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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 June 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: 333-74176

 


 

THE PRICE FUND I, L.P.

(Exact name of registrant as specified in charter)

 


 

Delaware   36-4400372
(State of Organization)   (IRS Employer Identification Number)

 

 

c/o Price Asset Management, Inc.

141 West Jackson Boulevard

Suite 1340A

Chicago, Illinois

  60604
(Address of principal executive offices)   (Zip Code)

 

(312) 264-4300

(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, and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Total number of Pages: 17 plus exhibits

 



Table of Contents

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

The following financial statements of The Price Fund I, L.P. are included in Item 1:

 

     Page

Financial Statements

    

Statements of Financial Condition as of June 30, 2004 (Unaudited) and December 31, 2003

   3

Schedule of Investments as of June 30, 2004 (Unaudited)

   4

Statements of Operations for the Three Months and Six Months Ended June 30, 2004 and June 30, 2003 (Unaudited)

   5

Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2004 and June 30, 2003 (Unaudited)

   6

Financial Highlights for the Three Months and Six Months Ended June 30, 2004 (Unaudited)

   7

Notes to Financial Statements (unaudited)

   8-10

 

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The Price Fund I, L.P.

 

Statements of Financial Condition as of June 30, 2004 (Unaudited) and December 31, 2003

 

     6/30/2004

   12/31/2003

ASSETS

             

Cash

   $ 716,542    $ 1,135,858

Investment in US Government obligations

     838,947       
    

  

Total Assets

   $ 1,555,489    $ 1,135,858
    

  

LIABILITIES

             

Management and incentive fees payable

   $ 15,597       

Administrative fees payable

     47,879       

Subscriptions received in advance

     35,000       

Escrow funds held

          $ 1,135,337

Unrealized net trading losses on open futures contracts

     5,329       

Other

     945       
    

  

Total Liabilities

   $ 104,750    $ 1,135,337
    

  

PARTNERS’ CAPITAL

             

Partners’ capital

             

Limited partners

     1,160,705       

General partner

     290,034      521
    

  

Total Partners’ Capital

     1,450,739      521
    

  

Total Liabilities and Partners’ Capital

   $ 1,555,489    $ 1,135,858
    

  

 

See accompanying notes to financial statements.

 

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Table of Contents

The Price Fund I, L.P.

 

Schedule of Investments as of June 30, 2004 (Unaudited)

 

          Market
Value


    Percent of
Partners’
Capital


 

US Government obligations (total cost - $837,822)

                   

US Treasury Bills, due 8/12/04, principal amount $840,000

        $ 838,947     57.83 %
         


 

Open Futures Contracts:

                   
    

Number of

Contracts


   Market
Value


   

Percent of

Partners’
Capital


 

Unrealized gains (100.00% US based)

                   

Financials

   18    $ 6,328     0.44 %
    
  


 

Unrealized losses (100.00% US based)

                   

Currencies

   2    $ (1,577 )   0.11 %

Metals

   18      (10,080 )   0.69 %
    
  


 

Total

   20    $ (11,657 )   0.80 %
    
  


 

Unrealized net trading losses on open futures contracts

        $ (5,329 )   0.37 %
         


 

 

See accompanying notes to financial statements.

 

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The Price Fund I, L.P.

 

Statements of Operations for the Three Months and Six Months Ended June 30, 2004 and June 30, 2003 (Unaudited)

 

     3 months
ended
6/30/2004


    3 months
ended
6/30/2003


    6 months
ended
6/30/2004


    6 months
ended
6/30/2003


 

Income

                                

Trading income

                                

Net trading gains - commodities

                                

Realized

   $ 60,373             $ 90,989          

Change in unrealized

     (38,815 )             (5,329 )        

Foreign exchange losses

     (1,605 )             (1,830 )        

Commissions

     (6,587 )             (15,126 )        
    


         


       

Total Trading Income

     13,366               68,704          

Interest Income

     2,176               3,561          
    


         


       

Total income

     15,542               72,265          
    


         


       

Expenses:

                                

Management fees - General Partner

     3,679               6,649          

Management fees - Trading Advisors

     5,573               10,385          

Incentive fees - Trading Advisors

     3,375               24,559          

Professional fees

     28,370               57,480          

Other expenses

     3,750     $ 39       7,500     $ 78  
    


 


 


 


Total expenses

     44,747       39       106,573       78  
    


 


 


 


Net loss

   $ (29,205 )   $ (39 )   $ (34,308 )   $ (78 )
    


 


 


 


 

See accompanying notes to financial statements.

