<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-16110
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3407269
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
(formerly ML Futures Investment Partners Inc.)
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-4161
----------------------------------------------------
(Registrant's telephone number, including area code)
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
----- -----
This document contains 12 pages.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
ASSETS
------
<S> <C> <C>
Equity in commodity futures trading
accounts $8,271,897 $7,626,185
------------ --------------
TOTAL $8,271,897 $7,626,185
============ ==============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Redemptions payable $ 156,921 $ 47,628
Administative fees and brokerage
commissions payable 12,637 12,046
------------ --------------
Total liabilities 169,558 59,674
------------ --------------
Minority interest 17,437 -
------------ --------------
PARTNERS' CAPITAL:
General Partner (680 and 680 units) 113,013 96,085
Limited Partners (47,958 and 53,537 7,971,889 7,470,426
units)
------------ --------------
Total partners' capital 8,084,902 7,566,511
------------ --------------
TOTAL $8,271,897 $7,626,185
============ ==============
NET ASSET VALUE PER UNIT $166.23 $141.33
======= =======
</TABLE>
See notes to financial statements.
2
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Trading profits:
Realized $377,104 $ 17,145 $ 633,782 $ 179,170
Change in unrealized 288,605 241,366 526,830 (198,449)
---------- ---------- ------------ -----------
Total trading results 665,709 258,511 1,160,612 (19,279)
---------- ---------- ------------ -----------
Interest income (Note 2) 45,234 (345,974) 206,295 (263,233)
---------- ---------- ------------ -----------
Total revenues 710,943 (87,463) 1,366,907 (282,512)
---------- ---------- ------------ -----------
EXPENSES:
Administrative fees 36,058 35,561 70,786 73,519
Brokerage commissions 974 2,225 2,599 6,622
---------- ---------- ------------ -----------
Total expenses 37,032 37,786 73,385 80,141
---------- ---------- ------------ -----------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST 673,911 (125,249) 1,293,522 (362,653)
Minority interest on income (1,437) - (1,437) -
---------- ---------- ------------ -----------
NET INCOME (LOSS) $672,474 $(125,249) $1,292,085 $(362,653)
======== ========= ========== =========
NET INCOME (LOSS) PER UNIT:
Weighted average number of units
outstanding (Note 5) 50,731 57,808 51,919 58,823
====== ====== ====== ======
Weighted average net income (loss)
per unit $13.28 $(2.17) $24.89 $(6.17)
====== ====== ====== ======
</TABLE>
See notes to financial statements.
3
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
for the six months ended June 30, 1995 and 1994
-----------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
----- -------- ------- -----
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1993 60,451 $8,650,204 $ 98,410 $8,748,614
Net loss - (358,363) (4,290) (362,653)
Redemptions (3,637) (520,523) - (520,523)
------ ---------- -------- ----------
PARTNERS' CAPITAL,
JUNE 30, 1994 56,814 $7,771,318 $ 94,120 $7,865,438
====== ========== ======== ==========
PARTNERS' CAPITAL,
DECEMBER 31, 1994 53,537 $7,470,426 $ 96,085 $7,566,511
Net income - 1,275,157 16,928 1,292,085
Redemptions (4,899) (773,694) - (773,694)
------ ---------- -------- ----------
PARTNERS' CAPITAL,
JUNE 30, 1995 48,638 $7,971,889 $113,013 $8,084,902
====== ========== ======== ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(a Delaware limited partnership)
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the six months ended June 30, 1995 and 1994
-----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The Growth and Guarantee Fund L.P. (the "Partnership"or the "Fund") was
organized on January 21, 1987 under the Delaware Revised Uniform Limited
Partnership Act and commenced trading activities on August 5, 1987. The
Growth and Guarantee Fund Trading L.P. (the "Trading Partnership") was
organized on and commenced trading activities on June 1, 1995. The
Partnership engages in the speculative trading of stock index futures and
options. On June 1, 1995, the Partnership began trading through the Trading
Partnership. Merrill Lynch Investment Partners Inc. (formerly ML Futures
Investment Partners Inc.) (the "General Partner") (a wholly-owned subsidiary
of Merrill Lynch Group, Inc., which in turn is a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.) invests for its account at least 1% of the total
contributions to the Partnership. The General Partner and each Limited
Partner share in the profits and losses of the Partnership attributable to
the series of units held by them in proportion to the amount of such units
owned by each.
The consolidated statements include the accounts of the Trading Partnership
in which the Partnership is the sole limited partner. All related
transactions and intercompany balances between the Partnership and the
Trading Partnership are eliminated in consolidation.
The ownership by the General Partner in the Trading Partnership represents a
minority interest in the Partnership. The General Partner's share of the
Trading Partnership's profits and losses is eliminated in consolidation.
The financial information included herein has been prepared by management
without audit by independent certified public accountants who do not express
an opinion thereon. The statement of financial condition as of December 31,
1994 has been derived from but does not include all the disclosures
contained in the audited financial statements for the year ended December
31, 1994. The information furnished includes all adjustments which are, in
the opinion of management, necessary for a fair statement of results for the
interim period. The results of operations as presented, however, should not
be considered indicative of the results to be expected for the entire year.
Revenue Recognition
-------------------
Commodity futures and option contracts and securities transactions are
recorded on the trade date and open contracts are reflected in the financial
statements at the market value on the last business day of the reporting
period. The difference between the original contract amount and the market
value is reflected in income as unrealized gain or loss. Market value or
fair value is based on quoted market prices. All commodity futures, options
and forward contracts are reflected at fair value in the financial
statements. The Partnership does not report open positions on a net basis.
5
<PAGE>
U.S. Government Obligations
---------------------------
The Partnership invests a portion of its assets in U.S. Government
obligations. These investments are carried at amortized cost which
approximates market value or fair value.
Fees
----
The Partnership pays a monthly administrative fee to the General Partner
equal to 0.1458 of 1% of the Partnership's month-end net asset value each
month (a 1.75% annual rate). The General Partner pays, at no additional cost
to the Partnership, ongoing quarterly fees of $0.0625 per unit for offering
and organizational costs beginning at the end of the twelfth full month of
operations. Prior to the change discussed below, the General Partner also
paid the following additional fees which were based on the Partnership's
average month-end net assets: (i) monthly advisory fees to Aetna Capital
Management, Inc. ("ACM") totaling, on an annual basis, 0.275 of 1% of the
first $100 million and 0.125 of 1% on amounts in excess of $100 million;
(ii) monthly consulting fees to Leland O'Brien Rubinstein Associates
Incorporated ("LOR") totalling, on an annual basis, 0.04375 of 1% of the
first $100 million and 0.02 of 1% on amounts in excess of $100 million; and
(iii) monthly insurance premiums to The Standard Fire Insurance Company
totalling, on an annual basis, 0.375 of 1%.
The General Partner, at no additional expense to the Partnership, pays all
normal ongoing administrative costs of the Partnership, such as legal,
printing and accounting expenses.
Protected Net Asset Value
-------------------------
The Limited Partnership Agreement provides protection against certain
losses. The maximum permissible decrease in the Net Asset Value per unit, as
of the end of successive Time Horizons (a term defined in the Limited
Partnership Agreement, generally 18 months in duration) is 10% of the Net
Asset Value per unit as of the beginning of each such Time Horizon (the
"Protected Minimum NAV"). The Partnership had entered into an agreement with
Chase Manhattan Bank N.A. ("Chase") whereby a letter of credit issued by
Chase served to ensure the Protected Minimum NAV. The letter of credit was
issued in favor of State Street Bank and Trust Company of Connecticut, N.A.,
which served as the paying agent for the Limited Partners of the
Partnership. The amounts of the letters of credit varied from time to time
as a result of units redeemed, or the occurrence of a New Profit Lock-In, as
defined in the Letter of Credit and Reimbursement Agreement. The Letter of
Credit expired in June 1994 and was not renewed. The Protected Minimum NAV
for the Time Horizon ending November 15, 1996 is guaranteed by the U.S.
Government obligations. The Partnership will also utilize a "downside
protection" strategy which is designed to maximize profits while controlling
the risk of major drawdowns. Avoiding significant losses is of particular
importance to the Partnership's long-term prospects for profitability due to
its "downside protection" feature.
Income Taxes
------------
No provision for income taxes has been made in the accompanying financial
statements as each partner is individually responsible for reporting income
or loss based on their respective share of the Partnership's income and
expenses as reported for income tax purposes.
6
<PAGE>
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2007 or at an earlier date if
certain conditions occur, regarding, among other things, a decline in net
assets to less than $250,000, a decline in Net Asset Value to less than $25
or under certain circumstances as defined in the Limited Partnership
Agreement.
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all of their
units at 100% of actual Net Asset Value as of the last business day of any
month, and at 100% of actual Net Asset Value plus any amounts due under the
Protected Minimum NAV as of the last business day of any month which is also
the last day of a Time Horizon, upon ten days' written notice to the General
Partner.
2. RELATED PARTY TRANSACTIONS
All of the Partnership's assets except for the U.S. Government obligations
are held by Merrill Lynch Futures Inc. ("MLF") (the commodity broker for the
Partnership), an affiliate of the General Partner, as margin deposits in
respect of the Partnership's futures and options trading. All brokerage
commissions are paid to MLF. MLF pays the Partnership of interest which
approximates the prevailing 91-day U.S. Treasury bill rate on the
Partnership's average daily "available assets". Available assets are all of
the Partnership's assets except for those assets invested in U.S. Government
obligations and excluding the unrealized profit and loss on open forward or
options positions or assets being held by other commodity brokers.
