Back to GetFilings.com
==============================================================================
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, 2004
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: 000-50728
FUTURES PORTFOLIO FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland 52-1627106
----------------------- ------------------------------
(State of Incorporation) (IRS Employer Identification No.)
c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200
Rockville, Maryland 20850
-------------------------
(Address of Principal Executive Office)(zip code)
(240) 631-9808
-------------
Registrant's telephone number, including area code:
----------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes [ ] No [X]
==============================================================================
Table of Contents
Item 1. Financial Statements
Statements of Financial Condition
September 30, 2004 (Unaudited) and December 31, 2003 (Audited)
Condensed Schedule of Investments
September 30, 2004 (Unaudited)
Condensed Schedule of Investments
December 31, 2003 (Audited)
Statements of Operations
For the Three Months and Nine Months Ended September 30, 2004 and
2003 (Unaudited)
Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and 2003 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value) - For
the Nine months Ended September 30, 2004 and 2003 (Unaudited)
Notes to Financial Statements for the Nine Months Ended
September 30, 2004 and 2003 (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Market Risk
Item 4. Controls and Procedures
i
ITEM 1: Financial Statements
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
September 30, 2004 (Unaudited) and December 31, 2003 (Audited)
================
September 30, December 31,
2004 2003
---- ----
ASSETS
Equity in broker trading accounts
Cash $ 29,160,396 $ 14,155,901
United States government securities 119,734,126 56,225,381
Unrealized gain on open futures contracts 6,940,896 6,241,625
-------------- --------------
Deposits with brokers 155,835,418 76,622,907
Cash 56,943,429 11,197,196
Unrealized gain on open forward currency contracts 2,170,849 797,823
General Partner 1% allocation 189,017 0
-------------- --------------
Total assets $215,138,713 $ 88,617,926
============== ==============
LIABILITIES
Accounts payable $ 160,550 $ 86,600
Commissions and other trading fees
on open contracts 74,710 30,210
General Partner management fee 658,248 129,471
General Partner 1% allocation 0 51,410
Advisor management fees 302,127 94,910
Advisor incentive fees 0 1,678,712
Selling agents fee 529,824 97,499
Redemptions payable 1,877,805 186,717
Subscriptions received in advance 8,863,122 8,496,538
-------------- --------------
Total liabilities 12,466,386 10,852,067
-------------- --------------
PARTNERS' CAPITAL (Net Asset Value)
Class A Interests - 50,922.3472 and 16,350.3885 units
outstanding at September 30, 2004 and December 31, 2003 159,440,406 55,901,105
Class B Interests - 11,573.8649 and 5,435.3839 units
outstanding at September 30, 2004 and December 31, 2003 43,231,921 21,864,754
-------------- --------------
Total partners' capital
(Net Asset Value) 202,672,327 77,765,859
-------------- --------------
$215,138,713 $ 88,617,926
============== ==============
See accompanying notes.
1
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS
September 30, 2004
(Unaudited)
----------------
UNITED STATES GOVERNMENT SECURITIES
- -----------------------------------
Maturity % of Net
Face Value Date Description Value Asset Value
---------- ---- ----------- ----- -----------
$36,000,000 01/06/05 U.S. Treasury Bill $ 35,848,680 17.69 %
32,000,000 12/02/04 U.S. Treasury Bill 31,921,191 15.75 %
27,000,000 11/04/04 U.S. Treasury Bill 26,968,380 13.31 %
25,000,000 10/07/04 U.S. Treasury Bill 24,995,875 12.33 %
------------ --------
Total United States government securities
(cost, including accrued interest, - $119,734,126) $119,734,126 59.08%
============ ========
LONG FUTURES CONTRACTS
- ----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ 2,306 0.00 %
Currency 784,513 0.39 %
Energy 3,237,182 1.60 %
Interest rate 1,625,287 0.80 %
Metal 3,350,685 1.65 %
Stock index (170,284) (0.08)%
------------ --------
Total long futures contracts $ 8,829,689 4.36 %
============ ========
SHORT FUTURES CONTRACTS
- -----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $1,322,742 0.65 %
Currency (714,250) (0.35)%
Energy (157,500) (0.08)%
Interest rate (24,609) ( 0.01)%
Metal (2,346,975) (1.16)%
Stock Index 31,799 0.02 %
------ ------
Total short futures contracts $ (1,888,793) (0.93)%
------------ --------
Total futures contracts $ 6,940,896 3.43 %
============ ========
FORWARD CURRENCY CONTRACTS
- --------------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Long forward currency contracts $ 6,488,391 3.20 %
Short forward currency contracts (4,317,542) (2.13)%
------------ --------
Total forward currency contracts $ 2,170,849 1.07%
============ ========
See accompanying notes.
2
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2003
(Audited)
--------------
UNITED STATES GOVERNMENT SECURITIES
- -----------------------------------
Maturity % of Net
Face Value Date Description Value Asset Value
---------- ---- ----------- ----- -----------
$16,000,000 06/03/04 U.S. Treasury Bill $15,931,137 20.49 %
12,300,000 05/06/04 U.S. Treasury Bill 12,256,220 15.76 %
10,000,000 02/19/04 U.S. Treasury Bill 9,985,990 12.84 %
6,500,000 04/01/04 U.S. Treasury Bill 6,484,069 8.34 %
5,000,000 03/11/04 U.S. Treasury Bill 4,990,348 6.42 %
Other U.S. Treasury Bills 6,577,617 8.45 %
----------- ---------
Total United States government securities
(cost, including accrued interest, - $56,225,381) $56,225,381 72.30 %
=========== ========
LONG FUTURES CONTRACTS
- ----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ 578,883 0.74 %
Currency 3,393,879 4.36 %
Energy 115,841 0.15 %
Interest rate (210,196) (0.27)%
Metal 2,888,152 3.72 %
Stock index 910,629 1.17 %
----------- ---------
Total long futures contracts $ 7,677,188 9.87 %
=========== ========
SHORT FUTURES CONTRACTS
- -----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ (25,120) (0.03)%
Currency (1,006,522) (1.30)%
Interest rate (111,541) (0.14)%
Metal (292,380) (0.38)%
----------- ---------
Total short futures contracts $ (1,435,563) (1.85)%
----------- ---------
Total futures contracts $ 6,241,625 8.02 %
=========== ========
FORWARD CURRENCY CONTRACTS
- --------------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Long forward currency contracts $ 894,946 1.15 %
Short forward currency contracts (97,123) (0.12)%
----------- ---------
Total forward currency contracts $ 797,823 1.03 %
=========== ========
See accompanying notes.
