TUDOR FUND FOR EMPLOYEES LP, 10-K, 1999-03-30

TUDOR FUND FOR EMPLOYEES LP
10-K, 1999-03-30
INVESTORS, NEC

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1998
-------------------

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 333-52543
--------

Tudor Fund For Employees L.P.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-3543779
- ----------------------------------- --------------------------
(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)

600 Steamboat Road, Greenwich, Connecticut 06830
- ---------------------------------------------------- ---------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (203) 863-6700
-----------------
Securities registered pursuant to Section 12(g) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------

N/A N/A
----------------------- -----------------------------------------

Securities registered pursuant to Section 12(g) of the Act:

N/A
- ---------------------------------------------------------------------
(Title of class)

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
------- ------

(Cover page 1 of 2 pages)
<PAGE>

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing. (See definition of affiliate in Rule
405.)

Not Applicable
- --------------

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Not Applicable
- --------------

DOCUMENTS INCORPORATED BY REFERENCE.

List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statements; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).

Partnership's Registration Statement on Form S-1, File No. 333-52543, as
- ------------------------------------------------------------------------
amended, dated June 8, 1998 - Part IV
- -------------------------------------

(cover page 2 of 2 pages)
<PAGE>

PART I

ITEM 1. BUSINESS.
--------

(a). GENERAL DEVELOPMENT OF BUSINESS. Tudor Fund For Employees L.P.,
-------------------------------
a Delaware limited partnership (the "Partnership"), was formed on November 22,
1989. The business and objective of the Partnership is to generate appreciation
of its assets through speculative trading of commodity futures, forwards and
option contracts and other commodity interests ("commodity interests"). Only
employees of Tudor Investment Corporation ("TIC") or its affiliates, and certain
employee benefit plans of TIC and its affiliates, are eligible to become limited
partners (each such owner a "Limited Partner") of the Partnership.

Second Management LLC, a Delaware limited liability company and the general
partner of the Partnership (the "General Partner" and together with the Limited
Partners, the "Partners"), is responsible for selecting and monitoring the
commodity trading advisors and counterparties used by the Partnership and for
performing all administrative services necessary to the Partnership's
operations. The General Partner's main business office is located at 600
Steamboat Road, Greenwich, Connecticut 06830, telephone (203) 863-6700,
facsimile (203) 863-8600.

In connection with a public offering of 10,000 units of Limited Partnership
Interest (together with units of General Partnership Interest issued to the
General Partner, the "Units"), an S-1 Registration Statement was filed with the
Securities and Exchange Commission on June 20, 1990. Beginning on June 22,
1990, the Partnership solicited initial subscriptions for Units at an offering
price of $1,000 per Unit, with a minimum subscription of $1,000. At the initial
closing held on July 2, 1990, the Partnership sold a total of 421 Units for an
aggregate capital contribution of $421,000 and 400 units of general partnership
interest for an aggregate capital contribution of $400,000 and commenced trading
activities. The Partnership registered an additional 10,000 units of Limited
Partnership Interest pursuant to an S-1 Registration Statement (the
"Registration Statement") that became effective on June 9, 1998.

Units are offered for sale on a continuous basis (the "Continuing Offering") at
quarterly closings at a purchase price equal to 100% of the Net Asset Value per
Unit as of the opening of business on the first business day of the month in
which the General Partner accepts the subscription. The minimum subscription is
$1,000. Amounts in excess of this minimum must be contributed in increments of
$1,000.

Management. The General Partner conducts and manages the business of the
- ----------
Partnership. The General Partner is authorized to delegate complete trading
authority of all of the Partnership's Net Assets to one or more trading
advisors. The General Partner has appointed TIC as the Partnership's sole
trading advisor pursuant to a management agreement between TIC and the
Partnership (the "Management Agreement"). The Management Agreement may be
terminated at any time upon twenty-four hours written notice to the other party.

The General Partner, on behalf of the Partnership, may engage and compensate
from the funds of the Partnership, such persons as the General Partner deems
advisable, including any person or entity affiliated with the General Partner.
The General Partner is also authorized to retain commodity brokers.
<PAGE>

Other responsibilities of the General Partner include, but are not limited to,
the following: determining whether the Partnership will make distributions;
administering redemptions of Limited Partners' Units; preparing periodic and
annual reports for the Limited Partners; preparing reports, filings,
registrations and other documents required by applicable regulatory bodies,
exchanges, or boards; depositing the Partnership's assets in an account or
accounts at banks or brokers selected by the General Partner; directing the
investment of the Partnership's assets; executing various documents on behalf of
the Partnership and the Limited Partners; and supervising the liquidation of the
Partnership if an event causes the termination of the Partnership to occur.

Professional fees and other. The Partnership pays its ordinary administrative
- ---------------------------
expenses, including the ordinary and recurring legal, accounting and auditing
expenses incurred in connection with preparing and printing reports and tax
information for Limited Partners and regulatory bodies, and mailing costs and
filing fees. Such expenses were $120,599, $88,989 and $100,679 for the years
ended December 31, 1998, 1997 and 1996.

Compensation of the Trading Advisor. Pursuant to the Management Agreement, the
- -----------------------------------
Partnership pays TIC a quarterly incentive fee equal to 12% of the "Trading
Profits" (as defined in the Registration Statement) earned as of the end of each
fiscal quarter and accrued monthly and receives a monthly management fee equal
to 1/12 of 2% of the Net Assets (a 2% annual rate). Effective August 1, 1995,
TIC waived its right to receive incentive and management 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").

For definitions of the terms "Management Agreement", "Trading Profits", "Charges
and Expenses", "Trading Managers", "Net Asset Value per Unit" and "Net Assets",
refer to the Registration Statement.

The General Partner estimates that, considering the above charges, the
Partnership may normally have to generate gross profits of up to
approximately 2% of the Partnership's average annual Net Assets, depending on
trading volume and the interest income it receives, simply to break even. It is
contemplated that the greatest of these charges will be brokerage commissions
(estimated at up to approximately 2% of the Partnership's average annual Net
Assets) even though the General Partner endeavors to negotiate rates that are
reasonable based on comparable commodity pools and industry standards.

Commodity Brokers. The Partnership's commodity trading accounts are carried by
- -----------------
its commodity brokers including Prudential Securities Incorporated, Bear Stearns
Securities Corp., CS First Boston Corporation, Salomon Smith Barney Inc., Lehman
Brothers Inc., Morgan Stanley & Co. Incorporated, Morgan Stanley & Co
International Limited, Daiwa Securities America Inc., Goldman, Sachs & Co.,
Cargill Investor Services, Inc., J.P. Morgan Futures, Inc., Merrill Lynch
Futures Inc., Greenwich Capital Markets, Inc., and Greenwich NatWest Futures.
The General Partner in its sole discretion may at any time appoint new commodity
brokers. The commodity brokers are responsible for holding and maintaining the
Partnership's funds, securities, commodities and other property; executing
and/or clearing trades for the Partnership's accounts; and performing other
record keeping and preparing and transmitting to the Partnership daily
confirmations of transactions and monthly statements of account, calculating
equity balances and margin requirements for the Partnership's account and other
similar administrative functions.
<PAGE>

Foreign Exchange Dealer. Since inception, the Partnership has engaged in the
- -----------------------
trading of foreign exchange forward and commodity forward contracts with
Bellwether Partners LLC, a Delaware limited liability company ("BPL"), or its
predecessor Bellwether Partners Inc. BPL is an affiliate of both the General
Partner and TIC.

