SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: December 31, 1996
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Commission File number: 33-96292
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Fremont Fund, Limited Partnership
-----------------------------------
(Exact name of registrant as specified in charter)
Indiana 35-1949364
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2990 W. 120
Fremont, IN 46737
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(Address of principal executive offices)
(219) 833-1306
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Registrant's telephone number
Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
-------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [ ] No [ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sect 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing. None
DOCUMENTS INCORPORATED BY REFERENCE
Audited Financial Statements for Registrant dated February 19, 1997, filed
with the United States Securities and Exchange Commission within 90 days of
the year end December 31, 1996, at Registration No. 33-96292.
Registration Statement and all amendments thereto filed with the United States
Securities and Exchange Commission at Registration No. 33-96292, particularly
the Prospectus dated August 12, 1996, are incorporated by reference to Parts
I, II, III, and IV.
PART I
Item 1. Business
On August 12, 1996, Registrant, through the efforts of its General Partner,
commenced the sale of Limited Partnership Units at the price established by
the General Partner of $1,000 per Unit. The Units were sold and continued to
be offered through World Invest Corporation, a National Association of
Securities Dealers, Inc. registered broker dealer. In November, 1996, upon
the sale of a total of $600,000 in face amount of Units, the Registrant
terminated the escrow established to collect the initial sales proceeds and
commenced its principal business, the trading of commodities.
Mr. Michael Frischmeyer, a National Futures Association registered commodity
trading advisor is the sole person authorized by the Registrant to select
trades. Mr. Frischmeyer is paid a management fee of four percent (4%) of
equity assigned to him to manage plus an incentive fee of fifteen percent
(15%) of New Net Profit, as that term is defined in the partnership agreement
which governs the operation of the registrant. The partnership agreement is
included in the registration statement and is incorporated herein by
reference.
After the commencement of business, the sale of Limited Partnership Units were
made and continue to be made at an offering price determined at the end of
each month after consideration of all profits, losses and expenses incurred by
the Partnership. As of February 28, 1997, the Registrant had sold 1,162 Units
for a total aggregate offering price of $1,127,502, paid sales commissions of
$67,650, and paid expenses of $61,992, for a total deposit to trading equity
of $994,060. A total of $5,000,000 in face amount of Units have been
registered.
None of the purchasers of Limited Partnership Units have a voice in the
management of the Partnership. Reports of the Net Asset Value of the
Partnership are sent to all purchasers of Units at the end of each month.
The General Partner provides its management services for a management fee of
two percent (2%) per year payable at the rate of one-sixth of one percent
(1/6th of 1%) per month.
Futures Investment Company, an introducing broker which is Affiliated with the
General Partner provides all clearing costs, including pit brokerage fees,
which includes floor brokerage, NFA and exchange fees for one percent (1%) of
total equity per month [twelve percent (12%) per year] on deposit at The
Chicago Corporation, the independent futures commission merchant selected by
the General Partner to hold the funds of the partnership.
The business of the Partnership is regulated by the Commodity Futures Exchange
Commission pursuant to the Commodity Exchange Act. These legal safeguards are
not intended to protect investors from the risks inherent in the trading of
commodities. The trading of commodities is highly speculative and risky. For
a complete description of the risks and regulation of the business of the
Partnership, see the Registration Statement for the partnership on file with
the Securities and Exchange Commission at No. 33-96292, particularly the
Prospectus dated August 12, 1996, which is incorporated herein by reference.
Item 2. Properties
Registrant maintains the majority of its assets on deposit at The Chicago
Corporation, 208 South LaSalle Street, Chicago, IL 60604. The Chicago
Corporation is registered with the National Futures Association pursuant to
the Federal Commodity Exchange Act as a commodity futures commission merchant.
The trading of commodities is highly speculative and the Registrant is at
unlimited risk of loss, including the pledge of all of its assets, to the
trades made on its behalf of the commodity trading advisor in the commodity
markets.
Item 3. Legal Proceedings
There have been no legal proceedings against the Registrant, its General
Partner, or any of its Affiliates, directors or officers. Neither the
commodity trading advisor nor the commodity futures commission merchant
selected by the Registrant have had any legal proceedings against them, any of
its Affiliates, directors or officers which would materially effect the
operation of the Registrant or its business.
