As Filed with the Securities and Exhcnage Commission on June 7, 1996
Registration No. 33-96292
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 3
TO FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FREMONT FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
INDIANA
[State of organization]
6289 35-1949364
(Primary SIC Number) (I.R.S. EIN)
2990 W. 120
Fremont, Indiana 46737
Telephone: (219) 833-1306
(address and telephone number of registrant's principal executive offices)
Ms. Shira Del Pacult
2990 W. 120
Fremont, Indiana 46737
Telephone: (219) 833-1306; Facsimile (219) 833-1505
(Name, address and telephone number of agent for service of process)
Copies to:
William Sumner Scott, Esquire
The Scott Law Firm
2730 SW 3rd Avenue, Suite 511
Miami, Florida 33129
(305) 285-4114; Facsimile (305) 285-4160
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being offered on the Form are to be offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Class Amount being Maximum Offering Maximum Aggregate Amount of
of Securities Being Registered:(1) Price Per Unit: (2) Offering Price: Registration Fee:
Registered:
<S> <C> <C> <C> <C>
Limited Partnership 5,000 $1,000 $5,000,000 $1,724
Interests ("Units")
</TABLE>
(1) This amount is based upon the number of Units to be initially offered.
The exact number of Units issued will vary because of the issuance of
additional Units for interest earned during the Escrow period.
(2) Initial offering price per Unit prior to the sale of the Minimum; after
sale of Minimum, trading will commence and the sales price per Unit will
fluctuate each month to reflect expenses and additions and subtractions
for trading results.
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
<TABLE>
CROSS REFERENCE SHEET
<CAPTION>
Item No. Prospectus Heading
<S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Cover Page; Table of Contents
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges Risk Disclosure Statements; Summary; Risk Factors;
Charges to the Fund
4. Use of Proceeds Use of Proceeds; Appendix II; Exhibit A
5. Determination of Offering Price Inside Cover Page; Offering Price; Plan of
Distribution
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Cover Page; Plan of Distribution
9. Description of Securities to Be Registered Cover Page; Distributions and Redemptions;
Agreement of Limited Partnership - Sharing of
Profits and Losses
10. Interests of Named Experts and Counsel Legal Matters; Experts
11. Information with Respect to the Registrant Summary; Risk Factors; Application of Proceeds;
The General Partner; Charges to the Fund; Trading
Management; Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities The Fund, Its Objectives, and Management
Discussion; Exhibit A, Article X, 10.4 (e)
</TABLE>
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
MINIMUM 600 Units ($600,000)
$1,000 per Unit until Minimum is Sold
and, thereafter, at Month end Net Asset Value per Unit
Fremont Fund, Limited Partnership (the "Partnership" ), is an Indiana
limited partnership. It is managed by Pacult Asset Management, Inc., a
Delaware corporation, its general partner (the "General Partner"). The
Partnership is organized to be a commodity pool to engage in the speculative
trading of futures, commodity options and forward contracts on currencies,
interest rates, energy and agriculture products, metals, and stock indices.
The Partnership Agreement attached as Exhibit A grants full management
control to the General Partner including the right to employ independent
trading managers ("Commodity Trading Advisors") to select trades. If
subscriptions for Six Hundred (600) Units ($600,000), (the "Minimum") have
not been received and accepted by the General Partner within one year (the
"Minimum Units Offering Period") from the effective date of this prospectus
(the "Prospectus" ), this offering will terminate and all amounts paid by
subscribers will be returned in the manner provided in the subscriber's
Subscription Agreement. A prospectus to disclose all material information
will be delivered to each subscriber either at or before the time of
confirmation of the investment in the Units. THESE SECURITIES ARE
SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS". ON PAGE 9
OF THE PROSPECTUS.
* Futures and forward trading is speculative, volatile and involves a high
degree of risk. The investors could lose all, or substantially all, of their
investment.
* The Partnership has substantial fixed management fees and commission costs
which must be paid without regard to the profits earned by the Partnership.
The General Partner estimates the Partnership must generate a 26% return on
investment during its first twelve months of trading to offset expenses and
approximately 30% to offset both expenses and redemption charges due on Units
redeemed as of the twelfth month after they are issued. See "Charges to the
Partnership".
* The transferability of the Units is restricted and there are limitations on
investors' rights to surrender the Units to the Partnership for their Net
Asset Value (the "Redemption Rights"). See "No Right To Transfer Units And
Limited Ability To Realize Return On Investment", and "Redemptions".
* The General Partner and its principal and affiliates have conflicts of
interest in regard to the management of the Partnership for the benefit of
the investors. See "Conflicts of Interest".
* Investors will be taxed upon the profits, if any, earned upon their
investment in the Partnership without the right to receive a distribution of
any such profits. See "Certain Federal Income Tax Aspects".
* The General Partner and its principal have no experience in the management
of commodity pools. See "Risk Factors" and "The General Partner".
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION OR AGENCY, NOR HAVE
ANY OF THEM CONFIRMED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Initial Price to Sales Proceeds to
Public(1) Commissions(2) Partnership(3)
<S> <C> <C> <C>
Per Limited
Partnership Unit $1,000 $60 $940
Total Minimum(4) $600,000 $36,000 $564,000
Total Maximum $5,000,000 $300,000 $4,700,000
</TABLE>
Date of this Prospectus is June _____, 1996
See Notes on pages i and ii
<PAGE>
NOTES:
(1) Units are initially offered for sale at a fixed value of One Thousand
Dollars ($1,000) per Unit, which amount was arbitrarily established by the
General Partner. The amount was not based on past or expected earnings and
does not represent that the Units have or will have a market value of or
could be resold or Redeemed at that price. When the General Partner has
received and accepted subscriptions for a face amount, excluding commissions,
of five hundred sixty-four thousand dollars ($564,000), (the "Minimum"), the
Partnership will commence trading operations. Until the 600 Units required
to reach the Minimum are sold, all cash and subscription documents will be
held in a separate escrow account (the "Escrow Account") in the name of the
Partnership at First American State Bank, 1207 Central Avenue, Fort Dodge, IA
50501 (the "Escrow Agent"). Any Units which remain unsold at the time the
Minimum is reached may be offered for sale, from time to time, in the
discretion of the General Partner, at a price per Unit equal to the value of
the Units determined to reflect the results from trading after payment of
expenses and fees, (the "Net Asset Value Per Unit"), as of the effective date
of the purchase, which shall be the close of business on the last day of the
month of acceptance of the Subscription Agreement.
The Units are being offered through World Invest Corporation, 2730 S.W. 3rd
Avenue, Miami, FL 33129, (305) 858-8100, (the "Selling Agent" or "WIC"), a
National Association of Securities Dealers, Inc. registered broker-dealer, on
a "best efforts" basis.
(2) See "Plan of Distribution - The Selling Agreement" for information
relating to indemnification arrangements with respect to the Selling Agent
and any Additional Sellers. Selling commissions of six percent (6%) of the
subscription price will be paid to the Selling Agent from the proceeds of
subscriptions without regard to the amount invested. The Selling Agent will
retain or distribute the sales commissions to the registered representatives
of all of the dealers, including the principal and Affiliates of the General
Partner who sold the Units.
(3) Before deduction of offering expenses, estimated to be a total of $70,
000, payable monthly over the first twenty-four months of operation by the
Partnership at the rate of 2% of Capital and 15% of New Net Profits per year,
until paid in full.
(4) Six Hundred (600) Units ($600,000 less sales commissions of $36,000)
(the "Minimum") must be sold before any money will be made paid to the
Selling Agent or cash and documents from any of the subscriptions received
and deposited to the Escrow Account will be delivered to the Partnership.
Once the Minimum is sold, the balance, up to a maximum of 5,000 Units ($5,000,
000) will be sold, until they are either all sold or the General Partner
elects to terminate this offering. There has been no promise by the Selling
Agent, or any other person, to purchase any Units or any other form of firm
underwriting commitment to assure the sale of the Units. The General Partner
or the Selling Agent may engage additional registered broker dealers (the
"Additional Sellers") to sell Units.
The General Partner may accept or reject subscriptions within five (5)
business days of receipt. If a subscription is rejected or if subscriptions
for at least six hundred (600) Units are not accepted during the Initial
Offering Period, or any extended Offering Period, all subscriptions will be
returned to prospective subscribers as soon as practicable.
Cash and subscription documents with respect to subscriptions received
prior to the commencement of trading operations by the Partnership (and not
rejected by the General Partner) will be deposited and held in a separate
escrow account (the "Escrow Account") in the name of the Partnership at First
American State Bank, 1207 Central Avenue, Fort Dodge, IA 50501 (the "Escrow
Agent")., pending receipt and acceptance of subscriptions for at least the
Minimum. See "Subscription Procedure and Plan of Distribution". No escrow
will be utilized for Units sold after the sale of the Minimum and the
commencement of trading operations.
i
<PAGE>
At the time trading commences, interest earned on subscriptions held in
escrow will be deposited in the Partnership's account and subscriber's will
receive additional Units at the rate of $1,000 per Unit (rounded in the case
of fractional Units to three decimal points) pro rata equal to the interest
earned on their subscriptions, taking into account both the length of time
and amount deposited to the Escrow Account. Subscribers whose subscriptions
are rejected will be refunded their entire subscription payments together
with the interest earned, if any, thereon. Cash from subscriptions held in
the Escrow Account will be invested in short-term investments which meet
applicable regulatory requirements such as United States Treasury Bills or
other comparable interest-bearing instruments which are expected to be liquid,
substantially riskless instruments, with correspondingly low yields.
ii
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT
PAGE 25 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN,
THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 20.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGE 9.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN
FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE
UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET,
MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION
TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY
AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF
REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE
TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
iii
<PAGE>
TABLE OF CONTENTS
COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT iii
PARTNERSHIP AND GENERAL PARTNER IDENTIFICATION 1
NOTICE TO RESIDENTS OF ALL STATES 1
VARIOUS SPECIFIC STATE NOTICES 3
NOTICE TO CALIFORNIA INVESTORS 3
NOTICE TO IDAHO INVESTORS 4
NOTICE TO MICHIGAN INVESTORS 4
NOTICE TO OREGON INVESTORS 4
NOTICE TO FOREIGN INVESTORS 4
SUMMARY OF THE OFFERING 4
RISK FACTORS 4
CONFLICTS OF INTEREST 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 5
Business Objective and Expenses 5
Securities Offered 5
CHARGES TO THE PARTNERSHIP 6
Compensation of the General Partner 6
Management and Incentive Fees 6
Charges to the Partnership 7
USE OF PROCEEDS 7
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 8
FEDERAL INCOME TAX ASPECTS 8
No Legal Opinion As To Certain Material Tax Aspects 8
REDEMPTIONS 9
PLAN OF DISTRIBUTION 9
SUBSCRIPTION PROCEDURE 9
RISK FACTORS 9
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE 9
LOW SECURITY DEPOSIT IN RELATION TO PRICE MOVEMENT 10
THE PARTNERSHIP WILL PAY SUBSTANTIAL CHARGES 10
NO RIGHT TO TRANSFER UNITS AND LIMITED ABILITY TO REALIZE RETURN ON
INVESTMENT 10
LACK OF OPPORTUNITY TO EXIT A POSITION 11
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE 11
LIMITED PARTNERS WILL BE TAXED ON PROFITS NOT DISTRIBUTED 11
PRESENT TRADE SELECTION METHODS SUBJECT TO SUDDEN ADVERSE CHANGE 11
TRADE SELECTION MADE WITHOUT NOTICE TO PARTNERSHIP 11
PROFITABILITY OPPORTUNITIES CHANGE WITH SIZE OF ACCOUNT 11
COMMENCEMENT OF TRADING WITH ONLY THE MINIMUM AMOUNT OF EQUITY 12
NO PRIOR OPERATION EXPERIENCE OF THE GENERAL PARTNER 12
LOWER COMMISSIONS FOR OTHER ACCOUNTS BECAUSE OF PARTNERSHIP ACTIVITY 12
FAILURE OF COMMODITY BROKERS OR BANKS 12
COUNTERPARTY CREDITWORTHINESS 12
TRADING ON FOREIGN EXCHANGES AND FORWARD CURRENCY CONTRACTS 13
OPTIONS TRADING RISKS 13
POSSIBLE EFFECTS OF POSITION LIMITS 13
iv
<PAGE>
COMPETITION IS INTENSE 13
GENERAL PARTNER AND CTA TO SERVE OTHER COMPETING BUSINESSES 13
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT 14
NO ASSURANCE THAT UNITS NECESSARY TO COMMENCE BUSINESS WILL BE SOLD 14
RISKS OF COMMENCEMENT OF BUSINESS AND CHANGES IN THE SIZE OF THE
PARTNERSHIP 14
STATE SECURITIES ADMINISTRATORS NET WORTH OF THE GENERAL PARTNER
REQUIREMENT 14
RELIANCE ON THE GENERAL PARTNER 14
NET WORTH OF GENERAL PARTNER - FEDERAL TAX REQUIREMENT AND
POSSIBILITY OF TAXATION AS A CORPORATION 15
RETIREMENT PLAN AND IRA PARTICIPANTS 15
NOT AN INVESTMENT COMPANY 15
POSSIBILITY OF AUDIT AND TAX MATTERS PARTNER 15
POSSIBLE ADVERSE DETERMINATION BY THE IRS 15
CONFLICTS OF INTEREST 16
MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GENERAL
PARTNER, THE CTA, AND THEIR PRINCIPALS 16
POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER 16
GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF
PARTNERSHIP 17
FEES AND CHARGES TO THE PARTNERSHIP PAID TO GENERAL PARTNER NOT
NEGOTIATED 17
GENERAL PARTNER TO DISCOURAGE REDEMPTIONS 17
HIGH RISK TRADING BY THE CTA TO GENERATE INCENTIVE FEES 17
IB AFFILIATED WITH THE GENERAL PARTNER TO RETAIN A SHARE OF THE
COMMISSIONS 17
NO RESOLUTION OF CONFLICTS PROCEDURES 17
INTERESTS OF NAMED EXPERTS AND COUNSEL 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 18
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS 18
THE COMMODITY TRADING ADVISOR 19
THE ADVISORY CONTRACT AND POWER OF ATTORNEY 19
BUSINESS OBJECTIVE AND EXPENSES 19
EXPENSES PER UNIT FOR THE FIRST 12-MONTH PERIOD OF OPERATIONS 20
SECURITIES OFFERED 21
MANAGEMENT'S DISCUSSION 22
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER 23
INDEMNIFICATION 23
RELATIONSHIP WITH THE FCM AND THE IB 24
RELATIONSHIP WITH THE CTA 24
RISK CONTROL 25
CHARGES TO THE PARTNERSHIP 25
COMPENSATION OF GENERAL PARTNER 25
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTA 25
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER 26
ALLOCATION OF COMMISSIONS 26
OTHER EXPENSES 27
CHARGES TO THE PARTNERSHIP 27
INVESTOR SUITABILITY 28
POTENTIAL ADVANTAGES 28
EQUITY MANAGEMENT 28
INVESTMENT DIVERSIFICATION 28
LIMITED LIABILITY 28
v
<PAGE>
ADMINISTRATIVE CONVENIENCE 28
ACCESS TO THE CTA 29
USE OF PROCEEDS 29
DETERMINATION OF THE OFFERING PRICE 29
NO MARKET AND LIMITATION OF RIGHT OF TRANSFER 29
THE GENERAL PARTNER 30
IDENTIFICATION 30
THE PRINCIPAL AND OFFICER OF THE GENERAL PARTNER 30
TRADING BY THE GENERAL PARTNER; INTEREST IN THE POOL 30
NO PRIOR PERFORMANCE AND REGULATORY NOTICE 30
TRADING MANAGEMENT 31
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 31
THE ADVISORY CONTRACTS 31
FREQUENCY OF CTA AND EQUITY REALLOCATIONS 31
FEDERAL INCOME TAX ASPECTS 32
SCOPE OF TAX PRESENTATION 32
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS 32
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER 32
NO IRS RULING 33
TAX OPINION 33
PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES 34
BASIS LOSS LIMITATION 34
AT-RISK LIMITATION 34
INCOME AND LOSSES FROM PASSIVE ACTIVITIES 34
ALLOCATION OF PROFITS AND LOSSES 34
TAXATION OF FUTURES AND FORWARD TRANSACTIONS 35
SECTION 988 FOREIGN CURRENCY TRANSACTIONS 35
CAPITAL GAIN AND LOSS PROVISIONS 35
BUSINESS FOR PROFIT 35
SELF-EMPLOYMENT INCOME AND TAX 35
INDIVIDUAL ALTERNATIVE MINIMUM TAX 36
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS 36
NOT A TAX SHELTER 36
TAXATION OF FOREIGN PARTNERS 36
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES 36
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S 37
THE LIMITED PARTNERSHIP AGREEMENT 37
FORMATION OF THE PARTNERSHIP 37
UNITS 37
MANAGEMENT OF PARTNERSHIP AFFAIRS 38
ADDITIONAL OFFERINGS 38
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS 38
FEDERAL TAX ALLOCATIONS 38
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER 38
TERMINATION OF THE PARTNERSHIP 39
vi
<PAGE>
MEETINGS 39
REDEMPTIONS 39
PLAN OF DISTRIBUTION 39
SUBSCRIPTION PROCEDURE 40
LEGAL MATTERS 41
LITIGATION AND CLAIMS 41
LEGAL OPINION 41
EXPERTS 41
ADDITIONAL INFORMATION 41
FINANCIAL STATEMENTS
A. FREMONT FUND, LIMITED PARTNERSHIP
Balance Sheet as of April 30, 1995
Notes to Statement of Financial Condition . . . . . . . . . F1
B. PACULT ASSET MANAGEMENT, INC.
Balance Sheet and Income Statement as of April 30, 1995
Notes to Statement of Financial Condition . . . . . . . . . F2
APPENDIX I - COMMODITY TERMS AND DEFINITIONS;
STATE REGULATORY GLOSSARY
APPENDIX II - THE COMMODITY TRADING ADVISOR . . . . . . . . . . . . F3
APPENDIX III - THE FUTURES COMMISSION MERCHANT
EXHIBIT A - LIMITED PARTNERSHIP AGREEMENT . . . . . . . . . . . . . F4
EXHIBIT B - REQUEST FOR REDEMPTION
EXHIBIT C - SUITABILITY INFORMATION
EXHIBIT D - SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
EXHIBIT E - ESCROW AGREEMENT
EXHIBIT F - INVESTMENT ADVISORY CONTRACT - MICHAEL J. FRISCHMEYER
vii
<PAGE>
PARTNERSHIP AND GENERAL PARTNER IDENTIFICATION
Fremont Fund, Limited Partnership (the "Partnership" ), is an Indiana limited
partnership. Its main business office is 2990 W. 120, Fremont, Indiana (219)
833-1306. It is managed by Pacult Asset Management, Inc., a Delaware
corporation, its general partner (the "General Partner"), with its main
business office c/o Corporate Systems, Inc. 101 North Fairfield Drive, Dover,
DE 19901 (302) 697-2139. The Partnership is organized to be a commodity pool
to engage in the speculative trading of futures, commodity options and
forward contracts on currencies, interest rates, energy and agriculture
products, metals, and stock indices. The Partnership Agreement attached as
Exhibit A grants full management control to the General Partner including the
right to employ independent trading managers ("Commodity Trading Advisors")
to select trades. The objective of the Partnership is substantial capital
appreciation with controlled volatility. There can be no assurance that the
Partnership will achieve its objectives or avoid substantial losses. The
General Partner and its principal have no prior experience in the management
of a commodity pool, however, the principal of the General Partner, Ms. Shira
Pacult, has been engaged in supervision of individual managed commodity
accounts for over 14 years. See "Description of the General Partner". The
Partnership hereby offers to sell $5,000,000 of units of limited partnership
interest (the "Units") under the terms and conditions described herein. The
Units are initially offered at a value arbitrarily established by the General
Partner at One Thousand Dollars ($1,000) per Unit, with a minimum purchase,
per investor, of 15 Units ($15,000); provided, however, the General Partner,
in its sole discretion, may permit the purchase by an investor of less than
15 but more than 5 Units. After the sale of the first six hundred Units, the
Partnership will commence trading and, thereafter, the Units will be sold for
the Net Asset Value at the end of each Month. Net Asset Value is the value
of the Unit after additions and deductions for profits, losses, expenses,
fees and reserves. If subscriptions for Six Hundred (600) Units ($600,000),
(the "Minimum Units") have not been received and accepted by the General
Partner within nine (9) months (the "Minimum Units Offering Period") from the
date of this prospectus (the "Prospectus" ), this offering will terminate and
all amounts paid by subscribers will be returned in the manner provided in
the subscriber's Subscription Agreement. If the General Partner receives and
accepts subscriptions for at least the Minimum Units prior to the close of
the Minimum Units Offering Period, the Partnership will commence trading
operations and, thereafter, Units may be offered for sale, from time to time,
in the sole discretion of the General Partner, at a price per Unit equal to
the Net Asset Value Per Unit computed as of the end of the month in which the
subscription agreement was received. If the Minimum Units are sold, this
offering shall continue until the earlier of (i) such time as all of the
Units offered hereby have been sold, or (ii) such earlier time as the
offering is terminated by the General Partner, in its sole discretion.
The transferability of Units is subject to the approval of the General
Partner and no trading or market for the Units now exists or is expected to
develop on any exchange or over the counter market. Consequently, Units
should be purchased for long-term investment only. There also can be no
assurance that any or all of the Minimum Units or any additional Units will
be sold.
NOTICE TO RESIDENTS OF ALL STATES
UNTIL 90 DAYS AFTER THE DATE HEREOF, ALL DEALERS EFFECTING TRANSACTIONS IN
THE UNITS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS OR BEST EFFORTS SELLERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE SELLING AND
ADDITIONAL SELLERS MUST ALSO DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS
ISSUED BY THE PARTNERSHIP.
1
<PAGE>
NO DEALER, SALESMAN, OFFICER, EMPLOYEE OR AGENT OF THE PARTNERSHIP OR THE
GENERAL PARTNER AND OR ANY OTHER PERSON HAS BEEN AUTHORIZED, IN CONNECTION
WITH THIS OFFERING, TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP, THE GENERAL PARTNER, THE SELLING AGENTS, OR
ANY OTHER PERSON CONNECTED WITH THIS OFFERING. THIS PROSPECTUS SPEAKS AS OF
THE DATE OF ITS ISSUANCE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
PARTNERSHIP SINCE THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY UNITS BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR PURCHASE IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION REQUIRE THAT NO
COMMODITY POOL OPERATOR MAY SOLICIT, ACCEPT OR RECEIVE FUNDS, SECURITIES OR
OTHER PROPERTY FROM A PROSPECTIVE PARTICIPANT IN A COMMODITY POOL WITHOUT
FIRST DELIVERING A DISCLOSURE DOCUMENT (THIS "PROSPECTUS") TO SUCH
PROSPECTIVE PARTICIPANT. THE GENERAL PARTNER MUST FURNISH ALL PARTNERS
ANNUAL AND MONTHLY REPORTS COMPLYING WITH COMMODITY FUTURES TRADING
COMMISSION ("CFTC") AND NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS.
THE ANNUAL REPORTS WILL CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY
REPORTS UNAUDITED, FINANCIAL INFORMATION IN REGARD TO THE OPERATION OF THE
PARTNERSHIP AND ITS GENERAL PARTNER
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC") REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH
HEREIN: FREMONT FUND, LIMITED PARTNERSHIP, IS NOT A MUTUAL FUND AND IS NOT
SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940. CONSEQUENTLY,
INVESTORS WILL NOT HAVE THE BENEFIT OF THE PROTECTIVE PROVISIONS OF SUCH
LEGISLATION.
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF
THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. INVESTORS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. ACCORDINGLY, THE UNITS MAY BE
SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH
THE TERMS OF THE LIMITED PARTNERSHIP AGREEMENT, INCLUDING THE CONSENT OF THE
GENERAL PARTNER, AND ONLY IF SUCH UNITS ARE SUBSEQUENTLY REGISTERED OR, IN
THE OPINION OF COUNSEL FOR THE COMPANY, SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS. THE SUBSCRIPTION AGREEMENT AND
THE CERTIFICATE FOR UNITS, IF ANY, WILL HAVE A LEGEND TO DISCLOSE THAT THE
UNITS ARE RESTRICTED FROM SALE OR OTHER TRANSFER WITHOUT PRIOR REGISTRATION
OR OTHER LEGAL JUSTIFICATION. NO PUBLIC MARKET EXISTS OR IS EXPECTED TO
DEVELOP FOR THE UNITS AND, CONSEQUENTLY, PROSPECTIVE INVESTORS WHO DESIRE
LIQUIDITY SHOULD NOT PURCHASE THE UNITS. EACH INVESTOR (PURCHASER OF UNITS)
MUST MEET THE FOLLOWING SUITABILITY STANDARDS: (i) AN INVESTOR MUST HAVE (A)
HAD AN ANNUAL GROSS INCOME IN EXCESS OF $45,000 IN THE LAST CALENDAR YEAR AND
REASONABLY EXPECTS TO HAVE GROSS INCOME IN EXCESS OF $45,000 FOR THE CURRENT
YEAR TOGETHER WITH A NET WORTH, EXCLUSIVE OF PRINCIPAL RESIDENCE, HOME
FURNISHINGS, AND AUTOMOBILE OF $45,000; OR (B) THE INVESTOR HAS A NET WORTH
(EXCLUSIVE OF PRINCIPAL RESIDENCE, HOME FURNISHINGS AND AUTOMOBILE) IN EXCESS
OF $150,000; AND (ii) THE INVESTOR IS REPRESENTED BY A PURCHASER
REPRESENTATIVE OR OTHERWISE DEMONSTRATES TO THE GENERAL PARTNER SUFFICIENT
KNOWLEDGE TO ACCEPT THE RISKS OF THIS INVESTMENT. A GENERAL PARTNERSHIP OR
OTHER ENTITY MAKING INVESTMENT MUST MEET THE FINANCIAL SUITABILITY
REQUIREMENTS PRESCRIBED FOR NATURAL PERSONS. A QUALIFIED PENSION,
PROFIT-SHARING OR KEOGH EMPLOYEE PLAN, THE FIDUCIARY FOR SUCH PLAN, OR THE
DONOR OF ANY SUCH PLAN WHO DIRECTLY OR INDIRECTLY SUPPLIES THE FUNDS TO
PURCHASE AN INTEREST (THE "UNITS") IN THE PARTNERSHIP MUST MEET THE MINIMUM
FINANCIAL SUITABILITY STANDARDS. "ACCREDITED INVESTORS", AS THAT TERM IS
DEFINED UNDER REGULATION D OF THE ACT, WHO MEET THE NET INCOME TEST IN (i)
ABOVE, ARE DEEMED TO HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL BUSINESS
MATTERS AS TO BE CAPABLE OF EVALUATING THE MERITS AND RISKS OF THE PROPOSED
INVESTMENT AND, AT THE TIME OF INVESTING, CAN AFFORD A COMPLETE LOSS.
2
<PAGE>
THE ACT AND THE SECURITIES LAWS OF CERTAIN STATES GRANT PURCHASERS OF
SECURITIES SOLD, EITHER IN VIOLATION OF THE REGISTRATION OR QUALIFICATION
PROVISIONS OF SUCH LAWS OR WITHIN CERTAIN TIME LIMITATIONS, THE RIGHT TO
RESCIND THEIR PURCHASE OF SUCH SECURITIES AND TO RECEIVE BACK THEIR
CONSIDERATION PAID, PLUS INTEREST. THE GENERAL PARTNER EITHER INTENDS TO
REGISTER THE UNITS FOR SALE OR BELIEVES THAT THE OFFERING DESCRIBED IN THIS
PROSPECTUS IS NOT REQUIRED TO BE REGISTERED OR QUALIFIED. MANY OF THESE LAWS
WHICH GRANT THE RIGHT OF RESCISSION ALSO PROVIDE THAT SUITS FOR SUCH
VIOLATIONS MUST BE BROUGHT WITHIN A SPECIFIED TIME, USUALLY ONE YEAR FROM
DISCOVERY OF FACTS CONSTITUTING SUCH VIOLATION. SHOULD ANY INVESTOR
INSTITUTE AN ACTION ON THE THEORY THAT THE OFFERING CONDUCTED AS DESCRIBED
HEREIN WAS REQUIRED TO BE REGISTERED OR QUALIFIED, THE PARTNERSHIP WILL
CONTEND THAT THE CONTENTS OF THIS PROSPECTUS PROVIDED NOTICE OF SUFFICIENT
FACTS TO COMMENCE THE TIME FROM WHICH AN ACTION FOR RESCISSION SHOULD HAVE
BEEN BROUGHT. ALSO, SHOULD ANY INVESTOR CONTEND THE OFFER WAS NOT QUALIFIED
FOR PRESENTATION OR THE INVESTOR NOT SUITABLE TO MAKE SUCH INVESTMENT, THE
GENERAL PARTNER WILL PLEAD RELIANCE UPON THE INFORMATION SUPPLIED BY THE
INVESTOR IN THE SUBSCRIPTION DOCUMENTS. INVESTORS ARE TO COMPLETE ALL
DOCUMENTS BEFORE SIGNING. NEITHER THE INFORMATION CONTAINED HEREIN, NOR ANY
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT COMMUNICATION SHOULD BE CONSTRUED BY THE
PROSPECTIVE INVESTOR AS LEGAL OR TAX ADVICE FOR THAT INVESTOR. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS OWN LEGAL AND TAX ADVISORS TO
ASCERTAIN THE MERITS AND RISKS DESCRIBED HEREIN PRIOR TO SUBSCRIBING TO
PURCHASE UNITS IN THE PARTNERSHIP PURSUANT TO THIS OFFERING.
VARIOUS SPECIFIC STATE NOTICES
NOTICE TO CALIFORNIA INVESTORS
CALIFORNIA RESIDENTS ARE REQUIRED TO HAVE A LIQUID NET WORTH OF $100,000 AND
ANNUAL INCOME OF $50,000 TO BE ABLE TO PURCHASE PARTNERSHIP INTERESTS IN THIS
COMMODITY POOL. THE TRANSFER OF THE LIMITED PARTNERSHIP INTERESTS OFFERED
AND SOLD PURSUANT TO THIS OFFERING CAN NOT BE RESOLD OR TRANSFERRED WITHOUT
PERMISSION OF THE GENERAL PARTNER AND FULFILLMENT OF OTHER TERMS AND
CONDITIONS CONTAINED IN THE PARTNERSHIP AGREEMENT. ACCORDINGLY, (a) THE
LIMITED PARTNERSHIP, AS ISSUER OF A SECURITY UPON WHICH A RESTRICTION ON
TRANSFER HAS BEEN IMPOSED MUST CAUSE A COPY OF RULE 260.141.11 TO BE
DELIVERED TO EACH ISSUEE OR TRANSFEREE OF SUCH SECURITY AT THE TIME THE
CERTIFICATE EVIDENCING THE SECURITY IS DELIVERED TO THE ISSUEE OR TRANSFEREE;
AND, (b) IT IS UNLAWFUL FOR THE HOLDER OF ANY SUCH SECURITY TO CONSUMMATE A
SALE OR TRANSFER OF SUCH SECURITY, OR ANY INTEREST THEREIN, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER (UNTIL THIS CONDITION IS REMOVED PURSUANT
TO SECTION 260.141.12 OF THESE RULES), EXCEPT AS PROVIDED IN THE CODE. THE
CERTIFICATES, WHETHER UPON INITIAL ISSUANCE OR UPON ANY TRANSFER, SHALL BEAR
ON THEIR FACE, IN CAPITAL LETTERS OF 10-POINT SIZE, AS FOLLOWS: "IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
3
<PAGE>
NOTICE TO IDAHO INVESTORS
INVESTORS WHO ARE RESIDENTS OF IDAHO ARE REQUIRED TO HAVE A NET WORTH OF $100,
000 OR NET WORTH OF $50,000 AND ANNUAL INCOME OF $50,000 TO BE ELIGIBLE TO
INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN THIS COMMODITY POOL.
NOTICE TO MICHIGAN INVESTORS
INVESTORS WHO ARE RESIDENTS OF MICHIGAN ARE REQUIRED TO HAVE A NET WORTH OF
$225,000 OR NET WORTH OF $60,000 AND TAXABLE ANNUAL INCOME OF $60,000 TO BE
ELIGIBLE TO INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN A COMMODITY
POOL. NET WORTH IN ALL CASES MUST BE CALCULATED EXCLUSIVE OF HOME, HOME
FURNISHINGS AND AUTOMOBILES. IN ADDITION, NO MORE THAN TEN PERCENT (10%) OF
THE INVESTOR'S NET WORTH MAY BE INVESTED IN THIS LIMITED PARTNERSHIP.
NOTICE TO OREGON INVESTORS
INVESTORS WHO ARE RESIDENTS OF OREGON ARE REQUIRED TO HAVE A NET WORTH OF
$225,000 OR NET WORTH OF $60,000 AND ANNUAL INCOME OF $60,000 TO BE ELIGIBLE
TO INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN THIS COMMODITY POOL.
NOTICE TO FOREIGN INVESTORS
THE SECURITIES HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION AND SEVERAL SELECTED STATES. HOWEVER, THE SECURITIES MAY
NOT BE OFFERED, SOLD, RENOUNCED OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN
THE UNITED STATES OF AMERICA, ITS TERRITORIES, POSSESSIONS, AND ALL AREAS
SUBJECT TO ITS JURISDICTION ("UNITED STATES" OR IN CANADA (COLLECTIVELY,
"NORTH AMERICA"), OR TO OR FOR THE BENEFIT OF ANY PERSON WHO IS A NATIONAL
CITIZEN OR A RESIDENT OR NORMALLY A RESIDENT THEREOF, THE ESTATES OF SUCH A
PERSON OR ANY CORPORATION OR OTHER ENTITY CREATED OR ORGANIZED UNDER ANY LAW
OF THE UNITED STATES OR CANADA OR ANY POLITICAL SUBDIVISION THEREOF
(COLLECTIVELY REFERRED TO AS "NORTH AMERICAN PERSONS") UNLESS (i) THE
SECURITIES ARE DULY REGISTERED UNDER THE APPLICABLE STATE ACT, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE APPLICABLE STATE ACT AND THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT REASONABLY SATISFACTORY TO
IT, OR (iii) SUCH SECURITIES ARE SOLD ON FOREIGN EXCHANGE IN ACCORDANCE WITH
PROCEDURES APPROVED BY SUCH FOREIGN STOCK EXCHANGE.
SUMMARY OF THE OFFERING
The following summary is qualified, in its entirety, by the more detailed
information appearing elsewhere in this Prospectus, in the Exhibits, and
other documents identified herein. Reference to subsections in this
Prospectus are in quotation marks. Terms with the initial letter capitalized
are defined in the Glossary in Appendix I to this Prospectus.
* RISK FACTORS
An investment in the Partnership is speculative and involves substantial
risks which include, but are not limited to, the risk of loss of a Partner's
entire investment, the speculative nature of trading in commodity futures and
forward contracts and options, the substantial charges which the Partnership
will incur regardless of whether any profits are earned, the restricted
transfer and no market for sale of the Units, the Partnership's reliance on
the General Partner and the commodity trading advisor ("CTA") it employs to
conduct trading on behalf of the Partnership. See "Description of Charges",
"Risk Factors", "Conflicts of Interest", and Exhibit A.
4
<PAGE>
* CONFLICTS OF INTEREST
Significant potential and actual conflicts of interest may arise as a result
of (i) the right of the principal of the General Partner, Ms. Shira Del
Pacult, and the General Partner to manage, and the actual management by the
Commodity Trading Advisor of, other commodity pools; (ii) Ms. Shira Del
Pacult's right, once the Minimum is sold, to purchase Units in the
Partnership; (iii) an Affiliate of the General Partner will receive the
difference between the fixed commissions and the actual round-turn
commissions paid from the Partnership's trading activities, creating a
disincentive for the General Partner to replace the IB which is Affiliated
with it even if such replacement may be in the best interest of the
Partnership; (iv) the share of the Partnership's fixed commission to be paid
to the Affiliate of the General Partner in lieu of round-turn brokerage
commissions has not been negotiated at arm's length; (v) the General Partner
selects the trading advisors for the Partnership and the trading advisors
determine the frequency of trading, resulting in a conflict of interest of
the General Partner between it selecting trading advisors who will trade to
maximize profits rather than to minimize the number of trades; i.e., it is in
the best interest of the General Partner to reduce the frequency of trading
to maximize the difference between the fixed commission and the share of the
fixed commission, after payment of the round-turn commissions, the IB
Affiliated with it will receive; (vi) the General Partner, should it manage
or sponsor other commodity accounts, and the Trading Advisor, may have
incentives to favor other accounts over the Partnership; (vii) the General
Partner has an incentive to discourage redemptions because the IB Affiliated
with the General Partner receives a portion of the fixed commissions based on
the Net Asset Value of the Partnership assigned to be traded; (viii) the
General Partner, the Trading Advisor and their principals and affiliates may
trade in the commodity markets for their own accounts and may take positions
opposite or ahead of those taken for the Partnership; and, (ix) the Trading
Advisor is compensated based on a percentage of the New Net Profit of the
Partnership and thus may have an incentive to engage in ill-advised trades.
See "Conflicts of Interest" and "Risk Factors".
* MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
* Business Objective and Expenses
The Partnership will engage in the speculative trading of domestic and
foreign commodity futures contracts and options at the direction of the
independent commodity trading advisor (the "CTA") or advisors, it selects.
See "Risk Factors", "Conflicts of Interest", "Use of Proceeds", "General
Partner", "Commodity Trading Advisor", Appendix I and II and Exhibit A. The
audited balance sheet of the Partnership as of November 30, 1995, is attached
hereto. See, "Experts" and the Financial Statements. The Partnership was
organized in January 1995 and, except for the preparation of this Prospectus
and the preparation to engage in the commodity trading business, has not yet
engaged in business. The principal objective will be to generate increased
capital. There can be no assurance that the Partnership can achieve this
objective. Distributions of profits, if any, will be made at the sole
discretion of the General Partner. The Partnership is subject to substantial
charges, regardless of whether profits are earned. If there are no claims,
the Partnership must earn approximately a twenty-eight and 3/10 percent (28.
3%) return on equity to permit the investor to Redeem a Unit at the sales
price of $1,000 at the end of the first year of operation. In addition,
Partners will be required to pay Federal, state and local taxes upon income,
if any, in the year earned by the Partnership, although there will be no
expectations of distributions of income during that, or any other, year.
Accordingly, the purchase of Units in the Partnership is intended to be a
long-term investment. Neither the General Partner nor any other person has
made any promise or guarantee that the Partnership will be profitable or
otherwise meet its objectives.
* Securities Offered
The Fremont Fund, Limited Partnership (the "Partnership") will offer and sell
Limited Partnership interests in the Partnership which will have prorata
rights to profit and losses with all other owners equal to the Capital they
have contributed but Limited Partners will have limited obligations to pay
the debts of the Partnership in excess of their contribution to Capital plus
their undistributed profits, less losses. In addition, these interests will
have no voice in the day to day management of the Partnership. They will
have the right to vote on Partnership matters such as the replacement of the
General Partner. These Limited Partnership interests are included in the
definition of units (the "Units") which are offered for sale for One Thousand
Dollars ($l,000) per Unit. This sales price per Unit was arbitrarily set by
5
<PAGE>
the General Partner without regard to expected earnings and does not
represent present or projected market or Redemption value. Funds with
respect to subscriptions received prior to the commencement of trading
operations by the Partnership (and not rejected by the General Partner) will
be deposited and held in a separate escrow account (the "Escrow Account") in
the name of the Partnership at First American State Bank, 1207 Central Avenue,
Fort Dodge, IA 50501 (the "Escrow Agent"). If the General Partner has not
accepted subscriptions for the 600 Units (the "Minimum") before the lapse of
one year from the date of this Prospectus, (the "Initial Offering Period"),
this offering will terminate and all documents and amounts deposited to the
Escrow Account by subscribers will be returned, plus interest and without
deduction for any commissions, fees or costs. Upon the sale of the Minimum,
the Partnership will commence trading. The remaining 4,400 Units will be
offered for sale at a price per Unit equal to the Net Asset Value Per Unit as
of the close of trading on the effective date of such purchase, which will be
the close on the last business day of the month in which the General Partner
accepts a duly executed Subscription Agreement and capital contribution from
the subscriber. No escrow will be utilized for Units sold after the sale of
the Minimum. All subscriptions are irrevocable and subscription payments,
after the statutory withdrawal period, if any, which are accepted by the
General Partner, and either deposited in the Escrow Account or in the
Partnership account, may not be withdrawn by subscribers. Although a maximum
of $5,000,000 of Units are offered hereby, the Limited Partnership Agreement
authorizes the General Partner to sell additional Units and there is,
therefore, no maximum aggregate number or contribution for Units which may be
offered or sold by the Partnership by future offerings. There cannot be any
assurance that the Minimum Units or any additional Units will be sold and the
General Partner is authorized, in its sole discretion, to terminate this, or
any future, offering of Units.