3
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2004 and 2003
(Unaudited)
---------------
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
TRADING GAINS (LOSSES)
Gain (loss) from trading
Realized $(17,162,700) $ (4,021,199) $(10,754,329) $ (848,962)
Change in unrealized 12,340,330 3,108,790 2,072,297 1,803,076
Brokerage commissions (381,905) (82,590) (878,883) (137,490)
--------- -------- --------- ---------
Gain (loss) from trading (5,204,275) (994,999) (9,560,915) 816,624
----------- --------- ----------- -------
NET INVESTMENT (LOSS)
Income 544,350 89,915 1,120,020 183,570
------- ------ --------- -------
Interest income
Expenses
General Partner management fee 962,898 176,774 2,192,955 325,427
General Partner 1% allocation (73,122) (13,328) (189,017) (2,659)
Advisor management fees 704,987 100,668 1,547,578 191,409
Advisor incentive fees 0 (368) 4,283,412 423,117
Selling agents fee 772,531 119,421 1,769,509 236,158
Operating expenses 211,855 31,228 667,344 90,242
------- ------ ------- ------
Total expenses 2,579,149 414,395 10,271,781 1,263,694
--------- ------- ---------- ---------
Net investment (loss) (2,034,799) (324,480) (9,151,761) (1,080,124)
----------- --------- ----------- -----------
NET LOSS $ (7,239,074) $ (1,319,479) $ (18,712,676) $(263,500)
============== ============= ============== ==========
Three Months Ended September 30, Nine Months Ended September 30,
2004 2003 2004 2003
---- ---- ---- ----
Class A Class B Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- ------- ------- -------
NET INCOME (LOSS) PER UNIT
(based on weighted average number of
units outstanding during the period) $(120.97) $(129.05) $(117.04) $(137.08) $(437.27) $(449.41) $(137.65) $ 114.68
========= ========= ========= ========= ========= ========= ========= ========
INCREASE (DECREASE) IN NET
ASSET VALUE PER UNIT $(124.84) $(131.17) $(166.96) $(176.16) $(287.90) $(287.37) $197.46 $ 280.22
========= ========= ========= ========= ========= ========= ======= ========
See accompanying notes.
4
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
-----------------
2004 2003
---- ----
Cash flows from (for) operating activities
Net (loss) $ (18,712,676) $ (263,500)
Adjustments to reconcile net (loss) to net
cash (for) operating activities
Net change in unrealized (2,072,297) (1,803,076)
(Increase) in General Partner 1% allocation
receivable (189,017) (2,659)
Increase (decrease) in accounts payable and
accrued expenses (443,353) 176,600
Net (purchases) of investments in United States
government securities (63,508,745) (27,467,127)
----------------- ------------------
Net cash (for) operating activities (84,926,088) (29,359,762)
----------------- ------------------
Cash flows from (for) financing activities
Addition of units 139,637,585 35,583,986
Subscriptions received in advance 8,809,962 9,637,448
Redemption of units (2,770,731) (520,561)
---------------- ---------------
Net cash from financing activities 145,676,816 44,700,873
-------------- ----------------
Net increase in cash 60,750,728 15,341,111
Cash at beginning of period 25,353,097 4,678,337
-------------- ---------------
Cash at end of period $ 86,103,825 $20,019,448
============= =============
End of period cash consists of:
Cash in broker trading accounts $ 29,160,396 $ 9,195,292
Cash 56,943,429 10,824,156
-------------- ----------------
Total end of period cash $ 86,103,825 $20,019,448
============= ===========
See accompanying notes.
5
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
Class A Interests Class B Interests
----------------- -----------------
Units Value Units Value Total
----- ----- ----- ----- -----
Nine Months Ended September 30, 2004
- ------------------------------------
Balances at
December 31, 2003 16,350.3885 $ 55,901,105 5,435.3839 $21,864,754 $77,765,859
Net (loss) for the nine months
ended September 30, 2004 (14,805,112) (3,907,564) (18,712,676)
Additions 35,484.5426 121,459,644 6,523.3960 26,674,479 148,134,123
Redemptions (681.3045) (2,298,416) (565.8773) (2,163,403) (4,461,819)
Transfers (231.2794) (816,815) 180.9623 763,655 (53,160)
----------- --------- -------- ------- --------
Balances at
September 30, 2004 50,922.3472 $ 159,440,406 11,573.8649 $43,231,921 $202,672,327
=========== ============= ============ =========== ============
Class A Interests Class B Interests
----------------- ------------------
Units Value Units Value Total
----- ----- ----- ----- -----
Nine Months Ended September 30, 2003
- ------------------------------------
Balances at
December 31, 2002 1,240.5575 $ 3,680,442 1,832.4761 $ 6,277,366 $ 9,957,808
Net income (loss) for the nine months
ended September 30, 2003 (562,132) 298,632 (263,500)
Additions 8,063.1826 26,326,030 2,491.3984 9,461,928 35,787,958
Redemptions (82.8473) (267,378) (64.7064) (254,183) (521,561)
--------- --------- --------- --------- ---------
Balances at
September 30, 2003 9,220.8928 $ 29,176,962 4,259.1681 $15,783,743 $44,960,705
============ ============ =========== =========== =============
Net Asset Value Per Unit
- -------------------------------------------------------------------------------------------------------------------------
September 30, 2004 December 31, 2003 September 30, 2003 December 31, 2002
----------------- ----------------- ------------------ -----------------
Class A Class B Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- ------- ------- -------
$3,131.05 $3,735.30 $3,418.95 $4,022.67 $3,164.22 $3,705.83 $2,966.76 $3,425.61
========= ========= ========= ========= ========= ========= ========= =========
See accompanying notes.
6
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30 2004 and 2003
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
A. General Description of the Partnership
Futures Portfolio Fund, Limited Partnership (the Partnership)
is a Maryland limited partnership which operates as a commodity
investment pool. The Partnership utilizes professional trading
advisors to engage in the trading of futures contracts, forward
currency contracts and other financial instruments.
