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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 September 30, 2012

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 000-52602

BRISTOL ENERGY FUND L.P.

 

(Exact name of registrant as specified in its charter)

 

New York

   

20-2718952

(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)

(855) 672-4468

 

(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 þ 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 this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ 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 þ   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 þ

As of October 31, 2012, 192,453.7857 Limited Partnership Redeemable Units were outstanding.


Table of Contents

BRISTOL ENERGY FUND L.P.

FORM 10-Q

INDEX

 

     Page
Number
 

PART I — Financial Information:

  

Item 1. Financial Statements:

  

Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011

     3   

Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2012 and 2011 (unaudited)

     4   

Notes to Financial Statements, including the Financial Statements of CMF SandRidge Master Fund L.P. (unaudited)

     5-18   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     19-21   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     22-23   

Item 4. Controls and Procedures

     24   

PART II — Other Information

  

Item 1. Legal Proceedings

     25   

Item 1A. Risk Factors

     26   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     27   

Item 5. Other Information

     27   

Item 6. Exhibits

     28   

 

2


Table of Contents

PART I

Item 1. Financial Statements

Bristol Energy Fund L.P.

Statements of Financial Condition

 

     (Unaudited)
September 30,
2012
     December 31,
2011
 

Assets:

     

Investment in Master, at fair value

   $ 290,025,047       $ 290,607,238   

Cash

     228,343         226,388   
  

 

 

    

 

 

 

Total assets

   $ 290,253,390       $ 290,833,626   
  

 

 

    

 

 

 

Liabilities and Partners’ Capital:

     

Liabilities:

     

Accrued expenses:

     

Brokerage fees

   $ 907,042       $ 908,855   

Management fees

     482,026         482,943   

Administrative fees

     120,507         120,736   

Other

     130,581         158,755   

Redemptions payable

     4,598,984        
3,436,028
  
  

 

 

    

 

 

 

Total liabilities

     6,239,140         5,107,317   
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, 2,166.2615 and 2,647.2615 unit equivalents outstanding at September 30, 2012 and December 31, 2011, respectively

     3,143,375         3,682,182   

Special Limited Partner, 800.7772 Redeemable Units outstanding at September 30, 2012 and December 31, 2011

     1,161,976         1,113,833   

Limited Partners, 192,762.4045 and 201,971.5156 Redeemable Units outstanding at September 30, 2012 and December 31, 2011, respectively

     279,708,899         280,930,294   
  

 

 

    

 

 

 

Total partners’ capital

     284,014,250         285,726,309   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 290,253,390       $ 290,833,626   
  

 

 

    

 

 

 

Net asset value per unit

   $ 1,451.06       $
1,390.94
  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

3


Table of Contents

Bristol Energy Fund L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Investment Income:

        

Interest income allocated from Master

   $ 37,838      $ 8,767      $ 96,701      $ 87,559   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Expenses allocated from Master

     247,271        158,044        679,242        611,688   

Brokerage fees

     2,802,322        2,875,383        8,659,896        8,971,503   

Management fees

     1,489,109        1,528,147        4,601,413        4,768,401   

Administrative fees

     372,278        382,037        1,150,354        1,192,100   

Other

     15,442        98,605        159,830        281,048   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     4,926,422        5,042,216        15,250,735        15,824,740   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (4,888,584     (5,033,449     (15,154,034     (15,737,181
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading Results:

        

Net realized gains (losses) on closed contracts allocated from Master

     (8,366,454     9,316,811        37,290,934        8,147,034   

Change in net unrealized gains (losses) on open contracts allocated from Master

     (10,491,973     8,343,129        (9,009,485     37,181,838   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total trading results allocated from Master

     (18,858,427     17,659,940        28,281,449        45,328,872   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (23,747,011     12,626,491        13,127,415        29,591,691   

Subscriptions — Limited Partners

     7,500,426        1,219,776        18,650,279        9,315,802   

Redemptions — Limited Partners

     (11,530,296     (12,481,714     (32,789,018     (115,664,903

Redemptions — General Partner

     (700,735     0        (700,735     (525,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in Partners’ Capital

     (28,477,616     1,364,553        (1,712,059     (77,282,410

Partners’ Capital, beginning of period

     312,491,866        299,460,290        285,726,309        378,107,253   
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, end of period

   $ 284,014,250      $ 300,824,843      $ 284,014,250      $ 300,824,843   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit (195,729.4432 and 214,840.8710 units outstanding at September 30, 2012 and 2011, respectively)

   $ 1,451.06      $ 1,400.22      $ 1,451.06      $ 1,400.22   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per unit*

   $ (119.09   $ 57.16      $ 60.12      $ 133.13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average units outstanding

     199,997.4452        220,091.1045        202,081.1754        241,170.6807   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

* Based on change in net asset value per unit.

See accompanying notes to financial statements.

 

4


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

1. General:

Bristol Energy Fund L.P. (the “Partnership”), is a limited partnership organized on April 20, 2005 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of commodity interests, including options, commodity futures contracts, forward and swap contracts on exchanges and markets located in the United States and abroad. The Master (as defined below) may enter into swap and derivative contracts on energy related products. The commodity interests that are traded by the Partnership, through its investment in the Master, are volatile and involve a high degree of market risk. The Partnership commenced trading on September 6, 2005. The Partnership privately and continuously offers redeemable units of limited partnership interest (“Redeemable Units”) 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 Inc. indirectly owns a minority equity interest in MSSB Holdings. Citigroup Inc. also indirectly owns Citigroup Global Markets Inc. (“CGM”), the commodity broker and a selling agent for the Partnership. 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 Inc. As of September 30, 2012, all trading decisions for the Partnership are made by the Advisor (defined below).

