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EX-32.02 - FUTURES PORTFOLIO FUND L.P.v201607_ex32-02.htm
EX-31.02 - FUTURES PORTFOLIO FUND L.P.v201607_ex31-02.htm
EX-32.01 - FUTURES PORTFOLIO FUND L.P.v201607_ex32-01.htm
EX-31.01 - FUTURES PORTFOLIO FUND L.P.v201607_ex31-01.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 September 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
September 30, 2010 (Unaudited) and December 31, 2009 (Audited)

   
September 30,
2010
   
December 31,
2009
 
Assets
           
Equity in broker trading accounts
           
Cash
  $ 317,459,850     $ 318,300,203  
Net unrealized gain on open futures contracts
    59,214,462       14,004,035  
Net unrealized gain (loss) on open forward currency contracts
    5,631,303       (2,429,014 )
Interest receivable
    39,545       13,642  
Total equity in broker trading accounts
    382,345,160       329,888,866  
Cash and cash equivalents
    269,186,085       671,220,632  
Commercial paper, at fair value
    424,800,297       --  
Government sponsored enterprise notes, at fair value
    75,034,516       107,514,649  
U.S. Treasury securities, at fair value
    159,934,667       --  
General Partner 1% allocation receivable
    --       639,856  
Total assets
  $ 1,311,300,725     $ 1,109,264,003  
                 
Liabilities and Partners’ Capital (Net Asset Value)
               
Liabilities
               
Trading Advisor management fees payable
  $ 2,054,819     $ 2,363,509  
Trading Advisor incentive fees payable
    --       1,444,958  
Commissions and other trading fees payable on open contracts
    361,089       117,427  
General Partner management fee payable
    2,089,019       1,732,238  
General Partner 1% allocation payable
    210,972       --  
Selling Agent fees payable – General Partner
    1,408,974       1,219,130  
Administrative expenses payable – General Partner
    696,637       1,736,156  
Redemptions payable
    11,235,640       5,857,719  
Subscriptions received in advance
    22,783,029       37,057,961  
Total liabilities
    40,840,179       51,529,098  
Partners’ Capital (Net Asset Value)
               
Class A Interests – 167,075.3782 units and 147,452.0886 units
               
outstanding at September 30, 2010 and December 31, 2009, respectively
    786,763,948       688,434,529  
Class B Interests – 77,345.1935 units and 60,362.5545 units
               
outstanding at September 30, 2010 and December 31, 2009, respectively
    483,696,598       369,300,376  
Total partners' capital (net asset value)
    1,270,460,546       1,057,734,905  
Total liabilities and partners' capital (net asset value)
  $ 1,311,300,725     $ 1,109,264,003  
 
The accompanying notes are an integral part of these financial statements.
 
1


Condensed Schedule of Investments
September 30, 2010
(Unaudited)

       
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
U.S. Treasury Securities
           
Face Value
 
Maturity Date
               
$ 80,000,000  
10/21/2010
 
U.S. Treasury Bill, 0.17%
  $ 79,992,445       6.30 %
  80,000,000  
1/13/2011
 
U.S. Treasury Bill, 0.25%
    79,942,222       6.29 %
         
Total U.S. Treasury securities (cost: $159,704,133)
  $ 159,934,667       12.59 %
                           
Government Sponsored Enterprise Notes
               
Face Value
 
Maturity Date
                   
$ 75,132,000  
3/23/2011
 
Federal Home Loan Mortgage Corporation, 0.27%
  $ 75,034,516       5.91 %
         
Total government sponsored enterprise notes
(cost: $75,000,707)
  $ 75,034,516       5.91 %
                           
Commercial Paper
               
Face Value
 
Maturity Date
                   
$ 55,000,000  
1/28/2011
 
Commonwealth Bank of Australia, 0.36%
  $ 54,934,550       4.32 %
  35,000,000  
1/31/2011
 
HSBC Finance Corp, 0.60%
    34,928,833       2.75 %
  20,000,000  
4/1/2011
 
Shell International Finance BV, 0.68%
    19,931,244       1.57 %
  30,260,000  
4/1/2011
 
Shell International Finance BV, 0.69%
    30,154,443       2.37 %
  67,521,000  
4/13/2011
 
