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EX-32.1 - FUTURES PORTFOLIO FUND L.P.v215643_ex32-1.htm
EX-32.2 - FUTURES PORTFOLIO FUND L.P.v215643_ex32-2.htm
EX-31.1 - FUTURES PORTFOLIO FUND L.P.v215643_ex31-1.htm
EX-31.2 - FUTURES PORTFOLIO FUND L.P.v215643_ex31-2.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:  000-50728

FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP

Organized in Maryland
IRS Employer Identification No.:  52-1627106    
 
c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200
Rockville, Maryland 20850
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 x 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  o
Accelerated Filer  £
   
Non-Accelerated Filer  x
(Do not check if a smaller reporting company)
Smaller reporting company  £

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

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
 
7
Item 1B.
 
Unresolved Staff Comments
 
12
Item 2.
 
Properties
 
12
Item 3.
 
Legal Proceedings
 
12
Item 4.
 
[Removed and Reserved]
 
12
         
Part II
         
Item 5.
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
13
Item 6.
 
Selected Financial Data
 
14
Item 7.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
15
Item 7A.
 
Quantitative and Qualitative Disclosures About Market Risk
 
23
Item 8.
 
Financial Statements and Supplementary Data
 
27
Item 9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
27
Item 9A.
 
Controls and Procedures
 
27
Item 9B.
 
Other Information
 
28
         
Part III
         
Item 10.
 
Directors, Executive Officers, and Corporate Governance
 
28
Item 11.
 
Executive Compensation
 
30
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management
 
30
Item 13.
 
Certain Relationships and Related Transactions
 
31
Item 14.
 
Principal Accounting Fees and Services
 
31
         
Part IV
         
Item 15.
 
Exhibits, Financial Statement Schedules
 
32
Signatures
  
33
 
 
 

 
 
PART I

Item 1.
Business

Futures Portfolio Fund, Limited Partnership (“Fund”) is a Maryland limited partnership, formed on May 11, 1989.  Using professional trading advisors, the Fund engages in the speculative trading of futures contracts, forward currency contacts and other financial instruments traded in the United States (“U.S.”) and internationally.  The Fund primarily trades futures contracts within six major market sectors:  stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.  The Fund began trading on January 2, 1990.

Approximately 96% of the Fund’s trading is in the form of exchange traded futures, and the balance is in off-exchange forward currency contracts.  All of the Fund’s off-exchange trading takes place in highly liquid, institutionally-based forward currency markets, although other types of forward contracts may be traded in the future.
 
The Fund’s fiscal year ends each December 31, and the Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Third Amended and Restated Limited Partnership Agreement (“Partnership Agreement”).  At December 31, 2010, the aggregate capitalization of the Fund was $1,401,627,694, consisting of Class A interest of $858,255,331 and Class B interest of $543,372,363.  The net asset value per limited partner interests (“Units”) of the Class A Units was $4,985.84 and Class B Units was $6,650.67 as of December 31, 2010.

The Fund’s assets are allocated among professional commodity trading advisors (“Trading Advisors”).  Portions of the Fund’s assets may be allocated to other investment funds or pools at the discretion of Steben & Company, Inc. (“General Partner”).  The General Partner is responsible for selecting and monitoring the Trading Advisors, and it may add new Trading Advisors in the future, terminate the current Trading Advisors, and will, in general, allocate and reallocate the Fund’s assets among the Trading Advisors as it deems is in the best interests of the Fund.

In February 2011, the Fund made an investment of $80 million in the Steben Institutional Fund LLC (SIF), whose manager is the General Partner.  Presently, the Fund is the only member in SIF.  Similar to the Fund, SIF uses professional trading advisors to engage in the speculative trading of futures and forward currency contracts traded in the U.S. and internationally.  SIF trades within six major market sectors:  stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.  SIF commenced trading on March 1, 2011.

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, a speculative commodity pool.  The Fund does not engage in material operations in foreign countries, although it does trade on international futures markets, nor is a material portion of its revenues derived from foreign customers.

General Partner
 
Under the Partnership Agreement, management of all aspects of the Fund’s business and administration is carried out exclusively by the 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 the Fund’s trading advisors; allocating the Fund’s assets among them; possibly investing a portion of the Fund’s assets in other investment pools; selecting the Fund’s futures broker(s), accountants and attorneys; computing the Fund’s net assets; reporting to limited partners; directing the investment of Fund excess margin monies in interest-bearing instruments and/or cash; and processing subscriptions and redemptions. The General Partner maintains office facilities for and furnishes administrative and clerical services to the Fund.  There have been no material administrative, civil or criminal actions within the past five years against the General Partner or its principals, and no such actions currently are pending.
 
 
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Trading Advisors
 
As of December 31, 2010, the Trading Advisors of the Fund and the allocation of the Fund’s trading level are reflected as follows:
 
   
% of Total Allocations
 
Altis Partners (Jersey), Ltd
    15 %
Aspect Capital, Ltd
    10 %
BlueCrest Capital Management LLP
    21 %
Quantitative Investment Management, LLC
    14 %
Sunrise Capital Partners, LLC
    8 %
Transtrend BV
    16 %
Winton Capital Management, Ltd.
    16 %

These allocations are subject to change at the General Partner’s sole discretion.
 
While past performance is not necessarily indicative of future results, the General Partner believes it is in the interests of the Fund to select Trading Advisors who have demonstrated ability during their trading history.  Consideration is given to the consistency of past returns.  Each Trading Advisor’s reputation, personnel, integrity and trading psychology, as well as its overall trading skill, money management, administrative support and the total amount of funds under management are also considered.  Finally, the General Partner uses its discretion and judgment in applying each of the above factors in making a final determination to include a particular Trading Advisor in the Fund.
 
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 Class A and Class B Units.  Selling agents are selected to assist in the making of offers and sales of Class A and Class B Units.  Including the General Partner, the Fund currently has approximately 110 selling agents.  The selling agents are not required to purchase any Class A and Class B Units, or sell any specific number or dollar amount of Class A and Class B Units, instead use their best efforts to sell such Units.  Where the General Partner acts as the selling agent it retains the selling agent fees.

The Futures Broker and Forward Currency Counterparties

The Fund utilizes Newedge USA, LLC as its futures broker and Newedge Group (U.K. Branch) as a forward currency counterparty (collectively “NUSA”).  The Fund also utilizes UBS A.G. as a forward currency counterparty.  In March 2011, the Fund began using JP Morgan Futures Inc. (“JP Morgan”) as a futures broker for a portion of its futures transactions.  The General Partner may, in its discretion, have the Fund utilize other futures brokers, swap or forward currency 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 (U.K. 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 its business in the U.K.

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

Cash Management Securities Brokers

The Fund utilizes UBS Financial Services, Inc. and Bank of America Merrill Lynch as its cash management securities brokers.  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.

The Fund maintains accounts with the cash management securities brokers for the purpose of investing margin excess balances typically in short-term fixed and similar interest-bearing instruments, which may include money market funds.
 
 
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Description of Current Charges
 
Charges
 
Amount
General Partner Management Fee
 
Class A and B Units incur a monthly General Partner management fee equal to 1/12th of 1.75% of Class A and Class B Units of Fund net assets at the end of each month, payable in arrears.  The General Partner may pay a portion of its monthly management fee on an ongoing basis to selected agents who have sold Units, in return for their provision of ongoing services to limited partners.
 
Prior to December 1, 2010, the General Partner management fee was 1.95% per annum.
     
General Partner 1 percent allocation
 
The General Partner receives an annual allocation of 1% of any increase (or decrease) in the Fund’s net asset value, without regard to contributions and redemptions.
     
Trading Advisor Management Fees
 
Each Class of Units incur monthly Advisor management fees, payable monthly or quarterly in arrears, to the Trading Advisors (based upon the assets under their management), equal to:
·      Altis Partners (Jersey), Ltd: 1/12th of 1%
·      Aspect Capital, Ltd: 1/12th of 2%
·      BlueCrest Capital Management, LLP: 1/12th of 2%
·      Quantitative Investment Management, LLC: 0%
·      Transtrend BV: 1/12th of 1%
·      Winton Capital Management, Ltd:  1/12th of 1.5%
·      Other Trading Advisors*:  1/12th of 0.5% to 1.5%
 
*Individual CTA represents less than 10% allocation of the Fund’s trading level.
     
Trading Advisor Incentive Fees
 
Each Class of Units incur quarterly Advisor incentive fees, payable in arrears to the Trading Advisors,  for any “Net New Trading Profits” generated on the portion of the Fund the respective Trading Advisor manages, equal to:
 
    Altis Partners (Jersey), Ltd
25%
 
    Aspect Capital, Ltd
20%
 
    BlueCrest Capital Management, LLP
20%
 
    Quantitative Investment Management, LLC
30%
 
    Transtrend BV
25%
 
    Winton Capital Management Ltd.
20%
 
    Other Trading Advisors*:
10% to 25%
 
           
   
*Individual CTA represents less than 10% allocation of the Fund’s trading level.
 
