Attached files
file | filename |
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EX-31.02 - PROFUTURES DIVERSIFIED FUND L P | efc9-1028_ex3102.htm |
EX-31.01 - PROFUTURES DIVERSIFIED FUND L P | efc9-1028_ex3101.htm |
EX-32.02 - PROFUTURES DIVERSIFIED FUND L P | efc9-1028_ex3202.htm |
EX-32.01 - PROFUTURES DIVERSIFIED FUND L P | efc9-1028_ex3201.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X] Quarterly
Report Under Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the
quarterly period ended September 30, 2009
Commission
File Number 0-16898
PROFUTURES
DIVERSIFIED FUND, L.P.
(Exact
name of Partnership)
Delaware
|
75-2197831
|
|
(State
of incorporation or organization)
|
(I.R.S.
Employer Identification
No.)
|
ProFutures,
Inc.
11719 Bee
Cave Road
Suite
200
Austin,
Texas 78738
(Address
of principal executive offices)
Partnership’s
telephone number
(800)
348-3601
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Yes o No
x
TABLE
OF CONTENTS
Page
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
2
– 14
|
Item
1.
|
Notes
to Financial Statements
|
15
– 35
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
|
36-41
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
41
|
Item
4T.
|
Controls
and Procedures
|
42
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
43
|
Item
1A.
|
Risk
Factors
|
43
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
43-44
|
Item
3.
|
Defaults
Upon Senior Securities
|
44
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
44
|
Item
5.
|
Other
Information
|
44
|
Item
6.
|
Exhibits
|
44
|
Signatures
|
45
|
|
Rule
13a–14(a)/15d–14(a) Certifications
|
46-47
|
|
Section
1350 Certifications
|
48-49
|
1
PART I -
FINANCIAL INFORMATION
Item
1. Financial Statements.
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF FINANCIAL CONDITION
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
September
30,
2009
|
December
31,
2008
|
|||||||
ASSETS
|
||||||||
Equity
in broker trading accounts
|
||||||||
Cash
|
$ | 4,737,185 | $ | 6,035,775 | ||||
Unrealized
gain (loss) on open contracts
|
257,222 | 289,265 | ||||||
Deposits
with broker
|
4,994,407 | 6,325,040 | ||||||
Cash
|
7,102 | 3,533 | ||||||
Investments
in other commodity pools
|
10,501,241 | 12,583,933 | ||||||
Redemption
receivable from other commodity pool
|
270,000 | 1,315,742 | ||||||
Total
assets
|
$ | 15,772,750 | $ | 20,228,248 | ||||
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 77,020 | $ | 40,823 | ||||
Commissions
and other trading fees on open contracts
|
1,672 | 1,576 | ||||||
Incentive
fees payable
|
0 | 185,497 | ||||||
Management
fees payable (includes $49,013 and $129,324
payable
to the General Partner at September 30, 2009 and
December
31, 2008, respectively)
|
77,485 | 156,423 | ||||||
Redemptions
payable
|
206,518 | 342,900 | ||||||
Total
liabilities
|
362,695 | 727,219 | ||||||
PARTNERS’
CAPITAL (Net Asset Value)
|
||||||||
Partners’
Capital (Non-restricted units):
|
||||||||
General
Partner – 184 and 173 units outstanding
at
September 30, 2009 and December 31, 2008, respectively
|
481,239 | 543,779 | ||||||
Limited
Partners – 5,699 and 5,686 units outstanding
at
September 30, 2009 and December 31, 2008, respectively
|
14,928,816 | 17,851,493 | ||||||
Partners’
Capital (Side pocket/restricted units):
|
||||||||
General
Partner – 0 and 12 units outstanding at
September
30, 2009 and December 31, 2008, respectively
|
0 | 32,232 | ||||||
Limited
Partners – 0 and 403 units outstanding at
September
30, 2009 and December 31, 2008, respectively
|
0 | 1,073,525 | ||||||
Total
partners’ capital (Net Asset Value)
|
15,410,055 | 19,501,029 | ||||||
$ | 15,772,750 | $ | 20,228,248 |
See
accompanying notes.
-2-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
September
30, 2009
|
December
31, 2008
|
||||||||||||||||
Fair
Value
|
%
of Net
Asset Value
|
Fair
Value
|
%
of Net
Asset Value
|
||||||||||||||
LONG
FUTURES CONTRACTS(1)
|
|||||||||||||||||
Description
|
|||||||||||||||||
U.S.
Agricultural
|
$ | (33,217 | ) | (0.21 | )% | $ | 67,037 | 0.34 | % | ||||||||
Currency
|
74,591 | 0.48 | % | 0 | 0.00 | % | |||||||||||
Energy
|
(3,160 | ) | (0.02 | )% | 20,667 | 0.10 | % | ||||||||||
Interest
rate
|
24,164 | 0.16 | % | 188,883 | 0.97 | % | |||||||||||
Metal
|
(1,560 | ) | (0.01 | )% | 0 | 0.00 | % | ||||||||||
Stock
index
|
(310 | ) | 0.00 | % | 33,545 | 0.17 | % | ||||||||||
Total
U.S. long futures contracts
|
$ | 60,508 | 0.40 | % | $ | 310,132 | 1.58 | % | |||||||||
Foreign
Agricultural
|
$ | 19,958 | 0.13 | % | $ | 1,226 | 0.01 | % | |||||||||
Interest
rate
|
37,778 | 0.24 | % | 18,911 | 0.10 | % | |||||||||||
Total
foreign long futures contracts
|
$ | 57,736 | 0.37 | % | $ | 20,137 | 0.11 | % | |||||||||
SHORT
FUTURES CONTRACTS(1)
|
|||||||||||||||||
Description
|
|||||||||||||||||
U.S.
Agricultural
|
$ | 146,273 | 0.95 | % | $ | (45,260 | ) | (0.23 | )% | ||||||||
Currency
|
2,268 | 0.01 | % | 101 | 0.00 | % | |||||||||||
Energy
|
(11,430 | ) | (0.07 | )% | 6,870 | 0.04 | % | ||||||||||
Interest
rate
|
0 | 0.00 | % | 20,969 | 0.11 | % | |||||||||||
Stock
index
|
1,530 | 0.01 | % | (22,085 | ) | (0.12 | )% | ||||||||||
Total
U.S. short futures contracts
|
$ | 138,641 | 0.90 | % | $ | (39,405 | ) | (0.20 | )% | ||||||||
Foreign
Interest
rate
|
$ | 0 | 0.00 | % | $ | 2,654 | 0.01 | % | |||||||||
Stock
index
|
337 | 0.00 | % | (4,253 | ) | (0.02 | )% | ||||||||||
Total
foreign short futures contracts
|
$ | 337 | 0.00 | % | $ | (1,599 | ) | (0.01 | )% | ||||||||
Total
futures contracts
|
$ | 257,222 | 1.67 | % | $ | 289,265 | 1.48 | % | |||||||||
INVESTMENTS IN OTHER COMMODITY
POOLS
|
|||||||||||||||||
SHK Diversified LLC(2)
|
|||||||||||||||||
Investment
Objective
To
achieve capital appreciation by
trading
U.S. and Non U.S.
futures
and forward currency contracts
|
$ | 0 | 0.00 | % | $ | 1,315,743 | 6.75 | % | |||||||||
________________________
|
|||||||||||||||||
(1)
|
No
individual futures contract position constitutes greater than 5% of the
Partnership’s Net Asset Value at September 30, 2009 or December 31,
2008. Accordingly, the number of contracts and expiration dates are
not presented.
|
||||||||||||||||
(2)
|
As
of January 31, 2008, the managing member of SHK Diversified LLC (SHK)
temporarily suspended future redemptions from this fund. This action
was taken by the managing member due to a decline in the liquidity of the
markets traded by this fund combined with a significant number of requests
for redemptions from this fund. On April 28, 2008, the Partnership
submitted a request for full redemption from SHK. Effective December
31, 2008, the managing member of SHK distributed approximately half of the
Partnership’s investment in SHK to the Partnership, which was paid to the
Partnership on January 15, 2009. Effective February 28, 2009, the
managing member of SHK distributed the remaining portion of the
Partnership’s investment in SHK to the Partnership, which was paid to the
Partnership on March 16, 2009.
|
See
accompanying notes.
-3-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS (CONTINUED)
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
September
30, 2009
|
December
31, 2008
|
||||||||||||||||
Fair
Value
|
%
of Net
Asset Value
|
Fair
Value
|
%
of Net
Asset Value
|
||||||||||||||
INVESTMENTS IN OTHER COMMODITY POOLS
(continued)
|
|||||||||||||||||
Valhalla
Synergy Fund LLC
|
|||||||||||||||||
Investment
Objective
To
achieve capital appreciation by trading U.S. and Non U.S.
futures
and forward currency contracts
|
|||||||||||||||||
Redemption
Provisions
Quarterly,
with 45 days notice
|
$ | 2,671,786 | 17.34 | % | $ | 2,740,835 | 14.05 | % | |||||||||
Winton Futures Fund, L.P. (US)
- Institutional Interests(1)
|
|||||||||||||||||
Investment
Objective
To
achieve capital appreciation by trading U.S. and Non U.S.
futures
contracts
|
|||||||||||||||||
Redemption
Provisions
Monthly,
with 15 days notice
|
7,829,455 | 50.81 | % | 8,527,355 | 43.73 | % | |||||||||||
Total
investments in other commodity pools
|
$ | 10,501,241 | 68.15 | % | $ | 12,583,933 | 64.53 | % | |||||||||
________________________
|
|||||||||||||||||
(1)
|
The
General Partner of Winton Futures Fund, L.P. (US) is Altegris Portfolio
Management, Inc., an affiliate of Altegris Investments,
Inc.
|
See
accompanying notes.
-4-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS (CONTINUED)
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
Proportional
Share of Investments of Other Commodity Pools as of September 30,
2009(1)
|
|||||||
Description
|
Investment Objective
|
Redemption
Provisions
|
Fair
Value
|
%
of Net
Asset Value
|
|||
Valhalla
Synergy
Master
Fund Ltd.
|
To
achieve capital appreciation through the speculative trading of
commodities, commodity futures contracts, options on futures contracts and
commodities, and spot and forward contracts traded in U.S. and non-U.S.
markets.
|
Quarterly
|
$ 2,627,983
|
17.05
%
|
|||
U.S. Government Agency Bonds and
Notes
|
|||||||
Face Value
|
Description
|
Range
of
Maturity Dates
|
Fair
Value
|
%
of Net
Asset Value
|
|||
$1,197,403
|
Federal
Home Loan Bank (0.24% - 2.05%)
|
11/2009
to 08/2011
|
$ 1,203,753
|
7.81
%
|
|||
$1,337,433
|
Federal
National Mortgage Association
(1.20%
- 2.00%)
|
07/2010
to 09/2011
|
$ 1,344,032
|
8.72
%
|
|||
Open Long Futures
Contracts
|
|||||||
No. of
Contracts
|
Description
|
Maturity Date
|
Fair
Value
|
%
of Net
Asset Value
|
|||
Metals
|
|||||||
1
|
Copper
|
12/2009
|
$ (52)
|
0.00
%
|
|||
Open Long and Short Forward
Contracts
|
|||||||
No. of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
|||
Long Forward Contracts
|
|||||||
Metals
|
|||||||
439
|
Aluminum
|
10/2009
to 12/2012
|
$
(786,984)
|
(5.11)%
|
|||
274
|
Copper
|
10/2009
to 12/2013
|
$
8,078,399
|
52.42
%
|
|||
Short Forward Contracts
|
|||||||
Metals
|
|||||||
478
|
Aluminum
|
10/2009
to 12/2013
|
$ 98,359
|
0.64
%
|
|||
274
|
Copper
|
10/2009
to 12/2013
|
$ (7,799,620)
|
(50.61)%
|
______________________________________
|
(1)
|
Represents
the Partnership’s proportional share of other commodity pools’ individual
underlying investments and open futures and forward contracts which exceed
5% of the Partnership’s Net Asset Value at September 30,
2009. In certain situations open futures contracts that are
less then 5% of the Partnership’s Net Asset Value are presented to better
indicate the Partnership’s net exposure to a particular underlying
commodity.
|
See
accompanying notes.
