<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended: October 31, 1999
___ Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
[No Fee Required]
Commission File Number: 0-9202
THE FUTURE FUND
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3033727
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o HEINOLD ASSET MANAGEMENT, INC.
440 South LaSalle
20th Floor
Chicago, Illinois 60605
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 663-7500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
Indicate by check mark whether the registrant (1) 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The registrant is a limited partnership and, accordingly, has no voting stock
held by nonaffiliates or otherwise.
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PART I
Item 1. Business.
(a) General development of business. The Future Fund (the
"Partnership") is a limited partnership organized on November 30, 1978 pursuant
to a Limited Partnership Agreement (the "Limited Partnership Agreement") and
under the Uniform Limited Partnership Act of the State of Illinois. On July 31,
1987, the Partnership elected to be governed under the Illinois Revised Uniform
Limited Partnership Act. The Partnership engages in speculative trading of
futures, options on futures and forward contracts.
Heinold Asset Management, Inc., a Delaware corporation, is the
General Partner of the Partnership and, in that capacity, performs various
administrative services. The General Partner was organized in 1982 to serve as
the general partner and pool operator for public and private commodity pools
sponsored by Heinold Commodities, Inc., an affiliate. Until March 31, 1996, the
General Partner was a wholly owned subsidiary of Geldermann, Inc., an Illinois
corporation ("Geldermann"). On March 31, 1996, the General Partner became a
wholly owned subsidiary of E.D. & F. Man Inc., a New York corporation with
headquarters in New York, New York. References herein to the "General Partner"
refer to Heinold Commodities, Inc. for the periods prior to November 1, 1988 and
to Heinold Asset Management, Inc. for periods on and after November 1, 1988.
Until June 1, 1995, Geldermann acted as the Partnership's futures
commission merchant or commodity broker. On that date, E.D. & F. Man
International Inc. (the "Commodity Broker") replaced Geldermann as the
Partnership's commodity broker. The General Partner and the Commodity Broker
perform various services related to the Partnership's trading pursuant to a
Customer Agreement. The Partnership conducts its forward contract trading
through an affiliate, ED& F Man Capital Inc., as well as other unaffiliated
dealers pursuant to various Customer Account Agreements.
The General Partner invested $128,000 in the Partnership at the
outset of trading and purchased additional Units for $6,500 during fiscal year
1985. The net asset value of the General Partner's interest in the Partnership,
after the redemption of 583 Unit-equivalents for $355,239 on October 1, 1988,
379 Unit-equivalents for $248,362 on November 1, 1991 and 111 Unit-equivalents
for $91,757 on October 31, 1994, was $221,771 as of October 31, 1999.
The Partnership's trading manager from the inception of trading
until August 1, 1988 had been Millburn Partners, a New Jersey partnership. On
August 1, 1988, Millburn Ridgefield Corporation, a Delaware corporation whose
sole shareholders consisted of the former partners of Millburn Partners, became
the commodity trading advisor for all public commodity pools previously managed
by Millburn Partners.
Effective January 1, 1990, the General Partner replaced Millburn
Ridgefield Corporation as the Partnership's trading manager with Baldwin
Financial Corporation, a Delaware corporation. The Management Contract with
Baldwin Financial Company was assigned to MC
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Baldwin Financial Company as of January 1, 1992. MC Baldwin Financial Company
served as trading manager for the Partnership until December 31, 1995.
Effective January 1, 1996, the General Partner entered into a
Trading Manager Agreement whereby it assumed the role of trading manager for the
Partnership (the "Trading Manager"). The Partnership is a multi-advisor
commodity pool and the Trading Manager allocates the assets of the Partnership
among several trading advisors to direct the Partnership's futures and forward
trading. References to the Trading Manager from the inception of the
Partnership's trading through December 31, 1989 refer to Millburn Ridgefield
Corporation, from January 1, 1990 through January 1, 1996 to MC Baldwin
Financial Company and on and after January 1, 1996 to Heinold Asset Management,
Inc.
The Trading Manager receives a monthly Management Fee at an
annual rate of 4% of the month-end Net Asset Value, as defined, of the
Partnership. The Trading Manager will also receive an incentive fee equal to 20%
of any New Trading Profit attributable to each trading advisor to be calculated
and paid quarterly or annually. The Trading Manager in turn will pay to each
trading advisor an incentive fee equal to 15% to 20% of any New Trading Profit
attributable to each trading advisor to be calculated and paid quarterly or
annually.
On April 1, 1996, the Partnership, pursuant to an exemption from
the Commodity Futures Trading Commission (the "CFTC"), was permitted to cease
trading on a stand-alone basis. On that date, the Partnership elected to
continue to allocate a portion of its assets to managed accounts with commodity
trading advisors and to trade the remaining assets through participation in a
series of private general partnerships ("Account Partnerships") formed together
with other pools of which the General Partner acts as general partner. Only
pools of which the General Partner acts as general partner are permitted to
participate in these Account Partnerships, and all such pools share pro rata in
the profits and losses of the Account Partnerships based on the capital which
each pool commits to each such Account Partnership. Because the Account
Partnerships combine the assets of numerous pools, they make it possible for
even the smaller pools to have access to a number of commodity trading advisors
without need of meeting each commodity trading advisors' minimum account size
requirements. Although the General Partner has agreed to various incremental
accounting procedures, the operation of the Account Partnerships is effectively
transparent to the Unitholders. As of December 1, 1997, all of the Partnership's
assets were allocated to the Account Partnerships.
