.94	%			3,388,150				198,000				1,542,246
Total		$	15,648,588				7.23	%

     As of December 31, 2009, Willowbridge Master’s total capitalization was $231,105,317. The Partnership owned approximately 30.8% of Willowbridge Master. As of December 31, 2009, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

		December 31, 2009
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	5,974,364				2.58	%		$	14,208,480			$	1,008,000			$	7,206,662
Energy			2,116,000				0.92	%			13,037,019				391,000				5,515,268
Grains			1,058,000				0.46	%			5,919,480				259,875				2,320,519
Interest Rates U.S.			1,959,945				0.85	%			9,939,105				280,500				2,836,425
Interest Rates Non-U.S.			3,403,449				1.47	%			14,168,324				455,649				4,852,602
Metals			3,968,558				1.72	%			8,372,754				1,909,575				3,799,612
Softs			2,725,100				1.18	%			3,202,100				237,900				1,531,645
Total		$	21,205,416				9.18	%

     As of December 31, 2010, Aspect Master’s total capitalization was $157,864,059. The Partnership owned approximately 68.7% of Aspect Master. As of December 31, 2010, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average *
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk
Currencies		$	6,641,142				4.21	%		$	6,908,626			$	1,960,264			$	4,676,665
Energy			1,421,450				0.90	%			1,932,150				351,414				1,223,668
Grains			663,172				0.42	%			853,702				150,472				496,932
Indices			2,735,405				1.73	%			15,325,500				832,920				2,830,563
Interest Rates U.S.			128,755				0.08	%			2,333,350				128,755				1,185,599
Interest Rates Non-U.S.			1,433,026				0.91	%			6,063,200				1,068,897				4,111,787
Livestock			109,519				0.07	%			240,000				14,717				93,906
Metals			1,798,174				1.14	%			2,724,717				539,569				1,434,801
Softs			853,509				0.54	%			1,719,693				494,690				987,242
Total		$	15,784,152				10.00	%

     As of December 31, 2009, Aspect Master’s total capitalization was $165,138,058. The Partnership owned approximately 60.3% of Aspect Master. As of December 31, 2009, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:

		December 31, 2009
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	3,005,547				1.82	%		$	9,657,630			$	1,450,765			$	3,783,484
Energy			948,800				0.57	%			4,972,100				440,450				1,516,206
Grains			327,245				0.20	%			1,461,017				291,283				622,287
Indices			4,002,477				2.42	%			4,177,780				735,579				2,382,946
Interest Rates U.S.			868,320				0.54	%			3,363,654				68,325				1,350,674
Interest Rates Non-U.S.			5,408,866				3.28	%			10,090,643				3,056,662				5,677,560
Livestock			155,900				0.09	%			704,364				130,800				287,937
Metals			2,647,427				1.60	%			4,707,270				813,671				2,289,309
Softs			1,800,229				1.09	%			2,057,410				648,164				1,382,129
Total		$	19,164,811				11.61	%

     As of December 31, 2010, CFM Master’s total capitalization was $163,073,234. The Partnership owned approximately 76.3% of CFM Master. As of December 31, 2010, CFM Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to CFM for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	2,320,930				1.42	%		$	6,402,680			$	414,348			$	2,078,665
Energy			344,275				0.21	%			2,166,109				154,579				709,954
Grains			238,210				0.15	%			585,400				91,736				276,553
Indices			9,619,057				5.90	%			9,619,057				1,002,179				5,981,337
Interest Rates U.S.			1,334,500				0.82	%			3,845,150				93,777				2,207,437
Interest Rates Non -U.S.			1,128,977				0.69	%			6,320,972				315,476				2,646,684
Livestock			13,404				0.01	%			129,150				2,626				30,932
Metals			396,250				0.24	%			814,850				13,102				336,186
Softs			193,451				0.12	%			587,384				124,374				253,108
Total		$	15,589,054				9.56	%

     As of December 31, 2009, CFM Master’s total capitalization was $194,668,638. The Partnership owned approximately 76.3% of CFM Master. As of December 31, 2009, CFM Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to CFM for trading) was as follows:

		December 31, 2009
						% of Total				High				Low Value at				Average Value at
Market Sector		Value at Risk				Capitalization				Value at Risk				Risk				Risk*
Currencies		$	1,236,160				0.63	%		$	11,762,820			$	422,120			$	3,753,698
Energy			268,420				0.14	%			5,914,077				154,593				1,586,039
Grains			181,491				0.09	%			779,500				91,000				284,195
Indices			5,578,750				2.87	%			24,411,702				1,026,517				7,228,664
Interest Rates U.S.			1,241,850				0.64	%			8,442,428				73,467				2,727,515
Interest Rates Non -U.S.			1,382,622				0.71	%			8,930,489				82,126				2,615,548
Livestock			11,950				0.01	%			87,075				1,500				35,893
Metals			64,876				0.03	%			1,529,181				29,024				247,081
Softs			91,212				0.05	%			1,268,172				107,469				449,559
Total		$	10,057,331				5.17	%

