10-Q 1 fpf-10q_033119.htm QUARTERLY REPORT

 

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

Commission file number: 000-50728

 

FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP

 

Organized in Maryland IRS Employer Identification No.: 52-1627106

  

c/o Steben & Company, Inc.

9711 Washingtonian Blvd., Suite 400

Gaithersburg, Maryland 20878

(240) 631-7600

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐  Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act: N/A

 

 

 

 

 

 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Futures Portfolio Fund, Limited Partnership 

Statements of Financial Condition

March 31, 2019 (unaudited) and December 31, 2018

 

  

March 31, 2019

(Unaudited)

   December 31, 2018 
Assets          
Equity in broker trading accounts          
Cash  $42,143,526   $27,926,584 
Net unrealized gain (loss) on open futures contracts   9,189,134    2,148,112 
Net unrealized gain (loss) on open forward currency contracts   (233,452)   155,058 
Total equity in broker trading accounts   51,099,208    30,229,754 
Cash and cash equivalents   18,213,698    18,259,197 
Investment in SMFSF, at fair value (cost $28,359,475 and $30,659,588)   25,275,448    27,423,206 
Investments in securities, at fair value (cost $190,035,433 and  $217,418,518)   191,063,779    217,055,133 
General Partner 1% allocation receivable       165,532 
Exchange membership, at fair value (cost $189,000)   115,500    145,500 
Total assets  $285,767,633   $293,278,322 
           
Liabilities and Partners’ Capital (Net Asset Value)          
Liabilities          
Trading Advisor management fees payable  $397,185   $369,048 
Trading Advisor incentive fees payable   1,226,335    492,547 
Commissions and other trading fees payable on open contracts   62,907    50,074 
Cash Manager fees payable   49,498    55,890 
General Partner management and performance fees payable   351,480    362,658 
General Partner 1% allocation payable   35,440     
Selling agent fees payable – General Partner   312,248    326,024 
Broker dealer servicing fees payable – General Partner   13,003    13,539 
Administrative fee payable – General Partner   68,197    67,240 
Redemptions payable   9,420,981    5,057,655 
Subscriptions received in advance   975,000    224,523 
Total liabilities   12,912,274    7,019,198 
           
Partners’ Capital (Net Asset Value)          
Class A Interests – 45,496.8342 and 48,319.8508 units outstanding at March 31, 2019 and December 31, 2018, respectively   180,104,357    189,019,997 
Class A2 Interests – 237.0174 and 146.5000 units outstanding at March 31, 2019 and December 31, 2018, respectively   239,893    146,018 
Class B Interests – 12,397.4185 and 13,290.4576 units outstanding at March 31, 2019 and December 31, 2018, respectively   75,839,918    79,984,663 
Class I Interests – 3,211.8665 and 3,466.2779 units outstanding at March 31, 2019 and December 31, 2018, respectively   3,248,706    3,440,608 
Class R Interests – 13,213.7962 and 13,683.8897 units outstanding at March 31, 2019 and December 31, 2018, respectively   13,422,485    13,667,838 
Total partners’ capital (net asset value)   272,855,359    286,259,124 
Total liabilities and partners’ capital (net asset value)  $285,767,633   $293,278,322 

 

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

 

1 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments

March 31, 2019 (Unaudited)

 

    Description      Fair Value   % of Partners’
Capital (Net
Asset Value)
 
INVESTMENTS IN SECURITIES         
U.S. Treasury Securities
Face Value   Maturity Date  Name   Yield1           
$8,000,000   4/18/19  U.S. Treasury   2.38%  $7,990,510    2.93%
 9,000,000   4/30/19  U.S. Treasury   1.25%   9,037,394    3.31%
 3,975,000   5/15/19  U.S. Treasury   0.88%   3,980,710    1.46%
 8,000,000   5/16/19  U.S. Treasury   2.38%   7,975,773    2.92%
 8,000,000   6/20/19  U.S. Treasury   2.42%   7,957,475    2.92%
 8,500,000   7/31/19  U.S. Treasury   1.38%   8,488,825    3.11%
 6,000,000   10/31/19  U.S. Treasury   1.25%   5,990,242    2.20%
 3,000,000   11/30/19  U.S. Treasury   1.75%   3,004,002    1.10%
Total U.S. Treasury securities (cost:  $54,149,486)         54,424,931    19.95%
                        
U.S. Commercial Paper                  
Face Value   Maturity Date  Name   Yield1           
Automotive                       
$1,500,000   5/22/19  American Honda Finance Corporation   2.55%   1,494,622    0.55%
 1,300,000   4/22/19  Nissan Motor Acceptance Corporation   2.77%   1,297,915    0.48%
 1,200,000   4/17/19  VW Credit, Inc.   2.75%   1,198,544    0.44%
Banks                       
 1,400,000   4/16/19  Mitsubishi UFJ Trust & Banking Corporation (U.S.A.)   2.59%   1,398,501    0.51%
 1,200,000   4/1/19  Nieuw Amsterdam Receivables Corporation   2.58%   1,200,000    0.44%
Beverages                       
 1,500,000   4/2/19  Anheuser-Busch InBev Worldwide Inc.   2.72%   1,499,888    0.55%
 1,500,000   4/2/19  Brown-Forman Corporation   2.54%   1,499,895    0.55%
Diversified financial services                
 1,700,000   4/3/19  CME Group Inc.   2.47%   1,699,769    0.61%
 1,300,000   4/18/19  DCAT, LLC   2.52%   1,298,465    0.48%
 1,400,000   4/12/19  Fairway Financial Corporation   2.54%   1,398,922    0.51%
 1,300,000   5/3/19  Gotham Funding Corporation   2.53%   1,297,100    0.48%
 1,300,000   5/1/19  Manhattan Asset Funding Company LLC   2.52%   1,297,292    0.48%
 1,400,000   4/15/19  Regency Markets No. 1, LLC   2.52%   1,398,639    0.51%
 1,400,000   5/9/19  Sheffield Receivables Company LLC   2.62%   1,396,158    0.51%
Energy                       
 1,400,000   4/25/19  Oglethorpe Power Corporation   2.77%   1,397,433    0.51%
 1,300,000   4/4/19  Southern Company Funding Corporation   2.82%   1,299,697    0.48%
Insurance                       
 1,500,000   4/26/19  Marsh & McLennan Companies, Inc.   2.75%   1,497,156    0.55%
Machinery                       
 1,200,000   4/26/19  Caterpillar Financial Services Corporation   2.57%   1,197,875    0.44%
Manufacturing                   
 1,400,000   4/8/19  E. I. du Pont de Nemours and Company   2.76%   1,399,254    0.51%
Total U.S. commercial paper (cost:  $26,112,152)      26,167,125    9.59%
                        
Foreign Commercial Paper               
Face Value   Maturity Date  Name   Yield1           
Automotive                       
$1,500,000   5/29/19  Toronto-Dominion Bank   2.54%   1,493,921    0.55%
 1,500,000   6/21/19  United Overseas Bank Limited   2.56%   1,491,428    0.55%
Energy                       
 1,300,000   5/15/19  Engie   2.63%   1,295,853    0.47%
 1,400,000   4/29/19  Schlumberger Investment SA   2.52%   1,397,278    0.51%

