Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - GLOBAL DIVERSIFIED FUTURES FUND L.P.Financial_Report.xls
EX-31.1 - EX-31.1 - GLOBAL DIVERSIFIED FUTURES FUND L.P.d803225dex311.htm
EX-31.2 - EX-31.2 - GLOBAL DIVERSIFIED FUTURES FUND L.P.d803225dex312.htm
EX-32.1 - EX-32.1 - GLOBAL DIVERSIFIED FUTURES FUND L.P.d803225dex321.htm
EX-32.2 - EX-32.2 - GLOBAL DIVERSIFIED FUTURES FUND L.P.d803225dex322.htm
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, 2014

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 000-30455

GLOBAL DIVERSIFIED FUTURES FUND L.P.

 

(Exact name of registrant as specified in its charter)

 

New York   13-4015586

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue

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, 2014, 9,256.8358 Limited Partnership Redeemable Units were outstanding.

 

 

 


Table of Contents

GLOBAL DIVERSIFIED FUTURES FUND L.P.

FORM 10-Q

INDEX

 

     Page
  Number  
 
PART I — Financial Information:   

Item 1. Financial Statements:

  

Statements of Financial Condition at September 30, 2014 (unaudited) and December 31, 2013

     3   

Schedules of Investments at September 30, 2014 (unaudited) and December 31, 2013

     4-5   

Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2014 and 2013 (unaudited)

     6   

Notes to Financial Statements (unaudited)

     7-18   

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

     22-26   

Item 4. Controls and Procedures

     27   

PART II — Other Information

  

Item 1. Legal Proceedings

     28-34   

Item 1A. Risk Factors

     35   

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

     36   

Item 5. Other Information

     36   

Item 6. Exhibits

     37-38   

 

2


Table of Contents

PART I

Item 1. Financial Statements

Global Diversified Futures Fund L.P.

Statements of Financial Condition

 

     (Unaudited)         
     September  30,
2014
     December 31,
2013
 
     

Assets:

     

Investment in Funds, at fair value

   $ 14,258,918       $ 15,284,306   

Cash

     48,995         30,712   
  

 

 

    

 

 

 

Total assets

   $ 14,307,913       $ 15,315,018   
  

 

 

    

 

 

 

Liabilities and Partners’ Capital:

     

Liabilities:

     

Accrued expenses:

     

Ongoing selling agent fees

   $ 34,577       $ 68,918   

Management fees

     13,821         14,623   

Other

     61,815         40,715   

Redemptions payable to General Partner

     15,184         —     

Redemptions payable to Limited Partners

     330,255         238,719   
  

 

 

    

 

 

 

Total liabilities

     455,652         362,975   
  

 

 

    

 

 

 

Partners’ Capital:

     

General Partner, 100.5634 and 110.9234 unit equivalents outstanding at September 30, 2014 and December 31, 2013

     147,383         159,355   

Limited Partners, 9,351.1848 and 10,296.8418 Redeemable Units outstanding at September 30, 2014 and December 31, 2013, respectively

     13,704,878         14,792,688   
  

 

 

    

 

 

 

Total partners’ capital

     13,852,261         14,952,043   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 14,307,913       $ 15,315,018   
  

 

 

    

 

 

 

Net asset per unit

   $ 1,465.58       $ 1,436.62   
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

3


Table of Contents

Global Diversified Futures Fund L.P.

Schedule of Investments

September 30, 2014

(Unaudited)

 

     Fair Value     % of Partners’
Capital
 

Investment in Funds

    

CMF Aspect Master Fund L.P.

   $ 5,387,251        38.89

CMF Altis Partners Master Fund L.P.

     4,337,717        31.32   

Blackwater Master Fund L.P.

     4,533,950        32.73   
  

 

 

   

 

 

 

Total investment in Funds, at fair value

   $ 14,258,918        102.94
  

 

 

   

 

 

 

See accompanying notes to financial statements.

 

4


Table of Contents

Global Diversified Futures Fund L.P.

Schedule of Investments

December 31, 2013

 

     Fair Value      % of Partners’
Capital
 

Investment in Funds

     

CMF Aspect Master Fund L.P.

   $ 5,464,202         36.54

CMF Altis Partners Master Fund L.P.

     4,592,354         30.71   

Blackwater Master Fund L.P.

     5,227,750         34.97   
  

 

 

    

 

 

 

Total investment in Funds, at fair value

   $ 15,284,306         102.22
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

5


Table of Contents

Global Diversified Futures Fund L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2014     2013     2014     2013  

Investment income:

        

Interest income from investment in Funds

   $ 351      $ 604      $ 1,678      $ 3,612   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Ongoing selling agent fees

     100,872        216,094        388,171        699,082   

Clearing fees

     10,048        11,072        30,016        38,902   

Management fees

     40,171        58,852        119,113        199,431   

Other

     57,387        60,269        154,996        140,291   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     208,478        346,287        692,296        1,077,706   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (208,127     (345,683     (690,618     (1,074,094
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading Results:

        

Net gains (losses) on investment in Funds:

        

Net realized gains (losses) on investment in Funds

     885,806        (179,544     1,144,310        (139,363

Change in net unrealized gains (losses) on investments in Funds

     177,447        (928,794     (231,421     (705,622
  

 

 

   

 

 

   

 

 

   

 

 

 

Total trading results

     1,063,253        (1,108,338     912,889        (844,985
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     855,126        (1,454,021     222,271        (1,919,079

Redemptions - Limited Partners

     (585,847     (302,313     (1,306,869     (906,721

Redemptions - General Partner

     (15,184     —          (15,184     (75,122
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in Partners’ Capital

     254,095        (1,756,334     (1,099,782     (2,900,922

Partners’ Capital, beginning of period

     13,598,166        16,874,834        14,952,043        18,019,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ Capital, end of period

   $ 13,852,261      $ 15,118,500      $ 13,852,261      $ 15,118,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per Unit (9,451.7482 and 10,615.8602 Units outstanding at September 30, 2014 and 2013, respectively)

   $ 1,465.58      $ 1,424.14      $ 1,465.58      $ 1,424.14   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per unit*

   $ 87.97      $ (135.02   $ 28.96      $ (178.04
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average units outstanding

     9,790.5629        10,711.0342        10,101.7575        10,962.4589   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* Based on change in net asset value per unit.

See accompanying notes to financial statements.

 

6


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

1. General:

Global Diversified Futures Fund L.P. (the “Partnership”) is a limited partnership organized under the partnership laws of the State of New York on June 15, 1998, to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests, including futures contracts, options, swaps and forward contracts on United States exchanges and certain foreign exchanges. The sectors traded include currencies, energy, grains, indices, metals, softs, livestock, lumber and U.S. and non-U.S. interest rates. The commodity interests that are traded by the Funds (as defined in note 5, “Investment in Funds”) are volatile and involve a high degree of market risk. The Partnership commenced trading on February 2, 1999. The Partnership was authorized to sell up to 100,000 redeemable units of limited partnership interest (“Redeemable Units”) during its initial offering period. The Partnership no longer offers Redeemable Units for sale.

Ceres Managed Futures LLC, a Delaware limited liability company (the “General Partner”), acts as 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”). MSSB Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Prior to June 28, 2013, Morgan Stanley indirectly owned a majority equity interest in MSSB Holdings, and Citigroup Inc. indirectly owned a minority equity interest in MSSB Holdings. 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, 2014, all trading decisions are made for the Partnership by Aspect Capital Limited (“Aspect”), Altis Partners (Jersey) Limited (“Altis”) and Blackwater Capital Management LLC (“Blackwater”) (each, an “Advisor” and collectively, the “Advisors”), each of which is a registered commodity trading advisor. Each Advisor is allocated a portion of the Partnership’s assets to manage. The Partnership invests the portion of its assets allocated to each Advisor indirectly through investments in the Funds.

