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Table of Contents

UNITED STATES
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 June 30, 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
(Registrant’s 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 X  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 July 31, 2011, 38,451.8890 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 June 30, 2011 (unaudited)
and December 31, 2010
  3
             
        Schedules of Investments at June 30, 2011 (unaudited)
and December 31, 2010
  4 − 5
             
        Statements of Income and Expenses and Changes in Partners’ Capital for the three and six months ended June 30, 2011 and 2010 (unaudited)   6
             
             
        Notes to Financial Statements (unaudited)   7 − 16
             
      Item 2.   Management’s 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 − 30
Exhibits
     
     
EX–31.1 CERTIFICATION
     
EX–31.2 CERTIFICATION
     
EX–32.1 CERTIFICATION
     
EX–32.2 CERTIFICATION
     
     
101.INS
  XBRL Instance Document.
 
   
101.SCH
  XBRL Taxonomy Extension Schema Document.
 
   
101.CAL
  XBRL Taxonomy Extension Calculation Linkbase Document.
 
   
101.LAB
  XBRL Taxonomy Extension Label Linkbase Document.
 
   
101.PRE
  XBRL Taxonomy Extension Presentation Linkbase Document.
 EX-10.10
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT


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Table of Contents

 
PART I
Item 1.  Financial Statements
 
 
Diversified 2000 Futures Fund L.P.
 
                 
      (Unaudited)
June 30,
  December 31,
 
      2011   2010  
 
Assets:
               
Investment in Funds, at fair value
    $ 52,890,478   $ 60,378,147  
Cash
      176,378     152,302  
               
Total assets
    $ 53,066,856   $ 60,530,449  
               
Liabilities and Partners’ Capital:
               
Liabilities:
               
Accrued expenses:
           
Brokerage fees
    $ 238,800   $ 272,388  
Management fees
      75,763     88,127  
Incentive fees
      0     352,348  
Other
      176,382     134,745  
Redemptions payable
      156,845     268,399  
               
Total liabilities
      647,790     1,116,007  
               
Partners’ Capital:
             
General Partner, 441.6499 unit equivalents outstanding at
June 30, 2011 and December 31, 2010
      592,694     621,185  
Limited Partners, 38,618.8145 and 41,800.7127 Redeemable Units outstanding at June 30, 2011 and December 31, 2010, respectively
      51,826,372     58,793,257  
               
Total partners’ capital
      52,419,066     59,414,442  
               
Total liabilities and partners’ capital
    $ 53,066,856   $ 60,530,449  
               
Net asset value per unit
    $ 1,342.00   $ 1,406.51  
               
 
See accompanying notes to financial statements.


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Table of Contents

Diversified 2000 Futures Fund L.P.
June 30, 2011
(Unaudited)
 
                 
          % of Partners’
 
    Fair Value     Capital  
 
Investment in Funds
               
CMF Aspect Master Fund L.P. 
  $ 9,951,119       18.98 %
CMF Graham Capital Master Fund L.P. 
    8,584,197       16.38  
CMF SandRidge Master Fund L.P. 
    5,115,129       9.76  
CMF Eckhardt Master Fund L.P. 
    10,374,303       19.79  
Waypoint Master Fund L.P.
  11,871,336       22.65
PGR Master Fund L.P.
  6,994,394       13.34
                 
Total investment in Funds, at fair value
  $ 52,890,478       100.90 %
                 
 
See accompanying notes to financial statements.


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Table of Contents

Diversified 2000 Futures Fund L.P.
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.

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Diversified 2000 Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners’ Capital
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Investment income:
                               
Interest income from investment in Funds
  $ 1,993     $ 15,326     $ 13,185     $ 23,012  
 
                       
 
                               
Expenses:
                               
Brokerage fees including clearing fees
    798,171       888,058       1,631,146       1,796,049  
Management fees
    238,157       275,908       486,528       559,969  
Incentive fees
    (3,225 )     142,677       0       152,604  
Other
    81,740       88,749       166,769       166,454  
 
                       
Total expenses
    1,114,843       1,395,392       2,284,443       2,675,076  
 
                       
Net investment income (loss)
    (1,112,850 )     (1,380,066 )     (2,271,258 )     (2,652,064 )
 
                       
 
                               
Trading Results:
                               
Net gains (losses) on trading of commodity interests and investment in Funds:
                               
Net realized gains (losses) on investment in Funds
    583,147       1,000,429       992,519       (273,681 )
Change in net unrealized gains (losses) on investment in Funds
    (720,360 )     (228,313 )     (1,320,684 )     179,348  
 
