UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 000-52602
BRISTOL ENERGY FUND L.P.
(Exact name of registrant as specified in its charter)
New York |
20-2718952 | |||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue, 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
(855) 672-4468
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ | Accelerated filer ¨ | Non Accelerated filer þ | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
Yes ¨ No þ
As of October 31, 2012, 192,453.7857 Limited Partnership Redeemable Units were outstanding.
BRISTOL ENERGY FUND L.P.
FORM 10-Q
2
Statements of Financial Condition
(Unaudited) September 30, 2012 |
December 31, 2011 |
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Assets: |
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Investment in Master, at fair value |
$ | 290,025,047 | $ | 290,607,238 | ||||
Cash |
228,343 | 226,388 | ||||||
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Total assets |
$ | 290,253,390 | $ | 290,833,626 | ||||
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Liabilities and Partners Capital: |
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Liabilities: |
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Accrued expenses: |
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Brokerage fees |
$ | 907,042 | $ | 908,855 | ||||
Management fees |
482,026 | 482,943 | ||||||
Administrative fees |
120,507 | 120,736 | ||||||
Other |
130,581 | 158,755 | ||||||
Redemptions payable |
4,598,984 | |
3,436,028 |
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Total liabilities |
6,239,140 | 5,107,317 | ||||||
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Partners Capital: |
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General Partner, 2,166.2615 and 2,647.2615 unit equivalents outstanding at September 30, 2012 and December 31, 2011, respectively |
3,143,375 | 3,682,182 | ||||||
Special Limited Partner, 800.7772 Redeemable Units outstanding at September 30, 2012 and December 31, 2011 |
1,161,976 | 1,113,833 | ||||||
Limited Partners, 192,762.4045 and 201,971.5156 Redeemable Units outstanding at September 30, 2012 and December 31, 2011, respectively |
279,708,899 | 280,930,294 | ||||||
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Total partners capital |
284,014,250 | 285,726,309 | ||||||
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Total liabilities and partners capital |
$ | 290,253,390 | $ | 290,833,626 | ||||
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Net asset value per unit |
$ | 1,451.06 | $ |
1,390.94 |
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See accompanying notes to financial statements.
3
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Investment Income: |
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Interest income allocated from Master |
$ | 37,838 | $ | 8,767 | $ | 96,701 | $ | 87,559 | ||||||||
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Expenses: |
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Expenses allocated from Master |
247,271 | 158,044 | 679,242 | 611,688 | ||||||||||||
Brokerage fees |
2,802,322 | 2,875,383 | 8,659,896 | 8,971,503 | ||||||||||||
Management fees |
1,489,109 | 1,528,147 | 4,601,413 | 4,768,401 | ||||||||||||
Administrative fees |
372,278 | 382,037 | 1,150,354 | 1,192,100 | ||||||||||||
Other |
15,442 | 98,605 | 159,830 | 281,048 | ||||||||||||
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Total expenses |
4,926,422 | 5,042,216 | 15,250,735 | 15,824,740 | ||||||||||||
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Net investment income (loss) |
(4,888,584 | ) | (5,033,449 | ) | (15,154,034 | ) | (15,737,181 | ) | ||||||||
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Trading Results: |
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Net realized gains (losses) on closed contracts allocated from Master |
(8,366,454 | ) | 9,316,811 | 37,290,934 | 8,147,034 | |||||||||||
Change in net unrealized gains (losses) on open contracts allocated from Master |
(10,491,973 | ) | 8,343,129 | (9,009,485 | ) | 37,181,838 | ||||||||||
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Total trading results allocated from Master |
(18,858,427 | ) | 17,659,940 | 28,281,449 | 45,328,872 | |||||||||||
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Net income (loss) |
(23,747,011 | ) | 12,626,491 | 13,127,415 | 29,591,691 | |||||||||||
Subscriptions Limited Partners |
7,500,426 | 1,219,776 | 18,650,279 | 9,315,802 | ||||||||||||
Redemptions Limited Partners |
(11,530,296 | ) | (12,481,714 | ) | (32,789,018 | ) | (115,664,903 | ) | ||||||||
Redemptions General Partner |
(700,735 | ) | 0 | (700,735 | ) | (525,000 | ) | |||||||||
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Net increase (decrease) in Partners Capital |
(28,477,616 | ) | 1,364,553 | (1,712,059 | ) | (77,282,410 | ) | |||||||||
Partners Capital, beginning of period |
312,491,866 | 299,460,290 | 285,726,309 | 378,107,253 | ||||||||||||
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Partners Capital, end of period |
$ | 284,014,250 | $ | 300,824,843 | $ | 284,014,250 | $ | 300,824,843 | ||||||||
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Net asset value per unit (195,729.4432 and 214,840.8710 units outstanding at September 30, 2012 and 2011, respectively) |
$ | 1,451.06 | $ | 1,400.22 | $ | 1,451.06 | $ | 1,400.22 | ||||||||
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Net income (loss) per unit* |
$ | (119.09 | ) | $ | 57.16 | $ | 60.12 | $ | 133.13 | |||||||
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Weighted average units outstanding |
199,997.4452 | 220,091.1045 | 202,081.1754 | 241,170.6807 | ||||||||||||
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* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
4
Notes to Financial Statements
September 30, 2012
(Unaudited)
1. General:
Bristol Energy Fund L.P. (the Partnership), is a limited partnership organized on April 20, 2005 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of commodity interests, including options, commodity futures contracts, forward and swap contracts on exchanges and markets located in the United States and abroad. The Master (as defined below) may enter into swap and derivative contracts on energy related products. The commodity interests that are traded by the Partnership, through its investment in the Master, are volatile and involve a high degree of market risk. The Partnership commenced trading on September 6, 2005. The Partnership privately and continuously offers redeemable units of limited partnership interest (Redeemable Units) to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the General Partner) and commodity pool operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith Barney Holdings LLC (MSSB Holdings). Morgan Stanley, indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings. Citigroup Inc. indirectly owns a minority equity interest in MSSB Holdings. Citigroup Inc. also indirectly owns Citigroup Global Markets Inc. (CGM), the commodity broker and a selling agent for the Partnership. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup Inc. As of September 30, 2012, all trading decisions for the Partnership are made by the Advisor (defined below).
On December 1, 2005, the Partnership allocated substantially all of its capital to CMF SandRidge Master Fund L.P. (the Master), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 14,410.6191 units of the Master with cash equal to $14,477,858 and a contribution of open commodity futures and option contracts with a fair value of $(16,018). The Master was formed in order to permit commodity pools managed now or in the future by SandRidge Capital, L.P. (SandRidge or the Advisor) using its Energy Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner of the Master. In addition, the Advisor is a special limited partner (the Special Limited Partner) of the Partnership. Individual and pooled accounts currently managed by SandRidge, including the Partnership, are permitted to be limited partners of the Master. The Masters commodity broker is CGM. The General Partner and SandRidge believe that trading through this master/feeder structure should promote efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same and redemption rights are not affected.
The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended September 30, 2012.
At September 30, 2012 and December 31, 2011, the Partnership owned approximately 98.5% and 98.0%, respectively, of the Master. It is the Partnerships intention to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Masters trading of futures, forwards, swap and option contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. The Master engages in such trading through a commodity brokerage account maintained with CGM. The Masters Statements of Financial Condition, Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partners Capital are included herein.
The General Partner and each limited partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits or losses, if any, net of distributions.
The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustment, necessary for a fair statement of the Partnerships financial condition at September 30, 2012 and December 31, 2011, and the results of its operations and changes in partners capital for the three and nine months ended September 30, 2012 and 2011. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. You should read these financial statements together with the financial statements and notes included in the Partnerships Annual Report on Form 10-K filed with the Securities and Exchange Commission (the SEC) for the year ended December 31, 2011.
5
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
The Masters Statements of Financial Condition and Condensed Schedules of Investments as of September 30, 2012 and December 31, 2011 and Statements of Income and Expenses and Changes in Partners Capital for the three and nine months ended September 30, 2012 and 2011 are presented below:
CMF SandRidge Master Fund L.P.
Statements of Financial Condition
(Unaudited) September 30, 2012 |
December 31, 2011 |
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Assets: |
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Equity in trading account: |
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Cash |
$ | 284,706,975 | $ | 300,431,661 | ||||
Cash margin |
24,949,338 | 3,206,567 | ||||||
Options purchased, at fair value (cost $4,490,370 and $70,380 at September 30, 2012 and December 31, 2011, respectively) |
1,657,522 | 276 | ||||||
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Total assets |
$ | 311,313,835 | $ | 303,638,504 | ||||
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Liabilities and Partners Capital: |
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Liabilities: |
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Net unrealized depreciation on open futures and exchange-cleared swap contracts |
$ | 13,879,298 | $ | 7,086,968 | ||||
Options premium received, at fair value (premium $3,516,775 and $0 at September 30, 2012 and December 31, 2011, respectively) |
2,976,880 | 0 | ||||||
Accrued expenses: |
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Professional fees |
53,044 | 105,784 | ||||||
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Total liabilities |
16,909,222 | 7,192,752 | ||||||
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Partners Capital: |
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General Partner, 0.0000 unit equivalents at September 30, 2012 and December 31, 2011 |
0 | 0 | ||||||
Limited Partners, 127,558.7228 and 140,469.0325 units outstanding at September 30, 2012 and December 31, 2011, respectively |
294,404,613 | 296,445,752 | ||||||
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Total liabilities and partners capital |
$ | 311,313,835 | $ | 303,638,504 | ||||
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Net asset value per unit |
$ | 2,307.99 | $ | 2,110.40 | ||||
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6
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
CMF SandRidge Master Fund L.P.
