Attached files
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EX-10.4 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex104.htm |
EX-10.6 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex106.htm |
EX-32.01 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex3201.htm |
EX-31.01 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex3101.htm |
EX-32.02 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex3202.htm |
EX-31.02 - PROFUTURES DIVERSIFIED FUND L P | efc10-301_ex3102.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2009
or
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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_______________________
Commission File Number: 0-16898
PROFUTURES DIVERSIFIED FUND, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
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75-2197831
(I.R.S. Employer
Identification No.)
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ProFutures, Inc.
11719 Bee Cave Road
Suite 200
Austin, Texas 78738
(Address of principal executive offices)
(800) 348-3601
(Registrant’s telephone number)
_______________________
Copies to:
William Kerr
Lauren Wolf
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
Page 1
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
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.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant’s Financial Statements for the Years ended December 31, 2009 and 2008 with Reports of Independent Registered Public Accounting Firms, the annual report to securities holders for the fiscal year ended December 31, 2009, is incorporated by reference into Part II Item 8 and Part IV hereof and filed as an exhibit herewith. Portions of the Registrant’s Prospectus dated July 31, 1994 and Supplement dated January 31, 1995 Post-Effective Amendment No. 3 dated June 23, 1995 also are incorporated by reference in Part I, Part II, Part III and Part IV of this Form 10-K.
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PART I
Item 1. Business.
General
ProFutures Diversified Fund, L.P. (the “Partnership”) is a limited partnership organized on March 10, 1987, under the laws of the State of Delaware. The business of the Partnership is the speculative trading of futures contracts and other financial instruments. The Partnership commenced its business operation in August 1987 under the name ATA Research/ProFutures Diversified Fund, L.P. Effective June 1, 2000, the Partnership changed its name from ATA Research/ProFutures Diversified Fund, L.P. to ProFutures Diversified Fund, L.P. Effective October 1, 2000, ATA Research, Inc., the Partnership’s co-general partner, withdrew as co-general partner. ProFutures, Inc. remains as the sole General Partner. The office of the Partnership is located at 11719 Bee Cave Road, Suite 200, Austin, Texas 78738; the telephone number is (800) 348-3601.
Trading Activity
ProFutures, Inc., a Texas corporation, is the General Partner of the Partnership which administers the business and affairs of the Partnership (exclusive of its trading operations). Trading decisions are made by independent Commodity Trading Advisors (“CTAs”) chosen by the General Partner. At December 31, 2009, there were two CTAs utilized via investing in commodity pools and four CTAs that were directly allocated Partnership assets for trading: Winton Futures Fund, L.P. (US), Valhalla Synergy Fund LLC, Cabana Capital Management Pty Ltd., Clarke Capital Management Inc., Haar Capital Management LLC and Paskewitz Asset Management LLC (collectively, the “Advisors”). All CTA advisory fees are paid by the Partnership, including the Partnership’s proportionate share of advisory fees to the commodity pools. Advisors may be changed from time to time by the General Partner.
Effective January 29, 2010, the Partnership terminated its advisory agreement with Clarke Capital Management Inc. Effective February 1, 2010, the Partnership submitted a full redemption request for its investment in Valhalla Synergy Fund LLC to be effective March 31, 2010. Effective March 1, 2010, the Partnership made an initial investment of $1,500,000 in APM-QIM Futures Fund, L.P., a commodity pool.
ProFutures, Inc. is registered with the Commodity Futures Trading Commission (“CFTC”) as a Commodity Trading Advisor and Commodity Pool Operator and is a member of National Futures Association (“NFA”). Gary D. Halbert is the Chairman and President, and principal stockholder, of ProFutures, Inc., which was incorporated and began operation in December, 1984, and specializes in speculative managed futures accounts.
The objective of the Partnership is to achieve appreciation of its assets through speculative trading of futures contracts. It ordinarily maintains open positions for a relatively short period of time. The Partnership’s ability to make a profit depends largely on the success of the Advisors in identifying market trends and price movements and buying or selling accordingly.
The Partnership’s Trading Policies are set forth on Page 59 of the Partnership’s Prospectus dated July 31, 1994, which is incorporated herein by reference.
Material changes in the Trading Policies described in the Prospectus must be approved by a vote of a majority of the outstanding units of Limited Partnership Interest (“Units”). A change in contracts traded, however, will not be deemed to be a material change in the Trading Policies.
Trading Methods and Advisors
Futures traders basically rely on either or both of two types of analysis for their trading decisions, “technical” or “fundamental.” Technical analysis uses the theory that a study of the markets will provide a
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means of anticipating price changes. Technical analysis generally will include a study of actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest, utilizing charts and/or computers for analysis of these items. Fundamental analysis, on the other hand, relies on a study and evaluation of external factors which affect the price of a futures contract in order to predict prices. These include political and economic events, weather, supply and demand and changes in interest rates.
The respective Advisors’ trading strategies attempt to detect trends in price movements for the commodities monitored by them. They normally seek to establish positions and maintain such positions while the particular market moves in favor of the position and to exit the particular market and/or establish reverse positions when the favorable trend either reverses or does not materialize. These trading strategies are not normally successful if a particular market is moving in an erratic and non-trending manner.
Because of the nature of the commodities markets, prices frequently appear to be trending when a particular market is, in fact, without a trend. In addition, the trading strategies may identify a particular market as trending favorably to a position even though actual market performance thereafter is the reverse of the trend identified.
None of the Advisors or their respective principals own any Units of the Partnership. The Partnership’s Advisors are independent Commodity Trading Advisors and are not affiliated with the General Partner; however, they may also be Advisors to other commodity pools with which the General Partner is currently associated and they may own an interest in those pools. Each Advisor is registered with the CFTC and is a member in such capacity with NFA. Because of their confidential nature, proprietary trading records of the Advisors and their respective principals are not available for inspection by the Limited Partners of the Partnership.
Investment in Other Commodity Pools
The Partnership has invested in other commodity pools for primarily two reasons. The General Partner believes that many CTAs are trending toward the use of funds rather than individual managed accounts. Many of the top tier CTAs only offer their investment management through one of their funds (i.e., Winton Futures Fund, L.P. (US)). They do not want investors to know the specifics of their daily trading positions, so no one can duplicate their methodology.
The top tier CTAs often require at least a $10 million trading level. The Partnership net asset value is about $14 million, with a trading level as high as $20 million. The minimum trading levels for these top tier CTAs require a higher allocation than desired for diversification and management of risk to the partners. The minimum investment for the commodity pools ranges from $50,000 to $1 million. The replacement of CTA managed accounts with funds potentially allows for greater diversification, less risk and increased flexibility in managing the Partnership.
Fees, Compensation and Expenses
The Partnership pays the General Partner a monthly management fee of 1/4 of 1.0% (3.0% annually) of month-end Net Asset Value. The Partnership pays the General Partner an additional monthly management fee of 0.0625% (0.75% annually) of the Partnership’s month-end Net Asset Value for consulting services rendered to the Partnership. Management fees related to the side pocket/restricted share class (see Item 7 herein) were accrued throughout 2008, but not paid until February 2009.
The Partnership has a consulting agreement with Altegris Investments, Inc. and Altegris Portfolio Management, Inc. (collectively, “Altegris”), whereby Altegris will recommend the selection and termination of the Advisors and the allocation and reallocation of the Partnership’s assets. Pursuant to this consulting agreement, Altegris receives a monthly consulting fee equal to 0.0208% (0.25% annually) of the Partnership’s month-end Net Asset Value (as defined in the consulting agreement) except for certain net assets of the Partnership invested with managers affiliated with Altegris. In addition, the net assets of the Partnership invested with a certain commodity trading advisor are excluded from the month-end Net Asset
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Value when computing the consulting fees due to Altegris since Altegris earns a percentage of such commodity trading advisor’s incentive fees. The consulting fee (included in management fees in the statement of operations) earned by Altegris totaled $10,119 and $10,683 for the years ended December 31, 2009 and 2008, respectively.
The current CTAs (six CTAs with two utilized via investing in other commodity pools as of December 31, 2009) receive management fees ranging from 0% to 2% annually of Allocated Net Asset Value (as defined in the trading advisory contracts). Each of the CTAs receives a quarterly incentive fee ranging from 20% to 25% of Trading Profits (as defined). The quarterly incentive fees are payable only on cumulative profits achieved by each CTA. For example, if one of the CTAs to the Partnership experiences a loss after an incentive fee payment is made, that CTA retains such payments but receives no further incentive fees until such CTA has recovered the loss and then generated subsequent Trading Profits since the last incentive fee was paid such CTA. An incentive fee may be paid to one CTA but the Partnership may experience no change or a decline in its Net Asset Value because of the performance of another CTA. The General Partner may allocate or reallocate the Partnership’s assets at any time among the current CTAs or any others that may be selected. Upon termination of a CTA’s contract, or at any other time in the discretion of the General Partner, the Partnership may employ other CTAs whose compensation may be calculated without regard to the losses which may be incurred by the present CTAs. Similarly, the Partnership may renew its relationship with each CTA on the same or different terms.
The Partnership is obligated to pay its periodic operating expenses, consisting substantially of preparation of the Limited Partners’ tax return information, filing and recording charges, legal, printing, accounting and auditing fees plus non-recurring expenses. Those periodic recurring expenses are estimated at approximately 2.3% of the Partnership’s average annual Net Asset Value. Non-recurring expenses, not included within these estimates, include expenses associated with significant litigation including, but not limited to, class action suits, suits involving the indemnification provisions of the Agreement of the Limited Partnership or any other agreement to which the Partnership is a party; by their nature, the dollar amount of non-recurring expenses cannot be estimated.
Additional descriptions and definitions are set forth in “Fees, Compensation and Expenses” on Pages 30-35 of the Partnership’s Prospectus, dated July 31, 1994, which is incorporated herein by reference.
Brokerage Arrangements
The Partnership deposits funds with MF Global Ltd. (the “Clearing Broker”) to act as broker, subject to CFTC regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such broker. The Partnership earns interest income on its assets deposited with the broker.
Financial Information About Industry Segments
The Partnership operates in only one industry segment, that of the speculative trading of futures contracts and other financial instruments. See also “Description of Futures Trading,” pages 64-65 of the Prospectus dated July 31, 1994, which is incorporated herein by reference.
Regulation
The U.S. futures markets are regulated under the Commodity Exchange Act (“CEA”), which is administered by the CFTC, a federal agency created in 1974. The CFTC licenses and regulates commodity exchanges, commodity brokerage firms (referred to in the industry as “Futures Commission Merchants”), Commodity Pool Operators, Commodity Trading Advisors and others. The General Partner is registered with the CFTC as a Commodity Pool Operator and each Commodity Trading Advisor is registered as such.
Futures professionals such as the General Partner and the Advisors are also regulated by NFA, a self-regulatory organization for the futures industry that supervises the dealings between futures professionals
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and their customers. If the pertinent CFTC registrations or NFA memberships were to lapse, be suspended or be revoked, the General Partner would be unable to act as the Partnership’s Commodity Pool Operator, and the respective Advisors as Commodity Trading Advisors, to the Partnership.
The CFTC has adopted disclosure, reporting and recordkeeping requirements for Commodity Pool Operators (such as the General Partner) and disclosure and recordkeeping requirements for Commodity Trading Advisors. The reporting rules require pool operators to furnish to the participants in their pools a monthly statement of account, showing the pool’s income or loss and change in Net Asset Value and an annual financial report, audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures markets, including the emergency power to suspend trading and order trading for liquidation only (i.e., traders may liquidate existing positions but not establish new positions). The exercise of such powers could adversely affect the Partnership’s trading.
Competition
The Partnership may experience increased competition for the same futures or option contracts. The Advisors may recommend similar or identical trades to other accounts which they may manage; thus, the Partnership may be in competition with such accounts for the same or similar positions. Such competition may also increase due to the widespread utilization of computerized trend-based trading methods similar to the methods used by some of the Advisors. This Partnership may also compete with other funds organized by the General Partner.
Financial Information About Foreign and Domestic Operations
The Partnership does not expect to engage in any operations in foreign countries nor does it expect to earn any portion of the Partnership’s revenue from customers in foreign countries.
Available Information
The Partnership is an electronic filer with the Securities and Exchange Commission (“SEC”). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov). The General Partner will voluntarily provide electronic or paper copies of this filing free of charge upon request.
Item 1A. Risk Factors.
The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not applicable.
Item 1B. Unresolved Staff Comments.
Because the Partnership is not an accelerated filer, a large accelerated filer or a well-known seasoned issuer, as defined by Rules 240.10b-2 and 230.405, the information required by Item 1B is not applicable.
Item 2. Properties.
The Partnership does not own or lease any real property. The General Partner currently provides all necessary office space at no additional charge to the Partnership.
Item 3. Legal Proceedings.
(a) The Partnership and the General Partner are not a party to any pending material legal proceedings.
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(b) None.
Item 4. (Removed and Reserved).
PART II
Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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(a) There is no established public trading market for the securities.
The Partnership has filed a registration statement with the SEC for the sale of up to $38,547,364 in Units. Such registration statement became effective as of July 31, 1994. This offering was extended on January 31, 1995 and continued through April 30, 1995. On June 23, 1995, Post-Effective Amendment No. 3 was filed to deregister $20,721,920 in Units. As of December 31, 2009, a total of 5,409 non-restricted Units are outstanding and held by 378 Unit holders, including 184 non-restricted Units held by the General Partner and its principals. During the calendar year 2009, a total of 811 non-restricted Units and 1 restricted Unit were redeemed. Of the 811 non-restricted Units redeemed, 2 non-restricted Units are pending redemption, which are not effective until January 31, 2010. Effective February 28, 2009, 414 restricted Units were transferred and converted to 361 non-restricted Units. There are no restricted Units outstanding. As of February 28, 2010, a total of 5,321 non-restricted Units are outstanding and held by 371 Unit holders, including 184 Units held by the General Partner and its principals.
The General Partner has sole discretion in determining what distributions, if any, the Partnership will make to its Unit holders. The General Partner made no distributions as of December 31, 2009, or as of the date hereof. A Limited Partner may request and receive redemption of Units subject to restrictions in the limited partnership agreement. The General Partner may suspend the determination of Net Asset Value and redemptions under certain circumstances, including the closure or suspension of trading on any relevant exchange, the suspension of redemptions by a commodity pool in which the Partnership invests or a breakdown in the means normally employed by the General Partner to value assets.
(b) There were no sales of securities by the Partnership within the past three years which were not registered under the Securities Act, thus the information required by Rule 229.701(f) is not applicable.
(c) There were no repurchases of securities by the Partnership made within the fourth quarter of the fiscal year covered by this report, thus the information required by Rule 229.703 is not applicable.
Item 6.
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Selected Financial Data.
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The Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1) and therefore this item is not applicable.
Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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The Partnership commenced trading on August 3, 1987. The success of the Partnership is dependent on the ability of the Advisors to generate profits through speculative trading sufficient to produce substantial capital appreciation after payment of all fees and expenses. Future results will depend in large part upon the futures markets in general, the performance of the Advisors for the Partnership and the amount of redemptions and changes in interest rates. Due to the highly leveraged nature of futures trading, small price movements may result in substantial losses. Because of the nature of these factors and their interaction, it is impossible to predict future operating results. The Partnership's business constitutes only one segment, i.e., a speculative commodity pool.
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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 1 to the Financial Statements.
The Partnership records all investments at fair value in its financial statements in accordance with Fair Value Measurements and Disclosures of the Accounting Standards Codification with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g. swap and forward contracts which are traded in the inter-bank market).
The fair value of exchange-traded contracts is based upon exchange settlement prices. The fair value of the Partnership’s investments in other commodity pools are ordinarily determined by each commodity pool in accordance with such commodity pool’s valuation policies as reported by its management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation (generally the net asset value of the commodity pool), based on information reasonably available at the time the valuation is made and that the partnership believes to be reliable.
(a) Liquidity. Approximately 31% of the Partnerships’ assets are held in cash or cash equivalents at December 31, 2009. There are no restrictions on the liquidity of these assets except for amounts on deposit with the broker needed to meet margin requirements on open futures contracts. The other estimated 69% is invested in other commodity pools which are subject to certain restrictions. The restrictions on withdrawals from these commodity pools typically include a 15 to 45 day written notice for withdrawals, monthly or quarterly redemptions and the commodity pools’ ability to limit or suspend redemptions.
Most United States exchanges (but generally not foreign exchanges, or banks or broker-dealer firms in the case of foreign currency forward contracts) limit by regulation the amount of fluctuation limits. The daily limits establish the maximum amount the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the trading session. Once the “daily limit” has been reached in a particular commodity, no trades may be made at a price beyond the limit. Positions in the commodity can then be taken or liquidated only if traders are willing to effect trades at or within the limit during the period for trading on such day. Because the “daily limit” rule only governs price movement for a particular trading day, it does not limit losses. The rule may, in fact, substantially increase losses because it may prevent the liquidation of unfavorable positions. Futures prices have occasionally moved the daily limit for several consecutive trading days, and thereby prevented prompt liquidation of futures positions on one side of the market, subjecting those futures traders involved to substantial losses.
Liquidity will be of concern to the Partnership primarily in that the futures markets in which the Advisors take positions may have periods in which illiquidity makes it impossible or economically undesirable to execute trades which its respective trading strategy would otherwise suggest. Other than in respect of the functioning of the markets in which it trades, liquidity will be of little relevance to the operation of the Partnership except insofar as the General Partner is relatively thinly capitalized. Nonetheless, the General Partner believes it has sufficient funding to meet both its capital contribution and net worth requirements based on capital contributions from the principals of the General Partner, or alternative funding sources, including the stock subscription from the Clearing Broker to ProFutures, Inc. The Clearing Broker has subscribed to purchase (up to $7,000,000, subject to conditions set forth in the stock subscription
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agreement dated October 22, 2004) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner’s net worth requirements.
As of January 31, 2008, the managing member of SHK Diversified LLC (“SHK”) temporarily suspended future redemptions. SHK’s managing member indicated to investors that this action was taken due to a decline in the liquidity of the markets traded by SHK combined with a significant number of requests for redemptions. Because of the uncertainty in valuing the Partnership’s investment in SHK, the General Partner established a side pocket for the Partnership’s interest in SHK effective April 30, 2008, to continue until such time as the investment could be valued with certainty. Investor units attributed to SHK were segregated into a side pocket while units not attributed to SHK continued to be available for redemption in cash. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. The side pocket/restricted share class was allocated its proportionate share of the Partnership’s expenses, as well as all expenses directly related to the class’ establishment and operation. Effective, December 31, 2008, SHK paid the Partnership approximately half of the Partnership’s redemption proceeds, equal to $1,315,742, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK paid the Partnership the remaining half of the Partnership’s redemption proceeds equal to $1,335,258, which was paid to the Partnership on March 16, 2009. The side pocket/restricted share class was subsequently canceled with existing Units either redeemed or converted to non-restricted shares. As of February 28, 2009 there are no restricted or side pocketed units.