During the nine months ended September 30, 2014, the Partnership’s/Funds’ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. During prior periods included in this report, Citigroup Global Markets Inc. (“CGM”) also served as a commodity broker.

During the fourth quarter of 2013, Blackwater Master Fund L.P. (“Blackwater Master”) entered into a futures brokerage account agreement with MS&Co. Blackwater Master commenced futures trading through accounts at MS&Co. on or about October 3, 2013. During the third quarter of 2013, CMF Aspect Master Fund L.P. (“Aspect Master”) and CMF Altis Partners Master Fund L.P. (“Altis Master”) entered into a futures brokerage account agreement with MS&Co. During the second quarter of 2013, Aspect Master entered into a foreign exchange brokerage account agreement with MS&Co. Aspect Master and Altis Master commenced futures trading through accounts at MS&Co. on or about July 15, 2013 and July 29, 2013, respectively. Aspect Master commenced foreign exchange trading through an account at MS&Co. on or about May 1, 2013. The Partnership, through its investment in the Funds, pays MS&Co. trading fees for the clearing and, where applicable, execution of transactions.

Effective October 1, 2013, the Partnership ceased paying a brokerage fee to CGM and CGM ceased acting as selling agent for the Partnership. Also effective October 1, 2013, the Partnership entered into a selling agreement with Morgan Stanley Smith Barney LLC (d/b/a Morgan Stanley Wealth Management). Pursuant to the selling agreement, Morgan Stanley Wealth Management received a selling agent fee equal to 5.4% per year of month-end net assets. The selling agent fee received by Morgan Stanley Wealth Management will be shared with the properly registered/exempted financial advisers of Morgan Stanley Wealth Management who sold redeemable units in the Partnership.

Effective April 1, 2014, the monthly ongoing selling agent fee was reduced from an annual rate of 5.4% to an annual rate of 2.9%.

Effective October 1, 2014, the monthly ongoing selling agent fee was further reduced from an annual rate of 2.9% to an annual rate of 2.0%. As of the same date, the Partnership began paying an administrative fee to the General Partner at an annual rate of 0.9%. The October 1, 2014 fee changes offset each other and, accordingly, there was no change to the aggregate fees incurred by the Partnership.

 

7


Table of Contents

Certain prior period amounts have been reclassified to conform to current period presentation. Amounts reported separately on the Statements of Income and Expenses and Changes in Partners’ Capital as ongoing selling agent fees and clearing fees were previously combined and presented as brokerage fees, including clearing fees.

The General Partner and each limited partner of the Partnership (each, a “Limited Partner”) share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no Limited Partner is liable for obligations of the Partnership in excess of its capital contribution and profits, if any, or net of distributions and losses, if any.

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at September 30, 2014 and December 31, 2013 and the results of its operations and changes in partners’ capital for the three and nine months ended September 30, 2014 and 2013. These financial statements present the results of interim periods and do not include all of the disclosures normally provided in annual financial statements. These financial statements should be read 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, 2013.

The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner 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.

 

8


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

2. Financial Highlights:

Changes in the net asset value per unit for the three and nine months ended September 30, 2014 and 2013 were as follows:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2014     2013     2014     2013  

Net realized and unrealized gains (losses) *

   $ 97.90      $ (124.01   $ 55.98      $ (147.34

Interest income

     0.03        0.05        0.15        0.32   

Expenses **

     (9.96     (11.06     (27.17     (31.02
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) for the period

     87.97        (135.02     28.96        (178.04

Net asset value per unit, beginning of period

     1,377.61        1,559.16        1,436.62        1,602.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit, end of period

   $ 1,465.58      $ 1,424.14      $ 1,465.58      $ 1,424.14   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* Includes ongoing selling agent fees and clearing fees. Net realized and unrealized gains (losses) excluding ongoing selling agent fees and clearing fees for the three months ended September 30, 2014 and 2013 and for the nine months ended September 30, 2014 and 2013 were $109.23, $(102.93), $97.18 and $(80.07), respectively.

 

** Excludes ongoing selling agent fees and clearing fees. Total expenses including ongoing selling agent fees and clearing fees for the three months ended September 30, 2014 and 2013 and for the nine months ended September 30, 2014 and 2013 were $(21.29), $(32.14), $(68.37), $(98.29) and respectively.

 

     Three Months  Ended
September 30,
    Nine Months  Ended
September 30,
 
             2014                     2013                     2014                     2013          

Ratios to average net assets:***

        

Net investment income (loss)

     (6.1 )%      (8.6 )%      (6.7 )%      (8.4 )% 

Incentive fees

     —       —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss) before incentive fees****

     (6.1     (8.6     (6.7     (8.4 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     6.1     8.6     6.8     8.4

Incentive fees

     —       —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     6.1     8.6     6.8     8.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return:

        

Total return before incentive fees

     6.4     (8.7 )%      2.0     (11.1 )% 

Incentive fees

     —       —       —       —  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return after incentive fees

     6.4     (8.7 )%      2.0     (11.1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

***  Annualized (other than incentive fees).

 

****  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.

 

9


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

3. Trading Activities:

The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity interests. The Partnership’s investments are in other funds which trade these instruments. The results of the Partnership’s trading activities from its investment in the Funds are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.

The customer agreement among the Partnership, MS&Co. and each of the Funds gives, and the customer agreements between the Partnership and CGM and each of the Funds and CGM gave, the Partnership and the Funds the legal right to net unrealized gains and losses on open futures and open forward contracts. The Funds net, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet,” have been met.

All of the commodity interests owned by the Funds are held for trading purposes.

Brokerage fees previously paid to CGM were calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and were affected by trading performance and redemptions. Trading and transaction fees are based on the number of trades executed by the Advisors for the Funds and the Partnership’s ownership of the Funds.

4. Fair Value Measurements:

Partnership’s and the Funds’ Investments. All commodity interests held by the Partnership, including derivative financial instruments and derivative commodity instruments, through the Partnership’s investments in the Funds, are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in the trading account on the Funds’ Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. The General Partner has concluded that based on available information in the marketplace, the Funds’ 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. The General Partner has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Funds’ Level 2 assets and liabilities.

 

10


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

The Partnership and the Funds will separately present purchases, sales, issuances, and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation as well as 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.

On October 1, 2012, the Financial Accounting Standards Board (the “FASB”) issued ASU 2012-04 “Technical Corrections and Improvements,” which makes minor technical corrections and clarifications to ASC 820, “Fair Value Measurements and Disclosures.” When the FASB issued Statement 157 (codified in ASC 820), it conformed the use of the term “fair value” in certain pre-Codification standards but not others. ASU 2012-04 conforms the term’s use throughout the ASC “to fully reflect the fair value measurement and disclosure requirements” of ASC 820. ASU 2012-04 also amends the requirements that must be met for an investment company to qualify for the exemption from presenting a statement of cash flows. Specifically, it eliminates the requirements that substantially all of an entity’s investments be carried at “market value” and that the investments be highly liquid. Instead, it requires substantially all of the entity’s investments to be carried at “fair value” and classified as Level 1 or Level 2 measurements under ASC 820.

The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards, swaps and options 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 options 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). Investments in funds (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended September 30, 2014 and December 31, 2013, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and twelve months ended December 31, 2013, there were no transfers of assets or liabilities between Level 1 and Level 2.

