<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1999
COMMISSION FILE NUMBER: 0-23950
THE DENNIS FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-1456461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (203) 861-1000
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 X
---- ----
<PAGE> 2
THE DENNIS FUND LIMITED PARTNERSHIP
QUARTER ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of September 30, 1999
(unaudited) and December 31, 1998 (audited) 3
Statements of Operations for the Three Months and Nine Months
Ended September 30, 1999 (unaudited) and 1998 (unaudited) 4
Statements of Changes in Partners' Capital (Net Asset Value)
for the Nine Months Ended September 30, 1999 (unaudited) and
1998 (unaudited) 5
Notes to Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12-13
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE DENNIS FUND LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
September 30, 1999 (unaudited) and December 31, 1998 (audited)
-------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $21,224,027 $19,677,383
Unrealized gain (loss) on open contracts (811,618) 1,383,936
----------- -----------
Deposits with broker 20,412,409 21,061,319
Cash and cash equivalents 20,460,662 3,279,209
Fixed income securities (cost, including
accrued interest, - $14,292,255 and $11,322,815) 14,215,733 11,319,699
Subscriptions receivable 1,114,334 203,902
----------- -----------
Total assets $56,203,138 $35,864,129
=========== ===========
LIABILITIES
Accounts payable $ 52,790 $ 84,488
Commissions and other trading fees
on open contracts 20,481 22,505
General Partner offering fee 140,225 77,444
Advisor management fee 79,089 50,836
Advisor incentive fee 0 0
Redemptions payable 281,837 44,677
Subscription received in advance 0 25,000
----------- -----------
Total liabilities 574,422 304,950
----------- -----------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner:
A Units - 107.1387 units outstanding at
September 30, 1999 and December 31, 1998 199,341 195,979
B Units - 170.1447 and 131.8532 units
outstanding at September 30, 1999 and
December 31, 1998 301,831 232,161
Limited Partners:
A Units - 6,439.8699 and 6,923.1908 units
outstanding at September 30, 1999 and
December 31, 1998 11,981,928 12,663,939
B Units - 24,321.5616 and 12,759.9200 units
outstanding at September 30, 1999 and
December 31, 1998 43,145,616 22,467,100
----------- -----------
Total partners' capital
(Net Asset Value) 55,628,716 35,559,179
----------- -----------
$56,203,138 $35,864,129
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
THE DENNIS FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1999 and 1998 and
For the Nine Months Ended
September 30, 1999 and 1998
(Unaudited)
---------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Commodity trading gains (losses)
Realized $ (5,928,597) $ 5,688,527 $ 5,486,771 $ 13,698,245
Change in unrealized (2,965,529) (527,609) (2,195,554) 79,905
------------ ----------- ------------ ------------
Gain (loss) from commodity trading (8,894,126) 5,160,918 3,291,217 13,778,150
------------ ----------- ------------ ------------
Fixed income securities gains (losses)
Realized (28,338) 36,320 (189,129) 46,649
Change in unrealized 170 108,141 (73,406) 106,573
------------ ----------- ------------ ------------
Gain (loss) from fixed income securities (28,168) 144,461 (262,535) 153,222
------------ ----------- ------------ ------------
Interest income 601,203 321,310 1,411,493 739,216
------------ ----------- ------------ ------------
Total income (loss) (8,321,091) 5,626,689 4,440,175 14,670,588
------------ ----------- ------------ ------------
EXPENSES
Brokerage commissions 592,891 338,063 1,599,078 1,100,075
General Partner offering fee 422,897 211,419 1,052,377 494,352
Advisor management fee 241,361 139,139 642,195 330,435
Advisor incentive fee 0 1,237,573 2,103,117 3,229,070
Operating expenses 75,243 38,236 119,387 90,225
------------ ----------- ------------ ------------
Total expenses 1,332,392 1,964,430 5,516,154 5,244,157
------------ ----------- ------------ ------------
NET INCOME (LOSS) $ (9,653,483) $ 3,662,259 $ (1,075,979) $ 9,426,431
============ =========== ============ ============
A UNITS
NET INCOME (LOSS) PER A UNIT
(based on weighted average number of
A Units outstanding during the period) $ (357.57) $ 223.45 $ 40.71 $ 720.44
============ =========== ============ ============
INCREASE (DECREASE) IN NET
ASSET VALUE PER A UNIT $ (358.77) $ 223.47 $ 31.38 $ 721.51