(b) Capital Resources. The Partnership’s initial offering and sale of Units commenced on May 27, 1987 and ended on July 31, 1987 after having sold $6,130,568 of Units at the initial offering price of $1,000. The Partnership commenced trading August 3, 1987. The Partnership continued offering Units through February 29, 1988. Thereafter additional offerings of the Partnership’s Units occurred on April 15, 1988, August 24, 1991, May 14, 1992, November 30, 1992, August 30, 1993 and July 31, 1994. The offering effective July 31, 1994 was extended on January 31, 1995 and continued through April 30, 1995. In June 1995, Post-Effective Amendment No. 3 was filed to deregister the Partnership’s remaining $20,721,920 of Units.
Since the Partnership’s business is the purchase and sale of various commodity interests, it will make few, if any, capital expenditures.
(c) Results of Operations. Due to the speculative nature of trading commodity interests, the Partnership’s income or loss from operations may vary widely from period to period. Management cannot predict whether the Partnership’s future Net Asset Value per Unit will increase or experience a decline.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Year-Ended December 31, 2009
The year 2009 had a net loss of $3,668,039 or ($611.25) loss per non-restricted Unit and $17.54 income per restricted Unit. At December 31, 2009, partners’ capital totaled $13,676,039, versus $19,501,029 for December 31, 2008, including capital redemptions of $2,153,879 from Non-Restricted Units and $3,072 from Restricted Units. In comparison, for December 31, 2008 the aggregate Net Asset Value includes the Non-Restricted Net Asset Value of $18,395,272 ($3,139.86 per Non-Restricted Unit) and the Restricted Units Net Asset Value of $1,105,757 ($2,663.73 per Restricted Unit). Effective December 31, 2008, one-half of the 878 Restricted Units from a side pocket were either converted to Non-Restricted Units or redeemed. Effective February 28, 2009, the second half of the Restricted Units were either converted to Non-Restricted Units or redeemed. As of February 28, 2009 we no longer have Restricted Units or a side-pocket. The Partnership ended the year with a loss of 18.65%.
Fourth Quarter 2009
The fourth quarter saw losses in interest rates, currencies, certain agricultural commodities and energy; gains were in the stock indexes and metals.
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The Partnership had a loss of 3.39% in October. The Partnership had losses in interest rates, stock indexes, currencies, energy and certain agricultural commodities; gains were limited to metals.
The Partnership had a gain of 3.31% in November. The Partnership had gains in interest rates, stock indexes, metals and currencies; losses were in certain agricultural commodities and energy.
The Partnership had a loss of 3.28% in December. The Partnership had large losses in interest rates, currencies, metals and energy; gains were in stock indexes and certain agricultural commodities.
The Partnership ended the quarter with a loss of 3.47%.
Third Quarter 2009
The Partnership had losses for the quarter in certain agricultural commodities, currencies, interest rates, and in stock indexes; gains were in certain agricultural commodities, metals and energy.
The Partnership had a loss of 3.98% in July. The Partnership had losses in the stock indexes, certain agricultural commodities, interest rates, metals currencies and energy; with no gains for the month.
The Partnership had a loss of 1.96% in August. The Partnership had losses in currencies and interest rates; gains were in energy, stock indexes and certain agricultural commodities.
The Partnership had a loss of 1.50% in September. The Partnership had losses in energy, stock indexes and certain agricultural commodities; gains were in interest rates, currencies and metals.
The Partnership ended the quarter with a loss of 7.27%.
Second Quarter 2009
The Partnership had losses for the quarter in interest rates, metals and certain agricultural commodities; gains were in stock indexes, certain agricultural commodities and energy.
The Partnership had a loss of 3.16% in April. The Partnership had losses in interest rates, energy, currencies, certain agricultural commodities and metals; gains were in certain agricultural commodities and stock indexes.
The Partnership had a gain of 2.92% in May. The Partnership had gains in currencies, certain agricultural commodities, energy, stock indexes and interest rates; losses were limited to metals and certain agricultural commodities.
The Partnership had a loss of 3.43% in June. The Partnership had losses in certain agricultural commodities, interest rates, metals and currencies; gains were in certain agricultural commodities, energy and stock indexes.
The Partnership ended the quarter with a loss of 3.75%.
First Quarter 2009
The Partnership had losses for the quarter in interest rates, currencies, certain agricultural commodities, metals and energy; gains were limited to the stock indexes.
The Partnership had a loss of 0.23% in January. The Partnership had losses in interest rates and certain agricultural commodities; gains were in stock indexes, currencies, energy and metals.
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The Partnership had a loss of 1.65% in February. The Partnership had losses in currencies, interest rates, energy, metals, stock indexes and certain agricultural commodities; gains were in certain agricultural commodities.
The Partnership had a loss of 4.74% in March. The Partnership had losses in every sector traded, in currencies, certain agricultural commodities, interest rates, stock indexes, metals and energy.
The Partnership ended the quarter with a loss of 6.53%.
Year-Ended December 31, 2008
The year 2008 had a net gain of $995,237 or $223.08 per non-restricted unit and a loss of $299.36 per side pocket/restricted unit. At December 31, 2008, partners’ capital totaled $19,501,029, versus $21,423,827 for December 31, 2007, including capital redemptions of $2,671,425 from non-restricted Units and $246,610 from restricted Units. The aggregate Net Asset Value includes the non-restricted Net Asset Value of $18,395,272 ($3,139.86 per non-restricted Unit) and the restricted Units Net Asset Value of $1,105,757 ($2,663.73 per restricted Unit). In comparison, the Net Asset Value per unit at December 31, 2007 amounted to $2,916.78 with no restricted Units. The Partnership ended the year with a gain of 5.31%.
Fourth Quarter 2008
The fourth quarter saw large gains in interest rates and the stock indexes followed by gains in currencies, energy and certain agricultural commodities; losses were in metals.
The Partnership had a gain of 2.25% in October. The Partnership had gains in currencies, interest rates, stock indexes, certain agricultural commodities and energy; losses were in metals.
The Partnership had a gain of 2.49% in November. The Partnership had gains in interest rates, stock indexes and metals; losses were in certain agricultural commodities, energy and currencies.
The Partnership had a gain of 1.88% in December. The Partnership had large gains in interest rates, stock indexes, energy and metals; losses were in certain agricultural commodities and currencies.
The Partnership ended the quarter with a gain of 6.76%.
Third Quarter 2008
The third quarter saw volatility in the stock indexes, energy and commodities. The Partnership had losses in energy, certain agricultural commodities, metals and currencies; gains were in the stock indexes.
The Partnership had a loss of 3.45% in July. The Partnership had large losses in certain agricultural commodities, followed by losses in energy, metals currencies; gains were in the stock indexes and interest rates.
The Partnership had a loss of 1.13% in August. The Partnership had losses in metals, energy and certain agricultural commodities; gains were in interest rates, stock indexes and currencies.
The Partnership had a gain of 2.11% in September. The Partnership had losses in interest rates currencies and energy; gains were in the stock indexes, certain agricultural commodities and metals.
The Partnership ended the quarter with a loss of 2.54%.
Page 11
Second Quarter 2008
The second quarter saw volatility in the energy and interest rate sectors. The Partnership had large gains in energy, with smaller gains in metals and certain agricultural commodities; large losses were in interest rates, with small losses in the stock indexes.
The Partnership had a loss of 1.55% in April. The Partnership had large losses in interest rates, followed by smaller losses in stock indexes; gains were in energy, metals, certain agricultural commodities and currencies.
The Partnership had a gain of 0.85% in May. The Partnership had large gains in energy again this month, followed by small gains in metals, currencies and certain agricultural commodities; large losses were in interest rates with smaller losses in stock indexes.
The Partnership had a gain of 0.35% in June. The Partnership had gains in certain agricultural commodities, energy and stock indexes; losses were in metals, interest rates and currencies.
The Partnership ended the quarter with a loss of 0.36%.
First Quarter 2008
The Partnership had large gains in interest rates, caused by the drop in interest rates by the Federal Reserve throughout the quarter. Small gains were also made in energy, currencies and certain agricultural commodities. The Partnership saw large losses in metals followed by small losses in the equity indexes.
The Partnership had a loss of 0.51% in January. The Partnership had large losses in metals and stock indexes; losses were mostly offset by large gains in interest rates with smaller gains in certain agricultural commodities and currencies.
The Partnership had a gain of 3.27% in February. The Partnership had large gains in interest rates, followed by gains in certain agricultural commodities, energy and currencies; losses were in metals and the stock indexes.
The Partnership had a loss of 1.13% in March. The Partnership had gains in energy, currencies, interest rates and metals; losses were in stock indexes and certain agricultural commodities.
The Partnership ended the quarter with a gain of 1.59%.
(d) Off-Balance Sheet Arrangements. 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 Partnership trades in futures and other commodity interest contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, the Partnership faces the market risk that these 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 commodity interest positions of the Partnership at the same time, and if the Partnership were unable to offset positions, the Partnership could lose all of its assets and the limited partners would realize a 100% loss. The Partnership minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 25%. All positions of the Partnership are valued each day on a mark-to-market basis.
In addition to market risk, in entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Partnership. The counterparty for futures and options on futures contracts traded in the United States and on most non-U.S. futures exchanges is the clearing organization associated with such exchange. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting
Page 12
from the non-performance by one of their members and, as such, should significantly reduce this credit risk.
In cases where the clearing organization is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward contracts, over-the-counter options contracts or swap contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a central clearing organization backed by a group of financial institutions. As a result, there likely will be greater counterparty credit risk in these transactions. The Partnership trades only with those counterparties that it believes to be creditworthy. Nonetheless, the clearing member, clearing organization or other counterparty to these transactions may not be able to meet its obligations to the Partnership, in which case the Partnership could suffer significant losses on these contracts.
In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.
(e) Contractual Obligations. None.
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not applicable.
Item 8.
|
Financial Statements and Supplementary Data.
|
Financial statements meeting the requirements of Regulation S-X are listed following this report.
Because the Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1), the supplementary financial information required by Item 302 of Regulation S-K is not applicable.
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
|
None.
|
Item 9A(T).
|
Controls and Procedures.
|
The General Partner, with the participation of the General Partner’s President and Chief Financial Officer has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the General Partner’s internal controls with respect to the Partnership or in other factors applicable to the Partnership that could materially affect these controls subsequent to the date of their evaluation.
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.
Page 13
There were no changes in the General Partner’s internal control over financial reporting during the period ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The General Partner is responsible for establishing and maintaining adequate internal control over the financial reporting of the Partnership. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, 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 U.S. 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 assets of the Partnership;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements of the Partnership in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the General Partner; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on its 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.
The management of the General Partner assessed the effectiveness of its internal control over financial reporting with respect to the Partnership as of December 31, 2009. 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, 2009, the General Partner’s internal control over financial reporting with respect to the Partnership is effective based on those criteria.
This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’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, Executive Officers and Corporate Governance.
|
The Partnership is a limited partnership and therefore does not have any directors or executive officers. The Partnership’s General Partner, ProFutures, Inc., administers and manages the affairs of the Partnership.
ProFutures, Inc. has adopted a code of ethics that applies to the Partnership and its affiliates as well as the executive officers of the General Partner. A copy of the code of ethics may be obtained at no charge by
Page 14
written request to the corporate secretary of ProFutures, Inc., 11719 Bee Cave Road, Suite 200, Austin, Texas 78738.
The Board of Directors of ProFutures, Inc., in its capacity as the audit committee for the Partnership, has determined that Debi B. Halbert qualifies as an “audit committee financial expert” in accordance with the applicable rules and regulations of the Securities and Exchange Commission. She is not independent of management.
Item 11.
|
Executive Compensation.
|
As discussed above, the Partnership does not have any officers, directors or employees. The General Partner received monthly management fees which aggregated $633,652 for 2009.
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
(a) As of December 31, 2009, a total of 5,409 non-restricted Units were issued and outstanding, representing 1 General Partner and 377 Limited Partners, of which 38 non-restricted Units were redeemed in January 2010. As of February 28, 2010, a total of 5,321 non-restricted Units were issued and outstanding, representing 1 General Partner and 370 Limited Partners. The Partnership knows of no one person who owns beneficially more than 5% of the Units of Limited Partnership Interest.
(b) The General Partner and its principals owned 184 non-restricted Units as of December 31, 2009, having an aggregate value of $464,548, which is approximately 3.4% of the Net Asset Value of the Partnership. As of February 28, 2010, the General Partner and its principals owned 184 non-restricted Units.
|
(c)
|
Changes in control. None have occurred and none are expected.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
The Partnership’s Prospectus, dated July 31, 1994, Pages 16-18, which is incorporated herein by reference, contains information concerning the relationships and transactions between the General Partner, the Clearing Broker and the Partnership.
Item 14.
|
Principal Accounting Fees and Services.
|
McGladrey & Pullen, LLP, as the Partnership’s independent registered public accountant for the years 2009 and 2008, billed the Partnership aggregate fees for professional services rendered to the Partnership for the last two years as follows:
2009
|
2008
|
||||
Audit Fees
|
$
|
84,500
|
$
|
63,500
|
|
Audit fees relate to the annual audit, quarterly reviews, and services normally provided by the independent accountant in connection with statutory and regulatory filings.
|
Audit-Related Fees. McGladrey & Pullen, LLP did not have any audit-related fees in 2009 or 2008.
Tax Fees. McGladrey & Pullen, LLP did not have any fees related to tax compliance, tax advice, and tax planning services for the Partnership in 2009 or in 2008.
Page 15
The Board of Directors of ProFutures, Inc., in its capacity as the audit committee for the Partnership, approved all of the services described above. The audit committee has determined that the payments made to its independent accountant for services during 2009 and 2008 are compatible with maintaining such auditor’s independence.
The audit committee explicitly pre-approves all audit and non-audit services and all engagement fees and terms, except as otherwise permitted by regulation.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
|
(a)
|
Financial Statements.
|
The following financial statements of the Partnership are included with the 2009 Report of Independent Registered Public Accounting Firm.
Report of Independent Registered Public Accounting Firm
Statements of Financial Condition
Condensed Schedules of Investments
Statements of Operations
Statements of Changes in Partners’ Capital
Statements of Cash Flows
Notes to Financial Statements
Pursuant to Rule 3-09 of Regulation S-X, the following financial statements for Winton Futures Fund, L.P. (US) are included herewith along with its 2009 Report of Independent Registered Public Accounting Firm.
Winton Futures Fund, L.P. (US)
Report of Independent Registered Public Accounting Firm
Statements of Financial Condition
Condensed Schedules of Investments
Statements of Operations
Statements of Changes in Partners’ Capital
Notes to Financial Statements
|
(b)
|
Exhibits.
|
*1.1
|
Form of Selling Agreement between the Partnership and ProFutures Financial Group, Inc.
|
*1.2
|
Form of Additional Selling Agents Agreement between ProFutures Financial Group, Inc. and certain Additional Selling Agents.
|
*3.1
|
Agreement of Limited Partnership (attached to the Prospectus as Exhibit A).
|
*3.2
|
Subscription Agreement and Power of Attorney (attached to the Prospectus as Exhibit B).
|
*3.3
|
Request for Redemption Form (attached to the Prospectus as Exhibit C).
|
*5.1
|
Opinion of Counsel as to the legality of the Units.
|
Page 16
*8.1
|
Tax Opinion of Counsel.
|
10.4
|
Form of Amended and Restated Consulting Agreement between the Registrant and Altegris Investments, Inc.
|
10.6
|
Form of Stock Subscription Agreement by and between Man Financial Inc. (now MF Global Inc.) and ProFutures, Inc.
|
31.01
|
Certification of Gary D. Halbert, President, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
31.02
|
Certification of Debi B. Halbert, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
32.01
|
Certification of Gary D. Halbert, President, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
32.02
|
Certification of Debi B. Halbert, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
|
(c)
|
Financial Statement Schedules.
|
|
Not applicable or information included in the financial statements.
|
_________________________________
*The foregoing forms of exhibits were filed in the April 6, 1987 Registration Statement No. 33-13008 and/or Post-Effective Amendment No. 1 thereto filed March 11, 1988; and/or the June 5, 1991 Registration Statement No. 33-41073, and/or Pre-Effective Amendment No. 1 thereto filed August 8, 1991 and/or Post-Effective Amendment No. 1 thereto filed March 26, 1992; and/or the October 14, 1992 Registration Statement No. 33-53324, and/or the November 17, 1992 Pre-effective Amendment No. 1 thereto and/or the July 2, 1993 Registration Statement No. 33-65596, and/or the Pre-Effective Amendment No. 1 thereto filed August 16, 1993, and Supplement dated December 3, 1993, Post-Effective Amendment No. 2 thereto filed June 30, 1994 and Supplement dated January 31, 1995, and/or Post-Effective Amendment No. 3 dated June 23 1995; and/or Form 10-K for the year ended 2001; and/or Form 10-Q for the quarter ended June 30, 2002. Accordingly, such exhibits are incorporated herein by reference and notified herewith.
Page 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PROFUTURES DIVERSIFIED FUND, L.P.
|
|||
(Partnership)
|
|||
April 15, 2010
|
By /s/ GARY D. HALBERT
|
||
Date
|
Gary D. Halbert, President and Director
|
||
ProFutures, Inc.
|
|||
General Partner
|
|||
April 15, 2010
|
By /s/ DEBI B. HALBERT
|
||
Date
|
Debi B. Halbert, Chief Financial Officer,
|
||
Treasurer and Director
|
|||
ProFutures, Inc.
|
|||
General Partner
|
|||
Page 18
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
April 15, 2010
|
By /s/ GARY D. HALBERT
|
||
Date
|
Gary D. Halbert, President and Director
|
||
ProFutures, Inc.
|
|||
General Partner
|
|||
April 15, 2010
|
By /s/ DEBI B. HALBERT
|
||
Date
|
Debi B. Halbert, Chief Financial Officer,
|
||
Treasurer and Director
|
|||
ProFutures, Inc.
|
|||
General Partner
|
|||
Page 19
PROFUTURES DIVERSIFIED FUND, L.P.
ANNUAL REPORT
December 31, 2009
F-1
PROFUTURES DIVERSIFIED FUND, L.P.
______________________
TABLE OF CONTENTS
______________________
PAGES | |
Report of Independent Registered Public Accounting Firm | F-3 |
Financial Statements | |
Statements of Financial Condition | F-4 |
Condensed Schedules of Investments | F-5 – F-9 |
Statements of Operations | F-10 –F- 11 |
Statements of Changes in Partners’ Capital (Net Asset Value) | F-12 |
Statements of Cash Flows | F-13 |
Notes to Financial Statements | F-14 – F-31 |
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
ProFutures Diversified Fund, L.P.
