Attached files

file filename
EX-32.01 - FUTURES PORTFOLIO FUND L.P.v193409_ex32-1.htm
EX-32.02 - FUTURES PORTFOLIO FUND L.P.v193409_ex32-2.htm
EX-31.02 - FUTURES PORTFOLIO FUND L.P.v193409_ex31-2.htm
EX-31.01 - FUTURES PORTFOLIO FUND L.P.v193409_ex31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010
 
Commission file number:  000-50728
 
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
   
Organized in Maryland
IRS Employer Identification No.:  52-1627106

c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200, Rockville, Maryland 20850
(240) 631-9808

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 [   ]

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 [    ]     No [   ]

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):

[   ]  Large accelerated filer                                                      [   ]  Accelerated filer

[ X ]  Non-accelerated filer                                                      [   ]  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 [   ]     No [ X ]

 
 
 

 

Item 1.  Financial Statements

Futures Portfolio Fund, Limited Partnership
Statements of Financial Condition
June 30, 2010 (Unaudited) and December 31, 2009 (Audited)

   
June 30,
2010
   
December 31,
2009
 
Assets
           
Equity in broker trading accounts
           
Cash
  $ 299,244,208     $ 318,300,203  
Net unrealized gain on open futures contracts
    13,470,123       14,004,035  
Net unrealized loss on open forward currency contracts
    (3,906,273 )     (2,429,014 )
Interest receivable
    25,982       13,642  
Total equity in broker trading accounts
    308,834,040       329,888,866  
Cash and cash equivalents
    326,712,360       671,220,632  
Commercial paper, at fair value
    110,713,376       --  
Government sponsored enterprise notes, at fair value
    216,247,229       107,514,649  
U.S. Treasury securities, at fair value
    239,841,644       --  
General Partner 1% allocation receivable
    408,937       639,856  
Total assets
  $ 1,202,757,586     $ 1,109,264,003  
                 
Liabilities and Partners’ Capital (Net Asset Value)
               
Liabilities
               
Trading Advisor management fees payable
  $ 1,886,338     $ 2,363,509  
Trading Advisor incentive fees payable
    --       1,444,958  
Commissions and other trading fees payable on open contracts
    260,182       117,427  
General Partner management fee payable
    1,886,158       1,732,238  
Selling Agent fees payable – General Partner
    1,296,289       1,219,130  
Administrative expenses payable – General Partner
    1,869,743       1,736,156  
Redemptions payable
    5,373,883       5,857,719  
Subscriptions received in advance
    37,963,551       37,057,961  
Total liabilities
    50,536,144       51,529,098  
Partners’ Capital (Net Asset Value)
               
Class A Interests – 162,395.1111 units and 147,452.0886 units
               
outstanding at June 30, 2010 and December 31, 2009, respectively
    729,331,259       688,434,529  
Class B Interests – 71,221.7548 units and 60,362.5545 units
               
outstanding at June 30, 2010 and December 31, 2009, respectively
    422,890,183       369,300,376  
Total partners' capital (net asset value)
    1,152,221,442       1,057,734,905  
Total liabilities and partners' capital (net asset value)
  $ 1,202,757,586     $ 1,109,264,003  


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

 
1

 

Condensed Schedule of Investments
June 30, 2010
(Unaudited)

     
Description
 
Fair Value
   
% of Partners’
Capital
(Net Asset
Value)
 
U.S. Treasury Securities
           
Face Value
 
Maturity Date
             
$ 40,000,000  
7/29/10
U.S. Treasury Bill, 0.115%
  $ 39,996,422       3.47 %
  40,000,000  
7/29/10
U.S. Treasury Bill, 0.115%
    39,996,422       3.47 %
  40,000,000  
10/21/10
U.S. Treasury Bill, 0.17%
    39,978,844       3.47 %
  40,000,000  
10/21/10
U.S. Treasury Bill, 0.17%
    39,978,844       3.47 %
  40,000,000  
1/13/11
U.S. Treasury Bill, 0.25%
    39,945,556       3.47 %
  40,000,000  
1/13/11
U.S. Treasury Bill, 0.25%
    39,945,556       3.47 %
       
Total U.S. Treasury securities (cost: $239,657,367)
  $ 239,841,644       20.82 %
                         
Government Sponsored Enterprise Notes
               
Face Value
 
Maturity Date
                 
$ 75,000,000  
7/26/10
Federal Home Loan Mortgage Corporation, 0.16%
  $ 74,991,334       6.51 %
  51,297,000  
8/16/10
Federal National Mortgage Association, 0.20%
    51,285,893       4.45 %
  50,000,000  
8/23/10
Federal National Mortgage Association, 0.23%
    49,983,069       4.34 %
  40,000,000  
8/26/10
Federal Home Loan Mortgage Corporation, 0.21%
    39,986,933       3.47 %
       
Total government sponsored enterprise notes
(cost: $216,118,262)
  $ 216,247,229       18.77 %
                         