Regulation. Congress enacted the Commodity Exchange Act as amended, (the "CE
- ----------
Act"), to regulate trading in commodity interests, the exchanges on which they
are traded, the individual brokers who are members of such exchanges and the
commodity professionals and commodity brokerage houses that trade in these
commodity interests. The Commodity Futures Trading Commission ("CFTC") is an
independent federal agency which administers the CE Act and is authorized to
promulgate rules thereunder. Under the CE Act, the CFTC is empowered, among
other things to (i) hear and adjudicate customer complaints against all
individuals and firms registered or subject to registration under the CE Act;
(ii) seek injunctions and restraining orders; (iii) issue orders to cease and
desist; and (iv) levy substantial fines. Transactions in spot or forward
contracts or on exchanges located outside the United States may not be within
the jurisdiction of the CFTC, and to the extent that the Partnership engages in
such transactions, it may be engaging in "unregulated" transactions.

Both the General Partner and TIC are registered with the CFTC as commodity pool
operators ("CPO") and commodity trading advisors ("CTA") as defined in the CE
Act. As such, each is subject to regulation by the CFTC. If the registration
of the General Partner were suspended, revoked or not renewed, the Partnership
would no longer be able to trade until a substitute general partner could be
duly elected and registered. If the registration of TIC as a CTA was suspended,
revoked or not renewed, TIC would not be permitted by the General Partner to
advise the Partnership.

The CFTC has adopted extensive regulations affecting CPOs and CTAs which, among
other things, requires distribution of disclosure documents to new customers,
requires the retention of current trading and other records, prohibits CPOs from
commingling pool assets with those of the operator or its other customers and
requires CPOs to provide their customers with monthly account statements and
annual reports.

Limited Partners are afforded certain rights for reparations under the CE Act.
Limited Partners may also be able to maintain a private right of action for
certain violations of the CE Act. The CFTC has adopted rules implementing the
reparations provision of the CE Act which provide that any person may file a
complaint for a reparation award with the CFTC for violation of the CE Act
against a floor broker, futures commission merchant, CTA, CPO or their
respective associated persons.

In order to prevent excessive speculation and attempted undue concentrated
control in certain markets ("market corners"), the CFTC and certain United
States exchanges have imposed speculative position limits on transactions in
certain commodity interest contracts. In addition, certain exchanges have set
limits on the total net positions that may be held by a commodity broker.
Position limits are subject to certain exemptions, such as bona fide hedging
transactions. While foreign exchanges do not generally impose position limits,
such limits are set by many of the member firms. The Partnership is subject to
the rules and regulations of the various exchanges on which it trades.
<PAGE>

The General Partner is a member of the National Futures Association ("NFA"), a
self-regulatory organization authorized by the CFTC. The NFA became operational
in 1982 and has assumed certain functions which were previously the
responsibility of the CFTC, (e.g., audits of registrants). Among other things,
the NFA has assumed responsibility for all CFTC registrations; has developed
training and proficiency standards for members; and has established arbitration
procedures for its members and customers of its members.

(b). FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. The Partnership's
---------------------------------------------
business constitutes only one segment, a speculative commodity pool, for
financial reporting purposes.

(c). NARRATIVE DESCRIPTION OF BUSINESS.
---------------------------------

(1) See discussion under Item 1 (a) above.
(i) - (ix): Not applicable.

(x) Competition. The Partnership experiences and will continue to
-----------
experience competition from publicly and privately offered commodity pools and
other investment funds, such as mutual funds. The Partnership also competes
with other customers of TIC and with affiliates of the General Partner that
trade proprietary accounts. Under TIC's trading method, all commodity-
only accounts under management (other than proprietary accounts) are generally
traded in a parallel fashion, with substantially equivalent trades made for all
accounts on a proportional basis. When TIC trades commodity interest contracts
on behalf of an investment pool or a customer with narrower or broader
investment parameters, hedging, loss reduction, arbitrage and similar strategies
often mandate that such accounts be traded in a manner that is not parallel with
commodity-only accounts. Thus, the Partnership is in competition with such
accounts for the same or similar positions at a particular time in a particular
market. The widespread utilization of trend-based and technical computerized
trading methods by many participants in the commodities markets causes similar
trades to be made at or about the same time which increases competition for the
Partnership as described above.

The General Partner and TIC have a conflict of interest in managing the
Partnership because BPL executes foreign exchange forward contracts for the
Partnership. This involves posting collateral with BPL in amounts of up to 15%
of the Partnership's Net Assets. Although, BPL has unrestricted use of these
funds, it does not receive a fee for its services. Many of the employee traders
of the Trading Advisor are also employees of BPL. There is no affiliation, and
consequently there is no conflict of interest, between the clearing brokers and
the General Partner, TIC or BPL.

<PAGE>

The Partnership trades in markets in competition with other traders whose assets
are greater than its assets.
(xi) - (xii): Not applicable.

(xiii): The Partnership has no employees; however, the General
Partner has arranged for TIC to fulfill its management and administrative
responsibilities.

(d). FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC CORPORATIONS
-------------------------------------------------------------
AND EXPORT SALES. The Partnership has engaged in the trading of commodity
- -----------------
interest contracts on exchanges located in foreign countries and has derived
significant revenue therefrom. See Note 7 included in the Partnership's
financial statements attached hereto.

ITEM 2. PROPERTIES.
----------

The Partnership does not utilize any physical properties in the conduct of its
business.

ITEM 3. LEGAL PROCEEDINGS.
-----------------

The Partnership is not aware of any material pending legal proceedings to which
it is a party or to which any of its assets are subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS.
-----------------------------------------------

To date, there have been no items which have been presented to the Unit holders.
<PAGE>

PART II.

ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED UNIT HOLDER MATTERS.
-------------------------------------------------------------

(a) MARKET FOR REGISTRANT'S UNITS. There is no established public trading
------------------------------
market for the Units. There have been no general distributions by the
Partnership since its organization. Pursuant to the Partnership Agreement, the
General Partner has the sole discretion to determine what distributions, if any,
the Partnership will make to its Partners.

Limited Partners may redeem some or all of their respective Units at the end of
each calendar quarter. Redemption of Units in $1,000 increments and full
redemption by a Limited Partner of all of its Units are made at 100% of the Net
Asset Value per Unit effective as of the last business day of any quarter as
defined in the Limited Partnership Agreement. 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 Limited Partner's initial investment, whichever is less, will be honored
only to the extent of such limitation.