-5-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS (CONTINUED)
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
Proportional
Share of Investments of Other Commodity Pools as of September 30, 2009
(cont.)(1)
|
||||||
Purchased Options on Forward
Contracts
|
||||||
No. of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
||
Metals
|
||||||
15
|
Aluminum
|
10/2009
to 12/2011
|
$ 59,532
|
0.39
%
|
||
4
|
Copper
|
10/2009
to 12/2010
|
$ 40,212
|
0.26
%
|
||
Written Options on Forward
Contracts
|
||||||
No. of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
||
Metals
|
||||||
19
|
Aluminum
|
10/2009
to 12/2011
|
$ (29,691)
|
(0.19)%
|
||
3
|
Copper
|
12/2009
to 12/2010
|
$ (42,408)
|
(0.28)%
|
||
Physical Inventory
|
||||||
Description
|
Fair
Value
|
%
of Net
Asset Value
|
||||
Metals
|
||||||
Aluminum
|
$ 510,461
|
3.31
%
|
______________________________________
|
(1)
|
Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at September 30, 2009. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity. |
See
accompanying notes.
-6-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS (CONTINUED)
Proportional Share of
Investments of Other Commodity Pools as of December 31,
2008(1)
|
||||||||
Description
|
Investment Objective
|
Redemption
Provisions
|
Fair
Value
|
%
of Net
Asset Value
|
||||
Valhalla
Synergy Master Fund Ltd.
|
To
achieve capital appreciation through the speculative trading of
commodities, commodity futures contracts, options on futures contracts and
commodities, and spot and forward contracts traded in U.S. and non-U.S.
markets.
|
Quarterly
|
$ 2,734,502
|
14.02
%
|
||||
Money Market Mutual Fund
Investments
|
||||||||
Shares
|
Description
|
Cost
|
Fair
Value
|
%
of Net
Asset Value
|
||||
1,121,826
|
UBS
Select Prime Institutional Fund
|
$ 1,121,826
|
$ 1,121,826
|
5.75
%
|
||||
U.S. Government Agency Bonds and
Notes
|
||||||||
Face
Value
|
Description
|
Range
of
Maturity Dates
|
Fair
Value
|
%
of Net
Asset Value
|
||||
$1,278,210 |
Federal
Home Loan Bank (0.03% - 4.35%)
|
01/2009 to 12/2010 | $ 1,281,568 | 6.57 % | ||||
Open Long and Short Futures
Contracts
|
||||||||
No. of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
||||
Long Futures Contracts
|
||||||||
Metals
|
||||||||
3
|
Copper
|
01/2009
to 05/2009
|
$ 9,130
|
0.05
%
|
||||
519
|
Gold
|
04/2009
to 12/2010
|
$ 1,747,460
|
8.96
%
|
||||
88
|
Silver
|
05/2009
to 07/2011
|
$ (593,490)
|
(3.04)%
|
||||
Short Futures
Contracts
|
||||||||
Metals
|
||||||||
9
|
Copper
|
02/2009
to 05/2009
|
$ (65,331)
|
(0.34)%
|
||||
519
|
Gold
|
02/2009
to 06/2012
|
$ (2,537,283)
|
(13.01)%
|
||||
88
|
Silver
|
03/2009
to 12/2011
|
$ (75,238)
|
(0.39)%
|
||||
Open Long and Short Forward
Contracts
|
||||||||
No. of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
||||
Long Forward Contracts
|
||||||||
Metals
|
||||||||
394
|
Aluminum
|
01/2009
to 12/2012
|
$ 5,470,495
|
28.05
%
|
||||
121
|
Copper
|
01/2009
to 12/2011
|
$ 4,836,078
|
24.80
%
|
||||
Short Forward
Contracts
|
||||||||
Metals
|
||||||||
349
|
Aluminum
|
01/2009
to 12/2012
|
$ (4,626,265)
|
(23.72)%
|
||||
114
|
Copper
|
01/2009
to 12/2011
|
$ (
4,446,044)
|
(22.80)%
|
______________________________________
|
(1)
|
Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity. |
See
accompanying notes.
-7-
PROFUTURES
DIVERSIFIED FUND, L.P.
CONDENSED
SCHEDULES OF INVESTMENTS (CONTINUED)
September
30, 2009 (Unaudited) and December 31, 2008 (Audited)
_________________
Proportional
Share of Investments of Other Commodity Pools as of December 31, 2008
(cont.)(1)
Purchased Options on Forward
Contracts
No.
of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
|
Metals
|
|||||
14
|
Aluminum
|
01/2009
to 12/2011
|
$ 126,957
|
0.65%
|
|
14
|
Copper
|
01/2009
to 12/2010
|
$ 235,909
|
1.21%
|
|
Written Options on Forward
Contracts
|
|||||
No.
of
Contracts
|
Description
|
Range
of
Expiration Dates
|
Fair
Value
|
%
of Net
Asset Value
|
|
Metals
|
|||||
29
|
Aluminum
|
01/2009
to 12/2011
|
$ (105,759)
|
(0.54)%
|
|
14
|
Copper
|
01/2009
to 12/2010
|
$ (346,786)
|
(1.78)%
|
|
Physical Inventory
|
|||||
Description
|
Fair
Value
|
%
of Net
Asset Value
|
|||
Metals
|
|||||
Aluminum
|
$ 32,010
|
0.16%
|
|||
Copper
|
$ 1,639,383
|
8.41%
|
|||
______________________________________
|
(1)
|
Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity. |
See
accompanying notes.
-8-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF OPERATIONS
For the
Three Months Ended September 30, 2009 and 2008 (Unaudited)
_________________
Three
Months Ended September 30,
|
||||||||||||||||
2009
|
2008
|
2008
|
2008
|
|||||||||||||
Total
|
Non-restricted
|
Side
pocket/
restricted
|
Total
|
|||||||||||||
TRADING
AND INVESTING GAINS (LOSSES)
|
||||||||||||||||
Gain
(loss) from futures and options on futures trading
|
||||||||||||||||
Realized
|
$ | (978,420 | ) | $ | 295,649 | $ | 0 | $ | 295,649 | |||||||
Change
in unrealized
|
159,619 | 256,622 | 0 | 256,622 | ||||||||||||
Brokerage
commissions
|
(64,929 | ) | (38,518 | ) | 0 | (38,518 | ) | |||||||||
Gain
(loss) from futures and options on
futures
trading
|
(883,730 | ) | 513,753 | 0 | 513,753 | |||||||||||
Gain
(loss) from investment in other commodity pools
|
(50,436 | ) | (688,358 | ) | 125,746 | (562,612 | ) | |||||||||
Total
trading and investing gains (losses)
|
(934,166 | ) | (174,605 | ) | 125,746 | (48,859 | ) | |||||||||
NET
INVESTMENT INCOME (LOSS)
|
||||||||||||||||
Income
|
||||||||||||||||
Interest
income
|
214 | 21,671 | 0 | 21,671 | ||||||||||||
Expenses
|
||||||||||||||||
Incentive
fees
|
0 | 168,692 | 0 | 168,692 | ||||||||||||
Management
fees (includes $150,745, $154,948,
$25,108
and $180,056 charged by the
General
Partner for the three months ended
September
30, 2009 and 2008, respectively)
|
207,212 | 201,152 | 25,108 | 226,260 | ||||||||||||
Operating
expenses
|
95,998 | 86,489 | 13,857 | 100,346 | ||||||||||||
Total
expenses
|
303,210 | 456,333 | 38,965 | 495,298 | ||||||||||||
General
Partner management fees waived
|
0 | 0 | 0 | 0 | ||||||||||||
Net
expenses
|
303,210 | 456,333 | 38,965 | 495,298 | ||||||||||||
Net
investment income (loss)
|
(302,996 | ) | (434,662 | ) | (38,965 | ) | (473,627 | ) | ||||||||
NET
INCOME (LOSS)
|
$ | (1,237,162 | ) | $ | (609,267 | ) | $ | 86,781 | $ | (522,486 | ) | |||||
NET
INCOME (LOSS) PER GENERAL AND
LIMITED
PARTNER UNIT
(based
on weighted average number of units outstanding
during
the period of 6,010, 5,773 and 923, respectively)
|
$ | (205.85 | ) | $ | (105.54 | ) | $ | 94.02 | $ | N/A | (1) | |||||
INCREASE
(DECREASE) IN NET ASSET VALUE
PER
GENERAL AND LIMITED PARTNER UNIT
|
$ | (205.44 | ) | $ | (100.89 | ) | $ | 93.97 | $ | N/A | (1) |
______________________________________
|
(1)
|
A total net income (loss) per general and limited partner unit and a total for the increase (decrease) in Net Asset Value per general and limited partner unit are not presented as the amounts are instead shown for each separate class of units. |
See
accompanying notes.
-9-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF OPERATIONS (CONTINUED)
For the
Nine Months Ended September 30, 2009 (Unaudited)
_________________
Nine
Months Ended September 30,
|
||||||||||||
2009
|
2009
|
2009
|
||||||||||
Non-restricted
|
Side
pocket/
restricted
|
Total
|
||||||||||
TRADING
AND INVESTING GAINS (LOSSES)
|
||||||||||||
Gain
(loss) from futures and options on futures trading
|
||||||||||||
Realized
|
$ | (1,059,562 | ) | $ | 0 | $ | (1,059,562 | ) | ||||
Change
in unrealized
|
(32,043 | ) | 0 | (32,043 | ) | |||||||
Brokerage
commissions
|
(160,421 | ) | 0 | (160,421 | ) | |||||||
Gain
(loss) from futures and options on
futures
trading
|
(1,252,026 | ) | 0 | (1,252,026 | ) | |||||||
Gain
(loss) from investment in other commodity pools
|
(796,949 | ) | 19,515 | (777,434 | ) | |||||||
Total
trading and investing gains (losses)
|
(2,048,975 | ) | 19,515 | (2,029,460 | ) | |||||||
NET
INVESTMENT INCOME (LOSS)
|
||||||||||||
Income
|
||||||||||||
Interest
income
|
2,199 | 0 | 2,199 | |||||||||
Expenses
|
||||||||||||
Incentive
fees
|
136,617 | 0 | 136,617 | |||||||||
Management
fees (includes $486,782, $7,714 and
$494,496
charged by the General Partner for the nine
months
ended September 30, 2009, respectively)
|
654,471 | 7,714 | 662,185 | |||||||||
Operating
expenses
|
321,811 | 3,707 | 325,518 | |||||||||
Total
expenses
|
1,112,899 | 11,421 | 1,124,320 | |||||||||
General
Partner management fees waived
|
0 | 0 | 0 | |||||||||
Net
expenses
|
1,112,899 | 11,421 | 1,124,320 | |||||||||
Net
investment income (loss)
|
(1,110,700 | ) | (11,421 | ) | (1,122,121 | ) | ||||||
NET
INCOME (LOSS)
|
$ | (3,159,675 | ) | $ | 8,094 | $ | (3,151,581 | ) | ||||
NET
INCOME (LOSS) PER GENERAL AND
LIMITED
PARTNER UNIT
(based
on weighted average number of units outstanding
during
the period of 6,064 and 462, respectively)
|
$ | (521.04 | ) | $ | 17.52 | $ | N/A | (1) | ||||
INCREASE
(DECREASE) IN NET ASSET VALUE
PER
GENERAL AND LIMITED PARTNER UNIT
|
$ | (520.40 | ) | $ | 17.54 | $ | N/A | (1) |
______________________________________
|
(1)
|
A total net income (loss) per general and limited partner unit and a total for the increase (decrease) in Net Asset Value per general and limited partner unit are not presented as the amounts are instead shown for each separate class of units. |
See
accompanying notes.