Commercial Paper
               
Face Value
 
Maturity Date
                 
$ 30,349,000  
7/8/10
Societe Generale North America, 0.24%
  $ 30,347,584       2.63 %
  30,349,000  
7/8/10
Societe Generale North America, 0.24%
    30,347,584       2.63 %
  6,505,000  
7/21/10
HSBC Finance Corp, 0.26%
    6,504,060       0.56 %
  43,530,000  
8/27/10
Nestle Capital Corporation, 0.23%
    43,514,148       3.78 %
       
Total commercial paper (cost: $110,649,827)
  $ 110,713,376       9.60 %
                         
Long U.S. Futures Contracts
               
       
Agricultural
  $ 182,922       0.02 %
       
Currency
    (475,293 )     (0.04 )%
       
Energy
    (4,701,202 )     (0.41 )%
       
Interest rate (1)
    18,270,944       1.59 %
       
Metal (1)
    (12,176,678 )     (1.06 )%
       
Stock index
    (3,457,247 )     (0.30 )%
       
Net unrealized loss on open long U.S. futures contracts
    (2,356,554 )     (0.20 )%
                         
Short U.S. Futures Contracts
               
       
Agricultural
    (75,584 )     (0.01 )%
       
Currency
    (2,557,741 )     (0.22 )%
       
Energy
    394,616       0.03 %
       
Interest rate
    (142,962 )     (0.01 )%
       
Metal (1)
    11,820,720       1.03 %
       
Single stock futures
    43,576       0.00 %
       
Stock index
    238,362       0.02 %
       
Net unrealized gain on open short U.S. futures contracts
    9,720,987       0.84 %


(1) No individual futures or forward currency contract position constituted greater than one percent of partners’ capital (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.
 

 
2

 

Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
June 30, 2010
(Unaudited)

 
Description
 
Fair Value
   
% of Partners’ Capital (Net Asset Value)
 
               
Long Foreign Futures Contracts
             
      $ 61,243       0.01 %
 
Agricultural
    (1,550,017 )     (0.13 )%
 
Currency
    (70,849 )     (0.01 )%
 
Energy
    16,263,631       1.41 %
 
Interest rate (1)
    (19,211 )     (0.00 )%
 
Metal
    (7,360,697 )     (0.64 )%
 
Stock index
    7,324,100       0.64 %
 
Net unrealized gain on open long foreign futures contracts
               
                   
Short Foreign Futures Contracts
                 
 
Agricultural
    93,369       0.01 %
 
Currency
    (2,462,968 )     (0.21 )%
 
Energy
    5,467       0.00 %
 
Interest rate
    (283,702 )     (0.02 )%
 
Stock index
    1,429,424       0.12 %
 
Net unrealized loss on open short foreign futures contracts
    (1,218,410 )     (0.10 )%
                   
 
Net unrealized gain on open futures contracts
  $ 13,470,123       1.18 %
                   
U.S. Forward Currency Contracts
                 
 
Long
  $ 628,289       0.05 %
 
Short
    (2,281,967 )     (0.20 )%
 
Net unrealized loss on open U.S. forward currency contracts
    (1,653,678 )     (0.15 )%
                   
Foreign Forward Currency Contracts
                 
 
Long
    (2,017,893 )     (0.18 )%
 
Short
    (234,702 )     (0.02 )%
 
Net unrealized loss on open foreign forward currency contracts
    (2,252,595 )     (0.20 )%
                   
Net unrealized loss on open forward currency contracts
  $ (3,906,273 )     (0.35 )%

(1) No individual futures or forward currency contract position constituted greater than one percent of partners’ capital (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.
 

 
3

 

Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments
December 31, 2009
(Audited)

     
Description
 
Fair Value
   
% of Partners’ Capital (Net Asset Value)
 
             
Government Sponsored Enterprise Notes
           
Face Value
 
Maturity Date
             
$ 46,750,000  
1/28/10
Federal Home Loan Mortgage Corporation, 0.96%
  $ 46,951,148       4.44 %
  60,000,000  
3/30/10
Federal Home Loan Mortgage Corporation, 1.10%
    60,563,501       5.73 %
       
Total government sponsored enterprise notes
(cost:  $107,153,196)
  $ 107,514,649       10.17 %
                         
Long U.S. Futures Contracts
               
       
Agricultural
  $ 3,874,697       0.37 %
       
Currency
    (1,096,530 )     (0.10 )%
       
Energy
    2,282,440       0.22 %
       
Interest rate
    (4,285,126 )     (0.41 )%
       
Metal
    7,959,480       0.75 %
       
Single stock futures
    (7,756 )     (0.00 )%
       
Stock index
    2,911,194       0.28 %
       
Net unrealized gain on open long U.S. futures contracts
    11,638,399       1.11 %
                         
Short U.S. Futures Contracts
               
       
Agricultural
    (135,790 )     (0.01 )%
       
Currency
    1,736,191       0.16 %
       
Energy
    (988,288 )     (0.09 )%
       
Interest rate
    2,012,021       0.19 %
       
Metal
    (4,574,662 )     (0.43 )%
       
Stock index
    23,900       0.00 %
       
Net unrealized loss on open short U.S. futures contracts
    (1,926,628 )     (0.18 )%
                         