The Partnership shall pay commodity brokerage commissions to the
Commodity Broker at an annual rate of 7% of month-end Net Assets per year, plus
National Futures Association ("NFA") and give-up fees.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"),
commodity exchanges and futures trading are subject to regulation by the CFTC.
The National Futures Association, a "registered futures association" under the
Act, is the only non-exchange self-regulatory organization for futures industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
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"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers." The Act requires "commodity pool
operators," such as the General Partner, "commodity trading advisors," such as
the Trading Manager and the Trading Advisors, and commodity brokers or "futures
commission merchants," such as the Commodity Broker, to be registered and to
comply with various reporting and record keeping requirements. The General
Partner, the Trading Advisors, and the Commodity Broker are all members of the
NFA. The CFTC may suspend a commodity pool operator's or commodity trading
advisor's registration if it finds that its trading practices tend to disrupt
orderly market conditions or in certain other situations. In the event that the
registration of the General Partner as a commodity pool operator or the Trading
Advisors' registrations as commodity trading advisors were terminated or
suspended, the General Partner and the Trading Advisors would be unable to
continue to manage the business of the Partnership, select the Trading Advisors
and direct the Partnership's futures and forward trading, respectively. Should
the General Partner's registration be suspended, termination of the Partnership
might result.
As members of the NFA, the General Partner, the Trading Manager,
the Trading Advisors and the Commodity Broker are subject to NFA standards
relating to fair trade practices, financial condition and customer protection.
As the self-regulatory body of the futures industry, the NFA promulgates rules
governing the conduct of futures industry professionals and disciplines those
professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and
certain futures exchanges have established limits on the maximum net long or net
short position which any person may hold or control in particular futures
contracts. The CFTC has adopted a rule requiring all domestic futures exchanges
to submit for approval speculative position limits for all futures contracts
traded on such exchanges. Many exchanges also limit the changes in futures
contract prices that may occur during a single trading day. The Partnership may
trade on foreign commodity exchanges which are not subject to regulation by any
United States government agency.
(b) Financial information about industry segments. The
Partnership's business constitutes only one segment, speculative trading of
futures and forward contracts for financial reporting purposes. The Partnership
does not engage in sales of goods or services. The Partnership's revenue,
operating profit and total assets for each of the five fiscal years in the
period ended October 31, 1999 are set forth under "Item 6. Selected Financial
Data."
(c) Narrative description of business.
(1) See Items 1(a) and (b) above.
(i) through (xii) -- not applicable.
(xiii) -- the Partnership has no employees.
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(d) Financial information about foreign and domestic operations
and export sales. The Partnership does not engage in sales of goods or services.
See "Item 1(b). Financial information about industry segments."
Item 2. Properties.
The Partnership does not own any properties. Under the terms of
the Limited Partnership Agreement, the General Partner performs the following
services for the Partnership:
(1) Manages the business of the Partnership. Pursuant to this
authority, the General Partner has entered into a Management Agreement with the
Partnership (under which the Trading Manager will serve as trading manager and
will retain trading advisors who will have complete discretion with respect to
determination of the Partnership's trading decisions) and a Customer Agreement
with the Commodity Broker (pursuant to which the Commodity Broker executes all
trades on behalf of the Partnership based on instructions of the trading
advisors selected by the Trading Manager). In addition, the General Partner and
the Partnership entered into a Back Office Services Agreement with Managed Asset
Service Corp., an affiliate of the General Partner ("MASC"), whereby MASC
provides various administrative services to the Partnership subject to the
oversight of the General Partner.
(2) Maintains the Partnership's books and records, which Limited
Partners or their duly authorized representatives may inspect during normal
business hours for any proper purpose upon 10 days' written notice to the
General Partner.
(3) Furnishes each Limited Partner with a monthly statement
describing the performance of the Partnership which sets forth aggregate
incentive fee allocations, brokerage commissions and other expenses incurred or
accrued by the Partnership during the month.
(4) Forwards annual audited financial statements to each Limited
Partner.
(5) Provides to each Limited Partner tax information necessary
for the preparation of his or her annual federal income tax return.
(6) Performs secretarial and other clerical responsibilities and
furnishes office space, equipment and supplies as may be necessary for
supervising the affairs of the Partnership.
(7) Administers the redemption of Units.
Item 3. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings
to which the Partnership is a party or to which any of its assets are subject.
In addition, there are no pending material proceedings involving the General
Partner or the Commodity Broker.