3. WEIGHTED AVERAGE UNITS
Weighted average number of units outstanding was computed for purposes of
disclosing net income per weighted average unit. The weighted average units
are equal to the number of units outstanding at the period end, adjusted
proportionately for units redeemed based on their respective time
outstanding during such period.
4. OFF-BALANCE SHEET RISK
The Partnership trades futures and options contracts on regulated U.S.
Exchanges. Risk arises from changes in the value of these contracts (market
risk) and the potential inability of counterparties or brokers to perform
under the terms of the contracts (credit risk). Although numerous factors
could have significant influences on the market risk of these contracts,
they are very interest rate sensitive. All open contracts mature within one
year from the balance sheet date.
Contract amounts represent the Partnership's extent of involvement in the
particular class of financial instrument, but not the credit risk associated
with counterparty nonperformance. The credit risk associated with these
instruments, from counterparty nonperformance, is the net unrealized gain,
if any, included on the Statements of Financial Condition. The Partnership
also has credit risk because the sole counterparty or broker with respect to
most of the Partnership's assets (except for the Government Obligations) is
MLF.
7
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
------ Condition and Results of Operations
-------------------------------------------------
Operational Overview:
--------------------
Due to the nature of the Fund's business, its results of operations
depend on the Trading Manager's ability to recognize and capitalize on trends or
other profit opportunities in futures and forward contracts and related options
in different sectors of the world commodity markets. However, the Trading
Manager's methods are confidential, and therefore the only information that can
be furnished regarding the Fund's results of operations is contained in the
performance record of its trading. Unlike many businesses, general economic or
seasonal conditions will not necessarily affect the profit potential of the
Fund, and its past performance is not necessarily indicative of future results.
Liquidity:
---------
A significant portion of the Partnership's assets were held in U.S.
Treasury strips which, in turn, were used to margin its futures positions and
liquidated, as necessary, to pay trading losses and redemptions when incurred.
U.S. Treasury strips are highly liquid.
In 1990, the Partnership entered into an arrangement with Merrill Lynch
Futures Inc. regarding the maintenance of the Partnership's assets, which
eliminates the interest loss resulting from being unable to invest 100% of the
Partnership's available assets in U.S. Treasury bills. Under the arrangement, a
portion of the Partnership's assets are ordinarily deposited as cash rather than
invested in U.S. Treasury bills and Merrill Lynch Futures Inc. credits the
Partnership with interest as if 100% of its cash assets were continuously
invested in 91-day Treasury bills. As a result, the Partnership is able to earn
a yield on all of its available assets.
On the other hand, the stock index futures contracts in which the
Partnership trades may become illiquid under certain market conditions. "Daily
limits," which limit fluctuations in futures prices during a single day, have
been made applicable to stock index futures contracts, in response to the market
turbulence of October 1987. During a single day no trades may be executed at
prices beyond the daily limit. Once the price of a futures contract for a
particular commodity has increased or decreased by an amount equal to the daily
limit, positions in the commodity can generally neither be taken nor liquidated
unless traders are willing to effect trades at or within the limit. As a result
of such limits, market conditions could prevent the Partnership from promptly
liquidating its stock index futures positions. Although "circuit breaker"
trading halts are in effect, daily limits are applicable to the "cash" market in
the stocks on which the stock indexes on which the futures contracts traded by
the Partnership are based.
Risk Factors:
-------------
The Fund experiences market risk because it's objective as a
speculative commodity pool is to profit from price changes in the S&P 500 Stock
Index. The General Partner monitors this market risk by valuing and reporting
each open position daily.
All of the fund's assets are maintained with MLF, the commodity
broker of the Fund and an affiliate of the General Partner. The General
Partner monitors daily the Fund's trading account to insure actual trading
complies with the terms of the prospectus. A substantial portion of the
Fund's assets are invested in U.S. Government Securities and maintained with
MLF in segregated accounts in accordance with Commodity Futures Trading
Commission regulations.
Capital Resources:
-----------------
The Partnership does not have, nor does it expect to have, any capital
assets and has no material commitments for capital expenditures. The
Partnership uses its assets solely to supply the necessary margin or premiums
for, and to pay any losses incurred in connection with, its investment in stock
index futures contracts and options on stock index futures contracts. Inflation
is not a significant factor in the Fund's profitability, although inflationary
cycles can give rise to the type of major price movements which can have a
material impact on the Fund's profitability.
1995:
----
Total assets of the Partnership and Partnership Capital at June 30,
1995 were $8,271,897 and $8,084,902, respectively. During the second quarter of
1995, 3,245 Units were redeemed, for an aggregate redemption value of $525,405.
8
<PAGE>
1994:
----
Total assets of the Partnership and Partnership Capital at June 30,
1994 were $7,891,389 and $7,865,438, respectively. The Partnership permits Units
to be redeemed on a monthly basis. During the second quarter of 1994, 1,568
Units were redeemed, for an aggregate redemption value of $221,976.
Results of Operations - General:
-------------------------------
Unlike an operating business, it is difficult to identify "trends" in
the Fund's operations and virtually impossible to make any predictions regarding
future results based on results to date. In general, markets in which sustained
price trends occur with some frequency tend to be favorable to managed futures
investments, but this is not always the case. It is impossible to predict when
trending markets will occur and the advisor is affected differently by trends in
general and particular types of trends. Consequently, the results of operations
of the Fund are difficult to discuss other than in terms of how it has performed
in the past.
At June 30, 1995, the Net Asset Value per Unit was $166.23, an 8.7%
increase from the Net Asset Value per Unit of $152.99 at March 31, 1995 and a
17.6% increase from the Net Asset Value per Unit of $141.33 at December 31,
1994.
During January 1995, the Fund's Net Asset Value for the Series A Units
increased by 2.6%, while the S & P 500 Stock Index also increased 2.6% for the
month.
During February 1995, the Fund's Net Asset Value for the Series A Units
increased 3.4%, while the S & P 500 Stock Index increased 3.9% for the month.
During March 1995, the Fund's Net Asset Value for the Series A Units
increased 2.1%, while the S & P 500 Stock Index increased 3.0% for the month.
During April 1995, the Fund's Net Asset Value for the Series A Units
increased 2.8%, while the S & P 500 Stock Index increased 3.0% for the month.
During May 1995, the Fund's Net Asset Value for the Series A Units
increased 3.7%, while the S & P 500 Stock Index increased 4.0% for the month.
During June 1995, the Fund's Net Asset Value for the Series A Units
increased 2%, while the S & P 500 Stock Index increased less than 2.3% for the
month.
The Partnership's operations were profitable during the second quarter
of 1995 with gross trading gains of $665,709 and interest income of $45,234,
less operating expenses of $38,469 (comprised of brokerage commissions of $974,
administrative fees of $36,058, and minority interest on income of $1,437)
resulting in income of $672,474.
The Partnership's operations were profitable during the first six
months of 1995 with gross trading gains of $1,160,612 and interest income of
$206,295, less operating expenses of $74,822 (comprised of brokerage commissions
of $2,599, administrative fees of $10,186 and minority interest income of
$1,437), resulting in net income of $1,292,085.
9
<PAGE>
During the second quarter of 1995, the Fund experienced three
profitable months of trading operations, and during the first six months of
1995, the Fund experienced six profitable months of trading operations.
The Net Asset Value of a Unit purchased on August 5, 1987 for $100 had
increased to $166.23 as of June 30, 1995.
At June 30, 1994, the Net Asset Value per Unit was $138.44, a 1.59%
decrease from the Net Asset Value per Unit of $140.67 at March 31, 1994, and a
4.34% decrease from the Net Asset Value per Unit of $144.72 at December 31,
1993.
During January 1994, the Fund's Net Asset Value increased 2.8%, while
the S & P 500 Stock Index increased 3.4% for the month.
During February 1994, the Fund's Net Asset Value decreased 2.6%, while
the S & P 500 Stock Index increased 2.7% for the month.
During March 1994, the Fund's Net Asset Value decreased 2.9%, while the
S & P 500 Stock Index decreased 4.4% for the month.
During April 1994, the Fund's Net Asset Value increased less than 1%,
while the S & P 500 Stock Index increased 1.3% for the month.
During May 1994, the Fund's Net Asset Value increased less than 1%,
while the S & P 500 Stock Index increased 1.6% for the month.
During June 1994, the Fund's Net Asset Value decreased 2.5%, while the
S & P 500 Stock Index decreased 2.5% for the month.
The Partnership's operations were unprofitable during the second
quarter of 1994 with gross trading gains of $258,511 and interest income of
$(345,974), less operating expenses of $37,786 (comprised of brokerage
commissions of $2,225 and administrative fees of $35,561), resulting in a net
loss of $125,249.
The Partnership's operations were unprofitable during the first six
months of 1994 with gross trading losses of $19,279 and interest income of
$(263,233), less operating expenses of $80,141 (comprised of brokerage
commissions of $6,622 and administrative fees of $73,519), resulting in a net
loss of $362,653.
During the second quarter of 1994, the Fund experienced two profitable
months and one unprofitable month of trading operations, and during the first
six months of 1994, the Fund experienced three profitable months and three
unprofitable months of trading operations.
The Net Asset Value of a Unit purchased on August 5, 1987 for $100 had
increased to $138.44 as of June 30, 1994.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are filed herewith:
Designation Description
----------- -----------
3.04 Amended and Restated Certificate of Limited Partnership of
the Partnership, dated July 27, 1995.
Exhibit 3.04 Is filed herewith.
------------
10.01(c) Form of Advisory Agreement between the Partnership, Merrill
Lynch Investment Partners Inc., Merrill Lynch Futures Inc.
and prospective trading advisors.
