Attached files
file | filename |
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EX-31.2 - EX-31.2 - DIVERSIFIED 2000 FUTURES FUND L.P. | y04763exv31w2.htm |
EX-31.1 - EX-31.1 - DIVERSIFIED 2000 FUTURES FUND L.P. | y04763exv31w1.htm |
EX-32.1 - EX-32.1 - DIVERSIFIED 2000 FUTURES FUND L.P. | y04763exv32w1.htm |
EX-32.2 - EX-32.2 - DIVERSIFIED 2000 FUTURES FUND L.P. | y04763exv32w2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 000-32599
DIVERSIFIED 2000 FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 13-4077759 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres
Managed Futures LLC
522 Fifth Avenue - 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
(212) 296-1999
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | Non-accelerated filer X | Smaller reporting company |
Indicate by check mark whether the registrant is a shell company
(as defined in
rule 12b-2
of the Exchange Act).
Yes No X
As of April 30, 2011, 39,069.7276 Limited Partnership
Redeemable Units were outstanding.
DIVERSIFIED 2000 FUTURES FUND L.P.
FORM 10-Q
INDEX
Page |
||||||||
Number
|
||||||||
Item 1. | Financial Statements: | |||||||
Statements of Financial Condition at
March 31, 2011 (unaudited) and December 31, 2010 |
3 | |||||||
Schedules of Investments at March 31, 2011 (unaudited) and December 31, 2010 |
4 − 5 | |||||||
Statements of Income and Expenses and Changes in Partners Capital for the three months ended March 31, 2011 and 2010 (unaudited) | 6 | |||||||
Notes to Financial Statements (unaudited) | 7 − 16 | |||||||
Item 2. |
Managements Discussion and Analysis of
Financial Condition and Results of Operations |
17 − 19 | ||||||
Item 3. |
Quantitative and Qualitative Disclosures about
Market Risk |
20 − 25 | ||||||
Item 4. | Controls and Procedures | 26 | ||||||
27 − 32 | ||||||||
Exhibits
|
||||||||
EX31.1 CERTIFICATION
|
||||||||
EX31.2 CERTIFICATION
|
||||||||
EX32.1 CERTIFICATION
|
||||||||
EX32.2 CERTIFICATION
|
2
PART
I
Item 1. Financial
Statements
Diversified 2000 Futures Fund L.P.
(Unaudited) March 31, |
December 31, |
|||||||
2011 | 2010 | |||||||
Assets: |
||||||||
Investment in Funds, at fair value |
$ | 56,573,097 | $ | 60,378,147 | ||||
Cash |
179,329 | 152,302 | ||||||
Total assets |
$ | 56,752,426 | $ | 60,530,449 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Accrued expenses: |
||||||||
Brokerage fees |
$ | 255,387 | $ | 272,388 | ||||
Management fees |
80,966 | 88,127 | ||||||
Incentive fees |
3,225 | 352,348 | ||||||
Other |
179,113 | 134,745 | ||||||
Redemptions payable |
1,658,022 | 268,399 | ||||||
Total liabilities |
2,176,713 | 1,116,007 | ||||||
Partners Capital: |
||||||||
General Partner, 441.6499 unit equivalents
outstanding at March 31, 2011 and December 31, 2010 |
606,982 | 621,185 | ||||||
Limited Partners, 39,268.5671 and 41,800.7127
Redeemable Units outstanding
at March 31, 2011 and December 31, 2010, respectively |
53,968,731 | 58,793,257 | ||||||
Total partners capital |
54,575,713 | 59,414,442 | ||||||
Total liabilities and partners capital |
$ | 56,752,426 | $ | 60,530,449 | ||||
Net asset value per unit |
$ | 1,374.35 | $ | 1,406.51 | ||||
See accompanying notes to financial statements.
3
Diversified 2000 Futures Fund L.P.
March 31, 2011
(Unaudited)
% of Partners |
||||||||
Fair Value | Capital | |||||||
Investment in Funds |
||||||||
CMF Aspect Master Fund L.P. |
$ | 11,234,460 | 20.59 | % | ||||
CMF Graham Capital Master Fund L.P. |
9,421,920 | 17.26 | ||||||
CMF SandRidge Master Fund L.P. |
5,433,165 | 9.96 | ||||||
CMF Eckhardt Master Fund L.P. |
10,660,281 | 19.53 | ||||||
Waypoint Master Fund L.P. |
12,696,276 | 23.26 | ||||||
PGR Master Fund L.P. |
7,126,995 | 13.06 | ||||||
Total investment in Funds, at fair value |
$ | 56,573,097 | 103.66 | % | ||||
See accompanying notes to financial statements.
4
Diversified 2000
Futures Fund L.P.
Schedule of Investments
December 31, 2010
Schedule of Investments
December 31, 2010
% of Partners |
||||||||
Fair Value | Capital | |||||||
Investment in Funds
|
||||||||
CMF Aspect Master Fund L.P.
|
$ | 12,593,732 | 21.19 | % | ||||
CMF Graham Capital Master Fund L.P.
|
12,185,485 | 20.51 | ||||||
CMF SandRidge Master Fund L.P.
|
8,175,283 | 13.76 | ||||||
CMF Eckhardt Master Fund L.P.
|
9,595,146 | 16.15 | ||||||
Waypoint Master Fund L.P.
|
12,714,093 | 21.40 | ||||||
PGR Master Fund L.P.
|
5,114,408 | 8.61 | ||||||
Total investment in Funds, at fair value
|
$ | 60,378,147 | 101.62 | % | ||||
See accompanying notes to financial statements.
5
Diversified 2000 Futures Fund L.P.
Statements of Income and Expenses and Partners Capital
(Unaudited)
Statements of Income and Expenses and Partners Capital
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Investment income: |
||||||||
Interest income from investment in Funds |
$ | 11,192 | $ | 7,686 | ||||
Expenses: |
||||||||
Brokerage fees including clearing fees |
832,975 | 907,991 | ||||||
Management fees |
248,371 | 284,061 | ||||||
Incentive fees |
3,225 | 9,927 | ||||||
Other |
85,029 | 77,705 | ||||||
Total expenses |
1,169,600 | 1,279,684 | ||||||
Net investment income (loss) |
(1,158,408 | ) | (1,271,998 | ) | ||||
Trading Results: |
||||||||
Net gains (losses) on trading of commodity interests and
investment in Funds: |
||||||||
Net realized gains (losses) on investment in Funds |
409,372 | (1,274,110 | ) | |||||
Change in net unrealized gains (losses) on investment in Funds |
(600,324 | ) | 407,661 | |||||
Total
trading results |
(190,952 | ) | (866,449 | ) | ||||
Net income (loss) |
(1,349,360 | ) | (2,138,447 | ) | ||||
Redemptions General Partner |
| (250,000 | ) | |||||
Redemptions Limited Partners |
(3,489,369 | ) | (2,894,419 | ) | ||||
Net increase (decrease) in Partners Capital |
(4,838,729 | ) | (5,282,866 | ) | ||||
Partners Capital, beginning of period |
59,414,442 | 67,723,311 | ||||||
Partners Capital, end of period |
$ | 54,575,713 | $ | 62,440,445 | ||||
Net asset value per unit
(39,710.2170 and 46,269.0095 units outstanding
at March 31, 2011 and 2010, respectively) |
$ | 1,374.35 | $ | 1,349.51 | ||||
Net income
(loss) per unit * |
$ | (32.16 | ) | $ | (43.35 | ) | ||
Weighted average units outstanding |
41,562.7448 | 47,991.3335 | ||||||
* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
6
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
1. | General: |
Diversified 2000 Futures Fund L.P. (the Partnership) is a limited partnership organized
under the partnership laws of the State of New York on
August 25, 1999 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, through its investment in the Funds (as defined in
note 5 Investment in Funds), are volatile
and involve a high degree of market risk.
Between January 31, 2000 (commencement of the initial offering
period) and May 30, 2000, 16,045 redeemable units of
limited partnership interest (Redeemable Units) and
162 general partner unit equivalents were sold at $1,000 per unit. The
proceeds of the initial offering were held in an escrow account
until May 31, 2000, at which time they were turned over to
the Partnership for trading. The Partnership was authorized to sell 150,000 Redeemable Units during its initial offering period. As of November 25, 2002, the Partnership was authorized to
sell an additional 40,000 Redeemable Units. The Partnership no longer offers Redeemable Units for sale.
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 March 31, 2011, all trading decisions for the
Partnership are made by the Advisors (defined below).
As of March 31, 2011, all trading decisions are made for the Partnership by Aspect
Capital Limited (Aspect), Graham Capital Management L.P. (Graham), Eckhardt
Trading Company (Eckhardt), SandRidge Capital L.P. (SandRidge), Waypoint
Capital Management LLC (Waypoint) and PGR Capital LLP
(PGR) (each, an Advisor, and collectively, the
Advisors), each of which is a registered commodity trading advisor. Each Advisor is allocated a portion of the
Partnerships assets to manage. The Partnership invests the portion of its assets allocated
to each of the Advisors indirectly through investments in the Funds.
