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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2003
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9202
THE FUTURE FUND
(Exact name of registrant as specified in its charter)
State of jurisdiction or incorporation (Illinois)
IRS EMPLOYER ID NO. #36-3033727
C/O HEINOLD ASSET MANAGEMENT INC.
ONE FINANCIAL PLACE
440 S. LASALLE ST-20 FLOOR
CHICAGO ILLINOIS 60605
PHONE NUMBER (312) 663-7500
SAME
(Former name, former address and former fiscal year, if changed)
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 shortened 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
1
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
4/30/2003 10/31/2002
(UNAUDITED)
ASSETS
Investments in affiliated general partnerships $6,999,648 $6,323,951
Due from affiliated broker 1,880,259 2,653,611
---------- ----------
Total assets $8,879,907 $8,977,562
========== ==========
LIABILITIES & PARTNERS' EQUITY
Brokerage commissions payable to Affiliate $ 51,627 $ 52,230
Redemptions payable 4,487 11,346
Management fees payable to Trading Manager 28,954 29,486
Other 29,593 23,832
---------- ----------
Total liabilities 114,661 116,894
========== ==========
Partners' equity:
General Partner (220 unit equivalents outstanding
at April 30, 2003 and October 31, 2002) 257,057 250,617
Limited Partners (7,282 and 7,558 units outstanding
at April 30, 2003 and October 31, 2002) 8,508,189 8,610,051
---------- ----------
Total partners' equity 8,765,246 8,860,668
---------- ----------
Total liabilities and partners' equity $8,879,907 $8,977,562
========== ==========
Net asset value per outstanding unit of partnership interest $ 1,168.44 $ 1,139.17
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
2
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2003 and 2002 (UNAUDITED)
2003 2002
Equity in income (loss) of affiliated general partnerships:
Net realized trading gains (losses) on closed contracts $ 421,427 $(384,374)
Change in net unrealized gains or losses on open contracts (479,251) 144,388
--------- ---------
(57,824) (239,986)
Interest income 18,923 21,829
--------- ---------
(38,901) (218,157)
Expenses:
Brokerage commissions paid to Affiliate 159,738 145,958
Management fees paid to Trading Manager 89,740 82,350
Incentive fee paid to Trading Manger (13,551) --
Other administrative expenses 12,000 6,200
--------- ---------
Total expenses 247,927 234,508
--------- ---------
Net income (loss) $(286,828) $(452,665)
========= =========
Net income (loss) allocated to General Partner $ (8,411) $ (12,058)
Net income (loss) allocated to Limited Partners $(278,417) $(440,607)
Net income (loss) for a unit of partnership interest (for a unit
outstanding throughout the period) $ (38.25) $ (54.81)
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
3
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 and 2002 (UNAUDITED)
2003 2002
Equity in income (loss) of affiliated general partnerships:
Net realized trading gains (losses) on closed contracts $ 685,339 $ (760,855)
Change in net unrealized gains or losses on open contracts 16,844 (621,992)
----------- -----------
702,183 (1,382,847)
Interest income 38,749 52,525
----------- -----------
740,932 (1,330,322)
Expenses:
Brokerage commissions paid to Affiliate 314,507 304,683
Management fees paid to Trading Manager 177,217 171,303
Incentive fee paid to Trading Manger 16,920 (91,719)
Other administrative expenses 25,000 18,294
----------- -----------
Total expenses 533,644 402,561
----------- -----------
Net income (loss) $ 207,288 $(1,732,883)
=========== ===========
Net income (loss) allocated to General Partner $ 6,440 $ (33,547)
Net income (loss) allocated to Limited Partners $ 200,848 $(1,699,336)
Net income (loss) for a unit of partnership interest (for a unit
outstanding throughout the period) $ 29.27 $ (207.29)
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
4
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
Limited General
Partners Partner Total
----------- ----------- -----------
Partners' equity at October 31, 2002 $ 8,610,051 $ 250,617 $ 8,860,668
Redemption of 276 units of limited partnership (302,710) -- (302,710)
interest
Net income 200,848 6,440 207,288
----------- ----------- -----------
Partners' equity at April 30, 2003 $ 8,508,189 $ 257,057 $ 8,765,246
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
5
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 and 2002 (UNAUDITED)
2003 2002
Cash flows from operating activities:
Net income (loss) $ 207,288 $(1,732,883)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Change in assets and liabilities:
Due from affiliated broker 773,352 1,257,958
Investment in affiliated general partnerships (675,697) 842,100
Other assets -- 24,567
Brokerage commissions payable to Affiliate (603) (12,430)
Management fees payable to Trading Advisor (532) (7,026)
Incentive fees payable to Trading Advisor -- (91,719)
Other liabilities 5,761 6,137
----------- -----------
Net cash provided by operating activities 309,569 286,704
Cash flows from financing activities:
Redemption of limited partnership interests (309,569) (286,704)
Net change in cash $ -- $ --
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
6
THE FUTURE FUND
(An Illinois Limited Partnership)
NOTES TO FORM 10-Q FINANCIAL STATEMENTS
The unaudited interim financial statements of the Future Fund (the
"Partnership") included herein have been prepared in conformity with accounting
principles generally accepted in the United States for interim financial
information and rule 10-01 of Regulation S-X. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
unaudited interim financial statements reflect all adjustments, which are of a
normal recurring nature, necessary for fair presentation of financial position,
results of operations, changes in partners' equity and cash flows of the
Partnership for the interim periods presented and are not necessarily indicative
of a full year's results.
