SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1997
--------------
Commission File Number 0-16898
-------
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
- ----------------------------------------------
(Exact name of registrant)
Delaware 75-2197831
- ----------------------- -----------------------------------
(State of Organization) (I.R.S. Employer Identification No.)
ATA Research, Inc. ProFutures, Inc.
5910 N. Central Expressway 1310 Highway 620
Suite 1520 Suite 200
Dallas, Texas 75206 Austin, Texas 78734
- -------------------------- --------------------
(Address of principal executive offices)
Registrant's telephone numbers
(214) 891-6200 (800) 348-3601
- -------------- --------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X
No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 1997 (Unaudited) and December 31, 1996 (Audited)
-----------
September 30, December 31,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $69,614,417 $75,180,978
Unrealized gain on open forward
contracts 0 73,191
----------- -----------
69,614,417 75,254,169
----------- -----------
Equity in broker trading accounts
Cash 20,920,829 16,147,869
Net option premiums (received) (809,015) (644,260)
Unrealized gain on open contracts 2,981,437 1,779,117
----------- -----------
Deposits with brokers 23,093,251 17,282,726
----------- -----------
Total assets $92,707,668 $92,536,895
=========== ===========
LIABILITIES
Accounts payable $ 5,451 $ 6,795
Commissions and other trading fees
on open contracts 156,587 136,720
Incentive fees payable 434,531 1,554,800
Management fees payable 533,953 529,837
Redemptions payable 518,365 447,582
----------- -----------
Total liabilities 1,648,887 2,675,734
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partners - 574 units
outstanding at September 30, 1997
and December 31, 1996 1,310,198 1,208,324
Limited Partners - 39,326 and
42,121 units outstanding
at September 30, 1997 and
December 31, 1996 89,748,583 88,652,837
----------- -----------
Total partners' capital
(Net Asset Value) 91,058,781 89,861,161
----------- -----------
$92,707,668 $92,536,895
=========== ===========
See accompanying notes.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
-----------
Nine Months Ended
September 30,
1997 1996
---- ----
INCOME
Trading gains
Realized $11,457,135 $ 6,999,112
Change in unrealized 1,129,129 2,317,264
----------- -----------
Gain from trading 12,586,264 9,316,376
Interest income 3,698,510 3,576,881
----------- -----------
Total income 16,284,774 12,893,257
----------- -----------
EXPENSES
Brokerage commissions 2,503,616 2,045,056
Management fees 3,409,596 3,326,091
Incentive fees 2,770,792 1,953,525
Operating expenses 275,335 304,311
----------- -----------
Total expenses 8,959,339 7,628,983
----------- -----------
NET INCOME $ 7,325,435 $ 5,264,274
=========== ===========
NET INCOME PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number
of units outstanding during the
period) $ 176.72 $ 111.54
=========== ===========
INCREASE IN NET ASSET VALUE
PER GENERAL AND LIMITED
PARTNER UNIT $ 177.45 $ 122.24
=========== ===========
See accompanying notes.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1997 and 1996
(Unaudited)
-----------
Three Months Ended
September 30,
1997 1996
---- ----
INCOME
Trading gains
Realized $ 5,426,519 $ 2,914,589
Change in unrealized 1,383,122 4,558,135
----------- -----------
Gain from trading 6,809,641 7,472,724
Interest income 1,247,036 1,149,174
----------- -----------
Total income 8,056,677 8,621,898
----------- -----------
EXPENSES
Brokerage commissions 813,803 767,901
Management fees 1,155,552 1,090,937
Incentive fees 410,328 1,122,148
Operating expenses 83,177 84,860
----------- -----------
Total expenses 2,462,860 3,065,846
----------- -----------
NET INCOME $ 5,593,817 $ 5,556,052
=========== ===========
NET INCOME PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number
of units outstanding during the
period) $ 138.46 $ 122.98
=========== ===========
INCREASE IN NET ASSET VALUE
PER GENERAL AND LIMITED
PARTNER UNIT $ 137.10 $ 127.76
=========== ===========
See accompanying notes.