Exhibit 10.01(c) Is filed herewith.
----------------
There are no other exhibits required to be filed as part of
this document.
11
<PAGE>
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the second quarter of fiscal
1995. A report on Form 8-K was filed on July 28, 1995 which reflects a name
change of the General Partner from ML Futures Investment Partners Inc. to
Merrill Lynch Investment Partners Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
THE GROWTH AND GUARANTEE FUND L.P.
MERRILL LYNCH INVESTMENT PARTNERS INC.
(formerly ML FUTURES INVESTMENT PARTNERS INC.)
(General Partner)
Date: August 9, 1995 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: August 9, 1995 By /s/JAMES M. BERNARD
-------------------
James M. Bernard
Chief Financial Officer
Treasurer and Vice President
<PAGE>
PAGE 1
EXHIBIT 3.04
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP", FILED IN THIS OFFICE ON THE
TWENTY-SEVENTH DAY OF JULY, A.D. 1995, AT 10 O'CLOCK A.M.
/s/ Edward J. Freel
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7588229
DATE: 07-27-95
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
OF
THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
THIS Amended and Restated Certificate of Limited Partnership of The Futures
Expansion Fund Limited Partnership (the "Partnership"), dated as of the 27th day
of July, 1995, has been duly executed and is being filed by the undersigned in
accordance with the provisions of 6 Del.C. (S) 17-210, to amend and restate the
------
original Certificate of Limited Partnership, which was filed on August 13, 1986
with the Secretary of State of the State of Delaware (the "Certificate"), to
form a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del.C. (S) 17-101, et seq.).
----- -- ---
The Certificate is hereby amended and restated in its entirety to read as
follows:
1. Name. The name of the limited partnership formed and continued hereby is
----
The Futures Expansion Fund Limited Partnership.
2. Registered Office. The address of the registered office of the
-----------------
Partnership in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
3. Registered Agent. The name and address of the registered agent for
----------------
service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
<PAGE>
4. General Partner. The name and the business address of the general
---------------
partner of the Partnership is:
Merrill Lynch Investment Partners Inc.
Merrill Lynch World Headquarters,
World Financial Center
South Tower, Sixth Floor
New York, New York 10080-6106
IN WITNESS WHEREOF, the undersigned general partner has duly executed this
Amended and Restated Certificate of Limited Partnership as of the date and year
first aforesaid.
MERRILL LYNCH INVESTMENT PARTNERS INC.
By: /s/ Steven Olgin
------------------------------
Steven Olgin
Vice President
-2-
<PAGE>
EXHIBIT 10.01(c)
FORM
OF
ADVISORY AGREEMENT
by and among
[THE PARTNERSHIP]
a Delaware limited partnership
and
[THE ADVISOR]
a ____________ corporation
and
ML FUTURES INVESTMENT PARTNERS INC.
a Delaware corporation
and
MERRILL LYNCH FUTURES INC.
a Delaware corporation
Effective as of ___________, 199__
Initial Allocation $____________
<PAGE>
ADVISORY AGREEMENT
------------------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Undertakings of the Trading Advisor.......... 2
2. Duties of Trading Advisor.................... 4
3. Allocation and Reallocation of Assets;
Designation of Additional Trading Advisors;
Charges to Allocated Assets................ 6
4. Trading Advisor Independent.................. 7
5. Commodity Broker; Floor Brokers.............. 7
6. Advisory Fees................................ 8
7. Term and Termination......................... 9
8. Right to Advise Others; Uniformity of
Acts and Practices......................... 10
9. Speculative Position Limits.................. 11
10. Representations and Warranties............... 12
11. Indemnification.............................. 18
12. Entire Agreement............................. 20
13. Assignment................................... 21
14. Amendment; Waiver............................ 21
15. Severability................................. 21
16. Notices ..................................... 21
17. Governing Law................................ 22
18. Consent to Jurisdiction...................... 22
19. Remedies..................................... 22
20. Confidentiality.............................. 22
21. Survival..................................... 23
22. Counterparts................................. 23
23. Headings..................................... 23
24. Third-Party Beneficiary...................... 23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
25. "Business Day"................................... 23
26. Multi-Programs................................... 23
Annex A -- Form of Trading Authorization.............. A-1
Annex B -- Commodity Interests Traded by the Advisor B-1
Annex C -- Advisory Fee Calculations.................. C-1
Annex D -- Selection of Multiple Programs Offered..... D-1
Form of Acknowledgement of Receipt of
Disclosure Document................................. ACK-1
</TABLE>
<PAGE>
ADVISORY AGREEMENT
------------------
THIS ADVISORY AGREEMENT ("Agreement"), made as of the date set forth on the
cover hereof (the "Effective Date"), by and among [THE PARTNERSHIP] (the
"Partnership"), [THE ADVISOR] (the "Trading Advisor"), ML FUTURES INVESTMENT
PARTNERS INC. ("MLFIP") and MERRILL LYNCH FUTURES INC. ("Merrill Lynch
Futures").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Partnership is engaged in the business of trading, buying,
selling or otherwise acquiring, holding or disposing of forward and futures
contracts, any rights pertaining thereto and any options thereon or on physical
commodities and engaging in all activities incident thereto (the foregoing forms
of trading being collectively referred to herein as "commodity interests");
WHEREAS, the Partnership has offered its Units of Limited Partnership
Interest ("Units") for sale to investors, as described in the Partnership's most
recent Prospectus Supplement (the "Prospectus Supplement"), and is currently
actively engaged in trading commodity interests;
WHEREAS, Merrill Lynch Futures acts as commodity broker to the Partnership
and will pay the Trading Advisor a Consulting Fee as described herein;
WHEREAS, from time to time during the Partnership's operations, MLFIP, the
Partnership's general partner, allocates and reallocates the Partnership's
assets among the Partnership's current or replacement trading advisors for
management as described in the Prospectus Supplement;
WHEREAS, the Trading Advisor is engaged in the business of, among other
things, making trading decisions on behalf of investors in the trading of
certain commodity interests; and
WHEREAS, the Partnership desires the Trading Advisor, upon the terms and
conditions set forth herein, to act as a trading advisor for the Partnership and
to make commodity interest trading decisions for the Partnership with respect to
the assets of the Partnership allocated to the Trading Advisor for management
(the "Allocated Assets") -- which shall include no "notional equity" -- and the
Trading Advisor desires to act in such capacity.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Undertakings of the Trading Advisor
-----------------------------------
-1-
<PAGE>
(a) To Furnish Information. The Trading Advisor agrees to make all
----------------------
disclosures reasonably requested by MLFIP regarding the Trading Advisor and its
trading performance, strategies and accounts (subject to the need to preserve
the secrecy of proprietary information concerning such strategies and of the
identity of the Trading Advisor's clients), to be included in disclosures made
by the Partnership to its investors or for any other purposes relating to the
operation of the Partnership.
The Trading Advisor shall cooperate, to the extent that MLFIP may
reasonably request, in preparing offering materials, investor information
reports and regulatory filings relating to the Partnership.
Any written reference to the Trading Advisor or its strategies shall be
approved by the Trading Advisor prior to general distribution by the
Partnership, MLFIP or the Trading Advisor.
(b) To Furnish Updated Performance Information. The Trading Advisor, at
------------------------------------------
its own expense, shall promptly provide the Partnership and MLFIP, upon request,
with a table or tables (in form and substance consistent with all applicable
regulations and all regulations which would be applicable were the Partnership
publicly to distribute the Units) reflecting the actual performance, on a
monthly basis, of all customer accounts directed by the Trading Advisor up to
the latest practicable month-end date.
(c) To Notify of Changes. If the Trading Advisor shall become aware of
--------------------
(i) any misleading statement, (ii) any untrue statement of a material fact or
any omission to state a material fact necessary to make the statements contained
in the disclosures made by the Partnership to its investors (relating to the
Trading Advisor, as approved in writing by the Trading Advisor), in light of the
circumstances under which such statements were made, not misleading, or (iii)
the occurrence of any event or change in circumstances which shall have resulted
or could reasonably be expected to result in there being any such misleading or
untrue statement or omission, the Trading Advisor shall promptly notify the
Partnership in writing and shall cooperate with the Partnership and MLFIP in the
preparation of any amended or supplemental disclosures reasonably requested by
MLFIP.
The Trading Advisor will promptly notify the Partnership and MLFIP of any
proposed material change in the management, ownership, personnel, organizational
structure, control or financial condition of the Trading Advisor.
(d) Not to Distribute Information Concerning the Partnership. None of the
--------------------------------------------------------
Trading Advisor or any of its employees, agents, stockholders, directors,
officers, employees, principals, affiliates, or agents of such affiliates, or
their respective successors or assigns (collectively, "related parties"), shall
publish, circulate, or distribute any information relating to the Partnership,
MLFIP or Merrill Lynch
-2-
<PAGE>
Futures or any of their respective affiliates, other than, in the case of the
Partnership, in the context of the preparation of the Trading Advisor's
performance tables as required by applicable law or regulation. The Trading
Advisor may also circulate performance information relating to the Partnership
account managed by the Trading Advisor so long as none of the Partnership,
MLFIP, Merrill Lynch Futures or any of their respective affiliates are named.
(e) Not to Solicit Investors. None of the Trading Advisor or any related
------------------------
party shall: (i) use or distribute for any purpose whatsoever any list
containing the names and/or residence addresses of and/or other information
relating to the Limited Partners or (ii) knowingly contact any current or former
Limited Partner for any purpose whatsoever unless such Limited Partner shall
have first contacted the Trading Advisor.