 

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The Price Fund I, L.P.

Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2004 and June 30, 2003 (Unaudited)

 

     6 months
ended
6/30/04


    6 months
ended
6/30/03


 

Partners’ Capital at beginning of year

   $ 521     $ 677  

Contributions

     1,484,526       —    

Net loss

     (34,308 )     (78 )

Withdrawals

     —         —    
    


 


Partners’ Capital at end of period

   $ 1,450,739     $ 599  
    


 


Per unit data    6/30/04

    6/30/03

 

Net asset value

   $ 971.64       —    
    


 


Units outstanding

     1,493       —    
    


 


 

Unit data cannot be provided for any periods prior to 2004 as the Partnership had not yet commenced operations.

 

The information presented for the six months ended June 30, 2003 is for the General Partner’s capital only as no limited partners were admitted to the Partnership prior to the first quarter of 2004.

 

See accompanying notes to financial statements.

 

6


Table of Contents

The Price Fund I, L.P.

Financial Highlights for the Three Months and Six Months Ended June 30, 2004 (Unaudited)

 

     3 months
ended
6/30/2004


    6 months
ended
6/30/2004


 

Ratio of Net Investment Loss to Average Net Assets

   (2.95 )%   (9.07 )%

Ratio of Expenses to Average Net Assets

   3.10 %   9.38 %

Total Return

   (1.94 )%   (2.84 )%

 

The above ratios have not been annualized and were calculated for the limited partner class taken as a whole. The computation of such ratios was not based on the amount of expenses assessed and income allocated to an individual partner’s capital account, which may vary from these ratios based on the timing of capital transactions.

 

See accompanying notes to financial statements.

 

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Table of Contents

The Price Fund I, L.P.

Notes to the Financial Statements (unaudited)

 

Note 1 Nature of Operations and Significant Accounting Policies

 

Nature of Operations—The Price Fund I, L.P. (a Delaware limited partnership) (the “Partnership”) was organized on October 5, 2000 to engage in speculative trading of a diversified portfolio of commodity interests, including futures, options on futures and forward contracts. The Partnership commenced trading activities on January 12, 2004.

 

Price Asset Management, Inc., the general partner of the Partnership (the “General Partner”), is registered as a commodity pool operator and commodity trading advisor. The Price Futures Group, Inc., an entity affiliated through common ownership, acts as the introducing broker for the Partnership, whereby certain of the Partnership’s accounts are introduced to the Partnership’s clearing broker. Man Financial Inc. serves as the clearing broker.

 

The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to their respective ownership interests.

 

Basis of presentation—The financial statements included herein were prepared by us without audit according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the three months and six months ended June 30, 2004 and 2003, are not necessarily indicative of the results to be expected for the full year or for any other period.

 

These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Registration Statement on Form S-1 as filed with the Securities and Exchange Commission.

 

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Net Assets—The valuation of net assets includes open commodity futures and forward contracts owned by the Partnership, if any, at the end of the period. The unrealized gain or loss on these contracts has been calculated based on closing prices on the last business day of each month. Foreign currency is translated into US dollars at the exchange rate prevailing on the last business day of each month. Net asset value is determined by subtracting liabilities from assets, which also equals Partners’ capital.

 

Revenue Recognition—Commodity futures contracts are recorded on the trade date, and open positions are reflected in the accompanying statements of financial condition as the difference between the original contract value and the market value on the last business day of the reporting period. The market value of the commodity futures is based upon the most recent available settlement prices on the appropriate commodity exchanges. Changes in unrealized gains or (losses) represent the total increases or (decreases) in unrealized gains or (increases) or decreases in unrealized losses on open positions during the period.

 

Interest Income Recognition—The Partnership records interest income in the period it is earned.

 

Income Taxes—The Partnership is not subject to federal income taxes because its income and losses are includable in the tax returns of its partners.

 

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Table of Contents

The Price Fund I, L.P.

Notes to the Financial Statements (unaudited)

 

Note 2 The Limited Partnership Agreement and Related-Party Activities

 

The General Partner is responsible for management of the Partnership.

 

New limited partners may purchase units of the Partnership upon approval by the General Partner at the net asset value, as defined, as of the last day of each month or on any other date as determined by the General Partner.