(b) USE OF PROCEEDS. The Partnership initially registered 10,000 Units of
----------------
Limited Partnership Interest pursuant to a registration statement (Commission
file number 33-33982) that was declared effective on June 22, 1990. The
Partnership registered an additional 10,000 Units of Limited Partnership
Interest on June 9, 1998 (Commission file number 33-52543). Of the 20,000 Units
that have been registered, 8,882.504 Units having an aggregate value of
20,309,839 had been sold through January 1, 1999.

ITEM 6. SELECTED FINANCIAL DATA.
-----------------------

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,153,767 $ 3,362,714 $ 1,417,232 $2,657,575 $1,028,281
Expenses 956,633 649,909 596,480 608,851 502,809
----------- ----------- ----------- ---------- ----------

Net Income $ 4,197,134 $ 2,712,805 $ 820,752 $2,048,724 $ 525,472
----------- ----------- ----------- ---------- ----------

Total Assets $18,265,036 $17,166,451 $12,138,706 $9,323,890 $7,383,887
----------- ----------- ----------- ---------- ----------
Partners' Capital $14,891,112 $ 9,495,687 $ 8,526,366 $8,113,393 $6,711,510
----------- ----------- ----------- ---------- ----------

Units Outstanding 2,786.401 2,382.864 2,718.466 2,833.134 3,052.721
----------- ----------- ----------- ---------- ----------

NAV Per Unit $ 5,344.21 $ 3,984.99 $ 3,136.46 $ 2,863.75 $ 2,198.53
----------- ----------- ----------- ---------- ----------
Change in NAV Per Unit $ 1,359.22 $ 848.53 $ 272.71 $ 665.22 $ 141.32
----------- ----------- ----------- ---------- ----------
Net Income Per Unit $ 1,327.46 $ 845.18 $ 246.06 $ 684.52 $ 149.12
----------- ----------- ----------- ---------- ----------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
-------------

The Partnership commenced operations on July 2, 1990. From inception through
March 1, 1999, the Partnership received total Limited Partner contributions of
$20,309,839. Total Limited Partner withdrawals for the same period were
$17,825,254. In addition, the General Partner has 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 interest in the
Partnership as of March 1, 1999 was approximately $1,072,000, representing
approximately 5.9% of the Partnership's equity. At March 1, 1999, the
Partnership had a total of 114 Partners.
<PAGE>

As specified in the Second Amended and Restated Limited Partnership Agreement
dated May 22, 1996, the Partnership may accept investments from certain employee
benefit plans of affiliates 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 affiliates. On August 1, 1995, the Partnership accepted an
initial investment of $99,306 from the Tudor Investment Corporation 401(k)
Savings and 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 March 1, 1999 of $1,737,827. The TIC 401(k)
Plan's equity in the Partnership as of March 1, 1999 was approximately
$2,870,000, representing approximately 15.7% of the Partnership equity or
approximately 17.9% of the Partnership equity excluding Units held by the
General Partner and affiliates. TIC has waived its right to receive management
and incentive fees attributable to Units held by the TIC 401(k) Plan.
Furthermore, on August 1, 1995, BPL ceased charging commissions for transacting
the Partnership's foreign exchange forward and commodity 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
December 31, 1998, U.S. Government Securities purchased under agreements to
resell maturing January 4, 1999 represent approximately 69% 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 redeem 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 bears to the total assets varies daily as the market
value of commodity interests contracts changes, as Government obligations are
purchased or mature, and as the Partnership receives Partner's contributions or
redeems Units. The Partnership did not hold any U.S. Government obligations
(other then under agreements to resell) at December 31, 1998. Since the
Partnership's sole purpose is to trade in futures, options, forward contracts
and other commodity interests contracts, it is anticipated that the Partnership
will continue to maintain substantial liquid assets for margin purposes.
Interest income for the years ended December 31, 1998, 1997 and 1996 was
$655,889, $571,106, and $545,860 which represented 4.8%, 4.9%, and 5.2% of
average net 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 20% and 41% of the Partnership's total assets as of
December 31, 1998 and 1997. The cash and U.S. Government securities purchased
under agreements to resell satisfy the Partnership's need for cash on both a
short term and long term basis.
<PAGE>

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 commodity
exchanges limit fluctuations in certain commodity contract prices during a
single day by regulations referred to as "daily price fluctuation limits" or
"daily limits." 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 or a particular commodity 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 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 positions.

(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 impact the amount
of funds available for investments in commodity interest contracts in subsequent
periods. As the amount of capital changes, the size of the positions taken by
the Partnership is adjusted.

The Partnership is currently open to new investments which can be made
quarterly. Such investments are limited to employees of TIC and 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 years ended
December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
Net Asset Value Increase in Net Asset Value per Unit
Per Unit For the Year Ended
--------------------- ---------------------------------------
$ %
----------------- -------------------
<S> <C> <C> <C>
December 31, 1998 $5,344.21 $1,359.22 34.11%
December 31, 1997 $3,984.99 $ 848.53 27.05%
December 31, 1996 $3,136.46 $ 272.71 9.52%
</TABLE>
<PAGE>

Net trading gains and losses (includes realized and unrealized trading gains,
losses and commissions ("Net Trading Gains")) from strategies that use a variety
of derivative financial instruments are recorded in the statements of income.
The following table summarizes the components (in thousands) of Net Trading
Gains for the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
--------------- ------------------ -----------------
Exchange traded contracts:
Interest rate futures and option contracts-
<S> <C> <C> <C>
Domestic $1,072 $ 982 $ 726
Foreign 2,181 413 (450)

Foreign exchange contracts (219) 373 591

Equity index contracts-
Domestic 329 (4) (544)
Foreign 453 173 399

Over-the-counter contracts:
Forward currency contracts 792 307 131
Commodity swaps (350) (51) 14
Equity index swaps 82 (78) -
Interest rate swaps - (64) -
Non-Financial derivative instruments (36) 552 (119)
--------------- ------------------ -----------------
Total $4,304 $2,603 $ 748
=============== ================== =================
</TABLE>

Since the Partnership is a speculative trader in the commodities markets,
current year results are not comparable to results generated in previous years.
The following table illustrates the Partnership's Net Trading Gains as a return
on average Net Assets; brokerage commissions and fees as a percentage of average
Net Assets; and incentive fees as a percentage of Net Trading Gains.

<TABLE>
<CAPTION>
For the Year Ended
------------------------------------------------------
December 31, December 31, December 31,
1998 1997 1996
----------------- ---------------- ----------------

<S> <C> <C> <C>
Net Trading Gains as a % of average Net Assets 31.43% 22.3% 6.8%
Brokerage commissions & fees as a % of average Net Assets 1.4% 1.6% 1.1%
Incentive Fees as a % of Net Trading Gains 9.34% 5.9% 22.2%
</TABLE>

In general, commission rates have remained stable during the past three years.
For the year ended December 31, 1996, incentive fees were greater than 12% of
Net Trading Gains due to the losses incurred in the second half of 1996. These
trading losses also resulted in lower incentive fees as a percentage of Net
Trading Gains during the year ended December 31, 1997 because trading losses
need to be recouped by the Partnership prior to the Partnership's payment of
incentive fees.

