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
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.
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."
Item 2.
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
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
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.
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.
Item 7.
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.
Item 8. Financial Statements and Supplementary Data
Financial statements are listed on page of this report.
The supplementary financial information specified by Item 302 of Regulation S-K is not applicable.
Item 9.
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.
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.
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.
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.
(c) Changes in control
None.
Item 13.
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.
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.
(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
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
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
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
[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
The Four Seasons Fund Limited Partnership (An Illinois Limited Partnership)
Combined Statements of Financial Condition
See accompanying notes.
The Four Seasons Fund Limited Partnership (An Illinois Limited Partnership)
Combined Statements of Operations
See accompanying notes.
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
See accompanying notes.
The Four Seasons Fund Limited Partnership (An Illinois Limited Partnership)
Combined Statements of Cash Flows
See accompanying notes.
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.
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.
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
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:
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:
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.
* * * * *
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
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.
(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