HSBC Finance Corp, 0.63%
    67,291,766       5.30 %
  32,000,000  
5/16/2011
 
Toyota Motor Credit Corporation, 0.39%
    31,921,307       2.51 %
  60,000,000  
5/24/2011
 
Barclays U.S. Funding LLC, 0.57%
    59,776,750       4.71 %
  74,107,000  
5/27/2011
 
ING (U.S.) Funding LLC, 0.57%
    73,827,741       5.81 %
  1,948,000  
6/2/2011
 
Shell International Finance BV, 0.53%
    1,941,002       0.15 %
  30,300,000  
7/6/2011
 
Shell International Finance BV, 0.53%
    30,175,989       2.38 %
  20,000,000  
7/11/2011
 
Shell International Finance BV, 0.53%
    19,916,672       1.57 %
         
Total commercial paper (cost: $424,443,561)
  $ 424,800,297       33.44 %
                           
Long U.S. Futures Contracts
               
         
Agricultural
  $ 8,654,415       0.68 %
         
Currency
    7,021,621       0.55 %
         
Energy
    6,248,436       0.49 %
         
Interest rate (1)
    14,576,535       1.15 %
         
Metal (1)
    25,059,535       1.97 %
         
Stock index
    6,431,604       0.51 %
         
Net unrealized gain on open long U.S. futures contracts
    67,992,146       5.35 %
                           
Short U.S. Futures Contracts
               
         
Agricultural
    (280,476 )     (0.02 )%
         
Currency
    (2,062,130 )     (0.16 )%
         
Energy
    965,176       0.08 %
         
Interest rate
    (79,273 )     (0.01 )%
         
Metal (1)
    (14,173,492 )     (1.12 )%
         
Stock index
    (28,900 )     (0.00 )%
         
Net unrealized loss on open short U.S. futures contracts
    (15,659,095 )     (1.23 )%
                           

(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)
September 30, 2010
(Unaudited)

 
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
Long Foreign Futures Contracts
           
 
Agricultural
  $ 94,560       0.01 %
 
Currency
    2,337,841       0.18 %
 
Energy
    37,216       0.00 %
 
Interest rate
    4,551,008       0.36 %
 
Metal
    67,130       0.01 %
 
Stock index
    (980,897 )     (0.08 )%
 
Net unrealized gain on open long foreign futures contracts
    6,106,858       0.48 %
                   
Short Foreign Futures Contracts
               
 
Agricultural
    (3,458 )     (0.00 )%
 
Currency
    1,105,555       0.09 %
 
Energy
    (113,433 )     (0.01 )%
 
Interest rate
    124,452       0.01 %
 
Metal
    (18,476 )     (0.00 )%
 
Stock index
    (320,087 )     (0.03 )%
 
Net unrealized gain on open short foreign futures contracts
    774,553       0.06 %
                   
 
Net unrealized gain on open futures contracts
  $ 59,214,462       4.66 %
                   
U.S. Forward Currency Contracts
               
 
Long
  $ 4,761,137       0.37 %
 
Short
    (2,567,088 )     (0.20 )%
 
Net unrealized gain on open U.S. forward currency contracts
    2,194,049       0.17 %
                   
Foreign Forward Currency Contracts
               
 
Long
    2,400,650       0.19 %
 
Short
    1,036,604       0.08 %
 
Net unrealized gain on open foreign forward currency contracts
    3,437,254       0.27 %
                   
 
Net unrealized gain on open forward currency contracts
  $ 5,631,303       0.44 %

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 Nine Months Ended September 30, 2010 and 2009
(Unaudited)

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2010
   
2009
   
2010
   
2009
 
Trading Income
                       
Net realized gain
  $ 23,348,170     $ 15,792,051     $ 21,111,512     $ 10,951,064  
Net change in unrealized gain
    55,281,915       32,514,500       53,270,744       11,372,789  
Brokerage commissions and trading expenses
    (941,820 )     (794,199 )     (2,693,126 )     (1,976,539 )
Net income from trading
    77,688,265       47,512,352       71,689,130       20,347,314  
                                 
Net Investment Loss
                               
Income
                               
Interest income
    924,757       633,167       1,942,846       4,125,311  
Expenses
                               
