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 March 31, 1998
Commission File Number 0-21586
F-1000 FUTURES FUND L.P., SERIES IX
(Exact name of registrant as specified in its charter)
New York 13-3678327
(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 IX
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition
at March 31, 1998 and December 31,
1997 3
Statement of Income and Expenses
and Partners' Capital for the three
months ended March 31, 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 IX
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------------------
(Unaudited)
<S> <C> <C>
ASSETS:
Equity in commodity futures trading account:
Cash and cash equivalents $1,795,013 $1,869,607
Net unrealized appreciation
on open futures contracts 42,318 189,234
Zero Coupons, $5,295,000 and $5,580,000
principal amount in 1998 and 1997, respectively,
due May 15, 1999, at market value
(amortized cost $4,981,530 and $5,179,077,
in 1998 and 1997, respectively) 4,975,870 5,167,917
---------- ----------
6,813,201 7,226,758
Receivable from SB on sale of Zero Coupons 239,527 321,204
Interest receivable 6,036 6,812
---------- ----------
$7,058,764 $7,554,774
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 16,871 $ 18,446
Management fees 3,899 4,309
Other 25,525 19,875
Redemption payable 322,195 439,802
---------- ----------
368,490 482,432
---------- ----------
Partners' Capital:
General Partner, 103 Units equivalents
outstanding in 1998 and 1997 130,142 130,547
Limited Partners, 5,192 and 5,477 Units
of Limited Partnership Interest
outstanding in 1998 and 1997, respectively 6,560,132 6,941,795
---------- ----------
6,690,274 7,072,342
---------- ----------
$7,058,764 $7,554,774
========== ==========
</TABLE>
See Notes to Financial statements.
3
<PAGE>
F-1000 FUTURES FUND L.P., SERIES IX
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1997
----------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains on closed positions $ 110,686 $ 423,526
Change in unrealized gains/losses on open
positions (146,916) 146,852
----------- -----------
(36,230) 570,378
Less, brokerage commissions and clearing fees
($2,380 and $2,113, respectively) (57,104) (69,418)
----------- -----------
Net realized and unrealized gains (losses) (93,334) 500,960
Loss on sale of Zero Coupons (400) (4,330)
Unrealized appreciation (depreciation)
on Zero Coupons 5,500 (43,127)
Interest income 88,494 99,146
----------- -----------
260 552,649
----------- -----------
Expenses:
Management fees 11,825 14,738
Other 10,405 13,054
Incentive fees -- 50,954
----------- -----------
22,230 78,746
----------- -----------
Net income (loss) (21,970) 473,903
Redemptions (360,098) (302,644)
----------- -----------
Net increase (decrease) in Partners' capital (382,068) 171,259
Partners' capital, beginning of period 7,072,342 7,756,766
----------- -----------
Partners' capital, end of period $ 6,690,274 $ 7,928,025
=========== ===========
Net asset value per Unit
(5,295 and 6,418 Units outstanding
at March 31, 1998 and 1997, respectively) $ 1,263.51 $ 1,235.28
=========== ===========
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (3.93) $ 71.12
=========== ===========
</TABLE>
4
<PAGE>
F-1000 FUTURES FUND L.P., SERIES IX
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. General
F-1000 Futures Fund L.P., Series IX (the "Partnership") is a limited
partnership organized under the laws of the State of New York on August 25, 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 for which payments are due approximately six years from the date
trading commenced ("Zero Coupons"). The Partnership uses such Zero Coupons and
its other assets to margin its commodities account. The Partnership commenced
trading on March 9, 1993.
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 made for the Partnership by Trendview Management, Inc. and Rabar
Market Research, Inc. (collectively, the "Advisors").
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 March 31, 1998 and the results of its operations for the
three months ended March 31, 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 IX
NOTES TO FINANCIAL STATEMENTS
(continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three months ended March
31, 1998 and 1997 were as follows:
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
-------- ---------
Net realized and unrealized
gains (losses) $ (16.75) $ 75.19
Realized and unrealized gains
(losses) on Zero Coupons 0.90 (7.12)
Interest income 15.88 14.88
Expenses (3.96) (11.83)
--------- ---------
Increase (decrease) for period (3.93) 71.12
Net Asset Value per Unit,
beginning of period 1,267.44 1,164.16
--------- ---------
Net Asset Value per Unit,
end of period $ 1,263.51 $1,235.28
========= =========
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 held for
trading purposes. The fair value of these commodity interests, including options
thereon, at March 31, 1998 and 1997 was $42,318 and $254,044, respectively, and
the average fair value during the three months then ended, based on monthly
calculation was $63,336 and $286,887, 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
6
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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 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 March 31, 1998, the notional or contractual
amounts of the Partnership's commitment to purchase and sell these instruments
was $13,721,329
7
<PAGE>
and $10,212,130, respectively, as detailed below. All of these instruments
mature within one year of March 31, 1998. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity. At March
31, 1998, the fair value of the Partnership's derivatives, including options
thereon, was $42,318 as detailed below.
