UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units
of Limited
Partnership
Interest
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [X]
As of February 28, 1999 Limited Partnership Units with an aggregate value of
$1,360.52 were outstanding and held by non-affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
Item 1. Business.
(a) General development of business. F-1000 Futures Fund L.P., Series
IX (the "Partnership") is a limited partnership organized on August 25, 1992
under the Partnership Laws of the State of New York. The Partnership engages in
speculative trading of commodity interests, including forward contracts on
foreign currencies, commodity options, if applicable, and commodity futures
contracts including futures contracts on United States Treasuries and certain
other financial instruments, foreign currencies and stock indices. The
Partnership maintains a portion of its assets in principal amounts stripped from
U.S. Treasury Bonds under the Treasury's STRIPS program ("Zero Coupons") which
payments will be due May 15, 1999. The Partnership uses the Zero Coupons and its
other assets to margin its commodities account.
A total of 50,000 Units of Limited Partnership Interest in the
Partnership (the "Units") were offered to the public. A Registration Statement
on Form S-1 relating to the public offering of 50,000 units became effective on
August 25, 1992. Between November 24, 1992 and March 8, 1993, 23,755 Units were
sold to the public at $1,000 per Unit. Proceeds of the offering along with the
General Partners' contribution of $249,000 were held in escrow until March 9,
1993 at which time an aggregate of $24,005,000 was turned over to the
Partnership and the Partnership commenced trading operations. Redemptions for
the years ended December 31, 1998, 1997 and 1996 are reported in the Statement
of Partners' Capital on page F-6 under "Item 8. Financial Statements and
Supplementary Data".
2
<PAGE>
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. On October 8, 1998
Travelers Group Inc. merged with Citicorp Inc. and changed its name to Citigroup
Inc. SSBH is a wholly owned subsidiary of Citigroup Inc.
The Partnership's trading of futures contracts on commodities is done
on United States and foreign commodity exchanges. It engages in such trading
through a commodity brokerage account maintained with SSB. Under the Limited
Partnership Agreement of the Partnership (the "Limited Partnership Agreement"),
the General Partner administers the business and affairs of the Partnership. As
of December 31, 1998 all commodity trading decisions are made for the
Partnership by Trendview Management, Inc. and Rabar Market Research, Inc.
("Rabar"), (collectively, the "Advisors"). Neither of the Advisors is affiliated
with the General Partner or SSB. The Advisors are not responsible for the
organization or operation of the Partnership. Pursuant to the terms of the
Management Agreements (the "Management Agreements"), the Partnership is
obligated to pay each Advisor: (i) a monthly management fee equal to 1/6 of 1%
of the Net Assets of the Partnership allocated to each Advisor as of the end of
each month (2% per year) and (ii) an incentive fee payable quarterly (Rabar will
be paid on an annual basis), equal to 20% of the New Trading Profits (as defined
in the Management Agreements) of the Partnership.
The Customer Agreement provides that the Partnership will pay SSB a
3
<PAGE>
monthly brokerage fee equal to .71% of month-end Net Assets allocated to the
Advisors (8.5% per year) in lieu of brokerage commissions on a per trade basis.
SSB will pay a portion of its brokerage fees to its financial consultants who
have sold Units and who are registered as associated persons with the Commodity
Futures Trading Commission (the "CFTC"). The Partnership will pay for National
Futures Association ("NFA") fees, exchange and clearing fees, give-up and user
fees and floor brokerage fees. Brokerage fees will be paid for the life of the
Partnership, although the rate at which such fees are paid may be changed. The
Customer Agreement between the Partnership and SSB gives the Partnership the
legal right to net unrealized gains and losses.
In addition, SSB will pay the Partnership interest on 75% of the
average daily equity maintained in cash in its account during each month at the
rate equal to the average noncompetitive yield of 13-week U.S. Treasury Bills as
determined at the weekly auctions thereof during the month.
SSBH has agreed to contribute up to $50,000,000 to the Partnership's
capital without recourse to the Partnership, the General Partner or SSB to
enable the Partnership to meet its margin obligations to SSB. As a result of the
agreement, the Partnership should not have to liquidate its Zero Coupons prior
to their due date except to fund redemptions, and investors who remain limited
partners until dissolution of the Partnership should receive an amount at least
equal to their initial investment. The General Partner will provide a copy of
SSBH's annual report as filed with the SEC to any limited partner requesting it.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
4
<PAGE>
interests (including, but not limited to, futures contracts, options and forward
contracts on U.S. Treasuries, other financial instruments, foreign currencies,
stock indices and physical commodities). The Partnership does not engage in
sales of goods or services. The Partnership's net income (loss) from operations
for the years ended December 31, 1998, 1997, 1996, 1995 and 1994 are set forth
under "Item 6. Selected Financial Data." Partnership capital as of December 31,
1998 was $6,601,095.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through
(xii) - Not applicable.
(xiii) - The Partnership has no employees.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales. The Partnership does not engage in
sales of goods or services, and therefore this item is not applicable.
Item 2. Properties.
The Partnership does not own or lease any properties. The General Partner
operates out of facilities provided by its affiliate, SSB.
Item 3. Legal Proceedings.
There are no material legal proceedings pending against the Partnership
or the General Partner. This section describes the major legal proceedings,
other than ordinary routine litigation incidental to the business, to which
SSBH, the parent company of this General Partner or its subsidiaries is a party
or to which any of their property is subject.
In September 1992, Harris Trust and Savings Bank (as trustee for
5
<PAGE>
Ameritech Pension Trust ("APT"), Ameritech Corporation, and an officer of
Ameritech filed suit against Salomon Brothers Inc. ("SBI") and Salomon Brothers
Realty Corporation ("SBRC") in the U.S. District Court for the Northern District
of Illinois (Harris Trust Savings Bank, not individually but solely as trustee
for the Ameritech Pension Trust, Ameritech Corporation and John A. Edwardson v.
Salomon Brothers Inc and Salomon Brothers Realty Corp.). The second amended
complaint alleges that three purchases by APT from defendants of participation
interests in net cash flow or resale proceeds of three portfolios of motels
owned by Motels of America, Inc. ("MOA"), as well as a fourth purchase by APT of
a similar participation interest with respect to a portfolio of motels owned by
Best Inns, Inc. ("Best"), violated the Employee Retirement Income Security Act
("ERISA"), and that the purchase of the participation interests for the third
MOA portfolio and for the Best portfolio violated the Racketeer Influenced and
Corrupt Organization Act ("RICO") and state law. SBI had acquired the
participation interests in transactions in which it purchased as principal
mortgage notes issued by MOA and Best to finance purchases of motel portfolios;
95% of three such interests and 100% of one such interest were sold to APT for
purchase prices aggregating approximately $20.9 million. Plaintiffs' second
amended complaint seeks (a) judgment on the ERISA claims for the purchase prices
of the four participation interests (approximately $20.9 million), for
rescission and for disgorgement of profits, as well as other relief, and (b)
judgment on the claims brought under RICO and state law in the amount of $12.3
million, with damages trebled to $37 million on the RICO claims and punitive
damages in excess of $37 million on certain of the state law claims as well as
other relief. The court dismissed the RICO, breach of contract, and unjust
6
<PAGE>
enrichment claims. The court also found that defendants did not qualify as an
ERISA fiduciary and dismissed the claims based on that allegation. Defendants
moved for summary judgment on the sole remaining claim. The motion was denied,
and defendants appealed to the U.S. Court of Appeals for the Seventh Circuit.
