THIS DOCUMENT IS A COPY OF THE FORM 10-K FILED ON APRIL 1, 1999
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required] For the year ended December 31, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] For the transition period from _______________to
______________________
Commission File Number 0-24035
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3968008
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y. 10048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
Indicate by check-mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check-mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment of this Form 10-K. [X]
State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which units were sold, or the average bid
and asked prices of such units, as of a specified date within 60 days prior to
the date of filing: $24,230,596.77 at January 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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MORGAN STANLEY TANGIBLE ASSET FUND L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1998
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . . 1
Part I.
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 2-4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 4-6
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . 6
Part II.
Item 5. Market for the Registrant's Partnership Units
and Related Security Holder Matters . . . . . . . . 7-8
Item 6. Selected Financial Data . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 10-17
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . 18
Item 8. Financial Statements and Supplementary Data . . . . 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . 18
Part III.
Item 10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant . . . . . . . . . 19-22
Item 11. Executive Compensation. . . . . . . . . . . . . . . 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . 22
Item 13. Certain Relationships and Related Transactions. . . 23
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . 24
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K
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Partnership's Prospectus dated
November 10, 1997 I
Annual Report to Morgan Stanley
Tangible Asset Fund L.P. Limited
Partners for the year ended
December 31, 1998 II, III and IV
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PART I
Item 1. BUSINESS
(a) General Development of Business. Morgan Stanley Tangible Asset Fund
L.P. (the "Partnership") is a Delaware limited partnership organized to engage
primarily in speculative trading of futures contracts in metals, energy and
agricultural markets, (collectively, "futures interests"). The Partnership
commenced operations on January 2, 1998. The Partnership's general partner is
Demeter Management Corporation ("Demeter"). The commodity brokers are Morgan
Stanley & Co. Incorporated ("MS & Co.") and Morgan Stanley & Co. International
Limited ("MSIL"), (collectively, the "Commodity Brokers"). The trading advisor
is Morgan Stanley Commodities Management, Inc. ("MSCM" or the "Trading
Advisor"). The selling agent is Dean Witter Reynolds Inc. ("DWR"). MSCM, DWR,
the Commodity Brokers and Demeter are all wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW").
The Partnership registered 5,000,000 Units of Limited Partnership Interest
("Units") pursuant to a Registration Statement on Form S-1 (SEC File number
333-33975), which became effective on November 10, 1997. The managing
underwriter for the Partnership is DWR.
Units were sold at the initial closing on January 2, 1998 (the "Initial
Offering"). After the Initial Offering, Units were sold at three closings held
on February 2, March 2 and April 1, 1998, at a price
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equal to 100% of the Net Asset Value per Unit at the close of business on the
last day of the month immediately preceding the closing.
The offering period for unsold Units was subsequently extended to
October 16, 1998 pursuant to Post Effective Amendment No. 1 to the Registration
Statement, which became effective on July 10, 1998. The subsequent closings were
held on August 3, September 1 and October 1, 1998, at a price equal to 100% of
the Net Asset Value per Unit at the close of business on the last day of the
month immediately preceding the closing.
The Partnership's Net Asset Value per Unit as of December 31, 1998 was
$6.57, representing a decrease of 34.3 percent from the Net Asset Value per Unit
of $10.00 at January 2, 1998 (commencement of operations). For a more detailed
description of the Partnership's business see subparagraph (c).
(b) Financial Information about Industry Segments. For financial
information reporting purposes the Partnership is deemed to engage in one
industry segment, the speculative trading of futures interests. The relevant
financial information is presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures interests pursuant to trading
instructions provided by the Trading Advisor. For a detailed description of the
different facets of the Partnership's business, see those portions
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of the Partnership's Prospectus, dated November 10, 1997, (the "Prospectus"),
and the corresponding portions of the Prospectus' Supplement dated July 10, 1998
(the "Supplement") each incorporated by reference in this Form 10-K, set forth
below.
Facets of Business
1. Summary 1. "Summary of the Prospectus"
(Pages 1-10 of the Prospec-
tus).
2. Futures Markets 2. "The Futures Markets"
(Pages 35-38 of the
Prospectus).
3. Partnership's Trading 3. "Investment Program, Use of
Arrangements and Policies Proceeds and Trading Poli-
cies" (Pages 26-28 of the
Prospectus) and "The
Trading Advisor" (Page
40-43 of the Prospectus
and Page S-11 of the
Supplement).
4. Management of the Part- 4. "The Management Agreement"
nership (Pages 45-46 of the
Prospectus). "The General
Partner" (Pages 29-31 of the
Prospectus and Page S-7 of
the Supplement)."The
Commodity Brokers" (Pages
43-44 of the Prospectus) and
"The Limited Partnership
Agreement" (Pages 47-51 of
the Prospectus).
5. Taxation of the Partnership's 5. "Material Federal Income
Limited Partners Tax Considerations" and
"State and Local Income Tax
Aspects" (Pages 56-64 of the
Prospectus).
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(d) Financial Information About Foreign and Domestic Operations and
Export Sales. The Partnership has not engaged in any operations in foreign
countries; however, the Partnership (through the commodity brokers) trades in
futures interests on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the offices
of DWR. The DWR offices utilized by the Partnership are located at Two World
Trade Center, 62nd Floor, New York, NY 10048.
Item 3. LEGAL PROCEEDINGS
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. ("DWFCM"), MSDW (all
such parties referred to hereafter as the "Dean Witter Parties"), certain other
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, alleging, among other
things, that the defendants committed fraud, deceit, negligent
misrepresentation, various violations of the California Corporations
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Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair
business practices, unjust enrichment, and conversion in the sale and operation
of the various limited partnership commodity pools. 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. A consolidated and
amended complaint in the action pending in the Supreme Court of the State of New
York was filed on August 13, 1997, alleging that the defendants committed fraud,
breach of fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools. On December 16,
1997, upon motion of the plaintiffs, the action pending in the Superior Court of
the State of Delaware was voluntarily dismissed without prejudice. The New York
Supreme Court dismisssed the New York action in November 1998, but granted
plaintiffs leave to file an amended complaint, which they did in early December
1998. The defendants have filed a motion to dismiss the amended complaint with
prejudice on February 1, 1999. 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
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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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY
HOLDER MATTERS
There is no established public trading market for Units of the
Partnership. The number of holders of Units at December 31, 1998 was
approximately 3,357. No distributions have been made by the Partnership since it
commenced trading operations on January 2, 1998. Demeter has sole discretion to
decide what distributions, if any, shall be made to investors in the
Partnership. No determination has yet been made as to future distributions.
The Partnership registered 5,000,000 Units of Limited Partnership
Interest pursuant to a Registration Statement on Form S-1, which became
effective on November 10, 1997 (the "Registration Statement") (SEC File Number
333-33975). The managing underwriter for the Partnership is DWR.
The offering originally commenced on November 10, 1997 with
4,045,503.483 Units sold through April 1, 1998. The aggregate price of the
offering amount registered was $50,000,000 (based upon the initial offering
price of $10.00 per Unit) for the initial closing on January 2, 1998 (the
"Initial Offering"). After the Initial Offering, Units were sold at three
closings held on February 2, March 2 and April 1, 1998, at a price equal to 100%
of the Net Asset Value per Unit at the close of business on the last day of the
month immediately preceding the closing.
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The aggregate price of the Units sold at the four closings of the offering was
$40,100,218 (based upon the Net Asset Value per Unit of $10.00 at January 2,
1998, $10.13 at February 2, 1998, $9.53 at March 2, 1998 and $9.54 at April 1,
1998 closings, respectively).
The offering period for unsold Units was subsequently extended to
October 16, 1998 pursuant to Post Effective Amendment No. 1 to the Registration
Statement, which became effective on July 10, 1998. An additional 149,990.149
Units were sold at subsequent closings; held on August 3, September 1 and
October 1, 1998 at a price equal to 100% of the Net Asset Value per Unit at the
close of business on the last day of the month immediately preceding the
closing. The aggregate price of the Units sold at the subsequent three closings
was $1,135,005 (based upon the Net Asset Value per Unit of $7.85 at August 3,
1998, $7.23 at September 1, 1998 and $7.75 at October 1, 1998). Together with
the Initial Offering the aggregate price of Units sold is $41,235,223.
Since DWR has paid all expenses of the offering and no other expenses
are chargeable against proceeds, 100% of the proceeds of the offering have been
applied to the working capital of the Partnership for use in accordance with the
"Investment Programs, Use of Proceeds and Trading Policies" section of the
Prospectus included as part of the Registration Statement.
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Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Period from
January 2, 1998
(commencement of
operations) to
December 31, 1998
------------------
Total Revenues
(including interest) (11,239,913)
Net Loss (13,543,631)
Net Loss
Per Unit (Limited
& General Partners) (3.43)
Total Assets 25,962,970
Total Limited Partners'
Capital 24,622,999
Net Asset Value Per
Unit of Limited
Partnership Interest 6.57
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with MS & Co. and
MSIL, the commodity brokers, in separate futures interest trading accounts. Such
assets are held in either non-interest bearing bank accounts or in securities
approved by the Commodity Futures Trading Commission ("CFTC") for investment of
customer funds. The Partnership's assets held by MS & Co. and MSIL may be used
as margin solely for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures interests, it is expected that the Partnership
will continue to own such liquid assets for margin purposes.
The Partnership's investment in futures interests may, from time to
time, be illiquid. Most United States futures exchanges limit fluctuations in
certain futures interest prices during a single day by regulations referred to
as "daily price fluctuations limits" or "daily limits". Pursuant to such
regulations, during a single trading day no trades may be executed at prices
beyond the daily limit. If the price for a particular futures interest has
increased or decreased by an amount equal to the daily limit, positions in such
futures interests can neither be taken nor liquidated unless traders are willing
to effect trades at or within the limit. Futures interests prices have
occasionally moved the
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daily limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its futures
interests and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world currencies have low
trading volume and are illiquid, which may prevent the Partnership from trading
in potentially profitable markets or from promptly liquidating unfavorable
positions, subjecting it to substantial losses. Either of these market
conditions could result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it expect to
have, any capital assets. Future redemptions of Units will affect the amount of
funds available for investment in futures interests in subsequent periods. Since
they are at the discretion of Limited Partners, it is not possible to estimate
the amount and therefore the impact of future redemptions.
Results of Operations. As of December 31, 1998, the Partnership's total
capital was $24,908,316, an increase of $24,906,316 from the Partnership's total
capital of $2,000 at December 31, 1997.
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For the year ended December 31, 1998, the Partnership generated a net loss of
$13,543,631, total subscriptions aggregated $41,665,223 and total redemptions
aggregated $3,213,276.
For the year ended December 31, 1998, the Partnership's total trading
revenues, net of interest income, were $(11,239,913). The Partnership's total
expenses for the year were $2,303,718, resulting in a net loss of $13,543,631.
The value of an individual unit in the Partnership decreased from $10.00 at
inception of trading on January 2, 1998 to $6.57 at December 31, 1998.
The Partnership's overall performance record represents varied results
of trading in futures interests markets. For a further description of 1998
trading results, refer to the letter to the Limited Partners in the accompanying
Annual Report to Limited Partners for the year ended December 31, 1998,
incorporated by reference in this Form 10-K. The Partnership's gains and losses
are allocated among its partners for income tax purposes.
Credit Risk. In entering into futures and forward contracts there is a
credit risk to the Partnership that the counterparty on the contract will not be
able to meet its obligations to the Partnership. The ultimate counterparty of
the Partnership for futures contracts traded in the United States and most
foreign exchanges on which the Partnership trades is the clearinghouse
associated with such exchange. In general, a clearinghouse is backed by the
membership of the exchange
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and will act in the event of non-performance by one of its members or one of its
member's customers, and, as such, should significantly reduce this credit risk.
For example, a clearinghouse may cover a default by (i) drawing upon a
defaulting member's mandatory contributions and/or non-defaulting members'
contributions to a clearinghouse guarantee fund, established lines or letters of
credit with banks, and/or the clearinghouse's surplus capital and other
available assets of the exchange and clearinghouse, or (ii) assessing its
members.
In cases where the Partnership trades on a foreign exchange where the
clearinghouse is not funded or guaranteed by the membership or where the
exchange is a "principals' market" in which performance is the responsibility of
the exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the sole
recourse of the Partnership will be the clearinghouse, the exchange member or
the off-exchange contract counterparty, as the case may be. There can be no
assurance that a clearinghouse, exchange or other exchange member will meet its
obligations to the Partnership, and the Partnership is not indemnified against a
default by such parties from Demeter, MSDW or DWR.
Further, the law is unclear as to whether a commodity broker has any
obligation to protect its customers from loss in the event of an exchange,
clearinghouse or other exchange member default on trades
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effected for the broker's customers. Any such obligation on the part of the
broker appears even less clear where the default occurs in a non-US
jurisdiction.
Demeter deals with the credit risks of all partnerships for which it
serves as general partner in several ways. First, it monitors the Partnership's
credit exposure to each exchange on a daily basis, calculating not only the
amount of margin required for it but also the amount of its unrealized gains at
each exchange, if any. The commodity brokers inform the Partnership, as with all
its customers, of its net margin requirements for all its existing open
positions, but do not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the Partnership's
potential margin liability, exchange by exchange. Demeter is then able to
monitor the Partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, as discussed earlier, the Partnership's trading policies limit
the amount of its net assets that can be committed at any given time to futures
contracts and require, in addition, a certain minimum amount of diversification
in the Partnership's trading, usually over several different products. One of
the aims of such trading policies has been to reduce the credit exposure of the
Partnership to a single exchange and, historically, the Partnership's exposure
has typically
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amounted to only a small percentage of its total net assets. On those relatively
few occasions where a partnership's credit exposure may climb above that level,
Demeter deals with the situation on a case by case basis, carefully weighing
whether the increased level of credit exposure remains appropriate.
