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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 033-37802
CERES FUND, L.P.
-------------------------------------
(State of incorporation) - Tennessee
(I.R.S. Employer Identification No.) - 62-1444129
889 Ridge Lake Blvd., Memphis, Tennessee 38120
(901)577-2229
-----------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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 ( )
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CERES FUND, L.P.
CONTENTS
PART I. Financial Information
ITEM 1 Financial Statements (unaudited)
Statements of Financial Condition
September 30, 1998, and December 31, 1997
Statements of Operations
Three and Nine Months Ended September 30, 1998 and 1997
Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997
Notes to Financial Statements
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. Other Information
FORWARD-LOOKING STATEMENTS
Statements contained in this Report, which are not historical in
nature, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include statements in the "Management's Discussion and Analysis of Financial
Conditional and Results of Operations" regarding liquidity and capital
resources. Such forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially from
anticipated results. These risks and uncertainties include regulatory
constraints, competition from other companies, changes in the Partnership's
operation or expansion strategy, the general economy of the United States and
the specific markets in which the Company operates and other factors as may be
identified from time to time in the Partnership's filings with the Securities
and Exchange Commission or in the Partnership's press releases.
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CERES FUND, L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying interim financial statements have been prepared in accordance
with the accounting policies in effect as of December 31, 1997, as set forth in
the annual financial statements of Ceres Fund, L.P. as of such date. In the
opinion of management, all adjustments necessary for a fair presentation of the
consolidated condensed financial statements have been included and all such
adjustments were of a normal recurring nature. The results of operations for the
nine-month period ended September 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
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CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Financial Condition
September 30, 1998 and December 31, 1997
(Unaudited)
Assets:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Cash $ 202,001 $ 155,155
U.S. Treasury obligations at
cost plus accrued interest 6,708,874 6,308,524
Equity in commodity trading account:
Cash 383,413 141,589
Unrealized gain (loss) on
open futures contracts (147,733) 27,202
Market value of open option
contracts 50,938 10,780
Other assets 4,148 4,395
----------- ----------
$ 7,201,641 $6,647,645
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accrued management fees $ 22,562 $ 20,855
Accrued incentive fees 184 1,662
Other accrued expenses 51,347 60,387
Amounts received
for future subscriptions 12,500 --
Redemptions payable 22,677 80,700
----------- ----------
109,270 163,604
----------- ----------
Partners' capital:
General partners 369,097 357,891
Limited partners 6,723,274 6,126,150
----------- ----------
Total partners' capital 7,092,371 6,484,041
----------- ----------
$ 7,201,641 $6,647,645
=========== ==========
</TABLE>
See accompanying notes to financial statements.
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CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Income
Net gains (losses) on trading
of commodity futures and
option contracts:
Realized gains (losses) on closed
positions $ 733,570 $ 435,129 $(537,750) $ 82,658
Change in unrealized gains
(losses) on open positions (104,689) (391,934) 513,616 390,490
Interest 263,930 214,686 87,512 78,062
--------- --------- --------- ---------
Income (Loss) From Operations $ 892,811 $ 257,881 $ 63,378 $ 551,210
--------- --------- --------- ---------
Expenses
Brokerage commissions, exchange,
clearing fees and NFA charges 635,661 690,085 186,372 153,645
Management fee allocations 203,112 162,207 67,288 57,844
Incentive fee allocations 14,116 1,429 184 1,429
Professional and administrative
expenses 54,000 70,403 18,000 18,000
--------- --------- --------- ---------
906,889 924,124 271,844 230,918
--------- --------- --------- ---------
Net Income (Loss) $ (14,078) $(666,243) $(208,466) $ 320,292
========= ========= ========= =========
Aggregate Income (Loss)
Allocated to General Partners $ 11,206 $ (29,100) $ (7,433) $ 21,260
Aggregate Income (Loss)
Allocated to Limited Partners $ (25,284) $(637,143) $(201,033) $299,032
Net Income (Loss) per Limited
Partnership Unit $ (.76) $ ( 25.95) $ (5.79) $ 9.82
</TABLE>
See accompanying notes to financial statements.
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CERES FUND, L.P.