The Registrant is not aware of any threatened or potential claims or legal
proceedings to which the Registrant is a party or to which any of its assets
are subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters occurred during the partial calendar year from the break of escrow
in November, 1996, to December 31, 1996, or to the date of filing of this Form
10-K which were submitted to or required a vote of the Partners. All of the
day to day management of the Registrant is performed by its corporate General
Partner. The Limited Partners, (sic the Security Holders), have no right to
participate in the management of the Partnership. All of their voting rights,
as defined in the Partnership Agreement, are limited to the selection of the
General Partner, amendments to the Partnership Agreement, and other similar
decisions.
PART II
Item 5. Market for Registrant's Limited Partnership Units
The Partnership desires to be taxed as a partnership and not as a corporation.
In furtherance of this objective, the Partnership Agreement requires a
security holder to obtain the approval of the General Partner prior to the
transfer of any Units of Partnership interest. Accordingly, there is no
market for the Units and none is likely to develop. The Partners must rely
upon the right of Redemption provided in the Partnership Agreement to
liquidate their interest.
The Partnership has less than 300 holders of its securities. Partners are
required to represent to the issuer that they are able to understand and
accept the risks of investment in a commodity pool for which no market will
develop and the right of redemption will be the sole expected method of
withdrawal of equity from the Partnership. See the Prospectus dated August
12, 1996, particularly the Partnership Agreement attached as Exhibit A,
incorporated herein by reference, for a complete explanation of the right of
redemption provided to Partners.
Item 6. Selected Financial Data
Registrant is not required to pay dividends or otherwise make distributions
and none are expected. The Partners must rely upon their right of redemption
to obtain their return of equity after consideration of profits, if any, and
losses from the Partnership. See the Prospectus dated August 12, 1996,
incorporated herein by reference, for a complete explanation of the allocation
of profits and losses to a partners capital account.
<TABLE>
Following is a summary of certain financial information for the Registrant for
the period from November 30, 1996, (inception) to December 31,1996.
<S> <C>
1996
Realized Gains (Losses) $ (57)
Change in Unrealized Gains (Losses)
on Open Contracts 17,861
Interest Income 6,259
Management Fees 4,492
Incentive Fees 1,716
Net Income (Loss) 6,899
General Partner Capital 25,154
Limited Partner Capital 768,498
Total Partnership Capital 793,652
Net Income (Loss) Per Limited and
General Partner Unit* 7.65
Net Asset Value Per Unit At
End of Year 880.53
- ----------------
* Based on weighted average units outstanding
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
The initial start-up costs attendant to the sale of partnership interests by
use of a Prospectus which has been filed with the Securities and Exchange
Commission are substantial. The results of the partial year 1996 reflect the
absorption of these costs by the Partnership. In addition, the break of
escrow in November did not allow sufficient time for the commodity trading
advisor to fully invest the equity made available for trading to permit the
Partnership the opportunity to produce profits to offset the start-up costs.
Accordingly, the Net Asset Value Per Unit at the End of the Year was below the
initial sales price of $1,000 per Unit. The General Partner expects the
equity available for trading to be fully invested within the first quarter of
1997.
The Partnership Agreement grants the right to the General Partner to select
the trading advisor or advisors and to otherwise manage the operation of the
Partnership. See the Prospectus dated August 12, 1996, incorporated by
reference herein, for an explanation of the operation of the Partnership.
Item 8. Financial Statements and Supplementary Data.
The Partnership financial statements as of December 31, 1996, were prepared by
James Hepner, certified public accountant, 1824 N. Normandy, Chicago, IL 60635
and were audited by Frank L. Sassetti & Co., Certified Public Accountants,
6611 West North Avenue, Oak Park, IL 60302, were sent to each Partner, and are
incorporated herein by reference and are provided at Pages F-1 through F-16 of
this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
No disagreements with the accountants identified in Item 8 above or any other
experts selected by the Partnership in regard to the Prospectus dated August
12, 1996, or the financial statements have occurred since the formation of the
Partnership on October 13, 1994, to the date of filing of this Form 10-K.
