Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - TIDEWATER FUTURES FUND LP | Financial_Report.xls |
EX-32.1 - EX-32.1 - TIDEWATER FUTURES FUND LP | y05246exv32w1.htm |
EX-32.2 - EX-32.2 - TIDEWATER FUTURES FUND LP | y05246exv32w2.htm |
EX-31.2 - EX-31.2 - TIDEWATER FUTURES FUND LP | y05246exv31w2.htm |
EX-31.1 - EX-31.1 - TIDEWATER FUTURES FUND LP | y05246exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
ACT OF 1934
For the quarterly period ended September 30, 2011
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from to
Commission File Number 000-52604
TIDEWATER FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 13-3811113 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres
Managed Futures LLC
522 5th Ave - 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
(212) 296-1999
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes 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 | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes No X
As of October 31, 2011, 15,612.7108 Limited Partnership Redeemable Units were outstanding.
TIDEWATER FUTURES FUND L.P.
FORM 10-Q
INDEX
Page | ||||||||
Number | ||||||||
3 | ||||||||
4 5 | ||||||||
6 | ||||||||
7 14 | ||||||||
15 17 | ||||||||
18 19 | ||||||||
20 | ||||||||
21 24 | ||||||||
Ex 31.1 Certification |
||||||||
Ex 31.2 Certification |
||||||||
Ex 32.1 Certification |
||||||||
Ex 32.2 Certification |
||||||||
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 |
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. |
2
Table of Contents
PART I
Item 1. Financial Statements
Tidewater Futures Fund L.P.
Statements of Financial Condition
(Unaudited) | ||||||||
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets: |
||||||||
Equity in trading account: |
||||||||
Cash |
$ | 18,657,304 | $ | 25,519,706 | ||||
Cash margin |
5,204,835 | 10,943,883 | ||||||
Net unrealized appreciation on open futures contracts |
0 | 6,452,412 | ||||||
Total
trading equity |
23,862,139 | 42,916,001 | ||||||
Interest receivable |
| 2,566 | ||||||
Total assets |
$ | 23,862,139 | $ | 42,918,567 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Net unrealized depreciation on open futures contracts |
$ | 1,305,702 | $ | 0 | ||||
Net unrealized depreciation on open forward contracts |
154,863 | 56,461 | ||||||
Accrued expenses: |
||||||||
Brokerage fees |
93,340 | 232,170 | ||||||
Management fees |
37,078 | 70,888 | ||||||
Other |
61,147 | 97,200 | ||||||
Redemptions payable |
63,387 | 789,804 | ||||||
Total liabilities |
1,715,517 | 1,246,523 | ||||||
Partners Capital: |
||||||||
General Partner, 184.9703 and 281.2556 unit equivalents outstanding
at September 30, 2011 and December 31, 2010, respectively |
260,416 | 557,570 | ||||||
Limited Partners, 15,545.4614 and 20,739.3934 Redeemable Units
outstanding at September 30, 2011 and December 31, 2010, respectively |
21,886,206 | 41,114,474 | ||||||
Total partners capital |
22,146,622 | 41,672,044 | ||||||
Total liabilities and partners capital |
$ | 23,862,139 | $ | 42,918,567 | ||||
Net asset value per unit |
$ | 1,407.88 | $ | 1,982.43 | ||||
See accompanying notes to financial statements.
3
Table of Contents
Tidewater Futures Fund L.P.
Condensed Schedule of Investments
September 30, 2011
(Unaudited)
September 30, 2011
(Unaudited)
Number of | % of Partners | |||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased |
||||||||||||
Currencies |
157 | $ | (242,230 | ) | (1.09 | )% | ||||||
Energy |
89 | (702,001 | ) | (3.17 | ) | |||||||
Grains |
112 | (511,875 | ) | (2.31 | ) | |||||||
Indices |
17 | (18,360 | ) | (0.08 | ) | |||||||
Interest Rates U.S. |
84 | 233,594 | 1.05 | |||||||||
Interest Rates Non-U.S. |
621 | 127,666 | 0.58 | |||||||||
Livestock |
19 | 43,650 | 0.20 | |||||||||
Metals |
19 | (68,500 | ) | (0.31 | ) | |||||||
Softs |
100 | (360,589 | ) | (1.63 | ) | |||||||
Total futures contracts purchased |
(1,498,645 | ) | (6.76 | ) | ||||||||
Futures Contracts Sold |
||||||||||||
Currencies |
169 | 60,262 | 0.27 | |||||||||
Grains |
21 | 43,375 | 0.20 | |||||||||
Indices |
85 | 22,947 | 0.10 | |||||||||
Livestock |
27 | (52,400 | ) | (0.24 | ) | |||||||
Softs |
77 | 118,759 | 0.54 | |||||||||
Total futures contracts sold |
192,943 | 0.87 | ||||||||||
Unrealized Appreciation on Open Forward Contracts |
||||||||||||
Metals |
98 | 603,389 | 2.72 | |||||||||
Total unrealized appreciation on open forward contracts |
603,389 | 2.72 | ||||||||||
Unrealized Depreciation on Open Forward Contracts |
||||||||||||
Metals |
47 | (758,252 | ) | (3.42 | ) | |||||||
Total unrealized depreciation on open forward contracts |
(758,252 | ) | (3.42 | ) | ||||||||
Net fair value |
$ | (1,460,565 | ) | (6.59 | )% | |||||||
See accompanying notes to financial statements.
