<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended: October 31, 1997
Transition Report Pursuant to Section 13
---
or 15(d) of the Securities Exchange Act of 1934
[No Fee Required]
Commission File Number: 0-9202
THE FUTURE FUND
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3033727
------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o HEINOLD ASSET MANAGEMENT, INC.
440 South LaSalle
20th Floor
Chicago, Illinois 60605
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 663-7500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
Indicate by check mark whether the registrant (1) 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 is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-----
The registrant is a limited partnership and, accordingly, has no voting stock
held by nonaffiliates or otherwise.
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PART I
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Item 1. Business.
(a) General development of business. The Future Fund (the "Partnership")
is a limited partnership organized on November 30, 1978 pursuant to a Limited
Partnership Agreement (the "Limited Partnership Agreement") and under the
Uniform Limited Partnership Act of the State of Illinois. On July 31, 1987,
the Partnership elected to be governed under the Illinois Revised Uniform
Limited Partnership Act. The Partnership engages in speculative trading of
futures and forward contracts.
Heinold Asset Management, Inc., a Delaware corporation, is the General
Partner of the Partnership and, in that capacity, performs various
administrative services. The General Partner was organized in 1982 to serve as
the general partner and pool operator for public and private commodity pools
sponsored by Heinold Commodities, Inc., an affiliate. Until March 31, 1996, the
General Partner was a wholly owned subsidiary of Geldermann, Inc., an Illinois
corporation ("Geldermann"). On March 31, 1996, the General Partner became a
wholly owned subsidiary of E.D. & F. Man Inc., a New York corporation with
headquarters in New York, New York. References herein to the "General Partner"
refer to Heinold Commodities, Inc. for the periods prior to November 1, 1988
and to Heinold Asset Management, Inc. for periods on and after November 1,
1988.
Until June 1, 1995, Geldermann acted as the Partnership's futures
commission merchant or commodity broker. On that date, E.D. & F. Man
International Inc. (the "Commodity Broker") replaced Geldermann as the
Partnership's commodity broker. The General Partner and the Commodity Broker
perform various services related to the Partnership's trading pursuant to a
Customer Agreement.
The General Partner invested $128,000 in the Partnership at the outset of
trading and purchased additional Units for $6,500 during fiscal year 1985. The
net asset value of the General Partner's interest in the Partnership, after the
redemption of 583 Unit-equivalents for $355,239 on October 1, 1988, 379
Unit-equivalents for $248,362 on November 1, 1991 and 111 Unit-equivalents for
$91,757 on October 31, 1994, was $235,510 as of October 31, 1997.
The Partnership's trading manager from the inception of trading until
August 1, 1988 had been Millburn Partners, a New Jersey partnership. On August
1, 1988, Millburn Ridgefield Corporation, a Delaware corporation whose sole
shareholders consisted of the former partners of Millburn Partners, became the
commodity trading advisor for all public commodity pools previously managed by
Millburn Partners.
Effective January 1, 1990, the General Partner replaced Millburn
Ridgefield Corporation as the Partnership's trading manager with Baldwin
Financial Corporation, a Delaware corporation. The Management Contract with
Baldwin Financial Company was assigned to MC Baldwin Financial Company as of
January 1, 1992. MC Baldwin Financial Company served as trading manager for
the Partnership until December 31, 1995.
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Effective January 1, 1996, the General Partner entered into a Trading
Manager Agreement whereby it assumed the role of trading manager for the
Partnership (the "Trading Manager"). The Partnership is a multi-advisor
commodity pool and the Trading Manager allocates the assets of the Partnership
among several trading advisors to direct the Partnership's futures and forward
trading. References to the Trading Manager prior to January 1, 1996, refer to
MC Baldwin Financial Company and on and after January 1, 1996 to Heinold Asset
Management, Inc.
The Trading Manager receives a Management Fee at an annual rate of 4% of
the average month-end Net Asset Value, as defined, of the Partnership. The
Trading Manager will also receive an incentive fee equal to 20% of any New
Trading Profit attributable to each trading advisor to be calculated and paid
quarterly or annually.
On April 1, 1996, the Partnership, pursuant to an exemption from the
Commodity Futures Commission (the "CFTC"), was permitted to cease trading
nd-alone basis. On that date, the Partnership elected to continue to allocate a
portion of its assets to managed accounts with commodity trading advisors and
to trade the remaining assets through participation in a series of private
general partnerships ("Account Partnerships") formed together with other pools
of which the General Partner acts as general partner. Only pools of which the
General Partner acts are permitted to participate in these Account
Partnerships, and all such pools share pro rata in the profits and losses of
the Account Partnerships based on the capital which each pool contributes to
each such Account Partnership. Because the Account Partnerships combine the
assets of numerous pools, they make it possible for even the smaller pools to
have access to a number of commodity trading advisors without need of meeting
each commodity trading advisors' minimum account size requirements. Although
the General Partner has agreed to various incremental accounting procedures,
the operation of the Account Partnerships should be effectively transparent to
the Unitholders. As of December 1, 1997, all of the Partnership's assets were
allocated to the Account Partnerships.
The Partnership shall pay commodity brokerage commissions to the Commodity
Broker at an annual rate of 7% of month-end Net Assets per year, plus National
Futures Association ("NFA") and give-up fees.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"), commodity
exchanges and futures trading are subject to regulation by the CFTC. The
Futures Association, a "registered futures association" under the Act, is the
only non-exchange self-regulatory organization for futures industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers." The Act requires "commodity pool
operators," such as the General Partner, "commodity trading advisors," such as
the Trading Manager and the Trading Advisors, and commodity brokers or "futures
commission merchants," such as the Commodity Broker, to be registered and to
comply with various reporting and record keeping requirements. The General
Partner, the Trading Advisors, and the Commodity Broker are all members of the
NFA. The CFTC may suspend a commodity pool operator's or commodity trading
advisor's registration if it
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finds that its trading practices tend to disrupt orderly market conditions or
in certain tuations. In the event that the registration of the General
Partner as a commodity pool operator or the Trading Advisors' registrations as
commodity trading advisors were terminated or suspended, the General Partner
and the Trading Advisors would be unable to continue to manage the business of
the Partnership, select the Trading Advisors and direct the Partnership's
futures and forward trading, respectively. Should the General Partner's
registration be suspended, termination of the Partnership might result.
As members of the NFA, the General Partner, the Trading Manager, the
Trading Advisors and the Commodity Broker are subject to NFA standards relating
to fair trade practices, financial condition and customer protection. As the
self-regulatory body of the futures industry, the NFA promulgates rules
governing the conduct of futures industry professionals and disciplines those
professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and certain
futures exchanges have established limits on the maximum net long or net short
position which any person may hold or control in particular futures contracts.