Inflation is not expected to be a major factor in the Partnership's operations,
except that traditionally the commodity 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.
<PAGE>

(4) RISK MANAGEMENT.
---------------

In the normal course of business, the Partnership is a party to a variety of
off-balance sheet financial instruments in connection with its trading
activities. These activities include the trading of financial futures,
forwards, swaps, exchange traded and negotiated over-the-counter options and
other commodity interests. The Partnership is subject to market and credit risk
associated with changes in the value of underlying financial instruments as well
as the loss of appreciation, on certain instruments, if its counterparty fails
to perform.

The trading advisor takes an active role in managing and controlling the
Partnership's market and credit risks and has established formal control
procedures that are reviewed on an ongoing basis. The trading advisor attempts
to minimize credit risk exposure to trading counterparties and brokers through
formal credit policies and monitoring procedures. The trading advisor has a
formal Credit Committee, comprised of senior managers from different disciplines
throughout the firm, that meets regularly to analyze the credit risks associated
with the Partnership's counterparties, intermediaries and service providers.
The trading advisor establishes counterparty exposure limits and specifically
designates which product types are approved for trading.

In order to control the Partnership's market exposure, the trading advisor
applies risk management guidelines and policies designed to protect the
Partnership's capital. These guidelines and policies include quantitative and
qualitative criteria for evaluating the appropriate risk levels for the
Partnership. The trading advisor's Risk Management Committee comprised of senior
personnel from different disciplines throughout the Firm, regularly assesses and
evaluates the Partnership's potential exposures to the financial markets based
on analysis provided by the Risk Management Department. The Risk Management
Department's responsibilities include: focusing on the positions taken in
various instruments and markets globally; ascertaining that all such positions
are accurately reflected on the Partnership's position reports; and evaluating
the risk exposure associated with all of those positions. The Partnership uses a
statistical technique known as Value at Risk ("VaR") to assist the Risk
Management Department in measuring its exposure to market risk related to it's
trading positions. The VaR model projects potential losses in the portfolio and
is based on a methodology which uses a one-year observation period of
hypothetical daily changes in trading portfolio value, a one-day holding period
and a one standard deviation level. These figures can be scaled up to indicate
risk at the 95% or 99% confidence level.

Cash and cash equivalents and due from brokers are due principally from high
credit quality international financial institutions.

Exchange traded futures and option 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 contracts are executed. Forward contracts are generally
settled with the counterparty two days after the trade.

<PAGE>

A substantial portion of the Partnership's open financial futures positions were
transacted with major international FCMs. BPL is the Partnership's primary
forward contract counterparty (Note 6 of the attached Financial Statements).
Notwithstanding the risk monitoring and credit review performed by TIC with
respect to its FCMs and counterparties, including BPL, there is always a risk of
nonperformance.

Generally, financial contracts can be closed out at TIC's discretion. However,
an illiquid or closed market could prevent the closeout of positions.

The following table illustrates the VaR for each component of market risk as of
December 31, 1998. The dollar values represent the VaR scaled up to a 95%
confidence level.

VaR
Risk Factors (95% Confidence)
- ---------------- -------------------------------------

Exchange traded contracts:
Interest rate futures and option contracts-
<S> <C>
Domestic $ 26,730
Foreign 83,160

Foreign exchange contracts 117,315

Equity index futures-
Domestic 83,655
Foreign 77,220

Non-derivative financial instruments 28,050
--------
$416,130
========
</TABLE>

(5) YEAR 2000 ISSUE
---------------

Like other organizations, the Partnership could be adversely affected if the
computer systems used by the Partnership and its service providers do not
properly process and calculate date-related information from and after January
1, 2000 (the "Year 2000 problem"). The Partnership 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. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any material adverse impact on the Partnership. The
inability of the Partnership or its third party providers to timely complete all
necessary procedures to address the Year 2000 problem could have a material
adverse impact on the Partnership's operations. The Partnership will continue
to monitor the status of and its exposure to this issue. For the year ended
December 31, 1998, the Partnership incurred no significant Year 2000 related
expenses and it does not expect to incur significant Year 2000 expenses in the
future.

The Partnership is in the process of establishing a contingency plan to address
recovery from unavoided or unavoidable Year 2000 problems, if any.
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------

See attached financial statements for:

Statements of Financial Condition as of December 31, 1998 and 1997

Statements of Income for the years ended December 31, 1998, 1997 and 1996

Statements of Changes in Partners' Capital for the years ended December 31,
1998, 1997 and 1996

Notes to Financial Statements, December 31, 1998, 1997 and 1996

The financial statements presented have been prepared pursuant to rules and
regulations of the Securities and Exchange Commission ("SEC") and, in the
opinion of management of the General Partner, includes all adjustments
necessary for a fair statement of each year presented.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------

None

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------

Second Management LLC, a Delaware limited liability company (the "General
Partner"), is the general partner of the Partnership. The General Partner's
principal office is located at 600 Steamboat Road, Greenwich, Connecticut 06830;
Telephone No. 203-863-6700; and Facsimile No. 203-863-8600. The General Partner
is registered with the CFTC as a CPO and CTA and is a member of the NFA in such
capacities.

Tudor Investment Corporation, a Delaware corporation ("TIC"), is the Trading
Advisor to the Partnership. TIC's principal office is located at 600 Steamboat
Road, Greenwich, Connecticut 06830; Telephone No. 203-863-6700; and Facsimile
No. 203-863-8600. TIC is registered with the CFTC as a CPO and CTA and is a
member of the NFA in such capacities.

TIC is the sole general partner and sole trading advisor of Tudor Futures Fund,
a New York limited partnership which engages in the speculative trading of
commodity interest contracts and securities interests and of The Raptor Global
Fund L.P. ("Raptor L.P."), a Delaware limited partnership which primarily
engages in the speculative trading of equity securities interests, and is the
sole trading advisor of The Raptor Global Fund Ltd. ("Raptor Ltd.") and The
North End Value Fund Ltd. ("North End"), each of which is a Cayman Islands
company which engages primarily in the speculative trading of equity securities
interests. TIC also acts as investment manager of Tudor Private Equity Fund
L.P., a Delaware limited partnership which makes privately negotiated
investments in both private companies and publicly traded companies based or
principally operating in the United States and Canada. Tudor BVI Futures, Ltd.
("Tudor BVI"), a British Virgin Islands company, is an

<PAGE>

investment fund that trades commodities and securities under the direction of
TIC. A portion of the assets of Tudor BVI are managed by Tudor Capital (U.K.),
L.P. ("Tudor Capital"), a United Kingdom affiliate of TIC, pursuant to a sub-
advisory agreement between TIC and Tudor Capital. Tudor Capital is also the
investment manager of The Upper Mill Capital Appreciation Fund Ltd. (the "Upper
Mill Fund"), a Cayman Islands investment fund that trades securities and
derivatives. A portion of the assets of the Upper Mill Fund are managed by TIC
pursuant to a sub-advisory agreement between Tudor Capital and TIC.

