10-Q 1 efc6-1514_10q.txt ============================================================================== 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 March 31, 2006 OR _ |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-50728 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Maryland 52-1627106 ----------------------- ------------------------------ (State of Incorporation) (IRS Employer Identification No.) c/o Steben & Company, Inc. 2099 Gaither Road, Suite 200 Rockville, Maryland 20850 ------------------------- (Address of Principal Executive Office)(zip code) (240) 631-9808 -------------- 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Aggregate market value of the voting and non-voting common equity held by non-affiliates: the registrant is a limited partnership; as of March 31, 2006, 78,118.3251 Class A units and 30,741.9503 Class B units with an aggregate value of $281,239,646 and $135,640,168 respectively, were outstanding. ============================================================================== Table of Contents Part I: Financial Information Item 1. Financial Statements Statements of Financial Condition March 31, 2006 (Unaudited) and December 31, 2005 (Audited) Condensed Schedule of Investments March 31, 2006 (Unaudited) Condensed Schedule of Investments December 31, 2005 (Audited) Statements of Operations For the Three Months Ended March 31, 2006 and 2005 (Unaudited) Statements of Cash Flows For the Three Months Ended March 31, 2006 and 2005 (Unaudited) Statements of Changes in Partners' Capital (Net Asset Value) - For the Three Months Ended March 31, 2006 and 2005 (Unaudited) Notes to Financial Statements for the Three Months Ended March 31, 2006 and 2005 (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk Item 4. Controls and Procedures Part II: Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits i FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP STATEMENTS OF FINANCIAL CONDITION March 31, 2006 (Unaudited) and December 31, 2005 (Audited) -----------------
March 31, December 31, 2006 2005 ASSETS Equity in broker trading accounts $ 189,997,057 $ 198,497,253 Cash 898,642 695,371 Interest receivable 22,510,152 8,689,576 Net unrealized gain on open futures contracts ----------------- ----------------- Deposits with brokers $ 213,405,851 207,882,200 Cash and cash equivalents 52,213,371 54,960,101 Commercial paper (cost, including accrued interest, - $135,915,180 and $124,721,316) 135,915,180 124,721,316 United States government agency securities (cost, including accrued interest, - $49,671,342 and $19,831,111) 49,671,342 19,831,111 Net unrealized gain (loss) on open forward currency contracts 129,758 (6,949,322) ----------------- ----------------- Total assets $ 451,335,502 $ 400,445,406 ================= ================= LIABILITIES Accounts payable $ 1,118,326 $ 533,744 Commissions and other trading fees on open contracts 134,148 107,284 General Partner management fee 685,965 608,924 General Partner 1 percent allocation 287,246 149,316 Advisor management fees 1,499,653 1,325,463 Advisor incentive fees 2,701,684 2,795,651 Selling agents' fees 504,068 462,691 Redemptions payable 8,911,026 2,326,682 Subscriptions received in advance 18,613,572 15,743,538 ----------------- ----------------- Total liabilities PARTNERS' CAPITAL (Net Asset Value) $ 34,455,688 24,053,293 ----------------- ----------------- Class A Interests - 78,118.3251 units and 75,378.5969 units outstanding at March 31,2006 and December 31,2005 $ 281,239,646 263,005,434 Class B Interests - 30,741.9503 units and 26,635.1317 units outstanding at March 31, 2006 and December 31,2005 $ 135,640,168 113,386,679 ----------------- ----------------- Total partners' capital (Net Asset Value) $ 416,879,814 376,392,113 ----------------- ----------------- Total liabilities and partners' capital $ 451,335,502 $ 400,445,406 ================= ================= See accompanying notes. 1
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP CONDENSED SCHEDULE OF INVESTMENTS March 31, 2006 (Unaudited) ----------
UNITED STATES GOVERNMENT AGENCY SECURITIES ------------------------------------------ Maturity % of Net Face Value Date Description Value Asset Value ---------- -------- ----------- ----- ----------- $30,000,000 07/18/06 Fed Home Ln Discount Note $ 29,597,700 7.10% 20,542,000 09/19/06 Freddie Mac Discount Note 20,073,642 4.82% Total United States government agency securities _______________ ___________ (cost, including accrued Interest, = $49,671,342) $ 49,671,342 11.92% =============== =========== COMMERCIAL PAPER ---------------- Maturity % of Net Face Value Date Description Value Asset Value ---------- -------- ----------- ----- ----------- $30,749,000 05/23/06 Daimlerchrysler Na Hldg $ 30,533,142 7.32% 10,000,000 07/25/06 General Elec Cap Corp 9,855,292 2.36% 20,339,000 07/25/06 General Elec Cap Corp 20,026,486 4.80% 20,000,000 08/14/06 Societe Generate N Amer 19,646,000 4.71% 10,300,000 08/14/06 UBS Finance Delaware LLC 10,116,918 2.43% 700,000 08/14/06 UBS Finance Delaware LLC 687,557 0.16% 20,392,000 08/14/06 UBS Finance Delaware LLC 20,021,120 4.80% 25,632,000 09/22/06 Societe Generale N Amer 25,028,665 6.00% Total commercial paper securities ______________ ____________ (cost, including accrued Interest, = $135,915,180) $ 135,915,180 32.58% =============== ============ LONG FUTURES CONTRACTS ---------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 470,371 0.11% Currency (30,479) -0.01% Energy 1,451,815 0.35% Interest Rate (401,238) -0.10% Metal 6,411,062 1.54% Stock Index 3,217,717 0.77% --------------- ------------ Total long futures contracts 11,119,248 2.66% =============== ============ SHORT FUTURES CONTRACTS ----------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural 314,498 0.08% Currency 2,863,426 0.69% Energy (153,807) -0.04% Interest Rate 9,678,894 2.32% Metal (1,344,235) -0.32% Stock Index 32,128 0.01% --------------- ----------- Total short futures contracts 11,390,904 2.74% --------------- ----------- Total futures contracts $ 22,510,152 5.40% =============== ============ FORWARD CURRENCY CONTRACTS -------------------------- % of Net Description Value Asset Value ----------- ----- ----------- Long forward currency contracts $ (5,993,571) -1.44% Short forward currency contracts 6,121,330 1.47% Pending Option Premiums 1,999 0.00% --------------- ---------- Total forward currency contracts $ 129,758 0.03% =============== =========== See accompanying notes. 2
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP CONDENSED SCHEDULE OF INVESTMENTS December 31, 2005 (Audited) ----------
UNITED STATES GOVERNMENT AGENCY SECURITIES ------------------------------------------ Maturity % of Net Face Value Date Description Value Asset Value ---------- -------- ----------- $20,000,000 03/22/06 Fannie Discount Note $ 19,831,111 5.27% Total United States government agency securities _______________ _____________ (cost, including accrued interest, = $19,831,111) $ 19,831,111 5.27% =============== ============= COMMERCIAL PAPER ---------------- Maturity % of Net Face Value Date Description Value Asset Value ---------- -------- ----------- ----- ------------ $30,222,000 01/23/06 Daimlerchrysler Na Hldg $ 30,141,845 8.01% 20,000,000 02/13/06 HSBC Finance Corp 19,899,667 5.29% 10,300,000 02/13/06 ING America Ins Hldgs 10,248,082 2.72% 20,000,000 03/22/06 General E1ec Cap Corp 19,825,333 5.27% 25,000,000 03/22/06 Societe Generale N Amer 24,781,944 6.58% 20,000,000 03/22/06 UBS Finance Delaware LLC 19,824,445 5.27% Total commercial paper securities =============== ============= (cost, including accrued interest, = $124,721,316) $ 124,721,316 33.14% =============== ============= LONG FUTURES CONTRACTS ---------------------- %of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 2,208,810 0.59% Currency (38,180) -0.01% Energy (1,989,422) -0.53% Interest Rate 572,769 0.15% Metal 6,560,479 1.74% Stock Index 493,210 0.13% _______________ _____________ Total long futures contracts 7,807,666 2.07% =============== ============= SHORT FUTURES CONTRACTS ----------------------- % of Net Description Value Asset Value ----------- ----- ------------ Agricultural (640,886) -0.17% Currency 153,910 0.04% Energy (355,062) -0.09% Interest Rate 3,114,494 0.83% Metal (1,217,256) -0.32% Stock Index (173,290) -0.05% _______________ ____________ Total short futures contracts 881,910 0.24% ______________ _____________ Total futures contracts $ 8,689,576 2.31% =============== ============= FORWARD CURRENCY CONTRACTS -------------------------- % of Net Description Value Asset Value ----------- ----- ------------ Long forward currency contracts $ (8,197,045) -2.18% Short forward currency contracts 1,226,183 0.33% Pending Option Premiums 21,540 0.01% --------------- ------------- Total forward currency contracts $ (6,949,322) 1.84% =============== ============= See accompanying notes. 3
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2006 and 2005 (Unaudited) _____________
