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EX-31.02 - EXHIBIT 31.02 - FUTURES PORTFOLIO FUND L.P.ex31_02.htm
EX-32.01 - EXHIBIT 32.01 - FUTURES PORTFOLIO FUND L.P.ex32_01.htm
EX-31.01 - EXHIBIT 31.01 - FUTURES PORTFOLIO FUND L.P.ex31_01.htm
EX-32.02 - EXHIBIT 32.02 - FUTURES PORTFOLIO FUND L.P.ex32_02.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended September 30, 2009
   
 
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                                      to

Commission file number:  000-50728

FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

 
Maryland
 
52-1627106
 
 
(State of Incorporation)
 
(IRS Employer Identification No.)
 

c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200
Rockville, Maryland 20850
(Address of Principal Executive Office)(zip code)

(240) 631-9808
Registrant’s Telephone Number, Including Area Code:
__________________________________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 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 small reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o  Large accelerated filer
o  Accelerated filer
   
x  Non-accelerated filer
o  Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: N/A
 


 
 

 

Table of Contents

Part I:
Financial Information
1
     
Item 1.
1
     
 
1
     
 
2
     
 
5
     
 
7
     
 
8
     
 
9
     
 
10
     
Item 2.
21
     
Item 3.
27
     
Item 4.
31
     
Part II:
Other Information
32
     
Item 1.
32
     
Item 1A.
32
     
Item 2.
32
     
Item 3.
32
     
Item 4.
32
     
Item 5.
32
     
Item 6.
33
 
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

   
September 30,
   
December 31,
 
   
2009
   
2008
 
ASSETS
           
Equity in broker trading accounts
           
Cash
  $ 281,184,124     $ 218,445,964  
U.S. Government securities, at fair value (cost - $0 and $66,403,849)
    -       66,972,902  
Interest receivable
    31,251       28,073  
Net unrealized gain on open futures contracts
    39,660,692       34,492,682  
Net unrealized gain (loss) on open forward currency contracts
    5,001,820       (1,202,959 )
Deposits with brokers
    325,877,887       318,736,662  
Cash and cash equivalents
    647,342,315       286,560,159  
Commercial paper, at fair value (cost - $0 and $139,797,933)
    -       140,590,377  
Government-sponsored enterprises, at fair value (cost - $107,153,196 and $74,304,142)
    107,341,414       75,198,945  
Corporate notes, at fair value (cost - $0 and $77,628,692)
    -       78,147,406  
General Partner 1 percent allocation
    267,337       -  
Total assets
  $ 1,080,828,953     $ 899,233,549  
                 
LIABILITIES
               
Accounts payable - General Partner
  $ 1,616,010     $ 1,313,479  
Commissions and other trading fees on open contracts
    115,742       60,314  
General Partner management fee
    1,689,559       1,374,743  
General Partner 1 percent allocation
    -       1,879,337  
Advisor management fees
    1,807,319       1,492,038  
Advisor incentive fees
    5,633,419       18,771,604  
Selling Agents' fee – General Partner
    1,185,478       971,084  
Redemptions payable
    3,927,068       10,448,411  
Subscriptions received in advance
    32,136,358       29,937,275  
Total liabilities
    48,110,953       66,248,285  
PARTNERS' CAPITAL (Net Asset Value)
               
Class A Interests - 138,438.6924 units and 108,989.0639 units outstanding at September 30, 2009 and December 31, 2008
  $ 670,137,654     $ 547,011,351  
Class B Interests - 57,421.4483 units and 44,268.0740 units outstanding at September 30, 2009 and December 31, 2008
    362,580,346       285,973,913  
Total partners' capital  (net asset value)
    1,032,718,000       832,985,264  
Total liabilities and partners' capital (net asset value)
  $ 1,080,828,953     $ 899,233,549  

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS
September 30, 2009
(Unaudited)

GOVERNMENT-SPONSORED ENTERPRISES
 
Face Value
 
Maturity Date
Description
 
Fair Value
   
% of Net
Asset Value
 
$46,750,000  
01/28/10
Fed Home Ln Bank Bond (not callable), 0.960%
  $ 46,873,641       4.54 %
60,000,000  
03/30/10
Fed Home Ln Bank Bond (not callable), 1.100%
    60,467,773       5.86 %
       
Total Government-sponsored enterprises (cost - $107,153,196)
  $ 107,341,414       10.40 %

LONG U.S. FUTURES CONTRACTS
 
       
Description
 
Net unrealized gain
(loss) on open long
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 1,815,107       0.18 %
       
Currency
    5,058,830       0.49 %
       
Energy
    (337,895 )     (0.03 %)
       
Equity
    (28,886 )     0.00 %
       
Interest rate
    9,220,024       0.89 %
       
Metal**
    10,326,185       1.00 %
       
Stock index
    1,436,245       0.14 %
       
Total long U.S. futures contracts
  $ 27,489,610       2.67 %

SHORT U.S. FUTURES CONTRACTS
       
 
 
     
Description
 
Net unrealized gain
(loss)  on open short
contracts (Fair Value)
   
% of Net
Asset Value
 
     
Agricultural
  $ 2,366,379       0.23 %
       
Currency
    174,775       0.02 %
       
Energy
    (3,738,486 )     (0.36 %)
       
Interest rate
    (87,019 )     (0.01 %)
       
Metal
    (4,886,149 )     (0.47 %)
       
Stock index
    2,570       0.00 %
       
Total short U.S. futures contracts
  $ (6,167,930 )     (0.59 %)
       
Total U.S. futures contracts
  $ 21,321,680       2.08 %

LONG FOREIGN FUTURES CONTRACTS
           
     
Description
 
Net unrealized gain
(loss) on open long
contracts (Fair Value)
   
% of Net
Asset Value
 
     
Agricultural
  $ 515,350       0.05 %
       
Currency
    712,521       0.07 %
       
Energy
    (4,435 )     0.00 %
       
Interest rate**
    11,520,443       1.12 %
       
Metal
    (331,287 )     (0.03 %)
       
Stock index
    1,239,700       0.12 %
       
Total long foreign futures contracts
  $ 13,652,292       1.33 %
 
**No individual futures or forward contract position constituted greater than 1 percent of net asset value. Accordingly, the number of contracts and expiration dates are not presented.The accompanying notes are an integral part of these financial statements.
 
The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS (continued)
September 30, 2009
(Unaudited)

SHORT FOREIGN FUTURES CONTRACTS
 
     
Description
 
Net unrealized gain
(loss) on open short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 277,771       0.03 %
       
Currency
    4,269,910       0.41 %
       
Energy
    75,877       0.01 %
       
Interest rate
    85,419       0.01 %
       
Stock index
    (22,257 )     0.00 %
       
Total short foreign futures contracts
  $ 4,686,720       0.46 %
       
Total foreign futures contracts
  $ 18,339,012       1.79 %
                         
       
Net unrealized gain on open futures contracts
  $ 39,660,692       3.87 %
                 
LONG/SHORT U.S. FORWARD CURRENCY CONTRACTS
               
       
Description
 
Net unrealized gain
on open long/short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Long U.S. forward currency
  $ 1,047,936       0.10 %
       
Short U.S. forward currency
    403,634       0.04 %
       
Total U.S. forward currency contracts
  $ 1,451,570       0.14 %
 
LONG/SHORT FOREIGN FORWARD CURRENCY CONTRACTS  
     
Description
 
Net unrealized gain
on open long/short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Long foreign forward currency
  $ 669,667       0.06 %
       
Short foreign forward currency
    2,880,583       0.28 %
       
Total foreign forward currency contracts
  $ 3,550,250       0.34 %
                         
       
Net unrealized gain on open forward currency contracts
  $ 5,001,820       0.48 %

**No individual futures or forward contract position constituted greater than 1 percent of net asset value. Accordingly, the number of contracts and expiration dates are not presented.

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2008
(Audited)

U.S. GOVERNMENT SECURITIES*
 
Face Value
 
Maturity Date
Description
 
Fair Value
   
% of Net
Asset Value
 
$67,000,000  
01/08/09
U.S. Treasury Bill, 1.820%
  $ 66,972,902       8.04 %
       
Total U.S. Government securities (cost - $66,403,849)
  $ 66,972,902       8.04 %
                         
GOVERNMENT-SPONSORED ENTERPRISES
               
Face Value
 
Maturity Date
Description
 
Fair Value
   
% of Net
Asset Value
 
$75,204,000  
01/02/09
Fed Home Ln Discount Nt, 2.42%
  $ 75,198,945       9.03 %
       
Total Government-sponsored enterprises (cost - $74,304,142)
  $ 75,198,945       9.03 %
                         
COMMERCIAL PAPER
                 
Face Value
 
Maturity Date
Description
 
Fair Value
   
% of Net
Asset Value
 
$47,000,000  
03/06/09
Royal Bk Of Scotland Grp, 2.65%
  $ 46,778,578       5.62 %
41,670,000  
03/10/09
Citigroup Funding Inc, 3.05%
    41,429,934       4.97 %
5,000,000  
03/10/09
Citigroup Funding Inc, 2.43%
    4,977,050       0.60 %
19,800,000  
05/04/09
Shell Intl Finance Bv, 2.08%
    19,659,288       2.36 %
28,000,000  
05/04/09
Societe Generale N Amer, 2.66%
    27,745,527       3.33 %
       
Total commercial paper securities (cost - $139,797,933)
  $ 140,590,377       16.88 %
                         
CORPORATE NOTES
                 
Face Value
 
Maturity Date
Description
 
Fair Value
   
% of Net
Asset Value
 
$50,461,000  
03/25/09
Bear Stearns Co. (JP Morgan Chase & Co.), 3.25%
  $ 50,631,503       6.08 %
27,500,000  
08/19/09
Proc & Gamb Intl F, 2.49%
    27,515,903       3.30 %
       
Total corporate notes (cost - $77,628,692)
  $ 78,147,406       9.38 %
                         
LONG U.S. FUTURES CONTRACTS
               
       
Description
 
Net unrealized gain
(loss) on open long
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 209,623       0.03 %
       
Currency
    583,235       0.07 %
       
Energy
    36,851       0.00 %
       
Interest rate
    7,568,968       0.91 %
       
Metal
    (5,458,382 )     (0.66 %)
       
Stock index
    283,733       0.03 %
       
Total long U.S. futures contracts
  $ 3,224,028       0.38 %

*Pledged as collateral for the trading of futures contracts.

