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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: September 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)

(312) 756-4450

Registrant’s telephone number, including area code:

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

FORM 10-Q FOR THE QUARTER ENDED September 30, 2011

INDEX

 

PART I - FINANCIAL INFORMATION   
        Item 1.  

Financial Statements

  
 

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

     1   
 

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

     2   
 

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

     4   
 

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

     6   
 

Consolidated Statements of Changes in Partners’ Capital (Net Asset Value) for the nine months ended September 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

     32   
        Item 4.  

Controls and Procedures

     35   
PART II - OTHER INFORMATION   
        Item 1A.  

Risk Factors

     36   
        Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     36   
        Item 5.  

Other Information

     38   
        Item 6.  

Exhibits

     39   
SIGNATURES      40   
CERTIFICATIONS      41   


Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Grant Park Futures Fund Limited Partnership

Consolidated Statements of Financial Condition

 

     September 30,
2011
     December 31, 2010  
     (Unaudited)         

Assets

     

Equity in brokers’ trading accounts:

     

Securities owned, at fair value (cost $142,436,784 and $98,314,299, respectively)

   $ 142,706,687       $ 98,441,357   

Cash

     23,135,785         6,757,371   

Unrealized gain (loss) on open contracts, net

     13,502,755         35,956,214   
  

 

 

    

 

 

 

Total equity in brokers’ trading accounts

     179,345,227         141,154,942   

Cash and cash equivalents

     338,821,301         338,154,495   

Securities owned, at fair value (cost $393,476,855 and $446,933,117, respectively)

     393,861,668         447,426,370   

Interest and dividends receivable

     56,667         82,357   
  

 

 

    

 

 

 

Total assets

   $ 912,084,863       $ 926,818,164   
  

 

 

    

 

 

 

Liabilities and Partners’ Capital (Net Asset Value)

     

Liabilities

     

Brokerage commission payable

   $ 5,278,592       $ 5,622,480   

Accrued incentive fees

     3,626,389         9,372,262   

Organization and offering costs payable

     215,485         217,123   

Accrued operating expenses

     187,267         140,163   

Pending partner additions

     10,048,195         12,218,587   

Redemptions payable

     10,072,940         7,334,779   
  

 

 

    

 

 

 

Total liabilities

     29,428,868         34,905,394   
  

 

 

    

 

 

 

Partners’ Capital (Net Asset Value)

     

General Partner

     

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

     4,108,386         4,478,872   

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

     495,354         542,672   

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

     980,025         1,050,542   

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

     947,447         1,019,793   

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

     954,798         1,028,338   

Global 2 Class (1,974.70 and 1,181.06 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     1,789,199         1,155,098   

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

     432,113         473,009   

Limited Partners

     

Class A (36,871.49 and 40,362.54 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     50,348,818         60,086,201   

Class B (452,430.44 and 498,484.71 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     524,840,719         633,504,348   

Legacy 1 Class (5,356.08 and 5,908.00 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     5,121,065         6,055,220   

Legacy 2 Class (16,970.56 and 6,361.06 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     16,078,710         6,486,967   

Global 1 Class (14,540.38 and 10,133.38 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     13,289,628         9,975,048   

Global 2 Class (29,871.22 and 18,631.40 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     27,065,169         18,221,772   

Global 3 Class (273,313.79 and 156,270.73 units outstanding at September 30, 2011 and December 31, 2010, respectively)

     236,204,564         147,834,890   
  

 

 

    

 

 

 

Total partners’ capital (net asset value)

     882,655,995         891,912,770   
  

 

 

    

 

 

 

Total liabilities and partners’ capital (net asset value)

   $ 912,084,863       $ 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

September 30, 2011

(Unaudited)

Futures, Forwards, and Options on Futures Contracts

 

                          Unrealized
gain/(loss) on
open long
contracts
          Unrealized
gain/(loss)

on open
short
contracts
          Net
unrealized
gain/(loss)

on open
contracts
       
     Expiration
Dates
     No. of
Contracts
       Percent of
Partners’
Capital
      Percent of
Partners’
Capital
      Percent of
Partners’
Capital
 
      Long      Short               

Futures Contracts *

                     

U.S. Futures Positions:

                     

Agriculturals

            $ (2,368,612     (0.27 )%    $ 5,488,956        0.62   $ 3,120,344        0.35

Currencies

            $ (1,024,787     (0.11 )%    $ 3,276,536        0.37   $ 2,251,749        0.26

Energy

            $ (1,370,547     (0.16 )%    $ 4,345,592        0.50   $ 2,975,045        0.34

Interest rates

            $ 255,569        0.03   $ 292,377        0.03   $ 547,946        0.06

Meats

            $ 689,549        0.07   $ (211,210     (0.02 )%    $ 478,339        0.05

Metals

            $ (700,977     (0.08 )%    $ 1,275,369        0.14   $ 574,392        0.06

Soft commodities

            $ (544,161     (0.06 )%    $ 1,539,189        0.17   $ 995,028        0.11

Stock indices and single stock futures

            $ (905,963     (0.10 )%    $ 874,553        0.10   $ (31,410     0.00
           

 

 

     

 

 

     

 

 

   

Total U.S. Futures Positions

            $ (5,969,929     $ 16,881,362        $ 10,911,433     
           

 

 

     

 

 

     

 

 

   

Foreign Futures Positions:

                     

Agriculturals

            $ (1,021     0.00   $ 29,422        0.00   $ 28,401        0.00

Energy

            $ (818,782     (0.09 )%    $ 570,801        0.07   $ (247,981     (0.02 )% 

Interest rates

            $ 2,190,852        0.25   $ 91,286        0.01   $ 2,282,138        0.26

Metals

                     

