FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the year ended 12-31-2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-119635
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 20-0069251
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
505 Brookfield Drive, Dover, DE 19901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 331-1532
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec 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. [ ]
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 definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
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 Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently
completed second fiscal quarter.: Not applicable. There is no market for the
Units of partnership interests and none is expected to develop. The
Registrant is a commodity pool. The Units are registered to permit the
initial sale of Units at month end net asset value.
<page>
Documents Incorporated by Reference
Registration Statement on Form S-1 and all amendments thereto filed with the
United States Securities and Exchange Commission at Registration Nos. 333-
119635 and 333-108629 are incorporated by reference to Parts I, II, III, and
IV.
PART I
Item 1. Business
On September 12, 2005, the registration statement filed by Providence Select
Fund, Limited Partnership, (the "Fund") with the Securities and Exchange
Commission (the "SEC"), which incorporated the disclosure document filed with
the Commodity Futures Trading Commission (the "CFTC"), was declared effective.
The Fund initially sold the Units of partnership interests at the initial
price of $1,000 per Unit. On March 2, 2007, the Fund commenced business after
admission of 46 limited partners, with total subscriptions of $1,088,370.
Subsequently, Units are sold at the net asset value per Unit as of the then
current month end. The Fund maintains separate Unit values for subscription
and redemption purposes, and for financial reporting purposes. The Fund will
continue to offer the unsold balance of its Units which, as of December 31,
2008, was $46,136,631 for sale to the public via its fully amended and
restated prospectus dated July 31, 2008 (the "Prospectus"), as it may be
amended in the future, until it has sold the total of $50,000,000 in
registered securities or the offering terminates as permitted or required by
the terms of the Limited Partnership Agreement. Pursuant to the terms of the
Limited Partnership Agreement, the Fund is engaged in the business of
speculative and high risk trade of commodity futures and options selected by
of one or more commodity trading advisors ("CTA") as that term is defined in
the Commodity Exchange Act. From inception to June 2, 2008, NuWave Investment
Corp. was the sole commodity trading advisor of the Fund, after which time a
power of attorney was granted to Clarke Capital Management, Inc. to serve as
sole trading advisor. The General Partner, in its sole discretion it selects
the CTA and the amount of equity assigned to the CTAs, from time to time.
The trades for the Fund are selected and placed with the futures commission
merchant ("FCM"), i.e., clearing broker, for the account of the Fund by the
currently selected sole commodity trading advisor, Clarke. The books and
records of the trades placed by the CTA in the Fund's trading account are kept
and available for inspection by the Limited Partners at the office of the
corporate General Partner, 5914 N. 300 West, Fremont, IN 46737. During the
twelve months ended December 31, 2008, until the removal of NuWave on June 2,
2008, the fixed costs of operation included a management fee of a percentage
based on the rate of trading assigned by NuWave and approved by the General
Partner of up to 3.25% annually and a quarterly incentive fee of 20% paid to
the commodity trading advisor, a quarterly incentive fee of up to 0.5% paid to
the general partner, fixed annual brokerage commissions of 6%, an annual
continuing service fee of 3%, and accounting, legal and other operating
expenses that must be paid before the limited partners may earn a profit on
their investment. With the removal of NuWave, all fees to NuWave were
eliminated, and the decision was made to change the Fund's fee structure such
that the General Partner's incentive fee would be eliminated, Clarke would be
paid a quarterly incentive fee of 25%, the annual brokerage commission to the
General Partner would be increased to 7%, and the annual continuing service
fee to the selling agents would be increased to 4%. The Fund Limited
Partnership Agreement is included as Exhibit A to the Prospectus delivered to
the prospective investors and filed as part of the Registration Statement.
The Limited Partnership Agreement defines the terms of operation of the Fund
and is incorporated herein by reference.
None of the purchasers of Limited Partnership Units has a voice in the
management of the Fund. Reports of the Net Asset Value of the Fund are sent
to all Partners at the end of each month.
The sale of Units is regulated by Securities Act of 1933 and the Commodity
Exchange Act. Once the Units are issued, the operation of the Fund is subject
to regulation pursuant to the Securities and Exchange Act of 1934 and the
Commodity Exchange Act. The U.S. Securities and Exchange Commission and the
Securities Commissions and securities acts of the several States where its
Units are offered and sold have jurisdiction over the operation of the Fund.
The National Futures Association has jurisdiction over the operation of the
General Partner and the Commodity Trading Advisors. This regulatory structure
is not intended, nor does it, protect investors from the risks inherent in the
trading of futures and options.
2
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Item 1A. Risk Factors
The trading of futures, options on futures and other commodities related
investments is highly speculative and risky. You should make an investment in
the Fund only after consulting with independent, qualified sources of
investment and tax advice and only if your financial condition will permit you
to bear the risk of a total loss of your investment. You should consider an
investment in the Units only as a long-term investment. Moreover, to evaluate
the risks of this investment properly, you must familiarize yourself with the
relevant terms and concepts relating to commodities trading and the regulation
of commodities trading, which are discussed in the Risk Factors section of the
Prospectus, which is incorporated herein by reference.
You should carefully consider all the information we have included or
incorporated by reference in this Report and our subsequent periodic filings
with the SEC. In particular, you should carefully consider the risk factors
described above and read the risks and uncertainties as set forth in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" Section of this Report. Any of the heretofore mentioned risks and
uncertainties could materially adversely affect the Fund, its trading
activities, operating results, financial condition and Net Asset Value and
therefore could negatively impact the value of your investment. You should not
invest in the Units unless you can afford to lose all of your investment.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The general partner has sole authority to determine the percentage of Fund
assets that will be held on deposit with the futures commission merchant
(FCM), used for other investments, and held in bank accounts to pay current
obligations. The Fund maintains approximately 64% of its assets in a Treasury
Direct Account maintained with the United States Department of the Treasury
and cash management funds that invest in U.S. Treasuries and have high
liquidity. Funds maintained with the Department of Treasury and any cash
management funds are in the name of the partnership and not commingled with
those of any other entity. The general partner maintains approximately 33% of
our net assets with the futures commission merchant for margin for trading by
the trading advisor. Approximately 3% of the previous month's net assets are
retained in the Fund's bank accounts to pay expenses and redemptions. MF
Global Inc. is registered with the National Futures Association pursuant to
the Commodity Exchange Act as a FCM. The trading of futures, options on
futures and other commodities is highly speculative and the Fund has an
unlimited risk of loss, including the pledge of all of its assets to the FCM
to secure the losses on the trades made on its behalf by the commodity trading
advisor or advisors selected, from time to time, by the General Partner.
Item 3. Legal Proceedings
There have been no legal proceedings against the Fund, its General Partner,
the CTA, the IB or any of their Affiliates, directors or officers. The FCM,
MF Global Inc., has had the following described reportable events, none of
which, in the opinion of the FCM, is material to the performance of the FCM on
behalf of the Fund's account:
MF Global Inc. ("MFG") is registered under the Commodity Exchange Act, as
amended, as a futures commission merchant and a commodity pool operator, and
is a member of the National Futures Association in such capacities. In
addition, MFG is registered with the Financial Industry Regulatory Authority
as a broker-dealer. MFG was formerly known as Man Financial Inc. ("MFI")
until the change of name to MFG was effected on July 19, 2007. MFG is a
member of all major U.S. futures exchanges and most major U.S. securities
exchanges. MFG's main office is located at 717 Fifth Avenue, 9th Floor, New
York, New York 10022-8101. MFG's telephone number at such location is (212)
589-6200.
At any given time, MFG is involved in numerous legal actions and
administrative proceedings, which in the aggregate, are not, as of the date of
this report, expected to have a material effect upon its condition, financial
or otherwise, or to the services it will render to the Partnership. There
have been no administrative, civil or criminal proceedings pending, on appeal
or concluded against MFG or its principals within the five years preceding the
date of this Memorandum that MFI would deem material for purposes of Part 4 of
the Regulations of the Commodity Futures Trading Commission, except as
follows:
3
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In May, 2006, MFI was sued by the Receiver for Philadelphia Alternate Asset
Fund ("PAAF") and associated entities for common law negligence, common law
fraud, violations of the Commodity Exchange Act and RICO violations (the
"Litigation"). In December, 2007, without admitting any liability of any
party to the Litigation to any other party to the Litigation, the Litigation
was settled with MFI agreeing to pay $69 million, plus $6 million of legal
expenses, to the Receiver, in exchange for releases from all applicable
parties and the dismissal of the Litigation with prejudice. In a related
action, MFI settled a CFTC administrative proceeding (In the Matter of MF
Global, f/k/a Man Financial Inc., and Thomas Gilmartin) brought by the CFTC
against MFI and one of its employees for failure to supervise and
recordkeeping violations. Without admitting or denying the allegations, MFI
agreed to pay a civil monetary penalty of $2 million and accepted a cease and
desist order. MFI has informed the Fund, the General Partner, the Trading
Advisor and the Selling Agent that the settlements referenced above will not
materially affect MFG or its ability to perform as a clearing broker.
On February 20, 2007, MFI also settled a CFTC administrative proceeding (In
the Matter of Steven M. Camp and Man Financial Inc., CFTC Docket No. 07-04) in
which MFI was alleged to have failed to supervise one of its former associated
persons (AP) who was charged with fraudulently soliciting customers to open
accounts at MFI. The CFTC alleged that the former AP misrepresented the
profitability of a web-based trading system and of a purported trading system
to be traded by a commodity trading advisor. Without admitting or denying the
allegation, MFI agreed to pay restitution to customers amounting to
$196,900.44 and a civil monetary penalty of $120,000. MFI also agreed to a
cease and desist order and to strengthen its supervisory system for overseeing
sales solicitations by employees in connection with accounts to be traded
under letters of direction in favor of third party system providers.
