UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
Commission file number: 000-50728
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP
Organized in Maryland | IRS Employer Identification No.: 52-1627106 |
c/o Steben & Company, Inc.
2099 Gaither Road, Suite 200
Rockville, Maryland 20850
(240) 631-7600
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ X ] No [ ]
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 “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
[ ] Large accelerated filer | [ ] Accelerated filer |
[ X ] Non-accelerated filer | [ ] Smaller Reporting Company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Futures Portfolio Fund, Limited Partnership
Consolidated Statements of Financial Condition
March 31, 2011 (Unaudited) and December 31, 2010 (Audited)
2011 | 2010 | |||||||
Assets | ||||||||
Equity in broker trading accounts | ||||||||
Cash | $ | 497,887,656 | $ | 426,420,669 | ||||
Net unrealized gain on open futures contracts | 36,643,360 | 52,816,088 | ||||||
Net unrealized gain on open forward currency contracts | 2,175,444 | 8,559,334 | ||||||
Interest receivable | 25,697 | 67,580 | ||||||
Total equity in broker trading accounts | 536,732,157 | 487,863,671 | ||||||
Cash and cash equivalents | 611,263,745 | 292,250,426 | ||||||
Commercial paper, at fair value | 358,031,598 | 522,463,363 | ||||||
U.S. government sponsored enterprise notes, at fair value | -- | 75,086,357 | ||||||
U.S. Treasury securities, at fair value | -- | 79,993,333 | ||||||
General Partner 1% allocation receivable | 280,138 | -- | ||||||
Total assets | $ | 1,506,307,638 | $ | 1,457,657,150 | ||||
Liabilities and Partners’ Capital (Net Asset Value) | ||||||||
Liabilities | ||||||||
Trading Advisor management fees payable | $ | 3,035,630 | $ | 2,266,651 | ||||
Trading Advisor incentive fees payable | 3,505,943 | 13,050,625 | ||||||
Commissions and other trading fees payable on open contracts | 169,529 | 141,733 | ||||||
General Partner management fee payable | 2,110,701 | 2,067,522 | ||||||
General Partner 1% allocation payable | -- | 1,017,537 | ||||||
Selling Agent fees payable – General Partner | 1,563,433 | 1,535,969 | ||||||
Administrative expenses payable – General Partner | 552,034 | 531,847 | ||||||
Redemptions payable | 7,146,149 | 11,807,236 | ||||||
Subscriptions received in advance | 50,663,004 | 23,610,336 | ||||||
Total liabilities | 68,746,423 | 56,029,456 | ||||||
Partners’ Capital (Net Asset Value) | ||||||||
Class A Interests – 178,706.1037 and 172,138.6872 units outstanding | ||||||||
at March 31, 2011 and December 31, 2010, respectively | 872,614,597 | 858,255,331 | ||||||
Class B Interests – 86,351.1522 and 81,701.8729 units outstanding | ||||||||
at March 31, 2011 and December 31, 2010, respectively | 564,946,618 | 543,372,363 | ||||||
Total partners' capital (net asset value) | 1,437,561,215 | 1,401,627,694 | ||||||
Total liabilities and partners' capital (net asset value) | $ | 1,506,307,638 | $ | 1,457,657,150 |
The accompanying notes are an integral part of these consolidated financial statements.
1
Futures Portfolio Fund, Limited Partnership
Consolidated Condensed Schedule of Investments
March 31, 2011
(Unaudited)
Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||
Commercial Paper | ||||||||||||
Face Value | Maturity Date | |||||||||||
$ | 20,000,000 | 4/1/2011 | Shell International Finance BV, 0.68% | $ | 20,000,000 | 1.39 | % | |||||
30,260,000 | 4/1/2011 | Shell International Finance BV, 0.69% | 30,260,000 | 2.10 | % | |||||||
67,521,000 | 4/13/2011 | HSBC Finance Corp, 0.63% | 67,506,821 | 4.70 | % | |||||||
32,000,000 | 5/16/2011 | Toyota Motor Credit Corporation, 0.39% | 31,984,400 | 2.22 | % | |||||||
60,000,000 | 5/24/2011 | Barclays U.S. Funding LLC, 0.57% | 59,949,650 | 4.17 | % | |||||||
74,107,000 | 5/27/2011 | ING (U.S.) Funding LLC, 0.57% | 74,041,291 | 5.15 | % | |||||||
1,948,000 | 6/2/2011 | Shell International Finance BV, 0.53% | 1,946,222 | 0.14 | % | |||||||
30,300,000 | 7/6/2011 | Shell International Finance BV, 0.53% | 30,257,176 | 2.10 | % | |||||||
20,000,000 | 7/11/2011 | Shell International Finance BV, 0.53% | 19,970,261 | 1.39 | % | |||||||
22,158,000 | 8/19/2011 | UBS Finance Delaware LLC, 0.49% | 22,115,777 | 1.54 | % | |||||||
Total commercial paper (cost: $356,724,747) | $ | 358,031,598 | 24.90 | % | ||||||||
Long U.S. Futures Contracts | ||||||||||||
Agricultural | $ | 2,045,885 | 0.14 | % | ||||||||
Currency | 4,916,817 | 0.34 | % | |||||||||
Energy | 11,362,116 | 0.79 | % | |||||||||
Interest rate | (4,331,286 | ) | (0.30 | )% | ||||||||
Metal | 4,421,711 | 0.31 | % | |||||||||
Single stock futures | (1,017 | ) | (0.00 | )% | ||||||||
Stock index | 11,070,181 | 0.77 | % | |||||||||
Net unrealized gain on open long U.S. futures contracts | 29,484,407 | 2.05 | % | |||||||||
Short U.S. Futures Contracts | ||||||||||||
Agricultural | (575,742 | ) | (0.04 | )% | ||||||||
Currency | 123,514 | 0.01 | % | |||||||||
Energy | (932,683 | ) | (0.06 | )% | ||||||||
Interest rate | (74,480 | ) | (0.01 | )% | ||||||||
Metal | (4,531,495 | ) | (0.32 | )% | ||||||||
Stock index | (127,193 | ) | (0.01 | )% | ||||||||
Net unrealized loss on open short U.S. futures contracts | (6,118,079 | ) | (0.43 | )% | ||||||||
Total U.S. Futures Contracts Net unrealized gain on open U.S. futures contracts | 23,366,328 | 1.62 | % | |||||||||
Long Foreign Futures Contracts | ||||||||||||
Agricultural | (185,660 | ) | (0.01 | )% | ||||||||
Currency | 1,909,275 | 0.13 | % | |||||||||
Energy | 696,570 | 0.05 | % | |||||||||
Interest rate | (608,935 | ) | (0.04 | )% | ||||||||
Metal | 164,845 | 0.01 | % | |||||||||
Stock index | 7,039,772 | 0.49 | % | |||||||||
Net unrealized gain on open long foreign futures contracts | 9,015,867 | 0.63 | % |
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 consolidated financial statements.
