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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              to             .

Commission File Number: 0-50316

 

 

Grant Park Futures Fund

Limited Partnership

(Exact name of registrant as specified in its charter)

 

 

 

Illinois   36-3596839

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o Dearborn Capital Management, L.L.C.

626 West Jackson Boulevard, Suite 600

Chicago, Illinois 60661

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (312) 756-4450

 

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x    Smaller reporting company   ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨    No  x

 

 

 


Table of Contents

GRANT PARK FUTURES FUND LIMITED PARTNERSHIP

QUARTER ENDED June 30, 2011

INDEX

 

PART I - FINANCIAL INFORMATION

  

Item 1.

  

Financial Statements

  
  

Consolidated Statements of Financial Condition as of June 30, 2011 (unaudited) and December 31, 2010 (audited)

     1   
  

Consolidated Condensed Schedule of Investments as of June 30, 2011 (unaudited)

     2   
  

Consolidated Condensed Schedule of Investments as of December 31, 2010 (audited)

     4   
  

Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (unaudited)

     6   
  

Consolidated Statements of Changes in Partners’ Capital (Net Asset Value) for the six months ended June 30, 2011 and 2010 (unaudited)

     7   
  

Notes to Consolidated Financial Statements (unaudited)

     9   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     21   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     29   

Item 4.

  

Controls and Procedures

     33   
PART II - OTHER INFORMATION   

Item 1A.

  

Risk Factors

     34   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     34   

Item 6.

  

Exhibits

     36   

SIGNATURES

     37   

CERTIFICATIONS

     38   


Table of Contents

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

Grant Park Futures Fund Limited Partnership

Consolidated Statements of Financial Condition

 

     June 30, 2011     December 31, 2010  
     (Unaudited)        

Assets

    

Equity in brokers’ trading accounts:

    

Securities owned, at fair value (cost $129,749,612 and $98,314,299, respectively)

   $ 129,943,165      $ 98,441,357   

Cash

     30,272,678        6,757,371   

Unrealized gain (loss) on open contracts, net

     (1,655,659     35,956,214   
  

 

 

   

 

 

 

Total equity in brokers’ trading accounts

     158,560,184        141,154,942   

Cash and cash equivalents

     465,292,600        338,154,495   

Securities owned, at fair value (cost $274,523,029 and $446,933,117, respectively)

     274,833,176        447,426,370   

Interest and dividends receivable

     42,016        82,357   
  

 

 

   

 

 

 

Total assets

   $ 898,727,976      $ 926,818,164   
  

 

 

   

 

 

 

Liabilities and Partners’ Capital (Net Asset Value)

    

Liabilities

    

Brokerage commission payable

   $ 4,959,712      $ 5,622,480   

Accrued incentive fees

     107,190        9,372,262   

Organization and offering costs payable

     207,755        217,123   

Accrued operating expenses

     181,147        140,163   

Pending partner additions

     27,866,110        12,218,587   

Redemptions payable

     6,648,206        7,334,779   
  

 

 

   

 

 

 

Total liabilities

     39,970,120        34,905,394   
  

 

 

   

 

 

 

Partners’ Capital (Net Asset Value)

    

General Partner

    

Class A (3,008.66 units outstanding at both June 30, 2011 and December 31, 2010)

   $ 4,129,131      $ 4,478,872   

Class B (427.01 units outstanding at both June 30, 2011 and December 31, 2010)

     498,670        542,672   

Legacy 1 Class (1,025.00 units outstanding at both June 30, 2011 and December 31, 2010)

     979,408        1,050,542   

Legacy 2 Class (1,000.00 units outstanding at both June 30, 2011 and December 31, 2010)

     948,948        1,019,793   

Global 1 Class (1,044.66 units outstanding at both June 30, 2011 and December 31, 2010)

     950,655        1,028,338   

Global 2 Class (1,624.52 and 1,181.06 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     1,466,585        1,155,098   

Global 3 Class (500.00 units outstanding at both June 30, 2011 and December 31, 2010)

     432,500        473,009   

Limited Partners

    

Class A (38,568.83 and 40,362.54 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     52,932,527        60,086,201   

Class B (470,752.49 and 498,484.71 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     549,750,422        633,504,348   

Legacy 1 Class (5,506.27 and 5,908.00 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     5,261,355        6,055,220   

Legacy 2 Class (11,404.73 and 6,361.06 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     10,822,498        6,486,967   

Global 1 Class (12,848.83 and 10,133.38 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     11,692,637        9,975,048   

Global 2 Class (23,026.49 and 18,631.40 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     20,787,810        18,221,772   

Global 3 Class (229,023.14 and 156,270.73 units outstanding at June 30, 2011 and December 31, 2010, respectively)

     198,104,710        147,834,890   
  

 

 

   

 

 

 

Total partners’ capital (net asset value)

     858,757,856        891,912,770   
  

 

 

   

 

 

 

Total liabilities and partners’ capital (net asset value)

   $ 898,727,976      $ 926,818,164   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Condensed Schedule of Investments

June 30, 2011

(Unaudited)

Futures, Forwards, and Options on Futures Contracts

 

     Unrealized
gain/(loss) on
open long
contracts
    Percent
of
Partners’
Capital
(net asset
value)
    Unrealized
gain/(loss)

on open
short
contracts
    Percent
of
Partners’
Capital
(net asset
value)
    Net
unrealized
gain/(loss)

on open
contracts
    Percent
of
Partners’
Capital
(net asset
value)
 

Futures Contracts *

            

U.S. Futures Positions:

            

Agriculturals

   $ (1,958,387     (0.2 )%    $ 3,589,002        0.4   $ 1,630,615        0.2

Currencies

   $ 3,882,953        0.5   $ (117,616     **      $ 3,765,337        0.4

Energy

   $ (1,134,525     (0.1 )%    $ (36,051     **      $ (1,170,576     (0.1 )% 

Interest rates

   $ (782,108     (0.1 )%    $ (74,621     **      $ (856,729     (0.1 )% 

Meats

   $ (211,944     **      $ 18,170        **      $ (193,774     **   

Metals

   $ (770,039     (0.1 )%    $ (104,944     **      $ (874,983     (0.1 )% 

Soft commodities

   $ 1,143,586        0.1   $ (75,226     **      $ 1,068,360        0.1

Stock indices and single stock futures

   $ 2,152,395        0.3   $ (521,891     (0.1 )%    $ 1,630,504        0.2
  

 

 

     

 

 

     

 

 

   

Total U.S. Futures Positions

   $ 2,321,931        $ 2,676,823        $ 4,998,754     
  

 

 

     

 

 

     

 

 

   

Foreign Futures Positions:

            

Agriculturals

   $ (1,688     **      $ 2,846        **      $ 1,158        **   

Energy

   $ (44,663     **      $ (138,564     **      $ (183,227     **   

Interest rates

   $ 859,030        0.1   $ 185,624        **      $ 1,044,654        0.1

Metals

   $ (5,084,205     (0.6 )%    $ (1,189,768     (0.1 )%    $ (6,273,973     (0.7 )% 

Soft commodities

   $ 225,119        **      $ (21,090     **      $ 204,029        **   

Stock indices

   $ 2,002,577        0.2   $ (2,042,232     (0.2 )%    $ (39,655     **   
  

 

 

     

 

 

     

 

 

   

Total Foreign Futures Positions

   $ (2,043,830     $ (3,203,184     $ (5,247,014  
  

 

 

     

 

 

     

 

 

   

Total Futures Contracts

   $ 278,101        **      $ (526,361     **      $ (248,260     **   
  

 

 

     

 

 

     

 

 

   

Forward Contracts *

            

Currencies

   $ 1,671,704        0.2   $ (3,277,884     (0.4 )%    $ (1,606,180     (0.2 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Options on Futures and Forward Contracts *

            

U.S. stock indices

   $ 1,683        **      $ (3,625     **      $ (1,942     **   

U.S. interest rates

   $ 284,625        **      $ (146,625     **      $ 138,000        **   

Currencies

   $ (7,792     **      $ 70,515        **      $ 62,723        **   
  

 

 

     

 

 

     

 

 

   

Total Options on Futures and Forward Contracts

   $ 278,516        **      $ (79,735     **      $ 198,781        **   
  

 

 

     

 

 

     

 

 

   

Total Futures, Forward and Options on Futures and Forward Contracts

   $ 2,228,321        0.3   $ (3,883,980     (0.5 )%    $ (1,655,659     (0.2 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* No individual futures, forward, and options on futures and forward contract position constituted greater than 1 percent of partners’ capital. Accordingly, the number of contracts and expiration dates are not presented.
** Represents less than 0.1% of partners’ capital.

The accompanying notes are an integral part of these consolidated financial statements.

 

2


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Condensed Schedule of Investments (continued)

June 30, 2011

(Unaudited)

 

U.S. Government securities in brokers’ trading accounts***

 

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$130,050,000    2/9/2012-5/31/2012   

U.S. Treasury Bills, 0.1%-0.3% (cost $129,749,612)

   $ 129,943,165         15.1
        

 

 

    

 

 

 

 

*** Pledged as collateral for the trading of futures, forward and options on futures contracts.

Securities owned

Bank deposits

 

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$25,000,000    11/3/2011-5/24/2012   

U.S. Certificates of deposit, 0.2-0.4% (cost $25,000,000)

   $ 25,009,930         2.9
        

 

 

    

 

 

 

U.S. Commercial paper

 

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$35,000,000    8/10/2011-9/28/2011   

U.S. Commercial paper, 0.2-0.3% (cost $34,977,661)

   $ 34,984,914         4.1
        

 

 

    

 

 

 

U.S. Government-sponsored enterprises

 

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$79,500,000    9/9/2013-6/30/2014   

Federal Home Loan Bank, 1.0-1.5%

   $ 79,666,119         9.3
$45,175,000    12/16/2013-6/13/2014   

Federal Farm Credit Bank, 1.1-1.6%

   $ 45,223,797         5.3
$15,000,000    8/23/2013   

Federal Agricultural Mortgage Corp., 1.3%

   $ 15,066,666         1.7
        

 

 

    

 

 

 
  

Total U.S. Government-sponsored enterprises (cost $139,672,000)

   $ 139,956,582         16.3
        

 

 

    

 

 

 

U.S. Government securities

 

Face Value

  

Maturity Dates

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$75,000,000    5/3/2012-6/28/2012   

U.S. Treasury Bills, 0.2% (cost $74,873,368)

   $ 74,881,750         8.7
        

 

 

    

 

 

 

 

     Fair Value      Percent of
Partners’  Capital
(net asset value)
 

Total securities owned

   $ 274,833,176         32.0
  

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Condensed Schedule of Investments

December 31, 2010

Futures, Forwards and Options on Futures Contracts

 

    Expiration
Dates
    No. of
Contracts
    Unrealized
gain/(loss)

on open
long
contracts
    Percent
of
Partners’
Capital
(net asset
value)
    Unrealized
gain/(loss)

on open
short
contracts
    Percent
of
Partners’
Capital
(net asset
value)
    Net
unrealized
gain/(loss)

on open
contracts
    Percent
of
Partners’
Capital
(net asset
value)
 
      Long     Short              

Futures Contracts *

                 

U.S. Futures Positions:

                 

Agriculturals

        $ 6,663,696        0.7   $ (377,927     **      $ 6,285,769        0.7

Currencies

        $ 9,558,662        1.1   $ 2,283,505        0.2   $ 11,842,167        1.3

Energy

        $ 2,655,082        0.3   $ (1,303,695     (0.1 )%    $ 1,351,387        0.2

Interest rates

        $ 277,176        **      $ (418,671     **      $ (141,495     **   

Meats

        $ 787,250        0.1   $ (20,500     **      $ 766,750        0.1

Metals

        $ 4,039,143        0.5   $ (616,704     (0.1 )%    $ 3,422,439        0.4

Soft commodities

        $ 2,720,770        0.3   $ (216,592     **      $ 2,504,178        0.3

Stock indices and single stock futures

        $ 928,568        0.1   $ 71,857        **      $ 1,000,425        0.1
       

 

 

     

 

 

     

 

 

   

Total U.S. Futures Positions

        $ 27,630,347        $ (598,727     $ 27,031,620     
       

 

 

     

 

 

     

 

 

   

Foreign Futures Positions:

                 

Agriculturals

        $ 24,719        **      $ —          **      $ 24,719        **   

Energy

        $ 509,737        0.1   $ (17,165     **      $ 492,572        0.1

Interest rates

        $ 2,243,690        0.2   $ (983,344     (0.1 )%    $ 1,260,346        0.1

Metals

            $ (11,958,488     (1.4 )%    $ 4,056,349        0.4

Copper

   
 
1/19/2011-
6/15/2011
 
  
    386        208      $ 8,937,572        1.0   $ (4,285,970     (0.5 )%    $ 4,651,602        0.5

Other Metals

        $ 7,077,265        0.8   $ (7,672,518     (0.9 )%    $ (595,253     (0.1 )% 

Soft commodities

        $ 27,959        **      $ —          **      $ 27,959        **   

Stock indices

        $ (120,097     **      $ 148,949        **      $ 28,852        **   
       

 

 

     

 

 

     

 

 

   

Total Foreign Futures Positions

        $ 18,700,845        $ (12,810,048     $ 5,890,797     
       

 

 

     

 

 

     

 

 

   

Total Futures Contracts

        $ 46,331,192        5.2   $ (13,408,775     (1.5 )%    $ 32,922,417        3.7
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward Contracts *

                 

Currencies

        $ 3,078,051        0.3   $ (39,629     **      $ 3,038,422        0.3
       

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Options on Futures Contracts*

                 

U.S. stock indices

        $ 4,840        **      $ (9,465     **      $ (4,625     **   
       

 

 

     

 

 

     

 

 

   

Total Futures, Forward and Options on Futures Contracts

                 
        $ 49,414,083        5.5   $ (13,457,869     (1.5 )%    $ 35,956,214        4.0
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* No individual futures, forward, or options on futures contract position constituted greater than 1 percent of partners’ capital. Accordingly, the number of contracts and expiration dates are not presented.
** Represents less than 0.1% of partners’ capital.