The CFTC has adopted a rule requiring all domestic futures exchanges to submit
for approval speculative position limits for all futures contracts traded on
such exchanges. Many exchanges also limit the changes in futures contract
prices that may occur during a single trading day. The Partnership may trade
on foreign commodity exchanges which are not subject to regulation by any
United States government agency.
(b) Financial information about industry segments. The Partnership's
business constitutes only one segment, speculative trading of futures and
forward contracts for financial reporting purposes. The Partnership does not
engage in sales of goods or services. The Partnership's revenue, operating
profit and total assets for each of the five fiscal years in the period ended
October 31, 1997 are set forth under "Item 6. Selected Financial Data."
(c) Narrative description of business.
---------------------------------
(1) See Items 1(a) and (b) above.
(i) through (xii) -- not applicable.
(xii) -- the Partnership has no employees.
(d) Financial information about foreign and domestic operations and
export sales. The Partnership does not engage in sales of goods or services.
See "Item 1(b). Financial information about industry segments."
Item 2. Properties.
The Partnership does not own any properties. Under the terms of the
Limited Partnership Agreement, the General Partner performs the following
services for the Partnership:
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(1) Manages the business of the Partnership. Pursuant to this authority,
the General Partner has entered into a Management Agreement with the
Partnership (under which the Trading Manager will serve as trading manager and
will retain trading advisors who will have complete discretion with respect to
determination of the Partnership's trading decisions) and a Customer Agreement
with the Commodity Broker (pursuant to which the Commodity Broker executes all
trades on behalf of the Partnership based on instructions of the trading
advisors selected by the Trading Manager).
(2) Maintains the Partnership's books and records, which Limited Partners
or their duly authorized representatives may inspect during normal business
hours for any proper purpose upon 10 days' written notice to the General
Partner.
(3) Furnishes each Limited Partner with a monthly statement describing
the performance of the Partnership which sets forth aggregate incentive fee
allocations, brokerage commissions and other expenses incurred or accrued by
the Partnership during the month.
(4) Forwards annual audited financial statements (including a statement
of financial condition and a statement of operations) to each Limited Partner.
(5) Provides to each Limited Partner tax information necessary for the
preparation of his or her annual federal income tax return.
(6) Performs secretarial and other clerical responsibilities and
furnishes office space, equipment and supplies as may be necessary for
supervising the affairs of the Partnership.
(7) Administers the redemption of Units.
Item 3. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to which
the Partnership is a party or to which any of its assets are subject. In
addition, there are no pending material proceedings involving the General
Partner or the Commodity Broker.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
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Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. There is no trading market for the
Units, and none is likely to develop. The Units are transferable only
after written notice has been given to and approved by the General Partner.
Units may be and have been redeemed upon 10 days' notice at their Net Asset
Value as of the end of any month, as provided in the Limited Partnership
Agreement. In the event that all Units for which redemption is requested
cannot be redeemed as of any redemption date, Units of Limited Partners will be
redeemed in the order that requests for redemption have been received by the
General Partner.
(b) Holders. As of November 1, 1997, there were 691 holders of
Units.
(c) Dividends. No distributions or dividends have been made on the
Units and the General Partner has no present intention to make any.
Item 6. Selected Financial Data.
The following is a summary of operations of the Partnership for each of
the five fiscal years in the period ended October 31, 1997.
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<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net gain (loss) on
trading of futures
and forward contracts $2,385,992 $3,994,809 $2,226,647 $ 257,407 $5,680,415
Interest income 685,611 685,594 845,122 599,540 536,710
------- ------- ------- ------- ----------
Total income 3,071,603 4,680,403 3,071,769 856,947 6,217,125
========== ========= ========= ========= ==========
Brokerage commissions 1,109,170 1,002,522 1,181,262 1,289,379 1,388,149
Management fees 556,956 622,696 675,007 736,788 793,228
Incentive fees 430,609 663,447 452,602 167,041 768,327
Other 53,799 77,024 95,150 82,639 95,554
------ ------ ------ ------- ------
Total expenses 2,150,534 2,365,689 2,404,021 2,275,847 3,045,258
========= ========= ========= ========= =========
Net income $921,069 $2,314,714 $667,748 $(1,418,900) $3,171,867
======== ========== ======== ============ ==========
Net income
allocated to:
General Partner $14,117 $32,898 $ 6,634 $(21,004) $44,763
======= ======= ======= ========= =======
Limited Partners $906,952 $2,281,816 $661,114 $(1,397,896) $3,127,104
======== ========== ======== ============ ==========
Net income for a unit
of partnership interest
(for a unit outstand-
ing throughout
each year) $64.17 $149.53 $ 30.16 $ (63.46) $ 135.24
====== ======= ======== ============ ==========
Total assets $15,019,983 $14,864,152 $15,244,909 $17,666,836 $20,201,846
=========== =========== =========== =========== ===========
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Reference is made to "Item 6. Selected Financial Data." and "Item 8.
Financial Statements and Supplementary Data." The information contained
therein is essential to, and should be read in conjunction with, the following
analysis.
Capital Resources
The Partnership does not intend to raise any additional capital
through borrowing and because it is a closed-end fund, it cannot sell any
additional Units unless it undertakes a new public offering, which would require
another registration with the Securities and Exchange Commission. Due to the
nature of the Partnership's business, it will make no significant capital
expenditures, and substantially all its assets are and will be represented by
cash, U.S. Treasury securities and investments in futures and forward contracts.
Liquidity
Many United States commodity exchanges limit fluctuations in futures
contract prices during a single day by regulations referred to as "daily price
fluctuation limits" or "daily limits." During a single trading day, no trades
may be executed at prices beyond the daily limit. Once the price of a futures
contract has reached the daily limit for that day, positions in that contract
can neither be taken nor liquidated. Futures prices have occasionally moved
the daily limit for several consecutive days with little or no trading.
Similar occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject the Partnership to substantial losses which
could exceed the margin initially committed to such trades. In addition, even
if futures prices have not moved the daily limit, the Partnership may not be
able to execute futures trades at favorable prices if little trading in such
contracts is taking place. Generally, forward contracts can be closed out at
the discretion of the Trading Advisor. However, if the market is not liquid,
it could prevent the timely closeout of an unfavorable position until the
delivery date, regardless of the changes in their value or the Trading
Advisors' investment strategies. Other than these limitations on liquidity,
which are inherent in the Partnership's trading operations, the Partnership's
assets are highly liquid and are expected to remain so.