Brokerage Commissions
 
The Fund incurs brokerage commissions on U.S. futures exchanges at the approximate rate of $0.10 to $7.72, with an average of $4.78 per “round-turn” futures transaction (includes NFA, execution, clearing and exchange fees).  Brokerage commissions may be higher for trades executed on certain foreign exchanges.
     
Selling Agent Fees and Broker Dealer Servicing Fees
 
The General Partner charges monthly selling agent fees and broker dealer servicing fees, equal to 1/12th of 2% of the month-end net asset value for Class A Units and 1/12th of 0.2% of the month-end net asset value for Class B Units, payable in arrears. The General Partner, in turn, pays selling agent fees and broker dealer servicing fees to the respective selling agents.  If selling agent fees are not paid to the selling agents, or the General Partner was the selling agent, such portions of the selling agent fees are retained by the General Partner.
     
Administrative Fee
  
Class A and B Units incur a monthly General Partner administrative fee equal to 1/12th of 0.45% of Class A and Class B Units of Fund net assets at the end of each month, payable in arrears.  This fee compensates the General Partner for a portion of its actual monthly administrative expenses incurred in administering the Fund.  The administrative expenses include all accounting, audit, legal, administrative, marketing and offering expenses, and other back office expenses related to the administration of the Fund.
 
Prior to December 1, 2010, the Class A and B Units reimbursed the General Partner for administrative expenses, up to 1/12th of 0.65% of Class A and Class B Units of Fund net assets at the end of each month.
 
 
5

 
 
 
Regulation

The Fund is a registrant with the SEC pursuant to the 1934 Act. As a registrant, the Fund is subject to the regulations of the SEC and the reporting requirements of the 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:

 
·
The Fund competes with other commodity pools and other investment vehicles for investors.
 
 
6

 
 
 
·
The Trading Advisors 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-Q, 10-K, 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 Reference Room may be obtained by calling the SEC at (800) SEC-0330. Reports filed electronically with the SEC  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

No Limitations on Trading Policies

The Fund’s Partnership Agreement places no limitation on the trading policies the General Partner may pursue for the Fund.
 
Potential Increase in Leverage

The General Partner may increase the leverage utilized with a particular Trading Advisor by the use of notional funds. Notional funds are utilized when a Trading Advisor is instructed to trade an account according to its trading system under the assumption that the account is larger than the actual cash or securities on hand. This additional leverage, while creating additional profit potential which the General Partner feels may be appropriate with certain Trading Advisors in light of the Fund’s multi-trader diversification, also increases the risk of loss to the Fund.

Volatility

The volatility of the Fund is expected to be similar to what it has been in the past, although it could be more or less volatile in the future depending upon the volatility of the market, the success of the Trading Advisors and the level of notional funding utilized by the General Partner in its allocations to the Trading Advisors.

Liquidity

Although the Fund offers monthly redemptions, the Fund may delay payment if special circumstances require, such as a market emergency that prevents the liquidation of commodity positions or a delay or default in payment to the Fund by the futures broker or a counterparty.

Complex Fee Structure

Allocation to more than one Trading Advisor makes the Fund’s fee structure more complex which in turn could diminish the pool’s profit potential.

Fund Expenses Will Be Substantial

The Fund is obligated to pay brokerage commissions, selling agent and management fees to the General Partner and various Trading Advisors and other administrative fees, regardless of whether it realizes profits. The Fund will need to make substantial trading profits to avoid depletion of its assets from these expenses.

Reliance on General Partner

The Fund’s success depends significantly on the General Partner’s ability to select Trading Advisors.
 
 
7

 

Dependence on Key Personnel

The General Partner is dependent on the services of Mr. Kenneth E. 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.

Reliance on the Trading Advisors

The Fund’s success depends largely on the ability of its Trading Advisors. There can be no assurance that their trading methods will produce profits (or not generate losses). Past performance is not necessarily indicative of future results.

Reliance on Futures Broker’s Financial Condition

If the futures broker becomes insolvent, the Fund might incur a loss of all or a portion of the funds it had deposited directly or indirectly with the futures broker. There is no government insurance for commodity brokerage accounts. Such a loss could occur if the futures broker unlawfully failed to segregate its customers’ funds or if a customer failed to pay a deficiency in its account.

Use of Money Market Instruments

Prior to the issuance of Units at monthly closings, an investor’s subscription proceeds are maintained in an escrow account at Bank of America, which earns interest that will accrue to the benefit of the investor. The Fund also maintains an operating account at Bank of America which earns interest for the benefit of the Fund. In addition, a percentage of the Fund’s assets may be maintained in money market funds with UBS Financial Services, Inc. and Bank of America which earn interest for the benefit of the Fund. These money market accounts invest primarily in high quality short term money market instruments. Although these investments are considered to be high quality, some of the securities utilized by the money market funds are neither guaranteed by the U.S. government nor supported by the full faith and credit of the U.S. government. There is some risk that an issuer of the short term money market instruments utilized in the money market account may fail to pay the interest and principal in a timely manner, or that negative perceptions about the issuer’s ability to make such payments will cause the price of these instruments to decline in value.

Investment in Other Investment Pools

The Fund may invest in other pools. The Fund expects to be liable to those pools (e.g., limited partners), only for the amount of its investment plus any undistributed profits. However, there can be no assurance in this regard, and the Fund might invest as a general partner if the situation warranted, and thus be liable for additional amounts.

Investment in pools (or similar investment vehicles), as distinguished from direct participation in the markets, has several potential disadvantages. Those investments may increase the Fund’s expenses, since the Fund will have to pay its pro rata share of the expenses borne by the investors in the pools, and the pools may have higher expenses. The Fund will generally be a minority investor in those pools and thus lack control over the pools. The pools might (a) change trading policies, strategies and trading advisors without prior notice to the Fund; (b) substantially restrict the ability of their investors to withdraw their capital from the pools; (c) be new ventures with little or no operating history; (d) be general rather than limited partnerships, thus increasing the Fund’s liability; and/or (e) use aggressive leveraging policies.

In February 2011, the Fund made an investment of $80 million in the Steben Institutional Fund LLC (SIF), whose manager is the General Partner. Presently, the Fund is the only member in SIF. Similar to the Fund, SIF uses professional trading advisors to engage in the speculative trading of futures and forward currency contracts traded in the U.S. and internationally. SIF trades within six major market sectors: stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities. SIF commenced trading on March 1, 2011. SIF incurs trading advisor management and incentive fees, as well as reimburses its manager for operating expenses incurred on its behalf.

Use of Electronic Trading

The Trading Advisors may use electronic trading while implementing their strategies on behalf of the Fund. Electronic trading differs from traditional methods of trading. Electronic system transactions are subject to the rules and regulations of the exchanges offering the system or listing the specific contracts. Attributes of electronic trading may vary widely among the various electronic trading systems with respect to order requirements, processes and administration. There may also be differences regarding conditions for access and reasons for termination and limitations on the types of orders that may be placed into the system. These factors may present various risk factors with respect to trading on or using a specific system. Electronic trading systems may also possess particular risks related to system access, varying response times and security procedures. Internet enabled systems may also have additional risks associated with service providers and the delivery and monitoring of electronic communications.
 
 
8

 
 
Electronic trading may also be subject to risks associated with system or component failure. In the event of system or component failure, it is possible that a Trading Advisor may not be able to initiate new orders, fill existing orders or modify or cancel orders that were previously entered, as well as exit existing positions. System or component failure may also result in loss of orders or order priority. Some contracts offered on an electronic trading system may also be traded electronically and through open outcry during the same trading hours. Exchanges offering an electronic trading system which lists contracts may have implemented rules to limit their liability, the liability of futures brokers, as well as software and communication system vendors and the damages that may be collected for system inoperability and delays. These limitations of liability provisions may vary among the various exchanges.

Changes in Trading Strategies

The trading strategies of the Trading Advisors are continually developing. The Trading Advisors are free to make any changes in their trading strategies, without notice, if they feel that doing so will be in the Fund’s best interest. The General Partner will notify the limited partners of any such changes that the General Partner considers material. Changes in commodities or the markets traded shall not be deemed a change in trading strategy.

Disadvantages of Periodic Incentive Fees

Because the Trading Advisor incentive fees (if any) are paid on a quarterly basis, they could receive incentive fees for a period even though their trading for the year was unprofitable. Once an incentive fee is paid, the Trading Advisors retain the fee regardless of their subsequent performance, but no new incentive fees will be paid until after all previous losses have been recovered.