U.S. Government securities in brokers’ trading accounts***

 

Face Value

  

Maturity Dates

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$98,450,000    1/6/2011-3/31/2011   

U.S. Treasury Bills, 0.1%-0.3% (cost $98,314,299)

   $ 98,441,357         11.0
        

 

 

    

 

 

 

 

*** Pledged as collateral for the trading of futures, forward and options on futures contracts.

The accompanying notes are an integral part of these consolidated financial statements.

 

4


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Condensed Schedule of Investments (continued)

December 31, 2010

 

Securities owned

Bank deposits

 

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of

Partners’ Capital
(net asset value)

 
$20,000,000    4/29/2011   

Bank of Nova Scotia, 0.3 % (cost $20,000,000)

   $ 20,009,468         2.2
        

 

 

    

 

 

 

U.S. Commercial paper

     

Face Value

  

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$15,000,000    2/2/2011   

Citigroup Funding, 0.3% (cost $14,988,158)

   $ 14,996,133         1.7
        

 

 

    

 

 

 

U.S. Government-sponsored enterprises

 

Face Value

    

Maturity Dates

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

 
$ 130,500,000       9/9/2013-12/30/2013   

Federal Home Loan Bank, 1.0-1.6%

   $ 130,677,841         14.6
$ 61,575,000       2/14/2011-12/16/2013   

Federal Farm Credit Bank, 0.2-1.4%

   $ 61,636,684         6.9
$ 45,000,000       4/27/2012-5/25/2012   

Federal National Mortgage Association, 1.3-1.4%

   $ 45,087,111         5.1
$ 30,075,000       2/1/2011-1/25/2012   

Federal Home Loan Mortgage Corp., 0.1-1.3%

   $ 30,109,748         3.4
$ 15,000,000       8/23/2013   

Federal Agricultural Mortgage Corp., 1.3%

   $ 15,066,667         1.7
$ 10,000,000       7/8/2011   

Federal Home Loan Discount Note, 0.4%

   $ 9,977,544         1.1
        

 

 

    

 

 

 
  

Total U.S. Government-sponsored enterprises (cost $292,091,597)

   $ 292,555,595         32.8
        

 

 

    

 

 

 

U.S. Government securities

 

Face Value

    

Maturity Dates

  

Description

  

Fair Value

    

Percent of

Partners’ Capital
(net asset value)

 
  $120,000,000       3/31/2011-11/17/2011   

U.S. Treasury Bills, 0.1%-0.3% (cost $119,853,362)

   $ 119,865,174         13.3
        

 

 

    

 

 

 

 

     Fair Value      Percent of
Partners’ Capital
(net asset value)
 

Total securities owned

   $ 447,426,370         50.1
  

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Statements of Operations

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  
     (Unaudited)     (Unaudited)  

Net trading gains (losses)

        

Net gain (loss) from futures and forward trading

        

Realized

   $ (24,070,301   $ 20,658,873        (2,756,641   $ (11,668,358

Change in unrealized

     (26,449,348     (22,375,478     (37,611,873     (5,993,193

Commissions

     (3,227,843     (3,109,340     (6,544,392     (6,120,117
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gains (losses) from futures and forward trading

     (53,747,492     (4,825,945     (46,912,906     (23,781,668
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gain (loss) from equities, equity options and exchange-traded funds

        

Realized

     863,322        0        408,727        0   

Change in unrealized

     (462,163     0        0        0   

Commissions

     44,149        0        (68,873     0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gains (losses) from equities, equity options and exchange-traded funds

     445,308        0        339,854        0   

Total trading gains (losses)

     (53,302,184     (4,825,945     (46,573,052     (23,781,668
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

        

Income

        

Dividend income

     38,431        0        72,394        0   

Interest income

     890,006        1,335,293        1,829,124        2,466,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income

     928,437        1,335,293        1,901,518        2,466,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses from operations

        

Dividend expense

     119,148        0        159,212        0   

Brokerage commission

     13,391,578        12,689,455        27,051,179        25,143,261   

Incentive fees

     107,190        1,139,881        1,763,036        1,380,933   

Organizational and offering costs

     649,335        518,223        1,302,799        1,020,019   

Operating expenses

     566,746        589,808        1,138,341        1,158,058   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     14,833,997        14,937,367        31,414,567        28,702,271   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss

     (13,905,560     (13,602,074     (29,513,049     (26,235,760
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (67,207,744   $ (18,428,019   $ (76,086,101   $ (50,017,428
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per unit from operations (based on weighted average number of units outstanding during the period) and decrease in net asset value per unit for the period:

        

General Partner & Limited Partner Class A Units

   $ (104.32   $ (31.74   $ (116.24   $ (82.86
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Class B Units

   $ (90.84   $ (29.09   $ (103.05   $ (74.93
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Legacy 1 Class Units

   $ (66.98   $ (17.28   $ (69.40   $ (47.74
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Legacy 2 Class Units

   $ (67.63   $ (17.91   $ (70.84   $ (48.89
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 1 Class Units

   $ (68.08   $ (4.03   $ (74.36   $ (39.87
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 2 Class Units

   $ (68.39   $ (4.41   $ (75.23   $ (41.34
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 3 Class Units

   $ (69.71   $ (8.81   $ (81.02   $ (49.24
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


Table of Contents

Grant Park Futures Fund Limited Partnership

Consolidated Statements of Changes in Partners’ Capital (Net Asset Value)

Six Months Ended June 30, 2011

(Unaudited)

 

    Class A     Class B     Legacy 1 Class     Legacy 2 Class  
    General
Partner
    Limited
Partners
    General
Partner
    Limited
Partners
    General
Partner
    Limited
Partners
    General
Partner
    Limited
Partners
 
    Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount     Number
of
Units
    Amount  

Partners’ capital, (net asset value) December 31, 2010

    3,008.66      $ 4,478,872        40,362.54      $ 60,086,201        427.01      $ 542,672        498,484.71      $ 633,504,348        1,025.00      $ 1,050,542        5,908.00      $ 6,055,220        1,000.00      $ 1,019,793        6,361.06      $ 6,486,967   

Contributions

    0        0        0        0        0        0        0        0        0        0        429.19        446,000        0        0        5,214.42        5,293,450   

Redemptions

    0        0        (1,793.71     (2,638,802     0        0        (27,732.22     (34,728,224     0        0        (830.92     (841,780     0        0        (170.75     (177,000

Net loss

    0        (349,741     0        (4,514,872     0        (44,002     0        (49,025,702     0        (71,134     0        (398,085     0        (70,845     0        (780,919
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital, (net asset value) June 30, 2011

    3,008.66      $ 4,129,131        38,568.83      $ 52,932,527        427.01      $ 498,670        470,752.49      $ 549,750,422        1,025.00      $ 979,408        5,506.27      $ 5,261,355        1,000.00      $ 948,948        11,404.73      $ 10,822,498   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at December 31, 2010

      $1,488.66            $1,270.86            $1,024.92            $1,019.79     

Net asset value per unit at June 30, 2011

      $1,372.42            $1,167.81            $   955.52            $   948.95     

 

    Global 1 Class     Global 2 Class     Global 3 Class        
    General Partner     Limited Partners     General Partner     Limited Partners     General Partner     Limited Partners        
    Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Total
Amount
 

Partners’ capital, (net asset value) December 31, 2010

    1,044.66      $ 1,028,338        10,133.38      $ 9,975,048        1,181.06      $ 1,155,098        18,631.40      $ 18,221,772        500.00      $ 473,009        156,270.73      $ 147,834,890      $ 891,912,770   

Contributions

    0        0        3,290.33        3,219,040        443.46        430,000        6,026.00        5,861,680        0        0        80,576.18        75,426,974        90,677,144   

Redemptions

    0        0        (574.88     (556,885     0        0        (1,630.91     (1,557,969     0        0        (7,823.77     (7,245,297     (47,745,957

Net loss

    0        (77,683     0        (944,566     0        (118,513     0        (1,737,673     0        (40,509     0        (17,911,857     (76,086,101
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital, (net asset value) June 30, 2011

    1,044.66      $ 950,655        12,848.83      $ 11,692,637        1,624.52      $ 1,466,585        23,026.49      $ 20,787,810        500.00      $ 432,500        229,023.14      $ 198,104,710      $ 858,757,856   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at December 31, 2010

      $984.38            $978.01            $946.02       

Net asset value per unit at June 30, 2011

      $910.02            $902.78            $865.00       

The accompanying notes are an integral part of these consolidated financial statements.

 

7


Table of Contents

Grant Park Futures Fund Limited Partnership

Statements of Changes in Partners’ Capital (Net Asset Value) (continued)

Six Months Ended June 30, 2010

(Unaudited)

 

    Class A     Class B     Legacy 1 Class     Legacy 2 Class  
    General Partner     Limited Partners     General Partner     Limited Partners     General Partner     Limited Partners     General Partner     Limited Partners  
    Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount  

Partners’ capital, (net asset value) December 31, 2009

    3,008.66      $ 4,287,922        48,356.59      $ 68,917,549        427.01      $ 522,813        570,593.04      $ 698,607,417        1,025.00      $ 990,276        3,851.25      $ 3,720,780        1,000.00      $ 964,540        3,122.95      $ 3,012,215   

Contributions

    0        0        0        0        0        0        0        0        0        0        1,975.78        1,845,814        0        0        1,912.99        1,768,629   

Redemptions

    0        0        (5,770.81     (7,808,989     0        0        (35,409.13     (41,020,064     0        0        (96.44     (89,369     0        0        (38.89     (36,330

Net loss

    0        (249,279     0        (3,943,906     0        (31,997     0        (42,435,657     0        (48,938     0        (214,371     0        (48,889     0        (168,964
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital, June 30, 2010

    3,008.66      $ 4,038,643        42,585.78      $ 57,164,654        427.01      $ 490,816        535,183.91      $ 615,151,696        1,025.00      $ 941,338        5,730.59      $ 5,262,854        1,000.00      $ 915,651        4,997.05      $ 4,575,550   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at December 31, 2009

      $1,425.20            $1,224.35            $966.12            $964.54     

Net asset value per unit at June 30, 2010

      $1,342.34            $1,149.42            $918.38            $915.65     

 

    Global 1 Class     Global 2 Class     Global 3 Class        
    General Partner     Limited Partners     General Partner     Limited Partners     General Partner     Limited Partners        
    Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Number
of Units
    Amount     Total
Amount
 

Partners’ capital, (net asset value) December 31, 2009

    1,044.66      $ 999,554        3,358.60      $ 3,213,581        708.97      $ 676,076        7,333.83      $ 6,993,517        500.00      $ 469,821        40,328.60      $ 37,894,437      $ 831,270,498   

Contributions

    0        0        4,735.95        4,324,837        332.48        305,000        8,349.50        7,645,026        0        0        68,978.54        61,764,712        77,654,018   

Redemptions

    0        0        (334.35     (308,381     0        0        (262.86     (241,164     0        0        (782.17     (695,250     (50,199,547

Net loss

    0        (41,655     0        (114,325     0        (31,006     0        (329,973     0        (24,624     0        (2,333,844     (50,017,428
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital, June 30, 2010

    1,044.66      $ 957,899        7,760.20      $ 7,115,712        1,041.45      $ 950,070        15,420.47      $ 14,067,406        500.00      $ 445,197        108,524.97      $ 96,630,055      $ 808,707,541   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at December 31, 2009

      $956.82            $953.60            $939.64       

Net asset value per unit at June 30, 2010

      $916.95            $912.26            $890.40       

The accompanying notes are an integral part of these consolidated financial statements.

 

8


Table of Contents

Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: Grant Park Futures Fund Limited Partnership (the “Partnership”) was organized as a limited partnership under Illinois law in August 1988 and will continue until December 31, 2027, unless sooner terminated as provided for in its Limited Partnership Agreement. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission (“CFTC”), an agency of the United States (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 the various commodity exchanges where the Partnership executes transactions. Additionally, the Partnership is subject to the requirements of futures commission merchants (“FCMs”) and interbank and other market makers through which the Partnership trades. The Partnership is a registrant with the Securities and Exchange Commission (“SEC”), and, accordingly is subject to the regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

The Partnership engages in the speculative trading of futures and forward contracts for commodities, financial instruments or currencies, any rights pertaining thereto and any options thereon, or on physical commodities, equities, listed options, and broad based exchange-traded funds. The Partnership may also engage in hedge, arbitrage and cash trading of commodities and futures.