We have audited the accompanying statements of financial condition, including the condensed schedules of investments, of ProFutures Diversified Fund, L.P. (the Partnership) as of December 31, 2009 and 2008 and the related statements of operations, changes in partners’ capital (net asset value) and cash flows for each of the two years in the period ended December 31, 2009. 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ProFutures Diversified Fund, L.P. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
We were not engaged to examine management’s assessment of the effectiveness of ProFutures Diversified Fund L.P.’s internal control over financial reporting as of December 31, 2009, included in the accompanying management’s annual report on internal controls over financial reporting and, accordingly, we do not express an opinion thereon.
/s/McGladrey & Pullen, LLP
Chicago, Illinois
April 15, 2010
F-3
PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 2009 and 2008
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Equity in broker trading accounts
|
||||||||
Cash
|
$ | 4,181,743 | $ | 6,035,775 | ||||
Net unrealized gain (loss) on open futures contracts
|
267,330 | 289,265 | ||||||
Deposits with broker
|
4,449,073 | 6,325,040 | ||||||
Cash
|
577 | 3,533 | ||||||
Investment in other commodity pools
|
9,275,174 | 12,583,933 | ||||||
Redemption receivable from other commodity pools
|
600,000 | 1,315,742 | ||||||
Total assets
|
$ | 14,324,824 | $ | 20,228,248 | ||||
LIABILITIES
|
||||||||
Accounts payable
|
$ | 43,635 | $ | 40,823 | ||||
Commissions and other trading fees payable
|
1,524 | 1,576 | ||||||
Incentive fee payable
|
0 | 185,497 | ||||||
Management fees payable (includes $44,594 and
|
||||||||
$129,324 payable to the General Partner at
|
||||||||
December 31, 2009 and 2008, respectively)
|
70,642 | 156,423 | ||||||
Redemptions payable
|
532,984 | 342,900 | ||||||
Total liabilities
|
648,785 | 727,219 | ||||||
PARTNER’S CAPITAL (Net Asset Value)
|
||||||||
Partners’ Capital (Non-restricted units):
|
||||||||
General Partner – 184 and 173 units outstanding
|
||||||||
at December 31, 2009 and 2008, respectively
|
464,548 | 543,779 | ||||||
Limited Partners – 5,225 and 5,686 units outstanding
|
||||||||
at December 31, 2009 and 2008, respectively
|
13,211,491 | 17,851,493 | ||||||
Partners’ Capital (Side pocket/restricted units):
|
||||||||
General Partner – 0 and 12 units outstanding
|
||||||||
at December 31, 2009 and 2008, respectively
|
0 | 32,232 | ||||||
Limited Partners – 0 and 403 units outstanding
|
||||||||
at December 31, 2009 and 2008, respectively
|
0 | 1,073,525 | ||||||
Total partners’ capital (Net Asset Value)
|
13,676,039 | 19,501,029 | ||||||
$ | 14,324,824 | $ | 20,228,248 | |||||
See accompanying notes.
F-4
PROFUTURES DIVERSIFIED FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS
December 31, 2009 and 2008
_______________
2009
|
2008
|
Fair Value
|
% of Net Asset Value
|
Fair Value
|
% of Net Asset Value
|
|||||||||||||
LONG FUTURES CONTRACTS(1)
|
||||||||||||||||
Description
|
||||||||||||||||
U.S.
|
||||||||||||||||
Agricultural
|
$ | 138,381 | 1.01 | % | $ | 67,037 | 0.34 | % | ||||||||
Currency
|
42,046 | 0.31 | % | 0 | 0.00 | % | ||||||||||
Energy
|
1,740 | 0.01 | % | 20,667 | 0.10 | % | ||||||||||
Interest rate
|
(716 | ) | (0.01 | )% | 188,883 | 0.97 | % | |||||||||
Metal
|
7,675 | 0.06 | % | 0 | 0.00 | % | ||||||||||
Stock index
|
6,475 | 0.05 | % | 33,545 | 0.17 | % | ||||||||||
Total U.S. long futures contracts
|
$ | 195,601 | 1.43 | % | $ | 310,132 | 1.58 | % | ||||||||
Foreign
|
||||||||||||||||
Agricultural
|
$ | 15,597 | 0.11 | % | $ | 1,226 | 0.01 | % | ||||||||
Interest rate
|
(34,360 | ) | (0.25 | )% | 18,911 | 0.10 | % | |||||||||
Stock index
|
14,396 | 0.11 | % | 0 | 0.00 | % | ||||||||||
Total foreign long futures contracts | $ | (4,367 | ) | (0.03 | )% | $ | 20,137 | 0.11 | % | |||||||
SHORT FUTURES CONTRACTS(1)
|
||||||||||||||||
Description
|
||||||||||||||||
U.S.
|
||||||||||||||||
Agricultural
|
$ | (330 | ) | 0.00 | %(2) | $ | (45,260 | ) | (0.23 | )% | ||||||
Currency
|
8,650 | 0.06 | % | 101 | 0.00 | %(2) | ||||||||||
Energy
|
17,045 | 0.12 | % | 6,870 | 0.04 | % | ||||||||||
Interest rate
|
20,125 | 0.15 | % | 20,969 | 0.11 | % | ||||||||||
Stock index
|
26,390 | 0.19 | % | (22,085 | ) | (0.12 | )% | |||||||||
Total U.S short futures contracts
|
$ | 71,880 | 0.52 | % | $ | (39,405 | ) | (0.20 | )% | |||||||
Foreign
|
||||||||||||||||
Interest rate
|
$ | 0 | 0.00 | % | $ | 2,654 | 0.01 | % | ||||||||
Stock index
|
4,216 | 0.03 | % | (4,253 | ) | (0.02 | )% | |||||||||
Total foreign short futures contracts
|
$ | 4,216 | 0.03 | % | $ | (1,599 | ) | (0.01 | )% | |||||||
Total futures contracts
|
$ | 267,330 | 1.95 | % | $ | 289,265 | 1.48 | % |
_________________________
(1)
|
No individual futures contract position constitutes greater than 5% of the Partnership’s Net Asset Value at December 31, 2009 or 2008. Accordingly, the number of contracts and expiration dates are not presented.
|
(2)
|
Represents less than 0.01% of the Partnership’s Net Asset Value.
|
See accompanying notes.
F-5
PROFUTURES DIVERSIFIED FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)
December 31, 2009 and 2008
_______________
2009
|
2008
|
|||||||||||||||
Fair
Value
|
% of Net
Asset Value
|
Fair
Value
|
% of Net
Asset Value
|
|||||||||||||
INVESTMENTS IN OTHER COMMODITY POOLS
|
||||||||||||||||
SHK Diversified LLC(1)
|
||||||||||||||||
Investment Objective
|
||||||||||||||||
To achieve capital appreciation by trading U.S. and
Non U.S. futures and forward currency contracts
|
$ | 0 | 0.00 | % | $ | 1,315,743 | 6.75 | % | ||||||||
Valhalla Synergy Fund LLC
|
||||||||||||||||
Investment Objective
|
||||||||||||||||
To achieve capital appreciation by trading U.S. and
Non U.S. futures and forward currency contracts
|
||||||||||||||||
Redemption Provisions
|
||||||||||||||||
Quarterly, with 45 days notice
|
2,097,074 | 15.33 | % | 2,740,835 | 14.05 | % | ||||||||||
Winton Futures Fund, L.P. (US) – Institutional Interests(2)
|
||||||||||||||||
Investment Objective
|
||||||||||||||||
To achieve capital appreciation by trading U.S. and
Non U.S. futures and forward currency contracts
|
||||||||||||||||
Redemption Provisions
|
||||||||||||||||
Monthly, with 15 days notice
|
7,178,100 | 52.49 | % | 8,527,355 | 43.73 | % | ||||||||||
Total investments in other commodity pools
|
$ | 9,275,174 | 67.82 | % | $ | 12,583,933 | 64.53 | % |
(1)
|
As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions from this fund. This action was taken by the managing member due to a decline in the liquidity of the markets traded by this fund combined with a significant number of requests for redemptions from this fund. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, the managing member of SHK distributed approximately half of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009.
|
(2)
|
The General Partner of Winton Futures Fund, L.P. (US) is Altegris Portfolio Management, Inc., an affiliate of Altegris Investments, Inc.
|
See accompanying notes.
F-6
PROFUTURES DIVERSIFIED FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)
December 31, 2009 and 2008
_______________
Proportional Share of Investments of Other Commodity Pools as of December 31, 2009(1)
|
||||
Description
|
Investment Objective
|
Redemption Provisions
|
Fair
Value
|
% of Net
Asset Value
|
Valhalla Synergy
Master Fund Ltd.
|
To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.
|
Quarterly - with
no minimum
notice period
|
$2,066,615
|
15.11%
|
U.S. Government Agency Bonds and Notes
|
||||
Face
Value
|
Description
|
Range of
Maturity Dates
|
Fair
Value
|
% of Net
Asset Value
|
$1,177,398
|
Federal Home Loan Bank (1.05 – 1.50%)
|
08/2010 to 12/2011
|
$1,180,073
|
8.63%
|
$1,061,817
|
Federal National Mortgage Association
(1.20 – 2.00%)
|
07/2010 to 12/2011
|
$1,063,867
|
7.78%
|
Open Long and Short Futures Contracts
|
||||
No. of
Contracts
|
Description
|
Range of
Expiration Dates
|
Fair
Value
|
% of Net
Asset Value
|
Long Futures Contracts
|
||||
U.S.
Metals
|
||||
142
|
Aluminum
|
01/2010 to 12/2011
|
$2,375,053
|
17.37%
|
244
|
Copper
|
01/2010 to 12/2011
|
$11,279,002
|
82.47%
|
Short Futures Contracts
|
||||
U.S.
Metals
|
||||
160
|
Aluminum
|
01/2010 to 12/2011
|
$(2,572,554)
|
(18.81)%
|
284
|
Copper
|
01/2010 to 12/2011
|
$(11,679,752)
|
(85.40)%
|
Purchased Options on Futures Contracts
|
||||
No. of
Contracts
|
Description
|
Expiration Date
|
Fair
Value
|
% of Net
Asset Value
|
U.S.
Metals
|
||||
9
|
Aluminum
|
02/2010
|
$42,523
|
0.31%
|
4
|
Copper
|
02/2010
|
$50,854
|
0.37%
|
Written Options on Futures Contracts
|
||||
No. of
Contracts
|
Description
|
Expiration Date
|
Fair
Value
|
% of Net
Asset Value
|
U.S.
Metals
|
||||
9
|
Aluminum
|
02/2010
|
$(39,157)
|
(0.29)%
|
4
|
Copper
|
02/2010
|
$(46,121)
|
(0.34)%
|
Physical Inventory
|
||||
Description
|
Fair
Value
|
% of Net
Asset Value
|
||
Metals
|
||||
Aluminum
|
$983,804
|
7.19%
|
(1)
|
Represents the Partnership’s proportional share of other commodity pool’s individual underlying investments and open futures contracts and options on futures contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2009. In certain situations, open futures contracts and options on futures contracts that are less than 5% of the Partnership’s Net Asset Value at December 31, 2009 may be presented to better indicate the Partnership’s net exposure to a particular underlying commodity.
|
See accompanying notes.
F-7
PROFUTURES DIVERSIFIED FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)
December 31, 2009 and 2008
_______________
Proportional Share of Investments of Other Commodity Pools as of December 31, 2008(1)
Description
|
Investment Objective
|
Redemption Provisions
|
Fair
Value
|
% of Net
Asset Value
|
|
Valhalla Synergy
Master Fund Ltd.
|
To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.
|
Monthly – with
30 days written notice
|
$ 2,734, 502
|
14.02%
|
|
Money Market Mutual Fund Investments
|
|||||
Shares
|
Description
|
Cost
|
Fair
Value
|
% of Net
Asset Value
|
|
1,121,826
|
UBS Select Prime Institutional Fund
|
$ 1,121,826
|
$ 1,121,826
|
5.75%
|
|
U.S. Government Agency Bonds and Notes
|
|||||
Face
Value
|
Description
|
Range of
Maturity Dates
|
Fair
Value
|
% of Net
Asset Value
|
|
$1,278,210
|
Federal Home Loan Bank (0.03 – 4.35%)
|
01/2009 to 12/2010
|
$ 1,281,568
|
6.57%
|
|
Open Long and Short Futures Contracts
|
|||||
No. of
Contracts
|
Description
|
Range of
Expiration Dates
|
Fair
Value
|
% of Net
Asset Value
|
|
Long Futures Contracts
|
|||||
U.S.
|
|||||
Metals
|
|||||
3
|
Copper
|
01/2009 to 5/2009
|
$ 9,130
|
0.05%
|
|
519
|
Gold
|
04/2009 to 12/2010
|
$ 1,747,460
|
8.96%
|
|
88
|
Silver
|
05/2009 to 07/2011
|
$ (593,490)
|
(3.04)%
|
|
Short Futures Contracts
|
|||||
U.S.
Metals
|
|||||
9
|
Copper
|
02/2009 to 5/2009
|
$ (65,331)
|
(0.34)%
|
|
519
|
Gold
|
02/2009 to 6/2012
|
$ (2,537,283)
|
(13.01)%
|
|
88
|
Silver
|
03/2009 to 12/2011
|
$ (75,238)
|
(0.39)%
|
|
Open Long and Short Forward Contracts
|
|||||
No. of
Contracts
|
Description
|
Range of
Expiration Dates
|
Fair
Value
|
% of Net
Asset Value
|
|
Long Forward Contracts
|
|||||
U.S.
Metals
|
|||||
394
|
Aluminum
|
01/2009 to 12/2012
|
$ 5,470,495
|
28.05%
|
|
121
|
Copper
|
01/2009 to 12/2011
|
$ 4,836,078
|
24.80%
|
|
Short Forward Contracts
|
|||||
U.S.
Metals
|
|||||
349
|
Aluminum
|
01/2009 to 12/2012
|
$(4,626,265)
|
(23.72)%
|
|
114
|
Copper
|
01/2009 to 12/2011
|
$(4,446,044)
|
(22.80)%
|
|
(1) Represents the Partnership’s proportional share of other commodity pool’s individual underlying investments and open futures contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations, open futures contracts that are less than 5% of the Partnership’s Net Asset Value at December 31, 2008 may be presented to better indicate the Partnership’s net exposure to a particular underlying commodity.
|
See accompanying notes.
F-8
PROFUTURES DIVERSIFIED FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)
December 31, 2009 and 2008
_______________
Proportional Share of Investments of Other Commodity Pools as of December 31, 2008 (continued)(1)
Purchased Options on Futures Contracts
No. of
Contracts
|
Description
|
Range of
Expiration Dates
|
Fair
Value
|
% of Net
Asset Value
|
14
|
U.S.
Metals
Aluminum
|
01/2009 to 12/2011
|
$126,957
|
0.65%
|
14
|
Copper
|
01/2009 to 12/2010
|
$235,909
|
1.21%
|
Written Options on Futures Contracts
|
||||
No. of
Contracts
|
Description
|
Range of
Expiration Dates
|
Fair
Value
|
% of Net
Asset Value
|
29
|
U.S.
Metals
Aluminum
|
01/2009 to 12/2011
|
$(105,759)
|
(0.54)%
|
14
|
Copper
|
01/2009 to 12/2010
|
$(346,786)
|
(1.78)%
|
Physical Inventory | ||||
|
Description
|
Fair
Value
|
% of Net
Asset Value
|
|
Metals
Aluminum
|
$32,010
|
0.16%
|
||
Copper
|
$1,639,383
|
8.41%
|
(1)
|
Represents the Partnership’s proportional share of other commodity pool’s individual underlying investments and open futures contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations, open futures contracts that are less than 5% of the Partnership’s Net Asset Value at December 31, 2008 may be presented to better indicate the Partnership’s net exposure to a particular underlying commodity
|
See accompanying notes.
F-9
PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2009 and 2008
________________
2009
Non-restricted
|
2009
Side pocket/ restricted
|
2009
Total
|
||||||||||
TRADING AND INVESTING GAINS (LOSSES):
|
||||||||||||
Net gain (loss) from futures trading
|
||||||||||||
Realized
|
$ | (1,217,351 | ) | $ | 0 | $ | (1,217,351 | ) | ||||
Change in unrealized
|
(21,935 | ) | 0 | (21,935 | ) | |||||||
Brokerage commissions
|
(216,068 | ) | 0 | (216,068 | ) | |||||||
Gain (loss) from futures and options
on futures trading
|
(1,455,354 | ) | 0 | (1,455,354 | ) | |||||||
Income (loss) from investments in other
commodity pools
|
(848,016 | ) | 19,515 | (828,501 | ) | |||||||
Total trading and investing gains (losses)
|
(2,303,370 | ) | 19,515 | (2,283,855 | ) | |||||||
NET INVESTMENT INCOME (LOSS):
|
||||||||||||
Income
|
||||||||||||
Interest income
|
1,230 | 0 | 1,230 | |||||||||
Expenses
|
||||||||||||
Incentive fees
|
136,617 | 0 | 136,617 | |||||||||
Management fees (includes $633,652 charged by the
General Partner)
|
846,564 | 7,714 | 854,278 | |||||||||
Operating Expenses
|
390,812 | 3,707 | 394,519 | |||||||||
Total expenses
|
1,373,993 | 11,421 | 1,385,414 | |||||||||
Net investment income (loss)
|
(1,372,763 | ) | (11,421 | ) | (1,384,184 | ) | ||||||
NET INCOME (LOSS)
|
$ | (3,676,133 | ) | $ | 8,094 | $ | (3,668,039 | ) | ||||
NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT
|
||||||||||||
(based on weighted average number of units outstanding
during the year of 5,962 and 462, respectively)
|
$ | (616.55 | ) | $ | 17.52 | N/A | (1) | |||||
INCREASE (DECREASE) IN NET VALUE
PER GENERAL AND LIMITED PARTNER UNIT
|
$ | (611.25 | ) | $ | 17.54 | N/A | (1) |
(1)
|
A total net income (loss) per general and limited partner Unit and a total for the increase (decrease) in Net Asset Value per general and limited partner Unit are not presented as the amounts are instead shown for each separate class of Units.
|
See accompanying notes.
