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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 JANUARY 31, 2004
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/0 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
1/31/2004 10/31/2003
(UNAUDITED)
ASSETS
Investments in affiliated general partnerships $5,506,436 $4,912,003
Due from affiliated broker 3,133,652 3,618,402
Other assets 21,208 5,658
---------- ----------
Total assets $8,661,296 $8,536,063
========== ==========
LIABILITIES & PARTNERS' EQUITY
Brokerage commissions payable to Affiliate $ 50,414 $ 49,703
Redemptions payable 24,121 24,789
Management fees payable to Trading Manager 28,444 28,045
Incentive fees payable to Trading Manager 2,405 --
Other liabilities 18,894 15,523
---------- ----------
Total liabilities 124,278 118,060
========== ==========
Partners' equity:
Limited Partners (6,859 and 7,057 units outstanding
at January 31, 2004 and October 31, 2003) 8,271,687 8,163,518
General Partner (220 units outstanding
at January 31, 2004 and October 31, 2003) 265,331 254,485
---------- ----------
Total partners' equity 8,537,018 8,418,003
---------- ----------
Total liabilities and partners' equity $8,661,296 $8,536,063
========== ==========
Net asset value per outstanding unit of partnership interest $ 1,206.05 $ 1,156.75
========== ==========
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 JANUARY 31, 2004 and 2003
(UNAUDITED)
2004 2003
Equity in income (loss) of affiliated general partnerships:
Net realized trading gains on closed contracts $ 809,584 $ 263,912
Change in net unrealized gains or losses on open contracts (196,274) 496,095
--------- ---------
613,310 760,007
Interest income 13,316 19,826
--------- ---------
626,626 779,833
Expenses:
Brokerage commissions paid to Affiliate 150,018 154,771
Management fees paid to Trading Manager 84,658 87,476
Incentive fee paid to Trading Manager 15,994 30,471
Other administrative expenses 22,500 13,000
--------- ---------
Total expenses 273,170 285,718
--------- ---------
Net income $ 353,456 $ 494,115
========= =========
Net income allocated to General Partner $ 10,846 $ 14,855
Net income allocated to Limited Partners $ 342,610 $ 479,260
Net income for a unit of partnership interest (for a unit
outstanding throughout the period) $ 49.30 $ 67.52
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
3
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 2004
(UNAUDITED)
Limited General
Partners Partner Total
-------- ------- -----
Partners' equity at October 31, 2003 $ 8,163,518 $ 254,485 $ 8,418,003
Redemption of 198 units of limited partnership
interest (234,441) -- (234,441)
Net income 342,610 10,846 353,456
----------- ----------- -----------
Partners' equity at January 31, 2004 $ 8,271,687 $ 265,331 $ 8,537,018
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
4
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2004 and 2003
(UNAUDITED)
2004 2003
Cash flows from operating activities:
Net income $ 353,456 $ 494,115
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in assets and liabilities:
Investment in affiliated general partnerships (594,433) 459,027
Due from affiliated broker 484,750 (676,144)
Other assets (15,550) --
Brokerage commissions payable to Affiliate 711 1,294
Management fees payable to Trading Manager 399 849
Incentive fees payable to Trading Manager 2,405 23,352
Other liabilities 3,371 (4,667)
--------- ---------
Net cash provided by operating activities 235,109 297,826
Cash flows from financing activities:
Redemption of limited partnership interests (235,109) (297,826)
Net change in cash -- --
Cash at beginning of period -- --
--------- ---------
Cash at end of period $ -- $ --
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
5
THE FUTURE FUND
(An Illinois Limited Partnership)
NOTES TO JANUARY 31, 2004 FORM 10-Q FINANCIAL STATEMENTS
(UNAUDITED)
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 the 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, 2003.
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. In August 2003, the FASB delayed the effective date of FIN 46 for
non-registered investment companies that currently account for their investments
in accordance with the specialized accounting guidance in the AICPA Audit and
Accounting Guide, Audits of Investment Companies (the "Audit Guide"). The
Partnership accounts for its investments in this manner and thus is subject to
the deferral. The FASB delayed the effective date while the AICPA finalizes its
Statement of Position ("SOP") on the clarification of the scope of the Audit
Guide and accounting by the parent companies and equity method investors for
investments in investment companies. When the AICPA issues the final SOP, the
FASB will consider modifying paragraph 4(e) of Interpretation 46 to provide an
exception for companies that apply the Audit Guide as revised by the SOP. 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 if FIN 46 becomes effective for the Partnership.
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,
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.