4
Table of Contents
Tidewater Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Number of | % of Partners | |||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased |
||||||||||||
Currencies |
251 | $ | 672,219 | 1.61 | % | |||||||
Energy |
239 | 200,124 | 0.48 | |||||||||
Grains |
562 | 2,286,361 | 5.49 | |||||||||
Indices |
782 | 392,394 | 0.94 | |||||||||
Interest Rates U.S. |
58 | (227,140 | ) | (0.54 | ) | |||||||
Interest Rates Non-U.S. |
700 | (2,789 | ) | (0.01 | ) | |||||||
Livestock |
201 | 421,367 | 1.01 | |||||||||
Metals |
57 | 749,650 | 1.80 | |||||||||
Softs |
353 | 1,766,647 | 4.24 | |||||||||
Total futures contracts purchased |
6,258,833 | 15.02 | ||||||||||
Futures Contracts Sold |
||||||||||||
Currencies |
238 | 718,098 | 1.72 | |||||||||
Indices |
2 | 6,214 | 0.02 | |||||||||
Interest Rates Non-U.S. |
92 | (14,145 | ) | (0.03 | ) | |||||||
Softs |
259 | (516,588 | ) | (1.24 | ) | |||||||
Total futures contracts sold |
193,579 | 0.47 | ||||||||||
Unrealized Appreciation on Open Forward Contracts |
||||||||||||
Metals |
133 | 1,063,713 | 2.55 | |||||||||
Total unrealized appreciation on open forward contracts |
1,063,713 | 2.55 | ||||||||||
Unrealized Depreciation on Open Forward Contracts |
||||||||||||
Metals |
121 | (1,120,174 | ) | (2.69 | ) | |||||||
Total unrealized depreciation on open forward contracts |
(1,120,174 | ) | (2.69 | ) | ||||||||
Net fair value |
$ | 6,395,951 | 15.35 | % | ||||||||
See accompanying notes to financial statements.
5
Table of Contents
Tidewater Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Investment Income: |
||||||||||||||||
Interest income |
$ | 835 | $ | 8,649 | $ | 9,818 | $ | 24,847 | ||||||||
Expenses: |
||||||||||||||||
Brokerage
commissions including clearing fees |
352,119 | 552,382 | 1,406,518 | 2,021,226 | ||||||||||||
Management fees |
134,595 | 160,037 | 514,614 | 585,013 | ||||||||||||
Other expenses |
39,034 | 103,139 | 115,448 | 179,927 | ||||||||||||
Total expenses |
525,748 | 815,558 | 2,036,580 | 2,786,166 | ||||||||||||
Management fees waived |
0 | (53,970 | ) | 0 | (53,970 | ) | ||||||||||
Net expenses |
525,748 | 761,588 | 2,036,580 | 2,732,196 | ||||||||||||
Net investment income (loss) |
(524,913 | ) | (752,939 | ) | (2,026,762 | ) | (2,707,349 | ) | ||||||||
Trading Results |
||||||||||||||||
Net gains (losses) on trading of commodity
interests: |
||||||||||||||||
Net realized gains (losses) on closed contracts |
(3,955,421 | ) | (5,430,516 | ) | 1,276,991 | (8,977,831 | ) | |||||||||
Change in
net unrealized gains (losses) on open
contracts |
(1,520,897 | ) | 7,908,748 | (7,856,516 | ) | (662,393 | ) | |||||||||
Total trading results |
(5,476,318 | ) | 2,478,232 | (6,579,525 | ) | (9,640,224 | ) | |||||||||
Net income (loss) |
(6,001,231 | ) | 1,725,293 | (8,606,287 | ) | (12,347,573 | ) | |||||||||
Subscriptions Limited Partners |
452,229 | 1,203,000 | 1,124,729 | 1,783,000 | ||||||||||||
Redemptions Limited Partners |
(521,278 | ) | (2,118,158 | ) | (11,843,864 | ) | (5,539,328 | ) | ||||||||
Redemptions General Partners |
0 | 0 | (200,000 | ) | (250,000 | ) | ||||||||||
Net
increase (decrease) in Partners Capital |
(6,070,280 | ) | 810,135 | (19,525,422 | ) | (16,353,901 | ) | |||||||||
Partners Capital, beginning of period |
28,216,902 | 32,564,615 | 41,672,044 | 49,728,651 | ||||||||||||
Partners Capital, end of period |
$ | 22,146,622 | $ | 33,374,750 | $ | 22,146,622 | $ | 33,374,750 | ||||||||
Net asset value per unit
(15,730.4317 and 22,003.9140 units outstanding
at September 30, 2011 and 2010, respectively) |
$ | 1,407.88 | $ | 1,516.76 | $ | 1,407.88 | $ | 1,516.76 | ||||||||
Net income (loss) per unit * |
$ | (380.86 | ) | $ | 80.67 | $ | (574.55 | ) | $ | (519.07 | ) | |||||
Weighted average units outstanding |
15,873.3636 | 22,692.1401 | 17,089.2039 | 23,422.4772 | ||||||||||||
* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
6
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
1. General:
Tidewater Futures Fund L.P. (the Partnership) is a limited partnership organized on February
23, 1995 under the partnership laws of the State of New York 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 are volatile and involve a high degree of
market risk. The Partnership privately and continuously offers redeemable units of
limited partnership interest (Redeemable Units) in the Partnership to qualified investors. There
is no maximum number of Redeemable Units that may be sold by the Partnership.
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 September 30, 2011, all trading decisions for the Partnership are made by Chesapeake Capital
Corporation (the Advisor). The Partnerships trading of futures, forwards and options contracts,
if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. It engages
in such trading through a commodity brokerage account maintained with CGM.
The General Partner and each limited partner share in the profits and losses of the
Partnership in proportion to the amount of Partnership interest owned by each, except that no
limited partner shall be liable for obligations of the Partnership in
excess of its capital
contribution and profits, if any, net of distributions.
The accompanying financial statements
and accompanying notes are unaudited but, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of
the Partnerships financial condition at September 30, 2011 and December 31, 2010 and the results of
its operations and changes in partners capital for the three
and nine months ended September 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 Partnerships annual
report on Form 10-K filed with the Securities and Exchange Commission (the SEC) for the year
ended December 31, 2010.
The preparation of financial statements and accompanying notes in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, income and
expenses, and related disclosures of contingent assets and liabilities in the financial statements
and accompanying notes. As a result, actual results could differ from these estimates.
Due to the nature of commodity trading, the results of operations for the interim periods
presented should not be considered indicative of the results that may be expected for the entire
year.
