FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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, 1998
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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)
5916 N. 300 West
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.
-------------------- ------------------------------------------
None None
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
There is no market for the Units of Partnership interests and none is expected
to develop. This is a commodity pool. The Units are registered to permit the
initial sale of Units at month end net asset value.
Documents Incorporated by Reference
Audited Financial Statements for Registrant filed with the United States
Securities and Exchange Commission within 90 days of each of the years ended
December 31, 1996 and December 31, 1997, 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, as amended by its post
effective amendments, 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. It is
presently engaged in the trade of commodities and expects that activity to be
continuos.
Mr. Michael Frischmeyer, a National Futures Association registered commodity
trading advisor ("CTA") was originally the sole person authorized by the
Registrant to select trades. However, because the trading results had
produced losses of 28% since inception of trading, the General Partner, in
July, 1998, selected another CTA, EPIC Trading, to select trades. The CTAs
are paid management fees of four percent (4%) of the equity assigned to them
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 as
Exhibit A to 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. In April of 1997, sales of Units were suspended
because the broker dealer selected to make the sales elected, for reasons
unrelated to the Fund, to leave the broker dealer business. The Fund has
selected Futures Investment Company, an NASD member broker dealer affiliated
with the principal of the General Partner, as the successor broker dealer.
Sales of Units are expected to resume in the near future.
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 include floor brokerage, NFA and exchange fees for one percent
(1%) of total equity per month [twelve percent (12%) per year] on deposit at
ABN AMRO, the independent futures commission merchant selected by the General
Partner to hold the funds of the partnership. From inception of trading by
the Partnership in November, 1996, until January 2, 1997, The Chicago
Corporation, 208 South LaSalle Street, Chicago, IL 60604 was the futures
commission merchant for the Partnership. On January 2, 1997, the stock of
The Chicago Corporation was purchased by ABN AMRO Capital Markets Holding,
Inc., a subsidiary of ABN AMRO Bank, N.V., headquartered in Amsterdam,
Netherlands. What was formerly The Chicago Corporation was then merged with
ABN AMRO Bank, N.V.'s wholly owned subsidiary, ABN AMRO Securities (USA)
Inc., to form ABN AMRO Chicago Corporation, at the same address. In
February, 1998, the name of ABN AMRO Chicago Corporation was changed to ABN
AMRO Incorporated ("FCM" or "ABN AMRO"). This change in ownership is not
expected to affect the Registrant in any way.
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, as amended by its
post effective amendments, which are incorporated herein by reference.
Item 2. Properties
Registrant maintains the majority of its assets on deposit at ABN AMRO, 208
South LaSalle Street, Chicago, IL 60604. ABN AMRO 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 period from December 31, 1997 to December 31,
1998 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, as amended by its post effective amendments, 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, as
amended by its post effective amendments, incorporated herein by reference,
for a complete explanation of the allocation of profits and losses to a
partners capital account.
Following is a summary of certain financial information for the Registrant
for the period from January 1, 1998 to December 31,1998.
1998
Realized Gain (Loss) From Trading In Futures $(11,037)
Change in Unrealized Gains (Losses) on Open Contracts 2,880
Interest Income 37,716
Management Fees 46,097
Incentive Fees 4,390
Net Income (Loss) (92,882)
General Partner Capital 20,613
Limited Partner Capital 601,895
Total Partnership Capital 622,508
Net Income (Loss) Per Limited and
General Partner Unit* (91.71)
Net Asset Value Per Unit At
End of Year 684.14
- ----------------
* Based on weighted average units outstanding
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 reflected
the absorption of these costs by the Partnership.
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, as amended by its
post effective amendments, 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, 1998, 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-10 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, as amended by its post effective amendments, 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 42, 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, as amended by its post
effective amendments, incorporated herein by reference. Ms. Pacult is also a
registered representative with Futures Investment Company, the broker dealer
which will serve as underwriter of the "best efforts" offering of the Units
once sales are resumed.
Since April, 1998, the General Partner has operated a separate, privately
offered commodity pool called Auburn Fund, Limited Partnership. Ms. Pacult
is also the principal of the general partner of another commodity pool called
Atlas Futures Fund, Limited Partnership, which has not yet commenced
business.
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 1998 was $__,___. The total
incurred, including unpaid amounts as of December 31, 1998, was $15,___.