Disadvantages of Multi-Trader Structure

The Fund’s use of multiple Trading Advisors to conduct its trading has several potential disadvantages.
Each Trading Advisor is paid incentive fees solely on the basis of its trading for the Fund. The Fund, therefore, could have periods in which it pays fees to one or more Trading Advisors even though the Fund, as a whole, has a loss for the period (because the losses incurred by the Fund from unprofitable Trading Advisors exceed the profits earned by the Fund from profitable Trading Advisors).

Because the Trading Advisors trade independently of each other, they may establish offsetting positions for the Fund. For example, one Trading Advisor may sell 12 March wheat contracts at the same time another Trading Advisor buys 12 March wheat contracts. The net effect for the Fund will be the incurring of two brokerage commissions without the potential for earning a profit (or incurring a loss).

Under certain unusual circumstances, the Fund might have to direct a Trading Advisor to liquidate positions in order to generate funds needed to meet margin calls, to fund the redemption of Units, or to permit the reallocation of funds to another Trading Advisor. Such liquidations could disrupt the Trading Advisor’s trading system or method.

Disadvantages of Replacing Trading Advisors

The General Partner has the authority to reallocate the Fund’s assets among the Trading Advisors, terminate Trading Advisors and allocate assets to new Trading Advisor(s), or invest the Fund’s assets in other investment funds or commodity pools.

Trading Advisors generally have to “make up” previous trading losses incurred by the Fund on portions of the Fund the Trading Advisors are managing, before they can earn an incentive fee. However, a Trading Advisor might terminate its services to the Fund or the General Partner might decide to replace a Trading Advisor when it has such a loss carry-forward. The Fund might have to pay a new Trading Advisor higher advisory fees than are currently being paid to the current Trading Advisor. In addition, the Fund would lose the potential benefit of not having to pay the Trading Advisor an incentive fee during the time that the Trading Advisor was generating profits that made up for the prior losses. The replacement Trading Advisor would “start from scratch,” that is, the Fund would have to pay a new Trading Advisor an incentive fee for each dollar of profit it generated for the Fund, regardless of the Fund’s previous experience.
 
 
9

 
 
Limited Partners Do Not Participate in Management

Limited partners are not entitled to participate in the management of the Fund or the conduct of its business.

Non-Transferability of Units

Investors may acquire Units only for investment and not for resale, and the Units are transferable only with the General Partner’s consent, provided that the economic benefits of ownership of a limited partner may be transferred or assigned without the consent of the General Partner. There will be no resale market for the Units. However, limited partners may redeem all or (subject to certain limitations) any portion of their Units at the end of any month, on five business days written notice to the General Partner.

Possible Adverse Effect of Large Redemptions

The Trading Advisors’ trading strategies could be disrupted by large redemptions by limited partners. For example, such redemptions could require the Trading Advisors to prematurely liquidate futures positions they had established for the Fund.

Mandatory Redemptions

The General Partner may require a limited partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a nonexempt prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund or (c) necessary to comply with the Investment Company Act of 1940.

Indemnification

The Fund is required to indemnify the General Partner, the Trading Advisors and the futures broker, and their affiliates, against various liabilities they may incur in providing services to the Fund, provided the indemnified party met the standard of conduct specified in the applicable indemnification clause. The Fund’s indemnification obligations could require the Fund to make substantial indemnification payments.

Termination of Fund

The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Partnership Agreement. For example, the General Partner can withdraw on 60 days prior written notice, and such a withdrawal could result in termination of the Fund. The General Partner has no present intention of withdrawing and intends to continue the Fund business as long as it believes that it is in the best interest of all Partners to do so. In addition, certain events may occur which could result in early termination.

Lack of Regulation

The Fund is not an investment company under the federal securities laws. Thus, limited partners will not have the benefits of federal regulation of investment companies. In addition, this offering is not registered with the SEC or any state.

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.
 
 
10

 
 
Incentive Fee to the Trading Advisors

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

Personal Trading

The Trading Advisors, 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 Advisors and their Principals

The Trading Advisors and their principals may trade for their own accounts in addition to directing trading for client accounts. Therefore, the Trading Advisors and their 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 Advisors and their 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 Advisors trade futures and foreign exchange for their own accounts, there is potentially a conflict of interest between these principals and the Trading Advisors’ clients when allocating prices on trades that are executed by a futures commission merchant at multiple prices. In such instances, the Trading Advisors use a non-preferential method of fill allocation. The clients of the Trading Advisors will not be permitted to inspect the personal trading records of the Trading Advisors 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 Advisors and their principals are combined for speculative position limits. Because speculative position limits allow the Trading Advisors and their principals to control only a limited number of contracts in any one commodity, the Trading Advisors and their principals are potentially subject to a conflict among the interests of all accounts the Trading Advisors and their principals control which are competing for shares of that limited number of contracts. There exists a conflict between the Trading Advisors’ 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 Advisors and their principals. The General Partner does not believe, however, that the position limits are likely to impair the Trading Advisors’ trading for the Fund, although it is possible the issue could arise in the future.

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 Advisors 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 Advisors cannot be executed in full, the Trading Advisors 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 Advisors

Certain principals of the Trading Advisors 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 Advisors 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 Advisors intend to devote substantial attention to the operation and activities of the Trading Advisors consistent with the division of responsibilities among them as is described herein.
 
 
11

 
 
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 outstanding Units may give them an incentive to advise 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 affects 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.

Item 1B.
Unresolved Staff Comments

Not Applicable.

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 (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]
 
 
12

 
 
PART II

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

Market Information

Neither A nor B Units of the Fund are publicly traded. Both A and B Units may be transferred or redeemed subject to the conditions imposed by the Partnership Agreement.

A and B Units are being offered continuously to the public by selling agents on a best-efforts basis at subsequent closing dates at a price equal to the net asset value per unit as of the close of business on each applicable closing date, which is the first business day of each month. The minimum investment is $10,000.

Holders

As of February 28, 2011, there were 11,527 and 6,738 holders of A and B Units of the Fund, respectively.

Dividends

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

Securities Authorized for Issuance under Equity Compensation Plans

No Units were authorized for issuance under equity compensation plans.

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

Issuer Purchases of Equity Securities.

A and B Units are eligible for redemption on a continuous basis at subsequent closing dates at a price equal to the net asset value per unit as of the close of business on each applicable closing date, which is the last business day of each month. 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, if making a partial redemption, the limited partner 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.

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

   
October
   
November
   
December
   
Total
 
A Units
                       
Units redeemed
    1,371.5609       695.2834       1,000.5561       3,067.4004  
Average net asset value per unit
  $ 4,902.83     $ 4,749.05     $ 4,985.84     $ 4,895.05  
                                 
B Units
                               
Units redeemed
    498.8584       1,021.5226       1,025.2537       2,545.6347  
Average net asset value per unit
  $ 6,520.82     $ 6,322.77     $ 6,650.67     $ 6,493.64  
 
 
13

 

Item 6.   Selected Financial Data

   
For the Year Ended December 31,
 
   
2010
   
2009
   
2008
   
2007
   
2006
 
Income Statement Items
                             
Net gain (loss) from trading
  $ 182,134,426     $ (1,321,770 )   $ 261,554,585     $ 45,735,396     $ 44,784,929  
Interest income
    3,119,900       4,484,279       19,068,236       26,770,478       22,657,865  
Net total expenses
    84,518,180       66,508,237       94,568,427       47,724,348       33,011,274  
Net income (loss)
  $ 100,736,146     $ (63,345,728 )   $ 186,054,394     $ 24,781,526     $ 34,431,520  
                                         
Balance Sheet Items
                                       
Total assets
  $ 1,457,657,150     $ 1,109,264,003     $ 899,233,549     $ 562,253,689     $ 525,148,484  
Total partners’ capital (net asset value)
  $ 1,401,627,694     $ 1,057,734,905     $ 832,985,264     $ 545,106,985     $ 504,060,093  
                                         
Class A Units
                                       
Net asset value per unit
  $ 4,985.84     $ 4,668.87     $ 5,018.96     $ 3,867.65     $ 3,725.59  
Increase (decrease) in net asset value per unit
  $ 316.97     $ (350.09 )   $ 1,151.31     $ 142.06     $ 236.46  
Total return
    6.79 %     (6.98 )%     29.77 %     3.81 %     6.78 %
                                         
Class B Units
                                       
Net asset value per unit
  $ 6,650.67     $ 6,118.04     $ 6,460.05     $ 4,891.11     $ 4,627.81  
Increase (decrease) in net asset value per unit
  $ 532.63     $ (342.01 )   $ 1,568.94     $ 263.30     $ 370.78  
Total return
    8.71 %     (5.29 )%     32.08 %     5.69 %     8.71 %

Results from past periods are not necessarily indicative of results that may be expected for any future period.

The following supplementary summarized quarterly data are presented for the three-month periods ended March 31, June 30, September 30 and December 31, 2010 and 2009.