                       
Total trading results
    (137,213 )     772,116       (328,165 )     (94,333 )
 
                       
Net income (loss)
    (1,250,063 )     (607,950 )     (2,599,423 )     (2,746,397 )
Redemptions — General Partner
    0       0       0       (250,000 )
Redemptions — Limited Partners
    (906,584 )     (2,147,661 )     (4,395,953 )     (5,042,080 )
 
                       
Net increase (decrease) in Partners’ Capital
    (2,156,647 )     (2,755,611 )     (6,995,376 )     (8,038,477 )
Partners’ Capital, beginning of period
    54,575,713       62,440,445       59,414,442       67,723,311  
 
                       
Partners’ Capital, end of period
  $ 52,419,066     $ 59,684,834     $ 52,419,066     $ 59,684,834  
 
                       
Net asset value per unit (39,060.4644 and 44,685.2519 units outstanding at June 30, 2011 and 2010, respectively)
  $ 1,342.00     $ 1,335.67     $ 1,342.00     $ 1,335.67  
 
                       
Net income (loss) per unit *
  $ (32.35 )   $ (13.84 )   $ (64.51 )   $ (57.19 )
 
                       
Weighted average units outstanding
    39,466.3109       45,664.3884       40,514.5278       46,827.8609  
 
                       
 
*   Based on change in net asset value per unit.
See accompanying notes to financial statements.

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Table of Contents

Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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 up to 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 June 30, 2011, all trading decisions for the Partnership are made by the Advisors (defined below).
 
As of June 30, 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 Partnership’s 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 Partnership’s financial condition at June 30, 2011 and December 31, 2010 and the results of its operations and changes in partners’ capital for the three and six months ended June 30, 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 Partnership’s 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.
 


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Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 2011
(Unaudited)
 
2.  Financial Highlights:
 
Changes in the net asset value per unit for the three and six months ended June 30, 2011 and 2010 were as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Net realized and unrealized gains (losses)*
  $ (24.42 )   $ (3.06 )   $ (48.77 )   $ (38.82 )
Interest income
    0.05       0.34       0.33       0.50  
Expenses**
    (7.98 )     (11.12 )     (16.07 )     (18.87 )
 
                       
Increase (decrease) for the period
    (32.35 )     (13.84 )     (64.51 )     (57.19 )
Net asset value per unit, beginning of period
    1,374.35       1,349.51       1,406.51       1,392.86  
 
                       
Net asset value per unit, end of period
  $ 1,342.00     $ 1,335.67     $ 1,342.00     $ 1,335.67  
 
                       
 
* Includes brokerage fees.
 
** Excludes brokerage fees.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Ratio to average net assets: ***
                               
Net investment income (loss) before incentive fees ****
    (8.2 )%     (8.1 )%     (8.2 )%     (8.0 )%
 
                       
Operating expenses
    8.2 %     8.2 %     8.2 %     8.1 %
Incentive fees
    0.0 %*****     0.2 %     0.0 %     0.2 %
 
                       
Total expenses
    8.2 %     8.4 %     8.2 %     8.3 %
 
                       
Total return:
                               
Total return before incentive fees
    (2.4 )%     (0.8 )%     (4.6 )%     (3.9 )%
Incentive fees
    0.0 %*****     (0.2 )%     0.0 %     (0.2 )%
 
                       
Total return after incentive fees
    (2.4 )%     (1.0 )%     (4.6 )%     (4.1 )%
 
                       
 
*** 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 Partnership’s investments are in other funds. The results of the Partnership’s 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.
 
All of the commodity interests owned by the Funds are held for trading purposes.
 
Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions.
 


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Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 2011
(Unaudited)
 
4.   Fair Value Measurements:
 
Partnership’s 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.
 
Partnership’s and the Funds’ Fair Value Measurements.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the 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 Partnership’s 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 Partnership’s investments in funds reflects its proportional interest in the funds. As of and for the periods ended June 30, 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 management’s assumptions and internal valuation pricing models (Level 3).
                                 
            Quoted Prices in Active     Significant Other     Significant  
            Markets for Identical     Observable Inputs     Unobservable  
    6/30/2011     Assets (Level 1)     (Level 2)     Inputs (Level 3)  
Assets
                               
Investment in Funds
  $ 52,890,478     $     $ 52,890,478     $  
 
                       
Net fair value
  $ 52,890,478     $     $ 52,890,478     $  
 
                       
                                 
            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.


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Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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 June 30, 2011.
 
Aspect Master’s, Graham Master’s, SandRidge Master’s, Eckhardt Master’s, Waypoint Master’s and PGR Master’s (collectively, the “Funds”) trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. The Funds 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 CGM’s direct brokerage fees are charged at the Partnership level.