Ms. Pacult also earns compensation from the sale of the Units through the
Affiliated selling broker and from the fixed commissions paid by the
Partnership to the Affiliated introducing broker. The amounts to be paid to
the affiliated companies which results in compensation to Ms. Pacult are
disclosed in the Prospectus dated August 12, 1996, as amended by the post
effective amendments, which are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No partners own more than five percent (5%) of the total equity of the
partnership.
(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 December 31, 1998, the General Partner
owned 30 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 of operations 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, as amended by its post effective
amendments, which are 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,
1998.
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 12, 1996,
as amended by its post effective amendments.
<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
(1)-02 Selling Agreement dated July 22, 1997, among the partnership, the
General Partner and Futures Investment Company, the Broker/Dealer July 28, 1997
(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 12, 1996
(included as Exhibit A to the Prospectus). April 11, 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). April 11, 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 December 14, 1998
(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
(22) - 08 Consent of Futures Investment Company July 28, 1997
(23) - 09 Consent of Durland & Company To be supplied
(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
(99) - 03 New Account Form for Futures Investment Company July 28, 1997
</TABLE>
(d) Reports on Form 8-K: none
(e) Exhibits filed herewith: none
(f) 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, 1998, 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: March 29, 1999 By: s/ Shira Del Pacult
Ms. Shira Del Pacult
Sole Director, Sole Shareholder
President and Treasurer
*******************************************************************************
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 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)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
TABLE OF CONTENTS
Page
Independent Auditors' Report F-1
Financial Statements -
Balance Sheet F-2
Statement of Operations F-3
Statement of Partners' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
<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, 1998 and 1997, and the related
statements of operations, partners' equity and cash flows for each of the
three years in the period ended December 31, 1998. 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 December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting
principles.
Accountants: Frank L. Sassetti & Co.
Certified Public Accountants
Date: March 18, 1999 By: /s/ Frank L. Sassetti & Co.
Frank L. Sassetti & Co.
Certified Public Accountants
F-1
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
-------- --------
Cash (Note 7) $ 9,891 $ 36,029
United States Treasury Obligations (Note 6) 553,832 833,160
Accrued interest receivable 2,061 8,754
Prepaid commissions 1,658
Equity in Commodity Futures Trading Accounts -
Cash (Note 6) 74,443 116,594
Net unrealized gain (loss) on open
commodity futures contracts (Note 8) (2,880)
Organization costs, net of amortization (Note 1) 915
-------- --------
$641,885 $992,572
======== ========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accrued commissions payable $ $ 12,666
Accrued management fees payable 6,314 6,544
Accrued accounting fees payable 1,306 2,023
Accrued auditing fees payable 1,495 3,500
Due to general partner 1,661
Partner redemptions payable 10,262 11,922
-------- --------
Total Liabilities 19,377 38,316
-------- --------
PARTNERS' CAPITAL
Limited partners - (879.78 units and 1207.47
units in 1998 and 1997, respectively) 601,895 932,082
General partner - (30.13 units) 20,613 22,174
-------- --------
Total Partners' Capital 622,508 954,256
-------- --------
$641,885 $992,572
======== ========
The accompanying notes are an integral part
of the financial statements.
F-2
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---------- ---------- ----------
REVENUES
Realized gain (loss) from trading in
futures $ 11,037 $ (1,667) $ (57)
Realized gain from trading options 20,482 24,413
Realized gain (loss) on exchange rate
fluctuation (367) 335 28
Changes in unrealized gains (loss) on
open commodity futures contracts 2,880 (20,769) 17,861
Interest income 37,716 49,620 6,259
Redemption penalty income 4,276 236
---------- ---------- ----------
Total Revenues 76,024 52,168 24,091
---------- ---------- ----------
EXPENSES
Commissions 90,478 112,058 8,542
Management fees 46,097 57,264 4,492
Incentive fees 4,390 1,717
Professional accounting and legal fees 26,582 27,137 1,499
Other operating and administrative
expenses 445 1,382 637
Amortization of organization costs 915 1,220 305
---------- ---------- ----------
Total Expenses 168,907 199,061 17,192
NET INCOME (LOSS) $ (92,883) $(146,893) $ 6,899
========== ========== ==========
NET INCOME (LOSS) -
Limited partnership unit $ (91.71) $ (119.19) $ 7.65
========== ========== ==========
General partnership unit $ (51.81) $ (98.90) $ 15.31
========== ========== ==========
The accompanying notes are an integral part
of the financial statements.