Defendants are awaiting a decision.
Both the Department of Labor and the Internal Revenue Service have
advised SBI that they were or are reviewing the transactions in which APT
acquired such participation interests. With respect to the Internal Revenue
Service review, SSBH, SBI and SBRC have consented to extensions of time for the
assessment of excise taxes that may be claimed to be due with respect to the
transactions for the years 1987, 1988 and 1989. In August 1996, the IRS sent
SSBH, SBI and SBRC what appeared to be draft "30-day letters" with respect to
the transactions and SSBH, SBI and SBRC were given an opportunity to comment on
whether the IRS should issue 30-day letters, which would actually commence the
assessment process. In October 1996, SSBH, SBI and SBRC submitted a memorandum
setting forth reasons why the IRS should not issue 30-day letters with respect
to the transactions.
In December 1996, a complaint seeking unspecified monetary damages was
filed by Orange County, California against numerous brokerage firms, including
Smith Barney, in the U.S. Bankruptcy Court for the Central District of
California (County of Orange et al. v. Bear Stearns & Co. Inc. et al.).
Plaintiff alleges, among other things, that defendants recommended and sold to
plaintiff unsuitable securities and that such transactions were outside the
scope of plaintiff's statutory and constitutional authority (ultra vires).
Defendants' motion for summary judgment was granted with respect to the ultra
7
<PAGE>
vires claims in February 1999. The court allowed the filing of an amended
complaint asserting claims based on alleged breaches of fiduciary duty.
In June 1998, complaints were filed in the U.S. District Court for the
Eastern District of Louisiana in two actions (Board of Liquidations, City Debt
of the City of New Orleans v. Smith Barney Inc. et ano. and The City of New
Orleans v. Smith Barney Inc. et ano.), in which the City of New Orleans seeks a
declaratory judgment that Smith Barney Inc. and another underwriter are
responsible for any damages that the City may incur in the event the Internal
Revenue Service denies tax exempt status to the City's General Obligation
Refunding Bonds Series 1991. The Company filed a motion to dismiss the
complaints in September 1998, and the complaints were subsequently amended. The
Company has filed a motion to dismiss the amended complaints.
In November 1998, a purported class action complaint was filed in the
United States District Court for the Middle District of Florida (Dwight Brock as
Clerk for Collier County v. Merrill Lynch, et al.). The complaint alleges that,
pursuant to a nationwide conspiracy, 17 broker-dealer defendants, including SSB,
charged excessive mark-ups in connection with advanced refunding transactions.
The Company intends to contest this complaint vigorously. Environmental Matters
In July 1996, the City and County of Denver ("Denver") enacted an ordinance
imposing a substantial fee on any radioactive waste or radium-contaminated
8
<PAGE>
material disposed of in the City of Denver. Under this ordinance, Denver
assessed a subsidiary of Salomon, the S.W. Shattuck Chemical Company, Inc.
("Shattuck"), $9.35 million for certain disposal already carried out. Shattuck
sued to enjoin imposition of the fee on constitutional grounds. The United
States also sued, seeking to enjoin imposition of the fee on constitutional
grounds. Denver counterclaimed and moved to add SSBH as a defendant for past
costs. These cases have been consolidated before the U.S. District Court in
Colorado, which granted Shattuck's motion for a preliminary injunction enjoining
Denver from enforcing the ordinance during the pendency of the litigation. The
parties have reached a settlement.
The Company and various subsidiaries have also been named as defendants
in various matters incident to and typical of the businesses in which they are
engaged. These include numerous civil actions, arbitration proceedings and other
matters in which the Company's broker-dealer subsidiaries have been named,
arising in the normal course of business out of activities as a broker and
dealer in securities, as an underwriter of securities, as an investment banker
or otherwise. In the opinion of the Company's management, none of these actions
is expected to have a material adverse effect on the consolidated financial
condition of the Company and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to the security holders for a vote
during the last fiscal year covered by this report.
9
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters.
(a) Market Information. The Partnership has issued no stock.
There is no established public trading market for the
Units of Limited Partnership Interest.
(b) Holders. The number of holders of Units of Limited
Partnership Interest as of December 31, 1998 was 425.
(c) Distribution. The Partnership did not declare a distribution
in 1998 or 1997.
10
<PAGE>
Item 6. Selected Financial Data. Realized and unrealized trading gains, realized
and unrealized gains (losses) on Zero Coupons, interest income, net income
(loss) and increase (decrease) in net asset value per Unit for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 and total assets at December 31,
1998, 1997, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Realized and unrealized trading
gains net of brokerage commissions
and clearing fees of $217,641,
$258,085, $271,097, $368,786 and
$584,851,respectively $ 177,068 $ 376,313 $ 23,106 $ 420,261 $ 222,464
Realized and unrealized gains
(losses)on Zero Coupons 25,540 42,987 (159,745) 899,375 (1,583,065)
Interest income 366,796 388,224 485,260 623,626 929,636
------------ ------------ ------------ ------------ ------------
$ 539,404 $ 807,524 $ 348,621 $ 1,943,262 $ (430,965)
============ ============ ============ ============ ============
Net Income (loss) $ 448,758 $ 662,979 $ 218,128 $ 1,519,530 $ (945,801)
============ ============ ============ ============ ============
Increase (decrease) in
net asset value per unit $ 89.97 $ 103.28 $ 39.64 $ 128.38 $ (42.92)
============ ============ ============ ============ ============
Total assets $ 6,719,883 $ 7,554,774 $ 8,030,154 $ 11,505,904 $ 15,407,997
============ ============ ============ ============ ============
</TABLE>
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(a) Liquidity. The Partnership does not engage in sales of goods or
services. Its only assets are its equity in its commodity futures trading
account, consisting of cash, Zero Coupons, net unrealized appreciation
(depreciation) on open futures contracts 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. Such
substantial losses could lead to a material decrease in liquidity. To minimize
this risk, the Partnership follows certain policies including:
(1) Partnership funds are invested only in commodity contracts which
are traded in sufficient volume to permit, in the opinion of the Advisors, ease
of taking and liquidating positions.
(2) The Partnership diversifies its positions among various
commodities.
(3) No Advisor will initiate additional positions in any commodity if
such additional positions would result in aggregate positions for all
commodities requiring as margin more than 66-2/3% of the Partnership's assets
allocated to the Advisor.
(4) The Partnership may occasionally accept delivery of a commodity.
Unless such delivery is disposed of promptly by retendering the warehouse
receipt representing the delivery to the appropriate clearing house, the
physical commodity position will be fully hedged.
(5) The Partnership will not employ the trading technique commonly
known as "pyramiding", in which the speculator uses unrealized profits on
existing positions as margin for the purchase or sale of additional positions in
the same or related commodities.
12
<PAGE>
(6) The Partnership will not utilize borrowings except short-term
borrowing if the Partnership takes delivery of any cash commodities.
(7) The Advisors may, from time to time, employ trading strategies such
as spreads or straddles on behalf of the Partnership. The term "spread" or
"straddle" describes a commodity futures trading strategy involving the
simultaneous buying and selling of contracts on the same commodity but involving
different delivery dates or markets and in which the trader expects to earn a
profit from a widening or narrowing of the difference between the prices of the
two contracts.
