<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 JUNE 30,
1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD
FROM _________ to _________
Commission file number 2-73692
THE BALANCED OPPORTUNITY FUND LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
- --- (Exact name of Registrant as specified in its charter)
Illinois 36-3655854
- -------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
233 South Wacker Drive, Suite 4500, Chicago, Illinois 60606
- ----------------------------------------------------- --------
Address of principal executive offices Zip Code
Registrant's telephone number, (312) 526-2000
--------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
50,000 Units of Limited Partnership Interest
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by a 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 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. [ ]
The registrant is a limited partnership and, accordingly, has no voting
stock held by non-affiliates or otherwise.
As of June 30, 1997, there were 2,078.9663 Units outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
- -----------------------------------
** Exhibit 1 June 30, 1997 Audited Financial Statement
TOTAL PAGES IN THIS REPORT 24
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PART I
ITEM 1. BUSINESS
The Balanced Opportunity Fund Limited Partnership (the "Fund" or the
"Partnership"), an Illinois limited partnership organized in July 1989,
commenced trading on March 23, 1990. The Fund conducts speculative trading of
commodity interests. The general partner of the Fund is Rodman & Renshaw
Futures Management, Inc. (the "General Partner"). Rodman & Renshaw, Inc.
("Rodman"), an affiliate of the General Partner, is the Partnership's commodity
broker and selling agent. Rodman and the General Partner are wholly owned
subsidiaries of Rodman & Renshaw Capital Group, Inc. The General Partner has
retained RXR, Inc. ("RXR") as the Trading Manager.
Approximately 80 percent of the Fund's assets at the commencement of
trading was invested in zero coupon United States Government Treasury
securities ("Stripped Notes") so as to yield (i) $1,000 per unit, plus (ii) a
five percent compound annual yield approximately six and one-half years after
the commencement of trading (the "Guaranteed Yield Pool"). Due to the interest
rate sensitivity of the market value of the Stripped Notes, persons who redeem
prior to the end of the approximate six and one-half year period noted above
have no such assured return. The Guaranteed Yield Pool note matured in
February 1997 and in accordance with the Fund's limited partnership agreement a
special redemption at the Fund's net asset market value was offered to
investors on February 28, 1997. A new Stripped Note was purchased after the
special redemption offer expired. As of June 30, 1997 and 1996, the maturity
value of the Stripped Notes amounted to $3,900,000 and $5,162,000 respectively.
The remainder of the Fund assets were invested in the Trading Company, in
which the Fund is the sole limited partner and possessor of substantially all
of the beneficial interest.
The two tier structure of the Fund and the Trading Company insulates the
Guaranteed Yield Pool against any liability for losses which might be incurred
by the Trading Company.
The Fund will terminate on December 31, 2009.
The consolidated financial statements include the Trading Company and the
Guaranteed Yield Pool (collectively, the "Fund" or the "Partnership").
Since July, 1995, the Partnership's broker has utilized an unrelated
clearing broker for clearing activities related to its commodity trading.
Margin requirements are satisfied by cash on deposit with such clearing broker
in segregated interest bearing accounts.
The Trading Company pays Rodman an annual brokerage fee which
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is equal to an annual rate of four percent of the average month-end net assets
as a whole, as defined, during the year. Transaction fees and costs are
accrued on a round-turn basis.
The General Partner administers the business and affairs of the Fund,
other than the selection of commodity transactions. The Trading Manager
selects all commodities transactions and is not affiliated with the General
Partner within the meaning of the rules promulgated by the Securities and
Exchange Commission.
RXR serves as the Trading Manager of the Trading Company. Compensation to
RXR for this service consists of a monthly consulting fee and a quarterly
incentive fee as follows:
Consulting Fee - The Trading Company pays a consulting fee equal to one
percent of the month-end net assets annually (before reduction for any
brokerage commissions or other charges as of such month-end) of the Fund
as a whole.