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS (continued)
December 31, 2008
(Audited)

SHORT U.S. FUTURES CONTRACTS
       
 
 
       
Description
 
Net unrealized gain
(loss) on open short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 203,129       0.02 %
       
Currency
    (536,035 )     (0.06 %)
       
Energy
    1,136,871       0.14 %
       
Interest rate
    (34,304 )     0.00 %
       
Metal**
    12,050,348       1.45 %
       
Stock index
    (100,242 )     (0.01 %)
       
Total short U.S. futures contracts
  $ 12,719,767       1.54 %
       
Total U.S. futures contracts
  $ 15,943,795       1.92 %
                         
LONG FOREIGN FUTURES CONTRACTS
               
       
Description
 
Net unrealized gain
on open long
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 526,077       0.06 %
       
Currency
    386,518       0.05 %
       
Interest rate**
    13,673,497       1.64 %
       
Metal
    132       0.00 %
       
Stock index
    353,887       0.04 %
       
Total long foreign futures contracts
  $ 14,940,111       1.79 %
                         
SHORT FOREIGN FUTURES CONTRACTS
               
       
Description
 
Net unrealized gain
(loss) on open short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Agricultural
  $ 1,586,457       0.19 %
       
Currency
    768,035       0.09 %
       
Energy
    761,334       0.09 %
       
Interest rate
    (443,162 )     (0.05 %)
       
Metal
    1,194,857       0.14 %
       
Stock index
    (258,745 )     (0.03 %)
       
Total short foreign futures contracts
  $ 3,608,776       0.43 %
       
Total foreign futures contracts
  $ 18,548,887       2.22 %
                         
       
Net unrealized gain on open futures contracts
  $ 34,492,682       4.14 %
                 
LONG/SHORT U.S. FORWARD CURRENCY CONTRACTS
               
       
Description
 
Net unrealized gain
(loss) on open long/short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Long U.S. forward currency
  $ 495,615       0.06 %
       
Short U.S. forward currency
    (1,697,447 )     (0.20 %)
       
Total U.S. forward currency contracts
  $ (1,201,832 )     (0.14 %)

**No individual futures or forward contract position constituted greater than 1 percent of net asset value. Accordingly, the number of contracts and expiration dates are not presented.

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
CONDENSED SCHEDULE OF INVESTMENTS (continued)
December 31, 2008
(Audited)
 
LONG/SHORT FOREIGN FORWARD CURRENCY CONTRACTS
           
     
Description
 
Net unrealized gain
(loss) on open long/short
contracts (Fair Value)
   
% of Net
Asset Value
 
       
Long foreign forward currency
  $ 217,280       0.03 %
       
Short foreign forward currency
    (218,407 )     (0.03 %)
       
Total foreign forward currency contracts
  $ (1,127 )     0.00 %
                         
       
Net unrealized loss on open forward currency contracts
  $ (1,202,959 )     (0.14 %)

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2009 and 2008
 (Unaudited)
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
 
TRADING GAIN (LOSS)
                       
Net realized gain (loss)
  $ 15,792,051     $ (17,407,249 )   $ 10,951,064     $ 122,910,706  
Net change in unrealized gain (loss)
    32,514,500       (32,409,033 )     11,372,789       (11,233,308 )
Brokerage commissions
    (794,199 )     (578,707 )     (1,976,539 )     (1,601,441 )
Net gain (loss) from trading
    47,512,352       (50,394,989 )     20,347,314       110,075,957  
NET INVESTMENT LOSS
                               
Income
                               
Interest income
    633,167       4,250,117       4,125,311       14,779,999  
Expenses
                               
General Partner management fee
    4,876,085       3,267,502       13,715,606       9,410,879  
General Partner 1 percent allocation
    289,447       (591,773 )     (267,337 )     621,241  
Advisor management fees
    3,630,303       2,798,548       10,665,853       8,235,991  
Advisor incentive fees
    5,631,887       3,572,159       12,560,513       35,230,213  
Selling Agents' fee – General Partner
    3,418,167       2,294,877       9,639,693       6,677,820  
Operating expenses
    2,201,007       2,560,381       6,507,786       5,430,445  
Total expenses
    20,046,896       13,901,694       52,822,114       65,606,589  
Operating expenses waived
    (556,610 )     (1,461,050 )     (1,883,103 )     (2,253,515 )
Net total expenses
    19,490,286       12,440,644       50,939,011       63,353,074  
Net investment loss
    (18,857,119 )     (8,190,527 )     (46,813,700 )     (48,573,075 )
                                 
NET INCOME (LOSS)
  $ 28,655,233     $ (58,585,516 )   $ (26,466,386 )   $ 61,502,882  
                                 
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2009
   
2008
   
2009
   
2008
 
   
Class A
   
Class B
   
Class A
   
Class B
   
Class A
   
Class B
   
Class A
   
Class B
 
INCREASE (DECREASE) IN NET ASSET VALUE PER UNIT
  $ 126.03     $ 191.93     $ (394.66 )   $ (478.97 )   $ (178.28 )   $ (145.68 )   $ 407.37     $ 586.55  
                                                                 
NET INCOME (LOSS) PER UNIT
(based on weighted average number of units outstanding)
  $ 131.58     $ 198.71     $ (380.34 )   $ (470.82 )   $ (163.61 )   $ (124.05 )   $ 407.07     $ 551.33  

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
 (Unaudited)
__________

   
2009
   
2008
 
Cash flows provided by (used in) operating activities
           
Net income (loss)
  $ (26,466,386 )   $ 61,502,882  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
               
Net change in unrealized (gain) loss
    (11,372,789 )     11,233,308  
Net proceeds from commercial paper
    140,590,377       3,802,964  
Net proceeds from corporate notes
    78,147,406       -  
Net proceeds (purchases) of investments in U.S. government securities
    66,972,902       (158,516,198 )
Net purchases of Government-sponsored enterprises
    (32,142,469 )     -  
(Increase) decrease in interest receivable
    (3,178 )     106,985  
Decrease in accounts payable and accrued expenses
    (11,935,735 )     (3,119 )
Increase (decrease) in General Partner 1 percent allocation
    (2,146,674 )     370,923  
Net cash provided by (used in) operating activities
    201,643,454       (81,502,255 )
                 
Cash flows provided by (used in) financing activities
               
Contributions
    262,412,284       147,677,830  
Subscriptions received in advance
    32,136,358       8,604,457  
Redemptions
    (72,671,780 )     (61,726,355 )
Net cash provided by financing activities
    221,876,862       94,555,932  
Net increase in cash and cash equivalents
    423,520,316       13,053,677  
                 
Cash and cash equivalents
               
Beginning of period
    505,006,123       85,537,812  
End of period
  $ 928,526,439     $ 98,591,489  
End of period cash and cash equivalents consists of:
               
Cash in broker trading accounts
  $ 281,184,124     $ 70,173,684  
Cash and cash equivalents
    647,342,315       28,417,805  
Total end of period cash and cash equivalents
  $ 928,526,439     $ 98,591,489  
                 
Supplemental disclosure of cash flow information:
               
Prior period redemptions paid
  $ 10,448,411     $ 4,753,938  
Prior period subscriptions received in advance
  $ 29,937,275     $ 3,956,128  
                 
Supplemental schedule of non-cash financing activities:
               
Redemptions payable
  $ 3,927,068     $ 4,518,384  

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited)
__________

   
Class A Interests
   
Class B Interests
       
   
Units
   
Amount
   
Units
   
Amount
   
Total
 
Nine Months Ended September 30, 2009
                             
Balance at December 31, 2008
    108,989.0639     $ 547,011,351       44,268.0740     $ 285,973,913     $ 832,985,264  
Net loss for the nine months ended September 30, 2009
    -       (20,137,315 )             (6,329,071 )     (26,466,386 )
Contributions
    38,143.3711       185,460,951       16,967.3754       106,888,608       292,349,559  
Redemptions
    (7,367.0398 )     (35,743,853 )     (4,839.0585 )     (30,406,584 )     (66,150,437 )
Transfers
    (1,326.7028 )     (6,453,480 )     1,025.0574       6,453,480       -  
Balance at September 30, 2009
    138,438.6924     $ 670,137,654       57,421.4483     $ 362,580,346     $ 1,032,718,000  
                                         
                                         
   
Class A Interests
   
Class B Interests
         
   
Units
   
Amount
   
Units
   
Amount
   
Total
 
Nine Months Ended September 30, 2008
                                       
Balance at December 31, 2007
    94,188.7078     $ 364,289,314       36,968.6171     $ 180,817,671     $ 545,106,985  
Net income for the nine months ended September 30, 2008
    -       39,577,371       -       21,925,511       61,502,882  
Contributions
    22,398.8129       95,765,492       10,309.8664       55,868,466       151,633,958  
Redemptions
    (10,156.9137 )     (44,638,161 )     (3,144.1560 )     (16,852,640 )     (61,490,801 )
Transfers
    (166.0804 )     (711,220 )     131.0055       711,220       -  
Balance at September 30, 2008
    106,264.5266     $ 454,282,796       44,265.3330     $ 242,470,228     $ 696,753,024  

Net Asset Value Per Unit
 
                                             
September 30, 2009
   
December 31, 2008
   
September 30, 2008
   
December 31, 2007
 
Class A
   
Class B
   
Class A
   
Class B
   
Class A
   
Class B
   
Class A
   
Class B
 
                                                             
$ 4,840.68     $ 6,314.37     $ 5,018.96     $ 6,460.05     $ 4,275.02     $ 5,477.66     $ 3,867.65     $ 4,891.11  

The accompanying notes are an integral part of these financial statements.


FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
__________

Note 1:
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Description of the Fund:

Futures Portfolio Fund, Limited Partnership (the “Fund”) is a Maryland limited partnership, which operates as a commodity investment pool that commenced trading operations on January 2, 1990.  The Fund issues units of Limited Partnership Interests (“Units”) in two Classes, Class A and Class B, which represent units of fractional undivided beneficial interest in and ownership of the Fund.  The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Limited Partnership Agreement.

The Fund utilizes commodity trading advisors to engage in the trading of futures contracts, forward currency contracts, and other financial instruments traded in the United States and internationally.

The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended, (the “’33 Act”) and the U.S. Securities Exchange Act of 1934 (the “’34 Act”).  As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the Act.  As a commodity pool, the Fund is subject to the regulations of the U.S.  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 (“NFA”), an industry self-regulatory organization; rules of Financial Industry Regulatory Authority (“FINRA”), an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions.  Additionally, the Fund is subject to the requirements of Futures Commission Merchants (brokers) and Interbank market makers through which the fund trades.

Steben & Company, Inc. (“Steben & Company”, the “General Partner” or the “Commodity Pool Operator”), is a Maryland corporation registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is also registered with the SEC as a registered investment advisor and a broker-dealer.  The General Partner is a member of the NFA and FINRA. The General Partner manages all aspects of the Fund’s business and serves as one of the Fund’s Selling Agents.

Classes of Interests:

There are two Classes of Interests held by the Limited Partners, Class A and Class B Units. The General Partner may offer additional classes at its discretion. Both Class A and Class B Units are traded pursuant to identical trading programs and differ only in respect to the selling agents’ fees, which consists of selling agents’ commissions and broker dealer servicing fees. Class B Units are issued only at the General Partner’s discretion and are generally intended for investors who are participating in fee based investment advisory programs. All items of income or loss, except for the selling agents’ fees, are allocated pro rata between Class A and Class B Units. The selling agents’ fees applicable to each class of Units are then charged to each class. All items of income or loss allocated to each class of Units are then allocated pro rata to each Limited Partner within each class. For purposes of both financial reporting and calculation of redemption value, net asset value per Class A or Class B Unit is calculated by dividing the net asset value of Class A or Class B Interests by the number or outstanding units of Class A or Class B.

Significant accounting policies are as follows:

Use of Estimates:

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.


Revenue Recognition:

Futures, options on futures, forward currency and swap contracts are recorded on a trade date basis, and gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the statements of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses.  Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Commercial paper, corporate notes, U.S. Government securities and Government-sponsored enterprises are recorded at amortized cost and interest is accrued and recorded through maturity, which approximates fair value.  Fair value of exchange-traded contracts is based upon settlement prices. Fair value of non-exchange traded contracts is based upon third-party quoted dealer values on the Interbank market.

Cash and Cash Equivalents:

Cash equivalents are highly liquid investments with an original maturity of three months or less at the date of acquisition that are not held for sale in the normal course of business. The Fund is at risk to the extent that it maintains balances with such institutions in excess of insured limits; however, the Fund does not believe it is exposed to any significant credit risk. As of September 30, 2009, significant cash balances held at Newedge, UBS, and Bank of America are $261,849,432, $294,946,984 and $371,730,023, respectively.  As of December 31, 2008, significant cash balances held at Newedge, UBS, and Bank of America are $209,660,354, $213,671,965 and $81,663,804, respectively.

Brokerage Commissions:

Brokerage commissions include other trading fees and are charged to expense when contracts are opened and when the positions are closed.

Redemptions Payable:

Redemptions payable represent redemptions approved by the General Partner prior to period end, including those that are not effective until subsequent periods.  These redemptions have been recorded using the period end net asset value per Unit.

Income Taxes:

The Fund prepares calendar year U.S. and applicable state tax returns.  The Fund is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Fund’s income, expenses and trading gains or losses.  The Fund, however, may be required to file returns in various state and local jurisdictions as a result of its operations or the residency of its partners.  For the three and nine months ended September 30, 2009 and 2008, and the year ended December 31, 2008, no income tax liability for uncertain tax positions has been recognized in the accompanying financial statements.  The 2006 through 2008 tax years generally remain subject to examination by U.S. federal and most state tax authorities.

Fair Value of Financial Instruments:

The Fund measures financial instruments at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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 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 following section describes the valuation techniques used by the Fund to measure different financial instruments at fair value and includes the level within the fair value hierarchy in which the financial instrument is categorized.

The Fund’s investments in U.S. Government securities, commercial paper, Government-sponsored enterprises and corporate notes are short-term in nature with a duration of less than one year, and typically, the Fund holds these investments through maturity. As such, interest income generated from these investments is recorded in the statements of operations. The fair value of these investments as obtained from cash management and clearing firms statements are compared to amortized cost to verify that the carrying amounts approximates their fair value.

The Fund’s cash management account holder and clearing firm (UBS and Newedge, respectively) utilize pricing services to value U.S. Government securities, commercial paper, Government-sponsored enterprises and corporate notes investments. These pricing services utilize the market approach which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing, which is used for Level 2 investments, is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, rather by relying on the securities’ relationship to other benchmark quoted securities.

U.S. Government securities are actively traded on a daily basis and the pricing services are able to obtain bid and ask quotes for identical assets by CUSIP. Commercial paper, Government-sponsored enterprises and corporate notes investments are also actively traded, however, the pricing services are only able to obtain bid and ask quotes for similar assets. As such, U.S. Government securities are classified within Level 1 and commercial paper, Government-sponsored enterprises and corporate notes investments are classified within Level 2.

Fair value of exchange traded contracts is based upon exchange settlement prices. Fair value of non-exchange traded contracts is based on third-party quoted dealer values on the Interbank market. The investments in money market funds and futures contracts are valued using quoted market prices and are classified within Level 1. The fair values of forward currency contracts are based upon an underlying asset, index, or reference rate or a combination of these factors and are classified within Level 2. The Fund uses some or all, when applicable, of these financial instruments as part of its trading activities. The recorded values of commercial paper, Government-sponsored enterprises, U.S. Government securities and corporate notes are based on amortized cost carrying amounts due to the short-term maturity of the instruments and are classified within Level 1 or 2; therefore, their carrying amounts approximate fair values.

The following tables present the Fund’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2009 and December 31, 2008:
 
   
September 30, 2009
 
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts
                 
Futures contracts
  $ 39,660,692           $ 39,660,692  
Forward currency contracts
          $ 5,001,820     $ 5,001,820  
Government-sponsored enterprises
          $ 107,341,414     $ 107,341,414  
Cash and cash equivalents
                       
Money market funds
  $ 600,776,990             $ 600,776,990  

 
   
December 31, 2008
 
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts
                 
Futures contracts
  $ 34,492,682           $ 34,492,682  
Forward currency contracts
          $ (1,202,959 )   $ (1,202,959 )
U.S. Government securities
  $ 66,972,902             $ 66,972,902  
Commercial paper
          $ 140,590,377     $ 140,590,377  
Government-sponsored enterprises
          $ 75,198,945     $ 75,198,945  
Corporate notes
          $ 78,147,406     $ 78,147,406  
Cash and cash equivalents
                       
Money market funds
  $ 256,592,512             $ 256,592,512  

There were no Level 3 holdings as of September 30, 2009 or December 31, 2008 or during the three and nine months ended September 30, 2009 and 2008, respectively.

Derivative Instruments:

The Fund adopted the provisions of the Derivatives and Hedging Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification effective January 1, 2009.  As required, the Fund presents qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of the gains and losses on agreements.

The Fund’s derivative contracts are comprised of futures and currency forward contracts. These derivative contracts are recorded on the statements of financial condition as assets measured at fair value and the related realized and unrealized gain (loss) associated with these derivatives is recorded in the statements of operations. The Fund has considered the counterparty credit risk related to all its futures and forward currency contracts and does not deem any counterparty credit risk material at this time. The Fund does not designate any derivative instruments as hedging instruments.

