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EX-32.1 - SENECA GLOBAL FUND, L.P.v215642_ex32-01.htm
EX-31.1 - SENECA GLOBAL FUND, L.P.v215642_ex31-01.htm
EX-32.2 - SENECA GLOBAL FUND, L.P.v215642_ex32-02.htm
EX-31.2 - SENECA GLOBAL FUND, L.P.v215642_ex31-02.htm

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

FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2010

Commission file number: 000-53453

ASPECT GLOBAL DIVERSIFIED FUND LP

Organized in Maryland
IRS Employer Identification No.: 75-3236572

c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200
Rockville, Maryland 20850
Telephone: (240) 631-7600

Securities to be registered pursuant to Section 12(b) of the Act: NONE
 
Securities to be registered pursuant to Section 12(g) of the Act: Limited Partner Interests
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
 
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes T No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer ¨
Accelerated Filer ¨
   
Non-Accelerated Filer ¨
(Do not check if a smaller reporting company)
Smaller reporting company x

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

Aggregate market value of the voting and non-voting common equity held by non-affiliates: N/A.

 
 

 

Table of Contents
 
Part I
     
Item 1.
Business
3
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
11
Item 2.
Properties
11
Item 3
Legal Proceedings
11
Item 4
[Removed and Reserved]
11
     
Part II
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
11
Item 6.
Selected Financial Data
13
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
20
Item 8.
Financial Statements and Supplementary Data
20
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
20
Item 9A.
Controls and Procedures
20
Item 9B.
Other Information
21
     
Part III
     
Item 10.
Directors, Executive Officers and Corporate Governance
21
Item 11.
Executive Compensation
23
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
23
Item 13.
Certain Relationships and Related Transactions, and Director Independence
24
Item 14.
Principal Accounting Fees and Services
24
     
Part IV
     
Item 15.
Exhibits and Financial Statement Schedules
25
Signatures
 
27
 
 
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PART I
 
Item 1.  Business
 
Aspect Global Diversified Fund LP (“Fund”) is a Delaware limited partnership, formed on March 23, 2007. Using a professional trading advisor, Aspect Capital Limited, the Fund engages 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 does not currently utilize swaps or options as part of its trading strategy, but may employ them in the future.

Aspect Capital Limited currently is the Fund’s sole commodity trading advisor (“Trading Advisor”). The Trading Advisor trades the assets of the Fund using the Aspect Diversified Program (“Trading Program”), a proprietary, systematic trading system that deploys multiple trading strategies utilizing derivatives that seeks to identify and exploit directional moves in market behavior to a broad and diversified range of global markets including (but not limited to) equity indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.

The Fund issues units of limited partner interests (“Units”) in four Series: Series A, Series B, Series C and Series I, which represent units of fractional undivided beneficial interest in and ownership of the Fund. The Fund began investment operations of its Series I Units, Series B Units and Series A Units on September 1, 2008, November 1, 2008 and December 1, 2008, respectively. Series C Units will be issued in exchange for Series A, B and I Units in certain circumstances. Through March 25, 2011, no Series C Units have been issued.

At December 31, 2010, the aggregate capitalization of the Fund was $53,551,896, which consists of Series A Units of $15,995,450, Series B Units of $13,396,321, Series I Units of $23,550,313 and General Partner Units of $609,812. At December 31, 2010, the net asset value per unit of the Series A, B and I Units were $96.61, $105.77 and $121.80, respectively, and the net asset value per unit of the General Partner Units was $126.87.

The Fund maintains its margin deposits and reserves in cash, short-term U.S. Treasury securities, U.S. government sponsored enterprise notes, registered U.S. money market funds and short-term investment grade commercial paper in accordance with Commodity Futures Trading Commission (“CFTC”) rules. All interest income earned by the Fund accrues to the benefit of the Fund.

The Fund’s business constitutes only one segment for financial reporting purposes. The Fund does not engage in material operations in foreign countries (although it does trade in foreign forward currency contracts and on international futures markets), nor is a material portion of its funds derived from foreign customers.

General Partner

Under the Amended and Restated Limited Partnership Agreement (“Partnership Agreement”), management of all aspects of the Fund’s business and administration is carried out exclusively by its general partner, Steben & Company, Inc. (“General Partner”), a Maryland corporation organized in February 1989. The General Partner is registered with the CFTC as a commodity pool operator and introducing broker, and is also registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser and a broker dealer. The General Partner is a member of the National Futures Association (“NFA”) and the Financial Industry Regulatory Authority (“FINRA”).

The General Partner manages all aspects of the Fund’s business, including selecting and monitoring the Fund’s trading advisor(s); replacing the Trading Advisor if appropriate or adding other trading advisors; selecting the Fund’s futures broker(s), forwards and swap counterparties; accountants and attorneys; computing the Fund’s net asset value; reporting to limited partners; directing the investment of the Fund’s excess margin monies in interest-bearing instruments and/or cash; and processing subscriptions and redemptions. The General Partner maintains office facilities and furnishes administrative and clerical services to the Fund.

All organizational and initial offering costs were borne by the General Partner on behalf of the Fund without reimbursement. Please see the table under “Description of Current Charges” regarding compensation paid to the General Partner.

Trading Advisor

The Trading Advisor offers discretionary advisory services to institutional and high net worth investors in the speculative trading of multiple asset classes including, without limitation, futures, forwards, swaps, options and other derivative contracts, commonly referred to as “futures.”

 
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The Trading Advisor was established in 1997 by Anthony Todd, Dr. Eugene Lambert, Martin Lueck and Michael Adam, all of whom were involved in the development of Adam, Harding and Lueck (now part of Man Group plc), where they advanced the application of systematic quantitative techniques in managed futures investment. As of December 31, 2010, the Trading Advisor had total assets under management of approximately $4.3 billion (including notional), with approximately $4.2 billion (including notional) in the Trading Program. The Trading Advisor’s investment approach involves a strong focus on rigorous research, disciplined systematic implementation, robust risk management and efficient market access and execution.

The Trading Advisor is a limited liability company registered in England and Wales (registration number 3491169), which is regulated in the United Kingdom by the Financial Services Authority. Since October 1999, the Trading Advisor has been a member of the NFA, registration number 0296934, and has been registered with the CFTC as a commodity trading advisor (“CTA”) and commodity pool operator. The Trading Advisor has also been registered with the NFA as a principal of its CTA subsidiary, Aspect Capital Inc. (registration number 0346983), since August 2004. The Trading Advisor has also been registered with the SEC as an investment adviser since October 2003. The main business address of the Trading Advisor is Nations House, 103 Wigmore Street, London, W1U 1QS, England.

By maintaining a comparatively small exposure to any individual market, the aim of the Trading Program is to achieve meaningful long-term diversification. The Trading Program seeks to maintain positions in a variety of markets. Market concentration varies according to the strength of signals, volatility and liquidity, amongst other factors. The Trading Program employs a fully automated system to collect, process and analyze market data (including current and historical price data) and to identify and exploit directional trends in market behavior, trading across a variety of frequencies to exploit trends over a range of timescales. Positions are taken according to aggregate signals and are adjusted to manage risk.

The Trading Advisor seeks to trade the Fund’s assets allocated to it at approximately 1.2 times the leverage normally utilized by the Trading Advisor in the Trading Program (which typically trades at a margin to equity ratio of approximately 5% to 30%, or for the Fund, at a margin to equity ratio of approximately 6% to 36%). Because the Fund trades at approximately 1.2 times the normal trading level of the Trading Program, the Trading Advisor increases the number of trading positions per dollar of Fund net assets by 20%, and as a result, the Fund experiences a greater potential for both profit and loss, greater volatility and greater brokerage commission expenses relative to the normal trading level of the Trading Program. The margin to equity ratio of the Fund is determined by the positions indicated by the trading models utilized by the Trading Advisor. The positions taken vary based upon the trading signals generated by the models at any given time. However, the net asset value of the Fund will rise or fall over time due to subscriptions and redemptions, as well as any profits or losses, therefore the actual leverage ratio in the Fund at any given time may be somewhat higher or lower than 120% of the leverage normally utilized by the Trading Advisor. Adjustments to the trading level do not affect the General Partner fee (as defined below) percentage or calculation.
 
The General Partner may in its sole discretion replace the Trading Advisor and/or allocate the Fund’s assets to one or more additional trading advisors.

Selling Agents

The General Partner acts as a selling agent for the Fund. The General Partner has and intends to continue to appoint certain other broker-dealers registered under the Securities Exchange Act of 1934, as amended (“1934 Act”), and members of FINRA, to act as additional selling agents with respect to Series A, Series B and Series I Units. Selling agents are selected to assist in the making of offers and sales of Series A, Series B and Series I Units. Including the General Partner, the Fund currently has approximately 45 selling agents. The selling agents are not required to purchase any Series A, Series B and Series I Units, or sell any specific number or dollar amount of Series A, Series B and Series I Units, instead use their best efforts to sell such Units. Where the General Partner acts as the selling agent it retains the selling agent fee.

Futures Broker and Forward Currency Counterparty

The Fund utilizes Newedge USA, LLC as its futures broker and Newedge Group (UK Branch) as its forward currency counterparty (collectively “NUSA”). The General Partner may, in its discretion, have the Fund utilize other futures brokers, swap or forward counterparties if it deems it to be in the best interest of the Fund.

Newedge Group was formed on January 2, 2008 as a joint venture by Société Générale and Calyon to combine the brokerage activities previously carried by their respective subsidiaries which comprised the Fimat Group and the Calyon Financial Group of affiliated entities. Newedge Group (UK Branch) is a branch of Newedge Group and lead regulated in France as a bank by the CECEI (Banque de France) and supervised by Commission Bancaire and the Autorité des Marchés Financiers for the conduct of investment services, and regulated by the Financial Services Authority for the conduct of business in the UK.

 
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Affiliates of NUSA may execute transactions opposite the Fund as principal.

Cash Management Securities Broker

The Fund utilizes UBS as its cash management securities broker. The General Partner may, in its discretion, have the Fund utilize other cash management securities brokers if it deems it to be in the best interest of the Fund.

UBS is a Delaware corporation. The Fund maintains an account with UBS through its Chicago office located at UBS Tower, One North Wacker Drive, Chicago, IL 60606. This account is utilized by the Fund for the purpose of investing margin excess balances typically in short-term fixed and similar interest-bearing instruments. In addition, the Fund may maintain a money market account with UBS.

Description of Current Charges

Charges
 
Amount
     
Trading Advisor Management Fee
 
Each Series of Units incurs a monthly management fee equal to 1/12th of 2% of the Fund’s trading level allocated to the Trading Program, payable quarterly in arrears to the Trading Advisor. Presently, the Fund’s trading level is approximately 1.2 times its net asset value. Accordingly, the trading advisor management fee represents approximately 2.4% of the Fund’s average net asset value for the year.
     
Trading Advisor Incentive Fee
 
Each Series of Units incurs a quarterly incentive fee equal to 20% of any Trading Profits, payable in arrears to the Trading Advisor. “Trading Profits” are the sum of: (i) the net of all realized profits and losses on account commodity positions liquidated during the quarter, plus (ii) the net of all unrealized profits and losses net of accrued brokerage expenses, NFA fees and give up fees on account commodity positions open as of the quarter end, minus (iii) the net of all unrealized profits and losses on account commodity positions open at the end of the previous quarter end, and (iv) any cumulative net realized losses (which do not include incentive fee expenses) from the Trading Advisor’s trading of the account carried forward from all previous quarters since the last quarter for which an incentive fee was payable to the Trading Advisor, and (v) any fees or expenses of the Fund (except for accrued incentive fees). Trading Profits do not include interest income earned by the Fund.
 
Trading Profits are calculated on the basis of assets allocated to the Trading Advisor. In determining Trading Profits, any trading losses generated by the Trading Advisor for the Fund in prior periods are carried forward, so that the incentive fee is paid only if and to the extent the profits generated by the Trading Advisor for the period exceed any losses from prior periods. The loss carry-forward is proportionally reduced if and to the extent the Fund reduces the amount of assets allocated to the Trading Advisor.
     
Brokerage Expenses
 
Total charges paid to the futures brokers/forward currency counterparty have and are expected to average less than $4.00 per round-turn trade, although the futures commission merchant’s brokerage commissions and trading fees, as well as the over-the-counter foreign exchange counterparty fees, are determined on a contract-by-contract basis are expected to range from $1.00 to $5.20 per round-turn. Some foreign contracts could be higher. Based on the foregoing estimate, each Series of Units is estimated to pay the brokers their pro-rated share of the actual monthly brokerage expenses of approximately 1/12th of 0.30% of the Fund’s month-end net asset value, payable in arrears. These brokerage expenses cover all actual brokerage and trading costs of the Fund. The exact amount of such brokerage commissions and trading fees to be incurred is impossible to estimate and will vary based upon a number of factors including the trading frequency, the types of instruments traded, transaction sizes, degree of leverage employed and transaction rates in effect from time-to-time. The compensation paid to the futures brokers/forward currency counterparty will not, under any circumstance, exceed the maximum permissible brokerage expense of 14% of the average annual net asset value of the Fund, as established by the North American Securities Administrators Association
 
 
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Charges
 
Amount
     
Organizational and Initial Offering Costs
 
All organizational and initial offering costs were borne by the General Partner on behalf of the Fund without reimbursement.
     
General Partner Fee
 
Each Series of Units, other than General Partner Units, incurs a monthly General Partner fee, equal to 1/12th of 1.10% of the Fund’s month-end net asset value, payable in arrears. The General Partner fee is paid to the General Partner to compensate it for its services to the Fund as general partner and commodity pool operator.
     
Administrative Expenses
 
Each Series of Units reimburses the General Partner for actual monthly administrative expenses to various third-party service providers, including the General Partner, up to 1/12th of 0.95% of the Fund’s month-end net asset value, payable quarterly in arrears. Actual administrative expenses may vary, but will not exceed 0.95% of the Fund’s net asset value per annum.
 