F-10
PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF OPERATIONS (CONTINUED)
For the Years Ended December 31, 2009 and 2008
_______________
2008
Non-restricted
|
2008
Side pocket/ restricted
|
2008
Total
|
||||||||||
TRADING AND INVESTING GAINS (LOSSES):
|
||||||||||||
Net gain (loss) from futures trading
|
||||||||||||
Realized
|
$ | 1,061,006 | $ | 0 | $ | 1,061,006 | ||||||
Change in unrealized
|
283,530 | 0 | 283,530 | |||||||||
Brokerage commissions
|
(116,150 | ) | 0 | (116,150 | ) | |||||||
Gain (loss) from futures and options
on futures trading
|
1,228,386 | 0 | 1,228,386 | |||||||||
Income (loss) from investments in other
commodity pools
|
1,452,633 | (104,924 | ) | 1,347,709 | ||||||||
Total trading and investing gains (losses)
|
2,681,019 | (104,924 | ) | 2,576,095 | ||||||||
NET INVESTMENT INCOME (LOSS):
|
||||||||||||
Income
|
||||||||||||
Interest income
|
37,120 | 0 | 37,120 | |||||||||
Expenses
|
||||||||||||
Incentive fees
|
383,650 | 0 | 383,650 | |||||||||
Management fees (includes $683,889 charged by the
General Partner)
|
796,035 | 74,671 | 870,706 | |||||||||
Operating Expenses
|
344,501 | 96,860 | 441,361 | |||||||||
Total expenses
|
1,524,186 | 171,531 | 1,695,717 | |||||||||
General Partner management fees waived
|
(77,739 | ) | 0 | (77,739 | ) | |||||||
Net expenses
|
1,446,447 | 171,531 | 1,617,978 | |||||||||
Net investment income (loss)
|
(1,409,327 | ) | (171,531 | ) | (1,580,858 | ) | ||||||
NET INCOME (LOSS)
|
$ | 1,271,692 | $ | (276,455 | ) | $ | 995,237 | |||||
NET INCOME (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
|
||||||||||||
(based on weighted average number of units outstanding
during the year of 6,189 and 924, respectively)
|
$ | 205.48 | $ | (299.19 | ) | N/A | (1) | |||||
INCREASE (DECREASE) IN NET VALUE
PER GENERAL AND LIMITED PARTNER UNIT
|
$ | 223.08 | $ | (299.36 | ) | N/A | (1) |
(1)
|
A total net income (loss) per general and limited partner Unit and a total for the increase (decrease) in Net Asset Value per general and limited partner Unit are not presented as the amounts are instead shown for each separate class of Units.
|
See accompanying notes.
F-11
PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 2009 and 2008
_______________
Total Number
|
Partners’ Capital
|
|||||||||||||||
Non-restricted units
|
of Units
|
General
|
Limited
|
Total
|
||||||||||||
Balances at
|
||||||||||||||||
December 31, 2007
|
7,345 | $ | 545,791 | $ | 20,878,036 | $ | 21,423,827 | |||||||||
Transfer to side pocket/restricted
|
(923 | ) | (71,709 | ) | (2,664,700 | ) | (2,736,409 | ) | ||||||||
Net income for the year
|
||||||||||||||||
ended December 31, 2008
|
37,465 | 1,234,227 | 1,271,692 | |||||||||||||
Redemptions
|
(916 | ) | 0 | (2,671,425 | ) | (2,671,425 | ) | |||||||||
Transfer from side pocket/restricted(3)
|
353 | 32,232 | 1,075,355 | 1,107,587 | ||||||||||||
Balances at
|
||||||||||||||||
December 31, 2008
|
5,859 | 543,779 | 17,851,493 | 18,395,272 | ||||||||||||
Net (loss) for the year
|
||||||||||||||||
ended December 31, 2009
|
(111,675 | ) | (3,564,458 | ) | (3,676,133 | ) | ||||||||||
Redemptions
|
(811 | ) | 0 | (2,153,879 | ) | (2,153,879 | ) | |||||||||
Transfer from side pocket/restricted(4)
|
361 | 32,444 | 1,078,335 | 1,110,779 | ||||||||||||
Balances at
|
||||||||||||||||
December 31, 2009
|
5,409 | $ | 464,548 | 13,211,491 | $ | 13,676,039 | ||||||||||
Side pocket/restricted units
|
||||||||||||||||
Balances at
|
||||||||||||||||
December 31, 2007
|
0 | $ | 0 | $ | 0 | $ | 0 | |||||||||
Transfer from non-restricted
|
923 | 71,709 | 2,664,700 | 2,736,409 | ||||||||||||
Net (loss) for the year
|
||||||||||||||||
ended December 31, 2008
|
(7,245 | ) | (269,210 | ) | (276,455 | ) | ||||||||||
Redemptions(1)
|
(92 | ) | 0 | (246,610 | ) | (246,610 | ) | |||||||||
Transfer to non-restricted(3)
|
(416 | ) | (32,232 | ) | (1,075,355 | ) | (1,107,587 | ) | ||||||||
Balances at
|
||||||||||||||||
December 31, 2008
|
415 | 32,232 | 1,073,525 | 1,105,757 | ||||||||||||
Net income for the year
|
||||||||||||||||
ended December 31, 2009
|
212 | 7,882 | 8,094 | |||||||||||||
Redemptions(2)
|
(1 | ) | 0 | (3,072 | ) | (3,072 | ) | |||||||||
Transfer to non-restricted(4)
|
(414 | ) | (32,444 | ) | (1,078,335 | ) | (1,110,779 | ) | ||||||||
Balances at
|
||||||||||||||||
December 31, 2009(5)
|
0 | $ | 0 | $ | 0 | $ | 0 | |||||||||
Total Partners’ Capital (Net Value Asset) at
|
||||||||||||||||
December 31, 2007
|
$ | 545,791 | $ | 20,878,036 | $ | 21,423,827 | ||||||||||
Total Partners’ Capital (Net Asset Value) at
|
||||||||||||||||
December 31, 2008
|
$ | 576,011 | $ | 18,925,018 | $ | 19,501,029 | ||||||||||
Total Partners’ Capital (Net Asset Value) at
|
||||||||||||||||
December 31, 2009
|
$ | 464,548 | $ | 13,211,491 | $ | 13,676,039 | ||||||||||
Net Asset Value Per Unit
|
|||||||||||||||||||||||
Non-restricted
|
Side pocket/restricted
|
||||||||||||||||||||||
December 31,
|
December 31,
|
||||||||||||||||||||||
2009
|
2008
|
2007
|
2009
|
2008
|
2007
|
||||||||||||||||||
$ | 2,528.61 | $ | 3,139.86 | $ | 2,916.78 | $ | N/A | (5) | $ | 2,663.73 | $ | N/A | |||||||||||
(1)
|
Side pocket/restricted unit redemptions have been recorded in accordance with the Distinguishing Liabilities from Equity Topic of the FASB Codification (formerly SFAS No. 150). Redemptions approved by the General Partner prior to the period end, that are not effective until subsequent periods are recorded in the current period as redemptions payable. Also includes the portion of the December 31, 2008 distribution from SHK Diversified LLC (SHK) related to partners who completely redeemed from the Partnership and did not hold non-restricted units.
|
(2)
|
Represents the portion of the February 28, 2009 distribution from SHK related to partners who completely redeemed from the Partnership and did not hold non-restricted units.
|
(3)
|
As of December 31, 2008, the Partnership recorded a redemption receivable from other commodity pools in the statement of financial condition for proceeds subsequently received in January 2009 from its investment in SHK that is held in side pocket/restricted units. As a result, half of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the December 31, 2008 non-restricted net asset value per unit.
|
(4)
|
Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership's investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009. As a result, the remaining units held in the side pocket/restricted unit class were transferred and converted to non-restricted units at the February 28, 2009 non-restricted net asset value per unit.
|
(5)
|
The side pocket/restricted unit class was terminated effective February 28, 2009. The side pocket/restricted net asset value per unit at February 28, 2009, prior to termination, was $2,681.27.
|
See accompanying notes.
F-12
PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2009 and 2008
_______________
2009
|
2008
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$ | (3,668,039 | ) | $ | 995,237 | |||
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
|
||||||||
Change in unrealized gain (loss) on open futures contracts
|
21,935 | (283,530 | ) | |||||
(Income) Loss from investments in other commodity pools
|
828,501 | (1,347,709 | ) | |||||
Change in operating assets and liabilities
|
||||||||
(Increase) decrease in cash deposits with broker
|
1,854,032 | (4,602,149 | ) | |||||
(Increase) decrease in option premiums paid (received)
|
0 | (34,500 | ) | |||||
Additions to investments in other commodity pools
|
(1,000,000 | ) | (10,690,000 | ) | ||||
Redemptions from other commodity pools
|
4,196,000 | 19,527,493 | ||||||
(Decrease) increase in accounts payable
|
2,812 | (56,719 | ) | |||||
(Decrease) increase in commissions and other
trading fees payable
|
(52 | ) | 1,310 | |||||
(Decrease) increase in incentive fees payable
|
(185,497 | ) | 185,497 | |||||
(Decrease) increase in management fees payable
|
(85,781 | ) | 85,665 | |||||
Net cash provided by (used in) Operating Activities
|
1,963,911 | 3,780,595 | ||||||
FINANCING ACTIVITIES
|
||||||||
Redemptions paid
|
(1,966,867 | ) | (3,780,449 | ) | ||||
Net cash provided by (used in) Financing Activities
|
(1,966,867 | ) | (3,780,449 | ) | ||||
Net cash increase (decrease) for the year
|
(2,956 | ) | 146 | |||||
Cash at beginning of year
|
3,533 | 3,387 | ||||||
Cash at end of year
|
$ | 577 | $ | 3,533 |
See accompanying notes.
F-13
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
_______________
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Description of the Partnership
|
ProFutures Diversified Fund, L.P. (the Partnership) is a Delaware limited partnership, which operates as a commodity investment pool. The Partnership engages in the speculative trading of futures contracts, options on futures contracts, physical commodities, interbank forward currency contracts, options on interbank forward currency contracts, United States (U.S.) Government agency obligations, corporate notes and repurchase agreements, directly and through its investments in other commodity pools. The Partnership closed to investors in 1995 and will terminate at the end of December 2012, at which time the remaining net assets will be distributed.
|
|
Regulation
|
|
As a registrant with the Securities and Exchange Commission, the Partnership is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the U.S. Government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges, futures commission merchants (brokers), and interbank market makers through which the Partnership trades.
|
|
Method of Reporting
|
|
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per Unit is calculated by dividing Net Asset Value by the total number of units outstanding.
|
|
Effective July 1, 2009, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), referred to as FASB ASC or the Codification, became the single source of U.S. generally accepted accounting principles (U.S. GAAP) for interim and annual periods ending after September 15, 2009. Existing accounting standards are incorporated into the Codification and standards not incorporated into the Codification are considered nonauthoritative.
|
|
Use of Estimates
|
|
The preparation of financial statements in conformity with U.S. GAAP 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 the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized.
|
Fair Value of Financial Instruments
|
Substantially all of the Partnership’s assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.
|
F-14
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value of Financial Instruments (Continued)
|
|
Fair value, as defined in the Fair Value Measurements and Disclosures Topic of the Codification, is 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 and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under the Fair Value Measurements and Disclosures Topic of the Codification as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below:
|
|
Level 1.
|
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
|
|
Level 2.
|
Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement.
|
|
Level 3.
|
Inputs are unobservable for the asset or liability.
|
|
The Partnership uses futures contracts as part of its trading activities. The fair values of futures contracts are based upon exchange settlement prices. These contracts are classified as Level 1 of the fair value hierarchy. The fair values of Level 1 financial instruments at December 31, 2009 and 2008, consisted of the following:
|
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Futures contracts | $ | 267,330 | $ | 289,265 | ||||
|
The Partnership’s investments in other commodity pools are reported in the statement of financial condition at fair value. Fair value ordinarily represents the Partnership’s proportionate share of each other commodity pool’s net asset value determined for each commodity pool in accordance with such commodity pool’s valuation policies and as reported by their management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation (generally the net asset value of the commodity pool), based on information reasonably available at the time the valuation is made and that the Partnership believes to be reliable. The Partnership records its proportionate share of other commodity pools’ income or loss in the statement of operations.
|
F-15
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value of Financial Instruments (Continued)
|
|
During September 2009, Accounting Standards Update No. 2009-12 (ASU 2009-12), Fair Value Measurements and Disclosures (Topic 820), Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), was issued by the FASB and is effective for interim and annual periods ending after December 15, 2009. ASU 2009-12 amends the Codification and provides that if the reporting entity has the ability to redeem its investment in another commodity pool at net asset value at the measurement date, the investment shall be categorized as a Level 2 fair value measurement, and if the reporting entity cannot redeem its investment in another commodity pool at net asset value at the measurement date but the investment may be redeemable at a future date, the reporting entity shall consider the length of time until the investment will be redeemable in determining whether it will be categorized as a Level 2 or Level 3 fair value measurement. Accordingly, in accordance with the provisions of ASU 2009-12, effective January 1, 2009, the Partnership’s investments in other commodity pools are categorized as Level 2 fair value measurements. At December 31, 2008, all of the Partnership’s investments in other commodity pools were categorized as Level 3 fair value measurements in accordance with then existing U.S. GAAP.
|
|
The following summarizes the Partnership’s investments in other commodity pools accounted for at fair value at December 31, 2009 and 2008 using the fair value hierarchy:
|
December 31, 2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Investments in other commodity pools
|
$ | 0 | $ | 9,275,174 | $ | 0 | $ | 9,275,174 | ||||||||
December 31, 2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Investments in other commodity pools
|
$ | 0 | $ | 0 | $ | 12,583,933 | $ | 12,583,933 |
|
The following table presents a reconciliation of the activity for the investments in other commodity pools measured at fair value on a recurring basis using significant Level 3 inputs during 2009 and 2008:
|
Balance at January 1, 2008:
|
$ | 16,889,459 | ||
Income from investments in
|
||||
other commodity pools
|
1,347,709 | |||
Additions and redemptions, net
|
(5,653,235 | ) | ||
Transfers in and/or out of Level 3
|
0 | |||
Balance at December 31, 2008:
|
12,583,933 | |||
Reclassification of categorization of level
|
||||
of fair value hierarchy
|
(12,583,933 | ) | ||
Income from investments
|
||||
in other commodity pools
|
0 | |||
Additions and redemptions, net
|
0 | |||
Transfers in and/or out of Level 3
|
0 | |||
Balance at December 31, 2009
|
$ | 0 |
F-16
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
|
Note 1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
Fair Value of Financial Instruments (Continued)
|
|
Income (loss) from investments in other commodity pools includes $780,220 attributable to the change in unrealized gain (loss) on the Partnership’s investments in other commodity pools held at December 31, 2008.
|
|
The amount of income from investments in other commodity pools included in net income (loss) for the year ended December 31, 2008 is reported as income (loss) from investments in other commodity pools as a single amount in the statement of operations, as the Partnership accounts for its investments in other commodity pools pursuant to the equity method of accounting.
|
|
Futures and Forward Currency Contracts
|
|
Transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions on futures contracts and options on futures contracts include other trading fees and are charged to expense when contracts are opened. Fair value of exchange-traded contracts is based upon exchange settlement prices.
|
|
Income Taxes
|
|
The Partnership is not subject to federal income taxes. The Partnership prepares and files calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership’s income, expenses and trading and investing gains or losses. The Partnership has elected an accounting policy to classify interest and penalties, if any, as interest expense. Management has determined there are no material uncertain income tax positions through December 31, 2009. The 2006 through 2008 tax years generally remain subject to examination by U.S. federal and most state tax authorities.
|
|
Foreign Currency Transactions
|
|
The Partnership’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in trading and investing in gains (losses) in the statements of operations.
|
|
Redemptions of Units
|
|
Redemptions payable represent redemptions approved by the General Partner prior to the period end, including those that are not effective until subsequent periods. These redemptions have been recorded as redemptions and redemptions payable, using the period end Net Asset Value per unit, in accordance with the provisions of the Distinguishing Liability from Equity Topic of the Codification. Redemptions that are not effective until subsequent periods are treated as next month’s redemption using the net asset value of the following month end. The change in redemptions payable from the previous reporting period due to change in net asset value is reported in net income and then allocated. Redemptions payable related to side pocket/restricted units at December 31, 2009 and 2008 are $0 and $124,216, respectively.
|
F-17
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
|
Note 1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
Derivative Instruments
|
|
The Partnership’s business is the speculative trading of U.S. and foreign futures contracts and options on U.S. and foreign futures contracts and other commodity-related contracts, (collectively, derivatives) pursuant to the trading and investment methodology of the General Partner. The Partnership also invests in other commodity pools and is indirectly exposed to the speculative trading of U.S. and foreign futures contracts, physical commodities and securities within those other commodity pools. The Partnership does not designate any derivative instruments as hedging instruments under the Derivatives and Hedging Topic of the Codification nor are the derivative instruments used for other risk management purposes. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.
|
|
The following tables summarize quantitative information required by the Derivatives and Hedging Topic of the Codification. The fair value of derivative contracts is presented as an asset if in a net gain position and a liability if in a net loss position. Fair value is presented on a gross basis in the table below even though the derivative contracts qualify for net presentation in the statement of financial condition:
|
Derivatives not designed as hedging instruments as of December 31, 2009: | |||||||||||
Type of Contract
|
Assets Derivatives*
Fair Value
|
Liability Derivatives*
Fair Value
|
Net
|
||||||||
Agricultural contracts
|
$ | 168,857 | $ | (15,209 | ) | $ | 153,648 | ||||
Currency contracts
|
57,146 | (6,450 | ) | 50,696 | |||||||
Energy contracts
|
19,325 | (540 | ) | 18,785 | |||||||
Interest rate contracts
|
24,242 | (39,193 | ) | (14,951 | ) | ||||||
Metal contracts
|
38,200 | (30,525 | ) | 7,675 | |||||||
Stock index contracts
|
52,282 | (805 | ) | 51,477 | |||||||
$ | 360,052 | $ | (92,722 | ) | $ | 267,330 |
|
*
|
The fair values of all asset and liability derivatives, including agricultural, currency, energy, interest rate and stock index contracts, are included in equity in broker trading accounts on the statement of financial condition.
|
Trading Revenue for the
Year Ended December 31, 2009
|
Trading Revenue for the
Year Ended December 31, 2009
|
||||||||
Type of Contract
|
Line Item in
Statement of
Operations
|
||||||||
Agricultural contracts
|
$ | (452,829 | ) |
Realized
|
$ | (1,217,351 | ) | ||
Currency contracts
|
(233,198 | ) | |||||||
Energy contracts
|
130,184 |
Change in unrealized
|
(21,935 | ) | |||||
Interest rate contracts
|
(758,852 | ) | |||||||
Metal contracts
|
(56,003 | ) | |||||||
Stock index contracts
|
131,412 | ||||||||
$ | (1,239,286 | ) | $ | (1,239,286 | ) |
|
For the year ended December 31, 2009, the monthly average number of futures contracts bought and sold was approximately 3,300.
|
F-18
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Recently Issued Accounting Pronouncement
The Partnership follows the provisions of the Subsequent Events Topic of the Codification, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The provisions of the Subsequent Events Topic of the Codification were effective for interim and annual periods ending after June 15, 2009. The adoption of this accounting pronouncement did not have a material impact on the Partnership’s financial statements.
Note 2.
|
GENERAL PARTNER
|
The General Partner of the Partnership is ProFutures, Inc., which conducts and manages the business of the Partnership. The Agreement of Limited Partnership requires the General Partner to contribute to the Partnership an amount in the aggregate equal to at least the greater of (i) 3% of the aggregate initial capital contributions of all partners or $100,000, whichever is less, or (ii) 1% of the aggregate initial capital contributions of all partners.