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 its capital contribution and profits, if any, net of distributions.
The accompanying financial statements and accompanying notes are unaudited but, in the
opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement
of the Partnerships financial condition at March 31,
2011 and December 31, 2010, and the results of its
operations and changes in partners capital
for the three months ended March 31, 2011 and 2010.
These financial statements present the results of interim
periods and do not include all disclosures normally provided in
annual financial statements. You should read these financial
statements together with the financial statements and notes
included in the Partnerships annual report on
Form 10-K
filed with the Securities and Exchange Commission (the
SEC) for the year ended December 31, 2010.
The preparation of financial
statements and accompanying notes in conformity with accounting principles generally accepted
in the United States of America (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related
disclosures of contingent assets and liabilities in the
financial statements and accompanying notes. As a result, actual results
could differ from these estimates.
Due to the nature of commodity trading, the results of
operations for the interim periods presented should not be
considered indicative of the results that may be expected for
the entire year.
7
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
2. | Financial Highlights: |
Changes
in the net asset value per unit for the three months ended
March 31, 2011 and 2010 were as follows:
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net realized
and unrealized gains (losses)* |
$ | (24.35 | ) | $ | (35.76 | ) | ||
Interest income |
0.28 | 0.16 | ||||||
Expenses** |
(8.09 | ) | (7.75 | ) | ||||
Increase
(decrease) for the period |
(32.16 | ) | (43.35 | ) | ||||
Net asset value per unit, beginning
of period |
1,406.51 | 1,392.86 | ||||||
Net asset
value per unit, end of period |
$ | 1,374.35 | $ | 1,349.51 | ||||
* | Includes brokerage fees. | |
** | Excludes brokerage fees. |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Ratio to
average net assets: *** |
||||||||
Net
investment income (loss) before incentive fees **** |
(8.2 | )% | (8.0 | )% | ||||
Operating expenses |
8.3 | % | 8.0 | % | ||||
Incentive
fees |
0.0 | %***** | 0.0 | %***** | ||||
Total expenses |
8.3 | % | 8.0 | % | ||||
Total return: |
||||||||
Total return
before incentive fees |
(2.3 | )% | (3.1 | )% | ||||
Incentive
fees |
0.0 | %***** | 0.0 | %***** | ||||
Total return
after incentive fees |
(2.3 | )% | (3.1 | )% | ||||
*** | Annualized (other than incentive fees). | |
**** | Interest income less total expenses. | |
***** | Due to rounding. |
The above capital ratios may vary for individual investors based
on the timing of capital transactions during the period.
Additionally, these ratios are calculated for the limited
partner class using the limited partners share of income,
expenses and average net assets.
3. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts
in a variety of commodity interests, including derivative
financial instruments and derivative commodity instruments.
However, the Partnerships investments are in other
funds. The results of the Partnerships trading
activity are resulting from its investments in other
funds as shown in the Statements of Income and Expenses
and Changes in Partners Capital.
The
customer agreement between the Partnership/Funds and CGM gives the
Partnership and the Funds the legal right to net unrealized gains and losses on
open futures and open forward contracts. The Partnership and the Funds net, for financial reporting
purposes, the unrealized gains and losses on open futures and exchange-cleared swap and open forward contracts on the
Statements of Financial Condition.
Brokerage
fees are calculated as a percentage of the Partnerships adjusted net asset value on the last day of
each month and are affected by trading performance, subscriptions and redemptions.
8
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
4. | Fair Value Measurements: |
Partnerships and the Funds Investments. All commodity interests (including derivative financial instruments and
derivative commodity instruments), through its investment in other funds, are held for
trading purposes. The commodity interests are recorded on trade date and open contracts are
recorded at fair value (as described below) at the measurement date. Investments in commodity
interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates
prevailing at the measurement date. Gains or losses are realized when contracts are liquidated.
Unrealized gains or losses on open contracts are included as a component of equity in
trading account on the Funds Statements of Financial
Condition. Net realized gains or losses and any
change in net unrealized gains or losses from the preceding period are reported in the Funds Statements
of Income and Expenses and Changes in Partners Capital.
Partnerships and the Funds Fair Value
Measurements. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date under current market conditions. The fair value
hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities
(Level 1) and the lowest priority to fair values
derived from unobservable inputs (Level 3). The level in
the fair value hierarchy within which the fair value measurement
in its entirety falls shall be determined based on the lowest
level input that is significant to the fair value measurement in
its entirety. Management has concluded that based on available information in the marketplace, the Funds Level 1 assets and liabilities are actively traded.
GAAP
also requires the
need to use judgment in determining if a formerly active market has become inactive and in
determining fair values when the market has become inactive. Management has
concluded that based on available information in the marketplace, there
has not been a significant decrease in the volume and level of activity in the Partnerships and the
Funds Level 2 assets.
The Partnership
and the Funds will separately present purchases, sales, issuances,
and settlements in its reconciliation of Level 3
fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures
regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements
that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Funds consider prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values
of non-exchange-traded forwards, 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 Partnerships
investments in funds reflects its proportional interest in the
funds. As of and for the periods ended March 31,
2011 and December 31, 2010, the Funds did not hold any derivative instruments that are priced at fair value using
unobservable inputs through the application of managements assumptions and internal valuation
pricing models (Level 3).
Quoted Prices in Active | Significant Other | Significant | ||||||||||||||
Markets for Identical | Observable Inputs | Unobservable | ||||||||||||||
3/31/11 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Investment in Funds |
$ | 56,573,097 | $ | | $ | 56,573,097 | $ | | ||||||||
Net fair value |
$ | 56,573,097 | $ | | $ | 56,573,097 | $ | | ||||||||
Quoted Prices in Active | Significant Other | Significant | ||||||||||||||
Markets for Identical | Observable Inputs | Unobservable | ||||||||||||||
12/31/2010 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Investment in Funds |
$ | 60,378,147 | $ | | $ | 60,378,147 | $ | | ||||||||
Net fair value |
$ | 60,378,147 | $ | | $ | 60,378,147 | $ | | ||||||||
5. | Investments in Funds: |
On January 1, 2005, the assets allocated to Campbell for
trading were invested in the CMF Campbell Master Fund L.P.
(Campbell Master), a limited partnership organized
under the partnership laws of the State of New York. The
Partnership purchased 51,356.1905 units of Campbell Master
with cash equal to $50,768,573, and a contribution of open
commodity futures and forward contracts with a fair value of
$587,618. Campbell Master was formed in order to permit
commodity pools managed now or in the future by Campbell using
its Financial, Metal and Energy Large Portfolio
(FME), a proprietary, systematic trading system, to invest together in one trading vehicle.
The Partnership fully redeemed its investment in Campbell Master
on February 28, 2010 for cash equal to $4,508,811.
9
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
On March 1, 2005, the assets allocated to Aspect for
trading were invested in CMF Aspect Master Fund L.P.
(Aspect Master), a limited partnership organized
under the partnership laws of the State of New York. The
Partnership purchased 43,434.9465 units of Aspect Master with
cash equal to $40,490,895, and a contribution of open commodity
futures and forward contracts with a fair value of $2,944,052.
Aspect Master was formed in order to permit commodity pools
managed now or in the future by Aspect using its Diversified
Program,
a proprietary systematic trading system,
to invest together in one trading vehicle. The General
Partner is also the general partner of 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 April 1, 2006, the assets allocated to Graham for
trading were invested in 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 41,952.2380 units of
Graham Master with cash equal to $41,952,238. Graham Master was
formed in order to permit commodity pools managed now or in the
future by Graham using the K4D - 15V program, a proprietary, systematic trading system,
to invest together in one trading vehicle. The General Partner
is also the general partner of Graham Master. Individual and
pooled accounts currently managed by Graham, including the
Partnership, are permitted to be limited partners of Graham
Master. The General Partner and Graham believe that trading
through this structure should promote efficiency and economy in
the trading process.
On April 1, 2007, the assets allocated to SandRidge for trading
were invested in 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 7,659.0734 units of
SandRidge Master with cash equal to $9,635,703. SandRidge Master
was formed in order to permit commodity pools managed now or in
the future by SandRidge using its Energy Program,
a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner
of 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 April 1, 2008, the assets allocated to
Eckhardt for trading were invested in CMF
Eckhardt Master Fund L.P. (Eckhardt Master), a
limited partnership organized under the partnership laws of the
State of New York. The Partnership purchased 10,000.0000 units
of Eckhardt Master with cash equal to $10,000,000. Eckhardt
Master was formed in order to permit commodity pools managed now
or in the future by Eckhardt using its Standard Program, a proprietary, systematic trading system, to
invest together in one trading vehicle. The General Partner is
the also general partner of Eckhardt Master. Individual and
pooled accounts currently managed by Eckhardt, including the
Partnership, are permitted to be limited partners of Eckhardt
Master. The General Partner and Eckhardt believe that trading
through this structure should promote efficiency and economy in
the trading process.
