<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED: 9/30/00 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.)
1275 King Street, Greenwich, Connecticut 06831
--------------------------------------------------------------------------------
(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 1 - FINANCIAL INFORMATION
Item 1. - Financial Statements
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
-------------------- ----------------------
ASSETS
------
<S> <C> <C>
CASH $ 720,082 $ 4,225,187
U.S. GOVERNMENT SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL 16,303,000 15,600,000
EQUITY IN COMMODITY TRADING ACCOUNTS:
Due from broker 2,132,213 1,622,633
Net unrealized gain on open commodity interests 881,097 794,344
-------------------- ----------------------
Total equity in commodity trading accounts 3,013,310 2,416,977
Total assets $ 20,036,392 $ 22,242,164
==================== ======================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Redemptions payable $ 975,408 $ 2,654,830
Pending partner additions 145,086 3,067,980
Incentive fee payable - 62,184
Management fee payable 50,384 51,617
Accrued professional fees and other 130,230 73,338
-------------------- ----------------------
Total liabilities 1,301,108 5,909,949
-------------------- ----------------------
PARTNERS' CAPITAL:
Limited Partners, 20,000 units authorized and 2,936.991 and
2,650.276 outstanding at September 30, 2000 and
December 31, 1999 17,559,949 15,204,445
General Partner, 196.580 units outstanding at September 30,
2000 and December 31, 1999 1,175,335 1,127,770
-------------------- ----------------------
Total partners' capital 18,735,284 16,332,215
-------------------- ----------------------
Total liabilities and partners' capital $20,036,392 $22,242,164
==================== ======================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
REVENUES:
Net realized trading gain (loss) $ 65,118 $ 570,007 $ 401,546 $(457,850)
Change in net unrealized trading gain (loss) 1,186,043 296,900 68,465 (367,460)
Interest income 299,184 210,407 887,975 617,283
------------------- ------------------- ------------------ -----------------
Total revenues 1,550,345 1,077,314 1,357,986 (208,027)
------------------- ------------------- ------------------ ----------------
EXPENSES:
Brokerage commissions and fees 43,235 44,555 156,304 164,917
Management fee 74,343 71,434 235,987 219,750
Professional fees and other 48,658 27,520 113,552 82,436
------------------- ------------------- ------------------ ----------------
Total expenses 166,236 143,509 505,843 467,103
------------------- ------------------- ------------------ ----------------
Net income (loss) $ 1,384,109 $ 933,805 $ 852,143 $(675,130)
=================== =================== ================== ================
Limited Partners' Net Income (Loss) 1,302,724 880,365 804,578 (636,804)
General Partner's Net Income (Loss) 81,385 53,440 47,565 (38,326)
------------------- ------------------- ------------------ ----------------
$ 1,384,109 $ 933,805 $ 852,143 (675,130)
=================== =================== ================== ================
Change in Net Asset Value Per Unit $ 414.01 $ 271.85 $ 241.96 $ (194.96)
=================== =================== ================== ================
Net income (loss) Per Unit (Note 2) $ 419.99 $ 276.19 $ 248.22 $ (194.97)
=================== =================== ================== ================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD ENDED SEPTEMBER 30, 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 (b) 2,650.276 15,204,445 196.580 1,127,770 16,332,215 $5,736.93
------------ --------------- ----------- ---------------- -------------- ---------------
Net income -- 804,578 -- 47,565 852,143
TIC 401(k) Plan unit adjustment (a) 9.758 -- -- -- --
Capital Contributions 935.141 5,271,366 -- -- 5,271,366
Redemptions (658.184) (3,720,440) -- -- (3,720,440)
------------ --------------- ----------- ---------------- -------------- ---------------
Partners' Capital, September 30, 2000 (b) 2,936.991 $17,559,949 196.580 $1,175,335 $18,735,284 $5,978.89
============ =============== =========== ================ ============== ===============
(a) See Note 3 - Capital Accounts
(b) See Note 4 - Redemption of Units
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 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 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 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
---------------------------------------------------------------
U.S. Government 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.
DUE FROM BROKERS
----------------
Due from brokers includes forward contracts pending settlement as well
as cash and foreign currency balances.
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 do not participate in
the earnings of the Partnership until the related units are issued.
<PAGE>
NET INCOME/(LOSS) PER UNIT
---------------------------
Net income/(loss) per unit is computed by dividing net income by the
average number of units outstanding at the beginning of each month
during the relevant reporting period.
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.
(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 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 shares of revenue and expenses of the
Partnership.
(6) RELATED PARTY TRANSACTIONS
--------------------------
The General Partner, due to its relationship with its affiliates and
certain other parties, may enter into certain related party
transactions.