     As of December 31, 2010, Winton Master’s total capitalization was $883,719,871. The Partnership owned approximately 14.0% of Winton Master. As of December 31, 2010, Winton Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Winton for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	8,969,665				1.01	%		$	13,529,797			$	3,127,432			$	9,858,603
Energy			3,277,769				0.37	%			4,944,082				236,988				2,213,508
Grains			3,992,796				0.45	%			4,064,389				556,164				2,285,359
Indices			15,987,691				1.81	%			22,020,780				2,382,812				12,021,182
Interest Rates U.S.			1,387,025				0.16	%			10,348,050				275,672				5,195,958
Interest Rates Non-U.S.			3,521,207				0.40	%			13,490,861				1,949,046				7,347,287
Livestock			268,200				0.03	%			437,350				158,080				263,226
Metals			6,416,979				0.73	%			8,963,451				3,939,668				5,989,765
Softs			1,393,632				0.16	%			2,071,953				538,916				1,029,710
Total		$	45,214,964				5.12	%

     As of December 31, 2009, Winton Master’s total capitalization was $574,408,313. The Partnership owned approximately 17.2% of Winton Master. As of December 31, 2009, Winton Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Winton 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		$	4,596,005				0.80	%		$	10,700,900			$	3,479,307			$	6,740,750
Energy			556,296				0.10	%			2,627,998				228,335				1,092,646
Grains			1,098,663				0.19	%			1,976,399				864,083				1,388,868
Indices			16,589,011				2.89	%			16,589,011				1,261,608				6,511,470
Interest Rates U.S.			1,030,011				0.18	%			6,518,610				716,705				2,896,261
Interest Rates Non-U.S.			4,507,567				0.78	%			11,661,822				2,841,339				5,786,393
Livestock			169,800				0.03	%			425,655				59,475				207,937
Metals			5,057,067				0.88	%			5,057,067				849,000				2,780,563
Softs			955,200				0.17	%			1,269,508				385,375				791,384
Total		$	34,559,620				6.02	%

     As of December 31, 2009 the AAA Master’s total capitalization was $1,229,195,192. The Partnership owned approximately 6.6% of AAA Master. As of December 31, 2009, AAA Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to AAA 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		$	133,905,240				10.89	%		$	352,329,038			$	4,405,231			$	166,882,818
Total		$	133,905,240				10.89	%

     As of December 31, 2010, Graham Master’s total capitalization was $168,924,671. The Partnership owned approximately 62.5% of Graham Master. As of December 31, 2010, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	6,192,975				3.67	%		$	11,364,239			$	996,231			$	5,226,199
Energy			1,048,521				0.62	%			1,989,347				236,269				1,000,222
Grains			448,450				0.26	%			964,687				124,875				411,118
Indices			5,301,813				3.14	%			13,726,706				1,137,775				5,507,221
Interest Rates U.S.			161,600				0.10	%			2,021,410				68,806				1,014,515
Interest Rates Non-U.S.			1,209,918				0.72	%			4,305,447				749,055				2,006,426
Livestock			40,000				0.02	%			106,400				800				50,304
Metals			1,012,127				0.60	%			1,771,142				494,357				993,963
Softs			258,565				0.15	%			1,144,148				85,988				385,351
Total		$	15,673,969				9.28	%

     As of December 31, 2009, Graham Master’s total capitalization was $171,212,260. The Partnership owned approximately 51.1% of Graham Master. As of December 31, 2009, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:

		December 31, 2009
						% of Total				High				Low Value at				Average Value at
Market Sector		Value at Risk				Capitalization				Value at Risk				Risk				Risk*
Currencies		$	2,410,532				1.41	%		$	8,136,447			$	833,881			$	4,612,528
Energy			684,083				0.40	%			3,017,929				273,236				1,214,764
Grains			549,675				0.32	%			1,846,996				96,550				731,407
Indices			4,809,915				2.81	%			12,019,804				623,680				5,396,991
Interest Rates U.S.			142,150				0.08	%			2,365,808				87,777				859,990
Interest Rates Non-U.S.			1,869,099				1.09	%			8,320,518				471,498				2,867,131
Livestock			59,200				0.04	%			160,380				1,080				58,409
Metals			1,222,254				0.71	%			1,806,942				297,478				1,002,985
Softs			1,131,557				0.66	%			1,479,945				190,202				768,323
Total		$	12,878,465				7.52	%

     As of December 31, 2010, SandRidge Master’s total capitalization was $528,735,257. The Partnership owned approximately 13.8% of SandRidge Master. As of December 31, 2010, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Energy		$	61,391,255				11.61	%		$	85,692,107			$	18,754,664			$	56,852,448
Total		$	61,391,255				11.61	%

     As of December 31, 2009, SandRidge Master’s total capitalization was $684,909,493. The Partnership owned approximately 11.7% of SandRidge Master. As of December 31, 2009, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:

		December 31, 2009
						% of Total				High				Low Value at				Average Value at
Market Sector		Value at Risk				Capitalization				Value at Risk				Risk				Risk*
Energy		$	19,220,494				2.81	%		$	40,574,022			$	11,157,117			$	24,955,810
Total		$	19,220,494				2.81	%

     As of December 31, 2010, Sasco Master’s total capitalization was $81,683,630. The Partnership owned approximately 55.3% of Sasco Master. As of December 31, 2010, Sasco Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Sasco for trading) was as follows:

		December 31, 2010
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Energy		$	9,618,175				11.77	%		$	16,002,038			$	2,149,045			$	10,344,808
Totals		$	9,618,175				11.77	%