On March 1, 2010, the assets allocated to Waypoint for trading were invested in
Waypoint Master Fund L.P. (Waypoint Master), a limited partnership organized under
the partnership laws of the State of New York. The Partnership purchased 5,975.7506
units of Waypoint Master with cash of $5,975,751. Waypoint Master was formed in order
to permit commodity pools managed now or in the future by Waypoint using its
Diversified Program, a proprietary, systematic trading system, to invest together in one
trading vehicle. The General Partner is also the general partner of Waypoint Master.
Individual and pooled accounts currently managed by Waypoint, including the
Partnership, are permitted to be limited partners of Waypoint Master. The General
Partner and Waypoint believe that trading through this structure should promote
efficiency and economy in the trading process.
On November 1, 2010, the assets allocated to PGR for trading were invested in PGR Master Fund
L.P. (PGR Master), a limited partnership organized under the partnership laws of the State of Delaware.
The Partnership purchased 5,000.0000 units of PGR Master with cash equal to $5,000,000. PGR Master
was formed in order to permit commodity pools managed now or in the future by PGR using its Mayfair
Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General
Partner is also the general partner of PGR Master. Individual and pooled accounts currently managed by
PGR, including the Partnership, are permitted to be limited partners of PGR Master. The General Partner
and PGR believe that trading through this structure should promote efficiency and economy in the trading
process.
The General Partner is not aware of any material changes to any of
the trading programs discussed above during the fiscal quarter ended
March 31, 2011.
Aspect Masters, Graham
Masters, SandRidge Masters, Eckhardt Masters,
Waypoint Masters and PGR Masters (collectively, the Funds) trading of futures,
forwards, swaps and options contracts, if applicable, on commodities is
done primarily on United States of America commodity exchanges
and foreign commodity exchanges. The Funds engage in such
trading through commodity brokerage accounts maintained with CGM.
A limited partner may withdraw all or part of its capital
contribution and undistributed profits, if any, from the Funds
in multiples of the net asset value per Redeemable Unit
as of the end of any day (the
Redemption Date) after
a request for redemption has been made to the General Partner at
least 3 days in advance of the Redemption Date. The units are
classified as a liability when the limited partner elects to redeem
and informs the Funds.
Management and incentive fees are charged at the Partnership level. All exchange, clearing,
user, give-up, floor brokerage and National Futures Association fees (collectively the clearing fees) are borne by the
Funds. All other fees including CGMs direct brokerage fees are charged at the Partnership level.
10
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
At March 31, 2011, the Partnership owned approximately 6.5% of Aspect Master,
6.0% of Graham Master, 1.4% of SandRidge Master, 41.4% of Eckhardt
Master, 32.5% of Waypoint Master and 25.7% of PGR Master. At December
31, 2010, the Partnership owned approximately
8.0% of Aspect Master, 7.2% of Graham Master, 1.5% of
SandRidge Master, 40.5% of Eckhardt Master, 30.8% of Waypoint Master and 25.1% of PGR Master.
It is Aspects, Grahams, SandRidges, Eckhardts, Waypoints and PGRs intention
to continue to invest the assets allocated to each by the Partnership
in Aspect Master, Graham Master, SandRidge Master, Eckhardt Master, Waypoint Master and PGR Master, respectively. The performance of the Partnership is directly affected by the
performance of the Funds. Expenses to investors as a result of the investment in the
Funds are approximately the same and redemption rights are not affected.
Summarized information reflecting the total assets, liabilities and capital for the Funds is shown in the following tables.
March 31, 2011 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Aspect Master |
$ | 171,917,989 | $ | 60,063 | $ | 171,857,926 | ||||||
Graham Master |
158,542,504 | 335,674 | 158,206,830 | |||||||||
SandRidge Master |
417,397,881 | 39,202,100 | 378,195,781 | |||||||||
Eckhardt Master |
25,991,860 | 239,967 | 25,751,893 | |||||||||
Waypoint Master |
39,176,243 | 71,071 | 39,105,172 | |||||||||
PGR Master |
27,797,437 | 43,941 | 27,753,496 | |||||||||
Total |
$ | 840,823,914 | $ | 39,952,816 | $ | 800,871,098 | ||||||
December 31, 2010 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Aspect Master |
$ | 157,910,582 | $ | 46,523 | $ | 157,864,059 | ||||||
Graham Master |
168,973,503 | 48,832 | 168,924,671 | |||||||||
SandRidge Master |
581,631,311 | 52,896,054 | 528,735,257 | |||||||||
Eckhardt Master |
23,748,773 | 62,448 | 23,686,325 | |||||||||
Waypoint Master |
41,306,976 | 59,330 | 41,247,646 | |||||||||
PGR Master |
20,415,391 | 28,810 | 20,386,581 | |||||||||
Total |
$ | 993,986,536 | $ | 53,141,997 | $ | 940,844,539 | ||||||
11
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
Summarized
information reflecting the net investment income (loss), total trading results and net
income (loss) for the Funds is shown in the following tables.
For the three months ended March 31, 2011 | ||||||||||||
Net Investment | ||||||||||||
Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
Aspect Master |
$ | (28,839 | ) | $ | 1,725,970 | $ | 1,697,131 | |||||
Graham Master |
(146,256 | ) | (1,070,720 | ) | (1,216,976 | ) | ||||||
SandRidge Master |
(250,105 | ) | 15,043,073 | 14,792,968 | ||||||||
Eckhardt Master |
(54,656 | ) | (273,717 | ) | (328,373 | ) | ||||||
Waypoint Master |
(64,415 | ) | (1,606,979 | ) | (1,671,394 | ) | ||||||
PGR Master |
(27,411 | ) | 591,465 | 564,054 | ||||||||
Total |
$ | (571,682 | ) | $ | 14,409,092 | $ | 13,837,410 | |||||
For the three months ended March 31, 2010 | ||||||||||||
Net Investment | ||||||||||||
Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
Aspect Master |
$ | (47,890 | ) | $ | 6,886,287 | $ | 6,838,397 | |||||
Graham Master |
(99,316 | ) | (3,943,186 | ) | (4,042,502 | ) | ||||||
SandRidge Master |
(261,244 | ) | (15,233,208 | ) | (15,494,452 | ) | ||||||
Eckhardt Master |
(36,785 | ) | (1,419,363 | ) | (1,456,148 | ) | ||||||
Waypoint Master |
(11,498 | ) | 573,053 | 561,555 | ||||||||
Total |
$ | (456,733 | ) | $ | (13,136,417 | ) | $ | (13,593,150 | ) | |||
12
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
Summarized information reflecting the Partnerships
investment in, and the operations of the Funds is shown in
the following tables.
March 31, 2011 | For the three months ended March 31, 2011 | |||||||||||||||||||||||||||||||
% of | Net | |||||||||||||||||||||||||||||||
Partnerships | Fair | Income | Expenses | Income | Investment | Redemptions | ||||||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
Aspect Master |
20.59 | % | $ | 11,234,460 | $ | 116,551 | $ | 2,533 | $ | 1,676 | $ | 112,342 | Commodity Portfolio |
Monthly | ||||||||||||||||||
Graham Master |
17.26 | % | 9,421,920 | (61,649 | ) | 9,586 | 1,459 | (72,694 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||||||
SandRidge Master |
9.96 | % | 5,433,165 | 247,726 | 3,510 | 1,180 | 243,036 | Energy Portfolio |
Monthly | |||||||||||||||||||||||
Eckhardt Master |
19.53 | % | 10,660,281 | (108,356 | ) | 17,402 | 7,183 | (132,941 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||||||
Waypoint Master |
23.26 | % | 12,696,276 | (520,116 | ) | 16,633 | 7,104 | (543,853 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||||||
PGR Master |
13.06 | % | 7,126,995 | 146,084 | 2,208 | 7,369 | 136,507 | Commodity Portfolio |
Monthly | |||||||||||||||||||||||
Total |
$ | 56,573,097 | $ | (179,760 | ) | $ | 51,872 | $ | 25,971 | $ | (257,603 | ) | ||||||||||||||||||||
December 31, 2010 | For the three months ended March 31, 2010 | |||||||||||||||||||||||||||||||
% of | Net | |||||||||||||||||||||||||||||||
Partnerships | Fair | Income | Expenses | Income | Investment | Redemptions | ||||||||||||||||||||||||||
Investment | Net Assets | Value | (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
Campbell Master |
| $ | | $ | (266,611 | ) | $ | 1,344 | $ | 672 | $ | (268,627 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||
Aspect Master |
21.19 | % | 12,593,732 | 844,224 | 6,292 | 1,951 | 835,981 | Commodity Portfolio |
Monthly | |||||||||||||||||||||||
Graham Master |
20.51 | % | 12,185,485 | (691,460 | ) | 12,179 | 1,975 | (705,614 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||||||
SandRidge Master |
13.76 | % | 8,175,283 | (265,256 | ) | 4,994 | 1,347 | (271,597 | ) | Energy Portfolio |
Monthly | |||||||||||||||||||||
Eckhardt Master |
16.15 | % | 9,595,146 | (571,383 | ) | 8,568 | 7,127 | (587,078 | ) | Commodity Portfolio |
Monthly | |||||||||||||||||||||
Waypoint Master |
21.40 | % | 12,714,093 | 91,723 | 1,371 | 987 | 89,365 | Commodity Portfolio |
Monthly | |||||||||||||||||||||||
PGR Master |
8.61 | % | 5,114,408 | | | | | Commodity Portfolio |
Monthly | |||||||||||||||||||||||
Total |
$ | 60,378,147 | $ | (858,763 | ) | $ | 34,748 | $ | 14,059 | $ | (907,570 | ) | ||||||||||||||||||||
13
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
6. | Financial Instrument Risks: |
In the normal course of business, the
Partnership, through its investments in the Funds, is a party to financial instruments with off-balance sheet risk, including derivative
financial instruments and derivative commodity instruments. These financial instruments may include forwards,
futures and options, whose values are based upon an underlying asset, index, or reference rate, and
generally represent future commitments to exchange currencies or cash balances, to purchase or sell
other financial instruments at specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable possibility to be settled in cash, through
physical delivery or with another financial instrument. These instruments may be traded on an
exchange or over-the-counter (OTC). Exchange-traded instruments are standardized and include
futures and certain forwards and option contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. Each of these instruments
is subject to various risks similar to those related to the underlying financial instruments
including
market and credit risk. In general, the risks associated with OTC contracts are greater than those
associated with exchange-traded instruments because of the greater risk of default by the
counterparty to an OTC contract.