Trading Advisor management fees
    4,537,925       3,630,303       12,910,570       10,665,853  
Trading Advisor incentive fees
    --       5,631,887       5,057,839       12,560,513  
General Partner management fee
    6,000,395       4,876,085       17,068,717       13,715,606  
Selling Agent fees
    4,064,645       3,418,167       11,751,927       9,639,693  
General Partner 1% allocation
    619,909       289,447       210,972       (267,337 )
Administrative expenses – General Partner
    2,415,068       2,201,007       7,359,659       6,507,786  
Total expenses
    17,637,942       20,046,896       54,359,684       52,822,114  
Administrative expenses waived
    (395,898 )     (556,610 )     (1,613,900 )     (1,883,103 )
Net total expenses
    17,242,044       19,490,286       52,745,784       50,939,011  
Net investment loss
    (16,317,287 )     (18,857,119 )     (50,802,938 )     (46,813,700 )
Net Income (Loss)
  $ 61,370,978     $ 28,655,233     $ 20,886,192     $ (26,466,386 )


   
Three Months Ended September 30,
 
   
2010
   
2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Increase in net asset value per Unit
  $ 217.95     $ 316.09     $ 126.03     $ 191.93  
                                 
Net income per Unit
  $ 222.81     $ 329.14     $ 131.58     $ 198.71  
(based on weighted average number of units outstanding)
                               
                                 
Weighted average number of Units outstanding
    164,973.5488       74,782.0779       133,640.3500       55,717.0311  

   
Nine Months Ended September 30,
 
   
2010
   
2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Increase (decrease) in net asset value per Unit
  $ 40.17     $ 135.70     $ (178.28 )   $ (145.68 )
                                 
Net income (loss) per Unit
  $ 55.17     $ 176.30     $ (163.61 )   $ (124.05 )
(based on weighted average number of units outstanding)
                               
                                 
Weighted average number of Units outstanding
    158,629.2651       68,827.0907       123,079.1530       51,021.0635  
 
The accompanying notes are an integral part of these financial statements.
 
6

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

   
2010
   
2009
 
Cash flows from operating activities
           
Net income (loss)
  $ 20,886,192     $ (26,466,386 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
               
Net change in unrealized gain
    (53,270,744 )     (11,372,789 )
Changes in
               
Interest receivable
    (25,903 )     (3,178 )
Commercial paper
    (424,800,297 )     140,590,377  
Government sponsored enterprise notes
    32,480,133       (32,142,469 )
U.S. Treasury securities
    (159,934,667 )     66,972,902  
Corporate notes
    --       78,147,406  
General Partner 1% allocation receivable/payable
    850,828       (2,146,674 )
Trading Advisor management fees payable
    (308,690 )     315,281  
Trading Advisor incentive fees payable
    (1,444,958 )     (13,138,185 )
Commissions and other trading fees payable on open contracts
    243,662       55,428  
General Partner management fee payable
    356,781       314,816  
Selling Agent fees payable – General Partner
    189,844       214,394  
Administrative expenses payable – General Partner
    (1,039,519 )     302,531  
Net cash provided by (used in) operating activities
    (585,817,338 )     201,643,454  
                 
Cash flows from financing activities
               
Subscriptions
    227,012,458       262,412,284  
Subscriptions received in advance
    22,783,029       32,136,358  
Redemptions
    (66,853,049 )     (72,671,780 )
Net cash provided by financing activities
    182,942,438       221,876,862  
                 
Net increase (decrease) in cash and cash equivalents
    (402,874,900 )     423,520,316  
Cash and cash equivalents, beginning of period
    989,520,835       505,006,123  
Cash and cash equivalents, end of period
  $ 586,645,935     $ 928,526,439  
                 
End of period cash and cash equivalents consists of
               
Cash in broker trading accounts
  $ 317,459,850     $ 281,184,124  
Cash and cash equivalents
    269,186,085       647,342,315  
Total end of period cash and cash equivalents
  $ 586,645,935     $ 928,526,439  
                 
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
  $ 11,235,640     $ 3,927,068  
 
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 Nine Months Ended September 30, 2010 and 2009
 (Unaudited)