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Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. There is no trading market for the Units,
and none is likely to develop. The Units are transferable only after written
notice has been given to and approved by the General Partner. Units may be and
have been redeemed upon 10 days' notice at their Net Asset Value as of the end
of any month, as provided in the Limited Partnership Agreement. In the event
that all Units for which redemption is requested cannot be redeemed as of any
redemption date, Units will be redeemed in the order that requests for
redemption have been received by the General Partner.
(b) Holders. As of November 1, 1999, there were 542 holders of
Units.
(c) Dividends. No distributions or dividends have been made on
the Units and the General Partner has no present intention to make any.
Item 6. Selected Financial Data.
The following is a summary of operations of the Partnership for
each of the five fiscal years in the period ended October 31, 1999.
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<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31, October 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net gain (loss) on
trading of futures
and forward contracts $ (482,764) $ 2,170,135 $ 2,385,992 $ 3,994,809 $ 2,226,647
Interest income 433,133 612,846 685,611 685,594 845,122
------------ ------------ ------------ ------------ ------------
Total income (49,631) 2,782,981 3,071,603 4,680,403 3,071,769
============ ============ ============ ============ ============
Brokerage commissions 896,686 972,546 1,109,170 1,002,522 1,181,262
Management fees 505,109 544,528 556,956 622,696 675,007
Incentive fees 21,155 367,066 430,609 663,447 452,602
Other 49,200 55,302 53,799 77,024 95,150
------------ ------------ ------------ ------------ ------------
Total expenses 1,472,150 1,939,442 2,150,534 2,365,689 2,404,021
============ ============ ============ ============ ============
Net income (loss) $ (1,521,781) $ 843,539 $ 921,069 $ 2,314,714 $ 667,748
============ ============ ============ ============ ============
Net income (loss) allocated to:
General Partner $ (30,133) $ 16,394 $ 14,117 $ 32,898 $ 6,634
============ ============ ============ ============ ============
Limited Partners $ (1,491,648) $ 827,145 $ 906,952 $ 2,281,816 $ 661,114
============ ============ ============ ============ ============
Net income (loss) for a unit
of partnership interest
(for a unit outstand-
ing throughout
each year) $ (136.96) $ 74.52 $ 64.17 $ 149.53 $ 30.16
============ ============ ============ ============ ============
Total assets $ 11,083,035 $ 14,045,326 $ 15,019,983 $ 14,864,152 $ 15,244,909
============ ============ ============ ============ ============
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Reference is made to "Item 6. Selected Financial Data." and "Item
8. Financial Statements and Supplementary Data." The information contained
therein is essential to, and should be read in conjunction with, the following
analysis.
Capital Resources
The Partnership does not intend to raise any additional capital
through borrowing and because it is a closed-end fund, it cannot sell any
additional Units unless it undertakes a new public offering, which would require
another registration with the Securities and Exchange Commission. Due to the
nature of the Partnership's business, it will make no significant capital
expenditures, and substantially all its assets are and will be represented by
cash, U.S. Treasury securities and investments in futures and forward contracts.
Liquidity
Many United States commodity exchanges limit fluctuations in
futures contract prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits." During a single trading day, no
trades may be executed at prices beyond the daily limit. Once the price of a
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 Partnership from promptly liquidating
unfavorable positions and subject the Partnership 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 Partnership may not be able
to execute futures trades at favorable prices if little trading in such
contracts is taking place. Generally, forward contracts can be closed out at the
discretion of the Trading Advisor. However, if the market is not liquid, it
could prevent the timely closeout of an unfavorable position until the delivery
date, regardless of the changes in their value or the Trading Advisors'
investment strategies. Other than these limitations on liquidity, which are
inherent in the Partnership's trading operations, the Partnership's assets are
highly liquid and are expected to remain so.
Results of Operations
Operating results showed a loss for the fiscal year ended October
31, 1999 and a profit for the fiscal years ended October 31, 1998 and October
31, 1997.
The Net Asset Value per Unit as of October 31, 1999, October 31,
1998 and October 31, 1997 was $1,008.06, 1,145.02 and $1,070.50, respectively.
For fiscal year 1999, the Partnership's Net Asset Value per Unit
decreased from $1,145.02 at October 31, 1998 to $1,008.06 at October 31, 1999.
This decline resulted in an 11.96% decrease for the fiscal year. The majority of
the losses that occurred were from trading activities in October 1999 where the
Partnership declined 7.23%. Long positions in the Hang Seng, Nikkei and Topix
were unprofitable as stocks pulled back after making strong previous
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gains. These positions were unprofitable due to stronger than expected US
inflation and the Federal Reserve's bias towards tight monetary policies. Losses
also arose from trading the Euro against the Japanese Yen. These short positions
against the European currency were unprofitable due to declining interest rates.
Excellent profits arose from short positions in London aluminum positions due to
oversupply and sluggish demand. The Partnership realized slight profits in short
positions on agricultural markets as prices continued to move lower during the
first half of the year.
For fiscal year 1998, the Partnership recorded gains even though
the first six months resulted in losses with the Net Asset Value per Unit
declining from $1,070.50 at October 31, 1997 to $996.74 at April 30, 1998.