The risk to the limited partners that have purchased interests in the Partnership is limited to the amount
of their capital contributions to the Partnership and their share of the Partnerships assets and undistributed
profits. This limited liability is a consequence of the organization of the Partnership as a limited
partnership under applicable law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Funds due to market changes, including interest and foreign exchange rate movements and
fluctuations in commodity or security prices. Market risk is directly impacted by the volatility
and liquidity in the markets in which the related underlying assets are traded. The Funds are
exposed to a market risk equal to the value of futures and forward contracts purchased and
unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to
perform according to the terms of a contract. The Partnerships/Funds risk of loss in the event of a
counterparty default is typically limited to the amounts recognized in the Statements of Financial
Condition and is not represented by the contract or notional amounts of the instruments. The Partnerships/Funds
risk of loss is reduced through the use of legally enforceable master netting agreements with
counterparties that permit the Partnership/Funds to offset unrealized gains and losses and other assets and
liabilities with such counterparties upon the occurrence of certain events. The Partnership/Funds have credit
risk and concentration risk as the sole counterparty or broker with respect to the Funds assets is
CGM or a CGM affiliate. Credit risk with respect to exchange-traded instruments is reduced to the
extent that through CGM, the Partnerships/Funds counterparty is an exchange or clearing organization.
As both a buyer and seller of options, the Funds pay or receive a premium at the outset and
then bears the risk of unfavorable changes in the price of the contract underlying the option.
Written options expose the Funds to potentially unlimited liability; for purchased options the risk
of loss is limited to the premiums paid. Certain written put options permit cash settlement and do
not require the option holder to own the reference asset. The Funds do not consider these contracts
to be guarantees.
The General Partner monitors and
attempts to control the Funds risk exposure on a daily basis through
financial, credit and risk management monitoring systems, and
accordingly, believes that it has
effective procedures for evaluating and limiting the credit and
market risks to which the Funds may be
subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading
results with risk adjusted performance indicators and correlation statistics. In addition, on-line
monitoring systems provide account analysis of futures, forwards and options positions by sector,
margin requirements, gain and loss transactions and collateral positions.
The majority of these instruments mature within one year of the inception date. However, due
to the nature of the Funds businesses, these instruments may not be held to maturity.
14
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
7. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in
conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, income and expenses, and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Partnerships and the Funds Investments. All commodity interests (including derivative
financial instruments and derivative commodity instruments), through
its investment in other funds, are held for trading purposes. The commodity interests are recorded on trade date and
open contracts are recorded at fair value (as described below) at the measurement date. Investments
in commodity interests denominated in foreign currencies are translated into U.S. dollars at the
exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are
liquidated. Unrealized gains or losses on open contracts are included as a component of equity in
trading account on the Funds Statements of Financial
Condition. Net realized gains or losses and any
change in net unrealized gains or losses from the preceding period are reported in the Funds
Statements of Income and Expenses and Changes in Partners Capital.
Partnerships and the Funds Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
under current market conditions. The fair value hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within
which the fair value measurement in its entirety falls shall be determined based on the lowest
level input that is significant to the fair value measurement in its entirety. Management has
concluded that based on available information in the marketplace, the Funds Level 1 assets and
liabilities are actively traded.
GAAP requires the need to use judgment in determining if a formerly active market has
become inactive and in determining fair values when the market has become inactive.
Management has concluded that based on available information in the marketplace, there has
not been a significant decrease in the volume and level of activity in the Partnerships and the
Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances, and
settlements in its reconciliation of Level 3 fair value measurements
(i.e., to present such items
on a gross basis rather than on a net basis), and make disclosures regarding the level of
disaggregation and the inputs and valuation techniques used to measure fair value for
measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required
under GAAP.
The Funds consider prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).
The values of non-exchange-traded forwards, 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
Partnerships investments in funds reflects its proportional interest in the funds.
As of and for the periods ended March 31, 2011 and December 31,
2010, the Funds did not hold any
derivative instruments that are priced at fair value using unobservable inputs through the
application of managements assumptions and internal valuation pricing models (Level 3).
Futures
Contracts. 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 Funds each business day,
depending on the daily fluctuations in the value of the underlying contracts, and are recorded as
unrealized gains or losses by the
Funds. When the contract is closed, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the value at the time it
was closed. Transactions in futures contracts require participants to make both initial
margin deposits of cash or other assets and variation margin deposits, through the futures broker,
directly with the exchange on which the contracts are traded. Net realized
gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the
Statements of Income and Expenses and Changes in Partners Capital.
Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the
Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on
an agreed future date. Foreign currency contracts are valued daily, and the Funds net equity
therein, representing unrealized gain or loss on the contracts as measured by the difference
between the forward foreign exchange rates at the dates of entry into the contracts and the forward
rates at the reporting date, is included in the Statements of Financial Condition. 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 and Changes in Partners Capital.
The
Funds do not isolate the portion of the results of operations arising from the effect of
changes in foreign exchange rates on investments from fluctuations from changes in market prices of
investments held. Such fluctuations are included in net gain (loss) on investments in the
Statements of Income and Expenses and Changes in Partners Capital.
London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals
Exchange (LME) represent a firm commitment to buy or sell a specified quantity of aluminum,
copper, lead, nickel, tin or zinc. LME contracts traded by the Funds are cash settled based on
prompt dates published by the LME. Payments (variation margin) may be made or received by the
Funds each business day, depending on the daily fluctuations in the value of the underlying
contracts, and are recorded as unrealized gains or losses by the Funds. A contract is considered
offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed
at the prompt date, the Funds record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or
other assets and variation margin deposits, through the broker, directly with the LME.
Net realized gains (losses) and changes in net unrealized gains (losses) on metal
contracts are included in the Statements of Income and Expenses and Changes in Partners Capital.
Options. The Funds may purchase and write (sell) both exchange listed and OTC
options on commodities or financial instruments. An option is a contract allowing, but not
requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial
instrument at a specified price during a specified time period. The option premium is the total
price paid or received for the option contract. When the Funds write an option, the premium
received is recorded as a liability in the Statements of Financial Condition and marked to market
daily. When the Funds purchase an option, the premium paid is recorded as an asset in the
Statements of Financial Condition and marked to market daily. Realized gains (losses) and changes
in unrealized gains (losses) on options contracts are included in the Statements of Income and
Expenses and Changes in Partners Capital.
15
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
Notes to Financial Statements
March 31, 2011
(Unaudited)
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed in the financial
statements and requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Partnerships financial statements to determine whether the tax positions
are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with
respect to tax at the Partnership level not deemed to meet the more-likely-than-not threshold would
be recorded as a tax benefit or expense in the current year. The General Partner concluded that no
provision for income tax is required in the Partnerships financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax
returns are currently under examination. Generally, the 2007 through 2010 tax years remain
subject to examination by U.S. federal and most state tax authorities. Management does not
believe that there are any uncertain tax positions that require recognition of a tax liability.
Subsequent
Events. Management of the Partnership evaluates events that occur
after the balance sheet date but before financial statements are
filed. Management has assessed the subsequent events through the date
of filing and determined that there were no subsequent events
requiring adjustment of or disclosure in the financial statements.
Net Income (Loss) per Unit. Net income (loss) per unit is calculated in
accordance with investment company guidance. See Note 2, Financial Highlights.
16
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services.
Its only assets are its investment in the Funds and cash.
Because of the low margin deposits normally required in
commodity futures trading, relatively small price movements may
result in substantial losses to the Partnership/Funds. While
substantial losses could lead to a material decrease in
liquidity, no such illiquidity occurred in the first quarter of
2011.