2
Description | Fair Value | % of Partners’ Capital (Net Asset Value) | |||||||
Short Foreign Futures Contracts | |||||||||
Agricultural | $ | 67,032 | 0.00 | % | |||||
Currency | 2,867,795 | 0.20 | % | ||||||
Interest rate | 5,823,948 | 0.41 | % | ||||||
Metal | (66,364 | ) | (0.00 | )% | |||||
Stock index | (4,431,246 | ) | (0.31 | )% | |||||
Net unrealized gain on open short foreign futures contracts | 4,261,165 | 0.30 | % | ||||||
Total Foreign Futures Contracts Net unrealized gain on open foreign futures contracts | 13,277,032 | 0.93 | % | ||||||
Net unrealized gain on open futures contracts | $ | 36,643,360 | 2.55 | % | |||||
U.S. Forward Currency Contracts | |||||||||
Long | $ | 2,851,234 | 0.20 | % | |||||
Short | (1,327,404 | ) | (0.09 | )% | |||||
Net unrealized gain on open U.S. forward currency contracts | 1,523,830 | 0.11 | % | ||||||
Foreign Forward Currency Contracts | |||||||||
Long | 1,006,102 | 0.07 | % | ||||||
Short | (354,488 | ) | (0.02 | )% | |||||
Net unrealized gain on open foreign forward currency contracts | 651,614 | 0.05 | % | ||||||
Net unrealized gain on open forward currency contracts | $ | 2,175,444 | 0.16 | % |
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 consolidated financial statements.
3
Futures Portfolio Fund, Limited Partnership
Consolidated Condensed Schedule of Investments
December 31, 2010
(Audited)
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 consolidated financial statements.
4
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 consolidated financial statements.
5
Futures Portfolio Fund, Limited Partnership
Consolidated Statements of Operations
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Trading Gain (Loss) | ||||||||
Net realized gain | $ | 16,004,219 | $ | 1,219,524 | ||||
Net change in unrealized gain (loss) | (22,556,618 | ) | 44,729,059 | |||||
Brokerage commissions and trading expenses | (1,186,335 | ) | (850,946 | ) | ||||
Net gain (loss) from trading | (7,738,734 | ) | 45,097,637 | |||||
Income | ||||||||
Interest income | 1,078,181 | 352,596 | ||||||
Expenses | ||||||||
Trading Advisor management fee | 5,264,887 | 4,063,298 | ||||||
Trading Advisor incentive fee | 3,498,236 | 5,057,839 | ||||||
General Partner management fee | 6,291,014 | 5,370,616 | ||||||
General Partner 1% allocation | (280,138 | ) | 253,942 | |||||
Selling Agent fees – General Partner | 4,669,986 | 3,755,686 | ||||||
Administrative expenses – General Partner | 1,629,137 | 2,467,367 | ||||||
Total expenses | 21,073,122 | 20,968,748 | ||||||
Administrative expenses waived | -- | (658,738 | ) | |||||
Net total expenses | 21,073,122 | 20,310,010 | ||||||
Net investment loss | (19,994,941 | ) | (19,957,414 | ) | ||||
Net Income (Loss) | $ | (27,733,675 | ) | $ | 25,140,223 |
Three Months Ended March 31, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Increase (decrease) in net asset value per Unit | $ | (102.88 | ) | $ | (108.24 | ) | $ | 87.12 | $ | 142.04 | ||||||
Net income (loss) per Unit | $ | (105.01 | ) | $ | (111.45 | ) | $ | 97.40 | $ | 163.36 | ||||||
(based on weighted average number of units outstanding during the period) | ||||||||||||||||
Weighted average number of Units outstanding | 175,224.6438 | 83,748.9258 | 152,352.0232 | 63,060.0436 |
The accompanying notes are an integral part of these consolidated financial statements.