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
may 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, or to purchase or sell other
financial instruments at specified terms at specified future dates. Each of
these instruments is subject to various risks similar to those relating to the
underlying financial instruments including market and credit risk. 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. (See
also "Item 8. Financial Statements and Supplementary Data.", for further
information on financial instrument risk included in the notes to financial
statements.)
13
<PAGE>
Other than the risks inherent in commodity futures trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in or which are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way. The
Limited Partnership Agreement provides that the General Partner may, at its
discretion, cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following: (i) December 31, 2012;
(ii) at the end of the month in which the Zero Coupons purchased by the
Partnership come due (May, 1999); (iii) the vote to dissolve the Partnership by
limited partners owning more than 50% of the Units; (iv) assignment by the
General Partner of all of its interest in the Partnership or withdrawal,
removal, bankruptcy or any other event that causes the General Partner to cease
to be a general partner under the Partnership Act unless the Partnership is
continued as described in the Limited Partnership Agreement; (v) the Partnership
is required to register under the Investment Company Act of 1940 and the General
Partner determines that dissolution is therefore in the Partnership's best
interest; or (vi) the occurrence of any event which shall make it unlawful for
the existence of the Partnership to be continued.
(b) Capital resources. (i) The Partnership has made no material
commitments for capital expenditures.
(ii) The Partnership's capital will consist of the capital
contributions of the partners as increased or decreased by gains or losses on
commodity futures trading and by expenses, interest income, redemptions of Units
and distributions of profits, if any. Gains or losses on commodity futures
14
<PAGE>
trading cannot be predicted. Market moves in commodities are dependent upon
fundamental and technical factors which the Partnership's Advisors may or may
not be able to identify. Partnership expenses will consist of, among other
things, commissions, management fees and incentive fees. The level of these
expenses is dependent upon the level of trading gains or losses and the ability
of the Advisors to identify and take advantage of price movements in the
commodity markets, in addition to the level of Net Assets maintained.
Furthermore, the Partnership will receive no payment on its Zero Coupons until
their due date. However, the Partnership will accrue interest on the Zero
Coupons and Limited Partners will be required to report as interest income on
their U.S. tax returns in each year their pro rata share of the accrued interest
on the Zero Coupons even though no interest will be paid prior to their due
date. In addition, the amount of interest income payable by SSB is dependent
upon interest rates over which the Partnership has no control.
No forecast can be made as to the level of redemptions in any given
period. A Limited Partner may cause all of his Units to be redeemed by the
Partnership at the Net Asset Value thereof as of the last day of a fiscal
quarter (the "Redemption Date") on fifteen days' written notice to the General
Partner. Redemption fees equal to 4%, 3%, 2% and 1% of Net Asset Value per Unit
redeemed were charged to any Limited Partner who redeemed his Units on the
first, second, third or fourth possible Redemption Dates, respectively. Since
then no redemption fee has been charged. During 1994 and 1993, SSB received
redemption fees of $52,854 and $77,949, respectively. Redemptions of partial
15
<PAGE>
Units or less than all the Units owned by a Limited Partner are not permitted
except at the sole discretion of the General Partner.
For the year ended December 31, 1998, 717 Units were redeemed totaling
$920,005. For the year ended December 31, 1997, 1,083 Units were redeemed
totaling $1,347,403. For the year ended December 31, 1996, 2,810 Units were
redeemed totaling $3,113,939.
For each Unit redeemed the Partnership liquidates $1,000 (principal
amount) of Zero Coupons and will continue to liquidate $1,000 (principal amount)
of Zero Coupons per Unit redeemed. These liquidations will be at market value
which will be less than the amount payable on their due date. Moreover, it is
possible that the market value of the Zero Coupon could be less than its
purchase price plus the original issue discount amortized to date.
(c) Results of operations. For the year ended December 31, 1998,
the net asset value per Unit increased 7.1% from $1,267.44 to $1,357.41. For the
year ended December 31, 1997, the net asset value per Unit increased 8.9% from
$1,164.16 to $1,267.44. For the year ended December 31, 1996, the net asset
value per Unit increased 3.5% from $1,124.52 to $1,164.16.
The Partnership experienced net trading gains of $394,709 before
commissions and expenses for the year ended December 31, 1998. Gains were
attributable to trading in U.S. and non-U.S. interest rates, currencies, grains,
indices and energy and were partially offset by losses in livestock, metals and
softs commodity futures. The Partnership experienced a realized gain of $161 on
16
<PAGE>
Zero Coupons liquidated in conjunction with the redemption of Units during 1998
and unrealized appreciation of $25,379 on Zero Coupons during 1998.
The Partnership experienced net trading gains of $634,398 before
commissions and expenses for the year ended December 31, 1997. Gains were
attributable to trading in U.S. and non-U.S. interest rates, currencies, metals,
softs and indices and were partially offset by losses in livestock, grains and
energy commodity futures. The Partnership experienced a realized loss of $8,752
on Zero Coupons liquidated in conjunction with the redemption of Units during
1997 and unrealized appreciation of $51,739 on Zero Coupons during 1997. The
Partnership experienced net trading gains of $294,203 before commission and
expenses for the year ended December 31, 1996. Gains were attributable to the
trading of commodity futures in currencies, energy products and interest rates
and were partially offset by losses in the trading of commodity futures in
metals, agricultural products and indices.
The Partnership experienced a realized loss of $46,071 on Zero Coupons
liquidated in conjunction with the redemption of Units during 1996 and
unrealized depreciation of $113,674 on Zero Coupons during 1996. 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
those price trends correctly. Price trends are influenced by, among other
things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
17
<PAGE>
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 gain capital from operations.
(d)Operational Risk
The Company is directly exposed to market risk and credit risk, which
arise in the normal course of its business activities. Slightly less direct, but
of critical importance, are risks pertaining to operational and back office
support. This is particularly the case in a rapidly changing and increasingly
global environment with increasing transaction volumes and an expansion in the
number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement Risk - the risk of financial and opportunity loss and
legal liability attributable to operational problems, such as inaccurate pricing
of transactions, untimely trade execution, clearance and/or settlement, or the
inability to process large volumes of transactions. The Company is subject to
increased risks with respect to its trading activities in emerging market
securities, where clearance, settlement, and custodial risks are often greater
than in more established markets.
Technological Risk - the risk of loss attributable to technological
limitations or hardware failure that constrain the Company's ability to gather,
process, and communicate information efficiently and securely, without
interruption, with customers, among units within the Company, and in the markets
where the Company participates.
Legal/Documentation Risk - the risk of loss attributable to deficiencies in the
18
<PAGE>
documentation oftransactions (such as trade confirmations) and customer
relationships (such as master netting agreements) or errors that result
in noncompliance with applicable legal and regulatory requirements.
Financial Control Risk - the risk of loss attributable to limitations in
financial systems and controls. Strong financial systems and controls ensure
that assets are safeguarded, that transactions are executed in accordance
with management's authorization, and that financial information utilized by
management and communicated to external parties, including the Company's
stockholder, creditors, and regulators, is free of material errors.
Risk of Computer System Failure (Year 2000 Issue)
The Year 2000 issue is the result of existing computers in
many businesses using only two digits to identify a year in the date field.
These computers and programs, often referred to as "information technology,"
were designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results at the Year 2000. Such systems and processes are
dependent on correctly identifying dates in the next century.