The Partnership is a multi-advisor pool that carries out its purpose through trading by independent professional commodity trading advisors retained by Dearborn Capital Management, L.L.C. (the “General Partner”), the Partnership and, the Partnership’s subsidiary limited liability trading companies (each, a “Trading Company” and collectively, the “Trading Companies”). The Trading Companies were set up to, among other things, segregate risk by commodity trading advisor. Effectively, this structure isolates one trading advisor from another and any losses from one Trading Company will not carry over to the other Trading Companies. The following is a list of the Trading Companies, for which the Partnership is the sole member and all of which were organized as Delaware limited liability companies:

 

GP 1, LLC (“GP 1”)    GP 7, LLC (“GP 7”)    GP 12, LLC (“GP 12”)
GP 3, LLC (“GP 3”)    GP 8, LLC (“GP 8”)    GP 14, LLC (“GP 14”)
GP 4, LLC (“GP 4”)    GP 9, LLC (“GP 9”)    GP 15, LLC (“GP 15”)
GP 5, LLC (“GP 5”)    GP 10, LLC (“GP 10”)    GP 16, LLC (“GP 16”)
GP 6, LLC (“GP 6”)    GP 11, LLC (“GP 11”)   

There were no assets allocated to GP 6 and GP 11 as of June 30, 2011.

Additionally, GP Cash Management, LLC was created as a Delaware limited liability company to collectively manage and invest excess cash not required to be held at clearing brokers. The members of GP Cash Management, LLC are the Trading Companies.

Classes of interests: The Partnership has seven classes of limited partner interests (each, a “Class” and collectively, the “Interests”), Class A, Class B, Legacy 1 Class, Legacy 2 Class, Global Alternative Markets 1 (“Global 1”) Class, Global Alternative Markets 2 (“Global 2”) Class and Global Alternative Markets 3 (“Global 3”) Class units.

The Class A and Class B units are outstanding but are no longer offered by the Partnership. Both Class A and Class B units are traded pursuant to identical trading programs and differ only in respect to the brokerage commission payable to the General Partner.

The Legacy 1 Class and Legacy 2 Class units are traded pursuant to trading programs pursuing a technical trend trading philosophy, which is the same trading philosophy used for the Class A and Class B units. The Legacy 1 Class and Legacy 2 Class units differ in respect to the General Partner’s brokerage commission and organization and offering and costs. The Legacy 1 Class and Legacy 2 Class units are offered only to investors who are represented by approved selling agents who are directly compensated by the investor for services rendered in connection with an investment in the Partnership (such arrangements commonly referred to as “wrap-accounts”).

The Global 1 Class, Global 2 Class and Global 3 Class units are traded pursuant to trading programs pursuing technical trend trading philosophies, as well as pattern recognition philosophies, focused on relatively shorter timeframes than the Legacy 1 Class and Legacy 2 Class units. The Global 1 Class, Global 2 Class and Global 3 Class units differ in respect to the General Partner’s brokerage commission. The Global 1 Class and Global 2 Class units are offered only to investors in wrap-accounts.

 

9


Table of Contents

Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

The Partnership’s significant accounting policies are as follows:

Consolidation: The Partnership is the sole member of each of the Trading Companies. The Trading Companies, in turn, are the only members of GP Cash Management, LLC. The Partnership presents consolidated financial statements for the Partnership, which include the accounts of the Trading Companies and GP Cash Management, LLC. All material inter-company accounts and transactions are eliminated in consolidation. Financial Accounting Standards Board (“FASB”) guidance under FASB ASC 810 establishes accounting and reporting requirements for noncontrolling interests. This guidance requires noncontrolling interests to be reported as a component of partners’ capital (net asset value) on the consolidated statement of financial condition and the amount of net income (loss) attributable to noncontrolling interests to be identified on the consolidated statement of operations.

Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles (“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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents: Cash and cash equivalents may include cash, overnight investments, commercial paper, U.S. treasury bills and short-term investments in interest-bearing demand deposits with banks and cash managers with maturities of three months or less at the date of acquisition. The Partnership maintains deposits with high quality financial institutions in amounts that are in excess of federally insured limits; however, the Partnership does not believe it is exposed to any significant credit risk.

Revenue recognition: Futures, options on futures, forward contracts, investments in equity securities, exchange traded funds and equity options are recorded on a trade date basis and realized gains or losses are recognized when contracts or securities are liquidated. Unrealized gains or losses on open contracts (the difference between contract trade price and market price) or securities are reported in the consolidated statement of financial condition as a net unrealized gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with FASB ASC 210-20, Balance Sheet, Offsetting. Any change in net unrealized gain or loss from the preceding period is reported in the consolidated statement of operations.

Redemptions payable: Pursuant to the provisions of FASB ASC 480, Distinguishing Liabilities from Equity, redemptions approved by the General Partner prior to month end with a fixed effective date and fixed amount are recorded as redemptions payable as of month end.

Income taxes: No provision for income taxes has been made in these consolidated financial statements as each partner is individually responsible for reporting income or loss based on its respective share of the Partnership’s income and expenses as reported for income tax purposes.

The Partnership follows the provisions of ASC 740, Income Taxes. The Partnership is not generally subject to examination by U.S. federal or state taxing authorities for tax years before 2007. As of June 30, 2011, the Partnership has no material uncertain income tax positions and, accordingly, has not recorded a liability for the payment of interest or penalties.

Organization and offering costs: All expenses incurred in connection with the organization and the ongoing public offering of partnership interests are paid by the General Partner and are reimbursed to the General Partner by the Partnership. This reimbursement is made monthly. In its discretion, the General Partner may require the Partnership to reimburse the General Partner in any subsequent calendar year for amounts that exceed the limits in Note 5 in any calendar year, provided that the maximum amount reimbursed by the Partnership will not exceed the overall limit. Amounts reimbursed by the Partnership with respect to ongoing public offering expenses are charged to expense from operations at the time of reimbursement or accrual. Any amounts reimbursed by the Partnership with respect to organizational expenses are expensed at the time the reimbursement is incurred or accrued. If the Partnership terminates prior to completion of payment of the calculated amounts to the General Partner, the General Partner will not be entitled to any additional payments, and the Partnership will have no further obligation to the General Partner. At June 30, 2011, all organization and offering costs incurred by the General Partner have been reimbursed.

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 consolidated 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.

 

10


Table of Contents

Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

The Partnership does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized or unrealized gain or loss from investments.

Reclassification: Certain amounts in the 2010 financial statements have been reclassified to conform with the 2011 presentation.

Statement of cash flows: The Partnership has elected not to provide statements of cash flows as permitted by FASB ASC 230, Statement of cash flows. The Partnership noted that as of and for the periods ended June 30, 2011 and 2010 substantially all investments were highly liquid, all investments are carried at fair value, the Partnership carried no debt, and the statements of changes in partners’ capital (net asset value) were presented.

Recent accounting pronouncements: In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value” and enhanced disclosure requirements for investments that do not have readily determinable fair values. The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the FASB Codification in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Partnership is currently assessing the impact of ASU 2011-04 on its future consolidated financial statements.

Note 2. Fair Value Measurements

The Partnership follows the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurement and also emphasizes that fair value is a market-based measurement, not an entity-specific measurement. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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 FASB ASC 820 as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under FASB ASC 820 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 following section describes the valuation techniques used by the Partnership to measure different financial instruments at fair value and includes the level within the fair value hierarchy in which the financial instrument is categorized.

Fair value of exchange-traded futures contracts and options on futures contracts are based upon exchange settlement prices. U.S. Government securities, U.S. Government-sponsored enterprises and commercial paper are stated at cost plus accrued interest, which approximates fair value based on quoted market prices in an active market. These financial instruments are classified in Level 1 of the fair value hierarchy.

The Partnership values bank deposits, which consist of certificates of deposit, at face value plus accrued interest, which approximates fair value, and these financial instruments are classified in Level 2 of the fair value hierarchy. The Partnership values forward contracts based on third-party quoted dealer values on the Interbank market, and forward contracts are classified in Level 2.

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

The following table presents the Partnership’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2011:

 

Assets

   Level 1     Level 2     Level 3      Total  

Equity in brokers’ trading accounts

         

U.S. Government securities

   $ 129,943,165      $ 0      $ 0       $ 129,943,165   

U.S. and Foreign Futures contracts

     (248,260     0        0         (248,260

Forward contracts

     0        (1,606,180     0         (1,606,180

Options on futures contracts

     136,058        0        0         136,058   

Options on forward contracts

     0        62,723        0         62,723   

Cash and cash equivalents

         

Bank deposits

     0        16,422,021        0         16,422,021   

U.S. Commercial paper

     421,047,398        0        0         421,047,398   

Securities owned

         

Bank deposits

     0        25,009,930        0         25,009,930   

U.S. Commercial paper

     34,984,914        0        0         34,984,914   

U.S. Government-sponsored enterprises

     139,956,582        0        0         139,956,582   

U.S. Government securities

     74,881,750        0        0         74,881,750   

The following table presents the Partnership’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2010:

 

Assets

   Level 1     Level 2      Level 3      Total  

Equity in brokers’ trading accounts

          

U.S. Government securities

   $ 98,441,357      $ 0       $ 0       $ 98,441,357   

U.S. and Foreign Futures contracts

     32,922,417        0         0         32,922,417   

Forward contracts

     0        3,038,422         0         3,038,422   

Options on futures contracts

     (4,625     0         0         (4,625

Cash and cash equivalents

          

Bank deposits

     0        28,202,983         0         28,202,983   

U.S. Commercial paper

     297,810,795        0         0         297,810,795   

Securities owned

          

Bank deposits

     0        20,009,468         0         20,009,468   

U.S. Commercial paper

     14,996,133        0         0         14,996,133   

U.S. Government-sponsored enterprises

     292,555,595        0         0         292,555,595   

U.S. Government securities

     119,865,174        0         0         119,865,174   

Note 3. Deposits with Brokers

The Partnership, through the Trading Companies, deposits assets with brokers subject to CFTC regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury bills, Government-sponsored enterprises and cash with such brokers. The Partnership earns interest income on its assets deposited with the brokers.

Note 4. Commodity Trading Advisors

The Partnership, through the Trading Companies, allocates assets to the commodity trading advisors. Each Trading Company has entered into an advisory contract with its own Advisor. The commodity trading advisors are Rabar Market Research, Inc., EMC Capital Management, Inc., Eckhardt Trading Co., Winton Capital Management Limited, Welton Investment Corporation, Global Advisors Jersey Limited, Transtrend B.V., Quantitative Investment Management LLC, Sunrise Capital Partners, LLC, Amplitude Capital International Limited, Alder Capital Limited (“Alder”) and Denali Asset Management, LLLP (“Denali”) (collectively, the “Advisors”). The Advisors are paid a quarterly management fee ranging from 0 percent to 3 percent per annum of the Partnership’s month-end allocated net assets and a quarterly incentive fee ranging from 20 percent to 26 percent of the new trading profits on the allocated net assets of the Advisor.

Note 5. General Partner and Related Party Transactions

The General Partner shall at all times, so long as it remains a general partner of the Partnership, own Units in the Partnership: (i) in an amount sufficient, in the opinion of counsel for the Partnership, for the Partnership to be taxed as a partnership rather than as an association taxable as a corporation; and (ii) during such time as the Units are registered for sale to the public, in an amount at least

 

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Table of Contents

Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

equal to the greater of: (a) 1 percent of all capital contributions of all Partners to the Partnership; or (b) $25,000; or such other amount satisfying the requirements then imposed by the North American Securities Administrators Association, Inc. (NASAA) Guidelines. Further, during such time as the Units are registered for sale to the public, the General Partner shall, so long as it remains a general partner of the Partnership, maintain a net worth (as such term may be defined in the NASAA Guidelines) at least equal to the greater of: (i) 5 percent of the total capital contributions of all partners and all limited partnerships to which it is a general partner (including the Partnership) plus 5 percent of the Units being offered for sale in the Partnership; or (ii) $50,000; or such other amount satisfying the requirements then imposed by the NASAA Guidelines. In no event, however, shall the General Partner be required to maintain a net worth in excess of $1,000,000 or such other maximum amount satisfying the requirements then imposed by the NASAA Guidelines.

Ten percent of the General Partner limited partnership interest in the Grant Park Futures Fund Limited Partnership is characterized as a general partnership interest. Notwithstanding, the general partnership interest will continue to pay all fees associated with a limited partnership interest.

The Partnership pays the General Partner a monthly brokerage commission, organization and offering costs and operating expenses as presented in the table below:

 

     Brokerage commission*     Organization and Offering
Reimbursement*
    Operating Expense*  

Class A units

     7.50     .10     .25

Class B units

     7.95     .30     .25

Legacy 1 Class units

     5.00     .30     .25

Legacy 2 Class units

     5.25     .30     .25

Global 1 Class units

     4.45     .30     .25

Global 2 Class units

     4.70     .30     .25

Global 3 Class units

     6.45     .30     .25

 

* The fees are calculated and payable monthly on the basis of month-end adjusted net assets. “Adjusted net assets” is defined as the month-end net assets of the particular class before accruals for fees and expenses and redemptions.