 

     September 30, 2014      Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs (Level 3)
 

Assets

           

Investment in Funds

   $ 14,258,918       $ 0       $ 14,258,918       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net fair value

   $ 14,258,918       $ 0       $ 14,258,918       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2013      Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs (Level 3)
 

Assets

           

Investment in Funds

   $ 15,284,306       $ 0       $ 15,284,306       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net fair value

   $ 15,284,306       $ 0       $ 15,284,306       $ 0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

11


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

5. Investment in Funds:

On March 1, 2005, the assets allocated to Aspect for trading were invested in Aspect Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 16,015.3206 units of Aspect Master with cash equal to $14,955,106 and a contribution of open commodity futures and forward contracts with a fair value of $1,060,214. Aspect Master permits accounts managed by Aspect using Aspect’s Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Aspect Master. Individual and pooled accounts currently managed by Aspect, including the Partnership, are permitted to be limited partners of Aspect Master. The General Partner and Aspect believe that trading through this structure should promote efficiency and economy in the trading process.

On November 1, 2005, the assets allocated to Altis for trading were invested in Altis Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 13,013.6283 units of Altis Master with cash equal to $11,227,843 and a contribution of open commodity futures and forwards contracts with a fair value of $1,785,785. Altis Master permits accounts managed by Altis using the Global Futures Portfolio Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Altis Master. Individual and pooled accounts currently managed by Altis, including the Partnership, are permitted to be limited partners of Altis Master. The General Partner and Altis believe that trading through this structure should promote efficiency and economy in the trading process.

On March 1, 2010, the assets allocated to Waypoint for trading were invested Waypoint Master Fund L.P. (“Waypoint Master”), a limited partnership organized under the partnership laws of the State Of New York. The Partnership purchased 4,959.4220 units of Waypoint Master with cash equal to $4,959,422. Waypoint Master permitted commodity pools managed by Waypoint using its Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. On November 30, 2013, the Partnership fully redeemed its investment in Waypoint Master for cash equal to $3,520,485.

On November 1, 2010, the assets allocated to Blackwater for trading were invested in Blackwater Master, a limited partnership organized under the partnership laws of the State of Delaware. The Partnership invested in Blackwater Master with cash equal to $5,000,000. Blackwater Master permits accounts managed by Blackwater using its Global Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Blackwater Master. Individual and pooled accounts currently managed by Blackwater, including the Partnership, are permitted to be limited partners of Blackwater Master. The General Partner and Blackwater believe that trading through this structure should promote efficiency and economy in the trading process.

 

12


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

The General Partner is not aware of any material changes to any of the trading programs discussed above during the fiscal quarter ended September 30, 2014.

Aspect Master’s, Altis Master’s and Blackwater Master’s (collectively, the “Funds”) trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on United States of America commodity exchanges and foreign commodity exchanges. References to the “Funds” included in this report may include, as relevant, Waypoint Master. During the nine months ended September 30, 2014, the Funds engaged in such trading through commodity brokerage accounts maintained by MS&Co. During prior periods included in this report, the Funds also engaged in such trading through commodity brokerage accounts maintained with CGM.

A limited partner of the Funds may withdraw all or part of its capital contribution and undistributed profits, if any, from the Funds as of the end of any day (the “Redemption Date”) after a request for redemption has been made to the General Partner at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner elects to redeem and informs the Funds.

Management and incentive fees are charged at the Partnership level. All trading, exchange, clearing, user, give-up, floor brokerage and National Futures Association fees (collectively the “clearing fees”) are borne by the Partnership through its investment in the Funds and allocated to their limited partners including the Partnership. All other fees are charged at the Partnership level.

At September 30, 2014, the Partnership owned approximately 9.5%, 7.0% and 16.8% of Aspect Master, Altis Master and Blackwater Master, respectively. At December 31, 2013, the Partnership owned approximately 5.3%, 5.0% and 8.2% of Aspect Master, Altis Master and Blackwater Master, respectively. It is the intention of the Partnership to continue to invest in the Funds. The performance of the Partnership is directly affected by the performance of the Funds. Expenses to the investors as a result of the investment in the Funds are approximately the same and redemption rights are not affected.

Summarized information reflecting the total assets, liabilities and capital of the Funds is shown in the following tables.

 

     September 30, 2014  
     Total Assets      Total
Liabilities
     Total
Capital
 

Aspect Master

   $ 57,012,498       $ 582,943       $ 56,429,555   

Altis Master

     62,268,290         32,765         62,235,525   

Blackwater Master

     27,337,271         370,501         26,966,770   
     December 31, 2013  
     Total Assets      Total
Liabilities
     Total
Capital
 

Aspect Master

   $ 102,342,493       $ 31,944       $ 102,310,549   

Altis Master

     93,798,364         1,680,201         92,118,163   

Blackwater Master

     63,936,601         610,828         63,325,773   

 

13


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Summarized information reflecting the net investment income (loss), total trading results and net income (loss) of the Funds is shown in the following tables.

 

     For the three months ended September 30, 2014  
     Net Investment
Income (Loss)
    Total Trading
Results
    Net Income
(Loss)
 

Aspect Master

   $ (73,201   $ 3,932,169      $ 3,858,968   

Altis Master

     (91,952     4,221,875        4,129,923   

Blackwater Master

     (14,963     2,462,046        2,447,083   
     For the nine months ended September 30, 2014  
     Net Investment
Income (Loss)
    Total Trading
Results
    Net Income
(Loss)
 

Aspect Master

   $ (207,332   $ 3,350,986      $ 3,143,654   

Altis Master

     (265,430     973,102        707,672   

Blackwater Master

     (62,309     732,472        670,163   
     For the three months ended September 30, 2013  
     Net Investment
Income (Loss)
    Total Trading
Results
    Net Income
(Loss)
 

Aspect Master

   $ (66,230   $ (7,692,184   $ (7,758,414

Altis Master

     (131,613     (11,456,410     (11,588,023

Waypoint Master

     (28,980     (764,582     (793,562

Blackwater Master

     (20,014     (2,708,600     (2,728,614
     For the nine months ended September 30, 2013  
     Net Investment
Income (Loss)
    Total Trading
Results
    Net Income
(Loss)
 

Aspect Master

   $ (226,589   $ (6,483,182   $ (6,709,771

Altis Master

     (431,383     (3,562,943     (3,994,326

Waypoint Master

     (94,780     (917,399     (1,012,179

Blackwater Master

     (79,090     (2,792,564     (2,871,654

 

14


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

Summarized information reflecting the Partnership’s investment in, and the operations of the Funds is shown in the following tables.

 

    September 30, 2014     For the three months ended September 30, 2014              
    % of
Partnership’s
Net Assets
    Fair
Value
    Income
(Loss)
    Expenses    

Net

Income

    Investment
Objective
    Redemptions
Permitted
 

Funds

        Clearing Fees     Other     (Loss)      

Aspect Master

    38.89   $ 5,387,251      $ 360,352      $ 3,206      $ 3,300      $ 353,846       
 
Commodity
Portfolio
  
  
    Monthly   

Altis Master

    31.32     4,337,717        321,400        3,805        2,284        315,311       
 
Commodity
Portfolio
  
  
    Monthly   

Blackwater Master

    32.73     4,533,950        381,852        3,037        3,503        375,312       
 
Commodity
Portfolio
  
  
    Monthly   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

    $ 14,258,918      $ 1,063,604      $ 10,048      $ 9,087      $ 1,044,469       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
    September 30, 2014     For the nine months ended September 30, 2014              
    % of
Partnership’s

Net Assets
    Fair
Value
    Income
(Loss)
    Expenses    

Net

Income

    Investment
Objective
    Redemptions  

Funds

        Clearing Fees     Other     (Loss)      