Condensed Schedule of Investments
September 30, 2012
(Unaudited)
Number of Contracts |
Fair Value | % of Partners Capital |
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Futures and Exchange-Cleared Swap Contracts Purchased |
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Energy |
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ICE Henry Hub Natural Gas Swap Nov. 12 - Jan. 14 |
6,708 | $ | (2,186,550 | ) | (0.74 | )% | ||||||
NYMEX Henry Hub Natural Gas Swap Jan. 13 - Jan. 14 |
9,496 | 6,668,540 | 2.27 | |||||||||
NYMEX Henry Hub Natural Gas Dec. 12 - Jan. 14 |
4,960 | 10,548,194 | 3.58 | |||||||||
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Total futures and exchange-cleared swap contracts purchased |
15,030,184 | 5.11 | ||||||||||
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Futures and Exchange-Cleared Swap Contracts Sold |
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Energy |
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ICE Henry Hub Natural Gas Swap Apr. 13 |
3,030 | (1,528,500 | ) | (0.52 | ) | |||||||
NYMEX Henry Hub Natural Gas Swap Nov. 12 - Dec. 13 |
8,772 | (3,003,800 | ) | (1.02 | ) | |||||||
NYMEX Henry Hub Natural Gas Nov. 12 - Apr. 13 |
10,225 | (24,377,182 | ) | (8.28 | ) | |||||||
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Total futures and exchange-cleared swap contracts sold |
(28,909,482 | ) | (9.82 | ) | ||||||||
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Options Purchased |
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Puts |
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Energy |
7,204 | 1,657,522 | 0.56 | |||||||||
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Total options purchased |
1,657,522 | 0.56 | ||||||||||
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Options Premium Received |
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Calls |
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Energy |
3,140 | (2,976,880 | ) | (1.01 | ) | |||||||
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Total options premium received |
(2,976,880 | ) | (1.01 | ) | ||||||||
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Net fair value |
$ | (15,198,656 | ) | (5.16 | )% | |||||||
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7
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
CMF SandRidge Master Fund L.P.
Condensed Schedule of Investments
December 31, 2011
Number of Contracts |
Fair Value | % of Partners Capital |
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Futures and Exchange-Cleared Swap Contracts Purchased |
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Energy |
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ICE Henry Hub Natural Gas Swap Feb. 12 - Dec. 13 |
2,408 | $ | (10,638,392 | ) | (3.59 | )% | ||||||
NYMEX Henry Hub Natural Gas Swap Oct. 12 |
1,448 | (7,610,660 | ) | (2.56 | ) | |||||||
NYMEX Henry Hub Natural Gas Dec. 13 |
158 | (235,956 | ) | (0.08 | ) | |||||||
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Total futures and exchange-cleared swap contracts purchased |
(18,485,008 | ) | (6.23 | ) | ||||||||
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Futures and Exchange-Cleared Swap Contracts Sold |
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Energy |
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ICE Henry Hub Natural Gas Swap April 12 |
164 | 272,060 | 0.09 | |||||||||
NYMEX Henry Hub Natural Gas Swap Feb. 12 - Dec. 13 |
2,788 | 9,639,450 | 3.25 | |||||||||
NYMEX Henry Hub Natural Gas Feb. 12 - Apr. 12 |
429 | 1,486,530 | 0.50 | |||||||||
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Total futures and exchange-cleared swap contracts sold |
11,398,040 | 3.84 | ||||||||||
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Options Purchased |
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Call |
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Energy |
184 | 276 | 0.00 | * | ||||||||
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Total options purchased |
276 | 0.00 | * | |||||||||
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Net fair value |
$ | (7,086,692 | ) | (2.39 | )% | |||||||
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* | Due to rounding. |
8
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
CMF SandRidge Master Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Investment Income: |
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Interest income |
$ | 38,423 | $ | 9,041 | $ | 98,270 | $ | 105,844 | ||||||||
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Expenses: |
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Clearing fees |
168,427 | 84,438 | 451,202 | 445,645 | ||||||||||||
Professional fees |
82,723 | 78,361 | 239,455 | 244,450 | ||||||||||||
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Total expenses |
251,150 | 162,799 | 690,657 | 690,095 | ||||||||||||
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Net investment income (loss) |
(212,727 | ) | (153,758 | ) | (592,387 | ) | (584,251 | ) | ||||||||
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Trading results: |
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Net gains (losses) on trading of commodity interests: |
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Net realized gains (losses) on closed contracts |
(8,488,249 | ) | 9,589,655 | 38,020,651 | 4,877,499 | |||||||||||
Change in net unrealized gains (losses) on open contracts |
(10,590,003 | ) | 8,604,047 | (9,015,179 | ) | 43,445,429 | ||||||||||
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Total trading results |
(19,078,252 | ) | 18,193,702 | 29,005,472 | 48,322,928 | |||||||||||
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Net income (loss) |
(19,290,979 | ) | 18,039,944 | 28,413,085 | 47,738,677 | |||||||||||
Subscriptions Limited Partners |
8,500,426 | 1,219,776 | 20,150,279 | 9,315,882 | ||||||||||||
Redemptions Limited Partners |
(14,079,468 | ) | (23,653,593 | ) | (50,506,233 | ) | (272,043,715 | ) | ||||||||
Distribution of interest income to feeder funds |
(38,423 | ) | (9,041 | ) | (98,270 | ) | (105,844 | ) | ||||||||
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Net increase (decrease) in Partners capital |
(24,908,444 | ) | (4,402,914 | ) | (2,041,139 | ) | (215,095,000 | ) | ||||||||
Partners Capital, beginning of period |
319,313,057 | 318,043,171 | 296,445,752 | 528,735,257 | ||||||||||||
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Partners Capital, end of period |
$ | 294,404,613 | $ | 313,640,257 | $ | 294,404,613 | $ | 313,640,257 | ||||||||
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Net asset value per unit (127,558.7228 and 150,008.7601 units outstanding at September 30, 2012 and 2011, respectively) |
$ | 2,307.99 | $ | 2,090.81 | $ | 2,307.99 | $ | 2,090.81 | ||||||||
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Net income (loss) per unit* |
$ | (150.58 | ) | $ | 117.17 | $ | 198.35 | $ | 287.27 | |||||||
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Weighted average units outstanding |
130,913.9145 | 157,297.3395 | 134,939.3312 | 201,795.0028 | ||||||||||||
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* | Based on change in net asset value per unit. |
9
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
2. Financial Highlights:
Changes in the net asset value per unit for the three and nine months ended September 30, 2012 and 2011 were as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Net realized and unrealized gains (losses)* |
$ | (109.50 | ) | $ | 66.60 | $ | 90.05 | $ | 159.69 | |||||||||||
Interest income allocated from Master |
0.19 | 0.04 | 0.49 | 0.34 | ||||||||||||||||
Expenses and allocation to Special Limited Partner** |
(9.78 | ) | (9.48 | ) | (30.42 | ) | (26.90 | ) | ||||||||||||
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Increase (decrease) for the period |
(119.09 | ) | 57.16 | 60.12 | 133.13 | |||||||||||||||
Net asset value per unit, beginning of period |
1,570.15 | 1,343.06 | 1,390.94 | 1,267.09 | ||||||||||||||||
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Net asset value per unit, end of period |
$ | 1,451.06 | $ | 1,400.22 | $ | 1,451.06 | $ | 1,400.22 | ||||||||||||
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* | Includes brokerage fees. |
** | Excludes brokerage fees and includes allocation to Special Limited Partner, if any. |
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||||||||
2012 | 2011*** | 2012 | 2011*** | |||||||||||||||||
Ratios to average net assets:**** |
||||||||||||||||||||
Net investment income (loss) |
(6.5 | )% | (6.6 | )% | (6.7 | )% | (6.7 | )% | ||||||||||||
Allocation to Special Limited Partner |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net investment income (loss) before allocation to Special Limited Partner***** |
(6.5 | )% | (6.6 | )% | (6.7 | )% | (6.7 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses |
6.6 | % | 6.7 | % | 6.8 | % | 6.8 | % | ||||||||||||
Allocation to Special Limited Partner |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total expenses and allocation to Special Limited Partner |
6.6 | % | 6.7 | % | 6.8 | % | 6.8 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total return: |
||||||||||||||||||||
Total return before allocation to Special Limited Partner |
(7.6 | )% | 4.3 | % | 4.3 | % | 10.5 | % | ||||||||||||
Allocation to Special Limited Partner |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total return after allocation to Special Limited Partner |
(7.6 | )% | 4.3 | % | 4.3 | % | 10.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
*** | The ratios are shown net and gross of allocation to Special Limited Partner, if any, to conform to current period presentation. |
**** | Annualized (except for allocation to Special Limited Partner, if applicable). |
***** | Interest income allocated from Master less total expenses. |
The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners share of income, expenses and average net assets.
10
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Financial Highlights of the Master:
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Net realized and unrealized gains (losses)* |
$ | (150.23 | ) | $ | 117.62 | $ | 199.41 | $ | 288.15 | |||||||||||
Interest income |
0.30 | 0.06 | 0.76 | 0.49 | ||||||||||||||||
Expenses ** |
(0.65 | ) | (0.51 | ) | (1.82 | ) | (1.37 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Increase (decrease) for the period |
(150.58 | ) | 117.17 | 198.35 | 287.27 | |||||||||||||||
Distribution of interest income to feeder funds |
(0.30 | ) | (0.06 | ) | (0.76 | ) | (0.49 | ) | ||||||||||||
Net asset value per unit, beginning of period |
2,458.87 | 1,973.70 | 2,110.40 | 1,804.03 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net asset value per unit, end of period |
$ | 2,307.99 | $ | 2,090.81 | $ | 2,307.99 | $ | 2,090.81 | ||||||||||||
|
|
|
|
|
|
|
|
* | Includes clearing fees. |
** | Excludes clearing fees. |
Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Ratios to average net assets:*** |
||||||||||||||||||||
Net investment income (loss) **** |
(0.3 | )% | (0.2 | )% | (0.3 | )% | (0.2 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses |
0.3 | % | 0.2 | % | 0.3 | % | 0.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total return |
(6.1 | )% | 5.9 | % | 9.4 | % | 15.9 | % | ||||||||||||
|
|
|
|
|
|
|
|
*** | Annualized. |
**** | Interest income less total expenses. |
The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners share of income, expenses and average net assets.