On March 6, 2008, and thereafter, four virtually identical proposed class
action securities suits were filed against MF Global Ltd., certain of its
officers and directors, and Man Group plc. The complaints allege that the
registration statement and prospectus issued in connection with MF Global
Ltd.'s initial public offering in July 2007, were materially false and
misleading to the extent that representations were made regarding the
company's risk management policies, procedures and systems. The allegations
are based upon the company's disclosure of $141.5 million in trading losses
incurred in a single day by an associated person in his personal trading
account, which losses the company was responsible to pay as an exchange
clearing member.
In connection with the incident involving the trading losses referenced above,
the CFTC issued a formal order of investigation naming MFG and the AP. The
CFTC, in coordination with the Chicago Mercantile Exchange ("CME"), has been
collecting documentation and taking depositions of MFG employees. This
investigation is ongoing and it is not yet certain what actions the CFTC
and/or the CME might take. MF Global has established an accrual of $10.0
million to cover potential CFTC civil monetary penalties in this matter and
the two CFTC matters referred to below. This is MF Global's best estimate at
this time and there is no assurance that the $10.0 million accrual will be
sufficient for these purposes or that the CFTC will not require remedial
measures. No accrual has been made for the CME matter.
In May 2007, MFG and two of its employees received what is commonly referred
to as a "Wells notice" from the staff of the Division of Enforcement of the
CFTC. The notice relates to two trades MFG executed in 2004 for a customer and
reported to NYMEX. The notice indicates that the Division of Enforcement is
considering recommending to the CFTC that a civil proceeding be commenced
against MFG and the two employees, in which the CFTC would assert that MFG and
the two employees violated Section 9(a)(4) of the Commodity Exchange Act,
which generally prohibits any person from willfully making any false,
fictitious, or fraudulent statements or representations, or making or using
any false writing or document knowing the same to contain any false,
fictitious, or fraudulent statement to a board of trade. The Division of
Enforcement staff contends that MFG and the individuals presented or
participated in the submission of information to NYMEX that falsely
represented the dates on which the trades in question occurred. MFG and the
individuals dispute these contentions. It is not yet certain what action the
CFTC will take, but see the reference to a $10.0 million accrual above.
4
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Additionally, MF Global is currently cooperating in an investigation conducted
by a New York County Grand Jury in conjunction with the U.S. Attorney's Office
in the Southern District of New York, with which the CFTC and the SEC are also
involved. The investigation centers around trading by a market making energy
trader at Bank of Montreal (BMO) who allegedly mismarked his book. An MFG
broker did business with the BMO trader, and used bid and offer prices for
forward OTC trades the BMO trader sent to him as a basis for prices which the
MFG broker disseminated to MFG's customers, including BMO, as price
indications that reflected a consensus. MFG has been told that neither MFG nor
the broker is a target of the Grand Jury investigation. In connection with
this investigation, MFG has been served by the CFTC with a Wells notice in
anticipation of civil charges against the broker under the anti-fraud
provisions of CFTC Regulation 33.10 and MFG with derivative liability for the
broker's actions. It is not yet certain what action the CFTC may take against
MFG or the broker, but see the reference to a $10.0 million accrual above.
The Fund is not aware of any threatened or potential claims or legal
proceedings to which the Fund is a party or to which any of its assets are
subject.
Item 4. Submission of Matters to a Vote of Security Holders
The General Partner makes all day to day decisions regarding the operation of
the Fund. The Limited Partners have not exercised any right to vote their
Units and there have been no matters which would cause the Fund to conduct a
vote of the Limited Partners. The Limited Partners, (sic the Security
Holders), have no right to participate in the management of the Fund. All of
their voting rights, as defined in the Limited Partnership Agreement, are
limited to the selection of the General Partner, amendments to the Limited
Partnership Agreement, and other similar decisions.
PART II
Item 5. Market for Registrant's Limited Partnership Units, Related
Stockholder Matters and Issuer Purchases of Equity Securities
The Fund desires to be taxed as a partnership and not as a corporation. In
furtherance of this objective, the Limited Partnership Agreement, subject to
certain exceptions upon the death of a Limited Partner, requires a Limited
Partner to obtain the approval of the General Partner prior to the transfer of
any Units. Accordingly, there is no trading market for the Fund Units and
none is likely to develop. The Limited Partners must rely upon the right of
Redemption provided in the Limited Partnership Agreement to liquidate their
interest.
The Fund has fewer than 300 holders of its securities. Limited Partners are
required to represent to the issuer that they are able to understand and
accept the risks of investment in a commodity pool for which no market will
develop and the right of redemption will be the sole expected method of
withdrawal of equity from the Fund. The General Partner has sole discretion
in determining what distributions, if any, the Fund will make to the Limited
Partners. The Fund has not made any distributions as of the date hereof. The
Fund has no securities authorized for issuance under equity compensation
plans. See the Limited Partnership Agreement attached as Exhibit A to the
Registration Statement, incorporated herein by reference, for a complete
explanation of the right of redemption provided to Limited Partners.
Item 6. Selected Financial Data
The Fund is not required to pay dividends or otherwise make distributions and
none are expected. The Limited Partners must rely upon their right of
redemption to obtain their return of equity after consideration of profits, if
any, and losses from the Fund. See the Registration Statement, incorporated
herein by reference, for a complete explanation of the allocation of profits
and losses to a Limited Partner's capital account.
Following is a summary of certain financial information for the Registrant for
the period from inception to December 31, 2008.
5
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<table>
<s> <c> <c> <c> <c> <c>
Years Ended December 31,
2008 2007 2006 2005 2004
Performance per Unit (2)
Net unit value, beginning of year $828.67 $(131,759.00) $(61,995.00) $(6,454.00) $(424.00)
Net realized and unrealized gain (loss) on
commodity transactions 120.48 34.80 - -
Investment and other income 10.77 32.89 - -
Expenses (1) (217.61) (189.41) (69,764.00) (15,603.00) (6,030.00)
Net (decrease) related to operations (86.36) (121.72) (69,764.00) (15,603.00) (6,030.00)
Syndication costs transferred to capital - - - (39,938.00) -
Reallocation of initial offering costs - 132,709.39 - - -
Net increase (decrease) for the year (86.36) 132,587.67 (69,764.00) (55,541.00) (6,030.00)
Net unit value at the end of the year $742.31 $828.67 $(131,759.00) $(61,995.00) $(6,454.00)
Net assets, end of the year ($000) $1,629 $3,061 $(264) $(124) $(13)
Total return (1) (10.42)% (12.81)% (78.79)% (57.08)% (175.34)%
Number of units outstanding at the end
of the year 2,194.92 3,693.39 2.00 2.00 2.00
Ratio to average net assets
Investment and other income (2) 1.00 % 4.76 % 0.00 % 0.00 % 0.00 %
Expenses (16.27)% (22.66)% (78.79)% (57.08)% (175.34)%
</table>
Total return is calculated based on the change in value of a unit during the
year. An individual partner's total return and ratios may vary from the above
total returns and ratios based on the timing of additions and redemptions.
(1) Includes brokerage commissions
(2) For the year ended December 31, 2006 and prior years, investment and
other income and expenses are calculated using the average number of
units outstanding during the year. Net realized and unrealized gains
and losses on commodity transactions is a balancing amount necessary
to reconcile the change in net unit value. For the years ended
December 31, 2008 and 2007, investments in other income and expenses
and net realized and unrealized gains and losses on commodity
transactions are calculated based on a single unit outstanding during
the period.
6
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The following summarized quarterly financial information presents the results
of operations for the quarterly periods during the years ended December 31,
2008 and 2007.
<table>
<s> <c> <c> <c> <c> <c> <c> <c> <c>
2008 2007
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Total Investment Gain 556,681 (218,978) (217,481) 252,948 32,565 101,490 (360,354) 311,899
Net Income (Loss) 326,998 (373,060) (311,146) 148,946 (35,827) 26,563 (427,379) 204,095
Net Income (Loss) per
limited partnership unit 87.19 (98.99) (102.83) 28.27 (227.27) 137.65 (107.10) 75.00
Net Income (Loss) per general
partnership unit 87.19 (98.99) (102.83) 28.27 (227.27) 137.65 (107.10) 75.00
Net asset value per partnership
unit at the end of period. 915.86 816.87 714.04 742.31 723.12 860.77 $753.67 828.67
Capitalized Syndication Costs - - - - - - - -
</table>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Critical Accounting Policies and Estimates
The Fund records all investments at market value in its financial statements,
with changes in market value reported as a component of realized and change in
unrealized trading gain (loss) in the Statements of Operations. In certain
circumstances, estimates are involved in determining market value in the
absence of an active market closing price (e.g. swap and forward contracts
which are traded in the inter-bank market).
Capital Resources
The Fund will raise additional capital only through the sale of Units offered
pursuant to the continuing offering, and does not intend to raise any capital
through resale of Units once issued or borrowing. Due to the nature of the
Fund's business, it will make no capital expenditures and will have no capital
assets which are not operating capital or assets.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity 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. Commodity futures prices have
occasionally moved to 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 commodity futures prices have not moved the daily limit, the Fund may
not be able to execute futures trades at favorable prices, if little trading
in such contracts is taking place. Other than these limitations on liquidity,
which are inherent in the Fund's commodity futures trading operations, the
Fund's assets are expected to be highly liquid.