   
March, 2010
   
March, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Net income (loss)
  $ 14,838,449     $ 10,301,774     $ (15,602,409 )   $ (6,950,973 )
                                 
Increase (decrease) in net asset value per unit
  $ 87.12     $ 142.04     $ (130.85 )   $ (140.40 )
                                 
Net asset value per unit
  $ 4,755.99     $ 6,260.08     $ 4,888.11     $ 6,319.65  
                                 
Ending net asset value
  $ 745,880,303     $ 413,165,763     $ 570,404,626     $ 305,743,507  

   
June, 2010
   
June, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Net loss
  $ (42,843,931 )   $ (22,781,078 )   $ (22,118,696 )   $ (10,449,541 )
                                 
Decrease in net asset value per unit
  $ (264.90 )   $ (322.43 )   $ (173.46 )   $ (197.21 )
                                 
Net asset value per unit
  $ 4,491.09     $ 5,937.65     $ 4,714.65     $ 6,122.44  
                                 
Ending net asset value
  $ 729,331,259     $ 422,890,183     $ 608,950,555     $ 330,947,199  
 
 
14

 

   
September, 2010
   
September, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Net income
  $ 36,757,542     $ 24,613,436     $ 17,583,790     $ 11,071,443  
                                 
Increase in net asset value per unit
  $ 217.95     $ 316.09     $ 126.03     $ 191.93  
                                 
Net asset value per unit
  $ 4,709.04     $ 6,253.74     $ 4,840.68     $ 6,314.37  
                                 
Ending net asset value
  $ 786,763,948     $ 483,696,598     $ 670,137,654     $ 362,580,346  

   
December, 2010
   
December, 2009
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Net income (loss)
  $ 47,567,365     $ 32,282,589     $ (25,248,765 )   $ (11,630,577 )
                                 
Increase (decrease) in net asset value per unit
  $ 276.80     $ 396.93     $ (171.81 )   $ (196.33 )
                                 
Net asset value per unit
  $ 4,985.84     $ 6,650.67     $ 4,668.87     $ 6,118.04  
                                 
Ending net asset value
  $ 858,255,331     $ 543,372,363     $ 688,434,529     $ 369,300,376  

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

Using Trading Advisors, 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.

Most U.S. commodity exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place.

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.

Contractual Obligations

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

Results of Operations

The returns for each Class of Units for the years ended December 31, 2010, 2009 and 2008 were:

Class of Units
 
2010
   
2009
   
2008
 
                         
Class A
    6.79 %     (6.98 )%     29.77 %
                         
Class B
    8.71 %     (5.29 )%     32.08 %

 
 
15

 
 
Past performance is no guarantee of future results. Monthly analysis of the trading gains and losses is provided below.

2010

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

February
 
A Units of the Fund were up 1.63% for the month of February and B Units were up 1.78%. The Fund posted positive gains in February as profits from interest rate instruments and currencies outweighed losses from agricultural commodities and energies. The most significant gains came from short-term interest rate instrument prices, which trended higher following news of the Greek debt crisis. This news also placed downward pressure on foreign currencies, especially the EU euro and British pound. The rise in interest rate instrument prices benefited the Funds’ long positions in that sector, while falling European currencies generated profits for the Fund’s short foreign currency positions. In agricultural commodities, declining prices went against the Fund’s long positions, including sugar, corn and soybeans.

March
 
A Units of the Fund were up 5.02% for the month of March and B Units were up 5.18%. The Fund finished higher this month with profits in five of the six major market sectors. The Fund’s most significant gains came from equity indices where prices continued to trend higher. Many of the global indices, including the S&P 500, reached their highest level since the third quarter of 2008. Although equity prices experienced a brief reversal between late January and early February, the Fund’s systematic trading systems maintained long positions and profited from the upward trend that resumed during late February and March. In the energy sector, natural gas resumed a strong downward trend that benefited the Fund’s short natural gas positions, while crude oil prices climbed which benefited the Fund’s long oil positions. In the metals sector, the base metals including nickel, copper, aluminum and zinc all profited on rising prices.

April
 
A Units of the Fund were up 1.48% for the month of April and B Units were up 1.63%. The Fund finished higher this month as profits in energy, interest rate instruments and currencies offset losses in agricultural commodities, equity indices and metals. The most significant gains came from the energy sector. Oil prices continued to rise, which benefited the Fund’s long positions, while the Fund’s short positions in natural gas realized profits as prices trended lower. Rating agencies lowered credit ratings on sovereign debt for Greece, Portugal and Spain. In a flight to safety, U.S. treasury prices and the U.S. dollar rallied while European currencies and debt instrument prices fell, generating profits for the Fund in each of those markets. U.S. equity markets continued to trend higher, but profits from those markets were offset by losses from long positions in foreign equity indices.
 
May
 
A Units of the Fund were down 6.38% for the month of May and B Units were down 6.25%. While disappointing, this wasn’t a surprise given the sharp turnaround in the global stock and bond markets caused by the sovereign debt crisis in Europe. Losses in energy and equity indices offset gains in interest rate instruments and metals. Long positions in the energy sector were responsible for the most significant losses as commodity prices fell on heightened concerns over the European debt crisis. U.S. Treasury instrument prices trended higher, while stock indices and energy prices fell in an apparent flight to safety. While the increase in the price of interest rate instruments was profitable for the Fund’s long positions, the sharp reversals in both energy and equities went against established upward trends in those markets, which generated losses. Base metal prices also reversed course, which resulted in a loss. Those losses, however, were tempered by gains in the Fund’s long positions in gold, aluminum and zinc.
 
 
16

 
 
June
 
A Units of the Fund were down 0.60% for the month of June and B Units were down 0.45%. The Fund finished lower this month as profits in interest rate instruments were offset by losses in equity indices, currencies, and commodities. The Fund’s most significant gains came from long positions in the interest rate instrument sector as concerns over the sovereign debt crisis in Europe and slow economic growth in the U.S. continued to dominate market sentiment. U.S. Treasury yields and short-term interest rates fell, which also generated strong profits in the sector. Global indices continued to drift lower which went against the Fund’s long positions. Over the past several weeks, the Fund’s long equity index positions have been systematically reduced in response to the market downturn. In currencies, a sudden rise in the euro and British Pound went against the Fund’s short positions generating losses.
 
July
 
A Units of the Fund were down 1.55% for the month and B Units were down 1.40%. The Fund finished lower this month as profits from interest rate instruments were offset by losses in commodities and global equity indices. The Fund’s most significant gains came from its long positions in the interest rate instrument sector. Although there were some positive signs in global markets, including successful outcomes from stress tests at major European banks, the combination of government stimulus spending declining or ending in many countries along with slow economic growth, has renewed fears of deflation. Global interest rates continued to edge lower creating profits from rising interest rate instrument prices. Precious metals reversed from last month’s highs, including gold which fell to a six-week low, going against the Fund’s long positions. Although U.S. equity prices enjoyed a modest rally this month, global indices were mixed. By the end of the month, the Fund netted losses in the sector.
 
August
 
A Units of the Fund were up 3.62% for the month and B Units were up 3.78%. The Fund finished higher this month led by profits in interest rate instruments, energy, metals and currencies. The most significant gains came from long positions in interest rate instruments. Concerns over a weak U.S. economy, along with perceived threats of a “double-dip” recession, sent yields lower, including 10-year Treasury bonds and 10-year UK gilts, which saw their lowest level since March 2009. Global stock indices continued to move sideways without strong trends. In the energy sector, the Fund’s short positions in natural gas profited from its sustained downward trend. The metals sector benefited from long positions in precious metals, including gold and platinum.
 
September
 
A Units of the Fund were up 2.78% for the month and B Units were up 2.93%. The Fund finished higher this month with profits in equity indices, agricultural commodities, metals and currencies offsetting losses in interest rate instruments and energy. The most significant gains came from long positions in equity indices. Global equity prices continued to move higher in September which benefited the Fund’s positions. Both industrial and precious metals prices trended higher, generating profits for the Fund’s long positions in gold, silver and copper. The U.S. dollar trended lower against several foreign currencies, with the Australian dollar generating the most profits in the sector. Early in the month, interest rate instruments prices fell which generated early losses for the sector. However, prices rallied toward the end of the month after the Fed’s comments on quantitative easing. The late rally in interest rate instruments benefited the Fund’s long positions, but it was not enough to offset earlier losses. In the energy sector, the Fund’s short positions in natural gas profited from a sustained downward trend, but a sharp rise in crude oil went against the Fund’s short positions, resulting in a net loss for that sector.
 