Losses occurred during this period primarily due to short positions in the
Deutschemark, Swiss franc, Danish krone, Spanish peseta, French franc and
Italian lire against the U.S. dollar. During the second half of fiscal 1998, the
Partnership experienced gains from short positions in the Nikkei 225 index and
the IMM S&P 500. These positions were profitable due to Japan's continued
political deadlock over its troubled banking system and the deepening financial
turmoil in Russia. Gains were also realized from short positions in the energy
and metal sectors. Net Asset Value per Unit as of October 31, 1997, December 31,
1997, April 30, 1998 and October 31, 1998 was $1,070.50, $1,067.02, $996.74 and
$1,145.02, respectively.
The Partnership recorded gains for fiscal year 1997. Due to the
downward trend in interest rates, the Partnership profited from long positions
in financial instruments. Other profits were realized in long U.S. index
positions due to the continued strength of the U.S. stock market. Further gains
were made in long agricultural positions. Although trading in long precious
metal positions proved unprofitable, such losses were not enough to offset the
Partnership's gains.
Inflation is not a significant factor in the Partnership's
profitability.
Item 8. Financial Statements and Supplementary Data.
Financial statements are listed on page F-1 of this report.
The supplementary financial information specified by Item 302 of
Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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The Partnership filed a Form 8-K on January 16, 1997 indicating a
change in auditors for the fiscal year ended October 31, 1997. Such Form 8-K is
herein incorporated by reference.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. The
Partnership is managed by its General Partner. There are no "significant
employees" of the Partnership.
The General Partner is a commodity pool operator registered with
the NFA.
Item 11. Executive Compensation.
The Partnership has no directors or officers. The General Partner
performs the services described in "Item 2. Properties." herein. E. D. & F. Man
International Inc. acts as the Partnership's commodity broker pursuant to the
Customer Agreement described in "Item 1(a). General development of business." E.
D. & F. Man Capital Inc. acts as the Partnership's forward dealer pursuant to
the Customer Account Agreement described in "Item 1(a). General development of
business."
The General Partner participates in any appreciation in the net
assets of the Partnership in proportion to its investment in it.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The Partnership knows of no person who owns beneficially more
than 5% of the Units.
(b) Security ownership of management.
Under the terms of the Limited Partnership Agreement, the
Partnership's affairs are managed by the General Partner. The Trading Manager
pursuant to its Management Agreement with the Partnership, enters into
Management Contracts with the Trading Advisors who have discretionary authority
over the Partnership's futures and forward contract trading. The General Partner
owned 220 Unit-equivalents valued at $221,771 as of October 31, 1999, 2.03% of
the Partnership's total equity.
(c) Changes in control.
None
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Item 13. Certain Relationships and Related Transactions.
See "Item 11. Executive Compensation" and "Item 12. Security
Ownership of Certain Beneficial Owners and Management."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) Financial Statements:
See Index to Financial Statements, infra.
(a)(2) Financial Statement Schedules:
All Schedules are omitted for the reason that they are not
required, are not applicable, or because equivalent information has been
included in the financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K:
(3) Articles of Incorporation and By-Laws:
(a) Limited Partnership Agreement dated as of November 27, 1978,
as amended on February 15, 1979.
(b) Certificate of Limited Partnership of the Partnership as
filed with the Cook County Recorder of Deeds on November 30, 1978.
The above exhibits are incorporated by reference from the Form
10-K Annual Report filed by the Partnership for the period ended October 31,
1978.
(c) Form LP-1205 of the Partnership, as filed with the Illinois
Secretary of State on July 31, 1987, electing to be governed under the Illinois
Revised Uniform Limited Partnership Act.
The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K for the fiscal year ended October 31, 1987.
(10) Material Contracts:
(a) Joint Venture Agreement dated as of April 1, 1987 between the
Partnership and Millburn Partners.
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(b) Customer Agreement dated as of April 1, 1987 between the
Joint Venture and Geldermann.
The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K for the fiscal year ended October 31, 1987.
(c) Amendment No. 1 to the Joint Venture Agreement between the
Partnership and Millburn Partners dated December 31, 1987.
(d) Amendment No. 1 to the Customer Agreement between the Joint
Venture and Geldermann dated December 31, 1987.
(e) Amendment No. 2 to the Joint Venture Agreement between the
Partnership and Millburn Ridgefield Corporation dated December 31, 1988.
The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K for the Fiscal Year ended October 31, 1988.
(f) Management Agreement dated December 14, 1989 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K filed on January 16, 1990.
(g) Amendment No. 1 to the Management Contract dated December 31,
1991 between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the
Partnership's report on Form 8-K filed on January 28, 1991.
(h) Amendment No. 2 to the Management Contract dated December 31,
1992 between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K filed on January 31, 1993.
(i) Amendment No. 3 to the Management Contract dated December 31,
1993 between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K filed on January 31, 1994.
(j) Amendment No. 4 to the Management Contract dated December 31,
1994 between the Partnership and the Trading Manager.