-10-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF OPERATIONS (CONTINUED)
For the
Nine Months Ended September 30, 2008 (Unaudited)
_________________
Nine
Months Ended September 30,
|
||||||||||||
2008
|
2008
|
2008
|
||||||||||
Non-restricted
|
Side
pocket/
restricted
|
Total
|
||||||||||
TRADING
AND INVESTING GAINS (LOSSES)
|
||||||||||||
Gain
(loss) from futures and options on futures trading
|
||||||||||||
Realized
|
$ | (9,529 | ) | $ | 0 | $ | (9,529 | ) | ||||
Change
in unrealized
|
321,201 | 0 | 321,201 | |||||||||
Brokerage
commissions
|
(83,045 | ) | 0 | (83,045 | ) | |||||||
Gain
(loss) from futures and options on
futures
trading
|
228,627 | 0 | 228,627 | |||||||||
Gain
(loss) from investment in other commodity pools
|
484,332 | 114,007 | 598,339 | |||||||||
Total
trading and investing gains (losses)
|
712,959 | 114,007 | 826,966 | |||||||||
NET
INVESTMENT INCOME (LOSS)
|
||||||||||||
Income
|
||||||||||||
Interest
income
|
36,491 | 0 | 36,491 | |||||||||
Expenses
|
||||||||||||
Incentive
fees
|
198,152 | 0 | 198,152 | |||||||||
Management
fees (includes $527,008, $50,217 and
$577,225
charged by the General Partner for the nine
months
ended September 30, 2008, respectively)
|
586,615 | 50,217 | 636,832 | |||||||||
Operating
expenses
|
312,684 | 60,575 | 373,259 | |||||||||
Total
expenses
|
1,097,451 | 110,792 | 1,208,243 | |||||||||
General
Partner management fees waived
|
(77,739 | ) | 0 | (77,739 | ) | |||||||
Net
expenses
|
1,019,712 | 110,792 | 1,130,504 | |||||||||
Net
investment income (loss)
|
(983,221 | ) | (110,792 | ) | (1,094,013 | ) | ||||||
NET
INCOME (LOSS)
|
$ | (270,262 | ) | $ | 3,215 | $ | (267,047 | ) | ||||
NET
INCOME (LOSS) PER GENERAL AND
LIMITED
PARTNER UNIT
(based
on weighted average number of units outstanding
during
the period of 6,397 and 923, respectively)
|
$ | (42.25 | ) | $ | 3.48 | $ | N/A | (1) | ||||
INCREASE
(DECREASE) IN NET ASSET VALUE
PER
GENERAL AND LIMITED PARTNER UNIT
|
$ | (53.56 | ) | $ | 3.48 | $ | N/A | (1) |
______________________________________
|
(1)
|
A total net income (loss) per general and limited partner unit and a total for the increase (decrease) in Net Asset Value per general and limited partner unit are not presented as the amounts are instead shown for each separate class of units. |
See
accompanying notes.
-11-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)
For the
Nine Months Ended September 30, 2009 and 2008
(Unaudited)
_________________
Total
|
||||||||||||||||
Number
of
|
Partners’
Capital
|
|||||||||||||||
Units
|
General
|
Limited
|
Total
|
|||||||||||||
Non-restricted units
|
||||||||||||||||
Balances
at
December
31, 2008
|
5,859 | $ | 543,779 | $ | 17,851,493 | $ | 18,395,272 | |||||||||
Transfer
from side pocket/restricted
|
361 | 32,444 | 1,078,335 | 1,110,779 | ||||||||||||
Net
income (loss) for the nine
months
ended September 30, 2009
|
(94,984 | ) | (3,064,691 | ) | (3,159,675 | ) | ||||||||||
Redemptions
|
(337 | ) | 0 | (936,321 | ) | (936,321 | ) | |||||||||
Balances
at
September
30, 2009
|
5,883 | 481,239 | 14,928,816 | 15,410,055 | ||||||||||||
Side pocket/restricted
units
|
||||||||||||||||
Balances
at
December
31, 2008
|
415 | $ | 32,232 | $ | 1,073,525 | $ | 1,105,757 | |||||||||
Transfer
to non-restricted(1)
|
(414 | ) | (32,444 | ) | (1,078,335 | ) | (1,110,779 | ) | ||||||||
Net
income (loss) for the nine
months
ended September 30, 2009
|
212 | 7,882 | 8,094 | |||||||||||||
Redemptions(2)
|
(1 | ) | 0 | (3,072 | ) | (3,072 | ) | |||||||||
Balances
at
September
30, 2009
|
0 | 0 | 0 | 0 | ||||||||||||
Total
Partners’ Capital (Net Asset
Value)
at September 30, 2009
|
$ | 481,239 | $ | 14,928,816 | $ | 15,410,055 | ||||||||||
Net
Asset Value Per Unit
|
||||||||||||||||
Non-restricted
units
|
Side
pocket/restricted units
|
|||||||||||||||
September
30,
|
December
31,
|
September
30,
|
December
31,
|
|||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
$ | 2,619.46 | $ | 3,139.86 | $ | N/A | (3) | $ | 2,663.73 |
______________________________________
|
(1)
|
Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009. As a result, the remaining units held in the side pocket/restricted units were transferred and converted to non-restricted units at the February 28, 2009 non-restricted net asset value per unit. |
(2)
|
Represents the portion of the February 28, 2009 distribution from SHK related to partners who have completely redeemed from the Partnership and do not hold non-restricted units. |
(3)
|
The side pocket/restricted unit class was terminated effective February 28, 2009. The side pocket/restricted net asset value per unit at February 28, 2009, prior to the termination, was $2,681.27. |
See
accompanying notes.
-12-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE) (CONTINUED)
For the
Nine Months Ended September 30, 2009 and 2008
(Unaudited)
_________________
Total
|
||||||||||||||||
Number
of
|
Partners’
Capital
|
|||||||||||||||
Units
|
General
|
Limited
|
Total
|
|||||||||||||
Non-restricted units
|
||||||||||||||||
Balances
at
December
31, 2007
|
7,345 | $ | 545,791 | $ | 20,878,036 | $ | 21,423,827 | |||||||||
Transfer
to side pocket/restricted
|
(923 | ) | (71,709 | ) | (2,664,700 | ) | (2,736,409 | ) | ||||||||
Net
(loss) for the nine
months
ended September 30, 2008
|
(7,605 | ) | (262,657 | ) | (270,262 | ) | ||||||||||
Redemptions
|
(863 | ) | 0 | (2,501,237 | ) | (2,501,237 | ) | |||||||||
Balances
at
September
30, 2008
|
5,559 | $ | 466,477 | $ | 15,449,442 | $ | 15,915,919 | |||||||||
Side pocket/restricted
units
|
||||||||||||||||
Balances
at
December
31, 2007
|
0 | $ | 0 | $ | 0 | $ | 0 | |||||||||
Transfer
from non-restricted
|
923 | 71,709 | 2,664,700 | 2,736,409 | ||||||||||||
Net
income for the nine
months
ended September 30, 2008
|
85 | 3,130 | 3,215 | |||||||||||||
Redemptions(1),
(2)
|
(104 | ) | 0 | (309,529 | ) | (309,529 | ) | |||||||||
Balances
at
September
30, 2008
|
819 | $ | 71,794 | $ | 2,358,301 | $ | 2,430,095 | |||||||||
Total
Partners’ Capital (Net Asset
Value)
at September 30, 2008
|
$ | 538,271 | $ | 17,807,743 | $ | 18,346,014 | ||||||||||
Net
Asset Value Per Unit
|
||||||||||||||||
Non-restricted
units
|
Side
pocket/restricted units
|
|||||||||||||||
September
30,
|
December
31,
|
September
30,
|
December
31,
|
|||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | 2,863.22 | $ | 2,916.78 | $ | 2,966.57 | $ | N/A | |||||||||
______________________________________
|
(1)
|
Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009. |
(2)
|
Side pocket/restricted unit redemptions have been recorded in accordance with the Statement of Financial Accounting Standards No. 150 (ASC Topic 480). Redemptions approved by the General Partner, prior to period end, that are not effective until subsequent periods are recorded in the current period. |
See
accompanying notes.
-13-
PROFUTURES
DIVERSIFIED FUND, L.P.
STATEMENTS
OF CASH FLOWS
For the
Nine Months Ended September 30, 2009 and 2008
(Unaudited)
_________________
September
30,
|
||||||||
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | (3,151,581 | ) | $ | (267,047 | ) | ||
Adjustment
to reconcile net income (loss) to net cash
provided
by (used in) operating activities:
(Gain)
loss from investment in other commodity pools
|
777,434 | (598,339 | ) | |||||
Change
in operating assets and liabilities
(Increase)
in cash deposits with broker
|
1,298,590 | (4,083,201 | ) | |||||
(Increase)
in options premiums paid (received)
|
0 | (32,775 | ) | |||||
(Increase)
decrease in unrealized gain (loss) on open contracts
|
32,043 | (322,926 | ) | |||||
Additions
to investments in other commodity pools
|
(1,000,000 | ) | (10,690,000 | ) | ||||
Redemptions
from other commodity pools
|
3,351,000 | 19,242,492 | ||||||
Increase
(decrease) in accounts payable
|
36,197 | (7,930 | ) | |||||
Increase
in commissions and other trading fees
on
open contracts
|
96 | 1,070 | ||||||
(Decrease)
increase in incentive fees payable
|
(185,497 | ) | 168,692 | |||||
(Decrease)
increase in management fees payable
|
(78,938 | ) | 57,007 | |||||
Net
cash provided by (used in) operating activities
|
1,079,344 | 3,467,043 | ||||||
FINANCING
ACTIVITIES
|
||||||||
Redemptions
paid
|
(1,075,775 | ) | (3,467,957 | ) | ||||
Net
cash provided by (used in) financing activities
|
(1,075,775 | ) | (3,467,957 | ) | ||||
Net
cash increase (decrease) for the period
|
3,569 | (914 | ) | |||||
Cash
at beginning of the period
|
3,533 | 3,387 | ||||||
Cash
at end of the period
|
$ | 7,102 | $ | 2,473 |
See
accompanying notes.
-14-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
General Description of the
Partnership
|
ProFutures
Diversified Fund, L.P. (the Partnership) is a Delaware limited
partnership, which operates as a commodity investment pool. The
Partnership engages in the speculative trading of futures contracts,
options on futures contracts, physical commodities, interbank forward
currency contracts and options on interbank forward currency contracts,
directly and through its investments in other commodity
pools. The Partnership closed to investors in 1995 and will
terminate at the end of December 2012, at which time the remaining assets
will be distributed.
|
|
As
more fully described in Note 7., effective April 1, 2008, the Partnership
established a “side pocket/restricted” account for each
investor. The Partnership transferred its interest in SHK
Diversified LLC (SHK), which had a net asset value of $2,736,409 and a per
unit value of $2,963.09 as of March 31, 2008, to a side pocket/restricted
unit class. Partners of record on April 1, 2008 had a
proportional interest in the assets, liabilities and income or loss
related to this side pocket.
|
|
Partners
who had requested redemptions continued to participate in any income or
loss specifically from the SHK side pocket investment until such time as
the Partnership received its redemption proceeds or liquidation proceeds
from SHK. The side pocket/restricted unit class also bore its
proportionate share of the Partnership’s expenses, as well as all expenses
directly related to this class’ establishment and
existence. Effective December 31, 2008, SHK distributed
approximately half ($1,315,742) of the Partnership’s investment in SHK to
the Partnership, which was paid to the Partnership on January 15,
2009. Effective February 28, 2009, SHK distributed the
remaining portion ($1,335,258) of the Partnership’s investment in SHK to
the Partnership, which was paid to the Partnership on March 16, 2009,
resulting in the termination of the side pocket/restricted unit
class.
|
Regulation
|
As
a registrant with the Securities and Exchange Commission (SEC), the
Partnership is subject to the regulatory requirements under the Securities
Act of 1933 and the Securities Exchange Act of 1934. As a
commodity investment 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
and futures commission merchants through which the Partnership
trades.
|
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.
|
|
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
total number of units outstanding for each
class.
|
-15-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Method of Reporting
(continued)
|
Effective
July 1, 2009, the Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC), referred to as FASB ASC or the Codification,
became the single source of U.S. generally accepted accounting principles
(U.S. GAAP) for interim and annual periods ending after September 15,
2009. Existing accounting standards are incorporated into the
Codification and standards not incorporated into the Codification are
considered nonauthoritative.
|
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 reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting
periods. Actual results could differ from the estimates and
assumptions utilized.
|
Fair Value of Financial
Instruments
|
All
of the Partnership’s assets and liabilities are considered financial
instruments and are reflected at fair value, or at carrying amounts that
approximate fair value because of the short maturity of the
instruments.
|
|
Fair
value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date and sets out a fair value
hierarchy. The fair value hierarchy gives the highest priority
to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level
3). Inputs are broadly defined under the Fair Value Measurements and
Disclosures Topic of the Codification as assumptions market
participants would use in pricing an asset or liability. The
three levels of the fair value hierarchy are described
below:
|
|
Level
1.
|
Unadjusted
quoted prices in active markets for identical assets or liabilities that
the reporting entity has the ability to access at the measurement
date.
|
|
Level
2.
|
Inputs
other than quoted prices within Level 1 that are observable for the asset
or liability, either directly or indirectly. A significant
adjustment to a Level 2 input could result in the Level 2 measurement
becoming a Level 3 measurement.
|
|
Level
3.
|
Inputs
are unobservable for the asset or
liability.
|
|
The
fair values of futures contracts are based upon exchange settlement
prices. The Partnership uses futures contracts as part of its
trading activities. These contracts are classified as Level 1
of the fair value hierarchy.