6
Futures Portfolio Fund, Limited Partnership
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | (27,733,675 | ) | $ | 25,140,223 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||
Net change in unrealized (gain) loss | 22,556,618 | (44,729,059 | ) | |||||
Changes in | ||||||||
Interest receivable | 41,883 | (33,246 | ) | |||||
Commercial paper | 164,431,765 | (93,461,340 | ) | |||||
Government sponsored enterprise notes | 75,086,357 | (57,366,051 | ) | |||||
U.S. Treasury securities | 79,993,333 | (239,733,456 | ) | |||||
Trading Advisor management fee payable | 768,979 | 146,200 | ||||||
Trading Advisor incentive fee payable | (9,544,682 | ) | 3,612,880 | |||||
Commissions and other trading fees payable on open contracts | 27,796 | 42,077 | ||||||
General Partner management fee payable | 43,179 | 170,010 | ||||||
General Partner 1% allocation receivable/payable | (1,297,675 | ) | 893,798 | |||||
Selling Agent fees payable – General Partner | 27,464 | 106,250 | ||||||
Administrative expenses payable – General Partner | 20,187 | 55,351 | ||||||
Net cash provided by (used in) operating activities | 304,421,529 | (405,156,363 | ) | |||||
Cash flows from financing activities | ||||||||
Subscriptions | 60,088,011 | 62,711,508 | ||||||
Subscriptions received in advance | 50,663,004 | 22,898,322 | ||||||
Redemptions | (24,692,238 | ) | (21,685,495 | ) | ||||
Net cash provided by financing activities | 86,058,777 | 63,924,335 | ||||||
Net increase (decrease) in cash and cash equivalents | 390,480,306 | (341,232,028 | ) | |||||
Cash and cash equivalents, beginning of period | 718,671,095 | 989,520,835 | ||||||
Cash and cash equivalents, end of period | $ | 1,109,151,401 | $ | 648,288,807 | ||||
End of period cash and cash equivalents consists of | ||||||||
Cash in broker trading accounts | $ | 497,887,656 | $ | 313,377,299 | ||||
Cash and cash equivalents | 611,263,745 | 334,911,508 | ||||||
Total end of period cash and cash equivalents | $ | 1,109,151,401 | $ | 648,288,807 | ||||
Supplemental disclosure of cash flow information | ||||||||
Prior period redemptions paid | $ | 11,807,236 | $ | 5,857,719 | ||||
Prior period subscriptions received in advance | $ | 23,610,336 | $ | 37,057,961 | ||||
Supplemental schedule of non-cash financing activities | ||||||||
Redemptions payable | $ | 7,146,149 | $ | 7,770,755 |
The accompanying notes are an integral part of these consolidated financial statements.
7
Futures Portfolio Fund, Limited Partnership
Consolidated Statements of Changes in Partners’ Capital (Net Asset Value)
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Class A Interests | Class B Interests | |||||||||||||||||||
Units | Amount | Units | Amount | Total | ||||||||||||||||
Three Months Ended March 31, 2011 | ||||||||||||||||||||
Balance at December 31, 2010 | 172,138.6872 | $ | 858,255,331 | 81,701.8729 | $ | 543,372,363 | $ | 1,401,627,694 | ||||||||||||
Net loss | (18,400,103 | ) | (9,333,572 | ) | (27,733,675 | ) | ||||||||||||||
Subscriptions | 9,433.0927 | 46,891,156 | 5,541.5401 | 36,807,191 | 83,698,347 | |||||||||||||||
Redemptions | (2,199.0919 | ) | (10,866,693 | ) | (1,390.0624 | ) | (9,164,458 | ) | (20,031,151 | ) | ||||||||||
Transfers | (666.5843 | ) | (3,265,094 | ) | 497.8016 | 3,265,094 | -- | |||||||||||||
Balance at March 31, 2011 | 178,706.1037 | $ | 872,614,597 | 86,351.1522 | $ | 564,946,618 | $ | 1,437,561,215 | ||||||||||||
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Balance at December 31, 2009 | 147,452.0886 | $ | 688,434,529 | 60,362.5545 | $ | 369,300,376 | $ | 1,057,734,905 | ||||||||||||
Net income | 14,838,449 | 10,301,774 | 25,140,223 | |||||||||||||||||
Subscriptions | 12,187.7184 | 55,497,066 | 7,417.9277 | 44,272,403 | 99,769,469 | |||||||||||||||
Redemptions | (2,575.7831 | ) | (11,802,542 | ) | (1,958.5631 | ) | (11,795,989 | ) | (23,598,531 | ) | ||||||||||
Transfers | (234.3151 | ) | (1,087,199 | ) | 178.1697 | 1,087,199 | -- | |||||||||||||
Balance at March 31, 2010 | 156,829.7088 | $ | 745,880,303 | 66,000.0888 | $ | 413,165,763 | $ | 1,159,046,066 |
Net Asset Value per Unit
Class A | Class B | |||||||
March 31, 2011 | $ | 4,882.96 | $ | 6,542.43 | ||||
December 31, 2010 | 4,985.84 | 6,650.67 | ||||||
March 31, 2010 | 4,755.99 | 6,260.08 | ||||||
December 31, 2009 | 4,668.87 | 6,118.04 |
The accompanying notes are an integral part of these consolidated financial statements.
8
Futures Portfolio Fund, Limited Partnership
Notes to Consolidated Financial Statements
(Unaudited)
1. | Organization and Summary of Significant Accounting Policies |
Description of the Fund
Futures Portfolio Fund, Limited Partnership (“Fund”) is a Maryland limited partnership, which operates as a commodity investment pool that commenced trading operations on January 2, 1990. The Fund issues units of limited partner interests (“Units”) in two classes, Class A and Class B, which represent units of fractional undivided beneficial interest in and ownership of the Fund. The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Third Amended and Restated Limited Partnership Agreement (“Partnership Agreement”).
The Fund uses commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally.
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 commodity 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.
The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Exchange Act of 1934, as amended (“1934 Act”). As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the 1934 Act. As a commodity pool, the Fund is subject to the regulations of the U.S. Commodity Futures Trading Commission (“CFTC”), an agency of the U.S. Government, which regulates most aspects of the commodity futures industry; rules of the National Futures Association (“NFA”), an industry self-regulatory organization; rules of Financial Industry Regulatory Authority (“FINRA”), an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of the futures brokers and interbank market makers through which the Fund trades.
Steben & Company, Inc. (“General Partner”), is the general partner of the Fund and a Maryland corporation registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is also registered with the SEC as a registered investment advisor and a broker dealer. The General Partner is a member of the NFA and FINRA. The General Partner manages all aspects of the Fund’s business and serves as one of the Fund’s selling agents.
The two classes of Units in the Fund differ only in the selling agent and broker dealer servicing fees applicable to each class. Class A Units are subject to a 2% per annum selling agent fee and Class B Units are subject to a 0.2% per annum broker dealer servicing fee.