 

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

 

2 

 

  

Futures Portfolio Fund, Limited Partnership 

Condensed Schedule of Investments (continued)

March 31, 2019 (Unaudited)

 

       Description   Fair Value   % of Partners’
Capital (Net
Asset Value)
 
Foreign Commercial Paper (continued)
Face Value   Maturity Date  Name   Yield1           
Insurance                       
$1,500,000   4/5/19  Prudential Public Limited Company   2.67%  $1,499,558    0.55%
Telecommunications                
 1,300,000   4/4/19  TELSTRA Corporation Ltd   2.57%   1,299,724    0.48%
Total foreign commercial paper (cost:  $8,462,934)         8,477,762    3.11%
Total commercial paper (cost:  $34,575,086)         34,644,887    12.70%
                        
U.S. Corporate Notes               
Face Value   Maturity Date  Name   Yield1           
Aerospace                       
$5,000,000   8/16/21  United Technologies Corporation   3.35%   5,083,047    1.86%
Agriculture                       
 4,850,000   5/5/21  Altria Group, Inc.   4.75%   5,130,732    1.88%
Banks                       
 4,250,000   1/10/20  Citigroup Inc.   3.57%   4,298,136    1.58%
 5,000,000   10/29/20  JPMorgan Chase & Co.   2.55%   5,040,443    1.85%
 3,000,000   10/29/20  JPMorgan Chase & Co.   3.96%   3,055,558    1.12%
 4,750,000   1/15/21  Wells Fargo Bank, National Association   2.60%   4,760,829    1.74%
Diversified financial services                
 2,250,000   4/25/19  Goldman Sachs Group, Inc.   3.81%   2,267,454    0.84%
Energy                       
 4,850,000   2/15/21  Enterprise Products Operating LLC   2.80%   4,870,413    1.78%
Food                       
 3,000,000   4/16/21  General Mills, Inc.   3.20%   3,070,322    1.13%
Healthcare                       
 5,000,000   9/17/21  Cigna Corporation   3.40%   5,058,931    1.85%
 3,000,000   6/1/21  CVS Health Corporation   2.13%   2,968,876    1.09%
Media                      
 3,000,000   9/20/19  Discovery Communications, LLC   3.34%   3,003,982    1.10%
 4,000,000   4/1/21  NBCUniversal, LLC   4.38%   4,211,684    1.54%
Pharmaceuticals                   
 4,200,000   5/11/20  Amgen Inc.   3.15%   4,230,708    1.55%
 3,500,000   6/25/21  Bayer US Finance II LLC   3.23%   3,464,469    1.27%
  Software                       
 3,500,000   10/8/19  Oracle Corporation   2.25%   3,529,111    1.29%
Telecommunications                
 2,500,000   9/20/19  Cisco Systems, Inc.   2.97%   2,504,660    0.92%
Total U.S. corporate notes (cost:  $66,061,464)         66,549,355    24.39%
                        
Foreign Corporate Notes               
Face Value   Maturity Date  Name   Yield1           
Banks                       
$5,500,000   3/2/20  Danske Bank A/S   2.20%   5,463,123    2.00%
Energy                       
 5,500,000   5/3/19  BP Capital Markets P.L.C.   1.68%   5,532,215    2.03%
 1,000,000   9/12/19  Shell International Finance B.V.   1.38%   994,808    0.36%
 2,500,000   5/11/20  Shell International Finance B.V.   2.13%   2,506,277    0.92%
Insurance                       
 4,000,000   9/20/21  AIA Group Limited   3.15%   4,004,692    1.47%

 

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

 

3 

 

  


Futures Portfolio Fund, Limited Partnership 

Condensed Schedule of Investments (continued)

March 31, 2019 (Unaudited)

 

       Description   Fair Value   % of Partners’
Capital (Net
Asset Value)
 
Foreign Corporate Notes (continued)               
Face Value   Maturity Date  Name   Yield1           
Manufacturing                       
$3,500,000   11/15/20  GE Capital International Funding Company   2.34%  $3,486,870    1.28%
Pharmaceuticals                       
 2,250,000   3/12/20  Allergan Funding SCS   3.85%   2,274,592    0.83%
Total foreign corporate notes (cost:  $24,094,873)         24,262,577    8.89%
Total corporate notes (cost:  $90,156,337)         90,811,932    33.28%
                        
U.S. Asset Backed Securities               
Face Value   Maturity Date  Name   Yield1           
Automotive                       
$335,230   1/8/21  AmeriCredit Automobile Receivables Trust 2015-2   2.40%   335,315    0.12%
 300,000   2/18/22  AmeriCredit Automobile Receivables Trust 2017-1   2.30%   298,475    0.11%
 675,000   1/18/22  AmeriCredit Automobile Receivables Trust 2018-3   3.11%   677,097    0.25%
 745,000   2/22/21  Capital Auto Receivables Asset Trust 2018-2   3.02%   746,421    0.27%
 63,305   9/15/20  CarMax Auto Owner Trust 2017-3   1.64%   63,294    0.02%
 434,756   6/15/21  Drive Auto Receivables Trust 2018-2   2.88%   435,377    0.16%
 500,000   11/15/21  Drive Auto Receivables Trust 2018-3   3.01%   500,931    0.18%
 700,000   4/15/26  Ford Credit Auto Owner Trust 2014-REV2   2.31%   698,765    0.26%
 15,239   1/21/20  GM Financial Automobile Leasing Trust 2017-2   1.72%   15,238    0.01%
 303,345   4/20/20  GM Financial Automobile Leasing Trust 2018-1   2.39%   303,235    0.11%
 785,142   9/21/20  GM Financial Automobile Leasing Trust 2018-3   2.89%   785,892    0.29%
 354,850   5/17/21  GM Financial Consumer Auto Receivables Tr 2018-2   2.55%   354,777    0.13%
 304,251   4/15/20  Mercedes-Benz Auto Lease Trust 2018-A   2.20%   304,278    0.11%
 735,000   5/16/22  Santander Drive Auto Receivables Trust 2017-1   2.58%   734,046    0.27%
 123,973   3/20/20  Santander Retail Auto Lease Trust 2017-A   2.02%   123,899    0.05%
 89,144   12/20/19  Tesla Auto Lease Trust 2018-A   2.32%   89,063    0.03%
Credit cards                       
 325,000   4/15/19  Capital One Multi-Asset Execution Trust   2.93%   325,487    0.12%
 175,000   5/15/19  Chase Issuance Trust   2.89%   175,303    0.06%
 600,000   8/15/19  Chase Issuance Trust   1.58%   597,978    0.22%
 400,000   8/17/20  Discover Card Execution Note Trust   1.88%   396,682    0.15%
Equipment                       
 113,537   4/15/21  CNH Equipment Trust 2015-A   1.85%   113,579    0.04%
 60,086   11/16/20  CNH Equipment Trust 2017-B   1.59%   60,078    0.02%
 137,914   2/24/20  Dell Equipment Finance Trust 2017-2   1.97%   137,783    0.05%
 447,453   10/22/20  Dell Equipment Finance Trust 2018-1   2.79%   447,799    0.16%
 525,000   6/15/21  GreatAmerica Leasing Receivables Funding, L.L.C.   2.97%   526,754    0.19%
Other                       
 475,000   12/20/20  Verizon Owner Trust 2017-2   1.92%   472,609    0.17%
 1,175,000   4/20/22  Verizon Owner Trust 2017-3   2.06%   1,168,201    0.44%
Student loans                       
 112,074   3/25/67  Navient Student Loan Trust 2018-1   2.68%   112,094    0.04%
 141,434   3/25/67  Navient Student Loan Trust 2018-2   2.73%   141,459    0.05%
 40,027   11/25/27  SLM Student Loan Trust 2011-2   3.09%   40,120    0.01%
Total U.S. asset backed securities (cost:  $11,154,524)         11,182,029    4.09%
Total investments in securities (cost:  $190,035,433)       $191,063,779    70.02%