|
|
The
fair values of Level 1 financial instruments at September 30, 2009 and
December 31, 2008, consisted of the
following:
|
September 30, 2009
|
December 31, 2008
|
||
Futures
contracts
|
$ 257,222
|
$ 289,265
|
-16-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair Value of Financial
Instruments (continued)
|
The
Partnership’s investments in other commodity pools are reported in the
statement of financial condition at fair value. Fair value
ordinarily represents the Partnership’s proportionate share of each other
commodity pool’s net asset value determined for each commodity pool in
accordance with such commodity pool’s valuation policies and as reported
by their management at the time of the Partnership’s
valuation. Generally, the fair value of the Partnership’s
investment in a commodity pool represents the amount that the Partnership
could reasonably expect to receive from such commodity pool if the
Partnership’s investment was redeemed at the time of valuation, based on
information reasonably available at the time the valuation is made and
that the Partnership believes to be reliable. The Partnership
records its proportionate share of other commodity pool’s income or loss
in the statement of operations. This financial instrument is
classified in Level 3 of the fair value
hierarchy.
|
|
The
fair values of Level 3 financial instruments at September 30, 2009 and
December 31, 2008, consisted of the
following:
|
September 30, 2009
|
December 31, 2008
|
||
Investments
in other commodity pools
|
$ 10,501,241
|
$ 12,583,933
|
|
The
following table presents a reconciliation of the activity for the
investments in other commodity
pools:
|
Balance
at January 1, 2008:
|
$ | 16,889,459 | ||
Gain
(loss) from investments in other
commodity
pools
|
1,347,709 | |||
Additions
and redemptions, net
|
(5,653,235 | ) | ||
Transfers
in and/or out of Level 3
|
0 | |||
Balance
at December 31, 2008:
|
12,583,933
|
|||
Gain
(loss) from investments in other
commodity
pools
|
(777,434 | ) | ||
Additions
and redemptions, net
|
(1,305,258 | ) | ||
Transfers
in and/or out of Level 3
|
0 | |||
Balance
at September 30, 2009:
|
$ |
10,501,241
|
-17-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair Value of Financial
Instruments (continued)
|
The
amount of income (loss) from investments in other commodity pools included
in net income (loss) for the three and nine months ended September 30,
2009 and 2008 is reported as gain (loss) from investment in other
commodity pools as a single amount in the statements of operations, as the
Partnership accounts for its investments in other commodity pools pursuant
to the equity method of accounting. A reconciliation of the
beginning and ending balances of the Partnership’s investments in other
commodity pools, which are measured at fair value using significant Level
3 inputs during the three and nine months ended September 30, 2009 and
2008, is provided in Note 7. to the financial
statements.
|
|
Gain
(loss) from investment in other commodity pools includes $(714,149) and
$780,220 attributable to the change in unrealized gain (loss) on the
Partnership’s investments in other commodity pools held at September 30,
2009 and December 31, 2008,
respectively.
|
Futures
Contracts
|
Transactions
are accounted for on the trade date. Gains or losses are
realized when contracts are liquidated. Unrealized gains or
losses on open contracts (the difference between contract trade price and
quoted market price) are reflected in the statement of financial condition
as a net gain or loss, as there exists a right of offset of unrealized
gains or losses. Any change in net unrealized gain or loss from
the preceding period is reported in the statement of
operations. Brokerage commissions on futures contracts and
options on futures contracts include other trading fees and are charged to
expense when contracts are opened. Fair value of
exchange-traded contracts is based upon exchange settlement
prices.
|
Income
Taxes
|
The
Partnership is not subject to federal income taxes. The
Partnership prepares and files 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 and investing gains or
losses. The Partnership has elected an accounting policy to
classify interest and penalties, if any, as interest
expense. The 2006 through 2008 tax years generally remain
subject to examination by U.S. federal and most state tax
authorities.
|
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 total trading and
investing gains (losses) in the statements of
operations.
|
-18-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Redemptions of
Units
|
Redemptions
payable represent redemptions approved by the General Partner prior to the
period end, including those that are not effective until subsequent
periods. These redemptions have been recorded as redemptions
and redemptions payable, using the period end Net Asset Value per unit, in
accordance with the provisions of the Equity Topic of the
Codification. The change in redemptions payable from the
previous reporting period due to change in net asset value is reported in
net income and then allocated. Redemptions payable related to
side pocket/restricted units at September 30, 2009 and December 31, 2008
are $0 and $124,216, respectively.
|
|
Derivative
Instruments
|
|
The
Partnership’s business is speculative trading of U.S. and foreign futures
contracts, options on U.S. and foreign futures contracts and other
commodity-related contracts (collectively, derivatives) pursuant to the
trading and investment methodology of the General Partner. The
Partnership also invests in other commodity pools and is indirectly
exposed to the speculative trading of U.S. and foreign futures contracts,
physical commodities and securities within those other commodity
pools. The Partnership does not designate any derivative
instruments as hedging instruments under the Derivative and Hedging
Topic of the Codification nor are the derivative instruments used for
other risk management purposes. Due to the speculative nature
of the Partnership’s derivative trading activity, the Partnership is
subject to the risk of substantial losses from derivatives
trading.
|
|
The
following tables summarize quantitative information required by the Derivative and Hedging
Topic of the Codification. The fair value of derivative
contracts is presented as an asset if in a gain position and a liability
if in a loss position. Fair value is presented on a gross basis
in the table below even though the derivative contracts qualify for net
presentation in the statement of financial
condition:
|
Derivatives
not designed as hedging instruments as of September 30,
2009:
|
||||||||||||
Asset
Derivatives*
|
Liability
Derivatives*
|
|||||||||||
Fair
Value
|
Fair
Value
|
Net
|
||||||||||
Agricultural
contracts
|
$ | 263,931 | $ | 130,917 | $ | 133,014 | ||||||
Currency
contracts
|
81,909 | 5,050 | 76,859 | |||||||||
Energy
contracts
|
0 | 14,590 | (14,590 | ) | ||||||||
Interest
rate contracts
|
61,942 | 0 | 61,942 | |||||||||
Metal
contracts
|
0 | 1,560 | (1,560 | ) | ||||||||
Stock
index contracts
|
4,095 | 2,538 | 1,557 | |||||||||
$ |
411,877
|
$ | 154,655 | $ | 257,222 |
*
|
The
fair values of all asset and liability derivatives, including
agricultural, currency, energy, interest rate and stock index contracts,
are included in equity in broker trading accounts on the statement of
financial condition.
|
-19-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
Derivative Instruments
(continued)
|
Trading
Revenue For the
Three
and Nine Months Ended September 30, 2009
|
Trading
Revenue For the
Three
and Nine Months Ended September 30, 2009
|
||||||||||||||||
Type of Instrument
|
Three
Months
Ended
September
30, 2009
|
Nine
Months
Ended
September
30, 2009
|
Line
Item in
Statement of Operations
|
Three
Months
Ended
September
30, 2009
|
Nine
Months
Ended
September
30, 2009
|
||||||||||||
Agricultural
contracts
|
$ | (64,117 | ) | $ | (405,251 | ) |
Realized
|
$ | (978,420 | ) | $ | (1,059,562 | ) | ||||
Currency
contracts
|
(313,803 | ) | (136,645 | ) | |||||||||||||
Energy
contracts
|
50,543 | 153,583 |
Change
in unrealized
|
159,619 | (32,043 | ) | |||||||||||
Interest
rate contracts
|
(172,848 | ) | (622,436 | ) | |||||||||||||
Metal
contracts
|
(1,560 | ) | (100,226 | ) | |||||||||||||
Stock
index contracts
|
(317,016 | ) | 19,370 | ||||||||||||||
$ | (818,801 | ) | $ | (1,091,605 | ) | $ | (818,801 | ) | $ | (1,091,605 | ) |
|
For
the three months ended September 30, 2009, the monthly average number of
futures contracts bought and sold was approximately 3,900. For
the nine months ended September 30, 2009, the monthly average number of
futures contracts bought and sold was approximately
3,200.
|
Interim Financial
Statements
|
The
unaudited financial statements of ProFutures Diversified Fund, L.P., as of
September 30, 2009 and for the three and nine month periods ended
September 30, 2009 and 2008, have been prepared by us pursuant to the
rules and regulations of the SEC. The information included
reflects all adjustments (consisting only of normal recurring accruals and
adjustments), which are, in the opinion of management; necessary to fairly
state the operating results for the respective
periods. However, these operating results are not necessarily
indicative of the results expected for the full fiscal
year. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to SEC
rules and regulations. The notes to the unaudited financial
statements should be read in conjunction with the notes to the financial
statements contained in our 2008 Annual Report on Form 10-K/A filed with
the SEC on April 27, 2009.
|
Recent Accounting
Pronouncement
In
September 2009, the FASB issued Accounting Standards Update
No. 2009-12, an amendment to Subtopic 820-10, Fair Value Measurements and
Disclosures, which permits, as a practical expedient, a reporting entity
to measure the fair value of an investment in certain entities on the basis of
the net asset value per share of the investment. The update is effective for
interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Partnership is evaluating the impact this
update will have on its financial statements.
-20-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
2. GENERAL
PARTNER
|
The
General Partner of the Partnership is ProFutures, Inc., which conducts and
manages the business of the Partnership. The Agreement of
Limited Partnership requires the General Partner to contribute to the
Partnership an amount in the aggregate equal to at least the greater of
(i) 3% of the aggregate initial capital contributions of all partners or
$100,000, whichever is less, or (ii) 1% of the aggregate initial capital
contributions of all partners.
|
|
The
Agreement of Limited Partnership also requires that the General Partner
maintain in the aggregate a net worth at least equal to (i) the lesser of
$250,000 or 15% of the aggregate initial capital contributions of any
limited partnerships for which it acts as general partner and which are
capitalized at less than $2,500,000; and (ii) 10% of the aggregate initial
capital contributions of any limited partnerships for which it acts as
general partner and which are capitalized at greater than
$2,500,000.
|
|
ProFutures,
Inc. has a callable stock subscription agreement with MF Global Ltd.
(MFG), the Partnership’s broker, whereby MFG has subscribed to purchase
(up to $7,000,000, subject to conditions set forth in the stock
subscription agreement dated October 22, 2004) the number of shares of
common stock of ProFutures, Inc. necessary to maintain the General
Partner’s net worth requirements.
|
|
The
Partnership pays the General Partner a monthly management fee of 1/4 of 1%
(3% annually) of month-end Net Asset Value. The General Partner
receives an additional monthly management fee of .0625% (.75% annually) of
the Partnership’s month-end Net Asset Value for consulting services
rendered to the Partnership.
|
|
Total
management fees earned by ProFutures, Inc. for the nine months ended
September 30, 2009 and 2008 were $494,496 and $577,225,
respectively. Such management fees earned for the three months
ended September 30, 2009 and 2008 were $150,745 and $180,056,
respectively. Management fees payable to ProFutures, Inc. as of
September 30, 2009 and December 31, 2008 were $49,013 and $129,324,
respectively. Management fees payable at September 30, 2009 and
December 31, 2008 includes $0 and $74,672 payable to ProFutures, Inc.
related to the side pocket/restricted unit
class.
|
|
During
the nine months ended September 30, 2009 and 2008, the General Partner
waived $0 and $77,739, respectively, of its monthly management fee related
to the value of the Partnership’s net assets invested in ProFutures
Strategic Allocation Trust (the Trust), an affiliated fund also managed by
ProFutures, Inc. The General Partner considered this waiver of
management fees necessary given ProFutures, Inc. received a 2% per annum
administration fee from the Trust. The Partnership fully
redeemed from the Trust as of May 31,
2008.
|
-21-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
3.
|
CONSULTANTS
|
|
The
Partnership maintains a consulting agreement with Altegris Investments,
Inc. (the CTA Consultant) and Altegris Portfolio Management, Inc. (the CPO
Consultant), collectively (the Consultants), whereby the Consultants
recommend the selection and termination of the Partnership’s trading
advisors and other commodity pools and the allocation and reallocation of
the Partnership’s assets. The CPO Consultant is the general
partner of Winton Futures Fund, L.P. (US). Pursuant to the
consulting agreement, the Consultants receive a monthly consulting fee
equal to .0208% (.25% annually) of the Partnership’s month-end Net Asset
Value (as defined in the Consulting Agreement). Certain net
assets of the Partnership invested with managers affiliated with the
Consultants are excluded from the month-end Net Asset Value when computing
the consulting fees due to the Consultants. In addition, the
net assets of the Partnership invested with a certain commodity trading
advisor are excluded from the month-end Net Asset Value when computing the
consulting fees due to the Consultants since the Consultants earn a
percentage of such commodity trading advisor’s incentive
fee.