Included in the total brokerage commission are amounts paid to the clearing brokers for execution and clearing costs which are reflected in the commissions line of the consolidated statements of operations, and the remaining amounts are management fees paid to the Advisors, compensation to the selling agents and an amount to the General Partner for management services rendered which are reflected in the brokerage commission line on the consolidated statements of operations.

Operating expenses of the Partnership are paid for by the General Partner and reimbursed by the Partnership.

Note 6. Redemptions

Class A and Class B Limited Partners have the right to redeem units as of any month-end upon ten (10) days’ prior written notice to the Partnership. The General Partner, however, may permit earlier redemptions in its discretion. There are no redemption fees applicable to Class A Limited Partners or to Class B Limited Partners who redeem their units on or after the one-year anniversary of their subscription. Legacy 1 Class, Legacy 2 Class, Global 1 Class, Global 2 Class and Global 3 Class Limited Partners are prohibited from redeeming such units for the three months following the subscription for units. There are no redemption fees applicable to Legacy 1 Class, Legacy 2 Class, Global 1 Class, Global 2 Class Limited Partners or to Global 3 Class Limited Partners who redeem their units on or after the one-year anniversary of their subscription. Global 3 Class Limited Partners who redeem their units after the three-month lock-up, but prior to the one-year anniversary of their subscriptions for the redeemed units will pay the applicable early redemption fee. 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 redemption is also contingent upon the Partnership’s having property 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 nonredeeming Limited Partners.

In addition, the General Partner may at any time cause the redemption of all or a portion of any Limited Partner’s units upon fifteen (15) days’ written notice. The General Partner may also immediately redeem any Limited Partner’s units without notice if the General Partner believes that (i) the redemption is necessary to avoid having the assets of the Partnership deemed Plan Assets under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) the Limited Partner made a misrepresentation in connection with its subscription for the units, or (iii) the redemption is necessary to avoid a violation of law by the Partnership or any Partner.

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 7. Financial Highlights

The following financial highlights reflect activity related to the Partnership. Total return is based on the change in value during the period of a theoretical investment made at the beginning of each calendar month during the period and is not annualized. Individual partner’s ratios may vary from these ratios based on various factors, including but not limited to, the timing of capital transactions.

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Total return – Class A Units

     (7.06 )%      (2.31 )%      (7.81 )%      (5.81 )% 

Total return – Class B Units

     (7.22 )%      (2.47 )%      (8.11 )%      (6.12 )% 

Total return – Legacy 1 Class Units

     (6.55 )%      (1.85 )%      (6.77 )%      (4.94 )% 

Total return – Legacy 2 Class Units

     (6.65 )%      (1.92 )%      (6.95 )%      (5.07 )% 

Total return – Global 1 Class Units

     (6.96 )%      (0.44 )%      (7.55 )%      (4.17 )% 

Total return – Global 2 Class Units

     (7.04 )%      (0.48 )%      (7.69 )%      (4.34 )% 

Total return – Global 3 Class Units

     (7.46 )%      (0.98 )%      (8.56 )%      (5.24 )% 

Ratios as a percentage of average net assets:

        

Expenses prior to incentive fees (1)

     6.59     6.77     6.61     6.77

Incentive fees (2)

     0.01     0.14     0.20     0.17
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     6.60     6.91     6.81     6.94
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss (1) (3)

     (6.17 )%      (6.12 )%      (6.19 )%      (6.16 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Annualized.
(2) Not annualized.
(3) Excludes incentive fee.

The expense ratios above are computed based upon the weighted average net assets of the Partnership for the three and six months ended June 30, 2011 and 2010 (annualized).

The following per unit performance calculations reflect activity related to the Partnership for the three and six months ended June 30, 2011 and 2010.

 

Class A Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 1,476.74      $ 1,374.08      $ 1,488.66      $ 1,425.20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (82.34     (10.69     (68.91     (42.22

Expenses net of interest and dividend income*

     (21.98     (21.05     (47.33     (40.64
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (104.32     (31.74     (116.24     (82.86
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 1,372.42      $ 1,342.34      $ 1,372.42      $ 1,342.34   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

Class B Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 1,258.65      $ 1,178.51      $ 1,270.86      $ 1,224.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (70.09     (9.14     (58.55     (36.34

Expenses net of interest and dividend income*

     (20.75     (19.95     (44.50     (38.59
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (90.84     (29.09     (103.05     (74.93
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 1,167.81      $ 1,149.42      $ 1,167.81      $ 1,149.42   
  

 

 

   

 

 

   

 

 

   

 

 

 
Legacy 1 Class Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 1,022.50      $ 935.66      $ 1,024.92      $ 966.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading *

     (57.45     (6.98     (48.11     (27.95

Expenses net of interest and dividend income*

     (9.53     (10.30     (21.29     (19.79
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (66.98     (17.28     (69.40     (47.74
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 955.52      $ 918.38      $ 955.52      $ 918.38   
  

 

 

   

 

 

   

 

 

   

 

 

 
Legacy 2 Class Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 1,016.58      $ 933.56      $ 1,019.79      $ 964.54   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (57.29     (7.02     (48.36     (27.75

Expenses net of interest and dividend income*

     (10.34     (10.89     (22.48     (21.14
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (67.63     (17.91     (70.84     (48.89
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 948.95      $ 915.65      $ 948.95      $ 915.65   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

Global 1 Class Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 978.10      $ 920.98      $ 984.38      $ 956.82   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (60.08     6.36        (57.70     (20.21

Expenses net of interest and dividend income*

     (8.00     (10.39     (16.66     (19.66
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (68.08     (4.03     (74.36     (39.87
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 910.02      $ 916.95      $ 910.02      $ 916.95   
  

 

 

   

 

 

   

 

 

   

 

 

 
Global 2 Class Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 971.17      $ 916.67      $ 978.01      $ 953.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (59.81     5.91        (57.43     (20.19

Expenses net of interest and dividend income*

     (8.58     (10.32     (17.80     (21.15
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (68.39     (4.41     (75.23     (41.34
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 902.78      $ 912.26      $ 902.78      $ 912.26   
  

 

 

   

 

 

   

 

 

   

 

 

 
Global 3 Class Units    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Per Unit Performance
(for unit outstanding throughout the entire period):

        

Net asset value per unit at beginning of period

   $ 934.71      $ 899.21      $ 946.02      $ 939.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

Net realized and change in unrealized gain (loss) from trading*

     (57.29     6.35        (54.98     (18.89

Expenses net of interest and dividend income*

     (12.42     (15.16     (26.04     (30.35
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (69.71     (8.81     (81.02     (49.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 865.00      $ 890.40      $ 865.00      $ 890.40   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Expenses net of interest and dividend income per unit and organization and offering costs per unit are calculated by dividing the expenses net of interest and dividend income and organization and offering costs by the average number of units outstanding during the period. The net realized and change in unrealized gain from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

Note 8. Trading Activities and Related Risks

The Partnership, through its Advisors, engages in the speculative trading of a variety of instruments, including U.S. and foreign futures contracts, options on U.S. and foreign futures contracts, forward contracts, and equity options (collectively, derivatives; see Note 10). These derivatives include both financial and nonfinancial contracts held as part of a diversified trading strategy. Additionally, the Partnership’s speculative trading includes equities and exchange-traded funds. The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.

The purchase and sale of futures and options on futures contracts require margin deposits with FCMs. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires an FCM to segregate all customer

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

transactions and assets from the FCM’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury bills) deposited with an FCM are considered commingled with all other customer funds subject to the FCM’s segregation requirements. In the event of an FCM’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 the total of cash and other property deposited.

The amount of required margin and good faith deposits with the FCMs and interbank market makers usually ranges from 5% to 35% of the Partnership’s net asset value. The fair value of securities held to satisfy such requirements at June 30, 2011 and December 31, 2010 was $129,943,165 and $98,441,357, respectively, which was 15.1% and 11.0% of the net asset value, respectively. The cash deposited with interbank market makers at June 30, 2011 and December 31, 2010 was $10,746,131 and $7,931,341, respectively, which was 1.3% and 0.9% of the net asset value, respectively.

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 value of futures and forward 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; for purchased options the risk of loss is limited to the premiums paid.

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 clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward 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 clearinghouse backed by a group of financial institutions; thus, there likely will be greater counterparty credit risk. The Partnership trades only with those counterparties that it believes to be creditworthy. All positions of the Partnership are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Partnership.

Securities sold short represent obligations of the Partnership to deliver specific securities and thereby create a liability to purchase these instruments in the open market at prevailing prices. These transactions may result in market risk not reflected in the consolidated statement of financial condition as the Partnership’s ultimate obligation to satisfy its obligation for trading liabilities may exceed the amount reflected in the consolidated statement of financial condition.

The General Partner has established procedures to actively monitor and minimize market and credit risks. 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. Derivative Instruments

The Partnership follows the provisions of FASB ASC 815, Derivatives and Hedging, which improves transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. FASB ASC 815 applies to all derivative instruments within the scope of FASB ASC 815-10-05. It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under FASB ASC 815-10-05. FASB ASC 815 amends the current qualitative and quantitative disclosure requirements for derivative instruments and hedging activities set forth in FASB ASC 815-10-05 and generally increases the level of disaggregation that will be required in an entity’s financial statements. FASB ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements.

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

The Partnership’s business is speculative trading. The Partnership intends to close out all futures, options on futures and forward contracts prior to their expiration. 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. 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%.

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. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the 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 will likely 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.

The Partnership does not designate any derivative instruments as hedging instruments under FASB ASC 815-10-05. The monthly average futures contracts, forward contracts, options on futures contracts and equity options bought and sold was approximately 8,184 and 8,228, respectively, for the three and six months ended June 30, 2011 and 9,214 and 8,556, respectively, for the three and six months ended June 30, 2010. The following tables summarize the quantitative information required by FASB ASC 815:

 

     Fair Values of Derivative Instruments
June 30, 2011
 
     Asset Derivatives*      Liability Derivatives*     Fair Value  

Agriculturals contracts

   $ 3,676,620       $ (2,044,847   $ 1,631,773   

Currencies contracts

     10,541,452         (8,319,572     2,221,880   

Energy contracts

     1,708,469         (3,062,272     (1,353,803

Interest rates contracts

     5,374,923         (5,048,998     325,925   

Meats contracts

     54,239         (248,013     (193,774

Metals contracts

     17,650,165         (24,799,121     (7,148,956

Soft commodities contracts

     1,608,124         (335,735     1,272,389   

Stock indices contracts

     4,290,913         (2,702,006     1,588,907   
  

 

 

    

 

 

   

 

 

 
   $ 44,904,905       $ (46,560,564   $ (1,655,659
  

 

 

    

 

 

   

 

 

 

 

* The fair values of all asset and liability derivatives, including agriculturals, currencies, energy, interest rates, meats, metals, soft commodities and stock indices contracts are included in equity in broker trading accounts in the Partnership’s consolidated statements of financial condition.

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

     Fair Values of Derivative Instruments
December 31, 2010
 
     Asset Derivatives*      Liability Derivatives*     Fair Value  

Agriculturals contracts

   $ 6,741,957       $ (431,469   $ 6,310,488   

Currencies contracts

     20,057,183         (5,176,594     14,880,589   

Energy contracts

     3,684,943         (1,840,984     1,843,959   

Interest rates contracts

     2,945,795         (1,826,944     1,118,851   

Meats contracts

     846,430         (79,680     766,750   

Metals contracts

     20,402,750         (12,923,962     7,478,788   

Soft commodities contracts

     3,241,903         (709,766     2,532,137   

Stock indices contracts

     2,674,715         (1,650,063     1,024,652   
  

 

 

    

 

 

   

 

 

 
   $ 60,595,676       $ (24,639,462   $ 35,956,214   
  

 

 

    

 

 

   

 

 

 

 

* The fair values of all asset and liability derivatives, including agriculturals, currencies, energy, interest rates, meats, metals, soft commodities and stock indices contracts, are included in equity in broker trading accounts in the consolidated statement of financial condition.

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Three and Six Months Ended

June 30, 2011 and 2010

 

     Three Months Ended
June 30, 2011*
    Three Months Ended
June 30, 2010*
    Six Months Ended
June 30, 2011*
    Six Months Ended
June 30, 2010*
 

Type of Contract

                       

Agriculturals contracts

  $ (7,324,028   $ (5,192,582   $ (8,998,188   $ (9,300,696

Currencies contracts

    (4,428,059     282,117        (5,138,692     1,866,413   

Energy contracts

    (17,200,403     (14,580,047     1,836,963        (21,134,509

Interest rates contracts

    17,659,435        48,243,785        6,636,577        49,066,965   

Meats contracts

    (3,824,116     (1,767,245     (794,169     27,119   

Metals contracts

    (12,073,921     (3,939,425     (11,369,007     (5,708,887

Soft commodities contracts

    (2,720,566     (3,062,875     1,170,438        (4,962,575

Stock indices and equity options contracts

    (17,389,125     (21,700,333     (19,791,340     (27,515,381
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ (47,300,783   $ (1,716,605   $ (36,447,418   $ (17,661,551
 

 

 

   

 

 

   

 

 

   

 

 

 

 

* The gains or losses on derivatives, including agriculturals, currencies, energy, interest rates, meats, metals, soft commodities and stock indices contracts are included in the realized and change in unrealized gains (loss) from futures and forward trading in the Partnership’s consolidated statements of operations. The gains or losses on derivatives for equity options contracts are included in the realized and unrealized gains (loss) from equities, equity options and exchange-traded funds in the Partnership’s consolidated statements of operations.