* CHARGES TO THE PARTNERSHIP
* Compensation of the General Partner
The Partnership will pay a fixed amount for brokerage commissions of twelve
percent (12%) per year, payable monthly, to Futures Investment Company, the
introducing broker, (the "IB"), affiliated with the principal of the General
Partner, for introducing trades through The Chicago Corporation , the futures
commission merchant (the "FCM"). See Appendix III. The IB will pay the
round-turn brokerage commissions, pit brokerage and other clearing expenses
to the FCM , which will act in the normal capacity as a futures commission
merchant and will hold the equity assigned by the General Partner for trading
and will clear the trades entered by the CTA pursuant to the power of
attorney granted by the General Partner to the CTA to trade on behalf of the
Partnership. The past history of the frequency of trades by the CTA has been
at the rate of approximately 225 round turns per month for every million
dollars ($1,000,000) of equity under management. In the unlikely event the
CTA trades 675 round turns for every million dollars ($1,000,000) in any
month, the General Partner has the right, but not the obligation, to suspend
trading until the commencement of the next month. This suspension of trading
is to limit the exposure to loss to the General Partner to a defined amount
determined by the maximum number of round turn commissions the General
Partner will pay to the FCM during in any one month. Trading will
automatically resume the following month subject to the same maximum of 675
trades for that and any future month. From the 12% paid by the Partnership,
the IB will pay six percent (6%) per year to the broker dealers and other
duly licensed entities, prorated to the value of Units sold, who have
facilitated the sale of Units, as trailing commissions, in exchange for
services provided to the investors and the Partnership to communicate results
to the investors and other similar assistance. The Partnership will
reimburse the General Partner for Offering Expenses estimated to be a total
of $70,000, payable by the Partnership at the rate of 2% of Capital and 15%
of Net New Profits per year, until paid in full. See "Charges to the
Partnership."
* Management and Incentive Fees
The Partnership will pay a management fee to the General Partner at the
annual rate of two percent (2%) of equity in the Partnership payable at the
end of each month (1/6 of 1%) and a management fee to Frischmeyer of four
percent (4%) per year, payable at the rate of one-third of one percent (1/3
of 1%) of the Net Assets allocated to Frischmeyer to trade at the close of
each month, which are held in the trading account assigned to him at the
futures commission merchant or merchants. The Partnership will also pay to
the General Partner an allocation of profit, earned in the accounts assigned
to Frischmeyer of fifteen percent (15%) of the New Net Profit of the
Partnership for each quarterly period that the Net Asset Value at the end of
such quarterly period for each account exceeds the highest previous quarterly
6
<PAGE>
Net Asset Value in that account. The General Partner will be responsible for
payment of all incentive fees to the Commodity Trading Advisor. In the event
of a future replacement of the existing CTA or the addition of other
commodity trading advisors, it will be possible for one of the Advisors to
produce New Net Profit in the account assigned to him and be paid an
incentive fee while the prior or other Advisor or Advisors produce losses
which cause the Partnership to suffer a net loss for the quarter or the year.
The Partnership also will be obligated to bear certain other periodic
operating, fixed, and extra-ordinary expenses of the Partnership including,
but not limited to, legal and accounting fees, defense and payment of claims,
trading and office expenses, and sales charges. See "Description of Charges
to the Partnership".
<TABLE>
* Charges to the Partnership
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
General Partner 2% management fee of Net Asset Value 2% management fee of Net Asset Value.
Selling Agents Sales Commission of 6% of Gross Selling 6% of Selling Commissions and Trailing
Price of Units and a percentage of the of 6%
Trailing Commission
Introducing Broker Fixed Commissions 12% of assets assigned by General Partner
Affiliated with the for trading, less costs to trade to FCM
General Partner and less 6% paid to associated persons who
sold Units which will include persons
Affiliated with the General Partner
Futures Commission Round-turn commissions paid from the Brokerage Commissions negotiated with the
Merchant fixed commissions paid by the Introducing Broker; reimbursement by the
Partnership; reimbursement of delivery, Partnership of actual payments to third
insurance, storage and any other charges parties in connection with Partnership
incidental to trading and paid to third trading.
parties.
Commodity Trading Fixed Management Fee and Incentive Fee One-third of one percent of Net Assets per
Advisor month assigned to Frischmeyer to trade;
Frischmeyer (4% per year) plus fifteen percent (15%) of
the New Net Profits of the account for each
quarterly period that the Net Assets at the
end of such quarterly period exceeds the
highest previous quarterly Net Assets.
Third Parties-Offering Legal, accounting fees, and other actual Estimated at $70,000 in the initial year
Expenses expenses necessary to the operation of and $17,000 for each year, thereafter,
the Partnership, and all claims and ($15,500 for accounting and $1,500 for
other extraordinary expenses of the legal). Claims and other costs can not be
Partnership. estimated and will be paid as incurred.
</TABLE>
See "Charges to the Partnership".
* USE OF PROCEEDS
The gross sales price, less 6% sales commissions; i.e., the net proceeds of
the offering, together with the General Partner's capital contribution, will
be used in the Partnership's business of speculative, high risk trading of
commodity futures contracts, inter-bank forward currency contracts, and
options upon those contracts. No limitations have been placed by the General
7
<PAGE>
Partner upon the positions or types of contracts which may be traded by the
commodity trading advisor who will trade for the Partnership. The General
Partner has complete authority pursuant to the Partnership Agreement to
determine, from time to time, the amount of equity deposited with the FCM and
how much is used for other investments and on deposit in bank accounts. Upon
the sale of the Minimum, the General Partner expects to deposit 3% of the
prior month-end Net Asset Value to a regular checking account in the name of
the Partnership to pay current expenses and Redemptions for the next month
and the balance to be deposited with the FCM to be available for trading.
From 5% to 30% of the Net Asset Value on deposit with the FCM is expected to
be committed to margin to hold positions taken by the CTA for the account of
the Partnership.
The General Partner will purchase Units to permit it to maintain not less
than a one percent (1%) interest in the income, losses, gains, deductions and
credits of the Partnership. In addition, the General Partner may purchase
additional Units for the same price established, from time to time, pursuant
to the terms of this Offer, without payment of sales commissions.
* SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY
The General Partner is solely responsible for the selection of the CTA and
the allocation of equity to the CTA it selects. The General Partner has
entered in advisory contract with an independent commodity trading advisor to
direct all trading with the commodity broker, The Chicago Corporation, (the
"Futures Commission Merchant"). The Partnership will rely solely, pursuant
to the Advisory Agreement and Power of Attorney attached as Exhibit F, upon
Michael J. Frischmeyer ("Frischmeyer"), the Commodity Trading Advisor
selected by the General Partner to trade the equity of the Partnership and to
implement the trading methods and strategies. Upon the sale of the Minimum,
the General Partner intends to assign 100% of total trading equity to
Frischmeyer. See Exhibit F.
* FEDERAL INCOME TAX ASPECTS
Partners must pay tax on any profits during the year earned by the
Partnership even though no distributions may have been made during that year.
The Partnership pays no income tax and prospective investors must recognize
that the actual and pro-forma performance records set forth in this
Prospectus do not reflect the taxes payable by investors on their investment.
Partners will be taxed on interest income earned by the Partnership even
though trading produces losses in excess of such interest income. The
Partnership's fiscal year for financial reporting and for tax purposes will
be the calendar year. The General Partner expects to delegate to Mr. James
Hepner, certified public accountant, the responsibility for the preparation
of the Partnership's Form K-1's which is the Internal Revenue Service form
which reports the taxable income and loss to each individual Partner and
which are included in the Partnership's tax return. The General Partner has
or will make certain elections on behalf of the Partnership and has been
appointed "tax matters partner" in the Limited Partnership Agreement to
determine the Partnership's response to an audit and to bind certain Limited
Partners to the terms of any settlement. The General Partner intends not to
treat any part of the incentive profit sharing, brokerage commissions and
other ordinary expenses of the Partnership as "investment advisory fees." A
change in such treatment could result in the Partners recognizing taxable
income despite having incurred a financial loss. No legal opinion will be
requested by the Partnership in regard any tax matter which involves the
determination by the IRS of the facts related to the operation of the
Partnership or as to any other matter which may be subject to Internal
Revenue Service interpretation or adjustment upon audit.
* No Legal Opinion As To Certain Material Tax Aspects
No legal opinion will be requested by the Partnership in regard any State
income tax issue. In addition, tax counsel to the Partnership can not opine
upon any Federal income tax issue which involves a determination by the IRS
of the facts related to the operation of the Partnership or as to any other
matter which may be subject to Internal Revenue Service interpretation or
adjustment upon audit. For example, commodity trading adviser fees are
aggregated with employee business expenses and other expenses of producing
income and the aggregate of such expenses is deductible only to the extent
such amount exceeds 2% of the taxpayer's adjusted gross income. The Federal
income tax deductibility of these expenses depends upon factual
determinations related to the operation of the Partnership by the General
Partner. See "Federal Income Tax Aspects".
8
<PAGE>
* REDEMPTIONS
No Partner may redeem or liquidate any Units until six (6) months after the
commencement of trading. A Limited Partner may thereafter request the
Partnership, subject to payment of fees, if applicable, and other conditions,
to redeem Units held by such Limited Partner at a per Unit redemption price
of the Net Asset Value Per Unit, adjusted to reflect certain reserves and
contingencies, as determined at the end of the applicable monthly period. A
Limited Partner desiring to have Units redeemed must provide written notice
to the General Partner by 12:00 noon on the tenth calendar day immediately
preceding the last business day of the month in which the Units are requested
to be redeemed. Under certain circumstances, the General Partner may honor
requests for Redemption only in part and/or suspend Redemptions or delay
payment of Redemptions. See the Limited Partnership Agreement, Exhibit A,
and "Redemptions". Distributions will be made from the Partnership only in
the sole discretion of the General Partner and no such distributions are
expected to be made.
* PLAN OF DISTRIBUTION
The Units are being offered and sold through World Invest Corporation ("WIC")
and other broker dealers it, or the General Partner may select, on a best
efforts basis. The selling commission will be six percent (6%) of the gross
subscription for all Units sold. See "Subscription Procedure" and "Plan of
Distribution". WIC is registered as a broker dealer with the SEC and is a
member of the National Association of Securities Dealers, Inc. (the "NASD").
* SUBSCRIPTION PROCEDURE
The minimum investment per subscriber in the Partnership is $15,000. The
General Partner may, in its sole discretion, agree to accept investments from
a subscriber of less than $15,000; provided, however, no such subscription
shall be less than $5,000. All investments are subject to compliance with
the minimum suitability standards established by the state of residence of
the investor. Unless higher amounts are otherwise specified for residents of
a particular state, an investor must have at least either (i) a minimum net
worth (determined exclusive of home, home furnishings, and automobiles) of
$150,000, or (ii) a minimum annual gross income of $45,000 and a minimum net
worth of $45,000 (once again determined exclusive of home, home furnishings
and automobiles). In the case of sales to fiduciary accounts, the net worth
and income standards may be met by the beneficiary, the fiduciary account, or
by the donor or grantor who directly or indirectly supplies the funds to
purchase the Units, if the donor or grantor is the fiduciary. In order to
purchase Units, an investor must complete, execute, and deliver to the
General Partner, suitability information, see Exhibit "C", and a Subscription
Agreement, see Exhibit "D".
RISK FACTORS
Investment in the Units is speculative, involves a high degree of risk, and
is suitable only for persons who have no need for liquidity in their
investment and who can also afford to lose their entire investment in the
Partnership. In addition to the Risk Disclosure Statements at the beginning
and in the Summary of this Prospectus, investors should carefully consider
the following risks and the conflicts of interests before subscribing for
Units. All of these risks and conflicts are present, in different degrees,
and without regard to whether the Minimum or the maximum number of Units are
sold.
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE
Commodity futures, forward, and option contract prices are highly volatile.
Price movements are influenced by changes in supply and demand; weather;
agricultural trade, fiscal, monetary and exchange control programs and
policies of governments; national and international political and economic
events; and, changes in interest rates. In addition, governments, exchanges,
and other market authorities intervene to influence prices. In addition,
notwithstanding that the analysis of the fundamental conditions by the
Partnership's trader is correct, prices still may not react as predicted. It
is also possible for most of the Partnership's open positions to move against
it at the same time. These negative events may occur in connection with
changes in price which reach the daily limit beyond which no further trading
is permitted until the following day. It is possible for daily limits to be
reached in the same direction for successive days. Should this occur and the
CTA has taken a position on behalf of the Partnership which is adverse to the
daily move in a particular commodity, the Partnership may not be able to exit
the position without a substantial loss. The loss could exceed the amount
allocated for margin to establish and hold the position or the total amount
of equity in the account.
9
<PAGE>
LOW SECURITY DEPOSIT IN RELATION TO PRICE MOVEMENT
The small amount of money to be deposited ("margins") to hold or short a
contract relative to its value (typically between 3% and 20% of the value)
permit a large percentage gain or loss relative to the size of a commodity
account. A small price movement in the value of the contract bought or sold
is expected to result in a substantial percentage gain or loss of equity to
the Partnership. For example, if at the time of purchase, five percent (5%)
of the price of the futures contract is deposited as margin, a five percent
(5%) decrease in the value of the position will cause a loss of all of the
equity allocated to the trade, which could equal all of the value of the
account. In addition, the amount of margin assigned to a trade by the FCM is
only a security deposit to hold the position. The loss on a position could
be substantially more than the margin deposited and the value of the account.
THE PARTNERSHIP WILL PAY SUBSTANTIAL CHARGES
The Partnership is obligated to pay fixed brokerage commissions of one
percent (1%) of equity per month, (twelve percent [12%] per year), payable
monthly, a management fee to the General Partner of two percent (2%) of Net
Asset Value, payable monthly, and a management fee on the equity assigned to
Frischmeyer of 4%, payable monthly plus $17,000 per year, ($1,500 in legal
expense and $15,500 in accounting and audit charges), together with Offering
Expenses of $70,000 payable over the first 24 months of operation of the
Partnership, subject to a 2% of Capital per calendar year limitation,
regardless of whether the Partnership realizes profits. The Partnership
expects to earn interest income. The charges (after deduction of sales
commissions of 6% and before incentive fees) to which the Partnership is
subject are estimated by the General Partner to equal or exceed 21.34% of the
Partnership's Net Assets per year, assuming Net Assets of $564,000, and 18.
34% of the Net Assets per year, assuming Net Assets of $4,700,000. The
Partnership must pay variable operating expenses such as incentive fees to
the CTA, telephone, postage, and office supplies, and extra-ordinary expenses,
such as claims and defense of claims from brokers, Partners, and other
parties. Also, because the incentive fees will be determined on a quarterly,
rather than on an annual basis, and will be paid to the CTA when profitable
without regard to total income or loss of the Partnership during the period,
the Partnership may be subject to substantial incentive fees in any given
twelve (12) consecutive month period despite total losses which produce a
decline in the Partnerships Net Assets for any such period. See "Description
of Charges to the Partnership".
NO RIGHT TO TRANSFER UNITS AND LIMITED ABILITY TO REALIZE RETURN ON INVESTMENT
Units cannot be assigned, transferred or otherwise encumbered except upon
certain condition, including the consent of the General Partner as set forth
in the Limited Partnership Agreement, which also imposes certain conditions
and restrictions on the ability of a transferee of a Unit to become a
substituted Limited Partner. See Partnership Agreement - No Right to
Transfer Without Consent of General Partner and Exhibit A, "The Limited
Partnership Agreement" Article VIII which provides that no transfer of Units
may be made without the written approval of the General Partner. See Article
VI, paragraph 6.1, of the Limited Partnership Agreement attached as Exhibit A.
Restrictions and conditions are also imposed upon a Partner's right and
ability to cause the Partnership to redeem and liquidate the Partner's Units,
including the fact that no Partner may redeem or liquidate any Units until
six months after the commencement of trading operations by the Partnership.
Redemptions may also be honored only in part and/or delayed and/or suspended
in certain circumstances. See, "Redemptions." Further, substantial
Redemptions of Units could require the Partnership to liquidate positions
more rapidly than otherwise desirable in order to raise the necessary cash to
fund the Redemptions, and, at the same time, cause a smaller equity base for
the Partnership. The absence of buyers or sellers in the market could also
make it difficult or impossible to liquidate positions in this circumstance
on favorable terms, and may result in further losses to the Partnership which
decrease the Net Asset Value Per Unit of the remaining outstanding Units.
Since there is no assurance that the Partnership will distribute to the
Partners any profits the Partnership may experience, the Partners will have
to depend on their limited and restricted transfer and Redemption rights to
realize their investment in the Units.
10
<PAGE>
LACK OF OPPORTUNITY TO EXIT A POSITION
It is not always possible to execute a buy or sell order, due to market
illiquidity. Such illiquidity can be caused by a lack of open interest in
the contract, market conditions which produce no persons willing to take a
particular side of a trade, or it may be the result of factors like the
suspension of trading because of "daily price limits". Most United States
commodity exchanges limit movement in a single direction in one trading day
by rules referred to as "daily price limits". These limits provide that no
trades may be executed at prices beyond the daily limits. Once the price of
a futures contract for a particular commodity has increased or decreased by
an amount equal to the daily limit, positions in the commodity can be neither
taken nor liquidated unless traders are willing to effect trades at or within
the limit. Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading. Similar future
occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject it to substantial losses which could exceed
the equity on deposit ("margins") for such trades. The inability to liquidate
positions could frustrate the trading plan of the CTA to cause losses to the
Partnership in excess of the money invested.
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE
Certain actual and potential conflicts of interest do exist in the structure
and operation of the Partnership which must be considered by investors before
they purchase Units in the Partnership. See "Risk Factors", "Conflicts of
Interest", and "The Limited Partnership Agreement" attached as Exhibit A to
this Prospectus.
LIMITED PARTNERS WILL BE TAXED ON PROFITS NOT DISTRIBUTED
The Partnership is not required to make any cash distributions from profits
and the principal objective of the Partnership is to increase capital, not
create cash flow. If the Partnership realizes profits for a fiscal year,
such profits will be taxable to the Partners in accordance with their
distributive share whether or not the profits have been distributed.
Distributions to Limited Partners may not equal taxes payable by Partners
with respect to Partnership profit. Also, the Partnership might sustain
losses offsetting such profit after the end of the year, so a Partner might
never receive a distribution in an amount equal to the distributive share of
the Partnership's prior year's taxable income. See "Federal Income Tax
Aspects" and Exhibit A, the "Limited Partnership Agreement".
PRESENT TRADE SELECTION METHODS SUBJECT TO SUDDEN ADVERSE CHANGE
The Partnership will rely solely, pursuant to the Advisory Agreement and
Power of Attorney attached as Exhibit F, upon Michael J. Frischmeyer, the
Commodity Trading Advisor, (the "CTA"), for the implementation of trading
methods and strategies. The Advisory Agreement provides that either the
Partnership, or the CTA, may terminate the relationship on immediate notice.
If the services of Mr. Frischmeyer becomes unavailable, for any reason, the
General Partner or one or more other trading advisors, or a combination of
both, will be selected by the General Partner to trade for the Partnership.
No assurance is provided that the General Partner or any other substitute
traders or methods will perform profitably or will be retained on as
favorable terms as the current CTA.
TRADE SELECTION MADE WITHOUT NOTICE TO PARTNERSHIP
The CTA will enter trades on behalf of the Partnership directly with the FCM
without the prior knowledge or approval of the General Partner of the methods
used by the CTA to select the trades, the number of contracts, or the margin
required. In addition, the General Partner does not know the prior methods
used by the CTA to compile the track record disclosed in this Prospectus
which was the basis for the selection of the CTA by the General Partner to
trade for the Partnership. Nor does the General Partner know how many times,
if any, the trading methods of the CTA have been changed in the past. The
General Partner will not be notified of any modifications, additions or
deletions to the trading methods and money management principles utilized by
the CTA. It is possible for the Partnership to experience sudden and large
losses before the General Partner becomes aware of the need to take remedial
action.
PROFITABILITY OPPORTUNITIES CHANGE WITH SIZE OF ACCOUNT
Commodity trading advisors often are unable to adjust to a change in the size
of the money they have under management. This is caused by numerous factors
including, but not limited to, the difficulty of executing substantially
larger trades made necessary by the larger amount of equity under management,
by the restrictive effect of speculative Position Limits, or by a
11
<PAGE>
diminishment of the opportunity to Scale in Positions when available equity
is reduced. See the definitions section, Appendix I, for the definition of
Position Limits and Scale in Positions. The Commodity Trading Advisor has
not agreed to limit the amount of additional equity that he may manage, and
he contemplates managing (and in all likelihood will manage) additional
equity. Increased equity generally results in a larger demand for the same
futures contract position among the accounts managed by a commodity trading
advisor. Furthermore, a considerable number of analysts believe that a
trading advisor's rate of return tends to decrease as the amount of equity
under management increases.
COMMENCEMENT OF TRADING WITH ONLY THE MINIMUM AMOUNT OF EQUITY
The Partnership will commence trading upon the sale of six hundred (600)
Units. The General Partner has caused the Partnership to accept the risks of
trading and payment of Offering Expenses prior to the sale of the total
offering. This decision could have been motivated, in part, by the need of
the General Partner to commence trading as soon as possible to permit it to
receive sales commissions, reimbursement of Expenses, and for the IB
Affiliated with it to receive a portion of the fixed commissions. However,
the General Partner believes $600,000 is sufficient equity for the
Partnership to break escrow, pay selling expenses, be obligated to pay
Offering Expenses, and commence trading.
NO PRIOR OPERATION EXPERIENCE OF THE GENERAL PARTNER
The General Partner of this Partnership is a recently formed Delaware
corporation which has not previously operated a commodity pool or engaged in
any other business. The risk to the Partnership of the lack of prior
experience is diminished by the amount of experience the commodity trading
advisor selected by the General Partner has to conduct the trading assigned
to him. See Appendix II, Trading Management. In addition, the principal of
the General Partner does have related experience applicable to the management
of commodity pools. She has over fourteen years of experience in selecting
commodity trading advisors to manage individual investor accounts and in
describing how individual managed futures accounts work to individual
investors. This experience is expected to benefit the Partnership in the
quality of commodity trading advisors selected and the explanation of the
operation of the Partnership and the attendant risks of investment in the
Partnership to prospective investors. See No Prior Performance.
LOWER COMMISSIONS FOR OTHER ACCOUNTS BECAUSE OF PARTNERSHIP ACTIVITY
The General Partner, and its principal, have not made agreements with or on
behalf of the Partnerships with third parties for the purpose of benefit,
directly or indirectly, to either of them; however, the maintenance of the
Partnership's Assets with the Partnership's FCM is expected to increase
trading activities which may enable the IB Affiliated with the principal of
the General Partner to negotiate a lower payment to the FCM for clearing the
trades of other accounts, including partnerships, presently in existence or
established in the future by the General Partner, its principal, or other
customers of the IB Affiliated with the principal of the General Partner, or
its principals, and their Affiliates.
FAILURE OF COMMODITY BROKERS OR BANKS
If the FCM engaged by the Partnership to execute trades were to become
bankrupt, it is possible that the Partnership would be able to recover none
or only a small portion of its assets held by such FCM. In addition, those
funds deposited in the Partnership's account at a U.S. bank will be insured
only up to $100,000 under existing Federal regulations. All insured deposits
are subject to delays in payment and amounts on deposit in a single bank in
excess of $100,000 would be subject to the risk of total loss.
COUNTERPARTY CREDITWORTHINESS
The trading of commodities involves the entry of a contract or option to
contract for the delivery of goods or money at a future date. The value of
the contract or option is directly dependent upon the creditworthiness of the
other party to the contract. The CTA selected will engage in trading of
commodities on United States Commodity Exchanges, foreign commodity exchanges,
12
<PAGE>
and the inter-bank currency markets. The commodity exchange contracts and
options traded on United States Exchanges are subject to regulation pursuant
to the Commodity Exchange Act and are guaranteed by the credit of the members.
Contracts and options upon foreign commodity exchanges and the inter-bank
currency markets are usually not regulated by specific laws and are backed
only by the parties to the contracts. It is possible for a price movement in
a particular contract or option to be large enough to destroy the
creditworthiness of the contracts and options issued by a particular party or
all of the contracts and options of an entire market. The CTA expects to
manage this risk by trading a widely diversified portfolio of futures markets.
TRADING ON FOREIGN EXCHANGES AND FORWARD CURRENCY CONTRACTS
The Partnership may trade in futures, forward and option contracts on
exchanges located outside the United States where CFTC regulations do not
apply, and trading on such exchanges may be subject to greater risks than
trading on United States exchanges. The trades will be denominated in the
foreign currency at the location of the trade. Accordingly, in addition to
the price fluctuation of the position taken, the rate of inflation or other
currency related factor may adversely effect the price. The forward
contracts are negotiated by the parties rather than by the open out-cry
method used on United States exchanges. The Partnership may experience
credit limitations and other disadvantages during negotiations. There are no
limitations on daily price moves or position limits in forward contracts,
although the principals with which the Partnership may deal in the forward
markets may limit the positions available to the Partnership as a consequence
of credit considerations.
OPTIONS TRADING RISKS
The Partnership may engage in the trading of options (both puts and calls).
No assurance can be given that a liquid market will exist for any particular
commodity option or at any particular time after a position is taken. If
there is insufficient liquidity in the option market at the time, the
Partnership may not be able to buy or sell to offset (liquidate) the
positions taken.
POSSIBLE EFFECTS OF POSITION LIMITS
The CFTC and the United States commodity exchanges have established limits
referred to as "Speculative Position Limits" or "Position Limits" (these are
different from "daily limits" described above) on the maximum net long or net
short futures or options positions which any person or group of persons may
own, hold, or control in futures contracts, except position limits do not
presently apply to certain currency futures contracts. All commodity
accounts owned, controlled or managed by a commodity trading advisor and the
advisor's principals will be combined for position limit purposes, to the
extent they may be applicable. No limitations have been placed by the
General Partner upon the positions or types of contracts which may be traded
by the commodity trading advisor who will trade for the Partnership.
COMPETITION IS INTENSE
Commodity futures trading is highly competitive. The Partnership will be
competing with others who may have greater experience, more extensive
information about and access to developments affecting the futures markets,
more sophisticated means of analyzing and interpreting the futures markets,
and greater financial resources. The greater the experience and financial
resources, the better chance an investor has to trade commodities at a profit.
The Partnership will be limited by trading without the advantages of a
warehouse to take delivery of commodities or a large capital base to hold
positions during a period when prices do not perform as expected.
GENERAL PARTNER AND CTA TO SERVE OTHER COMPETING BUSINESSES
The General Partner and its principal expect to manage additional pools in
the future which may use the Commodity Trading Advisor (and, thus, similar
trading methods) as the Partnership and also use the IB that is Affiliated
with the principal of the General Partner to enable them to negotiate better
terms for clearing and other services provided, which may produce better
results for such other pools. See "Responsibility of the General Partner".
The CTA currently manages other commodity accounts and may manage new or
additional deposits to existing accounts, including personal accounts and
other commodity pools. Although the CTA intends to use similar trading
methods for the Partnership and all other discretionary accounts he manages,
he may vary the trading method applicable to the Partnership from that used
for other managed accounts. No assurance is given that results of the
Partnership's trading will be similar to that of any other accounts which are
now, or in the future, concurrently managed by the CTA. See "Risk Factors",
"Trading Management", and Appendix II.
13
<PAGE>
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT
Limited Partners will not participate in the management of the Partnership or
in the conduct of its business. To the extent that a Limited Partner would
attempt to become involved or identified with the management of the
Partnership, such Limited Partner could be deemed a General Partner of the
Partnership. No such right is conferred upon any Limited Partner by the
Partnership Agreement. See Exhibit A, "The Limited Partnership Agreement".
NO ASSURANCE THAT UNITS NECESSARY TO COMMENCE BUSINESS WILL BE SOLD
World Invest Corporation and other broker dealers selected, if any, have no
obligation to purchase Units or otherwise support the price of the Units.
The sales commitment obligates the broker dealers to use their best efforts
only. See "Subscription Procedure and Plan of Distribution".
RISKS OF COMMENCEMENT OF BUSINESS AND CHANGES IN THE SIZE OF THE PARTNERSHIP
Upon the sale of the Minimum, the Partnership will encounter a start-up
period during which it will incur certain risks relating to the initial
assignment of equity to the CTA and investment by the CTA of its Net Assets
in commodity trading positions. The Partnership may commence trading
operations at a difficult time, such as after sustained moves in the
commodities markets, which result in significant initial losses. Moreover,
the start-up period also represents special risk in that the level of
diversification of the Partnership's portfolio may be lower than in a
fully-committed portfolio. The CTA divides the equity assigned to him into
uniform dollar amounts to trade. For example, Mr. Frischmeyer uses his best
efforts to trade every $40,000 the same. In other words, the Trading Matrix
for Mr. Frischmeyer is $40,000. Although the CTA selected initially for the
Partnership has a Trading Matrix of $40,000, no assurance can be given that
the Commodity Trading Advisor's procedures for moving to a Fully-Committed
Assigned Share of the $600,000 portfolio or any substantial increase or
decrease in equity in the future, will be successful. For example, the CTA
may have determined that the grains are in short supply and have taken a
position in February while the Partnership is not ready to break escrow until
May. The entry into the grains in May could be too late to experience the
gains required to assume the risk of taking the position and the CTA may
elect to defer taking a fully invested position until his grain trade is
completed for his other accounts. See the Definitions in Appendix I for the
definitions of Trading Matrix and Fully Committed Assigned Share.
STATE SECURITIES ADMINISTRATORS NET WORTH OF THE GENERAL PARTNER REQUIREMENT
The state securities administrators have established guidelines applicable to
the sale of interests in commodity pool limited partnerships. Among those
guidelines is the requirement that the Net Worth of a sole corporate general
partner be equal to five percent (5%) of the amount of the offering; provided,
however, such Net Worth is never to be less than $50,000 nor is it required
to be more than $1,000,000. The General Partner intends to use its best
efforts to maintain its Net Worth in compliance with these guidelines. There
can be no assurance, however, that the General Partner can maintain its Net
Worth in conformity with these requirements. The reduction in Net Worth to
below these limits will cause a suspension in trading to permit the General
Partner to restore its Net Worth or to liquidate the Partnership. Any
successful claims against the General Partner are expected to be limited in
amount of recovery to the amount of Net Worth maintained by the General
Partner.
RELIANCE ON THE GENERAL PARTNER
Limited Partners will be relying entirely on the ability of the General
Partner to select and to monitor the commodity trading activity of the
Partnership, including the Commodity Trading Advisor and any additional or
substituted trading advisors that may be retained in the future. Ms. Pacult
is the sole principal and officer of the General Partner, is a principal of
the IB, and the Partnership currently has no employees and, therefore, no
report of executive compensation is made in this Prospectus. In addition,
the General Partner must maintain sufficient net worth to make this offering
pursuant to the rules and regulations of certain State Securities
Administrators (the "NASAA Guidelines") and to maintain the tax status of the
Partnership pursuant to the Rules and Regulations of the Federal Internal
Revenue Service ("IRS Requirements"). To accomplish those results, the
General Partner has entered into a Subordinated Loan Agreement dated April 25,
1995, with Ms. Pacult whereby Ms. Pacult has agreed to loan up to $265,000
to the General Partner to be repaid on January 12, 2017, or at such time as
the General Partner has sufficient net worth to comply with NASAA Guidelines
and IRS Requirements.
14
<PAGE>
NET WORTH OF GENERAL PARTNER - FEDERAL TAX REQUIREMENT AND POSSIBILITY OF
TAXATION AS A CORPORATION
The Internal Revenue Service ("IRS") has established the amount of net
capital a sole corporate general partner must maintain to permit a
partnership to be taxed as partnership rather than as an association taxed as
a corporation. A sole corporate general partner is required to maintain a
net worth of fifteen percent (15%) of the first $2,500,000 of capital
contributions to all such partnerships or $250,000, whichever is less, and,
ten percent (10%) of all capital contributions in excess of $2,500,000. At
this time, the General Partner does not have sufficient net worth to sell the
$5,000,000 contemplated by this offering. However, it intends to use its
best efforts to utilize this safe harbor or otherwise to satisfy the
requirements necessary to cause the Partnership to be taxed as a partnership
and not as a corporation. The tax status of the Partnership has not been
confirmed by a ruling from the IRS. No such ruling has been or will be
requested on behalf of the Partnership. If the Partnership should be taxed
as a corporation for Federal income tax purposes in any taxable year or years,
(i) income or loss of the Partnership would not be passed through to the
Partners; and, (ii) the Partnership would be subject to tax on its income at
the rate of tax applicable to corporations; and, (iii) all or a portion of
distributions, if any, made to Partners would be taxed to the Partners as
dividend income; and, (iv) the amount of such distributions would not be
deductible by the Partnership in computing its taxable income. See the
"Federal Income Tax Aspects" section of this Prospectus.
RETIREMENT PLAN AND IRA PARTICIPANTS
The purchase of a Unit does not itself create an IRA and the creation and
administration of an IRA are solely the responsibility of the investor. A
retirement account should carefully consider the diversification of the
retirement assets and one should not place more of those assets in this
Partnership than the investor determines is prudent to allocate to highly
speculative, high risk investments, such as the Partnership. The General
Partner does not undertake to advise investors in any manner (including
diversification, prudence and liquidity) with respect to investment in the
Partnership for any investor, including retirement accounts.
NOT AN INVESTMENT COMPANY
The Partnership, the General Partner, Ms. Pacult, and the Commodity Trading
Advisor are not required nor do they intend to be registered under the
Investment Company Act of 1940, as amended (or any similar state law) as
either an investment company or investment advisor. Investors, therefore,
are not accorded the protective measures provided by any such legislation.
POSSIBILITY OF AUDIT AND TAX MATTERS PARTNER
Historically, partnership's have had a higher percentage of returns audited
by the IRS than other forms of business entities. In the event of any such
audit of the Partnership's return, there can be no assurance that adjustments
to the reported items will not be made. If an audit results in an adjustment,
Partners may be required to file amended returns, may be subject to a
separate audit, and may be required to pay back taxes, plus penalty and
interest. The General Partner is named "tax matters partner" and has been
granted the power to settle any claim from the IRS on behalf of each Limited
Partner who holds one percent (1%) or less in the Partnership, who does not
timely object to the exercise of such authority, after notice. See "Federal
Income Tax Aspects".
POSSIBLE ADVERSE DETERMINATION BY THE IRS
The General Partner has obtained the opinion of The Scott Law firm that the
Partnership, as it is intended to be operated by the General Partner, will be
taxed as a Partnership and not as an association taxable as a corporation.
The Law Firm is not able to opine upon the tax treatment of certain Offering
and operating Expenses as the determination depends upon questions of fact to
be resolved by the General Partner on behalf of the Partnership. For example,
commodity trading adviser fees are aggregated with employee business
expenses and other expenses of producing income and the aggregate of such
expenses is deductible only to the extent such amount exceeds 2% of the
taxpayer's adjusted gross income. It is the General Partner's position that
15
<PAGE>
the Partnership's intended operations will qualify as a trade or business.
If this position is sustained, the brokerage commissions and performance fees
will be deductible as ordinary and necessary business expenses. In the event
of an adverse determination by the IRS, these expenses would be added back to
the income earned by the Partnership and the Form K-1 submitted to each
Partner revised upward to reflect this additional income. Were this event to
occur, it is likely that the reporting year adjustment would be after the
individual tax returns were filed by the Partners. The Partners would be
required to file amended returns and pay interest and penalty, if any,
related to the increase in tax assessed upon the increase in reportable
income. Such increase in reportable income would not result in an increase
in the Net Asset Value of the Units owned by the Partners. Syndication costs
to organize the Partnership and Offering Expenses will not be deductible or
amortizable by the Partnership or its Partners.
CONFLICTS OF INTEREST
Significant actual and potential conflicts of interest exist in the structure
and operation of the Partnership. The General Partner has used its best
efforts to identify and describe all potential conflicts of interest which
may be present under this heading and elsewhere in this Prospectus and the
Exhibits attached hereto. Prospective investors should consider that the
General Partner intends to assert that Partners have, by subscribing to the
Partnership, consented to the existence of such potential conflicts of
interest as are described in this Prospectus and the Exhibits, in the event
of any claim or other proceeding against the General Partner, any principal
of the General Partner, the Commodity Trading Advisor, any Principal of the
Trading Advisor, the Partnership's FCM, or any principal of the FCM, the
Partnership's IB or any principal or any Affiliate of any of them alleging
that such conflicts violated any duty owed by any of them to said subscriber.
Specifically:
MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GENERAL PARTNER,
THE CTA, AND THEIR PRINCIPALS
The right of both Ms. Shira Del Pacult, the principal of the General Partner,
and the General Partner to manage and the actual management by the CTA of
accounts they or their Affiliates own or control and other commodity accounts
and pools presents the potential for conflicts of interest. There is no
limitation upon the right of Ms. Pacult, the General Partner, the CTA, or any
of their Affiliates to engage in trading commodities for their own account.
It is possible for these persons to take their positions in their personal
accounts prior to the orders they know they are going to place for the money
they manage for others. The General Partner will obtain representations from
all of these persons and their Affiliates that no such prior orders will be
entered for their personal accounts and that the personal accounts for these
persons and their Affiliates will be open for inspection by the Partners, at
the expense of the Partner seeking such information. The Partnership's CTA
will be effecting trades for his own accounts and for others (including other
commodity pools in competition with this Pool) on a discretionary basis. It
is possible that positions taken by the Commodity Trading Advisor for other
accounts may be taken ahead of or opposite positions taken on behalf of the
Partnership. The General Partner and its principal, should they form other
commodity pools, and the CTA may have financial incentives to favor other
accounts over the Partnership. In the event the General Partner, any of its
principal, or any CTA, or any of their principals trade for their own account,
such trading records shall be available for inspection and duplication, at
the expense of the investor, at the office of the General Partner or the CTA.
The General Partner and its principal do not presently intend to engage in
trading for their own account. The CTA does intend to trade for his own
account. Any trading for their personal accounts by the General Partner, any
commodity trading advisor selected to trade for the Partnership or any of
their principals could present a conflict of interest in regard to position
limits, timing of the taking of positions or other similar conflicts. The
result to the Partnership would be a reduction in the potential for profit
should the entry or exit of positions be at unfavorable prices by virtue of
position limits or entry of other trades in front of the Partnership trades
by the General Partner or CTA responsible for the management of the
Partnership.
POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER
There is no limit upon the number of Units in the Partnership the General
Partner and its principal and Affiliates may purchase. It will be possible
for them to vote, individually or as a block, to create a conflict with the
best interests of the Partnership, in regard to the selection of commodity
trading advisors which do not trade frequently to protect the twelve percent
(12%) fixed commission paid by the Partnership to the General Partner.
16
<PAGE>
GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF PARTNERSHIP
The General Partner's financial interest in the operation of the Partnership,
creates a disincentive for it to voluntarily replace itself, even if such
replacement would be in the best interest of the Partnership.
FEES AND CHARGES TO THE PARTNERSHIP PAID TO GENERAL PARTNER NOT NEGOTIATED
The two percent (2%) management fee to the General Partner and the amount of
the fixed commission of twelve percent (12%) per year in lieu of round-turn
brokerage commissions, payable to the IB that is Affiliated with the
principal of the General Partner, have not been negotiated at arm's length.
The General Partner has a conflict of interest between its responsibility to
manage the Partnership for the benefit of the Limited Partners and the
General Partner's interest in receiving the management fee and the IB
Affiliated with the principal of the General Partner receiving the difference
between the fixed commission charged the Partnership and the actual
transaction costs incurred by the FCM as a result of the frequency of trades
entered by the CTAs. See "Charges to the Partnership". The General Partner
will select the Commodity Trading Advisors to manage the Partnership assets
and the Commodity Trading Advisors determine the frequency of trading.
Because the IB Affiliated with the General Partner will receive the
difference between the brokerage commissions and other costs which will be
paid on behalf of the Partnership and the fixed commission, the General
Partner's best interests are served if it selects trading advisors which will
trade the Partnership's Net Assets assigned to the CTA in a way to minimize
the frequency of trades to maximize the difference between the fixed
commission and the round-turn commissions and other costs to trade charged by
the FCM; i.e., it is in the best interest of the General Partner to reduce
the frequency of trading rather than concentrate on the expected
profitability of the CTAs without regard to frequency of trades. This
conflict is offset by the fact the General Partner does not select any of the
trades and the Commodity Trading Advisor is paid an incentive of 15% of New
Net Profits. The arrangements between the General Partner and the
Partnership with respect to the payment of the commissions are consistent in
cost with arrangements other comparable commodity pools have made to clear
their trades. These arrangements are fair to the Partnership and its
investors because the General Partner has assumed the risk of frequency of
trading, up to a maximum of three times the normal rate by the CTA and has
assumed all liability for the payment of trailing commissions.
GENERAL PARTNER TO DISCOURAGE REDEMPTIONS
The General Partner has an incentive to withhold distributions and to
discourage Redemption because the General Partner receives compensation based
on the Net Asset Value of the Partnership assigned to the CTA to trade.