The General Partner administers the business of the
Partnership through various systems and processes maintained by SSBH and SSB. In
addition, the operation of the Partnership is dependent on the capability of the
Partnership's Advisors, the brokers and exchanges through which the Advisors
trade, and other third parties to prepare adequately for the Year 2000 impact on
their systems and processes. The Partnership itself has no systems or
information technology applications relevant to its operations.
19
<PAGE>
The General Partner, SSB, SSBH and their parent organization
Citigroup Inc. have undertaken a comprehensive, firm-wide evaluation of both
internal and external systems (systems related to third parties) to determine
the specific modifications needed to prepare for the year 2000. The combined
Year 2000 program in SSB is expected to cost approximately $140 million over the
four years from 1996 through 1999, and involve over 450 people at the peak
staffing level. SSB expects to complete all compliance and certification work by
June 1999. At this time, over 95% of SSBH systems have completed the correction
process and are Year 2000 compliant. Over 73% of the systems have completed
certification testing. The Year 2000 project at SSBH remains on schedule.
The systems and components supporting the General Partner's
business that require remediation have been identified and modifications have
been made to bring them into Year 2000 compliance. Testing of these systems was
completed in the fourth quarter of 1998. Final testing and certification are
expected to be completed by the end of the first quarter of 1999.
This expenditure and the General Partner's resources
dedicated to the preparation for Year 2000 do not and will not have a material
impact on the operation or results of the Partnership.
The General Partner has requested and received statements from
the Advisors that each has undertaken its own evaluation and remediation plans
to identify any of its computer systems that are Year 2000 vulnerable. Each
Advisor has confirmed it is taking immediate actions to remedy those systems as
necessary. The General Partner will continue to inquire into and to confirm each
Advisor's readiness for Year 2000.
20
<PAGE>
The most likely and most significant risk to the Partnership
associated with the lack of Year 2000 readiness is the failure of outside
organizations, including the commodities exchanges, clearing organizations, or
regulators with which the Partnership interacts to resolve their Year 2000
issues in a timely manner. This risk could involve the inability to determine
the value of the Partnership at some point in time and would make effecting
purchases or redemptions of Units in the Partnership infeasible until such
valuation was determinable.
SSB has successfully participated in industry-wide testing
including: The Streetwide Beta Testing organized by the Securities Industry
Association (SIA), a government securities clearing test with the Federal
Reserve Bank of New York, The Depository Trust Company, and The Bank of new
York, and Futures Industry Association participants test. The firm is also
participating in the streetwide testing which commenced in March 1999.
It is possible that problems may occur that would require some
time to repair. Moreover, it is possible that problems will occur outside SSBH
for which SSBH could experience a secondary effect. Consequently, SSBH is
preparing comprehensive, written contingency plans so that alternative
procedures and a framework for critical decisions are defined before any
potential crisis occurs. The goal of Year 2000 contingency planning is a set of
alternate procedures to be used in the event of a critical system failure or a
failure by a supplier or counterparty. Planning work was completed in December
1998, and testing of alternative procedures will be conducted in the first half
of 1999.
21
<PAGE>
European Economic and Monetary Union
European Economic and Monetary Union ("EMU") is an historic event in
Europe involving the unification of currency in eleven major countries. The new
unified currency, called the Euro, is expected to compete on a global scale with
the U.S. Dollar and the Japanese Yen.
Introduction of the Euro began on January 1, 1999, when the European
Central Bank assumed control of the monetary policy for participating nations.
Exchange rates between the participating countries were fixed and the Euro is
available for electronic payments. Also on January 1, 1999, various issuers
re-denominated their securities and harmonized bond payment conventions. A
three-year transition period began on January 1, 1999, after which Euro notes
and coins will be issued by the European Central Bank and national currencies
will be phased out.
The Company completed a successful conversion to the Euro and has
commenced trading and settlement in the new currency with no major exceptions.
As the preceding risks are largely interrelated, so are the Company's
actions to mitigate and manage them. The Company's Chief Administrative Officer
is responsible for, among other things, oversight of global operations
and technology. An essential element in mitigating the risks noted above is the
optimization of information technology and the ability to manage and implement
change. To be an effective competitor in an information-driven business of a
global nature requires the development of global systems and databases that
ensure increased and more timely access to reliable data.
22
<PAGE>
(e) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS
133 requires that an entity recognize all derivatives in the statement of
financial condition and measure those instruments at fair value. SFAS 133 is
effective for fiscal year beginning after June 15, 1999 SFAS 133 is expected to
have no material impact on the financial statements of the Partnership as all
commodity interests are recorded at fair value, with changes therein reported in
the statement of income and expenses.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair market value of
the Partnership's open positions and, consequently, in its earnings and cash
flow. The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and contracts, the
diversification effects among the Partnership's open positions and the liquidity
of the markets in which it trades.
23
<PAGE>
The Partnership rapidly acquires and liquidates both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance, and
the Partnership's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Partnership
could reasonably be expected to lose in a given market sector. However, the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets traded by the Partnership of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's experience to date (i.e., "risk of
ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification
included in this section should not be considered to constitute any assurance or
representation that the Partnership's losses in any market sector will be
limited to Value at Risk or by the Partnership's attempts to manage its market
risk.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's
market risk exposures contain "forward-looking statements" within the meaning of
the safe harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
24
<PAGE>
statements for purposes of the safe harbor except for statements of historical
fact (such as the terms of particular contracts and the number of market risk
sensitive instruments held during or at the end of the reporting period).
The Partnership's risk exposure in the various market sectors traded by
the Advisors is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized or unrealized).
Exchange maintenance margin requirements have been used by the Partnership as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance
margin has been used rather than the more generally available initial margin,
because initial margin includes a credit risk component which is not relevant to
Value at Risk.
In the case of market sensitive instruments which are not exchange
traded (almost exclusively currencies in the case of the Partnership), the
margin requirements for the equivalent futures positions have been used as Value
at Risk. In those rare cases in which a futures-equivalent margin is not
available, dealers' margins have been used.
25
<PAGE>
The fair value of the Partnership's futures and forward positions does
not have any optionality component. However, certain of the Advisors trade
commodity options. The Value at Risk associated with options is reflected in the
following table as the margin requirement attributable to the instrument
underlying each option. Where this instrument is a futures contract, the futures
margin, and where this instrument is a physical commodity, the
futures-equivalent maintenance margin has been used. This calculation is
conservative in that it assumes that the fair value of an option will decline by
the same amount as the fair value of the underlying instrument, whereas, in
fact, the fair values of the options traded by the Partnership in almost all
cases fluctuate to a lesser extent than those of the underlying instruments.
In quantifying the Partnership's Value at Risk, 100% positive
correlation in the different positions held in each market risk category has
been assumed. Consequently, the margin requirements applicable to the open
contracts have simply been added to determine each trading category's aggregate
Value at Risk. The diversification effects resulting from the fact that the
Partnership's positions are rarely, if ever, 100% positively correlated have not
been reflected.
The Partnership's Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of December 31, 1998. All
26
<PAGE>
open position trading risk exposures of the Partnership have been included in
calculating the figures set forth below. As of December 31, 1998, the
Partnership's total capitalization was $6,601,095.