3. Trading Activities:
The Partnership was formed for the purpose of trading commodity interests, including derivative financial instruments and derivative commodity instruments. The Partnership invests substantially all of its assets through a master/feeder structure. The Partnerships pro-rata share of the results of the Masters trading activities are shown in the Statements of Income and Expenses and Changes in Partners Capital.
The customer agreements between the Partnership and CGM and the Master and CGM give the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures contracts and exchange-cleared swap contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and exchange-cleared swap contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (ASC) 210-20, Balance Sheet, has been met.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions.
All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures and exchange-cleared swap contracts traded during the three months ended September 30, 2012 and 2011, were 39,264 and 20,308, respectively. The monthly average number of futures and exchange-cleared swap contracts traded during the nine months ended September 30, 2012 and 2011, were 33,614 and 44,108, respectively. The monthly average number of option contracts traded during the three months ended September 30, 2012 and 2011, were 12,527 and 3,920 respectively. The monthly average number of option contracts traded during the nine months ended September 30, 2012 and 2011, were 7,682 and 4,698, respectively.
11
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The following tables indicate the gross fair values of derivative instruments of futures and exchange-cleared swap and option contracts as separate assets and liabilities as of September 30, 2012 and December 31, 2011.
September 30, 2012 |
||||
Assets |
||||
Futures and Exchange-Cleared Swap Contracts |
||||
Energy |
$ | 23,622,949 | ||
|
|
|||
Total unrealized appreciation on open futures and exchange-cleared swap contracts |
$ | 23,622,949 | ||
|
|
|||
Liabilities |
||||
Futures and Exchange-Cleared Swap Contracts |
||||
Energy |
$ | (37,502,247 | ) | |
|
|
|||
Total unrealized depreciation on open futures and exchange-cleared swap contracts |
$ | (37,502,247 | ) | |
|
|
|||
Net unrealized depreciation on open futures and exchange-cleared swap contracts |
$ | (13,879,298 | )* | |
|
|
* | This amount is in Net unrealized depreciation on open futures and exchange-cleared swap contracts on the Masters Statements of Financial Condition. |
Assets |
||||
Options Purchased |
||||
Energy |
$ | 1,657,522 | ||
|
|
|||
Total options purchased |
$ | 1,657,522 | ** | |
|
|
|||
Liabilities |
||||
Options premium received |
||||
Energy |
$ | (2,976,880 | ) | |
|
|
|||
Total options premium received |
$ | (2,976,880 | )*** | |
|
|
** | This amount is in Options purchased, at fair value on the Masters Statements of Financial Condition. |
*** | This amount is in Options premium received, at fair value on the Masters Statements of Financial Condition. |
December 31, 2011 | ||||
Assets |
||||
Futures and Exchange-Cleared Swap Contracts |
||||
Energy |
$ | 11,398,040 | ||
|
|
|||
Total unrealized appreciation on open futures and exchange-cleared swap contracts |
$ | 11,398,040 | ||
|
|
|||
Liabilities |
||||
Futures and Exchange-Cleared Swap Contracts |
||||
Energy |
$ | (18,485,008 | ) | |
|
|
|||
Total unrealized depreciation on open futures and exchange-cleared swap contracts |
$ | (18,485,008 | ) | |
|
|
|||
Net unrealized depreciation on open futures and exchange-cleared swap contracts |
$ | (7,086,968 | )**** | |
|
|
**** | This amount is in Net unrealized depreciation on open futures and exchange-cleared swap contracts on the Masters Statements of Financial Condition. |
Assets |
||||
Options Purchased |
||||
Energy |
$ | 276 | ||
|
|
|||
Total options purchased |
$ | 276 | ***** | |
|
|
***** | This amount is in Options purchased, at fair value on the Masters Statements of Financial Condition. |
12
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The following table indicates the trading gains and losses, by market sector, on derivative instruments for the three and nine months ended September 30, 2012 and 2011.
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
Sector |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Energy |
$ | (19,078,252 | ) | $ | 18,193,702 | $ | 29,005,472 | $ | 48,322,928 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | (19,078,252 | )****** | $ | 18,193,702 | ****** | $ | 29,005,472 | ****** | $ | 48,322,928 | ****** | ||||
|
|
|
|
|
|
|
|
****** | This amount is in Total trading results on the Masters Statements of Income and Expenses and Changes in Partners Capital. |
4. Fair Value Measurements:
Partnerships Investments. The Partnership values its investment in the Master at the net asset value per unit as calculated by the Master. The Master values its investments as described in Note 2 of the Masters notes to the annual financial statements as of December 31, 2011.
Partnerships Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.
GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnerships Level 2 assets and liabilities.
The Partnership will separately present purchases, subscriptions, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
Effective January 1, 2012, the Partnership adopted Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards [(IFRS)]. The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify the Financial Accounting Standards Boards (the FASB) intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This new guidance did not have a significant impact on the Partnerships financial statements.
13
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The Partnership values its investment in the Master with no rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnerships investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2012 and December 31, 2011, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of managements assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets and liabilities between Level 1 and Level 2.
September 30, 2012 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets |
||||||||||||||||
Investment in Master |
$ | 290,025,047 | $ | | $ | 290,025,047 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net fair value |
$ | 290,025,047 | $ | | $ | 290,025,047 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2011 | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets |
||||||||||||||||
Investment in Master |
$ | 290,607,238 | $ | | $ | 290,607,238 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net fair value |
$ | 290,607,238 | $ | | $ | 290,607,238 | $ | | ||||||||
|
|
|
|
|
|
|
|
14
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Masters Investments. All commodity interests of the Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Masters 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 Masters Statements of Income and Expenses and Changes in Partners Capital.
Masters Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.
GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, the Masters Level 1 assets and liabilities are actively traded.
The Master will separately present purchases, sales, issuances and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Master considers prices for exchange-traded commodity futures, forward and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2012 and December 31, 2011, the Master did not hold any derivative instruments for which market quotations are not readily available and were priced by broker-dealers that derive fair values for those assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of managements assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
September 30, 2012 |
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets | ||||||||||||||||
Futures and Exchange-Cleared Swaps |
$ | 23,622,949 | $ | 23,622,949 | $ | | $ | | ||||||||
Options purchased |
1,657,522 | 1,657,522 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 25,280,471 | $ | 25,280,471 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities | ||||||||||||||||
Futures and Exchange-Cleared Swaps |
$ | 37,502,247 | $ | 37,502,247 | $ | | $ | | ||||||||
Options premium received |
2,976,880 | 2,976,880 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
40,479,127 | 40,479,127 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net fair value |
$ | (15,198,656 | ) | $ | (15,198,656 | ) | $ | | $ | | ||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2011 | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets | ||||||||||||||||
Futures and Exchange-Cleared Swaps |
$ | 11,398,040 | $ | 11,398,040 | $ | | $ | | ||||||||
Options purchased |
276 | 276 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 11,398,316 | $ | 11,398,316 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities | ||||||||||||||||
Futures and Exchange-Cleared Swaps |
$ | 18,485,008 | $ | 18,485,008 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
18,485,008 | 18,485,008 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net fair value |
$ | (7,086,692 | ) | $ | (7,086,692 | ) | $ | | $ | | ||||||
|
|
|
|
|
|
|
|
15
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
5. Financial Instrument Risks:
In the normal course of business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (OTC). Exchange-traded instruments are standardized and include futures and certain forward and option contracts. OTC contracts are negotiated between contracting parties and include swaps and certain forwards and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract.
The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnerships net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership/Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership/Master is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnerships/Masters risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnerships/Masters risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Master has credit risk and concentration risk as CGM or a CGM affiliate is the sole counterparty or broker with respect to the Partnerships/Masters assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through CGM, the Partnerships/Masters counterparty is an exchange or clearing organization.
The Advisor will concentrate the Partnerships/Masters trading in energy-related markets. Concentration in a limited number of commodity interests may subject the Partnerships/Masters account to greater volatility than if a more diversified portfolio of contracts was traded on behalf of the Partnership/Master.
As both a buyer and seller of options, the Partnership/Master pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership/Master to potentially unlimited liability; for purchased options the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership/Master does not consider these contracts to be guarantees.
The General Partner monitors and attempts to control the Partnerships/Masters risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership/Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, exchange-cleared swaps and options contracts by sector, margin requirements, gain and loss transactions and collateral positions.
The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnerships/Masters business, these instruments may not be held to maturity.
16
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
6. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Partnerships Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in Note 2 of the Masters notes to the annual financial statements as of December 31, 2011.
Partnerships and Masters Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Masters Level 1 assets and liabilities are actively traded.
GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and the level of activity in the Partnerships Level 2 assets and liabilities.
The Partnership and the Master will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Partnership values its investment in the Master where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnerships investment in the Master reflects its proportional interest in the Master. As of and for the periods ended September 30, 2012 and December 31, 2011, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or priced at fair value using unobservable inputs through the application of managements assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
The Master considers prices for exchange-traded commodity futures, forward and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2012 and December 31, 2011, the Master did not hold any derivative instruments for which market quotations are not readily available and were priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of managements assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
Futures Contracts. The Master trades futures contracts and exchange-cleared swaps. Exchange-cleared swaps are traded as futures. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (variation margin) may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Masters Statements of Income and Expenses and Changes in Partners Capital.
17
Bristol Energy Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Options. The Master may purchase and write (sell), both exchange-listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Master writes an option, the premium received is recorded as a liability in the Masters Statements of Financial Condition and marked to market daily. When the Master purchases an option, the premium paid is recorded as an asset in the Masters Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in unrealized gains (losses) on option contracts are included in the Masters Statements of Income and Expenses and Changes in Partners Capital.
Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnerships financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the more-likely-than-not threshold would be recorded 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 Partnerships financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2009 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.
Subsequent Events. The General Partner evaluates events that occur after the balance sheet date but before financial statements are filed. The General Partner has assessed the subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.
Recent Accounting Pronouncements. In October 2011, the FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company. Under longstanding GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes being proposed by the FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an investment company, the FASB also proposes that an investment company consolidate another investment company if it holds a controlling financial interest in the entity. In August 2012, the FASB updated the proposed ASU to state that entities regulated under the Investment Company Act of 1940 should qualify to be investment companies within the proposed investment company guidance. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, which creates a new disclosure requirement about the nature of an entitys rights of setoff and the related arrangements associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership would also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement would have on the financial statements.