HIGH RISK TRADING BY THE CTA TO GENERATE INCENTIVE FEES
As a general rule, the greater the risk assumed, the greater the potential
for profit. Because the CTA is compensated by the General Partner based on
15% of the New Net Profit of the Partnership, it is possible that the CTA
will select trades which are otherwise too risky for the Partnership to
assume to earn the 15% incentive fee on the profit should that ill-advised
speculative trade prove to be profitable.
IB AFFILIATED WITH THE GENERAL PARTNER TO RETAIN A SHARE OF THE COMMISSIONS
The Partnership will pay a fixed brokerage commission of 12% per year,
payable monthly to Futures Investment Company, an introducing broker
Affiliated with the General Partner. Futures Investment Company will retain
so much of the fixed brokerage commission as remains after payment of the
round turn brokerage commissions to the Futures Commission Merchant and the
6% per year trailing commissions to the associated persons who service the
Partners' accounts in the Partnership. Because the principal of the General
Partner, Ms. Shira Pacult, is also a principal in the IB, there is a
likelihood that the Partnership will continue to retain the IB even though
other IB's may be available to provide better service to the Partners and
their accounts.
NO RESOLUTION OF CONFLICTS PROCEDURES
As is typical in many futures partnerships , the General Partner has not
established formal procedures, and none are expected to be established in the
future, to resolve the potential conflicts of interest which may arise. It
will be extremely difficult, if not impossible, for the General Partner to
assure that these and future potential conflicts will not, in fact, result
in adverse consequences to the Partnership or the Limited Partners. The
17
<PAGE>
foregoing list of risk factors and conflicts of interest is complete as of
the date of this Prospectus, however, additional risks and conflicts may
occur which are not presently foreseen by the General Partner. Investors are
not to construe this Prospectus as legal or tax advice. Before determining
to invest in the Units, potential investors should read this entire
Prospectus, including the limited partnership agreement attached as Exhibit A
and the subscription agreement, and consult with their own personal legal,
tax, and other professional advisors as to the legal, tax, and economic
aspects of a purchase of Units and the suitability of such purchase for them.
See "Investor Suitability".
INTERESTS OF NAMED EXPERTS AND COUNSEL
The General Partner has employed The Scott Law Firm to prepare this
Prospectus, provide certain tax advice and opine upon the legality of the
issuance of the Units. The principal of the Law Firm, William S. Scott, is
also a principal of World Invest Corporation, the Underwriter. Although this
relationship could present a potential conflict of interest, the General
Partner has obtained agreement from The Scott Law Firm, its principal, and
the Underwriter that neither the Law Firm nor its principal will represent
the Underwriter in any manner in regard to this offering. Neither the Law
Firm nor its principal, nor any accountant or other expert employed by the
General Partner to render advice in connection with the preparation of the
Prospectus or any documents attendant thereto, have been retained on a
contingent fee basis nor do they have any present interest or future
expectation of ownership in the Partnership or its General Partner or the
Underwriter or the CTA or the IB or the FCM. The principal of the Law Firm
will not be engaged in, nor paid commissions for, the sale of the Units to be
made pursuant to this offering or the operation of the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS
Fremont Fund Limited Partnership (the "Partnership") was organized under the
Indiana Uniform Limited Partnership Act as of January 12, 1995. The
principal office of the Partnership is located at 2990 W. 120, Fremont, IN
46737. Its telephone number is (219) 833-1306 and facsimile number is (219)
833-1505. The Partnership will terminate at 11:59 p.m. on January 12, 2016,
or upon an event causing an earlier termination as set forth in the Limited
Partnership Agreement. See Exhibit A - "Termination of the Partnership".
The Partnership is managed by its General Partner, Pacult Asset Management,
Inc., a Delaware corporation, incorporated on October 13, 1994, (the
"General Partner" and "Commodity Pool Operator"). The Partnership will not
have officers or employees and, therefore, there is no report of executive
compensation in this Prospectus. The General Partner's principal office is
c/o Corporate Systems Inc., 101 North Fairfield Drive, Dover, Kent County, DE
19901. Ms. Shira Del Pacult is the sole principal, shareholder, director,
and officer of the General Partner and has no ownership in the CTA or the
selling broker dealer. Mr. Michael Pacult, Ms. Pacult's husband, will have
no ownership or role in the management of the General Partner, but will be an
associated person, officer and fifty percent shareholder in the Affiliated
introducing broker, Futures Investment Company, which will be paid the fixed
brokerage commissions by the Partnership and he is also a registered
representative of the Underwriter. Mr. Pacult is expected to sell Units in
the Partnership. Although the principal of the General Partner has over
fourteen years of experience in the sale of commodity pool interests for
other pool operators and the management of individual managed commodity
accounts, neither the General Partner, nor its principal, have any prior
experience in the management of commodity pools such as the Partnership.
The books and records for the Partnership will be maintained for six years
at 2990 W 120, P. O. Box C, Fremont, Indiana 46737. A duplicate set of the
books will be maintained by Mr. James Hepner, Certified Public Accountant,
1824 N. Normandy, Chicago, IL 60635, (312) 804-0074. Mr. Hepner will also
prepare the Form K-1 for the Partnership. The General Partner will prepare
the Federal and state tax returns. Frank L. Sassetti & Co., certified public
accountants, 6611 West North Avenue, Oak Park, IL 60302 will conduct the
annual audit of the Partnership and its General Partner.
18
<PAGE>
THE COMMODITY TRADING ADVISOR
The General Partner has initially selected one independent commodity trading
advisor ("CTA") to conduct trading on behalf of the Partnership. He is
Michael J. Frischmeyer of Fort Dodge, Iowa (the "Commodity Trading Advisor or
"CTA"). The General Partner has provided the CTA with a revocable power of
attorney pursuant to the terms of an advisory contract between the
Partnership and the CTA to trade the account or accounts of the Partnership
assigned by the General Partner to the CTA to trade. The markets to be
traded, the location of those markets, the size of the position to be taken
in each market, the timing of entry and exit in a market are within the sole
judgment of the CTA. The markets to be traded, the regulation of those
markets, and a general description of the methods of the CTA are described in
Appendix II. See "The Advisory Contract" and the "Commodity Trading
Advisor" and Appendix II.
THE ADVISORY CONTRACT AND POWER OF ATTORNEY
The General Partner will assign a portion of the Partnership assets to the
CTA it selects to trade. The terms of this assignment of assets is governed
by an Advisory Contract and Power of Attorney signed with the CTA. The
Advisory Contract and Power of Attorney granted by the Partnership to the CTA
is terminable upon immediate notice by either party to the other.
Accordingly, neither party can rely upon the continuation of the Advisory
Contract and Power of Attorney. Should the Partnership prove to be
profitable it is unlikely the General Partner will terminate the Power of
Attorney granted to the CTA responsible for the production of those profits.
BUSINESS OBJECTIVE AND EXPENSES
The General Partner organized the Partnership to be a commodity pool, as that
term is defined under the Commodity Exchange Act, to trade exchange listed
futures contracts and non-listed forward contracts and options upon those
contracts to produce profits to the investors in the Partnership. The
General Partner is authorized to do any and all things on behalf of the
Partnership incident thereto or connected therewith See Article II of The
Limited Partnership Agreement, attached as Exhibit A. The plan of operation
is for the General Partner to employ independent investment management to
conduct this trading. The Partnership is not expected to engage in any other
business. The objective of the Partnership is to achieve the potentially
high rates of return which are possible through speculative trading in the
contracts and in the markets identified in Appendix II attached hereto. The
General Partner intends to allocate substantially all of the Partnership
Capital to conduct this trading with the sole CTA identified on Appendix II.
The CTA has advised that he intends to allocate between 20 and 30% of the
Capital assigned to him to trade to margin to secure the trading positions he
selects. There can be no assurance that the Partnership will achieve its
business objectives, be able to pay the costs to do business, or avoid
substantial trading losses.
In that regard, the Partnership is subject to substantial fixed charges.
The General Partner will be paid a management fee of two percent (2%) of Net
Asset Value; in addition, the CTA will be paid a four percent (4%) management
fee upon the equity assigned to him, and the Partnership will pay fixed
brokerage commissions of twelve percent (12%) to the IB. Accordingly, to
redeem a Unit at the original face value at the end of the first twelve
months of trading and avoid a loss, the Partnership will need to generate,
annually, interest income and gross trading profits of thirty and 3/10
percent (30.3%), which includes the fixed costs of administration, which are
estimated by the General Partner to be approximately $17,000 per year, ($1,
500 for legal fees and $15,500 for accounting and audit fees), $70,000 in
Offering Expenses to be accrued and paid during the first 24 months either
from New Net Profits, commencing the end of the month following the month the
Minimum is sold, the Escrow is terminated, and the Partnership commences
operations, or from Capital, as that term is defined in Exhibit A, subject to
a two percent (2%) of Capital per year limitation, but excludes any variable
and extra-ordinary expenses, such as claims, it may incur.
Below is a chart setting forth expenses during the first twelve full months
of the Partnership's operations. All interest income will be paid to the
Partnership. The chart below assumes that the Partnership's Unit value
remains at $1,000 during the first 12 months of the Partnership's operations.
19
<PAGE>
<TABLE>
EXPENSES PER UNIT FOR THE FIRST 12-MONTH PERIOD OF OPERATIONS
<CAPTION>
Minimum Maximum
<S> <C> <C>
Gross Units Sold $ 600,000.00 $5,000,000.00
Selling Price per Unit (1) $ 1,000.00 $ 1,000.00
Selling Commission (1) $ 60.00 $ 60.00
Offering Expenses 20.00 14.00
General Partner's Management Fee (2) 20.00 20.00
Partnership Operating Expenses (3) 5.00 3.62
Trading Advisor's Management Fees (4) 40.00 40.00
Trading Advisor's Incentive Fees on
New Net Profits (5) 38.25 37.11
Brokerage Commissions and Trading Fees (6) 120.00 120.00
Redemption Fee (7) 40.00 40.00
Less Interest Income (8) (40.00) (40.00)
Amount of Trading Income Required for
the Partnership's Net Asset Value per
Unit (Redemption Value) at the End of
One Year to Equal the Selling Price
per Unit (9) $ 303.25 $ 294.73
Percentage of Initial Selling Price per Unit 30.3% 29.5%
<FN>
Explanatory Notes:
(1) Investors will initially purchase Units at $1,000 per Unit. After the
commencement of trading, Units will be purchased at the Partnership's
month-end Net Asset Value per Unit. A 6% sales commission will be deducted
from each subscription. During trading, 15% of New Net Profits will be used
to repay the General Partner the Offering Expenses of $70,000 subject to a
limitation at the end of the year to a 2% reduction in Capital should profits
not pay for the Offering Expenses. For purposes of this calculation, the
assumption has been used that no New Net Profits will be available to pay for
Offering Expenses.
(2) Except as set forth in these explanatory notes, the illustration is
predicated on the specific rates or fees contracted by the Partnership with
the General Partner, the Commodity Trading Advisor, and the Futures
Commission Merchant, as described in "Charges to the Partnership".
(3) The Partnership's actual accounting, auditing, legal and other
operating expenses will be borne by the Partnership. These expenses are
estimated to be $2,820 per year if only the Minimum is sold and $17,000 per
year if the Maximum is sold. These expenses have been computed against the
Minimum Partnership Beginning Capital of $564,000 and maximum of $4,700,000
to allow for deduction of sales commissions
(4) The Partnership's CTA will be paid a monthly management fee of 1/3 of
1% of Allocated Net Assets.
(5) The CTA will receive an incentive fee of 15% of New Net Profits each
quarter earned upon the Capital assigned to him to trade. The $38.25 of
incentive fees shown above is equal to 15% of total trading income of $283.25
adjusted to earn sufficient income to return the original $1,000 to the
investor upon Redemption at the end of the first year without computation of
incentive fee upon the interest earned or the incentive fee to be paid and
without reduction for brokerage commissions and after payment of management
fees to the General Partner and the CTA.
(6) Brokerage commissions and trading fees are fixed at 12% of Net Asset
Value. For purposes of this calculation, the assumption is that all equity
will be made available to Frischmeyer to trade.
20
<PAGE>
(7) The Redemption Fee of 4% is computed upon the assumed $1,000 value of
the Redemption at the end of the first year.
(8) The Partnership will earn interest on margin deposits with its Futures
Commission Merchant and Bank Deposits. Based on current interest rates,
interest income is estimated at 4% of Net Asset Value.
(9) This computation assumes there will be no claims or extra-ordinary
expenses during the first year.
</TABLE>
THE ABOVE PRESENTATION DOES NOT CONSTITUTE REPRESENTATION BY THE
PARTNERSHIP AS TO THE ACTUAL OPERATING EXPENSES OR INTEREST INCOME OF THE
PARTNERSHIP. THERE CAN BE NO ASSURANCE THAT THE EXPENSES TO BE INCURRED BY
THE PARTNERSHIP WILL NOT EXCEED THE AMOUNTS AS PROJECTED OR THAT THERE WILL
BE NO OTHER EXPENSES.
In addition, Partners will be required to pay Federal, state and local
taxes upon income, if any, in the year earned by the Partnership, although
there will be no expectations of distributions of income during that, or any
other, year. Accordingly, the purchase of Units in the Partnership is
intended to be a long-term investment. Neither the General Partner nor any
other person has made any promise or guarantee that the Partnership will be
profitable or otherwise meet its objectives. The General Partner has made no
guarantee that the Partnership will break even or produce any other rate of
return per year. All interest income earned upon the Capital of the
Partnership will be paid to the Partners in their prorata share determined by
the amount of Capital each Partner, including the General Partner, has
contributed to the Partnership. The current rate of interest income expected
is 5% per year upon the balances not used for trade margin purposes. The
General Partner estimates that 20% to 30% of total Capital, as that term is
defined in Exhibit A, will be used for margin purposes each year. The
specific futures contracts to be traded, the exchanges and forward markets,
and the trading methods of the CTA selected are identified in Appendix II.
SECURITIES OFFERED
The Fremont Fund, Limited Partnership (the "Partnership") will offer and sell
Limited Partnership interests in the Partnership which will have pro-rata
rights to profit and losses with all other owners equal to the Capital they
have contributed but Limited Partners will have limited obligations to pay
the debts of the Partnership in excess of their contribution to Capital plus
their undistributed profits, less losses. The Limited Partners will not be
exposed to payment of debts of the Partnership in excess of their Capital
contributions; provided, however, in the event the Limited Partners were to
receive distributions which represent a return of Capital, such distributions,
in the event of insolvency of the Partnership, would have to be returned to
pay Partnership debts. In addition, these interests will have no voice in
the day to day management of the Partnership. They will have the right to
vote on Partnership matters such as the replacement of the General Partner.
See the Partnership Agreement attached as Exhibit A.
These Limited Partnership interests are defined as the units (the "Units")
which are offered for sale for One Thousand Dollars ($l,000) per Unit. This
sales price per Unit was arbitrarily set by the General Partner without
regard to expected earnings and does not represent present or projected
market or Redemption value. Funds with respect to subscriptions received
prior to the commencement of trading operations by the Partnership (and not
rejected by the General Partner) will be deposited and held in a separate
escrow account (the "Escrow Account") in the name of the Partnership at First
American State Bank, 1207 Central Avenue, Fort Dodge, IA 50501 (the "Escrow
Agent"). If the General Partner has not accepted subscriptions for the 600
Units (the "Minimum") before the lapse of one year from the date of this
Prospectus, (the "Initial Offering Period"), this offering will terminate and
all documents and amounts deposited to the Escrow Account by subscribers will
be returned, plus interest and without deduction for any commissions, fees or
costs. Upon the sale of the Minimum, the Partnership will commence trading.
The remaining 4,400 Units will be offered for sale at a price per Unit equal
to the Net Asset Value Per Unit as of the close of trading on the effective
date of such purchase, which will be the close on the last business day of
the month in which the General Partner accepts a duly executed Subscription
Agreement and capital contribution from the subscriber. No escrow will be
utilized for Units sold after the sale of the Minimum. All subscriptions are
irrevocable and subscription payments, after the statutory withdrawal period,
if any, which are accepted by the General Partner, and either deposited in
the Escrow Account or in the Partnership account, may not be withdrawn by
subscribers. Although a maximum of $5,000,000 of Units are offered hereby,
the Limited Partnership Agreement authorizes the General Partner to sell
additional Units and there is, therefore, no maximum aggregate number or
contribution for Units which may be offered or sold by the Partnership.
There cannot be any assurance that the Minimum Units or any additional Units
will be sold and the General Partner is authorized, in its sole discretion,
to terminate this, or any future, offering of Units.
21
<PAGE>
MANAGEMENT'S DISCUSSION
This is the first offering of the Partnership's Limited Partnership
Interests (the "Units"). The Limited Partnership Agreement permits future
offerings of Units after the close of this offering. The Partnership has not
commenced operations and none will commence until after the sale of 600 Units,
$600,000 in face amount, before commissions, (the "Minimum") are sold and
the Escrow is terminated. The Partnership has no prior operating history and,
therefore, there is no discussion of results of operations.
The Partnership will raise capital only through the sale of Units offered
pursuant to this and future offerings, if any, and does not intend to raise
money for any purpose through borrowing. The Partnership will make certain
capital expenditures, such as for the preparation of this Prospectus and
other expenditures to qualify the Units for sale, and for office equipment,
and expects to allocate all of its capital not used to pay those capital and
operating expenses to trading and other investments. There is no report of
executive compensation in this Prospectus as the Partnership will not have
any directors, officers or employees; furthermore, the Partnership will
conduct all of its business through the General Partner.
The General Partner has selected The Chicago Corporation to serve as the
futures commission merchant (the "FCM") to hold the funds allocated to the
commodity trading advisor to trade. On a daily basis, the FCM will transmit
a computer run or facsimile transmission to the General Partner which will
depict the positions held, the margin allocated and the profit or loss on the
positions from the date the positions were taken. The General Partner will
review these transmissions and based upon that review will determine, with
the advice of the CTA, will make appropriate adjustments to the allocation of
Net Asset Value to trade; provided, however, only the CTA will make specific
trades and determine the number of positions taken and the timing of entry
and departure from the markets based upon the amount of equity available to
trade.
Most United States commodity exchanges limit fluctuations in commodity
futures contracts prices during a single day by regulations referred to as
"daily price fluctuation limits" or "daily limits". Once the price of a
futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with
little or no trading. Similar occurrences could prevent the Partnership from
promptly liquidating unfavorable positions and subject the Partnership to
substantial losses which could exceed the margin initially committed to such
trades. In addition, even if commodity futures prices have not moved the
daily limit, the Partnership may not be able to execute futures trades at
favorable prices, if little trading in such contracts is taking place or the
price move in a futures or forward contract is both sudden and substantial.
Other than these limitations on liquidity, which are inherent in the
Partnership's proposed commodity futures trading operations, the
Partnership's assets are expected to be highly liquid.
Once the Minimum is sold and the Partnership commences operations, except
for payment of offering and other expenses of the Partnership, the General
Partner is unaware of any (i) anticipated known demands, commitments or
required capital expenditures; (ii) material trends, favorable or unfavorable,
which will effect its capital resources; or (iii) trends or uncertainties
that will have a material effect on operations. From time to time, certain
regulatory agencies have proposed increased margin requirements on commodity
futures contracts. Because the Partnership generally will use a small
percentage of assets for margin, the Partnership does not believe that any
increase in margin requirements, as proposed, will have a material effect on
the Partnership's proposed operations. Management cannot predict whether the
Partnership's Net Asset Value per Unit will increase or decrease. Inflation
is not projected to be a significant factor in the Partnership's operations,
except to the extent inflation influences futures' prices.
22
<PAGE>
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER
The General Partner has a fiduciary responsibility to the Limited Partners to
exercise good faith and fairness in all dealings affecting the Partnership.
In the event that a Limited Partner believes the General Partner has violated
such fiduciary duty to the Limited Partners, a Limited Partner may seek legal
relief for such Limited Partner or on behalf of the Partnership under
applicable laws, including Indiana partnership and applicable Federal and
state securities laws, to recover damages from or require an accounting by
the General Partner. The Partnership Agreement conforms with the Uniform
Limited Partnership Act for the State of Indiana in regard to the definition
of the fiduciary duties of the General Partner.
In addition, Partners are afforded certain rights to institute reparations
proceedings under the Commodity Exchange Act for violations of such Act or of
any rule, regulation or order of the CFTC by the General Partner, the CTA
selected and the Introducing Broker and the Futures Commission Merchant. For
example, excessive trading of the Partnership's account may constitute a
violation of such Act. A Limited Partner may also institute legal
proceedings in court for excessive trading and may have a right to institute
legal proceedings in court for certain violations of applicable laws,
including the Commodity Exchange Act or rules, regulations or orders of the
CFTC. The General Partner will have certain defenses to claims that it is
liable merely because the Partnership lost money or otherwise did not meet
its business objectives. For example, the General Partner will not be liable
for actions taken in good faith and exercise of its best business judgment.
Also, the responsibility of a general partner to other partners is a
changing area of the law and Limited Partners who have questions concerning
the responsibilities of the General Partner should, from time to time,
consult their own legal counsel.
INDEMNIFICATION
The Limited Partnership Agreement provides that the General Partner shall not
be liable, responsible or accountable in damages or otherwise to the
Partnership or any of the Limited Partners for any act or omission performed
or omitted by the General Partner and which the General Partner determines,
in good faith, to be within the scope of authority and in the best interest
of the Partnership, except when such action or failure to act constitutes
negligence or misconduct. The Partnership shall defend, indemnify and hold
the General Partner harmless from and against any loss, liability, damage,
cost or expense (including attorneys' and accountants' fees and expenses
incurred in defense of any demands, claims or lawsuits) actually and
reasonably incurred and arising from any act, omission, activity or conduct
undertaken by or on behalf of the Partnership and within the scope of
authority granted the General Partner by the Limited Partnership Agreement,
including, without limitation, any demands, claims or lawsuits initiated by
another Partner. Applicable law provides that such indemnity shall be
payable only if the General Partner (a) determined, in good faith, that the
act, omission or conduct giving rise to the claim for indemnification was in
the best interests of the Partnership, and (b) the act, omission or activity
that was the basis for such loss, liability, damage, cost or expense was not
the result of negligence or misconduct and (c) such liability or loss was not
the result of negligence or misconduct by the General Partner, and (d) such
indemnification or agreement to hold harmless is recoverable only out of the
assets of the Partnership and not from the Partners, individually.
In addition, the indemnification of the General Partner in respect of any
losses, liability or expenses arising from or out of an alleged violation of
any Federal or state securities laws are subject to certain legal conditions.
Those conditions presently are that no indemnification may be made in
respect of any losses, liabilities or expenses arising from or out of an
alleged violation of Federal or state securities laws unless (i) there has
been a successful adjudication on the merits of each count involving alleged
securities law violations as to the General Partner or other particular
indemnitee, or (ii) such claim has been dismissed with prejudice on the
merits by a court of competent jurisdiction as to the General Partner or
other particular indemnitee, or (iii) a court of competent jurisdiction
approves a settlement of the claims against the General Partner or other
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, provided, with regard to such court approval,
the General Partner or other indemnitee must apprise the court of the
position against such indemnification held by the SEC and the securities
administrator of the state or states in which the plaintiffs claim they were
offered or sold Units in regard to indemnification for securities laws
violations before seeking court approval for indemnification. Insofar as
23
<PAGE>
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to the General Partner pursuant to the indemnification
provisions in the Limited Partnership Agreement, or otherwise, the General
Partner has been advised that, in the opinion of the SEC and the various
state administrators, such indemnification is against public policy as
expressed in the Securities Act of 1933 and the North American Securities
Administrators Association, Inc. commodity pool guidelines and is, therefore,
unenforceable.
The General Partner has indemnified the Managing Dealer, World Invest
Corporation, and the other Selling Agents that there are no misstatements or
omissions of material facts in this Prospectus.
RELATIONSHIP WITH THE FCM AND THE IB
The General Partner has initially engaged Futures Investment Company as the
sole introducing broker (the "IB") to the Partnership. Ms. Pacult, the
President and sole stockholder of the General Partner, is also a stockholder,
director and officer of the IB. Accordingly, the General Partner is
Affiliated with the IB. The IB has engaged The Chicago Corporation to act
as the sole futures commission merchant, (the "FCM") for the Partnership.
The General Partner believes the rates to be charged to the Partnership by
the IB for fixed commissions are competitive. In that regard, the General
Partner is obligated by the NASAA guidelines to obtain the best commission
rates available to the Partnership. Accordingly, the General Partner is free
to select any substitute or additional futures commission merchants or
introducing brokers at any time, for any reason, although it has a conflict
in regard to the IB because of the Affiliation with the principal of the
General Partner. The FCM and the IB may act for any other commodity pool for
which the General Partner or Ms. Pacult, individually, as the case may be,
will act, in the future, as general partner. It is possible for the General
Partner and any other commodity pools to obtain rates from the IB that are
more favorable to such other accounts than the fixed commissions in lieu of
round-turn commissions charged by the IB to the Partnership.
The FCM has tentatively established the per round turn rate to be paid by
the IB for trades made by the Partnership at $10 per round turn plus per
round turn pit and give up charges of approximately $2.50, US Exchange fees
of approximately one dollar and NFA fees of approximately 15 cents. Foreign
exchange and Globex fees are expected to range from $2.50 to $12.50 per round
turn. All of these costs will be paid by the IB from the 12% per year it
charges the Partnership.
RELATIONSHIP WITH THE CTA
The Commodity Trading Advisor will be effecting trades for his own accounts
and for others on a discretionary basis. He may employ trading methods,
policies and strategies for others which differ from those employed for the
Partnership and, as a consequence, such accounts may have trading results
which are different (which could be better or worse) from those experienced
by the Partnership. A potential conflict of interest arises in such cases in
that it is possible that positions taken by the CTA may be taken ahead of or
opposite positions taken on behalf of the Partnership. See definitions in
Appendix I for "Taking Positions Ahead of the Partnership". Where in any
case trades are identical with respect to the Partnership and other accounts
of the Commodity Trading Advisor and where prices are different, the
Commodity Trading Advisor has informed the General Partner that, pursuant to
CFTC Regulation 421.03, such Commodity Trading Advisor will utilize the
"Average Price System" for those futures and options contracts where its use
is authorized. See definitions in Appendix I for "Average Price System". The
Commodity Trading Advisor has also informed the General Partner that where
the Average Price System is not available, trades will be filled (both
purchases and sales) in order based on the numerical account numbers, with
the lowest price (on both purchases and sales) allocated to the lowest
account number and in numerical matching sequence, thereafter.
The past, present, and future trading methods to be utilized by the CTA are
proprietary in nature and will not be disclosed to the Partners. No notice
will be given by the CTA of any changes he may make in his trading methods to
the Partners. See "Risk Factors, No Notice of Trades or Trading Method".
24
<PAGE>
RISK CONTROL
The General Partner has obtained the commitment from the FCM that a report,
as of the close of each business day, of the equity used for margin to hold
the trades selected by the CTA will be sent to the General Partner by
overnight facsimile or computer transmission before the opening of trading on
the next business day to permit the General Partner to review the percentage
of equity used for margin and losses, if any. Should the equity fall below
fifty percent of the Net Asset Value on the last monthly valuation date, the
General Partner will suspend trading to permit the opportunity to the Limited
Partners to Redeem their Units at the value as of the date of the suspension.
The Redemption value may be less than fifty percent of the Net Asset Value
because of slippage at time of liquidation of positions or reserve for
contingent expenses.
CHARGES TO THE PARTNERSHIP
Investors in the Partnership will pay the cost of operation of the
Partnership. These charges are described in narrative form and in the chart
which follows this narrative.
COMPENSATION OF GENERAL PARTNER
The General Partner will be paid an annual management fee of two percent (2%)
of the Net Asset Value of the Partnership payable at the end of each month
(1/6 of 1%).
The General Partner will receive an allocation of New Net Profit of fifteen
percent (15%) on the trading accounts assigned to Frischmeyer, which will be
paid directly to him. New Net Profits, as used herein, means the excess, if
any, of the Net Assets of the Partnership increased by trading activity
conducted by the CTA at the end of each respective quarterly period over the
Net Assets of the Partnership at the end of the highest previous quarterly
period.
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTA
In addition to the management fee to the General Partner and the 12% fixed
commission, the Partnership will pay a management fee to Frischmeyer at the
annual rate of four percent (4%) of the equity assigned to him to trade,
payable at the rate of one-third of one percent (1/3 of 1%) per month of the
Net Assets on deposit at the future commission merchant or merchants
allocated to him to trade, computed and paid from said accounts to the CTA.
The Partnership also will be obligated to bear certain other periodic
operating, fixed, and extra-ordinary expenses of the Partnership including,
but not limited to, legal and accounting fees, defense and payment of claims,
trading and office expenses, and sales charges. The Partnership will also
pay to the General Partner an allocation of profit, earned in the accounts
assigned to Frischmeyer of fifteen percent (15%) of the New Net Profit of the
Partnership for each quarterly period that the Net Asset Value at the end of
such period for each account exceeds the highest previous Net Asset Value in
that account. The General Partner will be responsible for payment of all
incentive fees to the Commodity Trading Advisor. New Net Profits, as used
herein, means the excess, if any, of the Net Assets of the Partnership
increased by trading activity conducted by the CTA at the end of each
respective quarterly period over the Net Assets of the Partnership at the end
of the highest previous quarterly period. The Net Assets of the account
assigned to the CTA, as of the close of business on the last business day of
each month, determined before accrual of any incentive fee payable to the
Commodity Trading Advisor, shall be used to compute the management and
incentive fees to the CTA. The Net Assets of the Partnership shall be
adjusted to eliminate the effect thereon resulting from new Capital
Contributions received, if any, or Capital Distributions or Redemptions made,
if any, during the month, and shall be decreased by any Capital, interest or
other income earned on Partnership assets during the month which are not
directly assigned to the CTA to trade and are not related to such trading
activity and regardless of whether such assets are held separately or in a
margin account. These fees shall be payable by the Partnership, as to the
management fee, or by the General Partner, as to the incentive fee, to the
CTA within ten (10) business days after the close of the applicable
accounting period. If the Partnership should incur a net loss during any
quarter, such loss will be carried forward for purposes of calculating the
incentive fee to the Commodity Trading Advisor and will be charged against
the Net Assets of any succeeding quarterly period. No incentive fee will be
payable to the CTA until such losses have been offset by net profits in such
succeeding quarters. In no event may a modification of the compensation to
be paid to the CTA result in an incentive fee exceeding the above amount and
any new contract with the CTA must carry forward all losses attributable to
the CTA. For example, if in successive quarters the Partnership performance
25
<PAGE>
yields New Net Profits from trading activity of the funds on deposit with the
FCM assigned to Frischmeyer of $2,000, $8,000, ($4,000), ($3,000), $2,000,
and $8,000, then the incentive fee at the rate of fifteen percent (15%)
payable to him would be, respectively, $300, $1,200, $0, $0, $0, and $450.
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER
The futures commission merchant for the Partnership is The Chicago
Corporation (the "FCM"). The Partnership will pay a fixed commission of
twelve percent (12%) per year, payable monthly, to Futures Investment Company
(the "IB") for introducing trades through the FCM. See Appendix III. The IB,
will pay to the FCM the clearing costs, including the pit brokerage fees,
which shall include floor brokerage, NFA fees and exchange fees. The IB will
pay six percent (6%) of the fixed commissions to the broker/dealers and
introducing brokers who are qualified to provide services to the investors.
See Charges to the Partnership - Allocation of Commissions.
From the remaining six percent (6%) of the fixed commission, the IB will
pay, among other things, approximately 1% to the FCM for clearing charges.
The IB will retain approximately five percent (5%) of the fixed commission.
The past history of the frequency of Trades by the Commodity Trading Advisor
has been at the rate of approximately 225 round turns per month for every
million dollars ($1,000,000) under management. In the unlikely event the
Commodity Trading Advisor effects round-turns of 675 or more for every
million dollars ($1,000,000) in any month, the IB has the right, but not the
obligation, to suspend trading until the commencement of the next month. This
suspension of trading is to limit the exposure to loss to the IB to a
defined amount determined by the maximum number of round turns the General
Partner will pay to complete in any one month. Trading will automatically
resume the following month subject to the same maximum of 675 trades for that
and any future month. The General Partner has reserved the right to change
the IB, FCM, the fixed commission rate or to have the Partnership pay a per
round-turn brokerage commission, at any time in the future, with or without a
change in circumstances; provided, however, the brokerage commissions so
charged can not exceed (i) 80% of the published retail rate of the IB and
other similar introducing brokers, plus Pit Brokerage Fees or (ii) 14%
annually of the average Net Assets excluding the Partnership assets not
directly related to trading activity; this 14% shall include Pit Brokerage
Fees. In addition, to protect against excessive trading, the General Partner
has the right, but not the obligation, to suspend all trading by the
Partnership during any month in which the CTA trades at a rate of three times
his normal frequency. See "Fiduciary Responsibility of the General Partner".
The Partnership will also reimburse the FCM for all delivery, insurance,
storage or other charges incidental to trading and paid to third parties.
The General Partner does not anticipate significant charges of this nature.
The fixed commission to be paid by the Partnership is fair and reasonable to
the Partnership. This is an area of judgment which depends upon the value of
similar services provided by the same CTA for managed accounts and to other
pools and, to some degree, the value of similar services by other public
commodity pools, and this is not a matter upon which securities counsel will
express an opinion.
ALLOCATION OF COMMISSIONS
The General Partner, either directly or indirectly, controls the allocation
of the fixed commissions and the allocation may change, from time to time,
without the knowledge or consent of the Partners. The commodity brokerage
commissions are to be allocated as follows: The Partnership will pay the IB,
Affiliated with the General Partner, a fixed brokerage commission rate of
twelve percent (12%) per year, payable monthly upon the assets assigned by
the General Partner for trading. The IB will negotiate a round-turn
commission rate per trade with the FCM. The difference between the 12% fixed
commission rate and the per round turn commission negotiated, less the
amounts paid to the persons who sold Units in the Partnership, will be
retained by the IB Affiliated with the General Partner. The IB will pay its
associated persons and individual employee-broker (associated persons) of
World Invest Corporation and the other broker dealers, through whom Units are
sold. Such persons will include, but not be limited to, the principal of the
General Partner and the husband of the principal of the General Partner, who
is an associated person of the IB which is Affiliated with the principal of
the General Partner.
The IB will pay six percent (6%) per year of the fixed commission to the
Broker Dealer and Associated Persons of the IB and other duly licensed
entities and persons, which may include the principal of the General Partner
or other principals of the IB Affiliated with it, prorated to the value of
Units sold, who have facilitated the sale of Units, as trailing commissions
26
<PAGE>
in exchange for services provided to the investors and the Partnership It is
important that investment in the Partnership be maintained to permit
diversification of risk over a large number of investors and to allow the
long-term trading strategies of the CTA produce the opportunity for
investment in the Partnership. To accomplish these objectives will require a
continuous relationship with the Limited Partners to be aware of their
investment objectives and changes in circumstances, if any. Neither the
General Partner nor the IB have the staff or the time to maintain this
continuous contact and awareness. The IB will pay the trailing commissions
to the Brokers for payment to the persons who made the sale of the Units as
compensation for the effort required to maintain this continuous contact and
awareness during the time the Limited Partner holds the Units. In addition
the Brokers will communicate explanations of changes in operation methods,
such as a change in CTA and results from operations, answer questions
regarding the Partnership, and are expected to work to retain investment in
the Partnership.
OTHER EXPENSES
The Partnership is obligated to pay legal and accounting fees, other expenses
and claims. The General Partner projects the Offering Expenses of this
offering to be $70,000, see Appendix I, Offering Expenses, and annual legal
and accounting costs of approximately $17,000 ($15,500 for accounting and
audit and $1,500 for legal). In addition to management fees, incentive fees,
brokerage commissions, and the actual cost of legal and audit services
provided by third parties, the Partnership Agreement provides that all
customary and routine administrative expenses and other direct expenses of
the Partnership, will be paid by the Partnership. The General Partner will
be reimbursed by the Partnership for direct expenses (such as delivery
charges, statement preparation and mailing costs, telephone toll charges, and
postage).
<TABLE>
Charges to the Partnership
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
General Partner 2% management fee of Net Asset Value 2% management fee of Net Asset Value.
Selling Agents Sales Commission of 6% of Gross Selling 6% of Selling Commissions and Trailing
Price of Units and a percentage of the of 6%
Trailing Commission
Introducing Broker Fixed Commissions 12% of assets assigned by General Partner
Affiliated with the for trading, less costs to trade to FCM
General Partner and less 6% paid to associated persons who
sold Units which will include persons
Affiliated with the General Partner
Futures Commission Round-turn commissions paid from the Brokerage Commissions negotiated with the
Merchant fixed commissions paid by the Introducing Broker; reimbursement by the
Partnership; reimbursement of delivery, Partnership of actual payments to third
insurance, storage and any other charges parties in connection with Partnership
incidental to trading and paid to third trading.
parties.
Commodity Trading Fixed Management Fee and Incentive Fee One-third of one percent of Net Assets per
Advisor month assigned to Frischmeyer to trade;
Frischmeyer (4% per year) plus fifteen percent (15%) of
the New Net Profits of the account for each
quarterly period that the Net Assets at the
end of such quarterly period exceeds the
highest previous quarterly Net Assets.
27
<PAGE>
Third Parties-Offering Legal, accounting fees, and other actual Estimated at $70,000 in the initial year
Expenses expenses necessary to the operation of and $17,000 for each year, thereafter,
the Partnership, and all claims and ($15,500 for accounting and $1,500 for
other extraordinary expenses of the legal). Claims and other costs can not be
Partnership. estimated and will be paid as incurred.
</TABLE>
INVESTOR SUITABILITY
An investment in the Partnership is suitable only for a limited amount of the
risk portion of an investor's total portfolio and no one should invest more
in the Partnership than he or she can afford to lose., Investors
contemplating even the Minimum investment in the Partnership of $15,000 must
have (i) a net worth of at least $150,000 (exclusive of home, furnishings and
automobiles), or (ii) an annual gross income of at least $45,000 and a net
worth (as calculated above) of at least $45,000. NO INVESTOR MAY INVEST MORE
THAN 10% OF SUCH INVESTOR'S NET WORTH IN THE PARTNERSHIP. THE FOREGOING
STANDARD (AND THE ADDITIONAL STANDARDS APPLICABLE TO RESIDENTS OF CERTAIN
STATES AS SET FORTH IN THIS PROSPECTUS AND THE SUBSCRIPTION DOCUMENTS ARE
REGULATORY MINIMUMS ONLY.
POTENTIAL ADVANTAGES
Although commodity trading is speculative and involves a high degree of risk,
an investment in the Partnership will offer the following potential
advantages:
EQUITY MANAGEMENT
The Partnership offers the opportunity for investors to place equity with a
professional CTA who has demonstrated, in the judgment of the General Partner,
an ability to trade profitably and to have that equity allocated to the CTA
in a manner which is intended by the General Partner to optimize the
potential for profit in the future.
INVESTMENT DIVERSIFICATION
An investor who is not prepared to spend substantial time trading various
commodity contracts or options may participate in these markets through an
investment in the Partnership (with a minimum investment of only $15,000),
thereby obtaining diversification from investments in stocks, bonds and real
estate.
LIMITED LIABILITY
A Limited Partner in the Partnership will not be subject to margin calls and
cannot lose more than the amount of the Limited Partner's unredeemed capital
contribution, the Limited Partner's share of undistributed profits, if any,
and, under certain circumstances, any prior distributions and/or amounts
received upon Redemption of Units and interest thereon; provided, however,
the Limited Partner must not participate in the management of the Partnership.
In the opinion of legal counsel to the Partnership, subject to the
maintenance of the Partnership structure by the General Partner and no
affiliation by the Limited Partner with any phase of management of the
Partnership, there are no circumstances, including bankruptcy of the
Partnership, which will subject the personal assets of a Limited Partner to
the debts of the Partnership. See the Partnership Agreement attached as
Exhibit A.
ADMINISTRATIVE CONVENIENCE
The Partnership is structured so as to provide Limited Partners with certain
services designed to alleviate the administrative details involved in
engaging directly in commodities contract trading, including providing
monthly and annual financial reports (showing, among other things, the Net
Asset Value of a Unit, trading profits or losses and expenses), and all tax
information relating Limited Partner's interest in the Partnership.
28
<PAGE>
ACCESS TO THE CTA
The CTA selected by the General Partner requires a minimum account size of
$40,000. The Partnership permits a minimum investment of $15,000.
Accordingly, investors have access to the CTA for a smaller investment, at
substantially the same cost, than is available by a direct investment in a
managed account with the CTA.
USE OF PROCEEDS
At the time of the sale of the Units, the only deduction prior to the
delivery of the funds to the Partnership in furtherance of its business will
be the six percent (6%) selling commission. After commencement of operations,
at the end of each month, the actual management fees and fixed commissions
identified in this Prospectus will be deducted from the Partnership accounts.