(f) To Provide Access to Books and Records. Upon five (5) business days'
--------------------------------------
notice to the Trading Advisor, the Partnership or MLFIP shall have the right,
during normal business hours, to have access to and to inspect and copy such
books and records relating to the Trading Advisor and its trading as the
Partnership or MLFIP may reasonably request, including, without limitation, to
verify the accuracy and completeness of the data furnished by the Trading
Advisor pursuant to this Section 1 of this Agreement or otherwise to verify
compliance with the terms of this Agreement (subject to the need to preserve the
secrecy of proprietary information and of the identity of the Trading Advisor's
clients). Such right of inspection shall terminate upon the termination of this
Agreement and shall not include any right to access computer programs, records
or other information used in determining trading decisions.
The Trading Advisor shall not be required to disclose the actual trading
results of the proprietary accounts of the Trading Advisor or its principals
except upon the request of the Partnership or MLFIP for good cause given.
2. Duties of Trading Advisor
-------------------------
(a) Trading the Allocated Assets; Trading Policies. Except as otherwise
----------------------------------------------
provided in this Section 2, the Trading Advisor shall, commencing on the
Effective Date, have sole and exclusive authority and responsibility for
directing the trading of the Allocated Assets in commodity interests pursuant to
and in accordance with the Trading Advisor's best judgment and its trading
strategy as described in the information furnished, with the written approval of
the Trading Advisor, by the Partnership to its investors, or, if no such
information is furnished by the Partnership to its investors, as described in
the information concerning the Trading Advisor furnished by it in writing to the
Partnership, as such strategy may be refined and modified from time to time in
the future in accordance herewith, for the period and on the terms and
conditions set forth herein and in accordance with the Partnership's trading
policies as notified to the Trading Advisor in writing by the Partnership from
time to
-3-
<PAGE>
time (the "Trading Policies"). Notwithstanding the foregoing, the Partnership
may override the trading instructions of the Trading Advisor to the extent
necessary: (i) to comply with the Trading Policies; (ii) to fund any
distributions or redemptions of Units to be made by the Partnership; (iii) to
pay the Partnership's expenses; (iv) to effect any allocation or reallocation of
the Partnership's assets in accordance with this Agreement; or (v) as required
by law, provided that the Partnership shall, unless otherwise required by law,
use best efforts to permit the Trading Advisor three (3) full business days in
which to liquidate positions prior to exercising the Partnership's override
authority, and provided further that in the event that the Partnership's Trading
Policies are changed, any open positions at the time of such change shall not be
deemed to violate the revised Trading Policies and shall be closed out by the
Trading Advisor in the ordinary course of trading.
In the event that the Trading Advisor is required to liquidate open
positions in order to comply with instructions given by the Partnership under
clauses 2(a)(ii), (iii) or (iv), above, the Trading Advisor shall not be
responsible for any losses or damages sustained by the Partnership as a result
of such intervention.
The Trading Advisor, in its discretion, may alter the trading approach used
by the Trading Advisor in managing the Allocated Assets; provided that the
Trading Advisor determines that such alteration is in the best interest of the
Partnership and not inconsistent with the Trading Policies; and provided further
that the Trading Advisor gives the Partnership thirty (30) calendar days' prior
written notice of any alteration which the Trading Advisor considers to be
material. The Partnership may instruct the Trading Advisor not to make any
material alteration in the trading strategy used for the Allocated Assets, in
which case the Trading Advisor may terminate this Agreement pursuant to Section
7(b)(iii) hereof.
Any notices of material changes in trading approach required hereunder
shall be subject to reasonable assurances of confidentiality and need not
disclose any proprietary information concerning the nature of such material
change. The addition and/or deletion of commodity interests from the
Partnership's portfolio managed by the Trading Advisor shall not be deemed a
change in the Trading Advisor's strategy, and prior written notice to the
Partnership shall not be required therefor, unless the Trading Advisor's
strategy used for the Partnership is limited to a specific group of contracts or
a market sector in a manner inconsistent with such addition or deletion.
The Trading Advisor is in no respect making any guaranty to the Partnership
of profits or of protection against loss. All purchases and sales of commodity
interests shall be for the account and risk of the Partnership, and the Trading
Advisor shall not incur liability for trading losses resulting therefrom, except
as otherwise provided herein.
-4-
<PAGE>
(b) Investment of Assets Held in Securities and Cash. The Partnership,
------------------------------------------------
and not the Trading Advisor, shall have the sole and exclusive authority and
responsibility with regard to the investment, maintenance and management of the
Partnership's assets other than in respect of the Trading Advisor's trading of
the Allocated Assets in commodity interests.
(c) Trading Authorization. Prior to the Partnership's acceptance of
---------------------
trading advice from the Trading Advisor in accordance with this Agreement, the
Partnership shall deliver to the Trading Advisor a trading authorization in the
form of Annex A hereto appointing the Trading Advisor as the Partnership's agent
-------
and attorney-in-fact for such purpose.
The Partnership shall instruct its brokers to furnish to the Trading
Advisor copies of all trade confirmations and monthly statements relating to the
Allocated Assets. The Trading Advisor will maintain a record of all such
statements and monitor the open positions in the Partnership's account.
(d) Delivery of Disclosure Document; Proposed Changes. The Trading
-------------------------------------------------
Advisor shall, during the term of this Agreement, deliver to the Partnership
copies of all disclosure documents filed by the Trading Advisor with any
governmental authority, promptly following such filing.
The Trading Advisor agrees, during the term of this Agreement, to discuss
with the Partnership and MLFIP any changes which the Trading Advisor proposes to
make in the disclosures concerning itself or in its performance tables -- as
included in any other disclosure documents or as filed with any governmental
authority -- prior to implementing any such changes, and to use best efforts not
to make any such changes within a period of six (6) full calendar months
subsequent to having furnished the Partnership with information concerning the
Trading Advisor for distribution to the Partnership's investors.
(e) List of Commodity Interests Traded by the Trading Advisor. The
---------------------------------------------------------
Trading Advisor shall provide the Partnership -- in order for the Partnership to
ensure that non-United States investors will not be subject to federal income
tax on their investment in the Partnership -- with a complete list of the
commodity interests which the Trading Advisor intends to trade on the
Partnership's behalf. All commodity interests other than regulated futures
contracts and options on regulated futures contracts traded on a designated
board of trade in the United States shall be listed on Annex B to this
-------
Agreement. The addition of commodity interests (other than forward contracts on
foreign currencies) to the Partnership's portfolio managed by the Trading
Advisor as set forth in Annex B to this Agreement shall require prior written
-------
notice to the Partnership.
-5-
<PAGE>
Other than as the Partnership may notify the Trading Advisor, there is
no limitation on the commodity interests which the Trading Advisor may trade on
behalf of the Partnership, provided that the Trading Advisor agrees to trade
only in commodity interests which the Trading Advisor considers to be traded in
sufficient volume to permit the Trading Advisor readily to acquire and liquidate
positions on behalf of the Partnership.
(f) Trade Reconciliations. The Trading Advisor acknowledges its
---------------------
obligation to review the Partnership's positions in the account managed by the
Trading Advisor on a daily basis and promptly to notify MLFIP and the
Partnership of any errors committed by the Trading Advisor or any trade which
the Trading Advisor believes was not executed in accordance with its
instructions.
3. Allocation and Reallocation of Assets;
Designation of Additional Trading
Advisors; Charges to Allocated Assets
--------------------------------------
(a) Allocation and Reallocation of Assets; Designation of Additional
----------------------------------------------------------------
Trading Advisors. The initial amount of the Allocated Assets shall be the
----------------
amount set forth on the cover of this Agreement, none of which shall constitute
"notional funds." This initial amount shall be deposited at Merrill Lynch
Futures or an affiliate on the Effective Date, available for trading by the
Trading Advisor. The Partnership may at any time and from time to time in its
sole discretion: (i) reallocate the Partnership's assets, including a portion
of the Trading Advisor's Allocated Assets, among the various other trading
advisors for the Partnership, including the Trading Advisor; and/or (ii)
designate additional trading advisors for the Partnership, and allocate to such
additional trading advisors the management of such portion of the Partnership's
assets, including a portion of the Allocated Assets, as the Partnership shall
determine. Any reallocation from the Trading Advisor shall be preceded by
twenty-four (24) hours' notice, and the Partnership will use best efforts to
make reallocations only at month-end.
The Trading Advisor agrees to accept additional allocations of Partnership
assets for management, from time to time, provided that the Net Asset Value of
the Allocated Assets may not exceed $50,000,000 as of any month-end without the
Trading Advisor's prior consent, and provided further that the Partnership will
use its best efforts to make additional allocations only as of the beginning of
a month.
(b) Charges to Allocated Assets. The Trading Advisor understands and
---------------------------
agrees that: (i) the full amount of the Profit Share and Brokerage Fee
allocable to the Allocated Assets shall be charged to the Allocated Assets; (ii)
other expenses (not including distributions or redemptions) payable by the
Partnership shall be allocated to the Allocated Assets pro rata based on the
--- ----
relative month-end equity of the accounts managed by each of the Partnership's
trading advisors; and (iii) interest
-6-
<PAGE>
income earned on the Partnership's assets shall be allocated pro rata among the
--------
accounts managed by each of the Partnership's trading advisors, as provided in
clause (ii).
4. Trading Advisor Independent
---------------------------
For all purposes of this Agreement, the Trading Advisor shall be deemed to
be an independent contractor and, unless otherwise expressly provided herein or
with the prior written authorization of the Partnership, the Trading Advisor
shall have no authority to act for or represent the Partnership in any way and
shall not otherwise be deemed to be an agent of the Partnership. Except as
otherwise specifically provided herein, nothing in this Agreement shall be
deemed to confer on any of the foregoing any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. Nothing
contained herein shall create or constitute the Trading Advisor, any other
trading advisor for the Partnership, the Partnership, MLFIP or Merrill Lynch
Futures as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity.
