SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission file number 33-94050
CERES FUND, L. P.
(Name of small business issuer in its charter)
| TENNESSEE (State or other jurisdiction of incorporation or organization) | 62-1154702 (I.R.S. Employer Identification No.) |
C/O RANDELL COMMODITY CORPORATION
775 RIDGE LAKE BOULEVARD, SUITE 110
MEMPHIS, TENNESSEE 38120
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
Registrant’s telephone number (901) 766-4590
Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
The registrant is a limited partnership and, accordingly, has no voting stock held by non-affiliates or otherwise.
Incorporation by Reference: Registrant’s Registration Statement effective March 9, 1991 and the Prospectus contained therein into Part IV, Item 14 (a)(3) and Supplement No. 1 dated October 1, 1992, thereto, post effective Amendment No. 1 dated April 26, 1991, effective April 30, 1991, post effective Amendment No. 2 dated November 12, 1991, effective November 15, 1992, post effective Amendment No. 3 dated March 31, 1992, effective April 7, 1992, Supplement No. 3 dated June 30, 1992, Supplement No. 4 dated November 30, 1992, post effective Amendment No. 4 dated April 30, 1993, effective May 19, 1993, post effective Amendment No. 5 dated October 16, 1996, effective October 31, 1996, post effective Amendment dated August 25, 1997, effective September 2, 1997, post effective amendment dated May 30, 1998, effective June 8, 1998, post effective amendment dated May 30, 1999, effective June 15, 1999, post effective amendment dated December 9, 1999, post-effective amendment dated November 24, 2000, and September 28, 2001.
| PART I | ||||||||
| PART II | ||||||||
| PART III | ||||||||
| PART IV | ||||||||
| INDEPENDENT AUDITORS’ REPORT | ||||||||
| AFFIRMATION | ||||||||
| SIGNATURES | ||||||||
PART I
ITEM 1.
(a) BUSINESS
Ceres Fund, L.P. (the “Partnership”) is a limited partnership organized on September 19, 1990, pursuant to a Limited Partnership Agreement (the “Limited Partnership Agreement”) under the Uniform Limited Partnership Act of the State of Tennessee and funded through an offering of limited partnership units (the “Units”). The Partnership engages in speculative trading of commodity futures contracts, forward contracts, commodity options and other interests in commodities including, without limitation futures contracts and options on financial instruments, physical commodities and stock indices on organized exchanges in the U.S. and abroad.
The initial offering to the public of 100,000 Units was closed on November 29, 1991, and trading began December 1, 1991. Following the commencement of trading, the Partnership continued the offering of Units, issuing Units and fractions thereof at the Average Net Asset Value as of the last business day of the month during which the purchaser’s subscription was received. As of December 31, 2001, a total of 62,266.1596 units had been sold of which a total of 20,889.8541 were outstanding. The Prospectus is regularly updated and Units continue to be offered to the public.
The offering was registered under the Securities Act of 1933, as amended, and members of the National Association of Securities Dealers, Inc. act as selling agents on a best efforts basis. Effective July 1, 1995, and continuing during the continuous offering period, the selling commission is 4% of the issue price of each unit sold, all of which is retained by the selling agent.
Randell Commodity Corporation, a Tennessee corporation, is the Managing General Partner of the Partnership (the “Managing General Partner”) and RanDelta Capital Partners, L.P. is the Financial General Partner of the Partnership. Pursuant to a Customer Agreement (the “Customer Agreement”), Refco, Inc. (“Refco”) acts as the commodity broker for the Partnership and performs various administrative services for it. Services performed for the Partnership by Refco or the Managing General Partner under the terms of the Customer and the Limited Partnership Agreements, include the following:
(1) Executing all trades on behalf of the Partnership in conjunction with the Partnership’s Advisor.
(2) Maintaining the Partnership books and records, which limited partners or their duly authorized representatives may inspect during normal business hours for any proper purpose upon reasonable written notice to the Managing General Partner.
(3) Furnishing each limited partner with a monthly statement describing the performance of the Partnership, which sets forth aggregate management fees, incentive fees, brokerage commissions and other expenses incurred or accrued by the Partnership during the month.
(4) Forwarding annual audited financial statements (including a balance sheet and statement of income) to each limited partner.
(5) Providing each limited partner with tax information necessary for the preparation of his annual federal income tax return and such other information as the CFTC may by regulation require.
(6) Performing secretarial and other clerical responsibilities and furnishing office space and equipment as may be necessary for supervising the affairs of the Partnership.
(7) Administering the purchase, redemption and transfer of Units and distribution of profits, if any.
The Customer Agreement under which Refco, Inc. acts as the futures broker for the Partnership may be terminated by the Partnership or Refco upon 5 days’ notice.
Under the terms of the Customer Agreement, the Partnership pays commodity brokerage commissions to Refco on a round-turn basis in an amount equal to $32.50 per round-turn. A round-turn is the opening and closing of a commodity futures position consisting of one contract. One half of the round-turn commission is charged on the opening of a position and one half is charged on the close. The Partnership assets earn interest from Refco on 100% of the average daily equity maintained in cash in the Partnership’s trading account at a rate equal to 80% of the average yield on thirteen week U.S. Treasury Bills issued during each month.
(b) REGULATION
Under the Commodity Exchange Act, as amended (the “Act”), commodity exchanges and commodity futures trading are subject to regulation by the Commodity Futures Trading Commission (the “CFTC”). The Act requires “commodity pool operators,” and “commodity trading advisors,” to be registered and to comply with various reporting and record keeping requirements. The CFTC may suspend a commodity pool operator’s or advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the Managing General Partner as a commodity pool operator or as a commodity trading advisor is terminated or suspended, the Managing General Partner would be unable to continue to manage the business of the Partnership. Should the Managing General Partner’s registration be suspended, termination of the Partnership might result. The act also requires Refco to be registered as a “futures commission merchant.”
In addition to such registration requirements, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. The CFTC has adopted a rule requiring all domestic commodity exchanges to submit for approval speculative position limits for all futures contracts traded on such exchanges. Most exchanges also limit the changes in commodity futures contract prices that may occur during a single trading day. The Partnership will not trade on any commodity exchanges which are not subject to regulation by any United States government agency.
(c) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership’s business constitutes only one segment, speculative trading of commodity futures contracts, for financial reporting purposes. The Partnership does not engage in sales of goods or services. The Partnership began trading activities December 1, 1991, at which time Partnership capital was $1,392,168.
(d) NARRATIVE DESCRIPTION OF BUSINESS
(1) See Items 1(a), (b) and (c) above.
(i) through (xii) — Not applicable.
(xiii) — the Partnership has no employees.
(e) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Not applicable because the Partnership does not engage in sales of goods or services.
ITEM 2. PROPERTIES
The Partnership does not own or lease any properties. The Managing General Partner operates out of facilities provided by its parent, Randell Corporation.
ITEM 3. LEGAL PROCEEDINGS
The Managing General Partner is not aware of any pending legal proceedings to which the Partnership is a party or to which any of its assets are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
N/A — No security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no trading market for the Units, and none is likely to develop. Units are transferable only after written notice has been given to the Managing General Partner. Units may be redeemed as of the last day of any calendar quarter upon 10 days written notice to the Managing General Partner at the Redemption Net Asset Value (as defined in the Limited Partnership Agreement).
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of the total assets of the Partnership as of December 31, 2001, 2000, 1999, 1998 and 1997, and the results of operations for each of the years in the five-year period ended December 31, 2001.