============ =========== ============ ============
B UNITS
NET INCOME (LOSS) PER B UNIT
(based on weighted average number of
B Units outstanding during the period) $ (346.45) $ 229.69 $ (77.98) $ 651.86
============ =========== ============ ============
INCREASE (DECREASE) IN NET
ASSET VALUE PER B UNIT $ (343.72) $ 206.22 $ 13.21 $ 676.16
============ =========== ============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
THE DENNIS FUND LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Partners' Capital
------------------------------------------------------------------------------
A Units B Units
------------------------------------- -------------------------------------
General Limited General Limited
Units Partner Partners Units Partner Partners Total
----- ------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1999
Balances at December 31, 1998 7,030.3295 $195,979 $12,663,939 12,891.7732 $232,161 $22,467,100 $35,559,179
Net income (loss) for the nine months
ended September 30, 1999 3,362 274,871 0 670 (1,354,882) (1,075,979)
Additions 0.0000 0 0 12,388.3767 69,000 23,542,039 23,611,039
Redemptions (483.3209) 0 (956,882) (788.4436) 0 (1,508,641) (2,465,523)
---------- -------- ----------- ----------- -------- ----------- -----------
Balances at September 30, 1999 6,547.0086 $199,341 $11,981,928 24,491.7063 $301,831 $43,145,616 $55,628,716
========== ======== =========== =========== ======== =========== ===========
Nine Months Ended September 30, 1998
Balances at December 31, 1997 7,644.5427 $137,525 $ 9,675,138 2,981.2126 $ 40,515 $ 3,697,744 $13,550,922
Net income for the nine months
ended September 30, 1998 77,302 5,251,632 0 41,851 4,055,646 9,426,431
Additions 0.0000 0 0 8,094.8697 124,000 13,357,766 13,481,766
Redemptions (464.3783) 0 (744,447) (637.0783) 0 (1,169,155) (1,913,602)
---------- -------- ----------- ----------- -------- ----------- -----------
Balances at September 30, 1998 7,180.1644 $214,827 $14,182,323 10,439.0040 $206,366 $19,942,001 $34,545,517
========== ======== =========== =========== ======== =========== ===========
<CAPTION>
A Units
--------------------------------------------------------------
Net Asset Value Per Unit
--------------------------------------------------------------
<C> <C> <C> <C>
September 30, December 31, September 30, December 31,
1999 1998 1998 1997
---- ---- ---- ----
$1,860.59 $1,829.21 $2,005.13 $1,283.62
========= ========= ========= =========
<CAPTION>
B Units
--------------------------------------------------------------
Net Asset Value Per Unit
--------------------------------------------------------------
<C> <C> <C> <C>
September 30, December 31, September 30, December 31,
1999 1998 1998 1997
---- ---- ---- ----
$1,773.97 $1,760.76 $1,930.10 $1,253.94
========= ========= ========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
THE DENNIS FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
----------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
The Dennis Fund Limited Partnership (the Partnership) is a
Connecticut limited partnership which operates as a commodity
pool. The Partnership engages in the speculative trading of
futures contracts and other financial instruments. It 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 and
Futures Commission Merchants (brokers) through which the
Partnership trades.
Investments made prior to April 30, 1997 are referred to as "A
Units" and investments made on or after April 30, 1997 are
referred to as "B Units." The initial net asset value per B Unit
was the net asset value per A Unit at April 30, 1997. The only
difference between A Units and B Units are the advisor management
and incentive fee rates as further described in Note 3.
B. Method of Reporting
The Partnership's financial statements are presented in
accordance with generally accepted accounting principles, which
require the use of certain estimates made by the Partnership's
management.
C. Commodities
Gains or losses are realized when contracts are liquidated.
Unrealized gains or losses on open contracts (the difference
between contract purchase price and market price) at the date of
the statement of financial condition are included in equity in
broker trading accounts. Any change in net unrealized gain or
loss from the preceding period is reported in the statement of
operations. Brokerage commissions include other trading fees and
are charged to expense when contracts are opened.