 

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

 

4 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

March 31, 2019 (Unaudited)

 

  Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
OPEN FUTURES CONTRACTS          
Long U.S. Futures Contracts          
  Agricultural commodities  $(25,270)   (0.01)%
  Currencies   (289,593)   (0.11)%
  Energy   (211,409)   (0.08)%
  Equity indices   968,622    0.35%
  Interest rate instruments   1,695,621    0.62%
  Metals2   5,204,897    1.92%
  Single stock futures   207,134    0.08%
Net unrealized gain (loss) on open long U.S. futures contracts   7,550,002    2.77%
           
Short U.S. Futures Contracts          
  Agricultural commodities   1,933,326    0.72%
  Currencies   582,862    0.21%
  Energy   (20,584)   (0.01)%
  Equity indices   (428,860)   (0.16)%
  Interest rate instruments   (545,834)   (0.20)%
  Metals2   (5,666,665)   (2.07)%
  Single stock futures   (14,902)   (0.01)%
Net unrealized gain (loss) on open short U.S. futures contracts   (4,160,657)   (1.52)%
           
Total U.S. Futures Contracts - net unrealized gain (loss) on open U.S. futures contracts   3,389,345    1.25%
           
Long Foreign Futures Contracts          
  Agricultural commodities   2,549    0.00%
  Currencies   (157,592)   (0.06)%
  Energy   (3,509)   0.00%
  Equity indices   839,376    0.31%
  Interest rate instruments2   6,067,137    2.22%
  Metals   (6,206)   0.00%
  Single stock futures   1,537    0.00%
Net unrealized gain (loss) on open long foreign futures contracts   6,743,292    2.47%
           
Short Foreign Futures Contracts          
  Agricultural commodities   34,892    0.01%
  Currencies   (71,574)   (0.03)%
  Energy   29,530    0.01%
  Equity indices   (172,235)   (0.06)%
  Interest rate instruments   (763,624)   (0.28)%
  Metals   (492)   0.00%
Net unrealized gain (loss) on open short foreign futures contracts   (943,503)   (0.35)%
           
Total foreign futures contracts - net unrealized gain (loss) on open foreign futures contracts    5,799,789    2.12%
           
Net unrealized gain (loss) on open futures contracts  $9,189,134    3.37%

 

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

 

5 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

March 31, 2019 (Unaudited)

 

  Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
OPEN FORWARD CURRENCY CONTRACTS          
U.S. Forward Currency Contracts          
  Long  $(718,045)   (0.26)%
  Short   549,258    0.20%
Net unrealized gain (loss) on open U.S. forward currency contracts   (168,787)   (0.06)%
           
Foreign Forward Currency Contracts          
  Long   (45,271)   (0.02)%
  Short   (19,394)   (0.01)%
Net unrealized gain (loss) on open foreign forward currency contracts   (64,665)   (0.03)%
           
Net unrealized gain (loss) on open forward currency contracts  $(233,452)   (0.09)%

 

1 Represents the annualized yield at date of purchase for discount securities or the stated coupon rate for coupon-bearing securities.

 

2 No individual futures or forward currency contract position constituted one percent or greater of partners’ capital (net asset value). Accordingly, the number of contracts and expiration dates are not presented.

 

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

 

6 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments

December 31, 2018

 

    Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
INVESTMENTS IN SECURITIES         
U.S. Treasury Securities              
Face Value   Maturity Date  Name   Yield1           
$10,000,000   1/17/19  U.S. Treasury   2.29%  $9,989,327    3.49%
 10,000,000   2/28/19  U.S. Treasury   1.50%   10,036,567    3.50%
 10,000,000   2/14/19  U.S. Treasury   2.34%   9,970,594    3.48%
 6,000,000   3/15/19  U.S. Treasury   1.00%   6,001,041    2.10%
 10,000,000   3/21/19  U.S. Treasury   2.35%   9,948,667    3.48%
 9,000,000   4/30/19  U.S. Treasury   1.25%   8,982,278    3.14%
 3,975,000   5/15/19  U.S. Treasury   0.88%   3,956,063    1.38%
 8,500,000   7/31/19  U.S. Treasury   1.38%   8,490,770    2.97%
Total U.S. Treasury securities (cost:  $67,200,708)         67,375,307    23.54%
                        
U.S. Commercial Paper               
Face Value   Maturity Date  Name   Yield1           
Aerospace                       
$1,500,000   1/9/19  General Dynamics Corporation   2.54%   1,499,158    0.52%
 500,000   1/16/19  Northrop Grumman Corporation   2.71%   499,440    0.17%
Automotive                       
 1,300,000   1/8/19  Hyundai Capital America   2.69%   1,299,325    0.45%
 300,000   1/7/19  Nissan Motor Acceptance Corporation   2.44%   299,879    0.11%
 800,000   1/14/19  Nissan Motor Acceptance Corporation   2.45%   799,298    0.28%
 1,200,000   3/20/19  VW Credit, Inc.   3.19%   1,191,810    0.42%
Banks                       
 1,200,000   1/11/19  Cafco, LLC   2.47%   1,199,183    0.42%
 1,500,000   1/30/19  Mitsubishi UFJ Trust & Banking Corporation (U.S.A.)   2.62%   1,496,858    0.52%
 300,000   1/7/19  Nieuw Amsterdam Receivables Corporation   2.52%   299,875    0.11%
Beverages                       
 1,700,000   1/11/19  Brown-Forman Corporation   2.67%   1,698,749    0.59%
Diversified financial services                
 1,400,000   2/7/19  American Express Credit Corporation   2.69%   1,396,158    0.49%
 1,500,000   1/3/19  CME Group Inc.   2.50%   1,499,793    0.52%
 1,500,000   2/4/19  DCAT, LLC   2.67%   1,496,246    0.52%
 1,000,000   1/16/19  Fairway Financial Corporation   2.54%   998,950    0.35%
 1,400,000   1/10/19  Gotham Funding Corporation   2.52%   1,399,125    0.49%
 1,500,000   3/1/19  Liberty Street Funding LLC   2.78%   1,493,240    0.52%
 1,400,000   2/15/19  Manhattan Asset Funding Company LLC   2.65%   1,395,398    0.49%
 1,300,000   2/6/19  National Rural Utilities Cooperative Finance Corp.   2.60%   1,296,646    0.45%
 1,400,000   2/19/19  Thunder Bay Funding, LLC   2.72%   1,394,855    0.49%
Energy                       
 1,200,000   1/10/19  NextEra Energy Capital Holdings, Inc.   2.72%   1,199,190    0.42%
 1,500,000   1/15/19  One Gas, Inc.   2.52%   1,498,542    0.52%
 1,500,000   1/18/19  WEC Energy Group Inc.   3.02%   1,497,875    0.52%
Machinery                       
 1,600,000   1/25/19  Caterpillar Financial Services Corporation   2.67%   1,597,173    0.56%
 400,000   1/2/19  Parker-Hannifin Corporation   2.67%   399,971    0.15%
REIT                       
 1,500,000   1/7/19  Simon Property Group, L.P.   2.47%   1,499,388    0.52%
Total U.S. commercial paper (cost:  $30,285,187)         30,346,125    10.60%