Results of Operations
Operating results showed a profit for the fiscal years ended October
31, 1997, October 31, 1996 and October 31, 1995.
The Net Asset Value per Unit as of October 31, 1997 and October 31,
1996 was $1,070.50 and $1,006.33, respectively.
The Partnership recorded gains for fiscal year 1997. Due to the
downward trend in interest rates, the Partnership profited from long
positions in financial instruments. Other profits were realized in long U.S.
index positions due to to the conntinued strength of the U.S. stock
market. Further gains were made in long agricultural positions. Although
trading in long precious
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metal positions proved unprofitable, such losses were not enough to offset the
Partnership's gains.
Gains were realized by the Partnership in fiscal year 1996. Although
losses did occur in short positions in the foreign currency sector as well as
the financial and metals markets, such losses were more than offset by the
Partnership's profitable trading. The Partnership's gains resulted largely from
profitable trades made in long U.S. and foreign financial positions. These
trades were profitable due to a downward trend in interest rates. Other profits
were realized in short positions in the agricultural market and long positions
in the energy market. .
The trading losses which occurred in fiscal year 1994 did not continue in
fiscal year 1995. For the fiscal year ended October 31, 1995, the Partnership
showed a gain as the Partnership's profitable trading in the currencies, energy
and financial instrument sectors more than offset its unprofitable trading in
the agricultural and metal sectors. Losses were incurred in short metal
positions and, due to the drought in the second and third quarters, the
Partnership incurred additional losses in short agricultural positions. Despite
such losses, the Partnership made significant gains in long bond positions due
to the decline in interest rates. Other profitable trades were made in the
energy markets, primarily in crude oil positions.
Inflation is not a significant factor in the Partnership's
profitability.
Item 8. Financial Statements and Supplementary Data.
Financial statements are listed on page F-1 of this report.
The supplementary financial information specified by Item 302 of
Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
The Partnership filed a Form 8-K on January 16, 1997 indicating a
change in auditors for the fiscal year ended October 31, 1997. Such Form 8-K
is herein incorporated by reference. A report from Deloitte & Touche LLP
dated December 13, 1996 is filed as part of the financial statements to this
report.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. The Partnership
is managed by its General Partner. There are no "significant employees" of the
Partnership.
The General Partner is a commodity pool operator registered with the NFA.
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Item 11. Executive Compensation.
The Partnership has no directors or officers. The General Partner
performs the services described in "Item 2. Properties." herein. E. D. & F.
Man International Inc. acts as the Partnership's commodity broker pursuant to
the Customer Agreement described in "Item 1(a). General development of
business."
The General Partner participates in any appreciation in the net
assets of the Partnership in proportion to its investment in it.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The Partnership knows of no person who owns beneficially more
than 5% of the Units.
(b) Security ownership of management.
Under the terms of the Limited Partnership Agreement, the
Partnership's affairs are managed by the General Partner. The Trading Manager
pursuant to its Management Agreement with the Partnership, enters into
Management Contracts with the Trading Advisors who have discretionary authority
over the Partnership's futures and forward contract trading. The General
Partner owned 220 Unit-equivalents valued at $235,510 as of October 31, 1997,
1.61% of the Partnership's total equity.
(c) Changes in control.
None
Item 13. Certain Relationships and Related Transactions.
See "Item 11. Executive Compensation" and "Item 12. Security
Ownership of Certain Beneficial Owners and Management."
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) Financial Statements:
See Index to Financial Statements, infra.
(a)(2) Financial Statement Schedules:
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All Schedules are omitted for the reason that they are not required, are
not applicable, or because equivalent information has been included in the
financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of
Regulation S-K:
(3) Articles of Incorporation and By-Laws:
(a) Limited Partnership Agreement dated as of November 27, 1978, as
amended on February 15, 1979.
(b) Certificate of Limited Partnership of the Partnership as filed with
the Cook County Recorder of Deeds on November 30, 1978.
The above exhibits are incorporated by reference from the Form 10-K Annual
Report filed by the Partnership for the period ended October 31, 1978.
(c) Form LP-1205 of the Partnership, as filed with the Illinois Secretary
of State on July 31, 1987, electing to be governed under the Illinois Revised
Uniform Limited Partnership Act.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K for the fiscal year ended October 31, 1987.
(10) Material Contracts:
(a) Joint Venture Agreement dated as of April 1, 1987 between the
Partnership and Millburn Partners.
(b) Customer Agreement dated as of April 1, 1987 between the Joint
Venture and Geldermann.
The above exhibits are incorporated by reference from the Partnership's
report on Form 10-K for the fiscal year ended October 31, 1987.
(c) Amendment No. 1 to the Joint Venture Agreement between the
Partnership and Millburn Partners dated December 31, 1987.
(d) Amendment No. 1 to the Customer Agreement between the Joint Venture
and Geldermann dated December 31, 1987.
(e) Amendment No. 2 to the Joint Venture Agreement between the
Partnership and Millburn Ridgefield Corporation dated December 31, 1988.
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The above exhibits are incorporated by reference from the Partnership's
report on Form 10-K for the Fiscal Year ended October 31, 1988.
(f) Management Agreement dated December 14, 1989 between the Partnership
and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 16, 1990.
(g) Amendment No. 1 to the Management Contract dated December 31, 1991
between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 8-K filed on January 28, 1991.
(h) Amendment No. 2 to the Management Contract dated December 31, 1992
between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1993.
(i) Amendment No. 3 to the Management Contract dated December 31, 1993
between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1994.
(j) Amendment No. 4 to the Management Contract dated December 31, 1994
between the Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1995.
(k) Trading Manager Agreement dated January 1, 1996 among the Partnership
and the Trading Manager.
(l) Form of General Partnership Agreement among various commodity pools of
which Heinold Asset Management, Inc. acts as sole general partner.
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(m) Form of Management Contract among each Account Partnership and each
trading advisor.
(n) Form of Management Contract among the Partnership and each trading
advisor.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1997.
(o) Back Office Service Agreement dated November 1, 1996 among Managed
Asset Service Corp., the General Partner and the Partnership.
The above exhibit is filed herewith.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during the quarter
ended October 31, 1997.
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SIGNATURES
Pursuant to the requirements of Section 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, in the City of
Chicago and State of Illinois on the 26th day of January, 1998.
THE FUTURE FUND
By HEINOLD ASSET MANAGEMENT, INC.