B. Regulation
The Partnership is a registrant with the Securities and
Exchange Commission (SEC) pursuant to the Securities Exchange
Act of 1934, as amended (the Act). As a registrant, the
Partnership is subject to the regulations of the SEC and the
informational requirements of the Act. As a commodity pool, the
Partnership is subject to the regulations of the Commodity
Futures Trading Commission, an agency of the United States
(U.S.) government which regulates most aspects of the commodity
futures industry; rules of the National Futures Association, an
industry self-regulatory organization; and the requirements of
commodity exchanges where the Partnership executes
transactions. Additionally, the Partnership is subject to the
requirements of Futures Commission Merchants (brokers) and
interbank market makers through which the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
estimates made by the Partnership's management. Gains or losses
are realized when contracts are liquidated. Unrealized gains
and losses on open contracts (the difference between contract
trade price and market price) are reported in the statement of
financial condition as a net gain or loss, as there exists a
right of offset of unrealized gains or losses in accordance
with Financial Accounting Standards Board Interpretation No. 39
- "Offsetting of Amounts Related to Certain Contracts." Any
change in net unrealized gain or loss from the preceding period
is reported in the statement of operations. United States
government securities are stated at cost plus accrued interest,
which approximates market value.
For purposes of both financial reporting and calculation of
redemption value, net asset value per Class A or Class B unit
is calculated by dividing the net asset value of Class A or
Class B by the number of outstanding units of Class A or Class
B.
D. Brokerage Commissions
Brokerage commissions include other trading fees and are
charged to expense when contracts are opened.
E. Income Taxes
The Partnership prepares calendar year U.S. and applicable
state information tax returns and reports to the partners their
allocable shares of the Partnership's income, expenses and
trading gains or losses.
7
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(CONTINUED)
-----------
F. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar;
however, it transacts business in currencies other than the
U.S. dollar. Assets and liabilities denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at
the rates in effect at the date of the statement of financial
condition. Income and expense items denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at
the rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are reported in
income currently.
G. Classes of Interests
The Partnership has two classes of limited partnership
interests ("Interests"), Class A and Class B. The General
Partner may offer additional classes at its discretion. Both
Class A and Class B Interests are traded pursuant to identical
trading programs and differ only in respect to the General
Partner's management fee and selling agents fee. Class B
Interests are issued only at the General Partner's discretion
and are generally intended for investors who are participating
in fee based investment advisory programs. All items of income
or loss, except for the General Partner management fee and
selling agents fee, are allocated pro rata between Class A and
Class B Interests. The General Partner management fee and
selling agents fee applicable to each class of Interest is then
charged to each class. All items of income or loss allocated to
each class of Interest is then allocated pro rata to each
Limited Partner within each class.
H. Reclassification
Certain amounts in the December 31, 2003 statement of financial
condition were reclassified to conform with September 30, 2004
presentation.
Note 2. GENERAL PARTNER
The General Partner of the Partnership is Steben & Company, Inc.,
which conducts and manages the business of the Partnership. During
the three months and nine months ended September 30, 2004 and 2003,
the General Partner did not maintain a capital balance in the
Partnership, however, the sole shareholder of the General Partner
has an investment in Class B Interests of the Partnership.
During the three months and nine months ended September 30, 2004 and
2003, the General Partner received the following compensation:
o Class A Interests paid a monthly management fee equal to 1/12
of 2% (2% per annum) of the net asset value of the Class A
Interests as of the last day of each month.
o Class A Interests paid a monthly selling agents fee equal to
1/12 of 2% (2% per annum) of the net asset value of the Class A
Interests as of the last day of each month. The General
Partner, in turn, pays the selling agents fee to the respective
selling agent. If the selling agents fee is not paid to the
selling agent or if the General Partner was the selling agent,
such portion of the selling agents fee is retained by the
General Partner.
8
o Commencing May 1, 2003, Class B Interests paid a monthly
management fee equal to 1/12 of 1.95% (1.95% per annum) of the
net asset value of the Class B Interests as of the last day of
each month.
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. GENERAL PARTNER (CONTINUED)
---------------------------
o Commencing May 1, 2003, Class B Interests paid a monthly
selling agents fee equal to 1/12 of .20% (.20% per annum) of
the net asset value of the Class B Interests as of the last day
of each month. The General Partner, in turn, pays the selling
agents fee to the respective selling agent. If the selling
agents fee is not paid to the selling agent or if the General
Partner was the selling agent, such portion of the selling
agents fee is retained by the General Partner.
o Prior to May 1, 2003, Class B Interests paid a monthly
management fee equal to 1/12 of 1.15% (1.15% per annum) of the
net asset value of the Class B Interests as of the last day of
each month.
o Prior to May 1, 2003, Class B Interests paid a monthly selling
agents fee equal to 1/12 of 1.00% (1.00% per annum) of the net
asset value of the Class B Interests as of the last day of each
month. The General Partner, in turn, pays the selling agents
fee to the respective selling agent. If the selling agents fee
is not paid to the selling agent or if the General Partner was
the selling agent, such portion of the selling agents fee is
retained by the General Partner.
The General Partner also receives, at the time of subscription, a
subscription fee equal to 1% of the subscription amount. The General
Partner may reduce or waive this fee in its sole discretion.
Additions in the statement of changes in partners' capital (net
asset value) are reflected net of such subscription fee.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of any increase or decrease in the
Partnership's net assets. Such amount is reflected as the General
Partner 1% allocation in the statement of financial condition, the
statement of operations and the statement of cash flows.
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership has Advisory Agreements with three commodity trading
advisors, pursuant to which the Partnership pays each commodity
trading advisor a monthly management fee equal to 1/12 of 1% (1% per
annum) of the allocated net assets (as defined in each respective
Advisory Agreement) at the end of the month and a quarterly
incentive fee equal to 25% of Trading Profits (as defined in each
respective Advisory Agreement). In addition, the Partnership has an
Advisory Agreement with a fourth commodity trading advisor, pursuant
to which the Partnership pays the commodity trading advisor a
monthly management fee equal to 1/12 of 2% (2% per annum) of the
account's net assets (as defined in the Advisory Agreement) at the
end of the month and a quarterly incentive fee equal to 20% of
Trading Profits (as defined in the Advisory Agreement).