<TABLE>
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
-----------
<CAPTION>
General Limited
Partners Partners Total
----------------- --------------------- ---------------------
Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C>
Balances
at
December 31,
1996 574 $1,208,324 42,121 $ 88,652,837 42,695 $ 89,861,161
Net income
for the
nine months
ended
September 30,
1997 101,874 7,223,561 7,325,435
Redemptions 0 0 (2,795) (6,127,815) (2,795) (6,127,815)
--- ---------- ------ ------------ ------ ------------
Balances
at
September 30,
1997 574 $1,310,198 39,326 $ 89,748,583 39,900 $ 91,058,781
=== ========== ====== ============ ====== ============
Balances
at
December 31,
1995 574 $1,087,286 48,622 $ 92,084,180 49,196 $ 93,171,466
Net income
for the
nine months
ended
September 30,
1996 70,178 5,194,096 5,264,274
Redemptions 0 0 (5,673) (10,688,479) (5,673) (10,688,479)
--- ---------- ------ ------------ ------ ------------
Balances
at
September 30,
1996 574 $1,157,464 42,949 $ 86,589,797 43,523 $ 87,747,261
=== ========== ====== ============ ====== ============
Net asset value
per unit at
December 31, 1996 $ 2,104.72
===========
September 30, 1997 $ 2,282.17
===========
December 31, 1995 $ 1,893.89
===========
September 30, 1996 $ 2,016.13
===========
</TABLE>
See accompanying notes.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
-----------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
ATA Research/ProFutures Diversified Fund, L.P. (the Partnership)
is a Delaware limited partnership which operates as a commodity
investment pool.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Acts of 1933 and 1934. As a commodity investment pool,
the Partnership is subject to the regulations of the Commodity
Futures Trading Commission, an agency of the United States (U.S.)
government which regulates most aspects of the commodity futures
industry, rules of the National Futures Association, an industry
self-regulatory organization, and the requirements of commodity
exchanges and Futures Commission Merchants (brokers) through
which the Partnership trades.
C. 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. Gains or losses are realized when contracts are
liquidated. Net unrealized gain or loss on open contracts (the
difference between contract purchase price and market price)
is reported in the statement of financial condition in
accordance with Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to
Certain Contracts." Any change in net unrealized gain or
loss from the preceding period is reported in the statement of
operations.
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term investments
in fixed income securities.
E. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
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 PARTNERS
The General Partners of the Partnership are ATA Research, Inc. and
ProFutures, Inc., which conduct and manage the business of the
Partnership. The Agreement of Limited Partnership requires the
General Partners to contribute to the Partnership an amount in
the aggregate equal to the greater of $100,000 or 1% of the
aggregate initial capitalization of the Partnership. As of
September 30, 1997, the General Partners and their principals have
contributed $926,500 to the Partnership.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 2. GENERAL PARTNERS (CONTINUED)
The Agreement of Limited Partnership also requires that the General
Partners maintain in the aggregate a net worth not less than the
sum of (i) the lesser of $250,000 or 15% of the aggregate capital
contributions of any limited partnerships for which they act as a
General Partner if such contributions are equal to or less than
$2,500,000 and (ii) 10% of the aggregate capital contributions of
any limited partnerships for which they shall act as a general
partner if such contributions exceed $2,500,000. ProFutures, Inc.
has callable subscription agreements with Internationale Nederlanden
(U.S.) Derivatives Clearing, Inc. (ING), the Partnership's
primary broker, whereby ING agrees to purchase or subscribe to
(up to $19,000,090) the number of shares of common stock of
ProFutures, Inc. necessary to maintain the General Partner net
worth requirements.
A monthly management fee is paid by the Partnership to each General
Partner. ATA Research, Inc. receives 1/12 of 1% of month-end Net
Asset Value (approximately 1% annually), and ProFutures, Inc. receives
1/4 of 1% of month-end Net Asset Value (approximately 3% annually).
Total management fees earned by ATA Research, Inc. for the nine
months ended September 30, 1997 and 1996 were $688,674 and $672,894,
respectively, and for the three months ended September 30, 1997 and
1996, were $232,237 and $216,019, respectively. Total management fees
earned by ProFutures, Inc. for the nine months ended September 30,
1997 and 1996 were $2,066,623 and $2,021,454, respectively, and for
the three months ended September 30, 1997 and 1996, were $696,710
and $648,058, respectively.
Note 3. COMMODITY TRADING ADVISORS
The Partnership has trading advisory contracts with several unrelated
commodity trading advisors, pursuant to which the Partnership pays
selected advisors a quarterly incentive ranging from 20% to 29% of
excess cumulative Trading Profits (as defined in the trading advisory
contracts) and a management fee ranging from 0% to 2.8% annually of
Allocated Net Asset Value (as defined) on that portion of the
Partnership's assets which they direct.
