10-Q 1 d10q.htm FORM 10-Q Prepared by R.R. Donnelley Financial -- Form 10-Q
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended JUNE 30, 2002
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission file number 0-21286
 
 
THE FOUR SEASONS FUND II L.P.
(Exact name of registrant as specified in its charter)
 
Delaware
  
# 54-1640874
(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
 
c/o JAMES RIVER MANAGEMENT CORP.
103 Sabot Park
Manakin-Sabot, Virginia
(Address of principal executive offices)
 
23103
(Zip Code)
 
(804) 578-4500 Attention: Mr. Paul Saunders
(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 l5(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 ¨
 

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED STATEMENTS OF FINANCIAL CONDITION
 
    
June 30, 2002
     
December 31, 2001
    
(Unaudited)
     
(Audited)
Cash
   
$
16,367
 
   
$
  
Net Receivable From Commodity Broker:
                
Receivable For Cash Retained
   
 
147,858
 
   
 
255,047
Net Unrealized Gain on
   
 
59,026
 
   
 
21,390
Open Futures Contracts
                
Net Unrealized Gain on
   
 
(20,850
)
   
 
—  
Open Option Futures Contracts
                
Receivable from General Partner
   
 
6,843
 
   
 
—  
Accrued Interest Receivable
   
 
37
 
   
 
193
Other
   
 
458
 
   
 
355
U.S. Treasury Strip Securities (At Cost plus Accrued)
   
 
1,347,061
 
   
 
1,512,065
    
  
TOTAL ASSETS
   
$
1,556,801
 
   
$
1,789,050
    
  
LIABILITIES:
                
Accrued Brokerage Commissions
   
$
9,572
 
   
$
21,683
Accrued Advisory Fees
   
 
6,597
 
   
 
5,793
Accrued Sponsor Fees
   
 
—  
 
   
 
6,447
Distributions Payable
   
 
4,000
 
   
 
—  
Other Accrued Payables
   
 
10,632
 
   
 
15,803
    
  
    
 
30,801
 
   
 
49,726
Minority interest in Trading Company
   
 
3,154
 
   
 
3,591
    
  
TOTAL LIABILITIES
   
 
33,956
 
   
 
53,317
    
  
PARTNERS’ CAPITAL:
                
General Partner (22.717 units—06/30/02)
   
 
26,164
 
   
 
26,631
                     (22.717 units—12/31/01)
                
Limited Partners ( 1299.488 units—06/30/02)
   
 
1,496,681
 
   
 
1,709,102
    
  
                       (1457.909 units—12/31/01)
                
TOTAL PARTNERS’ CAPITAL
   
 
1,522,845
 
   
 
1,735,733
    
  
TOTAL LIABILITIES AND PARTNERS’ CAPITAL
   
$
1,556,801
 
   
$
1,789,050
    
  
PARTNERSHIP UNITS OUTSTANDING
   
 
1,322.205
 
   
 
1,480.626
    
  
NET ASSET VALUE PER PARTNERSHIP UNIT
   
$
1,151.75
 
   
$
1,172.30
    
  
 
The accompanying notes are an integral part of these combined condensed statements.

2

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)—FOR THE SIX MONTHS ENDED
JUNE 30, 2002 AND JUNE 30, 2001.
 
    
6/30/02
     
6/30/01
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Net Gain (Loss)
   
$
24,956
 
   
$
(25,575
)
Adjustments To Reconcile Net Gain (Loss) To
                  
Net Cash Provided By Operating Activities:
                  
Net Change In Unrealized Gains
                  
On Open Futures Contracts
   
 
(37,636
)
   
 
85,080
 
Net Change In Unrealized
                  
Option Premiums
   
 
20,850
 
   
 
11,800
 
Accrued Interest From U.S. Treasury
                  
Strip Securities
   
 
(48,583
)
   
 
(48,446
)
Gain on Sale of U.S. Treasury
                  
Strip Securities
   
 
(4,665
)
   
 
—  
 
(Increase) Decrease In Operating Assets:
                  
Net Receivable From Commodity
                  
Broker For Cash Retained
   
 
107,086
 
   
 
(26,704
)
Net Receivable From General Partner
   
 
(6,843
)
         
Net Receivable From Commodity
                  
Broker For Interest Receivable
   
 
156
 
   
 