Aspect Master

    38.89   $ 5,387,251      $ 397,562      $ 9,205      $ 6,484      $ 381,873       
 
Commodity
Portfolio
  
  
    Monthly   

Altis Master

    31.32     4,337,717        203,948        11,409        4,412        188,127       
 
Commodity
Portfolio
  
  
    Monthly   

Blackwater Master

    32.73     4,533,950        313,057        9,402        8,253        295,402       
 
Commodity
Portfolio
  
  
    Monthly   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

    $ 14,258,918      $ 914,567      $ 30,016      $ 19,149      $ 865,402       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

        December 31, 2013     For the three months ended September 30, 2013              
    % of
Partnership’s
Net Assets
    Fair
Value
    Income
(Loss)
    Expenses    

Net

Income

    Investment
Objective
    Redemptions
Permitted
 

Funds

        Clearing Fees     Other     (Loss)      

Aspect Master

    36.54   $ 5,464,202      $ (304,500   $ 2,260      $ 538      $ (307,298    
 
Commodity
Portfolio
  
  
    Monthly   

Altis Master

    30.71     4,592,354        (400,918     4,287        464        (405,669    
 
Commodity
Portfolio
  
  
    Monthly   

Waypoint Master

    —          —          (239,731     2,747        6,439        (248,917    
 
Commodity
Portfolio
  
  
    Monthly   

Blackwater Master

    34.97     5,227,750        (162,585     1,778        1,330        (165,693    
 
Commodity
Portfolio
  
  
    Monthly   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

    $ 15,284,306      $ (1,107,734   $ 11,072      $ 8,771      $ (1,127,577    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
    December 31, 2013     For the nine months ended September 30, 2013              
    % of
Partnership’s

Net Assets
    Fair
Value
    Income
(Loss)
    Expenses    

Net

Income

    Investment
Objective
    Redemptions
Permitted
 

Funds

        Clearing Fees     Other     (Loss)      

Aspect Master

    36.54   $ 5,464,202      $ (263,746   $ 7,422      $ 2,192      $ (273,360    
 
Commodity
Portfolio
  
  
    Monthly   

Altis Master

    30.71     4,592,354        (135,717     13,531        2,079        (151,327    
 
Commodity
Portfolio
  
  
    Monthly   

Waypoint Master

    —          —          (277,293     9,906        16,674        (303,873    
 
Commodity
Portfolio
  
  
    Monthly   

Blackwater Master

    34.97     5,227,750        (164,617     8,043        5,225        (177,885    
 
Commodity
Portfolio
  
  
    Monthly   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

    $ 15,284,306      $ (841,373   $ 38,902      $ 26,170      $ (906,445    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

15


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

6. Financial Instrument Risks:

In the normal course of business, the Partnership, through its investments in the Funds, 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 include futures and certain standardized forward and option contracts. Certain swap contracts may also be trading on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain standardized forward, swap and option contracts. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that at any given time approximately 15.6% to 28.2% of the Funds’ contracts are traded OTC.

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 Funds due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Funds are exposed to a market risk equal to the value of the 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 Funds’ risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Funds’ risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Funds to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Funds had credit risk and concentration risk during the reporting period and in prior periods included in this report as CGM and/or MS&Co. or their affiliates were the sole counterparties or brokers with respect to the Funds’ assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through CGM/MS&Co. the Funds’ counterparty is an exchange or clearing organization. The Funds continue to be subject to such risks with respect to MS&Co.

The General Partner monitors and attempts to control the Funds’ risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Funds may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forwards and option 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 Funds’ business, these instruments may not be held to maturity.

 

16


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

7. Critical Accounting Policies:

Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Partnership’s and the Funds’ Investments. All commodity interests held by the Partnership, including derivative financial instruments and derivative commodity instruments, through its investments in the Funds, are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Funds’ Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Fund’s Statements of Income and Expenses and Changes in Partners’ Capital.

Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. The General Partner has concluded that based on available information in the marketplace, the Funds’ 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. The General Partner has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Funds’ Level 2 assets and liabilities.

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

The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available, are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). Investments in funds (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended September 30, 2014 and December 31, 2013, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2014 and twelve months ended December 31, 2013, there were no transfers of assets and liabilities between Level 1 and Level 2.

Futures Contracts. The Funds trade futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Funds. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

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

 

17


Table of Contents

Global Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2014

(Unaudited)

 

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

London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Funds are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Funds. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

Investment Company Status. Effective January 1, 2014, the Partnership adopted, Accounting Standards Update (“ASU 2013-08”), “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements.” ASU 2013-08 changes the approach to the investment company assessment, requires non-controlling ownership interests in other investment companies to be measured at fair value, and requires additional disclosures about the investment company’s status as an investment company. ASU 2013-08 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Partnership’s financial statements. Based on management’s assessment, the Partnership has been deemed to be an investment company since inception. It has all of the fundamental and typical characteristics of an investment company.

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 2010 through 2013 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.

Net Income (loss) per unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 2, “Financial Highlights.”

Subsequent Events. The General Partner evaluates events that occur after the balance sheet date but before financial statements are issued. The General Partner has assessed the subsequent events through the date of issuance and has determined that, other than as referenced in note 1 to the financial statements, there were no subsequent events requiring adjustment of or disclosure in the financial statements.

 

18


Table of Contents

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

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investments in the Funds and cash. The Funds do not engage in sales of goods or services. The Funds’ only assets are their equity in trading accounts, consisting of cash and cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on forward contracts and commodity options purchased, if applicable, and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investments in the Funds. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the third quarter of 2014.

The Partnership’s capital consists of the capital contributions of the partners, as increased or decreased by net income or loss on trading and by expenses, interest income and redemptions of Redeemable Units and distributions of profits, if any.

For the nine months ended September 30, 2014, Partnership capital decreased 7.4% from $14,952,043 to $13,852,261. This decrease was attributable to the redemptions of 10.3600 General Partner unit equivalents totaling $15,184 and redemptions of 945.6570 Redeemable Units totaling $1,306,869. This decrease was partially offset by a net gain of $222,271. Future redemptions could impact the amount of funds available for investment in the Funds in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the General Partner 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. The General Partner believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s/Funds’ significant accounting policies are described in detail in Note 7 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

19


Table of Contents

Results of Operations

During the Partnership’s third quarter of 2014, the net asset value per unit increased 6.4% from $1,377.61 to $1,465.58 as compared to a decrease of 8.7% in the third quarter of 2013. The Partnership experienced a net trading gain, before fees and expenses in the third quarter of 2014 of $1,063,253. Gains were primarily attributable to the Fund’s trading of commodity futures in currencies, grains, non-U.S. interest rates, metals, softs and indices and were partially offset by losses in energy, U.S. interest rates and livestock. The Partnership experienced a net trading loss, before fees and expenses in the third quarter of 2013 of $1,108,338. Losses were primarily attributable to the Funds’ trading of commodity futures in currencies, energy, U.S. and non-U.S. interest rates, metals and softs and were partially offset by gains in grains, livestock and indices.

The most significant gains were achieved within the agricultural sector during September from short positions in corn and wheat futures as favorable growing conditions in the U.S. Midwest reinforced analysts’ predictions that U.S. farms are heading for record crop harvests in 2014. Additional gains in the sector were recorded during August and September from short positions in sugar futures as prices declined as farmers in Thailand, Brazil, and India moved to increase sugarcane plantings. Within the currency markets, gains were achieved during August and September from short positions in the Japanese yen versus the U.S. dollar as the relative value of the yen declined after economic indicators showed Japans economy was growing at a slower pace than previously forecast. Additional gains were experienced from short positions in the euro and Swiss franc versus the U.S. dollar as slumping economies across the Euro-zone increased speculation the European Central Bank would initiate further stimulus measures. During September, gains were recorded within the metals markets from short positions in silver and gold futures as prices declined as a strengthening U.S. dollar eroded investor demand for the precious metals. Additional gains were experienced during September from short positions in tin futures as prices fell following the release of weak manufacturing gauges in China. Within the global interest rate markets, gains were experienced primarily during August from long positions in European fixed income futures as prices moved higher amid investor speculation the European Central Bank would continue stimulus measures after reports showed euro-area manufacturing expanded less than previously estimated during July. Additional gains were recorded within the global stock index sector during August from long positions in U.S. equity index futures as prices moved higher after Commerce Department reports showed U.S. business investment reached a two year high during the second quarter. A portion of the Partnership’s gains for the quarter was offset by losses incurred within the energy markets during July from long positions in crude oil and its related products as prices declined after industry reports indicated crude stockpiles in the U.S. increased during the second quarter.