7
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
2. Financial Highlights:
Changes
in the net asset value per unit for the three and nine months ended September 30, 2011 and 2010 were as
follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net realized and unrealized gains (losses) * |
$ | (369.97 | ) | $ | 89.52 | $ | (538.18 | ) | $ | (489.84 | ) | |||||
Interest income |
0.05 | 0.39 | 0.54 | 1.08 | ||||||||||||
Expenses ** |
(10.94 | ) | (9.24 | ) | (36.91 | ) | (30.31 | ) | ||||||||
Increase
(decrease) for the period |
(380.86 | ) | 80.67 | (574.55 | ) | (519.07 | ) | |||||||||
Net asset value per unit, beginning of period |
1,788.74 | 1,436.09 | 1,982.43 | 2,035.83 | ||||||||||||
Net asset value per unit, end of period |
$ | 1,407.88 | $ | 1,516.76 | $ | 1,407.88 | $ | 1,516.76 | ||||||||
* | Includes brokerage fees. | |
** | Excludes brokerage fees. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Ratios to average net assets:*** |
||||||||||||||||
Net
investment income (loss) **** |
(7.7) | % | (9.5 | )% | (8.0) | % | (9.2 | )% | ||||||||
Operating
expenses |
7.7 | % | 9.6 | %***** | 8.1 | % | 9.3 | %***** | ||||||||
Incentive fees |
| % | | % | | % | | % | ||||||||
Total
expenses and incentive fee |
7.7 | % | 9.6 | % | 8.1 | % | 9.3 | % | ||||||||
Total return: |
||||||||||||||||
Total return before incentive fees |
(21.3) | % | 5.6 | % | (29.0) | % | (25.5 | )% | ||||||||
Incentive fees |
| % | | % | | % | | % | ||||||||
Total return after incentive fees |
(21.3) | % | 5.6 | % | (29.0) | % | (25.5 | )% | ||||||||
*** | Annualized (other than incentive fees). | |
**** | Interest income less total expenses. | |
***** | Percentages are after management fee waivers. For the period from August 1, 2010 through September 30, 2010, the Advisor temporarily reduced the management fee it receives from the Partnership from an annual rate of 2% of adjusted net assets to an annual rate of 1% of adjusted net assets. |
The above 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. The
results of the Partnerships trading activities are shown in the Statements of Income and Expenses
and Changes in Partners Capital.
The customer agreement between the Partnership and CGM gives the Partnership the legal right
to net unrealized gains and losses on open futures and open forward contracts. The Partnership nets, for
financial reporting purposes, the unrealized gains and losses on open futures and on open forward
contracts on the Statements of Financial Condition.
All of the commodity interests owned by the Partnership are held for trading purposes. The
monthly average number of futures contracts traded during the three months ended September 30, 2011 and
2010 were 2,002 and 3,392, respectively. The average number of
futures contracts traded during the nine months ended September 30, 2011
and 2010 were 2,786 and 4,209, respectively. The monthly average number of metals forward contracts
traded during the three months ended September 30, 2011 and 2010
were 98 and 180, respectively. The average number of
metal forward contracts traded during the nine months ended
September 30, 2011 and 2010 were 122 and 271, respectively.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance, subscriptions and redemptions.
8
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
The following tables indicate the gross fair values of derivative instruments of futures and
forward contracts as separate assets and liabilities as of September 30, 2011 and December 31, 2010.
September 30, | ||||
2011 | ||||
Assets |
||||
Futures Contracts |
||||
Currencies |
$ | 517,516 | ||
Grains |
70,737 | |||
Indices |
101,477 | |||
Interest Rates U.S. |
233,594 | |||
Interest Rates Non-U.S. |
234,815 | |||
Livestock |
43,650 | |||
Softs |
118,759 | |||
Total unrealized appreciation on open futures
contracts |
$ | 1,320,548 | ||
Liabilities |
||||
Futures Contracts |
||||
Currencies |
$ | (699,484 | ) | |
Energy |
(702,001 | ) | ||
Grains |
(539,237 | ) | ||
Indices |
(96,890 | ) | ||
Interest Rates Non-U.S. |
(107,149 | ) | ||
Livestock |
(52,400 | ) | ||
Metals |
(68,500 | ) | ||
Softs |
(360,589 | ) | ||
Total unrealized depreciation on open futures
contracts |
$ | (2,626,250 | ) | |
Net unrealized depreciation on open futures
contracts |
$ | (1,305,702 | )* | |
September 30, | ||||
2011 | ||||
Assets |
||||
Futures Contracts |
||||
Metals |
$ | 603,389 | ||
Total unrealized appreciation on open forward
contracts |
$ | 603,389 | ||
Liabilitiies |
||||
Futures Contracts |
||||
Metals |
$ | (758,252 | ) | |
Total unrealized depreciation on open forward
contracts |
$ | (758,252 | ) | |
Net unrealized depreciation on open forward
contracts |
$ | (154,863 | )** | |
* | This amount is in Net unrealized depreciation on open futures contracts on the Statements of Financial Condition. | |
** | This amount is in Net unrealized depreciation on open forward contracts on the Statements of Financial Condition. |
9
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
December 31, 2010 | ||||
Assets |
||||
Futures Contracts |
||||
Currencies |
$ | 1,561,451 | ||
Energy |
296,607 | |||
Grains |
2,286,361 | |||
Indices |
538,181 | |||
Interest Rates Non-U.S. |
77,000 | |||
Livestock |
421,367 | |||
Metals |
749,650 | |||
Softs |
1,788,112 | |||
Total unrealized appreciation on open futures contracts |
$ | 7,718,729 | ||
Liabilities |
||||
Futures Contracts |
||||
Currencies |
$ | (171,134 | ) | |
Energy |
(96,483 | ) | ||
Indices |
(139,573 | ) | ||
Interest Rates U.S. |
(227,140 | ) | ||
Interest Rates Non-U.S. |
(93,934 | ) | ||
Softs |
(538,053 | ) | ||
Total unrealized depreciation on open futures contracts |
$ | (1,266,317 | ) | |
Net unrealized appreciation on open futures contracts |
$ | 6,452,412 | * | |
Assets |
||||
Forward Contracts |
||||
Metals |
$ | 1,063,713 | ||
Total unrealized appreciation on open forward contracts |
$ | 1,063,713 | ||
Liabilities |
||||
Forward Contracts |
||||
Metals |
$ | (1,120,174 | ) | |
Total unrealized depreciation on open forward contracts |
$ | (1,120,174 | ) | |
Net unrealized depreciation on open forward contracts |
$ | (56,461 | )** | |
* | This amount is in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. | |
** | This amount is in Net unrealized depreciation on open forward contracts on the Statements of Financial Condition. |
The following table indicates the trading gains and losses, by market sector, on derivative
instruments for the three and nine months ended September 30, 2011 and 2010.