On December 1, 2005, the Partnership allocated substantially all of its capital to CMF SandRidge Master Fund L.P. (the “Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 14,410.6191 units of the Master with cash equal to $14,477,858 and a contribution of open commodity futures and option contracts with a fair value of $(16,018). The Master was formed in order to permit commodity pools managed now or in the future by SandRidge Capital, L.P. (“SandRidge” or the “Advisor”) 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 the Master. In addition, the Advisor is a special limited partner (the “Special Limited Partner”) of the Partnership. Individual and pooled accounts currently managed by SandRidge, including the Partnership, are permitted to be limited partners of the Master. The Master’s commodity broker is CGM. The General Partner and SandRidge believe that trading through this master/feeder structure should promote efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same and redemption rights are not affected.

The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended September 30, 2012.

At September 30, 2012 and December 31, 2011, the Partnership owned approximately 98.5% and 98.0%, respectively, of the Master. It is the Partnership’s intention to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Master’s trading of futures, forwards, swap and option contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. The Master engages in such trading through a commodity brokerage account maintained with CGM. The Master’s Statements of Financial Condition, Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partners’ Capital are included herein.

The General Partner and each limited partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits or losses, 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 adjustment, necessary for a fair statement of the Partnership’s financial condition at September 30, 2012 and December 31, 2011, and the results of its operations and changes in partners’ capital for the three and nine months ended September 30, 2012 and 2011. 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, 2011.

 

5


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

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.

The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of September 30, 2012 and December 31, 2011 and Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2012 and 2011 are presented below:

 

CMF SandRidge Master Fund L.P.

Statements of Financial Condition

 

     (Unaudited)
September  30,

2012
     December 31,
2011
 

Assets:

     

Equity in trading account:

     

Cash

   $ 284,706,975       $ 300,431,661   

Cash margin

     24,949,338         3,206,567   

Options purchased, at fair value (cost $4,490,370 and $70,380 at September 30, 2012 and December 31, 2011, respectively)

     1,657,522         276   
  

 

 

    

 

 

 

Total assets

   $ 311,313,835       $ 303,638,504   
  

 

 

    

 

 

 

Liabilities and Partners’ Capital:

     

Liabilities:

     

Net unrealized depreciation on open futures and exchange-cleared swap contracts

   $ 13,879,298       $ 7,086,968   

Options premium received, at fair value (premium $3,516,775 and $0 at September 30, 2012 and December 31, 2011, respectively)

     2,976,880         0   

Accrued expenses:

     

Professional fees

     53,044         105,784   
  

 

 

    

 

 

 

Total liabilities

     16,909,222         7,192,752   
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, 0.0000 unit equivalents at September 30, 2012 and December 31, 2011

     0         0   

Limited Partners, 127,558.7228 and 140,469.0325 units outstanding at September 30, 2012 and December 31, 2011, respectively

     294,404,613         296,445,752   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 311,313,835       $ 303,638,504   
  

 

 

    

 

 

 

Net asset value per unit

   $ 2,307.99       $ 2,110.40   
  

 

 

    

 

 

 

 

6


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

 

CMF SandRidge Master Fund L.P.

Condensed Schedule of Investments

September 30, 2012

(Unaudited)

 

     Number of
Contracts
     Fair Value     % of Partners’
Capital
 

Futures and Exchange-Cleared Swap Contracts Purchased

                   

Energy

       

ICE Henry Hub Natural Gas Swap Nov. 12 - Jan. 14

     6,708       $ (2,186,550     (0.74 )% 

NYMEX Henry Hub Natural Gas Swap Jan. 13 - Jan. 14

     9,496         6,668,540        2.27   

NYMEX Henry Hub Natural Gas Dec. 12 - Jan. 14

     4,960         10,548,194        3.58   
     

 

 

   

 

 

 

Total futures and exchange-cleared swap contracts purchased

        15,030,184        5.11   
     

 

 

   

 

 

 

Futures and Exchange-Cleared Swap Contracts Sold

                   

Energy

       

ICE Henry Hub Natural Gas Swap Apr. 13

     3,030         (1,528,500     (0.52

NYMEX Henry Hub Natural Gas Swap Nov. 12 - Dec. 13

     8,772         (3,003,800     (1.02

NYMEX Henry Hub Natural Gas Nov. 12 - Apr. 13

     10,225         (24,377,182     (8.28
     

 

 

   

 

 

 

Total futures and exchange-cleared swap contracts sold

        (28,909,482     (9.82
     

 

 

   

 

 

 

Options Purchased

                   

Puts

       

Energy

     7,204         1,657,522        0.56   
     

 

 

   

 

 

 

Total options purchased

        1,657,522        0.56   
     

 

 

   

 

 

 

Options Premium Received

                   

Calls

       

Energy

     3,140         (2,976,880     (1.01
     

 

 

   

 

 

 

Total options premium received

        (2,976,880     (1.01
     

 

 

   

 

 

 

Net fair value

      $ (15,198,656     (5.16 )% 
     

 

 

   

 

 

 

 

7


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

CMF SandRidge Master Fund L.P.

