10-Q 1 c79563e10vq.txt QUARTERLY REPORT 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 JULY 31, 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/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 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS THE FUTURE FUND (An Illinois Limited Partnership) STATEMENTS OF FINANCIAL CONDITION

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 JULY 31, 2003 and 2002 (UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 3 THE FUTURE FUND (An Illinois Limited Partnership) STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED JULY 31, 2003 and 2002 (UNAUDITED)

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 NINE MONTHS ENDED JULY 31, 2003 (UNAUDITED)

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 NINE MONTHS ENDED JULY 31, 2003 and 2002 (UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 6 THE FUTURE FUND (An Illinois Limited Partnership) NOTES TO FORM JULY 31, 2003 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 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, 2002. 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 reasonable 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. 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. At its August 13, 2003 meeting, 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, 2002. 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) INVESTMENTS IN AFFILIATED GENERAL PARTNERSHIPS Each of the General Partnerships had total assets (no liabilities) consisting of the following at July 31, 2003:

Each of the General Partnerships had total assets (no liabilities) consisting of the following at October 31, 2002:

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 July 31, 2003 and 2002:

The Partnership was allocated $241,548 and $1,425,054 for the three months ended July 31, 2003 and 2002, respectively. 8 THE FUTURE FUND (An Illinois Limited Partnership) NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED) INVESTMENTS IN AFFILIATED GENERAL PARTNERSHIPS (CONTINUED) Each of the General Partnerships had total income (no expenses) from net realized and unrealized trading gains consisting of the following for the nine months ended July 31, 2003 and 2002:

The Partnership was allocated $943,731 and $42,208 for the nine months ended July 31, 2003 and 2002, respectively. Each of the General Partnerships had Partners' equity consisting of the following for the nine months ended July 31, 2003

General Partnership V ceased trading as of June 30, 2003. The General Partnership's assets were distributed to the equity owners according to their respective investment balances. The Partnership received $1,615,483 from the liquidation of this partnership, which is included in Due From Affiliated Broker on the Statement of Financial Condition. 9 THE FUTURE FUND (An Illinois Limited Partnership) NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED) Management's discussion and analysis of financial condition as of July 31, 2003 and operating results for the three and nine months ended July 31, 2003 and July 31, 2002.

Partners' equity at July 31, 2003 was lower as compared with Partners' equity at October 31, 2002 due to unit redemptions exceeding net income for the period. Net income for the period of 2.2% and total redemptions of 5.8% caused a decrease in total partner's equity of 3.6% over the period. For the nine-month period ending July 31, 2003, the Partnership's Net Asset Value per Unit increased from $1,139.17 at October 31, 2002 to $1,166.95, representing a 2.4% 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.

Net Realized and Change in Net Unrealized Trading Gains for the nine months ended July 31, 2003 came from first and third quarter trading gains of $760,007 and $241,548 respectively, combined with second quarter losses of $57,824, causing a net trading gain of $943,731 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 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. 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. During the third quarter, the Partnership showed gains. Please see Note C for a more detailed discussion of trading during the period. 10 THE FUTURE FUND (An Illinois Limited Partnership) NOTES TO FORM 10-Q FINANCIAL STATEMENTS (CONTINUED) The current results of operations proved to be an improvement over the same period last year, when significant losses were posted in the first two quarters, with even greater gains during the third quarter gains netting out to a slight gain of $42,208 during the nine-month period. Losses of $1,142,860 and $239,986 for the three months ended January 31, 2002 and April 30, 2002, respectively, were offset by gains of $1,425,054 for the three months ended July 31, 2002, causing a small gain.

Net Realized and Change in Net Unrealized Trading Gains for the three months ended July 31, 2003 came from net profitable trading during the period. The quarter started out strong with substantial gains in May, but fell off with losses in June and July, netting to a modest gain for the period. May showed strong gains in the currency and interest rate sectors. The continued downtrend of the US Dollar caused the Euro to hit four-year highs against the Dollar, the Yen, and the British Pound. The Partnership recognized considerable profits in short USD positions against the Euro, as well as long Euro positions against the Yen. In June, performance turned towards the negative, as unfavorable conditions in other market sectors such as agricultural futures, metals, and equity indices posted losses for the month. Long gold positions performed poorly, while the energy and bond sectors also recorded losses. In July, losses were posted in part due to highly volatile currency markets. The US dollar started to rise, causing the short US Dollar positions which were extremely profitable earlier in the period to decline. A surge in the Yen also hurt performance in the currency sector. The current gain was not as substantial as the results for the three months ended July 31, 2002 when the Partnership posted significant gains after two unprofitable months. 11 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 September, 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 12

FUTURE FUND 10-Q