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | |||||||||||||
Sector | Gain (loss) from trading | Gain (loss) from trading | Gain (loss) from trading | Gain (loss) from trading | ||||||||||||
Currencies |
$ | (2,256,330 | ) | $ | 46,596 | $ | (744,996 | ) | $ | (1,099,088 | ) | |||||
Energy |
(789,081 | ) | 116,290 | 769,031 | (2,618,575 | ) | ||||||||||
Grains |
(704,236 | ) | (1,099,861 | ) | (2,138,665 | ) | (1,618,088 | ) | ||||||||
Indices |
(2,910,763 | ) | 1,803,244 | (3,014,293 | ) | (2,951,309 | ) | |||||||||
Interest Rates U.S. |
892,977 | 456,156 | 838,492 | 1,277,594 | ||||||||||||
Interest Rates Non-U.S. |
2,604,105 | 164,389 | 1,240,500 | 3,534,638 | ||||||||||||
Livestock |
(173,235 | ) | 78,272 | (1,232,627 | ) | (1,062,916 | ) | |||||||||
Metals |
(939,403 | ) | 1,272,060 | (478,067 | ) | (563,333 | ) | |||||||||
Softs |
(1,200,352 | ) | (358,914 | ) | (1,818,900 | ) | (4,539,147 | ) | ||||||||
Total |
$ | (5,476,318) | *** | $ | 2,478,232 | *** | $ | (6,579,525) | *** | $ | (9,640,224) | *** | ||||
*** | This amount is in Total trading results on the Statements of Income and Expenses and Changes in Partners Capital. |
10
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Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
4. Fair Value Measurements:
Partnerships Investments. All commodity interests (including derivative financial instruments
and derivative commodity instruments) are held for trading purposes. The commodity interests are
recorded on trade date and open contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or
losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are
included as a component of equity in trading account on the Statements of Financial Condition. Net
realized gains or losses and any change in net unrealized gains or losses from the preceding period
are reported in the Statements of Income and Expenses and Changes in Partners Capital.
Partnerships 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. 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,
the Partnerships Level 1 assets and liabilities are actively traded.
The
Partnership 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 Partnership considers prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).
The values of non exchange-traded forwards, swaps and certain options contracts for which market
quotations are not readily available are priced by broker-dealers who derive fair values for those
assets from observable inputs (Level 2). As of and for the periods
ended September 30, 2011 and
December 31, 2010, the Partnership did not hold any derivative instruments for which market
quotations were not readily available and that were priced by broker-dealers who derive fair values
for those assets from observable inputs (Level 2 ) or that were priced at fair value using
unobservable inputs through the application of managements assumptions and internal valuation
pricing models (Level 3).
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
09/30/2011 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Futures |
$ | 1,320,548 | $ | 1,320,548 | $ | | $ | | ||||||||
Forwards |
603,389 | 603,389 | | | ||||||||||||
Total assets |
1,923,937 | 1,923,937 | | | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
2,626,250 | 2,626,250 | | | ||||||||||||
Forwards |
758,252 | 758,252 | | | ||||||||||||
Total liabilities |
3,384,502 | 3,384,502 | | | ||||||||||||
Net fair value |
$ | (1,460,565 | ) | $ | (1,460,565 | ) | $ | | $ | | ||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
12/31/2010* | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Futures |
$ | 7,718,729 | $ | 7,718,729 | $ | | $ | | ||||||||
Forwards |
1,063,713 | 1,063,713 | | | ||||||||||||
Total assets |
8,782,442 | 8,782,442 | | | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
1,266,317 | 1,266,317 | | | ||||||||||||
Forwards |
1,120,174 | 1,120,174 | | | ||||||||||||
Total liabilities |
2,386,491 | 2,386,491 | | | ||||||||||||
Net fair value |
$ | 6,395,951 | $ | 6,395,951 | $ | | $ | | ||||||||
* | The amounts have been reclassified from December 31, 2010 financial statements to conform to current year presentation. |
11
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
5. Financial Instrument Risks:
In the normal course of business, the Partnership is party to financial instruments with
off-balance sheet risk, including derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards, futures, options and swaps, whose
values are based upon an underlying asset, index or reference rate, and generally represent future
commitments to exchange currencies or cash balances, or to purchase or sell other financial
instruments at specified terms on specified future dates, or, in the case of derivative commodity
instruments, to have a reasonable possibility to be settled in cash, through physical delivery or
with another financial instrument. These instruments may be traded on an exchange or
over-the-counter (OTC). Exchange-traded instruments are standardized and include futures and
certain forwards and option contracts. OTC contracts are negotiated between contracting parties and
include swaps and certain forwards and option contracts. Each of these instruments is subject to
various risks similar to those relating to the underlying financial
instruments, including market
and credit risk. In general, the risks associated with OTC contracts are greater than those
associated with exchange-traded instruments because of the greater risk of default by the
counterparty to an OTC contract.
The risk to the limited partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited liability is a result of the
organization of the Partnership as a limited partnership under New York law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership due to market changes, including interest and foreign exchange rate movements and
fluctuations in commodity or security prices. Market risk is directly impacted by the volatility
and liquidity in the markets in which the related underlying assets are traded. The Partnership is
exposed to a market risk equal to the value of futures and forward contracts purchased and
unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to
perform according to the terms of a contract. The Partnerships risk of loss in the event of a
counterparty default is typically limited to the amounts recognized in the Statements of Financial
Condition and is not represented by the contract or notional amounts of the instruments. The
Partnerships risk of loss is reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Partnership to offset unrealized gains and losses
and other assets and liabilities with such counterparties upon the occurrence of certain events.
The Partnership has credit risk and concentration risk as CGM or a CGM affiliate is the sole counterparty or broker with
respect to the Partnerships assets. Credit risk with respect to
exchange-traded instruments is reduced to the extent that through CGM, the Partnerships
counterparty is an exchange or clearing organization.