Three Months Ended March 31, 2006 2005 ---- ---- TRADING GAINS (LOSSES) Net realized losses $ (2,297,390) $ (10,537,483) Change in unrealized gains 20,899,656 485,418 Brokerage commissions (414,310) (430,194) --------------- -------------- 18,187,956 (10,482,259) Gain (loss) from trading --------------- -------------- NET INVESTMENT (LOSS) Income 4,541,650 1,994,049 Interest income --------------- -------------- Expenses General Partner management fee 1,990,757 1,244,668 General Partner 1 percent allocation 137,931 (125,809) Advisor management fees 1,995,457 1,081,914 Advisor incentive fee 2,708,144 206,630 Selling agents' fees 1,461,885 1,001,469 Operating expenses 1,178,491 980,345 --------------- -------------- Total expenses 9,472,665 4,389,217 --------------- -------------- Operating expenses waived (398,192) (422,368) --------------- -------------- Net total expenses 9,074,473 3,966,849 --------------- -------------- Net investment loss (4,532,823) (1,972,800) =============== ============== $ 13,655,133 $ (12,455,059) NET INCOME (LOSS) Three Months Ended March 31, 2006 2005 ---- ---- Class A Class B Class A Class B ------- ------- ------- ------- INCREASE (DECREASE) IN NET ASSET VALUE PER UNIT $111.05 $155.19 ($172.63) ($189.53) ======= ======= ======= =======
4 see accompanymg notes. FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2006 and 2005 (Unaudited) ----------
2006 2005 ---- ---- Cash flows from (for) operating activities Net income (loss) $ 13,655,133 $ (12,455,059) Adjustments to reconcile net income (loss) to net cash from (for) operating activities Net change in unrealized gains (20,899,655) (485,418) Increase in interest receivable (203,271) (610,606) Increase in General Partner 1 percent allocation (103,986) Increase in accounts payable and accrued expenses 948,017 151,089 Net sales (purchases) of investments in United States government agency securities (29,840,231) 35,877,912 Purchases of commercial paper (11,193,865) 0 --------------- ---------------- Net cash from (for) operating activities (47,533,872) 22,373,932 Cash flows from (for) financing activities Additions of units 27,047,598 27,226,543 Subscriptions received in advance 18,613,572 14,792,692 Redemption of units (9,374,224) (5,149,568) --------------- ---------------- Net cash fTom financing activities 36,286,946 36,869,667 Net increase (decrease) in cash (11,246,926) 59,243,599 Cash and cash equivalents Beginning of period 253,457,354 211,350,873 --------------- ---------------- End of period $ 242,210,428 $ 270,594,472 =============== ================= End of period cash consists of: Cash in broker trading accounts $ 189,997,057 $ 236,217,590 Cash and cash equivalents 52,213,371 34,376,882 --------------- ---------------- Total end of period cash $ 242,210,428 $ 270,594,472 =============== ================= See accompanying notes. 5
FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE) For the Three Months Ended March 31, 2006 and 2005 (Unaudited) ----------
Class A Interests Class B Interests ----------------- ----------------- Units Value Units Value Total ----- ----- ----- ----- ----- Three Months Ended March 31, 2006 Balances at December 31,2005 75,378.5969 $263,005,434 26,635.1317 $113,386,679 $376,392,113 Net income for the three months ended March 31,2006 8,853,281 4,801,852 13,655,133 Additions 6,523.5427 22,777,615 4,687.3488 20,013,521 42,791,136 Redemptions (3,663.9062) (12,974,633) (678.6703) (2,983,935) (15,958,568) Transfers (119.9083) (422,051) 98.1401 422,051 0 --------------- -------------- ------------ ------------- --------------- Balances at March 31,2006 78,118.3251 $281,239,646 30,741.9503 $135,640,168 $416,879,814 =============== ============== ============ ============= =============== Class A Interests Class B Interests ----------------- ----------------- Units Value Units Value Total ----- ----- ----- ----- ----- Three Months Ended March 31, 2005 Balances at December 31,2004 56,716.3746 $194,513,666 14,666.9737 $ 60,287,591 $254,801 ,257 Net (loss) for the three months ended March 31,2005 (9,791,682) (2,663,377) (12,455,059) Additions 6,154.3629 20,004,703 3,228.3613 12,528,508 32,533,211 Redemptions (1,700.2618) (5,498,475) (271.5557) (1,050,100) (6,548,575) Transfers (37.7372) (121,242) 24.8403 95,879 (25,363) --------------- -------------- ------------ ------------- --------------- Balances at March 31,2005 61,132.7385 $199,106,970 17,648.6196 $ 69,198,501 $268,305,471 =============== ============== ============ ============= ===============
Net Asset Value Per Unit --------------------------------------------------------------------------------------------------- March 31, 2006 December 31, 2005 March 31, 2005 December 31, 2004 Class A Class B Class A Class B Class A Class B Class A Class B ------- ------- ------- ------- ------- -------- ------- ------- $3,600.18 $4,412.22 $3,489.13 $4,257.03 $3,256.96 $3,920.90 $3,429.59 $4,110.43
See accompanying notes. 6 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) ---------- Note 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ----------------------------------------------------------- A. General Description of the Partnership Futures Portfolio Fund, Limited Partnership (the "Partnership") is a Maryland limited partnership which operates as a commodity investment pool. The Partnership utilizes professional trading advisors to engage in the trading of futures contracts, forward currency contracts, and other financial instruments. The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Limited Partnership Agreement. B. Regulation The Partnership is a registrant with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 (the "Act"). As a registrant, the Partnership is subject to the regulations of the SEC and the informational requirements of the Act. As a commodity pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, 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 commodity exchanges where the Partnership executes transactions. Additionally, the Partnership is subject to the requirements of Futures Commission Merchants (brokers) and interbank market makers through which the Partnership trades. C. Method of Reporting The Partnership's financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by the Partnership's management. Gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and market price) are reported in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board Interpretation No. 39 - "Offsetting of Amounts Related to Certain Contracts." Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. United States government securities and agency securities and Commercial Paper are stated at cost plus accrued interest, which approximates market value. For purposes of both financial reporting and calculation of redemption value, net asset value per Class A or Class B unit is calculated by dividing the net asset value of Class A or Class B by the number or outstanding units of Class A or Class B. D. Cash Equivalents Cash equivalents are highly liquid investments with original maturity of three months or less that are not held for sale in the normal course of business. E. Brokerage Commissions Brokerage commissions include other trading fees and are charged to expense when contracts are opened. F. Income Taxes The Partnership prepares calendar year U.S. and applicable state information tax returns. The Partnership is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Partnership's income, expenses and trading gains or losses. The Partnership however, may be required to file 7 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited) ---------- returns and pay tax in various state and local jurisdictions as a result of its operations or the residency of its partners. G. Foreign Currency Transactions The Partnership's functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently. H. Classes of Interests The Partnership has two classes of limited partnership interests ("Interests"), Class A and Class B. The General Partner may offer additional classes at its discretion. Both Class A and Class B Interests are traded pursuant to identical trading programs and differ only in respect to the General Partner's management fee and selling agent's fee. Class B Interests are issued only at the General Partner's discretion and are generally intended for investors who are participating in fee based investment advisory programs. All items of income or loss, except for the General Partner management fee and selling agent's fee, are allocated pro rata between Class A and Class B Interests. The General Partner management fee and selling agent's fee applicable to each class of Interest is then charged to each class. All items of income or loss allocated to each class of Interest are then allocated pro rata to each Limited Partner within each class. Note 2: GENERAL PARTNER --------------- The General Partner of the Partnership is Steben & Company, Inc., which conducts and manages the business of the Partnership. During the three months ended March 31, 2006 and 2005, the General Partner did not maintain a capital balance in the Partnership; however, the sole shareholder of the General Partner has an investment in Class B Interests of the Partnership. During the three months ended March 31, 2006 and 2005, the General Partner received the following compensation: o Commencing December 1, 2004, Class A Interests paid a monthly management fee equal to 1/12 of 1.95 percent (1.95 percent per annum) of the net asset value of the Class A Interests as of the last day of each month. o Class A Interests paid a monthly selling agents' fee equal to 1/12 of 2 percent (2 percent per annum) of the net asset value of the Class A Interests as of the last day of each month. The General Partner, in turn, pays the selling agents' fee to the respective selling agents. If the selling agents' fees are not paid to the selling agent, or the General Partner was the selling agent, such portions of the selling agents' fee are retained by the General Partner. o Class B Interests paid a monthly management fee equal to 1/12 of 1.95 percent (1.95 percent per annum) of the net asset value of the Class B Interests as of the last day of each month. 