<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998
COMMISSION FILE NUMBER: 0-23950
KENMAR PERFORMANCE PARTNERS L.P.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2751509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (203) 861-1000
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
--- ---
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KENMAR PERFORMANCE PARTNERS L.P.
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition as of September 30, 1998
(unaudited) and December 31, 1997 (audited) 3
Statements of Operations for the Three Months and Nine
Months Ended September 30, 1998 (unaudited) and 1997
(unaudited) 4
Statements of Changes in Partners' Capital (Net Asset Value)
for the Nine Months Ended September 30, 1998 (unaudited)
and 1997 (unaudited) 5
Notes to Financial Statements (unaudited) 6-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-13
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 1998 (unaudited) and December 31, 1997 (audited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 20,326,712 $ 25,448,177
Net option premiums paid (received) (784,862) 155,195
Unrealized gain on open contracts 4,273,328 6,236,877
------------- ------------
Deposits with brokers 23,815,178 31,840,249
Cash and cash equivalents 15,662,615 4,756,235
Fixed income securities (cost, including accrued
interest, - $37,575,831 and $39,579,849) 38,261,892 39,804,349
Other assets 0 78,253
------------- ------------
Total assets $ 77,739,685 $ 76,479,086
============= ============
LIABILITIES
Accounts payable $ 41,815 $ 41,790
Commissions and other trading fees
on open contracts 202,756 634,814
Management fees 208,124 223,863
Incentive fees 3,059,015 13,634
Redemptions payable 1,047,588 8,170,028
------------- ------------
Total liabilities 4,559,298 9,084,129
------------- ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 53.5807 units outstanding at
September 30, 1998 and December 31, 1997 995,403 769,245
Limited Partners - 3,885.5824 and 4,640.7205 units
outstanding at September 30, 1998 and December 31, 1997 72,184,984 66,625,712
------------- ------------
Total partners' capital
(Net Asset Value) 73,180,387 67,394,957
------------- ------------
$ 77,739,685 $ 76,479,086
============= ============
</TABLE>
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1998 and 1997 and
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME
Commodity trading gains (losses)
Realized $20,172,466 $ 9,492,828 $34,300,448 $ 3,290,317
Change in unrealized 1,313,700 5,685,604 (1,963,549) 8,562,760
----------- ----------- ----------- ------------
Gain from commodity trading 21,486,166 15,178,432 32,336,899 11,853,077
----------- ----------- ----------- ------------
Fixed income securities gains (losses)
Realized 76,137 (56,993) 211,740 (244,058)
Change in unrealized 594,279 136,040 461,561 273,506
----------- ----------- ----------- ------------
Gain from fixed income securities 670,416 79,047 673,301 29,448
----------- ----------- ----------- ------------
Interest income 846,729 1,298,941 2,662,714 3,974,683
----------- ----------- ----------- ------------
Total income 23,003,311 16,556,420 35,672,914 15,857,208
----------- ----------- ----------- ------------
EXPENSES
Brokerage commissions 2,697,642 4,085,784 9,886,252 13,276,134
Management fees 544,133 661,610 1,725,926 2,105,089
Incentive fees 3,059,015 145,999 6,062,290 1,403,415
General Partner administrative fee
for operating expenses 143,138 218,217 474,375 758,596
Cash management service charge 22,500 29,160 56,292 77,537
Legal expenses 4,015 9,636 11,888 28,577
----------- ----------- ----------- ------------
Total expenses 6,470,443 5,150,406 18,217,023 17,649,348
----------- ----------- ----------- ------------
NET INCOME (LOSS) $16,532,868 $11,406,014 $17,455,891 $(1,792,140)
=========== =========== =========== ============
NET INCOME (LOSS) PER UNIT
(based on weighted average number of
units outstanding during the period) $ 4,055.59 $ 1,840.87 $ 4,041.46 $ (259.95)
=========== =========== =========== ============
INCREASE (DECREASE) IN NET
ASSET VALUE PER UNIT $ 4,125.44 $ 1,848.48 $ 4,220.90 $ (10.26)
=========== =========== =========== ============
</TABLE>
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Partners' Capital
---------------------------------------------------------------------------
General Limited Total
------------------- ------------------------- -------------------------
Units Amounts Units Amount Units Amount
------------------- ------------------------- -------------------------
Nine Months Ended September 30, 1998
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 53.5807 $769,245 4,640.7205 $ 66,625,712 4,694.3012 $ 67,394,957
Net income for the nine months
ended September 30, 1998 226,158 17,229,733 17,455,891
Additions 0.0000 0 47.5907 733,750 47.5907 733,750
Redemptions 0.0000 0 (802.7288) (12,404,211) (802.7288) (12,404,211)
------- -------- ------------ ------------ ------------ ------------