December 31, 1998
% of Total
Market Sector Value at Risk Capitalization
Currencies
-Exchange Traded Contracts $ 17,630 0.27%
-OTC Contracts 15,576 0.24%
Energy 7,840 0.12%
Grains 16,250 0.25%
Interest rates U.S. 3,000 0.05%
Interest rates Non-U.S 72,770 1.10%
Livestock 1,150 0.02%
Metals 33,750 0.51%
Softs 9,754 0.15%
Indices $ 19,206 0.29%
-------- ---------
Total $196,926 3.00%
======== =========
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership
is typically many times the applicable margin requirement (margin requirements
generally range between 2% and 15% of contract face value) as well as the
capitalization of the Partnership. The magnitude of the Partnership's open
positions creates a "risk of ruin" not typically found in most other investment
vehicles. Because of the size of its positions, certain market conditions --
unusual, but historically recurring from time to time -- could cause the
Partnership to incur severe losses over a short period of time. The foregoing
Value at Risk table -- as well as the past performance of the Partnership --
give no indication of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, these balances (as well as any market
risk they represent) are immaterial.
27
<PAGE>
Materiality as used in this section, "Qualitative and Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Partnership's
market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (i) those disclosures that are statements of
historical fact and (ii) the descriptions of how the Partnership manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. The Partnership's primary market risk exposures as well as the
strategies used and to be used by the General Partner and the Advisors for
managing such exposures are subject to numerous uncertainties, contingencies and
risks, any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions, defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased regulation and
many other factors could result in material losses as well as in material
changes to the risk exposures and the management strategies of the Partnership.
28
<PAGE>
There can be no assurance that the Partnership's current market exposure and/or
risk management strategies will not change materially or that any such
strategies will be effective in either the short- or long- term. Investors must
be prepared to lose all or substantially all of their investment in the
Partnership
The following were the primary trading risk exposures of the
Partnership as of December 31, 1998, by market sector.
Interest Rates. Interest rate risk is the principal market exposure of
the Partnership. Interest rate movements directly affect the price of the
futures positions held by the Partnership and indirectly the value of its stock
index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions on the government debt of
smaller nations -- e.g., Australia. The General Partner anticipates that G-7
interest rates will remain the primary market exposure of the Partnership for
the foreseeable future. The changes in interest rates which have the most effect
on the Partnership are changes in long-term, as opposed to short-term, rates.
Consequently, even a material change in short-term rates would have little
effect on the Partnership were the medium- to long-term rates to remain steady.
Currencies. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
29
<PAGE>
general economic conditions. The General Partner does not anticipate that the
risk profile of the Partnership's currency sector will change significantly in
the future, although it is difficult at this point to predict the effect of the
introduction of the Euro on the Advisors' currency trading strategies. The
currency trading Value at Risk figure includes foreign margin amounts converted
into U.S. dollars with an incremental adjustment to reflect the exchange rate
risk inherent to the dollar-based Partnership in expressing Value at Risk in a
functional currency other than dollars.
Stock Indices. The Partnership's primary equity exposure is to equity
price risk in the G-7 countries. The stock index futures traded by the
Partnership are by law limited to futures on broadly based indices. As of
December 31, 1998, the Partnership's primary exposures were in the S&P 500,
Financial Times (England), Nikkei (Japan) and Hang Seng (Hong Kong) stock
indices. The General Partner anticipates little, if any, trading in non-G-7
stock indices. The Partnership is primarily exposed to the risk of adverse price
trends or static markets in the major U.S., European and Japanese indices.
(Static markets would not cause major market changes but would make it difficult
for the Partnership to avoid being "whipsawed" into numerous small losses.)
Metals. The Partnership's primary metal market exposure is to
fluctuations in the price of gold and silver. Although certain of the Advisors
will from time to time trade base metals such as aluminum and copper, the
principal market exposures of the Partnership have consistently been in the
precious metals, gold and silver. The Advisors' gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
30
<PAGE>
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Advisors have from time to time
taken substantial positions as they have perceived market opportunities to
develop. The General Partner anticipates that gold and silver will remain the
primary metals market exposure for the Partnership.
Commodities. The Partnership's primary commodities exposure is to
agricultural price movements which are often directly affected by severe or
unexpected weather conditions. Coffee, cocoa, cotton and sugar accounted for the
substantial bulk of the Partnership's commodity exposure as of December 31,
1998.
Energy. The Partnership's primary energy market exposure is to gas and
oil price movements, often resulting from political developments in the Middle
East. Oil prices are currently depressed, but they can be volatile and
substantial profits and losses have been and are expected to continue to be
experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the
Partnership as of December 31, 1998.
Foreign Currency Balances. The Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds and French francs.
The Advisor regularly converts foreign currency balances to dollars in an
attempt to control the Partnership's non-trading risk.
Securities Positions. The Partnership's only market exposure in
instruments held other than for trading is in its securitities portfolio. The
31
<PAGE>
Partnership maintains a portion of its assets in principal amounts stripped from
U.S. Treasury Bonds under the Treasury's STRIPS program. Violent fluctuations in
prevailing interest rates could cause immaterial mark-to-market losses on the
Partnership's securities.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partner monitors the Partnership's performance and the
concentration of its open positions, and consults with the Advisors concerning
the Partnership's overall risk profile. If the General Partner felt it necessary
to do so, the General Partner could require certain of the Advisors to close out
individual positions as well as enter programs traded on behalf of the
Partnership. However, any such intervention would be a highly unusual event. The
General Partner primarily relies on the Advisors' own risk control policies
while maintaining a general supervisory overview of the Partnership's market
risk exposures. Each Advisor applies its own risk management policies to its
trading. The Advisors often follow diversification guidelines, margin limits and
stop loss points to exit a position. The Advisors' research of risk management
often suggests ongoing modifications to their trading programs.
As part of the General Partner's risk management, the General Partner
periodically meets with the Advisors to discuss their risk management and to
look for any material changes to the Advisors' portfolio balance and trading
echniques. The Advisors are required to notify the General Partner of any
material changes to their programs.
In the unlikely event that the Partnership is required to meet a
32
<PAGE>
margin call in excess of the cash balance in its trading accounts, SSBH will
contribute up to an amount equal to the maturity value of the Zero Coupons held
by the Partnership at the time of such call to the capital of the Partnership to
permit it to meet its margin obligations in excess of its cash balance.
33
<PAGE>
Item 8. Financial Statements and Supplementary Data.
F-1000 FUTURES FUND L.P., SERIES IX
INDEX TO FINANCIAL STATEMENTS
Page
Number
Oath or Affirmation F-2
Report of Independent Accountants. F-3
Financial Statements:
Statement of Financial Condition at
December 31, 1998 and 1997. F-4
Statement of Income and Expenses for
the years ended December 31, 1998,1997
and 1996. F-5
Statement of Partners' Capital for the
years ended December 31, 1998, 1997
and 1996. F-6
Notes to Financial Statements. F-7 - F-11
F-1
Continued
<PAGE>
F-1000 Futures Fund L.P.,
Series IX
To the best of the knowledge and belief of the undersigned, the information
contained herein is accurate and complete.
By: Daniel A. Dantuono, Chief Financial Officer
Smith Barney Futures Management Inc.
General Partner, F-1000 Futures
Fund L.P., Series IX
Smith Barney Futures Management Inc.
