<PAGE>
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
(Exact name of registrant as specified in charter document)
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<S> <C> <C>
DELAWARE 6793 TO BE PROVIDED
(State of (Primary Standard (I.R.S. Employer
Organization Industrial Identification
of Issuer) Classification Code Number) Number)
</TABLE>
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Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Mark J. Hawley
DEMETER MANAGEMENT CORPORATION
Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES OF COMMUNICATIONS TO:
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Edwin L. Lyon, Esq. Michael T. Gregg, Esq.
Cadwalader, Wickersham & Taft Dean Witter Reynolds Inc.
1333 New Hampshire Avenue, N.W. 130 Liberty Street
Washington, D.C. 20036 New York, New York 10006
(202) 862-2200 (212) 392-5530
</TABLE>
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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 registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Units of Limited Partnership
Interest.................... 5,000,000 Units $10 $50,000,000 $15,152
</TABLE>
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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MORGAN STANLEY TANGIBLE ASSET FUND L.P.
CROSS REFERENCE SHEET
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ITEM NO. REGISTRATION ITEM LOCATION IN PROSPECTUS
- --------- --------------------------------------------------- ---------------------------------------------------
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1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Facing Page; Front Cover Pages.
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page; Table of Contents.
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges......................... Summary of the Prospectus; Risk Factors;
Description of Charges to the Partnership;
Investment Program, Use of Proceeds and Trading
Policies; The General Partner; The Commodity
Brokers.
4. Use of Proceeds.................................... Investment Program, Use of Proceeds and Trading
Policies.
5. Determination of Offering Price.................... Plan of Distribution.
6. Dilution........................................... Not Applicable.
7. Selling Security Holders........................... Not Applicable.
8. Plan of Distribution............................... Plan of Distribution.
9. Description of Securities to be Registered......... The Limited Partnership Agreement.
10. Interests of Named Experts and Counsel............. Not Applicable.
11. Information with Respect to the Registrant
(a) Description of Business........................ Summary of the Prospectus; Risk Factors; In-
vestment Program, Use of Proceeds and Trading
Policies; General Description of Trading
Approaches; The Trading Advisor; The Futures and
Options Markets; The Limited Partnership
Agreement.
(b) Description of Property........................ Not Applicable.
(c) Legal Proceedings.............................. Certain Litigation; The Trading Advisor.
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters............................ Risk Factors.
(e) Financial Statements........................... Independent Auditors' Reports.
(f) Selected Financial Data........................ Selected Financial Data.
(g) Supplementary Financial Information............ Selected Financial Data.
(h) Management's Discussion and Analysis
of Financial Condition and Results of
Operations..................................... Not applicable.
(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure...................................... Not Applicable.
(j) Directors and Executive Officers............... The General Partner.
</TABLE>
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ITEM NO. REGISTRATION ITEM LOCATION IN PROSPECTUS
- --------- --------------------------------------------------- ---------------------------------------------------
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(k) Executive Compensation......................... Summary of the Prospectus; Conflicts of Interest;
Fiduciary Responsibility; Description of Charges
to the Partnership; Risk Factors; The Trading
Advisor; The General Partner; The Commodity
Brokers.
(l) Security Ownership of Certain Beneficial
Owners and Management........................... Capitalization; The General Partner; Independent
Auditors' Reports.
(m) Certain Relationships and Related
Transactions.................................. Summary of the Prospectus; Conflicts of Interest;
Fiduciary Responsibility; Description of Charges
to the Partnership; Risk Factors; The Trading
Advisor; The General Partner; The Commodity
Brokers.
12. Disclosure of Commission Position on In-
demnification for Securities Act Liabilities...... Fiduciary Responsibility.
</TABLE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION; DATED AUGUST 20, 1997
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
5,000,000 UNITS OF LIMITED PARTNERSHIP INTEREST
----------------
Morgan Stanley Tangible Asset Fund L.P. (the "Partnership") is a commodity
pool limited partnership formed under the laws of the State of Delaware to
engage primarily in speculative trading of futures contracts in the metals,
energy, and agricultural markets, as more fully described herein (hereinafter
referred to collectively as "futures interests"). Demeter Management
Corporation, the general partner of the Partnership (the "General Partner"), has
retained Morgan Stanley Commodities Management, Inc. (the "Trading Advisor"), to
engage in futures interests trading on behalf of the Partnership. Morgan Stanley
& Co. Incorporated ("MS & Co.") will act as the primary futures commission
merchant for the Partnership's futures interest account.
Units of limited partnership interest ("Units") are being offered initially
at $10 per Unit, for issuance at the first closing (the "First Closing"), which
is currently scheduled to be held on November 3, 1997; provided, however, that
the General Partner may at its discretion hold such First Closing at any time
during the Offering Period (as defined herein). Units that remain unsold
following the First Closing may be offered for sale, in the sole discretion of
the General Partner, at a second closing, if any (the "Second Closing"), and a
third closing, if any (the "Third Closing"), currently scheduled to be held on
December 1, 1997 and January 2, 1998, respectively. Units will be offered for
sale at the Second and Third Closings at a price per Unit equal to 100% of the
Net Asset Value of a Unit (assets less liabilities, divided by number of Units
outstanding) as of the close of business on the last day of the month
immediately preceding such closing. Units are being offered and sold by the
Partnership through Dean Witter Reynolds Inc. ("DWR") on a best efforts basis.
If subscriptions for a minimum of 500,000 Units have not been received and
accepted by the General Partner at the time the Offering Period is terminated,
all subscriptions will be promptly credited to the subscribers' customer
accounts with DWR, but in no event later than 5 business days following
termination of the Offering Period.
THESE ARE SPECULATIVE SECURITIES AND INVOLVE A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE FOR INVESTMENT ONLY BY A PERSON WHO CAN AFFORD TO LOSE
HIS ENTIRE INVESTMENT. SEE "SUMMARY OF THE PROSPECTUS-- INVESTMENT REQUIREMENTS"
(PAGE 1), "RISK FACTORS" (PAGE 11), AND "CONFLICTS OF INTEREST" (PAGE 17).
An investment in the Partnership involves significant risks, including the
following:
-
Futures interests trading is speculative and volatile. Such
volatility could result in an investor losing all or a
substantial part of his investment.
-
The Partnership is subject to substantial charges by the Trading
Advisor, the General Partner, and MS & Co. The Partnership must
earn estimated net trading profits of 3.15% per year of its
average annual Net Assets (after taking into account estimated
interest income based upon current rates of 5%) in order to avoid
depletion of its assets. Investors should see "Break Even
Analysis" on page 24 for the effect of redemption charges which
are not included in the above figures.
-
No secondary market for Units exists. Units may be redeemed
monthly only after the end of the sixth month following the
closing at which an investor first became a Limited Partner. A
Unit redeemed at or prior to the end of the twenty-fourth month
following the closing at which the Unit was issued may be subject
to redemption charges. Certain market conditions may result in
possible delays in, or inability to pay, redemptions.
-
Conflicts of interest between and among the Trading Advisor, the
General Partner, DWR, the Commodity Brokers, their affiliates and
the Partnership may adversely affect the trading performance of
the Partnership. See "Conflicts of Interest."
-
The Partnership's profitability is largely dependent on the
performance of the Trading Advisor.
-
While the General Partner does not intend to make any
distributions, profits earned in any year will result in taxable
income to investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
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INITIAL PRICE PROCEEDS TO THE
TO SELLING PARTNER-
PUBLIC(1) COMMISSIONS(1) SHIP(2)(3)
<S> <C> <C> <C>
Per Unit $ 10 None $ 10
Total Minimum (500,000 Units) $ 5,000,000 None $ 5,000,000
Total Maximum (5,000,000 Units) $50,000,000 None $50,000,000
</TABLE>
COVER PAGE CONTINUED AND NOTES TO THE ABOVE TABLE ON PAGE (i).
<PAGE>
DEAN WITTER REYNOLDS INC.
The date of this Prospectus is - .
<PAGE>
The minimum investment for most subscribers is $5,000, or $2,000 in the case
of an Individual Retirement Account.
Subject to redemption charges during the 24 months following the issuance of
a Unit and certain other restrictions, a Unit may be redeemed as of the end of
any month beginning six months after the Unit was issued. See "Redemptions."
The Partnership is not a mutual fund or any other type of investment company
within the meaning of the Investment Company Act of 1940, as amended, and is not
subject to regulation thereunder.
NOTES TO TABLE ON FRONT COVER PAGE
(1) Units are offered for sale at the First Closing at $10 per Unit. Units that
remain unsold following the First Closing may be offered for sale, in the
sole discretion of the General Partner, at a Second Closing and a Third
Closing, if any, at a price per Unit equal to 100% of the Net Asset Value of
a Unit as of the close of business on the last day of the month immediately
preceding such closing. No underwriting compensation or selling commissions
will be paid out of the proceeds of this offering. However, except as
provided below, employees of DWR will receive from DWR (payable solely from
its own funds) a gross sales credit equal to 3% of the Net Asset Value per
Unit as of the applicable closing for each Unit sold by them and issued at
such closing. Commencing with the thirteenth month following the closing at
which a Unit is issued and continuing until the Partnership terminates or
such Unit is redeemed, an employee of DWR who sold such Unit and who is
properly registered with the Commodity Futures Trading Commission ("CFTC")
and has passed the Series 3 or Series 31 examination or was "grandfathered"
as an associated person of DWR also will receive from DWR (payable solely
from its own funds) up to 1/4 of 1% of the Net Asset Value (up to a 3%
annual rate) of a Unit as of the first day of each month. Such continuing
compensation is to be paid in recognition of the employee's continuing
services to the Limited Partners. For a description of all such continuing
services, see "Plan of Distribution." The Selling Agreement for the
Partnership provides that such compensation may only be paid as long as such
services are provided. Such continuing compensation may be deemed to be
underwriting compensation. The compensation described above will be paid by
DWR out of the portion of the brokerage fees received by DWR from MS & Co.
and will not be paid directly by any Limited Partner or the Partnership and,
accordingly, Net Assets will not be reduced as a result of such
compensation. No person will receive the continuing compensation described
above who is not a DWR employee at the time of receipt of payment.
DWR will not pay to its employees the 3% gross sales credit described above
with respect to Units purchased by a subscriber with the proceeds of a
redemption, on or after March 31, 1997, of all or a portion of such
subscriber's interest in any other commodity pool for which the General
Partner serves as the general partner and commodity pool operator. Such
employees will instead receive the continuing payments with respect to Units
that are comparable to the payments that were received by such employees
with respect to such other commodity pool.
DWR, with the approval of the General Partner, may appoint as its agent to
make offers and sales of Units any additional selling agent ("Additional
Seller") which is a member of the National Association of Securities
Dealers, Inc. ("NASD") or, under certain conditions, a foreign person as
described under "Plan of Distribution." DWR may compensate any Additional
Seller for each Unit sold by it by paying such Additional Seller a selling
commission, payable by DWR solely from its own funds, not to exceed 3% of
the Net Asset Value of such Unit. Additional Sellers who are properly
registered with the CFTC also may receive from DWR, payable solely from its
own funds, continuing compensation for providing to Limited Partners the
continuing services referred to above. Such continuing compensation may be
up to 1/4 of 1% (up to 3% annually) of the Net Asset Value as of the first
day of each month of outstanding Units sold by such Additional Sellers.
Additional Sellers may pay all or a portion of such continuing compensation
to their employees who have sold Units and provide continuing services to
Limited Partners if such employees are properly registered with the CFTC.
Such continuing compensation may be deemed to be underwriting compensation.
See "Plan of Distribution."
No part of the compensation described above will be paid by the Partnership
and, accordingly, Net Assets will not be reduced as a result of such
compensation. DWR has agreed to indemnify any Additional Seller against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended. DWR will be indemnified by the Partnership against certain
civil liabilities.
(2) Units are offered for sale for a period from the date hereof, unless sooner
terminated, to the date of the First Closing. Units that remain unsold
following the First Closing may be offered for sale, in the sole discretion
of the General Partner, for a period from the date of the First Closing to
the date of the Second Closing, if any, and from the date of the Second
Closing to the date of the Third Closing, if any (the period from the date
of this Prospectus through January 12, 1998 will be referred to herein as
the "Offering Period"). The General Partner may, in its discretion, extend
the Offering Period to provide for an additional closing for the sale of
Units, but in no event will the Offering Period be extended beyond March 31,
1998. In the event of any such extension, the term "Offering Period" shall
be deemed to include such additional closing. The General Partner shall also
have the discretion to terminate the offering of Units at any time during
the Offering Period. Subscription amounts received during the Offering
Period and not immediately rejected by the General Partner will be held in
escrow at The Chase Manhattan Bank, New York, New York (the "Escrow Agent")
until the applicable closing or until earlier rejection by the General
Partner. The funds will be invested in the Escrow Agent's interest-bearing
bank money market account. Interest earned on
i
<PAGE>
subscriptions accepted or rejected by the General Partner will be credited
to the subscribers' customer accounts with DWR. The General Partner will
determine to accept or reject a subscription generally within 10 days of the
receipt of a complete and executed Subscription and Exchange Agreement and
Power of Attorney. See "Plan of Distribution."
Any subscription received by DWR during the last five business days of the
month prior to a closing may be rejected by the General Partner. See "Plan
of Distribution."
(3) DWR will pay all of the costs incurred in connection with the organization
of the Partnership and the offering of Units, estimated to be approximately
$875,000 in the aggregate. Such costs include legal, accounting, and
auditing fees, printing costs, filing fees, escrow fees, marketing costs,
and other related fees and expenses incurred in connection with the offering
of Units. The Partnership will not reimburse DWR for any portion of the
costs so incurred or any offering expense incurred in connection with the
offering of Units, and while DWR may recoup such costs from receipt of a
portion of the brokerage fees paid to DWR by MS & Co. and receipt of
interest and compensating balance benefits with respect to the Partnership's
assets deposited with MS & Co., the Partnership will not be liable for any
such costs at any time. Investments by subscribers are not subject to any
upfront fees, commissions or expenses and therefore, 100% of the proceeds of
the offering are available for investment in the Partnership. The number of
Units sold will have no effect on the Net Asset Value per Unit.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED ON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER BY ANY PERSON WITHIN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE.
The Partnership must furnish all Limited Partners annual and monthly reports
complying with CFTC requirements. The annual reports will contain audited, and
the monthly reports unaudited, financial information. The audited financial
statements will be examined and reported upon by independent certified public
accountants.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, 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
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Partnership has filed with the SEC, in Washington, D.C., a Registration
Statement on Form S-1 under the Securities Act of 1933 with respect to the Units
offered hereby. This Prospectus does not contain all the information included in
the Registration Statement, certain items of which are omitted in accordance
with the Rules and Regulations of the SEC. For further information about the
Partnership and the Units offered hereby, reference is made to the Registration
Statement and the exhibits thereto.
ii
<PAGE>
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 BEGINNING AT PAGE
21 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 24.
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 BEGINNING AT PAGE 11.
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
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TABLE OF CONTENTS
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PAGE
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Risk Disclosure Statement..................... iii
Summary of the Prospectus..................... 1
Investment Requirements..................... 1
Additional Information...................... 2
The Investment Objective.................... 2
The Partnership............................. 2
The General Partner......................... 3
The Commodity Brokers....................... 3
The Trading Advisor......................... 3
Risk Factors................................ 3
Conflicts of Interest....................... 5
Description of Charges to the Partnership... 5
Redemptions................................. 6
Distributions............................... 7
Transferability of Units.................... 7
The Offering................................ 7
Interest on Partnership Assets.............. 9
Use of Proceeds............................. 9
Tax Considerations.......................... 9
Risk Factors.................................. 11
Risks Relating to Futures Interests Trading
and the Futures Interests Markets.......... 11
Risks Relating to the Partnership and the
Offering of Units.......................... 12
Risks Relating to the Trading Advisor....... 13
Taxation and Regulatory Risks............... 15
Conflicts of Interest......................... 17
Relationship of the General Partner and the
Trading Advisor to the Commodity Brokers... 17
Accounts of Affiliates of the General
Partner, the Commodity Brokers, and DWR.... 18
Management of Other Accounts by the Trading
Advisor.................................... 18
Customer Agreements with the Commodity
Brokers.................................... 19
Other Commodity Pools....................... 19
Fiduciary Responsibility...................... 19
Description of Charges to the Partnership..... 21
1. The Trading Advisor...................... 21
2. The Commodity Brokers.................... 22
3. The General Partner...................... 23
4. Extraordinary Expenses................... 23
5. Expense Limitations...................... 23
6. Break Even Analysis...................... 24
Investment Program, Use of Proceeds and
Trading Policies............................. 25
Trading Policies............................ 27
Capitalization................................ 27
The General Partner........................... 28
Directors and Officers of the General
Partner.................................... 29
Description and Performance Information of
Commodity Pools Operated by the General
Partner.................................... 30
The Futures Markets........................... 34
Futures Contracts........................... 34
Hedgers and Speculators..................... 34
Commodity Exchanges......................... 34
Speculative Position Limits................. 35
Daily Limits................................ 35
Regulations................................. 35
Margins..................................... 37
General Description of Trading Approaches..... 37
Introduction................................ 37
Systematic and Discretionary................ 37
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PAGE
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Technical and Fundamental Analysis.......... 38
Trend-Following............................. 39
Risk Control Techniques..................... 39
The Trading Advisor........................... 39
Introduction................................ 39
Morgan Stanley Commodities Management,
Inc........................................ 40
MSCM's Trading Program...................... 40
MSCM's Performance Record................... 40
The Commodity Brokers......................... 42
Description of the Commodity Brokers........ 42
Brokerage Arrangements...................... 43
Certain Litigation............................ 43
The Management Agreement...................... 44
Term........................................ 44
Liability and Indemnification............... 44
Obligations to the Partnership.............. 44
Redemptions................................... 45
The Limited Partnership Agreement............. 46
Nature of the Partnership................... 46
Management of Partnership Affairs........... 47
Additional Offerings........................ 47
Sharing of Profits and Losses............... 48
Restrictions on Transfers or Assignments.... 48
Amendments; Meetings........................ 48
Indemnification............................. 49
Reports to Limited Partners................. 49
Plan of Distribution.......................... 50
Subscription Procedure........................ 53
Purchases by Employee Benefit Plans--ERISA
Considerations............................... 54
Material Federal Income Tax Considerations.... 55
Introduction................................ 55
Partnership Status.......................... 56
Partnership Taxation........................ 56
Cash Distributions and Redemptions.......... 57
Gain or Loss on Trading Activity............ 57
Taxation of Limited Partners................ 59
Tax Audits.................................. 62
State and Local Income Tax Aspects............ 63
Potential Advantages.......................... 63
Legal Matters................................. 69
Experts....................................... 69
Additional Information........................ 69
Glossary...................................... 70
Certain Terms and Definitions............... 70
Blue Sky Glossary........................... 71
Morgan Stanley Tangible Asset Fund L.P.
Independent Auditors' Report................ F-1
Statement of Financial Condition............ F-2
Notes to Statement of Financial Condition... F-3
Demeter Management Corporation
Independent Auditors' Report................ F-5
Statements of Financial Condition........... F-6
Notes to Statements of Financial Condition
(certain information relating to the
financial condition of Demeter Management
Corporation's parent is contained in "The
General Partner").......................... F-7
Exhibit A--Limited Partnership Agreement...... A-1
Annex 1--Request for Redemption............... A-22
Exhibit B--Subscription and Exchange Agreement
and Power of Attorney........................ B-1
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iv
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SUMMARY OF THE PROSPECTUS
THE DATE OF THIS PROSPECTUS IS -.
The following is a summary of this Prospectus. This Prospectus contains more
detailed information under the captions referred to below, and this summary is
qualified in its entirety by the information appearing elsewhere herein.
INVESTMENT REQUIREMENTS
The minimum investment for most subscribers is $5,000, except that the
minimum investment is: (a) $2,000 in the case of an Individual Retirement
Account ("IRA"); or (b) for subscribers who redeem, on or after March 31, 1997,
units of limited partnership interest in any other commodity pool for which
Demeter Management Corporation, the Partnership's general partner (the "General
Partner"), serves as the general partner and commodity pool operator and use the
proceeds of such redemption (less any applicable redemption charges) to purchase
Units (such purchases are hereinafter referred to as "Exchanges"), the lesser of
(i) $5,000 ($2,000 in the case of an IRA), (ii) the proceeds from the redemption
of five units (two units in the case of an IRA) from commodity pools other than
the Spectrum Series (iii) the proceeds from the redemption of 500 units (200
units in the case of an IRA) from one, or any combination, of the Spectrum
Series of commodity pools, or (iv) the proceeds from the redemption of all of a
subscriber's units of limited partnership interest in any other commodity pool
for which the General Partner serves as general partner and commodity pool
operator. A subscriber whose subscription is accepted by the General Partner at
a closing (each, a "Limited Partner") and who desires to make an additional
investment in the Partnership may subscribe for Units at a subsequent closing
with a minimum investment of $1,000.
Subscribers should be aware that there are minimum net worth and/or annual
income suitability standards which must be met in order to subscribe for Units.
Each subscriber must represent and warrant in a Subscription and Exchange
Agreement and Power of Attorney that such subscriber has received this
Prospectus and that such subscriber meets the applicable State minimum financial
suitability standard set forth in the Subscription and Exchange Agreement and
Power of Attorney (which may require a greater minimum investment), and may be
required to provide additional information regarding the subscriber's background
and investment history. Dean Witter Reynolds Inc. ("DWR"), the Partnership's
selling agent, and its account executives have a duty to determine that this is
a suitable investment for the subscriber.
Unless otherwise specified in the Subscription and Exchange Agreement and
Power of Attorney under "State Suitability Requirements," a subscriber must have
either: (a) a net worth of at least $75,000 (exclusive of home, furnishings, and
automobiles), or (b) a net worth of at least $30,000 (exclusive of home,
furnishings, and automobiles) and an annual income of at least $30,000. Certain
jurisdictions impose more restrictive suitability and/or minimum investment
requirements than those set forth above, including requirements for a higher net
worth, a higher annual income, or both. A list of such jurisdictions and the
restrictions imposed is included in the Subscription and Exchange Agreement and
Power of Attorney under the heading "State Suitability Requirements." A specimen
form of the Subscription and Exchange Agreement and Power of Attorney is annexed
hereto as Exhibit B. Separate execution copies of the Subscription and Exchange
Agreement and Power of Attorney either accompany this Prospectus or may be
obtained, after delivery of this Prospectus, from a local DWR branch office.
Subject to certain limited revocation rights (see "Subscription Procedure"),
all subscriptions for Units are irrevocable by subscribers, and the General
Partner may, in its sole discretion, reject any subscription in whole or in
part. There are significant restrictions on the ability of a Limited Partner to
redeem Units, and although the Partnership's Limited Partnership Agreement (the
"Limited Partnership Agreement") permits the transfer of Units subject to
certain conditions, there is no public market
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for the Units and none is likely to develop. Therefore, a purchaser of Units
must be able to bear the economic risks of an investment in the Partnership for
a significant period of time. See "The Limited Partnership
Agreement--Restrictions on Transfers or Assignments" and "Redemptions."
ADDITIONAL INFORMATION
In addition to this Prospectus, a sales brochure and introductory letters
prepared by DWR may be delivered with this Prospectus or may be obtained from a
DWR account executive or by writing to Dean Witter Reynolds Inc., Two World
Trade Center, 62nd Floor, New York, New York 10048.
THE INVESTMENT OBJECTIVE
The objective of Morgan Stanley Tangible Asset Fund L.P. (the "Partnership")
is to generate substantial appreciation of its assets over time through
speculative trading. The proceeds of the sale of the Units will be deposited in
the Partnership's accounts with Morgan Stanley & Co. Incorporated ("MS & Co.")
and Morgan Stanley & Co. International Limited ("MSIL"), the Partnership's
commodity brokers, to be used as margin for the Partnership's trading activities
and may be subject to depletion if the Partnership experiences losses from its
trading activities.
The Partnership will trade futures contracts pursuant to the trading
approach utilized by Morgan Stanley Commodities Management, Inc. (the "Trading
Advisor"), the Partnership's trading advisor. The Partnership's portfolio will
normally include contracts for diverse futures interests, including metals,
energy products and agriculturals (collectively, "futures interests"). The
Trading Advisor may from time to time, in its discretion, modify its trading
program and add to and delete from the Partnership's portfolio additional
futures interests. See "Investment Program, Use of Proceeds and Trading Policies
- -- Trading Policies" and "The Trading Advisor."
Based upon the fees and expenses of the Partnership, the Partnership will be
required to earn net trading profits of 3.15% per year of its average annual Net
Assets (after taking into account estimated interest income based upon current
rates of 5%) in order to avoid depletion of its assets. See "Description of
Charges to the Partnership." Investors should see "Break Even Analysis" on page
24 for the effect of redemption charges which are not included in the above
figures. By reason of the foregoing, investors should consider an investment in
the Partnership as a long-term investment.
Distributions of profits, if any, will be made at the sole discretion of the
General Partner. It is currently the intention of the General Partner not to
make distributions. See "Distributions" in this section.
THE PARTNERSHIP
The Partnership was organized as a limited partnership on July 31, 1997
under the Delaware Revised Uniform Limited Partnership Act (the "Partnership
Act"). The offices of the Partnership are located at Two World Trade Center,
62nd Floor, New York, New York 10048, telephone (212) 392-8899.
The Partnership will terminate upon the first to occur of the following: (i)
December 31, 2027; (ii) the insolvency, bankruptcy, dissolution, liquidation, or
termination of the General Partner, unless the business of the Partnership is
continued by a successor general partner; (iii) the occurrence of any event
which shall make it unlawful for the existence of the Partnership to be
continued; (iv) an election to terminate and dissolve the Partnership at a
specified time by Limited Partners owning more than 50% of the Units then
outstanding; (v) withdrawal by the General Partner (unless a new general
partner(s) is elected by the Limited Partners); (vi) a decline in the Net Asset
Value of a Unit (as determined by the General Partner) as of the close of
business on any day to less than $250; (vii) a decline in the Partnership's Net
Assets (as determined by the General Partner) as of the close of business on any
day to $250,000 or less; (viii) a determination by the General Partner that the
Partnership's Net Assets in relation to the operating expenses of the
Partnership make it unreasonable or imprudent to
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continue the business of the Partnership; or (ix) a determination by the General
Partner to terminate the Partnership following a Special Redemption Date. See
"The Limited Partnership Agreement--Termination of the Partnership."
THE GENERAL PARTNER
The general partner and commodity pool operator of the Partnership is
Demeter Management Corporation, a Delaware corporation (the "General Partner").
The General Partner, the Trading Advisor, DWR, MS & Co., and MSIL are each
wholly-owned subsidiaries of Morgan Stanley, Dean Witter, Discover & Co.
("MSDWD"). See "Conflicts of Interest," "The General Partner," "The Trading
Advisor," and "The Commodity Brokers." The Trading Advisor makes all trading
decisions in respect of the funds of the Partnership, except that the General
Partner may override the instructions of the Trading Advisor and make trading
decisions under certain circumstances. See "The Management Agreement." The
General Partner is or has been the general partner and commodity pool operator
of 28 commodity pools, five of which have terminated. The General Partner had,
in the aggregate, approximately $1.1 billion of net assets under management as
of June 30, 1997.
THE COMMODITY BROKERS
The primary commodity broker for the Partnership is Morgan Stanley & Co.
Incorporated ("MS & Co."); Morgan Stanley & Co. International Limited ("MSIL"
and, together with MS & Co., the "Commodity Brokers"), will act as the
Partnership's commodity broker to the extent it trades on the London Metals
Exchange. The Commodity Brokers are wholly-owned subsidiaries of MSDWD. The
General Partner believes that the fees payable to MS & Co. by the Partnership
(no separate fees shall be payable to MSIL) are competitive with those paid by
other public commodity pools, although they may be higher than those paid by
certain other customers of MS & Co. See "Conflicts of Interest," "Description of
Charges to the Partnership--2. The Commodity Brokers," and "The Commodity
Brokers."
THE TRADING ADVISOR
The trading advisor for the Partnership is Morgan Stanley Commodities
Management, Inc. ("MSCM" or the "Trading Advisor"). The Trading Advisor is a
wholly-owned subsidiary of MSDWD. Subject to certain limitations, the Trading
Advisor has authority and responsibility for directing the investment and
reinvestment in futures interests of the Partnership's Net Assets. See "The
Management Agreement." Since the primary purpose of the Partnership is to
achieve appreciation of its assets through speculative trading in futures
interests, the Partnership's ability to succeed in that endeavor depends on the
success of the trading programs of the Trading Advisor.
RISK FACTORS
As a general matter, an investment in the Partnership is speculative and
involves substantial risk, including the risk of loss of a Limited Partner's
entire investment. Risks of an investment in the Partnership include:
RISKS RELATING TO FUTURES INTERESTS TRADING
-Futures interests trading is speculative and volatile. Such
volatility could result in an investor losing all or a
substantial part of his investment.
-Futures interests trading is highly leveraged and relatively
small price movements can result in significant losses to the
Partnership.
-Futures interests trading may be illiquid and in certain
situations prevent the Partnership from limiting its loss on an
unfavorable position.
-Trading on foreign exchanges may result in the Partnership having
less regulatory protection available.
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-The Partnership has credit risk because the Commodity Brokers act
as the futures commission merchants with respect to the
Partnership's assets.
-Speculative position limits may result in the Partnership having
to liquidate profitable positions.
RISKS RELATING TO THE PARTNERSHIP AND OFFERING OF UNITS
-The Partnership incurs substantial charges regardless of whether
it realizes profits. The Partnership must earn estimated net
trading profits of 3.15% per year of its average annual Net
Assets (after taking into account estimated interest income based
upon current rates of 5%) in order to avoid depletion of its
assets. Investors should see "Break Even Analysis" on page 24 for
the effect of redemption charges which are not included in the
above figures.
-The liquidity of the Units is restricted in that there is an
absence of a secondary market, the ability to assign or transfer
is restricted, redemptions are limited to monthly after the first
six months, and redeemed Units may be subject to redemption
charges.
-Significant actual and potential conflicts of interest exist
among the General Partner, the Trading Advisor and the Commodity
Brokers.
-Limited Partners do not participate in the management of the
Partnership or in the conduct of its business.
-Limited Partners must rely on the General Partner's selection of
a trading advisor.
RISKS RELATED TO THE TRADING ADVISOR
-The Partnership will not be profitable unless the Trading Advisor
is successful with its trading program. Past results are not
necessarily indicative of future results.
-Market factors may adversely affect or require modifications to
the Trading Advisor's program.
-The Management Agreement may not be renewed, may be renewed on
less favorable terms to the Partnership, or may be terminated by
the Trading Advisor such that the Trading Advisor will no longer
be available to the Partnership.
-Substantial increase in assets allocated to the Trading Advisor
may adversely affect its performance.
-The Trading Advisor's primarily technical trading program may not
perform under certain market conditions.
TAXATION RISKS
-If the tax laws and/or certain facts and circumstances change,
the Partnership may be taxed as a corporation.
-Profits earned during any year will result in taxable income to
an investor even though the General Partner does not intend to
make distributions.
-Deductibility of certain of the Partnership's expenses or losses
may be limited.
-The Partnership's tax return may be audited by the Internal
Revenue Service.
Only the General Partner will be liable for Partnership obligations
(including margin calls) to the extent that the Partnership's assets, including
amounts contributed by the Limited Partners and amounts paid to Limited Partners
upon redemptions, distributions or otherwise (together with interest
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thereon) are insufficient to meet those obligations. See "Risk Disclosure
Statement," "Risk Factors," "Conflicts of Interest," "Description of Charges to
the Partnership," and "The Limited Partnership Agreement--Nature of the
Partnership."
CONFLICTS OF INTEREST
Significant actual and potential conflicts of interest exist in the
structure and operation of the Partnership, principally arising from the
affiliation among the General Partner, DWR, the Trading Advisor, and the
Commodity Brokers, and the trading of other accounts of, or managed by, the
General Partner, DWR, the Trading Advisor, the Commodity Brokers, and their
affiliates. Such conflicts include the fact that the brokerage arrangements were
not agreed upon in arm's-length negotiations due to the affiliation between the
General Partner and the Commodity Brokers, and that the General Partner and the
Commodity Brokers may have conflicting demands in respect of other commodity
pools; that DWR employees selling Units will receive a portion of the brokerage
fees paid to MS & Co. by the Partnership, and thus have a conflict in advising
investors whether and when to redeem Units; that the Management Agreement was
not negotiated at arm's-length due to the affiliation between the General
Partner and the Trading Advisor; that the Trading Advisor, the Commodity
Brokers, and DWR, and individuals and entities associated with the General
Partner, the Commodity Brokers, and DWR, may trade futures interests for their
own accounts, which trading may compete with the Partnership for positions; that
trading by the Trading Advisor for its own account and for other customers could
result in application of position limits to restrict the Partnership's trading;
that under the customer agreements with the Commodity Brokers, the Commodity
Brokers may close out positions and take certain other actions with regard to
the Partnership's accounts without the Partnership's consent; and that other
commodity pools managed by the General Partner and the Trading Advisor may
compete with the Partnership. See "Conflicts of Interest," "The Trading Advisor"
"The General Partner," and "The Commodity Brokers."
DESCRIPTION OF CHARGES TO THE PARTNERSHIP
The Partnership is subject to substantial charges which are summarized below
and described in detail under "Description of Charges to the Partnership." See
also "Risk Factors--Risks Relating to the Partnership and the Offering of
Units--Substantial Charges to the Partnership," "Investment Program, Use of
Proceeds and Trading Policies," "The Commodity Brokers," and "The Management
Agreement."
<TABLE>
<CAPTION>
RECIPIENT FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
The Trading Advisor Monthly Management Fee. A flat-rate monthly fee of 5/24 of 1% of Net
Assets as of the first day of each month
(a 2.5% annual rate).
Annual Incentive Fee. 20% of the Trading Profits experienced as of
the end of each calendar year.
The Commodity Brokerage Fee. A flat-rate monthly fee of 1/12 of 3.65% of
Brokers Net Assets as of the first day of each
month (a 3.65% annual rate).
Financial benefit to Commodity Brokers, DWR The aggregate of (i) brokerage fees payable
or their affiliates from interest earned by the Partnership, and (ii) net excess
on the Partnership's assets in excess of interest and compensating balance benefits
the interest paid to the Partnership and to the Commodity Brokers, DWR or their
from compensating balance treatment in affiliates (after crediting the
connection with their designation of a Partnership with interest) are capped at
bank or banks in which Partnership assets 14% annually of the Partnership's average
are deposited. monthly Net Assets as of the last day of
each month during a calendar year.
</TABLE>
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<TABLE>
<CAPTION>
RECIPIENT FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
The General Partner Monthly Service Fee. A flat-rate monthly fee of 1/12 of 1% of Net
Assets as of the first day of each month
(a 1% annual rate).
</TABLE>
As long as redemption charges are imposed, as described under "Redemptions,"
the management, incentive, brokerage, and service fees and the cap on aggregate
brokerage fees and net excess interest and compensating balance benefits may not
be increased. Thereafter, none of such fees and cap may be increased unless
Limited Partners are given prior notice thereof and an opportunity to redeem
their Units, subject to additional limits described under "Description of
Charges to the Partnership."
Based on the annual fees and expenses of the Partnership described above,
the Partnership must earn estimated net trading profits (after taking into
account estimated interest income based upon current rates of 5%) of 3.15% per
year of its average annual Net Assets in order to avoid depletion of its assets.
In order for a Limited Partner to pay the redemption charge and recoup its
initial investment upon redemption after one year, the Partnership must earn
estimated net trading profits (after taking into account estimated interest
income based upon current rates of 5%) of 4.20% of its average annual Net
Assets.
REDEMPTIONS
A Limited Partner may first redeem Units effective as of the last day of the
sixth month following the closing at which such person first becomes a Limited
Partner, and may redeem Units at any month-end thereafter, in the manner
described herein. Such Units may be subject to redemption charges as described
herein.
Units redeemed on or prior to the last day of the eleventh month after such
Units were purchased will be subject to a redemption charge equal to 2% of the
Net Asset Value of a Unit on the date of such redemption. Units redeemed after
the last day of the eleventh month and on or prior to the last day of the
twenty-fourth month after which such Units were purchased will be subject to a
redemption charge equal to 1% of the Net Asset Value of a Unit on the date of
such redemption. Units redeemed after the last day of the twenty-fourth month
after which such Units were purchased will not be subject to a redemption
charge. The foregoing redemption charges will be paid to DWR.
A limited partner in any of the other commodity pools for which the General
Partner serves as the general partner and commodity pool operator who redeemed
all or a portion of his interest in one of such other partnerships on or after
March 31, 1997 and purchases Units will not be subject to the redemption charges
or restrictions under the circumstances described herein. The number of Units,
expressed as a percentage of Units purchased, which are not subject to a
redemption charge is determined by dividing (a) the dollar amount received upon
redeeming an interest in such other partnership and used to purchase Units by
(b) the total investment in the Partnership. For example, a limited partner who
receives $5,000 upon redeeming all or a part of his interest in a commodity pool
operated by the General Partner and invests $10,000 in the Partnership will not
be subject to a redemption charge on 50% of his Units. An investor who purchases
$500,000 or more of Units will not be subject to the redemption charges
described above.
A redemption may be made only in whole Units or in multiples of $1,000
(which may result in the redemption of fractional Units), unless a Limited
Partner's entire interest in the Partnership is redeemed. The right to obtain
redemption is contingent upon the Partnership having assets sufficient to
discharge its liabilities (including any amounts owed to affiliates of the
General Partner) as of the month-end, and the General Partner's timely receipt
of a properly executed Request for Redemption. The Partnership will liquidate
open positions to satisfy redemptions in the event it does not have sufficient
cash on hand. See "Redemptions."
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In addition to the information and reports described below under "The
Limited Partnership Agreement--Reports to Limited Partners," the General Partner
will provide Limited Partners with such other information and will comply with
any such procedures in connection with redemptions as in the future are
specifically required under Securities and Exchange Commission (the "SEC") rules
and policies for commodity pools and similar investment vehicles.
DISTRIBUTIONS
Distributions of profits, if any, will be made at the sole discretion of the
General Partner (it is currently the intention of the General Partner not to
make distributions). It is possible that no distributions will be made in some
years in which the Partnership has taxable profits, realized or unrealized.
However, a Limited Partner will nevertheless be required to account for his
share of such profits as income for federal tax purposes. Distributions may be
made by credit to a Limited Partner's customer account with DWR. See "Material
Federal Income Tax Considerations."
TRANSFERABILITY OF UNITS
The assignability or transferability of Units is limited by the Limited
Partnership Agreement and no assignee or transferee may become a substituted
Limited Partner without the consent of the General Partner, which consent the
General Partner may withhold, in its sole discretion. See "The Limited
Partnership Agreement--Restrictions on Transfers or Assignments."
THE OFFERING
SECURITIES OFFERED
5,000,000 Units have been registered and are available for sale by the
Partnership. The General Partner, in its discretion, may register and sell
additional Units from time to time.
SUBSCRIPTION PROCEDURE
The minimum subscription for most subscribers is $5,000, except the minimum
subscription is: (a) $2,000 in the case of an IRA; or (b) for subscribers
effecting Exchanges, the lesser of (i) $5,000 ($2,000 in the case of an IRA),
(ii) the proceeds from the redemption of five units (two units in the case of an
IRA) from commodity pools other than the Spectrum Series, (iii) the proceeds
from the redemption of 500 units (200 units in the case of an IRA) from one, or
any combination, of the Spectrum Series of commodity pools, or (iv) the proceeds
from the redemption of all of a subscriber's units of limited partnership
interest in any other commodity pool for which the General Partner serves as
general partner and commodity pool operator. A subscriber whose subscription is
accepted by the General Partner at a closing and who desires to make an
additional investment in the Partnership may subscribe for Units at a subsequent
closing with a minimum investment of $1,000. Certain jurisdictions may impose
higher minimum investment requirements; see "State Suitability Requirements" in
the Subscription and Exchange Agreement and Power of Attorney. No selling
commissions will be charged on subscriptions. No offering expenses will be
charged to investors or the Partnership. See "Investment Requirements" above,
"Plan of Distribution," and "Subscription Procedure."
In order to purchase Units, a subscriber must complete, execute, and deliver
an execution copy of the Subscription and Exchange Agreement and Power of
Attorney to DWR. In the Subscription and Exchange Agreement and Power of
Attorney, a subscriber will (i) authorize the General Partner and DWR to
transfer the subscription amount from the subscriber's customer account with DWR
to the Morgan Stanley Tangible Asset Fund L.P. Escrow Account, or (ii) in the
case of an Exchange, authorize the General Partner to redeem all or a portion of
such subscriber's interest in another commodity pool for which the General
Partner serves as general partner and commodity pool operator (subject to the
terms of the applicable limited partnership agreement) and use the proceeds of
such redemption (less any applicable redemption charges) to purchase Units in
the Partnership. A subscriber must have the appropriate amount in his customer
account with DWR on the first business day following the date that his
Subscription and Exchange Agreement and Power of Attorney is received by DWR,
and DWR will debit the customer account and transfer such funds to the escrow
account with the Escrow Agent on
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<PAGE>
that date. A subscriber may revoke his Subscription and Exchange Agreement and
Power of Attorney, and receive a full refund of the subscription amount and any
accrued interest thereon (or revoke the redemption of units in the other
commodity pool in the case of an Exchange), within five business days after
execution of such Agreement or no later than 3:00 p.m., New York City time, on
the date of the applicable closing, whichever comes first, by delivering written
notice to his DWR account executive.
PLAN OF DISTRIBUTION
The Units are being offered and sold by the Partnership through DWR.
Pursuant to a Selling Agreement among the Partnership, the General Partner, the
Trading Advisor and DWR, DWR will use its best efforts to sell Units, but DWR
has not made any commitment to offer and sell a specific amount of Units or to
purchase any Units. See "Plan of Distribution." The General Partner, in its sole
discretion, may reject a subscription in whole or in part at any time prior to
acceptance. Units are being offered initially to the public at $10 per Unit, for
issuance at the First Closing, which is currently scheduled to be held on
November 3, 1997; provided, however, that the General Partner may at its
discretion hold such First Closing at any time during the Offering Period (as
defined below). Units that remain unsold following the First Closing may be
offered for sale, in the sole discretion of the General Partner, at a Second
Closing and a Third Closing, currently scheduled to be held on December 1, 1997
and January 2, 1998, respectively, at a price per Unit equal to 100% of the Net
Asset Value thereof as of the close of business on the last day of the month
immediately preceding such closing. The General Partner shall have the
discretion to terminate the offering of Units at any time. The period from the
date of this Prospectus through January 12, 1998 will be referred to herein as
the "Offering Period." The General Partner may, in its discretion, extend the
Offering Period to provide for an additional closing for the sale of Units, but
in no event will the Offering Period be extended beyond March 31, 1998. In the
event of any such extension, the term "Offering Period" shall be deemed to
include such additional closing. If at least 500,000 Units have been subscribed
for at any time during the Offering Period, the General Partner may either elect
to (a) accept such subscriptions at the First Closing and commence the
Partnership's trading operations, or (b) continue to offer Units until the
conclusion or earlier termination of the Offering Period.
Funds with respect to a subscription received during the Offering Period and
not immediately rejected by the General Partner will be transferred to, and held
in escrow by, The Chase Manhattan Bank (the "Escrow Agent"), as described above,
until the General Partner either rejects such subscription prior to the
applicable closing or accepts such subscription at such closing.
If fewer than 500,000 Units have been subscribed for at the termination of
the Offering Period, the offering of Units will terminate and each subscription
will be promptly credited to the subscriber's customer account with DWR, but in
no event later than five business days following termination of the Offering
Period, together with any interest earned on the subscriber's subscription funds
while held in escrow, and at such time such funds will be immediately available
to the subscriber for investment or withdrawal. The General Partner, DWR, MS &
Co., MSIL, and the Trading Advisor and their respective principals, directors,
officers, employees, and affiliates may subscribe for Units. Such Units
subscribed for by any of the foregoing persons and entities will not be counted
for purposes of determining whether the 500,000 Unit minimum subscription
requirement has been met. If 500,000 or more Units have been subscribed for
during the Offering Period, each subscriber will receive a credit to his
customer account with DWR in the amount of any interest earned on his
subscription funds while held in escrow. Subject to certain limited revocation
rights (see "Subscription Procedure"), all subscriptions for Units are
irrevocable by subscribers. Interest earned on subscriptions deposited into
escrow and thereafter rejected by the General Partner will be credited to the
subscriber's customer account with DWR.
Employees of DWR will receive compensation from DWR, and not from the
Partnership, out of the portion of the brokerage fees received by DWR from MS &
Co. Such continuing compensation is in consideration of certain additional
services provided to Limited Partners by such persons on a continuing basis and
may be deemed to be additional underwriting compensation. See "Plan of
Distribution."
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<PAGE>
NO SELLING COMMISSIONS OR OFFERING EXPENSE CHARGE
In connection with the offering of Units pursuant to this Prospectus, no
selling commissions or offering expenses will be paid by Limited Partners or the
Partnership, and DWR will pay all of the costs incurred in connection with the
organization of the Partnership and this offering of Units, estimated to be
approximately $875,000 in the aggregate. The Partnership will not reimburse DWR
for any portion of the costs so incurred, and will not be liable for any such
costs at any time (although DWR may recoup such costs from receipt of a portion
of the brokerage fees and receipt of interest and compensating balance benefits
with respect to the Partnership's assets deposited with the Commodity Brokers).
However, except as provided below, employees of DWR will receive from DWR
(payable solely from its own funds) a gross sales credit equal to 3% of the Net
Asset Value per Unit as of the applicable closing for each Unit sold by them and
issued at such closing. Commencing with the thirteenth month following the
closing at which a Unit is issued and continuing until the Partnership
terminates or such Unit is redeemed, an employee of DWR that is properly
registered with the Commodity Futures Trading Commission (the "CFTC") will
receive from DWR (solely from its own funds) up to 1/4 of 1% of the Unit's
month-end Net Asset Value (up to a 3% annual rate), as described in Note (1) to
the table on the front cover page of this Prospectus. See "Plan of
Distribution." DWR's employees may have a conflict of interest in rendering
advice to Limited Partners as to when and whether to redeem Units because of
their interest in receiving certain continuing compensation for ongoing services
rendered to holders of outstanding Units. The compensation described above will
be paid by DWR out of the portion of the brokerage fees received by DWR from MS
& Co. and will not be paid directly by any Limited Partner or the Partnership
and, accordingly, Net Assets will not be reduced as a result of such
compensation.
SUITABILITY STANDARDS
Each investor (or person entitled to exercise control over assets of such
investor's account under an IRA or other employee benefit plan) must represent
and warrant in the Subscription and Exchange Agreement and Power of Attorney
that such investor and/or other person has received this Prospectus and
satisfies certain investment and/or suitability requirements described under
"--Investment Requirements" above.
INTEREST ON PARTNERSHIP ASSETS
Once the Partnership's assets are deposited with MS & Co., they will be held
in customer segregated funds accounts established by MS & Co. The Partnership's
assets held by the Commodity Brokers shall be used as margin solely for the
Partnership's trading. MS & Co. will credit the Partnership at each month-end
with interest income as if 80% of the Partnership's average daily Net Assets for
the month were invested at a rate based on U.S. Treasury Bills. See "Investment
Program, Use of Proceeds and Trading Policies."
USE OF PROCEEDS
The entire proceeds of this offering, together with the General Partner's
capital contribution, will be deposited in the Partnership's accounts maintained
with the Commodity Brokers, and used for trading in futures interests. See
"Investment Program, Use of Proceeds and Trading Policies."
TAX CONSIDERATIONS
In the opinion of the General Partner's tax counsel, the Partnership will be
classified as a partnership for federal income tax purposes and not as an
association (or publicly traded partnership) taxable as a corporation.
Accordingly, the Partnership will not be subject to federal income tax. Each
Limited Partner in computing his federal income tax liability for a taxable year
will be required to take into account his distributive share of all items of
Partnership income, gain, loss, deduction or credit for the taxable year of the
Partnership ending within or with the taxable year of the Limited Partner,
regardless of whether such Limited Partner has received any distributions from
the Partnership. Such items of Partnership gain or loss retain their character
(E.G., capital or ordinary) when allocated to the Limited Partners. Moreover,
the special allocation of Partnership gain or loss upon a redemption of Units,
which retains the same character as in the hands of the Partnership, may alter
the character of a redeeming
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Limited Partner's income (by reducing the amount of long-term capital gain
recognized upon receipt of redemption proceeds) and may accelerate the
recognition of income by such Limited Partner. All such allocations will
increase or decrease each Limited Partner's tax basis in his Units. The
allocation provisions are designed to reconcile tax allocations to economic
allocations; however, no assurance can be given that the Internal Revenue
Service will not challenge such allocation (including the Partnership's tax
allocations in respect of redeemed Units), especially in light of recently
issued final regulations. See "Material Federal Income Tax Considerations."
Taxes payable by partners with respect to Partnership profits may exceed the
amount of Partnership distributions, if any, for a taxable year. Based upon the
current and contemplated activities of the Partnership, the General Partner has
been advised by its legal counsel that, in such counsel's opinion, expenses
incurred by the Partnership should not be subject to the limitations on the
deductibility of certain miscellaneous itemized expenses, except to the extent
that the Internal Revenue Service promulgates regulations that so provide.
Cash distributions by the Partnership and amounts received or deemed
received upon the partial or complete redemption of a Limited Partner's Units
that do not exceed the Limited Partner's aggregate basis in his Units are not
taxable. Because of the special allocation of Partnership gain or loss upon a
redemption of Units, the amounts received upon the partial or complete
redemption of a Limited Partner's Units normally will not result in additional
taxable income or loss to the Limited Partner. However, to the extent cash
distributions and amounts received or deemed received upon the partial
redemption of a Limited Partner's Units exceed the Limited Partner's aggregate
tax basis in his Units, the excess will be taxable to the Limited Partner as
though it were gain on the sale of his Units. Loss will generally be recognized
on a redemption of Units only if a Limited Partner redeems all of his Units in
the Partnership and, following the complete redemption, such Limited Partner has
remaining tax basis in the Partnership. In such case, the Limited Partner will
recognize loss to the extent of the remaining basis. Subject to an exception for
certain types of Partnership assets, such gain or loss (assuming that the Units
constitute capital assets) will be either short-term capital gain or loss or
long-term capital gain or loss, depending upon the length of time that Units
were held prior to the distribution or redemption. See "Material Federal Income
Tax Considerations."
The General Partner has been advised that, in the opinion of its counsel, a
Limited Partner who is a nonresident alien individual, foreign corporation,
foreign partnership, foreign trust, or foreign estate (a "Foreign Limited
Partner") should not be deemed engaged in a trade or business in the United
States, and should not be subject to United States federal income tax, solely
because such Foreign Limited Partner is a limited partner in the Partnership,
provided such Foreign Limited Partner is not a dealer in commodities. In the
event the Partnership's activities should in the future not fall within certain
safe harbors from U.S. trade or business status, there is a risk that all of a
Foreign Limited Partner's distributive share of income of the Partnership would
be treated as effectively connected with the conduct of a trade or business in
the United States. In that event, the Foreign Limited Partner would be taxed at
regular rates applicable to U.S. taxpayers and, if a foreign corporation, could
be subject to a 30% branch profits tax. See "Material Federal Income Tax
Considerations." As regards tax-exempt Limited Partners, see "Purchases by
Employee Benefit Plans--ERISA Considerations."
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RISK FACTORS
In addition to the Risk Disclosure Statement appearing at the beginning of
this Prospectus, prospective subscribers should consider the following risks
before subscribing for Units.
RISKS RELATING TO FUTURES INTERESTS TRADING AND THE FUTURES INTERESTS MARKETS
FUTURES INTERESTS TRADING IS SPECULATIVE AND VOLATILE. Futures interests
prices are highly volatile. Price movements of futures interests are influenced
by, among other things: changing supply and demand relationships; weather;
agricultural, trade, fiscal, monetary, and exchange control programs and
policies of governments; domestic and foreign political and economic events and
policies; and changes in interest rates.
The Partnership is also subject to the risk of failure of any of the
exchanges on which it trades or of their clearinghouses, if any. In addition,
under certain circumstances, such as the inability of a customer of the
Commodity Brokers or the Commodity Brokers themselves to satisfy substantial
deficiencies in such customer's account, the Partnership may be subject to a
risk of loss of its funds on deposit with such Commodity Brokers. See "The
Futures Markets."
FUTURES INTERESTS TRADING IS HIGHLY LEVERAGED. Because of the low margin
deposits normally required in futures interests trading (typically between 2%
and 15% of the value of the contract purchased or sold), an extremely high
degree of leverage is typical of a futures interests trading account. As a
result, a relatively small price movement in a futures interest may result in
immediate and substantial losses to the investor. The Partnership uses leverage
which could, depending on performance, result in increased gain or loss. For
example, if at the time of purchase 10% of the price of a contract is deposited
as margin, a 10% decrease in the price of the contract would, if the contract is
then closed out, result in a total loss of the margin deposit before any
deduction for brokerage commissions. A decrease of more than 10% would result in
a loss of more than the total margin deposit. See "The Futures Markets--Margins"
and "The Limited Partnership Agreement--Nature of the Partnership."
FUTURES INTERESTS TRADING MAY BE ILLIQUID. Most United States futures
exchanges limit fluctuations in certain futures interests prices during a single
day by regulations referred to as "daily price fluctuation limits" or "daily
limits." Pursuant to such regulations, during a single trading day no trades may
be executed at prices beyond the daily limits. Once the price of a particular
futures interest has increased or decreased by an amount equal to the daily
limit, positions in the futures interest can neither be taken nor liquidated
unless traders are willing to effect trades at or within the limit. Prices in
various futures interests have occasionally moved 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 it
to substantial losses. While daily limits may reduce or effectively eliminate
the liquidity of a particular market, they do not limit ultimate losses, and may
in fact substantially increase losses because they may prevent the liquidation
of unfavorable positions.
In addition, the Partnership may not be able to execute trades at favorable
prices if little trading in the futures interests involved is taking place.
Under some circumstances, the Partnership may be required to accept or make
delivery of the underlying commodity if the position cannot be liquidated prior
to its expiration date. See "Investment Program, Use of Proceeds and Trading
Policies--Trading Policies." It also is possible that an exchange or the CFTC
may suspend trading in a particular futures interest, order immediate
liquidation and settlement of a particular futures interest, or order that
trading in a particular futures interest be conducted for liquidation only. See
"The Futures Markets."
SPECIAL RISKS ASSOCIATED WITH TRADING ON FOREIGN EXCHANGES. The Partnership
may trade in futures contracts on exchanges located outside the United States
where CFTC regulations do not apply. Some foreign exchanges, in contrast to
domestic exchanges, are "principals' markets" in which performance with respect
to a contract is the responsibility only of the individual member with whom the
trader has entered into a contract and not of the exchange or clearinghouse, if
any. In the case of trading
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on foreign exchanges, the Partnership will be subject to the risk of the
inability of, or refusal by, the counterparty to perform with respect to such
contracts. Although the Commodity Brokers monitor the creditworthiness of the
foreign exchanges with which they do business for clients, the Commodity Brokers
do not have the capability to precisely quantify the Partnership's exposure to
risks inherent in its trading activities on foreign exchanges, and as a result,
the risk is not monitored by the Commodity Brokers on an individual client basis
(including the Partnership).
Trading on foreign exchanges may involve certain other risks not applicable
to trading on United States exchanges, such as the risks of exchange controls,
expropriation, burdensome or confiscatory taxation, moratoriums, or political or
diplomatic events. For an additional discussion of the credit risks relating to
trading on foreign exchanges, see "The Futures Markets."
THE PARTNERSHIP HAS CREDIT RISK TO THE COMMODITY BROKERS. The Partnership
has credit risk because the Commodity Brokers act as the futures commission
merchants with respect to the Partnership's assets. Exchange traded futures
contracts are marked to market on a daily basis, with variations in value
credited or charged to the Partnership's account on a daily basis. MS & Co., as
futures commission merchant for the Partnership's U.S. exchange traded futures
contracts, is required, pursuant to CFTC regulations, to segregate from its own
assets, and for the sole benefit of its commodity customers, all funds held by
MS & Co. with respect to exchange traded futures contracts, including an amount
equal to the net unrealized gain on all open futures contracts.
POSSIBLE EFFECTS OF SPECULATIVE POSITION LIMITS. The CFTC and the United
States futures exchanges have established limits referred to as "speculative
position limits" or "position limits" on the maximum net long or net short
futures contract position which any person or group of persons may own, hold, or
control in particular futures interests.
All futures interests accounts owned, controlled or managed by the Trading
Advisor and its principals will be combined for position limit purposes. In this
connection, the Management Agreement provides that if speculative position
limits are exceeded by the Trading Advisor in the opinion of independent
counsel, the CFTC or any regulatory body, exchange, or board, the Trading
Advisor and its principals will promptly liquidate positions in all of their
accounts, including the Partnership's account, as to which positions are
attributed to the Trading Advisor, fairly and equitably in light of each
account's trading strategies to the extent necessary to comply with applicable
position limits. See "The Management Agreement." From time to time, the trading
approach or instructions of the Trading Advisor may have to be modified, and
positions held by the Partnership may have to be liquidated, in order to avoid
exceeding such limits. Such modification or liquidation, if required, could
adversely affect the operations and profitability of the Partnership. See
"Conflicts of Interest--Management of Other Accounts by the Trading Advisor."
The Partnership is also subject to the same speculative position limits and may
have to modify or liquidate positions if such limits are, or are about to be,
exceeded by the Partnership as a whole.
RISKS RELATING TO THE PARTNERSHIP AND THE OFFERING OF UNITS
SUBSTANTIAL CHARGES TO THE PARTNERSHIP. The Partnership is subject to
substantial charges to its Net Assets from the payment of the monthly management
fee, brokerage fee, service fee, and any extraordinary costs, regardless of
whether the Partnership realizes profits. See "Description of Charges to the
Partnership."
RESTRICTED INVESTMENT LIQUIDITY IN THE UNITS. The Units cannot be assigned
or transferred except on the terms and conditions set forth in the Limited
Partnership Agreement, and there will be no public market for the Units. See
"The Limited Partnership Agreement--Restrictions on Transfers or Assignments." A
Limited Partner, after proper notice has been given, may require the Partnership
to redeem all or part of his Units as of, but not before, the sixth month-end
following the closing at which such person becomes a Limited Partner, in the
manner described herein. Thereafter, Units may be redeemed as of the end of any
month. However, no Limited Partner may redeem fractions of Units, except that
fractions of Units may be redeemed if a Limited Partner is redeeming in
multiples of $1,000
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or is redeeming his entire interest in the Partnership. Redemptions of Units are
subject to redemption charges through the twenty-fourth month following the
closing at which such Units are issued. The foregoing redemption charges and the
six month limitation will not apply to Limited Partners who purchase Units
pursuant to Exchanges. An investor who purchases $500,000 or more of Units will
not be subject to the redemption charges described above. The right to obtain
payment on redemption is contingent upon (a) the Partnership having assets
sufficient to discharge its liabilities on the effective date of the redemption,
and (b) the timely receipt by the General Partner of a Request for Redemption.
All liabilities of the Partnership are accrued daily and are reflected in the
daily Net Asset Value of the Partnership. See "Redemptions." Under certain
circumstances (including, but not limited to, the Partnership's inability to
liquidate or a delay in liquidating positions or the default or delay in
payments due the Partnership from dealers, brokers, banks, or other persons),
the Partnership may delay payment to Limited Partners requesting redemptions of
the proportionate part of the redemption requests represented by the sums which
are the subject of any such default or delay. See "Redemptions."
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE. DWR and the General
Partner were instrumental in the organization of the Partnership and may be
deemed "promoters" of the Partnership within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "1933 Act"). Moreover, the Partnership,
DWR, the Commodity Brokers, the Trading Advisor, and the General Partner are
affiliated entities and are represented by a single counsel. As a consequence of
the foregoing, there is an absence of arm's-length negotiation with respect to
some of the terms of this offering. See "Conflicts of Interest."
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. See "The Limited Partnership Agreement--Management of Partnership
Affairs." However, the Limited Partnership Agreement provides that certain
actions may be taken upon the affirmative vote of Limited Partners owning more
than 50% of the Units then owned by Limited Partners. See "The Limited
Partnership Agreement--Amendments; Meetings."
RELIANCE ON THE GENERAL PARTNER. A Limited Partner is relying on the
ability of the General Partner in the selection of a successful trading advisor
for the Partnership. The selection by the General Partner of the Trading Advisor
involved numerous considerations. The General Partner evaluated the performance
record of the Trading Advisor and determined if the Trading Advisor was suitable
for the Partnership's overall trading approach, trading policies and investment
objectives. The General Partner reviewed other aspects of the Trading Advisor
(including the prospective Trading Advisor's trading programs, experience,
volatility of trading, futures interests traded, amount of management and
incentive fees normally charged, reputation of the Trading Advisor and its
personnel and amount of funds under management), and made certain subjective
judgments in retaining the Trading Advisor. Although the General Partner
carefully weighed the above factors in making its selections, other factors not
considered by the General Partner may also be important. In the future, the
General Partner may be required to terminate and replace the Trading Advisor by
reason of its poor performance or for other reasons or to retain additional
trading advisors for the Partnership and similar judgments will have to be made
from time to time.
CERTAIN LITIGATION. DWR, the General Partner, other affiliated entities,
certain limited partnership commodity pools of which the General Partner is the
general partner, and certain trading advisors to those pools, are all defendants
in certain purported class actions. In addition, the Commodity Brokers from time
to time are subject to various legal actions. See "Certain Litigation."
RISKS RELATING TO THE TRADING ADVISOR
RELIANCE ON THE TRADING ADVISOR TO TRADE SUCCESSFULLY. Futures interests
trading decisions for the Partnership will be made by the Trading Advisor, upon
whose judgment and abilities the success of the Partnership largely depends. No
assurance can be given that the trading program utilized by the Trading Advisor
will prove successful under all or any market conditions.
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MARKET FACTORS MAY ADVERSELY INFLUENCE THE TRADING PROGRAM. Any factor
which may lessen the prospect of major commodity price trends in the future may
reduce the Trading Advisor's ability to trade profitably in the future. Any
factor which would make it more difficult to execute timely trades, such as a
significant lessening of liquidity in a particular market, would also be
detrimental to profitability. As a result of these factors and the general
volatility of the futures interests markets, investors should view their
investment as long term (at least 2 years) in order to permit the program of the
Trading Advisor to function over time. Further, the Trading Advisor may alter
its program from time to time such that it is possible that the trading program
used by the Trading Advisor in the future may be different from that presently
in use.
LIMITED TERM OF THE MANAGEMENT AGREEMENT MAY LIMIT ACCESS TO THE TRADING
ADVISOR. The Management Agreement with the Trading Advisor will have an
original term of one year. Thereafter, the Partnership or the Trading Advisor
may terminate the Management Agreement upon 60 days' prior written notice to the
Partnership. In addition, the Management Agreement will be terminable by the
Partnership at any time without penalty at any month end upon 15 days' prior
written notice to the Trading Advisor, and at any time upon written notice under
certain circumstances specified therein. See "The Management Agreement." Upon
the expiration or termination of the Management Agreement, there can be no
assurance that the services of the Trading Advisor or another trading advisor
will be available on the same or similar terms.
POSSIBLE ADVERSE EFFECTS OF INCREASING THE ASSETS TRADED BY THE TRADING
ADVISOR. A trading advisor is limited in the amount of assets that it can
successfully manage, both by the difficulty of executing substantially larger
trades made necessary by the larger amount of equity under management and by the
restrictive effect of speculative position limits. Increased equity generally
results in a larger demand for the same futures interests among the accounts
managed by a trading advisor. Furthermore, while there has been substantial
debate on the subject, 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. The Trading Advisor has not agreed to limit the amount of
additional equity that it may manage. There can be no assurance that the Trading
Advisor's trading program will not be adversely affected by additional equity,
including the proceeds of this offering.
TRADING DECISIONS BASED ON TECHNICAL TRADING APPROACH MAY NOT PERFORM UNDER
CERTAIN MARKET CONDITIONS. Trading decisions of the Trading Advisor generally
are based on a "technical" trading program as opposed to a "fundamental" trading
method, although the Trading Advisor does utilize subjective judgment in an
effort to identify situations where future market reactions are likely to be
inconsistent with past market reactions. Fundamental trading methods attempt to
examine external factors (such as governmental policies, national and
international political and economic events, changing trade prospects, and
similar factors which affect the supply and demand for a particular futures
interest) in order to predict future prices. Technical trading systems, however,
generate buy and sell signals which are not based on analysis of fundamental
supply and demand factors, but rather are based, in most cases, upon a study of
actual daily, weekly, and monthly price fluctuations, volume variations and
changes in open interest and other related mathematical, statistical or
quantitative data utilizing charts and/or computers.
The profitability of both technical and fundamental analysis in futures
interest trading generally depends upon the accurate forecasting of major price
moves or trends in some futures interests. No assurance can be given of the
accuracy of the forecasts or the existence of some major price move. The best
trading approach will not be profitable if there are sustained periods in which
there are no price moves or trends of the kind the trading approach seeks to
identify and follow. In the past, there have been periods without discernible
trends and, presumably, such periods will continue to occur in the future.
Periods without such price moves may produce losses. Any factor which would
lessen the prospect of major trends occurring in the future (such as increased
governmental control of or participation in the markets) may reduce the prospect
that a particular trading approach will be profitable in the future. Moreover,
any factor which would make it more difficult to execute trades at desired
prices in accordance with a trading approach (such as a significant lessening of
liquidity in a particular market) would also be detrimental to profitability.
Many other trading approaches utilize similar
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analyses in making trading decisions; therefore, bunching of buy and sell orders
can occur which makes it more difficult for a position to be taken or
liquidated. No assurance can be given that the Trading Advisor's trading program
and trading decisions will be successful under all or any market conditions.
A limiting factor in the use of technical analysis is that such an approach
generally requires price movement data which can be translated into price trends
sufficient to dictate a market entry or exit decision. Any trading approach
which is based upon such technical concepts may not perform well when futures
interests markets are trendless or erratic, because a technical approach may
fail to identify a trend on which action should be taken or it may react to
minor price movements and thus establish a position contrary to overall price
trends, which may result in losses. In addition, a technical trading approach
may underperform other trading approaches when fundamental factors dominate
price moves within a given market. For example, since technical analysis
generally does not take into account fundamental factors such as supply, demand,
and political and economic events (except insofar as such factors may have
influenced price and other technical data constituting input information for
such approach), a technical trading approach may be unable to respond to
fundamental causative events until after their impact has ceased to influence
the markets; positions dictated by such resultant price movements may be
incorrect in light of the fundamental factors then affecting the markets.
TAXATION AND REGULATORY RISKS
POSSIBILITY OF TAXATION AS A CORPORATION. The General Partner has been
advised by its legal counsel, Cadwalader, Wickersham & Taft, that in its opinion
under current United States federal income tax (hereinafter "federal income
tax") laws and regulations, the Partnership will be classified as a partnership
and not as an association (or publicly traded partnership) taxable as a
corporation. This status has not been confirmed by a ruling from, and such
advice is not binding upon, the United States Internal Revenue Service (the
"Internal Revenue Service"). No such ruling has been or will be requested. The
facts and authorities relied upon by counsel in their opinion may change in the
future. If the Partnership were taxed as a corporation for federal income tax
purposes, income or loss of the Partnership would not be passed through to
Partners and the Partnership would be subject to tax on its income at the rates
of tax applicable to corporations, without any deductions for distributions to
the Partners. In addition, all or a portion of distributions made to the
Partners could be taxable to the Partners as dividends or capital gains. See
"Material Federal Income Tax Considerations."
PARTNER'S TAX LIABILITY MAY EXCEED DISTRIBUTIONS. If the Partnership has
profits for a taxable year, such profit will be taxable to the Partners in
accordance with their distributive shares of Partnership profit, whether or not
the profit actually has been distributed to the Partners. Accordingly, taxes
payable by Partners with respect to Partnership profit may exceed the amount of
Partnership distributions, if any, for a taxable year. Further, the Partnership
may sustain losses offsetting such profit in a succeeding taxable year, so that
Partners may never receive the profit on which they were taxed in the prior
year. See "Material Federal Income Tax Considerations."
POSSIBLE LIMITATION ON DEDUCTION OF CERTAIN EXPENSES. The deductibility of
certain miscellaneous itemized deductions is limited to the extent such expenses
exceed 2% of the adjusted gross income of an individual, trust or estate. In
addition, certain of an individual's itemized deductions are further reduced by
an amount equal to the lesser of (i) 3% of such individual's adjusted gross
income over a certain threshold amount and (ii) 80% of such itemized deductions.
Based upon the activities of the Partnership, the General Partner has been
advised by its legal counsel that in its opinion various expenses incurred by
the Partnership should not be subject to these limitations except to the extent
that the Internal Revenue Service promulgates regulations that so provide. Such
advice is not binding on the Internal Revenue Service or any court. If the
Partnership's expenses (including incentive fees) were treated as subject to
these limitations, a Limited Partner's after-tax return could be significantly
reduced. See "Material Federal Income Tax Considerations."
REDEMPTION OF UNITS MAY PRODUCE NEGATIVE TAX CONSEQUENCES. The Partnership
will allocate taxable gains or losses to a Limited Partner who redeems a Unit
generally to the extent such Limited Partner's capital account allocable to such
Unit differs from the federal income tax basis allocable to
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such Unit. Gain or loss allocable to a Limited Partner as his distributive share
of Partnership gain or loss (including such distributive share arising from a
special allocation upon redemption of Units) retains the same character as in
the hands of the Partnership. Accordingly, this special allocation of
Partnership gain or loss upon a redemption of Units may alter or modify the
character of such Limited Partner's income arising from a redemption of Units
(by reducing the amount of long-term capital gain recognized upon a receipt of
redemption proceeds) and may accelerate the recognition of income by such
Limited Partner. Further, no assurance can be given that the Internal Revenue
Service will not challenge the Partnership's tax allocations (including the
special allocation upon redemption of Units), and if such allocations are
successfully challenged, the amount of income or loss allocated to the Limited
Partners may be increased or reduced, or the character of such income or loss
may be modified. See "Material Federal Income Tax Considerations."
TAX LAWS ARE SUBJECT TO CHANGE. It is possible that the current federal
income tax treatment accorded an investment in the Partnership will be modified
by legislative, administrative, or judicial action in the future. The nature of
additional changes in federal income tax law cannot be determined prior to
enactment of any new tax legislation or administration or judicial action.
However, such legislation could significantly alter the tax consequences and
decrease the after-tax rate of return of an investment in the Partnership.
Prospective subscribers should seek, and must rely on, the advice of their own
tax advisers with respect to the possible impact on their investments of any
future proposed tax legislation or administrative or judicial action.
DEDUCTIBILITY OF PASSIVE LOSSES MAY BE LIMITED. Losses from a passive
activity ("passive losses") are generally disallowed to the extent such losses
exceed income from all passive activities ("passive income"). Pursuant to
Proposed and Temporary Treasury Regulations, the Partnership will not be treated
as a passive activity. Accordingly, a Limited Partner's distributive share of
items of income, gain, deduction or loss from the Partnership will not be
characterized as passive income or loss, and Partnership gains allocable to the
Limited Partners will not be available to offset passive losses from other
investments. However, Partnership gains allocable to the Limited Partners will
be available to offset losses with respect to "portfolio" investments, such as
stocks and bonds. Moreover, any Partnership losses allocable to the Limited
Partners will be available to offset other income, regardless of source. See
"Material Federal Income Tax Considerations."
POSSIBILITY OF TAX AUDIT. There can be no assurance that the Partnership's
tax return will not be audited by the Internal Revenue Service or that
adjustments to such return will not be made as a result of such an audit. If an
audit results in an adjustment, Limited Partners may be required to file amended
returns (which may themselves also be audited) and to pay back taxes plus
interest and/or penalties that may then be due. See "Material Federal Income Tax
Considerations."
ABSENCE OF REGULATIONS APPLICABLE TO SECURITIES MUTUAL FUNDS AND THEIR
ADVISERS. The Partnership is not registered as an investment company or a
"mutual fund" under the Investment Company Act of 1940, as amended (or any
similar state law), and neither the General Partner nor the Trading Advisor is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (or any similar state law). Investors, therefore, are not accorded
the protective measures provided by such legislation. However, in accordance
with the provisions of the Commodity Exchange Act, as amended (the "CEAct"), the
regulations of the CFTC thereunder and the rules of the National Futures
Association (the "NFA"), the General Partner is registered as a commodity pool
operator, the Trading Advisor is registered as a commodity trading advisor, and
MS & Co. is registered as a futures commission merchant, each subject to
regulation by the CFTC and each a member of the NFA in such respective
capacities.
THE FOREGOING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANATION OF
ALL THE RISKS INVOLVED IN THIS OFFERING. POTENTIAL INVESTORS SHOULD READ THIS
PROSPECTUS IN ITS ENTIRETY BEFORE DETERMINING WHETHER TO INVEST IN THE UNITS.
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CONFLICTS OF INTEREST
RELATIONSHIP OF THE GENERAL PARTNER AND THE TRADING ADVISOR TO THE COMMODITY
BROKERS
The General Partner, the Trading Advisor, and the Commodity Brokers are all
wholly-owned subsidiaries of Morgan Stanley, Dean Witter, Discover & Co.
("MSDWD"). Because the General Partner is affiliated with the Commodity Brokers,
the General Partner will have a conflict of interest between its
responsibilities to limit and reduce the brokerage fees paid by the Partnership
and otherwise manage the Partnership for the benefit of the Limited Partners and
its interest in obtaining for MS & Co. favorable brokerage fees (MSIL's fees
will be paid by MS & Co. and not directly by the Partnership). Most customers of
MS & Co. pay commissions at negotiated rates that are substantially less than
the rate that is paid by the Partnership. Four of the 22 currently actively
trading commodity pools for which Demeter acts as general partner (none of which
uses MS & Co. or MSIL as a commodity broker) are charged flat-rate asset-based
brokerage fees, 16 of such commodity pools are charged brokerage fees on a
roundturn brokerage commission basis (I.E., a charge for entering and exiting
each futures interest transaction) and such fees are subject to a monthly
asset-based cap, and two are charged on a roundturn brokerage commission basis
without a monthly asset-based cap. See "The Commodity Brokers" and "Fiduciary
Responsibility."
Because the General Partner is also affiliated with the Trading Advisor, the
General Partner will have a conflict with respect to its responsibility for
determining whether distributions are to be made to Partners by the Partnership.
Because any distributions will reduce the Partnership's Net Assets, which serve
as the basis on which the Trading Advisor's monthly management fee, the General
Partner's monthly service fee and MS & Co.'s flat-rate brokerage fee are
calculated, the General Partner will have a disincentive to make distributions.
Also, the General Partner selected the Trading Advisor and will participate in
the selection of any new trading advisor for the Partnership. However, because
the selection of trading advisors who engage in a high volume of trades will
increase the costs to MS & Co. of serving as a commodity broker for the
Partnership, without MS & Co.'s receipt of an offsetting increase in revenue,
the General Partner has an incentive to select trading advisors and trading
systems that engage in a low volume of trades.
Because the General Partner, the Trading Advisor and the Commodity Brokers
are subsidiaries of the same parent entity, the Customer Agreements with the
Commodity Brokers and the Management Agreement with the Trading Advisor have not
been agreed upon in arm's-length negotiations. Moreover, because of such
relationships, the General Partner has a disincentive to replace the Commodity
Brokers as the commodity brokers, and the Trading Advisor as trading advisor,
for the Partnership. However, the General Partner has a fiduciary duty under the
Partnership Act to exercise good faith and fairness in all dealings on behalf of
the Partnership, including the Partnership's dealings with the Trading Advisor
and the Commodity Brokers. See "Fiduciary Responsibility." In addition, the
Limited Partnership Agreement contains restrictions on the General Partner's
ability to contract with its affiliates on behalf of the Partnership. See "The
Limited Partnership Agreement--Management of Partnership Affairs."
While the Customer Agreements are nonexclusive, so that the Partnership has
the right to seek lower commission rates from other brokers at any time, the
General Partner believes that the Customer Agreements and other arrangements
between the Partnership and the Commodity Brokers are fair, reasonable and
competitive, and represent the best prices and services available, considering
the matters discussed in this paragraph below and in the immediately following
paragraph. DWR is subject to the risk and expense of offering the Units, and the
General Partner, an affiliate of DWR, will provide ongoing services to the
Partnership, which include operating the Partnership, monitoring the activity of
the Trading Advisor, administering the redemption of Units, and paying all of
the Partnership's ordinary administrative expenses, and has financial
obligations as the general partner of the Partnership. A significant portion of
the brokerage fees to be paid to MS & Co. by the Partnership will be paid by MS
& Co. to DWR. DWR will use this portion of the brokerage fees to pay certain of
its employees for providing continuing assistance to Limited Partners to whom
they have sold Units. Such DWR employees who provide continuing advice to
Limited Partners as to when and whether to redeem Units may have a conflict of
interest by reason of their continuing receipt of a portion of the brokerage
fees paid to MS & Co. by the Partnership.
17
<PAGE>
The General Partner will review the brokerage arrangements at least annually
to ensure they are fair, reasonable and competitive, and that they represent the
best price and services available, taking into consideration the size and
trading activity of the Partnership and the services provided, and costs,
expenses, and risk borne, by the Commodity Brokers, DWR, and the General
Partner. See "The Commodity Brokers" and "Fiduciary Responsibility."
The Commodity Brokers, the Trading Advisor, and the General Partner may,
from time to time, be subject to conflicting demands with respect to their
obligations to the Partnership and other commodity pools and accounts. Certain
pools may generate larger brokerage commissions, resulting in increased payments
to DWR employees as described above. Since DWR employees may receive greater
compensation from the sale of units of one pool over another, such employees are
subject to a conflict of interest in providing advice to Limited Partners.
ACCOUNTS OF AFFILIATES OF THE GENERAL PARTNER, THE COMMODITY BROKERS, AND DWR
While the General Partner does not trade futures interests for its own
account (other than indirectly as a consequence of its position as general
partner of commodity pools), certain officers, directors and employees of the
General Partner, the Commodity Brokers, and DWR, and their affiliates,
principals, directors, officers, and employees, may trade futures interests for
their own accounts. The records of such trading will not be available to Limited
Partners. In addition, MS & Co. is a large futures commission merchant, handling
substantial customer business in physical commodities and futures interests, and
is a clearing member of all of the major commodity exchanges in the United
States, while MSIL is a member of the London Metals Exchange and other foreign
commodity exchanges. It is possible that the Commodity Brokers will effect
transactions for the Partnership in which the other party to such transactions
is an employee of or otherwise affiliated with the General Partner, the
Commodity Brokers, DWR or their affiliates. Such persons might also compete with
the Partnership in bidding on purchases or sales of futures interests without
knowing that the Partnership is also bidding. It is possible that transactions
for the officers, directors, affiliates, employees, customers and correspondents
of the General Partner, the Commodity Brokers, or DWR might be effected when
similar trades for the Partnership are not executed or are executed at less
favorable prices. See "The General Partner" and "The Commodity Brokers."
The Limited Partnership Agreement provides that, except as described therein
or in this Prospectus, no person may receive, directly or indirectly, any
advisory, management, or incentive fee for investment advice who shares or
participates in per trade commodity brokerage commissions paid by the
Partnership. No commodity broker for the Partnership may pay, directly or
indirectly, rebates or "give ups" to the General Partner or any trading advisor,
and such prohibitions may not be circumvented by any reciprocal business
arrangements.