Net Income (loss) per unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 2, Financial Highlights.
18
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services. The Partnerships only assets are its investment in the Master and cash. The Master does not engage in sales of goods or services. The Masters only assets are its equity in its trading accounts, consisting of cash and cash margin and options purchased, at fair value. Because of the low margin deposits normally required in futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2012.
The Partnerships capital consists of capital contributions, as increased or decreased by income (loss) from its investment in the Master, expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any.
For the nine months ended September 30, 2012, Partnership capital decreased 0.6% from $285,726,309 to $284,014,250. This decrease was attributable to the redemption of 21,556.2496 Redeemable Units totaling $32,789,018 and 481.0000 General Partner unit equivalents were redeemed totaling $700,735, which was partially offset by net income of $13,127,415, coupled with the subscriptions of 12,347.1385 Redeemable Units totaling $18,650,279. Future redemptions can impact the amount of funds available for investment in the Master in subsequent periods.
The Masters capital consists of the capital contributions of the partners as increased or decreased by net realized and/or unrealized gains or losses on futures trading, interest income, expenses, redemptions of units and distributions of profits, if any.
For the nine months ended September 30, 2012, the Masters capital decreased 0.7% from $296,445,752 to $294,404,613. This decrease was attributable to the redemption of 21,538.8206 units totaling $50,506,233 and distribution of interest income to feeder funds totaling $98,270, which was partially offset by net income of $28,413,085, coupled with the subscriptions of 8,628.5109 units totaling $20,150,279. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnerships significant accounting policies are described in detail in Note 6 of the Financial Statements.
The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners Capital.
19
Results of Operations
During the Partnerships third quarter of 2012, the net asset value per unit decreased 7.6% from $1,570.15 to $1,451.06 as compared to an increase of 4.3% in the third quarter of 2011. The Partnership, through its investment in the Master, experienced a net trading loss before brokerage fees and related fees in the third quarter of 2012 of $18,858,427. Losses were primarily attributable to the Masters trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by gains in ICE Natural Gas. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the third quarter of 2011 of $17,659,940. Gains were primarily attributable to the Masters trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by ICE Natural Gas.
During the third quarter of 2012, the most significant losses were incurred during July as short futures positions in natural gas negatively impacted the Partnership as prices rallied due to seasonable warm weather throughout the U.S. Midwest. Further losses were incurred during September as short futures positions in natural gas continued to incur losses as prices rallied due to warmer weather throughout the United States. A portion of these losses was offset by gains from trading short futures positions in natural gas during August as prices declined due to mild temperatures throughout the United States.
During the Partnerships nine months ended September 30, 2012, the net asset value per unit increased 4.3% from $1,390.94 to $1,451.06 as compared to an increase of 10.5% in the nine months ended September 30, 2011. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the nine months ended September 30, 2012 of $28,281,449. Gains were primarily attributable to the Masters trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by gains in ICE Natural Gas. The Partnership, through its investment in the Master, experienced a net trading gain before brokerage fees and related fees in the nine months ended September 30, 2011 of $45,328,872. Gains were primarily attributable to the Masters trading of commodity futures and other derivatives of NYMEX Natural Gas and was partially offset by ICE Natural Gas.
During the nine months ended September 30, 2012, the most significant gains were recorded during March from short futures positions in natural gas as prices fell due to the unseasonably warm end to the winter season, thus weakening demand for the commodity. Gains were also recorded during August from short futures positions in natural gas as prices declined due to mild temperatures throughout the United States. Additional gains were recorded during January and February from short positions as natural gas prices declined during the end of the month due to significant increases in production and soft demand. Gains were also recorded during April and May from short futures positions in natural gas as prices declined due to mild weather and weaker demand. A portion of the Partnerships gains for the first nine months of year was offset by losses incurred during July as short futures positions in natural gas were negatively impacted as prices rallied due to seasonably warm weather throughout the U.S. Midwest. Further losses were incurred during September as short positions in natural gas continued to incur losses as prices rallied due to warmer weather throughout the United States. Finally, losses were incurred from trading natural gas futures in June as prices rallied due to warmer than expected weather throughout the U.S. Midwest, thus increasing demand for the commodity.
Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership (and the Master) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership (and the Master) expects to increase capital through operations.
Interest income on 80% of the Partnerships daily average equity allocated to it by the Master was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. Interest income allocated from the Master for the three and nine months ended September 30, 2012 increased by $29,071 and $9,142, respectively, as compared to the corresponding periods in 2011. The increase in interest income is due to higher U.S. Treasury bill rates during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Master account and upon interest rates over which the Partnership, the Master and CGM have no control.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Brokerage fees for the three and nine months ended September 30, 2012 decreased by $73,061 and $311,607, respectively, as compared to the corresponding periods in 2011. The decrease in brokerage fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.
Management fees are calculated as a percentage of the Partnerships adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Management fees for the three and nine months ended September 30, 2012 decreased by $39,038 and $166,988, respectively, as compared to the corresponding periods in 2011. The decrease in management fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.
20
Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the Partnerships adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Administrative fees for the three and nine months ended September 30, 2012 decreased by $9,759 and $41,746, respectively, as compared to the corresponding periods in 2011. The decrease in administrative fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.
Special Limited Partner profit share allocations are based on the new trading profits generated by the Advisor at the end of the quarter as defined in the advisory agreement among the Partnership, the General Partner and the Advisor. There were no profit share allocations made for the three and nine months ended September 30, 2012 and 2011, respectively. The Advisor will not earn a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.
In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisors past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All of the Partnerships assets are subject to the risk of trading loss through its investment in the Master. The Master is a speculative commodity pool. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnerships assets are subject to the risk of trading loss through its investment in the Master. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Masters and the Partnerships main line of business.
The limited partners will not be liable for losses exceeding the current net asset value of their investment.
Market movements result in frequent changes in the fair value of the Masters open positions and, consequently, in its earnings and cash balances. The Masters market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Masters open contracts and the liquidity of the markets in which it trades.
The Master rapidly acquires and liquidates both long and short positions in a wide range of different market sectors. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Masters past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Masters speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Masters experience to date (i.e., risk of ruin). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Masters losses in any market sector will be limited to Value at Risk or by the Masters attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Master as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The following tables indicate the trading Value at Risk associated with the Masters open positions by market category as of September 30, 2012 and December 31, 2011, and the highest, lowest and average value during the three months ended September 30, 2012, and during the twelve months ended December 31, 2011. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2011.
As of September 30, 2012, the Masters total capitalization was $294,404,613 and the Partnership owned approximately 98.5% of the Master. The Partnership invests substantially all of its assets in the Master. The Masters Value at Risk as of September 30, 2012 was as follows:
September 30, 2012
Three months ended September 30, 2012 | ||||||||||||||||||||
Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||
Energy |
$ | 21,675,334 | 7.36 | % | $ | 21,675,334 | $ | 12,624,778 | $ | 16,720,061 | ||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 21,675,334 | 7.36 | % | ||||||||||||||||
|
|
|
|
* | Average of month-end Values at Risk. |
22
As of December 31, 2011, the Masters total capitalization was $296,445,752 and the Partnership owned approximately 98.0% of the Master. The Partnership invests substantially all of its assets in the Master. The Masters Value at Risk as of December 31, 2011 was as follows:
December 31, 2011
Twelve months ended December 31, 2011 | ||||||||||||||||||||
Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||
Energy |
$ | 2,666,386 | 0.90 | % | $ | 61,733,650 | $ | 1,015,817 | $ | 20,188,738 | ||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 2,666,386 | 0.90 | % | ||||||||||||||||
|
|
|
|
* | Annual average of month-end Values at Risk. |
23
Item 4. Controls and Procedures
The Partnerships disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934 (the Exchange Act), is recorded, processed, summarized and reported within the time periods expected in the SECs rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the 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 Partnerships external disclosures.
The General Partners President and CFO have evaluated the effectiveness of the Partnerships disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2012 and, based on that evaluation, the General Partners President and CFO have concluded that, at that date, the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision of the General Partners 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 Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control over financial reporting process during the fiscal quarter ended September 30, 2012 that materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.
24
The following information supplements and amends the discussion set forth under Part I, Item 3. Legal Proceedings in the Partnerships Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as updated by the Partnerships Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012.
This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which CGM or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.
CGM (together with Citigroup Inc. and its other subsidiaries, Citigroup) (formerly known as Salomon Smith Barney Inc.) is a New York corporation with its principal place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (FCM), and provides futures brokerage and clearing services for institutional and retail participants in the futures markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five years against CGM or any of its individual principals and no such actions are currently pending, except as follows.
RMBS Litigation and Other Matters
On May 4, 2012, the district court in FEDERAL HOUSING FINANCE AGENCY v. UBS AMERICAS, INC., ET AL., a parallel case to FEDERAL HOUSING FINANCE AGENCY v. ALLY FINANCIAL INC., ET AL., FEDERAL HOUSING FINANCE AGENCY v. CITIGROUP INC., ET AL., and FEDERAL HOUSING FINANCE AGENCY v. JPMORGAN CHASE & CO., ET AL., denied defendants motion to dismiss plaintiffs securities law claims and granted defendants motion to dismiss plaintiffs negligent misrepresentation claims. On June 19, 2012, the district court granted defendants motion to certify an interlocutory appeal to the United States Court of Appeals for the Second Circuit from the courts statutes of repose and limitations rulings.
On May 15, 2012, Woori Bank filed a complaint in the United States District Court for the Southern District of New York against Citigroup alleging actionable misstatements and omissions in connection with Woori Banks $95 million investment in five collateralized debt obligations.
On May 18, 2012, the Federal Deposit Insurance Corporation filed (FDIC) complaints in the United States District Courts for the Southern District of New York and the Central District of California against various defendants, including Citigroup Global Markets Inc., Citicorp Mortgage Securities Inc., and CitiMortgage Inc., in connection with purchases of residential mortgage-backed securities (RMBS) by two failed banks for which the FDIC is acting as receiver.