Net increase (decrease) in components of Partnership capital from operations are as follows:
| 2001 | 2000 | 1999 | 1998 | 1997 | ||||||||||||||||
| Realized & unrealized trading gains (losses) net of brokerage commission and clearing fees of $326,741, $254,561, $346,157, $770,081, and $838,772 | 388,529 | $ | (150,958 | ) | $ | 155,301 | $ | (1,711,609 | ) | $ | (514,269 | ) | ||||||||
| Income (loss) from continuing operations | 278,123 | (165,787 | ) | 114,234 | (1,724,922 | ) | (504,535 | ) | ||||||||||||
| Cash dividends per Unit | — | — | — | — | 13.61 | |||||||||||||||
| Interest Income | 134,871 | 236,259 | 247,544 | 332,240 | 294,507 | |||||||||||||||
| Management fee | 133,693 | 152,088 | 208,611 | 259,437 | 223,279 | |||||||||||||||
| Administrative expenses | 95,000 | 84,000 | 80,000 | 72,000 | 58,403 | |||||||||||||||
| Incentive fee | 584 | — | — | 14,116 | 3,091 | |||||||||||||||
| Net Gain (loss) per Unit* | 11.17 | (6.32 | ) | 2.94 | (50.01 | ) | (19.61 | ) | ||||||||||||
| Total Assets | 3,643,696 | $ | 3,666,679 | $ | 5,121,209 | $ | 5,504,092 | $ | 6,647,645 | |||||||||||
| • | Calculated as net earnings(loss) allocated to limited partners divided by average units outstanding during the year. |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(a) RESULTS OF OPERATIONS
Trading results were profitable for the fiscal year ended December 31, 2001. Trading during the fiscal year resulted in an increase in net asset value per Unit from $142.13 to $152.89, an increase of 7.57% attributable primarily to gains in soybeans and cotton.
Trading results were unprofitable for the fiscal year ended December 31, 2000. Trading during the fiscal year resulted in a decrease in net asset value per Unit from $148.62 to $142.13, a decrease of 4.37% attributable primarily to losses in soybeans and corn.
Trading results were profitable for the fiscal year ended December 31, 1999. Trading during the fiscal year resulted in an increase in net asset value per Unit from $146.24 to $148.62, an increase of 1.63% attributable primarily to gains in soybeans and cotton.
(b) LIQUIDITY.
The Partnership does not engage in sales of goods or services. Its only assets are its investments in its commodity futures trading account, consisting of cash and net unrealized appreciation on open futures contracts, and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. Such substantial losses could lead to a material decrease in liquidity. To minimize this risk the Partnership follows certain policies including:
(1) Partnership funds will be invested only in futures contracts which are traded in sufficient volume to permit, in the opinion of the Advisor, ease of taking and liquidating positions.
(2) The Partnership will diversify its positions among various commodities. The Partnership will not initiate additional positions in a single commodity if such additional positions would result in a net single long or short position in such commodity requiring as margin more than 15% of the net assets of the Partnership.
(3) The Partnership will not establish commodity positions if such positions would result in required margins in excess of 80% of its net asset value for all commodities combined.
(4) The Partnership may occasionally accept delivery of a commodity. Unless such delivery is disposed of promptly by retendering the warehouse receipt representing the delivery to the appropriate clearing house, the Partnership’s position in the physical commodity will be fully hedged.
(5) The Partnership will not employ the trading technique commonly known as “pyramiding”, in which the speculator uses unrealized profits on existing positions as margin for the purchase or sale of additional positions in the same or related commodities.
(6) The Partnership may from time to time employ trading strategies such as spreads or straddles on behalf of the Partnership. The term “spread” describes a commodity futures trading strategy involving the simultaneous buying and selling of futures contracts on the same commodity but involving different delivery dates or markets and in which the trader expects to earn a profit from a widening or narrowing of the difference between the prices of the two contracts.
Other than the risks inherent in commodity futures trading, the Partnership knows of no trends, demands, commitments, events or uncertainties which will result in or which are reasonably likely to result in the Partnership’s liquidity increasing or decreasing in any material way. The Limited Partnership Agreement requires dissolution of the Partnership under certain circumstances as defined in the Limited Partnership Agreement including a decrease in the net asset value of a Unit at the close of business on any business day to less than 50% of the highest average net asset value at which Units have been sold.
In order to limit credit risks, the Partnership does not enter into counterparty transactions such as currency or other swaps and it limits its trading activities to futures and options traded on U.S. commodity exchanges.
(c) CAPITAL RESOURCES
The Partnership does not intend to raise any additional capital through borrowing. Due to the nature of the Partnership’s business, it will make no significant capital expenditures, and substantially all of its assets are and will be represented by cash, United States Treasury securities and commodity futures investments.
The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on commodity futures trading and by expenses, interest income, redemptions of Units and distributions of profits, if any. Gains or losses on commodity futures trading cannot be predicted. Market moves in commodities are dependent upon fundamental and technical factors which the Partnership may or may not be able to identify. Partnership expenses consist of, among other things, commissions, management fees and incentive fees. The level of these expenses is dependent upon the level of trading and the ability of the Advisors to identify and take advantage of price movements in the commodity markets, in addition to the level of net assets maintained. Furthermore, interest income is dependent upon interest rates over which the Partnership has no control. A forecast cannot be made as to the level of redemptions in any given period.
(d) INFLATION
Inflation does have an effect on commodity prices and the volatility of commodity markets; however, continued inflation is not expected to have a material adverse effect on the Partnership’s operations or assets. Because the Partnership conducts business as a Partnership, and, as such does not pay federal income taxes, neither the Taxpayer Relief Act of 1997 nor the Tax Reform Act of 1986 had an effect on its operations or on its tax liability. However, some expenses may be limited as to deductibility by individual partners.
(e) CRITICAL ACCOUNTING POLICIES
Our financial statements are prepared in accordance with accounting policies generally accepted in the United States of America which require that we make estimates and assumptions (see Note 1 to the Financial Statements) that affect the amounts reported in those financial statements. We believe that there are no estimates reported in our financial statements which would involve a higher degree of judgment and complexity than our other significant accounting policies. Fair Value of our open option contracts are obtained from a third party commodity broker and are quoted on national commodity exchanges.
ITEM 7(A) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X are indexed and included beginning on page F-1 of this report.
The supplementary financial information specified by Item 302 of Regulation S-K is not applicable.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. The Partnership is managed by its Managing General Partner. Trading decisions for the Partnership are made by the Managing General Partner.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or officers. The Managing General Partner and Refco perform the services described in “Item 1. Business” herein.
For the fiscal year ended December 31, 2001; incentive fees expensed totaled $584. Management fees expensed totaled $133,693. A total of $313,044 in brokerage commissions were paid to Refco.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
None.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the Managing General Partner, and it has discretionary authority over the Partnership’s investments. As of December 31, 2001, the General Partner’s investment in the Partnership was $333,836.
(c) CHANGES IN CONTROL
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) ACCOUNTS OF AFFILIATES OF THE COMMODITY BROKER
The officers, directors and employees and associated persons of Refco trade in commodity futures contracts for their own accounts. In addition, Refco is a registered futures commission merchant and executes transactions in commodity futures contracts for its customers. Thus, it is possible that Refco could execute transactions for the Partnership in which the other parties to the transactions are its officers, directors, employees or customers. Such persons might also compete with the Partnership in making purchases or sales of contracts without knowing that the Partnership is also bidding on such contracts.
(b) OTHER ACTIVITIES AND ACCOUNTS OF THE GENERAL PARTNER
The Managing General Partner trades in commodity futures contracts for its own accounts and for the accounts of other customers. It is possible that the Managing General Partner may engage in transactions on its own behalf or on behalf of others having an effect on transactions involving the Partnership.
(c) OTHER RELATIONSHIPS
The sole shareholder of the parent of the Managing General Partner is a partner in the law firm which is counsel to the Partnership, the Managing General Partner and the Memphis branch of Refco.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS
(a)(1) FINANCIAL STATEMENTS
See Index to Financial Statements; infra.