 

After holding the units for nine months, limited partners may require the Partnership to redeem some or all of their units at the net asset value, as defined, as of the last day of each month without a redemption charge. Any units redeemed before the holder has been a limited partner for six months will be assessed a redemption charge equal to 4 percent of the net asset value per unit on the date of such redemption and units redeemed after six but within nine months will be assessed a 3 percent redemption charge. As of June 30, 2004, the investor redemption fees were reduced from 4% to 3% for redemptions within the first six months and from 3% to 2% for redemptions after the first six but within the first nine months of ownership.

 

The Partnership will terminate and its remaining net assets will be distributed pro rata to the holders of the then outstanding units on December 31, 2035, or earlier if certain events occur.

 

The Partnership pays management and other fees as specified in the Form S-1 Registration Statement and offering documents. A summary of such fees payable to related entities is as follows:

 

Price Asset Management, Inc., as General Partner

 

The Partnership pays a monthly management fee based on the Partnership’s total assets, based on a 1 percent annual rate. Management fees paid to the General Partner for the three month and six month periods ended June 30, 2004, determined at the 1 percent rate, amounted to $3,679 and $6,649, respectively. The General Partner may choose one or more trading advisors that are responsible for making all trading decisions on behalf of the Partnership. The trading advisors, as selected by the General Partner and described in the Registration Statement, charge the Partnership management fees of up to 2 percent per annum (based on assets managed) and quarterly incentive fees of up to 20 percent of new trading profits, as defined.

 

The General Partner receives a portion of the incentive fee assessed by certain advisors. However, this fee is payable by the advisor to the General Partner and is not an obligation of or payable by the Partnership. Incentive fees paid by the advisors to the General Partner for the three month and six month periods ended June 30, 2004 amounted to $282 and $1,403.

 

The Price Futures Group, Inc., as Introducing Broker

 

The clearing broker pays Price Futures Group a portion of the brokerage fee paid by the Partnership for clearing transactions.

 

In addition, the Partnership pays Price Futures Group 0.5 percent of the purchase price of each limited partnership unit sold for syndication costs incurred by Price Futures Group, subject to increase to 1 percent at the discretion of the General Partner. As of June 30, 2004, the offering expense fee was increased to 1 percent of the purchase price of each limited partnership unit sold. Amounts payable for such costs to Price Futures Group for the six month period ended June 30, 2004 totaled $7,671. These syndication costs, which are related to the issuance of limited partnership units, are charged to partners’ capital upon the issuance of such units.

 

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The Price Fund I, L.P.

Notes to the Financial Statements (unaudited)

 

Uhlmann Price Securities, LLC, as Selling Group Manager

 

Uhlmann Price Securities, LLC, a related party to the General Partner by reason of common management, acts as the selling group manager for the Partnership. The Partnership pays Uhlmann Price Securities a commission of 5 percent (which includes a re-allowance of up to 4% to other broker dealers) of the purchase price of each unit sold. As of June 30, 2004, the commission to Uhlmann Price Securities was reduced to 3.5% (with a reallowance of up to 3% to other broker dealers). These commissions are charged to partners’ capital upon the issuance of such units. Commissions paid by the Partnership to Uhlmann Price Securities for the three month and six month periods ended June 30, 2004 amounted to $10,035 and $37,242, respectively. In addition, the Partnership pays a trailing commission to salespersons identified by Uhlmann Price Securities or selling agents beginning thirteen months after that unit has been outstanding. The trailing commission is equal to 2 percent of the net asset value of a unit. As of June 30, 2004, the trailing commission was increased from 2 percent to 3 percent. No trailing commission will accrue or be paid for any unit that has been outstanding for less than one full year.

 

The Partnership pays all of its direct legal, accounting, filing, reporting and data processing expenses, incentive fees, management fees, brokerage fees and extraordinary expenses, subject to overall limitations on fees described in the Partnership’s limited partnership agreement. The General Partner will bear any fees in excess of these limitations.

 

Note 3 Financial Instruments with Off-Balance-Sheet Risk

 

The Partnership’s trading activities involve derivative financial instruments, primarily futures, options on futures, and forward contracts, which have market and/or credit risk.

 

Market Risk—Market risk arises primarily from changes in the market value of financial instruments. Theoretically, the Partnership’s exposure is equal to the notional value of futures contracts purchased and unlimited on such contracts sold short. As both a buyer and seller of options on futures, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable market variations underlying the option. The risk of loss for purchased options on futures is limited to the premiums paid; written or sold options on futures expose the Partnership to potentially unlimited liability.