8 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited) ---------- Note 2: GENERAL PARTNER (CONTINUED) --------------------------- o Class B Interests paid a monthly selling agents' fees equal to 1/12 of .20 percent (.20 percent per annum) of the net asset value of the Class B Interests as of the last day of each month. The General Partner, in turn, pays the selling agents' fees to the respective selling agents. If the selling agents' fees are not paid to the selling agent, or the General Partner was the selling agent, such portion of the selling agents' fees are retained by the General Partner. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1 percent of any increase or decrease in the Partnership's net assets. Such amount is reflected as the General Partner 1 percent allocation in the statement of financial condition and the statement of operations. Note 3 COMMODITY TRADING ADVISORS -------------------------- The Partnership has Advisory Agreements with various commodity trading advisors, pursuant to which the Partnership pays each commodity trading advisor a monthly or quarterly management fee equal to 1 percent or 2 percent per annum of allocated net assets (as separately defined in each respective Advisory Agreement) and a quarterly or annual incentive fee equal to 20 percent or 25 percent of net new Trading Profits (as separately defined in each respective Advisory Agreement). Note 4 DEPOSITS WITH BROKERS --------------------- The Partnership deposits funds with brokers, subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash with such brokers. The Partnership earns interest income on its assets deposited with the brokers. Note 5: OPERATING EXPENSES ------------------ The Partnership is responsible for all of its operating expenses such as accounting, audit, legal, administrative, marketing and offering expenses. Operating expenses also include salary and administrative costs incurred by the General Partner relating to marketing and administration of the Partnership, such as salaries and commissions of General Partner marketing personnel, and administrative employee salaries and related costs. Pursuant to the terms of the Limited Partnership Agreement, operating expenses that exceed 1 percent of the average month-end net assets of the Partnership are the responsibility of the General Partner. For the three months ended March 31, 2006 and 2005, actual operating expenses exceeded .25 percent (pro rated operating expense limitation) of average month-end net assets of the Partnership by $146,934 and $ 344,719, respectively, with such amount included in operating expenses waived in the statement of operations. Additionally, during the three months ended March 31, 2006 and 2005, the General Partner voluntarily paid $251,258 and $77,649, respectively, of operating expenses of the Partnership, with such amounts also included in operating expenses waived in the statement of operations. Note 6 SUBSCRIPTIONS, DISTRIBUTIONS, AND REDEMPTIONS --------------------------------------------- Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner. Units are sold at the net asset value per Class A or Class B unit as of the close of business on the last day of the month in which the subscription is accepted. Investors whose subscriptions are accepted are admitted as Limited Partners as of the beginning of the month following the month in which their subscriptions were accepted. At March 31, 2006 and December 31, 2005, the Partnership had received subscriptions of $18,613,572 and $15,743,538, respectively, which were additions to the Partnership effective April 1, 2006 and January 1, 2006, respectively. 9 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited) ---------- Note 6 SUBSCRIPTIONS, DISTRIBUTIONS, AND REDEMPTIONS (CONTINUED) --------------------------------------------------------- The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of Class A or Class B units owned at the end of any month, subject to 15 days written notice to the General Partner and restrictions in the Limited Partnership Agreement. Note 7 TRADING ACTIVITIES AND RELATED RISKS ------------------------------------ The Partnership engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively, "derivatives"). 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. Purchase and sale of futures contracts requires margin deposits with the brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited. The Partnership trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement. The Partnership has a substantial portion of its assets on deposit with interbank market makers and other financial institutions in connection with its trading of forward currency contracts and its cash management activities. In the event of an interbank market maker's or financial institution's insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits. The Partnership utilizes UBS Financial Services, Inc. as its cash management securities broker for the investment of some margin excess amounts into short-term fixed income instruments including high grade commercial paper (interest bearing with some credit risk), U.S. Agency securities and Treasury Bills (interest bearing and credit risk free) with durations no longer than one year. Fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Partnership's Treasury Bills, although substantially all of these short-term investments are held to maturity. For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. The unrealized gain (loss) on open futures and forward currency contracts is comprised of the following:
Futures Contracts Forward Currency Contracts (exchange traded) (non-exchange traded) March 31, December 31, March 31, December 31, 2006 2005 2006 2005 ---- ---- ---- ---- Gross unrealized gains $ 26,818,422 $ 16,127,549 $ 11,622,028 $ 8,821,813 Gross unrealized losses (4,308,270) (7,437,973) (11,492,270) (15,771,135) Net unrealized gain (loss) ------------------- ----------------- ------------------- -------------------- $ 22,510,152 $ 8,689,576 $ 129,758 $ (6,949,322) =================== ================= =================== ====================
10 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited) ---------- Note 7 TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) ------------------------------------------------ The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Limited Partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. Note 8: GUARANTEES ---------- In the normal course of business, the Partnership may enter 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 cannot be estimated. However, the Partnership believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any continent liability in the financial statements for such indemnifications. Note 9: INTERIM FINANCIAL STATEMENTS ---------------------------- The statements of financial condition, including the condensed schedule of investments, as of March 31, 2006, the statements of operations for the three months ended March 31, 2006 and 2005, the statements of cash flows and changes in partners' capital (net asset value) for the three months ended March 31, 2006 and 2005 and the accompanying notes to the financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America may be omitted pursuant to such rules and regulations. In the opinion of management, such financial statements and accompanying disclosures reflect all adjustments, which were of a normal and recurring nature, necessary for a fair presentation of financial position as of March 31, 2006, results of operation for the three months ended March 31, 2006 and 2005, cash flows and changes in partners' capital (net asset value) for the three months ended March 31, 2006 and 2005. The results of operations for the three months ended March 31, 2006 and 2005 are not necessarily indicative of the results to be expected for the full year or any other period. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Form 10-K as filed with the Securities and Exchange Commission. 11 FUTURES PORTFOLIO FUND, LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited) ---------- Note 10: FINANCIAL HIGHLIGHTS -------------------- The following information presents per unit operating performance data and other supplemental financial data for the three months ended March 31, 2006 and 2005. This information has been derived from information presented in the financial statements.