Paul Tudor Jones II, age 44, is Chairman, Chief Executive Officer and the
indirect controlling equity owner of the General Partner and the Chairman, Chief
Executive Officer, the controlling shareholder and a Director of TIC, and has
served in those capacities since the Partnership's inception. Mr. Jones has
traded commodity contracts for his own proprietary account since September 1977
and for customer accounts since January 1981. Mr. Jones is a member of the
Commodity Exchange, Inc., the New York Board of Trade, Inc., the Chicago Board
of Trade and the Chicago Mercantile Exchange. In addition, Mr. Jones is a
member of the Board of Directors of the New York Board of Trade, Inc. and a
member of the Cotton Committee of such exchange. Mr. Jones served as Chairman of
the New York Cotton Exchange from August 1992 through June 1995. Mr. Jones is
First Vice Chairman of the Financial Instruments Exchange, a division of the
Board of Trade, Inc., Mr. Jones is also the Founder and a Director of The Robin
Hood Foundation, a charitable foundation.

Mark F. Dalton, age 48, is President of the General Partner and President and a
Director of TIC. Prior to joining TIC as President in September 1988, Mr.
Dalton was employed by Kidder, Peabody & Co. Incorporated where he served in
various senior positions including Chief Financial Officer. Mr. Dalton is also
a Director of Cathay Investment Fund Limited, an investment fund listed on the
Dublin Stock Exchange, Projenics Pharmaceuticals Inc. and various private
companies. Mr. Dalton does not participate in the commodity interests trading of
customer accounts for the General Partner, TIC or their affiliates.

John G. Macfarlane, age 44, is a Managing Director and the Chief Operating
Officer of the General Partner and a Managing Director and the Chief Operating
Officer and a Director of TIC. Prior to joining TIC in January 1998, Mr.
Macfarlane was employed by Salomon Smith Barney, Inc., where he served in
various senior positions including Managing Director and Head of US and Asian
Fixed Income Derivatives and Treasurer of Salomon Inc and Salomon Brothers Inc.
Mr. Macfarlane does not participate in the trading of the General Partner, TIC
or their affiliates.

Andrew S. Paul, age 46, is a Managing Director and the General Counsel and
Secretary of the General Partner and TIC and a Director of TIC. Mr. Paul has
been the General Counsel and Corporate Secretary of TIC since June 1989. Mr.
Paul does not participate in the trading of customer accounts for the General
Partner, TIC or their affiliates.
<PAGE>

Mark Pickard, age 43, is a Managing Director and the Chief Financial Officer of
the General Partner and TIC and a Director of TIC. From May 1995 until June
1996, Mr. Pickard was a Managing Director of Tudor Software, L.L.C. and was
Chief Operating Officer of Jacobson Capital Partners from February 1994 until
May 1995. From January 1993 until February 1994, Mr. Pickard was Vice President
and Treasurer of TIC. Mr. Pickard does not participate in the trading of
customer accounts for the General Partner, TIC or their affiliates.

James J. Pallotta, age 41, is a Managing Director and a Director of TIC. Mr.
Pallotta was previously a principal portfolio manger at Essex Investment
Management Company, Inc. ("Essex"). He joined Essex in 1983 as a Vice President,
became a Senior Vice President and the Director of Research in 1989 and
commenced actively directing the management of client funds in January 1989. He
became a member of the Board of Directors of Essex in 1990. Mr. Pallotta does
not participate in the trading of customer accounts of the General Partner
although he does participate in the trading of other customer accounts advised
by TIC.

Robert P. Forlenza, age 43, is a Managing Director and Director of TIC. Prior
to joining TIC in January 1995, Mr. Forlenza was a Vice President of Carlisle
Capital Corporation, a private leveraged buyout firm. Mr. Forlenza does not
participate in the trading of customer accounts of the General Partner although
he does participate in the trading of other customer accounts advised by TIC.

David E. Allanson, age 43, is a Director of TIC and a Managing Director of the
affiliates of TIC which maintain principal offices in Surrey, England. Prior to
joining TIC, Mr. Allanson was a Senior Vice President of Nationsbank/CRT. Mr.
Allanson does not participate in the day-to-day management of TIC.

Richard L. Fisher, age 45, is a director of TIC. Mr. Fisher received a B.S.
with Distinction and a Master of Science in Accounting from the University of
Virginia. Since September 1983 Mr. Fisher has been a managing director and
senior vice president of Dunavant Enterprises, Inc. Mr. Fisher has been a
director of TIC since June 1991. Mr. Fisher does not participate in the trading
or day-to-day management of the General partner, TIC or their affiliates.

There have been no material administrative, civil or criminal actions against
the General Partner, TIC or any of their executive officers or directors within
the last five years, except as follows.

On September 12, 1996, TIC settled a proceeding with the SEC related to alleged
violations of the "uptick rule" in connection with certain sales of stock over a
two-day period in March 1994. Without admitting or denying the SEC's findings,
TIC paid a civil penalty of $800,000 and agreed not to violate the uptick rule
in the future. This settlement did not have a material adverse effect on the
business, financial condition or results of operations of TIC, the General
Partner or the Partnership.
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.
----------------------

The Partnership has no officers or directors. The General Partner administers
the business and affairs of the Partnership. Mr. Jones, the Chairman, Chief
Executive Officer and controlling shareholder of the General Partner receives no
compensation from the Partnership. TIC earned $641,936, $372,809, and $372,402
in incentive and management fees from the Partnership during 1998, 1997 and
1996.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------

(a) Security Ownership of Certain Beneficial Owners. As of March 1, 1999,
-----------------------------------------------
the only Unit holders who owned more than five percent (5%) of the total
Units outstanding were:

NAME ADDRESS NO. UNITS PERCENT
- ------------------------ -------------------------------- --------- --------

Tudor 401k Savings and One Liberty Plaza 526.333 15.7%
Profit-Sharing Plan 51st Floor
New York, NY 10006

Second Management LLC 600 Steamboat Road 196.580 5.9%
Greenwich, CT 06830

James J. Pallotta (1) c/o Tudor Investment Corporation 178.754 5.3%
600 Steamboat Road
Greenwich, CT 06830

(1) James J. Pallotta is a Managing Director, principal and Director of TIC.

