<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended: July 31, 1998
OR
/ / Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 [No Fee Required]
Commission File Number: 0-17590
THE FOUR SEASONS FUND LIMITED PARTNERSHIP
-----------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3586810
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o HEINOLD ASSET MANAGEMENT, INC.
440 South LaSalle
20th Floor
Chicago, Illinois 60605
-----------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 663-7500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Units
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The registrant is a limited partnership and, accordingly, has no voting stock
held by nonaffiliates or otherwise.
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PART I
Item 1. Business
(a) General development of business
The Four Seasons Fund Limited Partnership (the "Partnership")
is a limited partnership organized on February 10, 1988 pursuant to an Agreement
of Limited Partnership (the "Limited Partnership Agreement") and under the
Revised Uniform Limited Partnership Act of the State of Illinois. The
Partnership was funded through an offering of Units of Limited Partnership
Interest ("Units"). Limited Partners of Units are referred to herein as
"Unitholders." The Partnership implements asset allocation strategies by trading
approximately 20% of its original assets in the futures markets through an
affiliated limited partnership (the "Trading Company") of which the Partnership
is the sole limited partner, while maintaining its remaining assets in a
"guaranteed yield pool". The guaranteed yield pool was established at the
commencement of operations, and approximately 80% of the Partnership's assets
were invested in zero coupon U.S. Treasury Strip Notes (the "Notes"), so as to
yield $1,000 per unit, plus 5% compound annual yield, on November 15, 1994. On
November 15, 1994, the Notes expired and in December 1994, approximately 80% of
the Partnership's assets were invested in new Notes so as to yield $1,515.85 per
unit, plus a minimum of 3% compound annual yield, on November 15, 2000.
The public offering of Units began on approximately October 1,
1988 and was completed on February 23, 1989. The offering was registered under
the Securities Act of 1933, as amended, and Geldermann Securities, Inc. acted as
selling agent and selected numerous broker/dealers to act as additional selling
agents on a best efforts basis. A total of 41,409 Units were sold to the public
during the public offering.
Heinold Asset Management, Inc. (the "General Partner"), a
Delaware corporation, is the General Partner of the Partnership and, in that
capacity, performs various administrative services. The General Partner was
organized in 1982 to serve as the general partner and pool operator for public
and private commodity pools sponsored by Heinold Commodities, Inc., an
affiliate. Until March 31, 1996, the General Partner was a wholly owned
subsidiary of Geldermann, Inc., an Illinois corporation ("Geldermann"). On March
31, 1996, the General Partner became a wholly owned subsidiary of E.D. & F. Man
Inc., a Delaware corporation with headquarters in New York, New York.
Until June 1, 1995, Geldermann acted as the Partnership's
futures commission merchant or commodity broker. On that date, E.D. & F. Man
International Inc. (the "Commodity Broker") replaced Geldermann as the
Partnership's commodity broker. The General Partner and the Commodity Broker
perform various services related to the Partnership's trading pursuant to the
Partnership's Limited Partnership Agreement and the Partnership's customer
agreement with the Commodity Broker. The General Partner's investment in the
Partnership at the outset of trading was $410,620, which, after the redemptions
set forth below, was worth $246,032 as of July 31, 1998. On October 1, 1991 and
March 31, 1995, the General Partner redeemed 59 Units and 250 Units for $73,625
and $402,510, respectively.
RXR, Inc., a New York corporation (the "Trading Advisor"), is
the Partnership's Trading Advisor. RXR is not an affiliate of the Partnership or
of the General Partner.
The Trading Advisor directs the Partnership's futures and
options trading in stock index, bond and managed futures and short-term interest
rate instruments and forward trading, pursuant to a Joint Venture Agreement with
the Partnership's Trading Company. The Trading Advisor receives a quarterly
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profit share from the Partnership of 15% of New Trading Profits provided that
the joint venture has taxable income in a calendar year. This profit share is
retained by the Trading Advisor even if trading losses occur in subsequent
quarters; however, no further profit share is payable until any such trading
losses (other than losses attributable to redeemed units) are recouped by the
Partnership. As of July 31, 1998, there was a carry-forward loss of $383,201.
Reference is made to Note (5) of the Financial Statements. In addition, the
Trading Advisor receives a monthly consulting fee paid by the Commodity Broker
of 0.0417 of 1% (0.5% per annum) of the Partnership's month-end Net Assets. New
Trading Profits and Net Assets are each determined pursuant to formulas set
forth in the Joint Venture Agreement between the Partnership's Trading Company
and the Trading Advisor and the Consulting Agreement between the Commodity
Broker and the Trading Advisor.
At the commencement of trading, the Partnership's assets were
deposited in the following proportions: approximately 20% with the Partnership's
Trading Company and approximately 80% which the General Partner, on the
Partnership's behalf, invested in zero-coupon United States Treasury strip notes
as the Partnership's guaranteed yield pool.
The Trading Company has a brokerage contract with the
Commodity Broker, which provides that the Commodity Broker will be paid a rate
of 4.00% of Net Assets per annum, plus floor brokerage, National Futures
Association, exchange and clearing fees. This rate was reduced from 4.75% to
4.45% on December 1, 1995 and further reduced to 4.00% on December 1, 1996.
The Trading Advisor's trading method is highly systematic and
technical. The objectives of the trading method are to maintain an optimum asset
mix in a fully diversified portfolio, while integrating a 20% to 30% managed
futures component to achieve significant capital gains through speculative
trading in the futures and forward market.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"),
commodity exchanges and futures trading are subject to regulation by the
Commodity Futures Trading Commission (the "CFTC"). The National Futures
Association ("NFA"), a "registered futures association" under the Act, is the
only non-exchange self-regulatory organization for futures industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers" and "floor traders". The Act requires
"commodity pool operators," such as the General Partner, "commodity trading
advisors," such as the Trading Advisor, and commodity brokers or "futures
commission merchants," such as the Commodity Broker, to be registered and to
comply with various reporting and recordkeeping requirements. The General
Partner, the Trading Advisor and the Commodity Broker are all members of NFA.
The CFTC may suspend a commodity pool operator's or a trading advisor's
registration if the CFTC finds that its trading practices tend to disrupt
orderly market conditions or in certain other situations. In the event that the
registration of the General Partner as a commodity pool operator or the Trading
Advisor's registration as a commodity trading advisor was terminated or
suspended, the General Partner and the Trading Advisor, respectively, would be
unable to continue to manage the business of the Partnership. Should the General
Partner's registration be suspended, termination of the Partnership might
result.
As members of NFA, the General Partner, the Trading Advisor
and the Commodity Broker are subject to NFA standards relating to fair trade
practices, financial condition and customer protection.