Bellwether Partners LLC ("BPL"), a Delaware limited liability company
and an affiliate of the General Partner, is the Partnership's primary
forward contract counterparty. Effective August 1, 1995, BPL ceased
charging commissions for 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 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
<PAGE>
over-the-counter options and the 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 such 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
<PAGE>
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 quarter-end assets and liabilities resulting
from unrealized gains and losses on derivative instruments included in the
statements of financial condition (000's omitted):
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
--------------------------- --------------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Exchange Traded Contracts:
Interest Rate Contracts-
Domestic 43 - $230 $12
Foreign 128 - 14 -
Foreign Exchange Contracts 6 2 64 -
Equity Index Futures-
Domestic 219 - - -
Foreign 93 11 56 3
Over-the-Counter Contracts:
Interest Rate Swap - 34 236 -
Commodity Swaps 4 - 27 -
Equity Index Swaps - - - 1
Forward Currency Options 398 - - -
Non-Financial Derivative Instruments 76 39 183 -
-------------- ----------- ------------- -----------
$967 $86 $810 $16
Total ============== =========== ============== ===========
</TABLE>
<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 $78,180 and redemptions of $975,408 during the
quarter ended September 30, 2000 (the "Current Quarter"). From its
inception through October 1, 2000, the Partnership received total Limited
Partner contributions of $31,216,058 and had total withdrawals of
$26,891,717. 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 in the
Partnership as of September 30, 2000 was approximately $1,175,000
representing 6% of the Partnership's equity. At October 1, 2000, the
Partnership had a total of 88 Limited Partners.
As specified in the Limited Partnership Agreement, the Partnership may
accept investments from certain employee benefit plans to the extent that
such investment does not exceed 25% of the aggregate value of outstanding
units, excluding units held by the General Partner and its affiliates. 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
October 1, 2000 of $3,584,260. The TIC 401(k) Plan's equity in the
Partnership as of October 1, 2000 was approximately $4,111,000 representing
approximately 21.8% of the Partnership's equity or approximately 24.0%
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,
counterparties 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 and the trading of other instruments. U.S.
Government 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 September 30, 2000 and December 31, 1999, U.S.
Government Securities purchased under agreements to resell maturing October
2, 2000 and January 3, 1999 represented approximately 81% and 70% of the
total assets of the Partnership. To the extent necessary, such U.S.
Government Securities are used by the Partnership as collateral in
connection with its trading activities. 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
<PAGE>
contracts changes, as such 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 $299,184, compared to $210,407 during the quarter ended
September 30, 1999. This increase was due to an increase in the
Partnership's assets.
In the context of the commodity or futures trading industry, cash and cash
equivalents are part of the Partnership's inventory. Cash deposited with
banks represented approximately 4% and 19% of the Partnership's assets as
of September 30, 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 or its
affiliates and certain employee benefit plans, including, but not limited
to, the TIC 401(k) Plan.
<PAGE>
(3) RESULTS OF OPERATIONS
---------------------
The following table compares net asset value per unit and changes in the
net asset value per unit for the three and nine months ended September 30,
2000 and 1999:
<TABLE>
<CAPTION>
Net Asset Value Three Months Ended Nine Months Ended
per Unit September 30 September 30
---------------------- --------------------------------- ------------------------------------
$ % $ %
--------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Sept. 30, 2000 $5,978.89 $414.01 7.44% $ 241.96 4.22%
Sept. 30, 1999 $5,149.25 $271.85 5.57% $(194.96) (3.65)%
</TABLE>
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 operations.
The following table summarizes the components (in thousands) of Net Trading
Gains, for the three and nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ----------------------------------
2000 1999 2000 1999
----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Exchange Traded Contracts:
Interest Rate Futures and Option Contracts-
Domestic $ (16) $ 146 $ (106) $ (221)
Foreign 375 221 43 104
Foreign Exchange Contracts (806) (442) (1,159) (1,323)
Equity Index Futures-
Domestic 299 (14) 1,338 (637)
Foreign 318 305 (345) (364)
Over-the-Counter Contracts:
Forward Currency Options 608 26 713 884
Commodity Swaps 165 182 (245) 63
Equity Index Swaps 90 (10) 172 (98)
Interest Rate Currency Swaps (34) 2
209 408 (99) 602
Non-Financial Derivative Instruments
----------- -------------- ------------ -----------
Total $1,208 $ 822 $ 314 $ (990)
=========== ============== ============ ===========
</TABLE>
<PAGE>
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 as a return
on average Net Assets, brokerage commissions and fees as a percentage of Net
Assets, and incentive fees as a percentage of Net Trading Gains.
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
----------------------------- ------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
--------- --------- --------- ---------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Trading Gains as a % of Net Assets 7.1% 4.8% 1.7% (5.7)%
Brokerage Commissions & Fees as a % of Net Assets 0.3% 0.3% 0.9% 1.0%
Incentive Fees as a % of Net Trading Gains 0.0% 0.0% 0.0% 0.0%
</TABLE>
In general, commission rates have remained stable during the past three
years. Professional fees and other expenses during the Current Quarter
ended remained stable as compared to the quarter ended September 30, 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, and thus potentially more profitable during times of
high inflation. Since the commencement of the Partnership's trading
operations in July 1990, inflation has not been a major factor in the
Partnership's operations.
(4) 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 the 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
<PAGE>
reflected on the Partnership's position reports; and evaluating the risk
exposure associated with all such 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.
The following table illustrates the VaR for each component of market risk as of
September 30, 2000. The dollar values represent the VaR assuming a 1.65 standard
deviation move in each of the financial instruments indicated.
VaR
Risk Factors (95% Confidence)
------------ -------------------
Interest Rate Futures and Option Contracts-
Domestic $ 45,375
Foreign $150,150
Foreign Exchange Contracts $ 32,835
Equity index futures-
Domestic $182,985
Foreign $130,845
Non-Financial Derivative Instruments $148,500
<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
333-33982) 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, 10,893.408 Units having an aggregate value of
$31,216,058 have been sold through October 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
November 14, 2000
