<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 33-33982
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
TUDOR FUND FOR EMPLOYEES L.P.
(Exact name of registrant as specified in Limited Partnership Agreement)
DELAWARE 6793 13-3543779
(State of Organization) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
----------------------------
One Liberty Plaza, 51st Floor
New York, New York 10006
(212) 602-6700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Andrew S. Paul, Esq.
Vice President and General Counsel
Tudor Investment Corporation
One Liberty Plaza, 51st Floor
New York, New York 10006
(212) 602-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------------
COPIES OF COMMUNICATIONS TO:
M. Holland West, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6000
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities [ x ]
Act of 1933 check the following box.
================================================================================
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
CROSS REFERENCE SHEET
Item
No. Registration Item Location in Prospectus
- ----- ----------------- ----------------------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page; Front
Cover Page.
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page;
Table of Contents.
3. Summary Information, Risk Factors, and Ratio
of Earnings to Fixed Charges................. Summary of Prospectus;
Principal Risk Factors;
Purchases by Employee
Benefit Plans--ERISA
Considerations; Con-
flicts of Interest; The
Partnership; Descript-
ion of Charges to the
Partnership; Investment
Program and Use of
Proceeds; The General
Partner; The Trading
Advisor; Brokerage
Arrangements; Guarantees
and Contribution Agree-
ments; The Commodities
Markets.
4. Use of Proceeds.............................. The Partnership; Invest-
ment Program and Use of
Proceeds.
5. Determination of Offering Price.............. The Partnership; Plan of
Distribution.
6. Dilution..................................... Not Applicable.
7. Selling Security Holders..................... Not Applicable.
8. Plan of Distribution......................... The Partnership; Plan of
Distribution; Purchases
by Employee Benefit
Plans--ERISA Consider-
ations.
9. Description of Securities to be Registered... The Limited Partnership
Agreement.
10. Interests of Named Experts and Counsel....... Not Applicable.
11. Information with Respect to the Registrant
-i-
<PAGE>
Item
No. Registration Item Location in Prospectus
- ----- ----------------- ----------------------
(a) Description of Business.............. Summary of Prospectus;
Principal Risk Factors;
The Partnership; The
General Partner; The
Trading Advisor; The
Commodities Markets;
The Limited Partnership
Agreement.
(b) Description of Property.............. Not Applicable.
(c) Legal Proceedings.................... The General Partner;
The Trading Advisor;
Brokerage Arrangements.
(d) Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters.......... Principal Risk Factors.
(e) Financial Statements................. Reports of Independent
Public Accountants.
(f) Selected Financial Data.............. Selected Financial Data.
(g) Supplementary Financial
Information.......................... Selected Financial Data.
(h) Management's Discussion and Management's Discussion
Analysis of Financial Condition and Analysis of Financial
Results of Operations................ Condition and Results
of Operations.
(i) Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure................. Not Applicable
(j) Directors and Executive Officers..... The General Partner.
(k) Executive Compensation............... Summary of Prospectus;
Principal Risk Factors;
Conflicts of Interest;
Description of Charges
to the Partnership;
The General Partner;
The Trading Advisor;
Brokerage Arrangements.
(l) Security Ownership of Certain
Beneficial Owners and
Management........................... Security Ownership of
Certain Beneficial
Owners and Management;
The Partnership; Cap-
italization; The General
Partner; The Trading
Advisor; Reports of
Independent Public
Accountants.
-ii-
<PAGE>
Item
No. Registration Item Location in Prospectus
____ _________________ ______________________
(m) Certain Relationships and Summary of Prospectus;
Related Transactions............. Principal Risk Factors;
Conflicts of Interest;
Fiduciary Responsibil-
ity; Description of
Charges to the
Partnership; The General
Partner; The Trading
Advisor; Brokerage
Arrangements; Guarantees
and Contribution
Agreements; The
Commodities Markets;
Purchases by Employee
Benefit Plans--ERISA
Considerations.
12. Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities................................. Not Applicable.
-iii-
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 31, 1996
TUDOR FUND FOR EMPLOYEES L.P.
10,000 UNITS OF LIMITED PARTNERSHIP INTEREST
MINIMUM INVESTMENT--$1,000
Tudor Fund For Employees L.P. (the "Partnership") is a limited partnership
commodity pool formed under the Delaware Revised Uniform Limited Partnership
Act, and is engaged in speculative trading of futures contracts, options on
futures contracts and on physical commodities, spot and forward contracts,
the cash items underlying such contracts, and other commodity interests
("commodity interest contracts"). Second Management LLC is the
Partnership's general partner (the "General Partner"). Tudor Investment
Corporation, an affiliate of the General Partner, is the Partnership's
trading advisor and makes all commodity interest contract trading
decisions for the Partnership ("TIC" or the "Trading Advisor").
The Partnership is soliciting subscriptions for Units of Limited Partnership
Interest in the Partnership ("Units") on a continuing basis (the "Continuing
Offering") at quarterly closings held as of January 1, April 1, July 1, and
October 1 of each year (the "Quarterly Closings"). There is no minimum
offering amount. UNITS MAY ONLY BE SOLD TO AND HELD BY (i) EMPLOYEES OF THE
GENERAL PARTNER, THE TRADING ADVISOR, ANY OF THEIR PRESENT OR FUTURE
AFFILIATED ENTITIES, OR THEIR SUCCESSORS OR ASSIGNS, (ii) THE GENERAL
PARTNER, THE TRADING ADVISOR, ANY OF THEIR PRESENT AND FUTURE AFFILIATED
ENTITIES, AND THEIR SUCCESSORS AND ASSIGNS, AND (iii) THE TUDOR
INVESTMENT CORPORATION 401(k) SAVINGS AND PROFIT-SHARING PLAN. Units are
offered for sale at a purchase price equal to 100% of the "Net Asset
Value" of a Unit (as defined herein) as of the opening of business on
the date of the applicable Quarterly Closing. The minimum
subscription per subscriber is $1,000, and whole Units and fractions
of Units (to the fourth decimal place) may be subscribed for. Any
subscriber may subscribe for amounts of Units in excess of the
foregoing minimum in increments of $1,000.
Units are offered through Cargill Investor Services, Inc. (in such capacity,
the "Selling Agent") on a best efforts basis and without any agreement by
the Selling Agent to purchase Units from the Partnership. No market
exists for the Units, and none is likely to develop.
The Partnership is not a mutual fund or any other type of investment company
within the meaning of the Investment Company Act of 1940 as amended, and
is not subject to regulation thereunder.
THESE ARE SPECULATIVE SECURITIES AND INVOLVE A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE FOR INVESTMENT ONLY BY PERSONS WHO CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "INVESTMENT REQUIREMENTS" (PAGE 1) AND
"PRINCIPAL RISK FACTORS" (PAGE 9).
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
CARGILL INVESTOR SERVICES, INC.
----------
The date of this Prospectus is June , 1996
<PAGE>
An investment in the Partnership involves significant risks and expenses,
including the following:
. Speculative and volatile nature of commodity interest contract trading
. Volatility of Net Asset Value of Units
. High degree of leverage employed in commodity interest contract trading
. Illiquid nature of various commodity interest contracts
. Illiquid nature of the Units
. Default risk with respect to the Partnership's counterparties, brokers,
and exchanges
. Substantial charges to the Partnership
. Conflicts of interest in the Partnership structure and operation
. Reliance on the General Partner and the Trading Advisor
For a detailed description of the foregoing risks and other risk factors
applicable to an investment in the Partnership, see "PRINCIPAL RISK FACTORS."
TRANSFERABILITY OF THE UNITS IS RESTRICTED AND THERE IS, AND WILL BE, NO
PUBLIC MARKET THEREFOR. UNITS ARE REDEEMABLE AT THE NET ASSET VALUE THEREOF AS
OF THE LAST DAY OF EACH CALENDAR QUARTER--MARCH 31, JUNE 30, SEPTEMBER 30, AND
DECEMBER 31--ON AT LEAST 5 BUSINESS DAYS' PRIOR WRITTEN NOTICE TO THE GENERAL
PARTNER; AND A LIMITED PARTNER MAY REDEEM UNITS ONLY IN INCREMENTS OF $1,000
UNLESS SUCH PARTNER IS REDEEMING HIS ENTIRE INTEREST IN THE PARTNERSHIP. SEE
"TRANSFERS AND REDEMPTIONS."
THE PARTNERSHIP IS SUBJECT TO ACTUAL AND POTENTIAL CONFLICTS OF INTEREST. SEE
"CONFLICTS OF INTEREST."
Neither Tudor Fund For Employees L.P. nor Tudor Investment Corporation is
affiliated with Tudor Fund, a U.S. mutual fund registered under the Investment
Company Act of 1940, or with Tudor Management Co., Inc., a wholly-owned
subsidiary of Weiss, Peck & Greer.
<TABLE>
<CAPTION>
PRICE ORGANIZATIONAL PROCEEDS TO
TO PUBLIC SELLING AND OFFERING PARTNERSHIP
NOTES (1), (2), COMMISSIONS COSTS NOTES (1), (2),
AND (3) NOTE (2) NOTE (3) AND (3)
--------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Per Unit (Minimum Notes (1), (2), None Note (3) Notes (1), (2),
$1,000) and (3) and (3)
Total Maximum (10,000 Notes (1), (2), None Note (3) Notes (1), (2),
Units) and (3) and (3)
</TABLE>
- --------
(Cover continued. Notes to above table on page iii)
ii
<PAGE>
The General Partner, the Trading Advisor, Bellwether Partners LLC ("BPL"), an
affiliate of the General Partner and the Trading Advisor, their present and
future affiliated entities, and their successors and assigns may subscribe for
Units, and there is no limitation on the number of Units that may be subscribed
for by such persons. Units purchased by the General Partner, the Trading
Advisor, BPL, their present or future affiliated entities, or their successors
or assigns will be for investment purposes only and not with the view to
resell.
Notes to Table
(1) At Quarterly Closings, Units are sold at a price equal to 100% of the Net
Asset Value of a Unit as of the opening of business on the date of the
Quarterly Closing at which such Units are sold. The minimum subscription
per subscriber is $1,000, and any subscriber may subscribe for amounts of
Units in excess of such minimum in increments of $1,000. All subscriptions
are irrevocable. The General Partner may in its sole discretion reject any
subscription in whole or in part at any time prior to acceptance.
A subscription received and not immediately rejected by the General Partner
is held in the Partnership's non-interest-bearing escrow account maintained
with United States Trust Company of New York located in New York, New York,
as escrow agent, until the General Partner either rejects such subscription
prior to the applicable Quarterly Closing or accepts such subscription at
such Quarterly Closing. Subscriptions must be received, at least (i) 2 full
business days in the case of checks drawn on New York City banks, (ii) 5
full business days in the case of checks drawn on banks located outside of
New York City, or (iii) 1 full business day in the case of wire transfers,
prior to the applicable Quarterly Closing in order to be accepted at such
Quarterly Closing. If the General Partner does not receive a subscription
within the prescribed time period prior to a Quarterly Closing, the
subscription will be accepted or rejected at the next following Quarterly
Closing. The General Partner may reject a subscription, in whole or in
part, at any time prior to the next following Quarterly Closing.
(2) Neither the Partnership nor any investor will pay any selling commissions
to the Selling Agent in connection with subscriptions for Units. However,
the General Partner (out of its own funds) will reimburse the Selling Agent
for certain of its out-of-pocket administrative expenses and may otherwise
compensate the Selling Agent for its selling efforts, to the extent
permitted by applicable law.
(3) The General Partner initially paid all of the costs incurred in connection
with the organization of the Partnership and the initial offering of Units
during the initial offering period (the "Initial Offering Period"). The
Partnership previously reimbursed the General Partner for such costs.
During the Continuing Offering, the General Partner also pays the costs of
preparing registration statements and prospectuses and the costs of
printing and mailing registration statements, prospectuses, and reports for
solicitation purposes. The Partnership pays escrow agent costs relating to
the Continuing Offering.
The Partnership receives 100% of the Net Asset Value of each Unit sold.
Therefore, there is no dilution in the Net Asset Value of a Unit when
additional Units are sold.
----------------
NO PERSON IS AUTHORIZED BY THE PARTNERSHIP TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
MATTERS DESCRIBED HEREIN, AND IF GIVEN OR MADE SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY ANY PERSON WITHIN ANY JURISDICTION IN WHICH
SUCH OFFER IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE.
iii
<PAGE>
THE PARTNERSHIP FURNISHES ALL LIMITED PARTNERS WITH ANNUAL AND MONTHLY REPORTS
COMPLYING WITH THE REQUIREMENTS OF THE COMMODITY FUTURES TRADING COMMISSION.
THE ANNUAL REPORTS CONTAIN AUDITED, AND THE MONTHLY REPORTS CONTAIN UNAUDITED,
FINANCIAL INFORMATION. THE AUDITED FINANCIAL STATEMENTS ARE EXAMINED, REPORTED
UPON, AND CERTIFIED BY INDEPENDENT PUBLIC ACCOUNTANTS.
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE PARTNERSHIP HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") IN WASHINGTON, D.C. A REGISTRATION STATEMENT ON FORM S-1 UNDER THE
SECURITIES ACT OF 1933 AS AMENDED WITH RESPECT TO THE UNITS OFFERED HEREBY.
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION INCLUDED IN THE
REGISTRATION STATEMENT, CERTAIN ITEMS OF WHICH ARE OMITTED IN ACCORDANCE WITH
THE RULES AND REGULATIONS OF THE SEC. FOR FURTHER INFORMATION ABOUT THE
PARTNERSHIP AND THE UNITS OFFERED HEREBY, REFERENCE IS MADE TO THE REGISTRATION
STATEMENT AND THE EXHIBITS THERETO.
THE PARTNERSHIP IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 AS AMENDED, AND IN ACCORDANCE THEREWITH FILES REPORTS,
PROXY STATEMENTS, AND OTHER INFORMATION WITH THE SEC. THESE REPORTS, PROXY
STATEMENTS, AND OTHER INFORMATION CAN BE INSPECTED AND COPIED AT THE PUBLIC
REFERENCE FACILITIES MAINTAINED BY THE SEC AT THE SEC'S OFFICE AT 450 FIFTH
STREET, N.W., ROOM 1024, WASHINGTON, D.C. 20549, AND AT ITS REGIONAL OFFICES
LOCATED AT 7 WORLD TRADE CENTER, SUITE 1300, NEW YORK, NEW YORK 10048 AND 500
WEST MADISON STREET, SUITE 1400, CHICAGO, ILLINOIS 60661. COPIES OF SUCH
MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE SEC AT 450
FIFTH STREET, N.W., ROOM 1024, WASHINGTON, D.C. 20549 AND AT THE REGIONAL
OFFICES DESCRIBED ABOVE, AT PRESCRIBED RATES.
THE PARTNERSHIP FIRST INTENDS TO USE THIS PROSPECTUS ON JUNE , 1996.
iv
<PAGE>
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN DOING SO, YOU SHOULD BE AWARE THAT FUTURES
AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH
TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, ADVISORY, AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL BEGINNING AT PAGE
27 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 29.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT BEGINNING AT PAGE 9.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE
UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OR REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
v
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Requirements................................................... 1
Summary of Prospectus..................................................... 1
Principal Risk Factors.................................................... 9
Conflicts of Interest..................................................... 21
Fiduciary Responsibility.................................................. 24
The Partnership........................................................... 26
Description of Charges to the Partnership................................. 27
Investment Program and Use of Proceeds.................................... 29
Capitalization............................................................ 38
Selected Financial Data................................................... 39
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 39
The General Partner....................................................... 41
Performance Record of the Partnership..................................... 42
Reporting to Pool Participants............................................ 44
The Trading Advisor....................................................... 44
The Management Agreement.................................................. 47
Brokerage Arrangements.................................................... 48
The Commodities Markets................................................... 59
Distributions............................................................. 66
The Limited Partnership Agreement......................................... 67
Plan of Distribution...................................................... 71
Subscription Procedure.................................................... 72
Purchases by Employee Benefit Plans--ERISA Considerations................. 72
Transfers and Redemptions................................................. 74
Security Ownership of Certain Beneficial Owners and Management............ 77
Federal Income Tax Aspects................................................ 77
State and Local Income Tax Aspects........................................ 85
Potential Advantages of an Investment in the Partnership.................. 86
Auditors.................................................................. 87
Legal Matters............................................................. 87
Additional Information.................................................... 88
Glossary.................................................................. 88
Report of Independent Public Accountants and Statements of Financial
Condition of Tudor Fund For Employees L.P................................ F-1
Report of Independent Public Accountants and Statements of Financial
Condition of Second Management Company, Inc.............................. F-21
Exhibit A--First Amended and Restated Limited Partnership Agreement....... A-1
Annex A--Form of Request for Redemption................................... A-36
Exhibit B--Subscription Agreement and Power of Attorney for Individuals... B-1
Exhibit C--Subscription Agreement and Power of Attorney for the Tudor
Investment Corporation 401(k) Savings and Profit-Sharing Plan............ C-1
Exhibit D--Representations and Agreements by Plan Participants............ D-1
</TABLE>
vi
<PAGE>
INVESTMENT REQUIREMENTS
The minimum investment per subscriber is $1,000, and whole Units and
fractions of Units (to the fourth decimal place) may be subscribed for. Any
subscriber may subscribe for amounts of Units in excess of the foregoing
minimum in increments of $1,000.
UNITS MAY ONLY BE SOLD TO AND HELD BY (i) EMPLOYEES OF SECOND MANAGEMENT LLC
(THE "GENERAL PARTNER"), TUDOR INVESTMENT CORPORATION (THE "TRADING ADVISOR"),
ANY OF THEIR PRESENT OR FUTURE AFFILIATED ENTITIES, OR THEIR SUCCESSORS OR
ASSIGNS, (ii) THE GENERAL PARTNER, THE TRADING ADVISOR, ANY OF THEIR PRESENT
AND FUTURE AFFILIATED ENTITIES, AND THEIR SUCCESSORS AND ASSIGNS, AND (iii) THE
TUDOR INVESTMENT CORPORATION 401(k) SAVINGS AND PROFIT-SHARING PLAN (THE "TIC
401(k) PLAN"). The suitability of employees desiring to purchase Units is
determined in the sole discretion of the General Partner. No employee may
invest in Units in an amount which exceeds 25% of the net worth of the employee
or, if married, the joint net worth of the employee and spouse (in each case,
exclusive of home, furnishings, and automobiles). The purchase of Units might
or might not be a suitable investment for an employee benefit plan. Before
proceeding with such a purchase, the person with investment discretion on
behalf of an employee benefit plan must determine whether the purchase of Units
is (a) permitted under the governing instruments of the plan, and (b)
appropriate for the plan in view of its overall investment policy, the
composition and diversification of its portfolio, and the considerations
discussed under "PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS." In
the case of participant directed, individual account plans (such as the TIC
401(k) Plan), the participant considering an investment in Units must make
these determinations with regard to such participant's account.
Each subscriber must represent and warrant in a Subscription Agreement, among
other things, that the subscriber has received this Prospectus, including the
Second Amended and Restated Limited Partnership Agreement of the Partnership
annexed hereto as EXHIBIT A (the "Limited Partnership Agreement"). This
warranty is required by regulations of the Commodity Futures Trading Commission
(the "CFTC"). In addition, each subscriber must represent that his investment
in the Partnership does not exceed 25% of his individual or joint net worth, as
the case may be. Forms of Subscription Agreement and Power of Attorney to be
used by subscribers are annexed hereto as EXHIBIT B and EXHIBIT C. A form of
Representations and Agreements to be made by TIC 401(k) Plan participants is
annexed hereto as EXHIBIT D. See "SUBSCRIPTION PROCEDURE."
All subscriptions for Units are irrevocable, and the General Partner may in
its sole discretion reject any subscription in whole or in part. There are
significant restrictions on the ability of a Limited Partner to redeem Units.
Although the Limited Partnership Agreement permits the transfer of Units
subject to certain conditions, there is no public market for the Units and none
is likely to develop. Therefore, a purchaser of Units must be able to bear the
economic risks of an investment in the Partnership for a significant period of
time. See "TRANSFERS AND REDEMPTIONS."
SUMMARY OF PROSPECTUS
The following is a summary of this Prospectus. This Prospectus contains more
detailed information under the captions referred to herein, and this summary is
qualified in its entirety by the information appearing elsewhere herein and in
the Partnership's Limited Partnership Agreement and forms of Subscription
Agreement and related documents.
INVESTMENT PROGRAM AND USE OF PROCEEDS
The business and objective of Tudor Fund For Employees L.P. (the
"Partnership") is to generate substantial appreciation of its assets over time
through speculative trading in commodity interest contracts (as defined below).
The net proceeds from the sale of Units are deposited and maintained in bank
accounts and trading accounts and used to meet the Partnership's margin and
collateral requirements and expenses and charges. A
1
<PAGE>
portion of the net proceeds is deposited and maintained with the Clearing
Brokers and BPL in cash, and the balance is held either in United States
Treasury bills, in interest-bearing accounts at banks, or in other short-term
investments. See "INVESTMENT PROGRAM AND USE OF PROCEEDS."
The Partnership's business is primarily to trade, buy, sell (including to
sell short), spread, swap, acquire, hold, dispose of, and deal in, commodities,
currencies, futures contracts, forward contracts, foreign exchange commitments,
currency exchanges, money market instruments, debt obligations and other
instruments issued or guaranteed by sovereigns, governments, and supranationals
and their bodies, agencies, instrumentalities, authorities, and similar
issuers, bonds, debentures, notes, bills, commercial paper, repurchase and
reverse repurchase agreements, standby purchase and sale agreements, financial
instruments, investment contracts, investment agreements, certificates of
interest, securities interests, securities of and interests in other
corporations, companies, partnerships, trusts, and other entities and vehicles,
swaps, swaptions, caps, floors, straddles, and collars, derivative and hybrid
transactions and instruments (however designated), options on and in respect of
any of the foregoing, and rights and interests in respect of, pertaining to,
and in connection with, any of the foregoing, on or off exchanges and markets,
in publicly offered and private placement transactions, on spot, current,
future, forward, and when-issued start, delivery, settlement, and optional
commitment bases, on secured and unsecured bases, and on margin, collateral,
and partial and full payment bases (collectively "commodity interest
contracts"). See "PRINCIPAL RISK FACTORS," "INVESTMENT PROGRAM AND USE OF
PROCEEDS," "THE GENERAL PARTNER," and "THE COMMODITIES MARKETS."
BREAK-EVEN ANALYSIS
The Partnership will need to achieve profits in an amount equal to
approximately 5% of the sale price of a Unit (i.e., Net Asset Value per Unit)
in order for the Net Asset Value of a Unit, one year following such sale, to
equal such sale price. Based on the minimum investment of $1,000, this would
amount to $50. See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP--BREAK-EVEN
ANALYSIS."
THE PARTNERSHIP
The Partnership, a limited partnership organized on November 22, 1989 under
the Delaware Revised Uniform Limited Partnership Act (the "Partnership Act"),
was capitalized on that date with contributions of $1,000 by the General
Partner and $1,000 by a principal of the General Partner (as initial Limited
Partner). The Partnership commenced trading operations on July 2, 1990.
A Limited Partner will not be liable for the Partnership's debts, losses, or
other obligations in excess of his unredeemed capital contribution and
undistributed profits, if any, except as provided otherwise in the Limited
Partnership Agreement. See "THE LIMITED PARTNERSHIP AGREEMENT--NATURE OF THE
PARTNERSHIP." The General Partner and Limited Partners may be referred to
herein individually as a "Partner" and collectively as the "Partners."
The Partnership's office is located at One Liberty Plaza, 51st Floor, New
York, New York 10006; Telephone No. 212-602-6700; and Facsimile No. 212-571-
7042. The Partnership's fiscal year is the calendar year, beginning January 1st
of each year and ending on the following December 31st.
The Partnership will terminate on the first to occur of: (1) December 31,
2010; (2) an election to dissolve the Partnership at a specified time by
Limited Partners owning more than 50% of the outstanding Units; (3) the
withdrawal, insolvency, termination, dissolution, or liquidation of the General
Partner or of any successor entity thereof (unless the business of the
Partnership is continued by any new, remaining, or successor general partner(s)
in accordance with the Limited Partnership Agreement); (4) the termination of
the Partnership by the Partners in accordance with the Limited Partnership
Agreement; (5) a decline in the Net Asset Value of a Unit as of the end of any
calendar month to less than $500; (6) a decline in the Partnership's aggregate
Net Assets as of the end of any calendar month to less than $125,000; (7) a
determination by the General Partner in its sole discretion either that the
Partnership's assets in relation to its operating expenses make it
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unreasonable or imprudent to continue the business of the Partnership, or that
the General Partner no longer desires to make available the Partnership to, or
operate the Partnership for, the persons permitted to become Limited Partners
pursuant to the Limited Partnership Agreement; (8) the enactment of any law or
the adoption of any rule, regulation, policy, or guideline by any regulatory
authority having jurisdiction over the Partnership which makes it unlawful,
unreasonable, or imprudent in the sole discretion of the General Partner for
the principal business of the Partnership to be continued; or (9) the
occurrence of any event requiring termination of the Partnership. See "THE
LIMITED PARTNERSHIP AGREEMENT--TERMINATION OF THE PARTNERSHIP."
THE GENERAL PARTNER
The Partnership's general partner is Second Management LLC (the "General
Partner"), a Delaware limited liability company and an affiliate of the Trading
Advisor and BPL, whose office and telephone number are the same as that of the
Partnership. The General Partner, to the exclusion of the Limited Partners,
conducts and manages the business of the Partnership. The General Partner
currently serves as commodity pool operator only for the Partnership. See
"CONFLICTS OF INTEREST," "FIDUCIARY RESPONSIBILITY," "THE GENERAL PARTNER,"
"PERFORMANCE RECORD OF THE PARTNERSHIP," and "THE LIMITED PARTNERSHIP
AGREEMENT--MANAGEMENT OF PARTNERSHIP AFFAIRS."
THE TRADING ADVISOR
The Partnership trades commodity interest contracts pursuant to trading
instructions provided by Tudor Investment Corporation ("TIC" or the "Trading
Advisor"), a Delaware corporation and an affiliate of the General Partner and
BPL. The Trading Advisor and its affiliates currently manage and advise other
customer accounts as well as their proprietary accounts. See "CONFLICTS OF
INTEREST," "THE TRADING ADVISOR," and "PERFORMANCE RECORD OF THE PARTNERSHIP."
CHARGES TO THE PARTNERSHIP
<TABLE>
<CAPTION>
RECIPIENT NATURE OF CHARGE AMOUNT OF CHARGE
--------- ---------------- ----------------
<S> <C> <C>
Trading Advisor......... Management fee 1/12 of 2% per calendar month (a 2%
annual rate) of the Partnership's
adjusted Net Assets (as defined in
the "GLOSSARY").
Incentive fee 12% of Trading Profits (as defined
in the "GLOSSARY") earned by the
Partnership as of the end of each
calendar quarter.
Clearing Brokers........ Brokerage fees Brokerage commissions at rates of
between $9 and $21 plus National
Futures Association ("NFA")
transaction fees of $0.14, per
roundturn for futures and options
trades on United States exchanges
(such rates include all transaction
costs in connection with trading
activities, including floor
brokerage, exchange, clearing, and
clearinghouse fees). For trades
effected on exchanges and markets
located outside of the United
States, rates per transaction which
are generally higher than the rates
for transactions on United States
exchanges.
Others.................. Ordinary operating Actual expenses incurred.
expenses (including
escrow agent costs) and
extraordinary expenses.
</TABLE>
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<PAGE>
MANAGEMENT FEE. The Partnership pays the Trading Advisor a monthly management
fee equal to 1/12 of 2% of the Partnership's adjusted Net Assets (as defined in
the "GLOSSARY"). As described under "FEES FOR PLAN INVESTOR PARTNERS" below,
the Trading Advisor does not receive management fees attributable to Units held
by Plan Investor Partners. See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP --
MANAGEMENT FEE."
INCENTIVE FEE. The Partnership pays the Trading Advisor a quarterly incentive
fee equal to 12% of the "Trading Profits" (as defined in the "GLOSSARY") earned
on the Partnership's assets as of the end of each calendar quarter. As
described under "FEES FOR PLAN INVESTOR PARTNERS" below, the Trading Advisor
does not receive incentive fees attributable to Units held by Plan Investor
Partners. The term "Trading Profits" generally means the net commodity interest
contract trading profits (realized and unrealized) earned on the Partnership's
assets. See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP--INCENTIVE FEE."
BROKERAGE COMMISSIONS. The Partnership pays BZW Futures ("BZW Futures"),
Cargill Investor Services, Inc. (in such capacity, "CIS"), Daiwa Securities
America Inc. ("Daiwa"), E.D. & F. Man International Inc. ("EDF"), Goldman,
Sachs & Co. ("Goldman"), J.P. Morgan Futures Inc. ("Morgan Futures"), Merrill
Lynch Futures Inc. ("Merrill Lynch"), Morgan Stanley & Co., Incorporated
("Morgan Stanley"), Morgan Stanley & Co. International Limited ("MSIL"),
Prudential Securities Incorporated ("Prudential"), and Salomon Brothers Inc
("Salomon Brothers"), as the Partnership's clearing brokers (individually a
"Clearing Broker", and collectively the "Clearing Brokers"), brokerage
commissions for trades on United States exchanges at rates of between $9 and
$21 per roundturn for futures and options trades (such rates include floor
brokerage, exchange, clearing, clearinghouse, and National Futures Association
("NFA") fees). For trades effected on exchanges and markets located outside of
the United States, the Partnership pays the Clearing Brokers brokerage
commissions at rates per transaction which are generally higher than the rates
for transactions on United States exchanges, and commissions for trades on
foreign exchanges and markets are subject to fluctuations in exchange rates and
additional regulatory fees and charges.
The foregoing commissions and fees are subject to change from time to time as
mutually agreed between the General Partner and the applicable broker or
dealer. The General Partner has negotiated competitive brokerage commission
rates. The Partnership anticipates that it will pay annually up to
approximately 5% of its average annual Net Assets in brokerage commissions and
other transaction fees and charges (although historically such annual costs
have been less than 5%). See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP--
BROKERAGE COMMISSIONS," "BROKERAGE ARRANGEMENTS," and "GUARANTEES AND
CONTRIBUTION AGREEMENTS."
OTHER EXPENSES. The Partnership pays its ordinary operating expenses. Such
expenses include legal, accounting, escrow, auditing, record keeping,
administration, computer, and clerical expenses, expenses incurred in
preparing, printing, and mailing reports and tax information to Limited
Partners and regulatory authorities, expenses of printing and mailing
registration statements, prospectuses, and reports to Limited Partners (but not
for solicitation purposes and not the expenses of preparing such registration
statements and prospectuses, all of which are paid by the General Partner),
expenses for specialized administrative services, other printing and
duplication expenses, other mailing costs, and filing fees. Such fees and
expenses have historically amounted, per annum, to approximately 0.5% to 2% of
the Partnership's average annual Net Assets. The Partnership will also pay any
extraordinary expenses it may incur. See "DESCRIPTION OF CHARGES TO THE
PARTNERSHIP--OTHER EXPENSES" and "REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AND
STATEMENTS OF FINANCIAL CONDITION OF TUDOR FUND FOR EMPLOYEES L.P."
4
<PAGE>
FEES FOR PLAN INVESTOR PARTNERS. Because of constraints under the Employee
Retirement Income Security Act of 1974 as amended ("ERISA") and the Internal
Revenue Code of 1986 as amended (the "Code"), TIC has irrevocably waived,
disclaimed, and renounced its right to receive management fees and incentive
fees attributable to Units held by the TIC 401(k) Plan or any pension,
retirement, or other employee benefit plan established for employees of TIC or
its present or future affiliates, successors, or assigns ("Plan Investor
Partners"). As a consequence of such waiver, disclaimer, and renunciation, and
pursuant to the terms of the Limited Partnership Agreement, the capital
accounts of Plan Investor Partners will not be charged for management fees or
incentive fees payable to TIC, and the number of Units held by each Plan
Investor Partner will be restated as necessary to equate the per Unit value of
such Plan Investor Partner's capital account with the per Unit value of a non-
Plan Investor Partner's capital account.
RISKS
An investment in the Partnership is speculative and involves substantial
risks, including the risk of loss of a Limited Partner's entire investment.
Other risks and considerations of an investment in the Partnership include: the
speculative and volatile nature of trading in commodity interest contracts; the
volatility of the Net Asset Value of Units as compared to investments in
certain other types of trading vehicles; the high degree of leverage employed
in commodity interest contract trading with its concomitantly high level of
loss (or gain) from a relatively small change in the price of the underlying
commodity; the illiquid nature of various commodity interest contracts; the
illiquid nature of the Units due to restrictions on assignment, transfer,
pledge, encumbrance, and redemption; the potential default of or delay by any
of the parties with which the Partnership trades, its brokers, or the exchanges
on which they trade; the substantial charges to the Partnership regardless of
whether any profits are earned; the presence of actual and potential conflicts
of interest in the Partnership structure and operation; and the Partnership's
reliance on the Trading Advisor. For a discussion of certain risks, see "RISK
DISCLOSURE STATEMENT," "PRINCIPAL RISK FACTORS," "DESCRIPTION OF CHARGES TO THE
PARTNERSHIP," and "THE COMMODITIES MARKETS."
DISTRIBUTIONS
The Limited Partnership Agreement, which does not provide for regular or
periodic cash distributions, grants the General Partner sole discretion in
determining the amount and frequency of distributions (other than on voluntary
redemptions of Units), if any, the Partnership will make to its Partners. Any
distributions made by the Partnership will be pro rata in accordance with the
interests owned by all Partners. As of the date hereof, the Partnership has
never made any distribution to Limited Partners other than in connection with a
Limited Partner's redemption. See "DISTRIBUTIONS," "PRINCIPAL RISK FACTORS--
PARTNER'S TAX LIABILITY MAY EXCEED DISTRIBUTIONS," and "TRANSFERS AND
REDEMPTIONS."
TRANSFERS AND REDEMPTIONS
A Limited Partner may only transfer, assign, pledge, or encumber his Units
for the benefit of (i) another person who is an employee of the General
Partner, the Trading Advisor, any of their present or future affiliated
entities, or their successors or assigns, (ii) the General Partner, the Trading
Advisor, any of their present or future affiliated entities, or their
successors or assigns, or (iii) such other person or entity as the General
Partner in its sole discretion may determine. A Limited Partner's transferee,
assignee, pledgee, or secured creditor may become a substituted Limited
Partner, provided that there is compliance with the transfer provisions of the
Limited Partnership Agreement. Certain attempted transfers, assignments,
pledges, and encumbrances will not be effective and will not be recognized by
the General Partner. A Limited Partner
5
<PAGE>
will bear all costs (including attorneys' and accountants' fees and expenses)
related to any transfer, assignment, pledge, or encumbrance of his Units.
A Limited Partner may require the Partnership to redeem all or a portion of
such Partner's Units as of the last day of each calendar quarter--March 31,
June 30, September 30, and December 31. A Limited Partner may redeem Units only
in $1,000 increments, unless such Limited Partner is redeeming his entire
interest in the Partnership. The amount received by a Limited Partner upon
redemption will equal 100% of the Net Asset Value of a Unit as of the
redemption date, less any amount owed by such Partner to the Partnership or the
General Partner as provided in the Limited Partnership Agreement or any amount
owed by such Partner to the Partnership for expenses incurred by the
Partnership in respect of such Partner's obligations or liabilities unrelated
to the Partnership pursuant to the indemnification provisions of the Limited
Partnership Agreement. Limited Partners are not charged any redemption fee. The
right to obtain payment on redemption is contingent upon the Partnership having
assets sufficient to discharge its liabilities on the redemption date, the
timely receipt by the General Partner of a Request for Redemption (a form of
which is attached as ANNEX A to the Limited Partnership Agreement), and the
satisfaction of the other conditions set forth in the Limited Partnership
Agreement. The General Partner endeavors to pay redemptions within 20 business
days after the applicable redemption date, subject to certain exceptions set
forth in the Limited Partnership Agreement.
The Limited Partnership Agreement also contains a mandatory redemption
provision. The General Partner may in its discretion require a Limited Partner
to withdraw entirely from the Partnership or to redeem a portion of such
Limited Partner's Units, upon 5 business days' notice to the affected Limited
Partner. The General Partner intends generally to require the withdrawal of a
Limited Partner who ceases to be an employee or affiliate of the General
Partner, the Trading Advisor, any of their present or future affiliated
entities, or their successors or assigns. Also, affiliates of the General
Partner have in the past required mandatory redemptions of funds managed by
them in order to reduce the assets under their management or to distribute
trading profits, and they (and the General Partner) may do so again in the
future. See "DISTRIBUTIONS" and "TRANSFERS AND REDEMPTIONS."
CONFLICTS OF INTEREST
Significant actual and potential conflicts of interest exist in the structure
and operation of the business of the Partnership. See "PRINCIPAL RISK FACTORS,"
"CONFLICTS OF INTEREST," and "FIDUCIARY RESPONSIBILITY."
SECURITIES OFFERED
Up to 3,448 unsold Units of Limited Partnership Interest as of the date of
this Prospectus. A total of 10,000 Units were initially registered and offered
for sale. See "THE LIMITED PARTNERSHIP AGREEMENT--ADDITIONAL PARTNERS."
MINIMUM SUBSCRIPTION
The minimum investment per subscriber is $1,000, and whole Units and
fractions of Units (to the fourth decimal place) may be subscribed for. Any
subscriber may subscribe for amounts of Units in excess of the foregoing
minimum in increments of $1,000.
At each Quarterly Closing at which subscriptions are accepted by the General
Partner, the Partnership issues to each subscriber whose subscription is
accepted the appropriate number of whole Units and/or fractions of Units as may
be determined in accordance with the price of 100% of the Net Asset Value of
the Units sold. See "SUMMARY OF PROSPECTUS--INVESTMENT REQUIREMENTS," "PLAN OF
DISTRIBUTION," and "SUBSCRIPTION PROCEDURE."
6
<PAGE>
PLAN OF DISTRIBUTION
The Units are offered and sold by the Partnership through Cargill Investor
Services, Inc. (in such capacity, the "Selling Agent"), a Delaware corporation,
an SEC-registered broker-dealer, and a member of the National Association of
Securities Dealers, Inc. (the "NASD"), on a best efforts basis without any firm
underwriting commitment. The Selling Agent is not affiliated with the General
Partner, the Trading Advisor, BPI, or any of their affiliates. The Selling
Agent also acts as a Clearing Broker for the Partnership, and acts as a selling
agent and clearing broker for certain other investment funds sponsored and/or
traded by the Trading Advisor and its affiliates. Neither the Partnership nor
any investor will pay any selling commissions to the Selling Agent in
connection with subscriptions for Units. However, the General Partner (out of
its own funds) will reimburse the Selling Agent for certain of its out-of-
pocket administrative expenses and may otherwise compensate the Selling Agent
for its selling efforts, to the extent permitted by applicable law. See "PLAN
OF DISTRIBUTION."