The entire offering proceeds will be credited to the Fund's bank and brokerage
accounts to engage in trading activities and as reserves for that trading. The
Fund meets its margin requirements by depositing U.S. government securities or
cash or both with the futures broker and the over-the-counter counterparties.
In this way, substantially all (i.e., 97% or more) of the Fund's assets,
whether used as margin for trading purposes or as reserves for such trading,
can be invested in U.S. government securities and time deposits with U.S.
banks. Investors should note that maintenance of the Fund's assets in U.S.
government securities and banks does not reduce the risk of loss from trading
futures, forward and swap contracts. The Fund receives all interest earned on
its assets. No other person shall receive any interest or other economic
benefits from the deposit of Fund assets.
7
<page>
Approximately 10% to 40% of the Fund's assets normally are committed as
required margin for futures contracts and held by the futures broker, although
the amount committed may vary significantly. Such assets are maintained in the
form of cash or U.S. Treasury bills in segregated accounts with the futures
broker pursuant to the Commodity Exchange Act and regulations thereunder. When
combined with the previously described assets committed to margin, a total of
up to approximately 40% of the Fund's assets may be deposited with over-the-
counter counterparties in order to initiate and maintain forward and swap
contracts. Such assets are not held in segregation or otherwise regulated
under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in
U.S. government securities or short-term time deposits with U.S.-regulated
bank affiliates of the over-the-counter counterparties. The remaining 60% to
90% of the Fund's assets are normally invested in cash equivalents, such as
U.S. Treasury bills, and held by the futures broker or the over-the-counter
counterparties, or in the Treasury Direct account or cash management fund
account identified in Part I, Item 2 of this Report.
The Fund's assets are not and will not be, directly or indirectly, commingled
with the property of any other person in violation of law or invested with or
loaned to the Fund, the General Partner or any affiliated entities.
Results of Operations
The Fund is subject to ongoing offering and operating expenses; however,
profits or losses are primarily generated by the commodity trading advisor by
methods that are proprietary to it. These results are not to be construed as
an expectation of similar profits in the future.
The Limited Partnership Agreement grants solely to the General Partner the
right to select the trading advisor or advisors and to otherwise manage the
operation of the Fund. The CTAs selected are responsible for the selection of
trades. See the Registration Statement, incorporated by reference herein, for
an explanation of the operation of the Fund.
The following comparison between the twelve month periods ended December 31
2008 and December 31, 2007 should be read taking into consideration that (i)
the Fund did not commence business until March 2, 2007 and, therefore, had no
expectation of profit generation prior to that; and, (ii) calculations of
profits and losses, including calculation of the net asset value (NAV) and NAV
per Unit, are calculated both for financial reporting purposes, in which the
offering expenses were expensed as incurred during the two periods, and for
subscription and redemption purposes, in which the offering expenses incurred
prior to the commencement of business were deferred until after the twelfth
month following the commencement of business. As of March 4, 2008, these
expenses were amortized on a straight-line basis over the subsequent twenty
four months. See Note 1 to the financial statements herein.
Discussion for Financial Reporting Purposes
The Fund's realized and unrealized trading gains (losses) before commissions
were $373,170 [$120.48 per Unit] and $[85,600] [$[34.80] per Unit] for the
twelve months ended December 31, 2008 and December 31, 2007, respectively.
The Fund's results after payment and accrual of expenses for the twelve months
ended December 30, 2008 and December 30, 2007 were profits (losses) of
$(208,262) [$(86.36) per Unit] and ($232,548) [$(121.72) per Unit],
respectively. The NAV per Unit as of December 31, 2008 and December 31, 2007
were $742.31 and $828.67, respectively.
Discussion for Subscription and Redemption Purposes
The Fund's realized and unrealized trading gains (losses) before commissions
were $373,170 [$120.48 per Unit] and [$85,600] [$34.80 per Unit] for the
twelve months ended December 31, 2008 and December 31, 2007, respectively.
The Fund's results after payment and accrual of expenses for the twelve months
ended December 31, 2008 and December 31, 2007 were profits (losses) of
$(322,726) [$(86.83) per Unit] and $(223,725) [$(121.72) per Unit],
respectively. The net asset value ("NAV") per Unit as of December 31, 2008,
was $815.15, a decrease of 9.72% from the December 31, 2007 NAV per Unit of
$902.94.
8
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Discussion for all Purposes
The above described performance was primarily due to the trading of the
commodity trading advisor that has traded for the Fund via its proprietary
methods. If a large movement occurs in a sector that a trading advisor
trades, such as agriculture, financials, metals or softs, it does not
necessarily mean that the trading advisor will engage in trades that capture
such moves. Accordingly, market movements and conditions are not necessarily
correlated with Fund performance. Past performance is not necessarily
indicative of future results.
Net additions (withdrawals) for the twelve months ended December 31, 2008 and
December 31, 2007 were $(1,223,006) and $3,536,650, respectively. The
substantial difference is primarily due to the commencement of business in
March, 2007, whereupon all subscription proceeds held in the Fund's segregated
subscription depository account were transferred to accounts in the name of
the Fund to be used for trading.
Interest income is earned on the Fund's assets, either through investment in
short term cash instruments or through its deposits with the clearing broker.
Interest income to the Fund varies monthly according to interest rates,
trading performance, subscriptions and redemptions. Interest income for the
twelve months ended December 31, 2008 was $37,951, a 44.74% decrease over the
interest income for the twelve months ended December 31, 2007 of $68,671. The
increase in interest income for the comparative twelve month periods was
primarily due to the fact that the Fund was not operational during
approximately two of the twelve months of the prior period and had
significantly less net assets during the prior period.
Brokerage commissions are calculated on the Fund's equity allocated to trading
as of the end of each month and therefore, vary according to monthly trading
performance, subscriptions and redemptions. See Note 5 to the financial
statements herein for the current and historical brokerage fee amounts.
Commissions for the twelve months ended December 31, 2008 were $172,538, a
74.70% increase over the commissions for twelve months ended December 31, 2007
of $98,761. The increase in commissions for the comparative twelve month
periods was primarily due to the fact that the Fund was not operational during
approximately two of the twelve months of the prior period and had
significantly less net assets during the prior period.
Continuing service fees are calculated on net asset value of the Units sold by
the selling agents as of the end of each month and therefore, vary according
to monthly trading performance, subscriptions and redemptions. See Note 5 to
the financial statements herein for the current and historical continuing
service fee amounts. Such fees for the twelve months ended December 31, 2008
were $98,868 a 64.30% increase over such fees for twelve months ended December
31, 2007 of $60,177. The increase in continuing service fees for the
comparative twelve month periods was primarily due to the fact that the Fund
was not operational during approximately two of the twelve months of the prior
period and had significantly less net assets during the prior period.
Pursuant to the Trading Advisory Agreement, the Fund paid a management fee to
the prior trading advisor until it was removed in December 2008, which was
calculated on the value of the Fund equity allocated to the advisor as of the
end of each month, and therefore, was affected by monthly trading performance,
subscriptions and redemptions. No management fee is paid to the current
trading advisor. See Note 5 to the financial statements herein for the
current and historical management fee amounts. Management fees for the twelve
months ended December 31, 2008 were $46,072 a 3.52% increase over the
management fee for the twelve months ended December 31, 2007 of $44,505. The
increase in management fee for the comparative twelve month periods was
primarily due to the fact that the Fund was not operational during
approximately two of the twelve months of the prior period and had
significantly less net assets during the prior period.
Pursuant to the Trading Advisory Agreement, the Fund pays a quarterly
incentive fee to the trading advisor. It also paid the General Partner an
incentive fee until the change in trading advisors. See Note 5 to the
financial statements herein for the current and historical incentive fees.
Incentive fees during the twelve months ended December 31, 2008 and December
31, 2007 were $165,453 and $26,851 respectively. The amounts are directly
related to the trading performance of the trading advisor.
Operating expenses include accounting, audit, tax, and legal fees, as well as
regulatory costs and printing and postage costs related to reports sent to
limited partners. Operating expenses during the twelve months ended December
31, 2008 and December 31, 2007 were $123,126 and $149,222respectively. The
decrease over the comparative twelve month periods was primarily due to
changes in accountants that were in progress during the prior period and costs
related to the commencement of business.
9
<page>
Inflation has had no material impact on the operations or on the financial
condition of the Fund from inception through December 31, 2008.
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, forward and swap
contracts and is therefore a party to financial instruments with elements of
off-balance sheet market and credit risk. In entering into these contracts
there exists a risk to the Fund, market risk, that such contracts may be
significantly influenced by market conditions, such as interest rate
volatility, resulting in such contracts being less valuable. If the markets
should move against all of the futures interests positions of the Fund at the
same time, and if the Fund's trading advisor was unable to offset futures
interests positions of the Fund, the Fund could lose all of its assets and the
Limited Partners would realize a 100% loss. The Fund, the General Partner and
the CTAs minimize market risk through real-time monitoring of open positions,
diversification of the portfolio and maintenance of a margin-to-equity ratio
that rarely exceeds 40%.
In addition to market risk, in entering into futures, forward and swap
contracts there is a credit risk that a counterparty will not be able to meet
its obligations to the Fund. The counterparty for futures contracts traded in
the United States 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 credit risk. In cases where the
clearinghouse is not backed by the clearing members, like some foreign
exchanges, it is normally backed by a consortium of banks or other financial
institutions.