465
 
Increase (Decrease) In Operating Liabilities:
                  
Accrued Brokerage Commissions
   
 
(12,111
)
   
 
(7,643
)
Accrued Advisory Fees
   
 
804
 
   
 
1,329
 
Accrued Sponsor Fees
   
 
(6,447
)
   
 
(3,414
)
Other Accrued Payables
   
 
(5,171
)
   
 
(1,960
)
Distributions Payable
   
 
4,000
 
   
 
—  
 
Redemptions Payable
   
 
—  
 
   
 
—  
 
Allocation of Income to Minority Interest
   
 
(437
)
   
 
(1,185
)
    
  
Net cash provided by operating activities
   
 
35,960
 
   
 
(16,253
)
    
  
NET CASH FLOWS FROM FINANCING ACTIVITIES
                  
Limited Partner Redemptions
   
 
(178,606
)
   
 
—  
 
Partner Distributions
   
 
(59,237
)
   
 
(59,225
)
    
  
Net cash used in financing activities
   
 
(237,843
)
   
 
(59,225
)
    
  
NET CASH FLOWS FROM INVESTING ACTIVITIES
                  
Maturity of U.S. Treasury Strip
   
 
60,000
 
   
 
60,000
 
Sale of U.S. Treasury Strip Securities
   
 
158,250
 
   
 
—  
 
    
  
Net cash provided by investing activities
   
 
218,250
 
   
 
60,000
 
    
  
NET INCREASE (DECREASE) IN CASH
   
 
16,367
 
   
 
(15,478
)
CASH AT BEGINNING OF PERIOD
   
 
—  
 
   
 
18,013
 
    
  
CASH AT END OF PERIOD
   
$
16,367
 
   
$
2,535
 
    
  
 
The accompanying notes are an integral part of these combined condensed statements.

3

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (UNAUDITED) — FOR THE SIX MONTHS ENDED JUNE 30, 2002, AND THE THREE MONTHS ENDED MARCH 31, 2002
 
    
UNITS OF PARTNERSHIP INTEREST
     
LIMITED PARTNERS
     
GENERAL PARTNER
     
TOTAL
  
PARTNERS’ CAPITAL, DECEMBER 31, 2001
   
 
1,480.626
 
   
$
1,709,102
 
   
$
26,631
 
   
$
1,735,733
 
    
  
  
  
Capital Distributions
   
 
—  
 
   
 
(58,328
)
   
 
(909
)
   
 
(59,237
)
Redemptions
   
 
(158.4207
)
   
 
(178,606
)
   
 
—  
 
   
 
(178,606
)
                      
        
Net Loss
   
 
—  
 
   
 
(7,103
)
   
 
(111
)
   
 
(7,214
)
    
  
  
  
PARTNERS’ CAPITAL, MARCH 31, 2002 (UNAUDITED)
   
 
1,322.205
 
   
$
1,465,065
 
   
 
25,611
 
   
$
1,490,675
 
    
  
  
  
Net Gain
   
 
—  
 
   
 
31,617
 
   
 
553
 
   
 
32,170
 
    
  
  
  
PARTNERS’ CAPITAL, JUNE 30, 2002 (UNAUDITED)
   
 
1,322.205
 
   
$
1,496,681
 
   
 
26,164
 
   
$
1,522,844
 
    
  
  
  
December 31, 2001:
                                    
Amount
   
$
1,172.30
 
                           
Units outstanding
   
 
1,480.626
 
                           
March 31, 2002:
                                    
Amount
   
$
1,127.42
 
                           
Units outstanding
   
 
1,322.205
 
                           
June 30, 2002:
                                    
Amount
   
$
1,151.75
 
                           
Units outstanding
   
 
1,322.205
 
                           
 
The accompanying notes are an integral part of these combined statements.