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The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K filed on January 31, 1995.
(k) Trading Manager Agreement dated January 1, 1996 among the
Partnership and the Trading Manager.
(l) Form of General Partnership Agreement among various commodity
pools of which Heinold Asset Management, Inc. acts as sole general partner.
(m) Form of Management Contract among each Account Partnership
and each trading advisor.
(n) Form of Management Contract among the Partnership and each
trading advisor.
The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K filed on January 31, 1996.
(o) Back Office Service Agreement dated November 1, 1996 among
Managed Asset Service Corp., the General Partner and the Partnership.
The above exhibit is incorporated by reference from the
Partnership's report on Form 10-K filed on January 28, 1997.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during the
quarter ended October 31, 1999.
(27) Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the
City of Chicago and State of Illinois on the 24th day of January, 2000.
THE FUTURE FUND
By HEINOLD ASSET MANAGEMENT, INC.
General Partner
By /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the General Partner of the Registrant in the capacities and on the date
indicated.
Title with
Signature General Partner Date
- --------- --------------- ----
/s/ Thomas M. Harte President (chief operating January 24, 2000
- ------------------------ officer) and Director
Thomas M. Harte
/s/ Judith M. Kula Chief Financial Officer January 24, 2000
- ------------------------ (principal accounting officer)
Judith M. Kula
/s/ Mary T. Bergonia Director January 24, 2000
- ------------------------
Mary T. Bergonia
/s/ Gary M. Rindner Director January 24, 2000
- ------------------------
Gary M. Rindner
/s/ Ira Polk Director January 24, 2000
- ------------------------
Ira Polk
(Being the principal executive officer, the principal financial
and accounting officer, and a majority of the directors of Heinold Asset
Management, Inc.)
HEINOLD ASSET General Partner of January 24, 2000
MANAGEMENT, INC. Registrant
By /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
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Financial Statements
The Future Fund
(An Illinois Limited Partnership)
Years ended October 31, 1999, 1998, and 1997
with Report of Independent Auditors
<PAGE> 16
The Future Fund
(An Illinois Limited Partnership)
Financial Statements
Years ended October 31, 1999, 1998, and 1997
CONTENTS
Report of Independent Auditors...............................................1
Financial Statements
Statements of Financial Condition............................................2
Statements of Operations.....................................................3
Statements of Changes in Partners' Equity....................................4
Statements of Cash Flows.....................................................5
Notes to Financial Statements................................................6
<PAGE> 17
Report of Independent Auditors
The Partners
The Future Fund
We have audited the accompanying statements of financial condition of The Future
Fund (the Partnership) as of October 31, 1999, and 1998,, and the related
statements of operations, changes in partners' equity, and cash flows for each
of the three years in the period ended October 31, 1999. These financial
statements are the responsibility of the Partnership's General Partner. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Future Fund at October 31,
1999, and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended October 31, 1999, in conformity with
generally accepted accounting principles.
Chicago, Illinois
December 7, 1999
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The Future Fund
(An Illinois Limited Partnership)
Statements of Financial Condition
<TABLE>
<CAPTION>
OCTOBER 31
1999 1998
-------------------------
<S> <C> <C>
ASSETS
Investment in affiliated general partnerships $ 5,612,300 $ 5,862,347
Equity in commodity trading accounts:
Due from affiliated broker 5,470,735 8,182,979
-------------------------
Total assets $11,083,035 $14,045,326
=========================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Brokerage commissions $ 64,355 $ 81,812
Redemptions payable 15,514 45,801
Management fees 36,341 46,034
Incentive fees - 83,648
Other 50,685 20,417
-------------------------
Total liabilities 166,895 277,712
Partners' equity:
Limited partners (10,609 and 11,804 units outstanding
at October 31, 1999 and 1998, respectively) 10,694,369 13,515,710
General Partner (220 unit equivalents outstanding
at October 31, 1999 and 1998) 221,771 251,904
-------------------------
Total partners' equity 10,916,140 13,767,614
-------------------------
Total liabilities and partners' equity $11,083,035 $14,045,326
=========================
Net asset value per outstanding unit of partnership interest $ 1,008.06 $ 1,145.02
=========================
</TABLE>
See accompanying notes.
2
<PAGE> 19
The Future Fund
(An Illinois Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS)
Net realized trading gains on closed contracts $ 487,315 $ 1,959,226 $ 4,156,566
Change in net unrealized gain (loss) on open
contracts (970,079) 210,909 (1,770,574)
Brokerage commissions (896,686) (972,546) (1,109,170)
---------------------------------------------
(1,379,450) 1,197,589 1,276,822
Interest income 433,133 612,846 685,611
---------------------------------------------
(946,317) 1,810,435 1,962,433
EXPENSES
Management fees 505,109 544,528 556,956
Incentive fees 21,155 367,066 430,609
Other 49,200 55,302 53,799
---------------------------------------------
575,464 966,896 1,041,364
---------------------------------------------
Net income (loss) $(1,521,781) $ 843,539 $ 921,069
=============================================
Net income (loss) for a unit of partnership
interest (for a unit outstanding
throughout each year):
General Partner $ (136.96) $ 74.52 $ 64.17
=============================================
Limited Partners $ (136.96) $ 74.52 $ 64.17
=============================================
Net income (loss) allocated to:
General Partner $ (30,133) $ 16,394 $ 14,117
=============================================
Limited Partners $(1,491,648) $ 827,145 $ 906,952
=============================================
</TABLE>
See accompanying notes.