(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted for the reason that they are not required or are not applicable or that equivalent information has been included in the financial statements or the notes thereto.
(a)(3) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BY-LAWS
i) Limited Partnership Agreement dated as of September 19, 1990.*
ii) Certificate of Limited Partnership of the Partnership as filed with the Shelby County Recorder of Deeds on September 19, 1990.*
(a)(3)(2) Material Contracts
i) Form of Selling Agreement among the Partnership and National Association of Securities Dealers, Inc. member.*
ii) Form of Customer Agreement between the Partnership and Refco, Inc.*
iii) Form of Subscription Agreement to be executed by each purchaser of Units.*
iv) Form of Escrow of Funds Agreement among the Partnership and National Bank of Commerce.*
| * | Incorporated herein by reference to the Partnership’s Registration Statement on Form S-1, Commission File No. 33-37802. |
CERES FUND, L.P.
INDEX TO FINANCIAL STATEMENTS
| Page(s) | |||||
| Independent Auditors’ Report | F-1 | ||||
| Financial Statements: | |||||
| Statements of Financial Condition as of December 31, 2001 and 2000 | F-2 | ||||
| Statements of Operations for the years ended December 31, 2001, 2000 and 1999 | F-3 | ||||
| Statements of Changes in Partners’ Capital for the years ended December 31, 2001 2000 and 1999 | F-4 | ||||
| Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 | F-5 | ||||
| Summary of Net Asset Values at December 31, 2001, 2000 and 1999 | F-6 | ||||
| Notes to Financial Statements | F-9 | ||||
| Schedule of Investments at December 31, 2001 | F-17 | ||||
| Affirmation | F-18 | ||||
KPMG
MORGAN KEEGAN TOWER, SUITE 900
FIFTY NORTH FRONT STREET
MEMPHIS, TN 38103
INDEPENDENT AUDITORS’ REPORT
The Partners Ceres Fund, L.P.:
We have audited the accompanying statements of financial condition of Ceres Fund, L.P. (a Tennessee Limited Partnership) as of December 31, 2001 and 2000 and summary of net asset values as of December 31, 2001, 2000 and 1999, and the related statements of operations, changes in partners’ capital and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ceres Fund, L.P. (a Tennessee Limited Partnership) as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Schedule 1 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic 2001 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2001 financial statements taken as a whole.
KPMG LLP
March 18, 2002
F-1
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Financial Condition
December 31, 2001 and 2000
| 2001 | 2000 | |||||||||||
| ASSETS | ||||||||||||
| Cash | $ | 57,298 | 43,676 | |||||||||
| Equity in commodity futures trading account: | ||||||||||||
| U.S. government obligations at fair value (cost of $2,987,867 and $3,547,207 at December 31, 2001 and 2000, respectively) | 2,989,350 | 3,557,990 | ||||||||||
| Cash | 721,518 | 105,512 | ||||||||||
| Unrealized losses on open futures contracts | (125,155 | ) | (40,675 | ) | ||||||||
| Interest receivable | 685 | 176 | ||||||||||
| Total assets | $ | 3,643,696 | 3,666,679 | |||||||||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||||||||
| Liabilities: | ||||||||||||
| Accrued management fees | $ | 10,815 | 11,052 | |||||||||
| Other accrued expenses | 69,157 | 56,807 | ||||||||||
| Redemptions payable | 36,143 | 95,179 | ||||||||||
| Total liabilities | 116,115 | 163,038 | ||||||||||
| Partners’ capital: | ||||||||||||
| General partners | 333,836 | 298,153 | ||||||||||
| Limited partners | 3,193,745 | 3,205,488 | ||||||||||
| Total partners’ capital | 3,527,581 | 3,503,641 | ||||||||||
| $ | 3,643,696 | 3,666,679 | ||||||||||
See accompanying notes to financial statements
F-2
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Operations
Years ended December 31, 2001, 2000 and 1999
| 2001 | 2000 | 1999 | ||||||||||||||
| Net gains (losses) on trading of commodity futures and options contracts: | ||||||||||||||||
| Realized gains (losses) on closed positions | $ | 799,750 | 170,737 | (22,015 | ) | |||||||||||
| Change in market valuation of open futures contracts | (84,480 | ) | (77,995 | ) | 504,019 | |||||||||||
| Change in market valuation of open options contracts | — | 10,861 | 19,454 | |||||||||||||
| Net gains on investments | 715,270 | 103,603 | 501,458 | |||||||||||||
| Investment income — interest (note 3) | 134,871 | 236,259 | 247,544 | |||||||||||||
| Less fees and commissions: | ||||||||||||||||
| Brokerage commissions (note 3) | 313,044 | 244,141 | 331,112 | |||||||||||||
| Exchange, clearing fees and NFA charges | 13,697 | 10,420 | 15,045 | |||||||||||||
| 326,741 | 254,561 | 346,157 | ||||||||||||||
| Income from operations | 523,400 | 85,301 | 402,845 | |||||||||||||
| Management fee allocations (note 2) | 133,693 | 152,088 | 208,611 | |||||||||||||
| Incentive fee allocations (note 2) | 584 | — | — | |||||||||||||
| Professional and administrative expenses | 95,000 | 84,000 | 80,000 | |||||||||||||
| Franchise and excise taxes | 16,000 | 15,000 | — | |||||||||||||
| 245,277 | 251,088 | 288,611 | ||||||||||||||
| Net earnings (loss) | $ | 278,123 | (165,787 | ) | 114,234 | |||||||||||
| Net earnings (loss) allocated to general partner | $ | 35,683 | (1,465 | ) | 16,355 | |||||||||||
| Net earnings (loss) allocated to limited partners | $ | 242,440 | (164,322 | ) | 97,879 | |||||||||||
| Average net earnings (loss) per unit | $ | 11.17 | (6.32 | ) | 2.94 | |||||||||||
See accompanying notes to financial statements
F-3
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Changes in Partners’ Capital
Years ended December 31, 2001, 2000 and 1999
| GENERAL | LIMITED | ||||||||||||
| PARTNERS | PARTNERS | TOTAL | |||||||||||
| Partners’ capital at December 31, 1998 | $ | 283,263 | 5,002,325 | 5,285,588 | |||||||||
| Capital contributions (228 units) | — | 36,742 | 36,742 | ||||||||||
| Redemption of units (3,332 units) | — | (514,260 | ) | (514,260 | ) | ||||||||
| Net earnings | 16,355 | 97,879 | 114,234 | ||||||||||
| Partners’ capital at December 31, 1999 | 299,618 | 4,622,686 | 4,922,304 | ||||||||||
| Capital contributions (482 units) | — | 72,115 | 72,115 | ||||||||||
| Redemption of units (9,032 units) | — | (1,324,991 | ) | (1,324,991 | ) | ||||||||
| Net loss | (1,465 | ) | (164,322 | ) | (165,787 | ) | |||||||
| Partners’ capital at December 31, 2000 | 298,153 | 3,205,488 | 3,503,641 | ||||||||||
| Redemption of units (1,663 units) | — | (254,183 | ) | (254,183 | ) | ||||||||
| Net income | 35,683 | 242,440 | 278,123 | ||||||||||
| Partners’ capital at December 31, 2001 | $ | 333,836 | 3,193,745 | 3,527,581 | |||||||||
| Average net asset value per limited partnership unit at: | |||||||||||||
| December 31, 2001; 20,889.8541 units outstanding | $ | 152.89 | |||||||||||
| December 31, 2000: 22,552.6785 units outstanding | $ | 142.13 | |||||||||||
| December 31, 1999; 31,103.0777 units outstanding | $ | 148.62 | |||||||||||
See accompanying notes to financial statements.