(A Tennessee Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ (14,078) $ (666,243)
Adjustments to reconcile net Income (Loss)
to Net cash provided by operating activities:
Net unrealized loss on open contracts (104,689) (391,934)
(Increase) decrease in operating assets:
U. S. Treasury obligations (400,350) (3,083,038)
Investments in commodities fund (241,824) 1,246,476
Unrealized gain (loss) on open futures and
options contracts 279,624 659,893
Market value of open option contracts (40,158) 320,375
Other Assets 247 4,713
Increase (decrease) in operating liabilities:
Accrued management fees 1,707 9,711
Accrued incentive fees (1,478) (31,420)
Other accrued expenses (9,040) 21,433
Amounts received for future subscriptions 12,500 103,462
Redemptions payable (58,023) (16,203)
----------- -----------
Total Adjustments (561,484) (1,156,532)
----------- -----------
Net cash used in operating activities (575,562) (1,822,775)
Cash flows from financing activities:
Net proceeds from sale of limited partnership units 824,461 2,556,006
Redemption of limited partnership units (202,053) (218,629)
Distribution to limited partners -- (244,228)
Net increase in cash 46,846 270,374
Cash at the beginning of the year 155,155 108,554
----------- -----------
Cash at the end of the quarter $ 202,001 $ 378,928
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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CERES FUND, L.P.
(A Tennessee Limited Partnership)
Notes to Financial Statements
September 30, 1998
(1) Summary of Significant Accounting Policies
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 will act 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. 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 continues to
sell 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, and can continue selling units until the maximum number
of units offered have been sold. At September 30, 1998, a total of 61,629.6755
units have been sold, 1,861.9400 units have been distributed in lieu of a cash
distribution, and 28,555.9655 units have been redeemed, leaving an outstanding
balance at September 30, 1998, of 34,935.6500 units.
The general partners agreed to make a capital contribution of the lesser of
$100,000 or 3% of total partnership capitalization and made an initial capital
contribution of $45,000 at the close of the Initial Offering and have made
additional capital contributions during the period of $55,000 to meet its
investment commitment in the Partnership. In no event will the general partners'
interest in the Partnership be less than 1% of total partnership capitalization.
Income and expenses of the Partnership (excluding the Management Allocation and
Incentive Allocation) will be 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.
The Partnership is not liable for any organizational and offering expenses in
connection with the issuance and distribution of the units. Refco, Inc., the
Partnership's commodity broker, paid the organizational expenses of the
Partnership and the expenses of offering the units to the public. The
Partnership will not reimburse Refco, Inc. for any portion of the costs so
incurred and will not be liable for any such costs at any time.
Units may not be redeemed during the first six months after they are purchased.
Thereafter, limited partners
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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 charge will be based on the redemption net asset value
on 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.
Valuation of Futures Contracts
Open commodity futures contracts are valued at market daily and unrealized gains
and losses are reflected in income.
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.
(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 advisors. The Partnership will pay to the general partners 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. During the nine months ended September 30, 1998, management fees
totaled $203,112 and incentive fees totaled $14,116.
(3) Customer Agreement with Refco, Inc.
The Partnership entered into a customer agreement with Refco, Inc. (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. During 1998, Refco charged the
Partnership commissions on commodity trades at the rate of $32.50 per
round-turn. Total commissions charged to the Partnership by Refco during this
nine month period were $608,677. The Partnership earns interest on 80% of the
average daily equity maintained as cash in the Partnership's trading account at
a rate equal to the average yield on 13-week United States Treasury Bills. Total
interest earned by the Partnership from this source during this nine month
period amounted to $263,930.
(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, the Memphis branch of Refco and the Partnership's commodity broker.
(5) Distribution to Limited Partners.
On January 16, 1997, the General Partner declared a distribution to the limited
partners equal to the difference
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between the December 31, 1996 net asset value per unit and $210 per unit. This
distribution, totaling $244,228 in cash and 1,861.94 in units, resulted in each
unit holder having a net asset value of $210 per unit on January 1, 1997.
(6) Calculation of Net Income (Loss) per Limited Partnership Unit
The Net Income (Loss) per Limited Partnership Unit for the period from January
1, 1998 through September 30, 1998 of $(.76) was calculated by dividing the
Aggregate Income (Loss) Allocated to Limited Partners of ($25,284) by the
Average Units outstanding between December 31, 1997 and September 30, 1998
(33,366.4837 Units).
The Net Income (Loss) per Limited Partnership Unit for the period from January
1, 1997 through September 30, 1997 of $(25.95) was calculated by dividing the
Aggregate Income (Loss) Allocated to Limited Partners of $(637,143) by the
Average Units outstanding between December 31, 1996 and September 30, 1997
(24,551.4085 Units).
The Net Income (Loss) per Limited Partnership Unit for the period from July 1,
1998 through September 30, 1998 of $(5.79) was calculated by dividing the
Aggregate Income (Loss) Allocated to Limited Partners of $(201,033) by the
Average Units outstanding between June 30, 1998 and September 30, 1998
(34,726.9331 Units).