390 Greenwich Street
1st Floor
New York, N.Y. 10013
212-723-5424
F-2
<PAGE>
Report of Independent Accountants
To the Partners of
F-1000 Futures Fund L.P., Series IX:
In our opinion, the accompanying statement of financial condition and the
related statements of income and expenses and of partners' capital present
fairly, in all material respects, the financial position of F-1000 Futures Fund
L.P., Series IX at December 31, 1998 and 1997, and the results of its operations
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the management of the General Partner; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by the management
of the General Partner, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 26, 1999
F-3
<PAGE>
F-1000 Futures Fund L.P., Series IX
Statement of Financial Condition
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Assets:
Equity in commodity futures
trading account:
Cash (Note 3c) $1,826,504 $1,869,607
Net unrealized appreciation
on open futures contracts 54,426 189,234
Zero Coupons, $4,863,000 and
$5,580,000 principal amount in
1998, and 1997, respectively, due
May 15, 1999, at fair value
(amortized cost $4,768,298 and
$5,179,077 in 1998 and 1997,
respectively) (Notes 1 and 2) 4,782,517 5,167,917
---------- ----------
6,663,447 7,226,758
Receivable from SSB on sale of Zero Coupons 51,120 321,204
Interest receivable 5,316 6,812
---------- ----------
$6,719,883 $7,554,774
---------- ----------
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 17,175 $ 18,446
Management fees 3,967 4,309
Professional fees 24,137 14,762
Other 2,924 5,113
Redemptions payable (Note 5) 70,585 439,802
---------- ----------
118,788 482,432
---------- ----------
Partners' capital (Notes 1, 5 and 6):
General Partner, 103 Unit equivalents
outstanding in 1998 and 1997 139,813 130,547
Limited Partners, 4,760 and
5,477 Units of Limited Partnership
Interest outstanding in 1998 and
1997, respectively 6,461,282 6,941,795
---------- ----------
6,601,095 7,072,342
$6,719,883 $7,554,774
========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
F-1000 Futures Fund L.P., Series IX
Statement of Income and Expenses
for the years ended
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Income:
Net gains (losses) on trading
of commodity interests:
Realized gains on closed positions $ 529,517 $ 552,356 $ 627,333
Change in unrealized gains/losses
on open positions (134,808) 82,042 (333,130)
--------- --------- ---------
394,709 634,398 294,203
Less, Brokerage commissions including
clearing fees of $5,883, $8,753 and
$9,263, respectively (Note 3c) (217,641) (258,085) (271,097)
--------- --------- ---------
Net realized and unrealized gains 177,068 376,313 23,106
Gains (losses) on sale of Zero Coupons 161 (8,752) (46,071)
Unrealized appreciation
(depreciation) on Zero Coupons 25,379 51,739 (113,674)
Interest income (Notes 2c and 3c) 336,796 388,224 485,260
--------- --------- ---------
539,404 807,524 348,621
--------- --------- ---------
Expenses:
Management fees (Note 3b) 46,577 54,426 56,703
Incentive fees (Note 3b) -- 50,954 20,099
Professional fees 40,028 31,790 39,713
Other expenses 4,041 7,375 6,457
Organization expense (Note 6) -- -- 7,521
--------- --------- ---------
90,646 144,545 130,493
--------- --------- ---------
Net income $ 448,758 $ 662,979 $ 218,128
========= ========= =========
Net income per Unit of Limited
Partnership Interest and General Partner
Unit equivalent (Notes 1 and 6) $ 89.97 $ 103.28 $ 39.64
========= ========= =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
F-1000 Futures Fund L.P., Series IX
Statement of Partners' Capital
for the years ended
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Partners' capital at December 31, 1995 $ 10,536,752 $ 115,825 $ 10,652,577
Net income 214,045 4,083 218,128
Redemption of 2,810 Units of
Limited Partnership Interest (3,113,939) -- (3,113,939)
------------ ------------ ------------
Partners' capital at December 31, 1996 7,636,858 119,908 7,756,766
Net income 652,340 10,639 662,979
Redemptions of 1,083 Units of
Limited Partnership Interest (1,347,403) -- (1,347,403)
------------ ------------ ------------
Partners' capital at December 31, 1997 6,941,795 130,547 7,072,342
Net income 439,492 9,266 448,758
Redemptions of 717 Units of
Limited Partnership Interest (920,005) -- (920,005)
------------ ------------ ------------
Partners' capital at December 31, 1998 $ 6,461,282 $ 139,813 $ 6,601,095
============ ============ ============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
F-1000 Futures Fund L.P.,
Series IX
Notes to Financial Statements
1. Partnership Organization:
F-1000 Futures Fund L.P., Series IX (the "Partnership") is a limited
partnership which was organized on August 25, 1992 under the partnership
laws of the State of New York 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 principal amounts stripped
from U.S. Treasury Bonds under the Treasury's STRIPS program which payments
are due approximately six years from the date trading commenced ("Zero
Coupons"). The Partnership was authorized to sell 50,000 Units during the
public offering period.
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. On October 8, 1998 Travelers Group Inc. merged with Citicorp Inc. and
changed its name to Citigroup Inc. SSBH is a wholly owned subsidiary of
Citigroup Inc.
The General Partner and each limited partner share in the profits and losses
of the Partnership in proportion to the amount of partnership interest owned
by each except that no limited partner shall be liable for obligations of
the Partnership in excess of his initial capital contribution and profits,
if any, net of distributions.
The Partnership will be liquidated upon the first to occur of the following;
at the end of the month in which the Zero Coupons purchased by the
Partnership come due (May 1999), or upon the earlier occurrence of certain
other circumstances set forth in the Limited Partnership Agreement. The
General Partner, in its sole discretion, may elect not to terminate the
Partnership as of the First Payment Date. In the event that the General
Partner elects to continue the Partnership, each limited partner shall have
the opportunity to redeem all or some of his Units.
2. Accounting Policies:
a. All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The
commodity interests are recorded on trade date and open contracts are
recorded in the statement of financial condition at fair value on the
last business day of the year, which represents market value for those
commodity interests for which market quotations are readily available.
Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing on the last
business day of the year. Realized gains (losses) and changes in
unrealized values on commodity interests are recognized in the period in
which the contract is closed or the changes occur and are included in net
gains (losses) on trading of commodity interests.
b. Income taxes have not been provided as each partner is individually
liable for the taxes, if any, on his share of the Partnership's income
and expenses.
c. The original issue discount on the Zero Coupons is being amortized over
their life using the interest method and is included in interest income.
d. Zero Coupons are recorded in the statement of financial condition at fair
value. Realized gain (loss) on the sale of Zero Coupons is determined on
the amortized cost basis of the Zero Coupons at the time of sale.
F-7
<PAGE>
e. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
3. Agreements:
a. Limited Partnership Agreement:
The Limited Partnership Agreement provides that the General Partner shall
manage the business of the Partnership and may make all trading decisions
for the Partnership.
b. Management Agreements:
The General Partner, on behalf of the Partnership, has entered into
Management Agreements with Rabar Market Research, Inc. ("Rabar") and
Trendview Management, Inc. (collectively, the "Advisors"), registered
commodity trading advisors. The Advisors are not affiliated with one
another and none is affiliated with the General Partner or SSB and are
not responsible for the organization or operation of the Partnership. The
Partnership will pay each Advisor a monthly management fee equal to 1/6
of 1% (2% per year) of Net Assets allocated to the Advisor as of the end
of each month. In addition, the Partnership is obligated to pay each
Advisor an incentive fee, payable quarterly (Rabar will be paid on an
annual basis), equal to 20% of the New Trading Profits, as defined, of
the Partnership.
c. Customer Agreement:
The Partnership has entered into a Customer Agreement, which was assigned
to SSB, which provides that the Partnership will pay SSB a monthly
brokerage fee equal to .71 of 1% (8.5% per year) of month-end Net Assets,
in lieu of brokerage commissions on a per trade basis. The Partnership
will pay for National Futures Association ("NFA") fees, exchange and
clearing fees, user, give-up and floor brokerage fees. SSB will pay a
portion of such brokerage fees to its financial consultants who have sold
Units in the Partnership. All of the Partnership's assets are deposited
in the Partnership's account at SSB. The Partnership maintains a portion
of these assets in Zero Coupons and a portion in cash. The Partnership's
cash is deposited by SSB in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At December
31, 1998 and 1997, the amount of cash held for margin requirements was
$220,654 and $416,013, respectively. Brokerage fees will be paid for the
life of the Partnership, although the rate at which such fees are paid
may be changed. SSB has agreed to pay the Partnership interest on 75% of
the average daily equity maintained in cash in its account during each
month at the rate of the average noncompetitive yield of 13-week U.S.