F-3
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Limited General Total
Partners Partners Partners' Equity
Amount Units Amount Units Amount Units
Balance -
December 31, 1995 $ 963 1 $ 963 1 $ 1,926 2
Additions of
904 units 760,827 875 24,000 29 784,827 904
Net income 6,708 191 6,899
----------- ----- --------- ---- ---------- -----
Balance -
December 31, 1996 768,498 876 25,154 30 793,652 906
Additions of
362 units 331,221 362 331,221 362
Withdrawals of
31 units (23,724) (31) (23,724) (31)
Net loss (143,913) (2,980) (146,893)
----------- ----- --------- ---- ---------- -----
Balance -
December 31, 1997 932,082 1,207 22,174 30 954,256 1,237
Withdrawals of
327 units (238,865) (327) (238,865) (327)
Net loss (91,322) (1,561) (92,883)
----------- ----- --------- ---- ---------- -----
Balance -
December 31, 1998 $ 601,895 880 $ 20,613 30 $ 622,508 910
=========== ===== ========= ==== ========== =====
December 31, December 31, December 31,
1998 1997 1996
Value per unit $684.14 $771.05 $875.54
======= ======= =======
Total partnership units 909.91 1,237.60 906.47
======= ======= =======
The accompanying notes are an integral part
of the financial statements.
F-4
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (92,883) $(146,893) $ 6,899
Adjustments to reconcile net income
to net cash provided by operating
activities -
Amortization of organization costs 915 1,220 305
Changes in operating assets and
liabilities -
Equity in Commodity Future
Trading Accounts 39,271 180,590 (294,304)
Accrued interest receivable 6,693 (6,375) (2,379)
U. S. Treasury Obligations 279,328 (470,508) (362,652)
Prepaid commissions (1,658)
Accrued commissions payable (12,666) (1,396) 14,062
Management and incentive
fees payable (230) 2,994 3,550
Accounting fees payable (717) 1,289 734
Auditing fees payable (2,005) 3,500
Due to partners (3,321) 2,723 10,860
---------- ---------- ----------
Net Cash Provided by
(Used in) Operating
Activities 212,727 (432,856) (622,925)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs (2,440)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of units, net
of sales commissions 331,221 830,327
Syndication and registration costs (45,500)
Partner redemptions (238,865) (23,724)
Net Cash Provided by
(Used in) Financing
Activities (238,865) 307,497 784,827
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (26,138) (125,359) 159,462
CASH -
Beginning of period 36,029 161,388 1,926
---------- ---------- ----------
End of period $ 9,891 $ 36,029 $ 161,388
========== ========== ==========
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, 1998, 1997 AND 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 advisors (CTAs) are Michael J. Frischmeyer and Epic
Trading, who have the authority to trade so much of the Fund's equity as are
allocated to them 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 $915, $1,220 and $305 was recorded for
the years ended December 31, 1998, 1997 and 1996, respectively.
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, 1998, 1997 AND 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 years ended
December 31, 1998, 1997 and 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.
Reclassifications - Certain items of the prior years financial
statements have been reclassified to conform to current year presentation.
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, 1998, 1997 AND 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 Advisors 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. This
fee is to be applied first to pay organization and initial registration costs
of the Partnership and, thereafter, to the benefit of the other Partners in
proportion to their capital accounts.
* 4% if such request is received prior to the end of the
sixth month after the commencement of trading.
* 3% if such request is received during the seventh to
twelfth months.
* 2% if such request is received during the thirteenth to
eighteenth months.
* 1% if such request is received during the nineteenth to
twenty-fourth months.
* 0% thereafter.
F-8
<PAGE>
FREMONT FUND, LIMITED PARTNERSHIP
(An Indiana Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 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 each CTA to trade will be paid to each CTA and 2% of
equity to the Fund's General Partner.
* An incentive fee of 15% of "new trading profits" will be
paid to each CTA. "New trading profits" includes all income earned by each
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, 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
Certain trades executed by the Fund are denominated
in foreign currencies. Gains and losses on these transactions are recorded
as futures trading gains or losses at the U. S. dollar equivalent on the date
the trade is settled. Exchange rate fluctuation gain or loss is reflected
when residual amounts of foreign currencies are reconverted to U. S. dollars.
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, 1998, 1997 AND 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. There were no open commodity
contracts as of December 31, 1998. Open commodity contracts had a gross
contract value of $272,220 on long positions at December 31, 1997 and
$3,891,594 on long positions and $180,775 on short positions at December 31,
1996.
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 (loss) on open commodity future contracts
at December 31, 1998, 1997 and 1996 was $0, $(2,880) and $17,889,
respectively.
F-10
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,891
<SECURITIES> 553,832
<RECEIVABLES> 2,061
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 641,885
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0
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