As of September 30, 2009 and for the three and nine months ended September 30, 2009, the Fund’s derivative contracts had the following impact on the statements of financial condition and the statements of operations:

   
Derivative Assets and Liabilities
 
Statements of Financial Condition Location
 
Assets
   
Liabilities
   
Net
   
Number of Contracts
 
Futures contracts
                       
Agricultural
  $ 5,759,379     $ (784,772 )   $ 4,974,607       5,007  
Currency
    10,656,964       (440,928 )     10,216,036       4,945  
Energy
    365,551       (4,370,490 )     (4,004,939 )     2,524  
Equity
    1,478       (30,364 )     (28,886 )     20  
Interest rate
    21,121,712       (382,845 )     20,738,867       36,836  
Metal
    10,360,588       (5,251,839 )     5,108,749       4,775  
Stock index
    3,729,104       (1,072,846 )     2,656,258       7,513  
 
Net unrealized gain on open futures contracts
    51,994,776       (12,334,084 )     39,660,692       61,620  
                         
Forward contracts
                       
Currency
Net unrealized gain (loss) on open forward currency contracts
    7,143,681       (2,141,861 )     5,001,820       N/A  
    $ 59,138,457     $ (14,475,945 )   $ 44,662,512       N/A  

 
   
Revenue
 
   
Three Months Ended
September 30, 2009
   
Nine Months Ended
September 30, 2009
 
Statements of Operations Location
 
Net realized gain (loss)
   
Number of Contracts
   
Net realized gain (loss)
   
Number of Contracts
 
Futures Contracts
                       
Agricultural
  $ 2,973,007       15,253     $ 1,230,290       40,324  
Currency
    (1,393,033 )     19,770       (6,233,611 )     34,234  
Energy
    (19,190,870 )     17,854       (21,725,672 )     34,194  
Equity
    (182,209 )     725       (82,127 )     1,087  
Interest rate
    570,484       86,512       (9,651,428 )     215,342  
Metal
    (1,446,981 )     6,530       240,460       14,376  
Stock index
    31,688,972       33,875       58,509,749       72,710  
    13,019,370       180,519       22,287,661       421,267  
                                 
Forward contracts
                               
Currency
    2,706,661       N/A       (10,977,047 )     N/A  
Net realized gain (loss)
  $ 15,726,031             $ 11,310,614          

   
Revenue
 
   
Net change in unrealized gain (loss)
 
Statements of Operations Location
 
Three Months
Ended September 30, 2009
   
Nine Months
Ended September 30, 2009
 
Futures contracts
           
Agricultural
  $ 882,036     $ 2,449,321  
Currency
    7,789,122       9,014,283  
Energy
    (7,920,562 )     (5,939,995 )
Equity
    (28,738 )     (28,886 )
Interest rate
    17,069,854       (26,132 )
Metal
    8,587,533       (2,678,206 )
Stock index
    1,591,361       2,377,625  
    27,970,606       5,168,010  
                 
Forward contracts
               
Currency
    4,543,894       6,204,779  
Net change in unrealized gain (loss)
  $ 32,514,500     $ 11,372,789  

Foreign Currency Transactions:

The Fund’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 statements of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently as part of net trading gains and losses.

Reclassification:

Certain amounts in the 2008 financial statements have been reclassified to conform with the 2009 presentation without affecting previously reported partner’s capital (net asset value).


Recently Adopted Accounting Standards:

The Fund adopted FASB Accounting Standards Codification (the “Codification”) on July 1, 2009.  The Codification is the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”).  The Codification does not change U.S. GAAP but combines all authoritative standards into a comprehensive, topically organized online database.  Effective with the Codification launch on July 1, 2009, only one level of authoritative U.S. GAAP exists, other than guidance issued by the SEC.  All other accounting literature excluded from the Codification is considered non-authoritative.  The Codification impacted the Fund’s financial statement disclosures by eliminating prior FASB reference since all references to authoritative accounting literature are now referenced in accordance with the Codification.

The Fund adopted the provisions of the Subsequent Events Topic of the Codification effective June 30, 2009.  The Subsequent Event Topic establishes general standards of and accounting for and disclosure of events that occur after the balance sheet data but before financial statements are issued or available to be issued.

Note 2:
GENERAL PARTNER

The General Partner of the Fund is Steben & Company, Inc., which conducts and manages the business of the Fund.  During the nine months ended September 30, 2009 and 2008, the General Partner did not maintain a capital balance in the Fund; however, the sole shareholder of the General Partner has an investment in Class B Interests of the Fund.

During the nine months ended September 30, 2009 and 2008, the General Partner received the following compensation:

 
·
Class A Units incur a monthly management fee equal to 1/12 of 1.95 percent (1.95 percent per annum) of the net asset value of the Class A Interests as of the last day of each month.

 
·
Class A Units incur a monthly selling agents’ commissions equal to 1/12 of 2 percent (2.00 percent per annum) of the net asset value of the Class A Units as of the last day of each month. The General Partner, in turn, pays the selling agents’ commissions to the respective selling agents. If the selling agents’ commissions are not paid to the selling agent, or the General Partner was the selling agent, such portions of the selling agents’ commissions are retained by the General Partner.

 
·
Class B Units incur a monthly management fee equal to 1/12 of 1.95 percent (1.95 percent per annum) of the net asset value of the Class B Units as of the last day of each month.

 
·
Class B Units incur a monthly broker dealer servicing fee equal to 1/12 of 0.20 percent (0.20 percent per annum) of the net asset value of the Class B Units as of the last day of each month.  The General Partner, in turn, pays the broker dealers’ servicing fees to the respective selling agent.  If the broker dealers’ servicing fees are not paid to the selling agent, or the General Partner was the selling agent, such portions of the broker dealers’ servicing fees are retained by the General Partner.

Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1 percent of any increase or decrease in the Fund’s net assets, as defined.  Such amount is reflected as the General Partner 1 percent allocation in the statements of financial condition and the statements of operations.

Note 3:
COMMODITY TRADING ADVISORS

 
The Fund has Advisory Agreements with various commodity trading advisors, pursuant to which the Fund pays each commodity trading advisor a monthly or quarterly management fee equal to 0 percent, 1 percent or 2 percent per annum of allocated net assets (as separately defined in each respective Advisory Agreement) and a quarterly or annual incentive fee equal to 20 percent, 25 percent or 30 percent of net new trading profits (as separately defined in each respective Advisory Agreement).


Note 4:
DEPOSITS WITH BROKERS

The Fund deposits funds with brokers, subject to U.S. Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of U.S. Government securities and cash with such brokers. The Fund earns interest income on its assets deposited with the brokers.

Note 5:
OPERATING EXPENSES

The Fund is responsible for all of its operating expenses such as accounting, audit, legal, administrative, marketing and offering expenses.  Operating expenses also include salary and administrative costs incurred by the General Partner relating to marketing and administration of the Fund, such as salaries and commissions of General Partner marketing personnel, and administrative employee salaries and related costs.  Pursuant to the terms of the Limited Partnership Agreement, operating expenses that exceed 1 percent of the average month-end net assets of the Fund are the responsibility of the General Partner.  For the three and nine months ended September 30, 2009, actual operating expenses were below this 1 percent (pro rated operating expense limitation) of average month-end net assets of the Fund by $319,229 and $580,530, respectively.  For the three and nine months ended September 30, 2008, actual operating expenses exceeded this 1 percent (pro rated operating expense limitation) of average month-end net assets of the Fund by $879,390 and $586,634, respectively.  Additionally, during the three and nine months ended September 30, 2009, the General Partner voluntarily waived $556,610 and $1,883,103, respectively ($581,660 and $1,666,881, respectively – September 30, 2008), of operating expenses of the Fund, with such amounts included in operating expenses waived in the statements of operations.  As of September 30, 2009 and December 31, 2008, $1,616,010 and $1,313,479, respectively, were payable to the General Partner for operating expenses not waived.  Such amounts are presented as accounts payable in the statements of financial condition.

Note 6:
SUBSCRIPTIONS, DISTRIBUTIONS, AND REDEMPTIONS

Investments in the Fund are made by subscription agreement, subject to acceptance by the General Partner. Units are sold at the net asset value per Class A or Class B Unit as of the close of business on the last day of the month in which the subscription is accepted. Investors whose subscriptions are accepted are admitted as Limited Partners as of the beginning of the month following the month in which their subscriptions were accepted. At September 30, 2009 and December 31, 2008, the Fund had received subscriptions of $32,136,358 and $29,937,275, respectively, which were additions to the Fund or returned, if applicable, subsequent to the quarter-end and year-end.

The Fund is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of Class A or Class B Units owned at the end of any month, subject to 15 days written notice to the General Partner and restrictions in the Limited Partnership Agreement.

The General Partner may require a Limited Partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a nonexempt prohibited transaction (see SA-4, “Investment by Employee Benefit Plans”) under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, or (b) beneficial to the Fund or (c) necessary to comply state, federal, or other self-regulatory organization regulations.

Note 7:
TRADING ACTIVITIES AND RELATED RISKS

The Fund engages in the speculative trading of futures, swaps, options and over-the-counter contracts, including currency forwards traded in the United States and internationally (collectively, “derivatives”). The Fund is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.

Purchase and sale of futures contracts requires margin deposits with the brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Government securities) 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 (or none of) the total cash and other property deposited. The Fund utilizes Newedge USA, LLC as its futures broker and Newedge Group (U.K. Branch) as its options broker and forwards counterparty.


The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currencies are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.

The Fund has a substantial portion of its assets on deposit with Interbank market makers and other financial institutions in connection with its trading of forward currency contracts and its cash management activities. In the event of an Interbank market maker’s or financial institution’s insolvency, recovery of Fund assets on deposit may be limited to account insurance or other protection afforded such deposits.

The Fund utilizes UBS Financial Services, Inc. and Bank of America as its cash management securities broker for the investment of some margin excess amounts into short-term fixed income instruments including high grade commercial paper (interest bearing with some credit risk), U.S. Government securities and Government-sponsored enterprises (interest bearing and credit risk free) with durations no longer than one year. The Fund invests in certain commercial paper issued by an affiliate of UBS Financial Services, Inc. Fluctuations in prevailing interest rates could cause immaterial market-to-market losses on the Fund’s U.S. Government securities and other fixed income instruments, although substantially all of the short-term investments are held to maturity.

For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Fund is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Fund 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 Fund to potentially unlimited liability; for purchased options the risk of loss is limited to the premiums paid.