Note 4. DEPOSITS WITH BROKERS
The Partnership deposits funds with brokers subject to Commodity
Futures Trading Commission regulations and various exchange and
broker requirements. Margin requirements are satisfied by the
deposit of cash with such brokers. The Partnership earns interest
income on its cash deposited with the brokers.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partners. The Partnership's
offering of Units of Limited Partnership Interest terminated on
April 30, 1995.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS (CONTINUED)
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partners. A Limited Partner
may request and receive redemption of units owned, subject to
restrictions in the Agreement of Limited Partnership.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and
foreign futures contracts, options on U.S. and foreign futures
contracts, forward contracts and options on forward contracts
(collectively, "derivatives"). These derivatives include both
financial and non-financial contracts held as part of a diversified
trading strategy. 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 and options on futures contracts
requires margin deposits with the brokers. Additional deposits
may be necessary for any loss on contract value. The Commodity
Exchange Act requires a broker to segregate all customer transactions
and assets from such broker's proprietary activities. A customer's
cash and other property (for example, U.S. Treasury bills) deposited
with a broker are considered commingled with all other customer
funds subject to the broker's segregation requirements. In the event
of a broker's insolvency, recovery may be limited to a pro rata
share of segregated funds available. It is possible that the
recovered amount could be less than total cash and other property
deposited.
The Partnership deposits assets with brokers and dealers in securities
and other financial institutions in connection with its trading of
forward contracts and 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. Since forward contracts and options thereon are traded
in unregulated markets between principals, the Partnership also
assumes the risk of loss from counterparty nonperformance.
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 and forward contracts purchased
and unlimited liability on such contracts sold short. As both a buyer
and seller of options, the Partnership pays or receives a premium at
the outset and then bears the risk of unfavorable changes in the price
of the contract underlying the option. Written options expose
the Partnership to potentially unlimited liability, and purchased
options expose the Partnership to a risk of loss limited to the
premiums paid.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
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 forward and futures contracts and long and short options at
market value. The average fair value of derivatives during the nine
months ended September 30, 1997 and 1996 was approximately $3,430,000
and $4,270,000, respectively, and the fair value as of September 30,
1997 and December 31, 1996 is approximately $2,172,000 and $1,208,000,
respectively.
Net trading results from derivatives for the nine and three months
ended September 30, 1997 and 1996 are reflected in the statement of
operations and equal gain from trading less brokerage commissions.
Such trading results reflect the net gain arising from the
Partnership's speculative trading of futures contracts, options on
futures contracts, forward contracts and options on forward contracts.
Open contracts generally mature within one year, however, the
Partnership intends to close all contracts prior to maturity. At
September 30, 1997 and December 31, 1996, the notional amount of open
contracts is as follows:
September 30, December 31,
1997 1996
---------------------------- --------------------------
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
------------ -------------- ------------ ------------
Derivatives (excluding
purchased options):
Futures contracts
and written options
thereon:
- Agriculture $ 37,200,000 $ 35,300,000 $ 44,800,000 $ 22,900,000
- Currency and
currency
indices 34,200,000 26,100,000 27,200,000 53,400,000
- Energy 12,000,000 1,700,000 3,400,000 3,900,000
- Equity indices 94,900,000 98,900,000 121,300,000 104,200,000
- Interest rates 525,700,000 238,800,000 398,600,000 138,500,000
- Metals 87,200,000 65,000,000 51,700,000 68,400,000
- Other 3,500,000 0 3,000,000 0
Forward Contracts
and written options
thereon:
- Currency 0 0 4,700,000 4,700,000
Purchased options on:
Futures Contracts:
- Agriculture 0 0 3,600,000 0
- Currency and
currency
indices 0 0 8,000,000 0
- Metals 1,800,000 0 5,600,000 0
- Equity indices 0 0 4,500,000 99,400,000
------------ -------------- ------------ ------------
$796,500,000 $ 465,800,000 $676,400,000 $495,400,000
============ ============== ============ ============
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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 Partners have established procedures to actively monitor
and minimize market and 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.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
A. LIQUIDITY: The Registrant is very liquid in that it holds
its assets in cash or near cash investments.