The parties acknowledge that the Trading Advisor has not been an organizer
or promoter of the Partnership.
5. Commodity Broker; Floor Brokers
-------------------------------
(a) Commodity Broker. Except as contemplated by Section 5(c) of
----------------
this Agreement, the Trading Advisor shall place orders for all commodity
interest transactions executed by the Trading Advisor for the Partnership
through such commodity broker or brokers as the Partnership shall designate from
time to time in its sole discretion -- the Partnership initially so designating
Merrill Lynch Futures. The parties acknowledge that the Trading Advisor has no
authority or responsibility for the Partnership's selection of Merrill Lynch
Futures or for the negotiation of the Partnership's Brokerage Fee rate, and is
not responsible for the execution and clearance of the Partnership's trades once
complete orders have been transmitted to Merrill Lynch Futures.
(b) The Trading Advisor shall place orders for all forward currency
transactions, to be executed by the Trading Advisor for the Partnership, through
the F/X Service Desk established by MLFIP.
(c) Floor Brokers. Notwithstanding Section 5(a) of this Agreement,
-------------
the Trading Advisor may place orders for commodity interest transactions for the
Partnership through floor brokers selected by the Trading Advisor, and approved
by the Partnership, such approval not to be unreasonably withheld. Such floor
brokers shall "give up" all Partnership trades to Merrill Lynch Futures for
clearance.
The brokerage and floor commissions, "give-up" fees and other
transaction costs charged by any floor broker, other
-7-
<PAGE>
than Merrill Lynch Futures, to effect Partnership transactions shall be subject
to the approval of Merrill Lynch Futures, which shall pay such costs, such
approval not to be unreasonably withheld provided that such fees and transaction
costs are competitive with Merrill Lynch Futures' standard rates.
The Trading Advisor shall be responsible for correcting all trading
errors or omissions relating to transactions executed in respect of the
Allocated Assets by any broker other than Merrill Lynch Futures.
6. Advisory Fees
-------------
(a) Profit Share; Consulting Fee. For the advisory services
----------------------------
contemplated by this Agreement, the Partnership shall pay to the Trading Advisor
a quarterly Profit Share and Merrill Lynch Futures shall pay to the Trading
Advisor a monthly Consulting Fee, in each case calculated as set forth in Annex
-----
C.
-
(b) No Share in Commissions. Without the express written consent of
-----------------------
the Partnership, neither the Trading Advisor nor any related party shall receive
or accept, whether in the form of rebates or otherwise, (i) any share of the
brokerage, floor, or clearinghouse commissions or fees or other transaction
costs paid by the Partnership to any commodity broker or floor broker, or (ii)
any form of compensation or remuneration from any executing or clearing broker
used by the Partnership.
7. Term and Termination
--------------------
(a) Term and Renewal. This Agreement shall continue in effect until
----------------
the end of the fourth full calendar quarter after the Effective Date.
Thereafter, this Agreement shall be renewable, at the option of the Partnership,
on the same terms for up to two (2) additional twelve-month periods on thirty
(30) calendar days' notice to the Trading Advisor. In addition, the Trading
Advisor hereby agrees to additional one-year renewals sufficient to last until
the Principal Assurance Date, if any, of the Units sold nearest to the Effective
Date; provided, however, that any such renewals will be on terms to be
negotiated in good faith by the Partnership and the Trading Advisor at the time.
(b) Termination. Notwithstanding Section 7(a) hereof, this Agreement
-----------
shall terminate:
(i) immediately if the Partnership shall terminate;
(ii) at the discretion of the Partnership as of the end of any
calendar month;
(iii) at the discretion of the Trading Advisor, upon twenty (20)
days' notice to the Partnership, as of any month-end should (a) the Trading
Advisor notify the Partnership of a proposed material change to the strategies
to be used in managing the Allocated Assets and the Partnership has instructed
the Trading Advisor not to implement such changes; (b) if the Trading Advisor
has determined to cease managing any customer accounts
-8-
<PAGE>
pursuant to the same strategy as the Trading Advisor has been retained to employ
on behalf of the Partnership; or (c) should the Allocated Assets have a Net
Asset Value, as of the close of business on any day, of less than $250,000 (any
such termination to be made at the first available month-end after the event
giving rise to the termination right or such right to be waived); or
(iv) immediately at the discretion of the Partnership or the Trading
Advisor, as the case may be, in the event that the Trading Advisor, on the one
hand, or the Partnership, MLFIP or Merrill Lynch Futures, on the other, is in
material breach of any provision hereof.
Any non-renewal of this Agreement pursuant to Section 7(a) or any
termination of this Agreement pursuant to clauses 7(b)(i), (b)(ii) or (b)(iii),
above, shall be without penalty or liability to any party.
8. Right to Advise Others; Uniformity of
Acts and Practices
-------------------------------------
During the term of this Agreement, the Trading Advisor and its
affiliates shall be free to advise other investors as to the purchase and sale
of commodity interests, to manage and trade other investors' commodity interest
accounts, and to trade for and on behalf of their own proprietary commodity
interest accounts. The compensation which the Trading Advisor receives from
other accounts may be more or less than that received from the Partnership.
However, under no circumstances shall the Trading Advisor or any of its
affiliates knowingly or deliberately favor any commodity interest account
directed by any of them over the Partnership's account in any way or manner,
provided that trading different portfolios for other accounts, trading other
accounts at different leverage, or charging different fees to different accounts
shall not be considered to constitute favoring such accounts over the
Partnership's account. The Trading Advisor and its affiliates also shall not be
deemed to be favoring another commodity interest account over the Partnership's
account if the Trading Advisor or his or its affiliates, in accordance with
specific instructions of the owner of such account, shall trade such account at
a degree of leverage or in accordance with trading policies which shall be
different from that which would normally be applied or if the Trading Advisor or
its affiliates, in accordance with the Trading Advisor's money management
principles, shall not trade certain commodity interest contracts for an account
based on the amount of equity in such account.
The Trading Advisor agrees that it will not accept additional client
accounts for management if doing so might reasonably be expected to require
material changes to the trading strategies used by the Trading Advisor for the
Partnership or materially adversely affect the Trading Advisor's ability to
perform services hereunder.
-9-
<PAGE>
The Trading Advisor agrees that in the event the Trading Advisor
determines to trade or is now trading another commodity interest account
pursuant to a trading approach materially different from the trading approach
utilized by the Trading Advisor in trading on behalf of the Partnership, the
Trading Advisor will disclose such trading approach to the Partnership, subject
to reasonable assurances of confidentiality, and will, if the Partnership so
elects, utilize any such trading approach in trading the Allocated Assets in the
future, provided that the Trading Advisor shall not hereby be required to use,
on behalf of the Partnership, any approach used solely in trading, experimental
or proprietary accounts or any approach which the Trading Advisor reasonably
believes to be inappropriate for the Partnership's account.
The Trading Advisor understands and agrees that it shall have a
fiduciary responsibility to the Partnership under this Agreement.
At the reasonable request of the Partnership and to the extent that
they are available without undue expense or burden, the Trading Advisor shall
make available to the Partnership copies of the daily, monthly, quarterly, and
annual, as the case may be, written reports prepared by the Trading Advisor in
the ordinary course, reflecting the performance of all commodity pool accounts
advised, managed, owned or controlled by the Trading Advisor and account
statements reflecting the performance of all other pools and (with the names of
clients deleted) commodity interest accounts advised, managed, owned, or
controlled by the Trading Advisor, in each case which implement the same
strategy or strategies used for the Partnership. At the reasonable request of
the Partnership, the Trading Advisor shall provide to the Partnership an
explanation of the differences, if any, in the performance between the
Partnership's account and such other accounts (subject to the need to preserve
the secrecy of proprietary information concerning the Trading Advisor's
strategies and the identity of the Trading Advisor's clients).
9. Speculative Position Limits
---------------------------
(a) Limits Applicable to Trading Advisor. The Trading Advisor agrees
------------------------------------
that in the event the Trading Advisor exceeds speculative position limits in
respect to the Trading Advisor's commodity interest trading, the Trading Advisor
will liquidate positions as necessary to comply with applicable speculative
position limits in all of the Trading Advisor's outstanding accounts in such
manner as the Trading Advisor deems to be fair and equitable. The Trading
Advisor agrees that in the event that any such liquidation becomes necessary,
the Trading Advisor will so inform the Partnership and will report to the
Partnership the steps taken by the Trading Advisor in order to comply with all
applicable speculative position limits.
The Trading Advisor represents and warrants that existing speculative
position limits will not materially adversely affect the Trading Advisor's
ability to manage the
-10-
<PAGE>
Partnership's account, provided that such account does not exceed $50,000,000,
as contemplated by Section 3(a) hereof.
(b) Notice That Limits Exceeded. If the Trading Advisor at any time
---------------------------
shall become aware that the positions in any commodity interest owned, held, or
controlled by the Trading Advisor exceed 90% of the applicable speculative
position limit allocable to the Trading Advisor, the Trading Advisor shall
promptly notify the Partnership of that fact in writing.
The Trading Advisor shall promptly notify the Partnership if
speculative position limits may reasonably be expected to require alteration of
the strategies used in managing the Partnership's account.
(c) Liquidation of Positions to Comply with Limits. If limits are
----------------------------------------------
exceeded by the Partnership, the Partnership shall instruct the Trading Advisor
as to whether any liquidation of Partnership positions managed by the Trading
Advisor is required.
