<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: 3/31/00 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 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
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
------------- -------------
ASSETS
------
CASH $ 2,502,329 $ 4,225,187
U.S. GOVERNMENT SECURITIES PURCHASED
UNDER AGREEMENTS TO RESELL
13,700,000 15,600,000
EQUITY IN COMMODITY TRADING ACCOUNTS:
Due from broker 4,335,700 1,622,633
Net unrealized gain on open
commodity interests 384,064 794,344
----------- -----------
Total equity in commodity
trading accounts 4,719,764 2,416,977
----------- -----------
Total assets $20,922,093 $22,242,164
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Redemptions payable $ 848,498 $ 2,654,830
Pending partner additions 2,125,206 3,067,980
Management fee payable 79,391 51,617
Incentive fee payable - 62,184
Accrued professional fees and other 98,732 73,338
----------- -----------
Total liabilities 3,151,827 5,909,949
----------- -----------
PARTNERS' CAPITAL:
Limited Partners, 20,000 units authorized
and 3,033.657 and 2,650.276 outstanding
at March 31, 2000 and December 31, 1999 16,688,830 15,204,445
General Partner, 196.580 units outstanding
at March 31, 2000 and December 31, 1999 1,081,436 1,127,770
----------- -----------
Total partners' capital 17,770,266 16,332,215
----------- -----------
Total liabilities and partners' capital $20,922,093 $22,242,164
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
REVENUES:
Net realized trading losses $(433,480) $(118,563)
Change in net unrealized trading losses (430,586) (627,732)
Interest income 264,384 197,860
--------- ---------
Total revenues (599,682) (548,435)
--------- ---------
EXPENSES:
Brokerage commissions and fees 74,009 78,813
Management fee 79,391 73,931
Professional fees and other 28,349 27,574
--------- ---------
Total expenses 181,749 180,318
--------- ---------
Net loss $(781,431) $(728,753)
========= =========
Limited Partners' Net loss (735,097) (685,159)
General Partners' Net loss (46,334) (43,594)
--------- ---------
$(781,431) $(728,753)
========= =========
Changes in Net Asset Value per Unit $(235.70) $ (221.76)
======== =========
Net loss per Unit (Note 2) $(230.89) $ (217.66)
======== =========
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 MARCH 31, 2000 AND THE YEAR ENDED DECEMBER 31, 1999
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, 1999 2,589.821 $13,840,543 196.580 $1,050,569 $14,891,112 $5,344.21
---------- ----------- ------- ---------- -----------
Net income -- 1,220,159 -- 77,201 1,297,360
TIC 401(k) Plan unit adjustment (a) 14.141 -- -- -- --
Capital Contributions 1,051.500 5,489,765 -- -- 5,489,765
Redemptions (1,005.186) (5,346,022) -- -- (5,346,022)
---------- ----------- ------- ---------- -----------
Partners' Capital, December 31, 1999 2,650.276 15,204,445 196.580 1,127,770 16,332,215 $5,736.93
(b)
---------- ----------- ------- ---------- -----------
Net loss -- (735,097) -- (46,334) (781,431)
TIC 401(k) Plan unit adjustment (a) 2.841 -- -- -- --
Capital Contributions 534.778 3,067,980 -- -- 3,067,980
Redemptions (154.238) (848,498) -- -- (848,498)
---------- ----------- ------- ---------- -----------
Partners' Capital, March 31, 2000 (b) 3,033.657 $16,688,830 196.580 $1,081,436 $17,770,266 $5,501.23
========== =========== ======= ========== ===========
</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
MARCH 31, 2000
(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") was the general partner
for the Partnership during the quarter ended March 31, 2000 and owned
approximately 197 units of general partnership interest. 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 Second Amended and Restated
Limited Partnership Agreement, dated as of May 22, 1996 ("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 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
------------------------------------------
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 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 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
an incentive fee attributable to units held 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 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.
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 and
to use such assets as collateral in connection with its trading.
PENDING PARTNER ADDITIONS
-------------------------
Pending partner additions is comprised of cash received prior to the
last day of the quarter for which units were issued on the first day of
the subsequent quarter. Pending partner additions did not participate
in the earnings of the Partnership until the related units were issued.
<PAGE>
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
NET LOSS PER UNIT
-----------------
Net loss per unit is computed by dividing net income by the monthly
average of units outstanding at the beginning of each month.
(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.
(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.
<PAGE>
(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 5% of the
Partnership's net assets.
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 assisting in 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 RISK AND CONCENTRATION OF
----------------------------------------------------------------------
CREDIT RISK
-----------
During June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The
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. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of Effective Date of SFAS
No. 133," amended SFAS No.133 to be effective for fiscal years beginning
after June 15, 2000 (January 1, 2001, for all companies with a calendar-
year fiscal year). The Partnership has elected early adoption of SFAS
No. 133 and, accordingly, its standards are applied in the accompanying
financial statements. The Partnership has always maintained a policy of
valuing its security and commodity interests at market values or
estimated fair values and of including any unrealized gains and losses
in results of operations. Accordingly, the adoption of SFAS No. 133 has
not resulted in a valuation or an accounting change in the accompanying
financial statements.
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.