4

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)—FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001
 
    
Three months
ended 06/30/02
     
Three months
ended 06/30/01
     
Six months
ended 06/30/02
     
Six months
ended 06/30/01
  
REVENUES
                                    
Trading Profit (Loss)
                                    
Net realized gains (losses)
   
$
(30,628
)
   
$
49,033
 
   
$
(405
)
   
$
59,601
 
Net option premiums
   
 
12,105
 
   
 
5,958
 
   
 
(547
)
   
 
10,844
 
Net change in unrealized gains(losses) on open futures contracts
   
 
65,347
 
   
 
(39,882
)
   
 
37,636
 
   
 
(85,080
)
Net change in unexpired options
   
 
(20,850
)
   
 
(26,925
)
   
 
(20,850
)
   
 
(11,800
)
    
  
  
  
Total Trading Results
   
 
25,974
 
   
 
(11,816
)
   
 
15,834
 
   
 
(26,435
)
Gain on sale of U.S. Treasury Strip Securities
   
 
4,665
 
   
 
—  
 
   
 
4,665
 
   
 
—  
 
Interest income
   
 
23,808
 
   
 
25,551
 
   
 
49,095
 
   
 
51,797
 
    
  
  
  
Total Revenues
   
 
54,447
 
   
 
13,736
 
   
 
69,593
 
   
 
25,362
 
    
  
  
  
EXPENSES
                                    
Brokerage commissions
   
 
9,554
 
   
 
10,703
 
   
 
20,527
 
   
 
21,712
 
Administrative expenses
   
 
6,083
 
   
 
8,572
 
   
 
10,495
 
   
 
15,465
 
Management fees
   
 
3,748
 
   
 
4,211
 
   
 
8,025
 
   
 
8,533
 
Sponsor fees
   
 
2,816
 
   
 
3,165
 
   
 
6,028
 
   
 
6,412
 
    
  
  
  
Total Expenses
   
 
22,201
 
   
 
26,651
 
   
 
45,074
 
   
 
52,122
 
    
  
  
  
GAIN (LOSS) BEFORE ALLOCATION OF MINORITY INTEREST
   
 
32,245
 
   
 
(12,915
)
   
 
24,519
 
   
 
(26,760
)
ALLOCATION OF MINORITY INTEREST
   
 
(75
)
   
 
583
 
   
 
437
 
   
 
1,185
 
    
  
  
  
NET GAIN (LOSS):
   
$
32,170
 
   
$
(12,332
)
   
$
24,956
 
   
$
(25,575
)
    
  
  
  
Limited Partners
   
$
31,617
 
   
$
(12,143
)
   
$
24,514
 
   
$
(25,184
)
General Partner
   
 
553
 
   
 
(189
)
   
 
442
 
   
 
(392
)
Net Gain (loss) per unit
   
 
24.33
 
   
 
(8.33
)
   
 
19.46
 
   
 
(17.27
)
 
The accompanying notes are an integral part of these combined condensed statements.

5

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED SCHEDULE OF INVESTMENTS (UNAUDITED) AS OF JUNE 30, 2002
 
FACE VALUE ($)/
CONTRACTS
   
SECURITY DESCRIPTION
     
CARRYING VALUE
  
      
U.S. Treasury Securities (86.5%)
           
$
1,380,000
   
U.S. Treasury Securities Stripped, Due 11/15/02
     
$
1,347,061
 
             
      
Total U.S. Treasury Securities, At Cost Plus Accrued Interest
           
      
(Fair Value $ 1,373,531)
     
 
1,347,061
 
      
Open Futures Contracts (2.3%)
           
      
Long Positions—
           
 
2
   
Dec 02 CBT Bean Oil
     
 
756
 
 
3
   
Dec 02 CBOT Corn
     
 
950
 
 
1
   
Sep 02 CBT T-Bonds
     
 
2,453
 
 
2
   
Sep 02 CBT Tnote 10Y
     
 
5,406
 
 
2
   
Sep 02 CBT Tnote 5Y
     
 
4,000
 
 
2
   
Sep 02 CBT Tnote 2Y
     
 
3,922
 
 
3
   
Sep 02 LIF 3M Euro SF
     
 
2,211
 
 
5
   
Sep 02 Lif 3M Euribor
     
 
1,029
 
 
1
   
Aug 02 LME Copper US
     
 
765
 
 
1
   
Sep 02 LME Nickel US
     
 
(2,088
)
 
