<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, 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 __
<PAGE> 2
KENMAR PERFORMANCE PARTNERS L.P.
QUARTER ENDED SEPTEMBER 30, 2000
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of September 30, 2000
(unaudited) and December 31, 1999 (audited) 3
Schedules of Securities as of September 30, 2000 (unaudited) 4
Statements of Operations for the Three Months and Nine Months
Ended September 30, 2000 (unaudited) and 1999 (unaudited) 5
Statements of Changes in Partners' Capital (Net Asset Value)
for the Nine Months Ended September 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
September 30, 2000 (Unaudited) and December 31, 1999 (Audited)
-------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 6,663,060 $ 4,036,550
Unrealized gain on open contracts 27,509 61,122
----------- -----------
Deposits with brokers 6,690,569 4,097,672
Cash and cash equivalents 2,781,815 19,355,234
Fixed income securities (cost, including accrued
interest, - $3,846,910 and $14,658,632) 3,872,333 14,443,563
Subscriptions receivable 0 16,880
----------- -----------
Total assets $13,344,717 $37,913,349
=========== ===========
LIABILITIES
Accounts payable $ 38,764 $ 19,710
Commissions and other trading fees
on open contracts 3,589 5,895
Management fees 74,850 132,919
Incentive fees 79,925 0
General Partner administrative fee for
operating expenses 23,449 0
Redemptions payable 846,048 2,065,947
----------- -----------
Total liabilities 1,066,625 2,224,471
----------- -----------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 18.7807 and 53.5807 units outstanding
at September 30, 2000 and December 31, 1999 131,932 630,670
Limited Partners - 1,729.0184 and 2,978.4899 units
outstanding at September 30, 2000 and December 31, 1999 12,146,160 35,058,208
----------- -----------
Total partners' capital
(Net Asset Value) 12,278,092 35,688,878
----------- -----------
$13,344,717 $37,913,349
=========== ===========
</TABLE>
See accompanying notes.
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KENMAR PERFORMANCE PARTNERS L.P.
SCHEDULE OF SECURITIES
September 30, 2000
(Unaudited)
------------
FIXED INCOME SECURITIES - 31.5% *
Face Value Description Value
---------- ----------- -----
U.S. GOVERNMENT OBLIGATIONS - 21.6% *
1,430,000 United States Treasury Notes, 5.75%, 8/15/2003 $1,432,866
700,000 United States Treasury Notes, 6.25%, 10/31/2001 718,119
500,000 United States Treasury Notes, 5.875%, 11/30/2001 507,752
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST, INCLUDING ACCRUED INTEREST, - $2,639,325) 2,658,737
----------
FEDERAL AGENCY OBLIGATIONS - 9.9% *
400,000 Federal Home Loan Bank, 4.875%, 1/22/2002 395,814
400,000 Federal Home Loan Mortgage Corporation,
6.25%, 10/15/2002 409,828
400,000 Federal Home Loan Mortgage Corporation,
7.00%, 2/15/2003 407,954
----------
TOTAL FEDERAL AGENCY OBLIGATIONS
(COST, INCLUDING ACCRUED INTEREST, - $1,207,585) 1,213,596
----------
TOTAL FIXED INCOME SECURITIES
(COST, INCLUDING ACCRUED INTEREST, - $3,846,910) $3,872,333
==========
* Percent of September 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 September 30, 2000 and
1999 and For the Nine Months Ended September 30,
2000 and 1999
(Unaudited)
--------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Commodity trading gains (losses)
Realized $ 485,818 $ (4,512,001) $ (2,001,076) $ 4,180,941
Change in unrealized 2,210 (4,887,020) (33,613) (2,703,186)
------------ ------------ ------------ ------------
Gain (loss) from commodity trading 488,028 (9,399,021) (2,034,689) 1,477,755
------------ ------------ ------------ ------------
Fixed income securities gains (losses)
Realized 13,517 (29,833) (287,689) (554,926)
Change in unrealized 20,002 (8,768) 240,492 (217,455)
------------ ------------ ------------ ------------
Gain (loss) from fixed income
securities 33,519 (38,601) (47,197) (772,381)
------------ ------------ ------------ ------------
Interest income 174,465 657,150 943,860 2,098,621
------------ ------------ ------------ ------------
Total income (loss) 696,012 (8,780,472) (1,138,026) 2,803,995
------------ ------------ ------------ ------------
EXPENSES
Brokerage commissions 1,330,708 1,537,793 5,839,192 6,795,921
Management fees 234,330 533,651 882,788 1,676,874
Incentive fees 79,925 21,958 333,264 853,963
General Partner administrative fee
for operating expenses 66,382 154,242 228,215 488,296
Cash management service charge 15,000 14,833 43,833 36,833
Legal expenses 8,174 20,939 23,204 31,634
------------ ------------ ------------ ------------
Total expenses 1,734,519 2,283,416 7,350,496 9,883,521
------------ ------------ ------------ ------------
NET (LOSS) $ (1,038,507) $(11,063,888) $ (8,488,522) $ (7,079,526)
============ ============ ============ ============
NET (LOSS) PER UNIT
(based on weighted average number of
units outstanding during the period) $ (535.24) $ (3,215.55) $ (3,777.86) $ (1,949.92)
============ ============ ============ ============
(DECREASE) IN NET ASSET
VALUE PER UNIT $ (566.56) $ (3,230.59) $ (4,745.57) $ (2,076.71)
============ ============ ============ ============
</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,
2000 and 1999
(Unaudited)
------------------
<TABLE>
<CAPTION>
Partners' Capital