Balances at September 30, 1998 53.5807 $995,403 3,885.5824 $ 72,184,984 3,939.1631 $ 73,180,387
======= ======== ============ ============ ============ ============
Nine Months Ended September 30, 1997
- ------------------------------------
Balances at December 31, 1996 53.5807 $785,756 7,517.5721 $110,244,519 7,571.1528 $111,030,275
Net (loss) for the nine months
ended September 30, 1997 (550) (1,791,590) (1,792,140)
Additions 0.0000 0 121.3538 1,714,251 121.3538 1,714,251
Redemptions 0.0000 0 (2,099.4687) (28,988,370) (2,099.4687) (28,988,370)
------- -------- ------------ ------------ ------------ ------------
Balances at September 30, 1997 53.5807 $785,206 5,539.4572 $ 81,178,810 5,593.0379 $ 81,964,016
======= ======== ============ ============ ============ ============
</TABLE>
Net Asset Value Per Unit
---------------------------------------------------------------------
September 30, December 31, September 30, December 31,
1998 1997 1997 1996
------------- ------------ ------------- ------------
$ 18,577.66 $ 14,356.76 $ 14,654.65 $ 14,664.91
============= ============ ============= ============
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
----------------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
Kenmar Performance Partners L.P. (the Partnership) is a New York
limited partnership. The Partnership is a multi-advisor,
multi-strategy commodity pool which trades United States (U.S.) and
foreign futures, options, forwards and related markets. It is subject
to the regulations of the Commodity Futures Trading Commission, an
agency of the U.S. government which regulates most aspects of the
commodity futures industry, rules of the National Futures Association,
an industry self-regulatory organization, and the requirements of
commodity exchanges where the Partnership executes transactions.
Additionally, the Partnership is subject to the requirements of
Futures Commission Merchants (FCMs) and interbank market makers
(collectively, "brokers") through which the Partnership trades.
The Partnership is a registrant with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. As a
registrant, the Partnership is subject to the regulation of the
Securities and Exchange Commission.
B. Method of Reporting
The Partnership's financial statements are presented in accordance
with generally accepted accounting principles, which require the use
of certain estimates made by the Partnership's management.
C. Commodities
Gains or losses are realized when contracts are liquidated. Unrealized
gains or losses on open contracts (the difference between contract
purchase price and market price) at the date of the statement of
financial condition are included in equity in broker trading accounts.
Any change in net unrealized gain or loss from the preceding period is
reported in the statement of operations. Brokerage commissions include
other trading fees and are charged to expense when contracts are
opened.
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and investments in money
market mutual funds. Interest income includes interest equivalent
dividends on money market mutual funds.
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(CONTINUED)
-----------
E. Fixed Income Securities
Fixed income securities are reported at market value plus accrued
interest. Fixed income securities transactions are accounted for on
the trade date. Interest is recorded on the accrual basis.
F. Income Taxes
The Partnership prepares calendar year U.S. and state information
tax returns and reports to the partners their allocable shares of
the Partnership's income, expenses and trading gains or losses.
G. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar; however,
it transacts business in currencies other than the U.S. dollar.
Assets and liabilities denominated in currencies other than the U.S.
dollar are translated into U.S. dollars at the rates in effect at
the date of the statement of financial condition. Income and
expense items denominated in currencies other than the U.S. dollar
are translated into U.S. dollars at the rates in effect during the
period. Gains and losses resulting from the translation to U.S.
dollars are reported in income currently.
Note 2. GENERAL PARTNER
---------------
The General Partner of the Partnership is Kenmar Advisory Corp., which
conducts and manages the business of the Partnership. The General
Partner is required by the Limited Partnership Agreement to maintain an
investment in the Partnership of 1% of the Net Asset Value, up to a
total of $500,000.
A portion of the brokerage commissions paid by the Partnership to
certain brokers is, in turn, paid by the brokers to the General
Partner.
Commencing May 31, 1998, the General Partner began rebating to certain
large investors' capital accounts a portion of the fees it receives for
managing the Partnership. For the period May 31, 1998 to September 30,
1998, such rebates amounted to $83,010.