|
|
The
consulting fee (included in management fees in the statement of
operations) earned by the Consultants for the nine months ended September
30, 2009 and 2008 totaled $8,168 and $8,745, respectively, and $2,357 and
$3,765 for the three months ended September 30, 2009 and 2008,
respectively. The consulting fee payable (included in
management fees payable in the statement of financial condition) to the
Consultants as of September 30, 2009 and December 31, 2008 was $711 and
$1,880, respectively. In addition to the monthly consulting
fee, the Consultants earn commissions for introducing the Partnership to
certain commodity trading advisors and other commodity pools based on the
number of trades entered on behalf of the
Partnership.
|
Note
4.
|
COMMODITY TRADING
ADVISORS
|
|
The
Partnership has trading advisory contracts with commodity trading advisors
to furnish investment management services to the
Partnership. These trading advisors typically receive
management fees ranging from 0% to 2% annually of Allocated Net Asset
Value (as defined in each respective trading advisory
agreement). In addition, the commodity trading advisors
typically receive quarterly incentive fees ranging from 20% to 25% of
Trading Profits (as defined). Total management fees earned by
the trading advisors amounted to $159,521 and $50,862 for the nine months
ended September 30, 2009 and 2008, respectively. Such
management fees earned by the trading advisor for the three months ended
September 30, 2009 and 2008 were $54,110 and $42,439,
respectively. Total incentive fees earned by the trading
advisors amounted to $136,617 and $198,152 for the nine months ended
September 30, 2009 and 2008, respectively. Such incentive fees
earned by the trading advisor for the three months ended September 30,
2009 and 2008 were $0 and $168,692,
respectively.
|
-22-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
5.
|
SUBSCRIPTIONS,
DISTRIBUTIONS AND
REDEMPTIONS
|
|
Limited
Partners have the right to redeem units as of any month-end upon ten (10)
days’ prior written notice to the Partnership. Redemptions will
be made on the last day of the month for an amount equal to the net asset
value per unit, as defined, represented by the units to be
redeemed. The right to obtain redemptions is also contingent
upon the Partnership’s having property sufficient to discharge its
liabilities on the redemption date and may be delayed if the General
Partner determines that earlier liquidation of commodity interest
positions to meet redemption payments would be detrimental to the
Partnership or non-redeeming Limited
Partners.
|
|
Under
certain circumstances, including, but not limited to, the inability to
liquidate commodity positions or a delay in payments due the Partnership
from commodity brokers, banks, commodity pools or other persons, the
Partnership may in turn delay payment to Partners requesting redemption of
units. In that event, payment for redemption of such units will
be made to Limited Partners as soon thereafter as is
practicable. As discussed more fully in Note 7., effective
April 1, 2008, the General Partner established a side pocket/restricted
unit class for the Partnership’s interest in SHK. A Partner
could not redeem units from the side pocket/restricted unit class until
management of SHK distributed proceeds from the Partnership’s investment
in SHK to the Partnership. Effective December 31, 2008, SHK
distributed approximately half of the Partnership’s investment in SHK to
the Partnership. As a result, half of the units held in the
side pocket/restricted units were transferred and converted to
non-restricted units at the December 31, 2008 non-restricted Net Asset
Value per unit or were paid their pro rata share of the proceeds if they
did not hold non-restricted units. Effective February 28, 2009,
SHK distributed the remaining portion of the Partnership’s investment in
SHK to the Partnership. As a result, all of the units held in
the side pocket/restricted units were transferred and converted to
non-restricted units at the February 28, 2009 non-restricted Net Asset
Value per unit or were paid their pro rata share of the proceeds if they
did not hold non-restricted units.
|
Note
6. DEPOSITS WITH
BROKER
|
The
Partnership deposits funds with MFG to act as broker, subject to Commodity
Futures Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit
of cash with such broker. All assets with MFG are subject to
being collateralized for any amounts due to MFG and to meet margin and
other broker or regulatory requirements. The Partnership earns
interest income on its assets deposited with the
broker.
|
-23-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS
|
|
The
Partnership invests in other commodity pools which are subject to the
terms of the respective limited partnership agreements and offering
memoranda of such other commodity pools, which may, among other things,
delay or suspend withdrawal rights under certain
circumstances.
|
Summarized
information for these investments is as follows:
ProFutures
Strategic Allocation Trust
|
SHK
Diversified LLC
|
Valhalla
Synergy Fund LLC
|
Winton
Futures Fund, L.P. (US)
|
Totals
|
||||||||||||||||
Net
Asset Value
December
31, 2008
|
$ | 0 | $ | 1,315,743 | $ | 2,740,835 | $ | 8,527,355 | $ | 12,583,933 | ||||||||||
Additions
|
0 | 0 | 0 | 1,000,000 | 1,000,000 | |||||||||||||||
Income
(loss)
|
0 | 19,515 | (69,049 | ) | (727,900 | ) | (777,434 | ) | ||||||||||||
Redemptions
|
0 | (1,335,258 | ) | 0 | (970,000 | ) | (2,305,258 | ) | ||||||||||||
Net
Asset Value
September
30, 2009
|
$ | 0 | $ | 0 | $ | 2,671,786 | $ | 7,829,455 | $ | 10,501,241 | ||||||||||
Income
(loss)
|
||||||||||||||||||||
Quarter
1, 2009
|
$ | 0 | $ | 19,515 | $ | 31,822 | $ | (206,395 | ) | $ | (155,058 | ) | ||||||||
Quarter
2, 2009
|
0 | 0 | 34,614 | (606,554 | ) | (571,940 | ) | |||||||||||||
Quarter
3, 2009
|
0 | 0 | (135,485 | ) | 85,049 | (50,436 | ) | |||||||||||||
Income
(loss) for the
nine
months ended
|
$ | 0 | $ | 19,515 | $ | (69,049 | ) | $ | (727,900 | ) | $ | (777,434 | ) | |||||||
Net
Asset Value
December
31, 2007
|
$ | 5,495,004 | $ | 3,117,286 | $ | 4,419,668 | $ | 3,857,501 | $ | 16,889,459 | ||||||||||
Additions
|
4,500,000 | 0 | 0 | 5,800,000 | 10,300,000 | |||||||||||||||
Income
(loss)
|
567,489 | (166,870 | ) | 381,646 | (183,926 | ) | 598,339 | |||||||||||||
Redemptions
|
(10,562,493 | ) | (100,000 | ) | (2,100,000 | ) | (2,180,000 | ) | (14,942,493 | ) | ||||||||||
Net
Asset Value
September
30, 2008
|
$ | 0 | $ | 2,850,416 | $ | 2,701,314 | $ | 7,293,575 | $ | 12,845,305 | ||||||||||
Income
(loss)
|
||||||||||||||||||||
Quarter
1, 2008
|
$ | 516,123 | $ | (280,877 | ) | $ | 454,755 | $ | 299,673 | $ | 989,674 | |||||||||
Quarter
2, 2008
|
51,366 | (11,739 | ) | 5,734 | 125,916 | 171,277 | ||||||||||||||
Quarter
3, 2008
|
0 | 125,746 | (78,843 | ) | (609,515 | ) | (562,612 | ) | ||||||||||||
Income
(loss) for the
nine
months ended
|
$ | 567,489 | $ | (166,870 | ) | $ | 381,646 | $ | (183,926 | ) | $ | 598,339 |
-24-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
ProFutures Strategic
Allocation Trust
|
|
The
Partnership’s investment in ProFutures Strategic Allocation Trust (the
Trust) is subject to an administration fee, charged by ProFutures, Inc.,
of 2.00% per annum of net assets, a monthly management fee, charged by the
commodity trading advisor, of 2.00% per annum on allocated assets, and a
quarterly incentive fee, charged by the commodity trading advisor of 20%
of trading profits on allocated assets. The Partnership fully
redeemed from the Trust on May 31, 2008. For the five months
ended May 31, 2008, the Partnership’s proportionate share of
administrative fees, management and incentive fees charged by the Trust
were approximately $77,900, $42,700 and $0,
respectively.
|
|
Condensed
financial information for the five month period ended May 31, 2008 is as
follows (the Partnership fully redeemed from the Trust as of May 31,
2008):
|
Five
Months Ended
May
31, 2008
|
||||
(Unaudited)
|
||||
Statement
of Operations
|
||||
Trading
and investing gains (losses)
|
||||
Realized
|
$ | (101,694 | ) | |
Change
in unrealized
|
456,850 | |||
Brokerage
commissions
|
(12,745
|
) | ||
Total
trading gains
|
342,411
|
|||
Gain
from investment in other commodity pools
|
981,259
|
|||
Total
trading and investing gains
|
|
1,323,670 | ||
Net
investment income (loss)
|
||||
Income
|
||||
Interest
income
|
47,506 | |||
Expenses
|
||||
Incentive
fees
|
0 | |||
Management
and other fees
|
217,083 | |||
Other
expenses
|
|
63,591 | ||
Total
expenses
|
|
280,674 | ||
Net
investment (loss)
|
|
(233,168 | ) | |
Net
income
|
$
|
1,090,502 |
|
Management
of the Partnership believes the accounting principles utilized by the
Trust are consistent in all material respects with those utilized by the
Partnership.
|
|
The
Partnership fully redeemed from the Trust effective May 31,
2008.
|
-25-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
SHK Diversified
LLC
|
|
As
of January 31, 2008, the managing member of SHK Diversified LLC (SHK)
temporarily suspended future redemptions. SHK’s managing member
indicated to investors that this action was taken due to a decline in the
liquidity of the markets traded by SHK combined with a significant number
of requests for redemptions. On April 28, 2008, the Partnership
submitted a request for full redemption from SHK. Effective December 31,
2008, SHK distributed approximately half ($1,315,742) of the Partnership’s
investment in SHK to the Partnership which was paid to the Partnership on
January 15, 2009. Effective February 28, 2009, SHK distributed
the remaining portion ($1,335,258) of the Partnership’s investment in SHK
to the Partnership which was paid to the Partnership on March 16,
2009.
|
|
The
Partnership’s investment in SHK is stated at $0 and $1,315,743 at
September 30, 2009 and December 31, 2008, respectively, and its
proportionate share in the earnings (losses) of this investment for the
nine months ended September 30, 2009 and 2008 of $19,515 and $(166,870),
respectively, is included in net income (loss) for the periods then
ended. The Partnership’s proportionate share in the earnings
(losses) of this investment for the three months ended September 30, 2008
is $125,746.
|
|
The
General Partner established a side pocket for the Partnership’s interest
in SHK effective April 1, 2008, until such time as these funds could be
released and valued with a reasonable degree of
certainty. Investor units attributed to SHK were segregated
into a side pocket while units not attributed to SHK continued to be
available for redemption. Redemptions were paid in cash for the
portion of the Partnership’s net assets not attributed to SHK while the
net assets attributed to SHK were held in the side pocket. The
side pocket/restricted unit class also bore its proportionate share of the
Partnership’s expenses, as well as all expenses directly related to this
class’ establishment and operation. Effective February 28,
2009, the side pocket/restricted unit class was terminated after all
proceeds were received from the Partnership’s investment in
SHK.
|
|
Investors
in SHK are charged management fees of 6.00% per annum (in 2008,
voluntarily reduced to 3.00% per annum by the Managing Member of SHK) and
a profit share of 25% of trading profits. For the nine months
ended September 30, 2009, the Partnership’s proportionate share of
management fees and profit share charged by SHK was approximately, $6,700
and $0, respectively. For the nine months ended September 30,
2008, the Partnership’s proportionate share of management fees and profit
share charged by SHK was approximately $61,900 and $0,
respectively. For the three months ended September 30, 2008,
the Partnership’s proportionate share of management fees and profit share
charged by SHK was approximately $21,400 and $0,
respectively.