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and all highly liquid
investments, including money market mutual funds and other
investments with a maturity of three months or less from the date
of purchase.
E. Fixed Income Securities
Fixed income securities are reported at market value plus accrued
interest. Fixed income securities transactions are accounted for
on the trade date. Interest income is recorded on the accrual
basis.
6
<PAGE> 7
THE DENNIS FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
----------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. Income Taxes
The Partnership prepares calendar year U.S. and state information
tax returns and reports to the partners their allocable shares of
the Partnership's income, expenses and trading gains or losses.
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.
Note 2. GENERAL PARTNER
The General Partner of the Partnership is Kenmar Advisory Corp., which
conducts and manages the business of the Partnership. The Limited
Partnership Agreement requires the General Partner to maintain a
capital account of no less than the lesser of 1% of the aggregate
capital accounts of all partners or $500,000.
Effective February 1, 1998, for managing the continuing offering of
units, the General Partner receives a monthly offering fee equal to
0.25% (3% annually) of that month's beginning Net Asset Value (as
defined in the Limited Partnership Agreement) of the Partnership.
Prior to February 1, 1998, the General Partner received a monthly
offering fee equal to .25% (3% annually) of the prior month's
beginning Net Asset Value (as defined) of the Partnership. Commencing
April 1998, the General Partner rebated to Million Dollar Investors
(as defined in the Confidential Private Placement Memorandum and
Disclosure Document) a monthly amount equal to two-thirds of the
offering fee applicable to such Million Dollar Investors. Such rebates
were made to Million Dollar Investors by issuing additional B Units.
Note 3. COMMODITY TRADING ADVISOR
The Partnership has an advisory agreement with Dennis Trading Group,
Inc. (the commodity trading advisor) pursuant to which the A Units pay
a monthly management fee of 1/6 of 1% (2% annually) of the month-end
Net Asset Value of the subaccount (as defined in the advisory
agreement) and a quarterly incentive fee equal to 25% of the Net New
Trading Profits (as defined). The commodity trading advisor and
General Partner each receive one-half of the management and incentive
fees applicable to A Units. Pursuant to the advisory agreement, the B
Units pay a monthly management fee of 1/12 of 1.75% (1.75% annually)
of the month-end Net Asset Value of the subaccount (as defined) and a
quarterly incentive fee equal to 27.5% of the Net New Trading Profits
(as defined). The commodity trading advisor receives 3/7 of the
management fee and 7/11 of the incentive fee applicable to B Units and
the General Partner receives 4/7 of the management fee and 4/11 of the
incentive fee applicable to B Units.
7
<PAGE> 8
THE DENNIS FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
----------
Note 4. DEPOSITS WITH BROKER
The Partnership deposits cash with E.D. & F. Man International
Inc. to act as broker subject to Commodity Futures Trading
Commission regulations and various exchange and broker requirements.
Margin requirements are satisfied by the deposit of cash with
such broker. The Partnership earns interest income on its cash
deposited with the broker.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partner. The subscription price
is equal to the Net Asset Value of the units purchased plus a 5%
selling commission, unless such selling commission is waived in whole
or in part by the General Partner. Additions to partners' capital are
shown net of such selling commissions which amounted to $253,334 and
$126,789 for the nine months ended September 30, 1999 and 1998,
respectively.
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 units owned, subject to restrictions
in the Limited Partnership Agreement.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and foreign
futures contracts ("derivatives"). These derivatives include both
financial and non-financial contracts held as part of a diversified
trading program. 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 broker. 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 has a substantial portion of its assets on deposit
with brokers and dealers in securities and other financial
institutions in connection with its cash management activities. In the
event of a financial institution's insolvency, recovery of Partnership
assets on deposit may be limited to account insurance or other
protection afforded such deposits. In the normal course of business,
the Partnership does not require collateral from such financial
institutions.
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 value of futures contracts purchased and unlimited
liability on such contracts sold short.
8
<PAGE> 9
THE DENNIS FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
----------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
The fair value of derivatives represents unrealized gains and losses
on open futures contracts. The average fair value of derivatives
during the nine months ended September 30, 1999 and 1998, was
approximately $2,240,000 and $890,000, respectively, and the related
fair values at September 30, 1999 and December 31, 1998, are
approximately $(812,000) and $1,384,000, respectively.