In the case of forward and swap 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 credit risk. The CTAs trade for the
Fund only with those counterparties which they believe to be creditworthy. All
positions of the Fund are valued each day on a mark-to-market basis. There can
be no assurance that any clearing member, clearinghouse or other counterparty
will be able to meet its obligations to the Fund.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The securities of the Fund are not traded and no market for the Fund
securities is expected to develop. The Fund is engaged in the speculative
trading of futures and options on futures. The risks are fully explained in
the Fund prospectus delivered to each prospective Limited Partner prior to
their investment.
Item 8. Financial Statements and Supplementary Data.
The Fund financial statements as of December 31, 2008, were audited by Jordan,
Patke & Associates, Ltd., 300 Village Green Drive Ste 210, Lincolnshire, IL
60069 and are provided in this Report beginning on page F-1. The
supplementary financial information specified by Item 302 of Regulation S-K is
included in Item 6. Selected Financial Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
10
<page>
Item 9A(T). Controls and Procedures.
Disclosure Controls and Procedures
The Registrant has adopted procedures in connection with the operation of its
business including, but not limited to, the review of account statements sent
to the General Partner before the open of business each day that disclose the
positions held overnight in the Fund accounts, the margin to hold those
positions, and the amount of profit or loss on each position, and the net
balance of equity available in each account. The Fund brokerage account
statements and financial books and records accounts are prepared by an
independent CPA Firm and then are reviewed each quarter and audited each year
by a different independent CPA firm.
The General Partner of the Fund, under the actions of its sole principal,
Michael Pacult, has evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the
end of the period covered by this Report. Based on their evaluation, Mr.
Pacult has concluded that these disclosure controls and procedures are
effective.
Changes in Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to
evaluate annually the effectiveness of its internal controls over financial
reporting as of the end of each fiscal year, and to include a management
report assessing the effectiveness of its internal control over financial
reporting in all annual reports. There were no changes in the General
Partner's internal control over financial reporting during the quarter ended
December 31, 2008 that have materially affected, or are reasonably likely to
materially affect, internal control over financial reporting applicable to the
Fund.
Management's Annual Report on Internal Control over Financial Reporting
The General Partner is responsible for establishing and maintaining adequate
internal control over the Fund's financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act as a process designed by, or under the supervision of,
a company's principal executive and principal financial officers and effected
by a company's board of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The General Partner's internal
control over financial reporting includes those policies and procedures that:
* pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the Fund's
assets;
* provide reasonable assurance that transactions are recorded as necessary
to permit preparation of the Fund's financial statements in accordance with
generally accepted accounting principles, and that the Fund's receipts and
expenditures are being made only in accordance with authorizations of the
General Partner's management and directors; and
* 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 Fund's financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. 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.
11
<page>
The Fund securities are not publicly traded so that there can be no insider
trading or leaks of confidential information to the public. All Fund money is
on deposit either with a bank or a futures commission merchant. See
Subsequent Events in Item 1 of this Report. There is an audit trail produced
by both. A certified public accountant prepares the monthly financial
statements. The Fund units are sold during the month at a net asset value to
be determined as of the close of business on the last day of trading each
month. No information related to the value of the units during the month is
available to the Fund sales force or the prospects. All quarterly financial
statements are reviewed by an independent certified public accountant who
audits the Fund financial statements at the end of each calendar year. The
Fund maintains its subscription agreements and other records for six years.
The management of the General Partner assessed the effectiveness of its
internal control over financial reporting with respect to the Fund as of
December 31, 2008. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control - Integrated Framework. Based on its assessment,
management has concluded that, as of December 31, 2008, the General Partner's
internal control over financial reporting with respect to the Fund is
effective based on those criteria.
This Report does not include an attestation report of the Fund's registered
public accounting regarding control over financial reporting. The General
Partner's report was not subject to attestation by the Fund's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's
report in this annual report.
Item 9B. Other Information.
None
Part III
Item 10. Directors and Executive Officers and Corporate Governance
The Fund is a Delaware Limited Partnership which acts through its corporate
General Partner. Accordingly, the Registrant has no Directors or Executive
Officers.
The General Partners of the Registrant during the year 2008 were White Oak
Financial Services, Incorporated, a Delaware corporation, and Michael P.
Pacult. The General Partners are both registered with the National Futures
Association as commodity pool operators pursuant to the Commodity Exchange
Act, and Mr. Michael Pacult, age 64, is the sole shareholder, director,
registered principal and executive officer of the corporate General Partner.
The background and qualifications of Mr. Pacult are disclosed in the
Registration Statement, incorporated herein by reference. Mr. Pacult is also
a registered representative with Futures Investment Company, the affiliated
broker dealer which conducts the "best efforts" offering of the Units.
There has never been a material administrative, civil or criminal action
brought against the Fund, the General Partner or any of its directors,
executive officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To
the best of the Fund's knowledge, no such forms have been or are required to
be filed.
Audit Committee Financial Expert
Mr. Pacult, in his capacity as the sole principal for the General Partner of
the Fund, has determined that he qualifies as an "audit committee financial
expert" in accordance with the applicable rules and regulations of the
Securities and Exchange Commission. He is not independent of management.
Code of Ethics
The Fund General Partner is registered with the National Futures Association
as a Commodity Pool Operator and its President, Michael P. Pacult is
registered as its principal. Both the Fund and the General Partner are
subject to Federal Commodity Exchange Act and audit for compliance and the
rules of good practice of the Commodity Futures Trading Commission and the
industry self regulatory organization, the National Futures Association.
Having said that, neither the Commodity Futures Trading Commission nor the
National Futures Association are responsible for the quality of the Fund
disclosures or its operation, those functions are exclusively the
responsibility of the Fund and its General Partner.
12
<page>
Item 11. Executive Compensation.
Although there are no executives of the Fund, the corporate General Partner
and certain persons Affiliated with the General Partners are paid compensation
that the Fund has elected to disclose on this Report. As described
previously, the General Partner is paid fixed brokerage commissions of seven
percent (7%) per year, payable monthly, to cover the cost of the trades
entered by the CTA. The corporate General Partner retains the difference, if
any, between the cost to enter the trades and the seven percent (7%).
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) The following Limited Partners owned more than five percent (5%) of the
total equity of the Fund on December 31, 2008:
Name Percent Ownership
Christopher Klee 6.7%
Robert Agnoletti 5.5%
Jack Murphy 5.3%
(b) As of December 31, 2008, the corporate General Partner owned 39.71 Units
of Limited Partnership Interest, which constituted approximately 1.8%
ownership in the Fund.
(c) The Limited Partnership Agreement governs the terms upon which control of
the Fund may change. No change in ownership of the Units will, alone,
determine the location of control. The Limited Partners must have 120 days
advance notice and the opportunity to redeem prior to any change in the
control from the General Partner to another general partner. Control of the
management of the Partnership may never vest in one or more Limited Partners.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters. The General
Partner has sole discretion over the selection of trading advisors. White Oak
Financial Services, Inc., the corporate General Partner, is paid a fixed
commission for trades and, therefore, the General Partner has a potential
conflict in the selection of a CTA that makes few trades rather than produces
profits for the Fund. This conflict and others are fully disclosed in the
Registration Statement, which is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
(1) Audit Fees
The fees and costs paid to Jordan, Patke and Associates for the audit of the
Fund's annual financial statements, for review of financial statements
included in the Fund's Forms 10-Q and other services normally provided in
connection with regulatory filing or engagements (i.e., consents related to
SEC registration statements) for the years ended December 31, 2008 and 2007
were $15,234 and $15,878, respectively.
(2) Audit Related Fees
None
(3) Tax Fees
The aggregate fees paid to Jordan, Patke and Associates, Ltd. for tax
compliance services for the years ended December 31, 2008 and 2007 were $2,500
and $475, respectively.
(4) All Other Fees
None
13
<page>
(5) The Board of Directors of White Oak Financial Services, Inc., General
Partner of the Fund, approved all of the services described above. The Board
of Directors has determined that the payments made to its independent
certified public accountants for these services are compatible with
maintaining such auditors' independence. The Board of Directors explicitly
pre-approves all audit and non-audit services and all engagement fees and
terms.
(6) Close to 100% of the hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year were attributed to work performed by persons other than the
principal accountant's full-time permanent employees. However, all work
performed was supervised by a full-time permanent employee.
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. All Financial Statements
The Financial Statements begin on page F-1 of this Report.
2. Financial Statement Schedules required to be filed by Item 8 on this
form, and by paragraph (b) below.
Not applicable, not required, or included in the Financial Statements.
3. List of those Exhibits required by Item 601 of Regulation S-K (Sec 229.601 of
this chapter) and by paragraph (b) below.
Incorporated by reference from the Fund's Registration Statement on Form S-1,
and all amendments at file Nos. 333-119635 and 333-108629 previously filed
with the Securities and Exchange Commission.
31.1 Certification of CEO and CFO pursuant to Section 302
32.2 Certification of CEO and CFO pursuant to Section 906
(b) Exhibits required by Item 601 of Regulation S-K (Sec 229.601 of this
chapter).
See response to 15(a)(3), above.