Note 4. DEPOSITS WITH BROKERS
---------------------
The Partnership deposits funds with brokers, subject to Commodity
Futures Trading Commission regulations and various exchange and
broker requirements. Margin requirements are satisfied by the
deposit of U.S. Treasury bills and cash with such brokers. The
Partnership earns interest income on its assets deposited with the
brokers.
9
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 5. OPERATING EXPENSES
------------------
The Partnership is responsible for all of its operating expenses
such as legal, accounting, auditing, record keeping, administration,
computer, clerical expenses, printing and duplication expenses,
mailing expenses, costs of researching and performing due diligence
on advisors for the Partnership, etc. Pursuant to the terms of the
Limited Partnership Agreement, operating expenses that exceed 1% of
the average month-end net assets of the Partnership are the
responsibility of the General Partner.
Note 6. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
--------------------------------------------
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partner. Units are sold at the
net asset value per Class A or Class B unit as of the close of
business on the last day of the month in which the subscription is
accepted. Prior to May 1, 2003, investors who subscribed through a
selling agent were subject to an up-front sales commission of up to
4% of the subscription amount. If the General Partner acted as the
selling agent, the General Partner was entitled to the up-front
sales commission, however, during the period January 1, 2003 through
April 30, 2003, the General Partner elected not to charge such
up-front sales commission to which it was entitled. Additions in the
statement of changes in partners' capital (net asset value) are
reflected net of such commissions to selling agents. Investors whose
subscriptions are accepted are admitted as Limited Partners as of
the beginning of the month following the month in which their
subscriptions were accepted. At September 30, 2004 and December 31,
2003, the Partnership had received subscriptions of $8,863,122 and
$8,496,538, respectively, which will be additions to the Partnership
effective October 1, 2004 and January 1, 2004, respectively.
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partner. A Limited Partner may
request and receive redemption of Class A or Class B units owned,
subject to restrictions in the Limited Partnership Agreement.
Note 7. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and
foreign futures contracts and forward currency contracts
(collectively, "derivatives"). The Partnership is exposed to both
market risk, the risk arising from changes in the market value of
the contracts, and credit risk, the risk of failure by another party
to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with
the brokers. Additional deposits may be necessary for any loss on
contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's
proprietary activities. A customer's cash and other property (for
example, U.S. Treasury bills) deposited with a broker are considered
commingled with all other customer funds subject to the broker's
segregation requirements. In the event of a broker's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less
than total cash and other property deposited.
10
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
The Partnership trades forward currency contracts in unregulated
markets between principals and assumes the risk of loss from
counterparty nonperformance. Accordingly, the risks associated with
forward currency contracts are generally greater than those
associated with exchange traded contracts because of the greater
risk of counterparty default. Additionally, the trading of forward
currency contracts typically involves delayed cash settlement.
The Partnership has a substantial portion of its assets on deposit
with financial institutions in connection with its trading of
forward currency contracts and its cash management activities. In
the event of a financial institution's insolvency, recovery of
Partnership assets on deposit may be limited to account insurance or
other protection afforded such deposits.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market
risk equal to the notional contract value of futures and forward
currency contracts purchased and unlimited liability on such
contracts sold short.
The unrealized gain (loss) on open futures and forward currency
contracts is comprised of the following:
Futures Contracts Forward Currency Contracts
(exchange traded) (non-exchange traded)
September 30, December 31, September 30, December 31,
2004 2003 2004 2003
---- ---- ---- ----
Gross unrealized gains $ 11,495,474 $ 8,128,348 $ 6,765,144 $ 1,129,789
Gross unrealized losses (4,554,578) (1,886,723) (4,594,295) (331,966)
-------------- -------------- ------------ ---------------
Net unrealized gain (loss) $ 6,940,896 $ 6,241,625 $ 2,170,849 $ 797,823
=========== ============= ============ ==============
The General Partner has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. The Limited
Partners bear the risk of loss only to the extent of the market
value of their respective investments and, in certain specific
circumstances, distributions and redemptions received.
Note 8. INTERIM FINANCIAL STATEMENTS
----------------------------
The statement of financial condition as of September 30, 2004,
including the September 30, 2004 condensed schedule of investments,
the statements of operations for the three months and nine months
ended September 30, 2004 and 2003, and the statements of cash flows
and changes in partners' capital (Net Asset Value) for the nine
months ended September 30, 2004 and 2003 are unaudited. In the
opinion of management, such financial statements reflect all
adjustments, which were of a normal and recurring nature, necessary
for a fair presentation of financial position as of September 30,
2004, and the results of operations for the three months and nine
months ended September 30, 2004 and 2003, and cash flows and changes
in partners' capital (net asset value) for the nine months ended
September 30, 2004 and 2003.
11
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 9. FINANCIAL HIGHLIGHTS
--------------------
The following information presents per unit operating performance
data and other supplemental financial data for the three months and
nine months ended September 30, 2004 and 2003. This information has
been derived from information presented in the financial statements.
Three months ended September 30,
2004 2003
(Unaudited) (Unaudited)
----------- -----------
Class A Class B Class A Class B
Interests Interests Interests Interests
--------- --------- --------- ---------
Per Unit Performance
(for a unit outstanding throughout the entire period)
-----------------------------------------------------
Net asset value per unit at beginning of period $3,255.89 $3,866.47 $3,331.18 $3,881.99
--------- --------- --------- ---------
Income from operations:
(Loss) from trading (1) (88.36) (105.04) (132.82) (153.30)
Net investment (loss) (1) (36.48) (26.13) (34.14) (22.86)
------------- ------- --------- -------
Total (loss) from operations (124.84) (131.17) (166.96) (176.16)
-------- -------- -------- --------
Net asset value per unit at end of period $3,131.05 $3,735.30 $3,164.22 $3,705.83
========= ========= ========= =========
Total Return (3) (3.83)% (3.39)% (5.01)% (4.54)%
========== ========== ========== ==========
Supplemental Data
Ratios to average net asset value:
Expenses prior to advisor incentive fees (4) 5.68% 3.86% 5.25% 3.43%
Advisor incentive fees (3) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total expenses 5.68% 3.86% 5.25% 3.43%
======== ======== ======== ========
Net investment (loss) (2),(4) (4.57)% (2.75)% (4.26)% (2.44)%
========== ========== ========== ==========
Total returns are calculated based on the change in value of a unit
during the period. An individual partner's total returns and ratios
may vary from the above total returns and ratios based on the timing
of additions and redemptions.