Condensed Schedule of Investments

December 31, 2011

 

    Number of
Contracts
    Fair Value     % of Partners’
Capital
 

Futures and Exchange-Cleared Swap Contracts Purchased

                 

Energy

     

ICE Henry Hub Natural Gas Swap Feb. 12 - Dec. 13

    2,408      $ (10,638,392     (3.59 )% 

NYMEX Henry Hub Natural Gas Swap Oct. 12

    1,448        (7,610,660     (2.56

NYMEX Henry Hub Natural Gas Dec. 13

    158        (235,956     (0.08
   

 

 

   

 

 

 

Total futures and exchange-cleared swap contracts purchased

      (18,485,008     (6.23
   

 

 

   

 

 

 

Futures and Exchange-Cleared Swap Contracts Sold

     

Energy

     

ICE Henry Hub Natural Gas Swap April 12

    164        272,060        0.09   

NYMEX Henry Hub Natural Gas Swap Feb. 12 - Dec. 13

    2,788        9,639,450        3.25   

NYMEX Henry Hub Natural Gas Feb. 12 - Apr. 12

    429        1,486,530        0.50   
   

 

 

   

 

 

 

Total futures and exchange-cleared swap contracts sold

      11,398,040        3.84   
   

 

 

   

 

 

 

Options Purchased

     

Call

     

Energy

    184        276        0.00
   

 

 

   

 

 

 

Total options purchased

      276        0.00
   

 

 

   

 

 

 

Net fair value

    $ (7,086,692     (2.39 )% 
   

 

 

   

 

 

 

 

 

* Due to rounding.

 

8


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

 

CMF SandRidge Master Fund L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Investment Income:

        

Interest income

   $ 38,423      $ 9,041      $ 98,270      $ 105,844   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Clearing fees

     168,427        84,438        451,202        445,645   

Professional fees

     82,723        78,361        239,455        244,450   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     251,150        162,799        690,657        690,095   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (212,727     (153,758     (592,387     (584,251
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading results:

        

Net gains (losses) on trading of commodity interests:

        

Net realized gains (losses) on closed contracts

     (8,488,249 )      9,589,655        38,020,651        4,877,499   

Change in net unrealized gains (losses) on open contracts

     (10,590,003 )      8,604,047        (9,015,179     43,445,429   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total trading results

     (19,078,252 )      18,193,702        29,005,472        48,322,928   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (19,290,979 )      18,039,944        28,413,085        47,738,677   

Subscriptions — Limited Partners

     8,500,426        1,219,776        20,150,279        9,315,882   

Redemptions — Limited Partners

     (14,079,468 )      (23,653,593     (50,506,233     (272,043,715

Distribution of interest income to feeder funds

     (38,423 )      (9,041     (98,270 )      (105,844
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in Partners’ capital

     (24,908,444     (4,402,914     (2,041,139     (215,095,000

Partners’ Capital, beginning of period

     319,313,057        318,043,171        296,445,752        528,735,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, end of period

   $ 294,404,613      $ 313,640,257      $ 294,404,613      $ 313,640,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit (127,558.7228 and 150,008.7601 units outstanding at September 30, 2012 and 2011, respectively)

   $ 2,307.99      $ 2,090.81      $ 2,307.99      $ 2,090.81   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per unit*

   $ (150.58 )    $ 117.17      $ 198.35      $ 287.27   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average units outstanding

     130,913.9145        157,297.3395        134,939.3312        201,795.0028   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* Based on change in net asset value per unit.

 

9


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

2. Financial Highlights:

 

Changes in the net asset value per unit for the three and nine months ended September 30, 2012 and 2011 were as follows:

 

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011   2012   2011

Net realized and unrealized gains (losses)*

    $ (109.50 )     $ 66.60       $ 90.05       $ 159.69  

Interest income allocated from Master

      0.19         0.04         0.49         0.34  

Expenses and allocation to Special Limited Partner**

      (9.78 )       (9.48 )       (30.42 )       (26.90 )
   

 

 

     

 

 

     

 

 

     

 

 

 

Increase (decrease) for the period

      (119.09 )       57.16         60.12         133.13  

Net asset value per unit, beginning of period

      1,570.15         1,343.06         1,390.94         1,267.09  
   

 

 

     

 

 

     

 

 

     

 

 

 

Net asset value per unit, end of period

    $ 1,451.06       $ 1,400.22       $ 1,451.06       $ 1,400.22  
   

 

 

     

 

 

     

 

 

     

 

 

 

 

 

* Includes brokerage fees.

 

** Excludes brokerage fees and includes allocation to Special Limited Partner, if any.

 

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011***   2012   2011***

Ratios to average net assets:****

               

Net investment income (loss)

      (6.5 )%       (6.6 )%       (6.7 )%       (6.7 )%

Allocation to Special Limited Partner

      0 %       0 %       0 %       0 %
   

 

 

     

 

 

     

 

 

     

 

 

 

Net investment income (loss) before allocation to Special Limited Partner*****

      (6.5 )%       (6.6 )%       (6.7 )%       (6.7 )%
   

 

 

     

 

 

     

 

 

     

 

 

 

Operating expenses

      6.6 %       6.7 %       6.8 %       6.8 %

Allocation to Special Limited Partner

      0 %       0 %       0 %       0 %
   

 

 

     

 

 

     

 

 

     

 

 

 

Total expenses and allocation to Special Limited Partner

      6.6 %       6.7 %       6.8 %       6.8 %
   

 

 

     

 

 

     

 

 

     

 

 

 

Total return:

               

Total return before allocation to Special Limited Partner

      (7.6 )%       4.3 %       4.3 %       10.5 %

Allocation to Special Limited Partner

      0 %       0 %       0 %       0 %
   

 

 

     

 

 

     

 

 

     

 

 

 

Total return after allocation to Special Limited Partner

      (7.6 )%       4.3 %       4.3 %       10.5 %
   

 

 

     

 

 

     

 

 

     

 

 

 

 

 

*** The ratios are shown net and gross of allocation to Special Limited Partner, if any, to conform to current period presentation.

 

**** Annualized (except for allocation to Special Limited Partner, if applicable).

 

***** Interest income allocated from Master less total expenses.

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.