In addition to market risk, upon entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures and options on futures contracts traded in the United States and on most non-U.S. futures exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some 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 clearinghouse backed by a group of financial institutions; thus there likely will be greater counterparty credit risk. The Fund trades only with those counterparties that it believes to be creditworthy. All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.

The net unrealized gain (loss) on open futures and forward currency contracts is comprised of the following:

   
Futures Contracts
(exchange traded)
   
Forward Currency Contracts
 (non-exchange traded)
 
   
September 30,
2009
   
December 31,
2008
   
September 30,
2009
   
December 31,
2008
 
Gross unrealized gains
  $ 51,994,776     $ 45,886,155     $ 7,143,681     $ 2,924,001  
Gross unrealized losses
    (12,334,084 )     (11,393,473 )     (2,141,861 )     (4,126,960 )
Net unrealized gain (loss)
  $ 39,660,692     $ 34,492,682     $ 5,001,820     $ (1,202,959 )

The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Limited Partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain specific circumstances, distributions and redemptions received.


Note 8:
INDEMNIFICATIONS

In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications.  The Fund’s maximum exposure under these arrangements cannot be estimated.  However, the Fund believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for such indemnifications.

Note 9:
INTERIM FINANCIAL STATEMENTS

The statements of financial condition, including the condensed schedule of investments, as of September 30, 2009, the statements of operations for the three and nine months ended September 30, 2009 and 2008, the statements of cash flows and changes in partners’ capital (net asset value) for the nine months ended September 30, 2009 and 2008, and the accompanying notes to the financial statements are unaudited.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles may be omitted pursuant to such rules and regulations.  In the opinion of management, such financial statements and accompanying disclosures reflect all adjustments, which were of a normal and recurring nature, necessary for a fair presentation of financial position as of September 30, 2009, results of operations for the three and nine months ended September 30, 2009 and 2008, cash flows and changes in partners’ capital (net asset value) for the nine months ended September 30, 2009 and 2008.  The results of operations for the three and nine months ended September 30, 2009 and 2008 are not necessarily indicative of the results to be expected for the full year or any other period.  These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Form 10-K as filed with the U.S. Securities and Exchange Commission.

Note 10: 
FINANCIAL HIGHLIGHTS

The following information presents per Unit operating performance data and other supplemental financial data for the three 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,
 
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
 
   
Class A
   
Class B
   
Class A
   
Class B
 
   
Interests
   
Interests
   
Interests
   
Interests
 
                         
Per Unit Performance
                       
(for a unit outstanding throughout the entire period)
                       
                         
Net asset value per unit at beginning of period
  $ 4,714.65     $ 6,122.44     $ 4,669.68     $ 5,956.63  
                                 
Income (loss) from operations:
                               
Gain (loss) from trading (1)
    225.14       292.65       (335.19 )     (428.03 )
Net investment loss (1)
    (99.11 )     (100.72 )     (59.47 )     (50.94 )
                                 
Total income (loss) from operations
    126.03       191.93       (394.66 )     (478.97 )
                                 
Net asset value per unit at end of period
  $ 4,840.68     $ 6,314.37     $ 4,275.02     $ 5,477.66  
                                 
Total Return
    2.67 %     3.13 %     (8.45 %)     (8.04 %)
                                 
Supplemental data
                               
Ratios to average net asset value:
                               
Expenses prior to advisor incentive fees (2), (3) (4) (6)
    6.31 %     4.48 %     5.91 %     4.11 %
Advisor incentive fees (5)
    0.58 %     0.57 %     0.53 %     0.53 %
                                 
Total expenses
    6.89 %     5.05 %     6.44 %     4.64 %
                                 
Net investment loss (2), (3) ,(4), (6)
    (6.05 %)     (4.22 %)     (3.38 %)     (1.58 %)

 
   
Nine months ended September 30,
 
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
 
   
Class A
   
Class B
   
Class A
   
Class B
 
   
Interests
   
Interests
   
Interests
   
Interests
 
                         
Per Unit Performance
                       
(for a unit outstanding throughout the entire period)
                       
                         
Net asset value per unit at beginning of period
  $ 5,018.96     $ 6,460.05     $ 3,867.65     $ 4,891.11  
                                 
Income (loss) from operations:
                               
Gain from trading (1)
    92.08       119.66       755.90       955.88  
Net investment loss (1)
    (270.36 )     (265.34 )     (348.53 )     (369.33 )
                                 
Total income (loss) from operations
    (178.28 )     (145.68 )     407.37       586.55  
                                 
Net asset value per unit at end of period
  $ 4,840.68     $ 6,314.37     $ 4,275.02     $ 5,477.66  
                                 
Total Return
    (3.55 %)     (2.26 %)     10.53 %     11.99 %
                                 
Supplemental data
                               
Ratios to average net asset value:
                               
Expenses prior to advisor incentive fees (2), (3), (4) ,(6)
    6.20 %     4.39 %     6.62 %     4.77 %
Advisor incentive fees (5)
    1.37 %     1.37 %     5.63 %     5.62 %
                                 
Total expenses
    7.57 %     5.76 %     12.25 %     10.39 %
                                 
Net investment loss (2), (3),(4), (6)
    (5.60 %)     (3.79 %)     (3.47 %)     (1.64 %)

Total returns are calculated based on the change in value of a Class A or Class B 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 contributions and redemptions.

(1) The net investment loss per unit is calculated by dividing the net investment loss by the average number of Class A or Class B Units outstanding during the period. Gain (loss) from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.  Such balancing amount may differ from the calculation of gain (loss) from trading per unit due to the timing of trading gains and losses during the period relative to the number of units outstanding.

(2) All of the ratios under the supplemental data are computed net of voluntary and involuntary waivers of operating expenses.  For the three and nine months ended September 30, 2009, the ratios are net of 0.23% and 0.27% of average net asset value (0.87% and 0.48%, respectively - September 30, 2008) relating to the waivers of operating expenses. Both the nature and the amounts of the waivers are more fully explained in Note 5.

(3) The net investment loss includes interest income and excludes gains from trading activities as shown on the statements of operations.  The total amount is then reduced by all expenses, excluding brokerage commissions. The resulting amount is divided by the average net asset value for the period.

 
(4) Ratios have been annualized.

 
(5) Ratios have not been annualized.

(6)  Ratio excludes advisor incentive fees.


Note 11:
SUBSEQUENT EVENTS

Management of the Fund evaluated subsequent events through November 16, 2009, the date these financial statements were issued.  There are no subsequent events to disclose.

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 connection with the following analysis.

Introduction

Futures Portfolio Fund, Limited Partnership (“the Fund”) is a Maryland limited partnership, formed on May 11, 1989 and began trading on January 2, 1990.  Utilizing professional trading advisors, the Fund may invest the proceeds from its offering of units in the speculative trading of futures, swaps, options and over-the-counter contracts, including currency forwards traded in the United States and internationally.  The Fund is an actively managed account with speculative trading profits as its objective. The Fund issues two different Classes of Interests, Class A units and Class B Units, which represent units of fractional undivided beneficial interest in and ownership of the Fund.

Recent Global Financial Crisis

There were several events that led to significant volatility in global capital markets during 2008 and continuing in 2009.  Following a series of global announcements regarding failures in financial institutions including the government take-over of Fannie Mae and Freddie Mac, equity markets fell and credit markets experienced a sharp drop in liquidity.

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008. The Act gave the U.S. Treasury certain powers to assist troubled financial institutions, especially those with assets that may have been affected by sub-prime mortgage exposure or credit default insurance exposure.

Despite the increased volatility in the capital markets, the Fund was not adversely impacted by these developments. In fact, as a result of the declining global markets, in 2008 and the first quarter of 2009, the Fund’s short positions in equity indices were highly profitable. Additionally, the Fund’s short positions in physical commodities and long positions in interest rate instruments were also profitable in 2008 as commodity prices decreased and bond prices increased.

Critical Accounting Policies

The preparation of the Fund’s financial statements in conformity with U.S. generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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 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 others 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 Fund’s investments in U.S. Government securities, commercial paper, Government-sponsored enterprises and corporate notes are short-term in nature with a duration of less than one year, and typically, the Fund holds these investments through maturity. As such, interest income generated from these investments is recorded in the statements of operations. The fair value of these investments as obtained from cash management and clearing firms statements are compared to amortized cost to verify that the carrying amounts approximates their fair value.

The Fund’s cash management account holder and clearing firm (UBS and Newedge, respectively) utilize pricing services to value U.S. Government securities, commercial paper, Government-sponsored enterprises and corporate notes investments. These pricing services utilize the market approach which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing, which is used for Level 2 investments, is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

U.S. Government securities are actively traded on a daily basis and the pricing services are able to obtain bid and ask quotes for identical assets by CUSIP. Commercial paper, Government-sponsored enterprises, and corporate notes investments are also actively traded, however, the pricing services are only able to obtain bid and ask quotes for similar assets. As such, U.S. Government securities are classified within Level 1 and commercial paper, Government-sponsored enterprises, and corporate notes investments are classified within Level 2.

Fair value of exchange traded contracts is based upon exchange settlement prices. Fair value of non-exchange traded contracts is based on third party quoted dealer values of the Interbank market. The investments in money market funds and futures contracts are valued using quoted market prices and are classified within Level 1. The fair values of forward currency contracts are based upon an underlying asset, index, or reference rate or a combination of these factors and are classified within Level 2.  The Fund uses some or all, when applicable, of these financial instruments as part of its trading activities.  The recorded values of commercial paper, Government-sponsored enterprises, U.S. Government securities, and corporate notes are based on amortized cost carrying amounts due to the short-term maturity of the instruments and are classified within Level 1 or 2; therefore, their carrying amounts approximate fair values.