---------
(1) The net investment (loss) per unit is calculated by dividing
the net investment (loss) by the average number of units
outstanding during the period. (Loss) from trading is a
balancing amount necessary to reconcile the change in net asset
value per unit with the other per unit information.
(2) Excludes advisor incentive fees.
(3) Not annualized.
(4) Annualized.
12
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 9. FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------
Nine months ended September 30,
2004 2003
(Unaudited) (Unaudited)
Class A Class B Class A Class B
Interests Interests Interests Interests
--------- --------- --------- ---------
Per Unit Performance
(for a unit outstanding throughout the entire period)
-----------------------------------------------------
Net asset value per unit at beginning of period $3,418.95 $4,022.67 $2,966.76 $3,425.61
--------- --------- --------- ---------
Income from operations:
Gain (loss) from trading(1) (71.68) (76.79) 346.94 460.59
Net investment (loss)(1) (216.22) (210.58) (149.48) (180.37)
------------ -------- -------- --------
Total income (loss) from operations (287.90) (287.37) 197.46 280.22
-------- -------- ------ ------
Net asset value per unit at end of period $3,131.05 $3,735.30 $3,164.22 $3,705.83
========= ========= ========= =========
Total Return(3) (8.42)% (7.14)% 6.66% 8.18%
========== ======== ======== ==========
Supplemental Data
Ratios to average net asset value:
Expenses prior to advisor incentive fees(4) 5.75 % 3.96 % 5.50 % 3.84 %
Advisor incentive fees(3) 2.81 % 3.01 % 1.21 % 2.62 %
------ ------ ------ ------
Total expenses 8.56% 6.97% 6.71% 6.46%
======== ======== ======== ========
Net investment (loss)(2),(4) (4.75)% (2.96)% (4.46)% (2.79)%
========= ========== ========== ==========
Total returns are calculated based on the change in value of a unit
during the period. An individual partner's total returns and ratios
may vary from the above total returns and ratios based on the timing
of additions and redemptions.
---------
(1) The net investment (loss) per unit is calculated by dividing
the net investment (loss) by the average number of units
outstanding during the period. Gain (loss) from trading is a
balancing amount necessary to reconcile the change in net asset
value per unit with the other per unit information.
(2) Excludes advisor incentive fees.
(3) Not annualized.
(4) Annualized.
13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Futures Portfolio Fund (the "Fund") is a Maryland limited partnership, formed
on May 11, 1989, that utilizes professional trading advisors to engage in the
trading of commodity futures contracts, other commodity interests, options,
securities and forward contracts. The Fund began trading on January 2, 1990.
The Fund is an actively managed account with speculative trading profits as
its objective.
The Fund currently trades in the U.S. and international futures and forward
markets. Specifically, the Fund trades a portfolio focused on futures and
forward contracts in currencies, interest rate instruments, energy, stock
indices, agricultural products and metals.
Gains or losses are realized when contracts are liquidated. Net unrealized
gains or losses on open contracts (the difference between contract price and
market price) are reflected in the statement of financial condition. Any
change in net unrealized gain or loss from the preceding period is reported in
the statement of operations. United States government securities are stated at
cost plus accrued interest, which approximates market value. For purposes of
both financial reporting and calculation of redemption value, Net Asset Value
per Unit is calculated by dividing Net Asset Value by the number of
outstanding Units.
As of September 30, 2004, the aggregate capitalization of the Fund was
$202,672,327 of which $159,440,406 was in A units and $43,231,921 was in B
units. A units and B units differ only with regard to lower General Partner
and Selling Agent fees for the B units. The net asset value per unit of
limited partnership interest ("Unit") for A units as of September 30, 2004 was
$3,131.05 and for B units was $3,735.30.
Critical Accounting Policies
The Fund's financial statements are presented in accordance with accounting
principles generally accepted in the United States of America, which require
the use of certain estimates made by management. Gains or losses are realized
when contracts are liquidated. Unrealized gains or losses on open contracts
(the difference between contract trade price and market price) are reported in
the statement of financial condition as a net gain or loss, as there exists a
right of offset of unrealized gains or losses in accordance with Financial
Accounting Standards Board Interpretation No. 39 -"Offsetting of Amounts
Related to Certain Contracts." The market value of futures (exchange-traded)
contracts is determined by the various futures exchanges, and reflects the
settlement price for each contract as of the close of the last business day of
the reporting period. Any change in net unrealized gain or loss from the
preceding period is reported in the statement of operations. United States
government securities are stated at cost plus accrued interest, which
approximates market value.
For purposes of both financial reporting and calculation of redemption value,
net asset value per Class A or Class B unit is calculated by dividing the net
asset value of Class A or Class B by the number of outstanding units of Class
A or Class B.
Capital Resources
The Fund will raise additional capital only through the sale of Units offered
pursuant to the continuing offering, and does not intend to raise any capital
through borrowing. Due to the nature of the Fund's business, it will make no
capital expenditures and will have no capital assets, which are not operating
capital or assets.
14
Liquidity
Most United States commodity exchanges limit fluctuations in commodity futures
contracts prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits". During a single trading day, no
trades may be executed at prices beyond the daily limit. Once the price of a
futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Similar occurrences could prevent the Fund from promptly
liquidating unfavorable positions and subject the Fund to substantial losses
which could exceed the margin initially committed to such trades. In addition,
even if commodity futures prices have not moved the daily limit, the Fund may
not be able to execute futures trades at favorable prices, if little trading
in such contracts is taking place. Other than these limitations on liquidity,
which are inherent in the Fund's commodity futures trading operations, the
Fund's assets are expected to be highly liquid.
The entire offering proceeds, without deductions, will be credited to the
Fund's bank and brokerage accounts to engage in trading activities and as
reserves for that trading. The Fund meets its margin requirements by
depositing U.S. government securities with the futures broker and the
over-the-counter counterparties. In this way, substantially all of the Fund's
assets, whether used as margin for trading purposes or as reserves for such
trading, can be invested in U.S. government securities and time deposits with
U.S. banks. Investors should note that maintenance of the Fund's assets in
U.S. government securities and banks does not reduce the risk of loss from
trading futures and forward contracts. The Fund receives all interest earned
on its assets. No other person shall receive any interest or other economic
benefits from the deposit of Fund assets.