(c) Financial statements required by Regulation S-X (17 CFR 210) which are
excluded from the annual report to shareholders by Rule 14a-3(b) including (1)
separate financial statements of subsidiaries not consolidated and fifty
percent or less owned persons; (2) separate financial statements of affiliates
whose securities are pledged as collateral; and (3) schedules.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K for the
period ended December 31, 2008, to be signed on its behalf by the undersigned,
thereunto duly authorized.
Registrant: Providence Select Fund, Limited Partnership
By White Oak Financial Services, Inc.
Its General Partner
Date: March 31, 2009 By: /s/ Michael Pacult
Mr. Michael P. Pacult
Sole Director, Sole Shareholder
President and Treasurer
14
<page>
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
ANNUAL REPORT
December 31, 2008
GENERAL PARTNER:
White Oak Financial Services, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
<page>
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Schedule of Investments - Cash and Securities - December 31, 2008 F-4
Schedule of Investments - Cash and Securities - December 31, 2007 F-5
Schedule of Investments - Futures Contracts - December 31, 2007 F-6 - F-7
Statements of Operations F-8
Statements of Changes in Net Assets F-9
Statements of Cash Flows F-10
Notes to the Financial Statements F-11 - F-18
Affirmation of the Commodity Pool Operator F-19
F-1
<page>
Jordan, Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Partners of
Providence Select Fund, Limited Partnership
Dover, Delaware
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Providence Select Fund, Limited
Partnership as of December 31, 2008 and 2007, and the related statements of
operations, changes in net assets and cash flows for each of the three years
in the period ended December 31, 2008. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 Partnership is
not required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion of the effectiveness of the Partnership's internal
control over financial reporting. Accordingly, we do not express such an
opinion. An audit includes, examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides 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 Providence Select Fund,
Limited Partnership as of December 31, 2008 and 2007. and the results of its
operations, its changes in net assets and its cash flows for each of the three
years in the period ended December 31, 2008 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Jordan, Patke & Associates, Ltd.
Jordan, Patke & Associates, Ltd.
Lincolnshire, Illinois
March 30, 2009
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
December 31, 2008 and 2007
<table>
<s> <c> <c>
2008 2007
Assets
Investments
Equity in broker trading accounts
Cash and cash equivalents at broker $489,774 $3,264,919
Net unrealized gain on open futures contracts - 48,797
Total equity in broker trading accounts 489,774 3,313,716
U.S. Treasury Bills (cost $998,736 and $0) 999,803 -
Cash 11,826 37,476
Interest receivable 12 7,209
Money market fund 166,464 -
Prepaid continuing service fee - 45,650
Total assets 1,667,879 3,404,051
Liabilities
Accrued expenses 18,426 16,959
Due to related parties 10,292 278,658
Accounts payable 2,479 14,887
Accrued incentive and management fees 7,367 18,685
Redemptions payable - 14,278
Total liabilities 38,564 343,467
Net assets $1,629,315 $3,060,584
Analysis of net assets
Limited partners $1,606,139 $3,031,282
General partners 23,176 29,302
Net assets (equivalent to $742.31 and $828.67 per unit) $1,629,315 $3,060,584
Partnership units outstanding
Limited partners units outstanding 2,155.21 3,658.03
General partners units outstanding 39.71 35.36
Total partnership units outstanding 2,194.92 3,693.39
</table>
The accompanying notes are an integral part of the financial statements
F-3
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
December 31, 2008
<table>
<s> <c> <c> <c> <c> <c> <c>
Fair Value Percent
Description Maturity Date Cost Face Value Local Currency U.S. Dollars of Net Assets
United States Treasury Bill
Total United States Treasury Bills January 2009 998,736 1,000,000 999,803 $999,803 61.36%
Cash and cash equivalents in trading accounts:
United States Markets 489,774 $489,774 30.06%
Total cash denominated in U.S. Dollars 489,774 30.06%
Total cash and cash equivalents in trading accounts $489,774 30.06%
Money market fund (166,464 shares at $1 per share) 166,464 $166,464 10.22%
</table>
The accompanying notes are an integral part of the financial statements
F-4
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
December 31, 2007
<table>
<s> <c> <c> <c>
Fair Value Percent
Description Local Currency U.S. Dollars of Net Assets
Cash and cash equivalents in trading accounts:
Cash denominated in U.S. Dollars:
United States Markets 3,184,450 $3,184,450 104.05%
Total cash denominated in U.S. Dollars 3,184,450 104.05%
Total cash and cash equivalents denominated in
U.S. Dollars 3,184,450 97.54%
Cash denominated in foreign currency:
Euro Markets - Euro 19,810 28,869 0.94%
British Pound Markets - GBP 10,607 21,031 0.69%
Australian Dollar Markets - AUD 31,619 27,709 0.91%
Japanese Yen Markets - JPY 320,000 2,860 0.09%
Total cash denominated in foreign currency 80,469 2.63%
Total cash and cash equivalents in trading accounts $3,264,919 106.68%
</table>
The accompanying notes are an integral part of the financial statements
F-5
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Futures Contracts
December 31, 2007
<table>
<s> <c> <c> <c> <c> <c>
Fair Value Percent
Description Expiration Date Contracts Local Currency USD of Net Assets
Net unrealized gain (loss) on open futures contracts
United States commodity futures positions held long:
LME Copper US February 2008 1 (27,569) $(27,569) (0.90)%
LME Aluminum US January 2008 1 (1,459) (1,459) (0.04)%
LME Aluminum US February 2008 2 (5,170) (5,170) (0.17)%
LME Copper US February 2008 1 4,520 4,520 0.15 %
CMX Gold February 2008 2 7,000 7,000 0.23 %
NY Heating Oil February 2008 1 (214) (214) (0.01)%
NYM RBOB Gas February 2008 9 (4,347) (4,347) (0.14)%
CBOT Corn March 2008 3 250 250 0.01 %
CBOT Soybeans March 2008 2 3,625 3,625 0.12 %
CBOT Wheat March 2008 1 (2,013) (2,013) (0.07)%
CBT T Note 10Y March 2008 13 14,750 14,750 0.48 %
CMX Silver March 2008 3 6,575 6,575 0.21 %
IMM Euro FX March 2008 6 (9,406) (9,406) (0.31)%
IMM Euro Dollar September 2008 34 13,700 13,700 0.45 %
Total United States Commodity Futures Positions 242 0.01 %
Australian commodity futures positions held long:
SFE 10Y T Bond March 2008 1 (799) (700) (0.02)%
Total Australian commodity futures positions held long (700) (0.02)%
Euro commodity futures positions held long:
MONEP CAC40 January 2008 8 5,560 8,103 0.26 %
DTB DAX Index March 2008 2 9,000 13,116 0.43 %
EURX E-Bund March 2008 12 (18,810) (27,412) (0.90)%
LIF 3M Euribor September 2008 22 4,100 5,975 0.20 %
Total European commodity futures positions held long (218) (0.01)%
British commodity futures positions held long:
LIF Long Gilt March 2008 6 9,170 18,181 0.59 %
LIF 3M Sterling
Interest Rate September 2008 17 4,250 8,426 0.28 %
Total British commodity futures positions held long 26,607 0.87 %
Total commodity futures positions held long 25,931 0.85 %
United States commodity futures positions held short:
LME Aluminum US February 2008 2 4,345 4,345 0.14 %
LME Copper US February 2008 1 7,424 7,424 0.24 %
LME Aluminum US January 2008 1 3,681 3,681 0.12 %
LME Aluminum US March 2008 3 2,829 2,829 0.09 %
LME Aluminum US March 2008 2 3,145 3,145 0.10 %
LME Aluminum US February 2008 1 12,087 12,087 0.39 %
LME Aluminum US February 2008 2 9,463 9,463 0.31 %
LME Aluminum US March 2008 1 536 536 0.02 %
LME Copper US February 2008 1 (589) (589) (0.02)%
LME Copper US March 2008 1 3,300 3,300 0.11 %
CME Cattle February 2008 9 7,380 7,380 0.24 %
NY Lt Crude February 2008 2 (11,350) (11,350) (0.37)%
NY Natural Gas February 2008 3 (7,130) (7,130) (0.23)%
CSC Sugar March 2008 5 (4,088) (4,088) (0.13)%
EMINI S&P 500 March 2008 1 1,165 1,165 0.04 %
IMM British Pounds March 2008 4 150 150 0.00 %
IMM Canadian Dollars March 2008 2 (4,890) (4,890) (0.16)%
IMM Japanese Yen March 2008 3 (3,113) (3,113) (0.09)%
Total United States commodity futures positions held short 24,345 0.80 %
</table>
The accompanying notes are an integral part of the financial statements
F-6
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Futures Contracts, Continued
December 31, 2007
<table>
<s> <c> <c> <c> <c> <c>
Fair Value Percent
Description Expiration Date Contracts Local Currency USD of Net Assets
Net unrealized gain (loss) on open futures contracts, con't.