F-4
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
| 2001 | 2000 | 1999 | ||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net earnings (loss) | $ | 278,123 | (165,787 | ) | 114,234 | |||||||||||
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | ||||||||||||||||
| Change of market valuation of open futures contracts | 84,480 | 77,995 | (504,019 | ) | ||||||||||||
| Decrease in market valuation of open option contracts | 14,610 | 37,265 | ||||||||||||||
| (Increase) decrease in operating assets: | ||||||||||||||||
| Investments in commodities futures trading account, net | (47,366 | ) | 1,373,770 | 737,699 | ||||||||||||
| Interest receivable | (509 | ) | 326 | 2,471 | ||||||||||||
| Increase (decrease) in operating liabilities: | ||||||||||||||||
| Accrued management fees | (237 | ) | (4,914 | ) | (1,225 | ) | ||||||||||
| Other accrued expenses | 12,350 | 25,033 | (31,655 | ) | ||||||||||||
| Net cash provided by operating activities | 326,841 | 1,321,033 | 354,770 | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Net proceeds from sale of limited partnership units | — | 72,115 | 36,742 | |||||||||||||
| Redemptions of limited partnership units | (313,219 | ) | (1,380,977 | ) | (500,979 | ) | ||||||||||
| Net cash used in financing activities | (313,219 | ) | (1,308,862 | ) | (464,237 | ) | ||||||||||
| Net increase (decrease) in cash | 13,622 | 12,171 | (109,467 | ) | ||||||||||||
| Cash at beginning of year | 43,676 | 31,505 | 140,972 | |||||||||||||
| Cash at end of year | $ | 57,298 | 43,676 | 31,505 | ||||||||||||
See accompanying notes to financial statements.
F-5
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Summary of Net Asset Values
December 31, 2001
| NUMBER | NUMBER | NUMBER | NET ASST | TOTAL LIMITED | ||||||||||||||||||||
| SUBSCRIBER | OF UNITS | OF UNITS | OF UNITS | OF UNITS | VALUE | PARTNER NET | ||||||||||||||||||
| ADMISSION DATE | SUBSCRIBED | WITHDRAWN | DISTRIBUTED | OUTSTANDING | PER UNIT | ASSET VALUE | ||||||||||||||||||
| January 1, 1996 | 43,256.2273 | (35,183.1116 | ) | 1,793.0394 | 9,866.1551 | $ | 153.389 | $ | 1,513,360 | |||||||||||||||
| November 1, 1996 | 239.4689 | (275.7058 | ) | 41.3760 | 5.1391 | 153.389 | 788 | |||||||||||||||||
| December 1, 1996 | 155.2598 | (182.7844 | ) | 27.5246 | — | — | — | |||||||||||||||||
| January 1, 1997 | 708.7734 | (702.8389 | ) | — | 5.9345 | 153.389 | 910 | |||||||||||||||||
| February 1, 1997 | 1,555.9517 | (879.4509 | ) | — | 676.5008 | 153.389 | 103,768 | |||||||||||||||||
| March 1, 1997 | 2,630.9876 | (1,045.9950 | ) | — | 1,584.9926 | 153.289 | 242,961 | |||||||||||||||||
| April 1, 1997 | 3,704.4494 | (1,094.5188 | ) | — | 2,609.9306 | 153.061 | 399,478 | |||||||||||||||||
| May 1, 1997 | 1,381.6388 | (637.4066 | ) | — | 744.2322 | 152.836 | 113,744 | |||||||||||||||||
| June 1, 1997 | 988.1934 | (396.1881 | ) | — | 592.0053 | 153.389 | 90,807 | |||||||||||||||||
| July 1, 1997 | 826.3808 | (188.8130 | ) | — | 637.5678 | 149.889 | 95,564 | |||||||||||||||||
| August 1, 1997 | 493.4459 | — | — | 493.4459 | 150.938 | 74,480 | ||||||||||||||||||
| September 1, 1997 | 209.0262 | — | — | 209.0262 | 150.592 | 31,478 | ||||||||||||||||||
| October 1, 1997 | 496.1560 | (35.8050 | ) | — | 460.3510 | 151.042 | 69,532 | |||||||||||||||||
| November 1, 1997 | 229.6653 | — | — | 229.6653 | 151.094 | 34,701 | ||||||||||||||||||
| December 1, 1997 | 327.4226 | (201.4908 | ) | — | 125.9318 | 151.389 | 19,065 | |||||||||||||||||
| January 1, 1998 | 103.8085 | (103.8085 | ) | — | — | — | — | |||||||||||||||||
| February 1, 1998 | 509.8596 | (255.8443 | ) | — | 254.0153 | 151.189 | 38,404 | |||||||||||||||||
| March 1, 1998 | 1,177.3329 | (491.2623 | ) | — | 686.0706 | 151.429 | 103,891 | |||||||||||||||||
| April 1, 1998 | 717.5374 | (597.4042 | ) | — | 120.1332 | 153.002 | 18,381 | |||||||||||||||||
| May 1, 1998 | 422.0476 | (114.0062 | ) | — | 308.0414 | 153.002 | 47,131 | |||||||||||||||||
| June 1, 1998 | 669.0029 | (299.6207 | ) | — | 369.3822 | 153.002 | 56,516 | |||||||||||||||||
| August 1, 1998 | 506.3963 | (345.0840 | ) | — | 161.3123 | 152.711 | 24,634 | |||||||||||||||||
| September 1, 1998 | 29.1615 | — | — | 29.1615 | 153.000 | 4,462 | ||||||||||||||||||
| October 1, 1998 | 217.9573 | — | — | 217.9573 | 152.995 | 33,346 | ||||||||||||||||||
| March 1, 1999 | 51.6151 | (51.6151 | ) | — | — | — | — | |||||||||||||||||
| April 1, 1999 | 66.7377 | (66.7377 | ) | — | — | — | — | |||||||||||||||||
| May 1, 1999 | 60.1015 | (60.1015 | ) | — | — | — | — | |||||||||||||||||
| June 1, 1999 | 28.6521 | (28.6521 | ) | — | — | — | — | |||||||||||||||||
| September 1, 1999 | 21.3654 | — | — | 21.3654 | 152.801 | 3,265 | ||||||||||||||||||
| March 1, 2000 | 319.7433 | — | — | 319.7433 | 151.878 | 48,562 | ||||||||||||||||||
| April 1, 2000 | 161.7934 | — | — | 161.7934 | 151.534 | 24,517 | ||||||||||||||||||
| 62,266.1596 | (43,238.2455 | ) | 1,861.9400 | 20,889.8541 | $ | 152.8850 | $ | 3,193,745 | ||||||||||||||||
See accompanying notes to financial statements.