Copper

    
 
10/19/2011-
12/19/2012
 
  
     706         752       $ (36,984,873     (4.19 )%    $ 37,627,242        4.26   $ 642,369        0.07

Aluminum

    
 
10/19/2011-
12/19/2012
 
  
     3119         3484       $ (28,109,358     (3.18 )%    $ 28,640,169        3.24   $ 530,811        0.06

Nickel

    
 
10/19/2011-
3/21/2012
 
  
     416         467       $ (11,331,026     (1.28 )%    $ 11,302,585        1.28   $ (28,441     0.00

Other Metals

            $ (5,158,921     (0.59 )%    $ 5,810,286        0.66   $ 651,365        0.07

Soft commodities

            $ (13,741     0.00   $ 99,934        0.01   $ 86,193        0.01

Stock indices

            $ (43,470     0.00   $ (375,869     (0.04 )%    $ (419,339     (0.04 )% 
           

 

 

     

 

 

     

 

 

   

Total Foreign Futures Positions

            $ (80,270,340     $ 83,795,856        $ 3,525,516     
           

 

 

     

 

 

     

 

 

   

Total Futures Contracts

            $ (86,240,269     (9.77 )%    $ 100,677,218        11.41   $ 14,436,949        1.64
           

 

 

     

 

 

     

 

 

   

Forward Contracts *

                     

Currencies

            $ (7,746,614     (0.88 )%    $ 6,832,705        0.77   $ (913,909     (0.11 )% 
           

 

 

     

 

 

     

 

 

   

Options on Futures Contracts *

                     

U.S. stock indices

            $ 23,050        0.00   $ (43,335     0.00   $ (20,285     0.00
           

 

 

     

 

 

     

 

 

   

Total Futures, Forward and Options on Futures and Forward Contracts

            $ (93,963,833     (10.65 )%    $ 107,466,588        12.18   $ 13,502,755        1.53
           

 

 

     

 

 

     

 

 

   

 

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

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)

September 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)

$142,750,000      2/9/2012-7/26/2012       U.S. Treasury Bills, 0.1-0.3% (cost $142,436,784)    $ 142,706,687       16.17%
        

 

 

    

 

 

*** 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)    $ 25,029,226       2.83%
        

 

 

    

 

U.S. Commercial paper

 

Face Value

  

Maturity Date

    

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

$40,000,000      10/18/2011-12/21/2011       U.S. Commercial paper, 0.2-0.3% (cost $39,974,200)    $ 39,988,997       4.53%
        

 

 

    

 

U.S. Government-sponsored enterprises

 

Face Value

    

Maturity Date

  

Description

  

Fair Value

    

Percent of
Partners’ Capital
(net asset value)

  $139,675,000       9/23/2013-9/29/2014    Federal Farm Credit Bank, 0.2-1.6%    $ 139,854,356       15.85%
  $89,000,000       3/6/2013-7/28/2014    Federal Home Loan Bank, 0.2-1.3%    $ 89,094,186       10.09%
  $25,000,000       3/19/2012    Federal National Mortgage Association Discount Note, 0.2%    $ 24,979,931       2.83%
        

 

 

    

 

      Total U.S. Government-sponsored enterprises (cost $253,629,287)    $ 253,928,473       28.77%
        

 

 

    

 

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)    $ 74,914,972         8.49
        

 

 

    

 

 

 

 

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

Total securities owned

   $ 393,861,668       44.62%
  

 

 

    

 

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

 

                          Unrealized
gain/(loss)

on open
long
contracts
                               
     Expiration
Dates
     No. of
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        0.75   $ (377,927     (0.04 )%    $ 6,285,769        0.71

Currencies

            $ 9,558,662        1.07   $ 2,283,505        0.26   $ 11,842,167        1.33

Energy

            $ 2,655,082        0.30   $ (1,303,695     (0.15 )%    $ 1,351,387        0.15

Interest rates

            $ 277,176        0.03   $ (418,671     (0.05 )%    $ (141,495     (0.02 )% 

Meats

            $ 787,250        0.09   $ (20,500     0.00   $ 766,750        0.09

Metals

            $ 4,039,143        0.45   $ (616,704     (0.07 )%    $ 3,422,439        0.38

Soft commodities

            $ 2,720,770        0.31   $ (216,592     (0.02 )%    $ 2,504,178        0.29

Stock indices and single stock futures

            $ 928,568        0.10   $ 71,857        0.01   $ 1,000,425        0.11
           

 

 

     

 

 

     

 

 

   

Total U.S. Futures Positions

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

 

 

     

 

 

     

 

 

   

Foreign Futures Positions:

                     

Agriculturals

            $ 24,719        0.00   $ 0        0.00   $ 24,719        0.00

Energy

            $ 509,737        0.06   $ (17,165     0.00   $ 492,572        0.06

Interest rates

            $ 2,243,690        0.25   $ (983,344     (0.11 )%    $ 1,260,346        0.14

Metals

                     

Copper

    
 
1/19/2011-
6/15/2011
 
  
     386         208       $ 8,937,572        1.00   $ (4,285,970     (0.48 )%    $ 4,651,602        0.52

Other Metals

            $ 7,077,265        0.79   $ (7,672,518     (0.86 )%    $ (595,253     (0.07 )% 

Soft commodities

            $ 27,959        0.00   $ 0        0.00   $ 27,959        0.00

Stock indices

            $ (120,097     (0.01 )%    $ 148,949        0.02   $ 28,852        0.01
           

 

 

     

 

 

     