(b) Security Ownership of Management. The General Partner and the executive
--------------------------------
officers of the General Partner own approximately 12% of the total Units
outstanding as of March 1, 1999. In addition to the persons identified in
the table above, Mark Pickard and Mark F. Dalton, each of whom is a
principal of both the General Partner and TIC, owned 100.044 Units (3%) and
107.530 Units (3.2%), respectively, as of such date.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------

(a) Transactions with Management and Others.
---------------------------------------

See Item 1(a), GENERAL DEVELOPMENT OF BUSINESS, MANAGEMENT; Item 1(c)
--------------------------------- ----------
(1)(x), NARRATIVE DESCRIPTION OF BUSINESS, COMPETITION; Item 11, EXECUTIVE
--------------------------------- ----------- ---------
COMPENSATION; and Note 6 "Related Party Transactions" of "Notes To
------------
Financial Statements" in the accompanying Financial Statements.

(b) Certain Business Relationships.
------------------------------

(1) None.

(2) The Partnership incurred incentive and management fees payable to
TIC of $641,936, $372,809, and $372,402 for the years ended
December 31, 1998, 1997, and 1996, which were in excess of 10% of
the Partnership's total revenue of $5,153,767, $3,362,714, and
$1,417,232 for the respective periods referred to above.

(3) None.

(4) Not applicable.

(5) Not applicable.
<PAGE>

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------

(a) 1. Financial Statements.
---------------------

The following financial statements and report of independent public
accountants are set forth in the annexed financial statements:

Report of Independent Public Accountants
Statements of Financial Condition as of December 31, 1998 and 1997
For the years ended December 31, 1998, 1997 and 1996:
Statements of Income
Statements of Changes in Partners' Capital
Notes to Financial Statements, December 31, 1998, 1997 and 1996

The Partnership meets all the provisions of SFAS No. 102, Paragraph 7,
"Statement of Cash Flows - Exemption of Certain Enterprises and
Classification of Cash Flows from Certain Securities Required for Resale."
Therefore, statements of cash flows have not been provided.

2. No financial statement schedules are required to be filed.
---------------------------------------------------------

3. Exhibits. (unless otherwise indicated, each Exhibit was previously filed
--------
and has not been amended in any material respect).

1.01 Form of Selling Agreement among Cargill Investor Services,
Inc., Second Management Company, Inc. (succeeded by Second
Management LLC), and the Partnership.

3.01 Form of Second Amended and Restated Limited Partnership
Agreement of the Partnership.

3.02(a) Certificate of Limited Partnership of the Partnership.

3.02(b) Amendment to the Certificate of Limited Partnership of the
Partnership.

10.01(a) Form of Amended and Restated to Customer Foreign Exchange
Agreement between the Partnership and Bellwether Partners
LLC.

10.02(a) Form of Management Agreement among the Partnership, Second
Management Company, Inc. (succeeded by Second Managment LLC),
and Tudor Investment Corporation.

10.02(b) Form of Amendment to Management Agreement among the
Partnership, Second Management Company, Inc., and Tudor
Investment Corporation.

10.03(a) Form of Subscription Agreement and Power of Attorney to be
executed by purchasers of Units who are individuals.

<PAGE>

10.03(b) Form of Subscription Agreement and Power of Attorney to be
executed by a Trustee of the Tudor Investment Corporation
401(k) Savings and Profit-Sharing Plan.

10.03(c) Form of Representations to be made by participants in the
Tudor Investment Corporation 401(k) Savings and Profit
Sharing Plan.

10.03(d) Form of Subscription Agreement for use in making additions to
existing accounts.

10.04(a) Form of Escrow Agreement among the Partnership, Seventh
Management, Inc., and United States Trust Company of New
York.

10.04(b) Form of Amendment to Escrow Agreement among the Partnership,
Cargill Investor Services, Inc., and United States Trust
Company of New York.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the year ended December 31, 1998.

<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 MANAGMENT LLC,
General Partner

By:
___________________________________________
Mark F. Dalton
President

DATE: March 30, 1999

Pursuant to the requirements of the Securities and 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.

SECOND MANAGEMENT LLC

By: ___________________________ March 30, 1999
Paul T. Jones, II, Chairman and
Chief Executive Officer

By: ___________________________ March 30, 1999
Mark F. Dalton, President

By: ___________________________ March 30, 1999
John Macfarlane, Managing Director and
Chief Operating Officer

By: ____________________________ March 30, 1999
Mark Pickard, Managing Director and
Chief Financial Officer

By: ____________________________ March 30, 1999
Andrew S. Paul, Managing Director,
General Counsel and Secretary
<PAGE>

SIGNATURES

TUDOR FUND FOR EMPLOYEES L.P.

By: SECOND MANAGMENT LLC,
General Partner

By: /s/ Mark F. Dalton
---------------------------------------------
Mark F. Dalton
President

DATE: March 30, 1999

SECOND MANAGEMENT LLC

By: /s/ Paul T. Jones, II March 30, 1999
-----------------------------------
Paul T. Jones, II, Chairman and
Chief Executive Officer

By: /s/ Mark F. Dalton March 30, 1999
-----------------------------------
Mark F. Dalton, President

By: /s/ John Macfarlane March 30, 1999
-----------------------------------
John Macfarlane, Managing Director and
Chief Operating Officer

By: /s/ Mark Pickard March 30, 1999
-----------------------------------
Mark Pickard, Managing Director and
Chief Financial Officer

By: /s/ Andrew S. Paul March 30, 1999
-----------------------------------
Andrew S. Paul, Managing Director,
General Counsel and Secretary
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of Tudor Fund For Employees L.P.:

We have audited the accompanying statements of financial condition of Tudor Fund
For Employees L.P. (a Delaware limited partnership) as of December 31, 1998 and
1997, and the related statements of income and changes in partners' capital for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tudor Fund For Employees L.P.
as of December 31, 1998 and 1997, and the results of its operations for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.

/s/ Arthur Andersen LLP

New York, New York
March 1, 1999
<PAGE>

TUDOR FUND FOR EMPLOYEES L.P.
-----------------------------

STATEMENTS OF FINANCIAL CONDITION
---------------------------------

DECEMBER 31, 1998 AND 1997
--------------------------

ASSETS 1998 1997
------- ----------- -----------
<S> <C> <C>
CASH $ 3,672,689 $ 7,088,210

US GOVERNMENT SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
12,600,000 -

EQUITY IN COMMODITY TRADING ACCOUNTS:
Due from brokers 1,281,103 2,264,274
U.S. Government obligations - 7,477,448
Net unrealized gain on open commodity interests 711,244 211,519
----------- -----------
Total equity in commodity trading accounts 1,992,347 9,953,241
----------- -----------

SUBSCRIPTION RECEIVABLE - 125,000

----------- ---------------
Total assets 18,265,036 $17,166,451
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
----------------------------------
LIABILITIES:
<S> <C> <C>
Pending partner additions $ 2,989,786 $ 4,160,168
Redemptions payable 238,091 3,339,382
Incentive fee payable 29,507 49,172
Management fee payable 40,370 56,054
Accrued professional fees and other 76,170 65,988
----------- -----------
Total liabilities 3,373,924 7,670,764
----------- -----------