Long Foreign Futures Contracts
               
       
Agricultural
    585,309       0.06 %
       
Currency
    (50,076 )     (0.00 )%
       
Energy
    107,204       0.01 %
       
Interest rate
    (3,745,572 )     (0.35 )%
       
Metal
    565,795       0.05 %
       
Stock index
    6,313,742       0.60 %
       
Net unrealized gain on open long foreign futures contracts
    3,776,402       0.37 %
                         
Short Foreign Futures Contracts
               
       
Agricultural
    (6,346 )     (0.00 )%
       
Currency
    345,604       0.03 %
       
Energy
    (58,775 )     (0.01 )%
       
Interest rate
    804,314       0.08 %
       
Stock index
    (568,935 )     (0.05 )%
       
Net unrealized gain on open short foreign futures contracts
    515,862       0.05 %
                         
       
Net unrealized gain on open futures contracts
  $ 14,004,035       1.35 %

No individual futures or forward currency contract position constituted greater than one percent of partners’ capital (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.
 

 
4

 

Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2009
(Audited)

 
Description
 
Fair Value
   
% of Partners’ Capital (Net Asset Value)
 
             
U.S. Forward Currency Contracts
           
 
Long
  $ (2,056,023 )     (0.19 )%
 
Short
    351,945       0.03 %
 
Net unrealized loss on open U.S. forward currency contracts
    (1,704,078 )     (0.16 )%
                   
Foreign Forward Currency Contracts
               
 
Long
    (224,594 )     (0.02 )%
 
Short
    (500,342 )     (0.05 )%
 
Net unrealized loss on open foreign forward currency contracts
    (724,936 )     (0.07 )%
                   
 
Net unrealized loss on open forward currency contracts
  $ (2,429,014 )     (0.23 )%

No individual futures or forward currency contract position constituted greater than one percent of partners’ capital (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.
 

 
5

 

Futures Portfolio Fund, Limited Partnership
Statements of Operations
For the Three and Six Months Ended June 30, 2010 and 2009
(Unaudited)

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Trading Loss
                       
Net realized loss
  $ (3,456,182 )   $ (22,393,243 )   $ (2,236,658 )   $ (4,840,987 )
Net change in unrealized gain (loss)
    (46,740,230 )     6,996,514       (2,011,171 )     (21,141,711 )
Brokerage commissions and trading expenses
    (900,360 )     (705,720 )     (1,751,306 )     (1,182,340 )
Net loss from trading
    (51,096,772 )     (16,102,449 )     (5,999,135 )     (27,165,038 )
                                 
Net Investment Loss
                               
Income
                               
Interest income
    665,493       1,093,089       1,018,089       3,492,144  
Expenses
                               
Trading Advisor management fees
    4,309,347       3,595,655       8,372,645       7,035,550  
Trading Advisor incentive fees
    --       5,015,194       5,057,839       6,928,626  
General Partner management fee
    5,697,706       4,549,158       11,068,322       8,839,521  
Selling Agent fees
    3,931,596       3,194,804       7,687,282       6,221,526  
General Partner 1% allocation
    (662,879 )     (328,972 )     (408,937 )     (556,784 )
Administrative expenses – General Partner
    2,477,224       2,228,467       4,944,591       4,306,779  
Total expenses
    15,752,994       18,254,306       36,721,742       32,775,218  
Administrative expenses waived
    (559,264 )     (695,429 )     (1,218,002 )     (1,326,493 )
Net total expenses
    15,193,730       17,558,877       35,503,740       31,448,725  
Net investment loss
    (14,528,237 )     (16,465,788 )     (34,485,651 )     (27,956,581 )
Net Loss
  $ (65,625,009 )   $ (32,568,237 )   $ (40,484,786 )   $ (55,121,619 )



   
Three Months Ended June 30,
 
   
2010
   
2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Decrease in net asset value per Unit
  $ (264.90 )   $ (322.43 )   $ (173.46 )   $ (197.21 )
                                 
Net loss per Unit
  $ (269.37 )   $ (332.42 )   $ (179.73 )   $ (204.41 )
(based on weighted average number of units outstanding)
                               
Weighted average number of Units outstanding
    159,053.7958       68,531.0660       123,063.8515       51,121.7376  


   
Six Months Ended June 30,
 
   
2010
   
2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Decrease in net asset value per Unit
  $ (177.78 )   $ (180.39 )   $ (304.31 )   $ (337.61 )
                                 
Net loss per Unit
  $ (180.05 )   $ (189.75 )   $ (319.91 )   $ (356.78 )
(based on weighted average number of units outstanding)
                               
Weighted average number of Units outstanding
    155,541.9382       65,766.3357       117,913.0566       48,771.0448  



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

 
6

 

Statements of Cash Flows
For the Six Months Ended June 30, 2010 and 2009
 (Unaudited)

   
2010
   
2009
 
Cash flows from operating activities
           
Net loss
  $ (40,484,786 )   $ (55,121,619 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
               