Three months ended March 31, 2006 2005 (Unaudited) (Unaudited) Class A Class B Class A Class B Interests Interests Interests Interests --------- --------- --------- --------- Per Unit Performance (for a unit outstanding throughout the entire period) ----------------------------------------------------- Net asset value per unit at beginning of period $3,489.13 $4,257.03 $3,429.59 $4,110.43 --------- --------- --------- --------- Income from operations Gain (loss) from trading (1) 156.26 191.59 (144.34) (172.54) Net investment loss(1) (45.21) (36.40) (28.29) (16.99) --------- --------- --------- --------- Total income (loss) from operations 111.05 155.19 (172.63) (189.53) --------- --------- --------- --------- Net asset value per unit at end of period $3,600.18 $4,412.22 $3,256.96 $3,920.90 ========= ========= ========= ========= Total Return 3.18% 3.65% (5.03%) (4.61%) ========= ========= ========= ========= Supplemental Data Ratios to average net asset value: Expenses prior to advisor incentive fees(2),(3) 1.75% 1.30% 6.20% 4.47% Advisor incentive fees 0.68% 0.70% 0.08% 0.08% --------- --------- --------- --------- Total expenses 2.43% 2.00% 6.28% 4.55% ========= ========= ========= ========= Net investment loss(2),(3) (1.28%) (0.85%) (3.14%) (1.40%) ========= ========= ========= =========
Total returns are calculated based on the change in value of a Class A or Class B unit during the period and have not been annualized. An individual partner's total returns and ratios may vary from the above total returns and ratios based on the timing of additions and redemptions. (1) The net investment loss per unit is calculated by dividing the net investment loss by the average number of Class A or Class B units outstanding during the period. Gains from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. Such balancing amount may differ from the calculation of gains from trading per unit due to the timing of trading gains and losses during the period relative to the number of units outstanding. (2) All of the ratios under the supplemental data are computed net of voluntary and involuntary waivers of operating expenses. For the three months ended March 31, 2006 and 2005, the ratios are net of approximately .06% and .03% relating to the voluntary waiver of operating expenses, respectively. Both the nature and the amounts of the waivers are more fully explained in Note 5. (3) The net investment loss includes interest income and excludes gains from trading activities as shown on the statement of operations. The total amount is then reduced by all expenses other than advisor incentive fees. The resulting amount is divided by the average net asset value for the year. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reference is made to Item 1, "Financial Statements," the information contained therein is essential to, and should be read in connection with the following analysis. Introduction Futures Portfolio Fund Limited Partnership (the "Fund") is a Maryland limited partnership, formed on May 11, 1989, that utilizes professional trading advisors to engage in the trading of commodity futures contracts, other commodity interests, options, securities and forward contracts. The Fund began trading on January 2, 1990. The Fund is an actively managed account with speculative trading profits as its objective. The Fund currently trades in the U.S. and international futures and forward markets. Specifically, the Fund trades a portfolio focused on futures and forward contracts in currencies, interest rate instruments, energy, stock indices, agricultural products and metals. Gains or losses are realized when contracts are liquidated. Net unrealized gains or losses on open contracts (the difference between contract price and market price) are reflected in the statement of financial condition. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. United States government and agency securities and commercial paper are stated at cost plus accrued interest, which approximates market value. For purposes of both financial reporting and calculation of redemption value, Net Asset Value per Unit is calculated by dividing Partners' Capital (Net Asset Value) by the number of outstanding Units. As of March 31, 2006 the aggregate capitalization of the Fund was $416,879,814 of which $281,239,646 was in A units and $135,640,168 was in B units. A units and B units differ only with regard to lower Selling Agent fees for the B units. The net asset value per unit of limited partnership interest ("Unit") for A units as of March 31, 2006 was $3,600.18 and for B units was $4,412.22. Critical Accounting Policies The Fund's financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by management. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts (the difference between contract trade price and market price) are reported in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board Interpretation No. 39 -"Offsetting of Amounts Related to Certain Contracts." The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. United States government and agency securities and commercial paper are stated at cost plus accrued interest, which approximates market value. For purposes of both financial reporting and calculation of redemption value, net asset value per Class A or Class B unit is calculated by dividing the net asset value of Class A or Class B by the number of outstanding units of Class A or Class B. Capital Resources 13 The Fund will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Fund's business, it will make no capital expenditures and will have no capital assets, which are not operating capital or assets. Off-Balance Sheet Arrangements The term "off-balance sheet arrangements" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund trades in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures positions of the Fund at the same time, and if the commodity trading advisors were unable to offset such futures positions of the Fund, the Fund could lose all of its assets and the Limited Partners would realize a 100% loss. Steben & Company, the General Partner, minimizes market risk through diversification of the portfolio allocations to multiple trading advisors, and maintenance of a margin-to-equity ratio that rarely exceeds 30%. In addition to market risk, in entering into futures and forward contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions. In the case of forward contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. Steben & Company utilizes only those counterparties that it believes to be creditworthy for the Fund. All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund. Contractual Obligations The Fund does not have any contractual obligations of the type contemplated by Regulation S-K 303(a)(5). The Fund's sole business is trading futures and forward currency contracts, both long (contracts to buy) and short (contracts to sell). Liquidity Most United States commodity exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits." During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Fund's futures trading operations, the Fund's assets are expected to be highly liquid. Redemptions may be made by a Limited Partner as of the last trading day of any month at the Net Asset Value of the redeemed Units (or portion thereof) on that date, on 15 days prior written notice to the General Partner. Partial redemptions must be for at least $1,000, unless such requirement is waived by 14 the General Partner. In addition, the Limited Partner, if making a partial redemption, must maintain at least $10,000 or his original investment amount, whichever is less, in the Fund unless such requirement is waived by the General Partner. The entire offering proceeds, without deductions, will be credited to the Fund's bank and brokerage accounts to engage in trading activities and as reserves for that trading. The Fund meets its margin requirements by depositing U.S. government securities with the futures broker and the over-the-counter counterparties. In this way, substantially all of the Fund's assets, whether used as margin for trading purposes or as reserves for such trading, can be invested in U.S. government securities and time deposits with U.S. banks. Investors should note that maintenance of the Fund's assets in U.S. government securities and banks does not reduce the risk of loss from trading futures and forward contracts. The Fund receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Fund assets. Approximately 10% to 30% of the Fund's assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Government Securities in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations there under. Approximately 10% to 30% of the Fund's assets are deposited with over-the-counter counterparties in order to initiate and maintain forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparties. The remaining 40% to 80% of the Fund's assets will normally be invested in cash equivalents, such as U.S. Treasury bills and commercial paper, and held by the futures broker or the over-the-counter counterparties. The Fund's assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested with or loaned to Steben & Company or any affiliated entities. Results of Operations 2006 January 2006 A Units of the Fund were up 1.18% for the month of January 2006 and B Units were up 1.33%. In January, profits from metals, equity indices, energy and agricultural commodities offset losses from interest rate instruments