<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED: 9/30/98 COMMISSION FILE NUMBER: 33-33982
------- --------
TUDOR FUND FOR EMPLOYEES L.P.
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3543779
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Steamboat Road, Greenwich, Connecticut 06830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
- ------------------------------------------------------------------------------
(203) 863-6700
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
X YES NO
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
---------------------- --------------------
<S> <C> <C>
ASSETS
------
CASH $ 7,592,662 $ 7,088,210
EQUITY IN COMMODITY TRADING ACCOUNTS:
Due from broker 4,824,295 2,264,274
U.S. Government securities purchased under agreements to resell 3,011,613 -
U.S. Government obligations - 7,477,448
Net unrealized gain on open commodity interests 748,000 211,519
---------------------- --------------------
Total equity 8,583,908 9,953,241
Subscriptions receivable 50,850 125,000
---------------------- --------------------
Total assets $16,227,420 $17,166,451
====================== ====================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Redemptions payable $ 1,159,242 $ 3,339,382
Pending partner additions 182,850 4,160,168
Incentive fee payable 305,948 49,172
Management fee payable 41,655 56,054
Accrued professional fees and other 49,095 65,988
---------------------- --------------------
Total liabilities 1,738,790 7,670,764
---------------------- --------------------
PARTNERS' CAPITAL:
Limited Partners, 20,000 units authorized and 2,595.376 and
2,186.284 outstanding at September 30, 1998 and December 31, 1997 13,468,491 8,712,315
General Partner, 196.580 units outstanding at September 30, 1998
and December 31, 1997 1,020,139 783,372
---------------------- --------------------
Total partners' capital 14,488,630 9,495,687
---------------------- --------------------
Total liabilities and partners' capital $16,227,420 $17,166,451
====================== ====================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------------- ------------------ --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
Net realized trading gain $3,450,741 $240,896 $3,478,574 $2,304,744
Change in net unrealized trading gain (loss) 407,386 (11,735) 563,493 (92,711)
Interest income 159,392 152,327 481,776 423,166
------------------- ------------------ --------------- ----------------
Total revenues 4,017,519 381,488 4,523,843 2,635,199
------------------- ------------------ --------------- ----------------
EXPENSES:
Brokerage commissions and fees 55,495 39,272 162,298 151,574
Incentive fee 305,948 11,355 372,562 105,098
Management fee 59,027 56,236 179,441 162,484
Professional fees and other 23,847 21,603 70,130 67,351
------------------- ------------------ --------------- ----------------
Total expenses 444,317 128,466 784,431 486,507
------------------- ------------------ --------------- ----------------
Net income $3,573,202 $253,022 $3,739,412 $2,148,692
=================== ================== =============== ================
Limited Partners' Net Income 3,344,040 237,958 3,502,645 2,015,572
General Partner's Net Income 229,162 15,064 236,767 133,120
------------------- ------------------ --------------- ----------------
$3,573,202 $253,022 $3,739,412 $2,148,692
=================== ================== =============== ================
Change in Net Asset Value Per Unit $1,165.74 $76.63 $1,204.43 $677.18
=================== ================== =============== ================
Net Income Per Unit (Note 2) $1,187.88 $78.85 $1,142.64 $670.12
=================== ================== =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
Limited Partners General Partner Total Net Asset Value
------------------------------- -----------------------
Units Capital Units Capital Capital Per Unit
------------- ------------- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Partners' Capital, January 1, 1997 2,521.886 $ 7,909,798 196.580 $ 616,568 $ 8,526,366 $3,136.46
------------- -------------- ------------ ----------- ------------ ----------------
Net income -- 2,546,001 -- 166,804 2,712,805
TIC 401(k) Plan unit adjustment (a) 9.772 -- -- -- --
Capital Contributions 746.608 2,546,367 -- -- 2,546,367
Redemptions (1,091.982) (4,289,851) -- -- (4,289,851)
------------ -------------- ----------- ----------- ------------
Partners' Capital, December 31, 1997 (b) 2,186.284 8,712,315 196.580 783,372 9,495,687 3,984.99
------------- -------------- ----------- ------------ ------------ --------------
Net income -- 3,502,645 -- 236,767 3,739,412
TIC 401(k) Plan unit adjustment (a) 20.657 -- -- -- --
Capital Contributions 1,268.319 5,088,067 -- -- 5,088,067
Redemptions (879.884) (3,834,536) -- -- (3,834,536)
------------- -------------- ------------ ----------- -------------
Partners' Capital, September 30, 1998 (b) 2,595.376 $13,468,491 196.580 $1,020,139 $14,488,630 5,189.42
============== ============== ============ =========== ============ ==============
</TABLE>
(a) See Note 3 - Capital Accounts
(b) See Note 4 - Redemption of Units
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
(1) ORGANIZATION
------------
Tudor Fund For Employees L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act (the "Act") on November
22, 1989, and commenced trading operations on July 2, 1990. Second
Management LLC (the "General Partner"), a Delaware limited liability
company was the general partner for the Partnership during the quarter
ended September 30, 1998 and owned approximately 197 units of general
partnership interest. Ownership of limited partnership units ("Units") is
restricted to employees of Tudor Investment Corporation ("TIC") and its
affiliates and certain employee benefit plans (each such owner a "Limited
Partner").