The Net Income (Loss) per Limited Partnership Unit for the period from July 1,
1997 through September 30, 1997 of $9.82 was calculated by dividing the
Aggregate Income (Loss) Allocated to Limited Partners of $299,032 by the Average
Units outstanding between June 30, 1997 and September 30, 1997 (30,443.4384
Units).
(7) Recent Pronouncements
In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information" was issued. This statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Operating segments are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. This statement is effective for fiscal years beginning
after December 15, 1997. The Partnership intends to comply with this statement
in 1998.
In June 1998, SFAS No. 133, "Accounting for Derivative instruments and Hedging
Activities" was issued. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The partnership intends to comply with this statement in 2000.
(8) Year 2000
The Partnership is aware of potential Year 2000 problems, and the general
partners have a plan to address these problems. It is estimated that Year 2000
readiness assessment will be completed by December 31, 1998.
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CERES FUND, L.P.
(A Tennessee Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Three and Nine Months ended September 30, 1998, compared to the Three and
Nine Months Ended September 30, 1997.
Trading gains decreased during the three months ended September 30, 1998, as
compared to the same period in 1997. The Partnership had a gain from trading
activities of $63,378 for the three months ended September 30, 1998, as compared
to a gain from trading activities of $551,210 for the three months ended
September 30, 1997. The gains during this period are primarily attributable to
gains in connection with the trading of grain contracts. As a result of expenses
in excess of such gains from trading activities, the Partnership had a net loss
of $208,466 for the three months ended September 30, 1998, compared to a net
gain of $320,292 for the same period in 1997; and a net loss per limited
partnership Unit of $5.79 for the three months ended September 30, 1998,
compared to a net gain per limited partnership Unit of $9.82 for the same period
in 1997.
Trading results were profitable during the nine months ended September 30, 1998,
as compared to the same period in 1997. The Partnership had income from trading
activities of $892,811 for the nine months ended September 30, 1998, compared to
a gain from trading activities of $257,881 for the nine months ended September
30, 1997. The gains during this period were primarily attributable to gains in
connection with the trading of grain contracts. As a result of such gains from
trading activities, the Partnership had a net loss of $14,078 for the nine
months ended September 30, 1998, compared to a net loss of $666,243 for the same
period in 1997, and a net loss per limited partnership Unit of $.76 for the nine
months ended September 30, 1998, compared to a net loss per limited partnership
Unit of $25.95 for the same period in 1997.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
A. The registration statement became effective on March 9, 1991 at which time
the Partnership began offering the securities for sale. The offering was
extended for 60 days and sales of 13,471.6805 Units for $1,413,296.45 were
consummated by November 30, 1991 at which time the initial offering period ended
and the continuous offering period commenced. The Partnership commenced
operations December 1, 1991. The Partnership continues to offer Units for sale.
During the period of January 1, 1998, through September 30, 1998, 4,135.1467
additional Units were sold and 996.8410 Units were redeemed.
B. The Units were offered by the Partnership through members of the National
Association of Securities Dealers, Inc. on a best efforts basis.
C. These securities were registered under the Securities Act of 1933.
D. (1) Units of Limited Partnership interest outstanding at
July 31, 1998 - 34,518.2161
(2) Units of Limited Partnership interest outstanding at
August 31, 1998 - 35,024.6124
(3) Units of Limited Partnership interest outstanding at
September 30, 1998 - 34,935.6500
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E. Issuance of Limited Partnership Units for cash in the following amounts and
on the following dates:
Dates Units Amount
July 1, 1998 -- $ --
August 1, 1998 506.3963 $ 96,229
September 1, 1998 29.1615 $ 5,673
F. Redemption of Limited Partnership Units for cash in the following amounts and
on the following dates:
Dates Units Amount
September 30, 1998 118.1239 $ 22,677
Item 6. Exhibits and Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Date: November 12, 1998
CERES FUND, L.P.
By: Randell Commodity Corporation
Managing General Partner
By: Frank L. Watson, Jr.
/s/ Frank L. Watson, Jr.
---------------------------
Frank L. Watson, Jr.
Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CERES FUND LP FOR THE QUARTER ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 202,001
<SECURITIES> 6,995,492
<RECEIVABLES> 4,148
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,201,641
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,201,641
<CURRENT-LIABILITIES> 109,270
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,092,371
<TOTAL-LIABILITY-AND-EQUITY> 7,201,641
<SALES> 628,881
<TOTAL-REVENUES> 892,811
<CGS> 0
<TOTAL-COSTS> 906,889
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,078)
<EPS-PRIMARY> (0.76)
<EPS-DILUTED> 0
</TABLE>