The General Partner monitors and attempts to control the Partnerships risk exposure on a
daily basis through financial, credit and risk management monitoring systems, and accordingly,
believes that it has effective procedures for evaluating and limiting the credit and market risks
to which the Partnership may be subject. These monitoring systems generally allow the General
Partner to statistically analyze actual trading results with risk-adjusted performance indicators
and correlation statistics. In addition, online monitoring systems provide account analysis of
futures, forwards and options positions by sector, margin requirements, gain and loss transactions
and collateral positions.
The majority of these instruments mature within one year of the inception date. However, due
to the nature of the Partnerships business, these instruments may not be held to maturity.
6. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related disclosures of contingent assets and
liabilities in the financial statements and accompanying notes.
As a result, actual results could differ from these estimates.
Partnerships Investments. All commodity interests (including derivative financial instruments
and derivative commodity instruments) are held for trading purposes. The commodity interests are
recorded on trade date and open contracts are recorded at fair value (as described below) at the
measurement date. Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or
losses are realized when contracts are
12
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
liquidated. Unrealized gains or losses on open contracts are included as a component of equity
in trading account on the 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 Statements
of Income and Expenses and Changes in Partners Capital.
Partnerships 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. 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,
the Partnerships Level 1 assets and liabilities are actively traded.
The Partnership 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 Partnership considers prices for exchange-traded commodity futures, forwards and options
contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).
The values of non exchange-traded forwards, swaps and certain options contracts for which market
quotations are not readily available are priced by broker-dealers who derive fair values for those
assets from observable inputs (Level 2). As of and for the periods
ended September 30, 2011 and
December 31, 2010, the Partnership did not hold any derivative instruments for which market
quotations were not readily available and that were priced by broker-dealers who derive fair values
for those assets from observable inputs (Level 2) or that were priced at fair value using
unobservable inputs through the application of managements assumptions and internal valuation
pricing models (Level 3).
Futures Contracts. The Partnership trades futures contracts. A futures contract is a firm
commitment to buy or sell a specified quantity of investments, currency or a standardized amount of
a deliverable grade commodity, at a specified price on a specified future date, unless the contract
is closed before the delivery date or if the delivery quantity is something where physical delivery
cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments
(variation margin) may be made or received by the Partnership each business day, depending on the
daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains
or losses by the Partnership. When the contract is closed, the Partnership records a realized gain
or loss equal to the difference between the value of the contract at the time it was opened and the
value at the time it was closed. Transactions in futures contracts require participants to make
both initial margin deposits of cash or other assets and variation margin deposits 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.
London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange
(LME) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead,
nickel, tin or zinc. LME contracts traded by the Partnership are cash settled based on prompt dates
published by the LME. Payments (variation margin) may be made or received by the Partnership each
business day, depending on the daily fluctuations in the value of the underlying contracts, and are
recorded as unrealized gains or losses by the Partnership. A contract is considered offset when all
long positions have been matched with a like number of short positions settling on the same prompt
date. When the contract is closed at the prompt date, the Partnership records a realized gain or
loss equal to the difference between the value of the contract at the time it was opened and the
value at the time it was closed. Transactions in 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.
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements and requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Partnerships financial statements to
determine whether the tax positions are more-likely-than-not to be sustained by the applicable
tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the
more-likely-than-not threshold would be recorded
13
Table of Contents
Tidewater Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
Notes to Financial Statements
September 30, 2011
(Unaudited)
as a tax benefit or expense in the current year. The General Partner concluded that no
provision for income tax is required in the Partnerships financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax
returns are currently under examination. Generally, the 2008 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 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 Standards 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 FASBs 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 Partnerships financial
statements.
In October 2011,
FASB issued a proposed
ASU intended to improve and converge financial reporting by
setting forth consistent criteria for determining whether an entity is an investment
company. Under longstanding U.S. GAAP,
investment companies carry all of their investments at fair value, even if they hold a
controlling interest in another company. The primary changes being proposed by the
FASB relate to which entities would be considered investment companies as well as
certain disclosure and presentation requirements. In addition to the changes to the criteria
for determining whether an entity is an investment company, the FASB also proposes that
an investment company consolidate another investment company if it holds a controlling
financial interest in the entity. The Partnership is currently evaluating the impact that this
proposed update would have on the financial statements.
Net Income (Loss) per Unit. Net income (loss) per unit is calculated in accordance with
investment company guidance. See Note 2, Financial Highlights.
14
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services. Its only assets are its equity
in its trading account, consisting of cash and cash equivalents, net
unrealized appreciation on
open futures contracts, net unrealized appreciation on open forward contracts, and interest
receivable. Because of the low margin deposits normally required in commodity futures trading,
relatively small price movements may result in substantial losses to the Partnership. While
substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in
the third quarter of 2011.
The Partnerships capital consists of the capital contributions of the partners as increased
or decreased by gains or losses on trading, and by expenses, interest income, redemptions of
Redeemable Units and distributions of profits, if any.
For the nine months ended September 30, 2011, Partnership capital
decreased 46.9% from $41,672,044 to $22,146,622. This decrease was
attributable to a net loss from operations of $8,606,287 coupled
with redemptions of 5,761.8657 Redeemable Units
totaling $11,843,864 and 96.2853 General Partner unit equivalents totaling $200,000, which was partially offset by the subscriptions of 567.9337 Redeemable Units totaling $1,124,729. Future redemptions can
impact the amount of funds available for investment in commodity contract positions in subsequent
periods.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expense during the reporting period. Management believes
that the estimates
utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The
Partnerships significant accounting policies are described in detail in Note 6 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 gains (losses) in the Statements of Income and Expenses and
Changes in Partners Capital.
15
Table of Contents
Results of Operations
During the Partnerships third quarter
of 2011, the net asset value per unit decreased 21.3% from $1,788.74
to $1,407.88 as compared to an increase of 5.6% in the third quarter of 2010. The
Partnership experienced a net trading loss before brokerage fees and related fees in the third
quarter of 2011 of $5,476,318. Losses were primarily attributable to
the trading of commodity futures in currencies, energy, grains, livestock, metals,
softs and indices, and were partially offset by gains in U.S. and non-U.S. interest rates. The Partnership experienced a net trading
gain before brokerage fees and related fees in the third quarter of 2010 of $2,478,232. Gains were
primarily attributable to the trading of commodity futures in energy, U.S. and non-U.S. interest rates, livestock,
metals and indices and were partially offset by gains in currencies,
grains and softs.
