FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1997
Commission File Number 0-21584
F-1000 FUTURES FUND L.P., SERIES VIII
(Exact name of registrant as specified in its charter)
New York 13-3653624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(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 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
<PAGE>
F-1000 FUTURES FUND L.P., SERIES VIII
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition at
September 30, 1997 and December 31,
1996. 3
Statement of Income and Expenses and
Partners' Capital for the three and
nine months ended September 30, 1997
and 1996. 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
PART II - Other Information 11
2
<PAGE>
PART I
Item 1. Financial Statements
F-1000 FUTURES FUND L.P., SERIES VIII
STATEMENT OF FINANCIAL CONDITION
September 30, December 31,
1997 1996
ASSETS: ------------- ------------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $ 2,212,931 $ 4,303,482
Net unrealized appreciation
on open futures contracts 79,906 118,727
Zero Coupons, $7,062,000 and $13,064,000
principal amount in 1997 and 1996,
respectively, due November 15, 1998
at market value (amortized cost $6,595,731
and $11,657,073 in 1997 and 1996, respectively) 6,628,181 11,724,026
Commodity options owned, at market value
(cost $39,587 in 1996) 0 31,136
----------- -----------
8,921,018 16,177,371
Receivable from SB on sale of Zero Coupons 244,120 407,583
Interest receivable 7,032 14,197
___________ ___________
$ 9,172,170 $16,599,151
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions 20,484 40,458
Management fees 4,786 9,450
Incentive fees 0 25,715
Other 38,097 42,022
Redemptions payable 323,448 553,453
Commodity options written
at market value (premiums received
$5,410 in 1996) 2,241
----------- -----------
386,815 673,339
----------- -----------
Partners' Capital:
General Partner, 175 Unit 217,706 213,336
equivalents outstanding in 1997 and 1996
Limited Partners, 6,887 and 12,889
Units of Limited Partnership
Interest outstanding in 1997 and 1996,
respectively 8,567,649 15,712,476
----------- -----------
8,785,355 15,925,812
----------- -----------
$ 9,172,170 $16,599,151
See Notes to Financial Statements. =========== ===========
3
<PAGE>
F-1000 FUTURES FUND L.P., SERIES VIII
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
------------------------------- --------------------------------
1997 1996 1997 1996
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ 221,930 $ (387,437) $ 594,228 $ 130,735
Change in unrealized gains/losses on open
positions (74,451) 268,234 (33,539) (174,034)
____________ ____________ ____________ ____________
147,479 (119,203) 560,689 (43,299)
Less, brokerage commissions and clearing fees
($2,033, $3,293 and $6,691, $10,182 respectively) (90,042) (116,914) (341,161) (376,375)
____________ ____________ ____________ ____________
Net realized and unrealized gains (losses) 57,437 (236,117) 219,528 (419,674)
Gain on sale of Zero Coupons 29,944 138 29,947 5,127
Unrealized appreciation (depreciation)
on Zero Coupons (6,427) 17,518 (34,503) (339,034)
Interest income 158,252 225,988 593,928 701,823
____________ ____________ ____________ ____________
239,206 7,527 808,900 (51,758)
____________ ____________ ____________ ____________
Expenses:
Management fees 19,637 25,232 75,367 81,440
Other 12,201 15,956 40,110 47,580
Incentive fees 10,943 -- 103,698 6,076
____________ ____________ ____________ ____________
42,781 41,188 219,175 135,096
____________ ____________ ____________ ____________
Net income (loss) 196,425 (33,661) 589,725 (186,854)
Redemptions (6,849,694) (647,535) (7,730,182) (2,470,971)
____________ ____________ ____________ ____________
Net decrease in Partners' capital (6,653,269) (681,196) (7,140,457) (2,657,825)
Partners' capital, beginning of period 15,438,624 16,396,481 15,925,812 18,373,110
____________ ____________ ____________ ____________
Partners' capital, end of period $ 8,785,355 $ 15,715,285 $ 8,785,355 $ 15,715,285
------------ ------------ ------------ ------------
Net asset value per Unit
(7,062 and 13,518 Units outstanding
at September 30, 1997 and 1996, respectively) $ 1,244.03 $ 1,162.54 $ 1,244.03 $ 1,162.54
------------ ------------ ------------ ------------
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (4.85) $ (2.40) $ 24.97 $ (10.19)
------------ ------------ ------------ ------------
</TABLE>
4
<PAGE>
F-1000 FUTURES FUND L.P., SERIES VIII
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. General:
F-1000 Futures Fund L.P., Series VIII (the "Partnership") is a limited
partnership organized under the laws of the State of New York on January 16,
1992 to engage in the speculative trading of a diversified portfolio of
commodity interests, including futures contracts, options and forward contracts.