 

10


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

Financial Highlights of the Master:

 

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011   2012   2011

Net realized and unrealized gains (losses)*

    $ (150.23 )     $ 117.62       $ 199.41       $ 288.15  

Interest income

      0.30         0.06         0.76         0.49  

Expenses **

      (0.65 )       (0.51 )       (1.82 )       (1.37 )
   

 

 

     

 

 

     

 

 

     

 

 

 

Increase (decrease) for the period

      (150.58 )       117.17         198.35         287.27  

Distribution of interest income to feeder funds

      (0.30 )       (0.06 )       (0.76 )       (0.49 )

Net asset value per unit, beginning of period

      2,458.87         1,973.70         2,110.40         1,804.03  
   

 

 

     

 

 

     

 

 

     

 

 

 

Net asset value per unit, end of period

    $ 2,307.99       $ 2,090.81       $ 2,307.99       $ 2,090.81  
   

 

 

     

 

 

     

 

 

     

 

 

 

 

 

* Includes clearing fees.

 

** Excludes clearing fees.

 

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011   2012   2011

Ratios to average net assets:***

               

Net investment income (loss) ****

      (0.3 )%       (0.2 )%       (0.3 )%       (0.2 )%
   

 

 

     

 

 

     

 

 

     

 

 

 

Operating expenses

      0.3 %       0.2 %       0.3 %       0.2 %
   

 

 

     

 

 

     

 

 

     

 

 

 

Total return

      (6.1 )%       5.9 %       9.4 %       15.9 %
   

 

 

     

 

 

     

 

 

     

 

 

 

 

 

*** Annualized.

 

**** Interest income less total expenses.

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 commodity interests, including derivative financial instruments and derivative commodity instruments. The Partnership invests substantially all of its assets through a “master/feeder” structure. The Partnership’s pro-rata share of the results of the Master’s trading activities are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.

The customer agreements between the Partnership and CGM and the Master and CGM give the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures contracts and exchange-cleared swap contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and exchange-cleared swap contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet,” has been met.

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.

All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures and exchange-cleared swap contracts traded during the three months ended September 30, 2012 and 2011, were 39,264 and 20,308, respectively. The monthly average number of futures and exchange-cleared swap contracts traded during the nine months ended September 30, 2012 and 2011, were 33,614 and 44,108, respectively. The monthly average number of option contracts traded during the three months ended September 30, 2012 and 2011, were 12,527 and 3,920 respectively. The monthly average number of option contracts traded during the nine months ended September 30, 2012 and 2011, were 7,682 and 4,698, respectively.

 

11


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

The following tables indicate the gross fair values of derivative instruments of futures and exchange-cleared swap and option contracts as separate assets and liabilities as of September 30, 2012 and December 31, 2011.

 

     September 30,
2012
 

Assets

  

Futures and Exchange-Cleared Swap Contracts

  

Energy

   $ 23,622,949   
  

 

 

 

Total unrealized appreciation on open futures and exchange-cleared swap contracts

   $ 23,622,949   
  

 

 

 

Liabilities

  

Futures and Exchange-Cleared Swap Contracts

  

Energy

   $ (37,502,247
  

 

 

 

Total unrealized depreciation on open futures and exchange-cleared swap contracts

   $ (37,502,247
  

 

 

 

Net unrealized depreciation on open futures and exchange-cleared swap contracts

   $ (13,879,298 )* 
  

 

 

 

 

 

* This amount is in “Net unrealized depreciation on open futures and exchange-cleared swap contracts” on the Master’s Statements of Financial Condition.

 

Assets

  

Options Purchased

  

Energy

   $ 1,657,522   
  

 

 

 

Total options purchased

   $ 1,657,522 ** 
  

 

 

 

Liabilities

  

Options premium received

  

Energy

   $ (2,976,880
  

 

 

 

Total options premium received

   $ (2,976,880 )*** 
  

 

 

 

 

 

** This amount is in “Options purchased, at fair value” on the Master’s Statements of Financial Condition.
*** This amount is in “Options premium received, at fair value” on the Master’s Statements of Financial Condition.

 

     December 31, 2011  

Assets

  

Futures and Exchange-Cleared Swap Contracts

  

Energy

   $ 11,398,040   
  

 

 

 

Total unrealized appreciation on open futures and exchange-cleared swap contracts

   $ 11,398,040   
  

 

 

 

Liabilities

  

Futures and Exchange-Cleared Swap Contracts

  

Energy

   $ (18,485,008
  

 

 

 

Total unrealized depreciation on open futures and exchange-cleared swap contracts

   $ (18,485,008
  

 

 

 

Net unrealized depreciation on open futures and exchange-cleared swap contracts

   $ (7,086,968 )**** 
  

 

 

 

 

 

**** This amount is in “Net unrealized depreciation on open futures and exchange-cleared swap contracts” on the Master’s Statements of Financial Condition.

 

Assets

  

Options Purchased

  

Energy

   $     276   
  

 

 

 

Total options purchased

   $ 276 ***** 
  

 

 

 

 

 

***** This amount is in “Options purchased, at fair value” on the Master’s Statements of Financial Condition.

 

 

12


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

The following table indicates the trading gains and losses, by market sector, on derivative instruments for the three and nine months ended September 30, 2012 and 2011.

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

Sector

  2012     2011     2012     2011  

Energy

  $ (19,078,252   $ 18,193,702      $ 29,005,472      $ 48,322,928   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ (19,078,252 )******    $ 18,193,702 ******    $ 29,005,472 ******    $ 48,322,928 ****** 
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

****** This amount is in “Total trading results” on the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

4. Fair Value Measurements:

Partnership’s Investments. The Partnership values its investment in the Master at the net asset value per unit as calculated by the Master. The Master values its investments as described in Note 2 of the Master’s notes to the annual financial statements as of December 31, 2011.

Partnership’s 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 use of 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 Level 2 assets and liabilities.

The Partnership will separately present purchases, subscriptions, 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.