Futures, options on futures, forward currency, and swap contracts are recorded on a trade date basis, and gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the statement of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses.  Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Commercial paper, corporate notes, U.S. Government securities and Government-sponsored enterprises are recorded at amortized cost and interest is accrued and recorded through maturity, which approximates fair value.  Fair value of exchange-traded contracts is based upon settlement prices. Fair value of non-exchange traded contracts is based upon third-party quoted dealer values on the Interbank market.

For purposes of both financial reporting and calculation of redemption value, net asset value per Class A or Class B unit is calculated by dividing the net asset value of Class A or Class B by the number or outstanding units of Class A or Class B. All items of income or loss, except for the selling agents’ fees, are allocated pro rata between Class A and Class B Interests. The selling agents’ fees applicable to each class of Interest are then charged to each class. All items of income or loss allocated to each class of Interest are then allocated pro rata to each Limited Partner within each class.

As of September 30, 2009, the aggregate capitalization of the Fund was $1,032,718,000, consisting of Class A units of $670,137,654 and Class B units of $362,580,346.  The net asset value per unit of the Class A units was $4,840.68 and Class B units was $6,314.37 as of September 30, 2009.

Liquidity

Most United States commodity exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Fund’s futures trading operations, the Fund’s assets are expected to be highly liquid. Redemptions may be made by a Limited Partner as of the last business day of any month at the net asset value on such redemption date of the redeemed units (or portion thereof) on that date, on 5 days’ prior written notice to the General Partner. Partial redemptions must be for at least $1,000, unless such requirement is waived by the General Partner. In addition, the Limited Partner, if making a partial redemption, must maintain at least $10,000 or his original investment amount, whichever is less, in the Fund unless such requirement is waived by the General Partner.


Capital Resources

The Fund intends to raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Fund’s business, the Fund does not contemplate making capital expenditures.  The Fund does not have, nor does it expect to have, any capital assets. Redemptions, exchanges, and sales of Units in the future will affect the amount of funds available for investments in futures interests in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows of Units. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Fund’s capital resource arrangements at the present time.

Contractual Obligations

The Fund does not have any contractual obligations of the type contemplated by Regulation S-K 303(a)(5).  The Fund’s sole business is trading futures and forward currency contracts, both long (contracts to buy) and short (contracts to sell).

Off-Balance Sheet Risk

The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss.  The Fund trades in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk.  In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable.  If the markets should move against all of the futures interests positions of the Fund at the same time, and if the commodity trading advisors were unable to offset futures interest positions of the Fund, the Fund could lose all of its assets and the Limited Partners would realize a 100% loss.  Steben & Company, the General Partner, minimizes market risk through diversification of the portfolio allocations to multiple trading advisors, and maintenance of a margin-to-equity ratio that rarely exceeds 30%.

In addition to market risk, upon entering into futures and forward contracts there is a risk that the counterparty will not be able to meet its obligations to the Fund.  The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange.  In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this risk.  In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward contracts, which are traded on the Interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty risk. Steben & Company utilizes only those counterparties that it believes to be creditworthy for the Fund.  All positions of the Fund are valued each day on a mark-to-market basis.  There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
 
The Fund will utilize high grade short-term commercial paper, which is an unsecured, short-term debt instrument issued by a corporation with maturities rarely longer than 270 days.  Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt rating will be used.  As commercial paper is not backed by the full faith and credit of the U.S. Government, if the issuing corporation defaults on their obligations to the Fund, the Fund bears the risk of loss of the amount expected to be received.

Results of Operations

The returns for A Units for the three and nine months ended September 30, 2009 were 2.67% and (3.55%), respectively (returns of (8.45%) and 10.53% respectively – September 30, 2008). The returns for B units for the three and nine months ended September 30, 2009 were 3.13% and (2.26%), respectively (returns of (8.04%) and 11.99%, respectively – September 30, 2008). Further analysis of the trading gains and losses is provided below.


Past results are not indicative of future performance.

2009

January
 
A Units of the Fund were up 0.61% for the month of January 2009 and B Units were up 0.76%.  January ended with the Fund realizing profits in five out of nine market sectors. In contrast to the trends of the last few months, many of the markets traded by the Fund were directionless. General optimism after the Obama transition along with government intervention into the world’s financial markets seemed to dampen the steady declines in equity prices experienced in recent quarters. The energy sector was profitable, driven by gains from crude oil and natural gas, whose prices continued to decline on slowing demand and rising inventory levels. Similarly, industrial metals such as aluminum, nickel and zinc also declined due to inventory build-ups, benefiting the Fund’s short positions. In foreign currencies, the U.S. dollar strengthened as risk adverse investors continued to seek the perceived safety of the U.S. currency. Interest rate instruments edged lower during the month which went against the Fund’s long bond positions.

February
 
A Units of the Fund were down 0.11% for the month of February 2009 and B Units were up 0.04%.The Fund ended the month essentially flat as most markets continued to trade within relatively narrow price ranges. Global equity markets continued to decline amid further weak economic data and a deepening recession. This decline benefited the Fund’s short positions in equity indices. The energy sector finished with modest profits from short positions in natural gas and heating oil. Agricultural commodities were profitable, despite some losses from a sharp reversal in cocoa markets. Foreign currencies experienced losses this month due to the weakening of the Japanese yen relative to the U.S. dollar. The yen rose about 30% between August 2008 and the start of February, then switched direction against the U.S. dollar and other major currencies.

March
 
A Units of the Fund were down 3.09% for the month of March 2009 and B Units were down 2.95%.  During March prices moved against established trends and the Fund’s positions. After equity markets reached a new 12 year low, markets reversed and showed some signs of recovery. The rising equity indices, including the S&P 500, DAX and Nikkei 225 Index, moved against the Fund’s short positions, resulting in losses for the Fund. The U.S. dollar fell sharply following the U.S. Treasury Department’s announcement that it planned to repurchase toxic assets, in an effort to help stimulate bank lending. Most foreign currencies strengthened against the U.S. dollar moving against the Fund’s short foreign currency positions. In the interest rate instrument markets, prices settled higher adding some profit to the Fund’s long positions in that sector.

April
 
A Units of the Fund were down 1.94% for the month of April 2009 and B Units were down 1.79%.  The Fund finished lower in April as most markets continued to move within narrow trading ranges without exhibiting any significant trends. One exception was in the energy sector where natural gas prices continued in a downward trend generating profits for the Fund’s short positions. A rally in global equities that began in March continued through April. The rising equity prices generated profits for the Fund’s long positions in this sector which helped to offset losses from other sectors. The Fund’s biggest losses came from interest rate instruments, where prices in medium to long term bonds fell, which went against the Fund’s long positions. Industrial metals prices rose toward the end of the month, with aluminum and nickel moving against the Fund’s short positions creating some losses. Agricultural commodities ended flat for the month.

May
 
A Units of the Fund were up 1.41% for the month of May 2009 and B Units were up 1.56%.  The Fund finished higher this month as profits realized from equity indices, foreign currencies, interest rate instruments, metals and agricultural commodities offset losses incurred in the energy sector. The Fund’s largest profits came from long positions in equity indices which continued to trend higher during the month. The most significant losses derived from the energy sector, which saw sharp price movements in natural gas that went against the Fund’s short positions. The Fund’s long positions in crude oil generated profits that helped reduce losses experienced from natural gas contracts. Interest rate instruments were mixed as rising prices on short term interest rate instruments were profitable, while a sell-off in longer term fixed income markets went against the Fund’s long positions. Profits in foreign currencies came from the Fund’s long positions in the Australian dollar, Swiss franc and South African rand.


June
 
A Units of the Fund were down 3.01% for the month of June 2009 and B Units were down 2.87%.  The Fund finished lower in June as gains in equity indices, energies, foreign currencies and agricultural commodities were offset by losses from interest rate instruments and metals. The most significant losses occurred in the Fund’s short-term interest rate positions, where prices reversed from previous longer term trends. A sharp sell-off in Eurodollar, short sterling and euribor contracts was fueled by speculation that global central banks may begin to increase short-term inter­est rates to counteract potential inflationary pressures. The sudden drop in interest rate instrument prices went against the Fund’s long positions. Also in interest rates, weaker than expected forecasts for Japan’s economy sent Japanese gov­ernment bond (JGB) prices higher, which was a reversal from the price trend in that market. The higher prices generated losses in the Fund’s short JGB positions. Commodity markets rallied during the month which benefited the Fund’s long positions in agricultural commodities, but resulted in losses for short positions in the metals sector. Long positions in the energies were profitable as oil prices made new highs for the year.

July
 
A Units of the Fund were down 0.72% for the month of July 2009 and B Units were down 0.57%.   So far, 2009 has proven to be a difficult year for managed futures investments. In contrast to the many steady trends of last year, this year’s markets have been characterized by several price reversals that went against established trends or by price movement without any sustained direction. This is not a new market phenomenon, but when it occurs it has historically posed challenges for systematic trend following programs, which the Fund utilizes. Although these recent months have been disappointing in the absolute sense, we have been satisfied with the Fund’s Trading Advisors’ ability to manage through this difficult environment. In July the Fund posted a loss as profits from equity indices, metals and foreign currencies were not sufficient to offset losses from energy and agricultural commodities. Equity markets were volatile as they initially fell early in the month in response to poor economic data in the U.S. By mid-month increased op­timism about the global economy pushed equity markets to eight month highs. The rising global equity prices generated profits for the Fund’s long positions. The Fund’s long positions in base metals, including aluminum, nickel and copper, benefited from upward trends in those markets that also generated profits. In energy markets heating oil and gasoline prices continued to move sideways and generated losses for the Fund’s positions in this sector.