Units and fractions of Units (to the fourth decimal place) are offered for
sale on a continuing basis (the "Continuing Offering") at quarterly closings
held as of January 1, April 1, July 1, and October 1 of each year or at such
other times as the General Partner may in its sole discretion determine (the
"Quarterly Closings"). There is no minimum offering amount. Units are sold at a
price per Unit equal to 100% of the Net Asset Value of a Unit as of the opening
of business on the date of the Quarterly Closing at which such Units are sold.
Because the Partnership receives 100% of the Net Asset Value of each Unit sold,
there will be no dilution in the Net Asset Value of a Unit purchased during the
Continuing Offering. The Continuing Offering will continue for as long as there
are registered Units (or fractions thereof) which have not been subscribed for,
unless the General Partner in its sole discretion at any time or from time to
time withdraws or discontinues the Continuing Offering.
During the Continuing Offering, the Net Asset Value of a Unit may increase or
decrease substantially between the date of a subscription and the date of the
Quarterly Closing at which such subscription is accepted by the General
Partner. Consequently, a subscriber may receive at a Quarterly Closing more or
fewer Units than would be received if the Quarterly Closing were held on the
date of receipt of the subscription by the General Partner. See "SUBSCRIPTION
PROCEDURE."
SUBSCRIPTION PROCEDURE
All subscriptions for Units are irrevocable. The General Partner, in its sole
discretion, may reject any subscription in whole or in part at any time prior
to acceptance. In order to subscribe for Units, a subscriber must: (1)
complete, date, sign, and deliver to the Selling Agent a Subscription Agreement
and other subscription documentation annexed hereto as EXHIBIT B, EXHIBIT C,
and/or EXHIBIT D as applicable; and (2) either (a) deliver a check for the full
amount of the subscription payable to "UNITED STATES TRUST COMPANY OF NEW YORK,
AS ESCROW AGENT FOR TUDOR FUND FOR EMPLOYEES L.P.", maintained with the United
States Trust Company of New York located in New York, New York (the "Escrow
Agent"), or (b) wire transfer Federal Funds for the full amount of the
subscription payable to the Partnership's escrow account designated as "CHASE
MANHATTAN BANK, NEW YORK, NEW YORK, ABA NO. 021000021, FOR CREDIT TO ACCOUNT
NO. 9201073195, UNITED STATES TRUST COMPANY OF NEW YORK, FOR FURTHER CREDIT TO
SUBSCRIPTION ACCOUNT NO. 098791, TUDOR FUND FOR EMPLOYEES L.P., REFERENCE:
[SUBSCRIBER'S NAME]".
Subscriptions must be received at least (i) 2 full business days in the case
of checks drawn on New York City banks, (ii) 5 full business days in the case
of checks drawn on banks located outside of New York City, or (iii) 1 full
business day in the case of wire transfers, prior to the applicable Quarterly
Closing in order to be accepted at such Quarterly Closing. If the General
Partner does not receive a subscription within the prescribed time period prior
to a Quarterly Closing, the subscription will be accepted or rejected at the
next following Quarterly Closing. A subscription received and not immediately
rejected by the General Partner is
7
<PAGE>
held in the Partnership's non-interest-bearing escrow account maintained with
the Escrow Agent until the General Partner either rejects such subscription
prior to the applicable Quarterly Closing or accepts such subscription at such
Quarterly Closing. See "SUMMARY OF PROSPECTUS--INVESTMENT REQUIREMENTS," "PLAN
OF DISTRIBUTION," and "SUBSCRIPTION PROCEDURE."
TAXATION
In the opinion of the General Partner's legal counsel, the Partnership will
be classified as a partnership for United States federal income tax purposes,
and not as an association taxable as a corporation. Accordingly, the
Partnership will not be subject to United States federal income tax. Each
Limited Partner in computing his federal income tax liability for a taxable
year will be required to take into account his distributive share of all items
of Partnership income, gain, loss, deduction, or credit for the taxable year of
the Partnership ending within or with the taxable year of the Limited Partner,
regardless of whether such Limited Partner has received any distributions from
the Partnership. Such items of Partnership gain or loss retain their character
(e.g., capital or ordinary) when allocated to the Limited Partners. Moreover,
all such allocations will increase or decrease each Limited Partner's tax basis
in his Units. The allocation provisions are designed to reconcile tax
allocations to economic allocations; however, no assurance can be given that
the Internal Revenue Service will not challenge such allocation, especially in
light of recently issued final regulations. See "FEDERAL INCOME TAX ASPECTS."
Taxes payable by partners with respect to Partnership profits may exceed the
amount of Partnership distributions, if any, for a taxable year. Based upon the
current and contemplated activities of the Partnership, the General Partner has
been advised by its legal counsel that, in such counsel's opinion, expenses
incurred by the Partnership should not be subject to the limitations on the
deductibility of certain miscellaneous itemized expenses, except to the extent
the Internal Revenue Service promulgates regulations that so provide.
Cash distributions by the Partnership and amounts received or deemed received
upon the partial or complete redemption of a Limited Partner's Units that do
not exceed the Limited Partner's aggregate tax basis in his Units are not
taxable. However, to the extent cash distributions and amounts received or
deemed received upon the partial redemption of a Limited Partner's Units exceed
the Limited Partner's aggregate tax basis in his Units, the excess will be
taxable to the Limited Partner as though it were gain on the sale of his Units.
Loss will generally be recognized on a redemption of Units only if a Limited
Partner redeems all of his Units in the Partnership and, following the complete
redemption, such Limited Partner has remaining tax basis in the Partnership. In
such case, the Limited Partner will recognize loss to the extent of the
remaining basis. Subject to an exception for certain types of Partnership
assets, such gain or loss (assuming that the Units constitute capital assets)
will be either short-term capital gain or loss or long-term capital gain or
loss, depending upon the length of time that Units were held prior to the
distribution or redemption. See "FEDERAL INCOME TAX ASPECTS."
The General Partner has been advised that, in the opinion of its legal
counsel, a Limited Partner who is a nonresident alien natural person, foreign
corporation, foreign partnership, foreign trust, or foreign estate (a "Foreign
Limited Partner") should not be deemed engaged in a trade or business in the
United States, and should not be subject to United States federal income tax,
solely because such Foreign limited Partner is a limited partner in the
Partnership. In the event the Partnership's activities should in the future not
fall within certain safe harbors from U.S. trade or business status, there is a
risk that all of a Foreign Limited Partner's distributive share of income of
the Partnership would be treated as effectively connected with the conduct of a
trade or business in the United States. In that event, the Foreign Limited
Partner would be taxed at regular rates applicable to U.S. taxpayers, and if a
foreign corporation, could be subject to a 30% branch profits tax. See "FEDERAL
INCOME TAX ASPECTS." As regards tax-exempt Limited Partners, see "PURCHASES BY
EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS."
8
<PAGE>
PRINCIPAL RISK FACTORS
In addition to the Risk Disclosure Statements appearing at the beginning of
this Prospectus and the other disclosures of risks and charges set forth
herein, prospective investors should consider the following before subscribing
for Units.
COMMODITY INTEREST CONTRACT TRADING IS SPECULATIVE AND VOLATILE. Commodity
interest contract prices are highly volatile. Price movements of contracts are
influenced by, among other things: changing supply and demand relationships;
weather; agricultural, trade, fiscal, monetary, and exchange control programs
and policies of governments; political and economic events and policies;
changes in interest rates and rates of inflation; currency devaluations and
revaluations; and emotions of the marketplace. Currency prices may be
influenced by, among other things: political events (including restrictions on
local exchanges or markets, limitations on foreign investment in a country or
on investment by residents of a country in other countries, and restrictions on
currency flows); changes in balances of payments and trade; rates of inflation;
trade restrictions; and currency devaluations and revaluations. Metals prices
can be affected by all such factors and by the effects of production.
Governments from time to time intervene, directly and by regulation, in certain
markets, particularly those in currencies and gold. Such intervention is often
intended to influence prices directly. See "THE COMMODITIES MARKETS."
COMMODITY INTEREST CONTRACT TRADING IS HIGHLY LEVERAGED. Because of the low
margin deposits normally required in commodity interest contract trading
(typically between 2% and 15% of the value of the contract purchased or sold),
an extremely high degree of leverage is typical of a commodity interest
contract trading account. As a result, a relatively small price movement in a
commodity interest contract may result in immediate and substantial losses to
the investor. For example, if at the time of purchase 10% of the price of a
contract is deposited as margin, a 10% decrease in the price of the contract
would, if the contract were then closed out, result in a total loss of the
margin deposit (before taking into account any transaction costs). A decrease
of more than 10% would result in a loss of more than the total margin deposit.
Thus, like other leveraged investments, any purchase or sale of a commodity
interest contract may result in losses in excess of the amount invested. See
"THE COMMODITIES MARKETS--MARGINS," and "THE LIMITED PARTNERSHIP AGREEMENT--
NATURE OF THE PARTNERSHIP."
COMMODITY INTEREST CONTRACT TRADING MAY BE ILLIQUID. It is not always
possible to execute a buy or sell order at the desired price or to close out an
open position, due to market illiquidity. Such illiquidity can be caused by
intrinsic market conditions, the interrelationship between or among markets, or
extrinsic factors like the imposition of daily price fluctuation limits.
Most United States commodity exchanges limit fluctuations in certain
commodity interest contract prices by regulations referred to as "daily price
fluctuation limits" or "daily limits." Pursuant to such regulations, during a
single trading day (or part thereof), no trades may be executed at prices
beyond the daily limits. Once the price of a particular commodity interest
contract has increased or decreased by an amount equal to the daily limit,
positions in such contract can neither be taken nor liquidated unless traders
are willing to effect trades at or within the limit. Prices in various
commodity interest contracts have occasionally moved the daily limit for
several consecutive days with little or no trading. Similar occurrences could
prevent the Trading Advisor from promptly liquidating unfavorable positions and
subject the Partnership to substantial losses. While daily limits may reduce or
effectively eliminate the liquidity of a particular market, they do not limit
ultimate losses, and may in fact substantially increase losses because they may
prevent the liquidation of unfavorable positions. There is no limitation on
daily price movements in trading spot, forward, swap, or over-the-counter
commodity option contracts.
In addition, the Partnership may not be able to execute trades at favorable
prices if little trading in the particular commodity interest contract is
taking place. Under some circumstances, the Partnership might be required to
accept or make delivery of the commodity underlying a particular contract if
the position cannot be liquidated prior to its expiration date. In addition, if
the Trading Advisor deems it to be in the
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<PAGE>
Partnership's best interest, the Partnership may make or take delivery of an
underlying commodity. In the case of commodity interest contracts that provide
for cash settlement in lieu of physical delivery, the Trading Advisor may
routinely allow contracts to expire without entering into an offsetting
transaction to liquidate the position. It is also anticipated that, if BPL
establishes credit and settlement and delivery lines for the physical delivery
of currencies, the Trading Advisor will cause the Partnership to make and take
actual delivery of currencies in settlement of spot and forward contracts.
It is also possible that an exchange or the CFTC may suspend or limit trading
in a particular contract, order immediate liquidation and settlement of a
particular contract, or order that trading in a particular contract be
conducted for liquidation only. Similarly, trading in options on a particular
futures contract may become restricted if trading in the underlying futures
contract has become restricted. During periods in October 1987 and 1988, for
example, trading in certain stock index futures contracts and options was too
illiquid for markets to function efficiently and was for a short time actually
suspended.
The Chicago Mercantile Exchange, which is the commodity exchange on which the
Standard & Poor's 500 Stock Index futures contract is traded, and other
commodity exchanges which trade stock index futures contracts have adopted
rules referred to as "circuit breakers"--procedures for an automatic halt in
trading for a period of time that will be triggered whenever the Dow Jones
Industrial Average declines by a certain number of points. There has been
limited experience with the effect of circuit breakers on liquidity and prices
in the stock index futures contract markets; thus the full impact of these
rules cannot be determined at this time.
Such market conditions could cause the Net Asset Value of a Unit to decline
below $500 as of the end of a month or the aggregate Net Assets of the
Partnership to decline below $125,000 as of the end of a month, which in either
case would cause the Partnership to terminate and dissolve. However, the
Partnership's Net Asset Value of a Unit or Net Assets, as the case may be,
could decline to zero, either prior to such termination or thereafter. See "THE
COMMODITIES MARKETS."
UNITS ARE ILLIQUID. Because of the limitations on redemptions and the fact
that Units are not tradeable, an investment in the Partnership is a relatively
illiquid investment and involves a high degree of risk. A subscription for
Units should be considered only by investors financially able to maintain their
investment and who can afford to lose all or a substantial part of their
investment. Units cannot be assigned, transferred, pledged, encumbered, or
otherwise disposed of except under the terms and conditions set forth in the
Limited Partnership Agreement, and there is and will be no public market for
Units. Limited Partners, after proper notice has been given to the General
Partner, may require the Partnership to redeem all or part of their Units as of
the last day of any calendar month at the Net Asset Value thereof on such date,
subject to certain limitations. See "TRANSFERS AND REDEMPTIONS."
TRADING OF SPOT AND FORWARD CONTRACTS. The Partnership enters into spot and
forward contracts for the trading of certain commodity interests (such as
currencies and metals) with United States and foreign banks and dealers in the
spot, forward, and interbank markets. Based on the Partnership's trading during
the past two years, spot and forward contracts are expected to comprise, on
average, between 20% and 50% of the Partnership's annual trading activities. A
spot contract is a cash market contractual obligation to purchase or sell
immediately a specified quantity of a commodity, usually with a two-day
settlement date. The Partnership may at times extend the settlement date of a
spot contract position by "rolling" the contract over into a new spot or
forward contract before the settlement date. "Rollover" trading enables the
Partnership to maintain an ongoing position in the spot market in order to take
better advantage of favorable price movements. A forward contract is a
contractual obligation to purchase or sell a specified quantity of a commodity
at a specified date in the future at a specified price, and therefore is
similar to a futures contract. Spot and forward contracts are not traded on
exchanges, and as a consequence investors in such contracts do not benefit from
the regulatory protections of such exchanges or the CFTC or other governmental
or regulatory authorities in any jurisdiction; rather, banks and dealers act as
principals in these markets. See "THE COMMODITIES MARKETS--SPOT AND FORWARD
CONTRACTS."
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Trading in the spot and forward markets presents certain risks in addition to
those found in the futures and options contract markets.
1. The interbank markets are not generally regulated by any United States or
foreign governmental authorities. Although banks and broker-dealers, which are
participants in these markets, are regulated in various ways by United States
and foreign banking and securities authorities, they generally do not regulate
the interbank markets.
2. There are no limitations on daily price movements in spot and forward
contracts.
3. Speculative position limits are not applicable to spot and forward
contract trading, although BPL or the principals with which BPL deals may limit
the positions available to BPL or the Partnership as a consequence of credit
considerations.
4. Participants in the spot and forward contract markets are not required to
make continuous markets in the contracts they trade. There have been periods
during which certain participants in these markets have refused to quote prices
for spot or forward contracts or have quoted prices with an unusually wide
spread between the price at which they are prepared to buy and the price at
which they are prepared to sell.
5. The Partnership principally trades spot and forward contracts with and
through BPL. As a result, liquidity problems might be greater in the
Partnership's trading than would be the case if trades were placed through a
larger number of market participants. Moreover, because of the relative size of
BPL's available lines of credit, the Partnership could experience liquidity
difficulties from time to time. However, the General Partner does not
anticipate that any such liquidity difficulties will arise.
6. Trading in the spot and forward markets involves the extension of credit
by a participant to its counterparty. The counterparties with which BPL trades
have traditionally required collateral deposits with respect to BPL's trading
of currencies. Consequently, BPL has required the Partnership to deposit and
maintain collateral with BPL in amounts up to 20% of the Partnership's Net
Assets, which may be a collateral obligation greater than that required of some
other affiliated customers of BPL. In order to satisfy this requirement, the
Partnership deposits and maintains cash with BPL and receives interest based
upon the monthly average of the then-prevailing weekly 90-day United States
Treasury bill auction rate. BPL has unrestricted use of such funds deposited as
collateral.
7. The General Partner and the Trading Advisor may in the future modify the
manner in which the Partnership and the other clients of the Trading Advisor
and its affiliates conduct their trading of spot and forward contracts for
currencies. Historically, the Partnership has not made or taken actual delivery
of currencies underlying spot and forward contracts.
8. Because the Partnership enters into spot and forward contract transactions
directly with a counterparty (be it BPL or another party) and because the
performance of spot and forward contracts is not guaranteed by any exchange or
clearinghouse, the Partnership is subject to the risk of the inability or
refusal to perform with respect to such contracts on the part of the principals
or agents with or through which BPL and the Partnership trade and of BPL
itself. In addition, the Partnership's spot and forward contract transactions
generally do not benefit from other safeguards which are applicable to
intermediaries in certain exchange-traded markets, including clearinghouse
guarantees, daily mark-to-market valuation and settlement of positions,
segregation of monies and property, and minimum capital requirements. Because
BPL has limited capital, the risk of the inability of BPL to perform with
respect to contracts with the Partnership also may be higher than with respect
to other market participants. Any such failure or refusal, whether due to
insolvency, bankruptcy, default, or other cause, could subject the Partnership
to substantial losses. BPL and the Partnership will not be excused from the
performance of any spot or forward contracts into which they have entered due
to the default of third parties (or BPL) in respect of spot or forward
contracts or other transactions which were to have substantially offset such
contracts. Thus, the Partnership is exposed to the risk of its counterparties'
default in its trading of spot and forward contracts. The Partnership and BPL
trade spot and forward contracts only with banks and dealers that the General
Partner believes to be creditworthy.
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9. Trading in the spot and forward markets includes a number of "exotic"
currencies, like the Malaysian Ringett, not designated for trading on United
States commodity exchanges. The markets in exotic currencies tend to be less
liquid than those in the major currencies. As a result, significant mispricings
may occur and give rise to opportunities for profit. However, this same
illiquidity may make it difficult for the Partnership to liquidate a position
without substantial losses.
10. The CFTC has published for comment a statement concerning its
jurisdiction over transactions in the foreign currency markets, including
transactions of the type which are engaged in by the Partnership. In the
future, the CFTC could assert that the forward contracts traded by the
Partnership constitute off-exchange futures contracts subject to the CFTC's
jurisdiction, and attempt to prohibit the Partnership from participating in
transactions in such contracts. If the Partnership were restricted in its
ability to trade in the currency forward markets, the activities of the Trading
Advisor, to the extent that it trades in such markets on behalf of the
Partnership, might be materially adversely affected. See "INVESTMENT PROGRAM
AND USE OF PROCEEDS--INVESTMENT PROGRAM--REGULATION."
TRADING ON FOREIGN EXCHANGES. The Partnership trades commodity interest
contracts on exchanges located outside of the United States, such as the
Singapore International Monetary Exchange, the Tokyo Stock Exchange, the Osaka
Securities Exchange, the Tokyo International Financial Futures Exchange, the
London International Financial Futures and Options Exchange, the International
Petroleum Exchange, the Sydney Futures Exchange, the Deutsche Terminboerse
(German Futures and Options Exchange) and the Marche a Terme d'Instruments
Financiers (French Futures Exchange), where CFTC regulations do not apply.
Based on the Partnership's trading during the past two years, trading on
foreign exchanges is expected to comprise, on average, between 10% and 40% of
the Partnership's annual trading activities. Some foreign commodity exchanges,
in contrast to domestic commodity exchanges, are "principals' markets" in which
performance with respect to a contract is the responsibility only of the
individual member with whom the trader has entered into a contract, and not of
the exchange or clearinghouse, if any. In the case of trading on foreign
exchanges, the Partnership may be subject to the risk of the inability or
refusal of counterparties to perform with respect to contracts. In the past,
certain members of the tin market on the London Metal Exchange failed to
perform their obligations under outstanding tin contracts, resulting in a
prolonged suspension of trading and, ultimately, a closing of that market and
settlement of outstanding positions at an artificial price level dictated by
the London Metal Exchange. As a result of such failure, a number of commodity
traders suffered substantial losses and others suffered substantial reductions
of the profits which they would otherwise have realized. Failure to require
sufficient margin and to monitor the financial soundness of clearing members
contributed to a similar suspension of trading on the Hong Kong Futures
Exchange following the stock market decline in October 1987. Due to the absence
of a clearinghouse system on certain foreign markets, such markets are
significantly more susceptible to disruptions than on United States exchanges,
such as that on the London Metal Exchange. The London Metal Exchange has now
instituted a clearinghouse system in an attempt to avoid a recurrence of such
difficulties.
Since the Partnership determines its Net Assets in United States dollars, the
Partnership's trading on foreign markets is subject to the risk of fluctuation
in the exchange rate between the local currency and dollars and to the
possibility of exchange controls. Unless the Partnership hedges itself against
fluctuations in exchange rates between the United States dollar and the foreign
currencies in which the foreign commodity interest contracts are denominated,
any profits which the Partnership might realize in such trading could be
eliminated as a result of adverse changes in exchange rates, and the
Partnership could even incur losses as a result of any such changes. See
"INVESTMENT PROGRAM AND USE OF PROCEEDS--INVESTMENT PROGRAM--REGULATION."
Trading on foreign exchanges may involve certain other risks not applicable
to trading on United States exchanges, such as the risks of exchange controls,
expropriation, burdensome or confiscatory taxation, moratoriums, or political
or diplomatic events. In addition, certain foreign markets are newly formed and
may lack personnel experienced in floor trading as well as in monitoring floor
trades for compliance with exchange rules. See "THE COMMODITIES MARKETS--
EXCHANGES."
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TRADING OF SWAPS. The Partnership infrequently enters into swap and similar
transactions involving or relating to interest rates, currencies, securities
interests, commodities interests, indices, prices, or other items. A swap
transaction is an individually negotiated, non-standardized agreement between
two parties to exchange cash flows (and sometimes principal amounts) measured
by different interest rates, exchange rates, indices, or prices, with payments
generally calculated by reference to a principal ("notional") amount or
quantity. Swap contracts are not traded on exchanges, and as a consequence
investors in such contracts do not benefit from the regulatory protections of
such exchanges or the CFTC, the Securities and Exchange Commission (the "SEC"),
or other governmental or regulatory authorities in any jurisdiction; rather,
affiliates of banks and broker-dealers generally act as principals in these
markets. Transactions in these markets present certain risks in addition to
those in the futures, spot, forward, and option contract markets.
1. The swap markets are generally not regulated by any United States or
foreign governmental authorities. Although banks and broker-dealers, which are
participants in these markets (either directly or through affiliates), are
regulated in various ways by United States and foreign banking and securities
authorities, such authorities generally do not regulate swap transactions.
2. There are no limitations on daily price movements in swap transactions.
3. Speculative position limits are not applicable to swap transactions,
although the counterparties with which the Partnership deals may limit the size
or duration of positions available to the Partnership as a consequence of
credit considerations.
4. Participants in the swap markets are not required to make continuous
markets in the swap contracts they trade. Participants could refuse to quote
prices for swap contracts or quote prices with an unusually wide spread between
the price at which they are prepared to buy and the price at which they are
prepared to sell.
5. Trading in the swap markets usually involves the extension of credit by a
participant to its counterparty. In general, the counterparties with which the
Partnership trades do not require collateral deposits, although from time to
time such deposits may be required of the Partnership. Similarly, the
Partnership generally does not hold collateral from its counterparties.
6. The swap markets are "principals' markets," in which performance with
respect to a swap contract is the responsibility only of the counterparty with
which the participant has entered into a contract, and not of any exchange or
clearinghouse. Such transactions generally do not benefit from clearinghouse
guarantees, daily mark-to-market valuation and settlement of positions,
segregation of monies and property, and minimum capital requirements applicable
to intermediaries in certain exchange-traded markets. As a result, the
Partnership is subject to the risk of the inability or refusal to perform with
respect to such contracts on the part of the counterparties with which the
Partnership trades. Any such failure or refusal, whether due to insolvency,
bankruptcy, default, or other cause, could subject the Partnership to
substantial losses. The Partnership will not be excused from the performance of
any swap contracts into which it has entered due to the default of third
parties in respect of swap or other transactions which were to have
substantially offset such swap contracts. The Partnership trades swap contracts
only with counterparties that the General Partner believes to be creditworthy.
7. In January 1993, the CFTC adopted regulations which provide an exemption
from regulation under the Commodity Exchange Act as amended (the "CEAct") for
swap transactions that meet certain specified criteria, over which the CFTC
will not assert its jurisdiction or regulate such transactions as futures or
commodity option contract transactions. The General Partner believes that the
Partnership should be able to rely upon the exemption with regard to swap
transactions entered into by it. Alternatively, the General Partner believes
that the Partnership should be able to rely upon the CFTC's Statement of Policy
Concerning Swap Transactions which provides a non-exclusive safe harbor for
swap transactions meeting certain conditions from regulation under the CEAct,
which was issued in July 1989 and remains in effect. However,
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the CFTC or a court could conclude in the future that swap transactions entered
into by the Partnership constitute off-exchange futures contracts or commodity
option contracts subject to the CFTC's jurisdiction or attempt to prohibit the
Partnership from engaging in, performing, or enforcing, such transactions. If
the Partnership were restricted in its ability to trade in the swap markets,
the activities of the Trading Advisor, to the extent that it trades in such
markets on behalf of the Partnership, might be materially adversely affected.
TRADING OF OPTIONS. An option on a futures contract or on a physical
commodity (a "commodity option") is the right (but not the obligation),
purchased for a certain price (the "premium"), to either buy (a "call") or sell
(a "put") the underlying futures contract or commodity on or until a certain
date (the "expiration date") for a fixed price (the "strike price"). The
Partnership trades commodity options. Successful commodity options trading
requires many of the same skills as does successful futures contract trading.
However, since specific market movements of the underlying futures contract or
commodity must be predicted accurately, the risks involved are somewhat
different. For example, if the Partnership buys an option (either to sell or
buy a futures contract or commodity), it will pay a "premium" representing the
market value of the option. Unless the price of the futures contract or
commodity underlying the option changes and it becomes profitable to exercise
or offset the option before it expires, the Partnership may lose the entire
amount of the premium. Conversely, if the Partnership sells an option (either
to sell or buy a futures contract or commodity), it will be credited with the
premium but will have to deposit margin due to its contingent liability to take
or make delivery of the underlying futures contract or commodity in the event
the option is exercised. Traders who sell options are subject to the entire
loss which occurs in the underlying futures contract or commodity (less any
premium received). The ability to trade in or exercise options may be
restricted in the event that trading in the underlying futures contract or
commodity becomes restricted. See "THE COMMODITIES MARKETS--OPTIONS." Based on
the Partnership's trading during the past two years, commodity options are
expected to comprise, on average, between 5% and 30% of the Partnership's
annual trading activities.
The Partnership also periodically trades over-the-counter options with
respect to United States and foreign government obligations, currencies, and
other commodities. Over-the-counter options present certain additional risks to
those found in exchange-traded options, similar to those risks involved in
trading spot, forward, and swap contracts. These risks include lack of
governmental regulation, no limitations on daily price movements, no
speculative position limits, no daily mark-to-market valuation and settlement
of positions, no minimum capital requirements, and because the performance of
over-the-counter options is not guaranteed by a clearinghouse, the risk that
counterparties will be unable to perform with respect to such options. In
addition, the over-the-counter options market is a "principals' market," in
which performance with respect to an option contract is the responsibility only
of the counterparty with which the participant has entered into a contract, and
not of any exchange or clearinghouse. As a result, the Partnership is subject
to the risk of the inability or refusal to perform with respect to contracts on
the part of the counterparties with whom the Partnership trades. Any such
failure or refusal, whether due to insolvency, bankruptcy, default, or other
cause, could subject the Partnership to substantial losses. The Partnership
will not be excused from the performance of any option contract into which it
has entered due to the default of third parties in respect of option or other
transactions which were to have substantially offset such option contracts. The
Partnership trades over-the-counter options only with banks and dealers that
the General Partner has determined to be creditworthy.
FAILURE OF BROKER OR EXCHANGE. Under CFTC regulations, futures commission
merchants ("FCMs"), such as the domestic Clearing Brokers, are required to
maintain customer assets in segregated accounts. If one or more of the
Partnership's FCMs fails to do so, the Partnership may be subject to the risk
of loss of the funds on deposit with such FCM in the event of such FCM's
insolvency. In addition, under certain circumstances, such as the inability of
another customer of an FCM or the FCM itself to satisfy substantial
deficiencies in such other customer's account, the Partnership may be subject
to the risk of loss of the funds on deposit with such FCM. In the case of any
such insolvency or other customer loss, the Partnership might
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recover, even in respect of property specifically traceable to it, only a pro
rata share of all property available for distribution to all of such FCM's
customers.
Because the Partnership may trade on foreign exchanges with or through
foreign brokers or dealers, the failure or default of a foreign broker or
dealer could result in the loss of Partnership funds or property on deposit
with such brokers or dealers depending on the applicable laws and regulatory
rules.
BPL, as a dealer in the spot and forward contract markets, is not subject to
the CEAct or similar state laws in its capacity as a dealer, and is neither
registered nor required to be registered with the CFTC or any self-regulatory
organization in such capacity. Moreover, no legal restrictions with regard to
segregation of funds or property exist for BPL, and BPL has unrestricted use of
the Partnership's funds and property on deposit with it as collateral for the
Partnership's spot and forward contract trading. BPL has internal guidelines
with respect to the treatment of customer funds and property. In addition, the
Partnership may be subject to the risk of loss of the full value of the
contracts as well as property on deposit with BPL in the case of a default by
or insolvency of BPL or a counterparty of BPL, or the failure by any of them to
return funds or property. See "INVESTMENT PROGRAM AND USE OF PROCEEDS."
The Partnership is also subject to the risk of the failure of, or delay by,
any of the exchanges and markets and their clearinghouses, if any, on which
commodity interest contracts are traded. See "INVESTMENT PROGRAM AND USE OF
PROCEEDS--INVESTMENT PROGRAM--REGULATION" and "BROKERAGE ARRANGEMENTS."
FEES AND CHARGES. The Partnership pays brokerage commissions, option
premiums, and other transaction costs to the Clearing Brokers, pays management
fees to the Trading Advisor, and pays ordinary, recurring administrative,
operational, legal, accounting, and auditing fees and any extraordinary
expenses. In addition, the Trading Advisor is paid incentive fees based on
Trading Profits earned by the Partnership. The foregoing expenses (other than
incentive fees) are payable by the Partnership regardless of whether the
Partnership realizes any profits. For fiscal year 1995, the Partnership paid
fees and expenses of approximately $609,000 from revenues of approximately
$2,658,000. The Trading Advisor was paid approximately $195,000 in incentive
fees in 1995.
The foregoing expenses (other than the incentive fee paid to the Trading
Advisor) are payable by the Partnership regardless of whether the Partnership
realizes any profits. See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP."
THE PARTNERSHIP MAY EXPERIENCE A HIGH TURNOVER IN INVESTMENTS. The Trading
Advisor's trading strategy involves certain short-term market considerations.
Accordingly, the turnover rate of the Partnership's portfolio is substantial
and involves correspondingly high transaction costs. See "THE TRADING ADVISOR,"
and "INVESTMENT PROGRAM AND USE OF PROCEEDS."
CONFLICTS OF INTEREST. Significant actual and potential conflicts of interest
exist in the structure and operation of the Partnership, particularly in view
of the affiliation of the General Partner, Paul Tudor Jones, II, the
controlling principal of the General Partner, and BPL. See "CONFLICTS OF
INTEREST."
EXPERIENCE OF AND RELIANCE ON THE GENERAL PARTNER AND THE TRADING
ADVISOR. The General Partner (and its predecessor) have operated only the
Partnership and one other commodity pool. The General Partner is the key
participant in the administration of the Partnership. If the General Partner
were to become unable to continue as general partner, the Partnership would be
terminated and dissolved, unless the Limited Partners elected another general
partner and such remaining general partner elected to continue the business of
the Partnership. The General Partner may withdraw from the Partnership on 90
days' written notice to the Limited Partners, and the Limited Partners may not
be able to replace the General Partner prior to its withdrawal. See "THE
GENERAL PARTNER" and "PERFORMANCE RECORDS OF THE PARTNERSHIP AND THE GENERAL
PARTNER."
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Mr. Jones and his affiliated companies have served as pool operator and
trading advisor to commodity pools, investment funds, and managed accounts
since July 1984. Trading decisions made by the Trading Advisor are based on a
combination of technical and fundamental analysis. The Trading Advisor plays
the key role in the Partnership's trading operations. Pursuant to the Limited
Partnership Agreement, the General Partner has delegated complete trading
authority to the Trading Advisor. Trading decisions by the Trading Advisor do
not adhere rigidly to any particular trading formula or system, but rather rely
to a large extent on the knowledge, judgment, and experience of Mr. Jones and
other employee traders of the Trading Advisor. If Mr. Jones were to become
unavailable, there is no other person at the Trading Advisor who is designated
to carry out his functions as the Partnership's principal trader. Certain
employees of the Trading Advisor have been designated to liquidate all open
commodity interest contract positions in all accounts (including the
Partnership's account) managed or controlled by the Trading Advisor, Mr. Jones,
and their affiliates upon Mr. Jones's death or disability. Such liquidation
could, in the case of unprofitable positions, result in realized losses and, in
the case of profitable positions, result in positions being liquidated prior to
the best price being attained. If the Trading Advisor were to become unable to
render trading advice to the Partnership and in the absence of any other
trading advisors, open commodity interest contract positions of the Partnership
would be liquidated as soon as practicable and substantial losses could be
incurred.
The profitability of technical or fundamental analysis depends upon the
accurate forecasting of major price moves or trends in commodity interest
contracts. However, there is no assurance that trends will develop in the
markets followed by the Trading Advisor or that they will be forecast
accurately. In the past, there have been periods without discernible trends,
and presumably such periods will occur in the future. Even where major trends
develop, their course may be shortened by outside factors, like governmental
intervention. Furthermore, a limiting factor in the use of technical analysis
is that such an approach requires price movement data which can be translated
into price trends sufficient to dictate a market entry or exit decision. In a
trendless or erratic market, a technical method may fail to identify a trend on
which action should be taken or the method may react to minor price movements
and thus establish a position contrary to overall price trends, which may
result in losses. In addition, a technical trading method may underperform
other trading methods when fundamental factors dominate price moves within a
given market. A limiting factor in the use of fundamental analysis is that the
analyst may not have knowledge of all of the pertinent factors affecting supply
and demand of a particular commodity interest, and prices may be affected by
factors which the analyst did not consider.
The calculations which underlie the Trading Advisor's trading methods and
strategies involve many variables and are determined in part by information
generated by computers and charts. The use of a computer in collating
information or in developing and operating a trading method does not ensure the
success of the method, because a computer is merely an aid in compiling and
organizing trade information. See "INVESTMENT PROGRAM AND USE OF PROCEEDS."
INCREASED USE OF OTHER TREND-FOLLOWING SYSTEMS. Commodity interest contract
trading systems, methods, and strategies employing trend-following timing
signals, based either exclusively on technical analysis or on a combination of
fundamental and technical analyses, are not new. There has been an increase in
both the use of trend-following trading approaches in recent years and in the
overall volume of trading and liquidity of the commodities markets. While the
precise effect of any increase in the proportion of funds traded pursuant to
trend-following trading approaches in recent years cannot be determined, any
such increase could alter trading patterns or affect execution of trades to the
detriment of the Partnership. See "THE TRADING ADVISOR."
TYPES OF COMMODITY INTEREST CONTRACTS PRIMARILY TRADED BY THE TRADING ADVISOR
ARE LIMITED. The Trading Advisor historically has focused the substantial
majority of its trading in stock index futures contracts, interest rate futures
contracts, cash currencies and currency futures contracts, precious metals
futures contracts, and energy futures contracts. The Trading Advisor's style of
trading is most likely to succeed in volatile markets having substantial
liquidity. In the event that all or any of these markets lose their volatility
or liquidity, the trading methods and strategies employed by the Trading
Advisor on behalf of
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the Partnership may not be as successful as they have been in the past.
Moreover, the concentration of investments in particular commodity interest
contracts or groups of related contracts may result in larger overall losses
(or gains) to the Partnership from a loss (or gain) in the trading of a
particular commodity interest contract or group of related contracts than might
be realized by a trading vehicle with a lesser concentration of its investments
in particular commodity interest contracts or groups of related contracts. See
"THE TRADING ADVISOR."
THE PARTNERSHIP'S MARKET POSITIONS MAY LACK DIVERSITY. Because of the Trading
Advisor's trading methods and strategies, the Partnership may at times have an
unusually high concentration in certain types of positions. Such lack of
diversification could result in greater losses than otherwise might be
anticipated. See "THE TRADING ADVISOR.
EXISTENCE OF SPECULATIVE POSITION LIMITS MAY RESTRICT THE FULL APPLICATION OF
THE TRADING ADVISOR'S TRADING STRATEGIES. The CFTC and United States exchanges
have established regulations referred to as "speculative position limits" or
"position limits" on the maximum net long or net short speculative position
which any person or group of persons may hold, own, or control in particular
commodity interest contracts. Insofar as such limits exist, all commodity
interest accounts owned, held, managed, and controlled (including the account
of the Partnership) by the Trading Advisor, the General Partner, their
principals, and their affiliates are aggregated for speculative position limit
purposes. The Trading Advisor, the General Partner, their principals, and
certain of their affiliates currently manage and/or advise trading accounts for
other commodity pools, investment funds, and accounts which they own or
control, and they intend to manage additional client and proprietary accounts
in the future. Mr. Jones may allocate up to 40% of applicable speculative
position limits to his own and his affiliates' proprietary accounts and the
remainder among all other accounts managed or controlled by Mr. Jones, the
Trading Advisor, and their affiliates, pursuant to a neutral allocation system
that is designed, over time, not to favor any account managed or controlled by
them.
The Trading Advisor believes that established position limits will not
adversely affect the Partnership's trading. However, it is possible that from
time to time the trading decisions of the Trading Advisor may have to be
modified and positions held or controlled by the Trading Advisor may have to be
liquidated in order to avoid exceeding applicable position limits. Such
modification or liquidation, if required, could adversely affect the
performance of the Partnership. If the application of speculative position
limits were to affect the Trading Advisor's trading decisions, the Trading
Advisor would attempt to modify its recommendations in such a manner so as not
to affect disproportionately the performance of any one customer account
compared with that of any other account managed or controlled by the Trading
Advisor and its affiliates. See "CONFLICTS OF INTEREST" and "THE COMMODITIES
MARKETS--SPECULATIVE POSITION LIMITS."
Speculative position limits are not applicable to bank or dealer spot,
forward, swap, or over-the-counter commodity option contract trading or to
foreign commodity interest contract trading, although the principals with which
the Partnership may trade in such markets may impose such limits as a matter of
credit policy.
LIMITED OPERATING HISTORY OF THE PARTNERSHIP. The Partnership has been
trading since July 2, 1990. See "THE PARTNERSHIP," "PERFORMANCE RECORD OF THE
PARTNERSHIP" and "REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AND STATEMENTS OF
FINANCIAL CONDITION OF TUDOR FUND FOR EMPLOYEES L.P."