General Partner
By /s/ Thomas M. Harte
-----------------------
Thomas M. Harte
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 General
Partner of the Registrant in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
Title with
Signature General Partner Date
--------- --------------- ----
/s/ Thomas M. Harte President (chief operating January 26, 1998
-------------------- officer) and Director
Thomas M. Harte
/s/ Lee E. Meyer Chief Financial Officer January 26, 1998
-------------------- (principal accounting officer)
Lee E. Meyer
/s/ Mary T. Bergonia Director January 26, 1998
--------------------
Mary T. Bergonia
/s/ Gary M. Rindner Director January 26, 1998
--------------------
Gary M. Rindner
/s/ Ira Polk Director January 26, 1998
--------------------
Ira Polk
</TABLE>
(Being the principal executive officer, the principal financial and
accounting officer, and a majority of the directors of Heinold Asset
Management, Inc.)
<TABLE>
<S> <C> <C>
HEINOLD ASSET General Partner of January 26, 1998
MANAGEMENT, INC. Registrant
</TABLE>
By /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
14
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Financial Statements
The Future Fund
(An Illinois Limited Partnership)
Years ended October 31, 1997, 1996, and 1995
with Report of Independent Auditors
<PAGE> 16
The Future Fund
(An Illinois Limited Partnership)
Financial Statements
Years ended October 31, 1997, 1996, and 1995
CONTENTS
Report of Independent Auditors.......................................... 1
Financial Statements
Statements of Financial Condition....................................... 2
Statements of Operations................................................ 3
Statements of Changes in Partners' Equity............................... 4
Statements of Cash Flows................................................ 5
Notes to Financial Statements........................................... 6
<PAGE> 17
Report of Independent Auditors
The Partners
The Future Fund
We have audited the accompanying statement of financial condition of The Future
Fund (the Partnership) as of October 31, 1997, and the related statements of
operations, changes in partners' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
General Partner. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of The
Future Fund for the year ended October 31, 1996, and for the two years then
ended, were audited by other auditors whose report dated December 13, 1996,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Future Fund at October 31,
1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
- ---------------------
Chicago, Illinois
December 11, 1997
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INDEPENDENT AUDITORS' REPORT
To the General Partner and
Limited Partners of
The Future Fund:
We have audited the accompanying statement of financial condition of The Future
Fund (the "Partnership") as of October 31, 1996, and the related statements of
operations, changes in partners' equity and cash flows for each of the two
years in the period ended October 31, 1996. These financial statements are the
responsibility of the Partnership's General Partner. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of October 31, 1996, and
the results of its operations and its cash flows for each of the two years in
the period ended October 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 13, 1996
<PAGE> 19
The Future Fund
(An Illinois Limited Partnership)
Statements of Financial Condition
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
-----------------------------
<S> <C> <C>
Assets
Investment in affiliated general partnership $ 1,491,685 $ 462,296
Equity in commodity trading accounts:
Net unrealized trading gains on open
contracts 356,939 1,801,659
Due from affiliated broker 13,171,359 12,600,197
-----------------------------
Total assets $15,019,983 $14,864,152
=============================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Brokerage commissions $81,156 $86,669
Redemptions payable 32,072 70,695
Management fees 43,588 55,381
Incentive fees 200,625 288,923
Other 7,502 6,578
-----------------------------
Total liabilities 364,943 508,246
Partners' equity:
Limited partners (13,470 and 14,046 units
outstanding at October 31, 1997 and 1996,
respectively) 14,419,530 14,134,513
General Partner (220 unit equivalents
outstanding at October 31, 1997 and
1996) 235,510 221,393
-----------------------------
Total partners' equity 14,655,040 14,355,906
-----------------------------
Total liabilities and partners' equity $15,019,983 $14,864,152
=============================
Net asset value per outstanding unit of
partnership interest $ 1,070.50 $ 1,006.33
=============================
</TABLE>
See accompanying notes.
2
<PAGE> 20
The Future Fund
(An Illinois Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
-----------------------------------------
<S> <C> <C> <C>
INCOME
Net realized trading gains
on closed contracts $4,156,566 $1,865,930 $3,087,234
Change in net
unrealized gain or loss
on open contracts (1,770,574) 2,128,879 (860,587)
Brokerage commissions (1,109,170) (1,002,522) (1,181,262)
-----------------------------------------
Interest income 685,611 685,594 845,122
-----------------------------------------
1,962,433 3,677,881 1,890,507
EXPENSES
Management fees 556,956 622,696 675,007
Incentive fees 430,609 663,447 452,602
Other 53,799 77,024 95,150
-----------------------------------------
1,041,364 1,363,167 1,222,759
-----------------------------------------
Net income $ 921,069 $ 2,314,714 $ 667,748
=========================================
Net income for a unit
of partnership interest
(for a unit outstanding
throughout each year):
General Partner $ 64.17 $ 149.53 $ 30.16
=========================================
Limited Partners $ 64.17 $ 149.53 $ 30.16
=========================================
Net income allocated to:
General Partner $ 14,117 $ 32,898 $ 6,634
=========================================
Limited Partners $ 906,952 $2,281,816 $ 661,114
=========================================
</TABLE>
See accompanying notes.
3
<PAGE> 21
The Future Fund
(An Illinois Limited Partnership)
Statements of Changes in Partners' Equity
Years ended October 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
------------------------------------
<S> <C> <C> <C>
Partners' equity at October 31, 1994 $17,084,696 $181,861 $17,266,557
Redemption of 3,320 units of
limited partnership interest (2,882,007) - (2,882,007)
Net income 661,114 6,634 667,748
------------------------------------
Partners' equity at October 31, 1995 14,863,803 188,495 15,052,298
Addition of 939 units of limited
partnership interest 797,000 - 797,000
Redemption of 4,241 units of
limited partnership interest (3,808,106) - (3,808,106)
Net income 2,281,816 32,898 2,314,714
------------------------------------
Partners' equity at October 31, 1996 14,134,513 221,393 14,355,906
Redemption of 576 units of limited
partnership interest (621,935) - (621,935)
Net income 906,952 14,117 921,069
------------------------------------
Partners' equity at October 31, 1997 $14,419,530 $235,510 $14,655,040
====================================
</TABLE>
See accompanying notes.