August
 
A Units of the Fund were up 1.41% for the month of August 2009 and B Unit’s were up 1.56%. It was a positive month for the Fund as all major sectors posted a profit with the exception of currencies. Performance was led by the Fund’s long positions in equity indices as further signs of economic recovery pushed equity prices higher. Globally, central banks indicated that near-term interest rate hikes were unlikely. In response, prices of short term inter­est rate instruments increased which benefited the Fund’s long positions. Price increases in sugar, wheat and corn con­tracts generated profits for the Fund’s long positions in agricultural commodities. Due to a drop in global supply, sugar prices hit a 28-year high as heavy rains in India and Brazil dampened inventory. Weak demand and increased production continued to send natural gas prices lower. Natural gas prices have fallen 84% in the last 13 months, which generated profits for the Fund’s short positions. Long positions in gasoline and crude oil were also profitable.

September
 
A Units of the Fund were up 1.98% for the month of September 2009 and B Unit’s were up 2.13%.  It was a positive month for the Fund as profits from interest rate instruments, foreign currencies and metals offset losses in the energy sector. Performance was led by the Fund’s long positions in interest rate instruments. Prices in both short-term instruments and long-term bonds have been trending higher since mid-August as central banks continue to signal that interest rates will remain low. The foreign currency sector generated profits as long positions in foreign currencies and short positions in the U.S. dollar were profitable. The USD declined to a twelve-month low versus the Euro and an eight-month low versus the yen. In the energy sector, natural gas rallied over 30% from a seven year low despite strong inventory data. The sudden increase in gas prices went against the Fund’s short positions generating losses for the Fund.

2008

January
 
A Units of the Fund were up 1.40% for the month of January 2008 and B Units were up 1.56%.  The Fund ended with a net gain in January as profits from interest rate instruments, agricultural commodities and metals offset losses from energy, equity indices and foreign currencies. Global interest rate instruments were the most profitable sector for the Fund as rates trended lower on growing concerns of a possible US recession. Later in the month, the Federal Reserve responded to a sharp sell off in global equity prices with a total 1.25% rate cut that pushed short term rates even lower, benefiting the Fund’s long positions in that sector. Long positions in agricultural commodities were profitable as grain and soybean prices continued an upward trend on strong global demand and declining inventory levels. The largest losses for the month came from the energy sector, where crude oil prices declined after hitting an all time nominal high at the beginning of the month. The fall in oil prices went against the Fund’s long positions.


February
 
A Units of the Fund were up 11.56% for the month of February 2008 and B Units were up 11.74%.  The Fund finished the month with net profits in all nine major market sectors. Physical commodities generated the largest profits as strong demand and tight supplies in a number of commodities drove contract prices to record highs. In the agricultural commodities sector, the Fund’s long positions in soybeans, wheat, coffee, corn and sugar were among the most profitable. Since the start of the year, wheat prices have climbed 21%, while soybeans and coffee were up 27% and 35% respectively. In the energy sector, light crude oil futures hit a new nominal high of $103.05 dollars per barrel. The Fund gained from its long positions in energy, especially crude oil, heating oil, gasoline and kerosene. In the metals sector, the Fund profited from its long positions in both precious and industrial metals including gold, silver, aluminum, platinum and copper. Short positions in equity indices profited as global indices weakened on fears of inflation and a weaker US dollar. Bond prices were mostly unchanged until the final days of the month, when prices jumped in reaction to Fed news about further rate cuts. The net increase in bond prices benefited the Fund’s long bond positions.

March
 
A Units of the Fund were down 1.62% for the month of March 2008 and B Units were down 1.49%.  The Fund finished lower in March as losses from agricultural products and metals offset profits from equity indices, foreign currencies, energy and interest rate instruments. Financial markets reacted to two announcements by the Federal Reserve that ultimately impacted several market sectors. The Fed cut the federal funds target interest rate by .75% and it also announced it would provide guarantees to JP Morgan Chase for the acquisition of Bear Stearns. Following the announcements, the US dollar which had been trending lower over the past several months, suddenly strengthened. The stronger dollar triggered a rapid sell-off in physical commodities including agricultural, metals and energy, with agricultural commodities generating the largest losses. Overall the Fund ended the first quarter up 11.28% and up 25.15% for the last 12 months.

April
 
A Units of the Fund were down 3.05% for the month of April 2008 and B Units were down 2.90%.  The Fund finished lower this month as profits from energy were offset by losses from the other five major market sectors. Japanese government bonds fell on reports that inflation in Japan had reached its highest level in a decade. By the end of the month, most domestic and international interest rates had edged higher even after the FOMC announced a .25% rate cut. Overall, the decline in bond prices went against the Fund’s long positions. Agricultural commodity prices continued to decline resulting in losses for the Fund's long positions in that sector. Wheat prices fell more than 6%, reaching five-month lows on news that the government of Ukraine had eased export restrictions. Corn and soybean prices also moved lower. Long positions in the energy sector posted gains as crude oil prices approached $120 per barrel. Concerns over Saudi supplies, Nigerian production disruptions and further evidence of continuing Chinese demand fueled the rise in oil prices.

May
 
A Units of the Fund were up 5.14% for the month of May 2008 and B Units were up 5.32%.  The Fund finished higher this month with gains in most of the major market sectors. The energy sector generated significant profits as the Fund’s long positions benefited from sustained upward trends in crude oil, gasoline, heating oil and natural gas. Analysts’ explanations for the rise in prices were mixed, but steady demand, supply disruptions and a weak U.S. dollar continued to be the most commonly stated factors. While prices for several energy contracts reached all time highs, other market sectors were relatively quiet this month. Foreign currencies, metals and stock indices all finished with modest profits for the month, with each sector experiencing a mix of offsetting returns. Short-term interest rate instruments were profitable as the Fund’s short positions benefited from a rise in short term international interest rates.

June
 
A Units of the Fund were up 6.42% for the month of June 2008 and B Units were up 6.53%.  The Fund’s systematic trading strategies generated profits from trends in all of the major market sectors in September. Crude oil, heating oil, gasoline and natural gas soared to new highs, producing significant profits from the Fund’s long energy sector positions. Higher energy prices, weakness in the U.S. dollar and concerns over inflation drove stock markets into bear market territory. The falling equity prices produced profits from the Fund’s short equity index positions. Agricultural prices rose this month as severe flooding in the U.S. threatened summer crop supplies. The rising prices benefited the Fund’s long positions in soybeans, corn and wheat. The Fund also profited from long positions in metals including copper, gold and zinc.

July
 
A Units of the Fund were down 9.26% for the month of July 2008 and B Units were down 9.13%.  The Fund finished lower in July as several key markets experienced sharp reversals that moved against previously established long term market trends. The most significant price reversals were experienced in the energy and agricultural commodity sectors. After reaching multi-month highs in June, prices in crude oil, heating oil, gasoline and natural gas fell sharply in July on signs of weaker demand and a rising U.S. dollar. Natural gas, which reached a 30-month high at the end of June, fell more than 32% during July, creating losses for the Fund’s long positions.  The stronger dollar also caused agricultural commodities to reverse from strong upward trends. Corn and soybeans fell more than 15% during the month creating losses for the Fund’s long systematic positions. Interest rate instruments have been directionless over the last several weeks. The Fund’s positions in that sector experienced losses due to a lack of trends resulting in “whipsawing” of the Fund’s positions. The Fund’s traders reduced their risk in each of the affected sectors by either reducing or getting out of positions.

 
August
 
A Units of the Fund were down 3.21% for the month of August 2008 and B Units were down 3.07%.  The Fund finished lower in August as profits from interest rate instruments were not enough to offset losses in foreign currencies, agricultural commodities, energies and metals. The U.S. dollar continued to strengthen against any foreign currencies including the euro which fell sharply to its lowest level against the U.S. dollar in the last six months.  Falling foreign currency prices went against the Fund’s long positions.  Agricultural commodities, energies and precious metals experienced multiple price changes during the month causing losing trades for the Fund.  The Fund’s long positions in interest rate instruments profited as long term interest rates declined.

September
 
A Units of the Fund were up 4.24% for the month of September 2008 and B Units were up 4.40%.  The Fund was profitable in September as gains from our positions in stock indices, metals, agricultural commodities and interest rate instruments offset losses incurred in foreign currencies and energy.  Increasing uncertainty in the global financial markets created significant volatility in both the credit and equity markets.  Lehman Brothers Holdings, Inc. filed for bankruptcy protection, Merrill Lynch was acquired by Bank of America and Fannie Mae, Freddie Mac, and AIG required government support to remain viable. Later in the month, the Dow Industrials suffered its worst single day point drop ever, sparked by U.S lawmakers’ rejection of a proposed $700 billion market bailout.  Over the course of the month, global equity prices declined which benefited the Fund’s short equity indices positions.  Investors sought the relative safety of government backed interest rate instruments, causing prices to rise which generated profits for the Fund’s long positions in interest rate instruments. Agricultural commodity and metals prices fell, benefiting the Fund’s short positions.

Disclosures about Certain Trading Activities that Include Non-exchange Traded Contracts Accounted for at Fair Value

The Fund invests in futures and forward currency contracts.  Fair value of exchange-traded contracts is based upon exchange settlement prices.  Fair value of non-exchange-traded contracts is based on third party quoted dealer values on the Interbank market.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Introduction

The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business.

Market movements result in frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades.

The Fund rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance is not indicative of its future results.

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund's speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund's experience to date (i.e., "risk of ruin"). Risk of ruin is defined to be no more than a 5% chance of losing 20% or more on a monthly basis. In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Fund's losses in any market sector will be limited to Value at Risk or by the Fund's attempts to manage its market risk.