The Agreement of Limited Partnership also requires that the General Partner maintain in the aggregate a net worth at least equal to (i) the lesser of $250,000 or 15% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at less than $2,500,000; and (ii) 10% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at greater than $2,500,000.
ProFutures, Inc. has a callable stock subscription agreement with MF Global Ltd. (MFG), the Partnership’s broker, whereby MFG has subscribed to purchase (up to $7,000,000, subject to conditions set forth in the stock subscription agreement dated October 22, 2004) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner’s net worth requirements.
The Partnership pays the General Partner a monthly management fee of 1/4 of 1% (3% annually) of month-end Net Asset Value. The General Partner receives an additional monthly management fee of .0625% (.75% annually) of the Partnership’s month-end Net Asset Value for consulting services rendered to the Partnership.
Total management fees earned by ProFutures, Inc. for the years ended December 31, 2009 and 2008 were $633,652 and $683,889, respectively. Management fees payable to ProFutures, Inc. as of December 31, 2009 and 2008 were $44,594 and $129,324, respectively. Management fees payable at December 31, 2008 includes $74,672 payable to ProFutures, Inc. related to the side pocket/restricted unit class. This amount was accrued throughout 2008 and was paid in February 2009. During the years ended December 31, 2009 and 2008, the General Partner waived $0 and $77,739, respectively, of its monthly management fee related to the value of the Partnership's net assets invested in ProFutures Strategic Allocation Trust, an affiliated fund also managed by ProFutures, Inc. The General Partner considered this waiver of management fees necessary for the period January 1, 2008 to May 31, 2008 (the date the Partnership fully redeemed from ProFutures Strategic Allocation Trust) given ProFutures, Inc. receives a 2% per annum administration fee from ProFutures Strategic Allocation Trust.
F-19
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 3. CONSULTANTS
|
The Partnership maintains a consulting agreement with Altegris Investments, Inc. (the CTA Consultant) and Altegris Portfolio Management, Inc. (the CPO Consultant), collectively (the Consultants), whereby the Consultants recommend the selection and termination of the Partnership’s trading advisors and other commodity pools and the allocation and reallocation of the Partnership’s assets. The CPO Consultant is the general partner of Winton Futures Fund, L.P. (US). Pursuant to the consulting agreement, the Consultants receive a monthly consulting fee equal to .0208% (.25% annually) of the Partnership’s month-end Net Asset Value (as defined in the Consulting Agreement). Certain net assets of the Partnership invested with managers affiliated with the Consultants are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants. In addition, the net assets of the Partnership invested with a certain commodity trading advisor are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants since the Consultants earn a percentage of such commodity trading advisor’s incentive fee.
|
The consulting fee (included in management fees in the statements of operations) earned by the Consultants for the years ended December 31, 2009 and 2008 totaled $10,119 and $10,683, respectively. The consulting fee payable (included in management fees payable in the statements of financial condition) to the Consultants as of December 31, 2009 and 2008 was $617 and $1,880, respectively. In addition to the monthly consulting fee, the Consultants earn commissions for introducing the Partnership to certain commodity trading advisors and other commodity pools based on the number of trades entered on behalf of the Partnership.
Note 4. COMMODITY TRADING ADVISORS
|
The Partnership has trading advisory contracts with commodity trading advisors to furnish investment management services to the Partnership. These trading advisors typically receive management fees ranging from 0% to 2% annually of Allocated Net Asset Value (as defined in each respective trading advisory agreement). In addition, the commodity trading advisors typically receive quarterly incentive fees ranging from 20% to 25% of Trading Profits (as defined). Total management fees earned by the trading advisors amounted to $210,507 and $98,395 for the years ended December 31, 2009 and 2008, respectively. Total incentive fees earned by the trading advisors amounted to $136,617 and $383,650 for the years ended December 31, 2009 and 2008, respectively.
|
Notional Funding Note: As of December 31, 2009, the Partnership has allocated notional funds to CTAs equal to approximately 51% of the Partnership’s cash and/or other margin - qualified assets. This percentage may be higher or lower at any given time. The management fees paid to a CTA, if any, are a percentage of the nominal account size of the account if an account had been notionally funded. The nominal account size is equal to a specific amount of funds initially allocated to a CTA which increases by profits and decreases by losses in the account, but not by additions to or withdrawals of actual funds from the account. Some, but not all, CTAs are expected to be allocated notional funds, and not all of the CTAs allocated notional funds are expected to be paid management fees. Further, the amount of cash and/or other margin-qualified assets in an account managed by a CTA will vary greatly at various times in the course of the Partnership’s business, depending on the General Partner’s general allocation strategy and pertinent margin requirements for the trading strategies undertaken by a CTA.
F-20
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 5.
|
SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
|
Limited Partners have the right to redeem units as of any month-end upon ten (10) days' prior written notice to the Partnership. Redemptions will be made on the last day of the month for an amount equal to the net asset value per unit, as defined, represented by the units to be redeemed. The right to obtain redemptions is also contingent upon the Partnership's having assets sufficient to discharge its liabilities on the redemption date and may be delayed if the General Partner determines that earlier liquidation of commodity interest positions to meet redemption payments would be detrimental to the Partnership or non-redeeming Limited Partners.
Under certain circumstances, including, but not limited to, the inability to liquidate commodity positions or a delay in payments due the Partnership from commodity brokers, banks, commodity pools or other persons, the Partnership may in turn delay payment to partners requesting redemption of units. In that event, payment for redemption of such units will be made to Limited Partners as soon thereafter as is practicable. As discussed more fully in Note 7, effective April 1, 2008, the General Partner established a side pocket/restricted unit class for the Partnership’s interest in SHK. A partner could not redeem units from the side pocket/restricted unit class until management of SHK distributed proceeds from the Partnership’s investment in SHK to the Partnership. Effective December 31, 2008, SHK distributed half of the Partnership’s investment in SHK to the Partnership. As a result, half of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the December 31, 2008 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units. Effective February 28, 2009, SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership. As a result, all of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the February 28, 2009 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units.
Note 6.
|
DEPOSITS WITH BROKER
|
The Partnership deposits funds with MFG to act as broker, subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such broker. All assets with MFG are subject to being collateralized for any amounts due to MFG to meet margin and other broker or regulatory requirements. The Partnership earns interest income on cash deposited with the broker.
F-21
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 7.
|
|
INVESTMENTS IN OTHER COMMODITY POOLS
|
|
The Partnership invests in other commodity pools, which are subject to the terms of the respective limited partnership agreements and offering memoranda of such other commodity pools, which may, among other things, delay or suspend withdrawal rights under certain circumstances.
|
Summarized information for these investments is as follows:
ProFutures
Strategic
Allocation Trust
|
SHK
Diversified LLC
|
Valhalla
Synergy
Fund LLC
|
Winton
Futures Fund, L.P. (US)
|
Totals
|
||||||||||||||||
Net Asset Value
December 31, 2007
|
$ | 5,495,004 | $ | 3,117,286 | $ | 4,419,668 | $ | 3,857,501 | $ | 16,889,459 | ||||||||||
Additions
|
4,500,000 | 0 | 0 | 6,190,000 | 10,690,000 | |||||||||||||||
Income (loss)
|
567,489 | (385,801 | ) | 421,167 | 744,854 | 1,347,709 | ||||||||||||||
Redemptions
|
(10,562,493 | ) | (1,415,742 | ) | (2,100,000 | ) | (2,265,000 | ) | (16,343,235 | ) | ||||||||||
Net Asset Value
December 31, 2008
|
0 | 1,315,743 | 2,740,835 | 8,527,355 | 12,583,933 | |||||||||||||||
Additions
|
0 | 0 | 0 | 1,000,000 | 1,000,000 | |||||||||||||||
Income (loss)
|
0 | 19,515 | (143,761 | ) | (704,255 | ) | (828,501 | ) | ||||||||||||
Redemptions
|
0 | (1,335,258 | ) | (500,000 | ) | (1,645,000 | ) | (3,480,258 | ) | |||||||||||
Net Asset Value
December 31, 2009
|
$ | 0 | $ | 0 | $ | 2,097,074 | $ | 7,178,100 | $ | 9,275,174 |
ProFutures Strategic Allocation Trust
|
The Partnership’s investment in ProFutures Strategic Allocation Trust (the Trust) is subject to an administration fee, charged by ProFutures, Inc., of 2.00% per annum, monthly management fees, charged by the commodity trading advisors, of 2.00% per annum, and quarterly incentive fees, charged by the commodity trading advisors, of 20% of trading profits. The Partnership fully redeemed from the Trust on May 31, 2008. For the year ended December 31, 2008, the Partnership’s proportionate share of administration fees, management fees and incentive fees charged by the Trust were approximately $77,900, $42,700 and $0, respectively.
|
F-22
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
|
Note 7.
|
INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)
|
|
Condensed financial information for the five month period ended May 31, 2008 is as follows (the Partnership fully redeemed from the Trust as of May 31, 2008):
|
Statement of Operations
Trading and investing gains (losses)
|
Five Months Ended
May 31, 2008
|
|||
Realized
|
$ | (101,694 | ) | |
Change in unrealized
|
456,850 | |||
Brokerage commissions
|
(12,745 | ) | ||
Total trading gains
|
342,411 | |||
Income from investment in Winton Futures Fund, L.P. (US)
|
981,259 | |||
Total trading and investing gains
|
1,323,670 | |||
Net investment income (loss)
|
||||
Interest income
|
47,506 | |||
Expenses
|
||||
Incentive fees
|
0 | |||
Management and other fees
|
217,083 | |||
Operating expenses
|
63,591 | |||
Total expenses
|
280,674 | |||
Net investment (loss)
|
(233,168 | ) | ||
Net income
|
$ | 1,090,502 |
|
Management of the Partnership believes the accounting principles utilized by the Trust are consistent in all material respects with those utilized by the Partnership.
|
SHK Diversified LLC
|
As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions. SHK’s managing member indicated to investors that this action was taken due to a decline in the liquidity of the markets traded by SHK combined with a significant number of requests for redemptions. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, SHK declared for distribution approximately half ($1,315,742) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK declared for distribution the remaining portion ($1,335,258) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on March 16, 2009.
|
|
The Partnership’s investment in SHK is stated at $0 and $1,315,743 at December 31, 2009 and 2008, respectively, and its proportionate share in the earnings (losses) of this investment for the years then ended of $19,515 and $(385,801), respectively, is included in net income (loss) for the years then ended.
|
F-23
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 7.
|
INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)
|
SHK Diversified LLC (Continued)
The General Partner established a side pocket/restricted unit class for the Partnership’s interest in SHK effective April 1, 2008, until such time as these funds could be released and valued with a reasonable degree of certainty. Investor units attributed to SHK were segregated into the side pocket while units not attributed to SHK continued to be available for redemption. Redemptions were paid in cash for the portion of the Partnership’s net assets not attributed to SHK while the net assets attributed to SHK were held in the side pocket. The side pocket/restricted unit class also bore its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and operation. Effective February 28, 2009, the side pocket/restricted unit class was terminated after all proceeds were received from the Partnership’s investment in SHK.
Investors in SHK are charged management fees of 6.00% per annum (in 2008, voluntarily reduced to 3.00% per annum by the managing member of SHK) and a profit share of 25% of trading profits. For the year ended December 31, 2009, the Partnership’s proportionate share of management fees and profit share charged by SHK were approximately $6,700 and $0, respectively. For the year ended December 31, 2008, the Partnership’s proportionate share of management fees and profit share charged by SHK were approximately $81,000 and $0, respectively.
Condensed financial information as of December 31, 2008 and for the period January 1, 2009 to February 28, 2009 and for the year ended December 31, 2008 is as follows:
December 31,
2008
|
||||
Statement of Financial Condition
|
||||
Assets
|
||||
Money market funds
|
$ | 34,078,075 | ||
Equity in broker trading accounts
|
||||
Cash (due to broker)
|
58,214,842 | |||
Unrealized gain (loss) on open contracts
|
(33,879,348 | ) | ||
Deposits with broker
|
58,413,569 | |||
Other assets
|
22,000 | |||
Total assets
|
$ | 58,435,569 | ||
Liabilities
|
||||
Accounts payable
|
$ | 55,534 | ||
Commissions payable
|
54,229 | |||
Management fee payable
|
124,048 | |||
Incentive fee payable
|
4,686 | |||
Redemptions payable
|
29,098,536 | |||
Total liabilities
|
29,337,033 | |||
Total Capital (Net Asset Value)
|
29,098,536 | |||
$ | 58,435,569 | |||
F-24
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 7. INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)
|
SHK Diversified LLC (Continued)
|
Two Months Ended
February 28,
2009
|
For the Year Ended
December 31,
2008
|
|||||||
Statement of Operations
|
||||||||
Trading gains (losses)
|
||||||||
Realized
|
$ | (10,063,882 | ) | $ | 158,094,631 | |||
Change in unrealized
|
10,768,533 | (162,223,165 | ) | |||||
Brokerage commissions
|
(89,581 | ) | (3,565,740 | ) | ||||
Total trading gains (losses)
|
615,070 | (7,694,274 | ) | |||||
Net investment income (loss)
|
||||||||
Interest and dividend income
|
13,459 | 1,206,272 | ||||||
Expenses
|
||||||||
Incentive fees
|
0 | 0 | ||||||
Management and other fees
|
126,078 | 1,531,615 | ||||||
Operating expenses
|
48,631 | 217,444 | ||||||
Total expenses
|
174,709 | 1,749,059 | ||||||
Net investment (loss)
|
(161,250 | ) | (542,787 | ) | ||||
Net income (loss)
|
$ | 453,820 | $ | (8,237,061 | ) |
|
Management of the Partnership believes the accounting policies utilized by SHK are consistent in all material respects with those utilized by the Partnership.
|
|
The Partnership’s investment in SHK represents approximately 0.00% and 4.50% of the investee fund’s net asset value as of December 31, 2009 and 2008, respectively.
|
|
Valhalla Synergy Fund LLC
|
|
Valhalla Synergy Fund LLC invests substantially all of its assets through a “master-feeder” structure into Valhalla Synergy Master Fund Ltd. (the Master Fund), a Cayman Islands exempted company. Valhalla Synergy Fund LLC pays to the manager of the Master Fund a management fee of 2.00% per annum and an annual profit participation allocation of 20% of trading profits. For the years ended December 31, 2009 and 2008, the Partnership’s proportionate share of management fees charged by the Master Fund were approximately $55,000 and $70,000, respectively. For the years ended December 31, 2009 and 2008, the Partnership’s proportionate share of profit allocation charged by the Master Fund were approximately $0 and $105,292, respectively.
|
|
Valhalla Synergy Fund LLC’s condensed financial information primarily consists of their investment in the Master Fund and income allocated from the Master Fund to Valhalla Synergy Fund LLC.
|
|
Valhalla Synergy Fund LLC’s net assets at December 31, 2009 and 2008 are $35,682,748 and $48,707,147, respectively. Total net income (loss) for the years ended December 31, 2009 and 2008 is $(2,144,686) and $6,597,373, respectively.
|
F-25
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
|
Note 7.
|
INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)
|
|
Valhalla Synergy Fund LLC (Continued)
|
|
Management of the Partnership believes the accounting principles utilized by Valhalla Synergy Fund LLC are consistent in all material respects with those utilized by the Partnership.
|
|
The Partnership’s investment in Valhalla Synergy Fund LLC represents approximately 5.88% and 5.63% of the investee fund’s net asset value as of December 31, 2009 and 2008, respectively.
|
|
Winton Futures Fund, L.P. (US) – Institutional Interests
|
|
Institutional Interests of Winton Futures Fund, L.P. (US) (formerly Class B Interests through May 2008) are charged management fees of 1.75% annually and incentive fees of 20% of trading profits. For the years ended December 31, 2009 and 2008, the Partnership’s proportionate share of management fees charged by Winton Futures Fund, L.P. (US) were approximately $147,000 and $90,000, respectively. For the years ended December 31, 2009 and 2008, the Partnership’s proportionate share of incentive fees charged by Winton Futures Fund, L.P. (US) were approximately $0 and $191,000, respectively.
|
|
The CPO Consultant is the General Partner of Winton Futures Fund, L.P. (US).
|
|
Condensed financial information as of December 31, 2009 and 2008 and for the years then ended is as follows:
|
December 31,
2009
|
December 31,
2008
|
|||||||
Statement of Financial Conditions
|
||||||||
Assets
|
||||||||
Equity in Newedge USA, LLC account
|
||||||||
Cash
|
$ | 57,157,995 | $ | 154,396,738 | ||||
Unrealized gain on open commodity futures contracts
|
2,751,248 | 4,174,311 | ||||||
Long options (cost - $31,080 and $0)
|
15,760 | 0 | ||||||
Unrealized gain on open forward contracts
|
3,227 | 0 | ||||||
59,928,230 | 158,571,049 | |||||||
Cash and cash equivalents
|
3,733,271 | 3,384,626 | ||||||
Investment securities at value (cost $469,559,059 and $132,744,996)
|
469,934,981 | 132,860,018 | ||||||
Other assets
|
719,323 | 175,971 | ||||||
Total assets
|
$ | 534,315,805 | $ | 294,991,664 | ||||
Liabilities
|
||||||||
Short options (proceeds – $68,320 and $0)
|
$ | 36,220 | $ | 0 | ||||
Payable for securities purchased
|
0 | 5,000,000 | ||||||
Accounts payable
|
249,209 | 176,744 | ||||||
Commissions payable
|
611,622 | 30,216 | ||||||
Management fee payable
|
822,084 | 314,556 | ||||||
Administrative fee payable
|
77,788 | 16,198 | ||||||
Service fees payable
|
420,136 | 229,428 | ||||||
Incentive fee payable
|
249,171 | 3,053,989 | ||||||
Redemptions payable
|
3,504,884 | 4,043,596 | ||||||
Subscriptions received in advance
|
12,878,915 | 23,079,459 | ||||||
Total liabilities
|
18,850,029 | 35,944,186 | ||||||
Total partners’ capital (Net Asset Value)
|
515,465,776 | 259,047,478 | ||||||
$ | 534,315,805 | $ | 294,991,664 |
F-26
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
|
Note 7.
|
INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)
|
|
Winton Futures Fund, L.P. (US) – Institutional Interests (Continued)
|
For the
|
For the
|
|||||||
Year Ended
|
Year Ended
|
|||||||
December 31,
|
December 31
|
|||||||
2009
|
2008
|
|||||||
Statements of Operations
|
||||||||
Gains (loss) on trading of derivatives contracts
|
||||||||
Realized
|
$ | (15,500,903 | ) | $ | 39,466,146 | |||
Changes in unrealized
|
(1,403,056 | ) | 2,819,778 | |||||
Brokerage commissions
|
(5,636,378 | ) | (499,445 | ) | ||||
Gain (loss) from trading derivatives
|
(22,540,337 | ) | 41,786,479 | ) | ||||
Gain (loss) on trading of securities
|
||||||||
Realized
|
$ | (1,633 | ) | $ | 5,605 | |||
Change in unrealized
|
260,900 | 115,022 | ||||||
Gain from trading securities
|
259,267 | 120,627 | ||||||
Total trading gains (losses)
|
(22,281,070 | ) | 41,907,106 | |||||
Net investment income (loss)
|
||||||||
Interest income
|
3,044,150 | 3,801,283 | ||||||
Expenses
|
||||||||
Incentive fee
|
546,869 | 8,685,185 | ||||||
Management and other fees
|
11,940,521 | 4,388,824 | ||||||
Operating expenses
|
1,169,523 | 515,291 | ||||||
Total expenses
|
13,656,913 | 13,589,300 | ||||||
Net investment (loss0
|
(10,612,763 | ) | (9,788,017 | ) | ||||
Net income (loss)
|
$ | (32,893,833 | ) | $ | 32,119,089 | |||
|
Management of the Partnership believes the accounting principles utilized by Winton Futures Fund, L.P. (US) are consistent in all material respects with those utilized by the Partnership.
|
|
The Partnership’s investment in Winton Futures Fund, L.P. (US) represents approximately 1.39% and 3.29% of the investee fund’s net asset value as of December 31, 2009 and 2008, respectively.
|
|
As of June 1, 2008, the Partnership’s “Class B Interest” in Winton Futures Fund, L.P. (US) was reclassified as an “Institutional Interest” in Winton Futures Fund, L.P. (US). This is a reclassification for Winton Futures Fund, L.P. (US) administrative purposes only. There was no change to the management and incentive fees charged the Partnership, or the Partnership’s rights as a limited partner in Winton Futures Fund, L.P. (US).
|
F-27
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 8.
|
MARKET AND CREDIT RISKS
|
The Partnership is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
As the Partnership deposits substantially all of its assets with MFG, the Partnership has a concentration of credit risk with MFG. The following details the maximum amount of loss the Partnership would incur due to the complete failure by MFG to perform according to the terms of the applicable contractual agreements, with such maximum amount of loss being based on the gross fair value of the financial instruments held by MFG:
Broker
|
December 31, 2009
|
December 31, 2008
|
||||||
MFG
|
$ | 4,541,795 | $ | 6,423,863 |
The above maximum amount of risk of loss of financial instruments does not take into account adverse market movements subsequent to December 31, 2009 or the fact that the maximum amount of risk of loss on certain financial instruments is potentially unlimited. Accordingly, the maximum amount of risk of loss subsequent to December 31, 2009 could be materially greater.