Incentive Fee - The Trading Company pays an incentive fee to RXR equal to
15 percent of any new trading profit (which includes interest income)
achieved by the Trading Company in each calendar quarter. Such incentive
fee is accrued in each month in which "New Appreciation" occurs. In those
months in which "New Appreciation" is negative, previous accruals, if any,
during the incentive period are reduced. In those instances in which a
limited partner redeems an investment, the incentive fee is to be paid to
RXR through the calendar year quarter.
The Trading Company incurs ongoing legal, accounting and administrative
costs.
The Fund has no employees.
The Fund does not engage in operations in foreign countries.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"), commodity
exchanges and commodity futures trading are subject to regulation by the
Commodity Futures Trading Commission (the "CFTC"). The National Futures
Association (the "NFA"), a "registered futures association" under the Act, is
the only non-exchange self-regulatory organization for commodity industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors", "commodity pool operators",
"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 "commodity brokers" or "futures commission merchants",
3
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such as Rodman, to be registered and to comply with various reporting and
record keeping requirements. The General Partner, the Trading Manager and
Rodman are all members of the NFA. The CFTC may suspend a commodity pool
operator's or 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 General Partner's registration as a
commodity pool operator or the Trading Manager's registration as a commodity
trading advisor were terminated or suspended, the General Partner and the
Trading Manager, respectively, would be unable to continue to manage the
business of the Fund. Should the General Partner's registration be suspended,
termination of the Fund might result. The Act also requires Rodman, in its
capacity as a commodity broker, to be registered as a "futures commission
merchant".
As members of the NFA, the General Partner, the Trading Manager and Rodman
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 commodity
professionals and disciplines those professionals which do not comply with such
standards.
In addition to such registration requirements, the CFTC and certain
commodity exchanges have established limits on the maximum net long and net
short positions which any person may hold or control in particular commodities.
The CFTC has adopted a rule requiring all domestic commodity exchanges to
submit speculative positions limits for all futures contracts traded on such
exchanges. Most exchanges also limit the changes in commodity futures contract
prices that may occur during a single trading day.
ITEM 2. PROPERTIES
The Partnership does not own or lease any real property. The General
Partner uses its offices to perform administrative services for the Fund at no
cost to the Fund.
ITEM 3. LEGAL PROCEEDINGS
The General Partner is not aware of any legal proceedings to which the
Fund or the General Partner is a party or to which any of their assets are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the quarter ending June 30, 1997 to a
vote of the holders of units of limited partnership interest ("Units") through
the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for the Units, nor will one
develop. Units may be transferred or redeemed subject to the conditions
imposed by the Agreement of Limited Partnership. As of June 30, 1997, a total
of 2,078.9663 Units were outstanding held by 166 Unit Holders, including
111.1143 Units of General Partnership interest.
The General Partner has sole discretion in determining what distributions,
if any, the Partnership will make to its Unit Holders. The General Partner has
not made any distributions as of the date hereof.
ITEM 6. SELECTED FINANCIAL DATA
On the following page is a summary of selected consolidated financial data
for the Partnership for the fiscal years ended June 30, 1997, 1996, 1995, 1994,
and 1993.