10


Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 2011
(Unaudited)
 
At June 30, 2011, the Partnership owned approximately 6.2% of Aspect Master, 5.3% of Graham Master, 1.6% of SandRidge Master, 41.4% of Eckhardt Master, 31.3% of Waypoint Master and 22.3% 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 Aspect’s, Graham’s, SandRidge’s, Eckhardt’s, Waypoint’s and PGR’s 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.
                         
    June 30, 2011  
    Total Assets     Total Liabilities     Total Capital  
Aspect Master
  $ 161,590,568     $ 1,233,120     $ 160,357,448  
Graham Master
    163,117,009       1,643,146       161,473,863  
SandRidge Master
    334,456,876       16,413,705       318,043,171  
Eckhardt Master
    25,163,091       125,459       25,037,632  
Waypoint Master
    38,256,105       292,377       37,963,728  
PGR Master
    31,466,858       41,093       31,425,765  
 
                 
Total
  $ 754,050,507     $ 19,748,900     $ 734,301,607  
 
                 
                         
    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


Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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 June 30, 2011  
    Net Investment
Income (Loss)
    Total Trading
Results
    Net Income (Loss)  
Aspect Master
  $ (49,767 )   $ (4,157,070 )   $ (4,206,837 )
Graham Master
    (236,860 )     (7,784,946 )     (8,021,806 )
SandRidge Master
    (180,388 )     15,086,153       14,905,765  
Eckhardt Master
    (62,034 )     (98,570 )     (160,604 )
Waypoint Master
    (49,050 )     846,382       797,332  
PGR Master
    (26,281 )     (107,699 )     (133,980 )
 
                 
Total
  $ (604,380 )   $ 3,784,250     $ 3,179,870  
 
                 
                         
    For the six months ended June 30, 2011  
    Net Investment
Income (Loss)
    Total Trading
Results
    Net Income (Loss)  
Aspect Master
  $ (78,606 )   $ (2,431,100 )   $ (2,509,706 )
Graham Master
    (383,116 )     (8,855,666 )     (9,238,782 )
SandRidge Master
    (430,493 )     30,129,226       29,698,733  
Eckhardt Master
    (116,690 )     (372,287 )     (488,977 )
Waypoint Master
    (113,465 )     (760,597 )     (874,062 )
PGR Master
    (53,692 )     483,766       430,074  
 
                 
Total
  $ (1,176,062 )   $ 18,193,342     $ 17,017,280  
 
                 
                         
    For the three months ended June 30, 2010  
    Net Investment
Income (Loss)
    Total Trading
Results
    Net Income (Loss)  
Aspect Master
  $ (66,054 )   $ 993,585     $ 927,531  
Graham Master
    (136,035 )     957,704       821,669  
SandRidge Master
    (388,928 )     (68,950,382 )     (69,339,310 )
Eckhardt Master
    (40,138 )     2,073,976       2,033,838  
Waypoint Master
    (47,691 )     5,344,480       5,296,789  
 
                 
Total
  $ (678,846 )   $ (59,580,637 )   $ (60,259,483 )
 
                 
                         
    For the six months ended June 30, 2010  
    Net Investment
Income (Loss)
    Total Trading
Results
    Net Income (Loss)  
Aspect Master
  $ (113,944 )   $ 7,879,872     $ 7,765,928  
Graham Master
    (235,351 )     (2,985,482 )     (3,220,833 )
SandRidge Master
    (650,172 )     (84,183,590 )     (84,833,762 )
Eckhardt Master
    (76,923 )     654,613       577,690  
Waypoint Master
    (59,189 )     5,917,533       5,858,344  
 
                 
Total
  $ (1,135,579 )   $ (72,717,054 )   $ (73,852,633 )
 
                 


12


Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 2011
(Unaudited)
 
Summarized information reflecting the Partnership’s investment in, and the operations of the Funds is shown in the following tables.
                                                                 
    June 30, 2011     For the three months ended June 30, 2011              
    % of                                     Net              
    Partnership’s     Fair     Income     Expenses     Income     Investment     Redemptions  
Investment   Net Assets     Value     (Loss)     Brokerage Fees     Other     (Loss)     Objective     Permitted  
Aspect Master
    18.98 %   $ 9,951,119     $ (257,814 )   $ 2,682     $ 757     $ (261,253 )   Commodity Portfolio   Monthly
Graham Master
    16.38 %     8,584,197       (349,661 )     12,271       774       (362,706 )   Commodity Portfolio   Monthly
SandRidge Master
    9.76 %     5,115,129       254,019       1,822       1,316       250,881     Energy Portfolio   Monthly
Eckhardt Master
    19.79 %     10,374,303       (41,095 )     18,488       7,614       (67,197 )   Commodity Portfolio   Monthly
Waypoint Master
    22.65 %     11,871,336       263,933       11,013       4,756       248,164     Commodity Portfolio   Monthly
PGR Master
    13.34 %     6,994,394       (4,602 )     2,092       4,154       (10,848 )   Commodity Portfolio   Monthly
 