Purchase and sale of futures and options on futures contracts requires margin deposits with the broker. Additional deposits may be necessary for any loss on contract fair value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited.
For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the notional contract value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid. The Partnership is also indirectly exposed to market risk on physical commodities equal to the fair value of physical commodities owned.
F-28
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 8.
|
MARKET AND CREDIT RISKS (CONTINUED)
|
|
The Partnership has a portion of its assets on deposit with a financial institution in connection with its cash management activities. In the event of a financial institution’s insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits.
|
|
The Partnership’s investments in other commodity pools are subject to the market and credit risks of futures contracts, forward currency contracts and other investment and derivative contracts held or sold short by these commodity pools. The Partnership bears the risk of loss only to the extent of the fair value of its respective investment and, in certain specific circumstances, distributions and redemptions received. The General Partner has established risk management procedures to monitor investments in other commodity pools and seeks to minimize risk primarily by investing in commodity pools, which the General Partner and the CPO Consultant believe are reliable and creditworthy. However, there can be no assurance that any commodity pool invested in will be able to meet its obligations to the Partnership.
|
|
The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The General Partner’s basic market risk control procedures consist of continuously monitoring the trading activity of the various commodity trading advisors, with the actual market risk controls being applied by the CTA Consultant and the advisors themselves. The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Partnership’s assets at financial institutions and brokers, which the General Partner believes to be creditworthy.
|
|
The Limited Partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain specific circumstances, distributions and redemptions received.
|
Note 9.
|
INDEMNIFICATIONS
|
|
In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.
|
Note 10.
|
SUBSEQUENT EVENTS
|
|
Effective January 29, 2010, the Partnership terminated its advisory agreement with one of its commodity trading advisors. Effective February 1, 2010, the Partnership submitted a full redemption request for its investment in Valhalla Synergy Fund LLC to be effective March 31, 2010. Effective March 1, 2010, the Partnership made an initial investment of $1,500,000 in APM – QIM Futures Fund, L.P., a commodity pool.
|
|
The General Partner has evaluated subsequent events through the date the financial statements were issued.
|
F-29
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 11. FINANCIAL HIGHLIGHTS
|
The following information presents non-restricted per unit operating performance data and other supplemental financial data for the years ended December 31, 2009 and 2008. This information has been derived from information presented in the financial statements.
|
2009
|
2008
|
|||||||
Per Unit Performance – Non-restricted units
|
||||||||
(for a unit outstanding throughout the entire year)
|
||||||||
Net asset value per unit at beginning of year
|
$ | 3,139.86 | $ | 2,916.78 | ||||
Income (loss) from operations:
|
||||||||
Total trading and investing gains (losses)(1)
|
(381.01 | ) | 450.78 | |||||
Net investment income (loss)(1)
|
(230.24 | ) | (227.70 | ) | ||||
Total income (loss) from operations
|
(611.25 | ) | 223.08 | |||||
Net asset value per unit at end of year
|
$ | 2,528.61 | $ | 3,139.86 | ||||
Total Return
|
(19.47 | )% | 7.65 | % | ||||
Supplement Data
|
||||||||
Ratios to average net asset value: (2), (3)
|
||||||||
Expenses prior to incentive fees(5)
|
7.32 | % | 5.86 | % | ||||
Incentive fees
|
0.81 | % | 2.12 | % | ||||
Total expenses
|
8.13 | % | 7.98 | % | ||||
Net investment income (loss)(4), (5)
|
(7.31 | )% | (5.65 | )% | ||||
Total returns are calculated based on the change in value of a unit during the year. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of redemptions.
|
|
(1)
|
The net investment income (loss) per unit is calculated by dividing the net investment income (loss) by the average number of units outstanding during the year. Total trading and investing gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. Such balancing amount may differ from the calculation of total trading and investing gains (losses) per unit due to the timing of trading and investing gains and losses during the year relative to the number of units outstanding.
|
|
(2)
|
Excludes the Partnership’s proportionate share of expenses and net investment income (loss) from investments in other commodity pools.
|
|
(3)
|
Ratios for the years ended December 31, 2009 and 2008, are after the waiver of management fees by the General Partner, equal to 0.00% and 0.43%, respectively, of average net asset value.
|
(4)
|
Excludes incentive fees.
|
(5)
|
Excludes brokerage commissions.
|
F-30
PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
Note 11. FINANCIAL HIGHLIGHTS (CONTINUED)
|
The following information presents side pocket/restricted per unit operating performance data and other supplemental financial data for the period January 1, 2009 to February 28, 2009 (termination of side pocket/restricted units) and for the period April 1, 2008 (inception of side pocket/restricted units) to December 31, 2008. This information has been derived from information presented in the financial statements.
|
Two Months
Ended
February 28,
2009
|
Nine Months
Ended
December 31,
2009
|
|||
Per Unit Performance – Side Pocket/Restructed units
(for a unit outstanding throughout the entire period)
|
||||
Net asset value per unit at beginning of period
|
$2,663.73 | $2,963.09 | ||
Income (loss) from operations:
|
||||
Total trading and investing gains (losses)(1)
|
42.27 | (113.62 | ) | |
Net investment income (loss)(1)
|
(24.73 | ) | (185.74 | ) |
Total income (loss) from operations
|
17.54 | (299.36 | ) | |
Net asset value per unit at end of period
|
$2,681.27 | (7) | $2,663.73 | |
Total Return(4)
|
0.66 | % | (10.10) | % |
Supplemental Data
|
||||
Ratios to average net asset value:(2)
|
||||
Expenses prior to incentive fees(3), (6)
|
5.53 | % | 8.62 | % |
Incentive fees(4)
|
0.00 | % | 0.00 | % |
Total expenses
|
5.53 | % | 8.62 | % |
Net investment income (loss)(3), (5), (6)
|
(5.53 | )% | (8.62 | )% |
Total returns are calculated based on the change in value of a unit during the period. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of redemptions.
|
(1)
|
The net investment income (loss) per unit is calculated by dividing the net investment income (loss) by the average number of units outstanding during the period. Total trading and investing gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. Such balancing amount may differ from the calculation of total trading and investing gains (losses) per unit due to the timing of trading and investing gains and losses during the period relative to the number of units outstanding.
|
|
(2)
|
Excludes the Partnership’s proportionate share of expenses and net investment income (loss) from investments in other commodity pools.
|
(3)
|
Annualized.
|
(4)
|
Not annualized.
|
|
(5)
|
Excludes incentive fees.
|
(6)
|
Excludes brokerage commissions.
|
(7)
|
Prior to termination of the side pocket/restricted unit class effective February 28, 2009.
|
F-31
WINTON FUTURES FUND, L.P. (US)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
F-32
WINTON FUTURES FUND, L.P. (US)
____________
TABLE OF CONTENTS
_____________
PAGES | |
Report of Independent Registered Public Accounting Firm | F-34 |
Financial Statements | |
Statements of Financial Condition | F-35 |
Condensed Schedules of Investments | F-36 – F-40 |
Statements of Operations | F-41 |
Statements of Changes in Partners’ Capital (Net Asset Value) | F-42 |
Notes to Financial Statements | F-43 – F-56 |
F-33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Winton Futures Fund, L.P. (US)
We have audited the accompanying statements of financial condition, including the condensed schedules of investments of Winton Futures Fund, L.P. (US) (“the Partnership”) as of December 31, 2009 and 2008, and the related statements of operations and changes in partners’ capital for the years ended December 31, 2009, 2008 and 2007. 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 audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Winton Futures Fund, L.P. (US) as of December 31, 2009 and 2008, and the results of its operations and changes in partners’ capital for the years ended December 31, 2009, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.
/s/ Spicer Jeffries LLP
Greenwood Village, Colorado
March 29, 2010
F-34
WINTON FUTURES FUND, L.P. (US)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2009 AND 2008
_______________
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Equity in Newedge USA, LLC account:
|
||||||||
Cash
|
$ | 57,157,995 | $ | 154,396,738 | ||||
Unrealized gain on open commodity futures contracts
|
2,751,248 | 4,174,311 | ||||||
Long options (cost $31,080 and $0)
|
15,760 | - | ||||||
Unrealized gain on open forward contracts
|
3,227 | - | ||||||
Interest receivable
|
- | 14,426 | ||||||
59,928,230 | 158,585,475 | |||||||
Cash and cash equivalents
|
3,733,271 | 3,384,626 | ||||||
Investment securities at value
|
||||||||
(cost -$469,559,059 and $132,744,996)
|
469,934,981 | 132,860,018 | ||||||
Interest receivable
|
719,323 | 161,545 | ||||||
Total assets
|
$ | 534,315,805 | $ | 294,991,664 | ||||
LIABILITIES
|
||||||||
Short options (proceeds $68,320 and $0)
|
$ | 36,220 | $ | - | ||||
Payable for securities purchased
|
- | 5,000,000 | ||||||
Commissions payable
|
611,622 | 30,216 | ||||||
Management fee payable
|
822,084 | 314,556 | ||||||
Administrative fee payable
|
77,788 | 16,198 | ||||||
Services fees payable
|
420,136 | 229,428 | ||||||
Incentive fee payable
|
249,171 | 3,053,989 | ||||||
Redemptions payable
|
3,504,884 | 4,043,596 | ||||||
Subscriptions received in advance
|
12,878,915 | 23,079,459 | ||||||
Other liabilities
|
249,209 | 176,744 | ||||||
Total liabilities
|
18,805,029 | 35,944,186 | ||||||
PARTNER’S CAPITAL (NET ASSET VALUE)
|
||||||||
General Partner
|
3,198 | 3,491 | ||||||
Limited Partners
|
515,462,578 | 259,043,987 | ||||||
Total partners’ capital (Net Asset Value)
|
515,465,776 | 259,047,478 | ||||||
Total liabilities and partners’ capital
|
$ | 534,315,805 | $ | 294,991,664 |
See accompanying notes.
F-35
WINTON FUTURES FUND, L.P. (US)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
_______________
INVESTMENT SECURITIES
Face Value
|
Maturity Date
|
Description
|
Value
|
% of Partners
Capital
|
||||
Fixed Income Investments – United States
|
||||||||
U.S. Government Agency Bonds and Notes
|
||||||||
$ 5,000,000
|
3/18/2010
|
Federal Farm Credit Bank, 1.05%
|
$5,009,400
|
0.97
|
||||
8,000,000
|
6/17/2011
|
Federal Farm Credit Bank, 1.2%
|
8,020,000
|
1.56
|
||||
5,000,000
|
9/23/2011
|
Federal Farm Credit Bank, 1.2%
|
4,987,500
|
0.97
|
||||
5,000,000
|
10/13/2011
|
Federal Farm Credit Bank, 1.2%
|
4,998,450
|
0.97
|
||||
10,000,000
|
11/4/2011
|
Federal Farm Credit Bank, 1.24%
|
9,981,300
|
1.94
|
||||
5,000,000
|
5/5/2011
|
Federal Farm Credit Bank, 1.375%
|
5,017,200
|
0.97
|
||||
5,000,000
|
3/23/2011
|
Federal Farm Credit Bank, 1.85%
|
5,012,500
|
0.97
|
||||
1,035,000
|
8/5/2011
|
Federal Home Loan Bank, 1.375%
|
1,041,148
|
0.20
|
||||
2,720,000
|
12/9/2011
|
Federal Home Loan Bank, 1.05%
|
2,702,157
|
0.52
|
||||
11,165,000
|
7/18/2011
|
Federal Farm Credit Bank, 1.125%
|
11,175,495
|
2.17
|
||||
10,000,000
|
9/30/2010
|
Federal Home Loan Bank, 1.25%
|
10,050,000
|
1.95
|
||||
1,500,000
|
10/19/2011
|
Federal Home Loan Bank, 1.25%
|
1,496,715
|
0.29
|
||||
8,130,000
|
10/21/2011
|
Federal Home Loan Bank, 1.25%
|
8,145,284
|
1.58
|
||||
5,000,000
|
11/23/2011
|
Federal Home Loan Bank, 1.25%
|
4,992,200
|
0.97
|
||||
15,000,000
|
6/15/2011
|
Federal Home Loan Bank, 1.3%
|
15,046,950
|
2.92
|
||||
10,000,000
|
10/14/2011
|
Federal Home Loan Bank, 1.3%
|
9,978,100
|
1.94
|
||||
10,000,000
|
8/27/2010
|
Federal Home Loan Bank, 1.375%
|
10,053,100
|
1.95
|
||||
5,000,000
|
9/10/2010
|
Federal Home Loan Bank, 1.4%
|
5,028,150
|
0.98
|
||||
5,000,000
|
9/13/2010
|
Federal Home Loan Bank, 1.5%
|
5,032,800
|
0.98
|
||||
5,950,000
|
11/10/2011
|
Federal Home Loan Mortgage Corporation, 1.2%
|
5,926,379
|
1.15
|
||||
3,225,000
|
12/30/2011
|
Federal Home Loan Mortgage Corporation, 1.3%
|
3,203,134
|
0.62
|
||||
4,175,000
|
11/18/2011
|
Federal Home Loan Mortgage Corporation, 1.5%
|
4,162,976
|
0.81
|
||||
5,000,000
|
2/9/2011
|
Federal Home Loan Mortgage Corporation, 1.75%
|
5,006,000
|
0.97
|
||||
10,000,000
|
3/16/2011
|
Federal Home Loan Mortgage Corporation, 2%
|
10,024,900
|
1.94
|
||||
15,000,000
|
5/27/2011
|
Federal National Mortgage Association, 1.35%
|
15,042,150
|
2.92
|
||||
5,000,000
|
9/30/2010
|
Federal National Mortgage Association, 1.2%
|
5,023,450
|
0.97
|
||||
10,000,000
|
9/28/2011
|
Federal National Mortgage Association, 1.25%
|
9,971,900
|
1.93
|
||||
2,000,000
|
9/29/2011
|
Federal National Mortgage Association, 1.25%
|
1,996,260
|
0.39
|
||||
6,250,000
|
12/30/2011
|
Federal National Mortgage Association, 1.25%
|
6,218,750
|
1.21
|
||||
10,000,000
|
5/27/2011
|
Federal National Mortgage Association, 1.5%
|
10,034,400
|
1.95
|
||||
5,000,000
|
7/6/2010
|
Federal National Mortgage Association, 1.50%
|
5,032,800
|
0.98
|
||||
10,000,000
|
4/8/2011
|
Federal National Mortgage Association, 1.875%
|
10,031,300
|
1.95
|
||||
3,000,000
|
2/11/2011
|
Federal National Mortgage Association, 2%
|
3,005,640
|
0.58
|
||||
10,000,000
|
4/1/2011
|
Federal National Mortgage Association, 2%
|
10,040,600
|
1.95
|
||||
Total U.S. Government Agency Bonds and Notes (cost - $232,113,166)
|
$232,489,088
|
45.10
|
See accompanying notes.
F-36
WINTON FUTURES FUND, L.P. (US)
CONDENSED SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 2009
_______________
Face Value
|
Maturity Date
|
Description
|
Value
|
% of Partners
Capital
|
Fixed Income Investments – United States (continued)
|
||||||||||||
Corporate Notes and Repurchase Agreement
|
||||||||||||
$ | 23,350,000 |
1/6/2010
|
American Honda Finance Corp Disc Note, .15%
|
$ | 23,347,179 | 4.53 | ||||||
21,900,000 |
1/4/2010
|
Avery Dennison Corp Disc Note, 0.15%
|
21,899,635 | 4.25 | ||||||||
22,900,000 |
1/4/2010
|
BMW US Capital Disc Note, .30%
|
22,989,855 | 4.44 | ||||||||
22,995,000 |
1/12/2010
|
BNP Paribas Financial Inc Disc Note, .14%
|
22,993,122 | 4.46 | ||||||||
2,370,000 |
1/13/2010
|
Chevron Corp Note, .07%
|
2,370,000 | 0.46 | ||||||||
21,910,000 |
1/4/2010
|
Devon Energy Corp Disc Note, .18%
|
21,909,577 | 4.25 | ||||||||
1,175,000 |
1/11/2010
|
Dexia Delaware LLC Disc Note, .29%
|
1,174,735 | 0.23 | ||||||||
23,175,000 |
1/8/2010
|
Dexia Delaware LLC Disc Note, .30%
|
23,169,493 | 4.49 | ||||||||
3,300,000 |
1/6/2010
|
Public Svc Co of NC Disc Note, .30%
|
3,299,807 | 0.64 | ||||||||
30,100,000 |
1/4/2010
|
Societe General North America Inc Disc Note, .08%
|
30,099,594 | 5.84 | ||||||||
2,300,000 |
1/15/2010
|
Toyota Motor Credit Corp Disc Note, .15%
|
2,299,712 | 0.45 | ||||||||
22,900,000 |
1/15/2010
|
Vodafone Group P/c disc Note, .23%
|
22,898,976 | 4.44 | ||||||||
20,000,000 |
1/5/2010
|
Volkswagen of America Disc Note, .27%
|
19,998,950 | 3.88 | ||||||||
19,087,000 |
1/4/2010
|
Wellpoint Inc DTD, .20%
|
19,086,258 | 3.70 | ||||||||
Total Corporate Notes and Repurchase Agreements (cost - $237,445,893)
|
237,445,893 | 46.06 | ||||||||||
Total investment securities - United States (cost $469,559,059)
|
$ | 469,934,981 | 91.16 | |||||||||
(1)
|
Represents the U.S. dollar equivalent of the notional amount bought or sold.
|
See accompanying notes.