|
-26-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
SHK Diversified LLC
(continued)
|
|
Condensed
financial information as of December 31, 2008 and for the two month period
ended February 28, 2009 and the three and nine month periods ended
September 30, 2008 is as follows:
|
December
31, 2008
|
|
(Audited)
|
|
Statement
of Financial Condition
|
|
Assets
|
|
Money
market funds
|
$ 34,078,075
|
Equity
in broker trading accounts
|
|
Cash
(due to broker)
|
58,214,842
|
Unrealized
gain (loss) on open contracts
|
(33,879,348)
|
Deposits
with broker
|
58,413,569
|
Other
assets
|
22,000
|
Total
assets
|
$ 58,435,569
|
Liabilities
|
|
Accounts
payable
|
$ 55,534
|
Commissions
payable
|
54,229
|
Management
fee payable
|
124,048
|
Incentive
fee payable
|
4,686
|
Subscription
received in advance
|
0
|
Redemptions
payable
|
29,098,536
|
Total
liabilities
|
29,337,033
|
Total
Capital (Net Asset Value)
|
29,098,536
|
$ 58,435,569
|
-27-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
SHK Diversified LLC
(continued)
|
Two
Months Ended
February
28, 2009
|
Three
Months Ended
September
30, 2008
|
Nine
Months Ended
September
30, 2008
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Statements
of Operations
|
||||||||||||
Trading
gains (losses)
|
||||||||||||
Realized
|
$ | (10,063,882 | ) | $ | 271,325,643 | $ | 319,459,425 | |||||
Change
in unrealized
|
10,768,533 | (267,542,315 | ) | (319,536,117 | ) | |||||||
Brokerage
commissions
|
(89,581 | ) | (783,653 | ) | (3,082,170 | ) | ||||||
Total
trading gains (losses)
|
615,070
|
2,999,675 | (3,158,862 | ) | ||||||||
Net
investment income (loss)
|
||||||||||||
Income
|
||||||||||||
Interest
income and dividend income
|
13,459 | 303,177 | 1,027,392 | |||||||||
Expenses
|
||||||||||||
Incentive
fees
|
0 | 0 | 0 | |||||||||
Management
and other fees
|
126,078 | 402,670 | 1,163,458 | |||||||||
Operating
expenses
|
48,631 | 55,100 | 170,504 | |||||||||
Total
expenses
|
174,709
|
457,770 | 1,333,962 | |||||||||
Net
investment income (loss)
|
(161,250
|
) | (154,593 | ) | (306,570 | ) | ||||||
Net income
(loss)
|
$ |
453,820
|
$ | 2,845,082 | $ | (3,465,432 | ) |
|
Management
of the Partnership believes the accounting policies utilized by SHK are
consistent in all material respects with those utilized by the
Partnership.
|
|
The
Partnership’s investment in SHK represents approximately 0% and 4.5% of
the investee fund’s net asset value as of September 30, 2009 and December
31, 2008, respectively.
|
|
Valhalla Synergy Fund
LLC
|
|
Valhalla
Synergy Fund LLC invests substantially all of its assets through a
“master-feeder” structure into Valhalla Synergy Master Fund Ltd. (the
Master Fund), a Cayman Islands exempted company. Valhalla Synergy Fund LLC
pays to the manager of the Master Fund a management fee of 2.00% per annum
and an annual profit participation allocation of 20% of trading
profits. For the nine months ended September 30, 2009, the
Partnership’s proportionate share of management fees and profit
participation allocation charged by the Master Fund were approximately
$41,700 and $0, respectively. For the three months ended
September 30, 2009, the Partnership’s proportionate share of management
fees and profit participation allocation charged by the Master Fund were
approximately $13,900 and $(16,600), respectively. For the nine
months ended September 30, 2008, the Partnership’s proportionate share of
management fees and profit participation allocation charged by the Master
Fund were approximately $56,400 and $53,000, respectively. For
the three months ended September 30, 2008, the Partnership’s proportionate
share of management fees and profit participation allocation charged by
the Master Fund were approximately $14,500 and $(38,000),
respectively.
|
-28-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
Valhalla Synergy Fund
LLC (continued)
|
|
Valhalla
Synergy Fund LLC condensed financial information primarily consists of its
investment in the Master Fund and income or loss is allocated from the
Master Fund to Valhalla Synergy Fund
LLC.
|
|
Valhalla
Synergy Fund LLC net assets at September 30, 2009 and December 31, 2008
are $41,881,145 and $48,707,147, respectively. Total net income
for the nine months ended September 30, 2009 and 2008 is $(1,022,131) and
$4,462,393, respectively. Total net income for the three months
ended September 30, 2009 and 2008 is $(2,167,204) and $(1,622,957),
respectively.
|
|
The
Partnership’s investment in Valhalla Synergy Fund LLC represents
approximately 6.38% and 5.63% of the investee fund’s net asset value as of
September 30, 2009 and December 31, 2008, respectively. In September
2009, the Partnership requested a redemption of $500,000 from Valhalla
Synergy Fund LLC effective December 31,
2009.
|
|
Management
of the Partnership believes the accounting principles utilized by Valhalla
Synergy Fund LLC are consistent in all material respects with those
utilized by the Partnership.
|
|
Winton Futures Fund,
L.P. (US) – Institutional
Interests
|
|
Institutional
Interests of Winton Futures Fund, L.P. (US) (formerly Class B Interests
through May 2008) are charged management fees of 1.75% annually and
incentive fees of 20% of trading profits. For the nine months
ended September 30, 2009, the Partnership’s proportionate share of
management fees and incentive fees charged by Winton Futures Fund, L.P.
(US) were approximately $113,000 and $0, respectively. For the
three months ended September 30, 2009, the Partnership’s proportionate
share of management fees and incentive fees charged by Winton Futures
Fund, L.P. (US) were approximately $35,000 and $0,
respectively. For the nine months ended September 30, 2008, the
Partnership’s proportionate share of management fees and incentive fees
charged by Winton Futures Fund, L.P. (US) were approximately $55,000 and
$103,000, respectively. For the three months ended September
30, 2008, the Partnership’s proportionate share of management fees and
incentive fees charged by Winton Futures Fund, L.P. (US) were
approximately $33,000 and $0,
respectively.
|
|
The
CPO Consultant is the General Partner of Winton Futures Fund, L.P.
(US).
|
-29-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
Winton Futures Fund,
L.P. (US) – Institutional Interests
(continued)
|
|
Condensed
financial information as of September 30, 2009 and December 31, 2008 and
for the three and nine month periods ended September 30, 2009 and 2008 is
as follows:
|
September
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Statements
of Financial Condition
|
||||||||
Assets
|
||||||||
Equity
in Newedge USA, LLC account
|
||||||||
Cash
|
$ | 39,742,269 | $ | 154,396,738 | ||||
Unrealized
gain on open commodity futures
contracts
|
15,248,892 | 4,174,311 | ||||||
Long
options (cost – $23,605 and $0)
|
15,253 | 0 | ||||||
Deposits
with broker
|
55,006,414
|
158,571,049 | ||||||
Cash
and cash equivalents
|
19,449,065 | 3,384,626 | ||||||
Investment
securities at value
|
||||||||
(cost
– $419,001,661 and $132,744,996)
|
419,996,260 | 132,860,018 | ||||||
Other
assets
|
681,100 | 175,971 | ||||||
Total
assets
|
$
|
495,132,839 | $ | 294,991,664 | ||||
Liabilities
|
||||||||
Short
options (proceeds – $54,120 and $0)
|
$ | 44,065 | $ | 0 | ||||
Payable
for securities purchased
|
0 | 5,000,000 | ||||||
Accounts
payable
|
221,026 | 176,744 | ||||||
Commissions
payable
|
118,705 | 30,216 | ||||||
Management
fee payable
|
694,164 | 314,556 | ||||||
Administrative
fee payable
|
61,957 | 16,198 | ||||||
Service
fees payable
|
373,428 | 229,428 | ||||||
Incentive
fee payable
|
292,980 | 3,053,989 | ||||||
Redemptions
payable
|
3,218,104 | 4,043,596 | ||||||
Subscriptions
received in advance
|
19,322,230 | 23,079,459 | ||||||
Total
liabilities
|
|
24,346,659 | 35,944,186 | |||||
Total
Capital (Net Asset Value)
|
470,786,180 | 259,047,478 | ||||||
$
|
495,132,839 | $ | 294,991,664 |
-30-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
7. INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
Winton Futures Fund,
L.P. (US) – Institutional Interests
(continued)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30, 2009
|
September
30, 2008
|
September
30, 2009
|
September
30, 2008
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Statements
of Operations
|
||||||||||||||||
Trading
gains (losses)
|
||||||||||||||||
Gain
(loss) on trading of commodity
futures
and options contracts
|
||||||||||||||||
Realized
|
$ | (6,676,953 | ) | $ | (8,183,891 | ) | $ | (32,901,444 | ) | $ | 13,598,216 | |||||
Change
in unrealized
|
14,560,617 | (7,827,198 | ) | 11,076,284 | (1,270,058 | ) | ||||||||||
Brokerage
commissions
|
(1,709,663 | ) | (141,601 | ) | (3,732,248 | ) | (396,715 | ) | ||||||||
Gain
(loss) from trading futures
|
6,174,001 | (16,152,690 | ) | (25,557,408 | ) | 11,931,443 | ||||||||||
Gain
(loss) on trading of securities
|
||||||||||||||||
Realized
|
0 | 162 | (3,188 | ) | 162 | |||||||||||
Change
in unrealized
|
327,321 | (278,747 | ) | 869,577 | (278,747 | ) | ||||||||||
Gain
(loss) from trading securities
|
327,321 | (278,585 | ) | 866,389 | (278,585 | ) | ||||||||||
Foreign
currency translation
gains
(losses)
|
428,566 | (466,259 | ) | (322,976 | ) | (146,434 | ) | |||||||||
Total
trading gains (losses)
|
6,929,888 | (16,431,275 | ) | (25,013,995 | ) | 11,652,858 | ||||||||||
Net
investment income (loss)
|
||||||||||||||||
Income
|
||||||||||||||||
Interest
income
|
913,735 | 1,120,176 | 2,124,189 | 3,053,004 | ||||||||||||
Expenses
|
||||||||||||||||
Incentive
fees
|
292,980 | 14,473 | 297,698 | 5,631,196 | ||||||||||||
Management
and other fees
|
3,272,870 | 1,258,548 | 8,187,345 | 2,873,143 | ||||||||||||
Operating
expenses
|
335,387 | 136,704 | 883,509 | 221,317 | ||||||||||||
Total
expenses
|
3,901,237 | 1,409,725 | 9,368,552 | 8,725,656 | ||||||||||||
Net
investment income (loss)
|
(2,987,502 | ) | (289,549 | ) | (7,244,363 | ) | (5,672,652 | ) | ||||||||
Net income
(loss)
|
$ | 3,942,386 | $ | (16,720,824 | ) | $ | (32,258,358 | ) | $ | 5,980,206 |
-31-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
|
Note
7.
|
INVESTMENTS IN OTHER
COMMODITY POOLS (CONTINUED)
|
|
Winton Futures Fund,
L.P. (US) – Institutional Interests
(continued)
|
|
Management
of the Partnership believes the accounting principles utilized by Winton
Futures Fund, L.P. (US) are consistent in all material respects with those
utilized by the Partnership.
|
|
The
Partnership’s investment in Winton Futures Fund, L.P. (US) represents
approximately 1.66% and 3.29% of the investee fund’s net asset value as of
September 30, 2009 and December 31, 2008,
respectively.
|
|
As
of June 1, 2008, the Partnership’s “Class B Interest” in Winton Futures
Fund, L.P. (US) was reclassified as an “Institutional Interest” in Winton
Futures Fund, L.P. (US). This is a reclassification for Winton
Futures Fund, L.P. (US) administrative purposes only. There was
no change to the management and incentive fees charged the Partnership, or
the Partnership’s rights as a limited partner of Winton Futures Fund, L.P.