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As the self-regulatory body of the futures industry, the NFA promulgates rules
governing the conduct of futures industry professionals and disciplines those
professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and
certain futures exchanges have established limits on the maximum net long or net
short position which any person may hold or control in particular futures. The
CFTC has adopted a rule requiring all domestic futures exchanges to submit for
approval speculative position limits for all futures contracts traded on such
exchanges. Many exchanges also limit the changes in futures contract prices that
may occur during a single trading day. The Partnership may trade on foreign
commodity exchanges which are not subject to regulation by any United States
Government agency.
The Trading Advisor engages in trading on most major
non-United States exchanges and markets on behalf of the Partnership. Trading on
such exchanges and markets involves certain risks not applicable to trading on
United States exchanges and is frequently less regulated. For example, certain
of such exchanges may not provide the same assurances of the integrity
(financial and otherwise) of the marketplace and its participants as do United
States exchanges. Some non-United States exchanges, in contrast to United States
exchanges, are "principals' markets" in which performance is the responsibility
only of the individual member with whom the trader has dealt and is not the
responsibility of an exchange or clearing association. Furthermore, trading on
certain non-United States exchanges may be conducted in such a manner that all
participants are not afforded an equal opportunity to execute certain trades and
may also be subject to a variety of political influences and the possibility of
direct government intervention. The Partnership also would be subject to the
risk of fluctuations in the exchange rate between the local currency and the
United States dollar and to the possibility of exchange controls. Finally,
futures contracts traded on non-United States exchanges (other than foreign
currency contracts) might not be considered to be "regulated futures contracts"
for Federal income tax purposes.
(b) Financial information about industry segments
The Partnership's business constitutes only one segment,
speculative trading of forward contracts and futures and options on futures
contracts, for financial reporting purposes. The Partnership does not engage in
sales of goods and services. The Partnership's revenue, operating results and
total assets for the five fiscal years ended July 31, 1998 are set forth under
"Item 6. Selected Financial Data."
(c) Narrative description of business
(1) See Items 1(a) and (b) above.
(i) through (xii) - not applicable.
(xiii) - the Partnership has no employees.
(d) Financial information about foreign and domestic operations
and export sales
The Partnership does not engage in sales of goods or services.
See "Item 1(b). Financial information about industry segments."
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Item 2. Properties
The Partnership does not own any properties. Under the terms
of the Limited Partnership Agreement, the General Partner performs the following
services for the Partnership:
(1) Manages the business of the Partnership. Pursuant to this
authority, the General Partner through its Trading Company, has entered into a
Joint Venture Agreement with the Trading Advisor (under which the Trading
Advisor has complete discretion with respect to determination of the
Partnership's trading decisions with respect to that portion of the
Partnership's assets which the Trading Advisor manages) and a Customer Agreement
with the Commodity Broker (pursuant to which the Commodity Broker executes all
trades on behalf of the Partnership based on the instructions of the Trading
Advisor).
(2) Maintains the Partnership's books and records which
Unitholders or their duly authorized representatives may inspect during normal
business hours for any proper purpose upon reasonable written notice to the
General Partner.
(3) Furnishes each Unitholder with a monthly statement
describing the performance of the Partnership which sets forth the brokerage
commissions and other expenses incurred or accrued and any profit share
allocable to the Trading Advisor by the Partnership for the month.
(4) Forwards annual audited financial statements (including a
statement of financial condition and statement of operations) to each
Unitholder.
(5) Provides to each Unitholder 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) Performs secretarial and other clerical duties and
furnishes office space, equipment and supplies as may be necessary for
supervising the affairs of the Partnership.
(7) Administers the redemption of Units.
Item 3. Legal Proceedings
The 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. In
addition, there are no pending material proceedings involving the General
Partner or the Commodity Broker.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Market Information. There is no trading market for the
Units, and none is likely to develop. They are transferable only after written
notice has been given to and approved by the General
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Partner. Units may be redeemed effective as of the close of business on the last
business day of any calendar quarter, and then only in whole Units, at the Net
Asset Value per Unit calculated as of the close of business (as determined by
the General Partner) on the effective date of redemption. The Net Asset Value is
calculated by valuing the Partnership's investment in U.S. Treasury Strip Notes
at the lower of accreted costs or market value. Units redeemed on or prior to
the end of the fourth and after the end of the fourth but on or prior to the end
of the eighth full calendar quarter of the Partnership's operations were subject
to a 4% and 3% redemption charge, respectfully. This charge was paid to the
General Partner. Requests for redemption must be received by the General Partner
ten days before the redemption date. During the period August 1, 1990 through
March 1991 (the last quarter during which redemption penalties were charged)
there were redemption charges of $83,805 paid to the General Partner.
(b) Holders. As of July 31, 1998, there were 316 holders of
Units.
(c) Dividends. No distributions or dividends have been made on
the Units, and the General Partner presently has no intention to make any.
Item 6. Selected Financial Data
The following is a summary of operations and total assets of
the Partnership for the five fiscal years ended July 31, 1998.
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<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended
July 31, 1998 July 31, 1997 July 31, 1996 July 31, 1995 July 31, 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Gain (loss) on trading of
futures and
forward contracts $ 227,175 $ 2,428,543 $ (148,660) $ (532,491) $ (1,445,324)
Interest income 126,262 104,045 133,072 314,556 269,873
Accretion of U.S. Treasury
Strip Notes 974,132 989,940 969,469 1,400,402 2,739,833
Net realized and unrealized
gain (loss) on U.S. Treasury
Strip Notes (58,872) 182,440 (270,765) 829,359 (1,823,682)
Realized gain on sale of
U.S. Treasury Strip Notes 0 0 0 45,157 88,837
------------ ------------ ------------ ------------ ------------
Total revenue 1,268,697 3,704,968 683,116 2,056,983 (170,463)
Expenses:
Brokerage commissions 658,592 661,043 726,631 1,068,370 1,918,393
Profit Share to Trading
Advisor 13,352 99,843 19,306 0 (36,724)
Other 23,000 54,501 83,898 155,159 324,678
------------ ------------ ------------ ------------ ------------
Total expenses 694,944 815,387 829,835 1,223,529 2,206,347
------------ ------------ ------------ ------------ ------------
Net income (loss) before
minority interest 573,753 2,889,581 (146,719) 833,454 (2,376,810)
Minority interest 13,970 (57,975) 21,622 24,054 50,618
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 587,723 $ 2,831,606 $ (125,907) $ 857,508 $ (2,326,192)
============ ============ ============ ============ ============
Net income (loss) allocated to:
General Partner $ 9,212 $ 38,753 $ (739) $ 20,910 $ (33,563)
============ ============ ============ ============ ============
Limited Partners $ 578,511 $ 2,792,853 $ (124,358) $ 836,598 $ (2,292,629)
============ ============ ============ ============ ============
Net income (loss) for a
Unit of Partnership Interest
(for a Unit outstanding
throughout each year):
General Partner $ 83.78 $ 352.30 $ (6.72) $ 195.09 $ (93.23)
============ ============ ============ ============ ============
Limited Partners $ 83.78 $ 352.30 $ (6.72) $ 195.09 $ (93.23)
============ ============ ============ ============ ============
Total assets $ 15,925,144 $ 17,270,133 $ 16,069,074 $ 18,434,548 $ 37,604,209
============ ============ ============ ============ ============
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to "Item 6. Selected Financial Data" and
"Item 8. Financial Statements and Supplementary Data." The information contained
therein is essential to, and should be read in conjunction with, the following
analysis.