LIMITED PARTNERS DO NOT PARTICIPATE IN MANAGEMENT. Limited Partners do not
participate in the management of the Partnership or in the conduct of its
business. Any such participation could subject a Limited Partner to unlimited
liability as a general partner or adversely affect the status of the
Partnership as a partnership for federal income tax purposes. See "THE LIMITED
PARTNERSHIP AGREEMENT--MANAGEMENT OF PARTNERSHIP AFFAIRS." The Limited
Partnership Agreement provides that certain actions may be taken upon the
affirmative vote of Limited Partners owning more than 50% of outstanding Units
then owned by Limited Partners, provided that no such action may be taken
unless independent counsel approved by Limited Partners owning more than 50% of
outstanding Units then owned
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by Limited Partners has rendered an opinion to the effect that the action to be
taken will not adversely affect the classification of the Partnership as a
partnership under the federal income tax laws or the status of the Limited
Partners as limited partners under the Partnership Act and is permitted
thereunder (or, in lieu of such an opinion, a court of competent jurisdiction
renders a final order to such an effect). See "THE LIMITED PARTNERSHIP
AGREEMENT--AMENDMENTS."
LIMITED PARTNERS MAY BE REQUIRED TO WITHDRAW. Under the Limited Partnership
Agreement, the General Partner may, at its sole discretion at any time upon 5
business days' written notice, require any Limited Partner to withdraw all or a
portion of such Limited Partner's capital from the Partnership at any month-
end. In this regard, the General Partner intends generally to require the
withdrawal of a Limited Partner who ceases to be an employee of the General
Partner, the Trading Advisor, any of their present or future affiliated
entities, or their successors or assigns. Furthermore, the General Partner
intends to require redemption in whole or in part of Units held by Plan
Investor Partners if the value of such Units, when considered against pending
redemptions by non-Plan Investor Partners, would equal or exceed 25% of the
value of all Units then outstanding, or because such Units may be deemed to
constitute assets of Plan Investor Partners under ERISA and the Code. Upon
mandatory redemption, a Limited Partner will receive an amount equal to the Net
Asset Value of each Unit redeemed as of the applicable redemption date, less
any amount owed to the General Partner or the Partnership pursuant to the
Limited Partnership Agreement.
Such mandatory redemption may create adverse tax and/or economic consequences
to the Limited Partner depending on the timing thereof. Affiliates of the
General Partner have in the past required mandatory redemptions of funds
managed by them in order to reduce the assets under their management, and they
(and the General Partner) may do so again in the future. See "DISTRIBUTIONS"
and "TRANSFERS AND REDEMPTIONS."
INVESTMENT BY THE GENERAL PARTNER, THE TRADING ADVISOR, THEIR AFFILIATES, AND
PRINCIPALS AND EMPLOYEES THEREOF. Certain principals and employees of the
General Partner, the Trading Advisor, and their affiliated entities have
previously subscribed for Units, and such entities and/or their principals and
employees are expected to subscribe for Units during the Continuing Offering.
Significant redemptions of Units held by such entities and/or their principals
and employees would reduce the amount of capital available for trading, which
could affect the Partnership's ability to earn profits in excess of the fees
and expenses payable by the Partnership.
PARTNERSHIP MAY BE TAXED AS A CORPORATION. The General Partner has been
advised by its legal counsel, Cadwalader, Wickersham & Taft, that under current
United States federal income tax (herein "federal income tax") law and
regulations, the Partnership will be classified as a partnership and not as an
association taxable as a corporation. This status has not been confirmed by a
ruling from, and such opinion is not binding upon, the Internal Revenue Service
(the "IRS"). No such ruling has been or will be requested. The facts and
authorities relied upon by counsel in its opinion may change in the future. If
the Partnership were taxed as a corporation for federal income tax purposes,
income or loss of the Partnership would not be passed through to the Partners,
and the Partnership would be subject to tax on its income at the rates of tax
applicable to corporations, without any deductions for distributions to the
Partners. In addition, all or a portion of distributions made to the Partners
could be taxable to the Partners as dividends or capital gains. See "FEDERAL
INCOME TAX ASPECTS--PARTNERSHIP STATUS."
PARTNERS' TAX LIABILITY MAY EXCEED DISTRIBUTIONS. If the Partnership has
profits for a taxable year, such profits will be taxable to the Partners in
accordance with their respective distributive shares of the Partnership's
profits, whether or not the profits actually have been distributed to the
Partners. Accordingly, taxes payable by the Partners with respect to the
Partnership's profits may exceed the amount of Partnership distributions, if
any, for a taxable year. Further, the Partnership may sustain losses offsetting
such profits in a succeeding taxable year, so that the Partners may never
receive the profits on which they were taxed in prior years. See "THE LIMITED
PARTNERSHIP AGREEMENT--SHARING OF PROFITS AND LOSSES: FEDERAL TAX ALLOCATIONS,"
"FEDERAL INCOME TAX ASPECTS," and "DISTRIBUTIONS."
18
<PAGE>
REDEMPTION OF UNITS MAY PRODUCE NEGATIVE TAX CONSEQUENCES. The Partnership
allocates taxable gains and losses to a Limited Partner who redeems a Unit
generally to the extent such Partner's capital account allocable to such Unit
differs from the federal income tax basis allocable to such Unit. Because of
this special allocation of Partnership gain or loss upon a redemption of Units,
amounts received upon the partial or complete redemption of a Limited Partner's
Units normally will not be taxable to the Partner. Apart from the special
allocation upon a redemption of Units, when a Limited Partner redeems less than
all of his Units, amounts received or deemed received are normally not taxable
to the Partner. However, if such amounts exceed the Partner's adjusted tax
basis for his Units, the excess will be taxable to him as though it were gain
from the sale of his Units. A Limited Partner who redeems all of his Units will
recognize gain or loss, if any, equal to the difference between the amount
realized upon redemption (i.e., the Net Asset Value of the Units redeemed) and
the adjusted tax basis of the Units redeemed. If all amounts reflected in the
Net Asset Value of the Units redeemed have been recognized for tax purposes, a
Partner's tax basis in his Units will equal the amount realized upon
redemption. However, because Net Asset Value takes into account both realized
and unrealized gains and losses, it is possible that the Net Asset Value of the
Units redeemed will be greater or less than the Partner's tax basis in his
Units, and that a Partner redeeming all of his Units will recognize gain or
loss equivalent to the difference. Unlike gain or loss allocable to a Partner
as his distributive share of Partnership gain or loss (including such
distributive share arising from a special allocation upon redemption of Units),
which retains the same character as in the hands of the Partnership, any such
gain or loss (assuming the Units were held as capital assets) will generally be
either long-term capital gain or loss (if the Units redeemed were held more
than one year) or short-term capital gain or loss (if the Units redeemed were
held for one year or less). Accordingly, this special allocation of Partnership
gain or loss upon a redemption of Units may alter or modify the character of
such Partner's income arising from a redemption of Units. See "THE LIMITED
PARTNERSHIP AGREEMENT--SHARING OF PROFITS AND LOSSES: FEDERAL TAX ALLOCATIONS"
and "FEDERAL INCOME TAX ASPECTS."
TAX LAWS ARE SUBJECT TO CHANGE. It is possible that the current federal
income tax treatment accorded an investment in the Partnership will be modified
by legislative, administrative, or judicial action in the future. The nature of
additional changes in federal income tax law, if any, cannot be determined
prior to enactment of any new tax legislation or administrative or judicial
action. However, such legislation could significantly alter the tax
consequences and decrease the after-tax rate of return of an investment in the
Partnership. Prospective subscribers should seek, and must rely on, the advice
of their own tax advisers with respect to the possible impact on their
investments of any future proposed tax legislation or administrative or
judicial action.
DEDUCTIBILITY OF PASSIVE LOSSES MAY BE LIMITED. Losses from a passive
activity ("passive losses") are generally disallowed to the extent that such
losses exceed income from all passive activities ("passive income"). Pursuant
to proposed and temporary United States Treasury regulations, the Partnership
will not be treated as a passive activity. Accordingly, a Limited Partner's
distributive share of items of income, gain, deduction, or loss from the
Partnership will not be characterized as passive income or loss, and
Partnership gains allocable to the Limited Partners will not be available to
offset passive losses from other investments. However, Partnership gains
allocable to the Limited Partners will be available to offset losses with
respect to "portfolio" investments, such as stocks and bonds. Moreover, any
Partnership losses allocable to the Limited Partners will be available to
offset other income, regardless of source. See "FEDERAL INCOME TAX ASPECTS--
TAXATION OF LIMITED PARTNERS: LIMITATIONS ON DEDUCTIBILITY OF PASSIVE LOSSES."
DEDUCTIONS BY INDIVIDUALS FOR INVESTMENT EXPENSES MAY BE LIMITED. Certain
miscellaneous itemized deductions, such as expenses incurred to maintain
property held for investment, are deductible only to the extent they exceed 2%
of the adjusted gross income of an individual, trust, or estate. In addition, a
portion of certain itemized deductions of an individual whose adjusted gross
income exceeds certain threshold amounts is disallowed. Based upon the
activities of the Partnership, the General Partner has been advised by its
legal counsel that expenses incurred in the commodities trading business of the
Partnership should not be subject
19
<PAGE>
to limitations except to the extent that the IRS promulgates regulations that
so provide. See "FEDERAL INCOME TAX ASPECTS--TAXATION OF LIMITED PARTNERS:
LIMITED DEDUCTION OF CERTAIN EXPENSES."
THE PARTNERSHIP'S TAX RETURNS MAY BE AUDITED. There can be no assurance that
the Partnership's tax returns will not be audited by the IRS or that
adjustments to such returns will not be made as a result of such an audit. If
an audit results in an adjustment, the Limited Partners may be required to file
amended returns (which may themselves also be audited) and to pay back taxes,
plus interest. See "FEDERAL INCOME TAX ASPECTS--TAX AUDITS."
NO ASSURANCE THAT UNITS WILL BE SOLD. Since the Continuing Offering of Units
is being made by the Partnership through the Selling Agent on a best efforts
basis without any firm commitment by the Selling Agent to purchase any Units,
no assurance is given that any or all of the unsold Units will be sold. See
"PLAN OF DISTRIBUTION."
STATUTORY REGULATION. The Partnership is not registered as an investment
company or mutual fund under the Investment Company Act of 1940 as amended (or
any similar state laws), and neither the General Partner nor the Trading
Advisor is registered as an investment adviser under the Investment Advisers
Act of 1940 as amended (or any similar state laws). Investors, therefore, will
not generally benefit from the protective measures provided by such
legislation. However, in accordance with the provisions of the CEAct, the
regulations of the CFTC thereunder, and the NFA rules, the General Partner is
registered as a commodity pool operator (a "CPO") and a commodity trading
advisor (a "CTA"), the Trading Advisor is registered as a CPO and a CTA, and
the domestic Clearing Brokers are registered as FCMs, each subject to
regulation by the CFTC and each a member of the NFA in its respective
capacities. If the CFTC registration or NFA membership of the General Partner
as a CPO were terminated, suspended, revoked, or not renewed, the General
Partner would not be able to continue to operate the Partnership until such
registration and membership were reinstated or until a new general partner
could be admitted and registered. If the CFTC registration or NFA membership of
the Trading Advisor as a CTA were terminated, suspended, revoked, or not
renewed, the Trading Advisor would not be able to continue to make trading
decisions for the Partnership, and the Partnership would be required to cease
trading commodity interest contracts until such registration and membership
were reinstated or until a new trading advisor could be retained. If the CFTC
registration or NFA membership of any domestic Clearing Broker as an FCM were
terminated, suspended, revoked, restricted, or not renewed, such Clearing
Broker would not be permitted to effect brokerage transactions for the
Partnership on United States exchanges until its registration and membership
were reinstated. See "INVESTMENT PROGRAM AND USE OF PROCEEDS--INVESTMENT
PROGRAM--REGULATION."
The Partnership is not registered, by reason of an exemption, as an
investment company under the Investment Company Act of 1940 as amended or
similar state laws, and the Trading Advisor is not registered, by reason of an
exemption, as an investment adviser under the Investment Advisers Act of 1940
as amended or similar state laws. Investors, therefore, are not accorded the
protective measures provided by such legislation.
BPL, as spot and forward contract dealer, is not registered in such capacity
under the CEAct (or similar state laws). Investors, therefore, are not afforded
the protective measures provided by the CEAct. See "INVESTMENT PROGRAM AND USE
OF PROCEEDS--REGULATION."
THE FOREGOING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANATION OF ALL
OF THE RISKS INVOLVED IN THE OFFERING OF UNITS. PROSPECTIVE INVESTORS SHOULD
READ THIS PROSPECTUS IN ITS ENTIRETY BEFORE DETERMINING WHETHER TO SUBSCRIBE
FOR UNITS.
20
<PAGE>
CONFLICTS OF INTEREST
1. RELATIONSHIP AMONG THE GENERAL PARTNER, THE TRADING ADVISOR, AND PAUL TUDOR
JONES, II.
Both the Trading Advisor and the General Partner are controlled, directly or
indirectly, by Mr. Jones. The General Partner has a conflict of interest
between its fiduciary duty to the Partnership to select a trading advisor in
the Partnership's best interests and to monitor trading in the Partnership's
account, and its interest in engaging TIC as the Partnership's Trading Advisor.
As a result of the General Partner's decision to delegate complete trading
authority to the Trading Advisor, the terms upon which the Trading Advisor
renders services to the Partnership were not negotiated at arm's length.
However, the rates for management and incentive fees paid by the Partnership
are approximately one-half the rates normally charged to other customer
accounts managed by the Trading Advisor and its affiliates. In addition, the
Partnership does not have available an independent CPO to monitor the trading
conducted for its account or to make an impartial determination whether, in
certain circumstances, the engagement of an independent trading advisor or
advisors would be in the best interests of the Partnership.
2. RELATIONSHIP AMONG THE GENERAL PARTNER, THE TRADING ADVISOR, BPL, PAUL TUDOR
JONES, II, AND THEIR AFFILIATES.
BPL has historically effected currency spot and forward contract transactions
for the Partnership and its other customers by entering into transactions with
its counterparties and corresponding back-to-back transactions with the
Partnership and such other customers. Since this trading can involve the
extension of credit by BPL's counterparties, BPL has required the Partnership
to deposit and maintain collateral with BPL in amounts up to 20% of the
Partnership's Net Assets.
3. RELATIONSHIP AMONG THE GENERAL PARTNER, THE TRADING ADVISOR, BPL, AND OTHER
BROKERS.
The Trading Advisor effects substantially all of the Partnership's spot and
forward contract transactions through the execution facilities of BPL, an
affiliate of the General Partner and the Trading Advisor.
The Partnership may deposit and maintain collateral (in the form of cash or
United States Government obligations) with BPL in amounts up to 20% of the
Partnership's Net Assets. BPL has unrestricted use of the funds and property
deposited and maintained with it as collateral. See "INVESTMENT PROGRAM AND USE
OF PROCEEDS."
Many of the employee traders of TIC who trade small portions of certain
customer assets are dual employees of BPL, and thus are responsible for
managing their own customer accounts as well as executing transactions for
TIC's, Mr. Jones's, and their customer and proprietary accounts. There are
conflicts of interest as a result of these traders having knowledge of customer
and proprietary orders when they are also managing their own customer accounts.
In addition, although they do not conduct such trading currently, employees of
BPL have in the past, and may again in the future, trade for their own
proprietary accounts or for the proprietary accounts of BPL, the General
Partner, the Trading Advisor, other affiliates, or their respective principals.
There are conflicts of interest as a result of such employees having knowledge
of customer orders when such dual employees engage in such trading. The
improper use of trading information or orders by BPL employees and TIC traders
would be contrary to BPL and TIC internal guidelines and policies.
Neither the General Partner, the Trading Advisor, nor their affiliates
participate in any brokerage commissions received by the Clearing Brokers in
connection with executing and clearing the Partnership's commodity interest
contract transactions. Consequently, no additional conflicts of interest exist
with regard to the generation of commissions for the Clearing Brokers and the
fiduciary responsibilities of the General Partner and the Trading Advisor. See
"BROKERAGE ARRANGEMENTS."
4. TIC AS TRADING ADVISOR.
The Trading Advisor has a conflict of interest between its duty to maximize
profits from trading and hence maximize its incentive fee, and the possible
desire of the Trading Advisor to avoid taking risks which
21
<PAGE>
might reduce the assets of the Partnership and consequently reduce the
management fee payable to it. In addition, by reason of payment to the Trading
Advisor of a lower management fee and incentive fee that is payable from
Trading Profits and only approximately one-half the rate normally charged to
its customers, the Trading Advisor has a conflict of interest between its
obligation to manage the Partnership's trading prudently, and the incentive
created by such a fee for the Trading Advisor to make investments that are
riskier or more speculative than would be the case in the absence of a low
management fee or a low incentive fee.
5. PROPRIETARY TRADING BY THE GENERAL PARTNER, TRADING ADVISOR, MR. JONES, AND
THEIR PRINCIPALS, AFFILIATES, AND EMPLOYEES.
The General Partner, Trading Advisor, Mr. Jones, and certain of their
principals, employees, and affiliates (collectively, the "Proprietary Traders")
have in the past traded, currently trade, or may in the future trade, commodity
interest contracts for their proprietary accounts. Mr. Jones trades extensively
for proprietary accounts. In such proprietary trading, the Proprietary Traders
may trade proprietary accounts aggressively and thus may assume more risks than
the Trading Advisor normally assumes on behalf of the Partnership. Also, such
proprietary trading may be conducted at brokerage commission and advisory fee
rates which are substantially lower than the rates which the Partnership is
charged. Accordingly, such proprietary accounts may produce trading results
which are substantially different from those experienced by the Partnership.
Limited Partners will not be permitted to inspect the proprietary trading
records or any written policies related to such trading. See "THE TRADING
ADVISOR--PROPRIETARY TRADING."
6. PRIORITY ALLOCATION OF SPECULATIVE POSITION LIMITS.
Mr. Jones may allocate up to 40% of the applicable speculative position
limits in futures contracts to his own and his affiliates' proprietary accounts
and the balance among all other accounts managed or controlled by Mr. Jones,
the Trading Advisor, and their affiliates, pursuant to a neutral allocation
system that is designed, over time, not to favor any account managed or
controlled by them.
7. MANAGEMENT OF CUSTOMER ACCOUNTS BY THE GENERAL PARTNER, THE TRADING ADVISOR,
AND THEIR AFFILIATES.
The Trading Advisor and its affiliates currently manage, and may in the
future manage, the accounts of various customers other than the Partnership.
Although the General Partner presently serves as commodity pool operator only
to the Partnership, the General Partner may in the future serve as commodity
pool operator to other pools, and may in the future manage the accounts of
customers other than the Partnership. Limited Partners will not be permitted to
inspect the trading records of the General Partner, the Trading Advisor, or
their affiliates, or any written policies related to such trading. The trading
methods and strategies that the Trading Advisor generally utilizes in managing
the account of the Partnership is utilized by the Trading Advisor and its
affiliates in managing the trading for certain other commodity interest-only
customer accounts. Accordingly, all such accounts may be competing for the same
or similar positions and, depending upon whose order is placed first, the
difference in timing may result in some accounts receiving better prices than
others. However, different types of accounts may be traded pursuant to
different trading policies. Also, some accounts may be limited in trading in
foreign markets. In addition, legal, authorization, and credit considerations
may preclude certain accounts from participating in certain transactions, such
as swap transactions.
Certain employees of the Trading Advisor and its affiliates (other than Mr.
Jones) manage other customer accounts. The records of such trading or any
written policies related to such trading will not be available for inspection
by the Limited Partners. The trading methods and strategies that such employees
utilize and the markets in which they trade may be similar to, or different
from, the trading methods, strategies, and markets utilized by Mr. Jones, and
the trading performance of such accounts may differ significantly from the
performance of the customer accounts managed by Mr. Jones. All such accounts
may
22
<PAGE>
be competing for the same or similar positions and, depending on whose order is
placed first, the difference in timing may result in some accounts receiving
better prices than others. Alternatively, such accounts may be taking opposite
positions to one another.
8. OTHER ACCOUNTS CARRIED BY BROKERS.
The Clearing Brokers utilized by the Partnership also serve as brokers,
dealers, or counterparties for other customers of the Trading Advisor and its
affiliates and for proprietary accounts of the Trading Advisor, Mr. Jones, and
their affiliates, principals, and employees. In addition, the Clearing Brokers
and their respective principals, directors, officers, employees, and affiliates
may from time to time trade commodity interest contracts for their proprietary
accounts or for customer accounts which they control or manage. In addition,
the Clearing Brokers are large commodities brokers handling substantial
customer business in commodity interest contracts, including other commodity
pools and investment funds. Thus, each Clearing Broker may execute transactions
for the account of the Partnership in which the other parties to the
transactions are the Clearing Broker's principals, directors, officers,
employees, affiliates, customers, or correspondents. Such persons might also
compete with the Partnership in bidding on purchases or sales of commodity
interest contracts without knowing that the Partnership is also bidding.
Transactions for the principals, directors, officers, employees, affiliates,
customers, and correspondents of a Clearing Broker might be executed when
similar trades for the Partnership are not executed or are executed at less
favorable prices. The operating policies of each Clearing Broker generally
require that orders be transmitted in the sequence received regardless of
customer size or identity, and consequently an order placed before an order for
the Partnership may be executed at a better price than the Partnership's order
due to market changes. Also, an order placed for a small number of positions
may be executed at a better price than a larger order for the Partnership. For
these reasons, it is possible that transactions might be executed for other
persons, including parties related to a Clearing Broker, when similar orders
for the Partnership are not executed or are executed at less favorable prices.
See "CONFLICTS OF INTEREST--RELATIONSHIP AMONG THE GENERAL PARTNER, THE TRADING
ADVISOR, BPL, AND THE OTHER BROKERS."
Neither the General Partner nor its affiliates participate in any brokerage
commissions received by the Clearing Brokers in connection with executing and
clearing the Partnership's commodity interest contract transactions. See
"BROKERAGE ARRANGEMENTS."
9. DUTIES TO MARKETS AND INDUSTRY ASSOCIATIONS.
Certain principals of the General Partner and its affiliates currently serve,
and may in the future serve, on various committees and boards of commodity
exchanges, the Futures Industry Association, the NFA, and other related
associations. In such capacity, they assist in establishing rules and policies
and have a fiduciary duty to the exchanges and associations on which they serve
and are required to act in the best interests of such organizations. Such rules
and policies, while generally enacted for the betterment of the commodities
industry as a whole, on occasion may be adverse to the interests of the
Partnership.
FIDUCIARY RESPONSIBILITY
In evaluating the foregoing conflicts of interest, prospective investors
should be aware that the General Partner has a responsibility to the Limited
Partners to exercise good faith and fairness in all dealings affecting the
Partnership. The responsibility of a general partner to limited partners is an
evolving area of the law, and Limited Partners who have questions concerning
the responsibilities of the General Partner should consult their own legal
counsel. In the event that a Limited Partner believes that the General Partner
has violated its responsibilities, he may seek legal relief for himself and
other similarly situated Limited Partners or on behalf of the Partnership under
applicable law to recover damages from, or to require an accounting by, the
General Partner.
23
<PAGE>
Limited Partners should be aware that the performance by the General Partner
of its fiduciary duty to the Partnership will be measured by the terms of the
Limited Partnership Agreement as well as by applicable law. Limited Partners
also are afforded certain rights to institute reparations proceedings under the
CEAct against the General Partner, the Trading Advisor, or the Clearing Brokers
for violations of the CEAct or any rule, regulation, or order of the CFTC. A
Limited Partner also may institute legal proceedings in court against the
General Partner, the Trading Advisor, or the Clearing Brokers for certain
violations of the CEAct or the rules, regulations, or orders of the CFTC.
Excessive trading of the Partnership's account may constitute a violation of
the antifraud provisions of the CEAct. Limited Partners should be aware that it
may be difficult to establish that excessive trading has occurred due to the
broad trading authority given to the Trading Advisor under the Management
Agreement, the broad discretion given to the General Partner in the Limited
Partnership Agreement to enter into the Management Agreement, exculpatory
provisions in the Management Agreement and the Limited Partnership Agreement,
and the relative dearth of judicial decisions providing standards defining
excessive trading. See "THE MANAGEMENT AGREEMENT" and "THE LIMITED PARTNERSHIP
AGREEMENT."
Under the exculpatory provisions of the Limited Partnership Agreement,
neither the General Partner nor its affiliates will be liable to the
Partnership or any of the Limited Partners except for any act, omission,
conduct, or activity (i) not taken in good faith, in a manner reasonably
believed to be within the scope of the authority granted to such person by the
Limited Partnership Agreement or by law or by the consent of the Limited
Partners, or in the best interests of the Partnership, or (ii) which
constituted negligence, misconduct, or breach of fiduciary duty.
The Partnership has agreed to indemnify the General Partner and its
affiliates from and against any loss, liability, damage, cost, and expense
resulting from any demand, claim, or lawsuit (other than actions brought by a
Limited Partner in the right of the Partnership) relating to the business or
activities undertaken by them on behalf of the Partnership or acts, omissions,
conduct, or activities by the General Partner in its capacity as such, provided
that the acts, omissions, conduct, or activities of such person did not
constitute misconduct, negligence, or breach of fiduciary responsibility and
was done in good faith, in the reasonable belief that it was within the scope
of the authority granted by the Limited Partnership Agreement or by law or by
consent of the Limited Partners, and in the best interests of the Partnership.
In any action brought by a Limited Partner in the name of the Partnership to
which the General Partner or any other person indemnified pursuant to the
foregoing provisions are party defendants, any such person will be indemnified
by the Partnership only to the extent and subject to the conditions specified
in the Partnership Act. Also, no indemnification of the General Partner or its
affiliates by the Partnership will be permitted for any loss, liability,
damage, cost, or expense resulting from liabilities incurred for violation of
federal or state securities laws.
24
<PAGE>
THE PARTNERSHIP
The Partnership was formed as a limited partnership on November 22, 1989
pursuant to the Partnership Act and was capitalized on that date with the
contributions of $1,000 by the General Partner and $1,000 by a principal of the
General Partner (as initial Limited Partner).
During the Initial Offering Period (June 22, 1990 through June 30, 1990), the
Partnership solicited subscriptions for up to 10,000 Units at an offering price
of $1,000 per Unit. At the initial closing held on July 2, 1990 (the "Initial
Closing"), the Partnership sold 421 Units to qualified employees for an
aggregate purchase price of $421,000. At the Initial Closing, the General
Partner contributed to the Partnership an additional $399,000 (which with the
General Partner's initial capital contribution of $1,000 aggregated a capital
contribution of $400,000), which exceeded the minimum capital contribution
requirement applicable to it. Accordingly, the Partnership commenced trading
operations on July 2, 1990 with Net Assets of $821,000, or $1,000 Net Asset
Value per Unit.
Following the Initial Closing, a total of 9,579 of the 10,000 registered
Units remained unsold. In July 1990, the Partnership commenced the Continuing
Offering of the unsold Units, at an offering price equal to 100% of the Net
Asset Value of a Unit as of the opening of business on the date of the
Quarterly Closing at which such Units are sold. Following the April 1, 1996
Quarterly Closing, 2,725 Units of Limited Partnership Interest were
outstanding, with 6,552 Units having been sold, 3,448 of the 10,000 registered
Units remaining unsold, and 3,829 of the sold Units having been redeemed. In
addition, as of that date, the General Partner held an aggregate of 643 Units
of General Partnership Interest. (For purposes of the foregoing, the number of
Units has been rounded to the nearest whole unit.) The Continuing Offering will
continue until the maximum of 10,000 Units is sold, unless the General Partner
sooner withdraws or otherwise discontinues the offering of Units.
The Units purchased and paid for pursuant to the Continuing Offering will be
fully paid and non-assessable. The liability of a Limited Partner is limited to
his unredeemed capital contribution, undistributed profits, if any, and under
certain circumstances any distributions and redemptions received together with
interest thereon. See "SUMMARY OF PROSPECTUS--INVESTMENT REQUIREMENTS," "THE
LIMITED PARTNERSHIP AGREEMENT--NATURE OF THE PARTNERSHIP," and "SUBSCRIPTION
PROCEDURE."
The actual performance record of the Partnership from July 2, 1990 through
March 31, 1996 is set forth in Table A of this Prospectus under "PERFORMANCE
RECORD OF THE PARTNERSHIP." See also, "CAPITALIZATION" and "REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS AND STATEMENTS OF FINANCIAL CONDITION OF TUDOR
FUND FOR EMPLOYEES L.P."
25
<PAGE>
DESCRIPTION OF CHARGES TO THE PARTNERSHIP
The Partnership is subject to substantial charges which are described below.
<TABLE>
<CAPTION>
RECIPIENT NATURE OF CHARGE AMOUNT OF CHARGE
--------- ---------------- ----------------
<S> <C> <C>
Trading Advisor... Management fee 1/12 of 2% per calendar month (a
2% annual rate) of the
Partnership's adjusted Net Assets
(as defined in the "GLOSSARY").
Incentive fee 12% of Trading Profits (as defined
in the "GLOSSARY") earned by the
Partnership as of the end of each
calendar quarter.
Clearing Brokers.. Brokerage fees Rates of between $9 and $21 per
roundturn for futures and options
trades on United States exchanges
(such rates include all
transaction costs in connection
with trading activities, including
floor brokerage, exchange,
clearing, clearinghouse, and NFA
fees). For trades effected on
exchanges and markets located
outside of the United States,
rates per transaction which are
generally higher than the rates
for transactions on United States
exchanges.
Others............ Ordinary operating Actual expenses incurred.
expenses (including
escrow agent costs) and
extraordinary expenses.
</TABLE>
1. Management Fee. The Partnership pays the Trading Advisor a monthly
management fee equal to 1/12 of 2% of the Partnership's adjusted Net Assets (as
defined in the "GLOSSARY") as of the end of each calendar quarter (a 2% annual
rate), without regard to the profitability of the Partnership. As described
under "Fees For Plan Investor Partners" below, the Trading Advisor does not
receive management fees attributable to Units held by Plan Investor Partners.
For purposes of calculating the management fee, the Partnership's month-end Net
Assets are determined before any incentive fees are accrued to the Trading
Advisor as of such month-end and before any distributions and redemptions are
accrued as of such month-end. In 1995, the Partnership paid approximately
$155,000 in management fees.
If the Management Agreement with the Trading Advisor is terminated on a date
other than the end of a calendar month, the management fee payable to the
Trading Advisor will be determined as if such termination date were the end of
a month, but such fee will be prorated based on the ratio that the number of
calendar days in the month through the termination date bears to the total
number of calendar days in the month.
2. Incentive Fee. The Partnership pays the Trading Advisor a quarterly
incentive fee equal to 12% of "Trading Profits," if any, earned on the
Partnership's assets as of the end of each calendar quarter. As described under
"Fees For Plan Investor Partners" below, the Trading Advisor does not receive
incentive fees attributable to Units held by Plan Investor Partners. The term
"Trading Profits" is defined in the Management Agreement with the Trading
Advisor and in the "GLOSSARY." Because incentive fees are paid to the Trading
Advisor on a quarterly basis, the Trading Advisor could receive substantial
fees during a year even though the Partnership incurs a net loss for the year.
In 1995, the Partnership paid approximately $195,000 in incentive fees.
26
<PAGE>
3. Brokerage Commissions. Commodity brokerage commissions for trades on
exchanges which are generally paid on the completion or liquidation of a trade
are referred to as "roundturn commissions," and cover both the initial purchase
(or sale) of a commodity interest contract and the subsequent offsetting sale
(or purchase) of such contract. If a trader closes out a position which
involves, for example, 50 futures contracts, he is charged for 50 roundturn
commissions, irrespective of whether or not the position is closed out in a
single transaction. In the case of options contracts, a "halfturn" brokerage
commission is generally charged for the establishment of a position, and
another halfturn commission is charged for the liquidation of such position.
The Partnership pays the Clearing Brokers brokerage commissions for trades on
United States exchanges at rates of between $9 and $21 per roundturn for
futures and options trades (such rates include floor brokerage, exchange,
clearing, clearinghouse, and NFA fees). For trades effected on exchanges and
markets located outside of the United States, the Partnership pays the Clearing
Brokers brokerage commissions at rates per transaction which are generally
higher than the rates for transactions on United States exchanges, and
commissions for trades on foreign exchanges and markets are subject to
fluctuations in exchange rates and additional regulatory fees and charges.
Brokerage commissions and fees are subject to change from time to time as
mutually agreed between the General Partner and the applicable broker or
dealer. The General Partner anticipates that the Partnership will normally pay
annually up to approximately 5% of its average annual Net Assets in brokerage
commissions and other transaction costs and charges (although historically such
annual costs have been less than 5%). In 1995, the Partnership paid
approximately $158,000 in brokerage commissions and fees and other transaction
costs and charges.
4. Other Expenses. The Partnership pays its ordinary operating expenses,
including expenses for services provided to the Partnership by third parties
(whether or not affiliated with the General Partner) selected by the General
Partner. Such expenses include legal, accounting, escrow, auditing, record
keeping, administration, computer, and clerical expenses, expenses incurred in
preparing, printing, and mailing reports and tax information to Limited
Partners and regulatory authorities, expenses of printing and mailing
registration statements, prospectuses, and reports to Limited Partners (but not
for solicitation purposes and not the expenses of preparing such registration
statements and prospectuses, all of which are paid by the General Partner),
expenses for specialized administrative services, other printing and
duplication expenses, other mailing costs, and filing fees. In 1995, the
Partnership paid approximately $100,000 in such other expenses.
The Partnership will also pay any extraordinary expenses it may incur. The
General Partner is not reimbursed by the Partnership for any costs incurred by
it relating to office space, equipment, and staff necessary for the
Partnership's operations and the administration of the sale and redemption of
Units, nor for the Continuing Offering costs paid by the General Partner. All
expenses of the Partnership are billed directly to and paid directly by the
Partnership. See "PERFORMANCE RECORD OF THE PARTNERSHIP" and "REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS AND STATEMENTS OF FINANCIAL CONDITION OF TUDOR
FUND FOR EMPLOYEES L.P."
5. Fees For Plan Investor Partners. Because of constraints under ERISA and
the Code, TIC has irrevocably waived, disclaimed, and renounced its right to
receive management fees and incentive fees attributable to Units held by the
TIC 401(k) Plan, or any pension, retirement, or other employee benefit plan
established for employees of TIC or its affiliates or their present or future
affiliates, successors, or assigns ("Plan Investor Partners"). As a consequence
of such waiver, disclaimer, and renunciation, and pursuant to the terms of the
Limited Partnership Agreement, the capital accounts of Plan Investor Partners
will not be charged for management fees or incentive fees payable to TIC, and
the number of Units held by each Plan Investor Partner will be restated as
necessary to equate the per Unit value of such Plan Investor Partner's capital
account with the per Unit value of a non-Plan Investor Partner's capital
account.
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6. Breakeven Analysis.
<TABLE>
<S> <C>
Initial Selling Price per Unit(1)................................... $1,000.00
Trading Advisor's Management Fee(2)................................. 20.00
Fund Operating Expenses(3).......................................... 10.00
Brokerage Commissions and Trading Fees(4)........................... 50.00
Less Interest Income(5)............................................. (30.00)
Amount of profit required for the Net Asset Value of a Unit at the
end of one year to equal the Initial Selling Price per Unit(6)..... $ 50.00
Percentage of Initial Selling Price per Unit........................ 5.00%
</TABLE>
- --------
(1) Investors initially purchased Units at $1,000.00 per Unit. Units are
currently purchased at the Partnership's month-end Net Asset Value per Unit.
(2) The Trading Advisor is paid a monthly management fee of 1/12 of 2% of the
adjusted Net Assets of the Partnership (a 2% annual rate).
(3) The Partnership's annual operating expenses are expected to amount to
approximately 1% of the average annual Net Assets of the Partnership.
(4) Annual brokerage commissions and trading fees are estimated at up to 5% of
the average annual Net Assets of the Partnership.
(5) The Partnership earns interest estimated at 3% of the average annual Net
Assets of the Partnership, on monies and property deposited with its brokers
and dealers.
(6) Trading profits are net of all of the expenses described above. Therefore,
there is no Trading Advisor incentive fee at the break-even point.
----------------
The General Partner is required to furnish to each Limited Partner monthly
statements of account describing the performance of the Partnership and setting
forth management and incentive fees, brokerage commissions and fees, and other
expenses incurred or accrued by the Partnership during the month, and certain
other information. In addition, the General Partner is required to furnish an
annual report of the Partnership, certified by an independent public accountant
and including financial statements, within 90 days of the close of each fiscal
year. See the annexed Annual Report of the Partnership for the 1994 and 1995
fiscal years, beginning on Page F-1. See also "THE LIMITED PARTNERSHIP
AGREEMENT--REPORTS TO LIMITED PARTNERS."
INVESTMENT PROGRAM AND USE OF PROCEEDS
INVESTMENT PROGRAM
Description Of Commodities Traded. TIC monitors virtually all commodities
actively traded on organized exchanges throughout the world. TIC normally
trades at any given time contracts for between 5 and 30 types of commodities,
although this number may vary substantially from time to time based on the
various factors described below. TIC trades contracts involving and relating to
financial instruments, currencies, precious metals, energy products, money
market instruments, government and government agency debt obligations, stock,
financial and economic indices, agricultural and tropical items, and energy and
industrial items. Historically, however, TIC has concentrated its commodity
interest contract trading in currencies and futures contracts thereon,
financial futures, stock index futures, energy futures and precious metals and
futures contracts thereon.
TIC may trade for the Partnership any of the commodity interest contracts
which are now, or may hereafter be, offered for trading on United States,
foreign, and international exchanges and markets. At any time in its sole
discretion, TIC may add or drop commodity interest contracts from the portfolio
it trades. In addition, TIC in its sole discretion may trade newly-designated
commodity interest contracts for the Partnership's accounts.
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TIC trades the world's commodities markets, particularly currencies, stock
index futures contracts, interest rate futures contracts, and metals, on a 24-
hour basis, and may trade on foreign exchanges and markets when United States
exchanges are closed. From time to time, TIC converts cash transactions into
futures contract positions.
TIC continuously reviews the volatility, liquidity, and risk associated with
the various commodities markets and, based upon its judgment, determines the
commodities that it will trade and the quantity of contracts it will buy or
sell of each. TIC normally attempts to maintain balance in an account among the
different commodity interest contracts traded, although diversification of a
portfolio is not a primary factor in TIC's trading approach. However, if TIC
believes that a particular commodity interest or group of related commodity
interests has significant profit potential, TIC may concentrate assets in that
area. For example, during 1987 TIC invested up to 90% of participating
customers' portfolios in contracts relating to currencies, United States
Treasury bonds, and the S&P 500 Stock Index.
Description Of Commodity Interest Contract Trading Methods And
Strategies. TIC employs the trading methods and strategies developed by Mr.