Net trading results from derivatives for the nine months ended
September 30, 1999 and 1998, are reflected in the statement of
operations and equal gain (loss) from commodity trading less brokerage
commissions. Such trading results reflect the net gain (loss) arising
from the Partnership's speculative trading of futures contracts.
At September 30, 1999 and December 31, 1998, the notional amount of
open contracts is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
-------- ---- -------- ----
<S> <C> <C> <C>
$327,100,000 $288,500,000 $766,400,000 $499,500,000
</TABLE>
The above amounts do not represent the Partnership's risk of loss due
to market and credit risk, but rather represent the Partnership's
extent of involvement in derivatives at the date of the statement of
financial condition.
The General Partner has established procedures to actively monitor
market risk and minimize credit risk. 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 7. INTERIM FINANCIAL STATEMENTS
The statement of financial condition as of September 30, 1999, the
statements of operations for the nine months ended September 30, 1999
and 1998, and for the three months ended September 30, 1999 and 1998,
and the statements of changes in partners' capital (net asset value)
for the nine months ended September 30, 1999 and 1998, are unaudited.
In the opinion of management, such financial statements reflect all
adjustments, which were of a normal and recurring nature, necessary
for a fair presentation of financial position as of September 30,
1999, and the results of operations for the nine months ended
September 30, 1999 and 1998, and for the three months ended September
30, 1999 and 1998.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The assets of the Dennis Fund Limited Partnership (the "Partnership") are used
to engage, directly or indirectly, in the speculative trading of (1)
commodities, futures contracts, forward contracts, foreign exchange
commitments, exchange for physicals, swap contracts, spot (cash) commodities
and other items, options on the foregoing, and any rights pertaining to the
foregoing contracts, instruments or investments ("Commodities") and (2)
options, warrants, or other rights and any other investment or transaction
(together with the Commodities, "Investments") that the Partnership's general
partner, Kenmar Advisory Corp. (the "General Partner") deems, in its sole
discretion, to be consistent with the objectives of the Partnership. From time
to time, a portion of such proceeds may be used for transactions in the cash
markets or for interbank trading.
The assets of the Partnership are deposited with E.D. & F. Man International
Inc. (the "Broker") in a trading account established by the Partnership for the
Dennis Trading Group, Inc. (the "Advisor") and are used by the Partnership as
margin to engage in trading. Such assets are held in either a non-interest
bearing bank account or in securities approved by the Commodity Futures Trading
Commission for investment of customer funds. In addition, certain of the
Partnership's assets may also be placed in a custodian account with a cash
manager to maximize the interest earned on assets not committed as margin.
Capital Resources. The Partnership does not have, nor does it expect to have,
any capital assets. Redemptions and sales of units of limited partnership
interest ("Units") in the future will affect the amount of funds available for
trading Investments in subsequent periods.
There are three primary factors that affect the Partnership's capital resources:
(i) the trading profit or loss generated by the Advisor (including interest
income); (ii) the money invested or redeemed by the limited partners of the
Partnership (the "Limited Partners"); and (iii) capital invested or redeemed by
the General Partner. The General Partner has maintained, and shall maintain, at
all times a capital account in such an amount, up to a total of $500,000, as is
necessary for the General Partner to maintain a one percent (1%) interest in the
capital, income and losses of the Partnership. All capital contributions by the
General Partner necessary to maintain such capital account balance shall be
evidenced by units of general partnership interest, each of which shall have an
initial value equal to the Net Asset Value per Unit (as defined below) at the
time of such contribution. The General Partner, in its sole discretion, may
withdraw any excess above its required capital contribution without notice to
the Limited Partners. The General Partner, in its sole discretion, may also
contribute any greater amount to the Partnership, for which it shall receive, at
its option, additional units of general partnership interest or Units at their
then-current Net Asset Value.