October
 
A Units of the Fund were up 4.12% for the month and B Units were up 4.27%. The Fund finished higher this month with profits in four of the six major market sectors. The most significant gains came from long positions in global stock indices driven by upward trends in the DAX, S&P 500, Russell 2000 and FTSE 100. In currencies, the rise in the Japanese yen, Australian dollar, Mexican peso and New Zealand dollar were responsible for generating the most profits from that sector. The combination of rising Chinese agricultural imports, lower inventories and a weaker U.S. dollar helped push agricultural commodity prices higher, which benefited the Fund’s long positions. Corn prices climbed to 2-year high, soybeans reached their highest price since July 2008, and sugar prices hit a 30-year high. Precious metals also trended higher, adding additional profit’s from that sector.
 
 
17

 
 
November
 
A Units of the Fund were down 3.18% for the month and B Units were down 3.04%. The Fund finished lower this month as losses from interest rate instruments, currencies and agriculturals offset gains in metals. The most significant losses came from the Fund’s long positions in interest rate instruments, where rice reversals caused by a rise in rates followed growing concerns over Irish sovereign debt in Europe and its threat to impact other EU nations including Portugal and Spain. In addition, there was a rise in short term U.S. interest rates that followed the Federal Reserve’s action of buying U.S. debt instruments in another round of quantitative easing. The net effect was that the fall in prices went against the Fund’s widely held long positions. The Irish debt crisis also pushed the euro lower relative to other foreign currencies, while the U.S. dollar reversed its downward direction. The sudden reversals in currencies went against the Fund’s positions, generating additional losses for the Fund. Metals, including gold, silver and copper, continued higher this month, generating profits for the Fund’s long positions.
 
December
 
A Units of the Fund were up 5.03% for the month and B Units were up 5.19%. The Fund finished higher this month with profits from all sectors with the exception of interest rate instruments. The most significant gains came from the Fund’s long positions in equity indices as equity prices continued to trend higher for the past two quarters. Foreign currencies were profitable for the Fund, driven by trends in international cross currencies resulting from a decline in the euro and British pound combined with rising Australian dollar and Japanese yen prices. Strong upward price trends in the metals markets also fueled profits for the Fund’s long positions in copper, silver, gold and aluminum. In agricultural commodities rising prices in coffee, soybeans, corn and sugar each contributed additional profits. Interest rate instrument prices went against the Fund’s long positions which generated losses.
 
2009
 
January
 
A Units of the Fund were up 0.61% for the month of January 2009 and B Units were up 0.76%. January ended with the Fund realizing profits in five out of nine market sectors. In contrast to the trends of the last few months, many of the markets traded by the Fund were directionless. General optimism after the Obama transition along with government intervention into the world’s financial markets seemed to dampen the steady declines in equity prices experienced in recent quarters. The energy sector was profitable, driven by gains from crude oil and natural gas, whose prices continued to decline on slowing demand and rising inventory levels. Similarly, industrial metals such as aluminum, nickel and zinc also declined due to inventory build-ups, benefiting the Fund’s short positions. In foreign currencies, the U.S. dollar strengthened as risk adverse investors continued to seek the perceived safety of the U.S. currency. Interest rate instruments edged lower during the month which went against the Fund’s long bond positions.
 
February
 
A Units of the Fund were down 0.11% for the month of February 2009 and B Units were up 0.04%.The Fund ended the month essentially flat as most markets continued to trade within relatively narrow price ranges. Global equity markets continued to decline amid further weak economic data and a deepening recession. This decline benefited the Fund’s short positions in equity indices. The energy sector finished with modest profits from short positions in natural gas and heating oil. Agricultural commodities were profitable, despite some losses from a sharp reversal in cocoa markets. Foreign currencies experienced losses this month due to the weakening of the Japanese yen relative to the U.S. dollar. The yen rose about 30% between August 2008 and the start of February, then switched direction against the U.S. dollar and other major currencies.

March
 
A Units of the Fund were down 3.09% for the month of March 2009 and B Units were down 2.95%. During March prices moved against established trends and the Fund’s positions. After equity markets reached a new 12 year low, markets reversed and showed some signs of recovery. The rising equity indices, including the S&P 500, DAX and Nikkei 225 Index, moved against the Fund’s short positions, resulting in losses for the Fund. The U.S. dollar fell sharply following the U.S. Treasury Department’s announcement that it planned to repurchase toxic assets, in an effort to help stimulate bank lending. Most foreign currencies strengthened against the U.S. dollar moving against the Fund’s short foreign currency positions. In the interest rate instrument markets, prices settled higher adding some profit to the Fund’s long positions in that sector.
 
April
 
A Units of the Fund were down 1.94% for the month of April 2009 and B Units were down 1.79%. The Fund finished lower in April as most markets continued to move within narrow trading ranges without exhibiting any significant trends. One exception was in the energy sector where natural gas prices continued in a downward trend generating profits for the Fund’s short positions. A rally in global equities that began in March continued through April. The rising equity prices generated profits for the Fund’s long positions in this sector which helped to offset losses from other sectors. The Fund’s biggest losses came from interest rate instruments, where prices in medium to long term bonds fell, which went against the Fund’s long positions. Industrial metals prices rose toward the end of the month, with aluminum and nickel moving against the Fund’s short positions creating some losses. Agricultural commodities ended flat for the month.
 
 
18

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

June
 
A Units of the Fund were down 3.01% for the month of June 2009 and B Units were down 2.87%. The Fund finished lower in June as gains in equity indices, energies, foreign currencies and agricultural commodities were offset by losses from interest rate instruments and metals. The most significant losses occurred in the Fund’s short-term interest rate positions, where prices reversed from previous longer term trends. A sharp sell-off in Eurodollar, short sterling and euribor contracts was fueled by speculation that global central banks may begin to increase short-term interest rates to counteract potential inflationary pressures. The sudden drop in interest rate instrument prices went against the Fund’s long positions. Also in interest rates, weaker than expected forecasts for Japan’s economy sent Japanese government bond (JGB) prices higher, which was a reversal from the price trend in that market. The higher prices generated losses in the Fund’s short JGB positions. Commodity markets rallied during the month which benefited the Fund’s long positions in agricultural commodities, but resulted in losses for short positions in the metals sector. Long positions in the energies were profitable as oil prices made new highs for the year.
 
July
 
A Units of the Fund were down 0.72% for the month of July 2009 and B Units were down 0.57%. Profits from equity indices, metals and foreign currencies were not sufficient to offset losses from energy and agricultural commodities. Equity markets were volatile as they initially fell early in the month in response to poor economic data in the U.S. By mid-month increased optimism about the global economy pushed equity markets to eight month highs. The rising global equity prices generated profits for the Fund’s long positions. The Fund’s long positions in base metals, including aluminum, nickel and copper, benefited from upward trends in those markets that also generated profits. In energy markets heating oil and gasoline prices continued to move sideways and generated losses for the Fund’s positions in this sector.
 
August
 
A Units of the Fund were up 1.41% for the month of August 2009 and B Unit’s were up 1.56%. It was a positive month for the Fund as all major sectors posted a profit with the exception of currencies. Performance was led by the Fund’s long positions in equity indices as further signs of economic recovery pushed equity prices higher. Globally, central banks indicated that near-term interest rate hikes were unlikely. In response, prices of short term interest rate instruments increased which benefited the Fund’s long positions. Price increases in sugar, wheat and corn contracts generated profits for the Fund’s long positions in agricultural commodities. Due to a drop in global supply, sugar prices hit a 28-year high as heavy rains in India and Brazil dampened inventory. Weak demand and increased production continued to send natural gas prices lower. Natural gas prices have fallen 84% in the last 13 months, which generated profits for the Fund’s short positions. Long positions in gasoline and crude oil were also profitable.

September
 
A Units of the Fund were up 1.98% for the month of September 2009 and B Unit’s were up 2.13%. It was a positive month for the Fund as profits from interest rate instruments, foreign currencies and metals offset losses in the energy sector. Performance was led by the Fund’s long positions in interest rate instruments. Prices in both short-term instruments and long-term bonds have been trending higher since mid-August as central banks continue to signal that interest rates will remain low. The foreign currency sector generated profits as long positions in foreign currencies and short positions in the U.S. dollar were profitable. The USD declined to a twelve-month low versus the euro and an eight-month low versus the yen. In the energy sector, natural gas rallied over 30% from a seven year low despite strong inventory data. The sudden increase in gas prices went against the Fund’s short positions, generating losses for the Fund.
 
 
19

 
 
October
 
A Units of the Fund were down 3.22% for the month of October 2009 and B Units were down 3.08%. It was a negative month for the Fund as losses from equity indices, interest rates, currencies and agricultural sectors offset modest profits realized from positive performance in metals and energies. The early weeks of the month were characterized by rising global equity and commodity prices and a declining US dollar, which generated profits for the Fund positions in their respective sectors. However, in the final week of October, uncertainty over global economic growth and central bank policies led to sharp price reversals in several market sectors. Falling prices in global indices went against the Fund’s long positions, while the sudden rise in the US dollar generated losses for the Fund’s long positions in several foreign currencies, including the Canadian dollar, British pound and Japanese yen. Agricultural commodity prices also reversed course, including sugar, corn, soybeans and wheat, which generated losses. Rising metals prices were the most profitable trades for the Fund, led by gold, zinc and copper. Rising crude oil prices benefited the Fund’s long positions.