During the Partnership’s nine months ended September 30, 2014 the net asset value per unit increased 2.0% from $1,436.62 to $1,465.58 as compared to a decrease of 11.1% during the nine months ended September 30, 2013. The Partnership experienced a net trading gain, before fees and expenses for the nine months ended September 30, 2014 of $912,889. Gains were primarily attributable to the Fund’s trading of commodity futures in currencies, grains, non-U.S. interest rates, livestock, softs and indices and were partially offset by losses in energy, U.S. interest rates and metals. The Partnership experienced a net trading loss, before fees and expenses during the nine months ended September 30, 2013 of $844,985. Losses were primarily attributable to the Funds’ trading of commodity futures in currencies, energy, grains and U.S. and non-U.S. interest rates and were partially offset by gains in livestock, metals, softs and indices.

The most significant gains were achieved within the agricultural markets during September from short positions in corn and wheat futures as favorable growing conditions in the U.S. Midwest reinforced analysts’ predictions that U.S. farms are heading for record crop levels in 2014. Additional gains in this sector were recorded during June from long positions in cattle futures as increased beef demand combined with U.S. farm herds being at reduced levels due to droughts in Texas and California boosted prices. Within the currency markets, gains were experienced during August and September from short positions in the Japanese yen versus the U.S. dollar as the relative value of the yen declined after economic indicators showed Japan’s economy was growing at a slower pace than previously forecast. Additional gains were recorded during March from long positions in Brazilian real versus the U.S. dollar after the value of the real increased following central bank stimulus measures which caused an inflow of foreign capital into the South American nation. Within the global interest rate sector, gains were recorded during August from long positions in European fixed income futures as prices increased amid investor speculation the European Central Bank would continue stimulus measures after reports showed euro-area manufacturing expanded less than previously estimated during July. Additional gains were experienced during May from long positions in European fixed income futures as prices advanced as German unemployment unexpectedly increased and euro-area lending contracted, boosting demand for the relative “safety” of government debt. Within the global stock index sector, gains were recorded during June from long positions in U.S. equity index futures as prices advanced as indicators of higher manufacturing output signaled renewed economic strength in the U.S. following a contraction during the previous quarter. During May, gains were achieved from long positions in European, Asian, and U.S. equity index futures as prices advanced as U.S. durable goods orders climbed and investors speculated the U.S. economy was improving. A portion of the Partnership’s gains for the first nine months of the year was offset by losses incurred within the energy markets primarily during July from long positions in crude oil and its related products as prices declined after industry reports indicated crude stockpiles in the U.S. increased during the second quarter. Within the metals markets, losses were incurred during February from short positions in aluminum futures as prices advanced after a report showed China’s new credit increased to a record during January, boosting demand prospects for industrial metals.

 

20


Table of Contents

Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Funds depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Funds expect to increase capital through operations.

During the reporting period, interest income on 80% of the Partnership’s (or the Partnership’s allocable portion of a Fund’s) average daily equity maintained in cash during each month was earned at a 30- day U.S. Treasury bill rate determined weekly based on the average noncompetitive yield on 3-month U.S. Treasury bill maturing in 30 days or at the monthly average of the 4-week U.S. Treasury bill rate, as applicable. Interest income for the three and nine months ended September 30, 2014 decreased by $253 and $1,934, respectively, as compared to the corresponding periods in 2013. The decrease in interest income is due to lower U.S. Treasury bill rates and lower average net assets during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013. The amount of interest income earned by the Partnership/Funds depends on the average daily equity in the Partnership’s/Funds’ accounts and upon interest rates over which neither the Partnership/Funds nor MS&Co. has control.

Ongoing selling agent/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 and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Ongoing selling agent/brokerage fees for the three and nine months ended September 30, 2014 decreased by $115,222 and $310,911, respectively, as compared to the corresponding periods in 2013. This decrease was due to lower average net assets during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013 and also a reduction in the monthly ongoing selling agent fee rate.

Certain clearing fees are based on the number of trades executed by the Advisors for the Funds. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three and nine months ended September 30, 2014 decreased by $1,024 and $8,886, respectively, as compared to the corresponding periods in 2013. The decrease in clearing fees is primarily due to a decrease in the number of trades during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013.

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 and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three and nine months ended September 30, 2014 decreased by $18,681 and $80,318, respectively, as compared to the corresponding periods in 2013. The decrease in management fees was due to lower average net assets during the three and nine months ended September 30, 2014, as compared to the corresponding periods in 2013.

Incentive fees are based on the new trading profits generated by each Advisor as defined in the management agreements among the Partnership, the General Partner and each Advisor and are payable annually. There were no incentive fees for the three and nine months ended September 30, 2014 and 2013. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.

As of September 30, 2014 and June 30, 2014, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:

 

Advisor

   September 30, 2014     June 30, 2014  

Aspect Capital Limited.

   $ 5,370,736         39   $ 5,269,291         39

Altis Partners (Jersey) Limited.

   $ 3,966,520         29   $ 4,054,979         30

Blackwater Capital Management LLC

   $ 4,515,005         32   $ 4,273,896         31

 

21


Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

All of the Partnership’s assets are subject to the risk of trading loss through its investments in the Funds. The Funds are speculative commodity pools. The market sensitive instruments held by them are acquired for speculative trading purposes, and all or substantially all of the Funds’ assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Funds’ main lines 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 Funds’ open contracts and, consequently in their earnings and cash balances. The Funds’ market risks are influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects of the Funds’ open contracts and the liquidity of the market in which they trade.

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

“Value at Risk” is a measure of the maximum amount which the Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Funds’ speculative trading and the recurrence in the markets traded by the Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Funds’ experiences to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Funds’ losses in any market sector will be limited to Value at Risk or by the Funds’ attempts to manage their market risks.

Exchange margin requirements have been used by the Funds as the measure of their Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The Advisors currently trade the Partnership’s assets indirectly in master fund managed accounts established in the name of the masters, over which they have been granted limited authority to make trading decisions. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership indirectly, through its investments in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments held by each Fund, separately. There have been no material changes in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

22


Table of Contents

The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of September 30, 2014 and December 31, 2013. As of September 30, 2014, the Partnership’s total capitalization was $13,852,261.

September 30, 2014

 

Market Sector

  

Value at Risk

     % of Total
Capitalization
 

Currencies

   $ 759,112         5.48

Energy

     176,044         1.27

Grains

     158,065         1.14

Interest Rates U.S.

     66,586         0.48

Interest Rates Non-U.S.

     225,403         1.63

Livestock

     13,039         0.09

Metals

     383,104         2.77

Softs

     75,132         0.54

Indices

     499,667         3.61
  

 

 

    

 

 

 

Total

   $  2,356,152         17.01 % 
  

 

 

    

 

 

 

As of December 31, 2013, the Partnership’s total capitalization was $14,952,043.

December 31, 2013

 

Market Sector

  

Value at Risk

     % of Total
Capitalization
 

Currencies

   $ 673,314         4.50

Energy

     192,078         1.28

Grains

     283,499         1.90

Interest Rates U.S.