MANAGEMENT OF OTHER ACCOUNTS BY THE TRADING ADVISOR
The Management Agreement allows the Trading Advisor to manage futures
interests accounts in addition to the Partnership's account. The Trading Advisor
and its affiliates may at any time be trading their own proprietary accounts,
advising accounts for other commodity pools and/or individual customers, and
operating other commodity pools, and will continue such activities in the
future. The Trading Advisor presently acts as advisor and commodity pool
operator to four other commodity pools. The Trading Advisor also operates an
additional trading program in its management of accounts, which program will not
be used in trading for the Partnership. In addition, other accounts using the
trading program to be employed for the Partnership trade at different leverage
levels and with different fees and costs from the Partnership. Such other
accounts may experience significantly different performance results than the
Partnership. The Trading Advisor is required to aggregate futures interests
positions in other accounts managed by it with futures interests positions in
the Partnership's account for speculative position limit purposes. Such
aggregation of positions could require the Trading Advisor to liquidate or
modify positions for all such accounts, and such liquidation or modification may
adversely affect the Partnership. Moreover, if the Trading Advisor makes trading
decisions for such accounts and the Partnership's account at or about the same
time, the Partnership may be competing with such other accounts for the same or
similar positions. While the records of accounts of the Trading Advisor's
employees and accounts managed by the Trading Advisor will not be made available
to Limited
18
<PAGE>
Partners, the Management Agreement permits the General Partner access to such
records in order to determine that the Partnership's account is traded fairly.
The Management Agreement also provides that the Trading Advisor will deal with
the Partnership in a fiduciary capacity to the extent recognized by applicable
law and will not enter into transactions where it knowingly or deliberately
favors itself or another client over the Partnership.
CUSTOMER AGREEMENTS WITH THE COMMODITY BROKERS
Under the Partnership's respective Customer Agreements with the Commodity
Brokers, all funds, futures interests positions, securities, and credits carried
for the Partnership are held as security for the Partnership's obligations to
the Commodity Brokers; the margins required to initiate or maintain open
positions will be as established by the Commodity Brokers from time to time; and
the Commodity Brokers may close out positions, purchase futures interests, or
cancel orders at any time they deem necessary for their protection, without the
consent of the Partnership. The Partnership also has agreed to indemnify and
defend the Commodity Brokers and their stockholders, employees, officers,
directors and affiliates against certain liabilities incurred by them by reason
of acting as the Partnership's commodity brokers. Each Commodity Broker or the
General Partner, upon 10 days' prior written notice to the other, or the Limited
Partners by majority vote, upon 60 days' prior written notice, may terminate the
brokerage relationship and close the Partnership's futures interests accounts at
the Commodity Broker. If so terminated, the Partnership would have to negotiate
a new customer agreement with a commodity broker upon terms and conditions,
including brokerage commission rates, which cannot now be determined.
OTHER COMMODITY POOLS
The General Partner is or has been the general partner for 28 other
commodity pools. DWR is the commodity broker for such pools and several other
commodity pools. Each may in the future establish and/or be the general partner
or commodity broker for additional commodity pools, and any such pool may be
said to be in competition with the Partnership in that any one or more of such
pools might compete with the Partnership for the execution of trades.
FIDUCIARY RESPONSIBILITY
Investors should be aware that the General Partner has a fiduciary duty
under the Partnership Act to the Limited Partners to exercise good faith and
fairness in all dealings affecting the Partnership. The General Partner's
fiduciary duty to the Limited Partners under the Limited Partnership Agreement
is in accordance with the fiduciary duty owed to limited partners by a general
partner under Delaware law. The Limited Partnership Agreement prohibits the
Limited Partners from limiting, by any means, the fiduciary duty of the General
Partner owed to the Limited Partners under statutory or common law. In the event
that a Limited Partner believes that the General Partner has violated its
responsibilities, the Limited Partner may seek legal relief for himself and all
other similarly situated Limited Partners or on behalf of the Partnership under
the Partnership Act, the CEAct, applicable federal and state securities laws and
other applicable laws to recover damages from, or to require an accounting by,
the General Partner. The Trading Advisor also has a fiduciary responsibility
under applicable law to the Partnership.
The Limited Partnership Agreement, the Customer Agreements, and the
Management Agreement generally provide that the General Partner, the Commodity
Brokers, the Trading Advisor and their "affiliates" (as defined in the Limited
Partnership Agreement) shall not be liable to the Partnership, the Limited
Partners, or its or their successors or assigns, for any act, omission, conduct,
or activity undertaken by or on behalf of the Partnership that the General
Partner, the Commodity Brokers, or the Trading Advisor, as applicable,
determines, in good faith, to be in the best interests of the Partnership,
unless such act, omission, conduct, or activity of or by the General Partner,
the Commodity Brokers, the Trading Advisor or their affiliates, as applicable,
constituted misconduct or negligence.
The Limited Partnership Agreement, the Customer Agreements, the Selling
Agreement, and the Management Agreement generally provide that the Partnership
will indemnify, defend, and hold harmless the General Partner, DWR, the
Commodity Brokers, the Trading Advisor, any Additional Sellers, and any
affiliates of the foregoing persons from and against any loss, liability,
damage, cost, or
19
<PAGE>
expense (including attorneys' and accountants' fees and expenses incurred in
defense of any demands, claims, or lawsuits) actually and reasonably incurred
arising from acts, omissions, activities, or conduct undertaken by or on behalf
of the Partnership, including, without limitation, any demands, claims, or
lawsuits initiated by a Limited Partner (or assignee thereof), PROVIDED that (1)
the General Partner, DWR, the Commodity Broker, or the Trading Advisor, as
applicable, has determined, in good faith, that the act, omission, activity or
conduct giving rise to the claim for indemnification was in the best interests
of the Partnership, and (2) the act, omission, activity, or conduct that was the
basis for such loss, liability, damage, cost, or expense was not the result of
misconduct or negligence. Payment of any indemnity to such person by the
Partnership would reduce the Net Assets of the Partnership. The General Partner
does not carry insurance covering such potential losses and it is not
contemplated that the Partnership will carry liability insurance covering its
potential indemnification exposure.
Notwithstanding the foregoing, in any action brought by a Limited Partner in
the right of the Partnership, the General Partner or any affiliate thereof may
only be indemnified to the extent and subject to the conditions specified in the
Partnership Act (which presently permits indemnification of any partner to the
extent provided in the Limited Partnership Agreement, as described in the
immediately preceding paragraph). Also, no indemnification of the General
Partner, DWR, any Additional Seller, either Commodity Broker, the Trading
Advisor or their affiliates by the Partnership shall be permitted for losses,
liabilities, or expenses arising from or out of alleged violations of federal or
state securities laws unless: (1) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to the
particular indemnitee, or (2) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (3) a court of competent jurisdiction approves a settlement of the claims
against the particular indemnitee and finds that indemnification of the
settlement and related costs should be made, PROVIDED, with regard to such court
approval, the indemnitee must apprise the court of the position of the SEC, and
the positions of the respective securities administrators of Massachusetts,
Missouri, Tennessee and/or those other states and jurisdictions in which the
plaintiffs claim they were offered or sold Units, with respect to
indemnification for securities laws violations, before seeking court approval
for indemnification. Note that, with respect to indemnification for liabilities
arising under the 1933 Act for directors, officers or controlling persons of the
Partnership or the General Partner, it is the opinion of the SEC that such
indemnification is against public policy, as expressed in the 1933 Act, and is
therefore unenforceable. The CFTC has issued a statement of policy relating to
indemnification of officers and directors of a futures commission merchant (such
as MS & Co.) and its controlling persons under which the CFTC has taken the
position that whether such an indemnification is consistent with the policies
expressed in the CEAct will be determined by the CFTC on a case-by-case basis.
20
<PAGE>
DESCRIPTION OF CHARGES TO THE PARTNERSHIP
The Partnership is subject to substantial charges, all of which are
described in detail below.
<TABLE>
<CAPTION>
FORM OF AMOUNT OF
RECIPIENT COMPENSATION COMPENSATION
- ------------------- ------------------------------------------ ------------------------------------------
<S> <C> <C>
The Trading Advisor Monthly Management Fee. A flat-rate monthly fee of 5/24 of 1% of
Net Assets as of the first day of each
month (a 2.5% annual rate).
Annual Incentive Fee. 20% of the Trading Profits experienced as
of the end of each calendar year.
The Commodity Brokerage Fee. A flat-rate monthly fee of 1/12 of 3.65%
Brokers of Net Assets as of the first day of
each month (a 3.65% annual rate).
Financial benefit to Commodity Brokers, The aggregate of (i) brokerage fees
DWR or their affiliates from interest payable by the Partnership, and (ii) net
earned on the Partnership's assets in excess interest and compensating balance
excess of the interest paid to the benefits to the Commodity Brokers, DWR
Partnership and from compensating or their affiliates (after crediting the
balance treatment in connection with its Partnership with interest) are capped at
designation of a bank or banks in which 14% annually of the Partnership's aver-
Partnership assets are deposited. age monthly Net Assets as of the last
day of each month during a calendar
year.
The General Partner Monthly Service Fee. A flat-rate monthly fee of 1/12 of 1% of
Net Assets as of the first day of each
month (a 1% annual rate).
</TABLE>
1. THE TRADING ADVISOR
(a) MONTHLY MANAGEMENT FEE. The Partnership will pay the Trading Advisor a
monthly management fee equal to 5/24 of 1% (a 2.5% annual rate) of Net Assets
(as defined herein on page 70) as of the first day of each month. For example,
if Net Assets were $30,000,000 as of the first of each month during a year, the
Trading Advisor would receive an aggregate monthly management fee for the year
of $750,000 (5/24 of 1% of $30,000,000 per month, or $62,500 times 12).
If during any month the Partnership suspends trading operations or the
Partnership does not conduct business operations, or, as a result of an act or
material failure to act by the Trading Advisor, the Trading Advisor does not
provide its services on any trading day, then the management fee payable to the
Trading Advisor will be prorated based on the ratio that the number of trading
days in the month in which the Partnership engaged in trading operations or, as
appropriate, in which the Trading Advisor provided its services bears to the
total number of trading days in such month.
If the Management Agreement is terminated on a date other than the end of a
calendar month, the management fee described above will be prorated based on the
ratio by which the number of trading days in the month through the date of
termination bears to the total number of trading days in the month.
(b) ANNUAL INCENTIVE FEE. The Partnership also will pay the Trading
Advisor an incentive fee equal to 20% of the Trading Profits as of the end of
each calendar year, as qualified below. "Trading Profits" is defined to mean net
futures interests trading profits (realized and unrealized) earned on Net Assets
allocated to the Trading Advisor, decreased by monthly management fees,
brokerage fees and service fees of the Partnership; with such Trading Profits
and items of decrease determined from the last date as of which an incentive fee
was earned by the Trading Advisor or, if no incentive fee has been previously
earned by the Trading Advisor, from the date the Partnership commenced trading
to the date as of which such incentive fee calculation is made. Extraordinary
expenses of the Partnership, if any, will not be deducted in determining Trading
Profits, and no incentive fees will be paid on interest earned by the
Partnership. Any accrued incentive fees with respect to any Units redeemed will
be deducted and paid to the Trading Advisor at the time of redemption.
21
<PAGE>
If any payment of incentive fees is made to the Trading Advisor on account
of Trading Profits earned by the Partnership and the Trading Advisor thereafter
fails to earn Trading Profits or experiences losses for any subsequent calendar
year, the Trading Advisor will be entitled to retain such amounts of incentive
fees previously paid to the Trading Advisor in respect of such Trading Profits.
However, no incentive fees will be payable to the Trading Advisor for subsequent
calendar years until Trading Profits have been earned by the Partnership;
PROVIDED, HOWEVER, that if Net Assets are reduced or increased because of
redemptions, distributions, reallocations or subscriptions that occur at the end
of, or subsequent to, a month in which the Trading Advisor experiences a futures
interests trading loss, the trading loss that must be recovered before the Net
Assets allocated to the Trading Advisor will be deemed to experience Trading
Profits will be reduced or increased proportionately.
Thus, for example, if the Trading Advisor earned Trading Profits of
$5,000,000 for the year ended December 31, 1997, the Trading Advisor would
receive an incentive fee of $1,000,000 for that period. If, however, the Trading
Advisor experiences realized and/or unrealized trading losses, or fees and
expenses that offset trading profits, so as to result in a $500,000 loss for the
year ended December 31, 1998, no incentive fee will be paid to the Trading
Advisor for that year. If the Trading Advisor is to earn an incentive fee for
the year ended December 31, 1999, the Trading Advisor will have to earn profits
exceeding $500,000 on behalf of the Partnership for that year, since the
incentive fee is payable measured from the last calendar year as of which an
incentive fee was paid (I.E., 1997), and not the immediately preceding calendar
year. For the calendar year ended December 31, 1999, Trading Profits would be
equal to the amount of profits in excess of $500,000. The Trading Advisor would
receive an incentive fee for such year equal to 20% of such Trading Profits.
(The foregoing examples assume no redemptions, reallocations or additional
purchases of Units during the periods in question, which would require
adjustments as described above.)
If the Management Agreement is terminated as of any date that is not the end
of a calendar year, the incentive fee described above, if applicable, will be
determined and paid as if such termination date were at the end of a calendar
year. See "The Management Agreement."
2. THE COMMODITY BROKERS
(a) BROKERAGE FEES. Commodity brokerage fees for futures interests trades
are typically paid on the completion or liquidation of a trade and are referred
as "roundturn commissions" that cover both the initial purchase (or sale) of a
futures interest and the subsequent offsetting sale (or purchase). However,
pursuant to the Customer Agreement with MS & Co., the Partnership will not pay
commodity brokerage commissions on a per-trade basis, but rather on a monthly
flat-rate basis. The Partnership will pay to MS & Co. a monthly brokerage fee of
1/12 of 3.65% of the Partnership's Net Assets as of the first day of each month
(a 3.65% annual rate). MS & Co. will pay, from the brokerage fees received by
it, all costs of executing trades by the Partnership, including floor brokerage
fees, exchange fees, clearinghouse fees, NFA fees, "give-up" or transfer fees,
and any costs associated with taking delivery of commodities (collectively,
"transaction fees and costs"). MS & Co. will also pay all costs of executing the
Partnership's trades through MSIL from the brokerage fees paid by the
Partnership; no separate fee will be payable by the Partnership to MSIL in this
connection.
While the Partnership will be paying a flat-rate brokerage fee, rather than
"roundturn commissions" on each trade, it is estimated, based upon the Trading
Advisor's historical trading, that such 3.65% flat-rate brokerage fee would
translate into an average roundturn commission of approximately $80. NO
REPRESENTATION OR WARRANTY IS MADE AS TO THE ACCURACY OF THE FOREGOING ESTIMATE,
AS IT IS ENTIRELY DEPENDENT ON THE NUMBER OF TRANSACTIONS EFFECTED BY THE
TRADING ADVISOR FOR THE PARTNERSHIP IN THE FUTURE.
(b) MS & CO. PAYMENTS TO DWR AND FINANCIAL BENEFITS. In order to
compensate DWR for introducing the Partnership's futures interests account to MS
& Co., MS & Co. will pay to DWR, out of the brokerage fee paid by the
Partnership, "trailing commissions" in a monthly amount up to 1/4 of 1% of the
Net Assets of the Partnership as of the first day of each month (up to a 3%
annual rate). DWR will in turn pay a portion of such compensation to its
employees for providing certain continuing services to the Limited Partners. See
"Plan of Distribution." The Commodity Brokers, DWR or their affiliates also will
receive interest income on and compensating balance benefits with respect to the
Partnership's funds deposited with the Commodity Brokers. See "Investment
Program, Use of Proceeds and Trading Policies."
22
<PAGE>
DWR will pay all of the costs incurred in connection with the organization
of the Partnership and the offering of Units, estimated to be approximately
$875,000 in the aggregate. Such costs include legal, accounting and auditing
fees, printing costs, filing fees, escrow fees, marketing costs (which include
costs relating to sales seminars and the preparation of customer sales kits and
brochures), and other related fees and expenses. The Partnership will not
reimburse DWR for any such organizational and offering costs, and while DWR may
recoup the costs of the offering from receipt of the portion of the brokerage
fees and interest income or compensating balance benefits it receives, the
Partnership will not be liable for any such costs at any time.
3. THE GENERAL PARTNER
To compensate the General Partner for serving as general partner to the
Partnership, the Partnership will pay the General Partner a monthly service fee
of 1/12 of 1% of Net Assets as of the first day of each month (a 1% annual
rate). This service fee compensates the General Partner for providing ongoing
services to the Partnership such as evaluating, retaining, monitoring, and
terminating trading advisors for the Partnership, administering the subscription
and redemption of Units, incurring substantial financial obligations as general
partner to the Partnership, and paying the Partnership's ordinary administrative
expenses, including legal, accounting, auditing, recordkeeping, administration,
and computer expenses, expenses incurred in preparing reports and tax
information to Limited Partners and regulatory authorities, printing and
duplication expenses, mailing expenses, and filing fees. The General Partner
shall not be reimbursed by the Partnership for any costs incurred by it relating
to office space, equipment, and staff necessary for Partnership operations and
administration of redemptions of Units.
4. EXTRAORDINARY EXPENSES
The Partnership is obligated to pay any extraordinary expenses it may incur.
Extraordinary expenses will be determined in accordance with generally accepted
accounting principles, which generally include events that are both unusual in
nature and occur infrequently.
5. EXPENSE LIMITATIONS
As long as redemption charges are imposed, as described under "Redemptions,"
the management, incentive, brokerage, and service fees and cap on aggregate
brokerage fees and interest benefits may not be increased. Thereafter, none of
such fees and cap may be increased unless Limited Partners are given prior
notice thereof (including a description of redemption and voting rights of
Limited Partners) and an opportunity to redeem their Units. Notwithstanding the
foregoing, in accordance with guidelines applied by certain state securities
regulators (see "Glossary--Blue Sky Glossary"), the Partnership's fees and
expenses are subject to the following limits: (a) the aggregate of (i) the
management fees payable by the Partnership, and (ii) either (A) the service fee
to the General Partner, or (B) the Partnership's customary and routine
administrative expenses (other than commodity brokerage fees or commissions,
transaction fees and costs, incentive fees, legal and auditing fees and
expenses, and extraordinary expenses), if such expenses are being paid directly
by the Partnership, shall not exceed 1/2 of 1% of the Partnership's Net Assets
per month, or 6% of the Partnership's Net Assets annually; (b) the incentive fee
payable by the Partnership to a trading advisor for the Partnership shall not
exceed 15% of the Partnership's Trading Profits (as defined herein) during the
relevant period (not more often than quarterly), PROVIDED that such incentive
fee may be increased by 2% for each 1% by which the aggregate fees and expenses
described in clause (a) of this sentence are below the 6% of Net Assets annual
limit thereon (I.E., if such fees and expenses are 3.5% of Net Assets, the
maximum incentive fee payable may be increased to 20%); (c) any "roundturn"
brokerage commissions (excluding transaction fees and costs) payable by the
Partnership to any commodity broker for the Partnership shall not exceed 80% of
such commodity broker's published non-member rates for speculative accounts; and
(d) the aggregate of (i) the brokerage commissions or fees payable by the
Partnership to any commodity broker for the Partnership, (ii) any transaction
fees and costs separately payable by the Partnership, and (iii) any net excess
interest and compensating balance benefits to any commodity broker for the
Partnership (after crediting the Partnership with interest, as described
herein), shall not exceed 14%
23
<PAGE>
annually of the Partnership's average monthly Net Assets as of the last day of
each month during each calendar year. The General Partner or an affiliate
thereof will pay any fees and expenses in excess of any such limits.
The foregoing fees and expenses may equal a significant percentage of the
annual average Net Assets of the Partnership. Based on the foregoing fees and
expenses of the Partnership, the Partnership will be required to earn estimated
net trading profits (after taking into account estimated interest income based
upon current rates of 5%) of 3.15% per year of its average annual Net Assets in
order to avoid depletion of its assets. This assumes that the Trading Advisor's
gross profits equal expenses such that no incentive fees are earned by the
Trading Advisor.
6. BREAK EVEN ANALYSIS
Based upon the annual fees and expenses of the Partnership, the Partnership
will be required to earn estimated net trading profits (after taking into
account estimated interest income) of 4.20% of its average Net Assets in its
first year in order for a Limited Partner to pay the redemption charge and to
recoup its initial investment upon redemption after one year.
Based upon the Net Asset Value per Unit of $10 at the First Closing, the
Partnership must earn estimated net trading profits of $0.42 per Unit, in order
for a Limited Partner to recoup its initial investment upon redemption of a Unit
after one year after payment by the Partnership of its expenses and payment of
the 1% redemption charge (as calculated below).
<TABLE>
<S> <C>
Net Asset Value per Unit(1)....................................................... $ 10.00
Management Fee(2)................................................................. 0.25
Brokerage Fee(3).................................................................. 0.37
Service Fee(4).................................................................... 0.10
Redemption Charge(5).............................................................. 0.10
Incentive Fee(6).................................................................. --
Less: Interest Income(7).......................................................... 0.40
Amount of Trading Income Required for a Limited Partner to Recoup its Investment
at the End of One Year.......................................................... 0.42
Percentage of Net Asset Value per Unit............................................ 4.20%
</TABLE>
- ---------
NOTES
(1) Units are offered for sale at the First Closing at $10 per Unit. Units that
remain unsold following the First Closing may be offered for sale, in the
sole discretion of the General Partner, at a Second Closing and a Third
Closing, if any, at a price per Unit equal to 100% of the Net Asset Value of
a Unit as of the close of business on the last day of the month immediately
preceding such closing.
(2) Monthly management fees are equal to 5/24 of 1% of the Net Assets on the
first day of each month (a 2.5% annual rate).
(3) The brokerage fee is a monthly fee of 1/12 of 3.65% of Net Assets as of the
first day of the month (a 3.65% annual rate). Such fee covers all brokerage
fees and transaction fees and costs (including "give up" and transfer fees).
(4) The service fee is a monthly fee of 1/12 of 1% of Net Assets as of the first
day of each month (a 1% annual rate).
(5) Units redeemed at the end of one year from the date of purchase are subject
to a 1% redemption charge.
(6) Incentive fees are assumed to be zero because (i) interest income will
exceed the redemption charge, and (ii) the Trading Advisor's profits from
futures interests trading will equal all of the other fees and expenses
reflected in this table.
24
<PAGE>
(7) MS & Co. will credit the Partnership at each month-end with interest income
as if 80% of the Partnership's average daily Net Assets for the month were
invested at a rate based on U.S. Treasury Bills. Such rate was estimated at
5% for purposes of the calculation.
The General Partner will furnish to each Limited Partner a monthly statement
describing the performance of the Partnership and setting forth, among other
things, aggregate management and incentive fees, brokerage fees, and service
fees incurred or accrued by the Partnership during the month and certain other
information. See "The Limited Partnership Agreement--Reports to Limited
Partners."
INVESTMENT PROGRAM, USE OF PROCEEDS AND TRADING POLICIES
The Partnership was formed to engage primarily in the speculative trading of
futures interests. The entire proceeds of this offering of Units and the capital
contribution of the General Partner will be deposited in the Partnership's
accounts maintained with the Commodity Brokers, except as described below, and
all of such proceeds will be allocated for use by the Partnership to engage in
futures interest trading pursuant to instructions provided by the Trading
Advisor.
The trading strategy to be employed by the Trading Advisor on behalf of the
Partnership, which is generally technical in nature, is designed to capture the
overall rate of commodity price inflation by maintaining long positions in
futures interests. The portfolio is maintained in a diversified manner and looks
to overweight and underweight individual commodities based on their relative
strength. The liquidity of each commodity also will influence its level of
inclusion in the Partnership's portfolio. The strategy will be continuously
evaluated over time and may be refined and modified in the future, including the
possibility, upon prior notice to the Limited Partners, that the Trading Advisor
may maintain short positions in futures interests for the Partnership's account.
The trading strategy will be applied to a broad range of commodities,
including futures interests on metals, energy products, agriculturals, and other
commodities selected by the Trading Advisor from time to time. At present, it is
anticipated that the Trading Advisor will invest the Partnership's assets in the
following types of futures interests on the futures markets indicated: Chicago
Board of Trade (corn, wheat, soybeans, soybean oil, soybean meal, oats);
Commodity Exchange, Inc. (platinum, silver, copper, gold); Chicago Mercantile
Exchange (live cattle, feeder cattle, lean hogs, pork bellies, lumber); Coffee,
Sugar & Cocoa Exchange (coffee, sugar, cocoa); London Metals Exchange (aluminum,
lead, copper, nickel, tin, zinc); New York Cotton Exchange (cotton, orange
juice); and New York Mercantile Exchange (crude oil, heating oil, gasoline,
natural gas). For a general description of the United States and non-United
States futures markets, see "The Futures Markets."
The Trading Advisor currently limits its trading strategy in the following
manner (although the Trading Advisor may change these policies in the future
with prior approval of the General Partner):
(a) The Partnership will maintain only long positions in futures
interests.
(b) The Partnership trades only futures interests that are now, or may
hereafter be, traded on United States or non-United States commodity
exchanges.
(c) The Partnership will not trade futures interests on financial
instruments (including stock indices) and foreign currencies.
(d) The underlying value of the positions entered into in the futures
interest markets (the "Portfolio Value") will be targeted at 1.0 to
2.0 times the assets of the Partnership with an expected average of 1.5
times the assets of the Partnership.
(e) Upon every portfolio reweighting:
(i) A minimum of 10% of the assets of the Partnership will be exposed
to each of the following commodities sectors: energy, precious
metals and base metals.
25
<PAGE>
(ii)A maximum of 20% of the Portfolio Value will be exposed to any
one particular commodity.
(iii)
A maximum of 40% of the Portfolio Value will be exposed to any
one of the following commodities sectors: energy, precious metals
and base metals. A maximum of 30% of the Portfolio Value will be exposed
to any one of the other commodities sectors.
Except as set forth below, the entire proceeds of this offering of Units
received by the Partnership, including any capital contribution of the General
Partner, will be deposited in the Partnership's accounts maintained with the
Commodity Brokers, and all of such proceeds will be allocated for use by the
Partnership in futures interest trading. The Partnership's assets deposited with
MS & Co. will be segregated pursuant to Section 4d(2) of the CEAct, and the
regulations of the CFTC. It is anticipated that no more than 30% of the
Partnership's Net Assets normally will be committed as margin for futures
interest trading, but the percentage of assets committed as margin may be more
or less than 30% from time to time. To the extent the Partnership trades on
non-U.S. exchanges, the Partnership's assets are deposited in accounts with
non-United States banks and foreign brokers. Currently, the London Metals
Exchange is the only foreign futures exchange on which the Trading Advisor
intends to trade on behalf of the Partnership, although trading on other foreign
exchanges could occur in the future. To the extent the Partnership trades on the
London Metals Exchange, Partnership assets will be deposited with MSIL. All such
banks and foreign brokers (including MSIL) will be qualified depositories
pursuant to relevant regulatory authorities, and foreign brokers (including
MSIL) will be members of the exchanges on which the futures trades are executed
and will be subject to the regulatory authorities in the jurisdictions in which
they operate. The protections provided by such foreign regulatory authorities
may differ significantly from those provided by United States regulators. Margin
commitments with respect to trading on non-U.S. exchanges are expected to be
less than 5% of the Partnership's Net Assets. See "Risk Factors--Risks Relating
to Futures and the Futures Interests Markets--Special Risks Associated with
Trading on Foreign Exchanges."
MS & Co. will credit the Partnership at each month-end with interest income
as if 80% of the Partnership's average daily Net Assets for the month were
invested at a rate based on U.S. Treasury Bills. All of such funds will be
available for margin for the Partnership's trading. For the purpose of such
interest payments, Net Assets do not include monies due to the Partnership on or
with respect to futures interests but not actually received by it from banks,
brokers or dealers. The Partnership's funds will either be invested together
with other customer segregated funds or will be held in non-interest-bearing
bank accounts. In either case, the Partnership will be credited with interest at
the most recent 3-month U.S. Treasury Bill auction rate as of the First Closing
and as of every 13 weeks thereafter (as if 80% of the Partnership's assets were
invested in U.S. Treasury Bills at such rate); MS & Co. will retain and pay to
DWR any interest earned in excess of the interest paid to the Partnership. To
the extent that the assets of the Partnership are held in non-interest-bearing
bank accounts, the Commodity Brokers, DWR or their affiliates will benefit from
compensating balance treatment in connection with the Commodity Brokers'
designation of a bank or banks in which the Partnership's assets are deposited,
I.E., the Commodity Brokers, DWR or their affiliates will receive favorable loan
rates from such bank or banks by reason of such deposits. It is not possible to
quantify compensating balance benefits at present; however, while it is
anticipated that such benefits will exceed the interest required to be credited
to the Partnership, it is estimated that they should not exceed 4% of the
Partnership's annual average Net Assets after such credits. To the extent that
such benefits to the Commodity Brokers, DWR or their affiliates exceed the
interest MS & Co. is obligated to credit to the Partnership, they will not be
shared with the Partnership, but will be retained by the Commodity Brokers, DWR
or their affiliates and shared among them as they shall agree from time to time.
Notwithstanding the foregoing, the aggregate of (i) brokerage fees payable by
the Partnership, and (ii) the net excess interest and compensating balance
benefits to the Commodity Brokers, DWR or their affiliates (after crediting the
Partnership with interest as described above) cannot exceed 14% annually of the
Partnership's average month-end Net Assets during each calendar year.
26
<PAGE>
Assets of the Partnership are not commingled with assets of any other
entity. Margin deposits and deposits of assets with a commodity broker do not
constitute commingling.
TRADING POLICIES
Material changes may be made to the following Trading Policies only with the
prior written approval of Limited Partners owning more than 50% of Units then
outstanding. The General Partner will notify the Limited Partners within seven
business days after any material change in the Partnership's Trading Policies so
approved by the Limited Partners.
1. The Partnership will not employ the trading technique commonly known as
"pyramiding," in which a speculator uses unrealized profits on existing
positions in a given futures interest due to favorable price movement as margin
specifically to buy or sell additional positions in the same or a related
futures interest. Taking into account the Partnership's open trade equity on
existing positions in determining generally whether to acquire additional
futures interest positions on behalf of the Partnership will not be considered
to constitute "pyramiding."
2. The Partnership will not purchase, sell, or trade securities (except
securities approved by the CFTC for investment of customer funds).
3. The Partnership will not under any circumstances lend money to affiliates
or otherwise. The Partnership will not utilize borrowings except if the
Partnership purchases or takes delivery of commodities. However, if the
Partnership borrows money, from the General Partner or any "affiliate" thereof
(as defined in the first sentence of Section 14(c) of the Limited Partnership
Agreement), the lending entity in such case (the "Lender") may not receive
interest in excess of its interest costs, nor may the Lender 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, nor may the Lender or any affiliate
thereof receive any points or other financing charges or fees regardless of the
amount.
4. The Partnership will not permit "churning" of the Partnership's assets.
CAPITALIZATION
The following table sets forth the capitalization of the Partnership as of
the date of this Prospectus and the pro forma capitalization of the Partnership
adjusted to reflect (i) the proceeds (at the initial offering price of $10 per
Unit) from the sale during the Offering Period of the minimum number of Units
(500,000) and the maximum number of Units (5,000,000) offered by this
Prospectus, and (ii) the capital contribution required of the General Partner
based on such capitalization of the Partnership. There will be no difference
insofar as sharing of profits and losses are concerned between Units of Limited
Partnership Interest and Units of General Partnership Interest:
<TABLE>
<CAPTION>
PRO FORMA(1)
--------------------------------
<S> <C> <C> <C>
SALE OF SALE OF
OUTSTANDING MINIMUM UNITS MAXIMUM UNITS
----------- --------------- ---------------
Limited Partnership Interest(1)(2)................................ $ 1,000 $ 5,000,000 $ 50,000,000
General Partnership Interest(1)(3)................................ 1,000 51,000 506,000
----------- --------------- ---------------
Total......................................................... $ 2,000 $ 5,051,000 $ 50,506,000
----------- --------------- ---------------
----------- --------------- ---------------
</TABLE>
- ---------
(1) The amounts shown assume that all Units are sold at the initial offering
price of $10 per Unit.
(2) The $1,000 Limited Partnership Interest shown as outstanding represents the
interest of Mr. Mark J. Hawley (President and a Director of the General
Partner) acquired by him as the initial Limited Partner of the Partnership;
such interest was originally acquired in order to permit the Partnership to
be organized as a limited partnership under the Partnership Act. At the
First Closing, such interest will be redeemed and $1,000 will be returned to
the initial Limited Partner.
(3) The $1,000 General Partnership Interest shown as outstanding reflects the
initial capital contribution to the Partnership by the General Partner to
permit the Partnership to be organized as a limited partnership under the
Partnership Act. The General Partner has agreed to contribute in $1,000
27
<PAGE>
increments at each closing an additional amount in cash as is necessary to
make the General Partner's capital contribution at least equal to the
greater of (a) 1% of aggregate capital contributions to the Partnership
(including the General Partner's contribution) and (b) $25,000. Such
additional contributions by the General Partner need not exceed the amount
described above and shall be evidenced by Units of General Partnership
Interest, each of which will have a Net Asset Value per Unit equal to that
of the Partnership's Net Asset Value per Unit at the date of such closing.
THE GENERAL PARTNER
The general partner and commodity pool operator of the Partnership is
Demeter Management Corporation, a Delaware corporation formed on August 18, 1977
to act as a commodity pool operator ("Demeter" or the "General Partner").
Effective in 1977, the General Partner became registered with the CFTC as a
commodity pool operator and is currently a member of the NFA in such capacity.
The General Partner's main business office is located at Two World Trade Center,
62nd floor, New York, New York 10048, telephone (212) 392-8899. The General
Partner, the Trading Advisor, the Commodity Brokers, and DWR are affiliates in
that each company is a wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), which is a publicly-owned company. MSDWD, DWR, the
Trading Advisor, the Commodity Brokers and the General Partner each may be
deemed to be a "parent" and "promoter" of the Partnership within the meaning of
the federal securities laws.
The General Partner is or has been the general partner and commodity pool
operator for 24 other publicly offered commodity pools--Dean Witter Reynolds
Commodity Partners ("Commodity Partners"), Columbia Futures Fund ("Columbia"),
Dean Witter Cornerstone Funds I, II, III, and IV (individually, "Cornerstone I,"
"Cornerstone II," "Cornerstone III," and "Cornerstone IV," and collectively, the
"Cornerstone Funds"), Dean Witter Diversified Futures Fund Limited Partnership
("Diversified"), Dean Witter Multi-Market Portfolio, L.P. (formerly Dean Witter
Principal Guaranteed Fund L.P.) ("Multi-Market"), Dean Witter Diversified
Futures Fund II L.P. ("Diversified II"), Dean Witter Principal Guaranteed Fund
II L.P. ("Principal Guaranteed Fund II"), Dean Witter Principal Guaranteed Fund
III L.P. ("Principal Guaranteed Fund III"), Dean Witter Principal Plus Fund L.P.
(including Dean Witter Principal Plus Fund Management L.P., an affiliated pool,
"Principal Plus"), Dean Witter Diversified Futures Fund III L.P. ("Diversified
III"), Dean Witter Portfolio Strategy fund L.P. (formerly Dean Witter Principal
Secured Futures Fund L.P.) ("Portfolio Strategy"), Dean Witter Select Futures
Fund L.P. ("Select"), Dean Witter Global Perspective Portfolio L.P. ("Global"),
Dean Witter World Currency Fund L.P. ("World Currency"), DWFCM International
Access Fund L.P. ("DWIAF"), Dean Witter Spectrum Strategic L.P. ("Spectrum
Strategic"), Dean Witter Spectrum Technical L.P. ("Spectrum Technical"), Dean
Witter Spectrum Balanced L.P. ("Spectrum Balanced"), DWR Chesapeake L.P.
("Chesapeake"), and DWR/JWH Futures Fund L.P. ("DWR/JWH"), plus four other
commodity pools that are exempt from certain disclosure requirements pursuant to
CFTC Rule 4.7. The General Partner has served in such capacities since the
inception of Commodity Partners in February 1981 (until its termination in
December 1988), the inception of Cornerstone I (until its termination in
December 1991), Cornerstone II, and Cornerstone III in December 1983, the
inception of Cornerstone IV in December 1986, February 1985 for Columbia, the
inception of Diversified in November 1987, the inception of Multi-Market in
April 1988, the inception of Diversified II in September 1988, the inception of
Principal Guaranteed Fund II in October 1988, the inception of Principal
Guaranteed Fund III in October 1988, the inception of Principal Plus in August
1989, the inception of Diversified III in May 1990, the inception of Portfolio
Strategy in February 1991, the inception of Select in March 1991, the inception
of Global in November 1991, the inception of World Currency in December 1992,
the inception of DWIAF in October 1993, the inception of each of Spectrum
Strategic, Spectrum Technical and Spectrum Balanced in April 1994, the inception
of Chesapeake in November 1994, and the inception of DWR/JWH in December 1995.
As of June 30, 1997, the General Partner had approximately $1.1 billion in
aggregate net assets under management, making it one of the largest operators of
managed futures funds in the United States. As of June 30, 1997, there were
approximately 84,000 investors in the commodity pools managed by Demeter.
The responsibilities of the General Partner are described under "Fiduciary
Responsibility" and "The Limited Partnership Agreement--Management of
Partnership Affairs." The General Partner will receive a service fee for its
services to the Partnership (see "Description of Charges to the Partnership--3.
The General
28
<PAGE>
Partner"). The General Partner also shares office space, equipment and staff
with DWR, which will receive interest income, compensating balance benefits and
a portion of the brokerage fees paid by the Partnership, as described under
"Description of Charges to the Partnership--2. The Commodity Brokers." Under the
Limited Partnership Agreement, the General Partner is required generally to
maintain its net worth at an amount not less than 10% of the total contributions
to the Partnership by all the Partners thereof (including the General Partner's
contribution) and to any other limited partnership for which it acts as a
general partner by all partners. In addition to its current capitalization and
exclusive of its anticipated additional investment in the Partnership, the
General Partner will increase its net worth from time to time as may be
required. MSDWD intends to contribute to the General Partner any additional
capital that may be necessary to permit the General Partner to meet such net
worth requirements. See "Capitalization."
In this connection, as reflected in the respective 1996 Annual Reports of
Dean Witter, Discover & Co. ("DWD") and Morgan Stanley Group Inc. ("MS Group"),
which merged to form MSDWD effective May 31, 1997, DWD had total shareholders'
equity of $5,164.4 million and total assets of $42,413.6 million as of December
31, 1996 (audited), while MS Group had total stockholders' equity of $6,538
million and total assets of $196,446 million as of November 30, 1996 (audited).
As reflected in its Form 10-Q for the quarter ended May 31, 1997, MSDWD had
total shareholders' equity of $12,156 million and total assets of $269,984
million as of May 31, 1997 (unaudited). Additional financial information
regarding DWD, MS Group and MSDWD is included in the financial statements filed
as part of such Annual Reports and Form 10-Q. MSDWD will provide to investors,
upon request, copies of its most recent Forms 10-K, 10-Q and 8-K, as filed from
time to time with the SEC. Such reports will be available for review or copying
at the offices of the SEC, 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549 or will be available at no charge by writing to MSDWD at
1585 Broadway, New York, New York 10036 (Attn: Investor Relations).
DIRECTORS AND OFFICERS OF THE GENERAL PARTNER
RICHARD M. DeMARTINI, age 44, is the Chairman of the Board and a Director of
the General Partner. Mr. DeMartini is also the Chairman of the Board and a
Director of Dean Witter Futures & Currency Management, Inc. ("DWFCM"), a
registered commodity trading advisor. Mr. DeMartini has served as President and
Chief Operating Officer of Dean Witter Capital, a division of DWR since January
1989. From January 1988 until January 1989, Mr. DeMartini served as President
and Chief Operating Officer of the Consumer Banking Division of DWD, and from
May 1985 until January 1988 was President and Chief Executive Officer of the
Consumer Markets Division of DWD. Mr. DeMartini currently serves as a Director
of DWD and of DWR, and has served as an officer of DWR for the past five years.
Mr. DeMartini has been with DWD and its affiliates for 22 years.
MARK J. HAWLEY, age 54, is President and a Director of the General Partner.
Mr. Hawley joined DWR in February 1989 as Senior Vice President and Director of
DWR's Managed Futures and Precious Metals Department, and currently serves as
Executive Vice President of that department. Mr. Hawley also serves as President
of DWFCM. From 1978 to 1989, Mr. Hawley was a member of the senior management
team at Heinold Asset Management, Inc., a commodity pool operator, and was
responsible for a variety of projects in public futures funds. From 1972 to
1978, Mr. Hawley was a Vice President in charge of institutional block trading
for the Mid-West at Kuhn Loeb & Co.
LAWRENCE VOLPE, age 50, is a Director of the General Partner and DWFCM. Mr.
Volpe joined DWR as a Senior Vice President and Controller in September 1983,
and currently holds those positions. From July 1979 to September 1983, he was
associated with E.F. Hutton & Company Inc. and prior to his departure, held the
positions of First Vice President and Assistant Controller. From 1970 to July
1979, he was associated with Arthur Andersen & Co. and prior to his departure he
served as audit manager in that firm's financial services division.
JOSEPH G. SINISCALCHI, age 52, is a Director of the General Partner. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting. He is currently Senior Vice President and Controller of the
Financial Markets Division of DWR. From February 1980 to July 1984, Mr.
Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb, Inc.
29
<PAGE>
EDWARD C. OELSNER III, age 55, is a Director of the General Partner. Mr.
Oelsner joined DWR in March 1981 as a Managing Director in the Corporate Finance
Department. He currently manages DWR's Retail Products Group within the
Corporate Finance Department. While Mr. Oelsner has extensive experience in the
securities industry, he has no experience in futures interests trading.
ROBERT E. MURRAY, age 36, is a Director of the General Partner. Mr. Murray
is currently a Senior Vice President of the DWR Managed Futures Division and is
a Director and the Senior Administrative Officer of DWFCM. Mr. Murray graduated
from Geneseo State University in May 1983 with a B.A. degree in Finance. Mr.
Murray began at DWR in 1984 and is currently the Director of Product Development
for the Managed Futures Division and is responsible for the development and
maintenance of the proprietary Fund Management System utilized by the General
Partner and DWFCM for organizing information and producing reports for
monitoring investors' accounts.
PATTI L. BEHNKE, age 37, is Vice President and Chief Financial Officer of
the General Partner. Ms. Behnke joined DWR in 1991 as Assistant Vice President
of Financial Reporting and is currently a First Vice President and Director of
Financial Reporting and Managed Futures Accounting in the Capital Markets
division of DWR. From August 1988 to September 1990, Ms. Behnke was Assistant
Controller of L.F. Rothschild & Co. and from September 1986 to August 1988, she
was associated with Carteret Savings Bank as Assistant Vice President--Financial
Analysis. From April 1982 to September 1986, Ms. Behnke was an auditor at Arthur
Andersen & Co.
The General Partner and its officers and directors may, from time to time,
trade futures interests contracts for their own proprietary accounts. The
records of trading in such accounts will not be made available to Limited
Partners for inspection.
No principals of the General Partner own Units as of the date of this
Prospectus, except that Mark J. Hawley owns one unit as the initial Limited
Partner.
The General Partner has agreed to make capital contributions to the
Partnership as needed to make the General Partner's capital contribution at
least equal to the greater of (a) 1% of aggregate capital contributions to the
Partnership by all Partners (including the General Partner's contribution) and
(b) $25,000. The General Partner and its principals are not obligated to
purchase Units but may do so.
DESCRIPTION AND PERFORMANCE INFORMATION OF COMMODITY POOLS OPERATED BY THE
GENERAL PARTNER
The following table sets forth summary information for the 23 other
commodity pools (other than the four pools exempt from disclosure under CFTC
Rule 4.7) operated to date by Demeter, thirteen of which are single-advisor
pools and ten of which are multi-advisor pools, for which Demeter serves as
general partner. In the single-advisor pool context, Demeter performs general
monitoring of the trading advisor and administrative services. Generally, in the
multi-advisor pool context, in addition to providing general monitoring and
administrative services, Demeter provides asset allocation strategies in the
selection and replacement of trading advisors as well as in the allocation of
assets to such advisors.
While each of these commodity pools has essentially the same objective,
appreciation of its assets through speculative trading, the structure (including
fees and interest income arrangements) and performance of these pools varies
widely. For example, certain pools employ only one trading advisor while others
are multi-advisor (several pools employ two to four trading advisors and some
have employed more than ten trading advisors at the same time). Certain pools
are so-called "principal protection pools," offering an assurance of principal
return at a date certain. The performance records of these pools include several
pools that have traded unprofitably, including four pools that have terminated
trading due to losses; other pools that have not incurred losses, but have not
achieved significant profits; and certain pools that have performed well over
time.
All summary performance information is current as of May 31, 1997.
Performance information is set forth for the most recent five full years of each
pool, or in the event that a pool has been trading for less than five years,
performance information is set forth from the inception of trading. Except as
otherwise indicated, rate of return information prior to January 1, 1992 has not
been included for pools that have been
30
<PAGE>
trading for more than five years in accordance with CFTC regulations. In
reviewing the following summary performance information, prospective investors
should understand that (i) such performance is calculated on the accrual basis
in accordance with generally accepted accounting principles and is "net" of all
fees and charges, and (ii) a more complete presentation of the performance of
the futures funds operated or managed by the General Partner and/or its
affiliates is available without charge upon request to the General Partner.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS AND
MATERIAL DIFFERENCES EXIST BETWEEN THE COMMODITY POOLS DESCRIBED HEREIN AND THE
PARTNERSHIP. THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP WILL PERFORM IN A
MANNER COMPARABLE TO ANY OF THE COMMODITY POOLS DESCRIBED BELOW OR THAT THE
PARTNERSHIP WOULD HAVE DONE SO IN THE PAST. INVESTORS SHOULD ALSO NOTE THAT
INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY POOL'S TOTAL
INCOME,AND IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE BEEN
REALIZED OR UNREALIZED LOSSES FROM COMMODITY TRADING.
-------------------
PROSPECTIVE INVESTORS SHOULD NOTE THAT THE PERFORMANCE RECORDS OF THE
COMMODITY POOLS OPERATED BY THE GENERAL PARTNER ARE SET FORTH IN SUMMARY FORM
HEREIN. A MORE DETAILED PRESENTATION OF SUCH PERFORMANCE INFORMATION WILL BE
PROVIDED TO ANY PROSPECTIVE INVESTOR UPON REQUEST AND WITHOUT CHARGE.
-------------------
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
31
<PAGE>
DEMETER MANAGEMENT CORPORATION
CAPSULE SUMMARY OF PERFORMANCE INFORMATION REGARDING COMMODITY POOLS OPERATED
(EXCEPT AS OTHERWISE INDICATED, BEGINNING JANUARY 1, 1992 THROUGH MAY 31, 1997)
<TABLE>
<CAPTION>
CURRENT
NET
CURRENT ASSET
TOTAL VALUE
START CLOSE AGGREGATE NET ASSET PER
FUND TYPE/FUND(1) DATE(2) DATE(3) SUBSCRIPTION(4) VALUE(5) UNIT(6)
- ------------------------------------------------ ---------- ---------- ---------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ $ $
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "PRINCIPAL PROTECTION"
DWR Commodity Partners Jan-81 Dec-88 9,648,397 739,757 488.29
Columbia Futures Fund(11) Jul-83 N/A 29,276,299 8,176,096 2,363.39
DW Diversified Futures Fund L.P.(11) Apr-88 N/A 206,815,107 152,622,719 925.47
DW Multi-Market Portfolio L.P.(11) Sep-88 N/A 252,526,000 10,910,476 1,019.69
DW Diversified Futures Fund II L.P. Jan-89 N/A 13,210,576 11,886,569 2,434.44
DW Diversified Futures Fund III L.P. Nov-90 N/A 126,815,755 75,331,490 1,529.14
DW Portfolio Strategy Fund L.P.(11) Feb-91 N/A 100,491,090 79,070,088 1,996.88
DWFCM International Access Fund L.P. Mar-94 N/A 68,115,440 41,724,202 1,190.72
DW Spectrum Balanced L.P. Nov-94 N/A 22,961,355 20,174,967 12.09
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I Jan-85 Dec-91 19,122,276 281,303 456.80
DW Cornerstone Fund II(11) Jan-85 N/A 65,588,764 28,875,275 3,356.19
DW Cornerstone Fund III(11) Jan-85 N/A 137,116,765 43,158,691 2,952.25
DW Cornerstone Fund IV(11) May-87 N/A 167,563,916 97,858,912 3,489.41
DW Select Futures Fund L.P. Aug-91 N/A 200,874,673 171,134,354 2,002.26
DW Global Perspective Portfolio L.P. Mar-92 N/A 67,424,535 22,056,890 948.55
DW World Currency Fund L.P. Apr-93 N/A 114,945,830 28,971,930 831.45
DW Spectrum Strategic L.P. Nov-94 N/A 60,171,225 56,893,698 11.69
DW Spectrum Technical L.P. Nov-94 N/A 138,300,562 139,877,455 13.09
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. Jul-89 Sep-95 126,263,000 7,022,437 1,000.00
DW Principal Plus Fund L.P.(11) Feb-90 N/A 109,013,535 50,615,073 1,502.30
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II, L.P. Mar-89 Mar-96 162,203,303 4,966,449 1,056.55
PRIVATELY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "PRINCIPAL PROTECTION"
DWR Chesapeake L.P. Nov-94 N/A 12,144,012 10,484,827 1,513.19
DWR/JWH Futures Fund L.P. Feb-96 N/A 15,265,775 16,105,753 1,068.72
<CAPTION>
CUMULATIVE COMPOUND ANNUAL RATES OF
RETURN WORST WORST PEAK- RETURN(10)
SINCE MONTHLY % TO-VALLEY ----------------------------
FUND TYPE/FUND(1) INCEPTION(7) DRAWDOWN(8) DRAWDOWN(9) 1997 1996
- ------------------------------------------------ ------------- --------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
% % % % %
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "P
DWR Commodity Partners (51.37) (34.48) (64.23)
7/88 4/86-12/88
Columbia Futures Fund(11) 141.16 (17.54) (42.58) 2.35 19.09
4/86 7/83-9/85 (5 months)
DW Diversified Futures Fund L.P.(11) 266.94 (12.85) (24.86) 1.53 (2.66)
5.90 5/95-6/96 (5 months)
DW Multi-Market Portfolio L.P.(11) 1.97 (13.26) (29.84) 1.18 (6.76)
2/96 5/95-6/96 (5 months)
DW Diversified Futures Fund II L.P. 143.44 (13.41) (25.62) 0.91 (4.83)
8/89 5/95-6/96 (5 months)
DW Diversified Futures Fund III L.P. 52.91 (13.62) (27.00) 1.48 (4.73)
1/92 5/95-6/96 (5 months)
DW Portfolio Strategy Fund L.P.(11) 99.69 (14.40) (25.65) (6.37) 25.50
1/92 1/92-4/92 (5 months)
DWFCM International Access Fund L.P. 19.07 (12.87) (22.84) 1.39 3.97
1/95 8/94-1/95 (5 months)
DW Spectrum Balanced L.P. 20.90 (7.92) (10.64) 3.96 (3.65)
2/96 2/96-5/96 (5 months)
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITHOUT "PR
DW Cornerstone Fund I (53.15) (20.88) (64.47)
8/91 4/86-8/91
DW Cornerstone Fund II(11) 244.22 (11.74) (32.70) 6.36 11.47
9/89 7/88-10/89 (5 months)
DW Cornerstone Fund III(11) 202.79 (18.28) (32.35) 8.72 8.24
2/89 2/89-10/89 (5 months)
DW Cornerstone Fund IV(11) 257.89 (21.04) (45.21) 8.89 12.97
9/89 7/89-9/89 (5 months)
DW Select Futures Fund L.P. 100.23 (13.72) (26.77) 2.03 5.27
1/92 6/95-8/96 (5 months)
DW Global Perspective Portfolio L.P. (5.15) (8.55) (40.90) 9.01 9.26
2/96 8/93-1/95 (5 months)
DW World Currency Fund L.P. (16.86) (9.68) (46.04) 16.59 12.97
5/95 8/93-1/95 (5 months)
DW Spectrum Strategic L.P. 16.90 (10.29) (15.61) 9.56 (3.53)
2/96 2/96-7/96 (5 months)
DW Spectrum Technical L.P. 30.90 (6.39) (8.27) (3.82) 18.35
2/96 3/97-5/97 (5 months)
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITH "PRIN
DW Principal Guaranteed Fund III L.P. 0.00 (13.98) (30.93)
1/92 5/90-4/92
DW Principal Plus Fund L.P.(11) 50.23 (7.48) (13.08) 1.52 (5.28)
2/96 2/96-5/96 (5 months)
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITH "PRINC
DW Principal Guaranteed Fund II, L.P. 5.66 (5.62) (14.69)
1/91 8/89-4/92 1.00
PRIVATELY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "
DWR Chesapeake L.P. 51.32 (16.14) (17.80) 1.64 15.23
7/96 5/96-7/96 (5 months)
DWR/JWH Futures Fund L.P. 6.87 (8.49) (13.13) (9.56) 18.17
5/97 2/97-5/97 (5 months) (11 months)
<CAPTION>
FUND TYPE/FUND(1) 1995 1994 1993 1992
- ------------------------------------------------ ------------ ------------- ------------- -------------
% % % %
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "P
DWR Commodity Partners
Columbia Futures Fund(11) 28.21 (5.75) 14.36 2.02
DW Diversified Futures Fund L.P.(11) (4.56) 7.68 6.65 16.70
DW Multi-Market Portfolio L.P.(11) (6.37) 2.66 8.65 (7.75)
DW Diversified Futures Fund II L.P. (2.90) 5.41 7.35 17.99
DW Diversified Futures Fund III L.P. (4.02) 5.89 7.58 15.79
DW Portfolio Strategy Fund L.P.(11) 25.37 (5.41) 19.88 (6.37)
DWFCM International Access Fund L.P. 21.88 (7.32)
(10 months)
DW Spectrum Balanced L.P. 22.79 (1.70)
(2 months)
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITHOUT "PR
DW Cornerstone Fund I
DW Cornerstone Fund II(11) 26.50 (8.93) 7.81 (1.34)
DW Cornerstone Fund III(11) 27.50 (10.04) (4.78) (11.08)
DW Cornerstone Fund IV(11) 22.96 (14.27) (9.12) 10.37
DW Select Futures Fund L.P. 23.62 (5.12) 41.62 (14.45)
DW Global Perspective Portfolio L.P. 16.76 (31.62) (4.67) 4.63
(10 months)
DW World Currency Fund L.P. 2.02 (25.13) (17.35)
(9 months)
DW Spectrum Strategic L.P. 10.49 0.10
(2 months)
DW Spectrum Technical L.P. 17.59 (2.20)
(2 months)
PUBLICLY-OFFERED SINGLE ADVISOR FUNDS WITH "PRIN
DW Principal Guaranteed Fund III L.P.
5.21 1.08 5.37 (18.78)
(9 months)
DW Principal Plus Fund L.P.(11) 17.98 (8.61) 11.55 9.44
PUBLICLY-OFFERED MULTI-ADVISOR FUNDS WITH "PRINC
DW Principal Guaranteed Fund II, L.P.
7.30 (8.12) 9.74 (4.54)
PRIVATELY-OFFERED SINGLE ADVISOR FUNDS WITHOUT "
DWR Chesapeake L.P. 15.80 11.57
(2 months)
DWR/JWH Futures Fund L.P.
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
32
<PAGE>
FOOTNOTES TO DEMETER MANAGEMENT CORPORATION PERFORMANCE INFORMATION
1. Each pool is identified by certain of the following classifications.
"Publicly-Offered Funds" are pools offered to the public pursuant to
registration in accordance with the requirements of the Securities Act of
1933, as amended. The General Partner also serves as general partner and/or
commodity pool operator to six "Privately-Offered Funds." "Privately-Offered
Funds" are pools offered in private placements exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule
506 thereunder. None of the privately offered pools has a principal
protection feature. Performance information for four of such
Privately-Offered Funds is not provided, consistent with CFTC Rule 4.7.
"Single Advisor Funds" are pools the assets of which are managed by one
commodity trading advisor. "Multi-Advisor Funds" are pools the assets of
which are managed by multiple commodity trading advisors. (The CFTC defines
a multi-advisor pool as one in which no advisor is allocated more than 25%
of the pool's assets available for trading; however, all pools with more
than one commodity trading advisor are identified herein as "Multi-Advisor
Funds.") Funds with "Principal Protection" are pools with an investment
feature whereby investors are guaranteed to receive back at least the amount
that they originally invested at a date certain in the future (generally 5
to 7 years after the date of subscription). Funds without "Principal
Protection" are pools in which there is no guarantee of investor's
investments.
2. "Start Date" is the month and year in which the pool commenced operations.
3. "Close Date" is the month and year in which the pool liquidated its assets
and ceased to do business.
4. "Aggregate Subscriptions" is the aggregate of all amounts ever contributed
to the pool, including investments which were subsequently redeemed by
investors.
5. "Current Total Net Asset Value" is the net asset value of the pool as of May
31, 1997, and, in the case of liquidated pools, the net asset value of the
pool on the date of liquidation.
6. "Current Net Asset Value Per Unit" is the Current Total Net Asset Value
divided by the total number of units outstanding as of May 31, 1997, and, in
the case of liquidated pools, the net asset value per unit on the date of
liquidation.
7. "Cumulative Return Since Inception" is the percentage increase in the net
asset value of a unit from inception through May 31, 1997.
8. "Drawdown" means losses experienced by the relevant pool over the specified
period and is calculated on a rate of return basis, I.E., dividing net
performance by beginning equity. "Drawdown" is measured on the basis of
monthly returns only, and does not reflect intra-month figures. The month in
which the worst monthly drawdown occurred during the history of the pool is
set forth under "Worst Monthly % Drawdown."
9. "Peak-to-Valley Drawdown" is the largest percentage decline in the net asset
value per unit over the history of the fund. This need not be a continuous
decline, but can be a series of positive and negative returns where the
negative returns are larger than the positive ones. "Peak-to-Valley
Drawdown" represents the greatest percentage decline from any month-end net
asset value per unit which occurs without such month-end net asset value per
unit being equaled or exceeded as of a subsequent month-end. For example, if
the net asset value per unit of a particular pool declined by $1 in each of
January and February, increased by $1 in March and declined again by $2 in
April, a "peak-to-valley drawdown" analysis conducted as of the end of April
would consider that "drawdown" to be still continuing and to be $3 in
amount, whereas if the net asset value per unit had increased by $2 in
March, the January-February drawdown would have ended as of the end of
February at the $2 level. The months during which the worst peak-to-valley
drawdown occurred are set forth under "Worst Peak-to-Valley Drawdown."
10. "Compound Annual Rates of Return" are calculated in respect of each year by
multiplying on a compound basis each of the monthly rates of return during
the year (not shown), and not by adding or averaging such monthly rates of
return. For the year in which a pool commenced operations and for 1997,
"Compound Annual Rates of Return" reflect the compounded monthly rates of
return (not shown) from the Start Date for, or the beginning of, such
partial year.
11. Columbia was a Publicly-Offered Multi-Advisor Fund from its inception in
July 1983 through January 1988, at which point it was changed to a
Publicly-Offered Single Advisor Fund. Diversified's net asset value per unit
was revalued from $3,964.23 to $1,000.00 after the close of business on
August 31, 1995. All investors in Diversified prior to August 31, 1995 had
their units increased by a corresponding amount to reflect this revaluation,
and all return calculations in the table have been adjusted accordingly.
Multi-Market, formerly named Dean Witter Principal Guaranteed Fund L.P., was
a Publicly-Offered Multi-Advisor Fund with "Principal Protection" from its
inception in September 1988 through September 30, 1993, at which point it
was changed to a publicly-offered single advisor fund without "Principal
Protection." Portfolio Strategy, formerly named Dean Witter Principal
Secured Futures Fund L.P., was a Publicly-Offered Single Advisor Fund with
"Principal Protection" from its inception in February 1991 through July 31,
1996, at which point it was changed to a Publicly-Offered Single Advisor
fund without "Principal Protection." Subscriptions for interests in
Cornerstone II, Cornerstone III, and Cornerstone IV included an up-front
7.625% of net asset value selling commission and continuing offering expense
charge until sales to new investors were terminated on September 30, 1994.
Because sales occurred through the year and, therefore, the amount of the
net asset value-based charge varied among investors, it was not practicable
to include the up-front charge in determining the Cornerstone Funds' annual
returns for the years 1992 through 1994. The performance record of Principal
Plus includes the performance of Dean Witter Plus Fund Management L.P., an
affiliated pool.
33
<PAGE>
THE FUTURES MARKETS
FUTURES CONTRACTS
Futures contracts are standardized contracts made on domestic or foreign
exchanges that call for the future delivery of specified quantities of various
agricultural and tropical commodities, industrial commodities, currencies,
financial instruments or metals at a specified time and place. The contractual
obligations, depending upon whether one is a buyer or a seller, may be satisfied
either by taking or making, as the case may be, physical delivery of an approved
grade of commodity or by making an offsetting sale or purchase of an equivalent
but opposite futures contract on the same exchange prior to the designated date
of delivery. As an example of an offsetting transaction where the physical
commodity is not delivered, the contractual obligation arising from the sale of
one contract of December 1997 wheat on a commodity exchange may be fulfilled at
any time before delivery of the commodity is required by the purchase of one
contract of December 1997 wheat on the same exchange. The difference between the
price at which the futures contract is sold or purchased and the price paid for
the offsetting purchase or sale, after allowance for brokerage commissions,
constitutes the profit or loss to the trader. Certain futures contracts, such as
those for stock or other financial or economic indices approved by the CFTC or
Eurodollar contracts, settle in cash (irrespective of whether any attempt is
made to offset such contracts), rather than delivery of any physical commodity.
HEDGERS AND SPECULATORS
The two broad classes of persons who trade futures interests contracts are
"hedgers" and "speculators." Commercial interests, including farmers, that
market or process commodities and financial institutions that market or deal in
commodities (including, for example, interest rate sensitive instruments,
foreign currencies and stock portfolios) and which are exposed to exchange,
interest rate and stock market risks, may use the commodities markets primarily
for hedging. Hedging is a protective procedure designed to minimize losses that
may occur because of price fluctuations occurring, for example, between the time
a merchandiser or processor makes a contract to buy or sell a raw or processed
commodity at a certain price and the time he must perform the contract. The
commodity markets enable the hedger to shift the risk of price fluctuations to
the speculator. The speculator risks his capital with the hope of making profits
from price fluctuations in futures interests contracts. Speculators rarely take
delivery of commodities, but generally close out their positions by entering
into offsetting purchases or sales of contracts. Since the speculator may take
either a long or short position in the commodities markets, it is possible for
him to make profits or incur losses regardless of whether prices go up or down.
Trading by the Partnership will be for speculative rather than hedging purposes.
COMMODITY EXCHANGES
Commodity exchanges provide centralized market facilities for trading
futures contracts relating to specified commodities, indices and other
intangibles. Members of, and trades executed on, a particular exchange are
subject to the rules of that exchange. Among the principal exchanges in the
United States are the Chicago Board of Trade, the Chicago Mercantile Exchange
(including the International Monetary Market), the New York Mercantile Exchange,
the New York Cotton Exchange and the Coffee, Sugar and Cocoa Exchange.
Each of the commodity exchanges in the United States has an associated
"clearinghouse." Once trades between members of an exchange have been confirmed,
the clearinghouse becomes substituted for each buyer and each seller of
contracts traded on the exchange and, in effect, becomes the other party to each
trader's open position in the market. Thereafter, each party to a trade looks
only to the clearinghouse for performance. The clearinghouse generally
establishes some sort of security or guarantee fund to which all clearing
members of the exchange must contribute; this fund acts as an emergency buffer
that enables the clearinghouse, at least to a large degree, to meet its
obligations with regard to the "other side" of an insolvent clearing member's
contracts. Furthermore, clearinghouses require margin deposits and continuously
mark positions to market to provide some assurance that their members will be
able to fulfill their contractual obligations. Thus, a central function of the
clearinghouses is to ensure the integrity of trades, and members effecting
futures transactions on an
34
<PAGE>
organized exchange need not worry about the solvency of the party on the
opposite side of the trade; their only remaining concerns are the respective
solvencies of their commodity broker and the clearinghouse. The exchanges also
impose speculative position limits and other restrictions on customer positions
to help ensure that no single trader can amass a position that would have a
major impact on market prices.
Commodity exchanges in the United States and their clearinghouses are given
reasonable latitude in promulgating rules and regulations to control and
regulate their members. Examples of regulations by exchanges and clearinghouses
include the establishment of initial margin levels, size of trading units,
contract specifications, speculative position limits and daily price fluctuation
limits. The CFTC reviews all such rules (other than those relating to specific
margin levels for futures, as opposed to options) and can disapprove or, with
respect to certain of such rules, require the amendment or modification thereof.
Foreign commodity exchanges differ in certain respects from their United
States counterparts. In contrast to United States exchanges, certain foreign
exchanges are "principals' markets," where trades remain the liability of the
traders involved, and the exchange does not become substituted for any party.
See "The Futures Markets--Regulations" and "Risk Factors--Risks Relating to
Futures Interests Trading and the Futures Interests Markets--Special Risks
Associated with Trading on Foreign Exchanges."
SPECULATIVE POSITION LIMITS
The CFTC and the United States commodity exchanges have established limits,
referred to as "speculative position limits" or "position limits," on the
maximum net long or net short speculative position that any person or group of
persons (other than a hedger, which the Partnership is not) may hold, own or
control in futures interests contracts. Among the purposes of speculative
position limits is to prevent a "corner" on a market or undue influence on
prices by any single trader or group of traders. The CFTC has jurisdiction to
establish position limits with respect to all commodities and has established
position limits for all agricultural commodities. In addition, the CFTC requires
each United States exchange to submit position limits for all commodities traded
on such exchange for approval by the CFTC. Certain exchanges or their
clearinghouses also set limits on the total net positions that may be held by a
clearing broker, such as MS & Co. However, position limits do not apply to many
currency futures contracts, and, in general, no position limits are in effect in
bank or dealer forward contract trading or in trading on foreign commodity
exchanges, although the principals with which the Partnership may trade in such
markets may impose such limits as a matter of credit policy. The futures
interests positions of the Partnership are not, and will not be, attributable to
Limited Partners with respect to their own futures interests trading, if any,
for purposes of position limits.
DAILY LIMITS
Most United States commodity exchanges (but generally not foreign exchanges
or banks or dealers in the case of forward contracts) normally limit the amount
of fluctuation in futures interests contract prices during a single trading day
by regulation. These regulations specify what are referred to as "daily price
fluctuation limits" or more commonly "daily limits." The daily limits establish
the maximum amount that the price of a futures interests contract may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular futures interest, no trades may be made at a
price beyond the limit. This can create liquidity problems.
REGULATIONS
Commodity exchanges in the United States are subject to regulation under the
CEAct by the CFTC, the governmental agency having responsibility for regulation
of commodity exchanges and futures interests contract trading conducted thereon.
The function of the CFTC is to implement the objectives of the CEAct of
preventing price manipulation and excessive speculation and promoting orderly
and efficient markets. Such regulation, among other things, provides that
trading in futures interests contracts must be on exchanges designated as
"contract markets," and that all trading on such exchanges must be done by or
through exchange members.
35
<PAGE>
The CFTC possesses exclusive jurisdiction to regulate the activities of
"commodity trading advisors" and "commodity pool operators" and has adopted
regulations with respect to certain of such persons' activities. Pursuant to its
authority, the CFTC requires a commodity pool operator (such as the General
Partner) to keep accurate, current and orderly records with respect to each pool
it operates. The CFTC may suspend the registration of a commodity pool operator
if the CFTC finds that the operator has violated the CEAct or regulations
thereunder and in certain other circumstances. Suspension, restriction or
termination of the General Partner's registration as a commodity pool operator
would prevent the General Partner, until such time (if any) as such registration
were to be reinstated, from managing, and might result in a termination of, the
Partnership. The CEAct gives the CFTC similar authority with respect to the
activities of commodity trading advisors, such as the Trading Advisor. If the
registration of the Trading Advisor as a commodity trading advisor were to be
terminated, restricted or suspended, the Trading Advisor would be unable, until
such time (if any) as such registration were to be reinstated, to render trading
advice to the Partnership. The Partnership itself is not registered with the
CFTC in any capacity.
The CEAct requires all "futures commission merchants," such as MS & Co., to
meet and maintain specified fitness and financial requirements, segregate
customer funds from proprietary funds and account separately for all customers'
funds and positions, and to maintain specified books and records open to
inspection by the staff of the CFTC. The CFTC has similar authority over
"introducing brokers," I.E., persons who solicit or accept orders for trades but
who do not accept margin deposits for the execution of trades. The Partnership
has no present intention of using any introducing brokers in its trading. The
CEAct also gives the states certain powers to enforce its provisions and the
regulations of the CFTC.
The fact of CFTC registration of the General Partner, DWR, MS & Co., and the
Trading Advisor does not imply that the CFTC has passed on or approved this
offering or their qualifications to act as described in the Prospectus.
Limited Partners are afforded certain rights for reparations under the
CEAct. Limited Partners may also be able to maintain a private right of action
for certain violations of the CEAct. The CFTC has adopted rules implementing the
reparation provisions of the CEAct which provide that any person may file a
complaint for a reparations award with the CFTC for violation of the CEAct
against a floor broker, futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, and their respective
associated persons.
Pursuant to authority in the CEAct, the NFA has been formed and registered
with the CFTC as a "registered futures association." At the present time, the
NFA is the only non-exchange self-regulatory organization for commodities
professionals. NFA members are subject to NFA standards relating to fair trade
practices, financial condition, and consumer protection. As the self-regulatory
body of the commodities industry, the NFA promulgates rules governing the
conduct of commodity professionals and disciplines those professionals who do
not comply with such standards. The CFTC has delegated to the NFA responsibility
for the registration of commodity trading advisors, commodity pool operators,
futures commission merchants, introducing brokers and their respective
associated persons and floor brokers. DWR, MS & Co., the General Partner and the
Trading Advisor are members of the NFA (the Partnership itself is not required
to become a member of the NFA, and MSIL is not registered with the CFTC or a
member of the NFA).
The above-described regulatory structure may be modified (or repealed) by
rules and regulations promulgated by the CFTC or by legislative changes enacted
by Congress.
The CFTC has no authority to regulate trading on foreign commodity exchanges
and markets. The CFTC has, however, adopted rules relating to the marketing of
foreign futures contracts in the United States. See "Risk Factors--Risks
Relating to Futures Interests Trading and the Futures Interests Markets."
36
<PAGE>
MARGINS
"Initial" or "original" margin is the minimum amount of funds that must be
deposited by a trader with his commodity broker in order to initiate futures
trading or to maintain an open position in futures contracts. "Maintenance"
margin is the amount (generally less than initial margin) to which a trader's
account may decline before he must deliver additional margin. A margin deposit
is like a cash performance bond. It helps assure the commodity trader's
performance of the commodity futures contracts he purchases or sells. Futures
interests contracts are customarily bought and sold on margins that represent a
very small percentage (ranging upward from less than 2%) of the purchase price
of the underlying commodity being traded. Because of such low margins, price
fluctuations occurring in the futures markets may create profits and losses that
are greater, in relation to the amount invested, than are customary in other
forms of investment or speculation. The minimum amount of margin required in
connection with a particular futures interests contract is set from time to time
by the exchange on which such contract is traded, and may be modified from time
to time by the exchange during the term of the contract. See "Risk
Factors--Risks Relating to Futures Interests Trading and the Futures Interests
Markets."
Brokerage firms, such as the Commodity Brokers, carrying accounts for
traders in futures interests contracts may not accept lower, and generally
require higher, amounts of margin as a matter of policy in order to afford
further protection for themselves. The Commodity Brokers will require the
Partnership to make margin deposits equal to the exchange minimum levels for all
futures contracts. This requirement may be altered from time to time at the
discretion of the Commodity Brokers.
Margin requirements are computed each day by a trader's commodity broker.
When the market value of a particular open futures interests contract position
changes to a point where the margin on deposit does not satisfy maintenance
margin requirements, a margin call is made by the broker. If the margin call is
not met within a reasonable time, the broker may close out the trader's
position. With respect to the Partnership's trading, the Partnership, and not
its Limited Partners personally, is subject to margin calls.
GENERAL DESCRIPTION OF TRADING APPROACHES
INTRODUCTION
The investment objective of the Partnership is capital appreciation of its
assets through speculative trading in futures interests. The Partnership's
ability to succeed in this endeavor depends largely on the success of the
trading approaches utilized on behalf of such Partnership by the Trading
Advisor. The following is a brief description of general approaches used in
trading futures interests; see "The Trading Advisor--MSCM's Trading Program" and
"Investment Program, Use of Proceeds and Trading Policies" for specific
information relating to the Trading Advisor.
SYSTEMATIC AND DISCRETIONARY
Trading advisors may be classified as either systematic or discretionary.
A systematic trader will generally rely to some degree on judgmental
decisions concerning, for example, what markets to follow and futures interests
to trade, when to liquidate a position in a contract that is about to expire and
how large a position to take in a particular futures interest. However, although
these judgmental decisions may have a substantial effect on a systematic trading
advisor's performance, his primary reliance is on trading programs or models
that generate trading signals. The systems utilized to generate trading signals
are changed from time to time (although generally infrequently), but the trading
instructions generated by the systems being used are followed without
significant additional analysis or interpretation. Discretionary traders, on the
other hand, while they
37
<PAGE>
may utilize market charts, computer programs and compilations of quantifiable
fundamental information to assist them in making trading decisions, make trading
decisions on the basis of their own judgment and trading experience, not on the
basis of trading signals generated by any program or model.
Each approach involves certain inherent risks. Systematic traders may fail
to capitalize on market trends that their systems would otherwise have exploited
due to judgmental decisions made by them in the context of applying their
generally mechanical trading systems. Discretionary traders, on the other hand,
may decide to make trades that would not have been signaled by a trading system
and that result in substantial losses. Furthermore, any trading system or trader
may suffer substantial losses by misjudging the market. Systematic traders tend
to rely more on computerized programs than do discretionary traders, and some
consider the prospect of disciplined trading, which largely removes the emotion
of the individual trader from the trading process, advantageous. In addition,
due to their use of computers, systematic traders are generally able to
incorporate more data into a particular trading decision than can discretionary
traders. However, when fundamental factors dominate the market, trading systems
may suffer rapid and severe losses due to their inability to respond to such
factors until the reversal of trading signals, by which time a precipitous price
change may already be in progress, preventing liquidation at anything but
substantial losses. The trading approaches applied by the Trading Advisor are
systematic, although subjective judgment is used in the application of its
systematic programs.
TECHNICAL AND FUNDAMENTAL ANALYSIS
In addition to being distinguished from one another by the criterion of
whether they trade systematically or on the basis of their discretionary
evaluations of the markets, trading advisors are also distinguished as relying
on either "technical" or "fundamental" analysis, or on a combination of the two.
Systematic traders tend to rely on technical analysis, because the data relevant
to such analysis is more susceptible to being isolated and quantified to the
extent necessary to be successfully incorporated into a program or mathematical
model than is most "fundamental" information, but there is no inconsistency in
attempting to trade systematically on the basis of fundamental analysis. The
fundamental information which can be evaluated by a formalized trading system
is, however, limited to some extent in that it generally must be quantifiable in
order to be processed by such a system.
Technical analysis is not based on anticipated supply and demand factors;
instead, it is based on the theory that the study of the futures interests
markets themselves will provide a means of anticipating prices in the future.
Technical analysis operates on the theory that market prices at any given point
in time reflect all known factors affecting the supply and demand for a
particular futures interest. Consequently, technical analysis focuses not on
evaluating those factors directly but on an analysis of market prices
themselves, theorizing that a detailed analysis of, among other things, actual
daily, weekly and monthly price fluctuations, volume variations and changes in
open interest is the most effective means of attempting to predict the future
course of price movements.
Fundamental analysis, in contrast, is based on the study of factors external
to the trading markets that affect the supply and demand of a particular futures
interest in an attempt to predict future price levels. Such factors might
include weather, the economy of a particular country, government policies,
domestic and foreign political and economic events, and changing trade
prospects. Fundamental analysis theorizes that by monitoring relevant supply and
demand factors for a particular commodity, a state of current or potential
disequilibrium of market conditions may be identified that has yet to be
reflected in the price level of that futures interest. Fundamental analysis
assumes that markets are imperfect, that information is not instantaneously
assimilated or disseminated, and that econometric models can be constructed that
generate equilibrium prices that may indicate that current prices are
inconsistent with underlying economic conditions and will, accordingly, change
in the future.
The Trading Advisor's trading program is primarily a technical program.
38
<PAGE>
TREND-FOLLOWING
"Trend-following" trading advisors gear their trading approaches towards
positioning themselves to take advantage of major price movements, as opposed to
traders who seek to achieve overall profitability by making numerous small
profits on short-term trades, or through arbitrage techniques. "Trend-following"
trading advisors assume that most of their trades will be unprofitable. Their
objective is to make a few large profits, more than offsetting their more
numerous but smaller losses, from capitalizing on major trends. Consequently,
during periods when no major price trends develop in a market, a
"trend-following" trading advisor is unlikely to develop any meaningful profits
and is likely to lose money. Trend-following is an element of the Trading
Advisor's technical analysis.
RISK CONTROL TECHNIQUES
As will be apparent from the following descriptions of the Trading Advisor's
trading programs, an important aspect of any speculative futures interests
strategy relates to the control of losses, not only the ability to identify
profitable trades. Unless it is possible to avoid major drawdowns, it is very
difficult to achieve long-term profitability.
Trading advisors often adopt fairly rigid "risk management" or "money
management" principles. Such principles typically restrict the size of positions
which will be taken, as well as establishing "stop-loss" points at which losing
positions must be liquidated. It is important for prospective investors to
recognize that no risk control technique is "fail safe" and can not, in fact,
assure that major drawdowns will be avoided. Not only do estimates of market
volatility themselves require judgmental input, but market illiquidity also can
make it impossible for an account to liquidate a position against which the
market is moving strongly, whatever risk management principles are utilized.
Similarly, unless a "trend-following" trading advisor trades profitably, the
losses incurred in the course of taking an initial position in a particular
futures interest can quickly accumulate into a major drawdown. A trading
advisor's risk management principles should, accordingly, be seen more as a
discipline applied to its trading in highly speculative markets rather than as
an effective protection against loss.
Not only are some methods proprietary and confidential, but they are also
continually evolving. Prospective investors and Limited Partners will generally
not be informed of a change in the Trading Advisor's trading approach, unless
the General Partner considers such change to be material.
In addition to the continually changing character of trading methods, the
futures interests markets themselves are continually changing. The Trading
Advisor may, in its sole discretion, elect to trade certain futures interests to
the exclusion of others in its programs, depending upon the Trading Advisor's
view of the markets.
THE TRADING ADVISOR
INTRODUCTION
The Partnership has entered into a Management Agreement with Morgan Stanley
Commodities Management, Inc. (the "Trading Advisor" or "MSCM"), pursuant to
which the Trading Advisor will have, subject to certain limitations, authority
and responsibility for directing the investment and reinvestment in futures
interests of the Partnership's Net Assets. See "The Management Agreement." Since
the primary purpose of the Partnership is to achieve appreciation of its assets
through speculative trading in futures interests, the Partnership's ability to
succeed in that endeavor will depend upon the continued success of the relevant
trading program of the Trading Advisor.
