Attached files
file | filename |
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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