Capital Resources
The Partnership does not intend to raise any additional
capital through borrowing and, because it is a closed-end fund, it cannot sell
any more Units unless it undertakes a new public offering, which would require
another registration with the Securities and Exchange Commission. 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
U.S. Treasury Strip Notes and investments in futures and options on futures.
Liquidity
Many United States commodity exchanges limit fluctuations in
futures contract prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits." During a single trading day, no
trades may be executed at prices beyond the daily limit. Once the price of a
futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Futures prices have occasionally
moved the daily limit for several consecutive days with little or no trading.
Similar occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject the Partnership to substantial losses which
could exceed the margin initially committed to such trades. In addition, even if
futures prices have not moved the daily limit, the Partnership may not be able
to execute futures trades at favorable prices if little trading in such
contracts is taking place. Other than these limitations on liquidity, which are
inherent in the Partnership's futures trading operations, the Partnership's
assets are highly liquid and are expected to remain so.
Results of Operations
The significant components of revenue generated by the
Partnership include: any net realized trading gains on closed futures and
forward contracts, any change in net unrealized appreciation/depreciation on
open futures and forward contracts, interest income earned on U.S. Treasury
securities, accretion of U.S. Treasury Strip Notes, any unrealized gain on
market value of U.S. Treasury Strip Notes and any realized gain on sale of U.S.
Treasury Strip Notes. Partnership expenses include brokerage commissions, profit
shares and other administrative expenses.
Operating results show a profit for the fiscal years ended
July 31, 1998 and July 31, 1997 and a loss for the fiscal year ended July 31,
1996.
The Net Asset Value per Unit on a redemption value basis as of
July 31, 1998 and July 31, 1997 was $2,140.56 and $2,048.19, respectively.
The Partnership realized a profit for the fiscal year ended
July 31, 1998. This profit was due in large part to the accretion of the U.S.
Treasury Strip Notes. Slight trading gains were realized by the Trading Advisor
from long IMM S&P contracts as well as long positions in U.S. fixed income
markets. These positions were profitable due to subdued inflation, the continued
strength of the U.S. economy and declining interest rates. The Partnership
incurred some losses in agricultural, energy and currency
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contracts, however, such losses did not offset trading gains. As of October 31,
1997, January 31, 1998, April 30, 1998 and July 31, 1998, the Net Asset Value
per Unit on a redemption value basis was $2,009.36, $2,075.77, $2,128.37 and
$2,140.56, respectively.
The Partnership realized a profit for the fiscal year ended
July 31, 1997. Profitable trading occurred in long U.S. dollar positions against
the Swiss franc, German mark, Japanese yen, and the New Zealand dollar.
Profitable trading also occurred from long positions in U.S. equity and fixed
income markets. These positions were profitable due to declining interest rates
and subdued inflation. The Partnership incurred some losses in agricultural,
sugar and cotton positions, however, such losses did not offset trading gains.
As of October 31, 1996, January 31, 1997, April 30, 1997 and July 31, 1997, the
Net Asset Value per Unit on a redemption value basis was $1,786.69, $1,838.66,
$1,847.70 and $2,048.19, respectively.
The Partnership showed slight overall trading losses for the
fiscal year ended July 31, 1996. The Partnership experienced profitable trading
in short U.S. and foreign financial positions which occurred due to an increase
in U.S. interest rates. Profitable positions were also held in the agricultural
and currency markets. The Fund's profitable trading, however, was offset by
unprofitable short positions held in currencies, primarily in the third quarter.
Additional losses were incurred in the financial and precious metals markets. As
of October 31, 1995, January 31, 1996, April 30, 1996 and July 31, 1996, the Net
Asset Value per Unit on a redemption value basis was $1,713.35, $1,802.86,
$1,727.99 and $1,721.38, respectively.
Inflation is not a significant factor in the Partnership's
profitability.
Impact of Year 2000
Like other financial and business organizations and
individuals around the world, the Partnership could be adversely affected if its
computer systems and those of its service providers, including affiliates of the
General Partner, do not properly process and calculate date-related information
relating to the year 2000. The General Partner is taking steps that it believes
are reasonably designed to address any problems with respect to the computer
systems that it uses and to obtain satisfactory assurances that comparable steps
are being taken by its service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Partnership.
Item 8. Financial Statements and Supplementary Data
Financial statements are listed on page F-1 of this report.
The supplementary financial information specified by Item 302
of Regulation S-K is not applicable.
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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
The Partnership filed a Form 8-K on January 17, 1997,
indicating a change in accountants for the fiscal year ended July 31, 1997. Such
Form 8-K is herein incorporated by reference. A report from Deloitte & Touche
LLP dated September 6, 1996, is filed as part of the financial statements to
this report.
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 General Partner. There are no "significant
employees" of the Partnership. Trading decisions for the Partnership are made by
the Trading Advisor.
The General Partner is a commodity pool operator registered
with the National Futures Association. The Trading Advisor and its respective
principals have been trading commodities accounts for investors pursuant to
their respective trading methods for several years.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General
Partner performs the services described in "Item 2. Properties" herein. E.D. &
F. Man International Inc. acts as the Partnership's commodity broker pursuant to
the Customer Agreement described in "Item 1(a). General development of
business."
The General Partner participates in any appreciation in the
net assets of the Partnership in proportion to its investment.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
The Echlin Inc. Pension Trust owned 2,057.95 Units of Limited
Partnership Interest in the Partnership valued at $4,405,158.00 as of July 31,
1998, 29.34% of the Partnership's total equity.
(b) Security ownership of management
Under the terms of the Limited Partnership Agreement, the
Partnership's affairs are managed by the General Partner and the Trading Advisor
has discretionary authority over the Partnership's futures and options on
futures contract trading. The General Partner owned 110 Unit-equivalents valued
at $246,032 as of July 31, 1998, 1.57% of the Partnership's total equity.
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(c) Changes in control
None.
Item 13. Certain Relationships and Related Transactions
See "Item 11. Executive Compensation" and "Item 12.
Security Ownership of Certain Beneficial Owners and Management."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1) Financial Statements
See Index to Financial Statements, infra.
(a)(2) Financial Statement Schedules
All Schedules are omitted for the reason that they are not
required, are not applicable, or because equivalent information has been
included in the financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K
(3) Articles of Incorporation and By-laws
a. Limited Partnership Agreement dated as of February 10,
1988, amended and restated as of August 18, 1988.