Australian commodity futures positions held short:
SFE SPI 200 March 2008 2 (2,700) (2,366) (0.08)%
Total Australian commodity futures positions held short (2,366) (0.08)%
Japanese commodity futures positions held short:
SMX NIKKEI March 2008 2 407,500 3,643 0.12 %
Total Japanese commodity futures positions held short 3,643 0.12 %
British commodity futures positions held short:
NEW FTSE 100 March 2008 1 (1,390) (2,756) 0.09)%
Total British commodity futures positions held short (2,756) (0.09)%
Total commodity futures positions held short 22,866 0.75 %
Net commodity futures positions $48,797 1.60 %
</table>
The accompanying notes are an integral part of the financial statements
F-7
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
2008 2007 2006
Investment income
Interest income $37,951 $68,671 $-
Total investment income 37,951 68,671 -
Expenses
Commission expense to affiliates 172,538 98,761
Commission expense 13,326 7,303 -
Management fees 46,072 44,505 -
Continuing service fee 98,868 60,177 -
Incentive fees 165,453 26,851 -
Professional accounting and legal fees 71,062 142,097 135,992
Other operating and administrative expenses 52,064 7,125 3,536
619,383 386,819 139,528
Net investment (loss) (581,432) (318,148) (139,528)
Realized and unrealized gain (loss) from investments and foreign currency
Net realized gain (loss) from:
Investments 933,252 368,916 -
Foreign currency transactions (511,285) (332,113) -
Net realized gain from investments and foreign currency transactions 421,967 36,803 -
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments (24,588) 24,588 -
Foreign currency transactions (24,209) 24,209 -
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions (48,797) 48,797 -
Net gain on investments and foreign currency 373,170 85,600 -
Net (decrease) in net assets resulting from operations $(208,262) $(232,548) $(139,528)
Net (loss) per unit (1)
Limited partnership unit (86.36) (121.72) (69,764.00)
General partnership unit (86.36) (121.72) (69,764.00)
</table>
(1) For the years ended December 31, 2008 and 2007, the amount is based
on a single unit outstanding for an entire year. For the year ended
December 31, 2006, the amount is calculated using average units
outstanding.
The accompanying notes are an integral part of the financial statements
F-8
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
Partners' Capital
General Limited Total
Net assets at December 31, 2005 $(61,995) $(61,995) $(123,990)
(Decrease) in net assets from operations:
Net investment (loss) (69,764) (69,764) (139,528)
Net realized (loss) from investments and foreign currency transactions - - -
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions - - -
Net (decrease) in net assets resulting from operations (69,764) (69,764) (139,528)
Subscriptions - - -
Redemptions - - -
Transfers - - -
Offering Costs - - -
Net assets at December 31, 2006 (131,759) (131,759) (263,518)
(Decrease) in net assets from operations:
Net investment (loss) (4,385) (313,763) (318,148)
Net realized gain from investments and foreign currency transactions 507 36,296 36,803
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions 673 48,124 48,797
- - -
Net (decrease) in net assets resulting from operations (3,205) (229,343) (232,548)
Subscriptions 32,050 3,566,311 3,598,361
Redemptions - (41,711) (41,711)
Transfers 1,000 (1,000) -
Offering Costs 131,216 (131,216) -
Net assets at December 31, 2007 29,302 3,031,282 3,060,584
(Decrease) in net assets from operations:
Net investment (loss) (28,270) (553,162) (581,432)
Net realized gain from investments and foreign currency transactions 20,517 401,450 421,967
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,373) (46,424) (48,797)
(10,126) (198,136) (208,262)
Net (decrease) in net assets resulting from operations
Subscriptions 4,000 261,009 265,009
Redemptions - (1,488,016) (1,488,016)
Transfers - - -
Offering Costs - - -
Net assets at December 31, 2008 $23,176 $1,606,139 $1,629,315
</table>
The accompanying notes are an integral part of the financial statements
F-9
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
2008 2007 2006
Cash Flows from Operating Activities
Net (decrease) in net assets resulting from operations $(208,262) $(232,548) $(139,528)
Adjustments to reconcile net increase (decrease) in net assets from operations
to net cash provided by (used in) operating activities:
Changes in operating assets and liabilities:
Unrealized appreciation (depreciation) on investments 48,797 (48,797) -
(Increase) decrease in interest receivable 7,197 (52,859) -
Decrease in prepaid continuing service fee 45,650 - -
Increase (decrease) in accrued management and incentive fees (11,318)
18,685 -
Increase (decrease) in accounts payable (12,408) 14,887 -
Increase in accrued expenses 1,467 9,883 7,076
Increase (decrease) in due to related parties 5,378 4,914 -
Net cash (used in) operating activities (123,499) (293,044) (132,452)
Cash Flows from Financing Activities
Increase (decrease) in due to related parties (273,744) (16,998) 132,375
Proceeds from sale of units, net of sales commissions 265,009 3,598,361 -
Partner redemptions (1,502,294) (27,433) -
Net cash provided by (used in) financing activities (1,511,029) 3,553,930 132,375
Net increase (decrease) in cash and cash equivalents (1,634,528) 3,260,886 (77)
Cash and cash equivalents at the beginning of the year 3,302,395 304 381
Cash and cash equivalents at the end of the year $1,667,867 $3,302,395 $304
End of period cash and cash equivalents consist of:
Cash and cash equivalents at broker $489,774 $3,264,919 $-
U.S. Treasury Bills 999,803 - -
Cash 11,826 37,476 304
Money market fund 166,464 - -
Total cash and cash equivalents $1,667,867 $3,302,395 $304
</table>
The accompanying notes are an integral part of the financial statements
F-10
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
1. Nature of the Business
Providence Select Fund, Limited Partnership (the Fund) was formed on May 16,
2003 under the Delaware Uniform Limited Partnership Act. The Fund is engaged
in high risk, speculative and hedge trading of futures and forward contracts,
options on futures and forward contracts, and other instruments selected by
registered commodity trading advisors (CTA's). On March 2, 2007, the Fund
commenced business after admission of 46 limited partners, with total
subscriptions of $1,088,370. The maximum offering is $50,000,000. White Oak
Financial Services, Inc. (White Oak) and Michael Pacult are the General
Partners and commodity pool operators (CPO's) of the Fund. From inception
through June 2, 2008, the Fund's CTA was NuWave Investment Corp. From June 2,
2008 forward, the Fund's CTA has been Clarke Capital Management, Inc. The CTA
has the authority to trade as much of the Fund's equity as is allocated to it
by the General Partner. The selling agent is Futures Investment Company (FIC),
which is controlled by Michael Pacult and his wife.
The Partnership was in the development stage prior to March 2, 2007 and its
efforts until then were principally devoted to organizational activities.
2. Significant Accounting Polices
Regulation - The Fund is a registrant (effective September 12, 2005) with the
Securities and Exchange Commission (SEC) pursuant to the Securities Act of
1933 (the Act). The Fund is subject to the regulations of the SEC and the
reporting requirements of the Securities and Exchange Act of 1934. The Fund is
also be subject to the regulations of the Commodities Futures Trading
Commission (CFTC), an agency of the U.S. government which regulates most
aspects of the commodity futures industry, the rules of the National Futures
Association and the requirements of various commodity exchanges where the Fund
executes transactions. Additionally, the Fund will be subject to the
requirements of futures commission merchants and interbank market makers
through which the Fund trades.
Offering Costs and Organizational Expenses - For financial reporting purposes
in conformity with U.S. Generally Accepted Accounting Principles (GAAP), on
the Fund's initial effective date, September 12, 2005, the Fund deducted from
Limited Partners' capital the total initial offering costs of $79,876 as of
that date and began expensing all subsequent offering costs. The commencement
of business was contingent upon the sale of at least $1,030,000 of partnership
interests. Organizational and operating costs are expensed as incurred for
GAAP purposes. For all other purposes, including determining the Net Asset
Value per Unit for subscription and redemption purposes, the Fund capitalized
all offering and organizational costs until after the twelfth month following
the commencement of business. The Fund has agreed to reimburse White Oak and
other affiliated companies for all expenses incurred up to the commencement of
business, which was March 2, 2007, until after the twelfth month following the
commencement of business. On March 4, 2008, during the thirteenth month
following the commencement of business, White Oak and its affiliates were
reimbursed for all such expenses, which totaled $274,715, and which are being
amortized by the Fund on a straight-line basis at $11,446 per month for twenty
four months commencing March 4, 2008. Any partner in the Fund during this
twenty four month period will be exposed to this per month charge on a pro
rata basis.
Consequently, as of December 31, 2008 and 2007, the Net Asset Value and Net
Asset Value per Unit for financial reporting purposes and for all other
purposes are as follows:
<table>
<s> <c> <c> <c> <c>
Balance Per Unit Calculation
December 31, December 31,
2008 2007 2008 2007
Net Asset Value for financial reporting purposes $1,629,315 $3,060,584 $742.31 $828.67
Adjustment for initial offering costs 79,876 79,876 36.39 21.63
Adjustment for other offering costs and organizational expenses 80,000 194,464 36.45 52.65
Net Asset Value for all other purposes $1,789,191 $3,334,924 $815.15 $902.94
Number of units 2,194.92 3,693.39
</table>
Registration Costs - Costs incurred for the initial filings with Securities
and Exchange Commission, National Association of Securities Dealers, Inc. and
the states where the offering is expected to be made are included in the
offering expenses and, accordingly, are accounted for as described above under
"Offering Costs and Organizational Expenses".
F-11
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
2. Significant Accounting Polices, Continued
Revenue Recognition - Commodity futures contracts are recorded on the trade
date and are reflected in the balance sheet at the difference between the
original contract amount and the market value on the last business day of the
reporting period.
Market value of commodity futures contracts is based upon exchange or other
applicable market best available closing quotations.
Interest income is recognized when it is earned.
Use of Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Income Taxes - The Fund prepares calendar year U.S. and applicable state tax
information tax returns and reports to the partners their allocable shares of
the Fund's income, expenses and trading gains or losses. No provision for
income taxes has been made in the accompanying financial statements as each
partner is individually responsible for reporting income or loss based on such
partner's respective share of the Fund's income and expenses as reported for
income tax purposes.