(US).
|
Note
8.
|
TRADING AND INVESTING
ACTIVITIES AND RELATED RISKS
|
|
The
Partnership, directly and through its investment in other commodity pools,
engages in the speculative trading of U.S. and foreign futures contracts,
options on U.S. and foreign futures contracts, physical commodities,
forward currency contracts and options on 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.
|
|
As
the Partnership deposits all of its equity in broker trading accounts with
MFG, the Partnership has a concentration of credit risk with
MFG. The following details both (i) the maximum amount of loss
the Partnership would incur due to the complete failure by MFG to perform
according to the terms of the applicable contractual agreements, with such
maximum amount of loss being based on the gross fair values of the
financial instruments held by MFG, and; (ii) the maximum risk of loss of
other assets (excluding financial instruments) held by
MFG:
|
Maximum Risk of Loss
|
||||||||||||
Broker
|
Financial
Instruments
|
Other
Assets
|
Total
|
|||||||||
MFG
|
$ | 257,222 | $ | 4,737,185 | $ | 4,994,407 |
|
The
above maximum amount of risk of loss of financial instruments does not
take into account unlimited liability on contracts sold short and adverse
market movements subsequent to September 30, 2009. Accordingly,
the maximum amount of risk of loss could be materially
greater.
|
|
Purchase
and sale of futures and options on futures contracts requires margin
deposits with the broker. 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.
|
-32-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
8.
|
TRADING AND INVESTING
ACTIVITIES AND RELATED RISKS
(CONTINUED)
|
|
For
derivatives, risks arise from changes in the fair value of the
contracts. Theoretically, the Partnership is exposed to a
market risk equal to the notional contract value of futures contracts
purchased and unlimited liability on such contracts sold
short. As both a buyer and seller of options, the Partnership
pays or receives a premium at the outset and then bears the risk of
unfavorable changes in the price of the contract underlying the
option. Written options expose the Partnership to potentially
unlimited liability, and purchased options expose the Partnership to a
risk of loss limited to the premiums paid. The Partnership is
also indirectly exposed to market risk on physical commodities equal to
the market value of physical commodities
owned.
|
|
The
Partnership has a portion of its assets on deposit with a financial
institution in connection with 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.
|
|
The
Partnership’s investments in other commodity pools are subject to the
market and credit risks of futures contracts, forward currency contracts
and other derivative contracts held or sold short by these commodity
pools. The Partnership bears the risk of loss only to the
extent of the market value of its respective investment and, in certain
specific circumstances, distributions and redemptions
received. The General Partner has established risk management
procedures to monitor investments in other commodity pools and seeks to
minimize risk primarily by investing in commodity pools, which the General
Partner and the CPO Consultant believe are reliable and
creditworthy. However, there can be no assurance that any
commodity pool invested in will be able to meet its obligations to the
Partnership.
|
|
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 General Partner’s basic
market risk control procedures consist of continuously monitoring the
trading activity of the various commodity trading advisors, with the
actual market risk controls being applied by the CTA Consultant and the
advisors themselves. The General Partner seeks to minimize
credit risk primarily by depositing and maintaining the Partnership’s
assets at financial institutions and brokers, which the General Partner
believes to be creditworthy.
|
|
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
9.
|
INDEMNIFICATIONS
|
|
In
the normal course of business, the Partnership enters into contracts and
agreements that contain a variety of representations and warranties and
which provide general indemnifications. The Partnership’s
maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Partnership that have
not yet occurred. The Partnership expects the risk of any
future obligation under these indemnifications to be
remote.
|
Note
10.
|
SUBSEQUENT
EVENTS
|
|
The
General Partner has evaluated subsequent events through November 13, 2009,
the date these financial statements were issued. There are no
subsequent events to disclose.
|
-33-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
10. FINANCIAL
HIGHLIGHTS
|
The
following information presents non-restricted per unit operating
performance data and other supplemental financial data for the three
months and nine months ended September 30, 2009 and 2008. This
information has been derived from information presented in the financial
statements.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Per
Unit Performance -
Non-restricted
units
(for a unit outstanding
throughout
the entire
period)
|
||||||||||||||||
Net
asset value per unit at beginning of
period
|
$ | 2,824.90 | $ | 2,964.11 | $ | 3,139.86 | $ | 2,916.78 | ||||||||
Income
(loss) from operations:
|
||||||||||||||||
Total
trading and investing gains
(losses)(1)
|
(155.02 | ) | (25.60 | ) | (337.24 | ) | 100.13 | |||||||||
Net
investment income (loss)(1)
|
(50.42 | ) | (75.29 | ) | (183.16 | ) | (153.69 | ) | ||||||||
Total
income (loss) from operations
|
(205.44 | ) | (100.89 | ) | (520.40 | ) | (53.56 | ) | ||||||||
Net
asset value per unit at end of period
|
$ | 2,619.46 | $ | 2,863.22 | $ | 2,619.46 | $ | 2,863.22 | ||||||||
Total
Return(4)
|
(7.27 | )% | (3.40 | )% | (16.57 | )% | (1.84 | )% | ||||||||
Ratios to average net asset
value:(2),
(5)
|
||||||||||||||||
Expenses
prior to incentive fees(3),
(7)
|
7.39 | % | 6.96 | % | 7.36 | % | 5.87 | % | ||||||||
Incentive
fees(4)
|
0.00 | % | 1.02 | % | 0.77 | % | 1.06 | % | ||||||||
Total
expenses
|
7.39 | % | 7.98 | % | 8.13 | % | 6.93 | % | ||||||||
Net
investment income (loss)(3),
(6), (7)
|
(7.38 | )% | (6.44 | )% | (7.34 | )% | (5.61 | )% |
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
redemptions.
______________________________________
|
(1)
|
The
net investment income (loss) per unit is calculated by dividing the net
investment income (loss) by the average number of units outstanding during
the period. Total trading and investing gains (losses) is a
balancing amount necessary to reconcile the change in net asset value per
unit with the other per unit information. Such balancing amount
may differ from the calculation of total trading and investing gains
(losses) per unit due to the timing of trading and investing gains and
losses during the period relative to the number of units
outstanding.
|
(2)
|
Excludes
the Partnership’s proportionate share of expenses and net investment
income (loss) from investments in other commodity pools.
|
||||||||||||||||
(3)
|
Annualized. | ||||||||||||||||
|
Not annualized. | ||||||||||||||||
(5)
|
Ratios
for the three and nine months ended September 30, 2008 are after the
waiver of management fees by the General Partner, equal to 0.00% and
0.56%, respectively, of average net asset value.
|
||||||||||||||||
(6)
|
Excludes incentive fees. | ||||||||||||||||
(7) | Excludes brokerage commissions. |
-34-
PROFUTURES
DIVERSIFIED FUND, L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
_________________
Note
11. FINANCIAL HIGHLIGHTS
(CONTINUED)
|
The
following information presents side pocket/restricted per unit operating
performance data and other supplemental financial data for the two months
ended February 28, 2009, the three months ended September 30, 2008 and for
the period April 1, 2008 (inception of side pocket/restricted units) to
September 30, 2008. This information has been derived from
information presented in the financial
statements.
|
Two
Months Ended
February
28, 2009
|
Three
Months Ended
September
30, 2008
|
Six
Months Ended
September
30, 2008
|
||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||
Per
Unit Performance – Side Pocket/Restricted units
(for a unit outstanding throughout the entire
period)
|
||||||||||||||||
Net
asset value per unit at beginning of period
|
$ | 2,663.73 | $ | 2,872.60 | $ | 2,963.09 | ||||||||||
Income
(loss) from operations:
|
||||||||||||||||
Total
trading and investing gains (losses)(1)
|
42.27 | 136.16 | 123.45 | |||||||||||||
Net
investment income (loss)(1)
|
(24.73 | ) | (42.19 | ) | (119.97 | ) | ||||||||||
Total
income (loss) from operations
|
17.54 | 93.97 | 3.48 | |||||||||||||
Net
asset value per unit at end of period
|
$ | 2,681.27 | $ | 2,966.57 | $ | 2,966.57 | ||||||||||
Total
Return(4)
|
0.66 | % | 3.27 | % | 0.12 | % | ||||||||||
Supplemental
Data
|
||||||||||||||||
Ratios to average net asset
value:(2)
|
||||||||||||||||
Expenses
prior to incentive fees(3),
(7)
|
5.53 | % | 5.73 | % | 8.17 | % | ||||||||||
Incentive
fees(4)
|
0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Total
expenses
|
5.53 | % | 5.73 | % | 8.17 | % | ||||||||||
Net
investment income (loss)(3),
(5), (7)
|
(5.53 | )% | (5.73 | )% | (8.17 | )% |
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
redemptions.
______________________________________
|
(1)
|
The
net investment income (loss) per unit is calculated by dividing the net
investment income (loss) by the average number of units outstanding during
the period. Total trading and investing gains (losses) is a
balancing amount necessary to reconcile the change in net asset value per
unit with the other per unit information. Such balancing amount
may differ from the calculation of total trading and investing gains
(losses) per unit due to the timing of trading and investing gains and
losses during the period relative to the number of units
outstanding.
|
(2)
|
Excludes
the Partnership’s proportionate share of expenses and net investment
income (loss) from investments in other commodity pools.
|
||||||||||||||||
(3)
|
Annualized. | ||||||||||||||||
|
Not annualized. | ||||||||||||||||
(5)
|
Excludes
incentive fees.
|
||||||||||||||||
(6)
|
Prior
to termination of the side pocket/restricted unit class effective February
28, 2009.
|
||||||||||||||||
(7) | Excludes brokerage commissions. |
-35-
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Reference
is made to Item 1, “Financial Statements.” The information
contained therein is essential to, and should be read in conjunction with,
the following analysis.
|
|
The
Partnership commenced trading on August 3, 1987. The success of
the Partnership is dependent on the ability of independent Commodity
Trading Advisors (“CTAs”) and commodity trading advisors that are utilized
via investing in commodity pools (collectively, the “Advisors”) to
generate profits through speculative trading sufficient to produce
substantial capital appreciation after payment of all fees and
expenses. Future results will depend in large part upon the
futures markets in general, the performance of the Advisors for the
Partnership and the amount of redemptions and changes in interest
rates. Due to the highly leveraged nature of futures trading,
small price movements may result in substantial losses. Because
of the nature of these factors and their interaction, it is impossible to
predict future operating results.
|
|
Critical Accounting
Policies
|
|
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expense during the reporting period. Management believes
that the estimates utilized in preparing the financial statements are
reasonable and prudent; however, actual results could differ from those
estimates. The Partnership’s significant accounting policies
are described in detail in Note 1 to the Financial
Statements.
|
|
The
Partnership records all investments at fair value in its financial
statements in accordance with Statement of Financial Accounting Standard
No. 157, Fair Value
Measurements, with changes in fair value reported as a component of
realized and change in unrealized trading gain (loss) and gain (loss) from
investments in other commodity pools in the Statements of
Operations. Generally, fair values are based on market prices;
however, in certain circumstances, estimates are involved in determining
fair value in the absence of an active market closing price (e.g., swap and forward
contracts which are traded in the inter-bank market).
|
|
The
fair value of exchange-traded contracts is based upon exchange settlement
prices. The fair value of non-exchange traded contract is based
on third party quoted dealer values on the Interbank
market. The fair value of the Partnership’s investments in
other commodity pools are ordinarily determined by each commodity pool in
accordance with such commodity pool’s valuation policies and as reported
by their management at the time of the Partnership’s valuation.
Generally, the fair value of the Partnership’s investment in a
commodity pool represents the amount that the Partnership could reasonably
expect to receive from such commodity pool if the Partnership’s investment
was redeemed at the time of valuation, based on information reasonably
available at the time the valuation is made and that the Partnership
believes to be reliable.
|
36
A. LIQUIDITY: Approximately
32% of the Partnership’s assets are highly liquid, such as cash and open
futures contracts. It is possible that extreme market
conditions or daily price fluctuation limits at certain exchanges could
adversely affect the liquidity of open futures contracts. There
are no restrictions on the liquidity of these assets except for amounts on
deposit with the brokers needed to meet margin requirements on open
futures contracts. The other estimated 68% of the Partnership’s
assets is invested in other commodity pools which are subject to certain
restrictions. The restrictions on withdrawals from these
commodity pools typically include a 15 to 45 day written notice for
withdrawals, monthly or quarterly redemptions and the commodity pools’
ability to limit or suspend redemptions.
|
|
As
of January 31, 2008, the managing member of SHK Diversified LLC (“SHK”)
temporarily suspended future redemptions resulting in the General
Partner’s decision to establish a side pocket, effective April 1, 2008,
for the Partnership’s interest in SHK. Investor units
attributed to SHK were segregated into and continued to be held in a side
pocket (“Restricted”) while units not attributed to SHK continued to be
available for redemption in cash (“Non-Restricted”). Effective
December 31, 2008, SHK paid the Partnership approximately half of the
Partnership’s redemption proceeds, equal to $1,315,742, and effective
February 28, 2009, SHK paid the Partnership the remaining half of the
Partnership’s redemption proceeds equal to $1,335,258. The side
pocket/Restricted share class was subsequently cancelled with existing
Units either redeemed or converted to Non-Restricted
shares.
|
|
B. CAPITAL
RESOURCES: Since the Partnership’s business is the purchase and
sale of various commodity interests, it will make few, if any, capital
expenditures.
|
|
The
Partnership’s offering of Units of Limited Partnership Interest terminated
in 1995.
