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, 1998
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, 1998 and December 31,
1997. 3
Statement of Income and Expenses and
Partners' Capital for the three and
nine months ended September 30,
1998 and 1997. 4
Notes to Financial Statements 5 - 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10 - 11
PART II - Other Information 12 - 13
2
<PAGE>
PART I
Item 1. Financial Statements
F-1000 FUTURES FUND L.P., SERIES VIII
STATEMENT OF FINANCIAL CONDITION
September 30, December 31,
1998 1997
ASSETS: ----------- -----------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $1,849,050 $2,088,122
Net unrealized appreciation
on open futures contracts 305,287 105,253
Zero Coupons, $5,744,000 and $6,720,000
principal amount in 1998 and 1997,
respectively, due November 15, 1998
at market value (amortized cost
$5,705,694 and $6,373,685 in 1998 and 1997,
respectively) 5,712,638 6,404,564
---------- ----------
7,866,975 8,597,939
Receivable from SSB on sale of Zero Coupons 174,011 316,203
Interest receivable 5,771 7,301
__________ __________
$8,046,757 $8,921,443
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 19,508 $ 20,452
Management fees 4,498 4,777
Incentive fees 9,552 -
Other 36,529 27,140
Redemptions payable 235,837 417,546
---------- ----------
305,924 469,915
---------- ----------
Partners' Capital:
General Partner, 175 Unit 235,837 220,092
equivalents outstanding in 1998 and 1997
Limited Partners, 5,569 and 6,545
Units of Limited Partnership
Interest outstanding in 1998
and 1997, respectively 7,504,996 8,231,436
---------- ----------
7,740,833 8,451,528
---------- ----------
$8,046,757 $8,921,443
========== ==========
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,
---------------------------- ----------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains on closed positions $ 299,008 $ 221,930 $ 277,836 $ 594,228
Change in unrealized gains/losses on open
positions 285,725 (74,451) 200,034 (33,539)
____________ ____________ ____________ ____________
584,733 147,479 477,870 560,689
Less, brokerage commissions and clearing fees
($885, $2,033, $2,808 and $6,691, respectively) (56,716) (90,042) (172,056) (341,161)
____________ ____________ ____________ ____________
Net realized and unrealized gains 528,017 57,437 305,814 219,528
Gain on sale of Zero Coupons 177 29,944 2,583 29,947
Unrealized depreciation
on Zero Coupons (8,213) (6,427) (23,935) (34,503)
Interest income 107,722 158,252 337,180 593,928
____________ ____________ ____________ ____________
627,703 239,206 621,642 808,900
____________ ____________ ____________ ____________
Expenses:
Management fees 12,548 19,637 38,023 75,367
Incentive fees 9,552 10,943 9,552 103,698
Other 11,139 12,201 36,995 40,110
____________ ____________ ____________ ____________
33,239 42,781 84,570 219,175
____________ ____________ ____________ ____________
Net income 594,464 196,425 537,072 589,725
Redemptions (235,837) (6,849,694) (1,247,767) (7,730,182)
____________ ____________ ____________ ____________
Net increase (decrease) in Partners' capital 358,627 (6,653,269) (710,695) (7,140,457)
Partners' capital, beginning of period 7,382,206 15,438,624 8,451,528 15,925,812
____________ ____________ ____________ ____________
Partners' capital, end of period $ 7,740,833 $ 8,785,355 $ 7,740,833 $ 8,785,355
------------ ------------ ------------ ------------
Net asset value per Unit
(5,744 and 7,062 Units outstanding
at September 30, 1998 and 1997, respectively) $ 1,347.64 $ 1,244.03 $ 1,347.64 $ 1,244.03
------------ ------------ ------------ ------------
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 100.44 $ (4.85) $ 89.97 $ 24.97
------------ ------------ ------------ ------------
</TABLE>
4
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F-1000 FUTURES FUND L.P., SERIES VIII
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(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 nine years from
the date trading commenced ("Zero Coupons"). The Partnership commenced trading
on August 18, 1992.
The Partnership will mature and dissolve on November 16, 1998, the day on
which the Zero Coupons mature.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. On September 1, 1998, the Partnership's
commodity broker, Smith Barney Inc., merged with Salomon Brothers Inc and
changed its name to Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of
the General Partner. The General Partner is wholly owned by Salomon Smith Barney
Holdings Inc. ("SSBH"), which is the sole owner of SSB. SSBH is a wholly owned
subsidiary of Travelers Group Inc. All trading decisions are being made for the
Partnership by TrendLogic Associates, Inc. and Willowbridge Associates, Inc.
(collectively, the "Advisors"). (see Note 5)
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, 1998 and the results of its operations for the three
and nine months ended September 30, 1998 and 1997. 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, 1997.