F-37
WINTON FUTURES FUND, L.P. (US)
CONDENSED SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 2009
_______________
Range of
Expiration Dates
|
Number of
Contracts
for Notional Value
|
Value
|
% of Partners
|
LONG FUTURES CONTRACTS:
|
||||||||||||||
Agriculture
|
Feb 10 – Oct 10
|
751 | $ | 739,441 | $ | 0.14 | ||||||||
Currencies
|
Mar 10
|
1,962 | (1,739,750 | ) | (0.34 | ) | ||||||||
Energy
|
Feb 10 – Mar 12
|
73 | 94,634 | 0.02 | ||||||||||
Interest Rates
|
Jan 10 – Mar 12
|
4,877 | 69,583 | 0.01 | ||||||||||
Metals
|
Jan 10 – Dec 10
|
962 | 1,890,916 | 0.37 | ||||||||||
Stock Indices
|
Jan 10 – Mar 10
|
3,281 | 3,443,054 | 0.67 | ||||||||||
Treasury Rates
|
Mar 10
|
301 | (477,078 | ) | (0.09 | ) | ||||||||
Total Long Futures Contracts
|
12,747 | 4,020,800 | 0.78 | |||||||||||
SHORT FUTURES CONTRACTS:
|
||||||||||||||
Agriculture
|
Jan 10 – May 10
|
668 | (169,625 | ) | (0.03 | ) | ||||||||
Currencies
|
Jan 10 – Mar 10
|
926 | (104,602 | ) | (0.02 | ) | ||||||||
Energy
|
Jan 10 – Mar 10
|
174 | (440,113 | ) | (0.09 | ) | ||||||||
Interest Rates
|
Mar 10 – Jun 10
|
149 | (26,810 | ) | (0.01 | ) | ||||||||
Metals
|
Jan 10
|
68 | (560,248 | ) | (0.11 | ) | ||||||||
Stock Indices
|
Mar 10
|
11 | (9,154 | ) | - | |||||||||
Treasury Rates
|
Mar 10
|
163 | 41,000 | 0.01 | ||||||||||
Total short futures contracts
|
2,159 | (1,269,552 | ) | (0.25 | ) | |||||||||
Total futures contracts
|
14,906 | $ | 2,751,248 | 0.53 | ||||||||||
LONG OPTIONS CONTRACTS:
|
||||||||||||||
Stock Indices (cost of $31,080)
|
Jan 10 – Mar 10
|
58 | $ | 15,760 | - | |||||||||
SHORT OPTIONS CONTRACTS:
|
||||||||||||||
Stock Indices (proceeds of $68,320)
|
Jan 10 – Mar 10
|
58 | $ | 36,220 | 0.01 | |||||||||
SHORT FORWARD CURRENT CONTRACTS:
|
||||||||||||||
Brazilian Real
|
Jan 10
|
$ | 200,850 | (1) | $ | (4,233 | ) | - | ||||||
SHORT FORWARD CURRENT CONTRACTS:
|
||||||||||||||
Brazilian Real
|
Jan 10 – Feb 10
|
$ | 400,000 | (1) | $ | 7,460 | - | |||||||
Total forward currency contracts
|
$ | 3,227 | - |
(1)
|
Represents the U.S. dollar equivalent of the notional amount bought or sold.
|
See accompanying notes.
F-38
WINTON FUTURES FUND, L.P. (US)
CONDENSED SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2008
_______________
INVESTMENT SECURITIES
|
|||||||||||||
Face Value
|
Maturity Date
|
Description
|
Value
|
% of Partners
Capital
|
|||||||||
Fixed Income Investments - United States
|
|||||||||||||
U.S. Government Agency Bonds and Notes
|
|||||||||||||
$ | 3,000,000 |
11/17/2009
|
Federal Farm Credit Bank, 2.05%
|
$ | 3,005,640 | 1.16 | |||||||
6,000,000 |
12/23/2010
|
Federal Farm Credit Bank, 2.37%
|
6,011,280 | 2.32 | |||||||||
4,000,000 |
7/10/2009
|
Federal Home Loan Bank, 4.35%
|
4,002,280 | 1.54 | |||||||||
3,250,000 |
5/1/2009
|
Federal Home Loan Bank, 3.00%
|
3,253,998 | 1.26 | |||||||||
3,600,000 |
5/20/2009
|
Federal Home Loan Bank, 2.04%
|
3,603,744 | 1.39 | |||||||||
2,800,000 |
11/20/2009
|
Federal Home Loan Bank, 2.04%
|
2,802,128 | 1.08 | |||||||||
5,000,000 |
12/29/2010
|
Federal Home Loan Bank, 2.05%
|
5,018,750 | 1.94 | |||||||||
5,000,000 |
8/21/2009
|
Federal Home Loan Bank, 0.44%
|
4,994,250 | 1.93 | |||||||||
5,000,000 |
4/28/2009
|
Federal Home Loan Bank, 2.50%
|
5,007,800 | 1.93 | |||||||||
5,000,000 |
4/29/2010
|
Federal Home Loan Bank, 3.05%
|
5,039,050 | 1.95 | |||||||||
4,000,000 |
4/30/2009
|
Federal Home Loan Bank, 2.60%
|
4,030,000 | 1.56 | |||||||||
5,000,000 |
12/30/2009
|
Federal Home Loan Mortgage Corporation, 1.00%
|
4,993,750 | 1.93 | |||||||||
4,000,000 |
11/10/2009
|
Federal Home Loan Mortgage Corporation, 2.05%
|
4,005,040 | 1.55 | |||||||||
5,000,000 |
7/6/2010
|
Federal Home Loan Mortgage Corporation, 1.50%
|
5,000,000 | 1.93 | |||||||||
1,180,000 |
1/7/2009
|
Federal Home Loan Bank Disc Note, 0.03%
|
1,179,993 | 0.46 | |||||||||
6,600,000 |
2/4/2009
|
Federal Home Loan Mortgage Corp Disc, 0.05%
|
6,599,670 | 2.55 | |||||||||
Total U.S. Government Agency Bonds and Notes (cost - $68,432,351)
|
68,547,373 | 26.48 | |||||||||||
Corporate Notes and Repurchase Agreements
|
|||||||||||||
$ | 27,893,000 |
1/2/2009
|
Bank of America Repo, 0.01%
|
$ | 27,893,000 | 10.77 | |||||||
6,000,000 |
1/6/2009
|
Chevron Corp Note, 0.02%
|
6,000,000 | 2.32 | |||||||||
2,124,000 |
1/5/2009
|
Hershey Foods Corp Disc Note, 0.15%
|
2,123,947 | 0.82 | |||||||||
896,000 |
1/2/2009
|
L'Oreal USA Inc Disc Note, 0.15%
|
895,974 | 0.31 | |||||||||
6,000,000 |
1/5/2009
|
Nestle Capital Disc Note, 0.01%
|
5,999,991 | 2.32 | |||||||||
6,000,000 |
1/5/2009
|
Northern Illinois Gas Disc Note, 0.07%
|
5,999,930 | 2.32 | |||||||||
6,000,000 |
1/6/2009
|
Rabobank USA Financial Corp Disc Note, 0.05%
|
5,999,942 | 2.32 | |||||||||
3,400,000 |
1/2/2009
|
Societe General North America Disc Note, 0.21%
|
3,399,861 | 1.31 | |||||||||
6,000,000 |
1/2/2009
|
Toyota Financial Service Puerto Rico, 0.10%
|
6,000,000 | 2.32 | |||||||||
Total Corporate Notes and Repurchase Agreements (cost - $64,312,645)
|
64,312,645 | 24.81 | |||||||||||
Total investment securities - United States (cost - $132,744,996)
|
$ | 132,860,018 | 51.29 | ||||||||||
See accompanying notes.
F-39
WINTON FUTURES FUND, L.P. (US)
CONDENSED SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 2008
_______________
Range of
Expiration Dates
|
Number of
Contracts
|
Value
|
% of Partners
Capital
|
||||||||||
LONG FUTURES CONTRACTS:
|
|||||||||||||
Agriculture
|
Feb - Jun 09
|
60 | $ | 120,994 | 0.05 | ||||||||
Currencies
|
Mar 09 - Jun 10 | 1,439 | 1,600,723 | 0.61 | |||||||||
Interest Rates
|
Jan 09 - Jun 10
|
1,533 | 2,662,065 | 1.03 | |||||||||
Metals
|
Jan 09
|
75 | (205,661 | ) | (0.08 | ) | |||||||
Stock Indices
|
Mar 09
|
2 | 875 | - | |||||||||
Treasury Rates
|
Mar 09 - Dec 09
|
563 | 1,542,447 | 0.59 | |||||||||
Total long futures contracts
|
3,672 | 5,721,443 | 2.20 | ||||||||||
SHORT FUTURES CONTRACTS:
|
|||||||||||||
Agriculture
|
Feb 09 - Nov 10
|
667 | (1,242,086 | ) | (0.48 | ) | |||||||
Currencies
|
Mar 09
|
441 | (1,489,992 | ) | (0.58 | ) | |||||||
Energy
|
Jan 09 - Dec 10
|
94 | 302,182 | 0.12 | |||||||||
Metals
|
Jan - Apr 09
|
175 | 998,975 | 0.39 | |||||||||
Stock Indices
|
Jan - Mar 09
|
119 | (112,475 | ) | (0.04 | ) | |||||||
Treasury Rates
|
Mar 09
|
18 | (3,736 | ) | - | ||||||||
Total short futures contracts
|
1,514 | (1,547,132 | ) | (0.59 | ) | ||||||||
Total futures contracts
|
5,186 | $ | 4,174,311 | 1.61 | |||||||||
See accompanying notes.
WINTON FUTURES FUND, L.P. (US)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
_______________
2009
|
2008
|
2007
|
||||||||||
TRADING GAINS (LOSSES):
|
||||||||||||
Gain (loss) on trading of
|
||||||||||||
derivatives contracts
|
||||||||||||
Realized
|
$ | (15,134,007 | ) | $ | 39,189,837 | $ | 15,016,680 | |||||
Change in unrealized
|
(1,403,056 | ) | 2,819,778 | (739,757 | ) | |||||||
Brokerage commissions
|
(5,636,378 | ) | (499,445 | ) | (673,161 | ) | ||||||
Gain (loss) from trading derivatives
|
(22,173,441 | ) | 41,510,170 | 13,603,762 | ||||||||
Gain (loss) on trading of securities
|
||||||||||||
Realized
|
(1,633 | ) | 5,605 | - | ||||||||
Change in unrealized
|
260,900 | 115,022 | - | |||||||||
Gain from trading securities
|
259,267 | 120,627 | - | |||||||||
Foreign currency translation gains (losses)
|
(366,896 | ) | 276,309 | 133,655 | ||||||||
Total trading gains (losses)
|
(22,281,070 | ) | 41,907,106 | 13,737,417 | ||||||||
NET INVESTMENT INCOME (LOSS):
|
||||||||||||
Income
|
||||||||||||
Interest income
|
3,044,150 | 3,801,283 | 3,810,719 | |||||||||
Expenses
|
||||||||||||
Management fee
|
7,310,067 | 2,474,653 | 1,170,329 | |||||||||
Administrative fee
|
616,020 | 49,259 | - | |||||||||
Service fees
|
4,014,434 | 1,864,912 | 536,306 | |||||||||
Incentive fee
|
546,869 | 8,685,185 | 2,765,664 | |||||||||
Professional fees
|
1,169,523 | 515,291 | 214,484 | |||||||||
Total expenses
|
13,656,913 | 13,589,300 | 4,686,783 | |||||||||
Net investment (loss)
|
(10,612,763 | ) | (9,788,017 | ) | (876,064 | ) | ||||||
NET INCOME (LOSS)
|
$ | (32,893,833 | ) | $ | 32,119,089 | $ | 12,861,353 | |||||
|
||||||||||||
|
||||||||||||
See accompanying notes.
F-41
WINTON FUTURES FUND, L.P. (US)
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
_______________
Limited Partners
|
||||||||||||||||||||||||||||||||
Total
|
Original
Class A
|
Original
Class B
|
Special
Special Interests
|
Class A
|
Class B
|
Institutional Interests
|
General
Partner
|
|||||||||||||||||||||||||
Balances at December 31, 2006
|
$ | 57,161,095 | $ | 16,714,934 | $ | 31,527,995 | $ | 8,915,623 | $ | - | $ | - | $ | - | $ | 2,543 | ||||||||||||||||
Transfers
|
- | (1,127,544 | ) | 1,127,544 | - | - | - | - | - | |||||||||||||||||||||||
Capital additions
|
41,661,121 | 18,167,321 | 22,673,800 | 820,000 | - | - | - | - | ||||||||||||||||||||||||
Capital withdrawals
|
(16,152,642 | ) | (2,299,027 | ) | (12,633,615 | ) | (1,220,000 | ) | - | - | - | - | ||||||||||||||||||||
Net income for the year
|
||||||||||||||||||||||||||||||||
ended December 31, 2006
|
12,861,353 | 4,051,251 | 7,557,205 | 1,252,541 | - | - | - | 356 | ||||||||||||||||||||||||
Offering costs
|
(16,066 | ) | (5,436 | ) | (9,077 | ) | (1,553 | ) | - | - | - | - | ||||||||||||||||||||
Balances at December 31, 2007
|
95,514,861 | 35,501,499 | 50,243,852 | 9,766,611 | - | - | - | 2,899 | ||||||||||||||||||||||||
Transfers
|
- | (3,428,705 | ) | (63,946,413 | ) | - | (262,983 | ) | 260,072 | 67,378,029 | - | |||||||||||||||||||||
Capital additions
|
178,574,330 | 64,322,008 | 32,627,859 | - | 29,770,930 | 26,373,531 | 25,480,002 | - | ||||||||||||||||||||||||
Capital withdrawals
|
(47,036,859 | ) | (3,474,589 | ) | (14,264,716 | ) | (8,174,000 | ) | (113,314 | ) | (54,100 | ) | (20,956,140 | ) | - | |||||||||||||||||
Net income for the year
|
||||||||||||||||||||||||||||||||
ended December 31, 2008
|
32,119,089 | 13,188,377 | 11,614,186 | 1,563,864 | 1,779,682 | 1,685,068 | 2,287,318 | 594 | ||||||||||||||||||||||||
Offering costs
|
(123,943 | ) | (61,913 | ) | (28,720 | ) | (5,995 | ) | (2,994 | ) | (2,145 | ) | (22,174 | ) | (2 | ) | ||||||||||||||||
Balances at December 31, 2008
|
259,047,478 | 106,046,677 | 16,246,048 | 3,150,480 | 31,171,321 | 28,262,426 | 74,167,035 | 3,491 | ||||||||||||||||||||||||
Transfers
|
- | (1,619,578 | ) | 918,871 | - | (584,077 | ) | 92,967 | 1,191,817 | - | ||||||||||||||||||||||
Capital additions
|
341,256,824 | 169,092 | 1,121 | 37,650,000 | 154,019,760 | 85,850,610 | 63,566,241 | - | ||||||||||||||||||||||||
Capital withdrawals
|
(51,787,951 | ) | (16,975,386 | ) | (1,277,714 | ) | (8,581,457 | ) | (7,082,968 | ) | (3,645,724 | ) | (14,224,702 | ) | - | |||||||||||||||||
Net loss for the year
|
||||||||||||||||||||||||||||||||
ended December 31, 2009
|
(32,893,833 | ) | (8,460,393 | ) | (1,146,642 | ) | (1,785,361 | ) | (9,287,406 | ) | (5,305,870 | ) | (6,907,869 | ) | (292 | ) | ||||||||||||||||
Offering costs
|
(156,742 | ) | (37,727 | ) | (6,117 | ) | (6,107 | ) | (40,512 | ) | (27,680 | ) | (38,598 | ) | (1 | ) | ||||||||||||||||
Balances at December 31, 2009
|
$ | 515,465,776 | $ | 79,122,685 | $ | 14,735,567 | $ | 30,427,555 | $ | 168,196,118 | $ | 105,226,729 | $ | 117,753,924 | $ | 3,198 |
See accompanying notes.
F-42
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS
_______________
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
General Description of the Partnership
The Partnership was organized as a limited partnership in Colorado in March 1999, and will continue until December 31, 2035, unless sooner terminated as provided for in the First Amended Agreement of Limited Partnership (“Agreement”). The Partnership's general partner is Altegris Portfolio Management, Inc. (d/b/a APM Funds) (the "General Partner"). The Partnership speculatively trades commodity futures contracts, options on futures contracts, forward contracts and other commodity interests. The objective of the Partnership’s business is appreciation of its assets.
Method of Reporting
The Partnership follows accounting standards set by the Financial Accounting Standards Board, commonly referred to as the “FASB.” The FASB sets generally accepted accounting principles (GAAP) that the Partnership follows to ensure consistent reporting of the Partnership’s financial condition, results of operations, and changes in partners’ capital. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification referred to as “ASC”. The FASB finalized the ASC effective for periods ending on or after September 15, 2009.
|
The Partnership’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by the Partnership’s management. Actual results could differ from those estimates.
|
Pursuant to the Cash Flows Topic of the Codification, the Fund qualifies for an exemption from the requirement to provide a statement of cash flows and has elected not to provide a statement of cash flows.
|
Cash and Cash Equivalents
|
Cash and cash equivalents includes cash and other highly liquid investments with financial institutions with maturity dates of 90 days or less.
Basis of Accounting
Security transactions are recorded on the trade date. Realized gains and losses from security transactions are determined using the identified cost method. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction. Interest income is recorded on the accrual basis.
F-43
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Basis of Accounting (concluded)
Gains or losses are realized when contracts are liquidated. Net unrealized gains or losses on open contracts (the difference between contract trade piece and quoted market price) are reflected in the statement of financial condition. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions on futures and options on futures contracts include other trading fees and are charged to expense when contracts are opened.