 

Exposure to market risk is influenced by a number of factors, including the relationships between financial instruments, and the volatility and liquidity in the markets in which the financial instruments are traded. In many cases, the use of financial instruments may serve to modify or offset market risk associated with other transactions and, accordingly, may serve to decrease the Partnership’s overall exposure to market risk. The Partnership attempts to control its exposure to market risk through various analytical monitoring techniques.

 

Credit Risk—Credit risk arises primarily from the potential inability of counterparties to perform in accordance with the terms of a contract. The Partnership’s exposure to credit risk associated with counterparty nonperformance is limited to the current cost to replace all contracts in which the Partnership has a gain. Exchange-traded financial instruments generally do not give rise to significant counterparty exposure due to the cash settlement procedures for daily market movements and the margin requirements of individual exchanges.

 

Concentration of Credit Risk—Some of the Partnership’s trades are cleared through Price Futures Group’s clearing broker. In the event this counterparty does not fulfill its obligations, the Partnership may be exposed to risk. This risk of default depends in part on the creditworthiness of this counterparty. The Partnership attempts to minimize this credit risk by monitoring the creditworthiness of the clearing broker.

 

10


Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

INTRODUCTION

 

The partnership commenced the offering of units on August 1, 2003. The initial offering period ended on December 31, 2003 and the partnership commenced operations in January 2004. The continuing offering period commenced at the termination of the initial offering period and is ongoing. For the period from commencement of the offering through June 30, 2004, subscriptions totaling $1,534,241 had been accepted and redemptions over the same period totaled $0.

 

CAPITAL RESOURCES

 

The partnership 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 borrowings. Due to the nature of the partnership’s business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.

 

LIQUIDITY

 

Most United States commodity exchanges limit fluctuations in 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. This may affect the partnership’s ability to initiate new positions or close existing ones or may prevent it from having orders executed. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the partnership from promptly liquidating unfavorable positions and subject the partnership to substantial losses, which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the partnership may not be able to execute future trades at favorable prices if little trading in such contracts is taking place.

 

Trading in forward contracts introduces a possible further impact on liquidity. Because such contracts are executed “off exchange” between private parties, the amount of time required to offset or “unwind” these positions may be greater than that for regulated instruments. This potential delay could be exacerbated to the extent a counterparty is not a United States person.

 

Other than these limitations on liquidity, which are inherent in the partnership’s futures trading operations, the partnership’s assets are expected to be highly liquid.

 

RESULTS OF OPERATIONS

 

Partnership Results for April 2004:

 

In April, the partnership profited from short positions in the United States Treasury markets which were offset in part from losses due to volatility in currencies and a weakness in metals. For the month, the partnership produced a profit of 0.86%.

 

Partnership Results for May 2004:

 

Financial and commodity markets this month generally traded in a narrower but no less volatile range than last month. The partnership was profitable based on strength in carry-over positions in the United States Treasury markets and in the extended rally of crude oil. These gains were tempered somewhat by losses in currency contracts resulting from a lower United States dollar. For the month, the partnership produced a profit of 2.17%.

 

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Table of Contents

Partnership Results for June 2004:

 

The partnership was unprofitable in June due to a series of short-term price spikes and corresponding market reversals in several futures markets. Interest rate, currency and metal markets each generated losses due to high volatility, directionless price behavior that appears affected by United States Federal Reserve policy. Such choppy, side-to-side activity among non-correlated markets tends to negate the diversification benefits of an asset class. For the month, the partnership produced a net loss of 4.84%.

 

For the three months ended June 30 and for the year to date, the partnership’s compounded rate of return was (1.94)% and (2.84)%, respectively.

 

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 intends to trade in futures and forward contracts and may therefore become a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, there exists a market risk that such contracts may be significantly influenced by 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 Price Asset Management was unable to offset such positions, the Fund could experience substantial losses. Price Asset Management will access and assess daily positions and profit and loss summaries for all trading advisors selected to trade Fund assets and will employ various measures to monitor draw-downs, market diversification and leverage.

 

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 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.