 

 

   

Total Foreign Futures Positions

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

 

 

     

 

 

     

 

 

   

Total Futures Contracts

            $ 46,331,192        5.19   $ (13,408,775     (1.50 )%    $ 32,922,417        3.69
           

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward Contracts *

                     

Currencies

            $ 3,078,051        0.34   $ (39,629     0.00   $ 3,038,422        0.34
           

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Options on Futures Contracts*

                     

U.S. stock indices

            $ 4,840        0.00   $ (9,465     0.00   $ (4,625     0.00
           

 

 

     

 

 

     

 

 

   

Total Futures, Forward and Options on Futures Contracts

                     
            $ 49,414,083        5.54   $ (13,457,869     (1.51 )%    $ 35,956,214        4.03
           

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

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       11.04%
        

 

 

    

 

 

*** 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       2.24%
        

 

 

    

 

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       1.68%
        

 

 

    

 

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       14.65%
$61,575,000    2/14/2011-12/16/2013    Federal Farm Credit Bank, 0.2-1.4%    $ 61,636,684       6.91%
$45,000,000    4/27/2012-5/25/2012    Federal National Mortgage Association, 1.3-1.4%    $ 45,087,111       5.05%
$30,075,000    2/1/2011-1/25/2012    Federal Home Loan Mortgage Corp., 0.1-1.3%    $ 30,109,748       3.38%
$15,000,000    8/23/2013    Federal Agricultural Mortgage Corp., 1.3%    $ 15,066,667       1.69%
$10,000,000    7/8/2011    Federal Home Loan Discount Note, 0.4%    $ 9,977,544       1.12%
        

 

 

    

 

   Total U.S. Government-sponsored enterprises (cost $292,091,597)    $ 292,555,595       32.80%
        

 

 

    

 

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       13.44%
        

 

 

    

 

 

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

Total securities owned

   $ 447,426,370         50.16
  

 

 

    

 

 

 

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
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  
     (Unaudited)     (Unaudited)  

Net trading gains (losses)

        

Net gain (loss) from futures and forward trading

        

Realized

   $ 1,533,658      $ 10,463,626      $ (1,222,983   $ (1,204,732

Change in unrealized

     15,103,836        39,616,125        (22,508,037     33,622,932   

Commissions

     (3,414,338     (3,112,918     (9,958,730     (9,233,034
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gains (losses) from futures and forward trading

     13,223,156        46,966,833        (33,689,750     23,185,166   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Realized

     0        0        408,727        0   

Change in unrealized

     0        0        0        0   

Commissions

     0        0        (68,873     0   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     0        0        339,854        0   

Total trading gains (losses)

     13,223,156        46,966,833        (33,349,896     23,185,166   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

        

Income

        

Dividend income

     0        0        72,394        0   

Interest income

     640,016        1,112,997        2,469,140        3,579,508   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income

     640,016        1,112,997        2,541,534        3,579,508   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses from operations

        

Dividend expense

     0        0        159,212        0   

Brokerage commission

     13,228,036        12,600,591        40,279,215        37,743,852   

Incentive fees

     3,626,389        3,520,544        5,389,425        4,901,477   

Organizational and offering costs

     654,280        591,669        1,957,079        1,749,728   

Operating expenses

     569,056        518,820        1,707,397        1,538,839   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     18,077,761        17,231,624        49,492,328        45,933,896   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss

     (17,437,745     (16,118,627     (46,950,794     (42,354,388
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4,214,589   $ 30,848,206      $ (80,300,690   $ (19,169,222
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

General Partner & Limited Partner Class A Units

   $ (6.90   $ 58.30      $ (123.14   $ (24.56
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Class B Units

   $ (7.76   $ 48.19      $ (110.81   $ (26.74
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Legacy 1 Class Units

   $ 0.60      $ 42.29      $ (68.80   $ (5.45
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Legacy 2 Class Units

   $ (1.50   $ 41.19      $ (72.34   $ (7.70
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 1 Class Units

   $ 3.96      $ 19.31      $ (70.40   $ (20.56
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 2 Class Units

   $ 3.28      $ 18.66      $ (71.95   $ (22.68
  

 

 

   

 

 

   

 

 

   

 

 

 

General Partner & Limited Partner Global 3 Class Units

   $ (0.77   $ 14.11      $ (81.79   $ (35.13
  

 

 

   

 

 

   

 

 

   

 

 

 

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)

Nine Months Ended September 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        630.38        641,324        0         0        11,200.61        11,017,655   

Redemptions

     0         0        (3,491.05     (5,009,150     0         0        (46,054.27     (56,338,190     0         0        (1,182.30     (1,186,506     0         0        (591.11     (580,322

Net loss

     0         (370,486     0        (4,728,233     0         (47,318     0        (52,325,439     0         (70,517     0        (388,973     0         (72,346     0        (845,590
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Partners’ capital, (net asset value)

                                    

September 30, 2011

     3,008.66       $ 4,108,386        36,871.49      $ 50,348,818        427.01       $ 495,354        452,430.44      $ 524,840,719        1,025.00       $ 980,025        5,356.08      $ 5,121,065        1,000.00       $ 947,447        16,970.56      $ 16,078,710   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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

                                    

September 30, 2011

        $ 1,365.52             $ 1,160.05             $ 956.12             $ 947.45     
       

 

 

          

 

 

          

 

 

          

 

 

   

 

     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        5,943.67        5,678,180        793.64         749,000        13,448.42        12,662,684        0         0        129,777.96        118,496,683        149,245,526   