Significant Accounting Policies
Accounting Principles
The Fund’s consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Consolidation
The accompanying consolidated financial statements include the accounts of the Fund and SIF, for which the Fund is the sole member. All material intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
Preparing consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
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Revenue Recognition
Futures, options on futures, forward currency contracts and swap contracts are recorded on a trade date basis, and gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the consolidated statements of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses. Any change in net unrealized gain or loss from the preceding period is reported in the consolidated statements of operations. Interest income earned on investments in commercial paper, U.S. Treasury securities, U.S. government sponsored enterprise notes and other cash and cash equivalent balances is recorded on an accrual basis.
Fair Value of Financial Instruments
Financial instruments are recorded at fair value, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities recorded at fair value are classified within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 – | Fair value is based on unadjusted quoted prices for identical instruments in active markets. Financial instruments utilizing Level 1 inputs include exchange-traded derivatives, U.S. Treasury securities and money market funds. |
Level 2 – | Fair value is based on quoted prices for similar instruments in active markets and inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals using a market approach. Financial instruments utilizing Level 2 inputs include forward currency contracts, commercial paper and U.S. government sponsored enterprise notes. |
Level 3 – | Fair value is based on valuation techniques in which one or more significant inputs are unobservable. The Fund has no financial instruments utilizing Level 3 inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The Fund assesses the classification of the instruments at each measurement date, and any transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Fund’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the periods ended March 31, 2011 and December 31, 2010, there were no such transfers between levels.
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.
U.S. Treasury securities are recorded at amortized cost, which approximates fair value based on bid and ask quotes for identical instruments. Commercial paper, U.S. government sponsored enterprise notes and corporate notes are recorded at amortized cost, which approximates fair value based on bid and ask quotes for similar, but not identical, instruments. Accordingly, U.S. Treasury securities are classified within Level 1, and commercial paper and U.S. government sponsored enterprise notes are classified within Level 2.
The investment in a money market fund, included in cash and cash equivalents in the consolidated statements of financial condition, and futures contracts, all of which are exchange-traded, are valued using quoted market prices for identical assets and are classified within Level 1. The fair values of forward currency contracts are based upon third-party quoted dealer values on the interbank market and are classified within Level 2.
Cash and Cash Equivalents
Cash and cash equivalents may include cash, money market accounts and short-term investments with maturities of three months or less at the date of acquisition and that are not held for sale in the normal course of business. The Fund maintains deposits with financial institutions in amounts that are in excess of federally insured limits; however, the Fund does not believe it is exposed to any significant credit risk.
Brokerage Commissions and Trading Expenses
Brokerage commissions and trading expenses include brokerage and other trading fees, and are charged to expense when contracts are opened and closed.
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Redemptions Payable
Redemptions payable represent redemptions that meet the requirements of the Fund and have been approved by the General Partner prior to period-end. These redemptions have been recorded using the period-end net asset value per Unit.
Income Taxes
The Fund prepares calendar year U.S. and applicable state and local tax returns. The Fund is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Fund’s income, expenses and trading gains or losses. The Fund evaluates the tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and asset or liability in the current year. Management has determined there are no material uncertain income tax positions through March 31, 2011. With few exceptions, the Fund is no longer subject to U.S. federal, or state and local income tax examinations by tax authorities for years before 2007.
Foreign Currency Transactions
The Fund has certain investments denominated in foreign currencies. The purchase and sale of investments, and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of investments held. Such fluctuations are included with the net realized and change in unrealized gain or loss on such investments in the consolidated statements of operations.
Reclassification
Certain amounts reported in the 2010 consolidated financial statements have been reclassified to conform to the 2011 presentation without affecting previously reported partners’ capital (net asset value).
2. | Fair Value Disclosures |
The Fund’s assets and liabilities, measured at fair value on a recurring basis, are summarized in the following tables by the type of inputs applicable to the fair value measurements:
At March 31, 2011 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Equity in broker trading accounts: | ||||||||||||
Net unrealized gain on open futures contracts* | $ | 36,643,360 | $ | -- | $ | 36,643,360 | ||||||
Net unrealized gain on open forward currency contracts* | -- | 2,175,444 | 2,175,444 | |||||||||
Cash and cash equivalents: money market fund | 158,081,769 | -- | 158,081,769 | |||||||||
Commercial paper* | -- | 358,031,598 | 358,031,598 | |||||||||
Total | $ | 194,725,129 | $ | 360,207,042 | $ | 554,932,171 |
*See the consolidated condensed schedule of investments for further description.
At December 31, 2010 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Equity in broker trading accounts: | ||||||||||||
Net unrealized gain on open futures contracts* | $ | 52,816,088 | $ | -- | $ | 52,816,088 | ||||||
Net unrealized gain on open forward currency contracts* | -- | 8,559,334 | 8,559,334 | |||||||||
Cash and cash equivalents: money market fund | 24,004,531 | -- | 24,004,531 | |||||||||
Commercial paper* | -- | 522,463,363 | 522,463,363 | |||||||||
U.S. government sponsored enterprise notes* | -- | 75,086,357 | 75,086,357 | |||||||||
U.S. Treasury securities* | 79,993,333 | -- | 79,993,333 | |||||||||
Total | $ | 156,813,952 | $ | 606,109,054 | $ | 762,923,006 |
*See the consolidated condensed schedule of investments for further description.
There were no Level 3 holdings at March 31, 2011 or December 31, 2010, or during the periods then ended.
In addition to the financial instruments listed above, substantially all of the Fund’s other assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.