The administrative expenses include all actual accounting, audit, legal, administrative, offering and other back office expenses related to the administration of the Fund and all associated costs incurred by the Fund.
     
Offering Expenses
 
Each Series of Units, other than Series C and General Partner Units, reimburses the General Partner for actual ongoing offering expenses, up to 1/12th of 0.75% of the Fund’s month-end net asset value, payable monthly in arrears. Actual ongoing offering costs in excess of this limitation are absorbed by the General Partner.
 
If the Fund terminates prior to completion of payment to the General Partner for the unreimbursed offering expenses incurred through the date of such termination, the General Partner will not be entitled to any additional payments, and the Fund will have no further obligation to the General Partner.
     
Selling Agent Fees
 
Series A Units incur a monthly selling agent fee equal to 1/12th of 2.00% of the outstanding Series A Units’ month-end net asset value, payable in arrears, subject to the Fee Limit (as defined below). The General Partner, in turn, pays the selling agents an upfront fee of 2.00% of the aggregate subscription amount for the sale of Series A Units. Beginning in the 13th month, the General Partner then pays the selling agents a monthly selling agent fee in arrears equal to 1/12th of 2.00% of the outstanding Series A Units’ month-end net asset value, subject to the Fee Limit.
 
If the selling agent fees are not paid to the selling agents, or where the General Partner acts as the selling agent, such portions of the selling agent fees are retained by the General Partner.
 
Series B, C and I Units do not incur selling agent fees.
     
Broker Dealer Servicing Fees
 
Series A Units incur a monthly broker dealer servicing fee equal to 1/12th of 0.15% of the outstanding Series A Units’ month-end net asset value, payable in arrears, subject to the Fee Limit.
 
Series B Units that are not held by broker dealers who act as custodian for the benefit of limited partners incur a monthly broker dealer servicing fee equal to 1/12th of 0.60% of the outstanding Series B Units’ month-end net asset value, payable in arrears, subject to the Fee Limit. Where the General Partner acts as the selling agent, it retains these fees.
 
Series C and I Units, and those Series B Units that incur a broker dealer custodial fee (as described below), do not incur a broker dealer servicing fee.
 
 
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Charges
 
Amount
     
Broker Dealer Custodial Fee
 
Series B Units that are held by broker dealers who act as custodian for Series B Units for the benefit of the limited partners incur a monthly broker dealer custodial fee equal to 1/12th of 0.60% of the outstanding Series B Units’ month-end net asset value, payable in arrears, subject to the Fee Limit. Where the General Partner acts as the selling agent, it retains these fees.
 
Series A, C and I Units, and Series B Units that incur a broker dealer servicing fee (as described above), do not incur a broker dealer custodial fee.
 
In no event will a limited partner holding Series B Units incur both a broker dealer servicing fee and a broker dealer custodial fee.
     
Fee Limit
 
The Fee Limit is the total amount of selling agent commissions, broker dealer servicing fees paid to selling agents, payments for wholesalers, payments for sales conferences, and other offering expenses that are items of compensation to FINRA members (but excluding, among other items, the production and printing of prospectuses and associated envelopes, folders and printed pieces provided with the prospectuses, as well as various legal and regulatory fees), paid by particular Series A, B or I Units when they equal 10.00% of the original purchase price paid by holders of those particular Units.
 
Each limited partner who owns Series A, Series B or Series I Units will continue to incur selling agent commissions, offering expenses and the broker dealer servicing fee, depending upon which expenses are applicable to the particular Series of Units, until the aggregate of such expenses reaches the Fee Limit.
 
Investors in the Fund will not incur expenses subject to the Fee Limit calculation in excess of the Fee Limit. Series C Units will be issued in exchange for an investor’s Series A, B or I Units to any limited partner who owns Series A, B or I Units when the General Partner determines that the Fee Limit has been reached as of the end of any month, or it anticipates that the Fee Limit will be reached during the following month. As a result, it is possible for a limited partner to have its Series A, B or I Units exchanged for Series C Units prior to reaching the Fee Limit. If a limited partner’s Series A, B or I Units are exchanged for Series C Units prior to reaching the Fee Limit, the General Partner will not seek additional fees from such limited partner.
     
Redemption Fee
 
Series A Units redeemed prior to the first anniversary of the subscription date will be subject to a redemption fee equal to the product of (i) 2.00% of the subscription price for such Series A Units on the subscription date, divided by twelve (ii) multiplied by the number of months remaining before the first anniversary of the subscription date. Limited partners will not be required to pay any redemption fees if such limited partners are subject to a mandatory redemption of their Units within the first year of purchase.
 
No other Series of Units will incur the redemption fee.
     
Extraordinary Fees and Expenses
  
The Fund will pay all extraordinary fees and expenses incurred by the Fund, if any, as determined by the General Partner. Extraordinary fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses will also include material expenses which are not currently anticipated obligations of the Fund or of managed futures funds in general. Routine operational, administrative and other ordinary expenses will not be deemed to be extraordinary expenses.

Market Sectors

The Fund trades speculatively, through the allocation of its assets to the Trading Advisor, in U.S. and international futures markets, and may trade or hold futures, forwards, swaps or options. Specifically, the Fund trades futures on interest rates, stock indices, energy products, currencies, metals and agricultural commodities. The Fund also trades forward currency contracts and may trade options, swaps and other forwards other than currencies in the future.

 
7

 

Market Types

The Fund trades on a variety of U.S. and international futures exchanges. As in the case of its market sector allocations, the Fund’s commitments to different types of markets - U.S. and non-U.S., regulated and non-regulated - differ substantially from time to time, as well as over time, and may change at any time if the Fund’s Trading Advisor, with the approval of the General Partner, determines such change to be in the best interests of the Fund.

Conflicts of Interest

The General Partner and its principals have organized and are involved in other business ventures, and may have incentives to favor certain of these ventures over the Fund. The Fund will not share in the risks or rewards of such other ventures. However, such other ventures will compete for the General Partner’s and its principals’ time and attention which might create other conflicts of interest. The Partnership Agreement does not require the General Partner to devote any particular amount of time to the Fund.

The General Partner or any of its affiliates or any person connected with it may invest in, directly or indirectly, or manage or advise other investment funds or accounts which invest in assets which may also be purchased or sold by the Fund. Neither the General Partner nor any of its affiliates nor any person connected with it is under any obligation to offer investment opportunities of which any of them becomes aware to the Fund or to account to the Fund in respect of (or share with the Fund or inform the Fund of) any such transaction or any benefit received by any of them from any such transaction, but will allocate such opportunities on an equitable basis between the Fund and other clients.

Incentive Fee to the Trading Advisor

The Trading Advisor is entitled to an incentive fee, therefore the Trading Advisor may have an incentive to cause the Fund to make riskier or more speculative investments than it otherwise would.

Personal Trading

The Trading Advisor, the futures broker, the General Partner and the principals and affiliates thereof may trade commodity interests for their own account. In such trading, positions might be taken which are opposite those of the Fund, or that compete with the Fund’s trades.

Trades by the Trading Advisor and its Principals

The Trading Advisor and its principals may trade for their own accounts in addition to directing trading for client accounts. Therefore, the Trading Advisor and its principals may be deemed to have a conflict of interest concerning the sequence in which orders for transactions will be transmitted for execution. Additionally, a potential conflict may occur when the Trading Advisor and its principals, as a result of a neutral allocation system, testing a new trading system, trading their own proprietary account(s) more aggressively, or any other actions that would not constitute a violation of fiduciary duties, take positions in their own proprietary account(s) which are opposite, or ahead of, the position(s) taken for a client. Proprietary accounts, in trading a new or experimental system, may enter the same markets earlier than (either days before or on the same day) client accounts traded at the same or other futures commission merchants. Since the principals of the Trading Advisor trade futures and foreign exchange for their own accounts, there is potentially a conflict of interest between these principals and the Trading Advisor’s clients when allocating prices on trades that are executed by a futures commission merchant at multiple prices. In such instances, the Trading Advisor uses a non-preferential method of fill allocation. The clients of the Trading Advisor will not be permitted to inspect the personal trading records of the Trading Advisor or NUSA, or their respective principals, or the written policies relating to such trading. Client records are not available for inspection due to their confidential nature.

Effects of Speculative Position Limits

The CFTC and domestic exchanges have established speculative position limits on the maximum net long or net short futures position which any person, or group of persons, or group of persons acting in concert, may hold or control in particular futures contracts or options on futures traded on U.S. commodity exchanges. All commodity accounts owned or controlled by the Trading Advisor and its principals are combined for speculative position limits. Because speculative position limits allow the Trading Advisor and its principals to control only a limited number of contracts in any one commodity, the Trading Advisor and its principals are potentially subject to a conflict among the interests of all accounts the Trading Advisor and its principals control which are competing for shares of that limited number of contracts. There exists a conflict between the Trading Advisor’s interest in maintaining a smaller position in an individual client’s account in order to also provide positions in the specific commodity to other accounts under management and the personal accounts of the Trading Advisor and its principals. The General Partner does not believe, however, that the position limits are likely to impair the Trading Advisor’s trading for the Fund, although it is possible the issue could arise in the future.

 
8

 

To the extent that position limits restrict the total number of commodity positions which may be held by the Fund and those other accounts, the Trading Advisor will allocate the orders equitably between the Fund and such other accounts. Similarly, where orders for the same commodity given on behalf of both the Fund and other accounts managed by the Trading Advisor cannot be executed in full, the Trading Advisor will equitably allocate between the Fund and such other accounts that portion of the total quantity able to be executed.

Other Activities of the Principals of the Advisor

Certain principals of the Trading Advisor are currently engaged, and expect in the future to be engaged, in other activities, some of which may involve other business activities in the futures industry. In addition, each principal of the Trading Advisor may be engaged in trading for his own personal account. The principals will have a conflict of interest between their obligations to devote all of their attention to client accounts and their interests in engaging in other activities. However, the principals of the Trading Advisor intend to devote substantial attention to the operation and activities of the Trading Advisor consistent with the division of responsibilities among them as is described herein.

Operation of Other Commodity Pools

The General Partner currently operates two other commodity pools and might have an incentive to favor those pools over the Fund.

Fiduciary Responsibility of the General Partner

The General Partner has a fiduciary duty to the Fund to exercise good faith and fairness in all dealings affecting the Fund. If a limited partner believes this duty has been violated, he/she may seek legal relief under applicable law, for himself/herself and other similarly situated partners, or on behalf of the Fund. However, it may be difficult for limited partners to obtain relief because of the changing nature of the law in this area, the vagueness of standards defining required conduct and the broad discretion given the General Partner in the Partnership Agreement and the exculpatory provisions therein.

Selling Agents

The receipt by the selling agents and their registered representatives of continued sales commissions and/or servicing fees for Units remaining in the Fund may give them an incentive to advise the limited partners to remain investors in the Fund. These payments cease to the extent the limited partners withdraw from the Fund.

The General Partner Serving as Selling Agent

The General Partner also serves as a selling agent for the Fund. As a result, the fees and other compensation received by the General Partner as selling agent have not been independently negotiated.

Futures Broker

The futures broker effects transactions for customers (including public and private commodity pools), including the Fund, who may compete with the Fund’s transactions including with respect to priorities or order entry. Since the identities of the purchaser and seller are not disclosed until after the trade, it is possible that the futures broker could effect transactions for the Fund in which the other parties to the transactions are the futures broker’s officers, directors, employees, customers or affiliates. Such persons might also compete with the Fund in making purchases or sales of commodities without knowing that the Fund is also bidding on such commodities. Since orders are filled in the order in which they are received by a particular floor broker, transactions for any of such persons might be executed when similar trades for the Fund are not executed or are executed at less favorable prices. However, in entering orders for the Fund and other customer accounts, including with respect to priorities of order entry and allocations of executed trades, CFTC regulations prohibit a futures commission merchant from utilizing its knowledge of one customer’s trades for its own or its other customer’s benefit.

 
9

 

Regulations

The Fund has registered its offering of Units with the SEC pursuant to the U.S. Securities Act of 1933, as amended (“1933 Act”), and is registered under the 1934 Act. As such, the Fund is subject to the regulations of the SEC and the reporting requirements of the 1933 Act and 1934 Act. As a commodity pool, the Fund is subject to the regulations of the CFTC, an agency of the U.S. Government which regulates most aspects of the commodity futures industry; rules of the NFA, an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of futures commission merchants, futures broker and Interbank market makers through which the Fund trades.

Under the Commodity Exchange Act (“CEAct”), commodity exchanges and commodity futures trading are subject to regulation by the CFTC. The NFA, a registered futures association under the CEAct, is the only non-exchange self-regulatory organization for commodity industry professionals. The CFTC has delegated to the NFA responsibility for the registration of commodity trading advisors, commodity pool operators, futures commission merchants, introducing brokers and their respective associated persons and floor brokers. The CEAct requires commodity pool operators, commodity trading advisors and futures brokers or futures commission merchants such as the Fund’s futures broker to be registered and to comply with various reporting and recordkeeping requirements. The General Partner and the Fund’s futures broker are members of the NFA. The CFTC may suspend a commodity pool operator’s or trading advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions, or as the result of violations of the CEAct or rules and regulations promulgated thereunder. In the event the General Partner’s registration as a commodity pool operator were terminated or suspended, the General Partner would be unable to continue to manage the business of the Fund. Should the General Partner’s registration be suspended, dissolution of the Fund might result.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Reform Act”) was enacted in July 2010. The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time. The Reform Act will mandate that a substantial portion of over-the-counter derivatives must be executed in regulated markets and submitted for clearing to regulated clearinghouses. The mandates imposed by the Reform Act may result in the Fund bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees.