Fair Value
The Partnership values its investments in accordance with Accounting Standards Codification 820 - Fair Value Measurements (“ASC 820”). Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants and the measurement date.
In determining fair value, the Partnership uses various valuation approaches. ASC 820 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Partnership.
Unobservable inputs reflect the Partnership’s assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Partnership has the ability to access. Valuation adjustments and blockage discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
F-44
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value (continued)
The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Partnership in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Partnership’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Partnership uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
The Partnership values futures and options on futures contracts at the closing price of the contracts primary exchange. The Partnership includes futures and options on futures contracts in Level 1 of the fair value hierarchy.
Forward currency contracts are valued at fair value using spot currency rates and adjusted for interest rates and other typical adjustment factors. The Partnership includes forward currency contracts in Level 2 of the fair value hierarchy.
The fair value of United States government bonds is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issue, maturity and seniority. United States government bonds are generally categorized in Levels 1 or 2 of the fair value hierarchy.
F-45
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value (continued)
The fair value of corporate bonds is estimated using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads. The spread data used are for the same maturity as of the bond. If the spread data does not reference the issuer, then data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy. In instances where significant inputs are unobservable, they are categorized in Level 3 of the hierarchy.
The industry classifications included in the condensed schedule of investments represent the General Partner’s belief as to the most meaningful presentation of the classification of the Partnership’s investments.
The following table presents information about the Partnership’s assets and liabilities measured at fair value as of December 31, 2009:
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
Balance as of December 31, 2009
|
||||||||||||||
Assets:
|
|||||||||||||||||
Futures contracts
|
$ | 2,751,248 | $ | - | $ | - | $ | 2,751,248 | |||||||||
Options contracts
|
15,760 | - | - | 15,760 | |||||||||||||
Forward currency contracts
|
- | 3,227 | - | 3,227 | |||||||||||||
US Government agency
obligations
|
232,489,088 | - | - | 232,489,088 | |||||||||||||
Corporate notes and
repurchase agreements
|
- | 237,445,893 | - | 237,445,893 | |||||||||||||
|
$ | 235,256,096 | $ | 237,449,120 | $ | - | $ | 472,705,216 | |||||||||
Liabilities:
|
|||||||||||||||||
Options contracts
|
$ | 36,220 | $ | - | $ | - | $ | 36,220 |
F-46
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value (concluded)
The following table presents information about the Partnership’s assets and liabilities measured at fair value as of December 31, 2008:
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
Balance as of December 31, 2008
|
||||||||||||||
Assets:
|
|||||||||||||||||
Futures contracts
|
$ | 4,174,311 | $ | - | $ | - | $ | 4,174,311 | |||||||||
US Government agency
obligations
|
68,547,373 | - | - | 68,547,373 | |||||||||||||
Corporate notes and
repurchase agreements
|
- | 64,312,645 | - | 64,312,645 | |||||||||||||
|
$ | 72,721,684 | $ | 64,312,645 | $ | - | $ | 137,034,329 |
Foreign Currency Transactions
The Partnership’s functional currency is the United States (“U.S.”) dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently.
Capital Accounts and Allocation of Income and Losses
The Partnership accounts for subscriptions, allocations and redemptions on a per partner capital account basis.
The Partnership consists of the General Partner’s Interest, Original Class A Interests, Original Class B Interests, Special Interests, Class A Interests, Class B Interests and Institutional Interests. Original Class A Interests and Original Class B Interests were issued prior to July 1, 2008 and are only issued to Limited Partners on a limited basis. Class A Interests, Class B Interests and Institutional Interests were first issued by the Partnership on July 1, 2008. Income or loss (prior to management fees, administrative fees, service fees and incentive fees) are allocated pro rata among the partners based on their respective capital accounts as of the end of each month in which the items accrue pursuant to the terms of the Agreement. Original Class A Interests, Original Class B Interests, Special Interests, Class A Interests, Class B Interests and Institutional Interests are then charged with their applicable management fee, administrative fee, service fee and incentive fee in accordance with the Agreement.
F-47
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Income Taxes
The Partnership is not subject to federal income taxes; each partner reports his allocable share of income, gain, loss, deductions or credits on their own income tax return.
The Partnership classifies interest and penalties, if any, as interest expense. The Partnership files U.S. federal and state tax returns. The 2006 through 2009 tax years generally remain subject to examination by U.S. federal and most state tax authorities.
|
Financial Derivative Instruments
The Partnership engages in the speculative trading of futures, options on futures, and forward contracts for the purpose of achieving capital appreciation. None of the Partnership’s derivative instruments are designated as hedging instruments, as defined in the Derivatives and Hedging Topic of the ASC, nor are they used for other risk management purposes. The Advisor and General Partner actively assess, manage and monitor risk exposure on derivatives on a contract basis, a sector basis (e.g., interest rate derivatives, agricultural derivatives, etc.), and on an overall basis in accordance with established risk parameters. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.
The following presents the fair value of derivative contracts at December 31, 2009. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the futures and forward contracts qualify for net presentation in the statement of financial condition.
F-48
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Financial Derivative Instruments (continued)
December 31, 2009
|
Futures Contracts
|
Asset
Derivatives
Fair Value
|
Liability
Derivatives
Fair Value
|
Net
Fair Value
|
|||||
Agriculture
|
$ 1,170,985
|
$ (601,169)
|
$ 569,816
|
|||||
Currencies
|
387,606
|
(2,231,958)
|
(1,844,352)
|
|||||
Energy
|
119,033
|
(464,512)
|
(345,479)
|
|||||
Interest Rates
|
1,809,953
|
(1,767,180)
|
42,773
|
|||||
Metals
|
2,938,456
|
(1,607,878)
|
1,330,668
|
|||||
Stock Indices
|
3,749,160
|
(315,260)
|
3,433,900
|
|||||
Treasury Rates
|
57,594
|
(493,672)
|
(436,078)
|
|||||
10,232,877
|
(7,481,629)
|
2,751,248
|
||||||
Options on Futures Contracts
|
||||||||
Stock Indices
|
15,760
|
(36,220)
|
(20,460)
|
|||||
Forward Currency Contracts
|
||||||||
Currencies
|
7,460
|
(4,233)
|
3,227
|
|||||
Total Gross Fair Value of Derivatives
|
$ 10,256,097
|
$ (7,522,082)
|
$ 2,734,015
|
|||||
The following presents the trading results of the Partnership’s derivative trading and information related to the volume of the Partnership’s derivative activity for the year ended December 31, 2009. The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the statement of operations.
F-49
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Financial Derivative Instruments (continued)
Year Ended December 31, 2009
|
||||||||
Futures Contracts
|
Realized
|
Change in
Unrealized
|
Number of
Contracts Closed
|
|||||
Agriculture
|
$ (1,573,442)
|
$ 1,690,908
|
2,838
|
|||||
Currencies
|
(1,811,907)
|
(1,955,084)
|
6,820
|
|||||
Energy
|
(7,203,938)
|
(647,661)
|
1,676
|
|||||
Interest Rates
|
4,429,561
|
(2,618,822)
|
6,524
|
|||||
Metals
|
3,183,739
|
537,355
|
1,034
|
|||||
Stock Indices
|
(6,947,020)
|
3,545,500
|
6,816
|
|||||
Treasury Rates
|
(5,360,121)
|
(1,975,259)
|
3,833
|
|||||
Total futures contracts
|
(15,283,128)
|
(1,423,063)
|
29,541
|
|||||
Options on Futures Contracts
|
||||||||
Stock Indices
|
149,121
|
16,780
|
386
|
|||||
Forward Currency Contracts
|
||||||||
Currencies
|
-
|
3,227
|
$ 200,000
|
(1)
|
||||
Total gains from derivatives trading
|
$ (15,134,007)
|
$ (1,403,056)
|
||||||
(1) Represents the U.S. dollar equivalent of the notional amount bought or sold.
|
Reclassifications
Certain amounts in the 2008 and 2007 financial statements were reclassified to conform with the 2009 presentation.
Recently Adopted Accounting Pronouncements
The Partnership adopted the provisions of FASB ASC 855, Subsequent Events, which establishes general standards of and accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. FASB ASC 855 is effective for financial statements issued for the Partnership’s first interim and annual period ending after June 15, 2009.
F-50
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 1 -
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Recently Adopted Accounting Pronouncements (continued)
The Partnership adopted FASB Accounting Standards Codification on September 30, 2009. FASB ASC is the single source of authoritative nongovernmental U.S. GAAP. The Codification does not change U.S. GAAP but combines all authoritative standards into a comprehensive, topically organized online database. Effective with the Codification launch on July 1, 2009 only one level of authoritative GAAP will exist, other than guidance issued by the SEC. All other accounting literature excluded from the Codification will be considered non-authoritative. The Codification impacted the Partnership’s financial statement disclosures by eliminating prior FASB references since all references to authoritative accounting literature will be references made in accordance with the Codification.
NOTE 2 - AGREEMENTS AND RELATED PARTIES
Advisory Contract
The Partnership's trading activities are conducted pursuant to an advisory contract with Winton Capital Management, Limited (“Advisor”). The Partnership pays the Advisor a quarterly incentive fee of 20% of the trading profits (as defined). However, the quarterly incentive fee is payable only on cumulative profits calculated separately for each partner’s interest achieved from commodity trading (as defined).
Effective July 1, 2008, the Advisor receives from the Partnership a monthly management fee equal to 0.083% (1.00% annually) for Class A, Class B, and Institutional Interests of the Partnership's management fee net asset value (as defined). In addition, the General Partner has assigned a portion of its management fees earned to the Advisor. Total management fees earned by the Advisor for the years ended December 31, 2009 and 2008 and 2007 were $3,266,333, $933,820 and $478,625, respectively.
Brokerage Agreements
Newedge USA, LLC is the Partnership’s commodity broker (the “Clearing Broker”), pursuant to the terms of a brokerage agreement. The Partnership pays brokerage commissions to the Clearing Broker for clearing trades on its behalf.
F-51
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 2 - AGREEMENTS AND RELATED PARTIES (CONTINUED)
General Partner Management Fee
The General Partner receives from the Partnership a monthly management fee equal to 0.0625% (0.75% annually) for Original Class A, 0.146% (1.75% annually) for Original Class B, and currently 0.0417% to 0.125% (0.50% to 1.5% annually) for Special Interests of the Partnership's management fee net asset value (as defined). Effective July 1, 2008, the General Partner receives from the Partnership a monthly management fee equal to 0.104% (1.25% annually) for Class A and Class B, and 0.0625% (0.75% annually) for Institutional Interests of the Partnership's management fee net asset value (as defined). The General Partner may declare any Limited Partner a “Special Limited Partner” and the management fees or incentive fees charged to any such partner may be different than those charged to other Limited Partners.
Total management fees earned by the General Partner, net of such management fees assigned to the Advisor, for the years ended December 31, 2009, 2008 and 2007 were $4,043,734, $1,540,833 and $691,704, respectively. Management fees payable to the General Partner as of December 31, 2009 and December 31, 2008 were $446,310 and $190,491, respectively.
Administrative Fee
Effective July 1, 2008, the General Partner receives from the Partnership a monthly administrative fee equal to 0.0275% (0.33% annually) of the Partnership's management fee net asset value (as defined) attributable to Class A and Class B Interests.
Service Fees
Original Class A Interests and Class A Interests pay selling agents an ongoing payment of 0.166% of the month-end net asset value (2% annually) of the value of interests sold by them which are outstanding at month end as compensation for their continuing services to the Limited Partners. Effective March 1, 2009 selling agents may, at their option, elect to receive the service fee for the sale of Institutional Interests.
If the selling agent so elects, the Partnership will charge an ongoing payment of 0.0417% (0.50% annually) of the value of interests sold by them which are outstanding at month end as compensation for their continuing services to the Limited Partners.
F-52
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 2 - AGREEMENTS AND RELATED PARTIES (CONTINUED)
Related Party
Altegris Investments, Inc. (“Altegris”), an affiliate of the General Partner, is registered as a broker-dealer with the Securities and Exchange Commission and an independent introducing broker registered with the Commodity Futures Trading Commission. Altegris has entered into a selling agreement with the Partnership where it receives 2% per annum as continuing compensation for interests sold by Altegris that are outstanding at month end. Altegris, as the Partnership’s introducing broker, also receives a portion of the commodity brokerage commissions paid by the Partnership to the Clearing Broker and interest income retained by the Clearing Broker. For the years ended December 31, 2009, 2008 and 2007, commissions, interest income and continuing compensation received by Altegris amounted to $6,358,789, $1,807,841 and $639,040, respectively.
Effective March 1, 2009, the Partnership pays to its clearing brokers and Altegris, at a minimum, brokerage charges at a flat rate of 0.125% (1.5% annually) of the Partnership’s management fee net asset value (as defined). Brokerage charges may exceed the flat rate described above, depending on commission and trading volume levels, which may vary.
Subscriptions, Distributions and Redemptions
Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner.
The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of capital, subject to restrictions in the Agreement. The General Partner may request and receive redemption of capital, subject to the same terms as any Limited Partner.
F-53
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 3 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS
AND UNCERTAINTIES
The Partnership participates in the speculative trading of commodity futures contracts, options on futures contracts and forward currency contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges and interbank market makers. Further for futures contracts and options on futures contracts, the Clearing Broker has the right to require margin in excess of the minimum exchange requirement. Risk arises from changes in the value of these contracts (market risk) and the potential inability of brokers or interbank market makers to perform under the terms of their contracts (credit risk). The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over the counter transactions since, in over the counter transactions, the Partnership must rely solely on the credit of their respective individual counterparties. For forward currency contracts, the Partnership is subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain on forward currency contracts.
The Partnership also has credit risk since the sole counterparty to all domestic futures contracts is the exchange clearing corporation. In addition, the Partnership bears the risk of financial failure by the Clearing Broker.
The Partnership’s policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting and control procedures. In addition, the Partnership has a policy of reviewing the credit standing of each clearing broker or counterparty with which it conducts business.
The Partnership has cash deposited with Wilmington Trust Company (“Custodian”). For cash not held with the Clearing Broker, the Partnership expanded its agreement with the Custodian in August 2008 to include provision of cash management services by an affiliate of the Custodian, Wilmington Trust Investment Management (“WTIM”). The Partnership has a substantial portion of its assets on deposit with WTIM in U.S. Government agency bonds and notes and corporate notes and repurchase agreements. Risks arise from investments in bonds, notes and repurchase agreements due to possible illiquidity and the potential for default by the issuer or counterparty. Such instruments are also particularly sensitive to changes in interest rates and economic conditions.
NOTE 4 - INDEMNIFICATIONS
In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.
F-54
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 5 - SUBSEQUENT EVENTS
Management of the Partnership evaluated subsequent events through March 29, 2010, the date these financial statements were available to be issued. There are no subsequent events to disclose.
NOTE 6 - FINANCIAL HIGHLIGHTS
The following information presents the financial highlights of the Partnership for the years ended December 31, 2009, 2008 and 2007. This information has been derived from information presented in the financial statements.
December 31, 2009
|
||||||||||||
Original
|
Original
|
Special
|
(5)
|
(5)
|
(5)
Institutional
|
|||||||
Class A
|
Class B
|
Interests
|
Class A
|
Class B
|
Interests
|
|||||||
Total return for Limited Partners (4)
|
(8.39)%
|
(7.46)%
|
(7.38)%
|
(10.28)%
|
(8.41)%
|
(7.56)%
|
||||||
Ratio to average net asset value
|
||||||||||||
Expenses prior to incentive fees (1)
|
3.06%
|
2.07%
|
1.83%
|
4.88%
|
2.89%
|
2.07%
|
||||||
Incentive fees (4)
|
0.00%
|
0.01%
|
0.11%
|
0.25%
|
0.19%
|
0.09%
|
||||||
Total expenses
|
3.06%
|
2.08%
|
1.94%
|
5.13%
|
3.08%
|
2.16%
|
||||||
Net investment (loss) (1) (2)
|
(2.36)%
|
(1.36)%
|
(1.08)%
|
(4.14)%
|
(2.16)%
|
(1.35)%
|
||||||
December 31, 2008
|
||||||||||||
Original
|
Original
|
Special
|
(5)
|
(5)
|
(5)
Institutional
|
|||||||
Class A
|
Class B
|
Interests
|
Class A
|
Class B
|
Interests
|
|||||||
Total return for Limited Partners (4)
|
20.33%
|
21.58%
|
21.93%
|
1.29%
|
2.16%
|
3.52%
|
||||||
Ratio to average net asset value
|
||||||||||||
Expenses prior to incentive fees (1) (3)
|
3.13%
|
1.97%
|
1.77%
|
5.08%
|
3.06%
|
2.18%
|
||||||
Incentive fees (4)
|
4.27%
|
6.70%
|
5.07%
|
2.95%
|
3.32%
|
1.22%
|
||||||
Total expenses
|
7.40%
|
8.67%
|
6.84%
|
8.03%
|
6.38%
|
3.40%
|
||||||
Net investment income (loss) (1) (2) (3)
|
(1.09)%
|
0.54%
|
0.56%
|
(3.65)%
|
(1.70)%
|
(0.49)%
|
||||||
Total return and the ratios to average net asset value are calculated for each class of Limited Partners’ capital taken as a whole. An individual Limited Partner’s total return and ratios may vary from the above returns and ratios due to the timing of their contributions and withdrawals and differing fee structures.
(1)
|
Includes offering costs, if any.
|
(2)
|
Excludes incentive fee.
|
(3)
|
Annualized only for Class A, Class B and Institutional Interests.
|
(4)
|
Not annualized.
|
(5)
|
Class A, Class B and Institutional Interests were first issued effective July 1, 2008.
|
F-55
|
WINTON FUTURES FUND, L.P. (US)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
December 31, 2007
|
|||||||
Original
|
Original
|
Special
|
|||||
Class A
|
Class B
|
Interests
|
|||||
Total return for Limited Partners (4)
|
13.61%
|
14.97%
|
15.45%
|
||||
Ratio to average net asset value
|
|||||||
Expenses prior to incentive fees (1)
|
3.05%
|
2.03%
|
1.77%
|
||||
Incentive fees (4)
|
3.46%
|
3.33%
|
2.87%
|
||||
Total expenses
|
6.51%
|
5.36%
|
4.64%
|
||||
Net investment income (1) (2)
|
1.51%
|
2.56%
|
2.79%
|
||||
Total return and the ratios to average net asset value are calculated for each class of Limited Partners’ capital taken as a whole. An individual Limited Partner’s total return and ratios may vary from the above returns and ratios due to the timing of their contributions and withdrawals and differing fee structures.
(1)
|
Includes offering costs, if any.
|
(2)
|
Excludes incentive fee.
|
(3)
|
Annualized.
|
(4)
|
Not annualized.
|
(5)
|
Class A, Class B and Institutional Interests were first issued effective July 1, 2008.
|
F-56