The Partnerships capital consists of the capital
contributions of the partners as increased or decreased by
gains or losses on trading and by expenses, interest income, redemptions of
Redeemable Units and distributions of profits, if any.
For the three months ended March 31, 2011, Partnership Capital
decreased 8.1% from $59,414,442 to $54,575,713. This
decrease was attributable to the net loss from operations of
$1,349,360, coupled with the redemption of 2,532.1456 Redeemable Units
resulting in an outflow of $3,489,369. Future redemptions can
impact the amount of funds available for investment in commodity
contract positions in subsequent months.
Critical
Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Management believes that the estimates utilized in
preparing the financial statements are reasonable. Actual results could differ from those estimates.
The Partnerships significant accounting policies are described
in detail in Note 7 of the Financial Statements.
The Partnership records all investments at fair value in its financial statements, with changes in fair
value reported as a component of net realized and change in net unrealized trading gain (loss) in the
Statements of Income and Expenses and Changes in Partners Capital.
17
Results of Operations
During the first quarter of 2011, the Partnerships net asset value per unit decreased
2.3% from $1,406.51 to $1,374.35 as compared to a decrease of 3.1% in the same period of 2010. The
Partnership experienced a net trading loss through its investment in the Funds before brokerage fees and
related fees in the first quarter of 2011 of $190,952. Losses were primarily attributable to the Funds trading
in currencies, U.S. and non-U.S. interest rates, metals and indices and were partially offset by gains in
energy, grains, livestock and softs. The Partnership experienced a net trading loss through its investment in
the Funds before brokerage fees and related fees in the first quarter of 2010 of $866,449. Losses were
primarily attributable to the Funds trading in energy, U.S. interest rates, metals, softs and indices and were
partially offset by gains in currencies, grains, non-U.S. interest rates and livestock.
The most significant losses were incurred within the interest rate sector, primarily during January, from long futures positions in European fixed-income as prices declined after European Central Bank President Jean-Claude Trichet said inflation pressures in the euro region may increase. Further losses were recorded within this sector during February from short positions in US and European interest rate futures as prices increased mid-month amid concern over unrest in the Middle East, which spurred demand for the relative safety of government debt. Within the metals sector, losses were experienced primarily during January due to long futures positions in gold as prices fell amid a strengthening U.S. dollar, which reduced the safe-haven appeal of the precious metal. Further losses were recorded within this sector during March from long futures positions in copper as prices moved lower amid concern that rising energy costs associated with mounting unrest in the Middle East may slow the global economy. Within the currency markets, losses were experienced primarily in January from long positions in the Australian dollar, South African rand, and Swiss franc versus the U.S. dollar as the value of these currencies declined against the U.S. dollar following the release of minutes from the latest U.S. Federal Reserve meeting that showed optimism about the U.S. economy and boosted demand for the U.S. currency. Within the global stock index markets, losses were experienced primarily during March from long positions in European, Pacific Rim, and U.S. equity index futures as prices moved sharply lower after the disaster in Japan spurred concern about global economic growth.
A portion of the Partnerships losses for the quarter was offset by gains achieved within the energy markets, primarily during February and March, from long futures positions in crude oil and its related products as prices rose after political tension in Egypt stoked worries that protests may spread to crude-producing parts of the Middle East. Further gains were recorded after futures prices of crude oil and its related products continued to increase as geopolitical tensions extended to Libya. Within the agricultural complex, gains were experienced primarily during January due to long futures positions in corn as prices increased to the highest levels since July 2008 after the U.S. government lowered forecasts for domestic inventories as adverse weather slashed harvests. Further gains were recorded within this sector during February from long positions in cocoa futures as prices rose to a one-year high on speculation that an order to ban exports from the Ivory Coast, the worlds largest producer of cocoa may be extended.
18
Commodity futures markets are highly volatile. The potential for
broad and rapid price fluctuations increases the risks involved
in commodity trading, but also increases the possibility of
profit. The profitability of the Funds depends on the existence
of major price trends and the ability of the Advisors to
correctly identify those price trends. Price trends are
influenced by, among other things, changing supply and demand
relationships, weather, governmental, agricultural, commercial
and trade programs and policies, national and international
political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to
identify them, the Funds expect to increase capital through
operations.
Interest income on 80% of the average daily equity maintained in
cash in the Funds brokerage account at a
30-day
U.S. Treasury bill rate determined by CGM
and/or will
place up to all of the Funds assets in
90-day
U.S. Treasury bills.
Interest income from investment in the Funds for the three months
ended March 31, 2011 increased by $3,506 as compared to the
corresponding period in 2010. The increase in interest income is primarily due to higher
U.S. Treasury bill rates during the three months ended March 31, 2011, as compared to
the corresponding period in 2010. The amount of interest income earned by the Partnership depends on the average daily equity
in the Partnerships and the Funds accounts and upon
interest rates over which neither
the Partnership nor CGM has control.
Brokerage fees are calculated on the Partnerships
adjusted net asset value on the last day of each month and are
affected by trading performance and redemptions.
Brokerage fees for the three months ended
March 31, 2011 decreased by
$75,016 as compared to the corresponding period in 2010.
The decrease in brokerage fees is primarily due to a
decrease in average net assets during the three months
ended
March 31, 2011 as compared to the corresponding
period in 2010.
Management fees are calculated as a percentage of the
Partnerships net asset value as of the end of each month
and are affected by trading performance and
redemptions. Management fees for the three months ended
March 31, 2011 decreased by
$35,690 as compared to the corresponding period in 2010.
The decrease in management fees is primarily due to a decrease
in average net assets during the three months ended
March 31, 2011 as compared to the corresponding period in
2010.
Incentive fees are based on the new trading profits generated by each Advisor as defined in the management agreement among the
Partnership, the General Partner and each Advisor and are
payable annually. Trading performance for the three months ended
March 31, 2011 and 2010 resulted in an incentive fee accrual
of $3,225 and $9,927, respectively.
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.
19
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
All of the Partnerships assets are subject to the risk of
trading loss through its investments in the Funds. The 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 Funds assets are subject
to the risk of trading loss. Unlike an operating company, the
risk of market sensitive instruments is integral, not
incidental, to the Funds main 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 Partnerships assets and undistributed
profits. This limited liability is a consequence of the
organization of the Partnership as a limited partnership under applicable law.
Market movements result in frequent changes in the fair value of
the Funds open positions and, consequently, in their
earnings and cash balances. The 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 value of financial instruments and contracts, the
diversification effects of the Funds open positions and
the liquidity of the markets in which they trade.
The Funds rapidly acquire and liquidate both long and short
positions in a wide range of different markets. Consequently, it
is not possible to predict how a particular future market
scenario will affect performance, and the Funds past
performance is not necessarily indicative of their future results.
Value at Risk is a measure of the maximum amount which the Funds
could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Funds speculative
trading and the recurrence in the markets traded by the Funds of
market movements far exceeding expectations could result in
actual trading or non-trading losses far beyond the indicated
Value at Risk or the Funds 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 Funds losses in any market sector will be limited to
Value at Risk or by the Funds attempts to manage its
market risk.
Exchange maintenance margin requirements have been used by the
Funds as the measure of their Value at Risk. Maintenance margin
requirements are set by exchanges to equal or exceed the maximum
losses reasonably expected to be incurred in the fair value of
any given contract in 95%-99% of any
one-day
interval. Maintenance margin has been used rather than the more
generally available initial margin, because initial margin
includes a credit risk component, which is not relevant to Value
at Risk.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk
sensitive instruments. The Partnerships advisors currently trade the Partnerships assets
indirectly in master fund managed accounts, over which they have been granted limited authority to
make trading decisions. The first trading Value at Risk table reflects the market sensitive
instruments held by the Partnership indirectly, through its investment in the Funds. The remaining
trading Value at Risk tables reflect the market sensitive instruments, indirectly held by each
Fund, separately.
The following tables indicate the trading Value at Risk associated with the
Partnerships open positions by market category as of March 31,
2011 and December 31, 2010. As of March 31, 2011, the
Partnerships total capitalization was $54,575,713.
March 31, 2011
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 4,170,851 | 7.64 | % | ||||
Energy |
1,083,557 | 1.99 | % | |||||
Grains |
144,793 | 0.27 | % | |||||
Indices |
815,208 | 1.49 | % | |||||
Interest Rates U.S. |
419,543 | 0.77 | % | |||||
Interest Rates Non-U.S. |
892,840 | 1.64 | % | |||||
Livestock |
100,626 | 0.18 | % | |||||
Lumber |
98 | 0.00 | % | |||||
Metals |
405,954 | 0.74 | % | |||||
Softs |
149,095 | 0.27 | % | |||||
Total |
$ | 8,182,565 | 14.99 | % | ||||
As of December 31, 2010, the
Partnerships total capitalization was $59,414,442.