5
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THE BALANCED OPPORTUNITY FUND LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
June 30 June 30 June 30 June 30 June 30
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
REVENUES:
Trading profit (loss)
Realized $ 335,000 $ (42,000) $ 576,000 $( 201,000) $1,124,000
Unrealized 100,000 (84,000) (387,000) 264,000 (11,000)
Foreign currency gain (loss) (15,000) (1,000) 1,000
---------- ---------- ---------- ---------- ----------
Total trading profit and
foreign currency gain 435,000 (141,000) 189,000 62,000 1,114,000
---------- ---------- ---------- ---------- ----------
Guaranteed Yield Pool:
Accrued interest 37,000 568,000 467,000 543,000 540,000
Unrealized market value
gain (loss) 54,000 (168,000) 50,000 (391,000) 467,000
---------- ---------- ---------- ----------
Interest received 497,000
Realized loss (322,000)
Total guaranteed yield ----------
pool revenue 266,000 400,000 517,000 152,000 1,007,000
---------- ---------- ---------- ---------- ----------
Interest income 45,000 35,000 33,000 18,000 28,000
Illinois replace tax refund 6,000
---------- ---------- ---------- ---------- ----------
Total revenues 746,000 294,000 745,000 232,000 2,149,000
EXPENSES:
Commissions and fees 205,000 261,000 205,000 427,000 397,000
Consulting fees 49,000 61,000 66,000 82,000 104,000
Incentive fees 62,000
Administrative expenses 54,000 64,000 68,000 73,000 78,000
---------- ---------- ---------- ---------- ----------
Total expenses 308,000 368,000 339,000 582,000 641,000
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) 438,000 $ (92,000) $ 406,000 $ (350,000) $1,508,000
========== ========== ========== ========== ==========
TOTAL ASSETS $3,605,000 $5,557,000 $6,772,000 $7,593,000 $8,959,000
---------- ========== ========== ========== ==========
TOTAL LIABILITIES $ 44,000 $ 78,000 $ 51,000 $ 33,000 $ 40,000
---------- ---------- ---------- ---------- ----------
PARTNERS' CAPITAL:
Limited partners (1,967.852,
3,392.4502, 4,106.4502,
4,985.7857, and 5,628.7807
units outstanding in 1997,
1996, 1995, 1994, and 1993
respectively) $3,371,000 $5,305,000 $6,544,000 $7,395,000 $8,746,000
General partner
(111.1143 units) 190,000 174,000 177,000 165,000 173,000
---------- ---------- ---------- ---------- ----------
TOTAL PARTNERS' CAPITAL $3,561,000 $5,479,000 $6,721,000 $7,560,000 $8,919,000
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $3,605,000 $5,557,000 $6,772,000 $7,593,000 $8,959,000
---------- ========== ========== ========== ==========
NET ASSET VALUE PER UNIT $1,712.760 $1,563.746 $1,593.492 $1,483.325 $1,533.906
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES
The purpose of the Fund is to trade commodity interests; as such, the Fund
does not have, nor does it expect to have, any capital assets and has no
material commitments for capital expenditures. The Fund's use of assets is
solely to provide necessary margin, and to pay any losses incurred in
connection with its trading activity.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity
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 a price 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. Commodity futures prices
have occasionally moved the daily limit for several consecutive days with
little or no trading. Similar occurrences could prevent the Fund from promptly
liquidating unfavorable positions and subject the Fund to substantial losses
that could exceed the margin initially committed to such trades. In addition,
even if commodity futures prices have not moved the daily limit, the Fund may
not be able to execute futures trades at favorable prices if little trading in
such contracts is taking place. Other than these limitations on liquidity,
which are inherent in the Fund's commodity interest trading operations, the
Fund's assets are highly liquid and are expected to remain so.
Results of Operations
Trading operations posted a gain/loss of $435,000 for the year ended June
30, 1997, as compared to a net loss of $141,000 in 1996 and a net gain of
$189,000 in 1995. The bullish momentum of the equity and bond markets as well
as the strengthening of the U.S. Dollar vs. most major foreign currencies
contributed significantly to Fund profits. Uncertainty over interest rate
direction and a subsequent raise in interest rates diminished these gains
modestly, however the Fund still faired relatively well due to its global
diversification
Higher valuations in the U.S. bond market created an unrealized gain
in fiscal 1997 of $54,000 in the guaranteed yield pool. This is compared to an
unrealized loss of $168,000 in 1996 and a gain of $50,000 in 1995.
The Guaranteed Yield Pool note matured in February 1997, resulting in a
realized loss of $322,000 for fiscal year 1997.
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an aggregate redemption value of $2,356,000, $1,150,000 and $1,245,000,
respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is submitted as a separate section
of this report. (See Index on page number 13).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting
and financial disclosure during the fiscal year ended June 30, 1997 and 1996.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Fund has no directors or executive officers. The Fund is managed by
the General Partner. There are no employees of the Fund.
The Fund's General Partner is Rodman & Renshaw Futures Management, Inc., a
Delaware corporation. The General Partner is a wholly-owned subsidiary of
Rodman & Renshaw Capital Group, Inc. The address of the General Partner is 233
South Wacker Drive, Suite 4500, Chicago, Illinois 60606. The telephone number
is (312) 526-2000.