                                                     
Total
          $ 52,890,478     $ (135,220 )   $ 48,368     $ 19,371     $ (202,959 )                
 
                                                     
                                                                 
    June 30, 2011     For the six months ended June 30, 2011              
    % of                                     Net              
    Partnership’s     Fair     Income     Expenses     Income     Investment     Redemptions  
Investment   Net Assets     Value     (Loss)     Brokerage Fees     Other     (Loss)     Objective     Permitted  
Aspect Master
    18.98 %   $ 9,951,119     $ (141,263 )   $ 5,215     $ 2,433     $ (148,911 )   Commodity Portfolio   Monthly
Graham Master
    16.38 %     8,584,197       (411,310 )     21,857       2,233       (435,400 )   Commodity Portfolio   Monthly
SandRidge Master
    9.76 %     5,115,129       501,745       5,332       2,496       493,917     Energy Portfolio   Monthly
Eckhardt Master
    19.79 %     10,374,303       (149,451 )     35,890       14,797       (200,138 )   Commodity Portfolio   Monthly
Waypoint Master
    22.65 %     11,871,336       (256,183 )     27,646       11,860       (295,689 )   Commodity Portfolio   Monthly
PGR Master
    13.34 %     6,994,394       141,482       4,300       11,523       125,659     Commodity Portfolio   Monthly
 
                                                     
Total
          $ 52,890,478     $ (314,980 )   $ 100,240     $ 45,342     $ (460,562 )                
 
                                                     
                                                                 
    December 31, 2010     For the three months ended June 30, 2010              
    % of                                     Net              
    Partnership’s     Fair     Income     Expenses     Income     Investment     Redemptions  
Investment   Net Assets     Value     (Loss)     Brokerage Fees     Other     (Loss)     Objective     Permitted  
Aspect Master
    21.19 %   $ 12,593,732     $ 123,814     $ 6,170     $ 5,911     $ 111,733     Commodity Portfolio   Monthly
Graham Master
    20.51 %     12,185,485       109,722       12,913       5,967       90,842     Commodity Portfolio   Monthly
SandRidge Master
    13.76 %     8,175,283       (1,149,016 )     8,203       1,541       (1,158,760 )   Energy Portfolio   Monthly
Eckhardt Master
    16.15 %     9,595,146       851,774       10,690       7,361       833,723     Commodity Portfolio   Monthly
Waypoint Master
    21.40 %     12,714,093       851,148       6,526       2,893       841,729     Commodity Portfolio   Monthly
PGR Master
    8.61 %     5,114,408                             Commodity Portfolio   Monthly
 
                                                     
Total
          $ 60,378,147     $ 787,442     $ 44,502     $ 23,673     $ 719,267                  
 
                                                     
                                                                 
    December 31, 2010     For the six months ended June 30, 2010              
    % of                                     Net              
    Partnership’s     Fair     Income     Expenses     Income     Investment     Redemptions  
Investment   Net Assets     Value     (Loss)     Brokerage Fees     Other     (Loss)     Objective     Permitted  
Campbell Master
    0.00 %   $     $ (266,611 )   $ 1,344     $ 672     $ (268,627 )   Financial, Metal &
Energy Large Portfolio
  Monthly
Aspect Master
    21.19 %     12,593,732       968,038       12,462       7,862       947,714     Commodity Portfolio   Monthly
Graham Master
    20.51 %     12,185,485       (581,738 )     25,092       7,942       (614,772 )   Commodity Portfolio   Monthly
SandRidge Master
    13.76 %     8,175,283       (1,414,272 )     13,197       2,888       (1,430,357 )   Energy Portfolio   Monthly
Eckhardt Master
    16.15 %     9,595,146       280,391       19,258       14,488       246,645     Commodity Portfolio   Monthly
Waypoint Master
    21.40 %     12,714,093       942,871       7,897       3,880       931,094     Commodity Portfolio   Monthly
PGR Master
    8.61 %     5,114,408                             Commodity Portfolio   Monthly
 
                                                     
Total
          $ 60,378,147     $ (71,321 )   $ 79,250     $ 37,732     $ (188,303 )                
 