F-6
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Summary of Net Asset Values
December 31, 2000
| NUMBER | NUMBER | NUMBER | NUMBER | NET ASSET | TOTAL LIMITED | |||||||||||||||||||
| SUBSCRIBER | OF UNITS | OF UNITS | OF UNITS | OF UNITS | VALUE | PARTNER NET | ||||||||||||||||||
| ADMISSION DATE | SUBSCRIBED | WITHDRAWN | DISTRIBUTED | OUTSTANDING | PER UNIT | ASSET VALUE | ||||||||||||||||||
| January 1, 1996 | 43,256.2273 | (34,257.4290 | ) | 1,793.0394 | 10,791.8377 | $ | 142.550 | $ | 1,538,258 | |||||||||||||||
| November 1, 1996 | 239.4689 | (272.9274 | ) | 41.3760 | 7.9175 | 142.550 | 1,129 | |||||||||||||||||
| December 1, 1996 | 155.2598 | (182.7844 | ) | 27.5246 | — | — | — | |||||||||||||||||
| January 1, 1997 | 708.7734 | (634.1576 | ) | — | 74.6158 | 142.550 | 10,636 | |||||||||||||||||
| February 1, 1997 | 1,555.9517 | (834.3509 | ) | — | 721.6008 | 142.457 | 102,797 | |||||||||||||||||
| March 1, 1997 | 2,630.9876 | (814.4287 | ) | — | 1,816.5589 | 142.457 | 258,781 | |||||||||||||||||
| April 1, 1997 | 3,704.4494 | (734.4429 | ) | — | 2,970.0065 | 142.245 | 422,468 | |||||||||||||||||
| May 1, 1997 | 1,381.6388 | (637.4066 | ) | — | 744.2322 | 142.035 | 105,707 | |||||||||||||||||
| June 1, 1997 | 988.1934 | (396.1881 | ) | — | 592.0053 | 142.550 | 84,390 | |||||||||||||||||
| July 1, 1997 | 826.3808 | (188.8130 | ) | — | 637.5678 | 139.296 | 88,810 | |||||||||||||||||
| August 1, 1997 | 493.4459 | — | — | 493.4459 | 140.271 | 69,216 | ||||||||||||||||||
| September 1, 1997 | 209.0262 | — | — | 209.0262 | 139.949 | 29,253 | ||||||||||||||||||
| October 1, 1997 | 496.1560 | (35.8050 | ) | — | 460.3510 | 140.367 | 64,618 | |||||||||||||||||
| November 1, 1997 | 229.6653 | — | — | 229.6653 | 140.415 | 32,249 | ||||||||||||||||||
| December 1, 1997 | 327.4226 | (201.4908 | ) | — | 125.9318 | 140.690 | 17,717 | |||||||||||||||||
| January 1, 1998 | 103.8085 | (103.8085 | ) | — | — | — | — | |||||||||||||||||
| February 1, 1998 | 509.8596 | (255.8443 | ) | — | 254.0153 | 140.504 | 35,690 | |||||||||||||||||
| March 1, 1998 | 1,177.3329 | (491.2623 | ) | — | 686.0706 | 140.727 | 96,549 | |||||||||||||||||
| April 1, 1998 | 717.5374 | (573.3805 | ) | — | 144.1569 | 142.189 | 20,498 | |||||||||||||||||
| May 1, 1998 | 422.0476 | (114.0062 | ) | — | 308.0414 | 142.189 | 43,800 | |||||||||||||||||
| June 1, 1998 | 669.0029 | (299.6207 | ) | — | 369.3822 | 142.189 | 52,522 | |||||||||||||||||
| August 1, 1998 | 506.3963 | (340.1678 | ) | — | 166.2285 | 141.919 | 23,591 | |||||||||||||||||
| September 1, 1998 | 29.1615 | — | — | 29.1615 | 148.650 | 4,335 | ||||||||||||||||||
| October 1, 1998 | 217.9573 | — | — | 217.9573 | 142.183 | 30,990 | ||||||||||||||||||
| March 1, 1999 | 51.6151 | (51.6151 | ) | — | — | — | — | |||||||||||||||||
| April 1, 1999 | 66.7377 | (66.7377 | ) | — | — | — | — | |||||||||||||||||
| May 1, 1999 | 60.1015 | (60.1015 | ) | — | — | — | — | |||||||||||||||||
| June 1, 1999 | 28.6521 | (28.6521 | ) | — | — | — | — | |||||||||||||||||
| September 1, 1999 | 21.3654 | — | — | 21.3654 | 142.171 | 3,038 | ||||||||||||||||||
| March 1, 2000 | 319.7433 | — | — | 319.7433 | 142.164 | 45,456 | ||||||||||||||||||
| April 1, 2000 | 161.7934 | — | — | 161.7934 | 142.091 | 22,989 | ||||||||||||||||||
| 62,266.1596 | (41,575.4211 | ) | 1,861.9400 | 22,552.6785 | $ | 142.133 | $ | 3,205,488 | ||||||||||||||||
See accompanying notes to financial statements.
F-7
CERES FUND, L.P.
( A Tennessee Limited Partnership)
Summary of Net Asset Values
December 31, 1999
| NUMBER | NUMBER | NUMBER | NUMBER | NET ASSET | TOTAL LIMITED | |||||||||||||||||||
| SUBSCRIBER | OF UNITS | OF UNITS | OF UNITS | OF UNITS | VALUE | PARTNER NET | ||||||||||||||||||
| ADMISSION DATE | SUBSCRIBED | WITHDRAWN | DISTRIBUTED | OUTSTANDING | PER UNIT | ASSET VALUE | ||||||||||||||||||
| January 1, 1996 | 43,256.2273 | (29,128.3907 | ) | 1,793.0394 | 15,920.8760 | $ | 149.029 | $ | 2,372,672 | |||||||||||||||
| November 1, 1996 | 239.4689 | (158.6871 | ) | 41.3760 | 122.1578 | 149.029 | 18,205 | |||||||||||||||||
| December 1, 1996 | 155.2598 | (73.6832 | ) | 27.5246 | 109.1012 | 149.029 | 16,259 | |||||||||||||||||
| January 1, 1997 | 708.7734 | (389.1942 | ) | — | 319.5792 | 149.029 | 47,627 | |||||||||||||||||
| February 1, 1997 | 1,555.9517 | (315.7003 | ) | — | 1,240.2514 | 149.029 | 184,833 | |||||||||||||||||
| March 1, 1997 | 2,630.9876 | (652.3322 | ) | — | 1,978.6554 | 148.932 | 294,685 | |||||||||||||||||
| April 1, 1997 | 3,704.4494 | (500.5439 | ) | — | 3,203.9055 | 148.710 | 476,453 | |||||||||||||||||
| May 1, 1997 | 1,381.6388 | (519.2827 | ) | — | 862.3561 | 148.490 | 128,051 | |||||||||||||||||
| June 1, 1997 | 988.1934 | (113.8472 | ) | — | 874.3462 | 149.028 | 130,302 | |||||||||||||||||
| July 1, 1997 | 826.3808 | (6.8935 | ) | — | 819.4873 | 145.625 | 119,338 | |||||||||||||||||
| August 1, 1997 | 493.4459 | — | — | 493.4459 | 146.645 | 72,361 | ||||||||||||||||||
| September 1, 1997 | 209.0262 | — | — | 209.0262 | 146.308 | 30,582 | ||||||||||||||||||
| October 1, 1997 | 496.1560 | (20.4600 | ) | — | 475.6960 | 146.746 | 69,806 | |||||||||||||||||
| November 1, 1997 | 229.6653 | — | — | 229.6653 | 146.796 | 33,714 | ||||||||||||||||||
| December 1, 1997 | 327.4226 | (75.5590 | ) | — | 251.8636 | 147.083 | 37,045 | |||||||||||||||||
| January 1, 1998 | 103.8085 | — | — | 103.8085 | 147.252 | 15,286 | ||||||||||||||||||
| February 1, 1998 | 509.8596 | (50.8031 | ) | — | 459.0565 | 146.889 | 67,430 | |||||||||||||||||
| March 1, 1998 | 1,177.3329 | (88.4793 | ) | — | 1,088.8536 | 147.123 | 160,195 | |||||||||||||||||
| April 1, 1998 | 717.5374 | (154.4626 | ) | — | 563.0748 | 148.651 | 83,702 | |||||||||||||||||
| May 1, 1998 | 422.0476 | (47.9973 | ) | — | 374.0503 | 148.651 | 55,603 | |||||||||||||||||
| June 1, 1998 | 669.0029 | (230.3615 | ) | — | 438.6414 | 148.651 | 65,204 | |||||||||||||||||
| August 1, 1998 | 506.3963 | (16.8074 | ) | — | 489.5889 | 148.369 | 72,640 | |||||||||||||||||
| September 1, 1998 | 29.1615 | — | — | 29.1615 | 148.650 | 4,335 | ||||||||||||||||||
| October 1, 1998 | 217.9573 | — | — | 217.9573 | 148.645 | 32,398 | ||||||||||||||||||
| March 1, 1999 | 51.6151 | — | — | 51.6151 | 148.640 | 7,672 | ||||||||||||||||||
| April 1, 1999 | 66.7377 | — | — | 66.7377 | 148.636 | 9,920 | ||||||||||||||||||
| May 1, 1999 | 60.1015 | — | — | 60.1015 | 148.628 | 8,933 | ||||||||||||||||||
| June 1, 1999 | 28.6521 | — | — | 28.6521 | 148.644 | 4,259 | ||||||||||||||||||
| September 1, 1999 | 21.3654 | — | — | 21.3654 | 148.633 | 3,176 | ||||||||||||||||||
| 61,784.6229 | (32,543.4852 | ) | 1,861.9400 | 31,103.0777 | $ | 148.6247 | $ | 4,622,686 | ||||||||||||||||
See accompanying notes to financial statements.