Approximately 10% to 30% of the Fund's assets normally are committed as
required margin for futures contracts and held by the futures broker, although
the amount committed may vary significantly. Such assets are maintained in the
form of cash or U.S. Treasury bills in segregated accounts with the futures
broker pursuant to the Commodity Exchange Act and regulations there under.
Approximately 10% to 30% of the Fund's assets are deposited with
over-the-counter counterparties in order to initiate and maintain forward
contracts. Such assets are not held in segregation or otherwise regulated
under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in
U.S. government securities or short-term time deposits with U.S.-regulated
bank affiliates of the over-the-counter counterparties. The remaining 40% to
80% of the Fund's assets will normally be invested in cash equivalents, such
as U.S. Treasury bills, and held by the futures broker or the over-the-counter
counterparties.
The Fund's assets are not and will not be, directly or indirectly, commingled
with the property of any other person in violation of law or invested with or
loaned to Steben & Company or any affiliated entities.
Results of Operations
The total return for the nine months ended September 30, 2004 was -8.42% and
- -7.14% for A units and B units, respectively. The total return for the nine
months ended September 30, 2003 was 6.66% and 8.18% for A units and B units,
respectively.
January 2004
- ------------
Fund performance in January remained positive despite some late price
reversals in the US dollar and US interest rates sensitive markets. The
Federal Open Market Committee introduced some minor language changes to its
policy statement, suggesting to some that the Federal Reserve might be setting
the stage to increase short term rates. This caused the US dollar to rise
sharply against major foreign currencies and it caused prices on long term US
interest rate instruments to fall, reflecting a rise in long term rates.
Overall, the fund benefited from net profits in virtually all market sectors
including foreign currencies, equities, agricultural, energy and metals. Only
the
15
fund's long positions in interest rate sensitive instruments, including the 30
year Treasury bond and 10 year Treasury note, experienced a loss.
February 2004
- -------------
In February the Fund benefited from gains across all market sectors including
interest rates, energy, energy, currencies, agricultural commodities, metals
and equities. The Fund's strongest returns came from long positions on
interest rate instruments as futures prices on several European and US medium
term instruments trended higher in anticipation of possible rate cuts in the
euro zone. In the energy sector, the Fund's long positions in crude oil
continued to show profits. The Organization of Petroleum Exporting Countries
(OPEC) is maintaining tight production controls in spite of strong demand,
which is pushing oil prices close to the highs observed just before the
invasion of Iraq.
March 2004
- ----------
Fund performance was virtually unchanged for the month of March with losses
from the energy and foreign currency markets edging out gains from metals,
interest rate instruments and agricultural commodities. The strongest returns
came from long positions in soybean futures as heavy demand from China
continued to push prices higher. Metals were profitable due to a continuing
upward trend in silver. The US dollar was mixed for the month with small gains
against most of the major currencies but losing ground to the Japanese yen.
The overseas bombing in Madrid along with lackluster US economic data, created
additional volatility in the energy markets that led to modest losses in the
Fund's long positions.
April 2004
- ----------
After showing positive returns for the first quarter, price trend reversals in
the fixed income, metals and currency markets produced losses for the Fund.
The energy market, which profited from long positions in both light crude and
unleaded gas, was the only positive performing sector in the month. Medium and
long-term interest rate instruments fell sharply after the release of U.S.
non-farm payroll numbers which supported growing sentiment that the US economy
was on a stronger footing. Reaction to the Federal Reserve's comments to
Congress and growing anticipation that the Fed will raise short-term interest
rates caused upward trends in metal prices to reverse. The U.S. dollar rallied
against major currencies energized by stronger U.S. economic reports which
created additional losses for the Fund.
May 2004
- --------
During May, many of the world's financial markets traded in a tight range as
market participants wrestled with the outlook for U.S. interest rates,
inflation, corporate earnings and events in the Middle East. Profits were
generated by the fund's long positions in the energy and agricultural sectors,
especially in crude oil (which went to record highs), unleaded gas, heating
oil and soybeans. However, late month production announcements by the Saudi
government led to a brief reversal in oil futures prices and some pull back in
our energy related profits. Consequently, our profits in energy were
overshadowed by losses from foreign exchange positions, including the
Australian dollar and British pound after a mid-month reversal in the US
dollar.
June 2004
- ---------
June was a turbulent month for interest rate and energy markets. Prices for
short-term interest rate instruments and petroleum products reversed sharply
while long-term bonds and the US dollar continued to vacillate ahead of the
FOMC's decisions on interest rates. Choppy market conditions and extended
periods of price consolidation, such as those experienced over the past few
months, typically result in losses for trend following systems and June was no
exception. The largest realized losses for the fund were in light crude oil,
the Australian dollar and unleaded gas. The largest profits were in cotton,
the ten-year Japanese government bond and the Nikkei 225 Index.
July 2004
- ---------
In July interest rates, currencies and global equity indices continued to
drift without significant trends this month leading to a loss in the Fund.
Although upbeat comments from the Federal Reserve temporarily pushed interest
rates and the U.S. dollar higher, the same markets reversed following a weaker
than expected durable goods report.
16
Precious metals also experienced intra-month reversals. Energy and
agricultural markets were profitable however, which partially offset the
losses from the other sectors. Oil and gasoline prices continued to rise to
historical highs on supply concerns from Russian based Yukos Oil. The Fund's
short positions in cotton and corn contracts also produced profits.
August 2004
- -----------
In August, several market sectors continued to drift without major trends. The
U.S. dollar whipsawed in reaction to news events, including economic reports
that failed to provide any clear direction for the U.S. economy. Oil prices
declined sharply from all time highs late in the month resulting in losses
from the Fund's long positions in crude oil. Profits from short positions in
natural gas however helped to stem the loss in the energy sector. Sugar and
cotton prices reversed this month resulting in losses from the agricultural
sector. The Fund continued to profit from its long positions in interest rate
instruments, partially offsetting the losses in the other sectors.
September 2004
- --------------
The Fund finished virtually unchanged in September despite solid gains in the
energy and agricultural commodity sectors. Prices across the energy sector
trended higher as concerns about oil supply in the wake of hurricane Ivan and
possible production disruptions in Russia, Nigeria and Iraq pushed crude oil
prices to record highs. However, losses from interest rate instruments offset
most of the energy profits after bond prices reversed in reaction to comments
and actions by the Federal Reserve. Losses also came from equity indices on
fears that higher fuel costs might begin to impact corporate earnings and hurt
economic growth.