                                                     


13


Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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 Partnership’s assets and undistributed profits. This limited liability is a result 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 Partnership’s/Funds’ risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Funds’ risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Funds to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Funds have credit risk and concentration risk as the sole counterparty or broker with respect to the Funds’ assets is CGM or a CGM affiliate. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through CGM, the Partnership’s/Funds’ counterparty is an exchange or clearing organization.
     As both a buyer and seller of options, the Funds pay or receive a premium at the outset and then 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 Fund’s 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


Table of Contents

 
Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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.
Partnership’s 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.
Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the 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 Partnership’s 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 Partnership’s investments in funds reflects its proportional interest in the funds. As of and for the periods ended June 30, 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 management’s 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.


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Diversified 2000 Futures Fund L.P.
Notes to Financial Statements
June 30, 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 Partnership’s 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 Partnership’s 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 Partnership’s 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. The General Partner of the Partnership evaluates events that occur after the balance sheet date but before financial statements are filed. The General Partner 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.
Recent Accounting Pronouncements. In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards” (“IFRS”). The amendments within this ASU change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between U.S. GAAP and IFRS. However, some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The ASU is effective for annual and interim periods beginning after December 15, 2011 for public entities. This new guidance is not expected to have a material impact on the Partnership’s 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”.


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Item 2.   Management’s 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 investments 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 second quarter of 2011.
 
The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.
 
For the six months ended June 30, 2011, Partnership Capital decreased 11.8% from $59,414,442 to $52,419,066. This decrease was attributable to the net loss from operations of $2,599,423, coupled with the redemption of 3,181.8982 Redeemable Units resulting in an outflow of $4,395,953. 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 Partnership’s 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 gains (losses) and change in net unrealized trading gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.
 


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Results of Operations
           During the second quarter of 2011, the Partnership’s net asset value per unit decreased 2.4% from $1,374.35 to $1,342.00 as compared to a decrease of 1.0% in the second quarter of 2010. The Partnership experienced a net trading loss through its investment in the Funds before brokerage fees and related fees in the second quarter of 2011 of $137,213. Losses were primarily attributable to the Funds trading in energy, grains, livestock, indices, metals, and softs, and were partially offset by gains in currencies, U.S. and non-U.S. interest rates. The Partnership experienced a net trading gain through its investment in the Funds before brokerage fees and related fees in the second quarter of 2010 of $772,116. Gains were primarily attributable to the Funds trading in currencies, U.S. and non-U.S. interest rates, and were partially offset by losses in energy, grains, livestock, metals, softs and indices.
          The most significant losses were incurred within the global stock index sector, primarily during May and June, from long positions in Pacific Rim, European, and U.S. equity index futures as prices declined on worse-than-expected economic reports and mounting worries over the European debt crisis. Within the energy markets, losses were recorded primarily during May and June due to long futures positions in crude oil and its related products as prices moved lower amid concern energy demand may weaken. Further losses were experienced in June due to short positions in natural gas futures as prices rose on forecasts of above-average temperatures in the U.S. Within the agricultural complex, losses were experienced primarily during June from long positions in corn futures as prices fell sharply after the U.S. Department of Agriculture revealed larger-than-expected plantings. Losses were also experienced within the metals markets, primarily during June, due to long positions in aluminum futures as prices fell amid a slowing global economy and a rising U.S. dollar. A portion of the Partnership’s losses during the quarter was offset by gains achieved within the global interest rate sector, primarily during May, from long positions in U.S. fixed-income futures as prices increased following reports that showed the U.S. economy grew less than forecast and U.S. jobless claims unexpectedly rose. Gains were also experienced within the currency markets, primarily during April, from long positions in the Swiss franc, Australian dollar, and Brazilian real versus the U.S. dollar as the value of these currencies rose against the U.S. dollar after better-than-expected corporate earnings reports and signs of global growth spurred demand for higher-yielding currencies.
           During the Partnership’s six months ended June 30, 2011, the net asset value per unit decreased 4.6% from $1,406.51 to $1,342.00 as compared to a decrease of 4.1% 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 six months ended June 30, 2011 of $328,165. Losses were primarily attributable to the Funds trading in grains, livestock, metals, non- U.S. interest rates and indices and were partially offset by gains in currencies, energy, U.S. interest rates, and softs. The Partnership experienced a net trading loss through its investment in the Funds before brokerage fees and related fees in the six months ended June 30, 2010 of $94,333. Losses were primarily attributable to the Funds trading in energy, grains, livestock, metals, softs and indices and were partially offset by gains in currencies, U.S. and non-U.S. interest rates, energy and livestock.
          The most significant losses were incurred within the global stock index sector, primarily during May and June, from long positions in Pacific Rim, European, and U.S. equity index futures as prices declined on worse-than-expected economic reports and mounting worries over the European debt crisis. Additional losses were experienced in this sector during March from long positions in European equity index futures as prices moved lower. Within the agricultural complex, losses were incurred primarily during March due to long positions in cocoa futures as prices fell on signs the political turmoil in the Ivory Coast, the world’s largest cocoa producing country, may be easing. Further losses were incurred within this sector during June from long positions soybean and corn futures as prices fell. Losses were also experienced within the metals markets, primarily during March, from long positions in copper futures as prices moved lower amid concern that rising energy costs would possibly slow the global economy and reduce demand for base metals. Further losses were incurred within this sector during May and June from long positions in aluminum futures, A portion of the Partnership’s losses for the first half of the year was offset by gains achieved within the energy markets, during the first four months of the year, from long futures positions in crude oil and its related products as prices rose after political tension in Egypt and Libya stoked worries that protests may spread to crude-producing parts of the Middle East. Gains were also experienced within the global interest rate sector, primarily during May, from long positions in U.S. fixed-income futures as prices increased following reports that showed the U.S. economy grew less than forecast and U.S. jobless claims unexpectedly rose. Gains were also experienced within the currency markets, primarily during April, from long positions in the Swiss franc, Indonesian rupiah, and Brazilian real versus the U.S. dollar as the value of these currencies rose against the U.S. dollar after better-than-expected corporate earnings reports and signs of global growth spurred demand for higher-yielding currencies.