<PAGE>
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 one standard
deviation level. These figures can be scaled-up to indicate risk
exposure 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 March 31, 2000 and December 31, 1999 assets and
liabilities resulting from unrealized gains and losses on derivative instruments
included in the statements of financial condition (000's omitted):
March 31, 2000 December 31,1999
--------------------- --------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Exchange Traded Contracts:
Interest Rate Contracts-
Domestic $41 $- $230 $12
Foreign 121 70 14 -
Foreign Exchange Contracts-
Financing Futures Contracts - - - -
Forward Currency Contracts - 4 64 -
Equity Index Futures-
Domestic 3 139 - -
Foreign 156 - 56 3
Over-the-Counter Contracts:
Commodity Swaps 204 - 27 -
Equity Index Swaps 39 - - 1
Interest Rate Swap - - 236 -
Non-Financial Derivative Instruments 44 11 183 -
---- ---- ---- --
Total $608 $224 $810 $16
==== ==== ==== ===
<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 $3,067,980 and redemptions of $848,498 during
the quarter ended March 31, 2000 (the "Current Quarter"). From its
inception through April 1, 2000, the Partnership received total Limited
Partner subscriptions and contributions of $30,992,791 and had total
withdrawals of $24,019,774. 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 March 31, 2000 was approximately $1,081,000
representing approximately 6% of the Partnership's equity. At April 1,
2000, the Partnership had a total of 96 Limited Partners.
As specified in its 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. On
August 1, 1995, the Partnership accepted an 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
April 1, 2000 of $3,445,994. The TIC 401(k) Plan's equity in the
Partnership as of April 1, 2000 was approximately $3,792,000 representing
approximately 19.1% of the Partnership's equity or approximately 20.9%
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 of limited
partnership interest 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 collaterlized
investment transactions and are carried at the amount the securities will
be subsequently resold plus accrued interest, which approximates market.
As of March 31, 2000 and December 31, 1999, U.S. Government Securities
purchased under agreements to resell maturing April 3, 2000 and January 3,
2000, represented approximately 65% and 70% of the total assets of the
Partnership. The percentage that U.S. Government Securities purchased
under agreements to resell bear to the total assets varies daily and
monthly, as the market value of commodity interest contracts changes, as
Government Securities are resold, and as the Partnership sells or redeems
units. 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 Current Quarter
was $264,384 compared to $197,860 during the quarter ended March 31, 1999.
This increase was due to an increase in the Partnership's assets and
liquidity in the Partnership.
<PAGE>
Cash and cash equivalents are part of the Partnership's inventory. Cash
deposited with banks represented approximately 12% and 19% of the
Partnership's assets as of March 31, 2000 and December 31, 1999. 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.
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 a "daily price fluctuation limit"
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 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 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
principals or 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 as of March 31, 2000
and 1999:
Net Asset Value Decrease During
per Unit Quarter
--------------- -------------------
$ %
-------------------
March 31, 2000 $5,501.23 $(235.70) (4.11%)
March 31, 1999 $5,122.45 $(221.76) (4.15%)
<PAGE>
Net trading gains and losses includes realized and unrealized trading gains
and losses and commissions 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 net trading
gains and losses, for the three months ended March 31, 2000 and 1999.
March 31, 2000 March 31, 1999
-------------- --------------
Exchange Traded Contracts:
Interest Rate Futures and Options Contracts-
Domestic $ (118) $ 24
Foreign (306) (343)
Foreign Exchange Contracts- (416) (556)
Equity Index Futures-
Domestic 138 (195)
Foreign (493) (605)
Over-the-Counter Contracts:
Forward Currency Contracts (103) 722
Commodity Swaps 140 99
Equity Index Swaps 50 (60)
Interest Rate Swaps 37
Non-Derivative Financial Instruments 133 89
------- ------
Total $ (938) $ (825)
======= ======
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 gains and losses
as a return on average Net Assets and brokerage commissions and fees as a
percentage of Net Assets.
Three Months Ended,
----------------------------
March 31, March 31,
2000 1999
------------- -----------
Net trading gains and losses as a % of Net Assets (4.9)% (4.7)%
Brokerage Commissions & Fees as a % of Net Assets 0.4% 0.5%
In general, commission rates have remained stable. Professional fees and
other expenses during the Current Quarter remained stable as compared to
the quarter ended March 31, 1999.
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. 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. 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 one standard deviation level.
These figures can be scaled-up to indicate risk exposure at the 95% or 99%
confidence level.
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 illustrates the VaR for each component of market risk
as of March 31, 2000. The dollar values represent the VaR scaled up to a
95% confidence level.
VaR
1 Standard Deviation
Risk Factors (95% Confidence)
- ------------ ------------------------
Interest rate futures and option contracts-
Domestic $ 26,600
Foreign 128,000
Foreign exchange contracts 8,800
Equity index futures-
Domestic 207,000
Foreign 119,700
Non-derivative financial instruments 92,300
--------
$582,400
========
<PAGE>
PART II - OTHER INFORMATION
CHANGES IN SECURITIES AND 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 333-52543). Of the 20,000 Units that
have been registered, 10,855.093 Units having an aggregate value of
$30,992,791 have been sold through April 1, 2000.
<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
May 15, 2000
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<PERIOD-END> MAR-31-2000
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0
0
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