1
   
Sep 02 FINEX Eur/JY
     
 
1,665
 
 
1
   
Sep 02 FINEX Eur/Aud
     
 
124
 
 
1
   
Dec 02 NYC Cotton
     
 
2,590
 
 
1
   
Sep 02 FINEX Eur/FX
     
 
5,813
 
 
3
   
Sep 02 FINEX Eur/DLR
     
 
5,613
 
 
1
   
Sep 02 IMM Swiss Frc
     
 
4,075
 
 
1
   
Sep 02 IMM JYEN
     
 
3,925
 
 
3
   
Sep 02 IMM S&P 500
     
 
5,525
 
 
2
   
Sep 02 SGX Mini JGB
     
 
1,665
 
 
5
   
Sep 02 SYD Tbill 90D
     
 
122
 
 
1
   
Sep 02 SFE 10Y T-Bond
     
 
623
 
 
4
   
Sep 02 SFE 3Y T-Bond
     
 
123
 
 
3
   
Sep 02 TIF Euroyen
     
 
(31
)
 
2
   
Sep 02 EURX Eurobobl
     
 
2,381
 
 
1
   
Sep 02 EURX E-Bund
     
 
1,518
 
      
Short Positions—
           
 
2
   
Oct 02 CSC Sugar 11
     
 
101
 
 
2
   
Call Jul 02 IMM S&P 500
     
 
(15,850
)
 
2
   
Sep 02 IMM Mex Peso
     
 
2,025
 
 
1
   
Call Jul 02 IMM S&P 500
     
 
(5,000
)
 
1
   
Sep 02 SMX Nikkei
     
 
586
 
 
1
   
Aug 02 IPE BRT Crude
     
 
(1,180
)
             
      
Total open futures contracts, at fair value
     
 
35,816
 
             
      
Open forward contracts (.15%)
           
 
1
   
18 Sep 02 Singapore Dollar, at fair value
           
      
(notional amount—$340,000)
     
 
2,360
 
             
      
Total investments
     
 
1,385,237
 
             
 
Note:    Percentages in parentheses represent a percent of total net asset value.

6

 
FORM 10-Q         PART 1         ITEM 1         FINANCIAL STATEMENTS
 
THE FOUR SEASONS FUND II L.P.
 
COMBINED CONDENSED SCHEDULE OF INVESTMENTS (AUDITED) AS OF DECEMBER 31, 2001
 
FACE VALUE ($)/
CONTRACTS
   
SECURITY DESCRIPTION
     
CARRYING VALUE
  
      
U.S. Treasury Securities (87.1%)
           
$
1,540,000
   
U.S. Treasury Securities Stripped, Due 11/15/02
     
$
1,452,566
 
 
60,000
   
U.S. Treasury Securities Stripped, Due 2/15/02
     
 
59,499
 
             
      
Total U.S. Treasury Securities, at Cost Plus Accrued Interest
           
      
(Fair value $ 1,575,863)
     
 
1,512,065
 
      
Open Futures Contracts (1.2%)
           
      
Long Positions—
           
 
1
   
Mar 02 FINEX Euro/Japanese Yen Cross Rate
     
 
4,669
 
 
2
   
Mar 02 IMM S&P 500
     
 
3,150
 
 
2
   
Mar 02 CBOT 5-Year T-Note
     
 
1,305
 
 
2
   
Mar 02 IMM Euro Dollar
     
 
1,075
 
 
1
   
Mar 02 CBOT 2-Year T-Note
     
 
1,063
 
 
1
   
Mar 02 FINEX Swiss Franc/Japanese Yen Cross Rate
     
 
957
 
 
1
   
Mar 02 CBOT U.S. Treasury Bonds
     
 
(836
)
 
3
   
Mar 02 LIFE 3-Month Euro Swiss Interest Rate
     
 
(829
)
 
1
   
Mar 02 IMM Mexican Peso
     
 
813
 
 
1
   
Mar 02 SMX LT Bond
     
 
(570
)
 
1
   
Mar 02 CSCE Sugar #11
     
 
(291
)
 
1
   
20 Feb 02 L E Copper US
     
 
(206
)
 
1
   
Mar 02 SYD 90-Day Banks Bills
     
 
(99
)
      
Short Positions—
           
 
1
   
Mar 02 IMM Japanese Yen
     
 
5,375
 
 
2
   
Mar 02 EUREX-EURO Bond
     
 
2,846
 
 
2
   
MAR 02 EUREX-EURO Bobl
     
 
1,740
 
 
1
   
MAR 02 FINEX Euro/British Pound Cross Rate
     
 
(874
)
 
1
   
MAR 02 IMM Swiss Franc
     
 
(738
)
 