The principals of the General Partner are as follows:
Francis Leo Kirby, age 52, has been President and a Director of the
General Partner since January 31, 1997, and Executive Vice President and a
Director of Rodman since June 24, 1994. Mr. Kirby was Senior Vice President of
Oppenheimer & Co., Inc., a financial services firm, from May 1993 to June 1994.
Prior to joining Oppenheimer & Co., Inc., Mr. Kirby was an Executive Vice
President and Director of Rodman from 1981 to 1993.
Thomas G. Pinou, age 37, has served as Treasurer and a Director of the
General Partner since January 31, 1997 and Associate Director of Accounting -
Division Controller of Rodman since August 12, 1996. Prior to joining Rodman,
Mr. Pinou was Vice President of Firm Trading for Yamaichi International, Inc.
from June 1994 to May 1996. Before that, Mr. Pinou was Assistant Treasurer of
Equity Trading Division for Bankers Trust Securities from September 1991 to
June 1994.
ITEM 11. EXECUTIVE COMPENSATION
The Fund is managed by its General Partner. Neither the General Partner
nor its executives or employees receive direct compensation from the Fund.
There are no compensation plans or arrangements relating to a change in control
of either the Fund or the General Partner.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 30, 1997, (a) there were 166 partners in The Balanced
Opportunity Fund Limited Partnership, of which one partner, Baptist Medical
System, with 250 units, was known to be the beneficial owner of more than five
percent of the units of limited partnership
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interest, (b) the General Partner, Rodman & Renshaw Futures Management, Inc.,
was the beneficial owner of approximately 5.34% of the Fund, and (c) there were
no arrangements, known to the Fund, the operation of which may on a subsequent
date result in a change in control of the Fund.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Item 11.
The Fund pays the following compensation to the firms that provide
services to it:
The brokerage rate paid by the Fund is approximately $50 per contract on a
round-turn basis adjusted to equal 4% of the Net Assets of the Fund annually.
For the fiscal year ended June 30, 1997, the Fund paid Rodman, an affiliated
Futures Commission Merchant of the General Partner, $205,000 in brokerage
commissions and fees. In July, 1995, the Fund began to utilize an unrelated
clearing broker for clearing activities related to its commodity trading.
RXR, Inc. acts as the Fund's commodity trading manager. During the fiscal
year ended June 30, 1997, no incentive fees were paid.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
See "Index to Financial Statements" on page F-1 hereof.
(2) Financial Statement Schedules
Schedule I - Marketable Securities - Other Investments
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
(3) Exhibits as required by Item 601 Regulation S-K
(3) Articles of Incorporation and By-Laws
3.1 Limited Partnership Agreement
(10) Material Contracts
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10.1 Form of Brokerage Agreement between the Partnership and
Rodman & Renshaw, Inc.
10.2 Advisory Contract between the Partnership and RXR, Inc.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
June 30, 1997.
11
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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.