Jones, who is and has always been the principal commodity interest trader for
TIC's futures related customer accounts. TIC's trading decisions do not adhere
rigidly to any particular trading formula or system devised by TIC or Mr.
Jones, but rather rely on the knowledge, judgment, and experience of Mr. Jones
and the other employee traders of TIC. TIC's trading methods are generally
discretionary and subjective. In arriving at trading decisions, TIC and its
employee traders may use a combination of trend-following techniques and
technical and fundamental analyses. However, regardless of the method or
strategy used, all trading decisions are governed by a disciplined system of
risk management. Since the trading methods utilized by TIC are proprietary and
confidential, the discussion that follows is of a general nature and not
intended to be exhaustive.
Generally, TIC and its affiliates attempt to trade all commodity-interest
only customer accounts based on similar trading methods, strategies, and
policies. However, various factors affecting different types and sizes of
accounts may require strategies or methods for some accounts to be adjusted.
For example, some accounts may be precluded from trading in foreign markets.
Also, legal, authorization, and credit considerations may preclude certain
accounts from participating in certain transactions, such as swap transactions.
TIC, from time to time at its sole discretion, may refine or change its
trading methods and strategies (including technical and fundamental trading
factors or analyses, commodity interest contracts traded, and money management
principles utilized) without prior notice to, or approval by, the Partners.
There can be no assurance that TIC's approach to trading will yield the same
results as it has in the past.
TIC and its affiliates actively trade proprietary capital in the financial
markets, engage in investment management and advisory activities for clients,
and serve as general partner of and/or advisor to different investment
vehicles. Each proprietary and client account may have different investment
goals, objectives, strategies, parameters, and levels of aggressiveness,
leverage, and risk. In some cases, it will be appropriate for TIC or its
affiliates to employ comparable trading approaches for a number of different
accounts. For example, the trading approaches which TIC or its affiliates may
employ in trading proprietary or other client accounts may include employing
investment strategies which are even more speculative, aggressive, or leveraged
than those employed on behalf of the Partnership, engaging in experimental
trading and investment strategies, or testing the price movement in certain
markets. TIC and its affiliates have adopted guidelines and procedures relating
to all accounts managed or controlled by them which are designed, subject to
different trading approaches being employed for different accounts due to
differences in investment objectives and risk tolerances, not to favor any
account managed or controlled by them over any other account.
Trading results experienced by the Partnership may be substantially different
from trading results experienced in proprietary and other client accounts,
including for the reasons set forth above. Limited Partners will not be
permitted to inspect trading records pertaining to proprietary or other client
accounts or any written policies related to such trading.
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<PAGE>
Goal Of Trading. TIC's trading objective for the Partnership is the gradual
and consistent appreciation of assets through the speculative trading of
commodity interest contracts. The success of TIC's trading depends largely on
the ability of the trading methods and strategies utilized by it to anticipate
market trends and effect the purchase and sale of commodity interest contracts
accordingly. The trading strategy utilized by TIC is premised on two factors
integral to any consistently profitable trading strategy:
1. a higher than average probability that a commodity interest contract
price move can be anticipated, measured, and captured; and
2. the assignment of realistic risk definition and control upon
initiating a commodity interest contract position.
TIC recognizes that a profitable commodity interest contract transaction
depends on accurate price prediction in conjunction with a practical system of
risk management.
Use Of Technical And Fundamental Analyses. There are generally two ways of
attempting to forecast price behavior in the commodities markets--"technical"
and "fundamental" analysis. Technical analysis operates on the theory that
market prices at any given point in time reflect all known factors affecting
supply and demand for a particular commodity. Consequently, only a detailed
analysis of, among other things, actual daily, weekly, and monthly price
fluctuations, volume variations, and changes in open interest are of predictive
value when determining the future course of price movements. Trading
recommendations are generally based on computer-generated signals, chart
interpretation, mathematical measurements, or a combination of such items. As
an example with respect to a financial commodity interest, one set of technical
procedures might evaluate the following factors, among others, on a daily
basis: (1) the price trends of the financial commodity interest and the levels
at which to initiate new positions and terminate old positions; (2) the
volatility that the financial commodity interest has displayed in the past; (3)
the condition of the financial commodity interest market being traded in terms
of whether it is a trending market or an erratic and non-trending market; and
(4) the state of the financial commodity interest market in terms of
determining the proper points for initiating new positions and allowing
increases in existing commitments.
Fundamental analysis, on the other hand, is based upon the study of the
external factors that affect the supply and demand of a particular commodity
interest in order to predict future prices. Such factors might include interest
rates, weather, crops, the economics of a particular commodity interest,
governmental policies, domestic and foreign political and economic events, and
changing trade prospects. Fundamental analysis assumes that markets are
imperfect, that information is not assimilated or disseminated, and that
econometric models can be constructed that generate equilibrium prices that may
indicate current prices are unsustainable. As an example with respect to an
agricultural commodity interest, some of the fundamental factors that affect
the supply of soybeans include the acreage planted, crop conditions (drought,
flood, disease, etc.), labor disputes affecting planting, harvesting, and
distribution, and the previous year's crop carryover. The demand for soybeans
consists of usage and exports, which are affected by general world economic
conditions and the cost of soybeans in relation to the cost of competing food
products.
TIC utilizes aspects of both technical and fundamental analyses in its
approach to trading the commodities markets. Fundamentals are assessed to
determine the likely price direction of a particular commodity interest, while
computer studies in conjunction with chart interpretation and mathematical
measurements are used for market timing. All available information on a
particular commodity interest is collated, its relative importance weighed, and
situations targeted where the relevant fundamental and technical factors tend
to collectively indicate price movement in the same direction. Each commodity
interest monitored by TIC is graded informally based on a continually evolving
model of critical price determining factors which TIC has selected over the
years and which it believes have a relevant or controlling influence on current
markets. Positions normally are taken only when very bullish or very bearish
trends are registered, but trade initiation is at the sole discretion of Mr.
Jones and the other employee traders and may be at odds with any trading
strategy to which TIC historically has adhered. See "PRINCIPAL RISK FACTORS--
EXPERIENCE OF AND RELIANCE ON THE GENERAL PARTNER AND THE TRADING ADVISOR."
30
<PAGE>
Use Of Trend-Following Analysis. TIC's trading strategy attempts to detect
trends in price movements for the commodity interests it monitors. TIC's
trading strategy normally seeks to establish positions and maintain such
positions while the particular market moves in favor of the position, and to
exit the particular market and/or establish reverse positions when the
favorable trend either reverses or does not materialize. TIC's trading strategy
normally is not successful if a particular market is moving in an erratic and
non-trending manner or if a market moves in a direction opposite to that
predicted by TIC.
Subject to the foregoing, TIC normally initiates positions only when the
price of a particular market and/or a particular commodity interest is moving
in the direction predicted by it. A corollary of this approach is that TIC
normally avoids initiating positions in flat or trendless markets, and from
time to time may liquidate all existing positions in and withdraw from a
particular market or all markets. However, when TIC's analysis of the
fundamentals of a particular market indicates a change in the price trend of
the market, TIC may initiate positions that are counter to the trend then in
effect. However, given the importance placed on participating in sustained
trends, a large countertrend position is normally initiated only when clear
stop-loss chart points exist to limit losses and when the charts and price
movement indicate strong signs of a reversal in prices.
Emphasis On Risk Management. Risk control is a very important aspect of TIC's
trading methods. Risk control is normally exercised by limiting the overall
number of trades in each market and across all markets. However, TIC is an
aggressive trader and more often controls risks through the use of close
protective stops than through broad diversification--i.e., TIC identifies a
predetermined level of loss at which point it will liquidate a position to
limit losses if the market moves in the direction contrary to TIC's
expectations. TIC's normal policy is that, when positions are initiated,
protective stops are identified simultaneously and held by TIC's trading desk
to limit losses in case of adverse price movement, although TIC may at times
deviate from that policy.
Use Of Risk Units. TIC initiates, adds, and exits positions in terms of risk
units. A risk unit is defined as the number of commodity interest contracts
that would result in realization of a 1% loss in the value of the portfolio in
the event of an average worst-case scenario in either intraday or overnight
price volatility. The number of risk units used depends on the average
volatility of the market, which is determined by computing the average daily
dollar net difference from either the high-to-low price intraday, or the
maximum net change interday from the previous day's close, whichever is the
greater. This average volatility is calculated over a variety of time periods.
Mr. Jones determines the optimal time period and thus the actual volatility
measure used.
Limits On Daily Exposure. TIC determines the size of any particular position
based on the amount of capital under management and the recent volatility of
the commodity interest contract traded. Daily exposure is normally limited to
1% of equity, but may range from .25% to 6% of the beginning equity for the
month for any one commodity interest on an intraday or overnight position. In
extraordinarily volatile markets, daily exposure could range materially higher.
Under certain market conditions, including but not limited to an abrupt
increase in margins required by an exchange or its clearinghouse or an
inability to liquidate open positions because of daily price fluctuation
limits, TIC may commit a significant amount of equity as margin for a given
commodity interest contract.
TIC estimates that on average approximately 20% to 50% of the Partnership's
Net Assets have normally been committed as margin for commodity interest
contracts, although this percentage may vary widely.
Tendency For Active Trading. TIC is a very active trader with an
intentionally short-term approach to the markets. Accordingly, TIC's trading
often results in high account activity and total transaction charges
commensurate with such activity. In the past, annual brokerage commissions for
TIC's customer accounts have averaged approximately 5% of the average annual
net asset value of such accounts. However, neither TIC, Mr. Jones, nor any of
their affiliates has any interest (financial or otherwise) in the generation of
brokerage commission revenue. See "CONFLICTS OF INTEREST."
31
<PAGE>
At times, TIC initiates positions in a series of trades in respect of a
commodity interest contract, each one linked to the preceding one. Normally,
after an initial position is taken, a second or subsequent position is not
added unless the preceding position is profitable. Liquidating stop-loss orders
normally are placed at the entry point of the first position. If a trade is
profitable, profits normally are accepted on most positions at a predetermined
price objective, with the remaining positions left open to track some trend-
following strategy. Usually, trades by TIC are initiated and closed out in one
to five days.
As described above, trading decisions by TIC rely to a great extent on the
knowledge, judgment, and experience of Mr. Jones. If Mr. Jones were to become
unavailable, there is no other person designated to carry out his functions as
the Partnership's principal trader. Certain employees of TIC have been
designated to liquidate all open commodity interest contract positions in all
accounts (including the Partnership's accounts) managed or controlled by TIC
upon Mr. Jones' death or disability. Such liquidation could result, in the case
of unprofitable positions, in realized losses and, in the case of profitable
positions, in positions being liquidated prior to the best price being
attained.
Description Of Orders And Order Placement. Mr. Jones determines the timing
and method by which orders are placed by TIC with brokers. Mr. Jones also
selects the types of orders placed. Executions for a customer's account may be
made during the day: (1) on a "stop" basis, where an order becomes a market
order when the specified stop price is reached; (2) on an "at market" basis,
where the order is executed as soon as possible after being received on the
floor of the exchange; (3) on a "limit" basis, where an order is placed to buy
or sell at a specified price or better than the specified price; or (4) on a
"closing price" basis, which is a contingent order based on the closing range
of the market. Order placement varies in accordance with the type of market
encountered and the type of order that can be used on the exchange on which a
particular commodity interest contract is traded, and is not limited to those
described above.
Normally, Mr. Jones' or TIC's execution desks place orders for customer
accounts, as well as for proprietary accounts directly with exchange floor
brokers. When an order for proprietary accounts is placed at the same time as
an order for customer accounts, the filled order is allocated among all such
accounts, including proprietary accounts, in a neutral manner. Thus,
proprietary account orders are filled in the same manner as customer orders.
Mr. Jones, however, may place his own orders with a floor broker before
customer orders have been placed. As a consequence of this order placement
procedure, orders for proprietary accounts may be executed on exchange floors
before or at better prices than orders for customer accounts. Accordingly,
proprietary accounts may experience trading results which are substantially
different from those experienced by customer accounts.
Trading Policies. The General Partner requires the Trading Advisor to follow,
and monitors its compliance with, such trading policies as the General Partner
may determine in its sole discretion from time to time, as well as the
following trading policies:
(1) The Partnership will not borrow or lend money to any Partner or other
person, except that the foregoing does not prohibit: (A) depositing margin
with respect to the initiation and maintenance of commodity interest
contract positions; (B) obtaining and utilizing lines of credit for the
trading of spot and forward contracts, currency contracts, swaps, and
related contracts and entering into guarantees, arrangements, and
agreements in connection therewith; or (C) guaranteeing obligations of any
person or entering into any other arrangement or agreement as contemplated
in the Limited Partnership Agreement.
(2) The Partnership will not permit "churning" of the Partnership's
assets.
(3) The Partnership will not employ the trading technique commonly known
as "pyramiding," in which the speculator uses unrealized profits on
existing positions in a given commodity interest contract due to favorable
price movement as margin specifically to buy or sell additional positions
in the same or a related commodity interest contract. However, open trade
equity (i.e., the profit or loss on an open commodity contract position)
may be taken into account when determining the size of positions to be
taken in all commodity interest contracts, and the Partnership may add to
existing commodity interest contract positions in its portfolio provided
that such action is consistent with the foregoing restriction.
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<PAGE>
The General Partner will not approve any material change in the foregoing
three trading policies without obtaining the prior written approval of Limited
Partners owning more than 50% of the Units then owned by the Limited Partners.
Regulation. Commodity exchanges in the United States are subject to
regulation under the Commodity Exchange Act as amended (the "CEAct") by the
Commodity Futures Trading Commission (the "CFTC"), the governmental agency
having responsibility for the regulation of commodity exchanges and futures and
option contract trading conducted thereon. The function of the CFTC is to
implement the objectives of the CEAct of preventing price manipulation and
excessive speculation and promoting orderly and efficient markets. Such
regulations, among other things, provide that trading in futures contracts must
be on exchanges designated as "contract markets," and that all trading on such
exchanges must be done by or through exchange members. In addition, the various
exchanges themselves exercise regulatory and supervisory authority over their
member firms.
The CFTC possesses exclusive jurisdiction to regulate the activities of
commodity pool operators ("CPOs") and commodity trading advisors ("CTAs"), and
has adopted regulations with respect to certain of such persons' activities.
Under the CEAct, a registered CPO, such as the General Partner, is required to
make annual filings with the CFTC describing its organization, capital
structure, management, and controlling persons. In addition, the CEAct
authorizes the CFTC to require and review books and records of, and documents
prepared by, a registered CPO. Pursuant to such authority, the CFTC requires a
registered CPO to keep accurate, current, and orderly records with respect to
each pool it operates. The CFTC may suspend the registration of a CPO (i) if
the CFTC finds that the CPO's trading practices tend to disrupt orderly market
conditions, (ii) if any controlling person of the CPO is subject to an order of
the CFTC denying such person trading privileges on any exchange, and (iii) in
certain other circumstances. Suspension, restriction, or termination of the
General Partner's registration as a CPO would prevent the General Partner from
operating the Partnership until such time, if any, as such registration was
reinstated or until a new or successor general partner was elected and
registered, and might result in the termination of the Partnership. The
Partnership itself is not registered with the CFTC in any capacity. The CEAct
gives the CFTC similar authority with respect to the activities of CTAs, such
as the Trading Advisor. If the registration of the Trading Advisor as a CTA
were terminated, restricted, or suspended, the Trading Advisor would be unable,
until such time, if any, as such registration was reinstated, to render trading
advice to the Partnership, which would have to cease trading activities until
such time, if any, as such registration was reinstated or until another CTA was
retained.
The CEAct requires all futures commission merchants ("FCMs"), such as the
domestic Clearing Brokers, to meet and maintain specified fitness and financial
requirements, segregate customer funds from proprietary funds, account
separately for customers' funds and positions, and maintain specified books and
records open to inspection by the CFTC staff. (The CFTC has similar authority
over "introducing brokers" ("IBs"), i.e., persons who solicit or accept orders
for trades, but who do not accept margin deposits for the execution of trades.)
The CEAct authorizes the CFTC to regulate trading by FCMs and their principals,
officers, directors, and employees, permits the CFTC to require action by
exchanges in the event of market emergencies, and establishes an administrative
procedure under which customers may institute complaints for damages arising
from alleged violations of the CEAct. The CEAct also gives the states certain
powers to enforce its provisions and the regulations of the CFTC. See
"PRINCIPAL RISK FACTORS--STATUTORY REGULATION."
Limited Partners are afforded certain rights for reparations under the CEAct.
Limited Partners may also be able to maintain a private right of action for
certain violations of the CEAct. The CFTC has adopted rules implementing the
reparations provisions of the CEAct which provide that any person may file a
complaint for a reparations award with the CFTC for violation of the CEAct
against a floor broker or an FCM, IB, CTA, CPO, or their respective associated
persons.
The CFTC has adopted rules designed to regulate option trading on United
States commodity exchanges. Under these rules, an exchange is permitted, upon
application to and qualification by the CFTC, to trade
33
<PAGE>
options on futures contracts and/or on a limited number of physical items. The
exchange has primary regulatory responsibility for policing option "retailing,"
and is required to establish rules, procedures, and safeguards for such
trading. Such requirements may vary from exchange to exchange. See "PRINCIPAL
RISK FACTORS--TRADING OF OPTIONS" and "THE COMMODITIES MARKETS--OPTIONS."
Pursuant to authority in the CEAct, the National Futures Association (the
"NFA") has been formed and registered with the CFTC as a "registered futures
association." At the present time, the NFA is the only non-exchange, self-
regulatory organization for commodity professionals. The CFTC has delegated to
the NFA responsibility for registration of CTAs, CPOs, FCMs, IBs, and their
respective associated persons, as well as floor brokers. The General Partner,
the Trading Advisor, and the domestic Clearing Brokers are all members of the
NFA. (The Partnership itself is not required to become a member of the NFA.) As
members, they are subject to NFA standards relating to fair trade practices,
financial condition, and consumer protection. As the self-regulatory body of
the commodities industry, the NFA promulgates rules governing the conduct of
commodities professionals, and disciplines those professionals who do not
comply with such standards. The NFA also arbitrates disputes between members
and their customers, conducts registration and fitness screening of applicants
for membership, and conducts audits of its existing members.
The regulations of the CFTC and the NFA prohibit any person who is registered
with the CFTC or a member of the NFA, respectively, from representing that such
registration or membership in any respect indicates that the CFTC or the NFA,
as the case may be, has approved or endorsed such person or such person's
commodity pool, trading program, or objectives. The registrations and
memberships described above must not be considered as constituting any such
approval or endorsement. Likewise, no commodity exchange has given or will give
any such approval or endorsement.
Pursuant to their emergency powers, the CFTC and the commodity exchanges may
take extraordinary actions in the event of a market emergency, including for
example, the retroactive implementation of speculative position limits or
higher margin requirements, the establishment of daily price fluctuation
limits, and the suspension of trading. Certain emergency actions have been
taken in the past, as for example with respect to certain stock index futures
and options contracts in response to the extraordinary declines of stock
prices. In addition, the regulation of futures and options trading in the
United States and other countries is an evolving area of law. The various
statements made herein are subject to modification by judicial decisions,
legislative actions, and changes in the rules and regulations of the CFTC, NFA,
commodity exchanges, or other regulatory authorities. In the future, emergency
actions by the CFTC or the exchanges or changes in the regulation of commodity
interest contract trading could have a detrimental effect on the Partnership's
trading performance.
The CFTC does not regulate the spot and forward contract markets, and the
Trading Advisor engages in a significant amount of spot and forward trading in
currencies. Although banks are regulated in various ways by the Federal Reserve
Board, the Comptroller of the Currency, and other federal and state banking
authorities, banking authorities do not regulate spot and forward trading, and
spot and forward dealers (such as BPL) are not subject to any registration or
similar regulatory requirements. The CFTC may in the future seek to assert
jurisdiction over forward contracts on currencies, such as those traded by the
Partnership, and attempt to prohibit certain United States entities, including
the Partnership, from engaging in transactions in such contracts. The Trading
Advisor believes, however, that it is unlikely that the forward trading in
which the Partnership engages will be prohibited by the CFTC. However, the
availability to the Unites States public of "off-exchange instruments" such as
forward contracts is a matter of ongoing debate in the industry, and any
prohibition or restriction on the Partnership's use of the forward markets
could have a materially adverse effect on the ability of the Trading Advisor to
trade on behalf of the Partnership. See "PRINCIPAL RISK FACTORS--TRADING OF
SPOT AND FORWARD CONTRACTS," "INVESTMENT PROGRAM AND USE OF PROCEEDS--
INVESTMENT PROGRAM--TRADING POLICIES," and "THE COMMODITIES MARKETS--SPOT AND
FORWARD CONTRACTS."
34
<PAGE>
While the United States Government does not currently impose any restrictions
on the movement of currency prices, it could choose to do so in the future. The
imposition or relaxation of exchange controls in various jurisdictions could
significantly affect the market for that and other jurisdictions' currencies.
Trading in the interbank market also exposes the Partnership to the risk of
default or delay since the failure or delay of a bank or dealer with which the
Partnership had forward contracted would likely result in a default or delay in
respect of the forward contract, and thus possibly substantial losses to BPL
and in turn the Partnership. See "PRINCIPAL RISK FACTORS--TRADING OF SPOT AND
FORWARD CONTRACTS" and "THE COMMODITIES MARKETS--SPOT AND FORWARD CONTRACTS."
Swap transactions, and swap market participants, likewise, are generally not
regulated in connection with such activities, similar to the forward contract
market. See "PRINCIPAL RISK FACTORS--TRADING OF SWAPS" and "--TRADING OF
OPTIONS."
The CFTC has no authority to regulate trading on foreign commodity exchanges
and markets. The CFTC has, however, adopted regulations relating to the
marketing of foreign futures contracts and options in the United States. These
regulations permit commodity options traded on certain foreign exchanges to be
offered and sold in the United States. For a discussion of trading on foreign
commodity exchanges and the risks associated with such trading, see "PRINCIPAL
RISK FACTORS--TRADING ON FOREIGN EXCHANGES."
The CEAct also gives the states certain powers to enforce its provisions and
the regulations of the CFTC.
The United Kingdom Financial Services Act (the "FSA") provides a
comprehensive scheme for regulating the conduct of the investment business in
the United Kingdom, including the formation of the Securities and Investments
Board, the body with authority to oversee the self-regulatory organizations of
the financial services industry in the United Kingdom. The FSA may also apply
to persons located outside the United Kingdom who are engaged in investment
business therein. The FSA authorized the establishment of a number of self-
regulatory organizations with responsibility for regulating specific types of
investment activity, including the Securities and Futures Authority Limited
(the "SFA"). The SFA functions in a manner similar to the CFTC, NFA, SEC, and
NASD, and deals, among other things, with a multitude of commodities- related
regulatory issues, including without limitation minimum capital, segregation of
funds, risk disclosure, dispute resolution, and self-dealing.
USE OF PROCEEDS
A portion of the Partnership's assets is deposited and maintained in cash
with the Partnership's Clearing Brokers and segregated or secured pursuant to
CFTC regulations, and is used to engage in commodity futures and options
trading. Additional assets reserved primarily for currency spot and forward
contract trading are deposited and maintained with BPL. At the direction of the
General Partner, such Clearing Brokers and BPL either invest the Partnership's
assets in United States Treasury bills for the account of the Partnership, or
periodically credit all or a portion of the Partnership's assets with interest
at a rate equivalent to the monthly average of the then-prevailing weekly 90-
day United States Treasury bill auction rate, or do a combination of both.
The balance of the Partnership's assets normally is held in accounts
identified to it and, except as described in the next sentence, invested in
short-term investments, including interest-bearing accounts at U.S. and foreign
money center banks, certificates of deposit, time deposits, and United States
Treasury bills and notes held at a Federal Reserve Bank or Clearing Broker. The
General Partner endeavors to earn interest on all of the Partnership's assets,
although balances denominated in certain foreign currencies may not earn
interest.
The General Partner estimates that approximately 20% to 50% of the
Partnership's Net Assets normally have been committed as initial margin for
commodity interest contracts, but from time to time the percentage of assets
committed as initial margin may be more or less than such range. In addition,
collateral deposited
35
<PAGE>
with BPL in connection with spot and forward contract transactions normally
constitutes up to 20% of the Net Assets of the Partnership.
To the extent the Partnership trades in futures contracts on United States
exchanges, the assets deposited by the Partnership with FCMs as margin is
segregated pursuant to the CEAct and the regulations of the CFTC. Such
segregated funds may only be invested in the limited range of essentially
"risk-free" instruments--principally United States Government obligations. The
Partnership utilizes United States Government securities and cash as margin on
United States futures and option on futures positions. The General Partner
anticipates that from time to time up to 50% of the Partnership's assets will
be segregated pursuant to CFTC regulations.
To the extent the Partnership trades in futures contracts on markets other
than regulated United States futures exchanges, funds deposited to margin
positions held on such exchanges are invested in bank deposits or in
instruments of a credit standing generally comparable to those authorized by
the CFTC for investment of "customer segregated funds," although applicable
CFTC rules do not require funds employed in trading on foreign exchanges to be
deposited in "customer segregated fund accounts."
BPL maintains separate accounts on its books and records in the name of the
Partnership with respect to its trading activities and the collateral deposited
and maintained by the Partnership. In turn, BPL's counterparties require BPL to
deposit and maintain collateral with them to engage in trading and to ensure
payment by BPL in respect of its spot and forward contracts. Accordingly, when
BPL enters into spot and forward contract transactions with its counterparties,
which as described herein mirror transactions between BPL and the Partnership,
BPL, in the case of collateralized transactions, normally deposits all or
substantially all of the Partnership's collateral deposits held by BPL (which
are separately identified on BPL's books and records in the name of the
Partnership) with BPL's counterparties, all of which are banks or broker-
dealers, or their affiliates. Pursuant to the direction of BPL, typically a
small percentage of the collateral deposited by BPL with its counterparties is
maintained in the form of cash, with the balance invested in United States
Treasury bills. The balance of the Partnership's assets held by BPL and not
deposited with its counterparties is instead deposited by BPL in accounts at a
money center bank.
The Partnership is assigned an account number by BPL, and receives daily and
monthly account statements which detail realized and unrealized profits and
losses as well as equity balances in the Partnership's account, and provide
information about the Partnership's collateral on deposit with BPL. The
requirement of counterparties to have collateral on hand prior to the
commencement of a transaction could prevent BPL, and in turn the Partnership,
from engaging in such trading during Tokyo or London trading hours because of
the delays in wire transfers of funds until New York business hours the
following day. In addition, annually BPL furnishes the Partnership with its
annual audited financial statements and the independent public accountants'
report and opinion relating thereto. See "PRINCIPAL RISK FACTORS," "CONFLICTS
OF INTERESTS," and "BROKERAGE ARRANGEMENTS."
The General Partner and its affiliates do not make any inter-company or
inter-fund loans using the assets or other property of the Partnership.
36
<PAGE>
CAPITALIZATION
The capitalization of the Partnership as of December 31, 1994, December 31,
1995, and March 31, 1996, respectively, is set forth under "REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS AND STATEMENTS OF FINANCIAL CONDITION OF TUDOR
FUND FOR EMPLOYEES L.P."
The following table sets forth (1) the actual capitalization of the
Partnership as of April 1, 1996, reflecting the Units of Limited Partnership
Interest and Units of General Partnership Interest outstanding as of that date,
and (2) the pro forma capitalization of the Partnership adjusted to reflect (i)
the sum of the Net Asset Value of the outstanding Units as of April 1, 1996
plus the gross proceeds from the sale of the 3,448 unsold Units of Limited
Partnership Interest offered by the Partnership at a price equal to 100% of the
Net Asset Value of a Unit as of April 1, 1996 (i.e., $3,223.33 per Unit), and
(ii) the capital contribution required of the General Partner based on such
capitalizations. (For purposes of this discussion, the numbers of Units and
dollar amounts have been rounded to the nearest whole Unit or whole dollar,
respectively.) There is no difference insofar as sharing of profits or losses
is concerned between a Unit of Limited Partnership Interest and a Unit of
General Partnership Interest.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------ -----------------
AMOUNT IF THE
MAXIMUM NUMBER OF
AMOUNT AS OF UNSOLD UNITS
TITLE OF CLASS 4/1/96 IS SOLD
-------------- ------------ -----------------
<S> <C> <C>
Units of Limited Partnership Interest(1)......... $ 8,782,968 $19,897,449
Units of General Partnership Interest(2)......... 2,072,418 2,072,418
----------- -----------
TOTAL........................................ $10,855,386 $21,969,867
=========== ===========
</TABLE>
- --------
(1) The actual amount shown reflects the Net Asset Value of Units of Limited
Partnership Interest outstanding as of April 1, 1996 (2,725 Units). During
the Continuing Offering, Units and fractions of Units (to the fourth
decimal place) are offered for sale at Quarterly Closings held as of the
first day of the applicable calendar quarter, at a purchase price per Unit
equal to 100% of the Net Asset Value of a Unit as of the opening of
business on the date of the applicable Quarterly Closing at which such Unit
is sold. The proceeds from such sales depend upon the Net Asset Value of a
Unit at the time of sale. See "PLAN OF DISTRIBUTION."
(2) The actual amount shown reflects the Net Asset Value of Units of General
Partnership Interest outstanding as of April 1, 1996 (643 Units). The Net
Asset Value of a Unit of General Partnership Interest is equivalent to the
Net Asset Value of a Unit of Limited Partnership Interest. The General
Partner has agreed to contribute such amounts to the Partnership as are
necessary from time to time to make the General Partner's capital
contribution equal to the greater of (i) $200,000 and (ii) the sum of (a)
the lesser of $100,000 or 3% of the first $10,000,000 in aggregate capital
contributions to the Partnership by all Partners and (b) 1% of the
aggregate capital contributions to the Partnership by all Partners in
excess of $10,000,000.
37
<PAGE>
SELECTED FINANCIAL DATA
The following is a summary of selected financial data of the Partnership for
the periods indicated. Certain reclassifications have been made to prior year
balances to conform with current year presentations. For the complete audited
financial statements for the periods indicated, see "REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS AND STATEMENTS OF FINANCIAL CONDITION OF TUDOR FUND FOR
EMPLOYEES L.P." For performance information with respect to the Partnership,
see "PERFORMANCE RECORD OF THE PARTNERSHIP." (For purposes of this discussion,
the numbers of Units and dollar amounts have been rounded to the nearest whole
Unit or whole dollar, respectively.)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ 1,365,102 $2,657,575 $1,028,281 $ 532,032 $2,842,603 $1,427,350
Expenses................ $ 244,848 $ 608,851 $ 502,809 $ 367,647 $ 682,491 $ 528,834
----------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)....... $ 1,120,254 $2,048,724 $ 525,472 $ 164,385 $2,160,112 $ 898,516
----------- ---------- ---------- ---------- ---------- ----------
Total Assets............ $11,450,098 $9,323,890 $7,383,887 $9,995,662 $9,540,911 $6,581,401
----------- ---------- ---------- ---------- ---------- ----------
Partners' Capital (see
"REDEMPTIONS")......... $ 9,775,318 $8,113,393 $6,711,510 $8,177,786 $7,088,708 $5,170,407
----------- ---------- ---------- ---------- ---------- ----------
Units Outstanding....... $ 3,033 2,733 3,053 3,975 3,510 3,431
----------- ---------- ---------- ---------- ---------- ----------
Net Asset Value Per
Unit................... $ 3,223 $ 2,864 $ 2,199 $ 2,057 $ 2,019 $ 1,507
Change In Net Asset
Value Per Unit......... $ 360 $ 665 $ 142 $ 38 $ 512 $ 253
Net Income (Loss) Per
Unit................... $ 358 $ 690 $ 149 $ 40 $ 529 $ 250
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY. The assets of the Partnership are deposited and maintained with
BPL, banks, and the Clearing Brokers in trading accounts, and are used by the
Partnership as margin and collateral to engage in futures, option, cash, spot,
and forward contract trading. The Partnership invests in United States
Government obligations approved by the various contract markets to fulfill
original margin and collateral requirements. As of March 31, 1996, United
States Government obligations maturing prior to October 1996 represented
approximately 42% of the total assets of the Partnership. The percentage that
Government obligations bears to total assets varies each day and from month to
month, as the market value of commodity interest contracts changes and as the
Partnership sells or redeems Units. Since the Partnership's sole purpose is to
trade in futures, option, cash, spot, forward, and similar contracts, it is
anticipated that the Partnership will continue to maintain substantial liquid
assets for margin and collateral purposes. Interest income for the quarter
ended March 31, 1996 was $118,595, compared to $89,368 during the first quarter
of 1995. Interest income for the years ended December 31, 1995, December 31,
1994, and December 31, 1993 was $409,148, $274,503, and $228,488, respectively.
This increase was due both to higher rates on U.S. Treasury investments
available in 1995 and a modest increase in the Partnership's assets. See
"PRINCIPAL RISK FACTORS," "INVESTMENT PROGRAM AND USE OF PROCEEDS," and
"BROKERAGE ARRANGEMENTS."
In addition, cash and cash equivalents are part of the Partnership's
inventory. Cash and cash equivalents deposited with banks and the Clearing
Brokers represented approximately 39% and 32% of the Partnership's assets as of
March 31, 1996 and December 31, 1995, respectively. The cash and United States
Government obligations held at banks and the Clearing Brokers at quarter-end
satisfy the Partnership's need for cash on a short-term and long-term basis.
Since futures contract trading generates a large percentage of the
Partnership's income, any restriction or limit on that trading may render the
Partnership's investment in futures contracts illiquid. Most United States
commodity exchanges limit fluctuations in certain commodity futures and options
contract prices
38
<PAGE>
during a single day by regulations referred to as "daily price fluctuation
limits" or "daily limits." Pursuant to such regulations, during a single
trading day, no trade may be executed at a price beyond the daily limit. If the
price for a contract has increased or decreased by an amount equal to the
"daily limit," positions in such contract can neither be taken nor liquidated
unless traders are willing to effect trades at or within the limit. Commodity
interest contract prices have occasionally moved the daily limit for several
consecutive days with little or no trading. Such market conditions could
prevent the Partnership from promptly liquidating its commodity interest
contract positions and impose restrictions on redemptions. See "PRINCIPAL RISK
FACTORS--COMMODITY INTEREST CONTRACT TRADING MAY BE ILLIQUID."
CAPITAL RESOURCES. The Partnership does not have, nor does it expect to have,
any fixed assets. Redemptions and additional sales of Units in the future will
affect the amount of funds available for investment in commodity interest
contracts in subsequent periods. See "PRINCIPAL RISK FACTORS," "INVESTMENT
PROGRAM AND USE OF PROCEEDS," "CAPITALIZATION," "PLAN OF DISTRIBUTION," and
"TRANSFERS AND REDEMPTIONS."
RESULTS OF OPERATIONS
As of December 31, 1995, 1994, and 1993, the Net Asset Value per Unit was
$2,863.75, $2,198.53, and $2,057.21, respectively. This represents an increase
of 30.26% or $665.22 per Unit for the year ended December 31, 1995, an increase
of 6.87% or $141.32 per Unit for the year ended December 31, 1994 and an
increase of 1.88% or $37.92 per Unit for the year ended December 31, 1993. As
of March 31, 1996 and 1995, the Net Asset Value per Unit was $3,223.33 and
$2,659.15, respectively. This represents an increase of 12.56% or $359.58 per
Unit for the quarter ended March 31, 1996 and an increase of 20.95% or $460.62
per Unit for the quarter ended March 31, 1995.
Net trading gains and losses from strategies that use a variety of derivative
financial instruments are recorded in the statements of operations. The
following table summarizes the components (in thousands) of net trading gains
and losses, net of commissions, for the quarters ended March 31, 1996 and 1995,
and for the years ended December 31, 1995, 1994, and 1993, respectively.
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE YEAR
ENDED MARCH 31, ENDED DECEMBER 31,
---------------- ----------------------
1996 1995 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest Rate Futures and Option
Contracts
Domestic...................... $ 167 $ (219) $ (48) $ 267 $ 93
Foreign....................... 93 (26) 18 1,160 101
Foreign Exchange Contracts...... 539 1,019 1,077 23 378
Equity Index Futures Contracts
Domestic...................... (117) (65) (266) (158) (712)
Foreign....................... 602 871 865 (301) 343
Over the Counter Contracts...... (72) (72) 414 (280) (163)
Non-Derivative Financial Instru-
ments.......................... (6) 64 29 (145) 108
Total.........................
------- ------- ------ ------ ------
$ 1,206 $ 1,572 $2,089 $ 566 $ 148
======= ======= ====== ====== ======
</TABLE>
Since the Partnership is a speculative trader in the commodities markets,
current year results are not comparable to the previous years' results. The
Partnership's net trading gain or loss represents a return on average Net
Assets of 12.3%, 21.7%, 27.4%, 7.6%, and 1.9%, for the quarters ended March 31,
1996 and 1995, and for the years ended 1995, 1994, and 1993, respectively.
Brokerage commissions and fees were 0.4%, 0.8%, 2.1%, 3.5%, and 2.9% of average
Net Assets for the quarters ended March 31, 1996 and 1995 and for the years
ended 1995, 1994, and 1993, respectively. In general, commission rates have
remained stable during the past three years.
Incentive fees are paid quarterly based on Trading Profits. For the year
ended December 31, 1995, incentive fees were 9.3% of Trading Profits. For the
quarters ended March 31, 1996 and 1995, incentive fees were 10.9% and 9.7% of
Trading Profits, respectively. For the year ended December 31, 1994, incentive
fees were greater than 12% of Trading Profits due to losses incurred in the
fourth quarter.
39
<PAGE>
Professional fees and other expenses increased during each of the past three
years due to increases in legal, audit, and bank charges.
Inflation is not expected to be a major factor in the Partnership's
operations, except that traditionally the commodities markets have tended to be
more active and thus potentially more profitable during times of high
inflation. Since the commencement of the Partnership's trading operations in
July 1990, inflation has not been a major factor in the Partnership's
operations.
(For purpose of this discussion, except where indicated otherwise, the
numbers of Units and dollar amounts have been rounded to the nearest whole Unit
or whole dollar, respectively.)
See also "CAPITALIZATION" and "REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AND
STATEMENTS OF FINANCIAL CONDITION OF TUDOR FUND FOR EMPLOYEES L.P."
THE GENERAL PARTNER
Second Management LLC, a Delaware limited liability company formed in April
1996 ("SML" or the "General Partner"), is the general partner of the
Partnership. Prior to April 1996, Second Management Company, Inc., a Delaware
corporation ("SMCI"), was the general partner of the Partnership. SML is the
successor-in-interest to SMCI by virtue of a merger with SMCI. The General
Partner's office is located at One Liberty Plaza, 51st Floor, New York, New
York 10006; Telephone No. 212-602-6700; and Facsimile No. 212-571-7042. Prior
to the merger, SMCI had been continuously registered with the CFTC as a CPO and
CTA since November 25, 1987 and a member of the NFA in such capacity. Upon the
merger of SMCI into SML on April 4, 1996, SML succeeded to SMCI's registrations
with the CFTC and membership in the NFA.