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3. | Derivative Instruments Disclosures |
The Fund’s derivative contracts are comprised of futures and forward currency contracts, none of which are designated as hedging instruments. At March 31, 2011 and December 31, 2010, the Fund’s derivative contracts had the following impact on the consolidated statements of financial condition:
March 31, 2011 | Derivative Assets and Liabilities, at fair value | |||||||||||
Consolidated Statements of Financial Condition Location | Assets | Liabilities | Net | |||||||||
Net unrealized gain on open futures contracts | ||||||||||||
Agricultural | $ | 5,709,445 | $ | (4,357,930 | ) | $ | 1,351,515 | |||||
Currency | 12,441,509 | (2,634,108 | ) | 9,817,401 | ||||||||
Energy | 12,185,335 | (1,059,332 | ) | 11,126,003 | ||||||||
Interest rate | 8,835,811 | (8,026,564 | ) | 809,247 | ||||||||
Metal | 16,298,336 | (16,309,639 | ) | (11,303 | ) | |||||||
Single stock futures | 171 | (1,188 | ) | (1,017 | ) | |||||||
Stock index | 18,888,214 | (5,336,700 | ) | 13,551,514 | ||||||||
Net unrealized gain on open futures contracts | $ | 74,358,821 | $ | (37,715,461 | ) | $ | 36,643,360 | |||||
Net unrealized gain on open forward currency contracts | $ | 7,403,411 | $ | (5,227,967 | ) | $ | 2,175,444 |
At March 31, 2011, there were 78,747 open futures contracts and 2,738 open forward currency contracts.
December 31, 2010 | Derivative Assets and Liabilities, at fair value | |||||||||||
Consolidated Statements of Financial Condition Location | Assets | Liabilities | Net | |||||||||
Net unrealized gain on open futures contracts | ||||||||||||
Agricultural | $ | 14,891,065 | $ | (1,823,558 | ) | $ | 13,067,507 | |||||
Currency | 22,299,654 | (2,342,343 | ) | 19,957,311 | ||||||||
Energy | 13,712,837 | (6,194,526 | ) | 7,518,311 | ||||||||
Interest rate | 4,677,106 | (4,520,520 | ) | 156,586 | ||||||||
Metal | 28,204,597 | (17,624,093 | ) | 10,580,504 | ||||||||
Single stock futures | 7,816 | -- | 7,816 | |||||||||
Stock index | 5,266,979 | (3,738,926 | ) | 1,528,053 | ||||||||
Net unrealized gain on open futures contracts | $ | 89,060,054 | $ | (36,243,966 | ) | $ | 52,816,088 | |||||
Net unrealized gain on open forward currency contracts | $ | 13,258,364 | $ | (4,699,030 | ) | $ | 8,559,334 |
At Decmeber 31, 2010, there were 61,017 open futures contracts and 2,529 open forward currency contracts.
For the three months ended March 31, 2011 and 2010, the Fund’s derivative contracts had the following impact on the consolidated statements of operations:
2011 | 2010 | |||||||||||||||
Types of Exposure | Net realized gain | Net change in unrealized gain (loss) | Net realized gain | Net change in unrealized gain (loss) | ||||||||||||
Futures contracts | ||||||||||||||||
Agricultural | $ | 7,888,220 | $ | (11,715,992 | ) | $ | (4,188,669 | ) | $ | 1,686,176 | ||||||
Currency | (13,385,902 | ) | (10,139,910 | ) | 8,623,416 | 3,420,149 | ||||||||||
Energy | 32,867,555 | 3,607,692 | (16,420,887 | ) | 15,032,911 | |||||||||||
Interest rate | (16,036,012 | ) | 652,661 | 12,611,074 | 22,383,368 | |||||||||||
Metal | 9,383,211 | (10,591,807 | ) | (4,718,283 | ) | 343,873 | ||||||||||
Single stock futures | (4,002 | ) | (8,833 | ) | 135,701 | (13,358 | ) | |||||||||
Stock index | (10,805,780 | ) | 12,023,461 | 3,308,255 | 270,411 | |||||||||||
Total futures contracts | 9,907,290 | (16,172,728 | ) | (649,393 | ) | 43,123,530 | ||||||||||
Forward currency contracts | 6,399,842 | (6,383,890 | ) | 1,561,213 | 1,605,529 | |||||||||||
Total futures and forward currency contracts | $ | 16,307,132 | $ | (22,556,618 | ) | $ | 911,820 | $ | 44,729,059 |
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For the three months ended March 31, 2011 and 2010, the number of futures contracts closed was 292,058 and 181,817, respectively, and the number of forward currency contracts closed was 10,911 and 9,919, respectively.
4. | General Partner |
At March 31, 2011 and December 31, 2010, and for the periods then ended, the General Partner did not maintain a capital balance in the Fund; however, the beneficiary of the sole shareholder of the General Partner had the following investment:
Class B Units | March 31, 2011 | December 31, 2010 | ||||||
Units Owned | 39.6245 | 39.6245 | ||||||
Value of Units | $ | 259,240 | $ | 263,529 |
During 2010, the beneficiary of the sole shareholder of the General Partner purchased an additional 8.6930 units for $54,964.
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% per annum. |
§ | 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 consolidated 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 consolidated 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. |
§ | Administrative Expenses – the Fund incurs a monthly fee equal to 1/12th of 0.45% of the month-end net asset value of the fund, payable in arrears to the General Partner. The General Partner, in turn, pays the administrative expenses of the Fund. See Note 7 for additional information regarding administrative expenses. |
Pursuant to the terms of the Partnership Agreement, each year the General Partner receives from the Fund 1% of any net income earned by the Fund. Conversely, the General Partner pays to the Fund 1% of any net loss incurred by the Fund. Such amounts are reflected as General Partner 1% allocation receivable or payable in the consolidated statements of financial condition and as General Partner 1% allocation in the consolidated statements of operations.
5. | Trading Advisors |
The Fund has advisory agreements with various commodity trading advisors, pursuant to which the Fund incurs monthly trading advisor management fees that range from 0% to 1/12th of 2% of allocated net assets (as defined in each respective trading advisory agreement), paid monthly or quarterly in arrears. Additionally, the Fund incurs trading advisor incentive fees, paid quarterly in arrears, ranging from 10% to 30% of net new trading profits (as defined in each respective trading advisory agreement). |
6. | Deposits with Brokers |
To meet margin requirements, the Fund deposits funds with its futures broker, subject to CFTC regulations and various exchange and broker requirements. The Fund earns interest income on its assets deposited with the broker. At March 31, 2011 and December 31, 2010, the Fund had margin requirements of $191,972,560 and $150,261,236, respectively.