December 31, 2010
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 2,017,181 | 3.40 | % | ||||
Energy |
1,274,022 | 2.14 | % | |||||
Grains |
254,311 | 0.43 | % | |||||
Indices |
1,280,463 | 2.16 | % | |||||
Interest Rates U.S. |
43,796 | 0.07 | % | |||||
Interest Rates Non-U.S. |
381,358 | 0.64 | % | |||||
Livestock |
14,152 | 0.02 | % | |||||
Metals |
390,875 | 0.66 | % | |||||
Softs |
130,248 | 0.22 | % | |||||
Total |
$ | 5,786,406 | 9.74 | % | ||||
20
The following tables indicate the trading Value at Risk associated with the Partnerships
investments in the Funds by market category as of March 31, 2011 and December 31, 2010, and the highest, lowest and
average value during the three months ended March 31, 2011 and for
the twelve months ended December 31, 2010. All open position trading risk
exposures of the Partnership have been included in calculating the figures set forth below. There
have been no material changes in the trading Value at Risk information previously disclosed in the
Partnerships Annual Report on Form 10-K for the year ended
December 31, 2010.
As of March 31, 2011, Aspect Masters total capitalization
was $171,857,926.
The Partnership owned approximately 6.5% of Aspect Master.
As of March 31, 2011, Aspect Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated to Aspect for trading) was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 6,848,407 | 3.99 | % | $ | 8,424,651 | $ | 6,132,034 | $ | 7,404,837 | ||||||||||
Energy |
2,054,170 | 1.20 | % | 2,054,170 | 1,241,868 | 1,577,567 | ||||||||||||||
Grains |
379,656 | 0.22 | % | 736,876 | 342,613 | 543,431 | ||||||||||||||
Indices |
1,979,457 | 1.15 | % | 3,093,179 | 1,263,661 | 2,599,483 | ||||||||||||||
Interest Rates U.S. |
586,200 | 0.34 | % | 586,200 | 172,125 | 370,718 | ||||||||||||||
Interest Rates Non-U.S. |
2,531,705 | 1.47 | % | 2,531,705 | 1,273,466 | 2,101,082 | ||||||||||||||
Livestock |
118,500 | 0.07 | % | 128,500 | 76,750 | 119,217 | ||||||||||||||
Lumber |
1,500 | 0.00 | %** | 3,000 | 1,300 | 1,933 | ||||||||||||||
Metals |
1,432,783 | 0.83 | % | 1,857,539 | 1,115,572 | 1,299,324 | ||||||||||||||
Softs |
646,569 | 0.38 | % | 891,860 | 628,212 | 699,379 | ||||||||||||||
Total |
$ | 16,578,947 | 9.65 | % | ||||||||||||||||
* | Average of month-end Values at Risk | |
** | Due to rounding |
As of December 31, 2010, Aspect Masters total capitalization was $157,864,059. The Partnership owned approximately 8.0% of Aspect Master. As of December 31, 2010, Aspect Masters
Value at Risk for its assets (including the portion of the Partnerships assets allocated to Aspect
for trading) was as follows:
December 31,
2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
Average | ||||||||||||||||||||
% of Total | High | Low | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | 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 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
21
As of March 31, 2011, Graham Masters total capitalization
was $158,206,830. The Partnership owned approximately 6.0% of Graham Master.
As of March 31, 2011, Graham Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated to Graham for trading) was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 10,526,667 | 6.65 | % | $ | 14,645,028 | $ | 5,042,022 | $ | 9,712,741 | ||||||||||
Energy |
1,121,320 | 0.71 | % | 1,221,130 | 430,473 | 715,112 | ||||||||||||||
Grains |
478,650 | 0.30 | % | 624,700 | 436,750 | 497,655 | ||||||||||||||
Indices |
4,094,626 | 2.59 | % | 11,180,261 | 3,276,704 | 6,785,775 | ||||||||||||||
Interest Rates U.S. |
829,155 | 0.52 | % | 1,205,145 | 545,675 | 851,529 | ||||||||||||||
Interest Rates Non-U.S. |
2,782,686 | 1.76 | % | 3,022,899 | 1,439,332 | 2,717,692 | ||||||||||||||
Livestock |
63,600 | 0.04 | % | 63,600 | 38,000 | 42,867 | ||||||||||||||
Metals |
1,048,048 | 0.66 | % | 1,637,443 | 616,825 | 1,030,163 | ||||||||||||||
Softs |
375,073 | 0.24 | % | 491,327 | 241,774 | 354,051 | ||||||||||||||
Total |
$ | 21,319,825 | 13.47 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, Graham Masters total capitalization
was $168,924,671. The Partnership owned approximately 7.2% of Graham Master. As of December 31, 2010, Graham Masters
Value at Risk for its assets (including the portion of the Partnerships assets allocated to Graham
for trading) was as follows:
December 31,
2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
Low | Average | |||||||||||||||||||
% of Total | High | Value | Value | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | at Risk | 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 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
As of March 31, 2011, SandRidge Masters total capitalization
was $378,195,781. The Partnership owned approximately 1.4% of
SandRidge Master. As of March 31, 2011, SandRidge Masters Value at Risk for its assets (including
the portion of the Partnerships assets allocated to SandRidge for trading) was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 34,995,837 | 9.25 | % | $ | 61,733,650 | $ | 31,352,944 | $ | 41,648,911 | ||||||||||
Total |
$ | 34,995,837 | 9.25 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, SandRidge Masters total capitalization
was $528,735,257. The Partnership owned approximately 1.5% of
SandRidge Master. As of December 31, 2010, SandRidge
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to SandRidge for trading) was as follows:
December 31,
2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
Low | Average | |||||||||||||||||||
% of Total | High | Value at | Value at | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Risk | Risk* | |||||||||||||||
Energy |
$ | 61,391,255 | 11.61 | % | $ | 85,692,107 | $ | 18,754,664 | $ | 56,852,448 | ||||||||||
Total |
$ | 61,391,255 | 11.61 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
22
As of March 31, 2011, Eckhardt Masters total capitalization
was $25,751,893. The Partnership owned approximately 41.4% of Eckhardt Master.
As of March 31, 2011, Eckhardt Masters Value at Risk for its assets (including the
portion of the Partnerships assets allocated to Eckhardt for trading) was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,226,115 | 4.76 | % | $ | 1,671,011 | $ | 400,509 | $ | 1,112,646 | ||||||||||
Energy |
686,180 | 2.66 | % | 736,750 | 191,724 | 657,310 | ||||||||||||||
Grains |
177,000 | 0.69 | % | 528,082 | 5,000 | 253,023 | ||||||||||||||
Indices |
1,004,141 | 3.90 | % | 889,841 | 114,649 | 887,330 | ||||||||||||||
Interest Rates U.S. |
318,450 | 1.24 | % | 390,050 | 172,050 | 375,467 | ||||||||||||||
Interest Rates Non -U.S. |
501,485 | 1.95 | % | 501,485 | 101,934 | 296,287 | ||||||||||||||
Metals |
503,540 | 1.95 | % | 618,550 | 155,269 | 480,364 | ||||||||||||||
Softs |
40,500 | 0.16 | % | 124,357 | 29,700 | 89,178 | ||||||||||||||
Total |
$ | 4,457,411 | 17.31 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, Eckhardt Masters total capitalization
was $23,686,325. The Partnership owned approximately 40.5% of Eckhardt Master. As of
December 31, 2010, Eckhardt
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Eckhardt for trading) was as follows:
December 31,
2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,025,866 | 4.33 | % | $ | 1,147,164 | $ | 9,175 | $ | 427,400 | ||||||||||
Energy |
248,250 | 1.05 | % | 580,400 | 10,875 | 238,534 | ||||||||||||||
Grains |
348,259 | 1.47 | % | 370,823 | 41,862 | 169,215 | ||||||||||||||
Indices |
610,979 | 2.58 | % | 3,147,442 | 19,055 | 430,625 | ||||||||||||||
Interest Rates U.S. |
3,900 | 0.02 | % | 887,750 | 3,900 | 351,889 | ||||||||||||||
Interest Rates Non -U.S. |
331,533 | 1.40 | % | 852,062 | 63,225 | 352,114 | ||||||||||||||
Metals |
268,184 | 1.13 | % | 365,762 | 26,255 | 198,271 | ||||||||||||||
Softs |
46,300 | 0.19 | % | 146,472 | 10,950 | 70,345 | ||||||||||||||
Total |
$ | 2,883,271 | 12.17 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
23
As of March 31, 2011, Waypoint Masters total capitalization was
$39,105,172. The Partnership owned approximately 32.5% of Waypoint Master.
As of March 31, 2011, Waypoint Masters Value at Risk for its assets (including the
portion of the Partnerships assets allocated to Waypoint for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Currencies |
$ | 7,828,647 | 20.01 | % | $ | 10,064,603 | $ | 2,910,415 | $ | 6,548,633 | ||||||||||
Energy |
109,000 | 0.28 | % | 195,000 | 45,000 | 89,333 | ||||||||||||||
Interest Rates U.S. |
170,500 | 0.44 | % | 502,450 | 30,400 | 145,783 | ||||||||||||||
Interest Rates Non-U.S. |
924,273 | 2.36 | % | 1,369,739 | 330,677 | 840,248 | ||||||||||||||
Metals |
120,024 | 0.31 | % | 197,750 | 70,014 | 121,691 | ||||||||||||||
Softs |
62,100 | 0.16 | % | 89,700 | 54,000 | 68,600 | ||||||||||||||
Total |
$ | 9,214,544 | 23.56 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As
of December 31, 2010, Waypoint Masters total capitalization was
$41,247,646. The Partnership owned approximately 30.8% of Waypoint Master.