     108,637         0.73

Interest Rates Non-U.S.

     394,750         2.64

Livestock

     48,445         0.32

Metals

     399,337         2.67

Softs

     79,174         0.53

Indices

     512,324         3.43
  

 

 

    

 

 

 

Total

   $ 2,691,558         18.00
  

 

 

    

 

 

 

 

23


Table of Contents

The following tables indicate the trading Value at Risk associated with the Partnership’s investments in the Funds by market category as of September 30, 2014 and December 31, 2013, and the highest, lowest and average value during the three months ended September 30, 2014 and during the twelve months ended December 31, 2013. All open contracts trading risk exposures have been included in calculating the figures set forth below.

As of September 30, 2014, Aspect Master’s total capitalization was $56,429,555. The Partnership owned approximately 9.5% of Aspect Master. As of September 30, 2014, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:

September 30, 2014

 

                  Three Months Ended September 30, 2014  

Market Sector

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

Currencies

   $  6,046,759         10.72   $  7,644,115       $  4,737,366       $  6,476,801   

Energy

     790,218         1.40     837,980         350,285         666,346   

Grains

     552,692         0.98     642,035         436,382         565,431   

Indices

     1,693,481         3.00     2,216,211         1,264,990         1,913,941   

Interest Rates U.S.

     411,428         0.73     667,766         316,459         481,146   

Interest Rates Non-U.S.

     1,891,683         3.35     2,305,929         1,839,006         2,059,839   

Livestock

     42,570         0.08     104,940         29,040         49,720   

Metals

     762,884         1.35     1,481,972         690,184         955,715   

Softs

     294,690         0.52     461,028         236,178         368,822   
  

 

 

    

 

 

         

Total

   $  12,486,405         22.13        
  

 

 

    

 

 

         

 

* Average of month-end Values at Risk.

As of December 31, 2013, Aspect Master’s total capitalization was $102,310,549. The Partnership owned approximately 5.3% of Aspect Master. As of December 31, 2013, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:

December 31, 2013

 

                  Twelve Months Ended December 31, 2013  

Market Sector

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

Currencies

   $ 8,074,032         7.89   $ 10,780,103       $ 67,390       $ 7,332,185   

Energy

     1,210,979         1.18     2,869,850         458,957         1,477,925   

Grains

     1,084,329         1.06     1,315,867         80,838         897,343   

Indices

     3,403,187         3.33     4,335,369         1,159,866         3,389,186   

Interest Rates U.S.

     682,636         0.67     805,234         118,357         431,818   

Interest Rates Non-U.S.

     3,296,581         3.22     4,524,738         863,953         2,810,624   

Livestock

     75,938         0.07     219,100         36,925         148,985   

Metals

     1,246,907         1.22     3,199,261         734,739         2,161,501   

Softs

     478,791         0.47     884,459         367,449         603,860   
  

 

 

    

 

 

         

Total

   $ 19,553,380         19.11 %         
  

 

 

    

 

 

         

 

* Annual average of month-end Values at Risk.

 

24


Table of Contents

As of September 30, 2014, Altis Master’s total capitalization was $62,235,525. The Partnership owned approximately 7.0% of Altis Master. As of September 30, 2014, Altis Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Altis for trading) was as follows:

September 30, 2014

 

                  Three Months Ended September 30, 2014  

Market Sector

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

Currencies

   $ 1,755,409         2.82   $  2,500,488       $ 676,543       $  1,427,505   

Energy

     907,588         1.46     2,239,925         588,854         1,169,076   

Grains

     1,033,244         1.66     1,466,599         105,669         958,507   

Indices

     1,485,568         2.39     3,565,353         1,317,123         2,239,017   

Interest Rates U.S.

     149,325         0.24     149,325         33,462         88,918   

Interest Rates Non-U.S.

     302,191         0.48     1,060,733         165,073         457,232   

Livestock

     103,950         0.17     523,050         80,245         183,077   

Metals

     3,247,322         5.22     4,200,668         1,901,967         3,468,803   

Softs

     673,384         1.08     1,036,023         615,289         786,593   
  

 

 

    

 

 

         

Total

   $  9,657,981         15.52        
  

 

 

    

 

 

         

 

* Average of month-end Values at Risk.

As of December 31, 2013, Altis Master’s total capitalization was $92,118,163. The Partnership owned approximately 5.0% of Altis Master. As of December 31, 2013, Altis Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Altis Master for trading) was as follows:

December 31, 2013

 

                  Twelve Months Ended December 31, 2013  

Market Sector

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

Currencies

   $ 1,889,702         2.05   $ 3,262,183       $ 1,086,832       $ 2,035,100   

Energy

     1,746,745         1.90     3,490,181         352,794         1,608,526   

Grains

     3,309,847         3.59     3,572,846         584,900         2,114,477   

Indices

     1,862,430         2.02     5,629,558         610,945         2,904,403   

Interest Rates U.S.

     374,179         0.41     1,814,375         97,248         407,842   

Interest Rates Non -U.S.

     2,083,654         2.26     3,353,969         568,721         2,072,859   

Livestock

     371,993         0.40     775,238         134,110         478,816   

Metals

     3,839,916         4.17     6,827,422         219,248         9,104   

Softs

     1,075,961         1.17     2,338,466         952,510         3,716,633   
  

 

 

    

 

 

         

Total

   $ 16,554,427         17.97 %         
  

 

 

    

 

 

         

 

 

* Annual average of month-end Values at Risk.

 

25


Table of Contents

As of September 30, 2014, Blackwater Master’s total capitalization was $26,966,770. The Partnership owned approximately 16.8% of Blackwater Master. As of September 30, 2014, Blackwater Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Blackwater for trading) was as follows:

September 30, 2014

 

                  Three Months Ended September 30, 2014  
            % of Total     High      Low      Average  

Market Sector

   Value at Risk      Capitalization     Value at Risk      Value at Risk      Value at Risk*  

Currencies

   $  367,806         1.36   $  1,801,965       $  367,806       $  799,963   

Energy

     222,868         0.83     416,537         112,530         236,521   

Grains

     197,808         0.73     197,808         4,125         68,961   

Indices

     1,397,600         5.18     2,206,286         796,633         1,219,330   

Interest Rates U.S.

     101,475         0.38     459,140         66,726         188,522   

Interest Rates Non -U.S.

     146,069         0.54     461,918         146,069         220,230   

Livestock

     10,230         0.04     59,400         10,230         10,560   

Metals

     495,940         1.84     1,148,900         340,845         567,129   
  

 

 

    

 

 

         

Total

   $  2,939,796         10.90        
  

 

 

    

 

 

         

 

 

* Average of month-end Values at Risk.

As of December 31, 2013, Blackwater Master’s total capitalization was $63,325,773. The Partnership owned approximately 8.2% of Blackwater Master. As of December 31, 2013, Blackwater Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Blackwater for trading) was as follows:

December 31, 2013

 

     Value at Risk      % of Total
Capitalization
    Twelve Months Ended December 31, 2013  

Market Sector

        High
Value at Risk
     Low
Value at Risk
     Average
Value at  Risk*
 

Currencies

   $ 1,840,305         2.91   $ 4,682,024       $ 288,643       $ 1,519,891   

Energy

     494,616         0.78     2,022,000         56,625         831,779   

Grains

     738,262         1.17     1,421,500         194,600         630,543   

Indices

     2,912,606         4.60     4,710,210         1,221,043         3,016,332   

Interest Rates U.S.

     655,463         1.03     655,463         20,900         231,447   

Interest Rates Non -U.S.