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7. | Administrative Expenses |
Effective December 1, 2010, the Fund incurs a monthly administrative fee equal to 1/12th of 0.45% of the Fund’s month-end net asset value. Prior to December 1, 2010, the Fund would reimburse the General Partner for actual monthly administrative expenses paid to various third-party service providers, including the General Partner, up to 1/12th of 0.65% of the Fund’s month-end net asset value. Administrative expenses include accounting, audit, legal, salary and administrative costs incurred by the General Partner relating to marketing and administration of the Fund; such as, salaries and commissions of General Partner marketing personnel, administrative employee salaries and related costs. Pursuant to the terms of the Partnership Agreement, administrative expenses that exceed 1% of the average month-end net asset value of the Fund are the responsibility of the General Partner. All of the administrative expenses were below the 1% administrative expense limitation for the three months ended March 31, 2010.
For the three months ended March 31, 2011, the Fund incurred an administrative fee of $1,629,137. For the three months ended March 31, 2010, actual administrative expenses were $2,467,367. Of that amount, the General Partner voluntarily waived $658,738, resulting in a net expense to the Fund of $1,808,629. The actual administrative expenses and the amount waived are presented in the consolidated statements of operations.
At March 31, 2011 and December 31, 2010, $552,034 and $531,847, respectively, were payable to the General Partner for administrative expenses. Such amounts are presented as Administrative expenses payable – General Partner in the consolidated statements of financial condition.
8. | Subscriptions, Distributions and Redemptions |
Generally, investments in the Fund are made by subscription agreement and must be received within five business days of the end of the month, subject to acceptance by the General Partner. The minimum investment is $10,000. Units are sold at the net asset value per Unit as of the close of business on the last day of the month in which the subscription is accepted. Investors whose subscriptions are accepted are admitted as limited partners as of the beginning of the month following the month in which their subscriptions were accepted. At March 31, 2011 and December 31, 2010, the Fund received advance subscriptions of $50,663,004 and $23,610,336, respectively, which were recognized as subscriptions to the Fund or returned, if applicable, subsequent to month-end.
The Fund is not required to make distributions, but may do so at the sole discretion of the General Partner. A limited partner may request and receive redemption of Class A or Class B Units owned at the end of any month, subject to five business days’ prior written notice to the General Partner, and in certain circumstances, restrictions in the Partnership Agreement.
The General Partner may require a limited partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a non-exempt prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund, or (c) necessary to comply with applicable government or self-regulatory organization regulations.
9. | Trading Activities and Related Risks |
The Fund engages in the speculative trading of futures, options and over-the-counter contracts, including forward currency contracts traded in the U.S. and internationally. Trading in derivatives exposes the Fund to both market risk, the risk arising from a change in the fair value of a contract, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with the futures brokers. Additional deposits may be necessary for any loss of contract value. The Commodity Exchange Act (“CEAct”) requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury securities) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than (or none of) the total cash and other property deposited. The Fund uses Newedge USA, LLC and JP Morgan Futures, Inc. as its futures brokers and Newedge Group (UK Branch) and UBG A.G. as its forward currency counterparties.
For futures contracts, risks arise from changes in the fair value of the contracts. Theoretically, the Fund is exposed to a market risk equal to the value of futures and forward currency contracts purchased, and unlimited liability on such contracts sold short.
In addition to market risk, upon entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures and options on futures contracts traded in the U.S. and on most non-U.S. futures exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.
14
In the case of forward currency contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a clearinghouse backed by a group of financial institutions; thus there likely will be greater counterparty credit risk. While the Fund trades only with those counterparties that it believes to be creditworthy, there can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty non-performance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange-traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.
The Fund has a portion of its assets on deposit with interbank market makers and other financial institutions in connection with its trading of forward currency contracts and its cash management activities. In the event of an interbank market maker’s or financial institution’s insolvency, recovery of Fund assets on deposit may be limited to account insurance or other protection afforded such deposits.
The Fund used UBS and Bank of America Merrill Lynch as its cash management securities brokers for the investment of some excess margin amounts into short-term fixed income instruments including commercial paper, corporate notes, U.S. Treasury securities and U.S. government sponsored enterprise notes with maturities no longer than one year. Fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Fund’s U.S. Treasury securities and other fixed income instruments, although substantially all of the short-term investments are held to maturity.
Effective April 2011, the Fund engaged J.P. Morgan Investment Management, Inc. and Principal Global Investors, LLC (collectively, the “Cash Managers”) to provide cash management services to the Fund. The Cash Managers will manage the Fund’s cash and excess margin through investments in fixed income securities, pursuant to investment parameters established by the General Partner. Fluctuations in prevailing interest rates could cause mark-to-market losses on the Fund’s fixed income securities.
10. | Indemnifications |
In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, and which provide general indemnifications. The Fund’s maximum exposure under these arrangements cannot be estimated. However, the Fund believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for such indemnifications.
11. | Interim Financial Statements |
The consolidated statements of financial condition, including the consolidated condensed schedule of investments, at March 31, 2011, the consolidated statements of operations, cash flows and changes in partners’ capital (net asset value) for the three months ended March 31, 2011 and 2010, and the accompanying notes to the consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP may be omitted pursuant to such rules and regulations. In the opinion of management, such consolidated financial statements and accompanying disclosures reflect all adjustments, which were of a normal and recurring nature, necessary to present fairly the financial position at March 2011,results of operations cash flows and changes in partners’ capital (net asset value) for the three months ended March 31, 2011 and 2010. The results of operations for the three months ended March 31, 2011 and 2010 are not necessarily indicative of the results to be expected for the full year or any other period. These consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Fund’s Form 10-K as filed with the SEC.