Redemptions

     0         0        (1,536.67     (1,445,731     0         0        (2,208.60     (2,089,944     0         0        (12,734.90     (11,551,768     (78,201,611

Net loss

     0         (73,540     0        (917,869     0         (114,899     0        (1,729,343     0         (40,896     0        (18,575,241     (80,300,690
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital, (net asset value)

                             

September 30, 2011

     1,044.66       $ 954,798        14,540.38      $ 13,289,628        1,974.70       $ 1,789,199        29,871.22      $ 27,065,169        500.00       $ 432,113        273,313.79      $ 236,204,564      $ 882,655,995   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at

                             

December 31, 2010

        $ 984.38             $ 978.01             $ 946.02       
       

 

 

          

 

 

          

 

 

     

Net asset value per unit at

                             

September 30, 2011

        $ 913.98             $ 906.06             $ 864.23       
       

 

 

          

 

 

          

 

 

     

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)

Nine Months Ended September 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        2,356.83        2,198,500        0         0        2,385.49        2,202,484   

Redemptions

     0         0        (7,010.05     (9,489,208     0         0        (57,230.37     (66,376,279     0         0        (371.46     (349,276     0         0        (70.14     (66,215

Net loss

     0         (73,890     0        (1,516,898     0         (11,422     0        (17,425,262     0         (5,592     0        37,045        0         (7,697     0        55,119   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Partners’ capital,

                                    

September 30, 2010

     3,008.66       $ 4,214,032        41,346.54      $ 57,911,443        427.01       $ 511,391        513,362.67      $ 614,805,876        1,025.00       $ 984,684        5,836.62      $ 5,607,049        1,000.00       $ 956,843        5,438.30      $ 5,203,603   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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

                                    

September 30, 2010

        $ 1,400.64             $ 1,197.61             $ 960.67             $ 956.84     
       

 

 

          

 

 

          

 

 

          

 

 

   

 

     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        5,716.30        5,212,637        382.09         350,000        10,049.83        9,188,976        0         0        93,620.45        83,433,378        102,585,975   

Redemptions

     0         0        (605.13     (558,058     0         0        (541.85     (491,764     0         0        (2,844.72     (2,522,593     (79,853,393

Net loss

     0         (21,479     0        61,759        0         (10,387     0        (12,424     0         (17,568     0        (220,526     (19,169,222
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ capital,

                             

September 30, 2010

     1,044.66       $ 978,075        8,469.77      $ 7,929,919        1,091.06       $ 1,015,689        16,841.81      $ 15,678,305        500.00       $ 452,253        131,104.33      $ 118,584,696      $ 834,833,858   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at

                             

December 31, 2009

        $ 956.82             $ 953.60             $ 939.64       
       

 

 

          

 

 

          

 

 

     

Net asset value per unit at

                             

September 30, 2010

        $ 936.26             $ 930.92             $ 904.51       
       

 

 

          

 

 

          

 

 

     

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 September 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. 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: 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.

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.

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 September 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 September 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.

 

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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 September 30, 2011 and 2010 substantially all investments were highly liquid and carried at fair value, the Partnership carried little or 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.

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 September 30, 2011:

 

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Notes to Consolidated Financial Statements

(Unaudited)

 

Assets

   Level 1     Level 2     Level 3      Total  

Equity in brokers’ trading accounts

         

U.S. Government securities

   $ 142,706,687      $ 0      $ 0       $ 142,706,687   

U.S. and foreign futures contracts

     14,436,949        0        0         14,436,949   

Forward contracts

     0        (913,909     0         (913,909

Options on futures contracts

     (20,285     0        0         (20,285

Cash and cash equivalents

         

Bank deposits

     0        3,534,083        0         3,534,083   

U.S. Commercial paper

     325,290,007        0        0         325,290,007   

Securities owned

         

Bank deposits

     0        25,029,226        0         25,029,226   

U.S. Commercial paper

     39,988,997        0        0         39,988,997   

U.S. Government-sponsored enterprises

     253,928,473        0        0         253,928,473   

U.S. Government securities

     74,914,972        0        0         74,914,972   

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, securities of 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 and Denali Asset Management, LLLP (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

 

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Notes to Consolidated Financial Statements

(Unaudited)

 

amount at least 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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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
September 30,
    Nine Months Ended
September 30,
 
      2011     2010     2011     2010  

Total return – Class A Units

     (0.50 )%      4.34     (8.27 )%      (1.72 )% 

Total return – Class B Units

     (0.66 )%      4.19     (8.72 )%      (2.18 )% 

Total return – Legacy 1 Class Units

     0.06     4.60     (6.71 )%      (0.56 )% 

Total return – Legacy 2 Class Units

     (0.16 )%      4.50     (7.09 )%      (0.80 )% 

Total return – Global 1 Class Units

     0.44     2.11     (7.15 )%      (2.15 )% 

Total return – Global 2 Class Units

     0.36     2.05     (7.36 )%      (2.38 )% 

Total return – Global 3 Class Units

     (0.09 )%      1.58     (8.65 )%      (3.74 )% 

Ratios as a percentage of average net assets:

        

Expenses prior to incentive fees (1)

     6.53     6.75     6.57     6.76

Incentive fees (2)

     0.41     0.43     0.60     0.61
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     6.94     7.18     7.17     7.37
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment loss (1) (3)

     (6.24 )%      (6.20 )%      (6.19 )%      (6.17 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 nine months ended September 30, 2011 and 2010 (annualized).