F-8
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| (1) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| (A) | ORGANIZATION |
| Ceres Fund, L.P. (the Partnership) is a Tennessee limited partnership organized on September 19, 1990 to engage in the speculative trading of commodities futures contracts and other commodity interests. Randell Commodity Corporation (Randell) and RanDelta Capital Partners, L.P. (RanDelta) are the general partners. Randell serves as the managing general partner and RanDelta serves as the financial general partner. Randell acts as commodity trading advisor with respect to the Partnership. | |||
| The Partnership solicited subscriptions for a maximum of 100,000 units of limited partnership interest at $105 per unit ($100 net of commission). During the initial offering period 13,471.6805 units were sold and the Partnership commenced trading commodity futures contracts on December 1, 1991. The Partnership sells units as of the end of each month at the then average net asset value per unit plus a selling commission of 4% in accordance with the terms of the Limited Partnership Agreement. The Partnership can continue selling units until the maximum 100,000 units offered have been sold. | |||
| Income and expenses of the Partnership (excluding the Management Allocation and Incentive Allocation) are allocated pro rata among the partners based on their respective capital accounts as of the beginning of the month in which the items of income and expense accrue, except that limited partners have no liability for partnership obligations in excess of his or her capital account, including earnings. The Management Allocation and Incentive Allocation are allocated to the Limited Partners only in accordance with the terms of the Limited Partnership Agreement. | |||
| Units may not be redeemed during the first six months after they are purchased. Thereafter, limited partners may redeem their units at the redemption net asset value per unit as of the end of any calendar quarter upon ten days written notice to the managing general partner. The redemption value is based on the net asset value of all units redeemed as more fully described in the offering prospectus. | |||
| Under the terms of the partnership agreement, the Partnership will terminate on the earlier of December 31, 2020, or the occurrence of certain events as more fully described in the Limited Partnership Agreement. | |||
| (B) | EQUITY IN COMMODITY FUTURES TRADING ACCOUNT | ||
| U.S. government obligations represent investments in U.S. Treasury Bills with a maturity of 90 days or less and are carried at fair value and any unrealized gains and losses are reflected in income. Cash represents deposits at brokers and funds temporarily held in interest bearing accounts. |
F-9
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| (C) | FUTURES CONTRACTS AND OPTIONS CONTRACTS | ||
| Futures contracts are required to be made on a commodity exchange and call for the future delivery of various agricultural and nonagricultural commodities, currencies or financial instruments at a specified time and place. These contractual obligations, depending on whether one is a buyer or a seller, may be satisfied either by taking or making physical delivery of an approved grade of the particular commodity (or, in the case of some contracts, by cash settlement) or by making an offsetting sale or purchase of an equivalent commodity futures contract on the same (or a linked) exchange prior to the designated date of delivery. In market terminology, a trader who purchases a futures contract is “long” in the futures market, and a trader who sells a futures contract is “short” in the futures market. Outstanding futures contracts (those that have not been closed out by an offsetting purchase or sale or by delivery) are known as “open trades” or “open positions.” | |||
| Among the agricultural commodities for which there are futures contracts are corn, oats, wheat, soybeans, soybean oil, soybean meal, live cattle, live hogs, pork bellies, coffee, sugar, cocoa and cotton. Nonagricultural commodities for which there are futures contracts include copper, silver, gold, platinum, lumber, currency, Treasury bonds and bills, mortgage-backed securities, Eurodollar deposits, certain petroleum products and stock, inflation and interest rate related indices. | |||
| An option on a futures contract gives the purchaser of the option the right (but not the obligation) to take a position at a specified price (the “striking”, “strike” or “exercise” price) in the underlying futures contract. Options have limited life spans, usually tied to the delivery or settlement date of the underlying futures contract. Some options, however, expire significantly in advance of such date. The value of an option at any given point in time is a function of market volatility and the price level of the underlying futures contract. | |||
| Open futures contracts are valued at the settlement price on the date of valuation as determined by the exchange on which the contract was traded. Changes in the market value of open futures contracts, entered into for speculative investing, are recorded as unrealized gains or losses in the accompanying statement of operations. Realized gains and losses (excluding commissions and other exchange related fees) are recognized when such contracts are closed. | |||
| (D) | MARKET AND CREDIT RISKS | ||
| Derivative instruments involve varying degrees of market risks, and changes in the level or volatility of interest rates, foreign currency exchange rates or market values of the underlying financial instruments or commodities underlying such derivative instruments frequently result in changes in the Partnership’s unrealized profit (loss) on such derivative instruments. The Partnership’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Partnership as well as the volatility and liquidity in the markets in which the financial instruments are traded. |
F-10
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| The credit risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter transactions (non-exchange-traded), because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. | |||
| (E) | INCOME TAXES | ||
| No provision for income taxes has been made in the accompanying financial statements since, as a partnership, income and losses for tax purposes are allocated to the partners for inclusion in their respective tax returns. | |||
| At December 31, 2000, the Partnership had net operating loss carryforwards for state income tax purposes and recorded a valuation allowance. During 2001 the Partnership had state taxable income which utilized the state net operating loss carryforward. | |||
| (F) | MANAGEMENT ESTIMATES | ||
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||
| (G) | RECLASSIFICATIONS | ||
| Certain prior year amounts have been reclassified to conform to their 2001 presentation. | |||
| (H) | AVERAGE NET EARNINGS (LOSS) PER UNIT | ||
| The average net earnings (loss) per unit as reported on the statement of operations was calculated as net earnings (loss) allocated to the limited partners divided by average outstanding units during the year. Average outstanding units were 21,711.75, 25,997.87 and 33,292.18 in 2001, 2000 and 1999, respectively. | |||
| (I) | RECENT ACCOUNTING PRONOUNCEMENT | ||
| In September 2000, SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguisments of Liabilities was issued. This Statement replaces SFAS No. 125. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of Statement 125’s provisions without reconsideration. The Partnership’s adoption of the statement had no material impact on its financial position or results of operation. |
F-11
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| In July 2001, SFAS No. 141, Business Combinations and SFAS No. 142 Goodwill and Other Intangible Assets were issued. Statement 141 required that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase business combination must meet to be recognized and reported apart from goodwill. The adoption of these statements will have no material impact on the Partnership’s financial position or results of operations. | ||