4
<PAGE> 22
The Future Fund
(An Illinois Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 921,069 $2,314,714 $ 667,748
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) in investment in affiliated
general partnership (1,029,389) (462,296) -
Decrease in equity in commodity
trading accounts 873,558 843,053 2,400,620
Increase (decrease) in liabilities:
Brokerage commissions (5,513) (2,263) (14,123)
Management fees (11,793) 4,563 (8,071)
Incentive fees (88,298) 288,923 (5,813)
Other 924 1,157 (726)
------------------------------------
Net cash provided by operating activities 660,558 2,987,851 3,039,635
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of limited partnership
interests (660,558) (2,987,851) (3,060,942)
------------------------------------
Net change in cash - - (21,307)
Cash at beginning of year - - 21,307
------------------------------------
Cash at end of year $ - $ - $ -
====================================
</TABLE>
See accompanying notes.
5
<PAGE> 23
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements
1. ORGANIZATION OF THE PARTNERSHIP
The Future Fund (Partnership) was organized in November 1978, under the
Illinois Uniform Limited Partnership Act, for purposes of engaging in the
speculative trading of futures, options on futures, and forward contracts.
Heinold Asset Management, Inc. (HAMI), a wholly owned subsidiary of E.D. & F.
Man, Inc., is the general partner of the Partnership (General Partner).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN AFFILIATED GENERAL PARTNERSHIPS
Investments in affiliated general partnerships are valued at fair value as
determined by the General Partner. In determining fair value, the General
Partner utilizes the valuations of the underlying partnerships. The underlying
partnerships value their financial instruments on a mark-to-market basis of
accounting. The income and related expenses from investments in affiliated
general partnerships are presented in the statements of operations on a pro
rata basis.
DUE FROM AFFILIATED BROKER
Due from affiliated broker consists of balances, including interest receivable,
due from E.D. & F. Man International, Inc. (Man), a registered broker-dealer
and an affiliate of the General Partner.
INCOME RECOGNITION
Realized and unrealized trading gains and losses on futures, options on
futures, and forward contracts, which represent the difference between cost and
selling price or quoted market value, are recognized currently. All trading
activities are accounted for on a trade-date basis.
INCOME TAXES
Income taxes are not provided for by the Partnership because taxable income or
loss of the Partnership is includable in the income tax returns of the
partners.
6
<PAGE> 24
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER UNIT
Net income per unit of Partnership interest is equal to the change in net asset
value per unit from the beginning of the year to the end of the year. Unit
amounts are rounded to whole numbers for financial statement presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statement
amounts to conform with the current year presentation.
3. LIMITED PARTNERSHIP AGREEMENT
The limited partners and the General Partner share in the profits and losses of
the Partnership in proportion to the number of units or unit equivalents held
by each partner. However, no limited partner is liable for obligations of the
Partnership in excess of its capital contribution and profits, if any.
Distributions (other than redemption of units) are made on a pro rata basis at
the sole discretion of the General Partner.
Limited partners may redeem any or all of their units as of the end of any
month at net asset value per unit on ten days' prior written notice to the
General Partner. The Partnership is scheduled to be dissolved on July 1, 1998,
or upon the occurrence of certain events as specified in the limited
partnership agreement. HAMI plans to extend the term of the Partnership during
the coming year. The length of this extension has not yet been determined.
The Partnership is closed to new subscriptions.
The Partnership bears the expenses incurred in connection with its activities.
These expenses include brokerage commissions, trading advisors' management and
incentive
7
<PAGE> 25
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
fees, legal, audit, and tax return preparation, and filing fees. The General
Partner bears all other operating expenses.
8
<PAGE> 26
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
4. ADVISORY AGREEMENTS
The Partnership enters into various advisory agreements. At October 31, 1997,
the Partnership's assets were allocated to four separately managed accounts and
one affiliated general partnership (see Note 5). The General Partner may
reallocate assets and add or terminate advisors at any time.
Each trading advisor receives from the Partnership a monthly management fee
ranging from .083% to .333% (1%-4% annually) of the Partnership's month-end net
asset value, as defined, and incentive fees ranging from 15% to 20% (annual
basis) of the Partnership's new trading profits, as defined. The incentive fee
is retained by the advisor even though trading losses may occur in subsequent
periods; however, no further incentive fees are payable until any such trading
losses (other than losses attributable to redeemed units and losses
attributable to assets reallocated to another advisor) are recouped by the
Partnership. At October 31, 1997, carryforward loses related to separately
managed accounts were $1,437,066.
The Partnership has a brokerage contract with Man which provides that the
Partnership pay a monthly brokerage fee of .5833 (7% annually) of the
Partnership's month-end net assets, as defined, plus NFA fees and related "give
up" charges. Man pays the Partnership interest on its average daily net assets
at a rate equal to 90% of the current U.S. Treasury Bill rate.
5. INVESTMENT IN AFFILIATED GENERAL PARTNERSHIPS
Effective April 1, 1996, the Partnership began participating in a series of
private affiliated general partnerships (General Partnerships) formed together
with other HAMI-sponsored limited partnerships. The General Partnerships
engage in the speculative trading of futures, options on futures, and forward
contracts based on their respective trading strategies. The Partnership shares
pro rata in profits and losses of such General Partnerships based on the
capital that the Partnership "commits," as defined, to each General
Partnership.
A separate General Partnership is formed for each Commodity Trading Advisor
(Trading Advisor) that the General Partner selects to trade partnership assets.
Under the terms of its management contract, each Trading Advisor has sole
responsibility for determining the General Partnership's trades. As
compensation for these services, each Trading Advisor receives a monthly
management fee based on a percentage of the Partnership's month-end allocated
assets, as defined. Each Trading Advisor also receives a quarterly or annual
9
<PAGE> 27
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
5. INVESTMENT IN AFFILIATED GENERAL PARTNERSHIPS (CONTINUED)
incentive fee based on a percentage of new trading profits, as defined. The
incentive fee is retained by the Trading Advisors even when "trading losses,"
as defined, occur in subsequent periods; however, no further incentive fees are
payable until such trading losses (other than those attributable to
redemptions) are recouped by the General Partnership. At October 31, 1997, the
Partnership was invested in Heinold General Partnership Account I (G. P. I).
Assets allocated to G. P. I as of October 31, 1997, were $3,288,121, including
committed funds of $1,796,436. As of October 31, 1997, there were no
carryforward losses for incentive fee purposes related to this investment.
Heinold General Partnership Account I had total assets (no liabilities)
consisting of the following at October 31, 1997:
Due from affiliated broker $2,114,280
Net unrealized gain on open contracts 93,413
----------
$2,207,693
==========
Each General Partnership's funds are held by, and its transactions cleared
through, Man. These funds are used to meet minimum margin requirements for the
General Partnership's open positions as set by the exchange where each futures
contract is traded. These requirements are adjusted, as needed, due to daily
fluctuations in the values of the underlying positions. Certain positions may
be liquidated, if necessary, to satisfy resulting changes in margin
requirements.