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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. Interest income from investment in the Funds for the three and six months ended June 30, 2011 decreased by $13,333 and $9,827, respectively, as compared to the corresponding periods in 2010. The decrease in interest income is primarily due to lower U.S. Treasury bill rates during the three and six months ended June 30, 2011, as compared to the corresponding periods in 2010. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s and the Funds’ accounts and upon interest rates over which neither the Partnership nor CGM has control.
 
Brokerage fees are calculated on the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance and redemptions. Brokerage fees for the three and six months ended June 30, 2011 decreased by $89,887 and $164,903, respectively, as compared to the corresponding periods in 2010. The decrease in brokerage fees is primarily due to a decrease in average net assets during the three and six months ended June 30, 2011 as compared to the corresponding periods in 2010.
 
Management fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Management fees for the three and six months ended June 30, 2011 decreased by $37,751 and $73,441, respectively, as compared to the corresponding periods in 2010. The decrease in management fees is primarily due to a decrease in average net assets during the three and six months ended June 30, 2011 as compared to the corresponding periods 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 June 30, 2011 resulted in a reversal of an incentive fee accrual of $3,225. There were no incentive fees earned for the six months ended June 30, 2011. Trading performance for the three and six months ended June 30, 2010 resulted in an incentive fee accrual of $142,677 and $152,604, 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.


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Item 3.   Quantitative and Qualitative Disclosures about Market Risk
 
All of the Partnership’s 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 Partnership’s assets and undistributed profits. This limited liability is a result 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 market value of financial instruments and contracts, the diversification effects of the Funds’ open contracts 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 Partnership’s advisors currently trade the Partnership’s assets indirectly in master fund managed accounts, over which they have been granted limited authority to make trading decisions. The first trading Value at Risk tables 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 Partnership’s open positions by market category as of June 30, 2011 and December 31, 2010. As of June 30, 2011, the Partnership’s total capitalization was $52,419,066.
June 30, 2011
                 
            % of Total  
Market Sector   Value at Risk     Capitalization  
Currencies
  $ 2,428,929       4.63 %
Energy
    408,094       0.78 %
Grains
    57,493       0.11 %
Indices
    999,227       1.91 %
Interest Rates U.S.
    234,650       0.45 %
Interest Rates Non-U.S.
    1,094,700       2.09 %
Livestock
    5,858       0.01 %
Lumber
    558       0.00 %*
Metals
    298,719       0.57 %
Softs
    110,746       0.21 %
 
           
Total
  $ 5,638,974       10.76 %
 
           
 
*  Due to rounding
As of December 31, 2010, the Partnership’s 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 %
 
           


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The following tables indicate the trading Value at Risk associated with the Partnership’s investments in the Funds by market category as of June 30, 2011 and December 31, 2010, and the highest, lowest and average value during the three months ended June 30, 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 Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
As of June 30, 2011, Aspect Master’s total capitalization was $160,357,448. The Partnership owned approximately 6.2% of Aspect Master. As of June 30, 2011, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:
 