 

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

 

7 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

December 31, 2018

 

       Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
Foreign Commercial Paper               
Face Value   Maturity Date  Name   Yield1           
Automotive                       
$1,300,000   1/8/19  Magna International Inc.   3.02%  $1,299,242    0.45%
Banks                       
 1,200,000   2/5/19  Sumitomo Mitsui Banking Corporation   2.67%   1,196,908    0.42%
Chemicals                       
 1,100,000   1/7/19  Nutrien Ltd.   2.69%   1,099,511    0.38%
Diversified financial services                       
 1,200,000   1/2/19  Anglesea Funding Plc   2.56%   1,199,915    0.42%
 800,000   1/14/19  Ontario Teachers’ Finance Trust   2.53%   799,275    0.28%
Engineering                       
 1,500,000   1/22/19  La Compagnie De Telephone Bell Du Canada Ou Bell Canada   2.77%   1,497,594    0.53%
Total foreign commercial paper (cost:  $7,073,489)         7,092,445    2.48%
Total commercial paper (cost:  $37,358,676)         37,438,570    13.08%
                        
U.S. Corporate Notes               
Face Value   Maturity Date  Name   Yield1           
Aerospace                       
$5,000,000   8/16/21  United Technologies Corporation   3.35%   5,049,063    1.77%
Agriculture                       
 4,850,000   5/5/21  Altria Group, Inc.   4.75%   4,992,536    1.74%
Banks                       
 4,250,000   1/10/20  Citigroup Inc.   3.20%   4,287,007    1.50%
 5,000,000   10/29/20  JPMorgan Chase & Co.   2.55%   4,965,408    1.73%
 3,000,000   10/29/20  JPMorgan Chase & Co.   3.71%   3,047,949    1.06%
 4,750,000   1/15/21  Wells Fargo Bank, National Association   2.60%   4,747,762    1.66%
Beverages                       
 1,954,000   2/1/21  Anheuser-Busch InBev Finance Inc.   2.65%   1,942,162    0.68%
Diversified financial services                
 2,600,000   2/15/19  Goldman Sachs Group, Inc.   7.50%   2,686,173    0.94%
 2,250,000   4/25/19  Goldman Sachs Group, Inc.   3.53%   2,268,737    0.79%
 3,000,000   2/1/19  Morgan Stanley   2.45%   3,029,155    1.06%
Energy                       
 4,850,000   2/15/21  Enterprise Products Operating LLC   2.80%   4,847,904    1.69%
Food                       
 3,000,000   4/16/21  General Mills, Inc.   3.20%   3,004,190    1.05%
Healthcare                       
 3,000,000   6/1/21  CVS Health Corporation   2.13%   2,907,453    1.02%
 5,000,000   9/17/21  Halfmoon Parent, Inc.   3.40%   5,037,511    1.77%
Media                       
 3,000,000   9/20/19  Discovery Communications, LLC   3.50%   3,000,982    1.05%
Pharmaceuticals                       
 4,200,000   5/11/20  Amgen Inc.   3.06%   4,212,691    1.47%
 3,500,000   6/25/21  Bayer US Finance II LLC   3.45%   3,455,729    1.21%
Software                       
 3,500,000   10/8/19  Oracle Corporation   2.25%   3,501,671    1.22%
Telecommunications                       
 3,000,000   2/22/19  Apple Inc.   3.50%   3,014,395    1.05%
 2,500,000   9/20/19  Cisco Systems, Inc.   3.13%   2,503,085    0.87%
Total U.S. corporate notes (cost:  $72,986,920)         72,501,563    25.33%

 

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

 

8 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

December 31, 2018

 

       Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
Foreign Corporate Notes               
Face Value   Maturity Date  Name   Yield1           
Banks                       
$4,000,000   1/18/19  ABN AMRO Bank N.V.   3.08%  $4,026,145    1.41%
 5,500,000   3/2/20  Danske Bank A/S   2.20%   5,421,142    1.89%
Energy                       
 5,500,000   5/3/19  BP Capital Markets P.L.C.   1.68%   5,488,176    1.92%
 1,000,000   9/12/19  Shell International Finance B.V.   1.38%   993,303    0.35%
 2,500,000   5/11/20  Shell International Finance B.V.   2.13%   2,481,653    0.87%
Insurance                       
 4,000,000   9/20/21  AIA Group Limited   3.31%   3,985,136    1.39%
Manufacturing                       
 3,500,000   11/15/20  GE Capital International Funding Company   2.34%   3,388,044    1.18%
Pharmaceuticals                       
 2,250,000   3/12/20  Allergan Funding SCS   4.03%   2,261,856    0.79%
Total foreign corporate notes (cost:  $28,176,810)         28,045,455    9.80%
Total corporate notes (cost:  $101,163,730)         100,547,018    35.13%
                        