and foreign currencies. The Fund's long positions in zinc, aluminum and copper generated the strongest profits in the metals sector. The strong upward trends in metals from 2005 continued into January as capacity constrained producers tried to keep pace with industrial growth. Global stock prices also continued their upward trends into 2006 benefiting the Fund's long positions in equity indices. Long positions in the energy sector delivered good profits as the price for light crude approached $70 per barrel. Interest rate instruments were the poorest performing sector this month. Medium to long-term bond prices declined which went against the Fund's long positions. February 2006 A Units of the Fund were down 1.79% for the month of February 2006 and B Units were down 1.64%. Losses from energy, metals, foreign currencies and agricultural commodities offset profits from equity indices and interest rate instruments. The Fund's most significant losses came from long positions in crude oil after the price of crude dropped nearly $10 per barrel following stronger than expected inventory reports. Prices rebounded somewhat later in the month after reports of violence in Nigeria and an attempted refinery bombing in Saudi Arabia. Short positions in natural gas produced positive returns as the price continued its strong downward trend despite a short cold snap in North America. Short positions in the Japanese yen lost ground against several foreign currencies including the USD, euro, Swiss franc and British pound as the yen strengthened amid speculation that Japanese interest rates might be raised sooner than expected. The best single market was in the interest rates sector, where short positions in the Eurodollar profited from market expectations of further US interest rate hikes. 15 March 2006 A Units of the Fund were up 3.84% for the month of March 2006 and B Units were up 4.00%. Profits in March came from interest rate instruments, equity indices, metals and energy sectors. The Fund's most significant profits came from short positions in interest rate instruments. Worldwide bond prices continued a downward trend that gained momentum following comments from Federal Reserve and European central bank officials that fueled expectations of further rate hikes. The Bank of Japan's decision to drop its policy of "quantitative easing" caused yields on the Japanese government bond to rise sharply, while the yield on the US 10-year Treasury note rose to its highest level since the start of the rate-tightening cycle in June 2004. Despite rising interest rates, long positions in equity indices in U.S., European and Asian markets benefited from upward trends in those markets. Metals profits were from long positions in both base and precious metals including silver, which reached a 22 year high. 2005 The returns for A Units for the years ended December 31, 2005, 2004 and 2003 were 1.74%, .31% and 15.25% respectively. The returns for B units for the years ended December 31, 2005, 2004 and 2003 were 3.57%, 2.18% and 17.43%, respectively. Further analysis of the trading gains and losses is provided below. A Units of the Fund were down 6.62% for the month of January 2005 and B Units were down 6.48%. A strong, abrupt rally in the U.S. dollar along with a sell-off in metals and equity indices resulted in significant losses for the Fund in January. The dollar's reversal strengthened after official minutes from the Federal Reserve Bank's December policy meeting were released early in the month. The minutes revealed that several key members were far more concerned about inflationary pressures than was previously known, which suggested to some that the Fed might become more aggressive with its short term rate hikes. The currency markets reacted sending the dollar sharply higher against major foreign currencies, including the euro, yen and British pound. In the metals sector, aluminum and copper price trends also reversed sharply as demand for raw materials continued to decline, in part due to China's softening economy. The Fund did earn some profits this month from its positions in the interest rate sector, including gains from short-term and long-term bond instruments. A Units of the Fund were up 0.39% for the month of February 2005 and B Units were up 0.54%. The Fund finished flat this month with profits from energy, equity indices, agricultural commodities and metals edging out losses from long term interest rate instruments. Profits in energy resulted from the Fund's long positions in crude oil, gas and heating oil where renewed trends pushed crude oil prices past $50/barrel for the first time since November. Equity prices trended higher across many international exchanges benefiting the Fund's long positions in indices. Tightening coffee supplies led coffee prices to a near five year high, which also generated profits. However, while the Fund's long positions in medium to long term interest rate instruments have generated steady profits in recent months, yields began reversing this month, generating losses in several contracts including the 10 year T-Note, Japanese government bond, long gilt and euro bund. A Units of the Fund were up 1.30% for the month of March 2005 and B Units were up 1.45%. Gains from the energy, interest rate and metals sectors offset losses from the Fund's positions in foreign currencies and equity indices. Futures prices in heating oil, unleaded gas and crude oil continued their upward trends this month, benefiting the Fund's long positions. Analysts suggested the rally was a continuation of bullish momentum supported by strong demand and tight supply in gasoline and crude oil ahead of the high-demand summer season. Concerns that rising energy costs might slow industrial growth weakened international equity prices and pushed European bond prices higher. This benefited the Fund's positions in long term interest rate instruments but hurt the Fund's long positions in equity indices. Renewed concerns over inflation coupled with an expected short term rate hike by the Federal Reserve, fueled a rally in the U.S. dollar that hurt some of the Fund's positions in foreign currencies. Profits from agricultural commodities and base metals including aluminum and copper, helped to end the month with positive returns. 16 A Units of the Fund were down 2.85% for the month of April 2005 and B Units were down 2.70%. Losses from the energy, equity indices and metals sectors offset modest profits from the Fund's positions in foreign currencies and interest rate instruments. Oil prices fell below $50 per barrel for the first time since February on reports that crude oil inventories were at their highest level since mid-2002. Futures prices in heating oil, unleaded gas and crude oil reversed from record highs hurting the Fund's long positions. Weak economic data, including the Michigan consumer confidence survey which fell to its lowest level in 18 months, caused a sell-off in equities. The Fund's long position in equity indices, including the DAX, NIKKEI and S&P500 experienced losses. Price reversals in base metals, including aluminum, copper and zinc, also generated losses for the Fund. A Units of the Fund were up 2.91% for the month of May 2005 and B Units were up 3.07%. Profits from interest rate instruments and foreign exchange contracts offset small losses from the agricultural, energy, equity indices and metals markets. Longer term government bond prices in the US, euro zone and Asia continued to trend higher this month. Although the decline in long-term yields continued to confound central banking officials, economists and speculators, the Fund's trend following systems captured significant profits from long positions in multiple interest rate instruments. France's decision not to ratify a new European constitution contributed significantly to a late sell-off in the euro, which also generated significant profits from the Fund's short positions. Modest losses came from base metals (copper and zinc), equity indices (NASDAQ, S&P500, DAX), energy (unleaded gas and heating oil) and some agricultural contracts (cotton and coffee). A Units of the Fund were up 3.16% for the month of June 2005 and B Units were up 3.32%. Profits from foreign exchange, interest rate instruments, equity indices and energy contracts offset losses from the agricultural and metals markets. Despite growing trade imbalances, the U.S. dollar continued to trend higher relative to other major currencies. Speculators saw the cut in interest rates by the Swedish central bank as further evidence of an economic slowdown in Europe. At the same time, the U.S. Federal reserve raised short-term rates by another quarter point. The growing spread between U.S. and European interest rates added further fuel to the dollar's upward trend, which benefited the Fund's short positions in the euro, Swiss franc and yen. The Fund also saw significant profits from its long positions in long-term interest rate instruments. Crude oil and natural gas prices experienced a strong rally in June benefiting the Fund's energy positions. The most significant losses came from long positions in soybeans, soybean meal and soybean oil. A Units of the Fund were down 1.17% for the month of July 2005 and B Units were down 1.03%. Losses from interest rate instruments offset profits from the energy, equity indices and metals markets. Long and medium term interest rate instruments reversed from previous month's highs, hurting the Fund's long