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, 1998
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1998 and 1997 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
Net realized and unrealized
gains (losses) $ 89.21 $ (19.76) $ 53.42 $ (8.22)
Realized and unrealized
gains (losses) on Zero
Coupons (1.36) 1.13 (3.40) (0.88)
Interest income 18.20 17.51 53.46 51.40
Expenses (5.61) (3.73)* (13.51) (17.33)
--------- --------- --------- ---------
Increase (decrease) for
period 100.44 (4.85)* 89.97 24.97
Net Asset Value per Unit,
beginning of period 1,247.20 1,248.88 1,257.67 1,219.06
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,347.64 $1,244.03 $1,347.64 $1,244.03
========= ========= ========= =========
* The amount shown per Unit for the three months ended September 30, 1997 does
not accord with 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.
6
<PAGE>
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 statements of income and expenses.
The Customer Agreement between the Partnership and SSB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The fair value of these commodity interests, including options
thereon, at September 30, 1998 and December 31, 1997 was $305,287 and $105,253,
respectively, and the average fair value during the nine and twelve months then
ended, based on monthly calculation, was $139,206 and $244,769, respectively.
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.
7
<PAGE>
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 SSB.
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 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, 1998, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $19,015,446 and $3,009,982, respectively as detailed below. All
of these instruments mature within one year of September 30, 1998. However, due
to the nature of the Partnership's business, these instruments may not be held
to maturity. At September 30, 1998, the fair value of the Partnership's
derivatives, including options thereon, was $305,287, as detailed below.
SEPTEMBER 30, 1998
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- - Exchange Traded Contracts $ 2,998,821 $ 130,800 $ 45,603
- - OTC Contracts 2,820,232 2,204,447 (1,929)
Energy 242,010 - 13,454
Grains - 40,425 38
Interest Rates U.S. 3,241,914 - 103,234
Interest Rates Non-U.S. 9,360,658 - 141,363
Metals 157,160 276,112 (10,110)
Softs 77,644 112,598 3,315
Indices 117,007 245,600 10,319
----------- ----------- -----------
Totals $19,015,446 $ 3,009,982 $ 305,287
=========== =========== ===========
8
<PAGE>
At December 31, 1997, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was $21,529,467
and $8,858,310, respectively, and the fair value of the Partnership's
derivatives, including options thereon, was $105,253, as detailed below.
DECEMBER 31, 1997
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- - Exchange Traded Contracts $ 202,585 $ 1,829,465 $ 17,345
- - OTC Contracts 3,702,679 4,624,068 1,395
Energy - 182,630 17,385
Grains 577,300 121,450 (18,332)
Interest Rates U.S. 6,535,568 353,531 11,956
Interest Rates Non-U.S. 9,072,755 760,257 42,805
Livestock - 96,120 3,800
Metals 447,114 444,880 55,902
Softs 690,870 264,150 (33,857)
Indices 300,596 181,759 6,854
----------- ----------- -----------
Totals $21,529,467 $ 8,858,310 $ 105,253
=========== =========== ===========
5. Subsequent Event:
On October 8, 1998, Travelers Group Inc. merged with Citicorp Inc. and
changed its name to Citigroup Inc.
9
<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 1998.
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, 1998, Partnership capital
decreased 8.4% from $8,451,528 to $7,740,833. This decrease was attributable to
the redemption of 976 Units, resulting in an outflow of $1,247,767 which was
partially offset by net income from operations of $537,072 during the nine
months ended September 30, 1998. .
The Partnership will mature and dissolve on November 16, 1998, the day on
which the Zero Coupons mature.
Results of Operations
During the Partnership's third quarter of 1998, the net asset value per
Unit increased 8.1% from $1,247.20 to $1,347.64, as compared to the third
quarter of 1997 in which the net asset value per Unit decreased 0.4%. The
Partnership experienced a net trading gain before brokerage commissions and
related fees in the third quarter of 1998 of $584,733. These gains were
primarily attributable to the trading of commodity futures in currencies,
energy, U.S. and non- U.S. interest rates, livestock and indices partially
offset by losses in grains, metals and softs. The Partnership experienced a net
trading gain in the third quarter of 1997 of $147,479. These gains were
recognized in the trading of currencies, energy products, non-U.S. interest
rates, indices and metals and were partially offset by losses in grains, softs,
livestock and U.S. interest rates.
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
10
<PAGE>
major price trends and the ability of the Advisors to identify 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, 1998 decreased by $50,530 and
$256,748, respectively, compared to the corresponding periods in 1997, 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 fees for the three
and nine months ended September 30, 1998 decreased by $33,326 and $169,105,
respectively, as compared to the corresponding periods in 1997.
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, 1998 decreased by $7,089 and $37,344, respectively, as compared to
the corresponding periods in 1997.