U.S. Asset Backed Securities               
Face Value   Maturity Date  Name   Yield1           
Automotive                       
$535,461   1/8/21  AmeriCredit Automobile Receivables Trust 2015-2   2.40%   535,220    0.19%
 675,000   1/18/22  AmeriCredit Automobile Receivables Trust 2018-3   3.11%   676,258    0.24%
 745,000   2/22/21  Capital Auto Receivables Asset Trust 2018-2   3.02%   745,278    0.26%
 141,983   9/15/20  CarMax Auto Owner Trust 2017-3   1.64%   141,716    0.05%
 575,000   6/15/21  Drive Auto Receivables Trust 2018-2   2.88%   575,081    0.20%
 500,000   11/15/21  Drive Auto Receivables Trust 2018-3   3.01%   500,019    0.17%
 700,000   4/15/26  Ford Credit Auto Owner Trust 2014-REV2   2.31%   695,819    0.24%
 89,815   1/21/20  GM Financial Automobile Leasing Trust 2017-2   1.72%   89,650    0.03%
 406,675   4/20/20  GM Financial Automobile Leasing Trust 2018-1   2.39%   405,845    0.14%
 800,000   9/21/20  GM Financial Automobile Leasing Trust 2018-3   2.89%   799,834    0.28%
 450,153   5/17/21  GM Financial Consumer Auto Receivables Trust 2018-2   2.55%   449,389    0.16%
 36,011   2/18/20  Hyundai Auto Receivables Trust 2017-A   1.48%   36,010    0.01%
 470,747   4/15/20  Mercedes- Benz Auto Lease Trust 2018-A   2.20%   470,176    0.16%
 43,358   8/15/19  Mercedes-Benz Auto Lease Trust 2017-A   2.66%   43,407    0.02%
 163,259   9/16/19  Nissan Auto Lease Trust 2017-A   1.64%   163,162    0.06%
 96,418   2/16/21  Santander Drive Auto Receivables Trust 2016-2   2.08%   96,438    0.03%
 208,158   3/20/20  Santander Retail Auto Lease Trust 2017-A   2.02%   207,518    0.07%
 128,432   12/20/19  Tesla Auto Lease Trust 2018-A   2.32%   128,170    0.04%
Credit cards                       
 325,000   4/15/19  Capital One Multi-Asset Execution Trust   2.91%   325,686    0.11%
 175,000   5/15/19  Chase Issuance Trust   2.87%   175,352    0.06%
 600,000   8/15/19  Chase Issuance Trust   1.58%   595,537    0.21%
 600,000   1/15/19  Discover Card Execution Note Trust   1.64%   599,987    0.21%
Equipment                       
 171,137   4/15/21  CNH Equipment Trust 2015-A   1.85%   170,566    0.06%
 135,325   11/16/20  CNH Equipment Trust 2017-B   1.59%   135,008    0.05%
 263,997   2/24/20  Dell Equipment Finance Trust 2017-2   1.97%   263,234    0.09%
 500,000   10/22/20  Dell Equipment Finance Trust 2018-1   2.80%   500,952    0.17%
 475,000   12/20/20  Verizon Owner Trust 2017-2   1.92%   470,419    0.16%
 1,175,000   4/20/22  Verizon Owner Trust 2017-3   2.06%   1,161,674    0.41%

 

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

 

9 

 


Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

December 31, 2018

 

          Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
U.S. Asset Backed Securities (continued)               
Face Value    Maturity Date  Name   Yield1           
Student loans                       
$        213,293    3/25/67  Navient Student Loan Trust 2018-1   2.70%  $213,387    0.07%
           278,555    3/25/67  Navient Student Loan Trust 2018-2   2.75%   278,705    0.10%
             44,538    11/25/27  SLM Student Loan Trust 2011-2   3.11%   44,741    0.02%
Total U.S. asset backed securities (cost:  $11,695,404)        11,694,238    4.07%
Total investments in securities (cost:  $217,418,518)      $217,055,133    75.82%
                          
OPEN FUTURES CONTRACTS               
Long U.S. Futures Contracts               
          Agricultural commodities       $66,814    0.02%
          Currencies        182,729    0.06%
          Energy        (1,434,763)   (0.50)%
          Equity indices        (188,683)   (0.07)%
          Interest rate instruments        698,695    0.24%
          Metals2        (6,940,650)   (2.42)%
          Single stock futures        (36,683)   (0.01)%
Net unrealized gain (loss) on open long U.S. futures contracts        (7,652,541)   (2.68)%
                          
Short U.S. Futures Contracts               
          Agricultural commodities        865,115    0.30%
          Currencies        (413,137)   (0.14)%
          Energy        1,978,283    0.69%
          Equity indices        1,261,593    0.44%
          Interest rate instruments        (1,223,198)   (0.43)%
          Metals2        6,492,571    2.27%
          Single stock futures        51,931    0.02%
Net unrealized gain (loss) on open short U.S. futures contracts        9,013,158    3.15%
                          
Total U.S. Futures Contracts - net unrealized gain (loss) on open U.S. futures contracts        1,360,617    0.47%
                          
Long Foreign Futures Contracts               
          Agricultural commodities        10,178    0.00%
          Currencies        (78,283)   (0.03)%
          Energy        19,962    0.01%
          Equity indices        (1,520,967)   (0.53)%
          Interest rate instruments2        2,938,406    1.03%
          Metals        2,710    0.00%
Net unrealized gain (loss) on open long foreign futures contracts        1,372,006    0.48%

 

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

 

10 

 

 

Futures Portfolio Fund, Limited Partnership

Condensed Schedule of Investments (continued)

December 31, 2018

 

  Description  Fair Value   % of Partners’
Capital (Net
Asset Value)
 
OPEN FUTURES CONTRACTS (continued)       
Short Foreign Futures Contracts          
  Agricultural commodities  $(66,257)   (0.02)%
  Currencies   95,922    0.03%
  Equity indices   79,455    0.03%
  Interest rate instruments   (698,453)   (0.24)%
  Metals   4,822    0.00%
Net unrealized gain (loss) on open short foreign futures contracts   (584,511)   (0.20)%
           
Total foreign futures contracts - net unrealized gain (loss) on open foreign futures contracts   787,495    0.28%
           
Net unrealized gain (loss) on open futures contracts  $2,148,112    0.75%
           
OPEN FORWARD CURRENCY CONTRACTS          
U.S. Forward Currency Contracts          
  Long  $519,445    0.18%
  Short   (549,732)   (0.19)%
Net unrealized gain (loss) on open U.S. forward currency contracts   (30,287)   (0.01)%
           
Foreign Forward Currency Contracts          
  Long   (197,500)   (0.07)%
  Short   382,845    0.13%
Net unrealized gain (loss) on open foreign forward currency contracts   185,345    0.06%
           
Net unrealized gain (loss) on open forward currency contracts  $155,058    0.05%

 

1 Represents the annualized yield at date of purchase for discount securities, the stated coupon rate for coupon-bearing securities, or the stated interest rate for certificates of deposit.

 

2 No individual futures or forward currency contract position constituted one percent or greater of partners’ capital (net asset value). Accordingly, the number of contracts and expiration dates are not presented.