Net change in unrealized loss
    2,011,171       21,141,711  
Changes in
               
Interest receivable
    (12,340 )     (1,765 )
Commercial paper
    (110,713,376 )     90,607,044  
Government sponsored enterprise notes
    (108,732,580 )     (32,193,634 )
U.S. Treasury securities
    (239,841,644 )     (2,971,798 )
Corporate notes
    --       50,626,878  
General Partner 1% allocation receivable/payable
    230,919       (2,436,121 )
Trading Advisor management fees payable
    (477,171 )     120,232  
Trading Advisor incentive fees payable
    (1,444,958 )     (13,756,410 )
Commissions and other trading fees payable on open contracts
    142,755       38,874  
General Partner management fee payable
    153,920       169,510  
Selling Agent fees payable – General Partner
    77,159       111,858  
Administrative expenses payable – General Partner
    133,587       202,485  
Net cash provided by (used in) operating activities
    (498,957,344 )     56,537,245  
                 
Cash flows from financing activities
               
Subscriptions
    143,116,201       180,220,376  
Subscriptions received in advance
    37,963,551       27,465,012  
Redemptions
    (45,686,675 )     (50,494,870 )
Net cash provided by financing activities
    135,393,077       157,190,518  
                 
Net increase (decrease) in cash and cash equivalents
    (363,564,267 )     213,727,763  
Cash and cash equivalents, beginning of period
    989,520,835       505,006,123  
Cash and cash equivalents, end of period
  $ 625,956,568     $ 718,733,886  
                 
End of period cash and cash equivalents consists of
               
Cash in broker trading accounts
  $ 299,244,208     $ 204,556,444  
Cash and cash equivalents
    326,712,360       514,177,442  
Total end of period cash and cash equivalents
  $ 625,956,568     $ 718,733,886  
                 
Supplemental disclosure of cash flow information
               
Prior period redemptions paid
  $ 5,857,719     $ 10,448,411  
Prior period subscriptions received in advance
  $ 37,057,961     $ 29,937,275  
                 
Supplemental schedule of non-cash financing activities
               
Redemptions payable
  $ 5,373,883     $ 8,077,083  



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

 
7

 

Futures Portfolio Fund, Limited Partnership
Statements of Changes in Partners’ Capital (Net Asset Value)
For the Six Months Ended June 30, 2010 and 2009
 (Unaudited)

   
Class A Interests
   
Class B Interests
       
   
Units
   
Amount
   
Units
   
Amount
   
Total
 
Six Months Ended
June 30, 2010
                             
Balance at December 31, 2009
    147,452.0886     $ 688,434,529       60,362.5545     $ 369,300,376     $ 1,057,734,905  
Net loss
            (28,005,482 )             (12,479,304 )     (40,484,786 )
Subscriptions
    20,887.8927       96,305,048       13,811.7408       83,869,114       180,174,162  
Redemptions
    (5,545.4301 )     (25,535,908 )     (3,255.8522 )     (19,666,931 )     (45,202,839 )
Transfers
    (399.4401 )     (1,866,928 )     303.3117       1,866,928       --  
Balance at June 30, 2010
    162,395.1111     $ 729,331,259       71,221.7548     $ 422,890,183     $ 1,152,221,442  
                                         
Six Months Ended
June 30, 2009
                                       
Balance at December 31, 2008
    108,989.0639     $ 547,011,351       44,268.0740     $ 285,973,913     $ 832,985,264  
Net loss
            (37,721,105 )             (17,400,514 )     (55,121,619 )
Subscriptions
    26,696.2301       131,564,699       12,349.9410       78,592,952       210,157,651  
Redemptions
    (5,295.0228 )     (25,919,326 )     (3,513.2932 )     (22,204,216 )     (48,123,542 )
Transfers
    (1,229.0048 )     (5,985,064 )     950.0817       5,985,064       --  
Balance at June 30, 2009
    129,161.2664     $ 608,950,555       54,054.8035     $ 330,947,199     $ 939,897,754  



Net Asset Value per Unit
             
   
Class A
   
Class B
 
June 30, 2010
  $ 4,491.09     $ 5,937.65  
December 31, 2009
    4,668.87       6,118.04  
June 30, 2009
    4,714.65       6,122.44  
December 31, 2008
    5,018.96       6,460.05  

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

 
8

 

Futures Portfolio Fund, Limited Partnership
Notes to Financial Statements
(Unaudited)

 
1.
Organization and Summary of Significant Accounting Policies

Description of the Fund

Futures Portfolio Fund, Limited Partnership (“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 partner 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 Third Amended and Restated Limited Partnership Agreement (“Partnership Agreement”).

The Fund uses commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally.

The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Exchange Act of 1934, as amended (“1934 Act”).  As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the 1934 Act.  As a commodity pool, the Fund is subject to the regulations of the U.S. Commodity Futures Trading Commission (“CFTC”), an agency of the 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 the futures broker and interbank market makers through which the fund trades.

Steben & Company, Inc. (“General Partner”), is the general partner of the Fund and 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.


Financial Accounting Standards Board Accounting Standards Codification
 
The Fund follows accounting standards established by the Financial Accounting Standards Board (“FASB”) to ensure consistent reporting of financial condition, results of operation and cash flows in conformity with accounting principles generally accepted in the U.S.  The accounting standards are embodied in the FASB Accounting Standards Codification, which became effective for periods ending on or after September 15, 2009.