"Net Asset Value" of the Partnership is defined as total assets of the
Partnership, including, but not limited to, all cash and cash equivalents,
accrued interest, earned discount, and open Commodities positions, less total
liabilities, including, but not limited to, brokerage commissions that would be
payable with respect to the closing of open Commodities positions, all as
determined in accordance with the principles set forth in the Limited
Partnership Agreement of the Partnership, dated June 18, 1996 and as amended on
December 15, 1997 (the "Partnership Agreement") or, where no such principles
are specified therein, in accordance with United States generally accepted
accounting principles applied on a consistent basis ("GAAP"). The term "Net
Asset Value per Unit" is defined in the Partnership Agreement to mean the Net
Asset Value of the Partnership divided by the number of Units outstanding as of
the date of determination.
Results of Operations. The success of the Partnership is dependent upon the
ability of the Advisor to generate trading profits through the speculative
trading of Investments sufficient to produce capital appreciation after payment
of all fees and expenses. Future results will depend in large part upon the
Investment markets in general, the performance of the Advisor, the amount of
additions and redemptions, and changes in interest rates. Due to the highly
leveraged nature of Investment trading, small price movements may result in
substantial losses. Because of the nature of these factors and their
interaction, it is impossible to predict future operating results.
The Partnership incurs substantial charges from the payment of brokerage
commissions to the Broker, management and/or incentive fees to the Advisor,
management fees, offering fees and/or incentive fees to the General Partner and
operating expenses. The
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Partnership is required to make substantial trading profits to avoid depletion
and exhaustion of its assets from the above-mentioned fees and expenses.
Due to the nature of the Partnership's business, the Partnership's trading
results depend on the Advisor and the ability of its individual trading system
to take advantage of price movement or other profit opportunities in the
Investment markets. The following paragraphs present a summary of the
Partnership's operations since inception. It is important to note, however,
that the Advisor trades in various markets at different times and that prior
activity in a particular market does not mean that such markets will be
actively traded by an Advisor or will be profitable in the future.
Consequently, the results of operations of the Partnership can only be
discussed in the context of the overall trading activities of the Partnership,
the Advisor's trading activities on behalf of the Partnership as a whole and
how the Partnership has performed in the past.
Set forth below is a comparison of the results of operations of the Partnership
for the three-month and nine-month periods ended September 30, 1999 and 1998.
As of September 30, 1999, the Net Asset Value of the Partnership was
$55,628,716, a decrease of approximately 2.26% from its Net Asset Value of
$56,913,897 at June 30, 1999. The Partnership's subscriptions and redemptions
for the quarter ended September 30, 1999 totaled $9,370,718 and $1,002,417,
respectively. For the quarter ended September 30, 1999, the Partnership had
revenues comprised of $(5,956,935) in realized trading losses, $(2,965,359) in
change in unrealized trading losses and $601,203 in interest income. The total
income for the third quarter of 1999 decreased by $13,947,780 from the same
period in 1998, while total expenses decreased by $632,038 between these
periods. This resulted in the Partnership having a net loss of $(9,653,483) for
the quarter ended September 30, 1999. For the quarter ended September 30, 1999,
the Net Asset Value of Class A Units decreased 16.17% from $2,219.36 to
$1,860.59 and the Net Asset Value of Class B Units decreased 16.23% from
$2,117.69 to $1,773.97. Approximately 80% of the Partnership's net losses during
the quarter ended September 30, 1999 were attributable to stock indices, 16% to
interest rates and 4% to grains.
The Net Asset Value of the Partnership increased $20,069,537, or 56.44% from
December 31, 1998 through September 30, 1999. The Partnership's subscriptions
and redemptions for the nine months ended September 30, 1999 totaled $23,611,038
and $2,465,521, respectively. For the nine months ended September 30, 1999, the
Partnership had revenues comprised of $5,297,642 in realized gains, $(2,268,960)
in change in unrealized losses and $1,411,493 in interest income compared to
revenue comprised of $13,744,894 in realized gains, $186,478 in change in
unrealized gains and $739,216 in interest income for the same period in 1998.
The total income for the first nine months of 1999 decreased by $10,230,413 from
the same period in 1998 while expenses increased by $271,997 between these
periods. For the nine months ended September 30, 1999, the Net Asset Value of
Class A Units increased 1.72% from $1,829.21 to $1,860.59 and the Net Asset
Value of Class B Units increased 0.75% from $1,760.76 to $1,773.97.