The commodity interests that are traded by the Partnership are volatile and
involve a high degree of market risk. The Partnership maintains a portion of its
assets in interest payments stripped from U.S. Treasury Bonds under the
Treasury's STRIPS program whose payments are due approximately six years from
the date trading commenced ("Zero Coupons"). The Partnership commenced trading
on August 18, 1992.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner, acts as commodity broker for the Partnership. All trading
decisions are being made for the Partnership by TrendLogic Associates, Inc. and
Willowbridge Associates, Inc. (collectively, the "Advisors"). Chesapeake Capital
Corporation was terminated as an Advisor effective July 31, 1997.
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Partnership's financial
condition at September 30, 1997 and the results of its operations for the three
and nine months ended September 30, 1997 and 1996. These financial statements
present the results of interim periods and do not include all disclosures
normally provided in annual financial statements. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes included in the Partnership's annual report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1996.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
<PAGE>
F-1000 FUTURES FUND L.P., SERIES VIII
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1997 and 1996 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
Net realized and unrealized
losses $ (19.76) $ (16.77) $ (8.22) $ (26.95)
Realized and unrealized
gains (losses) on Zero
Coupons 1.13 1.25 (0.88) (21.66)
Interest income 17.51 16.06 51.40 47.59
Expenses (3.73) (2.94) (17.33) (9.17)
--------- --------- --------- ---------
Increase (decrease) for
period (4.85)* (2.40) 24.97 (10.19)
Net Asset Value per Unit,
beginning of period 1,248.88 1,164.94 1,219.06 1,172.73
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,244.03 $1,162.54 $1,244.03 $1,162.54
========= ========= ========= =========
* The amount shown per Unit for the three months ended September 30,
1997 does not accord with the net income as shown in the Statement of
Income and Expenses for the three months ended September 30, 1997 because
of the timing of redemptions of the Partnership's Units in relation to the
fluctuating values of the Partnership's commodity interests.
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
The Customer Agreement between the Partnership and SB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are
6
<PAGE>
held for trading purposes. The fair value of these commodity interests,
including options thereon, at September 30, 1997 was $79,906 and the average
fair value during the nine months then ended, based on monthly calculation, was
$283,447.
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off- balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
include forwards, futures and options, whose value is based upon an underlying
asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash flows, to purchase or sell other financial
instruments at specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable possibility to be settled
in cash or with another financial instrument. These instruments may be traded on
an exchange or over-the-counter ("OTC"). Exchange traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
associated with exchange traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership is
subject. These monitoring systems allow the General Partner to statistically
analyze actual
7
<PAGE>
trading results with risk adjusted performance indicators and correlation
statistics. In addition, on-line monitoring systems provide account analysis of
futures, forwards and options positions by sector, margin requirements, gain and
loss transactions and collateral positions.
The notional or contractual amounts of these instruments, while not
recorded in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At September 30, 1997, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $12,866,193 and $8,461,675, respectively as detailed below. All
of these instruments mature within one year of September 30, 1997. However, due
to the nature of the Partnership's business, these instruments may not be held
to maturity. At September 30, 1997, the fair value of the Partnership's
derivatives, including options thereon, was $79,906, as detailed below.
