<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: JUNE 30, 2000
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 JUNE 30, 2000
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of June 30, 2000
(unaudited) and December 31, 1999 (audited) 3
Schedules of Securities as of June 30, 2000 (unaudited) 4
Statements of Operations for the Three Months and Six Months
Ended June 30, 2000 (unaudited) and 1999 (unaudited) 5
Statements of Changes in Partners' Capital (Net Asset Value)
for the Six Months Ended June 30, 2000
(unaudited) and 1999 (unaudited) 6
Notes to Financial Statements (unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 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
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KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF FINANCIAL CONDITION
June 30, 2000 (Unaudited) and December 31, 1999 (Audited)
------------
June 30, December 31,
2000 1999
------------- -------------
ASSETS
Equity in broker trading accounts
Cash $ 9,346,259 $ 4,036,550
Net option premiums paid 263,585 0
Unrealized gain on open contracts 25,299 61,122
------------- -------------
Deposits with brokers 9,635,143 4,097,672
Cash and cash equivalents 4,132,843 19,355,234
Fixed income securities (cost, including
accrued interest, - $3,542,917 and
$14,658,632) 3,548,338 14,443,563
Subscriptions receivable 0 16,880
------------- -------------
Total assets $ 17,316,324 $ 37,913,349
============= =============
LIABILITIES
Accounts payable $ 29,318 $ 19,710
Commissions and other trading fees on
open contracts 68,766 5,895
Management fees 89,226 132,919
Incentive fees 184,784 0
Due to affiliate 1,000,000 0
Redemptions payable 582,877 2,065,947
------------- -------------
Total liabilities 1,954,971 2,224,471
------------- -------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 53.5807 units outstanding
at June 30, 2000 and December 31, 1999 406,755 630,670
Limited Partners - 1,969.9268 and 2,978.4899
units outstanding at June 30, 2000 and
December 31, 1999 14,954,598 35,058,208
------------- -------------
Total partners' capital
(Net Asset Value) 15,361,353 35,688,878
------------- -------------
$ 17,316,324 $ 37,913,349
============= =============
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
SCHEDULE OF SECURITIES
June 30, 2000
(Unaudited)
------------
FIXED INCOME SECURITIES - 23.1%*
Face Value Description Value
---------- ---------------------- ------
U.S. GOVERNMENT OBLIGATIONS - 17.7%*
1,500,000 United States Treasury Notes, 5.75%, 8/15/2003 $ 1,507,982
700,000 United States Treasury Notes, 6.25%, 10/31/2001 705,046
500,000 United States Treasury Notes, 5.875%, 11/30/2001 498,474
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST, INCLUDING ACCRUED INTEREST, - $2,704,793) 2,711,502
-------------
FEDERAL AGENCY OBLIGATIONS - 5.4%*
400,000 Federal Home Loan Bank, 4.875%, 1/22/2002 396,562
438,957 Federal Home Loan Mortgage Corporation Gold
7-Year Balloon, 6.00%, 8/1/2000 440,274
-------------
TOTAL FEDERAL AGENCY OBLIGATIONS
(COST, INCLUDING ACCRUED INTEREST, - $838,124) 836,836
-------------
TOTAL FIXED INCOME SECURITIES
(COST, INCLUDING ACCRUED INTEREST, - $3,542,917) $ 3,548,338
==============
* PERCENT OF JUNE 30, 2000 NET ASSET VALUE IS SHOWN FOR EACH CATEGORY.