On June 6, 2012, the court granted in part and denied in part defendants motions to dismiss in WESTERN & SOUTHERN LIFE INS. CO., ET AL. v. RESIDENTIAL FUNDING CO., LLC, ET AL.
On June 26, 2012, the court overruled defendants demurrer to plaintiffs amended complaint in FEDERAL HOME LOAN BANK OF CHICAGO v. BANC OF AMERICA SECURITIES, LLC, ET AL.
On July 27, 2012, John Hancock Life Insurance Co. and several affiliated entities filed a complaint in the United States District Court for the District of Minnesota against various defendants, including CGM, asserting disclosure claims arising out of purchases of RMBS.
On August 29, 2012, the United States District Court for the Southern District of New York issued an order preliminarily approving the parties settlement in IN RE CITIGROUP INC. SECURITIES LITIGATION, pursuant to which Citigroup has agreed to pay $590 million. A fairness hearing is scheduled for January 15, 2013.
On August 30, 2012, Rentokil-Initial Pension Scheme filed a putative class action complaint against Citigroup on behalf of purchasers of 26 Citigroup offerings of medium term Euro Notes issued between October 12, 2005 and February 25, 2009. The complaint asserts claims under Section 90 of the Financial Services and Markets Act 2000 and includes allegations similar to those asserted in IN RE CITIGROUP INC. BOND LITIGATION.
On October 15, 2012, the United States District Court for the Southern District of New York granted lead plaintiffs amended motion for class certification in NEW JERSEY CARPENTERS HEALTH FUND v. RESIDENTIAL CAPITAL LLC, ET AL., having previously denied lead plaintiffs motion for class certification on January 18, 2011. Plaintiffs in this action allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, as amended, and assert disclosure claims on behalf of a putative class of purchasers of mortgage-backed securities issued by Residential Accredited Loans, Inc. pursuant or traceable to prospectus materials filed on March 3, 2006 and April 3, 2007. CGM is one of the underwriter defendants.
Other Matters
Citigroup and Citibank, N.A., along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in the multidistrict litigation (MDL) proceeding before Judge Buchwald in the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION. Judge Buchwald has appointed interim lead class counsel for, and consolidated amended complaints have been filed on behalf of, three separate putative classes of plaintiffs: (1) OTC purchasers of derivative instruments tied to USD LIBOR; (2) purchasers of exchange-traded derivative instruments tied to USD LIBOR; and (3) indirect OTC purchasers of U.S. debt securities. Each of these putative classes alleges that the panel bank defendants conspired to suppress USD LIBOR in violation of the Sherman Act and/or the Commodity Exchange Act, thereby causing plaintiffs to suffer losses on the instruments they purchased. Also consolidated into the MDL proceeding are individual civil actions commenced by various Charles Schwab entities that allege that the panel bank defendants conspired to suppress the USD LIBOR rates in violation of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act, and California state law, causing the Schwab entities to suffer losses on USD LIBOR-linked financial instruments that they owned. Plaintiffs in these actions seek compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.
In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of CGM. GCM may establish reserves from time to time in connections with such actions.
25
There have been no material changes to the risk factors set forth under Part 1, Item 1A. Risk Factors in the Partnerships Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and under Part II, Item 1A. Risk Factors in the Partnerships Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, other than as set forth below.
Speculative position and trading limits may reduce profitability.
The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person may hold or control in particular futures and options on futures. The trading instructions of an advisor may have to be modified, and positions held by the Partnership may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and foregoing potential profits.
In October 2011, the CFTC adopted new rules governing position limits. In September 2012, these rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. It is possible, nevertheless, that these rules may take effect in some form via re-promulgation or a successful appeal by the CFTC of the District Courts ruling. The vacated rules established position limits on certain futures contracts and any economically equivalent futures, options and swaps.
26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the three months ended September 30, 2012, there were subscriptions of 4,912.7905 Redeemable Units totaling $7,500,426. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by accredited investors as defined in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.
Proceeds of net offering were used for the trading of commodity interests, including futures contracts, options, swap and forward contracts and any other interests pertaining thereto, including interests in commodity pools.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
Period |
(a) Total Number of Redeemable |
(b) Average Price Paid per Redeemable Unit** |
(c) Total Number Plans or Programs |
(d) Maximum Number (or Approximate Dollar Value) of Redeemable Units that May Yet Be Purchased Under the Plans or Programs |
||||||||||||||||||||
July 1, 2012 - July 31, 2012 |
1,491.3480 | $ | 1,461.19 | N/A | N/A | |||||||||||||||||||
August 1, 2012 - August 31, 2012 |
3,269.0030 | $ | 1,545.59 | N/A | N/A | |||||||||||||||||||
September 1, 2012 - September 30, 2012 |
2,962.3960 | $ | 1,451.06 | N/A | N/A | |||||||||||||||||||
7,722.7470 | $ | 1,493.03 |
* | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date, the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnerships business in connection with effecting redemptions for limited partners. |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. |
Item 3. Defaults Upon Senior Securities None.
Item 4. Mine Safety Disclosures None.
The registrant does not have a board of directors. The registrants general partner, Ceres Managed Futures LLC (CMF), is managed by a board of directors.
Effective November 14, 2012, Mr. Damian George was appointed a director of CMF.
Damian George, age 45, has been a Director of the general partner since November 2012. Since June 2012, Mr. George has been the Chief Financial Officer and a principal of the general partner and is an associate member of the National Futures Association. Since August 2009, Mr. George has been employed by Morgan Stanley Smith Barney LLC (Morgan Stanley Smith Barney), a financial services firm, where his responsibilities include oversight of budgeting, finance and Sarbanes-Oxley testing for the Alternative Investments Managed Futures group. Since August 2009, Mr. George has been registered as an associated person of Morgan Stanley Smith Barney. From November 2005 through July 2009, Mr. George was employed by Citi Alternative Investments, a division of Citigroup Inc. (Citigroup), a financial services firm, which administered Citigroups hedge fund and fund of funds business, where he served as Director and was responsible for budgeting, finance and Sarbanes-Oxley testing for the Hedge Fund Management group. From November 2004 through July 2009, Mr. George was registered as an associated person of Citigroup Global Markets Inc. Mr. George earned his Bachelor of Science degree in Accounting in May 1989 from Fordham University and his Master of Business Administration degree in International Finance in February 1998 from Fordham University. Mr. George is a Certified Public Accountant.
27
Exhibit
3.1 (a) |
Certificate of Limited Partnership dated April 15, 2005 (filed as Exhibit 3.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |
(b) | Certificate of Amendment of the Certificate of Limited Partnership dated September 21, 2005 (filed as Exhibit 3.1(a) to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |
(c) | Certificate of Amendment of the Certificate of Limited Partnership dated September 19, 2008 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference). | |
(d) | Certificate of Amendment of the Certificate of Limited Partnership dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference). | |
(e) | Certificate of Amendment of the Certificate of Limited Partnership dated June 30, 2010 (filed as Exhibit 3.1(e) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference). | |
(f) | Certificate of Amendment of the Certificate of Limited Partnership Agreement dated September 2, 2011 (filed as Exhibit 3.1(f) to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference). | |
3.2 | Third Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on April 27, 2010 and incorporated herein by reference). | |
10.1 (a) |
Advisory Agreement among the Partnership, the General Partner and SandRidge Capital, L.P. (filed as Exhibit 10.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |
(b) | Letter from the General Partner to SandRidge Capital, L.P. extending the Advisory Agreement through June 30, 2012 (filed as Exhibit 10.1(b) to the Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference). | |
10.2 (a) |
Customer Agreement between the Partnership, the General Partner and CGM (filed as Exhibit 10.2 to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |
(b) | Addendum to the Customer Agreement between the Partnership, the General Partner and CGM (filed as Exhibit 10.2(a) to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference). | |
10.3 | Amended and Restated Agency Agreement between the Partnership, the General Partner and CGM and Morgan Stanley Smith Barney LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 3, 2010 and incorporated herein by reference). | |
10.4 | Form of Subscription Agreement (filed herein). | |
10.5 | Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the Quarterly Report on Form 10-Q filed on August 14, 2009 and incorporated herein by reference). |
28
31.1 | Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director). | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director). | |
32.1 | Section 1350 Certification (Certification of President and Director). | |
32.2 | Section 1350 Certification (Certification of Chief Financial Officer and Director). | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BRISTOL ENERGY FUND L.P. | ||
By: | Ceres Managed Futures LLC (General Partner) | |
By: | /s/ Walter Davis | |
Walter Davis | ||
President and Director |
Date: November 14, 2012
By: | /s/ Damian George | |
Damian George | ||
Chief Financial Officer and Director (Principal Accounting Officer) |
Date: November 14, 2012
30
Exhibit 10.4
BRISTOL ENERGY FUND L.P.
SUBSCRIPTION/EXCHANGE AGREEMENT
To accompany the Private Placement Offering Memorandum and Disclosure Document dated July 30, 2012.
NOT FOR USE AFTER APRIL 30, 2013.
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Morgan Stanley Smith Barney Account |
Full Name of Account |
CASH SUBSCRIPTIONS Note: only use this section for cash purchases or adding cash to an exchange subscription to meet the minimum
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Partnership |
Minimum Subscription Amounts $25,000; $10,000 for ERISA/IRA investors $10,000 for additional subscriptions (all accounts) | |||
Bristol Energy Fund L.P. |
$ |
EXCHANGE SUBSCRIPTIONS (AVAILABLE FOR TRAIL OPTION ONLY)
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Fund name and/or security number(s) for commodity pool(s) from which units are to be redeemed to exchange |
ALL MINIMUMS APPLY
Check Box to specify entire interest or quantity of units to be redeemed to exchange | |||
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¨ Entire Interest* or Units | |||
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¨ Entire Interest* or Units | |||
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¨ Entire Interest* or Units | |||
This Subscription/Exchange Agreement must be received by the General Partner no later than 3 business days prior to calendar month-end to be included in the current close. Enter Subscription/Exchange order before sending Agreement to the below address. Client(s) signature MUST be original and therefore can not be faxed or scanned to the General Partner. Account will be debited upon receipt of this Agreement by the General Partner.