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- - Exchange Traded Contracts $ 903,948 $ 195,520 $(1,985)
- - OTC Contracts 2,531,722 2,305,298 (11,878)
Energy 896,569 0 32,980
Grains 344,660 124,700 (13,978)
Interest Rates Non-U.S. 4,116,832 4,572,669 37,363
Interest Rates U.S. 2,854,925 0 3,484
Livestock 136,150 128,250 (550)
Metals 823,859 551,500 24,916
Softs 257,528 287,872 9,139
Indices 0 295,866 415
------------ ----------- -------
Totals $12,866,193 $8,461,675 $79,906
============ =========== =======
5. Pending Merger:
On September 24, 1997, Travelers Group Inc. ("Travelers") and Salomon
Inc ("Salomon") announced an agreement and plan of merger pursuant to which
Salomon will become a wholly owned subsidiary of Travelers and Smith Barney
Holdings Inc., the parent company of Smith Barney Inc. and Smith Barney Futures
Management Inc., will be merged into Salomon forming Salomon Smith Barney
Holdings Inc. The transaction is expected to be completed by year-end 1997.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity futures trading account, consisting of
cash and cash equivalents, Zero Coupons, net unrealized appreciation
(depreciation) on open futures contracts, interest receivable and receivable
from SB on the sale of Zero Coupons. Because of the low margin deposits normally
required in commodity futures trading, relatively small price movements may
result in substantial losses to the Partnership. While substantial losses could
lead to a decrease in liquidity, no such losses occurred during the third
quarter of 1997.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading and Zero Coupons, expenses, interest income, redemptions of Units and
distributions of profits, if any.
For the nine months ended September 30, 1997, Partnership capital
decreased 44.8% from $15,925,812 to $8,785,355. This decrease was attributable
to the redemption of 6,002 Units, resulting in an outflow of $7,730,182 which
was partially offset with net income from operations of $589,725 during the nine
months ended September 30, 1997. Future redemptions can impact the amount of
funds available for investments in commodity contract positions in subsequent
periods.
Results of Operations
During the Partnership's third quarter of 1997, the net asset value per
Unit decreased 0.4% from $1,248.88 to $1,244.03, as compared to the third
quarter of 1996 in which the net asset value per Unit decreased 0.2%. The
Partnership experienced a net trading gain before commissions and expenses in
the third quarter of 1997 of $147,479. These gains were recognized in the
trading of energy products, currencies, non U.S. interest rates, indices and
metals and were partially offset by losses recognized in grains, softs,
livestock and U.S. interest rates. The Partnership experienced a net trading
loss before commissions and expenses in the third quarter of 1996 of $119,203.
These losses were recognized in the trading of commodity futures in agricultural
products, currencies, indices and metals and were partially offset by gains
realized in interest rates and energy products.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify
9
<PAGE>
correctly those price trends. Price trends are influenced by, among other
things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to identify them,
the Partnership expects to increase capital through operations.
Interest income on 75% of the Partnership's daily average equity
maintained in cash was earned on the monthly average 13-week U.S. Treasury bill
yield. Also included in interest income is the amortization of original issue
discount on the Zero Coupons based on the interest method. Interest income for
the three and nine months ended September 30, 1997 decreased by $67,736 and
$107,895, respectively, as compared to the corresponding periods in 1996,
primarily as a result of the effect of redemptions on the Partnership's Zero
Coupons and equity maintained in cash.
Brokerage commissions are calculated on the adjusted net asset value on
the last day of each month and, therefore, vary according to trading performance
and redemptions. Accordingly, they must be compared in relation to the
fluctuations in the monthly net asset values. Commissions and clearing fees for
the three and nine months ended September 30, 1997 decreased by $26,872 and
$35,214, respectively, as compared to the corresponding periods in 1996.
All trading decisions for the Partnership are currently being made by the
Advisors. Management fees are calculated as a percentage of the Partnership's
net asset value as of the end of each month and are affected by trading
performance and redemptions. Management fees for the three and nine months ended
September 30, 1997 decreased by $5,595 and $6,073, respectively, as compared to
the corresponding periods in 1996.
Incentive fees are based on the new trading profits generated by the
Advisors as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor. Incentive fees of $10,943 and $103,698 were
earned for the three and nine months ended September 30, 1997. Incentive fees of
$6,076 were earned during the nine months ended September 30, 1996.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - None
11
<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.
F-1000 FUTURES FUND L.P., SERIES VIII
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/97
Pursuant to the requirements of the Securities 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.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/97
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/12/97
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883573
<NAME> F-1000 Futures Fund L.P., Series VIII
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,212,931
<SECURITIES> 6,708,087
<RECEIVABLES> 251,152
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,172,170
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,172,170
<CURRENT-LIABILITIES> 386,815
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,785,355
<TOTAL-LIABILITY-AND-EQUITY> 9,172,170
<SALES> 0
<TOTAL-REVENUES> 808,900
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 219,175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 589,725
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 589,725
<EPS-PRIMARY> 24.97
<EPS-DILUTED> 0
</TABLE>