 

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Grant Park Futures Fund Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 

Line Item in Consolidated Statement of Operations

   2011     2010     2011     2010  

Net gain (loss) from futures and forward trading

        

Realized

   $ (24,070,301   $ 20,658,873      $ (2,756,641   $ (11,668,358

Change in unrealized

     (26,449,348     (22,375,478     (37,611,873     (5,993,193
  

 

 

   

 

 

   

 

 

   

 

 

 

Total realized and changed in unrealized net gain (loss) from futures and forward trading

     (50,519,649     (1,716,605     (40,368,514     (17,661,551
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gain (loss) from equity options

        

Realized

     3,923,995        0        3,921,096        0   

Change in unrealized

     (705,129     0        0        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total realized and changed in unrealized net gain (loss) from equity options trading

     3,218,866        0        3,921,096        0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total realized and changed in unrealized net gain (loss) from futures, forward and equity options trading

   $ (47,300,783   $ (1,716,605   $ (36,447,418   $ (17,661,551
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 11. Subsequent Events

Subsequent to June 30, 2011, there were contributions and redemptions totaling approximately $45,652,000 and $23,000 respectively.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Grant Park is a multi-advisor commodity pool organized to pool assets of its investors for purpose of trading in the U.S. and international spot and derivatives markets for currencies, interest rates, stock indices, agricultural and energy products, precious and base metals and other commodities and underliers. The Partnership may also engage in equity securities, listed options, broad based exchange traded funds, hedge, arbitrage and cash trading of commodities and futures. Grant Park has been in continuous operation since it commenced trading on January 1, 1989. Grant Park’s general partner, commodity pool operator and sponsor is Dearborn Capital Management, L.L.C., an Illinois limited liability company. The managing member of Dearborn Capital Management, L.L.C. is Dearborn Capital Management, Ltd., an Illinois corporation whose majority shareholder is David M. Kavanagh.

Organization of Grant Park

Grant Park invests through different commodity trading advisors retained by the general partner. However, instead of each trading advisor maintaining a separate account in the name of Grant Park, the assets of Grant Park are invested in various trading companies, each of which is organized as a limited liability company. Each trading company allocates those assets to one of the commodity trading advisors retained by the general partner.

The following is a list of the Trading Companies, for which Grant Park is the sole member and all of which were organized as Delaware limited liability companies:

 

GP 1, LLC (“GP 1”)    GP 7, LLC (“GP 7”)    GP 12, LLC (“GP 12”)
GP 3, LLC (“GP 3”)    GP 8, LLC (“GP 8”)    GP 14, LLC (“GP 14”)
GP 4, LLC (“GP 4”)    GP 9, LLC (“GP 9”)    GP 15, LLC (“GP 15”)
GP 5, LLC (“GP 5”)    GP 10, LLC (“GP 10”)    GP 16, LLC (“GP 16”)
GP 6, LLC (“GP 6”)    GP 11, LLC (“GP 11”)   

None of the assets of Grant Park were invested in GP 6 and GP 11 as June 30, 2011.

Grant Park invests through the Trading Companies with independent professional commodity trading advisors retained by the general partner. Rabar Market Research, Inc. (“Rabar”), EMC Capital Management, Inc. (“EMC”), Eckhardt Trading Co. (“ETC”), Winton Capital Management (“Winton”), Welton Investment Corporation (“Welton”), Global Advisors Jersey Limited (“Global Advisors”), Transtrend B.V. (“Transtrend”), Quantitative Investment Management LLC (“QIM”), Sunrise Capital Partners, LLC (“Sunrise”), Amplitude Capital International Limited (“Amplitude”), Alder Capital Limited (“Alder”) and Denali Asset Management, LLLP (“Denali”) serve as Grant Park’s commodity trading advisors. Each of the trading advisors is registered as a commodity trading advisor under the Commodity Exchange Act and is a member of the NFA. As of June 30, 2011, the general partner allocated Grant Park’s net assets through the respective Trading Companies among its core trading advisors ETC, Winton and Welton and non-core trading advisors EMC, Rabar, Global Advisors, QIM, Transtrend, Sunrise, Amplitude, Alder and Denali. No more than twenty percent of Grant Park’s assets are allocated to any one Trading Company and, in turn, any one trading advisor. The general partner may terminate or replace the trading advisors or retain additional trading advisors in its sole discretion.

The table below illustrates the trading advisors for each class of Grant Park’s outstanding limited partnership units as of June 30, 2011:

 

     Alder    Amplitude    Denali    EMC    ETC    Global
Advisors
   QIM    Rabar    Sunrise    Transtrend    Welton    Winton

Class A

   X    X    X    X    X    X    X    X    X    X    X    X

Class B

   X    X    X    X    X    X    X    X    X    X    X    X

Legacy 1

   X    X    X    X    X    X    X    X    X    X    X    X

Legacy 2

   X    X    X    X    X    X    X    X    X    X    X    X

Global 1

   X    X    X    X    X       X    X    X    X    X    X

Global 2

   X    X    X    X    X       X    X    X    X    X    X

Global 3

   X    X    X    X    X       X    X    X    X    X    X

The trading advisors for the Legacy 1 Class and Legacy 2 Class units pursue a technical trend trading philosophy, which is the same trading philosophy the trading advisors have historically used for the Class A and Class B units. The trading advisors for the Global 1 Class, Global 2 Class and Global 3 Class units pursue technical trend trading philosophies, as well as pattern recognition philosophies focused on relatively shorter timeframes than the Legacy 1 Class and Legacy 2 Class units.

The general partner may, in its sole discretion, reallocate assets among the trading advisors upon termination of a trading advisor or retention of any new trading advisors, or at the commencement of any month.

 

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Critical Accounting Policies

Grant Park’s most significant accounting policy is the valuation of its assets invested in other commodity investment pools and in U.S. and international futures and forward contracts, options contracts, other interests in commodities, and fixed income products. The majority of these investments are exchange-traded contracts, valued based upon exchange settlement prices. The remainder of its investments are non-exchange-traded contracts with valuation of those investments based on third-party quoted dealer values on the Interbank market and fixed income products including U.S. Government-sponsored enterprises and commercial paper, which are stated at cost plus accrued interest, which approximates fair value based on quoted market prices in an active market. With the valuation of the investments easily obtained, there is little or no judgment or uncertainty involved in the valuation of investments, and accordingly, it is unlikely that materially different amounts would be reported under different conditions using different but reasonably plausible assumptions.

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Grant Park’s significant accounting policies are described in detail in Note 1 of the consolidated financial statements.

Grant Park is the sole member of each of the Trading Companies. The Trading Companies, in turn, are the only members of GP Cash Management, LLC. Grant Park presents consolidated financial statements which include the accounts of the Trading Companies and GP Cash Management, LLC. All material inter-company accounts and transactions are eliminated in consolidation. FASB guidance under FASB ASC 810 establishes accounting and reporting requirements for noncontrolling interests. This guidance requires noncontrolling interests to be reported as a component of partners’ capital on the consolidated statement of financial condition and the amount of net income (loss) attributable to noncontrolling interests to be identified on the consolidated statement of operations.

Valuation of Financial Instruments

Grant Park follows the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurement and also emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Grant Park records all investments at fair value in the financial statements. Changes in fair value are recorded as unrealized gain or losses and are reported in the consolidated statement of operations. Fair value of exchange-traded futures contracts and options on futures contracts are based upon exchange settlement prices. Equity securities, equity options and exchange-traded funds are recorded at fair value based on quoted market prices, which is generally the exchange settlement price. U.S. Government securities, U.S. Government-sponsored enterprises and commercial paper are stated at cost plus accrued interest, which approximates fair value based on quoted market prices in an active market. The Partnership values bank deposits at face value plus accrued interest, which approximates fair value.

Results of Operations

Grant Park’s returns, which are Grant Park’s trading gains plus interest income less brokerage fees, performance fees, operating costs and offering costs borne by Grant Park, for the three and six months ended June 30, 2011 and 2010, are set forth in the table below:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Total return – Class A units

     (7.06 )%      (2.31 )%      (7.81 )%      (5.81 )% 

Total return – Class B units

     (7.22 )%      (2.47 )%      (8.11 )%      (6.12 )% 

Total return – Legacy 1 Class units

     (6.55 )%      (1.85 )%      (6.77 )%      (4.94 )% 

Total return – Legacy 2 Class units

     (6.65 )%      (1.92 )%      (6.95 )%      (5.07 )% 

Total return – Global 1 Class units

     (6.96 )%      (0.44 )%      (7.55 )%      (4.17 )% 

Total return – Global 2 Class units

     (7.04 )%      (0.48 )%      (7.69 )%      (4.34 )% 

Total return – Global 3 Class units

     (7.46 )%      (0.98 )%      (8.56 )%      (5.24 )% 

 

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Grant Park’s net asset value at June 30, 2011 was approximately $858.8 million, at December 31, 2010 was approximately $891.9 million and at June 30, 2010 was approximately $808.7 million.

The table below sets forth Grant Park’s trading gains or losses by sector for the three and six month periods ended June 30, 2011 and 2010.

 

     % Gain (Loss)  
     Three Months Ended
June 30,
    Six Months Ended
June 30,
 

Sector

   2011     2010     2011     2010  

Agriculturals

     —       —       —       —  

Currencies

     (0.5     —          (0.6     0.3   

Energy

     (1.8     (1.8     0.1        (2.6

Interest rates

     1.8        5.9        0.5        6.0   

Meats

     —          —          0.3        —     

Metals

     (1.3     (0.5     (1.2     (0.6

Softs

     (1.5     (1.2     (0.9     (1.8

Stock indices, equities, equity options and exchange traded funds

     (2.2     (2.6     (2.6     (3.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (5.5 )%      (0.2 )%      (4.4 )%      (1.9 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended June 30, 2011 compared to three months ended June 30, 2010

For the three months ended June 30, 2011, Grant Park had a negative return of approximately 7.0% for the Class A units, 7.2% for the Class B units, 6.6% for the Legacy 1 Class units, 6.7% for the Legacy 2 Class units, 7.0% for the Global 1 Class units, 7.0% for the Global 2 Class units and 7.5% for the Global 3 Class units. On a combined basis prior to expenses, Grant Park had trading losses of approximately 5.5% which were offset by gains of approximately 0.1% from interest income. These trading losses were further increased by approximately 1.8% in combined brokerage fees, performance fees and operating and offering costs borne by Grant Park. For the same period in 2010, Grant Park had a negative return of approximately 2.3% for the Class A units, 2.5% for the Class B units, 1.9% for the Legacy 1 Class units, 1.9% for the Legacy 2 Class units, 0.4% for the Global 1 Class units, 0.5% for the Global 2 Class units and 1.0% for the Global 3 Class units. On a combined basis prior to expenses, Grant Park had trading losses of approximately 0.2% which were offset by approximately 0.2% from interest income. These losses were further increased by approximately 2.2% in combined brokerage fees, performance fees and operating and offering costs borne by Grant Park.

Six months ended June 30, 2011 compared to six months ended June 30, 2010

For the six months ended June 30, 2011, Grant Park had a negative return of approximately 7.8% for the Class A units, 8.1% for the Class B units, 6.8% for the Legacy 1 Class units, 7.0% for the Legacy 2 Class units, 7.6% for the Global 1 Class units, 7.7% for the Global 2 Class units and 8.6% for the Global 3 Class units. On a combined unit basis prior to expenses, approximately 4.4% resulted from trading losses which were offset by 0.1% of interest income. The trading losses were further increased by approximately 3.8% in brokerage fees, performance fees and operating and offering costs borne by Grant Park. For the same period in 2010, Grant Park had a negative return of approximately 5.8% for the Class A units, 6.1% for the Class B units, 4.9% for the Legacy 1 Class units, 5.1% for the Legacy 2 Class units, 4.2% for the Global 1 Class units, 4.3% for the Global 2 Class units, and 5.2% for the Global 3 Class units. On a combined unit basis prior to expenses, approximately 1.9% resulted from trading losses which were offset by 0.3% of interest income. The trading losses were further increased by approximately 4.3% in brokerage fees, performance fees and operating and offering costs borne by Grant Park.

Six months ended June 30, 2011

Crude oil markets predominantly fell in the second quarter as weak demand forecasts fostered investor liquidations. Depressed demand was driven by elevated gas prices and ongoing uncertainty surrounding the stability of the Eurozone economy. Data showing increased production from Saudi Arabia and the release of reserves from the International Energy Agency also pushed crude oil prices lower.

Grains markets experienced sharp declines due to strong supply forecasts resulting from favorable weather in the Midwest. Also adding to the decline in grains prices was the lifting of a Russian grains export ban. Sugar prices moved higher because of delays at key Brazilian ports and weak Brazilian supply data.

 

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Silver underwent sharp declines after news regarding rising margin requirements for silver positions prompted liquidations. Conversely, the gold markets posted gains as demand for safe-haven assets increased due to the lingering effects of the recent Japanese earthquake, political unrest in the Middle East and Africa, and the Eurozone debt crisis. Base metals markets declined as weak global economic data and tightening monetary policy in China spurred liquidations.