With respect to forward contract trading, the Partnership trades with
only those counterparties which Demeter, together with DWR, have determined to
be creditworthy. At the date of this filing, the Partnership deals only with MS
& Co. and MSIL as its counterparty on forward contracts.
See "Financial Instruments" under Notes to Financial Statements in the
Partnership's Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K.
Year 2000 Problem - Commodity pools, like financial and business
organizations and individuals around the world, depend on the smooth functioning
of computer systems. Many computer systems in use today cannot recognize the
computer code for the year 2000, but revert to 1900 or some other date. This is
commonly known as the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly process and calculate date-related
information and data concerning dates on or after January 1, 2000. Such a
failure could
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adversely affect the handling or determination of futures trades and prices and
other services.
MSDW began its planning for the Year 2000 Problem in 1995, and
currently has several hundred employees working on the matter. It has developed
its own Year 2000 compliance plan to deal with the problem and had the plan
approved by the company's executive management, Board of Directors and
Information Technology Department. Demeter is coordinating with MSDW to address
the Year 2000 Problem with respect to Demeter's computer systems that affect the
Partnership. This includes hardware and software upgrades, systems consulting
and computer maintenance.
Beyond the challenge facing internal computer systems, the systems
failure of any of the third parties with whom the Partnership has a material
relationship - the futures exchanges and clearing organizations through which it
trades could result in a material financial risk to the Partnership. All U.S.
futures exchanges are subject to monitoring by the CFTC of their Year 2000
preparedness and the major foreign futures exchanges are also expected to be
subject to market-wide testing of their Year 2000 compliance during 1999.
A worst case scenario would be one in which trading of contracts on
behalf of the Partnership becomes impossible as a result of the Year 2000
Problem encountered by any third parties. A less catastrophic but more likely
scenario would be one in which trading opportunities
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diminish as a result of technical problems resulting in illiquidity and fewer
opportunities to make profitable trades. MSDW has begun develop-ing various
"contingency plans" in the event that the systems of such third parties fail.
Demeter intends to consult closely with MSDW in implementing those plans.
Despite the best efforts of both Demeter and MSDW, however, it is possible that
these steps will not be sufficient to avoid any adverse impact to the
Partnership.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the speculative trading
of futures interests. The market sensitive instruments held by the Partnership
are acquired solely for speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's primary business activities.
The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned
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factors result in frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide variety of factors,
including the diversification effects among the Partnership's existing open
positions, the volatility present within the market(s) and the liquidity of the
market(s). At varying times, each of these factors may act to exacerbate or mute
the market risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative of its future
results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent uncertainty of its speculative trading, which may
cause future losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the
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Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Partnership accounts for open positions on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of the Partnership's
open positions is directly reflected in the Partnership's earnings, whether
realized or unrealized, and the Partnership's cash flow, as profits and losses
on open positions of exchange traded futures interests are settled daily through
variation margin.
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisors is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical simulation involves constructing a distribution of
hypothetical daily changes in trading portfolio value. The VaR model generally
takes into account linear exposures to price and interest rate risk. Market
risks that are incorporated in the VaR model include equity and commodity
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prices, interest rates, foreign exchange rates, as well as correlation that
exists among these variables. The hypothetical changes in portfolio value are
based on daily observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is sensitive. In the case
of the Partnership's VaR, the historical observation period is approximately
four years. The Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based on observed market risk factor moves, would have
been exceeded once in 100 trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either the
General Partner or the Trading Advisor in its daily risk management activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the Partnership's open
positions as a percentage of total net assets, by market category as of December
31, 1998. As of December 31, 1998, the Partnership's total capitalization was
approximately $39 million.
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Primary Market December 31, 1998
Risk Category Value at Risk
------------- -------------
Commodity (1.86)%
Aggregate Value at Risk $ (1.86)%
Aggregate value at risk represents the aggregate VaR of the Partnership's open
positions and not the sum of the VaR of the individual categories listed above.
Aggregate VaR will be lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR or the Partnership's open positions at
December 31, 1998 only and is not necessarily representative of either the
historic or future risk of an investment in the Partnership. As the
Partnership's sole business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can change
significantly over any given time period or even within a single trading day.
Such changes in open positions could materially impact market risk as measured
by VaR either positively or negatively.
The table below supplements the year end VaR by presenting the Partnership's
high, low and average VaR as a percentage of total net assets for the four
quarterly reporting periods from January 1, 1998 through December 31, 1998.
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Primary Market Risk Category High Low Average
- ---------------------------- ---- --- -------
Commodity (1.89)% (1.36)% (1.69)%
Aggregate Value at Risk (1.89)% (1.36)% (1.69)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable margin requirements, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of ruin" not typically found in other
investment vehicles. Due to the relative size of the positions held, certain
market conditions, may cause the Partnership to incur losses greatly in excess
of VaR within a short period of time. The foregoing VaR tables, as well as the
past performance of the Partnership, gives no indication of such "risk of ruin".
In addition, VaR risk measures should be interpreted in light of the
methodology's limitations, which include the following: past changes in market
risk factors will not always yield accurate predictions of the distributions and
correlations of future market movements; changes in portfolio value in response
to market movements may differ from the
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<PAGE>
responses implicit in a VaR model; published VaR results reflect past trading
positions while future risk depends on future positions; VaR using a one-day
time horizon does not fully capture the market risk of positions that cannot be
liquidated or hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into losses that could
be incurred under certain unusual market movements.
The foregoing VaR tables present the results of the Partnership's VaR for each
of the Partnership's market risk exposures and on an aggregate basis at December
31, 1998 and for the end of quarter periods during calendar 1998. Since VaR is
based on historical data, VaR should not be viewed as predictive of the
Partnership's future financial performance or its ability to manage and monitor
risk and there can be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated below or that such
losses will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not
needed for margin. However, such balances, as well as any market risk they may
represent, are immaterial. The Partnership also maintains a substantial portion
(approximately _______%) of its available assets
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<PAGE>
in cash at DWR. A decline in short-term interest rates will result in a decline
in the Partnership's cash management income. This cash flow risk is not
considered material.
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features
of the Partnership's market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market risk
exposures - except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Partnership manages its primary market
risk exposures - constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. The Partnership's primary market risk exposures as well as the strategies
used and to be used by the General Partner and the Trading Advisor for managing
such exposures are subject to numerous uncertainties, contingencies and risks,
any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions, defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals,
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<PAGE>
changes in historical price relationships, an influx of new market participants,
increased regulation and many other factors could result in material losses as
well as in material changes to the risk exposures and the risk management
strategies of the Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of December 31, 1998, by market sector. It may be anticipated
however, that these market exposures will vary materially over time.
Commodity.
Metals. The Partnership's primary metals market exposure is to
fluctuations in the price of gold and silver. Although the Trading Advisor will
from time to time trade base metals such as aluminum, copper, nickel and zinc,
the principal market exposures of the Partnership have consistently been in the
precious metals, gold and silver. The Trading Advisor's gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Advisor has from time to
time taken substantial positions as they have perceived market opportunities to
develop. The General Partner anticipates that gold and
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<PAGE>
silver will remain the primary metals market exposure for the Partnership.
Soft Commodities. One of the Partnership's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, cotton,
cocoa, sugar and coffee accounted for the substantial bulk of the Partnership's
commodities exposure at December 31, 1998. The Partnership has market exposure
to live cattle, lean hogs and porkbelly. However, the General Partner
anticipates that the Trading Advisor will maintain an emphasis on soybeans,
grains, cotton, cocoa, sugar and coffee in which the Partnership has
historically taken it's largest positions.
Energy. The Partnership's primary energy market exposure is to gas and
oil price movements, often resulting from political developments in the Middle
East. Although the Trading Advisor trades natural gas to a limited extent, oil
is by far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposures of the Partnership at
December 31, 1998:
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<PAGE>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Advisor, severally, attempt
to manage the risk of the Partnership's open positions are essentially the same
in all market categories traded. The General Partner attempts to manage the
Partnership's market exposure by (i) diversifying the Partnership's assets among
different market sectors and trading approaches, and (ii), monitoring the
performance of the Trading Advisor on a daily basis. In addition, the Trading
Advisor establishes diversification guidelines, often set in terms of the
maximum margin to be committed to positions in any one market sector or market
sensitive instrument.
The General Partner monitors and controls the risk of the Partnership's
non-trading instruments, cash, which is the only Partnership investment directed
by the General Partner, rather than the Trading Advisor.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the Annual Report to
Limited Partners for the year ended December 31, 1998 and is incorporated by
reference in this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership. The
Partnership is managed by Demeter.
General Partner
Demeter, a Delaware corporation, was formed on August 18, 1977 to act
as a commodity pool operator and is registered with the CFTC as a commodity pool
operator and currently is a member of the National Futures Association in such
capacity. Demeter is wholly-owned by MSDW and is an affiliate of DWR. MSDW, DWR
and Demeter may each be deemed to be "promoters" and/or or a "parent" of the
Partnership within the meaning of the federal securities laws.
Directors and Officers of the General Partner
The directors and officers of Demeter are as follows:
Mark J. Hawley, age 55, is Chairman of the Board and a Director of
Demeter. Mr. Hawley is also Chairman of the Board and a Director of DWFCM. Mr.
Hawley previously served as President of Demeter throughout 1998. Mr. Hawley
joined DWR in February 1989 as Senior Vice President and is currently the
Executive Vice President and Director of DWR's Product Management for Individual
Asset Management. In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures, Insurance, and Unit Investment Trust
Business. From
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<PAGE>
1978 to 1989, Mr. Hawley was a member of the senior management team at Heinold
Asset Management, Inc., a CPO, 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 & Company.
Joseph G. Siniscalchi, age 53, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting and served as a Senior Vice President and Controller for
DWR's Securities Division through 1997. He is currently Executive Vice President
and Director of the Operations Division of DWR. From February 1980 to July 1984,
Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb,
Inc.
Edward C. Oelsner, III, age 56, is a Director of Demeter. Mr. Oelsner
is currently an Executive Vice President and head of the Product Development
Group at Dean Witter InterCapital Inc., an affiliate of DWR. Mr. Oelsner joined
DWR in 1981 as a Managing Director in DWR's Investment Banking Department
specializing in coverage of regulated industries and, subsequently, served as
head of the DWR Retail Products Group. Prior to joining DWR, Mr. Oelsner held
positions at The First Boston Corporation as a member of the Research and
Investment Banking Departments from 1967 to 1981. Mr. Oelsner received his
M.B.A. in
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<PAGE>
Finance from the Columbia University Graduate School of Business in 1966 and an
A.B. in Politics from Princeton University in 1964.
Robert E. Murray, age 38, is President and a Director of Demeter. Mr.
Murray is also President and a Director of DWFCM. Effective as of the close of
business on December 31, 1998, Mr. Murray replaced Mr. Hawley as President of
Demeter. Mr. Murray is also a Senior Vice President of DWR's Managed Futures
Department and is the Senior Administrative Officer of DWFCM. Mr. Murray began
his career at DWR in 1984 and is currently the Director of the Managed Futures
Department. In this capacity, Mr. Murray is responsible for overseeing all
aspects of the firm's Managed Futures Department. Mr. Murray currently serves as
a Director of the Managed Funds Association, an industry association for
investment professionals in futures, hedge funds and other alternative
investments. Mr. Murray graduated from Geneseo State University in May 1983 with
a B.A. degree in Finance.
Lewis A. Raibley, III, age 36, is Vice President, Chief Financial
Officer and a Director of Demeter. Effective as of the close of business on
December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors. Mr.
Raibley is currently Senior Vice President and Controller in the Individual
Asset Management Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice President and Director in the Internal Reporting Department of
MSDW and prior to that,
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<PAGE>
from 1992 to 1997, he served as Senior Vice President and Director in the
Financial Reporting and Policy Division of Dean Witter Discover & Co. He has
been with MSDW and its affiliates since June 1986.
Mitchell M. Merin, age 45, became a Director of Demeter on March 17,
1999. Mr. Merin was appointed the Chief Operating Officer of Asset Management
for MSDW in December 1998 and the President and Chief Executive Officer of
Morgan Stanley Dean Witter Advisors in February 1998. He has been an Executive
Vice President of DWR since 1990, during which time he has been director of
DWR's Taxable Fixed Income and Futures divisions, managing director in Corporate
Finance and corporate treasurer. Mr. Merin received his Bachelor's degree from
Trinity College in Connecticut and his M.B.A. degree in finance and accounting
from the Kellogg Graduate School of Management of Northwestern University in
1977.
Richard A. Beech, age 47, became a Director of Demeter on March 17,
1999. Mr. Beech has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior Vice President
and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining DWR, Mr. Beech also had
worked at two
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<PAGE>
investment banking firms in Operations, Research, Managed Futures and Sales
Management.
Ray Harris, age 42, became a Director of Demeter on March 17, 1999. Mr.
Harris is currently Senior Vice President, Planning and Administration for
Morgan Stanley Dean Witter Asset Management and has worked at DWR or its
affiliates since July 1982, serving in both financial and administrative
capacities. From August 1994 to January 1999, he worked in two separate DWR
affiliates, Discover Financial Services and Novus Financial Corp., culminating
as Senior Vice President. Mr. Harris received his B.A. degree from Boston
College and his M.B.A. in finance from the University of Chicago.