The General Partner has extensive experience in the organization of
commodity pools and the evaluation and selection of trading advisors, having
operated 28 commodity pools since 1978. The General Partner's objective in
selecting the Trading Advisor is to obtain access to unique, well-disciplined
trading strategies coupled with strict risk control measures, which would be
able to capitalize on profitable changes in commodity prices while providing
substantial protection against major losses. The decision to retain the Trading
Advisor was influenced by a number of factors, among
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which was the General Partner's evaluation of the Trading Advisor's historical
performance, the markets traded by the Trading Advisor, its ability to control
risk, and the amount of equity managed by the Trading Advisor.
MORGAN STANLEY COMMODITIES MANAGEMENT, INC.
MSCM is a Delaware corporation and a wholly owned subsidiary of MSDWD. MSCM
became registered as a commodity pool operator and a commodity trading advisor
on June 4, 1992, and is a member of the NFA in such capacities. MSCM currently
acts as the general partner and/or trading advisor for several U.S. and offshore
funds.
The individual principals of MSCM are as follows:
WAYNE D. PETERSON. Mr. Peterson is a Director and the President of MSCM.
Prior to heading MSCM, Mr. Peterson worked in MS & Co.'s Structured Products
Group, having previously worked for eight years in MS & Co.'s Commodities
Department. Mr. Peterson joined MS & Co. in 1982, was named a Vice President in
1987 and a Principal in 1988. Mr. Peterson received a B.A. degree in mathematics
and economics from Cornell University in 1980 and an M.B.A. from the University
of Chicago in 1982.
JEFFREY S. ALVINO. Mr. Alvino is a Director and Vice President of MSCM. Mr.
Alvino joined MS & Co. in 1990 and was named a Vice President in 1996. Prior to
joining MS & Co., Mr. Alvino worked at Deloitte & Touche. Mr. Alvino received a
B.S. degree in accounting from Lehigh University in 1988 and is a Certified
Public Accountant.
MSCM'S TRADING PROGRAM
MSCM pursues a trading program designed to capture the overall rate of
commodity price inflation by maintaining long positions in certain futures
interests. For a description of MSCM's trading program, see "Investment Program,
Use of Proceeds and Trading Policies."
MSCM'S PERFORMANCE RECORD
Table A sets forth the actual performance record of a commodity pool that
has been traded solely by the Trading Advisor since the pool commenced trading
in April 1994, and that employs the same trading approach on an unleveraged
basis that will be employed for the Partnership on a leveraged basis. Table B
sets forth the actual performance record of a commodity pool that has been
traded by the Trading Advisor since the pool commenced trading in February 1993.
The commodity pool in Table B does not employ the trading strategy that will be
employed for the Partnership; therefore, performance information set forth in
Table B has less significance to a prospective investor than the performance
information set forth in Table A. The commodity pools in both Table A and Table
B are privately offered pursuant to Regulation D of the Securities Act of 1933,
as amended. The Trading advisor also acts as commodity pool operator and trading
advisor for several other funds that are operated pursuant to an exemption under
CFTC Rule 4.7. The performance of these funds has not been included herein. The
notes following Tables A and B are an integral part thereof.
Prospective investors should note that both the fees and expenses to be paid
by the Partnership and the leverage to be employed in trading for the
Partnership will be higher than that applicable to the account in Table A (which
required a $250,000 minimum investment). The account included in Table A was
traded in a manner such that the underlying value of its futures interest
positions was targeted at 1.0 times the assets of the account. The assets of the
Partnership will be traded in a manner such that the underlying value of its
futures interest positions will be targeted at 1.0 to 2.0 times the assets of
the Partnership, with an expected average of 1.5 times the assets of the
Partnership. As a result, the volatility of the Partnership's account likely
will be greater than that of the account in Table A. In addition, while the
expenses to be paid by the Partnership are higher than those paid by the account
in Table A, the General Partner and the Trading Advisor believe that if the
account in Table A had employed leverage at a constant 1.5 times its assets, the
expected increase in performance returns would have more than compensated for
the higher expenses. However, while the Partnership will target
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its leverage, on average, at 1.5 times its assets, the Partnership will not be
traded at a constant leverage of 1.5 times its assets. Therefore, the
Partnership's performance returns could be higher or lower than the account in
Table A.
INVESTORS ARE CAUTIONED THAT THE PERFORMANCE INFORMATION SET FORTH IN THE
PERFORMANCE TABLES AND THE FOOTNOTES THAT FOLLOW IS NOT INDICATIVE OF, AND HAS
NO BEARING ON, ANY TRADING RESULTS THAT MAY BE ATTAINED BY THE PARTNERSHIP IN
THE FUTURE SINCE PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP WILL MAKE ANY PROFITS AT ALL OR
WILL BE ABLE TO AVOID INCURRING SUBSTANTIAL LOSSES. INVESTORS SHOULD ALSO NOTE
THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY POOL'S
TOTAL INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE
BEEN REALIZED OR UNREALIZED LOSSES FROM COMMODITY TRADING.
TABLE A
Name of CTA: Morgan Stanley Commodities Management, Inc.
Name of Program: MS Commodity Investment Portfolio Strategy
Inception of Client Trading by CTA: February 1993
Inception of Client Trading in Program: May 1994
Number of Open Accounts: 3
Aggregate Assets Overall: $297,500,000
Aggregate Assets in Program: $296,500,000
Largest Monthly % Drawdown: (2.24)%--(6/97)
Largest Peak-to-Valley Drawdown: (2.24)%--(6/97)
<TABLE>
<CAPTION>
1997 1996 1995 1994
MONTHLY RATES OF RETURN % % % %
- ----------------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
January...................................................................... 1.35 (0.70) (0.82)
February..................................................................... 2.26 2.45 0.21
March........................................................................ 1.30 3.93 1.69
April........................................................................ 0.29 1.64 0.34
May.......................................................................... 0.58 (0.99) (1.17) 7.32
June......................................................................... (2.24) 0.13 (0.36) 4.83
July......................................................................... 3.19 (0.12) 1.40 2.06
August....................................................................... 4.91 1.86 (0.82)
September.................................................................... (0.95) 1.01 0.50
October...................................................................... (0.90) 0.46 0.38
November..................................................................... 2.36 1.49 1.88
December..................................................................... 2.45 5.53 1.35
Compound (period)
Rate of Return............................................................. 6.85 14.92 12.09 18.61
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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TABLE B
Name of CTA: Morgan Stanley Commodities Management, Inc.
Name of Program: MS Commodity Yield Fund Strategy
Inception of Client Trading by CTA: February 1993
Inception of Client Trading in Program: February 1993
Number of Open Accounts: 1
Aggregate Assets Overall: $297,500,000
Aggregate Assets in Program: $1,000,000
Largest Monthly % Drawdown: (8.07)%--(5/94)
Largest Peak-to-Valley Drawdown: (16.58)%--(11/93-8/94)
1997 year-to-date return (7 months): 1.99%
1996 annual return: 16.33%
1995 annual return: (3.26)%
1994 annual return: (9.25)%
1993 annual return (11 months): 16.20%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
NOTES TO TABLES
1. All rates of return are net of fees and expenses and include all interest
income earned by the fund.
2. Largest Monthly Drawdown represents the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by the fund
during any one month period.
3. Largest Peak-to-Valley Drawdown represents the greatest cumulative
percentage decline in month-end net asset value due to losses sustained by
the fund during any period in which a month-end net asset value is not
equaled or exceeded by a subsequent net asset value.
4. Tables A and B have been prepared in accordance with generally accepted
accounting principles consistently applied under the accrual basis of
accounting.
5. Number of Open Accounts and Aggregate Assets in Program in Table A include
two accounts which, pursuant to CFTC Rule 4.7, are not included in the
performance results.
THE COMMODITY BROKERS
DESCRIPTION OF THE COMMODITY BROKERS
Morgan Stanley & Co. Incorporated, a Delaware corporation ("MS & Co."), is
the primary commodity broker for the Partnership. MS & Co. has its main business
office located at 1585 Broadway, New York, New York 10036. MS & Co. is
registered as a futures commission merchant, is a member of the NFA and is a
member of most major United States and foreign commodity exchanges. MS & Co. is
registered with the U.S. Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc. (the
"NASD"). Morgan Stanley & Co. International Limited, a United Kingdom
corporation ("MSIL"), will act as the Partnership's commodity broker solely with
regard to any trading on the London Metals Exchange. MSIL has its main business
office located at 25 Cabot Square, Canary Wharf, London E14 4QA, England, is
regulated by the United Kingdom Securities and Futures Authority (the "SFA") as
a member firm, and is a member of the London Metals Exchange and other
securities and commodities exchanges worldwide. MSDWD, the parent company of MS
& Co., MSIL, and DWR, is a worldwide financial services firm, employing,
directly and through its subsidiaries, more than 45,000 people worldwide in 409
offices throughout the United States and 20 foreign countries. MSDWD is a
publicly-traded company whose shares are listed on the New York Stock Exchange;
its common stock had a market value of over $25 billion at June 30, 1997. At
that date,
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MSDWD had leading market positions in its three primary businesses (securities,
asset management and credit services), and it ranked among the top five asset
managers globally, with over $270 billion in assets under management.
BROKERAGE ARRANGEMENTS
The Partnership's brokerage arrangements with the Commodity Brokers are
discussed in "Conflicts of Interest--Relationship of the General Partner and the
Trading Advisor to the Commodity Brokers" and "--Customer Agreements with the
Commodity Brokers," and "Description of Charges to the Partnership--2. The
Commodity Brokers."
The General Partner will review at least annually the brokerage arrangements
of the Partnership to ensure that such brokerage arrangements are fair,
reasonable, and competitive, and represent the best price and services
available, taking into consideration: (i) the size of the Partnership; (ii) the
futures interests trading activity; (iii) the services provided by the Commodity
Brokers or any affiliate thereof to the Partnership; (iv) the cost incurred by
the Commodity Brokers or any affiliate thereof in organizing and operating the
Partnership and offering Units; (v) the overall costs to the Partnership; (vi)
any excess interest and compensating balance benefits to the Commodity Brokers
from assets held thereby; and (vii) if the General Partner is an affiliate of
the Commodity Brokers, the risks incurred by and the obligations of the General
Partner as such. See "Conflicts of Interest."
The Customer Agreements set forth a standard of liability for the Commodity
Brokers and provide for certain indemnities of the Commodity Brokers. See
"Fiduciary Responsibility."
CERTAIN LITIGATION
At any given time, DWR, the General Partner, and the Commodity Brokers are
involved in numerous legal actions, some of which seek significant damages.
On May 16, 1996, an NASD arbitration panel awarded damages and costs against
DWR and one of its account executives in the amount of approximately $1.1
million, including punitive damages, to three customers who alleged, among other
things, fraud and misrepresentation in connection with their individually
managed futures accounts (not commodity pools).
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported
class actions were filed in the Superior Court of the State of California,
County of Los Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by DWR. Named defendants include DWR, Demeter
Management Corporation, Dean Witter Futures & Currency Management Inc., Dean
Witter, Discover & Co. (all such parties referred to hereafter as the "Dean
Witter Parties"), certain limited partnership commodity pools of which Demeter
is the general partner, and certain trading advisors to those pools. On June 16,
1997, the plaintiffs in the above actions filed a consolidated amended
complaint. Similar purported class actions were also filed on September 18 and
20, 1996 in the Supreme Court of the State of New York, New York County, and on
November 14, 1996 in the Superior Court of the State of Delaware, New Castle
County, against the Dean Witter Parties and certain trading advisors on behalf
of all purchasers of interests in various limited partnership commodity pools
sold by DWR. Generally, these complaints allege, among other things, that the
defendants committed fraud, deceit, misrepresentation, breach of fiduciary duty,
fraudulent and unfair business practices, unjust enrichment, and conversion in
connection with the sale and operation of the various limited partnership
commodity pools. The complaints seek unspecified amounts of compensatory and
punitive damages and other relief. It is possible that additional similar
actions may be filed and that, in the course of these actions, other parties
could be added as defendants. The Dean Witter Parties believe that they have
strong defenses to, and they will vigorously contest, the actions. Although the
ultimate outcome of legal proceedings cannot be predicted with certainty, it is
the opinion of management of the Dean Witter Parties that the resolution of the
actions will not have a material adverse effect on the financial condition or
the results of operations of any of the Dean Witter Parties.
On October 25, 1996, the Market Surveillance Committee of the NASD filed a
formal complaint against MS & Co. alleging violations of certain NASD rules
relating to manipulative and deceptive practices, locked and crossed markets and
failure to supervise. MS & Co. believes that the NASD allegations are meritless
and intends to contest them vigorously.
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On May 30, 1995 the SFA announced that it had reached a settlement with MSIL
in a disciplinary proceeding against the firm. The proceeding involved the
conduct of foreign exchange business by a former employee for five private
client accounts in 1991. In accordance with the settlement, MSIL paid the SFA a
fine of L240,000 and made a contribution towards the SFA's costs. In reaching
its settlement with MSIL, the SFA took into account the following factors: MSIL
reported the matter to the SFA and cooperated fully in the investigation; MSIL
took over the clients' positions promptly and offered to restore the clients to
their original positions; and MSIL conducted its own internal review and
promptly took steps to improve its procedure.
During the five years preceding the date of this Prospectus, there have been
(other than as described above) no material criminal, civil or administrative
actions pending, on appeal or concluded against DWR, the Commodity Brokers, the
General Partner, the Trading Advisor or any of their principals that DWR or the
General Partner believes would be material to an investor's decision to invest
in the Partnership.
THE MANAGEMENT AGREEMENT
The Trading Advisor has entered into a Management Agreement with the
Partnership and the General Partner which provides that the Trading Advisor has
sole authority and responsibility, except in certain limited situations, for
directing the investment and reinvestment of the Partnership's assets in futures
interests.
TERM
The Management Agreement has a term of one year, with annual renewals
thereafter. After the initial one year term, the Partnership or the Trading
Advisor may terminate the Management Agreement effective as of any annual
renewal date upon 60 days' prior written notice to the Partnership. The
Management Agreement may also be terminated by the Partnership at any month end
without penalty upon 15 days' prior written notice to the Trading Advisor, and
at any time upon written notice under certain circumstances specified therein.
No assurance is given that the Partnership will be able to retain the
services of a new trading advisor if the Management Agreement is terminated, or,
if such services are available, that they will be available on the same or
similar terms as those of the Management Agreement. The compensation payable by
the Partnership to the Trading Advisor for its services under the Management
Agreement is described under "Description of Charges to the Partnership--1. The
Trading Advisor."
LIABILITY AND INDEMNIFICATION
The Management Agreement sets forth a standard of liability for the Trading
Advisor and also provides for certain indemnities of the Trading Advisor. See
"Fiduciary Responsibility".
OBLIGATIONS TO THE PARTNERSHIP
The Trading Advisor is engaged in the business of advising investors as to
the purchase and sale of futures interests. During the term of the Management
Agreement, the Trading Advisor, and its affiliates, are free to advise other
investors as to the purchase and sale of futures interests, to manage and trade
such investors' futures interests accounts, to charge such investors advisory
fees at rates that are different from the rate charged the Partnership, and to
trade for and on behalf of their own proprietary accounts. However, under no
circumstances may the Trading Advisor or any of its principals and affiliates by
any act or omission favor (other than by charging different management and/or
incentive fees) any account advised or managed by the Trading Advisor or its
principals over the account of the Partnership in any way or manner. The Trading
Advisor will treat the Partnership in a fiduciary capacity to the extent
recognized by applicable law, but, subject to that standard, the Trading Advisor
or any of its principals and affiliates are free to advise and manage accounts
of other investors and are free to trade on the basis of the same trading
systems, methods, or strategies employed by the Trading Advisor on behalf of the
Partnership, or on the basis of trading systems, methods, or strategies that are
entirely independent of, or materially different from, those employed on behalf
of the Partnership, and
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are free to compete for the same futures interests as the Partnership, or to
take positions opposite to the Partnership, where such actions do not knowingly
or deliberately favor any of such accounts to the Partnership's account.
REDEMPTIONS
A Limited Partner may first redeem Units effective as of the last day of the
sixth month following the closing at which such person first becomes a Limited
Partner, and may redeem Units at any month-end thereafter, in the manner
described herein. Such Units may be subject to redemption charges as described
herein.
Units redeemed on or prior to the last day of the eleventh month after such
Units were purchased will be subject to a redemption charge equal to 2% of the
Net Asset Value of a Unit on the date of such redemption. Units redeemed after
the last day of the eleventh month and on or prior to the last day of the
twenty-fourth month after which such Units were purchased will be subject to a
redemption charge equal to 1% of the Net Asset Value of a Unit on the date of
such redemption. Units redeemed after the last day of the twenty-fourth month
after which such Units were purchased will not be subject to a redemption
charge. The foregoing redemption charges will be paid to DWR. Notwithstanding
the above, Units purchased by an investor who purchases $500,000 or more of
Units will not be subject to the foregoing redemption charges, but will be
subject to the other restrictions on redemptions.
In addition, a limited partner in any of the other commodity pools for which
the General Partner serves as the general partner and commodity pool operator
who redeemed all or a portion of his interest in one of such other partnerships
on or after March 31, 1997 and purchases Units will not be subject to the
foregoing redemption charges or restrictions under the circumstances described
below. The number of Units, expressed as a percentage of Units purchased, which
is not subject to a redemption charge or such other restrictions is determined
by dividing (a) the dollar amount received upon redeeming an interest in such
other partnership and used to purchase Units by (b) the total investment in the
Partnership. For example, a limited partner who receives $5,000 upon redeeming
all or a part of his interest in a commodity pool operated by the General
Partner and invests $10,000 in the Partnership will not be subject to a
redemption charge on 50% of his Units.
Redemptions may only be made in whole Units or in multiples of $1,000 (which
may result in a redemption of fractional Units), unless a Limited Partner is
redeeming his entire interest in the Partnership. Redemptions will be effective
as of the last day of the month ending after a Request for Redemption in proper
form has been timely received by the General Partner ("Redemption Date"). A
"Request for Redemption" is an irrevocable letter in the form specified by the
General Partner and received by the General Partner prior to 5:00 p.m. (New York
time) at least 5 business days prior to the Redemption Date. A form of Request
for Redemption is annexed to the Limited Partnership Agreements which is annexed
hereto as Exhibit A. Additional forms of Request for Redemption may be obtained
by a written request to the General Partner or a local DWR branch office. In
addition to the information and reports described below under "The Limited
Partnership Agreement--Reports to Limited Partners," the General Partner will
provide Limited Partners with such other information and will comply with any
such procedures in connection with redemptions as in the future are specifically
required under SEC rules and policies for commodity pools and similar investment
vehicles.
The "Net Asset Value" of a Unit is the amount of Net Assets allocated to
capital accounts represented by Units divided by the aggregate number of Units.
"Net Assets" are defined in the Limited Partnership Agreement to mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents (valued at cost), accrued interest and amortization of original
issue discount, and the market value of all open futures interests positions and
other assets of the Partnership), less the total liabilities of the Partnership
(including, but not limited to, brokerage fees, service fees, management fees,
incentive fees, and extraordinary expenses), determined in accordance with
generally accepted accounting principles consistently applied under the accrual
basis of accounting. Unless generally accepted accounting principles require
otherwise, the market value of a futures interest traded on a
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United States exchange shall mean the settlement price on the exchange on which
the particular futures interest was traded by the Partnership on the day with
respect to which Net Assets are determined, PROVIDED, HOWEVER, that if a futures
interest could not have been liquidated on such day due to the operation of
daily limits or other rules of the exchange upon which that futures interest
shall be traded or otherwise, the settlement price on the first subsequent day
on which the futures interest could have been liquidated shall be the market
value of such futures interest for such day. The market value of a futures
interest traded on a foreign exchange or market shall mean its market value as
determined by the General Partner on a basis consistently applied for each
different variety of futures interest.
The General Partner shall endeavor to pay redemptions within 10 business
days after the Redemption Date, and the Partnership's futures interests
positions will be liquidated to the extent appropriate to effect redemptions.
Payment is made by credit in the amount of such redemption to the Limited
Partner's customer account with DWR or by check mailed to the Limited Partner if
such account is closed. The right to obtain redemption is contingent upon (i)
the Partnership having assets sufficient to discharge its liabilities on the
Redemption Date, and (ii) timely receipt by the General Partner of a Request for
Redemption as described above.
The terms and conditions applicable to redemption of Units in general, other
than those prohibiting redemptions before the sixth month-end following the
closing at which such Units were issued, and providing that redemptions may only
be made as of the end of any calendar month, will also apply to redemptions
effected on "Special Redemption Dates," as described under "The Limited
Partnership Agreement--Reports to Limited Partners."
The liability of Limited Partners, including the possible liability of a
person who has redeemed Units, for liabilities of the Partnership that arose
before such redemption is described under "The Limited Partnership
Agreement--Nature of the Partnership."
Federal income tax aspects of redemptions are described under the caption
"Material Federal Income Tax Considerations."
THE LIMITED PARTNERSHIP AGREEMENT
This Prospectus contains an explanation of the more significant terms and
provisions of the Limited Partnership Agreement of the Partnership (the "Limited
Partnership Agreement"), a copy of which is annexed hereto as Exhibit A and is
incorporated herein by this reference. The following description is a summary
only of certain significant terms of the Limited Partnership Agreement not set
forth elsewhere in this Prospectus, is not intended to be complete and is
qualified in its entirety by reference to Exhibit A.
NATURE OF THE PARTNERSHIP
The Partnership was formed on July 31, 1997 under the Partnership Act. The
fiscal year of the Partnership begins on January 1 of each year and ends on the
following December 31.
Units purchased and paid for pursuant to this offering will be fully paid
and nonassessable. Except as described under "Restrictions on Transfers and
Assignments" below, Limited Partners may only withdraw from the Partnership by
redeeming all of their Units. The Partnership may have a claim against its
Limited Partners after redemption or receipt of distributions from the
Partnership for liabilities of the Partnership that arose before the date of
such redemption or distribution, but such claim will not exceed the sum of such
Limited Partner's unredeemed capital contribution, undistributed profits, if
any, and any redemptions or distributions, together with interest thereon. The
Partnership will not make a claim against its Limited Partners with respect to
amounts distributed to them or amounts received by them upon redemption of Units
unless the Net Assets of the Partnership are insufficient to discharge the
liabilities of the Partnership that arose before the payment of such amounts.
The General Partner will be liable for all obligations of the Partnership to the
extent that assets of the Partnership, including amounts contributed by its
Limited Partners and paid out in distributions,
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redemptions, or otherwise to Limited Partners, are insufficient to discharge
such obligations. However, neither the General Partner, MS & Co., MSIL, DWR, the
Trading Advisor, nor any of their affiliates shall be personally liable to a
Limited Partner (or assignee) for the return or repayment of all or any portion
of the capital or profits of such Limited Partner.
MANAGEMENT OF PARTNERSHIP AFFAIRS
The Limited Partners do not participate in the management or operations of
the Partnership. Any participation by a Limited Partner in the management of the
Partnership may jeopardize the limited liability of such Limited Partner. Under
the Limited Partnership Agreement, responsibility for managing the Partnership
is vested solely in the General Partner. See "Fiduciary Responsibility." The
General Partner may delegate complete trading authority to trading advisors and
has done so (except for the ability of the General Partner to override trading
instructions that violate the Partnership's trading policies and to the extent
necessary to fund distributions or redemptions, or to pay Partnership expenses)
pursuant to the Management Agreement with the Trading Advisor. However, pursuant
to the Management Agreement, the General Partner has the right to make trading
decisions at any time at which the Trading Advisor becomes incapacitated or some
other emergency arises as a result of which the Trading Advisor is unable or
unwilling to act and the General Partner has not yet retained a successor
trading advisor. See "The Trading Advisor" and "The Management Agreement."
On behalf of the Partnership, the General Partner may engage and compensate
on behalf and from the funds of the Partnership, such persons, firms, or
corporations, including any affiliated person or entity, as the General Partner
in its sole judgment deems advisable for the conduct and operation of the
business of the Partnership; PROVIDED, HOWEVER, that, except as described in the
Limited Partnership Agreement and in this Prospectus, the General Partner will
not engage on behalf of the Partnership any person, firm, or corporation that is
an affiliate of the General Partner to perform services for the Partnership
without having made a good faith determination that: (i) the affiliate which it
proposes to engage to perform such services is qualified to do so (considering
the prior experience of the affiliate or the individuals employed thereby), (ii)
the terms and conditions of the agreement pursuant to which such affiliate is to
perform services for the Partnership are no less favorable to the Partnership
than could be obtained from equally-qualified unaffiliated third parties, or are
otherwise determined by the General Partner to be fair and reasonable to the
Partnership and the Limited Partners, and (iii) the maximum period covered by
the agreement pursuant to which such affiliate is to perform services for the
Partnership will not exceed one year, and such agreement will be terminable
without penalty upon 60 days' prior written notice by the Partnership.
Other responsibilities of the General Partner include, but are not limited
to, the following: determining whether the Partnership will make distributions;
administering redemptions of Units; preparing monthly and annual reports to the
Limited Partners; executing various documents on behalf of the Partnership and
its Limited Partners pursuant to a power of attorney; and supervising the
liquidation of the Partnership if an event causing termination occurs. To
facilitate the execution of various documents by the General Partner on behalf
of the Partnership and its Limited Partners, each of the Limited Partners will
appoint the General Partner, with power of substitution, his attorney-in-fact by
executing a Subscription Agreement and Power of Attorney.
ADDITIONAL OFFERINGS
The General Partner may, in its discretion, make additional public or
private offerings of Units, provided, that the net proceeds to the Partnership
of any such sales shall in no event be less than the Net Asset Value of a Unit
at the time of sale (unless the newly-offered Units' participation in the
Partnership's profits and losses is proportionately reduced). The Partnership
shall not pay the costs of any such offering or any selling commissions relating
thereto. No Limited Partner shall have any preemptive, preferential or other
rights with respect to the issuance of any additional Units, except as described
in the applicable prospectus or other disclosure document with respect to such
offering, and no Limited Partner shall have the right to consent to the
admission of any additional Limited Partner. There is no maximum aggregate
amount of contributions which may be received by the Partnership.
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SHARING OF PROFITS AND LOSSES
Each Partner, including the General Partner, of the Partnership will have a
capital account with an initial balance equal to the amount paid for Units, or,
in the case of the General Partner, its capital contribution. The Partnership's
Net Assets 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. For a description
of the federal tax allocations, see "Material Federal Income Tax
Considerations."
RESTRICTIONS ON TRANSFERS OR ASSIGNMENTS
Except as set forth below, the Limited Partnership Agreement provides that
Units may be transferred or assigned, but no transferee or assignee may become a
substituted Limited Partner without the written consent of the General Partner,
which consent may be withheld in the General Partner's sole discretion, nor may
a Limited Partner, an assignee or transferee, or the estate of any beneficiary
of a deceased Limited Partner withdraw any capital or profits from the
Partnership, except by redemption of Units. See "Redemptions." The General
Partner, without prior notice to or consent of the Limited Partners, may
withdraw any portion of its interest in the Partnership that is in excess of the
interest required under the Limited Partnership Agreement.
Any transfer or assignment of Units permitted by the Limited Partnership
Agreement will be effective as of the end of the month in which such transfer or
assignment is made; PROVIDED, HOWEVER, that the Partnership need not recognize
any transfer or assignment until it has received at least 30 days' prior written
notice thereof from the Limited Partner, which notice sets forth the address and
social security or taxpayer identification number of the transferee or assignee
and the number of Units transferred or assigned, and is signed by the Limited
Partner (a Limited Partner's signature must be guaranteed as provided for in the
Limited Partnership Agreement). No transfers or assignments of Units will be
effective or recognized by the General Partner if as a result any party to such
transfer or assignment owns fewer than the minimum number of Units required to
be purchased as described herein (subject to certain exceptions relating to
gifts, death, divorce, or transfers to family members or affiliates contained in
the Limited Partnership Agreement). No transfer or assignment will be permitted
unless the General Partner is satisfied that (i) such transfer or assignment
would not be in violation of the Partnership Act or applicable federal, state,
or foreign securities laws, and (ii) notwithstanding such transfer or
assignment, the Partnership will continue to be classified as a partnership
rather than as an association taxable as a corporation under the Internal
Revenue Code of 1986, as amended. No transfer or assignment of Units will be
effective or recognized by the Partnership if such transfer or assignment would
result in the termination of the Partnership for federal income tax purposes,
and any attempted transfer or assignment in violation of the Limited Partnership
Agreement will be ineffective. The Limited Partner will bear all costs
(including any attorneys' and accountants' fees) related to such transfer or
assignment.
AMENDMENTS; MEETINGS
The Limited Partnership Agreement may be amended in accordance with, and to
the extent permissible under, the Partnership Act by an instrument signed by the
General Partner and by Limited Partners owning more than 50% of the Units then
outstanding. In addition, the General Partner may make certain amendments to the
Limited Partnership Agreement without the consent of the Limited Partners. No
amendment of the Limited Partnership Agreement may, without the consent of all
Partners affected thereby, reduce the capital account of any Partner, modify the
percentage of profits, losses, or distributions to which any Partner is
entitled, or change or alter the provisions of such Agreement relating to
amendments requiring the consent of all Partners.
Any Limited Partner or his authorized attorney or agent, upon written
request addressed to the General Partner, delivered either in person or by
certified mail, and payment of reasonable duplicating and postage costs, shall
be entitled to obtain from the General Partner by mail a list of the names and
addresses of record of all Limited Partners and the number of Units owned by
each.
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Upon receipt of a written request, signed by Limited Partners owning at
least 10% of the Units then owned by Limited Partners, that a meeting of the
Partnership be called to vote upon any matter upon which all Limited Partners
may vote pursuant to the Limited Partnership Agreement, the General Partner, by
written notice to each Limited Partner of record sent by certified mail or
delivered in person within 15 days after such receipt, must call a meeting of
the Partnership. Such meeting must be held at least 30 but not more than 60 days
after the mailing of such notice, and such notice must specify the date, a
reasonable time and place, and the purpose of such meeting.
At any such meeting, upon the affirmative vote (either in person or by
proxy) of Limited Partners owning more than 50% of the Units then owned by
Limited Partners, the following actions may be taken without the consent of the
General Partner: (i) the Limited Partnership Agreement may be amended in
accordance with and to the extent permissible under the Partnership Act;
PROVIDED, HOWEVER, that without the consent of all Partners affected thereby, no
such amendment may reduce the capital account of any Partner, modify the
percentage of profits, losses, or distributions to which any Partner shall be
entitled, or change or alter the provisions of this proviso; (ii) the
Partnership may be dissolved; (iii) the General Partner may be removed and
replaced; (iv) a new general partner or partners may be elected following the
withdrawal, insolvency, bankruptcy, dissolution, liquidation, or termination of
the General Partner; (v) any contracts with the General Partner or any of its
affiliates may be terminated without penalty on not less than 60 days' prior
written notice to the General Partner and such affiliate(s); and (vi) the sale
of all or substantially all of the assets of the Partnership may be approved;
PROVIDED, HOWEVER, that no such action shall adversely affect the classification
of the Partnership as a partnership under United States federal income tax laws
or the status of the Limited Partners as limited partners under the Partnership
Act. Units owned by the General Partner or any affiliate thereof may not be
voted on the matters described in clauses (iii) and (v) above.
INDEMNIFICATION
The Limited Partnership Agreement provides for certain indemnities of the
General Partner and its affiliates. See "Fiduciary Responsibility."
REPORTS TO LIMITED PARTNERS
The books and records of the Partnership are maintained at its principal
office. The Limited Partners have the right at all times during normal business
hours to have access to and copy such books and records of the Partnership, in
person or by their authorized attorney or agent, and, upon request, copies of
such books and records will be sent to any Limited Partner if reasonable
reproduction and distribution costs are paid by him. Within 30 days after the
close of each calendar month, the General Partner shall provide such financial
and other information with respect to the Partnership as the CFTC and NFA from
time to time shall require in monthly reports, together with information
concerning any material change in the brokerage commissions and fees payable by
the Partnership to any commodity broker.
In addition, if any of the following events occurs, notice of such event
will be mailed to each Limited Partner within seven business days of the
occurrence of the event: (i) a decrease in the Net Asset Value of a Unit as of
the close of business on any business day to 50% or less of the Net Asset Value
for such Unit as of the end of the immediately preceding month; (ii) any
material amendment to the Limited Partnership Agreement; (iii) any change in
trading advisors or any material change in the management agreement with a
trading advisor; (iv) any change in commodity brokers or any material change in
the compensation arrangement with a commodity broker; (v) any change in general
partners or any material change in the compensation arrangement with a general
partner; (vi) any change in the Partnership's fiscal year; (vii) any material
change in the Partnership's trading policies as specified in the Limited
Partnership Agreement; or (viii) cessation of futures interests trading by the
Partnership. In the case of a notice given in accordance with clause (i) of the
immediately preceding sentence: (a) such notice shall also advise Limited
Partners that a "Special Redemption Date," on a date specified in such notice
(but in no event earlier than 15, nor later than 45, days after the mailing of
such notice), will take place as of which Limited Partners may redeem their
Units in the same manner as described under
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"Redemptions" for regular Redemption Dates (a Special Redemption Date may take
place on a regular Redemption Date); and (b) following the close of business on
the date of the 50% decrease giving rise to such notice, the Partnership shall
liquidate all existing positions as promptly as reasonably practicable and shall
suspend all futures interests trading through the Special Redemption Date.
Thereafter, the General Partner shall determine whether to reinstitute futures
interests trading or to terminate the Partnership.
Additionally, the General Partner distributes to the Limited Partners within
90 days after the close of each fiscal year an annual report containing audited
financial statements (including a statement of income and statement of financial
condition) of the Partnership for the fiscal year then ended, prepared in
accordance with generally accepted accounting principles and accompanied by a
report of the certified public accounting firm which audited such financial
statements, and such other information as the CFTC and the NFA may from time to
time require. Such annual reports provide a detailed statement of any
transactions with the General Partner or its affiliates and of fees, commissions
and any compensation paid or accrued to the General Partner or its affiliates
for the fiscal year completed, showing the amount paid or accrued to each
recipient and the services performed. Within 75 days after the close of each
fiscal year (but in no event later than March 15 of each year), the Partnership
will report to each Limited Partner tax information necessary for the
preparation of the Limited Partner's federal income tax returns.
The Net Asset Value of Units is determined daily by the General Partner and
the most recent Net Asset Value calculations will be promptly supplied in
writing to any Limited Partner after receipt of a request in writing to such
effect. In addition to the above-described information and reports, the General
Partner will provide Limited Partners with such other information and will
comply with any such procedures in connection with redemptions as in the future
are specifically required under SEC rules and policies for commodity pools and
similar investment vehicles.
In addition, subject to limits imposed under certain state guidelines
incorporated in the Limited Partnership Agreement, no increase in (a) any of the
management, incentive, brokerage, or service fees, or the cap on aggregate
brokerage fees and net excess interest or compensating balance benefits to MS &
Co., as described under "Description of Charges to the Partnership," may take
effect until the first business day following a Redemption Date, PROVIDED that:
(i) notice of such increase is mailed to each Limited Partner at least five
business days prior to the last date on which a "Request for Redemption" must be
received by the General Partner with respect to the applicable Redemption Date;
(ii) such notice describes the redemption and voting rights of Limited Partners;
and (iii) none of such fees or cap may be increased until the first business day
following the first Redemption Date as of which a redemption charge is no longer
payable.
PLAN OF DISTRIBUTION
The Units are being offered through DWR pursuant to a Selling Agreement
among the Partnership, the General Partner, the Trading Advisor, and DWR, as
selling agent. DWR, with the approval of the General Partner, may appoint as its
agent to make offers and sales of the Units any securities broker or dealer
which is a member in good standing of the NASD, or any foreign bank, dealer,
institution or person ineligible for membership in the NASD which agrees to make
no offers or sales of Units within the United States or its territories,
possessions or areas subject to its jurisdiction or to persons who are citizens
thereof or residents therein, and which further agrees in making offers and
sales of Units to comply with the applicable provisions of the Conduct Rules of
the NASD ("Additional Sellers"). DWR, the Trading Advisor, the Commodity
Brokers, and the General Partner are "affiliates" of one another pursuant to SEC
rules under the 1933 Act.
The Units are being offered on a "best efforts" basis without any agreement
by DWR to purchase Units. The General Partner has registered 5,000,000 Units
with the SEC, and the General Partner, in its discretion, may register and sell
additional Units. Also, the Limited Partnership Agreement provides
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that additional public and/or private offerings may be made at the discretion of
the General Partner in the future; therefore, there is no maximum aggregate
amount of funds that may be contributed to the Partnership.
Units are being offered initially to the public at $10 per Unit, for
issuance at the First Closing, which is currently scheduled to be held on
November 3, 1997; PROVIDED, HOWEVER, that the General Partner may at its
discretion hold such First Closing at any time during the Offering Period (as
defined below). Units that remain unsold following the First Closing may be
offered for sale, in the sole discretion of the General Partner, at a Second
Closing and a Third Closing, currently scheduled to be held on December 1, 1997
and January 2, 1998, respectively, at a price per Unit equal to 100% of the Net
Asset Value thereof as of the close of business on the last day of the month
immediately preceding such closing. The General Partner shall have the
discretion to terminate the offering of Units at any time. The period from the
date of this Prospectus through January 12, 1998 will be referred to herein as
the "Offering Period." The General Partner may, in its discretion, extend the
Offering Period to provide for an additional closing for the sale of Units, but
in no event will the Offering Period be extended beyond March 31, 1998. In the
event of any such extension, the term "Offering Period" shall be deemed to
include such additional closing. If at least 500,000 Units have been subscribed
for at any time during the Offering Period, the General Partner may either elect
to (a) accept such subscriptions at the First Closing and commence the
Partnership's trading operations, or (b) continue to offer Units until the
conclusion or earlier termination of the Offering Period.
Funds with respect to a subscription received during the Offering Period and
not immediately rejected by the General Partner will be promptly transferred to,
and held in escrow by, The Chase Manhattan Bank, New York, New York (the "Escrow
Agent"), as described below under "Subscription Procedure," and invested solely
in the Escrow Agent's interest-bearing money market account until the General
Partner either rejects such subscription prior to the applicable closing or
accepts such subscription at such closing. At all times during the Offering
Period, and prior to each closing, subscription funds will be in the possession
of the Escrow Agent and at no time will the General Partner handle or take
possession of such funds.
If fewer than 500,000 Units have been subscribed for at the termination of
the Offering Period or for any reason the First Closing does not occur, the
offering of Units will terminate and each subscription received during the
Offering Period will be promptly returned by the Escrow Agent to DWR for prompt
deposit to each subscriber's customer account with DWR, but in no event later
than five business days following termination of the Offering Period, together
with any interest earned on such subscription while held in escrow. DWR will
promptly notify each subscriber that such subscription has been returned to such
subscriber's customer account with DWR and that such funds are under such
subscriber's control.
Following each closing, a credit will be advanced to each subscriber's
customer account with DWR in the amount of any interest earned on such
subscriber's funds while held in escrow. Interest earned on subscriptions
deposited into escrow and thereafter rejected by the General Partner will be
credited to the subscriber's customer account with DWR. In the event a
subscriber's customer account with DWR has been closed, any subscription
returned and/or interest earned will be paid by check. During the Offering
Period, the General Partner, DWR, MS & Co., MSIL, the Trading Advisor, and their
respective principals, directors, officers, employees, and affiliates may
subscribe for any number of Units. Units subscribed for by such persons or
entities will not be counted for purposes of determining whether the 500,000
Unit minimum subscription requirement has been met. Any such subscriptions will
be for investment purposes only and not for resale.
Except as provided below, employees of DWR will receive from DWR (payable
solely from its own funds) a gross sales credit equal to 3% of the Net Asset
Value per Unit as of the applicable closing for each Unit sold by them and
issued at such closing. Employees of DWR who are properly registered with the
CFTC and are members of the NFA also will receive, beginning the thirteenth
month after a Unit was issued, from DWR (payable solely from its own funds) up
to 1/4 of 1% of the Net Asset Value (up to a
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3% annual rate) of a Unit as of the first day of each month. Such compensation
may only be paid to employees of DWR who are registered as associated persons
with the CFTC, are members of the NFA in such capacity, and have passed the
Series 3 or Series 31 examination or have been "grandfathered" as an associated
person, and will be paid by DWR to its employees in consideration of certain
additional services relating to the Units which such employees have agreed to
render on an ongoing basis. Such additional services include: (a) inquiring of
the General Partner from time to time, at the request of Limited Partners, as to
the Net Asset Value of the Units; (b) inquiring of the General Partner, at the
request of Limited Partners, regarding the futures markets and the activities of
the Partnership; (c) responding to questions of Limited Partners with respect to
the monthly account statements, annual reports, financial statements, and annual
tax information furnished periodically to Limited Partners; (d) providing advice
to Limited Partners as to when and whether to redeem Units; (e) assisting
Limited Partners in the redemption of Units; and (f) providing such other
services as Limited Partners from time to time may reasonably request. The
Selling Agreement provides that such continuing compensation may only be paid by
DWR as long as such services are provided and only to those employees who are
properly registered with the CFTC and are members of the NFA. A Limited Partner
may telephone, write, or visit such employee at the local DWR branch office to
avail himself of such services. The compensation described above will be paid by
DWR out of the portion of the brokerage fees received by DWR from MS & Co. and
will not be paid directly by any Limited Partner or the Partnership and,
accordingly, Net Assets will not be reduced as a result of such compensation.
DWR will not pay to its employees the 3% gross sales credit described above
with respect to Units purchased by a subscriber with the proceeds of a
redemption on or after March 31, 1997, of all or a portion of such subscriber's
interest in any other commodity pool for which the General Partner serves as the
general partner and commodity pool operator. Such employees will instead receive
continuing payments with respect to Units that are comparable to the payments
that were received by such employees with respect to such other commodity pools.
DWR may compensate any Additional Seller for each Unit sold by it by paying
such Additional Seller a selling commission, payable by DWR solely from its own
funds, not to exceed 3% of the Net Asset Value of such Unit. Additional Sellers
who are properly registered with the CFTC also may receive from DWR, payable
solely from its own funds, continuing compensation for providing to Limited
Partners the continuing services referred to above. Such continuing compensation
may be up to 1/4 of 1% (up to 3% annually) of the Net Asset Value as of the
first day of each month of outstanding Units sold by such Additional Sellers.
Additional Sellers may pay all or a portion of such continuing compensation to
their employees who have sold Units and provide continuing services to Limited
Partners if such employees are properly registered with the CFTC. Such
continuing compensation may be deemed to be underwriting compensation.
Redemptions of Units at or prior to the end of the twenty-fourth month
following a closing are subject to certain redemption charges payable to DWR.
For example, if (i) all 5,000,000 Units are sold at the First Closing, (ii) the
Net Asset Value per Unit remained at $10 per Unit during the first eleven months
following the First Closing, (iii) all Units were subject to a redemption
charge, and (iv) all Units were redeemed during the first eleven months
following the First Closing, then DWR would receive $1,000,000 in redemption
charges. These redemption charges may be deemed to be underwriting compensation
to DWR. See "Redemptions."
In connection with the sale of Units, DWR may implement a cash sales
incentive and/or promotional program for its employees who sell Units. Such a
program will provide for DWR, and not the Partnership or General Partner, to pay
its employees bonus compensation based on sales of Units. Any such program will
be approved by the NASD prior to implementation.
The aggregate of all compensation paid to employees of DWR from the intitial
3% gross sales credit, the redemption charges received by DWR and any sales
incentives will not exceed 10% of the proceeds of the sale of Units.
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The Units are being sold by the Partnership when, as and if subscriptions
therefor are accepted by the General Partner, subject to the satisfaction of
certain conditions set forth in the Selling Agreement and the approval by
counsel of certain legal matters. The Partnership has agreed to indemnify the
Trading Advisor in connection with the offer and sale of Units with respect to
any misleading or untrue statement or alleged misleading or untrue statement of
a material fact or a material omission or alleged omission unrelated to the
Trading Advisor or its principals. The Partnership also has agreed to certain
indemnities of DWR and any Additional Sellers in connection with the offer and
sale of Units. See "Fiduciary Responsibility."
SUBSCRIPTION PROCEDURE
The minimum subscription for most new subscribers during the Offering Period
is $5,000, except that the minimum subscription is: (a) $2,000 in the case of an
IRA; or (b) for subscribers effecting Exchanges, the lesser of (i) $5,000
($2,000 in the case of an IRA), (ii) the proceeds from the redemption of five
units (two units in the case of an IRA) from commodity pools other than the
Spectrum Series, (iii) the proceeds from the redemption of 500 units (200 units
in the case of an IRA) from one, or any combination, of the Spectrum Series of
commodity pools, or (iv) the proceeds from the redemption of all of a
subscriber's units of limited partnership interest in any other commodity pool
for which the General Partner serves as general partner and commodity pool
operator (see "Summary of the Prospectus--Investment Requirements"). A
subscriber whose subscription is accepted by the General Partner at a closing
and who desires to make an additional investment in the Partnership may
subscribe for Units at a subsequent closing with a minimum investment of $1,000.
In order to purchase Units, a subscriber must complete, execute, and deliver
an execution copy of a Subscription and Exchange Agreement and Power of Attorney
to DWR. In the Subscription and Exchange Agreement and Power of Attorney, a
subscriber (other than one effecting an Exchange) will authorize the General
Partner and DWR to transfer the subscription amount from his customer account
with DWR to the Morgan Stanley Tangible Asset Fund L.P. Escrow Account. A
subscriber (other than one effecting an Exchange) whose Subscription and
Exchange Agreement and Power of Attorney is received by DWR and whose
subscription is not immediately rejected, must have the appropriate amount in
his customer account with DWR on the first business day following the date that
his Subscription and Exchange Agreement and Power of Attorney is received by
DWR, and DWR will debit the customer account and transfer such funds into escrow
with the Escrow Agent on that date. In the event that a subscriber (other than
one effecting an Exchange) does not have a customer account with DWR or does not
have sufficient funds in his existing customer account with DWR, the subscriber
should make appropriate arrangements with his DWR account executive, if any, and
if none, should contact his local DWR branch office. Additional Sellers will
arrange for their customers subscribing for Units to open customer accounts with
DWR. Payment must not be mailed to the General Partner, as any mailed payment
will be returned to the subscriber for proper placement with the DWR branch
office where his account is maintained. Additional investments in the
Partnership for subscribers who already own Units must be made by executing a
Subscription and Exchange Agreement and Power of Attorney authorizing the
immediate transfer of funds from the customer's account with DWR to the Escrow
Agent. In the case of Exchanges, the execution of the Subscription and Exchange
Agreement and Power of Attorney will authorize the General Partner to redeem all
or a portion of such subscriber's interest in another commodity pool for which
the General Partner serves as general partner and commodity pool operator
(subject to the terms of the applicable limited partnership agreement), and use
the proceeds of such redemption (less any applicable redemption charges) to
purchase Units.
In the case of a subscription on behalf of an IRA or other employee benefit
plan, merely subscribing for Units does not create a plan. Those considering the
purchase of Units on behalf of an IRA or other employee benefit plan must first
ensure that the plan has been properly established in accordance with the Code
and the regulations thereunder and administrative rulings thereof and that the
plan has been adequately funded. If an IRA or other employee benefit plan has
been properly established and adequately funded, the trustee or custodian of the
plan who decides to or who is instructed
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to do so may subscribe for Units. Payment of the subscription price must be made
by having the trustee or custodian of the plan authorize the General Partner and
DWR to transfer the subscription amount to the Morgan Stanley Tangible Asset
Fund L.P. Escrow Account from the plan's customer account with DWR. An employee
benefit plan, including an IRA, should consider the tax consequences of an
investment in the Partnership. See "Purchases by Employee Benefit Plans--ERISA
Considerations."
All Units subscribed for upon DWR's transfer of funds from a customer
account following receipt of a subscriber's check will be issued subject to the
collection of the funds represented by such check. In the event that a
subscriber's check is returned unpaid, DWR will notify the General Partner, and
the Partnership will cancel the Units issued to such subscriber represented by
such check. Any losses or profits sustained by the Partnership in connection
with the Partnership's business allocable to such cancelled Units will be deemed
a decrease or increase in Net Assets and allocated among the remaining Partners.
In the Limited Partnership Agreement, each Limited Partner agrees to reimburse
the Partnership for any expense or loss (including any trading loss) incurred in
connection with the issuance and cancellation of any Units issued to such
Limited Partner.
All subscriptions for Units are generally irrevocable by subscribers,
provided, however, that (i) a subscriber may revoke his Subscription and
Exchange Agreement and Power of Attorney, and receive a full refund of the
subscription amount and any accrued interest thereon (or revoke the redemption
of units in the other commodity pool in the case of an Exchange), within five
business days after execution of such Agreement or no later than 3:00 P.M., New
York City time, on the date of the applicable closing, whichever comes first, by
delivering written notice to his DWR account executive; and (ii) there may be
possible rescission rights under applicable federal and state securities laws.
The General Partner may reject any subscription, in whole or in part, in its
sole discretion. See "Plan of Distribution." A specimen form of the Subscription
and Exchange Agreement and Power of Attorney is annexed hereto as Exhibit B. A
separate execution copy of the Subscription and Exchange Agreement and Power of
Attorney accompanies this Prospectus or may be obtained, after delivery of this
Prospectus, from a local DWR branch office. Limited Partners will not receive
certificates evidencing Units, but will be sent confirmations of purchase in
DWR's customary form.
PURCHASES BY EMPLOYEE BENEFIT PLANS--
ERISA CONSIDERATIONS
The purchase of Units might or might not be a suitable investment for an
employee benefit plan. Before proceeding with such a purchase, the person with
investment discretion on behalf of an employee benefit plan must determine
whether the purchase of Units is (a) permitted under the governing instruments
of the plan and (b) appropriate for that particular plan in view of its overall
investment policy, the composition and diversification of its portfolio, and the
considerations discussed below.
As used herein, the term "employee benefit plans" refers to plans and
accounts of various types (including their related trusts) which provide for the
accumulation of a portion of an individual's earnings or compensation, as well
as investment income earned thereon, free from federal income tax until such
time as funds are distributed from the plan. Such plans include corporate
pension and profit-sharing plans (such as so-called 401(k) plans), "simplified
employee pension plans," so-called "Keogh" plans for self-employed individuals
(including partners), and, for purposes of this discussion, individual
retirement accounts ("IRAs"), described in Section 408 of the Internal Revenue
Code of 1986, as amended (the "Code").
Notwithstanding the general requirement that most investors in the
Partnership must invest a minimum of $5,000, a minimum purchase requirement of
$2,000 has been set for IRAs. See "Investment Requirements." Greater minimum
purchases and special suitability standards may be mandated by the securities
laws and regulations of certain states, and each plan investor should consult
the Subscription and Exchange Agreement and Power of Attorney to determine the
applicable investment requirements. See "Subscription Procedure."
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If the assets of an investing employee benefit plan were to be treated, for
purposes of the reporting and disclosure provisions and certain other of the
fiduciary responsibility provisions of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code, as
including an undivided interest in each of the underlying assets of the
Partnership, an investment in Units would in general be an inappropriate
investment for the plan. A U.S. Department of Labor regulation (the
"Regulation") defines "plan assets" in situations where employee benefit plans
purchase equity securities in investment entities such as the Partnership. The
Regulation provides that the assets of an entity will NOT be deemed to be "plan
assets" of an employee benefit plan which purchases an equity security of such
an entity if the equity security is a "publicly-offered security," meaning it is
(1) freely transferable, (2) held by more than 100 investors independent of the
issuer and of each other, and (3) either (a) registered under Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act") or (b) sold to the plan as part of a public offering of such securities
pursuant to an effective registration statement under the 1933 Act, where the
security is then timely registered under Section 12(b) or Section 12(g) of the
1934 Act. It is expected that the Units will meet the criteria of the
Regulation.
The General Partner believes, based upon the advice of its legal counsel,
that income earned by the Partnership will not constitute "unrelated business
taxable income" under Section 512 of the Code to employee benefit plans and
other tax-exempt entities which purchase Units, provided that the Units
purchased by such plans and entities are not "debt-financed." Although the
Internal Revenue Service has issued favorable private letter rulings to
taxpayers in somewhat similar circumstances, other taxpayers may not use or cite
such rulings as precedent. Persons with investment discretion on behalf of
employee benefit plans who are considering the purchase of Units should consult
a professional tax adviser regarding the application of the foregoing matters to
their purchase of Units.
Units may not be purchased with the assets of an employee benefit plan if
the General Partner, DWR, or the Trading Advisor or any of their respective
affiliates either: (a) has investment discretion with respect to the investment
of such plan assets; (b) has authority or responsibility to give or regularly
gives investment advice with respect to such plan assets for a fee and pursuant
to an agreement or understanding that such advice will serve as a primary basis
for investment decisions with respect to such plan assets and that such advice
will be based on the particular investment needs of the plan; or (c) is an
employer maintaining or contributing to such plan.
Subscribing for Units does not create an IRA or other employee benefit plan.
Those considering the purchase of Units on behalf of an IRA or other employee
benefit plan must first ensure that the plan has been properly established in
accordance with the Code and the regulations thereunder and administrative
rulings thereunder and that the plan has been adequately funded. Then, after all
of the considerations discussed above have been taken into account, the trustee
or custodian of a plan who decides to or who is instructed to do so may
subscribe for Units, subject to the minimum subscription requirement.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF EMPLOYEE BENEFIT PLANS IS IN NO
RESPECT A REPRESENTATION BY THE GENERAL PARTNER, DWR, THE TRADING ADVISOR OR THE
PARTNERSHIP THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH
RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN OR THAT THIS
INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The General Partner has been advised by counsel, Cadwalader, Wickersham &
Taft, that in its opinion, the following summary correctly describes the
material federal income tax consequences to United States taxpayers of
acquiring, owning, and disposing of Units. The opinions appearing in this
section are the opinions of Cadwalader, Wickersham & Taft, except as otherwise
specifically noted herein. The following summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), rulings thereon, regulations
promulgated thereunder and existing interpretations thereof, any of which could
be changed at any time and which changes could be retroactive. The federal
income tax
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summary and the state and local income tax summary which follow in general
relate only to the tax implications of an investment in the Partnership by
individuals who are citizens or residents of the United States. Except as
indicated below or under "Purchases by Employee Benefit Plans--ERISA
Considerations," the summaries do not address the tax implications of an
investment in the Partnership by corporations, partnerships, trusts, and other
non-individuals. Moreover, the summaries are not intended as a substitute for
careful tax planning, particularly since certain of the tax consequences of
owning an interest in the Partnership may not be the same for all taxpayers,
such as non-individuals or foreign persons, or in light of an investor's
personal investment circumstances. A complete discussion of all federal, state
and local tax aspects of an investment in the Partnership is beyond the scope of
the following summary, and prospective investors must consult their own tax
advisors on such matters.
PARTNERSHIP STATUS
The General Partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in its opinion under current federal income tax law, the
Partnership will be classified as a partnership and not as an association (or a
publicly traded partnership) taxable as a corporation. No ruling has been
requested from the Internal Revenue Service with respect to classification of
the Partnership and the General Partner does not intend to request such a
ruling.
The opinion of counsel described above is based upon the facts set forth
herein, including that a principal activity of the Partnership consists of
buying and selling commodities not held as inventory, or futures, options and
forward contracts with respect to such commodities, and at least 90% of the
Partnership's gross income during each year consists of gains from such trading
and interest income.
Certain "publicly traded partnerships" are taxed as corporations. While this
treatment does not affect the Partnership, new legislation governing the
taxation of limited partnerships may be enacted at any time, and may apply to
the Partnership retroactively. If a partnership were treated as an association
(or a publicly traded partnership) taxable as a corporation, income or loss of
such partnership would not be passed through to its partners, and such
partnership would be subject to tax on its income without deduction for any
distributions to its partners, at the rates applicable to corporations. In
addition, all or a portion of any distributions by such partnership to its
partners could be taxable to the partners as dividends or capital gains.
PARTNERSHIP TAXATION
PARTNERS, RATHER THAN PARTNERSHIP, SUBJECT TO FEDERAL INCOME TAX. The
Partnership, as an entity, will not be subject to federal income tax. Except as
provided below with respect to certain nonresident aliens, each Limited Partner
in computing his federal income tax liability for a taxable year will be
required to take into account his distributive share of all items of Partnership
income, gain, loss, deduction, and credit for the taxable year of the
Partnership ending within or with the taxable year of such Partner, regardless
of whether such Partner has received any distributions from the Partnership. The
characterization of an item of profit or loss will usually be determined at the
Partnership level.
ORGANIZATION AND SYNDICATION EXPENSES. Neither the Partnership nor any
Partner thereof will be entitled to any deduction for syndication expenses
(I.E., those amounts paid or incurred in connection with issuing and marketing
Units).
ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES. For federal income tax
purposes, a Limited Partner's distributive share of items of Partnership income,
gain, loss, deduction, and credit will be determined by the Limited Partnership
Agreement, annexed hereto as Exhibit A, unless an allocation under such
Agreement does not have "substantial economic effect," in which case the
allocations are made in accordance with the Partners' interests in the
Partnership. In general, the Limited Partnership Agreement allocates items of
ordinary income and expense pro rata among the Partners based upon their
respective capital accounts as of the end of the month in which such items are
accrued. Net recognized gain or loss is generally allocated among all Partners
based upon their respective capital accounts. However, net recognized capital
gain or loss is allocated first to Partners who have redeemed Units in the
Partnership during a taxable year to the extent of the difference between the
amount received on the
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redemption and the allocation account as of the date of redemption attributable
to the redeemed Units. Net recognized gain for each year is allocated next among
all Partners whose capital accounts are in excess of their Units' allocation
accounts to the extent of such excess in the ratio that each such Partner's
excess bears to all such Partners' excesses. Net recognized loss for each year
is allocated next among all Partners whose Units' allocation accounts are in
excess of their capital accounts to the extent of such excess in the ratio that
each such Partner's excess bears to all such Partners' excesses.
The special allocation of Partnership net gain or loss upon a redemption of
Units, which retains the same character as in the hands of the Partnership, may
alter the character of a redeeming Limited Partner's income (by reducing the
amount of long-term capital gain recognized upon receipt of redemption proceeds)
and may accelerate the recognition of income by such Limited Partner.
These allocation provisions are designed to reconcile tax allocations to
economic allocations. However, no assurance can be given that the Internal
Revenue Service will not challenge such allocations (including the Partnership's
tax allocations in respect of redeemed Units), especially in light of issued
final regulations.
If the allocation provided by the Limited Partnership Agreement is not
recognized by the Internal Revenue Service for federal income tax purposes, the
amount of income or loss allocated to the Partners for federal income tax
purposes under the Limited Partnership Agreement may be increased or reduced or
the character of such income or loss may be modified.
CASH DISTRIBUTIONS AND REDEMPTIONS
Because of the special allocation of Partnership gain or loss upon a
redemption of Units, the amounts received upon the partial or complete
redemption of a Limited Partner's Units normally will not result in additional
taxable income or loss to the Limited Partner. However, distributions by the
Partnership and amounts received upon the partial or complete redemption of a
Limited Partner's Units will be taxable to the Limited Partner to the extent
cash distributions by the Partnership or amounts received upon redemption by a
Limited Partner exceed such Partner's adjusted tax basis in his Units. Such
excess will be taxable to him as though it were a gain from a sale of the Units.
A loss will be recognized upon a redemption of Units only if, following the
redemption of all of a Limited Partner's Units, such Partner has any tax basis
in his Units remaining. In such case, the Limited Partner will recognize loss to
the extent of such remaining basis. See "Redemptions." Generally, if a Limited
Partner is not a "dealer" with respect to his interest in the Partnership and he
has held his interest in the Partnership for more than 18 months, such gain or
loss would be long-term capital gain or loss.
GAIN OR LOSS ON TRADING ACTIVITY
Because the Partnership will purchase futures interests contracts for its
own account and not for the account of others, because the Partnership will not
maintain an inventory of futures interests contracts, and because substantially
all of the expected return of any combination of the Partnership's commodity
contract positions will not be attributable to the time value of the
Partnership's net investment in such positions, for federal income tax purposes
substantially all of the profit and loss generated by the Partnership from its
trading activities will be capital gain and loss, which in turn may be either
short-term, mid-term, long-term or a combination thereof. Gain or loss with
respect to a "Section 1256 contract" is generally treated as short-term capital
gain or loss to the extent of 40% of such gain or loss, and long-term capital
gain or loss to the extent of 60% of such gain or loss. For individual partners,
long-term capital gains are taxed at a maximum marginal rate of 20%, mid-term
capital gains (I.E., gains with respect to capital assets held for more than one
year, but not more than 18 months) are taxed at a maximum marginal rate of 28%,
and short-term capital gains are taxed at a maximum marginal rate of 39.6%. For
corporate partners, all capital gains are taxed at the same rate.
A "Section 1256 contract" includes a "regulated futures contract," which is
a futures contract traded on or subject to the rules of a national securities
exchange which is registered with the SEC, a domestic board of trade designated
as a contract market by the CFTC, or any other board of trade, exchange or other
market designated by the Secretary of the Treasury (a "qualified board or
exchange"), and which is "marked-to-market" to determine the amount of margin
which must be deposited or may
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be withdrawn. Each Section 1256 contract held at the end of the Partnership's
taxable year will be treated as having been sold for its fair market value on
the last day of such taxable year, and gain or loss will be taken into account
for such year. The Partnership expects that a majority of its trading activities
will be conducted in Section 1256 contracts; however, the Partnership also
expects that a portion of its trading activities will be conducted in contracts
that do not presently qualify as Section 1256 contracts ("non-Section 1256
contracts").
Subject to certain limitations, a Limited Partner, other than a corporation,
estate, or trust, may elect to carry back net Section 1256 contract losses to
each of the three preceding years. Net Section 1256 contract losses carried back
to prior years may only be used to offset net Section 1256 contract gains.
Generally, such losses are carried back as 40% short-term capital losses and 60%
long-term capital losses. Capital assets not marked to the market under Section
1256, such as non-currency forward contracts, are not subject to the 60/40 tax
regime for Section 1256 contracts, and gain or loss on sale generally will be
long-term only if such property has been held for more than 18 months.
During taxable years in which little or no profit is generated from trading
activities, a Limited Partner will still have interest income.
The Partnership will not initially, but may eventually engage in spread and
straddle trading (I.E., holding offsetting positions whereby the risk of loss
from holding either or both position(s) is substantially diminished). Realized
losses with respect to any position in a spread or straddle are taken into
account for federal income tax purposes only to the extent that the losses
exceed unrecognized gain (at the end of the taxable year) from offsetting
positions, successor positions, or offsetting positions to the successor
positions. Thus, spreads and straddles may not be used to defer gain from one
taxable year to the next. For purposes of applying the above rules restricting
the deductibility of losses with respect to offsetting positions, if a Partner
takes into account gain or loss with respect to a position held by the
Partnership, the Partner will be treated as holding the Partnership's position,
except to the extent otherwise provided in regulations. Accordingly, positions
held by the Partnership may limit the deductibility of realized losses sustained
by a Limited Partner with respect to positions held for his own account, and
positions held by a Limited Partner for his own account may limit his ability to
deduct realized losses sustained by the Partnership. Reporting requirements
generally require taxpayers to disclose all unrecognized gains with respect to
positions held at the end of the taxable year. The above principle, whereby a
Limited Partner may be treated as holding Partnership positions, may also apply
to require a Limited Partner to capitalize (rather than deduct) interest and
carrying charges allocable to property held by him. A portion of the gain on a
"conversion transaction," including spread and straddle trading, may be
characterized as ordinary income where substantially all of the expected return
is attributable to the time value of the net investment in the transaction.
Pursuant to current Proposed and Temporary Treasury Regulations, the holding
period of any position included in a straddle begins anew when the straddle is
terminated unless the position was held for more than the long-term capital gain
and loss holding period before the straddle was established. Further, the loss
on any position included in a straddle will be treated as a long-term capital
loss if, at the time the loss position was acquired, the taxpayer held
offsetting positions with respect to such loss position that would give rise
only to long-term capital loss if such offsetting positions were disposed of on
the day the loss position was acquired.
Where the positions of a straddle are comprised of both Section 1256 and
non-Section 1256 contracts, the Partnership will be subject to the mixed
straddle rules of the Code and the regulations promulgated thereunder. The
appropriate tax treatment of any gains and losses from trading in mixed
straddles will depend on which of the following four alternatives the
Partnership elects to pursue. The Partnership may elect to treat Section 1256
positions as non-Section 1256 positions, and the mixed straddle would be subject
to the rules governing non-Section 1256 straddles. Alternatively, the
Partnership may identify the positions of a particular straddle as an
"identified mixed straddle" under Section 1092(b)(2) of the Code and, thereby,
net the capital gain or loss attributable to the offsetting positions. The net
capital gain or loss is treated as 60% long-term and 40% short-term capital gain
or loss if
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attributable to the Section 1256 positions, or all short-term capital gain or
loss if attributable to the non-Section 1256 positions. Alternatively, the
Partnership may place the positions in a "mixed straddle" account which is
marked-to-market daily. Under a special account cap, not more than 50% of net
capital gain may be long-term capital gain, and not more than 40% of net capital
loss may be short-term capital loss. If the Partnership does not make any of the
aforementioned three elections, any net loss attributable to either the Section
1256 or the non-Section 1256 positions will be treated as 60% long-term and 40%
short-term capital loss, while any net gain will be treated as 60% long-term and
40% short-term capital gain, or all short-term capital gain, depending upon
whether the net gain was attributable to Section 1256 positions or non-Section
1256 positions.
TAXATION OF LIMITED PARTNERS
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES. The amount of
Partnership loss, including capital loss, which a Limited Partner will be
entitled to take into account for federal income tax purposes is limited to the
lesser of the tax basis of his Units or (in the case of certain Limited
Partners, including individuals and closely-held C corporations) the amounts for
which he is "at risk" with respect to such interest as of the end of the
Partnership's taxable year in which such loss occurred.
Generally, a Limited Partner's initial tax basis will be the amount paid for
each Unit of the Partnership (100% of the Net Asset Value of a Unit as of the
close of business of the last day of the month immediately preceding the
applicable closing for Units sold at such closing). A Limited Partner's adjusted
tax basis will be his initial tax basis reduced by the Limited Partner's share
of Partnership distributions, losses and expenses and increased by his share of
Partnership income, including gains. The amount for which a Limited Partner is
"at risk" with respect to his interest in the Partnership will generally be
equal to his tax basis for such interest, less: (i) any amounts borrowed in
connection with his acquisition of such interest for which he is not personally
liable and for which he has pledged no property other than his interest; (ii)
any amounts borrowed from persons who have a proprietary interest in the
Partnership; and (iii) any amounts borrowed for which the Limited Partner is
protected against loss through guarantees or similar arrangements.
Because of the limitations imposed upon the deductibility of capital losses
referred to below, a Limited Partner's share of the Partnership's net capital
losses, if any, will not materially reduce his federal income tax on his
ordinary income. In addition, certain expenses of the Partnership might be
deductible by a Partner only as so-called itemized deductions and, therefore,
will not reduce the federal taxable income of a Partner who does not itemize his
deductions. Furthermore, an individual who is subject to the alternative minimum
tax for a taxable year will not realize any tax benefit from such itemized
deductions.
LIMITATIONS ON DEDUCTIBILITY OF PASSIVE LOSSES. In general, losses from a
passive activity ("passive losses") are disallowed to the extent such losses
exceed income from all passive activities ("passive income"). A passive activity
is defined as a trade or business in which the taxpayer does not materially
participate unless otherwise provided in Treasury Regulations.
Proposed and Temporary Treasury Regulations provide that the trading of
personal property, such as commodities, will not be treated as a passive
activity. Accordingly, a Limited Partner's distributive share of items of
income, gain, deduction, or loss from the Partnership will not be treated as
passive income or loss and Partnership gains allocable to Limited Partners will
not be available to offset passive losses from sources outside the Partnership.
Partnership gains allocable to Limited Partners will, however, be available to
offset losses with respect to "portfolio" investments, such as stocks and bonds.
Moreover, any Partnership losses allocable to Limited Partners will be available
to offset other income, regardless of source. Final Treasury Regulations may
modify the Proposed and Temporary Regulations, and such regulations may be
retroactive in effect.
LIMITED DEDUCTION OF CERTAIN EXPENSES. Certain miscellaneous itemized
deductions, such as expenses incurred to maintain property held for investment,
are deductible only to the extent that they exceed 2% of the adjusted gross
income of an individual, trust, or estate. The amount of certain itemized
deductions allowable to individuals is further reduced by an amount equal to the
lesser of
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(i) 3% of the individual's adjusted gross income in excess of a certain
threshold amount (for tax years beginning in 1997, this amount is $121,200
($60,600 in the case of married individuals filing a separate return)) and (ii)
80% of such itemized deductions. Moreover, such investment expenses are
miscellaneous itemized deductions that are not deductible by a non-corporate
taxpayer in calculating its alternative minimum tax liability. Based upon the
contemplated activities of the Partnership, the General Partner has been advised
by its legal counsel that, in such counsel's opinion, expenses incurred by the
Partnership in its futures interests trading business should not be subject to
the 2% "floor" or the 3% phaseout, except to the extent that the Internal
Revenue Service promulgates regulations that so provide. However, such advice is
not binding on a court or the Internal Revenue Service, and the Internal Revenue
Service could assert, and a court could agree, that such Partnership expenses
(including incentive fees) are investment expenses which are subject to these
limitations.
TAX ON CAPITAL GAINS AND LOSSES. For individuals, trusts and estates,
long-term capital gains are currently taxed at a maximum marginal tax rate of
20%, mid-term capital gains are taxed at a maximum marginal rate of 28%, and
other income is taxed at a maximum marginal tax rate of 39.6%. Corporate
taxpayers are currently subject to a maximum marginal tax rate of 35% on all
income.
The excess of capital losses over capital gains is deductible by an
individual against ordinary income on a one-for-one basis, subject to an annual
limitation of $3,000 ($1,500 in the case of married individuals filing a
separate return). Excess capital losses may be carried forward.
Net losses from Section 1256 contracts are treated as 60% long-term capital
loss and 40% short-term capital loss. Such losses may, at the individual
taxpayer's election, be carried back to each of the preceding three years and
applied against gains from Section 1256 contracts.
ALTERNATIVE MINIMUM TAX. An alternative minimum tax may be imposed on
Limited Partners, depending on their particular circumstances. This tax, with
respect to taxpayers other than corporations, will be assessed to the extent
that 26% of the first $175,000 ($87,500 for married individuals filing a
separate return) of "alternative minimum taxable income" in excess of the
exemption amount ($45,000 in the case of married taxpayers filing joint returns
or a surviving spouse; $33,750 in the case of an unmarried taxpayer who is not a
surviving spouse; or $22,500 in the case of a married individual filing a
separate return or an estate or trust) plus 28% of the balance of such excess
exceeds the taxpayer's regular federal income tax liability (subject to special
modification) for the year. The alternative minimum tax exemption is phased-out
for individual taxpayers with alternative minimum taxable income in excess of
$112,500 ($150,000 for married taxpayers filing a joint return and surviving
spouses; $75,000 for married individuals filing separate returns, estates, and
trusts). "Alternative minimum taxable income" is equal to adjusted gross income
computed without deducting normal net operating losses, less specified net
operating losses, credits, trust distributions and itemized deductions, and
increased by certain tax preferences. Long-term capital gains are taxed at a
maximum 28% rate. However, the limitation on the long-term capital gains rate
does not give rise to an adjustment or increase in "alternative minimum taxable
income." Therefore, transactions in Section 1256 contracts should not directly
affect the application of the alternative minimum tax. The extent, if any, to
which the alternative minimum tax will be imposed will depend on the overall tax
situation of each Limited Partner at the end of each such taxable year.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT
INDEBTEDNESS. Interest paid or accrued on indebtedness properly allocable to
property held for investment is investment interest. Such interest is generally
deductible by non-corporate taxpayers only to the extent it does not exceed net
investment income. A Limited Partner's distributive share of net Partnership
income and any gain from the disposition of Units will be treated as investment
income, except that a Limited Partner's net capital gain from the disposition of
Units is not investment income unless the Limited Partner waives the benefit of
the 28% tax rate on such gain. It is not clear whether a Limited Partner's
distributive share of Partnership net capital gain constitutes investment income
where such gain is taxed at the maximum 28% rate. Interest expense incurred by a
Limited Partner to acquire his Units generally will be
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investment interest. Any investment interest disallowed as a deduction in a
taxable year solely by reason of the limitation above is treated as investment
interest paid or accrued in the succeeding taxable year.
TAXATION OF FOREIGN LIMITED PARTNERS. A Limited Partner who is a
non-resident alien individual, foreign corporation, foreign partnership, foreign
trust, or foreign estate (a "Foreign Limited Partner") generally is not subject
to taxation by the United States on United States source capital gains from
commodity trading for a taxable year, provided that such Foreign Limited Partner
does not have certain present or former connections with the United States
(e.g., if the Foreign Limited Partner (in the case of an individual) does not
spend more than 182 days in the United States during his taxable year (or, in
certain limited circumstances, a prior taxable year), or if the Foreign Limited
Partner is not engaged in a trade or business within the United States during
the taxable year or, in certain limited circumstances, a prior taxable year to
which income, gain, or loss from the Partnership is treated as effectively
connected).
Pursuant to a "safe harbor" provision of the Code, a Foreign Limited Partner
would not be engaged in a trade or business within the United States solely
because such Foreign Limited Partner is a partner of a partnership which effects
transactions in the United States in commodities for the partnership's own
account, as long as neither the Foreign Limited Partner nor the partnership is a
dealer in commodities and as long as the partnership only trades commodities
which are of a kind customarily dealt in on an organized commodity exchange in
transactions of a kind customarily consummated on such an exchange. The
Partnership has been advised by its counsel that, in such counsel's opinion, the
Partnership's commodities transactions should satisfy the safe harbor, and that
owning an interest in the Partnership should not, in such counsel's opinion, by
itself, cause a Foreign Limited Partner that is not a dealer in commodities to
be engaged in a trade or business within the United States. In the event that
future Partnership transactions are not covered by the safe harbor, there is a
risk that all of a Foreign Limited Partner's distributive share of income of the
Partnership would be treated as effectively connected with the conduct of a
trade or business in the United States and taxed at regular rates (discussed
previously) and, in the case of a Foreign Limited Partner which is a foreign
corporation, an additional 30% branch profits tax (unless reduced or eliminated
by treaty).
If a Foreign Limited Partner is a dealer in commodities, or otherwise is
engaged in a U.S. trade or business, and if income, gain, or loss from the
Partnership is treated as effectively connected with such trade or business, the
Partnership may be required to withhold tax on income allocable to such Foreign
Limited Partner and remit to the Internal Revenue Service an amount equal to
39.6% (35% for corporations) of the amount of such effectively connected taxable
income allocable to the Foreign Limited Partner. Any amounts remitted will
constitute a refundable credit against the Foreign Limited Partner's United
States federal income tax liability, which can be claimed on the Foreign Limited
Partner's United States federal income tax return. Foreign Limited Partners that
are corporations and derive effectively connected income from the Partnership
may also be required to pay a branch profits tax at a 30% rate unless reduced by
an applicable tax treaty.
A foreign person generally is subject to a 30% withholding tax (unless
reduced or exempted by treaty) on certain types of United States source income
that are not effectively connected with the conduct of a United States trade or
business, such as certain interest-bearing obligations, the income attributable
to which is not exempt from tax. 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 Limited
Partner. However, 30% withholding is not required in respect of certain
interest-bearing obligations, such as "portfolio interest" obligations issued
after July 18, 1984 (if procedural requirements are complied with). If the
Partnership is required to withhold tax on such income of a Foreign Limited
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 Limited Partner.
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The estate of a deceased Foreign Limited Partner may be liable for U.S.
estate tax and may be required to obtain an estate tax release from the Internal
Revenue Service in order to transfer the Units of such Foreign Limited Partner.
FOREIGN PERSONS SHOULD CONSULT THEIR OWN TAX ADVISERS BEFORE DECIDING
WHETHER TO INVEST IN THE PARTNERSHIP.
TAX ELECTIONS. The Code provides for optional adjustments to the basis of
Partnership property upon distributions of Partnership property to a Partner
(Section 734) and transfers of Units, including transfers by reason of death
(Section 743), provided that a Partnership election has been made pursuant to
Section 754. As a result of the complexities and added expense of the tax
accounting required to implement such an election, the General Partner does not
presently intend to make such an election. Therefore, any benefits which might
be available to the Partners by reason of such an election will be foreclosed.
TAX RETURNS AND INFORMATION. The Partnership will file its information
return using the accrual method of accounting. Within 75 days after the close of
the Partnership's taxable year, the Partnership will furnish each Limited
Partner (and any assignee of the Units of any Limited Partner) copies of (i) the
Partnership's Schedule K-1 indicating the Limited Partner's distributive share
of tax items and (ii) such additional information as is reasonably necessary to
permit the Limited Partners to prepare their own federal and state tax returns.
PARTNERSHIP'S TAX ACCOUNTING. The Partnership has the calendar year as its
taxable year.
UNRELATED BUSINESS TAXABLE INCOME OF EMPLOYEE BENEFIT PLAN LIMITED PARTNERS
AND OTHER TAX-EXEMPT INVESTORS. Income allocated to a Limited Partner which is
an employee benefit plan or other tax-exempt entity should not be subject to tax
under Section 511 of the Code, provided that the Units purchased by such plans
and entities are not "debt-financed." Such investors should see "Purchases by
Employee Benefit Plans--ERISA Considerations."
TAX AUDITS
All Partners are required under the Code to report all the Partnership items
on their own returns consistently with the treatment by the Partnership, unless
they file a statement with the Internal Revenue Service disclosing the
inconsistencies. Adjustments in tax liability with respect to Partnership items
will be made at the Partnership level. The General Partner will represent the
Partnership during any audit and in any dispute with the Internal Revenue
Service. Each Limited Partner in the Partnership will be informed by the General
Partner of the commencement of an audit of the Partnership. In general, the
General Partner may enter into a settlement agreement with the Internal Revenue
Service on behalf of, and binding upon, certain Limited Partners (I.E., Limited
Partners owning less than a 1% profits interest if the Partnership has more than
100 Partners). However, prior to settlement, a Limited Partner may file a
statement with the Internal Revenue Service stating that the General Partner
does not have the authority to settle on behalf of such Limited Partner.
The period for assessing a deficiency against a partner in a partnership,
such as the Partnership, with respect to a partnership item is the later of
three years after the partnership files its return or, if the name and address
of the partner does not appear on the partnership return, one year after the
Internal Revenue Service is furnished with the name and address of the partner.
In addition, the General Partner may consent on behalf of the Partnership to the
extension of the period for assessing a deficiency with respect to a Partnership
item. As a result, a Limited Partner's federal income tax return may be subject
to examination and adjustment by the Internal Revenue Service for a Partnership
item more than three years after it has been filed.
-------------------
All of the foregoing statements are based upon the existing provisions of
the Code and the regulations promulgated thereunder and the existing
administrative and judicial interpretations thereof. It is emphasized that no
assurance can be given that legislative, administrative or judicial changes will
not occur which will modify such statements.
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The foregoing statements are not intended as a substitute for careful tax
planning, particularly since certain of the federal income tax consequences of
purchasing an interest in the Partnership may not be the same for all taxpayers.