November
 
A Units of the Fund were up 4.83% for the month of November 2009 and B Units were up 4.99%. It was a positive month as profits were realized from all six market sectors. The largest profits came from the interest rate sector. Here, the Fund’s long positions in long- and short-term interest rate instruments benefited from upward price trends. Within the sector, the Fund’s long positions in eurodollars were most profitable. In metals, long positions in gold and silver generated the most significant profits as a weaker dollar pushed precious and base metal prices higher, including gold, which hit an all-time high. Global equity prices trended higher, which generated profits for long positions in that sector, including the S&P 500, NASDAQ, FTSE and Japanese Topix indices.

December
 
A Units of the Fund were down 4.93% for the month of December 2009 and B Units were down 4.78%. The Fund finished lower this month as losses from interest rate instruments, energy, foreign currencies and metals offset profits from equity indices and agricultural commodities. The Fund’s most significant losses came from its long positions in interest rate instruments. Early in the month, short-term interest rates rose suddenly on speculation that the Federal Reserve might speed up its timetable for increasing its target rate. In the energy sector, a long downward trend in natural gas prices unexpectedly reversed. Natural gas prices hit an 11-month high as government data showed lower than expected U.S. inventories. This sharp price increase went against the Fund’s short natural gas positions, which resulted in a loss. In equity indices, the Fund generated profits from its long positions as the stock market rally that began in early March continued through December.

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

February
 
A Units of the Fund were up 11.56% for the month of February 2008 and B Units were up 11.74%. The Fund finished the month with net profits in all six major market sectors. Physical commodities generated the largest profits as strong demand and tight supplies in a number of commodities drove contract prices to record highs. In the agricultural commodities sector, the Fund’s long positions in soybeans, wheat, coffee, corn and sugar were among the most profitable. Since the start of the year, wheat prices have climbed 21%, while soybeans and coffee were up 27% and 35% respectively. In the energy sector, light crude oil futures hit a new nominal high of $103.05 dollars per barrel. The Fund gained from its long positions in energy, especially crude oil, heating oil, gasoline and kerosene. In the metals sector, the Fund profited from its long positions in both precious and industrial metals including gold, silver, aluminum, platinum and copper. Short positions in equity indices profited as global indices weakened on fears of inflation and a weaker U.S. dollar. Bond prices were mostly unchanged until the final days of the month, when prices jumped in reaction to Fed news about further rate cuts. The net increase in bond prices benefited the Fund’s long bond positions.
 
 
20

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

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

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

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

July
 
A Units of the Fund were down 9.26% for the month of July 2008 and B Units were down 9.13%. The Fund finished lower in July as several key markets experienced sharp reversals that moved against previously established long term market trends. The most significant price reversals were experienced in the energy and agricultural commodity sectors. After reaching multi-month highs in June, prices in crude oil, heating oil, gasoline and natural gas fell sharply in July on signs of weaker demand and a rising U.S. dollar. Natural gas, which reached a 30-month high at the end of June, fell more than 32% during July, creating losses for the Fund’s long positions. The stronger dollar also caused agricultural commodities to reverse from strong upward trends. Corn and soybeans fell more than 15% during the month creating losses for the Fund’s long systematic positions. Interest rate instruments have been directionless over the last several weeks. The Fund’s positions in that sector experienced losses due to a lack of trends resulting in “whipsawing” of the Fund’s positions. The Fund’s traders reduced their risk in each of the affected sectors by either reducing or getting out of positions.
 
 
21

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

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

October
 
A Units of the Fund were up 10.18% for the month of October 2008 and B Units were up 10.34%. October was a very profitable month for the Fund with gains in all six major market sectors. As monetary authorities sought to restore liquidity in the domestic and international credit markets, the fear of prolonged economic weakness led to steep declines in global equity prices. The downward trend in global equity prices benefited the Fund’s short positions in equity indices. Demand for physical commodities declined as speculators grew increasingly concerned about a global recession. The fall in demand led to lower prices in metals, energy and agricultural commodities, all of which created profits for the Fund’s short positions in those respective sectors. Strong performance was also seen in interest rate instruments as major global central banks joined in a coordinated effort to cut interest rates in order to restore investor confidence. Rising interest rate instrument prices led to profits in the Fund’s long positions. In currencies, long positions in the U.S. dollar were mostly positive against other major foreign currencies.

November
 
A Units of the Fund were up 3.91% for the month of November 2008 and B Units were up 4.07%. November was a profitable month for the Fund with gains in five out of the six major market sectors traded. Interest rate instrument prices continued to trend higher as international bond prices rallied on fears of a prolonged global economic recession. In addition, investors shifted assets toward the relative safe haven of medium to long term government securities, while European and Asian central banks cut short term rates. The rising interest rate instrument prices generated profits for the Fund’s long positions in that sector. Short positions in stock indices were profitable as equity indices continued to decline during the month. Commodity prices, especially energy prices declined creating additional profits for the Fund’s short energy positions. In currencies, the U.S. dollar strengthened, particularly against the British pound and the euro leading to profits in the Fund’s contracts.

December
 
A Units of the Fund were up 2.55% for the month of December 2008 and B Units were up 2.71%. December was a profitable month for the Fund as global trends continued, resulting in gains in five out of the six major market sectors. Interest rate instruments were the most profitable sector. The Fund’s long interest rate instrument positions benefited as weaker than expected employment data in the U.S. and further rate cuts by the U.S. Federal Reserve and other central banks around the world fueled a continuing decline in long and short term interest rates. In the energy sector, crude oil prices fell 18% in December and approximately 70% since mid July. Falling oil, gasoline and natural gas prices created profits for the Fund’s short positions. The Fund also profited from falling metals prices, especially aluminum, copper and silver. In foreign currencies, a stronger euro relative to the U.S. dollar and British pound also created profits for the Fund.
 
 
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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 that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if the commodity trading advisors were unable to offset futures interest positions of the Fund, the Fund could lose all of its assets and the limited partners would realize a 100% loss. The General Partner minimizes market risk through diversification of the portfolio allocations to multiple trading advisors, and maintenance of a margin-to-equity ratio that rarely exceeds 30%.

In addition to 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, as is the case with 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 utilized only those counterparties that it believes to be creditworthy for the Fund. All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance, however, that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
 
The Fund uses 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.

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

Introduction

The Fund is a speculative commodity pool. The market-sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business.
 
 
23

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

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

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

Standard of Materiality

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

Quantifying the Fund’s Trading Value at Risk

Quantitative Forward-Looking Statements

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

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

Exchange margin requirements have been used by the Fund as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

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

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

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

 
 
24

 

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

The following table indicates the trading Value at Risk associated with the Fund's open positions by market sector at December 31, 2010 and 2009. All open position trading risk exposures of the Fund have been included in calculating the figures set forth below. At December 31, 2010 and 2009, the Fund's total capitalization was $1,401,627,694 and $1,057,734,905, respectively.

   
December 31,
 
   
2010
   
2009
 
Market Sector
 
Value at Risk
   
% of Total
Capitalization
   
Value at Risk
   
% of Total
Capitalization
 
                         
Agricultural
  $ 17,909,018       1.28 %   $ 9,643,002       0.91 %
Currency
    52,897,225       3.77       31,050,237       2.94  
Energy
    24,625,833       1.76       12,344,514       1.17  
Interest rate
    18,406,255       1.31       33,136,438       3.13  
Metal
    16,124,426       1.15       14,626,587       1.38  
Single stock futures
    35,438       0.00       47,348       0.00  
Stock index
    47,021,043       3.35       47,762,176       4.52  
Total
  $ 177,019,238       12.62 %   $ 148,610,302       14.05 %

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

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

Non-Trading Risk

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Fund's market risk exposures - except for those disclosures that are statements of historical fact and the descriptions of how the Fund manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, (“1933 Act”) and Section 21E of the Securities Exchange Act of 1934, (“1934 Act”). The Fund's primary market risk exposures as well as the strategies used and to be used by the Fund’s Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund.

The following were the primary trading risk exposures of the Fund as of December 31, 2010, by market sector.

Agricultural

The Fund’s primary agricultural exposure is due to price movements in agricultural commodities, which are often directly affected by severe or unexpected weather conditions as well as other factors. The Fund's agricultural exposure is primarily to cotton, coffee, cocoa, rubber, corn, soybeans and wheat.
 
 
25

 
 
Currency

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

Energy

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

Interest Rate

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

Metal

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

Single Stock Futures

The Fund has a very small exposure to Single Stock Futures (“SSF”). The Fund’s SSF exposure is primarily due to adverse price movements in the underlying stock.