The objective of the Partnership is to realize capital appreciation through
speculative trading of commodity futures, forward, and option contracts and
other commodity interests ("commodity interests"). The Partnership will
terminate on December 31, 2010 or at an earlier date if certain conditions
occur as outlined in its Second Amended and Restated Limited Partnership
Agreement (the "Limited Partnership Agreement").
DUTIES OF THE GENERAL PARTNER
-----------------------------
The General Partner acts as the commodity pool operator for the Partnership
and is responsible for the selection and monitoring of the commodity
trading advisor and the commodity brokers used by the Partnership. The
General Partner is also responsible for the performance of all
administrative services necessary to the Partnership's operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
ACCOUNTING POLICY
-----------------
The financial statements presented have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and, in
the opinion of management of the General Partner, include all adjustments
necessary for a fair statement of each period presented.
REVENUE RECOGNITION
-------------------
Commodity interests are recorded on the trade date at the transacted
contract price and valued at market.
BROKERAGE COMMISSIONS AND FEES
------------------------------
These expenses represent all brokerage commissions and exchange, National
Futures Association and other fees incurred in connection with the
execution of commodity interest trades. Commissions and fees associated
with open commodity interests at the end of the period are accrued on a
round-turn basis.
<PAGE>
INCENTIVE FEE
-------------
The Partnership pays TIC, as trading advisor, an incentive fee equal to 12%
of the Trading Profits (as defined in the Limited Partnership Agreement)
earned as of the end of each fiscal quarter of the Partnership. Effective
August 1, 1995, TIC waived its right to receive incentive fees attributable
to Units held at the beginning of each month by the Tudor Investment
Corporation 401(k) Savings and Profit-Sharing Plan (the "TIC 401(k) Plan").
MANAGEMENT FEE
--------------
The Partnership also pays TIC, for the performance of its duties, a monthly
management fee equal to 1/12 of 2% (2% per annum) of the Partnership's Net
Assets (as defined in the Limited Partnership Agreement). Effective August
1, 1995, TIC waived its right to receive management fees attributable to
Units held at the beginning of each month by the TIC 401(k) Plan.
FOREIGN CURRENCY TRANSLATION
----------------------------
Assets and liabilities denominated in foreign currencies are translated at
month-end exchange rates. Gains and losses resulting from foreign currency
transactions are calculated using daily exchange rates and are included in
the accompanying statements of operations.
US GOVERNMENT SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
-------------------------------------------------------------
Securities purchased under agreements to resell are collateralized
investment transactions and are carried at the amounts the securities will
be subsequently resold plus accrued interest, which approximates market.
U.S. GOVERNMENT OBLIGATIONS
---------------------------
At times, the Partnership invests a varying amount of its assets in U.S.
Treasury bills. A portion of such bills is held in commodity trading
accounts and used to fulfill initial margin requirements. U.S. Treasury
bills are valued in the statements of financial conditions at original cost
plus accrued discount which approximates the market value. At December 31,
1997, these bills had a face value of $7,500,000 (cost $7,405,486). The
Partnership did not hold any U.S. Treasury bills (other than under
agreements to resell) at September 30, 1998.
SUBSCRIPTIONS RECEIVABLE
------------------------
Prospective investors are required to complete, execute and deliver a
Subscription Agreement, as defined in the Limited Partnership Agreement.
Subscriptions receivable arise when a signed Subscription Agreement has
been completed, executed and delivered, and payment is received by the
Partnership subsequent to the last day of the quarter.
NET INCOME PER UNIT
-------------------
Net income per Unit is computed by dividing net income by the monthly
average of Units outstanding at the beginning of each month.