The Reform Act also amended the definition of eligible contract participant, and the CFTC is interpreting that definition in such a manner that the Fund may no longer be permitted to engage in forward currency transactions by directly accessing the interbank market. Rather, when the Reform Act goes into effect in July 2011, the Fund may be limited to engaging in retail forex transactions which could limit the Fund’s potential forward currency counterparties to futures commission merchants and retail foreign exchange dealers. Thus, limiting the Fund’s potential forward currency counterparties could lead to the Fund bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees. The retail forex markets could also be significantly less liquid than the interbank market. Moreover, the creditworthiness of the futures commission merchants and retail foreign exchange dealers with whom the Fund may be required to trade could be significantly weaker than the creditworthiness of the financial institutions with whom the Fund currently engages for its forward currency transactions. Although the impact of requiring the Fund to conduct forward currency transactions in the retail market could be substantial, the full scope is currently unknown and the ultimate effect could also be negligible.

Additionally, the CFTC and certain commodity exchanges have established limits on the maximum net long and net short positions which any person, including the Fund, may hold or control in particular commodities. Most exchanges also limit the maximum changes in futures contract prices that may occur during a single trading day. The Fund also trades in dealer markets for forward currency contracts, which are not regulated by the CFTC. Federal and state banking authorities do not regulate forward trading or forward dealers. In addition, the Fund trades on foreign commodity exchanges, which are not subject to regulation by any U.S. government agency. In January 2011, the CFTC proposed a separate position limits regime for 28 so-called “exempt” (i.e. metals and energy) and agricultural futures and options contracts and their economically equivalent swap contracts. Position limits in spot months are proposed to be 25% of the official estimated deliverable supply of the underlying commodity and in a non-spot month a percentage of the average aggregate 12-month rolling open interest in all months (swaps and futures) for each contract. The General Partner believes that the proposed limits are sufficiently large that if adopted, they should not restrict the Fund’s trading strategy.

Competition

The Fund operates in a competitive environment in which it faces several forms of competition, including, without limitation, the following:

 
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·
The Fund competes with other commodity pools and other investment vehicles for investors.
 
 
·
The Trading Advisor may compete with other traders in the markets in establishing or liquidating positions on behalf of the Fund.
 
Available Information

The Fund files Forms 10-K, 10-Q, 8-K, 3 and 4, as required, with the SEC. The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Additional information about the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Reports filed electronically with the SEC, including the Fund’s annual report, may be found at http://www.sec.gov.

Reports to Security Holders

None.

Enforceability of Civil Liabilities Against Foreign Persons

None.

Item 1A.       Risk Factors

A smaller reporting company, as defined by Rule 12b-2 of the 1934 Act, is not required to provide the information under this Item.

Item 1B.       Unresolved Staff Comments

None.

Item 2.Properties

The Fund does not use any physical properties in the conduct of its business. Its assets currently consist of futures and other contracts, cash and high grade short-term fixed income securities with maturities of less than one year.

The General Partner’s principal business office is in Rockville, Maryland.


Item 3.Legal Proceedings

None.

Item 4.[Removed and Reserved]


PART II

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information

There is no established public trading market for Units of the Fund.

Units of the Fund are offered continuously to the public by selling agents on a best-efforts basis at the month-end net asset value per unit. The minimum investment is $10,000. Currently, Units of each Series are issued as of the commencement of business on the first business day of each month and are valued at the net asset value per unit of the relevant Series on the last day of the preceding month.

 
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The Fund issued General Partner Units to the General Partner to memorialize its ownership interest in the Fund. The General Partner may determine and adjust the number of General Partner Units which represent the General Partner’s interest in the Fund.

Holders

As of February 28, 2011, there were 850, 556 and 910 holders of Series A, B and I Units, respectively. There were no Series C Unit holders as of February 28, 2011.

Dividends

The General Partner has sole discretion to determine what distributions, if any, the Fund will make to its limited partners. The General Partner has not made any distributions as of the date hereof.

Securities Authorized for Issuance under Equity Compensation Plans

None.

Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities

There were no sales of unregistered securities of the Fund during the year ended December 31, 2010.

The Fund’s Registration Statement on Form S-1 (Registration No.: 333-148049), registering $60,000,000 Series A Units, $24,000,000 Series B Units and $36,000,000 Series I Units, was declared effective on August 12, 2008 with information with respect to the use of proceeds from the sale of Units being disclosed therein. The Fund’s initial offering period was from August 12, 2008 through August 31, 2008. Thereafter, the Fund began investment operations of its Series A Units, Series B Units and Series I Units on December 1, 2008, November 1, 2008 and September 1, 2008, respectively.

The proceeds from the sale of registered securities are deposited in the Fund’s bank and brokerage accounts for the purpose of engaging in trading activities in accordance with the Fund’s trading policies and the Trading Advisor’s Trading Program.

Issuer Purchases of Equity Securities.
 
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. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed.

Redemptions of Units during the fourth quarter of 2010 were as follows:

   
October
   
November
   
December
   
Total
 
A Units
                       
Units redeemed
          189.9555       171.3479       361.3034  
Average net asset value per unit
          $ 91.40     $ 96.61     $ 93.87  
                                 
B Units
                               
Units redeemed
    800.1309             179.2003       979.3312  
Average net asset value per unit
  $ 105.11             $ 105.77     $ 105.23  
                                 
I Units
                               
Units redeemed
    2,841.5100       733.8602             3,575.3702  
Average net asset value per unit
  $ 120.92     $ 115.03             $ 119.71  
 
 
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Item 6.          Selected Financial Data
 
A smaller reporting company, as defined by Rule 12b-2 of the 1934 Act, is not required to provide the information under this Item.

Item 7.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Utilizing the Trading Advisor, the Fund invests the proceeds from its offering of Units in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the U.S. and internationally.

Liquidity

At December 31, 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 through the continued sale of Units offered pursuant to the offering, and does not intend to raise 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 investment in futures contracts, etc. in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows funds 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.

Off-Balance Sheet Risk

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

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

In the case of forward currency contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty risk. The General Partner utilizes only those counterparties that it believes to be creditworthy for the Fund. There can be no assurance, however, that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund. All positions of the Fund are valued each day on a mark-to-market basis.

The Fund invests in U.S. Treasury securities, U.S. government sponsored enterprise notes, corporate notes and investment grade commercial paper with maturities of less than one year. Investment grade commercial paper is an unsecured, short-term debt instrument issued by a corporation with maturities rarely longer than 270 days. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt rating will be used. As commercial paper is not backed by the full faith and credit of the U.S. government, if the issuing corporation defaults on their obligations to the Fund, the Fund bears the risk of loss of the amount expected to be received.

 
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Results of Operations

The returns for each Series of Units for the years ended December 31, 2010 and 2009 were:

Series of Units
 
2010
   
2009
 
 Series A
    12.77 %     (17.87 )%
 Series B
    14.55 %     (16.61 )%
 Series I
    15.25 %     (16.01 )%

Past performance is not indicative of expected future financial condition or results of operations. Further analysis of the trading gains and losses is provided below.

2010

January
 
The Fund’s Series A, B and I Units were down 3.61%, 3.49% and 3.44%, respectively, for the month of January 2010. After positive performance in the first two weeks of the year, a reversal in investor risk appetite resulted in a loss for the calendar month. The change in sentiment was driven, in part, by disappointing earnings announcements and fears over potential monetary tightening in China as the People’s Bank of China increased banks’ reserve requirements and introduced measures aimed at curbing lending. As a result, the Fund’s long positions in stock indices and the net short exposure to the U.S. dollar saw losses. Long positions in fixed income markets benefited from the move toward risk aversion, some UK data and comments by both the Bank of England and the ECB. In addition, the strengthening U.S. dollar and poorer growth outlook also resulted in many commodities markets selling off. This was particularly detrimental to the Fund’s long positioning in the oil complex and industrial metals. Oil prices faced additional downward pressure due to an increase in inventories and milder weather in the Unites States. In agriculturals, gains on the long exposure to sugar markets, whose price rallied due to supply concerns, more than offset losses on long positions in the soy complex and cotton.

February
 
The Fund’s Series A, B and I Units ended the month of February up 2.44%, 2.57% and 2.63%, respectively. The month of February was, to a large degree, dominated by news relating to the debt crisis within the Euro area. The prevailing macroeconomic sentiment oscillated between risk aversion and inflationary concerns with the former being marginally dominant over the calendar month. As a result, the Fund saw profits from long positions in both short-term interest rate futures contracts and some bond markets. Positive performance was also seen in other sectors with long positions in energy contracts benefiting from the further upward move in prices during the middle of the month and the weakness of the EU euro and British pound providing opportunity for profits in the currencies sector. Smaller positive contributions were seen from small long exposures in both stock indices and metals; the price action in each of these sectors were similar as a sell-off at the beginning of the month was followed by a recovery during the remainder of the month as risk aversion fears dominated. The largest negative performance was seen in agricultural commodities. The longer-term bull market in sugar reversed sharply from multi-year highs as output in both Brazil and India rose.

March
 
The Fund’s Series A, B and I Units were up 4.06%, 4.19% and 4.24%, respectively, for the month of March 2010. Data pointing to economic recovery drove the prices of risky assets higher, despite some continued concerns about European sovereign debt mid-month. Consequently, global stock markets rallied, producing good profits for the Fund, and bond markets sold off. Japanese Government Bonds were the Fund’s worst performer. In currencies, emerging market and commodity currencies strengthened against the U.S. dollar to the benefit of the Fund’s positioning, while European interest rate markets were buoyed by concerns over Greece and poor economic data out of the UK Commodities markets generally followed the direction of stock markets and finished the month higher. In energies, this resulted in positive performance on long positions in the oil complex, but the Fund also profited on the short side from the decline in the natural gas price following milder weather in the U.S. and a build-up in inventories. In agricultural commodities, positive performance on short positions in corn and wheat was offset by losses in sugar and coffee. The sugar losses were incurred early in the month when prices fell to 11-week lows as the supply outlook improved. Good profits were seen in industrial metals, especially nickel which reached 22-month highs.

 
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April
 
The Fund’s Series A, B and I Units were up 1.82%, 1.95% and 2.01%, respectively, for the month of April 2010. Competing drivers of returns characterized the month. Strong economic data and positive earnings announcements aided long equity positions in the early part of the month, but these gains were mostly given back as sentiment reversed following the announcement of SEC charges against Goldman Sachs and sovereign credit downgrades in Europe. The latter events, however, provided good opportunities for the Fund’s long fixed income positions, notably in Europe and Japan. Positive returns in currency markets were driven by a weakening EU dollar and emerging market exposure. Performance in commodities was mixed. The Fund benefited from a continued rise in the oil market, but incurred modest losses in other commodity sectors. Agricultural markets painted a mixed picture with gains on short positions in sugar being offset by losses on short exposures to grains. Base metals declined following more bearish economic sentiment towards the end of the month, resulting in small losses on long positions in aluminum and copper.

May
 
The Fund’s Series A, B and I Units finished the month down 4.01%, 3.88% and 3.83%, respectively. Most of the performance in the month was driven by a sell-off in stock indices and commodities which hurt the Fund’s long exposures in these sectors. Fears of contagion in the European debt crisis drove stock markets downward. Energy markets also fell sharply during this period and these two sectors finished as the Fund’s worst performers for the month. Their performance impact for the remainder of the month was relatively muted as the fund’s systematic trading models adjusted position sizes to offset the importance of the price reversals. Performance in industrial metals followed a similar pattern, but was partly offset by profits in gold, which hit new highs mid-month. Fixed income markets also saw positive performance throughout the month as general risk aversion saw these markets rally. The best performances came from long positions in European and UK markets at both ends of the yield curve. The strengthening U.S. dollar yielded good profits for long positions against the major European currencies, but these were offset by losses elsewhere in the sector, most notably against the Australian dollar.
 
June
 
The Fund’s Series A, B and I Units finished the month up 0.80%, 0.93% and 0.98%, respectively. Long positions in the fixed income markets drove gains as prices rallied toward the end of the month. This happened as investors questioned the sustainability of global growth given the poor economic data out of the U.S., Japan, China and concerns about the creditworthiness of European banks and governments. The central bank’s commitment to keep rates at current levels also helped boost the price of interest rate futures. The currencies sector was the worst performer as losses on the short Swiss Franc and British Pound exposures offset small gains on the short Euro exposure. The Swiss National Bank decided that deflationary risks were no longer a threat and stopped limiting the Swiss Franc’s strength, while in the UK, the emergency budget and commentary surrounding it caused the British Pound to strengthen against the U.S. dollar. In agriculturals, NYMEX front-month coffee futures rallied 22% over the course of June, to the detriment of the Fund’s short position. Price action was driven by concerns about global supply. In energies, natural gas prices rallied in the first half of the month due to a combination of short covering and bullish inventory data.
 
July
 
The Fund’s Series A, B and I Units finished the month down 1.98%, 1.86% and 1.81%, respectively. In a similar pattern to recent months, positive performance was seen in currency markets and from long positions in the fixed income sector. However, short exposures in equities and commodities experienced losses as these sectors generally rallied, reversing the downward trends of previous months. The fixed income performance was driven by the U.S. and UK markets. In the U.S., weaker than expected economic data released in the middle of the month pushed both government bonds and short-term interest rate futures higher. In the UK, the trend was briefly derailed by unexpectedly strong GDP figures but prices recovered following the Bank of England statement playing down the significance of this on the outlook for interest rates. Global equity markets rallied sharply, helped by strong earnings results and economic data in Europe and the UK, as well as the relatively benign impact of the EU banks’ stress testing results. Energy and base metal markets also joined in this rally, hurting the Fund’s short exposures, especially in Zinc. By contrast, Gold prices fell back in July as economic worries waned, causing some giveback of recent profits. Finally, agriculturals produced mixed results. The Fund’s short position in wheat suffered as the market saw its biggest monthly gain since 1973 driven by supply concerns over droughts in Russia and Ukraine. However, long exposure in coffee profited as prices reached a 12-year high.
 