The National Futures Association and the Commodity Futures Trading Commission
adopted rules and regulations which changed the disclosures required of
commodity pool operators during the years 1995 and 1996 which changed the
method of presentation of the pool expenses in the Prospectus included in the
Registration Statement from the date of the initial filing with the Securities
and Exchange Commission to the effective date on August 12, 1996. Registrant
used its best efforts to fully comply with all of these changes without
objection to or from its accountants and other experts selected to make and
audit these changes.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Registrant is a Limited Partnership which acts through its corporate
general partner. Accordingly, the Registrant has no Directors or Executive
Officers.
The General Partner of the Registrant is Pacult Asset Management,
Incorporated, a Delaware corporation. The General Partner is registered as a
commodity pool operator pursuant to the Commodity Exchange Act and Ms. Shira
Del Pacult, age 40, is its sole shareholder, director, registered principal,
and executive officer. The background and qualifications of Ms. Pacult are
disclosed in the Prospectus dated August 12, 1996, incorporated herein by
reference. Ms. Pacult is also a registered representative with World Invest
Corporation, the underwriter of the "best efforts" offering of the Units.
Neither the General Partner nor Ms. Pacult have any prior experience in the
management of commodity pools.
Item 11. Executive Compensation.
The Registrant pays its General Partner a management fee of two percent (2%)
per year, payable monthly, to serve the Partnership in an executive capacity.
All operating costs related to management of the Partnership, including
compensation to Ms. Pacult, are paid from that management fee. The total paid
to the General Partner during the year 1996 was $560. The total incurred,
including unpaid amounts as of December 31, 1996, was $1,645.
Ms. Pacult also earns compensation from the sale of the Units through the
selling broker and from the fixed commissions paid by the Partnership to the
Affiliated introducing broker. The total compensation to Ms. Pacult is
disclosed in the Prospectus dated August 12, 1996, which is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) The following partners own more than five percent (5%) of the total
equity of the partnership.
Name Percentage Ownership
Ondine Partnership 11.95%
(b) Pursuant to the terms of the Partnership Agreement and the offering, the
General Partner must maintain no less than one percent (1%) of the total
equity of the partnership. As of February 28, 1997, the General Partner
owned 30.130838 Units of Limited Partnership interests.
(c) The Limited Partnership Agreement governs the terms upon which control of
the Partnership may change. No change in ownership of the Units will,
alone, determine the location of control. A vote of the limited partners
is required to change the control from the General Partner to another
general partner. Control of the management of the Partnership may never
vest in one or more Limited Partners. There were no changes in control of
the Partnership from inception to the date of the filing of this Form 10-K.
Item 13. Certain Relationships and Related Transactions.
The General Partner has sole discretion over the selection of trading
advisors. The Affiliated introducing broker is paid a fixed commission for
trades and, therefore, the General Partner has a potential conflict in the
selection of a trading advisor who makes few trades rather than produces
profits for the Partnership. This conflict and others are fully disclosed in
the Prospectus dated August 12, 1996, which is incorporated herein by
reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
See Index to Financial Statements for the period ended December 31,
1996.
The Financial Statements begin on page F-1.
(a) 2. Financial Schedules
Not applicable, not required, or included in the Financial Statements.
(a) 3. Exhibits.
Incorporated by reference from Form S-1, and all amendments at file No.
33-96292 previously filed with the Washington, D. C. office of the
Securities and Exchange Commission, particularly, the Prospectus dated
August 26, 1996.
<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). July 17, 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). July 17, 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 August 5, 1996
(23) - 02 Consent of James Hepner, Certified Public Accountant August 28, 1995
(23) - 03 Consent of The Scott Law Firm. August 5, 1996
(23) - 04 Consent of Michael J. Frischmeyer, CTA August 5, 1996
(23) - 05 Consent of World Invest Corporation August 5, 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>
(b) Reports on Form 8-K: none
(c) Exhibits filed herewith: none
(d) Financial Schedules filed herewith: not applicable, not required or
included with the financial statements
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K for the
period ended December 31, 1996, to be signed on its behalf by the undersigned,
thereunto duly authorized.
Registrant: Fremont Fund, Limited Partnership
By Pacult Asset Management, Inc.
Its General Partner
Date: April 23, 1997 By: s/ Ms. Shira Del Pacult
Ms. Shira Del Pacult
Sole Director, Sole Shareholder
President and Treasurer
<F1>**************************************************************************
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
FOR THE YEAR ENDED DECEMBER 31, 1996
(With Auditors' Report Thereon)
GENERAL PARTNER:
Pacult Asset Management, Inc.