<PAGE>
(3) CAPITAL ACCOUNTS
----------------
Each partner, including the General Partner, has a capital account with an
initial balance equal to the amount such partner paid for its Units. The
Partnership's net assets are determined monthly, and any increase or
decrease from the end of the preceding month is added to or subtracted from
the capital accounts of the partner based on the ratio that each capital
account bears to all capital accounts as of the beginning of the month. The
number of Units held by the TIC 401(k) Plan will be restated as necessary
for management and incentive fees attributable to Units held at the
beginning of each month by the TIC 401(k) Plan to equate the per Unit value
of the TIC 401(k) Plan's capital account with the Partnership's per Unit
value.
(4) REDEMPTION OF UNITS
-------------------
At each quarter-end, Units are redeemable at the discretion of the Limited
Partner. Redemption of Units in $1,000 increments and full redemption of
all Units are made at 100% of the Net Asset Value per Unit (as defined in
the Limited Partnership Agreement) effective as of the last business day of
any quarter. Partial redemptions of Units which would reduce the net asset
value of a Limited Partner's unredeemed Units to less than the minimum
investment then required of new Limited Partners or such partner's initial
investment, whichever is less, will be honored only to the extent of such
limitation.
(5) INCOME TAXES
------------
No provision for income taxes has been made in the accompanying financial
statements. Partners are responsible for reporting income or loss based
upon their respective shares of revenue and expenses of the Partnership.
(6) RELATED PARTY TRANSACTIONS
--------------------------
The General Partner, due to its relationship with its affiliates and
certain other parties, may enter into certain related party transactions.
Bellwether Partners LLC ("BPL"), a Delaware limited liability company and
an affiliate of the General Partner, is the Partnership's primary forward
contract counterparty. Effective August 1, 1995, BPL ceased charging
commissions for the Partnership's foreign exchange and commodity contracts
transactions. The Partnership typically has on deposit with BPL, as
collateral for forward contracts, up to 15% of the Partnership's Net
Assets.
Bellwether Futures LLC ("BFL"), a Delaware limited liability company is an
affiliate of the General Partner. Effective January 1, 1996, BFL ceased
collecting give-up fees from the Partnership as compensation for managing
the execution of treasury bond futures for the Partnership by floor
brokers on the Chicago Board of Trade.
TIC, an affiliate of the General Partner, receives incentive and management
fees as compensation for acting as the Partnership's trading advisor (see
Note 2).
<PAGE>
(7) FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND CONCENTRATION OF
----------------------------------------------------------------------
CREDIT RISK
-----------
The Partnership is a party to financial instruments with elements of off-
balance sheet credit and market risk in excess of the amounts recognized in
the statements of financial condition through its trading of financial
futures, forwards, swaps and exchange traded and negotiated over-the-counter
options.
Exchange traded futures and options contracts are marked-to-market daily,
with variations in value settled on a daily basis with the exchange upon
which they are traded and with the futures commission merchant through which
the commodity futures and options are executed. The forward contracts are
generally settled with the counterparty at least two business days after the
trade. Futures and forwards are typically liquidated by entering into
offsetting contracts with the same counterparty, although the Partnership
from time to time may take delivery on such contracts.