Disclosures about Certain Trading Activities that Include Non-exchange Traded
Contracts Accounted for at Fair Value
The Fund invests in futures and forward currency contracts. The market value
of futures (exchange-traded) contracts is determined by the various futures
exchanges, and reflects the settlement price for each contract as of the close
of the last business day of the reporting period. The market value of forward
(non-exchange traded) contracts is extrapolated on a forward basis from the
spot prices quoted as of 5:00 P.M. (E.T.) of the last business day of the
reporting period.
Item 3. Market Risk
Introduction
Past performance is not indicative of future results.
The Fund is a speculative commodity pool that utilizes professional trading
advisors with systematic, proprietary trading and risk management methods for
trading commodity futures contracts, other commodity interests, options,
securities and forward contracts. The market sensitive instruments held by it
are acquired for speculative trading purposes, and all or a substantial amount
of the Fund's assets are subject to the risk of trading loss. Unlike an
operating company, the risk of market sensitive instruments is integral, not
incidental, to the Fund's business.
Market movements result in frequent changes in the fair market value of the
Fund's open positions and consequently, in its earnings and cash flow. The
Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of exchange rates, interest rates, equity price levels,
the market value of financial instruments and contracts, market prices for
base and precious metals, energy complexes and other commodities, the
diversification effects among the Fund's open positions and the liquidity of
the markets in which it trades.
The Fund rapidly acquires and liquidates both long and short positions in a
wide range of different markets. Consequently, it is not possible to predict
how a particular future market scenario will affect performance. The
17
Fund's current trading advisors all employ strategies that rely on sustained
movements in price. Erratic, choppy, sideways trading markets and sharp
reversals in movements can materially and adversely affect the Fund's results.
The Fund's past performance is not indicative of its future results.
Value at risk is one measure of the maximum amount that a trading advisor
could reasonably be expected to lose in a given market sector in a given day.
These measures and calculations are performed by each trading advisor, are
proprietary in nature and vary between each of the Fund's trading advisors.
However, the inherent uncertainty of the Fund's speculative trading and the
recurrence in the markets traded by the Fund of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond
any calculated value at risk or the Fund's experience to date. In light of the
foregoing as well as the risks and uncertainties intrinsic to all future
projections, any qualification of risk should not be considered to constitute
any assurance or representation that the Fund's losses in any market sector
will be limited to value at risk or by the Fund's attempts to manage its
market risk. Materiality as used in this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage and multiplier features of the
Fund's market sensitive instruments.
The following disclosures regarding the Fund's market risk exposures
contain forward-looking statements. All disclosures in this section are deemed
to be forward-looking statements, except for statements of historical fact and
descriptions of how the Fund manages its risk exposure. The Fund's primary
market risk exposures, as well as the strategies used and to be used by its
trading advisors for managing such exposures are subject to numerous
uncertainties, contingencies and risks which could cause the actual results of
the Fund's risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political upheavals,
changes in historical price relationships, an influx of new market
participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. The Fund's current market exposure
and/or risk management strategies may not be effective in either the short-or
long-term and may change materially. Therefore, you should be prepared to lose
all or substantially all of your investment in the Fund.
Trading Risk
The following were the primary trading risk exposures of the Fund as of
September 30, 2004, by market sector.
Interest Rates
Interest rate risk is the principal market exposure of the Fund. Interest
rate movements directly affect the price of the futures positions held by the
Fund and indirectly the value of its stock index and currency positions.
Interest rate movements in one country as well as relative interest rate
movements between countries materially impact the Fund's profitability. The
Fund's primary interest rate exposure is to interest rate fluctuations in the
United States and the other G-7 countries. However, the Fund also takes
futures positions on the government debt of smaller nations.
Currencies
Exchange rate risk is a significant market exposure of the Fund. The
Fund's currency exposure is to exchange rate fluctuations, primarily
fluctuations that disrupt the historical pricing relationships between
different currencies and currency pairs. These fluctuations are influenced by
interest rate changes as well as political and general economic conditions.
The Fund trades in a large number of currencies, including cross-rates, which
are positions between two currencies other than the U.S. dollar.
Energy
18
The Fund's primary energy market exposure is to gas and oil price
movements, often resulting from political developments in the Middle East. Oil
and gas prices can be volatile and substantial profits and losses have been
and are expected to continue to be experienced in this market.
Stock Indices
The Fund's primary equity exposure is to equity price risk in the G-7
countries as well as other countries. The stock index futures contracts traded
by the Fund currently are generally limited to futures on broadly based
indices, although the Fund may trade narrow-based stock index futures
contracts in the future. The Fund is primarily exposed to the risk of adverse
price trends or static markets in the major U.S., European and Japanese
indices. Static markets would not cause major market changes but would make it
difficult for the Fund to avoid being "whipsawed" into numerous small losses.
Metals
The Fund's metals market exposure is to fluctuations in the price of both
precious metals, including gold and silver, as well as base metals including
aluminum, copper, nickel and zinc.
Agricultural
The Fund's primary commodities exposure is to agricultural price
movements, which are often directly affected by severe or unexpected weather
conditions.
Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Fund as of
September 30, 2004.
Foreign Currency Balances
The Fund's primary foreign currency balances are in Japanese yen, British
pounds, Euros and Australian dollars. The advisors regularly convert foreign
currency balances to U.S. dollars in an attempt to control the Fund's
non-trading risk.
Cash Management
The Fund maintains a substantial portion of its available assets in
Treasury bills held at the clearing broker. Violent fluctuations in prevailing
interest rates could cause immaterial mark-to-market losses on the Fund's cash
management income, although substantially all of these short-term investments
are held to maturity.
Off-Balance Sheet Risk
The term "off-balance sheet risk" refers to an unrecorded potential liability
that, even though it does not appear on the balance sheet, may result in
future obligation or loss. The Fund trades in futures and forward contracts
and is therefore a party to financial instruments with elements of off-balance
sheet market and credit risk. In entering into these contracts there exists a
risk to the Fund, market risk, that such contracts may be significantly
influenced by market conditions, such as interest rate volatility, resulting
in such contracts being less valuable. If the markets should move against all
of the futures interests positions of the Fund at the same time, and if the
commodity trading advisors were unable to offset futures interests positions
of the Fund, the Fund could lose all of its assets and the Limited Partners
would realize a 100% loss. Steben & Company, the General Partner, minimizes
market risk through diversification of the portfolio allocations to multiple
trading advisors, and maintenance of a margin-to-equity ratio that rarely
exceeds 30%.