The principals of the General Partner (who collectively comprise the
Management Committee of the General Partner) are Paul Tudor Jones, II, Mark F.
Dalton, Patrick A. Keenan, Andrew S. Paul, and Mark A. Heffernan. Messrs.
Jones, Dalton, Keenan, and Paul are officers and employees of the General
Partner and its domestic corporate affiliates. Mr. Heffernan is an executive
manager and officer of certain of the General Partner's affiliated entities
which maintain principal offices in Surrey, England. Mr. Jones is the Chairman
and Chief Executive Officer and indirect controlling equity owner, Mr. Dalton
is the President and Chief Operating Officer, Mr. Keenan is a Vice President
and Chief Financial Officer, and Mr. Paul is Vice President, General Counsel,
and Secretary. The business backgrounds of Messrs. Jones, Dalton, Keenan, Paul,
and Heffernan are described under "THE TRADING ADVISOR--TRADING ADVISOR AND
PRINCIPALS." Mr. Jones is the only principal of the General Partner who makes
trading decisions for the Partnership. Mr. Jones makes such decisions in his
capacity as Chief Executive Officer of the Trading Advisor. Other employee
traders of the Trading Advisor, none of whom is a principal of the General
Partner, may make trading decisions with respect to a portion of the
Partnership's account with the Trading Advisor.
While the General Partner does not presently trade commodity interest
contracts for its own account, it may do so in the future. Mr. Jones has in the
past traded, currently trades, and intends to continue to trade, commodity
interest contracts extensively for his and his affiliated entities' proprietary
accounts. It is possible that Mr. Jones may from time to time take positions
either similar or opposite to positions taken by the Partnership, and that the
Partnership and Mr. Jones may from time to time be competing for similar
positions in the commodities markets. Neither the records of such proprietary
trading nor any written policies relating to such trading will be available to
Limited Partners for inspection. See "CONFLICTS OF INTEREST" and "INVESTMENT
PROGRAM AND USE OF PROCEEDS."
There has been no material administrative, civil, or criminal action against
the General Partner or its principals within the last five years, whether
pending or concluded. See "THE TRADING ADVISOR--MATERIAL ACTIONS."
40
<PAGE>
The General Partner does not currently own any Units of Limited Partnership
Interest. However, the General Partner has made capital contributions to the
Partnership and has received Units of General Partnership Interest. The General
Partner may subscribe for additional Units of General Partnership Interest as
well as Units of Limited Partnership Interest during the Continuing Offering
(for investment purposes only and not with the view to resell). As of April 1,
1996, the General Partner owned 642.9433 Units of General Partnership Interest.
In addition, principals, employees, and affiliates of the General Partner have
previously purchased Units, and it is expected that they will purchase Units
during the Continuing Offering. As of April 1, 1996, the principals of the
General Partner owned 245.0281 Units of Limited Partnership Interest. There is
no limitation on the number of Units that may be subscribed for by the General
Partner, its affiliates, and their principals and employees. See "PRINCIPAL
RISK FACTORS--INVESTMENT BY THE GENERAL PARTNER, THE TRADING ADVISOR, THEIR
AFFILIATES, AND PRINCIPALS AND EMPLOYEES THEREOF" and "CAPITALIZATION."
PERFORMANCE RECORD OF THE PARTNERSHIP
The General Partner and, prior to its formation, SMCI have operated the
Partnership and one other commodity pool, Tudor Select Futures Fund, L.P.
("Tudor Select"), a multi-advisor Delaware limited partnership commodity pool,
which ceased operation in November 1991. The actual performance record of the
Partnership from July 1990 (commencement of trading) through March 1996 is set
forth in Table A below. Since the assets of Tudor Select were managed by
several different trading advisors, only one of whom (TIC) manages the assets
of the Partnership, and since the fees and commissions charged to Tudor Select
were higher than the fees and commissions charged to the Partnership, the
performance of Tudor Select is not comparable to the performance of the
Partnership.
The information in Table A has not been audited. However, the General Partner
believes that such information is accurate and fairly presented.
THE PAST PERFORMANCE OF THE PARTNERSHIP'S TRADING ADVISOR AND A DESCRIPTION
OF SUCH PERFORMANCE IS SET FORTH UNDER "PERFORMANCE RECORDS OF THE TRADING
ADVISOR."
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE PERFORMANCE INFORMATION SET
FORTH IN TABLE A IS NOT INDICATIVE OF, AND HAS NO BEARING ON, ANY TRADING
RESULTS WHICH MAY BE ATTAINED BY THE PARTNERSHIP OR THE GENERAL PARTNER IN THE
FUTURE, SINCE PAST RESULTS ARE NOT A GUARANTEE OF FUTURE RESULTS. THERE CAN BE
NO ASSURANCE THAT THE PARTNERSHIP WILL MAKE ANY PROFITS AT ALL, OR WILL BE ABLE
TO AVOID INCURRING SUBSTANTIAL LOSSES. INVESTORS SHOULD ALSO NOTE THAT INTEREST
INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY POOL'S TOTAL INCOME
AND, IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED
OR UNREALIZED LOSSES FROM COMMODITY INTEREST CONTRACT TRADING.
41
<PAGE>
TABLE A
PERFORMANCE OF TUDOR FUND FOR EMPLOYEES L.P.
MONTHLY RATES OF RETURN
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990
----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
January........................ 9.92% 4.12% 4.61% -2.80% 9.61% 3.96%
February....................... 0.69% 3.59% -2.24% -0.83% 6.07% -8.01%
March.......................... 1.70% 12.14% -0.23% -1.45% 8.13% 0.47%
April.......................... 0.53% -1.28% -1.39% 3.02% 5.96%
May............................ -3.96% -1.64% -2.99% -4.03% -0.75%
June........................... -3.19% 5.62% 0.98% -6.88% 7.95%
July........................... 0.18% -4.37% 1.59% -4.30% -4.41% -9.62%
August......................... 5.50% 1.04% 0.05% 1.11% 0.10% 13.44%
September...................... 1.49% 8.29% 1.23% 13.23% 1.55% 2.46%
October........................ 4.73% -3.58% 2.57% 10.13% 5.78% 17.19%
November....................... 0.50% 2.04% 1.02% -3.10% 9.07% -1.87%
December....................... 2.08% -0.79% 4.12% -0.98% -1.76% 3.83%
----- ------ ------ ------ ------ ------ ------
Compound Annual
(Period) Rate of Return..... 12.56% 30.26% 6.87% 1.88% 34.01% 20.13% 25.44%
===== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<S> <C>
Name of Pool: Tudor Fund For Employees LP
Type of Pool: Publicly-Offered Pool
Inception of Trading: July 2, 1990
Aggregate Subscriptions Since Inception: $11,466,077
Current Net Asset Value: $8,113,394
Largest Monthly Percentage Draw-down(1): July 1990 (-9.62%)
Worst Peak to Valley Percentage Draw-
down(2): May 1, 1992 - July 31, 1992 (-14.50%)
</TABLE>
The performance data presented in Table A has been calculated on an accrual
basis of accounting in accordance with U.S. generally accepted accounting
principles.
(1) Largest Monthly Percentage Draw-down represents the greatest cumulative
percentage decline in month-end Net Assets due to losses sustained by the
Partnership during any one month period.
(2) Worst Peak to Valley Percentage Draw-down represents the greatest
cumulative percentage decline in month-end Net Assets due to losses
sustained by the Partnership during any period in which the initial month-
end Net Assets were not equaled or exceeded by subsequent month-end Net
Assets.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
42
<PAGE>
REPORTING TO POOL PARTICIPANTS
The General Partner is required to provide all Limited Partners with monthly
statements of account and with a certified annual report of financial
condition. The General Partner reports monthly to the Limited Partners on such
performance, financial, and other information with respect to the Partnership
as the CFTC and the NFA from time to time require in such periodic reports to
Limited Partners. In addition, if any of the following events occurs, notice of
such event will be mailed to each Limited Partner within seven business days of
the occurrence of the event: (1) a decrease in the Net Asset Value of a Unit to
or below 50% of the Net Asset Value of a Unit for the fiscal year-end most
recently reported to the Limited Partners; (2) any change in general
partner(s); (3) any change in the Partnership's fiscal year; or (4) any
amendment to the Limited Partnership Agreement.
The General Partner is required to distribute to the Limited Partners, not
more than 90 days after the close of each fiscal year, a certified annual
report of financial condition for the Partnership for the fiscal year then
ended containing audited financial statements prepared in accordance with U.S.
generally accepted accounting principles and certified by an independent public
accountant (including a statement of income and a statement of financial
condition). The General Partner endeavors to furnish to the Limited Partners
tax information relating to the Partnership necessary for the preparation of
the Limited Partners' income tax returns within 90 days after the close of each
fiscal year.
THE TRADING ADVISOR
TRADING ADVISOR AND PRINCIPALS. Tudor Investment Corporation ("TIC") is a
Delaware corporation having its office located at One Liberty Plaza, 51st
Floor, New York, New York 10006; Telephone No. 212-602-6700; and Facsimile No.
212-571-7042. TIC is the Trading Advisor for the Partnership, and makes all
trading decisions for the Partnership. TIC was incorporated in November 1980
for the principal purpose of providing commodity floor brokerage services to
customers of Paul Tudor Jones, II. In July 1984, TIC also began providing
trading advice to, and managing accounts for, investors in the commodity
interest markets. Since April 17, 1984, TIC has been continuously registered
with the CFTC as a CPO and CTA, and since May 24, 1984 has been a member of the
NFA in such capacities. In October 1993, TIC began providing trading advice to
certain investment funds, and managing accounts for certain investors, engaged
primarily in trading the equity securities markets.
TIC previously operated floor brokerage operations on certain New York
commodity exchanges in order to improve order executions for TIC's and Mr.
Jones's customer and proprietary accounts and to gain a valuable source of
market trend information. Bellwether Partners Inc. ("BPI") was formed in July
1986 for the principal purpose of providing commodity floor brokerage services
to Mr. Jones, his affiliates, and their customers. In June 1988, BPI expanded
its operations to include currency trading operations for Mr. Jones, his
affiliates, and their customers, and shortly thereafter transferred its floor
brokerage operations to Bellwether Futures Corporation, a Delaware corporation
("BFC") and an affiliate of TIC. BFC terminated substantially all of its floor
brokerage operations as of January 1992. Both BPI and BFC were registered as
FCMs while engaged in floor brokerage activities.
The currency trading operations of BPI are currently conducted by BPL, and
BPL serves as the Partnership's principal counterparty in the purchase and sale
of currency spot and forward contracts. See "DESCRIPTION OF CHARGES TO THE
PARTNERSHIP," "CONFLICTS OF INTEREST," and "BROKERAGE ARRANGEMENTS."
The Trading Advisor does not currently own any Units, although it may
subscribe for Units during the Continuing Offering (for investment purposes
only and not with a view to resell). Principals and employees of the Trading
Advisor have previously purchased Units, and it is expected that they will
purchase Units during the Continuing Offering. There is no limitation on the
number of Units that may be subscribed for by
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the Trading Advisor, its affiliates, and their principals and employees. See
"PRINCIPAL RISK FACTORS--INVESTMENT BY THE GENERAL PARTNER, THE TRADING
ADVISOR, THEIR AFFILIATES, AND PRINCIPALS AND EMPLOYEES THEREOF."
The principals of the Trading Advisor (who collectively comprise the Board of
Directors of the Trading Advisor) are Paul Tudor Jones, II, Mark F. Dalton,
Patrick A. Keenan, Mark A. Heffernan, Andrew S. Paul, and Richard L. Fisher.
Messrs. Jones, Dalton, Keenan, and Paul are also officers and employees of the
Trading Advisor and directors, officers, and/or employees of the Trading
Advisor's domestic corporate affiliates. Mr. Heffernan is an executive manager
and officer of certain of the Trading Advisor's affiliated entities which
maintain principal offices in Surrey, England. Mr. Fisher, Vice President--
Investments of Dunavant Enterprises, Inc. (Memphis, Tennessee), is an outside
Director and is not otherwise employed by, or affiliated with, the Trading
Advisor or its affiliates. Mr. Jones is the only principal of the Trading
Advisor who makes trading decisions for the Partnership. Other employee traders
of the Trading Advisor, none of whom is a principal of the Trading Advisor, may
make trading decisions with respect to a portion of the Partnership's account
with the Trading Advisor.
BUSINESS BACKGROUNDS
PAUL TUDOR JONES, II. Since its incorporation, the Trading Advisor has been
continuously controlled by Mr. Jones. A staff of stockholders, directors,
officers, employees, and employee traders assists Mr. Jones in the Trading
Advisor's and its affiliates' business activities.
Mr. Jones, age 41, is Chairman and Chief Executive Officer and controlling
stockholder of the Trading Advisor, which serves as trading advisor to, and/or
pool operator of, several commodity pools and investment funds. Mr. Jones has
traded commodity interests for his proprietary accounts since September 1977
and for customer accounts since January 1981. Mr. Jones is a member of the
Commodity Exchange, Inc., the Coffee, Sugar & Cocoa Exchange, Inc., the New
York Cotton Exchange, the Chicago Board of Trade, and the Chicago Mercantile
Exchange. In addition, Mr. Jones is a member of the Board of Managers of the
New York Cotton Exchange and served as Chairman of that exchange from August
1992 through June 1995. Mr. Jones is First Vice Chairman of the Financial
Instruments Exchange, a division of the Cotton Exchange. Mr. Jones is also
Chairman of the Board of Directors of The Robin Hood Foundation, a charitable
foundation.
TIC is the sole general partner and trading advisor of Tudor Futures Fund, a
New York limited partnership which engages in the speculative trading of
commodities interests, and of The Raptor Global Fund L.P. ("Raptor L.P."), a
Delaware limited partnership which primarily engages in the speculative trading
of equity securities interests, and is the sole trading advisor of The Raptor
Global Fund Ltd. ("Raptor Ltd."), a Cayman Islands company which primarily
engages in the speculative trading of equity securities interests. An employee
of TIC other than Mr. Jones (James J. Pallotta) primarily directs the trading
of the accounts of Raptor L.P. and Raptor Ltd. Tudor BVI Futures, Ltd., a
British Virgin Islands company, is an investment fund that trades commodities
and securities interests under the direction of TIC.
MARK F. DALTON. Mr. Dalton, age 45, is President and Chief Operating Officer
of the Trading Advisor. Prior to joining the Trading Advisor as President in
September 1988, Mr. Dalton was employed by Kidder, Peabody & Co. Incorporated
where he served in various senior positions, including Chief Financial Officer.
Mr. Dalton is an Associate Director of the Futures Industry Association. Mr.
Dalton is also a director of Cathay Investment Fund Limited and various private
companies in the United States, Europe and Asia. Mr. Dalton does not
participate in the trading of commodity interest contracts for customer
accounts of TIC or its affiliates.
PATRICK A. KEENAN. Mr. Keenan, age 42, is a Vice President of TIC, and has
been its Chief Financial Officer since February 1988. Mr. Keenan graduated from
Fordham University with a B.S. in Accounting, and received an MBA in Taxation
from Pace University. Mr. Keenan does not participate in the trading of
customer accounts for TIC or its affiliates.
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ANDREW S. PAUL. Mr. Paul, age 43, has been a Vice President, the General
Counsel and the Secretary of TIC since July 1989. Mr. Paul graduated from
Windham College and received a J.D. from the College of William & Mary School
of Law. Mr. Paul does not participate in the trading of customer accounts for
TIC or its affiliates.
MARK A. HEFFERNAN. Mr. Heffernan, age 32, is a Vice President of the
affiliated entities of the General Partner which maintain offices in Surrey,
England. From June 1985 until January 1992, Mr. Heffernan was employed by
Goldman Sachs International in London as a Vice President-Foreign Exchange. In
January 1992, Mr. Heffernan resigned his post to form his own company, Alwyne
Investment Corporation Ltd. In July 1992, Mr. Heffernan joined the New York
office of the General Partner as a proprietary funds manager where he worked
until May 1993, at which time he joined the London office of an affiliate of
the General Partner in the same capacity. Mr. Heffernan has primary
responsibility for the trading of The Upper Mill Capital Appreciation Fund
Ltd., a Cayman Islands company (the "Upper Mill Fund") which is an investment
fund under the management of Tudor Capital (U.K.), L.P., an affiliate of the
General Partner. The Upper Mill Fund commenced operations in May 1996.
RICHARD L. FISHER. Mr. Fisher, age 41, is a Director of TIC. Mr. Fisher
received a B.S. with Distinction and a Master of Science in Accounting from the
University of Virginia. Since September 1983, Mr. Fisher has been a Managing
Director and Senior Vice President of Investments/Acquisitions of Dunavant
Enterprises, Inc. Mr. Fisher has been a Director of TIC since June 1991. Mr.
Fisher does not participate in the trading or day-to-day management of TIC or
its affiliates.
The Trading Advisor does not currently own any Units although it may
subscribe for Units during the Continuing Offering (for investment purposes
only and not with a view to resell). Principals, employees, and affiliates of
the Trading Advisor have previously purchased Units, and it is expected that
they will purchase Units in the Continuing Offering. See "THE GENERAL PARTNER"
and "CONFLICTS OF INTEREST."
PROPRIETARY TRADING. The General Partner, TIC, Mr. Jones, and certain of
their affiliates, principals, and employees have in the past traded, currently
trade, and may in the future trade, commodity interest contracts for
proprietary accounts. In his proprietary trading, except as described below,
Mr. Jones generally has followed the same basic trading methods and strategies
developed, modified, and refined by him since 1976. Although Mr. Jones
generally trades proprietary accounts in parallel with customer accounts, there
are various times and circumstances in which the trading of customer and
proprietary accounts may not be parallel. For example, in trading for
proprietary accounts, Mr. Jones may trade a larger number of contracts, utilize
a higher degree of leverage, pay lower commission rates, pay lower or no
advisory fees, concentrate assets in one or a few commodity interests, and
conduct a significant amount of intraday trading. Consequently, Mr. Jones
generally assumes more risks when trading proprietary accounts than he normally
assumes when trading customer accounts.
Limited Partners will not be permitted to inspect the trading records of Mr.
Jones, the General Partner, TIC, or their affiliates, principals, or employees
or any written policies related to such trading. See "CONFLICTS OF INTEREST."
MATERIAL ACTIONS. There has been no material administrative, civil, or
criminal action against TIC, its affiliated entities (including the General
Partner or BPL), or their principals within the last five years, with the
exception of the following:
TIC is currently responding to an investigation by the SEC concerning certain
alleged violations of the "uptick rule" which may have occurred on one day in
March 1994. TIC has been in discussions with the SEC concerning the disposition
of this matter, and while TIC cannot predict the outcome of these discussions,
it does not believe that the disposition will have a material adverse effect on
its business, financial condition, or results of operations, but it may involve
payment of a monetary fine by TIC.
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THE MANAGEMENT AGREEMENT
The Trading Advisor has entered into a management agreement (the "Management
Agreement") with the Partnership, which provides that the Trading Advisor has
sole responsibility (except in certain limited situations and as otherwise
provided below) for directing the investment and reinvestment of the
Partnership's assets in commodity interest contracts.
Term. The Management Agreement continued in effect for a period of one year
following the end of the month in which the Partnership initially began to
receive trading advice from the Trading Advisor, and thereafter has been, and
will be, renewed automatically for additional one-year terms unless either
party, upon written notice given not less than 30 days prior to any extended
termination date, notifies the other party of its intention not to renew.
Either the Partnership or the Trading Advisor may terminate the Management
Agreement upon 24 hours prior written notice to the other party. The Management
Agreement will terminate immediately if the Partnership terminates or is
dissolved in accordance with the Limited Partnership Agreement or otherwise. In
addition, the Management Agreement will terminate immediately upon the
occurrence of any of the following events: (i) if the Trading Advisor merges or
consolidates with, or sells or otherwise transfers its advisory business, any
portion of its trading systems or methods, or its goodwill to, any individual
or entity; (ii) if the Trading Advisor becomes bankrupt or insolvent; (iii) if
the Trading Advisor is unable to use all or any portion of its trading systems
or methods as in effect on the date of the Management Agreement or as refined
or modified in the future in accordance with the Management Agreement for the
benefit of the Partnership for any reason whatsoever; (iv) if the registration
of the Trading Advisor with the CFTC as a CTA or its membership in the NFA in
such capacity expires or is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) if the General Partner, upon receipt
of notice from the Trading Advisor, sends written notice to the Trading Advisor
stating that any change proposed by the Trading Advisor in its trading systems
or methods or the manner in which trading decisions are to be made or
implemented is unacceptable to the General Partner; (vi) if the Trading Advisor
materially violates any of the Trading Policies or any administrative policy of
the Partnership; (vii) if the Partnership or Trading Advisor fails to perform
any of its respective material obligations under the Management Agreement;
(viii) if Mr. Jones ceases to be the majority stockholder of the Trading
Advisor or dies or becomes disabled or incapacitated; or (ix) if the General
Partner's registration with the CFTC as a CPO or its membership in the NFA in
such capacity expires or is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect.
No assurance is given that the Partnership will be able to retain the
services of the Trading Advisor once the term of the Management Agreement is
completed or, if such services are available, that they will be available on
the same or similar terms as those of the Management Agreement. Further, no
assurance is given that the Partnership will be able to retain the services of
a new trading advisor once the Management Agreement is terminated. The
compensation payable by the Partnership to the Trading Advisor for its services
under the Management Agreement is described under "DESCRIPTION OF CHARGES TO
THE PARTNERSHIP--MANAGEMENT FEE" and "--INCENTIVE FEE."
Liability And Indemnification. The Management Agreement provides that the
Trading Advisor and its stockholders, directors, officers, employees,
principals, affiliates, agents, and their respective successors and assigns
will not be liable to the Partnership, the General Partner, the General
Partner's stockholders, directors, officers, employees, principals, affiliates,
and agents, the Limited Partners, and their respective successors and assigns
except for an act, omission, conduct, or activity in respect of the Partnership
which is found (i) to have constituted willful misconduct, gross negligence, a
breach of a warranty, covenant, or agreement, or a material misrepresentation
in the Management Agreement by the Trading Advisor, and (ii) to have not been
done in good faith and in the reasonable belief that such act, omission,
conduct, or activity was in, or not opposed to, the best interests of the
Partnership.
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The Management Agreement provides that the Partnership will indemnify, hold
harmless, and defend the Trading Advisor and its stockholders, directors,
officers, employees, and principals, and their respective successors and
assigns from and against any and all loss, liability, claim, demand, damage,
cost, and expense, joint and several, to which any of them may become subject
arising out of or based upon an act, omission, conduct, or activity by any of
them in respect of the Partnership unless such act, omission, conduct, or
activity is found (i) to have constituted willful misconduct, gross negligence,
a breach of a warranty, covenant, or agreement, or a misrepresentation in the
Management Agreement by the Trading Advisor, and (ii) to have not been done in
good faith and in the reasonable belief that such act, omission, conduct, or
activity was in, or not opposed to, the best interests of the Partnership.
The Management Agreement also provides that the Trading Advisor will
indemnify, hold harmless, and defend the Partnership from and against any and
all loss, liability, claim, demand, damage, cost, and expense, joint and
several, to which the Partnership may become subject arising out of or based
upon an act, omission, conduct, or activity by the Trading Advisor or any of
its stockholders, directors, officers, employees, principals, affiliates,
agents, or their respective successors or assigns which is found (i) to have
constituted willful misconduct, gross negligence, a breach of a warranty,
covenant, or agreement, or a misrepresentation in the Management Agreement by
the Trading Advisor, and (ii) to have not been done in good faith and in the
reasonable belief that such act, omission, conduct, or activity was in, or not
opposed to, the best interests of the Partnership.
In addition, the Trading Advisor and the Partnership have agreed to indemnify
each other against certain other liabilities, including other liabilities under
federal and state securities and commodities laws.
BROKERAGE ARRANGEMENTS
The Clearing Brokers. BZW Futures ("BZW Futures"), Cargill Investor Services,
Inc. (in such capacity, "CIS"), Daiwa Securities America Inc. ("Daiwa"), E.D. &
F. Man International Inc. ("EDF"), Goldman, Sachs & Co. ("Goldman"), J.P.
Morgan Futures Inc. ("Morgan Futures"), Merrill Lynch Futures Inc. ("Merrill
Lynch"), Morgan Stanley & Co., Incorporated ("Morgan Stanley"), Morgan Stanley
& Co. International Limited ("MSIL"), Prudential Securities Incorporated
("Prudential"), and Salomon Brothers Inc ("Salomon Brothers") (individually a
"Clearing Broker", and collectively the "Clearing Brokers") currently carry the
Partnership's trading accounts and execute and clear the Partnership's
transactions. The Clearing Brokers are responsible for holding and maintaining
the Partnership's funds, securities, commodity interest contracts, and other
property, the execution and/or clearance of trades for the Partnership's
account, the record keeping and preparation and transmittal to the Partnership
of daily confirmations of transactions and monthly statements of account, the
calculation of the equity balances and margin requirements for the
Partnership's account, and similar administrative functions.
Typically, the Partnership's order placement, execution, and clearance is
effected in the following manner. The Trading Advisor normally places commodity
interest contract orders for the Partnership's account directly with exchange
floor brokers selected by it. If a floor broker other than one employed by the
Clearing Brokers is used to execute the Partnership's orders on the floor of
the relevant exchange, such floor broker gives up the trade to one or more of
the Clearing Brokers for clearance by it. See "THE TRADING ADVISOR--DESCRIPTION
OF ORDERS AND ORDER PLACEMENT."
The services provided to the Partnership by the Clearing Brokers are limited
to those described above and those described below under "BROKERAGE
ARRANGEMENTS--DESCRIPTION OF CUSTOMER AGREEMENTS." The Clearing Brokers do not
act as underwriters of the offering of Units and have not determined the
adequacy or accuracy of this Prospectus, nor do the Clearing Brokers act in any
supervisory role with respect to the Partnership, the General Partner, or the
Trading Advisor. Similarly, the Clearing Brokers do not participate in any way
in the management of the affairs of the Partnership. The furnishing of
brokerage services to the Partnership does not constitute an endorsement or
recommendation
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by the Clearing Brokers of an investment in the Partnership. Therefore, a
subscriber for Units should not rely on the reputation or expertise of the
Clearing Brokers or on the brokerage arrangements in making a decision to
invest in the Partnership.
Description Of Customer Agreements. The Partnership has entered into non-
exclusive customer agreements with the Clearing Brokers (each a "Customer
Agreement"), pursuant to which the Clearing Brokers execute and/or clear trades
in commodity interest contracts on behalf of the Partnership. Each Customer
Agreement may be terminated at any time by the Partnership or the relevant
Clearing Broker by giving notice of termination to the other. If so terminated,
the General Partner may have to negotiate a new customer agreement with a
broker. The General Partner is also authorized under the Limited Partnership
Agreement to retain other brokers for the Partnership's trading at any time.
The terms and conditions of such other customer agreements and related
transaction charges cannot now be determined and may not be as favorable to the
Partnership as the current brokerage arrangements. However, the General Partner
will endeavor to negotiate transaction charges and other terms that are
competitive and similar to those applicable to similar investment pools in the
industry at the relevant time.
Each Clearing Broker is obligated to follow the instructions of the Trading
Advisor with respect to the investment of the Partnership's assets on deposit
with or under the control of such Clearing Broker. In general, a sufficient
portion of the Partnership's assets are deposited and maintained with the
Clearing Brokers to effect the Trading Advisor's trading strategies. The
General Partner endeavors to maximize the amount of interest it earns on the
balance of the Partnership's funds not allocated to trading consistent with the
preservation of capital. See "INVESTMENT PROGRAM AND USE OF PROCEEDS."
The Partnership has opened separate trading accounts with each of the
Clearing Brokers. Under each of the Customer Agreements, all of the
Partnership's funds and all commodity interest contract positions and credits
carried for the Partnership are held as security for the Partnership's
obligations to the relevant Clearing Broker. The margins required to initiate
or maintain open positions are established from time to time by each Clearing
Broker and applicable regulatory authorities. A Clearing Broker may close out
positions, purchase commodity interest contracts, or cancel orders for the
Partnership's account at any time it deems necessary for its protection,
generally without the consent of or notice to the Trading Advisor or the
General Partner.
Generally, the Customer Agreements provide that each Clearing Broker, in
performing the services required by its Customer Agreement, will not be liable
to the Partnership, the General Partner, the Limited Partners, or their
respective successors or assigns except for any loss, damage, liability, and
expense to which the Partnership may become subject arising out of, or based
upon, an act, omission, conduct, or activity by the Clearing Broker in respect
of the Partnership which constitutes misconduct or negligence.
Generally, the Customer Agreements provide that the Partnership will
indemnify, defend, and hold harmless each Clearing Broker from and against any
loss, claim, damage, liability, cost, and expense (including attorneys' fees)
to which the Clearing Broker may become subject in respect of the Partnership,
provided that such loss, claim, damage, liability, cost, or expense did not
arise out of, or was not based upon, an act, omission, conduct, or activity of
such Clearing Broker which constituted misconduct or negligence.
Description Of Clearing Brokers
BZW Futures. BZW Futures, a division of Barclays Bank PLC, has its main
business office located at Ebbgate House, 2 Swan Lane, London EC4R 3TS,
England; Telephone No. 0171-623-2323. BZW Futures provides execution and
clearing services for global futures and options transactions on 33 exchanges.
BZW Futures has offices in ten countries.
During the five years preceding the date of this Prospectus, neither BZW nor
any of its principals has been subject to any material administrative, civil,
or criminal action, whether pending or concluded.
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Neither BZW Futures nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPL, or any of their principals, affiliates,
officers, or directors. BZW Futures and its principals do not own, and will not
be permitted to purchase, any Units.
Cargill Investor Services, Inc. CIS is a Delaware corporation, formed in
October 1972, having its main business office located at Sears Tower, 233 South
Wacker Drive, Suite 2300, Chicago, Illinois 60606; Telephone No. 312-460-4000.
CIS is registered with the CFTC as an FCM and is a member of the NFA in such
capacity, and is registered with the SEC as a broker-dealer and is an NASD
member firm. In addition to acting as a Clearing Broker for the Partnership,
CIS acts as Selling Agent for the Partnership, and acts as clearing broker and
selling agent for certain other investment funds sponsored and/or traded by the
Trading Advisor and its affiliates.
CIS is a wholly-owned, but separately managed, subsidiary of Cargill,
Incorporated, a privately-owned Delaware corporation. Cargill, Incorporated is
an international trader, processor, and transporter of a wide variety of goods
and commodities. CIS provides commodity brokerage services to numerous
individual, corporate, and institutional clients through its ten offices on a
worldwide basis. CIS is a member of the Chicago Board of Trade, the Chicago
Mercantile Exchange, the Commodity Exchange, Inc., and all other major United
States commodity exchanges.
In the ordinary course of its business, Cargill is engaged in civil
litigation and subject to administrative proceedings which in the aggregate are
not expected to have a material effect on its condition, financial or
otherwise. During the five years preceding the date of this Prospectus, neither
Cargill nor any of its principals has been subject to any material
administrative, civil, or criminal action, whether pending or concluded.
Neither CIS nor any of its principals is affiliated with the General Partner,
the Trading Advisor, BPL, or any of their principals, affiliates, officers, or
directors. CIS and its principals do not own, and will not be permitted to
purchase, any Units.
Daiwa Securities America, Inc. Daiwa is a wholly-owned, indirect subsidiary
of Daiwa Securities Co. Ltd. of Tokyo, Japan, and has its main business office
at One World Financial Center, New York, New York 10281; Telephone No. 212-945-
0100. Daiwa is registered with the SEC as a broker-dealer and is a member of
the NASD in such capacity, and is registered with the CFTC as an FCM and CPO
and is a member of the NFA in such capacities. Daiwa is a member of the major
United States securities and commodities exchanges and a primary dealer in
United States Government securities. As an integral constituent of the Daiwa
group of companies, the firm offers its clients a worldwide, integrated network
of financial services.
During the five years preceding the date of this Prospectus, neither Daiwa
nor any of its principals has been subject to any material administrative,
civil, or criminal action, whether pending or concluded, except as follows:
Daiwa is among the defendants in class action litigation pending in federal
court in Brooklyn, New York relating to securities of MTC Electronic
Technologies Ltd. ("MTC"). Daiwa was the managing underwriter of a public
offering of MTC securities in July 1993. The complaints principally allege
violations of Section 10(b) of the Securities Exchange Act of 1934 as amended
(the "Securities Exchange Act") and Rule 10b-5 thereunder, and seek damages in
unspecified amounts.
On February 25, 1993, in two unrelated administrative proceedings brought by
the SEC, Daiwa, for the purpose of settlement and without admitting or denying
liability or any finding, consented to entry of orders finding that it violated
(i) Section 17(a) of the Securities Exchange Act and Rule 17a-3 thereunder in
connection with the recording of a payment received from a customer to
compensate Daiwa for a loss resulting from a customer error, and with practices
arising from a failure to comply with certain registration requirements of
self-regulatory organizations, and (ii) Section 17(a) of the Securities
Exchange Act and Rules 17a-3 and 17a-4 thereunder and Section 10(b) of the
Securities Exchange Act and Rule 10b-5 thereunder in
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connection with Daiwa's accommodation of another broker-dealer's improper
request to submit a bid in an auction of government bonds on the other firm's
behalf. In each proceeding, Daiwa was censured and ordered to cease and desist
from future violations of the relevant sections of the Securities Exchange Act
and the rules promulgated thereunder. Daiwa also agreed to pay a civil penalty
of $200,000 to comply with certain undertakings, including the retention of
outside consultants to review certain of Daiwa's policies, procedures, and
practices, and to make a disgorgement payment of $249,340.
On January 16, 1992, Daiwa and 97 other firms, for the purposes of settlement
but without admitting or denying liability or any finding, consented to an SEC
cease and desist order and agreed to pay a civil fine, and to implement certain
procedures with regard to the record keeping requirements of Section 17(a) of
the Securities Exchange Act and Rules 17a-3 and 4 thereunder in connection with
the distribution of unsecured debt securities issued by certain government-
sponsored enterprises. Daiwa's fine was $50,000.
Neither Daiwa nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPL, or any of their principals, affiliates,
officers, or directors. Daiwa and its principals do not own, and will not be
permitted to purchase, any Units.
E.D.&F. Man International Inc. EDF has its main business office located at
Two World Financial Center, 27th Floor, New York, New York 10281-2700;
Telephone No. 212-566-9000. EDF is registered with the CFTC as an FCM and is a
member of the NFA in such capacity, and is registered with the SEC as a broker-
dealer and is a member of the NASD in such capacity. EDF, which is part of the
E.D.&F. Man Group of companies, is a member of all major United States
commodity exchanges as well as the Philadelphia Stock Exchange.
During the five years preceding the date of this Prospectus, neither EDF nor
any of its principals has been subject to any material administrative, civil,
or criminal action, whether pending or concluded.
Neither EDF nor any of its principals is affiliated with the General Partner,
the Trading Advisor, BPL, or any of their principals, affiliates, officers, or
directors. EDF and its principals do not own, and will not be permitted to
purchase, any Units.
Goldman, Sachs & Co. Goldman has its main business office located at 85 Broad
Street, New York, New York 10004; Telephone No. 212-902-1000. Goldman is
registered with the SEC as a broker-dealer and is a member of the NASD in such
capacity, and is registered with the CFTC as an FCM and is a member of the NFA
in such capacity. Goldman or one of its affiliates is a member of most major
commodities and securities exchanges in the United States, as well as a member
of a number of foreign exchanges.
During the five years preceding the date of this Prospectus, neither Goldman
nor any of its principals has been subject to any material administrative,
civil, or criminal action, whether pending or concluded, except as follows:
During January 1994, Goldman, without admitting or denying liability, settled
an SEC administrative proceeding involving alleged books and records and
supervisory violations unrelated to FCM activities. The allegations relate to
certain trades in the secondary markets for U.S. Treasury securities in 1985
and 1986, which include five trades in 1985 and six trades in 1986 in which
Goldman realized losses aggregating $36.6 million, and four trades in 1986 in
which losses were realized by Salomon Brothers. All the trades were done at
prevailing market prices, and thus the losses reflected actual economic
declines in the value of Goldman's positions in the securities it held. The SEC
charged that Goldman's books and records nonetheless should have reflected that
the trades were subject to alleged understandings with the counterparties that
the original positions would be re-established through reversing transactions,
also effected at market prices. The SEC also cited Goldman with failing to
maintain written procedures sufficient to prevent and detect the record keeping
deficiencies, and failing to make records of certain unexecuted customer orders
for the purchase and sale of U.S. Treasury securities. Goldman cooperated with
the SEC's investigation
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and settled the administrative charges by consenting to entry by the SEC of a
cease and desist order and payment of an administrative penalty of $250,000.
In an administrative proceeding unrelated to FCM activity initiated by the
SEC in January 1992, Goldman, along with many other broker- dealers, without
admitting or denying the facts, consented to a finding that, in connection with
the distribution of securities issued by certain government sponsored
enterprises, it had maintained certain records which were inaccurate. Goldman
and the other firms paid a fine in the amount of $100,000 and were ordered to
cease and desist from committing future violations.
In the preceding five years, there have been no material administrative,
civil, or criminal actions against Goldman or any of its principals, nor is any
such administrative, civil, or criminal action pending, which could reasonably
be expected to result in any material adverse change in the financial
condition, business, or operations of Goldman and its subsidiaries taken as a
whole.
Neither Goldman nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPL, or any of their principals, affiliates,
officers, or directors. Goldman and its principals do not own, and will not be
permitted to purchase, any Units.
J.P. Morgan Futures, Inc. J.P. Morgan is a Delaware corporation having its
main business office located at 60 Wall Street, New York, New York 10260;
Telephone No. 212-648-6560. J.P. Morgan is registered with the CFTC as an FCM
and is a member of the NFA in such capacity.
J.P. Morgan is wholly-owned by J.P. Morgan & Company Inc. J.P. Morgan is a
futures brokerage firm serving the United States and foreign commodities
markets, and as such is engaged in providing institutional clients with
services in connection with the purchase and sale of futures and options
contracts. J.P. Morgan is a member of the Commodity Exchange, Inc., the New
York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of
Trade, and the Singapore International Monetary Exchange Ltd., and has access
to many other domestic and foreign futures exchanges through affiliated and
unaffiliated entities.
From time to time, J.P. Morgan may be the subject of certain actions. During
the five years preceding the date of this Prospectus, neither J.P. Morgan nor
any of its principals has been subject to any material administrative, civil,
or criminal action, whether pending or concluded.
Neither J.P. Morgan nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPL, or any of their principals, affiliates,
officers, or directors. J.P. Morgan and its principals do not own, and will not
be permitted to purchase, any Units.
Merrill Lynch Futures Inc. Merrill Lynch is a Delaware corporation with its
main business office located at 250 Vesey Street, 23rd Floor, New York, New
York 10281-1323; Telephone No. 212-449-1000. Merrill Lynch is registered with
the CFTC a an FCM and is a member of the NFA in such capacity. Merrill Lynch is
a clearing member of the Chicago Board of Trade, the Chicago Mercantile
Exchange, the New York Mercantile Exchange and all other principal United
States futures exchanges.