The General Partner will determine, in its sole judgment, from time to time,
the percentage of Partnership Net Asset Value will be on deposit with the FCM
and how much will be used for other investments and held in bank accounts to
pay current obligations. Other than the approximately three percent (3%) of
the previous month end Net Asset Value the General Partner expects to be
retained in the Partnership's bank accounts as a reserve to pay Partnership
Expenses, and other similar current payments, the General Partner expects to
deposit the Net Asset Value including the proceeds from interest and trading
profits, in the commodity account with the FCM to be used by the Partnership
to engage in the speculative trading of commodity futures contracts and
options under the direction of the CTA. The Partnership will use only cash
and cash equivalents, such as United States Treasury Bills to satisfy margin
requirements. All FCMs, CTAs, money market, other cash investment accounts,
and banks selected by the General Partner to hold or trade assets of the
Partnership will be based in the United States and be subject to United
States regulations. The trades of the Partnership will be cleared by the FCM.
The trades of the Partnership will be cleared by the FCM. The General
Partner believes that between twenty percent (20%) to thirty percent (30%) of
the Partnership's assets will normally be committed as margin for commodity
futures contracts but, from time to time, the percentage of assets committed
as margin may be substantially more, or less, than such range. For purposes
of the estimate of the amount of interest income to be earned upon the
Capital of the Partnership, the General Partner has estimated that between
20% and 30% of the Capital will be used for margin upon trades and that the
rate of interest to be paid on the available balances with be the T-Bill
rates which are currently approximately 4%. The FCM may increase margins
applicable to the Partnership at any time.
In the event the General Partner does not sell a minimum of $600,000 in
Partnership Units (the "Minimum") during the first one year of this Offering,
the Escrow Agent will return all money deposited to the Escrow Account to the
investors together with their prorata share of the interest earned without
any deduction for fees or other costs promptly following the lapse of such
Offering period.
DETERMINATION OF THE OFFERING PRICE
The Units are currently offered for sale for One Thousand Dollars ($l,000)
per Unit, which amount was arbitrarily set by the General Partner. The amount
was not based on expected earnings and is not a representation that the Units
have or will have a market value of or could be resold or redeemed at that
price. After trading operations have commenced, any remaining Units that are
offered for sale shall be offered at a price per Unit equal to the Net Asset
Value Per Unit as of the close of business on the effective date of such
purchase, which will be the last business day of the month in which the
General Partner accepts a duly executed Subscription Agreement and the
required applicable Capital Contribution from the subscriber. All sales will
be subject to a sales commission of 6% to be deducted from the proceeds prior
to the issuance of Units.
NO MARKET AND LIMITATION OF RIGHT OF TRANSFER
None of the Units sold will be traded on any United States Market or any
other Market. To the Contrary, before any transfer of Units may be made, the
General Partner must grant its written approval. See "Plan of Distribution"
and Partnership Agreement attached as Exhibit A. The Partners will have the
right of Redemption. See "Redemption."
29
<PAGE>
THE GENERAL PARTNER
IDENTIFICATION
The General Partner of the Partnership, Pacult Asset Management, Inc., a
Delaware corporation, c/o Corporate Systems, Inc. 101 N. Fairfield Drive,
Dover, DE 19901 was incorporated on October 13, 1994, and neither it nor its
principal have previously operated a commodity pool. It was registered as a
commodity pool operator on January 27, 1995. The balance sheet of the General
Partner as of November 30, 1995, and an Income Statement, Statement of Cash
Flows and Statement of Changes in Stockholders' Equity are attached hereto.
See "Experts". The General Partner has expended effort and advanced money to
permit the Partnership to be available for this Offering but has not yet
engaged in the business of management of trading on behalf of the
Partnership or any other business activities. Purchasers of Units in the
Partnership will not acquire or otherwise have any interest in the General
Partner.
THE PRINCIPAL AND OFFICER OF THE GENERAL PARTNER
Ms. Shira Del Pacult, age 39, is the sole shareholder, director, principal,
and officer of the General Partner. She graduated Phi Beta Kappa from the
University of California, at Berkeley, in 1979. From 1980 to 1981, she was
employed by a real estate developer in Sonoma County, California, as an
administrative assistant. From 1981 - 1983 she was employed by Heinold
Commodities, Inc., Chicago, IL, to assist in the development of the
Commodities Options Department. She became a senior account executive at
Heinold and was a member of the President's Council, a select group appointed
to advise the firm on all matters of business practice. In 1983, Ms. Pacult
and her husband established Futures Investment Company, an Introducing Broker,
to sell futures investments managed by independent commodity trading
advisors to retail clients. Presently, Futures Investment Company is located
at 2990 W. 120, Fremont, Indiana, 46737, with clearing agreements with R.J.
O'Brien, Inc., Vision, LP, First Options of Chicago, Inc., and The Chicago
Corporation. The Partnership intends to clear its trades through The Chicago
Corporation . Ms. Pacult is a member of the National Association of
Introducing Brokers and the NFA. She is also a registered representative of
the broker/dealer, World Invest Corporation, a Delaware corporation. World
Invest Corporation is registered as a fully disclosed broker dealer with the
SEC and is a member of the NASD. In addition to the Units offered pursuant to
this Prospectus, World Invest offers for sale, on a best efforts basis,
securities of other issuers and engages in other broker-dealer activities.
Ms. Pacult intends to devote adequate time to handle properly the
responsibilities of the General Partner; however, Ms. Pacult will provide
less than her full time to the business affairs of the Partnership. Ms.
Pacult and her husband, Michael, are included in the book Master Brokers:
Interviews with Top Futures Brokers by John Walsh, ISBN 0-915513-61-7.
TRADING BY THE GENERAL PARTNER; INTEREST IN THE POOL
The General Partner and its principal, may, from time to time, trade
commodity interests for their own accounts. The records of any such trading
activities will not be made available to Limited Partners. As stated earlier,
the General Partner will not knowingly take positions on its own behalf
which would be ahead of identical positions taken on behalf of the
Partnership. Once the Minimum is sold, the General Partner may purchase and
hold Units.
NO PRIOR PERFORMANCE AND REGULATORY NOTICE
THIS POOL HAS NOT BEGUN TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE REGULATIONS OF THE CFTC AND NFA PROHIBIT ANY REPRESENTATION BY A PERSON
REGISTERED WITH THE CFTC OR BY ANY MEMBER OF THE NFA, RESPECTIVELY, THAT SUCH
REGISTRATION OR MEMBERSHIP IN ANY RESPECT INDICATES THAT THE CFTC OR THE NFA,
AS THE CASE MAY BE, HAS APPROVED OR ENDORSED SUCH PERSON OR SUCH PERSON'S
TRADING PROGRAMS OR OBJECTIVES. THE REGISTRATIONS AND MEMBERSHIPS DESCRIBED
IN THIS PROSPECTUS MUST NOT BE CONSIDERED AS CONSTITUTING ANY SUCH APPROVAL
OR ENDORSEMENT. LIKEWISE, NO COMMODITY EXCHANGE HAS GIVEN OR WILL GIVE ANY
SUCH APPROVAL OR ENDORSEMENT.
30
<PAGE>
TRADING MANAGEMENT
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY
The General Partner will select Commodity Trading Advisors for the
Partnership by utilizing the best judgment of its principal and her fourteen
year personal experience in the review of disclosure documents of CTAs. The
Partnership will rely solely, pursuant to the Advisory Agreement and Power of
Attorney attached as Exhibit F, upon Michael J. Frischmeyer ("Frischmeyer"),
the Commodity Trading Advisor (the "CTA") selected by the General Partner to
trade the equity of the Partnership and to implement the trading methods and
strategies. Upon the sale of the Minimum, the General Partner intends to
assign substantially all of the Partnership Capital to Frischmeyer to trade.
See Exhibit F and Appendix II.
The CTA, his past actual track record, and a fourteen year composite
hypothetical track record developed by the General Partner to reflect what
the CTA would have produced in profits and losses had this CTA traded for the
Partnership with the same management, incentive and other fees and costs as
would have been paid by the Partnership during that past period of time are
included in Appendix II to this Prospectus. The General Partner will
periodically review the performance of the Partnership to determine if the
CTA selected to trade for the Partnership should be changed or if other CTAs
should be added. In the event of a future replacement of the existing CTA or
the addition of other commodity trading advisors, it will be possible for one
of the Advisors to produce New Net Profit in the account assigned to him and
be paid an incentive fee while the prior or other Advisor or Advisors produce
losses which cause the Partnership to suffer a net loss for the Quarter or
the year. From time to time, the General Partner may use computer generated
correlation analysis or other types of automated review procedures to
evaluate CTAs.
THE ADVISORY CONTRACTS
For the purpose of directing and effecting trades, the Partnership has
entered advisory contracts and granted Power of Attorney to the CTA to
trade. The CTA has sole discretion, in the account so assigned, to determine
the commodity futures trades made by the Partnership. The Partnership is
bound by the directions of the CTA given to the FCM under the Power of
Attorney. The Power of Attorney is subject to termination by either the
General Partner or the respective CTA upon written notice to the other and to
the FCM. If the Power of Attorney is terminated, the General Partner will
undertake to manage the trading or will seek and retain a new commodity
trading advisor or advisors. See Exhibit F.
FREQUENCY OF CTA AND EQUITY REALLOCATIONS
The General Partner believes that a CTA should be retained on a medium to
long-term basis and should be given the opportunity to implement fully his
trading strategy or program. While it is not anticipated that frequent
changes will be made to the number of CTAs advising the Partnership or that
frequent reallocations of assets among existing CTAs will be made, the
General Partner will retain the flexibility to replace CTAs or to reallocate
the Partnership's assets among CTAs based upon its sole judgment and
experience. From time to time, the General Partner may engage in
reallocations of assets or add or replace CTAs on a frequent basis. In the
event of a future replacement of the existing CTA or the addition of other
commodity trading advisors, it will be possible for one of the Advisors to
produce New Net Profit in the account assigned to him and be paid an
incentive fee while the prior or other Advisor or Advisors produce losses
which cause the Partnership to suffer a net loss for the Quarter or the year.
NEITHER THE COMMODITY POOL OPERATOR (the GENERAL PARTNER) NOR ITS PRINCIPAL
HAVE PREVIOUSLY OPERATED ANY OTHER POOLS OR TRADED ANY OTHER ACCOUNTS;
HOWEVER, THE COMMODITY TRADING ADVISOR FOR THIS POOL, MICHAEL J. FRISCHMEYER,
HAS SERVED AS THE COMMODITY POOL OPERATOR FOR TWO OTHER COMMODITY POOLS AND
HAS TRADED BOTH OTHER COMMODITY POOLS AND INDIVIDUAL MANAGED ACCOUNTS. SEE
APPENDIX II ATTACHED.
THIS POOL HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE
HISTORY.
31
<PAGE>
FEDERAL INCOME TAX ASPECTS
SCOPE OF TAX PRESENTATION
This presentation is based on the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder (hereinafter
collectively called the "Code") which were in effect as of November 1, 1995,
and is based upon the express intention of the General Partner to cause the
Partnership to invest only its equity capital and not to borrow funds from
any source. Any change in the Code or deviation from the intent to invest
equity capital only, could alter this presentation and also have adverse tax
consequences to the Partnership and the Partners. Under current IRS
guidelines, there exists a substantial possibility that the partnership's
return will be examined. If the partnership is audited, significant factual
questions may arise which, if challenged by the IRS, might only be resolved
at considerable legal and accounting expense to the Partners and the
Partnership. Any adjustment made to the Partnership return will flow through
to the Partners' returns and could result in a separate audit of the
Partners' individual returns. The Partnership will report its income for tax
and book purposes under the accrual method of accounting and its tax year
will be the calendar year, or such other period as is required under section
706(b) of the Code. During taxable years in which little or no profit is
generated from trading activities, a Limited Partner may still have interest
income which will be taxed as ordinary income.
THIS DISCUSSION ASSUMES THAT THE INVESTOR IS AN INDIVIDUAL AND IS NOT
INTENDED AS A SUBSTITUTE FOR CAREFUL PLANNING, PARTICULARLY, SINCE CERTAIN OF
THE INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP WILL NOT BE
THE SAME FOR ALL TAXPAYERS. ALL MATTERS UPON WHICH THE PARTNERSHIP HAS
OBTAINED AN OPINION OF TAX COUNSEL ARE DISCUSSED UNDER THE CAPTION "TAX
OPINION" BELOW. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR TAX SITUATION.
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS
No legal opinion will be requested by the Partnership in regard any State
income tax issue. In addition, tax counsel to the Partnership can not opine
upon any Federal income tax issue which involves a determination by the IRS
of the facts related to the operation of the Partnership or as to any other
matter which may be subject to Internal Revenue Service interpretation or
adjustment upon audit. For example, commodity trading adviser fees are
aggregated with employee business expenses and other expenses of producing
income and the aggregate of such expenses is deductible only to the extent
such amount exceeds 2% of the taxpayer's adjusted gross income. The Federal
income tax deductibility of these expenses depends upon factual
determinations related to the operation of the Partnership by the General
Partner. See "Federal Income Tax Aspects".
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER
If the Partnership were treated as an association or publicly traded
partnership, taxable as a corporation, in any taxable year, the Partnership
would pay taxes at the corporate rates upon its income and gains, items of
deduction and losses would be deductible only by the Partnership and not by
the Partners, tax credits would be available only to the Partnership and not
to the Partners, and all or a part of the distributions to the Partners could
be taxable as dividend income to the Partners and would not be deductible by
the Partnership in computing its taxable income. This would substantially
increase the total amount of taxes the Partnership and it Partners would pay
each year.
The Code, at Section 7701, provides the characteristics of a corporation
which should not be present if a partnership is to be taxed as a partnership.
Among those characteristics are net capital requirements to be met by a sole
corporate general partner of a limited partnership, such as the Partnership.
Among those requirements are that the General Partner, as such, will maintain
a capital contribution in the Partnership in an amount not less than the
greater of (i) $25,000 or (ii) one percent (1%) of the aggregate Capital
Contributions from time to time, of all Limited Partners (measured at the
time of each respective investment) and sufficient net worth to enable the
creditors of the Partnership to have a viable entity to hold responsible for
Partnership debts. The General Partner of the Partnership must comply with
the requirements to maintain the partnership taxation status of the
Partnership. Accordingly, the General Partner will use its best efforts to
satisfy the requirements. The amount of Net Worth the IRS has deemed
32
<PAGE>
sufficient to provide a "safe harbor" from an adverse finding that the
Partnership is an association to be taxed as a corporation is a Net Worth
equal to (15%) of the first $2,500,000 or $250,000, whichever is less, and
(10%) of all above $2,500,000 exclusive of the amount invested by the General
Partner in this Partnership or any other partnership. There can be no
assurance, however, that the General Partner can fulfill or maintain its Net
Worth in conformity with these requirements.
Historically, the right of redemption, similar to the right available to
Partners in the Partnership, renders a pool, such as the Partnership, a
publicly traded partnership, taxed as a corporation. However, the Revenue
Act of 1987 (the "1987 Act") Act provides an exception. The exception
requires ninety percent (90%) or more of the partnership's gross income to be
qualifying income. Qualifying income includes interest, dividends, and income
from futures, options or forward contracts on commodities, if the buying and
selling of commodities is a principal activity of the partnership. The
General Partner intends to limit the sources of income so that the exception
will apply to the Partnership.
NO IRS RULING
THE PARTNERSHIP HAS NOT APPLIED FOR A RULING FROM THE INTERNAL REVENUE
SERVICE (THE "IRS") REGARDING ITS STATUS AS A PARTNERSHIP OR WITH REGARD TO
ANY OTHER TAX ASPECT, NOR DOES THE PARTNERSHIP INTEND TO SEEK A RULING. IN
THE ABSENCE OF A RULING, THERE CAN BE NO ASSURANCE THAT THE IRS WILL NOT
ATTEMPT TO TAKE A POSITION ADVERSE TO THE PARTNERSHIP.
TAX OPINION
The Partnership has obtained an opinion, which is not binding upon the IRS or
the Courts, from The Scott Law Firm, that the Partnership will be taxable as
a partnership and not as a corporation. Such opinion is based on the Code as
of November 1, 1995, a review of the Limited Partnership Agreement, and is
conditioned upon the following representations of facts by the General
Partner: (a) at all times, the Partnership will be operated in accordance
with the Indiana Uniform Limited Partnership Act and the Limited Partnership
Agreement attached hereto as Exhibit A; (b) the General Partner will, at all
times maintain not less than a one percent (1%) interest in the income,
losses, gains, deductions and credits of the Partnership; (c) the aggregate
deductions to be claimed by the Partners as their distributive shares of the
Partnership net losses for the first two years of operation of the
Partnership will not exceed the amount of equity capital invested in the
Partnership; (d) no creditor who makes a loan to the Partnership, including
margin accounts, will have or acquire, as a result of making the loan, any
direct or indirect interest in the capital, profits or property of the
Partnership, other than as a secured creditor; (e) the General Partner will
at all times actively direct the affairs of the Partnership; (f) the General
Partner will at all times possess substantial assets (exclusive of its
interest in the Partnership or any other limited partnership) which can be
reached by the general creditors of the Partnership within the meaning of
Treasury Regulation Section 301.7701 2(d)(2) or the General Partner otherwise
complies with the tax code general partner requirements imposed upon sole
corporate general partners of limited partnerships; (g) interests in the
Partnership will be transferable only upon approval of the General Partner
and not, otherwise, be (1) traded on an established securities market, or (2)
readily tradable on a secondary market (or the substantial equivalent
thereof); (h) the Partnership will not be registered under the Investment
Advisor's Act of 1940; and, (i) over ninety percent of the income earned by
the Partnership will be Qualifying Income as that term is defined in the 1987
Act.
The Law Firm is not able to opine upon the tax treatment of certain
expenses as the determination depends upon questions of fact to be resolved
by the General Partner on behalf of the Partnership. In addition, commodity
trading adviser fees are aggregated with employee business expenses and other
expenses of producing income and the aggregate of such expenses is deductible
only to the extent such amount exceeds 2% of the taxpayer's adjusted gross
income. It is the General Partner's position that the Partnership's intended
operations will qualify as a trade or business. If this position is
sustained, the brokerage commissions and performance fees will be deductible
as ordinary and necessary business expenses. Syndication costs to organize
the Partnership and Offering Expenses will not be deductible or amortizable
by the Partnership or its Partners.
33
<PAGE>
Any change in these representations or the operative facts will prevent
reliance by the Partnership and the Partners upon the legal opinion from The
Scott Law Firm.
PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES
In addition to the imposition of a corporate level tax on publicly traded
partnerships, special rules apply to partnerships in regard to the
application of the passive loss and unrelated business income tax rules. In
Notice 88-75 issued on June 17, 1988 (the "Notice"), the IRS provided
guidance as to the operation of the Partnership. The General Partner intends
to cause the Partnership to comply with the applicable provisions of these
guidelines. In the event the Expenses of the Partnership were deemed not to
qualify as deductions from trading profits, if any, the total taxes paid by
the Partners would increase while the distributions to them would remain the
same.
BASIS LOSS LIMITATION
Generally, the "basis" of a Partner's interest in the Partnership for tax
purposes is equal to the cost decreased, but not below zero, by the Partner's
share of any Partnership losses and distributions and increased by the
Partner's share of any Partnership income. A Partner may not deduct losses
in excess of the adjusted basis for the interest in the Partnership at the
end of the partnership year in which such losses occurred, but may carry
forward any excess to such time, if ever, as the basis for the interest in
the Partnership is sufficient to absorb the loss. Upon the sale or
liquidation of a Partner's interest in the Partnership, the Partner will
recognize a gain or loss for Federal income tax purposes equal to the
difference between the amount realized by such Partner in the transaction and
the basis for such Partner's interest in the Partnership at the time of such
sale. For individuals, capital losses would offset capital gains on a dollar
for dollar basis, with any excess capital losses subject to a $3,000 annual
limitation. Accordingly, it is possible for the Partners to sustain a loss
from the operation of the Partnership which will be not allowed as a
deduction for tax purposes or limited to a $3,000 annual limitation.
AT-RISK LIMITATION
The election by a Partner to borrow the money to invest in the Partnership
carries with it certain at risk limitations. Section 465 of the Code
provides that the amount of any loss allowable for any year to be included in
a Limited Partner's personal tax return is limited to the amount paid for the
Units (tax basis) of the amount "at risk". Losses already claimed may be
subject to recapture if the amount "at risk" is reduced as a result of cash
distributions from the activity, deduction of losses from the activity,
changes in the status of indebtedness from recourse to non-recourse, the
commencement of a guarantee, or other events that affect the taxpayer's risk
of loss. Partners should consider the "at-risk" provisions in arranging debt
financing for purchase of an interest in the Partnership.
INCOME AND LOSSES FROM PASSIVE ACTIVITIES
Code Section 469 limits the deductibility of losses from business activities
in which the taxpayer (limited to individuals, certain estates and trusts,
personal service corporations or closely-held corporations) does not
materially participate ("Passive Losses"). Under temporary Treasury
Regulations, the trading of personal property, such as futures contracts,
will not be treated as a passive activity and Partnership gains allocable to
Limited Partners will not be available to offset passive losses from sources
outside the Partnership and Partnership losses will not be subject to
limitation under the Passive Loss Rules.
ALLOCATION OF PROFITS AND LOSSES
The allocation of profits, losses, deductions and credits contained in the
Limited Partnership Agreement will be recognized for tax purposes only if the
allocations have substantial economic effect. While the General Partner
believes that the Limited Partnership Agreement either meets the requirements
or satisfies a substitute "capital account equivalency" test, the Limited
Partnership Agreement does not meet a third requirement, that a Partner must
make a contribution to the Partnership equal to any deficit in the Capital
account. Accordingly, under the regulations and the Limited Partnership
Agreement, losses would not be allocable to a Partner in excess of the
Partner's capital contribution plus properly allocated profits less any prior
distributions. The General Partner intends to allocate income and losses in
accordance with the Partnership Agreement which it believes complies with
applicable Code Section 704. However, no assurances can be given that the
IRS will not attempt to change any allocation that is made among Partners
admitted on different dates which could adversely effect the amount of
taxable income to one Partner as opposed to another Partner.
34
<PAGE>
TAXATION OF FUTURES AND FORWARD TRANSACTIONS
The CTAs selected by the Partnership are expected to trade primarily in
Section 1256 Contracts as defined in the Code. All Section 1256 contracts
will be marked-to-market upon the closing of every contract (including
closing by taking an offsetting position or by making or taking delivery, by
exercise or being exercised, by assignment or being assigned; or by lapse or
otherwise) and all open Section 1256 contracts held by the Partnership at its
fiscal year-end will be treated as sold for their fair market value on the
last business day of such taxable year. This will result in all unrealized
gains and losses being recognized for Federal income tax purposes for the
taxable year. As a consequence, the Partners may have tax liability relating
to unrealized Partnership profits in open positions at year-end. Sixty
percent (60%) of any gain or loss from a Section 1256 contract will be
treated as long-term, and forty percent (40%) as short-term, capital gain or
loss (the "60/40 Rule"), regardless of the actual holding period of the
individual contracts. The character of a Partner's distributive share of
profits or losses of the Partnership from Section 1256 contracts will thus be
60% long-term capital gain or loss and 40% short-term capital gain or loss.
Each partner's distributive share of such gain or loss for a taxable year
will be combined with its other items of capital gain or loss for such year
in computing its Federal income tax liability. The Code contains certain
rules designed to eliminate the tax benefits flowing to high-income taxpayers
from the graduated tax rate schedule and from the personal and dependency
exemptions. The effect of these rules is to tax a portion of a high-income
taxpayer's income at a marginal tax rate of 39.6%. However, long-term
capital gains are now subject to a maximum tax rate of 28%. Subject to
certain limitations, a Limited Partner, other than a corporation, estate or
trust, may elect to carry-back any net Section 1256 contract losses to each
of the three preceding years. The marked-to-market rules do not apply to
interests in personal property of a nature which are actively traded other
than Section 1256 contracts (termed "off-exchange positions").
SECTION 988 FOREIGN CURRENCY TRANSACTIONS
A "Section 988 transaction" is defined as the entering or acquiring of any
forward contract, futures contract, option or similar financial instrument if
the amount to be received or to be paid by reason of a transaction is
denominated in a nonfunctional currency (i.e., other than the dollar) or is
determined by reference to one or more nonfunctional currencies. If the
Section 988 transaction results in a gain or loss, it is considered to be a
foreign currency gain or loss to the extent it does not exceed gain or loss
realized by reason of changes in exchange rates.
CAPITAL GAIN AND LOSS PROVISIONS
If long-term capital gains exceed short-term capital losses, the net capital
gain will be taxed at the same rates as ordinary income. Subject to an
annual limitation of $3,000, the excess of capital losses over capital gains
will be deductible by an individual against ordinary income. Excess capital
losses which are not used to reduce ordinary income in a particular taxable
year may be carried forward to, and treated as capital losses incurred in,
future years.
BUSINESS FOR PROFIT
Code Section 183 sets forth the general rule that no deduction is allowable
to an individual for an activity "not engaged in for profit." These are
activities other than those constituting a trade or business or engaged in
for the production or collection of income or for the management,
conservation, or maintenance of property held for the production of income.
The determination of whether an activity is engaged in for profit is based on
all facts and circumstances, and no single factor is determinative. The
General Partner believes that the employment by the Partnership of an
independent CTA with a strong track record of production of profits, it is
more likely than not, that the activity of the Partnership will be considered
an activity engaged for profit.
SELF-EMPLOYMENT INCOME AND TAX
Section 1402 of the Code provides that an individual's net earnings from
self-employment shall not include the distributive share of income or loss
from any trade or business carried on by a partnership of which he is a
Limited Partner. Therefore, a Limited Partner should not consider that the
ordinary income from the Partnership constitutes net earnings from
self-employment for purposes of either the Social Security Act or the Code.
35
<PAGE>
INDIVIDUAL ALTERNATIVE MINIMUM TAX
Non-corporate taxpayers are subject to the alternative minimum tax to the
extent it exceeds their regular tax. For an entity taxable as an estate or
trust, the first $22,500 of "alternative minimum taxable income" is exempt
from the alternative minimum tax, while for an individual it is the first $33,
750 of such income ($45,000 for a joint return; $22,500 for married taxpayers
filing separately). The exemption amounts will be phased out at the rate of
$.25 for each dollar of alternative minimum taxable income in excess of $150,
000 for married taxpayers filing jointly, $112,500 for single taxpayers, and
$75,000 for married taxpayers filing separately, estates and trusts.
Alternative minimum taxable income in excess of the exemption amount, after
any applicable phase-out, will be subject to a two-tiered rate schedule.
Alternative minimum taxable income (net of exemption) up to and including
$175,000 will be taxed at a rate of 26% and alternative minimum taxable
income over $175,000 will be taxed at a 28% rate. Taxpayers liable for the
alternative minimum tax are required to make estimated tax payments.
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS
Section 265(a)(2) of the Code will disallow any deduction for interest on
indebtedness of a taxpayer incurred or continued to purchase or carry
obligations the interest on which is wholly exempt from tax. The IRS
announced in Revenue Procedure 72-18 that the proscribed purpose will be
deemed to exist with respect to indebtedness incurred to finance a "portfolio
investment." The Revenue Procedure further states that a limited partnership
interest will be regarded as a "portfolio investment," unless rebutted by
other evidence. Therefore, in the case of a Limited Partner owning
tax-exempt obligations, the IRS might take the position that any interest
expense incurred by him to purchase or carry Units should be viewed as
incurred by him to continue carrying tax exempt obligations and that such
Limited Partner should not be allowed to deduct all or a portion of the
interest on any such loans.
NOT A TAX SHELTER
In the opinion of tax counsel, the Partnership does not constitute a tax
shelter, as defined in Code Section 6111(c), since the General Partner
intends to operate the Partnership so that the tax shelter ratio will not
exceed two-to-one at the close of any of the first five years. Accordingly,
the General Partner does not plan to register the Partnership as a tax
shelter with the IRS.
TAXATION OF FOREIGN PARTNERS
An investment in the Partnership should not, by itself, cause a Foreign
Partner to be engaged in a trade or business within the United States. A
foreign person is subject to a 30% withholding tax (unless reduced or
exempted by treaty) on certain types of United States source income which is
not effectively connected with the conduct of a United States trade or
business. This tax must be withheld by the person having control over the
payment of such income. Accordingly, the Partnership may be required to
withhold tax on items of such income which are included in the distributive
share (whether or not actually distributed) of a Foreign Partner. If the
Partnership is required to withhold tax on such income of a Foreign Partner,
the General Partner may pay such tax out of its own funds and then be
reimbursed out of the proceeds of any distribution to or redemption of Units
by the Foreign Partner.
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES
The Code provides that the tax treatment of items of partnership income, gain,
loss, deduction and credit will be determined at the partnership level in a
single partnership proceeding. The Partnership Agreement has appointed the
General Partner the "Tax Matters Partner" to settle any issue involving any
partner with less than a one percent (1%) profits interest unless such a
partner, upon notice, properly elects not to give such authority to the Tax
Matters Partner. The Tax Matters Partner may seek judicial review for any
adjustment to partnership income, but there will be only one such action for
judicial review to which all partners will be bound. The Code provides that
a partner must report a partnership item consistently with its treatment on
the partnership return, unless the partner specifically identifies the
inconsistency or can show that its treatment of the partnership item on its
return is consistent with a schedule furnished to the partner by the
Partnership. Failure to comply with this requirement may result in penalties
for underpayment of tax and could result in an extended statute of
limitations. The statute of limitations for adjustment of tax with respect
to partnership items will generally be three years from the date of filing
the partnership return.
36
<PAGE>
Code Section 6662 imposes a penalty for a substantial understatement of
income tax equal to 20% of the amount of any underpayment attributable to
that understatement. "Understatement" is defined as meaning the excess of
the correct amount of tax required to be shown on the return over the amount
of tax which is actually shown on the return. A substantial understatement
exists for any taxable year if the amount of the "understatement" for the
taxable year exceeds the greater of (1) 10% of the correct tax, or (2) $5,000
($10,000, in the case of a corporation other than an S corporation or a
personal holding company).
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S
In considering an investment in the Partnership, a fiduciary of an employee
benefit plan covered by the Employee Retirement Income Security Act of 1974
("ERISA") (such as, for example, a qualified pension, profit-sharing or stock
bonus plan, or health and welfare plan), or of an Individual Retirement
Account ("IRA") (collectively "Qualified Plans"), taking into account the
facts and circumstances of such Qualified Plan, should consider applicable
fiduciary standards under ERISA. The General Partner intends to limit the
investment in the Partnership by benefit plan investors to less that 25% of
the total equity invested in the Partnership. Prospective plan investors
should consult their own legal and financial advisors regarding these and
other considerations involved in an investment in the Partnership by a
particular plan.
ACCORDINGLY, THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS
OR HER ATTORNEY AS TO THE PROPRIETY OF SUCH AN INVESTMENT IN LIGHT OF
CIRCUMSTANCES OF THE PARTICULAR PLAN.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF EMPLOYEE BENEFIT PLANS IS NOT A
REPRESENTATION BY GENERAL PARTNER OR ANY OTHER PARTY THAT THIS INVESTMENT
MEETS ALL LEGAL REQUIREMENTS OR IS APPROPRIATE WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT
WITH THE ATTORNEY FOR THE PLAN AS TO THE PROPRIETY OF AN INVESTMENT IN THE
PARTNERSHIP.
THE LIMITED PARTNERSHIP AGREEMENT
This Prospectus contains an explanation of some of the more significant terms
of the Limited Partnership Agreement, however, prospective investors are
urged to read the Agreement in its entirety. See Exhibit "A".
FORMATION OF THE PARTNERSHIP
The Partnership Agreement dated December 12, 1994 was filed on January 12,
1995, pursuant to the Indiana Uniform Limited Partnership Act (the "Indiana
Act"). It was Amended and Restated in its entirety on January 12, 1996,
Units of the Partnership purchased and paid for will be fully paid and
nonassessable. The liability of a Limited Partner for the losses, debts and
obligations of the Partnership is limited to the Limited Partner's Capital
Contribution and share of any undistributed assets of the Partnership, so
long as the Limited Partner complies with Article V of the Limited
Partnership Agreement. The Limited Partnership Agreement provides that the
death, incompetency, withdrawal, insolvency, bankruptcy, termination,
liquidation, dissolution or other legal incapacity of a Limited Partner will
not terminate or dissolve the Partnership, and that the legal representatives
of such Limited Partner have no right to become a substituted Limited Partner
solely by reason of such capacity or to withdraw the Limited Partner's
interest except by redemption of Units.
UNITS
The number of Units held by a Partner will determine the Partner's percentage
interest in the Net Assets of the Partnership, such percentage interest to be
equal to an amount calculated by dividing the number of Units held by the
Partner by the aggregate number of outstanding Units of the Partnership, from
time to time.
37
<PAGE>
MANAGEMENT OF PARTNERSHIP AFFAIRS
Responsibility for managing the Partnership is vested solely in the General
Partner. The Limited Partners will not take part in the business or affairs
of the Partnership nor have any voice in the management or operations of the
Partnership. Any material change in the Limited Partnership Agreement or the
Partnership's structure shall, however, require the prior written approval of
the Limited Partners who collectively hold a majority of the Units of the
Partnership; provided, however, the General Partner may change trading
advisors, change the commodity contracts traded by the Partnership, and
change the diversification of the Partnership's assets among the various
types of or in the positions held in commodity contracts without a vote or
other form of permission from the Limited Partners. The Limited Partners who
collectively hold a majority of the Units of the Partnership may, to the
extent permitted by law, without the concurrence of the General Partner, vote
to (i) amend any term in the Limited Partnership Agreement and, if necessary,
the Certificate of Limited Partnership including, but not limited to, the
right to remove the General Partner and elect a new general partner. The
General Partner has no authority to engage in the actual selection or
frequency of trading. Trading must be done by independent CTAs selected by
the General Partner.
ADDITIONAL OFFERINGS
The General Partner may from time to time, in its sole discretion, terminate
any offering of Units, or register additional Units and/or make additional
public or private offerings of Units. No Limited Partner shall have any
preemptive, preferential or other rights with respect to the issuance or sale
of any additional Units. There is no limit upon the amount of contributions
or the maximum number of Units which may be issued, offered, or sold.
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS
Each Partner will have a Capital account, and its initial balance will be the
amount the Partner paid for the Partner's Units. The Net Assets of the
Partnership will be determined monthly, and any increase or decrease from the
end of the preceding month will be added to or subtracted from the accounts
of the Partners in the ratio that each account bears to all accounts.
Distributions from profits or Capital will be made solely at the discretion
of the General Partner. On a monthly basis the General Partner will cause to
be reported to the Partners, the following information: the Net Asset Value
Per Unit as of the end of the month and as of the end of the previous month,
and the percentage change in Net Asset Value per Unit between the two months;
the amount of distributions during the month; the aggregate fixed commission
in lieu of round-turn brokerage commissions, other fees, administrative
expenses, and reserves for claims and other extra-ordinary expenses incurred
or accrued by the Partnership during the month; and, such other information
as the CFTC may, by regulation, require. Partners or their duly authorized
representatives may, after adequate notice, inspect the Partnership books and
records at any reasonable time, to copy, at their expense said records
related to the Capital Account of said Partner.
FEDERAL TAX ALLOCATIONS
At the end of each fiscal year the Partnership's realized capital gain or
loss and ordinary income or loss will be allocated among the Partners, after
having given effect to the fees of the General Partner and the Commodity
Trading Advisor and each Partner's share of such items are includable in the
Partner's personal income tax return.
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER
A purchaser is admitted to the Partnership and is registered on the records
of the Partnership as the owner of those Units. The registered holder is
entitled to receive all distributions, allocations of losses and withdrawals
or reductions of Capital contributions with respect to such Units, and to
vote on any matters submitted to the Limited Partners for voting. Units are
transferable only with the written consent of the General Partner, whose
consent will be withheld if, among other things, the transfer (i) will
violate any applicable laws or governmental rules or regulations, including
without limitation, any applicable Federal or state securities laws and the
limited partnership laws of the State of Indiana; or (ii) will jeopardize the
status of or cause a termination of the Partnership for Federal income tax
purposes or affect characterizations or treatment of income or loss.
38
<PAGE>
TERMINATION OF THE PARTNERSHIP
The Partnership will terminate at 11:59 p.m. twenty-one years from the date
of the Partnership Agreement; by election of the General Partner, in its
sole discretion, to terminate and dissolve the Partnership; the dissolution,
death, resignation, withdrawal, bankruptcy or insolvency of the General
Partner, unless the Limited Partners unanimously elect to carry on the
business and a new general partner has been substituted; upon the occurrence
of an event specified under the laws of the State of Indiana as one effecting
dissolution; any event which shall make unlawful the continued existence of
the Partnership; or, upon the unanimous vote of the Limited Partners.
MEETINGS
No regular meetings of the Partnership are required to be held, however, a
meeting of the Partners for the purpose of acting upon any matter upon which
the Partners are entitled to vote may be called by the General Partner at any
time and shall be called by the General Partner, no more than 15 days after
receipt by the General Partner, either in person or by certified mail, of a
written request, accompanied by an advance of the costs to send notice of the
meeting to all Partners, for such a meeting which sets forth the purpose
thereof, which is signed by one or more of the Partners who collectively own
10% or more of the then outstanding Units.
REDEMPTIONS
No Partner may redeem or liquidate any Units until six months after the
commencement of trading.. Written notice must be received by the General
Partner no later than 12:00 noon on the tenth calendar day immediately
preceding the desired effective date of Redemption which must be as of the
last day of the then current or a future month. The General Partner intends
to use its best efforts to make payment of the Redemption request of the
Partner's pro-rata share of the Net Asset Value, as those terms are defined
in Appendix I, within ten days following the effective date. However,
investors should be aware that while the General Partner intends to so honor
all proper Unit Redemption requests, circumstances existing in the
Partnership's business at the time of such Redemption request, specifically,
the lack of sufficient cash or the accrual for contingent claims, may cause
the General Partner to suspend or delay Redemptions or to honor such requests
only in part. A Redemption fee payable to the Partnership of four percent
(4%) of the value of the Redemption request which is received prior to the
nineteenth day of the twelfth month after the commencement of trading.
Thereafter, there will be a reduction in the Redemption fee of one percent
(1%) for each six (6) months the investment in the Units remained invested in
the Partnership after the initial six months; i.e., a redemption during the
next 7 to 12 months will be charged a 3% Redemption fee; 13 to 18 months 2%,
19 to 24 months 1% and, thereafter, no Redemption fee will be charged.
PLAN OF DISTRIBUTION
The Units are being offered and sold through World Invest Corporation ("WIC"),
2730 SW 3rd Avenue, Fifth Floor, Miami, FL 33129, (305) 858-8100, Ext. 110,
an NASD registered broker dealer and other broker dealers selected by the
General Partner, on a best efforts basis. Ms. Pacult, the sole shareholder,
director, and officer of the General Partner and her husband, Mr. Michael
Pacult, are registered representatives of WIC and they will earn sales and
trailing commissions as a result of the Units they sell and service. A best
efforts basis means there is no requirement that the General Partner or any
broker dealer (sometimes referred to as the underwriter) purchase any unsold
Units, and no person or entity, including the General Partner and the broker
dealer have any obligation, currently or are expected at any time in the
future, to purchase any unsold Units. In addition, the General Partner may,
in its sole discretion, terminate this offering of Units at anytime. There
will be a selling commission of six percent (6%) paid to the broker dealers
selected, from time to time, to sell Units. WIC, the broker dealer, is a
Delaware corporation which was incorporated as Bico Securities, Inc. on
September 30, 1985; its name was changed to World Invest Corporation in 1990.
Its registration as a fully disclosed broker dealer with the SEC became
effective on November 22, 1985, and it became a member of the NASD on March
24, 1986. Neither the General Partner, Ms. Pacult or any of their affiliates
own any interest in WIC or any other broker dealer. The principal business
functions of the broker dealer are currently the offering and trading of
securities. It is contemplated that the broker dealer will participate in
the offering of other commodity pools sponsored by the General Partner or
other persons or entities in competition with the Partnership.
39
<PAGE>
A minimum of 600 Units (the "Minimum") are currently offered for sale at a
fixed value of One Thousand Dollars ($1,000) per Unit, which amount was
arbitrarily established by the General Partner. The amount was not based on
expected earnings and does not represent that the Units have or will have a
market value of or could be resold or redeemed at that price. When the
General Partner has received and accepted subscriptions for the Minimum, the
Partnership will commence trading operations. The remaining 4,400 Units will
be offered at a price per Unit equal to the Net Asset Value Per Unit as of
the close of business on the effective date of such purchase, which will be
the last business day of the month in which the General Partner accepts a
duly executed Subscription Agreement and the required applicable Capital
contribution from the Partner in question. The General Partner will not grant
its permission for any subscription documents or payments, once accepted, to
be withdrawn by a subscriber. There can be no assurance that the Minimum or
any additional Units will be sold. Funds with respect to subscriptions
received and accepted by the General Partner prior to the sale of the Minimum
will be deposited and held in a separate escrow account in the name of the
Partnership at First American State Bank, 1207 Central Avenue, Fort Dodge, IA
50501 (the "Escrow Agent") pending the General Partner's receipt and
acceptance of subscriptions for at least the Minimum. The broker dealer, the
Partnership and the Escrow Agent have entered an escrow agreement. The
Escrow Agent shall receive a fee for its services which will be paid by the
General Partner without a right of reimbursement from the Partnership. Units
purchased by the General Partner, its principals or any Affiliate shall not
be counted in determining whether the Minimum has been subscribed for and
sold. If subscriptions for at least the Minimum are not received and
accepted by the General Partner prior to the close of one year from the
effective date of the Prospectus, this offering shall terminate and the
Escrow Agent is obligated to return all amounts paid by each subscriber,
together with the original subscription documents, within ten days thereafter,
without deduction for fees and costs, together with the subscriber's pro
rata share of interest earned from their deposit to the Escrow Account.