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK OR CONCENTRATION OF CREDIT RISK
The Partnership invests in futures, options on futures, and forward contracts
that involve varying degrees of market and credit risk. Market risks may arise
from unfavorable changes in interest rates, foreign exchange rates, or the
market values of the instruments underlying the contracts. All contracts are
stated at fair value, and changes in those values are reflected currently in
trading gains (losses) in the statements of operations.
The fair values of the Partnership's derivative financial instruments held in
separately managed accounts at October 31, 1997 and 1996, were $356,939 and
$1,801,659, respectively, and the average fair values of these instruments for
the years then ended, based on month-end amounts, were $614,532 and $947,874,
respectively.
10
<PAGE> 28
The Future Fund
(An Illinois Limited Partnership)
Notes to Financial Statements (continued)
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK OR CONCENTRATION OF CREDIT RISK (CONTINUED)
The contract or notional amounts of derivative instruments held in separately
managed accounts to purchase and sell at October 31, 1997, were as follows:
Forward contracts:
To purchase $9,234,096
To sell 10,256,678
Futures contracts:
To purchase 17,635,450
To sell 26,703,421
Although contract or notional amounts may reflect the extent of the
Partnership's involvement in a particular class of financial instruments, they
are not indicative of potential loss. Futures, options on futures, and forward
contracts are typically closed out by entering into offsetting contracts. For
these contracts, the net unrealized gains or losses, rather than contract or
notional amounts, represent the approximate future cash requirements.
The Partnership is exposed to credit risk in the event of nonperformance by
counterparties to financial instruments. The credit risk from counterparty
nonperformance associated with these instruments is the net unrealized gain, if
any, included on the statements of financial condition. At October 31, 1997,
there were no unrealized gains on open forward contracts. Forward contracts
are entered into on an arm's-length basis with ED&F Man Capital, Inc., an
affiliate of the General Partner. For exchange-traded contracts, the clearing
organization acts as the counterparty of specific transactions and, therefore,
bears the risk of delivery to and from counterparties to specific positions.
The Partnership has general partner liability with respect to its interest in
the affiliated general partnership.
The Partnership's assets and affiliated general partnership's assets held at
Man are in segregated accounts as required by the Commodity Futures Trading
Commission.
* * * * *
11
<PAGE> 29
Oath of Commodity Pool Operator
To the best of my knowledge and belief, the information contained herein is
accurate and complete.
Heinold Asset Management, Inc.
(Pool Operator)
/s/ Lee E. Meyer
- -------------------------------
Lee E. Meyer
Chief Financial Officer
<PAGE> 1
EX. 10(O)
BACK OFFICE SERVICES AGREEMENT
Back Office Services Agreement ("Agreement") made and entered into
effective as of the 1st day of November, 1996, by and between Managed Asset
Service Corp., a Delaware corporation (the "Servicer"), and Heinold Asset
Management, Inc., a Delaware Corporation (the "General Partner") on its own
behalf and on behalf of each futures fund listed in Schedule 1 for which the
General Partner acts as general partner (each a "Fund").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund's business and purpose is to invest in, reinvest in,
hold and trade commodities and commodity futures, forward and option contracts,
as well as any other items which are presently, or may hereafter become, the
subject of futures, forward or option contract trading by retaining commodity
trading advisors (hereinafter collectively referred to as "Futures Interests")
and other investments; and
WHEREAS, the Fund, through the General Partner and pursuant to the Limited
Partnership Agreement of the Fund, is authorized to appoint agents to provide
various administrative services to the Fund subject to the oversight of the
General Partner; and
WHEREAS, the Fund has heretofore offered limited partnership interests
("Units") for sale to investors by means of an offering memorandum including
all exhibits thereto, as the same may be amended or supplemented from time to
time (the "Prospectus"); and
WHEREAS, the Servicer's present business includes providing back office
administrative services to futures funds and monitoring the operations and
activities of companies engaged in the trading of Futures Interests; and
WHEREAS, the Fund and the Servicer wish to enter into this Agreement in
order to set forth the terms and conditions upon which the Servicer will
provide certain back office administrative services for the Fund in connection
with the conduct by the Fund of its Futures Interest trading activities during
the term of this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and agreements set
forth herein, the parties hereto do hereby agree as follows:
1. DUTIES OF THE SERVICER.
The General Partner and the Fund hereby appoint the Servicer, and the
Servicer hereby accepts appointment, as the provider of back office
administrative services to the Fund. For the period and on the terms and
conditions set forth in this Agreement, the Servicer will perform on behalf of
the Fund, the services set forth on Appendix A subject to the oversight of the
General Partner.
<PAGE> 2
The Fund acknowledges that the Servicer's responsibilities hereunder
depend in large measure upon the Servicer receiving accurate information with
respect to the Fund on a timely basis from the General Partner and/or the
Fund's clearing broker at the instruction of the General Partner. The Fund
agrees that the Servicer shall have no liability for its failure to perform
services contemplated hereunder if it is rendered unable to do so because of
the failure of the General Partner and/or the Fund's clearing broker at the
instruction of the General Partner to provide necessary information on the Fund
on a timely basis. The General Partner and the Partnership further acknowledge
and agree that the Servicer will not independently verify the adequacy or
accuracy of the information provided to the Servicer by the General Partner
and/or third parties and that the Servicer shall have no liability for the
adequacy or accuracy of the Services to the extent that the information
provided by the General Partner and/or third parties is the basis for such
Services.
2. COMPENSATION.
In consideration of and as compensation for its services under this
Agreement, the Fund and/or the General Partner will pay the Servicer a monthly
administrative fee as set forth in Appendix B. The Servicer will submit an
invoice to each Fund and/or the General Partner within ten business days after
month-end and each Fund and/or General Partner shall remit payment to the
Servicer by the following month-end.
3. TERM AND TERMINATION.
This Agreement shall commence on the date hereof and shall continue in
effect until terminated by either party by 30 days' written notice to the
other.
In the event of the termination of this Agreement pursuant to this
Paragraph 3, the rights of the Servicer to receive fees earned through the date
of expiration or termination shall survive this Agreement until satisfied.
The termination of this Agreement pursuant to this Paragraph 3 with
respect to any Fund shall have no effect on any other Fund.