3
<PAGE> 20
The Future Fund
(An Illinois Limited Partnership)
Statements of Changes in Partners' Equity
Years ended October 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
------------------------------------------------
<S> <C> <C> <C>
Partners' equity at October 31, 1996 $ 14,134,513 $ 221,393 $ 14,355,906
Redemption of 576 units of limited
partnership interest (621,935) - (621,935)
Net income 906,952 14,117 921,069
------------------------------------------------
Partners' equity at October 31, 1997 14,419,530 235,510 14,655,040
Redemption of 1,666 units of limited
partnership interest (1,730,965) - (1,730,965)
Net income 827,145 16,394 843,539
------------------------------------------------
Partners' equity at October 31, 1998 13,515,710 251,904 13,767,614
Redemption of 1,195 units of limited
partnership interest (1,329,693) - (1,329,693)
Net loss (1,491,648) (30,133) (1,521,781)
------------------------------------------------
Partners' equity at October 31, 1999 $ 10,694,369 $ 221,771 $ 10,916,140
================================================
</TABLE>
See accompanying notes.
4
<PAGE> 21
The Future Fund
(An Illinois Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,521,781) $ 843,539 $ 921,069
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Change in assets and liabilities:
Due from affiliated broker 2,712,244 4,988,380 (1,029,389)
Investment in affiliated general partnerships 250,047 (4,370,662) 873,558
Net unrealized trading gains on open contracts - 356,939 -
Brokerage commissions (17,457) 656 (5,513)
Management fees (9,693) 2,446 (11,793)
Incentive fees (83,648) (116,977) (88,298)
Other 30,268 12,915 924
---------------------------------------------
Net cash provided by operating activities 1,359,980 1,717,236 660,558
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of limited partnership interests (1,359,980) (1,717,236) (660,558)
---------------------------------------------
Net change in cash - - -
Cash at beginning of year - - -
---------------------------------------------
Cash at end of year $ - $ - $ -
=============================================
</TABLE>
See accompanying notes.
5
<PAGE> 22
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements
1. ORGANIZATION OF THE PARTNERSHIP
The Future Fund (Partnership) was organized in November 1978, under the Illinois
Uniform Limited Partnership Act, for purposes of engaging in the speculative
trading of futures, options on futures, and forward contracts. Heinold Asset
Management, Inc. (HAMI), a wholly owned subsidiary of E.D. & F. Man, Inc., is
the general partner of the Partnership (General Partner).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN AFFILIATED GENERAL PARTNERSHIPS
Investments in affiliated general partnerships are valued at fair value as
determined by the General Partner. In determining fair value, the General
Partner utilizes the valuations of the underlying partnerships. The underlying
partnerships value their financial instruments on a mark-to-market basis of
accounting. The income (loss) from investments in affiliated general
partnerships is presented in the statements of operations on a pro rata basis.
DUE FROM AFFILIATED BROKER
Due from affiliated broker consists of balances, including interest receivable,
due from E.D. & F. Man International, Inc. (Man) an affiliate of the General
Partner. Man pays the Partnership interest on the Partnership's daily balance at
a rate generally equal to 90% of the published 90-day Treasury bill rate.
Man is registered with the Commodity Futures Trading Commission (CFTC) as a
futures commission merchant and is a member of the National Futures Association,
an industry self-regulatory agency. Man is also registered with the Securities
and Exchange Commission (SEC) and National Association of Securities Dealers,
Inc. (NASD) as a securities broker-dealer.
INCOME RECOGNITION
Realized and unrealized trading gains and losses on futures, options on futures,
and forward contracts, which represent the difference between cost and selling
price or quoted market value, are recognized currently. All trading activities
are accounted for on a trade date basis.
6
<PAGE> 23
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets, liabilities, gains, and losses denominated in foreign currencies are
translated at end-of-period exchange rates. The resulting net realized and
unrealized foreign exchange gains and losses are not material and are recorded
in trading gains (losses) in the statements of operations.
INCOME TAXES
Income taxes are not provided for by the Partnership because taxable income
(loss) of the Partnership is includable in the income tax returns of the
partners.
NET INCOME (LOSS) PER UNIT
Net income (loss) per unit of Partnership interest is equal to the change in net
asset value per unit from the beginning of the year to the end of the year. Unit
amounts are rounded to whole numbers for financial statement presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
DISCLOSURE OF DERIVATIVE FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. Statement No. 133
reduces certain previously required quantitative disclosures relating to
derivative financial instruments held or issued for trading purposes. The
adoption of Statement No. 133 did not have a material impact on the results of
operations or financial statement disclosures.