The above exhibit is incorporated by reference from the
Registration Statement Amendment No. 1 filed by the Partnership on Form S-1
(File No. 33-20264) and declared effective as of September 28, 1988.
(10) Material Contracts
a. Joint Venture Agreement between the Partnership and RXR,
Inc.
b. Customer Agreement between the Partnership and Geldermann,
Inc.
The above exhibit is incorporated herein by reference from the
Registration Statement filed by the Partnership on Form S-1 (Reg. No. 33-20264)
and declared effective as of September 28, 1988.
c. Back Office Service Agreement dated November 1, 1996 among
Managed Asset Service Corp., the General Partner and the Partnership.
The above exhibit is filed herewith.
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(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during
the quarter ended July 31, 1998.
(27) Financial Data Schedule
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Combined Financial Statements
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Years ended July 31, 1998, 1997, and 1996
with Report of Independent Auditors
<PAGE> 14
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Combined Financial Statements
Years ended July 31, 1998, 1997, and 1996
CONTENTS
Report of Independent Auditors............................................F-1
Combined Financial Statements
Combined Statements of Financial Condition................................F-2
Combined Statements of Operations.........................................F-3
Combined Statements of Changes in Partners' Equity........................F-4
Combined Statements of Cash Flows.........................................F-5
Notes to Combined Financial Statements....................................F-6
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the General Partner and
Limited Partners of
The Four Seasons Fund Limited Partnership:
We have audited the accompanying combined statements of operations, changes in
partners' equity and cash flows of The Four Seasons Fund Limited Partnership and
Geldermann Asset Allocation Limited Partnership (collectively, the
"Partnerships") for the year ended July 31, 1996. These financial statements are
the responsibility of the Partnerships' General Partner. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, such combined statements present fairly, in all material
respects, the results of the Partnerships' operations and their cash flows for
the year ended July 31, 1996, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
September 6, 1996
Chicago, Illinois
<PAGE> 16
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
The Partners
The Four Seasons Fund Limited Partnership
We have audited the accompanying combined statements of financial condition of
The Four Seasons Fund Limited Partnership and Geldermann Asset Allocation
Management Limited Partnership, collectively, the Fund, as of July 31, 1998 and
1997, and the related combined statements of operations, changes in partners'
equity, and cash flows for the years then ended. These combined financial
statements are the responsibility of the Fund's General Partner. Our
responsibility is to express an opinion on these financial statements based on
our audits. The combined statements of operations, changes in partner's equity
and cash flows for the year then ended July 31, 1996, were audited by other
auditors whose report dated September 6, 1996, expressed an unqualified opinion
on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Fund at
July 31, 1998 and 1997, and the combined results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
September 4, 1998
F-1
<PAGE> 17
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Combined Statements of Financial Condition
<TABLE>
<CAPTION>
JULY 31
1998 1997
------------------------------------
<S> <C> <C>
ASSETS
Equity in commodity trading accounts:
Net unrealized trading gain (loss) on open contracts $ (27,581) $ 1,489,012
Due from affiliated broker 2,591,526 2,165,611
------------------------------------
2,563,945 3,654,623
U.S. Treasury Strip Notes - at market value (accreted cost:
$12,686,941 and $12,789,840 in 1998 and 1997, respectively) 13,361,199 13,615,510
------------------------------------
Total assets $15,925,144 $ 17,270,133
====================================
LIABILITIES, MINORITY INTEREST, AND PARTNERS' EQUITY
Liabilities:
Brokerage commissions $ 48,898 $ 52,556
Incentive fees 65,422 99,843
Other 11,459 17,741
------------------------------------
Total liabilities 125,779 170,140
Minority interest 111,371 125,341
Partners' equity:
Limited partners (6,904 and 7,775 units outstanding at
July 31, 1998 and 1997, respectively) 15,441,962 16,737,832
General Partner (110 unit equivalents outstanding at
July 31, 1998 and 1997) 246,032 236,820
------------------------------------
Total partners' equity 15,687,994 16,974,652
------------------------------------
Total liabilities, minority interest, and partners' equity $ 15,925,144 $ 17,270,133
====================================
Net asset value per outstanding unit of partnership interest
$ 2,236.69 $ 2,152.91
====================================
Net redemption value per outstanding unit of partnership
interest $ 2,140.56 $ 2,048.19
====================================
</TABLE>
See accompanying notes.
F-2
<PAGE> 18
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Combined Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS)
Net realized trading gains (losses) on closed
contracts $ 1,743,768 $ 1,190,428 $ (306,794)
Change in net unrealized trading gain (loss) on
open contracts (1,516,593) 1,238,115 158,134
Brokerage commissions (658,592) (661,043) (726,631)
------------------------------------------------------
(431,417) 1,767,500 (875,291)
Interest income 126,262 104,045 133,072
Accretion of U.S. Treasury Strip Notes 974,132 989,940 969,469
Net realized and unrealized gain (loss) on U.S.
Treasury Strip Notes (58,872) 182,440 (270,765)
------------------------------------------------------
610,105 3,043,925 (43,515)
EXPENSES
Profit share to trading advisor 13,352 99,843 19,306
Other 23,000 54,501 83,898
------------------------------------------------------
36,352 154,344 103,204
------------------------------------------------------
Net income (loss) before minority interest 573,753 2,889,581 (146,719)
Minority interest 13,970 (57,975) 21,622
------------------------------------------------------
Net income (loss) $ 587,723 $ 2,831,606 $ (125,097)
======================================================
Net income (loss) for a unit of
partnership interest (for a unit
outstanding throughout each year):
General Partner $ 83.78 $ 352.30 $ (6.72)
======================================================
Limited Partners $ 83.78 $ 352.30 $ (6.72)
======================================================
Net income (loss) allocated to:
General Partner $ 9,212 $ 38,753 $ (739)
Limited Partners 578,511 2,792,853 (124,358)
</TABLE>
See accompanying notes.