THE BALANCED OPPORTUNITY FUND LIMITED PARTNERSHIP
By: ________________________________________
Francis Leo Kirby
President of Rodman & Renshaw Futures Management, Inc.,
General Partner
Date: September 26, 1997
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
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------- ----- ----
<S> <C> <C>
President and a Director of September 26, 1997
- ------------------------ Rodman & Renshaw Futures
Francis Leo Kirby Management, Inc., General Partner
Treasurer and a Director of September 26, 1997
- ------------------------ Rodman & Renshaw Futures
Thomas G. Pinou Management, Inc., General Partner
</TABLE>
12
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THE BALANCED OPPORTUNITY FUND LIMITED PARTNERSHIP
Report on FORM 10-K for the Fiscal Year ended June 30, 1997
FINANCIAL STATEMENTS AND SCHEDULE INDEX
<TABLE>
<CAPTION>
Sequential Page
---------------
<S> <C>
Independent Auditors' Reports............................ 14
Statements of Financial Condition as of
June 30, 1997 and 1996 .................................. 15
Statements of Operations for the Years ended
June 30, 1997, 1996, and 1995............................ 16
Statements of Changes in Partners' Capital
for the years ended June 30, 1997, 1996, and 1995........ 17
Notes to Financial Statements............................ 18
</TABLE>
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[LETTERHEAD OF COOPERS & LYBRAND]
INDEPENDENT AUDITOR'S REPORT
The Partners of The Balanced Opportunity
Fund Limited Partnership
We have audited the accompanying consolidated statements of financial
condition of The Balanced Opportunity Fund Limited Partnership (the
"Partnership") as of June 30, 1997 and 1996, and the related consolidated
statements of operations and changes in partners' capital for the years ended
June 30, 1997, 1996 and 1995. These consolidated financial statements are the
responsibility of the Partnership's General Partner. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Balanced Opportunity Fund Limited Partnership as of June 30, 1997 and
1996, and the results of its operations for the years ended June 30, 1997,
1996 and 1995 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
September 22, 1997
<PAGE> 15
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Equity in commodity futures trading accounts:
Cash $ 714,000 $ 568,000
Net unrealized gain on open contracts 103,000 -
---------- ----------
Total equity in commodity futures trading accounts 817,000 568,000
---------- ----------
Guaranteed yield pool - at market 2,783,000 4,987,000
Illinois replacement tax receivable 1,000 1,000
Interest receivable 2,000 -
Other receivables 2,000 1,000
---------- ----------
Total assets $3,605,000 $5,557,000
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued administrative expenses $ 20,000 $ 40,000
Accrued commissions and fees 24,000 38,000
---------- ----------
Total liabilities 44,000 78,000
---------- ----------
Partners' capital:
Limited partners (units outstanding:
1997 - 1,967.8520; 1996 - 3,392.4502) 3,371,000 5,305,000
General partner (units outstanding: 111.1143) 190,000 174,000
---------- ----------
Total partners' capital 3,561,000 5,479,000
---------- ----------
Total liabilities and partners' capital $3,605,000 $5,557,000
========== ==========
Net asset value per unit $1,712.760 $1,563.746
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Trading profit (loss):
Realized $ 335,000 $ (42,000) $ 576,000
Unrealized 100,000 (99,000) (387,000)
---------- ---------- ---------
Total trading profit and foreign
currency gain (loss) 435,000 (141,000) 189,000
---------- ---------- ---------
Guaranteed yield pool:
Accrued interest 37,000 568,000 467,000
Interest received 497,000 - -
Unrealized market value gain (loss) 54,000 (168,000) 50,000
Realized loss (322,000) - -
---------- ---------- ---------
Total guaranteed yield pool revenue 266,000 400,000 517,000
---------- ---------- ---------
Interest income 45,000 35,000 33,000
Illinois replacement tax refund - - 6,000
---------- ---------- ---------
Total revenues 746,000 294,000 745,000
---------- ---------- ---------
Expenses:
Brokerage commissions and fees 205,000 261,000 205,000
Consulting fees 49,000 61,000 66,000
Administrative expenses 54,000 64,000 68,000
---------- ---------- ---------
Total expenses 308,000 386,000 339,000
---------- ---------- ---------
Net income (loss) $ 438,000 $ (92,000) $ 406,000
========== ========== =========
Net income (loss) allocated to:
General partner $ 16,000 $ (3,000) $ 12,000
========== ========== =========
Limited partners $ 422,000 $ (89,000) $ 394,000
========== ========== =========
Net income (loss) per limited partnership
unit outstanding for entire period $ 149.01 $ (29.75) $ 110.17
========== ========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
for the years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
TOTAL
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
Partners' capital, June 30, 1994 5,096.9000 $7,395,000 $165,000 $7,560,000
Redemptions (879.3355) (1,245,000) - (1,245,000)
Net income - 394,000 12,000 406,000
----------- ---------- ----------- ------------
Partners' capital, June 30, 1995 4,217.5645 6,544,000 177,000 6,721,000
Redemptions (714.0000) (1,150,000) (1,150,000)
Net loss (89,000) (3,000) (92,000)
----------- ---------- ----------- ------------
Partners' capital, June 30, 1996 3,503.5645 5,305,000 174,000 5,479,000
Redemptions (1,424.5982) (2,356,000) - (2,356,000)
Net income - 422,000 16,000 438,000
----------- ---------- ----------- ------------
Partners' capital, June 30, 1997 2,078.9663 $3,371,000 $190,000 $3,561,000
=========== ========== =========== ============
</TABLE>
50,000 units of limited partnership interest were available during the initial
offering period. The Fund is closed and not presently selling additional
units.