B. CAPITAL RESOURCES: The Registrant has filed several
Registration Statements with the Securities and Exchange
Commission for the sale of Units of Limited Partnership
Interest. The latest offering of $38,547,364 of Units
became effective July 31, 1994. This offering was extended
on January 31, 1995 and continued through April 30, 1995.
On June 23, 1995, Post-Effective Amendment No. 3 was filed
to deregister $20,721,920 of Units of Limited Partnership
Interest.
As of September 30, 1997, 39,900.1485 Units are outstanding,
including 574.1020 General Partner Units, with an aggregate
Net Asset Value of $91,058,781 ($2,282.17 per Unit).
C. RESULTS OF OPERATIONS: The Registrant commenced commodity
trading during August 1987. For the years ended December 31,
1994, 1995 and 1996, the Registrant realized net income (loss)
of $(651,490), $(6,415) and $9,128,038, respectively. For the
three months ended September 30, 1997 the Registrant had net income
of $5,593,817, as compared to net income of $5,556,052 for the
three months ended September 30, 1996. For the nine months ended
September 30, 1997 the Registrant had net income of $7,325,435 as
compared to net income of $5,264,274 for the nine months ended
September 30, 1996.
The Fund's income for the quarter ended September 30, 1997
resulted from significant July gains in the foreign currency and
interest rate markets which were partially reduced in August
by losses in the interest rate and base metals markets, followed
by gains in the interest rate markets in September.
The Fund's loss for the quarter ended June 30, 1997 resulted
from significant May gains in the food and fiber, foreign
currency, non-U.S. interest rate and base metals markets, which
only partially offset large losses in the U.S. equity indices
and non-U.S. interest rate markets in April and losses in
the grain markets during June.
The Fund's income for the quarter ended March 31, 1997 resulted
from significant January gains in the foreign currency
markets, as well as February gains in the energy, metals and
grain markets and March gains in grain, equity indices and
interest rate markets. These gains were slightly reduced by
losses in the month of January in the non-U.S. interest rate
markets, February losses in non-U.S. equity indices and March
losses in the foreign currency, metals and energy markets.
The Fund's income for the quarter ended September 30, 1996
resulted from large gains in the foreign interest rate and bond
markets in September and gains in the foreign interest rate,
grain and energy markets in August. These gains were slightly
offset by losses in July in the grain, foreign currency and
interest rate markets.
The Fund's income for the quarter ended June 30, 1996 resulted
from large gains in the interest rate, energy and grain markets
in April, which were largely offset by losses in grains, foreign
currencies and interest rates in May, followed by gains in the
bond, energy and foreign currency markets in June.
The Fund's losses for the quarter ended March 31, 1996 resulted
from significant February losses in the bond and interest rate
markets, as well as February losses in the energy, metal and
grain markets. The February losses were slightly offset by
gains in the months of January and March in the interest rate,
currency and precious metals markets.
There are no unusual or infrequent events which materially affected
the Registrant's operations.
The General Partners have established procedures to actively
monitor and minimize the market and credit risk of the Fund.
ATA Research, Inc. (ATA), in its capacity as Trading Manager of
the Fund, manages market risk through the monitoring of the
Fund's advisors and their trading in the various commodity
markets. The General Partners seek to minimize credit risk
primarily by keeping only minimal amounts of excess cash at the
brokers, with excess cash being maintained in custodial or other
accounts providing credit protection. Additionally, the General
Partners monitor credit risk based on their current knowledge of
the brokers' credit worthiness.
Due to the speculative nature of trading commodity interests,
the Registrant's income or loss from operations may vary widely
from month to month and year to year.
D. POSSIBLE CHANGES: The General Partners reserve the right to
terminate some and/or engage additional trading advisors or change
any of the Registrant's clearing arrangements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
There were no reports filed on Form 8-K.
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.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
(Registrant)
Aladin T. Abughazaleh, President
ATA Research Inc., General Partner
ATA Research/ProFutures Diversified Fund, L.P.
Gary D. Halbert, President
ProFutures, Inc., General Partner
ATA Research/ProFutures Diversified Fund, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 69,614,417
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92,707,668
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,707,668
<CURRENT-LIABILITIES> 1,648,887
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 92,707,668
<SALES> 0
<TOTAL-REVENUES> 16,284,774
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,959,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,325,435
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,325,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,325,435
<EPS-PRIMARY> 176.72
<EPS-DILUTED> 176.72
</TABLE>