Effective January 1, 2012, the Partnership adopted Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards [(“IFRS”)].” The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify the Financial Accounting Standards Board’s (the “FASB”) 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. This new guidance did not have a significant impact on the Partnership’s financial statements.

 

13


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

The Partnership values its investment in the Master with no rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2012 and December 31, 2011, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets and liabilities between Level 1 and Level 2.

 

    September 30,
2012
    Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

Assets

       

Investment in Master

  $ 290,025,047      $      $ 290,025,047      $   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net fair value

  $ 290,025,047      $      $ 290,025,047      $   
 

 

 

   

 

 

   

 

 

   

 

 

 
    December 31, 2011     Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

Assets

       

Investment in Master

  $ 290,607,238      $      $ 290,607,238      $   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net fair value

  $ 290,607,238      $      $ 290,607,238      $   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

14


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

Master’s Investments. All commodity interests of the Master (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 Master’s 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 Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

Master’s 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 use of 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 Master’s Level 1 assets and liabilities are actively traded.

The Master 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 Master considers prices for exchange-traded commodity futures, forward and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2012 and December 31, 2011, the Master did not hold any derivative instruments for which market quotations are not readily available and were priced by broker-dealers that 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 management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.

 

    September 30,
2012
    Quoted Prices in
Active Markets for
Identical Assets

and Liabilities
(Level 1)
    Significant Other
Observable
Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 
Assets        

Futures and Exchange-Cleared Swaps

  $ 23,622,949      $ 23,622,949      $      $   

Options purchased

    1,657,522        1,657,522                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 25,280,471      $ 25,280,471      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

 
Liabilities        

Futures and Exchange-Cleared Swaps

  $ 37,502,247      $ 37,502,247      $      $   

Options premium received

    2,976,880        2,976,880                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    40,479,127        40,479,127                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Net fair value

  $ (15,198,656   $ (15,198,656   $      $   
 

 

 

   

 

 

   

 

 

   

 

 

 
    December 31, 2011     Quoted Prices in
Active Markets for
Identical Assets

and Liabilities
(Level 1)
    Significant Other
Observable
Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 
Assets        

Futures and Exchange-Cleared Swaps

  $ 11,398,040      $ 11,398,040      $      $   

Options purchased

    276        276                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 11,398,316      $ 11,398,316      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

 
Liabilities        

Futures and Exchange-Cleared Swaps

  $ 18,485,008      $ 18,485,008      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    18,485,008        18,485,008                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Net fair value

  $ (7,086,692   $ (7,086,692   $      $   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

15


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

5. Financial Instrument Risks:

In the normal course of business, the Partnership, through its investment in the Master, 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, 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 forward and option contracts. OTC contracts are negotiated between contracting parties and include swaps and certain forwards and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. 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 Redeemable Units is limited to the amount of their share of the Partnership’s net 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/Master 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/Master 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 Partnership’s/Master’s 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/Master’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Master has credit risk and concentration risk as CGM or a CGM affiliate is the sole counterparty or broker with respect to the Partnership’s/Master’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through CGM, the Partnership’s/Master’s counterparty is an exchange or clearing organization.

The Advisor will concentrate the Partnership’s/Master’s trading in energy-related markets. Concentration in a limited number of commodity interests may subject the Partnership’s/Master’s account to greater volatility than if a more diversified portfolio of contracts was traded on behalf of the Partnership/Master.

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

The General Partner monitors and attempts to control the Partnership’s/Master’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 Partnership/Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, exchange-cleared swaps and options contracts by sector, margin requirements, gain and loss transactions and collateral positions.

The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s/Master’s business, these instruments may not be held to maturity.

 

16


Table of Contents

Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

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.

Partnership’s Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in Note 2 of the Master’s notes to the annual financial statements as of December 31, 2011.

Partnership’s and Master’s 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 Master’s Level 1 assets and liabilities are actively traded.

GAAP also requires the use of 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 the level of activity in the Partnership’s Level 2 assets and liabilities.

The Partnership and the Master will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

The Partnership values its investment in the Master where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2012 and December 31, 2011, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.

The Master considers prices for exchange-traded commodity futures, forward and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2012 and December 31, 2011, the Master did not hold any derivative instruments for which market quotations are not readily available and 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 management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.

Futures Contracts. The Master trades futures contracts and exchange-cleared swaps. Exchange-cleared swaps 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 Master 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 Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Master’s Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Bristol Energy Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

 

Options. The Master 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 Master writes an option, the premium received is recorded as a liability in the Master’s Statements of Financial Condition and marked to market daily. When the Master purchases an option, the premium paid is recorded as an asset in the Master’s Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in unrealized gains (losses) on option contracts are included in the Master’s 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 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 has 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. The 2009 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner 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 has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.

Recent Accounting Pronouncements. In October 2011, the 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 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. In August 2012, the FASB updated the proposed ASU to state that entities regulated under the Investment Company Act of 1940 should qualify to be investment companies within the proposed investment company guidance. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangements associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership would also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement 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.”

 

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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. The Partnership’s only assets are its investment in the Master and cash. The Master does not engage in sales of goods or services. The Master’s only assets are its equity in its trading accounts, consisting of cash and cash margin and options purchased, at fair value. Because of the low margin deposits normally required in futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2012.

The Partnership’s capital consists of capital contributions, as increased or decreased by income (loss) from its investment in the Master, expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any.

For the nine months ended September 30, 2012, Partnership capital decreased 0.6% from $285,726,309 to $284,014,250. This decrease was attributable to the redemption of 21,556.2496 Redeemable Units totaling $32,789,018 and 481.0000 General Partner unit equivalents were redeemed totaling $700,735, which was partially offset by net income of $13,127,415, coupled with the subscriptions of 12,347.1385 Redeemable Units totaling $18,650,279. Future redemptions can impact the amount of funds available for investment in the Master in subsequent periods.