12. | Financial Highlights |
The following information presents per Unit operating performance data and other financial ratios for the three months ended March 31, 2011 and 2010, assuming the Unit was outstanding throughout the entire period:
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2011 | 2010 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Per Unit Operating Performance | ||||||||||||||||
Net asset value per Unit at beginning of period | $ | 4,985.84 | $ | 6,650.67 | $ | 4,668.87 | $ | 6,118.04 | ||||||||
Income (loss) from operations | ||||||||||||||||
Gain (loss) from trading(1) | (24.56 | ) | (33.36 | ) | 179.06 | 236.40 | ||||||||||
Net investment loss(1) | (78.32 | ) | (74.88 | ) | (91.94 | ) | (94.36 | ) | ||||||||
Total income (loss) from operations | (102.88 | ) | (108.24 | ) | 87.12 | 142.04 | ||||||||||
Net asset value per Unit at end of period | $ | 4,882.96 | $ | 6,542.43 | $ | 4,755.99 | $ | 6,260.08 | ||||||||
Total return (5) | (2.06 | )% | (1.63 | )% | 1.87 | % | 2.32 | % | ||||||||
Other Financial Ratios | ||||||||||||||||
Ratios to average net asset value | ||||||||||||||||
Expenses prior to Trading Advisor incentive fees and General Partner 1% allocation (2) (3) (4) | 5.73 | % | 3.91 | % | 6.18 | % | 4.37 | % | ||||||||
Trading Advisor incentive fees (5) | 0.25 | % | 0.25 | % | 0.46 | % | 0.47 | % | ||||||||
General Partner 1% allocation (5) | (0.02 | )% | (0.02 | )% | 0.02 | % | 0.03 | % | ||||||||
Total expenses | 5.96 | % | 4.14 | % | 6.66 | % | 4.87 | % | ||||||||
Net investment loss (2) (3) (4) (6) | (5.43 | )% | (3.61 | )% | (6.05 | )% | (4.24 | )% |
Total returns are calculated based on the change in value of a Unit during the period. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of subscriptions and redemptions.
(1) The net investment loss per Unit is calculated by dividing the net investment loss by the average number of Class A or Class B Units outstanding during the period. Gain (loss) from trading is a balancing amount necessary to reconcile the change in net asset value per Unit with the other per Unit information. Such balancing amount may differ from the calculation of gain (loss) from trading per Unit due to the timing of trading gains and losses during the period relative to the number of Units outstanding.
(2) All of the ratios under other financial ratios are computed net of voluntary and involuntary waivers of administrative expenses. For the three months ended March 31, 2010, the ratios are net of 0.24% of average net asset value relating to the waivers of administrative expenses. Both the nature and the amounts of the waivers are more fully explained in Note 7.
(3) The net investment loss includes interest income and excludes realized and unrealized gain (loss) from trading activities as shown in the consolidated statements of operations. The total amount is then reduced by all expenses, excluding brokerage commissions, which are included in net trading gain (loss) in the consolidated statements of operations. The resulting amount is divided by the average net asset value for the period.
(4) Ratios have been annualized.
(5) Ratios have not been annualized.
(6) Ratio excludes Trading Advisor incentive fees and General Partner 1% allocation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cash Management
Effective April 2011, the Fund engaged J.P. Morgan Investment Management, Inc. and Principal Global Investors, LLC (collectively, the “Cash Managers”) to provide cash management services to the Fund. The Cash Managers will manage the Fund’s cash and excess margin through investments in short term, fixed income securities, pursuant to investment parameters established by the General Partner.
The Fund’s objective in retaining the Cash Managers to provide cash management services is to enhance the return on its assets not required to be held by the Fund’s brokers to support the Fund’s trading. There is no guarantee that the Cash Managers will achieve returns for the Fund, net of fees payable to the Cash Managers, in excess of the returns previously achieved through the General Partner’s efforts and/or available through the Fund’s brokers, or that the Cash Managers will avoid a loss of principal on amounts placed under their management.
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Fund Investment
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 commodity 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.
Liquidity
There are no known material trends, demands, commitments, events, or uncertainties at the present time that are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.
Capital Resources
The Fund intends to raise additional capital only through the sale of Units, and does not intend to raise any capital through borrowing. Due to the nature of the Fund’s business, the Fund does not contemplate making capital expenditures. The Fund does not have, nor does it expect to have, any capital assets. Redemptions, exchanges and sales of Units in the future will affect the amount of funds available for investments in futures contracts, forward currency contracts and other financial instruments in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future capital inflows and outflows related to the sale and redemption of Units. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Fund’s capital resource arrangements at the present time.
Results of Operations
The returns for Units for the three months ended March 31, 2011 and 2010 were as follows:
Class of Units | 2011 | 2010 | ||||||
Class A | (2.06 | )% | 1.87 | % | ||||
Class B | (1.63 | )% | 2.32 | % |
Past performance is not necessarily indicative of future results. Further analysis of the trading gains and losses is provided below.
2011
January
A Units of the Fund were down 1.42% for the month of January and B Units were down 1.27%. The Fund finished lower this month as losses from foreign currencies, interest rate instruments and metals offset profits from energy, equity indices and agricultural commodities. The most significant losses came from the Fund’s positions in international currencies as several exchange prices reversed direction in response to positive economic news in both the U.S. and Europe. Cross-currency trades in several markets, including the British pound/Japanese yen, euro/Australian dollar, and British pound/Australian dollar all reversed and moved against the Fund’s positions during the month. In equity indices, the Fund saw profits from its long positions in both European and U.S. indices. In interest rates, mixed performance among contracts led to a loss in that sector. Gold prices retreated this month generating losses for the Fund’s long positions, while rising prices in cotton, corn and sugar contributed additional profits in agricultural commodities.
February
A Units of the Fund were up 2.16% for the month of February and B Units were up 2.31%. The Fund finished higher this month as profits from energy, equity indices, metals, agricultural commodities and currencies offset losses in interest rate instruments. The most significant profits came from the Fund’s positions in energy as tensions in the Middle East, and especially in Libya, pushed oil prices higher benefiting the Funds’ long positions in that sector. Global equity prices were volatile this month, but finished higher by the end of the month which added profits from the Fund’s long positions. Both industrial and precious metals prices trended higher, as did agricultural commodity prices. The rising prices from all three of these sectors generated profits for the Fund’s long positions. Prices were mixed in interest rate instruments, with losses offsetting profits in that sector.