As of
December 31, 2010, Waypoint
Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated
to Waypoint for trading) was as follows:
December 31,
2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,878,430 | 4.55 | % | $ | 11,817,974 | $ | 633,809 | $ | 5,198,266 | ||||||||||
Indices |
901,236 | 2.18 | % | 1,613,660 | 100,993 | 790,428 | ||||||||||||||
Metals |
80,750 | 0.20 | % | 216,426 | 31,500 | 66,207 | ||||||||||||||
Total |
$ | 2,860,416 | 6.93 | % | ||||||||||||||||
* | Period from March 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk |
As of March 31, 2011, PGR Masters total capitalization was $27,753,496 . The Partnership owned
approximately 25.7% of PGR Master. As of March 31, 2011, PGR Masters Value at Risk for its
assets (including the portion of the Partnerships assets allocated to PGR for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 164,135 | 0.59 | % | $ | 265,514 | $ | 125,948 | $ | 205,315 | ||||||||||
Energy |
285,258 | 1.03 | % | 302,794 | 173,242 | 244,413 | ||||||||||||||
Grains |
70,500 | 0.25 | % | 133,500 | 52,500 | 89,333 | ||||||||||||||
Indices |
562,023 | 2.03 | % | 837,150 | 372,931 | 658,492 | ||||||||||||||
Interest Rates U.S. |
207,450 | 0.75 | % | 207,450 | 132,200 | 161,292 | ||||||||||||||
Interest Rates Non -U.S. |
346,720 | 1.25 | % | 346,720 | 108,867 | 214,136 | ||||||||||||||
Livestock |
9,600 | 0.03 | % | 9,600 | 6,000 | 8,867 | ||||||||||||||
Metals |
185,269 | 0.67 | % | 230,771 | 134,516 | 179,933 | ||||||||||||||
Softs |
97,864 | 0.35 | % | 134,013 | 70,400 | 100,477 | ||||||||||||||
Total |
$ | 1,928,819 | 6.95 | % | ||||||||||||||||
* | Average of month-end Value at Risk |
24
As of December 31, 2010, PGR Masters total capitalization was $20,386,581 . The Partnership owned
approximately 25.1% of PGR Master. As of December 31, 2010, PGR Masters Value at Risk for
its assets (including the portion of the Partnerships assets allocated to PGR for trading) was as
follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average* | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | |||||||||||||||
Currencies |
$ | 183,120 | 0.90 | % | $ | 183,120 | $ | 103,066 | $ | 154,058 | ||||||||||
Energy |
252,600 | 1.24 | % | 252,600 | 107,024 | 195,337 | ||||||||||||||
Grains |
111,250 | 0.54 | % | 111,250 | 43,750 | 83,625 | ||||||||||||||
Indices |
617,024 | 3.03 | % | 621,232 | 385,104 | 524,198 | ||||||||||||||
Interest Rates U.S. |
80,800 | 0.40 | % | 141,150 | 66,450 | 81,150 | ||||||||||||||
Interest Rates Non-U.S. |
180,603 | 0.89 | % | 265,434 | 135,161 | 161,976 | ||||||||||||||
Livestock |
10,000 | 0.05 | % | 11,000 | 6,000 | 9,500 | ||||||||||||||
Metals |
162,000 | 0.79 | % | 162,000 | 69,500 | 125,875 | ||||||||||||||
Softs |
98,003 | 0.48 | % | 109,657 | 57,757 | 89,793 | ||||||||||||||
Total |
$ | 1,695,400 | 8.32 | % | ||||||||||||||||
* | Period from November 1, 2010 (commencement of trading operations) to December 31, 2010 average of month-end Value at Risk |
25
Item 4. | Controls and Procedures |
The Partnerships disclosure controls and procedures are
designed to ensure that information required to be disclosed
by the Partnership on the reports that it files or submits under the Securities Exchange Act of
1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods
expected in the SECs rules and forms. Disclosure controls and procedures include controls
and procedures designed to ensure that information required to be disclosed by the Partnership in
the reports it files
is accumulated and communicated to management,
including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO) of the General Partner, to allow for timely
decisions regarding required disclosure and appropriate SEC
filings.
Management is responsible for ensuring that there is an adequate
and effective process for establishing, maintaining and
evaluating disclosure controls and procedures for the
Partnerships external disclosures.
The General Partners CEO and CFO have evaluated the
effectiveness of the Partnerships disclosure controls and
procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act) as of March 31, 2011 and, based on
that evaluation, the General Partners CEO and CFO have concluded that at that
date the Partnerships disclosure controls and procedures
were effective.
The Partnerships internal control over financial
reporting is a process under the supervision of the General
Partners CEO and CFO to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements in accordance with
GAAP. These
controls include policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; | |
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control
over financial reporting process during the fiscal quarter ended
March 31, 2011 that materially affected, or are reasonably
likely to materially affect, the Partnerships internal
control over financial reporting.
26
PART II.
OTHER INFORMATION
Item 1. | Legal Proceedings. |
This section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which CGM is a party or to which any of their property is
subject. There are no material legal proceedings pending against the Partnership or the General
Partner.
CGM is a New York corporation with its principal place of business at 388 Greenwich St., New
York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (FCM),
and provides futures brokerage and clearing services for institutional and retail participants in
the futures markets. CGM and its affiliates also provide investment banking and other financial
services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five
years against CGM (formerly known as Salomon Smith Barney) or any of its individual principals and
no such actions are currently pending, except as follows.
Mutual Funds
Several issues in the mutual fund industry have come under the scrutiny of federal and state
regulators. Citigroup has received subpoenas and other requests for information from various
government regulators regarding market timing, financing, fees, sales practices and other mutual
fund issues in connection with various investigations. Citigroup is cooperating with all such
reviews. Additionally, CGM has entered into a settlement agreement with the SEC with respect to
revenue sharing and sales of classes of funds.
On May 31, 2005, Citigroup announced that Smith Barney Fund Management LLC and CGM completed a
settlement with the SEC resolving an investigation by the SEC into matters relating to arrangements
between certain Smith Barney mutual funds, an affiliated transfer agent and an unaffiliated
sub-transfer agent. Under the terms of the settlement, Citigroup agreed to pay fines totaling
$208.1 million. The settlement, in which Citigroup neither admitted nor denied any wrongdoing or
liability, includes allegations of willful misconduct by Smith Barney Fund Management LLC and CGM
in failing to disclose aspects of the transfer agent arrangements to certain mutual fund investors.
In May 2007, CGM finalized its settlement agreement with the NYSE and the New Jersey Bureau of
Securities on the matter related to its market-timing practices prior to September 2003.
FINRA Settlement
On October 12, 2009, FINRA announced its acceptance of an Award Waiver and Consent (AWC) in
which CGM, without admitting or denying the findings, consented to the entry of the AWC and a fine
and censure of $600,000. The AWC includes findings that CGM failed to adequately supervise the
activities of its equities trading desk in connection with swap and related hedge trades in U.S.
and Italian equities that were designed to provide certain perceived tax advantages. CGM was
charged with failing to provide for effective written procedures with
27
respect to the implementation of the trades, failing to monitor Bloomberg messages and failing
to properly report certain of the trades to the NASDAQ.
Auction Rate Securities
On May 31, 2006, the SEC instituted and simultaneously settled proceedings against CGM and 14
other broker-dealers regarding practices in the auction rate securities market. The SEC alleged
that the broker-dealers violated Section 17(a)(2) of the Securities Act of 1933, as amended. The
broker-dealers, without admitting or denying liability, consented to the entry of an SEC
cease-and-desist order providing for censures, undertakings and penalties. CGM paid a penalty of
$1.5 million.
On August 7, 2008, Citigroup reached a settlement with the New York Attorney General, the SEC,
and other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par
auction rate securities from all Citigroup individual investors, small institutions (as defined by
the terms of the settlement), and charities that purchased auction rate securities from Citigroup
prior to February 11, 2008. In addition, Citigroup agreed to pay a $50 million fine to the State
of New York and a $50 million fine to the other state regulatory agencies.
Subprime Mortgage-Related Actions
The SEC, among other regulators, is investigating Citigroups subprime and other
mortgage-related conduct and business activities, as well as other business activities affected by
the credit crisis, including an ongoing inquiry into Citigroups structuring and sale of
collateralized debt obligations. Citigroup is cooperating fully with the SECs inquiries.
On July 29, 2010, the SEC announced the settlement of an investigation into certain of
Citigroups 2007 disclosures concerning its subprime-related business activities. On October 19,
2010, the United States District Court for the District of Columbia entered a final judgment
approving the settlement, pursuant to which Citigroup agreed to pay a $75 million civil penalty and
to maintain certain disclosure policies, practices and procedures for a three-year period.