Standard of Materiality

Materiality as used in this section, "Quantitative and Qualitative Disclosures about Market Risk," is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Fund's market sensitive instruments.

Quantifying the Fund’s Trading Value at Risk

Quantitative Forward-Looking Statements

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

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

Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval.  The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.  Maintenance margin has been used rather than initial margin, because initial margin includes a credit risk component which is not relevant to Value at Risk.

In the case of market sensitive instruments which are not exchange-traded (which includes currencies and some energy products and metals in the case of the Fund), the margin requirements required by the forward counterparty is used as Value at Risk.

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

Value at Risk as calculated herein may not be comparable to similarly titled measures used by others.

The Fund’s Trading Value at Risk in Different Market Sectors

The following tables indicate the trading Value at Risk associated with the Fund's open positions by market category as of July 31, 2009, August 31, 2009 and September 30, 2009.  All open position trading risk exposures of the Fund have been included in calculating the figures set forth below. As of July 31, 2009, August 31, 2009 and September 30, 2009, the Fund's total capitalization was $950,471,185, $991,459,863 and $1,032,718,000, respectively.


THIRD QUARTER 2009

                                     
                                     
   
July 2009
   
% of Total
   
August 2009
   
% of Total
   
September 2009
   
% of Total
 
Market Sector
 
Value at Risk
   
Capitalization
   
Value at Risk
   
Capitalization
   
Value at Risk
   
Capitalization
 
                                     
Agricultural
  $ 8,990,241       0.95 %   $ 8,254,258       0.83 %   $ 8,838,849       0.86 %
Currency
    32,162,803       3.38 %     34,264,314       3.46 %     43,030,301       4.17 %
Energy
    17,318,671       1.82 %     16,999,472       1.71 %     11,752,275       1.14 %
Interest rates
    36,877,834       3.88 %     36,046,691       3.64 %     46,027,680       4.46 %
Metal
    7,466,119       0.79 %     8,492,742       0.86 %     13,203,650       1.28 %
Stock indices
    26,335,884       2.77 %     34,515,005       3.48 %     40,144,266       3.89 %
Total
  $ 129,151,552       13.59 %   $ 138,572,482       13.98 %   $ 162,997,021       15.80 %

Of the 2.67% and (3.55%) return for the three and nine months ended September 30, 2009 for A Units, approximately 4.77% and 1.83% was due to trading gain (after commissions) and approximately 0.07% and 0.44% was due to interest income, offset by approximately (2.17%) and (5.82%) in incentive fees, management fees, selling agents’ fees and operating expenses borne by the Fund, respectively.  Of the 3.13% and (2.26%) return for the three and nine months ended September 30, 2009 for B Units, approximately 4.77% and 1.85% was due to trading gain (after commissions) and approximately 0.07% and 0.44% was due to interest income, offset by approximately (1.71%) and (4.55%) in incentive fees, management fees, selling agents’ fees and operating expenses borne by the Fund, respectively.

Material Limitations on Value at Risk as an Assessment of Market Risk

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

Non-Trading Risk

The Fund has non-trading market risk on its foreign cash balances not needed for margin.  However, these balances (as well as the market risk they represent) are immaterial.  The Fund also has non-trading market risk as a result of investing a substantial portion of its available assets in Government-sponsored enterprises and high grade commercial paper.  The market risk represented by these investments is immaterial.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Fund's market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund's primary market risk exposures as well as the strategies used and to be used by the Fund’s Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund.

The following were the primary trading risk exposures of the Fund as of September 30, 2009, by market sector.


Agricultural

The Fund’s primary Agricultural exposure is due price movements in agricultural commodities, which are often directly affected by severe or unexpected weather conditions as well as other factors.  The Fund's agricultural exposure is primarily to cotton, coffee, cocoa, rubber, corn, soybeans and wheat.

Currencies

The Fund's currency risk exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs.  These fluctuations are influenced by interest rate changes as well as political and general economic conditions.  The Fund trades various currencies, including cross-rates - i.e., positions between two currencies other than the U.S. dollar.  The General Partner does not anticipate that the risk profile of the Fund's currency sector will change significantly in the future.

Energy

The Fund's primary energy market exposure is to gas and oil price movements, often resulting from political developments, ongoing conflicts or production interruptions in the Middle East and other oil producing nations.  Crude oil, heating oil and unleaded gas are the dominant energy market exposures of the Fund.  Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

Interest Rates

Interest rate risk is a significant market exposure of the Fund.  Interest rate movements directly affect the price of the sovereign bond futures positions held by the Fund and indirectly the value of its stock index and currency positions.  Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund's profitability.  The Fund's primary interest rate exposure is to interest rate fluctuations in the United States, Japan, Great Britain, the European Economic Union, Sweden, Canada, Australia and New Zealand.  The General Partner anticipates that interest rates fluctuations will remain the primary market exposure of the Fund for the foreseeable future.

Metals

The Fund's metals market exposure is primarily to fluctuations in the price of aluminum, copper, gold, silver, nickel, platinum, lead and zinc.

Stock Indices

The Fund's primary equity exposure is to equity price risk in many countries other than the U.S.  The stock index futures traded by the Fund are limited to futures on broadly based indices.  The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European, Hong Kong, and Japanese indices.  (Static markets would not cause major market changes but would make it difficult for the Fund to avoid being "whipsawed" into numerous small losses.)

Qualitative Disclosures Regarding Non-Trading Risk Exposure.

The following were the primary non-trading risk exposures of the Fund as of September 30, 2009.

Foreign Currency Balances

The Fund's primary foreign currency balances are in Euros, Japanese yen, British pounds, Australian dollars, Singapore dollars, New Zealand dollars and Canadian dollars.  The Fund controls the non-trading risk of these balances by regularly converting these balances back into dollars (no less frequently than once a week).

U.S. Government Securities, Government-Sponsored Enterprises, Commercial Paper Securities and Corporate Notes

The Fund utilizes UBS Financial Services, Inc. as its cash management securities brokers for the investment of some margin excess amounts into short-term fixed income instruments, either directly or through liquid money market funds, including high grade commercial paper (interest bearing with some credit risk), Government-sponsored enterprises (interest bearing and credit risk free) and corporate notes with durations no longer than one year. Excess margin amounts may also be placed in liquid money market funds at Bank of America. In addition, U.S. Government securities are held with Newedge USA, LLC. Violent fluctuations in prevailing interest rates could cause material mark-to-market losses on the Fund's short term investments; although substantially all short term investments are held to maturity.


Qualitative Disclosures Regarding Means of Managing Risk Exposure

The means by which the Fund and the Fund’s Trading Advisors, severally, attempt to manage the risk of the Fund's open positions is essentially the same in all market categories traded.  The Fund’s Advisors apply risk management policies to their respective trading which generally limit the total exposure that may be taken.  In addition, the Trading Advisors generally follow proprietary diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups).

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

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the management of the General Partner, including its Chief Executive Officer and Interim Chief Financial Officer, the Fund evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2008 (the “Evaluation Date”). Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Based upon our evaluation, the Chief Executive Officer and Interim Chief Financial Officer of the General Partner concluded that, as of the Evaluation Date, the Fund’s disclosure controls and procedures were effective to provide reasonable assurance that they are timely alerted to material information relating to the Fund required to be disclosed in the Fund’s periodic SEC filings.

Changes in Internal Control Over Financial Reporting

There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the Fund’s last fiscal quarter that has materially affected or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.


PART II-OTHER INFORMATION

Item 1: Legal Proceedings.

None

Item 1A: Risk Factors.

There have been no material changes from the risk factors disclosed in the Fund’s Form 10-K for the year-ended December 31, 2008.

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

Between July and September 2009, the Fund issued Units at monthly closings as set forth in the following chart. However, pursuant to Regulation Section 229.701 Item 701(d), the Fund enjoys the private offering exemption within the Securities Exchange Act of 1933 Section 4(2). The Fund is privately offered and sold to “accredited investors” as defined in Securities Exchange Act of 1933 Rule 501(a).

Schedule of Number of Units and Dollar Amount of Interests Issued
(Contributions)
(Includes both A and B Units)
 
 
Month
 
Dollar Amount of Interests Issued
   
Number of Additional Units Issued
 
             
July 2009
  $ 22,716,967       4,385.3024  
August 2009
  $ 34,956,520       6,950.2417  
September 2009
  $ 24,515,421       4,729.0313  

Item 3: Defaults Upon Senior Securities

Not applicable.

Item 4: Submissions of Matters to a vote of Security Holders.

None

Item 5: Other Information

None

 
Item 6: Exhibits.

(a)   Exhibits and Index.

The following exhibits filed herewith.

Exhibit No.
Description of Document
Page No.
     
Certification of Kenneth E. Steben, Chief Executive Officer,  pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
E-2
     
Certification of Yun T. Callahan, Controller and Interim Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
E-3
     
Certification of Kenneth E. Steben, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
E-4
     
Certification of Yun T. Callahan, Controller and Interim Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
E-5

(b) Reports.

None.


SIGNATURES

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

FUTURES PORTFOLIO FUND,
LIMITED PARTNERSHIP
(Registrant)
     
By:
Steben & Company, Inc.
 
 
General Partner
 
     
By:
/s/ Kenneth E. Steben
November 16, 2009
 
Kenneth E. Steben
 
Chief Executive Officer
 
(Principal Executive Officer)
     
By:
/s/ Yun T. Callahan
November 16, 2009
 
Yun T. Callahan
 
Controller and Interim Chief Financial Officer
 
(Principal Financial Officer)
 
 
E-1