|
|
C. RESULTS
OF OPERATIONS: The Partnership’s net income (loss) for the
three and nine months ended September 30, 2009 and 2008 is as
follows:
|
2009
|
2008
|
|||||||
Three
months ended September 30,
|
$ | (1,237,162 | ) | $ | (522,486 | ) | ||
Non-Restricted
|
(1,237,162 | ) | (609,267 | ) | ||||
Restricted
|
0 | 86,781 | ||||||
Nine
months ended September 30,
|
$ | (3,151,581 | ) | $ | (267,047 | ) | ||
Non-Restricted
|
(3,159,675 | ) | (270,262 | ) | ||||
Restricted
|
8,094 | 3,215 |
As
of September 30, 2009, 5,883 Units are outstanding, including 184 General
Partner Units, with an aggregate Net Asset Value of $15,410,055 ($2,619.46
per Unit). This represents a decrease in Net Asset Value of
($4,090,974) compared with December 31, 2008. The decrease was
caused by a combination of partner redemptions and trading losses for the
period. Effective December 31, 2008, one-half of the 878 Restricted Units
from a side pocket were either converted to Non-Restricted Units or
redeemed. Effective February 28, 2009, the second half of the
Restricted Units were either converted to
Non-
|
37
Restricted Units or redeemed. As of February 28, 2009 we no longer have Restricted Units or a side-pocket. | |
As
of September 30, 2008, 6,378 Units were outstanding, including 187 General
Partner Units and 819 Restricted Units, with an aggregate Net Asset Value
of $18,346,014. The aggregate Net Asset Value includes the
Non-Restricted Net Asset Value of $15,915,919 ($2,863.22 per
Non-Restricted Unit) and the Restricted Units Net Asset Value of
$2,430,095 ($2,966.57 per Restricted Unit). This represents a
decrease in the aggregate Net Asset Value of $(3,077,813) compared with
December 31, 2007. The decrease was caused by redemptions of
limited partner units in addition to a loss of 1.36% in net income for the
nine months ended September 30, 2008.
|
|
Third Quarter 2009
|
|
The
Partnership had losses for the quarter in certain agricultural
commodities, currencies, interest rates, and in stock indexes; gains were
in certain agricultural commodities, metals and energy.
|
|
The
Partnership had a loss of 3.98% in July. The Partnership had
losses in the stock indexes, certain agricultural commodities,
interest rates, metals currencies and energy; with no gains for the
month.
|
|
The
Partnership had a loss of 1.96% in August. The Partnership had
losses in currencies and interest rates; gains were in energy, stock
indexes and certain agricultural commodities.
|
|
The
Partnership had a loss of 1.50% in September. The Partnership
had losses in energy, stock indexes and certain agricultural commodities;
gains were in interest rates, currencies and metals.
|
|
The
Partnership ended the quarter with a loss of 7.27%.
|
|
Second Quarter 2009
|
|
The
Partnership had losses for the quarter in interest rates, metals and
certain agricultural commodities; gains were in stock indexes, certain
agricultural commodities and energy.
|
|
The
Partnership had a loss of 3.16% in April. The Partnership had
losses in interest rates, energy, currencies, certain agricultural
commodities and metals; gains were in certain agricultural
commodities and stock indexes.
|
|
The
Partnership had a gain of 2.92% in May. The Partnership had
gains in currencies, certain agricultural commodities, energy, stock
indexes and interest rates; losses were limited to metals and certain
agricultural commodities.
|
38
The
Partnership had a loss of 3.43% in June. The Partnership had
losses in certain agricultural commodities, interest rates, metals and
currencies; gains were in certain agricultural commodities, energy and
stock indexes.
|
|
The
Partnership ended the quarter with a loss of 3.75%.
|
|
First Quarter 2009
|
|
The
Partnership had losses for the quarter in interest rates, currencies,
certain agricultural commodities, metals and energy; gains were limited to
the stock indexes.
|
|
The
Partnership had a loss of 0.23% in January. The Partnership had
losses in interest rates and certain agricultural commodities; gains
were in stock indexes, currencies, energy and
metals.
|
|
The
Partnership had a loss of 1.65% in February. The Partnership
had losses in currencies, interest rates, energy, metals, stock indexes
and certain agricultural commodities; gains were in certain agricultural
commodities.
|
|
The
Partnership had a loss of 4.74% in March. The Partnership had
losses in every sector traded, in currencies, certain agricultural
commodities, interest rates, stock indexes, metals and
energy.
|
|
The
Partnership ended the quarter with a loss of 6.53%.
|
|
Third Quarter 2008
|
|
The
third quarter saw volatility in the stock indexes, energy and
commodities. The Partnership had losses in energy, certain
agricultural commodities, metals and currencies; gains were in the stock
indexes.
|
|
The
Partnership had a loss of 3.45% in July. The Partnership had
large losses in certain agricultural commodities, followed by losses in
energy, metals currencies; gains were in the stock indexes and interest
rates.
|
|
The
Partnership had a loss of 1.13% in August. The Partnership had
losses in metals, energy and certain agricultural commodities; gains were
in interest rates, stock indexes and currencies.
|
|
The
Partnership had a gain of 2.11% in September. The Partnership
had losses in interest rates currencies and energy; gains were in the
stock indexes, certain agricultural commodities and
metals.
|
|
The
Partnership ended the quarter with a loss of
2.54%.
|
39
Second Quarter 2008
|
|
The
second quarter saw volatility in the energy and interest rate
sectors. The Partnership had large gains in energy, with
smaller gains in metals and certain agricultural commodities; large losses
were in interest rates, with small losses in the stock
indexes.
|
|
The
Partnership had a loss of 1.55% in April. The Partnership had
large losses in interest rates, followed by smaller losses in stock
indexes; gains were in energy, metals, certain agricultural commodities
and currencies.
|
|
The
Partnership had a gain of 0.85% in May. The Partnership had
large gains in energy again this month, followed by small gains in metals,
currencies and certain agricultural commodities; large losses were in
interest rates with smaller losses in stock indexes.
|
|
The
Partnership had a gain of 0.35% in June. The Partnership had
gains in certain agricultural commodities, energy and stock indexes;
losses were in metals, interest rates and currencies.
|
|
The
Partnership ended the quarter with a loss of 0.36%.
|
|
First Quarter 2008
|
|
The
Partnership had large gains in interest rates, caused by the drop in
interest rates by the Federal Reserve throughout the
quarter. Small gains were also made in energy, currencies
and certain agricultural commodities. The Partnership saw large
losses in metals followed by small losses in the equity
indexes.
|
|
The
Partnership had a loss of 0.51% in January. The Partnership had
large losses in metals and stock indexes; losses were mostly offset by
large gains in interest rates with smaller gains in certain agricultural
commodities and currencies.
|
|
The
Partnership had a gain of 3.27% in February. The Partnership
had large gains in interest rates, followed by gains in certain
agricultural commodities, energy and currencies; losses were in metals and
the stock indexes.
|
|
The
Partnership had a loss of 1.13% in March. The Partnership had
gains in energy, currencies, interest rates and metals; losses were in
stock indexes and certain agricultural commodities.
|
|
The
Partnership ended the quarter with a gain of 1.59%.
|
|
D. OFF-BALANCE
SHEET ARRANGEMENTS: 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 Partnership trades in futures and other commodity
interest contracts and is therefore a party to financial instruments with
|
40
elements of off-balance sheet market and credit risk. In entering into these contracts, the Partnership faces the market risk that these 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 commodity interest positions of the Partnership at the same time, and if the Partnership were unable to offset positions, the Partnership could lose all of its assets and the limited partners would realize a 100% loss. The Partnership minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 25%. All positions of the Partnership are valued each day on a mark-to-market basis. | |
In addition to market risk, in entering into
commodity interest contracts there is a credit risk that a counterparty
will not be able to meet its obligations to the
Partnership. The counterparty for futures and options on
futures contracts traded in the United States and on most non-U.S. futures
exchanges is the clearing organization associated with such
exchange. In general, clearing organizations are backed by the
corporate members of the clearing organization 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 clearing organization is not
backed by the clearing members, like some non-U.S. exchanges, it is
normally backed by a consortium of banks or other financial
institutions.
|
|
In the case of forward contracts, over-the-counter
options contracts or swap contracts, which are traded on the interbank or
other institutional market rather than on exchanges, the counterparty is
generally a single bank or other financial institution, rather than a
central clearing organization backed by a group of financial
institutions. As a result, there likely will be greater
counterparty credit risk in these transactions. The Partnership
trades only with those counterparties that it believes to be
creditworthy. Nonetheless, the clearing member, clearing
organization or other counterparty to these transactions may not be able
to meet its obligations to the Partnership, in which case the Partnership
could suffer significant losses on these
contracts.
|
|
In the normal course of business, the Partnership
enters into contracts and agreements that contain a variety of
representations and warranties and which provide general
indemnifications. The Partnership’s maximum exposure under
these arrangements is unknown, as this would involve future claims that
may be made against the Partnership that have not yet
occurred. The Partnership expects the risk of any future
obligation under these indemnifications to be
remote.
|
|
E. CONTRACTUAL
OBLIGATIONS: None.
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
The Partnership is a Smaller Reporting Company as
defined by Rule 229.10(f)(1) and therefore this item is not
required.
|
41
Item
4T.
|
Controls
and Procedures.
|
ProFutures,
Inc., as General Partner of ProFutures Diversified Fund, L.P., with the
participation of the General Partner’s President 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
Partnership as of the end of the period covered by this quarterly
report. Based on their evaluation, the President and Chief
Financial Officer have concluded that these disclosure controls and
procedures are effective.
|
|
Changes in Internal Control over Financial
Reporting:
|
|
There
were no changes in the General Partner’s internal control over financial
reporting applicable to the Partnership 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 are reasonably likely to materially affect, internal control
over financial reporting applicable to the
Partnership.
|
42
PART
II - OTHER INFORMATION
|
|
Item
1.
|
Legal
Proceedings.
|
None.
|
|
Item
1A.
|
Risk
Factors.
|
The Partnership is a Smaller Reporting Company as
defined by Rule 229.10(f)(1) and therefore this item is not
required.
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
(a)
None.
|
|
(b)
Not applicable.
|
|
(c)
Effective April 1, 2008, investor units attributed to the investment in
SHK were segregated into and held in a side pocket due to SHK’s temporary
suspension of redemptions, while units not attributed to SHK continued to
be available for redemption in cash. Effective February 28, 2009,
SHK paid the Partnership the balance of the Partnership’s redemption
proceeds. The side pocket/Restricted share class was
subsequently cancelled with existing Units either redeemed or converted to
Non-Restricted shares.
|
|
Pursuant
to the Partnership’s Limited Partnership Agreement, partners may redeem
their Limited Partnership Units at the end of each calendar month at the
then current Net Asset Value per Unit. The redemption of Units
has no impact on the value of Units that remain outstanding, and Units are
not reissued once redeemed.
|
|
The
right to obtain redemption is contingent upon the Partnership’s having
property sufficient to discharge its liabilities on the redemption date
and may be delayed if the General partner determines that early
liquidation of the commodity interest positions to meet redemption
payments would be detrimental to the Partnership or non-redeeming Limited
Partners.
|
|
Under
certain circumstances, including but not limited to, the inability to
liquidate commodity positions or a delay in payment due the Partnership
from commodity brokers, banks, commodity pools or other persons, the
Partnership may in turn delay payment to Partners requesting redemption
units. In that event, payment for redemption of such units will be
made to Limited Partners as soon as thereafter is
practicable.
|
|
The
following table summarizes the redemptions, excluding those that are not
effective until subsequent periods, by partners during the three months
ended September 30, 2009 for Non-Restricted
Units:
|
43
MONTH
|
UNITS REDEEMED
|
NAV PER UNIT
|
|
July
31, 2009
|
14
|
2,712.53
|
|
August
31, 2009
|
65
|
2,659.30
|
|
September
30, 2009
|
78
|
2,619.46
|
|
TOTAL
|
157
|
Item
3.
|
Defaults
Upon Senior Securities.
|
|
None.
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
|
None.
|
||
Item
5.
|
Other
Information.
|
|
None.
|
||
Item
6.
|
Exhibits.
|
|
Exhibits
filed herewith:
|
||
31.01
|
Certification
of Gary D. Halbert, President, pursuant to Rules 13a-14 and 15d-14 of the
Securities Exchange Act of 1934.
|
|
31.02
|
Certification
of Debi B. Halbert, Chief Financial Officer, pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
|
32.01
|
Certification
of Gary D. Halbert, President, pursuant to 18 U.S.C. Section 1350 as
enacted by Section 906 of The Sarbanes- Oxley Act of
2002.
|
|
32.02
|
Certification
of Debi B. Halbert, Chief Financial Officer, pursuant to 18 U.S.C. Section
1350 as enacted by Section 906 of The Sarbanes-Oxley Act of
2002.
|
44
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.
PROFUTURES
DIVERSIFIED FUND, L.P.
(Registrant)
|
|
November 13, 2009
|
By /s/ GARY D. HALBERT
|
Date
|
Gary
D. Halbert, President and Director
ProFutures,
Inc.
General
Partner
|
November 13, 2009
|
By /s/ DEBI B. HALBERT
|
Date
|
Debi
B. Halbert, Chief Financial Officer,
Treasurer
and Director
ProFutures,
Inc.
General
Partner
|
45