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership has advisory agreements with various commodity trading
advisors pursuant to which the Partnership pays monthly management fees
of 0% to 1/6 of 1% (2% annually) of the net asset value under
management (as defined in the advisory agreements) and quarterly
incentive fees of 15% to 25% of the profit subject to incentive fee (as
defined in the advisory agreements).
Note 4. DEPOSITS WITH BROKERS
---------------------
The Partnership deposits cash with brokers subject to Commodity Futures
Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of cash
with such brokers. The Partnership earns interest income on its cash
deposited with the brokers.
Note 5. OTHER EXPENSES
--------------
The General Partner pays substantially all ordinary operating and
administrative expenses incurred by the Partnership. The Partnership
pays the General Partner a monthly administrative fee equal to 1/12 of
1% of the prior month's beginning Net Asset Value of the Partnership.
The Partnership also pays actual amounts incurred for cash management
services and services performed by independent legal counsel.
Note 6. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
--------------------------------------------
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partner. The subscription price
is equal to the Net Asset Value of the units purchased plus a 5%
selling commission, unless waived in whole or in part by the General
Partner. Additions to partners' capital are shown net of such selling
commissions, which amounted to $5,128 and $14,591 for the nine months
ended September 30, 1998 and 1997, respectively.
The Partnership is not required to make distributions, but may do so at
the sole discretion of the General Partner. A Limited Partner may
request and receive redemption of units owned, subject to restrictions
in the Limited Partnership Agreement.
Note 7. TRADING ACTIVITIES AND RELATED RISKS
------------------------------------
The Partnership engages in the speculative trading of U.S. and foreign
futures contracts, options on U.S. and foreign futures contracts and
forward contracts (collectively, "derivatives"). These derivatives
include both financial and non-financial contracts held as part of a
diversified trading strategy. The Partnership is exposed to both
market risk, the risk arising from changes in the market value of the
contracts, and credit risk, the risk of failure by another party to
perform according to the terms of a contract.
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
Purchase and sale of futures and options on futures contracts requires
margin deposits with the FCMs. Additional deposits may be necessary
for any loss on contract value. The Commodity Exchange Act requires an
FCM to segregate all customer transactions and assets from such FCM's
proprietary activities. A customer's cash and other property (for
example, U.S. Treasury bills) deposited with an FCM are considered
commingled with all other customer funds subject to the FMC's
segregation requirements. In the event of an FCM's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less than
total cash and other property deposited.
The Partnership has a substantial portion of its assets on deposit with
brokers and dealers in securities and other financial institutions in
connection with its trading of forward contracts and its cash
management activities. In the event of a financial institution's
insolvency, recovery of Partnership assets on deposit may be limited to
account insurance or other protection afforded such deposits. In the
normal course of business, the Partnership requires collateral for
repurchase agreements in excess of the face value of such agreements.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk
equal to the value of futures contracts purchased and unlimited
liability on such contracts sold short. As both a buyer and seller of
options, the Partnership pays or receives a premium at the outset and
then bears the risk of unfavorable changes in the price of the contract
underlying the option. Written options expose the Partnership to
potentially unlimited liability, and purchased options expose the
Partnership to a risk of loss limited to the premiums paid.
The fair value of derivatives represents unrealized gains and losses on
open futures and forward contracts and long and short options at market
value. The average fair value of derivatives during the nine months
ended September 30, 1998 and 1997 and the related fair values as of
September 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
For The Nine Months Ended As of
September 30, 1998 September 30, 1997 September 30, 1998 December 31, 1997
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Exchange traded futures and
options on futures contracts $ 4,210,000 $ 6,380,000 $ 3,488,000 $ 6,392,000
Forward contracts 0 (3,000) 0 0
</TABLE>
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<PAGE> 10
KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
Net trading results from derivatives for the three months and nine
months ended September 30, 1998 and 1997 are reflected in the statement
of operations and equal gain from commodity trading less brokerage
commissions. Such trading results reflect the net gain (loss) arising
from the Partnership's speculative trading of futures contracts,
options on futures contracts and forward contracts.
At September 30, 1998 and December 31, 1997, the notional amount of
open contracts is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Derivatives (excluding
purchased options) $744,500,000 $430,100,000 $1,490,800,000 $756,300,000
Purchased options 2,400,000 0 23,900,000 59,600,000
</TABLE>
The above amounts do not represent the Partnership's risk of loss due
to market and credit risk, but rather represent the Partnership's
extent of involvement in derivatives at the date of the statement of
financial condition.
