<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-19436
THE MILLBURN CURRENCY FUND II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 22-3117668
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o MILLBURN RIDGEFIELD CORPORATION
411 West Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 625-7554
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant Limited Partnership Units
to Section 12(g) of the Act: (Title of Class)
Indicate by check mark whether the registrant (1) 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 [ ]
Aggregate market value of the voting and non-voting common equity held by
non-affiliates: $ 1,464,125
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE MILLBURN CURRENCY FUND II, L.P.
Statements of Financial Condition (UNAUDITED)
<TABLE>
<CAPTION>
30-Sep-98 31-Dec-97
Assets: ------------ ------------
<S> <C> <C>
Investment in Millburn Currency Fund -
at value $ 1,951,476 -
Investment in U.S. Treasury bills - at value
(amortized cost $0 at Sept.30, 1998) - 1,757,480
Money market mutual funds 103,246 418,481
Options owned, at market value
(cost $0 at September 30, 1998) - 8,000
Unrealized appreciation on open contracts - 19,299
Cash - 60,578
------------ ------------
Total Assets $ 2,054,722 $ 2,263,838
============ ============
Liabilities & Partners' Capital:
Accounts payable and accrued expenses 91,570 11,983
Redemptions payable to limited
partners, net 33,924 58,531
Accrued brokerage commissions 10,054 11,939
Net unrealized depreciation on open
contracts 529 -
------------ ------------
Total Liabilities 136,077 82,453
Partners' Capital:
General Partner 454,520 458,401
Limited Partners (12,861 Limited
Partnership Units outstanding
- at September 30, 1998) 1,464,125 1,722,984
------------ ------------
Total Partners' Capital 1,918,645 2,181,385
------------ ------------
Total Liabilities and Partners' Capital $ 2,054,722 $ 2,263,838
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MILLBURN CURRENCY FUND II, L.P.
Statements of Operations
For the three months ended September 30, 1998 and 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Realized Gain(Loss) on Closed
Currency Contracts (241,043) 92,503
Change in Unrealized Gain(Loss) on
Open Currency Contracts 205,720 (10,408)
Interest Income 34,932 33,507
------------ ------------
$ (391) $ 115,602
Expenses:
Brokerage Commissions 29,324 40,308
Administrative 4,838 6,203
------------ ------------
$ 34,162 $ 46,511
============ ============
Net Income(Loss) $ (34,553) $ 69,091
Net Income(Loss) allocated to General Partner $ ( 960) $ 20,193
Net Income(Loss) allocated to Limited Partners $ (33,593) $ 48,898
Increase(Decrease) in Redemption Value
for each Unit outstanding throughout
each period $ (2.55) $ 3.07
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MILLBURN CURRENCY FUND II, L.P.
Statements of Operations
For the nine months ended September 30, 1998 and 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Realized Gain(Loss) on Closed
Currency Contracts (307,838) 722,367
Change in Unrealized Gain(Loss) on
Open Currency Contracts 214,409 (185,945)
Interest Income 90,614 101,347
------------ ------------
$ (2,815) $ 637,769
Expenses:
Brokerage Commissions 95,846 126,860
Administrative 15,288 18,992
------------ ------------
$ 111,134 $ 145,852
============ ============
Net Income(Loss) $ (113,949) $ 491,917
Net Income(Loss) allocated to General Partner $ (3,881) $ 101,641
Net Income(Loss) allocated to Limited Partners $ (110,068) $ 390,276
Increase(Decrease) in Redemption Value
for each Unit outstanding throughout
each period $ (8.10) $ 21.58
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MILLBURN CURRENCY FUND II, L.P.
Statements of Partners' Capital
For the nine months ended September 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------ ------------ ------------
<S> <C> <C> <C>
Partners' Equity at
December 31, 1997 (14,130 Units) 1,722,984 458,401 2,181,385
Redemption of 1,269 Units (148,791) - (148,791)
Net Gain(Loss) in Partnership
Equity (110,068) (3,881) (113,949)
------------ ------------ ------------
Partnership Equity at
September 30, 1998 (12,861 Units) 1,464,125 454,520 1,918,645
============ ============ ============
Redemption Value per Unit
at September 30, 1998 113.84
============
</TABLE>
Statements of Cash Flows
For the nine months ended September 30, 1998 and 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income(Loss) (113,949) 491,917
Adjustments to reconcile Net Income
(Loss) to Net Cash Flows from
Operating Activities:
Decrease (Increase) in Equity in
Futures and Forward Trading Accounts (74,751) (729,534)
(Decrease) Increase in Accrued Expenses (13,715) (122,387)
------------ ------------
Net Cash Flows from Operating Activities (202,415) (360,004)
Cash Flows from Financing Activities:
Redemption of Limited and General
Partner Units and Unit Equivalents (173,398) (447,589)
------------ ------------
Net Change in Cash (375,813) (807,593)
Cash - Beginning of Year 479,059 1,074,094
------------ ------------
Cash - End of Period 103,246 266,501
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MILLBURN CURRENCY FUND II, L.P. NOTES TO FORM 10-Q
These interim consolidated financial statements do not include all the
disclosures contained in the annual financial statements. These interim
statements have been prepared by management without audit by Independent
Public Accountants. The consolidated statements of financial condition has
been derived from the audited financial statements as of December 31, 1997.