positions. Interest rate instrument prices fell after European Central Bank officials softened their stance on possible rate cuts in the Euro-zone, while minutes from June's Federal Reserve committee meeting suggested further increases in short term U.S. interest rates were likely. The Chinese government later announced that it would no longer peg its currency to the US dollar fueling speculation that China might curb its large purchases of US Treasuries, which further weakened interest rate instrument prices. Long positions in the energy sector profited as supply uncertainties from the effects of Hurricane Dennis and two large oil refinery fires in the US caused crude oil prices to increase. Additional profits came from the Fund's long positions in several international equity indices including the DAX, S&P500, FTSE and Hang Seng Indices. A Units of the Fund were down 1.48% for the month of August 2005 and B Units were down 1.33%. Losses from currencies and interest rate instruments offset significant profits from the energy sector this month. Short and medium term interest rates fell. This adversely affected the Fund's short positions in Eurodollars, Japanese government bonds and US treasury bonds. Traders speculated that higher energy costs might impact U.S. economic growth and force the Federal Reserve to modify its current rate tightening policy. The effects of hurricane Katrina late in the month exacerbated that view sending bond prices even higher. Energy prices however, continued to rise benefiting the Fund's long positions in light crude oil, natural gas, heating oil and unleaded gasoline. Oil supply and distribution concerns grew stronger in the wake of hurricane Katrina. Crude oil breached $70 a barrel before administration officials announced they would tap strategic oil reserves. 17 A Units of the Fund were up 2.51% for the month of September 2005 and B Units were up 2.67%. Profits from equity indices, foreign currencies, metals and agricultural commodities offset losses from energy and interest rate instruments. The Fund's long positions in Japanese and German stock indices generated the strongest profits. The Tokyo Stock Exchange's Nikkei index increased 23 percent since May and was bolstered this month by upbeat economic reports as well as Prime Minister Koizumi's election victory in Japan. The US dollar continued to strengthen, generating profits for the Fund's short positions in the yen, euro and Australian dollar. Crude oil prices retreated from August's highs after the impact from Hurricane Rita was determined to be much less than anticipated. Fortunately, losses in the energy sector were largely offset by the Fund's long positions in natural gas which reached all-time highs in September. Fixed income markets also retreated, hurting some of the Fund's long positions in foreign interest rate instruments. A Units of the Fund were up 1.21% for the month of October 2005 and B Units were up 1.36%. The Fund posted a profit in October with profits from currencies, instrument rate instruments and metals offsetting losses from energy and equity indices. The majority of the Fund's short positions in foreign currencies profited as the U.S. dollar continued to gain strength and trend higher. The Fund's most significant profits came from short positions in the Japanese yen, which hit a 25-month low against the U.S. dollar. Additional profits resulted from short positions in domestic and international interest rate instruments, which trended downward on expectations of rising U.S. inflation and interest rates. Long positions in the energy sector lost some ground as prices retreated from last month's highs. Base metal prices, including aluminum, zinc, copper and nickel also profited this month. Overall, we were pleased with the performance in October in what was a volatile and difficult economic environment for trend following systems. A Units of the Fund were up 4.43% for the month of November 2005 and B Units were up 4.59%. The Fund's strongest profits in November came from long positions in the US dollar which continued to strengthen against other foreign currencies. Positions in the Japanese yen were particularly profitable. Long positions in the metals sector, including zinc, aluminum, copper and silver also contributed profits as increased demand from Asia helped push metals prices higher. The FOMC released meeting minutes this month that suggested the Federal Reserve might be nearing the end of its interest rate tightening cycle. That news sparked a rally in the U.S. financial markets driving U.S. fixed income products higher. The rally neutralized earlier gains from the Fund's short positions in interest rate instruments. Long positions in the energy sector lost some ground as prices retreated from previous highs. A Units of the Fund were down 1.55% for the month of December 2005, ending the year up 1.74% and B Units were down 1.40% for the month and up 3.57% for the year. Losses from currencies, interest rate instruments and energy offset profits from the metals, equity indices and agricultural commodities markets. The Fund's long positions in the U.S. dollar generated the strongest losses. Foreign currencies rallied against the dollar after the Federal Reserve's Open Market Committee signaled it might be nearing the end of its credit tightening cycle. News that the U.S. trade deficit hit record highs this month sent the dollar even lower against the yen, which posted its largest single-day rally against the dollar since March 2002. Short positions in medium and long-term interest rate instruments also lost ground, as the spread between short-term and long-term rates narrowed. Metals delivered another positive month as long positions in aluminum, zinc, copper and gold continued to trend higher. 2004 The returns for A units for the years ended December 31, 2004, 2003 and 2002 were 0.31%, 15.25% and 19.59% respectively. The returns for B units for the years ended December 31, 2004, 2003 and 2002 were 2.18 %, 17.43 % and 21.86 %, respectively. Further analysis of the trading gains and losses is provided below. A Units of the Fund were up 1.97% for the month of January 2004 and B Units were up 2.13%. Fund performance in January was positive despite some late price reversals in the U.S. dollar and U.S. interest rate sensitive markets. The Federal Open Market Committee ("FOMC") introduced some minor language changes to its policy statement, suggesting to some that the Federal Reserve might be setting the stage to increase short term 18 rates. This caused the U.S. dollar to rise sharply against major foreign currencies and it caused prices on long term U.S. interest rate instruments to fall, reflecting a rise in long term interest rates. Overall, the Fund benefited from net profits in virtually all market sectors including foreign currencies, equities, agricultural, energy and metals. Only the Fund's long positions in interest rate sensitive instruments, including the 30 year Treasury bond and 10 year Treasury note, experienced a loss. A Units of the Fund were up 9.03% for the month of February 2004 and B Units were up 9.21%. The Fund benefited from gains across all market sectors in February including interest rates, energy, currencies, agricultural commodities, metals and equities. The Fund's strongest returns came from long positions on interest rate instruments as futures prices on several European and U.S. medium term instruments trended higher in anticipation of possible rate cuts in the euro zone. In the energy sector, the Fund's long positions in crude oil continued to profit. The Organization of Petroleum Exporting Countries ("OPEC") maintained tight production controls in spite of strong demand, which pushed oil prices close to the highs observed before the invasion of Iraq. A Units of the Fund were down 0.02% for the month of March 2004 and B Units were up 0.13%. Fund performance was virtually flat for the month with losses from the energy and foreign currency markets edging out gains from metals, interest rate instruments and agricultural commodities. The strongest returns came from long positions in soybean futures as heavy demand from China continued to push prices higher. Metals were profitable due to a continuing upward trend in silver. The U.S. dollar was mixed for the month with small gains against most of the major currencies but losing ground to the Japanese yen. An overseas bombing in Madrid along with lackluster U.S. economic data, created additional volatility in the energy markets that led to modest losses in the Fund's long positions. A Units of the Fund were down 8.49% for the month of April 2004 and B Units were down 8.35%. After showing positive returns for the first quarter, price trend reversals in the fixed income, metals and currency markets produced losses for the Fund during the month. The energy market, which profited from long positions in both light crude and unleaded gas, was the only positive performing sector in April. Medium and long-term interest rate instruments fell sharply after the release of U.S. non-farm payroll numbers which supported growing sentiment that the U.S. economy was on a stronger footing. Reaction to the Federal Reserve's comments to Congress and growing anticipation that the Fed will raise short-term interest rates, caused upward trends in metal prices to reverse. The U.S. dollar rallied against major currencies energized by stronger U.S. economic reports which created additional losses