10-Q 1 g71215e10-q.txt CERES FUND, L.P. 1 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 June 30, 2001 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 775 Ridge Lake Blvd., Suite 110, 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 ( ) 2 CERES FUND, L.P. CONTENTS

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 Condition 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 Partnership 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. 2 3 CERES FUND, L.P. PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The accompanying interim consolidated financial statements have been prepared in accordance with the accounting policies in effect as of December 31, 2000, as set forth in the annual consolidated 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 condensed financial statements have been included and all such adjustments were of a normal recurring nature. The results of operations for the six-month and three-month period ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year. 3 4 CERES FUND, L.P. (A Tennessee Limited Partnership) Statements of Financial Condition June 30, 2001 and December 31, 2000 (Unaudited)

See accompanying notes to financial statements. 4 5 CERES FUND, L.P. (A Tennessee Limited Partnership) Statements of Operations (Unaudited)

See accompanying notes to financial statements. 5 6 CERES FUND, L.P. (A Tennessee Limited Partnership) Statements of Cash Flows (Unaudited)

See accompanying notes to financial statements. 6 7 CERES FUND, L.P. (A Tennessee Limited Partnership) Notes to Financial Statements June 30, 2001 (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 June 30, 2001, a total of 62,266.1593 units have been sold, 1,861.9400 units have been distributed in lieu of a cash distribution, and 42,946.8038 units have been redeemed, leaving an outstanding balance at June 30, 2001, of 21,181.2955 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 to date 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) are allocated pro rata among the partners based on their respective capital accounts as of the beginning of the month in which the items of income and expense accrue, except that limited partners have no liability for partnership obligations in excess of their capital accounts, including losses. 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 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. 7 8 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 Federal 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. The Partnership is subject to franchise/excise taxes pursuant to the Tennessee Franchise/Excise Tax of 1999. A provision for State of Tennessee excise taxes has been made in the accompanying financial statements, based on the Partnership's income for the six months ended June 30, 2001. A provision for State of Tennessee excise taxes has been made in the accompanying financial statements; based on the Partnership's income for the six months ended June 30, 2001. (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 six months ended June 30, 2001, management fees totaled $67,264 and incentive fees totaled $341. (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 2001, 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 the first and second quarters were $161,428. 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 six-month period amounted to $87,670. (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. 8 9 (5) Calculation of Net Income (Loss) per Limited Partnership Unit The Net Income per Limited Partnership Unit for the period from January 1, 2001, through June 30, 2001, of $12.62 was calculated by dividing the Aggregate Income Allocated to Limited Partners of $276,018 by the Average Units outstanding between December 31, 2000 and June 30, 2001 (21,866.9870 Units). The Net Loss per Limited Partnership Unit for the period from January 1, 2000, through June 30, 2000 of ($4.96) was calculated by dividing the Aggregate Loss Allocated to Limited Partners of ($136,663) by the Average Units outstanding between December 31, 1999 and June 30, 2000 (27,543.3545 Units). The Net Income per Limited Partnership Unit for the period from April 1, 2001 through June 30, 2001 of $3.73 was calculated by dividing the Aggregate Income Allocated to Limited Partners of $80,590 by the Average Units outstanding between March 31, 2001 and June 30, 2001 (21,583.7713 Units). The Net Loss per Limited Partnership Unit for the period from April 1, 2000 through June 30, 2000 of ($5.41) was calculated by dividing the Aggregate Loss Allocated to Limited Partners of ($133,645) by the Average Units outstanding between March 31, 2000 and June 30, 2000 (24,720.1329 Units). (6) Recent Pronouncements In June 1998, SFAS No. 133, as amended by SFAS No. 137, "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, 2000. The partnership adopted this statement January 1, 2001 with no material impact on its financial position. In September 2000, SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" was issued. This Statement replaces SFAS No. 125. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of Statement 125's provisions without reconsideration. The partnership's adoption of the statement had no material impact on its financial position. In July 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets" were issued. Statement 141 required that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The adoption of these statements will have no material impact on the partnership's financial position. 9 10 CERES FUND, L.P. (a Tennessee Limited Partnership) ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management's discussion should be read in conjunction with the Financial Statements and the discussion of Ceres Fund, L.P.'s (the "Partnership") business and other detailed information appearing elsewhere herein. All information is based on the Partnership's fiscal quarter ended June 30, 2001. RESULTS OF OPERATIONS The Three and Six Months Ended June 30, 2001, compared to the Three Months and Six Months Ended June 30, 2000. Trading results were more profitable during the three months ended June 30, 2001, as compared to the same period in 2000. The Partnership had income from trading activities of $226,062 for the three months ended June 30, 2001, as compared to income from trading activities of $3,037 for the three months ended June 30, 2000. The gains during this period are primarily attributable to gains in connection with the trading of grain contracts. As a result of such trading activities, the Partnership had a net gain of $91,677 for the three months ended June 30, 2001 compared to a net loss of $141,322 for the same period in 2000; and a net gain per limited partnership Unit of $3.73 for the three months ended June 30, 2001, compared to a net loss per limited partnership Unit of $5.41 for the same period in 2000. Trading results were more profitable during the six months ended June 30, 2001, as compared to the same period in 2000. The Partnership had income from trading activities of $604,843 for the six months ended June 30, 2001, as compared to income from trading activities of $125,005 for the six months ended June 30, 2000. The gains during this period are primarily attributable to gains in connection with the trading of grain contracts. As a result of such trading activities, the Partnership had a net gain of $308,475 for the six months ended June 30, 2001, compared to a net loss of $141,483 for the same period in 2000; and a net gain per limited partnership Unit of $12.62 for the six months ended June 30, 2001, compared to a net loss per limited partnership Unit of $4.96 for the same period in 2000. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. As of June 30, 2001, management believes that there have been no significant changes in market risk as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2000. 10 11 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, 2001, through June 30, 2001, no additional Units were sold and 1,371.3830 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 April 30, 2001 - 21,986.2470 (2) Units of Limited Partnership interest outstanding at May 31, 2001 - 21,986.2470 (3) Units of Limited Partnership interest outstanding at June 30, 2001 - 21,181.2955 11 12 E. Issuance of Limited Partnership Units for cash in the following amounts and on the following dates:

F. Redemption of Limited Partnership Units for cash in the following amounts and on the following dates:

Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) 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: August 13, 2001 CERES FUND, L.P. By: Randell Commodity Corporation Managing General Partner By: /s/ Frank L. Watson, Jr. --------------------------- Frank L. Watson, Jr. Chairman 12

CERES FUND LP 10-Q