10. Representations and Warranties
------------------------------
(a) The Trading Advisor represents and warrants to the Partnership,
MLFIP and Merrill Lynch Futures as follows:
(i) The Trading Advisor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated. The Trading Advisor has full corporate power
and authority to perform its obligations and to direct the
Partnership's trading, as described in the information furnished in
writing by the Trading Advisor to the Partnership or MLFIP for
distribution to prospective or existing investors and to discharge its
obligations under this Agreement and is qualified to conduct its
business as a foreign corporation and is in good standing in every
jurisdiction in which the nature or conduct of its business requires
such qualification and failure to so qualify would have a material
adverse effect on its ability to comply with, or perform its
obligations under this Agreement.
(ii) The references to the Trading Advisor, its principal(s) and
its trading strategies in the information furnished in writing by the
Trading Advisor to MLFIP for distribution to Limited Partners do not
contain any material misstatements or omissions. The Trading Advisor's
Disclosure Document complies in all material respects with the
Commodity Exchange Act and the regulations of the Commodity Futures
Trading Commission.
(iii) The disclosures made by the Partnership to its investors
relating to the Trading Advisor, as
-11-
<PAGE>
approved in writing by the Trading Advisor, do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
(iv) This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Trading Advisor and constitutes the
binding and enforceable obligation of the Trading Advisor in
accordance with its terms.
(v) The Trading Advisor and its principals each has all
governmental, regulatory and exchange licenses and approvals and has
effected all filings and registrations with governmental and
regulatory agencies required to conduct its business and to act as
described in the information furnished in writing by the Trading
Advisor to the Partnership or MLFIP for distribution to prospective or
existing investors or required to perform its obligations under this
Agreement (including, without limitation, registration of the Trading
Advisor as a commodity trading advisor under the Commodity Exchange
Act and membership of the Trading Advisor as a commodity trading
advisor in the National Futures Association).
(vi) The execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the information furnished in
writing by the Trading Advisor to MLFIP for distribution to Limited
Partners, will not constitute a breach of, or default under, the
Articles of Incorporation or By-laws or other organizational documents
of the Trading Advisor, or under any instrument by which the Trading
Advisor or any of its principals is bound or under any order, rule or
regulation applicable to the Trading Advisor or any of its principals,
of any court or any governmental body or administrative agency having
jurisdiction over the Trading Advisor or such principal(s).
(vii) The Trading Advisor's provision of management services as
contemplated hereby will not violate the Investment Advisers Act of
1940.
(viii) There is not pending, or to the best of the Trading
Advisor's knowledge threatened, any action, suit or proceeding before
or by any court or other governmental body to which the Trading
Advisor or any of its principals is a party, or to
-12-
<PAGE>
which any of the assets of the Trading Advisor or any of its
principals is subject, which might reasonably be expected to result in
any material adverse change in the condition, financial or otherwise,
business or prospects of the Trading Advisor or any of its principals.
Neither the Trading Advisor nor any of its principals has received any
notice of an investigation regarding non-compliance by the Trading
Advisor or such principals with applicable law.
(ix) As a condition precedent to the allocation of the Allocated
Assets to the Trading Advisor, the Trading Advisor agrees to furnish
to the Partnership such opinions and certificates as the Partnership
may reasonably request.
(b) MLFIP represents and warrants to the Trading Advisor and the
Partnership as follows:
(i) MLFIP is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. MLFIP has full
corporate power and authority to perform its obligations as described
in the information furnished by MLFIP for distribution to Limited
Partners and to discharge its obligations under this Agreement and is
qualified to conduct its business as a foreign corporation and is in
good standing in every jurisdiction in which the nature or conduct of
its business requires such qualification and failure to so qualify
would have a material adverse effect on its ability to comply with, or
perform its obligations under this Agreement.
(ii) The references to MLFIP and its principals in the information
furnished by MLFIP for distribution to Limited Partners do not contain
any material misstatements or omissions.
(iii) This Agreement has been duly and validly authorized,
executed and delivered on behalf of MLFIP and constitutes the binding
and enforceable obligation of MLFIP in accordance with its terms.
(iv) MLFIP and its principals each has all United States
governmental, regulatory and exchange licenses and approvals and has
effected all filings and registrations with governmental and
regulatory agencies required to conduct its business and to act as
described in the information furnished by MLFIP for distribution to
Limited Partners or required to perform its obligations under this
Agreement (including,
-13-
<PAGE>
without limitation, registration of MLFIP as a commodity pool operator
and commodity trading advisor under the Commodity Exchange Act and
membership of MLFIP as a commodity pool operator and commodity trading
advisor in the National Futures Association).
(v) The execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the information furnished by
MLFIP for distribution to Limited Partners will not constitute a
breach of, or default under, the organizational documents of MLFIP, or
under any instrument by which MLFIP or any of its principals is bound
or under any order, rule or regulation applicable to MLFIP or any of
its principals, of any court or any governmental body or
administrative agency having jurisdiction over MLFIP or such
principals.
(vi) There is not pending, or to the best of MLFIP's knowledge
threatened, any action, suit or proceeding before or by any court or
other governmental body to which MLFIP or any of its principals is a
party, or to which any of the assets of MLFIP or any of its principals
is subject, which might reasonably be expected to result in any
material adverse change in the condition, financial or otherwise,
business or prospects of MLFIP or any of its principals. Neither MLFIP
nor any of its principals has received any notice of an investigation
regarding non-compliance by MLFIP or such principals with applicable
law.
(c) Merrill Lynch Futures represents and warrants to the Trading
Advisor and the Partnership as follows:
(i) Merrill Lynch Futures is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Merrill Lynch Futures has full corporate power and authority to perform
its obligations and to clear the Partnership's trading, as described in
the information furnished by Merrill Lynch Futures for distribution to
Limited Partners, and to discharge its obligations under this Agreement
and is qualified to conduct its business as a foreign corporation and
is in good standing in every jurisdiction in which the nature or
conduct of its business requires such qualification and failure to so
qualify would have a material adverse effect on its ability to comply
with, or perform its obligations under this Agreement.
-14-
<PAGE>
(ii) The references to Merrill Lynch Futures in the information
furnished by Merrill Lynch Futures for distribution to Limited Partners
do not contain any material misstatements or omissions.
(iii) This Agreement has been duly and validly authorized,
executed and delivered on behalf of Merrill Lynch Futures and
constitutes the binding and enforceable obligation of Merrill Lynch
Futures in accordance with its terms.
(iv) Merrill Lynch Futures and its principals each has all
governmental, regulatory and exchange licenses and approvals and has
effected all filings and registrations with governmental and regulatory
agencies required to conduct its business and to act as described in
the information furnished by Merrill Lynch Futures for distribution to
Limited Partners or required to perform its obligations under this
Agreement (including, without limitation, registration of Merrill Lynch
Futures as a futures commission merchant under the Commodity Exchange
Act and membership of Merrill Lynch Futures as a futures commission
merchant in the National Futures Association).
(v) The execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the information furnished by
Merrill Lynch Futures for distribution to Limited Partners will not
constitute a breach of, or default under, the organizational documents
of Merrill Lynch Futures or under any instrument by which Merrill Lynch
Futures or any of its principals is bound or under any order, rule or
regulation applicable to Merrill Lynch Futures or any of its
principals, of any court or any governmental body or administrative
agency having jurisdiction over Merrill Lynch Futures or such
principals.
(vi) There is not pending, or to the best of Merrill Lynch
Futures' knowledge threatened, any action, suit or proceeding before or
by any court or other governmental body to which Merrill Lynch Futures
or any of its principals is a party, or to which any of the assets of
Merrill Lynch Futures or any of its principals is subject, which might
reasonably be expected to result in any material adverse change in the
condition, financial or otherwise, business or prospects of Merrill
Lynch Futures or any of its principals. Neither Merrill Lynch Futures
nor any of its principals has received any notice of an investigation
regarding non-compliance by Merrill Lynch Futures or such principals
with applicable law.
-15-
<PAGE>
(d) The Partnership hereby represents and warrants to MLFIP, Merrill
Lynch Futures and the Trading Advisor as follows:
(i) The Partnership is duly organized pursuant to and validly
existing under the laws of the State of Delaware, with full corporate
power and authority to engage in the activities as described in the
Prospectus Supplement.
(ii) The Partnership has full corporate power and authority under
applicable law to perform its obligations under this Agreement.
(iii) This Agreement has been duly and validly authorized,
executed and delivered by the Partnership and constitutes binding and
enforceable obligations of the Partnership in accordance with its
terms.
(iv) The execution and delivery of this Agreement, the incurrence
of the obligations set forth herein and the consummation of the
transactions contemplated herein will not constitute a breach of, or
default under, the Certificate of Limited Partnership or Limited
Partnership Agreement of the Partnership, or any instrument by which
the Partnership is bound or any order, rule or regulation applicable to
the Partnership of any court or any governmental body or administrative
agency having jurisdiction over the Partnership.
(v) The Partnership does not require any governmental, regulatory
or exchange approvals or licenses, nor need it effect any filings or
registrations with any federal, state or other governmental agencies in
order to conduct its business and to act as contemplated by this
Agreement.
(e) The foregoing representations and warranties shall be continuing,
and if any of them shall cease to be true and accurate in all material respects,
the affected party shall promptly give notice to such effect to all other
parties hereto.