1
   
MAR 02 SFE 10-Year Treasury Bond
     
 
570
 
 
3
   
MAR 02 CBOT Corn
     
 
475
 
 
1
   
MAR 02 CBOT Munipical Bond Index
     
 
344
 
 
2
   
MAR 02 SFE 3-Year Treasury Bond
     
 
312
 
 
3
   
MAR 02 CBOT Soybean Oil
     
 
210
 
 
3
   
MAR 02 TIFFE Euroyen
     
 
85
 
 
1
   
20 Feb 02 LME Copper US
     
 
31
 
             
      
Total Open Futures Contracts, At Fair Value
     
 
20,577
 
             
      
Open Forward Contracts (.1%)
           
 
1
   
20 Mar 02 Singapore Dollar, At Fair Value
           
      
(Notional Amount—$170,000)
     
 
813
 
             
      
Total Investments
     
 
1,533,455
 
             
 
Note:    Percentages in parentheses represent a percent of total net asset value.

7

 
EXHIBITS
 
None
 
PART II
 
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 by the undersigned thereunto duly authorized.
 
THE FOUR SEASONS FUND II L.P.
(Registrant)
By:
  
JAMES RIVER MANAGEMENT CORP.
   
(General Partner)
 
By:
  
/s/    EDWARD M. JASINSKI        
   
EDWARD M. JASINSKI
Director of Fund Administration

8

 
Form 10-Q         Part 1         Item 2         Management’s Discussion
 
THE FOUR SEASONS FUND II L.P.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001:
 
(A)
    
June 30,
2002
   
June 30,
2001
PARTNERS’ CAPITAL
   
$
1,522,845
   
$
1,672,844
 
For the six month period ended June 30, 2002, Partners’ Capital decreased $212,888 due primarily to capital distributions of $59,237, capital withdrawals of $178,606 and operating expenses of $45,074. The decrease in capital resulting from capital distributions and operating expenses was partially offset by the U.S. Treasury Strip Securities’ interest of $48,583. Realized and unrealized results from the trading of futures, options on futures, and currency forwards amounted to a gain of $15,834 for the period ended June 30, 2002. Largest gains in futures trading were recognized in the trading of Japanese Yen and Euro currencies and largestlosses were recognized in S&P futures contracts and Aussie 3 year bonds.
 
In comparison, for the six month period ended June 30, 2001, Partners’ capital decreased $84,802 due primarily to capital distributions of $59,225, and operating expenses of $52,122. The decrease in capital resulting from capital distributions and operating expenses was partially offset by the U.S. Treasury Strip Securities’ interest of $48,446.
 
Net realized and unrealized results from the trading of futures, options on futures, and currency forwards amounted to a loss $26,436 for the period ended June 30, 2001.

9

Largest losses in futures trading were recognized in the trading of S&P 500 futures contracts and U.S. 30 year bonds; largest gains were recognized in cotton and Eurodollar futures.
 
(B)
 
The U.S. Treasury Strip Securities are valued at the lower of cost plus accrued interest or market value. As of June 30, 2002, the cost plus accrued interest value (as shown on the Combined Statement of Financial Condition) of the U.S. Treasury Strip Securities is $1,347,061 and the value of said securities at market value is $1,373,531. As of June 30, 2001, the value of the U.S. Treasury Strip Securities at cost plus accrued interest was $1,462,065 and the market value was $1,513,725.
 
(C)
 
The condensed consolidated financial statements include the accounts of Four Seasons Fund II LP (the “LP”) and the Four Seasons Trading Fund LP. James River Management Corp., a Delaware Corporation, is the general partner of the Partnership and the Trading Company and is a registered commodity pool operator. ED&F Man. International Inc. is the commodity broker for the Partnership. All trading activity of the Partnership and Trading Company (collectively the Fund) take place through the Trading Company. The remaining proceeds from the partnership’s initial public offering were used to purchase Zero coupon U.S. Treasury securities (the Guaranteed Distribution Pool)
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying

10

notes. Actual results could differ from these estimates. Operating results for the three and six months ended June 30, 2002, are not necessarily indicative of the results for the year ending December 31, 2002. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2001 should be read in conjunction with these condensed consolidated financial statements. All significant intercompany balances and transactions have been eliminated.

11