August
 
The Fund’s Series A, B and I Units finished the month up 7.90%, 8.04% and 8.09%, respectively. Performance was largely driven by the Fund’s long positions in fixed income, particularly bonds. August was characterized by risk-aversion in markets, which was fueled by poor economic data out of the U.S. and comments Bernanke made early in the month. The UK, Europe and Japan also released weak data. Consequently, the majority of global stock markets sold off and posted losses for the month. Against this backdrop, fixed income markets rallied worldwide and the U.S. dollar strengthened. Losses on the Fund’s net short exposure to the U.S. dollar were partially offset by gains on long exposures to other safe-haven currencies, namely, the Swiss franc and the Japanese yen. The yen hit 15-year highs in August and the Bank of Japan met several times to discuss the yen’s strength. In energies, gains on short positions in crude oil and natural gas were reduced by variable exposures to gas oil and reformulated gasoline. Crude oil and natural gas prices declined as a result of the weaker growth outlook and risk aversion. Natural gas was further affected by bearish inventory data. Performance in agriculturals was mostly driven by losses on long positions in Robusta coffee. After range bound behavior for most of the month, prices pulled back sharply on the 24th following strong export numbers out of Vietnam.

 
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September
 
The Fund’s Series A, B and I Units finished the month up 0.98%, 1.11% and 1.16%, respectively. The month started with investor optimism following strong manufacturing numbers out of China and the U.S. Consequently, fixed income markets sold off, to the detriment of the Fund’s long positions, while equity markets rallied. However, the prices of U.S. bonds recovered following the U.S. Federal Reserve’s comments towards the end of the month about the possibility of a further round of quantitative easing. Similarly, Japanese Government bonds prices also recovered following the Bank of Japan’s mid-month market action in an effort to weaken the Yen. Against this backdrop, the U.S. dollar declined to the benefit of the Fund’s net short positioning, particularly against commodity currencies and the Swiss franc. Long positions in emerging market currencies also contributed positively. Performance in commodities was mixed. Strong performance in agriculturals was driven by gains on long positions in cotton, the soy complex, sugar and corn. Grain prices rallied after delays in the U.S. harvest and poor crop yields; cotton reached 15-year highs as poor weather in China and floods in Pakistan damaged crops. In energies, oil prices gained on the back of a weaker U.S. dollar and an unexpected drop in inventories towards the end of the month, to the detriment of the Fund’s short positioning. Lastly, performance in metals was largely driven by gains from gold and silver, whose prices rallied on the back of safe-haven buying.
 
October
 
The Fund’s Series A, B and I Units finished the month up 3.95%, 4.08% and 4.13%, respectively. Positive stock market earnings announcements, continued speculation about the magnitude and extent of a further round of quantitative easing and a general increase in risk appetite saw stocks and commodity markets rise in October against a backdrop of a further weakening U.S. dollar and increasing Treasury yields. The Fund’s long bond positions incurred losses as the threat of a double-dip recession waned. For the first time ever, U.S. TIPS maturing in five years time were sold at a negative yield, highlighting the overwhelming demand for inflation protection. Meanwhile the Fund made gains in stocks and currencies. The U.S. dollar continued its slide against major trading partners, reaching 15-year lows against the Japanese yen and briefly touching parity with the commodity-led Australian dollar. Most stock indices rose in the month but Japan struggled and profits were made on both the long and short positions in this sector. The Fund also capitalized on its commodity positions, particularly in agriculturals and precious metals. A report by the USDA early in the month highlighted the effects of adverse weather on harvests in grains and softs making the agricultural sector the Fund’s best performer for the month. Precious metals rallied in response to the weakening dollar while industrial metals such as copper and zinc reacted to the positive growth outlook.
 
November
 
The Fund’s Series A, B and I Units finished the month down 5.05%, 4.92% and 4.87%, respectively. The month started positively following the Federal Reserve’s announcement of a second round of quantitative easing, which led to a rally in global markets and decline in the U.S. dollar. The fund made gains on its long positions in agriculturals and metals as prices rose due to U.S. dollar weakness and agricultural supply-side concerns. However, the remainder of the month was characterized by risk aversion. Concerns about European sovereign debt contagion pushed the euro lower, while the U.S. dollar strengthened against major currencies to the detriment of the Fund’s net short U.S. dollar positioning. Risk aversion was also driven by monetary tightening in China causing risky assets to sell off. Fixed income markets also experienced reversals having already absorbed the expected impact of quantitative easing. The Fund incurred losses on its long bond position as yields across the curve rose in the U.S. and UK. In Japan, stronger-than-expected GDP growth helped push Japanese equities higher. The Fund’s long position in Japanese Government Bonds incurred losses due to the reduced demand for the perceived safety of fixed income. Towards the end of the month, tension on the Korean peninsula sparked a flight to safety, driving stock markets lower. Precious metals gained, particularly at the end of the month, making gold and silver the top performing instruments.
 
December
 
The Fund’s Series A, B and I Units finished the month up 5.70%, 5.83% and 5.89%, respectively. Optimistic signals of a global recovery helped risk appetite return to the markets. The decision to extend the tax cuts in the U.S. led to an aggressive selloff in U.S. Treasuries and a general sell-off in global fixed income. This resulted in some losses from the Fund’s small long bond and interest rate positions. Stock indices, however, performed well to the benefit of the Fund’s long positions. Energy and metals prices also rose over the month, with the Fund’s long position in reformulated gasoline performing especially well. This robust performance from risky assets reduced safe-haven demand for the U.S. dollar, which lost ground against major currencies to the benefit of the Fund’s net short exposure. The best performance this month came from the commodity-driven Australian dollar, which reached its highest level against the U.S. dollar since July 1982. Continued strong demand from China propped up the agricultural and industrial metals markets and copper reached a record high. The agriculturals sector was the largest driver of positive returns, with prices here also being driven upwards by supply and weather concerns. The Fund also profited from the return of safe-haven demand for gold amid poor U.S. housing and consumer confidence data and lingering concern about Chinese rates.

 
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2009

January
 
The Fund’s Series A Units were up 0.37%, Series B Units were up 0.47% and Series I Units were up 0.51% for the month of January 2009. The muted contributions from several sectors reflect the systematic reduction in exposures resulting from the increased market volatility experienced in the fourth quarter of 2008. Stock markets started 2009 with renewed investor optimism in response to President Obama’s stimulus plan. The optimism was short-lived however, and stock markets declined as economic and earnings data continued to show a negative outlook. Bonds also sold off and yields rose as governments continued to develop rescue plans and packages to boost growth. This was particularly seen in European bond markets with UK Gilts and Bunds being two of the worst contracts this month. Conversely, the portfolio’s long positions in interest rates benefited from the rate cut decisions of the Bank of England and the ECB. In currencies, the U.S. dollar continued strengthening as a result of risk aversion and the increasingly negative outlook for Europe, which continues to deal with crises in the financial sector; this effect continued to be particularly seen in the weakness of Sterling to the benefit of the Fund’s short exposure. The energy sector was the best performer this month, driven by gains from crude oil and natural gas, whose prices declined on the back of bearish inventory data. Similarly, industrial metals also declined due to stock build-ups, benefiting the Fund’s short positions.
 
February
 
The Fund’s Series A Units were up 0.57%, Series B Units were up 0.67% and Series I Units were up 0.71% for the month of February 2009. In comparison with recent months, returns were relatively muted overall. The Fund, however, still made profits in the majority of sectors. The currency sector had an eventful month and provided the most volatility; profits were seen from weakness in the Swedish krona and Canadian dollar which offset losses in the yen against the U.S. dollar. The Swedish krona fell to a record low against the euro after an unexpectedly large rate-cut and the worst Swedish GDP figures since 1940. The best performing sectors overall were stock indices and energies. Global equity markets continued their poor start to the year amid further weak economic data and problems for financial companies, which benefited the Fund’s small short exposure. In energy, it was short positions in natural gas and products of crude oil which drove performance in a choppy month for crude itself. Agricultural commodities were also profitable, despite some losses from a sharp reversal in cocoa markets. Fixed income markets were more mixed. The longer end of the curve was generally profitable, with the exception of Australian bonds, however, performance was dragged down by losses in shorter-dated Australian bills and especially in short sterling, as quantitative easing started to seem more likely than further rate-cuts in the UK.
 
March
 
The Fund’s Series A Units were down 4.55%, Series B Units were down 4.40% and Series I Units were down 4.23% for the month of March 2009. Although most global stock markets remain in negative territory year to date, many saw a strong rally during March, to the detriment of the Fund’s short positions. Investor risk appetite appeared to return following some positive corporate earnings news and the U.S. Federal Reserve’s revamped toxic asset repurchase and quantitative easing plans. The S&P 500 had its strongest monthly rally since October 2002, recovering from a 12-year low on March 9. The Federal Reserve’s plan to repurchase debt caused U.S. fixed income markets to rally. U.S. interest rate markets and European fixed income markets followed and the Fund’s long positions performed positively in fixed income sectors. In currency, the announcement of the Treasury’s new plans resulted in the U.S. dollar weakening against major currencies and consequently a give-back of some of the profits the Fund had generated on the back of U.S. dollar strength since the third quarter of 2008. U.S. dollar weakness and revised inflationary expectations caused commodities markets to rally to the detriment of the Fund’s short positions. This was seen particularly in metals, where strategic buying by China caused the prices of base metals to rally. Precious metals on the other hand declined as investors sold out of safe haven assets, contrary to the Fund’s long positioning. Energy markets followed stock markets' direction, with crude oil prices rising over 10% this month, despite OPEC announcing that it will not cut output.

 
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April
 
The Fund’s Series A Units were down 4.18%, Series B Units were down 4.05% and Series I Units were down 4.00% for the month of April 2009. Performance suffered early in the month as the trend reversals seen in late March continued, most notably in currencies, and also in interest rate markets following the ECB’s surprise decision to only reduce rates by 25bps. The interest rates sector recovered well to finish the month flat, but the currencies sector was unable to match this: both the Sterling and the Canadian dollar recovered following recent weakness and the resulting losses outweighed the profits seen from the strengthening South African Rand. In commodities, the energies and agricultural sectors recorded small profits driven by short positions in natural gas, which reached multi-year lows, and in lean hogs following concerns over swine flu. Metals markets were less successful however; short positions in aluminum and nickel suffered as markets anticipated increased demand as equities rallied following the G20 summit. Most equity index positions also suffered from this rally continuing in early April, but positions responded and small profits were seen in the MSCI Taiwan index and in European sector indices.
 
May
 
The Fund’s Series A Units were down 2.77%, Series B Units were down 2.65% and Series I Units were down 2.60% for the month of May 2009. Performance was dominated by the energies sector, which saw sharp price movements against the Fund's net short position. Positive economic releases continued to boost investor optimism and risk appetite, consequently global stock indices finished the month positively. The portfolio managed to capture this equity market strength, producing positive returns from most of the positions. Rallying equity markets were accompanied by a sell-off in fixed income markets. This was to the benefit of the Fund’s short positions in several bond contracts, most notably Japanese and Australian government bonds. The interest rates sector also contributed positively to performance; increased liquidity within the financial sector helped short ends to rally, particularly Euribor which was the second best contract for the month. Short sterling also rallied following the latest UK inflation report however increased risk appetite resulted in a sell-off in the U.S. dollar, which hit 2009 lows towards the end of the month and inflicted losses in the currencies sector. This weakening in the U.S. dollar coupled with improving global outlook prompted most commodity markets to rally. Prices of energies were further boosted by bullish inventory data, particularly in natural gas.
 
June
 
The Fund’s Series A Units were down 10.02%, Series B Units were down 9.90% and Series I Units were down 9.86% for the month of June 2009. The majority of the losses occurred early in the month and were driven by positions in the interest rates and metals sectors. Rallying equity and commodities markets continued to boost investor optimism and also increased speculation that central banks would need to increase short-term rates to counteract inflationary pressures. Consequently, the U.S. dollar, which had been weakening since the Fed announced its quantitative easing policies in March, regained some of its strength and the recent trend in short-term interest rates reversed. Eurodollar, short sterling and Euribor all saw their most aggressive selling since October 2008. These sharp moves resulted in losses on the Fund’s long positions in these contracts. In response, the Fund reduced its positions as volatility increased. Performance in other sectors also reflected the difficult market environment for medium-term trend-following strategies. The bonds sector saw some losses with the Fund’s short exposure to Japanese Government bonds suffering from the weak outlook for the Japanese economy. In currencies, the losses in U.S. dollar positions were compounded by losses in the Swiss franc and Japanese yen; these were partially offset by gains on the Fund’s short euro exposure. Commodities markets meanwhile rallied during the month - this benefited long positions in agricultural such as sugar and soy meal but resulted in losses on short positions in metals including aluminum.
 
July
 
The Fund’s Series A Units were down 1.91%, Series B Units were down 1.78% and Series I Units were down 1.73% for the month of July 2009. Global equity markets sold off at the start of the month in response to poor economic data in the U.S. In addition, the ECB announced that it would keep interest rates on hold at their current levels resulting in a rally in fixed income markets. This benefited the Fund’s long exposure to European bonds and short-term rates. However, investor sentiment changed mid-month as corporate earnings announcements across a broad range of industries exceeded analysts’ forecasts and drove stock markets higher. Increased risk appetite in turn resulted in commodities markets rallying, the U.S. dollar weakening and fixed income markets selling off. Consequently, the Fund saw a reduction of the previous gains made in fixed income and its net short USD exposure also saw losses. The agricultural sector was the worst performer in July; the Fund’s long positions in the soy complex suffered as grains sold off early in the month due to favorable weather conditions in the U.S. In energies, short positions in natural gas continued to be profitable as mild weather and inventory build-ups pushed prices downwards. However, these gains were more than offset by losses on short positions across most of the other energy markets.