for the Fund. A Units of the Fund were down 1.01% for the month of May 2004 and B Units were down 0.86%. During May, many of the world's financial markets traded in a tight range as market participants wrestled with the outlook for U.S. interest rates, inflation, corporate earnings and events in the Middle East. Profits were generated by the fund's long positions in the energy and agricultural sectors, especially in crude oil (which went to record highs), unleaded gas, heating oil and soybeans. However, late month production announcements by the Saudi government led to a brief reversal in oil futures prices and some pull back in our energy related profits. A mid-month reversal in the direction of the U.S. dollar resulted in our profits in energy being overshadowed by losses from foreign exchange positions, including the Australian dollar and British pound. A Units of the Fund were down 5.42% for the month of June 2004 and B Units were down 5.28%. June was a turbulent month for interest rate and energy markets. Prices for short-term interest-rate instruments and petroleum products reversed sharply this month while long-term bonds and the U.S. dollar continued to vacillate ahead of the FOMC's decision on interest rates. Choppy market conditions and extended periods of price consolidation, such as those experienced over the past few months, typically result in losses for trend following systems and June was no exception. The largest realized losses for the fund were in light crude oil, the Australian dollar and unleaded gas. The largest profits were in cotton, the ten-year Japanese government bond and the Nikkei 225 Index. 19 A Units of the Fund were down 1.50% for the month of July 2004 and B Units were down 1.35%. Interest rates, currencies and global equity indices drifted without significant trends in July leading to a loss in the Fund for the month. Although upbeat comments from the Federal Reserve temporarily pushed interest rates and the U.S. dollar higher, the same markets reversed following a weaker than expected durable goods report. Precious metals also experienced intra-month reversals. Energy and agricultural markets were profitable however, which partially offset the losses from the other sectors. Oil and gasoline prices continued to rise to historical highs on supply concerns from Russian based Yukos Oil. The Fund's short positions in cotton and corn contracts also produced profits. A Units of the Fund were down 2.42% for the month of August 2004 and B Units were down 2.27% for the month. In August, several market sectors continued to drift without major trends. The U.S. dollar whipsawed in reaction to news events, including economic reports that failed to provide any clear direction for the U.S. economy. Oil prices declined sharply from all time highs late in the month resulting in losses from the Fund's long positions in crude oil. Profits from short positions in natural gas however helped to stem the loss in the energy sector. Sugar and cotton prices reversed this month resulting in losses from the agricultural sector. The Fund continued to profit from its long positions in interest rate instruments, partially offsetting the losses in the other sectors. A Units of the Fund were up 0.05% for the month of September 2004 and B Units were up 0.21% for the month. The Fund finished virtually unchanged for the month despite solid gains in the energy and agricultural commodity sectors. Prices across the energy sector trended higher as concerns about oil supply in the wake of hurricane Ivan and possible production disruptions in Russia, Nigeria and Iraq pushed crude oil prices to record highs. However, losses from interest rate instruments offset most of the energy profits after bond prices reversed in reaction to comments and actions by the Federal Reserve. Losses also came from equity indices on fears that higher fuel costs might begin to impact corporate earnings and hurt economic growth. A Units of the Fund were up 5.39% for the month of October 2004 and B Units were up 5.55%. The Fund profited from solid trends across multiple market sectors including energy, foreign currency and fixed income. Worries over world oil supplies pushed energy prices higher including crude oil, which posted another record high. Rising energy prices and a report on the growing U.S. trade deficit indicated to the financial markets a possible slowdown in the U.S. economy. As a result bond prices moved higher and the U.S. dollar declined which benefited the Fund's positions in those sectors. The Fund experienced some losses in metals as copper and nickel prices reversed their strong upward trend in reaction to speculation that China's economy was cooling and that Chinese imports were declining. A Units of the Fund were up 4.54% for the month of November 2004 and B Units were up 4.70%. In November the Fund profited from trends in most market sectors including foreign exchange, metals, interest rate instruments and equity indices. Long positions in foreign exchange contracts generated the Fund's strongest gains as the U.S. dollar continued to decline against most major foreign currencies. The weakness in the dollar also led to higher prices in precious metals which benefited the Fund's long positions in gold and silver. Long positions in long term interest rate instruments including the Euro Bund and British Long Gilt were also profitable. The Fund's losing positions included natural gas and heating oil. A Units of the Fund were down 0.58% for the month of December 2004, ending the year up 0.31%. B Units were down 0.43% for the month and up 2.18% for the year. Performance was mixed in December with losses from the metals, energy and currency sectors edging out profits from equity, interest rate and agricultural market contracts. Global stock indices and bond markets finished the month higher, generating profits for the Fund's long positions in those markets. The Fund lost ground on its long positions in precious metals after gold 20 and silver contracts fell sharply in response to a rebound in the U.S. dollar. In addition, the energy sector went through volatile periods after the release of several inventory announcements, which led to significant whipsawing in those markets. For the year the Fund's strong fourth quarter performance offset the mid-year drawdown leaving the Fund positive for 2004. Past Performance is Not Indicative of Future Results. Disclosures about Certain Trading Activities that Include Non-exchange Traded Contracts Accounted for at Fair Value The Fund invests in futures and forward currency contracts. The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. The market value of forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 5:00 P.M. (E.T.) of the last business day of the reporting period. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business. Market movements result in frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades. The Fund acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance is not indicative of its future results. Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund's speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund's experience to date (i.e., "risk of ruin"). Risk of ruin is defined to be no more than a 5% chance of losing 20% or more on a monthly basis. In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Fund's losses in any market sector will be limited to Value at Risk or by the Fund's attempts to manage its market risk. Standard of Materiality Materiality as used in this section, "Quantitative and Qualitative Disclosures about Market Risk," is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Fund's market sensitive instruments. Quantifying the Fund's Trading Value at Risk Quantitative Forward-Looking Statements 21 The following quantitative disclosures regarding the Fund's market risk exposures contain "forward-looking statements" within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the reporting period). The Fund's risk exposure in the various market sectors traded by the Fund's Trading Advisors is quantified below in terms of Value at Risk. Due to mark-to-market accounting, any loss in the fair value of the Fund's open positions is directly reflected in the Fund's earnings (realized or unrealized). Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component which is not relevant to Value at Risk. In the case of market sensitive instruments which are not exchange-traded (which includes currencies and some energy products and metals in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those cases in which a futures-equivalent margin is not available, dealers' margins have been used. In the case of contracts denominated in foreign currencies, the Value at Risk figures include foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based Fund in expressing Value at Risk in a functional currency other than dollars. In quantifying the Fund's Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category's aggregate Value at Risk. The diversification effects resulting from the fact that the Fund's positions are rarely, if ever, 100% positively correlated have not been reflected. Value at Risk as calculated herein may not be comparable to similarly titled measures used by others. The Fund's Trading Value at Risk in Different Market Sectors The following tables indicate the trading Value at Risk associated with the Fund's open positions by market category as of March 31, 2006. All open position trading risk exposures of the Fund have been included in calculating the figures set forth below. As of January 31, February 28, March 31, 2006, the Fund's total capitalization was $394,362,593, $394,792,596 and $416,879,814 respectively. FIRST QUARTER 2006