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999 and
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INCOME
Commodity trading gains (losses)
Realized $ (4,063,400) $ 9,295,474 $ (2,486,894) $ 8,692,942
Change in unrealized (589,293) 3,340,211 (35,823) 2,183,834
------------- ------------- ------------- --------------
Gain (loss) from
commodity trading (4,652,693) 12,635,685 (2,522,717) 10,876,776
------------- ------------- ------------- --------------
Fixed income securities gains (losses)
Realized (107,389) (218,493) (301,206) (525,093)
Change in unrealized 98,845 (25,782) 220,490 (208,687)
------------- ------------- ------------- --------------
(Loss) from fixed income
securities (8,544) (244,275) (80,716) (733,780)
------------- ------------- ------------- --------------
Interest income 286,457 618,541 769,395 1,441,471
------------- ------------- ------------- --------------
Total income (loss) (4,374,780) 13,009,951 (1,834,038) 11,584,467
------------- ------------- ------------- --------------
EXPENSES
Brokerage commissions 2,206,828 2,596,424 4,508,484 5,258,128
Management fees 287,112 568,992 648,458 1,143,223
Incentive fees 184,784 717,514 253,339 832,005
General Partner administrative fee
for operating expenses 66,101 153,491 161,833 334,054
Cash management service charge 18,333 15,000 28,833 22,000
Legal expenses 13,269 4,369 15,030 10,695
------------- ------------- ------------- --------------
Total expenses 2,776,427 4,055,790 5,615,977 7,600,105
------------- ------------- ------------- --------------
NET INCOME (LOSS) $ (7,151,207) $ 8,954,161 $ (7,450,015) $ 3,984,362
============= ============= ============= ==============
NET INCOME (LOSS) PER UNIT
(based on weighted average number
of units outstanding during the
period) $ (3,255.65) $ 2,453.98 $ (3,103.87) $ 1,069.45
============= ============= ============= ==============
INCREASE (DECREASE) IN NET
ASSET VALUE PER UNIT $ (3,297.25) $ 2,468.86 $ (4,179.01) $ 1,153.88
============= ============= ============= ==============
</TABLE>
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
------------
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
-----------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
------------------- ---------------------------- ----------------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 2000
------------------------------
Balances at December 31, 1999 53.5807 $ 630,670 2,978.4899 $ 35,058,208 3,032.0706 $ 35,688,878
Net (loss) for six months
ended June 30, 2000 (223,915) (7,226,100) (7,450,015)
Additions 0.0000 0 4.5920 50,000 4.5920 50,000
Redemptions 0.0000 0 (1,013.1551) (12,927,510) (1,013.1551) (12,927,510)
-----------------------------------------------------------------------------------
Balances at June 30, 2000 53.5807 $ 406,755 1,969.9268 $ 14,954,598 2,023.5075 $ 15,361,353
===================================================================================
Six Months Ended June 30, 1999
------------------------------
Balances at December 31, 1998 53.5807 $ 914,497 3,770.9723 $ 64,361,633 3,824.5530 $ 65,276,130
Net income for the six months
ended June 30, 1999 61,825 3,922,537 3,984,362
Additions 0.0000 0 62.4056 1,060,903 62.4056 1,060,903
Redemptions 0.0000 0 (397.4314) (6,736,874) (397.4314) (6,736,874)
-----------------------------------------------------------------------------------
Balances at June 30, 1999 53.5807 $ 976,322 3,435.9465 $ 62,608,199 3,489.5272 $ 63,584,521
===================================================================================
NET ASSET VALUE PER UNIT
------------------------------------------------------
June 30, December 31, June 30, December 31,
2000 1999 1999 1998
$ 7,591.45 $11,770.46 $ 18,221.53 $ 17,067.65
======================================================
</TABLE>
See accompanying notes
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KENMAR PERFORMANCE PARTNER 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 in United States (U.S.)
and foreign futures, options and forward contracts. 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 (SEC) pursuant to the Securities Exchange Act of 1934
(the Act). As a registrant, the Partnership is subject to the
regulations of the SEC and the informational requirements of the
Act.
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) are reflected in the
statement of financial condition. 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.
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 income is recorded on the accrual basis.
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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)
----------------------------------------------------------------------
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.
During the six months ended June 30, 1999, the General Partner rebated
to certain multi-million dollar investors a portion of the compensation
it received for managing the Partnership. Such rebates were made by
issuing additional units and amounted to $148,407 for the six months
ended June 30, 1999. No such rebates to multi-million dollar investors
occurred during the six months ended June 30, 2000.
On June 5, 2000, the Fund received $1,000,000 in error from an
affiliate. Such amount was returned to the affiliate on July 13, 2000
and is reflected in the June 30, 2000 statement of financial
condition as due to affiliate.
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 1/12 of 2% (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).
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------
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% (1% annually) 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 $0 and $7,808 for the six months ended
June 30, 2000 and 1999, 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.
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 FCM'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.
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KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
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 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 does
not require collateral from such financial institutions.
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 and forward 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 General Partner has established procedures to actively monitor
market risk and minimize 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 June 30, 2000, the
statements of operations for the three months and six months ended
June 30, 2000 and 1999, and the statements of changes in partners'
capital (net asset value) for the six months ended June 30, 2000 and
1999, 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 June 30, 2000, and the results of operations for the
three months and six months ended June 30, 2000 and 1999.
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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 different trading systems and may trade in
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
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<PAGE> 12
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 six-month periods ended June 30, 2000 and 1999.