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

 

Class A Units   

Three Months Ended
September 30,

   

Nine Months Ended
September 30,

 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 1,372.42      $ 1,342.34      $ 1,488.66      $ 1,425.20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     19.39        83.99        (49.54     41.45   

Expenses net of interest and dividend income*

     (26.29     (25.69     (73.60     (66.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (6.90     58.30        (123.14     (24.56
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 1,365.52      $ 1,400.64      $ 1,365.52      $ 1,400.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Notes to Consolidated Financial Statements

(Unaudited)

 

Class B Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 1,167.81      $ 1,149.42      $ 1,270.86      $ 1,224.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     16.57        71.91        (42.04     35.43   

Expenses net of interest and dividend income*

     (24.33     (23.72     (68.77     (62.17
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (7.76     48.19        (110.81     (26.74
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 1,160.05      $ 1,197.61      $ 1,160.05      $ 1,197.61   
  

 

 

   

 

 

   

 

 

   

 

 

 
Legacy 1 Class Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 955.52      $ 918.38      $ 1,024.92      $ 966.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     13.47        57.89        (34.67     30.68   

Expenses net of interest and dividend income*

     (12.87     (15.60     (34.13     (36.13
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     0.60        42.29        (68.80     (5.45
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 956.12      $ 960.67      $ 956.12      $ 960.67   
  

 

 

   

 

 

   

 

 

   

 

 

 
Legacy 2 Class Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 948.95      $ 915.65      $ 1,019.79      $ 964.54   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     14.54        57.72        (32.53     30.87   

Expenses net of interest and dividend income*

     (16.04     (16.53     (39.81     (38.57
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (1.50     41.19        (72.34     (7.70
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 947.45      $ 956.84      $ 947.45      $ 956.84   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Notes to Consolidated Financial Statements

(Unaudited)

 

Global 1 Class Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 910.02      $ 916.95      $ 984.38      $ 956.82   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     16.49        31.15        (40.76     11.54   

Expenses net of interest and dividend income*

     (12.53     (11.84     (29.64     (32.10
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     3.96        19.31        (70.40     (20.56
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 913.98      $ 936.26      $ 913.98      $ 936.26   
  

 

 

   

 

 

   

 

 

   

 

 

 
Global 2 Class Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 902.78      $ 912.26      $ 978.01      $ 953.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     16.42        30.92        (40.48     11.17   

Expenses net of interest and dividend income*

     (13.14     (12.26     (31.47     (33.85
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     3.28        18.66        (71.95     (22.68
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 906.06      $ 930.92      $ 906.06      $ 930.92   
  

 

 

   

 

 

   

 

 

   

 

 

 
Global 3 Class Units    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

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

        

Net asset value per unit at beginning of period

   $ 865.00      $ 890.40      $ 946.02      $ 939.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations:

        

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

     15.81        30.59        (38.52     12.29   

Expenses net of interest and dividend income*

     (16.58     (16.48     (43.27     (47.42
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from operations

     (0.77     14.11        (81.79     (35.13
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per unit at end of period

   $ 864.23      $ 904.51      $ 864.23      $ 904.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* 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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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 September 30, 2011 and December 31, 2010 was $142,706,687 and $98,441,357, respectively, which was 16.1% and 11.0% of the net asset value, respectively. The cash deposited with interbank market makers at September 30, 2011 and December 31, 2010 was $10,742,926 and $7,931,341, respectively, which was 1.2% 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 6,662 and 7,706, respectively, for the three and nine months ended September 30, 2011 and 8,686 and 8,599, respectively, for the three and nine months ended September 30, 2010. The following tables summarize the quantitative information required by FASB ASC 815:

 

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

Agriculturals contracts

   $ 5,554,418       $ (2,405,673   $ 3,148,745   

Currencies contracts

     13,968,745         (12,630,905     1,337,840   

Energy contracts

     4,958,502         (2,231,438     2,727,064   

Interest rates contracts

     5,184,274         (2,354,190     2,830,084   

Meats contracts

     693,052         (214,713     478,339   

Metals contracts

     84,868,820         (82,498,324     2,370,496   

Soft commodities contracts

     1,722,256         (641,035     1,081,221   

Stock indices contracts

     1,694,883         (2,165,917     (471,034
  

 

 

    

 

 

   

 

 

 
   $ 118,644,950       $ (105,142,195   $ 13,502,755   
  

 

 

    

 

 

   

 

 

 

 

* 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 Nine Months Ended

September 30, 2011 and 2010

 

     Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  

Type of Contract

   September 30, 2011*     September 30, 2010*     September 30, 2011*     September 30, 2010*  

Agriculturals contracts

   $ (6,764,659   $ 10,172,660      $ (15,721,792   $ 888,475   

Currencies contracts

     (20,765,064     7,952,460        (27,284,899     9,818,873   

Energy contracts

     (7,646,687     (5,732,482     (5,874,550     (26,884,790

Interest rates contracts

     58,520,368        26,489,368        66,485,195        75,587,579   

Meats contracts

     (1,129,600     49,834        (1,923,770     76,953   

Metals contracts

     10,903,716        10,102,678        (351,400     4,395,426   

Soft commodities contracts

     (3,655,235     8,999,759        (2,484,797     4,055,312   

Stock indices and equity options contracts

     (12,825,345     (7,954,526     (32,653,911     (35,519,628
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 16,637,494      $ 50,079,751      $ (19,809,924   $ 32,418,200   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* 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      Nine Months Ended
 
     September 30,      September 30,  

Line Item in Consolidated Statement of Operations

   2011      2010      2011     2010  

Net gain (loss) from futures and forward trading

          

Realized

   $ 1,533,658       $ 10,463,626       $ (1,222,983   $ (1,204,732

Change in unrealized

     15,103,836         39,616,125         (22,508,037     33,622,932   
  

 

 

    

 

 

    

 

 

   

 

 

 

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

     16,637,494         50,079,751         (23,731,020     32,418,200   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net gain (loss) from equity options

          

Realized

     0         0         3,921,096        0   

Change in unrealized

     0         0         0        0   
  

 

 

    

 

 

    

 

 

   

 

 

 

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

     0         0         3,921,096        0   
  

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 16,637,494       $ 50,079,751       $ (19,809,924   $ 32,418,200   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

Note 11.    Subsequent Events

Subsequent to September 30, 2011, there were contributions and redemptions totaling approximately $16,100,000 and $0 respectively.