During the third quarter, the Partnership posted a loss in net asset value per unit as losses in stock indices,
agriculturals, currencies, metals, and energies offset gains recorded within the global interest rate sector. The most
significant losses were incurred within the global stock index markets, primarily during July and August, due to long
positions in European and U.S. equity index futures as prices dropped amid Standard & Poors downgrade of the
United States sovereign credit rating and concern about the European sovereign debt crisis. Within the agricultural
markets, losses were incurred primarily during September due to long futures positions in corn and soybeans as prices
declined on speculation that Europes sovereign debt crisis may hinder the global economy, reducing demand for the
grains. Within the currency markets, losses were experienced during August primarily from long positions in the
Russian ruble, Mexican peso, and South African rand versus the U.S. dollar as the value of the U.S. dollar was boosted
higher against these currencies by increased safe haven demand following central bank intervention in the Japanese
yen and amid concerns related to the European debt crisis. Additional losses were incurred, primarily during August
and September, from long positions in the euro versus most other currencies as the value of the euro fell amid
concern of a deepening debt crisis in Europe. During September, long positions in the New Zealand dollar, Australian
dollar, and Brazilian real versus the U.S. dollar resulted in losses as the value of these commodity currencies moved
lower in tandem with declining commodity prices. Losses were also incurred in the metals sector, primarily during
September, from long futures positions in gold and silver after prices moved lower amid a rise in the value of the U.S.
dollar, which reduced demand for the precious metals. Within the energy markets, losses were experienced primarily
during August and September due to long futures positions in crude oil and its related products as prices fell on
concern energy demand may falter amid slowing economic growth in the U.S. A portion of the Partnerships losses
for the quarter was offset by gains achieved within the global interest rate sector throughout the majority of the
quarter from long positions in European, U.S., and Australian fixed income futures as prices advanced higher due to
concern about the European sovereign debt crisis and a faltering global economy.
During the Partnerships nine months
ended September 30, 2011, the net asset value per unit decreased 29.0% from $1,982.43 to $1,407.88 as compared to a decrease of
25.5% during the nine months ended September 30, 2010. The Partnership experienced a net trading loss before brokerage fees and
related fees for the nine months ended September 30, 2011 of $6,579,525. Losses were primarily attributable to the trading of
commodity futures in currencies, grains, livestock, metals, softs and indices and were partially offset by
gains in energy U.S. and non-U.S. interest rates. The Partnership experienced a net trading loss before brokerage fees and related
fees for the nine months ended September 30, 2010 of $9,640,224. Losses were primarily attributable to the trading of commodity
futures in currencies, energy, grains, livestock, metals, softs and indices, and were partially offset by gains in U.S. and
non-U.S. interest rates.
During the first nine months of the year, the Partnership posted a loss in net asset value per unit as losses in
agriculturals, stock indices, metals, currencies, and energies offset gains in the global interest rate sector. The most
significant losses were incurred within the agricultural complex, primarily during June, from long positions in wheat
futures as prices fell on speculation that warm weather would aid U.S. crops. Additional losses were recorded during
September due to long futures positions in corn and soybeans as prices declined on speculation that Europes
sovereign debt crisis may hinder the global economy, reducing demand for the grains. Within the global stock index
sector, losses were incurred primarily during June from long positions in Pacific Rim and U.S. equity index futures as
prices moved lower on concerns about the overall pace of the global economic recovery. During July and August,
long positions in European and U.S. equity index futures resulted in additional losses as prices dropped amid Standard
& Poors downgrade of the United States sovereign credit rating and concern about the European sovereign debt
crisis. Within the metals markets, losses were experienced primarily during May from long positions in silver futures as
prices fell sharply from a 31-year high. In September, long futures positions in gold and silver resulted in losses after
prices moved amid a rise in the value of the U.S. dollar, which reduced demand for the precious metals. Losses were
incurred within the currency sector during May due to long positions in the euro and British pound versus the U.S.
dollar as the value of these currencies moved lower against the U.S. dollar after Standard & Poors downgraded
Greeces credit rating. In August, long positions in the Australian dollar, New Zealand dollar, and Canadian dollar
versus the U.S. dollar resulted in losses as the value of the U.S. dollar was boosted higher against these currencies by
increased safe haven demand following central bank intervention in the Japanese yen. During September, additional
losses were incurred due to long positions in the Singapore dollar, Norwegian krone, and New Zealand dollar versus
the U.S. dollar after the value of these currencies declined against the U.S. dollar as a deepening debt crisis in Europe
diminished demand for higher-yielding currencies. Within the energy markets, losses were recorded during May, June,
August, and September from long futures positions in crude oil and its related products as prices moved lower amid
signs of a slowing global economic recovery and concern energy demand may falter. A portion of the Partnerships
losses during the first nine months of the year was offset by gains recorded within the global interest rate sector,
primarily during the third quarter, from long positions in European, U.S., and Australian fixed income futures as
prices advanced higher due to concern about the European sovereign debt crisis and a faltering global economy.
16
Table of Contents
Commodity futures markets are highly volatile. Broad price fluctuations and
rapid inflation increase the risks involved in commodity trading, but also increase the
possibility for profit or loss. The profitability of the Partnership depends on the existence of major price
trends and the ability of the Advisor to identify those price trends correctly. Price trends are
influenced by, among other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and international political and
economic events and changes in interest rates. To the extent that market trends exist and the
Advisor is able to identify them, the Partnership expects to increase capital through operations.
Interest income on 80% of the average daily equity maintained in cash in the Partnerships
brokerage account was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on
the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. Interest
income for the three and nine months ended September 30, 2011
decreased by $7,814 and $15,029, 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 nine months ended September 30, 2011, as compared to the corresponding
periods in 2010. Interest earned by the Partnership will increase the net asset value of the
Partnership. The amount of interest income earned by the Partnership depends on the average daily
equity in the Partnerships account and upon interest rates over which neither the Partnership nor
CGM has control.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance, subscriptions and redemptions.
Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values.
Brokerage fees for the three and nine months ended September 30,
2011 decreased by $200,263 and $614,708, respectively, as compared to the
corresponding periods in 2010. The decrease in brokerage fees is due to lower average adjusted net
assets during the three and nine months ended September 30, 2011, as compared to
the corresponding periods in 2010.
Management fees are calculated as a percentage of the Partnerships adjusted net asset value
as of the end of each month and are affected by trading performance, subscriptions and redemptions.
Management fees for the three and nine months ended September 30, 2011 decreased by $25,442 and $70,399, respectively, as compared to the
corresponding periods in 2010. The decrease in management fees is due to lower average adjusted net
assets during the three and nine months ended September 30, 2011, as compared to the corresponding periods in
2010.
Incentive fees are based on the new trading profits generated by the Advisor at the end of the
quarter, as defined in the management agreement among the Partnership, the General Partner and the
Advisor. There were no incentive fees earned for the three and nine months ended September 30, 2011 or 2010. The
Advisor will not be paid incentive fees until the Advisor recovers the net loss incurred and earns
additional new trading profits for the Partnership.
In
allocating the assets of the Partnership to the Advisor, the General Partner considers
the Advisors past performance, trading style, volatility of markets traded and fee requirements. The General
Partner may modify or terminate the allocation of assets to the Advisor at any time.
17
Table of Contents
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is a speculative commodity pool. The market sensitive instruments held by it
are acquired for speculative trading purposes, and all or substantially all of the Partnerships
assets are subject to the risk of trading loss. Unlike an operating company, the risk of market
sensitive instruments is integral, not incidental, to the Partnerships main line of business.
The risk to the limited partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited
liability is a result of the
organization of the Partnership as a limited partnership under New York law.
Market movements result in frequent changes in the fair value of the Partnerships open
positions and, consequently, in its earnings and cash balances. The Partnerships market risk is
influenced by a wide variety of factors, including the level and volatility of interest rates,
exchange rates, equity price levels, the market value of financial instruments and contracts, the
diversification effects among the Partnerships open contracts and the liquidity of the markets in
which it trades.
The Partnership rapidly acquires and liquidates both long and short positions in a wide range
of different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Partnerships past performance is not necessarily
indicative of its future results.
Value at Risk is a measure of the maximum amount which the Partnership could reasonably be
expected to lose in a given market sector. However, the inherent uncertainty of the Partnerships
speculative trading and the recurrence in the markets traded by the Partnership of market movements
far exceeding expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnerships experience to date (i.e., risk of ruin). In light of
the foregoing as well as the risks and uncertainties intrinsic to all future projections, the
inclusion of the quantification in this section should not be considered to constitute any
assurance or representation that the Partnerships losses in any market sector will be limited to
Value at Risk or by the Partnerships attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Partnership as the measure of
its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the
maximum losses reasonably expected to be incurred in the fair value of any given contract in
95%-99% of any one-day 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.
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Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk
sensitive instruments. The following tables indicate the trading Value at Risk associated with the
Partnerships open positions by market category as of September 30, 2011 and December 31, 2010, and the
highest, lowest and average values during the three months ended September 30, 2011 and 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. As of September 30, 2011, the Partnerships total
capitalization was $22,146,622. There has been no material change in the trading Value at Risk
information previously disclosed in the Partnerships Annual Report on Form 10-K for the year ended
December 31, 2010.
September 30, 2011
Three Months Ended September 30, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,026,674 | 4.64 | % | $ | 1,379,868 | $ | 999,083 | $ | 1,159,847 | ||||||||||
Energy |
541,704 | 2.45 | % | 728,508 | 541,704 | 615,173 | ||||||||||||||
Grains |
186,400 | 0.84 | % | 539,200 | 186,400 | 376,733 | ||||||||||||||
Indices |
558,991 | 2.52 | % | 1,854,551 | 295,731 | 950,936 | ||||||||||||||
Interest Rates U.S. |
166,900 | 0.75 | % | 166,900 | 78,000 | 140,950 | ||||||||||||||
Interest Rates Non-U.S. |
957,799 | 4.32 | % | 1,020,702 | 765,801 | 916,804 | ||||||||||||||
Livestock |
39,970 | 0.18 | % | 93,070 | 39,970 | 39,970 | ||||||||||||||
Metals |
369,061 | 1.67 | % | 813,138 | 360,549 | 631,445 | ||||||||||||||
Softs |
401,100 | 1.81 | % | 827,662 | 400,792 | 531,067 | ||||||||||||||
Total |
$ | 4,248,599 | 19.18 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As of December 31, 2010, the Partnerships total capitalization was $41,672,044.
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High Value | Low Value | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | at Risk | at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 1,249,666 | 3.00 | % | $ | 2,057,069 | $ | 867,991 | $ | 1,472,045 | ||||||||||
Energy |
661,702 | 1.59 | % | 1,012,471 | 173,691 | 554,668 | ||||||||||||||
Grains |
1,104,950 | 2.65 | % | 1,637,000 | 163,960 | 815,322 | ||||||||||||||
Indices |
2,432,046 | 5.84 | % | 14,744,438 | 1,055,959 | 3,158,056 | ||||||||||||||
Interest Rates U.S. |
108,900 | 0.26 | % | 196,300 | 58,400 | 123,815 | ||||||||||||||
Interest Rates Non-U.S. |
697,780 | 1.67 | % | 1,302,981 | 634,429 | 888,963 | ||||||||||||||
Livestock |
208,500 | 0.50 | % | 495,950 | 23,373 | 257,388 | ||||||||||||||
Metals |
1,124,452 | 2.70 | % | 2,458,619 | 601,999 | 1,466,625 | ||||||||||||||
Softs |
1,513,817 | 3.63 | % | 2,103,301 | 309,772 | 1,229,004 | ||||||||||||||
Total |
$ | 9,101,813 | 21.84 | % | ||||||||||||||||
* | Annual average of month-end Values at Risk. |
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Table of Contents
Item 4. Controls and Procedures
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934, as amended (the Exchange
Act), is recorded, processed, summarized and
reported within the time periods expected in the SECs rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information required to be
disclosed by the Partnership in the reports it files is accumulated and communicated to management,
including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the General
Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
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 Partnerships
external disclosures.