As of June 30, 2000, the Net Asset Value of the Partnership was $15,361,353 a
decrease of approximately 37.45% from its Net Asset Value of $24,560,778 at
March 31, 2000. The Partnership's subscriptions and redemptions for the quarter
ended June 30, 2000 totaled $0 and $2,048,218, respectively. For the quarter
ended June 30, 2000, the Partnership had revenues comprised of $(4,170,789) in
realized losses, $(490,448) in change in unrealized losses and $286,457 in
interest income compared to revenues comprised of $9,076,981 in realized gains,
$3,314,429 in change in unrealized gains and $618,541 in interest income for the
same period in 1999. The total income for the second quarter of 2000 decreased
by $17,384,731 from the same period in 1999, while total expenses decreased by
$1,279,363 between these periods. The Net Asset Value per Unit at June 30, 2000
decreased 30.28% from $10,888.70 at March 31, 2000 to $7,591.45 at June 30,
2000.
The Net Asset Value of the Partnership decreased $20,327,525, or 56.96% from
December 31, 1999 through June 30, 2000. The Partnership's subscriptions and
redemptions for the six months ended June 30, 2000 totaled $50,000 and
$12,927,510, respectively. For the six months ended June 30, 2000, the
Partnership had revenues comprised of $(2,788,100) in realized losses, $184,667
in change in unrealized gains and $769,395 in interest income compared to
revenue comprised of $8,167,849 in realized gains, $1,975,147 in change in
unrealized gains and $1,441,471 in interest income for the same period in 1999.
The total income for the six months of 2000 decreased by $13,418,505 from the
same period in 1999 while expenses decreased by $1,984,128 between these
periods. The Net Asset Value per Unit at June 30, 2000 decreased 35.50% from
$11,770.46 at December 31, 1999 to $7,591.45 at June 30, 2000.
For the reasons described in this Management's Discussion and Analysis, past
performance is not indicative of future results. As a result, any recent
increases in realized or unrealized trading gains may have no bearing on any
results that may be obtained in the future.
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 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.
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.
SAFE HARBOR STATEMENT. The discussions above and under the heading "Item 3.
Quantitative and Qualitative Disclosures About Market Risk" contain 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 could cause the Partnership's actual results, performance or
achievements for 2000 and beyond to differ materially from the results,
performance or achievements expressed in, or implied by, such forward-looking
statements.
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<PAGE> 13
These factors include, without limitation, the factors described above and under
the heading "Item 3. Quantitative and Qualitative Disclosures About Market
Risk."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Derivative instruments involve varying degrees of off-balance sheet market risk.
Changes in the level or volatility of interest rates or foreign currency
exchange rates or the market values of the financial instruments or commodities
underlying such derivative instruments frequently result in changes in the
Partnership's unrealized profit (loss) on such derivative instruments as
reflected in the Statements of Financial Condition included herein. The
Partnership's exposure to market risk is influenced by a number of factors,
including the relationships among derivative instruments held by the
Partnership, as well as the volatility and liquidity of the markets in which the
financial instruments are traded. There has been no material change, during the
six months ended June 30, 2000, in the sources of the Partnership's exposure to
market risk.
The General Partner has procedures in place intended to control the
Partnership's exposure to market risk, although there can be no assurance that
it will, in fact, succeed in doing so. These procedures focus primarily on
monitoring the trading of the Advisors selected from time to time for the
Partnership, calculating the Net Asset Value of the Advisors' respective
Partnership accounts as of the close of business on each day and reviewing
outstanding positions for over-concentrations - both on an Advisor-by-Advisor
and an overall Partnership basis. While the General Partner will not itself
intervene in the markets to hedge or diversify the Partnership's market
exposure, the General Partner may urge Advisors to reallocate positions, or
itself reallocate Partnership assets among Advisors (although typically only as
of the end of a month) in an attempt to avoid over-concentrations. However, such
interventions would be unusual. Except in cases in which it appears that an
Advisor has begun to deviate from past practice or trading policies or to be
trading erratically, the General Partner's basic risk control procedures consist
of the ongoing process of Advisor monitoring and selection, with the market risk
controls being applied by the Advisors themselves.
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<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. The sales qualify as an exempt offering under Rule 506
of Regulation D because they are made solely to "accredited investors," as
defined by Regulation D. 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 second quarter of 2000, 0 Units were sold for a total of $0.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
27 Financial Data Schedule.
B. REPORTS ON FORM 8-K. None.
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<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: August 14, 2000 By: /s/ Esther Eckerling Goodman
----------------------------------------------
Esther Eckerling Goodman
Chief Operating Officer and Senior Executive
Vice President (Duly Authorized Officer of
the General Partner)
Dated: August 14, 2000 By: /s/ Thomas J. DiVuolo
----------------------------------------------
Thomas J. DiVuolo
Senior Vice President (Principal Financial
and Accounting Officer of the Registrant)