The accompanying notes are an integral part of the consolidated financial
statements.
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THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Balanced Opportunity Fund Limited Partnership (the "Fund" or the
"Partnership"), an Illinois limited partnership organized in July, 1989,
commenced trading on March 23, 1990. All of the Fund's trading takes place
through Rodman Asset Allocation Management Limited Partnership (the
"Trading Company"), an Illinois limited partnership, of which the Fund is
the sole limited partner. The Fund controls all of the Trading Company's
activities through its investment therein. The general partner for the
Fund is Rodman & Renshaw Futures Management, Inc. (the "General Partner").
The commodity broker and selling agent is Rodman & Renshaw, Inc.
("Rodman"). Both Rodman and the General Partner are wholly owned
subsidiaries of Rodman & Renshaw Capital Group, Inc. The General Partner
has retained RXR, Inc. ("RXR") as the trading manager.
Approximately 80 percent of the Fund's assets at the commencement of
trading was invested in zero coupon United States Government Treasury
Securities ("Stripped Notes") so as to yield (i) $1,000 per unit, plus
(ii) a five percent compound annual yield approximately six and one-half
years after the commencement of trading (the "Guaranteed Yield Pool"). Due
to the interest rate sensitivity of the market value of the Stripped
Notes, persons who redeem prior to the dissolution date have no such
assured return. The Guaranteed Yield Pool note matured in February 1997
and in accordance with the Fund's limited partnership agreement a special
redemption at the Fund's net asset market value was offered to investors
on February 28, 1997. A new Stripped Note was purchased after the special
redemption offer expired. As of June 30, 1997 and 1996, the maturity value
of the Stripped Notes amounted to $3,900,000 and $5,162,000, respectively.
The remainder of the Fund assets were invested in the Trading Company, in
which the Fund is the sole limited partner and possessor of substantially
all the beneficial interest.
The two-tier structure of the Fund and the Trading Company insulates
the Guaranteed Yield Pool against any liability for losses which might be
incurred by the Trading Company. Consequently, the Fund controls all of
the substantive activities of the Trading Company and, as such, has
consolidated its results for financial reporting purposes.
The consolidated financial statements include the Trading Company and
the Guaranteed Yield Pool (collectively, the "Fund" or the "Partnership").
The Fund has elected not to provide statements of cash flows as
permitted by Statement of Financial Accounting Standards No. 102,
"Statements of Cash Flows - Exemption of Certain Enterprises and
Classification of Cash Flows from Certain Securities Acquired for Resale."
The Fund will terminate on December 31, 2009.
5
<PAGE> 19
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
REVENUE RECOGNITION
Futures contracts are recorded on trade date and are reflected in the
accompanying statements of financial condition at the difference between
the original contract amount and the market value on the last business day
of the reporting period. The difference between the original contract
amount (or the market value as of the last reporting date) and the current
value is reflected as the change in net unrealized gain on open contracts.
Market value of futures contracts are based upon exchange settlement
prices.
TRANSLATION GAINS AND LOSSES
The Partnership trades in foreign denominated contracts. The assets and
liabilities related to these activities are translated at the
end-of-period exchange rates with the associated profits and losses
translated at monthly average exchange rates. The resulting translation
gains and losses are immaterial and are recorded in unrealized trading
profit (loss).
TRANSACTION FEES AND COSTS
Transaction fees and costs are accrued at approximately $50 per
contract on a round-turn basis adjusted to equal 4% of the annual net
assets of the Partnership.