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March
A Units of the Fund were down 2.75% for the month of March and B Units were down 2.61%. The Fund finished lower this month with losses in equity indices, agricultural commodities, interest rate instruments and metals. The most significant profits came from the energy markets as events in Japan and Libya sent energy prices sharply higher benefiting the Fund’s long positions. The same global events also generated reversals in global stock indices that went against the Fund’s long positions. Although equity prices rebounded later in the month it wasn’t enough to offset the earlier losses. Agricultural commodity prices led by corn, sugar and cocoa, experienced significant volatility this month. Prices generally moved against the Fund’s long positions generating losses. Prices in interest rate instruments and foreign currencies were mixed this month with losses offsetting profits in that sector.
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.
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%.
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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 consolidated 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 3. Quantitative and Qualitative Disclosures about Market Risk
Introduction
The market-sensitive instruments held by the Fund are acquired for speculative trading purposes, and all or substantially all of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business.
Market movements result in frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades.
The Fund rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance cannot be relied on as indicative of its future results.
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.
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Quantifying the Fund’s Trading Value at Risk
The following quantitative disclosures regarding the Fund's market risk exposures contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. 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.
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 to market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund's experience to date (i.e., "risk of ruin"). Risk of ruin is defined to be no more than a 5% chance of losing 20% or more on a monthly basis. In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Fund's losses in any market sector will be limited to Value at Risk or by the Fund's attempts to manage its market risk.
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 that are not exchange-traded (includes currencies, certain energy products and metals), the margin requirements required by the forward counterparty is used as Value at Risk.
In quantifying the Fund's Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category's aggregate Value at Risk. The diversification effects resulting from the fact that the Fund's positions are rarely, if ever, 100% positively correlated, have not been reflected.
Value at Risk as calculated herein may not be comparable to similarly titled measures used by others.
The Fund’s Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with the Fund's open positions by market sector at March 31, 2011 and December 31, 2010. All open position trading risk exposures of the Fund have been included in calculating the figures set forth below.
March 31, 2011 | December 31, 2010 | |||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | Value at Risk | % of Total Capitalization | ||||||||||||
Agricultural | $ | 14,129,483 | 0.98 | % | $ | 17,909,018 | 1.28 | % | ||||||||
Currency | 54,191,935 | 3.77 | 52,897,225 | 3.77 | ||||||||||||
Energy | 19,477,503 | 1.35 | 24,625,833 | 1.76 | ||||||||||||
Interest rate | 41,324,382 | 2.87 | 18,406,255 | 1.31 | ||||||||||||
Metal | 22,652,718 | 1.58 | 16,124,426 | 1.15 | ||||||||||||
Single stock futures | 41,826 | 0.00 | 35,438 | 0.00 | ||||||||||||
Stock index | 64,447,570 | 4.48 | 47,021,043 | 3.35 | ||||||||||||
Total | $ | 216,265,417 | 15.03 | % | $ | 177,019,238 | 12.62 | % |
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 range between 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 table – as well as the past performance of the Fund – gives no indication of this "risk of ruin."
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Non-Trading Risk
The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Fund also has non-trading market risk as a result of investing a substantial portion of its available assets in government sponsored enterprise notes and 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 March 31, 2011, 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.
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 mainly in, but not limited 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.
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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. Price movement is primarily affected by changing supply and demand characteristics for the metals.
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 only non-trading risk exposures of the Fund as of March 31, 2011.
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, Government Sponsored Enterprise Notes and Commercial Paper
Monies in excess of margin requirements may be invested in short-term fixed income instruments, including U.S. Treasury securities, government sponsored enterprise notes and commercial paper 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.
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. Since the Fund generally use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund's operations.
Item 4. Controls and Procedures
The General Partner, 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 March 31, 2011 (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.
There has been no change in internal control over financial reporting that occurred during the first quarter of 2011 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
There have been no material changes from risk factors disclosed in the Fund’s Form 10-K for year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered securities of the Fund during the three months ended March 31, 2011. Under the Fund’s Partnership Agreement, limited partners may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit. Redemptions of Units during the first quarter of 2011 were as follows:
January | February | March | Total | |||||||||||||
A Units | ||||||||||||||||
Units redeemed | 617.3567 | 788.5886 | 793.1466 | 2,199.0919 | ||||||||||||
Average net asset value per Unit | $ | 4,915.02 | $ | 5,020.96 | $ | 4,882.96 | $ | 4,941.45 | ||||||||
B Units | ||||||||||||||||
Units redeemed | 565.6948 | 324.0573 | 500.3103 | 1,390.0624 | ||||||||||||
Average net asset value per Unit | $ | 6,566.00 | $ | 6,717.51 | $ | 6,542.43 | $ | 6,592.84 |
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. [Removed and Reserved]
Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed herewith of incorporated by reference.
Exhibit No. | Description of Exhibit |
1.1 * | Form of Selling Agreement |
3.1 * | Maryland Certificate of Limited Partnership |
4.1 * | Limited Partnership Agreement |
10.1 * | Form of Subscription Agreement |
31.01 | Certification of Chief Executive Officer of the General Partner in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 |
31.02 | Certification of Chief Financial Officer of the General Partner in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 |
32.01 | Certification of Chief Executive Officer of the General Partner in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 |
32.02 | Certification of Chief Financial Officer of the General Partner in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 |
* Filed with the Registrant’s Form 10, filed on April 29, 2004, and incorporated herein by reference.
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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.
Dated May 13, 2011 | Futures Portfolio Fund, Limited Partnership | |
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 | |
(Principal Executive Officer) | ||
By: | /s/ Carl A. Serger | |
Name: | Carl A. Serger | |
Title: | Chief Financial Officer and Director of the General Partner | |
(Principal Financial and Accounting Officer) |
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