The U.S. dollar declined against most major currencies due to weak domestic growth and employment data. Despite volatility in the European markets, caused by the Greek debt crisis, the euro held on to gains from April and finished the quarter stronger than the U.S. dollar. Early in the quarter, the primary driver for gains in the euro was speculation by investors that European monetary policy shifts would out pace those of the U.S. The Swiss franc moved steadily higher in the second quarter as demand for safe-haven currencies increased.

North American equity markets experienced mixed results and finished nearly flat in the second quarter. Bullish influences, including positive first quarter earnings, were nearly offset by the negative impact of weak economic data and concerns over ongoing turmoil in the Middle East and Africa. In Asia, the Japanese Nikkei 225 index made gains as investors bought equities to take advantage of depressed prices resulting from the recent earthquake.

U.S. Treasury markets showed strong growth throughout the second quarter as increased risk-aversion supported demand for safe-haven debt instruments. Among the main contributing factors to the rally in the Treasury markets were weak U.S. unemployment data, reports showing slowing production in China, and the elevation of the Japanese nuclear crisis to a level unseen since the disaster at Chernobyl. German Bunds also moved higher as investors looked to diversify their fixed-income exposure away from European sovereign debt.

Key trading developments for Grant Park during the first six months of 2011 included the following:

Grant Park recorded losses in the month of January. Class A units were down 0.52%, Class B units were down 0.58%, Legacy 1 Class units were down 0.35%, Legacy 2 Class units were down 0.37%, Global 1 Class units were down 0.74%, Global 2 Class units were down 0.76% and Global 3 Class units were down 0.91%. Grains prices predominantly moved higher in January due to supply concerns stemming from severe flooding in Australia and by poor weather conditions in South America. In the commodities markets, sugar prices also rose, driven by U.S. dollar weakness. Successful debt auctions in several smaller European nations were received as a sign that economic stability in the Eurozone may be improving and strengthened the euro against major counterparts. Adding to the euro rally was speculation European leaders were close to formalizing a plan for creating emergency financing for ailing European nations. Renewed optimism for the Eurozone weighed on the U.S. dollar and moved it lower against other major currencies. The British pound strengthened against counterparts as speculators believed recent inflation data might cause the Bank of England to raise interest rates sooner than previously expected. Speculators drove crude oil markets higher as supply concerns were raised by the closure of an 800-mile Alaskan pipeline. The political events in Egypt raised additional concerns about oil production in the region and also played a role in moving crude oil price higher. Natural gas markets also rose as abnormally cold temperatures served as a bullish influence on demand. An improved economic outlook for Europe boded well for the global equity markets in January. North American, European, and Asian equity markets moved higher as optimism spurred investor risk appetite. Positive earnings reports and strong economic data from the U.S. and the Eurozone also drove markets higher. Global fixed-income markets endured setbacks due to decreased investor risk-aversion. Investors shifted their focus towards riskier assets and liquidated positions in the U.S. Treasury markets, which pushed prices sharply lower. In Europe, Bund prices fell as improving sentiment strengthened demand for European sovereign debt. The metals sector performed similarly to the fixed income markets as investor desire to pursue additional risk put heavy pressure on metal prices. A better economic outlook for Europe allowed investors to liquidate euro-hedging gold positions and caused a near 6% price decline. Base metals profited from strength in the global equity markets. Strong U.S. manufacturing data and better-than-expected earnings reports by manufacturing firms served as indicators that industrial demand may be on the rise, further supporting base metals prices.

Grant Park recorded gains in February. Class A units were up 2.26%, Class B units were up 2.20%, Legacy 1 Class units were up 2.37%, Legacy 2 Class units were up 2.33%, Global 1 Class units were up 2.00%, Global 2 Class units were up 1.99% and Global 3 Class units were up 1.76%. Corn markets underwent a sharp rally after the United States Department of Agriculture issued a report which forecasted tight U.S. supplies. Soybean prices declined due to expectations of bullish supply and slowing international demand. In the livestock markets, prices for lean hogs moved higher following the largest increase in pork demand by China since the early 1980s. Safe-haven currencies including the Japanese yen and Swiss franc strengthened amidst growing instability in the Middle East. Optimistic comments by the Reserve Bank of Australia provided bullish support to the Australian dollar, moving the currency higher against foreign counterparts. Crude oil markets rose in excess of 6% in February as speculators perceived escalating violence in the Middle East as a threat to crude oil production in the region. Warm weather forecasts in the U.S. put substantial pressure on the natural gas markets, moving prices sharply lower. Global equity markets generally moved higher in February as declines in U.S. jobless estimates fueled investor sentiment. The Japanese Nikkei 225 rallied due to strong earnings reports from several key Japanese firms. Hong Kong’s Hang Seng index, however, moved lower due to uncertainty surrounding the impact of rising Chinese interest rates on the nation’s economy. U.S. Treasury Bonds finished higher in February, following a late-month rally caused by instability in the Middle East. Unsure of the overall effects of recent upheaval in Libya, many investors shifted their focus to safe-haven fixed-income

 

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products. Precious metals markets benefitted from increased risk-aversion. Safe-haven buying resulted in a 6% and 20% respective price increase in the gold and silver markets. Base metal prices finished slightly higher due to bullish industrial demand forecasts early in the month.

Grant Park recorded losses in March. Class A units were down 2.48%, Class B units were down 2.53%, Legacy 1 Class units were down 2.21%, Legacy 2 Class units were down 2.22%, Global 1 Class units were down 1.85%, Global 2 Class units were down 1.89% and Global 3 Class units were down 2.01%. Corn and wheat prices generally fell after the United States Department of Agriculture reported upcoming harvests may produce near-record supplies. Adding to the decline in grains prices was weak demand from China for U.S crops. In the livestock markets, strong U.S. meat export data led to rallies in the live cattle and lean hogs markets. The Swiss franc posted gains as ongoing tension in Libya and the Japanese earthquake increased demand for safe-haven currencies. Comments made by the European Central Bank alluding to a potential interest rate hike in the Eurozone caused the euro to strengthen over major counterparts. Crude oil markets rallied, predominantly led higher by global turmoil. Supply concerns caused by unrest in Libya, strong economic data, and optimistic recovery forecasts for Japan combined to move crude oil prices higher. Natural gas finished nearly 9% higher for the month on speculation that Japanese demand for alternative fuels would increase due to ongoing turmoil at some of the nation’s key nuclear power plants. The Japanese Nikkei 225 fell in excess of 10% amidst concerns regarding the economic outlook for the nation following the recent earthquake and threats of a radiation leak at a key nuclear power plant. European equity markets also finished lower on renewed fears surrounding the financial stability of Spain and Portugal which weighed on investor sentiment. U.S. fixed-income markets predominantly declined because of liquidations prompted by optimistic employment and U.S. growth data. Intra-month gains in the U.S. equity markets also played a role in moving debt prices lower. Precious metals markets experienced gains as ongoing tension in Libya buoyed demand for safe-haven assets. The base metals markets moved generally lower as production disruptions in Japan and reports showing a Chinese trade deficit weighed on prices.

Grant Park recorded gains in April. Class A units were up 3.79%, Class B units were up 3.74%, Legacy 1 Class units were up 3.84%, Legacy 2 Class units were up 3.77%, Global 1 Class units were up 2.92%, Global 2 Class units were up 2.91% and Global 3 Class units were up 2.75%. Corn prices rose nearly 9% due to two factors: poor weather forecasts in major U.S. and European farming regions and increased corn demand from ethanol producers. Sugar prices fell sharply based on strong production forecasts from Thailand, the world second-largest exporter. Precious metals markets moved steadily higher on increased buying by investors seeking to hedge against U.S. dollar weakness. Safe-haven buying caused by the economic situation in Japan and political unrest in the Middle East and Africa also played a role in driving precious metals markets higher. Copper prices declined due to forecasts for weaker industrial demand caused by the recent Japanese earthquake and potential interest rate hikes in China. The U.S. dollar weakened against global counterparts on concerns about economic growth in the U.S. Weak employment data and reports from Standard & Poor’s called for a prolonged U.S. economic recovery and put further pressure on the dollar. The euro and Swiss franc strengthened against the dollar as speculators believed that monetary policy shifts in the U.S. would lag those of its European counterparts. North American and European equity markets moved predominantly higher, fueled by strong corporate earnings reports for the first quarter. Japanese equity markets finished the month slightly higher due to heavy buying by investors looking to take advantage of low share prices caused by recent downtrends. The Hong Kong Hang Seng index fell due to concerns over potential Chinese interest rate hikes which could hinder the nation’s economic growth. U.S. Treasury markets posted monthly gains as an unexpected rise in jobless claims put pressure on investor risk appetite. The current crisis events in Japan and turmoil in the Middle East and Africa combined to support increased demand in this sector.

Grant Park recorded losses in May. Class A units were down 6.93%, Class B units were down 6.98%, Legacy 1 Class units were down 6.63%, Legacy 2 Class units were down 6.63%, Global 1 Class units were down 6.49%, Global 2 Class units were down 6.53% and Global 3 Class units were down 6.67%. The U.S. dollar and Swiss franc resumed their roles as safe-haven currencies in May, strengthening against counterparts. Ongoing fears surrounding the Eurozone debt markets was the main driver behind elevated risk-aversion. Comments made by the President of the European Central Bank which suggested that Eurozone interest rates would remain unchanged for the near future put heavy pressure on the euro. The Japanese yen also posted minor setbacks because of forecasts predicting a longer recovery time than previously expected from the nation’s recent earthquake. Crude oil markets declined due to weak demand forecasts. Elevated gas prices and weak global economic indicators were the main drivers behind weakening demand. Adding to crude oil’s setbacks was uncertainty regarding the outcome of an upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC). Global equity markets fell as ongoing fears surrounding Eurozone debt weighed heavily on investor sentiment. China’s decision to raise reserve requirements also played a role in driving the global share prices lower. In the U.S., weak employment estimates fueled a pessimistic outlook for domestic growth and caused liquidations in the North American equity markets. U.S. fixed-income markets posted solid gains in May as increased global risk-aversion prompted buying. Equity market setbacks and a weaker outlook for global economic growth fostered the liquidations of riskier assets in exchange for safer debt instruments. Bund markets also moved higher as fears surrounding the sovereign debt of smaller European nations drove demand for safe-haven investments higher. Wheat markets finished the month predominantly higher as speculators believed recent rains in the Midwest would delay plantings, thereby putting pressure on supplies. Sugar prices experienced modest declines following reports of strong production from Thailand. In the precious metals markets, silver prices declined in excess of 21% following news regarding rising margin requirements for silver positions, weighing on demand. Also adding to weakness in the metals markets was U.S. dollar strength. Base metals generally fell on concerns about the global economy and industrial production slowdowns in China.

 

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Grant Park recorded losses in June. Class A units were down 3.79%, Class B units were down 3.84%, Legacy 1 Class units were down 3.62%, Legacy 2 Class units were down 3.66%, Global 1 Class units were down 3.33%, Global 2 Class units were down 3.36% and Global 3 Class units were down 3.50%. The U.S. dollar posted strong gains against international counterparts after reports showed a narrower U.S. trade deficit. The dollar rose higher on increased demand for safe-haven assets amidst continuing concerns regarding a potential Greek debt collapse. Conversely, higher-yielding currencies, including the Australian and New Zealand dollars experienced heavy losses as investors sought safer investments. Crude oil markets fell nearly 12% in June following depressed industrial demand forecasts which spurred liquidations. Adding to crude oil’s declines were improved supply forecasts stemming from increased production in Saudi Arabia and the release of reserves from the International Energy Agency. Natural gas also moved lower as U.S. Energy Information Administration reports showed a larger-than-expected increase in domestic inventories. Ongoing uncertainty regarding the fate of the Greek financial system weighed heavily on the equity markets. Uncertainty about a possible Greek collapse caused investors to liquidate global equity positions and adopt more risk-averse portfolios. Furthering the decline in the North American markets was disappointing unemployment data and cautious comments from the Chairman of the U.S. Federal Reserve. U.S. Treasuries predominantly finished higher as equity weakness increased demand for more risk-averse assets. Also adding to the rally in the domestic debt markets were reports showing an increase in Chinese demand for U.S. debt. In the Eurozone, Bund prices also moved higher as comments from the European Central Bank President failed to provide any clarity on the timeframe for a new Greek bailout plan. Alleviated supply concerns in the grains markets put heavy pressure on prices. Favorable weather conditions in key U.S. farming regions and the lifting of a Russian grains export ban were the main drivers behind elevated supply forecasts. Sugar prices rallied sharply due to delays at key Brazilian ports and weak Brazilian supply data. Precious metals markets fell, driven lower by liquidations from large commodity funds attempting to lock in profits following recent upward trends in the gold and silver markets. Base metals markets also moved lower due to weak global economic data including falling U.S. home prices, weak consumer confidence in Germany, and disappointing Chinese manufacturing data. Also weighing on the base and precious metals markets was a stronger U.S. dollar.

Six months ended June 30, 2010

Grains prices moved predominantly higher in the second quarter as international demand for U.S. crops supported the corn and wheat markets. In the livestock markets, lean hogs prices rallied as a poultry dispute between Russia and China boosted pork demand. Reversing recent downtrends, sugar prices rallied following elevated demand from several Middle Eastern and Asian nations.