At September 30, 1998 and December 31, 1997, the Partnership held financial
instruments with the following approximate aggregate notional value (in
thousands of dollars):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------------- -------------------
<S> <C> <C>
Exchange Traded Contracts:
Interest Rate Futures and Options Contracts
Domestic $ 6,254 $ 5,995
Foreign
Less than 6 months 20,369 40,892
6 months to 1 year 11,163 43,351
1 to 2 years - 38,106
Foreign Exchange Contracts
Financial Futures Contracts 4,622 8,257
Forward Currency Contracts
Less than 6 months 64,340 8,389
6 months to 1 year 1,556 3,000
Equity Index Futures-
Domestic 11,340 3,425
Foregin 6,381 2,333
Over-The-Counter Contracts:
Forward Currency Contracts - -
Commodity Swaps - 436
Equity Swaps
6 months to 1 year 375 -
-------------- --------------
Total $126,400 $154,184
============== ==============
</TABLE>
<PAGE>
Notional amounts of these financial instruments are indicative only of the
volume of activity and should not be used as a measure of market and credit
risk. The various financial instruments held at September 30, 1998 and December
31, 1997 mature through the following dates:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Exchange traded Contracts:
Interest Rate Futures and Options Contracts September 1999 December 1999
Foreign Exchange Contracts April 1999 October 1998
Equity Index Futures December 1998 March 1998
Over-the Counter Contracts:
Commodity Swaps - April 1988
Equity Swaps September 1999 -
</TABLE>
The following table summarizes the quarter-end and the average assets and
liabilites resulting from unrealized gains and losses on derivative instruments
included in the statements of financial condition based on month-end balances
(in thousands of dollars):
<TABLE>
<CAPTION>
Assets Liabilities
------------------------ --------------------------
September 30, September 30,
1998 Average 1998 Average
------- ------- ------- -------
<S> <C> <C> <C> <C>
Exchange Traded Contracts:
Interest Rate Contracts-
Domestic $ 56 $ 87 $ - $ 7
Foreign 177 64 25 11
Foreign Exchange Contracts-
Financing Futures Contracts 12 17 - 20
Forward Currency Contracts 69 65 - 19
Equity Index Futures-
Domestic 115 27 2 6
Foreign 324 80 - 26
Over-the-Counter Contracts:
Forward Currency Contracts - 48 - -
Commodity Swaps - - - 33
Equity Index Swaps 9 81 - 7
---------- --------- ------------- -----------
Total $762 $469 $27 $129
========== ========= ============= ===========
</TABLE>
<PAGE>
Net trading gains and losses from strategies that use a varitey of derivative
finaincial instruments are recorded in the statements of operations. The
following table summarizes the components (in thousands) of trading gains and
losses, net of commissions and fees, for the three and nine months ended
September 30, 1998 and 1997 (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------------
1998 1997 1998 1997
------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Exchange Traded Contracts:
Interest Rate Futures and Option Contracts-
Domestic $1,180 $ 346 $1,109 $ 745
Foreign 931 23 973 378
Foreign Exchange Contracts 688 (148) 490 254
Equity Index Futures-
Domestic 142 (157) 251 (78)
Foreign 714 155 706 191
Over-the-Counter Contracts:
Forward Currency Contracts - 183 521 344
Commodity Swaps (134) - (350) (17)
Equity Index Swaps 387 (46) 236 (47)
Interest Rate Swaps - - - (64)
Non-Derivative Financial Instruments (105) (166) (56) 354
------------- ------------ ------------- ---------------
Total $3,803 $ 190 $3,880 $2,060
============= ============ ============= ===============
</TABLE>
In general, exchange traded futures and option contracts possess low
credit risk as most exchanges act as principal to a Futures Commission
Merchant ("FCM") on all commodity transactions. Furthermore, most global
exchanges require FCM's to segregate client funds to insure ample customer
protection in the event of an FCM's default. The Partnership monitors the
creditworthiness of its FCM's and counterparties and, when deemed necessary,
reduces its exposure to these FCM's and counterparties. The Partnership's
exposure to credit risk associated with the non-performance of these FCM's
and counterparties in fulfilling contractual obligations can be directly
impacted by volatile financial markets. A substantial portion of the
Partnership's open financial futures positions were transacted with major
international FCM's. BPL is the Partnership's primary forward contract
counterparty (Note (6)). Notwithstanding the risk monitoring and credit
review performed by the Partnership with respect to its FCM's and
counterparties, including BPL, there always is a risk of nonperformance.
Generally, financial contracts can be closed out at the discretion of the
trading advisor. However, an illiquid or closed market could prevent the
close-out of positions.
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
- ------- -------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The Partnership commenced operations on July 2, 1990. Following the
closing of the initial offering period, the Partnership had 37 Limited
Partners who subscribed for 421 Units for $421,000. In addition, the
General Partner purchased 400 units of general partnership interest for
$400,000. The Partnership had additions of $302,000 and redemptions of
$1,159,242 during the quarter ended September 30, 1998 (the "Current
Quarter"). From its inception through October 1, 1998, the Partnership
received total Limited Partner contributions of $20,309,839 and had total
withdrawals of $17,587,164. In addition, the General Partner contributed
$1,900,000 since inception. The General Partner redeemed $2,000,000 on
March 31, 1994 and $1,400,000 on December 31, 1996. The General Partner's
equity in the Partnership as of September 30, 1998 was approximately
$1,020,000, representing approximately 7% of the Partnership's equity. At
October 1, 1998, the Partnership had a total of 96 Limited Partners.