There can be no assurance that the Partnership's tax return will not be audited
by the Internal Revenue Service or that no adjustments to the return will be
made as a result of such audits. If an audit results in adjustment, Limited
Partners may be required to file amended returns and their returns may be
audited. Accordingly, prospective purchasers of an interest in the Partnership
are urged to consult their tax advisers with specific reference to their own tax
situation under federal law and the provisions of applicable state, local and
foreign laws before subscribing for Units.
STATE AND LOCAL INCOME TAX ASPECTS
In addition to the federal income tax consequences for individuals described
under "Material Federal Income Tax Considerations" above, the Partnership and
its Limited Partners may be subject to various state and local taxes. Certain of
such taxes could, if applicable, have a significant effect on the amount of tax
payable in respect of an investment in the Partnership. A Limited Partner's
distributive share of the realized profits of the Partnership may be required to
be included in determining his reportable income for state or local tax
purposes. Furthermore, state and local tax laws may not reflect recent changes
made to the federal income tax law and hence may be inconsistent with the
federal income treatment of gains and losses arising from the Partnership's
transactions in Section 1256 contracts. Accordingly, prospective Limited
Partners should consult with their own tax advisers concerning the applicability
of state and local taxes to an investment in the Partnership.
The General Partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in such counsel's opinion, the Partnership should not be
liable for New York City unincorporated business tax. Limited Partners who are
nonresidents of New York State will not be liable for New York State personal
income tax on such Partners' income from the Partnership, but may be liable for
such tax to the extent such Limited Partner's allocable share of income
attributable to Partnership transactions involves tangible personal property.
Likewise, Limited Partners who are nonresidents of New York City will not be
liable for New York City earnings tax on such Partners' income from the
Partnership. New York City residents may be subject to New York City personal
income tax on such Partners' income from the Partnership. No ruling from the New
York State Department of Taxation and Finance or the New York City Department of
Finance has been, or will be, requested regarding such matters.
POTENTIAL ADVANTAGES
An investment in the Partnership is speculative and involves a high degree
of risk. The General Partner and DWR believe that managed futures investments
(such as the Partnership) provide investors with the potential for long-term
capital appreciation (with commensurate risk) and are appropriate only for the
aggressive growth portion of an investor's comprehensive financial plan. See
"Risk Factors." However, such an investment offers the following potential
advantages.
INVESTMENT DIVERSIFICATION
An investor who is not prepared to make a significant investment or spend
substantial time trading various futures interests nevertheless may participate
in these markets through an investment in the Partnership, thereby obtaining
diversification from investments in stocks, bonds, and real estate. The General
Partner believes that the profit potential of the Partnership does not depend
upon favorable general economic conditions, and that the Partnership is as
likely to be profitable during periods of declining stock, bond, and real estate
markets as at any other time; conversely, the Partnership may be unprofitable
(as well as profitable) during periods of generally favorable economic
conditions.
63
<PAGE>
Managed futures investments can serve to diversify a portfolio and smooth
overall portfolio volatility. Modern Portfolio Theory ("MPT") is the academic
affirmation of the value of diversification. MPT was developed in the 1950s by
Nobel Laureates William Sharpe and Harold Markowitz. These two pioneers
developed a framework for efficiently diversifying assets within a portfolio.
They suggested that investing in any asset class with positive returns and low
correlation to other assets improves the overall risk/reward characteristics of
the entire portfolio. In 1983, Dr. John H. Lintner of Harvard University focused
on the concepts of MPT in a ground-breaking study about portfolio
diversification. The results of Lintner's work demonstrated that by including a
variety of assets, such as commodities, in a hypothetical portfolio an investor
may lower the portfolio's overall volatility or risk.
The Partnership's combined benefits of growth potential (with commensurate
risk) and diversification can potentially reduce overall portfolio volatility
while increasing profits. By combining asset classes, investors strive to create
a portfolio mix that provides the potential to offer the greatest possible
return within acceptable levels of volatility. As reported in THE WALL STREET
JOURNAL, Harvard University shifted about 3% of its $8.6 billion endowment into
commodity-related investments in 1994, and since then, other colleges and
universities, such as Stanford and Notre Dame, have followed; according to Jack
R. Meyer, President and Chief Executive Officer of Harvard Management Co.,
"Commodities have zero or negative correlation" to other financial assets. Thus,
while past performance is no guarantee of future results, a managed futures
investment such as the Partnership may profit (with commensurate risk) from
futures interests market moves, with the potential to enhance an investor's
overall portfolio.
In investigating opportunities in traditional commodities markets, there are
two major factors an investor should consider:
1.
Which commodities markets they would like exposure to, and
2.
Would they prefer an active or passive approach to those markets.
In choosing the commodities markets with which to become involved, a
parallel may be drawn with the equity markets. If one chooses to focus an equity
portfolio on a single industry within a particular country, one's results will
generally differ greatly from a broadly diversified portfolio of stocks in that
country. Similarly, if one chooses to focus on a particular commodity market or
sector, results are likely to be far different from a broadly diversified
approach to all or most of the traditional commodity markets. In both cases,
narrowing the focus and being "right" will improve the return on the investment,
but almost certainly at the expense of higher volatility. Most equity market
investors, unless they are particularly knowledgeable and optimistic about the
prospects for a specific industry, gravitate towards a more broadly diversified
portfolio. Similar caution should be exhibited prior to shunning a diversified
commodities investment in favor of narrowly focused approach to one specific
commodity market or sector, particularly if prices in that market or sector have
recently reached new heights.
The Trading Advisor's speculative trading techniques will be the primary
factors in the Partnership's future success or failure. MSCM's trading strategy
is designed to take advantage of the fact that commodity markets generally
follow the basic laws of supply and demand. Thus, on the demand side, consumers
generally react to price increases by looking for ways to economize on their
usage or find more attractively priced alternatives. Such action puts downward
pressure on prices. Conversely, consumer reaction to a decrease in prices is to
consider utilizing a greater quantity of the more attractively priced commodity,
thereby creating upward price pressure. On the supply side, producers react to
increasing prices by increasing production so that they can benefit from the
increased profit margin that higher prices provide. Such added supply creates
downward price pressure. Lower prices generally cause producers to reduce their
investment spending and, when prices fall below marginal costs of production, to
decrease production. These actions generally create upward price pressure.
The trading strategy will seek to benefit from these supply and demand
dynamics by over-weighting exposure to commodities that are historically
undervalued and showing signs of strengthening, and under-weighting exposure to
those markets that are historically overvalued and showing signs
64
<PAGE>
of weakening. While this strategy is applied in a highly disciplined manner, the
fundamentals of the individual commodity markets will be continually monitored
in order to identify any cases in which the existing supply and demand dynamics
may diverge from the norm. The markets will also be monitored in an attempt to
identify the existence of any potential price shocks that might be caused by
unusual supply-side or demand-side factors. When the supply and demand dynamics
for a given commodity diverge from the norm to an extent that is deemed to be
sufficiently extreme, the Partnership's trading strategy will be adjusted to
incorporate these unusual factors in the marketplace.
Investors should note that there are always two parties to a futures
interests contract, consequently, for any gain achieved by one party on a
futures interests contract, a corresponding loss is suffered by the other.
Therefore, due to the nature of futures interests trading, only 50% of futures
interests held by all market participants can experience gain at any one time,
without reference to brokerage commissions and other costs of trading, which may
reduce or eliminate any gain that would otherwise be achieved.
FUTURES INTERESTS TRADED AND THE FUTURES MARKETS
The Partnership will normally trade a portfolio of futures interests in
diverse commodities, but may trade a greater or lesser number of futures
interests, from time to time. Each Limited Partner will obtain greater
diversification in futures interests traded than would be possible trading
individually, unless substantially more than the minimum investment described
herein were committed to the futures interests markets.
Unlike broad stock market indices, which are generally influenced by
activity in the market as a whole, prices in each commodity sector are
influenced by a different set of factors. As a result, there are generally
commodity markets that are increasing in price and other commodity markets that
are decreasing in price at any point in time. The following tables illustrate
the price movements of coffee (Coffee, Sugar & Cocoa Exchange), crude oil (New
York Mercantile Exchange), and corn (Chicago Board of Trade) futures contracts
over the period April 1994 - July 1997. The notes following each table reflect
the varying factors affecting significant price increases and decreases.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATES COFFEE
<S> <C>
04/29/94 89.15
05/02/94 89.80
05/03/94 93.95
05/04/94 94.75
05/05/94 100.20
05/06/94 104.20
05/09/94 108.40
05/10/94 108.90
05/11/94 106.65
05/12/94 108.85
05/13/94 115.50
05/16/94 128.00
05/17/94 121.00
05/18/94 123.15
05/19/94 132.55
05/20/94 130.90
05/23/94 139.05
05/24/94 133.10
05/25/94 127.75
05/26/94 117.80
05/27/94 121.30
05/30/94 123.65
05/31/94 126.00
06/01/94 123.00
06/02/94 126.25
06/03/94 124.55
06/06/94 119.25
06/07/94 122.95
06/08/94 127.95
06/09/94 124.85
06/10/94 125.20
06/13/94 138.30
06/14/94 138.45
06/15/94 138.10
06/16/94 133.65
06/17/94 134.70
06/20/94 129.85
06/21/94 131.30
06/22/94 127.40
06/23/94 125.95
06/24/94 125.95
06/27/94 159.75
06/28/94 170.30
06/29/94 188.75
06/30/94 189.75
07/01/94 193.45
07/04/94 189.07
07/05/94 184.70
07/06/94 191.75
07/07/94 191.15
07/08/94 187.30
07/11/94 233.75
07/12/94 245.50
07/13/94 245.25
07/14/94 232.75
07/15/94 234.75
07/18/97 237.45
07/19/97 230.45
07/20/97 220.55
07/21/97 229.20
07/22/97 219.40
07/25/94 209.20
07/26/94 208.10
07/27/94 210.95
07/28/94 202.40
07/29/94 202.75
08/01/97 211.60
08/02/97 213.40
08/03/97 210.30
08/04/97 207.80
08/05/97 202.75
08/08/97 178.60
08/09/97 182.30
08/10/97 177.45
08/11/97 184.85
08/12/97 181.10
08/15/94 194.00
08/16/94 191.95
08/17/94 179.45
08/18/94 182.75
08/19/94 178.10
08/22/97 182.75
08/23/97 191.80
08/24/97 189.00
08/25/97 191.75
08/26/97 205.85
08/29/94 209.00
08/30/94 207.75
08/31/94 205.75
09/01/94 206.75
09/02/94 204.25
09/05/94 208.32
09/06/94 212.40
09/07/94 210.50
09/08/94 210.00
09/09/94 211.50
09/12/94 217.50
09/13/94 217.00
09/14/94 207.15
09/15/94 206.50
09/16/94 216.15
09/19/94 222.25
09/20/94 224.25
09/21/94 231.35
09/22/94 227.55
09/23/94 229.65
09/26/94 226.60
09/27/94 219.95
09/28/94 214.50
09/29/94 216.10
09/30/94 208.85
10/03/94 209.60
10/04/94 214.15
10/05/94 215.05
10/06/94 205.75
10/07/94 192.90
10/10/94 179.75
10/11/94 184.40
10/12/94 190.90
10/13/94 194.60
10/14/94 188.35
10/17/94 203.85
10/18/94 194.90
10/19/94 201.60
10/20/94 202.65
10/21/94 195.55
10/24/94 196.75
10/25/94 195.45
10/26/94 190.80
10/27/94 189.40
10/28/94 189.50
10/31/94 187.40
11/01/94 186.35
11/02/94 178.30
11/03/94 180.70
11/04/94 183.00
11/07/94 183.80
11/08/94 189.00
11/09/94 186.90
11/10/94 183.85
11/11/94 183.95
11/14/94 177.15
11/15/94 171.25
11/16/94 176.10
11/17/94 171.30
11/18/94 167.40
11/21/94 158.65
11/22/94 160.35
11/23/94 158.40
11/24/94 159.00
11/25/94 159.63
11/28/94 160.25
11/29/94 158.50
11/30/94 157.15
12/01/94 158.00
12/02/94 158.00
12/05/94 159.50
12/06/94 162.00
12/07/94 161.00
12/08/94 162.00
12/09/94 160.30
12/12/94 163.75
12/13/94 150.75
12/14/94 144.25
12/15/94 147.75
12/16/94 158.50
12/19/94 152.30
12/20/94 161.65
12/21/94 173.75
12/22/94 171.75
12/23/94 172.45
12/26/94 172.42
12/27/94 172.40
12/28/94 174.20
12/29/94 173.85
12/30/94 168.85
01/02/95 168.30
01/03/95 167.75
01/04/95 168.00
01/05/95 172.55
01/06/95 174.95
01/09/95 169.10
01/10/95 169.00
01/11/95 164.70
01/12/95 167.70
01/13/95 169.80
01/16/95 168.45
01/17/95 170.30
01/18/95 174.25
01/19/95 172.35
01/20/95 169.85
01/23/95 169.55
01/24/95 166.60
01/25/95 165.40
01/26/95 167.00
01/27/95 161.65
01/30/95 157.45
01/31/95 155.50
02/01/95 155.75
02/02/95 158.20
02/03/95 154.35
02/06/95 153.90
02/07/95 154.00
02/08/95 156.85
02/09/95 158.90
02/10/95 162.75
02/13/95 162.20
02/14/95 164.50
02/15/95 165.25
02/16/95 162.85
02/17/95 169.35
02/20/95 169.73
02/21/95 170.10
02/22/95 169.15
02/23/95 169.65
02/24/95 174.55
02/27/95 184.30
02/28/95 181.00
03/01/95 186.35
03/02/95 182.05
03/03/95 179.85
03/06/95 179.65
03/07/95 179.65
03/08/95 181.15
03/09/95 183.30
03/10/95 186.35
03/13/95 181.50
03/14/95 182.70
03/15/95 178.75
03/16/95 172.00
03/17/95 168.25
03/20/95 168.30
03/21/95 165.50
03/22/95 169.55
03/23/95 165.65
03/24/95 167.60
03/27/95 167.70
03/28/95 167.50
03/29/95 167.25
03/30/95 164.05
03/31/95 166.30
04/03/95 165.45
04/04/95 165.10
04/05/95 167.45
04/06/95 166.80
04/07/95 167.10
04/10/95 167.00
04/11/95 165.45
04/12/95 165.65
04/13/95 162.65
04/14/95 163.47
04/17/95 164.30
04/18/95 165.75
04/19/95 169.15
04/20/95 169.20
04/21/95 172.85
04/24/95 175.05
04/25/95 174.95
04/26/95 173.65
04/27/95 171.80
04/28/95 170.25
05/01/95 169.50
05/02/95 167.80
05/03/95 172.20
05/04/95 171.50
05/05/95 171.00
05/08/95 170.60
05/09/95 171.10
05/10/95 171.25
05/11/95 166.65
05/12/95 165.00
05/15/95 167.00
05/16/95 164.50
05/17/95 167.00
05/18/95 165.65
05/19/95 167.10
05/22/95 162.35
05/23/95 155.45
05/24/95 151.05
05/25/95 154.85
05/26/95 152.10
05/29/95 153.08
05/30/95 154.05
05/31/95 153.85
06/01/95 158.65
06/02/95 159.60
06/05/95 158.40
06/06/95 156.65
06/07/95 150.15
06/08/95 151.70
06/09/95 152.30
06/12/95 153.60
06/13/95 146.45
06/14/95 147.10
06/15/95 154.25
06/16/95 149.90
06/19/95 147.15
06/20/95 149.55
06/21/95 149.80
06/22/95 151.15
06/23/95 144.15
06/26/95 138.80
06/27/95 138.10
06/28/95 139.20
06/29/95 136.65
06/30/95 130.50
07/03/95 129.00
07/04/95 127.63
07/05/95 126.25
07/06/95 120.75
07/07/95 131.35
07/10/95 138.00
07/11/95 136.50
07/12/95 138.00
07/13/95 139.00
07/14/95 145.00
07/17/95 140.00
07/18/95 139.90
07/19/95 137.00
07/20/95 142.20
07/21/95 148.30
07/24/95 146.70
07/25/95 147.35
07/26/95 152.30
07/27/95 147.60
07/28/95 143.30
07/31/95 145.70
08/01/95 142.00
08/02/95 144.40
08/03/95 144.75
08/04/95 144.15
08/07/95 143.75
08/08/95 145.25
08/09/95 144.75
08/10/95 147.00
08/11/95 146.95
08/14/95 146.25
08/15/95 147.15
08/16/95 147.35
08/17/95 145.45
08/18/95 144.65
08/21/95 147.45
08/22/95 149.50
08/23/95 151.20
08/24/95 150.35
08/25/95 153.60
08/28/95 153.90
08/29/95 153.00
08/30/95 147.00
08/31/95 146.40
09/01/95 147.65
09/04/95 146.65
09/05/95 145.65
09/06/95 143.50
09/07/95 138.20
09/08/95 137.30
09/11/95 133.35
09/12/95 126.75
09/13/95 127.00
09/14/95 129.00
09/15/95 133.00
09/18/95 124.45
09/19/95 120.00
09/20/95 122.85
09/21/95 127.70
09/22/95 125.60
09/25/95 116.10
09/26/95 119.80
09/27/95 115.20
09/28/95 115.25
09/29/95 117.25
10/02/95 121.80
10/03/95 121.80
10/04/95 123.15
10/05/95 123.50
10/06/95 118.10
10/09/95 114.05
10/10/95 117.80
10/11/95 119.90
10/12/95 118.65
10/13/95 122.05
10/16/95 125.90
10/17/95 122.20
10/18/95 123.55
10/19/95 125.45
10/20/95 124.95
10/23/95 126.35
10/24/95 124.60
10/25/95 121.75
10/26/95 123.40
10/27/95 122.75
10/30/95 120.55
10/31/95 121.55
11/01/95 122.25
11/02/95 123.90
11/03/95 125.80
11/06/95 125.35
11/07/95 124.95
11/08/95 127.90
11/09/95 126.90
11/10/95 126.75
11/13/95 128.40
11/14/95 124.15
11/15/95 125.45
11/16/95 121.15
11/17/95 120.35
11/20/95 117.80
11/21/95 116.50
11/22/95 114.15
11/23/95 114.30
11/24/95 114.60
11/27/95 114.90
11/28/95 112.60
11/29/95 112.00
11/30/95 107.70
12/01/95 107.10
12/04/95 105.95
12/05/95 108.15
12/06/95 105.00
12/07/95 106.90
12/08/95 104.75
12/11/95 105.90
12/12/95 105.80
12/13/95 107.75
12/14/95 107.20
12/15/95 108.60
12/18/95 100.90
12/19/95 99.50
12/20/95 95.70
12/21/95 96.70
12/22/95 96.35
12/25/95 96.00
12/26/95 95.60
12/27/95 95.20
12/28/95 93.90
12/29/95 94.90
01/01/96 93.08
01/02/96 91.25
01/03/96 93.75
01/04/96 97.85
01/05/96 96.25
01/08/96 96.75
01/09/96 97.33
01/10/96 97.90
01/11/96 103.05
01/12/96 102.70
01/15/96 98.95
01/16/96 103.90
01/17/96 104.30
01/18/96 105.40
01/19/96 104.65
01/22/96 107.50
01/23/96 107.00
01/24/96 108.90
01/25/96 111.75
01/26/96 116.95
01/29/96 123.45
01/30/96 119.55
01/31/96 128.60
02/01/96 126.40
02/02/96 123.75
02/05/96 120.65
02/06/96 119.40
02/07/96 118.60
02/08/96 123.70
02/09/96 126.05
02/12/96 121.60
02/13/96 122.80
02/14/96 122.65
02/15/96 124.30
02/16/96 124.20
02/19/96 123.42
02/20/96 122.65
02/21/96 124.85
02/22/96 124.20
02/23/96 117.60
02/26/96 115.70
02/27/96 116.30
02/28/96 114.60
02/29/96 117.80
03/01/96 113.50
03/04/96 114.50
03/05/96 116.90
03/06/96 115.80
03/07/96 116.10
03/08/96 114.80
03/11/96 116.75
03/12/96 120.00
03/13/96 118.85
03/14/96 121.70
03/15/96 124.75
03/18/96 127.20
03/19/96 124.50
03/20/96 117.70
03/21/96 120.00
03/22/96 119.70
03/25/96 119.20
03/26/96 123.45
03/27/96 121.75
03/28/96 121.40
03/29/96 115.45
04/01/96 114.50
04/02/96 115.85
04/03/96 115.35
04/04/96 115.25
04/05/96 114.40
04/08/96 113.55
04/09/96 114.65
04/10/96 118.50
04/11/96 117.10
04/12/96 115.25
04/15/96 114.85
04/16/96 115.60
04/17/96 117.30
04/18/96 118.80
04/19/96 118.15
04/22/96 130.25
04/23/96 127.05
04/24/96 127.45
04/25/96 125.35
04/26/96 127.95
04/29/96 123.25
04/30/96 125.10
05/01/96 128.25
05/02/96 128.25
05/03/96 128.25
05/06/96 126.20
05/07/96 127.65
05/08/96 130.00
05/09/96 128.30
05/10/96 128.25
05/13/96 127.15
05/14/96 126.95
05/15/96 127.25
05/16/96 129.75
05/17/96 129.80
05/20/96 127.00
05/21/96 124.20
05/22/96 120.45
05/23/96 117.85
05/24/96 117.65
05/27/96 117.25
05/28/96 116.85
05/29/96 117.30
05/30/96 115.85
05/31/96 116.10
06/03/96 112.55
06/04/96 113.40
06/05/96 113.85
06/06/96 113.05
06/07/96 115.35
06/10/96 117.75
06/11/96 117.30
06/12/96 118.80
06/13/96 116.90
06/14/96 117.95
06/17/96 120.70
06/18/96 122.70
06/19/96 121.90
06/20/96 121.45
06/21/96 119.70
06/24/96 122.95
06/25/96 122.70
06/26/96 123.20
06/27/96 124.50
06/28/96 126.95
07/01/96 126.50
07/02/96 125.00
07/03/96 124.15
07/04/96 125.00
07/05/96 125.58
07/08/96 126.15
07/09/96 122.05
07/10/96 121.00
07/11/96 123.00
07/12/96 120.25
07/15/96 115.45
07/16/96 111.40
07/17/96 116.65
07/18/96 118.85
07/19/96 117.65
07/22/96 104.05
07/23/96 104.30
07/24/96 104.10
07/25/96 102.95
07/26/96 104.05
07/29/96 105.40
07/30/96 105.25
07/31/96 106.40
08/01/96 106.70
08/02/96 107.50
08/05/96 107.90
08/06/96 109.20
08/07/96 109.30
08/08/96 116.10
08/09/96 115.10
08/12/96 116.15
08/13/96 123.15
08/14/96 121.30
08/15/96 121.15
08/16/96 120.85
08/19/96 120.65
08/20/96 122.50
08/21/96 125.05
08/22/96 131.10
08/23/96 132.25
08/26/96 136.45
08/27/96 131.10
08/28/96 127.30
08/29/96 128.10
08/30/96 128.35
09/02/96 126.70
09/03/96 125.05
09/04/96 124.20
09/05/96 122.60
09/06/96 124.60
09/09/96 122.50
09/10/96 121.85
09/11/96 117.15
09/12/96 114.85
09/13/96 115.25
09/16/96 116.10
09/17/96 112.20
09/18/96 109.20
09/19/96 103.60
09/20/96 103.60
09/23/96 104.55
09/24/96 106.00
09/25/96 106.45
09/26/96 105.70
09/27/96 105.25
09/30/96 102.95
10/01/96 104.75
10/02/96 105.40
10/03/96 107.45
10/04/96 109.80
10/07/96 112.70
10/08/96 112.50
10/09/96 113.55
10/10/96 114.90
10/11/96 116.30
10/14/96 115.10
10/15/96 114.20
10/16/96 112.20
10/17/96 109.90
10/18/96 109.10
10/21/96 113.00
10/22/96 117.60
10/23/96 119.30
10/24/96 117.45
10/25/96 116.00
10/28/96 119.10
10/29/96 116.35
10/30/96 119.15
10/31/96 117.20
11/01/96 117.25
11/04/96 117.75
11/05/96 118.85
11/06/96 124.30
11/07/96 127.35
11/08/96 125.85
11/11/96 119.95
11/12/96 118.20
11/13/96 118.50
11/14/96 121.60
11/15/96 122.50
11/18/96 119.55
11/19/96 122.25
11/20/96 120.75
11/21/96 117.25
11/22/96 118.25
11/25/96 117.75
11/26/96 117.15
11/27/96 116.25
11/28/96 116.00
11/29/96 115.40
12/02/96 114.80
12/03/96 114.30
12/04/96 112.80
12/05/96 112.45
12/06/96 111.75
12/09/96 113.10
12/10/96 117.75
12/11/96 119.00
12/12/96 123.40
12/13/96 129.40
12/16/96 124.50
12/17/96 122.50
12/18/96 111.90
12/19/96 110.20
12/20/96 112.15
12/23/96 113.10
12/24/96 114.75
12/25/96 115.00
12/26/96 115.60
12/27/96 116.20
12/30/96 115.95
12/31/96 116.90
01/01/97 116.78
01/02/97 116.65
01/03/97 116.25
01/06/97 114.05
01/07/97 119.35
01/08/97 118.90
01/09/97 119.35
01/10/97 119.60
01/13/97 118.45
01/14/97 122.20
01/15/97 122.60
01/16/97 123.05
01/17/97 124.00
01/20/97 129.25
01/21/97 129.65
01/22/97 135.30
01/23/97 140.05
01/24/97 136.90
01/27/97 136.60
01/28/97 139.50
01/29/97 144.60
01/30/97 140.30
01/31/97 139.40
02/03/97 145.65
02/04/97 147.45
02/05/97 144.55
02/06/97 150.80
02/07/97 151.05
02/10/97 158.65
02/11/97 163.55
02/12/97 171.85
02/13/97 180.05
02/14/97 177.85
02/17/97 172.98
02/18/97 168.10
02/19/97 175.30
02/20/97 178.45
02/21/97 174.80
02/24/97 173.45
02/25/97 174.15
02/26/97 185.45
02/27/97 183.10
02/28/97 190.40
03/03/97 198.45
03/04/97 211.65
03/05/97 219.75
03/06/97 211.95
03/07/97 205.75
03/10/97 215.50
03/11/97 219.00
03/12/97 215.65
03/13/97 202.00
03/14/97 205.00
03/17/97 197.65
03/18/97 209.60
03/19/97 168.10
03/20/97 169.15
03/21/97 165.75
03/24/97 162.90
03/25/97 179.30
03/26/97 186.85
03/27/97 189.80
03/28/97 190.47
03/31/97 191.15
04/01/97 194.30
04/02/97 193.15
04/03/97 177.70
04/04/97 179.15
04/07/97 179.40
04/08/97 178.75
04/09/97 189.70
04/10/97 191.05
04/11/97 189.10
04/14/97 196.00
04/15/97 192.40
04/16/97 208.05
04/17/97 209.80
04/18/97 216.55
04/21/97 214.90
04/22/97 211.20
04/23/97 214.30
04/24/97 219.75
04/25/97 216.35
04/28/97 220.25
04/29/97 226.40
04/30/97 239.05
05/01/97 252.75
05/02/97 247.55
05/05/97 250.90
05/06/97 249.60
05/07/97 245.65
05/08/97 240.00
05/09/97 239.00
05/12/97 245.65
05/13/97 261.00
05/14/97 261.50
05/15/97 277.05
05/16/97 276.50
05/19/97 255.25
05/20/97 240.25
05/21/97 253.10
05/22/97 260.30
05/23/97 256.85
05/26/97 265.57
05/27/97 274.30
05/28/97 295.55
05/29/97 314.80
05/30/97 276.40
06/02/97 253.95
06/03/97 264.20
06/04/97 251.55
06/05/97 230.50
06/06/97 237.25
06/09/97 253.30
06/10/97 217.95
06/11/97 207.65
06/12/97 207.80
06/13/97 195.70
06/16/97 196.50
06/17/97 208.70
06/18/97 190.05
06/19/97 195.90
06/20/97 198.95
06/23/97 194.65
06/24/97 198.00
06/25/97 200.00
06/26/97 190.25
06/27/97 189.90
06/30/97 192.40
07/01/97 196.50
07/02/97 196.00
07/03/97 187.50
07/04/97 186.38
07/07/97 185.25
07/08/97 191.50
07/09/97 197.00
07/10/97 182.50
07/11/97 186.00
07/14/97 187.00
07/15/97 184.50
07/16/97 187.25
07/17/97 186.90
07/18/97 192.50
07/21/97 195.70
07/22/97 169.10
07/23/97 181.65
07/24/97 180.40
07/25/97 176.30
07/28/97 188.35
07/29/97 188.90
07/30/97 185.75
07/31/97 184.50
08/01/97 184.95
08/04/97 193.75
08/05/97 203.10
08/06/97 200.55
08/07/97 208.80
08/08/97 205.85
08/11/97 199.35
</TABLE>
65
<PAGE>
NOTES TO TABLE:
Coffee prices more than triple in price during 1994 as a 20-year frost
(I.E., a frost, the severity of which one would expect to experience only once
in 20 years) is followed by an even more severe 50-year frost less than three
weeks later.
Coffee prices decline throughout 1995 as higher prices discourage demand,
particularly through less waste of coffee. Additionally, higher prices attract
to market older, lower grades of coffee for blending with more desirable grades.
By early 1997, U.S. inventories of quality coffee have reached historic
lows. Strikes and disappointing harvests in important South American growing
regions reduce supply and briefly lead to an unsustainable tripling in price.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATES CRUDE
<S> <C>
04/29/94 16.90
05/02/94 17.16
05/03/94 16.89
05/04/94 16.86
05/05/94 17.29
05/06/94 17.70
05/09/94 17.73
05/10/94 17.61
05/11/94 17.85
05/12/94 18.28
05/13/94 18.21
05/16/94 18.06
05/17/94 17.59
05/18/94 17.99
05/19/94 18.45
05/20/94 18.92
05/23/94 18.06
05/24/94 17.92
05/25/94 17.70
05/26/94 17.74
05/27/94 18.03
05/30/94 18.17
05/31/94 18.31
06/01/94 18.21
06/02/94 18.23
06/03/94 18.12
06/06/94 18.11
06/07/94 17.75
06/08/94 18.34
06/09/94 18.67
06/10/94 18.48
06/13/94 18.79
06/14/94 18.95
06/15/94 19.86
06/16/94 19.91
06/17/94 20.71
06/20/94 20.75
06/21/94 20.04
06/22/94 19.37
06/23/94 19.42
06/24/94 19.32
06/27/94 19.01
06/28/94 19.27
06/29/94 18.83
06/30/94 19.37
07/01/94 19.53
07/04/94 19.58
07/05/94 19.62
07/06/94 19.24
07/07/94 19.12
07/08/94 19.48
07/11/94 20.18
07/12/94 20.43
07/13/94 20.15
07/14/94 20.18
07/15/94 19.89
07/18/97 19.51
07/19/97 19.46
07/20/97 19.20
07/21/97 19.39
07/22/97 19.61
07/25/94 19.41
07/26/94 19.21
07/27/94 19.46
07/28/94 19.77
07/29/94 20.30
08/01/97 20.55
08/02/97 20.14
08/03/97 20.10
08/04/97 20.14
08/05/97 19.31
08/08/97 19.42
08/09/97 19.30
08/10/97 18.96
08/11/97 18.66
08/12/97 18.05
08/15/94 18.20
08/16/94 17.73
08/17/94 18.11
08/18/94 17.72
08/19/94 17.58
08/22/97 16.87
08/23/97 17.09
08/24/97 17.49
08/25/97 17.52
08/26/97 17.14
08/29/94 17.63
08/30/94 17.45
08/31/94 17.56
09/01/94 17.47
09/02/94 17.52
09/05/94 17.57
09/06/94 17.62
09/07/94 17.81
09/08/94 17.67
09/09/94 17.53
09/12/94 17.39
09/13/94 17.12
09/14/94 16.71
09/15/94 16.70
09/16/94 16.83
09/19/94 17.21
09/20/94 17.24
09/21/94 17.22
09/22/94 17.67
09/23/94 17.83
09/26/94 17.67
09/27/94 17.55
09/28/94 17.68
09/29/94 17.98
09/30/94 18.39
10/03/94 18.19
10/04/94 18.08
10/05/94 18.01
10/06/94 18.25
10/07/94 18.26
10/10/94 17.99
10/11/94 17.70
10/12/94 17.19
10/13/94 17.13
10/14/94 16.97
10/17/94 17.06
10/18/94 17.22
10/19/94 17.42
10/20/94 17.54
10/21/94 17.38
10/24/94 17.45
10/25/94 17.58
10/26/94 17.95
10/27/94 18.15
10/28/94 18.23
10/31/94 18.19
11/01/94 18.68
11/02/94 18.93
11/03/94 18.90
11/04/94 18.76
11/07/94 18.39
11/08/94 18.58
11/09/94 18.16
11/10/94 18.19
11/11/94 18.04
11/14/94 17.47
11/15/94 17.58
11/16/94 17.37
11/17/94 17.65
11/18/94 17.47
11/21/94 17.56
11/22/94 17.82
11/23/94 18.15
11/24/94 18.14
11/25/94 18.13
11/28/94 18.12
11/29/94 18.05
11/30/94 18.05
12/01/94 17.82
12/02/94 16.99
12/05/94 16.85
12/06/94 16.94
12/07/94 16.87
12/08/94 17.12
12/09/94 17.13
12/12/94 16.91
12/13/94 16.91
12/14/94 16.99
12/15/94 16.73
12/16/94 16.76
12/19/94 16.91
12/20/94 16.98
12/21/94 17.02
12/22/94 17.09
12/23/94 17.35
12/26/94 17.49
12/27/94 17.64
12/28/94 17.79
12/29/94 17.72
12/30/94 17.76
01/02/95 17.60
01/03/95 17.44
01/04/95 17.48
01/05/95 17.72
01/06/95 17.67
01/09/95 17.40
01/10/95 17.37
01/11/95 17.72
01/12/95 17.72
01/13/95 17.52
01/16/95 17.88
01/17/95 18.32
01/18/95 18.73
01/19/95 18.69
01/20/95 18.65
01/23/95 18.10
01/24/95 18.39
01/25/95 18.39
01/26/95 18.24
01/27/95 17.95
01/30/95 18.09
01/31/95 18.39
02/01/95 18.52
02/02/95 18.54
02/03/95 18.78
02/06/95 18.59
02/07/95 18.46
02/08/95 18.30
02/09/95 18.24
02/10/95 18.46
02/13/95 18.27
02/14/95 18.32
02/15/95 18.42
02/16/95 18.59
02/17/95 18.91
02/20/95 18.89
02/21/95 18.86
02/22/95 18.63
02/23/95 18.43
02/24/95 18.69
02/27/95 18.66
02/28/95 18.49
03/01/95 18.32
03/02/95 18.35
03/03/95 18.63
03/06/95 18.59
03/07/95 18.63
03/08/95 18.33
03/09/95 18.02
03/10/95 17.91
03/13/95 18.19
03/14/95 17.94
03/15/95 18.11
03/16/95 18.16
03/17/95 18.26
03/20/95 18.56
03/21/95 18.43
03/22/95 18.96
03/23/95 18.92
03/24/95 18.78
03/27/95 19.07
03/28/95 19.05
03/29/95 19.22
03/30/95 19.15
03/31/95 19.17
04/03/95 19.03
04/04/95 19.18
04/05/95 19.56
04/06/95 19.77
04/07/95 19.67
04/10/95 19.59
04/11/95 19.88
04/12/95 19.55
04/13/95 19.15
04/14/95 19.44
04/17/95 19.73
04/18/95 20.05
04/19/95 20.41
04/20/95 20.52
04/21/95 20.41
04/24/95 20.12
04/25/95 20.29
04/26/95 20.15
04/27/95 20.43
04/28/95 20.38
05/01/95 20.50
05/02/95 20.09
05/03/95 19.89
05/04/95 20.29
05/05/95 20.33
05/08/95 20.29
05/09/95 19.61
05/10/95 19.75
05/11/95 19.41
05/12/95 19.52
05/15/95 19.90
05/16/95 20.08
05/17/95 19.96
05/18/95 20.00
05/19/95 20.06
05/22/95 19.81
05/23/95 19.77
05/24/95 19.41
05/25/95 19.26
05/26/95 18.69
05/29/95 18.74
05/30/95 18.78
05/31/95 18.89
06/01/95 18.90
06/02/95 19.14
06/05/95 19.25
06/06/95 19.06
06/07/95 19.13
06/08/95 18.91
06/09/95 18.80
06/12/95 18.86
06/13/95 18.91
06/14/95 19.05
06/15/95 18.94
06/16/95 18.84
06/19/95 18.22
06/20/95 18.01
06/21/95 17.46
06/22/95 17.50
06/23/95 17.49
06/26/95 17.64
06/27/95 17.77
06/28/95 17.97
06/29/95 17.56
06/30/95 17.40
07/03/95 17.30
07/04/95 17.24
07/05/95 17.18
07/06/95 17.37
07/07/95 17.14
07/10/95 17.34
07/11/95 17.32
07/12/95 17.49
07/13/95 17.25
07/14/95 17.32
07/17/95 17.20
07/18/95 17.35
07/19/95 17.33
07/20/95 17.01
07/21/95 16.79
07/24/95 16.88
07/25/95 16.93
07/26/95 17.50
07/27/95 17.49
07/28/95 17.43
07/31/95 17.56
08/01/95 17.70
08/02/95 17.78
08/03/95 17.72
08/04/95 17.71
08/07/95 17.65
08/08/95 17.79
08/09/95 17.78
08/10/95 17.89
08/11/95 17.86
08/14/95 17.48
08/15/95 17.47
08/16/95 17.55
08/17/95 17.66
08/18/95 17.87
08/21/95 18.25
08/22/95 18.54
08/23/95 18.00
08/24/95 17.86
08/25/95 17.86
08/28/95 17.82
08/29/95 17.82
08/30/95 17.79
08/31/95 17.84
09/01/95 18.04
09/04/95 18.31
09/05/95 18.58
09/06/95 18.36
09/07/95 18.27
09/08/95 18.44
09/11/95 18.47
09/12/95 18.64
09/13/95 18.54
09/14/95 18.85
09/15/95 18.92
09/18/95 18.93
09/19/95 18.95
09/20/95 18.69
09/21/95 17.56
09/22/95 17.25
09/25/95 17.47
09/26/95 17.33
09/27/95 17.57
09/28/95 17.76
09/29/95 17.54
10/02/95 17.64
10/03/95 17.56
10/04/95 17.30
10/05/95 16.87
10/06/95 17.03
10/09/95 17.31
10/10/95 17.42
10/11/95 17.29
10/12/95 17.12
10/13/95 17.41
10/16/95 17.59
10/17/95 17.68
10/18/95 17.61
10/19/95 17.32
10/20/95 17.37
10/23/95 17.21
10/24/95 17.32
10/25/95 17.32
10/26/95 17.58
10/27/95 17.54
10/30/95 17.62
10/31/95 17.64
11/01/95 17.74
11/02/95 17.98
11/03/95 17.94
11/06/95 17.71
11/07/95 17.65
11/08/95 17.82
11/09/95 17.84
11/10/95 17.83
11/13/95 17.80
11/14/95 17.82
11/15/95 17.93
11/16/95 18.19
11/17/95 18.57
11/20/95 18.06
11/21/95 17.97
11/22/95 17.96
11/23/95 18.00
11/24/95 18.19
11/27/95 18.38
11/28/95 18.33
11/29/95 18.26
11/30/95 18.18
12/01/95 18.43
12/04/95 18.63
12/05/95 18.67
12/06/95 18.77
12/07/95 18.73
12/08/95 18.97
12/11/95 18.66
12/12/95 18.73
12/13/95 19.00
12/14/95 19.11
12/15/95 19.51
12/18/95 19.67
12/19/95 19.12
12/20/95 18.97
12/21/95 18.96
12/22/95 19.14
12/25/95 19.18
12/26/95 19.27
12/27/95 19.50
12/28/95 19.36
12/29/95 19.55
01/01/96 19.68
01/02/96 19.81
01/03/96 19.89
01/04/96 19.91
01/05/96 20.26
01/08/96 20.11
01/09/96 19.95
01/10/96 19.67
01/11/96 18.79
01/12/96 18.25
01/15/96 18.38
01/16/96 18.05
01/17/96 18.52
01/18/96 19.18
01/19/96 18.94
01/22/96 18.62
01/23/96 18.06
01/24/96 18.28
01/25/96 17.67
01/26/96 17.73
01/29/96 17.45
01/30/96 17.56
01/31/96 17.74
02/01/96 17.71
02/02/96 17.80
02/05/96 17.54
02/06/96 17.69
02/07/96 17.74
02/08/96 17.76
02/09/96 17.78
02/12/96 17.97
02/13/96 18.91
02/14/96 18.96
02/15/96 19.04
02/16/96 19.16
02/19/96 20.10
02/20/96 21.05
02/21/96 19.71
02/22/96 19.85
02/23/96 19.06
02/26/96 19.39
02/27/96 19.70
02/28/96 19.29
02/29/96 19.54
03/01/96 19.44
03/04/96 19.20
03/05/96 19.54
03/06/96 20.19
03/07/96 19.81
03/08/96 19.61
03/11/96 19.91
03/12/96 20.46
03/13/96 20.58
03/14/96 21.16
03/15/96 21.99
03/18/96 23.27
03/19/96 24.34
03/20/96 23.06
03/21/96 21.05
03/22/96 21.95
03/25/96 22.40
03/26/96 22.19
03/27/96 21.79
03/28/96 21.41
03/29/96 21.47
04/01/96 22.26
04/02/96 22.70
04/03/96 22.27
04/04/96 22.75
04/05/96 22.89
04/08/96 23.03
04/09/96 23.06
04/10/96 24.21
04/11/96 25.34
04/12/96 24.29
04/15/96 25.06
04/16/96 24.47
04/17/96 24.67
04/18/96 23.82
04/19/96 23.95
04/22/96 24.07
04/23/96 22.70
04/24/96 22.40
04/25/96 22.20
04/26/96 22.32
04/29/96 22.43
04/30/96 21.20
05/01/96 20.81
05/02/96 20.86
05/03/96 21.18
05/06/96 21.04
05/07/96 21.11
05/08/96 21.00
05/09/96 20.68
05/10/96 21.01
05/13/96 21.36
05/14/96 21.42
05/15/96 21.48
05/16/96 20.78
05/17/96 20.64
05/20/96 22.48
05/21/96 22.65
05/22/96 21.40
05/23/96 21.23
05/24/96 21.32
05/27/96 21.22
05/28/96 21.11
05/29/96 20.76
05/30/96 19.94
05/31/96 19.76
06/03/96 19.85
06/04/96 20.44
06/05/96 19.72
06/06/96 20.05
06/07/96 20.28
06/10/96 20.25
06/11/96 20.10
06/12/96 20.09
06/13/96 20.01
06/14/96 20.34
06/17/96 22.14
06/18/96 21.46
06/19/96 20.76
06/20/96 20.65
06/21/96 19.92
06/24/96 19.98
06/25/96 19.96
06/26/96 20.65
06/27/96 21.02
06/28/96 20.92
07/01/96 21.53
07/02/96 21.13
07/03/96 21.21
07/04/96 21.23
07/05/96 21.25
07/08/96 21.27
07/09/96 21.41
07/10/96 21.55
07/11/96 21.95
07/12/96 21.90
07/15/96 22.48
07/16/96 22.38
07/17/96 21.80
07/18/96 21.68
07/19/96 21.00
07/22/96 21.40
07/23/96 21.01
07/24/96 20.68
07/25/96 20.74
07/26/96 20.11
07/29/96 20.28
07/30/96 20.33
07/31/96 20.42
08/01/96 21.04
08/02/96 21.34
08/05/96 21.23
08/06/96 21.13
08/07/96 21.42
08/08/96 21.55
08/09/96 21.57
08/12/96 22.22
08/13/96 22.37
08/14/96 22.12
08/15/96 21.90
08/16/96 22.66
08/19/96 23.26
08/20/96 22.86
08/21/96 21.72
08/22/96 22.30
08/23/96 21.96
08/26/96 21.62
08/27/96 21.56
08/28/96 21.71
08/29/96 22.15
08/30/96 22.25
09/02/96 22.83
09/03/96 23.40
09/04/96 23.24
09/05/96 23.44
09/06/96 23.85
09/09/96 23.73
09/10/96 24.12
09/11/96 24.75
09/12/96 25.00
09/13/96 24.51
09/16/96 23.19
09/17/96 23.31
09/18/96 23.89
09/19/96 23.54
09/20/96 23.63
09/23/96 23.37
09/24/96 24.07
09/25/96 24.46
09/26/96 24.16
09/27/96 24.60
09/30/96 24.38
10/01/96 24.14
10/02/96 24.05
10/03/96 24.81
10/04/96 24.73
10/07/96 25.24
10/08/96 25.54
10/09/96 25.07
10/10/96 24.26
10/11/96 24.66
10/14/96 25.62
10/15/96 25.42
10/16/96 25.17
10/17/96 25.42
10/18/96 25.79
10/21/96 25.92
10/22/96 25.75
10/23/96 24.86
10/24/96 24.51
10/25/96 24.86
10/28/96 24.85
10/29/96 24.34
10/30/96 24.28
10/31/96 23.35
11/01/96 23.03
11/04/96 22.79
11/05/96 22.64
11/06/96 22.69
11/07/96 22.74
11/08/96 23.59
11/11/96 23.37
11/12/96 23.35
11/13/96 24.12
11/14/96 24.41
11/15/96 24.17
11/18/96 23.88
11/19/96 24.49
11/20/96 23.76
11/21/96 23.84
11/22/96 23.75
11/25/96 23.49
11/26/96 23.62
11/27/96 23.75
11/28/96 23.85
11/29/96 24.32
12/02/96 24.80
12/03/96 24.93
12/04/96 24.80
12/05/96 25.58
12/06/96 25.62
12/09/96 25.30
12/10/96 24.42
12/11/96 23.38
12/12/96 23.72
12/13/96 24.47
12/16/96 25.74
12/17/96 25.71
12/18/96 26.16
12/19/96 26.57
12/20/96 25.08
12/23/96 24.79
12/24/96 25.10
12/25/96 25.00
12/26/96 24.92
12/27/96 25.22
12/30/96 25.37
12/31/96 25.92
01/01/97 25.81
01/02/97 25.69
01/03/97 25.59
01/06/97 26.37
01/07/97 26.23
01/08/97 26.62
01/09/97 26.37
01/10/97 26.09
01/13/97 25.19
01/14/97 25.11
01/15/97 25.95
01/16/97 25.52
01/17/97 25.41
01/20/97 25.23
01/21/97 24.80
01/22/97 24.24
01/23/97 24.18
01/24/97 24.05
01/27/97 23.94
01/28/97 23.90
01/29/97 24.47
01/30/97 24.87
01/31/97 24.15
02/03/97 24.15
02/04/97 24.02
02/05/97 23.91
02/06/97 23.10
02/07/97 22.23
02/10/97 22.46
02/11/97 22.42
02/12/97 21.86
02/13/97 22.02
02/14/97 22.41
02/17/97 22.47
02/18/97 22.52
02/19/97 22.79
02/20/97 21.98
02/21/97 21.39
02/24/97 20.71
02/25/97 21.00
02/26/97 21.11
02/27/97 20.89
02/28/97 20.30
03/03/97 20.25
03/04/97 20.66
03/05/97 20.49
03/06/97 20.94
03/07/97 21.28
03/10/97 20.49
03/11/97 20.11
03/12/97 20.62
03/13/97 20.70
03/14/97 21.29
03/17/97 20.92
03/18/97 22.06
03/19/97 22.04
03/20/97 22.32
03/21/97 21.51
03/24/97 21.06
03/25/97 20.99
03/26/97 20.64
03/27/97 20.70
03/28/97 20.56
03/31/97 20.41
04/01/97 20.28
04/02/97 19.47
04/03/97 19.47
04/04/97 19.12
04/07/97 19.23
04/08/97 19.35
04/09/97 19.27
04/10/97 19.57
04/11/97 19.53
04/14/97 19.90
04/15/97 19.83
04/16/97 19.35
04/17/97 19.42
04/18/97 19.91
04/21/97 20.38
04/22/97 19.60
04/23/97 19.73
04/24/97 20.03
04/25/97 19.99
04/28/97 19.91
04/29/97 20.44
04/30/97 20.21
05/01/97 19.91
05/02/97 19.60
05/05/97 19.63
05/06/97 19.66
05/07/97 19.62
05/08/97 20.34
05/09/97 20.43
05/12/97 21.38
05/13/97 21.37
05/14/97 21.39
05/15/97 21.30
05/16/97 22.12
05/19/97 21.59
05/20/97 21.19
05/21/97 21.86
05/22/97 21.86
05/23/97 21.63
05/26/97 21.21
05/27/97 20.79
05/28/97 20.79
05/29/97 20.97
05/30/97 20.88
06/02/97 20.98
06/03/97 20.33
06/04/97 20.12
06/05/97 19.66
06/06/97 18.79
06/09/97 18.68
06/10/97 18.67
06/11/97 18.53
06/12/97 18.69
06/13/97 18.83
06/16/97 19.01
06/17/97 19.23
06/18/97 18.79
06/19/97 18.67
06/20/97 18.55
06/23/97 19.14
06/24/97 19.03
06/25/97 19.52
06/26/97 19.09
06/27/97 19.46
06/30/97 19.80
07/01/97 20.12
07/02/97 20.34
07/03/97 19.56
07/04/97 19.54
07/07/97 19.52
07/08/97 19.73
07/09/97 19.46
07/10/97 19.22
07/11/97 19.33
07/14/97 18.99
07/15/97 19.67
07/16/97 19.65
07/17/97 19.99
07/18/97 19.27
07/21/97 19.18
07/22/97 19.08
07/23/97 19.63
07/24/97 19.77
07/25/97 19.89
07/28/97 19.81
07/29/97 19.85
07/30/97 20.30
07/31/97 20.14
08/01/97 20.28
08/04/97 20.75
08/05/97 20.81
08/06/97 20.46
08/07/97 20.09
08/08/97 19.54
08/11/97 19.69
</TABLE>
NOTES TO TABLE:
After strong demand for gasoline during the summer of 1994 supports crude
oil prices, a mild winter leads to disappointing heating oil demand and lower
crude oil prices.
The spring of 1995 sees crude oil prices rally in anticipation of another
strong summer of gasoline demand, which fails to materialize. Crude oil prices
return to recent lows.
Tensions in the Middle East, including a delayed resumption of Iraqi
exports, combined with the failing health of King Fahd in Saudi Arabia propel
prices higher during 1996.
A mild winter moves crude oil prices lower for the start of 1997.
66
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATES CORN
<S> <C>
04/29/94 269.00
05/02/94 269.25
05/03/94 261.75
05/04/94 264.50
05/05/94 256.50
05/06/94 259.00
05/09/94 256.25
05/10/94 256.75
05/11/94 257.75
05/12/94 260.25
05/13/94 260.25
05/16/94 266.50
05/17/94 266.25
05/18/94 266.25
05/19/94 261.50
05/20/94 268.75
05/23/94 275.25
05/24/94 267.25
05/25/94 266.75
05/26/94 264.50
05/27/94 266.75
05/30/94 272.75
05/31/94 278.75
06/01/94 281.00
06/02/94 281.00
06/03/94 273.50
06/06/94 265.50
06/07/94 268.00
06/08/94 271.50
06/09/94 271.25
06/10/94 273.25
06/13/94 274.75
06/14/94 275.25
06/15/94 280.00
06/16/94 281.75
06/17/94 283.25
06/20/94 271.25
06/21/94 265.25
06/22/94 259.00
06/23/94 257.25
06/24/94 255.50
06/27/94 248.50
06/28/94 258.00
06/29/94 246.25
06/30/94 249.25
07/01/94 248.00
07/04/94 242.50
07/05/94 237.00
07/06/94 238.25
07/07/94 240.00
07/08/94 241.50
07/11/94 239.00
07/12/94 232.50
07/13/94 235.75
07/14/94 235.75
07/15/94 236.75
07/18/97 238.75
07/19/97 235.50
07/20/97 225.25
07/21/97 215.00
07/22/97 215.25
07/25/94 217.00
07/26/94 219.00
07/27/94 217.25
07/28/94 216.00
07/29/94 218.75
08/01/97 217.75
08/02/97 217.75
08/03/97 215.25
08/04/97 215.00
08/05/97 217.25
08/08/97 219.75
08/09/97 218.25
08/10/97 219.25
08/11/97 219.00
08/12/97 217.50
08/15/94 217.50
08/16/94 219.00
08/17/94 220.75
08/18/94 220.25
08/19/94 221.00
08/22/97 221.50
08/23/97 221.00
08/24/97 223.50
08/25/97 221.75
08/26/97 220.50
08/29/94 219.00
08/30/94 218.50
08/31/94 220.75
09/01/94 221.75
09/02/94 222.75
09/05/94 224.63
09/06/94 226.50
09/07/94 226.50
09/08/94 224.75
09/09/94 223.00
09/12/94 224.50
09/13/94 224.00
09/14/94 221.25
09/15/94 217.25
09/16/94 216.75
09/19/94 216.25
09/20/94 217.75
09/21/94 210.50
09/22/94 217.25
09/23/94 217.00
09/26/94 216.75
09/27/94 215.75
09/28/94 214.75
09/29/94 214.75
09/30/94 215.75
10/03/94 217.50
10/04/94 217.50
10/05/94 217.75
10/06/94 215.75
10/07/94 214.25
10/10/94 213.75
10/11/94 213.75
10/12/94 215.00
10/13/94 215.50
10/14/94 217.50
10/17/94 216.50
10/18/94 215.00
10/19/94 214.50
10/20/94 217.50
10/21/94 214.75
10/24/94 217.25
10/25/94 215.50
10/26/94 215.25
10/27/94 218.00
10/28/94 216.75
10/31/94 215.75
11/01/94 215.75
11/02/94 215.75
11/03/94 215.25
11/04/94 215.75
11/07/94 216.50
11/08/94 217.00
11/09/94 219.00
11/10/94 219.75
11/11/94 217.50
11/14/94 217.00
11/15/94 216.75
11/16/94 216.75
11/17/94 217.75
11/18/94 217.25
11/21/94 216.25
11/22/94 215.00
11/23/94 211.75
11/24/94 212.00
11/25/94 212.25
11/28/94 212.25
11/29/94 211.50
11/30/94 213.00
12/01/94 214.00
12/02/94 215.50
12/05/94 217.75
12/06/94 214.50
12/07/94 216.00
12/08/94 217.00
12/09/94 218.75
12/12/94 219.75
12/13/94 219.25
12/14/94 216.50
12/15/94 216.50
12/16/94 218.25
12/19/94 216.00
12/20/94 219.00
12/21/94 229.50
12/22/94 229.50
12/23/94 231.25
12/26/94 231.88
12/27/94 232.50
12/28/94 233.25
12/29/94 231.50
12/30/94 231.00
01/02/95 229.75
01/03/95 228.50
01/04/95 228.75
01/05/95 230.75
01/06/95 231.75
01/09/95 232.75
01/10/95 232.25
01/11/95 232.50
01/12/95 234.25
01/13/95 234.00
01/16/95 234.50
01/17/95 235.50
01/18/95 234.75
01/19/95 234.25
01/20/95 233.50
01/23/95 233.00
01/24/95 233.25
01/25/95 233.25
01/26/95 233.00
01/27/95 232.25
01/30/95 229.50
01/31/95 229.50
02/01/95 231.00
02/02/95 231.75
02/03/95 232.50
02/06/95 235.75
02/07/95 233.75
02/08/95 233.75
02/09/95 233.75
02/10/95 234.50
02/13/95 234.00
02/14/95 234.75
02/15/95 234.25
02/16/95 233.25
02/17/95 232.75
02/20/95 232.50
02/21/95 232.25
02/22/95 232.50
02/23/95 233.50
02/24/95 233.25
02/27/95 233.25
02/28/95 234.25
03/01/95 235.25
03/02/95 234.75
03/03/95 233.50
03/06/95 236.75
03/07/95 238.00
03/08/95 237.75
03/09/95 237.75
03/10/95 238.75
03/13/95 241.00
03/14/95 241.00
03/15/95 242.25
03/16/95 241.00
03/17/95 240.75
03/20/95 239.75
03/21/95 240.50
03/22/95 241.25
03/23/95 247.25
03/24/95 246.75
03/27/95 248.25
03/28/95 249.25
03/29/95 248.75
03/30/95 249.00
03/31/95 250.00
04/03/95 253.25
04/04/95 252.00
04/05/95 250.75
04/06/95 249.75
04/07/95 250.00
04/10/95 251.50
04/11/95 252.00
04/12/95 250.25
04/13/95 246.75
04/14/95 245.88
04/17/95 245.00
04/18/95 243.75
04/19/95 244.25
04/20/95 246.00
04/21/95 246.75
04/24/95 247.00
04/25/95 248.50
04/26/95 249.25
04/27/95 248.75
04/28/95 249.00
05/01/95 251.50
05/02/95 252.75
05/03/95 251.00
05/04/95 252.00
05/05/95 249.75
05/08/95 252.25
05/09/95 252.25
05/10/95 252.25
05/11/95 252.25
05/12/95 252.25
05/15/95 250.00
05/16/95 251.25
05/17/95 253.25
05/18/95 255.50
05/19/95 252.25
05/22/95 262.25
05/23/95 268.00
05/24/95 267.25
05/25/95 267.00
05/26/95 271.00
05/29/95 268.88
05/30/95 266.75
05/31/95 266.00
06/01/95 269.25
06/02/95 272.25
06/05/95 268.75
06/06/95 267.50
06/07/95 265.50
06/08/95 271.00
06/09/95 269.50
06/12/95 268.50
06/13/95 271.25
06/14/95 276.25
06/15/95 278.00
06/16/95 277.25
06/19/95 283.75
06/20/95 280.75
06/21/95 282.00
06/22/95 279.25
06/23/95 279.00
06/26/95 267.25
06/27/95 263.50
06/28/95 270.00
06/29/95 268.25
06/30/95 272.00
07/03/95 275.50
07/04/95 276.13
07/05/95 276.75
07/06/95 277.00
07/07/95 277.25
07/10/95 277.25
07/11/95 280.00
07/12/95 284.75
07/13/95 284.50
07/14/95 287.00
07/17/95 294.50
07/18/95 295.50
07/19/95 296.50
07/20/95 293.50
07/21/95 293.50
07/24/95 293.00
07/25/95 296.00
07/26/95 294.50
07/27/95 290.50
07/28/95 289.00
07/31/95 281.75
08/01/95 282.50
08/02/95 279.00
08/03/95 279.00
08/04/95 276.25
08/07/95 273.25
08/08/95 278.25
08/09/95 278.25
08/10/95 277.25
08/11/95 278.75
08/14/95 281.25
08/15/95 281.00
08/16/95 281.25
08/17/95 281.75
08/18/95 281.75
08/21/95 286.00
08/22/95 286.00
08/23/95 284.50
08/24/95 286.25
08/25/95 288.75
08/28/95 291.75
08/29/95 290.25
08/30/95 291.75
08/31/95 295.50
09/01/95 296.00
09/04/95 294.63
09/05/95 293.25
09/06/95 289.50
09/07/95 289.75
09/08/95 291.00
09/11/95 290.25
09/12/95 292.00
09/13/95 291.00
09/14/95 292.75
09/15/95 294.25
09/18/95 304.75
09/19/95 300.50
09/20/95 296.25
09/21/95 311.00
09/22/95 310.00
09/25/95 306.50
09/26/95 306.25
09/27/95 307.50
09/28/95 309.25
09/29/95 311.75
10/02/95 312.25
10/03/95 310.50
10/04/95 309.25
10/05/95 309.75
10/06/95 310.75
10/09/95 313.25
10/10/95 317.75
10/11/95 322.75
10/12/95 320.75
10/13/95 325.25
10/16/95 327.75
10/17/95 325.00
10/18/95 325.75
10/19/95 332.00
10/20/95 332.75
10/23/95 330.00
10/24/95 329.50
10/25/95 328.50
10/26/95 329.50
10/27/95 328.50
10/30/95 329.00
10/31/95 332.50
11/01/95 336.50
11/02/95 336.75
11/03/95 332.00
11/06/95 333.75
11/07/95 331.75
11/08/95 331.00
11/09/95 327.25
11/10/95 327.75
11/13/95 325.25
11/14/95 321.75
11/15/95 320.75
11/16/95 323.25
11/17/95 328.00
11/20/95 326.50
11/21/95 323.50
11/22/95 325.25
11/23/95 326.63
11/24/95 328.00
11/27/95 324.75
11/28/95 324.75
11/29/95 328.75
11/30/95 330.75
12/01/95 331.25
12/04/95 329.50
12/05/95 334.25
12/06/95 334.75
12/07/95 333.00
12/08/95 336.75
12/11/95 339.50
12/12/95 337.75
12/13/95 339.75
12/14/95 338.50
12/15/95 337.00
12/18/95 342.25
12/19/95 343.25
12/20/95 354.50
12/21/95 352.50
12/22/95 358.25
12/25/95 360.63
12/26/95 363.00
12/27/95 360.75
12/28/95 363.75
12/29/95 369.25
01/01/96 371.25
01/02/96 373.25
01/03/96 374.00
01/04/96 369.00
01/05/96 366.50
01/08/96 360.50
01/09/96 366.75
01/10/96 362.25
01/11/96 357.50
01/12/96 362.75
01/15/96 365.00
01/16/96 354.00
01/17/96 351.25
01/18/96 355.00
01/19/96 360.75
01/22/96 357.75
01/23/96 360.75
01/24/96 358.75
01/25/96 356.25
01/26/96 357.50
01/29/96 363.75
01/30/96 367.75
01/31/96 369.00
02/01/96 366.50
02/02/96 366.75
02/05/96 361.50
02/06/96 363.50
02/07/96 361.00
02/08/96 359.25
02/09/96 363.00
02/12/96 365.00
02/13/96 371.50
02/14/96 378.50
02/15/96 378.25
02/16/96 380.00
02/19/96 379.88
02/20/96 379.75
02/21/96 377.25
02/22/96 375.00
02/23/96 380.50
02/26/96 385.00
02/27/96 388.00
02/28/96 391.75
02/29/96 395.00
03/01/96 393.25
03/04/96 389.25
03/05/96 383.25
03/06/96 383.00
03/07/96 390.75
03/08/96 392.00
03/11/96 393.75
03/12/96 391.00
03/13/96 395.00
03/14/96 397.75
03/15/96 391.25
03/18/96 393.50
03/19/96 398.25
03/20/96 396.50
03/21/96 387.75
03/22/96 390.00
03/25/96 393.50
03/26/96 396.75
03/27/96 399.25
03/28/96 399.25
03/29/96 409.00
04/01/96 416.50
04/02/96 414.25
04/03/96 424.25
04/04/96 426.50
04/05/96 431.13
04/08/96 435.75
04/09/96 435.00
04/10/96 444.50
04/11/96 444.50
04/12/96 451.00
04/15/96 455.50
04/16/96 444.50
04/17/96 448.50
04/18/96 460.50
04/19/96 458.00
04/22/96 470.00
04/23/96 478.50
04/24/96 487.00
04/25/96 499.00
04/26/96 507.50
04/29/96 473.75
04/30/96 462.50
05/01/96 488.00
05/02/96 476.75
05/03/96 471.00
05/06/96 472.50
05/07/96 485.25
05/08/96 500.75
05/09/96 508.00
05/10/96 506.00
05/13/96 515.00
05/14/96 505.00
05/15/96 500.50
05/16/96 517.25
05/17/96 528.75
05/20/96 529.00
05/21/96 524.50
05/22/96 486.50
05/23/96 493.25
05/24/96 488.75
05/27/96 483.63
05/28/96 478.50
05/29/96 466.50
05/30/96 472.75
05/31/96 477.25
06/03/96 465.25
06/04/96 447.25
06/05/96 435.00
06/06/96 447.00
06/07/96 459.00
06/10/96 471.00
06/11/96 471.00
06/12/96 477.50
06/13/96 476.75
06/14/96 464.75
06/17/96 459.50
06/18/96 471.50
06/19/96 473.50
06/20/96 474.00
06/21/96 470.00
06/24/96 466.25
06/25/96 470.50
06/26/96 477.25
06/27/96 481.50
06/28/96 516.25
07/01/96 538.50
07/02/96 518.50
07/03/96 529.50
07/04/96 530.25
07/05/96 531.00
07/08/96 537.00
07/09/96 537.00
07/10/96 531.00
07/11/96 539.00
07/12/96 548.00
07/15/96 532.00
07/16/96 501.75
07/17/96 489.00
07/18/96 477.50
07/19/96 494.50
07/22/96 476.50
07/23/96 361.50
07/24/96 358.00
07/25/96 351.00
07/26/96 350.00
07/29/96 359.25
07/30/96 357.75
07/31/96 354.25
08/01/96 360.50
08/02/96 358.25
08/05/96 348.25
08/06/96 346.00
08/07/96 344.75
08/08/96 353.00
08/09/96 363.00
08/12/96 375.00
08/13/96 373.00
08/14/96 377.75
08/15/96 375.50
08/16/96 367.50
08/19/96 364.00
08/20/96 362.25
08/21/96 366.25
08/22/96 367.50
08/23/96 365.50
08/26/96 369.50
08/27/96 369.75
08/28/96 367.75
08/29/96 370.50
08/30/96 370.50
09/02/96 368.63
09/03/96 366.75
09/04/96 358.75
09/05/96 362.25
09/06/96 362.50
09/09/96 362.25
09/10/96 365.75
09/11/96 360.75
09/12/96 365.25
09/13/96 361.75
09/16/96 357.00
09/17/96 351.25
09/18/96 355.50
09/19/96 354.75
09/20/96 314.25
09/23/96 313.25
09/24/96 310.50
09/25/96 312.25
09/26/96 306.00
09/27/96 303.25
09/30/96 296.75
10/01/96 296.00
10/02/96 292.75
10/03/96 292.00
10/04/96 289.50
10/07/96 292.75
10/08/96 296.50
10/09/96 293.75
10/10/96 290.00
10/11/96 283.75
10/14/96 286.50
10/15/96 286.50
10/16/96 283.25
10/17/96 283.25
10/18/96 280.25
10/21/96 279.00
10/22/96 279.50
10/23/96 282.75
10/24/96 278.00
10/25/96 275.25
10/28/96 275.25
10/29/96 274.50
10/30/96 270.25
10/31/96 266.00
11/01/96 263.00
11/04/96 261.75
11/05/96 258.50
11/06/96 260.00
11/07/96 264.50
11/08/96 267.50
11/11/96 268.25
11/12/96 268.00
11/13/96 271.75
11/14/96 271.25
11/15/96 269.50
11/18/96 266.00
11/19/96 265.25
11/20/96 270.00
11/21/96 272.50
11/22/96 272.50
11/25/96 274.75
11/26/96 273.25
11/27/96 272.00
11/28/96 271.38
11/29/96 270.75
12/02/96 266.50
12/03/96 265.00
12/04/96 266.00
12/05/96 268.50
12/06/96 267.25
12/09/96 266.75
12/10/96 266.50
12/11/96 267.50
12/12/96 267.75
12/13/96 267.25
12/16/96 270.00
12/17/96 270.75
12/18/96 271.25
12/19/96 269.50
12/20/96 266.75
12/23/96 266.50
12/24/96 266.75
12/25/96 266.88
12/26/96 267.00
12/27/96 264.50
12/30/96 258.25
12/31/96 258.25
01/01/97 258.38
01/02/97 258.50
01/03/97 256.50
01/06/97 257.00
01/07/97 258.25
01/08/97 259.25
01/09/97 258.25
01/10/97 265.50
01/13/97 267.25
01/14/97 270.75
01/15/97 273.75
01/16/97 273.50
01/17/97 273.25
01/20/97 271.75
01/21/97 271.00
01/22/97 270.50
01/23/97 270.25
01/24/97 272.75
01/27/97 275.00
01/28/97 274.75
01/29/97 275.00
01/30/97 273.75
01/31/97 270.25
02/03/97 269.50
02/04/97 270.50
02/05/97 272.50
02/06/97 268.75
02/07/97 271.00
02/10/97 272.00
02/11/97 272.50
02/12/97 273.75
02/13/97 274.50
02/14/97 274.00
02/17/97 278.38
02/18/97 282.75
02/19/97 283.50
02/20/97 287.00
02/21/97 291.75
02/24/97 289.00
02/25/97 293.25
02/26/97 292.75
02/27/97 296.00
02/28/97 296.75
03/03/97 302.75
03/04/97 303.75
03/05/97 301.75
03/06/97 306.25
03/07/97 306.00
03/10/97 312.00
03/11/97 308.50
03/12/97 297.75
03/13/97 300.75
03/14/97 307.25
03/17/97 310.25
03/18/97 306.00
03/19/97 302.50
03/20/97 304.75
03/21/97 300.25
03/24/97 299.00
03/25/97 302.25
03/26/97 305.25
03/27/97 308.25
03/28/97 309.13
03/31/97 310.00
04/01/97 313.00
04/02/97 308.50
04/03/97 301.00
04/04/97 294.25
04/07/97 300.75
04/08/97 299.50
04/09/97 299.00
04/10/97 303.75
04/11/97 299.50
04/14/97 303.75
04/15/97 302.75
04/16/97 297.25
04/17/97 297.00
04/18/97 300.25
04/21/97 299.75
04/22/97 301.25
04/23/97 298.50
04/24/97 293.00
04/25/97 294.50
04/28/97 290.75
04/29/97 291.50
04/30/97 295.00
05/01/97 298.50
05/02/97 294.75
05/05/97 293.00
05/06/97 288.50
05/07/97 288.00
05/08/97 288.00
05/09/97 292.00
05/12/97 288.25
05/13/97 289.25
05/14/97 285.75
05/15/97 284.75
05/16/97 288.25
05/19/97 293.25
05/20/97 287.75
05/21/97 276.75
05/22/97 273.25
05/23/97 270.50
05/26/97 267.38
05/27/97 264.25
05/28/97 269.50
05/29/97 269.25
05/30/97 270.75
06/02/97 274.00
06/03/97 277.50
06/04/97 271.25
06/05/97 274.25
06/06/97 274.00
06/09/97 274.00
06/10/97 271.75
06/11/97 272.50
06/12/97 271.25
06/13/97 271.50
06/16/97 268.50
06/17/97 270.25
06/18/97 266.50
06/19/97 265.25
06/20/97 265.50
06/23/97 260.50
06/24/97 260.25
06/25/97 256.25
06/26/97 250.25
06/27/97 246.25
06/30/97 248.00
07/01/97 243.25
07/02/97 245.75
07/03/97 244.75
07/04/97 242.63
07/07/97 240.50
07/08/97 243.25
07/09/97 249.75
07/10/97 247.75
07/11/97 251.50
07/14/97 262.25
07/15/97 270.75
07/16/97 266.50
07/17/97 265.50
07/18/97 270.25
07/21/97 263.75
07/22/97 271.00
07/23/97 247.25
07/24/97 243.50
07/25/97 243.25
07/28/97 250.50
07/29/97 258.00
07/30/97 262.25
07/31/97 265.50
08/01/97 268.50
08/04/97 263.75
08/05/97 254.50
08/06/97 259.00
08/07/97 250.00
08/08/97 253.50
08/11/97 249.75
</TABLE>
NOTES TO TABLE:
Corn prices rally early in 1994 as severe flooding in the U.S. Midwest
delays planting.
Improved weather for the balance of the growing season in 1994 increases
most estimates for the size of the U.S. crop.
Late revisions to the size of the corn crop in early 1995 indicate a smaller
1994 harvest than originally thought, as the effects of the damp weather in the
spring reduce yields.
Severe weather affects the price of wheat in 1996, and corn, which is a
substitute for wheat in certain applications, sees increased global demand and
corn prices rally.
Given the relatively high price of corn, increased acreage is planted with
corn in 1996, and good growing conditions lead to a large harvest which puts
downward pressure on price.
Strong global demand moves prices higher at the start of 1997, but near
ideal planting and growing conditions raise the prospect for a record harvest
and prices begin to retreat.
-------------------
With commodities, historically, there have been macroeconomic cycles that
occur in both bull and bear markets. These periods tend to move in multi-year
cycles influenced by factors such as geopolitical developments, level of
economic activity, monetary policies, climate and demographic trends. The two
most recent cycles illustrate this tendency:
INCREASING CYCLE: The years 1967 through 1981 were dominated by
heightened international inflation, of which a major contributing factor
was the energy crisis in the early 1970s. The Knight-Ridder Commodities
Research Bureau ("CRB") Index, a broad commodity index composed of 21
different commodities held in equal proportion, rose from 100 in 1967 to
345 in 1981. During the same period, North American inflation rose from
an average annual level of about 2% to 12%.
DECREASING CYCLE: The years 1981 through 1994 were characterized by
disinflationary policies, maturing Western economies and the emergence
of new consumer economies in Asia, South
67
<PAGE>
America and Eastern Europe. The CRB Index declined from a high of 345 in
1981 to 200 in 1994. During the same period, North American inflation
rates declined from an average annual level of 12% to 2%.
Consider developments that will place severe pressure on the world's
critical commodities. In Asia alone, there is expected to be an urban population
expansion of one billion people over the next 20 years, which will likely create
significant strain on commodity supplies, including: (1) AGRICULTURALS: since
most of the population increase is expected in the urban areas as Asian
countries exploit their global labor cost advantage, the local supply of
agricultural products is projected to fall far short of expected demand, and, as
wealth increases in an emerging economy, history has shown that there will be a
significant shift towards increased meat consumption in the diet, which will
dramatically increase the demand for grains as livestock feed; (2) ENERGY
PRODUCTS: as people replace their bicycles with mopeds and other forms of
transportation, there will be an increased demand for gasoline and other refined
products; and (3) METALS: construction of housing and businesses will increase
demand for base metals, such as copper, zinc and nickel.
In the early 19th century in the United States, farmers hauled their goods
by the wagonload to a big city looking for buyers. Problems resulting from
imbalances in supply and demand, transportation and storage led to a chaotic
marketing environment. Beginning in the middle of the 19th century, organized
central marketplaces were established which made it easier for buyers and
sellers (such as farmers and grain dealers) to meet, set uniform quality and
quantity standards and establish rules of business. Today, there are eight major
futures exchanges in the Unites States (71 worldwide) where commodities are
traded, according to the Futures Industry Institute. These exchanges provide a
visible, free market setting where members can conduct transactions subject to
established rules and regulations. Since all commodity futures contracts are
standardized, thereby possessing the same specifications for quality, quantity
and delivery terms, only price is negotiable.
The Partnership provides investors access to the actual commodity markets,
as opposed to mutual funds, which are prohibited from owning tangible assets
directly and therefore can only buy stocks in companies involved in the
production of commodities. Owning the commodity directly offers exposure to the
performance of the underlying asset while mitigating the unsystematic or company
specific risk. For example, one oil spill for an oil company or one mine
collapse at a metals company can sharply impact the stock's performance, but not
the price of oil or the metal.
PROFESSIONAL TRADING MANAGEMENT
Trading decisions for the Partnership are made by the Trading Advisor
retained by the General Partner. See "The Trading Advisor." The trading program
employed on behalf of the Partnership by the Trading Advisor is not available
for investments as small as the required minimum investment in the Partnership
(as of June 30, 1997, approximately 50% of MSCM's assets under management were
from clientele with investments in excess of $5 million each, while the balance
of its clients generally maintained a minimum investment of $250,000). The
performance record of the Trading Advisor is set forth in "Trading
Advisor--Performance Record of the Trading Advisor." No assurance is given that
the Partnership will in the future obtain results consistent with the Trading
Advisor's past performance or that the Partnership will not incur substantial
losses in the future.
LIMITED LIABILITY
Unlike an individual who invests directly in futures interests, an investor
in the Partnership cannot be individually subject to margin calls and cannot
lose more than the amount of his unredeemed capital contribution, his share of
undistributed profits, if any, and, under certain circumstances, any
distributions and amounts received upon redemption of Units and interest
thereon. See "The Futures and Options Markets," "Redemptions," and "The Limited
Partnership Agreement-- Nature of the Partnership."
68
<PAGE>
INTEREST INCOME
Many commodity brokers permit accounts above a certain size to deposit
margin for futures interests in the form of interest-bearing obligations, such
as U.S. Treasury Bills, rather than cash, thus enabling the account to earn
interest on funds being used for futures interests trading, or such brokers pay
interest at U.S. Treasury Bill rates on a portion of the cash deposited in the
account. The Partnership's assets will be deposited in futures interests trading
accounts with the Commodity Brokers. MS & Co. will credit the Partnership at
each month-end with interest income as if 80% of the Partnership's average daily
Net Assets for the month were invested at a rate based on U.S. Treasury Bills.
Generally, an individual trader would not receive any interest on the funds in
his futures interests account unless he committed substantially more than the
minimum investment described herein. While the Partnership will be credited with
interest by MS & Co. on a portion of its assets deposited as margin as described
above, the form of margin posted, whether cash or interest-bearing obligations
(such as U.S. Treasury Bills), does not reduce the risks inherent in the trading
of futures interests. See "Risk Factors" and "Investment Program, Use of
Proceeds and Trading Policies."
ADMINISTRATIVE CONVENIENCE
The Partnership is structured so as to provide Limited Partners with
numerous services designed to alleviate the administrative details involved in
engaging directly in futures interests 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
to the Partnership necessary for Limited Partners to complete their federal
income tax returns.
LEGAL MATTERS
Legal matters in connection with the Units being offered hereby, including
the discussion of the material federal income tax considerations relating to the
acquisition, ownership and disposition of Units, have been passed upon for the
Partnership and the General Partner by Cadwalader, Wickersham & Taft, 100 Maiden
Lane, New York, New York 10038. Cadwalader, Wickersham & Taft also has acted as
counsel for DWR in connection with the offering of Units. Cadwalader, Wickersham
& Taft may advise the General Partner with respect to its responsibilities as
general partner of, and with respect to matters relating to, the Partnership.
EXPERTS
The statement of financial condition of Morgan Stanley Tangible Asset Fund
L.P. as of July 31, 1997 and the statements of financial condition of Demeter
Management Corporation as of December 31, 1996 and 1995 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
indicated in their reports with respect thereto in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing. Deloitte & Touche LLP also acts as independent auditors
for MSDWD.
ADDITIONAL INFORMATION
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits relating thereto that have been filed
with the Securities and Exchange Commission in Washington, D.C. For further
information pertaining to the Partnership and the Units offered hereby,
reference is hereby made to the Registration Statement, including the exhibits
filed as part thereof. The Registration Statement and exhibits are on file at
the offices of the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and may be examined, without charge, at
the offices of the SEC, and copies may be obtained of all or part thereof from
the SEC upon payment of the prescribed fees.
69
<PAGE>
GLOSSARY
CERTAIN TERMS AND DEFINITIONS
Knowledge of various terms and concepts relating to this offering is
necessary for a potential investor to determine whether to invest in the
Partnership.
"Affiliate" -- An "affiliate" of a person means (i) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly owning, controlling, or holding with power to vote 10% or more of the
outstanding voting securities of such person; (ii) any partnership, corporation,
association, or other legal entity 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with power to
vote by such person; (iii) any natural person, partnership, corporation,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with, such person; or (iv) any officer,
director or partner of such person.
"Brokerage Fee" -- The fee charged by a broker for executing a trade in a
commodity account of a customer. MS & Co. will charge the Partnership a
flat-rate monthly fee of 1/12 of 3.65% of Net Assets as of the first day of each
month (a 3.65% annual rate).
"Churning" -- Engaging in excessive trading with respect to a commodity
account for the purpose of generating brokerage commissions.