The General Partner has established procedures to actively monitor and
minimize market and credit risk. The Limited Partners bear the risk of
loss only to the extent of the market value of their respective
investments and, in certain specific circumstances, distributions and
redemptions received.
Note 8. INTERIM FINANCIAL STATEMENTS
----------------------------
The statement of financial condition as of September 30, 1998, the
statements of operations for the nine months ended September 30, 1998
and 1997 and for the three months ended September 30, 1998 and 1997
and the statements of changes in partners' capital (net asset value)
for the nine months ended September 30, 1998 and 1997 are unaudited.
In the opinion of management, such financial statements reflect all
adjustments, which were of a normal and recurring nature, necessary
for a fair presentation of financial position as of September 30, 1998
and the results of operations for the nine months ended September 30,
1998 and 1997 and for the three months ended September 30, 1998 and
1997.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The assets of Kenmar Performance Partners L.P. (the "Partnership") are used for
trading, buying, selling, spreading, swapping or otherwise acquiring, holding or
disposing of commodities, futures contracts, forward contracts, foreign exchange
commitments, swap contracts, exchange-for-physicals, spot (cash) commodities and
other items, options on the foregoing, and any rights pertaining to the
foregoing contracts, instruments or investments throughout the world
(collectively, "Commodities") through the retention of professional commodity
trading advisors (the "Advisors").
The assets of the Partnership are deposited with commodity brokers and foreign
exchange dealers (collectively, the "Commodity Brokers") in trading accounts
established by the Partnership for the Advisors and are used by the Partnership
as margin to engage in trading. Such assets are held in either a non-interest
bearing bank account or in securities approved by the Commodity Futures Trading
Commission for investment of customer funds. In addition, certain of the
Partnership's assets may be placed in a custodial account with a cash manager to
maximize the interest earned on assets not committed as margin.
Capital Resources. The Partnership does not have, nor does it expect to have,
any capital assets. Redemptions and sales of units of limited partnership
interests ("Units") in the future will affect the amount of funds available for
trading Commodities in subsequent periods.
There are three primary factors that affect the Partnership's capital resources:
(i) the trading profit or loss generated by the Advisors (including interest
income); (ii) the capital invested or redeemed by the limited partners of the
Partnership (the "Limited Partners"); and (iii) the capital invested or redeemed
by the Partnership's general partner, Kenmar Advisory Corp. (the "General
Partner"). The General Partner has maintained, and has agreed to maintain, at
all times a capital account in such amount, up to a total of $500,000, as is
necessary for the General Partner to maintain a one percent (1%) interest in the
capital, income and losses of the Partnership. All capital contributions by the
General Partner necessary to maintain such capital account balance are evidenced
by units of general partnership interests, each of which has an initial value
equal to the Net Asset Value per Unit (as defined below) at the time of such
contribution. The General Partner, in its sole discretion, may withdraw any
excess above its required capital contribution without notice to the Limited
Partners. The General Partner, in its sole discretion, may also contribute any
greater amount to the Partnership, for which it shall receive, at its option,
additional units of general partnership interests or Units at their then-current
Net Asset Value (as defined below).
"Net Asset Value" is defined as total assets of the Partnership less total
liabilities as determined in accordance with the principles set forth in the
Second Restatement of the Limited Partnership Agreement of the Partnership,
dated September 1, 1993, as amended December 1, 1995 (the "Partnership
Agreement"), or where no such principles are specified therein, in accordance
with United States generally accepted accounting principles applied on a
consistent basis. The term "Net Asset Value Per Unit" is defined in the
Partnership Agreement to mean the Net Asset Value of the Partnership divided by
the number of Units issued and outstanding as of the date of computation.
Results of Operations. The Partnership incurs substantial charges from the
payment of management and/or incentive fees to the Advisors and administrative
fees to the General Partner which are payable based upon the Net Asset Value of
the Partnership and are payable without regard to the profitability of the
Partnership. The brokerage commissions to the Commodity Brokers are also payable
without regard to the profitability of the Partnership, although under certain
circumstances such commissions have been, and may continue to be, higher when
advisors experience profits and, as a result, increase their trading activity.
As a result, in certain years the Partnership has incurred a net loss when
trading profits were not substantial enough to avoid depletion of the
Partnership's assets from such fees and expenses. Thus, due to the nature of the
Partnership's business, the success of the Partnership is dependent upon the
ability of the Advisors to generate trading profits through the speculative
trading of Commodities sufficient to produce capital appreciation after payment
of all fees and expenses.