In addition to market risk, in entering into futures and forward contracts
there is a credit risk that a counterparty will not be able to meet its
obligations to the Fund. The counterparty for futures contracts traded in the
United
19
States and on most foreign exchanges is the clearinghouse associated with such
exchange. In general, clearinghouses are backed by the corporate members of
the clearinghouse who are required to share any financial burden resulting
from the non-performance by one of their members and, as such, should
significantly reduce this credit risk. In cases where the clearinghouse is not
backed by the clearing members, like some foreign exchanges, it is normally
backed by a consortium of banks or other financial institutions.
In the case of forward contracts, which are traded on the inter-bank market
rather than on exchanges, the counterparty is generally a single bank or other
financial institution, rather than a group of financial institutions; thus
there may be a greater counterparty credit risk. Steben & Company utilizes
only those counterparties that it believes to be creditworthy for the Fund.
All positions of the Fund are valued each day on a mark-to-market basis. There
can be no assurance that any clearing member, clearinghouse or other
counterparty will be able to meet its obligations to the Fund.
Item 4: Controls and Procedures
Steben & Company, Inc., the General Partner of the Fund, with the
participation of the General Partner's Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as
of the end of the period covered by this quarterly report. Based on their
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that these disclosure controls and procedures are effective. There
were no changes in the General Partner's internal control over financial
reporting applicable to the Fund identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred
during the last fiscal quarter that have materially affected, or is reasonably
likely to materially affect, internal control over financial reporting
applicable to the Fund.
21
PART II-OTHER INFORMATION
Item 1: Legal Proceedings.
None
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Between July 1, 2004 and September 30, 2004, the Fund issued Units at monthly
closings as set forth in the following chart. Each of the Units was privately
offered and sold only to "accredited investors" as defined in Rule 501(a)
under the Securities Act in reliance on the exemption from registration.
================================================================================
Schedule on Number and Dollar Amount of Interests (Additions)
================================================================================
(Includes both A and B Units)
================================================================================
============================= ================== ==========================
Dollar Amount Number of
Month of Interests Additional Units
Sold Sold
============================= ================== ==========================
July 2004 $22,488,435 6,553.7800
============================= ================== ==========================
August 2004 $12,418,363 3,806.8200
============================= ================== ==========================
September 2004 $13,530,883 4,243.8700
============================= ================== ==========================
Item 3: Defaults Upon Senior Securities
Not applicable.
Item 4: Submissions of Matters to a vote of Security Holders.
None
Item 5: Other Information
None
Item 6: Exhibits.
(a) Exhibits and Reports on Form 8-K
Exhibit Description:
Certification of Kenneth E. Steben, Chief Executive Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934.
Certification of Michael D. Bulley, Chief Financial Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934.
Certification of Kenneth E. Steben, Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of
2002.
Certification of Michael D. Bulley, Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of
2002.
(b) Reports.
None.
21
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.
Futures Portfolio Fund Limited
Partnership (Registrant)
By: Steben & Company, Inc.
General Partner
Date: November 15, 2004 By: /s/Michael D. Bulley
---------------------
Michael D. Bulley
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description of Document Page Number
31.01 Certification by Chief Executive Officer E2
31.02 Certification by Chief Financial Officer E4
32.01 Certification by Chief Executive Officer E6
32.02 Certification by Chief Financial Officer E7
E-1
CERTIFICATION
I, Kenneth E. Steben, Chief Executive Officer of Steben & Company, Inc., the
General Partner of The Futures Portfolio Fund, LP (the "Fund"), certify that:
1. I have reviewed this report on Form 10-Q of the Fund;
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 quarterly 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 registrant's other certifying officer 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)) 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) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly
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
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonable
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's 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 registrant's 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
registrant's internal control over financial reporting.
E-2
FUTURES PORTFOLIO FUND
LIMITED PARTNERSHIP
By: Steben & Co., Inc.
General Partner
By: /s/ Kenneth E. Steben
----------------------
Kenneth E. Steben
Chief Executive Officer
November 15, 2004
E-3
CERTIFICATION
I, Michael D. Bulley, Chief Financial Officer of Steben & Company, Inc., the
General Partner of The Futures Portfolio Fund, LP (the "Fund"), certify that:
1. I have reviewed this report on Form 10-Q of the Fund;
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 quarterly 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 registrant's other certifying officer 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)) 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
quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's 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
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonable
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's 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 registrant's 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
registrant's internal control over financial reporting.
E-4
FUTURES PORTFOLIO FUND
LIMITED PARTNERSHIP
By: Steben & Co., Inc.
General Partner
By: /s/ Michael D. Bulley
---------------------
Michael D. Bulley
Chief Financial Officer
November 15, 2004
E-5
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, Kenneth E. Steben, the Chief Executive Officer of Steben & Company, Inc. as
General Partner of Futures Portfolio Fund, LP, certify that:
(i) the Form 10Q for the quarter ended September 30, 2004 of Futures
Portfolio Fund, LP fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the
information contained in the Form 10Q for the quarter ended
September 30, 2004 fairly presents, in all material respects, the
financial condition and results of operations of Futures Portfolio
Fund, LP .
FUTURES PORTFOLIO FUND
LIMITED PARTNERSHIP
By: Steben & Co., Inc.
General Partner
By: /s/ Kenneth E. Steben
---------------------
Kenneth E. Steben
Chief Executive Officer
November 15, 2004
E-6
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, Michael D. Bulley, the Chief Financial Officer of Steben & Company, Inc. as
General Partner of Futures Portfolio Fund, LP, certify that:
(i) the Form 10Q for the quarter ended September 30, 2004 of Futures
Portfolio Fund, LP fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the
information contained in the Form 10Q for the quarter ended
September 30, 2004 fairly presents, in all material respects, the
financial condition and results of operations of Futures Portfolio
Fund, LP .
FUTURES PORTFOLIO FUND
LIMITED PARTNERSHIP
By: Steben & Co., Inc.
General Partner
By: /s/ Michael D. Bulley
---------------------
Michael D. Bulley
Chief Financial Officer
November 15, 2004
E-7