The Master’s capital consists of the capital contributions of the partners as increased or decreased by net realized and/or unrealized gains or losses on futures trading, interest income, expenses, redemptions of units and distributions of profits, if any.

For the nine months ended September 30, 2012, the Master’s capital decreased 0.7% from $296,445,752 to $294,404,613. This decrease was attributable to the redemption of 21,538.8206 units totaling $50,506,233 and distribution of interest income to feeder funds totaling $98,270, which was partially offset by net income of $28,413,085, coupled with the subscriptions of 8,628.5109 units totaling $20,150,279. 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 and assumptions 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 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.

 

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Results of Operations

During the Partnership’s third quarter of 2012, the net asset value per unit decreased 7.6% from $1,570.15 to $1,451.06 as compared to an increase of 4.3% in the third quarter of 2011. The Partnership, through its investment in the Master, experienced a net trading loss before brokerage fees and related fees in the third quarter of 2012 of $18,858,427. Losses were primarily attributable to the Master’s trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by gains in ICE Natural Gas. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the third quarter of 2011 of $17,659,940. Gains were primarily attributable to the Master’s trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by ICE Natural Gas.

During the third quarter of 2012, the most significant losses were incurred during July as short futures positions in natural gas negatively impacted the Partnership as prices rallied due to seasonable warm weather throughout the U.S. Midwest. Further losses were incurred during September as short futures positions in natural gas continued to incur losses as prices rallied due to warmer weather throughout the United States. A portion of these losses was offset by gains from trading short futures positions in natural gas during August as prices declined due to mild temperatures throughout the United States.

During the Partnership’s nine months ended September 30, 2012, the net asset value per unit increased 4.3% from $1,390.94 to $1,451.06 as compared to an increase of 10.5% in the nine months ended September 30, 2011. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the nine months ended September 30, 2012 of $28,281,449. Gains were primarily attributable to the Master’s trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by gains in ICE Natural Gas. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the nine months ended September 30, 2011 of $45,328,872. Gains were primarily attributable to the Master’s trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by ICE Natural Gas.

During the nine months ended September 30, 2012, the most significant gains were recorded during March from short futures positions in natural gas as prices fell due to the unseasonably warm end to the winter season, thus weakening demand for the commodity. Gains were also recorded during August from short futures positions in natural gas as prices declined due to mild temperatures throughout the United States. Additional gains were recorded during January and February from short positions as natural gas prices declined during the end of the month due to significant increases in production and “soft” demand. Gains were also recorded during April and May from short futures positions in natural gas as prices declined due to mild weather and weaker demand. A portion of the Partnership’s gains for the first nine months of year was offset by losses incurred during July as short futures positions in natural gas were negatively impacted as prices rallied due to seasonably warm weather throughout the U.S. Midwest. Further losses were incurred during September as short positions in natural gas continued to incur losses as prices rallied due to warmer weather throughout the United States. Finally, losses were incurred from trading natural gas futures in June as prices rallied due to warmer than expected weather throughout the U.S. Midwest, thus increasing demand for the commodity.

Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership (and the Master) depends on the existence of major price trends and the ability of the Advisor 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 Advisor is able to identify them, the Partnership (and the Master) expects to increase capital through operations.

Interest income on 80% of the Partnership’s daily average equity allocated to it by the Master 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 allocated from the Master for the three and nine months ended September 30, 2012 increased by $29,071 and $9,142, respectively, as compared to the corresponding periods in 2011. The increase in interest income is due to higher U.S. Treasury bill rates during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011. 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 Master account and upon interest rates over which the Partnership, the Master and CGM have no control.

Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Brokerage fees for the three and nine months ended September 30, 2012 decreased by $73,061 and $311,607, respectively, as compared to the corresponding periods in 2011. The decrease in brokerage fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.

Management fees are calculated as a percentage of the Partnership’s 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, 2012 decreased by $39,038 and $166,988, respectively, as compared to the corresponding periods in 2011. The decrease in management fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.

 

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Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Administrative fees for the three and nine months ended September 30, 2012 decreased by $9,759 and $41,746, respectively, as compared to the corresponding periods in 2011. The decrease in administrative fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.

Special Limited Partner profit share allocations are based on the new trading profits generated by the Advisor at the end of the quarter as defined in the advisory agreement among the Partnership, the General Partner and the Advisor. There were no profit share allocations made for the three and nine months ended September 30, 2012 and 2011, respectively. The Advisor will not earn a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisor’s 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.

 

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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 investment in the Master. The Master is a speculative commodity pool. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master’s and the Partnership’s main line of business.

The limited partners will not be liable for losses exceeding the current net asset value of their investment.

Market movements result in frequent changes in the fair value of the Master’s open positions and, consequently, in its earnings and cash balances. The Master’s 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 Master’s open contracts and the liquidity of the markets in which it trades.

The Master rapidly acquires and liquidates both long and short positions in a wide range of different market sectors. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Master’s past performance is not necessarily indicative of its future results.

“Value at Risk” is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master’s speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master’s 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 Master’s losses in any market sector will be limited to Value at Risk or by the Master’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Master 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.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master’s open positions by market category as of September 30, 2012 and December 31, 2011, and the highest, lowest and average value during the three months ended September 30, 2012, and during the twelve months ended December 31, 2011. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. There has been no material change 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, 2011.

As of September 30, 2012, the Master’s total capitalization was $294,404,613 and the Partnership owned approximately 98.5% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of September 30, 2012 was as follows:

September 30, 2012

 

                  Three months ended September 30, 2012  

Market Sector

   Value at Risk      % of Total
Capitalization
    High
Value at Risk
     Low
Value at Risk
     Average
Value at Risk*
 

Energy

   $ 21,675,334         7.36   $ 21,675,334       $ 12,624,778       $ 16,720,061   
  

 

 

    

 

 

         

Total

   $ 21,675,334         7.36        
  

 

 

    

 

 

         

 

* Average of month-end Values at Risk.