11. Indemnification.
---------------
The Partnership shall indemnify, defend and hold harmless the Trading
Advisor and its related parties from and against any and all losses, claims,
damages, liabilities (joint and several), costs and expenses (including any
investigatory, legal and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Partnership shall have
approved such settlement) resulting from a demand, claim, lawsuit, action or
proceeding relating to (i) any of such indemnified person's actions or
capacities relating to the business or activities of
-16-
<PAGE>
the Partnership, (ii) any activities of the Partnership, and (iii) any
Partnership-related activities of MLFIP, Merrill Lynch Futures, or any other
trading advisor to the Partnership; provided that the conduct of such person
which was the subject of the demand, claim, lawsuit, action or proceeding did
not constitute negligence, misconduct or a breach of this Agreement and was done
in good faith and in a manner such person reasonably believed to be in, or not
opposed to, the best interests of the Partnership. The termination of any
demand, claim, lawsuit, action or proceeding by settlement shall not, in itself,
create a presumption that the conduct in question constituted negligence or
misconduct or was not undertaken in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Partnership.
In the event that the Trading Advisor or any related party is made a
party to any claim, dispute or litigation or otherwise incurs any loss or
expense as a result of, or in connection with, the Partnership's activities or
claimed activities unrelated to the Trading Advisor, the Partnership shall
indemnify, defend and hold harmless the Trading Advisor or such related party
against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.
The Trading Advisor shall indemnify, defend and hold harmless the
Partnership and its related parties from and against any and all losses, claims,
damages, liabilities (joint and several), costs and expenses (including any
reasonable investigatory, legal and other expenses incurred in connection with,
and any amounts paid in, any settlement; provided that the Trading Advisor shall
have approved such settlement) resulting from a demand, claim, lawsuit, action
or proceeding relating to any action or omission of the Trading Advisor relating
to the business or activities of the Trading Advisor under this Agreement or
relating to the management by the Trading Advisor of an account of the
Partnership if the action of omission of the Trading Advisor which was the
subject of the demand, claim, lawsuit, action or proceeding constituted
negligence, misconduct or a breach of this Agreement, or was an action or
omission taken otherwise than in good faith and in a manner reasonably believed
to be in, or not opposed to, the best interests of the Partnership.
In the event that the Partnership or any related party is made a party
to any claim, dispute or litigation or otherwise incurs any loss or expense as a
result of, or in connection with, the activities or claimed activities of the
Trading Advisor or any related party unrelated to the Partnership's business,
the Trading Advisor shall indemnify, defend and hold harmless the Partnership or
any of its affiliates against any loss, liability, damage, cost or expense
(including, without limitation, attorneys' and accountants' fees) incurred in
connection therewith.
No indemnification under this Section 11 shall be made in respect of
any demand, claim, lawsuit, action or proceeding
-17-
<PAGE>
relating to activities of the person to be indemnified which have been adjudged,
by a court, having jurisdiction with respect to the matter upon entry of a final
judgment, not to have been done in good faith and in the reasonable belief that
such conduct was in, or not opposed to, the best interests of the Partnership or
to constitute negligence, misconduct or a breach of this Agreement unless, and
except to the extent that, such court determines that, despite such judgment,
such person is fairly and reasonably entitled to indemnity.
Any indemnification required by this Section 11, unless ordered or
expressly permitted by a court, shall be made by the indemnifying party only
upon a determination by independent legal counsel in a written opinion that the
conduct which is the subject of the claim, demand, lawsuit, action or proceeding
with respect to which indemnification is sought meets the applicable standard
set forth in this Section 11; provided, however, that if the indemnified party
shall prevail on the merits and the defense of any demand, claim, lawsuit or
proceeding subject to indemnification hereunder, indemnification shall be
payable hereunder irrespective of the receipt of any such legal opinion.
In the event that a person entitled to indemnification under this
Section 11, is made a party to an action, suit, or proceeding alleging both
matters for which indemnification may be due hereunder and matters for which
indemnification may not be due hereunder, such person shall be indemnified only
in respect of the former matters.
The Partnership or the Trading Advisor, as the case may be, shall
advance indemnification payments reasonably asserted to be due hereunder,
provided that the putatively indemnified party which receives such advances
undertakes in writing to repay the advanced funds, without interest, in the
event that such recipient is determined not to be entitled to indemnification
under this Section 11.
Notwithstanding any provision of this Agreement to the contrary, in
respect of all losses, liabilities, claims, demands, damages, costs, and
expenses described above in this Section 11 (including legal, accounting, and
other expenses incurred in each connection therewith), the Partnership's
indemnity obligation shall be limited to the greater of (i) the net worth of the
Trading Advisor as of the Effective Date and (ii) the net worth of the Trading
Advisor as of the time that any event giving rise for a claim to indemnity
arose.
The foregoing agreements of indemnity shall be in addition to, and
shall in no respect limit or restrict, any other remedies which may be available
to an indemnified party under this Agreement.
Promptly after receipt by any of the indemnified parties under this
Agreement of notice of any demand, claim, lawsuit, action or proceeding, the
indemnified party shall notify the indemnifying party in writing of the
commencement thereof if a claim in respect thereof is to be made under this
Agreement,
-18-
<PAGE>
but the omission so to notify shall not relieve the indemnifying party from any
obligation or liability which it may have to any such indemnified party
otherwise than under this section. In case such demand, claim, lawsuit, action
or proceeding is brought against a person indemnified under this Agreement, and
the indemnifying party is notified of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that the
indemnifying party may wish, to assume the defense thereof, with counsel
selected by the indemnifying party and approved by the indemnified person
(provided that approval may not be unreasonably withheld), and after notice from
the indemnifying party to such indemnified person of the indemnifying party's
election so to assume the defense thereof, the indemnifying party shall not be
liable to such person under this section for any legal or other expenses
subsequently incurred by such person in connection with the defense thereof,
unless (i) the indemnifying party approves the employment of separate counsel by
such person, or (ii) the action has been brought against both such person and
the indemnifying party and such person's counsel has advised it or him that it
or he has legal defenses different from or in addition to those of the
indemnifying party (it being understood, however, that the indemnifying party
shall not be liable for legal or other expenses of more than one separate firm
of attorneys for all such persons indemnified hereunder, which firm shall be
designated in writing by the Trading Advisor or the Partnership, as the case may
be).
12. Entire Agreement
----------------
This Agreement and the agreements referenced herein constitutes the
entire agreement between the parties hereto with respect to the matters referred
to herein, and no other agreement, verbal or otherwise, shall be binding as
between the parties unless it shall be in writing and signed by the party
against whom enforcement is sought.
13. Assignment
----------
This Agreement shall not be assigned by any of the parties hereto
without the prior express written consent of the other parties hereto.
14. Amendment; Waiver
-----------------
This Agreement shall not be amended except by a writing signed by the
parties hereto. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its rights hereunder on any occasion or series of
occasions.
15. Severability
------------
If any provision of this Agreement, or the application of any
provision to any person or circumstance, shall be held to be inconsistent with
any present or future law, ruling, rule, or
-19-
<PAGE>
regulation of any court or governmental or regulatory authority having
jurisdiction over the subject matter hereof, such provision shall be deemed to
be rescinded or modified in accordance with such law, ruling, rule, or
regulation, and the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it shall be
held inconsistent, shall not be affected thereby; provided that alteration of
this Agreement in this manner shall not have a material effect on the terms
hereof.
16. Notices
-------
Any notice required or desired to be delivered under this Agreement
shall be in writing and shall be delivered by courier service, postage prepaid
mail, telex, facsimile, telegram, or other similar means and shall be effective
upon actual receipt by the party to which such notice shall be directed,
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 MLFIP:
c/o ML Futures Investment Partners Inc.
Merrill Lynch World Headquarters
South Tower, 6th Floor
World Financial Center
New York, New York 10080-6106
Attn: John R. Frawley Jr.
if to the Trading Advisor:
To the address notified in writing to the Partnership from time
to time by the Trading Advisor
if to Merrill Lynch Futures:
Merrill Lynch Futures Inc.
Merrill Lynch World Headquarters
South Tower, 6th Floor
World Financial Center
New York, New York 10080
Attn: William Maitland, Esquire
17. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
law.
18. Consent to Jurisdiction
-----------------------
The parties hereto agree that any action or proceeding arising
directly, indirectly, or otherwise in connection with, out of, related to, or
from this Agreement, any breach hereof, or
-20-
<PAGE>
any transaction covered hereby, shall be resolved, whether by arbitration or
otherwise, within the County, City, and State of New York. Accordingly, the
parties consent and submit to the jurisdiction of the federal and state courts
and any applicable arbitral body located within the County, City, and State of
New York. The parties further agree that any such action or proceeding brought
by either party 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 federal or state courts, or if appropriate before any applicable
arbitral body, located within the County, City, and State of New York.
19. Remedies
--------
In any action or proceeding arising out of any of the provisions of
this Agreement, the parties hereto agree that they shall not seek any
prejudgment equitable or ancillary relief. Such parties also agree that their
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement; provided, however, that the parties
hereto agree that declaratory judgment may be sought with respect to the
indemnification provisions of this Agreement.
20. Confidentiality
---------------
The Partnership, MLFIP and Merrill Lynch Futures acknowledge that the
Trading Advisor's strategies and trades constitute proprietary data belonging to
the Trading Advisor and agree that they will not disseminate any confidential
information regarding any of the foregoing, except as required by law, and any
such information as may be acquired by MLFIP or the Partnership is to be used
solely to monitor the Trading Advisor's performance on behalf of the
Partnership.
21. Survival
--------
The provisions of this Agreement shall survive the termination hereof
with respect to any matter arising while this Agreement shall be in effect.
22. Counterparts
------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
23. Headings
--------
Headings to sections and subsections in this Agreement are for the
convenience of the parties only and are not intended to be a part of or to
affect the meaning or interpretation hereof.