Use of Estimates
 
Preparing financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

Revenue Recognition

Futures, options on futures, forward currency contracts 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.  Interest income earned on investments in commercial paper, corporate notes, U.S. Treasury securities, government sponsored enterprise notes and other cash and cash equivalent balances is recorded on an accrual basis.
 
 
9

 
Fair Value of Financial Instruments
 
Financial instruments are carried at fair value, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Assets and liabilities carried at fair value are classified and disclosed in the following categories:

 
Level 1 –
Fair value is based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical instruments.  Financial instruments utilizing Level 1 inputs include exchange-traded derivatives, U.S. Treasury securities and money market funds.

 
Level 2 –
Fair value is based on quoted prices for similar instruments in active markets and inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals using a market approach.  Financial instruments utilizing Level 2 inputs include forward currency contracts and government sponsored enterprise notes.

 
Level 3 –
Fair value is based on valuation techniques in which one or more significant inputs are unobservable.  The Fund has no financial instruments utilizing Level 3 inputs.

U.S. Treasury securities are recorded at amortized cost, which approximates fair value based on bid and ask quotes for identical instruments.  Commercial paper, government sponsored enterprise notes and corporate notes are recorded at amortized cost, which approximates fair value based on bid and ask quotes for similar, but not identical, instruments.  Accordingly, U.S. Treasury securities are classified within Level 1 and commercial paper, government sponsored enterprise notes and corporate notes are classified within Level 2.

The investments in money market funds, included in cash and cash equivalents in the statements of financial condition, and futures contracts, all of which are exchange-traded, are valued using quoted market prices for identical assets and are classified within Level 1. The fair values of forward currency contracts are based upon third-party quoted dealer values on the interbank market and are classified within Level 2.

Derivative Instruments
 
Effective January 1, 2009, the Fund adopted new guidance issued by FASB regarding derivatives and hedging.  The Fund’s derivative contracts are comprised of futures and forward currency contracts.  These derivative contracts are recorded in the statements of financial condition as assets measured at fair value and the related realized and change in unrealized gain or 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.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less at the date of acquisition that are not held for sale in the normal course of business.  The Fund maintains cash and cash equivalents balances at Newedge USA, LLC and Newedge Group (U.K. Branch) (collectively “NUSA”), UBS Financial Services, Inc. and UBS A.G. (collectively “UBS”) and Bank of America and Banc of America Securities, LLC (collectively “Bank of America”). At June 30, 2010, cash and cash equivalents balances held at NUSA, UBS and Bank of America were $278,456,136, $70,790,551 and $276,709,881, respectively.   The Fund is at risk to the extent that it maintains balances with financial institutions in excess of insured limits; however, the Fund does not believe it is exposed to any significant credit risk.

Brokerage Commissions and Trading Expenses

Brokerage commissions and trading expenses include brokerage and other trading fees, and are charged to expense when contracts are opened and closed.

Redemptions Payable

Redemptions payable represent redemptions that meet the requirements of the Fund and have been approved by the General Partner prior to period-end.  These redemptions have been recorded using the period-end net asset value per Unit.

 
10

 


Income Taxes

The Fund prepares calendar year U.S. and applicable state and local 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 evaluates the tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when examined by the applicable tax authority.  Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and liability in the current year.  Management has determined there are no material uncertain income tax positions through June 30, 2010.  With few exceptions, the Fund is no longer subject to U.S. federal, or state and local income tax examinations by tax authorities for years before 2006.
 
Foreign Currency Transactions
 
The Fund has certain investments denominated in foreign currencies.  The purchase and sale of investments and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.  The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of investments held.  Such fluctuations are included with the net realized and unrealized gain or loss on such investments.

Reclassification

Certain amounts in the 2009 financial statements have been reclassified to conform to the 2010 presentation without affecting previously reported partners’ capital (net asset value).

Subsequent Events

The Fund has evaluated subsequent events for potential recognition and/or disclosure through the date the financial statements were issued.
 
2.
Fair Value Disclosures

The Fund’s assets and liabilities, measured at fair value on a recurring basis, are summarized in the following tables by the type of inputs applicable to the fair value measurements:

At June 30, 2010
     
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts:
                 
    Net unrealized gain on open futures contracts
  $ 13,470,123     $ --     $ 13,470,123  
    Net unrealized loss on open forward currency contracts
    --       (3,906,273 )     (3,906,273 )
Cash and cash equivalents:
                       
    Money market funds
    50,002,479       --       50,002,479  
Commercial paper
    --       110,713,376       110,713,376  
Government sponsored enterprise notes
    --       216,247,229       216,247,229  
U.S. Treasury securities
    239,841,644       --       239,841,644  
Total
  $ 303,314,246     $ 323,054,332     $ 626,368,578  

At December 31, 2009
     
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts:
                 
    Net unrealized gain on open futures contracts
  $ 14,004,035     $ --     $ 14,004,035  
    Net unrealized loss on open forward currency contracts
    --       (2,429,014 )     (2,429,014 )
Cash and cash equivalents:
                       
    Money market funds
    633,081,225       --       633,081,225  
Government sponsored enterprise notes
    --       107,514,649       107,514,649  
Total
  $ 647,085,260     $ 105,085,635     $ 752,170,895  


 
11

 


There were no Level 3 holdings at June 30, 2010 and December 31, 2009, or during the periods then ended.