7
<PAGE> 24
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
3. LIMITED PARTNERSHIP AGREEMENT
The limited partners and the General Partner share in the profits and losses of
the Partnership in proportion to the number of units or unit equivalents held by
each partner. However, no limited partner is liable for obligations of the
Partnership in excess of its capital contribution and profits, if any.
Distributions (other than redemption of units), if any, are made on a pro rata
basis at the sole discretion of the General Partner.
Limited partners may redeem any or all of their units as of the end of any month
at net asset value per unit on ten days' prior written notice to the General
Partner. The Partnership is scheduled to be dissolved on July 1, 2025, or upon
the occurrence of certain events as specified in the limited partnership
agreement. The Partnership is closed to new subscriptions.
The Partnership bears the expenses incurred in connection with its activities.
These expenses include brokerage commissions, trading advisors' management and
incentive fees, legal, audit, tax return preparation, and filing fees. The
General Partner bears all other operating expenses.
4. INVESTMENT IN AFFILIATED GENERAL PARTNERSHIPS
The Partnership invests in a series of private affiliated general partnerships
(General Partnerships) formed together with other HAMI limited partnerships. The
General Partnerships engage in the speculative trading of futures, options on
futures, and forward contracts based on their respective trading strategies. The
Partnership shares pro rata in profits and losses of such General Partnerships,
based on the capital that the Partnership commits, as defined in the offering
document, to each General Partnership.
A separate General Partnership is utilized for each Commodity Trading Advisor
(Trading Advisor) that the General Partner selects to trade partnership assets.
An affiliate of the General Partner is the Trading Advisor for Heinold General
Partnership III. Under the terms of its management contract, each Trading
Advisor has sole responsibility for determining the General Partnership's
trades. As compensation for these services, each Trading Advisor receives a
monthly management fee based on a percentage of the
8
<PAGE> 25
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
4. INVESTMENT IN AFFILIATED GENERAL PARTNERSHIPS (CONTINUED)
Partnership's month-end assets, as defined in the offering document. Each
Trading Advisor also receives a quarterly or annual incentive fee based on a
percentage of new trading profits, as defined in the offering document. The
incentive fee is retained by a Trading Advisor even when trading losses, as
defined in the offering document, occur in subsequent periods; however, no
further incentive fees are payable until such trading losses (other than those
attributable to redemptions) are recouped by the General Partnership. At October
31, 1999, carryforward losses related to the Partnership for incentive fee
purposes were $(299,478), $(454,433), $(132,113), $(131,336), $(227,218),
$(533,510), and $(196,959) for General Partnerships I, III, IV, V, IX, X, and
XI, respectively.
At October 31, 1999, investments in General Partnerships were as follows:
<TABLE>
<CAPTION>
ALLOCATED ASSETS
-----------------------------------------------
ADDITIONAL PROFIT
COMMITTED ALLOCATION
GENERAL PARTNERSHIP INVESTMENT CAPITAL TOTAL PERCENTAGE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Heinold General Partnership Account I $1,366,068 $ 886,705 $ 2,252,773 44.93%
Heinold General Partnership Account III 1,380,446 1,269,071 2,649,517 44.93
Heinold General Partnership Account IV 63,856 205,182 269,038 44.93
Heinold General Partnership Account V 509,753 785,489 1,295,242 44.93
Heinold General Partnership Account IX 366,636 52,187 418,823 44.93
Heinold General Partnership Account X 1,377,412 1,137,760 2,515,172 44.93
Heinold General Partnership Account XI 548,128 953,666 1,501,794 44.93
-----------------------------------------------
$5,612,299 $5,290,060 $10,902,359
===============================================
</TABLE>
At October 31, 1998, investments in General Partnerships were as follows:
<TABLE>
<CAPTION>
ALLOCATED ASSETS
-----------------------------------------------
ADDITIONAL PROFIT
COMMITTED ALLOCATION
GENERAL PARTNERSHIP INVESTMENT CAPITAL TOTAL PERCENTAGE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Heinold General Partnership Account I $1,430,155 $ 870,320 $ 2,300,475 44.41%
Heinold General Partnership Account II 317,723 1,287,128 1,604,851 44.41
Heinold General Partnership Account III 1,442,492 1,746,292 3,188,784 44.41
Heinold General Partnership Account V 486,715 1,029,750 1,516,465 44.41
Heinold General Partnership Account IX 446,961 149,776 596,737 44.41
Heinold General Partnership Account X 1,239,180 1,877,284 3,116,464 44.41
Heinold General Partnership Account XI 499,121 987,389 1,486,510 44.41
-----------------------------------------------
$5,862,347 $7,947,939 $13,810,286
===============================================
</TABLE>
9
<PAGE> 26
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
4. INVESTMENT IN AFFILIATED GENERAL PARTNERSHIPS (CONTINUED)
Each of the General Partnerships had total assets (no liabilities) consisting of
the following at October 31, 1999:
<TABLE>
<CAPTION>
NET UNREALIZED
HEINOLD GENERAL DUE FROM GAIN (LOSS) ON OPEN