 

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

 

 

11 

 

 

Futures Portfolio Fund, Limited Partnership

Statements of Operations

For the Three Months Ended March 31, 2019 and 2018

(Unaudited)

 

   Three Months Ended March 31,
   2019  2018
Realized and Change in Unrealized Gain (Loss) on Investments          
Net realized gain (loss) on:          
Futures and forward contracts  $68,667   $1,696,970 
Investments in SMFSF   (300,113)   288,127 
Investments in securities   (398,350)   151,456 
Net change in unrealized gain (loss) on:          
Futures and forward contracts   6,652,512    (6,732,879)
Investments in SMFSF   152,355    (1,981,104)
Investments in securities   1,198,061    (516,597)
Exchange membership   (30,000)   (37,750)
Brokerage commissions and trading expenses   (830,492)   (1,110,883)
Net realized and change in unrealized gain (loss) on investments   6,512,640    (8,242,660)
           
Net Investment Income (Loss)          
Income          
Interest income (loss)   1,570,431    1,245,912 
           
Expenses          
Trading Advisor management fee   1,061,485    1,335,834 
Trading Advisor incentive fee   1,226,335     
Cash Manager fees   54,674    59,833 
General Partner management and performance fees   1,036,488    1,308,151 
Selling agent fees – General Partner   918,506    1,183,049 
Broker dealer servicing fees – General Partner   38,727    48,853 
General Partner 1% allocation   35,440    (111,865)
Administrative expenses – General Partner   202,824    254,031 
Total expenses   4,574,479    4,077,886 
Net investment income (loss)   (3,004,048)   (2,831,974)
Net Income (Loss)  $3,508,592   $(11,074,634)

 

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

 

12

 

 

Futures Portfolio Fund, Limited Partnership

Statements of Operations (continued)

For the Three Months Ended March 31, 2019 and 2018 (unaudited)

 

   Three Months Ended March 31, 2019
   Class A  Class A2  Class B  Class I  Class R
Increase (decrease) in net asset value per unit  $46.76   $15.42   $99.20   $18.88   $16.96 
Net income (loss) per unit†  $43.47   $38.88   $89.64   $19.23   $17.48 
                          
Weighted average number of units outstanding   47,015.4240    169.1293    12,892.3936    3,402.6750    13,565.6655 

 

   Three Months Ended March 31, 2018 
    Class A    Class A2    Class B    Class I    Class R 
Increase (decrease) in net asset value per unit  $(143.25)  $   $(189.43)  $(28.45)  $(30.88)
Net income (loss) per unit†  $(139.87)  $   $(172.03)  $(28.46)  $(29.97)
                          
Weighted average number of units outstanding   56,810.3734        15,470.0328    3,466.2779    12,298.4430 

 

(based on weighted average number of units outstanding during the period)

 

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

 

13

 

 

Futures Portfolio Fund, Limited Partnership

Statements of Cash Flows

For the Three Months Ended March 31, 2019 and 2018

(Unaudited)

 

   Three Months Ended March 31,
   2019  2018
Cash flows from operating activities          
Net income (loss)  $3,508,592   $(11,074,634)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities          
Net change in unrealized (gain) loss from futures and forwards trading   (6,652,512)   7,225,379 
Net realized and change in unrealized (gain) loss on SMFSF, securities and certificates of deposit   (651,953)   6,865,557 
Purchases of securities and certificates of deposit   (109,548,291)   (153,717,469)
Proceeds from disposition of SMFSF, securities and certificates of deposit    138,339,356    154,090,686 
Changes in          
Exchange membership   30,000    37,750 
Trading Advisor management fee payable   28,137    69,086 
Trading Advisor incentive fee payable   733,788    (1,297,698)
Commissions and other trading fees payable on open contracts   12,833    (25,334)
Cash Manager fees payable   (6,392)   30,549 
General Partner management and performance fees payable   (11,178)   (41,783)
General Partner 1% allocation receivable/payable   200,972    (140,621)
Selling agent fees payable – General Partner   (13,776)   (39,201)
Broker dealer servicing fees payable – General Partner   (536)   (1,751)
Administrative fee payable – General Partner   957    (8,083)
Net cash provided by (used in) operating activities   25,969,997    1,972,433 
           
Cash flows from financing activities          
Subscriptions   2,234,300    2,207,000 
Subscriptions received in advance   975,000    972,808 
Redemptions   (15,007,854)   (24,734,053)
Net cash provided by (used in) financing activities   (11,798,554)   (21,554,245)
           
Net increase (decrease) in cash and cash equivalents   14,171,443    (19,581,812)
Cash and cash equivalents, beginning of period   46,185,781    90,141,061 
Cash and cash equivalents, end of period  $60,357,224   $70,559,249 
           
End of period cash and cash equivalents consists of          
Cash in broker trading accounts  $42,143,526   $39,041,782 
Cash and cash equivalents not in broker trading accounts   18,213,698    31,517,467 
Total end of period cash and cash equivalents  $60,357,224   $70,559,249 
           
Supplemental disclosure of cash flow information      
Prior period redemptions paid  $5,057,655   $11,825,677 
Prior period subscriptions received in advance  $224,523   $287,000 
           
Supplemental schedule of non-cash financing activities          
Redemptions payable  $9,420,981   $4,020,682 

 

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

 

14

 

 

Futures Portfolio Fund, Limited Partnership

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

For the Three Months Ended March 31, 2019 and 2018

(Unaudited)

 

   Class A  Class A2  Class B  Class I  Class R  Total

Three Months Ended

March 31, 2019

                              
Balance at December 31, 2018  $189,019,997   $146,018   $79,984,663   $3,440,608   $13,667,838   $286,259,124 
Net income (loss)   2,043,816    6,575    1,155,708    65,428    237,065    3,508,592 
Subscriptions   2,091,523    87,300    70,000        210,000    2,458,823 
Redemptions   (12,881,564)       (5,539,868)   (257,330)   (692,418)   (19,371,180)
Transfers   (169,415)       169,415             
Balance at March 31, 2019  $180,104,357   $239,893   $75,839,918   $3,248,706   $13,422,485   $272,855,359 
                               

Three Months Ended

March 31, 2018

                              
Balance at December 31, 2017  $240,860,323   $   $100,657,081   $3,547,299   $12,470,722   $357,535,425 
Net income (loss)   (7,946,101)       (2,661,301)   (98,643)   (368,589)   (11,074,634)
Subscriptions   631,000        803,000        1,060,000    2,494,000 
Redemptions   (10,348,464)       (6,445,115)       (135,479)   (16,929,058)
Transfers                        
Balance at March 31, 2018  $223,196,758   $   $92,353,665   $3,448,656   $13,026,654   $332,025,733 

 

   Units
   Class A  Class A2  Class B  Class I  Class R

Three Months Ended

March 31, 2019

               
Balance at December 31, 2018    48,319.8508    146.5000    13,290.4576    3,466.2779    13,683.8897 
Subscriptions    551.5426    90.5174    12.0124        217.0747 
Redemptions    (3,329.8411)       (934.0369)   (254.4114)   (687.1682)
Transfers    (44.7181)       28.9854         
Balance at March 31, 2019    45,496.8342    237.0174    12,397.4185    3,211.8665    13,213.7962 
                           

Three Months Ended

March 31, 2018

                          
Balance at December 31, 2017    58,081.8421        16,061.6377    3,466.2779    12,013.6394 
Subscriptions    152.6465        130.1735        1,055.0794 
Redemptions    (2,486.2985)       (995.8273)       (134.8093)
Transfers                     
Balance at March 31, 2018    55,748.1901        15,195.9839    3,466.2779    12,933.9095 

 

   Net Asset Value per Unit
   Class A  Class A2  Class B  Class I  Class R
                
March 31, 2019   $3,958.61   $1,012.13   $6,117.40   $1,011.47   $1,015.79 
December 31, 2018    3,911.85    996.71    6,018.20    992.59    998.83 
March 31, 2018    4,003.66        6,077.50    994.92    1,007.17 
December 31, 2017    4,146.91        6,266.93    1,023.37    1,038.05 

 

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

 

15

 

 

Futures Portfolio Fund, Limited Partnership

Notes to Financial Statements

1.Organization and Summary of Significant Accounting Policies

 

Description of the Fund

 

Futures Portfolio Fund, Limited Partnership (“Fund”) is a Maryland limited partnership, which operates as a commodity investment pool that commenced trading operations on January 2, 1990. The Fund issues units of limited partner interests (“Units”) in six classes, Class A, A2, A3, B, I and R, which represent units of fractional undivided beneficial interest in and ownership of the Fund. The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Third Amended and Restated Limited Partnership Agreement (“Partnership Agreement”).