On October 31, 2011, MF Global Holdings Ltd., the parent of MF Global Inc. (collectively “MF Global”), one of the clearing brokers of the Partnership, reported to the SEC and CFTC possible deficiencies in customer segregated accounts held at the firm. As a result, the SEC and CFTC determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets, and SIPC initiated the liquidation of MF Global under the Securities Investor Protection Act.

The Partnership’s General Partner does not believe that these actions will have a material impact upon the operations of the Partnership in valuing or satisfying redemption requests or for providing accurate valuation for new or existing limited partners.

Three of the Partnership’s twelve commodity trading advisors executed a portion of their trading activity through MF Global. In the aggregate, the assets of the Partnership allocated to these trading advisors and on deposit with MF Global immediately prior to October 31, 2011 represent approximately 2.3%, or approximately $20 million, of the Partnership’s total net assets as of October 31, 2011, and the Partnership had total net assets of approximately $842.7 million. None of these traders executed any Forex trading through MF Global.

On October 31, 2011, the Partnership established customer segregated accounts at Jefferies Bache LLC (“Jefferies”), an affiliate of Jefferies & Company. The Partnership’s other clearing brokers, Newedge USA LLC and UBS Securities LLC, continue to clear trades for the Partnership in the normal course of business.

On November 2, 2011, the Chicago Mercantile Exchange (“CME”) notified the CFTC of the CME’s intention to transfer certain customer positions in connection with the SIPC liquidation of MF Global. As a result, certain of the Partnership’s positions held at MF Global as of October 31, 2011 aggregating approximately $4.7 million were transferred to R.J. O’Brien & Associates on November 4, 2011. Also, various foreign exchanges liquidated certain other positions of the Partnership between November 1, 2011 and November 4, 2011. Approximately 1.8%, or $15.4 million, of the Partnership’s assets remain at MF Global and are held in cash and U.S. Treasury bills in customer segregated or secured accounts as of November 4, 2011.

The Partnership’s General Partner continues to monitor the situation relating to MF Global and is attempting to effect the orderly transfer of all of the Partnership’s remaining cash balances currently held at MF Global to R.J. O’Brien & Associates. However, there can be no assurances when or if the Partnership will have access to any or all of its assets that remain in accounts held at MF Global or as to the amount or value of those assets under the SIPC liquidation.

 

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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 of September 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 September 30, 2011, the general partner allocated Grant Park’s net assets through the respective Trading Companies among its core trading advisors EMC, Winton and Welton and non-core trading advisors ETC, 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 September 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.

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, securities of 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 nine months ended September 30, 2011 and 2010, are set forth in the table below:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

Total return – Class A units

     (0.50 )%      4.34     (8.27 )%      (1.72 )% 

Total return – Class B units.

     (0.66 )%      4.19     (8.72 )%      (2.18 )% 

Total return – Legacy 1 Class units

     0.06     4.60     (6.71 )%      (0.56 )% 

Total return – Legacy 2 Class units

     (0.16 )%      4.50     (7.09 )%      (0.80 )% 

Total return – Global 1 Class units

     0.44     2.11     (7.15 )%      (2.15 )% 

Total return – Global 2 Class units

     0.36     2.05     (7.36 )%      (2.38 )% 

Total return – Global 3 Class units

     (0.09 )%      1.58     (8.65 )%      (3.74 )% 

 

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Grant Park’s net asset value at September 30, 2011 was approximately $882.7 million, at December 31, 2010 was approximately $891.9 million and at September 30, 2010 was approximately $834.8 million.

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

 

     % Gain (Loss)  
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

Sector

   2011     2010     2011     2010  

Agriculturals

     —       —       —       —  

Currencies

     (2.7     1.0        (3.3     1.1   

Energy

     (0.9     (0.7     (1.0     (3.2

Interest rates

     7.0        3.3        7.5        9.1   

Meats

     —          —          0.3        —     

Metals

     1.2        1.2        —          0.6   

Softs

     (1.3     2.4        (2.2     0.6   

Stock indices, equities, equity options and exchange traded funds

     (1.4     (1.0     (3.9     (4.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1.9     6.2     (2.6 )%      4.0
  

 

 

   

 

 

   

 

 

   

 

 

 

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

For the three months ended September 30, 2011, Grant Park had a negative return of approximately 0.5% for the Class A units, 0.7% for the Class B units, positive return of approximately 0.1% for the Legacy 1 Class units, negative return of 0.2% for the Legacy 2 Class units, positive return of 0.4% for the Global 1 Class units, positive return of 0.4% for the Global 2 Class units and negative return of 0.1% for the Global 3 Class units. On a combined basis prior to expenses, Grant Park had trading gains of approximately 1.9% which were further increased by 0.1% from interest income. These trading gains were decreased by approximately 2.4% 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 positive return of approximately 4.3% for the Class A units, 4.2% for the Class B units, 4.6% for the Legacy 1 Class units, 4.5% for the Legacy 2 Class units, 2.1% for the Global 1 Class units, 2.1% for the Global 2 Class units and 1.6% for the Global 3 Class units. On a combined basis prior to expenses, Grant Park had trading gains of approximately 6.2% which were further increased by approximately 0.1% from interest income. These trading gains were decreased by approximately 2.5% in combined brokerage fees, performance fees and operating and offering costs borne by Grant Park.