June 30, 2011
                                         
                    Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 6,644,755       4.14 %   $ 9,705,808     $ 6,644,755     $ 8,426,784  
Energy
    950,544       0.59 %     2,078,345       856,518       1,280,704  
Grains
    123,592       0.08 %     498,219       123,592       340,962  
Indices
    1,221,773       0.76 %     2,915,866       914,885       1,958,623  
Interest Rates U.S.
    1,448,950       0.90 %     2,289,150       1,118,150       1,618,750  
Interest Rates Non-U.S.
    6,697,399       4.18 %     6,742,007       1,784,812       4,313,958  
Livestock
    33,755       0.02 %     131,900       31,500       61,990  
Lumber
    9,000       0.01 %     9,000       1,000       7,500  
Metals
    916,286       0.57 %     1,578,653       811,801       1,137,353  
Softs
    425,101       0.27 %     627,776       410,674       487,133  
                                     
Total
  $ 18,471,155       11.52 %                        
                                     
 
 
* Average of month-end Values at Risk
As of December 31, 2010, Aspect Master’s total capitalization was $157,864,059. The Partnership owned approximately 8.0% of Aspect Master. As of December 31, 2010, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:
December 31, 2010
                                         
                    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
 


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As of June 30, 2011, Graham Master’s total capitalization was $161,473,863. The Partnership owned approximately 5.3% of Graham Master. As of June 30, 2011, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:
 
June 30, 2011
                                         
                    Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 13,555,324       8.40 %   $ 13,555,324     $ 8,726,569     $ 11,581,843  
Energy
    1,054,172       0.65 %     1,790,886       646,679       1,209,214  
Grains
    392,062       0.24 %     561,012       325,891       400,296  
Indices
    2,488,837       1.54 %     8,218,707       1,625,857       3,260,028  
Interest Rates U.S.
    968,150       0.60 %     4,564,925       968,150       2,351,225  
Interest Rates Non-U.S.
    1,987,740       1.23 %     2,505,732       795,437       1,561,437  
Livestock
    66,000       0.04 %     88,800       6,000       40,800  
Metals
    1,263,511       0.78 %     1,753,698       740,183       1,078,290  
Softs
    332,954       0.21 %     508,137       247,550       337,506  
 
                                   
Total
  $ 22,108,750       13.69 %                        
 
                                   
 
 
* Average of month-end Values at Risk
As of December 31, 2010, Graham Master’s total capitalization was $168,924,671. The Partnership owned approximately 7.2% of Graham Master. As of December 31, 2010, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:
December 31, 2010
                                         
                    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 June 30, 2011, SandRidge Master’s total capitalization was $318,043,171. The Partnership owned approximately 1.6% of SandRidge Master. As of June 30, 2011, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:
June 30, 2011
(Unaudited)

                                         
          Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Energy
  $ 14,252,103       4.48 %   $ 36,257,390     $ 14,252,103     $ 26,359,282  
 
                                   
Total
  $ 14,252,103       4.48 %                        
 
                                   
 
 
* Average of month-end Values at Risk
 
As of December 31, 2010, SandRidge Master’s total capitalization was $528,735,257. The Partnership owned approximately 1.5% of SandRidge Master. As of December 31, 2010, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:
December 31, 2010
                                         
                    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


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As of June 30, 2011, Eckhardt Master’s total capitalization was $25,037,632. The Partnership owned approximately 41.4% of Eckhardt Master. As of June 30, 2011, Eckhardt Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Eckhardt for trading) was as follows:
 
June 30, 2011
(Unaudited)
                                         
          Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 1,554,541       6.21 %   $ 1,678,029     $ 421,164     $ 1,318,042  
Energy
    9,000       0.04 %     886,666       9,000       295,257  
Grains
    16,250       0.07 %     353,000       16,250       148,500  
Indices
    874,793       3.49 %     1,132,389       202,007       814,340  
Interest Rates U.S.
    59,900       0.24 %     1,698,650       59,900       625,667  
Interest Rates Non -U.S.
    432,300       1.73 %     810,839       330,312       471,232  
Metals
    243,462       0.97 %     486,126       97,609       322,180  
Softs
    81,000       0.32 %     98,480       19,800       53,500  
 
                                   
Total
  $ 3,271,246       13.07 %                        
 
                                   
 
 
* Average of month-end Values at Risk
 
As of December 31, 2010, Eckhardt Master’s total capitalization was $23,686,325. The Partnership owned approximately 40.5% of Eckhardt Master. As of December 31, 2010, Eckhardt Master’s Value at Risk for its assets (including the portion of the Partnership’s 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