In preparing the unaudited interim financial statements, management is required
to make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to current year
presentation.
The financial statements should be read in conjunction with the Partnership's
audited financial statements for the year ended October 31, 2002.
Recent Accounting Pronouncement
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46").
FIN 46 addresses consolidation by business enterprises of variable interest
entities. As General Partner of the Partnership, Heinold Asset Management, Inc.
has not yet determined if the Partnership would be required to consolidate
certain affiliated General Partnerships when FIN 46 becomes effective on August
1, 2003. Each of these related party entities are described in further detail in
Note 4 of the Partnership's audited financial statements for the year ended
October 31, 2002. FIN 46 would be immediately effective for any similar
affiliated General Partnership in which the Partnership has a new investment
subsequent to February 1, 2003. The General Partner estimates that the
Partnership's maximum exposure to loss as a result of its involvement with these
affiliated General Partnerships is limited to their carrying value as recorded
in the Statement of Financial Condition.
7
THE FUTURE FUND
(An Illinois Limited Partnership)
NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED)
Management's discussion and analysis of financial condition and operating
results for the three and six months ended April 30, 2003 and April 30, 2002.
Note A: April 30, 2003 October 31, 2002
(Unaudited)
--------------- ------------------
Partners' equity $8,765,246 $8,860,668
Partners' equity at April 30, 2003 was lower as compared with Partners' equity
at October 31, 2002 due to unit redemptions exceeding trading gains for the
period (see Note B). Net income for the period of 2.3% and total redemptions of
3.5% caused a decrease in total partner's equity of 1.2% over the period. For
the six month period ending April 30, 2003, the Partnership's Net Asset Value
per Unit increased from $1,139.17 at October 31, 2002 to $1,168.44, representing
a 2.6% gain. The difference between the net income percentage and the percentage
gain in Net Asset Value per Unit is due to the timing of capital transactions.
Note B: Six months Six months
ended 4/30/2003 ended 4/30/2002
(Unaudited) (Unaudited)
--------------- ------------------
Net Realized and Change in Unrealized Trading Gains
(Losses) $ 702,183 $ (1,382,847)
Net Realized and Unrealized Trading Gains for the six months ended April 30,
2003 came from first quarter trading gains of $760,007 which exceeded second
quarter losses of $57,824, causing a net trading gain for the period.
During the first quarter, gains were seen in both agricultural products and
metals, most notably long gold positions as the demand for gold increased due to
renewed interest as a safe investment in uncertain times. Long positions on
crude oil were also profitable, as the price for oil rose due to tensions in the
Middle East. As the weakening US dollar continued to decline in light of the
then anticipated conflict with Iraq and potential problems with North Korea,
short US dollar positions against other major currencies such as the Euro and
the Swiss Franc created significant profits.
During the second quarter, the Partnership netted a slight loss. Please see Note
C for a more detailed discussion of the gains and losses during the period.
The current results of operations proved to be the opposite of the same period
last year, when substantial losses were posted in an entirely different
environment. The loss for the six months ended April 30, 2002 was due to
unprofitable trading for the period, most notably the three months ended January
31, 2002 when the partnership posted a trading loss of $1,142,861. Coupled with
loss of $239,986 for the three months ended April 30, 2002, the partnership
netted a loss of $1,382,847 six-month period.
8
Note C: Three months Three months
ended 4/30/2003 ended 4/30/2002
(Unaudited) (Unaudited)
------------------ ------------------
Net Realized and Unrealized Trading Gains (Losses) $(57,824) $ (239,986)
Net Realized and Unrealized Trading Losses for the three months ended April 30,
2003 came from unprofitable trading during the period. Volatility due to
international tensions and economic worries kept the markets from getting a
general sense of direction. As a result, the Partnership showed both gains and
losses in various commodities, finishing the period with a slight loss. Gains on
long crude oil positions due to oil prices reaching highs in February were
turned to losses in March, as prices dropped considerably. Trading in currencies
also showed both gains and losses as prolonged anxiety about the war was
reflected in narrow price changes in most major currencies. US Treasury
positions posted losses, then gains, while long Euro Bond positions posted
negative returns after sharp price falls. The current loss was not as
significant as the results for the three months ended April 30, 2002 when the
partnership lost $239,986 due to unprofitable trading.
9
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 on the 12th day of June, 2003.
THE FUTURE FUND
By HEINOLD ASSET MANAGEMENT, INC.
General Partner
By /s/ Thomas M. Harte
---------------------------
Thomas M. Harte
President and Chief Executive Officer
By /s/ Ira Polk
---------------------------
Ira Polk
Chief Financial Officer
10
CERTIFICATION
I, Thomas M. Harte, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Future Fund;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in the Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: June 12, 2003 /s/ Thomas M. Harte
-------------------
Thomas M. Harte
Chief Executive Officer
11
CERTIFICATION
I, Ira Polk, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Future Fund;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in the Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: June 12, 2003 /s/ Ira Polk
--------------
Ira Polk
Chief Financial Officer
12