F-3
<PAGE> 19
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Combined Statements of Changes in Partners' Equity
Years ended July 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
------------------------------------------------------
<S> <C> <C> <C>
Partners' equity at July 31, 1995 $18,074,506 $198,806 $18,273,312
Redemption of 1,258 units of limited
partnership interest (2,207,253) - (2,207,253)
Net loss (124,358) (739) (125,097)
------------------------------------------------------
Partners' equity at July 31, 1996 15,742,895 198,067 15,940,962
Redemption of 969 units of limited
partnership interest (1,797,916) - (1,797,916)
Net income 2,792,853 38,753 2,831,606
------------------------------------------------------
Partners' equity at July 31, 1997 16,737,832 236,820 16,974,652
Redemption of 871 units of limited
partnership interest (1,874,381) - (1,874,381)
Net income 578,511 9,212 587,723
------------------------------------------------------
Partners' equity at July 31, 1998 $15,441,962 $246,032 $15,687,994
======================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 20
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 587,723 $ 2,831,606 $ (125,097)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Increase) decrease in equity in
commodity trading accounts 1,090,678 (1,205,206) 1,627,720
Accretion of U.S. Treasury Strip Notes (974,132) (989,940) (969,469)
Net realized and unrealized (gain)
loss on U.S. Treasury Strip Notes 58,872 (182,440) 270,765
Increase (decrease) in liabilities (44,361) 108,894 (11,001)
Increase (decrease) in minority
interest (13,970) 57,975 (21,622)
------------------------------------------------------
Net cash provided by operating activities 704,810 620,889 771,296
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of U.S. Treasury Strip Notes 1,169,571 1,177,027 1,435,957
------------------------------------------------------
Net cash provided by investing activities 1,169,571 1,177,027 1,435,957
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of limited partnership
interests (1,874,381) (1,797,916) (2,207,253)
------------------------------------------------------
Net change in cash - - -
Cash at beginning of year - - -
======================================================
Cash at end of year $ - $ - $ -
======================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 21
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Notes to Combined Financial Statements
1. ORGANIZATION OF THE PARTNERSHIP
The Four Seasons Fund Limited Partnership (Partnership) was organized in
February 1988, under the Illinois Uniform Limited Partnership Act for the
purpose of engaging in the speculative trading of futures and forward contracts,
and options thereon. Heinold Asset Management, Inc. (HAMI), a wholly owned
subsidiary of E.D. & F. Man, Inc., is the general partner of the Partnership
(General Partner).
The Partnership was formed to enable its limited partners to participate in the
Balanced Portfolio Program offered by RXR Capital Management, Inc. (RXR). Under
this trading program, a substantial portion of the limited partner's
contribution is invested in the form of zero coupon U.S. Treasury Strip Notes
which are held by an independent custodian. The balance of the assets have been
invested in Geldermann Asset Allocation Management Limited Partnership (Trading
Partnership), and are being used to trade futures and forward contracts, and
options thereon. The Partnership is the sole limited partner of the Trading
Partnership. The general partner of the Trading Partnership is HAMI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements are prepared on a combined basis and
include the accounts of The Four Seasons Fund Limited Partnership and Geldermann
Asset Allocation Management Limited Partnership, collectively, the Fund. All
significant intercompany balances and transactions have been eliminated in the
accompanying combined financial statements.
DUE FROM AFFILIATED BROKER
Due from affiliated broker consists of balances, including interest receivable,
due from E.D. & F. Man International, Inc. (Man), a registered broker-dealer and
an affiliate of the General Partner.
INCOME RECOGNITION
Realized and unrealized trading gains and losses on futures and forward
contracts, which represent the difference between cost and selling price or
quoted market value, are recognized currently. All trading activities are
accounted for on a trade-date basis.
F-6
<PAGE> 22
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Notes to Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets, liabilities, gains, and losses denominated in foreign currencies are
translated at end-of-period exchange rates. The resulting net realized and
unrealized foreign exchange gains and losses are not material and are recorded
in trading gains (losses) in the combined statements of operations.
INCOME TAXES
Income taxes are not provided for by the Fund and the Partnership because
taxable income (loss) of the Fund and the Partnership is includable in the
income tax returns of the partners.
NET INCOME (LOSS) PER UNIT
Net income (loss) per unit of Partnership interest is equal to the change in net
asset value per unit from the beginning of the year to the end of the year. Unit
amounts are rounded to whole numbers for financial statement presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. LIMITED PARTNERSHIP AGREEMENT
The limited partners and the General Partner share in the profits and losses of
the Partnership in proportion to the number of units or unit equivalents held by
each partner. However, no limited partner is liable for obligations of the
Partnership in excess of its capital contribution and profits, if any.
F-7
<PAGE> 23
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Notes to Combined Financial Statements (continued)
3. LIMITED PARTNERSHIP AGREEMENT (CONTINUED)
Responsibility for managing the Partnership is vested solely in the General
Partner; however, the General Partner has delegated complete trading authority
to an unrelated party (see Note 5).
Distributions (other than redemption of units), if any, are made on a pro rata
basis at the sole discretion of the General Partner.
Limited partners may redeem any or all of their units as of the end of any
calendar quarter following 10 days' prior written notice to the General Partner.
Redemption is at net asset value of the Partnership as of quarter end. The
Partnership will be dissolved on December 31, 2007, or upon the occurrence of
certain events, as specified in the limited partnership agreement. The
Partnership is closed to new subscriptions.
The Partnership bears the expenses incurred in connection with its activities.
These expenses include brokerage commissions, trading advisor's incentive fees,
legal, audit, and tax return preparation fees and filing fees.
The General Partner bears all other operating expenses.
4. U.S. TREASURY STRIP NOTES
Upon commencement of operations, the Partnership invested in zero coupon U.S.
Treasury Strip Notes (Strip Notes) at a cost of $32,863,272, so as to yield
$1,000 per unit, plus a 5% compound annual yield, approximately 5 1/2 years
after commencement of operations. These Strip Notes matured on November 15,
1994, and approximately $29,231,000 of proceeds was received at the maturity
date. In December of 1994, approximately 80% of the Partnership's assets were
invested in new strip notes so as to yield $1,515.85 per unit, plus a minimum of
3% compound annual yield, on November 15, 2000.
5. ADVISORY AND BROKERAGE AGREEMENTS
The Trading Partnership's sole trading advisor is RXR, Inc. (RXR). RXR directs
the Partnership's futures, forwards and options trading pursuant to a Joint
Venture Agreement with the Trading Partnership. RXR receives a quarterly profit
share of 15% of new trading profits, as defined, provided that the joint venture
has taxable income in a
F-8
<PAGE> 24
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Notes to Combined Financial Statements (continued)
5. ADVISORY AND BROKERAGE AGREEMENTS (CONTINUED)
calendar year. This profit share is retained by RXR even if such trading losses
occur in subsequent quarters; however, no further profit share is payable until
any such trading losses (other than losses attributable to redeemed units) are
recouped by the Trading Partnership.
The Partnership has a brokerage contract with Man, which provides that Man will
be paid an annual rate equal to 4.0% of the month-end net assets of the
Partnership, as defined, plus related floor brokerage, NFA, exchange and
clearing fees. Prior to December 1, 1996, Man was paid brokerage commissions at
annual rates equal to 4.45%.
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE-SHEET RISK OR CONCENTRATION OF CREDIT RISK
The Trading Partnership invests in futures, options on futures, and forward
contracts that involve varying degrees of market and credit risk. Market risks
may arise from unfavorable changes in interest rates, foreign exchange rates, or
the market values of the instruments underlying the contracts. All contracts are
stated at fair value, and changes in those values are reflected currently in
trading gains (losses) in the combined statements of operations.