As specified in the Limited Partnership Agreement, the Partnership may
accept investments from certain employee benefit plans to the extent that
such investment does not exceed 25% of the aggregate value of outstanding
Units, excluding Units held by the General Partner and its affiliates and
excluding units of general partnership interest. On August 1, 1995, the
Partnership accepted an initial investment of $99,306 from the Tudor
Investment Corporation 401(k) Savings & Profit-Sharing Plan (the "TIC
401(k) Plan"), a qualified plan organized for the benefit of employees of
TIC and certain of its affiliates. The Partnership has received TIC 401(k)
Plan contributions in the aggregate amount from inception through October
1, 1998 of $1,662,042. The TIC 401(k) Plan's equity in the Partnership as
of October 1, 1998 was approximately $2,634,000 representing approximately
18% of Partnership equity or approximately 20.3% excluding Units held by
the General Partner and its affiliates. TIC has waived its right to receive
management and incentive fees attributable to Units held by the TIC 401(k)
Plan. The number of Units held by the TIC 401(k) Plan will be restated as
necessary to equate the per Unit value of the TIC 401(k) Plan's capital
account with the Partnership's per Unit value. Furthermore, BPL ceased
charging commissions for transacting the Partnership's foreign exchange
spot and forward and commodity forward contracts.
(1) LIQUIDITY
---------
The Partnership's assets are deposited and maintained with BPL, banks or in
trading accounts with clearing brokers, and are used by the Partnership as
margin and collateral to engage in futures, option, and forward contract
trading. Securities purchased under agreements to resell are collateralized
investment transactions and are carried at the amount the securities will
be subsequently resold plus accrued interest, which approximates market. At
September 30, 1998, U.S. Government securities purchased under agreements
to resell represented approximately 19% of the total assets of the
Partnership. The percentage that U.S. Government securities purchased under
agreements to resell bear to total assets varies daily and monthly, as the
market value of commodity interest contract changes, U.S. Government
securities are resold, and as the Partnership sells or redeems Units. The
Partnership invests in U.S. Government obligations approved by the various
contract markets to fulfill initial margin requirements. At December 31,
1997, U.S. Government obligations with varying maturities through March
1998 represented approximately 44% of the total assets of the Partnership.
The percentage that U.S. Government obligations bear to the total assets
varies daily and monthly, as the market value of commodity interest
contracts changes, as Government obligations are purchased or mature, and
as the Partnership sells or redeems Units. The Partnership did not hold any
U.S. Government obligations (other than under agreements to resell) at
September 30, 1998. Since the Partnership's sole purpose is to trade in
futures, option, and forward contracts, and other commodity interest
contracts, it is anticipated that the Partnership will continue to maintain
substantial liquid assets for margin purposes. Interest income for the
<PAGE>
Current Quarter was $159,392, compared to $152,327 during the quarter ended
September 30, 1997. This increase was due to an increase in the
Partnership's assets.
In the context of the commodity or futures trading industry, cash and cash
equivalents are part of the Partnership's inventory. Cash deposited with
banks represented approximately 47% and 41% of the Partnership's assets as
of September 30, 1998 and December 31, 1997. The cash held at clearing
brokers and banks at quarter-end satisfy the Partnership's need for cash on
both a short-term and long-term basis.
Since futures contract trading generates a significant percentage of the
Partnership's income, any restriction or limit on that trading may render
the Partnership's investment in futures contracts illiquid. Most U.S.
commodity exchanges limit fluctuations in certain commodity futures and
options contract prices during a single day by regulations referred to as a
"daily price fluctuation limit" or "daily limit." Pursuant to such
regulations, during a single trading day, no trade may be executed at a
price beyond the daily limits. If the price for a contract has increased
or decreased by an amount equal to the "daily limit," positions in such
contracts can neither be taken nor liquidated unless traders are willing to
effect trades at or within the limit. Commodity interest contract prices
have occasionally moved the daily limit for several consecutive days with
little or no trading. Such market conditions could prevent the Partnership
from promptly liquidating its commodity interest contract positions and
impose restrictions on redemptions.
(2) CAPITAL RESOURCES
-----------------
The Partnership does not have, nor does it expect to have, any fixed
assets. Redemptions and additional sales of Units in the future will affect
the amount of funds available for investments in commodity interest
contracts in subsequent periods.
The Partnership is currently open to new investments which can be made on a
quarterly basis. Such investments are limited to existing and future
employees of TIC and certain of its affiliates and certain employee benefit
plans, including, but not limited to, the TIC 401(k) Plan.