In addition to the financial instruments listed above, substantially all of the Fund’s other assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.
 
3.
Derivative Instruments Disclosures

At June 30, 2010, the Fund’s derivative contracts had the following impact on the statements of financial condition:

   
Derivative Assets and Liabilities, at fair value
 
Statements of Financial Condition Location
 
Assets
   
Liabilities
   
Net
 
Net unrealized gain on open futures contracts
                 
Agricultural
  $ 2,640,903     $ (2,378,953 )   $ 261,950  
Currency
    2,144,760       (9,190,779 )     (7,046,019 )
Energy
    1,106,429       (5,478,397 )     (4,371,968 )
Interest rate
    35,364,932       (1,257,021 )     34,107,911  
Metal
    16,810,900       (17,186,069 )     (375,169 )
Single stock futures
    43,576       --       43,576  
Stock index
    1,774,031       (10,924,189 )     (9,150,158 )
Net unrealized gain on open futures contracts
  $ 59,885,531     $ (46,415,408 )   $ 13,470,123  
                         
Net unrealized loss on open forward currency contracts
  $ 2,750,864     $ (6,657,137 )   $ (3,906,273 )

At June 30, 2010, there were 65,009 open futures contracts and 1,459 open forward currency contracts.


For the three and six months ended June 30, 2010, the Fund’s derivative contracts had the following impact on the statements of operations:

   
Three Months Ended June 30, 2010
   
Six Months Ended June 30, 2010
 
Types of Exposure
 
Net realized loss
   
Net change
in unrealized gain (loss)
   
Net realized loss
   
Net change
in unrealized gain (loss)
 
Futures contracts
                       
Agricultural
  $ (2,235,394 )   $ (5,742,096 )   $ (6,424,063 )   $ (4,055,920 )
Currency
    7,243,837       (11,401,357 )     15,867,253       (7,981,208 )
Energy
    (27,261,693 )     (20,747,460 )     (43,682,580 )     (5,714,549 )
Interest rate
    65,567,728       16,938,906       78,178,802       39,322,274  
Metal
    (1,371,893 )     (4,669,655 )     (6,090,176 )     (4,325,782 )
Single stock futures
    (150,672 )     64,690       (14,971 )     51,332  
Stock index
    (43,716,314 )     (18,100,470 )     (40,408,059 )     (17,830,059 )
Total futures contracts
    (1,924,401 )     (43,657,442 )     (2,573,794 )     (533,912 )
                                 
Forward currency contracts
    (842,030 )     (3,082,788 )     719,183       (1,477,259 )
                                 
Total futures and forward currency contracts
  $ (2,766,431 )   $ (46,740,230 )   $ (1,854,611 )   $ (2,011,171 )

For the three and six months ended June 30, 2010, the number of futures contracts closed was 183,705 and 365,522, respectively, and the number of forward currency contracts closed was 9,727 and 19,646, respectively.


 
12

 


At December 31, 2009, the Fund’s derivative contracts had the following impact on the statements of financial condition:

   
Derivative Assets and Liabilities, at fair value
 
Statements of Financial Condition Location
 
Assets
   
Liabilities
   
Net
 
Net unrealized gain on open futures contracts
                 
Agricultural
  $ 5,392,510     $ (1,074,640 )   $ 4,317,870  
Currency
    4,398,977       (3,463,788 )     935,189  
Energy
    3,830,525       (2,487,944 )     1,342,581  
Interest rate
    8,760,428       (13,974,791 )     (5,214,363 )
Metal
    13,545,225       (9,594,612 )     3,950,613  
Single stock futures
    --       (7,756 )     (7,756 )
Stock index
    9,898,985       (1,219,084 )     8,679,901  
Net unrealized gain on open futures contracts
  $ 45,826,650     $ (31,822,615 )   $ 14,004,035  
                         
Net unrealized loss on open forward currency contracts
  $ 3,001,447     $ (5,430,461 )   $ (2,429,014 )

At December 31, 2009, there were 58,336 open futures contracts and 1,237 open forward currency contracts.