4. STANDARD OF INDEMNITY AND LIABILITY.
(a) The Servicer agrees to indemnify and hold harmless each of the Fund
and the General Partner from and against any loss, claim, damage, liability,
cost and expense (including, without limitation, attorneys' and accountants'
fees and disbursements), judgments and amounts paid in settlement
(collectively, "Loss") to which the Fund or the General Partner may become
subject, insofar as any such Loss arises out of, relates to, or is based upon
any claim asserted or enforced against the Fund and/or the General Partner to
the extent that such claim is based upon gross negligence or misconduct on the
part of the Servicer, or any violations by the Servicer of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
2
<PAGE> 3
(b) The Servicer agrees to reimburse the Fund for any legal or other
expenses reasonably incurred by it in investigating or defending or preparing
to defend against any such Loss described in subparagraph 4(a), above.
(c) The Fund agrees to indemnify and hold harmless the Servicer from and
against any Loss to which the Servicer may become subject, insofar as such Loss
arises out of, relates to, or is based upon any claim asserted or enforced
against the Servicer with respect to this Agreement or the activities
contemplated hereunder to the extent that such claim is not based upon gross
negligence or misconduct on the part of the Servicer or any violations by the
Fund of any of its representations, warranties, covenants or agreements
contained in this Agreement.
(d) The Fund agrees to reimburse the Servicer for any legal or other
expenses reasonably incurred by it in connection with investigating or
defending or preparing to defend against any Loss described in subparagraph
4(c), above.
(e) Promptly after receipt by a party to be indemnified under
subparagraph 4(a) or 4(c), above, of any notice of the commencement of any
action or proceeding, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subparagraphs,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subparagraphs. The requirement that an indemnifying party be given written
notice of the commencement of any action shall be deemed to be satisfied if
such indemnifying party shall have actual knowledge thereof or shall have been
given written notice of the commencement of any action or proceeding within a
reasonable time after the commencement thereof. If any such action shall be
brought against any indemnified party and the indemnified party notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, to assume
the defense thereof with counsel satisfactory to such indemnified party, and
shall have the right to negotiate and consent to a settlement thereof, provided
that the indemnified party shall have consented to the settlement. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subparagraphs for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent it,
if, in the indemnified party's reasonable judgment, it is advisable for such
party to be represented by separate counsel, in which event the fees and
expenses of such separate counsel shall be borne by the indemnified party. No
indemnifying party shall be liable for any settlement of any such action
effected without its consent, but if any such action or proceeding is settled
with the consent of any indemnifying party or if there be a final judgment for
the plaintiff in any such action or proceeding (of which an indemnifying party
shall have been notified), such indemnifying party shall indemnify and hold
harmless each indemnified party from and against any Loss incurred or suffered
by reason of such settlement or judgment.
3
<PAGE> 4
Any indemnification under subparagraphs (a) or (c), above, unless ordered
by a court, shall be made by the indemnifying party only as authorized in the
specific case and only upon a determination by independent legal counsel in a
written opinion that indemnification of the indemnified party is proper in the
circumstances because it has met the applicable standard of conduct set forth
in subparagraphs (a) or (c) above, as the case may be.
(f) As used in these subparagraphs (c) and (d), above, the term
"Servicer" shall include the Servicer and as used in these subparagraphs (a)
and (b), above, the term "Fund" shall include the Fund.
(g) The provisions of this Paragraph 4 shall survive the termination or
other expiration of this Agreement.
5. REPRESENTATIONS AND WARRANTIES.
(a) The Fund represents and warrants to the Servicer as follows:
(i) This Agreement has been duly and validly authorized, executed
and delivered by the Fund and, assuming due execution by all other
parties hereto, is a valid and binding agreement of the Fund enforceable
in accordance with its terms.
(ii) The Fund has been duly organized and is validly existing and
in good standing as a limited partnership under the laws of its
organization, with full power and authority to carry out its obligations
under this Agreement, its Limited Partnership Agreement establishing the
Fund ("LPA") and conduct its business as described in the Prospectus.
(iii) The performance by the Fund of its obligations under this
Agreement will not conflict with or result in a breach of any of the
terms or provisions of, or in the imposition of any lien, charge or
encumbrance upon any of the property or assets of the Fund pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Fund is a party or by which
the Fund is bound or to which any of the property or assets of the Fund
is subject, nor will any such action or performance result in a violation
of the provisions of the LPA or any statute or any order, rule or
regulation of any court or governmental authority or body having
jurisdiction over the Fund.
(b) The Servicer represents and warrants to the Fund as follows:
(i) This Agreement has been duly and validly authorized, executed
and delivered by the Servicer and, assuming due execution by all other
parties hereto, is a valid and binding agreement of it enforceable in
accordance with its terms.
(ii) The Servicer is a corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware and is
qualified to do business in each other jurisdiction
4
<PAGE> 5
in which the or conduct of its business requires such qualification and in
which the failure to be so qualified would materially adversely affect
the Servicer's ability to perform its obligations under this Agreement. The
Servicer has full corporate power and authority under its Certificate of
Incorporation and By-Laws to conduct its business and to perform its
obligations under this Agreement.
(iii) The performance by the Servicer of its obligations under this
Agreement will not conflict with or result in a breach of any of the
terms or provisions of, or in the imposition of any lien, charge or
encumbrance upon any of the property or assets of the Servicer pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Servicer is a party or by
which the Servicer is bound or to which any of the property or assets of
the Servicer is subject, nor will any such action or performance result
in a violation of the provisions of the By-Laws or the Certificate of
Incorporation of the Servicer or any statute or any order, rule or
regulation of any court or governmental authority or body having
jurisdiction over the Servicer.
(c) All representations, warranties and covenants contained in this
Agreement shall be continuing during the term of this Agreement and shall
survive the termination or expiration of this Agreement with respect to any
matter arising while such Agreement was in effect. Each party hereby agrees
that as of the date of this Agreement it is, and during its term shall be, in
compliance with its representations, warranties and covenants herein contained.
In addition, if at any time any event occurs which would make, or tend to
make, any of such representations, warranties or covenants not true, the party
who made such representations, warranties and covenants promptly will notify
the other party of such facts in the manner provided below. All
representations, warranties and covenants herein contained shall inure to the
benefit of each of the parties to whom it is addressed and their respective
heirs, executors, administrators, legal representatives, successors and
permitted assigns.
6. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof, and no other agreement, verbal or
otherwise, shall be binding on the parties hereto.
7. ASSIGNMENT.
This Agreement may not be assigned by any party without the express
written consent of the other parties. An assignment of this Agreement with
respect to one Fund shall have no effect on any other Fund.
8. AMENDMENT.
This Agreement may not be amended or modified except by the written
consent of all of the parties hereto. An amendment of this Agreement with
respect to one Fund shall have no effect
5
<PAGE> 6
on any other Fund.
9. SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and permitted assigns, and except as otherwise
provided in Paragraph 4, above, no other person shall have any right or
obligation under this Agreement.
10. NOTICES.
Except as otherwise provided herein, all notices, demands or requests
required to be made or delivered under this Agreement shall be effective only
if in writing and delivered personally or by registered or certified mail,
return receipt requested, postage prepaid, to the respective addresses below or
to such other addresses as may be designated by the party entitled to receive
the same by notice similarly given and shall be deemed given by the party
required to provide notice when received by the party to whom notice is
required to be given:
If to the Fund, to it at:
c/o Heinold Asset Management, Inc.
440 S. LaSalle St., 20th Floor
Chicago, Illinois 60605
If to the Servicer, to it at:
440 S. LaSalle St., 20th Floor
Chicago, Illinois 60605
11. SURVIVAL.
The provisions of this Agreement shall survive the termination or other
expiration of this Agreement with respect to any matter arising while this
Agreement was in effect.
12. HEADINGS.
Headings to Paragraphs herein are for the convenience of the parties
only and are not intended to be a part of or to affect the meanings or
interpretation of this Agreement.
13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the principles
of conflict of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been executed and delivered for and
on behalf of the undersigned as of the day and year first above written.
HEINOLD ASSET MANAGEMENT, INC.
On its own behalf and on behalf of each of the
limited partnerships listed in Schedule 1
By: /s/ Lee E. Meyer
----------------
Lee E. Meyer
Chief Financial Officer
MANAGED ASSET SERVICE CORP.
By: /s/ Thomas M. Harte
-------------------
Thomas M. Harte
President
7
<PAGE> 8
Appendix A
The Servicer may provide any one or more of the following record keeping,
reporting and customer service functions provided that the Servicer receives
adequate information from the Fund, the General Partner and the Fund's clearing
broker at the instruction of the General Partner:
Record keeping
- --------------
- - Maintain an itemized daily record of each commodity interest transaction of
the Fund
- - Maintain a record of each customer showing the customer's name, address
and all funds that the Fund received from such customer
- - Maintain a general ledger containing details of all asset, liability,
capital, income and expense accounts
- - Maintain copies of each confirmation of a commodity interest transaction
of the Fund, each purchase and sale statement and each monthly statement for
the Fund from the Fund's clearing broker
- - Maintain copies of canceled checks and bank statements
- - Maintain partner files
- - Maintain customer complaint files
- - Maintain copies of all monthly account statements, Annual Reports, and
notices to customers
Reporting
- - calculate the Net Asset Value (as defined in the Prospectus of the Fund)
and Net Asset Value per Unit
- - prepare and distribute monthly account statements to customers and brokers
- - prepare and distribute any notices relating to material changes in the Fund
- - prepare and file with regulators, Form 10-Q, quarterly reports, if
required under U.S. securities laws
- - prepare and file with regulators, Form 10-K, annual reports, if required
under U.S. securities laws
- - prepare and distribute an Annual Report to customers/brokers/regulators
- - prepare and file with the Secretary of States' office, biennial renewal
reports
- - prepare and file federal and state tax returns
- - prepare and review customer K-1 forms
Customer Service
Telephone Services:
- - Answer inquiries from customers regarding redemptions/transfers/monthly
statements
- - Answer inquiries from brokers regarding client accounts; including
redemptions/transfers/monthly statements/trailing commissions
- - Answer inquiries from customers relating to tax and financial matters
8
<PAGE> 9
Redemptions and Transfers:
- - Effect the completion of redemptions/transfers for month-end posting
- - Calculate amount of redemption proceeds, prepare checks
- - Distribute redemption notices and proceeds
- - Distribute transfer notices to relevant parties
- - Liase with lawyers and accountants on transfer issues
Database Maintenance:
- - Daily upkeep of data base regarding changes with respect to customer
information/broker information
Miscellaneous:
- - Respond to general correspondence from custodians, brokers, customers
- - Liase with internal and outside auditors and regulators during audits
- - Effect title changes, prepare and distribute confirmation re: same
In addition, the Servicer may provide one or more of the miscellaneous services
as set forth below:
- - Liase with outside auditors and attorneys with respect to various
filings
- - Assist in the preparation of management contracts, service agreements,
general partnership agreements
- - Calculate management fees, incentive and trailing fees for the General
Partner's review and approval and effect the payment of same and other
expenses
- - Assist in due diligence examinations of trading advisors, hedge fund
managers, broker-dealers and CFTC registered entities
9
<PAGE> 10
Appendix B
I. Fees paid by the Fund
Monthly Reports:
-Financial Statement and postage $1.49
Special Mailings:
-Per page At cost by third parties
-Postage At cost
Miscellaneous:
-Form K-1 $16.00 per investor
-Annual Audit At cost by third party
-Filing Fees At cost
II. Fees paid by the General Partner
-------------------------------------
The General Partner shall pay Servicer, $28,000 per month for
recordkeeping, other reporting, customer service, due diligence, contract
negotiation and other miscellaneous functions.
10
<PAGE> 11
Schedule 1
The Four Seasons Fund Limited Partnership
Fundamental Traders Fund L.P.
The Future Fund
The Future Fund II
The Futures Advantage Fund
The Futures Dimension Fund
The Horizon Futures Fund
The Horizon World Futures Fund
Institutional Balanced Portfolio Account Limited Partnership I
The Jefferson Futures Fund
Landmark Fund I, A Limited Partnership
Landmark Fund II, A Limited Partnership
Main Street Futures Partners L.P.
New Century Currency & Financial Fund L.P.
Patriot Futures Fund I L.P.
Patriot Futures Fund II L.P.
The Renaissance Futures Fund
The Resource Fund
The Sycamore Futures Fund
11
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<ARTICLE> BD
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1996
<PERIOD-START> OCT-31-1996 OCT-31-1995
<PERIOD-END> OCT-31-1997 OCT-31-1996
<EXCHANGE-RATE> 1 1
<CASH> 0 0
<RECEIVABLES> 15,019,983 14,864,152
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 15,019,983 14,864,152
<SHORT-TERM> 0 0
<PAYABLES> 364,943 508,246
<REPOS-SOLD> 0 0
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<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 14,655,040 14,355,906
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 15,019,983 14,864,152
<TRADING-REVENUE> 2,385,992 3,994,809
<INTEREST-DIVIDENDS> 685,611 685,594
<COMMISSIONS> (1,109,170) (1,002,522)
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> (1,041,364) (1,363,167)
<INCOME-PRETAX> 0 0
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 921,069 2,314,714
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