ALLOCATION OF PROFITS AND LOSSES
All the profits and losses, income and expenses relating to the
operation of the Fund and the Trading Company are allocated to each
limited partner and the General Partner based on the monthly increase or
decrease in their respective net asset value per unit, as defined.
REDEMPTIONS
Investors are entitled to redeem their units (including fractional
units in $100 increments) as of any calendar quarter-end upon ten days'
written notice to the General Partner. No redemption charges are assessed.
DISTRIBUTIONS
The General Partner does not presently intend to make any distributions
to limited partners although it may, if doing so would not reduce the
Partnership's asset base to a level which would impair the Partnership's
objective. Accordingly, the limited partners may incur current income tax
liabilities in excess of any distributions received from the Partnership.
6
<PAGE> 20
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES
No provision for Federal income taxes has been made in the accompanying
financial statements, as the partners are individually responsible for
reporting income or loss based upon their respective shares of the
Partnership's income and expenses for income tax purposes. At June 30,
1997, the Partnership has available state net operating loss
carryforwards available to offset future state taxable income of $69,000.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
RIGHT OF SETOFF OF CERTAIN AMOUNTS
Pursuant to the Trading Company's agreement with its futures clearing
broker, all balances placed on deposit with such broker, whether used for
trading purposes or not, are available to be used for margin purposes on
any exchange and for any contract in which the Trading Company trades. The
Trading Company conducts all of its exchange-traded activity through a
single account with its futures clearing broker. The Trading Company
cleared all of its activity through an unrelated clearing broker during
fiscal 1996 and through April 1997. Effective during April 1997, the
Trading Company commenced clearing its activities through a different
unrelated clearing broker. The Trading Company has similar agreements with
a financial institution for its over-the-counter contracts. As a result,
the consolidated financial statements only present the net asset or
liability relating to such trading activities.
2. RELATED PARTY TRANSACTIONS
The Partnership pays Rodman .333 of 1% (a 4% annual rate) of the
Partnership's month-end assets for brokerage and other services.
Furthermore, the Partnership pays all execution and exchange fees. For the
periods ended June 30, 1997, 1996 and 1995, brokerage commission and fee
expenses totaled $205,000, $261,000 and $205,000, respectively. At June
30, 1997 and 1996; brokerage commissions payable to Rodman totaled $24,000
and $38,000, respectively.
7
<PAGE> 21
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. TRADING MANAGER
RXR serves as the trading manager for the assets of the Trading Company.
Compensation to RXR for their services is as follows:
CONSULTING FEE
The Trading Company pays a consulting fee at a one percent annual rate
based upon the average month-end net assets of the Partnership before
reduction for any brokerage commissions or other charges as of such
month-end.
INCENTIVE FEE
The Trading Company pays an incentive fee to RXR equal to 15 percent of
any new trading profit (which includes interest income) achieved by the
Trading Company in each calendar quarter. Such incentive fee is accrued
in each month in which "New Appreciation" occurs. In those months in
which "New Appreciation" is negative, previous accruals, if any, during
the incentive period will be reduced. In those instances in which a
limited partner redeems an investment, the incentive fee is to be paid
to RXR through the calendar year quarter.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
During its 1996 fiscal year, the Partnership adopted SEAS No. 107
entitled "Disclosure about Fair Value of Financial Instruments". The
Partnership believes that the carrying value of its financial instruments
is a reasonable estimate of fair value. Equity in commodity futures
trading accounts and the guaranteed yield pool are recorded at market
using market quotations from the Partnership's futures broker. The fair
value of all other financial instruments reflected in the statement of
financial condition (primarily other receivables and accrued expenses)
approximate the recorded value due to their short-term nature.
5. NET INCOME (LOSS) PER PARTNERSHIP UNIT
The net income (loss) per limited partnership unit outstanding for the
entire period is the difference between the net asset value per unit at
the beginning and end of the period.
8
<PAGE> 22
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership is engaged in trading various financial instruments
with off-balance sheet risk. These financial instruments include positions
in financial futures contracts and options thereon and foreign currency
futures contracts and options thereon. These instruments involve, in
varying degrees, elements of credit and market risk in excess of the
amount recognized in the statements of financial condition. Risks arise
from the possible inability of futures commission merchants and/or
commodity futures exchanges to meet the terms of their obligations and
from movements in interest rates and foreign currency values.