----------------------------------------------------------------------------------
General Limited Total
---------------------- -------------------------- --------------------------
Units Amount Units Amount Units Amount
-------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 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 the nine months
ended September 30, 2000 (254,272) (8,234,250) (8,488,522)
Additions 0.0000 0 4.5920 50,000 4.5920 50,000
Redemptions (34.8000) (244,466) (1,254.0635) (14,727,798) (1,288.8635) (14,972,264)
-------- ------------ ----------- ------------ ----------- ------------
Balances at September 30, 2000 18.7807 $ 131,932 1,729.0184 $ 12,146,160 1,747.7991 $ 12,278,092
======== ============ =========== ============ =========== ============
Nine Months Ended September 30, 1999
Balances at December 31, 1998 53.5807 $ 914,497 3,770.9723 $ 64,361,633 3,824.5530 $ 65,276,130
Net (loss) for the nine months
ended September 30, 1999 (111,272) (6,968,254) (7,079,526)
Additions 0.0000 0 92.5800 1,571,329 92.5800 1,571,329
Redemptions 0.0000 0 (576.6746) (9,691,327) (576.6746) (9,691,327)
-------- ------------ ----------- ------------ ----------- ------------
Balances at September 30, 1999 53.5807 $ 803,225 3,286.8777 $ 49,273,381 3,340.4584 $ 50,076,606
======== ============ =========== ============ =========== ============
</TABLE>
Net Asset Value Per Unit
---------------------------------------------------------------------------
September 30, December 31, September 30, December 31,
2000 1999 1999 1998
---- ---- ---- ----
$7,024.89 $11,770.46 $14,990.94 $17,067.65
========= ========== ========== ==========
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 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. Net
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 nine months ended September 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 $211,845 for the
nine months ended September 30, 1999. No such rebates to multi-million
dollar investors occurred during the nine months ended September 30,
2000.
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).
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.
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<PAGE> 9
KENMAR PERFORMANCE PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
----------------
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 $8,733 for the nine months ended
September 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"). 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.
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.
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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)
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 September 30, 2000,
including the September 30, 2000 schedule of securities, the
statements of operations for the three months and nine months ended
September 30, 2000 and 1999, and the statements of changes in
partners' capital (net asset value) for the nine months ended
September 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 September 30, 2000, and the
results of operations for the three months and nine months ended
September 30, 2000 and 1999.
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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").
During the third quarter, the Partnership eliminated Dennis Trading Group, Hirst
Investment Management and Computer Trading Corporation as Advisors. They were
replaced by IXORCAP, Clarke Capital Management Stonebrook Structured Products,
LLC and Winton Capital Management Limited. In addition, the Partnership
decreased the allocation to Crabel Capital Management and incorporated an
overlay strategy designed to improve risk-adjusted return of the portfolio's
trend followers.
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.
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<PAGE> 12
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 of the Partnership, the Advisors'
trading activities on behalf of the Partnership as a whole and how the
Partnership has performed in the past.
In 1999 and 2000, Commodity Trading Advisors and the managed futures industry
as a whole experienced their worst annualized performance since 1994.
Trend-following CTAs, such as Dennis Trading Group (DTG), until October 2000,
a trading advisor for the Partnership had a particularly difficult time owing
to a marked lack of trends in all but a few markets.
In general, CTAs analyze the movement of prices in the commodity and financial
futures markets to identify trends and the opportunities for profit which
accompany them. Because a CTA can take long or short positions in the futures
markets, the direction of a trend is less important than the existence of a
trend itself. A CTA has the potential to generate profits when prices are
identified as trending downward, by going short or selling ahead of a price
decline, and when prices appear to be trending upward, by going long or buying
ahead of the rise in price. When prices are moving sideways (i.e., with little
movement up or down) or are exhibiting significant short-term volatility (such
as rapid intra-day or inter-day price swings) trends are few and far between,
and CTA profits can be flat or negative.