Richard M. DeMartini, age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31, 1998, Mr. DeMartini resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.
Lawrence Volpe, age 51, served as a Director to Demeter throughout
1998. Effective as of the close of business on December 31, 1998, Mr. Volpe
resigned as a Director of Demeter.
Patti L. Behnke, age 38, served as Vice President and Chief Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of
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<PAGE>
Demeter in order to take on new responsibilities as Operations Officer -
Controllers Division for MSDW, and was replaced by Mr. Raibley.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a limited
partnership, the business of the Partnership is managed by Demeter, which is
responsible for the administration of the business affairs of the Partnership
but receives no compensation for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of December
31, 1998 there were no persons known to be beneficial owners of more than 5
percent of the Units.
(b) Security Ownership of Management - At December 31, 1998, Demeter
owned 43,395.648 Units of General Partnership Interest in the Partnership
representing a 1.15 percent interest in the Partnership.
(c) Changes in Control - None
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to Financial
Statements", in the accompanying Annual Report to Limited Partners for the year
ended December 31, 1998, incorporated by reference in this Form 10-K. In its
capacity as the Partnership's retail commodity
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<PAGE>
brokers, MS & Co. and MSIL received commodity brokerage commissions (paid and
accrued by the Partnership) of $1,176,024 for the year ended December 31, 1998.
In its capacity as the Partnership's Trading Advisor, MSCM received a
management fee of $805,496 for the year ended December 31, 1998. In its capacity
as General Partner, Demeter received a Service fee of $322,198 for the year
ended December 31, 1998.
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<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and reports of independent
accountants, all appearing in the accompanying Annual Report to Limited Partners
for the year ended December 31, 1998, are incorporated by reference in this Form
10-K:
- Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 1998, 1997 and 1996.
- Statements of Financial Condition as of December 31, 1998 and
1997.
- Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1998, 1997 and
1996.
- Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the Annual Report to Limited
Partners for the year ended December 31, 1998 is not deemed to be filed with
this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with this
report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during the
last quarter of the period covered by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 29, 1999 BY: /s/ Robert E. Murray
-----------------------------------
Robert E. Murray, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray March 29, 1999
---------------------------------------
Robert E. Murray, Director and
President
/s/ Mark J. Hawley March 29, 1999
---------------------------------------
Mark J. Hawley, Director
and Chairman of the Board
/s/ Joseph G. Siniscalchi March 29, 1999
--------------------------------------
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 29, 1999
--------------------------------------
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin March 29, 1999
--------------------------------------
Mitchell M. Merin, Director
/s/ Richard A. Beech March 29, 1999
--------------------------------------
Richard A. Beech, Director
/s/ Ray Harris March 29, 1999
--------------------------------------
Ray Harris, Director
/s/ Lewis A. Raibley, III March 29, 1999
----------------------------------------
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal
Accounting Officer
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<PAGE>
EXHIBIT INDEX
ITEM
3.01 Form of Limited Partnership Agreement of the Partnership, dated as of
July 31, 1997, is incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated November 10, 1997, filed with the
Securities and Exchange Commission pursuant to Rule 424(b)(3) under
the Securities Act of 1933, as amended, on November 18, 1998.
3.02 Certificate of Limited Partnership, dated July 31, 1997, is
incorporated by reference to Exhibit 3.02 of the Partnership's
Registration Statement on Form S-1 (File No. 333-33975) filed with
the Securities and Exchange Commission on August 20, 1997.
10.01 Management Agreement, dated as of December 31, 1997, among the
Partnership, Demeter Management Corporation, and Morgan Stanley
Commodities Management Inc. is filed herewith.
10.02 Commodity Futures Customer Agreement, dated as of December 31, 1997,
between Morgan Stanley & Co. Incorporated and the Partnership is
filed herewith.
10.03 Customer Agreement, dated as of December 31, 1997, among the
Partnership, Morgan Stanley & Co. International Limited and Morgan
Stanley & Co. Incorporated is filed herewith.
10.04 Subscription and Exchange Agreement and Power of Attorney to be
executed by each purchaser of Units is incorporated by reference to
Annex A of the Partnership's Supplement to the Prospectus, dated July
10, 1998, filed with the Securities and Exchange Commission pursuant
to Rule 424(b)(3) under the Securities Act of 1933, as amended, on
July 10, 1998.
10.05 Escrow Agreement, dated October 14, 1998, among the Partnership, Dean
Witter Reynolds Inc., and Chemical Bank is filed herewith.
13.01 December 31, 1998 Annual Report to Limited Partners is filed
herewith.
E-1
Exhibit 10.01
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, made as of the 31st day of December,
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. 333-33975) (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") 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 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 Partner 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.
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 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 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, 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:
(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.
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 December 1, 1997.
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 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.
<PAGE>
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: /s/ Mark J. Hawley
-------------------------------
Mark J. Hawley, President
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley
-------------------------------
Mark J. Hawley, President
MORGAN STANLEY COMMODITIES MANAGEMENT, INC.
By: /s/ Wayne D. Peterson
-------------------------------
Wayne D. Peterson, President
Exhibit 10.02
COMMODITY FUTURES CUSTOMER AGREEMENT
This Commodity Futures Customer Agreement ("Agreement"), dated as of
December 31, 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.
(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, 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 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 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 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 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.
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
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.
(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):
[ X ] 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)
(II) 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 ss.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 INITIALED, CUSTOMER WILL BE DEEMED TO HAVE
ELECTED TO HAVE ALL POSITIONS LIQUIDATED. THIS ELECTION MAY BE CHANGED AT ANY
TIME BY WRITTEN NOTICE.
<PAGE>
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: /s/ Mark J. Hawley
-----------------------------
Mark J. Hawley, President
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Jeffrey Jennings
-------------------------
Name: Jeffrey Jennings
Title: Principal
Acknowledged and Agreed
(as to Section 3(b), (c) and (d))
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
------------------------
Mark J. Hawley
Executive Vice President
REMINDER: PLEASE BE SURE TO INITIAL THE APPROPRIATE BOXES IN
SECTIONS 8(K)(1)(I)ABOVE.
EXHIBIT 10.03
CUSTOMER AGREEMENT
------------------
THIS CUSTOMER AGREEMENT (this "Agreement") made as of the 31st day
of December, 1997, by and among MORGAN STANLEY TANGIBLE ASSET FUND L.P., a
Delaware limited partnership (the "Customer"), MORGAN STANLEY & CO.
INTERNATIONAL LIMITED ("MSIL") and MORGAN STANLEY & CO. INCORPORATED ("MS &
Co.");
W I T N E S S E T H:
-------------------
WHEREAS, Customer, MSIL and MS & Co. wish to enter into this
Agreement to set forth the terms and conditions upon which MSIL will perform
brokerage services with respect to Client Contracts, Contracts and Transactions
for Customer through an account carried by MSIL on behalf and in the name of
Customer (the "Account").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Incorporation by Reference. The Non-Private Customer Agreement
annexed hereto is hereby incorporated by reference herein and made a part hereof
to the same extent as if such document were set forth in full herein. If any
provision of this Agreement is or at any time becomes inconsistent with the
annexed document, the terms of this Agreement shall control.
2. Charges. Notwithstanding any provision in the Non-Private
Customer Agreement to the contrary, Customer shall not be responsible to MSIL
for any commission or mark-up or mark-down or fee payable for the relevant
Transaction and/or any such other amounts with respect to the Account, but
rather all of MSIL's commissions, fees mark-ups, mark-downs and charges shall be
paid by MS & Co. and not by Customer.
3. Standard of Liability and Indemnity.
(a) Standard of Liability. MSIL 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 MSIL on behalf of
Customer which MSIL determines, in good faith, to be in the best interests of
Customer, unless such act, omission, conduct, or activity constituted misconduct
or negligence. Without limiting the foregoing, MSIL shall have no responsibility
or liability to Customer hereunder (i) in connection with the performance or
non-performance by any Exchange, Clearing House and/or Broker to MSIL of its
obligations in respect of any Contract or Transaction or property of Customer;
(ii) as a result of any prediction, recommendation or advice made or given by a
representative of MSIL whether or not made or given at the request of Customer;
(iii) as a result of MSIL'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 MSIL's obligations hereunder directly or indirectly
caused by the occurrence of any contingency beyond the control of MSIL
including, but not limited to, the unscheduled closure of an Exchange or
Clearing House 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, it being understood that MSIL 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 MSIL to comply with Market Requirements or
Applicable Law; or (vi) for any acts or omissions of those neither employed nor
supervised by MSIL. In no event will MSIL be liable to Customer for
consequential, incidental or special damages hereunder.
(b) Indemnification by Customer. Customer shall indemnify, defend
and hold harmless MSIL 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 MSIL on behalf of Customer, including, without limitation, any
demands, claims or lawsuits initiated by a limited partner (or assignee
thereof); provided that (i) MSIL 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 MSIL 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 MSIL
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
3. Customer shall make advances to MSIL 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 MSIL. MSIL 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 MSIL has approved such settlement)
incurred as a direct result of the activities of MSIL or its affiliates,
provided that the act, omission, conduct, or 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 3 by Customer to MSIL 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 MSIL contained in this
Agreement to the extent caused by such event. Likewise, the indemnities provided
in this Section 3 by MSIL 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 3, the term
"affiliate" of MSIL 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 MSIL; (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 MSIL; (iii) any
natural person, partnership, corporation, association, or other legal entity
directly or indirectly controlling, controlled by, or under common control with,
MSIL; or (iv) any officer or director of MSIL. Notwithstanding the foregoing,
"affiliates" for purposes of this Section 3 shall include only those persons
acting on behalf of MSIL and performing services for Customer within the scope
of the authority of MSIL, as set forth in this Agreement.
4. Termination. This Agreement may be terminated at any time by any
party upon ten (10) days' prior written notice to the other parties hereto. 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
broker.
5. Complete Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters referred to herein, and
no other agreement, verbal or otherwise, shall be binding as among the parties
with respect to such matters unless in writing and signed by the party against
whom enforcement is sought.
6. Assignment. This Agreement may not be assigned by any party
without the express written consent of the other parties.
7. Amendment. This Agreement may not be amended except by the
written consent of the parties and provided such amendment is consistent with
Customer's Limited Partnership Agreement. 8. Notices. All notices required or
desired to be delivered under this Agreement shall be sent to the following
addresses:
8. Notices. All notices required or desired to be delivered under
this Agreement shall be sent to the following addressess:
if to the Partnership:
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attention: Mark J. Hawley
if to MS & Co.:
MORGAN STANLEY & CO. INCORPORATED
One Pierrepont Plaza, 8th Floor
Brooklyn, New York 11201
Attention: Commodity Operations Manager
if to MSIL:
as set forth in the Non-Private Customer Agreement.
9. 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.
10. Headings. Headings of Sections herein are for the convenience of
the parties only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
By: Demeter Management Corporation
General Partner
By: /s/ Mark J. Hawley
------------------------------------
Mark J. Hawley
President
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
By: /s/ Robert C. Whitehand
-------------------------------------
Name: Robert C. Whitehand
Title: Managing Director
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Jeffrey Jennings
--------------------------------------
Name: Jeffrey Jennings
Title: Principal
<PAGE>
NON-PRIVATE CUSTOMER DOCUMENTS
(EXCHANGE-TRADED DERIVATIVES)
TABLE OF CONTENTS
Please read the contents of Part One before signing the Customer Signatures
pages in Part Three.
PAGE
PART ONE: NON-PRIVATE CUSTOMER AGREEMENT 3
(EXCHANGE-TRADED DERIVATIVES)
Chapter I Introduction 3
II Terms Applicable to Dealings 6
III Margin 8
IV Material Interests 9
V Powers and Exclusions of Liability 10
VI Authorisation 12
VII General 13
PART TWO: SCHEDULE 16
PART THREE: CUSTOMER SIGNATURE PAGES 19
Non-Private Customer Documents
Customers Domiciled in Luxembourg
Third Party Trading Authorisation
Certificates of Authority to Deal
Certificate of Trustees
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PART ONE
NON-PRIVATE CUSTOMER AGREEMENT
(EXCHANGE-TRADED DERIVATIVES)
Made in compliance with the Rules of The Securities and Future Authority Limited
("SFA")
THIS AGREEMENT is made as of the date specified on the first customer signature
page below
BETWEEN:
(A) You, as the client named on the customer signature page; and
(B) MORGAN STANLEY & CO. INTERNATIONAL LIMITED ("MSIL") AND/OR MORGAN
STANLEY SECURITIES LIMITED ("MSSL") both of 25 Cabot Square, Canary
Wharf, London E14 4QA. MSIL is regulated by SFA, and MSSL is regulated
by SFA and a member of the London Stock Exchange.
IT IS HEREBY AGREED AS FOLLOWS:
We will treat you as a NON-PRIVATE CUSTOMER regarding all investment business
regulated by the SFA which we carry on for or with you pursuant to this
Agreement other than for any business referred to below under "Market
Counterparties".
All investment business mentioned in Clause 2 below which we carry out with you
or on your behalf as a Non-Private Customer will be carried under the terms
and conditions set out below (as amended or supplemented from time to time)
and the Customer Documents.
MARKET COUNTERPARTS
Theterms of this Agreement and the Customer Documents will also apply to
investment business which we carry out with you or on your behalf if, in
respect of such business, you are a market counterparty.