24. Third-Party Beneficiary.
-----------------------
-21-
<PAGE>
This Agreement is not intended to and shall not convey any rights to
persons not a party to this Agreement. In particular, and not by way of
limitation, no investor in the Partnership may assert any rights hereunder.
25. "Business Day." "Business day," as used herein, shall mean a day
------------
on which banks are required or authorized to remain open for business in New
York City.
26. Multi-Programs. If the Trading Advisor offers more than one
--------------
trading program to clients, the program(s) to be used for the Partnership, and
the additional allocation of the Allocated Assets to, between or among such
program(s), are set forth in Annex D hereto.
-------
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf
of the undersigned as of the Effective Date.
[THE PARTNERSHIP]
BY: ML FUTURES INVESTMENT PARTNERS INC.
General Partner
BY: ___________________________________
James M. Bernard
Vice President
THE TRADING ADVISOR
BY: ___________________________________
Name:
President
MERRILL LYNCH FUTURES INC.
BY: ___________________________________
Name:
Title:
ML FUTURES INVESTMENT PARTNERS INC.
By: ___________________________________
James M. Bernard
Vice President
-22-
<PAGE>
Annex A
-------
FORM OF
TRADING AUTHORIZATION
[TRADING ADVISOR]
To Whom It May Concern:
[PARTNERSHIP], a Delaware limited partnership (the "Partnership"),
does hereby make, constitute, and appoint [TRADING ADVISOR] as the Partnership's
attorney-in-fact to buy and sell commodity interests, in accordance with the
Advisory Agreement among us and certain others.
This authorization shall terminate and be null, void, and of no
further effect simultaneously with the termination of the said Advisory
Agreement.
Very truly yours,
Dated as of _______, 199__
[PARTNERSHIP]
BY: ML FUTURES INVESTMENT PARTNERS INC.
General Partner
By: __________________________________
James M. Bernard
Vice President
ACCEPTED AND AGREED TO:
[TRADING ADVISOR]
By: ___________________________________
Name:
Title:
<PAGE>
Annex B
-------
FORM OF LIST OF
COMMODITY INTERESTS TRADED BY
[THE TRADING ADVISOR]
The undersigned represents that the following is a complete list of
commodity interests which the undersigned intends to trade on behalf of
[PARTNERSHIP] other than regulated futures contracts and options on regulated
futures contracts traded on a qualified board or exchange in the United States:
Contract Type
(Futures, Forward,
Options on Futures) Exchange Contract
------------------- -------- --------
[TRADING ADVISOR]
By:_________________________
Name:
Dated as of ____, 199_
<PAGE>
ANNEX C
-------
ADVISORY FEE CALCULATIONS
Consulting Fee
--------------
For the advisory services contemplated by this Agreement, Merrill
Lynch Futures shall, at no additional cost to the Partnership, remit to the
Trading Advisor a Consulting Fee equal to 0.___ of 1% of the Net Asset Value of
the Allocated Assets, as of the end of each calendar month (a __% annual rate),
after reduction of such Net Asset Value by the Brokerage Fee due Merrill Lynch
Futures in respect of such month but without reduction for any withdrawals as of
such month-end or for any accrued Profit Shares as of such month-end, and after
including any month-end interest credits.
Merrill Lynch Futures will remit the Consulting Fees due to the
Trading Advisor within ten (10) business days of the month-end as of which they
are due. At such time as Merrill Lynch Futures remits each monthly Consulting
Fee payment hereunder to the Trading Advisor, Merrill Lynch Futures shall also
submit a reasonably itemized statement setting forth the calculation of the
amount due to the Trading Advisor in respect of such month. If the Trading
Advisor does not object to such statement within ten (10) business days of the
receipt thereof, such statement shall for all purposes be deemed to be
conclusively correct.
The Consulting Fee due to the Trading Advisor hereunder shall be
prorated for any partial month during which this Agreement is in effect, or for
any reallocations during a month, such proration to be made on the basis of the
number of business days during such month that the Trading Advisor managed
assets on which the Consulting Fee is being calculated hereunder, compared to
the total number of business days in such month.
If, as of the end of the fourth full calendar quarter after the
Effective Date, the Partnership account managed by the Trading Advisor has
incurred negative cumulative Trading Profit, calculated as described below for
purposes of calculating the Trading Advisor's Profit Share (e.g., with the
amount of any negative cumulative Trading Profit being proportionately reduced
upon redemptions, reallocations or distributions), the Trading Advisor shall
rebate to the Partnership 50% of the Consulting Fee paid to the Trading Advisor
through the end of such fourth full calendar quarter, but only to the extent of
such negative cumulative Trading Profit (which shall not for this purpose be
proportionately reduced upon redemptions, reallocations or distributions). In
the event that the Trading Advisor is terminated prior to the end of such fourth
full calendar quarter, with a negative cumulative Trading Profit, such rebate
shall be made (based on the Consulting Fees paid through the date of
C-1
<PAGE>
termination) as if the date of termination were the end of such fourth full
calendar quarter.
Profit Share
------------
As of the end of each calendar quarter, beginning with the end of the
first full calendar quarter after the Effective Date, the Partnership will pay
the Trading Advisor a Profit Share equal to ______ percent (___%) of any New
Trading Profit recognized in respect of the Allocated Assets during the
preceding quarter (or, in the case of the first Profit Share calculation period,
since the Effective Date).
Trading Profit for purposes of calculating the Trading Advisor's
Profit Share includes, for any period, (i) the realized trading profit (loss),
plus or minus (ii) the change in unrealized trading profit (loss) on open
positions from the beginning to the end of such period, and is calculated after
reduction for the Brokerage Fee (0.____ of 1% of the Partnership's month-end Net
Assets each month) payable to Merrill Lynch Futures. Trading Profit does not
include interest credited on the Partnership's assets (which, like the Brokerage
Fee, will be allocated pro rata to the Partnership account managed by each of
--- ----
the Partnership's advisors, including the Trading Advisor, based on the month-
end equity in each such account). New Trading Profit is only generated to the
extent that the Trading Advisor exceeds its previous calendar quarter-end high
in cumulative Trading Profit.
In the case of redemptions, reallocations or distributions as of the
end of any month that is not the end of a calendar quarter, a proportional
Profit Share will be deducted (and the Net Asset Value at which Units are
redeemed correspondingly reduced), and the amounts so deducted will be paid to
the Trading Advisor. Such amounts will not be subject to being returned to the
Partnership (or to any redeeming Limited Partners), irrespective of subsequent
losses during the quarter.
Redemption of Units, reallocations or distributions result in a
proportional decrease in any shortfall between the level of cumulative Trading
Profit as of the date of withdrawal and the highest level of cumulative prior
Trading Profit as of any calendar quarter-end (or $0, if higher) for purposes of
subsequent calculations of New Trading Profit, with the result that redemptions,
reallocations or distributions do not reduce the Profit Shares potentially
payable by the Units which remain outstanding.
Early redemption charges and extraordinary costs, such as litigation
or taxes, shall not reduce Trading Profit.
F/X Service Desk service fees shall reduce Trading Profit.
In calculating New Trading Profit, Profit Shares paid at previous
quarter-ends do not reduce cumulative New Trading Profit in subsequent periods.
C-2
<PAGE>
Termination of the Trading Advisor's Advisory Agreement will be
treated as if the date of termination were a calendar quarter-end for purposes
of calculating any Profit Share due to the Trading Advisor.
The Partnership will remit the Profit Shares due to the Trading
Advisor within ten (10) business days of the quarter-end as of which they are
due. At such time as the Partnership remits each Profit Share payment hereunder
to the Trading Advisor, the Partnership shall also submit a reasonably itemized
statement setting forth the calculation of the amount of the Profit Share due to
the Trading Advisor in respect of such quarter. If the Trading Advisor does not
object to such statement within ten (10) business days of the receipt thereof,
such statement shall for all purposes be deemed to be conclusively correct.
C-3
<PAGE>
Annex D
-------
SELECTION OF
MULTIPLE PROGRAMS OFFERED
The Trading Advisor will trade the following programs for the
Partnership (need not be completed if the Advisor offers a single program):
Initial % of
Program Allocated Assets
------- ----------------
__________
100%
==========
<PAGE>
FORM OF
ACKNOWLEDGEMENT OF RECEIPT OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of the Disclosure Document
dated __________, 19__ of [TRADING ADVISOR] (the "Trading Advisor") in
connection with the Trading Advisor's management of an account for
[PARTNERSHIP].
Dated as of _______, 19__
[PARTNERSHIP]
By: ML FUTURES INVESTMENT PARTNERS INC.
General Partner
By: ___________________________________
James M. Bernard
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF FINANCIAL CONDITION, STATEMENTS OF OPERATIONS, STATEMENTS OF CHANGES IN
PARTNERS' CAPITAL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 0 0
<RECEIVABLES> 8,271,897 7,891,389
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 8,271,897 7,891,389
<SHORT-TERM> 0 0
<PAYABLES> 186,995 25,951
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 8,084,902 7,865,438
<TOTAL-LIABILITY-AND-EQUITY> 8,271,897 7,891,389
<TRADING-REVENUE> 1,160,612 (19,279)
<INTEREST-DIVIDENDS> 206,295 (263,233)
<COMMISSIONS> 0 0
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 1,292,085 (362,653)
<INCOME-PRE-EXTRAORDINARY> 1,292,085 (362,653)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,292,085 (362,653)
<EPS-PRIMARY> 24.89 (6.17)
<EPS-DILUTED> 24.89 (6.17)
</TABLE>