Persisting uncertainty regarding the outlook of the global economy resulted in gains for more risk-averse currencies such as the Japanese yen and U.S. dollar. Conversely, the Australian and New Zealand dollars experienced declines following a drop in demand for high-yielding currencies. The Euro and Swiss franc came under pressure as credit concerns surrounding several smaller Eurozone nations caused investors to liquidate positions.

A strong U.S. dollar put pressure on the crude oil market, moving prices nearly 10% lower. Furthering the decline in the crude oil markets were weak demand forecasts fostered by pessimism regarding the U.S. economy. Natural gas prices underwent sharp upwards moves due to Energy Information Administration reports showing a decline in active U.S. natural gas rigs. Speculation that 2010 would have an active hurricane season also played a role in moving natural gas prices higher.

Concerns regarding the fiscal instability in the Eurozone led to dip in the global equity markets. Also adding to the decline was a number of weak economic indicators, including U.S. unemployment and U.S. retail sales. In Asia, the Nikkei 225 fell due to investor liquidations in response to the potential effects of proposed shifts in Chinese economic policy.

Elevated risk aversion caused by downturns in the equity markets was among the main driving forces in moving fixed-income markets higher in the second quarter. The downgrading of the debt of several European nations bode well for the U.S. treasury markets as investors sought safer investments.

Similar to the fixed-income markets, precious metals benefited from decreased demand for riskier assets. Investors drove gold prices steadily higher throughout the quarter as investors tried to hedge Euro-based positions. Poor growth prospects for global industrial production resulted in sharp declines in the base metals markets, moving prices lower.

Key trading developments for Grant Park during the first six months of 2010 included the following:

Grant Park recorded losses in the month of January. Class A units were down 7.95%, Class B units were down 8.00%, Legacy 1 Class units were down 7.77%, Legacy 2 Class units were down 7.79%, Global 1 Class units were down 7.80%, Global 2 Class units were down 7.82% and Global 3 Class units were down 7.95%. Grains markets predominantly fell as turmoil in the financial markets and record U.S. grains supplies weighed on prices. In the softs markets, sugar continued its recent uptrend due to weak supply forecasts from Brazil and ongoing strong demand from Southeast Asia. The Japanese yen posted solid gains for January following short-term weakness in the U.S. dollar. Despite intra-month volatility, the U.S. dollar finished the month higher as several

 

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changes in Chinese banking regulations increased investor risk aversion. Crude oil markets declined due to weak industrial demand forecasts resulting from poor economic data and depressed crude production estimates from U.S. refiners. In the natural gas markets, prices increased slightly as a cold front in the U.S. supported demand. Share price declines in several large European financial firms sent most benchmark indices sharply lower. The Eurostoxx 50 and the German Dax indices, which both declined in excess of 5%, were among the most affected. In the U.S., concerns over changes to Chinese lending policies spurred liquidations in the U.S. equity markets, moving prices lower. U.S. Treasury prices rallied in January as a number of weaker-than-expected economic indicators, including unemployment estimates and U.S. retail sales in December, supported demand for more risk-averse U.S. debt instruments. German Bunds also moved higher due to decreased demand for sovereign debt following financial trouble in Greece and other smaller EU nations. Gold and silver prices underwent several intra-month price swings to finish nearly unchanged for January. The flat performance in the precious metals markets was due to the effects of short-term dollar weakness being offset by lower-than-expected Consumer Price Index data and weak demand forecasts. Industrial metals generally declined as a result of bearish Chinese demand and elevated global base metals inventories.

Grant Park recorded gains in February. Class A units were up 0.63%, Class B units were up 0.57%, Legacy 1 Class units were up 0.82%, Legacy 2 Class units were up 0.80%, Global 1 Class units were up 0.71%, Global 2 Class units were up 0.69% and Global 3 Class units were up 0.54%. Grains markets rallied as strong sales data and downward revisions to inventory estimates bolstered prices. Moving contrary to its recent uptrend, sugar prices declined following liquidations from large commodity funds. In the livestock markets, prices rose as gains in the equity markets supported bullish demand forecasts. Ongoing concerns over several smaller EU nations led to a decline in major currencies across Europe. The Swiss franc, euro, and British pound all declined against the U.S. dollar as investors sought safer assets. Strong Australian unemployment data led to gains in the Australian dollar over most major currencies. Bullish demand forecasts from the Energy Information Administration and positive U.S. industrial production data led to gains in the crude oil markets. Elevated U.S. natural gas inventories put substantial pressure on the natural gas markets, moving prices nearly 7% lower for the month. Optimistic economic data in the U.S. propelled North American equity markets higher in February. Ailing economies in several European nations drove European equity markets down. Ongoing fears in Asia regarding changes to Chinese lending polices resulted in declines in Hong Kong’s Hang Seng Index. Weak demand for European sovereign debt resulted in strong gains in the U.S. Treasury markets. An unexpected jump in U.S. jobless claims added to the rally in the U.S. debt markets. In Europe, short-term gains in the European equity markets put pressure on the Bund market. Concern over the economic state of the European Union and short-term U.S. dollar weakness propelled the gold markets higher in February. In the base metals markets, bullish demand forecasts spurred by strong economic data led to gains in a number of industrial metals, including copper, aluminum, and tin.

Grant Park recorded gains in March. Class A units were up 4.08%, Class B units were up 4.03%, Legacy 1 Class units were up 4.15%, Legacy 2 Class units were up 4.13%, Global 1 Class units were up 3.65%, Global 2 Class units were up 3.56% and Global 3 Class units were up 3.40%. Sugar prices fell nearly 30% in March as elevated supply forecasts from India and Brazil weighed on prices. Higher prices also reduced demand, causing prices to fall further. In the grains markets, corn and wheat prices declined as a result of mild weather conditions in the Midwest and on the strength in the U.S. dollar. Improving economic indicators, including better-than-expected payroll estimates and U.S. industrial production, led to gains in the U.S. dollar. The euro fell as concerns regarding the economic stability of Greece and Portugal caused investors to liquidate European holdings. The New Zealand dollar moved higher against its counterparts due to speculation about a narrowing interest rate gap between New Zealand and Australia. Natural gas prices fell sharply in March because of elevated U.S. inventories. Unusually warm weather also put pressure on the natural gas markets. Crude oil markets moved lower due to ongoing weak demand forecasts and uncertainty following the pace of the economic recovery in the U.S. Equity markets rallied as improving economic indicators fostered optimism in the global economy. Bullish forecasts for Japanese exports, caused by weakness in the Japanese yen, drove the Nikkei 225 index higher. Eurozone equity markets rallied following strong German consumer sentiment data. Decreased demand for safe-haven debt instruments led to a decline in the U.S. fixed-income markets. Increased demand for riskier assets led to price declines in the U.S. debt markets, as evidenced by poor results in recent Treasury auctions. In the Eurozone, concerns regarding sovereign debt of several ailing European nations weighed on the debt markets. Gold markets declined in March under pressure from a stronger U.S. dollar. Base metals generally rose following reports that industrial production in the U.S. had improved during February. Nickel made especially big gains as production disruptions in Canada and Australia prompted supply concerns.

Grant Park recorded gains in April. Class A units were up 1.80%, Class B units were up 1.74%, Legacy 1 Class units were up 1.77%, Legacy 2 Class units were up 1.72%, Global 1 Class units were up 1.52%, Global 2 Class units were up 1.50% and Global 3 Class units were up 1.33%. Increased international demand for U.S. grains drove corn, wheat, and soybean markets higher. Improved production forecasts for Brazil and India put pressure on the sugar markets, moving prices nearly 10% lower. A dispute between Russia and China concerning poultry increased demand for U.S. pork products and drove lean hogs prices up throughout the month. Increased risk-aversion caused by the financial turmoil in Europe moved the U.S. dollar higher against counterparts. Ongoing concerns about the creditworthiness of several smaller European nations weighed heavily on the euro and Swiss franc. In New Zealand, strong prospects for economic growth drove the New Zealand dollar higher. Optimism regarding the U.S. economy led to gains in the crude oil markets. The Energy Information Administration (EIA) reported larger-than-expected draws on U.S. inventories and added to crude oil’s rally. In the natural gas markets, EIA also reported a reduction in U.S. natural gas rigs, creating a lift in prices. Positive economic indicators, including stronger U.S. home sales in March and improving employment conditions, prompted

 

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gains in the U.S. equity markets. Better-than-expected earnings projections from several key North American firms also moved equities higher. Asian equity markets declined as investors liquidated positions over concerns the upcoming changes in Chinese lending policy will slow economic growth in the region. Weakness in the global equity markets drove fixed-income prices higher in April. U.S. Treasury markets rallied as demand for safe-haven assets increased after Standard and Poor’s downgraded Portuguese and Greek debt. Short-term dollar weakness and increased risk aversion increased demand for gold and moved prices higher. Base metals prices generally moved lower as speculators viewed Europe’s economic situation as an indicator of a slowing global economic recovery.

Grant Park recorded losses in May. Class A units were down 3.83%, Class B units were down 3.88%, Legacy 1 Class units were down 3.53%, Legacy 2 Class units were down 3.53%, Global 1 Class units were down 2.21%, Global 2 Class units were down 2.24% and Global 3 Class units were down 2.38%. Uncertainty regarding the global economy’s growth potential weighed on demand for grains and moved prices lower. In the sugar markets, favorable weather conditions in India and Brazil produced a strong crop and drove prices down more than 5% in May. The ailing financial situation in Europe put heavy pressure on European currencies. European debt concerns caused investors to purchase the U.S. dollar and Japanese yen, driving each higher against counterparts. The New Zealand and Australian dollars declined sharply against most major currencies as risk-averse investors liquidated higher-yielding currencies. A stronger U.S. dollar put substantial pressure on the crude oil markets, moving prices nearly 15% lower. Weak U.S. economic indicators and global equity market declines caused increased supply forecasts and also drove oil prices down. Natural gas prices rose as low prices spurred technical-buying. Natural gas prices also rose based on the National Oceanic and Atmospheric Administration report predicting an active 2010 hurricane season. Global equity markets faltered as European debt concerns weakened investor sentiment. Weaker-than-expected U.S. employment estimates added to the downturn in the equity markets. U.S. fixed-income prices rose steadily as growth concerns and declines in the global equity markets caused investors to liquidate riskier assets. In Europe, diminished demand for sovereign debt and Germany’s decision to ban the short-selling of various European debt instruments drove Bund prices higher. Safe-haven buying due to the financial situation in Europe led to gains in the gold markets. Gold was also used to reduce exposure to the euro, which experienced heavy losses during the month. Prices in the base metals markets predominantly fell as investors liquidated positions. The main drivers behind declines were weak economic indicators and poor growth prospects for the global economy.

Grant Park recorded gains and losses in June. Class A units were down 0.21%, Class B units were down 0.27%, Legacy 1 Class units were down 0.03%, Legacy 2 Class units were down 0.05%, Global 1 Class units were up 0.29%, Global 2 Class units were up 0.29% and Global 3 Class units were up 0.10%. Ideal weather conditions in the Midwest led to a decline in corn prices. In the softs markets, forecasts of elevated demand, especially from several Middle Eastern and Asian nations, resulted in sharp gains in the sugar markets. Sugar prices finished nearly 30% over the previous month’s close. Concerns regarding the state of the global economy weighed on livestock prices as investors liquidated positions. The British pound rallied as higher-than-expected retail sales figures and several positive economic indicators bolstered the outlook for the UK economy. Also supporting the pound were beliefs Great Britain’s new government would be able to develop policy to solidify the economy. The Japanese yen strengthened against counterparts as investors sought more risk-averse positions due to ongoing concerns over the US and EU economies. Natural gas prices rose in excess of 6% due to abnormally high temperatures across the U.S. Also adding to the rally in natural gas were supply concerns stemming from forecasts of a very active hurricane season in the Gulf of Mexico for 2010. Crude oil prices rallied as weakness in the U.S. dollar and Energy Information Administration reports calling for higher future demand supported prices. Global equity markets generally declined as weak economic indicators and ongoing debt concerns weighed on the outlook for the global economy. Additionally, the equity markets were driven lower by news of fiscal instability in Hungary and by Fitch’s downgrading of BNP Paribas, SA, one of the Eurozone’s largest banks. The U.S. Treasury markets advanced due to weaker-than-expected U.S. housing data and speculation of additional Chinese purchases of U.S. debt would increase. Downturns in the equity markets also played a role in moving fixed-income prices higher as investors sought less volatile investments. Investors attempted to hedge European currency exposures, driving the price of gold higher by nearly 3%. In the base metals markets, a combination of a weaker economic outlook for China and short-term strength in the US dollar put pressure on industrial metals, moving prices lower.

Capital Resources

Grant Park plans to raise additional capital only through the sale of units pursuant to the continuous offering and does not intend to raise any capital through borrowing. Due to the nature of Grant Park’s business, it does not make any capital expenditures and does not have any capital assets that are not operating capital or assets.

Grant Park maintains 65% to 95% of its net asset value in cash, cash equivalents or other liquid positions over and above that needed to post as collateral for trading. These funds are available to meet redemptions each month.