Additional information relating to this action is publicly available in court filings under the
docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the OCC and the FDIC, among other federal and state authorities, are
investigating issues related to the conduct of certain mortgage servicing companies, including
Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is cooperating fully
with these inquiries.
Credit Crisis Related Matters
Beginning in the fourth quarter of 2007, certain of Citigroups, and CGM regulators and other
state and federal government agencies commenced formal and informal investigations and inquiries,
and issued subpoenas and requested information, concerning Citigroups subprime mortgage-related
conduct and business activities. Citigroup and certain of its affiliates, including CGM, are
involved in discussions with certain of its regulators to resolve certain of these matters.
Certain of these regulatory matters assert claims for substantial or indeterminate damages.
Some of these matters already have been resolved, either through settlements or court
28
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.
29
Item 1A. | Risk Factors. |
There have been no material changes to the risk factors set forth under Part I, Item 1A. Risk
Factors in the Partnerships Annual Report on Form 10-K for the fiscal year ended December 31,
2010.
30
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The Partnership no longer offers Redeemable Units at the net
asset value per Redeemable Unit as of the end of each month.
The following chart sets forth the purchases of Redeemable Units
by the Partnership.
(d) Maximum Number |
||||||||||||||||||||
(c) Total Number |
(or Approximate |
|||||||||||||||||||
of Shares (or |
Dollar Value) of Shares |
|||||||||||||||||||
(a) Total Number |
(b) Average |
Redeemable Units) |
(or Redeemable Units) that |
|||||||||||||||||
of Shares |
Price Paid per |
Purchased as Part |
May Yet Be |
|||||||||||||||||
(or Redeemable |
Share (or |
of Publicly Announced |
Purchased Under the |
|||||||||||||||||
Period | Units) Purchased* | Redeemable Unit)** | Plans or Programs | Plans or Programs | ||||||||||||||||
January
1, 2011
January 31, 2011 |
713.1124 | 1,372.31 | N/A | N/A | ||||||||||||||||
February
1, 2011
February 28, 2011 |
612.6286 | 1,391.93 | N/A | N/A | ||||||||||||||||
March
1, 2011
March 31, 2011 |
1,206.4046 | 1,374.35 | N/A | N/A | ||||||||||||||||
2,532.1456 | 1,378.03 | |||||||||||||||||||
* Generally, limited partners are permitted to redeem their
Redeemable Units as of the end of each month on
three business days notice to the General Partner. Under certain
circumstances, the General Partner can compel redemption, although to
date the General Partner has not exercised this right. Purchases
of Redeemable Units by the Partnership reflected in the chart
above were made in the ordinary course of the Partnerships
business in connection with effecting redemptions for limited
partners.
** Redemptions of Redeemable Units are effected as of the last
day of each month at the net asset value per Redeemable Unit as
of that day.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | [Removed and Reserved] |
Item 5. | Other Information |
None.
31
Item 6. | Exhibits |
3.1 Limited Partnership Agreement (filed as Exhibit 3.1 to the Registration Statement on Form S-1
filed on September 23, 1999 and incorporated herein by reference).
3.2 Certificate of Limited Partnership of the Partnership as filed in the Office of the Secretary
of State of the State of New York on August 25, 1999 (filed as Exhibit 3.2 to the Registration
Statement on Form S-1 filed on September 23, 1999 and incorporated herein by reference).
(a)Certificate of
Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the
State of New York, dated May 21, 2003 (filed as Exhibit 3.2(a) to the Form 10-Q filed on November 16, 2009
and incorporated herein by reference).
(b) Certificate
of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the
State of New York, dated September 21, 2005 (filed as Exhibit 3.2(b) to the Form 10-Q filed on November 16, 2009
and incorporated herein by reference).
(c) Certificate
of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the
State of New York, dated September 19, 2008 (filed as Exhibit 3.2(c) to the Form 10-Q filed on November 16, 2009
and incorporated herein by reference).
(d) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office
of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to
the Form 8-K filed on September 2, 2008 and incorporated herein by reference).
(e) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office
of the Secretary of State of the State of New York, dated September 24, 2009 (filed as Exhibit 99.1
to the Form 8-K filed on September 30, 2009 and incorporated herein by reference).
(f) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated June 30, 2010 (filed as Exhibit 3.1(f) to the Form 8-K filed on July 2, 2010 and incorporated
herein by reference).
10.1 Form of Customer Agreement between the Partnership and Salomon Smith Barney Inc. (filed as
Exhibit 10.3 to the Registration Statement on Form S-1 filed on September 23, 1999 and incorporated
herein by reference).
10.2 Form of Escrow Agreement among the Partnership, European American Bank, Smith Barney Futures
Management Inc. and Salomon Smith Barney Inc. (filed as Exhibit 10.3 to the Registration Statement
on Form S-1 filed on September 23, 1999 and incorporated herein by reference).
(a) Form of Letter Amending Escrow Agreement among the Partnership, European American Bank,
Smith Barney Futures Management Inc. and Salomon Smith Barney Inc. (filed as Exhibit 10.3A to the
Registration Statement on Form S-1 filed on November 12, 2002 and incorporated herein by
reference).
10.3 Form of Selling Agreement among the Partnership, Smith Barney Futures Management LLC and
Salomon Smith Barney Inc. (filed as Exhibit 1.1 to the Registration Statement on Form S-1 filed on
November 12, 2002 and incorporated herein by reference).
10.4 Joinder Agreement among the Partnership, the General Partner, Citigroup Global Markets Inc.
and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as Exhibit 10 to the Quarterly
Report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference).
10.5 Amended and Restated
Advisory Agreement among the Partnership, the General Partner and SandRidge Capital, LP, dated
June 30, 2007 (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on August 14, 2007
and incorporated herein by reference).
(a) Letter
from the General Partner extending Advisory Agreement between the General Partner and SandRidge Capital,
L.P. for 2010, dated June 1, 2010 (filed as Exhibit 10.5(a) to the Annual Report on Form 10-K filed on
March 31, 2011 and incorporated herein by reference).
10.6 Management
Agreement among the Partnership, the General Partner and Aspect Capital Limited,
dated January 3, 2002 (filed as Exhibit 99 to the Annual Report on Form 10-K filed
on March 27, 2003 and incorporated herein by reference).
(a) Letter
from the General Partner extending Management with Aspect Capital
Limited for 2010, dated June 1, 2010
(filed as Exhibit 10.6(a) to the Annual Report on Form 10-K filed on
March 31, 2011 and incorporated herein
by reference).
10.7 Management Agreement among the
Partnership, the General Partner and Eckhardt Trading Company, dated March 31, 2008 (filed as Exhibit 10
to the Quarterly Report on Form 10-Q filed on August 14, 2008 and incorporated herein by reference).
(a) Letter from
the General Partner extending Management Agreement with Eckhardt
Trading Company for 2010, dated June 1, 2010
(filed as Exhibit 10.7(a) to the Annual Report on Form 10-K filed on
March 31, 2011 and incorporated herein by
reference).
10.8 Management Agreement among
the Partnership, the General Partner and Waypoint Capital Management LLC, dated February 25, 2010 (filed as Exhibit 10.8 to the Quarterly Report on Form 10-Q filed on May 17, 2010 and incorporated herein by reference).
(a) Letter
from the General Partner extending Management Agreement with Waypoint Capital Management LLC for 2010, dated June 1, 2010 (filed as Exhibit 10.10(A) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference).
10.9 Management Agreement
among the Partnership, the General Partner and Graham Capital Management, L.P., dated June 11, 2001
(filed as Exhibit 10 to the Annual Report on Form 10-K filed on March 27, 2002 and incorporated herein
by reference).
(a) Letter
from the General Partner extending Management Agreement with Graham
Capital Management, L.P. for 2010, dated
June 1, 2010 (filed as Exhibit 10.9(a) to the Annual Report on Form
10-K filed on March 31, 2011 and
incorporated herein by reference).
10.10
Management Agreement among the Partnership, the General Partner and
PGR Capital LLP, dated October 29, 2010 (filed as Exhibit 10.10 to
the Form 8-K filed on November 4, 2010 and incorporated herein by
reference).
Exhibit 31.1 Rule 13a-14(a)/15d-14(a)
Certification (Certification of President and Director)
Exhibit 31.2 Rule 13a-14(a)/15d-14(a)
Certification (Certification of Chief Financial Officer and
Director)
Exhibit 32.1 Section 1350 Certification
(Certification of President and Director)
Exhibit 32.2 Section 1350 Certification
(Certification of Chief Financial Officer and Director)
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DIVERSIFIED 2000 FUTURES
FUND L.P.
By: | Ceres Managed Futures LLC |
(General Partner)
By: |
/s/
Walter Davis
|
Walter Davis
President and Director
Date: | May 16, 2011 |
By: |
/s/ Jennifer
Magro
|
Jennifer Magro
Chief Financial Officer and Director
(Principal Accounting Officer)
(Principal Accounting Officer)
Date: | May 16, 2011 |
33