Nine months ended September 30, 2011 compared to nine months ended September 30, 2010

For the nine months ended September 30, 2011, Grant Park had a negative return of approximately 8.3% for the Class A units, 8.7% for the Class B units, 6.7% for the Legacy 1 Class units, 7.1% for the Legacy 2 Class units, 7.2% for the Global 1 Class units, 7.4% for the Global 2 Class units and 8.7% for the Global 3 Class units. On a combined unit basis prior to expenses, approximately 2.6% resulted from trading losses which were offset by 0.3% of interest income. The trading losses were further increased by approximately 6.2% 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 1.7% for the Class A units, 2.2% for the Class B units, 0.6% for the Legacy 1 Class units, 0.8% for the Legacy 2 Class units, 2.2% for the Global 1 Class units, 2.4% for the Global 2 Class units, and 3.7% for the Global 3 Class units. On a combined unit basis prior to expenses, approximately 4.0% resulted from trading gains which were further increased by 0.4% of interest income. The trading gains were decreased by approximately 6.8% in brokerage fees, performance fees and operating and offering costs borne by Grant Park.

Nine months ended September 30, 2011

Crude oil markets predominantly fell in the third quarter as diminished investor sentiment regarding global economic growth weighed heavily on demand. Weak economic data and the lack of a resolution to the Eurozone debt situation were the main drivers putting pressure on demand. Natural gas markets also fell, driven lower by temperate climates in the U.S. and elevated domestic inventories.

Corn and soybean markets underwent a sharp retracement of nearly 5% and 10% respectively in September due to depressed Chinese demand and upward revisions to harvest estimates. Wheat markets finished higher, holding on to gains from early in the quarter stemming from poor weather and delayed plantings in key farming regions. In the softs markets, sugar and coffee prices declined as reports forecasted better-than-expected growing conditions in Brazil.

 

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Gold markets firmed in the third quarter because of safe-haven buying by investors attempting to reduce risk in their portfolios. Silver markets fell sharply as the decision to raise margin requirements on silver positions prompted liquidations. Base metals markets generally fell due to weak industrial demand forecasts caused by equity market declines.

The Swiss franc endured a sharp selloff against counterparts due to intervention by the Swiss National Bank to devalue the nation’s currency. Ongoing concerns surrounding a potential default on Greece’s debt obligations led to declines in the euro and U.S. dollar strength. The Australian and New Zealand dollars declined as a result of sharp downturns in the commodities markets and depressed demand for higher-yielding currencies.

Global equity markets fell sharply in the third quarter as the downgrading of the U.S. debt markets resulted in selling. The failure of European officials to come to terms on a new plan to aid the ailing Eurozone financial markets also added to declines.

U.S. Treasury markets posted large profits as investors shifted their focus towards safe-haven assets amid steep declines in equity markets and Eurozone financial instability. Bund markets also posted gains, as investors diversified away from European sovereign debt as they believed a Greek default would impact the economies of other more stable European nations.

Key trading developments for Grant Park during the first nine 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 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.

 

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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.

Grant Park recorded gains in July. Class A units were up 3.02%, Class B units were up 2.96%, Legacy 1 Class units were up 3.23%, Legacy 2 Class units were up 3.18%, Global 1 Class units were up 3.09%, Global 2 Class units were up 3.07% and Global 3 Class units were up 2.92%. The U.S. dollar slipped against major currencies as investor confidence fell while Congress failed to reach an agreement on a new U.S. debt ceiling. Investors sought non-U.S. assets, a move that benefitted safe-haven currencies, including the Japanese yen and Swiss franc. The euro fell when Portuguese debt was reclassified to “junk” status. Also pushing the euro lower were fears the recent financial instability in the Eurozone was beginning to affect larger European nations. The Australian dollar posted gains as investors believed recent jumps in inflation would prompt the Reserve Bank of Australia to raise interest rates sooner than expected. Despite heavy volatility throughout the month, the crude oil markets were able to hold on to early-month gains and finish July slightly positive. The crude oil market was driven by reports of strong U.S. manufacturing data and decreases in U.S. stockpiles. Natural gas markets fell over 5% on weak industrial demand forecasts and cool temperatures at month-end. European equity markets generally fell as investors feared that recent financial instability could begin to affect the economies of larger nations, including Spain and Italy. In the U.S., equity prices moved lower because of the failed debt-ceiling negotiations. Japanese share prices finished with modest gains stemming from bullish manufacturing data. U.S. fixed-income markets posted strong gains in July as uncertainty regarding the overall global economic outlook prevailed. Weak economic data, ailing European nations, and U.S. debt-ceiling concerns all played a role in driving demand for safe-haven assets higher. The German Bund picked up additional gains as some fixed-income investors shifted their focus outside of the U.S. U.S. grains markets finished last month higher as a combination of heat waves and dry weather threatened domestic supplies. Reports of elevated demand from biofuel and livestock producers added to profits in the grains and foods markets. Sugar prices also moved higher due to reports showing weaker-than-expected sugar production from Brazil, the world’s largest sugar exporter. Gold and silver markets moved more than 8% and 15%, respectively, as investors sought safe-haven assets due to a number of global economic concerns. Ongoing fears regarding the financial stability of the Eurozone economy and uncertainty surrounding the inability of lawmakers to pass a plan to establish a new U.S. debt ceiling were among the critical factors that influenced the markets. In the base metals markets, copper markets rose because of improved Chinese import data and a work stoppage at a key Chilean copper production facility.