Stock Index

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

The following were the significant non-trading risk exposures of the Fund as of December 31, 2010.

Foreign Currency Balances

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

U.S. Treasury Securities, U.S. Government Sponsored Enterprise Notes, Commercial Paper and Corporate Notes

Monies in excess of margin requirements are invested in short-term fixed income instruments, including U.S. Treasury securities, high-quality commercial paper (interest bearing with some credit risk), U.S. government sponsored enterprise notes and corporate notes with durations of less than one year. Violent fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Fund's short term investments; although substantially all of these short term investments are held to maturity.
 
 
26

 
 
Qualitative Disclosures Regarding Means of Managing Risk Exposure

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

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

Item 8.
Financial Statements and Supplementary Data

Financial statements meeting the requirements of Regulation S-X appear in Part IV of this report. The supplementary financial information specified by Item 302 of Regulation S-K is included in this report under the heading "Selected Financial Data" above.

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

The General Partner of the Fund, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures at December 31, 2010 (the “Evaluation Date”). Based on their 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.

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.

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 United States. 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 United States, 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.
 
 
27

 
 
Changes in Internal Control Over Financial Reporting

There has been no change in internal control over financial reporting that occurred during the year ended December 31, 2010 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 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. Mr. Steben, along with Michael D. Bulley, is responsible for deciding on the Fund’s allocation to the Trading Advisors, 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 Advisors, 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.
 
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.
 
 
28

 
 
John H. Grady is General Counsel and 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 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 Senior Vice President of Distribution. 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 Investments Company. 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 February 29, 2004, Steben & Company, Inc. has acted as 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 27, 2007, Steben & Company, Inc. has acted as general partner of a Delaware limited partnership, Aspect Global Diversified Fund LP, whose units of limited partner interests are registered with the SEC pursuant to a public offering that was effective August 12, 2008. Since March 1, 2011, Steben & Company, Inc. has acted as a manager of a Delaware limited liability company, Steben Institutional Fund LLC. Because Steben & Company, Inc. serves as the sole general partner or manager of these funds, the officers and directors of Steben & Company, Inc. effectively manage 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.
 
Family Relationships
 
None.

Business Experience
 
See “Item 10. Directors, Executive Officers and Corporate Governance” above.
 
Involvement in Certain Legal Proceedings
 
None.
 
Promoters and Control Persons
 
Not applicable.
 
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 year ended December 31, 2010. During the year ended December 31, 2010, all reporting persons complied with all Section 16(a) filing requirements applicable to them.
 
 
29

 
 
Code of Ethics

The General Partner 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. 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 Management Fee – the Fund incurs a monthly fee on Class A and Class B Units equal to 1/12th of 1.75% of the month-end net asset value of the Class A and Class B Units, payable in arrears. Prior to December 1, 2010, the General Partner management fee was 1.95%. During 2010 and 2009, the General Partner earned $23,477,737 and $18,920,212, respectively, in General Partner management fees.

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

§
Broker Dealer Servicing Fees – the Class B Units incur a monthly fee equal to 1/12th of 0.20% of the month-end net asset value of the Class B Units and such amounts are included in Selling Agent fees – General Partner in the statements of operations. The General Partner, in turn, pays the fee to the respective selling agents. If there is no designated selling agent or the General Partner was the selling agent, such portions of the broker dealer servicing fee are retained by the General Partner. During 2010 and 2009, the General Partner earned $16,206,868 and $13,294,827, respectively, in Selling Agent and Broker Dealer Servicing Fees.

Additionally, each year the General Partner receives from the Fund 1% of any net income earned by the Fund or pays to the Fund 1% of any net loss incurred by the Fund. For the year ended December 31, 2010, the General Partner received $1,017,537 from the General Partner 1% allocation. For the year ended December 31, 2009, the General Partner paid the Fund $639,856 for the General Partner 1% allocation.

 Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The Fund has no officers or directors as its affairs are managed by the General Partner. Set forth in the table below is information regarding the beneficial ownership of the officers and directors of the Fund’s General Partner at February 28, 2011.  There are no securities authorized for issuance under an equity compensation plan.

At February 28, 2011, no person or group is known to have been the beneficial owner of more than 5% of the Units.
 
At February 28, 2011, the General Partner did not own any Units.  At February 28, 2011, the directors, executive officers and principals of the General Partner beneficially owned Units as follows:
 
Name
 
Title of Class
 
Units Owned
   
Value of Units
   
Percentage of
Limited Partnership
 
Kenneth E. Steben
 
Class B
    39.6245     $ 266,178       0.02 %
Michael D. Bulley
 
Class B
    15.9425       107,094       0.01 %
John H. Grady
 
Class B
    57.8938       388,902       0.03 %
Neil D. Menard
 
Class B
    4.3721       29,370       0.00 %
Total directors and executive officers of the General Partner as a group
        117.8329       791,544       0.06 %

 
30

 

The address of each director and officer is c/o Steben & Company, Inc., 2099 Gaither Road Suite 200, Rockville, Maryland 20850.  On March 1, 2011, Carl A. Serger purchased 1.4888 Class B Units of the Fund for $10,000.

There has been no change in control of the Fund.

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 the cash management securities broker.  See “Item 11. Executive Compensation” and “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
 
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 years.

Fee Category
 
2010
   
2009
 
Audit fees(1)
  $ 160,000     $ 207,500  
Audit-related fees
           
Tax fees(2)
    50,000       46,000  
All other fees
           
Total fees
  $ 210,000     $ 253,500  

 
(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.
 
 
31

 

PART IV

Item 15.
Exhibits and Financial Statement Schedules

Financial Statements
 
Futures Portfolio Fund, Limited Partnership
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, 2009 and 2008
Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
Statements of Changes in Partners’ Capital (Net Asset Value) for the Years Ended December 31, 2010, 2009 and 2008
Notes to Financial Statements
 
Financial statement schedules not included in this Form 10-K have been omitted for the reason that they are not required or are not applicable or that equivalent information has been included in the financial notes or statements thereto.
 
Exhibits.
 
The following exhibits are filed herewith or incorporated by reference.
 
Exhibit Number
 
Description of Document
     
1.1*
 
Form of Selling Agreement.
     
3.1*
 
Maryland Certificate of Limited Partnership.
     
4.1*
 
Limited Partnership Agreement.
     
10.1*
 
Form of Subscription Agreement.
     
16.1*
 
Letter regarding change in certifying accountant.
     
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
     
 
* Incorporated by reference to the corresponding exhibit to the Registrant’s registration statement (File no. 000-50728) filed on April 29, 2004 on Form 10 under the 1934 Act, as amended.
 
 
32

 

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
 
March 25, 2011
Michael D. Bulley
  General Partner    
 
  
 
  
 
 
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.
 
 
Futures Portfolio Fund, Limited Partnership
Dated March 25, 2011
 
 
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
 
 
33

 

Report of Independent Registered Public Accounting Firm

To the Partners of
Futures Portfolio Fund, Limited Partnership
 
We have audited the accompanying statements of financial condition, including the condensed schedule of investments, of Futures Portfolio Fund, Limited Partnership (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 each of the three years in the period ended December 31, 2010.  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 the 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 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 Futures Portfolio Fund, Limited Partnership as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010 in conformity with U.S. generally accepted accounting principles.

 
/s/ McGladrey & Pullen, LLP

Chicago, Illinois
March 25, 2011
 
 
F-1

 

Futures Portfolio Fund, Limited Partnership
Statements of Financial Condition
December 31, 2010 and 2009

   
2010
   
2009
 
Assets
           
Equity in broker trading accounts
           
Cash
  $ 426,420,669     $ 318,300,203  
Net unrealized gain on open futures contracts
    52,816,088       14,004,035  
Net unrealized gain (loss) on open forward currency contracts
    8,559,334       (2,429,014 )
Interest receivable
    67,580       13,642  
Total equity in broker trading accounts
    487,863,671       329,888,866  
Cash and cash equivalents
    292,250,426       671,220,632  
Commercial paper, at fair value
    522,463,363        
U.S. government sponsored enterprise notes, at fair value
    75,086,357       107,514,649  
U.S. Treasury securities, at fair value
    79,993,333        
General Partner 1% allocation receivable
          639,856  
Total assets
  $ 1,457,657,150     $ 1,109,264,003  
                 
Liabilities and Partners’ Capital (Net Asset Value)
               