 
18

 

August
 
The Fund’s Series A Units were up 4.37%, Series B Units were up 4.50% and Series I Units were up 4.55% for the month of August 2009. The Fund had a positive month, with all sectors contributing positively. Performance in August was led by commodities, with agricultural finishing as the best sector. The long positions in sugar provided much of the profit, as global supplies and crop forecasts declined due to adverse weather conditions in Brazil and India, pushing prices to 28-year highs. In contrast, natural gas profits came on the short side as inventory build-ups pushed prices down to 7-year lows, making it the Fund’s second best market this month. Positions elsewhere in the energies sector were less successful however, as the oil price became more range-bound. In metals, the continued rally in copper provided better opportunities. In financial markets, the recovery of risk appetite continued with global stock markets finishing higher for another month. The Fund’s long stock indices exposure was able to take advantage of this strengthening trend. Furthermore, major central bankers reiterated that interest rate increases are unlikely in the near-term, causing the prices of short-term interest rate futures to rise and to result in positive performance from the Fund’s positions in that sector. The Bank of England’s bearish tones on the UK economy particularly boosted the short sterling.
 
September
 
The Fund’s Series A Units were up 3.01%, Series B Units were up 3.15% and Series I Units were up 3.20% for the month of September 2009. The Fund returns were driven by the financials and metals sectors. Global stock markets started the month on the decline following some poor economic data from the U.S. and the UK Sentiment later recovered and stock markets rallied following more positive economic releases, increased merger activity and comments by the ECB indicating that the worst of the recession is over. The ECB also, however, cautioned that it was too early to unwind monetary stimuli, which resulted in fixed income markets, particularly short-term rates, rallying as the likelihood of interest rate hikes was discounted. The currencies sector was the best performer as the U.S. dollar sold off and the Dollar Index hit its lowest levels since September 2008. In commodities, the price of natural gas provided most of the volatility within the sector. Front month natural gas contracts eventually rallied by over 30% from 7-year lows following bullish inventory data and short covering. Consequently, the Fund’s short position here was the worst performer. The contribution from the metals sector was also volatile over the course of the month but finished positively. Precious metals were the key within this sector with strong gains on long positions in gold and silver, which both rallied on the back of U.S. dollar weakness.
 
October
 
The Fund’s Series A Units were down 5.76%, Series B Units were down 5.63% and Series I Units were down 5.59% for the month of October 2009. The first half of the month was characterized by broadly positive sentiment as the U.S. earnings season proved to be better than expected. This, together with expectations of a robust economic recovery, resulted in investors shifting out of fixed income and into riskier assets. Consequently, the Fund’s long positioning in bonds and short exposures within the oil complex detracted from performance, particularly as oil prices were further boosted by forecasts of colder weather in the U.S. In agricultural, sugar was the worst performer as the market sold off from recent highs. Towards the end of the month disappointing economic data releases and negative expectations resulted in a shift towards risk aversion and a sell-off in stock markets to the Fund’s detriment. The U.S. dollar subsequently rallied, resulting in some give back on profitable positions in currencies and metals, particularly in precious metals. Long exposure in interest rates contributed positively, but the overall impact was limited.
 
November
 
The Fund’s Series A Units were up 9.26%, Series B Units were up 9.41% and Series I Units were up 9.46% for the month of November 2009. The dominant macro theme for the month was economic recovery coupled with uncertainty. Global stock indices finished the month in positive territory and gold reached record highs as investors bought into risky assets while keeping an eye on the potential inflationary effects of government stimulus efforts. Consequently, the U.S. dollar declined against major currencies, most notably the Japanese yen. These market moves benefited the Fund’s long positions in stock indices and precious metals as well as the net short U.S. dollar exposure. Sentiment shifted repeatedly through the month with uncertainty stemming from a rise in the U.S. unemployment rate and weak corporate earnings results. However, a number of central banks, particularly the Bank of England, indicated that support measures would need to continue in order to help sustain the economic recovery. The Fund’s long fixed income exposures performed well against this backdrop. Finally, the energies sector finished the month positively. The largest single driver was the fall in natural gas prices toward the end of the month as the continued mild weather in the U.S. reduced demand for gas yet further.

December
 
The Fund’s Series A Units were down 6.37%, Series B Units were down 6.25% and Series I Units were down 6.20% for the month of December 2009. The dominant theme for the month was continued investor optimism surrounding the global economic recovery. Consequently, global stock markets rallied while fixed income markets fell. The sell-off in fixed income was further exacerbated by central bank comments, which indicated that some stimulus measures that have been in place for 2009 will likely be removed in the near future. In currencies, the U.S. dollar strengthened following positive economic data out of the U.S., to the detriment of the Fund’s net short USD exposure. This was most notable against the Japanese yen, which also weakened as the Bank of Japan indicated that it will seek to limit the currency’s strength. The metals sector was mixed with positive performance from long positions in industrial metals being more than offset by losses on long positions in precious metals, most notably gold, largely as a result of a strengthening U.S. dollar. Performance in the energies sector was dominated by losses on the short position in natural gas. A combination of colder weather in the U.S. and heavy short covering caused natural gas futures to rally from their December 3rd lows. Lastly, the agricultural sector contributed positively with the largest gains being made on the long exposure to sugar contracts, the price of which rallied as heavy rains in Brazil hampered harvesting.

 
19

 

Significant Accounting Estimates

A summary of the Fund’s significant accounting policies are included in Note 1 to the Financial Statements.

The Fund’s most significant accounting policy is the valuation of its assets invested in U.S. and foreign futures and forward currency contracts, and fixed-income investments. The majority of the Fund’s futures contracts are exchange-traded, with the fair value of these contracts based on exchange settlement prices. The fair values of non-exchange-traded contracts, such as forward currency contracts, are based on third-party quoted dealer values on the interbank market. The fair value of money market funds is based quoted market prices for identical shares. U.S. Treasury securities, which are stated at amortized cost plus accrued interest, approximate fair value based on quoted market prices for identical assets in an active market. Notes of U.S. government sponsored enterprises and commercial paper, which are stated at cost plus accrued interest, approximate fair value based on quoted market prices for similar assets in an active market. Given the valuation sources, there is little judgment or uncertainty involved in the valuation of these assets, and it is unlikely that materially different amounts would be reported under different valuation methodologies or assumptions.
 
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk
 
A smaller reporting company, as defined by Rule 12b-2 of the 1934 Act, is not required to provide the information under this item.

Item 8.          Financial Statements and Supplementary Data
 
Financial statements meeting the requirements of Regulation S-X appear in Part IV of this report.

A smaller reporting company, as defined by Rule 12b-2 of the 1934 Act, is not required to provide the supplementary data under this item.

Item 9.          Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
 
None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the management of the General Partner, including its Chief Executive Officer and Chief Financial Officer, the Fund evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the 1934 Act) as of December 31, 2010 (“Evaluation Date”). Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Based upon our evaluation, the Chief Executive Officer and Chief Financial Officer of the General Partner concluded that, as of the Evaluation Date, the Fund’s disclosure controls and procedures were effective to provide reasonable assurance that they are timely alerted to material information relating to the Fund required to be disclosed in the Fund’s periodic SEC filings.

Management’s Annual Report on Internal Control over Financial Reporting

The management of the General Partner is responsible for establishing and maintaining adequate internal control over financial reporting by the Fund.

 
20

 

The Fund’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. The Fund’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Fund; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the U.S., and that receipts and expenditures of the Fund are being made only in accordance with authorizations of management of the Fund; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Fund’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Fund’s internal control over financial reporting as of December 31, 2010, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2010, the Fund’s internal control over financial reporting is effective based on the criteria established in Internal Control-Integrated Framework.

Changes in Internal Control Over Financial Reporting

There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the 1934 Act) that occurred during the Fund’s last fiscal quarter that has materially affected or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

Item 9B.       Other Information
 
None.

PART III

Item 10.        Directors, Executive Officers and Corporate Governance
 
Directors and Executive Officers

The Fund itself has no directors or officers and has no employees. It is managed by the General Partner in its capacity as general partner. The Kenneth E. Steben Revocable Trust, dated January 29, 2008, (“Trust”) is the sole shareholder of the General Partner and Mr. Kenneth E. Steben is the sole trustee and beneficiary of the Trust. The principals, directors and executive officers of the General Partner are Kenneth E. Steben, Michael D. Bulley, Carl A. Serger, John H. Grady and Neil D. Menard. Their respective biographies are set forth below.

Kenneth E. Steben is the General Partner’s founder, President and Chief Executive Officer, and Chairman of the Board of Directors. Mr. Steben, along with Michael D. Bulley, is responsible for deciding on the Fund’s allocation to the Trading Advisor, or other trading advisors in the future should they deem it in the best interest of the Fund. Mr. Steben, born in January 1955, received his Bachelors Degree in Interdisciplinary Studies, with a concentration in Accounting in 1979 from Maharishi University of Management. Mr. Steben has been a licensed stockbroker since 1981 and a licensed commodities broker since 1983. Mr. Steben holds his Series 3, 5, 7, 24, 63 and 65 FINRA and NFA licenses. Mr. Steben has been a CFTC listed Principal, and registered as an Associated Person since March 15, 1989 and has been registered with FINRA as a general securities principal since September 18, 1986.

Michael D. Bulley is Senior Vice President of Research and Risk Management, and a Director. Mr. Bulley is a CAIASM designee and Member of the Chartered Alternative Investment Analyst Association®. Mr. Bulley, along with Kenneth E. Steben are responsible for deciding on the Fund’s allocation to the Trading Advisor, or other trading advisors in the future should they deem it in the best interest of the Fund. Mr. Bulley, born in October 1957, received his Bachelors Degree in Electrical Engineering from the University of Wisconsin – Madison in 1980 and his Masters in Business Administration with a concentration in Finance from Johns Hopkins University in 1998. Mr. Bulley joined the General Partner in November 2002, and holds Series 3, 7, 28 and 30 FINRA and NFA licenses. Mr. Bulley has been a CFTC listed Principal and registered as an Associated Person of the General Partner since February 11, 2003 and December 23, 2002, respectively.

 
21

 

Carl A. Serger is Chief Financial Officer and a Director. Mr. Serger joined the General Partner in December of 2009 and has been listed as a CFTC Principal of the General Partner since February 2, 2010. Mr. Serger, born in March of 1960, graduated cum laude from Old Dominion University with a BS in Business Administration, and has a Technology Management Certification from the California Institute of Technology. Mr. Serger has over 20 years of accounting experience, including 10 years of audit experience. Prior to joining the General Partner, Mr. Serger was the CFO, Senior VP and Treasurer of Finetre Corporation, a financial technology platform company providing services to major brokerage firms, banks and insurance companies from December 1999 until its acquisition by Ebix, Inc. in October 2006. Mr. Serger remained with Ebix, a software company serving the financial services industry, as Senior VP and CFO until July 2007. From July 2007 to November 2007, he acted as an independent consultant to start up companies. From November 2007 until November 2009, Mr. Serger was the Senior VP, CFO and COO for Peracon, Inc., a leading electronic transactions platform for institutional commercial real estate transactions. Mr. Serger holds Series 28 FINRA and NFA licenses.
 
John H. Grady is General Counsel, Chief Operating Officer, and a Director. Mr. Grady joined the General Partner in December of 2009 and has been listed as a CFTC registered Principal and registered as an associated person of the General Partner since February 2010. Mr. Grady, born in June 1961, received his JD from The University of Pennsylvania Law School in 1985 and received his Bachelor of Arts, magna cum laude, from Colgate University in 1982. Prior to joining the General Partner, Mr. Grady was President of Arcady Investment Consulting LLP, a consulting firm based in Philadelphia that served funds, advisers and brokerage firms from January 2009 to December 2009. Before that, Mr. Grady was a Senior Advisor to Coil Investment Group, a Norway-based investment firm from April 2008 to December 2008, and Chief Executive Officer of the Nationwide Funds Group from October 2006 to January 2008. From April 2004 to June 2006, Mr. Grady served as Chief Executive Officer of the Constellation Funds Group; prior to that, he was the Chief Operating Officer of Turner Investment Partners from February 2001 to March 2004. During the periods of June 2006 to October 2006 and February 2008 to April 2008, Mr. Grady was a consultant in a sole proprietorship. After graduating from law school, Mr. Grady was an attorney in private practice for over 15 years, and was a partner with Morgan, Lewis & Bockius LLP in the firm’s D.C. and Philadelphia offices from July 1993 to January 2001. Mr. Grady holds Series 3, 7, 24 and 63 FINRA and NFA licenses.
 
Neil D. Menard is Director of Sales and Marketing. Mr. Menard, born in August 1967, graduated from Colby College in 1989 with a BA in political science. Prior to joining the General Partner in July of 2006, Mr. Menard was the Director of Sales for Engagement Systems, LLC, a strategic outsource solution for independent financial advisors from October 2004 to June of 2006. From June 2003 to October 2004, Mr. Menard served as the Managing Director of New Business Development. Mr. Menard created sales and selection systems for the new business development team and utilized these processes to select independent investment advisors for SEI. Mr. Menard holds his Series 3, 7, 24 and 63 FINRA and NFA licenses and is a General Securities Principal. Mr. Menard has been registered as an Associated Person and a CFTC listed Principal of the General Partner since August 7, 2006 and July 6, 2006, respectively.
 
Kenneth E. Steben Revocable Trust, dated January 29, 2008, has been a CFTC listed Principal of the General Partner since March 10, 2008. The Trust is the sole shareholder of the General Partner. Kenneth E. Steben is the sole beneficiary of the Trust and serves as its sole trustee. A biography of Mr. Steben is set forth above.