Liquidity

Most U.S. futures exchanges limit fluctuations in some futures and options contract prices during a single day by regulations referred to as daily price fluctuation limits or daily limits. During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a contract has reached the daily limit for that day, positions in that contract can neither be taken nor

 

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liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent Grant Park from promptly liquidating unfavorable positions and subject Grant Park to substantial losses that could exceed the margin initially committed to those trades. In addition, even if futures or options prices do not move to the daily limit, Grant Park may not be able to execute trades at favorable prices, if little trading in the contracts is taking place. Other than these limitations on liquidity, which are inherent in Grant Park’s futures and options trading operations, Grant Park’s assets are expected to be highly liquid.

A portion of each Trading Company’s assets is used as margin to support its trading. Margin requirements are satisfied by the deposit of U.S. Treasury bills, obligations of Government-sponsored enterprises and cash with brokers subject to CFTC regulations and various exchange and broker requirements.

Grant Park maintains a portion of its assets at its clearing brokers as well as at Lake Forest Bank & Trust Company. These assets, which may range from 5% to 35% of Grant Park’s value, are held in U.S. Treasury securities, commercial paper and/or Government-sponsored enterprises. The balance of Grant Park’s assets, which range from 65% to 95%, are invested in investment grade money market instruments purchased and managed at Middleton Dickinson Capital Management, LLC which are held in a separate, segregated account at State Street Bank and Trust Company. Violent fluctuations in prevailing interest rates or changes in other economic conditions could cause mark-to-market losses on Grant Park’s cash management income.

Off-Balance Sheet Risk

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. Grant Park 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, Grant Park 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 Grant Park at the same time, and if Grant Park were unable to offset positions, Grant Park could lose all of its assets and the limited partners would realize a 100% loss. Grant Park 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 Grant Park are valued each day on a mark-to-market basis.

In addition to market risk, when entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to Grant Park. 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 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. Grant Park 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 Grant Park, in which case Grant Park could suffer significant losses on these contracts.

In the normal course of business, Grant Park enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. Grant Park’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against Grant Park that have not yet occurred. Grant Park expects the risk of any future obligation under these indemnifications to be remote.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Introduction

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

 

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Market movements result in frequent changes in the fair market value of Grant Park’s open positions and, consequently, in its earnings and cash flow. Grant Park’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, market prices for base and precious metals, energy complexes and other commodities, the diversification effects among Grant Park’s open positions and the liquidity of the markets in which it trades.

Grant Park rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance. Erratic, choppy, sideways trading markets and sharp reversals in movements can materially and adversely affect Grant Park’s results. Grant Park’s past performance is not necessarily indicative of its future results.

Materiality, as used in this section, is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of Grant Park’s market sensitive instruments.

The following quantitative and qualitative disclosures regarding Grant Park’s market risk exposures contain forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative and qualitative disclosures in this section are deemed to be forward-looking statements, except for statements of historical fact and descriptions of how Grant Park manages its risk exposure. Grant Park’s primary market risk exposures, as well as the strategies used and to be used by its trading advisors for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of Grant Park’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of Grant Park. Grant Park’s current market exposure and/or risk management strategies may not be effective in either the short-or long-term and may change materially.

Quantitative Market Risk

Grant Park’s approximate risk exposure in the various market sectors traded by its trading advisors is quantified below in terms of Value at Risk (VaR). Due to Grant Park’s mark-to-market accounting, any loss in the fair value of Grant Park’s open positions is directly reflected in Grant Park’s earnings, realized or unrealized.

As of March 31, 2011, Grant Park reevaluated the methodology used to calculate VaR and concluded that an Aggregate Returns Volatility method was a more precise method to measure Grant Park’s risk exposure. As of June 30, 2011, Grant Park uses an Aggregate Returns Volatility method to calculate VaR for the portfolio. The method consists of creating historical price time series for each instrument or its proxy instrument for the past 200 days, and then measures the standard deviation of that return history. Then, using a normal distribution (normal distribution curve has a mean of zero and a standard deviation of one), the standard deviation measurement is scaled up in order to achieve a result in line with the 95% degree of confidence, which corresponds to a scaling factor of approximately 1.645 times of standard deviations.

The VaR for each market sector represents the one day risk of loss for the aggregate exposures associated with that sector. The current methodology used to calculate VaR represents the VaR of Grant Park’s open positions across all market sectors and is less than the sum of the VaR of the individual market sectors due to the diversification benefit across all market sectors combined.

Grant Park’s VaR methodology and computation is based on the underlying risk of each contract or instrument in the portfolio and does not distinguish between exchange and non-exchange traded contracts. It is also not based on exchange maintenance margin requirements.

VaR is a measure of the maximum amount that Grant Park could reasonably be expected to lose in a given market sector in a given day; however, VaR does not typically represent the worst case outcome. The inherent uncertainty of Grant Park’s speculative trading and the recurrence in the markets traded by Grant Park of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated value at risk or Grant Park’s experience to date. This risk is often referred to as the risk of ruin. In light of the preceding information, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that Grant Park’s losses in any market sector will be limited to VaR or by Grant Park’s attempts to manage its market risk. VaR models, including Grant Park’s, are continually evolving as trading portfolios become more diverse and modeling systems and techniques continue to evolve. Moreover, value at risk may be defined differently as used by other commodity pools or in other contexts.

The composition of Grant Park’s trading portfolio, based on the nature of its business of speculative trading of futures, forwards and options, can change significantly, over any period of time, including a single day of trading. These changes can positively or negatively have a material impact on the market risk as measured by VaR.

 

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Value at Risk by Market Sectors

The following tables indicate the trading value at risk associated with Grant Park’s open positions by market category as of June 30, 2011 and December 31, 2010 and the trading gains/losses by market category for the six months ended June 30, 2011 and the year ended December 31, 2010. All open position trading risk exposures of Grant Park have been included in calculating the figures set forth below. As of June 30, 2011, Grant Park’s net asset value was approximately $858.8 million. As of December 31, 2010, Grant Park’s net asset value was approximately $891.9 million.

 

     June 30, 2011  

Market Sector

   Value at Risk*     Trading
Gain/(Loss)
 

Currencies

     0.5     (0.6 )% 

Interest rates

     0.5        0.5   

Stock indices

     0.3        (2.6

Energy

     0.1        0.1   

Metals

     0.1        (1.2

Agriculturals/softs/meats

     0.1        (0.6
  

 

 

   

 

 

 

Aggregate/Total

     0.7     (4.4 )% 
  

 

 

   

 

 

 
     December 31, 2010  

Market Sector

   Value at Risk*     Trading
Gain/(Loss)
 

Agriculturals/softs/meats

     0.4     4.3

Currencies

     0.4        3.0   

Energy

     0.3        (2.5

Stock indices

     0.3        (1.9

Metals

     0.3        2.5   

Interest rates

     0.1        8.0   
  

 

 

   

 

 

 

Aggregate/Total

     1.3     13.4
  

 

 

   

 

 

 

 

* The VaR for a market sector represents the one day risk of loss for the aggregate exposure for that particular sector. The aggregate VaR represents the VaR of Grant Park’s open positions across all market sectors and is less than the sum of the VaR of the individual market sectors due to the diversification benefit across all market sectors combined.

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

Past market risk factors will not always result in an accurate prediction of future distributions and correlations of future market movements. Changes in the portfolio value of cause by market movements may differ from those measured by the VaR model. The VaR model reflects past trading positions while future risk depends on future trading positions. VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated within one day. The historical market risk data for the VaR model may provide only limited insight into the losses that could be incurred under unusual market movements. The magnitude of Grant Park’s open positions creates a risk of ruin not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions—unusual, but historically recurring from time to time—could cause Grant Park to incur severe losses over a short period of time. The value at risk table above, as well as the past performance of Grant Park, gives no indication of this risk of ruin.

Non-Trading Risk

Grant Park has non-trading market risk on its foreign cash balances not needed for margin. However, these balances, as well as the market risk they represent, are immaterial. Grant Park also has non-trading market risk as a result of investing a substantial portion of its available assets in U.S. Treasury bills and Treasury repurchase agreements. The market risk represented by these investments is also immaterial.

 

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Qualitative Market Risk

Trading Risk

The following were the primary trading risk exposures of Grant Park as of June 30, 2011, by market sector.

Currencies

Exchange rate risk is a significant market exposure of Grant Park. Grant Park’s currency exposure is due to exchange rate fluctuations, primarily fluctuations that disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. Grant Park trades in a large number of currencies, including cross-rates, which are positions between two currencies other than the U.S. dollar. The general partner anticipates that the currency sector will remain one of the primary market exposures for Grant Park for the foreseeable future. As of June 30, 2011, Grant Park was short the U.S. dollar against various major currencies including the Australian dollar, Canadian dollar, Mexican peso, Japanese yen, British pound, euro, Swiss franc, and New Zealand dollar. In general, a weaker U.S. dollar against most major currencies would benefit Grant Park.

Interest Rates

Interest rate risk is a principal market exposure of Grant Park. Interest rate movements directly affect the price of the futures positions held by Grant Park and indirectly affect the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact Grant Park’s profitability. Grant Park’s primary interest rate exposure is due to interest rate fluctuations in the United States and the other G-7 countries. Grant Park also takes futures positions on the government debt of smaller nations, such as Australia, New Zealand, Singapore, and Mexico. The general partner anticipates that G-7 interest rates will remain the primary market exposure of Grant Park for the foreseeable future. As of June 30, 2011, Grant Park was predominantly long interest rate instruments in the U.S., Eurozone, United Kingdom, Australia, Canada, Japan, Mexico and Singapore.

Stock Indices

Grant Park’s primary equity exposure is due to equity price risk in the G-7 countries as well as other jurisdictions including Hong Kong, Taiwan, South, Africa, India, Turkey, Singapore, South Korea, and Australia. The stock index futures contracts currently traded by Grant Park are generally futures on broadly based indices, although Grant Park also trades narrow-based stock index or single-stock futures contracts. As of June 30, 2011, Grant Park was predominantly long indices in the U.S., Eurozone, South Korea, United Kingdom, China, Mexico, Taiwan and Canada. The portfolio was also short indices in South Africa, Singapore, Turkey, Australia, and Hong Kong. Grant Park is primarily exposed to the risk of adverse price trends or static markets in the major North American, European, and Asian indices. Static markets would not cause major market changes but would make it difficult for Grant Park to avoid being “whipsawed” into numerous small losses.

Energy

Grant Park’s primary energy market exposure is due to gas and oil price movements, often resulting from political developments in the Middle East, Nigeria, Russia, and South America. As of June 30, 2011, the energy market exposure of Grant Park was predominantly long in the gasoline blendstock, brent crude oil, heating oil, and gas oil markets and short the electricity, kerosene, unleaded gasoline, crude oil, and natural gas markets. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

Metals

Grant Park’s metals market exposure is due to fluctuations in the price of both precious metals, including gold and silver, as well as base metals including aluminum, lead, copper, tin, nickel and zinc. As of June 30, 2011, in the precious metals sector Grant Park had long positions in gold, silver, and palladium, and short positions in platinum. In the base metals markets, Grant Park was long copper, lead, and zinc, and short tin, aluminum, and nickel.

 

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Agricultural/Meat/Softs

Grant Park’s primary commodities exposure is due to agricultural price movements, which are often directly affected by severe or unexpected weather conditions as well as other factors. As of June 30, 2011, in the grains markets, Grant Park had long positions in the corn and soybeans markets, and short positions in rice, oats, canola, soybean oil, soybean meal, and wheat. In the livestock markets, Grant Park was long lean hogs, live cattle, and feeder cattle. In the foods/softs markets Grant Park was long sugar, cocoa, orange juice, and coffee and short lumber and rubber.

Non-Trading Risk Exposure

The following were the only non-trading risk exposures of Grant Park as of June 30, 2011.

Grant Park’s primary foreign currency balances are in Japanese yen, British pounds, Euros and Australian dollars. The trading advisors regularly convert foreign currency balances to U.S. dollars in an attempt to control Grant Park’s non-trading risk.

Grant Park also has non-trading risk as a result of investing a portion of its assets in U.S. Treasury bills held at the clearing brokers and prime brokers. The market risk associated with these investments is minimal. A portion of Grant Park’s assets are invested by its cash manager in U.S. Treasury bills, commercial paper and government-sponsored enterprises. The cash manager uses his best efforts to minimize risk but Grant Park provides no guarantee that any profit will be made or interest accrued.

Managing Risk Exposure

The general partner monitors and controls Grant Park’s risk exposure on a daily basis through financial, credit and risk management monitoring systems and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which Grant Park is subject.

The general partner monitors Grant Park’s performance and the concentration of its open positions and consults with the trading advisors concerning Grant Park’s overall risk profile. If the general partner felt it necessary to do so, the general partner could require the trading advisors to close out individual positions as well as enter positions traded on behalf of Grant Park. However, any intervention would be a highly unusual event. The general partner primarily relies on the trading advisors’ own risk control policies while maintaining a general supervisory overview of Grant Park’s market risk exposures. The trading advisors apply their own risk management policies to their trading. The trading advisors often follow diversification guidelines, margin limits and stop loss points to exit a position. The trading advisors’ research of risk management often suggests ongoing modifications to their trading programs.