| In July 2001, SFAS No. 143, Accounting for Asset Retirement Obligations was issued. This statement requires entities to record the fair value of a liability for an asset retirement obligation in the period which it is incurred. The standard is effective for fiscal years beginning after June 15, 2002, with earlier adoption permitted. The Partnership does not expect this statement to have a material impact on its financial position or results of operations. | ||
| In October 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, was issued. Statement 144 develops an accounting model for long-lived assets that are to be disposed of by sale. The Partnership will adopt Statement 144 effective January 1, 2002. The Partnership does not expect the adoption of this statement to have a material impact on its financial position or results of operations. | ||
| (J) | FAIR VALUE OF FINANCIAL INSTRUMENTS | |
| SFAS No. 107, Disclosure About Fair Value of Financial Instruments, extends existing fair value disclosure practices for some instruments by requiring all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of financial condition, for which it is practicable to estimate fair value. If estimating fair value is not practicable, this Statement requires disclosures of descriptive information pertinent to estimating the value of a financial instrument. At December 31, 2001 and 2000, substantially all of the Partnership’s financial instruments, as defined in the Statement, are carried at fair value. | ||
| (2) | MANAGEMENT AGREEMENT | |
| The Partnership has entered into a Management Agreement in consideration of and as compensation for the services to be rendered by the General Partners and trading advisor. The Partnership pays a monthly Management Allocation equal to 1/3 of 1% (4% per annum) of the Adjusted Net Asset Value of units at month end, plus a quarterly Incentive Allocation of 15% of any net new appreciation in the Adjusted Net Asset Value of units for the quarter. Such fees were as follows: |
| 2001 | 2000 | 1999 | ||||||||||
| Management fees | $ | 133,693 | 152,088 | 208,611 | ||||||||
| Incentive fees | 584 | — | — | |||||||||
F-12
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| (3) | CUSTOMER AGREEMENT WITH REFCO, INC. | |
| The Partnership entered into a customer agreement with Refco, pursuant to which the Partnership deposits its assets in a commodity trading account with Refco who executes trades on behalf of the Partnership. The Partnership agrees to pay such brokerage and commission charges and fees as Refco may establish and charge from time to time. Refco charges the Partnership commissions on commodity trades at the rate of $32.50 per round-turn. Total commissions charged to the Partnership by Refco in 2001, 2000 and 1999 were $313,044, $244,141 and $331,112, respectively. The Partnership earns interest on Treasury Bills held in its account, on interest-bearing accounts and on 80% of the average daily equity maintained as cash in the Partnership’s trading account at a rate that approximated the average yield on 13-week United States Treasury Bills. Total interest earned by the Partnership in 2001, 2000 and 1999 was $134,871, $236,259 and $247,544, respectively. | ||
| (4) | RELATED PARTIES | |
| The sole shareholder of the parent of the managing General Partner is an active partner in the law firm which is the counsel to the Partnership, the General Partners and the Memphis branch of Refco, the Partnership’s commodity broker. | ||
| (5) | DERIVATIVE INSTRUMENTS USED IN SPECULATIVE TRADING | |
| In the normal course of business, the Partnership enters into transactions with derivative instruments used for speculative trading. These derivative instruments include financial futures contracts and option contracts. Futures contracts provide for the delayed delivery of commodities, whereby the seller agrees to make delivery at a specified future date, at a specified price. Futures contracts and options on such contracts are held for trading and arbitrage purposes. The notional value of these contracts reflect the extent of involvement the Partnership has in particular types of contracts. Risk arises from movements in commodities’ values. At December 31, 2001, the underlying notional value of open contract commitments were long $5,310,250 and short $(6,299,900). | ||
| The Partnership trades in a variety of futures and options derivative instruments, and all open positions are reported at fair value. Trading gains, including realized and unrealized gains and losses, from financial futures contracts and options transactions for the year ended December 31, 2001 was $715,270. The average fair value of open commodity financial instruments, and the year-end fair value of open commodities are as follows: |
| AVERAGE FAIR | FAIR VALUE OF | |||||||
| VALUE OF OPEN | OPEN POSITIONS AT | |||||||
| POSITIONS DURING | DECEMBER 31, 2001 | |||||||
| 2001 | ||||||||
| Assets (Long Positions) | $ | (6,244 | ) | $ | 1,775 | |||
| Liabilities (Short Positions) | (23,587 | ) | (126,930 | ) | ||||
F-13
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| (6) | SEGMENT INFORMATION | |
| The Fund’s principal activity is speculative trading of agricultural commodities futures contracts and other commodity interests. Management has determined that these activities constitute one reportable segment. The Fund trades ten different commodities: soybean, cattle, grain spread, corn, cotton, wheat, coffee, Deutsche Marks, S&P Futures, and S&P Petroleum. The accounting policies are the same as those described in the summary of significant accounting policies. | ||
| The results of operations and selected financial information by commodity for the three years ended December 31, 2001, 2000 and 1999 are presented below: |
| GRAIN | ||||||||||||||||||||||
| SOYBEAN | CATTLE | SPREAD | CORN | COTTON | ||||||||||||||||||
| 2001 | ||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||
| Net gains (losses) from closed positions, net | $ | 243,783 | 94,444 | (30,131 | ) | (103,741 | ) | 332,457 | ||||||||||||||
| Change in unrealized gains (losses) on open futures contracts | (3,625 | ) | (136,480 | ) | 338 | (57,500 | ) | 9,075 | ||||||||||||||
| Net gains (losses) on trading activities | $ | 240,158 | (42,036 | ) | (29,793 | ) | (161,241 | ) | 341,532 | |||||||||||||
| Investment income — interest | ||||||||||||||||||||||
| Management fees allocations | ||||||||||||||||||||||
| Incentive fees allocations | ||||||||||||||||||||||
| Professional and administrative expenses | ||||||||||||||||||||||
| Tennessee franchise and excise taxes | ||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | $ | (188 | ) | (134,380 | ) | 338 | 9,075 | |||||||||||||||
| Other unallocated amounts | ||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||
| DEUTSCHE | S&P | |||||||||||||||||||||
| WHEAT | COFFEE | MARKS | FUTURES | TOTAL | ||||||||||||||||||
| 2001 | ||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||
| Net gains (losses) from closed positions, net | (40,612 | ) | 1,100 | (5,864 | ) | (18,427 | ) | $ | 473,009 | |||||||||||||
| Change in unrealized gains (losses) on open futures contracts | 36,212 | — | (2,500 | ) | 70,000 | (84,480 | ) | |||||||||||||||
| Net gains (losses) on trading activities | (4,400 | ) | 1,100 | (8,364 | ) | 51,573 | 388,529 | |||||||||||||||
| Investment income — interest | 134,871 | |||||||||||||||||||||
| Management fees allocations | (133,693 | ) | ||||||||||||||||||||
| Incentive fees allocations | (584 | ) | ||||||||||||||||||||
| Professional and administrative expenses | (95,000 | ) | ||||||||||||||||||||
| Franchise and excise taxes | (16,000 | ) | ||||||||||||||||||||
| Net earnings | $ | 278,123 | ||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | $ | (125,155 | ) | |||||||||||||||||||
| Other unallocated amounts | 3,768,851 | |||||||||||||||||||||
| Total assets | $ | 3,643,696 | ||||||||||||||||||||
F-14
CERES FUND, L.P.