Since May 11, 1989, Steben & Company, Inc. has acted as a general partner to a Maryland limited partnership, Futures Portfolio Fund, Limited Partnership, an SEC registrant under the 1934 Act whose shares are privately offered. Additionally, since August 2, 1995, Steben & Company, Inc. has acted as a general partner to another Maryland limited partnership, Sage Fund Limited Partnership, an SEC registrant under the 1934 Act whose shares are privately offered. Since March 1, 2011, Steben & Company, Inc. has acted as manager of a Delaware limited liability company, Steben Institutional Fund LLC. Because Steben & Company, Inc. serves as the sole general partner or manager of all of these funds, the officers and directors of Steben & Company, Inc. effectively manage them as officers and directors of the respective funds.

Significant Employees
 
The General Partner is dependent on the services of Mr. Steben and key management personnel. If Mr. Steben’s services became unavailable, another principal of the firm or a new principal (whose experience cannot be known at this time) will need to take charge of the General Partner.
 
Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act requires that reports of beneficial ownership of limited partner interests and changes in such ownership be filed with the SEC by Section 16 “reporting persons.” The Fund is required to disclose in this Annual Report on Form 10-K each reporting person whom it knows to have failed to file any required reports under Section 16(a) on a timely basis during the fiscal year ended December 31, 2010. During the fiscal year ended December 31, 2010, all reporting persons complied with all Section 16(a) filing requirements applicable to them.

 
22

 

Code of Ethics

The General Partner on behalf of the Fund has adopted a code of ethics, as of the period covered by this report, which applies to the Fund’s principal executive officer and principal financial officer or persons performing similar functions. A copy of the code of ethics is available without charge upon request by calling 240-631-7600.

Item 11.        Executive Compensation
 
The Fund does not itself have any officers, directors or employees. The managing officers of the General Partner are remunerated by the General Partner in their respective positions. The directors and managing officers of the General Partner receive no other compensation from the Fund. The Fund does not and will not make any loans to the General Partner, its affiliates, or their respective officers, directors or employees. There are no compensation plans or arrangements relating to a change in control of either the Fund or the General Partner.
 
As compensation for its services in managing the Fund, the General Partner earns the following compensation:
 
 
§
General Partner Fee – each Series of Units, except for General Partner Units, incurs a monthly general partner fee, equal to 1/12th of 1.10% of the Fund’s month-end net asset value. During 2010 and 2009, the General Partner earned $458,261 and $244,752, respectively.
 
 
§
Selling Agent Fees – the Series A Units incur a monthly fee equal to 1/12th of 2% of their month-end net asset value. The General Partner, in turn, pays the selling agent fees 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 fees are retained by the General Partner. During 2010 and 2009, the General Partner earned $255,150 and $99,034, respectively.
 
 
§
Broker Dealer Servicing Fee – the Series A Units incur a monthly fee equal to 1/12th of 0.15% of their month-end net asset value. The Series B Units which are not subject to a broker dealer custodial fee incur a monthly fee equal to 1/12th of 0.60% of their month-end net asset value. These fees are payable in arrears to the selling agents by the General Partner. Where the General Partner acts as the selling agent, it retains these fees. During 2010 and 2009, the General Partner earned $25,455 and $12,321, respectively.
 
 
§
Broker Dealer Custodial Fee – the Series B Units that are held by broker dealers who act as the custodian for Series B Units for the benefit of the limited partners incur a fee equal to 1/12th of 0.60% of their month-end net asset value. These fees are payable to the selling agents by the General Partner. During 2010 and 2009, the General Partner earned $62,961 and $32,414, respectively.
 
Item 12.        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
As of February 28, 2011, no person or group is known to have been the beneficial owner of more than 5% of the Units.

The Trading Adviser purchased an ownership interest in the Fund with the purchase of $5,001,156 of Series I Units effective September 1, 2008, which was fully redeemed in 2009. As of February 28, 2011, the Fund’s Trading Advisor did not maintain a capital balance in the Fund. As of February 28, 2011, the General Partner had an investment in the Fund of $619,660 (4,806.7772 Units).
 
As of February 28, 2011, an officer of the General Partner beneficially owned Units as follows:

Name
 
Title of
Series
 
Units
Owned
   
Value of
Units
 
Percentage of Limited
Partnership
Neil Menard
 
Series I Units
    79.0719     $ 9,756  
Less than 1%

The address of the officer is c/o Steben & Company, Inc., 2099 Gaither Road, Suite 200, Rockville, Maryland 20850.

There has been no change of control of the Fund.

 
23

 

Item 13.        Certain Relationships and Related Transactions, and Director Independence
 
See “Item 1. Business” for a description of the relationships between the General Partner, the Fund, the Trading Advisor, the futures broker and forward currency counterparty and the cash management securities broker. See “Item 10. Executive Compensation” and “Item 11. Security Ownership of Certain Beneficial Owners and Management.”
 
Item 14.        Principal Accounting Fees and Services
 
The following table sets forth the fees billed to the Fund for professional audit services provided by McGladrey & Pullen, LLP, the Fund’s independent registered public accountant, for the audit of the Fund’s annual financial statements for the years ended December 31, 2010 and 2009, and fees billed for other professional services rendered by McGladrey & Pullen, LLP and RSM McGladrey, Inc. (an associated entity of McGladrey & Pullen, LLP) during those periods.

   
2010
   
2009
 
Fee Category
           
Audit fees(1)
  $ 72,000     $ 82,450  
Audit-related fees
           
Tax fees(2)
  $ 17,000       10,000  
All other fees
           
Total fees
  $ 89,000     $ 92,450  

 
(1)
Audit fees consist of fees for professional services rendered for the audit of the Fund’s financial statements and review of financial statements included in the Fund’s quarterly reports, as well as services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements.

 
(2)
Tax fees consist of fees for the preparation of original tax returns.

The General Partner’s Board of Directors pre-approves all audit and permitted non-audit services of the Fund’s independent accountants, including all engagement fees and terms. The General Partner’s Board of Directors approved all the services provided by McGladrey & Pullen, LLP and RSM McGladrey, Inc. (collectively “McGladrey”) during 2010 and 2009 to the Fund described above. The General Partner’s Board of Directors has determined that the payments made to McGladrey for these services during 2010 and 2009 are compatible with maintaining that firm’s independence.

 
24

 
 
PART IV

Item 15:
Exhibits and Financial Statements Schedules
 
Financial Statements
 
Aspect Global Diversified Fund LP
 
Report of Independent Registered Public Accounting Firm
 
Statements of Financial Condition as of December 31, 2010 and 2009
 
Condensed Schedule of Investments as of December 31, 2010
 
Condensed Schedule of Investments as of December 31, 2009
 
Statements of Operations for the Years Ended December 31, 2010 and 2009
 
Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
 
Statements of Changes in Partners’ Capital (Net Asset Value) for the Years Ended December 31, 2010 and 2009
 
Notes to Financial Statements
 
 
Exhibits.
 
The following exhibits are filed herewith or incorporated by reference.
 
Exhibit Number
 
Description of Document
     
1.1***
 
Form of Selling Agreement
     
4.1****
 
Limited Partnership Agreement
     
4.2*****
 
Amended and Restated Limited Partnership Agreement
     
10.1***
 
Form of Amended and Restated Advisory Agreement between the Fund and the Trading Advisor
     
10.1.1****
 
Form of Second Amended and Restated Advisory Agreement between the Fund and the Trading Advisor
     
10.2*
 
Form of Commodity Brokerage Agreement between the Fund and Newedge
     
10.3**
 
Form of Corporate Cash Management Account Agreement between the Fund and UBS
     
31.01
 
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
     
31.02
 
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
     
32.01
 
Section 1350 Certification of Principal Executive Officer
     
32.02
 
Section 1350 Certification of Principal Financial Officer
  

 
  * Previously filed as an exhibit to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-1 (SEC File No.: 333-148049) on April 8, 2008 and incorporated herein by reference.
 
** Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (SEC File No.: 333-148049) on February 14, 2008 and incorporated herein by reference.
 
*** Previously filed as an exhibit to Pre-Effective Amendment No. 3 to the Registration Statement on Form S-1 (SEC File No.: 333-148049) on May 23, 2008 and incorporated herein by reference.
 
 
25

 
 
**** Previously filed as an exhibit to Pre-Effective Amendment No. 4 to the Registration Statement on Form S-1 (SEC File No.: 333-148049) on August 7, 2008 and incorporated herein by reference.
 
***** Previously filed as an exhibit to the Form 10-K filed on March 31, 2009, and incorporated herein by reference.
 
 
26

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the General Partner of the Registrant in the capacities and on the date indicated.

Name
 
Title
 
Date
         
/s/ Kenneth E. Steben
 
President, Chief Executive Officer and Director of the General Partner
 
March 25, 2011
Kenneth E. Steben        
/s/ Carl A. Serger
 
Chief Financial Officer and Director of the General Partner
 
March 25, 2011
Carl A. Serger
       
/s/ Michael Bulley
  
Senior Vice President, Research & Risk Management and Director of the General Partner
  
March 25, 2011
Michael D. Bulley        
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Dated March 25, 2011
 
ASPECT GLOBAL DIVERSIFIED FUND LP
       
   
By:
Steben & Company, Inc.
     
General Partner
       
   
By:
/s/ Kenneth E. Steben
   
Name: 
Kenneth E. Steben
   
Title:
President, Chief Executive Officer and
     
Director of the General Partner

 
 
27

 
 
Report of Independent Registered Public Accounting Firm

To the Partners of
Aspect Global Diversified Fund LP

We have audited the accompanying statements of financial condition, including the condensed schedules of investments, of Aspect Global Diversified Fund LP (the Fund) as of December 31, 2010 and 2009, and the related statements of operations, cash flows, and changes in partners’ capital (net asset value) for the years then ended. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Fund is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aspect Global Diversified Fund LP as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
 
 
/s/ McGladrey & Pullen, LLP

Chicago, Illinois
March 25, 2011
 
 
F-1

 
 
Aspect Global Diversified Fund LP
Statements of Financial Condition
December 31, 2010 and 2009

   
2010
   
2009
 
Assets
           
Equity in broker trading accounts
           
Cash
  $ 15,060,123     $ 9,216,600  
Net unrealized gain (loss) on open futures contracts
    2,154,522       (92,230 )
Net unrealized gain (loss) on open forward currency contracts
    977,320       (122,645 )
Interest receivable
    1,563       189  
Total equity in broker trading accounts
    18,193,528       9,001,914  
Cash and cash equivalents
    38,989,573       22,864,973  
U.S. government sponsored enterprise notes, at fair value
          2,018,783  
Total assets
  $ 57,183,101     $ 33,885,670  
                 
Liabilities and Partners’ Capital (Net Asset Value)
               
Liabilities
               
Trading Advisor management fee payable
  $ 311,768     $ 189,042  
Trading Advisor incentive fee payable
    582,381        
Commissions and other trading fees payable on open contracts
    2,995       3,732  
Administrative expenses payable – General Partner
    42,727       74,835  
Broker dealer custodial fee payable – General Partner
    6,174       4,397  
Broker dealer servicing fee payable – General Partner
    2,675       1,685  
General Partner fee payable
    49,337       28,705  
Offering expenses payable – General Partner
    33,639       19,571  
Selling Agent fees payable – General Partner
    27,143       15,967  
Redemptions payable
    35,507       189,947  
Subscriptions received in advance
    2,536,859       1,957,075  
Total liabilities
    3,631,205       2,484,956  
                 
Partners’ Capital (Net Asset Value)
               
General Partner Units – 4,806.7772 and 4,011.5691 units outstanding at December 31, 2010 and 2009, respectively
    609,812       434,130  
Series A Units –  165,574.3151 units and 110,813.7773 units outstanding at December 31, 2010 and 2009, respectively
    15,995,450       9,492,784  
Series B Units –  126,655.8355 units and 104,085.6268 units outstanding at December 31, 2010 and 2009, respectively
    13,396,321       9,610,394  
Series I Units –  193,350.1543 units and 112,253.4442 units outstanding at December 31, 2010 and 2009, respectively
    23,550,313       11,863,406  
Total partners’ capital  (net asset value)
    53,551,896       31,400,714  
Total liabilities and partners’ capital (net asset value)
  $ 57,183,101     $ 33,885,670  

The accompanying notes are an integral part of these financial statements.
 
 
F-2

 
 
Aspect Global Diversified Fund LP
Condensed Schedule of Investments
December 31, 2010

    
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
Long U.S. Futures Contracts
           
   
Agricultural (1)
  $ 904,521       1.69 %
   
Currency
    1,675       0.00 %
   
Energy
    288,899       0.54 %
   
Interest rate
    (35,509 )     (0.07 )%
   
Metal (1)
    997,430       1.86 %
   
Stock index
    134,266       0.25 %
   
Net unrealized gain on open long U.S. futures contracts
    2,291,282       4.27 %
                     
Short U.S. Futures Contracts
               
   
Agricultural
    (9,000 )     (0.02 )%
   
Energy
    (85,500 )     (0.16 )%
   
Interest rate
    (7,391 )     (0.01 )%
   
Metal
    (65,245 )     (0.12 )%
   
Net unrealized loss on open short U.S. futures contracts
    (167,136 )     (0.31 )%
    Total U.S. Futures Contracts                
   
   Net unrealized gain on open U.S. futures contracts
    2,124,146       3.96 %
                     
Long Foreign Futures Contracts
               
   
Agricultural
    20,842       0.04 %
   
Interest rate
    41,176       0.08 %
   
Stock index
    3,896       0.01 %
   
Net unrealized gain on open long foreign futures contracts
    65,914       0.13 %
                     
Short Foreign Futures Contracts
               
   
Interest rate
    (50,122 )     (0.09 )%
   
Stock index
    14,584       0.03 %
   
Net unrealized loss on open short foreign futures contracts
    (35,538 )     (0.06 )%
    Total Foreign Futures Contracts                 
   
  Net unrealized gain on open foreign futures contracts
    30,376       0.07 %
                     
   
Net unrealized gain on open futures contracts
  $ 2,154,522       4.03 %
                     
U.S. Forward Currency Contracts
               
   
Long
  $ 369,809       0.69 %
   
Short
    (138,598 )     (0.26 )%
   
Net unrealized gain on open U.S. forward currency contracts
    231,211       0.43 %
                     
Foreign Forward Currency Contracts
               
   
Long
    (56,626 )     (0.11 )%
   
Short (1)
    802,735       1.50 %
   
Net unrealized gain on open foreign forward currency contracts
    746,109       1.39 %
                     
   
Net unrealized gain on open forward currency contracts
  $ 977,320       1.82 %

(1) No individual futures or forward currency contract position constituted one percent or greater 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.
 