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. Trading performance for the three and nine
months ended September 30, 1998 resulted in incentive fees of $9,552. Trading
performance for the three and nine months ended September 30, 1997 resulted in
incentive fees of $10,943 and $103,698, respectively.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Partnership is subject to SEC Financial Reporting Release No. 48,
regarding quantitative and qualitative disclosures of market risk and will
comply with the disclosure and reporting requirements in its Form 10-K as of
December 31, 1998.
12
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Between May 1994 and the present, Salomon Brothers Inc. ("SBI"),
Smith Barney Inc. ("SB") and The Robinson Humphrey Company, Inc.
("R-H"), all currently subsidiaries of Salomon Smith Barney Holdings
Inc. ("SSBH"), along with a number of other broker-dealers, were
named as defendants in approximately 25 federal court lawsuits and
two state court lawsuits, principally alleging that companies that
make markets in securities traded on NASDAQ violated the federal
antitrust laws by conspiring to maintain a minimum spread of $.25
between the bid and asked price for certain securities. The federal
lawsuits and one state court case were consolidated for pre-trial
purposes in the Southern District of New York in the fall of 1994
under the caption In re NASDAQ Market-Makers Antitrust Litigation,
United States District Court, Southern District of New York No.
94-CIV-3996 (RWS); M.D.L. No. 1023. The other state court suit,
Lawrence A. Abel v. Merrill Lynch & Co., Inc. et al.; Superior Court
of San Diego, Case No. 677313, has been dismissed without prejudice
in conjunction with a tolling agreement.
In consolidated action, the plaintiffs purport to represent a class
of persons who bought one or more of what they currently estimate to
be approximately 1,650 securities on NASDAQ between May 1, 1989 and
May 27, 1994. They seek unspecified monetary damages, which would be
trebled under the antitrust laws. The plaintiffs also seek
injunctive relief, as well as attorney's fees and the costs of the
action. (The state cases seek similar relief.) Plaintiffs in the
consolidated action filed an amended consolidated complaint that
defendants answered in December 1995. On November 26, 1996, the
Court certified a class composed of retail purchasers. A motion to
include institutional investors in the class and to add class
representatives was granted. In December 1997, SBI, SB and R-H,
along with several other broker-dealer defendants, executed a
settlement agreement with the plaintiffs. This agreement has been
preliminarily approved by the U.S. District Court for the Southern
District of New York but is subject to final approval.
On July 17, 1996, the Antitrust Division of the Department of
Justice filed a complaint against a number of firms that act as
market makers in NASDAQ stocks. The complaint basically alleged that
a common understanding arose among NASDAQ market makers which
13
<PAGE>
worked to keep quote spreads in NASDAQ stocks artificially wide.
Contemporaneous with the filing of the complaint, SBI, SB and other
defendants entered into a stipulated settlement agreement, pursuant
to which the defendants would agree not to engage in certain
practices relating to the quoting of NASDAQ securities and would
further agree to implement a program to ensure compliance with
federal antitrust laws and with the terms of the settlement. In
entering into the stipulated settlement, SBI and SB did not admit
any liability. There are no fines, penalties, or other payments of
monies in connection with the settlement. In April 1997, the U.S.
District Court for the Southern District of New York approved the
settlement. In May 1997, plaintiffs in the related civil action (who
were permitted to intervene for limited purposes) appealed the
district court's approval of the settlement. The appeal was argued
in March 1998 and was affirmed in August 1998.
The Securities and Exchange Commission ("SEC") is also conducting a
review of the NASDAQ marketplace, during which it has subpoenaed
documents and taken the testimony of various individuals including
SBI and SB personnel. In July 1996, the SEC reached a settlement
with the National Association of Securities Dealers and issued a
report detailing certain conclusions with respect to the NASD and
the NASDAQ market.
In December 1996, a complaint seeking unspecified monetary damages
was filed by Orange County, California against numerous brokerage
firms, including SB, in the U.S. Bankruptcy Court for the Central
District of California. Plaintiff alleged, among other things, that
the defendants recommended and sold to plaintiff unsuitable
securities. The case (County of Orange et al. v. Bear Stearns & Co.
Inc. et al.) has been stayed by agreement of the parties.
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
14
<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: 11/12/98
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: 11/12/98
By
Daniel A. Dantuono
Chief Financial Officer and
Director
Date:
15
<PAGE>
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<CIK> 0000883573
<NAME> F-1000 FUTURES FUND L.P., SERIES VIII
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,849,050
<SECURITIES> 6,017,925
<RECEIVABLES> 179,782
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,046,757
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<TOTAL-ASSETS> 8,046,757
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0
0
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<SALES> 0
<TOTAL-REVENUES> 621,642
<CGS> 0
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<OTHER-EXPENSES> 84,570
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