CHAPTER 1 - INTRODUCTION
1. INTERPRETATION
In the Customer Documents, the words and phrases below have the following
meanings:-
"acting in due capacity" in relation to you means as beneficial owner or, where
some other person is beneficial owner, as trustee or agent for and (in
either case) with all requisite authorities from that other person;
"Applicable Law" includes without limitation
(a) Market requirements, and
(b) the rules, regulations, orders, directives, announcements,
decisions, procedures, terms, other requirements and/or customs
made, given or issued by, or published under the authority of any
Regulatory Body, all as amended, supplemented or replaced from time
to time;
"Approved Custodian" means such bank, financial institution or company approved
by us, or any nominee company or trust corporation which is a subsidiary
thereof;
"Asset" means currencies, Securities (including futures or option contracts),
deposits or physical assets;
"Associated Firm" means any company in the Morgan Stanley, Dean Witter, Discover
& Co. group of companies and, as the context requires, any other person
connected with us.
"Broker" means such member of an Exchange and/or Clearing House as is instructed
by us to enter, clear or settle any transaction on an Exchange;
"Charged Securities" means such Securities as
(a) with our agreement, you (or any person for your account) by way
of security have deposited with or transferred to or may
hereafter deposit with or transfer to us or our agents or
nominees (or with or to our or their order, account, direction or
control), wholly or partly in satisfaction of a demand for
Margin. We shall have sole discretion to determine the type,
amount and quality of the Securities that you may deposit or
transfer as Charged Securities;
(b) are or may at any time hereafter be held (in a clearance system or
otherwise)
(i) to our order by or for the account of an Approved Custodian
or
(ii) by, or to the order or, for the account of or under the
control or direction of us (or our agents or nominees) and in
either case which have, with our agreement, by way of security
been made subject to the terms of the charge in Clause 19.2;
"Clearing House" means any clearing house providing settlement or
clearing or similar services for, or as part of, an Exchange;
"Client Contract" means a futures or option contract between us and you
which is matched by an identical Contract;
"Client Money" means all initial and variation cash Margin, option
premiums and all other sums received from or due to you pursuant to the
Customer Documents which is "Client Money" within the meaning of the
Client Money Regulations;
"Client Money Regulations" means The Financial Services (Dedesignation)
Rules and Regulations (1994), The Financial Services (Client Money)
(Amendment) Regulations 1996 and the related client money rules in Chapter
4 of the rules of SFA;
"close out" means the entering into of a Contract equal and opposite to a
Contract previously entered into (and each matching a Client Contract) to
create a level position in relation to the Assets underlying the
Contracts, or in relation to the Contracts themselves, and fix the amount
of profit or loss arising from such Contracts and the corresponding Client
Contracts;
"Contract" means a futures or option contract entered into by us on an
Exchange or with or through a Broker pursuant to Clause 3.2;
"Customer Documents" means this Agreement, any notice (including but not
limited to any "Notice of treatment as a Non-Private Customer" or "Notice
of treatment as a Market Counterparty") and any Further Schedules
(including, without limitation, confirmations, contract notes and
statements) and additional documents relating directly to or indirectly to
the services provided under Clause 2 below and accompanying this Agreement
whether or not expressly incorporated in this Agreement and each as
amended and/or supplemented from time to time;
"Exchange" means any exchange, market or association of dealers in any
part of the world on or through which investments or currencies or assets
underlying, derived from or otherwise related directly or indirectly to
investments or currencies are bought and sold and includes, without
limitation, any automated trading system administered by an Exchange;
"FSA" means the Financial Services Act 1986 of the United Kingdom;
"Further Schedule" means any further schedule or notice issued by us to
you after the date of this Agreement;
"a futures or option contract" means a contract, for future delivery
and/or settlement, to (a) buy or sell an Asset and/or (b) pay or receive a
sum of money by reference to an index or formula (including without
limitation the price or value of any Assets);
"LCH" means the London Clearing House Limited;
"LIFFE" means the London International Financial Futures and Options
Exchange and/or, as the context requires, LIFFE Administration and
Management;
"Margin" means the amount of cash (including premiums) as may from time to
time be demanded by us from you to protect us against any loss or risk of
loss on present, future or contemplated Contracts and/or Client Contracts;
"Margin Account" means a client bank account with such approved bank or
banks as we may from time to time determine which (in the case of any such
account in which Client Money is held) is a margined transaction bank
account within the meaning of the Client Money Regulations;
"Market Requirements" means
(a) the constitution, bye-laws, rules, regulations, orders,
directives, announcements, decisions, procedures, standard terms
and customs made, issued by, or published under the authority of
any Exchange, Clearing House, self-regulating organisation or
market of which we or any relevant Associated Firm or any Broker
is a member, or to whose authority we are or any of them is
subject, directly or indirectly, or where the relevant
transaction is executed and/or cleared, and
(b) any other requirements of the relevant Exchange, Clearing House or
Broker (including without limitations any and all agreements and
deeds entered into by us or any relevant Associated Firm or Broker
with or in favour of the relevant Broker, Exchange or Clearing
House,
all as amended, supplemented or replaced from time to time;
"Open Contract" means a Contract which has not been closed out and which
has not yet matured;
"Regulatory Body" means any Exchange, Clearing House, governmental,
quasi-governmental or other department, agency or self-regulating
organisation of which we are a member which has direct or indirect
regulatory or enforcement authority or responsibility over us (or to any
relevant Associated Firm or Broker), or any investment business conducted
by us or such relevant Associated Firm or Broker for or with you;
"Rules" means the SIB Statements of Principle, the rules of SFA, the
Client Money Regulations and the Common Unsolicited Calls Regulations;
"Securities" means securities, investments and financial instruments;
"SIB" means the Securities and Investments Board, the central
regulatory authority for United Kingdom investment business;
"Taxes" means taxes, duties, imposts and fiscal and regulatory charges of
any nature, wherever and whenever imposed, including without limitation
value added taxes, stamp and other documentary taxes and Exchanges and
Clearing House and investment industry levies; and
"Transaction" means the entering into of a Contract, closing out or
effecting delivery and/or settlement of a Contract (which terms shall
include exercise or allocation of an option Contract) pursuant to the
Customer Documents.
References herein to "we" or "us" shall mean MSIL and/or MSSL and/or each
or any of our Associated Firms or members of a relevant Exchange to whom
we have delegated pursuant to Clause 3 and/or (in Clause 9, 21 and 22) any
associate of MSIL and/or MSSL, and references to "our" shall be construed
accordingly.
Any words or expressions to which a meaning is given in the Rules, shall,
except where the context indicates otherwise, have the same meaning in the
Customer Documents.
Words importing the singular shall, where the context permits, include the
plural and vice versa. The expression "person" shall include any firm,
partnership, association of persons and body corporate and any such
persons acting jointly and the personal representatives or successors in
title of any such person. Where the Customer comprises two or more persons
the liabilities and obligations under the Customer Documents shall be
jointly and several. References to "writing" shall include telex,
facsimile transmission or transmission of text by any other electronic
means. References to statutory provisions, rules and regulations shall
include any modification or re-enactment re-making thereof.
All headings are for convenience only and shall not affect the
interpretation of the Customer Documents.
2. SERVICES TO BE PROVIDED
2.1 The services which we may provide to you are general investment and
dealing services in financial commodity options, futures and contracts for
differences traded on an Exchange, together with related research, advice,
clearing and settlement facilities and any other services agreed between
us. The agreement does not cover any investment business which is
regulated by the Bank of England, provided that, other than clauses
4.2(b), 16, 28 and 39.1, this Agreement shall apply to such business
subject to The London Code of Conduct (as amended from time to time by the
Bank of England).
2.2 We shall not undertake discretionary transactions for you unless you have
signed and returned to us a Discretionary Trading Authorisation.
3. DELEGATION
3.1 We may arrange for any of our Associated Firms or any other member of a
relevant Exchange to carry out the services which we agree to provide you
pursuant to this Agreement.
3.2 We may designate a Broker to execute, clear and/or settle any transaction
subject to the Rules and to such conditions as we may impose.
4. INTRODUCTION OF BUSINESS
4.1 We may introduce you to any Associated Firm outside the United Kingdom and
you hereby authorise us on any such Associated Firm's behalf to expressly
invite it to call you with a view to entering into investment transactions
from time to time with or for you. If such Associated Firm agrees to do
so:
(a) you shall have a direct relationship solely with such Associated
Firm and, in any dispute between, or claim against, you and/or any
such Associated Firm, you shall have no recourse to us; and
(b) you may place orders with us for the Associated Firm to execute,
subject to its terms. In any of these transactions, we will act as
agent for the Associated Firm, and nothing we do in connection with
such transactions will make us your agent.
4.2 For any transaction or other investment services provided to you by such
Associated Firms, only the following provisions of this Agreement will
apply as between us and you, as the context may require and each as
amended from time to time;
(a) Clauses 1, 2, 4, 5.2, 8, 9, 21, 22, 26, 29-31, Chapters VI and VII
and Schedule 1; and
(b) in the case of the latest Notice of Treatment sent by us to you as a
non-private customer or market counterparty, paragraphs 1 and 2 of
that Notice.
5. DEALINGS AND RULES, REGULATIONS AND RESTRICTIONS
5.1 All Client Contract and Transactions shall be subject to applicable Market
Requirements and Applicable Law.
(a) if there is a conflict between (i) the Customer Documents and (ii)
any such requirements and/or law, the latter will prevail;
(b) we are entitled to take or omit to take any action we consider fit
or appropriate to ensure compliance with such laws and requirements;
all actions we take will be binding on you.
5.2 We are authorised by you at any time to do any thing or disclose any
matters concerning you or your dealings (whether or not pursuant to the
Customer Documents) if required by any Applicable Law, or which we are
requested to do or disclose by any Regulatory Body.
CHAPTER II - TERMS APPLICABLE TO DEALINGS
6. CONTRACTS AND CLIENT CONTRACTS
6.1 If we carry out a Transaction on your request or pursuant to Clause 24
below:
(a) a corresponding Client Contract shall come into existence on the
purchase or sale of a Contract or, as the case may be exercise and
allocation of an option Contract in respect of which the underlying
Asset is a futures Contract. The Client Contract will terminate when
the Contract is closed out, settled or delivered; and
(b) you will have the obligations in relation to the Transaction and the
Client Contract that are mentioned in this Agreement and the
Customer Documents.
6.2 For each Client Contract, we will have made or placed an equivalent
Contract on the floor of the relevant market (by open outcry on the floor
of, or on an automated trading system administered by, a futures and
options Exchange or the futures or options market of any other Exchange)
or will have entered into an equivalent Contract with or through a Broker
pursuant to Clause 3.2 and we shall thus have an interest in the
Transaction.
6.3 Any Contract which we acquire as a result of your instructions will,
unless the position has been closed out, result in you becoming liable to
us in relation to the corresponding Client Contract for actual delivery of
its underlying Asset or payment of the relevant price, under and subject
to Market Requirements.
7. ACCEPTANCE AND EXECUTION OF ORDERS
7.1 Every order which we may take is accepted and executed, and every Client
Contract shall be entered into, on the basis that we contract with you
only as a principal and not as an agent for you unless otherwise required
by Market Requirements.
7.2 If we have to carry out a Transaction as agent on an Exchange where we
would not deal as principal then, for that Transaction, you agree to be
bound by all Market Requirements of that Exchange and you undertake to
sign and deliver to us any further Customer Documents as we may require.
Unless we otherwise require, Market Requirements of that Exchange will be
incorporated herein.
8. AGGREGATION OF ORDERS
We may aggregate your orders with our own (in-house) orders, orders of our
associates, connected customers and/or other customers. This aggregation
may operate on some occasions to your advantage and on others to your
disadvantage.
9. RESEARCH RECOMMENDATIONS
9.1 We are under no obligation to provide research reports and recommendations
to you and, where provided, you may not receive them at the same time as
our other customers.
9.2 Our employees, officers and directors may receive, know about, act upon or
use such research reports and recommendations before they are received by
our customers. We are under no obligation to take account of these reports
or recommendations when we deal with or for you.
10. CLIENT ACTIONS
10.1 You will take any action and give us in relation to the corresponding
Client Contract any information that we ask for in relation to the
delivery, settlement, and, if a purchased Option Contract, the exercise or
allocation, of any Contract which has not been closed out.
10.2 Notwithstanding Clause 10.1 above and regardless of any right of equity,
set-off or counterclaim which you may have or allege against us, any of
our Associated Firms or any person connected with us, you will promptly
take all action necessary (including the supply of information) to enable
us to settle or deliver any Contract which you have instructed us to open
and which has not been closed out at the time such Contract is to be
performed.
11. CLOSING OUT
11.1 Subject in particular to Clauses 3 to 8 and 33.3, Market Requirements and
any further requirements we notify you of, you may at any time before the
date for performance of a Client Contract request to us to close out the
matching Contract or, if a purchased option Contract, exercise that
Contract in accordance with its terms. If the closing out or exercise
results in a sum of money being due to us, the relevant Exchange, Clearing
House and/or Broker, we shall notify you of that amount, which will be
payable by you immediately.
11.2 Unless we in our absolute discretion determine otherwise or we accept
instructions from you to do otherwise, equal and opposite Contracts and
Client Contracts (closing out being determined on a "first in, first out"
basis) will automatically fix the amount of profit or loss in relation
thereto.
12. ALLOCATION
If the relevant Clearing House and/or Broker does not allocate long Open
Contracts at maturity direct to a specific account of ours or to short
Client Contracts (or vice versa) we may allocate those Contracts at random
or in a way which seems to us to be most equitable as between clients. If
dealings on our own account are involved at the same time, allocation will
be to all clients first, and we will receive no allocation until all
relevant Client Contracts have been satisfied.