PARTNERS' CAPITAL:
Limited partners, 10,000 units authorized and 2,589.821
and 2,186.284 units outstanding as of December 31, 1998 and 1997 13,840,543 8,712,315
General Partner, 196.580 units outstanding as of
December 31, 1998 and 1997 1,050,569 783,372
----------- -----------
Total partners' capital 14,891,112 9,495,687
----------- -----------
Total liabilities and partners' capital $18,265,036 $17,166,451
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.
<PAGE>

TUDOR FUND FOR EMPLOYEES L.P.
-----------------------------

STATEMENTS OF INCOME
--------------------

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
REVENUES:
<S> <C> <C> <C>
Net realized trading gain $3,978,084 $2,719,222 $ 896,840
Change in net unrealized trading gain (loss) 519,794 72,386 (25,468)
Interest income 655,889 571,106 545,860
---------- ---------- ----------
Total revenues 5,153,767 3,362,714 1,417,232
---------- ---------- ----------

EXPENSES:
Brokerage commissions and fees 194,098 188,111 123,399
Management fee 239,867 218,539 206,329
Incentive fee 402,069 154,270 166,073
Professional fees and other 120,599 88,989 100,679
---------- ---------- ----------
Total expenses 956,633 649,909 596,480
---------- ---------- ----------

Net income $4,197,134 $2,712,805 $ 820,752
========== ========== ==========

LIMITED PARTNERS' NET INCOME $3,929,937 $2,546,001 $ 645,415

GENERAL PARTNER'S NET INCOME 267,197 166,804 175,337
---------- ---------- ----------
Net income $4,197,134 $2,712,805 $ 820,752
========== ========== ==========

Change in Net Asset Value Per Unit 1,359.22 $848.53 $272.71
---------- ---------- ----------
Net Income Per Unit 1,327.46 $845.18 $246.06
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these statements.
<PAGE>

TUDOR FUND FOR EMPLOYEES L.P.
-----------------------------

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------

Limited Partners General Partner Net Asset
------------------------ ------------------- Total Value
Units Capital Units Capital Capital Per Unit
---------- ----------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL, January 1, 1996 2,190.191 6,272,162 642.943 1,841,231 8,113,393 $2,863.75

Net income - 645,415 - 175,337 820,752
TIC 401(k) Plan unit adjustment (Note 3) 5.462 - - - -
Capital contributions 931.637 2,926,549 - - 2,926,549
Redemptions (605.404) (1,934,328) (446.363) (1,400,000) (3,334,328)
---------- ----------- -------- ----------- -----------

PARTNERS' CAPITAL, December 31, 1996 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 (Note 3) 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 2,186.284 $ 8,712,315 196.580 $ 783,372 $ 9,495,687 $3,984.99
---------- ----------- -------- ----------- -----------

Net income - 3,929,937 267,197 4,197,134
TIC 401(k) Plan unit adjustment (Note 3) 24.416 - - - -
Capital contributions 1,303.556 5,270,917 - - 5,270,917
Redemptions (924.435) (4,072,626) - - (4,072,626)
---------- ----------- -------- ----------- -----------

PARTNERS' CAPITAL, December 31, 1998 2,589.821 $13,840,543 196.580 $ 1,050,569 $14,891,112 $5,344.21
========== =========== ======== =========== ===========

</TABLE>

The accompanying notes are an integral part of these statements.
<PAGE>

TUDOR FUND FOR EMPLOYEES L.P.
-----------------------------

NOTES TO FINANCIAL STATEMENTS
-----------------------------

DECEMBER 31, 1998, 1997, AND 1996
---------------------------------

1. ORGANIZATION AND BUSINESS
-------------------------

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") is the general partner of the Partnership. Tudor
Investment Corporation ("TIC"), an affiliate of the General Partner, acts as the
trading advisor of the Partnership. Ownership of limited partnership units is
restricted to either employees of TIC and its principals or its affiliates.

The objective of the Partnership is to realize capital appreciation through
speculative trading of commodity futures, forwards, 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 the Limited Partnership Agreement.

Duties of the General Partner
- -----------------------------

The General Partner acts as the commodity pool operator of the Partnership and
is responsible for the selection and monitoring of the commodity trading
advisors 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
------------------------------------------

Revenue Recognition
- -------------------

Commodity interests are recorded on the trade date at the transacted contract
price and are valued at market or fair value.

Brokerage Commissions and Fees
- ------------------------------

These expenses represent all brokerage commissions, exchange, National Futures
Association and other fees incurred in connection with the execution of
commodity interests trades. Commissions and fees associated with open commodity
interests at the end of the period are accrued.
<PAGE>

Incentive Fee
- -------------

The Partnership pays TIC, as trading advisor, an incentive fee equal to 12% of
the Net Trading Profits as defined by the Second Amended and Restated Limited
Partnership Agreement, dated as of May 22, 1996 (the "Limited Partnership
Agreement") earned as of the end of each fiscal quarter of the Partnership.
Effective August 1, 1995, TIC has waived its right to receive an incentive fee
attributable to units held at the beginning of each month by the TIC 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 a management fee 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 year-
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.

U.S. Government Securities Purchased Under Agreements to Resell
- ---------------------------------------------------------------

Securities purchased under agreements to resell are collateralized investment
transactions and are carried at the amounts at which the securities will be
subsequently resold plus accrued interest, which approximates market value.
These transactions are part of the Partnership's operating activities, and it is
the policy of the Partnership to take possession or control of all underlying
assets.

Due From Brokers
- ----------------

Due from brokers includes forward contracts pending settlement as well as cash,
foreign currencies and margin balances.

U.S. Government Obligations
- ---------------------------

At times, the Partnership invests a varying amount of its assets in U.S.
Treasury bills. These bills are held in commodity trading accounts and are used
to fulfill initial margin requirements. U.S. Treasury bills are valued in the
statements of financial condition 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 December 31, 1998.

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>

Subscription Receivable
- -----------------------

Prospective investors are required to complete, execute and deliver a
Subscription Agreement, as defined in the Limited Partnership Agreement.
Subscription receivable arises when a signed Subscription Agreement has been
completed, executed and delivered but payment is received by the Partnership
subsequent to year-end.

Pending Partner Additions
- -------------------------

Pending partner additions is comprised of cash received prior to year-end for
which units were issued on January 1 of the subsequent year. Pending partner
additions did not participate in the earnings of the Partnership until the
related units were issued.

Use of Estimates
- ----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Management believes that the estimates utilized in preparing the financial
statements are reasonable and prudent, however, actual results could differ from
these estimates.

3. CAPITAL ACCOUNTS
----------------

The minimum subscription amount is $1,000 for new Limited Partners. Additional
contributions may be made in increments of $1,000. Both subscriptions and
contributions may be made quarterly, at the beginning of the respective month.