Grant Park recorded losses in August. Class A units were down 1.81%, Class B units were down 1.86%, Legacy 1 Class units were down 1.62%, Legacy 2 Class units were down 1.69%, Global 1 Class units were down 1.25%, Global 2 Class units were down 1.28% and Global 3 Class units were down 1.43%. The Swiss franc underwent a sharp selloff due to intervention by the Swiss National Bank attempting to devalue the currency. The euro posted modest gains against counterparts on news the European Central Bank (ECB) was considering buying Italian debt to aid the ailing Italian financial system. Higher-yielding currencies, such as the Australian and New Zealand dollars, declined sharply as concerns surrounding global economic growth weighed on investor risk appetite. Crude oil markets fell in excess of 7% due to weak industrial demand throughout the month. Disappointing economic indicators, waning investor confidence, and concerns regarding stalled global economic growth were the main drivers behind declines. Temperate U.S. climates and a rise in domestic inventories pushed natural gas markets lower. The credit downgrading of the U.S. debt markets sent a wave of panic through the financial markets and caused a sharp selloff in equities. Failure of the ECB to produce a new plan to aid the ailing European financial system put pressure on Eurozone equity prices. In Asia, the Hong Kong Hang Seng Index declined due to beliefs the elevated inflation rate in China would make it difficult for the Chinese government to foster growth by easing monetary policy. U.S. Treasury markets produced strong gains due to increased safe-haven buying amidst turmoil in the financial markets. Investors drove U.S. debt products higher as they sought safety from the financial instability of the Eurozone and

 

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from sharp declines in the global equity markets. U.S. grain markets moved sharply higher due to delayed plantings and weak harvest estimates stemming from poor weather conditions in key U.S. farming regions. Sugar prices also rose following reports which forecasted weak Brazilian production and elevated demand from China. Gold and silver markets rallied due to a surge in safe-haven demand stemming from the credit downgrading of the U.S. fixed-income markets. Investors bought gold to hedge short-term U.S. dollar weakness and added to gains. Base metals markets generally fell during the month, depressed by sharp declines in the global equity markets and weak economic data.

Grant Park recorded losses in September. Class A units were down 1.64%, Class B units were down 1.69%, Legacy 1 Class units were down 1.47%, Legacy 2 Class units were down 1.57%, Global 1 Class units were down 1.34%, Global 2 Class units were down 1.36% and Global 3 Class units were down 1.52%. The euro weakened against major counterparts as the failure of Eurozone officials to come to terms on new funding plans for ailing Greece prompted liquidations. Amidst European financial instability investors focused their attention on the U.S. dollar, driving the currency steadily higher throughout September. The Swiss franc and Japanese yen declined as investors feared further intervention to devalue the currencies by the countries’ respective financial policy makers. Crude oil markets declined as weak economic data in the U.S. and concerns about global economic growth weighed on industrial demand forecasts. Natural gas prices fell because of beliefs the rising inventories in the U.S. would be sufficient to meet demand in the foreseeable future. Comments from the U.S. Federal Reserve Chairman stating the U.S. still faced significant obstacles weighed heavily on investor sentiment, resulting in sharp declines in the domestic equity markets. News that rating-agency Moody’s Investors Services was planning to downgrade the credit rating of three major U.S. banks also put pressure on domestic share prices. In Europe, ongoing concerns surrounding possible contagion from a Greek default put pressure on the equity markets. Fixed income prices finished the month generally higher as risk-averse investors purchased safer debt instruments. Weak economic data from the U.S. and fears that a Greek debt default could impact the economies of larger more stable nations, also supported safe-haven demand. U.S. Department of Agriculture reports showing strong supply forecasts put heavy pressure on the grains markets, driving corn, wheat, and soybeans nearly 20% lower for the month. Depressed demand from China also played a role in driving grains prices lower. In the softs markets, coffee and sugar prices declined as crop supply forecasts for Brazil were revised higher. Gold and silver underwent sharp price declines as the decision to raise margin requirements on key U.S. exchanges prompted liquidations. Base metals dipped because losses in the global equity markets caused investors to liquidate riskier commodities positions.

Nine months ended September 30, 2010

Forecasts of weak supply in the grains markets sent grains prices predominantly higher in the third quarter. Supply concerns were caused by droughts in key Russian farming areas and abnormally warm temperatures in the Midwest. Increased overseas demand for U.S crops also played a role in moving prices higher. Sugar prices also rose as severe flooding in Pakistan put pressure on supply.

Weak economic data in the U.S. and speculation that the Federal Reserve would be instating further quantitative easing policies weakened the U.S. dollar against competitors. In Europe, the euro strengthened as a result of positive economic data across the Eurozone, including improved investor sentiment and positive GDP growth data for France. The Australian dollar rallied because investors viewed data showing improved manufacturing conditions in China as a positive indicator for the Australian economy.

Rallies in the U.S. equity markets bode well for crude oil prices in the third quarter. Speculators drove the crude markets higher as they viewed rising equity prices as a sign that industrial demand may improve. Mild temperatures in the U.S. put pressure on the natural gas markets, moving prices lower. Also driving natural gas prices lower were forecasts that the hurricane season for 2010 would be weaker than previously expected.

Global equity markets moved generally higher in the third quarter. Strong corporate earnings reports served as a bullish influence for the U.S. equity markets, driving prices up. In Europe, better-tha