 

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As of December 31, 2011, the Master’s total capitalization was $296,445,752 and the Partnership owned approximately 98.0% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of December 31, 2011 was as follows:

December 31, 2011

 

                  Twelve months ended December 31, 2011  

Market Sector

   Value at Risk      % of Total
Capitalization
    High
Value at Risk
     Low
Value at
Risk
     Average
Value at Risk*
 

Energy

   $ 2,666,386         0.90   $ 61,733,650       $ 1,015,817       $ 20,188,738   
  

 

 

    

 

 

         

Total

   $ 2,666,386         0.90        
  

 

 

    

 

 

         

 

* Annual average of month-end Values at Risk.

 

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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 (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 President and Chief Financial Officer (the “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 President 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 September 30, 2012 and, based on that evaluation, the General Partner’s President 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 President 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 September 30, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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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 Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which CGM or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

CGM (together with Citigroup Inc. and its other subsidiaries, “Citigroup”) (formerly known as Salomon Smith Barney Inc.) is a New York corporation with its principal place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (“FCM”), and provides futures brokerage and clearing services for institutional and retail participants in the futures markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.

There have been no material administrative, civil or criminal actions within the past five years against CGM or any of its individual principals and no such actions are currently pending, except as follows.

RMBS Litigation and Other Matters

On May 4, 2012, the district court in FEDERAL HOUSING FINANCE AGENCY v. UBS AMERICAS, INC., ET AL., a parallel case to FEDERAL HOUSING FINANCE AGENCY v. ALLY FINANCIAL INC., ET AL., FEDERAL HOUSING FINANCE AGENCY v. CITIGROUP INC., ET AL., and FEDERAL HOUSING FINANCE AGENCY v. JPMORGAN CHASE & CO., ET AL., denied defendants’ motion to dismiss plaintiff’s securities law claims and granted defendants’ motion to dismiss plaintiff’s negligent misrepresentation claims. On June 19, 2012, the district court granted defendants’ motion to certify an interlocutory appeal to the United States Court of Appeals for the Second Circuit from the court’s statutes of repose and limitations rulings.

On May 15, 2012, Woori Bank filed a complaint in the United States District Court for the Southern District of New York against Citigroup alleging actionable misstatements and omissions in connection with Woori Bank’s $95 million investment in five collateralized debt obligations.

On May 18, 2012, the Federal Deposit Insurance Corporation filed (“FDIC”) complaints in the United States District Courts for the Southern District of New York and the Central District of California against various defendants, including Citigroup Global Markets Inc., Citicorp Mortgage Securities Inc., and CitiMortgage Inc., in connection with purchases of residential mortgage-backed securities (“RMBS”) by two failed banks for which the FDIC is acting as receiver.

On June 6, 2012, the court granted in part and denied in part defendants’ motions to dismiss in WESTERN & SOUTHERN LIFE INS. CO., ET AL. v. RESIDENTIAL FUNDING CO., LLC, ET AL.

On June 26, 2012, the court overruled defendants’ demurrer to plaintiff’s amended complaint in FEDERAL HOME LOAN BANK OF CHICAGO v. BANC OF AMERICA SECURITIES, LLC, ET AL.

On July 27, 2012, John Hancock Life Insurance Co. and several affiliated entities filed a complaint in the United States District Court for the District of Minnesota against various defendants, including CGM, asserting disclosure claims arising out of purchases of RMBS.

On August 29, 2012, the United States District Court for the Southern District of New York issued an order preliminarily approving the parties’ settlement in IN RE CITIGROUP INC. SECURITIES LITIGATION, pursuant to which Citigroup has agreed to pay $590 million. A fairness hearing is scheduled for January 15, 2013.

On August 30, 2012, Rentokil-Initial Pension Scheme filed a putative class action complaint against Citigroup on behalf of purchasers of 26 Citigroup offerings of medium term Euro Notes issued between October 12, 2005 and February 25, 2009. The complaint asserts claims under Section 90 of the Financial Services and Markets Act 2000 and includes allegations similar to those asserted in IN RE CITIGROUP INC. BOND LITIGATION.

On October 15, 2012, the United States District Court for the Southern District of New York granted lead plaintiffs’ amended motion for class certification in NEW JERSEY CARPENTERS HEALTH FUND v. RESIDENTIAL CAPITAL LLC, ET AL., having previously denied lead plaintiffs’ motion for class certification on January 18, 2011. Plaintiffs in this action allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, as amended, and assert disclosure claims on behalf of a putative class of purchasers of mortgage-backed securities issued by Residential Accredited Loans, Inc. pursuant or traceable to prospectus materials filed on March 3, 2006 and April 3, 2007. CGM is one of the underwriter defendants.

Other Matters

        Citigroup and Citibank, N.A., along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in the multidistrict litigation (MDL) proceeding before Judge Buchwald in the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION. Judge Buchwald has appointed interim lead class counsel for, and consolidated amended complaints have been filed on behalf of, three separate putative classes of plaintiffs: (1) OTC purchasers of derivative instruments tied to USD LIBOR; (2) purchasers of exchange-traded derivative instruments tied to USD LIBOR; and (3) indirect OTC purchasers of U.S. debt securities. Each of these putative classes alleges that the panel bank defendants conspired to suppress USD LIBOR in violation of the Sherman Act and/or the Commodity Exchange Act, thereby causing plaintiffs to suffer losses on the instruments they purchased. Also consolidated into the MDL proceeding are individual civil actions commenced by various Charles Schwab entities that allege that the panel bank defendants conspired to suppress the USD LIBOR rates in violation of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act, and California state law, causing the Schwab entities to suffer losses on USD LIBOR-linked financial instruments that they owned. Plaintiffs in these actions seek compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.