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Table of Contents

 
As of June 30, 2011, Waypoint Master’s total capitalization was $37,963,728. The Partnership owned approximately 31.3% of Waypoint Master. As of June 30, 2011, Waypoint Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Waypoint for trading) was as follows:
June 30, 2011
                                         
                    Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 1,978,315       5.21 %   $ 10,317,436     $ 381,280     $ 6,777,194  
Energy
    46,750       0.12 %     112,500       42,500       51,875  
Grains
    40,250       0.11 %     111,500       19,250       75,875  
Indices
    1,040,966       2.74 %     1,280,802       200,908       648,984  
Interest Rates U.S.
    26,000       0.07 %     591,250       26,000       367,367  
Interest Rates Non-U.S.
    697,203       1.84 %     1,537,795       78,185       821,745  
Metals
    142,500       0.37 %     170,512       40,500       156,506  
Softs
    37,800       0.10 %     105,300       37,800       62,100  
 
                                   
Total
  $ 4,009,784       10.56 %                        
 
                                   
 
* Average of month-end Values at Risk
 
As of December 31, 2010, Waypoint Master’s total capitalization was $41,247,646. The Partnership owned approximately 30.8% of Waypoint Master. As of December 31, 2010, Waypoint Master’s Value at Risk for its assets (including the portion of the Partnership’s 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 June 30, 2011, PGR Master’s total capitalization was $31,425,765. The Partnership owned approximately 22.3% of PGR Master. As of June 30, 2011, PGR Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to PGR for trading) was as follows:
June 30, 2011
                                         
                    Three Months Ended June 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 160,222       0.51 %   $ 215,746     $ 136,005     $ 169,091  
Energy
    210,298       0.67 %     343,619       154,095       251,494  
Grains
    43,612       0.14 %     93,250       37,750       67,454  
Indices
    464,495       1.48 %     823,818       451,440       624,393  
Interest Rates U.S.
    271,600       0.86 %     393,800       234,600       299,075  
Interest Rates Non-U.S.
    793,338       2.52 %     793,338       429,966       603,584  
Livestock
    1,200       0.00 % **    10,800       1,200       4,400  
Metals
    132,500       0.42 %     220,971       77,258       133,010  
Softs
    95,865       0.31 %     108,860       61,317       83,750  
 
                                   
Total
  $ 2,173,130       6.91 %                        
 
                                   
 
* Average of month-end Value at Risk
** Due to rounding
 


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Table of Contents

As of December 31, 2010, PGR Master’s total capitalization was $20,386,581. The Partnership owned approximately 25.1% of PGR Master. As of December 31, 2010, PGR Master’s Value at Risk for its assets (including the portion of the Partnership’s 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


Table of Contents

 
Item 4.   Controls and Procedures
 
The Partnership’s 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 SEC’s 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.
 
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
 
The General Partner’s CEO and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2011 and, based on that evaluation, the General Partner’s CEO and CFO have concluded that at that date, the Partnership’s disclosure controls and procedures were effective.
 
The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s 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 Partnership’s 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 Partnership’s assets that could have a material effect on the financial statements.
 
There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended June 30, 2011 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.


26


Table of Contents

 
PART II. OTHER INFORMATION
Item 1.   Legal Proceedings
     There are no material changes to the discussion set forth under Part I, Item 3, “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as updated by the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.


27


Table of Contents

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 Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.


28


Table of Contents

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  
April 1, 2011 –
April 30, 2011
      198.8395         1,450.25         N/A         N/A  
May 1, 2011 –
May 31, 2011
      334.0394         1,381.19         N/A         N/A  
June 1, 2011 –
June 30, 2011
      116.8737         1,342.00         N/A         N/A  
        649.7526         1,395.27                      
                                         
 
* 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 Partnership’s 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.


29


Table of Contents

 
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 Form of Amended and Restated Management Agreement among the Partnership, the General Partner and PGR Capital LLP, (filed herein).
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)
     
101.INS
  XBRL Instance Document.
 
   
101.SCH
  XBRL Taxonomy Extension Schema Document.
 
   
101.CAL
  XBRL Taxonomy Extension Calculation Linkbase Document.
 
   
101.LAB
  XBRL Taxonomy Extension Label Linkbase Document.
 
   
101.PRE
  XBRL Taxonomy Extension Presentation Linkbase Document.

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Table of Contents

 
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:  August 15, 2011
 
By:  
/s/  Jennifer Magro
Jennifer Magro
Chief Financial Officer and Director
(Principal Accounting Officer)
 
Date:  August 15, 2011