Treasury Bills as determined at the weekly auctions thereof during the
month. The Customer Agreement between the Partnership and SSB gives the
Partnership the legal right to net unrealized gains and losses. The
Customer Agreement may be terminated upon notice by either party.
4. 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. All of the
commodity interests owned by the Partnership are held for trading purposes.
The fair value of these commodity interests, including options thereon, if
applicable, at December 31,1998 and 1997, was $54,426 and $189,234,
respectively, and the average fair value during the years then ended, based
on a monthly calculation, was $113,655 and $210,449, respectively.
F-8
<PAGE>
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner and at such times as the General Partner may decide. A
limited partner may require the Partnership to redeem his Units at their Net
Asset Value as of the last day of a fiscal quarter on 15 days' notice to the
General Partner. Redemptions of partial Units or of less than all the Units
owned by a limited partner are not permitted except at the sole discretion
of the General Partner.
6. Organization and Offering Costs:
Offering and organization expenses of $391,118 relating to issuance and
marketing of the Units offered to the public were paid by SSB's predecessor.
The Partnership has reimbursed SSB for all such expenses from the interest
earned on funds held in its account beginning with the second month of
trading. The Partnership was charged interest at the prime rate on the
unpaid organization expense balance. This interest expense of $4,683 in 1995
has been included in organization expense.
7. Net Asset Value Per Unit:
Changes in the net asset value per Unit of Partnership interest for the
years ended December 31,1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net realized and unrealized gains $ 37.65 $ 56.61 $ 12.46
Net realized and unrealized
gains (losses) on Zero Coupons 4.79 7.36 (14.87)
Interest income 64.95 61.76 56.98
Expenses (17.42) (22.45) (14.93)
--------- --------- ---------
Increase for year 89.97 103.28 39.64
Net asset value per Unit,
beginning of year 1,267.44 1,164.16 1,124.52
--------- --------- ---------
Net asset value per Unit,
end of year $ 1,357.41 $ 1,267.44 $ 1,164.16
========= ========= =========
</TABLE>
8. Guarantee:
SSBH has agreed to contribute up to $50,000,000 to the Partnership's capital
without recourse to the Partnership, the General Partner or SSB to enable
the Partnership to meet its margin obligations to SSB. As a result of the
agreement, the Partnership should not have to liquidate its Zero Coupons
prior to their due date except to fund redemptions, and investors who remain
limited partners until dissolution of the Partnership should receive an
amount at least equal to their initial investment.
9. Financial Instrument Risks:
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 may 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").
F-9
<PAGE>
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 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 on 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.
F-10
<PAGE>
At December 31, 1998, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was
$14,748,019 and $10,922,858, respectively. All of these instruments mature
within one year of December 31, 1998. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity. At
December 31, 1998, the fair value of the Partnership's derivatives,
including options thereon, if applicable, was $54,426, as detailed below.
<TABLE>
<CAPTION>
December 31, 1998
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
<S> <C> <C> <C>
Currencies
- -Exchange Traded Contracts $ 328,575 $ 485,718 $ 6,667
- -OTC Contracts 1,645,975 1,380,492 (14,592)
Energy 14,574 79,026 449
Grains -- 548,944 8,541
Interest Rate Non-U.S 12,300,119 6,007,926 42,277
Interest Rate U.S. -- 1,423,613 (1,838)
Livestock -- 48,560 140
Metals 98,122 686,398 7,015
Softs 45,375 202,215 6,826
Indices 315,279 59,966 (1,059)
----------- ----------- -----------
Total $14,748,019 $10,922,858 $ 54,426
=========== =========== ===========
</TABLE>
At December 31, 1997, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was
$22,485,602 and $13,608,222, respectively, and the fair value of the
Partnership's derivatives, including options thereon, if applicable, was
$189,234, as detailed below.
<TABLE>
<CAPTION>
December 31, 1997
Notional or Contractual
Amount of Commitments
<S> <C> <C> <C>
To Purchase To Sell Fair Value
Currencies $ 365,170 $ 3,009,202 $ 29,903
Energy -- 536,290 27,986
Grains -- 850,281 19,336
Interest Rate Non-U.S 12,259,700 6,105,305 34,668
Interest Rate U.S. 9,068,015 -- 5,997
Livestock -- 531,362 7,310
Metals 767,217 1,788,949 23,225
Softs 25,500 686,993 36,009
Lumber -- 99,840 4,800
----------- ----------- -----------
Total $22,485,602 $13,608,222 $ 189,234
=========== =========== ===========
</TABLE>
10. New Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). SFAS 133 requires that an entity recognize all derivatives in the
statement of financial condition and measure those instruments at fair
value. SFAS 133 is effective for fiscal years beginning after June 15,
1999. SFAS 133 is expected to have no material impact on the financial
statements of the Partnership as all commodity interests are recorded at
fair value, with changes therein reported in the statement of income and
expenses.
F-11
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the last two fiscal years and any subsequent interim period,
no independent accountant who was engaged as the principal accountant to audit
the Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs are
managed by its General Partner, Smith Barney Futures Management Inc.
Investment decisions are made by Trendview Management, Inc. and Rabar Market
Research, Inc. (collectively the "Advisors").
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by Smith Barney Futures Management Inc., its General Partner. SSB, an
affiliate of the General Partner, is the commodity broker for the Partnership
and receives brokerage commissions for such services, as described under "Item
1. Business." Brokerage commissions and clearing fees of $217,641 were paid for
the year ended December 31, 1998. Management fees and incentive fees of $46,577
and $0, respectively, were paid to the Advisors for the year ended December 31,
1998.
34
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a). Security ownership of certain beneficial owners.
The Partnership knows of no person who beneficially owns more than 5% of the
Units outstanding.
(b). Security ownership of management. Under the terms of the
Limited Partnership Agreement, the Partnership's affairs are managed by the
General Partner. The General Partner owns Units of partnership interest
equivalent to 103 (2.1%) Units of Limited Partnership Interest.
(c). Changes in control. None.
Item 13. Certain Relationships and Related Transactions.
Salomon Smith Barney Inc. and Smith Barney Futures Management Inc.
would be considered promoters for purposes of Item 404(d) of Regulation S-K.
The nature and the amounts of compensation each promoter will receive from
the Partnership are set forth under "Item 1. Business." and "Item 11. Executive
Compensation."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements:
Statement of Financial Condition at December 31, 1998
and 1997.
Statement of Income and Expenses for the years ended
December 31, 1998, 1997 and 1996.