Upon the sale of the Minimum, the escrowed funds (together with the
interest earned thereon) will be released for use by the Partnership on the
first business day after which the Minimum contingency has been satisfied and
this offering shall continue until the earlier of (i) such time as all of the
Units offered hereby have been sold, or (ii) such time as the offering is
terminated by the General Partner, in its sole discretion. No escrow will be
utilized in regard to the sale of any Units after the sale of the Minimum.
SUBSCRIPTION PROCEDURE
In order to purchase Units, an investor must complete and execute a
Suitability Questionnaire and a Subscription Agreement in the form attached
hereto as Exhibits "C" and "D", and deliver the executed Subscription
Documents to the Sales Agent and, if prior to the sale of the Minimum, all
checks shall be made payable to "First American State Bank-Escrow Agent for
Fremont Fund, LP" to be delivered by the Sales Agent to the Escrow Agent
within 24 hours after receipt for deposit to the Escrow Account. After the
sale of the Minimum and the termination of the Escrow Account, all
Subscription Documents shall be sent by the Sales Agent to the General
Partner with a check or money order made payable to "Fremont Fund, Limited
Partnership" for investment in the Fund effective on the next admission date.
Under no circumstances are any sales to be made for cash or any checks to
be made payable to the General Partner or the Selling Agent or any of their
registered representatives or affiliates. The minimum subscription per
investor is $15,000; provided, however, the General Partner may reduce this
minimum investment to $5,000 and investors may make additional investments
above $15,000 in $1,000 increments. All Units subscribed for shall be
recorded on the books of the Partnership subject to the collection of good
funds. Any Units recorded in favor of a Subscriber who has not provided
collectible funds (whether in the form of a bad check or draft, or otherwise)
shall be canceled.
All subscriptions for Units are irrevocable by subscribers, subject only to
possible rights under applicable Federal and state securities laws. The
General Partner may reject any subscription, in whole or in part, in its sole
discretion. Unless higher amounts are otherwise specified in the Subscription
Agreement for residents of a particular state, an investor must have at least
either (i) a minimum net worth (determined exclusive of home, home
furnishings and automobiles) of $150,000, or (ii) a minimum annual gross
income of $45,000 and a minimum net worth of $45,000 (once again determined
exclusive of home, home furnishings and automobiles). In the case of sales
to fiduciary accounts, the net worth and income standards may be met by the
beneficiary, the fiduciary account, or by the donor or grantor who directly
or indirectly supplies the funds to purchase the Units if the donor or
grantor is the fiduciary.
40
<PAGE>
LEGAL MATTERS
LITIGATION AND CLAIMS
There have been no material administrative, civil or criminal actions against
the General Partner (who is the Commodity Pool Operator), the principal of
the General Partner, Ms. Pacult, the Commodity Trading Advisor, the Futures
Commission Merchant, the Introducing Broker, or any principal or any
Affiliate of any of them, pending, on appeal, or concluded, threatened or
otherwise known to them, within the five (5) years preceding the date of this
Prospectus.
LEGAL OPINION
The Scott Law Firm, 2730 S.W. 3rd Avenue, Suite 511, Miami, FL 33129, serves
as general counsel to the Partnership and the General Partner in regard to
the offering of Units and the preparation of this Prospectus, the legality
the Units offered, and the classification of the Partnership as a partnership
for tax purposes. In addition, the Firm will advise the Partnership and its
General Partner, from time to time, in regard to the maintenance of the tax
status of the Partnership and the legality of subsequent offers, if any, of
sale of Units to and transfers by investors. The General Partner has granted
the right to the Law Firm to employ other law firms to assist in specific
matters which may now, or in the future, relate to the sale of Units or the
operation of the Partnership.
A principal of the Law Firm is also a principal of the Broker/Dealer, World
Invest Corporation. The Scott Law Firm will not provide legal advice to any
potential investors or any Partners other than the General Partner, or to
World Invest Corporation in regard to this offering. Those parties should
seek investment, legal, and tax advice from counsel of their choice.
EXPERTS
The financial Statement of the Partnership and the General Partner included
in this Prospectus have been audited by Frank L. Sassetti, & Co., 6611 West
North Avenue, Oak Park, IL 60302, as indicated in their reports included with
each such statement. Such financial statements have been included herein and
any filings to the SEC, CFTC, NFA, and selected state administrators in
reliance upon the authority of Frank L. Sassetti, & Co., as experts in
accounting and auditing, in giving said respective reports. Frank L.
Sassetti, & Co. will be responsible for the audit of the Partnership for the
partial year ending December 31, 1996, assuming the sale of the Minimum. The
accountant who will establish the original books and records for the
Partnership and handle the journal entries, prepare the monthly and annual
statements of account and financial statements, and prepare the Partnership
K-1s, once trading commences, will be Mr. James Hepner, certified public
accountant, 1824 N. Normandy, Chicago, IL 60635. The General Partner will
prepare and file the Federal and applicable state tax returns for the
Partnership. The General Partner is required by CFTC rules and regulations
to send monthly, unaudited, and annual statements of account and financial
statements, audited by an independent certified public accountant, to each
Partner. The unaudited monthly statements will be sent as soon as
practicable after the end of each month and the audited annual financial
statements will be sent within 90 days after the end of each calendar year.
41
<PAGE>
ADDITIONAL INFORMATION
The Partnership, by its General Partner, has filed a Registration Statement
on Form S-1 with the Securities and Exchange Commission with respect to the
issuance and sale of the limited partnership interests (the "Units") under
the Securities Act of 1933. This Prospectus does not contain all of the
information set forth in the Form S-1 filing and reference is made to said
Form S-1 and the Exhibits thereto (for example, the Selling Agreement, the
Escrow Agreement, and the Customer Agreement). The description contained in
this Prospectus to the exhibits to the Registration Statement are summaries.
For further information regarding the Partnership and the Units offered,
the Prospectus, including the Exhibits and other documents filed and periodic
reports, may be inspected, without charge, and copied at the public reference
facilities of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, D.C. 20549 and at its Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and copies of all or any part of this filing can be obtained by mail from the
Securities and Exchange Commission, at such offices, upon payment of the
prescribed rates.
In addition, the books and records for the Partnership will be maintained
for six years at 2990 W 120, Fremont, Indiana 46737 with a duplicate set
maintained at the offices of Mr. James Hepner, Certified Public Accountant,
at 1824 N. Normandy, Chicago, IL 60635, (312) 804-0074. Prospective
investors are invited to review any materials available to the General
Partner relating to the Partnership; the operations of the Partnership; this
offering; the commodity experience and trading history of the CTA; the
General Partner and the commodity brokers and their respective officers,
directors and affiliates; the advisory agreements between the Partnership and
the CTA; the Customer Agreements between the Partnership and the Commodity
Brokers for the Partnership; the Disclosure Documents of the CTA; the forms
filed with the NFA for any registered entity or person related to the
Partnership; and any other matters relating to this offering, the operation
of the Partnership, or the laws applicable to the offering or the Partnership.
The officer and staff of the General Partner will answer all reasonable
inquiries from prospective investors relating thereto. All such materials
will be made available at any mutually convenient location at any reasonable
hour after reasonable prior notice. The General Partner will afford
prospective investors the opportunity to obtain any additional information
necessary to verify the accuracy of any representations or information set
forth in this Prospectus or any exhibits attached hereto to the extent that
the Partnership or the General Partner possess such information or can
acquire it without unreasonable effort or expense. Such review is limited
only by the proprietary and confidential nature of the trading systems to be
utilized by the CTA and by the confidentiality of certain personal
information relating to other investors.
[The balance of this page is intentionally left blank]
42
<PAGE>
<F1>**************************************************************************
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND
INITIAL PERIOD ENDED DECEMBER 31, 1995
(With Auditors' Report Thereon)
GENERAL PARTNER:
Pacult Asset Management, Inc.
2990 West 120
Fremont, Indiana 46737
<PAGE>
Frank L. Sassetti & Co.
Certified Public Accountants
To The Partners
Fremont Fund, Limited Partnership
Fremont, Indiana
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of FREMONT FUND, LIMITED
PARTNERSHIP as of April 30, 1996 and December 31, 1995, and the related
statements of operations, partners' equity and cash flows for the four months
ended April 30, 1996 and the initial period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FREMONT FUND, LIMITED
PARTNERSHIP as of April 30, 1996 and December 31, 1995, and the results of
its operations and its cash flows for the four months ended April 30, 1996,
the initial period ended December 31, 1995, and the cumulative period ended
April 30, 1996 in conformity with generally accepted accounting principles.
Frank L. Sassetti & Co.
May 30, 1996
Oak Park, Illinois
1
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
<TABLE>
BALANCE SHEET
APRIL 30, 1996 AND DECEMBER 31, 1995
ASSETS
<CAPTION>
April 30, December 31,
1996 1995
<S> <C> <C>
Cash $ 1,924 $ 1,926
Organization costs 36,247 34,204
------- -------
$38,171 $36,130
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Due to general partner $36,247 $34,204
PARTNERS' CAPITAL
Limited partners - (1 unit) 962 963
General partner - (1 unit) 962 963
------- -------
Total Partners' Capital 1,924 1,926
------- -------
$38,171 $36,130
</TABLE>
The accompanying notes are an integral part
of the financial statements
2
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
<TABLE>
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND THE INITIAL PERIOD ENDED DECEMBER 31, 1995
<CAPTION>
Four Months Initial Period
Ended Ended
April 30, December 31,
1996 1995
----------- --------------
<S> <C> <C>
REVENUES $ $
__________ __________
Total Revenues __________ __________
EXPENSES
Bank charges 2 74
--------- ---------
Total Expenses 2 74
NET INCOME (LOSS) $ (2) $ (74)
</TABLE>
The accompanying notes are an integral part
of the financial statements
3
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
<TABLE>
STATEMENT OF PARTNERS' EQUITY
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND THE INITIAL PERIOD ENDED DECEMBER 31, 1995
<CAPTION>
Total
Limited General Partners'
Partners Partners Equity
<S> <C> <C> <C>
Initial Partner Contribution $1,000 $1,000 $2,000
Net loss - 1995 (37) (37) (74)
Balance - December 31, 1995 963 963 1,926
Net loss - 1996 (1) (1) (2)
------- ------- -------
Balance - April 30, 1996 $ 962 $ 962 $1,924
Value per unit at December 31, 1995 $963
Total partnership units at
December 31, 1995 2
Value per unit at April 30, 1996 $962
Total partnership units at
April 30, 1996 2
</TABLE>
The accompanying notes are an integral part
of the financial statements
4
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
<TABLE>
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND THE INITIAL PERIOD ENDED DECEMBER 31, 1995
<CAPTION>
Four Months Initial Period
Ended Ended
April 30, December 31,
1996 1995
----------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES -
Net loss $ (2) $ (74)
Net Cash Used In
Operating Activities $ (2) $ (74)
CASH FLOWS FROM INVESTING ACTIVITIES
________ ________
Net Cash Provided By
Investing Activities ________ ________
CASH FLOWS FROM FINANCING
ACTIVITIES -
Initial partner
contributions ________ 2,000
Net Cash Provided By
Investing Activities ________ 2,000
NET INCREASE (DECREASE) IN CASH
(2) 1,926
CASH -
Beginning of period 1,926 ________
End of period $1,924 $1,926
</TABLE>
The accompanying notes are an integral part
of the financial statements
5
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND DECEMBER 31, 1995
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Fremont Fund, Limited Partnership (the Fund) is a limited partnership
engaged in the development stage. The Partnership was formed January 12,
1995. The Fund, once the offering is approved on a Form S-1 filed with the
Securities and Exchange Commission, intends to raise a minimum of $600,000
and a maximum of $5,000,000 in capital from limited partners. Upon the
raising of the minimum, the Fund will engage in speculative trading of
futures contracts in commodities. Pacult Asset Management, Inc. is the
General Partner and the commodity pool operator (CPO) of Fremont Fund,
Limited Partnership. The commodity trading advisor (CTA) is Michael J.
Frischmeyer. He will have the authority to trade so much of the Fund's
equity as is allocated to him by the General Partner.
Income taxes: In accordance with the generally accepted method of
presenting partnership financial statements, the financial statements do not
include assets and liabilities of the partners, including their obligation
for income taxes on their distributive shares of the net income of the Fund
or their rights to refunds on its net loss.
Organizational costs: Organizational costs and costs incurred for the
initial registration with the Securities and Exchange Commission, National
Association of Securities Dealers, Inc., Commodity Futures Trading Commission,
National Futures Association (the "NFA") and the states where the offering
will be made will be capitalized and amortized over twenty-four months on a
straight line method starting when operations begin, payable from profits or
capital subject to a 2% annual capital limitation. All organizational costs
paid to date have been capitalized as of April 30, 1996 and December 31, 1995,
respectively and no amortization expense was charged for either period.
Recurring registration costs, if any, will be charged to expense as incurred.
6
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND DECEMBER 31, 1995
2. FEES
The Fund will be charged the following fees on a monthly basis beginning
when trading commences.
- - A management fee of 4% (annual rate) of the Fund's net assets allocated
to the CTA to trade will be paid to the CTA and 2% of equity to the Fund's
General Partner.
- - An incentive fee of 15% of "new trading profits" will be paid to the CTA.
"New trading profits" includes all income earned by the CTA and expense
allocated to his activity, except interest income, the management fee and
the incentive fee. In the event that trading produces a loss, no incentive
fees will be paid and all losses will be carried over to the following months
until profits from trading exceed the loss.
- - The Fund will pay fixed commissions of 12% (annual rate) of net assets,
payable monthly, to the Introducing Broker affiliated with the General
Partner. The Affiliated Introducing Broker will pay the costs to clear the
trades to the futures commission merchant and all PIT Brokerage costs which
shall include the NFA and exchange fees.
3. STATEMENT OF OPERATIONS/DEVELOPMENT STAGE ACTIVITIES
No information other than bank service charges on the statements of
operations has been presented because, as of April 30, 1996, the partnership
has not commenced business to produce either income or expenses from
operations.
7
<PAGE>
<F2>**************************************************************************
PACULT ASSET MANAGEMENT, INC.
FINANCIAL STATEMENTS
FOUR MONTHS ENDED APRIL 30, 1996
AND
TWELVE MONTHS ENDED DECEMBER 31, 1995
<PAGE>
PACULT ASSET MANAGEMENT, INC.
FOUR MONTHS ENDED APRIL 30, 1996
AND TWELVE MONTHS ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements -
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5
Purchases of units in the partnership will not
acquire or otherwise have any interest
in this Company.
<PAGE>
Frank L. Sassetti & Co.
Certified Public Accountants
To The Shareholders
Pacult Asset Management, Inc.
Fremont, Indiana
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of PACULT ASSET MANAGEMENT,
INC. as of April 30, 1996 and December 31, 1995, and the related statements
of income and retained earnings and cash flows for the four months ended
April 30, 1996 and the twelve months ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PACULT ASSET MANAGEMENT,
INC. as of April 30, 1996 and December 31, 1995, and the results of its
operations and its cash flows for the four months ended April 30, 1996 and
the twelve months ended December 31, 1995, in conformity with generally
accepted accounting principles.
Frank L. Sassetti & Co.
May 24, 1996
Oak Park, Illinois
Purchases of units in the partnership will not
acquire or otherwise have any interest
in this Company.
1
<PAGE>
PACULT ASSET MANAGEMENT, INC.
<TABLE>
BALANCE SHEET
APRIL 30, 1996 AND DECEMBER 31, 1995
ASSETS
<CAPTION>
April 30, December 31,
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash $ 58,994 $ 62,445
Due from Fremont Fund (Note 2) 36,247 34,204
Investments (Note 3) 1,000 1,000
-------- --------
$ 96,241 $ 97,649
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Advances from Futures Investment
Co. (Note 2) $ $
Advances from stockholder (Note 2) ________ ________
Total Current Liabilities ________ ________
Long-Term Debt (Note 4) 100,000 100,000
Stockholder's Equity
Capital stock (common 1,500 shares
authorized, no par value; 1,000
issued and outstanding) 1,000 1,000
Accumulated deficit (4,759) (3,351)
--------- ---------
Total Stockholder's Equity (3,759) (2,351)
$ 96,241 $ 97,649
</TABLE>
Purchases of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements
2
<PAGE>
PACULT ASSET MANAGEMENT, INC.
<TABLE>
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<CAPTION>
Four Months Twelve Months
Ended Ended
April 30, December 31,
1996 1995
----------- --------------
<S> <C> <C>
REVENUES $________ $________
EXPENSES (Note 4)
Registration and dues 670
Professional accounting, legal and
audit fees 658 2,199
Licenses and fees 750 160
-------- --------
Total Expenses 1,408 3,029
NET INCOME (LOSS) (1,408) (3,029)
ACCUMULATED DEFICIT
Beginning of period (3,351) (322)
End of period $(4,759) $(3,351)
</TABLE>
Purchases of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements
3
<PAGE>
PACULT ASSET MANAGEMENT, INC.
<TABLE>
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
AND THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<CAPTION>
Four Months Twelve Months
Ended Ended
April 30, December 31,
1996 1995
----------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,408) $ (3,029)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in due from Fremont Fund (2,043) (28,204)
Purchase of investment interest in
limited partnership ________ (1,000)
Net Cash (Used In)
Investing Activities (2,043) (29,204)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in advances
from stockholder (10,000)
Loan proceeds from stockholder ________ 100,000
Net Cash Provided by
Financing Activities ________ 90,000
NET INCREASE (DECREASE) IN CASH (3,451) 57,767
CASH -
Beginning of period 62,445 4,678
End of period $58,994 $ 62,445
</TABLE>
Purchases of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements
4
<PAGE>
PACULT ASSET MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND DECEMBER 31, 1995
1. STATEMENT OF CASH FLOWS
Net cash provided by operating activities includes no cash payment for
interest nor income taxes for the four months ended April 30, 1996 and the
twelve months ended December 31, 1995.
2. CORPORATE AFFILIATION
The Company's sole shareholder is also a joint owner of Futures
Investment Company. In addition, the Company is the general partner of
Fremont Fund, a limited partnership. Last year, Futures Investment Company
advanced $9,000 to the Company. Ms. Shira Pacult, sole principal to the
Company, advanced $18,000 to the Company. These advances were not
collateralized, bore no interest and were repaid in 1995.
Also, the Company, in its capacity as general partner, has been advancing
the organization costs of Fremont Fund which total $36,247 and $34,204 as of
April 30, 1996 and December 31, 1995, respectively. These funds are not
collateralized and bear no interest.
3. INVESTMENTS
Last year, the Company purchased an interest as the general partner in a
limited partnership with an initial investment of $1,000. As of the balance
sheet date, the partnership has not begun operations.
4. LONG-TERM DEBT
The Company and its sole shareholder signed a subordinated loan agreement
on April 26, 1995, whereby the Company can borrow up to $265,000 from the
shareholder. The loan agreement bears interest at the rate of 6% per annum
and is payable on or before January 12, 2017. On November 28, 1995, the
Company borrowed $100,000 against this commitment, which will mature January
12, 2017, in part to fund the expenses of the Company and to advance proceeds
to the limited partnership.
5
<PAGE>
<F3>**************************************************************************
FREMONT FUND, LIMITED PARTNERSHIP
APPENDIX II - THE CTA
INTRODUCTION AND GENERAL INFORMATION
Michael J. Frischmeyer is the Commodity Trading Advisor (the "CTA") to whom
this Appendix II relates. The CTA conducts the business of the trading
program described in this Prospectus as a sole proprietorship, and the main
business office and main business telephone number of the CTA are as follows:
Main Business Office: 1422 Central Avenue, P.O. Box 898, Fort Dodge, Iowa
50501; Main Business Telephone Number: (515) 955-3800; Facsimile: (515)
955-1444. The books and records of the CTA will be kept and made available
for inspection at the Main Business Office.
DESCRIPTION OF TRADING PROGRAM
A client desiring to establish an account to be traded by the CTA under the
trading program described in this Appendix must purchase Units in the Fremont
Fund, a limited partnership, (the "Partnership") pursuant to the terms
described in this Prospectus and the subscription documents.
The Chicago Corporation will serve as the futures commission merchant for
the Partnership. The minimum account size that an investor must establish
with Partnership is $15,000. The requirement of a minimum size for an
investor in the Partnership is not intended as a protective measure for the
investor or the Partnership, but rather is established for the administrative
convenience of the General Partner. As discussed elsewhere (see e.g., "Risk
Factors" in the Prospectus and below), futures and options trading is a high
risk, speculative business.
The business of the CTA includes managing commodity pools and discretionary
futures accounts, and the CTA will be managing and directing the trading of
accounts for other clients during the same period that the CTA is managing
any particular client's account, including the Partnership account. See
"Risk Factors" and "Conflicts of Interest".
The power of attorney granted to the CTA by the Partnership will not
prohibit the CTA from managing or directing the trading of other accounts
during the term of the power of attorney or from using the same information
and trading strategy obtained, produced or utilized in the performance of
services for the Partnership for the benefit of other clients or the CTA and
his Affiliates. The power of attorney will authorize and empower the CTA to
act for the account of the Partnership to buy, sell (including short sales)
and trade in domestic and foreign futures contracts and options on margin or
otherwise. Under the power of attorney, the CTA will be acting as agent for
the Partnership, and the Partnership will be legally bound as principal for
all trades and any and all other obligations incurred by the CTA. In the
event, therefore, of a deficiency in a Partnership account due to a margin
call, a loss exceeding the value of the account, or otherwise, the
Partnership will be responsible for the full amount of the deficiency, and
investors in the Partnership must be aware and recognize that the potential
liability of the Partnership is not limited to the amount of funds available
in or the value of the Partnership accounts, from time to time. See "Risk
Factors".
Prospective investors should be aware that the power of attorney for the
Partnership to appoint the CTA has been prepared by The Chicago Corporation
and, therefore, contains provisions for the benefit of The Chicago
Corporation, the General Partner, the CTA and other parties, such as
provisions requiring the Partnership to indemnify The Chicago Corporation and
other parties for all losses in the Partnership accounts and for other
matters. The power of attorney utilized by the Partnership to appoint the CTA
provides for arbitration of any disputes to be held before the American Stock
Exchange, Inc., the Chicago Board Options Exchange, Inc. or the National
Association of Securities Dealers, Inc., and in accordance with rules then in
effect.
1
<PAGE>
The types of futures contracts and options which the CTA may trade for the
Partnership include, without limitation, all domestic and foreign currency
futures contracts and all domestic and foreign commodities, currencies and
provisions, and options therefore, as are usually dealt in on exchanges or in
the interbank foreign currency forward markets.
The CTA's trading has been active in the soybean complex (beans, oil and
meal), corn, wheat, cattle (live and feeder), live hog and pork belly
contracts and interest rate futures (long-term treasury bonds, Eurodollars
and others). The CTA's trading has also been active in foreign currencies
and in stock index futures and options and in precious metals (primarily gold
and silver) futures, as well as in futures and options on foreign futures and
options exchanges.
The futures and options traded by the CTA, including the trades to be made
for the Partnership, will be traded on regulated exchanges located in the
United States and in non-United States jurisdictions, including England,
France, Spain, Germany, Canada, Australia, Japan and Singapore. No business
will in any event be conducted which is forbidden by or will be contrary to
any applicable law (whether laws of the United States or a foreign
jurisdiction) or any lawful rules and regulations as are established by the
regulated exchanges (whether United States exchanges or foreign exchanges)
upon which futures or options are traded for the Partnership. Prospective
clients should be aware, however, that trading on foreign exchanges will not
be subject to the regulations of the Commodity Futures Trading Commission
(the "CFTC") and may involve greater risks than trading on exchanges located
in the United States. In addition, the CTA will be effecting certain trades
through the "GLOBEX" system, Project A and other systems, which are
electronic order-entry and matching systems for futures and options. See
"Risk Factors".
The CTA contemplates trading the contracts identified on the following
Futures Exchanges for the Partnership, although other exchanges may be used
and other types of contracts or interests may be traded:
FOREIGN FUTURES EXCHANGES: Deutsche Terminborse - DAX Index; London
International Financial Futures Exchange (LIFFE) - 3-Month Sterling, 3-Month
EuroDeutscheMark, 3-Month EuroLira, 3-Month EuroSwissFranc, German Bond,
British Gilt, Italian Government Bond (BTP), FT-SE 100 Index; Marche A Terme
Internationale de France (MATIF) - 3-Month PIBOR, French Notional Bond, CAC
40 Index; Mercado de Futuros Y Opciones (MEFF) - 3-Month MIBOR, Spanish
Notional Bond; Montreal Stock Exchange - 3-Month Canadian Bankers Acceptance,
Canadian Government Bond; Sydney Futures Exchange - 3-Month Australian Bills,
10 Year Australian Bonds; Tokyo International Financial Futures Exchange
(TIFFE) - EuroYen; Tokyo Stock Exchange - Japanese 10 Year Bond; Singapore
International Financial Futures Exchange (SIMEX) - EuroDollars, Nikkei,
Japanese 10 Year Bond.
UNITED STATES FUTURES EXCHANGES: Chicago Board of Trade (CBOT) - Corn,
Soybeans, Soybean Meal, Soybean Oil, Wheat, Treasury (10 year) Notes,
Treasury Bonds, Municipal Bond Index; Chicago Mercantile Exchange (CME) -
Live Cattle, Feeder Cattle, Live Hogs, Pork Bellies; International Monetary
Market (IMM) a division of the CME - Australian Dollar, Canadian Dollar,
Deutsche Mark, French Franc, Japanese Yen, Swiss Franc, Eurodollars, British
Pound, Mexican Peso; Index and Options Market (IOM) a division of the CME - S
& P 500 Index, S & P Midcap 400 Index; New York Futures Exchange (NYFE) -
NYSE Composite; Financial Instruments Exchange (FINEX) - U.S. Dollar Index,
British Sterling-Deutsche Mark, Deutsche Mark-Yen, Deutsche Mark-French Franc,
Deutsche Mark-Italian Lira; Commodity Exchange, Inc. (COMEX) - Gold, Silver;
Kansas City Board of Trade (KCBT) - Hard Red Winter Wheat, Value Line Index.
The following description of the CTA's trading systems, methods and
strategies is not intended to be exhaustive. In addition, the trading
methods, systems and principles utilized by the CTA are proprietary and
confidential and the following descriptions are general in nature. Further,
in preparing the following discussion, the CTA may have chosen to refer to or
emphasize only specific aspects of his trading systems, methods and
strategies. Prospective clients should also be aware that there are numerous
trading systems, methods and strategies utilized in the various futures and
options contexts and that the following discussion only addresses those
systems, methods and strategies utilized by the CTA. Prospective clients
will be unable to compare the CTA's systems, methods and strategies with any
other trading systems, methods and strategies that are or may be utilized by
other traders or commodity trading advisors or trading managers.
2
<PAGE>
The CTA will rely on his subjective judgment and discretion in the trading
of Partnership accounts. The intent of such subjective judgment and
discretion is to enhance returns and/or lower risks; however, there can be no
assurances that such actions will be successful. One example of such
subjective judgment or discretion may be determining the appropriate level of
aggressiveness during periods of unusual uncertainty.
In certain trades, the CTA will be utilizing a practice known as "Exchange
for Physicals" ("EFP"). EFP is a practice whereby positions in certain
futures contracts may be initiated or liquidated by first executing the
transaction in the appropriate cash market and then arbitraging the position
into the futures market (simultaneously buying the cash position and selling
the futures position, or vice versa). Although it is not anticipated to
occur, if the CTA's ability to engage in such transactions were to be
restricted by the CFTC or other applicable authority, the current trading
techniques employed by the CTA may be impaired to the detriment of clients of
the CTA.
The CTA will utilize the "Average Price System" for those futures and
options contracts where its use is authorized. Under the Average Price
System, when multiple price executions are received on a "blocked" order, the
prices will be averaged and confirmed to each account on the averaged basis,
which will be computed by multiplying the execution prices by the quantities
at those prices divided by the total quantities. See also "Conflicts of
Interest".
BUSINESS BACKGROUND OF THE CTA
The business background of the CTA for at least five (5) years is as follows:
The CTA, Mr. Frischmeyer, was born in 1953. He graduated from Iowa State
University, Ames, Iowa, in 1976 with a bachelor of science degree in
agricultural business. From March of 1976 to November of 1979, Mr.
Frischmeyer was an account executive in the commodity brokerage business of
Stark Brokerage, Inc., Fort Dodge, Iowa. In November of 1979, he joined the
newly organized North Iowa Commodities, now known as Iowa Commodities, Ltd.
He is currently Vice President and owner of approximately 21% of the total
outstanding stock of Iowa Commodities, Ltd. and is registered with the CFTC
and the NFA as an associated person of Iowa Commodities, Ltd. (since 1984).
Iowa Commodities, Ltd. serves as an introducing broker for various traders,
and is registered as an introducing broker with the CFTC (though the NFA) and
a member of the Chicago Board of Trade.
Mr. Frischmeyer is registered with the CFTC and the NFA as a commodity
trading advisor (since October 12, 1984), and, as a commodity pool operator
(since April, 1987). He directs the trading for discretionary accounts for
individuals and entities and devotes substantially all of his time to the
futures and options trading business. Mr. Frischmeyer serves as both the
commodity pool operator and commodity trading advisor for two commodity pools
and also advises other commodity pool operators and other traders and
managers with respect to trading strategies.
Mr. Frischmeyer was affiliated with R.G. Dickinson and Company, based in
Des Moines, Iowa, as registered representative from January, 1986 through
December, 1991. R.G. Dickinson is a securities broker-dealer. Mr.
Frischmeyer became a registered representative with Broker-Dealer Financial
Services, Inc., based in Des Moines, Iowa on January 1, 1992. Mr.
Frischmeyer terminated his association with Broker-Dealer Financial Services
Corporation on December 31, 1994, and became a registered representative of
Investment Guidance, Inc., effective January 1, 1995. Investment Guidance,
Inc. is registered as a fully-disclosed broker-dealer with the Securities and
Exchange Commission and member of the National Association of Securities
Dealers, Inc. It serves as the underwriter for certain limited partnership
commodity pool offerings, in addition to offering general brokerage services
to the public.
PERFORMANCE RECORD OF THE CTA
The performance capsules set forth below are presented on a composite basis.
While there may be differences in the specific trades made in each account,
the trading program and strategies employed for accounts traded in Mr.
Frischmeyer's Managed Account Program, Iowa Commodities Fee Schedule and in
his Managed Account Program, Regular Fee Schedule are the same, and Mr.
Frischmeyer does not believe there are substantial differences between the
trading systems, money management policies or fee structures, or any other
3
<PAGE>
significant differences among the accounts comprising the respective
composites which would make the use of a composite inappropriate. As much as
possible, Mr. Frischmeyer attempts to trade all managed accounts
proportionately the same. For example, if one account is twice the size of
another, it will trade twice the number of contracts so that the two accounts
would generate a similar rate of return.
When reviewing the CTA's performance record, prospective clients should
also be aware, however, that composite performance results tend to create an
"averaging effect" on the performance of the accounts. Further, prospective
clients should recognize that different accounts can have and have had
varying investment results, even though they have been traded according to
the same general trading approach. The reasons for this include numerous
material differences between accounts, including the following:
1. The relative sizes of the accounts, which influences the number of
interests and the number of contracts in each interest traded by accounts, as
well as the diversification of the account and the design and execution of
the CTA's methods. For instance, in the example given above, the larger
account might not be exactly twice the size of the smaller account. The CTA
may, from time to time, determine that certain trades may entail greater than
ordinary risks, which may cause him to also determine that all accounts
should trade a smaller than usual number of contracts. As a result, in some
circumstances larger accounts may trade a reduced number of contracts in such
trades and the small accounts may not participate in such trades.
2. The period during which the accounts were active.
3. The trading approach used--although all accounts may be traded in
accordance with the same general trading approach, such approach can and does
change periodically as a result of research and development by the CTA.
4. Split fills. When entering an order to buy or sell futures or options,
the CTA will block his managed accounts (group them together) so that
multiple accounts can be filled on one order. If fills occur at more than
one price, a small difference in performance can result. In such instances
(except where the Average Price System is applicable, described in the
Sections entitled "Description of Trading Program" and "Conflicts of
Interest"), the fills are arbitrarily allocated so that the highest prices
(whether buys or sells) are successively allocated to the numerically highest
account numbers.
5. Incomplete fills. Occasionally, a blocked order can be partially, but not
completely filled at the price specified on the order. In such an instance,
the CTA attempts to allocate one contract to each account, regardless of
account size, and then allocate the remaining fills in proportion to account
capitalization, but some discrepancies may be unavoidable. See "Conflicts of
Interest" above.
6. The rates and timing of payment of brokerage commissions and fees paid by
the accounts.
7. The amount of administrative costs paid by the accounts.
8. The amount of interest income earned by the accounts.
9. The market condition in which accounts are traded, which in part
determines the quality of trade executions.
10. The timing of orders to open or close positions.
Thus, the results of individual accounts, as a result of differences in the
above factors, may experience better or worse than the composite performance
results shown.
Managed Account Program, Iowa Commodities Fee Schedule
The following capsule shows the past performance of Mr. Frischmeyer's
Managed Account Program, Iowa Commodities Fee Schedule for the most recent
five calendar years and year-to-date (through December, 1995). PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
4
<PAGE>
<TABLE>
Managed Account Program, Iowa Commodities Fee Schedule
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
January (.70) (12.81) 4.47 (2.81) 2.20 9.93
FebruarY (7.62) 5.01 8.95 (5.81) (1.06) (2.55)
March (5.23) (3.56) 22.46 (3.15) (8.96) 4.53
April (10.30) (.65) 12.78 2.84 (.49) 17.35
May (6.81) 14.01 10.17 (5.83) (4.06) (12.15)
June (4.00) (4.96) 26.75 7.77 (2.41) 5.38
July 6.10 12.61 33.84 (7.03) (.12) 4.74
August 18.04 7.13 (20.26) 12.28 (2.01) (19.03)
September 28.62 (2.16) .48 (1.82) 12.55 4.80
October 7.31 2.69 (.13) 14.19 .83 (13.53)
November (3.25) .19 (1.51) 3.23 3.89 (4.01)
December 22.63 (4.96) 15.25 8.40 (3.97) 3.93
Year 42.35 9.71 166.90 21.19 (4.96) (6.73)
<FN>
Name of Commodity Trading Advisor: Michael J. Frischmeyer
Name of Trading Program: Managed Account Program, Iowa Commodities Fee
Schedule ("ICL Program")
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Being Traded Pursuant To The ICL Program:
January 1, 1981
Number of Accounts Directed Pursuant To The ICL Program: 53
Total Assets Under Management of Mr. Frischmeyer: $25,013,426
Total Assets Traded Pursuant To The ICL Program: $15,760,735
Largest Monthly Draw-Down** For The ICL Program During The Most Recent Five
Calendar Years and Year-to-Date (through November, 1995): 8-93/20.26% of
client funds
Worst Peak-to-Valley Draw-Down For The ICL Program During The Most Recent
Five Calendar Years and Year-to-Date (through November, 1995): 5-90 to
5-92/42.08% of net asset value
* Rate of Return is computed by dividing the net trading results by
beginning net asset value for the period. Subsequent to 1990, for those
months when additions or withdrawals exceed ten percent of beginning net
assets, the Time-Weighting of Additions and Withdrawals method is used to
compute rates of return. To date, the month of November, 1991 is the only
period requiring such adjustment.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period
</TABLE>
Six (6) accounts in Mr. Frischmeyer's Managed Account Program, Iowa
Commodities Fee Schedule were opened in 1995 (through December 15, 1995).
Twenty-one (21) such accounts were opened in 1994. Eight such accounts were
opened in 1993, and one such account was opened in 1992, being a commodity
pool which was created as a vehicle for existing managed accounts of less
than $30,000 to permit participation in trades that would be unsuitable for a
small account. In the course of consolidating those accounts, twenty-four
(24) managed accounts were closed. The historical performance of each of
those accounts was comparable to that shown in the composite performance
record. The lifetime performance of such accounts is dependent upon when
each account was opened. The most recent such account (through December 15,
1995) was opened in December, 1995, and the earliest of those accounts was
opened in 1976.
5
<PAGE>
One account in Mr. Frischmeyer's Managed Account Program, Iowa Commodities
Fee Schedule was closed in 1992, one other was closed in 1993, three were
closed in 1994, and five such accounts were closed in 1995 (through December
15, 1995). The account closed in 1992 had been traded for ten quarters from
April, 1990 through September, 1992 and was unprofitable (as were all of Mr.
Frischmeyer's managed accounts during that period). The account closed in
1993 was transferred to Mr. Frischmeyer in 1989, had been profitable, and was
closed due to the dissolution of the partnership which owned the account. Of
the three closed in 1994, one was opened in 1989 and was profitable, one was
opened in 1990 and was profitable (closed for estate planning), and one was
opened in 1976 and was closed due to a death. Of the five closed in 1995,
one was opened in 1981 and was profitable, one was opened in 1984 and was
profitable, and three were opened in 1994 and were unprofitable. Two of the
accounts which were closed in 1995 were closed pursuant to reorganizations by
the client, and resulted in two new accounts being opened in 1995.
Managed Account Program, Regular Fee Schedule
The following capsule shows the past performance of Mr. Frischmeyer's
Managed Account Program, Regular Fee Schedule since the inception of the
Managed Account Program, Regular Fee Schedule and year-to-date (through
December, 1995). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
<TABLE>
Managed Account Program, Iowa Commodities Fee Schedule
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1995 1994
<S> <C> <C>
January 1.49 N/A
February (5.82) N/A
March (3.05) 0.19
April (8.77) (3.40)
May (7.21) 0.58
June (3.64) (6.47)
July 3.64 11.36
August 12.84 3.06
September 22.27 1.30
October 3.90 1.72
November (2.20) (1.64)
December 12.69 (1.52)
Year 23.03 4.31
<FN>
Name of Commodity Trading Advisor: Michael J. Frischmeyer
Name of Trading Program: Managed Account Program, Regular Fee Schedule
("Regular Program")
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Being Traded Pursuant To The Regular Program:
March 1, 1994
Number of Accounts Directed Pursuant To The Regular Program: 195
Total Assets Under Management of Mr. Frischmeyer: $25,013,426
Total Assets Traded Pursuant To The Regular Program: $9,252,681
Largest Monthly Draw-Down** For The Regular Program Since Inception and
Year-to-Date (through November, 1995): 4-95/8.77% of client funds
Worst Peak-to-Valley Draw-Down For The Regular Program Since Inception and
Year-to-Date (through November, 1995): 11-94 to 6-95/26.77% of net asset
value
6
<PAGE>
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period
</TABLE>
As indicated above, the performance capsule is a composite consisting of
195 accounts, comprised of 168 at $40,000, 19 at $80,000, 6 at $120,000, 1 at
$200,000 and one (1) pool with assets in excess of $2,000,000. As also
indicated above, Mr. Frischmeyer's Managed Account Program, Regular Fee
Schedule began in March of 1994. One hundred nineteen (119) such accounts
were opened in 1994, and 98 such accounts were opened in 1995 (through
December 15, 1995). Three of such accounts were closed in 1994, all of which
were profitable. Forty-eight (48) such accounts were closed in 1995 (through
December 15, 1995), of which 10 were profitable, 37 of which were
unprofitable, and one (1) of which was closed before any trading was done in
order to transfer the account to a commodity pool for which Mr. Frischmeyer
acts as the commodity trading advisor. A total of 13 accounts closed in 1995
have transferred to that commodity pool.
The regulations of the CFTC require the CTA to maintain certain other more
detailed performance records. The CTA will provide such other performance
records to the Fremont Fund upon request.
CLIENTS MUST BE AWARE THAT THE INFORMATION INCLUDED IN THE ABOVE
PERFORMANCE CAPSULES HAVE BEEN PREPARED SOLELY BY THE CTA AND HAS NOT BEEN
AUDITED; BUT, IN THE OPINION OF THE CTA, SUCH INFORMATION PRESENTS ACCURATELY
THE PERFORMANCE OF THE POOLS OR ACCOUNTS TRADED BY THE CTA FOR THE PERIODS
SHOWN.
THERE CAN BE NO ASSURANCE THAT THE CTA OR ANY ACCOUNT WILL MAKE ANY PROFITS
AT ALL OR WILL BE ABLE TO AVOID INCURRING SUBSTANTIAL LOSSES.
INDIVIDUAL TRADING BY THE CTA
As discussed in the Section entitled "Conflicts of Interest" in the
Prospectus, the CTA may trade interests for his own account. The records of
the CTA's trading, but not his trading policies or methods, will be available
for inspection by The Fremont Fund.