Approximately 48% of the Partnership's net gains during the nine months ended
September 30, 1999 were attributable to energies, 40% to currencies, 8% to
grains, 4% to metals and 1% to meats.
For the reasons described in this Management's Discussion and Analysis, past
performance is not indicative of future results. As a result, any recent
increases in net realized or unrealized trading gains may have no bearing on
any results that may be obtained in the future.
Liquidity. Although there is no public market for the Units, a Limited Partner
may redeem its Units in the Partnership as of any month-end upon ten days'
written notice to the General Partner in the form of a request for redemption.
With respect to the Partnership's trading, in general, the Advisor will trade
only Investments that have sufficient liquidity to enable it to enter and close
out positions without causing major price movements. Notwithstanding the
foregoing, most United States commodity exchanges limit the amount by which
certain commodities may move during a single day by regulations referred to as
"daily price fluctuation limits" or "daily limits." Pursuant to such
regulations, no trades may be executed on any given day at prices beyond daily
limits. The price of a futures contract has occasionally moved the daily limit
for several consecutive days, with little or no trading, thereby effectively
preventing a party from liquidating its position. While the occurrence of such
an event may reduce or effectively eliminate the liquidity of a particular
market, it will not limit ultimate losses and may in fact substantially
increase losses because of its inability to liquidate unfavorable positions. In
addition, if there is little or no trading in a particular
11
<PAGE> 12
futures or forward contract that the Partnership is trading, whether such
illiquidity is caused by any of the above reasons or otherwise, the Partnership
may be unable to execute trades at favorable prices and/or may be unable or
unwilling to liquidate its position prior to its expiration date, thereby
requiring the Partnership to make or take delivery of the underlying interest
of the Investment.
The Partnership's trading also may be impacted by the various conflicts of
interest between the Partnership and the General Partner, the Advisor, the
Broker, and their affiliates.
Year 2000 Compliance. Many computer systems were designed using only two
digits to designate years. These systems may not be able to distinguish the
Year 2000 from the Year 1900 (commonly known as the "Year 2000 Problem"). Like
other investment funds and financial business organizations, the Partnership
could be adversely affected if the computer systems used by the General Partner
or the Partnership's service providers do not properly address this problem
prior to January 1, 2000. Currently, the General Partner does not anticipate
that the transition to the 21st century will have any material effect on the
Partnership.
The General Partner has established a "Y2K Task Force" consisting of
representatives of its information technology, research, accounting, compliance
and trading departments to specifically address all Year 2000 issues in a
timely manner. Actions taken have included an analysis of all in-house software
and hardware to determine Year 2000 compliance. The General Partner is
currently in the process of requesting confirmation from all third parties with
which it and the Partnership have a material relationship that these parties
have taken the same actions. Procedures to bring all mission-critical software
into Year 2000 compliance are in progress. Testing of corrected software has
already begun. Contingency plans are being established for all non-mission
critical systems. No direct costs have been or are expected to be incurred in
addressing the year 2000 Problem. The General Partner has addressed all of the
issues as a part of its ongoing operations, so the Partnership will not be
required to reimburse the General Partner for any expenses incurred.
Despite the corrective measures that the General Partner has implemented, no
assurance can be given that the Partnership's service providers have
anticipated every step necessary to avoid any adverse effect on the Partnership
attributable to the Year 2000 Problem. A most likely worst case scenario would
be one in which trading of contracts on behalf of the Partnership becomes
impossible as a result of the Year 2000 Problem. The General Partner would be
able to assess such a situation in advance of the December 31, 1999 deadline
and either liquidate all positions prior to that date and/or establish
relationships with additional counterparties. Further, prospective investors
should understand that the failure of third parties, such as futures exchanges,
clearing organizations or regulators, to resolve the Year 2000 Problem in a
timely manner could result in a material financial risk to the Partnership.
Safe Harbor Statement. The discussions above and under the heading "Item 3.