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 partners based on the ratio that the balance of each capital
account bears in relation to the balance of 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 each 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 effective as of the last
business day of any quarter as defined in the Limited Partnership Agreement.
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 Limited Partner's initial investment, whichever is
less, will be honored only to the extent of such limitation.
<PAGE>

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 share 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
transacting the Partnership's foreign exchange and commodity forward contracts.
The Partnership typically has on deposit with BPL, as collateral for forward
contracts, up to 15% of the Partnership's net assets. During 1998, 1997, and
1996 the Partnership received $60,264, $55,229, and $69,866 in interest income
for the amounts on deposit with BPL. At December 31, 1998 and 1997, the amounts
on deposit with BPL were $657,501 and $942,565 (including $82,643 in unrealized
gains and $27,933 in unrealized losses) as of December 31, 1998 and 1997.

Bellwether Futures LLC ("BFL"), a Delaware limited liability company, is an
affiliate of the General Partner and is qualified to do business in Illinois.
Effective January 1, 1996, BFL ceased collecting give-up fees from the
Partnership as compensation for managing the execution of treasury bond futures
by floor brokers on the Chicago Board of Trade.

TIC receives incentive and management fees as compensation for acting as trading
advisor (Note 2).

7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET MARKET RISK AND CONCENTRATION OF
-----------------------------------------------------------------------------
CREDIT RISK
-----------

During June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). This statement requires the
Partnership to recognize all derivatives in the statements of financial
condition at fair value with adjustments to fair value recorded through income.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
(January 1, 2000, for entities with calendar-year fiscal years); however, early
adoption is allowed. The Partnership has elected early adoption and,
accordingly, its standards are applied in the accompanying financial statements.
The Partnership has always maintained a policy of valuing its commodity
interests at market values or estimated fair values and including any unrealized
gains and losses in income and, accordingly, the adoption of SFAS No. 133 has
not resulted in a valuation or an accounting change in the accompanying
financial statements.
<PAGE>

In the normal course of business, the Partnership is a party to a variety of
off-balance sheet financial instruments in connection with its trading
activities. These activities include the trading of financial futures,
forwards, swaps, exchange traded and negotiated over-the-counter options and
other commodity interests. These financial instruments give rise to market and
credit risk in excess of the amounts recognized in the statements of financial
condition. The Partnership is subject to market and credit risk associated with
changes in the value of underlying financial instruments, as well as the loss of
appreciation on certain instruments, if its counterparties fail to perform.

TIC takes an active role in managing and controlling the Partnership's market
and credit risks and has established formal control procedures that are reviewed
on an ongoing basis. TIC attempts to minimize credit risk exposure to trading
counterparties and brokers through formal credit policies and monitoring
procedures.

In order to control the Partnership's market exposure, TIC applies risk
management guidelines and policies designed to protect the Partnership's
capital. These guidelines and policies include quantitative and qualitative
criteria for evaluating the appropriate risk levels for the Partnership. TIC's
Risk Management Committee, comprised of senior personnel from different
disciplines throughout the firm, regularly assesses and evaluates the
Partnership's potential exposures to the financial markets based on analysis
provided by the Risk Management Department. The Risk Management Department's
responsibilities include: focusing on the positions taken in various instruments
and markets globally; ascertaining that all such positions are accurately
reflected on the Partnership's position reports; and evaluating the risk
exposure associated with all of those positions.

The Partnership uses a statistical technique known as Value at Risk ("VaR") to
assist the Risk Management Department in measuring its exposure to market risk
related to its trading positions. The VaR model projects potential losses in the
portfolio and is based on a methodology which uses a one-year observation period
of hypothetical daily changes in trading portfolio value, a one-day holding
period and a one standard deviation level. These figures can be scaled up to
indicate risk at the 95% or 99% confidence level.

Cash and due from brokers are due principally from high credit quality
international financial institutions.

Exchange traded futures and option 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. Forwards are generally settled with the
counterparties two days after the trade date.

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 FCMs to
segregate client funds to ensure ample customer protection in the event of an
FCM's default. The Partnership monitors the creditworthiness of its FCMs and,
when deemed necessary, reduces its exposure to these FCMs. The Partnership's
credit risk associated with the nonperformance of these FCMs 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 FCMs. BPL is the Partnership's primary
forward contract counterparty (Note 6). Notwithstanding the risk monitoring and
credit review performed by TIC with respect to its FCMs and counterparties,
including BPL, there is always a risk of nonperformance.

Generally, financial contracts can be closed out at TIC's discretion. An
illiquid or closed market, however, could prevent the closeout of positions.

TIC has a formal Credit Committee, comprised of senior managers from different
disciplines throughout the firm, that meets regularly to analyze the credit risk
associated with the Partnership's counterparties, intermediaries and service
providers. A significant portion of the Partnership's positions are invested
with or held at institutions with high credit standing. TIC establishes
counterparty exposure limits and specifically designates which product types are
approved for trading.

<PAGE>

The following table summarizes the year-end assets and liabilities at December
31, 1998 and 1997, resulting from unrealized gains and losses on derivative
instruments included in the statements of financial condition (000's omitted):

<TABLE>
<CAPTION>
1998 1997
------------------------ -------------------------
Assets Liabilities Assets Liabilities
------- ----------- ------ ------------
Exchange traded contracts:
Interest rate contracts-
<S> <C> <C> <C> <C>
Domestic $ 21 $ 3 $ 27 $ -
Foreign 521 - 83 37

Foreign exchange contracts-
Financial futures contracts 2 - - 9
Forward currency contracts 75 - - 30

Equity index contracts-
Domestic 27 17 106 -
Foreign 24 - 57 -

Over-the-counter contracts:
Commodity swaps - - - 24

Non-Financial derivative instruments 61 - 63 24

---- --- ---- ----
$731 $20 $336 $124
==== === ==== ====
</TABLE>
<PAGE>

8. YEAR 200 ISSUE UNAUDITED
-------------------------

Like other organizations, the Partnership could be adversely affected if the
computer systems used by the Partnership and its service providers do not
properly process and calculate date-related information from and after January
1, 2000 (the "Year 2000 Problem"). The Partnership 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. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any material adverse impact on the Partnership. The
inability of the Partnership or its third party providers to timely complete all
necessary procedures to address the Year 2000 Problem could have a material
adverse impact on the Partnership's operations. the Partnership will continue
to monitor the status of and its exposure to this issue. For the year ended
December 31, 1998, the Partnership incurred no significant Year 2000 related
expenses and it does not expect to incur significant Year 2000 expenses in the
future.

The Partnership is in the process of establishing a contingency plan to address
recovery from unavoided or unavoidable Year 2000 Problems, if any.

<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
FINAICAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3672689
<SECURITIES> 12600000
<RECEIVABLES> 1992347
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18265036
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18265236
<CURRENT-LIABILITIES> 3373924
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14891112
<TOTAL-LIABILITY-AND-EQUITY> 18265236
<SALES> 5153767
<TOTAL-REVENUES> 5153767
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 956633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4197134
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4197134
<EPS-PRIMARY> 1359.22
<EPS-DILUTED> 0

</TABLE>