The fair value of the Trading Partnership's derivative financial instruments at
July 31, 1998 and 1997, and the average fair value of these instruments, based
on month-end amounts, were as follows:
<TABLE>
<CAPTION>
ASSET (LIABILITY)
----------------------------------
AVERAGE FAIR
FAIR VALUE VALUE
----------------------------------
<S> <C> <C>
1998
Commodity futures contracts $ 99,864 $254,831
Commodity options contracts - (30,750)
Commodity forward contracts (127,445) 5,678
1997
Commodity futures contracts 1,343,514 440,705
Commodity options contracts - -
Commodity forward contracts 145,498 28,318
</TABLE>
F-9
<PAGE> 25
The Four Seasons Fund Limited Partnership
(An Illinois Limited Partnership)
Notes to Combined Financial Statements (continued)
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK OR CONCENTRATION OF CREDIT RISK (CONTINUED)
The contract or notional amounts of the Partnership's derivatives financial
instruments at July 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
JULY 31
1998 1997
--------------------- --------------------
<S> <C> <C>
Commodity futures contracts:
To purchase $180,451,755 $62,364,627
To sell (2,135,161) (47,133,813)
Commodity forward contracts:
To purchase $1,503,986 3,513,472
To sell (1,530,018) (2,726,772)
</TABLE>
Although contract or notional amount may reflect the extent of the Partnership's
involvement in a particular class of financial instrument, they are not
indicative of potential loss.
The Trading Partnership is exposed to credit risk in the event of nonperformance
by counterparties to financial instruments. The credit risk from counterparty
nonperformance associated with these instruments is the net unrealized gain, if
any, included on the combined statements of financial condition. The
counterparty to all forward contracts is E.D. & F. Man Capital, Inc., an
affiliate of the General Partner. For exchange-traded contracts, the clearing
organization acts as the counterparty of specific transactions and, therefore,
bears the risk of delivery to and from counterparties to specific positions.
The Partnership's and Trading Partnership's assets held at Man are in segregated
accounts as required by the Commodity Futures Trading Commission.
* * * * *
F-10
<PAGE> 26
Oath of Commodity Pool Operator
To the best of my knowledge and belief, the information contained herein is
accurate and complete.
Heinold Asset Management, Inc.
(Pool Operator)
/s/ Lee E. Meyer
- -------------------------------
Lee E. Meyer
Chief Financial Officer
<PAGE> 27
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 Chicago and State of Illinois on the 28th day of October, 1998.
THE FOUR SEASONS FUND LIMITED
PARTNERSHIP
By HEINOLD ASSET MANAGEMENT, INC.
General Partner
By /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the General Partner of the Registrant in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Title with
Signature General Partner Date
- --------- --------------- ----
<S> <C> <C>
/s/ Thomas M. Harte President (chief operating October 28, 1998
- --------------------------- officer) and Director
Thomas M. Harte
/s/ Lee E. Meyer Chief Financial Officer October 28, 1998
- --------------------------- (principal accounting officer)
Lee E. Meyer
/s/ Mary T. Bergonia Director October 28, 1998
- ---------------------------
Mary T. Bergonia
/s/ Gary M. Rindner Director October 28, 1998
- ---------------------------
Gary M. Rindner
/s/ Ira Polk Director October 28,1998
- ---------------------------
Ira Polk
</TABLE>
(Being the principal executive officer, the principal
financial and accounting officer, and a majority of the directors of Heinold
Asset Management, Inc.)
HEINOLD ASSET General Partner of October 28, 1998
MANAGEMENT, INC. Registrant
By /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
<PAGE> 1
EXHIBIT 10.A
BACK OFFICE SERVICES AGREEMENT
Back Office Services Agreement ("Agreement") made and entered
into effective as of the 1st day of November, 1996, by and between Managed Asset
Service Corp., a Delaware corporation (the "Servicer"), and Heinold Asset
Management, Inc., a Delaware Corporation (the "General Partner") on its own
behalf and on behalf of each futures fund listed in Schedule 1 for which the
General Partner acts as general partner (each a "Fund").
W I T N E S S E T H:
WHEREAS, the Fund's business and purpose is to invest in,
reinvest in, hold and trade commodities and commodity futures, forward and
option contracts, as well as any other items which are presently, or may
hereafter become, the subject of futures, forward or option contract trading by
retaining commodity trading advisors (hereinafter collectively referred to as
"Futures Interests") and other investments; and
WHEREAS, the Fund, through the General Partner and pursuant to
the Limited Partnership Agreement of the Fund, is authorized to appoint agents
to provide various administrative services to the Fund subject to the oversight
of the General Partner; and
WHEREAS, the Fund has heretofore offered limited partnership
interests ("Units") for sale to investors by means of an offering memorandum
including all exhibits thereto, as the same may be amended or supplemented from
time to time (the "Prospectus"); and
WHEREAS, the Servicer's present business includes providing
back office administrative services to futures funds and monitoring the
operations and activities of companies engaged in the trading of Futures
Interests; and
WHEREAS, the Fund and the Servicer wish to enter into this
Agreement in order to set forth the terms and conditions upon which the Servicer
will provide certain back office administrative services for the Fund in
connection with the conduct by the Fund of its Futures Interest trading
activities during the term of this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
agreements set forth herein, the parties hereto do hereby agree as follows:
1. DUTIES OF THE SERVICER.
The General Partner and the Fund hereby appoint the Servicer,
and the Servicer hereby accepts appointment, as the provider of back office
administrative services to the Fund. For the period and on the terms and
conditions set forth in this Agreement, the Servicer will perform on behalf of
the Fund, the services set forth on Appendix A subject to the oversight of the
General Partner.
<PAGE> 2
The Fund acknowledges that the Servicer's responsibilities
hereunder depend in large measure upon the Servicer receiving accurate
information with respect to the Fund on a timely basis from the General Partner
and/or the Fund's clearing broker at the instruction of the General Partner. The
Fund agrees that the Servicer shall have no liability for its failure to perform
services contemplated hereunder if it is rendered unable to do so because of the
failure of the General Partner and/or the Fund's clearing broker at the
instruction of the General Partner to provide necessary information on the Fund
on a timely basis. The General Partner and the Partnership further acknowledge
and agree that the Servicer will not independently verify the adequacy or
accuracy of the information provided to the Servicer by the General Partner
and/or third parties and that the Servicer shall have no liability for the
adequacy or accuracy of the Services to the extent that the information provided
by the General Partner and/or third parties is the basis for such Services.
2. COMPENSATION.
In consideration of and as compensation for its services under
this Agreement, the Fund and/or the General Partner will pay the Servicer a
monthly administrative fee as set forth in Appendix B. The Servicer will submit
an invoice to each Fund and/or the General Partner within ten business days
after month-end and each Fund and/or General Partner shall remit payment to the
Servicer by the following month-end.