During its 1997 and 1996 fiscal years, the Partnership's broker,
Rodman, utilized an unrelated clearing broker for all execution and
clearing activities related to the Partnership's commodity trading. Margin
requirements are satisfied by cash on deposit with such clearing broker in
segregated and non-segregated interest bearing accounts. At June 30, 1997
and 1996, all of the equity in commodity futures trading accounts
reflected on the statements of financial condition is due principally from
the respective unrelated clearing broker, each of whom are members of
nationally recognized futures exchanges. In the event that a clearing
broker becomes insolvent, recovery of segregated funds may be limited to a
pro rata share of all customer segregated funds available. In such an
instance, the Partnership could incur losses to the extent that the
recovered amount is less than the total cash and other property deposited
with the respective clearing broker.
The Partnership conducts its trading with its futures commission
merchant on commodity futures exchanges that are located in Chicago, New
York, London, Paris, Singapore, Sydney and other major financial markets.
The General Partner monitors the credit standing of its futures commission
merchant with whom it conducts business.
The Partnership also engages in trading of forward delivery foreign
currency contracts. Trading in such contracts is done through a New York
Branch of a major European bank and involves a variety of cross-currency
forward positions in the major European and Far East currencies.
9
<PAGE> 23
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CONTINUED
At June 30, 1997 and 1996, open contracts were:
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
----------------------------
1997 1996
<S> <C> <C>
Financial futures and forward contracts: $ 39,572,000 $ 34,091,000
Commitments to purchase 8,881,000 19,890,000
Commitments to sell
Options written:
Exchange traded options on futures - 1,015,000
</TABLE>
The contractual amount of these instruments reflect the extent of the
Partnership's involvement in the related financial instruments and does not
represent the risk of loss due to counterparty non-performance. The
Partnership attempts to mitigate the risk of futures and forwards trading
activities through the use of daily monitoring procedures. The settlement of
these transactions is not expected to have a material adverse effect on the
statement of financial condition.
7. TRADING ACTIVITIES
The results of the trading activities, net of brokerage commissions,
are summarized by those categories of financial instruments in the
following table. Net trading income is included separately in the
statement of operations.
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Futures contracts $343,000 $(327,000)
Option contracts (157,000) (25,000)
Forward contracts 44,000 (50,000)
-------- ---------
$230,000 $(402,000)
======== =========
</TABLE>
10
<PAGE> 24
THE BALANCED OPPORTUNITY FUND
LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. TRADING ACTIVITIES, CONTINUED
For derivatives held for trading purposes (which constitute all
derivatives held by the Partnership), the market value at June 30, 1997 and
1996 and the average market value (calculated on a monthly basis) for the
years then ended are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997 MONTHLY AVERAGE FOR 1997
------------------------ -----------------------------
ASSET LIABILITY ASSET LIABILITY
<S> <C> <C> <C> <C>
Futures $ 107,000 $ (1,000) $ 131,000 $ (8,000)
Forwards - (2,000) 17,000 (10,000)
Options - - 2,000 (16,000)
JUNE 30, 1996 MONTHLY AVERAGE FOR 1996
------------------------ -----------------------------
ASSET LIABILITY ASSET LIABILITY
<S> <C> <C> <C> <C>
Futures $ 27,000 $ - $ 72,000 $ -
Forwards - (6,000) - (21,000)
Options - (20,000) - (3,000)
</TABLE>
8. SUBSEQUENT EVENT
As of September 22, 1997, limited partners redeemed partnership units
with a net asset value totaling approximately $387,000.
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 714,000
<SECURITIES> 2,886,000
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,605,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,605,000
<CURRENT-LIABILITIES> 44,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,605,000
<SALES> 0
<TOTAL-REVENUES> 746,000
<CGS> 0
<TOTAL-COSTS> 308,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 438,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 438,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 438,000
<EPS-PRIMARY> 149.01
<EPS-DILUTED> 0
</TABLE>