Some CTAs monitor long-term trends, some intermediate term, a few short-term.
DTG's trading strategy was opportunistic but concentrated largely on long- and
intermediate-term trends. During periods of market volatility, DTG could either
exit the markets or ignore the volatility and maintain position to capture
potential profits over the long-term. As a result, drawdowns, or periods of
negative profits, can be a normal part of the business. The Partnership believes
that DTG's trading strategy, based in part on markets' trends and
counter-trends, was adversely affected by the lack of trends in the markets.
Also, DTG's trading policy, during 1999 and 2000, was to increase leverage in
its positions at the end of a profitable day and to decrease leverage at the
end of a losing day. During 1999 and 2000, there were very few consecutive
profitable days. This meant that in most instances where leverage was increased
at the end of a profitable day it was followed by a losing day thus increasing
the loss. Conversely, since there were very few consecutive profitable days, on
most profitable days DTG had committed the lowest leverage thus decreasing the
profit for that day. The Partnership also believes that this has had an adverse
effect on its 2000 and 1999 results.
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, 2000 and 1999.
As of September 30, 2000, the Net Asset Value of the Partnership was
$12,278,092, a decrease of approximately 20.07% from its Net Asset Value of
$15,361,353 at June 30, 2000. The Partnership's subscriptions and redemptions
for the quarter ended September 30, 2000 totaled $0 and $2,044,754,
respectively. For the quarter ended September 30, 2000, the Partnership had
revenues comprised of $499,335 in realized gains, $22,212 in change in
unrealized gains and $174,465 in interest income compared to revenues comprised
of $(4,541,834) in realized losses, $(4,895,788) in change in unrealized losses
and $657,150 in interest income for the same period in 1999. The total income
for the third quarter of 2000 was $696,012 compared to a loss of $(8,780,472)
for the third quarter of 1999. Total expenses for the third quarter of 2000
decreased by $548,897 from the 3rd quarter of 1999. The Net Asset Value per Unit
at September 30, 2000 decreased 7.46% from $7,591.45 at June 30, 2000 to
$7,024.89 at September 30, 2000. Approximately 84% of the Partnership's net
losses during the third quarter were attributable to interest rates, 8% to
metals, 4% to stock index and 4% to grains.
The Net Asset Value of the Partnership decreased $23,410,786, or 65.60%, from
December 31, 1999 through September 30, 2000. The Partnership's subscriptions
and redemptions for the nine months ended September 30, 2000 totaled $50,000 and
$14,972,264, respectively. For the nine months ended September 30, 2000, the
Partnership had revenues comprised of $(2,288,765) in realized losses, $206,879
in change in unrealized gains and $943,860 in interest income compared to
revenue comprised of $3,626,015 in realized gains, $(2,920,641) in change in
unrealized losses and $2,098,621 in interest income for the same period in 1999.
The total income for the nine months of 2000 decreased by $3,942,021 from the
same period in 1999 while expenses decreased by $2,533,025 between these
periods. The Net Asset Value per Unit at September 30, 2000 decreased 40.32%
from $11,770.46 at December 31, 1999 to $7,024.89 at September 30, 2000.
Approximately 74% of the Partnership's net losses during the third quarter were
attributable to interest rates, 12% to metals, 9% to grains and 5% to energy.
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 or decreases in realized or unrealized trading gains may have no
bearing on any results that may be obtained in the remainder of 2000 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 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
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<PAGE> 13
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. These factors include,
without limitation, risk of failure by third parties to perform according to
contract terms and 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
three and nine months ended September 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 third quarter of 2000, there were no Units sold.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
27 Financial Data Schedule.
B. REPORTS ON FORM 8-K. None.
The Partnership filed a report on Form 8-K dated October 18, 2000,
announcing that Dennis Trading Group, Hirst Investment Management and
Computerized Trading Corporation had been replaced as trading advisors by
IXORCAP, Clarke Capital Management and Winton Capital Management, and that the
allocation to existing trader Crabel Capital Management had been decreased.
Additionally, the Partnership incorporated an overlay strategy designed to
improve risk-adjusted return of the portfolio's trend followers.
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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: November 14, 2000 By: /s/ Kenneth A. Shewer
------------------------------------------------
Kenneth A. Shewer
Chairman
(Duly Authorized Officer of the General Partner)
Dated: November 14, 2000 By: /s/ Thomas J. DiVuolo
------------------------------------------------
Thomas J. DiVuolo
Senior Vice President (Principal Financial
and Accounting Officer of the Registrant)