The Advisors trade in various markets at different times, and prior activity in
a particular market does not mean that such markets will be actively traded by
an Advisor or will be profitable in the future and the Advisors trade
independently of each other using
11
<PAGE> 12
different trading systems and may trade different markets with various
concentrations at various times. Consequently, the results of operations of the
Partnership can only be discussed in the context of the overall trading
activities of the Partnership, the Advisors' trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in the past.
Set forth below is a comparison of the results of operations of the Partnership
for the three-month and nine-month periods ended September 30, 1998 and 1997.
As of September 30, 1998, the Net Asset Value of the Partnership was
$73,180,387, an increase of approximately 21.52% from its Net Asset Value of
$60,222,550 at June 30, 1998. The Partnership's subscriptions and redemptions
for the quarter ended September 30, 1998 totaled $211,868 and $3,786,945,
respectively. For the quarter ended September 30, 1998, the Partnership had
revenues comprised of $20,248,603 in realized gains, $1,907,978 in change in
unrealized gains and $864,729 in interest income, compared to revenues comprised
of $9,435,835 in realized gains, $5,821,644 in change in unrealized gains and
$1,298,941 in interest income for the same period in 1997. Total income for the
third quarter of 1998 increased by $6,446,891 from the same period in 1997,
while total expenses increased by $1,320,037 between these periods. The Net
Asset Value per Unit at September 30, 1998 increased 28.55% from $14,452.22 at
June 30, 1998 to $18,577.66 at September 30, 1998. The Partnership's positive
performance for the quarter ended September 30, 1998 resulted primarily from
gains in global interest rates, European and Pacific Rim stock indices and
energies.
The Net Asset Value of the Partnership increased $5,785,430, or 8.58% from
December 31, 1997 through September 30, 1998. The Partnership's subscriptions
and redemptions for the nine months ended September 30, 1998 totaled $733,750
and $12,404,211, respectively. For the nine months ended September 30, 1998,
the Partnership had revenues comprised of $34,512,188 in realized gains,
($1,501,988) in change in unrealized losses and $2,662,714 in interest income,
compared to revenues comprised of $3,046,259 in realized gains, $8,836,266 in
change in unrealized gains and $3,974,683 in interest income for the same period
in 1997. Total income for the first nine months of 1998 increased by
$19,815,706 from the same period in 1997, while total expenses increased by
$567,675 between these periods. The Net Asset Value per Unit at September 30,
1998 increased 29.40% from $14,356.76 at December 31, 1997 to $18,577.66 at
September 30, 1998. The Partnership's positive performance for the first nine
months of 1998 resulted primarily from gains in global interest rates and
European stock indices.
Past performance is not indicative of future results. As a result, any recent
increases in realized or unrealized trading gains will have no bearing on any
results that may be obtained in the remainder of 1998 and future years.
Liquidity. Although there is no public market for the Units, a Limited Partner
may redeem its Units in the Partnership as of any month-end occurring six months
or more after such investment was made.
With respect to the Partnership's trading, in general, the Partnership's trading
advisors will endeavor to trade only Commodities that have sufficient liquidity
to enable them to enter and close out positions without causing major price
movements. Notwithstanding the foregoing, most United States commodity exchanges
limit the amount by which certain commodities may move during a single day by
regulations referred to as "daily price fluctuation limits" or "daily limits".
Pursuant to such regulations, no trades may be executed on any given day at
prices beyond the daily limits. The price of a futures contract has occasionally
moved the daily limit for several consecutive days, with little or no trading,
thereby effectively preventing a party from liquidating its position. While the
occurrence of such an event may reduce or effectively eliminate the liquidity of
a particular market, it will not limit ultimate losses and may in fact
substantially increase losses because of this inability to liquidate unfavorable
positions. In addition, if there is little or no trading in a particular futures
or forward contract that the Partnership is trading, whether such illiquidity is
caused by any of the above reasons or otherwise, the Partnership may be unable
to execute trades at favorable prices and/or may be unable or unwilling to
liquidate its position prior to its expiration date, thereby requiring the
Partnership to make or take delivery of the underlying interest of the
Commodity.
In addition, certain Advisors trade on futures markets outside the United States
on behalf of the Partnership. Certain foreign exchanges may be substantially
more prone to periods of illiquidity than United States exchanges. Further,
certain Advisors trade forward contracts which are not traded on exchanges;
rather banks and dealers act as principals in these markets. The Commodity
Futures Trading Commission does not regulate trading on non-U.S. futures markets
or in forward contracts.