13. DELIVERY TO YOU
When we receive any amounts and/or Assets (including documents of title),
pursuant to a Transaction, provided that you have fulfilled all your
obligations under this Agreement and subject to Clause 15, 18.3, 22.2 and
24.2, we will deliver such amounts and/or Assets to you in respect of the
corresponding Client Contract, after deduction of any Charges and Taxes.
14. OPTION PREMIUMS
In respect of an option Contract matching a Client Contract:-
(a) if you are a buyer, you will pay to us on demand any premium payable
under the rules of the relevant Exchange and/or Clearing House ("the
premium"); and
(b) if you are a seller, when we receive premium from the relevant
Exchange, Clearing House and/or Broker we will pay it into the
Margin Account as Margin for your account. You may be required to
pay further margin in respect of the relevant Contract and
corresponding Client Contract.
15. ALTERATION OF CONTRACTS
If the relevant Exchange, Clearing House or Broker requires any terms or
conditions of any Contract matching a Client Contract (including the
Assets subject to it) to be altered, we may take all actions as may, in
our absolute discretion, be necessary, desirable or expedient to comply
with such requirements or to avoid or mitigate loss resulting from any
alteration. All actions taken by us will be binding on you, and any
alteration will be deemed incorporated into the corresponding Client
Contract. We shall notify you of any alteration (in advance, where
reasonably practicable).
16. CHARGES
16.1 Our charges will either be a commission or a mark-up or mark-down on the
fee payable by us to any Exchange, Clearing House and/or Broker for the
relevant Transaction and/or such other amounts as may be agreed from time
to time. Our charges vary according to the transaction and customer, so
the charges you pay for any particular transaction may differ from those
another customer may pay in a similar transaction.
16.2 We may share charges with our Associated Firms or other third parties or
receive remuneration from them for transactions carried out with or for
you. Details of any such arrangements will be made available to you on
your written request.
17. INTEREST
17.1 We will not pay interest to you on any Client Money or other money which
we receive from you or hold on your behalf unless we separately agree to
do so.
17.2 Interest will accrue on the amount that you have not paid us when due
until payment (as well after as before judgement). Such interest will be
calculated at the rate not to exceed 2 per cent annum above the base rate
or prime rate (or local equivalent thereof) of the bank (or if there is
more than one bank, the one determined by us in our absolute discretion)
at which we maintain our principal securities settlement or other relevant
account in the relevant currency. If such rate cannot be ascertained for
any reason or is insufficient in our sole judgement to compensate us for
our loss or expense, such interest shall be calculated at the rate per
annum conclusively determined by us to be equal to the loss of interest we
suffer or, as applicable, our cost of funding at prevailing markets rates
the amount you owe from such sources and for such periods as we may
decide.
CHAPTER III - MARGIN
18. MARGIN PAYMENT AND CLIENT MONEY
18.1 You will pay to us upon demand such sums as we may in our absolute
discretion require from time to time as Margin in respect of all present,
future or contemplated Contracts and Client Contracts.
18.2 As soon as practicable we will pay or credit all Client Money or other
Margin to a Margin Account at an approved bank (which may be any of our
Associated Firms that we select. The currency of the Margin you pay to us
shall be the currency of the relevant underlying Contract or, if agreed by
us and you, another currency. Settlement of all transactions (including
Margin Payments thereon) will be made in the currency of the relevant
underlying Contract and you bear all risk and cost in respect of any
conversion of currency in a Margin Account. Any such conversion will be
made by us at such reasonable market rate or rates as we will determine.
18.3 You agree that we will hold your interest under the trust declared under
the Client Money Regulations and all other Client Money which is in a
Margin Account on trust in the following order of priority:
(a) for ourselves to the extent of all amounts which are or may become
due to us or payable by us on your behalf under or pursuant to the
Customer Documents; and, thereafter
(b) for you to the extent of any surplus which is due to you after the
payment of all amounts due to or payable by us under paragraph (a)
above.
18.4 We may withdraw Client Money and/or any other money held in a Margin
Account to pay to any Broker, Clearing house, Exchange or other parties
all margins, premiums and other sums on futures and options contracts
demanded or due from us in respect of our clients, and for any other
purposes allowed under the Client Money Regulations.
18.5 Subject to the terms of the Client Money Regulations, any loss incurred or
default by any Exchange, Clearing House or Broker in respect of Margin
paid by us shall be borne by all of our clients at the date of such loss
pari passu, in proportion to their respective entitlement to monies in the
relevant Margin Account at that time.
18.6 Where you agree to effect transactions, or if you give instructions to us
to effect transactions in a jurisdiction outside the United Kingdom, then
we may need to appoint an intermediate broker to undertake those
transactions. In order to meet the margin obligations to the relevant
Exchange or Clearing House, we may need to pass your money to an
intermediate broker as if it were held in a client bank account in the
United Kingdom. You should note that in the event of a shortfall arising
on the money available to meet the claims of segregated clients, your
claim will be restricted to the money held in our client bank accounts in
respect of transactions carried on through that intermediate broker and to
any money received from the intermediate broker relating to those
transactions.
19. MARGIN SECURITIES
19.1 Amounts you owe to us by way of Margin under Clause 18 may, in our
absolute discretion, be satisfied by way of deposit or transfer of Charged
Securities as security. We may, in our discretion, permit you to deliver
by way of Margin Charged Securities other than those accepted by the
relevant Exchange or Clearing House as Margin. Our charges for providing
this facility to you will be separately agreed with you. This Clause 19
will apply to all Securities delivered by way of Margin. Charged
Securities will not (unless we agree otherwise) be registered in your
name.
19.2 As continuing security for all your liabilities and obligations under the
Customer Documents, you acting in due capacity (and with the intent that
the security so constituted shall be a security in our favour extending to
all beneficial interests in the assets hereby charged and to any proceeds
of sale or other realisation thereof, including any redemption monies paid
or payable in respect thereof) hereby assign, charge and pledge to us,
free of all adverse interests whatsoever by way of first fixed charge, all
Charged Securities. Each Approved Custodian will hold to our order all
Charged Securities held by it for its account.
19.3 You will forthwith execute on request all transfers, assignments,
mortgages, charges and other documents, give notices and directions and do
any other acts and things as we may specify, to enable us or our nominee
to be registered as the owner of or otherwise obtain legal title to any
Charged Securities, to perfect our rights with respect to the security
referred to in this Clause 19, to secure further your liabilities and
obligations, to facilitate the exercise of our rights hereunder, or to
satisfy any Market Requirements.
19.4 You will not, without our prior written consent, at any time during the
term of this Agreement, grant or agree to grant any option over, sell,
assign or transfer, or agree to attempt to sell, assign or transfer, or
create, agree or attempt to create, or allow to exist any charge, lien, or
other encumbrance on or over any or all of the Charged Securities, except
for the charge set out above.
19.5 We will hold all Charged Securities for the purposes of satisfying any and
all of your obligations and liabilities under the Customer Documents. We
may, without prior notice, free of any interest therein of yours, any
client of yours or any other person for whom you are trustee or agent:
(a) deposit, charge, pledge or otherwise create security over the
Charged Securities with, to the order of or in favour of any
Exchange, Clearing House or Broker
(i) on such terms as such Exchange or Clearing House may
prescribe, and
(ii) on terms that, subject to the Rules, the Broker may deal with
the Charged Securities in accordance with Market Requirements
and any agreement made with us;
The relevant Exchange, Clearing House or Broker may enforce and
retain such deposit, charge, pledge or other security to satisfy any
obligations of yours or ours to the Exchange, Clearing House or
Broker; and
(b) register, sell, realise, charge or otherwise deal with the Charged
Securities on such terms (including as to the consideration received
therefore) as we may in our absolute discretion think fit (without
any prior reference to you where practicable, but in any case with
subsequent notice to you, and without being responsible for any loss
or diminution in price). Any consideration received will be credited
to the Margin Account.
If Charged Securities are denominated in a different currency from that in
which any relevant cost, damages, loss, liability or expense is
denominated, we may convert any amount realised at such rate as we
determine at the time.
19.6 Where we deposit, pledge or charge Charged Securities under Clause
19.5(a), the part of the proceeds of any sale of those securities which
exceeds your margin requirements to us will be subject, in the event of
our default, to the pooling rules under the Client Money Regulations. This
means that money held in our Client Money bank accounts is pooled and
distributed pari passu to meet the claims of all customers who are
entitled to protection under the Client Money Regulations. If there is a
shortfall in an overseas Client Money bank account, a separate pool may be
formed for all customers whose money was held in that account.
19.7 When we are satisfied that all costs, damages, losses, liabilities and
expenses incurred under the Customer Documents have been satisfied,
discharged or otherwise released, we may re-transfer or, re-deliver any
certificates or documents of title relating to you upon request.
19.8 You agree that if we re-transfer or re-deliver fungible Securities
(whether Charged Securities or otherwise) to you, these need not be the
identical Securities originally deposited, charged, or transferred to us,
and you will accept Securities of the same class and denomination or other
Securities which then represent the same.
19.9 Pending the re-transfer or re-delivery we will credit any income received
in respect of Charged Securities, net of any Taxes payable by us (whether
by withholding or otherwise) on the income, to the Margin Account. You may
direct us as to the exercise of any voting or other rights attached to or
conferred on any Charged Securities.
19.10 Unless the context otherwise requires, references in this Clause 19 to
"we" or "us" includes references to any person holding any of the
Securities or in whose name any of them may be registered.
20. LENDING/BORROWING
Subject to Clauses 19 and 24 and the Rules we are not authorised to:
(a) borrow money on your behalf against the security of Securities; or
(b) lend any documents of title or certificates evidencing title to any
third party unless we have first entered into a written agreement
with you giving us such authorisation.
CHAPTER IV - MATERIAL INTERESTS
21.1 The relationship between you and us is as described in the Customer
Documents. Neither that relationship nor the services we provide nor any
other matter will give rise to any fiduciary or equitable duties on our
part which would prevent or hinder us from doing business for or with you
(whether acting as principal or agent), doing business with associates,
connected customers, and other investors and generally acting as provided
in the Customer Documents.
We may give advice or make recommendations to you, enter into Transactions
for or with you or act as your agents or provide any other service
pursuant to Clause 2 notwithstanding that we may have a relationship,
arrangement or interest that is material in relation to the Transaction,
advice or recommendation concerned and/or the Asset underlying any
Contract or Client Contract, including (but not limited to) the following
circumstances were:-
(a) we have acted, are acting or are seeking to act as a financial
adviser or lending banker to the issuer (or any of its affiliated
companies) of the Assets the subject of a Transaction or have
advised or are advising any person in connection with a merger,
acquisition or take-over by or for such issuer (or any of its
affiliated companies);
(b) we have sponsored or underwritten or otherwise participated in, or
are sponsoring or underwriting or otherwise participating in the
Assets the subject of a Transaction;
(c) we have a holding, dealing, or market-making position or may
otherwise be trading or dealing in the assets the subject of a
Transaction or in investments (including without limitation any
futures or option contracts) or assets of any kind underlying,
derived from or otherwise directly or indirectly related to such
investments;
(d) we have received or are receiving payments or other benefits for
giving business to the firm with which your order is placed;
(e) we have been or are an associate of the issuer (or any of its
affiliated companies) of the Assets the subject of a Transaction;
(f) we are matching your transaction with that of any other client
(including without limitation us, any Associated Firm, connected
customer or other customer of us) either by acting on behalf of such
person as well as on behalf of you ("agency cross") or by executing
matching transactions at or about the same time with you and such
persons ("back-to-back principal trade").
21.2 No further disclosure to you is required of any relationship, arrangement
or interest which falls within one of the circumstances referred to in
Clause 21.1 above, and we will be entitled to retain any profit or benefit
arising as if no such relationship, arrangement or interest existed.
21.3 We will not be obligated to disclose to you any matter, fact or thing,
whether or not such disclosure would or might be a breach of any duty
owned by us to any other person, and we shall not be obliged to disclose
to you any matter, fact or thing which comes to the notice of any of our
employees, officers or directors if the employee, officer or director who
is dealing for or with you is unaware of such matter, fact or thing.
21.4 We may in our absolute discretion decline to carry out a Transaction for
or with you or to give advice or make a recommendation to you where we may
have an interest in respect thereof which will or may conflict with your
interests.
CHAPTER V - POWERS AND EXCLUSIONS OF LIABILITY
22. EXCLUSION AND RESTRICTION OF LIABILITY
22.1 Nothing in the Customer Documents shall exclude or restrict any liability
which we have, under the Rules, the FSA or the regulatory system
established by the FSA, and which may not be excluded or restricted
thereunder.
22.2 We shall not be liable to you in respect of any relevant Client Contract,
any matching Contract or otherwise if and to the extent that the relevant
Exchange, Clearing House and/or Broker has ceased for any reason
(including netting-off our positions with it) to recognise the existence
of any Contract or fails to perform or close out any Contract or defaults
in respect of margin or collateral. This will not affect your obligations
and liabilities hereunder in respect of Contracts which you have
instructed us to open and which have not been closed out.
22.3 Neither we nor any of our employees, officers or directors will be liable
for any loss resulting from any act or omission made under or in relation
to or in connection with the Customer Documents, except where such loss
results from any bad faith, wilful default, fraud or negligence of us or
any of our employees, officers or directors.
22.4 Neither we nor our employees, officers or directors will be liable for any
consequential or special damages howsoever arising.