Notes to Financial Statements
December 31, 2001 and 2000
| GRAIN | ||||||||||||||||||||||
| SOYBEAN | CATTLE | SPREAD | CORN | COTTON | ||||||||||||||||||
| 2000 | ||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||
| Net gains (losses) from closed positions, net | $ | (304,658 | ) | 60,426 | (34,650 | ) | (76,253 | ) | 17,381 | |||||||||||||
| Change in unrealized gains (losses) on open futures contracts | 3,438 | (40,220 | ) | — | 57,500 | — | ||||||||||||||||
| Change in unrealized gains (losses) on open options contracts | — | — | 7,656 | — | — | |||||||||||||||||
| Net gains (losses) on trading activities | $ | (301,220 | ) | 20,206 | (26,994 | ) | (18,753 | ) | 17,381 | |||||||||||||
| Investment income — interest | ||||||||||||||||||||||
| Management fees allocations | ||||||||||||||||||||||
| Professional and administrative expenses | ||||||||||||||||||||||
| Franchise and excise taxes | ||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | $ | 3,438 | 2,100 | — | 57,500 | — | ||||||||||||||||
| Other unallocated amounts | ||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||
| DEUTSCHE | S&P | |||||||||||||||||||||
| WHEAT | COFFEE | MARKS | FUTURES | TOTAL | ||||||||||||||||||
| 2000 | ||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||
| Net gains (losses) from closed positions, net | 105,612 | 1,954 | 47,800 | $ | 98,564 | $ | (83,824 | ) | ||||||||||||||
| Change in unrealized gains (losses) on open futures contracts | (36,213 | ) | — | 7,500 | (70,000 | ) | (77,995 | ) | ||||||||||||||
| Change in unrealized gains (losses) on open options contracts | — | — | 3,205 | — | 10,861 | |||||||||||||||||
| Net gains (losses) on trading activities | 69,399 | 1,954 | 58,505 | $ | 28,564 | (150,958 | ) | |||||||||||||||
| Investment income — interest | 236,259 | |||||||||||||||||||||
| Management fees allocations | (152,088 | ) | ||||||||||||||||||||
| Professional and administrative expenses | (84,000 | ) | ||||||||||||||||||||
| Franchise and excise taxes | (15,000 | ) | ||||||||||||||||||||
| Net earnings | $ | (165,787 | ) | |||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | (36,213 | ) | — | 2,500 | $ | (70,000 | ) | $ | (40,675 | ) | ||||||||||||
| Other unallocated amounts | 3,707,354 | |||||||||||||||||||||
| Total assets | $ | 3,666,679 | ||||||||||||||||||||
F-15
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
December 31, 2001 and 2000
| GRAIN | ||||||||||||||||||||||||||
| SOYBEAN | CATTLE | SPREAD | CORN | COTTON | WHEAT | |||||||||||||||||||||
| 1999 | ||||||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||||||
| Net gains (losses) from closed positions, net | $ | 92,443 | (315,869 | ) | (16,164 | ) | 35,800 | 75,849 | (88,553 | ) | ||||||||||||||||
| Change in unrealized gains (losses) on open futures contracts | 49,120 | 456,680 | — | — | — | — | ||||||||||||||||||||
| Change in unrealized gains (losses) on open options contracts | (4,063 | ) | — | (7,655 | ) | — | 34,375 | — | ||||||||||||||||||
| Net gains (losses) on trading activities | $ | 137,500 | 140,811 | (23,819 | ) | 35,800 | 110,224 | (88,553 | ) | |||||||||||||||||
| Investment income — interest | ||||||||||||||||||||||||||
| Management fees — allocations | ||||||||||||||||||||||||||
| Professional and administrative expenses | ||||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | $ | — | 42,320 | — | — | — | — | |||||||||||||||||||
| Open option contracts, at market | — | — | 2,344 | — | — | — | ||||||||||||||||||||
| $ | — | 42,320 | 2,344 | — | — | — | ||||||||||||||||||||
| Other unallocated amounts | ||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||
| DEUTSCHE | S&P | S&P | ||||||||||||||||||||
| COFFEE | MARKS | FUTURES | PETROLEUM | TOTAL | ||||||||||||||||||
| 1999 | ||||||||||||||||||||||
| RESULTS OF OPERATIONS: | ||||||||||||||||||||||
| Net gains (losses) from closed positions, net | (31,060 | ) | (58,000 | ) | (54,067 | ) | (8,551 | ) | $ | (368,172 | ) | |||||||||||
| Change in unrealized gains (losses) on open futures contracts | — | 2,344 | (4,125 | ) | — | 504,019 | ||||||||||||||||
| Change in unrealized gains (losses) on open options contracts | — | (3,203 | ) | — | — | 19,454 | ||||||||||||||||
| Net gains (losses) on trading activities | (31,060 | ) | (58,859 | ) | (58,192 | ) | (8,551 | ) | 155,301 | |||||||||||||
| Investment income — interest | 247,544 | |||||||||||||||||||||
| Management fees — allocations | (208,611 | ) | ||||||||||||||||||||
| Professional and administrative expenses | (80,000 | ) | ||||||||||||||||||||
| Net earnings | $ | 114,234 | ||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION: | ||||||||||||||||||||||
| Unrealized gains (losses) on open futures contracts | — | (5,000 | ) | — | — | $ | 37,320 | |||||||||||||||
| Open option contracts, at market | — | 12,266 | — | — | 14,610 | |||||||||||||||||
| — | 7,266 | — | — | 51,930 | ||||||||||||||||||
| Other unallocated amounts | 5,069,279 | |||||||||||||||||||||
| Total assets | $ | 5,121,209 | ||||||||||||||||||||
F-16
Schedule 1
CERES FUND, L.P.
(A Tennessee Limited Partnership)
Schedule of Investments
December 31, 2001
| PAR OR | |||||||||
| NUMBER OF | FAIR | ||||||||
| DESCRIPTION | CONTRACTS | VALUE | |||||||
| United States Treasury Bill due March 21, 2002 | 3,000,000 | $ | 2,989,350 | ||||||
| Net cash balances from futures trading | 721,518 | ||||||||
| Open contracts in futures trading accounts: | |||||||||
| February 2 Live Cattle | 175 | 6,800 | |||||||
| April 2 Live Cattle | (100 | ) | (82,230 | ) | |||||
| June 2 Live Cattle | (75 | ) | (58,950 | ) | |||||
| March 2 NY Cotton | (20 | ) | 9,075 | ||||||
| May 2 Soybeans — CBT | (25,000 | ) | (188 | ) | |||||
| March 2 S Wheat | 25 | (5,025 | ) | ||||||
| July 2 S Wheat | (25 | ) | 5,363 | ||||||
| (125,155 | ) | ||||||||
| Total investments | $ | 3,585,713 | |||||||
See accompanying independent accountant’s report
F-17
AFFIRMATION
STATE OF TENNESSEE )
)
CITY OF MEMPHIS )
I, FRANK L. WATSON, JR. being duly sworn, deposes and says:
1. I am President of Randell Commodity Corporation, the commodity pool operator and the managing general partner of Ceres Fund, L.P., as named in the attached Annual Report and am duly authorized to execute this Affirmation.
2. To the best of my knowledge and belief, the information contained in the attached Annual Report is accurate and complete.
| /s/Frank L. Watson, Jr. Frank L. Watson, Jr., Chairman Randell Commodity Corporation |
SWORN TO AND SUBSCRIBED before me this 1st day of April 2002.
/s/Marty Morgan
Marty Morgan
NOTARY PUBLIC
My Commission Expires: December 29, 2004
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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, in the City of Memphis, and State of Tennessee on the 1st day of April 2002
CERES FUND, L.P.
| By: | RANDELL COMMODITY CORPORATION Managing General Partner | |
| By: | /s/Frank L. Watson, Jr. Frank L. Watson, Jr. Chairman |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Managing General Partner of the Registrant in the capacities and on the date indicated.
RANDELL COMMODITY CORPORATION
Managing General Partner of the Registrant
| By: | /s/Frank L. Watson, Jr. Frank L. Watson, Jr., Principal Executive Officer & Sole Director |
December 4, 2002
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
None.