     1,412,783         2.23     1,674,803         186,215         928,368   

Livestock

     314,888         0.50     401,963         15,000         154,801   

Metals

     1,722,627         2.72     2,838,178         56,320         998,173   
  

 

 

    

 

 

         

Total

   $ 10,091,550         15.94        
  

 

 

    

 

 

         

 

* Annual average of month-end Values at Risk.

 

26


Table of Contents

Item 4. Controls and Procedures.

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934 (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, 2014, 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 and correction 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, 2014 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

27


Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings pending against the Partnership nor the General Partner.

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, 2013, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014.

On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC.

MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the Securities and Exchange Commission as required by the Exchange Act, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, please refer to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2013, 2012, 2011, 2010, and 2009.

In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and MS&Co. has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Each of Morgan Stanley and MS&Co. is also involved, from time to time, in investigations and proceedings by governmental and/or regulatory agencies or self-regulatory organizations, certain of which may result in adverse judgments, fines or penalties. The number of these investigations and proceedings has increased in recent years with regard to many financial services institutions, including Morgan Stanley and MS&Co.

MS&Co. is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, MS&Co. is registered as a futures commission merchant and is a member of NFA.

On May 7, 2009, MS&Co. was named as a defendant in a purported class action lawsuit brought under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, which is now styled In re Morgan Stanley Mortgage Pass-Through Certificates Litigation and is pending in the United States District Court for the Southern District of New York (“SDNY”). The third amended complaint, filed on September 30, 2011, alleges, among other things, that the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 contained false and misleading information concerning the pools of

 

28


Table of Contents

residential loans that backed these securitizations. The plaintiffs seek, among other relief, class certification, unspecified compensatory and rescissionary damages, costs, interest and fees. On July 22, 2014, the parties reached an agreement in principle to settle the litigation. The settlement is subject to approval by the court, which has set a final approval hearing for December 18, 2014.

On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against MS&Co. and an affiliate and other defendants in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On October 18, 2010, defendants filed a motion to dismiss the action. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants’ omnibus motion to dismiss plaintiff’s amended complaint and on August 15, 2011, the court denied MS&Co.’s individual motion to dismiss the amended complaint. At June 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $54 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss for this action up to the difference between the $54 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against MS&Co. and other defendants in the Superior Court of the State of California. These actions are styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints filed on June 10, 2010 allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. in these cases was approximately $704 million and $276 million, respectively. The complaints raise claims under both the federal securities laws and California law and seek, among other things, to rescind the plaintiff’s purchase of such certificates. On August 11, 2011, plaintiff’s Securities Act of 1933, as amended, claims were dismissed with prejudice. The defendants filed answers to the amended complaints on October 7, 2011. On February 9, 2012, defendants’ demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiff’s negligent misrepresentation claims were dismissed with prejudice. A bellwether trial is currently scheduled to begin in January 2015. MS&Co. is not a defendant in connection with the securitizations at issue in that trial. On May 23, 2014, plaintiff and the defendants in the bellwether trial filed motions for summary adjudication, which were denied. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $291 million, and the certificates had incurred actual losses of approximately $6 million. Based on currently available information, MS&Co. believes it could incur a loss for this

 

29


Table of Contents

action up to the difference between the $291 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and its affiliates and other defendants in the Circuit Court of the State of Illinois styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. and/or its affiliates in this action was approximately $203 million. The complaint raises claims under Illinois law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On March 24, 2011, the court granted plaintiff leave to file an amended complaint. MS&Co. and its affiliates filed an answer on December 21, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $55 million and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $55 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against MS&Co. and certain of its affiliates in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to plaintiffs by MS&Co. and/or its affiliates was approximately $104 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud and negligent misrepresentation and seeks, among other things, compensatory and/or recessionary damages associated with plaintiffs’ purchases of such certificates. On March 15, 2013, the court denied in substantial part the defendants’ motion to dismiss the amended complaint, which order MS&Co. and its affiliates appealed on April 11, 2013. On May 3, 2013, MS&Co. and its affiliates filed an answer to the amended complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $82 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $82 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to an offset for interest received by the plaintiff prior to a judgment.

 

30


Table of Contents

On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against MS&Co. and certain affiliates and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by MS&Co. and/or its affiliates was approximately $153 million. The amended complaint raises claims under the Ohio Securities Act, federal securities laws, and common law and seeks, among other things, to rescind the plaintiffs’ purchases of such certificates. MS&Co. and its affiliates filed an answer on August 17, 2012. Trial is currently scheduled to begin in July 2015. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $111 million, and the certificates had incurred actual losses of approximately $2 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $111 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to an offset for interest received by the plaintiff prior to a judgment.

On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank S.S.B., filed two complaints against MS&Co. in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation, as Receiver for Franklin Bank S.S.B. v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that MS&Co. made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to the plaintiff by MS&Co. in these cases was approximately $67 million and $35 million, respectively. The complaints each raised claims under both federal securities law and the Texas Securities Act and each seeks, among other things, compensatory damages associated with plaintiff’s purchase of such certificates. On March 20, 2012, MS&Co. filed answers to the complaints in both cases. On June 7, 2012, the two cases were consolidated. On January 10, 2013, MS&Co. filed a motion for summary judgment and special exceptions with respect to plaintiff’s claims. On February 6, 2013, the FDIC filed an amended consolidated complaint. On February 25, 2013, MS&Co. filed a motion for summary judgment and special exceptions, which motion was denied in substantial part on April 26, 2013. On May 3, 2013, the FDIC filed a second amended consolidated complaint. On October 7, 2014, the court denied MS&Co.’s motion for reconsideration of the court’s order denying its motion for summary judgment and granted its motion for reconsideration of the court’s order denying permission for interlocutory appeal. On October 22, 2014, MS&Co. filed a petition for permissive interlocutory appeal with the appellate court. Trial is currently scheduled to begin in March 2015. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $44 million, and the certificates had incurred actual losses of approximately $5 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $44 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

 

31


Table of Contents

On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Superior Court of the State of New Jersey styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. is approximately $1 billion. The complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud and tortious interference with contract and seeks, among other things, compensatory damages, punitive damages, rescission and rescissionary damages associated with plaintiffs’ purchases of such certificates. On October 16, 2012, plaintiffs filed an amended complaint which, among other things, increases the total amount of the certificates at issue by approximately $80 million, adds causes of action for fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act, and includes a claim for treble damages. On March 15, 2013, the court denied the defendants’ motion to dismiss the amended complaint. On April 26, 2013, the defendants filed an answer to the amended complaint. On June 5, 2014, the defendants filed a renewed motion to dismiss the amended complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $613 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $613 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and certain affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 19, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. and/or its affiliates or sold to plaintiff by MS&Co. and/or its affiliates was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. On October 11, 2012, defendants filed motions to dismiss the amended complaint, which was granted in part and denied in part on September 30, 2013. The defendants filed an answer to the amended complaint on December 16, 2013. Plaintiff voluntarily dismissed its claims against MS&Co. and its affiliates with respect to two of the securitizations at issue. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $66 million, and the certificates had

 

32


Table of Contents

not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $66 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On February 14, 2013, Bank Hapoalim B.M. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiff was approximately $141 million. The complaint alleges causes of action against MS&Co. and its affiliates for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On April 22, 2014, the defendants’ motion to dismiss was denied in substantial part. On August 29, 2014, the defendants filed an answer to the complaint, and on September 18, 2014, the defendants filed a notice of appeal from the ruling denying their motion to dismiss. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $73 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $73 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs.

On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiff was approximately $694 million. The complaint alleges causes of action against MS&Co. and its affiliates for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court denied defendants’ motion to dismiss. On July 10, 2014, MS&Co. and its affiliates filed a renewed motion to dismiss with respect to two certificates at issue in the case. On October 13, 2014, MS&Co. filed its answer to the complaint. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $300 million, and the certificates had incurred actual losses of approximately $78 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $300 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses.