2990 West 120
Fremont, Indiana 46737
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
FOR THE YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
Independent Auditors' Report F1
Financial Statments -
Balance Sheet F2
Statement of Operations F3
Statement of Partners' Capital F4
Statement of Cash Flows F5
Notes to Financial Statments F6 - F10
<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 December 31, 1996, and the related statements of
operations, partners' equity and cash flows for the year ended.
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 audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 December 31, 1996, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Accountants: Frank L. Sassetti & Co.
Certified Public Accountants
Date: February 19, 1997 By: s/ Frank L. Sassetti & Co.
Frank L. Sassetti & Co.
Certified Public Accountants
F-1
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
<TABLE>
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<S> <C>
Cash (Note 7) $161,388
United States Treasury Obligations (Note 6) 362,652
Accrued interest receivable 2,379
Equity in Commodity Futures Trading Accounts -
Cash (Note 6) 276,415
Net unrealized gain on open commodity
futures contracts (Note 8) 17,889
Organization costs, net of amortization (Note 1) 2,135
--------
$822,858
========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accrued commissions payable $ 14,062
Accrued management and incentifve fees payable 3,550
Accrued accounting fees payable 734
Due to general partner 10,860
-------
Total Liabilities 29,206
-------
PARTNERS' CAPITAL
Limited partners - (876.34 units) 768,498
General partner - (25 unit) 25,154
-------
793,652
-------
$822,858
========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-2
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C>
REVENUES
Realized loss from trading on futures $ (57)
Realized gain on exchange rate fluctuation 28
Changes in unrealized gains on open commodity
futures contracts 17,861
Interest income 6,259
-------
Total Revenues 24,091
-------
EXPENSES
Commissions 8,542
Management and incentive fees 6,209
Professional accounting and legal fees 1,499
Other operating and administrative expenses 637
Amortization of organization costs 305
-------
Total Expenses 17,192
-------
NET INCOME $ 6,899
========
NET INCOME -
Limited partnership unit $ 7.65
========
General partnership unit $ 7.65
========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-3
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
<TABLE>
STATEMENT OF PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Limited General Total
Partners Partners Partners' Equity
Amount Units Amount Units Amount Units
<S> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1995 $ 963 1.00 $ 963 1.00 $ 1,926 2.00
Addition of
899.34 units 760,827 875.34 24,000 24.00 784,827 899.34
Net income 6,708 191 6,899
------- ------- ------- ------- ------- -------
Balance -
December 31, 1996 $768,498 876.34 $ 25,154 25.00 $793,652 901.34
======== ======= ======== ======= ======== =======
Value per unit at December 31, 1996 $880.53
=======
Total partnership units at
December 31, 1996 901.34
=======
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-4
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
<TABLE>
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES -
Net income $ 6,899
Adjustments to reconcile net income to net cash
provided by operating activities -
Amortization of organization costs 305
Changes in operating assets and liabilities -
Increase in Equity in Commodity Future
Trading accounts (294,304)
Increase in accrued interest receivable (2,379)
Increase in U. S. Treasury Obligations (362,652)
Increase in accrued commissions payable 14,062
Increase in management and incentive fees
payable 3,550
Increase in accounting fees payable 734
Increase in due to general partner 10,860
--------
Net Cash Used in Operating Activities (622,925)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in organization costs (2,440)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Gross proceeds from sale of units 830,327
Syndication and registration costs (45,500)
--------
Net Cash Provided by
Financing Activities 784,827
--------
NET INCREASE IN CASH 159,462
CASH -
Beginning of period 1,926
--------
End of period $ 161,388
=========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-5
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Fremont Fund, Limited Partnership (the Fund) was formed January 12, 1995. The
Fund is engaged 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, who has 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 are capitalized and amortized
over twenty-four months on a straight line method starting when operations
began, payable from profits or capital subject to a 2% annual capital
limitation. All organizational costs paid to date have been capitalized.
Amortization expense of $305 was recorded for the year ended December 31,
1996.
Registration Costs - 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 was made were
accumulated, deferred and charged against the gross proceeds of offering at
the initial closing. Recurring registration costs, if any, will be charged to
expense as incurred.
Revenue Recognition - Commodity futures contracts are recorded on the trade
date and are reflected in the accompanying Balance Sheet at the difference
between the original contract amount and the market value on the last business
day of the reporting period.