6
THE FUTURE FUND
(An Illinois Limited Partnership)
NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED)
INVESTMENTS IN AFFILIATED GENERAL PARTNERSHIPS
At January 31, 2004, investments in and capital committed t0 Account
Partnerships were as follows:
ALLOCATED ASSETS
----------------------------
TOTAL
TRADING
ACCOUNT PARTNERSHIP INVESTMENT CAPITAL
Heinold General Partnership Account III $2,121,626 $2,553,150
Heinold General Partnership Account IV 1,479,232 3,109,709
Heinold General Partnership Account XI 1,905,578 2,870,267
---------- ----------
$5,506,436 $8,533,126
========== ==========
At October 31, 2003, investments in and capital committed to Account
Partnerships were as follows:
ALLOCATED ASSETS
----------------------------
TOTAL
TRADING
ACCOUNT PARTNERSHIP INVESTMENT CAPITAL
Heinold General Partnership Account III $1,945,630 $2,518,838
Heinold General Partnership Account IV 1,292,829 3,100,418
Heinold General Partnership Account XI 1,673,544 2,794,316
---------- ----------
$4,912,003 $8,413,572
========== ==========
Each of the General Partnerships had total assets (no liabilities) consisting of
the following at January 31, 2004:
NET
DUE FROM UNREALIZED
AFFILIATED GAIN ON
ACCOUNT PARTNERSHIP BROKER CONTRACTS TOTAL
Heinold General Partnership Account III $4,605,748 $ 48,635 $4,654,383
Heinold General Partnership Account IV 3,169,236 75,876 3,245,112
Heinold General Partnership Account XI 3,810,792 369,630 4,180,422
7
THE FUTURE FUND
(An Illinois Limited Partnership)
NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED)
Each of the General Partnerships had total assets (no liabilities) consisting of
the following at October 31, 2003:
NET
DUE FROM UNREALIZED
AFFILIATED GAIN ON
ACCOUNT PARTNERSHIP BROKER CONTRACTS TOTAL
Heinold General Partnership Account III $4,143,995 $ 109,420 $4,253,415
Heinold General Partnership Account IV 2,450,898 375,404 2,826,302
Heinold General Partnership Account XI 3,218,004 440,590 3,658,594
The Partnership's ownership percentage of the total assets of each Account
Partnership as of January 31, 2004 and October 31, 2003, and the proportionate
share of Account Partnership income for the months then ended was 45.58% and
45.74%, respectively.
Each of the General Partnerships had total income (no expenses) from net
realized and unrealized trading gains consisting of the following for the three
months ended January 31, 2004 and 2003:
ACCOUNT PARTNERSHIP 2004 2003
Heinold General Partnership Account III $ 400,969 $ 288,483
Heinold General Partnership Account IV 418,811 604,279
Heinold General Partnership Account V -- 253,217
Heinold General Partnership Account XI 521,828 547,510
---------- ----------
$1,341,608 $1,693,489
========== ==========
The Partnership was allocated $613,310 and $760,007 for the three months ended
January 31, 2004 and 2003, respectively.
8
THE FUTURE FUND
(An Illinois Limited Partnership)
Item 2. Management's Discussion and Analysis of Financial Condition as of
January 31, 2004 and Operating Results for the Three Months Ended
January 31, 2004 and January 31, 2003
Note A: January 31, October 31,
2004 2003
(Unaudited)
---------- ----------
Partners' equity $8,537,018 $8,418,003
Partners' equity at January 31, 2004 increased from Partners' equity at October
31, 2003 due to net income exceeding redemptions for the period. Net income for
the period of 4.2% and total redemptions of 2.8% caused a net increase in total
Partner's equity of 1.4% for the period. For the three-month period ending
January 31, 2004, the Partnership's Net Asset Value per Unit increased from
$1,156.75 at October 31, 2003 to $1,206.05, representing a 4.3% 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: Three Three
months months
ended ended
1/31/2004 1/31/2003
(Unaudited) (Unaudited)
----------- -----------
Net Realized and Change in Net Unrealized Trading
Gains $613,310 $760,007
The three months ended January 31, 2004 showed strong profits overall, after
starting out the period with negative results. Losses were posted early in the
quarter, most notably due to volatility in crude oil prices. After rising due to
terrorist attacks overseas being seen as a potential supply threat, the market
plummeted after the US Energy Department reported significant reserves, causing
values to decline amidst heavy selling of crude oil futures, forcing long
positions to be liquidated at a loss. Later in the quarter, gains were posted in
long metals positions due to growing physical demand in industrial metals,
particularly copper. Long positions in precious metals such as gold and silver
were also profitable, partially driven by the continued decline of the US
Dollar. The decreasing power of the dollar against most other major currencies
also created opportunities in foreign exchange trading, particularly short US
Dollar positions and long positions in the Euro, Japanese Yen and British Pound.
S&P 500 Index futures benefited from an upward price trend mid-quarter, as
strong retail sales and increasing economic optimism pushed the equity markets
higher.
The current quarter's trading gains were similar to, however not as substantial
as, those of a year ago. For the three months ended January 31, 2003, 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 continuing tensions in the Middle East. The weakening US
Dollar continued to decline in light of potential conflicts with Iraq and North
Korea, short positions against other major currencies such as the Euro and the
Swiss Franc created significant profits.
9
THE FUTURE FUND
(An Illinois Limited Partnership)
Item 4. Controls and Procedures
Management, including the Partnership's Chief Executive Officer and Chief
Financial Officer, has made an evaluation of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. During the period covered by the report, there was no
change in internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Partnership's
internal control over financial reporting. Based upon the evaluation, the Chief
Executive Officer and Chief Financial officer have concluded, as of the end of
the period covered by this report, that the Partnership's disclosure controls
and procedures are effective to ensure that all material information required to
be filed in this report has been known to them, as appropriate to allow timely
decisions regarding required disclosure.
Item 6. Exhibits
31.1 Certification by Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
10
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 2nd day of March, 2004.
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
11