"Commodity Trading Advisor" -- Any person who for any consideration engages
in the business of advising others, either directly or indirectly, as to the
value or purchase of futures interests.
"Daily Limits" -- Limits imposed by commodity exchanges on the amount of
fluctuation in futures interest prices during a single trading day.
"Futures Contract" -- Standardized contract made on domestic or foreign
commodity exchanges which calls for the future delivery of a specified quantity
of a commodity at a specified time and place.
"Limit Order" -- An order to execute a trade at a specified price or better.
As contrasted with a stop order, a limit order does not become a market order
when the limit price is reached.
"Margin" -- Good faith deposits with a broker to assure fulfillment of a
purchase or sale of a commodity futures contract and, under certain
circumstances, a commodity option contract.
"Market Order" -- An order to execute a trade at the prevailing price as
soon as possible.
"Net Assets" -- The total assets of the Partnership (including, but not
limited to, all cash and cash equivalents (valued at cost), accrued interest and
amortization of original issue discount, and the market value of all open
futures interests positions and other assets of the Partnership), less the total
liabilities of the Partnership (including, but not limited to, one-half of the
brokerage commissions that would be payable with respect to the closing of each
of the Partnership's open futures interests positions (if charged on a
"roundturn" basis), or brokerage fees (if charged on a "flat-rate" basis),
service fees, management fees, incentive fees, ordinary administrative expenses,
transaction fees and costs, and extraordinary expenses), determined in
accordance with generally accepted accounting principles consistently applied
under the accrual basis of accounting. Unless generally accepted accounting
principles require otherwise, the market value of a futures interest traded on a
United States exchange shall mean the settlement price on the exchange on which
the particular futures interest was traded by the Partnership on the day with
respect to which Net Assets shall be determined, PROVIDED, HOWEVER, that if a
futures interest could not have been liquidated on such day due to the operation
of daily limits or other rules of the exchange upon which that futures interest
shall be traded or otherwise, the settlement price on the first subsequent day
on which the futures interest could have been liquidated shall be the market
value of such futures interest for such day. The market value of a futures
interest traded on a foreign exchange or market shall mean its market value as
determined by the General Partner on a basis consistently applied for each
different variety of futures interest.
"Net Asset Value Per Unit" -- The Net Assets allocated to capital accounts
represented by Units of Limited Partnership Interest divided by the aggregate
number of Units of Limited Partnership Interest.
70
<PAGE>
"Organizational and Offering Expenses" -- Costs incurred in the organization
of the Partnership and the offering of Units, including legal, accounting and
auditing fees, printing costs, filing fees, escrow fees, marketing costs and
expenses, and other related expenses.
"Pyramiding" -- Using unrealized profits on existing positions in a given
commodity due to favorable price movements as margin specifically to buy or sell
additional positions in the same or related commodity.
"Settlement Price" -- The closing price for futures contracts in a
particular commodity established by the clearinghouse or exchange after the
close of each day's trading.
"Speculative Position Limits" -- Limits established by the CFTC and United
States commodity exchanges on the maximum net long or short speculative
positions which a person or group of persons may hold, own, or control in
futures interests.
"Stop Order" -- An order given to a broker to execute a trade in a futures
interest when the contract price reaches the specified stop order price. Stop
orders become market orders when the stop price is reached.
"Trading Profits" -- Net futures interests trading profits (realized and
unrealized) earned on Net Assets allocated to the Trading Advisor, decreased by
monthly management fees, brokerage fees, and service fees (excluding incentive
fees payable) of the Partnership; with such Trading Profits and items of
decrease determined from the last date as of which an incentive fee was earned
by the Trading Advisor or, if no incentive fee has been previously earned by the
Trading Advisor, from the date the Partnership commenced trading to the date as
of which such incentive fee calculation is made. Extraordinary expenses are not
deducted in determining Trading Profits, and no incentive fees will be paid on
interest earned by the Partnership.
"Transaction Fees and Costs" -- Floor brokerage fees, exchange fees,
clearinghouse fees, NFA fees, "give up" or transfer fees, and any costs
associated with taking delivery of futures interests.
"Unrealized Profit or Loss" -- The profit or loss which could be realized on
an open position if it were closed out at the current settlement price.
BLUE SKY GLOSSARY
Prospective investors should be aware of the following definitions,
reprinted verbatim from the "Guidelines for Registration of Commodity Pool
Programs" adopted by the North American Securities Administrators Association,
Inc., as revised in September, 1993 (the "Guidelines"), which Guidelines are
applied by certain state securities administrators in reviewing public offerings
of "commodity pools" (such as the Partnership). For ease of reference, each of
these definitions is followed by the comparable defined term used in the Limited
Partnership Agreement and this Prospectus, in brackets, as applicable.
"Advisor" -- Any Person who for any consideration engages in the business of
advising others, either directly or indirectly, as to the value, purchase, or
sale of Commodity Contracts or commodity options. ["Trading Advisor" -- page
A-4]
"Affiliate" -- An Affiliate of a Person means (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person; (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote, by such Person; (c) any Person, directly or
indirectly, controlling, controlled by, or under common control of such Person;
(d) any officer, director or partner of such Person; or (e) if such Person is an
officer, director or partner, any Person for which such Person acts in any such
capacity. ["Affiliate" -- page A-17]
"Capital Contributions" -- The total investment in a Program by a
Participant or by all Participants, as the case may be. ["Unit of General
Partnership Interest" -- page A-3; "Units" -- page A-3]
71
<PAGE>
"Commodity Broker" -- Any Person who engages in the business of effecting
transactions in Commodity Contracts for the account of others or for his own
account. ["MS & Co." -- page A-4; "MSIL" -- page A-4; "Commodity Broker" -- page
A-4]
"Commodity Contract" -- A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point. ["Futures Interests" -- pages
A-1 - A-2]
"Net Assets" -- The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net Assets
shall include any unrealized profits or losses on open positions, and any fee or
expense including Net Asset fees accruing to the Program. ["Net Assets" -- page
A-7]
"Net Worth" -- The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles. ["net worth," as
regards subscribers' investment requirements, is referenced on pages 1, B-4,
B-5, and B-6; as regards the General Partner's net worth requirement, see
Section 5 of the Limited Partnership Agreement on page A-2]
"Organizational and Offering Expenses" -- All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its Program Interest under
federal and state law, including taxes and fees, accountants' and attorneys'
fees. ["organizational and offering expenses" -- page A-7]
"Participant" -- The holder of a Program Interest. ["General Partner,"
"Limited Partners," "Partners" -- page A-1]
"Person" -- Any natural Person, partnership, corporation, association or
other legal entity. [No comparable term]
"Program" -- The limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts. ["Partnership" -- page A-1]
"Pyramiding" -- A method of using all or part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities. [See trading policy 1 on page
A-11]
"Sponsor" -- Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the Organizational
Expenses of the Program, and the general partner(s) and any other Person who
regularly performs or selects the Persons who perform services for the Program.
Sponsor does not include wholly independent third parties such as attorneys,
accountants, and underwriters whose only compensation is for professional
services rendered in connection with the offering of the units. The term
"Sponsor" shall be deemed to include its Affiliates. ["General Partner," "DWR"
and their "Affiliates."]
"Valuation Date" -- The date as of which the Net Assets of the Program are
determined. [No comparable term, but for purposes of redemption, Net Assets of
the Partnership are determined as of the last day of the month -- page A-15]
72
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Tangible Asset Fund L.P.:
We have audited the accompanying statement of financial condition of Morgan
Stanley Tangible Asset Fund L.P. (the "Partnership") as of July 31, 1997. This
financial statement is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statement presents fairly, in all material
respects, the financial position of Morgan Stanley Tangible Asset Fund L.P. as
of July 31, 1997 in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
August 19, 1997
New York, New York
F-1
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
(LIMITED PARTNERS SHOULD NOTE THAT THEIR OWNERSHIP OF UNITS IN THE PARTNERSHIP
DOES NOT RESULT IN THE OWNERSHIP OF ANY INTEREST IN THE GENERAL PARTNER)
STATEMENT OF FINANCIAL CONDITION
AS OF JULY 31, 1997
ASSETS
<TABLE>
<S> <C>
Equity in Commodity Interest Trading Account:
Cash............................................................................. $ 2,000
---------
---------
</TABLE>
PARTNERS' CAPITAL
<TABLE>
<S> <C>
Limited Partner -- 1 Unit Outstanding.............................................. $ 1,000
General Partner -- 1 Unit Outstanding.............................................. 1,000
---------
$ 2,000
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
NOTES TO STATEMENT OF FINANCIAL CONDITION
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Morgan Stanley Tangible Asset Fund L.P. (the "Partnership") is
a limited partnership organized under the Delaware Revised Uniform Limited
Partnership Act on July 31, 1997 to engage in the speculative trading of, among
other things, futures contracts in metals, energy products, and agricultural
products (collectively, "futures interests"). The initial capital contributed
are the capital contributions of $1,000 by Demeter Management Corporation, the
general partner of the Partnership (the "General Partner"), and $1,000 by Mark
J. Hawley, President of the General Partner and Executive Vice President of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the General Partner, as initial
Limited Partner, to permit the filing of a Certificate of Limited Partnership
under the Delaware Revised Uniform Limited Partnership Act.
The Partnership will offer 5,000,000 Units of Limited Partnership Interest
("Units") for sale to the public at an initial price of $10 per Unit. The
minimum subscription for most subscribers will be (i) $5,000, except in the case
of an IRA, for which the minimum subscription is $2,000, or (ii) the lesser of
$5,000 or the redemption proceeds from the sale of five Units ($2,000 or the
redemption proceeds from the sale of two units in the case of IRAs), for most
subscribers effecting "Exchanges," as described in the Partnership's Prospectus.
If at least 500,000 Units are subscribed for during the "Offering Period" (date
of the Prospectus to January 12, 1998, subject to earlier termination or
extension), the General Partner may accept such subscriptions at the "First
Closing" (currently scheduled for November 3, 1997) and commence operations of
the Partnership. If such "First Closing" is concluded before the Offering Period
ends and unsold Units are available, the General Partner may, in its sole
discretion, continue to solicit for the remaining unsold Units and accept such
subscriptions at a "Second Closing" and "Third Closing," scheduled for December
1, 1997 and January 2, 1998, respectively. If it appears that subscriptions will
be received in excess of the Units available for sale, the General Partner may
register additional Units for sale at any of the closings.
The Partnership's cash is on deposit with Morgan Stanley & Co. Incorporated
("MS & Co."), an affiliate of the General Partner, in a futures interests
trading account. At each of the closings, the General Partner will contribute,
in $1,000 increments, the additional amount in cash that is necessary for it at
all times to own, for its account, Units of General Partnership Interest at
least equal to the greater of $25,000 or 1% of aggregate capital contributions.
The General Partner and each Limited Partner will share in the profits and
losses of the Partnership in proportion to the amount of Partnership interest
owned by each.
The Partnership will terminate on December 31, 2027 or at an earlier date if
certain conditions occur as defined in the Partnership's Limited Partnership
Agreement.
Limited Partners may redeem some or all of their Units at 100% of the Net
Asset Value per Unit effective as of the sixth month-end following the closing
at which they first become Limited Partners. The Net Asset Value of a Unit is
equal to Net Assets (as defined below) divided by the aggregate number of Units
of Limited and General Partnership Interests outstanding. Thereafter, Units may
be redeemed as of the end of any month upon advance notice by redemption form to
the General Partner. However, any Units redeemed on or prior to the last day of
the eleventh month after such Units were purchased will be subject to a
redemption charge equal to 2% of the Net Asset Value of a Unit on the date of
such redemption. Units redeemed after the last day of the eleventh month and on
or prior to the last day of the twenty-fourth month after which such Units were
purchased will be subject to a redemption charge equal to 1% of the Net Asset
Value of a Unit on the date of such redemption. Units redeemed after the last
day of the twenty-fourth month after which such Units were purchased will not be
subject to a redemption charge. A limited partner in any other commodity pool
for which the General Partner serves as the general partner who redeems any of
his interest in such partnership on or after March 31, 1997 and purchases Units
in the Partnership will not be subject to the above redemption charges or
restrictions. Investors who purchase $500,000 or more of Units will not be
subject to the redemption charges described below.
F-3
<PAGE>
Net Assets, which will be determined daily, is defined as the total assets
of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest contract positions and other
assets of the Partnership) less the total liabilities of the Partnership
(including, but not limited to, one-half of the brokerage commissions that would
be payable with respect to the closing of each of the Partnership's open futures
interest contract positions (if charged on a "roundturn" basis), or brokerage
fees (if charged on a "flat rate" basis), management fees, incentive fees,
service fees, ordinary administrative expenses, transaction fees and costs, and
extraordinary expenses) determined in accordance with generally accepted
accounting principles consistently applied under the accrual basis of
accounting. Unless generally accepted accounting principles require otherwise,
the market value of a futures interest traded on a United States exchange shall
mean the settlement price on the exchange on which the particular futures
interest shall be traded by the Partnership on the day with respect to which Net
Assets shall be determined; PROVIDED, HOWEVER, that if a futures interest could
not have been liquidated on such day due to the operation of daily limits or
other rules of the exchange upon which that futures interest shall be traded or
otherwise, the settlement price on the first subsequent day on which the futures
interest could have been liquidated shall be the market value of such futures
interest for such day. The market value of a futures interest traded on a
foreign exchange or market shall mean its market value as determined by the
General Partner on a basis consistently applied for each different variety of
futures interest.
2. ORGANIZATION AND OFFERING EXPENSES
The Partnership is not liable for any organizational and offering expenses
in connection with the issuance and distribution of the Units. DWR has agreed to
pay the organizational expenses of the Partnership and the expenses of offering
the Units to the public.
The proceeds from the subscription of Units will be held in escrow and
invested in an interest-bearing money market account. The pro-rata share of
interest earned on accepted or rejected subscription funds while such funds are
held in escrow will be credited to subscribers' customer accounts with DWR.
3. OTHER AGREEMENTS
The proceeds from the closings will be used to establish futures interests
trading accounts with MS & Co. and Morgan Stanley & Co. International Limited
("MSIL") for the Partnership's trading advisor, Morgan Stanley Commodities
Management, Inc. (the "Trading Advisor"), an affiliate of the General Partner,
MS & Co., MSIL, and DWR.
The Partnership will pay the Trading Advisor a monthly management fee equal
to 5/24 of 1% per month (a 2.5% annual rate) of the Partnership's Net Assets, as
defined, as of the first day of each month.
The Partnership will pay the General Partner a monthly service fee equal to
1/12 of 1% per month (a 1% annual rate) of the Partnership's Net Assets, as
defined, as of the first day of each month.
The Partnership also will pay an annual incentive fee to the Trading Advisor
equal to 20% of "Trading Profits" as of the end of each calendar year. If the
Trading Advisor has experienced losses with respect to Net Assets at the end of
a calendar year, the Trading Advisor must earn back such losses plus a pro rata
amount relating to the funds allocated to the Trading Advisor in a subsequent
calendar year before the Trading Advisor is eligible for an incentive fee. Any
accrued incentive fees with respect to Units redeemed at the end of a month that
is not the end of a calendar year will be deducted and paid to the Trading
Advisor at the time of such redemption.
Under its Customer Agreement with MS & Co., the Partnership will pay MS &
Co. a flat-rate monthly brokerage fee of 1/12 of 3.65% of Net Assets as of the
first day of each month (a 3.65% annual rate), which will also cover all fees
due MSIL under its Customer Agreement with the Partnership.
MS & Co. will credit the Partnership at each month-end with interest income
as if 80% of the Partnership's average daily Net Assets for the month were
invested at a rate based on U.S. Treasury Bills. For purposes of such interest
payments, Net Assets do not include monies due to the Partnership on or with
respect to futures interests but not actually received by it from banks, brokers
or dealers.
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Demeter Management Corporation:
We have audited the accompanying statements of financial condition of Demeter
Management Corporation (a wholly-owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co.) (the "Company") as of December 31, 1996 and 1995. These
statements of financial condition 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, such statements of financial condition present fairly, in all
material respects, the financial position of Demeter Management Corporation as
of December 31, 1996 and 1995 in conformity with generally accepted accounting
principles.
/S/ DELOITTE & TOUCHE LLP
February 17, 1997
(June 16, 1997 as to Note 5 and July 31, 1997 as to Note 6)
New York, New York
F-5
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
("MSDWD"))
STATEMENTS OF FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------- ----------------------------------
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
$ $ $
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Investments in affiliated partnerships (Note 2)........... 20,208,711 18,955,507 17,788,814
Income taxes payable...................................... 222,420 -- --
Receivable from affiliated partnership.................... 999 1,049 1,154
---------------- ---------------- ----------------
TOTAL ASSETS...................................... 20,432,130 18,956,556 17,789,968
---------------- ---------------- ----------------
---------------- ---------------- ----------------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C> <C>
LIABILITIES:
Payable to MSDWD (Note 3)............................. 16,916,922 15,762,235 15,157,797
Income taxes payable.................................. -- 114,218 156,337
Accrued expenses...................................... 32,890 30,379 32,579
---------------- ---------------- ----------------
TOTAL LIABILITIES................................. 16,949,812 15,906,832 15,346,713
---------------- ---------------- ----------------
STOCKHOLDER'S EQUITY:
Common stock, no par value:
Authorized 1,000 shares;
Issued and outstanding 100 shares
at stated value of $500 per share................. 50,000 50,000 50,000
Additional paid-in capital............................ 111,170,000 111,170,000 111,170,000
Retained earnings..................................... 3,332,318 2,899,724 2,293,255
---------------- ---------------- ----------------
114,552,318 114,119,724 113,513,255
Less: Notes receivable from MSDWD (Note 4)............ (111,070,000) (111,070,000) (111,070,000)
---------------- ---------------- ----------------
TOTAL STOCKHOLDER'S EQUITY........................ 3,482,318 3,049,724 2,443,255
---------------- ---------------- ----------------
TOTAL LIABILITIES AND 20,432,130 18,956,556 17,789,968
STOCKHOLDER'S EQUITY.............................
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION
(THE INFORMATION RELATING TO 1997 IS UNAUDITED)
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
Demeter manages the following commodity pools as their sole general partner:
Dean Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III, Dean Witter
Cornerstone Fund IV, Columbia Futures Fund, Dean Witter Diversified Futures Fund
Limited Partnership ("DWDFF"), Dean Witter Diversified Futures Fund II L.P.,
Dean Witter Diversified Futures Fund III L.P., Dean Witter Multi-Market
Portfolio L.P. (formerly Dean Witter Principal Guaranteed Fund L.P.), Dean
Witter Principal Plus Fund L.P. ("DWPPF"), Dean Witter Principal Plus Fund
Management L.P., Dean Witter Portfolio Strategy Fund L.P. (formerly Dean Witter
Principal Secured Futures Fund L.P.) ("DWPSF"), Dean Witter Select Futures Fund
L.P. ("DWSFF"), Dean Witter Global Perspective Portfolio L.P., Dean Witter World
Currency Fund L.P., Dean Witter Institutional Balanced Portfolio Account I L.P.
("DWIBP I"), Dean Witter Institutional Account II L.P., DWFCM International
Access Fund L.P., Dean Witter Anchor Institutional Balanced Portfolio Account
L.P., Dean Witter Spectrum Balanced L.P., Dean Witter Spectrum Strategic L.P.,
Dean Witter Spectrum Technical L.P., DWR Chesapeake L.P., DWR Institutional
Balanced Portfolio Account III L.P., and DWR/JWH Futures Fund L.P. ("DWR/JWH").
Each of the commodity pools is a limited partnership organized to engage in
the speculative trading of commodity futures contracts, forward contracts on
foreign currencies and other commodity interests.
Demeter reopened DWDFF for additional investment and on June 30, 1995 DWDFF
registered with the Securities and Exchange Commission (the "SEC") 75,000 units
which were offered to investors for a limited time in a public offering.
Demeter terminated Dean Witter Principal Guaranteed Fund III L.P. ("DWPGF
III") as of September 30, 1995. DWPGF III received the guarantee payment
necessary to bring the net asset value per unit to $1,000, and all units were
redeemed.
Demeter reopened DWPPF for additional investment and on November 8, 1995
DWPPF registered with the SEC 75,000 units which were offered to investors for a
limited time in a public offering.
In November of 1995, Demeter entered into a limited partnership agreement as
General Partner in DWR/JWH, which offered units to investors in an initial
private offering period ending January 31, 1996 and began trading on February 1,
1996. Demeter's initial investment in DWR/JWH was $75,000.
Demeter terminated Dean Witter Principal Guaranteed Fund II L.P. ("DWPGF
II") as of March 31, 1996. DWPGF II was liquidated and holders of units as of
March 31, 1996 received a final distribution equal to the net asset value per
unit on that date multiplied by their respective number of units.
On July 31, 1996, with the Net Asset Value of DWPSF above $1,000 per unit,
the letter of credit arrangement which assured investors who redeemed their
units on July 31, 1996 a minimum Net Asset Value of $1,000 per unit expired. On
August 1, 1996, that partnership was renamed "Dean Witter Portfolio Strategy
Fund L.P." and will continue trading in a non-guaranteed format. As a result,
both the reduction of interest income of 1.125% per annum for the letter of
credit fee paid by Dean Witter Reynolds Inc. ("DWR") and the letter of credit
fee of 1% of new appreciation have been eliminated.
Demeter reopened DWSFF for additional investment and on August 13, 1996
DWSFF registered with the SEC 60,000 Units which were offered to investors for a
limited time in a public offering.
F-7
<PAGE>
On August 20, 1996, Demeter ceased trading activities in DWIBP I and
distributed approximately 97% of DWIBP I's assets. At that time, there were open
forward positions maturing through December 1996. DWIBP I will liquidate and
distribute its remaining assets in 1997.
Demeter reopened DWPSF for additional investment and on May 12, 1997 DWPSF
registered with the SEC 50,000 units that were offered to investors for a
limited time in a public offering.
INCOME TAXES--The results of operations of Demeter are included in the
consolidated federal income tax return of MSDWD, computed on a separate company
basis and due to MSDWD.
BASIS OF ACCOUNTING--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts in the financial
statements.
2. INVESTMENTS IN AFFILIATED PARTNERSHIPS
The limited partnership agreement of each commodity pool requires Demeter to
maintain a general partnership interest in each partnership, generally in an
amount equal to, but not less than, 1 percent of the aggregate capital
contributed to the partnership by all partners.
The total assets, liabilities and partners' capital of all the funds managed
by Demeter at June 30, 1997, December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------- ----------------------------------
1997 1996 1995
---------------- ---------------- ----------------
$ $ $
<S> <C> <C> <C>
(UNAUDITED)
Total assets.................................... 1,105,410,534 1,084,660,072 1,091,082,360
Total liabilities............................... 27,356,938 27,893,698 20,934,451
Total partners' capital......................... 1,078,053,596 1,056,766,374 1,070,147,909
</TABLE>
Demeter's investments in the above limited partnerships are carried at
market value with changes in such market value reflected currently in
operations.
3. PAYABLE TO MSDWD
The payable to MSDWD is primarily for amounts due for the purchase of
partnership investments.
4. NET WORTH REQUIREMENT
At June 30, 1997 and December 31, 1996 and 1995, Demeter held non-interest
bearing notes from MSDWD that were payable on demand. These notes were received
in connection with additional capital contributions aggregating $111,070,000.
The limited partnership agreement of each commodity pool requires Demeter to
maintain its net worth at an amount not less than 10% of the capital
contributions by all partners in each pool in which Demeter is the general
partner (15% if the capital contributions to any partnership are less than
$2,500,000, or $250,000, whichever is less).
In calculating this requirement, Demeter's interests in each limited
partnership and any amounts receivable from or payable to such partnerships are
excluded from net worth. Notes receivable from MSDWD are included in net worth
for purposes of this calculation.
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported
class actions were filed in the Superior Court of the State of California,
County of Los Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by DWR. Named defendants include DWR, Demeter,
Dean Witter Futures and Currency Management Inc., DWD (all such parties referred
to hereafter as the "Dean Witter Parties"), certain limited partnership
commodity pools of which Demeter is the general partner, and certain trading
advisors to those pools. On June 16, 1997, the plaintiffs in the above actions
filed a consolidated amended complaint. Similar purported class actions were
also filed on September 18 and 20, 1996 in the Supreme Court of the State of New
York, New York County, and on November 14, 1996 in the Superior Court of the
State of Delaware, New Castle County, against the Dean
F-8
<PAGE>
Witter Parties and certain trading advisors on behalf of all purchasers of
interests in various limited partnership commodity pools sold by DWR. Generally,
these complaints allege, among other things, that the defendants committed
fraud, deceit, misrepresentation, breach of fiduciary duty, fraudulent and
unfair business practices, unjust enrichment, and conversion in connection with
the sale and operation of the various limited partnership commodity pools. The
complaints seek unspecified amounts of compensatory and punitive damages and
other relief. It is possible that additional similar actions may be filed and
that, in the course of these actions, other parties could be added as
defendants. The Dean Witter Parties believe that they have strong defenses to,
and they will vigorously contest, the actions. Although the ultimate outcome of
legal proceedings cannot be predicted with certainty, it is the opinion of
management of the Dean Witter Parties that the resolution of the actions will
not have a material adverse effect on the financial condition or the results of
operations of any of the Dean Witter Parties.
6. SUBSEQUENT EVENTS
Prior to June 1, 1997, Demeter was a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWD"). On June 1, 1997 DWD merged with Morgan Stanley Group
Inc. ("Morgan Stanley") to form MSDWD. Under the terms of the merger agreement
unanimously approved by the Boards of Directors of both companies, each Morgan
Stanley common share was exchanged for 1.65 common shares of DWD. Morgan Stanley
preferred shares outstanding were exchanged for preferred shares of DWD having
substantially identical terms. The transaction was a tax-free exchange and
accounted for as a pooling of interest.
On July 31, 1997, DWR closed on the sale of its institutional futures
business and foreign currency trading operations to Carr Futures Inc. ("Carr"),
a subsidiary of Credit Agricole Indosuez. Following the sale, Carr became the
counterparty on the Partnership's foreign currency trades. However, during a
transition period of about three months, DWR will continue to perform certain
services relating to the Partnership's futures trading including clearance.
After such transition period, DWR will continue to serve as a futures broker for
the Partnership with Carr providing execution and clearing services for the
Partnership's account.
7. UNAUDITED INTERIM INFORMATION
The unaudited financial statement included herein and the related financial
information in the footnotes include, in the opinion of management, all
adjustments (including normal and recurring adjustments) necessary for a fair
presentation of the financial position at June 30, 1997.
F-9
<PAGE>
EXHIBIT A
TABLE OF CONTENTS TO LIMITED PARTNERSHIP AGREEMENT
FOR MORGAN STANLEY TANGIBLE ASSET FUND L.P.
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C> <C>
1. Formation; Name............................................................................................ A-1
2. Office..................................................................................................... A-1
3. Business................................................................................................... A-1
4. Term; Dissolution; Fiscal Year............................................................................. A-2
(a) Term............................................................................................ A-2
(b) Dissolution..................................................................................... A-2
(c) Fiscal Year..................................................................................... A-2
5. Net Worth of General Partner............................................................................... A-2
6. Capital Contributions and Offering of Units of Limited Partnership Interest................................ A-3
7. Allocation of Profits and Losses; Accounting; Other Matters................................................ A-5
(a) Capital Accounts................................................................................ A-5
(b) Monthly Allocations............................................................................. A-5
(c) Allocation of Profit and Loss for Federal Income Tax Purposes................................... A-6
(d) Definitions; Accounting......................................................................... A-7
(e) Expenses and Limitations Thereof................................................................ A-7
(f) Limited Liability of Limited Partners........................................................... A-8
(g) Return of Limited Partner's Capital Contribution................................................ A-9
(h) Distributions................................................................................... A-9
(i) Interest on Assets.............................................................................. A-9
8. Management and Trading Policies............................................................................ A-9
(a) Management of the Partnership................................................................... A-9
(b) General Partner................................................................................. A-9
(c) General Trading Policies........................................................................ A-10
(d) Changes to Trading Policies..................................................................... A-11
(e) Miscellaneous................................................................................... A-11
9. Audits; Reports to Limited Partners........................................................................ A-12
10. Transfer; Redemption of Units.............................................................................. A-14
(a) Transfer........................................................................................ A-14
(b) Redemption...................................................................................... A-15
11. Special Power of Attorney.................................................................................. A-15
12. Withdrawal of Partners..................................................................................... A-16
13. No Personal Liability for Return of Capital................................................................ A-16
14. Standard of Liability; Indemnification..................................................................... A-16
(a) Standard of Liability........................................................................... A-16
(b) Indemnification by the Partnership.............................................................. A-17
(c) Affiliate....................................................................................... A-17
(d) Indemnification by Partners..................................................................... A-17
15. Amendments; Meetings....................................................................................... A-18
(a) Amendments With Consent of the General Partner.................................................. A-18
(b) Meetings........................................................................................ A-18
(c) Amendments and Actions Without Consent of the General Partner................................... A-19
(d) Action Without Meeting.......................................................................... A-19
(e) Amendments to Certificate of Limited Partnership................................................ A-19
16. Index of Defined Terms..................................................................................... A-20
17. Governing Law.............................................................................................. A-21
18. Miscellaneous.............................................................................................. A-21
(a) Priority Among Limited Partners................................................................. A-21
(b) Notices......................................................................................... A-21
(c) Binding Effect.................................................................................. A-21
(d) Captions........................................................................................ A-21
Annex 1--Request for Redemption....................................................................................... A-22
</TABLE>
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
LIMITED PARTNERSHIP AGREEMENT
This Agreement of Limited Partnership, made as of July 31, 1997 (this
"Agreement"), by and among Demeter Management Corporation, a Delaware
corporation (the "General Partner"), and the other parties who shall execute
this Agreement, whether in counterpart, by separate instrument, or otherwise, as
limited partners (collectively "Limited Partners"; the General Partner and
Limited Partners may be collectively referred to herein as "Partners"). The
definitions of capitalized terms used in this Agreement and not defined where
used may be found by reference to the index of defined terms in Section 16.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to form a limited partnership for the
purpose of engaging in the speculative trading of futures interests;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. FORMATION; NAME.
The parties hereto do hereby form a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, as amended and in effect on the date
hereof (the "Act"). The name of the limited partnership is Morgan Stanley
Tangible Asset Fund L.P. (the "Partnership"). The General Partner may, without
the approval of the Limited Partners, change the name of the Partnership, or
cause the Partnership to transact business under another name. The General
Partner shall notify all Limited Partners (or any assignees thereof) of any such
change. The General Partner shall execute and file a Certificate of Limited
Partnership of the Partnership (the "Certificate of Limited Partnership") in
accordance with the Act and shall execute, file, record, and publish as
appropriate such amendments, assumed name certificates, and other documents as
necessary or advisable in connection with the operation of the Partnership, as
determined by the General Partner, and shall take all steps which the General
Partner may deem necessary or advisable to allow the Partnership to conduct
business as a limited partnership where the Partnership conducts business in any
jurisdiction, and to otherwise provide that the Limited Partners will have
limited liability with respect to the activities of the Partnership in all such
jurisdictions, and to comply with the law of any jurisdiction. Each Limited
Partner hereby undertakes to furnish to the General Partner a power of attorney
and such additional information as the General Partner may request to complete
and execute such documents, and to cooperate in the filing, recording, or
publishing of such documents as the General Partner determines appropriate.
2. OFFICE.
The principal office of the Partnership shall be Two World Trade Center,
62nd Floor, New York, New York 10048, or such other place as the General Partner
may designate from time to time.
The address of the principal office of the Partnership in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801, and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, or such other
agent as the General Partner shall designate from time to time.
3. BUSINESS.
The Partnership's business and general purpose is to trade, buy, sell,
spread, or otherwise acquire, hold, or dispose of commodities (which may include
foreign currencies, money market instruments, financial instruments, and any
other securities or items which are now, or may hereafter be, the subject of
futures contract trading), domestic and foreign commodity futures contracts,
commodity forward contracts, foreign exchange commitments, options on physical
commodities and on futures contracts, spot (cash) commodities and currencies,
and any rights pertaining thereto (collectively, "Futures
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Interests") and securities (such as United States Treasury securities) approved
by the Commodity Futures Trading Commission (the "CFTC") for investment of
customer funds, and to engage in all activities incident thereto. The objective
of the Partnership's business is appreciation of its assets through speculative
trading. The Partnership may pursue this objective in any lawful manner
consistent with the Partnership's trading policies. The Partnership may engage
in the foregoing activities either directly or through any lawful transaction or
any lawful activity into which a limited partnership may enter or in which a
limited partnership may engage under the laws of the State of Delaware;
PROVIDED, that such transactions or activities do not subject the Limited
Partners to any liability in excess of the limited liability provided for herein
and contemplated by the Act.
4. TERM; DISSOLUTION; FISCAL YEAR.
(A) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2027; (ii) the insolvency, bankruptcy, dissolution,
liquidation, or termination of any general partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof; (iii) the occurrence of any event
which shall make it unlawful for the existence of the Partnership to be
continued; (iv) an election to terminate and dissolve the Partnership at a
specified time by Limited Partners owning more than 50% of the Units then
outstanding, notice of which is sent by registered mail to the General Partner
not less than 90 days prior to the effective date of such termination and
dissolution; (v) withdrawal by the General Partner (unless a new general
partner(s) is elected by the Limited Partners as provided in Section 15(c));
(vi) a decline in the Net Asset Value (as determined by the General Partner) of
a Unit as of the close of business on any day to less than $250; (vii) a decline
in the Partnership's Net Assets (as determined by the General Partner) as of the
close of business on any day to $250,000 or less; (viii) a determination by the
General Partner that the Partnership's Net Assets in relation to the operating
expenses of the Partnership make it unreasonable or imprudent to continue the
business of the Partnership; or (ix) a determination by the General Partner to
terminate the Partnership following a Special Redemption Date.
(B) DISSOLUTION. Upon the occurrence of an event causing the termination
of the Partnership, the Partnership shall terminate and be dissolved.
Dissolution, payment of creditors, and distribution of the Partnership's Net
Assets shall be effected as soon as practicable in accordance with the Act,
except that the General Partner and each Limited Partner (and any assignee)
shall share in the assets of the Partnership pro rata in accordance with such
Partner's respective capital account, less any amount owing by such Partner (or
assignee) to the Partnership. The General Partner shall, at its option, be
entitled to supervise the liquidation of the Partnership.
Nothing contained in this Agreement shall impair, restrict, or limit the
rights and powers of the Partners under the laws of the State of Delaware and
any other jurisdiction in which the Partnership shall be conducting business to
reform and reconstitute themselves as a limited partnership following
dissolution of the Partnership, either under provisions identical to those set
forth herein or any others which they shall deem appropriate.
(C) FISCAL YEAR. The fiscal year of the Partnership shall begin on January
1 of each year and end on the following December 31.
5. NET WORTH OF GENERAL PARTNER.
The General Partner agrees that at all times, as long as it remains General
Partner of the Partnership, it shall maintain its net worth at an amount not
less than 10% of the total contributions to the Partnership by all Partners and
to any other limited partnership for which it acts as a general partner by all
such partnership's partners; PROVIDED, HOWEVER, that if the total contributions
to the Partnership by all Partners, or to any limited partnership for which it
acts as a general partner by all partners, are less than $2,500,000, then with
respect to the Partnership and any such limited partnership, the General Partner
shall maintain its net worth at an amount of at least 15% of the total
contributions to the Partnership by all Partners and of the total contributions
to any such limited partnership for which it acts as general partner by all such
partnership's partners or $250,000, whichever is the lesser; and,
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PROVIDED, FURTHER, that in no event shall the General Partner's net worth be
less than $50,000. For the purposes of this Section 5, net worth shall be
calculated in accordance with generally accepted accounting principles, except
as otherwise specified in this Section 5, with all current assets based on their
then current market values. The interests owned by the General Partner in the
Partnership and any other partnerships for which it acts as a general partner
and any notes and accounts receivable and payable to any limited partnership in
which it has an interest shall not be included as an asset in calculating its
net worth, but any notes receivable from an "affiliate" (as such term is defined
in Regulation S-X of the rules and regulations of the Securities and Exchange
Commission (the "SEC")) of the General Partner or letters of credit may be
included.
The General Partner agrees that it shall not be a general partner of any
limited partnership other than the Partnership unless, at all times when it is a
general partner of any such additional limited partnership, its net worth is at
least equal to the net worth required by the preceding paragraph of this Section
5.
The requirements of the preceding two paragraphs of this Section 5 may be
modified by the General Partner at its option, without notice to or the consent
of the Limited Partners, PROVIDED THAT: (a) such modification does not adversely
affect the interests of the Limited Partners, and (b) the General Partner
obtains a written opinion of counsel for the Partnership that such proposed
modification: (i) will not adversely affect the classification of the
Partnership as a partnership for federal income tax purposes, (ii) will not
adversely affect the status of the Limited Partners as limited partners under
the Act, and (iii) will not violate any applicable state securities or Blue Sky
law or any rules, regulations, guidelines, or statements of policy promulgated
or applied thereunder; PROVIDED, HOWEVER, that the General Partner's net worth
may not be reduced below the lesser of (A) 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. in September 1993 (the "NASAA Guidelines"), and (B) the net worth required
by such Guidelines as in effect on the date of such proposed modification.
6. CAPITAL CONTRIBUTIONS AND OFFERING OF UNITS OF LIMITED PARTNERSHIP INTEREST.
The General Partner is herewith contributing $1,000 in cash to the
Partnership, for which it is receiving 100 units of general partnership interest
(each, a "Unit of General Partnership Interest"). At the initial closing (the
"Initial Closing"), if any, for the acceptance of subscriptions for Units of
Limited Partnership Interest of the Partnership ("Units" or, individually, a
"Unit") during the initial offering of Units (the "Initial Offering"), the
General Partner shall contribute to the Partnership in $1,000 increments the
additional amount in cash that is necessary to make the General Partner's
capital contribution at least equal to the greater of (a) $25,000 and (b) 1% of
the aggregate capital contributions to the Partnership by all Partners
(including the General Partner's contribution). Such additional contribution by
the General Partner need not exceed the amount described above and shall be
evidenced by Units of General Partnership Interest. Thereafter, the General
Partner shall maintain its interest in the capital of the Partnership at no less
than the amount stated above. The General Partner, without notice to or consent
of the Limited Partners, may withdraw any portion of its interest in the
Partnership that is in
excess of its required interest described above. The net asset value of a Unit
of General Partnership Interest shall at all times be equivalent to the Net
Asset Value of a Unit of Limited Partnership Interest.
The General Partner's minimum investment requirements of the preceding
paragraph of this Section 6 may be modified by the General Partner at its
option, without notice to or the consent of the Limited Partners, PROVIDED THAT:
(a) such modification does not adversely affect the interests of the Limited
Partners, and (b) the General Partner obtains a written opinion of counsel for
the Partnership that such proposed modification: (i) will not adversely affect
the Partnership's ability to meet the administrative requirements applicable to
partnerships under the federal income tax laws, (ii) will not adversely affect
the status of the Limited Partners as limited partners under the Act, and (iii)
will not violate any applicable state securities or Blue Sky law or any rules,
regulations, guidelines, or statements of policy promulgated or applied
thereunder; PROVIDED, HOWEVER, that the General Partner's
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minimum investment in the Partnership may not be reduced below the lesser of (A)
the minimum investment required by Section II.C of the NASAA Guidelines, and (B)
the minimum investment required by such Guidelines as in effect on the date of
such proposed modification.
Interests in the Partnership, other than the General Partnership Interest of
the General Partner, shall be Units. The initial Limited Partner named at the
end of this Agreement is herewith contributing $1,000 in cash to the capital of
the Partnership in consideration for receiving one Unit. The initial Limited
Partner agrees to withdraw as a Limited Partner at the Initial Closing, and the
remaining Partners hereby consent to such withdrawal. The $1,000 capital
contribution of the initial Limited Partner shall be returned to him, without
interest, and he shall have no further rights or obligations as a Limited
Partner with respect to such contribution.
The General Partner, for and on behalf of the Partnership, shall issue and
sell Units to persons desiring to become Limited Partners, PROVIDED that such
persons shall be determined by the General Partner to be qualified investors and
their subscriptions for Units shall be accepted by the General Partner, which
acceptance the General Partner may withhold in whole or in part in its sole
discretion. The minimum subscription for Units per subscriber shall be such
amount as the General Partner shall determine from time to time in its sole
discretion.
The Partnership, directly and/or through Dean Witter Reynolds Inc. ("DWR")
or such other selling agent or agents (each, a "Selling Agent") as may be
approved by the General Partner, may at any time and from time to time in the
sole discretion of the General Partner offer for sale Units and fractions of
Units (to the third decimal place) in public and/or private offerings, at prices
per Unit, in such minimum amounts, for such periods of time, and on such terms
and conditions as the General Partner shall determine in its sole discretion.
Units offered during any offering shall be issued and sold by the Partnership as
of the opening of business (as determined by the General Partner) on the first
business day of a fiscal quarter or month and a closing for subscriptions
received during such offering shall be held as of such date; PROVIDED, HOWEVER,
that the General Partner may hold closings at such other times and for such
other periods as it shall determine in its sole discretion to effectuate such
offerings. At each such closing, the Partnership shall issue and sell Units to
each subscriber whose subscription shall be accepted by the General Partner at a
price per Unit to be determined by the General Partner in its sole discretion;
PROVIDED, HOWEVER, that the offering price per Unit at the Initial Closing shall
be $10 per Unit, and the offering price per Unit at any subsequent closing
during the Initial Offering and during any subsequent offering of Units shall
not at any time be less than the Net Asset Value of a Unit as of the opening of
business on the date of the applicable closing at which such Unit shall be
issued and sold, unless the newly offered Units' participation in the
Partnership's profits and losses is proportionately reduced. During any
offering, Units may be subscribed for by the General Partner, DWR, Morgan
Stanley & Co. Incorporated ("MS & Co."), Morgan Stanley & Co. International
Limited ("MSIL"), Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), any
trading advisor to the Partnership (each, a "Trading Advisor"), any commodity
broker for the Partnership (each, a "Commodity Broker"), and such persons'
respective shareholders, directors, officers, partners, employees, principals,
and Affiliates. Subscriptions for Units by such persons shall not preclude them
from receiving compensation from the Partnership for services rendered by them
in their respective capacities as other than Limited Partners. No subscriber for
Units during any offering of Units shall become a Limited Partner until the
General Partner shall: (a) accept such subscriber's subscription at a closing
relating to such offering; (b) execute this Agreement on behalf of such
subscriber pursuant to the power of attorney in the subscription agreement
executed by the subscriber in connection with such offering; and (c) make an
entry on the books and records of the Partnership reflecting that such
subscriber has been admitted as a Limited Partner. Accepted subscribers shall be
deemed Limited Partners at such time as their admission shall be reflected on
the books and records of the Partnership. The aggregate of all capital
contributions to the Partnership shall be available to the Partnership to carry
on its business and no interest shall be paid by the Partnership on any such
contribution.
In connection with any offering of Units by the Partnership, the General
Partner, on behalf of the Partnership, shall: (a) cause to be filed one or more
Disclosure Documents and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable
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law with the CFTC and the National Futures Association ("NFA"), Forms D or other
applications, notices or forms with the SEC and state securities and Blue Sky
administrators, and Registration Statements, Prospectuses (as used hereinafter,
the term "Prospectus" shall mean the most recent version of the Prospectus
issued by the Partnership, or the most recent version of the Disclosure Document
or other offering memorandum prepared, in connection with the particular
offering of Units), and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable law, with the
CFTC, the NFA, the SEC, and the National Association of Securities Dealers,
Inc.; (b) qualify by registration or exemption from registration the Units for
sale under the Blue Sky and securities laws of such states of the United States
and such other jurisdictions as the General Partner in its sole discretion shall
deem advisable or as may be required by applicable law; (c) make such
arrangements for the sale of Units as it shall deem advisable, including
engaging DWR or any other firm as Selling Agent and entering into a selling
agreement with DWR or such other Selling Agent; and (d) take such action with
respect to and in order to effectuate the matters described in clauses (a)
through (c) as it shall deem advisable or necessary.
The Partnership shall not pay the costs of any offering or any selling
commissions relating thereto. No Limited Partner shall have any preemptive,
preferential or other rights with respect to the issuance or sale of any
additional Units, except as described in the applicable Prospectus. No Limited
Partner shall have the right to consent to the admission of any additional
Limited Partner. The Partnership may offer different classes of Units for sale
having different economic terms than the Units previously sold to the public,
provided that the issuance of such new class of Units shall in no respect
adversely affect the holders of outstanding Units. There is no maximum aggregate
amount of contributions which may be received by the Partnership.
All Units subscribed for shall be issued subject to the collection of good
funds. If, at any time, good funds representing payment for Units are not made
available to the Partnership because a subscriber has provided bad funds in the
form of a bad check or draft or otherwise to DWR or another Selling Agent which,
in turn, has deposited the subscription amount with the escrow agent, the
Partnership shall cancel the Units issued to such subscriber represented by such
bad funds, and the subscriber's name shall be removed as a Limited Partner from
the books and records of the Partnership. Any losses or profits sustained by the
Partnership in connection with its Futures Interests trading allocable to such
cancelled Units shall be deemed a decrease or increase in Net Assets and
allocated among the remaining Partners as described in Section 7. Each Limited
Partner agrees to reimburse the Partnership for any expense or loss (including
any trading loss) incurred in connection with the issuance and cancellation of
any such Units issued to such Limited Partner.
7. ALLOCATION OF PROFITS AND LOSSES; ACCOUNTING; OTHER MATTERS.
(A) CAPITAL ACCOUNTS. A capital account shall be established for each
Partner. The initial balance of each Partner's capital account shall be the
amount of a Partner's initial capital contribution to the Partnership.
(B) MONTHLY ALLOCATIONS. As of the close of business (as determined by the
General Partner) on the last day of each calendar month ("Determination Date")
during each fiscal year of the Partnership, the following determinations and
allocations shall be made:
(1) The Net Assets of the Partnership, before accrual of any monthly
management or service fee and any incentive fee shall be determined.
(2) The accrued monthly management and service fees shall then be charged
against Net Assets.
(3) The accrued incentive fee, if any, shall then be charged against Net
Assets.
(4) Any increase or decrease in Net Assets (after the adjustments in
subparagraphs (2) and (3) above), over those of the immediately
preceding Determination Date (or, in the case of the first Determination
Date, the Initial Closing), shall then be credited or charged to the capital
accounts of each Partner in the ratio that the balance of each account bears
to the balance of all accounts.
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(5) The amount of any distribution to a Partner, any amount paid to a
Partner on redemption of Units, and any amount paid to the General
Partner upon withdrawal of its interest in the Partnership shall be charged
to that Partner's capital account.
(C) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of
the end of each fiscal year of the Partnership, the Partnership's recognized
profit or loss shall be allocated among the Partners pursuant to the following
subparagraphs for federal income tax purposes. Such allocations of profit and
loss will be pro rata from net capital gain or loss and net operating income or
loss realized by the Partnership. For United States federal income tax purposes,
a distinction will be made between net short-term gain or loss and net long-term
gain or loss.
(1) Items of ordinary income (such as interest or credits in lieu of
interest) and expense (such as the management fees, incentive fees,
service fees, and extraordinary expenses) shall be allocated pro rata among
the Partners based on their respective capital accounts (exclusive of these
items of ordinary income or expense) as of the end of each month in which
the items of ordinary income or expense accrued.
(2) Net recognized gain or loss from the Partnership's trading activities
shall be allocated as follows (with any allocation of recognized gain
or loss consisting of pro rata shares of capital or ordinary gain or loss):
(aa)For the purpose of allocating the Partnership's net recognized
gain or loss among the Partners, there shall be established an
allocation account with respect to each outstanding Unit. The initial
balance of each allocation account shall be the amount paid by the
Partner to the Partnership for the Unit. Allocation accounts shall be
adjusted as of the end of each calendar month and as of the date a
Partner completely redeems his Units as follows:
(i)Each allocation account shall be increased by the amount of
income allocated to the holder of the Unit pursuant to
subparagraph (c)(1) above and subparagraph (c)(2)(cc) below.
(ii)Each allocation account shall be decreased by the amount of
expense or loss allocated to the holder of the Unit pursuant
to subparagraph (c)(1) above and subparagraph (c)(2)(ee) below and by
the amount of any distribution the holder of the Unit has received
with respect to the Unit (other than on redemption of the Unit).
(iii)When a Unit is redeemed, the allocation account with respect
to such Unit shall be eliminated.
(bb)Net recognized gain shall be allocated first to each Partner who
has partially redeemed his Units during the fiscal year up to the
excess, if any, of the amount received upon redemption of the Units over
the allocation account attributable to the redeemed Units.
(cc)Net recognized gain remaining after the allocation thereof
pursuant to subparagraph (c)(2)(bb) above shall be allocated next
among all Partners whose capital accounts are in excess of their Units'
allocation accounts (after the adjustments in subparagraph (c)(2)(bb)
above) in the ratio that each such Partner's excess bears to all such
Partners' excesses. In the event that gain to be allocated pursuant to
this subparagraph (c)(2)(cc) is greater than the excess of all such
Partners' capital accounts over all such allocation accounts, the excess
will be allocated among all Partners in the ratio that each Partner's
capital account bears to all Partners' capital accounts.
(dd)Net recognized loss shall be allocated first to each Partner who
has partially redeemed his Units during the fiscal year up to the
excess, if any, of the allocation account attributable to the redeemed
Units over the amount received upon redemption of the Units.
(ee)Net recognized loss remaining after the allocation thereof
pursuant to subparagraph (c)(2)(dd) above shall be allocated next
among all Partners whose Units' allocation accounts are in excess of
their capital accounts (after the adjustments in subparagraph (c)(2)(dd)
above)
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in the ratio that each such Partner's excess bears to all such Partners'
excesses. In the event that loss to be allocated pursuant to this
subparagraph (c)(2)(ee) is greater than the excess of all such allocation
accounts over all such Partners' capital accounts, the excess loss will
be allocated among all Partners in the ratio that each Partner's capital
account bears to all Partners' capital accounts.
(3) The tax allocations prescribed by this Section 7(c) shall be made to
each holder of a Unit whether or not the holder is a substituted
Limited Partner. In the event that a Unit has been transferred or assigned
pursuant to Section 10(a), the allocations prescribed by this Section 7(c)
shall be made with respect to such Unit without regard to the transfer or
assignment, except that in the year of transfer or assignment the
allocations prescribed by this Section 7(c) shall be divided between the
transferor or assignor and the transferee or assignee based on the number of
months each held the transferred or assigned Unit. For purposes of this
Section 7(c), tax allocations shall be made to the General Partner's Units
of General Partnership Interest on a Unit-equivalent basis.
(4) The allocation of profit and loss for federal income tax purposes set
forth herein is intended to allocate taxable profits and loss among
Partners generally in the ratio and to the extent that net profit and net
loss are allocated to such Partners under Section 7(b) hereof so as to
eliminate, to the extent possible, any disparity between a Partner's capital
account and his allocation account with respect to each Unit then
outstanding, consistent with the principles set forth in Section 704(c) of
the Internal Revenue Code of 1986, as amended (the "Code").
(D) DEFINITIONS; ACCOUNTING.
(1) NET ASSETS. The Partnership's "Net Assets" shall mean the total assets
of the Partnership (including, but not limited to, all cash and cash equivalents
(valued at cost), accrued interest and amortization of original issue discount,
and the market value of all open Futures Interests positions and other assets of
the Partnership), less the total liabilities of the Partnership (including, but
not limited to, one-half of the brokerage commissions that would be payable with
respect to the closing of each of the Partnership's open Futures Interests
positions (if charged on a "roundturn" basis), or brokerage fees (if charged on
a "flat rate" basis), management fees, incentive fees, service fees, ordinary
administrative expenses, Transaction Fees and Costs, and extraordinary expenses)
determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a Futures
Interest traded on a United States exchange shall mean the settlement price on
the exchange on which the particular Futures Interest was traded by the
Partnership on the day with respect to which Net Assets shall be determined;
PROVIDED, HOWEVER, that if a Futures Interest could not have been liquidated on
such day due to the operation of daily limits or other rules of the exchange
upon which that Futures Interest shall be traded or otherwise, the settlement
price on the first subsequent day on which the Futures Interest could have been
liquidated shall be the market value of such Futures Interest for such day. The
market value of a Futures Interest traded on a foreign exchange or market shall
mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of Futures Interest.
(2) NET ASSET VALUE. The "Net Asset Value" of a Unit shall mean the Net
Assets allocated to capital accounts represented by Units divided by the
aggregate number of Units.
(E) EXPENSES AND LIMITATIONS THEREOF. DWR shall pay all of the
organizational and Initial Offering expenses of the Partnership (including, but
not limited to, legal, accounting, and auditing fees, printing costs, filing
fees, escrow fees, marketing costs and expenses, and other related expenses),
and shall not be reimbursed therefor. Any such offering expenses in connection
with a subsequent offering of Units shall not be paid by the Partnership.
The Partnership shall either (i) pay a monthly service fee to the General
Partner as described in the Prospectus or as amended from time to time as
permitted by this Agreement, from which the General Partner shall pay all of the
Partnership's ordinary administrative expenses, including expenses for services
provided by third parties selected by the General Partner and reimbursement of
all out-of-pocket expenses incurred by such persons and by the General Partner
and its Affiliates in providing
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such services to the Partnership; or (ii) pay all of such ordinary
administrative expenses itself, subject to such limits thereon as set forth in
this Agreement. Such ordinary administrative expenses shall include legal,
accounting, auditing, recordkeeping, administration, and computer expenses,
expenses incurred in preparing reports and tax information to Limited Partners
and regulatory authorities, printing and duplication expenses, mailing expenses,
and filing fees. The General Partner shall not be reimbursed by the Partnership
for any costs incurred by it relating to office space, equipment, and staff
necessary for Partnership operations and administration of redemptions of Units.
The Partnership will be obligated to pay any extraordinary expenses (determined
in accordance with generally accepted accounting principles) it may incur.
The Partnership's assets held by any Commodity Broker, as provided in
Section 7(i), may be used as margin solely for the Partnership's trading. The
Partnership shall bear all commodity brokerage fees and commissions and, except
as otherwise set forth herein, shall be obligated to pay all liabilities
incurred by it, including, without limitation, all fees and expenses incurred in
connection with its trading activities (including, but not limited to, floor
brokerage fees, exchange fees, clearinghouse fees, NFA fees, "give up" or
transfer fees, and any costs associated with the taking of delivery of
commodities (collectively, "Transaction Fees and Costs")), management and
incentive fees payable to any Trading Advisor, and any service fee payable to
the General Partner. Appropriate reserves may be created, accrued, and charged
against Net Assets for contingent liabilities, if any, as of the date any such
contingent liability becomes known to the General Partner. Such reserves shall
reduce the Net Asset Value of interests in the Partnership for all purposes,
including redemptions.
The following special limits shall apply to the Partnership's fees and
expenses, in accordance with Section IV.C of the NASAA Guidelines: (a) the
aggregate of (i) the management fees payable by the Partnership to the Trading
Advisor(s), and (ii) either (A) the service fee payable to the General Partner,
if the Partnership is paying such a fee, or (B) the Partnership's customary and
routine administrative expenses (other than commodity brokerage commissions or
fees, Transaction Fees and Costs, incentive fees, legal and auditing fees and
expenses, and extraordinary expenses), if such expenses are being paid directly
by the Partnership, shall not exceed 1/2 of 1% of the Partnership's Net Assets
per month, or 6% of the Partnership's Net Assets annually; (b) the incentive
fees payable by the Partnership to any Trading Advisor shall not exceed 15% of
the Partnership's "Trading Profits" (as defined in the management agreement with
such Trading Advisor) during the relevant period, PROVIDED that such incentive
fees may be increased by 2% for each 1% by which the aggregate fees and expenses
described in clause (a) of this sentence are below the 6% of Net Assets annual
limit thereon (I.E., if such fees and expenses are 3.5% of Net Assets, the
maximum incentive fee payable may be increased to 20%); (c) any "roundturn"
brokerage commissions (excluding Transaction Fees and Costs) payable by the
Partnership to any Commodity Broker shall not exceed 80% of such Commodity
Broker's published non-member rates for speculative accounts; and (d) the
aggregate of (i) the brokerage commissions or fees payable by the Partnership to
any Commodity Broker, (ii) any Transaction Fees and Costs separately payable by
the Partnership, and (iii) any net excess interest and compensating balance
benefits to any Commodity Broker (after crediting the Partnership with interest)
shall not exceed 14% annually of the Partnership's average monthly Net Assets as
of the last day of each month during each calendar year. The General Partner or
an Affiliate thereof shall pay and shall not be reimbursed for any fees and
expenses in excess of any such limits.
(F) LIMITED LIABILITY OF LIMITED PARTNERS. Each Unit, when purchased by a
Limited Partner in accordance with the terms of this Agreement, shall be fully
paid and nonassessable. No Limited Partner shall be liable for the Partnership's
obligations in excess of such Partner's unredeemed capital contribution,
undistributed profits, if any, and any distributions and amounts received upon
redemption of Units, together with interest thereon. The Partnership shall not
make a claim against a Limited Partner with respect to amounts distributed to
such Partner or amounts received by such Partner upon redemption of Units unless
the Net Assets of the Partnership (which shall not include any right of
contribution from the General Partner except to the extent of the General
Partner's capital account) shall be insufficient to discharge the liabilities of
the Partnership which shall have arisen prior to the payment of such amounts.
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(G) RETURN OF LIMITED PARTNER'S CAPITAL CONTRIBUTION. Except to the extent
that a Limited Partner shall have the right to withdraw capital through
redemption of Units in accordance with Section 10(b), no Limited Partner shall
have any right to demand the return of his capital contribution or any profits
added thereto, except upon termination and dissolution of the Partnership. In no
event shall a Limited Partner be entitled to demand or receive from the
Partnership property other than cash.
(H) DISTRIBUTIONS. The General Partner shall have sole discretion in
determining what distributions (other than on redemption of Units), if any, the
Partnership shall make to its Partners. If made, all distributions shall be pro
rata in accordance with the respective capital accounts of the Partners and may
be made by credit to a Limited Partner's account with DWR or by check if such
account is closed.
(I) INTEREST ON ASSETS. The Partnership shall deposit all of its assets
with such Commodity Broker(s) as the Partnership shall utilize from time to
time, and such assets shall be used by the Partnership to engage in Futures
Interests trading. Unless provided otherwise in the Prospectus, such assets will
be invested in securities approved by the CFTC for investment of customer funds
or held in non-interest-bearing accounts, and such Commodity Broker(s) will
credit the Partnership at month-end with interest income as set forth in the
Prospectus or as otherwise set forth in a notice to Limited Partners.
8. MANAGEMENT AND TRADING POLICIES.
(A) MANAGEMENT OF THE PARTNERSHIP. Except as may be otherwise specifically
provided herein, the General Partner, to the exclusion of all Limited Partners,
shall conduct and manage the business of the Partnership, including without
limitation, the investment of the funds of the Partnership. No Limited Partner
shall have the power to represent, act for, sign for, or bind the General
Partner or the Partnership. Except as provided herein, no Partner shall be
entitled to any salary, draw, or other compensation from the Partnership. Each
Limited Partner hereby undertakes to furnish to the General Partner such
additional information as may be determined by the General Partner to be
required or appropriate for the Partnership to open and maintain an account or
accounts with the Partnership's Commodity Brokers for the purpose of trading in
Futures Interests.
The General Partner shall be under a fiduciary duty to conduct the affairs
of the Partnership in the best interests of the Partnership. The Limited
Partners will under no circumstances be permitted to contract away, or be deemed
to have contracted away, the fiduciary obligations owed them by the General
Partner under statutory or common law. The General Partner shall have fiduciary
responsibility for the safekeeping of all of the funds and assets of the
Partnership, whether or not in its immediate possession or control, and the
General Partner shall not employ, or permit another to employ, such funds or
assets in any manner except for the benefit of the Partnership.
(B) GENERAL PARTNER. The General Partner, on behalf of the Partnership,
shall retain one or more Trading Advisors (who may include officers, employees,
and Affiliates of the General Partner, DWR, MS & Co., and MSDWD; PROVIDED,
HOWEVER, that: (i) the initial Trading Advisor shall be Morgan Stanley
Commodities Management, Inc. ("MSCM"), an Affiliate of the General Partner, DWR,
MS & Co., and MSDWD; and (ii) no other officer, employee or Affiliate of the
foregoing persons shall be retained as a Trading Advisor until the first
business day following a Redemption Date, in which case (A) notice of such
retention must be mailed to each Limited Partner at least five business days
prior to the last date on which a Request for Redemption must be received by the
General Partner with respect to the applicable Redemption Date; and (B) such
notice must describe the redemption and voting rights of Limited Partners, as
set forth in Sections 10(b) and 15) to make all trading decisions for the
Partnership and shall delegate complete trading discretion to such Trading
Advisors; PROVIDED, HOWEVER, that the General Partner may override any trading
instructions: (i) that the General Partner, in its sole discretion, determines
to be in violation of any trading policy of the Partnership, as set forth in
subsection (c) below; (ii) to the extent the General Partner believes doing so
is necessary for the protection of the Partnership; (iii) to terminate the
Futures Interests trading of the Partnership; (iv) to comply with applicable
laws or regulations; or (v) as and to the extent necessary, upon the failure of
a Trading Advisor to comply with a request to make the necessary amount of funds
available to the Partnership within five days of such request, to fund
distributions, redemptions, or reapportionments among
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Trading Advisors or to pay the expenses of the Partnership; and PROVIDED,
FURTHER, that the General Partner may make trading decisions at any time at
which a Trading Advisor shall become incapacitated or some other emergency shall
arise as a result of which such Trading Advisor shall be unable or unwilling to
act and a successor Trading Advisor has not yet been retained.
The Partnership shall not enter into any agreement with the General Partner,
DWR, MSCM, MS & Co., MSIL, or their respective Affiliates (other than a selling
agreement as contemplated by Section 6) which has a term of more than one year
and which does not provide that it shall be terminable by the Partnership
without penalty upon 60 days' prior written notice by the General Partner;
PROVIDED, HOWEVER, that any such agreement may provide for automatic renewal for
additional one-year terms unless either the Partnership or the other party to
such agreement, upon written notice given not less than 60 days prior to the
original termination date or any extended termination date, notifies the other
party of its intention not to renew.
Subject to the foregoing paragraph, the General Partner is hereby
authorized, on behalf of the Partnership, to enter into the form of management
agreement described in the Prospectus (the "Management Agreement") with MSCM,
and to cause the Partnership to pay to MSCM the management and incentive fees
provided for in such Management Agreement, as described in the Prospectus.
The General Partner is further authorized: (a) to modify (including changing
the form and amount of compensation and other arrangements and terms) or
terminate any Management Agreement in its sole discretion in accordance with the
terms of such Management Agreement and to employ from time to time other Trading
Advisors pursuant to management agreements having such terms and conditions and
providing for such form and amount of compensation as the General Partner in its
sole discretion shall deem to be in the best interest of the Partnership, which
terms may include provision for the payment of an incentive fee to a new or
replacement Trading Advisor or Advisors which shall be based on any trading
profits which shall be earned by such Trading Advisor(s), irrespective of
whether such profits shall exceed trading losses incurred by any previous or
existing Trading Advisor or Advisors or by the Partnership as a whole; (b) to
enter into the respective forms of customer agreements described in the
Prospectus (the "Customer Agreements") with MS & Co. and MSIL, and to cause the
Partnership to pay to MS & Co. brokerage fees (which shall include any fees
payable to MSIL) at the rates provided for in its Customer Agreement and as
described in the Prospectus; and (c) to modify (including changing the form and
amount of compensation and other arrangements and terms) and terminate any
Customer Agreement in its sole discretion in accordance with the terms of such
Customer Agreement and to employ from time to time other Commodity Brokers
pursuant to customer agreements having such terms and conditions and providing
for such form and amount of compensation as the General Partner in its sole
discretion shall deem to be in the best interest of the Partnership, PROVIDED,
HOWEVER, that the General Partner shall review at least annually the brokerage
arrangements with the Partnership to ensure that the brokerage fees or
commissions paid to any Commodity Broker are fair, reasonable, and competitive,
and represent the best price and services available, taking into consideration:
(i) the size of the Partnership; (ii) the Futures Interests trading activity;
(iii) the services provided by the Commodity Broker or any Affiliate thereof to
the Partnership; (iv) the costs incurred by the Commodity Broker or any
Affiliate thereof in organizing and operating the Partnership and offering
Units; (v) the overall costs to the Partnership; (vi) any excess interest and
compensating balance benefits to the Commodity Broker from assets held thereby;
and (vii) if the General Partner is an Affiliate of the Commodity Broker, the
risks incurred by and the obligations of the General Partner as such; and (d) to
modify the service fee payable to it as described in the Prospectus. Any
modifications to any of the foregoing compensation arrangements shall be subject
to the limits described in the fourth paragraph of Section 7(e) and the notice
requirements of Section 9.
The General Partner may subdivide or combine Units in its discretion,
provided that no such subdivision or combination shall affect the Net Asset
Value of any Limited Partner's interest in the Partnership.
(C) GENERAL TRADING POLICIES. The General Partner shall require any
Trading Advisor retained by the Partnership to follow the trading policies set
forth below. The following trading policies are applicable to the Partnership as
a whole and do not apply to the trading of any individual Trading Advisor.
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1. The Partnership will not employ the trading technique commonly known
as "pyramiding," in which a speculator uses unrealized profits on
existing positions in a given Futures Interest due to favorable price
movement as margin specifically to buy or sell additional positions in the
same or a related Futures Interest. Taking into account the Partnership's
open trade equity on existing positions in determining generally whether to
acquire additional Futures Interest positions on behalf of the Partnership
will not be considered to constitute "pyramiding."
2. The Partnership will not purchase, sell, or trade securities (except
securities approved by the CFTC for investment of customer funds).
3. The Partnership will not under any circumstances lend money to
Affiliates or otherwise. The Partnership will not utilize borrowings
except if the Partnership purchases or takes delivery of commodities.
However, if the Partnership borrows money from the General Partner or any
Affiliate thereof, the lending entity in such case (the "Lender") may not
receive interest in excess of its interest costs, nor may the Lender 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, nor
may the Lender or any Affiliate thereof receive any points or other
financing charges or fees regardless of the amount.
4. The Partnership will not permit "churning" of the Partnership's
assets.
(D) CHANGES TO TRADING POLICIES. The General Partner shall not make any
material change in the trading policies in Section 8(c) without obtaining prior
written approval of Limited Partners owning more than 50% of the outstanding
Units.
(E) MISCELLANEOUS. The General Partner may take such other actions as it
deems necessary or desirable to manage the business of the Partnership,
including, but not limited to, the following: opening bank accounts and paying
or authorizing the payment of distributions to the Partners and the expenses of
the Partnership, such as brokerage fees and commissions, management and
incentive fees, service fees, ordinary and extraordinary expenses, and
Transaction Fees and Costs.
The General Partner shall prepare or cause to be prepared and shall file on
or before the due date (or any extension thereof) any federal, state, or local
tax returns which shall be required to be filed by the Partnership. 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 legal proceedings contesting the
validity, applicability, or amount thereof and such contest shall not materially
endanger any right or interest of the Partnership.
The General Partner shall be authorized to perform all duties imposed by
Section 6221 through 6233 of the Code on the General Partner as "tax matters
partner" of the Partnership, including, but not limited to, the following: (a)
the power to conduct all audits and other administrative proceedings with
respect to Partnership tax items; (b) the power to extend the statute of
limitations for all Limited Partners with respect to Partnership tax items; (c)
the power to file a petition with an appropriate federal court for review of a
final Partnership administrative adjustment; and (d) the power to enter into a
settlement with the Internal Revenue Service on behalf of, and binding upon,
those Limited Partners having less than a 1% interest in the Partnership, unless
a Limited Partner shall have notified the Internal Revenue Service and the
General Partner that the General Partner may not act on such Partner's behalf.
If the Partnership is required to withhold United States taxes on income
with respect to Units held by Limited Partners who are nonresident alien
individuals, foreign corporations, foreign partnerships, foreign trusts, or
foreign estates, the General Partner may, but is not required to, pay such tax
out of its own funds and then be reimbursed out of the proceeds of any
distribution or redemption with respect to such Units.
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The General Partner shall keep at the principal office of the Partnership
such books and records relating to the business of the Partnership as it deems
necessary or advisable, as are required by the Commodity Exchange Act, as
amended (the "CEAct"), and the CFTC's rules and regulations thereunder, or as
shall be required by other regulatory bodies, exchanges, boards, and authorities
having jurisdiction. Such books and records shall be retained by the Partnership
for not less than five years.
The Partnership's books and records shall be available to Limited Partners
or their authorized attorneys or agents for inspection and copying during normal
business hours of the Partnership and, upon request, the General Partner shall
send copies of same to any Limited Partner upon payment by him of reasonable
reproduction and distribution costs. Any subscription documentation executed by
a Limited Partner in connection with his purchase of Units shall be retained by
the Partnership for not less than six years.
Except as described herein or in the Prospectus, no person may receive,
directly or indirectly, any advisory, management, or incentive fee for
investment advice who shares or participates in per trade commodity brokerage
commissions paid by the Partnership. No Commodity Broker for the Partnership may
pay, directly or indirectly, rebates or "give-ups" to the General Partner or any
Trading Advisor, and such prohibitions may not be circumvented by any reciprocal
business arrangements. Assets of the Partnership shall not be commingled with
assets of any other person. Margin deposits and deposits of assets with a
Commodity Broker shall not constitute commingling.
The General Partner shall devote such time and resources to the
Partnership's business and affairs as it in its sole discretion shall deem
necessary or advisable to effectively manage the Partnership. Subject to Section
5, the General Partner may engage in other business activities and shall not be
required to refrain from any other activity or disgorge any profits from any
such activity, whether as general partner of additional partnerships formed for
investment in Futures Interests or otherwise. The General Partner may engage and
compensate, on behalf and from funds of the Partnership, such persons, firms, or
corporations, including any Affiliate of the General Partner, as the General
Partner in its sole judgment shall deem advisable for the conduct and operation
of the business of the Partnership; PROVIDED, HOWEVER, that, except as described
herein and in the Prospectus, the General Partner shall not engage any such
Affiliate to perform services for the Partnership without having made a good
faith determination that (i) the Affiliate which it proposes to engage to
perform such services is qualified to do so (considering the prior experience of
the Affiliate or the individuals employed thereby); (ii) the terms and
conditions of the agreement pursuant to which such Affiliate is to perform
services for the Partnership are no less favorable to the Partnership than could
be obtained from equally-qualified unaffiliated third parties, or are otherwise
determined by the General Partner to be fair and reasonable to the Partnership
and the Limited Partners; and (iii) the maximum period covered by the agreement
pursuant to which such Affiliate is to perform services for the Partnership
shall not exceed one year, and such agreement shall be terminable without
penalty upon 60 days' prior written notice by the Partnership. Nothing contained
in the preceding sentence shall prohibit the General Partner from receiving
reimbursement from the Partnership for expenses advanced on behalf of the
Partnership (other than organizational and offering expenses).
No person dealing with the General Partner shall be required to determine
its authority to make any undertaking on behalf of the Partnership or to
determine any fact or circumstance bearing upon the existence of its authority.
9. AUDITS; REPORTS TO LIMITED PARTNERS.
The Partnership's books shall be audited annually by an independent
certified public accounting firm selected by the General Partner in its sole
discretion. The Partnership shall cause each Partner to receive: (a) within 90
days after the close of each fiscal year an annual report containing audited
financial statements (including a statement of income and a statement of
financial condition) of the Partnership for the fiscal year then ended, prepared
in accordance with generally accepted accounting principles and accompanied by a
report of the accounting firm which audited such statements, and such other
information as the CFTC and NFA may from time to time require (such annual
reports will
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provide a detailed statement of any transactions with the General Partner or its
Affiliates and of fees, commissions and any compensation paid or accrued to the
General Partner or its Affiliates for the fiscal year completed, showing the
amount paid or accrued to each recipient and the services performed); (b) within
75 days after the close of each fiscal year (but in no event later than March 15
of each year) such tax information relating to the Partnership as is necessary
for such Partner to complete his federal income tax return; (c) within 30 days
after the close of each calendar month such financial and other information with
respect to the Partnership as the CFTC and NFA from time to time shall require
in monthly reports, together with information concerning any material change in
the brokerage commissions and fees payable by the Partnership to any Commodity
Broker; and (d) at such times as shall be necessary or advisable in the General
Partner's sole discretion, such other information as the CFTC and NFA from time
to time shall require under the CEAct to be given to participants in commodity
pools.
In addition, if any of the following events occurs, notice of such event,
including a description of the redemption and voting rights of Limited Partners,
as set forth in Sections 10(b) and 15, shall be mailed to each Limited Partner
within seven business days after the occurrence of such event: (a) a decrease in
the Net Asset Value of a Unit as of the close of business on any business day to
50% or less of the Net Asset Value for such Unit as of the end of the end of the
immediately preceding month; (b) any material amendment to this Agreement; (c)
any change in Trading Advisors or any material change in the Management
Agreement with a Trading Advisor; (d) any change in Commodity Brokers or any
material change in the compensation arrangements with a Commodity Broker; (e)
any change in general partners or any material change in the compensation
arrangements with a general partner; (f) any change in the Partnership's fiscal
year; (g) any material change in the Partnership's trading policies; or (h)
cessation of Futures Interests trading by the Partnership. In the case of a
notice given in accordance with clause (a) of the immediately preceding
sentence: (i) such notice shall also advise Limited Partners that a "Special
Redemption Date," on a date specified in such notice (but in no event earlier
than 15, nor later than 45, days after the mailing of such notice), will take
place as of which Limited Partners may redeem their Units in the same manner as
provided in Section 10(b) for regular Redemption Dates (a Special Redemption
Date may take place on a regular Redemption Date); and (ii) following the close
of business on the date of the 50% decrease giving rise to such notice, the
Partnership shall liquidate all existing positions as promptly as reasonably
practicable and shall suspend all Futures Interests trading through the Special
Redemption Date. Thereafter, the General Partner shall determine whether to
reinstitute Futures Interests trading or to terminate the Partnership. As used
in this paragraph, "material change in the Partnership's trading policies" shall
mean any change in those trading policies specified in Section 8(c).
The Net Asset Value of a Unit shall be determined daily by the General
Partner and the most recent Net Asset Value calculation shall be promptly
supplied by the General Partner in writing to any Limited Partner after the
General Partner shall have received a written request from such Partner.
In addition, no increase (subject to the limits in the fourth paragraph of
Section 7(e)) in any of the management, incentive, brokerage, or service fees
payable by the Partnership, or any caps (other than those described in the
fourth Paragraph of Section 7(e)) on management fees, incentive fees, brokerage
commissions or fees, Transaction Fees and Costs, service fees, ordinary
administrative expenses, or net excess interest or compensating balance
benefits, all as described in the Prospectus, may take effect until the first
business day following a Redemption Date (as defined in Section 10(b)), PROVIDED
that: (i) notice of such increase is mailed to each Limited Partner at least
five business days prior to the last date on which a Request for Redemption must
be received by the General Partner with respect to the applicable Redemption
Date; (ii) such notice shall describe the redemption and voting rights of
Limited Partners, as set forth in Sections 10(b) and 15; and (iii) none of such
fees or caps may be increased until the first business day following the first
Redemption Date as of which a redemption charge is no longer payable as set
forth in Section 10(b).
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10. TRANSFER; REDEMPTION OF UNITS.
(A) TRANSFER. A Limited Partner may transfer or assign his Units only as
provided in this Section 10(a). No transferee or assignee shall become a
substituted Limited Partner unless the General Partner first consents to such
transfer or assignment in writing, which consent may be withheld in its sole
discretion. Any transfer or assignment of Units which is permitted hereunder
shall be effective as of the end of the month in which such transfer or
assignment is made; PROVIDED, HOWEVER, that the Partnership need not recognize
any transfer or assignment until it has received at least 30 days' prior written
notice thereof from the Limited Partner, which notice shall set forth the
address and social security or taxpayer identification number of the transferee
or assignee and the number of Units to be transferred or assigned, and which
notice shall be signed by the Limited Partner. No transfer or assignment of
Units will be effective or recognized by the Partnership if the transferee or
assignee, or the transferor or assignor (if fewer than all Units held by the
transferor or assignor are being transferred or assigned), would, by reason of
such transfer or assignment, acquire Units which do not meet the minimum initial
subscription requirements, as described in the Prospectus; PROVIDED, HOWEVER,
that the foregoing restriction shall not apply to transfers or assignments of
Units (i) by the way of gift or inheritance, (ii) to any members of the Limited
Partner's family, (iii) resulting from divorce, annulment, separation or similar
proceedings, or (iv) to any person who would be deemed an Affiliate of the
Limited Partner (for purposes of this clause (iv), the term "Affiliate" also
includes any partnership, corporation, association, or other legal entity for
which such Limited Partner acts as an officer, director or partner). No transfer
or assignment shall be permitted unless the General Partner is satisfied that
(i) such transfer or assignment would not be in violation of the Act or
applicable federal, state, or foreign securities laws, and (ii) notwithstanding
such transfer or assignment, the Partnership shall continue to be classified as
a partnership rather than as an association taxable as a corporation under the
Code. No transfer or assignment of Units shall be effective or recognized by the
Partnership if such transfer or assignment would result in the termination of
the Partnership for federal income tax purposes, and any attempted transfer or
assignment in violation hereof shall be ineffective to transfer or assign any
such Units. Any transferee or assignee of Units who has not been admitted to the
Partnership as a substituted Limited Partner shall not have any of the rights of
a Limited Partner, except that such person shall receive that share of capital
and profits, shall have that right of redemption, and those rights to which his
transferor or assignor would otherwise have been entitled and shall remain
subject to the other terms of this Agreement binding upon Limited Partners. No
Limited Partner shall have any right to approve of any person becoming a
substituted Limited Partner. The Limited Partner shall bear all costs (including
any attorneys' and accountants' fees) related to such transfer or assignment of
his Units.
In the event that the General Partner consents to the admission of a
substituted Limited Partner pursuant to this Section 10(a), the General Partner
is hereby authorized to take such actions as may be necessary to reflect such
substitution of a Limited Partner.
(B) REDEMPTION. Except as set forth below and in accordance with the terms
hereof, a Limited Partner (or any assignee thereof) may withdraw all or part of
his unredeemed capital contribution and undistributed profits, if any, by
requiring the Partnership to redeem all or part of his Units at the Net Asset
Value thereof, reduced as hereinafter described (any such withdrawal shall be
referred to herein as a "Redemption"). Redemptions shall be made only in whole
Units or in multiples of $1,000, except that fractions of Units may be redeemed
if a Limited Partner shall be redeeming his entire interest in the Partnership.
A Limited Partner may first redeem Units effective as of the last day of the
sixth month following the closing at which such person first became a Limited
Partner, and may redeem Units at any month-end thereafter, in the manner
described herein. Such Units may be subject to redemption charges as described
herein.
Units redeemed on or prior to the last day of the eleventh month after such
Units were purchased will be subject to a redemption charge equal to 2% of the
Net Asset Value of a Unit on the date of such redemption. Units redeemed after
the last day of the eleventh month and on or prior to the last day of
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the twenty-fourth month after which such Units were purchased will be subject to
a redemption charge equal to 1% of the Net Asset Value of a Unit on the date of
such redemption. Units redeemed after the last day of the twenty-fourth month
after which such Units were purchased will not be subject to a redemption
charge. The foregoing redemption charges will be paid to DWR.