For the three and six months ended June 30, 2009, the Fund’s derivative contracts had the following impact on the statements of operations:

   
Three Months Ended June 30, 2009
   
Six Months Ended June 30, 2009
 
Types of Exposure
 
Net realized loss
   
Net change
in unrealized gain (loss)
   
Net realized loss
   
Net change
in unrealized gain (loss)
 
Futures contracts
                       
Agricultural
  $ (578,644 )   $ 4,869,758     $ (1,742,717 )   $ 1,567,285  
Currency
    1,596,414       2,282,522       (4,840,578 )     1,225,161  
Energy
    (7,247,249 )     3,445,102       (2,534,802 )     1,980,567  
Interest rate
    (19,410,041 )     (10,802,382 )     (10,221,912 )     (17,095,986 )
Metal
    (4,765,233 )     (2,566,029 )     1,687,441       (11,265,739 )
Single stock futures
    100,082       (148 )     100,082       (148 )
Stock index
    21,540,171       1,290,494       26,820,777       786,264  
Total futures contracts
    (8,764,500 )     (1,480,683 )     9,268,291       (22,802,596 )
                                 
Forward currency contracts
    (13,665,889 )     8,477,197       (13,683,708 )     1,660,885  
                                 
Total futures and forward currency contracts
  $ (22,430,389 )   $ 6,996,514     $ (4,415,417 )   $ (21,141,711 )

For the three and six months ended June 30, 2009, the number of futures contracts closed was 132,754 and 231,748, respectively, and the number of forward currency contracts closed was 9,603 and 15,872, respectively.
 
4.
General Partner

At June 30, 2010 and December 31, 2009, and for the periods then ended, the General Partner did not maintain a capital balance in the Fund; however, the beneficiary of the sole shareholder of the General Partner had an investment of 30.9315 Class B Units.  At June 30, 2010 and December 31, 2009, this investment was valued at $183,661 and $189,240, respectively.

 
13

 

 
The General Partner earns the following compensation:
 
§
General Partner Management Fee – the Fund incurs a monthly fee on Class A and Class B Units equal to 1/12th of 1.95% of the month-end net asset value of the Class A and Class B Units, payable in arrears.

§
Selling Agent Fees – the Class A Units incur a monthly fee equal to 1/12th of 2% of the month-end net asset value of the Class A Units and such amounts are included in Selling Agent fees – General Partner in the statements of operations.  The General Partner, in turn, pays the selling agent fee to the respective selling agents.  If there is no designated selling agent or the General Partner was the selling agent, such portions of the selling agent fee are retained by the General Partner.

§
Broker Dealer Servicing Fees – the Class B Units incur a monthly fee equal to 1/12th of 0.20% of the month-end net asset value of the Class B Units and such amounts are included in Selling Agent fees – General Partner in the statements of operations.  The General Partner, in turn, pays the fee to the respective selling agents.  If there is no designated selling agent or the General Partner was the selling agent, such portions of the broker dealer servicing fee are retained by the General Partner.

Pursuant to the terms of the Partnership Agreement, the General Partner receives from the Fund one percent of any increase in the Fund’s net asset value.  Conversely, the General Partner pays to the Fund one percent of any decrease in the Fund’s net asset value.  Such amounts are reflected as General Partner 1% allocation receivable or payable in the statements of financial condition and as General Partner 1% allocation in the statements of operations.
 
5.
Trading Advisors

The Fund has advisory agreements with various commodity trading advisors, pursuant to which the Fund incurs a monthly advisor management fee that ranges from 0% to 1/12th of 2% of allocated net assets (as defined in each respective advisory agreement), paid monthly or quarterly in arrears.  Additionally, the Fund incurs advisor incentive fees, paid quarterly in arrears, ranging from 20% to 30% of net new trading profits (as defined in each respective advisory agreement).
 
6.
Deposits with Brokers

To meet margin requirements, the Fund deposits funds with brokers, subject to CFTC regulations and various exchange and broker requirements.  The Fund earns interest income on its assets deposited with brokers.  At June 30, 2010 and December 31, 2009, the Fund had margin requirements of $105,523,898 and $132,093,486, respectively.
 
7.
Administrative Expenses

The Fund reimburses the General Partner for actual monthly administrative expenses paid to various third-party service providers, including the General Partner, up to 1/12th of 0.65% of the Fund’s month-end net asset value, payable in arrears.  Administrative expenses include accounting, audit, legal, 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, administrative employee salaries and related costs.  Pursuant to the terms of the Partnership Agreement, administrative expenses that exceed 1% of the average month-end net asset value of the Fund are the responsibility of the General Partner.

For the three months ended June 30, 2010 and 2009, actual administrative expenses were $2,477,224 and $2,228,467, respectively, which were below the 1% administrative expense limitation.  For the six months ended June 30, 2010 and 2009, actual administrative expenses were $4,944,591 and $4,306,779, respectively, which were also below the 1% administrative expense limitation.

Additionally, during the three months ended June 30, 2010 and 2009, the General Partner voluntarily waived $559,264 and $695,429, respectively, of administrative expenses of the Fund.  During the six months ended June 30, 2010 and 2009, the General Partner voluntarily waived $1,218,002 and $1,326,493, respectively, of administrative expenses.  Such amounts are included in Administrative expenses waived in the statements of operations.

 
14

 


At June 30, 2010 and December 31, 2009, $1,869,743 and $1,736,156, respectively, were payable to the General Partner for administrative expenses incurred on behalf of the Fund and not waived by the General Partner.  Such amounts are presented as Administrative expenses payable – General Partner in the statements of financial condition.
 