 
F-3

 
 
Aspect Global Diversified Fund LP
Condensed Schedule of Investments
December 31, 2009

           
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
                         
U.S. Government Sponsored Enterprise Notes            
Face Value    
Maturity Date
               
2,000,000
   
3/30/10
 
Federal Home Loan Mortgage Corporation, 1.10%
  $ 2,018,783       6.43 %
           
Total U.S. government sponsored enterprise notes (cost: $2,009,778)
  $ 2,018,783       6.43 %
                             
Long U.S. Futures Contracts                
           
Agricultural
  $ 290,004       0.92 %
           
Currency
    (7,350 )     (0.02 )%
           
Energy
    108,288       0.34 %
           
Interest rate
    (307,955 )     (0.98 )%
           
Metal
    (181,592 )     (0.58 )%
           
Stock index
    93,052       0.30 %
           
Net unrealized loss on open long U.S. futures contracts
    (5,553 )     (0.02 )%
                             
Short U.S. Futures Contracts                
           
Agricultural
    (8,230 )     (0.03 )%
           
Energy
    22,300       0.07 %
           
Interest rate
    2,000       0.01 %
           
Metal
    (17,106 )     (0.05 )%
           
Net unrealized loss on open short U.S. futures contracts
    (1,036 )     (0.00 )%
            Total U.S. Futures Contracts                
           
   Net unrealized loss on open U.S. futures contracts
    (6,589 )     (0.02 )%
                             
Long Foreign Futures Contracts                
           
Agricultural
    55,580       0.18 %
           
Interest rate (1)
    (347,237 )     (1.11 )%
           
Stock index
    196,445       0.63 %
           
Net unrealized loss on open long foreign futures contracts
    (95,212 )     (0.30 )%
                             
Short Foreign Futures Contracts                
           
Agricultural
    475       0.00 %
           
Interest rate
    9,096       0.03 %
           
Net unrealized gain on open short foreign futures contracts
    9,571       0.03 %
            Total Foreign Futures Contracts                
           
   Net unrealized loss on open foreign futures contracts
    (85,641 )     (0.27 )%
                             
 
 
        Net unrealized loss on open futures contracts   $ (92,230 )     (0.29 )%
                             
U.S. Forward Currency Contracts                
           
Long
  $ (39,736 )     (0.13 )%
           
Short
    105,323       0.34 %
           
Net unrealized gain on open U.S. forward currency contracts
    65,587       0.21 %
                             
Foreign Forward Currency Contracts                
           
Long
    6,446       0.02 %
           
Short
    (194,678 )     (0.62 )%
           
Net unrealized loss on open foreign forward currency contracts
    (188,232 )     (0.60 )%
                             
           
Net unrealized loss on open forward currency contracts
  $ (122,645 )     (0.39 )%
 
(1) No individual futures or forward currency contract position constituted one percent or greater 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.

 
 
F-4

 
     
Aspect Global Diversified Fund LP
Statements of Operations
Years Ended December 31, 2010 and 2009

   
2010
   
2009
 
Trading Gain (Loss)
           
Net realized gain (loss)
  $ 5,846,296     $ (1,514,549 )
Net change in unrealized gain (loss)
    3,346,717       (591,469 )
Brokerage commissions and trading expenses
    (87,084 )     (72,878 )
Net gain (loss) from trading
    9,105,929       (2,178,896 )
                 
Net Investment Loss
               
Income
               
Interest income
    119,684       53,167  
Expenses
               
Trading Advisor management fee
    1,011,377       544,882  
Trading Advisor incentive fee
    618,276        
General Partner fee
    458,261       244,752  
Selling Agent fees – General Partner
    255,150       99,034  
Broker dealer custodial fee – General Partner
    62,961       32,414  
Broker dealer servicing fee – General Partner
    25,455       12,321  
Administrative expenses – General Partner
    554,397       342,364  
Offering expenses – General Partner
    403,926       374,242  
Total expenses
    3,389,803       1,650,009  
Administrative and offering expenses waived
    (245,534 )     (333,838 )
Net total expenses
    3,144,269       1,316,171  
Net investment loss
    (3,024,585 )     (1,263,004 )
Net Income (Loss)
  $ 6,081,344     $ (3,441,900 )

   
Series A
   
Series B
   
Series I
   
General
Partner
 
Year Ended December 31, 2010
                       
Increase in net asset value per Unit for the year
  $ 10.95     $ 13.44     $ 16.12     $ 18.65  
Net income per Unit (based on weighted average number of units outstanding during the year)
  $ 12.11     $ 14.17     $ 17.99     $ 18.31  
Weighted average number of Units outstanding
    138,675.7151       115,932.0983       149,182.1541       4,133.9088  
                                 
Year Ended December 31, 2009
                               
Decrease in net asset value per Unit for the year
  $ (18.65 )   $ (18.39 )   $ (20.15 )   $ (18.24 )
Net loss per Unit (based on weighted average number of units outstanding during the year)
  $ (10.09 )   $ (15.53 )   $ (20.88 )   $ (18.24 )
Weighted average number of Units outstanding
    51,734.1285       60,216.2268       91,541.8632       4,011.5691  
 
The accompanying notes are an integral part of these financial statements.
 
 
F-5

 
 
Aspect Global Diversified Fund LP
Statements of Cash Flows
Years Ended December 31, 2010 and 2009
 
   
2010
   
2009
 
Cash flows from operating activities
           
Net income (loss)
  $ 6,081,344     $ (3,441,900 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
               
Net change in unrealized (gain) loss
    (3,346,717 )     591,469  
Changes in
               
Interest receivable
    (1,374 )     210  
U.S. government sponsored enterprise notes
    2,018,783       (2,018,783 )
Commercial paper
          1,993,829  
Trading Advisor management fee payable
    122,726       143,093  
Trading Advisor incentive fee payable
    582,381       (326,088 )
Commissions and other trading expenses payable on open contracts
    (737 )     3,092  
Administrative expenses payable – General Partner
    (32,108 )     52,835  
Broker dealer custodial fee payable – General Partner
    1,777       4,282  
Broker dealer servicing fee payable – General Partner
    990       1,542  
General Partner fee payable
    20,632       20,401  
Offering expenses payable – General Partner
    14,068       13,909  
Selling Agent fees payable – General Partner
    11,176       15,685  
Net cash provided by (used in) operating activities
    5,472,941       (2,946,424 )
                 
Cash flows from financing activities
               
Subscriptions
    17,385,409       28,952,517  
Subscriptions received in advance
    2,536,859       1,957,075  
Redemptions
    (3,427,086 )     (7,111,053 )
Net cash provided by financing activities
    16,495,182       23,798,539  
                 
Net increase in cash and cash equivalents
    21,968,123       20,852,115  
Cash and cash equivalents, beginning of year
    32,081,573       11,229,458  
Cash and cash equivalents, end of year
  $ 54,049,696     $ 32,081,573  
                 
End of year cash and cash equivalents consists of
               
Cash in broker trading accounts
  $ 15,060,123     $ 9,216,600  
Cash and cash equivalents
    38,989,573       22,864,973  
Total end of year cash and cash equivalents
  $ 54,049,696     $ 32,081,573  
                 
Supplemental disclosure of cash flow information
               
Prior year redemptions paid
  $ 189,947     $ 125,000  
Prior year subscriptions received in advance
  $ 1,957,075     $ 3,633,808  
                 
Supplemental schedule of non-cash financing activities
               
Redemptions payable
  $ 35,507     $ 189,947  

The accompanying notes are an integral part of these financial statements.
 
 
F-6

 
 
Aspect Global Diversified Fund LP
Statements of Changes in Partners’ Capital (Net Asset Value)
Years Ended December 31, 2010 and 2009
 
   
Series A
   
Series B
   
Series I
   
General Partner
       
   
Units
   
Amount
   
Units
   
Amount
   
Units
   
Amount
   
Units
   
Amount
   
Total
 
Balance at December 31, 2008
    1,598.6744     $ 166,755       3,692.0156     $ 408,780       66,355.1442     $ 8,349,440       4,011.5691     $ 507,314     $ 9,432,289  
Net loss
            (522,035 )             (935,123 )             (1,911,558 )             (73,184 )     (3,441,900 )
Subscriptions
    109,941.5136       9,910,285       103,606.4510       10,434,915       106,128.2610       12,241,125                   32,586,325  
Redemptions
    (726.4107 )     (62,221 )     (3,212.8398 )     (298,178 )     (60,229.9610 )     (6,815,601 )                 (7,176,000 )
Balance at December 31, 2009
    110,813.7773       9,492,784       104,085.6268       9,610,394       112,253.4442       11,863,406       4,011.5691     $ 434,130       31,400,714  
Net income
            1,679,404               1,642,755               2,683,503               75,682       6,081,344  
Subscriptions
    57,843.6599       5,095,563       36,806.4851       3,491,139       96,214.7618       10,655,782       795.2081       100,000       19,342,484  
Redemptions
    (3,083.1221 )     (272,301 )     (14,090.2424 )     (1,333,219 )     (15,245.0597 )     (1,667,126 )                 (3,272,646 )
Transfers
                (146.0340 )     (14,748 )     127.0080       14,748                    
Balance at December 31, 2010
    165,574.3151     $ 15,995,450       126,655.8355     $ 13,396,321       193,350.1543     $ 23,550,313       4,806.7772     $ 609,812     $ 53,551,896  
 
   
Net Asset Value Per Unit
 
    
Series A
   
Series B
   
Series I
   
General Partner
 
December 31, 2010
  $ 96.61     $ 105.77     $ 121.80     $ 126.87  
December 31, 2009
    85.66       92.33       105.68       108.22  
December 31, 2008
    104.31       110.72       125.83       126.46  

The accompanying notes are an integral part of these financial statements.
  
 
F-7

 
 
Aspect Global Diversified Fund LP
Notes to Financial Statements
 
1.
Organization and Summary of Significant Accounting Policies

Description of the Fund

Aspect Global Diversified Fund LP (“Fund”) is a Delaware limited partnership, which was formed in 2007.  The Fund operates as a commodity investment pool, and commenced investment operations on September 1, 2008.  The Fund issues units of limited partner interests (“Units”) in four series: Series A, Series B, Series C and Series I, which represent units of fractional undivided beneficial interest in and ownership of the Fund.  Only Series A, B and I Units are offered by the fund.  Series A, B and I Units will be re-designated as Series C Units after the Fee Limit has been reached.  The Series C Units are identical to these other Units except that the Series C Units only incur the Trading Advisor management fee, Trading Advisor incentive fee, brokerage expenses, General Partner management fee and administrative expenses.
 
The Fee Limit is the total amount of selling agent commissions, broker dealer servicing fees paid to the selling agents, payments for wholesalers, payments for sales conferences, and other offering expenses that are items of compensation to Financial Industry Regulatory Authority (“FINRA”) members (but excluding among other items, the production and printing of prospectuses and related collateral material, as well as various legal and regulatory fees) paid by particular Series A, B or I Units when it is equal to 10.00% of the original purchase price paid by holders of those particular Units.

The Fund uses a commodity trading advisor 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 does not currently use options or swaps as part of its trading system, but may employ them in the future.

The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Exchange Act of 1933, as amended, (“1933 Act”) and 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 1933 Act and 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 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 its futures broker and interbank market makers through which the Fund trades.

Under its Amended and Restated Limited Partnership Agreement (“Partnership Agreement”), the Fund’s business and affairs are managed and conducted by the Fund’s general partner, Steben & Company, Inc. (“General Partner”), a Maryland corporation.  The General Partner is registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is registered with the SEC as an investment advisor and a broker dealer.  Additionally, 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.

Aspect Capital Limited (“Trading Advisor”) is the sole trading advisor for the Fund.  The Trading Advisor uses the Aspect Diversified Program (“Trading Program”), a proprietary, systematic trading system that deploys multiple trading strategies utilizing derivatives that seeks to identify and exploit directional moves in market behavior to a broad and diversified range of global markets including stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.
 
Significant Accounting Policies
 
Accounting Principles
 
The Fund’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
 
 
F-8

 
 
Use of Estimates
 
Preparing financial statements in conformity with GAAP 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 contracts and forward currency contracts are recorded on a trade date basis, and gains or losses are realized when contracts are liquidated.  Unrealized gains and losses on open futures and forward currency 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, U.S. Treasury securities, U.S. government sponsored enterprise notes and other cash and cash equivalent balances is recorded on an accrual basis.
 
Fair Value of Financial Instruments
 
Financial instruments are recorded 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 recorded at fair value are classified within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value.   The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).   The three levels of the fair value hierarchy are described below:

 
Level 1 –
Fair value is based on unadjusted quoted prices for identical instruments in active markets. Financial instruments utilizing Level 1 inputs include exchange-traded derivatives 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 U.S. 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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

The Fund assesses the classification of the instruments at each measurement date, and any transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Fund’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy.  For the years ended December 31, 2010 and 2009, there were no such transfers between levels.

A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.

U.S. government sponsored enterprise 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. government sponsored enterprise notes are classified within Level 2.