 

33


Table of Contents

On September 23, 2013, plaintiffs in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against MS&Co. and certain affiliates in the United States District Court for the Southern District of New York. The complaint alleges that defendants made untrue statements of material fact or omitted to state material facts in the sale to plaintiffs of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. and/or its affiliates to plaintiffs was approximately $417 million. The complaint alleges causes of action against MS&Co. and its affiliates for violations of Section 11 and Section 12(a)(2) of the Securities Act of 1933, as amended, violations of the Texas Securities Act, and violations of the Illinois Securities Law of 1953 and seeks, among other things, rescissionary and compensatory damages. The defendants filed a motion to dismiss the complaint on November 13, 2013. On January 22, 2014, the court granted defendants’ motion to dismiss with respect to claims arising under the Securities Act of 1933, as amended, and denied defendants’ motion to dismiss with respect to claims arising under Texas Securities Act and the Illinois Securities Law of 1953. On April 28, 2014, the court granted in part and denied in part plaintiff’s motion to strike certain of the defendants’ affirmative defenses. On July 11, 2014, the defendants filed a motion for reconsideration of the court’s order on the motion to dismiss the complaint or, in the alternative, for certification of interlocutory appeal and a stay of all proceedings, which was denied on September 30, 2014. At September 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $211 million, and the certificates had incurred actual losses of approximately $27 million. Based on currently available information, MS&Co. believes it and/or its affiliates could incur a loss in this action up to the difference between the $211 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co. and/or its affiliates, or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. and/or its affiliates may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is 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 MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.

 

34


Table of Contents

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, 2013 as updated by the Partnership’s quarterly reports in Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014.

 

35


Table of Contents

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

The Partnership no longer offers Redeemable Units for sale.

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, 2014 –

July 31, 2014

    57.4590          $ 1,357.50            N/A            N/A       

August 1, 2014 –

August 31, 2014

    125.9410          $ 1,410.11            N/A            N/A       

September 1, 2014 –

September 30, 2014

    225.3410          $ 1,465.58            N/A            N/A       
          408.7410          $ 1,433.30                       

 

* 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 end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.

Item 3. Defaults Upon Senior Securities — None

Item 4. Mine Safety Disclosures — Not Applicable

Item 5. Other Information None

 

36


Table of Contents

Item 6. Exhibits

Exhibits:

3.1 — Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York, dated June 12, 1998 (filed as Exhibit 3.2 to the Registration Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference).

 

  (a) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 30, 1998 (filed as Exhibit 3.2 to the Registration Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference).

 

  (b) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated October 1, 1999 (filed as Exhibit 3.1(b) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

 

  (c) Certificate of Change to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, effective January 31, 2000 (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 to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 3.1(d) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

 

  (e) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 3.1(e) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

 

  (f) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 2, 2008 and incorporated herein by reference).

 

  (g) Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(g) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).

 

  (h) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 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).

 

  (i) Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated June 30, 2010 (filed as Exhibit 3.1(i) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).

 

  (j) Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).

 

  (k) Certificate of Amendment to the Certificate of Limited Partnership dated August 7, 2013 (filed as Exhibit 3.1(k) to the Quarterly Report on Form 10-Q filed on August 13, 2013 and incorporated herein by reference).

3.2 — Limited Partnership Agreement, dated June 15, 1998 (filed as Exhibit A to the Registration Statement on Form S-1 filed on August 20, 1998 and incorporated herein by reference).

 

  (a) Amendment No. 1 to the Limited Partnership Agreement, dated August 8, 2014 (filed as Exhibit 3.2(a) to the Quarterly Report on Form 10-Q filed on August 13, 2014 and incorporated herein by reference).

10.1 — Customer Agreement between the Partnership and Salomon Smith Barney Inc., dated October 21, 1998 (filed as Exhibit 10.1 to the Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed on October 22, 1998 and incorporated herein by reference).

10.2 — Escrow Agreement among the Partnership, Smith Barney Inc., and European American Bank, dated October 21, 1998 (filed as Exhibit 10.3 to the Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed on October 22, 1998 and incorporated herein by reference).

 

37


Table of Contents

10.3 — Management Agreement among the Partnership, the General Partner and Aspect Capital Management Limited, dated April 17, 2001 (filed as Exhibit 10.12 to the Annual Report on Form 10-K filed on March 28, 2002 and incorporated herein by reference).

 

  (a) Letter from the General Partner extending Management Agreement with Aspect Capital Management Limited, from June 30, 2013 to June 30, 2014, (filed as Exhibit 10.5(a) to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).

10.4 — Management Agreement among the Partnership, the General Partner and Altis Partners (Jersey) Limited, dated October 1, 2005 (filed as Exhibit 33.1 to the Quarterly Report on Form 10-Q/A filed on November 16, 2005 and incorporated herein by reference).

 

  (a) Letter from the General Partner extending Management Agreement with Altis Partners (Jersey) Limited, from June 30, 2013 to June 30, 2014, (filed as Exhibit 10.6(a) to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).

10.5 — Management Agreement among the Partnership, the General Partner and Waypoint Capital Management LLC, dated September 29, 2008 (filed as Exhibit 10.23 to the Form 10-K filed on March 31, 2009 and incorporated herein by reference).

 

  (a) Letter from the General Partner extending Management Agreement with Waypoint Capital Management LLC, from June 30, 2013 to June 30, 2014, (filed as Exhibit 10.7A to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).

10.6 — Management Agreement among the Partnership, the General Partner and Blackwater Capital Management LLC, dated October 29, 2010 (filed as Exhibit 10.9 to the Current Report on Form 8-K filed on November 4, 2010 and incorporated herein be reference).

 

  (a) Amendment to the Management Agreement among the Partnership, the General Partner and Blackwater Capital Management LLC, dated December 1, 2013 (filed as Exhibit 10.6(a) to the Quartely Report on Form 10-Q filed May 14, 2014 and incorporated herein by reference).

 

  (b) Letter from the General Partner extending Management Agreement among the Partnership, the General Partner and Blackwater Capital Management LLC, from June 30, 2013 to June 30, 2014, (filed as Exhibit 10.8A to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).

10.9 — Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management effective October 1, 2013 (filed as Exhibit 10.9 to the Quarterly Report on Form 10-Q filed November 14, 2013 and incorporated herein by reference)

 

  (a) Amendment to the Alternative Investment Selling Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective April 1, 2014 (filed as Exhibit 10.9(a) to the Quarterly Report on Form 10-Q filed May 14, 2014 and incorporated herein by reference).

 

  (b) Amendment to the Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective October 1, 2014 (filed as Exhibit 10.9(b) to the Quarterly Report on Form 10-Q filed August 13, 2014 and incorporated herein by reference).

10.10 — Commodity Futures Customer Agreement between the Partnership and MS&Co., effective October 29, 2013 (filed as Exhibit 10.9 to the quarterly report on Form 10-Q filed November 14, 2013 and incorporated herein by reference)

31.1   Rule 13a-14(a)/15d-14(a) Certification (Certification of Director). (filed herewith)

31.2   Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer). (filed herewith)

32.1   Section 1350 Certification (Certification of Director). (filed herewith)

32.2   Section 1350 Certification (Certification of Chief Financial Officer). (filed herewith)

 

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 Document.

 

38


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

GLOBAL DIVERSIFIED FUTURES FUND L.P.
By:  

Ceres Managed Futures LLC

(General Partner)

By:  

/s/ Patrick T. Egan

 

Patrick T. Egan

  Director
Date: November 13, 2014
By:  

/s/ Steven Ross

  Steven Ross
 

Chief Financial Officer

(Principal Accounting Officer)

Date: November 13, 2014

 

39