For Branch Use: FA/PWA Payment Type: Check one: (Trail) (Upfront)
Mail completed Subscription Agreement to: | Ceres Managed Futures LLC 522 Fifth Ave, 14th Fl New York, New York 10036 (855) 672-4468 (Option 3) |
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Financial Advisor/Private Wealth Advisor Name | Employee ID/FA/PW Number | FA/PW Advisors Telephone No. |
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Client Service Associate Name |
Client Service Associate Telephone No. |
B-1
By executing the signature page of this Subscription Agreement and Power of Attorney (the Agreement), you (for yourself and any co-subscriber, and, if you are signing on behalf of an entity, on behalf of and with respect to that entity and its shareholders, partners, beneficiaries or members), represent and warrant to Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC, Ceres Managed Futures LLC (the General Partner) and Bristol Energy Fund L.P. (the Partnership), as follows (as used below, the terms you and your refer to you and your co-subscriber, if any, or if you are signing on behalf of an entity, such entity). You understand that Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC, the General Partner, and the Partnership will rely upon all of your statements and representations in this Agreement in deciding whether to allow you to invest in the Partnership.
(1) You have received and carefully read, understand and agree to abide by the terms of investment as described in the Private Placement Memorandum and Disclosure Document dated July 30, 2012 (the Memorandum) and the limited partnership agreement (the Limited Partnership Agreement) including any supplements and exhibits thereto, relating to and describing the terms and conditions of the private placement of units of limited partnership interest (the Units). You hereby acknowledge that no person is authorized to give any information or to make any statement not contained in the Memorandum or the Limited Partnership Agreement, and that any information or statement not contained in the Memorandum or the Limited Partnership Agreement must not be relied upon as having been authorized by the Partnership. You represent that an investment in the Partnership in the amount subscribed, despite its substantial risk, is suitable and appropriate for you given your investment objectives, risk tolerance, other holdings, and financial situation and needs, and you understand that an investment in the Partnership is speculative and may result in the complete loss of your investment. You have carefully reviewed and understand the various risks of an investment in the Partnership, including those summarized under Risk Factors and Conflicts of Interest in the Memorandum.
(2) You understand that the General Partner intends to restrict investment in the Partnership to purchasers who are accredited investors as defined in Regulation D of the Securities Act of 1933, as amended (the Securities Act). You hereby represent that you are an accredited investor because you satisfy one or more of the following categories of accredited investor:
INDIVIDUAL INVESTORS
Please check ALL applicable boxes below.
¨ | I have a net worth (or joint net worth together with my spouse) in excess of $1,000,000. I understand that the term net worth means the excess of total assets at fair market value, excluding the value of my primary residence, over total liabilities. In calculating net worth, I have not included as a liability any indebtedness that is secured by my primary residence other than the amount of such indebtedness in excess of (i) the amount outstanding 61 days ago, unless incurred as a result of the acquisition of such residence, or (ii) the estimated fair market value of such residence (whichever excess amount of indebtedness is greater). |
¨ | I have had an annual income during the last two full calendar years of in excess of $200,000 (or joint income together with my spouse of in excess of $300,000) and reasonably expect to have an annual income in excess of $200,000 (or joint income together with my spouse of in excess of $300,000) during the current calendar year. |
INVESTORS OTHER THAN INDIVIDUALS INCLUDING TRUSTS, CORPORATIONS OR PARTNERSHIPS
Please check ALL applicable boxes below.
¨ | Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity. |
¨ | Any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act. |
B-2
¨ | Any investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined in Section 2(a)(48) of that Act. |
¨ | Any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958. |
¨ | Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000. |
¨ | An employee benefit plan within the meaning of Title I of ERISA, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors. |
¨ | Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940. |
¨ | Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Units, with total assets in excess of $5,000,000. |
¨ | Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under Regulation D. |
¨ | Any trust that is an accredited investor because it is a revocable trust which may be amended or revoked at any time by the grantors thereof and all of the grantors are accredited investors. |
¨ | Any entity in which all of the equity owners are accredited investors. |
(3) You are acquiring the Units for your own account, as principal, for investment and not with a view to the resale or distribution of all or any part of such Units.
(4) Units were not offered to you by means of any general solicitation or general advertising by the General Partner or any person acting on its behalf, including without limitation (a) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or (b) any seminar or meeting to which you were invited by any general solicitation or general advertising.
(5) You have carefully considered the amount that you are proposing to invest in the Partnership. The Subscription Amount listed above on the first page, together with any other investments that you have made in the Partnership, is either: (i) no more than 10% of your net worth; or (ii) more than 10% of your net worth, but (a) you have adequate means of providing for my current needs and contingencies and have no need for liquidity of this investment or need to dispose of Units to satisfy an existing or contemplated indebtedness or undertaking and you understand the illiquid nature of an investment in the Partnership; and (b) you acknowledge that meeting the criteria to be permitted to invest in the Partnership in no way implies that such investment is appropriate for you.
(6) You are of legal age to execute this Agreement and are legally competent and authorized to make this investment.
(7) You represent that you are a U.S. resident or a U.S. citizen. If you are not a U.S. resident or U.S. citizen, you agree to pay or reimburse Morgan Stanley Smith Barney LLC (the Selling Agent) or the Partnership for any taxes, including but not limited to withholding tax imposed with respect to your Units.
(8) Unless representation (9) below is applicable, your subscription is made with your funds for your own account and not as trustee, custodian or nominee for another.
B-3
(9) If you are subscribing as custodian for a minor, either (a) the subscription is a gift you have made to that minor and is not made with that minors funds, in which case the representation in number (2) above applies only to you, as the custodian; or (b) if the subscription is not a gift, the representation in number (2) above applies only to that minor.
(10) If you are subscribing in a representative capacity, you have full power and authority to make this investment and enter into and be bound by this Agreement on behalf of the entity for which you are purchasing the Units, and that entity has full right and power to purchase the Units and enter into and be bound by this Agreement and become a limited partner pursuant to the Limited Partnership Agreement, and has been duly organized and is validly existing and is in good standing in the jurisdiction of its formation. In your representative capacity, you have determined that an investment by either the represented beneficiary or beneficial owner in the Partnership (i) is consistent with the investment objectives, (ii) is in the best interests of, and (iii) is within the risk tolerance of such investors investment in the Partnership. You have also satisfied any additional due diligence obligation you may have to your beneficiaries or beneficial owners.
(11) If you are subscribing for a joint or community property account, you have full power and authority to purchase Units and enter into and be bound by this Agreement on behalf of the joint or community property account.
(12) You either: (a) are not required to be registered with the Commodity Futures Trading Commission (CFTC) or to be a member of the National Futures Association (NFA); or (b) if so required, you are duly registered with the CFTC and are a member in good standing of the NFA. It is an NFA requirement that the General Partner attempt to verify that any person or entity that seeks to purchase Units be duly registered with the CFTC and a member of the NFA, if required. You agree to supply the General Partner with such information as the General Partner may reasonably request in order to attempt such verification. Certain entities that invest in the Partnership may, as a result, themselves become commodity pools within the intent of applicable CFTC and NFA rules, and their sponsors, accordingly, may be required to register as commodity pool operators.
(13) You have carefully reviewed and understand the fees and expenses that are directly and indirectly assessed on the Partnership.
(14) You understand that the General Partner is an affiliate of Citigroup Global Markets Inc., which will serve as a selling agent and commodity broker for the Partnership and may, along with its affiliates, serve as an FX counterparty for the Partnership, and Morgan Stanley Smith Barney LLC, which will also serve as the selling agent for the Partnership. You further understand that the Partnership is subject to conflicts of interest as discussed in the Conflicts of Interest section in the Memorandum. You also understand that Citigroup Global Markets Inc. credits up to 80% of the brokerage fees to financial advisors who sell Units in the Partnership and the prospect of receiving these fees may provide the General Partner (including its affiliates), the Selling Agent and your Morgan Stanley Smith Barney LLC financial advisor or private wealth advisor with interests that potentially conflict with your own in respect of your investment in the Partnership. You consent to such conflicts and you covenant not to object to or bring any proceedings against any of the foregoing relating to any such conflicts of interest, provided that Citigroup Global Markets Inc. and the relevant Morgan Stanley (including Morgan Stanley Smith Barney LLC) parties comply with the appropriate standard of liability as set forth in the Limited Partnership Agreement or any other relevant controlling agreement.
(15) You understand that the Units are illiquid and have not been registered under the Securities Act, or any similar state law, and cannot be transferred, sold, pledged or assigned except in certain limited circumstances, and with the consent of the General Partner, as set forth in the Limited Partnership Agreement. You understand that the Partnership has no intention or obligation to register the Units under the Securities Act.
(16) You have such knowledge and experience in financial and business matters that you are capable of evaluating the merits and risks of an investment in the Partnership and are able to make an informed investment decision. You are not relying on the General Partner, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC, or any of their affiliates with respect to any legal, tax, or economic considerations relating to your investment decision, and you further understand that the only disclosures for which the Partnership, the General Partner, Citigroup Global Markets, Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC, or any affiliates, as applicable, accepts any responsibility relating to your investment are those set forth in the Memorandum and the Limited Partnership Agreement.
B-4
(17) You agree that neither the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, nor their respective affiliates, nor their respective managers, officers, directors, members, equity holders, employees or other applicable representatives (collectively, Affiliated Persons), shall incur any liability (a) in respect of any action taken upon any information provided to the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, or their Affiliated Persons by you or for relying on any notice, consent, request, instructions or other instrument believed, in good faith, to be genuine or to be signed by properly authorized persons on your behalf, including any document transmitted in a manner consistent with the Notice section herein, or (b) for adhering to applicable anti-money laundering obligations whether now or hereinafter in effect.