The General Partners CEO and CFO have evaluated the effectiveness of the Partnerships
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of September 30, 2011 and, based on that evaluation, the General Partners CEO and CFO have
concluded that, at that date, the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision
of the General Partners CEO and CFO to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. These
controls include policies and procedures that:
| pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; | ||
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | ||
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control over financial reporting process
during the fiscal quarter ended September 30, 2011 that materially affected, or are reasonably likely
to materially affect, the Partnerships internal control over financial reporting.
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Table of Contents
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The following information supplements and amends the discussion set forth under Part I, Item 3
Legal Proceedings in the Partnerships Annual Report on Form 10-K for the fiscal year ended December
31, 2010, as updated by the Partnerships Quarterly Reports on Form 10-Q for the quarters ended March
31, 2011 and June 30, 2011.
Subprime-Mortgage Related Actions
On October 19, 2011, the SEC and Citigroup announced a settlement, subject to judicial approval, in
connection with the SECs investigation into the structuring and sale of CDOs. Pursuant to the proposed
settlement, CGM agreed to pay $160 million in disgorgement, $30 million in prejudgment interest, and a
civil penalty of $95 million relating to CGMs role in the structuring and sale of the Class V Funding III
CDO transaction. Additional information relating to this matter is publicly available in court filings under
the docket number 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.).
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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 Partnerships Annual Report on Form 10-K for the fiscal year ended December 31,
2010 and under Part II, Item 1A. Risk Factors in the Partnerships Quarterly Report
on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the three months ended September 30, 2011, there were additional
subscriptions of 252.2033 Redeemable Units totaling $452,229. The Redeemable Units were issued in reliance upon applicable
exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and
Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by
accredited investors as defined in Regulation D.
Proceeds of net offering were used for the trading of commodity interests, including futures
contracts, options, forwards and swap contracts.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
(d) Maximum Number | |||||||||||||||||||||
(or Approximate | |||||||||||||||||||||
(c) Total Number | Dollar Value) of Shares | ||||||||||||||||||||
of Shares (or Units) | (or Units) that | ||||||||||||||||||||
(a) Total Number | (b) Average | Purchased as Part | May Yet Be | ||||||||||||||||||
of Shares | Price Paid per | of Publicly Announced | Purchased Under the | ||||||||||||||||||
Period | (or Units) Purchased* | Share (or Unit)** | Plans or Programs | Plans or Programs | |||||||||||||||||
July 1, 2011 - July 31, 2011 |
68.2632 | $ | 1,864.11 | N/A | N/A | ||||||||||||||||
August 1, 2011 - August 31, 2011 |
183.2433 | $ | 1,804.38 | N/A | N/A | ||||||||||||||||
September 1, 2011 - September 30, 2011 |
45.0228 | $ | 1,407.88 | N/A | N/A | ||||||||||||||||
296.5293 | $ | 1,757.93 | |||||||||||||||||||
* | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnerships business in connection with effecting redemptions for limited partners. | |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. |
Item 3. Defaults Upon Senior Securities None
Item 4. [Removed and Reserved]
Item 5. Other Information None
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Table of Contents
Item 6. Exhibits
3.1 |
Second Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.2 to the general form for registration of securities on Form 10 filed on April 30, 2007 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 the State of New York (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
(a) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated February 26, 1999 (filed as Exhibit 3.1(a) to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
(b) | Certificate of Change of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated January 31, 2000 (filed as Exhibit 3.2(g) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
(c) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated April 1, 2001 (filed as Exhibit 3.1(b) to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
(d) | Certificate of Amendment of 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(c) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
(e) | Certificate of Amendment of 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 3.1(c) to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
(f) | Certificate of Amendment of 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(e) to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
(g) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 30, 2009 (filed as Exhibit 99.1(a) to the current report on Form 8-K filed on September 30, 2009 and incorporated herein by reference). | |||
(h) | Certificate of Amendment of the Certificate of Limited Partnership dated June 30, 2010 (filed as Exhibit 3.2(h) to the current report on Form 8-K filed on July 2, 2010 and incorporated herein by reference). | |||
(i) | Certificate of Amendment of the Certificate of Limited Partnership dated September 2, 2011 (filed as Exhibit 3.1 to the current report on Form 8-K filed on September 17, 2011 and incorporated herein by reference). | |||
10.1
|
Amended and Restated Management Agreement among the Partnership, the General Partner and Chesapeake Capital Corporation (filed as Exhibit 10.1 to the current report on Form 8-K filed on September 16, 2010 and incorporated herein by reference). | |||
10.1(a)
|
Letter extending the Management Agreement between the General Partner and Chesapeake Capital Corporation (filed as Exhibit 10.1 (c) to the annual report on Form 10-K, filed March 31, 2011 and incorporated herein by reference). | |||
10.2
|
Second Amended and Restated Customer Agreement between the Partnership and Salomon Smith Barney Inc. (filed as Exhibit 10.2 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.3
|
Amended and Restated Agency Agreement between the Partnership, Smith Barney Futures Management LLC and Salomon Smith Barney Inc. (filed as Exhibit 10.3 to the general form for registration of securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |||
10.4
|
Form of Subscription Agreement (filed as Exhibit 10.4 to the quarterly report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |||
10.5
|
Joinder Agreement among Citigroup Managed Futures LLC (the former name of the General Partner), Citigroup Global Markets Inc. and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the quarterly report on Form 10-Q filed on August 14, 2009 and in corporated herein by reference). |
Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director)
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)
Exhibit 32.1 Section 1350 Certification (Certification of President and Director)
Exhibit 32.2 Section 1350 Certification (Certification of Chief Financial Officer)
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. |
23
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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.
TIDEWATER FUTURES FUND L.P. By: Ceres Managed Futures LLC (General Partner) |
||||
By: | /s/ Walter Davis | |||
Walter Davis | ||||
President and Director | ||||
Date: November 14, 2011 |
||||
By: | /s/ Brian Centner | |||
Brian Centner | ||||
Chief Financial Officer
(Principal Accounting Officer) |
Date:
November 14, 2011
24