The consolidated results of operation as displayed, should not be considered
indicative of results to be expected for the entire year.
Management discussion and analysis of the consolidated financial statements
for the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
30-Sep-98 31-Dec-97
------------- -------------
<S> <C> <C>
Ending Equity $ 2,054,722 $ 2,181,385
</TABLE>
The net assets decreased 5.81% in the first three quarters of 1998. This
was a result of redemptions from the fund and net losses on trading.
Currency markets were quite changeable at the start of 1998. In January, the
swift reversal of a dollar uptrend produced losses on long dollar positions
versus Europe and Japan. In February, increased volatility led to widespread
losses in both dollar based and cross rate trading. Finally, in March,
currency markets were profitable primarily due to yen weakness versus U.S.
dollars, German marks and Canadian dollars. U.S. dollar strength relative to
a number of continental currencies also resulted in significant profits from
other long dollar positions in March.
Currency markets were erratic during the second quarter. A dollar up-trend
versus the European currencies at the end of March was reversed abruptly at
the beginning of April and losses were sustained on long dollar positions
against the German, Swiss, Danish, Spanish, French, Italian, and Norwegian
currencies. Meanwhile, small profits were made trading far eastern currencies
and emerging markets currencies in Eastern Europe. In May, short positions
in the yen versus the U.S. dollar, Deutschemark, Swiss franc, and Canadian
dollar were profitable, but only slightly outweighed losses produced in other
currency trading. In June, yen developments dominated the currency landscape.
The yen weakened rapidly at first and then surged strongly on central bank
intervention. On balance, our yen trading versus the dollar was profitable,
but there were losses compiled on yen crosses against Canadian dollars, Swiss
francs, and German marks.
Third quarter 1998 foreign exchange performance was influenced primarily by
developments in the US dollar. As the quarter commenced, the Fund's long
dollar positions, especially vis-`-vis the European currencies, produced
losses as the US currency's up-trend faltered and reversed. By August,
however, when a dollar down-trend became firmly established, short dollar
positions versus these same European currencies were quite profitable. Cross
rate trading was slightly profitable during the quarter while exotic currency
trading had no appreciable impact. Overall, significant gains during
September did not offset completely the losses registered in July and August.
<PAGE>
The Year 2000 Computer Issue
Many existing computer systems use only two digits to refer to a year.
This technique can cause the systems to treat the year 2000 as 1900, an
effect commonly known as the "Year 2000 Problem." The Partnership, like
other financial and business organizations, depends on the smooth
functioning of computer systems and could be adversely affected if the
computer systems on which it relies do not properly process and calculate
date-related information concerning dates on or after January 1, 2000.
The General Partner administers the business of the Partnership through
various systems and processes maintained by the General Partner. The
General Partner's modifications for Year 2000 compliance are proceeding
and are expected to be completed, with respect to mission-critical systems,
by April 1999, and, with respect to other systems, by July 1999. The
expenses incurred to date by the General Partner in preparing for Year 2000
compliance have not had a material adverse impact on the General Partner's
financial position, and the expenses to be incurred in becoming fully
Year 2000 compliant are not expected to have a material adverse impact on
the General Partner's financial position. The Partnership itself has no
systems or information technology applications relevant to its operations
and, thus, has no expenses related to addressing the Year 2000 Problem.
In addition to the General Partner, the Partnership is dependent on the
capability of the Currency Dealers and other third parties with which the
Partnership has material relationships to prepare adequately for the
Year 2000 Problem and its impact on their systems and processes. The
General Partner is currently implementing procedures to monitor the
progress of the Currency Dealers and other third parties with which
the Partnership has a material relationship in addressing their Year 2000
issues.
The most likely and most significant risk to the Partnership associated
with the lack of Year 2000 readiness is the failure of third parties,
including the Currency Dealers and various regulators, to resolve their
Year 2000 issues in a timely manner. This risk could involve the temporary
inability to transfer funds electronically or to determine the Net Asset
Value of the Partnership, in which case redemption payments could be delayed
until the Partnership's assets could be valued and/or funds could be
transferred. If the General Partner believes, prior to December 31, 1999,
that any third party has failed to resolve a Year 2000 issue likely to have
a material adverse impact on the Partnership, the General Partner will
attempt to close any Partnership positions carried by such third party or
exposed to such third party's failure to resolve its Year 2000 issue and
to cease trading with or through such third party until such issue is
resolved.
<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, in the City of New York
and State of New York on the 28th day of October, 1998.
THE MILLBURN CURRENCY FUND II, L.P.
By: Millburn Ridgefield Corporation,
General Partner
By /s/ Tod A. Tanis October 28, 1998
Tod A. Tanis
Vice-President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL CONDITION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 103,246
<SECURITIES> 1,950,947
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,054,722
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,054,722
<CURRENT-LIABILITIES> 136,077
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,918,645
<TOTAL-LIABILITY-AND-EQUITY> 2,054,722
<SALES> 0
<TOTAL-REVENUES> -2,815
<CGS> 0
<TOTAL-COSTS> 95,846
<OTHER-EXPENSES> 15,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> -113,949
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> -113,949
<EPS-PRIMARY> -8.10
<EPS-DILUTED> -8.10
</TABLE>