 

CRITICAL ACCOUNTING POLICIES – VALUATION OF THE FUND’S POSITIONS

 

Price Asset Management believes that the accounting policies that are most critical to the Fund’s financial condition and results of operations relate to the valuation of the Fund’s positions. The majority of the Fund’s positions are exchange-traded futures contracts, which are valued daily at settlement prices published by the exchanges. Any spot and forward foreign currency contracts held by the Fund are also valued at published daily settlement prices or at dealers’ quotes. Thus, Price Asset Management expects that under normal circumstances substantially all of the Fund’s assets are valued on a daily basis using objective measures.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

INTRODUCTION

 

Past Results Not Necessarily Indicative of Future Performance

 

The Fund is a speculative commodity pool. 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 main line of business.

 

Market movements can produce 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, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.

 

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The Fund may rapidly acquire and liquidate both long and short positions in a wide range of different markets through the allocations it makes to trading advisors. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. 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 the indicated Value at Risk or the Fund’s experience to date (i.e., “risk of ruin”). In light of this, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section 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.

 

Standard of Materiality

 

Materiality as used in this section, “Quantitative and Qualitative Disclosures About Market Risk,” 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.

 

QUANTIFYING THE FUND’S TRADING VALUE AT RISK

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the reporting period).

 

The Fund’s risk exposure in the various market sectors traded by the Fund is quantified below in terms of Value at Risk. Due to the Fund’s mark-to-market accounting, any loss in the fair value of the Fund’s open positions is directly reflected in the Fund’s earnings (realized or unrealized).

 

Exchange maintenance margin requirements are expected to be used by the Fund 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 intervals. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

 

In the case of market sensitive instruments which are not exchange-traded (which includes currencies and some energy products and metals in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

 

In the case of contracts denominated in foreign currencies, the Value at Risk figures include foreign margin amounts converted into U.S. Dollars with an incremental adjustment to reflect the exchange rate risk inherent to the Dollar-based Fund in expressing Value at Risk in a functional currency other than Dollars.

 

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In quantifying the Fund’s Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been taken into account.

 

THE FUND’S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS

 

The following table indicates the trading Value at Risk associated with the Fund’s open positions by market category as of June 30, 2004.

 

Market Sector


   Value at Risk

   Percent of Net Assets

 

Currencies

   $ 1,577    0.11 %

Financials

   $ 6,328    0.44 %

Metals

   $ 10,080    0.69 %

TOTAL:

   $ 17,985    1.24 %

 

MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK

 

The face value of the market sector instruments held by the Fund may typically be many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund. The magnitude of the Fund’s open positions could create a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time. The Value at Risk tables — as well as the past performance of the Fund — give no indication of this “risk of ruin.”

 

NON-TRADING RISK

 

The Fund may experience non-trading market risk on any foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are expected to be immaterial. The Fund also may have non-trading market risk as a result of investing in U.S. Treasury Bills. The market risk represented by these investments is expected to be immaterial.

 

QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES

 

The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by Price Asset Management for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of 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. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund.

 

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QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE

 

General

 

The Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Fund generally will use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund’s operations.

 

QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE

 

The means by which the Fund attempts to manage the risk of the Fund’s open positions is essentially the same in all market categories traded. Price Asset Management applies risk management policies to trading which generally are designed to limit the total exposure that may be taken per “risk unit” of assets under management. In addition, Price Asset Management follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as imposing “stop-loss” points for each of the Fund’s trading advisors.

 

ITEM 4. CONTROLS AND PROCEDURES

 

The principal executive officer and principal financial officer of Price Asset Management have concluded that the Fund has effective disclosure controls and procedures to ensure that material information relating to the Fund is made known to them by others within the Fund, particularly during the period in which this quarterly report is being prepared. The principal executive officer and financial and principal accounting officer of Price Asset Management have evaluated the effectiveness of the Fund’s disclosure controls and procedures as of a date within ninety (90) days prior to the filing date of this report (the “Evaluation Date”) and have based the foregoing conclusion about the effectiveness of the Fund’s disclosure controls and procedures based on their evaluation as of the Evaluation Date.

 

During the period covered by this report, there have been no significant changes in the Fund’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

 

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PART II-OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None

 

Item 2. Changes in Securities

 

None

 

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 and Reports on Form 8-K.

 

None

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August 13, 2004.

 

THE PRICE FUND I, L.P.
            (Registrant)
By:   Price Asset Management, Inc.
    General Partner
By:  

/s/ Walter Thomas Price III


    Walter Thomas Price III
    Chairman, President and Director

 

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EXHIBIT INDEX

 

Exhibit

Number


 

Description of Document


  

Page

Number


31.01   Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    E-2
32.01   Certification by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    E-3
31.02   Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    E-4
32.02   Certification by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    E-5

 

E-1