Management has continued to evaluate the application of Financial Accounting
Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48)," to the
Fund and has determined that FIN 48 does not have a material impact on the
Fund's financial statements. The Fund files federal and state tax returns.
The 2005 through 2008 tax years generally remain subject to examination for
the U.S. federal and most state tax authorities.
Statement of Cash Flows - For purposes of the Statement of Cash Flows, the
Fund considers cash at broker, cash, U.S. Treasury Bills and money market
funds to be cash equivalents. Net cash provided by operating activities
include no cash payments for interest or income taxes for the periods ended
December 31, 2008, 2007 and 2006.
Foreign Currency - Investment securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollar amounts at
the date of valuation. Purchases and sales of investment securities and
income and expense items denominated in foreign currencies are translated into
U.S. dollar amounts 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 securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the fair values of assets and liabilities, other than investments in
securities at fiscal period end, resulting from changes in exchange rates.
Reclassification
Certain amounts in the 2007 financial statements were reclassified to conform
with the 2008 presentation.
Recently Issued Accounting Pronouncements
The Fund adopted the provisions of Statement of Financial Accounting Statement
No. 157 - "Fair Value Measurement", or SFAS 157, as of January 1, 2008. SFAS
157 provides guidance for determining fair value and requires increased
disclosure regarding the inputs to valuation techniques used to measure fair
value. SFAS 157 clarifies the definition of fair value as the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
SFAS No. 157 establishes a fair value hierarchy which prioritizes the inputs
to valuation techniques used to measure fair value into three broad levels.
The fair value hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Fund has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability, including
the Fund's own assumptions used in determining the fair value of investments.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the
measurement date. As of and for the year ended December 31, 2008, the Fund
did not have any Level 3 assets or liabilities.
The following table sets forth by level within the fair value hierarchy the
Fund's investments accounted for at fair value on a reoccurring basis as of
December 31, 2008.
Description Level 1 Level 2 Level 3 Total
U.S. Treasury Bills $- $999,803 $- $999,803
Total $- $999,803 $- $999,803
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to
improve financial reporting about derivate instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand how
those instruments and activities are accounted for; how and why they are used;
and their effects on a Fund's financial position, financial performance, and
cash flows. SFAS 161 is effective for financial statement issued for fiscal
years beginning after November 15, 2008, and interim periods within those
fiscal years. The Fund is currently evaluating the impact that the adoption
of SFAS 161 will have on its financial statement disclosures.
F-12
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
3. General Partner Duties
The responsibilities of the General Partner, in addition to directing the
trading and investment activity of the Fund, including suspending all trading,
includes executing and filing all necessary legal documents, statements and
certificates of the Fund, retaining independent public accountants to audit
the Fund, employing attorneys to represent the Fund, reviewing the brokerage
commission rates to determine reasonableness, maintaining the tax status of
the Fund as a limited partnership, maintaining a current list of the names,
addresses and numbers of units owned by each Limited Partner and taking such
other actions as deemed necessary or desirable to manage the business of the
Partnership.
The Corporate General Partner has contributed $38,050 in cash for deposit to
the capital of the Fund for a General Partnership interest in the Partnership.
If the net unit value of the partnership falls to less than 50% of the greater
of the original $1,000 selling price, less commissions and other charges or
such higher value earned through trading, then the General Partner will
immediately suspend all trading, provide all limited partners with notice of
the reduction in net unit value and give all limited partners the opportunity,
for fifteen days after such notice, to redeem partnership interests. No
trading shall commence until after the lapse of such fifteen day period.
4. The Limited Partnership Agreement
The Limited Partnership Agreement provides, among other things, that-
Capital Account - A capital account shall be established for each partner.
The initial balance of each partner's capital account shall be the amount of
the initial contributions to the partnership.
Monthly Allocations - Any increase or decrease in the Partnership's net asset
value as of the end of a month shall be credited or charged to the capital
account of each Partner in the ratio that the balance of each account bears to
the total balance of all accounts.
Any distribution from profits or partners' capital will be made solely at the
discretion of the General Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Partnership's realized capital gain or loss and ordinary income or loss shall
be allocated among the Partners, after having given effect to the fees and
expenses of the Fund.
Subscriptions - Investors must submit subscription agreements and funds at
least five business days prior to month end. Subscriptions must be accepted or
rejected by the general partner within five business days. The investor also
has five business days to withdraw his subscription. Funds are deposited into
an interest bearing subscription account and will be transferred to the Fund's
account after the minimum to commence business has been raised and,
thereafter, on the first business day of the month after the subscription is
accepted. Interest earned on the subscription funds will accrue to the
account of the investor.
Redemptions - A limited partner may request any or all of his investment be
redeemed at the net asset value as of the end of a month. Unless this
requirement is waived, the written request must be received by the general
partner no less than ten days prior to a month end. Redemptions will
generally be paid within twenty days of the effective month end. However, in
various circumstances due to liquidity, etc. the general partner may be unable
to comply with the request on a timely basis. For partners admitted after
July 31, 2008, there will be a redemption fee commencing from the date of
purchase of units of 4% during the first three months, 3% during the second
three months, 2% during the third three months, 1% during the fourth three
months and no redemption fees for redemption requests received in the
thirteenth month or later. For partners admitted prior, there will be a
redemption fee commencing from the date of purchase of units of 3% during the
first four months, 2% during the second four months, 1% during the third four
months and no redemption fees for redemption requests received in the
thirteenth month or later.
F-13
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
5. Fees
Until September 1, 2007, a monthly management fee was paid to the CTA based on
the rate of trading assigned by the CTA and approved by the General Partner of
up to 2.5% (annual rate) of the Fund's net assets allocated to the CTA to
trade. As of September 1, 2007, such management fee was increased to up to
3.25% annually.
The Fund pays the Corporate General Partner a fixed brokerage commission of 6%
on total Fund net assets, from which the Corporate General Partner pays the
round turn commissions to the futures commission merchant.
A quarterly incentive fee of 20% of "new trading profits" is paid to the CTA
and, until September 1, 2007, up to a 3% quarterly incentive fee was paid to
the Corporate General Partner. As of September 1, 2007, the quarterly
incentive fee to the Corporate General Partner was reduced to up to 0.5%.
"New trading profits" includes all income earned by the CTA and expense
allocated to his activity. In the event that trading produces a loss for the
CTA, no incentive fees will be paid and all losses will be carried over to the
following months until profits from trading exceed the loss. It is possible
for the CTA to be paid an incentive fee during a quarter or a year when the
Fund experienced a loss.
The Fund pays the selling agents a 3% continuing service fee based on the
initial investment the first year. Each year thereafter, for so long as the
investment remains in the Fund, the Fund pays this fee at 1/4% monthly based
on the net asset value of the investment.
On June 2, 2008, the Fund changed trading advisors from NuWave to Clarke. The
Fund also made the decision to change the fees as follows:
A 25% quarterly incentive fee of new trading profits is paid to the CTA and no
management fee is paid to it.
Brokerage commissions of 7% annually on total Fund net assets are paid to the
Corporate General Partner, and no incentive fee is paid to it.
A 4% continuing service fee to the selling agents based on the initial
investment the first year. Each year thereafter, for so long as the
investment remains in the Fund, the Fund pays this fee at 1/3% monthly based
on the net asset value of the investment.
The General Partner has reserved the right to change the management fee and
the incentive fee at its sole discretion. The total incentive fees may be
increased to 27% if the management fee is eliminated. The Fund may also
increase the management fees paid to the CTA and general partner to 6% of
total net assets if the total incentive fees are decreased to 15%.
6. Related Party Transactions
Financial Accounting Standards Board Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, identifies certain disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. In the normal course of business, the
Fund has provided general indemnifications to the General Partner, its CTA
and others when they act, in good faith, in the best interests of the Fund.
The Fund is unable to develop an estimate for future payments resulting from
hypothetical claims, but expects the risk of having to make any payments under
these indemnifications to be remote.
F-14
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
6. Related Party Transactions, Continued
"""Due to related parties"" at December 31, 2008 and December 31, 2007 were
amounts payable to White Oak Financial Services, Inc., Ashley Capital
Management, Inc., Futures Investment Company, and Michael Pacult, president of
Futures Investment Company, White Oak Financial Services, Inc. and Ashley
Capital Management, Inc. The balances result from two types of transactions:
Due to related parties: Due to related parties consist of offering,
organizational and operating costs paid by the related parties on behalf of
the Fund and cash advances. These amounts bear no interest or due dates and
are unsecured. The balances are usually paid back within a year from the
start of trading or when the Fund is financially capable of repaying the
advance.
Commissions: The Fund has an agreement to pay commissions to White Oak
Financial Services, Inc. The related party is 100% owned by Michael Pacult,
the Fund's CPO. Commissions payable to White Oak Financial Service, Inc. at
December 30, 2008 and December 31, 2007 were $10,292 and $4,914, respectively.
"
Incentive fees: Prior to June 2, 2008, White Oak Financial Services, Inc.
received a quarterly incentive fee (see footnote 5) of new trading profits.
There were no incentive fees due at December 31, 2008 and 2007.
Continuing service fee: The Fund pays Futures Investment Company a continuing
service fee. Continuing service fees prepaid to Futures Investment Company
amounted to $0 and $45,650 at December 31, 2008 and December 31, 2007,
respectively.