SUPPLEMENTAL INFORMATION
Pro Forma Performance Record, ICL Managed Account Program
The following capsule shows the pro forma performance of Mr. Frischmeyer's
Managed Account Program, Iowa Commodities Fee Schedule for the most recent
five calendar years and year-to-date (through March, 1996). PAST PERFORMANCE
IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
7
<PAGE>
<TABLE>
Managed Account Program, Iowa Commodities Fee Schedule
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
January (0.43%) (12.56%) 4.74% (2.55%) 2.47%
February (7.37%) 5.29% 8.37% (5.55%) (0.80%)
March (4.96%) (3.29%) 19.39% (2.89%) (8.70%)
April (10.05%) (0.39%) 11.15% 3.11% 0.23%
May (6.55%) 14.30% 8.92% (5.57%) (3.80%)
June (3.74%) (4.70%) 23.04% 8.05% (2.14%)
July 6.38% 11.68% 29.07% (6.77%) 0.15%
August 18.33% 6.35% (16.99%) 12.56% (1.75%)
September 24.17% (1.57%) 0.68% (1.55%) 12.84%
October 6.49% 2.55% 0.16% 14.47% 1.10%
November (2.63%) 0.44% (1.01%) 3.51% 5.70%
December 19.54% (4.29%) 13.25% 8.67% (3.71%)
Year 37.41% 11.33% 144.42% 25.10% (0.42%)
<FN>
Name of Commodity Trading Advisor: Michael J. Frischmeyer
Name of Trading Program: Managed Account Program, Iowa Commodities Fee
Schedule ("ICL Program")
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Being Traded Pursuant To The ICL Program:
January 1, 1981
Number of Accounts Directed Pursuant To The ICL Program: 53
Total Assets Under Management of Mr. Frischmeyer: $25,013,426
Total Assets Traded Pursuant To The ICL Program: $15,760,735
Largest Monthly Draw-Down** For The ICL Program During The Most Recent Five
Calendar Years and Year-to-Date (through March, 1996): 8-93/20.26% of client
funds
Worst Peak-to-Valley Draw-Down For The ICL Program During The Most Recent
Five Calendar Years and Year-to-Date (through March, 1996): 5-90 to 5-92/42.
08% of net asset value
* Rate of Return is computed by dividing the net trading results by
beginning net asset value for the period. Subsequent to 1990, for those
months when additions or withdrawals exceed ten percent of beginning net
assets, the Time-Weighting of Additions and Withdrawals method is used to
compute rates of return. To date, the month of November, 1991 is the only
period requiring such adjustment.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period
</TABLE>
8
<PAGE>
[To keep the rows of the following tables from exceding 132 characters,
Column 'L' and its resulting value has been placed in brackets following
the 'Total's for each year.]
<TABLE>
Michael J. Frischmeyer SUPPLEMENTAL INFORMATION
ICL Managed Account Program PRO FORMA PERFORMANCE RECORD
Under Fremont Fund Fee Schedule
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Pro Forma Pro Forma Pro Forma Pro Forma
Beg. Net Net Trading End. Net Rate of Accrual for Annual Int- Rate of Continuous
Month Assets Additions Withdrawals Results Assets Return 15% Fee erest 4% Return Value of
Investment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1981 1,000.00
January 659,341.33 1,500.00 (69,172.40) 591,668.93 -10.49% 1,671.35 -10.24% 897.62
February 591,668.93 94,208.81 95,027.72 780,905.46 16.06% (3,878.30) 1,833.76 15.72% 1,038.69
March 780,905.46 27,000.00 (70,741.83) 737,163.63 -9.06% 3,878.30 2,028.14 -8.30% 952.45
April 737,163.63 (3,789.50) (170,055.42) 563,318.71 -23.07% 1,737.44 -22.83% 734.98
May 563,318.71 23,509.00 586,827.71 4.17% 1,536.60 4.45% 767.65
June 586,827.71 150,311.75 737,139.46 25.61% 1,768.82 25.92% 966.60
July 737,139.46 14,329.50 751,468.96 1.94% 1,988.78 2.21% 987.99
August 751,468.96 (75,010.58) 281,107.25 957,565.63 37.41% (44,880.31) 2,283.27 31.74% 1,301.58
September 957,565.63 (8,100.00) (76,836.00) 872,629.63 -8.02% 11,525.40 2,445.14 -6.57% 1,216.13
October 872,629.63 7,128.75 183,371.22 1,063,129.60 21.01% 27,505.68) 2,586.17 18.16% 1,436.95
November 1,063,129.60 (21,386.62) (394,134.47) 647,608.51 -37.07% 27,505.68 2,285.55 -34.27% 944.49
December 647,608.51 (129,410.75) 518,197.76 -19.98% 1,557.52 -19.74% 758.03
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 129,837.56 (108,286.70) (162,694.43)
[(L) Pro Forma Annual Rate of Return: -24.20%]
1982
January 518,197.76 3,446.91 (2,449.16) 519,195.51 -0.47% 1,385.96 -0.21% 756.47
February 519,195.51 (29,816.77) (10,602.59) 478,776.15 -2.04% 1,333.29 -1.79% 742.97
March 478,776.15 (31,388.98) 200.50 447,587.67 0.04% 1,237.62 0.30% 745.20
April 447,587.67 (23,455.87) 61,520.05 485,651.85 13.74% 1,246.81 14.02% 849.70
May 485,651.85 (57,224.30) 428,427.55 -11.78% 1,221.21 -11.53% 751.72
June 428,427.55 2,249.50 430,677.05 0.53% 1,147.76 0.79% 757.68
July 430,677.05 526.58 (51,961.00) 379,242.63 -12.06% 1,082.05 -11.81% 668.17
August 379,242.63 (850.73) (30,819.25) 347,572.65 -8.13% 971.03 -7.87% 615.58
September 347,572.65 65,014.00 412,586.65 18.71% 1,015.57 19.00% 732.53
October 412,586.65 (64,500.00) 57,058.25 405,144.90 13.83% 1,092.49 14.09% 835.77
November 405,144.90 (5,247.52) (28,489.85) 371,407.53 -7.03% 1,037.47 -6.78% 779.14
December 371,407.53 (3,784.97) 3,777.50 371,400.06 1.02% 992.39 1.28% 789.14
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 3,973.49 (159,044.84) 8,273.65
[(L) Pro Forma Annual Rate of Return: 4.10%]
1983
January 371,400.06 11,205.13 38,297.84 420,903.03 10.31% 1,058.52 10.60% 872.77
February 420,903.03 7,725.40 50,535.12 479,163.55 12.01% 1,202.49 12.29% 980.05
March 479,163.55 (20,550.00) 206,178.19 664,791.74 43.03% 1,528.32 43.35% 1,404.88
April 664,791.74 (65,250.00) 61,857.86 661,399.60 9.30% (3,745.30) 1,771.79 9.01% 1,531.43
May 661,399.60 (81,132.38) 580,267.22 -12.27% 3,745.30 1,658.87 -11.45% 1,356.08
June 580,267.22 (1,000.00) (87,886.25) 491,380.97 -15.15% 1,431.72 -14.90% 1,154.04
July 491,380.97 (296.22) 3,979.00 495,063.75 0.81% 1,317.89 1.08% 1,166.48
August 495,063.75 6,453.64 105,229.80 606,747.19 21.26% 1,472.02 21.55% 1,417.89
September 606,747.19 3,160.00 609,907.19 0.52% 1,625.45 0.79% 1,429.08
October 609,907.19 37,500.00 (13,362.42) 634,044.77 -2.19% 1,661.92 -1.92% 1,401.66
November 634,044.77 70,645.31 85,395.10 790,085.18 13.47% (6,052.73) 1,902.64 12.81% 1,581.27
December 790,085.18 (54,796.02) 18,481.20 753,770.36 2.34% (2,772.18) 2,062.59 2.25% 1,616.83
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 133,529.48 (141,892.24) 390,733.06
[(L) Pro Forma Annual Rate of Return: 104.88%]
1984
January 753,770.36 13,600.00 134,411.15 901,781.51 17.83% (20,161.67) 2,211.82 15.45% 1,866.64
February 901,781.51 1,747.25 (28,960.80) 874,567.96 -3.21% 4,344.12 2,373.20 -2.47% 1,820.60
March 874,567.96 (10,000.00) (63,809.00) 800,758.96 -7.30% 9,571.35 2,238.24 -5.95% 1,712.35
April 800,758.96 9,000.00 133,568.76 943,327.72 16.68% (20,035.31) 2,330.10 14.47% 1,960.12
May 943,327.72 (17,000.00) (22,532.95) 903,794.77 -2.39% 3,379.94 2,467.76 -1.77% 1,925.45
June 903,794.77 10,000.00 266,174.02 1,179,968.79 29.45% (39,926.10) 2,783.91 25.34% 2,413.38
July 1,179,968.79 (43,500.00) 850,133.11 1,986,601.90 72.05% (127,519.97) 4,230.54 61.60% 3,899.98
August 1,986,601.90 (133,901.84) (198,201.25) 1,654,498.81 -9.98% 29,730.19 4,864.51 -8.24% 3,578.80
September 1,654,498.81 (26,500.00) (85,189.95) 1,542,808.86 -5.15% 12,778.49 4,271.60 -4.12% 3,431.41
October 1,542,808.86 (28,000.00) 103,820.81 1,618,629.67 6.73% (15,573.12) 4,223.68 5.99% 3,637.08
November 1,618,629.67 (22,500.00) 549,514.50 2,145,644.17 33.95% (82,427.18) 5,029.07 29.17% 4,697.93
December 2,145,644.17 (16,500.00) 12,812.24 2,141,956.41 0.60% (1,921.84) 5,728.23 0.77% 4,734.31
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 34,347.25 (297,901.84) 1,651,740.64
[(L) Pro Forma Annual Rate of Return: 192.81%]
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
9
<PAGE>
<TABLE>
Michael J. Frischmeyer SUPPLEMENTAL INFORMATION
ICL Managed Account Program PRO FORMA PERFORMANCE RECORD
Under Fremont Fund Fee Schedule
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Pro Forma Pro Forma Pro Forma Pro Forma
Beg. Net Net Trading End. Net Rate of Accrual for Annual Int- Rate of Continuous
Month Assets Additions Withdrawals Results Assets Return 15% Fee erest 4% Return Value of
Investment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985
January 2,141,956.41 (57,737.64) (572,332.00) 1,511,886.77 -26.72% 4,881.53 -26.49% 3,480.09
February 1,511,886.77 (26,500.00) 543,943.15 2,029,329.92 35.98% 4,731.07 36.29% 4,743.04
March 2,029,329.92 (207,821.01) (583,498.10) 1,238,010.81 -28.75% 4,365.17 -28.54% 3,389.46
April 1,238,010.81 (8,000.00) (106,723.84) 1,123,286.97 -8.62% 3,154.69 -8.37% 3,105.91
May 1,123,286.97 10,500.00 99,681.74 1,233,468.71 8.87% 3,148.63 9.15% 3,390.24
June 1,233,468.71 (46,342.03) 1,187,126.68 -3.76% 3,233.92 -3.49% 3,271.75
July 1,187,126.68 (2,500.00) 104,887.06 1,289,513.74 8.84% 3,308.79 9.11% 3,569.94
August 1,289,513.74 (10,000.00) 369,258.16 1,648,771.90 28.64% 3,925.55 28.94% 4,603.08
September 1,648,771.90 (36,755.00) 82,811.23 1,694,828.13 5.02% 4,467.05 5.29% 4,846.75
October 1,694,828.13 (45,748.27) (187,183.90) 1,461,895.96 -11.04% 4,217.38 -10.80% 4,323.51
November 1,461,895.96 (7,000.00) (45,478.76) 1,409,417.20 -3.11% 3,836.07 -2.85% 4,200.36
December 1,409,417.20 (27,800.00) 151,157.28 1,532,774.48 10.72% 3,930.77 11.00% 4,662.55
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 10,500.00 (429,861.92) (189,820.01)
[(L) Pro Forma Annual Rate of Return: -1.52%]
1986
January 1,532,774.48 (105,719.95) 222,569.02 1,649,623.55 14.52% (4,912.35) 4,251.68 14.48% 5,337.57
February 1,649,623.55 (241,534.64) 480,080.98 1,888,169.89 29.10% (72,012.15) 4,726.49 25.02% 6,673.23
March 1,888,169.89 (23,802.94) (645,256.81) 1,219,110.14 -34.17% 76,924.50 4,151.33 -29.88% 4,679.28
April 1,219,110.14 37,000.00 129,226.05 1,385,336.19 10.60% 3,479.54 10.89% 5,188.64
May 1,385,336.19 (1,400.00) (3,837.55) 1,380,098.64 -0.28% 3,694.62 -0.01% 5,188.11
June 1,380,098.64 (71,613.66) (147,292.12) 1,161,192.86 -10.67% 3,395.17 -10.43% 4,647.17
July 1,161,192.86 (25,218.58) 75,525.76 1,211,500.04 6.50% 3,169.92 6.78% 4,962.11
August 1,211,500.04 (303,038.00) 908,462.04 -25.01% 2,832.27 -24.78% 3,732.52
September 908,462.04 23,000.00 (73,920.38) 857,541.66 -8.14% 2,359.38 -7.88% 3,438.50
October 857,541.66 16,642.41 (53,244.64) 820,939.43 -6.21% 2,242.45 -5.95% 3,234.00
November 820,939.43 2,434.98 (15,172.56) 808,201.85 -1.85% 2,176.53 -1.58% 3,182.80
December 808,201.85 (27,325.10) (6,765.60) 774,111.15 -0.84% 2,113.97 -0.58% 3,164.48
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 79,077.39 (496,614.87) (341,125.85)
[(L) Pro Forma Annual Rate of Return: -32.13%]
1987
January 774,111.15 11,476.54 (3,103.94) 205,250.60 987,734.35 26.51% 2,353.83 26.82% 4,013.14
February 987,734.35 (12,985.05) 40,861.32 1,015,610.62 4.14% 2,676.47 4.41% 4,190.04
March 1,015,610.62 (11,600.00) (75,509.92) 928,500.70 -7.43% 2,597.33 -7.18% 3,889.23
April 928,500.70 (40,000.00) (15,376.50) 873,124.20 -1.66% 2,406.97 -1.40% 3,834.90
May 873,124.20 (116,930.21) 756,193.99 -13.39% 2,176.77 -13.14% 3,330.89
June 756,193.99 2,035.00 (40,527.06) 717,701.93 -5.36% 1,969.12 -5.10% 3,161.05
July 717,701.93 (82,888.24) 634,813.69 -11.55% 1,806.96 -11.30% 2,803.93
August 634,813.69 96,481.21 731,294.90 15.20% 1,825.12 15.49% 3,238.14
September 731,294.90 (13,200.00) 244,209.61 962,304.51 33.39% 2,262.65 33.70% 4,329.51
October 962,304.51 (5,000.00) 17,979.14 975,283.65 1.87% 2,588.62 2.14% 4,422.05
November 975,283.65 60,000.00 280,221.24 1,315,504.89 28.73% (3,423.80) 3,060.49 28.70% 5,690.96
December 1,315,504.89 (5,000.00) 186,678.79 1,497,183.68 14.19% (28,001.82) 3,757.75 12.35% 6,393.66
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 73,511.54 (90,888.99) 740,449.98
[(L) Pro Forma Annual Rate of Return: 102.04%]
1988
January 1,497,183.68 (265,000.00) 204,319.98 1,436,503.66 13.65% (30,648.00) 3,919.41 11.86% 7,152.06
February 1,436,503.66 13,841.68 (22,099.71) (77,645.68) 1,350,599.95 -5.41% 11,646.85 3,723.57 -4.34% 6,842.00
March 1,350,599.95 19,000.00 (11,500.00) 339,964.20 1,698,064.15 25.17% (50,994.63) 4,073.02 21.70% 8,326.53
April 1,698,064.15 (207,000.00) 137,326.91 1,628,391.06 8.09% (20,599.04) 4,444.14 7.14% 8,920.70
May 1,628,391.06 (9,000.00) (44,017.69) 1,575,373.37 -2.70% 6,602.65 4,280.23 -2.03% 8,739.18
June 1,575,373.37 19,000.00 4,105.46) (31,010.69) 1,509,257.22 -1.97% 4,651.60 4,121.07 -1.41% 8,615.82
July 1,509,257.22 (12,000.00) 549,714.40 2,046,971.62 36.42% (82,457.16) 4,751.12 31.27% 11,310.34
August 2,046,971.62 20,000.00 465,538.68 2,532,510.30 22.74% (69,830.80) 6,118.19 19.63% 13,530.60
September 2,532,510.30 (1,000.00) (146,591.23) 2,384,919.07 -5.79% 21,988.68 6,569.69 -4.66% 12,899.97
October 2,384,919.07 (232,500.00) (428,450.60) 1,723,968.47 -17.96% 5,489.47 -17.73% 10,612.19
November 1,723,968.47 20,000.00 (68,490.69) 1,675,477.78 -3.97% 4,541.66 -3.71% 10,218.54
December 1,675,477.78 10,000.00 140,761.28 1,826,239.06 8.40% 4,678.29 8.68% 11,105.56
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 101,841.68 (814,205.17) 1,041,418.87
[(L) Pro Forma Annual Rate of Return: 73.70%]
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
10
<PAGE>
<TABLE>
Michael J. Frischmeyer SUPPLEMENTAL INFORMATION
ICL Managed Account Program PRO FORMA PERFORMANCE RECORD
Under Fremont Fund Fee Schedule
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Pro Forma Pro Forma Pro Forma Pro Forma
Beg. Net Net Trading End. Net Rate of Accrual for Annual Int- Rate of Continuous
Month Assets Additions Withdrawals Results Assets Return 15% Fee erest 4% Return Value of
Investment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989
January 1,826,239.06 279,079.72 17,052.80 2,122,371.58 0.93% 5,275.34 1.22% 11,241.34
February 2,122,371.58 (111,669.57) 2,010,702.01 -5.26% 5,521.79 -5.00% 10,679.11
March 2,010,702.01 229,915.38 2,240,617.39 11.43% 5,679.76 11.72% 11,930.39
April 2,240,617.39 (12,000.00) 274,378.63 2,502,996.02 12.25% (8,024.58) 6,337.47 12.17% 13,382.37
May 2,502,996.02 (5,000.00) 441,674.46 2,939,670.48 17.65% (66,251.17) 7,271.40 15.29% 15,428.46
June 2,939,670.48 (7,256.92) (440,179.22) 2,492,234.34 -14.97% 66,026.88 7,257.02 -12.48% 13,502.86
July 2,492,234.34 (38,000.00) 520,621.79 2,974,856.13 20.89% (78,093.27) 7,304.03 18.05% 15,940.04
August 2,974,856.13 20,500.00 (284,729.15) 2,710,626.98 -9.57% 42,709.37 7,595.81 -7.88% 14,683.94
September 2,710,626.98 (53,000.00) (9,738.26) 2,647,888.72 -0.36% 1,460.74 7,158.98 -0.04% 14,677.88
October 2,647,888.72 (36,500.00) 503,862.01 3,115,250.73 19.03% (75,579.30) 7,699.55 16.47% 17,094.63
November 3,115,250.73 (3,388.44) (162,887.40) 2,948,974.89 -5.23% 24,433.11 8,101.81 -4.18% 16,379.33
December 2,948,974.89 (17,000.00) 157,111.55 3,089,086.44 5.33% (23,566.73) 8,066.85 4.80% 17,165.88
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 299,579.72 (172,145.36) 1,135,413.02
[(L) Pro Forma Annual Rate of Return: 54.57%]
1990
January 3,089,086.44 165,382.29 (97,000.00) 306,791.17 3,464,259.90 9.93% (46,018.68) 8,755.27 8.73% 18,663.63
February 3,464,259.90 20,000.00 (2,000.00) (88,501.11) 3,393,758.79 -2.55% 13,275.17 9,162.31 -1.91% 18,307.71
March 3,393,758.79 60,000.00 (130,500.00) 153,743.43 3,477,002.22 4.53% (23,061.51) 9,179.34 4.12% 19,062.20
April 3,477,002.22 (33,500.00) 603,433.00 4,046,935.22 17.35% (90,514.95) 10,051.98 15.04% 21,929.31
May 4,046,935.22 195,000.00 (3,000.00) (491,629.43) 3,747,305.79 -12.15% 73,744.41 10,413.11 -10.07% 19,721.32
June 3,747,305.79 (29,500.00) 201,443.55 3,919,249.34 5.38% (30,216.53) 10,242.52 4.84% 20,676.36
July 3,919,249.34 93,000.00 (69,000.00) 185,656.75 4,128,906.09 4.74% (27,848.51) 10,752.34 4.30% 21,565.62
August 4,128,906.09 30,000.00 (785,827.04) 3,373,079.05 -19.03% 27,848.51 10,022.65 -18.12% 17,658.98
September 3,373,079.05 161,826.42 3,534,905.47 4.80% 9,229.07 5.07% 18,554.51
October 3,534,905.47 (2,000.00) (478,138.00) 3,054,767.47 -13.53% 8,803.80 -13.28% 16,091.00
November 3,054,767.47 39,000.00 (2,500.00) (122,422.10) 2,968,845.37 -4.01% 8,047.55 -3.74% 15,488.53
December 2,968,845.37 (4,000.00) 116,780.29 3,081,625.66 3.93% 8,083.43 4.21% 16,139.95
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 602,382.29 (373,000.00) (236,843.07)
[(L) Pro Forma Annual Rate of Return: -5.98%]
1991
January 3,081,625.66 51,274.29 (6,000.00) 67,767.00 3,194,666.95 2.20% 8,385.13 2.47% 16,538.79
February 3,194,666.95 (39,000.00) (33,865.71) 3,121,801.24 -1.06% 8,438.80 -0.80% 16,407.16
March 3,121,801.24 (10,609.81) (279,572.85) 2,831,618.58 -8.96% 7,953.77 -8.70% 14,979.62
April 2,831,618.58 52,692.39 (70,000.00) (13,952.90) 2,800,358.07 -0.49% 7,524.32 -0.23% 14,945.61
May 2,800,358.07 (12,564.13) (113,807.68) 2,673,986.26 -4.06% 7,313.72 -3.80% 14,377.25
June 2,673,986.26 49,900.00 (16,171.06) (64,434.78) 2,643,280.42 -2.41% 7,103.87 -2.14% 14,069.00
July 2,643,280.42 (42,600.00) (3,042.22) 2,597,638.20 -0.12% 7,001.87 0.15% 14,090.07
August 2,597,638.20 (15,300.00) (52,266.12) 2,530,072.08 -2.01% 6,850.62 -1.75% 13,843.73
September 2,530,072.08 317,559.45 2,847,631.53 12.55% 7,184.61 12.84% 15,620.62
October 2,847,631.53 623.07 (46,000.00) 23,732.88 2,825,987.48 0.83% 7,579.95 1.10% 15,792.39
November 2,825,987.48 1,100,674.14 (21,883.39) 151,776.47 4,056,554.70 5.37% 9,195.08 5.70% 16,691.94
December 4,056,554.70 (22,106.09) (161,037.88) 3,873,410.73 -3.97% 10,594.43 -3.71% 16,072.89
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 1,255,163.89 (302,234.48) (161,144.34)
[(L) Pro Forma Annual Rate of Return: -0.42%]
1992
January 3,873,410.73 104,809.67 (62,558.03) (108,981.58) 3,806,680.79 -2.81% 10,260.60 -2.55% 15,663.25
February 3,806,680.79 (37,950.00) (221,109.31) 3,547,621.48 -5.81% 9,825.35 -5.55% 14,793.88
March 3,547,621.48 212,862.28 (213,862.28) (111,802.04) 3,434,819.44 -3.15% 9,328.54 -2.89% 14,366.56
April 3,434,819.44 24,435.18 (90,941.95) 97,643.88 3,465,956.55 2.84% 9,219.44 3.11% 14,813.53
May 3,465,956.55 302.97 (38,600.00) (201,979.58) 3,225,679.94 -5.83% 8,940.03 -5.57% 13,988.48
June 3,225,679.94 25,518.78 (21,250.00) 250,774.54 3,480,723.26 7.77% 8,959.75 8.05% 15,114.84
July 3,480,723.26 235.23 (29,000.00) (244,546.82) 3,207,411.67 -7.03% 8,935.35 -6.77% 14,091.71
August 3,207,411.67 (9,000.00) 393,721.76 3,592,133.43 12.28% 9,084.19 12.56% 15,861.43
September 3,592,133.43 (65,282.60) 3,526,850.83 -1.82% 9,510.96 -1.55% 15,615.17
October 3,526,850.83 1,286.44 (123,123.86) 500,534.39 3,905,547.80 14.19% 9,929.68 14.47% 17,875.25
November 3,905,547.80 (10,000.00) 126,302.13 4,021,849.93 3.23% 10,591.00 3.51% 18,501.80
December 4,021,849.93 7,348.38 (61,797.83) 337,694.46 4,305,094.94 8.40% 11,124.80 8.67% 20,106.48
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 376,798.93 (698,083.95) 752,969.23
[(L) Pro Forma Annual Rate of Return: 25.10%]
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
11
<PAGE>
<TABLE>
Michael J. Frischmeyer SUPPLEMENTAL INFORMATION
ICL Managed Account Program PRO FORMA PERFORMANCE RECORD
Under Fremont Fund Fee Schedule
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Pro Forma Pro Forma Pro Forma Pro Forma
Beg. Net Net Trading End. Net Rate of Accrual for Annual Int- Rate of Continuous
Month Assets Additions Withdrawals Results Assets Return 15% Fee erest 4% Return Value of
Investment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
January 4,305,094.94 73,914.44 (248,150.00) 192,418.99 4,323,278.37 4.47% 11,527.51 4.74% 21,058.99
February 4,323,278.37 13,000.00 (6,000.00) 387,130.93 4,717,409.30 8.95% (37,387.67) 12,078.36 8.37% 22,821.44
March 4,717,409.30 (8,000.00) 1,059,621.28 5,769,030.58 22.46% (158,943.19) 14,009.88 19.39% 27,246.44
April 5,769,030.58 32,118.86 (224,900.00) 737,454.82 6,313,704.26 12.78% (110,618.22) 16,142.53 11.15% 30,283.15
May 6,313,704.26 10,000.00 (119,082.03) 642,234.37 6,846,856.60 10.17% (96,335.16) 17,582.51 8.92% 32,985.84
June 6,846,856.60 4,460.06 (52,000.00) 1,831,758.09 8,631,074.75 26.75% (274,763.71) 20,678.52 23.04% 40,586.54
July 8,631,074.75 176,000.00 (280,900.00) 2,920,344.18 11,446,518.93 33.84% (438,051.63) 26,823.67 29.07% 52,385.34
August 11,446,518.93 50,000.00 (307,000.00) (2,319,311.14) 8,870,207.79 -20.26% 347,896.67 27,143.15 -16.99% 43,487.32
September 8,870,207.79 120,000.00 (51,600.00) 42,873.25 8,981,481.04 0.48% (6,430.99) 23,849.86 0.68% 43,782.91
October 8,981,481.04 (55,500.00) (11,465.93) 8,914,515.11 -0.13% 23,909.05 0.14% 43,843.57
November 8,914,515.11 81,500.00 (24,000.00) (134,237.61) 8,837,777.50 -1.51% 23,717.06 -1.24% 43,300.00
December 8,837,777.50 5,126.37 (311,825.57) 1,348,060.88 9,879,139.18 15.25% (180,353.60) 25,005.80 13.50% 49,143.61
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 566,119.73 (1,688,957.60) 6,696,882.11
[(L) Pro Forma Annual Rate of Return: 144.42%]
1994
January 9,879,139.18 180,550.63 (192,400.00) (1,265,598.22) 8,601,691.59 -12.81% 24,690.39 -12.56% 42,970.73
February 8,601,691.59 316,402.58 (50,000.00) 430,695.06 9,298,789.23 5.01% 23,915.04 5.29% 45,241.79
March 9,298,789.23 636,000.00 (117,197.44) (331,151.96) 9,486,439.83 -3.56% 25,097.07 -3.29% 43,752.73
April 9,486,439.83 12,000.00 (93,000.00) (62,072.86) 9,343,366.97 -0.65% 25,156.62 -0.39% 43,582.47
May 9,343,366.97 147,000.00 (30,000.00) 1,309,155.67 10,769,522.64 14.01% 26,870.82 14.30% 49,814.41
June 10,769,522.64 33,211.63 (212,667.53) (534,096.04) 10,055,970.70 -4.96% 27,822.86 -4.70% 47,472.64
July 10,055,970.70 130,000.00 (93,000.00) 1,268,348.59 11,361,319.29 12.61% (122,292.04) 28,613.50 11.68% 53,018.07
August 11,361,319.29 598,313.78 (126,000.00) 810,535.40 12,644,168.47 7.13% (121,580.31) 32,071.33 6.35% 56,382.77
September 12,644,168.47 41,000.00 (277,000.00) (272,564.34) 12,135,604.13 -2.16% 40,884.65 33,105.78 -1.57% 55,497.29
October 12,135,604.13 19,953.44 (34,000.00) 325,895.48 12,447,453.05 2.69% (48,884.32) 32,842.96 2.55% 56,914.29
November 12,447,453.05 430,000.00 (70,000.00) 24,175.31 12,831,628.36 0.19% (3,626.30) 33,772.85 0.44% 57,162.67
December 12,831,628.36 475,000.00 (105,868.97) (636,416.75) 12,564,342.64 -4.96% 52,510.62 33,929.02 -4.29% 54,712.61
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 3,019,432.06 (1,401,133.94) 1,066,905.34
[(L) Pro Forma Annual Rate of Return: 11.33%]
1995
January 12,564,342.64 336,988.06 (277,672.56) (87,339.38) 12,536,318.76 -0.70% 33,534.48 -0.43% 54,478.32
February 12,536,318.76 15,000.00 (62,110.75) (955,879.41) 11,533,328.60 -7.62% 32,157.05 -7.37% 50,464.15
March 11,533,328.60 420,000.00 (81,841.85) (602,979.72) 11,268,507.03 -5.23% 30,463.25 -4.96% 47,959.10
April 11,268,507.03 19,492.48 (90,395.72) (1,160,705.75) 10,036,898.04 -10.30% 28,464.02 -10.05% 43,140.25
May 10,036,898.04 201,262.88 (28,737.12) (683,837.91) 9,525,585.89 -6.81% 26,135.48 -6.55% 40,313.33
June 9,525,585.89 (4,000.00) (381,377.57) 9,140,208.32 -4.00% 24,937.50 -3.74% 38,804.84
July 9,140,208.32 90,000.00 (18,000.00) 557,451.71 9,769,660.03 6.10% 25,263.58 6.38% 41,278.76
August 9,769,660.03 1,762,340.07 11,532,000.10 18.04% 28,459.02 18.33% 48,845.25
September 11,532,000.10 293,542.39 (54,000.00) 3,300,250.79 15,071,793.28 28.62% (548,534.38) 35,542.67 24.17% 60,651.04
October 15,071,793.28 10,000.00 (11,500.00) 1,102,463.65 16,115,867.75 7.31% (165,369.55) 41,666.72 6.49% 64,589.71
November 16,115,867.75 270,000.00 (156,000.00) (547,883.31) 15,681,984.44 -3.40% 82,182.50 42,481.93 -2.63% 62,893.52
December 15,681,984.44 200,000.00 (180,000.00) 3,549,258.80 19,251,243.24 22.63% (532,388.82) 46,670.79 19.54% 75,180.03
- ---------- ------------- ---------- ------------ -------------- ------------- ------- ------------ ----------- --------- ----------
Totals 1,856,285.81 (964,258.00) 5,851,761.97
[(L) Pro Forma Annual Rate of Return: 37.41%]
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
THE COMPOSITE PERFORMANCE ANALYSIS INCLUDES ACCOUNTS IN EXISTENCE FROM 1981
THROUGHT THE PRESENT.
12
<PAGE>
SUPPLEMENTAL INFORMATION
ASSUMPTIONS UNDERLYING
THE PRO FORMA PERFORMANCE RECORD
COMPILED UNDER FREMONT FUND FEE SCHEDULE
Data appearing in pro forma table columns A, B, C, D, E, F and G is
original data. The Rate Of Return column, G, shows the monthly rate of
return for the accounts comprising the original data. Column H contains the
monthly pro forma accruals for the 15% of New Trading Profits to be paid to
the CTA as an incentive fee. Column I contains the monthly interest earned
by Fremont Fund assuming that 80% of the average monthly balance earns
interest at an annual rate of 4%. Columns J and K are a derived Rate Of
Return and Value Of Investment, incorporating columns H and I with the
original data in columns A, B, C, D, E, and F.
The assumptions used in the pro forma performance table are as follows:
1. The accounts summarized in columns A through G pay round-turn trading
commissions averaging $70.00 per contract, exchange fees on the Chicago Board
Of Trade, and NFA fees, but incur no other costs. The CBOT exchange fees and
NFA fees have a negligible impact on the rate of return generated by the
accounts.
2. The CTA trades at the rate of 2700 contracts / $1,000,000 / year. (225
contracts / month)
3. Assumptions 1 and 2 cause the original accounts to pay 18.9% of equity in
trading commissions annually. ((2700*70)/1,000,000)=18.9%
4. Fremont Fund pays trading costs set an annual rate of 12% of assets.
Included in this charge are all trading commissions, exchange fees, clearing
fees, floor brokerage fees, NFA fees, and give-up fees.
5. Fremont Fund pays the General Partner a management fee of 0.165% of assets
at each month-end for an annual rate of 1.98%. Fremont also pays the
Commodity Trading Advisor a management fee of 0.33% of assets at each
month-end for an annual rate of 3.96%.
6. Fremont Fund pays the CTA an incentive fee of 15% of New Trading Profits,
paid quarterly.
7. Under assumptions 4 and 5, Fremont Fund will pay 12% of assets, annually,
as trading costs and 5.94% of assets, annually, as a management fee to the
General Partner and Commodity Trading Advisor, equal an annual load very
similar to the annual load paid in trading commissions by the original
accounts. (12%+5.94%= 17.94%) vs. 18.9%
8. The pro-forma adjustment for the incentive fee of 15% of New Trading
Profits paid to the CTA is made in column H.
9. Annual interest at the assumed rate of 4% on 80% of Fremont Fund assets is
made in column I.
The information concerning the CTA was supplied by the Advisor and,
although such information is believed by the General Partner to be complete
and correct, no independent investigation has been made to verify the facts
stated herein by the General Partner or by any other person on behalf of the
Partnership.
THE PRO FORMA RESULTS ARE HYPOTHETICAL ONLY AND SHOULD NOT BE USED OR
CONSIDERED AS ESTIMATES OF THE RESULTS TO BE ACHIEVED BY THE PARTNERSHIP IN
THE FUTURE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
13
<PAGE>
SUPPLEMENTAL INFORMATION
FOOTNOTES TO
PRO FORMA PERFORMANCE RECORD
COMPILED UNDER FREMONT FUND FEE SCHEDULE
A. Month designates the period to which the table entries relate.
B. Beginning Net Assets is equal to the ending net asset value of the
previous period and represents the total assets minus total liabilities,
determined in accordance with generally accepted accounting principles, with
each position in a commodity interest accounted for at fair market value.
C. Additions represents additional trading funds provided to the CTA during
the period by clients.
D. Withdrawals represents trading funds withdrawn by clients during the
period.
E. Net Trading Results takes into account all trading profits and losses,
brokerage commissions and all other expenses, and represents the change in
net asset value, net of additions and withdrawals.
F. Ending Net Assets represents beginning net asset value plus or minus
additions, withdrawals, and net trading results.
G. Rate Of Return is computed by dividing net trading results by beginning
net asset value for the period. The CTA believes this method of computation
most accurately reflects the true performance results. Subsequent to 1990,
for months when additions or withdrawals exceed ten percent of beginning net
assets, the Time-Weighting Of Additions And Withdrawals method is used to
compute rates of return. To date, the month of November, 1991, is the only
period requiring such adjustment.
H. Pro Forma Accrual For 15% Fee represents the pro forma monthly accrual to
Net Trading Results, as shown in column E, to accrue the 15% of New Trading
Profit to be paid to the CTA by Fremont Fund. Whenever the cumulative Net
Trading Results achieve a new high value, a debit equaling 15% of the new
increment is accrued, and paid to the CTA at the end of each quarter.
Negative fees, shown as positive entries in this column, will occur
I. Pro Forma Annual Interest 4% represents interest earnings to the Fremont
Fund assuming interest is earned at an annual rate of 4% on a balance
equaling 80% of the average of the beginning net assets and ending net assets
for each month.
J. Pro Forma Rate Of Return is computed by dividing net trading results,
adjusted for the pro forma accrual for the CTA 15% incentive fee and the
interest accrual, by beginning net asset value for the period. The CTA
believes this method of computation most accurately reflects the true
performance results. Subsequent to 1990, for months when additions or
withdrawals exceed ten percent of beginning net assets, the Time-Weighting Of
Additions And Withdrawals method is used to compute rates of return. To date,
the month of November, 1991, is the only period requiring such adjustment.
K. Pro Forma Continuous Value Of Investment assumes an investment of
$1,000.00 in January of 1981. For each month, the value of the investment is
adjusted by the pro forma rate of return for that month, providing a
continuous performance record from January 1, 1981, to the present.
L. Pro Forma Annual Rate Of Return shows the percentage change between the
figure shown in column K for December of the current year and the figure
shown in column K for December of the previous year.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. NO
REPRESENTATION IS MADE THAT THE COMMODITY ACCOUNT WILL ACHIEVE RESULTS EQUAL
TO THOSE SET FORTH.
14
<PAGE>
SUPPLEMENTAL INFORMATION
PRO FORMA PERFORMANCE RECORD
[GRAPH--See explanation below]
EXPLANATION OF GRAPH
The Pro Forma Performance Record graph shows the Pro Forma Continuous Value
of Investment of column (K) from the previous table. It shows the month-end
value of a pro forma $1,000 investment made Jan. 1, 1981 plotted relative a
hypothetical investment whose value compounds at a 30% annual rate. The
Commodity Trading Advisor has client accounts which have been in existence
continuously throughout the period reflected in the Pro Forma graph.
The following annual rates of return have been computed by dividing the
change in the Pro Forma Value of Investment during each calendar year by the
Pro Forma Value of Investment at the previous year-end.
1981 -26.93% 1988 76.32%
1982 4.10% 1989 54.81%
1983 107.07% 1990 -7.30%
1984 197.75% 1991 -0.42%
1985 -1.52% 1992 25.10%
1986 -36.07% 1993 144.42%
1987 106.43% 1994 11.33%
1995 37.41%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
15
<PAGE>
<F4>**************************************************************************
\wss\word.6\1.15 EXHIBIT A
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FREMONT FUND, LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT, (the "Agreement") dated as of the 12th
day of December, 1994, and amended and restated as of the 15th day of January,
1996, by and among Pacult Asset Management, Incorporated, a Delaware
corporation, as managing general partner (hereinafter referred to as the
"General Partner"), and those who are admitted as partners, (hereinafter
referred to as either "Limited Partners" or "Other General Partners"),
pursuant to the terms of this Agreement, (the General Partner, any Other
General Partners, and the Limited Partners are hereinafter collectively
referred to as the "Partners").
WITNESSETH:
IN CONSIDERATION of good and valuable consideration, the receipt of which is
hereby acknowledged, the General Partner and the initial Limited Partner
entered into and formed a limited partnership (hereinafter called either the
"Partnership" or the "Fund") pursuant and subject to the Indiana Uniform
Limited Partnership Act (the "Act"), as follows:
ARTICLE I
Definitions
Certain terms used in this Agreement shall have the special meaning
designated below:
1.1 The term AFFILIATE means (1) any person controlled by or under common
control with another person, (2) a person owning or controlling 10% or more
of the outstanding voting securities of such other person, (3) any officer or
director of such other person, and (4) if such other person is an officer or
director, any other company for which such person acts as an officer or
director.