In addition, a limited partner in any of the other commodity pools for which
the General Partner serves as the general partner and who purchases Units
pursuant to an Exchange (as defined in the Prospectus) will not be subject to
the foregoing redemption charges or restrictions under the circumstances
described below. The number of Units (determined on a per closing basis),
expressed as a percentage of Units purchased, which are not subject to a
redemption charge is determined by dividing (a) the dollar amount received upon
redeeming an interest in such other partnership and used to purchase Units by
(b) the total investment in the Partnership. In addition, redemption charges may
not be imposed for certain large purchasers of Units, or may be otherwise
reduced or waived, as provided in the Prospectus. Redemptions of Units will be
deemed to be in the order in which they are purchased (assuming purchases at
more than one closing), with the Units not subject to a redemption charge being
deemed to be the first Units purchased at a closing.
Redemption of a Limited Partner's Units shall be effective as of the last
day of the first month ending after an irrevocable Request for Redemption in
proper form shall have been received by the General Partner ("Redemption Date");
PROVIDED, that all liabilities, contingent or otherwise, of the Partnership
(except any liability to Partners on account of their capital contributions)
shall have been paid or there shall remain property of the Partnership
sufficient to pay them. As used herein, "Request for Redemption" shall mean a
letter in the form specified by the General Partner and received by the General
Partner by 5:00 p.m. (New York City time) at least five business days prior to
the date on which such Redemption is to be effective. A form of Request for
Redemption is annexed to this Agreement. Additional forms of Request for
Redemption may be obtained by written request to the General Partner.
Upon Redemption, a Limited Partner (or any assignee thereof) shall receive
from the Partnership for each Unit redeemed an amount equal to the Net Asset
Value thereof as of the Redemption Date, less any redemption charges and any
amount owing by such Partner (and his assignee, if any) to the Partnership
pursuant to Section 14(d). If a Redemption is requested by an assignee, all
amounts owed to the Partnership under Section 14(d) by the Partner to whom such
Unit was sold, as well as all amounts owed by all assignees of such Unit, shall
be deducted from the Net Asset Value of such Unit upon Redemption. The General
Partner shall endeavor to pay Redemptions within 10 business days after the
Redemption Date, except that under special circumstances (including, but not
limited to, the inability on the part of the Partnership to liquidate futures
interests positions or the default or delay in payments which shall be due the
Partnership from commodity brokers, banks, or other persons), the Partnership
may delay payment to Partners requesting Redemption of Units of the
proportionate part of the Net Asset Value of the Units represented by the sums
which are the subject of such default or delay. Redemptions will be made by
credit to the Limited Partner's customer account with DWR or by check mailed to
the Limited Partner if such account is closed. The General Partner may, in its
absolute discretion, waive any restrictions or charges applicable to
redemptions.
The foregoing terms and conditions in this Section 10(b), other than those
in the second paragraph hereof prohibiting redemptions before the sixth
month-end following the closing at which a person first becomes a Limited
Partner, shall also apply to redemptions effected on "Special Redemption Dates"
held in accordance with Section 9.
The General Partner shall be authorized to execute, file, record, and
publish, on behalf of the Partnership and each Partner, such amendments to this
Agreement and such other documents as shall be necessary or desirable to reflect
any Redemption pursuant to this Section 10(b).
11. SPECIAL POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, does irrevocably
constitute and appoint the General Partner, with full power of substitution, as
his true and lawful agent and attorney-in-fact, in
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his name, place, and stead, (a) to execute, acknowledge, swear to, deliver, file
and record in his behalf in the appropriate public offices, and publish: (i)
this Agreement and the Certificate of Limited Partnership and amendments
thereto; (ii) all instruments that the General Partner deems necessary or
appropriate to reflect any amendment, change, or modification of this Agreement
or the Certificate of Limited Partnership made in accordance with the terms of
this Agreement; (iii) certificates of assumed name; and (iv) all instruments
that the General Partner deems necessary or appropriate to qualify or maintain
the qualification of the Partnership to do business as a foreign limited
partnership in other jurisdictions; and (b) to admit additional Limited Partners
and, to the extent that it is necessary under the laws of any jurisdiction, to
execute, deliver and file amended certificates or agreements of limited
partnership or other instruments to reflect such admission. The Power of
Attorney granted herein shall be irrevocable and deemed to be a power coupled
with an interest and shall survive the incapacity, death, dissolution,
liquidation, or termination of a Limited Partner. Each Limited Partner hereby
agrees to be bound by any representation made by the General Partner and by any
successor thereto acting in good faith pursuant to such Power of Attorney. Each
Limited Partner agrees to execute a special Power of Attorney on a document
separate from this Agreement. In the event of any conflict between this
Agreement and any instruments filed by such attorney-in-fact pursuant to the
Power of Attorney granted in this Section 11, this Agreement shall control.
12. WITHDRAWAL OF PARTNERS.
The Partnership shall terminate and be dissolved upon the withdrawal,
insolvency, bankruptcy, dissolution, liquidation, or termination of any General
Partner (unless a new general partner(s) is elected pursuant to Section 15(c)
and any such remaining general partner(s) shall have elected to continue the
business of the Partnership, which any remaining general partner(s) shall have
the right to do). The General Partner shall not withdraw or assign all of its
interest at any time without giving the Limited Partners 120 days' prior written
notice of its intention to withdraw or assign and, if the Limited Partners
thereupon elect a new general partner or partners pursuant to Section 15(c)
which elect(s) to continue the business of the Partnership, the withdrawing
General Partner shall pay all reasonable expenses incurred by the Partnership in
connection with such withdrawal. The General Partner shall be paid the Net Asset
Value of its interests in the Partnership as of the date of such withdrawal.
The death, incompetency, withdrawal, insolvency, bankruptcy, termination,
liquidation, or dissolution of a Limited Partner shall not terminate or dissolve
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 Section 10. Each Limited
Partner (and any assignee of such Partner's interest) expressly agrees that in
the event of his death, 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
of the Partnership and any right to an audit or examination of the books of the
Partnership (except to the extent permissible under the sixth paragraph of
Section 8(e)).
13. NO PERSONAL LIABILITY FOR RETURN OF CAPITAL.
Subject to Section 14, neither the General Partner, DWR, nor any Affiliate
thereof shall be personally liable for the return or repayment of all or any
portion of the capital or profits of any Partner (or assignee), it being
expressly agreed that any such return of capital or profits made pursuant to
this Agreement shall be made solely from the assets (which shall not include any
right of contribution from the General Partner) of the Partnership.
14. STANDARD OF LIABILITY; INDEMNIFICATION.
(A) STANDARD OF LIABILITY. The General Partner and its Affiliates shall
not be liable to the Partnership, the Limited Partners, or its or their
successors or assigns, for any act, omission, conduct or activity undertaken by
or on behalf of the Partnership which the General Partner determines, in good
faith, to be in the best interests of the Partnership, unless such act,
omission, conduct, or activity constituted misconduct or negligence.
A-16
<PAGE>
(B) INDEMNIFICATION BY THE PARTNERSHIP. The Partnership shall indemnify,
defend, and hold harmless the General Partner and its Affiliates 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 arising from any act, omission,
activity, or conduct undertaken by or on behalf of the Partnership, including,
without limitation, any demands, claims, or lawsuits initiated by a Limited
Partner (or assignee thereof), PROVIDED that (1) the General Partner has
determined, in good faith, that the act, omission, conduct or activity giving
rise to the claim for indemnification was in the best interests of the
Partnership, and (2) the act, omission, activity, or conduct that was the basis
for such loss, liability, damage, cost, or expense was not the result of
misconduct or negligence. Notwithstanding anything to the contrary contained in
the foregoing, neither the General Partner nor any of its Affiliates nor any
person acting as a broker-dealer shall be indemnified by the Partnership for any
losses, liabilities or expenses arising from or out of an alleged violation of
federal or state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee, or (2) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee, or (3) a court of competent jurisidiction approves
a settlement of the claims against the particular indemnitee and finds that
indemnification of the settlement and related costs should be made, PROVIDED,
with regard to such court approval, the indemnitee must apprise the court of the
position of the SEC, and the positions of the respective securities
administrators of Massachusetts, Missouri, Tennessee and/or those other states
and jurisdictions in which the plaintiffs claim that they were offered or sold
Units, with respect to indemnification for securities laws violations before
seeking court approval for indemnification. Furthermore, in any action or
proceeding brought by a Limited Partner in the right of the Partnership to which
the General Partner or any Affiliate thereof is a party defendant, any such
person shall be indemnified only to the extent and subject to the conditions
specified in the Act and this Section 14(b). The Partnership shall make advances
to the General Partner or its Affiliates hereunder only if: (1) the demand,
claim, lawsuit, or legal action relates to the performance of duties or services
by such persons to the Partnership; (2) such demand, claim, lawsuit, or legal
action is not initiated by a Limited Partner; and (3) such advances are repaid,
with interest at the legal rate under Delaware law, if the person receiving such
advance is ultimately found not to be entitled to indemnification hereunder.
Nothing contained in this Section 14(b) shall increase the liability of any
Limited Partner to the Partnership beyond the amount of his unredeemed capital
contribution, undistributed profits, if any, and any amounts received on
distributions and redemptions, together with interest thereon. All rights to
indemnification and payment of attorneys' and accountants' fees and expenses
shall not be affected by the termination of the Partnership or the withdrawal,
insolvency, or dissolution of the General Partner.
The Partnership shall not incur the cost of that portion of liability
insurance which insures the General Partner and its Affiliates for any liability
as to which the General Partner and its Affiliates are prohibited from being
indemnified.
(C) AFFILIATE. As used in this Agreement, the term "Affiliate" of a person
shall mean: (i) any natural person, partnership, corporation, association, or
other legal entity directly or indirectly owning, controlling, or holding with
power to vote 10% or more of the outstanding voting securities of such person;
(ii) any partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by such person; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by, or under common control with, such
person; or (iv) any officer or director of such person. Notwithstanding the
foregoing, solely for purposes of determining eligibility for indemnification
under Section 14(b), the term "Affiliate" shall include only those persons
performing services for the Partnership.
(D) INDEMNIFICATION BY PARTNERS. In the event that the Partnership is made
a party to any claim, demand, dispute, or litigation or otherwise incurs any
loss, liability, damage, cost, or expense as a
A-17
<PAGE>
result of, or in connection with, any Partner's (or assignee's) obligations or
liabilities unrelated to the Partnership's business, such Partner (or assignees
cumulatively) shall indemnify, defend, hold harmless, and reimburse the
Partnership for such loss, liability, damage, cost, and expense to which the
Partnership shall become subject (including attorneys' and accountants' fees and
expenses).
15. AMENDMENTS; MEETINGS.
(A) AMENDMENTS WITH CONSENT OF THE GENERAL PARTNER. If, at any time during
the term of the Partnership, the General Partner shall deem it necessary or
desirable to amend this Agreement, such amendment shall be effective only if
embodied in an instrument approved by the General Partner and by Limited
Partners owning more than 50% of the Units then outstanding and if made in
accordance with, and to the extent permissible under, the Act. Any amendment to
this Agreement or actions taken pursuant to this Section 15 that shall have been
approved by the percentage of outstanding Units prescribed above shall be deemed
to have been approved by all Limited Partners. Notwithstanding the foregoing,
the General Partner shall be authorized to amend this Agreement without the
consent of any Limited Partner in order to: (i) change the name of the
Partnership; (ii) clarify any inaccuracy or any ambiguity, or reconcile any
inconsistent provisions herein; (iii) make any amendment to this Agreement,
PROVIDED that such amendment is not adverse to the Limited Partners; (iv) effect
the intent of the allocations proposed herein to the maximum extent possible and
to the extent necessary to comply with Section 704 of the Code or the
interpretations thereof affecting such allocations; (v) attempt to ensure that
the Partnership is not taxed as an association taxable as a corporation for
federal income (or relevant state income or franchise) tax purposes; (vi)
qualify or maintain the qualification of the Partnership as a limited
partnership in any jurisdiction; (vii) delete or add any provision of or to this
Agreement required to be deleted or added by the staff of the SEC, the CFTC, any
other federal agency or any state "Blue Sky" official or other governmental
official, or in order to opt to be governed by any amendment or successor to the
Act, or to comply with applicable law; (viii) make any modification to this
Agreement to reflect the admission of additional or substitute general partners
and to reflect any modification to the net worth requirements applicable to the
General Partner and any other general partner, as contemplated by Section 5
hereof; (ix) make any amendment that is appropriate or necessary, in the opinion
of the General Partner, to prevent the Partnership or the General Partner or its
directors, officers or controlling persons from in any manner being subject to
the provisions of the Investment Company Act of 1940, as amended (the "1940
Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"), or
"plan asset" regulations adopted under the Employee Retirement Income Security
Act of 1974, as amended; and (x) to make any amendment that is appropriate or
necessary, in the opinion of the General Partner, to qualify the Partnership
under the 1940 Act, and any individuals under the 1940 Act and the Advisers Act,
if the General Partner is informed that doing so is necessary. Any such
supplemental or amendatory agreement shall be adhered to and have the same force
and effect from and after its effective date as if the same had originally been
embodied in, and formed a part of, this Agreement; PROVIDED, HOWEVER, that no
such supplemental or amendatory agreement shall, without the consent of all
Partners affected thereby, change or alter the provisions of this proviso,
reduce the capital account of any Partner, or modify the percentage of profits,
losses, or distributions to which any Partner is entitled.
(B) MEETINGS. Any Limited Partner or his authorized attorney or agent,
upon written request to the General Partner, delivered either in person or by
certified mail, and upon payment of reasonable duplicating and postage costs,
shall be entitled to obtain from the General Partner by mail a list of the names
and addresses of record of all Limited Partners and the number of Units owned by
each.
Upon receipt of a written request, signed by Limited Partners owning at
least 10% of the Units then owned by Limited Partners, that a meeting of the
Partnership be called to vote upon any matter upon which all Limited Partners
may vote pursuant to this Agreement, the General Partner, by written notice to
each Limited Partner of record sent by certified mail or delivered in person
within 15 days after such receipt, shall call a meeting of the Partnership. Such
meeting shall be held at least 30 but not more than 60 days after the mailing of
such notice, and such notice shall specify the date, a reasonable place and
time, and the purpose of such meeting.
A-18
<PAGE>
(C) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE GENERAL PARTNER. At any
meeting of the Limited Partners, upon the affirmative vote (which may be in
person or by proxy) of Limited Partners owning more than 50% of the Units then
owned by Limited Partners, the following actions may be taken without the
consent of the General Partner: (i) this Agreement may be amended in accordance
with, and only to the extent permissible under, the Act; PROVIDED, HOWEVER, that
no such amendment shall, without the consent of all Partners affected thereby,
change or alter the provisions of this proviso, reduce the capital account of
any Partner, or modify the percentage of profits, losses, or distributions to
which any Partner is entitled; (ii) the Partnership may be dissolved; (iii) the
General Partner may be removed and replaced; (iv) a new general partner or
general partners may be elected if the General Partner terminates or liquidates
or elects to withdraw from the Partnership pursuant to Section 12, or becomes
insolvent, bankrupt, or is dissolved; (v) any contracts with the General Partner
or any of its Affiliates may be terminated without penalty on not less than 60
days' prior written notice; and (vi) the sale of all or substantially all of the
assets of the Partnership may be approved. Notwithstanding the foregoing, no
such action shall adversely affect the status of the Limited Partners as limited
partners under the Act or the classification of the Partnership as a partnership
under the federal income tax laws, and Units owned by the General Partner and
any Affiliate thereof shall not be voted on the matters described in clauses
(iii) and (v) above. Any action which shall have been approved by the percentage
of outstanding Units prescribed above shall be deemed to have been approved by
all Limited Partners.
(D) ACTION WITHOUT MEETING. Notwithstanding contrary provisions of this
Section 15 covering notices to, meetings of, and voting by Limited Partners, any
action required or permitted to be taken by Limited Partners at a meeting or
otherwise may be taken by Limited Partners without a meeting, without prior
notice, and without a vote if a consent in writing setting forth the action so
taken shall be signed by Limited Partners owning Units having not fewer than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting of Limited Partners at which all outstanding Units shall have been
present and voted. Notice of the taking of action by Limited Partners without a
meeting by less than unanimous written consent of Limited Partners shall be
given to those Limited Partners who shall not have consented in writing within
seven business days after the occurrence thereof.
(E) AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP. If an amendment to
this Agreement shall be made pursuant to this Section 15, the General Partner
shall be authorized to execute, acknowledge, swear to, deliver, file, record,
and publish, on behalf of the Partnership and each Partner, such amendments to
the Certificate of Limited Partnership as shall be necessary or desirable to
reflect such amendment.
A-19
<PAGE>
16. INDEX OF DEFINED TERMS.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
1940 Act............................................................................................. 15(a)
Act.................................................................................................. 1
Advisers Act......................................................................................... 15(a)
Agreement............................................................................................ Preamble
CEAct................................................................................................ 8(e)
Certificate of Limited Partnership................................................................... 1
CFTC................................................................................................. 3
Code................................................................................................. 7(c)(4)
Commodity Broker..................................................................................... 6
Customer Agreement................................................................................... 8(b)
Determination Date................................................................................... 7(b)
DWR.................................................................................................. 6
Futures Interests.................................................................................... 3
General Partner...................................................................................... Preamble
Initial Closing...................................................................................... 6
Initial Offering..................................................................................... 6
Limited Partners..................................................................................... Preamble
Management Agreement................................................................................. 8(b)
MS & Co.............................................................................................. 6
MSCM................................................................................................. 8(b)
MSDWD................................................................................................ 6
MSIL................................................................................................. 6
NASAA Guidelines..................................................................................... 5
Net Asset Value...................................................................................... 7(d)(2)
Net Assets........................................................................................... 7(d)(1)
NFA.................................................................................................. 6
Partners............................................................................................. Preamble
Partnership.......................................................................................... 1
Prospectus........................................................................................... 6
Pyramiding........................................................................................... 8(c)(5)
Redemption........................................................................................... 10(b)
Redemption Date...................................................................................... 10(b)
Request for Redemption............................................................................... 10(b)
SEC.................................................................................................. 5
Selling Agent........................................................................................ 6
Special Redemption Date.............................................................................. 9
Trading Advisor...................................................................................... 6
Transaction Fees and Costs........................................................................... 7(e)
Unit(s) of General Partnership Interest.............................................................. 6
Unit(s).............................................................................................. 6
</TABLE>
A-20
<PAGE>
17. GOVERNING LAW.
THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE, INCLUDING,
SPECIFICALLY, THE ACT (WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES);
PROVIDED, HOWEVER, THAT CAUSES OF ACTION FOR VIOLATIONS OF FEDERAL OR STATE
SECURITIES LAWS SHALL NOT BE GOVERNED BY THIS SECTION 17.
18. MISCELLANEOUS.
(A) PRIORITY AMONG LIMITED PARTNERS. Except as otherwise specifically set
forth in this Agreement, no Limited Partner shall be entitled to any priority or
preference over any other Limited Partner in regard to the affairs of the
Partnership.
(B) NOTICES. All notices under this Agreement (other than Requests for
Redemption, notices of assignment or transfer of Units, and reports by the
General Partner to the Limited Partners) shall be in writing and shall be
effective upon personal delivery or, if sent by registered or certified mail,
postage prepaid, addressed to the last known address of the party to whom such
notice is to be given, upon the deposit of such notice in the United States
mail. Requests for Redemption and notices of assignment or transfer of Units
shall be effective upon timely receipt by the General Partner. Except as
otherwise provided herein, all reports and notices hereunder shall be in writing
and shall be delivered in person or sent by first-class mail to the last known
address of the General Partner or the Limited Partner, as the case may be.
(C) BINDING EFFECT. This Agreement shall inure to the benefit of, and be
binding upon, all of the parties, their successors, assigns as permitted herein,
custodians, estates, heirs, and personal representatives. For purposes of
determining the rights of any Partner or assignee hereunder, the Partnership and
the General Partner may rely upon the Partnership's records as to who are
Partners and assignees, and all Partners and assignees agree that their rights
shall be determined and that they shall be bound thereby, including all rights
that they may have under Section 15.
(D) CAPTIONS. Captions in no way define, limit, extend, or describe the
scope of this Agreement nor the effect of any of its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year specified on the first page hereof.
<TABLE>
<S> <C>
ADDITIONAL LIMITED PARTNERS: GENERAL PARTNER:
By: Demeter Management DEMETER MANAGEMENT CORPORATION
Corporation, General By:
Partner, as Authorized Mark J. Hawley,
Agent and Attorney-in-Fact President
By:
Mark J. Hawley,
President INITIAL LIMITED PARTNER:
Mark J. Hawley
</TABLE>
A-21
<PAGE>
ANNEX 1 TO LIMITED PARTNERSHIP AGREEMENT
<TABLE>
<S> <C>
MFAD USE ONLY: CLOSING DATE:
</TABLE>
REQUEST FOR REDEMPTION: DEAN WITTER MANAGED FUTURES FUNDS
THIS IRREVOCABLE REQUEST FOR REDEMPTION SHOULD BE DELIVERED TO A LIMITED
PARTNER'S LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER (DEMETER MANAGEMENT CORPORATION, TWO WORLD TRADE CENTER, 62ND FLOOR, NEW
YORK, NY 10048) AT LEAST 5 BUSINESS DAYS PRIOR TO THE LAST DATE OF THE MONTH IN
WHICH THE REDEMPTION IS TO BE EFFECTIVE. THIS FORM CANNOT BE FAXED.
__________________________, 19 _____
[DATE] [PRINT OR TYPE DEAN WITTER ACCOUNT NUMBER]
I hereby request redemption (effective as of the next applicable date as of
which redemption is permitted as set forth in the Limited Partnership Agreement
of the Partnership for which redemption is requested, subject to all terms and
conditions set forth therein) of my capital account in an amount equal to the
respective Net Asset Value, as defined in the Limited Partnership Agreement, of
the following Unit(s) of Limited Partnership Interest ("Units"), less any
amounts specified in the Limited Partnership Agreement.
COMPLETE ONLY ONE SECTION--A, B OR C--PER FORM
SECTION A
SPECTRUM SERIES SHALL ONLY REDEEM UNITS OF LIMITED PARTNERSHIP INTEREST IN A
MINIMUM AMOUNT OF
50 UNITS, UNLESS A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN
SUCH PARTNERSHIP.
0
<TABLE>
<S> <C> <C>
[DWSB] Spectrum Balanced Entire Units
Interest
[DWSS] Spectrum Strategic Entire Units
Interest
[DWST] Spectrum Technical Entire Units
Interest
</TABLE>
SECTION B
CORNERSTONE FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
<TABLE>
<S> <C> <C> <C>
[CFCFB] Cornerstone Fund II Entire Units $ ,000
Interest
[CFCFC] Cornerstone Fund III Entire Units $ ,000
Interest
[CFCFD] Cornerstone Fund IV Entire Units $ ,000
Interest
</TABLE>
SECTION C
OTHER MANAGED FUTURES FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS
UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
MARK ONE FUND ONLY (USE ONE FORM PER FUND):
<TABLE>
<S> <C> <C>
[CFF] Columbia Futures Fund [PPF] Principal Plus Fund Entire Interest
[DFF] Diversified Futures Fund [PSF] Portfolio Strategy Fund
[DFF2] Diversified Futures Fund II [SFF] Select Futures Fund Units
[DFF3] Diversified Futures Fund III [MSTAF]Morgan Stanley Tangible Asset Fund
[GPP] Global Perspective Portfolio [WCF] World Currency Fund $ ,000
[IAF] International Access Fund
[PGF] Multi-Market Portfolio
</TABLE>
A-22
<PAGE>
SPECIMEN
ACCOUNT INFORMATION AND SIGNATURES
I understand that I may only redeem Units at such times as are specified in the
Limited Partnership Agreement and that, under certain circumstances described
therein, I may be subject to a redemption charge.
I (either in my individual capacity or as an authorized representative of an
entity, if applicable) hereby represent and warrant that I am the true, lawful
and beneficial owner of Units (or fractions thereof) to which this Request for
Redemption relates, with full power and authority to request redemption. The
Units (or fractions thereof) which are the subject of this request are not
subject to any pledge or otherwise encumbered in any fashion. My signature has
been represented by a member of a registered national securities exchange.
SIGNATURE MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
TYPE OR PRINT ALL INFORMATION BELOW
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
................................................. ..................................................
[Name of Limited Partner] [Dean Witter Account Number]
Address .............................................................................................
[Street]
</TABLE>
...............................................................................
[City] [State or Province] [Zip Code or Postal Code]
- --------------------------------------------------------------------------------
2. SIGNATURE(S) OF INDIVIDUAL PARTNER(S) OR ASSIGNEE[S] INCLUDING IRAS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
X ...................................................... X ......................................................
Date Date
X ...................................................... X ......................................................
Date Date
</TABLE>
We, the undersigned Account Executive and Branch Manager, represent that the
above signature(s) is true and correct.
<TABLE>
<S> <C>
X ................................................ X ................................................
(Account Executive MUST sign and date) (Branch Manager MUST sign and date)
</TABLE>
- --------------------------------------------------------------------------------
3. SIGNATURE OF ENTITY PARTNER OR ASSIGNEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
............................................... By: X ..........................................
(Name of Entity) [Authorized officer, partner, trustee or
custodian. If a corporation, include
certified copy of authorized resolution.]
</TABLE>
We, the undersigned Account Exeuctive and Branch Manager, represent that the
above signature is true and correct.
<TABLE>
<S> <C>
X .............................................. X ..............................................
(Account Executive MUST sign and date) (Branch Manager MUST sign and date)
...............................................
[Branch Telephone Number]
</TABLE>
A-23
<PAGE>
EXHIBIT B
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
SUBSCRIPTION AND EXCHANGE AGREEMENT AND
POWER OF ATTORNEY
--------------
UNITS OF LIMITED PARTNERSHIP INTEREST
Subscribers purchasing Units for cash hereby are "Subscribers." Subscribers
who are redeeming units in another commodity pool for which the General Partner
serves as the general partner and commodity pool operator are "Exchange
Subscribers." Subscribers and Exchange Subscribers should follow the
instructions below.
SUBSCRIPTION INSTRUCTIONS
Any person desiring to subscribe for Units should carefully read and review
the Prospectus dated -, 1997 (the "Prospectus") and this Subscription and
Exchange Agreement and Power of Attorney.
SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY ON PAGES B-9 AND
B-10, AND EXCHANGE SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY ON
PAGES B-11 and B-12, USING BLACK INK, AS FOLLOWS:
<TABLE>
<S> <C> <C>
Item 1 (PAGE B-9 OR PAGES B-11-B-12)
-- Enter Dean Witter Reynolds Inc. ("DWR") Account Number.
-- Enter the Social Security Number or Taxpayer ID Number and check the
appropriate box to indicate the type of entity that is subscribing. In case of
joint ownership, either Social Security Number may be used.
-- Each subscriber must (i) if a United States taxable subscriber, review the
representation relating to backup withholding tax under "United States Taxable
Investors Only" on Page B-9 (for Subscribers) or Page B-11 (for Exchange
Subscribers) or (ii) if a non-United States subscriber, review the
representation relating to such subscriber's classification as a non-resident
alien for United States federal income tax purposes under "Non-United States
Investors Only" on Page B-9 (for Subscribers) or Page B-11 (for Exchange
Subscribers). SUBSCRIBER(S) AND EXCHANGE SUBSCRIBER(S) MUST SIGN BELOW THE TAX
REPRESENTATION IN ITEM 1 ON PAGE B-9 OR B-11.
-- Enter the exact name in which the Units are to be held based on ownership type,
and enter residency and other information.
-- Enter taxable year of subscriber, if other than calendar year.
-- Check box if the subscriber is a non-resident alien that is a dealer in
commodities or is otherwise engaged in a trade or business within the U.S.
-- If there is a co-subscriber, trustee or custodian, complete applicable
information.
-- Each subscriber purchasing Units as custodian for a minor: (i) if a gift to
minor not made with minor's funds, net worth and annual income representations
apply only to subscriber, or (ii) if not a gift, net worth and annual income
representations apply only to such minor.
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C>
-- Each subscriber purchasing Units as a trustee or custodian of an employee
benefit plan with an individual beneficiary or of an individual retirement
account ("IRA") at the direction of the beneficiary of such plan or IRA: net
worth and annual income representations apply only to the beneficiary of such
plan or account.
For Signatories to Subscription Signature Page (PAGE B-9)
-- Enter the dollar amount of the subscription for the Partnership.
For Signatories to Exchange Signature Page (PAGE B-11)
-- Enter the symbol of the limited partnership from which units are to be
redeemed; specify the quantity to be redeemed (entire interest or number of
whole units).
</TABLE>
Item 2 (PAGE B-10 OR B-12)
<TABLE>
<S> <C> <C>
-- Each subscriber must execute the Subscription and Exchange Agreement and Power
of Attorney Signature Page (on Page B-10 (for Subscribers) or Page B-12 (for
Exchange Subscribers)).
Item 3 (PAGE B-10 OR B-12)
-- Account Executive and Branch Manager must complete the required information.
-- This Subscription and Exchange Agreement and Power of Attorney must be mailed
to Dean Witter Reynolds Inc. at Two World Trade Center, 62nd Floor, New York,
New York 10048-0626.
</TABLE>
B-2
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
------------
SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY
Any person subscribing for Units of Limited Partnership Interest ("Units")
in Morgan Stanley Tangible Asset Fund L.P. (the "Partnership") should carefully
read and review the Partnership's Prospectus dated -, 1997 (the "Prospectus").
Capitalized terms used below and not defined in this Subscription and Exchange
Agreement and Power of Attorney ("Agreement") are defined (and de-
scribed in detail) in the Prospectus.
FOR SIGNATORIES TO SUBSCRIPTION SIGNATURE PAGE: By executing the Signature
Page of this Agreement, the undersigned Subscriber ("Subscriber") irrevocably
subscribes for Units at the price per Unit described in the Prospectus.
FOR SIGNATORIES TO EXCHANGE SIGNATURE PAGE: By executing the Signature Page
of this Agreement, the undersigned Subscriber ("Subscriber") irrevocably redeems
the units of limited partnership interest in the limited partnership indicated
on the signature page of this Agreement and, with the proceeds of such
redemption, hereby irrevocably subscribes for Units at the price per Unit
described in the Prospectus.
NOTWITHSTANDING THE FOREGOING, SUBSCRIBER MAY REVOKE THIS AGREEMENT, AND
RECEIVE A FULL REFUND OF THE SUBSCRIPTION AMOUNT AND ANY ACCRUED INTEREST
THEREON (OR REVOKE THE REDEMPTION OF UNITS IN THE OTHER LIMITED PARTNERSHIP IN
THE CASE OF AN EXCHANGE), WITHIN FIVE BUSINESS DAYS AFTER EXECUTION OF THIS
AGREEMENT OR NO LATER THAN 3:00 P.M., NEW YORK CITY TIME, ON THE DATE OF THE
CLOSING, WHICHEVER COMES FIRST, BY DELIVERING WRITTEN NOTICE TO SUBSCRIBER'S DWR
ACCOUNT EXECUTIVE. If this Agreement is accepted, Subscriber agrees to
contribute Subscriber's subscription to the Partnership and to be bound by the
terms of the Partnership's Amended and Restated Limited Partnership Agreement,
included as Exhibit A to the Prospectus (the "Limited Partnership Agreement").
BY EXECUTION OF THE SIGNATURE PAGE ATTACHED HERETO, SUBSCRIBER SHALL BE DEEMED
TO HAVE EXECUTED THIS AGREEMENT AND THE LIMITED PARTNERSHIP AGREEMENT (INCLUDING
THE POWERS OF ATTORNEY HEREIN AND THEREIN).
- --------------------------------------------------------------------------------
PAYMENT INSTRUCTIONS
- --------------------------------------------------------------------------------
FOR SIGNATORIES TO SUBSCRIPTION SIGNATURE PAGE: Payment of this
subscription must be made by charging the Subscriber's Customer Account with
DWR. In the event that the Subscriber does not have a Customer Account or does
not have sufficient funds in Subscriber's existing Customer Account, the
Subscriber should make appropriate arrangements with Subscriber's DWR account
executive, if any, and if none, should contact Subscriber's local DWR branch
office. If Subscriber is a customer of another broker-dealer acting as an
Additional Seller of the Units, such Additional Seller will assist Subscriber in
opening a DWR Customer Account. Payment must NOT be mailed to the General
Partner at its offices in New York City. Any such payment will not be accepted
by the General Partner and will be returned to the Subscriber for proper
placement with the DWR branch office where Subscriber's Customer Account is
maintained. The undersigned Subscriber hereby authorizes and directs the General
Partner and DWR to transfer the appropriate amount from the Customer Account to
the Escrow Account.
FOR SIGNATORIES TO EXCHANGE SIGNATURE PAGE: Payment of this subscription
must be made by applying the proceeds from a redemption of limited partnership
units in another commodity pool for which the General Partner serves as the
general partner and commodity pool operator. Subscriber may only redeem units at
such times as are specified in the applicable limited partnership agreement for
such other commodity pool, and under certain circumstances described therein
Subscriber may be subject to a redemption charge.
B-3
<PAGE>
- --------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES
- --------------------------------------------------------------------------------
Subscriber (for myself/ourselves, and, if Subscriber is an entity, on behalf
of and with respect to such entity and its shareholders, partners, or
beneficiaries) hereby represents and warrants to the General Partner and the
Partnership as follows:
(1) Subscriber has received a copy of the Prospectus, which includes the
Limited Partnership Agreement.
(2) Subscriber is of legal age to execute this Agreement and is legally
competent to do so.
(3) Subscriber has either: (a) net worth of at least $75,000 (exclusive
of home, furnishings, and automobiles); or (b) net worth of at least
$30,000 (exclusive of home, furnishings, and automobiles) and annual gross
income of at least $30,000. However, if Subscriber is a resident and/ or
subject to regulation by one of the states which imposes more restrictive
suitability requirements than the foregoing, or requires a higher minimum
investment, as set forth below under the caption "State Suitability
Requirements" (or in the special Supplement to the Prospectus for residents
of the state in which Subscriber resides), Subscriber's net worth and/or
income and investment satisfies the requirements of such state. (If Units
are being purchased by spouses as joint owners, their joint net worth and
annual income may be used to satisfy applicable state suitability
requirements.) Subscriber agrees to provide any additional documentation
requested by the General Partner, as may be required by the securities
administrators of certain states to confirm that Subscriber meets the
applicable minimum financial suitability standards to invest in the
Partnership.
(4) The address set forth on the Signature Page is Subscriber's true and
correct residence and Subscriber has no present intention of becoming
a resident of any other state or country. All the information that is
provided on the Signature Page regarding Subscriber is correct and complete
as of the date of this Agreement, and, if there should be any material
change in such information prior to Subscriber's admission as a Limited
Partner, Subscriber will immediately furnish such revised or corrected
information to the General Partner.
(5) If Subscriber is an employee benefit plan, to the best of
Subscriber's knowledge, neither the General Partner, DWR, the Trading
Advisor, nor any of their respective affiliates either: (a) has investment
discretion with respect to the investment of Subscriber's plan assets; (b)
has authority or responsibility to or regularly gives investment advice with
respect to such plan assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such plan assets and that such advice will be
based on the particular investment needs of the plan; or (c) is an employer
maintaining or contributing to such plan. For purposes hereof, an "employee
benefit plan" shall include plans and accounts of various types (including
their related trusts) which provide for the accumulation of a portion of an
individual's earnings or compensation as well as investment income earned
thereon free from federal income tax until such time as funds are
distributed from the plan, and include corporate "pension" and
profit-sharing plans, "simplified employee pension plans," "Keogh" plans for
self-employed individuals, and IRAs.
(6) Unless (7) or (8) below is applicable, Subscriber's subscription is
made with Subscriber's funds for Subscriber's own account and not as
trustee, custodian, or nominee for another.
(7) The subscription, if made as custodian for a minor, is a gift
Subscriber has made to such minor and is not made with such minor's
funds or, if not a gift, the representations as to net worth and annual
income set forth herein apply only to such minor.
(8) If Subscriber is subscribing as a trustee or custodian of an employee
benefit plan or of an IRA at the direction of the beneficiary of the
plan or IRA, the representations set forth above apply only to the
beneficiary of such plan or IRA.
B-4
<PAGE>
(9) If Subscriber is subscribing in a representative capacity, Subscriber
has full power and authority to purchase the Units and enter into and
be bound by this Agreement on behalf of the entity for which Subscriber is
purchasing the Units, and such entity has full right and power to purchase
such Units and enter into and be bound by this Agreement and become a
Limited Partner pursuant to the Limited Partnership Agreement.
(10)Subscriber either is not required to be registered with the Commodity
Futures Trading Commission ("CFTC") or to be a member of the National
Futures Association ("NFA"), or, if so required, is duly registered with the
CFTC and is a member in good standing of the NFA. It is an NFA requirement
that the General Partner attempt to verify that any person or entity that
seeks to purchase Units be duly registered with the CFTC and a member of the
NFA, if required. Subscriber agrees to supply the General Partner with such
information as the General Partner may reasonably request in order to
attempt such verification. Certain entities that acquire Units may, as a
result, themselves become "commodity pools" within the intent of applicable
CFTC and NFA rules, and their sponsors, accordingly, may be required to
register as "commodity pool operators."
ADDITIONAL REPRESENTATION AND WARRANTY FOR EXCHANGE SUBSCRIBERS ONLY:
(11)Subscriber is the true, lawful, and beneficial owner of the units of
limited partnership interest (or fractions thereof) to be redeemed
pursuant to this Agreement, with full power and authority to request
redemption and a subsequent purchase of Units. The units of limited
partnership interest (or fraction thereof) which are the subject of this
redemption request are not subject to any pledge or otherwise encumbered in
any fashion.
By making the representations and warranties set forth above, Subscribers
should be aware that they have not waived any rights of action which they may
have under applicable federal or state securities laws. Federal and state
securities laws provide that any such waiver would be unenforceable. Subscribers
should be aware, however, that the representations and warranties set forth
above may be asserted in the defense of the Partnership, the General Partner,
the Trading Advisor, DWR, or others in any subsequent litigation or other
proceeding.
- --------------------------------------------------------------------------------
STATE SUITABILITY REQUIREMENTS
- --------------------------------------------------------------------------------
Except as indicated below, investors in the Partnership must have a net
worth (exclusive of home, furnishings, and automobiles) of at least $75,000 or,
failing that standard, have a net worth (same exclusions) of at least $30,000
and an annual gross income of at least $30,000, and must make a minimum
aggregate investment of $5,000, or $2,000 in the case of IRAs, or, in the case
of an Exchange, the lesser of (i) $5,000 ($2,000 in the case of an IRA), (ii)
the proceeds from the redemption of five units (two units in the case of an IRA)
from commodity pools other than the Spectrum Series, (iii) the proceeds from the
redemption of 500 units (200 units in the case of an IRA) from one, or any
combination, of the Spectrum Series of commodity pools, or (iv) the proceeds
from the redemption of all of the Subscriber's units of limited partnership
interest in any other commodity pool for which the General Partner serves as
general partner and commodity pool operator. However, the states listed below
(or, in certain cases, in special Supplements to the Prospectus attached
thereto) have more restrictive suitability or minimum investment requirements
for Subscribers residing therein. Please read the following list to make sure
that Subscriber meets the suitability and/or investment requirements for the
state in which Subscriber resides. (As used below, "NW" means net worth
exclusive of home, furnishings, and automobiles; "AI" means annual gross income;
and "TI" means annual taxable income for federal income tax purposes.)
B-5
<PAGE>
[TO BE PROVIDED]
B-6
<PAGE>
- --------------------------------------------------------------------------------
SIGNIFICANT DISCLOSURES
- --------------------------------------------------------------------------------
Subscriber should read the Prospectus in its entirety before completing this
Agreement and subscribing for Units, and should carefully consider the
information contained therein as well as the following information (which is set
forth in detail in the Prospectus) concerning an investment in the Partnership:
(1) The General Partner, DWR, Morgan Stanley & Co. Incorporated ("MS &
Co."), Morgan Stanley & Co. International Limited ("MSIL"), the
Partnership's commodity brokers, and Morgan Stanley Commodities Management,
Inc., the Partnership's trading advisor, are each wholly-owned subsidiaries
of Morgan Stanley, Dean Witter, Discover & Co., and conflicts of interest
therefore exist. The principal business address of the General Partner is
Two World Trade Center, 62nd Floor, New York, New York 10048.
(2) MS & Co. and MSIL will receive substantial commodity brokerage fees
from the Partnership, and will also realize the benefits of excess
interest earned on the Partnership's funds and compensating balance benefits
from deposits of the Partnership's funds, and MS & Co. will pay a portion of
such amounts to DWR, all subject to certain limitations, as described in the
Prospectus. A Limited Partner will consent to the execution and delivery by
the General Partner on behalf of the Partnership of the Customer Agreements
with MS & Co. and MSIL, and to the payment to MS & Co., MSIL, and DWR of
such fees and benefits.
(3) The performance information in the Prospectus should be read only in
conjunction with the textual description and notes thereto, and such
data should not be interpreted to mean that the Partnership will have
similar results or will realize any profits whatsoever. A Limited Partner
will be deemed to have consented to the execution and delivery by the
General Partner on behalf of the Partnership of the Management Agreement
with the Trading Advisor (as described in the Prospectus), and with such
other trading advisors as the General Partner may retain from time to time.
(4) Units cannot be transferred or assigned except as set forth in the
Limited Partnership Agreement. Units may be redeemed at the option of
a Limited Partner as of, but not before, the sixth month end following the
closing at which such person first became a Limited Partner. Thereafter,
Units may be redeemed as of the end of any month. However, any Units
redeemed at the end of the sixth or at or prior to the end of the eleventh
or twenty-fourth month after which such Units were purchased will be
assessed a redemption charge equal to 2% or 1%, respectively, of the Net
Asset Value of a Unit on the date of such redemption. The foregoing charges
will be paid to DWR. A limited partner in any of the other commodity pools
for which the General Partner serves as the general partner and commodity
pool operator who redeemed all or a portion of his interest in one of such
other partnerships on or after March 31, 1997, and purchases Units will not
be subject to the foregoing redemption charges or restrictions under the
circumstances described below. The number of Units, expressed as a
percentage of Units purchased, which are not subject to a redemption charge
is determined by dividing (a) the dollar amount received upon redeeming an
interest in such other partnership and used to purchase Units by (b) the
total investment in the Partnership. Subscribers who purchase $500,000 or
more of Units will not be subject to the redemption charges described above.
Units may only be redeemed upon 5 business days' written notice to the
General Partner prior to the effective date of a redemption, which will be
the last day of a calendar month.
(5) All subscriptions are subject to acceptance or rejection by the
General Partner in whole or in part for any reason and are
irrevocable by Subscribers, subject to the limited revocation right
described on page 3 of this Agreement.
- --------------------------------------------------------------------------------
ACCEPTANCE OF THE LIMITED PARTNERSHIP AGREEMENT
- --------------------------------------------------------------------------------
Subscriber hereby agrees that as of the date that Subscriber's name is
entered on the books of the Partnership, Subscriber shall become a Limited
Partner of the Partnership. Subscriber hereby agrees to
B-7
<PAGE>
each and every term of the Limited Partnership Agreement as if Subscriber's
signature were subscribed thereto. Subscriber further agrees that DWR may
receipt on Subscriber's behalf for the Units purchased by Subscriber hereunder
upon the issuance of such Units by the Partnership (although no certificate
evidencing Unit(s) will be issued to Subscriber).
- --------------------------------------------------------------------------------
POWER OF ATTORNEY AND GOVERNING LAW
- --------------------------------------------------------------------------------
Subscriber hereby irrevocably constitutes and appoints Demeter Management
Corporation, the General Partner of the Partnership, as Subscriber's true and
lawful Attorney-in-Fact, with full power of substitution, in Subscriber's name,
place, and stead, to do all things necessary to admit Subscriber as a Limited
Partner of the Partnership and to admit others as additional or substituted
Limited Partners to the Partnership so long as such admission is in accordance
with the terms of the Limited Partnership Agreement or any amendment thereto, to
file, prosecute, defend, settle, or compromise any and all actions at law or
suits in equity for or on behalf of the Partnership in connection with any
claim, demand, or liability asserted or threatened by or against the
Partnership, and to execute, acknowledge, swear to, deliver, file, and record on
Subscriber's behalf and as necessary in the appropriate public offices, and
publish: (a) the Limited Partnership Agreement and the Certificate of Limited
Partnership and all amendments thereto permitted by the terms thereof; (b) all
instruments that the General Partner deems necessary or appropriate to reflect
any amendment, change, or modification of the Limited Partnership Agreement or
the Certificate of Limited Partnership made in accordance with the terms of the
Limited Partnership Agreement; (c) certificates of assumed name; and (d) all
instruments that the General Partner deems necessary or appropriate to qualify
or maintain the qualification of the Partnership to do business as a foreign
limited partnership in other jurisdictions. Subscriber agrees to be bound by any
representation made by the General Partner or any successor thereto acting in
good faith pursuant to this Power of Attorney.
The Power of Attorney granted hereby shall be deemed to be coupled with an
interest and shall be irrevocable and survive the death, incapacity,
dissolution, liquidation, or termination of the Subscriber.
THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK; PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT BE DEEMED A WAIVER OF ANY
RIGHTS OF ACTION SUBSCRIBER MAY HAVE UNDER APPLICABLE FEDERAL OR STATE
SECURITIES LAW.
- --------------------------------------------------------------------------------
RECEIPT OF DOCUMENTATION
- --------------------------------------------------------------------------------
The regulations of the Commodity Futures Trading Commission require that the
undersigned Subscriber be given a copy of the Prospectus, as well as certain
additional documentation consisting of: (a) a supplement to the Prospectus,
which must be given to the undersigned if the Prospectus is dated more than nine
months prior to the date that the undersigned first receives the Prospectus, and
(b) the most current monthly account statement (report) for the Partnership
after it begins trading operations. The undersigned hereby acknowledges receipt
of the Prospectus and the additional documentation referred to above, if any.
B-8
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
UNITS OF LIMITED PARTNERSHIP INTEREST
SUBSCRIPTION SIGNATURE PAGE
PLEASE PRINT OR TYPE. USE BLACK INK ONLY.
PAGES B-9 AND B-10, THE SUBSCRIPTION SIGNATURE PAGES, SHOULD BE DELIVERED TO
THE LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL PARTNER
AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK 10048-0626, AT LEAST
FIVE BUSINESS DAYS PRIOR TO THE CLOSING.
The Subscriber named below, by execution and delivery of this Signature Page
and by payment of the purchase price for Units of
Limited Partnership Interest ("Units") in Morgan Stanley Tangible Asset Fund
L.P. (the "Partnership"), hereby subscribes for Units at the applicable Closing,
at a price equal to $10 per Unit at the First Closing, or 100% of the Net Asset
Value as of the close of business on the last day of the month immediately
preceding any subsequent Closing, all as described in the Prospectus. Unless
otherwise provided under "State Suitability Requirements" or in a Supplement
attached to the Prospectus, the minimum investment in the Partnership is $5,000
or $2,000 in the case of IRAs. Existing Limited Partners who desire to make an
additional investment in the Partnership may subscribe for Units at a subsequent
Closing with a minimum investment of $1,000.
BY SUCH EXECUTION AND PAYMENT, THE SUBSCRIBER ACKNOWLEDGES RECEIPT OF THE
PROSPECTUS OF THE PARTNERSHIP DATED -, 1997, INCLUDING THE LIMITED PARTNERSHIP
AGREEMENT AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY,
THE TERMS OF WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR
HEREBY.
- --------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (SUBSCRIBER MUST SIGN BELOW TAX REPRESENTATION)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C><C> <C>
DWR ACCOUNT NO. MSTAF $
</TABLE>
<TABLE>
<CAPTION>
- AMOUNT OF SUBSCRIPTION
<S> <C> <C> <C> <C>
TAXABLE INVESTORS NON-TAXABLE INVESTORS
/ / / / / / -- / / / / -- / / / / / / / / OR / / / / -- / / / / / / / / / / / / / OR / / / / / / / / / / / / / / / / / / / / / /
Social Security Number of: (check one) Taxpayer ID Number for: (check one) Soc. Sec. #/Taxpayer ID # for: (check
one)
/ / Individual Ownership / /Trust other than Grantor or / /IRA (the DWR Branch Manager must
Revocable Trust sign below for IRA accounts)
/ /Joint Tenants with Rights of
Survivorship / / Estate / /Employee Benefit Plan
(Participant
/ / Tenants in Common / /UGMA/UTMA (Minor) Directed)
/ / Community Property / / Partnership / / Defined Benefit Plan (Other)
/ /Grantor or other Revocable Trust / / Corporation / / Other (specify)
</TABLE>
ALL SUBSCRIBERS (OR BRANCH MANAGERS IN THE CASE OF AN IRA) MUST SIGN
<TABLE>
<S> <C> <C>
UNITED STATES TAXABLE INVESTORS: OR NON-UNITED STATES INVESTORS
/ / Check box if Subscriber is subject to backup Under penalties of perjury, by signature below, the
withholding under the provisions of Section Subscriber certifies that such Subscriber is NOT
3406(a)(1)(C) of the Internal Revenue Code. (a) a citizen or resident of the United
If Subscriber's taxable year is other than the calendar States;
year, indicate the date on which (b) or, a United States corporation, partnership,
Subscriber's taxable year estate or trust.
ends ...............................................
Under penalties of perjury, by signing below, I
certify that the Social Security Number (or Taxpayer
ID Number) above to be the true, correct and complete
Social Security Number (or Taxpayer ID Number) and
that all the information above is true, correct and
complete.
X
</TABLE>
<TABLE>
<S> <C> <C> <C>
(Signature of Subscriber or Officer, Partner or Trustee of Subscriber or Branch Manager Date
in the case of an IRA)
If Subscriber is an Type or Print Name of Entity: .........................................................
Entity:
Name: ................................................................ Date: .........
Title: ................................................................................
Full Name of Account..............................................................................................
(Subscriber's Name or Name of Trust or Custodial Account--do not use initials)
Subscriber is a resident of ........................ and a citizen of ........................
(name of country) (name of country)
Street Address ...................................................................................................
(MUST be residence address--P.O. Box alone not acceptable)
City ................... State ............. Zip Code ............. Tel. No. ( ............. ) ............
</TABLE>
/ / Check here if Subscriber is a non-resident alien individual, foreign
corporation, foreign partnership, foreign trust or foreign estate
that is a dealer in commodities or otherwise engaged in a trade or business
within the U.S.A. to which income, gain or loss from the
Partnership would be treated as effectively connected. (Subscriber must complete
Form W-8 which may be obtained from DWR AE.)
B-9
<PAGE>
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
<TABLE>
<S> <C>
Name .................................................. Telephone Number ( ................. ) ................
The person or entity above is a/an (check one)
</TABLE>
<TABLE>
<S> <C> <C>
/ / Co-Subscriber / / Trustee or Custodian / / Authorized Person, if an
Institutional Trustee
</TABLE>
Street Address .................................................................
(P. O. Box alone not acceptable)
<TABLE>
<S> <C>
City ....................................................... State ..................... Zip Code ....................
Co-Subscriber, Trustee or Custodian is a resident of ....... and a citizen of ...........................................
Minor (if not a gift) is a resident of ..................... and a citizen of ...........................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S)--SUBSCRIBER(S) MUST SIGN UNDER TAX REPRESENTATION ON
PRECEDING PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If this subscription is for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription".
<TABLE>
<S> <C> <C> <C>
X X
(Signature of Subscriber) Date (Signature of Co-Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING IRAS)
IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned corporate officer, partner or trustee hereby certifies and
warrants that s/he has full power and authority from or on behalf of the entity
named below and its shareholders, partners, or beneficiaries to complete,
execute and deliver this Subscription and Exchange Agreement and Power of
Attorney on their behalf and to make the statements, representations, and
warranties made herein on their behalf, and that investment in the Partnership
is authorized under applicable law and the governing documents of the entity,
has been affirmatively authorized by the governing board or body, if any, of the
entity, and is legally permissible.
<TABLE>
<S> <C>
............................. X
(Type or Print Name of Entity) (Signature) Date
Print Name .................. Title .......................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 3 -- BRANCH MANAGER AND ACCOUNT EXECUTIVE USE ONLY (COMPLETED IN FULL AND
IN INK)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
THE UNDERSIGNED ACCOUNT EXECUTIVE HEREBY CERTIFIES THAT: THE ACCOUNT EXECUTIVE MUST SIGN BELOW IN ORDER TO
(1) the above signature(s) is/are true and correct; SUBSTANTIATE COMPLIANCE WITH NASD CONDUCT RULE 2810.
(2) s/he has informed the Subscriber about the liquidity X ........................................................
and marketability of the Units as set forth in the ACCOUNT EXECUTIVE'S SIGNATURE
Prospectus; ..........................................................
(3) based on information obtained from the Subscriber Type or Print Full Name of Account Executive
concerning this Subscriber's investment objectives, Telephone
other investments, financial situation, needs and any Number ( ............. ) ...................................
other relevant information, that s/he reasonably THE UNDERSIGNED BRANCH MANAGER HEREBY CERTIFIES THAT:
believes that: (1) the above signature(s) is/are true and correct.
(a) such Subscriber is or will be in a financial position (2) the above client(s) is/are suitable.
appropriate to enable such Subscriber to realize the X
benefits of the Partnership as described in the BRANCH MANAGER'S SIGNATURE
Prospectus; .........................................................
(b) such Subscriber has a net worth sufficient to sustain Type or Print Full Name of Branch Manager
the risk inherent in the Partnership (including loss
of investment and lack of liquidity); and
(c) the Partnership is otherwise a suitable investment
for such Subscriber; and
(4) the Subscriber received the Prospectus at least five
business days prior to the Closing.
</TABLE>
Please drop a BUY ticket upon receipt of a completed Subscription Agreement.
B-10
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
UNITS OF LIMITED PARTNERSHIP INTEREST
EXCHANGE SIGNATURE PAGE
PLEASE PRINT OR TYPE. USE BLACK INK ONLY.
PAGES B-11 AND B-12, THE EXCHANGE SIGNATURE PAGES, SHOULD BE DELIVERED TO
THE LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL PARTNER
AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK 10048-0626, AT LEAST
FIVE BUSINESS DAYS PRIOR TO THE CLOSING.
The Subscriber named below, by execution and delivery of this Signature
Page, hereby redeems the units of limited partnership interest of the limited
partnership identified in Item 1 below and, by application of the proceeds of
such redemption to the payment of the purchase price for Units of Limited
Partnership Interest ("Units") in Morgan Stanley Tangible Asset Fund L.P.
("MSTAF" or the "Partnership"), hereby subscribes for Units at the applicable
Closing, at a price equal to $10 per Unit at the First Closing, or 100% of the
Net Asset Value as of the close of business on the last day of the month
immediately preceding any subsequent Closing, all as described in the
Prospectus. Redemption of units of any partnership for an exchange must be in
whole units, unless Subscriber is redeeming its entire interest in such
partnership.
BY SUCH EXECUTION AND PAYMENT, THE SUBSCRIBER ACKNOWLEDGES RECEIPT OF THE
PROSPECTUS OF THE PARTNERSHIP DATED -, INCLUDING THE LIMITED PARTNERSHIP
AGREEMENT AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY,
THE TERMS OF WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR
HEREBY.
<TABLE>
<S> <C> <C> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (SUBSCRIBER MUST SIGN BELOW TAX REPRESENTATION)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DWR ACCOUNT NO.
</TABLE>
-
<TABLE>
<S> <C>
SYMBOL FOR FUND FROM WHICH SPECIFY QUANTITY OF UNITS TO BE REDEEMED
UNITS TO BE REDEEMED (CHECK BOX IF ENTIRE INTEREST;
INSERT NUMBER IF WHOLE UNITS)
</TABLE>
/ / / / / / / / / / / / ENTIRE INTEREST OR
- -
- ---------------
- ---------------
- - WHOLE UNITS TO
- - MSTAF
- -
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
The Subscriber hereby authorizes Demeter Management Corporation to redeem the
above quantity of units of limited partnership interest set forth opposite the
symbol of the partnership identified on the left above at the "Net Asset Value"
thereof, as defined in the limited partnership agreement of such partnership,
less any redemption charges, and to utilize the net proceeds thereof to purchase
Units in MSTAF as indicated. The Subscriber may redeem either (a) whole units of
limited partnership interest, with a minimum redemption equal to the lesser of
(i) $5,000 ($2,000 in the case of an IRA), (ii) the proceeds from the redemption
of a minimum of 5 units (2 units in the case of an IRA) from a partnership other
than those in the Dean Witter Spectrum Series ("Spectrum"), or (iii) the
proceeds from the redemption of 500 units (200 units in the case of an IRA) from
one, or any combination, of Spectrum partnerships; or (b) his entire interest in
a partnership.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TAXABLE INVESTORS NON-TAXABLE INVESTORS
/ / / / / / -- / / / / -- / / / / / / / / OR / / / / -- / / / / / / / / / / / / / OR / / / / / / / / / / / / / / / / / / / / / /
Social Security Number of: (check one) Taxpayer ID Number for: (check one) Soc. Sec. #/Taxpayer ID # for: (check
one)
/ / Individual Ownership / / Trust other than Grantor or / / IRA (the DWR Branch Manager
Revocable Trust must sign below for IRA
/ / Joint Tenants with Rights of accounts)
Survivorship / / Estate
/ / Employee Benefit Plan
/ / Tenants in Common / / UGMA/UTMA (Minor) (Participant-
Directed)
/ / Community Property / / Partnership
/ / Defined Benefit Plan (Other)
/ / Grantor or other Revocable / / Corporation
Trust / / Other (specify)
</TABLE>
ALL SUBSCRIBERS (OR BRANCH MANAGERS IN THE CASE OF AN IRA) MUST SIGN
<TABLE>
<S> <C> <C>
UNITED STATES TAXABLE INVESTORS OR NON-UNITED STATES INVESTORS
/ / Check box if Subscriber is subject to backup Under penalties of perjury, by signature below, the
withholding under the provisions of Section Subscriber certifies that such Subscriber is NOT
3406(a)(1)(C) of the Internal Revenue Code. (a) a citizen or resident of the United
If Subscriber's taxable year is other than the calendar States;
year, indicate the date on which (b) or, a United States corporation, partnership,
Subscriber's taxable year estate or trust.
ends ...............................................
Under penalties of perjury, by signing below, I
certify that the Social Security Number (or Taxpayer
ID Number) above to be the true, correct and complete
Social Security Number (or Taxpayer ID Number) and
that all the information above is true, correct and
complete.
X
(Signature of Subscriber or Officer, Partner or Date
Trustee of Subscriber [or Branch Manager in the case
of an IRA])
</TABLE>
<TABLE>
<S> <C> <C>
If Subscriber is an Entity: Type or Print Name of Entity: ...........................................................
Name: ...................................... Date: ......................................
Title: ..................................................................................
</TABLE>
B-11
<PAGE>
<TABLE>
<S> <C>
Full Name of Account ....................................................................................................
(Subscriber's Name or Name of Trust or Custodial Account--do not use initials)
Subscriber is a resident of ........................................... and a citizen of ...........................................
(name of country) (name of country)
Street Address ....................................................................................................................
(MUST be residence address -- P. O. Box alone not acceptable)
</TABLE>
<TABLE>
<S> <C> <C> <C>
City........................................................ State.......... Zip Code....... Tel. No. ( ....... ) ......
</TABLE>
/ / Check here if Subscriber is a non-resident alien individual, foreign
corporation, foreign partnership, foreign trust or foreign estate that is a
dealer in commodities or otherwise engaged in a trade or business within the
U.S.A. to which income, gain or loss from the Partnership would be treated as
effectively connected. (Subscriber must complete Form W-8 which may be obtained
from DWR AE.)
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
Name ............... Telephone Number ( ......... ) ..........................
The person or entity above is a/an (check
one)
<TABLE>
<S> <C> <C>
/ / Authorized Person, if an
/ / Co- Subscriber / / Trustee or Custodian Institutional Trustee
</TABLE>
Street Address ................................................................
(P. O. Box alone not acceptable)
<TABLE>
<S> <C> <C>
City................................................................................................ State.......... Zip Code.......
</TABLE>
Co-Subscriber, Trustee or Custodian
is a resident of................... and a citizen of...................
Minor (if not a gift) is a resident
of................................. and a citizen of...................
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S)--SUBSCRIBER(S) MUST SIGN UNDER TAX REPRESENTATION ON
PRECEDING PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If this subscription is for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription".
<TABLE>
<S> <C> <C> <C>
X X
(Signature of (Signature of Co-
Subscriber) Date Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING
IRAS) IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned corporate officer, partner or trustee hereby certifies and
warrants that s/he has full power and authority from or on behalf of the entity
named below and its shareholders, partners, or beneficiaries to complete,
execute and deliver this Subscription and Exchange Agreement and Power of
Attorney on their behalf and to make the statements, representations, and
warranties made herein on their behalf, and that investment in the Partnership
is authorized under applicable law and the governing documents of the entity,
has been affirmatively authorized by the governing board or body, if any of the
entity, and is legally permissible.
<TABLE>
<S> <C>
...................................................... X ....................................................
............. .....................
(Type or Print Name of Entity) (Signature) Date
Print Name ........................................ Title ................................................
............ ......................
</TABLE>
B-12
<PAGE>
- --------------------------------------------------------------------------------
ITEM 3 -- BRANCH MANAGER AND ACCOUNT EXECUTIVE USE ONLY (COMPLETED IN FULL AND
IN INK)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The undersigned Account Executive hereby THE ACCOUNT EXECUTIVE MUST SIGN BELOW IN
certifies that: ORDER TO SUBSTANTIATE COMPLIANCE WITH NASD
(1) the above signature(s) is/are true and CONDUCT RULE 2810.
correct; X
(2) s/he has informed the Subscriber about ACCOUNT EXECUTIVE'S SIGNATURE
the liquidity and marketability of the ..................................................
Units as set forth in the Prospectus; ......................
(3) based on information obtained from the Type or Print Full Name of Account
Subscriber concerning this Subscriber's Executive
investment objectives, other Telephone
investments, financial situation, needs Number ( ............. ) ............
and any other relevant information, .......................
that s/he reasonably believes that: THE UNDERSIGNED BRANCH MANAGER HEREBY
(a) such Subscriber is or will be in a CERTIFIES THAT:
financial position appropriate to (1) the above signature(s) is/are true and
enable such Subscriber to realize the correct.
benefits of the Partnership as (2) the above client(s) is/are suitable.
described in the Prospectus; X
(b) such Subscriber has a net worth BRANCH MANAGER'S SIGNATURE
sufficient to sustain the risk inherent in .........................................
the Partnership (including loss of Type or Print Full Name of Branch Manager
investment and lack of liquidity); and
(c) the Partnership is otherwise a
suitable investment for such
Subscriber; and
(4) the Subscriber received the Prospectus
at least five business days prior to
the Closing.
</TABLE>
Please drop an EXG ticket upon receipt of a completed Exchange Agreement.
B-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee..................................................... $ 15,152
NASD filing fee.......................................................... 5,500
Printing and engraving................................................... 350,000*
Legal fees and expenses excluding Blue Sky legal fees.................... 225,000*
Accounting fees and expenses............................................. 50,000*
Escrow Agent fees........................................................ 3,000*
Blue Sky fees and expenses including Blue Sky legal fees................. 75,000*
Miscellaneous............................................................ 151,348*
---------
Total.................................................................. $ 875,000*
---------
---------
</TABLE>
- ------------------------
*Estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14 of the Limited Partnership Agreement (a form of which is annexed
to the Prospectus as Exhibit A) provides for indemnification of the General
Partner and its affiliates (as such term is defined therein) by the Partnership
for any loss, liability, damage, cost or expense arising for conduct undertaken
by or on behalf of the Partnership that is determined by the General Partner in
good faith to be in the best interests of the Partnership and was not the result
of misconduct or negligence. The Limited Partnership Agreement also provides for
indemnification of the Partnership by its partners for any loss, liability,
damage, cost and expense incurred in connection with any partner's obligations
or liabilities unrelated to the Partnership's business. Section 14 of the
Selling Agreement provides for indemnification by the Trading Advisor, MS & Co.,
MSIL, and the General Partner of each other, DWR, the Partnership, their
respective affiliates, officers, directors, principals, shareholders, and
controlling persons, and their respective successors and assigns, for any loss,
claim, damage, liability, cost, and expense incurred for misleading or untrue
statements and material omissions regarding the Trading Advisor, MS & Co., MSIL,
or the General Partner or Partnership, as applicable, in the Registration
Statement or Prospectus (as defined therein). Section 14 of the Selling
Agreement also provides for the indemnification of the Trading Advisor, MS &
Co., MSIL, DWR, the General Partner, and their affiliates by the Partnership,
for any loss, liability, damage, cost, or expense for any act, omission,
activity or conduct taken on behalf of the Partnership, provided that the
Trading Advisor, MS & Co., MSIL, DWR, or the General Partner, as applicable, has
determined in good faith that the conduct was in the best interests of the
Partnership and was not the result of misconduct or negligence. Section 5 of the
respective Customer Agreements provides for indemnification of MS & Co., MSIL,
and their respective affiliates by the Partnership for liabilities, losses,
damages, costs, or expenses for activities taken by or on behalf of the
Partnership which MS & Co. or MSIL, as applicable, has determined in good faith
are in the best interests of the Partnership and are not the result of
misconduct or negligence. Section 8 of the Management Agreement provides for
indemnification of the Trading Advisor and its affiliates by the Partnership for
any loss, liability, damage, cost, or expense for any act, omission, conduct, or
activity taken on behalf of the Partnership, provided that the Trading Advisor
has determined in good faith that the conduct was in the best interests of the
Partnership and was not the result of misconduct or negligence. Section 8 of the
Management Agreement also provides for indemnification of the Partnership, the
General Partner and each of their affiliates by the Trading Advisor for
liabilities, losses, claims, damages, costs, and expenses incurred as a result
of actions regarding the Trading Advisor which are the result of bad faith,
misconduct or negligence.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- --------------- ---------------------------------------------------------------------------------------
<C> <S>
1.01 Form of Selling Agreement among the Registrant, Demeter Management Corporation, the
Trading Advisor and Dean Witter Reynolds Inc.
1.02 Form of Additional Seller Agreement between Dean Witter Reynolds Inc. and additional
selling agents (to also be included as an annex to Exhibit 1.01, form of Selling
Agreement).
3.01 Form of Limited Partnership Agreement of the Registrant (included as Exhibit A to the
Prospectus).
3.02 Certificate of Limited Partnership of the Registrant.
5.01 Opinion of Cadwalader, Wickersham & Taft to the Registrant regarding the legality of
Units (including consent).
8.01 Opinion of Cadwalader, Wickersham & Taft to the Registrant regarding certain federal
income tax matters (including consent).
10.01 Form of Customer Agreement between the Registrant and Morgan Stanley & Co.
Incorporated.
10.02 Form of Management Agreement among the Registrant, the General Partner and the Trading
Advisor.
10.03 Subscription and Exchange Agreement and Power of Attorney to be executed by purchasers
of Units (included as Exhibit B to the Prospectus).
10.04 Escrow Agreement among the Registrant, Dean Witter Reynolds Inc., and The Chase
Manhatten Bank, the escrow agent.
23.01 Consent of Independent Auditors for the General Partner and the Registrant.
</TABLE>
(B) FINANCIAL STATEMENTS.
Included in the Prospectus:
Morgan Stanley Tangible Asset Fund L.P.
Independent Auditors' Report
Statement of Financial Condition
Notes to Statement of Financial Condition
Demeter Management Corporation
Independent Auditors' Report
Statements of Financial Condition
Notes to Statements of Financial Condition
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (a) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (b) 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, represent a fundamental change
in the information set forth in the Registration Statement; and (c) 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.
II-2
<PAGE>
(3) That all post-effective amendments will comply with the applicable
forms, rules and regulations of the Securities and Exchange Commission in effect
at the time such post-effective amendments are filed.
(4) 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.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
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 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on the 19th day of August, 1997.
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
By: DEMETER MANAGEMENT
CORPORATION,
General Partner
By: _/S/ MARK J. HAWLEY___________________
Mark J. Hawley, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
DEMETER MANAGEMENT
CORPORATION General Partner
/s/ MARK J. HAWLEY
- ------------------------------ President and Director of August 19, 1997
Mark J. Hawley the General Partner
/s/ RICHARD M. DEMARTINI Chairman of the Board and
- ------------------------------ Director of the General August 19, 1997
Richard M. DeMartini Partner
/s/ LAWRENCE VOLPE
- ------------------------------ Director of the General August 19, 1997
Lawrence Volpe Partner
- ------------------------------ Director of the General
Joseph G. Siniscalchi Partner
- ------------------------------ Director of the General
Edward C. Oelsner, III Partner
/s/ ROBERT E. MURRAY
- ------------------------------ Director of the General August 19, 1997
Robert E. Murray Partner
Vice President and Chief
/s/ PATTI L. BEHNKE Financial and Principal
- ------------------------------ Accounting Officer of August 19, 1997
Patti L. Behnke the General Partner
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT PAGE
- -------------- ------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.01 Form of Selling Agreement among the Registrant, Demeter Management Corporation, the Trading
Advisor and Dean Witter Reynolds Inc.
1.02 Form of Additional Seller Agreement between Dean Witter Reynolds Inc. and additional
selling agents (to also be included as an annex to Exhibit 1.01, form of Selling
Agreement)................................................................................
3.01 Form of Limited Partnership Agreement of the Registrant (included as Exhibit A to the
Prospectus) ..............................................................................
3.02 Certificate of Limited Partnership of the Registrant.......................................
5.01 Opinion of Cadwalader, Wickersham & Taft to the Registrant regarding the legality of Units
(including consent).......................................................................
8.01 Opinion of Cadwalader, Wickersham & Taft to the Registrant regarding certain federal income
tax matters (including consent)...........................................................
10.01 Form of Customer Agreement between the Registrant and Morgan Stanley & Co. Incorporated....
10.02 Form of Management Agreement among the Registrant, the General Partner and the Trading
Advisor...................................................................................
10.03 Subscription and Exchange Agreement and Power of Attorney to be executed by purchasers of
Units (included as Exhibit B to the Prospectus)...........................................
10.04 Escrow Agreement among the Registrant, Dean Witter Reynolds Inc., and The Chase Manhattan
Bank, the escrow agent....................................................................
23.01 Consent of Independent Auditors for the General Partner and the Registrant.................
</TABLE>
<PAGE>
EXHIBIT 1.01
SELLING AGREEMENT
Dated as of __________, 1997
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Dear Sirs:
Morgan Stanley Tangible Asset Fund L.P. (the "Partnership"), a limited
partnership organized pursuant to its certificate of limited partnership filed
on July 31, 1997 ("Certificate of Limited Partnership") and its limited
partnership agreement dated as of July 31, 1997 (the "Limited Partnership
Agreement") under the Delaware Revised Uniform Limited Partnership Act
("DRULPA"), proposes, subject to the terms and conditions set forth in this
Agreement, to offer, sell, and issue up to 5,000,000 Units of Limited
Partnership Interest of the Partnership (the "Units").
Demeter Management Corporation, a Delaware corporation, is the sole
general partner of the Partnership (the "General Partner"). Morgan Stanley
Commodities Management, Inc., a Delaware corporation (the "Trading Advisor"),
acts as trading advisor with respect to the management of the Partnership's
trading activities pursuant to a management agreement among the Trading Advisor,
the Partnership and the General Partner dated as of ____________, 1997 (the
"Management Agreement").
Dean Witter Reynolds Inc., a Delaware corporation ("DWR"), will act as
selling agent pursuant to this Agreement. Subscriptions for Units will be held
by The Chase Manhattan Bank (in such capacity, the "Escrow Agent") pursuant to
an escrow agreement dated ____________, 1997 among the Partnership, The Chase
Manhattan Bank and DWR (the "Escrow Agreement").
Morgan Stanley & Co. Incorporated, a Delaware corporation ("MS &
Co."), and Morgan Stanley & Co. International Limited, a United Kingdom
corporation ("MSIL"), act as commodity brokers (together, the "Commodity
Brokers") pursuant to customer agreements between the Partnership and each of
the Commodity Brokers, each dated as of __________, 1997 (each, a "Customer
Agreement").
1. REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER AND THE
PARTNERSHIP. The General Partner and the Partnership represent and warrant to
each of the other parties hereto, as follows:
(a) The Partnership has provided to the Trading Advisor, DWR and
the Commodity Brokers, and filed with the Securities and Exchange Commission
(the "SEC") on August ___, 1997, a registration statement on Form S-1 (No.
333-____), including a preliminary prospectus (which has not been distributed to
the public), for the registration of
<PAGE>
the Units under the Securities Act of 1933, as amended (the "1933 Act"), and the
rules and regulations promulgated thereunder (the "SEC Regulations"), and has
filed copies of such registration statement with (i) the Commodity Futures
Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEAct")
and the rules and regulations promulgated thereunder (the "CFTC Rules"), (ii)
the National Association of Securities Dealers, Inc. (the "NASD") pursuant to
its Conduct Rules; and (iii) the National Futures Association (the "NFA") in
accordance with NFA Compliance Rule 2-13. The registration statement and the
prospectus included therein are hereinafter called the "Registration Statement"
and the "Prospectus," respectively, except that (i) if the Partnership files a
post-effective amendment to the registration statement, then the term
"Registration Statement" shall, from and after the declaration of the
effectiveness of such post-effective amendment, refer to such post-effective
amendment, and the term "Prospectus" shall refer to the amended prospectus then
on file with the SEC as part of the Registration Statement, and (ii) if a
prospectus is filed pursuant to Rule 424 of the SEC Regulations, the term
"Prospectus" shall refer to the prospectus most recently filed pursuant to such
Rule from and after the date on which it shall have been first used, including
any amendment or supplement thereto, from and after the date on which it shall
have been first used. The Partnership will not file any amendment to the
Registration Statement or any amendment or supplement to the Prospectus unless
DWR, the Trading Advisor and the Commodity Brokers have received reasonable
prior notice of and a copy of such amendments or supplements and have not
reasonably objected thereto in writing.
(b) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken by the
General Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as defined in
Section 8(b) hereof will have been, taken; and, upon payment of the
consideration therefor specified in each accepted Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus, the
Units will constitute valid limited partnership interests in the Partnership.
(c) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the DRULPA, and is validly existing under the laws of the State of
Delaware with full power and authority to engage in its other contemplated
activities as described in the Prospectus; the Partnership has received a
certificate of authority to do business in the State of New York as provided by
Section 121-902 of the New York Revised Limited Partnership Act and is qualified
to do business in each jurisdiction in which the nature or conduct of its
business requires such qualification and where the failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder or under the Management Agreement, the Customer
Agreements, the Escrow Agreement, or the Limited Partnership Agreement, as
applicable.
(d) The General Partner is duly organized and validly existing
and in good standing as a corporation under the laws of the State of Delaware;
is in good standing and qualified to do business as a foreign corporation under
the laws of the State of New York; and is qualified to do business and is in
good standing as a foreign corporation in each
-2-
<PAGE>
jurisdiction in which the nature or conduct of its business requires such
qualification and where the failure to be so qualified could materially
adversely affect the General Partner's ability to perform its obligations
hereunder or under the Management Agreement, the Limited Partnership Agreement,
or as described in the Prospectus.
(e) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to conduct
their business and to perform their respective obligations, as applicable, under
the Limited Partnership Agreement, the Escrow Agreement, the Management
Agreement, the Customer Agreements, and this Agreement.
(f) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct and the
CFTC Rules. When the Registration Statement becomes effective under the 1933
Act and at all times subsequent thereto up to and including each Closing, the
Registration Statement and Prospectus will comply in all material respects with
the requirements of the 1933 Act, the SEC Regulations, the CEAct, the CFTC
Rules, and the rules of the NASD and NFA. As of its effective date, the
Registration Statement did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus, as of its date of
issue and at each Closing, did not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading. Any supplemental sales literature employed in the
offering of Units ("Sales Literature"), when read in conjunction with the
Prospectus, did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading. The Sales Literature complies and will comply with the CEAct, the
CFTC Rules, SEC Regulations, and the rules of the NFA and NASD. This
representation and warranty shall not, however, apply to any statement or
omission in the Registration Statement, Prospectus or Sales Literature made in
reliance upon and in conformity with information furnished by or relating to the
Trading Advisor, its trading methods or its trading performance, or any
information furnished by or relating to the Commodity Brokers.
(g) The accountants who certified the financial statements filed
with the SEC as part of the Registration Statement are, with respect to the
General Partner and the Partnership, independent public accountants as required
by the 1933 Act and the SEC Regulations.
(h) The financial statements filed as part of the Registration
Statement and those included in the Prospectus present fairly the financial
positions of the Partnership and of the General Partner as of the dates
indicated; and said financial statements have been prepared in conformity with
generally accepted accounting principles (as described therein).
-3-
<PAGE>
(i) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the General Partner or the Partnership, whether or not arising in
the ordinary course of business.
(j) The General Partner will have a net worth at each Closing
sufficient in amount and satisfactory in form to meet the net worth requirements
set forth in the Limited Partnership Agreement.
(k) The Limited Partnership Agreement, the Management Agreement
and this Agreement have each been duly and validly authorized, executed and
delivered by the General Partner on behalf of the Partnership and the General
Partner, and each constitutes a valid and binding agreement of the Partnership
and of the General Partner, enforceable in accordance with its terms. The
Escrow Agreement has been duly and validly authorized, executed and delivered by
the General Partner on behalf of the Partnership, and constitutes a valid and
binding agreement of the Partnership, enforceable in accordance with its terms.
As of the First Closing, the Customer Agreements will be duly and validly
authorized, executed and delivered by the General Partner on behalf of the
Partnership.
(l) The execution and delivery of the Limited Partnership
Agreement, the Escrow Agreement, the Customer Agreements, the Management
Agreement, and this Agreement, the incurrence of the obligations set forth in
each of such agreements, and the consummation of the transactions contemplated
therein and in the Registration Statement and Prospectus, will not violate, or
constitute a breach of, or default under, the General Partner's certificate of
incorporation or bylaws, the Certificate of Limited Partnership, the Limited
Partnership Agreement, any agreement or instrument by which either the General
Partner or the Partnership, as the case may be, is bound, or any law, order,
rule, or regulation applicable to the General Partner or the Partnership of any
court, governmental body, administrative agency, panel, or self-regulatory
organization having jurisdiction over the General Partner or the Partnership.
(m) Except as set forth in the Prospectus, there has not been in
the five years preceding the date of the Prospectus and there is not pending or,
to the best of the General Partner's knowledge, threatened, any action, suit, or
proceeding at law or in equity before or by any court, governmental body,
administrative agency, panel, or self-regulatory organization to which the
General Partner, any of the "principals" of the General Partner, as defined in
CFTC Rule 4.10(e) ("General Partner Principals"), or the Partnership is or was a
party, or to which any of the assets of the General Partner or the Partnership
is or was subject; and neither the General Partner nor any General Partner
Principal has received any notice of an investigation by the NFA, NASD, SEC, or
CFTC regarding non-compliance by any of the General Partner, the General Partner
Principals, or the Partnership with the 1933 Act, SEC Regulations, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), any other federal
securities laws, rules or regulations, the CEAct, the CFTC Rules, or the Rules
of the NASD or NFA, which action, suit, proceeding, or investigation resulted or
might reasonably be expected to result in any material adverse change in the
condition, financial or otherwise,
-4-
<PAGE>
business or prospects of the General Partner or the Partnership, or which could
be material to an investor's decision to invest in the Partnership.