Quantitative and Qualitative Disclosures About Market Risk" contain certain
"forward-looking statements" (as such term is defined in Section 21E of the
Securities Exchange Act of 1934) that are based on the beliefs of the
Partnership, as well as assumptions made by, and information currently
available to, the Partnership. Words such as "expects, "anticipates" and
similar expressions have been used to identify "forward-looking statements" but
are not the exclusive means of identifying such statements. A number of
important factors should cause the Partnership's actual results, performance or
achievements for 1999 and beyond to differ materially from the results,
performance or achievements expressed in, or implied by, such forward-looking
statements. These factors include, without limitation, the factors described
above and under the heading "Item 3. Quantitative and Qualitative Disclosures
About Market Risk."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Derivative instruments involve varying degrees of off-balance sheet market
risk. Changes in the level or volatility of interest rates or foreign currency
exchange rates or the market values of the financial instruments or commodities
underlying such derivative instruments frequently result in changes in the
Partnership's unrealized profit (loss) on such derivative instruments as
reflected in the Statements of Financial Condition included herein. The
Partnership's exposure to market risk is influenced by a number of
12
<PAGE> 13
factors, including the relationships among derivative instruments held by the
Partnership, as well as the volatility and liquidity of the markets in which
the financial instruments are traded. There has been no material change, during
the three and nine months ended September 30, 1999, in the sources of the
Partnership's exposure to market risk.
The General Partner has procedures in place intended to control the
Partnership's exposure to market risk, although there can be no assurance that
it will, in fact, succeed in doing so. These procedures focus primarily on
monitoring the trading of the Advisors selected from time to time for the
Partnership, calculating the Net Asset Value of the Advisors' respective
Partnership accounts as of the close of business on each day and reviewing
outstanding positions for over-concentrations-both on an Advisor-by-Advisor and
an overall Partnership basis. While the General Partner will not itself
intervene in the markets to hedge or diversify the Partnership's market
exposure, the General Partner may urge Advisors to reallocate positions, or
itself reallocate Partnership assets among Advisors (although typically only as
of the end of a month) in an attempt to avoid over-concentrations. However, such
interventions would be unusual. Except in cases in which it appears that an
Advisor has begun to deviate from past practice or trading policies or to be
trading erratically, the General Partner's basic risk control procedures
consist of the ongoing process of Advisor monitoring and selection, with the
market risk controls being applied by the Advisors themselves.
13
<PAGE> 14
PART II- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In June, 1996, the Partnership commenced a private placement of Units in
reliance on the exemptions afforded by, among others, Section 4(2) of the 1933
Act and Rule 506 of Regulation D promulgated thereunder. The sales qualify as
an exempt offering under Rule 506 of Regulation D because they are made solely
to "accredited investors," as defined by Regulation D. Similar reliance has been
placed on available exemptions from securities qualification requirements under
applicable state securities laws. Units are offered monthly at a price per Unit
equal to the then-current Net Asset Value per Unit plus a selling commission
equal to 5% unless such selling commission is waived in whole or in part. The
minimum subscription is $26,250 for new investors other than Employee Benefit
Plans or $10,500 for Employee Benefit Plans and existing Limited Partners, which
amounts include selling commissions of $1,250 and $500, respectively. A
subscriber may subscribe for Units in excess of the foregoing minimum amounts.
As of the date hereof, the Partnership continues to offer Units, and there is no
maximum number of Units that may be purchased or sold.
During the third quarter of 1999, 5,003.9178 Units were sold for a total of
$9,370,719.
ITEM 5. OTHER INFORMATION.
On June 22, 1999, the Partnership filed a Form 10 which registered the Units
pursuant to the 1934 Act. The Partnership filed an amendment to the Form 10 on
September 21, 1999. As a result of these filings, the Partnership became
subject to the periodic reporting obligations under the 1934 act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
27 Financial Data Schedule.
B. REPORTS ON FORM 8-K. None.
14
<PAGE> 15
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.
THE DENNIS FUND LIMITED PARTNERSHIP
By: Kenmar Advisory Corp., General Partner
Dated: November 15, 1999 By: /s/ Robert L. Cruikshank
Robert L. Cruikshank
Executive Vice President
(Duly Authorized Officer of the General Partner)
Dated: November 15, 1999 By: /s/ Thomas J. DiVuolo
Thomas J. DiVuolo
Senior Vice President (Principal Financial
and Accounting Officer of the Registrant)
15
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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