 

The Fund uses commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally.

 

The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Exchange Act of 1934, as amended (“1934 Act”). As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the 1934 Act. As a commodity pool, the Fund is subject to the regulations of the U.S. Commodity Futures Trading Commission (“CFTC”), an agency of the U.S. Government, which regulates most aspects of the commodity futures industry; rules of the National Futures Association (“NFA”), an industry self-regulatory organization; rules of Financial Industry Regulatory Authority (“FINRA”), an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of the futures brokers and interbank market makers through which the Fund trades.

 

Steben & Company, Inc. (“General Partner”), is the general partner of the Fund and a Maryland corporation registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is also registered with the SEC as a registered investment advisor and a broker dealer. The General Partner is a member of the NFA and FINRA. The General Partner manages all aspects of the Fund’s business and serves as one of the Fund’s selling agents.

 

The six classes of Units in the Fund differ only in the fees applicable to each class. Class A Units are subject to a 2% per annum selling agent fee. Class A2 Units may pay an up-front sales commission of up to 3% of the offering price and a 0.6% per annum selling agent fee. Class A3 Units may pay an up-front sales commission of up to 2% of the offering price and a 0.75% per annum selling agent fee. Class B Units are subject to a 0.2% per annum broker dealer servicing fee. Class I Units are subject to higher minimum investments requirements and lower General Partner management fees (0.75% per annum instead of 1.50% per annum) as well as a General Partner performance fee (7.5% of new profits, described more fully in Footnote 4). Class R Units do not pay selling compensation or servicing fees to selling agents, and are generally intended for clients of registered investment advisors. There were no Class A3 Units outstanding on March 31, 2019.

 

At March 31, 2019, the Fund owned approximately $25 million of Class I shares of the Steben Managed Futures Strategy Fund (“SMFSF”), which represents approximately 36% of that fund. SMFSF is a non-diversified series of shares of beneficial interest of Steben Alternative Investment Funds (the “Trust”), a statutory trust organized under the laws of the State of Delaware, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end investment company.  SMFSF issues four classes of shares: Class A, C, I and N. The General Partner serves as the investment manager of SMFSF. SMFSF has a similar investment strategy to the Fund, using commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments.

 

Significant Accounting Policies

 

Accounting Principles

The Fund’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Under GAAP, the Fund is an investment company and follows accounting and reporting guidance under the Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 946, Financial Services – Investment Companies.

 

16

 

 

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Revenue Recognition

Futures, forward currency contracts, investments in securities, certificates of deposit, and the exchange membership are recorded on a trade date basis, and gains or losses are realized when contracts/positions are liquidated. Realized gains and losses on investments in securities and certificates of deposit are determined on a specific identification basis and are included in net realized gain (loss) in the statements of operations. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the statements of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses. The difference between cost and the fair value of open investments in securities and certificates of deposit is reflected as unrealized gain or loss on investments in securities and certificates of deposit. Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Interest income earned on investments in securities, certificates of deposit and other cash and cash equivalent balances is recorded on an accrual basis. Market discounts and premiums on fixed-income securities are amortized daily over the expected life of the security using the effective yield method.

 

Fair Value of Financial Instruments

Financial instruments are recorded at fair value, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities recorded at fair value are classified within a fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. This fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 –    Fair value is based on unadjusted quoted prices for identical instruments in active markets. Financial instruments utilizing Level 1 inputs include futures contracts, U.S. Treasury securities and mutual funds.

 

Level 2 –    Fair value is based on quoted prices for similar instruments in active markets and inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals using a market approach. Financial instruments utilizing Level 2 inputs include forward currency contracts, commercial paper, corporate notes, asset backed securities and the exchange membership.

 

Level 3 –    Fair value is based on valuation techniques in which one or more significant inputs are unobservable. The Fund has no financial instruments utilizing Level 3 inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

The Fund assesses the classification of the instruments at each measurement date, and any transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Fund’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the period ended March 31, 2019 and year ended December 31, 2018, there were no such transfers between levels.

 

A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.

 

U.S. Treasury securities are recorded at fair value based on bid and ask quotes for identical instruments. Commercial paper, certificates of deposit, corporate notes, asset backed securities and the exchange membership are recorded at fair value based on bid and ask quotes for similar, but not identical, instruments. Accordingly, U.S. Treasury securities are classified within Level 1, and commercial paper, certificates of deposit, corporate notes, asset backed securities and exchange memberships are classified within Level 2.

 

The investment in SMFSF (a mutual fund), a money market fund and futures contracts are valued using quoted market prices for identical assets in active markets, and are classified within Level 1. The money market fund is included in cash and cash equivalents in the statements of financial condition. The fair values of forward currency contracts are based upon third-party quoted dealer values on the interbank market and are classified within Level 2.

 

17

 

 

Cash and Cash Equivalents

Cash and cash equivalents may include cash, funds held in money market accounts and short-term investments with maturities of three months or less at the date of acquisition and that are not held for sale in the normal course of business. The Fund maintains deposits with financial institutions in amounts that are in excess of federally insured limits; however, the Fund does not believe it is exposed to any significant credit risk.

 

Exchange Membership

The Fund incurs reduced fees for transactions on the Chicago Mercantile Exchange (CME) due to a membership interest in the CME. The membership is accounted at its fair value and changes in fair value are reported in net change in unrealized gain (loss) in exchange membership on the statement of operations.

 

Brokerage Commissions and Trading Expenses

Brokerage commissions and trading expenses include brokerage and other trading fees, and are charged to expense when contracts are opened and closed.

 

Redemptions Payable

Redemptions payable represent redemptions that meet the requirements of the Fund and have been approved by the General Partner prior to period-end. These redemptions have been recorded using the period-end net asset value per Unit.

 

Income Taxes

The Fund prepares calendar year U.S. and applicable state and local tax returns. The Fund is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Fund’s income, expenses and trading gains or losses. The Fund evaluates the tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and asset or liability in the current year. Management has determined there are no material uncertain income tax positions through March 31, 2019. With few exceptions, the Fund is no longer subject to U.S. federal, or state and local income tax examinations by tax authorities for years before 2015.