   
Class A Interests
   
Class B Interests
       
   
Units
   
Amount
   
Units
   
Amount
   
Total
 
Nine Months Ended September 30, 2010
                             
Balance at December 31, 2009
    147,452.0886     $ 688,434,529       60,362.5545     $ 369,300,376     $ 1,057,734,905  
Net income
            8,752,060               12,134,132       20,886,192  
Subscriptions
    29,305.5322       134,091,821       21,561.2334       129,978,598       264,070,419  
Redemptions
    (8,828.4657 )     (40,614,630 )     (5,224.8536 )     (31,616,340 )     (72,230,970 )
Transfers
    (853.7769 )     (3,899,832 )     646.2592       3,899,832       --  
Balance at September 30, 2010
    167,075.3782     $ 786,763,948       77,345.1935     $ 483,696,598     $ 1,270,460,546  
                                         
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
            (20,137,315 )             (6,329,071 )     (26,466,386 )
Subscriptions
    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  
 
 
Net Asset Value per Unit
   
Class A
   
Class B
 
September 30, 2010
  $ 4,709.04     $ 6,253.74  
December 31, 2009
    4,668.87       6,118.04  
September 30, 2009
    4,840.68       6,314.37  
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 (UK 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 September 30, 2010, cash and cash equivalents balances held at NUSA, UBS and Bank of America were $298,707,601, $18,756,019 and $269,182,315, 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 asset or liability in the current year.  Management has determined there are no material uncertain income tax positions through September 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 2007.
 
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 September 30, 2010
     
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts:
                 
    Net unrealized gain on open futures contracts
  $ 59,214,462     $ --     $ 59,214,462  
    Net unrealized gain on open forward currency contracts
    --       5,631,303       5,631,303  
Cash and cash equivalents:
                       
    Money market fund
    3,769       --       3,769  
Commercial paper
    --       424,800,297       424,800,297  
Government sponsored enterprise notes
    --       75,034,516       75,034,516  
U.S. Treasury securities
    159,934,667       --       159,934,667  
Total
  $ 219,152,898     $ 505,466,116     $ 724,619,014  
 
11

 
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  

There were no Level 3 holdings at September 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 September 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
  $ 11,024,062     $ (2,559,021 )   $ 8,465,041  
Currency
    13,392,172       (4,989,285 )     8,402,887  
Energy
    13,277,965       (6,140,570 )     7,137,395  
Interest rate
    23,144,525       (3,971,803 )     19,172,722  
Metal
    25,224,781       (14,290,084 )     10,934,697  
Stock index
    8,600,751       (3,499,031 )     5,101,720  
Net unrealized gain on open futures contracts
  $ 94,664,256     $ (35,449,794 )   $ 59,214,462  
                         
Net unrealized gain (loss) on open forward currency contracts
  $ 13,950,934     $ (8,319,631 )   $ 5,631,303  

At September 30, 2010, there were 84,618 open futures contracts and 2,533 open forward currency contracts.

12


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

   
Three Months Ended
September 30, 2010
   
Nine Months Ended
September 30, 2010
 
Types of Exposure
 
Net realized
gain
   
Net change
in unrealized
gain
   
Net realized
gain
   
Net change
in unrealized
gain
 
Futures contracts
                       
Agricultural
  $ (603,001 )   $ 8,203,091     $ (7,027,064 )   $ 4,147,171  
Currency
    (11,977,428 )     15,448,906       3,889,825       7,467,698  
Energy
    (16,009,110 )     11,509,363       (59,691,690 )     5,794,814  
Interest rate
    72,460,931       (14,935,189 )     150,639,733       24,387,085  
Metal
    (5,404,080 )     11,309,866       (11,494,256 )     6,984,084  
Single stock futures
    57,515       (43,576 )     42,544       7,756  
Stock index
    (13,589,047 )     14,251,878       (53,997,106 )     (3,578,181 )
Total futures contracts
    24,935,780       45,744,339       22,361,986       45,210,427  
                                 
Forward currency contracts
    (1,889,571 )     9,537,576       (1,170,388 )     8,060,317  
                                 
Total futures and forward currency contracts
  $ 23,046,209     $ 55,281,915     $ 21,191,598     $ 53,270,744  

For the three and nine months ended September 30, 2010, the number of futures contracts closed was 190,478 and 556,000, respectively, and the number of forward currency contracts closed was 12,229 and 31,875, respectively.
 
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 gain (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.