(n) The General Partner and each "principal" of the General
Partner, as defined in CFTC Rule 3.1(a), have all federal, state, and foreign
governmental, regulatory, self-regulatory, and exchange approvals, licenses, and
memberships, and have effected all filings and registrations with federal,
state, and foreign governmental regulators, self-regulatory organizations, and
exchanges required to conduct their business and to act as described in the
Registration Statement and Prospectus, or required to perform their obligations
under the Limited Partnership Agreement, the Customer Agreements, the Escrow
Agreement, the Management Agreement, and this Agreement, as applicable. The
General Partner is registered as a commodity pool operator under the CEAct and
is a member of the NFA as a commodity pool operator. The General Partner's
principals identified in the Prospectus are all of the General Partner
Principals.
2. REPRESENTATIONS AND WARRANTIES OF MS & CO. MS & Co. represents
and warrants to each of the other parties hereto, as follows:
(a) MS & Co. is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is in good
standing and qualified to do business as a foreign corporation in the State of
New York and in each other jurisdiction in which the nature or conduct of its
business requires such qualification and where the failure to be so qualified
could materially adversely affect MS & Co.'s ability to perform its obligations
hereunder or under the Customer Agreement. MS & Co. has full corporate power
and authority to perform its obligations under the Customer Agreement and this
Agreement and to conduct its business as described in the Registration Statement
and Prospectus.
(b) As to MS & Co. and the "principals" of MS & Co., as defined
in CFTC Rule 4.10(e) (the "Commodity Broker Principals"), (i) the Registration
Statement and Prospectus are accurate and complete in all material respects and
contain all statements and information required to be included therein under the
1933 Act, the SEC Regulations, the CEAct, the CFTC Rules, and the rules of the
NFA; (ii) as of its effective date, the Registration Statement did not contain
any untrue statement of a material fact or omit to state a material fact which
is required to be stated therein or necessary to make the statements therein not
misleading; and (iii) the Prospectus, at its date of issue and as of each
Closing, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which such statements were made, not misleading.
(c) MS & Co. and each "principal" of MS & Co., as defined in
CFTC Rule 3.1(a), have all federal, state, and foreign governmental, regulatory,
self-regulatory, and exchange approvals, licenses and memberships, and have
effected all filings and registrations with federal, state, and foreign
governmental regulators, self-regulatory organizations, and exchanges required
to conduct their business and to act as described in the Registration Statement
and Prospectus, or required to perform their obligations under the
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Customer Agreement and this Agreement, as applicable. MS & Co. is registered as
a futures commission merchant under the CEAct and is a member of the NFA as a
futures commission merchant.
(d) The Customer Agreement and this Agreement have each been
duly and validly authorized, executed and delivered by MS & Co., and each
constitutes a valid and binding agreement of MS & Co., enforceable in accordance
with its terms.
(e) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of MS & Co., whether or not arising in the ordinary course of
business.
(f) Except as set forth in the Prospectus, there has not been in
the five years preceding the date of the Prospectus and there is not pending,
or, to the best of MS & Co.'s knowledge, threatened, any action, suit, or
proceeding at law or in equity before or by any court, governmental body,
administrative agency, panel, or self-regulatory organization to which MS & Co.
or any of its Commodity Broker Principals is or was a party, or to which any of
the assets of MS & Co. is or was subject; and neither MS & Co. nor any of its
Commodity Broker Principals has received any notice of an investigation by the
NFA or the CFTC regarding noncompliance by MS & Co. or any of its Commodity
Broker Principals with the CEAct, the CFTC Rules or the rules of the NFA, which
action, suit, proceeding or investigation resulted in or might reasonably be
expected to result in any material adverse change in the condition, financial or
otherwise, business or prospects of MS & Co. or which could be material to an
investor's decision to invest in the Partnership.
(g) The execution and delivery of the Customer Agreement and
this Agreement, the incurrence of the obligations set forth in each of such
agreements, and the consummation of the transactions contemplated therein and in
the Prospectus, will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of MS & Co. or any agreement or
instrument by which it is bound, or any law, order, rule, or regulation
applicable to MS & Co. of any court, governmental body, administrative agency,
panel, or self-regulatory organization having jurisdiction over MS & Co.
3. REPRESENTATIONS AND WARRANTIES OF MSIL. MSIL represents and
warrants to each of the other parties hereto, as follows:
(a) MSIL is a corporation duly organized, validly existing and
in good standing under the laws of the United Kingdom, and is in good standing
and qualified to do business in each other jurisdiction in which the nature or
conduct of its business requires such qualification and where the failure to be
so qualified could materially adversely affect MSIL's ability to perform its
obligations hereunder or under the Customer Agreement. MSIL has full corporate
power and authority to perform its obligations under the Customer Agreement and
this Agreement and to conduct its business as described in the Registration
Statement and Prospectus.
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(b) As to MSIL and any of its Commodity Broker Principals,
(i) the Registration Statement and Prospectus are accurate and complete in all
material respects and contain all statements and information required to be
included therein under the 1933 Act, the SEC Regulations, the CEAct, the CFTC
Rules, and the rules of the NFA; (ii) as of its effective date, the Registration
Statement did not contain any untrue statement of a material fact or omit to
state a material fact which is required to be stated therein or necessary to
make the statements therein not misleading; and (iii) the Prospectus, at its
date of issue and as of each Closing, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
(c) MSIL and each "principal" of MSIL, as defined in CFTC Rule
3.1(a), have all governmental, regulatory, self-regulatory, and exchange
approvals, licenses and memberships, and have effected all filings and
registrations with governmental regulators, self-regulatory organizations, and
exchanges required to conduct their business and to act as described in the
Registration Statement and Prospectus, or required to perform their obligations
under the Customer Agreement and this Agreement, as applicable. MSIL is a
member firm of the United Kingdom Securities and Futures Authority (the "SFA").
(d) The Customer Agreement and this Agreement have each been
duly and validly authorized, executed and delivered by MSIL, and each
constitutes a valid and binding agreement of MSIL, enforceable in accordance
with its terms.
(e) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of MSIL, whether or not arising in the ordinary course of business.
(f) Except as set forth in the Prospectus, there has not been in
the five years preceding the date of the Prospectus and there is not pending,
or, to the best of MSIL's knowledge, threatened, any action, suit, or proceeding
at law or in equity before or by any court, governmental body, administrative
agency, panel, or self-regulatory organization to which MSIL or any of its
Commodity Broker Principals is or was a party, or to which any of the assets of
MSIL is or was subject; and neither MSIL nor any of its Commodity Broker
Principals has received any notice of an investigation by the SFA regarding
noncompliance by MSIL or any of its Commodity Broker Principals with the United
Kingdom Financial Services Act, as amended, or the rules of the SFA, which
action, suit, proceeding or investigation resulted in or might reasonably be
expected to result in any material adverse change in the condition, financial or
otherwise, business or prospects of MSIL or which could be material to an
investor's decision to invest in the Partnership.
(g) The execution and delivery of the Customer Agreement and
this Agreement, the incurrence of the obligations set forth in each of such
agreements, and the consummation of the transactions contemplated therein and in
the Prospectus, will not violate, or constitute a breach of, or default under,
the memorandum of association or articles of
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association of MSIL or any agreement or instrument by which it is bound, or any
law, order, rule, or regulation applicable to MSIL of any court, governmental
body, administrative agency, panel, or self-regulatory organization having
jurisdiction over MSIL.
4. REPRESENTATIONS AND WARRANTIES OF THE TRADING ADVISOR. The
Trading Advisor represents and warrants to each of the other parties hereto, as
follows:
(a) The Trading Advisor is a corporation duly organized, validly
existing and in good standing as a corporation under the laws of the State of
Delaware, and is in good standing and qualified to do business as a foreign
corporation in the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and where the
failure to so qualify could materially adversely affect the Trading Advisor's
ability to perform its duties hereunder or under the Management Agreement. The
Trading Advisor has full corporate power and authority to perform its
obligations under each of such agreements, and to conduct its business as
described in the Registration Statement and Prospectus. The only "principals"
(as defined in CFTC Rule 4.10) of the Trading Advisor are those set forth in the
Prospectus (the "Trading Advisor Principals").
(b) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading program and systems,
in the Registration Statement and the Prospectus, and in the Sales Literature
which has been approved in writing by the Trading Advisor, are accurate and
complete in all material respects. With respect to the material relating to the
Trading Advisor and each Trading Advisor Principal, including the Trading
Advisor's and the Trading Advisor Principals' trading program and systems, as
applicable, (i) the Registration Statement and Prospectus contain all statements
and information required to be included therein under the 1933 Act, the SEC
Regulations, the CEAct, the CFTC Rules and the rules of the NFA; (ii) as of its
effective date, the Registration Statement did not contain any misleading or
untrue statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements therein not
misleading; and (iii) the Prospectus, at its date of issue and as of each
Closing, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which such statements were made, not misleading.
(c) The Management Agreement and this Agreement have each been
duly and validly authorized, executed and delivered by the Trading Advisor, and
each constitutes a valid and binding agreement of the Trading Advisor,
enforceable in accordance with its terms.
(d) The Trading Advisor and each "principal" of the Trading
Advisor, as defined in CFTC Rule 3.1(a), have all federal, state, and foreign
governmental, regulatory, self-regulatory, and exchange approvals, licenses and
memberships, and have effected all filings and registrations with federal,
state, and foreign regulators, self regulatory organizations and exchanges
required to conduct their business and to act as described in the Registration
Statement and Prospectus, or required to perform their obligations under this
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Agreement and the Management Agreement, as applicable. The Trading Advisor is
registered as a commodity trading advisor under the CEAct and is a member of the
NFA as a commodity trading advisor.
(e) The execution and delivery of the Management Agreement and
this Agreement, the incurrence of the obligations set forth in each of such
agreements, and the consummation of the transactions contemplated therein and in
the Prospectus, will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound, or any law, order, rule, or
regulation of any court, governmental body, administrative agency, panel, or
self-regulatory organization having jurisdiction over the Trading Advisor.
(f) The Trading Advisor is not required to be registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, in
respect to its activities described in the Registration Statement and the
Prospectus and its obligations under the Management Agreement.
(g) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the Trading Advisor or any Trading Advisor Principal whether or not
arising in the ordinary course of business.
(h) Except as set forth in the Prospectus, there has not been in
the five years preceding the date of the Prospectus and there is not pending,
or, to the best of the Trading Advisor's knowledge, threatened, any action,
suit, or proceeding at law or in equity before or by any court, governmental
body, administrative agency, panel, or self-regulatory organization to which the
Trading Advisor or any Trading Advisor Principal is or was a party, or to which
any of the assets of the Trading Advisor is or was subject; and neither the
Trading Advisor nor any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the Trading
Advisor or any of the Trading Advisor Principals with the CEAct, the CFTC Rules
or the rules of the NFA, which resulted in or might reasonably be expected to
result in any material adverse change in the condition, financial or otherwise,
business or prospects of the Trading Advisor or which could be material to an
investor's decision to invest in the Partnership.
(i) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in connection
with the organization or operation of the Partnership, other than as described
in the Prospectus.
5. COVENANTS OF THE PARTNERSHIP AND THE GENERAL PARTNER. The
Partnership and the General Partner covenant and agree as follows:
(a) The Partnership will use its best efforts to cause any
post-effective amendments to the Registration Statement to become effective as
promptly as possible. The Partnership will prepare and file with the SEC, NASD,
CFTC, and NFA,
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promptly upon DWR's request, any amendments to the Registration Statement and
any amendments and supplements to the Prospectus which may be necessary or
advisable in connection with the offering and sale of Units and will use its
best efforts to cause the same to become effective as promptly as possible.
(b) As soon as the Partnership is advised or obtains knowledge
thereof, it will advise DWR, the Trading Advisor, and the Commodity Brokers of
any requests made by the SEC, NASD, CFTC, or NFA to amend the Registration
Statement, to amend or supplement the Prospectus, or for additional information
or of the issuance by the SEC of any stop order suspending the effectiveness of
the Registration Statement, of any order by the SEC, NASD, CFTC, or NFA
preventing or suspending the use of the Prospectus, or of the institution of
any proceedings for any such purpose, and will use its best efforts to prevent
the issuance of any such order and, if any such order is issued, to obtain the
lifting thereof as promptly as possible.
(c) If, at any time after the effective date of the Registration
Statement and any amendment thereto, any event occurs involving the Partnership,
the General Partner, or any General Partner Principal, or of which the
Partnership, the General Partner, or any General Partner Principal is aware, as
a result of which the Registration Statement or Prospectus, as then amended and
supplemented, would include any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein (and, with respect to the Prospectus, in light of
the circumstances under which they were made) not misleading, or if it becomes
necessary or desirable at any time to amend or supplement the Registration
Statement or Prospectus to comply with the 1933 Act, SEC Regulations, the CEAct,
the CFTC Rules, or the rules of the NFA, the Partnership will promptly notify
DWR, the Trading Advisor, and the Commodity Brokers thereof and will prepare and
file with the SEC, NASD, CFTC, and NFA an amendment or supplement that will
correct such statement or omission.
(d) The Partnership will furnish to each party hereto copies of
the Registration Statement, the Prospectus, and all amendments and supplements
thereto, in each case as soon as available and, in the case of DWR, in such
quantities (in the case of the Prospectus) as DWR may reasonably request for
delivery to it.
6. COVENANTS OF THE TRADING ADVISOR. The Trading Advisor covenants
and agrees as follows:
(a) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself in the preparation of any amendments or
supplements to the Registration Statement and the Prospectus.
(b) The Trading Advisor agrees to notify the General Partner
immediately upon discovery of any untrue statement of a material fact in the
Registration Statement or the Prospectus relating to the Trading Advisor or the
Trading Advisor Principals or an omission to state a material fact relating to
the Trading Advisor or the Trading Advisor Principals required to be stated
therein or necessary to make the statements therein (and, with
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<PAGE>
respect to the Prospectus, in light of the circumstances under which they were
made) not misleading, or of the occurrence of any event or change in
circumstances which would result in there being any material untrue or
misleading statement or a material omission in the Prospectus or Registration
Statement regarding the Trading Advisor or the Trading Advisor Principals, or
which would result in the Prospectus not including all material information
relating to the Trading Advisor and the Trading Advisor Principals required
pursuant to the CEAct, the CFTC Rules, or the rules of the NFA.
(c) The Trading Advisor will not use or distribute any
preliminary prospectus, Prospectus, amended or supplemented Prospectus or Sales
Literature nor engage in any selling activities whatsoever in connection with
the offering of the Units, except that the Trading Advisor shall, at the General
Partner's request, assist in the marketing of the Partnership to prospective
investors, including, without limitation, participating in "road show"
presentations, sales seminars, and other similar events. The amount of time the
Trading Advisor must devote to assisting in such marketing efforts will be
reduced if the Trading Advisor reasonably believes that assisting in such
marketing efforts would be disruptive to its trading activities.
7. COVENANTS OF THE COMMODITY BROKERS. Each Commodity Broker
covenants and agrees as follows:
(a) The Commodity Broker agrees reasonably to cooperate by
providing information regarding itself in the preparation of any amendments or
supplements to the Registration Statement and the Prospectus.
(b) The Commodity Broker agrees to notify the General Partner
immediately upon discovery of any untrue statement of a material fact in the
Registration Statement or the Prospectus relating to the Commodity Broker or its
Commodity Broker Principals or an omission to state a material fact relating to
the Commodity Broker or its Commodity Broker Principals required to be stated
therein or necessary to make the statements therein (and, with respect to the
Prospectus, in light of the circumstances under which they were made) not
misleading, or of the occurrence of any event or change in circumstances which
would result in there being any material untrue or misleading statement or a
material omission in the Prospectus or Registration Statement regarding the
Commodity Broker or its Commodity Broker Principals, or which would result in
the Prospectus not including all material information relating to the Commodity
Broker and its Commodity Broker Principals required pursuant to the CEAct, the
CFTC Rules, or the rules of the NFA.
8. APPOINTMENT OF THE SELLING AGENT.
(a) Subject to the terms and conditions set forth in this
Agreement, the Partnership hereby appoints DWR as its selling agent to offer and
sell Units on a best efforts basis, without any firm commitment on the part of
DWR to purchase any Units. DWR shall offer for sale up to 5,000,000 Units, and
such additional Units as the General Partner may, in its discretion, register
and offer for sale from time to time.
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<PAGE>
(b) The "Offering Period" will be the period commencing on the
date of the Prospectus and ending on January 12, 1998, unless all of the
registered Units have previously been subscribed for or the General Partner has
sooner terminated the Offering Period, or the General Partner extends the
Offering Period as described below. During the Offering Period, DWR will offer
Units for sale at a "First Closing," which currently is scheduled to be held
November 3, 1997, at a price equal to $10.00 per Unit. However, the General
Partner may at its discretion hold such First Closing at any time during the
Offering Period. Units which remain unsold following the First Closing may be
offered, in the sole discretion of the General Partner, for sale at a "Second
Closing," currently scheduled to be held on December 1, 1997, at a price per
Unit equal to 100% of the Net Asset Value per Unit as of the last day of the
month immediately preceding the Second Closing. Units which remain unsold
following the Second Closing may be offered, in the sole discretion of the
General Partner, for sale at a "Third Closing," currently scheduled to be held
on January 2, 1998, at a price per Unit equal to 100% of the Net Asset Value per
Unit as of the last day of the month immediately preceding the Third Closing.
The General Partner may, in its discretion, extend the Offering Period to
provide for additional closings for the sale of Units, but in no event will the
Offering Period be extended beyond March 31, 1998 (the First, Second and Third,
or any such additional closing, is herein called a "Closing"). The minimum
subscription for most subscribers shall be $5,000, EXCEPT that the minimum
subscription is (a) $2,000 in the case of an IRA; or (b) for subscribers who
purchase Units pursuant to an Exchange (as defined in the Prospectus), the
lesser of (i) $5,000 ($2,000 in the case of IRAs), (ii) the proceeds from the
redemption of five units (two units in the case of IRAs) from commodity pools
other than the Spectrum Series, (iii) the proceeds from the redemption of 500
units (200 units in the case of IRAs) from one, or any combination, of the
Spectrum Series of commodity pools, or (iv) the proceeds from the redemption of
all of a subscriber's units of limited partnership interest in any other
commodity pool for which the General Partner serves as general partner and
commodity pool operator. A subscriber whose subscription is accepted at a
Closing and who desires to make an additional investment in the Partnership may
subscribe for Units at a subsequent Closing with a minimum investment of $1,000.
The number of Units received by a subscriber will be rounded to the third
decimal place.
Notwithstanding any provision to the contrary herein, the
General Partner will have the sole discretion to accept or reject any
subscription for Units in whole or in part at any time prior to acceptance. The
General Partner will determine to accept or reject a subscription generally
within 10 days of the receipt of a complete and executed Subscription and
Exchange Agreement and Power of Attorney.
(c) No selling commissions will be charged the Partnership or
any subscriber with respect to the sale of Units during the Offering Period.
The Partnership understands, however, that DWR may provide to its employees,
solely from its own funds, an amount equal to that described in the following
paragraph.
(d) Except as provided below, employees of DWR will receive
gross sales credit equal to three percent (3%) of the Net Asset Value per Unit
as of the date of the
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applicable Closing for each Unit sold by them and issued at the Closing (such
compensation, together with any other underwriting compensation, will not exceed
the 10% of the proceeds received in connection with the issuance of the Units).
Commencing with the thirteenth month following the Closing at which a Unit is
issued, and continuing until the Partnership terminates or such Unit is
redeemed, employees of DWR who are qualified under Section 8(e) of this
Agreement also will receive up to 1/4 of 1% of the Net Asset Value (up to a 3%
annual rate) of a Unit as of the first day of each month. No person will
receive the continuing compensation described above who is not DWR's employee at
the time of receipt of payment.
DWR will not pay to an employee the 3% gross sales credit
described above with respect to Units purchased by a subscriber pursuant to an
Exchange (as defined in the Prospectus). Such employee will receive the
continuing payments with respect to Units that are comparable to the payments
that were received by such employee with respect to the units of the other
commodity pool involved in the Exchange.
(e) Notwithstanding the foregoing, DWR will not pay any such
continuing compensation to any of its employees who is not legally qualified or
permitted to receive such continuing compensation. In that regard, each of DWR's
employees who receives any such continuing compensation must have become
registered as an associated person with the CFTC and with the NFA in such
capacity only after either having passed the National Commodity Futures
Examination (NASD Test Series #3), the Futures Managed Funds Examination (NASD
Test Series #31), or having been "grandfathered" under the CEAct and the Bylaws
and rules of the NFA. Also, such compensation may be paid by DWR to its
employees only in respect of outstanding Units sold by such persons and only so
long as the additional services described in Section 8(g) of this Agreement are
provided by such persons to Limited Partners; PROVIDED, HOWEVER, that DWR may
not pay any portion of such compensation to any individual no longer employed by
it, and PROVIDED, FURTHER, that such compensation may be paid to its employees
who, although not responsible for the sale of an outstanding Unit, provide the
services described below in place of the individual who was responsible for such
sale.
(f) With the written approval of the General Partner, DWR may
appoint as its agent to make offers and sales of Units, one or more additional
selling agents (each, an "Additional Seller" and collectively, the "Additional
Sellers"), PROVIDED that each Additional Seller shall execute an Additional
Seller Agreement substantially in the form attached hereto as Exhibit A. DWR
may compensate any Additional Seller by paying such Additional Seller a
commission, not to exceed three percent (3%) of the Net Asset Value per Unit as
of the date of the applicable Closing, for each Unit sold by such Additional
Seller and issued at such Closing. In addition, commencing with the thirteenth
month after the Closing at which a Unit is issued and continuing until the
Partnership terminates or the Unit is redeemed, DWR may pay any Additional
Seller continuing compensation of up to 1/4 of 1% (up to 3% annually) of the Net
Asset Value as of the first day of each month of outstanding Units sold by such
Additional Seller, in recognition of such Additional Seller's continuing
services to Limited Partners of the Partnership, as set forth in Section 8(g) of
this Agreement; PROVIDED, HOWEVER, that: (A) no continuing compensation shall
be paid to an Additional Seller unless it
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is properly registered with the CFTC as a "futures commission merchant" or
"introducing broker," and is a member of the NFA in one of such capacities, and
(B) no Additional Seller which is registered as a futures commission merchant or
introducing broker may pay any portion of such continuing compensation to an
employee thereof unless such employee meets the same qualifications as DWR's
employees, as set forth in Section 8(e) of this Agreement.
(g) The additional services that DWR's employees will provide on
an ongoing basis to Limited Partners at no charge will include, but not be
limited to: (i) inquiring of the General Partner from time to time, at the
request of Limited Partners, as to the Net Asset Value of a Unit; (ii) inquiring
of the General Partner from time to time, at the request of Limited Partners, as
to the futures markets and the activities of the Partnership; (iii) responding
to questions of Limited Partners from time to time with respect to monthly
account statements, annual reports, financial statements, and annual tax
information furnished periodically to Limited Partners; (iv) providing advice to
Limited Partners from time to time as to when and whether to redeem Units; (v)
assisting Limited Partners from time to time in the redemption of Units; and
(vi) providing such other services as Limited Partners from time to time may
reasonably request.
(h) The Partnership and DWR acknowledge that DWR will be paid
any and all redemption charges imposed on Limited Partners in accordance with
Section 10(b) of the Limited Partnership Agreement.
9. UNDERTAKINGS OF DWR.
(a) DWR agrees to use its best efforts to offer and sell Units
on the terms set forth in this Agreement, the Registration Statement, and the
Prospectus. It is understood that DWR has no commitment to offer and sell Units
or to purchase Units other than to use its best efforts to offer and sell Units.
(b) DWR will make the public offering of Units at the offering
price and on the other terms and conditions set forth in the Registration
Statement, the Prospectus, and this Agreement. DWR will offer and sell Units
only to persons who satisfy the suitability and/or minimum investment
requirements set forth in the Prospectus and the Subscription and Exchange
Agreement and Power of Attorney and who, to the General Partner's satisfaction,
complete a Subscription and Exchange Agreement and Power of Attorney. DWR will
conduct a thorough review of the suitability of each subscriber for Units, of
each Subscription and Exchange Agreement and Power of Attorney (i) authorizing
the General Partner and DWR to transfer the full subscription price from the
subscriber's customer account with DWR to the Morgan Stanley Tangible Asset Fund
L.P. Escrow Account, and (ii) requesting the redemption of units of limited
partnership interest in another partnership of which the General Partner is the
general partner and commodity pool operator and authorizing the purchase of
Units with the proceeds of such redemption.
All of DWR's branch offices will be required to forward
subscriptions to DWR's New York, New York branch office no later than noon of
the first business day following their receipt of an acceptable Subscription and
Exchange Agreement
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and Power of Attorney from a subscriber for Units. Subsequent to its review of
each Subscription and Exchange Agreement and Power of Attorney, the General
Partner will notify DWR, and DWR shall notify each subscriber by the business
day following its receipt of notice from the General Partner, of the General
Partner's acceptance of all, a portion, or none of the subscriber's
subscription.
All funds from subscriptions received by DWR during the
Offering Period and not rejected by the General Partner will be promptly
deposited by DWR in the Partnership's escrow account which will have been
established with the Escrow Agent as of the dates set forth below. The escrow
arrangements are described in the Prospectus and in the Escrow Agreement to
which DWR is a party along with the Escrow Agent and the Partnership. A
subscriber whose Subscription and Exchange Agreement and Power of Attorney is
received by DWR and not immediately rejected must have the full subscription
amount in his customer account with DWR on the first business day following the
date that his Subscription and Exchange Agreement and Power of Attorney is
received by DWR, and DWR will transfer such subscription funds to the Escrow
Agent on that date. DWR will notify the General Partner of the subscription
amount deposited with the Escrow Agent on behalf of each subscriber for Units
and the name and residence address of each such subscriber.
DWR will offer and sell Units in compliance with the
requirements set forth in the Registration Statement, the Prospectus
(particularly under the captions "Summary of the Prospectus -- Investment
Requirements," "Plan of Distribution," "Subscription Procedure," and "Purchases
by Employee Benefit Plans -- ERISA Considerations"), the Subscription and
Exchange Agreement and Power of Attorney, and this Agreement. In connection
with DWR's acting as selling agent, DWR will comply fully at all times with all
applicable federal, state, and foreign securities and commodities laws
(including, without limitation, the 1933 Act, the 1934 Act, the CEAct and the
securities ("Blue Sky") laws of the jurisdictions in which DWR solicits
subscriptions), and all requirements of the NASD (particularly Conduct Rule
2810), the Board of Governors of the Federal Reserve System, and the securities
and commodities exchanges and other governmental and self-regulatory authorities
and organizations having jurisdiction over DWR. Specifically, (i) DWR will not
permit the purchase of any Units by a customer account over which DWR has
discretionary authority without the prior written approval by the customer
owning such account; (ii) DWR confirms that it has reasonable grounds to believe
that all material facts are adequately and accurately disclosed in the
Prospectus, which provides a basis for evaluating an investment in the
Partnership; (iii) DWR confirms that in determining the adequacy of disclosed
facts pursuant to clause (ii), it has obtained information on material facts
relating to: (A) items of compensation, (B) tax aspects, (C) financial stability
and experience of the General Partner, and (D) the Partnership's conflicts and
risk factors; (iv) in recommending to a subscriber the purchase or sale of
Units, DWR shall take such measures as are reasonably necessary to assure itself
that its Account Executives have informed such subscriber of all pertinent facts
relating to the liquidity and marketability of the Units and that its account
executives ("Account Executives") have reasonable grounds to believe, on the
basis of information obtained from such subscriber concerning his investment
objectives, other investments, financial situation and needs, and any other
information known by such Account
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Executive, that: (A) such subscriber is or will be in a financial position
appropriate to enable him to realize to a significant extent the benefits
described in the Prospectus, (B) such subscriber has a fair market net worth
sufficient to sustain the risks inherent in the purchase of Units, including
loss of investment and lack of liquidity, and (C) the purchase of Units is
otherwise suitable for such subscriber; (v) DWR shall take such measures as are
reasonably necessary to assure itself that each subscriber has received a
Prospectus at least five business days prior to the applicable Closing; and (vi)
the General Partner will maintain in its files, located c/o Dean Witter Reynolds
Inc., Two World Trade Center, New York, New York 10048, each subscriber's
Subscription and Exchange Agreement and Power of Attorney for not less than six
years, and DWR will maintain, at its respective branch offices, any other
documents disclosing the basis upon which the determination of suitability was
reached for each such subscriber.
(c) If for any reason the General Partner determines not to hold
the First Closing, the offering of Units will terminate and each subscription
received during the Offering Period will be promptly returned to DWR for deposit
in the subscriber's customer account with DWR within five business days of the
termination of the Offering Period, together with any interest earned on such
subscriber's funds while held in escrow in accordance with the Escrow Agreement,
and DWR will promptly notify each subscriber that such subscription has been
returned to such subscriber's customer account with DWR and that such funds are
under such subscriber's control.
All subscriptions received and accepted by the General
Partner will, upon the satisfaction at each Closing of the conditions set forth
in Sections 12 and 13 hereof, be delivered to the Partnership at each Closing,
and any interest earned on a subscriber's subscription funds while held in
escrow will be promptly returned to DWR in accordance with the Escrow Agreement
for prompt deposit in the subscriber's customer account with DWR. Interest
earned on any subscriptions deposited into the Escrow Account and thereafter
rejected by the General Partner will be credited to the subscriber's customer
account with DWR.
10. BLUE SKY FILINGS. The Partnership will use its best efforts to
qualify Units for offer and sale under the Blue Sky laws of such jurisdictions
as DWR may reasonably request, to make applications, file documents, and furnish
information as may be reasonably required for that purpose, and to comply with
such laws so as to permit the continuance of sales and dealings in such
jurisdictions for as long as may be necessary to complete the offer and sale of
Units; PROVIDED, HOWEVER, that neither the Partnership nor the General Partner
will be required to qualify as or be subject to taxation as a foreign
partnership or corporation or to execute a general consent to service of process
in any jurisdiction. The Partnership further agrees that its counsel will
prepare and deliver to DWR Blue Sky surveys which will set forth, for DWR's
guidance, in what manner, at what time, in what amounts, and by whom Units may
be offered and sold in jurisdictions requested by DWR as provided above.
11. OFFERING EXPENSES. DWR shall pay all of the expenses of the
offering of Units (collectively, the "Offering Expenses"), including, but not
limited to, all legal
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accounting, and auditing fees and expenses of outside firms and all costs,
disbursements, filing fees, printing and duplication costs, the Escrow Agent's
fees, marketing costs and expenses, and other related costs and expenses.
Legal, accounting, and auditing fees and expenses of outside firms shall include
the legal and accounting expenses relating to the offering of Units of DWR, the
Partnership and the General Partner. Marketing costs and expenses shall
include, but not be limited to, the printing and preparation of Sales
Literature, the production of any sales video, and the staging of sales seminars
and the travel of DWR and General Partner personnel associated therewith. DWR
shall not be reimbursed for such expenses by the Partnership. Such expenses
will not include the travel, legal and other expenses of the Trading Advisor,
including such expenses incurred in connection with the marketing of Units,
which expenses shall be borne by the Trading Advisor.
12. CLOSINGS.
(a) The First Closing, if any, for the acceptance of
subscriptions for Units received during the Offering Period is currently
scheduled to be held on November 3, 1997. The Second Closing, if any, for the
acceptance of subscriptions for Units is currently scheduled to be held on
December 1, 1997. The Third Closing, if any, for the acceptance of
subscriptions for Units is currently scheduled to be held on January 2, 1998.
Each Closing will be held at such time, and at such location or locations as the
General Partner and DWR may mutually agree upon.
(b) Subject to its right to reject any subscription in its sole
discretion in whole or in part at any time prior to acceptance, the General
Partner, on behalf of the Partnership, will accept subscriptions for Units
properly made and cause proper entry to be made in the Unit register to be
maintained by the General Partner. DWR will cause a receipt to be made on behalf
of subscribers for Units accepted by the General Partner at each Closing and
shall send such subscribers a confirmation of purchase in its customary form.
(c) At each Closing, the delivery, receipt, and acceptance of
subscriptions for Units will be subject to the terms and conditions set forth in
this Agreement, including the following: (i) payment of the full subscription
price for Units and delivery of a properly completed Subscription and Exchange
Agreement and Power of Attorney by each subscriber, and (ii) compliance with
Section 13 hereof. Upon the satisfaction of such terms and conditions, the
aggregate subscription price for Units (exclusive of any interest earned on such
subscriptions while held in escrow and payable to the subscribers in accordance
with the Escrow Agreement) will be paid and delivered to the Partnership at each
Closing.
13. CONDITIONS OF DWR'S OBLIGATIONS.
(a) DWR's obligations to proceed with the offering and sale of
Units and each Closing will be subject to: (i) the accuracy of the
representations and warranties by the Partnership, the General Partner, the
Trading Advisor, and the Commodity Brokers in this Agreement as of the date
hereof and as of the date of such Closing as if such representations and
warranties had been made on and as of the date thereof; (ii) the performance by
the Partnership, the General Partner, the Trading Advisor, and the Commodity
Brokers of the
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covenants and agreements herein; and (iii) to the additional conditions
precedent set forth below.
(b) At the First Closing, and at each subsequent closing with
respect to clauses (i), (ii), (iii), (iv), and (v) below (and update letters
from all legal counsel), the additional conditions precedent are as follows:
(i) The Registration Statement will have become effective. No
stop order suspending the effectiveness of the Registration Statement will
have been issued and no proceedings for that purpose will have been
instituted or are pending or, to the knowledge of the Partnership or DWR,
are contemplated or threatened by the SEC. No order preventing or
suspending the use of the Prospectus will have been issued and no
proceedings for that purpose will have been instituted or are pending or,
to the knowledge of the Partnership or DWR, are contemplated or threatened
by the SEC, NASD, CFTC, or NFA. Any requests of the SEC, NASD, CFTC, and
NFA for additional information (to be included in the Registration
Statement or Prospectus or otherwise) will have been complied with to DWR's
satisfaction.
(ii) Neither DWR, the Trading Advisor, MS & Co. nor MSIL will have
advised the Partnership or the General Partner that, in its opinion, the
Registration Statement or the Prospectus contains any untrue statement of a
material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made)
not misleading.
(iii) The Trading Advisor, with respect to itself, will have
furnished to DWR, the General Partner and the Partnership a certificate,
dated the date of the Closing and in form and substance satisfactory to
such parties, to the effect that:
(A) The representations and warranties by the Trading Advisor in
this Agreement are true, accurate, and complete on and as of the date
of the Closing as if made on the date of the Closing.
(B) The Trading Advisor has performed all of its obligations and
satisfied all of the conditions on its part to be performed or
satisfied under the Management Agreement and this Agreement, as
applicable, at or prior to the date of the Closing.
(iv) Each Commodity Broker, with respect to itself, will have
furnished to each of the other parties hereto a certificate, dated the date
of the Closing and in form and substance satisfactory to such parties, to
the effect that:
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(A) The representations and warranties by the Commodity Broker
in this Agreement are true, accurate, and complete on and as of the
date of the Closing as if made on the date of the Closing.
(B) The Commodity Broker has performed all of its obligations
and satisfied all of the conditions on its part to be performed or
satisfied under the Customer Agreement and this Agreement, as
applicable, at or prior to the date of the Closing.
(v) The General Partner will have furnished to each of the other
parties hereto a certificate, dated the date of the Closing and in form and
substance satisfactory to such parties, to the effect that:
(A) The representations and warranties by the Partnership and
the General Partner in this Agreement are true, accurate, and complete
on and as of the date of the Closing as if made on the date of the
Closing.
(B) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings
for that purpose have been instituted or are pending or, to the
knowledge of the General Partner, are contemplated or threatened under
the 1933 Act. No order preventing or suspending the use of the
Prospectus has been issued by the SEC, NASD, CFTC, or NFA and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the General Partner, are contemplated or
threatened under the 1933 Act or the CEAct.
(C) The Partnership and the General Partner have performed all
of their obligations and satisfied all of the conditions on their part
to be performed or satisfied under this Agreement, the Management
Agreement, the Escrow Agreement, and the Customer Agreements at or
prior to the date of the Closing.
(D) The General Partner has made the capital contribution to the
Partnership and has met the net worth standard, both as required of it
by the Limited Partnership Agreement.
(vi) Cadwalader, Wickersham & Taft, counsel to the General Partner and
the Partnership, shall deliver its opinion to each of the parties hereto at the
First Closing (with an update letter at each subsequent Closing), in form and
substance satisfactory to such parties, to the effect that:
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(A) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be
taken by the General Partner and the Partnership as a condition to the
subscription for and sale of the Units to qualified subscribers
therefor has been taken; and, upon payment of the consideration
therefor specified in the accepted Subscription and Exchange
Agreements and Powers of Attorney, the Units will constitute valid
limited partnership interests in the Partnership and each subscriber
who purchases Units will become a Limited Partner, subject to the
requirement that such purchaser shall have duly completed, executed
and delivered to the Partnership a Subscription and Exchange Agreement
and Power of Attorney relating to the Units purchased by such
purchaser, that such purchaser meets all applicable suitability
standards, and that the representations and warranties of such
purchaser in the Subscription and Exchange Agreement and Power of
Attorney are true and correct and that such purchaser is included as a
Limited Partner in the Partnership's records.
(B) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA, and is validly existing under
the laws of the State of Delaware with full partnership power and
authority to conduct the business in which it proposes to engage as
described in the Registration Statement and Prospectus, and to perform
its obligations under the Management Agreement, the Escrow Agreement,
the Customer Agreements and this Agreement; the Partnership has
received a Certificate of Authority as contemplated under Section
121-902 of the New York Revised Limited Partnership Act and is
qualified to do business in New York and need not affect any other
filings or qualifications under the laws of any other jurisdictions to
conduct its business as described in the Registration Statement and
Prospectus.
(C) The General Partner is duly organized, validly existing and
in good standing as a corporation under the laws of the State of
Delaware with full corporate power and authority to act as general
partner of the Partnership, and is qualified to do business and is in
good standing as a foreign corporation in the State of New York and in
each other jurisdiction in which the nature or conduct of its business
requires such qualification and where the failure to so qualify might
reasonably be expected to result in material adverse consequences to
the Partnership or the General Partner's ability to perform its
obligations as described
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<PAGE>
in the Registration Statement and Prospectus. The General Partner has
full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform
its obligations under the Limited Partnership Agreement, the
Management Agreement, and this Agreement.
(D) The General Partner and each of its "principals," as defined
in CFTC Rule 3.1(a), and the Partnership have all federal and state
governmental, regulatory and self-regulatory licenses, registrations
and memberships required by law and have made all filings with federal
and state regulators and self-regulatory organizations necessary in
order for the General Partner and the Partnership to perform their
obligations under the Limited Partnership Agreement, the Escrow
Agreement, the Customer Agreements, the Management Agreement and this
Agreement, as applicable, and to conduct their business as described
in the Registration Statement and Prospectus, except for such
licenses, registrations, memberships, and filings, the absence of
which would not have a material adverse effect on their ability to act
as described in the Registration Statement and Prospectus, or to
perform their obligations under such agreements, and, to the best of
such counsel's knowledge, after due investigation, none of such
licenses, registrations, or memberships have been rescinded, revoked
or suspended.
(E) Each of the Limited Partnership Agreement, the Escrow
Agreement, the Customer Agreements, the Management Agreement and this
Agreement has been duly authorized, executed and delivered by or on
behalf of the General Partner and/or the Partnership, as the case may
be, and each of the Limited Partnership Agreement, the Management
Agreement, and this Agreement constitutes a valid and binding
agreement of the General Partner and the Partnership, and the Escrow
Agreement constitutes a valid and binding agreement of the
Partnership, and, in the case of each valid and binding agreement
above, the agreement is enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability
generally of rights of creditors and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law), and except as enforceability of any
indemnification, exculpation and contribution provisions contained in
such agreements may be limited by applicable law or public policy.
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<PAGE>
(F) The execution and delivery of this Agreement, the Limited
Partnership Agreement, the Customer Agreements, the Escrow Agreement,
and the Management Agreement, as applicable, and the offer and sale of
the Units by the Partnership and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
contemplated herein and therein and in the Prospectus will not be in
contravention of the General Partner's certificate of incorporation or
bylaws, the Certificate of Limited Partnership, or the Limited
Partnership Agreement and, to the best of such counsel's knowledge
based upon due inquiry of certain officers of the General Partner,
will not constitute a breach of, or default under, or a violation of
any agreement or instrument known to such counsel by which the General
Partner or the Partnership is bound, and will not violate any law,
order, rule, or regulation applicable to the General Partner or the
Partnership of any court, governmental body, administrative agency,
panel, or self-regulatory organization having jurisdiction over the
General Partner or the Partnership.
(G) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of the General Partner, except as
disclosed in the Prospectus, there are no actions, suits, or
proceedings pending or threatened in any court or before or by any
governmental body, administrative agency, panel, or self-regulatory
organization, nor have there been any such actions, suits, or
proceedings within the five years preceding the date of the
Prospectus, to which the General Partner, any General Partner
Principal, or the Partnership is or was a party, or to which any of
their assets is or was subject, which would be material to an
investor's decision to invest in the Partnership or which might
reasonably be expected to materially adversely affect the condition,
financial or otherwise, or business of the General Partner, or the
Partnership, whether or not arising in the ordinary course of
business, or impair their ability to discharge their obligations as
described in the Prospectus.
(H) No authorization, approval, or consent of any governmental
authority or agency (with respect to the Partnership and General
Partner) is necessary in connection with the subscription for and sale
of the Units in the United States, except such as may be required
under the 1933 Act, the SEC Regulations, the CEAct, the CFTC Rules,
the NFA and NASD rules, and Blue Sky laws.
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<PAGE>
(I) The information in the Prospectus under the captions "Risk
Factors - Taxation and Regulatory Risks," "Purchases by Employee
Benefit Plans -- ERISA Considerations," "Material Federal Income Tax
Considerations," "State and Local Income Tax Aspects," and "The
Limited Partnership Agreement," to the extent that such information
constitutes matters of law or legal conclusions, has been reviewed by
such counsel and is correct.
(J) The Registration Statement is effective under the 1933 Act
and, to the best of such counsel's knowledge, no proceedings for a
stop order are pending or threatened under Section 8(d) of the 1933
Act or any Blue Sky laws.
(K) At the time the Registration Statement became effective, the
Registration Statement, and at the time the Prospectus was issued and
as of the Closing, the Prospectus, complied as to form in all material
respects with the requirements of the 1933 Act, the SEC Regulations,
the CEAct, the CFTC Rules, and the rules of the NFA and NASD. Nothing
has come to such counsel's attention that would lead them to believe
that the Registration Statement at the time it became effective
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus at the time
it was issued or at the Closing contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that Cadwalader,
Wickersham & Taft need express no opinion or belief (a) as to
information in the Registration Statement or the Prospectus regarding
the Trading Advisor, the Commodity Brokers, or their respective
principals, or (b) as to the financial statements, notes thereto and
other financial or statistical data set forth in the Registration
Statement and Prospectus.
(L) Based upon reliance on certain SEC No-Action letters, as of
the Closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and
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that a Subscription and Exchange Agreement and Power of Attorney, in the form
included in the Prospectus, has been duly authorized, completed, dated,
executed, and delivered, and good funds representing the full subscription price
for the Units purchased have been delivered by each purchaser of Units in
accordance with the requirements set forth in the Prospectus.
(vii) Counsel to MS & Co. shall deliver an opinion to each of the
parties hereto at the First Closing (with an update letter at each
subsequent Closing), in form and substance satisfactory to such parties, to
the effect that:
(A) MS & Co. is duly organized, validly existing and in good
standing as a corporation under the laws of the State of Delaware, and
is qualified to do business and in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in
which the nature or conduct of its business requires such
qualification and where the failure to be so qualified would
materially adversely affect MS & Co.'s ability to perform its
obligations under the Customer Agreement and this Agreement. MS & Co.
has full corporate power and authority to conduct its business as
commodity broker as described in the Registration Statement and
Prospectus, and to perform its obligations under the Customer
Agreement and this Agreement.
(B) Each of the Customer Agreement and this Agreement has been
duly and validly authorized, executed, and delivered by MS & Co., and
constitutes a valid and binding agreement of MS & Co. enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium, or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of any indemnification, exculpation, and
contribution provisions contained in such agreements may be limited by
applicable law or public policy.
(C) MS & Co. has all federal and state governmental, regulatory,
and self-regulatory approvals, licenses, registrations, and
memberships required by law, and has effected all filings with federal
and state governmental regulators and self-regulatory organizations
required to conduct its business as commodity broker as described in
the Registration Statement and the Prospectus, and to perform its
obligations under the Customer Agreement and this Agreement, except
for such approvals, licenses, registrations, memberships, and filings,
the absence of which would not have a material adverse effect on its
ability to
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act as described in the Registration Statement and Prospectus or to
perform its obligations under such agreements (except that counsel
need not opine as to exchange or clearinghouse membership) and, to the
best of such counsel's knowledge, after due investigation, none of
such approvals, licenses, registrations, or memberships, has been
rescinded, revoked, or suspended.
(D) The execution and delivery of this Agreement and the
Customer Agreement, the incurrence of the obligations herein and
therein set forth, and the consummation of the transactions
contemplated herein, therein, and in the Prospectus, will not be in
contravention of any of the provisions of the certificate of
incorporation or bylaws of MS & Co., and to the best of such counsel's
knowledge, based upon due inquiry of certain officers of MS & Co.,
will not constitute a breach of, or default under, or a violation of,
any agreement or instrument known to such counsel by which MS & Co. is
bound, and will not violate any law, order, rule, or regulation
applicable to MS & Co., of any court, governmental body,
administrative agency, panel, or self-regulatory organization having
jurisdiction over MS & Co.
(E) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of MS & Co., except as disclosed in the
Prospectus, there are no actions, suits, or proceedings pending or
threatened in any court or before or by any governmental body,
administrative agency, panel, or self-regulatory organization, nor
have there been any such actions, suits, or proceedings within the
five years preceding the date of the Prospectus, to which MS & Co. or
any of its Commodity Broker Principals is or was a party, or to which
any of its assets is or was subject, which would be material to an
investor's decision to invest in the Partnership or which might
reasonably be expected to materially adversely affect the condition,
financial or otherwise, or the business of MS & Co., whether or not
arising in the ordinary course of business, or impair its ability to
discharge its obligations as described in the Prospectus.
(F) Nothing has come to such counsel's attention to lead such
counsel to believe that, solely as to MS & Co. and its Commodity
Broker Principals, (a) the Registration Statement at the time it
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (b) the
Prospectus at the time it was issued or at the Closing contained an
untrue statement of a material fact or
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<PAGE>
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of MS & Co., and other sources believed
by it to be responsible, and may assume that signatures on all documents
examined by it are genuine.
(viii) Counsel to MSIL shall deliver an opinion to each of the
parties hereto at the First Closing (with an update letter at each
subsequent Closing), in form and substance satisfactory to such parties, to
the effect that:
(A) MSIL is duly organized, validly existing and in good
standing as a corporation under the laws of the United Kingdom, and is
qualified to do business and in good standing in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and where the failure to be so qualified would
materially adversely affect MSIL's ability to perform its obligations
under the Customer Agreement and this Agreement. MSIL has full
corporate power and authority to conduct its business as commodity
broker as described in the Registration Statement and Prospectus, and
to perform its obligations under the Customer Agreement and this
Agreement.
(B) Each of the Customer Agreement and this Agreement has been
duly and validly authorized, executed, and delivered by MSIL and
constitutes a valid and binding agreement of MSIL enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium, or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of any indemnification, exculpation, and
contribution provisions contained in such agreements may be limited by
applicable law or public policy.
(C) MSIL has all governmental, regulatory, and self-regulatory
approvals, licenses, registrations, and memberships required by law,
and has effected all filings with governmental regulators and
self-regulatory organizations required to conduct its business as
commodity broker as described in the Registration Statement and the
Prospectus, and to perform its obligations under the Customer
Agreement and this Agreement, except for such approvals, licenses,
registrations, memberships, and filings,
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the absence of which would not have a material adverse effect on its
ability to act as described in the Registration Statement and
Prospectus or to perform its obligations under such agreements (except
that counsel need not opine as to exchange or clearinghouse
membership) and, to the best of such counsel's knowledge, after due
investigation, none of such approvals, licenses, registrations, or
memberships, has been rescinded, revoked, or suspended.
(D) The execution and delivery of this Agreement and the
Customer Agreement, the incurrence of the obligations herein and
therein set forth, and the consummation of the transactions
contemplated herein, therein, and in the Prospectus, will not be in
contravention of any of the provisions of the memorandum of
association or articles of association of MSIL, and to the best of
such counsel's knowledge, based upon due inquiry of certain officers
of MSIL, will not constitute a breach of, or default under, or a
violation of, any agreement or instrument known to such counsel by
which MSIL is bound, and will not violate any law, order, rule, or
regulation applicable to MSIL, of any court, governmental body,
administrative agency, panel, or self-regulatory organization having
jurisdiction over MSIL.
(E) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of MSIL, except as disclosed in the
Prospectus, there are no actions, suits, or proceedings pending or
threatened in any court or before or by any governmental body,
administrative agency, panel, or self-regulatory organization, nor
have there been any such actions, suits, or proceedings within the
five years preceding the date of the Prospectus, to which MSIL or any
of its Commodity Broker Principals is or was a party, or to which any
of its assets is or was subject, which would be material to an
investor's decision to invest in the Partnership or which might
reasonably be expected to materially adversely affect the condition,
financial or otherwise, or the business of MSIL, whether or not
arising in the ordinary course of business, or impair its ability to
discharge its obligations as described in the Prospectus.
(F) Nothing has come to such counsel's attention to lead such
counsel to believe that, solely as to MSIL and its Commodity Broker
Principals, (a) the Registration Statement at the time it became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not
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misleading, or (b) the Prospectus at the time it was issued or at the
Closing contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of MSIL, and other sources believed by
it to be responsible, and may assume that signatures on all documents examined
by it are genuine.
(ix) Counsel to the Trading Advisor shall deliver an opinion to each
of the parties hereto at the First Closing (with an update letter at each
subsequent Closing), in form and substance satisfactory to such parties, to
the effect that:
(A) The Trading Advisor is duly organized, validly existing and
in good standing as a corporation under the laws of the State of
Delaware, and is qualified to do business and in good standing as a
foreign corporation in the State of New York and each other
jurisdiction in which the nature or conduct of its business requires
such qualification and where the failure to be so qualified would
materially adversely affect the Trading Advisor's ability to perform
its obligations under the Management Agreement and this Agreement.
The Trading Advisor has full corporate power and authority to conduct
its business as trading advisor as described in the Registration
Statement and Prospectus, and to perform its obligations under the
Management Agreement and this Agreement.
(B) The Trading Advisor and the Trading Advisor Principals have
all federal and state governmental, regulatory, and self-regulatory
approvals, licenses, registrations, and memberships required by law,
and have effected all filings with federal and state governmental
regulators and self-regulatory organizations required to conduct its
business as trading advisor as described in the Registration Statement
and the Prospectus, and to perform its obligations under this
Agreement and the Management Agreement, except for such approvals,
licenses, registrations, memberships, and filings the absence of which
would not have a material adverse effect on its ability to act as
described in the Registration Statement and Prospectus or to perform
its obligations under such agreements, and, to the best of such
counsel's knowledge, after due investigation, none of such approvals,
licenses, registrations, or memberships has been rescinded, revoked or
suspended.
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(C) Each of the Management Agreement and this Agreement has been
duly and validly authorized, executed, and delivered by or the Trading
Advisor and constitutes a valid and binding agreement of the Trading
Advisor enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium, or similar laws at
the time in effect affecting the enforceability generally of rights of
creditors and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law), and except as enforceability of any indemnification,
exculpation, and contribution provisions contained in such agreements
may be limited by applicable law or public policy.
(D) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of the Trading Advisor, except as
disclosed in the Prospectus, there are no actions, suits, or
proceedings pending or threatened in any court or before or by any
governmental body, administrative agency, panel, or self-regulatory
organization, nor have there been any such actions, suits, or
proceedings within the five years preceding the date of the
Prospectus, to which the Trading Advisor or any Trading Advisor
Principal is or was a party, or to which any of its assets is or was
subject, which would be material to an investor's decision to invest
in the Partnership or which might reasonably be expected to materially
adversely affect the condition, financial or otherwise, or the
business of the Trading Advisor, whether or not arising in the
ordinary course of business, or impair its ability to discharge its
obligations as described in the Prospectus.
(E) The execution and delivery of this Agreement and the
Management Agreement, the incurrence of the obligations herein and
therein set forth, and the consummation of the transactions
contemplated herein, therein, and in the Prospectus, will not be in
contravention of any of the provisions of the certificate of
incorporation or bylaws of the Trading Advisor, and, to the best of
such counsel's knowledge, based upon due inquiry of certain officers
of the Trading Advisor, will not constitute a breach of, or default
under, or a violation of, any agreement or instrument known to such
counsel by which the Trading Advisor is bound, and will not violate
any law, order, rule, or regulation applicable to the Trading Advisor
of any court, governmental body, administrative agency, panel, or
self-regulatory organization having jurisdiction over the Trading
Advisor.
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(F) Based upon reliance of certain SEC No-Action letters, as of
the Closing the performance by the Trading Advisor of the transactions
contemplated by the Management Agreement and this Agreement and as
described in the Prospectus will not require the Trading Advisor to be
registered as an "investment adviser" as that term is defined in the
Investment Advisers Act of 1940, as amended.
(G) Nothing has come to such counsel's attention that would lead
them to believe that, solely as to the Trading Advisor and the Trading
Advisor Principals, (a) the Registration Statement at the time it
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (b) the
Prospectus at the time it was issued or at the Closing contained an
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
provided, however, that counsel need express no opinion or belief as
to the financial or statistical data set forth in the Registration
Statement and Prospectus, except that counsel shall opine, without
rendering any opinion as to the accuracy of the information in such
performance data, that the performance data of the Trading Advisor set
forth in the Prospectus comply as to form in all material respects
with the CEAct and CFTC Rules, except as disclosed in the Prospectus.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
sources believed by it to be responsible, and may assume that signatures on all
documents examined by it are genuine.
(x) Deloitte & Touche LLP, independent certified public accountants
for the Partnership and the General Partner, will have furnished to DWR a
letter, dated the date of the First Closing and in form and substance
satisfactory to DWR, to the effect that:
(A) Such accountant is an independent certified public
accountant within the meaning of the 1933 Act, the CEAct, the SEC
Regulations, and the CFTC Rules with respect to the Partnership and
the General Partner.
(B) In such accountant's opinion, the statements of financial
condition of the Partnership and the General Partner and the notes
thereto included in the Prospectus and examined by it
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comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act, the CEAct, the SEC
Regulations, and the CFTC Rules.
(C) On the basis of limited procedures not constituting an
audit, including inquiries of officials of the General Partner having
responsibility for financial and accounting matters pertaining to the
Partnership and such other inquiries and procedures as may be
specified in such letter, nothing has come to such accountant's
attention which causes it to believe that, as of a specified date not
more than five business days prior to the date of the Closing, there
has been any decrease in the Net Assets of the Partnership as compared
to Net Assets set forth in the statement of financial condition of the
Partnership included in the Prospectus, except as may be disclosed in
such letter.
(D) On the basis of limited procedures, not constituting an
audit, including a reading of the latest available financial
statements of the General Partner, inspection of the minute book of
the General Partner since the date of the latest audited financial
statements of the General Partner, inquiries of officials of the
General Partner having responsibility for financial and accounting
matters, and such other inquiries and procedures as may be specified
in such letter, nothing has come to such accountant's attention that
causes it to believe that, as of a specified date not more than five
business days prior to the date of the Closing, there has been any
decrease in the General Partner's net worth as compared to net worth
set forth in the statement of financial condition of the General
Partner included in the Prospectus, except as may be disclosed in such
letter.
(xi) All agreements contemplated herein or in the Registration
Statement or Prospectus shall have been duly executed and delivered.
14. INDEMNIFICATION.
(a) The Trading Advisor agrees to indemnify, defend, and hold
harmless DWR, the Partnership, the General Partner, MS & Co., MSIL, their
affiliates, and each of their officers, directors, principals, shareholders,
controlling persons and their respective successors and assigns, from and
against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified party may become subject under the 1933 Act,
the 1934 Act, the CEAct, the Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, accounting and other fees and
expenses incurred in connection with, and any amounts paid in, any settlement,
provided that the Trading Advisor shall have approved such settlement, and in
connection with any administrative
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proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by the Trading Advisor to
perform any covenant made by the Trading Advisor herein; or (ii) a misleading or
untrue statement or alleged misleading or untrue statement of a material fact
made in the Registration Statement, the Prospectus, or any Sales Literature, or
an omission or alleged omission to state a material fact therein which is
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus and any Sales Literature, in light of the
circumstances under which they were made) not misleading, PROVIDED THAT such
statement or omission relates specifically to the Trading Advisor, or its
Trading Advisor Principals, or was made in reliance upon, and in conformity
with, written information or instructions furnished by the Trading Advisor, and,
in the case of Sales Literature only, was approved in writing by the Trading
Advisor. The Trading Advisor will also reimburse any indemnified party for any
legal, accounting, and other expenses incurred by such indemnified party in
connection with investigating or defending any loss, claim, damage, liability,
cost, and expense covered by the indemnities in this Section 14(a). This
indemnity shall not relate to any matter for which the Trading Advisor would be
indemnified under paragraph (e) of this Section 14.
(b) MS & Co. agrees to indemnify, defend, and hold harmless DWR,
the Partnership, the General Partner, the Trading Advisor, MSIL, their
affiliates, and each of their officers, directors, principals, shareholders,
controlling persons and their respective successors and assigns, from and
against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified party may become subject under the 1933 Act,
the 1934 Act, the CEAct, the Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, accounting, and other fees and
expenses incurred in connection with, and any amounts paid in, any settlement,
provided that MS & Co. shall have approved such settlement, and in connection
with any administrative proceedings), in respect of the offer or sale of Units,
insofar as such loss, claim, damage, liability, cost, or expense (or action in
respect thereof) arises out of, or is based upon: (i) a breach by MS & Co. of
any representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by MS & Co. to perform any
covenant made by MS & Co. herein; or (ii) a misleading or untrue statement or
alleged misleading or untrue statement of a material fact made in the
Registration Statement or the Prospectus, or an omission or alleged omission to
state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, PROVIDED
THAT such statement or omission relates specifically to MS & Co., or its
Commodity Broker Principals, or was made in reliance upon, and in conformity
with, written information or instructions furnished by MS & Co. MS & Co. will
also reimburse any indemnified party for any legal, accounting, and other
expenses incurred by such indemnified party in connection with investigating or
defending any loss, claim, damage, liability, cost, and expense covered by the
indemnities in this Section 14(b). This indemnity shall not relate to any
matter for which MS & Co. would be indemnified under paragraph (e) of this
Section 14.
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(c) MSIL agrees to indemnify, defend, and hold harmless DWR, the
Partnership, the General Partner, the Trading Advisor, MS & Co., their
affiliates, and each of their officers, directors, principals, shareholders,
controlling persons and their respective successors and assigns, from and
against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified party may become subject under the 1933 Act,
the 1934 Act, the CEAct, the Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, accounting, and other fees and
expenses incurred in connection with, and any amounts paid in, any settlement,
provided that MSIL shall have approved such settlement, and in connection with
any administrative proceedings), in respect of the offer or sale of Units,
insofar as such loss, claim, damage, liability, cost, or expense (or action in
respect thereof) arises out of, or is based upon: (i) a breach by MSIL of any
representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by MSIL to perform any
covenant made by MSIL herein; or (ii) a misleading or untrue statement or
alleged misleading or untrue statement of a material fact made in the
Registration Statement or the Prospectus, or an omission or alleged omission to
state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, PROVIDED
THAT such statement or omission relates specifically to MSIL, or its Commodity
Broker Principals, or was made in reliance upon, and in conformity with, written
information or instructions furnished by MSIL. MSIL will also reimburse any
indemnified party for any legal, accounting, and other expenses incurred by such
indemnified party in connection with investigating or defending any loss, claim,
damage, liability, cost, and expense covered by the indemnities in this Section
14(c). This indemnity shall not relate to any matter for which MSIL would be
indemnified under paragraph (e) of this Section 14.
(d) The General Partner agrees to indemnify, defend and hold
harmless DWR, the Trading Advisor, MS & Co., MSIL, their affiliates, and each of
their officers, directors, principals, shareholders, controlling persons and
their respective successors and assigns, from and against any loss, claim,
damage, liability, cost, and expense, joint and several, to which any
indemnified party may become subject under the 1933 Act, the 1934 Act, the
CEAct, the Blue Sky law of any jurisdiction, or otherwise (including any
reasonable investigatory, legal, accounting, and other fees and expenses
incurred in connection with, and any amounts paid in any settlement, provided
that the General Partner shall have approved such settlement, and in connection
with any administrative proceedings), in respect of the offer or sale of Units,
insofar as such loss, claim, damage, liability, cost, or expense (or action in
respect thereof) arises out of, or is based upon: (i) a breach by the
Partnership or the General Partner of any representation, warranty, or agreement
in this Agreement or certificate delivered pursuant to this Agreement or the
failure by the Partnership or the General Partner to perform any covenant made
by them herein; or (ii) a misleading or untrue statement or alleged misleading
or untrue statement of a material fact made in the Registration Statement or the
Prospectus, or an omission or alleged omission to state a material fact therein
which is required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, PROVIDED THAT such misleading or untrue
statement or alleged misleading or untrue statement or
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omission or alleged omission relates specifically to the General Partner or the
Partnership, or was made in reliance upon, and in conformity with, information
or instructions furnished by the General Partner or the Partnership. The
General Partner will also reimburse any indemnified party for any legal,
accounting, and other expenses incurred by such indemnified party in connection
with investigating or defending any loss, claim, damage, liability, cost, and
expense covered by the indemnities in this Section 14(d).
(e) The Partnership agrees to indemnify, defend, and hold
harmless the Trading Advisor, MS & Co., MSIL, DWR, the General Partner, each
Additional Seller (if any), and their respective affiliates (as defined in
Section 14(c) of the Limited Partnership Agreement), from and against any loss,
liability, damage, cost, or expense (including any reasonable investigatory,
legal, accounting, and other fees and expenses incurred in defense of any
demands, claims, or lawsuits), actually and reasonably incurred arising from
act, omission, activity or conduct undertaken pursuant to this Agreement by or
on behalf of the Partnership, including, without limitation, any demands,
claims, or lawsuits initiated by a Limited Partner (or assignee thereof),
PROVIDED that (1) the Trading Advisor, MS & Co., MSIL, DWR, the General Partner,
or the Additional Seller, as applicable, has determined, in good faith, that the
act, omission, conduct or activity giving rise to the claim for indemnification
was in the best interests of the Partnership, and (2) the act, omission,
activity, or conduct that was the basis for such loss, liability, damage, cost,
or expense was not the result of misconduct or negligence. The indemnity in
this Section 14(e) is in addition to any liability that the Partnership may
otherwise have and will extend, upon the same terms and conditions, to each
person, if any, who controls an indemnified person within the meaning of the
1933 Act.
(f) Notwithstanding anything to the contrary contained in the
foregoing, neither the Trading Advisor, MS & Co., MSIL, DWR, the General
Partner, an Additional Seller nor their respective affiliates shall be
indemnified by the Partnership for any losses, liabilities or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(1) there has been a successful adjudication on the merits of each count
involving alleged securities laws violations as to the particular indemnitee, or
(2) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (3) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, PROVIDED, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC and the positions
of the respective securities administrators of Massachusetts, Missouri,
Tennessee, and/or those other states and jurisdictions in which the plaintiffs
claim that they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
Furthermore, in any action or proceeding brought by a Limited Partner in the
right of the Partnership to which the Trading Advisor, MS & Co., MSIL, DWR, the
General Partner, an Additional Seller or any affiliate of any of the foregoing
is a party defendant, any such person shall be indemnified only to the extent
and subject to the conditions specified in the DRULPA and this Section 14(f).
The Partnership shall make advances to the Trading Advisor, MS & Co., MSIL, DWR,
the General Partner, an
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Additional Seller, or their respective affiliates hereunder only if: (1) the
demand, claim, or lawsuit relates to the performance of duties or services by
such persons to the Partnership; (2) such demand, claim, or lawsuit is not
initiated by a Limited Partner; and (3) such advances are repaid, with interest
at the legal rate under Delaware law, if the person receiving such advance is
ultimately found not to be entitled to indemnification hereunder.
(g) DWR agrees to indemnify, defend and hold harmless the
Partnership, the Trading Advisor, MS & Co., MSIL, the General Partner, their
affiliates, and each of their officers, directors, principals, shareholders,
controlling persons, and their respective successors and assigns, from and
against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified person may become subject under the 1933 Act,
the 1934 Act, the CEAct, the Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, accounting, and other fees and
expenses incurred in connection with, and any amounts paid in, any settlement,
provided that DWR shall have approved such settlement, and in connection with
any administrative proceedings), in respect of the offer or sale of Units,
insofar as such loss, claim, damage, liability, cost, or expense (or action in
respect thereof) arises out of, or is based upon: (i) a breach by DWR of any
agreement in this Agreement or the failure by DWR to perform any undertaking
made by DWR herein; or (ii) a misleading or untrue statement or alleged
misleading or untrue statement of a material fact made in the Registration
Statement, the Prospectus, or any Sales Literature, or an omission or alleged
omission to state a material fact therein which is required to be stated therein
or necessary to make the statements therein (in the case of the Prospectus and
any Sales Literature, in light of the circumstances under which they were made)
not misleading, PROVIDED THAT such statement or omission relates specifically to
DWR, or was made in reliance upon, and in conformity with, written information
or instructions furnished by DWR. DWR will also reimburse any indemnified party
for any legal, accounting, and other expenses incurred by such indemnified party
in connection with investigating or defending any loss, claim, damage,
liability, cost, and expense covered by the indemnities in this Section 14(g).
The indemnity in this Section 14(g) is in addition to any liability that DWR may
otherwise have.
(h) Promptly after receipt by an indemnified party of notice of
the commencement of any action, claim, or proceeding to which any of the
foregoing subsections of this Section 14 may apply, the indemnified party will
notify the indemnifying party in writing of the commencement thereof if a claim
in respect thereof is to be made against the indemnifying party under any of
such subsections; but the failure to notify the indemnifying party will not
relieve the indemnifying party from any liability which the indemnifying party
may have to the indemnified party under any of such subsections, except where
such failure has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified party and the
indemnified party notifies the indemnifying party of the commencement thereof as
provided above, the indemnifying party will be entitled to participate therein
and, to the extent that the indemnifying party desires, to assume the defense
thereof with counsel selected by the indemnifying party and not disapproved by
the indemnified party, any such disapproval not to be unreasonable. After
notice from the indemnifying party to the indemnified party of the indemnifying
party's election so to assume
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the defense thereof as provided above, the indemnifying party will not be liable
to the indemnified party hereunder for any legal and other expenses subsequently
incurred by the indemnified party in connection with the defense thereof, other
than reasonable costs of investigation.
Notwithstanding the preceding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available under
any of Sections 14(a) - (g) hereof, an indemnified party reasonably determines
that its interests are or may be adverse, in whole or in part, to the
indemnifying party's interests or that there may be legal defenses available to
the indemnified party which are inconsistent with the defenses available to the
indemnifying party, the indemnified party may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event, however, will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified parties in connection with
any one action, claim, or proceeding, or in connection with separate but similar
or related actions, claims, or proceedings, in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent or
if there is a final judgment for the plaintiff in any such action, claim, or
proceeding, the indemnifying party will indemnify, defend, and hold harmless an
indemnified party as provided in Sections 14(a) - (g) hereof, as applicable.
(i) The exculpation provisions in the Management Agreement, the
Customer Agreements, and the Limited Partnership Agreement shall not relieve any
party thereto from any liability it may have or incur to any party under this
Agreement; nor shall any party thereto be entitled to be indemnified by any
party thereto pursuant to the indemnification provisions contained in such
agreements, against any loss, liability, damage, cost or expense it may incur
under this Agreement.
14. TERMINATION. The General Partner shall have the right to
terminate this Agreement at any time prior to a Closing by giving written notice
of such termination to DWR, the Trading Advisor, and the Commodity Brokers.
15. SURVIVAL. The respective indemnities, agreements, obligations,
representations, warranties, and other statements of the parties hereto set
forth in this Agreement or in any certificates delivered pursuant hereto will
remain in full force and effect (regardless of any investigation or any
statement as to the results thereof made by, or on behalf of, DWR, the
Partnership, the General Partner, the Trading Advisor, the Commodity Brokers, or
any officer, director, controlling person, or agent of any of the foregoing),
and will survive the delivery of and payment for Units and the termination or
expiration of this Agreement, and each Closing.
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16. NOTICES. All notices required or desired to be given under this
Agreement must be in writing and will be effective when given personally on the
date delivered or, when given by mail, on the date of receipt, addressed as
follows (or to such other address as the party entitled to notice hereafter
designates in accordance with the terms hereof):
if to the Partnership or the General Partner:
Morgan Stanley Tangible Asset Fund L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
President
if to the Trading Advisor:
Morgan Stanley Commodities Management, Inc.
1221 Avenue of the Americas
21st Floor
New York, NY 10020
Attn: Mr. Wayne D. Peterson
President
if to DWR:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
Executive Vice President
if to MS & Co.:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Attn:________________________-
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if to MSIL:
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA, England
Attn:__________________________
17. SUCCESSORS. This Agreement will be binding upon and inure solely
to the benefit of DWR, the Trading Advisor, the Partnership, the Commodity
Brokers and the General Partner (and to the extent provided in Section 14
hereof, the officers, directors, controlling persons, and agents of the
Partnership, the Trading Advisor, the General Partner, the Commodity Brokers,
and DWR and the respective heirs, executors, administrators, successors, and
assigns of such persons), and no other person will acquire or have any rights
under or by virtue of this Agreement. No purchaser of Units will be deemed to be
a successor or assign to any party hereto merely by reason of such purchase.
18. ASSIGNMENT; AMENDMENT. This Agreement may not be assigned by any
party hereto without the prior express written consent of all other parties.
This Agreement may not be amended except by the express written consent of all
parties hereto.
19. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflicts of laws. If any action or proceeding shall be brought
by a party to this Agreement to enforce any right or remedy under this
Agreement, each party hereto hereby consents and will submit to the jurisdiction
of the courts of the County, City and State of New York or any federal court
sitting in the County, City and State of New York. Any action or proceeding
brought by any party to this Agreement to enforce any right, assert any claim or
obtain any relief whatsoever in connection with this Agreement shall be brought
by such party exclusively in the courts of the County, City and State of New
York or any federal court sitting in the County, City and State of New York.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing Agreement is satisfactory to you, please so indicate by
signing at the place provided below.
MORGAN STANLEY TANGIBLE ASSET
FUND L.P.
By: Demeter Management Corporation,
General Partner
By:___________________________-
Mark J. Hawley
President
Accepted and Agreed: DEMETER MANAGEMENT CORPORATION
DEAN WITTER REYNOLDS INC.
By:
Mark J. Hawley
President
By:_____________________________
Mark J. Hawley
Executive Vice President
MORGAN STANLEY & CO. INCORPORATED
By:______________________________
MORGAN STANLEY COMMODITIES
MANAGEMENT, INC.
By:______________________________
Wayne D. Peterson
President
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
By:_______________________________
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EXHIBIT 1.02
ADDITIONAL SELLER AGREEMENT
___________, 199_
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Gentlemen:
Morgan Stanley Tangible Asset Fund L.P. (the "Partnership"), a limited
partnership organized under the Delaware Revised Uniform Limited Partnership
Act, proposes to offer and sell, and issue, up to of 5,000,000 units of limited
partnership interest of the Partnership ("Units"), in accordance with the terms
and conditions set forth in the Selling Agreement (as defined below) and in the
registration statement on Form S-1 (File No. 333-_____ effective _______, 1997),
including the exhibits and any amendments thereto, as filed by the Partnership
with the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"). Such registration statement, in the form
in which it has become effective under the 1933 Act, is herein referred to as
the "Registration Statement," and the prospectus constituting a part of the
Registration Statement, in the form last filed with the SEC pursuant to Rule 424
under the 1933 Act, together with any supplements thereto, is herein referred to
as the "Prospectus."
Pursuant to the Selling Agreement, dated as of _______, 1997 the "Selling
Agreement"), among you, the Partnership, Demeter Management Corporation, a
Delaware corporation which is the general partner of the Partnership (the
"General Partner"), Morgan Stanley Commodities Management, Inc., a Delaware
corporation which is the trading advisor to the Partnership (the "Trading
Advisor"), and Morgan Stanley & Co. Incorporated, a Delaware corporation which
is the commodity broker for the Partnership ("the Commodity
<PAGE>
Broker"), you were appointed the selling agent for the Units to use your best
efforts to offer and sell Units and, in that connection, you were authorized
under the Selling Agreement to appoint, with the written approval of the General
Partner, as your agent to make offers and sales of Units, certain securities
brokers or dealers ("Additional Sellers"). All capitalized terms used herein
shall have the meanings ascribed to them in the Selling Agreement unless
otherwise defined herein or unless the context indicates otherwise.
On the basis of the terms, conditions, and agreements contained in this
Agreement, we agree with you as follows:
1. We agree to become an Additional Seller, to use our best efforts to
offer and sell the Units on the terms stated in this Agreement, the Selling
Agreement, the Registration Statement, and the Prospectus, and to comply with
the terms and conditions of this Agreement and the Selling Agreement in making
offers and sales of Units.
2. We represent and warrant to you, as follows:
(a) The Additional Seller is a corporation, partnership, or other entity
duly organized, validly existing, and in good standing under the laws of the
jurisdiction indicated on the signature page hereof, and is qualified to do
business and is in good standing in each jurisdiction in which the nature or
conduct of its business requires such qualification and where the failure to be
so qualified could materially adversely affect the Additional Seller's ability
to perform its obligations hereunder. The Additional Seller has full power and
authority under applicable law to conduct its business and perform its
obligations under this Agreement.
(b) The Additional Seller has all U.S. federal and state, and non-U.S.
regulatory and self-regulatory approvals, licenses, registrations, and
memberships, and has
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effected all filings with U.S. federal and state, and non-U.S. governmental
regulators and self-regulatory organizations required to conduct its business
and required to perform its obligations under this Agreement. Specifically, the
Additional Seller is either: (i) a broker or dealer which is (A) registered and
in good standing as such with the SEC under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), (B) registered or licensed and in good standing as
such under the respective securities laws of the 50 states, the District of
Columbia, and Puerto Rico where such registration or licensing is required for
us to consummate offers and sales of Units as contemplated by this Agreement,
and (C) a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"); or (ii) a non-U.S. broker or dealer not eligible for
membership in the NASD, in which case we agree (A) to make no offers or sales of
Units within the United States, its territories or possessions, or areas subject
to its jurisdiction, or to persons who are citizens thereof or residents
therein, (B) that in making offers and sales of Units, we will comply with the
"Free-Riding and Withholding Interpretation" in IM-2110-1 to NASD Conduct Rule
2110, and NASD Conduct Rules 2730 and 2750, as if we were a member of the NASD,
and NASD Conduct Rule 2420 as it applies to a non-member non-U.S. broker or
dealer, and (C) that we will not offer or sell any Units in any non-U.S.
jurisdiction until we effect, at our cost and expense, any and all registration
or qualification filings with regard to the Units, the Partnership or the
General Partner as may be required under the securities or other laws of such
jurisdiction (we will provide you, at our cost and expense, an opinion of
qualified counsel, satisfactory in form and substance to you, confirming that
any such filings have been properly effected, or that no such filings were
required, prior to the time any Subscription and Exchange Agreement and Power of
Attorney is delivered by a resident of any non-U.S. jurisdiction).
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<PAGE>
(c) This Agreement has been duly and validly authorized, executed, and
delivered by the Additional Seller and constitutes a valid and binding agreement
of the Additional Seller, enforceable in accordance with its terms.
(d) The execution and delivery of this Agreement, the incurrence of the
obligations set forth herein, and the consummation of the transactions
contemplated herein will not violate, or constitute a breach of, or default
under, the certificate of incorporation or bylaws, partnership certificate or
agreement, or other organizational document of the Additional Seller or any
other agreement or instrument by which it is bound or any order, law, rule, or
regulation applicable to the Additional Seller of any court, governmental body,
administrative agency, panel, or self-regulatory organization having
jurisdiction over the Additional Seller.
3. It is understood and agreed that we shall not, without your prior
written approval, publish, circulate, distribute, or otherwise use any
advertisement or solicitation material relating to the Units, other than the
Prospectus and any other selling literature supplied by you to us expressly for
such purpose ("Selling Literature"). We understand and acknowledge that we are
not authorized by you, the General Partner, or the Partnership to make any
representations in connection with the offering of Units other than those
contained in the Prospectus.
4. We will offer and sell Units only to persons who satisfy the
suitability and/or minimum investment requirements set forth in the Prospectus
and the Subscription and Exchange Agreement and Power of Attorney (and as may be
required by the law of any non-U.S. jurisdiction in which we may offer Units)
and who, to the General Partner's satisfaction, complete a Subscription and
Exchange Agreement and Power of Attorney. We will conduct a
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<PAGE>
thorough review of the suitability of each subscriber for Units. We will
forward subscriptions to DWR's New York, New York branch office no later than
noon of the first business day following our receipt of an acceptable
Subscription and Exchange Agreement and Power of Attorney from a subscriber for
Units, and we will arrange for the opening of a customer account with you for
each such subscriber for the purpose of paying for subscriptions, crediting of
interest thereon, redemptions of Units, and receipt of any distributions
thereon. We understand that subsequent to its review of each Subscription and
Exchange Agreement and Power of Attorney, the General Partner will notify us,
and we shall notify each subscriber by the business day following our receipt of
notice from the General Partner, of the General Partner's acceptance of all, a
portion, or none of the subscriber's subscription. We understand that the
General Partner may reject subscriptions, in whole or in part, for any reason,
and we agree that we shall not be entitled to commissions with respect to any
rejected subscriptions. All payments for subscriptions by subscribers shall be
made as provided under the heading "Subscription Procedure" in the Prospectus.
You shall be responsible for the deposit of subscription funds into the Escrow
Account as described under the heading "Plan of Distribution" in the Prospectus.
You shall be responsible for issuance and delivery of interim receipts to
subscribers.