3. TERM AND TERMINATION.
This Agreement shall commence on the date hereof and shall
continue in effect until terminated by either party by 30 days' written notice
to the other.
In the event of the termination of this Agreement pursuant to
this Paragraph 3, the rights of the Servicer to receive fees earned through the
date of expiration or termination shall survive this Agreement until satisfied.
The termination of this Agreement pursuant to this Paragraph 3
with respect to any Fund shall have no effect on any other Fund.
4. STANDARD OF INDEMNITY AND LIABILITY.
(a) The Servicer agrees to indemnify and hold harmless each of
the Fund and the General Partner from and against any loss, claim, damage,
liability, cost and expense (including, without limitation, attorneys' and
accountants' fees and disbursements), judgments and amounts paid in settlement
(collectively, "Loss") to which the Fund or the General Partner may become
subject, insofar as any such Loss arises out of, relates to, or is based upon
any claim asserted or enforced against the Fund and/or the General Partner to
the extent that such claim is based upon gross negligence or misconduct on the
part of the Servicer, or any violations by the Servicer of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
2
<PAGE> 3
(b) The Servicer agrees to reimburse the Fund for any legal or
other expenses reasonably incurred by it in investigating or defending or
preparing to defend against any such Loss described in subparagraph 4(a), above.
(c) The Fund agrees to indemnify and hold harmless the
Servicer from and against any Loss to which the Servicer may become subject,
insofar as such Loss arises out of, relates to, or is based upon any claim
asserted or enforced against the Servicer with respect to this Agreement or the
activities contemplated hereunder to the extent that such claim is not based
upon gross negligence or misconduct on the part of the Servicer or any
violations by the Fund of any of its representations, warranties, covenants or
agreements contained in this Agreement.
(d) The Fund agrees to reimburse the Servicer for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending or preparing to defend against any Loss described in subparagraph
4(c), above.
(e) Promptly after receipt by a party to be indemnified under
subparagraph 4(a) or 4(c), above, of any notice of the commencement of any
action or proceeding, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subparagraphs,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subparagraphs. The requirement that an indemnifying party be given written
notice of the commencement of any action shall be deemed to be satisfied if such
indemnifying party shall have actual knowledge thereof or shall have been given
written notice of the commencement of any action or proceeding within a
reasonable time after the commencement thereof. If any such action shall be
brought against any indemnified party and the indemnified party notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, to assume the
defense thereof with counsel satisfactory to such indemnified party, and shall
have the right to negotiate and consent to a settlement thereof, provided that
the indemnified party shall have consented to the settlement. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subparagraphs for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent it,
if, in the indemnified party's reasonable judgment, it is advisable for such
party to be represented by separate counsel, in which event the fees and
expenses of such separate counsel shall be borne by the indemnified party. No
indemnifying party shall be liable for any settlement of any such action
effected without its consent, but if any such action or proceeding is settled
with the consent of any indemnifying party or if there be a final judgment for
the plaintiff in any such action or proceeding (of which an indemnifying party
shall have been notified), such indemnifying party shall indemnify and hold
harmless each indemnified party from and against any Loss incurred or suffered
by reason of such settlement or judgment.
3
<PAGE> 4
Any indemnification under subparagraphs (a) or (c), above,
unless ordered by a court, shall be made by the indemnifying party only as
authorized in the specific case and only upon a determination by independent
legal counsel in a written opinion that indemnification of the indemnified party
is proper in the circumstances because it has met the applicable standard of
conduct set forth in subparagraphs (a) or (c) above, as the case may be.
(f) As used in these subparagraphs (c) and (d), above, the
term "Servicer" shall include the Servicer and as used in these subparagraphs
(a) and (b), above, the term "Fund" shall include the Fund.
(g) The provisions of this Paragraph 4 shall survive the
termination or other expiration of this Agreement.
5. REPRESENTATIONS AND WARRANTIES.
(a) The Fund represents and warrants to the Servicer as
follows:
(i) This Agreement has been duly and validly authorized,
executed and delivered by the Fund and, assuming due execution by all
other parties hereto, is a valid and binding agreement of the Fund
enforceable in accordance with its terms.
(ii) The Fund has been duly organized and is validly existing
and in good standing as a limited partnership under the laws of its
organization, with full power and authority to carry out its
obligations under this Agreement, its Limited Partnership Agreement
establishing the Fund ("LPA") and conduct its business as described in
the Prospectus.
(iii) The performance by the Fund of its obligations under
this Agreement will not conflict with or result in a breach of any of
the terms or provisions of, or in the imposition of any lien, charge or
encumbrance upon any of the property or assets of the Fund pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Fund is a party or by which
the Fund is bound or to which any of the property or assets of the Fund
is subject, nor will any such action or performance result in a
violation of the provisions of the LPA or any statute or any order,
rule or regulation of any court or governmental authority or body
having jurisdiction over the Fund.
(b) The Servicer represents and warrants to the Fund as
follows:
(i) This Agreement has been duly and validly authorized,
executed and delivered by the Servicer and, assuming due execution by
all other parties hereto, is a valid and binding agreement of it
enforceable in accordance with its terms.
(ii) The Servicer is a corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware and
is qualified to do business in each other jurisdiction
4
<PAGE> 5
in which the nature or conduct of its business requires such
qualification and in which the failure to be so qualified would
materially adversely affect the Servicer's ability to perform its
obligations under this Agreement. The Servicer has full corporate power
and authority under its Certificate of Incorporation and By-Laws to
conduct its business and to perform its obligations under this
Agreement.
(iii) The performance by the Servicer of its obligations under
this Agreement will not conflict with or result in a breach of any of
the terms or provisions of, or in the imposition of any lien, charge or
encumbrance upon any of the property or assets of the Servicer pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Servicer is a party or by
which the Servicer is bound or to which any of the property or assets
of the Servicer is subject, nor will any such action or performance
result in a violation of the provisions of the By-Laws or the
Certificate of Incorporation of the Servicer or any statute or any
order, rule or regulation of any court or governmental authority or
body having jurisdiction over the Servicer.
(c) All representations, warranties and covenants contained in
this Agreement shall be continuing during the term of this Agreement and shall
survive the termination or expiration of this Agreement with respect to any
matter arising while such Agreement was in effect. Each party hereby agrees that
as of the date of this Agreement it is, and during its term shall be, in
compliance with its representations, warranties and covenants herein contained.
In addition, if at any time any event occurs which would make, or tend to make,
any of such representations, warranties or covenants not true, the party who
made such representations, warranties and covenants promptly will notify the
other party of such facts in the manner provided below. All representations,
warranties and covenants herein contained shall inure to the benefit of each of
the parties to whom it is addressed and their respective heirs, executors,
administrators, legal representatives, successors and permitted assigns.
6. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof, and no other agreement,
verbal or otherwise, shall be binding on the parties hereto.