13


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

   
Three Months Ended
September 30, 2009
   
Nine Months Ended
September 30, 2009
 
Types of Exposure
 
Net realized
gain
   
Net change
in unrealized
gain
   
Net realized
gain
   
Net change
in unrealized
gain
 
Futures contracts
                       
Agricultural
  $ 2,973,007     $ 882,036     $ 1,230,290     $ 2,449,321  
Currency
    (1,393,033 )     7,789,122       (6,233,611 )     9,014,283  
Energy
    (19,190,870 )     (7,920,562 )     (21,725,672 )     (5,939,995 )
Interest rate
    570,484       17,069,854       (9,651,428 )     (26,132 )
Metal
    (1,446,981 )     8,587,533       240,460       (2,678,206 )
Single stock futures
    (182,209 )     (28,738 )     (82,127 )     (28,886 )
Stock index
    31,688,972       1,591,361       (58,509,749 )     2,377,625  
Total futures contracts
    13,019,370       27,970,606       22,287,661       5,168,010  
                                 
Forward currency contracts
    2,706,661       4,543,894       (10,977,047 )     6,204,779  
                                 
Total futures and forward currency contracts
  $ 15,726,031     $ 32,514,500     $ 11,310,614     $ 11,372,789  

For the three and nine months ended September 30, 2009, the number of futures contracts closed was 180,519 and 421,267, respectively, and the number of forward currency contracts closed was 10,092 and 25,964, respectively.
 
4.
General Partner

At September 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 September 30, 2010 and December 31, 2009, this investment was valued at $193,438 and $189,240, respectively.
 
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, each year the General Partner receives from the Fund 1% of any profit earned by the Fund.  Conversely, the General Partner pays to the Fund 1% of any loss incurred by the Fund.  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.
 
14

 
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 September 30, 2010 and December 31, 2009, the Fund had margin requirements of $182,914,844 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 September 30, 2010 and 2009, actual administrative expenses were $2,415,068 and $2,201,007, respectively, which were below the 1% administrative expense limitation.  For the nine months ended September 30, 2010 and 2009, actual administrative expenses were $7,359,659 and $6,507,786, respectively, which were also below the 1% administrative expense limitation.

Additionally, during the three months ended September 30, 2010 and 2009, the General Partner voluntarily waived $395,898 and $556,610, respectively, of administrative expenses of the Fund.  During the nine months ended September 30, 2010 and 2009, the General Partner voluntarily waived $1,613,900 and $1,883,103, respectively, of administrative expenses.  Such amounts are included in Administrative expenses waived in the statements of operations.

At September 30, 2010 and December 31, 2009, $696,637 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 September 30, 2010 and December 31, 2009, the Fund received advance subscriptions of $22,783,029 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.

15

 
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 non-exempt 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 of 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 (UK 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 non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.
 
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 non-performance.  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 mark-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.
 
16

 
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 September 30, 2010, the statements of operations for the three and nine months ended September 30, 2010 and 2009, the statements of cash flows and changes in partners’ capital (net asset value) for the nine months ended September 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 September 30, 2010, results of operations for the three and nine months ended September 30, 2010 and 2009, cash flows and changes in partners’ capital (net asset value) for the nine months ended September 30, 2010 and 2009.  The results of operations for the three and nine months ended September 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.
 
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12. 
Financial Highlights

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


   
Three Months Ended
September 30, 2010
   
Three Months Ended
September 30, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Per Unit Operating Performance
                       
Net asset value per Unit at beginning of period
  $ 4,491.09     $ 5,937.65     $ 4,714.65     $ 6,122.44  
Income from operations
                               
Income from trading (1)
    287.33       381.22       225.14       292.65  
Net investment loss (1)
    (69.38 )     (65.13 )     (99.11 )     (100.72 )
Total income from operations
    217.95       316.09       126.03       191.93  
Net asset value per Unit at end of period
  $ 4,709.04     $ 6,253.74     $ 4,840.68     $ 6,314.37  
Total return (5)
    4.85 %     5.32 %     2.67 %     3.13 %
                                 
Other Financial Ratios
                               
Ratios to average net asset value
                               
Expenses prior to Trading Advisor incentive fees and General Partner 1% allocation (2) (3) (4)
    6.21 %     4.41 %     6.19 %     4.35 %
Trading Advisor incentive fees (5)
    --       --       0.58 %     0.57 %
General Partner 1% allocation (5)
    0.05 %     0.06 %     0.03 %     0.03 %
Total expenses
    6.26 %     4.47 %     6.80 %     4.95 %
Net investment loss (2) (3) (4) (6)
    (5.90 )%     (4.10 )%     (5.93 )%     (4.09 )%
 