(3) RESULTS OF OPERATIONS
---------------------
The following table compares Net Asset Value per Unit for the three and
nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Increase in Net Asset Value per Unit
------------------------------------------------------
Net Asset Value Three Months Ended Nine Months Ended
per Unit September 30 September 30
------------------- -------------------------- ------------------------
$ % $ %
-------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1998 $5,189.42 $1,165.74 28.98% $1,204.43 30.22%
September 30, 1997 $3,813.64 $76.63 2.05% $677.18 21.59%
</TABLE>
<PAGE>
Net trading gains and losses from strategies that use a variety of
derivative financial instruments are recorded in the statements of
operations. The following table summarizes the components (in thousands) of
trading gains and losses, net of commissions, for the three and nine months
ended September 30, 1998 and 1997 (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------------
1998 1997 1998 1997
------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Exchange Traded Contracts:
Interest Rate Futures and Option Contracts-
Domestic $1,180 $ 346 $1,109 $ 745
Foreign 931 23 973 378
Foreign Exchange Contracts 688 (148) 490 254
Equity Index Futures-
Domestic 142 (157) 251 (78)
Foreign 714 155 706 191
Over-the-Counter Contracts:
Forward Currency Contracts - 183 521 344
Commodity Swaps (134) - (350) (17)
Equity Index Swaps 387 (46) 236 (47)
Interest Rate Swaps - - - (64)
Non-Derivative Financial Instruments (105) (166) (56) 354
------------- ------------ ------------- --------------
Total $3,803 $ 190 $3,880 $2,060
============= ============ ============= ===============
</TABLE>
Since the Partnership is a speculative trader in the commodities markets,
current year results are not comparable to previous year's results.
The following table illustrates the Partnership's net trading gain as a
return on net assets, brokerage commissions and fees as a percentage of net
assets, and incentive fees as a percentage of Trading Profits.
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
--------------------------------- -------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Trading Gains as a % of Net Assets 30.52% 1.52% 28.99% 17.51%
Brokerage Commissions & Fees as a % of Net Assets 0.4% 0.3% 1.2% 1.3%
Incentive Fees as a % of Trading Profits 8.05% 5.98% 9.6% 5.1%
</TABLE>
In general, commission rates have remained stable during the past three
years. Trading losses of $866,300 incurred during the last six months of
1996 resulted in lower incentive fees as a percentage of Trading Profits
during the first nine months of 1997.
Professional fees and other expenses during the Current Quarter ended
remained stable as compared to the quarter ended September 30, 1997.
<PAGE>
Inflation is not expected to be a major factor in the Partnership's
operations, except that traditionally the commodities markets have tended
to be more active, and thus potentially more profitable during times of
high inflation. Since the commencement of the Partnership's trading
operations in July 1990, inflation has not been a major factor in the
Partnership's operations.
(4) YEAR 2000 ISSUE
---------------
Like other organizations, the Partnership could be adversely affected if
the computer systems used by the General Partner, TIC and other service
providers do not properly process and calculate date-related information
from and after January 1, 2000 (the "Year 2000 Problem"). The General
Partner, in consultation with TIC, is taking steps that it believes are
reasonably designed to address the Year 2000 Problem with respect to the
computer systems that it uses and to obtain satisfactory assurances that
comparable steps are being taken by each of the Partnership's major service
providers.
PART II - OTHER INFORMATION
CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
The effective date of the initial registration statement of the Partnership
(Commission file number 33-33982) was June 22, 1990. Through October 1,
1998, an aggregate of $22,204,839 of Units had been sold.
<PAGE>
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.
TUDOR FUND FOR EMPLOYEES L.P.
By: Second Management LLC,
General Partner
By: /s/ Mark F. Dalton
--------------------------------
Mark F. Dalton,
President of the General Partner
By: /s/ Mark Pickard
--------------------------------
Mark Pickard,
Managing Director and
Chief Financial Officer of the
General Partner
November 13, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TUDOR FUND
FOR EMPLOYEES L.P. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,592,662
<SECURITIES> 3,011,613
<RECEIVABLES> 5,623,145
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,227,420
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,227,420
<CURRENT-LIABILITIES> 1,738,790
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,488,630
<TOTAL-LIABILITY-AND-EQUITY> 16,227,420
<SALES> 4,017,519
<TOTAL-REVENUES> 4,017,519
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 444,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,573,202
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,573,202
<EPS-PRIMARY> 1,165.74
<EPS-DILUTED> 0
</TABLE>