Foreign Currency Transactions

The Fund has certain investments denominated in foreign currencies. The purchase and sale of investments, and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of investments held. Such fluctuations are included with the net realized and change in unrealized gain or loss on such investments in the statements of operations.

 

Reclassification

Certain amounts reported in the 2018 financial statements may have been reclassified to conform to the 2019 presentation without affecting previously reported partners’ capital (net asset value) or net income (loss).

 

New Accounting Pronouncements

Fair Value Disclosures

In August 2018, the FASB issued guidance updating the disclosure requirements for fair value measurement and the fair value hierarchy. Primarily, the guidance added or modified certain disclosures regarding Level 3 fair value measurements and removed certain disclosures involving transfers between Level 1 and Level 2 of the fair value hierarchy. Historically, the Fund has not had any Level 3 fair value measurements and has not had any transfers between Level 1 and Level 2 on the fair value hierarchy. The update is effective beginning after December 15, 2019, although early adoption is permitted. The Fund does not believe that adoption of this guidance will have a material effect on the financial statements.

 

18

 

 

2.Fair Value Disclosures

 

The Fund’s assets and liabilities, measured at fair value on a recurring basis, are summarized in the following tables by the type of inputs applicable to the fair value measurements:

 

At March 31, 2019    
   Level 1   Level 2   Total 
Equity in broker trading accounts:               
Net unrealized gain (loss) on open futures contracts*  $9,189,134   $   $9,189,134 
Net unrealized gain (loss) on open forward currency contracts*       (233,452)   (233,452)
Cash and cash equivalents:               
Money market fund   13,818,640        13,818,640 
Investment in SMFSF   25,275,448        25,275,448 
Investments in securities:               
U.S. Treasury securities*   54,424,931        54,424,931 
Asset backed securities*       11,182,029    11,182,029 
Commercial paper*       34,644,887    34,644,887 
Corporate notes*       90,811,932    90,811,932 
Exchange membership       115,500    115,500 
Total  $102,708,153   $136,520,896   $239,229,049 

*See the condensed schedule of investments for further description.

 

At December 31, 2018    
   Level 1   Level 2   Total 
Equity in broker trading accounts:               
Net unrealized gain (loss) on open futures contracts*  $2,148,112   $   $2,148,112 
Net unrealized gain (loss) on open forward currency contracts*       155,058    155,058 
Cash and cash equivalents:               
Money market fund   14,836,223        14,836,223 
Investment in SMFSF   27,423,206        27,423,206 
Investments in securities:               
U.S. Treasury securities*   67,375,307        67,375,307 
Asset backed securities*       11,694,238    11,694,238 
Commercial paper*       37,438,570    37,438,570 
Corporate notes*       100,547,018    100,547,018 
Exchange membership       145,500    145,500 
Total  $111,782,848   $149,980,384   $261,763,232 

*See the condensed schedule of investments for further description.

 

There were no Level 3 holdings at March 31, 2019 and December 31, 2018, or during the periods then ended.

 

In addition to the financial instruments listed above, substantially all of the Fund’s other assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.

 

3.Derivative Instruments Disclosures

 

The Fund’s derivative contracts are comprised of futures and forward currency contracts, none of which are designated as hedging instruments. At March 31, 2019, the Fund’s derivative contracts had the following impact on the statements of financial condition:

 

March 31, 2019  Derivative Assets and Liabilities, at fair value 
Statements of Financial Condition Location 

Gross

Amounts of

Recognized

Assets

  

Gross Amounts

Offset in the

Statements of

Financial Condition

  

Net Amount of

Assets Presented in

the Statements of Financial Condition

 
Equity in broker trading accounts:
Net unrealized gain (loss) on open futures contracts
               
Agricultural commodities  $2,289,213   $(343,716)  $1,945,497 
Currencies   958,128    (894,025)   64,103 
Energy   214,638    (420,610)   (205,972)
Equity indices   2,325,681    (1,118,778)   1,206,903 
Interest rate instruments   8,193,236    (1,739,936)   6,453,300 
Metals   6,855,990    (7,324,456)   (468,466)
Single stock futures   274,994    (81,225)   193,769 
Net unrealized gain (loss) on open futures contracts  $21,111,880   $(11,922,746)  $9,189,134 
                
Net unrealized gain (loss) on open forward currency contracts  $1,589,127   $(1,822,579)  $(233,452)

 

19

 

 

At March 31, 2019, there were 33,048 open futures contracts and 12,893 open forward currency contracts.

 

The Fund’s financial assets, derivative assets, and cash collateral held by counterparties at March 31, 2019 were:

 

      

Gross Amounts Not Offset in the

Statements of Financial Condition

     
Counterparty  Net Amount of Assets in the Statements of Financial Condition  

Financial

Instruments

  

Cash Collateral

Received

   Net Amount 
                     
Deutsche Bank AG  $(249,024)  $   $   $(249,024)
Deutsche Bank Securities, Inc.   862,664            862,664 
JP Morgan Securities, LLC   (166,201)           (166,201)
R.J. O’Brien & Associates, LLC   189,667            189,667 
SG Americas Securities, LLC   8,303,004            8,303,004 
Société Générale International Limited   15,572            15,572 
Total  $8,955,682   $   $   $8,955,682 

 

For the three months ended March 31, 2019, the Fund’s derivative contracts had the following impact on the statements of operations:

 

   Three Months Ended
March 31, 2019
 
Types of Exposure 

Net realized

gain (loss)

   Net change
in unrealized gain (loss)
 
Futures contracts          
Agricultural commodities  $82,565   $1,069,647 
Currencies   (63,910)   276,872 
Energy   (4,407,779)   (769,454)
Equity indices   (1,434,933)   1,575,505 
Interest rate instruments   7,070,733    4,737,850 
Metals   (473,138)   (27,919)
Single stock futures   (178,512)   178,521 
Total futures contracts   595,026    7,041,022 
           
Forward currency contracts   (529,991)   (388,510)
           
Total futures and forward currency contracts  $65,035   $6,652,512 

 

For the three months ended March 31, 2019, the number of futures contracts closed was 362,350 and the number of forward currency contracts closed was 254,667.

 

20

 

 

At December 31, 2018, the Fund’s derivative contracts had the following impact on the statements of financial condition:

 

December 31, 2018  Derivative Assets and Liabilities, at fair value 
Statements of Financial Condition Location 

Gross

Amounts of

Recognized

Assets

  

Gross Amounts

Offset in the

Statements of

Financial Condition

  

Net Amount of

Assets Presented in

the Statements of Financial Condition

 
Equity in broker trading accounts:
Net unrealized gain (loss) on open futures contracts
               
Agricultural commodities  $1,218,664   $(342,814)  $875,850 
Currencies   760,876    (973,645)   (212,769)
Energy   2,141,913    (1,578,431)   563,482 
Equity indices   2,064,863    (2,433,465)   (368,602)
Interest rate instruments   3,725,805    (2,010,355)   1,715,450 
Metals   8,434,167    (8,874,714)   (440,547)