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Nine Months Ended
September 30, 2010
   
Nine Months Ended
September 30, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Per Unit Operating Performance
                       
Net asset value per Unit at beginning of period
  $ 4,668.87     $ 6,118.04     $ 5,018.96     $ 6,460.05  
Income (loss) from operations
                               
Income from trading (1)
    266.51       352.16       92.08       119.66  
Net investment loss (1)
    (226.34 )     (216.46 )     (270.36 )     (265.34 )
Total income (loss) from operations
    40.17       135.70       (178.28 )     (145.68 )
Net asset value per Unit at end of period
  $ 4,709.04     $ 6,253.74     $ 4,840.68     $ 6,314.37  
Total return (5)
    0.86 %     2.22 %     (3.55 )%     (2.26 )%
                                 
Other Financial Ratios
                               
Ratios to average net asset value
                               
Expenses prior to Trading Advisor incentive fees and General Partner 1% allocation (2) (3) (4)
    6.18 %     4.37 %     6.25 %     4.42 %
Trading Advisor incentive fees (5)
    0.45 %     0.43 %     1.37 %     1.37 %
General Partner 1% allocation (5)
    0.01 %     0.03 %     (0.03 )%     (0.02 )%
Total expenses
    6.64 %     4.83 %     7.59 %     5.77 %
Net investment loss (2) (3) (4) (6)
    (5.96 )%     (4.14 )%     (5.65 )%     (3.82 )%
 
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 subscriptions 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.  Income 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 income 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 administrative expenses.  For the three months ended September 30, 2010 and 2009 the ratios are net of 0.13% and 0.23%, respectively, and for the nine months ended September 30, 2010 and 2009 the ratios are net of 0.19% and 0.27%, respectively, of average net asset value relating to the waivers of administrative expenses.  Both the nature and the amounts of the waivers are more fully explained in Note 7.
 
(3) The net investment loss includes interest income and excludes realized and unrealized gain from trading activities as shown in the statements of operations.  The total amount is then reduced by all expenses, excluding brokerage commissions, which are included in net trading income in the statements of operations.  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 Trading Advisor incentive fees and General Partner 1% allocation.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Using professional trading advisors, the Fund engages in the speculative trading of futures contracts, forward currency contacts and other financial instruments traded in the U.S. and internationally.  The Fund primarily trades futures contracts within six major market sectors:  stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.

Liquidity

Most U.S. 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.  Additionally, 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 five business 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.

At September 30, 2010, there are no known material trends, demands, commitments, events, or uncertainties at the present time that are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.

Capital Resources

The Fund intends to raise additional capital only through the sale of Units, 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 contracts, forward currency contracts and other financial instruments in subsequent periods.  It is not possible to estimate the amount, and therefore the impact, of future capital inflows and outflows related to the sale and redemption 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.

Results of Operations
The returns for Class A andUnits for the nine months ended September 30, 2010 and 2009 were as follows:

Class of Units
 
2010
   
2009
 
  Class A
    0.86 %     (3.55 )%
  Class B
    2.22 %     (2.26 )%

Past performance is not necessarily indicative of future results. Further analysis of the trading gains and losses is provided below.

2010

January
 
A Units of the Fund were down 4.56% for the month of January and B Units were down 4.42%.  The Fund ended the month lower as losses from global equity indices, energy, metals and currencies offset profits from interest rate instruments and agricultural commodities.  The Fund’s most significant losses came from global equity indices. The sector reversed from an upward trend that began in March of 2009.  The stock market experienced a sharp sell-off after investors reacted to the rowing concern of weaker global economic growth and the decision by the U.S. government to limit speculative trading by banks.  This price reversal went against the Fund’s long positions, which generated losses. China announced it was taking steps to limit bank lending in order to moderate its own growth.  The news pushed commodity prices lower, especially in energy and industrial metals.  The lower prices went against the Fund’s long positions in those sectors.  Interest rate instrument prices were higher this month, which helped recover some of the losses the sector generated in last month’s trading.
 
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