5. We will offer and sell Units in compliance with the requirements set
forth in the Registration Statement, the Prospectus (particularly under the
captions "Summary of the Prospectus -- Investment Requirements," "Plan of
Distribution," "Subscription Procedure," and "Purchases by Employee Benefit
Plans -- ERISA Considerations"), the Subscription and Exchange Agreement and
Power of Attorney, the Selling Agreement, and this Agreement. We will comply
fully at all times with all applicable U.S. federal and state,
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<PAGE>
and non-U.S. securities and commodities laws (including, without limitation, the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act, as amended (the "CEAct"), and the securities laws of the
jurisdictions in which we solicit subscriptions), and all requirements of the
NASD (including NASD Conduct Rule 2810, particularly paragraphs (b)(2) and (3)
thereof), the Board of Governors of the Federal Reserve System, and the
securities and commodities exchanges and other governmental regulators and
self-regulatory organizations having jurisdiction over us or the offer and sale
of Units by us. Specifically, if we are a member of the NASD, (a) we will not
permit the purchase of any Units by a customer account over which we have
discretionary authority without the prior written approval by the customer
owning such account; (b) we confirm that we have reasonable grounds to believe
that all material facts are adequately and accurately disclosed in the
Prospectus, which provides a basis for evaluating the Partnership; (c) we
confirm that in determining the adequacy of disclosed facts pursuant to clause
(b), we have obtained information on material facts relating to: (i) items of
compensation, (ii) tax aspects, (iii) financial stability and experience of the
General Partner, and (iv) the Partnership's conflicts and risk factors; (d) we
will take such measures as are reasonably necessary to assure ourselves that (i)
our registered principals and representatives have informed each subscriber of
all pertinent facts relating to the liquidity and marketability of the Units,
and (ii) in recommending the purchase or redemption of Units, our registered
principals and representatives have reasonable grounds to believe, on the basis
of information obtained from each subscriber concerning his investment
objectives, other investments, financial situation and needs, and any other
information known by such registered principal or representative, that: (A)
such subscriber is or will be in a financial position appropriate to enable him
to realize to
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<PAGE>
a significant extent the benefits described in the Prospectus, (B) such
subscriber has a fair market net worth sufficient to sustain the risks inherent
in the purchase of Units, including loss of investment and lack of liquidity,
and (C) the purchase of Units is otherwise suitable for such subscriber; and (e)
it is understood that the General Partner will maintain in its files, located
c/o Dean Witter Reynolds Inc., Two World Trade Center, New York, New York 10048,
each subscriber's Subscription and Exchange Agreement and Power of Attorney for
not less than six years, and we will maintain, at our respective branch offices,
any other documents disclosing the basis upon which the determination of
suitability was reached for each such subscriber.
6. Promptly after each closing, you shall pay to us for each Unit
subscribed, accepted, and paid for through our efforts, a commission of ___% of
the Net Asset Value of each such Unit as of the closing as of which the Unit is
issued. Your determination of the amount payable to us, if any, shall be
conclusive. In addition, if we are legally qualified or permitted to receive
additional compensation, as provided in Section __ of the Selling Agreement, you
agree to pay to us, as additional compensation, an amount equal to _____% of the
Net Asset Value as of the first day of each month of the outstanding Units sold
by us. Such additional compensation shall be in consideration of and is
contingent upon our agreement (which we hereby undertake to perform) to provide
additional services in connection with Units sold by us, including: (i)
inquiring of the General Partner from time to time, at the request of a Limited
Partner, as to the Net Asset Value of a Unit; (ii) inquiring of the General
Partner, at the request of a Limited Partner, as to the futures markets and the
activities of the Partnership; (iii) responding to questions of Limited Partners
from time to time with respect to monthly account statements, annual reports,
financial statements, and
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<PAGE>
annual tax information furnished periodically to Limited Partners; (iv)
providing advice to Limited Partners from time to time as to when and whether to
redeem Units; (v) assisting Limited Partners in the redemption of Units; and
(vi) providing such other services as Limited Partners from time to time may
reasonably request. We understand and agree that no portion of such additional
compensation may be paid to our employees unless such employees meet the
qualifications set forth in Section __ of the Selling Agreement. Acceptance of
compensation hereunder shall constitute a representation by us that we have
complied with all of the provisions of this Agreement, and that we shall comply
with the provisions of this Paragraph 6 so long as we shall continue to receive
any additional compensation hereunder as specified in this Paragraph 6. We
shall not be entitled to a commission in any case in which it is determined by
you or the General Partner that the solicitation by us was made in violation of
the securities laws of any jurisdiction. It is understood that any compensation
payable to us hereunder is payable solely from your funds, and neither the
Partnership, the General Partner, the Trading Advisor, the Commodity Broker, any
subscriber, nor any Limited Partner shall be liable or responsible therefor.
7. This Agreement shall terminate upon the termination of the offering
pursuant to the Selling Agreement and may be terminated by either party upon ten
(10) days' prior written notice to the other. Upon termination of this
Agreement, all authorizations, rights and obligations hereunder shall cease,
except (a) the indemnities set forth in Paragraph 9 hereof, (b) the obligations
to settle accounts hereunder, (c) our obligations under Paragraph 8 hereof, and
(d) your agreement to provide additional compensation and our obligations in
connection therewith set forth in Paragraph 6 hereof.
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<PAGE>
8. We authorize you to deduct from any compensation that we may receive
under Paragraph 6 all transfer taxes, if any, paid by you for our account with
respect to sales of Units made through our efforts. We agree to pay our
proportionate share of any amount asserted against and discharged by you and the
other Additional Sellers, or any of them, based on the claim that you and the
Additional Sellers constitute an association, unincorporated business, or other
separate entity, including any expense incurred in defending against such claim.
9. (a) We agree to indemnify, hold harmless, and defend you, the General
Partner, the Trading Advisor, the Commodity Broker, and the Partnership and
their affiliates (as defined in Section 14(c) of the Limited Partnership
Agreement) against any loss, claim, damage, liability, cost, and expense, joint
or several (including attorneys' and accountants' fees and expenses reasonably
incurred in investigating or defending any demands, claims, or lawsuits), to
which you or any indemnified party may become subject under the 1933 Act, the
1934 Act, the CEAct, the securities law of any jurisdiction, or otherwise
(including in connection with the settlement of claims approved in advance by us
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense arises out of, or is based upon a breach by us of any representation,
warranty, or agreement in this Agreement, or the failure by us to perform any
covenant made by us herein. The indemnity agreement in this subparagraph (a)
shall be in addition to any liability that we may otherwise have and will
extend, upon the same terms and conditions, to each person, if any, who controls
you, the General Partner, the Trading Advisor, the Commodity Broker, or the
Partnership within the meaning of the 1933 Act.
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<PAGE>
(b) Promptly after receipt by an indemnified party under subparagraph (a)
above of notice of the commencement of any action, claim, or proceeding to which
either of such subparagraphs may apply, the indemnified party shall notify the
indemnifying party in writing of the commencement thereof if a claim in respect
thereof is to be made against the indemnifying party under such subparagraph;
but the omission so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which the indemnifying party may have to
the indemnified party otherwise than under such subparagraph, except where such
omission has materially prejudiced the indemnifying party. In case any action,
claim, or proceeding is brought against an indemnified party and the indemnified
party notifies the indemnifying party of the commencement thereof as provided
above, the indemnifying party shall be entitled to participate therein and, to
the extent that the indemnifying party desires, to assume the defense thereof
with counsel selected by the indemnifying party and approved by the indemnified
party, such approval not to be unreasonably withheld. After notice from the
indemnifying party to the indemnified party of the indemnifying party's election
so to assume the defense thereof as provided above, the indemnifying party shall
not be liable to the indemnified party under subparagraph (a) for any legal and
other expenses subsequently incurred by the indemnified party in connection with
the defense thereof, other than reasonable costs of investigation.
(c) Notwithstanding subparagraph (b), if, in any action, claim, or
proceeding as to which indemnification is or may be available under subparagraph
(a) above, an indemnified party reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified party which are
inconsistent with the defenses available to the indemnifying
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<PAGE>
party, the indemnified party may retain its own counsel in connection with such
action, claim, or proceeding, and shall be indemnified by the indemnifying party
for any legal and other expenses reasonably incurred in connection with
investigating or defending such action, claim, or proceeding.
(d) In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified parties in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent or
if there is a final judgment for the plaintiff in any such action, claim, or
proceeding, the indemnifying party shall indemnify, defend, and hold harmless an
indemnified party as provided in subparagraph (a) above.
10. We agree that under no circumstances shall we engage in any activities
hereunder in any jurisdiction unless (a) the Units have been registered or
qualified for sale under the securities laws thereof, or (b) we may lawfully so
engage in such activities therein.
11. We acknowledge receipt of copies of the Selling Agreement,
Registration Statement, and the Prospectus and confirm that in executing this
Agreement we have relied thereon and upon no other representations whatsoever,
either written or oral. We hereby confirm (a) that we have examined the Selling
Agreement and the Registration Statement, as amended to date, and we are
familiar with the terms of the Units and other terms of the offering, (b) that
the information, if any, relating to us which has been furnished by us
-11-
<PAGE>
or on our behalf expressly for use in connection with the Registration
Statement, the Prospectus, and any Selling Literature does not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus and any Selling Literature, in light of the circumstances under which
such statements were made) not misleading, (c) that we are willing to accept the
responsibilities of an Additional Seller under the 1933 Act, and (d) that we are
willing to proceed with the offering of Units in the manner contemplated.
Further, we understand that you may approve of or object to any further
amendments to the Registration Statement, amendments or supplements to the
Prospectus and any Selling Literature, or the filing of one or more additional
registration statements and amendments thereto, without our consent or approval.
With respect to the Selling Agreement, we understand that you may in your
discretion exercise any right of cancellation or termination and consent to such
other changes in the Selling Agreement as you may approve without our consent or
approval. You agree that you will cause a copy of any such amendment to the
Registration Statement, any amendment or supplement to the Prospectus or any
Selling Literature, or any additional registration statement and any amendment
thereto, to be furnished to us and will notify us of any material change in the
Selling Agreement.
12. We agree that you shall be under no liability (except for your own
lack of good faith and for obligations expressly assumed by you hereunder) to us
in respect of any matters connected herewith or action taken by you pursuant
hereto for, or in respect of, the form of or the statements contained in the
Registration Statement, the Prospectus, any Selling Literature, any additional
registration statement, or any amendment or supplement to any of the foregoing
documents; the qualification of the Units for sale under the laws of any
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<PAGE>
jurisdiction; or any matter in connection with any of the foregoing; provided,
however, that nothing in this Paragraph 12 shall be deemed to relieve you from
any liability imposed by the 1933 Act.
13. Nothing contained herein shall constitute us as partners with you or
with other Additional Sellers, and the obligations of ourselves and of all other
Additional Sellers are several and not joint.
14. Any notice from you to us at the address set forth below shall be
deemed to have been duly given if mailed, telexed, telegraphed, telecopied, or
telephoned and subsequently confirmed in writing to us.
15. This Agreement shall be construed in accordance with the internal laws
of the State of New York, without regard to principles of conflicts of laws.
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<PAGE>
Your acceptance of this Agreement and approval hereof shall be indicated
below, whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
_______________________________________
Print or Type Name of Additional Seller
By:____________________________________
(Signature of Authorized Signatory)
Name:_____________________________
Title:____________________________
Address:
_______________________________________
_______________________________________
Attention:_____________________________
Telephone No.:_________________________
Telex No.:_____________________________
Telecopier No.:________________________
Type of Organization (Corporation,
Partnership or Other Entity):___________
________________________________________
State or Other Jurisdiction Where
Organized:__________________________
Accepted as of ________, 199_:
Dean Witter Reynolds Inc.
By:_____________________________
(Signature of Authorized Officer)
Name:___________________________
Title:__________________________
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<PAGE>
EXHIBIT 3.02
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
The undersigned, in order to form a limited partnership under and pursuant to
the provisions of the Delaware Revised Uniform Limited Partnership Act, hereby
certifies as follows:
FIRST. NAME OF LIMITED PARTNERSHIP. The name of the
limited partnership is Morgan Stanley Tangible Asset Fund L.P.
(the "Partnership").
SECOND. REGISTERED OFFICE AND AGENT. The address of the
Partnership's registered office in the State of Delaware is c/o
The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Partnership's
registered agent is The Corporation Trust Company.
THIRD. GENERAL PARTNER. The name and mailing address of
the sole general partner of the Partnership is Demeter Management
Corporation, Two World Trade Center, 62nd Floor, New York, New
York 10048.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Limited Partnership on July 31, 1997.
DEMETER MANAGEMENT CORPORATION,
General Partner
By: /s/ Mark J. Hawley
-----------------------
Mark J. Hawley
President
<PAGE>
EXHIBIT 5.01
August 15, 1997
Dean Witter Reynolds Inc.
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Re: MORGAN STANLEY TANGIBLE ASSET FUND L.P.
Ladies and Gentlemen:
We have acted as your counsel in connection with the organization of
Morgan Stanley Tangible Asset Fund L.P., a Delaware limited partnership (the
"Partnership"), and the preparation and filing with the Securities and Exchange
Commission of a Registration Statement on Form S-1 (the "Registration
Statement") relating to the registration under the Securities Act of 1933, as
amended, of 5,000,000 units of limited partnership interest of the Partnership
("Units"). In such connection, we have assisted in the preparation of the
Limited Partnership Agreement of the Partnership and in the preparation and
filing with the Secretary of State of the State of Delaware of the Certificate
of Limited Partnership of the Partnership. We have also examined such other
documents, records, and applicable law as we have deemed necessary or
appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that upon (1) the sale
of the Units described in the Registration Statement in the manner and on the
terms and conditions set forth therein, and (2) the identification of the
purchasers of Units as limited partners on the books and records of the
Partnership, the Units will be validly issued, fully-paid, and non-assessable.
We are also of the opinion that a limited partner's liability for the losses and
obligations of the Partnership solely by reason of such person being a limited
partner of the Partnership will not exceed such limited partner's unredeemed
capital contribution,
<PAGE>
Dean Witter Reynolds Inc.
Demeter Management Corporation - 2 - August 15, 1997
undistributed profits, if any, and any distributions and amounts received upon
redemption of Units with interest thereon.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
CADWALADER, WICKERSHAM & TAFT
<PAGE>
EXHIBIT 8.01
August 15, 1997
Dean Witter Reynolds Inc.
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Re: MORGAN STANLEY TANGIBLE ASSET FUND L.P.
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-1 (the "Registration Statement") relating to the registration under
the Securities Act of 1933, as amended, of 5,000,000 units of limited
partnership interest ("Units") of Morgan Stanley Tangible Asset Fund L.P., a
Delaware limited partnership (the "Partnership"). We have also examined such
documents, records, and applicable law as we have deemed necessary for purposes
of rendering this opinion.
Based upon the foregoing, we hereby confirm our opinion under the
heading "Material Federal Income Tax Considerations" in the Prospectus
constituting a part of the Registration Statement (the "Prospectus") that the
Partnership will be taxed as a partnership for federal income tax purposes. We
also confirm our opinion that the descriptions set forth under the heading
"Material Federal Income Tax Considerations" in the Prospectus correctly
describe the material federal income tax consequences to United States taxpayers
who are individuals of acquiring, owning, and disposing of Units.
<PAGE>
Dean Witter Reynolds Inc.
Demeter Management Corporation - 2 - August 15, 1997
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the references made to us in the Prospectus under
the captions "Summary of the Prospectus--Tax Considerations," "Risk Factors --
Taxation and Regulatory Risks," "Purchases by Employee Benefit Plans -- ERISA
Considerations," "Material Federal Income Tax Considerations," "State and Local
Income Tax Aspects," and "Legal Matters."
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
CADWALADER, WICKERSHAM & TAFT
<PAGE>
EXHIBIT 10.01
COMMODITY FUTURES CUSTOMER AGREEMENT
This Commodity Futures Customer Agreement ("Agreement"), dated as of
___________, 1997, between Morgan Stanley & Co. Incorporated ("Morgan Stanley")
and Morgan Stanley Tangible Asset Fund L.P. (the "Customer"), and acknowledged
and agreed to by Dean Witter Reynolds Inc. ("DWR"), shall govern the purchase
and sale by Morgan Stanley of commodity futures contracts and options thereon
(collectively, "Contracts") for the account and risk of Customer through one or
more accounts carried by Morgan Stanley on behalf and in the name of Customer
(collectively, the "Account").
1. APPLICABLE LAW. The Account and all transactions and agreements
in respect of the Account shall be subject to all applicable Federal, state,
exchange, clearinghouse and self-regulatory agency rules, regulations and
interpretations and custom and usage of the trade. All such rules, regulations,
interpretations, custom and usage are hereinafter collectively referred to as
"Applicable Law."
2. CUSTOMER'S REPRESENTATIONS AND WARRANTIES. Customer represents
and warrants that: (a) Customer has full right, power and authority to enter
into this Agreement, and the person executing this Agreement on behalf of
Customer is authorized to do so; (b) this Agreement is binding on Customer and
enforceable against Customer in accordance with its terms; (c) Customer may
lawfully establish and open the Account for the purpose of effecting purchases
and sales of Contracts through Morgan Stanley; (d) transactions entered into
pursuant to this Agreement will not violate any applicable law (including any
Applicable Law) to which Customer is subject or any agreement to which Customer
is subject or a party; and (e) all information provided by Customer in the
Account Application preceding this Agreement (which Application and the
information contained therein hereby is incorporated into this Agreement) is
true and correct and Customer shall immediately (and in no event later than
within one business day) notify Morgan Stanley of any change in such
information.
3. PAYMENT & INTEREST OBLIGATIONS.
(a) BROKERAGE FEE. Customer will pay to Morgan Stanley upon demand
(a) a monthly flat-rate fee of 1/12 of 3.65% of Customer's Net Assets (an
3.65% annual rate) as of the first day of each month; (b) any tax imposed
on such transactions by any competent taxing authority; (c) the amount of
any trading losses in the Account; (d) any debit balance or deficiency in
the Account; (e) interest on any debit balances or deficiencies in the
Account, at the overnight rate customarily charged by Morgan Stanley,
together with costs and reasonable attorneys' fees incurred in collecting
any such debit balance or deficiency; and (f) any other amounts owed by
Customer to Morgan Stanley with respect to the Account or any transactions
therein. Morgan Stanley will pay, from the brokerage fees received by it,
all costs of executing trades by Customer, including floor brokerage fees,
exchange fees, clearinghouse fees, NFA fees, "give up" or transfer fees,
any costs associated with taking delivery on Contracts.
(b) PAYMENT TO DWR. In connection with the sale to investors by DWR
of units of limited partnership interest ("Units") in Customer and the
obligation of DWR and its employees to provide certain continuing services
to those investors, Morgan Stanley shall pay to DWR each month, from the
brokerage fee that Morgan Stanley receives from Customer, an amount equal
to 1/4 of 1% (a 3.0% annual rate) of Customer's Net Assets as of the first
day of each month.
<PAGE>
(c) PAYMENT OF INTEREST. Morgan Stanley will credit Customer at
each month-end with interest income as if 80% of Customer's average daily
Net Assets for the month were invested at a rate based on U. S. Treasury
Bills. All of such funds will be available for margin for Customer's
trading. For the purpose of such interest payments, Net Assets do not
include monies due to Customer on or with respect to Contracts but not
actually received by it from banks, brokers or dealers. Customer's funds
will either be invested together with other Customer segregated funds or
will be held in non-interest-bearing bank accounts. In either case,
Customer will be credited with interest at the most recent 3-month U.S.
Treasury Bill auction rate as of the first closing for the sale of Units
and as of every 13 weeks thereafter (as if 80% of Customer's assets were
invested in U.S. Treasury Bills at such rate); Morgan Stanley will retain
and pay to DWR any interest earned in excess of the interest paid to
Customer. To the extent that the assets of Customer are held in
non-interest-bearing bank accounts, Morgan Stanley, DWR or their affiliates
will benefit from compensating balance treatment in connection with Morgan
Stanley's designation of a bank or banks in which Customer's assets are
deposited, I.E., Morgan Stanley, DWR or their affiliates will receive
favorable loan rates from such bank or banks by reason of such deposits.
To the extent that such benefits to Morgan Stanley, DWR or their affiliates
exceed the interest Morgan Stanley is obligated to credit to Customer, they
will not be shared with Customer, but will be retained by Morgan Stanley,
DWR or their affiliates and shared among them as they shall agree from time
to time. Ownership of the right by Customer to receive interest on
Customer's assets pursuant to this paragraph shall be reflected and
maintained, and may be transferred only, on the books and records of Morgan
Stanley. Any purported transfer of such ownership shall not be effective
or recognized until such transfer shall have been recorded on the books and
records of Morgan Stanley.
(d) CAPS ON BROKERAGE AND INTEREST. Notwithstanding the foregoing,
the aggregate of (i) brokerage fees payable by Customer, and (ii) the net
excess interest and compensating balance benefits to Morgan Stanley, DWR or
their affiliates (after crediting Customer with interest as described
above) cannot exceed 14% annually of Customer's average month-end Net
Assets during each calendar year; provided, however, that Morgan Stanley
will not be responsible for monitoring such limitation.
(e) In connection with DWR's receipt of any fees, interest or other
payments as required above, DWR represents and warrants that such payments
will not violate any Applicable Law to which DWR is subject or any
agreement to which DWR is subject or a party. Morgan Stanley will not be
responsible for any errors or omissions in the calculation of the above
referenced fees, interest and other payment resulting from inaccurate
information or data provided to it by Customer, DWR, or any of their
respective officers, employees or agents for use in making such
calculations.
(f) DEFINITION OF CUSTOMER'S "NET ASSETS." As used in this Section
3, Customer's "Net Assets" shall be determined in accordance with Section
7(d)(1) of Customer's Limited Partnership Agreement.
4. CUSTOMER'S EVENTS OF DEFAULT; MORGAN STANLEY'S REMEDIES.
(a) EVENTS OF DEFAULT. As used herein, each of the following shall
be deemed an "Event of Default": (i) the commencement of a case under any
Federal or state bankruptcy,
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insolvency or reorganization law, or the filing of a petition for the
appointment of a receiver by or against Customer, an assignment made by
Customer for the benefit of creditors, an admission in writing by Customer
that it is insolvent or is unable to pay its debts when they mature, or the
suspension by Customer of its usual business or any material portion
thereof; (ii) the issuance of any warrant or order of attachment against
the Account or the levy of a judgment against the Account; (iii) the
failure by Customer to deposit or maintain margins, to pay required
premiums, or to make payments required by Section 3 hereof; and (iv) the
failure by Customer to perform, in any material respect, its obligations
hereunder.
(b) REMEDIES. Upon the occurrence of an Event of Default or in the
event Morgan Stanley, in its sole and absolute discretion, considers it
necessary for its protection, Morgan Stanley shall have the right, in
addition to any other remedy available to Morgan Stanley at law or in
equity, and in addition to any other action Morgan Stanley may deem
appropriate under the circumstances, to liquidate any or all open Contracts
held in or for the Account, sell any or all of the securities or other
property of Customer held by Morgan Stanley, and to apply the proceeds
thereof to any amounts owed by Customer to Morgan Stanley, borrow or buy
any options, securities, Contracts or other property for the Account, and
cancel any unfilled orders for the purchase or sale of Contracts for the
Account, or take such other or further actions which Morgan Stanley, in its
reasonable discretion, deems necessary or appropriate for its protection,
all without demand for margin and without notice or advertisement. Any
such action may be made at the discretion of Morgan Stanley in any
commercially reasonable manner. In the event Morgan Stanley's position
would not be jeopardized thereby, Morgan Stanley will make reasonable
efforts under the circumstances to notify Customer prior to taking any such
action. A prior demand or margin call of any kind from Morgan Stanley or
prior notice from Morgan Stanley shall not be considered a waiver of Morgan
Stanley's right to take any action without notice or demand. In the event
Morgan Stanley exercises any remedies available to it under this Agreement,
Customer shall reimburse, compensate and indemnify Morgan Stanley for any
and all costs, losses, penalties, fines, taxes and damages that Morgan
Stanley may incur, including reasonable attorneys' fees incurred in
connection with the exercise of its remedies and the recovery of any such
costs, losses, penalties, fines, taxes and damages.
5. STANDARD OF LIABILITY AND INDEMNITY.
(a) STANDARD OF LIABILITY. Morgan Stanley and its affiliates (as
defined below) shall not be liable to Customer, the limited partners of
Customer ("Limited Partners"), or any of its or their respective successors
or assigns, for any act, omission, conduct, or activity undertaken by
Morgan Stanley on behalf of Customer which Morgan Stanley determines, in
good faith, to be in the best interests of Customer, unless such act,
omission, conduct, or activity by Morgan Stanley or its affiliates
constituted misconduct or negligence. Without limiting the foregoing,
Morgan Stanley shall have no responsibility or liability to Customer
hereunder (i) in connection with the performance or non-performance by an
contract market, clearing house, clearing firm or other third party
(including floor brokers and banks) to Morgan Stanley of its obligations in
respect of any Contract or other property of Customer; (ii) as a result of
any prediction, recommendation or advice made or given by a representative
of Morgan Stanley whether or not made or given at the request of Customer;
(iii) as a result of Morgan Stanley's reliance on any instructions, notices
and communications that it believes to be that of an individual authorized
to act on behalf of Customer; (iv) as a result of any delay in the
performance or non-performance of any of Morgan Stanley's obligations
hereunder directly or indirectly caused by the occurrence of any
contingency beyond the control of Morgan
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Stanley including, but not limited to, the unscheduled closure of an
exchange or contract market or delays in the transmission of orders due to
breakdowns or failures of transmission or communication facilities,
execution, and/or trading facilities or other systems (including, without
limitation, GLOBEX, ACCESS, or other electronic trading systems, facilities
or services), it being understood that Morgan Stanley shall be excused from
performance of its obligations hereunder for such period of time as is
reasonably necessary after such occurrence to remedy the effects therefrom;
(v) as a result of any action taken by Morgan Stanley or its floor brokers
to comply with Applicable Law; or (vi) for any acts or omissions of those
neither employed nor supervised by Morgan Stanley. In no event will Morgan
Stanley be liable to Customer for consequential, incidental or special
damages hereunder.
(b) INDEMNIFICATION BY CUSTOMER. Customer shall indemnify, defend
and hold harmless Morgan Stanley and its affiliates from and against any
loss, liability, damage, cost or expense (including attorneys' and
accountants' fees and expenses incurred in the defense of any demands,
claims, or lawsuits) actually and reasonably incurred arising from any act,
omission, conduct, or activity undertaken by Morgan Stanley on behalf of
Customer, including, without limitation, any demands, claims or lawsuits
initiated by a Limited Partner (or assignee thereof); PROVIDED that (i)
Morgan Stanley has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in
the best interests of Customer, and (ii) the act, omission, conduct or
activity that was the basis for such loss, liability, damage, cost or
expense was not the result of misconduct or negligence. Notwithstanding
the foregoing, no indemnification of Morgan Stanley or its affiliates by
Customer shall be permitted for 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 particular
indemnitee, or (ii) such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction as to the particular
indemnitee, or (iii) a court of competent jurisdiction approves a
settlement of the claims against the particular indemnitee and finds that
indemnification of the settlement and related costs should be made,
PROVIDED, with regard to such court approval, the indemnitee must apprise
the court of the position of the SEC and the positions of the respective
securities administrators of Massachusetts, Missouri, Tennessee and/or
those other states and jurisdictions in which the plaintiffs claim that
they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for
indemnification. Furthermore, in any action or proceeding brought by a
Limited Partner in the right of Customer to which Morgan Stanley or any
affiliate thereof is a party defendant, any such person shall be
indemnified only to the extent and subject to the conditions specified in
the Delaware Revised Uniform Limited Partnership Act, as amended, and this
Section 5. The Customer shall make advances to Morgan Stanley or its
affiliates hereunder only if: (i) the demand, claim, lawsuit or legal
action relates to the performance of duties or services by such persons to
Customer; (ii) such demand, claim, lawsuit or legal action is not initiated
by a Limited Partner; and (iii) such advances are repaid, with interest at
the legal rate under Delaware law, if the person receiving such advance is
ultimately found not to be entitled to indemnification hereunder.
(c) INDEMNIFICATION BY MORGAN STANLEY. Morgan Stanley shall
indemnify, defend and hold harmless Customer and its successors or assigns
from and against any losses, liabilities, damages, costs and expenses
(including in connection with the defense or settlement of claims; PROVIDED
Morgan Stanley has approved such settlement) incurred as a direct result of
the activities of Morgan Stanley or its affiliates, PROVIDED that the act,
omission, conduct, or
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activity giving rise to the claim for indemnification was the result of bad
faith, misconduct or negligence.
(d) LIMITATION ON INDEMNITIES. The indemnities provided in this
Section 5 by Customer to Morgan Stanley and its affiliates shall be
inapplicable in the event of any losses, liabilities, damages, costs or
expenses arising out of, or based upon, any material breach of any
agreement of Morgan Stanley contained in this Agreement to the extent
caused by such event. Likewise, the indemnities provided in this Section 5
by Morgan Stanley to Customer and any of its successors and assigns shall
be inapplicable in the event of any losses, liabilities, damages, costs or
expenses arising out of, or based upon, any material breach of any
representation, warranty or agreement of Customer contained in this
Agreement to the extent caused by such event.
(e) DEFINITION OF "AFFILIATE." As used in this Section 5, the term
"affiliate" of Morgan Stanley shall mean: (i) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly owning, controlling, or holding with power to vote 10% or more
of the outstanding voting securities of Morgan Stanley; (ii) any
partnership, corporation, association, or other legal entity 10% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by Morgan Stanley; (iii) any natural
person, partnership, corporation, association, or other legal entity
directly or indirectly controlling, controlled by, or under common control
with, Morgan Stanley; or (iv) any officer or director of Morgan Stanley.
Notwithstanding the foregoing, "affiliates" for purposes of this Section 5
shall include only those persons acting on behalf of Morgan Stanley and
performing services for Customer within the scope of the authority of
Morgan Stanley, as set forth in this Agreement.
6. GENERAL AGREEMENTS. The parties agree that:
(a) MORGAN STANLEY'S RESPONSIBILITY. Morgan Stanley is not acting
as a fiduciary, foundation manager, commodity pool operator, commodity
trading advisor or investment adviser in respect of any Account opened by
Customer. Morgan Stanley shall have no responsibility hereunder for
compliance with any law or regulation governing the conduct of fiduciaries,
foundation managers, commodity pool operators, commodity trading advisors
or investment advisers.
(b) ADVICE. All advice communicated by Morgan Stanley with respect
to any Account opened by Customer hereunder is incidental to the conduct of
Morgan Stanley's business as a futures commission merchant and such advice
will not serve as the primary basis for any decision made by or on behalf
of Customer in respect of the Account, regardless of whether Customer
relies on the advice of Morgan Stanley in making any such decision.
Customer acknowledges that Morgan Stanley and its managing directors,
officers, employees and affiliates may take or hold positions in, or advise
other Customers concerning, contracts that are the subject of advice from
Morgan Stanley to Customer. The positions and advice of Morgan Stanley and
its managing directors, officers, employees and affiliates may be
inconsistent with or contrary to positions of, and the advice given by,
Morgan Stanley to Customer.
(c) RECORDING. Morgan Stanley, in its sole and absolute discretion,
may record, on tape or otherwise, any telephone conversation between Morgan
Stanley and Customer involving
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their respective officers, agents and employees, and Customer hereby agrees
and consents thereto.
(d) ACCEPTANCE OF ORDERS; POSITION LIMITS.
(i) Morgan Stanley shall have the right to limit the size of open
positions (net or gross) of Customer with respect to the Account at any
time and to refuse acceptance of orders to establish new positions, whether
such refusal or limitation is required by, or based on position limits
imposed under, Applicable Law. Morgan Stanley shall immediately notify
Customer of its rejection of any order. Unless specified by Customer,
Morgan Stanley may designate the exchange or other markets (including,
without limitation, GLOBEX or ACCESS) on which it will attempt to execute
orders.
(ii) Customer shall file or cause to be filed all applications or
reports required under Applicable Law with the CFTC or the relevant
contract market or clearinghouse, and shall provide Morgan Stanley with a
copy of such applications or reports and such other information as Morgan
Stanley may reasonably request in connection therewith.
(e) ORIGINAL AND VARIATION MARGIN; PREMIUMS; OTHER CONTRACT OBLIGATIONS.
Customer shall make, or cause to be made, all applicable original margin,
intra-day margin and premium payments, and perform all other obligations
attendant to transactions or positions in such Contracts, as may be required by
Applicable Law or by Morgan Stanley. Requests for margin deposits and/or
premium payments may, at Morgan Stanley's election, be communicated to Customer
orally, telephonically or in writing. Customer margin deposits and/or premium
payments shall be made by wire transfer to Morgan Stanley's Customer Segregated
Account and shall be in U.S. dollars unless Morgan Stanley specifically requests
otherwise.
(f) SECURITY INTEREST AND RIGHTS RESPECTING COLLATERAL. Except to the
extent proscribed by Applicable Law not subject to waiver, all Contracts, cash,
securities, and/or any other property of Customer whatsoever (collectively, the
"Collateral") at any time held by Morgan Stanley or its affiliates, or carried
by others for the Account, hereby are pledged to Morgan Stanley and shall be
subject to a general lien and security interest in Morgan Stanley's favor to
secure any indebtedness or other amounts, obligations and/or liabilities at any
time owing from Customer to Morgan Stanley (collectively, the "Customer's
Liabilities"). Customer hereby grants Morgan Stanley the right to borrow,
pledge, repledge, hypothecate, rehypothecate, loan or invest any of the
Collateral, including utilizing the Collateral to purchase United States
Government Treasury obligations pursuant to repurchase agreements or reverse
repurchase agreements with any party, in each case without notice to Customer
and without any obligation to pay or to account to Customer for any interest,
income or benefit that may be derived therefrom, except to the extent set forth
in Section 3 hereof. The rights of Morgan Stanley set forth above shall be
qualified by any applicable requirements for segregation of Customers' property
under Applicable Law.
(g) REPORTS AND OBJECTIONS. All confirmations, purchase and sale
notices, correction notices and account statements (collectively, "Statements")
shall be submitted to Customer and shall be conclusive and binding on Customer
unless Customer notifies Morgan Stanley of any objection thereto prior to the
opening of trading on the contract market on which
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such transaction occurred on the business day following the day on which
Customer receives such Statement; PROVIDED that, with respect to monthly
Statements, Customer may notify Morgan Stanley of any objection thereto within
five business days after receipt of such monthly Statement, provided the
objection could not have been raised at the time any prior Statement was
received by Customer as provided for above. Any such notice of objection, if
given orally to Morgan Stanley, shall immediately (and no later than within one
business day) be confirmed in writing by Customer.
(h) DELIVERY PROCEDURES; OPTIONS ALLOCATION PROCEDURE.
(i) Customer will provide Morgan Stanley with instructions either
to liquidate Contracts previously established by Customer, make or take
delivery under any such Contracts, or exercise options entered into by
Customer, within such time limits as may be specified by Morgan Stanley.
Morgan Stanley shall have no responsibility to take any action on behalf of
Customer or positions in the Account unless and until Morgan Stanley
receives oral or written instructions reasonably acceptable to Morgan
Stanley indicating the action Morgan Stanley is to take. Funds sufficient
to take delivery pursuant to such Contract or deliverable grade commodities
to make delivery pursuant to such Contract must be delivered to Morgan
Stanley at such time as Morgan Stanley may require in connection with any
delivery.
(ii) Short option Contracts may be subject to exercise at any time.
Exercise notices received by Morgan Stanley from the applicable contract
market with respect to option Contracts sold by Customer may be allocated
to Customer pursuant to a random allocation procedure, and Customer shall
be bound by any such allocation of exercise notices. In the event of any
allocation to Customer, unless Morgan Stanley has previously received
instructions from Customer, Morgan Stanley's sole responsibility shall be
to use its best efforts to notify Customer of such allocation.
(iii) If Customer fails to comply with any of the foregoing
obligations, Morgan Stanley may, in its sole and absolute discretion,
liquidate any open positions, make or receive delivery of any commodities
or instruments, or exercise or allow the expiration of any options, in such
manner and on such terms as Morgan Stanley, in its sole and absolute
discretion, deems necessary or appropriate, and Customer shall indemnify
and hold Morgan Stanley harmless as a result of any action taken or not
taken by Morgan Stanley in connection therewith or pursuant to Customer's
instructions.
(i) FINANCIAL AND OTHER INFORMATION. Customer shall provide to Morgan
Stanley such financial information regarding Customer as Morgan Stanley may from
time to time reasonably request. Customer shall notify Morgan Stanley
immediately (and no later than within one business day) if the financial
condition of Customer changes materially and adversely from that shown in the
most recent financial information theretofore provided to Morgan Stanley. An
investigation may be conducted pertaining to Customer's credit standing and
business.
(j) CURRENCY EXCHANGE RISK. Customer shall bear all risk and cost in
respect of the conversion of currencies incident to transactions effected on
behalf of Customer pursuant hereto.
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7. TERMINATION. This Agreement may be terminated at any time by
Customer or Morgan Stanley upon ten (10) days' prior written notice to the
other. In the event of such notice, Customer shall either close out open
positions in the Account or arrange for such open positions to be transferred to
another futures commission merchant. Upon satisfaction by Customer of all of
Customer's Liabilities, Morgan Stanley shall transfer to another futures
commission merchant all Contracts, if any, then held for the Account, and shall
transfer to Customer or to another futures commission merchant, as Customer may
instruct, all cash, securities and other property held in the Account, whereupon
this Agreement shall terminate.
8. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement is, or at any
time becomes, inconsistent with any present or future law, rule or
regulation of any exchange or other market, sovereign government or
regulatory body thereof, and if any of these authorities have jurisdiction
over the subject matter of this Agreement, the inconsistent provision shall
be deemed superseded or modified to conform with such law, rule or
regulation but in all other respects, this Agreement shall continue and
remain in full force and effect.
(b) BINDING EFFECT. This Agreement shall be binding on and inure to
the benefit of the parties and their successors. Morgan Stanley shall have
the right to transfer or assign this Agreement (and thereby the Account) to
any successor entity or to another properly registered futures commission
merchant only upon obtaining the prior consent of Customer.
(c) ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties and supersedes any prior agreements between the parties
as to the subject matter hereof. No provision of this Agreement shall in
any respect be waived, altered, modified, or amended unless such waiver,
alteration, modification, or amendment is signed by the party against whom
such waiver, alteration, modification, or amendment is to be enforced.
(d) CURRENCY DENOMINATION. Unless another currency is designated in
the confirmations reporting transactions entered into by Customer, all
margin deposits in connection with such transactions, and a debit or credit
in the Account, shall be stated in United States dollars, and margin
requirements, debits or credits expressed in another currency shall be
converted into United States dollars at a rate of exchange determined by
Morgan Stanley, in its sole and absolute discretion, on the basis of the
then prevailing money market rates of exchange for such foreign currency.
(e) INSTRUCTIONS, NOTICES OR COMMUNICATIONS. Except as specifically
otherwise provided in this Agreement, all instructions, notices or other
communications may be oral or written. All oral instructions, unless
custom and usage of trade dictate otherwise, shall be promptly confirmed in
writing. All written instructions, notices or other communications shall
be addressed as follows:
(i) if to Morgan Stanley:
Morgan Stanley & Co. Incorporated
One Pierrepont Plaza, 8th Floor
Brooklyn, New York 11201
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Attention: Commodity Operations Manager
(ii) if to Customer, at the address as indicated on the Commodity
Account Application.
(f) RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies arising under
this Agreement as amended and modified from time to time are cumulative and not
exclusive of any rights or remedies which may be available at law or otherwise.
(g) NO WAIVER. No failure on the part of Morgan Stanley to exercise, and
no delay in exercising, any contractual right will operate as a waiver thereof,
nor will any single or partial exercise by Morgan Stanley of any right preclude
any other or future exercise thereof or the exercise of any other partial right.
(h) GOVERNING LAW. THE INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT
AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CHOICE OF LAW.
(i) CONSENT TO JURISDICTION. ANY LITIGATION BETWEEN MORGAN STANLEY AND
CUSTOMER RELATING TO THIS AGREEMENT OR TRANSACTIONS HEREUNDER SHALL TAKE PLACE
IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.
CUSTOMER CONSENTS TO THE SERVICE OF PROCESS BY THE MAILING TO CUSTOMER OF COPIES
OF SUCH COURT FILING BY CERTIFIED MAIL TO THE ADDRESS OF CUSTOMER AS IT APPEARS
ON THE BOOKS AND RECORDS OF MORGAN STANLEY, SUCH SERVICE TO BE EFFECTIVE TEN
DAYS AFTER MAILING. CUSTOMER HEREBY WAIVES IRREVOCABLY ANY IMMUNITY TO WHICH IT
MIGHT OTHERWISE BE ENTITLED IN ANY ARBITRATION, ACTION AT LAW, SUIT IN EQUITY OR
ANY OTHER PROCEEDING ARISING OUT OF OR BASED ON THIS AGREEMENT OR ANY
TRANSACTION IN CONNECTION HEREWITH.
(j) WAIVER OF JURY TRIAL. Customer hereby waives a trial by jury in
any action arising out of or relating to this Agreement or any transaction in
connection therewith.
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(k) AGREEMENT NON-EXCLUSIVE. Morgan Stanley shall be free to render
services of the nature to be rendered to Customer hereunder to other persons or
entities in addition to Customer, and the parties acknowledge that Morgan
Stanley may render such services to additional entities similar in nature to
Customer. It is expressly understood and agreed that this Agreement is
non-exclusive and that Customer has no obligation to execute any or all of its
trades for futures interests through Morgan Stanley. The parties acknowledge
that Customer may execute and clear trades for futures interests through such
other broker or brokers as Customer may direct from time to time. Customer's
utilization of one or more additional commodity brokers shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
Customer and Morgan Stanley.
(l) CUSTOMER ACKNOWLEDGMENTS.
(i) CUSTOMER HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED AND UNDERSTANDS
THE FOLLOWING DISCLOSURE STATEMENT PRESCRIBED BY THE CFTC AND FURNISHED
HEREWITH (PLEASE INITIAL):
/ / RISK DISCLOSURE STATEMENT
FOR FUTURES OPTIONS
(Appendix A to CFTC Rule 1.55(c) transcribed in full on
pages 1-3 of Booklet 2 -- Risk Disclosure Statements)
IF CUSTOMER HAS INDICATED ON THE COMMODITY FUTURES ACCOUNT APPLICATION THAT
ORDERS PLACED FOR THE ACCOUNT REPRESENT BONA FIDE HEDGING TRANSACTIONS, PLEASE
COMPLETE THE FOLLOWING. You should note that CFTC Regulation Section 190.06
permits you to specify whether, in the unlikely event of Morgan Stanley's
bankruptcy, you prefer the bankruptcy trustee to liquidate all positions in the
Account. Accordingly, Customer hereby elects as follows: (PLEASE INITIAL):
/ / LIQUIDATE / / NOT LIQUIDATE
IF NEITHER ALTERNATIVE IS INITIAL, CUSTOMER WILL BE DEEMED TO HAVE ELECTED
TO HAVE ALL POSITIONS LIQUIDATED. THIS ELECTION MAY BE CHANGED AT ANY TIME BY
WRITTEN NOTICE.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first indicated above.
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
By: Demeter Management Corporation, General
Partner
By:_______________________________________
Mark J. Hawley, President
MORGAN STANLEY & CO. INCORPORATED
By:_______________________________________
Name:
Title:
Acknowledged and Agreed
(as to Section 3(b), (c) and (d))
DEAN WITTER REYNOLDS INC.
By: __________________________
Mark J. Hawley
Executive Vice President
REMINDER: PLEASE BE SURE TO INITIAL THE APPROPRIATE BOXES IN SECTIONS 8(K) (I)
AND (II) ABOVE.
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EXHIBIT 10.02
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, made as of the day of ______, 1997, among
MORGAN STANLEY TANGIBLE ASSET FUND L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and MORGAN STANLEY COMMODITIES MANAGEMENT, INC., a Delaware
corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership's business and general purpose is to trade, buy,
sell, spread, or otherwise acquire, hold, or dispose of certain
commodity-related interests including but not limited to commodity futures
contracts (hereinafter referred to as "futures interests") and securities (such
as United States Treasury securities) approved by the Commodity Futures Trading
Commission (the "CFTC") for investment of customer funds, and to engage in all
activities incident thereto;
WHEREAS, the Trading Advisor has extensive experience trading in futures
interests and is willing to provide certain services and undertake certain
obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to act as trading
advisor for the Partnership and to make investment decisions with respect to
futures interests for the Partnership and the Trading Advisor desires so to act;
WHEREAS, the Partnership plans to offer units of Limited Partnership
Interest ("Units") to investors in a public offering under the Securities Act of
1933, as amended, (the "Securities Act"), pursuant to a Registration Statement
on Form S-1 (No. _________) (as amended from time to time, the "Registration
Statement") and a final Prospectus constituting a part thereof (as amended and
supplemented, the "Prospectus"); and
WHEREAS, the Partnership, the General Partner and the Trading Advisor wish
to enter into this Management Agreement which, among other things, sets forth
certain terms and conditions upon which the Trading Advisor will conduct the
Partnership's futures interests trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection
WITH THE OFFERING OF UNITS.
(a) The Trading Advisor agrees: (i) to make all disclosures regarding
itself, its principals and affiliates, its trading performance, its trading
systems, methods, and strategies (subject to the need to preserve the secrecy of
proprietary information concerning such systems, methods, and strategies), any
client accounts over which it has discretionary trading authority, and
otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus including any amendments or supplements thereto, or (y)
to comply with any applicable federal or state law or rule or regulation,
including those of the Securities and Exchange Commission (the "SEC"), the CFTC,
the National Futures Association (the "NFA"), the National Association of
Securities Dealers, Inc. (the "NASD")
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or any other regulatory body, exchange, or board; and (ii) otherwise to
cooperate with the Partnership, the General Partner, and Dean Witter Reynolds
Inc., the selling agent for the Partnership ("DWR") by providing information
regarding the Trading Advisor in connection with the preparation and filing of
the Registration Statement and Prospectus, including any pre- or post-effective
amendments or supplements thereto, with the SEC, CFTC, NFA, NASD, and with
appropriate governmental authorities as part of making application for
registration of the Units under the securities or Blue Sky laws of such
jurisdictions as the Partnership may deem appropriate.
(b) The General Partner, in its sole discretion and at any time may (i)
withdraw the SEC registration of the Units, or (ii) discontinue the offering of
Units.
(c) If, while Units continue to be offered and sold, the Trading Advisor
becomes aware of any untrue or misleading statement or omission regarding itself
or any of its principals or affiliates in the Registration Statement or
Prospectus, or of the occurrence of any event or change in circumstances which
would result in there being any untrue or misleading statement or omission in
the Registration Statement or Prospectus regarding itself or any of its
principals or affiliates, the Trading Advisor shall promptly notify the General
Partner and shall cooperate with it in the preparation of any necessary
amendments or supplements to the Registration Statement or Prospectus.
2. DUTIES OF THE TRADING ADVISOR.
(a) The Trading Advisor agrees to act as the trading advisor for the
Partnership and, as such, shall have sole authority and responsibility for
advising the investment and reinvestment of the assets of the Partnership in
futures interests on the terms and conditions and in accordance with the
restrictions and trading policies set forth in this Agreement, the Partnership's
Limited Partnership Agreement as from time to time in effect (the "Limited
Partnership Agreement"), and the Prospectus; PROVIDED, HOWEVER, that the General
Partner may override the instructions of the Trading Advisor to the extent
necessary (i) to comply with the trading policies of the Partnership described
in the Limited Partnership Agreement, (ii) to fund any distributions or
redemptions, or (iii) to pay the Partnership's expenses. The General Partner
agrees not to override any such instructions for the reasons specified in
clauses (ii) and (iii) of the preceding sentence unless the Trading Advisor
fails to comply with a request of the General Partner to make the necessary
amount of funds available to the Partnership within five days of such request.
(b) The Trading Advisor shall exercise its best judgment in determining
the trades in futures interests for the account of the Partnership in accordance
with the restrictions and trading policies of the Partnership and the Trading
Advisor's trading strategy as in effect on the date hereof, [WITH SUCH CHANGES
AND ADDITIONS TO SUCH TRADING STRATEGY AS THE TRADING ADVISOR, FROM TIME TO
TIME, INCORPORATES INTO ITS TRADING APPROACH FOR ACCOUNTS THE SIZE OF THE
PARTNERSHIP.]
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees and commissions arising from trading by the Trading Advisor shall
be for the account of the Partnership.
(d) Notwithstanding any provision of this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any errors committed
or caused by it
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in transmitting orders for the purchase or sale of futures interests for the
Partnership's account. The Trading Advisor's errors shall include, but not be
limited to, inputting improper trading signals or communicating incorrect orders
to any commodity broker for the Partnership. However, the Trading Advisor shall
not be responsible for errors committed or caused by any commodity broker for
the Partnership. The Trading Advisor shall have an affirmative obligation
promptly to notify the General Partner of its own errors, and the Trading
Advisor shall use its best efforts to identify and promptly notify the General
Partner of any order or trade which the Trading Advisor reasonably believes was
not executed in accordance with its instructions to any commodity broker for the
Partnership.
(e) The General Advisor on behalf of the Partnership shall deliver to the
Trading Advisor a trading authorization in the form annexed hereto as Exhibit A
appointing the Trading Advisor the Partnership's attorney-in-fact for such
purpose.
3. DESIGNATION OF ADDITIONAL TRADING ADVISORS; ADDITIONAL ASSETS.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets (as
defined in Section 6(c) hereof) as the General Partner shall determine in its
absolute discretion. The designation of an additional trading advisor or
advisors and the apportionment of Net Assets to any such trading advisor(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Advisor hereunder. In the event that additional trading
advisor(s) are so designated, the Trading Advisor shall thereafter receive
management and incentive fees based, respectively, on that portion of the Net
Assets managed by the Trading Advisor and that portion of the Net Profits
properly attributable to the trading done by the Trading Advisor.
(b) The Trading Advisor in its sole discretion may refuse to accept any
additional allocation of Partnership assets for management hereunder after the
final closing of the public offering pursuant to the Registration Statement.
4. TRADING ADVISOR INDEPENDENT.
For all purposes of this Agreement, the Trading Advisor shall be deemed to
be an independent contractor and shall, unless otherwise expressly provided
herein or authorized, have no authority to act for or represent the Partnership
in any way or otherwise be deemed an agent of the Partnership. Nothing
contained herein shall be deemed to require the Partnership to take any action
contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor(s) for the Partnership as members of any partnership, joint
venture, association, syndicate or other entity, or be deemed to confer on any
of them any express, implied, or apparent authority to incur any obligation or
liability on behalf of any other.
5. COMMODITY BROKER.
The Trading Advisor shall effect all transactions in futures interests for
the Partnership through, and shall maintain a separate account with, such
commodity broker or brokers as the General Partner shall direct. At the present
time, MS & Co. acts as commodity broker for the Partnership.
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6. FEES.
(a) For the services to be rendered to the Partnership by the Trading
Advisor under this Agreement, the Partnership shall pay the Trading Advisor the
following fees:
(i) A monthly management fee (the "Management Fee"), without regard
to the profitability of the Trading Advisor's trading for the Partnership's
account, equal to 5/24 of 1% of the Net Assets of the Partnership as of the
first day of each calendar month commencing with the month in which the
Partnership begins to receive trading advice from the Trading Advisor pursuant
to this Agreement (a 2.5% annual rate).
(ii) An annual incentive fee equal to 20% of the "Trading Profits" (as
defined in Section 6(d)) as of the end of each calendar year. Any accrued
incentive fees with respect to any Units redeemed at the end of the month which
is not the end of a calendar year will be deducted and paid to the Trading
Advisor at the time of the redemption.
(b) If this Agreement is terminated on a date other than the end of a
calendar year, the incentive fee described above shall be determined as if such
date were the end of a calendar year. If this Agreement is terminated on a date
other than the first day of a calendar month, the management fee described above
shall be prorated based on the ratio of the number of trading days in the month
through the date of termination to the total number of trading days in the
month. If, during any month after the Partnership commences trading operations
(including the month in which the Partnership commences such operations), the
Partnership does not conduct business operations, or suspends trading for the
account of the Partnership, or, as a result of an act or failure to act by the
Trading Advisor, is otherwise unable to utilize the trading advice of the
Trading Advisor on any of the trading days of that period for any reason, the
management fee described above shall be prorated based on the ratio of the
number of trading days in the month which the Partnership engaged in trading
operations or utilizes the trading advice of the Trading Advisor to the total
number of trading days in the month.
(c) As used herein, the term "Net Assets" shall have the same meaning as
in Section 8(d)(1) of the Limited Partnership Agreement.
(d) As used herein, the term "Trading Profits" shall mean futures
interests trading profits (realized and unrealized) earned by the Partnership,
decreased by monthly Management Fees, brokerage fees, service fees, and other
expenses directly attributable to the Partnership's futures interests trading
activities, with such trading profits and items of decrease determined from the
end of the last calendar year for which an incentive fee was earned by the
Trading Advisor or, if no incentive fee has been earned previously by the
Trading Advisor, from the date the Partnership commenced trading to the end of
the calendar year as of which such incentive fee calculation is being made. If
Net Assets are reduced or increased because of redemptions or subscriptions
which occur at the end of, or subsequent to, a calendar year in which the
Partnership experiences a futures interests trading loss, the trading loss which
must be recovered before the Partnership will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing Net Assets after
such redemptions or subscriptions by the Net Assets immediately before such
redemptions or subscriptions and (y) multiplying that fraction by the amount of
the unrecovered futures interests trading loss. In the event that the
Partnership experiences a futures interests trading loss in more than one fiscal
year without an intervening payment of an incentive fee and Net Assets are
reduced or increased in more than one such calendar year because of redemptions
or subscriptions, then the trading loss shall in each case be adjusted in
accordance with the formula described above and such adjusted amount of futures
interests trading loss shall be carried forward and used to offset
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subsequent futures interests contract trading profits. Extraordinary expenses
of the Partnership, if any, will not be deducted in determining Trading Profits.
Trading Profits do not include interest income earned by the Partnership on its
assets.
(e) If any payment of incentive fees is made to the Trading Advisor on
account of Trading Profits earned by the Partnership and the Partnership
thereafter fails to earn Trading Profits or experiences losses for any
subsequent incentive period, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits.
7. TERM.
This Agreement shall continue in effect for a period of one year after the
date of this Agreement. Thereafter, this Agreement shall be renewed
automatically for additional one-year terms unless either the Partnership or the
Trading Advisor, upon written notice given not less than 60 days prior to the
original termination date or any extended termination date, notifies the other
party of its intention not to renew. This Agreement shall terminate if the
Partnership terminates. The Partnership shall have the right to terminate this
Agreement without penalty (a) upon 15 days prior written notice to the Trading
Advisor or (b) at any time upon written notice to the Trading Advisor upon the
occurrence of any of the following events: (i) if the Trading Advisor becomes
bankrupt or insolvent; (ii) if the Trading Advisor is unable to use its trading
systems or methods as in effect on the date of this Agreement and as refined and
modified in the future for the benefit of the Partnership; (iii) if the
registration as a commodity trading advisor of the Trading Advisor with the CFTC
or its membership in the NFA is revoked, suspended, terminated, or not renewed,
or limited or qualified in any respect; (iv) except as provided in Section 11
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its trading systems or methods, or its goodwill to,
any individual or entity; (v) if, the Net Asset Value of a Unit, after adding
back distributions, if any, shall be less than $500; (vi) if, at any time, the
Trading Advisor violates any trading policy set forth in the Limited Partnership
Agreement or any administrative policy the General Partner delivered to the
Trading Advisor, except with the prior express written consent of the General
Partner; or (vii) if the Trading Advisor fails in a material manner to perform
any of its obligations under this Agreement. The indemnities set forth in
Section 8 hereof shall survive any termination of this Agreement.
8. STANDARD OF LIABILITY AND INDEMNITY.
(a) The Trading Advisor and its affiliates (as defined below) shall not be
liable to the Partnership, the General Partner, the Limited Partners, or any of
its or their respective successors or assigns, for any act, omission, conduct,
or activity undertaken by or on behalf of the Partnership; provided, that, the
Trading Advisor shall be liable for such act, omission, conduct or activity
unless the Trading Advisor in good faith determines such act, omission, conduct
or activity to be in the best interests of the Partnership, and such act,
omission, conduct, or activity did not constitute misconduct or negligence.
(b) The Partnership shall indemnify, defend and hold harmless the Trading
Advisor and its affiliates from and against any loss, liability, damage, cost,
or expense (including attorneys' and accountants' fees and expenses incurred in
the defense of any demands, claims, or lawsuits) actually and reasonably
incurred arising from any act, omission, conduct, or activity undertaken by the
Trading Advisor or its affiliates on behalf of the Partnership, including,
without limitation, any demands, claims, or lawsuits initiated by a Limited
Partner of the Partnership (or assignee thereof), PROVIDED, that (i) the Trading
Advisor
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has determined, in good faith, that the act, omission, conduct, or activity
giving rise to the claim for indemnification was in the best interests of the
Partnership, and (ii) the act, omission, conduct, or activity that was the basis
for such loss, liability, damage, cost, or expense was not the result of
misconduct or negligence. Notwithstanding anything to the contrary contained in
the foregoing, neither the Trading Advisor nor any of its affiliates shall be
indemnified by the Partnership for any losses, liabilities, or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(A) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(B) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (C) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, PROVIDED, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC, and the position
of the securities administrators of Massachusetts, Missouri, Tennessee, and/or
those other states and jurisdictions in which the plaintiffs claim they were
offered or sold Units, with respect to indemnification for securities laws
violations before seeking court approval for indemnification. Furthermore, in
any action or proceeding brought by a Limited Partner in the right of the
Partnership to which the Trading Advisor or any affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in this Section 8. The Partnership shall make
advances to the Trading Advisor or its affiliates hereunder only if: (1) the
demand, claim, lawsuit, or legal action relates to the performance of duties or
services by such persons to the Partnership; (2) such demand, claim, lawsuit, or
legal action is not initiated by a Limited Partner; and (3) such advances are
repaid, with interest at the legal rate under Delaware law, if the person
receiving such advance is ultimately found not to be entitled to indemnification
hereunder.
(c) The Trading Advisor shall indemnify, defend and hold harmless the
Partnership, the General Partner, and each of their affiliates from and against
any liabilities, losses, claims, damages, costs and expenses (including
attorneys' and accountants' fees and expenses incurred in the defense of any
demands, claims, or lawsuits) actually and reasonably incurred as a result any
act, omission, conduct or activity of the Trading Advisor or its affiliates,
PROVIDED that the act, omission, conduct, or activity giving rise to the claim
for indemnification was the result of such person's bad faith, misconduct or
negligence.
(d) The indemnities provided in this Section 8 by the Partnership to the
Trading Advisor and its affiliates shall be inapplicable in the event of any
liabilities, losses, claims, damages or expenses arising out of, or based upon,
any material breach of any representation, warranty, covenant, or agreement of
the Trading Advisor contained in this Agreement to the extent caused by such
event. Likewise, the indemnities provided in this Section 8 by the Trading
Advisor to the General Partner and the Partnership and any of their affiliates
shall be inapplicable in the event of any liabilities, losses, claims, damages
or expenses arising out of, or based upon, any material breach of any
representation, warranty, covenant, or agreement of the Partnership or the
General Partner, as applicable, contained in this Agreement to the extent caused
by such event. The indemnifying party will not be liable for any settlement
effected without the indemnifying party's express written consent.
(e) As used in this Section 8, the term "affiliate" of an entity shall
mean: (i) any natural person, partnership, corporation, association, or other
legal entity directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of such entity; (ii)
any partnership, corporation, association, or other legal entity 10% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by such entity; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by,
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or under common control with, such entity; or (iv) any officer or director of
such entity. Notwithstanding the foregoing, "affiliates" of the Trading Advisor
for purposes of this Section 8 shall include only those persons acting on behalf
of the Trading Advisor within the scope of the authority of the Trading Advisor,
as set forth in this Agreement, who perform services for the Partnership.
9. RIGHT TO ADVISE OTHERS AND
UNIFORMITY OF ACTS AND PRACTICES.
(a) The Trading Advisor is engaged in the business of advising persons as
to the purchase and sale of futures interests. During the term of this
Agreement, the Trading Advisor, its principals and affiliates, will be advising
other persons (including affiliates) and trading for their own accounts.
However, under no circumstances shall the Trading Advisor by any act or omission
favor any account advised or managed by the Trading Advisor (which employs the
same trading strategy as the Partnership) over the account of the Partnership in
any way or manner (other than by charging different management and/or incentive
fees or employing different leverage). The Trading Advisor agrees to treat the
Partnership in a fiduciary capacity to the extent recognized by applicable law,
but, subject to that standard, the Trading Advisor or any of its principals or
affiliates shall be free to advise and manage accounts for other persons and
shall be free to trade on the basis of the same trading systems, methods, or
strategies employed by the Trading Advisor for the account of the Partnership,
or trading systems, methods, or strategies which are entirely independent of, or
materially different from, those employed for the account of the Partnership,
and shall be free to compete for the same futures interests as the Partnership
or to take positions opposite to the Partnership, where such actions do not
knowingly or deliberately prefer any of such accounts over the account of the
Partnership.
(b) The Trading Advisor shall not be restricted as to the number or nature
of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the
Commodity Exchange Act or any regulations promulgated thereunder, any applicable
rule or regulation of the CFTC or any other regulatory body, exchange, or board;
and (ii) neither the Trading Advisor nor any of its principals or affiliates
shall render trading advice to any other individual or entity or otherwise
engage in activity which shall knowingly cause positions in futures interests to
be attributed to the Trading Advisor under the rules or regulations of the CFTC
or any other regulatory body, exchange, or board so as to require the
significant modification of positions taken or intended for the account of the
Partnership; provided that the Trading Advisor may modify its trading systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor, fairly and equitably in light of each accounts trading strategies to
the extent necessary to comply with the applicable position limits.
10. REPRESENTATIONS WARRANTIES AND COVENANTS.
(a) The Trading Advisor represents and warrants that:
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(i) It will exercise good faith and due care in trading on behalf
of the Partnership pursuant to the trading programs described in the Prospectus
or any other trading programs agreed to by the General Partner.
(ii) All information furnished or to be furnished in writing to the
General Partner by the Trading Advisor relating to the Trading Advisor or its
trading is or will be accurate and complete in all material respects.
(iii) The Trading Advisor has reviewed the information concerning
the Trading Advisor set forth in the Registration Statement and Prospectus and
such information is accurate in all material respects.
(iv) The Trading Advisor shall follow, at all times, the Trading
Policies of the Partnership (as described in the Prospectus) and as amended from
time to time with the consent of the Trading Advisor, which consent shall not be
unreasonably withheld.
(v) The Trading Advisor shall trade the Partnership's Net Assets
only in futures contracts traded on U.S. contract markets, and futures contracts
traded on non-U.S. exchanges which are permitted under the Commodity Exchange
Act for trading in the U.S. by U.S. persons.
(b) The Trading Advisor covenants and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain all
registrations and memberships necessary for the Trading Advisor to continue to
act as described herein and to at all times comply in all material respects with
all applicable laws, rules, and regulations, to the extent that the failure to
so comply would have a materially adverse effect on the Trading Advisor's
ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately in the event that the Trading Advisor or any of its principals
described in the Prospectus becomes the subject of any investigation, claim, or
proceeding of any exchange, commission, court or regulatory authority or becomes
a named party to any litigation materially affecting the business of the Trading
Advisor. The Trading Advisor shall also inform the General Partner immediately
if the Trading Advisor or any of its officers becomes aware of any breach of
this Agreement by the Trading Advisor.
(c) The General Partner covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain all
registrations and memberships necessary for the General Partner to continue to
act as described herein and in the Prospectus and to at all times comply in all
material respects with all applicable laws, rules, and regulations, to the
extent that the failure to so comply would have a materially adverse effect on
the General Partner's ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor immediately
in the event that the General Partner or any of its principals described in the
Prospectus becomes the subject of any investigation, claim, or proceeding of any
exchange, commission, court or regulatory authority or becomes a named party to
any litigation materially affecting the business of the General Partner. The
General Partner shall also inform the Trading Advisor immediately if the General
Partner or any of its officers become aware of any breach of this Agreement by
the General Partner.
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11. MERGER OR TRANSFER OF ASSETS OF TRADING ADVISOR.
The Trading Advisor may merge or consolidate with, or sell or otherwise
transfer its advisory business, or all or a substantial portion of its assets,
any portion of its trading systems or methods, or its goodwill, to any entity
that is directly or indirectly controlled by, controlling, or under common
control with, the Trading Advisor, provided that such entity expressly assumes
all obligations of the Trading Advisor under this Agreement and agrees to
continue to operate the business of the Trading Advisor, substantially as such
business is being conducted on the date hereof.
12. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the matters referred to herein, and no other agreement, verbal or
otherwise, shall be binding as between the parties unless in writing and signed
by the party against whom enforcement is sought.
13. ASSIGNMENT.
This Agreement may not be assigned by any party hereto without the express
written consent of the other parties hereto.
14. AMENDMENT.
This Agreement may not be amended except by the written consent of the
parties hereto.
15. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement or
any covenant herein contained shall not affect the validity or enforceability of
any other provision or covenant hereof or herein contained and any such invalid
provision or covenant shall be deemed to be severable.
16. INCONSISTENT FILINGS.
Prior to the end of 90 days following termination of the offering of Units,
the Trading Advisor agrees not to file, participate in the filing of, or publish
any description of the Trading Advisor, or of its respective principals and
affiliates or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication. No such description shall be
published or filed to which the General Partner reasonably objects, except as
otherwise required by law. If a copy of any materially inconsistent filing or
publication is filed or published after the 90th day following termination of
the offering of Units, the Trading Advisor shall promptly furnish the General
Partner with such a copy, but the Trading Advisor need not give the General
Partner prior notice thereof.
17. DISCLOSURE DOCUMENTS.
The General Partner acknowledges receipt of the Trading Advisor's
disclosure document dated ___________________.
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18. NOTICES.
All notices required to be delivered under this Agreement shall be in
writing and shall be effective when delivered personally on the day delivered,
or when given by mail, on the day of receipt, addressed as follows (or to such
other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):
if to the Partnership:
Morgan Stanley Tangible Asset Fund
Limited Partnership
c/o Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
if to the General Partner:
Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
if to the Trading Advisor:
Morgan Stanley Commodities Management, Inc.
1221 Avenue of the Americas
21st Floor
New York, New York 10020
Attn: Wayne D. Peterson
in each case with a copy to:
Dean Witter Reynolds Inc.
130 Liberty Street
New York, New York 10006
Attn: Michael T. Gregg, Esq.
19. SURVIVAL.
The provisions of this Agreement shall survive the termination of this
Agreement with respect to any matter arising while this Agreement was in effect.
20. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE BROUGHT BY A
PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS AGREEMENT,
EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY, CITY
AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS
AGREEMENT TO ENFORCE ANY RIGHT, ASSERT
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ANY CLAIM OR OBTAIN ANY RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT BY SUCH PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.
21. REMEDIES.
In any action or proceeding arising out of any of the provisions of this
Agreement, the Trading Advisor agrees not to seek any prejudgment equitable or
ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
22. HEADINGS.
Headings to sections herein are for the convenience of the parties only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned and its terms will take effect as of the day and year first
above written.
MORGAN STANLEY TANGIBLE ASSET LIMITED
PARTNERSHIP
By: Demeter Management Corporation,
General Partner
By: _________________________________
Mark J. Hawley, President
DEMETER MANAGEMENT CORPORATION
By: _________________________________
Mark J. Hawley, President
MORGAN STANLEY COMMODITIES MANAGEMENT, INC.
By: __________________________________
Wayne D. Peterson, President
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EXHIBIT 10.04
ESCROW AGREEMENT
August __, 1997
The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Morgan Stanley Tangible Asset Fund L.P.
ESCROW ACCOUNT
Gentlemen:
In accordance with arrangements made by Demeter Management
Corporation, a Delaware corporation (the "General Partner"), on behalf of Morgan
Stanley Tangible Asset Fund L.P. (the "Partnership"), and Dean Witter Reynolds
Inc., the selling agent for the Partnership (the "Depositor"; the Partnership
and the Depositor being herein sometimes collectively referred to as the
"Parties" or, individually, as a "Party"), the Depositor shall: (i) deliver to
you, as Escrow Agent, all subscription funds (by the direct transfer of
immediately available funds into the non-interest bearing escrow account
established by you for the Partnership, for investment in your interest bearing
money market account) received by the Depositor from each subscriber
("Subscriber" or, collectively, the "Subscribers") during the "Offering Period"
(as described in the Partnership's Prospectus, as the same may be updated,
supplemented, and amended from time to time (the "Prospectus")) in connection
with the offering to the public of Units of Limited Partnership Interest of the
Partnership (the "Units") and (ii) also promptly transmit to the General Partner
a complete report of all funds deposited with you. You, as Escrow Agent, shall
hold such subscription funds together with any additions, substitutions, or
other financial instruments in which such funds may be invested or for which
such funds may be exchanged (collectively referred to herein as the "Fund"), IN
ESCROW upon the following terms:
1. (a) Following receipt by you of written notice from the General
Partner that the General Partner has rejected a Subscriber's subscription, in
whole or in part, during the Offering Period, you shall transmit to the
Depositor, as soon as practicable but in no event later than three business days
following receipt by you of such notice, the amount of such Subscriber's
subscription funds that shall have been deposited with you hereunder and
<PAGE>
that the General Partner shall have notified you have been rejected and any
interest earned on the Fund and allocated to the rejected amount of such
subscription in accordance with Section 2 hereof. You shall at the same time
give notice to the Depositor of the amount of aggregate subscription funds
and/or interest so returned.
(b) On the second business day before the scheduled day of each
closing during the Offering Period (closings are currently scheduled to be held
on November 3, 1997, December 1, 1997, and January 2, 1998), the General Partner
shall notify you of the portion of the Fund that represents subscriptions to be
accepted by the General Partner for the Partnership equal to the number of Units
subscribed for multiplied by a price per Unit equal to 100% of the Net Asset
Value thereof as of the close of business on the last day of the month
immediately preceding such closing. Upon receipt by you of joint written notice
from the General Partner and the Depositor on the date of each such closing to
the effect that all of the terms and conditions with respect to the release of
subscription funds from escrow set forth in the Prospectus have been fulfilled,
you shall promptly pay and deliver to the Partnership the portion of the Fund
specified in the General Partner's prior instructions (excluding any interest
earned on the Fund and funds relating to rejected subscriptions).
(c) On the date of each closing, or as soon thereafter as
practicable, you shall transmit to the Depositor an amount representing: (i)
for each Subscriber whose subscription shall be accepted by the General Partner
in whole or in part, any interest earned on the Fund and allocated to the
accepted portion of such Subscriber's subscription in accordance with Section 2
hereof, and (ii) for each Subscriber whose subscription shall have been rejected
by the General Partner in whole or in part but whose subscription funds shall
not have been previously returned to the Depositor by you in accordance with the
first paragraph of this Section 1, such Subscriber's subscription funds that
shall have been deposited with you hereunder and that shall have been rejected
by the General Partner, and any interest earned on the Fund and allocated to the
rejected amount of such subscription in accordance with Section 2 hereof. You
shall at the same time give notice to the Depositor of the aggregate amount of
subscription funds and/or interest so returned.
(d) Notwithstanding subparagraph (a) of this Paragraph 1, upon
receipt by you during the Offering Period of written notice from the General
Partner that a Subscriber has been rejected (because good funds representing
payment for Units have not been deposited in a Subscriber's customer account
with the Depositor or because such Subscriber has provided bad funds in the form
of a bad check, draft, or otherwise to the Depositor), you shall transmit to the
Depositor, within three business days following receipt by you of such notice,
the amount of subscription funds deposited with you hereunder relating to that
amount (the portion of such Subscriber's subscription for which good funds have
not been provided) together with any interest earned on the Fund and allocated
to such portion of such a subscription in accordance with Section 2 hereof to
the date of such return, and shall immediately notify the General Partner of the
return of such funds.
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2. You shall hold the Fund (including any interest earned thereon) for
the account of the Partnership pending delivery to either the Partnership or the
Depositor, pursuant to Paragraphs 1 or 3 hereof, as the case may be. On each
day that subscription funds are transferred to you hereunder in immediately
available funds and receipt is confirmed before 2:00 P.M., New York City time,
you shall immediately invest such subscription funds solely in your interest
bearing money market account. If subscription funds are transferred to you in
immediately available funds and receipt is confirmed after 2:00 P.M., New York
City time, you shall so invest such funds on the next day. Interest earned on
the Fund shall be allocated by the Depositor among the subscribers
proportionately based on (A) the amount of their respective subscriptions on
deposit in the Fund and (B) the period of time from the date that their
respective subscriptions shall have been deposited in the Fund to the earlier of
the delivery of the Fund to the Partnership at a closing or the Depositor in
accordance with Sections 1 or 3 hereof, as the case may be.
3. If, during the Partnership's Offering Period, you are notified in
writing jointly by the Parties that the offering of Units for the Partnership
has been terminated, and that no First Closing will be held, you shall transmit
to the Depositor, as soon as practicable but in no event later than three
business days after receipt by you of such notice, an amount representing the
full amount of all subscription funds that shall have been deposited with you
hereunder, together with any interest earned on the Fund in accordance with
Paragraph 2 hereof. You shall at the same time give notice to the Depositor of
the aggregate amounts of subscription funds and/or interest so returned.
4. The Parties further agree with you as follows:
(a) Your duties and responsibilities shall be limited solely to those
expressly set forth in this Agreement and are ministerial in nature. You shall
neither be subject to nor obliged to recognize any other agreement between, or
other direction or instruction of, any or all of the Parties or any Subscriber
even though reference thereto may be made herein; PROVIDED, HOWEVER, that with
your written consent, this Agreement may be amended at any time or times by an
instrument in writing signed by the Parties.
(b) You are authorized, in your sole discretion, to disregard any and
all notices or instructions given by any of the Parties or by any other person,
firm, or corporation, EXCEPT only such notices or instructions as are hereunder
provided for and orders or process of any court entered or issued with or
without jurisdiction. If the Fund or any part thereof is at any time attached,
garnished, or levied upon under any court order or in case the payment,
assignment, transfer, conveyance, or delivery of the Fund shall be stayed or
enjoined by any court order, or in case any order, judgment, or decree shall be
made or entered by any court affecting the Fund or any part thereof, then and in
any such event you are authorized, in your sole discretion, to rely upon and
comply with any such order, writ, judgment, or decree that you are advised by
legal counsel of your own choosing is binding upon you, and if you comply with
any such order, writ, judgment, or decree you shall not be liable to any of the
Parties or to any other person, firm, or corporation by reason of such
compliance even though
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such order, writ, judgment, or decree may be subsequently reversed, modified,
annulled, set aside, or vacated.
(c) You shall be fully protected in relying upon any written notice,
demand, certificate, document, or instrument believed by you in good faith to be
genuine and to have been signed or presented by the proper person or persons or
Party or Parties. The Parties shall provide you with a list of officers and
employees who shall be authorized to deliver instructions hereunder. You shall
not be liable for any action taken or omitted by you in connection herewith in
good faith and in the exercise of your own best judgment.
(d) Should any dispute arise with respect to the delivery, ownership,
right of possession, and/or disposition of the subscription funds deposited with
you hereunder, or should any claim be made upon any such subscription funds by a
third party, you, upon receipt of written notice of such dispute by any of the
Parties or by a third party, are authorized and directed to retain in your
possession all or any of such subscription funds until such dispute shall have
been settled either by mutual agreement of the parties involved or by final
order, decree, or judgment of any court in the United States.
(e) If for any reason funds are deposited in the escrow account other
than by transfer of immediately available funds, you shall proceed as soon as
practicable to collect checks, drafts, and other collection items at any time
deposited with you hereunder. All such collections shall be subject to the
usual collection agreement regarding items received by your commercial banking
department for deposit or collection; PROVIDED, HOWEVER, that if any check,
draft, or other collection item at any time deposited with you hereunder is
returned to you as being uncollectable (except by reason of an account closing),
you shall attempt a second time to collect such item before returning such item
to the Depositor as uncollectable. Subject to the foregoing, you shall promptly
notify the Parties of any uncollectable check, draft, or other collection item
deposited with you hereunder and shall promptly return such uncollectable item
to the Depositor, in which case you shall not be liable to pay any interest on
the subscription funds represented by such uncollectable item. In no event,
however, shall you be required or have a duty to take any legal action to
enforce payment of any check or note deposited hereunder.
(f) You shall not be responsible for the sufficiency or accuracy of
the form, execution, validity, or genuineness of documents now or hereafter
deposited with you hereunder, or for any lack of endorsement thereon or for any
description therein, nor shall you be responsible or liable in any respect on
account of the identity, authority, or rights of the persons executing or
delivering or purporting to execute or deliver any such document, or endorsement
or this Agreement. You shall not be liable for any loss sustained as a result
of any investment made pursuant to the instructions of the Parties or as a
result of any liquidation of an investment prior to its maturity or the failure
of the Parties to give you any instructions to invest or reinvest the Fund or
any earnings thereon.
(g) All notices required or desired to be delivered hereunder shall
be in writing and shall be effective when delivered personally on the day
delivered, or when
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given by registered or certified mail, postage prepaid, return receipt
requested, on the day of receipt, addressed as follows (or to such other address
as the party entitled to notice shall hereafter designate in accordance with the
terms hereof):
if to the Partnership or the General Partner:
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
President
if to the Depositor:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
Executive Vice President
in either case with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Edwin L. Lyon, Esq.
if to you:
The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Whenever, under the terms hereof, the time for giving a notice or performing
an act falls on a Saturday, Sunday, or legal holiday, such time shall be
extended to the next business day.
(h) The Depositor agrees to indemnify, defend, and hold you harmless
from and against, any and all loss, damage, tax, liability, and expense that may
be incurred by you arising out of or in connection with your duties hereunder,
except as caused by your gross negligence, bad faith, or willful misconduct,
including the legal costs and expenses of defending yourself against any claim
or liability in connection with your performance hereunder.
(i) You shall be paid by the Depositor a single fee of $3,000 in
advance for your services with respect to the first year from the date hereof or
any portion
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thereof in connection herewith. In addition, the Depositor shall pay an
additional $3,000 fee for any services provided hereunder in any subsequent
year.
(j) It is understood that you may at any time resign hereunder as
Escrow Agent by giving written notice of your resignation to the Parties at
their address set forth above at least 20 days prior to the date specified for
such resignation to take effect, and upon the effective date of such
resignation, all property then held by you hereunder shall be delivered by you
to such person as may be designated jointly by the Parties in writing, whereupon
all your obligations hereunder shall cease and terminate. If you shall resign
prior to the conclusion of the first 60 days of the Offering Period, you shall
pay back to the Depositor an amount equal to the product of $50 and the number
of days remaining until the 60th day of the Offering Period. If you shall
resign at or after the conclusion of the first 60 days of the Offering Period,
you shall have no obligation to pay any amount back to the Depositor. If no
successor Escrow Agent has been appointed or has accepted such appointment by
such date, all your obligations hereunder shall nevertheless cease and
terminate. Your sole responsibility thereafter shall be to keep safely all
property then held by you and to deliver the same to a person designated by the
Parties hereto or in accordance with the directions of a final order or judgment
of a court of competent jurisdiction.
5. This Agreement shall be governed by and construed in accordance with
the law of the State of New York and any action brought hereunder shall be
brought in the courts of the State of New York, sitting in the County of New
York.
6. The undersigned Escrow Agent hereby acknowledges and agrees to hold,
deal with, and dispose of, the Fund (including any interest earned thereon) and
any other property at any time held by the Escrow Agent hereunder in accordance
with this Agreement.
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If the foregoing Agreement is satisfactory to you, please so indicate by signing
at the place provided below.
Sincerely,
MORGAN STANLEY TANGIBLE ASSET
FUND L.P.
By: Demeter Management Corporation
By:________________________________
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By:________________________________
Mark J. Hawley
Executive Vice President
Accepted:
THE CHASE MANHATTAN BANK
By:________________________
P.J. Gilkeson
Vice President
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EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of our report dated August
19, 1997 relating to the statement of financial condition of Morgan Stanley
Tangible Asset Fund L.P. as of July 31, 1997 and our report dated February 17,
1997 (June 16, 1997 as to Note 5 and July 31, 1997 as to Note 6) relating to the
statements of financial condition of Demeter Management Corporation as of
December 31, 1996 and 1995 appearing in the Prospectus which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Deloitte & Touche LLP
New York, New York
August 19, 1997