During the five years preceding the date of this Prospectus, neither Merrill
Lynch nor any of its principals has been subject to any material
administrative, civil, or criminal action, whether pending or concluded.
Neither Merrill Lynch nor any of its principals is affiliated with the
General Partner, the Trading Advisor, BPL, or any of their principals,
affiliates, officers, or directors. Merrill Lynch and its principals do not
own, and will not be permitted to purchase, any Units.
Morgan Stanley & Co. Incorporated. Morgan Stanley has its main business
office located at 1251 Avenue of the Americas, New York, New York 10020;
Telephone No. 212-703-4000. Morgan Stanley is
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registered with the SEC as a broker-dealer and is a member of the NASD in such
capacity, and is registered with the CFTC as an FCM and is a member of the NFA
in such capacity.
Morgan Stanley operates on an integrated worldwide basis through six
divisions: Investment Banking; Equities; Taxable Fixed Income; Tax Exempt Fixed
Income; Asset Management; and Finance, Administration, and Operations. Morgan
Stanley conducts its business through its head office in New York,
international offices in London, Tokyo, Frankfurt, Zurich, Australia, and
Canada, and United States regional offices in Chicago, Los Angeles, and San
Francisco.
In the ordinary course of its business, Morgan Stanley is involved in
numerous legal actions, some of which seek significant damages. During the five
years preceding the date of this Prospectus, neither Morgan Stanley nor any of
its principals has been subject to any material administrative, civil, or
criminal action, whether pending or concluded, except as follows:
On January 16, 1992, in an administrative proceeding brought by the SEC,
Morgan Stanley, without admitting or denying liability, consented to the entry
of an order finding that it violated Section 17 of the Securities Exchange Act
and certain rules promulgated thereunder by creating and maintaining inaccurate
books and records in connection with the primary distribution of unsecured debt
securities of various government- sponsored enterprises. Morgan Stanley agreed
to pay a civil penalty of $100,000. Morgan Stanley also agreed to cease and
desist from any future violations of these record keeping requirements in
connection with such distributions and to maintain or develop procedures to
ensure compliance with this undertaking.
Neither Morgan Stanley nor any of its principals is affiliated with the
General Partner, the Trading Advisor, BPL, or any of their principals,
affiliates, officers, or directors. Morgan Stanley and its principals do not
own, and will not be permitted to purchase, any Units.
Morgan Stanley & Co. International Limited. MSIL is a subsidiary of Morgan
Stanley UK Group which is ultimately owned by Morgan Stanley Group Inc. Its
main business office is located at 25 Cabot Square, Canary Wharf, London E14
4QA, England; Telephone No. 171-425-8000. MSIL is regulated by the United
Kingdom Securities and Futures Authority Limited (the "SFA") as a member firm.
In the ordinary course of its business, MSIL is involved in numerous legal
actions, some of which seek significant damages. During the five years
preceding the date of this Prospectus, neither MSIL nor any of its principals
has been subject to any material administrative, civil, or criminal action,
whether pending or concluded, except as follows:
On May 30, 1995, the SFA published Board Notice 256, recording an agreed
settlement of disciplinary proceedings against MSIL. MSIL admitted breaches of
United Kingdom Securities and Investments Board Principles 2 (failure to
exercise skill, care, and diligence) and 9 (lack of appropriate systems) and
other related breaches in connection with foreign exchange business on five
private client accounts during 1992. MSIL was fined (Pounds)240,000 and made a
contribution to the SFA's costs.
Neither MSIL nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPL, or any of their principals, affiliates,
officers, or directors. MSIL and its principals do not own, and will not be
permitted to purchase, any Units.
Prudential Securities Incorporated. Prudential has its main business office
at One Seaport Plaza, New York, New York 10292; Telephone No. 212-214-1000.
Prudential is registered with the SEC as a broker-dealer and is a member of the
NASD in such capacity, and is registered with the CFTC as an FCM and is a
member of the NFA in such capacity. Prudential is a major securities firm with
a large commodity brokerage business. It has over 270 offices in 43 states, the
District of Columbia, and 18 foreign countries. Prudential is a clearing member
of the Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity
Exchange, Inc., and all other major United States commodity exchanges.
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From time to time Prudential (in its respective capacities as an FCM and as a
broker-dealer) and its principals are involved in numerous legal actions, some
of which individually, and all of which in the aggregate, seek significant or
indeterminate damages. During the five years preceding the date of this
Prospectus, neither Prudential nor any of its principals has been subject to
any material administrative, civil, or criminal action, whether pending or
concluded, except as follows:
On June 19, 1995, Prudential entered into a settlement with the CFTC in
which, without admitting or denying the allegations of the complaint,
Prudential consented to findings by the CFTC of certain recordkeeping
violations and failure to supervise in connection with the commodity trading
activities of a former broker of Prudential in 1990 and early 1991. Pursuant to
the settlement, Prudential agreed to (i) pay a civil penalty of $725,000, (ii)
the entry of a cease and desist order with respect to the violations charged,
and (iii) an undertaking directing the Prudential Compliance Committee that a
review of certain of the firm's commodity compliance and supervisory policies
and procedures be conducted and a report be submitted to the CFTC, as well as a
report to the CFTC on the actions taken as a result of the review.
On October 27, 1994, Prudential and Prudential Securities Group entered into
an agreement with the Office of the United States Attorney for the Southern
District of New York (the "U.S. Attorney") deferring prosecution of charges
contained in a criminal complaint. The complaint alleged that Prudential
committed fraud in connection with the sale of certain oil and gas limited
partnership interests between 1983 and 1990 in violation of federal securities
laws. The agreement requires that Prudential deposit an additional $330,000,000
into an account established by the SEC to pay restitution to the investors who
purchased oil and gas limited partnership interests. Prudential further agreed
to appoint a mutually acceptable outsider to sit on the Board of Directors of
Prudential Securities Group and the Compliance Committee of Prudential. The
outside director will serve as an "ombudsman" whom Prudential's employees can
contact anonymously with complaints about ethics or compliance. Prudential will
report any allegations or instances of criminal conduct and material
improprieties to the new director. The new director will submit compliance
reports of his findings every three months for a three year period. Upon
completion of a three year period, if Prudential has complied with the terms of
the agreement, then the U.S. Attorney will not pursue the charges in the
complaint. If Prudential does not comply with the agreement, then the U.S.
Attorney may elect to pursue the charges.
On September 19, 1994, Prudential consented to the entry of an agreement and
order issued by the State of Idaho, Department of Finance, Securities Bureau
(the "Department"). The allegations against Prudential were that the firm
failed to supervise certain employees in connection with securities and options
trading activities entered into on behalf of Idaho clients, in violation of the
Idaho Securities Act (the "Idaho Act"). It was alleged that Prudential failed
to amend the Forms U-4 for certain employees. Prudential agreed to a number of
sanctions and remedial measures, including but not limited to, the following:
(a) to install a new branch manager in the Prudential Boise branch office, who
is to function in a supervisory capacity only; (b) to designate a regional
quality review officer to review all securities option accounts and option
trading activities of Idaho customers in three Prudential offices; (c) to
implement procedures reasonably designed to ensure compliance with regulations
concerning the timely delivery of prospectuses; and (d) to cooperate in the
Department's ongoing investigation and to comply with all provisions of the
Idaho Act. In addition, Prudential agreed to pay a fine to the State of Idaho
in the amount of $300,000, and Prudential voluntarily reimbursed certain
customers for losses suffered in their accounts in the amount of $797,518.49.
On June 8, 1994, the Business Conduct Committee of the New York Mercantile
Exchange ("NYMEX") accepted an offer of settlement submitted by Prudential
concerning allegations that Prudential violated NYMEX rules regarding pre-
arranged trades and wash trades. Without admitting or denying the allegations,
Prudential consented to a finding by NYMEX that it had violated NYMEX Rule
8.55(A)(18) relating to conduct substantially detrimental to the interest and
welfare of NYMEX, agreed to cease and desist from future violations of Rule
8.55, and agreed to pay a fine in the amount of $20,000.
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On March 10, 1994, Prudential agreed to the entry of a consent order issued
by the State of Missouri, Commissioner of Securities. The allegations against
Prudential were that the firm failed to supervise a former registered
representative, in violation of Missouri securities laws. Without admitting or
denying the allegations, Prudential agreed to the following: (a) to maintain
and make available to the Missouri Division of Securities all customer and
regulatory complaints concerning any Prudential employee working in a branch
located in Missouri or any security sold by such employees; (b) beginning 30
days from the date of the consent order and continuing for a period of three
years, to include at least one public service information piece selected by the
Commissioner of Securities in all of Prudential's new account packages mailed
to Missouri residents; (c) for a period of three years from the date of the
consent order, to provide a notice annually to Prudential's Missouri customers
which details the procedures for filing a complaint with Prudential and the
applicable regulatory authorities. In addition, Prudential agreed to pay a fine
in the amount of $175,000.
On January 25, 1994, Prudential agreed to the entry of a consent order issued
by the Banking Commissioner (the "Commissioner") of the State of Connecticut,
Department of Banking. The allegations against Prudential were that, from
January 1992 through at least July 1993, Prudential employed investment adviser
agents who solicited investment advisory business in Connecticut without being
registered to do so. This conduct was found by the Commissioner to be in
violation of the Connecticut Uniform Securities Act (the "Act") and in
violation of the terms and conditions of a stipulation and agreement entered
into between the Commissioner and Prudential on February 20, 1992. It was
further alleged, with respect to Prudential's investment advisory business,
that certain Prudential agents held themselves out to the public in Connecticut
under a business name other than Prudential. Without admitting or denying the
allegations, Prudential agreed to be censured by the Department of Banking, to
cease and desist from violation of the provisions of the Act, and agreed to pay
a civil penalty to the Department of Banking in the amount of $150,000.
Further, Prudential agreed to be subject to a period of administrative
probation which will conclude upon Prudential's completion of certain remedial
actions, including, but not limited to, the following: (a) Prudential will
review, implement, and maintain supervisory procedures designed to ensure its
compliance with the provisions of the Act; and (b) commencing on April 1, 1994
and continuing until April 1, 1996, Prudential will file quarterly reports with
the Securities and Business Investments Division of the Department of Banking
(the "Division") relating to its investment advisory business. In addition,
Prudential agreed to pay the Department of Banking the cost of two or more
examinations of any of its offices by the Division, such amount not to exceed
$10,000.
On January 18, 1994, Prudential agreed to the entry of a final consent order
and a parallel consent order by the Texas State Securities Board. Prudential
also entered into a related agreement with the Texas State Securities
Commissioner. The allegations against Prudential were that the firm had engaged
in improper sales practices and other improper conduct resulting in pecuniary
losses and other harm to investors residing in Texas with respect to purchases
and sales of limited partnership interests during the period from January 1,
1980 through December 31, 1990. Without admitting or denying the allegations,
Prudential consented to a reprimand, agreed to cease and desist from further
violations, and agreed to provide voluntary donations to the State of Texas in
the aggregate amount of $1,500,000. Prudential agreed to suspend the creation
of new customer accounts, the general solicitation of new accounts, and the
offering for sale of securities in or from Prudential's North Dallas office,
irrespective of the place of residence of such new customers, during a period
of 20 consecutive business days. Prudential further agreed to suspend the
creation of new customer accounts, the general solicitation of new customer
accounts, and offering for sale of securities into or from the State of Texas
to any new customers, irrespective of the place of residence of such new
customers, during a period of five consecutive business days. Prudential also
agreed to comply with the terms of the administrative order entered by the SEC
on October 21, 1993 (as discussed below), and to institute training programs
for its securities salesmen in Texas.
On December 17, 1993, Prudential agreed to the entry of a consent order
issued by the State of Rhode Island, Department of Business Regulation,
Division of Securities (the "Department of Business Regulation"). The
allegations against Prudential were that ten employees of Prudential engaged in
investment advisory activities with clients in Rhode Island although these
employees were neither licensed as investment
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adviser representatives nor exempt from the licensing requirements of Section
203 of the Rhode Island Uniform Securities Act (the "Rhode Island Act").
Prudential consented to the payment of a civil penalty in the amount of $33,000
and agreed to cease and desist from further violations of Section 203 of the
Rhode Island Act. Prudential also agreed to modify relevant internal marketing
and training materials distributed to its sales force. Prior to the entry of
the consent order discussed above, Prudential entered into a series of consent
agreements with the Department of Business Regulation involving similar
allegations concerning the registration of Prudential investment advisor
representatives.
On October 21, 1993, Prudential entered into an omnibus settlement with the
SEC, state securities regulators in 51 jurisdictions (49 states, the District
of Columbia, and Puerto Rico), and the NASD to resolve allegations that had
been asserted against Prudential with respect to the sale of interests in more
than 700 limited partnerships generated by Prudential's Direct Investment Group
and sold from January 1, 1980 through December 31, 1990. The partnerships
principally involved real estate, oil and gas producing properties, and
aircraft leasing ventures.
The allegations against Prudential were set forth in a complaint filed by the
SEC on October 21, 1993 and in an administrative order issued by the SEC also
on October 21, 1993. It was alleged that federal and state securities laws had
been violated through sales of the limited partnership interests (and a limited
number of certain other securities) to persons from whom such securities were
not suitable in light of their investment objectives, financial status, or
investment sophistication. It was also alleged that the safety, potential
returns, and liquidity of the investments had been misrepresented. Prudential
neither admitted nor denied the allegations asserted against it. The
administrative order included findings that Prudential's conduct violated the
federal securities laws and that Prudential had not complied with an order
issued by the SEC in 1986 requiring Prudential to adopt, implement, and
maintain certain supervisory procedures. The administrative order, to which
Prudential consented without admitting or denying the SEC's findings, directed
Prudential to cease and desist from violating the federal securities laws and
imposed a $10 million civil penalty. The administrative order also required
Prudential to adopt certain remedial measures, including the establishment of a
Compliance Committee of its Board of Directors.
Prudential's settlement with the state securities regulators included an
agreement to pay a penalty of $500,000 per jurisdiction. In settling the NASD
disciplinary action, Prudential consented to a censure and to the payment of a
$5 million fine to the NASD.
In connection with the settlement of the allegations asserted against it, and
pursuant to a Final Order and Judgment entered on October 21, 1993 in the
action commenced by the SEC, Prudential deposited $330 million in a fund to be
used for the resolution of claims for compensatory damages asserted by persons
who purchased the limited partnership interests from Prudential, and has agreed
to provide additional funds, if necessary, for that purpose. The fund is to be
administered by a court-approved Claims Administrator who is a former SEC
Commissioner. Prudential also consented to the establishment of court-
supervised expedited claims resolution procedures with respect to such claims.
On July 22, 1993, Prudential entered into a Settlement Agreement with the
Office of the Secretary of State of the State of South Carolina. Without
admitting or denying the allegations, Prudential agreed to pay $225,000 in
settlement of all administrative inquiries, investigations, and other
proceedings against Prudential and its agents in South Carolina relating to the
supervisory and retail sale activities of Prudential and certain of its
registered representatives.
On September 29, 1992, Prudential entered into a settlement with the CFTC in
which, without admitting or denying the allegations of the complaint,
Prudential consented to findings by the CFTC that it failed to supervise
employees in connection with the commodity trading activities of a customer of
Prudential-Bache Securities Inc. (the predecessor of Prudential), who was
indicted and convicted of fraud, and the trading practices of two account
executives formerly employed by Prudential-Bache Securities Inc. Prudential
further admitted to findings of record keeping violations and for employing an
unregistered associated person in
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connection with this matter. Pursuant to the settlement, Prudential agreed to
pay a $240,000 civil penalty and to cease and desist from engaging in further
violations of the rules and regulations with which it had been charged.
Neither Prudential nor any of its principals is affiliated with the General
Partner, the Trading Advisor, BPI, or any of their principals, affiliates,
officers, or directors. Prudential and its principals do not own, and will not
be permitted to purchase, any Units.
Salomon Brothers Inc. Salomon Brothers is a Delaware corporation with its
principal place of business at Seven World Trade Center, New York, New York
10048; Telephone No. 212-783-7000. Salomon Brothers is registered with the CFTC
as an FCM and is a member of the NFA in such capacity, and is registered with
the SEC as a broker-dealer and is an NASD member firm. Salomon Brothers and its
affiliates engage in securities and futures trading for their customers and
themselves on major markets, and are members of major securities and futures
exchanges throughout the world. Salomon Brothers and its affiliates also engage
in investment banking and act as financial advisors for companies on a
worldwide basis.
During the five years preceding the date of this Prospectus, neither Salomon
Brothers nor any of its principals has been subject to any material
administrative, civil, or criminal action, whether pending or concluded, except
as follows:
Various civil and administrative actions and proceedings are currently
pending against or involve Salomon Brothers. However, Salomon Brothers'
management considers that, with the exception of the matters described in the
following paragraph, the aggregate liability or loss, if any, resulting from
these actions and proceedings will not be significant.
On May 20, 1992, Salomon Brothers and its parent Salomon Inc settled various
actions arising out of alleged misconduct in auctions of U.S. Treasury
securities and government securities trading brought by the SEC and the
Department of Justice. Salomon Brothers consented, without admitting or denying
any allegations, to among other things, an injunction against federal
securities law violations, an SEC administrative order, forfeiture to obtain
dismissal of an antitrust complaint, and payment of a total of $290 million in
civil penalties and forfeitures, including $100 million for a fund for the
payment of private compensatory damage claims. On the same day, The Federal
Reserve Bank of New York announced the continuation of Salomon Brothers'
primary dealer designation but a cessation of its trading activity with Salomon
Brothers commencing June 1, 1992, with full trading resuming on August 3, 1992,
and the Department of Treasury announced that Salomon Brothers would be
permitted to resume bidding for customers in U.S. Treasury auctions on August
3, 1992, having restricted Salomon Brothers to purchasing securities for its
own account in U.S. Treasury auctions since August 18, 1991. In January and
February of 1993, Salomon Brothers and Salomon Inc settled with 42 states and
the District of Columbia certain claims regarding Salomon Brothers' role in the
U.S. Treasury auctions and related matters. Under the accords, Salomon Brothers
placed $2 million in a multistate Investor Protection Trust Fund and paid $2.15
million to the jurisdictions that were parties to the accords. These
settlements do not affect certain investigations by governmental and self-
regulatory authorities into U.S. Treasury auctions and related matters.
Numerous private actions have been commenced against Salomon Brothers and
Salomon Inc, and certain present and former directors, officers, and employees
of Salomon Brothers, with respect to the U.S. Treasury auctions and related
matters. On September 13, 1993, Salomon Inc agreed to a settlement of the
purported class action brought on behalf of its securities holders, subject to
court approval. It is contemplated that the settlement amount of approximately
$55 million will be paid from the private compensatory damage fund referred to
above, and plaintiffs' attorneys' fees of approximately $12 million will be
paid by Salomon Inc. This settlement does not affect other claims, including
those of certain Treasury market participants.
Neither Salomon Brothers nor any of its principals is affiliated with the
General Partner, the Trading Advisor, BPI, or any of their principals,
affiliates, officers, or directors. Salomon Brothers and its principals do not
own, and will not be permitted to purchase, any Units.
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Description Of Customer Foreign Exchange Agreement. The Partnership has
entered into a non-exclusive customer foreign exchange agreement with BPL (the
"CFE Agreement"), pursuant to which BPL acts as intermediary for, and principal
to, the Partnership in the purchase and sale of spot and forward contracts for
currencies. BPL may also act as intermediary for, and principal to, the
Partnership in the purchase and sale of other commodity interests. Pursuant to
the CFE Agreement, BPL acts as intermediary in executing a portion or all of
the Partnership's foreign exchange spot and forward contracts in the interbank
market. BPL, as principal, further contracts with the Partnership and, through
the use of credit and settlement and delivery lines proposed to be established
with certain of its counterparties, will settle such contracts by making and
taking physical delivery of specified quantities of currencies at prices
mutually agreed upon by BPL and the Partnership.
The Partnership deposits and maintains collateral with BPL in order to engage
in some trading activity without settling contracts by physical delivery.
Accordingly, the Partnership deposits and maintains with BPL such collateral as
BPL in its absolute discretion requires. Normally, the Partnership deposits
collateral with BPL in amounts up to 20% of the Partnership's Net Assets. BPL
may, in its sole discretion, use any collateral in the ordinary course of its
business, including without limitation the pledging by BPL of the collateral to
secure the trading obligations of BPL to third parties. In addition, the
Partnership pledges, assigns, conveys, and transfers to BPL a first and prior
security interest in and to, a general first lien upon, and a right of set-off
against, all of the Partnership's right, title, and interest in and to the
collateral as security for the punctual payment and satisfaction of all of the
Partnership's obligations under the CFE Agreement. BPL pays interest to the
Partnership on any cash collateral at a rate equivalent to the monthly average
of the then-prevailing weekly 90-day United States Treasury bill auction rate,
which for any day means, under the terms of the CFE Agreement, the rate set
forth for such day in the weekly statistical release designated as H.15(519)
published by the Board of Governors of the Federal Reserve System. Such
interest is credited to the Partnership monthly. The Partnership may also
deposit and maintain as collateral with BPL interest-bearing obligations, such
as United States Treasury bills, and the interest earned thereon is for the
Partnership's own account.
Pursuant to the CFE Agreement, the Partnership has agreed to back-to-back
purchase and sale of spot and forward contracts by BPL with respect to every
transaction executed by BPL as principal and/or intermediary to the
Partnership.
BPL may close out spot and forward positions, buy the underlying items,
cancel orders, and sell collateral at any time it deems necessary for its
protection and upon the occurrence of other specified events. The Partnership
has agreed to indemnify and hold harmless BPL and its principals, employees,
and affiliates from, and to pay BPL promptly upon demand, any and all loss,
cost, indebtedness, and liability arising from the purchase and/or sale of spot
and forward contracts by BPL as intermediary for the Partnership. See "RISK
FACTORS--TRADING OF SPOT AND FORWARD CONTRACTS," "THE COMMODITIES MARKETS--SPOT
AND FOREIGN CONTRACTS" and "--MARGIN."
The General Partner is authorized under the Limited Partnership Agreement to
retain other brokers and dealers for the Partnership's trading of spot and
forward contracts.
Bellwether Partners LLC. BPL, a Delaware limited liability company and an
affiliate of the General Partner and the Trading Advisor, having its main
business office located at 600 Steamboat Road, Greenwich, Connecticut 06830 and
controlled by Mr. Jones, was formed in December 1995 and is the successor in
interest, by virtue of merger, to Bellwether Partners, Inc. ("BPI"). Mr. Jones
is the Chairman and Chief Executive Officer of BPL. The other principal
officers of BPL are the same as the principal officers of TIC. BPI was formed
in July 1986 for the principal purpose of providing commodity floor brokerage
services to Mr. Jones, TIC, their clients, and their affiliates. In July 1988,
BPI expanded its operations to include currency trading operations for Mr.
Jones, his affiliates, and their clients, and shortly thereafter terminated its
floor brokerage service operations. Such currency trading operations are
currently conducted by BPL.
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There has been no material administrative, civil, or criminal action against
BPL or its principals within the last five years, whether pending or concluded.
See "THE TRADING ADVISOR--MATERIAL ACTIONS."
BPL does not currently own any Units, although it may subscribe for Units
during the Continuing Offering (for investment purposes only and not with a
view to resell). Principals, employees, and affiliates of BPL have previously
purchased Units, and it is expected that they will purchase Units in the
Continuing Offering. See "THE GENERAL PARTNER" and "CONFLICTS OF INTEREST."
THE COMMODITIES MARKETS
FUTURES CONTRACTS
Commodity futures contracts are standardized contracts made on domestic or
foreign commodity exchanges which call for the future delivery of specified
quantities of various agricultural and tropical commodities, industrial
commodities, currencies, financial instruments, metals, or other items at a
specified time and place. The size and term of futures contracts on a
particular commodity are identical and are not subject to any negotiation
between the buyer and seller. Standardization of futures contracts generally
makes the exchange market more liquid than the forward contract and interbank
markets, at least for smaller positions, because exchange-traded contracts are
interchangeable. The contractual obligations, depending upon whether one is a
buyer or a seller, may be satisfied either by taking or making, as the case may
be, physical delivery of an approved grade of commodity or by making an
offsetting sale or purchase of an equivalent but opposite futures contract on
the same exchange prior to the designated date of delivery. As an example of an
offsetting transaction where the underlying commodity is not delivered, the
contractual obligation arising from the sale of one contract of December 1997
gold on a commodity exchange may be fulfilled at any time before delivery of
the commodity is required by the purchase of one contract of December 1997 gold
on the same exchange. The difference between the price at which the futures
contract is sold or purchased and the price paid for the offsetting purchase or
sale, after allowance for brokerage commissions, constitutes the profit or loss
to the trader. Certain futures contracts, such as a futures contract linked to
a stock or other financial or economic index approved by the CFTC or Eurodollar
contracts, settle in cash (irrespective of whether any attempt is made to
offset such contracts) rather than delivery of any physical item.
In market terminology, a trader who purchases a futures contract is "long" in
the market, and a trader who sells a futures contract is "short" in the market.
Before a trader closes out his long or short position by an offsetting sale or
purchase, his outstanding contracts are known as "open trades" or "open
positions." The aggregate amount of open positions held by traders in a
particular contract is referred to as the "open interest" in such contract.
SPOT AND FORWARD CONTRACTS
Contracts for future delivery of certain commodities may also be made off
established exchanges. Currencies may be purchased or sold for current delivery
through banks or dealers pursuant to "spot contracts," or for future delivery
pursuant to "forward contracts." A forward contract is a contractual right to
purchase or sell a specified quantity of an item at or before a specified date
in the future at a specified price, and therefore is similar to a futures
contract. In forward contract trading, a bank or dealer generally acts as
principal in the transaction and includes its anticipated profit (i.e., the
"spread" between the "bid" and the "asked" prices) and in some instances a
"mark-up" in the prices it quotes for spot and forward contracts. A spot
contract is either settled within two days or rolled over (i.e., converted)
into a new spot contract or into a forward contract. Unlike futures contracts,
spot and forward contracts are not standardized contracts; rather, spot and
forward contracts for a given item are generally available in any size (and, in
the case of forward contracts, maturity) and are subject to individual
negotiation between the parties involved. Moreover, historically there has not
been a direct means of "offsetting" or closing out a spot or forward
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contract by taking an offsetting position, as one would a futures contract on
an exchange. When a trader desires to close out a futures position, he
establishes an equivalent but opposite position in the contract and settles and
recognizes the profit or loss on the two positions at the time that the
offsetting position is established. However, if a trader desires to close out a
spot or forward contract position, he cannot contract through an exchange but
must enter into an offsetting contract with the same counterparty. An
offsetting position may not be available at a competitive price. Consequently,
a trader may offset a position by establishing an equivalent but opposite
position in the contract with another counterparty and settle by making and
taking delivery of the underlying items and recognize the profit or loss on
both positions simultaneously on the delivery date. As a result, the trader is
subject to the risk of default and non-performance of a counterparty. Where the
contract is settled by physical delivery, these risks are accentuated by the
exposure to the full value of the contract. Thus, unlike in the futures
contract market where a trader who has offset positions recognizes profit or
loss immediately, in the spot and forward contract market a trader with a
position that has been offset at a profit generally does not receive from the
counterparty such profit until the delivery date, and likewise a trader with a
position that has been offset at a loss generally does not have to pay money to
the counterparty until the delivery date. In recent years, the terms of spot
and forward contracts have become more standardized, and in many instances such
contracts now provide a right of offset or cash settlement as an alternative to
making or taking physical delivery of the underlying item. The spot and forward
contract markets provide what has typically been a highly liquid market for
currency trading, and in certain cases, particularly for large trades, the
prices quoted for currency spot and forward contracts may be more favorable
than the prices for currency futures contracts on exchanges.
Spot and forward contracts on currencies are traded primarily in the
interbank market. The interbank market is not a formally organized exchange; it
is an informal network of trading relationships among world participants which
include primarily major commercial banks and also investment banks, securities
and commodities brokers and dealers, pension funds, insurance companies,
investment companies, hedge funds, commodity pools, multinational corporations,
and sophisticated individuals. In this market, transactions may be conducted in
United States dollars or in most other currencies. Virtually all major
currencies are traded in the interbank market. The role of banks in this market
is particularly important because they maintain active currency trading
operations and offer to buy and sell currencies to and from their customers and
correspondent banks. Participants in the interbank market can also include any
business or institution which buys or sells goods or services abroad and, as a
result, has a need for currencies in making or receiving payment for those
goods or services.
The interbank market is a 24-hour worldwide market, with participants
maintaining instantaneous communications with one another through
telecommunications devices (e.g., telephones, computers, and telexes) which
provide participants with access to the current prices at which other
participants are willing to buy or sell currencies. Trading is generally
conducted by telephone, with orders confirmed later by written confirmations.
Centralization of the marketplace in time and location has generally tended to
make the currency markets more liquid, and the volume and size of trades in the
interbank market are both much greater than on commodity exchanges. Thus,
whereas the futures market may be more liquid for smaller trades, the interbank
market may more easily accommodate large trades and offers substantially more
flexibility. Indeed, the existence of a 24-hour currency market is essential
for commercial hedgers of foreign exchange risks. Neither the interbank market
nor participation therein is subject to regulation by the United States
Government or by any international agency. While banks and broker-dealers in
the United States are subject to federal and/or state regulation, foreign
banks, brokers, and dealers may not be subject to similar regulation. See
"PRINCIPAL RISK FACTORS--TRADING OF SPOT AND FORWARD CONTRACTS."
The term or maturity of a spot or forward contract is established by
agreement between the two parties to the contract, and may range from several
days to several years. Similarly, the quantity of a spot or forward trade is
established by the parties themselves; there are no fixed contract quantities.
Also, the price at which the agreed-upon quantity of an item is to be bought or
sold is established at the time the spot or forward
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contract is entered into. Prices in a currency spot or forward contract
generally are expressed in terms of the amount of currency to be exchanged per
one foreign currency unit (e.g., U.S. $1.50 per one British pound).
Currency forward contracts are frequently used to protect the price at which
goods or services are to be bought or sold against fluctuations in the value of
a foreign currency between the time a commitment to buy or sell is made and the
time the required payment is to be made. Thus, forward contract transactions of
commercial users generally are made as part of a broader business transaction,
and are not entered for the purpose of profiting from the forward contract
transaction. See "PARTICIPANTS" below.
Unlike certain commercial users of the forward markets, the Partnership
engages in spot and forward contract trading for speculative purposes--making a
profit from the relative movements of the prices of the commodity that is the
subject of the contract between the time a position is taken in a contract
(e.g., a sale) and the time the position matures or is offset by an opposite
contract (e.g., a purchase) for the identical quantity of commodity at the
identical maturity date. For example, the Partnership would sell a spot or
forward contract for a given foreign currency (i.e., take a short position) if
the Trading Advisor anticipates a decline in the price of that currency, and it
would purchase a spot or forward contract for a foreign currency (i.e., take a
long position) if the Trading Advisor anticipates an increase in the price of
that currency. At the maturity of a spot or forward contract, the Partnership
will make or take delivery of the underlying currency, or prior to the maturity
the Trading Advisor may enter into another spot or forward contract that
offsets its existing position or roll over the contract into another contract.
The offsetting contract would have the same maturity date and would be for the
same quantity of the foreign currency as the original contract. Subject to
obtaining the prior consent of the requisite number of Partners, the
Partnership intends to reduce the level of trading currency spot and forward
contracts on margin or collateral, and will rely primarily on the use of BPL's
credit and settlement and delivery lines to settle currency spot and forward
contracts. The Trading Advisor might also buy and sell spot and forward
contracts in two different foreign currencies at or about the same time,
similar to a spread position, in order to take advantage of potential profit in
the price relationship between the two currencies. Profits and losses then
generally accrue as the price relationship changes between the two currencies.
The interbank market consists of a direct dealing market and a brokers'
market. In the direct dealing market, a participant trades directly with
another participating bank, dealer, or financial institution. The Partnership
trades in the direct dealing market. Generally, when the Trading Advisor
determines that the Partnership will either sell or buy a particular currency,
BPL does back-to-back principal trades with the Partnership and its
counterparties. BPL, as principal, arranges bank lines of credit and settlement
and delivery lines and contracts with banks and dealers to make or take future
deliveries of specified quantities of currencies at negotiated prices. BPL,
again as principal, in turn contracts with the Partnership to make or take
future deliveries of the same specified quantities of currencies. BPL does not
charge the Partnership any commissions or other fees for its services.
In the brokers' market, brokers generally do not buy or sell currencies for
their own accounts (although affiliates of brokers may be engaged in such
trading) and do not guarantee performance by the parties to transactions they
help to arrange. In the brokers' market, brokers may add a commission to the
prices that they communicate to their customers, or they may incorporate a fee
into the quotations they provide to the customer. See "PRINCIPAL RISK FACTORS--
TRADING OF SPOT AND FORWARD CONTRACTS."
Swap transactions involving or relating to interest rates, currencies,
commodity interests, securities interests, indices, prices, or other items have
many of the same, if not identical, attributes as forward contracts. See
"PRINCIPAL RISK FACTORS--TRADING OF SWAPS."
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OPTIONS
An option on a futures contract or on a physical commodity (a "commodity
option") gives the buyer of the option the right to take a position at a
specified price (i.e., the "striking," "strike," or "exercise" price) in the
underlying futures contract or commodity. The buyer of a "call" option acquires
the right to take a long position (i.e., the obligation to take delivery of a
specified amount of a specified commodity) in the underlying futures contract
or commodity, and the buyer of a "put" option acquires the right to take a
short position (i.e., the obligation to make delivery of a specified amount of
a specified commodity) in the underlying futures contract or commodity.
The purchase price of an option is referred to as its "premium." The seller
(or "writer") of an option is obligated to take a futures position or physical
commodity at a specified price opposite to the option buyer if the option is
exercised. Thus, the seller of a call option must stand ready to take a short
position in the underlying futures contract or commodity at the strike price if
the buyer exercises the option. The seller of a put option, on the other hand,
must stand ready to take a long position in the underlying futures contract or
commodity at the strike price if the buyer exercises the option.
A call option is said to be "in-the-money" if the strike price is below the
current market price of the underlying futures contract or physical commodity,
and "out-of-the-money" if the strike price is above the current market price.
Similarly, a put option is said to be "in-the-money" if the strike price is
above the current market price of the underlying futures contract or commodity,
and "out-of-the-money" if the strike price is below the current market price.
Options have limited life spans, usually tied to the delivery or settlement
date of the underlying futures contract or commodity. Some options, however,
expire in advance of such date. An option that is out-of-the-money and not
offset by the time it expires becomes worthless. On certain exchanges, in-the-
money options are automatically exercised on their expiration date, but on
others unexercised options simply become worthless after their expiration date.
Options usually trade at a premium above their intrinsic value (i.e., the
difference between the market price for the underlying futures contract or
commodity and the strike price) because the option trader is speculating on (or
hedging against) future movements in the price of the underlying futures
contract or commodity. As an option nears its expiration date, the market and
intrinsic value typically move into parity. The difference between an option's
intrinsic value and market value is referred to as the "time value" of the
option.
The use of interrelated options and futures positions can provide an
additional means of risk management and permit a trader to retain a futures
contract position in the hope of additional appreciation in that position,
while at the same time allowing the trader to limit the possible adverse
effects of a decline in the position's value.
Selling options creates additional risks. The seller of a call option who
does not have a long position in the underlying futures contract or physical
commodity is subject to risk of loss should the price of the futures contract
or commodity be higher than the strike price upon exercise or expiration of the
option by an amount greater than the premium received for selling the option.
The seller of a call option who has a long position in the underlying futures
contract or commodity is subject to the full risk of a decline in price of the
contract or commodity reduced by the premium received for selling the option.
In exchange for the premium received for selling a call option, the option
seller gives up all of the potential gain resulting from an increase in the
price of the underlying futures contract or commodity above the strike price
upon exercise or expiration of the option.
The seller of a put option who does not have a short position in the
underlying futures contract or physical commodity is subject to risk of loss
should the price of the contract or commodity decrease below the strike price
upon exercise or expiration of the option by an amount in excess of the premium
received for selling the option. The seller of a put option on a futures
contract or commodity who has a short position in the underlying futures
contract or commodity is subject to the full risk of a rise in the price in the
futures
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contract or commodity reduced by the premium received for selling the option.
In exchange for the premium received for selling a put option, the option
seller gives up all of the potential gain resulting from a decrease in the
price of the futures contract or commodity below the strike price upon exercise
or expiration of the option. See "PRINCIPAL RISK FACTORS--TRADING OF OPTIONS"
and "INVESTMENT PROGRAM AND USE OF PROCEEDS--INVESTMENT PROGRAM--REGULATION."
PARTICIPANTS
The two broad classes of persons who trade commodity interest contracts are
"hedgers" and "speculators." Commercial interests (including farmers) that
market or process commodities and financial institutions that market or deal in
commodities (including, for example, interest rate sensitive instruments,
currencies, and stock portfolios), and which are exposed to exchange, interest
rate, and stock market risks, may use the commodities markets primarily for
hedging. Hedging is a protective procedure designed to minimize losses that may
occur because of price fluctuations occurring, for example, between the time a
merchandiser or processor makes a contract to buy or sell a commodity at a
certain price and the time it must perform the contract. In such case, at the
time the hedger contracts to buy the commodity at a future date, it will
simultaneously buy futures or forward contracts for the necessary equivalent
quantity of the commodity. At the time for performance of the contract, the
hedger may accept delivery under its futures or forward contracts or it may buy
the actual commodity and close out its position by making an offsetting sale of
its futures or forward contracts. A hedger also may wish to protect against the
risk of adverse interest rate shifts, and thus may purchase futures contracts
for United States Government obligations to offset its interest rate
liabilities.
In the foreign exchange context, the need to hedge currency exposures arises
because of the volatility of exchange rates. Such exposures include
"translation exposures," which occur because of certain accounting rules when
an entity must translate its foreign currency-denominated assets and
liabilities into domestic currency on its financial statements. Such exposures
also include "transaction exposures," which occur in connection with a
transaction when an entity expects to receive payment or make payment in a
foreign currency.
The futures markets enable the hedger to shift the risk of price fluctuations
to the speculator. The usual objective of the hedger is to protect the profit
that he expects to earn from farming, merchandising, processing, other business
operations, or investment activities rather than to profit from his trading.
However, at times the impetus for a hedge transaction may result in part from
speculative objectives.
The speculator risks its capital with the hope of making profits from price
fluctuations in commodity interest contracts. The speculator is, in effect, the
risk bearer who assumes the risks that the hedger seeks to avoid. Speculators
rarely take delivery of physical commodities but generally close out their
positions by entering into offsetting purchases or sales of contracts. Since
the speculator may take either a long or short position in the commodities
markets, it is possible for it to make profits or incur losses regardless of
whether prices go up or down.