22.5 We will not be liable for the solvency, acts or omissions of:-
(i) any nominee, custodian or other third party by whom any Charged
Securities (or other investments) pursuant to Clause 19 above; or
(ii) any bank with which we maintain any client bank account; or
(iii) any other third party with whom we deal or transact business or who
is appointed by us in good faith on your behalf unless such nominee,
custodian, bank or other third party is an Associated Firm, but we
will make available to you, when and to the extent reasonably so
requested, any rights that we may have against such person,
provided, that we have selected any nominee, custodian or other
third party in good faith and with due care.
22.6 If any claim is made by or against us or any of our employees, officers or
directors against or by any third party in connection with this Agreement,
any Contract acquired or transaction effected on your instructions or a
corresponding Client Contract or arising out of any act or omission by us
or our employees , officers or directors, you hereby agree to provide us
or our employees, officers or directors you will provide us with any
assistance which may be reasonably asked to give.
22.7 Neither we nor any of our directors, officers or employees will have any
responsibility or liability whatsoever for:-
(a) any advice or opinion which may be given to you concerning the
Customer Documents; or
(b) any expense, loss or damage suffered by you as a result of (i) our
carrying out your instructions, if we acted in accordance with such
instructions or otherwise acted reasonably, or (ii) properly
carrying out or failing to carry out any actions
which we are permitted but not required to carry out under the Customer
Documents.
23. INDEMNITY
You will fully indemnify us, our Associated Firms and any of our or their
employees, offices or directors (each an "Indemnified Person") against all
costs, expenses, damages, liabilities and losses which any such
Indemnified Person may suffer or incur directly or indirectly as a result
of, or in connection with, or arising out of the Customer Documents or any
Transaction effected on your instructions or arising out of any act or
omission by such Indemnified Person or by any other person permitted under
the Customer Documents, and against any claims which may be made against
any such Indemnified Person in the performance of the powers or duties of
any such Indemnified Person (including in any such case any cost of
enforcing the same). The indemnity will not extend to any Indemnified
Person if such costs, expenses, damages, liabilities and losses result
primarily from the bad faith, wilful default, fraud or negligence of such
Indemnified Person.
24. MORGAN STANLEY'S POWERS
24.1 If we have determined, on our absolute discretion, that you have not
performed (or may not be able or willing in the future to perform) any of
your obligations to us under or pursuant to the Customer Documents, we may
(with prior notice only if reasonably practicable) take such steps as we
consider necessary or desirable to comply with, perform, cancel or satisfy
any of our obligations to the relevant Exchange, Clearing House or Broker
in respect of any Contract or Contracts acquired on your instructions, or
otherwise to protect our position, including closing out and/or performing
any or all such Open Contracts. For such purpose, we may:
(a) buy or sell the Asset underlying any Open contract in any manner
including to or from ourselves or any Connected Company;
(b) buy or sell futures or options contracts;
(c) open new long or short positions in order to establish a spread or
straddle;
(d) borrow, buy or sell any currency;
(e) apply any Margin;
(f) cancel, terminate or otherwise liquidate any Transaction between you
and us; and/or
(g) set off any obligation to you against any of your obligations to
us;
in each case so that all amounts spent by us in connection with any such
actions that are in excess of the amount held in the Margin Account for
you shall be paid by you to us on demand.
24.2 On the exercise of our rights under Clause 24.1 above:
(a) we are not obliged to deliver to you in respect of any corresponding
Client Contract the underlying Asset or any money received or
receivable on closing out until all of your liabilities to us are
satisfied or discharged to our satisfaction, and all amounts you owe
us are paid, and:
(i) any such underlying Asset may be registered in our name or
that of our nominee (which may be an Associated Firm), and we
or such nominee may be the custodian of the documents of title
or certificates evidencing title to such Asset;
(ii) if such amounts are not paid and/or liabilities to us are not
satisfied or discharged to our satisfaction, we may sell or
realise the underlying Asset upon terms (including the
consideration received therefore) as we in our absolute
discretion think fit, without being responsible for any loss
or diminution in price; any consideration received therefore
shall be credited to the Margin Account; and
(iii) any income in respect of such Asset paid to us, net of any
Taxes payable by us (whether by withholding or otherwise) in
respect of such income, shall be credited to the Margin
Account; and
(b) all amounts owing to us hereunder will become immediately payable.
24.3 We do not have to close out Contracts or take any other action in respect
of Open Contracts acquired on your instruction. In particular (subject to
Clause 24.1 above), no failure by you to pay Margin when demanded will
require us to close out any relevant Contract to which such Margin is
attributable.
24.4 We may convert any funds realised pursuant to this Clause 24 at such rate
and into such currencies as we may reasonably consider appropriate at the
relevant time.
25. CERTIFICATES CONCLUSIVE
Our certificate that any of our rights under the Customer Documents have
been exercisable, or as to any amount payable or due under the Customer
Documents, will be conclusive and binding on you, absent manifest error.
No purchaser, pledgee or transferee of Charged Securities will need to
enquire whether any such power has become enforceable, or to establish the
proper application of any money paid.
26. TIME OF THE ESSENCE
Time shall be of the essence in relation to all matters arising under or
pursuant to the Customer Documents in respect of Transactions or Client
Contracts or otherwise in respect of your dealing in futures or options.
27. RETENTION OF TITLE
Title to Securities purchased by you (whether upon exercise of an option
Client Contract or otherwise) will pass only when you pay the amount due
for such purchase.
28. LIEN AND SET-OFF
As further security for all of your obligations hereunder (but subject to
the Rules) we shall have the right to retain (and apply as set out below)
all of your property which we or any of our Associated Firms hold for any
purpose, including but not limited to, property held in any other of your
accounts with us or any of our Associated Firms, whether or not we have
made any advances in connection with such property. From time to time we
may, without notice, transfer and re-transfer any money or other property
between any such accounts. You shall execute such documents and take such
other action as we shall reasonably request in order to perfect our rights
with respect to any security referred to in this Clause 28.
29. FORCE MAJEURE
We shall not be liable to you for the non-performance of any of our
obligations under this Agreement due to any cause beyond our reasonable
control, including without limitation any breakdown or failure of
transmission or communication or computer facilities, postal or other
strikes or similar industrial action, or the failure of any relevant
Exchange, Clearing House or Broker to perform its obligations for any
reason.
30. TAXES
30.1 All amounts which you must pay under the customer Documents do not include
any applicable Taxes. You must pay any Taxes to us at the same time as the
amounts to which those Taxes relate.
30.2 You are fully responsible for paying all other Taxes due and the making of
all claims in relation thereto whether for exemption from withholding
taxes or otherwise, for filing any and all tax returns, and for providing
any relevant tax authorities with all necessary information in relation to
any investment business we carry on for or with you or any investments
which we hold on your behalf.
30.3 We will use all reasonable endeavours to send you any tax documents which
we receive relating to you or to any monies or investments we hold under
the Customer Documents.
31. ADVICE
You rely on your own judgement when you give orders or instructions to us.
We do not provide any legal or tax advice. Accordingly, if you consider it
necessary you should consult your own legal or tax advisers.
CHAPTER VI - AUTHORISATION
32. DUE AUTHORISATION
32.1 You represent, warrant and undertake to us that:-
(a) in any investment business we carry on for or with you under this
Agreement, you are and will be acting either as principal or as
agent;
(b) you have and will have full power and capacity and have taken all
necessary corporate and other action, and in the case of a
trustee of a particular trust you have and will have full power
and capacity under the relevant trust deeds, to enter into and
perform your obligations under this Agreement (including without
limitation the powers and capacity to grant us the charge and any
other security herein provided for) and to confer on us the
rights and powers contained in or given pursuant to this
Agreement. Without limitation:
(i) your execution, delivery and performance of this Agreement
will not violate or conflict with any Applicable Law or your
constitution or any charge, trust deed, contract or other
instrument to which you are a party or which is binding upon
you or your assets; and
(ii) the terms and conditions contained in this Agreement will be
your legal, valid and binding obligations;
(c) you are (or some other person for whom you are trustee or agent
and from whom you hold and will at all times hold all requisite
authorities is) and will at all times during the continuance of
this Agreement be the sole beneficial owner of all Charged
Securities. In each case such Charged Securities are and shall
be fully paid and free from all mortgages, charges, liens and
other encumbrances other than those which may arise in our
favour. No other person has or will have any rights or interests
therein and you are lawfully entitled to create in our favour the
security evidenced or intended to be evidenced hereby;
(d) when further Securities become Charged Securities or otherwise
subject to the charge in Clause 19.2 above you shall be deemed to
have made a further and separate representation and warranty in the
terms of paragraph (c) above;
(e) you and any person designated by you have and shall have, due
authorisation to act in all respects in relation to this
Agreement and each Transaction, Contract and Client Contract and,
in relation thereto, you have obtained, shall obtain and shall
maintain in effect all necessary authorisations, consents or
approvals (including without limitation any required by any
Regulatory Body) and shall comply with the terms of the same and
with all Applicable Law, and shall provide us with copies or
other evidence of such consents or approvals and such evidence of
compliance with such law as we may reasonably require.
32.2 You agree that, in all investment business which we carry on for or with
you where you are acting as agent, only you will be our customer and we
shall have no responsibility to any principal of yours as our customer.
32.3 If you are acting as agent for, or on behalf of another in relation to any
Contract and/or Client Contract carried out under this Agreement then:
(a) you have and will have full power and capacity to enter into this
Agreement and to perform all obligations pursuant hereto to be
performed by your principal under this Agreement;
(b) you are expressly authorised by your principal to instruct us in
relation to such Contract and/or Client Contract in accordance with
the terms and conditions of this Agreement; and
(c) you will be, and you will procure that your principal will be,
jointly and severally liable, each as if a principal, to us in
respect of all obligations and liabilities to be performed by you
pursuant to and in respect of any such Contract and/or Client
Contract.
32.4 You agree to supply us with such financial information about yourself (or
any immediate, intermediate or ultimate holding company) as we may
reasonably request.
33. AUTHORISED INSTRUCTIONS
33.1 You may from time to time notify us in writing of the names of those
persons who are authorised to give instructions on your behalf. Until we
receive notice in writing to the contrary, we shall be entitled to assume
that any of those persons have full and unrestricted power to give us
instructions on your behalf.
33.2 We are entitled to rely and act without further enquiry on any
instruction, notice, demand, request or information (by whatever means
transmitted and whether or not in writing) which purports or appears to
come and which we reasonably believe in good faith to come from you or
from any person who is or appears to us to be a person designated in the
attached Certificate (if any) or otherwise authorised by you for the
purpose of the Customers Documents or from someone acting on your behalf,
and we shall not be liable for any actions taken or omitted to be taken in
good faith pursuant thereto nor shall we be under any obligation to
confirm instructions before they are executed or the accuracy or
completeness of any such information before it is acted or otherwise
relied upon.
33.3 We are not under any obligation to execute or otherwise enter into any
particular Transaction, or to accept and act in accordance with any order
or instructions, nor shall we be obliged to give any reasons for declining
to do so.
33.4 If we decline to carry out a Transaction we will promptly notify you. We
will have no liability for any expense, loss or damage incurred by you by
reason of any omission so to notify you, otherwise than as a result of our
bad faith, wilful default or negligence; in no event will be have any
liability for any consequential or special damage.
CHAPTER VII - GENERAL
34. INFORMATION
34.1 You warrant, represent and undertake that:
(a) you will notify us promptly in writing of any significant change in
your financial position (including changes in assets, net assets or
called-up share capital); and
(b) in entering into this Agreement, we have not made and you are not
relying upon any statements, representations, promises or
undertakings whatsoever that are not contained in this Agreement;
34.2 You will:
(a) provide us on request all information in your agent's possession or
control of you or your agents as may be required to be filed or
disclosed pursuant to Applicable Law, in each case regarding us,
you, the Customer Documents or any Contract, Client Contract;
(b) file (within any applicable time periods) such reports, letters and
other communications as may be required from time to time by any
Regulatory Body relating to you or us, you, the Customer Documents,
or any Contract Client Contract; and
(c) send a copy of all such reports referred to in paragraph (b) above
to us promptly upon such filing, and we may send a copy of the same
to any relevant Exchange, Clearing House member or Broker.
35. CONFIRMATION AND STATEMENTS
As soon as practicable after we have carried out a Transaction we shall
confirm details of that Transaction to you. We will provide to you at
agreed intervals a statement of your overall trading (and Margin)
positions with us at the then available current market price.
36. TELEPHONE RECORDING
We may use voice record orders, instructions or conversations we receive
by telephone. Our voice records shall be prima facie evidence of the order
instructions or conversations recorded, and you agree that such records
shall be admissible as such evidence in any Proceedings (as defined in
Clause 42.2).
37. NOTICES
37.1 Any instructions or requests you give, or demands or confirmations by us
may be given in writing or, where permitted under the Rules, orally. Any
notice in writing (including without limitation any contract note,
confirmation or demand) may be given by posting or delivering it or by
sending it by telex, facsimile transmission or any other electronic
transmission.
37.2 Any notice of demand given by post will be sent first class, or where
appropriate, by air mail and will, subject to Clauses 37.3 and 37.4 below,
be deemed given seven business days after posting and any notice given by
delivery or by telex, facsimile transmission or any other electronic
transmission will be deemed given upon delivery or transmission (as the
case may be), and in proving service of notice it shall be sufficient to
prove, in the case of delivery by post, that the letter was correctly
addressed and was posted first class or, where appropriate, air mail or,
in the case of delivery otherwise than by post, that it was delivered to
the correct address or, in the case of transmission by facsimile or telex,
that it was transmitted to the correct number and (in the case of telex)
received the proper answer back.