(18) You agree to indemnify and hold harmless the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, and their Affiliated Persons from and against any and all direct and consequential losses, damages, liabilities, costs or expenses (including reasonable attorneys and accountants fees and disbursements) whether incurred in an action between the parties hereto or otherwise or resulting from any unsuccessful proceeding or other action brought by you against any of the foregoing relating to the Partnership or the offering of the Units (collectively, Losses) which the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, and their Affiliated Persons, or any one of them, may incur by reason of or in connection with this Agreement, including any misrepresentation made by you or any of your agents, any breach of any declaration, representation or warranty by you, the failure by you to fulfill any covenant or agreements under this Agreement, our reliance on facsimile, electronic copy or other instructions, or the assertions of your lack of proper authorization from any beneficial owners to execute and perform the obligations under this Agreement. You also agree that you will indemnify and hold harmless the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, and their Affiliated Persons, or any one of them, for any Losses they may incur in connection with your failure to comply with any applicable law, rule or regulation (including anti-money laundering laws and regulations) having application to the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, or their Affiliated Persons.
(19) You hereby represent and agree that the name, address, and ownership capacity on the Morgan Stanley Smith Barney LLC account referenced on this Agreement are your true and correct name, address, and ownership capacity, that the name, address, and ownership capacity on the Partnerships books and records shall be the same as your name, address, and ownership capacity on such account, and that you will promptly notify Morgan Stanley Smith Barney LLC of any change in your address, which change shall also be effective for all Partnership purposes. You also agree to promptly notify us if any representation, warranty or statement in this Agreement becomes incomplete, untrue or inaccurate.
(20) All the representations, warranties and information that you have provided in this Agreement and that you provided upfront during the initial intake process are correct and complete as of the date of this Agreement, and, if there should be any material change in such information you provided either in this Agreement or during the initial intake process prior to or after your admission as a limited partner, you will immediately furnish such revised or corrected information to your Morgan Stanley Smith Barney LLC financial advisor or private wealth advisor. You acknowledge that the Partnership, the General Partner, Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC, and their Affiliated Persons will rely on such information, representations and warranties on an ongoing basis.
Additional Representations and Warranties regarding Anti-money Laundering:
(21) During the intake process, you previously made certain representations and warranties that your subscription is in compliance with the applicable anti-money laundering laws and regulations as of such time and that there have been no material developments to make such representations and warranties false. Additionally, you represent and warrant that: you are not (a) a Prohibited Investor which includes: (i) an individual, entity or organization that is named on the U.S. Department of the Treasurys Office of Foreign Assets Control (OFAC) List of Specially Designated Nationals and Blocked Persons (the SDN List), or that is located in, organized under the laws of, a citizen or resident of, or the government of a country or territory that is subject to U.S. trade or
B-5
economic sanctions administered by OFAC; (ii) a foreign shell bank; and (iii) a person or entity resident in or whose subscription funds are transferred from or through a jurisdiction identified as non-cooperative by the Financial Action Task Force (FATF);1 (b) a senior foreign political figure,2 an immediate family member of a senior foreign political figure,3 or a close associate of a senior foreign political figure4 within the meaning of the USA Patriot Act of 2001.5 You also represent and warrant that, to the best of your knowledge and belief, after appropriate due diligence, none of (a) each person controlling or controlled by you; (b) if you are a privately held entity, each person holding a senior management position or any beneficial equity interest in you; nor (c) any person for whom you are acting as agent, representative, or nominee in connection with this investment, is named on the SDN List or is otherwise subject to U.S. trade or economic sanctions administered by OFAC.
You acknowledge that due to money laundering requirements within their respective jurisdictions, the Partnership and the General Partner (and/or the administrator, if applicable) acting on behalf of the Partnership may require further identification of the Subscriber and the source of payment before this Agreement can be processed.
You acknowledge that if, following the date of acceptance of your subscription, the General Partner (or administrator, if applicable) reasonably believes that you are or have become a Prohibited Investor, or have otherwise breached the representations and warranties herein as to identity, the Partnership may be obliged to freeze your investment, require you to immediately withdraw your investment, or take such other action as the Partnership considers necessary or required in accordance with applicable regulations.
Additional Representations and Warranties of Investor:
(22) You represent and warrant that, except as you may disclose in writing to the General Partner, you are not subject to the Freedom of Information Act or any similar state, county or municipal legislation or regulation under which you are or may be compelled to disclose to the public any information regarding your investment in the Partnership or the commodity trading advisor.
(23) You represent that the Form W-9 that you previously completed and returned to your Morgan Stanley Smith Barney LLC financial advisor or private wealth advisor remains current as of the date of this Agreement, and, if there should be any material change in such information prior to or after your admission as a limited partner, you will immediately furnish a revised Form W-9 to your Morgan Stanley Smith Barney LLC financial advisor or private wealth advisor.
(24) You agree that the representations and warranties in this Agreement may be used as a defense in any actions relating to the Partnership or the offering of the Units, and that it is only on the basis of such representations and warranties that the General Partner and the Selling Agent may be willing to accept your subscription for Units.
Additional Representation and Warranty for Exchange Subscribers:
(25) You are the true, lawful, and beneficial owner of the Units (or fractions thereof) to be redeemed pursuant to this Agreement, with full power and authority to request redemption and make a subsequent investment in the Partnership. The Units (or fractions thereof) which you are redeeming are not subject to any pledge or are otherwise encumbered in any fashion.
1 | The current list of FATF member countries and territories may be found at http://www.fatf-gafi.org. |
2 | A senior foreign political figure is defined as a current or former senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a current or former senior official of a major foreign political party, or a current or former senior executive of a foreign government-owned corporation. In addition, a senior foreign political figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure. |
3 | Immediate family of a senior foreign political figure typically includes the figures parents, siblings, spouse, children and in-laws. |
4 | A close associate of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of a senior foreign political figure. |
5 | The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). |
B-6
Additional Representations and Warranties for Employee Benefit Plan and IRA Investors:
(26) If you are a Benefit Plan Investor (within the meaning of Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended (ERISA)), you are a fiduciary (within the meaning of ERISA) with respect to the subscriber and you are responsible for purchasing the Units, and such purchase is in accordance with ERISA requirements and will not constitute a prohibited transaction under ERISA or the Internal Revenue Code of 1986, as amended (the Code). The term Benefit Plan Investor means (a) an employee benefit plan subject to the provisions of Part 4 of Title I of ERISA, (b) a plan or individual retirement account subject to Section 4975(e)(1) of the Code, or (c) an entity whose underlying assets are deemed to include ERISA plan assets by reason of investment in such entity by investors described in clauses (a) and/or (b). You are not a participant-directed defined contribution plan. You understand that the General Partner in its sole discretion may limit investments in the Partnership so that less than 25% of the Units of the Partnership are owned by Benefit Plan Investors, and the General Partner may require a Benefit Plan Investor to redeem its interest in the Partnership if such 25% limit would be exceeded.
(27) If you are a Benefit Plan Investor, you also represent that either (a) or (b) as follows is true:
(a) neither the General Partner nor any of its affiliates (i) manages any part of your investment portfolio on a discretionary basis, (ii) regularly gives investment advice for a fee with respect to your assets, or (iii) has an agreement or understanding, written or unwritten, with you under which you receive information, recommendations or advice concerning investments that are used as a primary basis for your decisions, or under which you receive individualized investment advice concerning your assets; or
(b) you are independent of the General Partner, have studied the Memorandum and have made an independent decision to make the investment solely on the basis of such Memorandum and without reliance on any other information or statements as to the appropriateness of the investment, and neither the General Partner nor its employees or affiliates: (i) has exercised any investment discretion or control with respect to your investment; (ii) has authority, responsibility to give, or has given individualized investment advice with respect to your investment; or (iii) is the employer maintaining or contributing to you.
(28) If you are a Benefit Plan Investor, you also represent that both (a) and (b) as follows are true:
(a) the plans investment in the Partnership does not violate and is not otherwise inconsistent with the terms of any legal document constituting the plan or any trust agreement thereunder; and
(b) the subscriber will, at the request of the Partnership, furnish the Partnership with such information as the Partnership may reasonably require to establish that the purchase of the Units by the plan does not violate any provision of ERISA or the Code, including without limitation, those provisions relating to prohibited transactions by parties in interest or disqualified persons as defined therein.
(29) If you are a benefit plan or retirement account that is not a Benefit Plan Investor as defined in number (26) above, such as a governmental plan, a non-U.S. benefit plan, or a church plan that is not subject to ERISA, this investment is in accordance with legal requirements applicable to you.
ACCEPTANCE OF THE LIMITED PARTNERSHIP AGREEMENT
You agree that as of the date that your name is entered on the books of the Partnership, you shall become a limited partner of the Partnership. You also agree to each and every term of the Limited Partnership Agreement of the Partnership as if you signed that Limited Partnership Agreement. You further agree that you will not be issued a certificate evidencing the Units that you are purchasing, but that you will receive a confirmation of purchase in Morgan Stanley Smith Barney LLCs customary form.
B-7
POWER OF ATTORNEY AND GOVERNING LAW
You hereby irrevocably constitute and appoint Ceres Managed Futures LLC, the general partner of the Partnership (in addition to and not by way of limitation of the Power of Attorney included in the Limited Partnership Agreement), as your true and lawful Attorney-in-Fact, with full power of substitution, in your name, place, and stead: (1) to do all things necessary to admit you as a limited partner of the Partnership; (2) to admit others as additional or substituted limited partners to the Partnership so long as such admission is in accordance with the terms of the Limited Partnership Agreement or any amendment thereto; (3) to file, prosecute, defend, settle, or compromise any and all actions at law or suits in equity for or on behalf of the Partnership in connection with any claim, demand, or liability asserted or threatened by or against the Partnership; and (4) to execute, acknowledge, swear to, deliver, file, and record on your behalf and, as necessary, in the appropriate public offices, and publish: (a) the Limited Partnership Agreement and certificate of limited partnership and all amendments thereto permitted by the terms thereof; (b) all instruments that the General Partner deems necessary or appropriate to reflect any amendment, change, or modification of the Limited Partnership Agreement or the certificate of limited partnership made in accordance with the terms of the Limited Partnership Agreement; (c) certificates of assumed name; and (d) all instruments that the General Partner deems necessary or appropriate to qualify or maintain the qualification of the Partnership to do business as a foreign limited partnership in other jurisdictions. You agree to be bound by any representation made by the General Partner or any successor thereto acting in good faith pursuant to this power of attorney.