1.2 When referring to the capital of the Partnership:
(a) the term CAPITAL shall mean cash invested in the Partnership by any
Partner and placed at risk for the business of the Partnership;
(b) the term CAPITAL CONTRIBUTION shall mean, with respect to any Partner,
the sum of all Capital contributed to the Partnership pursuant to Article I;
(c) the term CAPITAL SUBSCRIPTION shall mean the amount set forth opposite
the name of such Partner in the schedule of Partners, which amount shall be
the purchase price, less sales commissions, if any, to be paid or paid by
such Partner for the Unit or Units in the Partnership purchased by such
Partner;
(d) the term INITIAL CAPITAL shall mean the sum of all Capital Subscriptions
received by the General Partner prior to commencement of trading;
(e) the term NET ASSET VALUE means the total assets, including all cash and
cash equivalents (valued at cost plus accrued interest and earned discount),
less total liabilities, of the Partnership (each determined on the basis of
generally accepted accounting principles, consistently applied under the
accrual method of accounting or as required by applicable laws, regulations
and rules including those of any authorized self regulatory organization),
specifically:
1
<PAGE>
(i) Net Asset Value includes any unrealized profit or loss on open security
and commodity positions subject to reserves for loss established, from time
to time, by the General Partner;
(ii) All open stock, option, and commodity positions are calculated on the
then current market value, which shall be based upon the settlement price for
that particular position on the date with respect to which Net Asset Value is
being determined; provided, however, that if a position could not be
liquidated on such day due to the operation of the daily limits or other
rules of the exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position could be
liquidated shall be the basis for determining the market value of such
position for such day. As used herein, "settlement price" includes, but is
not limited to: (1) in the case of a futures contract, the settlement price
on the commodity exchange on which such futures contract is traded; and (2)
in the case of a foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price and the
highest bid price, at the close of business on the day Net Asset Value is
being determined, established by the bank or broker through which such
forward contract was acquired or is then currently traded;
(iii) Brokerage commissions to close security and commodity positions, if
charged on a round-turn basis, are accrued in full at the time the position
is initiated (i.e., on a round-turn basis) as a liability of the Partnership;
(iv) Interest earned on all Partnership accounts is accrued at least monthly;
(v) The amount of any distribution made by the Partnership is a liability of
the Partnership from the day when the distribution is declared by the General
Partner or as provided in this Agreement and the amount of any redemption is
a liability of the Partnership as of the valuation date; and
(vi) Syndication Costs incurred in organizing and all present and future
costs to increase or maintain the qualification of the Units available for
sale and the cost to present the initial and future offering of Units for
sale shall be capitalized when incurred and amortized and paid from Capital
or Monthly Profit as required by applicable law.
(f) the term PROFIT (LOSS) ATTRIBUTABLE TO UNITS means the product of A)
the number of Units divided into B) an amount equal to the Net Profit (Loss)
determined as follows: (1) the net of profits and losses realized on all
trades closed out, plus (2) the net of any unrealized profits and losses an
open positions as of the end of the period, less (3) the net of any
unrealized profits and losses on open positions as of the end of the
preceding period, minus, (4) the Expenses attributable to Units. Profit
(Loss) shall include interest earned on Partnership assets, realized and
unrealized capital gains or losses on U.S. Treasury bills, and other
securities;
(g) the term MANAGEMENT FEE shall mean up to six percent (6%) of the Net
Assets of the Partnership computed on the close of business on the last day
of each month and payable to the General Partner without regard to the income
or loss of the Partnership for that period. The General Partner has the right
to both reduce, and subsequently, increase the Management Fee to six percent
(6%) and below; presently, the General Partner is paid a Management Fee or
two percent (2%) of the Net Assets of the Partnership;
(h) the term INCENTIVE FEE means a percentage of the profits accrued and paid
to the General Partner, or its Affiliates, of up to fifteen percent (15%) of
New Net Profit earned from inception of trading, through the date of the
computation, based upon total Capital of the Partnership. The General Partner
has the right to both reduce and, subsequently, increase the Incentive Fee to
fifteen percent (15%) and below; presently, the Incentive Fee paid to the
General Partner is paid to the CTA;
2
<PAGE>
(i) the term NEW NET PROFIT OR LOSS means the amount of income earned from
trading, less the trading losses and brokerage commissions and fees paid to
clear the trades which are incurred or accrued during the then current
accounting period; and,
(j) the term UNIT shall mean a partnership interest in the Partnership
requiring an initial Capital Contribution of one thousand dollars ($1,000),
less a sales commission, or the Net Asset Value of the initial Unit, as
adjusted to reflect increases and decreases caused by receipt, accrual, and
payment of profit, Expenses, losses, bonuses, and fees, from time to time.
1.3 When referring to costs and expenses of the Partnership to be allocated
and charged pursuant to this Agreement:
(a) the term EXPENSES shall mean costs allocated, incurred, paid, accrued,
or reserved, including the fixed commissions payable to the Introducing
Broker of twelve percent (12%) of the total equity placed under management
with the commodity trading advisors, which are, in the opinion of the General
Partner, required, necessary or desirable to establish, manage, continue and
promote the business of the Partnership including, but not limited to, all
deferred organization costs, brokerage commissions, and all management and
incentive fees payable to the General Partner or to independent investment
and commodity trading advisors by the Partnership as negotiated and
determined by the General Partner on behalf of the Partnership on a basis
consistently applied in accordance with generally accepted accounting
principals under the accrual method of accounting or as required by
applicable laws, regulations and rules including those of any authorized self
regulatory organization with proper jurisdiction over the business of the
Partnership; provided, however, Expenses shall not include salaries, rent,
travel, expenses and other items of General Partner overhead and, provided,
further, management fees, advisory fees and all other fees, except for
incentive fees and commodity brokerage commissions, the actual cost of legal
and audit services and extraordinary expenses, shall not exceed one half of
one percent of Net Assets per month (not to exceed six percent annually). If
necessary, the General Partner shall reimburse the Partnership no less
frequently than quarterly, for the amount by which such aggregate fees and
expenses exceed the limitations provided by NASAA Guideline IVC.1. During
the period for which reimbursement is made up to an amount not exceeding the
aggregate compensation received by the General Partner, including direct or
indirect participations in commodity brokerage commissions charged to the
Partnership. In addition, if reimbursement is required or ordinary expenses
are incurred, the General Partner shall include in the Partnership's next
regular report to the auditors a discussion of the circumstances or events
which resulted in the reimbursement or extraordinary expenses;
(b) the term NET UNIT VALUE shall mean the Net Asset Value divided, from time
to time, by the total number of Units outstanding;
(c) the term OFFERING PERIOD means the period of time established by the
General Partner after the Partnership begins to offer to sell Units at the
Net Asset Value per Unit; and,
(d) the term SYNDICATION COSTS shall mean the promotion and syndication costs
of the Partnership and the costs of the offering of Units, and to establish
the initial business relationships on behalf of the Partnership, including
all legal and printing costs to prepare the Disclosure Documents,
registrations and filing fees, contract negotiation, and travel incurred
which are deemed necessary or desirable by the General Partner to form the
Partnership, be ready to engage in business, and to sell the Units.
1.4 The terms DISCLOSURE DOCUMENT, MEMORANDUM, OFFERING CIRCULAR,
PROSPECTUS and REGISTRATION STATEMENT shall mean the document or documents,
together with the exhibits and any subsequent continuations thereof, which
describes this Partnership to persons selected by the General Partner
including, but not limited to, potential purchasers of Units, or the Partners
or to any government or self regulatory agency or to persons selected by the
General Partner to participate in the affairs or provide services to the
Partnership.
3
<PAGE>
1.5 When referring to this Agreement and the Partners of the Partnership:
(a) the term ACT shall refer to the partnership act of Indiana.
(b) the term AGREEMENT refers to this Partnership agreement;
(c) the term GENERAL PARTNER shall refer to Pacult Asset Management,
Incorporated, 2990 W. 120, Fremont, IN 46737 (219) 833-1306;
(d) the term LIMITED PARTNER shall refer to any party listed on the Schedule
of Limited Partners attached to this Agreement as Attachment I, as amended,
from time to time, pursuant to Article VI hereof;
(e) the term MAJORITY IN INTEREST shall refer to that number of Partners who
collectively hold over 50% of all of the outstanding Units held by all
Partners in the Partnership; provided, however, the Units held by the General
Partner cannot be considered to determine a MAJORITY IN INTEREST or otherwise
vote or consent regarding the question of removal of the General Partner. In
addition, see the rights and duties of the General Partner in Article IV and
of the Limited Partners in Articles V;
(f) the term OTHER GENERAL PARTNER refers to any General Partner other than
Pacult Asset Management, Incorporated; and
(g) the term PARTNERS refers to the General Partner, any Other General
Partner, and the Limited Partners, collectively.
ARTICLE II
Partnership Organization and Purpose
2.1 PARTNERSHIP NAME AND LOCATION OF BOOKS AND RECORDS. The name of the
Partnership shall be Fremont Fund, an Indiana Limited Partnership. The
address where the books and records of the Partnership will be maintained for
inspection by the Partners is 2990 W. 120, Fremont, IN 46737 or such other
address as the General Partner shall, from time to time, determine.
2.2 CHARACTER OF THE BUSINESS. The Partnership's business purpose is to
increase Capital through the speculative and hedge trading of futures and
options on futures. The General Partner is authorized to do any and all
things on behalf of the Partnership incident thereto or connected therewith
including, but not limited to:
(a) trade, buy, sell or otherwise acquire, hold or dispose of all forms of
investments (including tangibles and intangibles, foreign currencies,
mortgage-backed securities, money market instruments, stock and futures
options, and any other securities or items which are now, or may hereafter be,
the subject of barter or stock or futures trading), commodity futures, and
forward contracts and any rights pertaining thereto. The Partnership shall
carry on the foregoing activities through the exercise of judgment by its
General Partner and/or the Investment and/or Commodity Trading Advisors and
consultants and brokers selected by the General Partner. The General Partner
may serve as an investment or trading advisor to the Partnership for
management fees, incentive fee, reimbursement of costs and other remuneration
at the same rates charged either by independent third parties for similar
services to other partnerships or by the General Partner to others for the
same service.
4
<PAGE>
(b) invest and trade, on margin or otherwise, in capital stocks, bonds,
debentures, trust receipts and other obligations, instruments or evidences of
indebtedness, gold, silver, cattle, corn, wheat, soybeans, or any other asset
for which a trading market is maintained or otherwise paid for by cash or
otherwise including, but not limited to, the right to sell short and to cover
such short sales.
(c) possess, sell, exchange, discount, transfer, mortgage, pledge, deal in,
maintain multiple accounts for, and to exercise all rights, powers,
privileges and other rights, incidental to ownership of the assets held by
the Partnership.
(d) borrow or raise monies and, from time to time without limit as to amount,
to issue, accept, endorse and execute promissory notes, draft bills of
exchange, warrants, bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the payment of any
thereof and the interest thereon by mortgage or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
Partnership, whether at the time owned or thereafter acquired, and to sell,
pledge of otherwise dispose of such instruments issued by the Partnership for
its purposes; form and own one or more corporations to engage in such
businesses as the General Partner shall deem advisable.
(e) lend any of its properties or funds, either with or without security in
furtherance of the objects and purposes of the Partnership as the General
Partner shall deem advisable and consent.
(f) rent or own and maintain one or more offices staffed as the General
Partner shall determine and to do such other acts attendant thereto as may be
necessary or desirable.
(g) waive the sales commission to acquire investment Capital as the General
Partner, in its sole discretion, may determine.
(h) enter into, make and perform all contracts, surety and guarantees as may
be necessary or advisable or incidental to the carrying out of the foregoing
objects and purposes.
2.3 ADDRESS OF PARTNERS. The General Partner's address is listed in
paragraph 1.5(a) hereof and the Limited Partners addresses are on record at
the office of the General Partner to the Partnership.
2.4 TERM OF PARTNERSHIP. The term of the Partnership shall commence on the
date of this Agreement and shall continue until dissolved or terminated
pursuant to Article IX.
2.5 REGISTRATION. The General Partner, on behalf of the Partnership, shall
have the authority, but not the obligation, to cause a Registration statement
to be filed, and such amendments thereto as the General Partner deems
advisable, with the appropriate Federal and state regulatory agencies,
including the United States Securities and Exchange Commission and the
commission of securities for registration under the securities laws of the
various states and any other jurisdiction desirable or proper to the sale of
Units to qualify for public offerings. Each of the Limited Partners hereby
confirm and ratify all action taken and things done by the General Partner
with respect to such filings and public offerings. The General Partner may
make such other arrangements for the sale of Units, including the private
placement of Units, as it deems appropriate.
ARTICLE III
Capital Contributions and Allocation of Profits and Losses
3.1 CAPITAL CONTRIBUTIONS OF LIMITED PARTNERS.
(a) Each Limited Partner has delivered to the Partnership an executed
Subscription which has been accepted by the General Partner on behalf of the
Partnership, an Amended Certificate of Limited Partnership, and a check in
5
<PAGE>
the amount of his Capital Subscription. The Partnership shall use the funds
thus contributed solely to pay, sales commissions, Expenses, Organization
Costs and to otherwise make the payments required to be made by the
Partnership to engage in active trading and to pay the management fees, if
any, and, from profits, the incentive fees and distributions to Partners
Capital Accounts.
(b) Until such time as the General Partner elects to qualify the Partnership
Units for public sale, the General Partner will establish, from time to time,
the minimum amount which each Limited Partner will be required to contribute
to Capital of the Partnership. Upon receipt of notice from the General
Partner of such minimum (which will be equally applicable to all Limited
Partners), each Limited Partner will be required to contribute sufficient
Capital to equal or exceed such minimum or will withdraw and have his Units
redeemed as a Limited Partner pursuant to Article IX, Section 9.4. The
failure to contribute such Capital within ten days after receipt of said
notice from the General Partner shall be a request for redemption by the
Limited Partner. Upon election by the General Partner and qualification of
the Partnership Units for public sale, there will be no further right of the
General Partner to give notice of an increase in the minimum amount which all
Limited Partners will be required to contribute to Capital of the Partnership
other than as provided in Article VIII. Except for the increase in the
minimum amount which all Limited Partners, in the sole discretion of the
General Partner, shall be required to contribute to Capital or suffer
redemption and amendments required by Article VIII, there will be no required
contribution or assessments of the Limited Partners.
3.2 CAPITAL CONTRIBUTIONS OF GENERAL PARTNER.
(a) The General Partner has not made and shall not be required to make any
capital contribution to the Partnership except for purchases which are
required by law. Currently, the General Partner is required by the
applicable securities and tax laws to purchase (i) one percent (1%) or (ii)
$25,000 of the total Capital paid in by the Limited Partners, which ever is
greater.
(b) The General Partner and the initial Limited Partner have contributed in
excess of $1,000 to the Partnership. Immediately prior to the time the
Partnership commences trading and as may be required, thereafter, as the
result of the admission of additional Limited Partners, the General Partner
shall make such additional contribution to its capital or to the Partnership
so as to be certain that the General Partner has sufficient Capital at risk
to prevent the Partnership from loss of that element of the Partnership test
imposed by the Federal Internal Revenue Code and the Regulations promulgated
thereunder to permit the Partnership to be taxed as a partnership and not as
a corporation. The General Partner shall not reduce its Capital nor shall it
make any assignment or transfer of its interest or withdrawal of its
contribution while it is the General Partner which would reduce its
percentage interest in the Partnership to less than its percentage interest
at the time the Partnership commences trading. The General Partner may
withdraw any excess above the required percentage without notice to the
Limited Partners.
(c) Partnership interests shall be evidenced by Units. The General Partner,
on behalf of the Partnership, may, in accordance with applicable law and the
Offering Memorandum of the Partnership, issue Units to persons desiring to
become Limited Partners. For each Unit purchased during the initial Offering
Period, a Partner shall contribute one thousand dollars ($1,000), less the
sales commission, to the Capital of the Partnership. Thereafter, a Partner
shall contribute an amount equal to the Net Asset Value of a Unit, plus the
sales commission, if any, on the valuation date following acceptance of the
purchase. The General Partner and Affiliates of the General Partner may
purchase Limited Partnership Units with the same rights as other Limited
Partners.
(d) All subscriptions for Units made pursuant to the offering of the Units
must be on the form provided with the Prospectus. A minimum number of Units
must be sold as follows:
6
<PAGE>
(i) If subscriptions for at least 600 Units at an initial Net Asset Value
per Unit of $1,000 have been accepted (the 'Minimum') by the General Partner
within the initial Offering Period of up to one year from the commencement of
the offering of sale of Units, including the Units subscribed for by the
General Partner, the General Partner may, pursuant to Paragraph 12, execute,
acknowledge, swear to, file and record on behalf of the Partnership and each
Limited Partner an amended Limited Partnership Agreement, cause such
subscriptions to be transferred from escrow to the Partnership's trading
account and cause the Partnership to pay its organization costs pursuant to
the agreements negotiated by the General Partner and, thereafter, the
aggregate of all contributions to the Partnership shall be available to the
Partnership to carry on its business; or
(ii) If the General Partner has not received and accepted subscriptions for
the Minimum Units prior to the close of the Minimum Units Offering Period,
the offering of the Units shall terminate and all amounts paid by subscribers
for Units shall be returned in the manner provided in the Prospectus. All
Units subscribed for shall be issued to the collection of good funds, and any
Units issued to a Subscriber who has not provided collectible funds (whether
in the form of a bad check or draft, or otherwise) shall be canceled.
3.3 ALLOCATION OF PROFITS AND LOSSES
(a) A distribution account shall be established for each Partner which
shall include, as the initial balance thereof, each Partners' initial
contribution to the Partnership expressed in total dollars and Units
purchased. As of the close of business each month, allocations shall be made
as follows:
(i) The Incentive Fee. The incentive fee upon New Net Profit at the rate
of up to (15%) shall be paid quarterly to the CTA but allocated to the
Partners monthly.
(ii) The Profit (Loss) Attributable to Units shall be added to (subtracted
from) the distribution accounts of the Partners. Items of income, gain or
loss, accrued and paid Expenses shall be added to (subtracted from) the
distribution account of each Partner in accordance with the ratio that such
distribution account bears to the sum of all of the Partners' distribution
accounts.
(iii) The amount of any cash distributions to a Partner during such month and
any amount paid upon Redemption of Units as of the end of such month shall be
subtracted from the distribution account of such Partner.
(iv) The distribution account of any Unit which was redeemed shall be reduced
by the Redemption Charge per Unit multiplied by the number of Units which
were redeemed by the Partner represented by such distribution account. The
Redemption Charge, if any, shall be first used to defray expenses and any
excess treated as interest earned by the Fund.
ARTICLE IV
Rights and Obligations of the General Partner
4.1 GENERAL. The General Partner shall have full, exclusive and complete
discretion in the management and control of the affairs of the Partnership to
the best of its ability and shall use its best efforts to carry out the
purposes of the Partnership set forth in Article II. In connection therewith,
it shall have all powers of a general partner under the Act, including,
without limitation, the power to:
(a) enter into, execute and maintain contracts, agreements and any or all
other instruments, and to do and perform all such things, as may be required
or desirable in furtherance of Partnership purposes or necessary or
appropriate to the conduct of Partnership activities including, but not
limited to, contracts with third parties for:
7
<PAGE>
(i) brokerage services on behalf of the Partnership (which brokerage
services may be performed by the General Partner or an Affiliate of the
General Partner), specifically, Futures Investment Company, or any successor
to its business, an Affiliated introducing broker of the General Partner may
clear the trades and pay trailing commissions to its associated persons,
including Affiliates of the General Partner and the General Partner, in
consideration of the payment of twelve percent (12%) of the total equity
placed with the commodity trading advisor or advisors it selects, will cause
and pay for the trades to be cleared through one or more futures commission
merchants selected by the General Partner;
(ii) trading advisory services relating to the purchase and sale of all
stocks, options, commodity futures contracts, commodity options and contracts
for forward delivery of foreign currencies on behalf of the Partnership
(which advisory services may be performed by the General Partner or an
Affiliate of the General Partner); and
(iii) rent, salaries, computer, accounting, legal and other services
attendant to the maintenance of the Fund.
(b) open and maintain bank accounts on behalf of the Partnership with banks
and money market funds.
(c) deposit, withdraw, pay, retain and distribute the Partnership's funds in
any manner consistent with the provisions of this Agreement.
(d) supervise the preparation and filing of all documentation required by law
including, but not limited to, Registration Statements to be filed with
Federal and state agencies.
(e) pay or authorize the payment of distributions to the Partners and pay
Expenses of the Partnership.
(f) invest or direct the investment of funds of the Partnership not involving
the purchases or sale of stocks, futures contracts, options, and contracts
for forward delivery of foreign currencies.
(g) purchase, at the expense of the Partnership, liability and other
insurance to protect the Partnership's proprieties and business.
(h) borrow money from banks and other lenders for Partnership purposes, and
may pledge any or all of the Partnership's assets for such loans. No bank or
other lender to which application is made for a loan by the lender to which
application is made for a loan by the General Partner shall be required to
inquire as to the purposes for which such loan is sought and, as between the
Partnership and such bank or other lender, it shall be conclusively presumed
that the proceeds of such loan are to be and will be used for the purposes
authorized under this Agreement.
(i) confess judgment for and against the Partnership and control any matters
affecting the rights and obligations of the Partnership, including the
employment of attorneys, in the conduct of litigation and otherwise incur
legal expenses and costs of consultation, settlement of claims, and
litigation against or on behalf of the Partnership.
4.2 LOANS BY GENERAL PARTNER. The General Partner or its Affiliates will
be not be required to advance or loan funds to the Partnership. In the event
the General Partner makes any advance or loan to the Partnership, the General
Partner will not receive interest in excess of its interest costs, nor will
the General Partner receive interest in excess of the amounts which would be
charged the Partnership (without reference to the General Partner's financial
abilities or guarantees) by unrelated banks on comparable loans for the same
purpose and the General Partner shall not receive points or other financing
charges or fees regardless of the amount.
8
<PAGE>
4.3 TRANSACTION WITH PARTNERSHIP. Notwithstanding anything to the contrary
which may be contained herein, the General Partner shall not:
(a) sell, or otherwise dispose of, any of the Partnership's assets to the
General Partner or its Affiliates.
(b) subject to the provisions regarding and without diminishment of the right
of the General Partner or any Affiliate to compensation for services provided
to the Partnership as set forth in this Agreement, cause or permit the
Partnership to enter into any agreement with the General Partner or an
Affiliate which is not in the best interest of and for the benefit of the
Partnership or which would be in contravention of the General Partner's
fiduciary obligations to the Partnership or pursuant to which the General
Partner or any Affiliate;
(i) would provide or sell any services, equipment, or supplies at other
than rates charged to others; or
(ii) would receive from the Partnership, Units of Partnership interest in
consideration for services rendered.
4.4 OBLIGATIONS OF GENERAL PARTNER. In addition to the obligations
provided by law or this Agreement, the General Partner shall:
(a) Devote such of its time to the business and affairs of the Partnership
as it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Partnership for the
benefit of the Partnership and the Limited Partners.
(b) Execute, file, record and/or publish all certificates, statements and
other documents and do any and all other things as may be appropriate for the
formation , qualification and operation of the Partnership and for the
conduct of its business in all appropriate jurisdictions including, but not
limited to, the compliance, at its expense, with all laws related to its
qualification to serve as the commodity pool operator of the Fund.
(c) Retain independent public accountants to audit the accounts of the
Partnership.
(d) Employ attorneys to represent the Partnership.
(e) Use its best efforts to maintain the status of the Partnership as a
partnership for United States Federal income tax purposes.
(f) Employ only independent CTAs which are registered pursuant to the
Commodity Exchange Act to conduct trading and to otherwise establish and
monitor the trading policies of the Partnership; and the activities of the
partnership's trading advisor(s) in carrying out those policies.
(g) Review, not less often than annually, the brokerage commission rates
charged to comparable funds to determine that the commission rates paid by
the Partnership are comparable with such other rates.
(h) Have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in the General Partner's
immediate possession or control, and the General Partner will not employ or
permit others to employ such funds or assets in any manner except for the
benefit of the Partnership.
(i) Agree that so long as it remains the sole General Partner of the
Partnership, it will maintain the Partnership as a limited partnership as
required by all applicable laws including, but not limited to the requirement
of the United States Department of the Treasury, Internal Revenue Service,
9
<PAGE>
for the sole corporate general partner of a limited partnership to maintain
its "Net Worth" (as defined below) at an amount equal to no less than (i) the
lesser of $250,000 or 15% of the aggregate capital contributions of any
limited partnerships (including the Partnership, if applicable,) for which it
shall act as general partner and which are capitalized at less than $2,500,
000, and (ii) 10% of the aggregate capital contributions of any limited
partnerships (including the Partnership, if applicable,) for which it shall
act as general partner and which are capitalized at greater than or equal to
$2,500,000. For the purposes of this subparagraph, "Net Worth" shall be
calculated in accordance with generally accepted accounting principles,
consistently applied, provided that all current assets shall be based on the
lower of cost or the then current market value. Net Worth may include
promissory notes (valued at their fair market value) issued to the General
Partner by one or more of its principals. The Units owned by the General
Partner in the Partnership and in other partnerships in which it acts as a
general partner shall not be included in calculating its Net Worth. A letter
of credit may be included. The requirements of this subparagraph (i) may be
modified if the General Partner obtains an opinion of counsel for the
Partnership to effect that a proposed modification will not (1) adversely
affect the classification of the Partnership as a partnership for Federal
income tax purposes; (2) will not adversely affect the status of the Limited
Partners as limited partners under the Act; (3) will not violate any
applicable state securities or Blue Sky law or any rules, regulations,
guidelines or statements of policy promulgated or applied thereunder
including, but not limited to, the net worth required by Section II.B of the
Guidelines for Registration of Commodity Pool Programs, as adopted in revised
form by the North American Securities Administrators Association, Inc. as are
in effect on the date of such proposed modification. (4) or otherwise
adversely affect the Limited Partners.
(j) Maintain a current list of the name, address, and number of Units owned
by each Limited Partner at the General Partner's principal office. Such list
shall be disclosed to any Partner or their representative at reasonable times,
upon request, either in person or by mail, upon payment, in advance, of the
reasonable cost of reproduction and mailing. The Partners and their
representatives shall be permitted access to all other records of the
Partnership, after adequate notice, at any reasonable time, at the offices of
the Partnership. The General Partner shall maintain and preserve such
records for a period of not less than six (6)years.
4.5 GENERAL PROHIBITIONS. The Partnership shall not:
(a) borrow from or loan to any person, except that the foregoing is not
intended to prohibit the incurring of any indebtedness to a Partner or an
Affiliate with respect to the offering of Units for sale, Registration, or
initiation and maintenance of the Partnership's trading positions.
(b) commingle its assets with those of any other person, except to the extent
permitted under the Securities and Exchange Act or the Commodity Exchange Act
and the regulations promulgated under each.
(c) permit rebates or give-ups to be received by the General Partner or any
Affiliate of the General Partner, or permit the General Partner or any
Affiliate of the General Partner to engage in reciprocal business
arrangements which would circumvent the foregoing prohibition; provided,
however, that an Affiliate or the General Partner may provide goods or
services, including brokerage, at a competitive cost to the Partnership.
(d) engage in the pyramiding of its positions (i.e., the use of unrealized
profits on existing positions to provide margins for additional positions in
the same or a related stock or commodity); provided, however, that there may
be taken into account the Partnership's open trade equity on existing
positions in determining whether to acquire additional unrelated stock or
commodity positions.
(e) margins of all open positions in all stocks and commodities combined
would exceed 250% of the partnership's Net Asset Value at the time such
position would otherwise be initiated.
10
<PAGE>
(f) permit churning of the Partnership's trading account for the purpose of
generating brokerage commissions to any person.
(g) directly or indirectly pay or award any finder's fees, commissions or
other compensation to any persons engaged by a potential limited partner for
independent investment advice as an inducement to such advisor to advise the
potential limited partner to purchase Units in the Partnership without the
knowledge of such potential limited partner.
(h) No Partnership funds will be held outside the United States. The
Partnership funds committed to trading will be on deposit with and under the
control of a futures commission merchant regulated pursuant to the Commodity
Exchange Act, as may be amended, from time to time. The funds not committed
to trading will be in investments which are properly registered under the
United States securities or other financial institution regulations.
4.6 FEES AND EXPENSES.
(a) The Partnership shall pay all Organization Costs and offering Expenses
incurred in the creation of the Partnership and sale of Units. The foregoing
expenses may be paid directly by the Partnership or may be reimbursed by the
Partnership to the General Partner or an Affiliate of the General Partner.
Notwithstanding the foregoing, in no event will reimbursement by the
Partnership to the General Partner for Organization Costs and offering
Expenses charged to the Partnership exceed an amount equal to 15% of the
gross proceeds from the sale of Units. Organization Costs and Offering
Expenses shall mean those Expenses incurred in connection with the formation,
qualification and Registration of the Partnership and in distributing and
processing the Units under applicable Federal and state law, sales
commissions, and any other expenses such as: (i) registration fees, filing
fees and taxes; (ii) the costs of qualifying, printing, amending,
supplementing, mailing and distributing the Registration Statement and
Prospectus; (iii) the costs of qualifying, printing, amending, supplementing,
mailing and distributing sales materials used in connection with the issuance
of the Units; (iv) salaries of officers and employees of the General Partner
and any Affiliate of the General Partner while directly engaged in
distributing and processing the Units and establishing records therefor; (v)
rent, travel, remuneration of personnel, telegraph, telephone and other
expenses in connection with the offering of the Units; (vi) accounting,
auditing, and legal fees incurred in connection therewith; and (vii) any
extraordinary expenses related thereto. Organization Costs and Offering
Expenses do not include salaries, rent, travel, expenses and other items of
General Partner overhead.
(b) All operating expenses of the Partnership shall be billed directly to and
paid by the Partnership.
(c) The General Partner or any Affiliate of the General Partner may be
reimbursed for the actual costs of any Expense including, but not limited to,
legal, accounting and auditing services used for or by the Partnership, as
well as printing and filing fees and extraordinary expenses incurred for or
by the Partnership; provided, however, the limitations of contained in
Article X - Exoneration and Indemnification contained in this Agreement will
apply to restrict the purchase of certain insurance coverage and the
assumption of the defense of certain claims.
(d) The General Partner may establish its compensation, from time to time,
for its services; provided, however, such charges shall be no more than:
(i) A sales commission of up to six percent (6%) to be established, from time
to time, by the General Partner, for sales of Units;
(ii) A management fee of up to one half of one percent (1/2 of 1%) per month
(6% per year) of the Net Asset Value of the Partnership, computed and paid to
the General Partner on the close of business on the last day of each month;
11
<PAGE>
provided, however, the management fee paid to the General Partner when added
to the management fee paid to a CTA upon due equity assigned to that CTA may
not exceed a total of six percent (6%);
(iii) An incentive fee of up to fifteen percent (15%) of the first one
hundred percent (100%) of New Net Profit, or less earned upon Capital, and
prorated to consider the date of deposit of such Capital to the Partnership
each year. The incentive fee at the rate of up to fifteen percent (15%) of
New Net Profit will be paid quarterly. Each trading subaccount established by
the General Partner shall be considered separately for purposes of incentive
fee. The incentive fee will be non-refundable; i.e., in the event that the
Partnership earns substantial New Net Profit during the first month of any
year and, thereafter, suffers losses, the General Partner will not refund any
of the profit incentive fee paid for the prior month or months. However, the
Partnership will not pay or accrue to the General Partner any further
incentive fee during that year until such time as the New Net Profit, when
added to Net Asset Value, after additions, deductions of Redemptions and
distributions, exceeds the highest Net Asset Value, computed for that year; i.
e., incentive fees will only be earned and paid or accrued upon New Net
Profit for that year; and
(iv) A share of the brokerage commissions paid for trades made by the
Partnership. Such commissions shall not be more than the average published
fixed rate per month or per round-turn charged, from time to time, to public
commodity pools by national brokerage firms for similar trading size,
frequency, and style.
(e) The General Partner is hereby authorized to employ brokers, attorneys,
accountants, consultants, and administrative personnel who may be Affiliated
with the General partner to perform Partnership business at the expense of
the Partnership.
(f) The General Partner is hereby authorized, individually or through an
Affiliate, to employ non-affiliated independent investment and trading
advisors to all or a portion of the Fund to be paid a management fee of up to
six percent (6%) of the Net Asset Value assigned to such advisor per year and
an incentive fee of up to fifteen percent (15%) on New Net Profit earned by
such advisor. All incentive fees may be prorated and paid quarterly.
4.7 ACTIVITIES OF PARTNERS.
(a) The General Partner and its Affiliates shall devote to the Partnership
only such time as shall be reasonably required to fulfill their
responsibilities hereunder.
(b) Any Partner may, notwithstanding the existence of this Agreement, engage
in whatever other activities they may choose, whether the same be competitive
with the Partnership or otherwise, without having or incurring any obligation
or conflict of interest in such activities with the Partnership or to any
party hereto. The Partners are specifically authorized to deal with other
partnerships and to acquire interests in positions and trading without having
to offer participation therein to the Partnership or the other Partners.
Neither this Agreement nor any activities undertaken pursuant hereto shall
prevent any Partner, including the General Partner and its Affiliates and
their officers, directors and employees, from engaging in the trading
contemplated by this Partnership individually, jointly with others, or as a
part of any other association to which any of them are or may become parties,
in the same trades as the Partnership, or require any of them to permit the
Partnership, the General Partner or any other Partner to participate in any
of the foregoing. As a material part of the consideration for each party's
execution hereof, each Partner hereby waives, relinquishes and renounces any
such right or claim of conflict of interest and participation from any other
Partner.
12
<PAGE>
(c) The General Partner is a corporation which was formed on October 13, 1994,
and neither it nor its principals have any prior experience in the
management of a partnership which trades commodity futures or options, or any
other securities. The past and future results of trading by the principals of
the General Partner, both within and without the partnership, will be
confidential and not disclosed to the other Partners. Such positions taken
by the principals may be the same as or different from any positions taken by
the General Partner or any advisor to the Fund. Nothing in this Section, or
elsewhere in the Partnership Agreement, shall permit the General Partner to
violate its fiduciary or legal obligations to the Partnership.
4.8 CONFLICT OF INTEREST
(a) The General Partner may not remain independent from and may be
affiliated with the brokers selected. It is, therefore, important to the
Partners for the General Partner to select CTAs to initiate and close
positions upon criteria which are designed to minimize the risk of loss when
contrasted with the opportunity for gain rather than to generate commissions.
(b) All actions of the General Partner will be designed to minimize conflicts
of interest whenever possible. However, the General Partner could have a
duty of loyalty to commission agents and brokers who are responsible for the
solicitation and sale of Units and to brokers and trading advisors who have
introduced purchasers of Units to the General Partner. Accordingly, some
commission paid to certain brokerage commission agents who sold the Units in
the Partnership may be at rates higher than the lowest rates available to the
General Partner and the Partnership as a result of such obligations.
(c) Officers and Affiliates of the General Partner will be reimbursed for
legal and other fees and costs for services, and receive brokerage
commissions and incentive fees as a result of the formation and trading
activity of the Partnership.
(d) The General Partner and its principals and affiliates intend to engage in
trading and investing for their own accounts. The positions they take, if
any, will be proprietary and kept confidential from the other Partners.
4.9 LIMITATION OF POWERS. Without concurrence of a Majority in Interest,
the General Partner may not:
(a) Amend this Agreement except for those amendments which do not adversely
affect the rights of the Limited Partners.
(b) Voluntarily withdraw as a General Partner.
(c) Appoint a new General Partner or additional general partners; provided,
however, additional general partners may be appointed without obtaining the
consent of a Majority in Interest if the addition of such person is necessary
to preserve the tax status of the Partnership as a partnership and not as a
corporation; and such additional general partner has no authority to manage
or control the Partnership and the admission of such additional general
partner does not materially adversely affect the Limited Partners.
(d) Sell all or substantially all of the Partnership assets other than in
the ordinary course of business.
(e) Cause the merger or other reorganization of the Partnership.
(f) Dissolve the Partnership other than because of an event, which by law,
requires such dissolution.
13
<PAGE>
ARTICLE V
Rights and Obligations of Limited Partners
5.1 LIMITATION OF LIABILITY. No Limited Partner shall be personally liable
for any of the debts of the Partnership or any of the losses thereof.
However, the amount committed by him to the Capital of the Partnership and
his interest in Partnership assets shall be subject to liability for
Partnership debts and obligations. Limited Partners may be liable to repay
any wrongful distribution of profits to them and may be liable for
distributions (with interest thereon) considered to be a return of Capital if
necessary to satisfy creditors of the Partnership.
5.2 NO MANAGEMENT RIGHTS. No Limited Partner shall take part in the
management of the business of the Partnership or transact any business for
the Partnership. No Limited Partner, as such, shall have the power to sign
for or to bind the Partnership.
5.3 CERTAIN RIGHTS. Provided the following, does not either (i) subject
the Limited Partners to unlimited liability or (ii) subject the Partnership
to be taxable as a Corporation for purposes of Federal Income tax laws, the
Partners, by a vote of a Majority in Interest, without the necessity for
concurrence by the General Partner, shall have the following rights in
addition to those granted elsewhere in this Agreement:
(a) Amend the Partnership Agreement; provided, however, any amendment which
modifies the compensation or distributions to the General Partner or which
affects the duties of the General Partner requires the consent of the General
Partner.
(b) The General Partner may be removed and a new General Partner elected in
accordance with the terms of this Agreement.
(c) Cancel any contract for services with the General Partner, without
penalty, upon 60 days written notice; provided, however, the maximum period
of any contract between the General Partner and the Partnership is one year;
and, provided further, should any amendment to this Partnership Agreement
attempt to modify the compensation or distributions to which the General
Partner is entitled or which affects the duties of the General Partner, such
amendment will become effective only upon the consent of the General Partner.
(d) The right to approve, prior to sale, the sale or distribution, outside
the ordinary course of business, of all or substantially all of the assets of
the Partnership.
(e) Dissolve the Partnership.
(f) Any material changes in the Partnership's basic investment policies
identified in Article III including, but not limited to, the speculation and
trade in commodity futures, forward futures contracts, and options upon those
contracts both within and without the United States or the structure of the
Partnership as a limited partnership requires prior written notification of a
meetings which identifies the purpose of the meeting and the approval by a
vote of the Majority in Interest of the Partners.
5.4 NOTIFICATION. Notice shall be sent to each Partner within seven
business days from the date of:
(a) any decline in the Net Asset Value Per Unit to less than 50% of the
Net Asset Value on the last Valuation Date;
(b) any material change in contracts with the FCM or CTA including, but not
limited to, any change in CTAs or any modification in connection with the
method of calculating the incentive fee;
14
<PAGE>
(c) any other material change affecting the compensation of the General
Partner, FCM, CTA or any Affiliated party;
5.5 NOTIFICATION CONTENTS.
(a) a material change related to brokerage commissions shall not be made
until notice is given and the Partners, after such notice, have the
opportunity to Redeem pursuant to Article IX;
(b) in addition, in regard to all other changes, the required notification
shall describe the change in detail, include a description of the Partners'
Redemption rights pursuant to Article IX and voting rights pursuant to this
Article V and a description of any material effect such changes may have on
the interests of the Partners.
5.6 EXERCISE OF RIGHTS. Upon receipt of a written request, executed by the
holders of Units aggregating ten percent (10%) or more of the Units, for a
vote upon and to take action with respect to any rights of the Partners under
this Agreement, together with a check for the costs to distribute the request
to all of the Partners, the General Partner shall call a meeting of all
Partners of the Partnership in the time and manner as provided in Section 8.7
hereof.
5.7 EXAMINATION OF BOOKS AND RECORDS. A Limited Partner shall have the
right to examine the books and records of the Partnership at all reasonable
times, including the right to have such examination conducted at his sole
expense by any reasonable number of representatives. Notwithstanding the
foregoing, the General Partner may keep and withhold the names of the other
Partners, specific trading and other designed information confidential from
the Partners.
ARTICLE VI
Assignment of Limited Partnership Units;
Admission of Limited Partners
6.1 RESTRICTION ON ASSIGNMENT. A Partner may not assign or transfer some or
all of his Units in the Partnership without the written consent of the
General Partner; provided, however, that in no event may an assignment be
made or permitted until after two years from the date of purchase of such
assigned or transferred Units(s) by said Partner; and, provided, further,
that full Units must be assigned and the assignor, if he is not assigning all
of his Units, will retain more than five Units. Any such assignment shall be
subject to all applicable securities, commodity, and tax laws and the
regulations promulgated under each such law. The General Partner shall
review any proposed assignment and shall withhold its consent in the event it
determines, in its sole discretion, that such assignment could have an
adverse effect on the business activities or the legal or tax status of the
Partnership.
6.2 DOCUMENTATION OF ASSIGNMENT. The General Partner shall furnish to the
assigning Limited partner a proper form to duly effect such assignment. The
General Partner shall not be required to recognize any assignment and shall
not be liable to the assignee for any distributions made to the assigning
Limited Partner until the General Partner has received such form of
assignment, properly executed with signature guaranteed, together with the
Certificate of Ownership originally issued to the Limited Partner (or an
indemnity bond in lieu therefor) and such evidence of authority as the
General Partner may reasonably request and the General Partner shall have
accepted such assignment.
ARTICLE VII
Accounting Records and Reports
7.1 BOOKS OF ACCOUNT. Proper books of account shall be kept and there shall
be entered therein all transactions, matters and things relating to the
Partnership's business as required by applicable law and the regulations
promulgated thereunder and as are usually entered into books of account kept
by persons engaged in business of like character. The books of account shall
15
<PAGE>
be kept at the principal office of the General Partner and each Limited
Partner (or any duly constituted agent of a Limited Partner) shall have, at
all times during reasonable business hours, free access, subject to rules of
confidentiality established by the General Partner, the right to inspect and
copy the same. Such books of account shall be kept on an accrual basis. A
Capital account shall be established and maintained from each Partner, as set
forth above.