All trades made by the Partnership are for speculative, rather than for
hedging, purposes. There are always two parties to a commodity interest
contract; consequently, for any gain achieved by one party on a contract, a
corresponding loss is suffered by the other. At most, only 50% of commodity
interest contracts can experience gain at any one time, without reference to
brokerage commissions and other transaction costs which may reduce or eliminate
any gain that would otherwise be achieved.
EXCHANGES
Commodity exchanges provide centralized market facilities for trading futures
contracts and options (but not spot and forward contracts) relating to
specified commodities. Members of, and trades executed on, a particular
exchange are subject to the rules of that exchange. Among the principal
exchanges in the United
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States are the Chicago Board of Trade, the Chicago Mercantile Exchange
(including the International Monetary Market division thereof), the Commodity
Exchange, Inc., and the New York Mercantile Exchange.
Each of the commodity exchanges in the United States has an associated
"clearinghouse." Once trades between members of an exchange have been
confirmed, the clearinghouse becomes substituted for each buyer and each seller
of contracts traded on the exchange, and in effect becomes the other party to
each trader's open position in the market. Thereafter, each party to a trade
looks only to the clearinghouse for performance. The clearinghouse normally
establishes some sort of security or guarantee fund to which all clearing
members of the exchange must contribute; this fund acts as an emergency buffer
which enables the clearinghouse, at least to a large degree, to meet its
obligations with regard to the "other side" of an insolvent clearing member's
contracts. Furthermore, clearinghouses require margin deposits and continuously
mark positions to market to provide some assurance that their members will be
able to fulfill their contractual obligations. Thus, a central function of the
clearinghouse is to ensure the integrity of trades, and members effecting
transactions on an exchange need not worry about the solvency of the party on
the opposite side of the trade; their only remaining concerns are the
respective solvencies of their FCMs and the clearinghouse. The exchanges also
impose speculative position limits and other restrictions on customer positions
to help ensure that no single trader can amass a position that would have a
major impact on market prices. See "PRINCIPAL RISK FACTORS--FAILURE OF BROKER
OR EXCHANGE."
The commodity exchanges in the United States and their clearinghouses are
given reasonable latitude in promulgating rules to control and regulate their
members. Examples of rules of exchanges and clearinghouses include the
establishment of initial margin levels, size of trading units, contract
specifications, speculative position limits, and daily price fluctuation
limits. The CFTC reviews all such rules (other than those relating to specific
margin levels for futures contracts, as opposed to options) and can disapprove
or, with respect to certain of such rules, require the amendment or
modification thereof.
Some foreign exchanges differ in certain respects from their United States
counterparts. In contrast to United States exchanges, many foreign exchanges
are "principals' markets," where trades remain the liability of the individual
traders involved, and the exchange does not become substituted for any party.
The participants must satisfy themselves as to the individual creditworthiness
of each entity with whom they enter into contracts. See "PRINCIPAL RISK
FACTORS--TRADING ON FOREIGN EXCHANGES."
SPECULATIVE POSITION LIMITS
The CFTC and the United States commodity exchanges have established
regulations referred to as "speculative position limits" or "position limits"
on the maximum net long or net short speculative position which any person or
group of persons (other than a hedger, which the Partnership is not) may hold,
own, or control in certain futures or options contracts. Among the purposes of
speculative position limits is to prevent a "corner" on a market or undue
influence on prices by any single trader or group of traders. The CFTC has
jurisdiction to establish position limits with respect to all commodities. The
speculative position limits established by the CFTC apply to certain
agricultural commodities, such as grains, soybeans, cotton, eggs, rye, corn,
wheat, and potatoes. Certain exchanges or their clearinghouses also set limits
on the total net positions that may be held by an FCM, such as the domestic
Clearing Brokers. Speculative position limits are not applicable to bank or
dealer forward contract, swap, or over-the-counter option trading or foreign
commodity exchange trading, although the principals with which the Partnership
may trade in such markets may impose such limits as a matter of credit policy.
The commodity interest contract positions of the Partnership will not be
attributable to Limited Partners in their own commodities trading, if any, for
purposes of position limits. See "PRINCIPAL RISK FACTORS--EXISTENCE OF
SPECULATIVE POSITION LIMITS MAY RESTRICT THE FULL APPLICATION OF THE TRADING
ADVISOR'S TRADING STRATEGIES."
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DAILY PRICE FLUCTUATION LIMITS
Most United States commodity exchanges (but generally not foreign exchanges
or banks or dealers in the case of spot, forward, or swap contract trading)
normally limit the amount of fluctuation in futures and option contract prices
during a single trading day (or part thereof) by regulations referred to as
"daily price fluctuation limits" or "daily limits." The daily limits establish
the maximum amount that the price of a futures or option contract may vary
either up or down from the previous day's settlement price (or from the price
earlier in the same trading day). Once the daily limit has been reached in a
particular commodity interest contract, no trades may be made at a price beyond
the limit. This can create liquidity problems. See "PRINCIPAL RISK FACTORS--
COMMODITY INTEREST CONTRACT TRADING MAY BE ILLIQUID."
PRICES
Commodity interest prices are volatile and, although ultimately determined by
the interaction of supply and demand, are subject to many other influences,
including the psychology of the marketplace and assessments of future world and
economic events. See "PRINCIPAL RISK FACTORS--COMMODITY INTEREST CONTRACT
TRADING IS SPECULATIVE AND VOLATILE."
REGULATION
For a discussion of the regulations applicable to the trading of futures
contracts and commodity options, see "INVESTMENT PROGRAM AND USE OF PROCEEDS--
INVESTMENT PROGRAM--REGULATION."
MARGINS
"Initial" or "original" margin is the minimum amount of funds that must be
deposited by a trader with his FCM in order to initiate futures contract
trading or to maintain an open position in futures contracts. "Maintenance"
margin is the amount (generally less than initial margin) to which a trader's
account may decline before he must deliver additional margin. A margin deposit
is like a cash performance bond. It helps ensure the trader's performance on
the futures contracts he purchases or sells. Futures contracts are customarily
bought and sold on margin that represents a very small percentage (ranging
upward from less than 2%) of the purchase price of the underlying contract
being traded. Because of such low margins, price fluctuations occurring in the
futures markets may create profits and losses that are greater, in relation to
the amount invested, than are customary in other forms of investment or
speculation. The minimum amount of margin required in connection with a
particular futures contract is set from time to time by the exchange on which
such contract is traded, and may be modified from time to time by the exchange
during the term of the contract. See "PRINCIPAL RISK FACTORS--COMMODITY
INTEREST CONTRACT TRADING IS HIGHLY LEVERAGED."
Brokerage firms carrying accounts for traders in futures contracts may not
accept lower, and generally require higher, amounts of margin as a matter of
policy in order to afford further protection for themselves. The Clearing
Brokers require the Partnership to make margin deposits equal to the exchange
minimum levels for all futures contracts. This requirement may be changed from
time to time at the discretion of the Clearing Brokers.
Trading in the spot and forward contract markets generally does not require
margin, but generally does require the extension of credit by a bank or dealer
with which a person trades. Since the Partnership's spot and forward contract
trading is conducted with and through BPL, the Partnership is able to take
advantage of BPL's credit lines with market participants, and is able to take
advantage of BPL's credit and settlement and delivery lines with market
participants. Most participants with which BPL and the Partnership trade
require adequately secured credit and settlement and delivery lines or
collateral with respect to their trading of currencies.
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BPL requires good faith collateral deposits with it in amounts approximately
equivalent to those required for trading foreign currency futures contracts on
the Chicago Mercantile Exchange. The Partnership generally deposits such
amounts with BPL in the forms of cash (and BPL pays the Partnership interest at
a rate equivalent to the monthly average of the then-prevailing weekly 90-day
United States Treasury bill auction rate) or interest-bearing obligations, such
as United States Treasury bills (and the interest earned thereon accrues for
the Partnership's account). BPL, in turn, normally is required to deposit all
or a portion of such cash or securities with the dealers and banks with which
BPL conducts back-to-back trades, as collateral in respect of such trades.
Because performance of spot and forward contracts on currencies is not
guaranteed by any exchange or clearinghouse, the Partnership is subject to the
risk of the inability or refusal to perform with respect to such contracts on
the part of the principals or agents with and through which the Partnership and
other customers of BPL trade. In its spot and forward contract trading with and
through BPL, the Partnership generally contracts directly with BPL.
Accordingly, any failure or refusal by BPL, or any dealer or bank with which
BPL contracts, to perform with respect to a contract, whether due to the
insolvency, bankruptcy, default, delay, or other cause relating to BPL or any
dealer or bank with which BPL contracts, could subject the Partnership to the
risk of loss with respect to its good faith deposits and the full value of the
underlying contracts.
When a trader purchases an option, there is no margin requirement. When a
trader sells an option, on the other hand, it is required to deposit margin in
an amount determined by the margin requirements established for the futures
contract or physical commodity underlying the option and, in addition, an
amount substantially equal to the current premium for the option. The margin
requirements imposed on the selling of options, although adjusted to reflect
the probability that out-of-the-money options will not be exercised, can in
fact be higher than those imposed in dealing in the futures markets directly.
Complicated margin requirements apply to "spreads" and "conversions," which are
complex trading strategies in which a trader acquires a mixture of related
futures and options contract positions.
Margin requirements are computed each day by a trader's FCM. When the market
value of a particular open futures contract position changes to a point where
the margin on deposit does not satisfy maintenance margin requirements, a
"variation" margin call is made by the FCM. If the margin call is not met
within the required time, the FCM may close out the trader's position. With
respect to the Partnership's trading, the Partnership (and not the Limited
Partners personally) is subject to margin calls.
Major United States exchanges have certain combined margining arrangements
involving procedures pursuant to which the futures and option contract
positions held in an account would, in the case of certain accounts, be
aggregated and margin requirements assessed on a portfolio basis, measuring the
total risk of the combined positions. See "PRINCIPAL RISK FACTORS--COMMODITY
INTEREST CONTRACT TRADING IS HIGHLY LEVERAGED," "INVESTMENT PROGRAM AND USE OF
PROCEEDS," and "BROKERAGE ARRANGEMENTS."
DISTRIBUTIONS
The Limited Partnership Agreement, which does not provide for regular or
periodic cash distributions, grants the General Partner sole discretion in
determining the frequency and amount of distributions (other than on voluntary
redemption of Units), if any, the Partnership will make to its Partners.
However, no Partner will receive a distribution to the extent that, after
giving effect to such distribution, all liabilities of the Partnership (other
than liabilities to the Partners on account of their Partnership interests)
will exceed the fair market value of the Partnership's assets. Any
distributions made by the Partnership will be pro rata in accordance with the
respective capital accounts of all Partners. See "PRINCIPAL RISK FACTORS--
PARTNER'S TAX LIABILITY MAY EXCEED DISTRIBUTIONS," "PERFORMANCE RECORDS OF THE
PARTNERSHIP," and "TRANSFERS AND REDEMPTIONS."
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THE LIMITED PARTNERSHIP AGREEMENT
This Prospectus contains an explanation of the material terms and provisions
of the Limited Partnership Agreement, a copy of which is annexed hereto as
EXHIBIT A and is incorporated herein by this reference. The following
description is a summary only, is not intended to be complete, and is qualified
in its entirety by such reference.
Nature Of The Partnership. The Partnership was formed on November 22, 1989 as
a limited partnership under the Delaware Revised Uniform Limited Partnership
Act (the "Partnership Act"). Units purchased and paid for pursuant to the
Continuing Offering of Units will be fully paid and non-assessable. The
Partnership may have a claim against a Limited Partner after his redemption of
Units or receipt of distributions from the Partnership for liabilities of the
Partnership that arose before the date of such redemption or distribution, but
such claim will not exceed the sum of such Limited Partner's unredeemed capital
contribution, undistributed profits, if any, and any redemptions and
distributions received together with interest thereon. The Partnership will not
make a claim against Limited Partners with respect to amounts distributed to
them, paid to them in violation of the Partnership Act or the Limited
Partnership Agreement, received by them upon redemption of Units, or otherwise
paid to them unless the assets of the Partnership (including the General
Partner's capital contribution) are insufficient to discharge liabilities of
the Partnership that arose before the return of such amounts. The General
Partner will be liable for all obligations of the Partnership to the extent
that the assets of the Partnership (including amounts contributed by Limited
Partners and paid out as distributions, redemptions, or otherwise to Limited
Partners) are insufficient to discharge such obligations.
The Limited Partnership Agreement provides that, if the Partnership is made a
party to any claim, demand, dispute, or litigation or otherwise incurs any
loss, liability, damage, cost, or expense as a result of, or in connection
with, any Partner's (or his assignee's) obligations or liabilities unrelated to
the Partnership's business, such Partner (or assignees cumulatively) will be
obligated to indemnify, defend, hold harmless, and reimburse the Partnership
for all loss, liability, damage, cost, and expense incurred, including
attorneys' and accountants' fees and expenses.
The Limited Partnership Agreement provides that the death, disability, legal
incompetency, withdrawal, insolvency, termination, liquidation, or dissolution
of a Limited Partner will not terminate or dissolve the Partnership, and that
the legal representative of such Limited Partner has no right to withdraw or
value his interest, except by redemption of Units. Each Limited Partner waives
on behalf of himself and in the event of his death, on behalf of his estate the
furnishing of any inventory, accounting, or appraisal of the Partnership's
assets or any right to an audit or examination of the books of the Partnership.
The Limited Partnership Agreement provides that the General Partner may, in
its sole discretion at any time, require any Limited Partner to withdraw all or
a portion of such Limited Partner's unredeemed capital contribution and
undistributed profits, if any, from the Partnership at any month-end on 5
business days' written notice.
Management Of Partnership Affairs. The Limited Partners do not participate in
the management or operations of the Partnership. Any participation by a Limited
Partner in the management of the Partnership may jeopardize the limited
liability of such Limited Partner. Under the Limited Partnership Agreement,
responsibility for managing the Partnership is vested solely in the General
Partner. The General Partner may delegate complete trading authority to one or
more trading advisors and has done so (except for the ability of the General
Partner to override trading instructions that violate the Partnership's trading
policies and to the extent necessary to fund distributions or redemptions, to
effect the allocation or reallocation of the Partnership's assets among trading
advisors, or to pay the Partnership's expenses) in the Management Agreement
with TIC. However, the General Partner may make trading decisions at any time
at which a trading advisor becomes incapacitated or some other emergency arises
as a result of which such trading advisor is unable or unwilling to act or no
trading advisor is then retained by the Partnership and the General
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Partner has not yet retained a successor trading advisor. In addition, the
General Partner is authorized and directed to manage the trading of the
Partnership's assets itself. Although the General Partner does not presently
contemplate doing so, the General Partner is also authorized to delegate
trading authority with respect to all or a portion of the Partnership's assets
to other trading advisors, and may do so in the future. See "THE TRADING
ADVISOR."
Other responsibilities of the General Partner include, but are not limited
to, the following: determining whether the Partnership will make distributions;
administering redemptions of Units; preparing monthly and annual reports to the
Limited Partners; preparing reports, filings, registrations, and other
documents required by applicable regulatory authorities; depositing the
Partnership's assets in accounts at banks, brokers, and other depositories
selected by the General Partner; borrowing money (but only in connection with
depositing margin with respect to the initiation and maintenance of commodity
interest contract positions or obtaining and utilizing lines of credit for the
trading of spot and forward contracts, currency contracts, swaps, and related
contracts); directing the investment of the Partnership's assets; negotiating,
executing, delivering, and performing agreements necessary or desirable to
carry out the purposes, business, and objectives of the Partnership, and
executing various documents on behalf of the Partnership and the Limited
Partners pursuant to the power of attorney described below. To facilitate the
execution of various documents by the General Partner on behalf of the
Partnership and the Limited Partners, each Limited Partner appoints the General
Partner, with full power of substitution, such Limited Partner's agent and
attorney-in-fact by executing the Subscription Agreement and Power of Attorney
annexed hereto as EXHIBIT B or EXHIBIT C, as applicable.
Sharing Of Profits And Losses: Monthly Allocations. Each Partner, including
the General Partner, has a capital account with an initial balance equal to the
amount such Partner paid for his interest in the Partnership. The Partnership's
Net Assets are determined monthly at the close of business on the last day of
each calendar month, and any increase or decrease from the end of the preceding
month is added to or subtracted from the accounts of the Partners as follows:
(1) the Partnership's Net Assets, before accrual of management and incentive
fees for such month is determined (the "Adjusted Net Assets"); (2) any increase
or decrease in Adjusted Net Assets as compared to the next previous
determination of Net Assets is then credited or charged to the capital account
of each Partner in the ratio that the balance of each Partner's capital account
bears to the balance of all Partners' capital accounts; (3) accrued management
fees and accrued incentive fees, if any, are then charged to the capital
account of each non-Plan Investor Partner in the ratio that the balance of each
such Partner's capital account bears to the balance of all Partners' capital
accounts other than Plan Investor Partners' capital accounts; (4) the number of
Units held by each Plan Investor Partner is then restated in order to equate
the value of each Unit held by such Partner with the value of each Unit held by
a non-Plan Investor Partner; and (5) the amount of any distribution to a
Partner, any amount paid to a Partner on redemption of Units, and any amount
paid to the General Partner upon withdrawal of its interest in the Partnership
is charged to that Partner's capital account.
Sharing Of Profits And Losses: Federal Tax Allocations. As of the end of each
calendar month, the Partnership's recognized profit and loss are allocated
among the Partners, and each Partner is required to include in such Partner's
personal federal income tax return such Partner's share of such items.
Allocation of recognized gains or recognized losses will consist of pro rata
shares of each item of capital or ordinary gain or loss.
Any management fees or incentive fees payable to any affiliate of the General
Partner and any brokerage commissions, transaction fees, or other fees or
expenses payable to any affiliate of the General Partner are allocated pro rata
among the Units of Partners, other than any Plan Investor Partners, based on
the Units outstanding as of the beginning of the calendar month in which such
items accrued. Items of ordinary income (such as interest) and ordinary expense
not allocated pursuant to the preceding sentence are allocated pro rata among
the Units of Partners based on the Units outstanding as of the beginning of the
calendar month in which the items of ordinary income and ordinary expense
accrued.
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For the purpose of allocating the Partnership's net realized capital gain and
loss among the Partners, an allocation account is established with respect to
each Unit, the initial balance of which is generally the amount paid by the
Partner for the Unit. The initial balance of the allocation account for a
restated Unit of a Plan Investor Partner is an amount equal to a pro rata
portion of the aggregate allocation accounts of the other Units owned by such
Plan Investor Partner immediately before such Unit restatement, and the
allocation accounts of the pre-existing Units held by such Plan Investor
Partner are correspondingly reduced pro rata. As of the end of each calendar
month, each outstanding Unit's allocation account is increased by the amount of
income and gain allocated to the Partner holding the Unit, and decreased by the
amount of loss and expense allocated to such Partner and by the amount of
distributions made to such Partner. The allocation account with respect to a
redeemed Unit is eliminated.
Net recognized capital gain is allocated first to each Partner who has
redeemed a Unit during the month up to the excess, if any, of the amount such
Partner received on redemption over the allocation account as of the date of
redemption with respect to the Unit redeemed. Net recognized capital gain
remaining after the allocation to the Partners who redeemed Units is allocated
among the Partners whose capital accounts are in excess of their Units'
allocation accounts in the ratio that each such Partner's excess bears to all
Partners' excesses. Any remaining net recognized capital gain is allocated
among all Partners in proportion to their capital accounts.
Net recognized capital loss is allocated first to each Partner who redeemed a
Unit during the month up to the excess, if any, of the allocation account as of
the date of redemption with respect to the Unit redeemed over the amount such
Partner received on redemption. Net recognized capital loss remaining after the
allocation to Partners who redeemed Units is allocated among the Partners who
hold Units with allocation accounts which are in excess of the Partners'
capital accounts in the ratio that each such Partner's excess bears to all such
Partners' excesses. Any remaining net recognized capital loss is allocated
among all Partners in proportion to their capital accounts.
If a Unit has been assigned as permitted by the Limited Partnership
Agreement, the above-described tax allocations are made with respect to the
Unit without regard to the assignment, except that in the month of assignment
the tax allocations are divided between the assignor and assignee based on the
number of calendar days each held the assigned Unit during such month.
Upon termination and dissolution of the Partnership, the assets of the
Partnership will be distributed to each Partner in the ratio that each
Partner's capital account bears to the capital accounts of all Partners.
Additional Partners. The General Partner may at any time admit additional
Limited Partners who purchase Units. Such newly-admitted Limited Partners may
not pay less than the then-current Net Asset Value for the Units acquired.
Additional general partners will not be admitted to the Partnership except by
vote of the Limited Partners; provided, however, that at any time and from time
to time in its sole discretion, the General Partner may admit additional
general partners that are affiliated with the General Partner, the Trading
Advisor, any of their present or future affiliated entities, or their
successors or assigns.
Restrictions On Transfers Or Assignments. For a description of the
restricitons on the ability of a Limited Partner to transfer, assign pledge, or
encumber his Units, see "TRANSFERS AND REDEMPTIONS--TRANSFERS."
Termination Of The Partnership. The affairs of the Partnership will be wound
up and the Partnership liquidated as soon as practicable upon the first to
occur of the following: (1) December 31, 2010; (2) the receipt by the General
Partner of a notice setting forth an election to dissolve the Partnership at a
specified time by Limited Partners owning more than 50% of the Units then
outstanding, which notice is delivered to the General Partner at least 90 days
prior to the effective date of such dissolution; (3) the withdrawal,
insolvency, termination, dissolution, or liquidation of the General Partner or
of any successor entity thereof, unless the business of the Partnership is
continued by any new, remaining, or successor general partner(s); (4) a decline
in the Net Asset Value of a Unit as of the end of any calendar month to less
than $500; (5) a
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decline in the Partnership's aggregate Net Assets as of the end of any calendar
month to less than $125,000; (6) upon the enactment of any law or the adoption
of any rule, regulation, policy, or guideline by any regulatory authority
having jurisdiction over the Partnership which would make it unlawful,
unreasonable, or imprudent in the sole discretion of the General Partner for
the principal business of the Partnership to be continued; (7) the Partners
terminate the Partnership in accordance with the Limited Partnership Agreement;
(8) a determination by the General Partner in its sole discretion either that
the Partnership's assets in relation to its operating expenses make it
unreasonable or imprudent to continue the business of the Partnership, or the
General Partner no longer desires to make available the Partnership to, or
operate the Partnership for, the persons permitted to become Limited Partners;
or (9) the occurrence of any event requiring termination of the Partnership.
The General Partner may not withdraw from the Partnership unless it has given
the Limited Partners at least 90 days' prior written notice of its intention to
withdraw.
Amendments. The Limited Partnership Agreement may be amended only if the
amendment is approved (in person or by proxy) and embodied in an instrument
signed (personally or by an attorney-in-fact) by the General Partner and by
Limited Partners owning more than 50% of outstanding Units and only if the
amendment is made in accordance with and to the extent permissible under the
Partnership Act. Any amendment to the Limited Partnership Agreement which is
approved by Limited Partners owning the percentage of outstanding Units
prescribed above will be deemed to have been approved by all Limited Partners
and all outstanding Units.
Notwithstanding the foregoing, the General Partner is authorized to amend the
Limited Partnership Agreement without the consent of Limited Partners in order
(1) to change the name of the Partnership, (2) to clarify any ambiguity, (3) to
supplement or clarify any inconsistent provisions, (4) to effect the intent of
the allocation provisions to the maximum extent possible in the event of a
change in the Code or the interpretations thereof affecting such allocations,
(5) to attempt to ensure that the Partnership is not taxed as an association
taxable as a corporation for federal income tax purposes, (6) to attempt to
ensure that the Partnership is not classified as a "publicly traded
partnership" for federal income tax purposes, (7) to make any other amendment
that is not adverse to the Limited Partners, or (8) to make any amendment that
the General Partner deems advisable or considers necessary to comply with any
applicable law, rule, regulation, or interpretation, provided that such
amendment is not adverse to the Limited Partners.
Upon the affirmative vote (in person or by proxy) of Limited Partners owning
more than 50% of outstanding Units (excluding any Units owned by the General
Partner), the following actions may be taken without the consent of the General
Partner: (1) the Limited Partnership Agreement may be amended in accordance
with, and to the extent permissible under, the Partnership Act and the Limited
Partnership Agreement; (2) the Partnership may be dissolved; (3) the General
Partner may be removed and a new general partner or partners may be elected to
replace the General Partner; (4) a new general partner or partners may be
elected prior to the withdrawal of the General Partner from the Partnership;
(5) any contracts with the General Partner or any of its affiliates may be
terminated without penalty on 60 days' prior written notice; or (6) the sale of
all or substantially all of the assets of the Partnership may be approved.
Without the consent of all Partners, no amendment to the Limited Partnership
Agreement may reduce the capital account of any Partner, modify the percentage
of profits, losses, or distributions to which any Partner is entitled, or
modify the provisions of the Limited Partnership Agreement relating to
amendments requiring the consent of all Partners.
Books And Records. The books and records of the Partnership are maintained at
its principal office. The Limited Partners have the right at all times during
normal business hours to have access to and copy such books and records, upon
at least 24 hours' prior written notice to the General Partner, in person or by
their authorized attorney or agent, and upon request copies of such books and
records will be sent to any Limited Partner if reasonable reproduction and
distribution costs are paid by such Limited Partner.
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PLAN OF DISTRIBUTION
Units are offered and sold by the Partnership through Cargill Investor
Services, Inc. (in such capacity, the "Selling Agent"), a Delaware corporation,
an SEC-registered broker-dealer, and an NASD member firm, on a best efforts
basis pursuant to a Selling Agreement. The Selling Agent is not affiliated with
the General Partner, the Trading Advisor, BPL, or any of their affiliates. The
Selling Agent also acts as a Clearing Broker for the Partnership, and acts as a
selling agent and clearing broker for certain other investment funds sponsored
and/or traded by the Trading Advisor and its affiliates. The Selling Agent is
under no obligation to purchase Units, but is only required to use its best
efforts to sell Units to investors.
With the approval of the General Partner, the Selling Agent may appoint any
broker-dealer, which is registered as such with the SEC and is a member as such
of the NASD, to make offers or sales of Units. Additionally, with the approval
of the General Partner, the Selling Agent may appoint, under certain
circumstances, any foreign bank, dealer, institution, or individual which is
ineligible for, or not subject to, SEC registration or NASD membership to make
offers or sales of Units outside of the United States and its possessions and
territories.
The Selling Agent has agreed, under circumstances described in the Selling
Agreement, to indemnify the Partnership against certain liabilities, including
certain liabilities under the Securities Act of 1933 as amended, the Securities
Exchange Act of 1934 as amended, and the CEAct arising from specific conduct by
the Selling Agent.
UNITS MAY ONLY BE SOLD TO AND HELD BY (i) EMPLOYEES OF THE GENERAL PARTNER,
THE TRADING ADVISOR, ANY OF THEIR PRESENT OR FUTURE AFFILIATED ENTITIES, OR
THEIR SUCCESSORS OR ASSIGNS, (ii) THE GENERAL PARTNER, THE TRADING ADVISOR, ANY
OF THEIR PRESENT AND FUTURE AFFILIATED ENTITIES, AND THEIR SUCCESSORS AND
ASSIGNS, AND (iii) THE TUDOR INVESTMENT CORPORATION 401(k) SAVINGS AND PROFIT-
SHARING PLAN. See "TRANSFERS AND REDEMPTIONS--TRANSFERS."
Units and fractions of Units (to the fourth decimal place) are offered for
sale on a continuing basis (the "Continuing Offering") at quarterly closings
held in the sole discretion of the General Partner as of January 1, April 1,
July 1, and October 1 of each year or at such other times as the General
Partner may at its sole discretion determine (the "Quarterly Closings"). There
is no minimum offering amount. Units are sold at a price equal to 100% of the
Net Asset Value of a Unit as of the opening of business on the date of the
Quarterly Closing at which such Units are sold. During the Continuing Offering,
the Net Asset Value of a Unit may increase or decrease substantially between
the date of the submission of a subscription and the date of the Quarterly
Closing at which such subscription is accepted by the General Partner.
Consequently, a subscriber may receive at a Quarterly Closing more or fewer
Units and/or fractions of Units than would be received if the Quarterly Closing
were held on the date of the submission of the subscription.
The Continuing Offering will continue for as long as there are registered
Units which have not been subscribed for, unless the General Partner in its
sole discretion at any time or from time to time withdraws or discontinues the
Continuing Offering.
A subscription received and not immediately rejected by the General Partner
is held in a non-interest bearing escrow account (the "Escrow Account")
maintained with United States Trust Company of New York, located in New York,
New York (the "Escrow Agent"), until the General Partner either rejects such
subscription prior to the applicable Quarterly Closing or accepts such
subscription at such Quarterly Closing.
Neither the Partnership nor any investor will pay any selling commissions to
the Selling Agent in connection with subscriptions for Units. However, the
General Partner (out of its own funds) may reimburse the Selling Agent for
certain of its out-of-pocket administrative expenses and may otherwise
compensate the Selling Agent for its selling efforts, to the extent permitted
by applicable law. Historically, the Selling Agent has not requested, and has
not received, reimbursement for its expenses.
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SUBSCRIPTION PROCEDURE
The minimum subscription per subscriber is $1,000, and whole Units and
fractions of Units (to the fourth decimal place) may be subscribed for. Any
subscriber may subscribe for amounts of Units in excess of the foregoing
minimum in increments of $1,000.
To subscribe for Units, a subscriber must complete, date, and sign a
Subscription Agreement and other subscription documentation annexed hereto as
EXHIBIT B, EXHIBIT C, and/or EXHIBIT D, as applicable (the "Subscription
Agreement"), and must deliver the Subscription Agreement to the Selling Agent.
Subscription funds are due upon delivery of the Subscription Agreement. As
provided in the Subscription Agreement, a subscriber must pay for his
subscription by either (1) delivering to the Selling Agent a check payable to
"UNITED STATES TRUST COMPANY OF NEW YORK, AS ESCROW AGENT FOR TUDOR FUND FOR
EMPLOYEES L.P.", or (2) wire transferring Federal Funds to the Partnership's
escrow account designated as "CHASE MANHATTAN BANK, NEW YORK, NEW YORK, ABA
NO. 021000021, FOR CREDIT TO ACCOUNT NO. 9201073195, UNITED STATES TRUST
COMPANY OF NEW YORK, FOR FURTHER CREDIT TO SUBSCRIPTION ACCOUNT NO. 098791,
TUDOR FUND FOR EMPLOYEES L.P., REFERENCE: [SUBSCRIBER'S NAME]". Upon receipt of
subscription funds, the Selling Agent promptly delivers the subscription funds
to the Escrow Agent.
All subscriptions for Units are irrevocable. The General Partner, in its sole
discretion, may reject any subscription in whole or in part at any time prior
to acceptance. Subscriptions must be received at least (i) 2 full business days
in the case of checks drawn on New York City banks, (ii) 5 full business days
in the case of checks drawn on out-of-town banks, or (iii) 1 full business day
in the case of wire transfers, prior to any Quarterly Closing. If the General
Partner does not receive a subscription within the prescribed time period prior
to a Quarterly Closing, the subscription will be accepted or rejected at the
next following Quarterly Closing.
All Units subscribed for are issued subject to the collection of good funds.
If at any time good funds representing payment for Units are not made available
to the Partnership because a subscriber has failed to provide good funds, the
General Partner will cancel the Units issued to the subscriber, and the
subscriber's name will be removed as a Limited Partner from the books and
records of the Partnership. Any losses or profits sustained by the Partnership
in connection with the Partnership's trading allocable to such cancelled Units
will be deemed a decrease or increase in Net Assets and allocated among the
remaining Limited Partners. Each Limited Partner will reimburse the Partnership
for any expense and loss (including any trading loss) incurred in connection
with the issuance and cancellation of any Units issued to such Limited Partner.
PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS
Investment Considerations. The purchase of Units might or might not be a
suitable investment for an employee benefit plan. Before proceeding with such a
purchase, the person with investment discretion on behalf of an employee
benefit plan must determine whether the purchase of Units is (a) permitted
under the governing instruments of the plan, and (b) appropriate for the plan
in view of its overall investment policy, the composition and diversification
of its portfolio, and the considerations discussed below. In the case of
participant directed, individual account plans, the participant considering an
investment in Units must make these determinations with regard to such
participant's account.
For purposes of this discussion, the term "employee benefit plans" refers to
plans and accounts of various types (including their related trusts) which
provide for the accumulation of a portion of an individual's earnings or
compensation, as well as investment income earned thereon, free from United
States federal income tax until such time as funds are distributed from the
plan. Such plans include corporate pension and profit sharing plans, so-called
401(k) plans, so-called "Keogh" plans for self-employed individuals (including
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partners), "simplified employee pension plans," and, for purposes of this
discussion, Individual Retirement Accounts for persons (including employees and
self-employed persons) who receive compensation income as described in Section
408 of the Internal Revenue Code of 1986 as amended (the "Code"). As discussed
below, the General Partner has determined that the TIC 401(k) Plan will, at
present, be the only employee benefit plan permitted to invest in Units, and
the Limited Partnership Agreement places certain restrictions on the extent to
which any employee benefit plans in the aggregate may hold Units.
Appropriate fiduciaries acting on behalf of investors which are employee
benefit plans must complete in full, execute, and deliver to the General
Partner or the Selling Agent, as the case may be, (1) a Subscription Agreement
and Power of Attorney in the form provided by the General Partner and the
Selling Agent, and (2) a check made payable to "UNITED STATES TRUST COMPANY OF
NEW YORK, AS ESCROW AGENT FOR TUDOR FUND FOR EMPLOYEES L.P." for the full
amount of the subscription, or a federal funds wire transfer to the Escrow
Agent pursuant to the instructions provided in the Subscription Agreement. See
"SUBSCRIPTION PROCEDURE."
If the assets of an investing employee benefit plan were to be treated, for
purposes of the prohibited transaction and certain other of the fiduciary
responsibility provisions of Title I of the Employee Retirement Income Security
Act of 1974 as amended ("ERISA") and Section 4975 of the Code, as including the
underlying assets of the Partnership, an investment in Units would, in general,
be an inappropriate investment for the plan.
The Department of Labor (the "DOL") has published regulations (the
"Regulations") concerning whether or not the assets of an employee benefit plan
would be deemed to include any of the underlying assets of an entity, such as a
limited partnership, for purposes of the reporting, disclosure, and fiduciary
responsibility provisions of ERISA if the employee benefit plan acquires an
"equity interest" in such entity. The Regulations state that the underlying
assets of an entity will not be considered to be "plan assets" of an investing
employee benefit plan if (a) immediately after the most recent acquisition of
an equity interest in the entity, whether or not from the issuer or an
underwriter, less than 25% of the value of each class of equity interests in
the entity is held by "benefit plan investors" i.e.,--employee benefit plans
subject to ERISA, Individual Retirement Accounts, and other employee benefit
plans not subject to ERISA (for example, governmental plans and plans
maintained outside of the United States primarily for the benefit of persons
substantially all of whom are nonresident aliens), (b) the equity interests
acquired by employee benefit plans are "publicly-offered securities"--that is,
they are widely held, freely transferable, and registered pursuant to certain
provisions of the federal securities laws, or (c) the entity is an "operating
company" as defined in the Regulations.
The Partnership may issue Units to employee benefit plans meeting certain
criteria discussed below, and from time to time in the future employee benefit
plans might also acquire Units by transfer from existing Limited Partners. In
keeping with the Regulations, the General Partner does not intend to accept
subscriptions from an employee benefit plan, will not consent to the admission
of an employee benefit plan as a substituted Limited Partner, and will require
an employee benefit plan to which a transfer of Units has been made to redeem
part or all of its Units if, after giving effect to such subscription,
admission, or transfer, 25% or more of the value of all Units then outstanding
would be deemed to be held by "benefit plan investors." For purposes of this
25% standard, the value of equity interests held by the General Partner or
certain of its affiliates will be disregarded.
Pursuant to the Limited Partnership Agreement, the General Partner in its
sole discretion may, on five days' prior written notice, require a Limited
Partner to withdraw all or any portion of its investment in the Partnership for
any reason whatsoever, such as because the value of Units held by benefit plan
investors, when considered against pending redemptions by non-Plan Investor
Partners, would equal or exceed 25% of the value of all Units then outstanding,
or because Units may be deemed to constitute assets of benefit plan investors.
See "PRINCIPAL RISK FACTORS--LIMITED PARTNERS MAY BE REQUIRED TO WITHDRAW."
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Generally, Units may not be purchased with the assets of an employee benefit
plan if the General Partner or any of its affiliates either: (a) has investment
discretion with respect to the investment of such plan assets; (b) has
authority or responsibility to give or regularly gives investment advice with
respect to such plan assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such plan assets and that such advice will be based
on the particular investment needs of such plan; or (c) is an employer
maintaining or contributing to such plan. However, as authorized under the
Limited Partnership Agreement, the General Partner has determined that, unless
and until it decides to the contrary, the TIC 401(k) Plan (and no other plans)
will be allowed to invest in Units. Participants in the TIC 401(k) Plan should
review this Prospectus carefully before directing that any portion of their
accounts be invested in Units. Such participants should consider, among other
factors, the discussion set forth herein under "DESCRIPTION OF CHARGES TO THE
PARTNERSHIP."
After the considerations discussed above have been taken into account and if
the purchase of Units is permitted by the General Partner and under the
governing instruments of the employee benefit plan, the trustee or custodian of
the plan might decide or be instructed to subscribe for Units. A fiduciary
and/or plan participant subscribing for Units on behalf of a plan assumes
responsibility for evaluating the appropriateness of the investment and should
perform such person's duties with respect to the plan solely in the interest of
the participants of the plan and with the care, skill, and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of a similar enterprise.
Tax Considerations. Federal income tax consequences to employee benefit plans
that subscribe for Units differ from those consequences pertaining to other
types of Limited Partners based upon the Code and the rules and regulations
promulgated thereunder and existing interpretations thereof, any of which could
be changed at any time.
Pension, profit sharing, and stock bonus plans qualified under Section 401(a)
of the Code should consider the special tax rules relating to such plans before
investing in the Partnership. Such employee benefit plans are generally exempt
from federal income taxation except to the extent that their "unrelated
business taxable income" under Section 512 of the Code exceeds $1,000 for any
taxable year. Interest as well as gains or losses from the sale, exchange, or
other disposition of property (including commodity interest contracts), other
than inventory or property held primarily for sale in the ordinary course of
trade or business, are excluded from the computation of unrelated business
taxable income. The person with investment discretion on behalf of an employee
benefit plan who is considering the purchase of Units should consult a
professional tax adviser with regard to whether the purchase of Units might
give rise to "unrelated business taxable income" under Section 512 of the Code.
Although the IRS has issued favorable private letter rulings to taxpayers in
somewhat similar circumstances, and there exists a favorable memorandum by the
General Counsel of the IRS, other taxpayers may not use or cite such rulings or
memorandum as precedent. See "FEDERAL INCOME TAX ASPECTS."