7. ASSIGNMENT.
This Agreement may not be assigned by any party without the
express written consent of the other parties. An assignment of this Agreement
with respect to one Fund shall have no effect on any other Fund.
8. AMENDMENT.
This Agreement may not be amended or modified except by the
written consent of all of the parties hereto. An amendment of this Agreement
with respect to one Fund shall have no effect
5
<PAGE> 6
on any other Fund.
9. SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their successors and permitted assigns, and except as
otherwise provided in Paragraph 4, above, no other person shall have any right
or obligation under this Agreement.
10. NOTICES.
Except as otherwise provided herein, all notices, demands or
requests required to be made or delivered under this Agreement shall be
effective only if in writing and delivered personally or by registered or
certified mail, return receipt requested, postage prepaid, to the respective
addresses below or to such other addresses as may be designated by the party
entitled to receive the same by notice similarly given and shall be deemed given
by the party required to provide notice when received by the party to whom
notice is required to be given:
If to the Fund, to it at:
c/o Heinold Asset Management, Inc.
440 S. LaSalle St., 20th Floor
Chicago, Illinois 60605
If to the Servicer, to it at:
440 S. LaSalle St., 20th Floor
Chicago, Illinois 60605
11. SURVIVAL.
The provisions of this Agreement shall survive the termination
or other expiration of this Agreement with respect to any matter arising while
this Agreement was in effect.
12. HEADINGS.
Headings to Paragraphs herein are for the convenience of the
parties only and are not intended to be a part of or to affect the meanings or
interpretation of this Agreement.
13. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been executed and
delivered for and on behalf of the undersigned as of the day and year first
above written.
HEINOLD ASSET MANAGEMENT, INC.
On its own behalf and on behalf
of each of the limited partnerships listed
in Schedule 1
By: /s/ Lee E. Meyer
----------------------------------
Lee E. Meyer
Chief Financial Officer
MANAGED ASSET SERVICE CORP.
By: /s/ Thomas M. Harte
----------------------------------
Thomas M. Harte
President
7
<PAGE> 8
Appendix A
The Servicer may provide any one or more of the following record keeping,
reporting and customer service functions provided that the Servicer receives
adequate information from the Fund, the General Partner and the Fund's clearing
broker at the instruction of the General Partner:
Record keeping
- Maintain an itemized daily record of each commodity interest
transaction of the Fund
- Maintain a record of each customer showing the customer's name, address
and all funds that the Fund received from such customer
- Maintain a general ledger containing details of all asset, liability,
capital, income and expense accounts
- Maintain copies of each confirmation of a commodity interest
transaction of the Fund, each purchase and sale statement and each
monthly statement for the Fund from the Fund's clearing broker
- Maintain copies of canceled checks and bank statements
- Maintain partner files
- Maintain customer complaint files
- Maintain copies of all monthly account statements, Annual Reports, and
notices to customers
Reporting
- calculate the Net Asset Value (as defined in the Prospectus of the
Fund) and Net Asset Value per Unit
- prepare and distribute monthly account statements to customers and
brokers
- prepare and distribute any notices relating to material changes in the
Fund - prepare and file with regulators, Form 10-Q, quarterly reports,
if required under U.S. securities laws
- prepare and file with regulators, Form 10-K, annual reports, if
required under U.S. securities laws
- prepare and distribute an Annual Report to customers/brokers/regulators
- prepare and file with the Secretary of States'office, biennial renewal
reports
- prepare and file federal and state tax returns
- prepare and review customer K-1 forms
Customer Service
Telephone Services:
- Answer inquiries from customers regarding redemptions/transfers/monthly
statements
- Answer inquiries from brokers regarding client accounts; including
redemptions/transfers/monthly statements/trailing commissions
- Answer inquiries from customers relating to tax and financial matters
8
<PAGE> 9
Redemptions and Transfers:
- Effect the completion of redemptions/transfers for month-end posting -
Calculate amount of redemption proceeds, prepare checks
- Distribute redemption notices and proceeds
- Distribute transfer notices to relevant parties
- Liase with lawyers and accountants on transfer issues
Database Maintenance:
- Daily upkeep of data base regarding changes with respect to customer
information/broker information
Miscellaneous:
- Respond to general correspondence from custodians, brokers, customers
- Liase with internal and outside auditors and regulators during audits
- Effect title changes, prepare and distribute confirmation re: same
In addition, the Servicer may provide one or more of the miscellaneous services
as set forth below:
- Liase with outside auditors and attorneys with respect to various
filings
- Assist in the preparation of management contracts, service agreements,
general partnership agreements
- Calculate management fees, incentive and trailing fees for the General
Partner's review and approval and effect the payment of same and other
expenses
- Assist in due diligence examinations of trading advisors, hedge fund
managers, broker-dealers and CFTC registered entities
9
<PAGE> 10
Appendix B
I. Fees paid by the Fund
Monthly Reports:
-Financial Statement and postage $1.49
Special Mailings:
-Per page At cost by third parties
-Postage At cost
Miscellaneous:
-Form K-1 $16.00 per investor
-Annual Audit At cost by third party
-Filing Fees At cost
II. Fees paid by the General Partner
The General Partner shall pay Servicer, $28,000 per month for
recordkeeping, other reporting, customer service, due diligence, contract
negotiation and other miscellaneous functions.
10
<PAGE> 11
Schedule 1
The Four Seasons Fund Limited Partnership
Fundamental Traders Fund L.P.
The Future Fund
The Future Fund II
The Futures Advantage Fund
The Futures Dimension Fund
The Horizon Futures Fund
The Horizon World Futures Fund
Institutional Balanced Portfolio Account Limited Partnership I
The Jefferson Futures Fund
Landmark Fund I, A Limited Partnership
Landmark Fund II, A Limited Partnership
Main Street Futures Partners L.P.
New Century Currency & Financial Fund L.P.
Patriot Futures Fund I L.P.
Patriot Futures Fund II L.P.
The Renaissance Futures Fund
The Resource Fund
The Sycamore Futures Fund
11
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1997
<PERIOD-START> JUL-31-1997 JUL-31-1996
<PERIOD-END> JUL-31-1998 JUL-31-1997
<CASH> 0 0
<RECEIVABLES> 2,563,945 3,654,623
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 13,361,199 13,615,510
<PP&E> 0 0
<TOTAL-ASSETS> 15,925,144 17,270,133
<SHORT-TERM> 0 0
<PAYABLES> 237,150 295,481
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 15,687,994 16,974,652
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 15,925,144 17,270,133
<TRADING-REVENUE> 227,175 2,428,543
<INTEREST-DIVIDENDS> 1,041,522 1,276,425
<COMMISSIONS> (658,592) (661,043)
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> (22,382) (212,319)
<INCOME-PRETAX> 0 0
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 587,723 2,831,606
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