(a) Each Partner shall be furnished as of the end of each Fiscal Year with
(1) annual financial statements, audited by a certified public accountant,
within 90 days from the end of such year; together with such other reports
(in such detail) as are required to be given to Partners by applicable law,
specifically, annual and periodic reports will be supplied by the General
Partner to the other Partners in conformance with the provisions of CFTC
regulations for Reporting to Pool Participants, 17 C.F.R. Section 4.22, as
amended, from time to time, and, (2) any other reports or information which
the General Partner, in its sole discretion, determines to be necessary or
appropriate.
(b) Appropriate tax information (adequate to enable each Partner to complete
and file his Federal tax return) shall be delivered to such Partner no later
than January 31 following the end of each Calendar Year.
7.2 CALCULATION OF NET ASSET VALUE. Net Asset Value shall be calculated
daily and reports delivered to Partners as of the last day of each month by
the 20th of the following month. Upon request, the General Partner shall
make available to any Partner the Net Asset Value per Unit.
7.3 MAINTENANCE OF RECORDS. The General Partner shall maintain all records
as required by law including, but not limited to, (1) all books of account
required by paragraph 7.1 of this Article VII; and, (2) a record of the
information obtained to indicate that a Partner meets the applicable investor
suitability standards.
7.4 TAX RETURNS The General Partner shall cause tax returns for the
Partnership to be prepared and timely filed with the appropriate authorities.
The General Partner shall cause the Partnership to pay any taxes payable by
the Partnership; provided, however, that the General Partner shall not be
required to cause the Partnership to pay any tax so long as the General
Partner or the Partnership shall be in good faith and by appropriate means
contesting the applicability, validity or amount thereof and such contest
shall not materially endanger any right or interest of the Partnership.
7.5 TAX ELECTIONS The General Partner shall from time to time, make such
tax elections or allocations deemed necessary or desirable to carry out the
business of the Partnership or the purposes of this Agreement. The General
Partner shall be authorized to perform all duties imposed by Sections 6221
through 6232 of the Internal Revenue Code on the General Partner as "tax
matters partner" of the Partnership, including, but not limited to, the
following: (i) the power to conduct all audits and other administrative
proceedings with respect to Partnership tax items; (ii) the power to extend
the statute of limitations for all Limited Partners with respect to
Partnership tax items; (iii) the power to file a petition with an appropriate
federal court for a review of a final Partnership administrative adjustment;
and, (iv) a power of attorney on behalf of each Limited Partner having less
than a 1% interest in the Partnership to enter into a settlement with the
Internal Revenue Service on behalf of, and binding upon, those Limited
Partners unless any said Limited Partner shall have notified the Internal
Revenue Service and the General Partner, within 30 days of service of the
notice of claim up said Limited Partner, that the General Partner may not act
on such Limited Partner's behalf.
16
<PAGE>
ARTICLE VIII
Amendments of Partnership Agreement
8.1 RESTRICTION ON AMENDMENTS. No amendment to this Agreement shall be
effective or binding upon the partners unless the same shall have been
approved by a Majority in Interest of the Partners; provided, however, the
General Partner may adopt amendments without such approval which are, in the
sole judgment of the General Partner, deemed necessary or desirable to
maintain the business or limited partnership or other favorable tax status of
the Partnership, or permit a Public Offering of the Units, or to maintain the
Partnership and the General Partner and its principals in compliance with the
laws which govern the business, including the requirements of any self
regulatory organization, or to substitute or add persons as Limited Partners.
8.2 ADMISSION OF ADDITIONAL PARTNERS. At any time, the General Partner may,
in its sole discretion and subject to applicable law, admit additional
Partners. Each newly admitted Partner shall contribute cash equal to the Net
Asset Value Per Unit of the Partnership for each Unit to be acquired. The
terms of any additional offering may be different from the terms of the
initial offering. All expenses of any such additional offering shall be
borne by the either the Partnership or the subscribers thereto, as determined
in the sole discretion of the General Partner. Pursuant to Article VI, the
General Partner may consent to and admit any assignee of Units as a
substituted Partner. There is no maximum aggregate amount of Units which may
be offered and sold by the Partnership or on the amount of contributions
which may be received by the Partnership.
8.3 TERMINATION OF OFFERINGS; ADDITIONAL OFFERINGS. Notwithstanding
anything stated herein to the contrary, the General Partner may from time to
time, in its sole discretion, limit the number of Units to be offered,
terminate any offering of Units, or register additional Units and/or make
additional public or private offerings of Units. No Limited Partner shall
have any preemptive, preferential or other rights with respect to the
issuance or sale of any additional Units. No Limited Partner shall have the
right to consent to the admission of any additional Limited Partners.
8.4 NOTICE OF RESTRICTED TRANSFER. Each certificate of Limited Partnership
shall be subject to and contain the following notice:
THE LIMITED PARTNER MUST DETERMINE IF THE PARTNERSHIP INTERESTS REPRESENTED
BY THIS LIMITED PARTNERSHIP AGREEMENT MAY BE TRANSFERRED IN ACCORDANCE WITH
APPLICABLE FEDERAL AND STATE LAWS AND REFERENCE MUST BE MADE TO THE OFFERING
DOCUMENTATION AND LEGAL COUNSEL CHOSEN BY THE INVESTOR TO DETERMINE THE RIGHT
OF THE INVESTOR TO RESELL THE UNITS EVIDENCED HEREBY. THESE LIMITED
PARTNERSHIP INTERESTS SHALL NOT BE TRANSFERABLE BY THE REGISTERED HOLDER
EXCEPT BY CONSENT OF THE GENERAL PARTNER AND AS OTHERWISE PROVIDED IN THE
PARTNERSHIP AGREEMENT AND UPON THE ISSUANCE OF A FAVORABLE OPINION OF COUNSEL
FOR THE LIMITED PARTNERSHIP, AND/OR SUBMISSION TO THE LIMITED PARTNERSHIP OF
SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE LIMITED PARTNERSHIP, THAT
SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
8.5 MEETINGS OF PARTNERS. Upon receipt of a written request, together with
the costs to distribute such request to all Partners, executed by Partners
holding ten percent (10%) or more of the Units, for the calling of a meeting
of the Partners or should the General Partner desire a meeting for any
purpose, the General Partner shall, within fifteen (15) days thereafter,
provide written notice, either in person or by certified mail, after the date
of receipt of said notice. Such written notice shall state the purpose of
17
<PAGE>
the meeting, specify a reasonable time, place, and date, which shall be not
less than thirty (30) or more than sixty (60) days thereafter. An Amendment
shall be adopted and binding upon all parties hereto if a Majority in
Interest of the Partners vote for the adoption of such amendment. Partners
may vote in person or by written proxy delivered to any such meeting.
Meetings of Partners may also be held by conference telephone where all
Partners can hear one another.
8.6 RIGHT OF GENERAL PARTNER TO RESIGN. The General Partner may resign or
assign any portion of its' interest in the Partnership at anytime to a third
party and become a Limited Partner with respect to the balance of its
interest in the Partnership, if any, if it provides one hundred twenty (120)
days prior written notice to all other Partners of its' intention to resign
and states in such notice the name of the intended assignee who is to become
substitute General Partner and the information reasonably appropriate to
enable the Partner to decide whether or not to approve the substitution or,
in the alternative, provide that the partners must elect a successor general
partner. In the event of the voluntary withdrawal by the General Partner,
the General Partner shall pay the legal fees, recording fees and all other
expenses incurred as a result of its withdrawal. Upon resignation, the
General Partner shall be paid the items identified in Section 8.7 below.
8.7 AMENDMENT INVOLVING SUCCESSOR GENERAL PARTNER. Should a resignation or
an amendment to the Agreement provide for a change in the general partner
upon the conditions provided in this Agreement, the election and admission of
a person or persons as a successor or successors to the General Partner,
shall require the following conditions: the General Partner shall retire and
withdraw as General Partner and the Partnership business shall be continued
by the successor general partner or general partners, and such amendment
shall expressly provide that on or before the effective date of removal.
(a) The General Partner shall be permitted to Redeem 100% of its Units ten
(10) days prior to the effective date of its removal in cash equal to the Net
Asset Value of such General Partner's interest in the Partnership.
(b) The Partnership shall pay to the removed General Partner an amount equal
to the Appraised Value of such General Partner's assets to be transferred to
the successor General Partner to enable the successor to continue the
business of the Partnership. The Appraised Value of the withdrawing General
Partner's interest in the Partnership shall equal such General Partner's
interest in the sum of (1) the Expenses advanced by the General Partner to
the Partnership, (2) all cash items, (3) all prepaid expenses and accounts
receivable less a reasonable discount for doubtful accounts, and (4) the net
book value of all other assets, unless the withdrawing General Partner of the
successor General Partner believes that the net book value of an asset does
not fairly represent its fair market value in which event such General
Partner shall cause, at the expense of the Partnership, an independent
appraisal to be made by a person selected by the General Partner with
approval of a Majority in Interest of the Partners to determine its value.
(c) The successor General Partner or Partners shall indemnify the former
General Partner for all future activities of the Fund.
ARTICLE IX
Dissolution, Liquidation and Redemption
9.1 DISSOLUTION. The Partnership shall be dissolved, and shall terminate and
wind-up its affairs, upon the first to occur of the following:
(a) the affirmative vote of a Majority in Interest of the Partners adopting
an amendment to this Agreement providing for the dissolution of the
Partnership;
18
<PAGE>
(b) the sale, exchange, forfeiture or other disposition of all or
substantially all the properties of the Partnership out of the ordinary
course of business;
(c) the resignation of the General Partner after one hundred twenty days
notice to the Partners, of the bankruptcy, insolvency or dissolution, or
failure of the General Partner to maintain sufficient Net Worth to qualify
the Partnership as a partnership for Federal Income Tax purposes or as
required by the NASAA Guidelines in effect at the time the Units were sold,
without a successor, promptly after any such event, but in no event beyond
one hundred twenty (120) days after the effective date of such event;
(d) at 11:59 p.m. on the day which is twenty-one (21) years from the date of
this Agreement; or
(e) any event which legally dissolves the Partnership.
9.2 EFFECT OF LIMITED PARTNER STATUS. The death, legal disability,
bankruptcy, insolvency, dissolution, or withdrawal of any Limited Partner
shall not result in the dissolution or termination of the Partnership, and
such Limited Partner, his estate, custodian or personal representative shall
have no right to withdraw or value such Limited Partner's interest in the
Partnership except as provided in Paragraph 9.3. Each Limited Partner (any
assignee thereof) expressly agrees that the provisions of the Act, as amended,
titled "Powers of Legal Representative or Successor of Deceased, Incompetent,
Dissolved or Terminated Partner", shall not apply to his interest in the
Partnership and expressly waives any rights and benefits thereunder. Each
Limited Partner (and any assignee of such Partner's interest) expressly
agrees that in the event of his death, that he waives on behalf of himself
and his estate, and he directs the legal representative of his estate and any
person interested therein to waive the furnishing of any inventory,
accounting or appraisal of the assets and any right to an audit or
examination of the books of the Partnership. The General Partner may assign,
sell, or otherwise dispose of all or any portion of its shares of common
stock without any legal effect upon the operation of the Partnership and no
Limited Partner may object to any such transfer.
9.3 LIQUIDATION. Upon the termination and dissolution of the Partnership,
the General Partner (or in the event the dissolution is caused by the
dissolution or the cessation to exist as a legal entity of the General
Partner, voluntary withdrawal, bankruptcy or insolvency, such person as the
Majority in Interest of the Partners may select) shall act as liquidating
trustee and shall take full charge of the Partnership assets and liabilities.
Thereafter, the business and affairs of the Partnership shall be wound up and
all assets shall be liquidated as promptly as is consistent with obtaining
the fair value thereof, and the proceeds therefrom shall be applied and
distributed in the following order: (i) to the expenses of liquidation and
termination and to creditors, including the General Partner, in order or
priority as provided by law, and (ii) to the Partners pro rata in accordance
with his or its Capital account, less any amount owed by such Partner to the
Partnership.
9.4 RETURN OF CAPITAL CONTRIBUTION SOLELY OUT OF ASSETS. A Partner shall
look solely to the properties and assets of the Partnership for the return of
his Capital Contribution, and if the properties and assets of the Partnership
remaining after the payment or discharge of the debts and liabilities of the
Partnership are insufficient to return his Capital Contribution, he shall
have no recourse against the General Partner or any other Limited Partner for
that purpose.
9.5 REDEMPTION. A Partner (including any approved assignee who becomes a
Limited Partner) may withdraw any part or all of his Capital Contribution and
undistributed profits, if any, by requiring the Partnership to redeem any or
all of his Units at the Net Asset Value thereof (such withdrawal being herein
referred to as "Redemption"). Redemption shall be effective as of the last
day of the period established, from time to time, by the General Partner for
Redemptions. Such Redemptions shall be no less often than quarterly;
provided, however, Redemption may be deferred until after the lapse of six
months from the date of purchase of the Units.
19
<PAGE>
9.6 REDEMPTION PROCEDURES. Redemption shall be after all liabilities,
contingent, accrued, reserved in amounts determined by the General Partner
have been deducted and there remains property of the Partnership sufficient
to pay the Net Unit Value as defined in Paragraph 1.3(b). As used herein,
"request for Redemption: shall mean a letter mailed or delivered by a Partner
and received by the General Partner at least 10 days in advance of the
effective date for which Redemption is requested. Upon Redemption, a Partner
shall receive, on or before the last day of the following month, an amount
equal to the Net Unit Value per Unit redeemed as of the date for which the
request for Redemption was received, less accrued expenses and any amount
owed by such Partner to the Partnership. Redemption is subject to a
Redemption fee to be paid by the Partners as provided below; provided,
however, no Partner other than the initial Limited Partner, may redeem any
Units until the last day of the sixth month after the commencement of trading.
All Redemption requests shall be subject to the following:
(a) Under special circumstances including, but not limited to, the
inability to liquidate positions as of such Redemption date or default or
delay in payments due the Partnership from banks, brokers, or other persons,
the Partnership may in turn delay payment to Partners requesting Redemption
of Units of the proportionate part of the Net Unit Value represented by the
sums which are the subject of such delay or default.
(b) The General Partner in its sole discretion may, upon notice to the
Partners, declare additional Redemption dates and may cause the Partnership
to redeem fractions of Units and, prior to registration of Units for public
sale, redeem Units held by Partners who do not hold the required minimum
amount of Units established, from time to time, by the General Partner.
(c) Redemption of Units shall be charged a redemption fee, payable to the
Partnership, to be applied first to pay organization costs and, thereafter,
to the benefit of the other Partners in proportion to their Capital accounts,
equal to four percent (4%) for all Redemptions effective during the first six
(6) months after commencement of trading. Thereafter, there will be a
reduction of one percent (1%) for each six (6) months the investment in the
Units remained invested in the Fund after the initial six months; i.e., 7-12
months a Redemption fee of 3%, 12-18 months 2%, 18-24 months 1%, and,
thereafter, no redemption fee. The initial Limited Partner may withdraw from
the Partnership at the time the Minimum number of Units are sold without
payment of a Redemption fee.
9.7 SPECIAL REDEMPTION. In the event the Net Asset Value per Unit falls to
less than fifty percent (50%) of the Net Asset Value established by the
greater of the initial offering price of one thousand dollars ($1,000), less
commissions and other charges, or such higher value earned after payment of
the incentive fee for the addition of profits, the General Partner shall
immediately suspend all trading, provide immediate notice, in accordance with
the terms of this Agreement, to all Partners of the reduction in Net Asset
Value, and afford all Partners the opportunity for fifteen (15) days after
the date of such notice to Redeem their Units in accordance with the
provisions of Section 9.5 and 9.6, above. No trading shall commence until
after such fifteen day period.
ARTICLE X
Nature of Partner's Liabilities for Claims
10.1 PROSECUTION OF CLAIMS. The General Partner shall arrange to prosecute,
defend, settle or compromise actions at law or in equity or with any self
regulatory organizations at the expense of the Partnership as such may be
necessary or desirable to enforce, protect, or maintain Partnership interests.
10.2 SATISFACTION OF CLAIMS. The General Partner shall satisfy any claims
against, errors asserted, or other liability of the Partnership and any
judgment, decree, decision or settlement, first out of any insurance proceeds
available therefor, next, out of Partnership assets and income, and finally
out of the assets and income of the General Partner.
20
<PAGE>
10.3 GENERAL PARTNER DECISION. The decisions made by the General Partner in
regard to the prosecution or settlement of claims, errors, and other
liabilities, will be final and binding without right of appeal or other legal
action by the other Partners or the Partnership.
10.4 EXONERATION AND INDEMNIFICATION. The General Partner shall not be
liable to the Partnership or the Partners for any failure to comply with its
obligations hereunder except for breach of fiduciary obligation owed to the
partnership or negligence on its part in the management of Partnership
affairs. In addition:
(a) The General Partner will be indemnified for liabilities and expenses
arising from any threatened, pending or completed action or suit in which it
or any affiliate is a party or is threatened to be made a party by reason of
the fact that it is or was the General Partner of the Partnership (other than
an action by the Partnership or a Partner against the General Partner which
is finally resolved in favor of the Partnership or Partner). The Partnership
will indemnify the General Partner and its affiliates against expenses,
including attorney's fees, judgments and amounts paid in settlement of an
action, suit or proceeding if it has acted in good faith and in a manner it
reasonably believed to be in or not opposed to the best interest of the
Partnership, and provided that its conduct did not constitute negligence,
willful or wanton misconduct or a breach of fiduciary obligations in the
performance of its duty to the Partnership. The termination of any action,
suit or proceeding by judgment, order or settlement against the Partnership
shall not of itself create a presumption that the General Partner or any
affiliate did not act in good faith and not in the best interest of the
Partnership; provided, however, any advance of funds to the General Partner
to pay such costs and expenses must be preceded by all of the following: (i)
a determination by the General Partner that, in good faith, the course of
conduct which caused the loss of liability was in the best interests of the
Partnership; and, (ii) the General Partner was acting on behalf of or
performing services for the Partnership; and, (iii) such asserted claim or
liability or loss to the claimant was not the result of negligence or
misconduct by the General Partner; and, (iv) such indemnification or
agreement to hold harmless is recoverable only out of the assets of the
Partnership and not from the Partners.
(b) In any threatened, pending or completed action or suit by or in the right
of the Partnership, to which the General Partner or an Affiliate was or is a
party or is threatened to be made a party, involving an alleged cause of
action by a Partner for damages arising from the activities of the General
Partner in the performance of management of the internal affairs of the
partnership as proscribed by this Agreement or by Federal or the State of
Indiana, the Partnership shall indemnify such General Partner against
expenses, including attorneys' fees and costs, actually and reasonably
incurred by such General Partner or Affiliate in connection with the defense
or settlement of such action or suit if it acted in good faith and in a
manner it reasonably believed to be in or not opposed to the best interests
of the Partnership, except that no indemnification shall be made in respect
of any claim, issue or matter as to which the General Partner shall have been
adjudged to be liable for negligence, misconduct, or breach of fiduciary
obligations in the performance of its duty to the Partnership unless and only
to the extent that the court in which such action or suit was brought shall
determine upon application, that, despite the adjudication of liability, in
view of all circumstances of the case, the General Partner or Affiliate is
reasonably entitled to indemnification for such expenses as such court shall
deem proper; provided, however, notwithstanding any other provisions of this
Agreement, the Partnership shall advance or pay the General Partner or any of
its Affiliates for legal expenses and other costs incurred as a result of any
legal action if the following conditions are satisfied: (i) the legal action
relates to acts or omissions with respect to the performance of duties or
services on behalf of the Partnership; (ii) the legal action is initiated by
a third party who is not a Limited Partner, or the legal action is initiated
by a Limited Partner and an independent arbitration panel, administrative law
judge, or court of competent jurisdiction specifically approves such
advancement; and, (iii) the General Partner or its Affiliates undertake to
repay the advanced funds to the Partnership, together with the applicable
legal rate of interest thereon, in cases which such party is not entitled to
indemnification under NASAA Guideline II.F.
21
<PAGE>
(c) To the extent that a General Partner or an Affiliate has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to above or in defense of any claim, issue or other matter related
to the Partnership or any other Partner or person who applied to be a Partner,
the Partnership shall indemnify such General Partner against the expenses,
including attorneys' fees and costs, actually and reasonably incurred by it
in connection therewith.
(d) The indemnification of a General Partner shall be limited to and
recoverable only out of the assets of the Partnership. Notwithstanding the
foregoing, the Partnership's indemnification of the General Partner shall be
limited to the amount of such loss, liability or damage which is not
otherwise compensated for by insurance carried for the benefit of the
Partnership.
(e) Notwithstanding any provision in this Agreement to the contrary, the
Partnership shall not advance or pay for any insurance to pay for the costs
of the defense or any liability which is prohibited from being indemnified
pursuant to NASAA Guideline II.F. Specifically, no indemnification which is
the result of negligence or misconduct by the General Partner or for any
allegation of a violation of the Federal or state securities laws by or
against the General Partner, any broker/dealer or any other party unless
there has been a successful adjudication on the merits of each count
involving alleged securities law violation as to the General Partner or
broker/dealer or such other party; or a court of competent jurisdiction
approves a settlement of the claims against the General Partner or any
broker/dealer or any other party and finds, specifically, that the
indemnification of the settlement and related costs should be made after the
court of law has been made aware of the position of the Securities and
Exchange Commission and the position of any applicable state securities
regulatory authority where the Partnership Interests were offered or sold
against the indemnification for violation of securities laws without the
compliance with specific conditions upon such indemnification and the action
covered satisfies the provisions of Section 10.4 (a) of this Agreement. Any
change in the requirements imposed by the Securities and Exchange Commission
and the state securities administrators in regard to indemnification shall
cause a corresponding change in this paragraph.
(f) The indemnification of the General Partner provided in this Article shall
extend to any employee, agent, attorney, certified public accountant, or
Affiliate of the General Partner.
(g) The Partnership shall indemnify, to the extent of the Partnership assets,
each Partner against any claims of liability asserted against a partner
solely because he is a Partner in the Partnership.
(h) In the event the Partnership or any Partner is made a party to any claim,
dispute or litigation or otherwise incurs any loss or expense as a result of
or in connection with any Partner's activities unrelated to the Partnership
business or as a result of an unfounded claim against the Partnership or any
other Partner brought as a result of alleged actions by said Partner, the
Partner which was responsible for the allegations which caused such loss or
expense shall indemnify and reimburse the Partnership and all other Partners
for all loss and expense incurred, including attorneys' fees and costs.
(i) No creditor of a Partner shall have a right to vote Units. Nor may any
Partner or creditor of a Partner anticipate any principal or income from the
Fund prior to the approval of a Redemption Request or the payment of a
distribution from the Fund.
ARTICLE XI
Power of Attorney
11.1 POWER OF ATTORNEY EXECUTED CONCURRENTLY. Concurrent with the written
acceptance and adoption of the provisions of this Agreement, each Partner
shall execute and deliver to the General Partner, a Power of Attorney
(paragraph 5 of the Subscription Agreement). Said Power of Attorney
22
<PAGE>
irrevocably constitutes and appoints the General Partner as a true and lawful
attorney-in-fact and agent for such Partner with full power and authority to
act in his name and on his behalf in the execution, acknowledgment and filing
of documents, which will include, but shall not be limited to, the following:
(a) Any certificates and other instruments, including but not limited to, a
Certificate of Limited partnership and amendments thereto and a certificate
of doing business under an assumed name, which the General Partner deems
appropriate to qualify or continue the Partnership as a limited partnership
in the jurisdictions in which the Partnership may conduct business, so long
as such qualifications and continuations are in accordance with the terms of
this Agreement or any amendment hereto, or which may be required to be filed
by the Partnership or the Partners under the laws of any jurisdiction;
(b) Any other instrument which may be required to be filed by the Partnership
under Federal or any state laws or by any governmental agency or which the
General Partner deems advisable to file; and
(c) Any documents required to effect the continuation of the Partnership, the
admission of the signer of the Power as a Limited Partner or of others as
additional or substituted Partners or Limited Partners, or the dissolution
and termination of the Partnership, provided such continuation, admission,
dissolution or termination is pursuant to the terms of this Agreement.
11.2 EFFECT OF POWER OF ATTORNEY. The Power of Attorney concurrently
granted by each Partner to the General Partner is a special Power of Attorney
coupled with an interest, is irrevocable, and shall survive the death or
legal incapacity of the Partner; and may be exercised by the General Partner
for each Partner by a facsimile signature of one of its officers or by
listing all of the Partners executing any instrument with a single signature
of one of its officers acting as attorney-in-fact for all of them; and shall
survive the delivery of an assignment by a Partner of the whole or any
portion of his interest in the Partnership; except that where the assignee
thereof has been approved by the General Partner for admission to the
Partnership as a substituted partner, the Power of Attorney shall survive the
delivery of such assignment for the sole purpose of enabling the General
Partner to execute, acknowledge and file an instrument necessary to effect
such substitution.
11.3 FURTHER ASSURANCES. Upon request, each Limited Partner agrees to
execute and deliver to the Partnership, within thirty (30) days after receipt
of a written request from the General Partner, a separate form of power of
attorney granting the same powers described above; and such other further
statements of interest, holdings, designations, powers of attorney and other
instruments as the General Partner deems necessary or desirable.
ARTICLE XII
Miscellaneous Provisions
12.1 NOTICES. Notices, requests, reports, payments or other communications
required to be given or made hereunder shall be in writing and shall be
deemed to be delivered when properly addressed and posted by United States
registered or certified mail or delivered by independent courier which
provides an record of receipt, postage or delivery fees prepaid, properly
addressed to the party being given such notice at its last known address.
Addresses shown on the Schedule of Limited Partners records of the
Partnership shall be considered the last known address of each said party
unless the General Partner is otherwise notified in writing.
12.2 NATURE OF INTEREST OF PARTNERS. The interest of each Partner in the
Partnership is personal property. No Partner may anticipate the distribution
or redemption of principal or income from the Partnership and no assignment
to secure the position of a lender to a Partner shall be valid without the
express written consent of the General Partner.
23
<PAGE>
12.3 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed in all respects by the laws of the State of Indiana. All
Partners agree to consent to the jurisdiction and to bring all actions for
claims related to the Partnership and the sale of the Units in the State and
County of the principal office of the Partnership as it is established, from
time to time, by the General Partner. Currently, the principal office of the
Partnership is located in Steuben County, Indiana.
12.4 SUCCESSORS IN INTEREST. This Agreement shall be binding on and inure to
the benefit of he parties hereto and, to the extent permitted by this
Agreement, their respective heirs, executors, administrators, personal
representatives, successors and assigns.
12.5 INTEGRATION. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings of such parties in
connection herewith. Any amendment or supplement made hereto must be in
writing.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. In such event, each counterpart shall constitute an original
and all such counterparts shall constitute one agreement. The addition of
Limited Partners pursuant to the power of attorney granted to the General
Partner shall not be deemed amendments to alter the rights of the other
Partners under this Agreement.
12.7 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal, or unenforceable in any respect in any jurisdiction shall be, as to
such jurisdiction, ineffective to the extent of such invalidity, illegality
or unenforceability. The remaining provisions hereof in such jurisdiction
shall be and remain effective. Any such invalidity, illegality or
unenforceability in any jurisdiction shall not invalidate or in any way
effect the validity, legality or enforceability of such provision or the
remainder of this Agreement in any other jurisdiction.
12.8 WAIVERS. The failure of any Partner to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.9 HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof.
12.10 RIGHTS AND REMEDIES CUMULATIVE. This rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
Partner shall not preclude or waive his right to use addition to any other
rights such Partner may have by law, statute, ordinance or otherwise.
12.11 WAIVER OF RIGHT TO PARTITION. Each of the Partners irrevocably
waives, during the term of the Partnership, any right that it may have to
maintain any action for partition with respect to the property and assets of
the Partnership.
12.12 INTEREST OF CERTAIN SECURED CREDITORS. No creditor who makes
nonrecourse loan to the Partnership shall have or acquire at any time as a
result of making the loan, any direct or indirect interest in the profits,
Capital, or property of the Partnership other than as a secured creditor.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
General Partner:
PACULT ASSET MANAGEMENT, INCORPORATED
By: s/ Shira Del Pacult
Shira Del Pacult
President
Initial Limited Partner:
By: s/ Shira Del Pacult
Shira Del Pacult
25
<PAGE>
<F5>**************************************************************************
FORM S-1, AMENDMENT NO. 3
Registration No. 33-96292
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Pacult Asset Management, Inc., (the "General Partner") will advance certain
of the Offering Expenses in connection with the offering of the limited
partnership interests (the "Units") subject to reimbursement by the
Registrant, after the sale of the Minimum, the termination of the Escrow, and
the commencement of trading in 24 equal monthly installments or 2% of the
subscriptions accepted by the General Partner at the time of the termination
of the Escrow, whichever is greater; provided, however, that the aggregate
amount of such reimbursement payments received during any subsequent calendar
year shall not exceed 2% of the Partnership's average month-end Net Assets
during such year (pro rated in the case of partial years) or 15% of New Net
Profits. The following is an estimate of the initial expenses to be
advanced by the General Partner in connection with the offering:
Approximate
Amount
Securities and Exchange Commission Registration Fee $ 1,724*
National Association of Securities Dealers, Inc. Filing Fee 1,000*
Printing Expenses 13,000
Fees of Certified Public Accountants 6,000
Blue Sky Expenses (Excluding Legal Fees) 5,000
Fees of Legal Counsel 40,200
Escrow Fees 1,000
Miscellaneous Offering Costs 2,076
Total $70,000
* Indicates not an estimated amount. See definition of Offering Expenses
to Appendix I of the Prospectus.
Item 14. Indemnification of Directors and Officers.
Article X, particularly Section 10.4 of the Limited Partnership Agreement
(attached as Exhibit A to the Prospectus which forms a part of this
Registration Statement) provides for the Exoneration and Indemnification of
the General Partner, its affiliates and its directors, officers and
controlling persons by the Registrant in certain circumstances. Such
indemnification is limited to claims sustained by such persons in connection
with the Registrant; provided that such claims were not the result of
negligence or misconduct on the part of the General Partner (Pacult Asset
Management, Inc.) or its affiliates, directors, officers and controlling
persons. The Registrant is prohibited from incurring the cost of any
insurance covering any broader indemnification than that provided above.
Advances of Registrant funds to cover legal expenses and other costs incurred
as a result of legal action initiated against the General Partner by any
other Partner to claim a violation of the Federal or state securities laws
are prohibited.
Item 15. Recent Sales of Unregistered Securities.
The General Partner and the initial Limited Partner, the sole principal of
the General Partner, each acquired a limited partnership interest (a "Unit")
in the Partnership for $1,000 per Unit on December 12, 1994, to legally
permit the filing of a Certificate of Limited Partnership for the Registrant.
1
<PAGE>
The sale of these Units were exempt from registration under the Securities
Act of 1933 pursuant to Section 4(2) thereof. No discounts or commissions
were paid in connection with these sales and no other offeree or purchaser
was solicited. There have been no other unregistered sales of Units. The
Limited Partner has the right, but not the obligation, to surrender her Unit,
once the Minimum is sold but before the Partnership commences operation, at
the face amount of $1,000 which she contributed to the Partnership. In the
event she elects to remains a Limited Partner, she will have the same rights
and obligations as all other Limited Partners.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (unless indicated) are filed herewith and made a
part of this Registration Statement:
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Date Filed
<S> <C> <C>
(1) - 01 Selling Agreement dated March 12, 1996, among the Partnership, the
General Partner, and World Invest Corporation, the Broker/Dealer. March 12, 1996
(2) None
(3) - 01 Articles of Incorporation of the General Partner August 28, 1995
(3) - 02 By-Laws of the General Partner August 28, 1995
(3) - 03 Board Resolution of General Partner to authorize formation of
Indiana Limited Partnership August 28, 1995
(3) - 04 Amended and Restated Agreement of Limited Partnership of the
Registrant dated January 15, 1996
(included as Exhibit A to the Prospectus). June 7, 1996
(3) - 05 Indiana Secretary of State acknowledgment of filing of Certificate
of Limited Partnership April 11, 1996
(3) - 06 Certificate of Limited Partnership, Designation of Registered Agent
and Certificate of Initial Capital filed with the Indiana Secretary
of State on January 12, 1996 April 11, 1996
(4) - 01 Amended and Restated Agreement of Limited Partnership of the
Registrant dated January 15, 1996
(included as Exhibit A to the Prospectus). June 7, 1996
(5) - 01 Opinion of The Scott Law Firm relating to the legality of the
Partnership Units. August 28, 1995
(6) Not Applicable
(7) Not Applicable
(8) - 01 Opinion of The Scott Law Firm with respect to Federal income tax
consequences. March 12, 1996
(9) None
(10) - 01 Form of Advisory Agreement between the Partnership and the CTA
(included as Exhibit F to the Prospectus) August 28, 1995
(10) - 02 Form of New Account Agreement between the Partnership and the FCM March 12, 1996
(10) - 03 Form of Subscription Agreement and Power of Attorney
(included as Exhibit D to the Prospectus). March 12, 1996
(10) - 04 Escrow Agreement among Escrow Agent, Underwriter, and the
Partnership. (included as Exhibit E to the Prospectus). August 28, 1995
(10) - 05 Introducing Broker Clearing Agreement dated the 19th day of October,
1995, by and between The Chicago Corporation as futures commission
merchant (the "FCM") and Futures Investment Co. as introducing
broker (the "IB") April 11, 1996
(11) Not Applicable - start-up business
(12) Not Applicable
(13) Not Required
(14) None
(15) None
(16) Not Applicable
(17) Not Required
(18) Not Required
(19) Not Required
(20) Not Required
(21) None
(22) Not Required
(23) - 01 Consent of Frank L. Sassetti & Co., Certified Public Accountants June 7, 1996
(23) - 02 Consent of James Hepner, Certified Public Accountant August 28, 1995
(23) - 03 Consent of The Scott Law Firm. June 7, 1996
(23) - 04 Consent of Michael J. Frischmeyer, CTA June 7, 1996
(23) - 05 Consent of World Invest Corporation June 7, 1996
(23) - 06 Consent of Escrow Agent August 28, 1995
(23) - 07 Consent of The Chicago Corporation June 7, 1996
(24) None
(25) None
(26) None
(27) Not Applicable
(28) Not Applicable
(99) - 01 Subordinated Loan Agreement for Equity Capital April 11, 1996
(99) - 02 Representative's Agreement between World Invest Corporation and
Shira Del Pacult dated December 10, 1992 June 7, 1996
</TABLE>
2
<PAGE>
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
Item 17. Undertakings.
(a) (1) The undersigned registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental: change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) The General Partner has provided an indemnification to World
Invest Corporation, the best efforts selling agent. The Partnership (issuer)
has not made any indemnification to World Invest Corporation.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant including, but not limited to, the General Partner pursuant to the
provisions described in Item 14 above, or otherwise, the Registrant had been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any such action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
3
<PAGE>
******************************************************************************
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the General
Partner of the Registrant has duly caused this Amendment No. 3 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont in the State of Indiana on
the 6th day of June, 1996.
PACULT ASSET MANAGEMENT, INC. FREMONT FUND
BY PACULT ASSET MANAGEMENT, INC.
GENERAL PARTNER
By: MS. SHIRA PACULT By: MS. SHIRA PACULT
MS. SHIRA PACULT MS. SHIRA PACULT
PRESIDENT PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement Amendment No. 3 has been signed below by the following
person on behalf of Pacult Asset Management, Inc., General Partner of the
Registrant in the capacities and on the date indicated.
MS. SHIRA PACULT
MS. SHIRA PACULT Date: July 17, 1996
PRESIDENT
(Being the principal executive officer, the principal financial and
accounting officer and the sole director of Pacult Asset Management, Inc.,
General Partner of the Fund)
CONSENT OF ROBERT W. KRONE, CPA
and FRANK L. SASSETTI & CO.
The undersigned, Robert W. Krone, CPA and Frank L. Sassetti & Co., hereby
consent to the use of the audit reports and certifications for the period
ended April 30, 1996, for Fremont Fund, Limited Partnership and
Pacult Asset Management, Inc. in the Form S-1.
The undersigned hereby further consents to inclusion of our names and the
other information under the section "Experts" in the Form S-1 registration
statement to be filed with the Securities and Exchange commission and the
states to be selected by the General Partner. Without further consent of the
undersigned, the General Partner will cause such changes to the Form S-1 as
are appropriate in response to the comments of said Commission and
administrators and, thereafter, deliver the Prospectus to prospective
investors with respect to the offering of up to $5,000,000 aggregate amount
of limited partnership interest (the "Units") in Fremont Fund, Limited
Partnership.
Robert W. Krone, CPA
Robert W. Krone, CPA
Frank L. Sassetti & Co.
6611 West North Avenue
Oak Park, Illinois 60302
(708) 386-1433
Date: June 6, 1996
CONSENT BY LEGAL AND TAX COUNSEL
The Scott Law Firm, (the "Undersigned"), hereby consents to being named as
legal and tax counsel in a Form S-1 Registration Statement and the inclusion
of the legal opinions rendered by the Undersigned as Exhibits 5 and 8 thereto
filed with the Securities and Exchange Commission by the Fremont Fund,
Limited Partnership, in connection with a proposed offering of limited
partnership interests (the "Units") to the public as described in said
Registration Statement.
William S. Scott
William S. Scott
The Scott Law Firm
2730 SW 3rd Avenue, 5th Floor
Miami, Florida 33129
(305) 285-4114
Facsimile (305) 285-4160
Florida Bar Number #947822
Dated: June 6, 1996
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
1. Michael J. Frischmeyer, Commodity Trading Advisor, (the "Undersigned" or
"CTA"), hereby consents to being named as CTA in a Registration Statement on
Form S-1 and Amendment 3 filed at number 33-96292 with the Securities and
Exchange Commission by Fremont Fund, Limited Partnership, (the "Fund") and to
the states selected by the General Partner of the Fund in connection with the
offering and sale of limited partnership interests (the "Units") to the
public as described in said Prospectus.
2. The Undersigned hereby certifies that he furnished the statements and
information set forth in the offering circular with respect to the
Undersigned, and that such statements and information are accurate, complete
and fully responsive to the requirement of disclosure of my background,
trading history, and the information required to be supplied in the
Prospectus thereto and do not omit any information required to be stated
therein with respect to me or my trading ability or methods or risks which
are necessary to make the statements and information therein, not misleading.
3. The Undersigned agrees to keep his track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to
keep the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in
full compliance with all laws and regulations applicable to the operation of
the Fund.
Michael J. Frischmeyer, CTA
Michael J. Frischmeyer, CTA
Date: June 6, 1996
CONSENT AND CERTIFICATION BY UNDERWRITER
1. World Invest Corporation (the "Undersigned") hereby consents to being
named as underwriter in a Form S-1 Registration Statement as amended under
number 3 to be filed with the Securities and Exchange Commission by Fremont
Fund, Limited Partnership, in connection with a proposed offering of limited
partnership interests (the "Units") to the public as described in said
registration statement.
2. The Undersigned hereby certifies that it furnished the statements and
information set forth in the Prospectus with respect to the Undersigned, its
directors and officers, that such statements and information are accurate,
complete and fully responsive to the requirement of Form S-1 and do not omit
any material information required to be stated therein with respect of any
such persons, or necessary to make the statements and information therein,
with respect to any of them, not misleading.
3. If Preliminary Registration Statements are distributed, the Undersigned
hereby undertakes to keep an accurate and complete record of the name and
address of each person furnished a Registration Statement and, if such
Registration Statement is inaccurate or inadequate, in any material respect,
to furnish a revised or a Registration Statement to all persons to whom the
securities are to be sold at least 48 hours prior to the mailing of any
confirmation of sale to such persons, or to send such a circular to such
persons under circumstances that it would normally be received by them 48
hours prior to their receipt of confirmation of the sale.
WORLD INVEST CORPORATION
Henry F. Tegler, Jr.
By: Henry F. Tegler, Jr.
President
Date: June 6, 1996
CONSENT AND CERTIFICATION
BY FUTURES COMMISSION MERCHANT
1. James A. Gary, (the "Undersigned") of The Chicago Corporation., Futures
Commission Merchant, (the "FCM"), first duly authorized by the FCM, hereby
consents to The Chicago Corporation being named as a FCM in a Form S-1
Prospectus, as amended, filed with the Securities and Exchange Commission
under number 33-96292 by Fremont Fund, Limited Partnership, (the "Fund") in
connection with a proposed offering of limited partnership interests (the
"Units") to the public as described in said Prospectus.
2. The Undersigned hereby certifies that the statements and information set
forth in the Prospectus with respect to the FCM are accurate, complete and
fully responsive to the requirement of disclosure of the material facts
related to it and the relationship of the FCM with the Fund and such
disclosures do not omit any information required to be stated therein with
respect to the FCM which are necessary to make the statements and information
therein with respect to it, not misleading.
3. The Undersigned agrees to perform the terms of the New Account Forms and
to supply all information required, including, but not limited to, daily
trade confirmation, monthly account statements and daily account runs. The
Undersigned agrees further to take those actions reasonably required of the
FCM by any regulatory or tax authority to keep the FCM and its customers in
full compliance with all laws and regulations applicable to the operation of
the FCM.
James A. Gary
James A. Gary
Executive Vice President
The Chicago Corporation
208 South LaSalle
Chicago, IL 60604
Date: 3/25/96