MARCH 31, 1998
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- Exchange Traded Contracts $ 1,130,738 $ 2,182,668 $ 27,152
- OTC Contracts -- 1,621,603 (2,800)
Energy 74,400 94,612 (515)
Grains 33,024 883,250 33,081
Interest Rate U.S. 1,844 1,884,600 (984)
Interest Rates Non-U.S 10,468,560 2,136,245 (7,518)
Livestock -- 103,840 (1,400)
Metals 1,132,858 1,007,065 (15,951)
Softs 66,225 298,247 300
Indices 813,680 -- 10,953
----------- ----------- -----------
Totals $13,721,329 $10,212,130 $ 42,318
=========== =========== ===========
At March 31, 1997, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was $5,493,446
and $32,778,492, respectively, and the fair value of the Partnership's
derivatives, including options thereon, was $254,044 as detailed below.
MARCH 31, 1997
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- Exchange Traded Contracts $ 610,350 $ 3,330,491 $ 7,104
- OTC Contracts 75,075 75,075 --
Energy -- 152,825 3,388
Grains 2,028,330 -- 119,770
Interest Rates U.S. -- 6,243,783 23,650
Interest Rate Non-U.S 169,420 20,866,232 28,815
Livestock 261,120 -- 880
Metals 1,712,995 1,016,443 37,936
Softs 254,556 519,318 21,624
Indices 381,600 574,325 10,877
----------- ----------- -----------
Totals $ 5,493,446 $32,778,492 $ 254,044
=========== =========== ===========
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 and forward contracts, commodity options and
interest receivable. 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
substantial decrease in liquidity no such losses occurred in the Partnership's
first quarter of 1998.
The Partnership's capital consists of capital contributions, 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 three months ended March 31, 1998, Partnership capital decreased
5.4% from $7,072,342 to $6,690,274. This decrease was attributable to net loss
from operations of $21,970 coupled with the redemption of 285 Units resulting in
an outflow of $360,098 during the three months ended March 31, 1998. 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 first quarter of 1998, the net asset value per
Unit decreased 0.3% from $1,267.44 to $1,263.51 as compared to the first quarter
of 1997 in which the net asset value per Unit increased 6.1%. The Partnership
experienced a net trading loss before commissions and expenses in the first
quarter of 1998 of $36,230. Losses were recognized in the trading of currencies,
U.S. interest rates, grains, livestock, metals and softs and were partially
offset by gains in non-U.S. interest rates, indices and energy products. The
Partnership experienced a net trading gain before commissions and expenses in
the first quarter of 1997 of $570,378. Gains were recognized in the trading of
softs, metals, grains, currencies and indices and were partially offset by
losses in livestock, energy products and 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 major price trends and the ability of the Advisors to
identify
10
<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
months ended March 31, 1998 decreased by $10,652, as compared to the
corresponding period in 1997. The decrease in interest income is primarily due
to 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 months ended March 31, 1998 decreased by $12,314, as compared to the
corresponding period 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 months ended
March 31, 1998 decreased by $2,913, as compared to the corresponding period in
1997.
Incentive fees are based on the new trading profits generated by each
Advisor as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor. Trading performance for the three months ended
March 31, 1998 and 1997 resulted in incentive fees of $0, and $50,954,
respectively.
11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Between May 1994 and the present, Salomon Brothers Inc.
("SBI"), SB and The Robinson Humphrey Company, Inc. ("R-
H"), all currently subsidiaries of Salomon Smith Barney
Holdings Inc. ("SSBHI"), 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 worked to keep
12
<PAGE>
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 is
pending.
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 Sterns & 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
13
<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 IX
By: Smith Barney Futures Management Inc.
(General Partner)
By:
David J. Vogel, President
Date:
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:
David J. Vogel, President
Date:
By:
Daniel A. Dantuono
Chief Financial Officer and
Director
Date:
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 IX
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 5/15/98
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: 5/15/98
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 5/15/98
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000892381
<NAME> F-1000 FUTURES FUND L.P., SERIES IX
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,795,013
<SECURITIES> 5,018,188
<RECEIVABLES> 245,563
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,058,764
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,058,764
<CURRENT-LIABILITIES> 368,490
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,690,274
<TOTAL-LIABILITY-AND-EQUITY> 7,058,764
<SALES> 0
<TOTAL-REVENUES> 260
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,970)
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (21,970)
<EPS-PRIMARY> (3.93)
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</TABLE>