37.3 Any contract note, confirmation or account statement which we give in
writing shall be deemed correct, conclusive and binding on you if not
objected to in writing within the earlier of five business days of
despatch by us or one business day of your receipt thereof.
37.4 Communications from you under Clause 33.1, 33.2 and 40.1 and any objection
pursuant to Clauses 37.3 and 39.2 shall be deemed received only if
actually delivered.
38. CORRECT ADDRESSES AND NUMBERS
Our address for serving notices is shown at the front of this document,
and our facsimile and telex numbers are:
Fax No: 0171 425 8990/0171 513 8990
Telex No: 8812564MORSTAN
We may change any of these details by written notice to you. Unless you
tell us otherwise we will assume that your correct address and facsimile
and telex numbers are those shown on any communication we receive which we
reasonably believe to come from you.
39. ENTIRE AGREEMENT AND AMENDMENTS
39.1 This Agreement, together with all other Customer Documents, represent the
entire terms on which we will undertake for or with your investment
business in Exchange-traded futures and options contracts which is
regulated by SFA. Any alteration to the Customer Documents must be agreed
by us in writing.
39.2 We may amend or supplement our arrangements with you by sending you
Further Schedules or a revised Agreement or by written agreement with you.
Any amendment or supplement will, unless we have received your written
objection, take effect twenty-one days after despatch to you or on such
later date as we may specify, and will apply in respect of any commitment
or transaction entered into by us after that date. Any amendment or
supplement that elates to or results from a change of Applicable Law may
take effect immediately or otherwise as we may specify.
40. TERMINATION
40.1 Either party can terminate this Agreement without penalty by giving notice
in writing, which will take effect seven days after the notice is given or
after any other period specified in the notice.
40.2 Termination of this Agreement will not affect the rights or liabilities of
either party in respect of Contracts and any corresponding Client
Contracts for which you have already given an instruction which we have
accepted, or in respect of which there is an outstanding liability with
us. Any termination will be without prejudice to our rights to all Margin
and amounts in the Margin Account. The Customer Documents will apply to
these liabilities until all Contracts have been closed out, settled or
delivery effected and all liabilities discharged.
40.3 Termination of this Agreement will not affect any provision of the
Customer Documents which is intended to survive termination.
41. ASSIGNMENT AND TRANSFER
41.1 The Customer Documents shall be binding upon, and inure to the benefit of,
MSIL and its successors and assigns.
41.2 MSIL may at any time cause all or any part of its rights, benefits and/or
obligations under the Customer Documents to be novated to any subsidiary
or holding company (as defined in section 736 of the Companies Act 1985)
of MSIL or a subsidiary of any such holding company or any company
otherwise affiliated with MSIL (any such company being a "Connected
Company") by delivering to you a written substitution notice. Upon
delivery of a substitution notice to you:
(a) to the extent that in the substitution notice MSIL seeks to cause
its rights and/or its obligations hereunder to be novated, you and
MSIL shall be released from further obligations to each other
hereunder and their respective rights against each other shall be
cancelled;
(b) you and the Connected Company shall acquire the same rights and
assume the same obligations between themselves as they would have
acquired or assumed by it as a result of such novation.
41.3 You may not assign any of your rights under the Customer Documents, any
Contract or Client Contract without our prior written consent. Any
purported assignment of your rights will be invalid.
42. MISCELLANEOUS
42.1 If any term or part of the Customer Documents is void, voidable or
unenforceable, the rest of the Customer Documents will not be affected.
42.2 Our rights, remedies, powers and privileges in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law.
Our failure to exercise, or delay in exercising, any of our rights,
remedies, powers or privileges will not operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof.
43. GOVERNING LAW
43.1 The Customer documents and all Transactions thereunder, shall be governed
by and construed in accordance with English Law.
43.2 Any suit action, claim or proceeding (together in this Clause referred to
as "Proceedings") arising out of or in connection with the Customer
Documents or any Transaction thereunder may be brought in the English
courts. Any objection that you or we may have now or in the future to the
laying of the venue of any Proceedings in any English court, and any claim
that any Proceedings have been brought in an inconvenient forum, is
waived.
43.3 If you are entitled in any jurisdiction to claim immunity for yourself or
for your property or assets from service of process, jurisdiction, suit,
judgement, execution, attachment (whether before judgement, in aid of
execution or otherwise) or legal process in respect of your obligations
under this Agreement, or to the extent that in any jurisdiction there may
be attributed to you or your property or assets such immunity (whether or
not claimed), you waive such immunity to the fullest extent under the laws
of such jurisdiction.
43.4 You irrevocably and generally consent in respect of any legal action or
Proceedings arising out of or in connection with the Customer Documents or
any Transaction to the giving of any relief or the issue of any process in
connection with such action or Proceedings, including, without limitation,
the making, enforcement or execution against any property, asset, or
revenues whatsoever (irrespective of their use or intended use) of any
order or judgement which may be made or given in such action or
Proceedings.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into on the date written in
Section A of the Customer Signature pages below.
Signed on behalf of
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
-and-
MORGAN STANLEY SECURITIES LIMITED
By:
Name: R.S. Rosenthal
Title: Company Secretary
<PAGE>
PART TWO
SCHEDULE
ADDITIONAL PROVISIONS FOR LIFFE
The provisions of this Schedule apply where the Contract is a futures or options
contract subject to the Rules of LIFFE.
1. GENERAL PROVISIONS
1.1 Morgan Stanley & Co. International Limited is an individual clearing
member of LIFFE. Morgan Stanley Securities Limited is a non-clearing
member of LIFFE.
1.2 You accept that in relation to LIFFE:
(a) any allocation pursuant to Clause 12 of this Agreement shall be made
as follows. We shall allocate as between clients, first, on the
basis of a first in first out (FIFO) basis and, secondly, pro rata
in respect of Open Contracts for which there is a corresponding
Client Contract;
(b) any dispute arising from or relating to this Agreement, insofar as
it relates to Contracts or Clients Contracts subject to the rules of
LIFFE, and any dispute arising from or relating to any such Contract
or Client Contract as aforesaid and made hereunder shall, unless
resolved between us, be referred to the arbitration rules of LIFFE,
or to such other organisation as LIFFE may direct before either of
us resorts to the jurisdiction of the courts (other than to obtain
an injunction or an order for security for a claim). Clause 43 of
this Agreement shall be subject to the agreement contained in this
sub-paragraph; and
(c) subject to the arbitration clause in sub-paragraph (b) above,
disputes arising from this Agreement or from Contracts or Client
Contracts made under or pursuant to this Agreement shall (for our
benefit) be subject to the exclusive jurisdiction of the English
courts to which both parties hereby irrevocably submit.
2. EXCLUSION OF LIABILITY
2.1 As a member of LIFFE and pursuant to the Rules of LIFFE, we are required
to include a provision dealing with exclusion of liability in our
agreement with you. The following provisions and paragraph 3.1 shall apply
without prejudice to the generality of Clauses 22, 23, 27 and 28 of this
Agreement with you.
2.2 LIFFE Administration and Management (the "Exchange") is obliged under the
FSA to ensure that business conducted by means of its market facilities is
conducted in an orderly manner and so as to afford proper protection to
investors. We and the Exchange wish to draw to your attention that, inter
alia, business on the market may from time to time be suspended or
restricted, or the market may from time to time be closed for a temporary
period or for such longer period as may be determined in accordance with
LIFFE's rules on the occurrence of one or more events which require such
action to be taken in the interests of, inter alia, maintaining a fair and
orderly market. Any such action may result in our being unable, and
through us you and your clients (if any) may from time to time be
prevented from or hindered in entering into contracts in accordance with
LIFFE's rules as a result of a failure of some or all market facilities.
We and the Exchange wish to draw the following exclusion of liability to
your attention and to the attention of your clients (if any). Unless
otherwise expressly provided in LIFFE's rules or in any other agreement to
which LIFFE is party, we and LIFFE shall not be liable to you or any
client of yours for loss (including any indirect or consequential loss
including, without limitation, loss of profit), damage, injury or delay,
whether direct or indirect, arising from any of the circumstances or
occurrences referred to above, or from any act or omission of the
Exchange, its officers, employees, agents or representatives, under
LIFFE's rules or pursuant to the Exchange's obligations under statute, or
from any breach of contract by or any negligence howsoever arising of the
Exchange, its officers, employees, agents or representatives.
2.3 Paragraphs 2.1 and 2.2 of this Schedule shall be construed as applying to,
and having the same effect in relation to, business which we transact, or
which we would transact, but for one of the events referred to in this
Paragraph occurring, on other futures and options markets.
3. LINKED CONTRACTS
DEFINITIONS
"LCH" means The London Clearing House
Limited;
"LIFFE" means LIFFE Administration and
Management;
"LIFFE Contract" means an Exchange Contract to
which a Linked Participating
Exchange Contract is linked;
"Linked LIFFE Contract" means an Exchange Contract made
available for trading on the
market pursuant to a Link, which
is specified as such in a General
Notice published from time to time
by the Exchange and is linked to a
Participating Exchange Contract;
"Linked Participant Exchange means a Participating Exchange
Contract" Contract specified as such in a
General Notice published from time
to time by the Exchange and is
linked to an Exchange Contract;
"Participating Exchange" means an exchange which has
concluded one or more agreements
in relation to a Link with the
Exchange and/or LCH pursuant to
which:
(i) contracts in the terms of one
or more Linked LIFFE Contracts
are to be transferred to, for
clearing by, such exchange or
its clearing house; or
(ii) contracts in the terms of a
Linked Participating Exchange
Contract are to be transferred
to, for clearing by, LCH. The
term
"Participating Exchange" shall include any clearing house
which from time to time provides
clearing services to such exchange;
"Participating Exchange Contract" in respect of a
Participating Exchange, means a
class of contract permitted to be
made by Participating Exchange
Members under Participating Exchange
rules.
GENERAL PROVISIONS
3.1 EXCLUSION OF LIABILITY
We and LIFFE Administration and Management ("LIFFE") wish to draw to your
attention that LIFFE shall have no liability whatsoever to any member or
client in contract, tort (including, without limitation, negligence),
trust, as fiduciary or under any other cause of action (except in respect
of gross negligence, wilful default or fraud on its part), in respect of
any damage, loss, cost or expense of whatsoever nature suffered or
incurred by any member or client, as the case may be, as a result of: any
suspension, restriction or closure of the market administered by either a
Participating Exchange or LIFFE, whether for a temporary period or
otherwise, or as a result of a decision taken on the occurrence of a
market emergency; any failure by a Participating Exchange, LIFFE or LCH to
supply each other with data or information in accordance with arrangements
from time to time established between all or any of them; the failure of
communications facilities or technology supplied, operated or used by
either a Participating Exchange, LIFFE or LCH for the purposes of the
Link; any event which is outside its or their control; any act or omission
of either a Participating Exchange (where a Participating Exchange is
acting otherwise than in connection with its clearing function) or LIFFE
in connection with any Participating Exchange Contract, Linked LIFFE
Contract or Linked Participating Exchange Contract or any act or omission
of a Participating Exchange, LIFFE, or LCH (as the case may be) in
connection with the operation of the Link or the arrangements for the
transfer of contracts.
3.2 GOVERNING LAW
This agreement and all contracts in the terms of LIFFE Contracts made
under this agreement shall be subject to and construed in accordance with
English Law.
3.3 MARGIN AND CLIENT MONEY/ASSETS
Following the transfer of a contract in the terms of a Linked LIFFE
Contract and the creation of a contract in the terms of a Participating
Exchange Contract or prior to the transfer of a contract in the terms of a
Linked Participating Exchange Contract and the creation of a contract in
the terms of a LIFFE Contract (as the case may be), margin requirements
will be determined in accordance with the rules of the Participating
Exchange rather than LIFFE Rules. Any money or assets held in any country
other than the UK may be subject to the applicable law of that country
rather than UK client money and other assets rules, and you should satisfy
yourself that this is acceptable to you before instructing us to transact
any such business.
PROVISIONS RELATING TO OUTWARD TRANSFERS OF LINKED LIFFE CONTRACTS
3.4 RULES OF LIFFE
All contracts in the terms of a Linked LIFFE Contract made on LIFFE shall
be subject to the Rules of LIFFE as from time to time in force.
3.5 TRANSFER
We shall endeavour to secure the transfer through the relevant Link of
each contract in the terms of a Linked LIFFE Contract made between us
which is intended for transfer. Upon confirmation by the relevant
Participating Exchange of receipt of trade/position details from LCH,
rights and obligations under such contract, save for outstanding
obligations with respect to fees and margin and those rights and
obligations referred to in the Rules of LIFFE and the Regulations of LCH,
shall be discharged and there shall arise simultaneously a contract in the
terms of a Participating Exchange Contract between us. The contract in
terms of a Participating Exchange Contract shall be subject to the rules
of the relevant Participating Exchange and shall not be subject to the
provisions of this agreement.
3.6 DELAYED TRANSFER
In the event that, on any LIFFE trading day, LCH is unable for whatever
reason to transmit details of all contracts in the terms of a Linked LIFFE
Contract, or the relevant Participating Exchange is unable to receive or
acknowledge receipt of all such details, any such contract made between us
on that day shall remain as an undischarged contract in the terms of a
Linked LIFFE Contract (but without prejudice to any default provisions
agreed between us which may be operated to discharge such contract),
subject to the Rules of LIFFE and the General Regulations and Default
Rules of LCH as from time to time in force, until such time as transfer
can be achieved.