The power of attorney granted hereby shall be deemed to be coupled with an interest and shall be irrevocable and survive your death, incapacity, dissolution, liquidation, or termination.
The validity and construction of this Agreement is governed by, and construed in accordance with, the laws of the State of New York (without regard to its choice of law principles); provided, however, that causes of action for violations of federal or state securities laws shall not be governed by this Agreement.
ANY ACTION OR PROCEEDING RELATING IN ANY RESPECT TO THIS AGREEMENT, THE OPERATION OF THE PARTNERSHIP OR THE OFFERING OF THE UNITS AGAINST YOU, THE PARTNERSHIP OR THE GENERAL PARTNER MAY BE BROUGHT AND ENFORCED IN THE COURTS OF THE CITY, COUNTY, AND STATE OF NEW YORK OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFORE) IN THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND YOU, THE GENERAL PARTNER AND THE PARTNERSHIP IRREVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH STATE AND FEDERAL COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. YOU, THE GENERAL PARTNER AND THE PARTNERSHIP IRREVOCABLY WAIVES ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO LAYING THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN THE COURTS OF THE CITY, COUNTY, AND STATE OF NEW YORK OR IN THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
YOU HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST THE PARTNERSHIP AND THE GENERAL PARTNER RELATING IN ANY RESPECT TO THIS AGREEMENT, THE OPERATION OF THE PARTNERSHIP AND THE OFFERING OF THE UNITS.
YOU HEREBY AGREE THAT SERVICE OF PROCESS MAY BE EFFECTED IN THE SAME MANNER AS NOTICES ARE GIVEN PURSUANT TO THE NOTICE SECTION BELOW.
MISCELLANEOUS
Equitable Relief. You agree that the Partnership, the General Partner and their affiliates would be subject to potentially irreparable injury as a result of any breach by you of any of the representations, warranties, acknowledgements, covenants, or agreements set forth in this Agreement, and that monetary damages would not be sufficient to compensate or make whole the Partnership, the General Partner and their affiliates for any such breach. Accordingly, you agree that the Partnership and the General Partner, separately or together, shall be entitled to equitable and injunctive relief, on an emergency, temporary, preliminary, and/or permanent basis, so as to prevent any such breach or the continuation thereof.
B-8
Survival; Legal Effect.
(i) You agree that the representations, warranties, agreements, and covenants set forth in this Agreement shall, in pertinent part, survive the acceptance (or rejection) of this Agreement, and any subsequent withdrawal from the Partnership by you.
(ii) This Agreement shall be binding upon you to the extent set forth herein prior to acceptance of you as a limited partner and, if accepted, on you and the General Partner, its affiliates, and shall inure to the benefit of you, the General Partner, its affiliates and the Partnership.
Severability. In the event that any provision of this Agreement is held to be invalid or unenforceable in any jurisdiction, such provision shall be deemed modified to the minimum extent necessary so that such provision, as so modified, shall no longer be held to be invalid or unenforceable. Any such modification, invalidity, or unenforceability shall be strictly limited both to such provision and to such jurisdiction, and in each case to no other. Furthermore, in the event of any such modification, invalidity, or unenforceability, this Agreement shall be interpreted so as to achieve the intent expressed herein to the greatest extent possible in the jurisdiction in question and otherwise as set forth herein.
Counterparts; Facsimiles and Electronic Copies.
(i) The execution page may be executed in one or more counterparts, together shall constitute the same document. It is the General Partners policy to require submission of manually executed copies of this Agreement. In rare occasions, and in the sole discretion of the General Partner, the General Partner may from time-to-time permit facsimiles and/or electronic copies to have the same binding force as originals.
(ii) You agree that the General Partner is authorized to accept and execute the execution page, as well as any instructions given by you, in original signed form or by facsimile or electronic copy. If instructions are given by facsimile or electronic copy, you shall promptly courier the original signed form to the General Partner and shall indemnify the Partnership, the General Partner and their affiliates for any losses and damages suffered by them as a result of acting on faxed or e-mailed instructions rather than instructions in original signed form. You further agree that the Partnership, the General Partner and their affiliates, are entitled to rely conclusively on, and shall incur no liability in respect of any action taken on the basis of, any notice, consent, request, instruction, or other instrument believed in good faith to be genuine or to be signed by properly authorized persons.
Entire Agreement. This Agreement and the Limited Partnership Agreement contain the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and supersede any prior agreements and understandings of the parties relating to such subject matter.
No Waiver.
(i) No failure or delay on the part of the Partnership, the General Partner and their affiliates in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. Failure on the part of the Partnership, the General Partner and their affiliates to challenge any act by you or to declare you in default with respect to the Partnership, the General Partner and their affiliates, irrespective of how long that failure continues, shall not constitute a waiver by the Partnership, the General Partner and their affiliates of their rights with respect to that default until the applicable statute of limitations period has run.
(ii) Any waiver granted by the General Partner with respect to any term of this Agreement hereunder must be in writing, signed by an authorized representative of the General Partner, and shall be valid only in the specific instance in which given.
B-9
Confidentiality.
(i) You understand that the information requested in this Agreement is needed in order to ensure compliance with applicable laws and regulations, including, but not limited to, applicable anti-money laundering laws and regulations. You acknowledge that you will receive or have access to confidential proprietary information concerning the Partnership, including, without limitation, portfolio positions, valuations, information regarding potential investments, financial information, trade secrets and the like (collectively, Confidential Information), which is proprietary in nature and non-public. You agree that, except with the prior written consent of the General Partner, you have and you shall at all times keep confidential any Confidential Information to which you have been or shall become privy relating to the business or assets of the Partnership, the General Partner, the commodity trading advisor and their affiliates unless required to be disclosed by law; provided, that before you make any disclosure of Confidential Information required by law, you shall so inform the General Partner and shall give the General Partner, to the greatest extent practicable, an opportunity to contest whether such information is required by law to be disclosed. Furthermore, you have not reproduced, duplicated or delivered (and will not reproduce, duplicate or deliver) the Memorandum or this Agreement and any and all other Partnership related documents to any other person, except your professional advisors or as instructed by the Partnership.
(ii) Notwithstanding anything to the contrary contained herein, you (and each of your employees, agents or other representatives, as applicable) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated herein and all materials of any kind provided by you relating to such tax treatment and tax structure (as such terms are defined in U.S. Treasury Regulation section 1.6011-4).
Notices.
Notice shall be provided in accordance with the Limited Partnership Agreement.
RECEIPT OF DOCUMENTATION
The regulations of the CFTC require that you be given a copy of the Memorandum, as well as additional documentation consisting of: (a) any required supplements or amendments to the Memorandum, and (b) the most current monthly account statement (report) for the Partnership. You hereby acknowledge receipt of the Memorandum and any such additional documentation.
THE SUBSCRIPTION PROCESS
In order to invest in the Partnership, you must (1) date, complete and execute one copy of this Agreement and (2) deliver or mail the Agreement to your Morgan Stanley Smith Barney LLC financial advisor or private wealth advisor at such persons Morgan Stanley Smith Barney LLC branch office in time for it to be forwarded and received by the General Partner at Morgan Stanley Smith Barney Managed Futures, 522 Fifth Avenue, 14th Floor, New York, New York 10036, no later than 3:00 p.m. New York City time, on the third to last business day of the month. This subscription is not binding on the Partnership unless and until it is accepted by General Partner, The General Partner may accept or reject this subscription in whole or in part for any reason whatsoever.
THIS IS A SPECULATIVE INVESTMENT. YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF YOUR INVESTMENT.
B-10
SIGNATURE(S) You MUST sign Either Section A or Section B Below. | ||||||
By signing below you acknowledge that you have received and carefully read, understand and agree to abide by the terms of investment as described in the Memorandum and the Limited Partnership Agreement, including any supplements and exhibits thereto. | ||||||
Section A. Please sign here if you are an: INDIVIDUAL or INDIVIDUAL RETIREMENT ACCOUNT. | ||||||
If you are subscribing for a joint or community property account, the statements, representations, and warranties set forth in this Subscription and Exchange Agreement and Power of Attorney shall be deemed to have been made by each owner of the account. (If the Units will be owned by tenants-in-common, signatures of all owners are required.) | ||||||
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Signature of Subscriber | Date | Signature of Co-Subscriber | Date | |||
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Print Full Name of Subscriber | Print Full Name of Co-Subscriber | |||||
Section B. Please sign here if you are an: ENTITY, TRUST, BENEFIT PLAN INVESTOR (see number (26) on page B-7 for the definition) or OTHER (please specify) .
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ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF ERISA PLANS OR INDIVIDUAL RETIREMENT ACCOUNTS IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR MORGAN STANLEY SMITH BARNEY LLC THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN.
The undersigned officer, partner, trustee, manager, or other representative hereby certifies and warrants that s/he has full power and authority from or on behalf of the entity named below and its shareholders, partners, beneficiaries, or members to make the statements, representations, and warranties made herein on their behalf. | ||||||
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Print Full Name of Entity | Signature of Person Signing for Entity | Date | ||||
Title: | ||||||
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Print Full Name of Person Signing for Entity |
B-11
Exhibit 31.1
CERTIFICATION
I, Walter Davis, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Bristol Energy Fund L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 14, 2012
/s/ Walter Davis | ||
Walter Davis Ceres Managed Futures LLC President and Director |
Exhibit 31.2
CERTIFICATION
I, Damian George, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Bristol Energy Fund L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 14, 2012
/s/ Damian George | ||
Damian George and Director |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bristol Energy Fund L.P. (the Partnership) on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Walter Davis, President and Director of Ceres Managed Futures LLC, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
/s/ Walter Davis | ||
Walter Davis Ceres Managed Futures LLC President and Director |
Date: November 14, 2012
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bristol Energy Fund L.P. (the Partnership) on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Damian George, Chief Financial Officer and Director, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
/s/ Damian George | ||
Damian George Ceres Managed Futures LLC Chief Financial Officer and Director |
Date: November 14, 2012
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