Market value of commodity futures contracts is based upon exchange closing
quotations.
F-6
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Statement of Cash Flows - Net cash provided by operating activities includes
no cash payments for interest or income taxes for the year ended December 31,
1996 since the Fund has no debt nor pays federal income taxes. For purposes
of the Statement of Cash Flows, the Fund considers only cash and money market
funds to be cash equivalents.
2. GENERAL PARTNER DUTIES
The responsibilities of the General Partner, in addition to directing the
trading and investment activity of the Fund, include executing and filing all
necessary legal documents, statements and certificates of the Fund, retaining
independent public accountants to audit the Fund, employing attorneys to
represent the Fund, reviewing the brokerage commission rates to determine
reasonableness, maintaining the tax status of the Fund as a limited
partnership, maintaining a current list of the names, addresses and numbers of
units owned by each Limited Partner and taking such other actions as deemed
necessary or desirable to manage the business of the Partnership.
3. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement provides, among other things, that -
Capital Account - A capital account shall be established for each partner.
The initial balance of each partner's capital account shall be the amount of
the initial contributions to the partnership.
F-7
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. THE LIMITED PARTNERSHIP AGREEMENT - CONTINUED
Monthly Allocations - Any increase or decrease in the Partnership's net asset
value as of the end of a month shall be credited or charged to the capital
account of each Partner in the ratio that the balance of each account bears to
the total balance of all accounts.
Any distribution from profits or partners' capital will be made solely at the
discretion of the General Partner.
Allocation of Profit and Loss for Federal Income Tax Purposes -As of the end
of each fiscal year, the Partnership's realized capital gain or loss and
ordinary income or loss shall 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.
Redemption - No partner may redeem or liquidate any Units until six months
after the commencement of trading. A Limited Partner may withdraw any part or
all of his units from the Partnership at the Net Asset Value per Unit as of
the last day of any month on ten days prior written notice to the General
Partner. A redemption fee payable to the Partnership of a percentage of the
value of the redemption request bears the following schedule.
4% if such request is received prior to the nineteenth day of the twelfth
month after the commencement of trading.
3% if such request is received during the next seven to twelve months.
2% if such request is received during the next thirteen to eighteen
months.
1% if such request is received during the next nineteen to twenty-four
months.
0% thereafter.
F-8
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. FEES
The Fund is charged the following fees on a monthly basis since the
commencement of trading on November 14, 1996.
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
General Partner for payment to the CTA. "New trading profits" includes all
income earned by the CTA and expense allocated to his activity. 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
allocated to trading, 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.
5. REALIZED GAIN ON EXCHANGE RATE FLUCTUATIONS
The Fund is investing in certain foreign currency futures contracts. The
difference in the exchange rates from the trade date to the end of the fiscal
year is being recorded as a realized gain or loss on exchange rate
fluctuation.
6. PLEDGED ASSETS
The U. S. Treasury Obligations and cash in trading accounts are pledged as
collateral for commodities trading on margin.
F-9
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
7. CONCENTRATIONS OF CREDIT RISK
The Fund maintains its cash balances at a high credit quality financial
institution. The balances may, at times, exceed federally insured credit
limits.
8. OFF BALANCE SHEET RISK
As discussed in Note 1, the Fund is engaged in speculative trading of futures
contracts in commodities. The carrying amounts of the Fund's financial
instruments and commodity contracts generally approximate their fair values at
December 31. Open commodity contracts had a gross contract of $3,891,594 on
long positions and $180,775 on short positions.
Although the gross contract values of open commodity contracts represent
market risk, they do not represent exposure to credit risk, which is limited
to the current cost of replacing those contracts in a gain position. The
unrealized gain on open commodity future contracts at December 31 was $17,889.
F-10
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
To the best of my knowledge and belief, the information in this statement is
accurate and complete.
Shira Pacult
President
Pacult Asset Management, Inc.
General Partner
Fremont Fund, Limited Partnership
F-11
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 437,803
<SECURITIES> 362,652
<RECEIVABLES> 2,379
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 822,858
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 822,858
<CURRENT-LIABILITIES> 14,062
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0
0
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<SALES> 0
<TOTAL-REVENUES> 24,091
<CGS> 0
<TOTAL-COSTS> 17,192
<OTHER-EXPENSES> 0
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