In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of CGM. GCM may establish reserves from time to time in connections with such actions.

 

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Item 1A. Risk Factors

There have been no material changes to the risk factors set forth under Part 1, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, other than as set forth below.

Speculative position and trading limits may reduce profitability.

The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person may hold or control in particular futures and options on futures. The trading instructions of an advisor may have to be modified, and positions held by the Partnership may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and foregoing potential profits.

In October 2011, the CFTC adopted new rules governing position limits. In September 2012, these rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. It is possible, nevertheless, that these rules may take effect in some form via re-promulgation or a successful appeal by the CFTC of the District Court’s ruling. The vacated rules established position limits on certain futures contracts and any economically equivalent futures, options and swaps.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

For the three months ended September 30, 2012, there were subscriptions of 4,912.7905 Redeemable Units totaling $7,500,426. 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. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

Proceeds of net offering were used for the trading of commodity interests, including futures contracts, options, swap and forward contracts and any other interests pertaining thereto, including interests in commodity pools.

The following chart sets forth the purchases of Redeemable Units by the Partnership.

 

Period       

(a) Total Number

of Redeemable
Units Purchased*

         (b) Average
Price Paid per
Redeemable  Unit**
        

(c) Total Number
of Redeemable Units
Purchased as Part
of  Publicly
Announced

Plans or Programs

         (d) Maximum Number
(or Approximate
Dollar  Value) of
Redeemable Units that
May Yet Be
Purchased Under the
Plans or Programs
 

July 1, 2012 - July 31, 2012

        1,491.3480          $ 1,461.19            N/A            N/A  

August 1, 2012 - August 31, 2012

        3,269.0030          $ 1,545.59            N/A            N/A  

September 1, 2012 - September 30, 2012

        2,962.3960          $ 1,451.06            N/A            N/A  
          7,722.7470          $ 1,493.03                           

 

* Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date, the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the 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. Mine Safety Disclosures — None.

Item 5. Other Information

The registrant does not have a board of directors. The registrant’s general partner, Ceres Managed Futures LLC (“CMF”), is managed by a board of directors.

Effective November 14, 2012, Mr. Damian George was appointed a director of CMF.

            Damian George, age 45, has been a Director of the general partner since November 2012. Since June 2012, Mr. George has been the Chief Financial Officer and a principal of the general partner and is an associate member of the National Futures Association. Since August 2009, Mr. George has been employed by Morgan Stanley Smith Barney LLC (“Morgan Stanley Smith Barney”), a financial services firm, where his responsibilities include oversight of budgeting, finance and Sarbanes-Oxley testing for the Alternative Investments — Managed Futures group. Since August 2009, Mr. George has been registered as an associated person of Morgan Stanley Smith Barney. From November 2005 through July 2009, Mr. George was employed by Citi Alternative Investments, a division of Citigroup Inc. (“Citigroup”), a financial services firm, which administered Citigroup’s hedge fund and fund of funds business, where he served as Director and was responsible for budgeting, finance and Sarbanes-Oxley testing for the Hedge Fund Management group. From November 2004 through July 2009, Mr. George was registered as an associated person of Citigroup Global Markets Inc. Mr. George earned his Bachelor of Science degree in Accounting in May 1989 from Fordham University and his Master of Business Administration degree in International Finance in February 1998 from Fordham University. Mr. George is a Certified Public Accountant.

 

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Table of Contents

Item 6. Exhibits

Exhibit

 

3.1
    (a)
  Certificate of Limited Partnership dated April 15, 2005 (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).
          (b)   Certificate of Amendment of the Certificate of Limited Partnership dated September 21, 2005 (filed as Exhibit 3.1(a) to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
          (c)   Certificate of Amendment of the Certificate of Limited Partnership dated September 19, 2008 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
          (d)   Certificate of Amendment of the Certificate of Limited Partnership dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).
          (e)   Certificate of Amendment of the Certificate of Limited Partnership dated June 30, 2010 (filed as Exhibit 3.1(e) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).
          (f)   Certificate of Amendment of the Certificate of Limited Partnership Agreement dated September 2, 2011 (filed as Exhibit 3.1(f) to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).
3.2   Third Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on April 27, 2010 and incorporated herein by reference).
10.1
  (a)
  Advisory Agreement among the Partnership, the General Partner and SandRidge Capital, L.P. (filed as Exhibit 10.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
          (b)   Letter from the General Partner to SandRidge Capital, L.P. extending the Advisory Agreement through June 30, 2012 (filed as Exhibit 10.1(b) to the Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference).
10.2  
(a)
  Customer Agreement between the Partnership, the General Partner and CGM (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).
          (b)   Addendum to the Customer Agreement between the Partnership, the General Partner and CGM (filed as Exhibit 10.2(a) 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, the General Partner and CGM and Morgan Stanley Smith Barney LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 3, 2010 and incorporated herein by reference).
10.4   Form of Subscription Agreement (filed herein).
10.5   Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the Quarterly Report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference).

 

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Table of Contents
31.1   Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director).
31.2   Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director).
32.1   Section 1350 Certification (Certification of President and Director).
32.2   Section 1350 Certification (Certification of Chief Financial Officer and Director).
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.
101.DEF           XBRL Taxonomy Extension Definition Linkbase Document.

 

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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.

 

BRISTOL ENERGY FUND L.P.
By:  

Ceres Managed Futures LLC

(General Partner)

By:   /s/ Walter Davis
  Walter Davis
  President and Director

Date: November 14, 2012

 

By:   /s/ Damian George
  Damian George
 

Chief Financial Officer and Director

(Principal Accounting Officer)

Date: November 14, 2012

 

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