Commissions and due to related parties included in accrued expenses:
2008 2007
Futures Investment Company $- $86,017
Ashley Capital Management, Inc. - 62,355
Michael Pacult - 46,650
White Oak Financial Services, Inc. 10,292 83,636
Due to related parties $10,292 $278,658
Commissions and fees included in expenses:
2008 2007 2006
White Oak Financial Services, Inc. - commissions $172,538 $98,761 $-
White Oak Financial Services, Inc. - incentive fee $3,761 $2,509 $-
Futures Investment Company -continuing service fee $98,868 $60,177 $-
7. Partnership Unit Transactions
As of December 30, 2008, 2007 and 2006 partnership units were $742.31,
$828.67, and $(131,759) per unit respectively for financial reporting
purposes.
Transactions in partnership units were as follows:
<table>
<s> <c> <c> <c> <c> <c> <c>
Units Amount
2008 2007 2006 2008 2007 2006
Limited Partner Units
Subscriptions 299.84 3,705.20 - $261,009 $3,566,311 $-
Redemptions (1,802.66) (47.17) - (1,488,015) (41,711) -
Net (loss) for the year ended - - - (198,136) (229,343) (69,764)
Transfers - (1.00) - - (1,000) -
Offering costs - - - - (131,216) -
Total (1,502.82) 3,657.03 - (1,425,142) 3,163,041 (69,764)
General Partner Units
Subscriptions 4.35 33.36 - 4,000 32,050 -
Redemptions - - - - - -
Net (loss) for the year ended - - - (10,126) (3,205) (69,764)
Transfers - 1.00 - - 1,000 -
Offering costs - - - - 131,216 -
Total 4.35 34.36 - (6,126) 161,061 (69,764)
Total Units
Subscriptions 304.19 3,738.56 - 265,009 3,598,361 -
Redemptions (1,802.66) (47.17) - (1,488,015) (41,711) (139,528)
Net (loss) for the year ended - - - (208,262) (232,548) -
Offering costs - - - - - -
Total (1,498.47) 3,691.39 - $(1,431,268) $3,324,102 $(139,528)
</table>
F-15
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
8. Trading Activities and Related Risks
The Fund is engaged in speculative trading of U.S. and foreign futures
contracts in commodities. The Fund is exposed to both market risk, the risk
arising from changes in market value of the contracts, and credit risk, the
risk of failure by another party to perform according to the terms of a
contract.
A certain portion of cash in trading accounts are pledged as collateral for
commodities trading on margin. Additional deposits may be necessary for any
loss on contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's proprietary
activities.
Each U.S. commodity exchange, with the approval of the CFTC and the futures
commission merchant, establish minimum margin requirements for each traded
contract. The futures commission merchant may increase the margin
requirements above these minimums for any or all contracts. In general, the
amount of required margin should never fall below 10% of the Net Asset Value.
The cash deposited in trading accounts at December 31, 2008 and December 31,
2007 was $489,774. and $3,264,919, respectively, which equals approximately
30.1% and 106.7% of Net Asset Value, respectively.
Trading in futures contracts involves entering into contractual commitments to
purchase or sell a particular commodity at a specified date and price. The
gross or face amount of the contract, which is typically many times that of
the Fund's net assets being traded, significantly exceeds the Fund's future
cash requirements since the Fund intends to close out its open positions prior
to settlement. As a result, the Fund is generally subject only to the risk of
loss arising from the change in the value of the contracts. The market risk is
limited to the gross or face amount of the contracts held of approximately $0
on long positions at December 31, 2008 and $29,248,921 on long positions at
December 31, 2007. However, when the Fund enters into a contractual commitment
to sell commodities, it must make delivery of the underlying commodity at the
contract price and then repurchase the contract at prevailing market prices or
settle in cash. Since the repurchase price to which a commodity can rise is
unlimited, entering into commitments to sell commodities exposes the Fund to
unlimited potential risk.
Market risk is influenced by a wide variety of factors including government
programs and policies, political and economic events, the level and volatility
of interest rates, foreign currency exchange rates, the diversification
effects among the derivative instruments the Fund holds and the liquidity and
inherent volatility of the markets in which the Fund trades.
The net unrealized gains (losses) on open commodity futures contracts at
December 31, 2008 were $0. The fund had no open commodity futures contracts at
December 31, 2008.
Open contracts generally mature within three months of December 31, 2008.
The fund had no open commodity futures contracts at December 31, 2008.
Credit risk is the possibility that a loss may occur due to the failure of a
counter party to perform according to the terms of a contract.
The Fund has a substantial portion of its assets on deposit with financial
institutions. In the event of a financial institution's insolvency, recovery
of Fund deposits may be limited to account insurance or other protection
afforded deposits.
The Fund has established procedures to actively monitor market risk and
minimize credit risk although there can be no assurance that it will succeed.
The basic market risk control procedures consist of continuously monitoring
open positions, diversification of the portfolio and maintenance of a
desirable margin-to-equity ratio. The Fund seeks to minimize credit risk
primarily by depositing and maintaining its assets at financial institutions
and brokers which it believes to be creditworthy.
F-16
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
9. Derivative Financial Instruments and Fair Value of Financial Instruments
A derivative financial instrument is a financial agreement whose value is
linked to, or derived from, the performance of an underlying asset. The
underlying asset can be currencies, commodities, interest rates, stocks, or
any combination. Changes in the underlying asset indirectly affect the value
of the derivative. As the instruments are recognized at fair value, those
changes directly affect reported income.
All investment holdings are recorded in the statement of assets and
liabilities at their net asset value (fair value) at the reporting date.
Financial instruments (including derivatives) used for trading purposes are
recorded in the statement of financial condition at fair value at the
reporting date. Realized and unrealized changes in fair values are recognized
in net investment gain (loss) in the period in which the changes occur.
Interest income arising from trading instruments is included in the statement
of operations as part of interest income.
Notional amounts are equivalent to the aggregate face value of the derivative
financial instruments. Notional amounts do not represent the amounts
exchanged by the parties to derivatives and do not measure the Fund's exposure
to credit or market risks. The amounts exchanged are based on the notional
amounts and other terms of the derivatives.
10. Financial Instruments with Off-Balance Sheet Credit and Market Risk
All financial instruments are subject to market risk, the risk that future
changes in market conditions may make an instrument less valuable or more
onerous. As the instruments are recognized at fair market value, those
changes directly affect reported income.
Included in the definition of financial instruments are securities, restricted
securities and derivative financial instruments. Theoretically, the
investments owned by the Fund directly are exposed to a market risk (loss)
equal to the notional value of the financial instruments purchased and
substantial liability on certain financial instruments purchased short.
Generally, financial instruments can be closed. However, if the market is not
liquid, it could prevent the timely close-out of any unfavorable positions or
require the Fund to hold those positions to maturity, regardless of the
changes in their value or the trading advisor's investment strategies.
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise
from financial instruments exist for groups of counterparties when they have
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions.
11. Indemnifications
In the normal course of business, the Fund enters 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 is unknown, as this would involve future claims that may be made
against the Fund that have not yet occurred. The Fund expects the risk of any
future obligation under these indemnifications to be remote.
F-17
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Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
12. Financial Highlights
<table>
<s> <c> <c> <c> <c> <c>
Years Ended December 31,
2008 2007 2006 2005 2004
Performance per Unit (2)
Net unit value, beginning of year $828.67 $(131,759.00) $(61,995.00) $(6,454.00) $(424.00)
Net realized and unrealized gain (loss) on
commodity transactions 120.48 34.80 - -
Investment and other income 10.77 32.89 - -
Expenses (1) (217.61) (189.41) (69,764.00) (15,603.00) (6,030.00)
Net (decrease) related to operations (86.36) (121.72) (69,764.00) (15,603.00) (6,030.00)
Syndication costs transferred to capital - - - (39,938.00) -
Reallocation of initial offering costs - 132,709.39 - - -
Net increase (decrease) for the year (86.36) 132,587.67 (69,764.00) (55,541.00) (6,030.00)
Net unit value at the end of the year $742.31 $828.67 $(131,759.00) $(61,995.00) $(6,454.00)
Net assets, end of the year ($000) $1,629 $3,061 $(264) $(124) $(13)
Total return (1) (10.42)% (12.81)% (78.79)% (57.08)% (175.34)%
Number of units outstanding at the end
of the year 2,194.92 3,693.39 2.00 2.00 2.00
Ratio to average net assets
Investment and other income (2) 1.00 % 4.76 % 0.00 % 0.00 % 0.00 %
Expenses (16.27)% (22.66)% (78.79)% (57.08)% (175.34)%
</table>
Total return is calculated based on the change in value of a unit during the
year. An individual partner's total return and ratios may vary from the above
total returns and ratios based on the timing of additions and redemptions.
(1) Includes brokerage commissions
(2) For the year ended December 31, 2006 and prior years, investment and
other income and expenses are calculated using the average number of
units outstanding during the year. Net realized and unrealized gains
and losses on commodity transactions is a balancing amount necessary
to reconcile the change in net unit value. For the years ended
December 31, 2008 and 2007, investments in other income and expenses
and net realized and unrealized gains and losses on commodity
transactions are calculated based on a single unit outstanding during
the period.
F-18
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Providence Select Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
*****************************************************************************
To the best of the knowledge and belief of the undersigned, the information
contained in this report is accurate and complete.
/s/ Michael Pacult March 31, 2009
Michael Pacult Date
President, White Oak Financial Services, Inc.
General Partner
Providence Select Fund, Limited Partnership
F-19
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