The investment in money market fund, 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.
 
 
F-9

 
 
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 ordinary 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. (“UBS”) and Bank of America.  At December 31, 2010, cash and cash equivalents balances held at NUSA, UBS and Bank of America were $15,060,123, $7,399 and $38,982,174, respectively.  The Fund is at risk to the extent that it maintains balances with such institutions in excess of insured limits; however, the Fund does not believe it is exposed to any significant credit risk.

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.

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 December 31, 2010.  All of the Fund’s income tax returns remain subject to federal, state or local income tax examinations.

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 change in unrealized gain or loss on such investments in the statement of operations.

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).
 
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 December 31, 2010
                 
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts:
                 
Net unrealized gain on open futures contracts*
  $ 2,154,522     $     $ 2,154,522  
Net unrealized gain on open forward currency contracts*
          977,320       977,320  
Cash and cash equivalents:
                       
Money market fund
    7,399             7,399  
Total
  $ 2,161,921     $ 977,320     $ 3,139,241  
*See the condensed schedule of investments for further description.
 
 
F-10

 
 
At December 31, 2009
                 
   
Level 1
   
Level 2
   
Total
 
Equity in broker trading accounts:
                 
Net unrealized loss on open futures contracts*
  $ (92,230 )   $     $ (92,230 )
Net unrealized loss on open forward currency contracts*
          (122,645 )     (122,645 )
Cash and cash equivalents:
                       
Money market fund
    20,871,136             20,871,136  
U.S. government sponsored enterprise notes*
          2,018,783       2,018,783  
Total
  $ 20,778,906     $ 1,896,138     $ 22,675,044  
*See the condensed schedule of investments for further description.

There were no Level 3 holdings at December 31, 2010 and 2009, or during the years 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

The Fund’s derivative contracts are comprised of futures and forward currency contracts, none of which are designated as hedging instruments.  At December 31, 2010 and 2009, the Fund’s derivative contracts had the following impact on the statements of financial condition:

December 31, 2010
 
Derivative Assets and Liabilities, at fair value
 
Statements of Financial Condition Location
 
Assets
   
Liabilities
   
Net
 
Net unrealized gain (loss) on open futures contracts
                 
Agricultural
  $ 931,812     $ (15,449 )   $ 916,363  
Currency
    1,675             1,675  
Energy
    308,149       (104,750 )     203,399  
Interest rate
    92,261       (144,107 )     (51,846 )
Metal
    999,158       (66,973 )     932,185  
Stock index
    239,757       (87,011 )     152,746  
Net unrealized gain (loss) on open futures contracts
  $ 2,572,812     $ (418,290 )   $ 2,154,522  
                         
Net unrealized gain (loss) on open forward currency contracts
  $ 1,202,472     $ (225,152 )   $ 977,320  

At December 31, 2010, there were 1,891 open futures contracts and 494 open forward currency contracts.
 
December 31, 2009
 
Derivative Assets and Liabilities, at fair value
 
Statements of Financial Condition Location
 
Assets
   
Liabilities
   
Net
 
Net unrealized gain (loss) on open futures contracts
                 
Agricultural
  $ 421,805     $ (83,976 )   $ 337,829  
Currency
          (7,350 )     (7,350 )
Energy
    134,439       (3,851 )     130,588  
Interest rate
    180,879       (824,975 )     (644,096 )
Metal
    216,721       (415,419 )     (198,698 )
Stock index
    304,167       (14,670 )     289,497  
Net unrealized gain (loss) on open futures contracts
  $ 1,258,011     $ (1,350,241 )   $ (92,230 )
                         
Net unrealized gain (loss) on open forward currency contracts
  $ 271,180     $ (393,825 )   $ (122,645 )
 
At December 31, 2009, there were 2,358 open futures contracts and 170 open forward currency contracts.
 
 
F-11

 
 
For the years ended December 31, 2010 and 2009, the Fund’s derivative contracts had the following impact on the statements of operations:

   
2010
   
2009
 
Types of Exposure
 
Net realized
gain (loss)
   
Net change
in unrealized
gain (loss)
   
Net realized
gain (loss)
   
Net change
in unrealized
gain (loss)
 
Futures contracts
                       
Agricultural
  $ 1,354,154     $ 578,534     $ (226,627 )   $ 361,031  
Currency
    (14,097 )     9,025       20,779       (7,350 )
Energy
    (1,631,831 )     72,811       (1,796,532 )     94,604  
Interest rate
    5,102,652       592,250       135,688       (1,064,779 )
Metal
    310,302       1,130,883       647,992       (164,947 )
Stock index
    (630,601 )     (136,751 )     286,056       292,928  
Total futures contracts
    4,490,579       2,246,752       (932,644 )     (488,513 )
                                 
Forward currency contracts
    1,401,130       1,099,965       (606,869 )     (102,956 )
                                 
Total futures and forward currency contracts
  $ 5,891,709     $ 3,346,717     $ (1,539,513 )   $ (591,469 )

For the years ended December 31, 2010 and 2009, the number of futures contracts closed was 23,419 and 18,685, respectively, and the number of forward currency contracts closed was 7,477 and 4,189, respectively.
 
4.
General Partner
 
In accordance with the Partnership Agreement, the General Partner must maintain its interest in the capital of the Fund at no less than the greater of: (i) 1% of aggregate capital contributions to the Fund by all partners (including the General Partner’s contributions) or (ii) $25,000.  The General Partner shares in the profits and losses of the Fund in proportion to its respective ownership interest.

At December 31, 2010 and 2009, the General Partner had an investment of 4,806.7772 units valued at $609,812, and 4,011.5691 units valued at $434,130, respectively.

The General Partner earns the following compensation:

 
§
General Partner Fee – each Series of Units, other than General Partner Units, incurs a monthly fee equal to 1/12th of 1.10% of the respective series’ month-end net asset value, payable in arrears.

 
§
Selling Agent Fees – the General Partner charges Series A Units a monthly fee equal to 1/12th of 2.00% of the outstanding Series A Units’ month-end net asset value, payable in arrears.  The General Partner pays to the selling agents an upfront fee of 2.00% of the aggregate subscription amount for the sale of Series A Units.  Beginning in the 13th month, the General Partner pays the selling agents a monthly fee in arrears equal to 1/12th of 2.00% of the outstanding Series A Units’ month-end net asset value.  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 Fee – the General Partner charges Series A Units a monthly fee equal to 1/12th of 0.15% of the outstanding Series A Units’ month-end net asset value.  The Series B Units which are not subject to a broker dealer custodial fee incur a monthly fee equal to 1/12th of 0.60% of their month-end net asset value.  These fees are payable in arrears to the selling agents by the General Partner.  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.

 
§
Broker Dealer Custodial Fee – the General Partner charges Series B Units that are held by broker dealers who act as custodian for Series B Units for the benefit of the limited partners, a monthly fee to such broker dealers equal to 1/12th of 0.60% of the outstanding Series B Units’ month-end net asset value.  These fees are payable in arrears to the selling agents by the General Partner
 
 
F-12

 
 
5.
Trading Advisor

The Fund has an agreement with the Trading Advisor, pursuant to which the Fund incurs a management fee, payable monthly to the Trading Advisor in arrears, equal to 1/12th of 2% of the Fund’s trading level (as defined in the advisory agreement) and an incentive fee, payable quarterly in arrears, equal to 20% of new trading profits (as defined in the advisory agreement).  The Fund’s trading level is currently expected to be approximately 1.2 times the normal trading level of the Trading Program.
 
6.
Deposits with Brokers

To meet margin requirements, the Fund deposits funds with its brokers, subject to CFTC regulations and various exchange and broker requirements.  The Fund earns interest income on its assets deposited with its brokers.  At December 31, 2010 and 2009, the Fund had margin requirements of $6,567,566 and $5,413,756, respectively.
 
7.
Administrative and Offering 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 0.95% of the Fund’s month-end net asset value, payable in arrears.  Actual administrative expenses may vary; however, such administrative expenses will not exceed 0.95% of the Fund’s month-end net asset value per annum.  The administrative expenses include legal, accounting, clerical and other back office related expenses related to the administration of the Fund and all other associated costs incurred by the Fund.  For the years ended December 31, 2010 and 2009, actual administrative expenses were $554,397 and $342,364, respectively.  Such amounts are presented as administrative expenses in the statements of operations.

During the years ended December 31, 2010 and 2009, the General Partner absorbed administrative expenses in excess of the 0.95% limitation of $154,059 and $126,473, respectively.  Such amounts are included in administrative and offering expenses waived in the statements of operations.

At December 31, 2010 and 2009, $42,727 and $74,835, 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.

The Fund reimburses the General Partner for actual ongoing offering expenses, up to 1/12th of 0.75% of the Fund’s month-end net asset value pro rata for each Series of Units except for the General Partner and Series C Units, payable monthly in arrears.  Actual ongoing offering expenses in excess of this limitation are absorbed by the General Partner.  For the years ended December 31, 2010 and 2009, actual offering expenses were $403,926 and $374,242, respectively.  Such amounts are presented as offering expenses in the statements of operations.

During the years ended December 31, 2010 and 2009, the General Partner absorbed offering expenses in excess of the 0.75% limitation of $91,475 and $207,365, respectively.  Such amounts are included in administrative and offering expenses waived in the statements of operations.  At December 31, 2010 and 2009, $33,639 and $19,571, respectively, were payable to the General Partner for offering expenses incurred on behalf of the Fund and not waived by the General Partner.  Such amounts are presented as offering 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 Series A, B and I Units 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 December 31, 2010 and 2009, the Fund received advance subscriptions of $2,536,859 and $1,957,075, respectively, which were recognized as subscriptions to the Fund or returned, if applicable, subsequent to year-end.
 
 
F-13

 
 
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 Series A, B and I 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.

Series A Units redeemed prior to the first anniversary of the subscription date are subject to a redemption fee equal to the product of (i) 2.00% of the subscription price for such Series A Units on the subscription date, divided by twelve (ii) multiplied by the number of months remaining before the first anniversary of the subscription date.  Series B, C and I Units are not subject to the redemption fee.  During 2010 and 2009, these redemption fees were negligible.

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 any applicable government or self-regulatory agency regulations.  Limited partners will not be required to pay any redemption fees if such limited partners are subject to a mandatory redemption of their Units within the first year of purchase.
 
9.
Trading Activities and Related Risks

The Fund engages in the speculative trading of futures and 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 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 and Newedge Group (UK Branch) as its forward currency counterparty.
 
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 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 the 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, 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 uses UBS as its cash management securities broker for the investment of a portion of the Fund’s excess margin amounts into short-term fixed income instruments including commercial paper, U.S. Treasury securities and U.S. government sponsored enterprise notes with maturities of less than one year.  Fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Fund’s fixed income instruments, although substantially all of the short-term investments are held to maturity.
 
 
F-14

 
 
The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so.  The limited partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain 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.
Financial Highlights

The following information presents per Unit operating performance results and other supplemental financial ratios for the years ended December 31, 2010 and 2009.  This information has been derived from information presented in the financial statements for limited partner Units and assumes that a Unit is outstanding throughout the entire year:
 
   
2010
   
2009
 
    
Series A
Units
   
Series B
Units
   
Series I
Units
   
Series A
Units
   
Series B
Units
   
Series I
Units
 
Per Unit Operating Performance
                                   
Net asset value per Unit at beginning of year
  $ 85.66     $ 92.33     $ 105.68     $ 104.31     $ 110.72     $ 125.83  
Income (loss) from operations
                                               
Gain (loss) from trading (1)
    18.79       20.27       23.65       (11.78 )     (12.61 )     (14.19 )
Net investment loss (1)
    (7.84 )     (6.83 )     (7.53 )     (6.87 )     (5.78 )     (5.96 )
Total income (loss) from operations
    10.95       13.44       16.12       (18.65 )     (18.39 )     (20.15 )
Net asset value per Unit at end of year
  $ 96.61     $ 105.77     $ 121.80     $ 85.66     $ 92.33     $ 105.68  
                                                 
Total return
    12.77 %     14.55 %     15.25 %     (17.87 )%     (16.61 )%     (16.01 )%
                                                 
Other Financial Ratios
                                               
Ratios to average net asset value
                                               
Expenses prior to Trading Advisor incentive fee (2) (3)
    7.56 %     5.96 %     5.40 %     8.00 %     6.30 %     5.59 %
Trading Advisor incentive fee
    1.49 %     1.38 %     1.62 %                  
Total expenses (2) (3)
    9.05 %     7.34 %     7.02 %     8.00 %     6.30 %     5.59 %
Net investment loss (2) (3)
    (8.76 )%     (7.05 )%     (6.72 )%     (7.81 )%     (6.09 )%     (5.29 )%
 
Total returns are calculated based on the change in value of a Series A, Series B or Series I Units during the year.  An individual limited 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 Series A, Series B or Series I Units outstanding during the year.  Gain (loss) from trading is a balancing amount necessary to reconcile the change in net asset value per Unit with the other per Unit information.  Such balancing amount may differ from the calculation of gain (loss) from trading per Unit due to the timing of trading gains and losses during the year relative to the number of Units outstanding.

(2)
All of the ratios under Other Financial Ratios are computed net of involuntary waivers of administrative and offering expenses.  For the years ended December 31, 2010 and 2009, the ratios are net of 0.38% and 0.60% effect of waived administrative expenses, respectively.  For the years ended December 31, 2010 and 2009, the ratios are net of 0.23% and 1.01% effect of waived offering expenses, respectively.

 
 
F-15

 
 
(3)
The net investment loss includes interest income and excludes realized and unrealized gain (loss) from trading activities as shown on the statements of operations.  The total amount is then reduced by all expenses, excluding brokerage commissions, which are included in net gain (loss) from trading on the statements of operations. The resulting amount is divided by the average net asset value for the year.
 
 
F-16