Liabilities
               
Trading Advisor management fees payable
  $ 2,266,651     $ 2,363,509  
Trading Advisor incentive fees payable
    13,050,625       1,444,958  
Commissions and other trading fees payable on open contracts
    141,733       117,427  
General Partner management fee payable
    2,067,522       1,732,238  
General Partner 1% allocation payable
    1,017,537        
Selling Agent fees payable – General Partner
    1,535,969       1,219,130  
Administrative expenses payable – General Partner
    531,847       1,736,156  
Redemptions payable
    11,807,236       5,857,719  
Subscriptions received in advance
    23,610,336       37,057,961  
Total liabilities
    56,029,456       51,529,098  
Partners’ Capital (Net Asset Value)
               
Class A Interests – 172,138.6872 units and 147,452.0886 units
               
outstanding at December 31, 2010 and 2009, respectively
    858,255,331       688,434,529  
Class B Interests – 81,701.8729 units and 60,362.5545 units
               
outstanding at December 31, 2010 and 2009, respectively
    543,372,363       369,300,376  
Total partners' capital (net asset value)
    1,401,627,694       1,057,734,905  
Total liabilities and partners' capital (net asset value)
  $ 1,457,657,150     $ 1,109,264,003  

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

 

Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments
December 31, 2010

       
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
U.S. Treasury Securities
           
Face Value
 
Maturity Date
               
$ 80,000,000  
1/13/2011
 
U.S. Treasury Bill, 0.25%
  $ 79,993,333       5.71 %
         
Total U.S. Treasury securities (cost: $79,805,000)
  $ 79,993,333       5.71 %
                           
U.S. Government Sponsored Enterprise Notes
               
Face Value
 
Maturity Date
                   
$ 75,132,000  
3/23/2011
 
Federal Home Loan Mortgage Corporation, 0.27%
  $ 75,086,357       5.36 %
         
Total U.S. government sponsored enterprise notes
(cost: $75,000,707)
  $ 75,086,357       5.36 %
                           
Commercial Paper
               
Face Value
 
Maturity Date
                   
$ 55,000,000  
1/28/2011
 
Commonwealth Bank of Australia, 0.36%
  $ 54,985,150       3.92 %
  35,000,000  
1/31/2011
 
HSBC Finance Corp, 0.60%
    34,982,500       2.50 %
  75,000,000  
2/7/2011
 
Reckitt Benckiser, 0.32%
    74,975,334       5.35 %
  20,000,000  
4/1/2011
 
Shell International Finance BV, 0.68%
    19,966,000       1.42 %
  30,260,000  
4/1/2011
 
Shell International Finance BV, 0.69%
    30,207,801       2.16 %
  67,521,000  
4/13/2011
 
HSBC Finance Corp, 0.63%
    67,400,475       4.81 %
  32,000,000  
5/16/2011
 
Toyota Motor Credit Corporation, 0.39%
    31,953,200       2.28 %
  60,000,000  
5/24/2011
 
Barclays U.S. Funding LLC, 0.57%
    59,864,150       4.27 %
  74,107,000  
5/27/2011
 
ING (U.S.) Funding LLC, 0.57%
    73,935,689       5.27 %
  1,948,000  
6/2/2011
 
Shell International Finance BV, 0.53%
    1,943,641       0.14 %
  30,300,000  
7/6/2011
 
Shell International Finance BV, 0.53%
    30,217,029       2.16 %
  20,000,000  
7/11/2011
 
Shell International Finance BV, 0.53%
    19,943,761       1.42 %
  22,158,000  
8/19/2011
 
UBS Finance Delaware LLC, 0.49%
    22,088,633       1.58 %
         
Total commercial paper (cost: $521,448,130)
  $ 522,463,363       37.28 %
                           
Long U.S. Futures Contracts
               
         
Agricultural
  $ 13,165,181       0.94 %
         
Currency
    7,670,918       0.55 %
         
Energy
    11,760,545       0.84 %
         
Interest rate
    1,052,750       0.08 %
         
Metal (1)
    27,501,487       1.96 %
         
Single stock futures
    7,816       0.00 %
         
Stock index
    1,703,171       0.12 %
         
Net unrealized gain on open long U.S. futures contracts
    62,861,868       4.49 %
                           
Short U.S. Futures Contracts
               
         
Agricultural
    (1,237,450 )     (0.09 )%
         
Currency
    (1,511,655 )     (0.11 )%
         
Energy
    (5,384,762 )     (0.38 )%
         
Interest rate
    (841,009 )     (0.06 )%
         
Metal (1)
    (17,274,015 )     (1.23 )%
         
Stock index
    121,975       0.01 %
         
Net unrealized loss on open short U.S. futures contracts
    (26,126,916 )     (1.86 )%
                           
         
Total U.S. Futures Contracts
               
         
Net unrealized gain on open U.S. futures contracts
    36,734,952       2.63 %
 
(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

 

Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2010

       
Description
 
Fair Value
   
% of
Partners’
Capital
(Net Asset
Value)
 
                     
Long Foreign Futures Contracts
           
       
Agricultural
  $ 1,367,853       0.10 %
            
Currency
    948,518       0.07 %
         
Energy
    1,142,528       0.08 %
         
Interest rate
    1,539,476       0.11 %
         
Metal
    353,032       0.03 %
         
Stock index
    (541,376 )     (0.04 )%
         
Net unrealized gain on open long foreign futures contracts
    4,810,031       0.35 %
                           
Short Foreign Futures Contracts
               
         
Agricultural
    (228,077 )     (0.02 )%
         
Currency
    12,849,530       0.92 %
         
Interest rate
    (1,594,631 )     (0.11 )%
         
Stock index
    244,283       0.02 %
         
Net unrealized gain on open short foreign futures contracts
    11,271,105       0.81 %
                           
         
Total Foreign Futures Contracts
               
         
Net unrealized gain on open foreign futures contracts
    16,081,136       1.16 %
                           
         
Net unrealized gain on open futures contracts
  $ 52,816,088       3.79 %
                           
U.S. Forward Currency Contracts
               
         
Long
  $ 2,498,957       0.18 %
         
Short
    229,704       0.02 %
         
Net unrealized gain on open U.S. forward currency contracts
    2,728,661       0.20 %
                           
Foreign Forward Currency Contracts
               
         
Long
    537,826       0.04 %
         
Short
    5,292,847       0.38 %
         
Net unrealized gain on open foreign forward currency contracts
    5,830,673       0.42 %
                           
         
Net unrealized gain on open forward currency contracts
  $ 8,559,334       0.62 %

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

 

Futures Portfolio Fund, Limited Partnership
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
               
$ 46,750,000  
1/28/10
 
Federal Home Loan Mortgage Corporation, 0.96%
  $ 46,951,148       4.44 %
  60,000,000  
3/30/10
 
Federal Home Loan Mortgage Corporation, 1.10%
    60,563,501       5.73 %
         
Total U.S. government sponsored enterprise notes
(cost:  $107,153,196)
  $ 107,514,649       10.17 %
                           
Long U.S. Futures Contracts
               
         
Agricultural
  $ 3,874,697       0.37 %
         
Currency
    (1,096,530 )     (0.10 )%
         
Energy
    2,282,440       0.22 %
         
Interest rate
    (4,285,126 )     (0.41 )%
         
Metal
    7,959,480       0.75 %
         
Single stock futures
    (7,756 )     (0.00 )%
         
Stock index
    2,911,194       0.28 %
         
Net unrealized gain on open long U.S. futures contracts
    11,638,399       1.11 %
                           
Short U.S. Futures Contracts
               
         
Agricultural
    (135,790 )     (0.01 )%
         
Currency
    1,736,191       0.16 %
         
Energy
    (988,288 )     (0.09 )%
         
Interest rate
    2,012,021       0.19 %
         
Metal
    (4,574,662 )     (0.43 )%
         
Stock index
    23,900       0.00 %
         
Net unrealized loss on open short U.S. futures contracts
    (1,926,628 )     (0.18 )%
         
Total U.S. Futures Contracts
               
         
Net unrealized gain on open U.S. futures contracts
    9,711,771       0.93 %
                           
Long Foreign Futures Contracts
               
         
Agricultural
    585,309       0.06 %
         
Currency
    (50,076 )     (0.00 )%
         
Energy
    107,204       0.01 %
         
Interest rate
    (3,745,572 )     (0.35 )%
         
Metal
    565,795       0.05 %
         
Stock index
    6,313,742       0.60 %
         
Net unrealized gain on open long foreign futures contracts
    3,776,402       0.37 %
                           
Short Foreign Futures Contracts
               
         
Agricultural
    (6,346 )     (0.00 )%
         
Currency
    345,604       0.03 %
         
Energy
    (58,775 )     (0.01 )%
         
Interest rate
    804,314       0.08 %
         
Stock index
    (568,935 )     (0.05 )%
         
Net unrealized gain on open short foreign futures contracts
    515,862       0.05 %
          Total Foreign Futures Contracts                
         
Net unrealized gain on open foreign futures contracts
    4,292,264       0.42 %
                           
         
Net unrealized gain on open futures contracts
  $ 14,004,035       1.35 %

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-5

 

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

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