Market Jan % Total Feb % Total Mar % Total Sector VaR Cap VaR Cap VaR Cap Agricultural $ 2,019,869 0.51% $ 2,314,704 0.59% $ 2,840,994 0.68% 22 Currency $ 24,761,007 6.28% $ 29,629,576 7.51% $ 32,569,864 7.81% Energy $ 5,570,306 1.41% $ 5,074,423 1.29% $ 3,453,272 0.83% Financial Indices $ 12,786,540 3.24% $ 13,789,433 3.49% $ 9,517,530 2.28% Interest Rates $ 11,772,505 2.99% $ 12,744,857 3.23% $ 16,923,297 4.06% Metals $ 2,480,684 0.63% $ 2,717,807 0.69% $ 4,186,258 1.00% Total $ 59,390,912 15.06% $ 66,270,800 16.79% $ 69,491,215 16.67%
Of the 3.18% return for the quarter ended March 31, 2006 for A Units, approximately 4.48% was due to trading gains (after commissions) and approximately 1.16% was due to interest income, offset by approximately 2.46% in performance fees, management fees, selling agent fees and operating costs borne by the Fund. Of the 3.65% return for the quarter ended March 31, 2006 for B Units, approximately 4.50% was due to trading gains (after commissions) and approximately 1.17% was due to interest income, offset by approximately 2.02% in performance fees, management fees, selling agent fees and operating costs borne by the Fund. Material Limitations on Value at Risk as an Assessment of Market Risk. The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund. The magnitude of the Fund's open positions creates a "risk of ruin" not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions - unusual, but historically recurring from time to time - could cause the Fund to incur severe losses over a short period of time. The foregoing Value at Risk tables - as well as the past performance of the Fund - gives no indication of this "risk of ruin." Non-Trading Risk The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Fund also has non-trading market risk as a result of investing a substantial portion of its available assets in U.S. Treasury Bills, U.S. Agencies and high grade commercial paper. The market risk represented by these investments is immaterial. Qualitative Disclosures Regarding Primary Trading Risk Exposures. The following qualitative disclosures regarding the Fund's market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund's primary market risk exposures as well as the strategies used and to be used by the Fund's Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund. The following were the primary trading risk exposures of the Fund as of March 31, 2006, by market sector. Currencies 23 Exchange rate risk is the principal market exposure of the Fund. The Fund's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Fund trades in a large number of currencies, including cross-rates - i.e., positions between two currencies other than the U.S. Dollar. The General Partner does not anticipate that the risk profile of the Fund's currency sector will change significantly in the future. Interest Rates Interest rate risk is a significant market exposure of the Fund. Interest rate movements directly affect the price of the sovereign bond futures positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund's profitability. The Fund's primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries. The General Partner anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future. Stock Indices The Fund's primary equity exposure is to equity price risk in many countries other than the United States. The stock index futures traded by the Fund are limited to futures on broadly based indices. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. (Static markets would not cause major market changes but would make it difficult for the Fund to avoid being "whipsawed" into numerous small losses.) Energy The Fund's primary energy market exposure is to gas and oil price movements, often resulting from political developments and ongoing conflicts in the Middle East. As of March 31, 2006, crude oil, heating oil and unleaded gas are the dominant energy market exposures of the Fund. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market. Metals The Fund's metals market exposure is to fluctuations in the price of aluminum, copper, gold, nickel and zinc. Agricultural During 2006, the Fund's agricultural exposure was to soybeans, wheat, corn, coffee and cotton. Qualitative Disclosures Regarding Non-Trading Risk Exposure. The following were the only non-trading risk exposures of the Fund as of March 31, 2006. Foreign Currency Balances The Fund's primary foreign currency balances are in Euros, Japanese Yen, British Pounds, Australian Dollars, Hong Kong dollars and Canadian dollars. The Fund controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars (no less frequently than once a week). Treasury Bill and Commercial Paper Positions 24 The Fund utilizes UBS Financial Services, Inc. as its cash management securities broker for the investment of some margin excess amounts into short-term fixed income instruments including high grade commercial paper (interest bearing with some credit risk), U.S. Agency securities and Treasury Bills (interest bearing and credit risk free) with durations no longer than one year. Violent fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Fund's Treasury Bills, although substantially all of these short-term investments are held to maturity. Qualitative Disclosures Regarding Means of Managing Risk Exposure The means by which the Fund and the Fund's Trading Advisors, severally, attempt to manage the risk of the Fund's open positions is essentially the same in all market categories traded. The Fund's Trading Advisors apply risk management policies to their respective trading which generally limit the total exposure that may be taken. In addition, the Trading Advisors generally follow proprietary diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as imposing "stop-loss" points at which open positions must be closed out. The Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Fund generally will use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund's operations. Item 4: Controls and Procedures Steben & Company, Inc., the General Partner of the Fund, with the participation of the General Partner's Chief Executive Officer and Comptroller (principal executive officer and principal financial officer, respectively), has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the end of the period covered by this quarterly report. Based on their evaluation, the Chief Executive Officer and Comptroller have concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner's internal control over financial reporting applicable to the Fund identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, internal control over financial reporting applicable to the Fund. 25 PART II-OTHER INFORMATION Item 1: Legal Proceedings. None Item 1A: Risk Factors. There have been no material changes from the risk factors disclosed in the Fund's Form 10-K for the year-ended December 31, 2005. Item 2: Unregistered Sales of Equity Securities and Use of Proceeds Between January and March 2006, the Fund issued Units at monthly closings as set forth in the following chart. However, pursuant to Regulation Section 229.701. Item 701(d), the Fund enjoys the private offering exemption within the Securities Exchange Act of 1933 Section 4(2). The Fund is privately offered and sold to "accredited investors" as defined in Securities Exchange Act of 1933 Rule 501(a). Schedule on Number and Dollar Amount of Interests (Additions) (Includes both A and B Units) --------------------------- ---------------------- ---------------------- Dollar Amount of Number of Month Interests Additional Units Sold Sold --------------------------- ---------------------- ---------------------- January 2006 $15,597,122 4,112.8080 --------------------------- ---------------------- ---------------------- February 2006 $12,140,458 3,116.0296 --------------------------- ---------------------- ---------------------- March 2006 $15,053,556 3,982.0539 --------------------------- ---------------------- ---------------------- Item 3: Defaults Upon Senior Securities Not applicable. Item 4: Submissions of Matters to a vote of Security Holders. None Item 5: Other Information None Item 6: Exhibits. (a) Exhibits and Index. 26 The following exhibits filed herewith. Exhibit No. Description of Document Page No. 31.01 Certification of Kenneth E. Steben, Chief Executive Officer, E-2 pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. 31.02 Certification of Barbara Rittenhouse, Comptroller, pursuant E-4 to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. 32.01 Certification of Kenneth E. Steben, Chief Executive Officer, E-6 pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. 32.02 Certification of Barbara Rittenhouse, Comptroller, pursuant E-7 to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. (b) Reports. None. 27 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FUTURES PORTFOLIO FUND LIMITED PARTNERSHIP (Registrant) By: Steben & Company, Inc. General Partner By: /s/ Kenneth E. Steben --------------------- Kenneth E. Steben Chief Executive Officer (Principal Executive Officer) May 15, 2006 By: /s/ Barbara Rittenhouse ----------------------- Barbara Rittenhouse Comptroller (Principal Financial Officer) May 15, 2006 E-1