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<PAGE> 13
The Partnership's trading may also be impacted by the various conflicts of
interest among the Partnership and the General Partner, the Advisors and the
Commodity Brokers.
Year 2000 Compliance. Commodity pools, like financial business organizations
and individuals around the world, depend on the smooth functioning of computer
systems. Many computer systems in use today cannot recognize the computer code
for the year 2000, but revert to 1900 or some other date. This is commonly
known as the "Year 2000 Problem." The Partnership could be adversely affected
if computer systems used by the General Partner or any third party with whom it
has a material relationship do not properly process and calculate date-related
information and data concerning dates on or after January 1, 2000. Such a
failure could have a negative impact on the handling or determination of futures
trades and prices and the services provided to the Partnership.
The General Partner has begun its planning in response to the Year 2000 Problem
and currently has employees specifically working on such response. The General
Partner has developed its own Year 2000 compliance plan to deal with the
potential problems and has taken steps that it believes are reasonably designed
to address the Year 2000 Problem with respect to the computer systems that
relate to the Partnership. This includes hardware and software upgrades,
systems consulting and computer maintenance.
Beyond the challenges facing internal computer systems, the systems failure of
any of the third parties with whom the Partnership has a material
relationship-e.g., the futures exchanges and clearing organizations through
which it trades and the respective Advisors could result in a material financial
risk to the Partnership. Regarding the futures exchanges, all United States
futures exchanges will be subject to the monitoring of the CFTC for their Year
2000 preparedness, and the major foreign futures exchanges are also expected to
be subject to market-wide testing of their Year 2000 compliance during 1999.
With respect to the Advisors, the General Partner intends to monitor their
progress throughout 1999 in their Year 2000 compliance and, where applicable, to
test external interface with the Advisors. Despite the best efforts of the
General Partner, there can be no assurance that the above steps will be
sufficient to avoid any adverse impact to the Partnership, whether from failures
in its own computer systems or those of the Advisors or Commodity Brokers or
other third parties. The cost of Year 2000 compliance has not been, and is not
expected to be, material to the financial condition or operating results of the
Partnership.
Despite the best efforts of the General Partner, there can be no assurance that
the above steps will be sufficient to avoid any adverse impact to the
Partnership, whether from failures in its own computer systems or those of the
Advisors or Commodity Brokers or other third parties. The cost of Year 2000
compliance has not been, and is not expected to be, material to the financial
condition or operating results of the Partnership.
Safe Harbor Statement. The discussion above contains certain "forward-looking
statements" (as such term is defined in Section 21E of the Securities Exchange
Act of 1934) that are based on the beliefs of the Partnership, as well as
assumptions made by, and information currently available to, the Partnership.
Words such as "expects," "anticipates" and similar expressions have been used to
identify "forward-looking statements" but are not the exclusive means of
identifying such statements. A number of important factors should cause the
Partnership's actual results, performance or achievements for 1998 and beyond to
differ materially from the results, performance or achievements expressed in, or
implied by, such forward-looking statements. These factors include, without
limitation, the factors described above.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In September 1985, the Partnership commenced a private placement of Units in
reliance on the exemptions afforded by, among others, Sections 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of Regulation
D promulgated thereunder. Similar reliance has been placed on available
exemptions from securities qualification requirements under applicable state
securities laws. Units are offered monthly at a price per Unit equal to the then
current Net Asset Value per Unit, with a required minimum subscription of
$25,000 for new investors other than individual retirement accounts ("IRAs") and
qualified retirement plans and Keogh Plans ("Plans") and $10,500 for IRAs, Plans
and existing Limited Partners, which minimums may be waived by the General
Partner in its sole discretion. A subscriber may subscribe for Units in excess
of the foregoing minimum amounts. As of the date hereof, the Partnership
continues to offer Units, and there is no maximum number of Units that may be
purchased or sold.
During the third quarter of 1998, 12.9 Units were sold for a total of $211,868.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS. 27 Financial Data Schedule.
B. REPORTS ON FORM 8-K. None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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.
KENMAR PERFORMANCE PARTNERS L.P.
By: Kenmar Advisory Corp., general partner
Dated: November 13, 1998 By: /s/ ROBERT L. CRUIKSHANK
Robert L. Cruikshank
Executive Vice President
(Duly Authorized Officer of the General Partner)
Dated: November 13, 1998 By: /s/ THOMAS J. DIVUOLO
Thomas J. DiVuolo
Senior Vice President (Principal Financial
and Accounting Officer of the Registrant)
15
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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<SECURITIES> 38,261,892
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0
0
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