8.
Subscriptions, Distributions and Redemptions

Investments in the Fund are made by subscription agreement and must be received within five business days of the end of the month, subject to acceptance by the General Partner.  The minimum investment is $10,000.  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 June 30, 2010 and December 31, 2009, the Fund received advance subscriptions of $37,963,551 and $37,057,961, respectively, which were recognized as subscriptions to the Fund or returned, if applicable, subsequent to period-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 five business days’ prior written notice to the General Partner, and in certain circumstances, restrictions in the 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 under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund, or (c) necessary to comply with applicable government or other self-regulatory organization regulations.
 
9.
Trading Activities and Related Risks

The Fund engages in the speculative trading of futures, swaps, options and over-the-counter contracts, including forward currency contracts traded in the U.S. and internationally.  Trading in derivatives exposes the Fund to both market risk, the risk arising from a change in the fair value of a contract, 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 futures brokers.  Additional deposits may be necessary for any loss on contract value.  The Commodity Exchange Act (“CEAct”) requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities.  A customer’s cash and other property (for example, U.S. Treasury 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 uses Newedge USA, LLC as its futures broker (“futures broker”) and Newedge Group (U.K. Branch) and UBG A.G. as its forward currency counterparties (“forward currency counterparties”).
 
For futures contracts, 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 currency contracts purchased, and unlimited liability on such contracts sold short.
 
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 U.S. 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.

 
15

 

 
In the case of forward currency 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.  While the Fund trades only with those counterparties that it believes to be creditworthy, 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 trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange-traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.

The Fund has a 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 uses UBS and Banc of America Securities, LLC as its cash management securities brokers (“cash management securities brokers”) for the investment of some excess margin amounts into short-term fixed income instruments including commercial paper, corporate notes, U.S. Treasury securities and government sponsored enterprise notes with maturities no longer than one year.  Fluctuations in prevailing interest rates could cause immaterial marked-to-market losses on the Fund’s U.S. Treasury securities and other fixed income instruments, although substantially all of the short-term investments are held to maturity.

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

   
Futures Contracts
(exchange-traded)
   
Forward Currency Contracts
 (non-exchange-traded)
 
   
June 30,
2010
   
December 31,
2009
   
June 30,
2010
   
December 31,
2009
 
                         
Gross unrealized gains
  $ 59,885,531     $ 45,826,650     $ 2,750,864     $ 3,001,447  
                                 
Gross unrealized losses
    (46,415,408 )     (31,822,615 )     (6,657,137 )     (5,430,461 )
                                 
Net unrealized gain (loss)
  $ 13,470,123     $ 14,004,035     $ (3,906,273 )   $ (2,429,014 )

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 specific circumstances, distributions and redemptions received.
 
10.
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.
 
11.
Interim Financial Statements

The statements of financial condition, including the condensed schedule of investments, at June 30, 2010, the statements of operations for the three and six months ended June 30, 2010 and 2009, the statements of cash flows and changes in partners’ capital (net asset value) for the six months ended June 30, 2010 and 2009 and the accompanying notes to the financial statements are unaudited.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. 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 to present fairly the financial position at June 30, 2010, results of operations for the three and six months ended June 30, 2010 and 2009, cash flows and changes in partners’ capital (net asset value) for the six months ended June 30, 2010 and 2009.  The results of operations for the three and six months ended June 30, 2010 and 2009 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 SEC.

 
16

 


 
12.
Financial Highlights

The following information presents per Unit operating performance data and other ratios for the three and six months ended June 30, 2010 and 2009, assuming the Unit was outstanding throughout the entire period:

   
Three Months Ended
June 30, 2010
   
Three Months Ended
June 30, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Per Unit Operating Performance
                       
Net asset value per Unit at beginning of period
  $ 4,755.99     $ 6,260.08     $ 4,888.11     $ 6,319.65  
Loss from operations
                               
Loss from trading (1)
    (199.19 )     (262.94 )     (78.90 )     (102.76 )
Net investment loss (1)
    (65.71 )     (59.49 )     (94.56 )     (94.45 )
Total loss from operations
    (264.90 )     (322.43 )     (173.46 )     (197.21 )
Net asset value per Unit at end of period
  $ 4,491.09     $ 5,937.65     $ 4,714.65     $ 6,122.44  
                                 
Total return (5)
    (5.57 )%     (5.15 )%     (3.55 )%     (3.12 )%
                                 
Other Financial Ratios
                               
Ratios to average net asset value
                               
Expenses prior to Trading Advisor incentive fees and General Partner 1% allocation (2) (3) (4)
    6.12 %     4.33 %     6.29 %     4.46 %
Trading Advisor incentive fees (5)
    --       --       0.55 %     0.55 %
General Partner 1% allocation (5)
    (0.06 )%     (0.05 )%     (0.04 )%     (0.03 )%
Total expenses
    6.06 %     4.28 %     6.80 %     4.98 %
                                 
Net investment loss (2) (3) (4) (6)
    (5.89 )%     (4.10 )%     (5.81 )%     (3.98 )%


 
17

 


   
Six Months Ended
June 30, 2010
   
Six Months Ended
June 30, 2009
 
   
Class A
   
Class B
   
Class A