35
<PAGE>
Statement of Partners' Capital for the years ended
December 31, 1998, 1997 and 1996.
(2) Financial Statement Schedules: Financial data schedule
for the year ended December 31, 1998.
(3) Exhibits:
3.1 - Limited Partnership Agreement (filed as Exhibit 3.1
- to the Registration Statement on Form S-1 (File No.
33-52460) and incorporated herein by reference).
3.2 - Certificate of Limited Partnership of the Partnership
as filed in the office of the County Clerk of New York
County on August 25, 1992 (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 (File No. 33-52460
and incorporated herein by reference).
10.1 - Customer Agreement between the Partnership and Smith
Barney Shearson Inc. (filed as Exhibit 10.1 to the
Registration Statement on Form S-1 (File No. 33-52460)
and incorporated herein by reference).
10.3 - Escrow Instructions relating to escrow of subscription
funds (filed as Exhibit 10.3 to the Registration
Statement on Form S-1 (File No. 33-52460) and
incorporated herein by reference).
36
<PAGE>
10.5 - Management Agreement among the Partnership, the
General Partner and A. O. Management Corp. (filed as
Exhibit 10.5 to the Registration Statement on Form
S-1 (File No. 33-52460) and incorporated herein by
reference).
10.6 - Management Agreement among the Partnership, the
General Partner and PRAGMA, Inc. (filed as Exhibit
10.6 to the Registration Statement on Form S-1 (File
No. 33-52460) and incorporated herein by reference).
10.7 - Management Agreement among the Partnership, the
General Partner and Rabar Market Research, Inc.
(filed as Exhibit 10.7 to the Registration Statement
on Form S-1 (Filed No. 33-52460) and incorporated
herein by reference).
10.8 - Management Agreement among the Partnership, the
General Partner and Trendview Management, Inc. filed
as Exhibit 10.8 to the Registration Statement on
Form S-1 (File No. 33-52460) and incorporated herein
by reference).
10.9 - Letter dated September 7, 1993 from the General
Partner to A. O. Management Corp. terminating the
Management Agreement (filed as Exhibit 10.9 to Form
10-K for the period ended December 31, 1993 and
incorporated herein by reference).
37
<PAGE>
10.10- Management Agreement among the Partnership, the General
Partner and Reynwood Trading Corp. (filed as Exhibit
10.10 to Form 10-K for the period ended December 31,
1993 and incorporated herein by reference).
10.11- Letter dated July 29, 1994 from the General Partner
to PRAGMA INC. terminating the Management Agreement
(filed as Exhibit 10.11 to Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference).
10.12- Management Agreement among the Partnership, the
General Partner and Friedberg Commodity Management
(filed as Exhibit 10.12 to Form 10-K for the year ended
December 31, 1994 and incorporated herein by
reference).
10.13- Letters dated February 16, 1995 from the General
Partner to Rabar Market Research, Inc., Trendview
Management, Inc. and Friedberg Commodity Management,
Inc. extending Management Agreements to June 30, 1995
(filed as Exhibit 10.13 to Form 10-K for the year ended
December 31, 1995 and incorporated herein by
reference).
10.14- Letter dated March 31, 1995 from the General Partner to
Friedberg Commodity Management, Inc. terminating the
Management Agreement (previously filed).
38
<PAGE>
10.15- Letters extending Management Agreements with Rabar
Market Research Inc. and Trendview Management Inc.
for 1997 and 1996 (filed as Exhibit 10.15 to Form 10-K
for the year ended December 31, 1997 and incorporated
herein by reference).
10.16- Letters extending Management Agreements with Rabar
Market Research Inc. and Trendview Management Inc. for
1998 (filed herein).
(b) Reports on 8-K: None Filed.
39
<PAGE>
Supplemental Information To Be Furnished With Reports Filed Pursuant To
Section 15(d) Of The Act by Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, the Registrant has duly caused this Registration Statement
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 24th day of March 1999.
F-1000 FUTURES FUND L.P., SERIES IX
By: Smith Barney Futures Management Inc.
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III
David J. Vogel, Jack H. Lehman III
Director, Principal Executive Chairman and Director
Officer and President
/s/ Michael R. Schaefer /s/ Daniel A. Dantuono
Michael R. Schaefer Daniel A. Dantuono
Director Treasurer, Chief Financial
Officer and Director
/s/ Daniel R. McAuliffe, Jr. /s/ Steve J. Keltz
Daniel R. McAuliffe, Jr. Steve J. Keltz
Director Secretary and Director
/s/ Shelley Ullman
Shelley Ullman
Director
41
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000892381
<NAME> F-1000 Futures Fund L.P., Series IX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,826,504
<SECURITIES> 4,836,943
<RECEIVABLES> 56,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,719,883
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,719,883
<CURRENT-LIABILITIES> 118,788
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,601,095
<TOTAL-LIABILITY-AND-EQUITY> 6,719,883
<SALES> 0
<TOTAL-REVENUES> 539,404
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 90,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 448,758
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 448,758
<EPS-PRIMARY> 89.97
<EPS-DILUTED> 0
</TABLE>
June 22, 1998
Rabar Market Research
10 Bank St. - Suite 830
White Plain, N.Y. 10606
Attention: Mr. John Dreyer
Mr. Paul Rabar
Re: Management Agreement Renewal
F-1000 Futures Fund L.P., Series IX
Dear Mr. Dreyer & Mr. Rabar:
We are writing with respect to your management agreement concerning the
commodity pool to which reference is made above (the "Management Agreement"). We
would like to extend the term of the Management Agreement through June 30, 1999
and make the attached modification on Rider 1. The incentive fee will now be
paid annually instead of quarterly. All other provisions of the Management
Agreement will remain unchanged.
Please indicate your agreement to and acceptance of this modification by signing
one copy of this letter and returning it to the attention of Mr. Daniel Dantuono
at the address above or fax to 212-723-8985. If you have any questions I can be
reached at 212-723-5416.
Very truly yours,
SMITH BARNEY FUTURES MANAGEMENT INC.
By:
Daniel A. Dantuono
Chief Financial Officer,
Director & Treasurer
AGREED AND ACCEPTED
RABAR MARKET RESEARCH
By:
Print Name:
DAD/sr
June 22, 1998
Trendview Management Inc.
591 Camino de la Reina
Suite 316
San Deigo, California 93208-3105
Attention: Mr. Clark Smith
Re: Management Agreement Renewal
F-1000 Futures Fund L.P., Series IX
Dear Mr. Smith:
We are writing with respect to your management agreement concerning the
commodity pool to which reference is made above (the "Management Agreement"). We
would like to extend the term of the Management Agreement through June 30, 1999
and make the attached modification on Rider 1. Per our recent correspondence to
you, the current allocation is 50% to the Diversified trading system and 50% to
the Currency trading system. All other provisions of the Management Agreement
will remain unchanged.
Please indicate your agreement to and acceptance of this modification by signing
one copy of this letter and returning it to the attention of Mr. Daniel Dantuono
at the address above or fax to 212-723-8985. If you have any questions I can be
reached at 212-723-5416.
Very truly yours,
SMITH BARNEY FUTURES MANAGEMENT INC.
By:
Daniel A. Dantuono
Chief Financial Officer,
Director & Treasurer
AGREED AND ACCEPTED
TRENDVIEW MANAGEMENT INC.
By:
Print Name:
DAD/sr