PARTNERSHIP ACCOUNT AFFILIATED BROKER CONTRACTS TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I $3,011,592 $ 28,545 $3,040,137
III 3,092,629 (20,495) 3,072,134
IV 114,411 27,697 142,108
V 1,077,796 56,641 1,134,437
IX 814,347 1,591 815,938
X 3,593,300 (527,918) 3,065,382
XI 1,224,417 (4,576) 1,219,841
</TABLE>
Each of the General Partnerships had total assets (no liabilities) consisting of
the following at October 31, 1998:
<TABLE>
<CAPTION>
NET UNREALIZED
HEINOLD GENERAL DUE FROM GAIN (LOSS) ON OPEN
PARTNERSHIP ACCOUNT AFFILIATED BROKER CONTRACTS TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I $3,182,762 $ 37,827 $3,220,589
II 736,513 (21,028) 715,485
III 2,836,420 411,954 3,248,374
V 1,020,746 75,295 1,096,041
IX 820,465 186,055 1,006,520
X 2,140,065 650,467 2,790,532
XI 735,775 388,205 1,123,980
</TABLE>
The General Partnerships incur no expenses. Each General Partnership's funds are
held by, and its transactions cleared through, Man. These funds are used to meet
minimum margin requirements for all of the General Partnership's open positions
as set by the exchange where each futures contract is traded. These requirements
are adjusted, as needed, due to daily fluctuations in the values of the
underlying positions. Certain positions may be liquidated, if necessary, to
satisfy resulting changes in margin requirements. Forward contracts are entered
into on an arm's-length basis with E.D.&F. Man Capital, Inc., an affiliate of
the General Partner, or with an unaffiliated broker-dealer.
10
<PAGE> 27
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
5. MANAGED ACCOUNTS
Prior to December 1, 1997, the Partnership entered into various advisory
agreements directly with trading advisors (Managed Accounts).
Each trading advisor of the Managed Accounts received from the Partnership a
monthly management fee ranging from 0.083% to 0.333% (1% to 4% annually) of the
Partnership's month-end net assets, as defined in the offering document, and
annual incentive fees ranging from 15% to 20% of the Partnership's new trading
profits, as defined in the offering document.
6. AGREEMENTS
The Partnership has a brokerage contract with Man which provides that the
Partnership pay a monthly brokerage fee of 0.5833% (7% annually) of the
Partnership's month-end net assets, as defined in the offering document, plus
NFA fees, and related give-up charges.
With respect to the General Partnerships (see Note 4), the Partnership pays HAMI
a monthly management fee of 0.333% (4% annually) of the Partnership's month-end
net assets, as defined in the offering document. HAMI in turn pays each Trading
Advisor at a rate of up to 4%. The Partnership pays the Trading Advisors a
quarterly and annual incentive fee ranging from 15% to 20% of the Partnership's
new trading profits, as defined in the offering document (see Note 4).
7. DERIVATIVE FINANCIAL INSTRUMENTS
The General Partnerships trade derivative financial instruments. Derivative
financial instruments involve varying degrees of market risk whereby changes in
the level or volatility of interest rates, foreign currency exchange rates, or
market values of the underlying financial instruments or commodities may result
in changes in the value of the financial instrument in excess of the amounts
reflected in the summarized financial information of each respective General
Partnership in Note 4.
Credit risk arises from the potential inability of counterparties to perform in
accordance with the terms of the contract. Each General Partnership's exposure
to credit risk associated with counterparty nonperformance is limited to the
current cost to replace all contracts in which the General Partnership has
gains. Exchange-traded financial instruments, such as futures and options on
futures, give rise to limited counterparty exposure as the clearing organization
acts as the counterparty to all contracts.
11
<PAGE> 28
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
7. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Partnership has general partner liability with respect to its interest in
each of the General Partnerships.
The Partnership's and General Partnerships' assets held at Man are in segregated
accounts as required by the Commodity Futures Trading Commission.
* * * * *
12
<PAGE> 29
Oath of Commodity Pool Operator
To the best of my knowledge and belief, the information contained herein is
accurate and complete.
Heinold Asset Management, Inc.
(Commodity Pool Operator)
- ---------------------------------- ----------------------------------
Judith M. Kula Date
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1999 OCT-31-1998
<PERIOD-START> OCT-31-1998 OCT-31-1997
<PERIOD-END> OCT-31-1999 OCT-31-1998
<CASH> 0 0
<RECEIVABLES> 11,083,035 14,045,326
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 11,083,035 14,045,326
<SHORT-TERM> 0 0
<PAYABLES> 166,895 277,712
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 10,916,140 13,767,614
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 11,083,035 14,045,326
<TRADING-REVENUE> (482,764) 2,170,135
<INTEREST-DIVIDENDS> 433,133 612,846
<COMMISSIONS> (896,686) (972,546)
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> (575,464) (966,896)
<INCOME-PRETAX> 0 0
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,521,781) 843,539
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