3.7 IMPOSSIBILITY OF TRANSFER
If it is not possible for whatever reason for details of contracts in the
terms of the Linked LIFFE Contract to be transmitted by LCH, or for the
relevant Participating Exchange to receive or acknowledge receipt of all
such details, so that transfer of such contracts cannot occur on any
particular day, and any circumstances preventing such transfer continues
so that the Link is suspended or terminated, any such contract made
between us during any such period shall remain as an undischarged contract
in the terms of a Linked LIFFE Contract, subject to the Rules of LIFFE and
the Regulations of LCH as from time to time in force, and shall be
performed in accordance with its terms or may be closed out or otherwise
discharged, in accordance with the Rules and any agreement reached between
us.
PROVISIONS RELATING TO INWARD TRANSFERS OF LINKED PARTICIPATING EXCHANGE
CONTRACTS
3.8 TRANSFER
In respect of each contract in the terms of a Linked Participating
Exchange Contract made between us which is intended for transfer through
the relevant Link, rights and obligations under such contract, save for
outstanding obligations with respect to fees or margin and any other
rights or obligations referred to in the Rules of the Participating
Exchange, shall be discharged upon confirmation by LCH of receipt of
trade/position details from the Participating Exchange and there shall
arise simultaneously a contract in the terms of a LIFFE Contract between
us. The LIFFE Contract shall be subject to the Rules of LIFFE and the
General Regulations and Default Rules of LCH.
3.9 DELAYED TRANSFER
In the event that, on any Participating Exchange trading day, the relevant
Participating Exchange is unable for whatever reason to transmit details
of all contracts in the terms of a Linked Participating Exchange Contract,
or LCH is unable to receive or acknowledge receipt of all such details,
any such contract made between us on that Participating Exchange on that
day shall remain an undischarged contract in the terms of a Linked
Participating Exchange Contract (but without prejudice to any default
provisions agreed between us which might be operated to discharge such
contract), subject to the rules of the Participating Exchange as from time
to time in force, until such time as transfer can be achieved.
3.10 IMPOSSIBILITY OF TRANSFER
If it is not possible for whatever reason for details of contracts in the
terms of a Linked Participating Exchange Contract to be transmitted by the
relevant Participating Exchange, or for LCH to receive or acknowledge
receipt of all such details, so that transfer of such contracts cannot
occur on any particular day, and any circumstance preventing such transfer
continues so that the Link is suspended or terminated, any such contract
made between us on that Participating Exchange during that period shall
remain as an undischarged contract in the terms of a Linked Participating
Exchange Contract, subject to the rules of the Participating Exchange as
from time to time in force and shall be performed in accordance with its
terms or may be closed out or otherwise discharged in accordance with the
Rules and any agreement reached between us.
<PAGE>
PART THREE
NON-PRIVATE CUSTOMER DOCUMENTS
(EXCHANGE-TRADED DERIVATIVES)
CUSTOMER SIGNATURES
To: Morgan Stanley & Co. International Limited
Morgan Stanley Securities Limited
The undersigned agrees to the terms of the Non-Private Customer Agreement
(Exchange-traded Derivatives) including without limitation, the indemnities,
exclusions and restrictions of duties and liabilities in your favour therein and
any additional enclosures, all of which we have read and understood.
Date:
---------------------- ----------------------
Signed:
---------------------- ----------------------
Name(s):
---------------------- ----------------------
Print
Authorised Signatory(ies)
for and on behalf of
---------------------- ----------------------
Print Name of Client (Non-Private Customer)
All notices or other documents pursuant to this booklet shall be served at the
following address:
Address:
For the attention of:
Telex and Answerback:
Fax:
Corporate Registered Office
(if different from above)
CUSTOMERS DOMICILED IN LUXEMBOURG ONLY
I/We confirm that I/we specifically and expressly consent to Clause 9, 21, 22,
23, 32, 33, 34, 39, 40 and 42 of the above Agreement for the purposes of Article
1135-1 of the Civil Code and Article 1 of the Protocol annexed to the Convention
on Jurisdiction and the Enforcement of Judgements in Civil and Commercial
Matters signed in Brussels on 27th September 1968.
Signed:
<PAGE>
THIRD PARTY TRADING AUTHORISATION
THIS DOCUMENT SHOULD BE COMPLETED ONLY BY CUSTOMERS WHO HAVE SIGNED THE
CUSTOMER SIGNATURE PAGES BUT WHO WISH TO DELEGATE AUTHORITY TO AN INVESTMENT
ADVISOR, INVESTMENT MANAGER OR OTHER THIRD PARTY.
To: Morgan Stanley & Co. International Limited
Morgan Stanley Securities Limited
Dear Sirs
I/We refer to the Non-Private Customer Agreement (Exchange-traded Derivatives)
set out on the preceding pages of this booklet which is supplemented hereby.
Terms used herein have the same meanings as ascribed to them in the Agreement
and any customer documents referred to therein.
I/We hereby authorise the individual or organisation named as agent (in the
"Agent's Details" section below) and hereinafter referred to as the "Agent" as
my/our agent to purchase, sell and trade generally in, exercise, and otherwise
enter into and carry out transactions and give other instructions relating to
financial and commodity futures, options and contracts for differences (and any
related transactions including without limitation, foreign exchange transactions
to facilitate any of the foregoing), on margin or otherwise, for my/our account
and risk and in my/our name or number on your books, including trades which will
or may result in me/us having short position in any such investment. I/We
authorise you to accept and act on:
(a) any and all orders and instructions received in connection with
such transactions; and
(b) any other instructions of the Agent in any respect concerning my/our
account(s) with you (including, without limitation, delivering or
otherwise as the Agent may order or direct, and whether or not any
such delivery or other transfer is to be made against payment, or
any such payment is to be made against delivery or other transfer).
In all matters or things mentioned above or otherwise concerning or incidental
to any of my/our account(s) with you, the Agent is authorised to act for me/us
and in my/our behalf in the same manner and with the same effect as I/we
myself/ourselves might or could do. The Agent may from time to time appoint (in
writing, effective upon receipt thereof by you) individuals to sign documents
and give instructions pursuant to this authorisation.
I/We acknowledge that any Transaction entered into by the Agent pursuant to the
above authority will be governed by the customer documents and that I/we shall
have all the rights and obligations in respect thereof as are contained in the
customer and, without prejudice to the generality of the foregoing, I/we shall
indemnify you and hold you harmless from, and pay you promptly on demand, any
and all losses, costs, expenses, damages and liabilities whatsoever (including
consequential and special damage) arising directly or indirectly from any such
Transaction or debt balances due thereon.
This authorisation and indemnity is in addition to, and in no way limits or
restricts, any rights which may have under the customer documents and any other
agreement or agreements entered between us.
I/We acknowledge that neither you nor any of your associates nor any of your or
their directors, offices or employees will be liable for any loss howsoever
suffered by me/us pursuant to this authorisation unless loss arises from your
negligence, bad faith, wilful default, or fraud. I/We have carefully examined
the provisions of the documents by which I/we have given trading authority or
control over my/our account(s) to the Agent and understand fully the obligations
which I/we have assumed by executing that document. I/We understand that neither
you nor any of your associates are in any way responsible for any loss to me/us
occasioned by the actions of the Agent, and you do not, by implication or
otherwise, endorse the operating methods of the Agent. We further understand
that to the extent that we now or hereafter give to the Agent authority to
exercise any of my/our account(s) I/we do so at my/our own risk.
This authorisation may be terminated by me/us at any time with effect from
actual receipt by you of written notice of termination. Termination of this
authorisation shall not affect any liability resulting from transactions
initiated prior to such termination. This authorisation and indemnity shall
inure to your benefit and that of your successors and assigns.
Yours faithfully
Signed:
---------------------- ----------------------
AGENT'S DETAILS (PLEASE PRINT)
Name of Agent: ----------------------------
Address of Agent: ----------------------------
Telephone: ----------------------------
Telex and Answerback: ----------------------------
Fax: ----------------------------
<PAGE>
CERTIFICATES OF AUTHORITY TO DEAL
FOR USE BY COMPANIES AND PARTNERSHIPS
Certificate of Company Secretary/Authorised Partner*
Extracts from the Minutes of the Meeting of the Board of
Directors/Partners/Management Comimttee* of ___________________ (the
"Company/Partnership") held at ______________ on _______________ 19___
IT WAS RESOLVED THAT:
(1) the Company/Partnership* is by its Memorandum and Articles of
Association/Partnership Agreement/constitutional documents* empowered to
trade in financial and commodity futures, options and contracts for
differences ("investments") and to enter into and perform the Non-Private
Customer Agreement between the Company and Morgan Stanley & Co.
International Limited and Morgan Stanley Securities Limited concerning
investment and dealing and related services (including such transactions
in such investments);
(2)+ trading or dealing in financial and commodity futures, options and
contracts for differences and/or other investments pursuant to the
Non-Private Customer Agreement would be carrying on the ordinary business
of the Partnership;
(2/3*) any one/two* of the undermentioned designated persons be hereby
authorised, on behalf of the Company/Partnership*
(a) to accept and sign the Non-Private Customer Agreement;
(b) to sign all documents in connection with, and give all instructions
relating to, trading in investments and otherwise howsoever under
the pursuant to the Non-Private Customer Agreement; and
(c) to delegate authority to one or more persons to sign any documents,
give any instructions and do anything else permitted to be signed,
given or done by such designated person.
DESIGNATED PERSONS
Name Position Signature
I certify that the above is a true extract from the Minutes of a duly convened
and held meeting of the Board of Directors/Partners/Management Committee* of the
Company/Partnership*
Signed:
Name:
Title: Secretary/Director/Authorised Partner*
Date:
- -----------------------
* Delete as appropriate
+ Partnerships
Note: Companies incorporated outside the UK, British Dependent Territories and
Commonwealth may, instead of extract minutes comprising a director's
resolution, provide a certificate signed by a duly authorised officer of
the Company (and showing the officer's name and title) and comprising both
paragraphs (1) and (2) as applicable to companies but preceded by the
words "This is to certify that".
Corporate general partners of a limited partnership should provide a
certificate as a company but including appropriate additional references
to the partnership (including paragraph 2 for partnerships).
<PAGE>
CERTIFICATE OF TRUSTEES
(FOR USE BY TRUSTEES)
Extracts from the Minutes of a Meeting of the trustees of
- -----------------------------------------------
(the "Trust") held at ___________________ on _________________ 19___
IT WAS RESOLVED THAT all the Trustees accept and authorise the signature on
behalf of each of them of the Non-Private Customer Agreement between the
Trustees and Morgan Stanley & Co. International Limited and Morgan Stanley
Securities Limited concerning transactions in financial and commodity futures,
options and contracts for difference and that, in connection therewith:
(1) The Trustees, after taking legal advice, were satisfied that they were
empowered by the Trust Deed(s) constituting the Trust to enter into and
perform the Non-Private Customer Agreement and all liabilities and
obligations attaching to the "Private Customer" (as defined) thereunder;
(2) The exercise of all rights and privileges of the "Non-Private Customer"
(as so defined) under the Non-Private Customer Agreement would be carried
out only in accordance with the said powers contained in the Trust Deed(s)
constituting the Trust and in particular after obtaining all proper and
requisite investment advice;
(3) The Trustees were satisfied that they were empowered by the said Trust
Deed(s) to delegate the requisite powers and pursuant to that power any
one/two* of the undermentioned persons be hereby authorised, on behalf of
the Trustees:
(a) to sign the Non-Private Customer Agreement and all documents in
connection with, and give all instructions relating to, the
Non-Private Customer Agreement; and
(b) to delegate authority to one or more persons to sign any documents,
give any instructions and do anything else permitted to be signed,
given or done by such designated person;
DESIGNATED PERSONS
Name Position Signature
(4) The Trustees would give to Morgan Stanley & Co. International Limited and
Morgan Stanley Securities Limited written notice in the terms of
sub-paragraph (3) above each time there was an alteration in the persons
authorised as referred to in such sub-paragraph.
I certify that the above is a true extract from the Minutes of a duly convened
and held meeting of all the Trustees of the Trust.
Signed: ------------------------ ------------------------
Name: ------------------------ ------------------------
Title: Chairman of the Trustees/Authorised Trustee*
------------------------ ------------------------
Date: ------------------------ ------------------------
- -------------------
* Delete as appropriate
Exhibit 10.05
ESCROW AGREEMENT
October 14, 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 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 December 1, 1997, January 2, 1998, and February 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.
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 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 uncollectible (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 uncollectible. Subject to the foregoing, you shall promptly
notify the Parties of any uncollectible check, draft, or other collection item
deposited with you hereunder and shall promptly return such uncollectible item
to the Depositor, in which case you shall not be liable to pay any interest on
the subscription funds represented by such uncollectible 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 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 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.
<PAGE>
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: /s/ Mark J. Hawley
----------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
----------------------------
Mark J. Hawley
Executive Vice President
Accepted:
THE CHASE MANHATTAN BANK
By: /s/ Paul Gilkeson
----------------------------
Name: Paul Gilkeson
Title: Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Morgan Stanley Tangible Asset Fund L.P. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 26,519,891
<SECURITIES> 0
<RECEIVABLES> 78,722<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,962,970<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,962,970<F3>
<SALES> 0
<TOTAL-REVENUES> (11,239,913)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,303,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,543,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,543,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,543,631)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $78,722.
<F2>In addition to cash and receivables, total assets include net
unrealized loss on open contracts of $635,643.
<F3>Liabilities include redemptions payable of $895,547, accrued
brokerage fees of $81,222, accrued management fee of $55,632 and
accrued service fees of $22,253.
<F4>Total revenues include realized trading revenue of $(11,870,063),
net change in unrealized of $(635,643) and interest income of $1,265,793.
</FN>
</TABLE>