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF EMPLOYEE BENEFIT PLANS IS IN NO
RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR THE PARTNERSHIP THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
SUCH PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.
TRANSFERS AND REDEMPTIONS
TRANSFERS
A Limited Partner may only transfer, assign, pledge, or encumber his Units
for the benefit of (i) another person who is an employee of the General
Partner, the Trading Advisor, any of their present or future affiliated
entities, or their successors or assigns, (ii) the General Partner, the Trading
Advisor, any of their
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present or future affiliated entities, or their successors or assigns, or (iii)
such other person or entity as the General Partner in its sole discretion may
determine, which to date has only been the TIC 401(k) Plan. A Limited Partner's
transferee, assignee, pledgee, or secured creditor may become a substituted
Limited Partner, provided that there is compliance with the transfer provisions
of the Limited Partnership Agreement, which provide, among other things, that:
(a) any transfer, assignment, pledge, or encumbrance of Units which is
permitted thereunder will be effective as of the last day of the calendar month
in which such transaction occurs, provided that the Partnership need not
recognize any transfer, assignment, pledge, or encumbrance until the General
Partner has received at its principal office at least 30 days' prior written
notice of such proposed transaction from the transferring Limited Partner; (b)
such notice is signed by the transferring Limited Partner and sets forth the
name, residence address, and social security or taxpayer identification number
of the proposed transferee, assignee, pledgee, or secured creditor, the number
of Units that are proposed to be transferred, assigned, pledged, or encumbered,
and a certification that the proposed transferee, assignee, pledgee, or secured
creditor is a person permitted by the Limited Partnership Agreement to own and
hold Units; and (c) the transferring Limited Partner's signature is guaranteed
by a commercial bank, a trust company, or a member of either a United States
registered national securities exchange or the NASD, other than a sole
proprietor.
A transfer, assignment, pledge, or encumbrance of Units will not be effective
and the General Partner need not recognize the transferee, assignee, pledgee,
or secured creditor as a substituted Limited Partner if such transaction: (1)
would be in violation of the Partnership Act; (2) would be in violation of
applicable federal or state securities law or any applicable foreign law; (3)
would adversely affect the classification of the Partnership as a partnership
for United States federal income tax purposes; (4) would cause the transfer,
assignment, pledge, or encumbrance to or for the benefit of a minor, an
incompetent, a person who will become insolvent after such transaction, or a
person not permitted to own and hold Units; (5) would adversely affect the
status of Limited Partners as limited partners under the Partnership Act; or
(6) would otherwise violate the Partnership Act or the transfer provisions of
the Limited Partnership Agreement. Any transferee, assignee, pledgee, or
secured creditor of Units who has not been admitted to the Partnership as a
substituted Limited Partner will not have any of the rights of a Limited
Partner, except that such person will receive the share of capital and profits
and will have the right of redemption to which his transferor, assignor,
pledgor, or debtor would otherwise have been entitled and will remain subject
to the other terms of the Limited Partnership Agreement binding upon Limited
Partners. A Limited Partner will bear all costs (including attorneys' and
accountants' fees and expenses) related to any transfer, assignment, pledge, or
encumbrance of his Units.
A Limited Partner and his assignee, transferee, pledgee, personal
representative, or estate may not withdraw any capital or profits from the
Partnership except by redemption of Units. The General Partner, without notice
to or consent of the Limited Partners, may withdraw any portion of its interest
in the Partnership which is in excess of the interest required of it under the
Limited Partnership Agreement.
REDEMPTIONS
Except as limited below, a Limited Partner may redeem all or part of his
Units as of the last day of any calendar quarter--March 31, June 30, September
30, and December 31--at the Net Asset Value thereof on such date. A Limited
Partner may redeem only in $1,000 increments and not in fractions of Units,
unless he is redeeming his entire interest in the Partnership. Moreover, a
Limited Partner may not make a partial redemption of Units which would reduce
the Net Asset Value of the Units retained by such Partner (after giving effect
to such redemption) to less than the amount of the minimum investment then
required of new Limited Partners by the Partnership, and any request for
partial redemption will be honored (to the nearest whole Unit) only to the
extent it complies with such limitation. Notwithstanding the foregoing, the
General Partner may, in its sole discretion, waive any of the foregoing
restrictions.
Redemptions are effective as of the close of business on the last day of the
calendar quarter during which a Request for Redemption in proper form is
received by the General Partner. A "Request for Redemption"
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is a letter in the form specified by the General Partner, sent by a Limited
Partner (or an assignee thereof) and received by the General Partner at least 5
business days prior to the end of the quarter in which redemption is to be
effective. A form of Request for Redemption is annexed to the Limited
Partnership Agreement as ANNEX A. Additional forms of Request for Redemption
may be obtained by written or telephone request to the General Partner.
Upon Redemption, a Limited Partner receives, for each full or partial Unit
redeemed, an amount equal to the Net Asset Value of such Unit as of the
redemption date, less any amount which is owed by such Partner to the General
Partner or the Partnership in accordance with the Limited Partnership
Agreement. For example, if, pursuant to applicable law, the Partnership has
been required to pay or withhold tax on certain income of the Partnership
allocable to a Limited Partner and the General Partner has paid such tax out of
its own funds (which the General Partner is not obligated to do), upon
redemption of Units by such Limited Partner the amount of the tax paid may be
deducted from the Net Asset Value of the redeemed Units. In addition, upon
redemption of Units, all amounts which are owed to the Partnership under the
indemnification provisions of the Limited Partnership Agreement or otherwise
will be deducted from the Net Asset Value of such Units. Limited Partners are
not charged any redemption fee.
The General Partner endeavors to pay redemptions no later than 20 business
days after the applicable redemption date, and the Partnership's commodity
interest contract positions will be liquidated to the extent necessary to
effect redemptions. Under certain circumstances (including but not limited to
the inability on the part of Partnership to liquidate positions or the default
or delay in payments due the Partnership from banks, brokers, dealers, or other
persons), the Partnership may delay payment to Limited Partners requesting
redemption of the proportionate part of the Net Asset Value of the Units
represented by the sums which are the subject of such default or delay. The
right to obtain payment on redemption is contingent upon (1) the Partnership
having assets on the redemption date sufficient to discharge its liabilities,
(2) the receipt by the General Partner of a Request for Redemption in a timely
manner as described above, and (3) otherwise satisfying the terms and
conditions set forth in the Limited Partnership Agreement.
The Limited Partnership Agreement also contains a mandatory redemption
provision. The General Partner may, in its sole discretion, require a Limited
Partner to withdraw entirely from the Partnership or to withdraw a portion of
the Limited Partner's unredeemed capital contribution and undistributed
profits, if any, as of the end of any month. The General Partner must give
written notice to the affected Limited Partner, which notice must be mailed at
least 5 business days prior to the applicable month-end. The Limited Partner
will be obligated to redeem his Units from the Partnership as of the end of the
month specified in such notice. The Limited Partner will receive an amount
equal to the Net Asset Value of the redeemed Units less any amounts owed by the
Limited Partner to the General Partner or the Partnership. The General Partner
intends generally to require the withdrawal of a Limited Partner who ceases to
be an employee or affiliate of the General Partner, the Trading Advisor, any of
their present or future affiliated entities, or their successors or assigns.
Also, affiliates of the General Partner have in the past required mandatory
redemptions of funds managed by them in order to reduce assets under the
management of the General Partner or its affiliates or to distribute trading
profits, and they (and the General Partner) may do so again in the future. See
"DISTRIBUTIONS."
The liability of Limited Partners (including the possible liability of a
Limited Partner who has redeemed Units, for liabilities of the Partnership
which arose before such redemption) is described under "THE LIMITED PARTNERSHIP
AGREEMENT--NATURE OF THE PARTNERSHIP."
Federal income tax aspects of redemptions are described under "FEDERAL INCOME
TAX ASPECTS."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. As of April 1, 1996, the
only persons who owned more than five percent (5%) of the outstanding interests
in the Partnership were:
<TABLE>
<CAPTION>
NAME(1) ADDRESS NO. UNITS PERCENT
- ------- ------- --------- -------
<S> <C> <C> <C>
Second Management Company, Inc. .... One Liberty Plaza 642.943 19.1%
(Succeeded by Second Management 51st floor
LLC) New York, NY 10006
Christian J. Hore................... Eastdale East Road 243.047 7.2%
St. Georges Hill
Weybridge Surrey KT13OLF
England
Mark A. Heffernan(2)................ 98 Frognal 208.496 6.2%
Hampstead NW3 England
Tudor Investment Corporation 401(k) One Liberty Plaza 183.001 5.4%
Savings and 51st Floor
Profit-Sharing Plan................ New York, NY 10006
James J. Pallotta................... 61 Bristol Road 178.754 5.3%
Wellesley, MA 02181
</TABLE>
Security Ownership of Management. As of April 1, 1996, the General Partner
and the executive officers and members of the Management Committee of the
General Partner collectively owned 43.5% of the outstanding interests in the
Partnership. As of April 1, 1996, in addition to the persons identified in the
table above, Patrick A. Keenan, a principal of both the General Partner and the
Trading Advisor, owned 36.53 Units (1.1%).
Changes in Control. On April 4, 1996, as part of the reorganization of the
Tudor Group of companies, the shareholders of Second Management Company, Inc.
("SMCI"), the immediately preceding general partner of the Partnership, merged
SMCI into Second Management LLC, a newly-formed Delaware limited liability
company and the general partner of the Partnership ("SML" or the "General
Partner"). The General Partner is owned by holding companies, and such holding
companies are owned by the former shareholders of SMCI in substantially the
same proportions that such shareholders formerly owned SMCI. The General
Partner acceded to all of the assets and liabilities of SMCI, including its
rights and obligations under the Partnership's Limited Partnership Agreement to
act as general partner of the Partnership. The members of the Management
Committee of the General Partner (formerly certain of the shareholders of SMCI)
do not believe that the merger has materially affected, or will materially
affect, the conduct of its business or financial condition. The individual
controlling persons, principals, officers, and employees have remained the
same, and no registration has been materially affected.
- --------
(1) The persons named in this table have sole voting and investment power with
respect to all interests in the Partnership shown as beneficially owned by
them, subject to community property or similar laws where applicable.
(2) Mr. Heffernan is a Director of the Trading Advisor and a member of the
Management Committee of the General Partner.
FEDERAL INCOME TAX ASPECTS
Introduction. The General Partner has been advised by its legal counsel,
Cadwalader, Wickersham & Taft, that, in its opinion, the following summary
correctly describes the material United States federal income and certain other
tax (herein "federal income tax") consequences to the Limited Partners of
owning Units. The discussion is based upon the Internal Revenue Code of 1986 as
amended (the "Code"), rulings thereon,
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regulations promulgated thereunder, and the existing administrative and
judicial interpretations thereof, any of which could be changed at any time and
which changes could be retroactive. This discussion in general relates only to
the tax implications of owning an interest in the Partnership by individuals
who are citizens or residents of the United States or its states, territories,
possessions, or areas subject to its jurisdiction. Except as indicated below or
under "PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS," this
discussion does not address the tax implications of owning an interest in the
Partnership by corporations, partnerships, trusts, and other non-individuals.
Moreover, this discussion is not intended as a substitute for careful tax
planning, particularly since certain of the tax consequences of owning an
interest in the Partnership may not be the same for all taxpayers, such as non-
individuals or foreign persons.
Partnership Status. The General Partner has been advised by its legal
counsel, Cadwalader, Wickersham & Taft, that, in its opinion under current
federal income tax law, the Partnership will be classified as a partnership and
not as an association taxable as a corporation. No ruling has been requested
from the Internal Revenue Service (the "IRS") with respect to the
classification of the Partnership, and the General Partner does not intend to
request such a ruling.
The advice of counsel described above is based upon the facts set forth
herein, including that: (i) the General Partner will maintain a net worth equal
to the sum of at least 10% of the total contributions to the Partnership by all
Partners; (ii) the General Partner's interest in each item of the Partnership's
income, gain, loss, deduction, or credit will be equal to at least 1% of each
such item; and (iii) a principal activity of the Partnership consists of buying
and selling of commodities not held as inventory or from futures, options, and
forward contracts with respect to such commodities, and at least 90% of the
Partnership's gross income consists of gains from such trading and interest
income.
Certain "publicly traded partnerships" are treated as corporations. While
this treatment does not affect the Partnership, new legislation governing the
taxation of limited partnerships may be enacted at any time and may apply to
the Partnership retroactively. If a partnership were classified as an
association taxable as a corporation, income or loss of such partnership would
not be passed through to its partners, and such partnership would be subject to
tax on its income without deduction for any distributions to its partners at
the rates applicable to corporations. In addition, all or a portion of any
distributions by such partnership to its partners could be taxable to the
partners as dividends or capital gains.
Partnership Taxation.
PARTNERS, RATHER THAN PARTNERSHIP, SUBJECT TO FEDERAL INCOME TAX. The
Partnership, as an entity, is not subject to federal income tax. Except as
provided below with respect to certain nonresident aliens, each Limited Partner
in computing his federal income tax liability for a taxable year is required to
take into account his distributive share of all items of Partnership income,
gain, loss, deduction, and credit for the taxable year of the Partnership
ending within or with the taxable year of such Partner, regardless of whether
such Partner has received any distributions from the Partnership. The
characterization of an item of profit or loss is usually determined at the
Partnership level.
ORGANIZATION AND SYNDICATION COSTS. Neither the Partnership nor any Partner
is entitled to any deduction for syndication expenses (i.e., amounts paid or
incurred in connection with issuing and marketing Units). The General Partner
initially paid the costs incurred in connection with the commencement of
operations of the Partnership (the "Organization Costs") and has been
reimbursed by the Partnership for such Organization Costs.
ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES. For federal income tax
purposes, a Limited Partner's distributive share of items of Partnership
income, gain, loss, deduction, and credit is determined by the Limited
Partnership Agreement, annexed hereto as EXHIBIT A, unless an allocation under
such Agreement does not have "substantial economic effect" or is not in
accordance with the Partners' interests in the
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Partnership. The allocations provided by the Limited Partnership Agreement are
described under "THE LIMITED PARTNERSHIP AGREEMENT--SHARING OF PROFITS AND
LOSSES: FEDERAL TAX ALLOCATIONS." In general, the Limited Partnership Agreement
allocates items of ordinary income and expense pro rata among the Partners
based upon their respective capital accounts as of the beginning of the month
in which such items accrue. Net realized capital gain or loss is generally
allocated among all Partners based upon their respective capital accounts.
However, net realized capital gain or loss is allocated first to Partners who
redeemed Units in the Partnership during a taxable year to the extent of the
difference between the amount received on redemption and the allocation account
as of the date of redemption attributable to the redeemed Units. Net realized
capital gain for each year is allocated next among all Partners whose capital
accounts are in excess of their Units' allocation accounts to the extent of
such excess in the ratio that each such Partner's excess bears to all such
Partners' excesses. Net realized capital loss for each year is allocated next
among all Partners whose Units' allocation accounts are in excess of their
capital accounts to the extent of such excess in the ratio that each such
Partner's excess bears to all such Partners' excesses.
These allocation provisions are designed to reconcile tax allocations to
economic allocations. However, no assurance can be given that the IRS will not
challenge such allocations, especially in light of recently-issued final
Treasury Regulations. Although the allocations are generally consistent with
recently-issued Treasury Regulations governing a "securities partnership," the
Partnership may not technically qualify as a "securities partnership."
Moreover, the application of such Regulations to the Partnership's tax
allocations in respect of investors that redeem Units during a taxable year is
unclear.
If the allocations provided by the Limited Partnership Agreement are not
recognized by the IRS for federal income tax purposes, the amount of income or
loss allocated to the Partners for federal income tax purposes under the
Limited Partnership Agreement may be increased or reduced or the character of
such income or loss may be modified.
Cash Distributions And Redemptions. Because of the special allocation of
Partnership gain or loss upon a redemption of Units, distributions by the
Partnership and amounts received upon the partial or complete redemption of a
Limited Partner's Units normally will not be taxable to the Limited Partner.
However, if cash distributions by the Partnership or amounts received upon
redemption by a Limited Partner exceed such Partner's adjusted tax basis in his
Units, the excess will be taxable to him as though it were a gain from a sale
of the Units. A loss will be recognized upon a redemption of Units only if,
following the redemption of all of a Limited Partner's Units, such Partner has
any tax basis in his Units remaining. In such case, the Limited Partner will
recognize loss to the extent of such remaining basis. See "PRINCIPAL RISK
FACTORS--PARTNER'S TAX LIABILITY MAY EXCEED DISTRIBUTIONS" and "PRINCIPAL RISK
FACTORS--REDEMPTION OF UNITS MAY PRODUCE NEGATIVE TAX CONSEQUENCES." Generally,
if a Limited Partner has held his interest in the Partnership for more than one
year, such gain or loss will be long-term capital gain or loss. Accordingly,
the special allocation of Partnership gain or loss pursuant to a redemption of
Units, which retains the same character as in the hands of the Partnership, may
alter the character of a redeeming Partner's income. See "FEDERAL INCOME TAX
ASPECTS--TAXATION OF LIMITED PARTNERS--TAX ON CAPITAL GAINS AND LOSSES."
Gain Or Loss On Trading Activity. Because the Partnership purchases commodity
interest contracts for its own account and not for the account of others and
because the Partnership does not maintain an inventory of commodity interest
contracts, except as described below with respect to certain foreign currency
gain or loss, certain periodic income from notional principal contracts (such
as swaps), and certain portions of the gain from "conversion transactions," for
federal income tax purposes the profit and loss generated by the Partnership
from its trading activities generally is capital gain and loss, which in turn
may be either short-term, long-term, or a combination of both. For individuals,
estates, and trusts, net long-term capital gains are taxed at a maximum
marginal rate of 28%, while other income is taxed at a maximum marginal rate of
39.6%. Corporate taxpayers are subject to a maximum marginal tax rate of 35% on
all income. Gain or loss with respect to a "Section 1256 contract" is generally
treated as short-term capital gain or loss to the extent of 40% of such gain or
loss, and long-term capital gain or loss to the extent of 60% of such gain or
loss
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("60/40 tax regime"). Accordingly, an individual's gains from a Section 1256
contract are taxed at a maximum rate of 32.64%. Gain or loss with respect to
capital assets that are not Section 1256 contracts or Section 988 contracts,
such as non-currency forward contracts and swap agreements, generally will be
long-term only if such property has been held for more than one year.
Some of the commodity interest contracts entered into pursuant to the
Partnership's trading activities are Section 1256 contracts. A Section 1256
contract includes a "regulated futures contract," a "foreign currency
contract," a "nonequity option," and a "dealer equity option." A "regulated
futures contract" is a futures contract which is traded on or subject to the
rules of a national securities exchange which is registered with the SEC, a
domestic board of trade designated as a contract market by the CFTC, or any
other board of trade, exchange, or other market designated by the Secretary of
the Treasury (a "qualified board or exchange") and which is "marked-to-market"
to determine the amount of margin which must be deposited or may be withdrawn.
A "foreign currency contract" is a contract which requires delivery of, or the
settlement of which depends upon the value of, a foreign currency which is a
currency in which positions are also traded through regulated futures
contracts, which is traded in the interbank market, and which is entered into
at arm's length at a price determined by reference to the price in the
interbank market. A "nonequity option" is an option which is traded on a
qualified board or exchange and the value of which is not determined directly
or indirectly by reference to any stock (or group of stocks) or stock index
unless (i) there is in effect a designation by the CFTC of a contract market
for a contract based on such group of stocks or stock index, or (ii) such
option is a cash-settled option on a stock index that the SEC has determined to
be "broad-based." A "dealer equity option" is, with respect to an options
dealer, any listed option which is an equity option, is purchased or granted by
such options dealer in the normal course of his activity of dealing in options,
and is listed on the qualified board or exchange on which such options dealer
is registered. Each Section 1256 contract held at the end of the Partnership's
taxable year will be treated as having been sold for its fair market value on
the last day of such taxable year, and gain or loss will be taken into account
for such year.
Currency gain or loss from transactions in physical currencies, debt
securities denominated in a foreign currency and certain other financial
instruments (other than regulated futures contracts and nonequity options) is
generally treated as ordinary income or loss under Section 988 of the Code.
With respect to foreign currency futures contracts or option contracts that are
not Section 1256 contracts or any foreign currency forward contract, any gain
or loss on such contracts will be ordinary unless (i) the contract is a capital
asset in the hands of the Partnership and is not part of a straddle
transaction, and (ii) the Partnership makes an election (by the close of the
day the transaction is entered into) to treat the gain or loss attributable to
such contract as capital gain or loss. In addition, gain or loss with respect
to foreign currency forward and futures contracts that are not traded on United
States exchanges or on certain foreign exchanges designated as "qualified
boards or exchanges" by the IRS ("foreign currency positions") is treated as
capital gain or loss if held by an electing "qualified fund." In general, a
"qualified fund" is an electing partnership that: (1) has at least 20 unrelated
partners (no one of which owns more than 20% of the capital or profits of the
partnership); (2) has as a principal activity the buying and selling of option,
futures, or forward contracts with respect to commodities; and (3) receives at
least 90% of its gross income from interest, dividends, gain from the sale or
disposition of capital assets held for the production of interest or dividends,
and income and gain from futures, forward, and option contracts with respect to
commodities. All such foreign currency positions held by a qualified fund are
treated as Section 1256 contracts (i.e., marked-to-market at year-end). Gain or
loss with respect to "regulated futures contracts," "foreign currency
contracts," and "nonequity options" is treated as 60% long-term gain or loss
and 40% short-term gain or loss, and gain or loss with respect to all other
foreign currency positions is treated as 100% short-term gain or loss. If the
General Partner does not make (or cannot make) the qualified fund election with
respect to the Partnership, the Partners may individually elect to have their
share of foreign currency gain or loss from the Partnership's currency futures
and options that are regulated futures contracts and nonequity options treated
as ordinary gain or loss, rather than 60% long-term and 40% short-term capital
gain or loss.
Subject to certain limitations, a Limited Partner, other than a corporation,
estate, or trust, may elect to carry back net Section 1256 contract losses to
each of the three preceding years. Net Section 1256 contract
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losses carried back to prior years may only be used to offset net Section 1256
contract gains. Generally, such losses are carried back as 40% short-term
capital loss and 60% long-term capital loss.
During taxable years in which little or no profit is generated from trading
activities, a Limited Partner may still have interest income.
The Partnership may engage in "spread and straddle" trading (i.e., holding
offsetting positions whereby the risk of loss from holding either or both
position(s) is substantially diminished). Realized losses with respect to any
position in a spread or straddle are taken into account for federal income tax
purposes only to the extent that the losses exceed unrecognized gain (at the
end of the taxable year) from offsetting positions, successor positions, or
offsetting positions to the successor positions. Thus, spreads or straddles may
not be used to defer gain from one taxable year to the next. For purposes of
applying the above rules restricting the deductibility of losses with respect
to offsetting positions, if a Partner takes into account gain or loss with
respect to a position held by the Partnership, the Partner will be treated as
holding the Partnership's position, except to the extent provided otherwise in
regulations. Accordingly, positions held by the Partnership may limit the
deductibility of realized losses sustained by a Limited Partner with respect to
positions held for his own account, and positions held by a Limited Partner for
his own account may limit his ability to deduct realized losses sustained by
the Partnership. Reporting requirements generally require taxpayers to disclose
all unrecognized gains with respect to positions held at the end of the taxable
year. The above principle, whereby a Limited Partner may be treated as holding
Partnership positions, may also apply to require a Limited Partner to
capitalize (rather than deduct) interest and carrying charges allocable to
property held by him.
Pursuant to current proposed and temporary United States Treasury
regulations, the holding period of any position included in a straddle begins
anew when the straddle is terminated unless the position was held for more than
the long-term capital gain and loss holding period before the straddle was
established. Further, the loss on any position included in a straddle will be
treated as a long-term capital loss if, at the time the loss position was
acquired, the taxpayer held offsetting positions with respect to such loss
position that would give rise only to long-term capital gain or loss if
disposed of on the same day. A portion of the gain on a "conversion
transaction," including certain spread and straddle trading, may be
characterized as ordinary income where substantially all the expected return is
attributable to the time value of the net investment in the transaction.
Where the positions of a straddle are comprised of both Section 1256 and non-
Section 1256 contracts, the Partnership will be subject to the mixed straddle
rules of the Code and the regulations promulgated thereunder. The appropriate
tax treatment of any gains and losses from trading in mixed straddles will
depend on which of the following four alternatives the General Partner elects
to pursue in respect of the Partnership. The General Partner may elect to treat
Section 1256 positions as non-Section 1256 positions, and the straddle would be
subject to the rules governing non-Section 1256 straddles. Alternatively, the
General Partner may identify the positions of a particular straddle as an
"identified mixed straddle" under Section 1092(b)(2) of the Code, and thereby
net the capital gain or loss attributable to the offsetting positions. The net
capital gain or loss is treated as 60% long-term and 40% short-term capital
gain or loss if attributable to the Section 1256 positions, or all short-term
capital gain or loss if attributable to the non-Section 1256 positions.
Alternatively, the General Partner may place the positions in a "mixed straddle
account" which is marked-to-market daily. Under a special account cap, not more
than 50% of net capital gain may be long-term capital gain and not more than
40% of net capital loss may be short-term capital loss. If the General Partner
does not make any of the aforementioned three elections (and, to date, it has
not), any net loss attributable to either the Section 1256 or the non-Section
1256 positions generally will be treated as 60% long-term and 40% short-term
capital loss.
Taxation Of Limited Partners.
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES. The amount of Partnership
loss, including capital loss, which a Limited Partner is entitled to take into
account for federal income tax purposes is limited
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to the lesser of the tax basis of such Partner's Units or (in the case of
certain Limited Partners, including individuals and closely-held C
corporations) the amount for which such Partner is "at risk" with respect to
such interest as of the end of the Partnership's taxable year in which such
loss occurs.
Generally, a Limited Partner's initial tax basis is the amount paid for each
Unit. A Limited Partner's adjusted tax basis is his initial tax basis reduced
by his share of Partnership distributions, losses, and expenses, and increased
by his share of Partnership income, including gains. The amount for which a
Limited Partner is "at risk" with respect to his interest in the Partnership is
generally equal to his tax basis for such interest, less (i) any amounts
borrowed in connection with his acquisition of such interest for which he is
not personally liable and for which he has pledged no property other than his
interest, (ii) any amounts borrowed from persons who have a proprietary
interest in the Partnership, and (iii) any amounts borrowed for which the
Limited Partner is protected against loss through guarantees or similar
arrangements.
Because of the limitations imposed upon the deductibility of capital losses
referred to below, a Limited Partner's share of the Partnership's net capital
losses, if any, will not materially reduce his federal income tax on his
ordinary income. In addition, certain expenses of the Partnership might be
deductible by a Partner only as so-called itemized deductions, and therefore
will not reduce the federal taxable income of a Partner who does not itemize
his deductions. Furthermore, an individual who is subject to the alternative
minimum tax for a taxable year will not realize any tax benefit from such
itemized deductions.
LIMITATIONS ON DEDUCTIBILITY OF PASSIVE LOSSES. In general, losses from a
passive activity ("passive losses") are disallowed to the extent such losses
exceed income from all passive activities ("passive income"). A passive
activity is defined as a trade or business in which the taxpayer does not
materially participate unless otherwise provided in United States Treasury
regulations.
The General Partner has been advised by its legal counsel that the trading of
personal property, such as commodities, is not treated as a passive activity
under proposed and temporary United States Treasury regulations. Accordingly, a
Limited Partner's distributive share of items of income, gain, deduction, or
loss from the Partnership will not be treated as passive income or loss, and
Partnership gains allocable to Limited Partners will not be available to offset
passive losses from sources outside the Partnership. Partnership gains
allocable to Limited Partners will, however, be available to offset losses with
respect to "portfolio" investments, such as stocks and bonds. Moreover, any
Partnership losses allocable to Limited Partners will be available to offset
other income, regardless of source. Final Treasury regulations may modify the
proposed and temporary regulations, and such regulations may be retroactive in
effect.
LIMITED DEDUCTION OF CERTAIN EXPENSES. Certain miscellaneous itemized
deductions are deductible only to the extent that they exceed 2% of the
adjusted gross income of an individual, trust, or estate. The Code also imposes
additional limitations on the amount of certain itemized deductions allowable
to individuals by reducing the otherwise allowable portion of such deductions
by an amount equal to the lesser of (i) 3% of the individual's adjusted gross
income in excess of certain threshold amounts and (ii) 80% of the amount of
certain itemized deductions otherwise allowable for the taxable year. Based
upon the contemplated activities of the Partnership, the General Partner has
been advised by its legal counsel that various expenses incurred by the
Partnership should not be subject to the 2% "floor" or the 3% "phase out"
except to the extent that the IRS promulgates regulations that so provide.
TAX ON CAPITAL GAINS AND LOSSES. For individuals, trusts, and estates, net
long-term capital gains are taxed at a maximum marginal rate of 28%, while
other income is taxed at a maximum marginal rate of 39.6%. Corporate taxpayers
are subject to a maximum marginal tax rate of 35% on all income.
The excess of capital losses over capital gains is deductible by an
individual against ordinary income on a dollar-for-dollar basis, subject to an
annual limitation of $3,000 ($1,500 for married individuals filing a separate
return). As such, capital losses can offset gain attributable to Partnership
ordinary income only to
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the extent of such limit. Accordingly, Partners may be required to pay tax on
such income even when losses are sustained by the Partnership. Excess capital
losses may be carried forward.
Net losses from Section 1256 contracts are treated as 60% long-term capital
loss and 40% short-term capital loss. Such losses may, at the individual
taxpayer's election, be carried back to each of the preceding three years and
applied against gains from Section 1256 contracts.
ALTERNATIVE MINIMUM TAX. An alternative minimum tax may be imposed on Limited
Partners, depending on their particular circumstances. This tax, with respect
to taxpayers other than corporations, will be assessed to the extent that 26%
of the first $175,000 ($87,500 for married individuals filing a separate
return) of "alternative minimum taxable income" in excess of the exemption
amount ($45,000 in the case of married taxpayers filing joint returns or a
surviving spouse, $33,750 in the case of an unmarried taxpayer who is not a
surviving spouse, or $22,500 in the case of a married individual filing a
separate return or an estate or trust) plus 28% of the balance of such excess
exceeds the taxpayer's regular federal income tax liability (subject to special
modifications) for the year. The alternative minimum tax exemption is phased
out for individual taxpayers with alternative minimum taxable income in excess
of $112,500 ($150,000 for married taxpayers filing a joint return and surviving
spouses, and $75,000 for married taxpayers filing separate returns, estates,
and trusts). "Alternative minimum taxable income" is equal to adjusted gross
income computed without deducting normal net operating losses, less specified
net operating losses, credits, trust distributions, and itemized deductions,
and increased by certain tax preferences. Long-term capital gains are taxed at
a maximum 28% rate for individuals, estates, and trusts. However, the
limitation on the long-term capital gains rate does not give rise to an
adjustment or increase in "alternative minimum taxable income." Therefore,
transactions in Section 1256 contracts should not directly affect the
application of the alternative minimum tax. The extent, if any, to which the
alternative minimum tax will be imposed will depend on the overall tax
situation of each Limited Partner at the end of each taxable year.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT INDEBTEDNESS. Interest
paid or accrued on indebtedness properly allocable to property held for
investment is investment interest. Such interest is generally deductible by
noncorporate taxpayers only to the extent it does not exceed net investment
income. A noncorporate Limited Partner's distributive share of net Partnership
income and any gain from the disposition of Units is treated as investment
income, except that a Limited Partner's net capital gain from the disposition
of Units is not investment income unless the Limited Partner waives the benefit
of the 28% tax rate on such gain. It is not clear whether a Limited Partner's
distributive share of Partnership net capital gain constitutes investment
income where such gain is taxed at the maximum 28% rate. Interest expense
incurred by a Limited Partner to acquire or carry his Units generally will be
investment interest. Any investment interest disallowed as a deduction in a
taxable year solely by reason of the limitation above is treated as investment
interest paid or accrued in the succeeding taxable year.
TAXATION OF FOREIGN LIMITED PARTNERS. A Limited Partner who is a nonresident
alien individual, foreign corporation, foreign partnership, foreign trust, or
foreign estate (a "Foreign Limited Partner") generally is not subject to
taxation by the United States on United States source capital gains from
commodity trading for a taxable year, provided that such Foreign Limited
Partner does not have certain present or former connections with the United
States (e.g., if the Foreign Limited Partner (in the case of an individual)
does not spend more than 182 days in the United States during his taxable year,
or if the Foreign Limited Partner is not (and has not been) engaged in a trade
or business within the United States during the taxable year to which income,
gain, or loss from the Partnership is treated as effectively connected). As
explained below, an investment in the Partnership should not, by itself, cause
a Foreign Limited Partner to be engaged in a trade or business within the
United States for the foregoing purposes.
Pursuant to a "safe harbor" provision of the Code, a Foreign Limited Partner
will not be engaged in a trade or business within the United States solely
because such Foreign Limited Partner is a limited partner of a partnership
which effects transactions in the United States in commodities for the
partnership's own
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account, as long as the partnership is not a dealer in commodities, the
partnership only trades commodities which are of a kind customarily dealt in on
an organized commodity exchange in transactions of a kind customarily
consummated on such an exchange, and the principal business of the partnership
is not trading in stocks or securities for its own account. It is anticipated
that the Partnership will not be trading in stocks or securities for its own
account as its principal business. It is anticipated that the Partnership's
commodity interest contract transactions should satisfy the safe harbor
provision. There is little guidance on whether certain types of transactions,
such as certain swap transactions, are properly viewed as transactions in
commodities, but the General Partner believes that such transactions should be
so classified. Accordingly, owning an interest in the Partnership should not,
by itself, cause a Foreign Limited Partner to be engaged in a trade or business
within the United States. In the event that future Partnership transactions are
not covered by the safe harbor, there is a risk that all of a Foreign Limited
Partner's distributive share of income of the Partnership will be treated as
effectively connected with the conduct of a trade or business in the United
States and taxed at regular rates (discussed previously) and, in the case of a
Foreign Limited Partner which is a foreign corporation, subject to an
additional 30% branch profits tax (unless reduced or eliminated by treaty).
If a Foreign Limited Partner is a dealer in commodities or otherwise is
engaged in a United States trade or business and if income, gain, or loss from
the Partnership is treated as effectively connected with such trade or
business, the Partnership may be required to withhold tax on income allocable
to such Foreign Limited Partner and remit to the IRS an amount equal to 39.6%
(35% in the case of corporations) of the amount of such effectively connected
taxable income allocable to such Foreign Limited Partner. Any amounts remitted
will constitute a refundable credit against the Foreign Limited Partner's
United States federal income tax liability, which can be claimed on the Foreign
Limited Partner's U.S. federal income tax return.
A Foreign Limited Partner generally is subject to a 30% withholding tax
(unless reduced or exempted by treaty) on certain types of United States source
income which are not effectively connected with the conduct of a United States
trade or business, such as certain interest-bearing obligations, the income
attributable to which is not exempt from tax. This tax must be withheld by the
person having control over the payment of such income. Accordingly, the
Partnership may be required to withhold tax on items of such income which are
included in the distributive share (whether or not actually distributed) of a
Foreign Limited Partner. However, 30% withholding is not required in respect of
certain interest-bearing obligations, such as United States Treasury securities
issued after July 18, 1984 (where procedural requirements are met). If the
Partnership is required to withhold tax on the income of a Foreign Limited
Partner, the General Partner may pay such tax out of its own funds and then be
reimbursed out of the proceeds of any distribution to, or redemption of, Units
by the Foreign Limited Partner.
The estate of a deceased Foreign Limited Partner may be liable for U.S.
estate tax, and may be required to obtain an estate tax release from the IRS in
order to transfer the Units of such Foreign Limited Partner.
FOREIGN PERSONS SHOULD CONSULT THEIR OWN TAX ADVISERS BEFORE DECIDING WHETHER
TO INVEST IN THE PARTNERSHIP.
TAX ELECTIONS. The Code provides for optional adjustments to the basis of
Partnership property upon distributions of Partnership property to a Partner
(Section 734) and transfers of Units, including transfers by reason of death
(Section 743), provided that the Partnership has made an election pursuant to
Section 754. As a result of the complexities and added expense of the tax
accounting required to implement such an election, the General Partner does not
presently intend to make such an election in respect of the Partnership.
Therefore, any benefits which might be available to Partners by reason of such
an election will be foreclosed.
TAX RETURNS AND INFORMATION. The General Partner files the Partnership's
information return using the accrual method of accounting. The General Partner
endeavors to furnish each Limited Partner (and the assignee of the Units of any
Limited Partner), within 75 days after the close of the Partnership's taxable
year, copies of (i) the Partnership's Schedule K-1 indicating the Limited
Partner's distributive share of tax items
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and (ii) such additional information as is reasonably necessary to permit the
Limited Partners to prepare their own federal and state tax returns.
PARTNERSHIP'S TAX ACCOUNTING. The Partnership has the calendar year as its
taxable year.
UNRELATED BUSINESS TAXABLE INCOME OF EMPLOYEE BENEFIT PLAN LIMITED PARTNERS
AND OTHER TAX-EXEMPT INVESTORS. Income allocated to a Limited Partner which is
an employee benefit plan or other tax-exempt entity (including Plan Investor
Partners) should not be subject to tax under Section 511 of the Code. See
"PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS."
TAX AUDITS. All Partners are required under the Code to report all
Partnership items on their own income tax returns consistent with the treatment
by the Partnership, unless they file a statement with the IRS disclosing the
inconsistencies. Adjustments in tax liability with respect to Partnership items
are made at the Partnership level.
The General Partner will be the "Tax Matters Partner," and will represent the
Partnership during any audit and in any dispute with the IRS. Each Limited
Partner will be informed by the General Partner of the commencement of an audit
of the Partnership. In general, the Tax Matters Partner has the authority to
bind certain Limited Partners (i.e., Limited Partners owning less than a 1%
profits interest in the Partnership) to settlement agreements. However, prior
to any such settlement, any such Limited Partner may file a statement with the
IRS stating that the Tax Matters Partner does not have the authority to settle
on behalf of such Limited Partner.
The period for assessing a deficiency against a partner in a partnership,
such as the Partnership, with respect to a partnership item is the later of
three years after the partnership files its return or, if the name and address
of the partner does not appear on the partnership return, one year after the
IRS is furnished with the name and address of the partner. The General Partner
may consent on behalf of the Partnership to the extension of the period for
assessing a deficiency with respect to a Partnership item. As a result, a
Limited Partner's federal income tax return may be subject to examination and
adjustment by the IRS for a Partnership item more than three years after it has
been filed.
----------------
All of the foregoing statements are based upon the existing provisions of the
Code, the regulations promulgated thereunder, and the existing administrative
and judicial interpretations thereof. No assurance can be given that
legislative, administrative, or judicial changes will not occur which will
modify such statements.
The foregoing statements are not intended as a substitute for careful tax
planning, particularly since certain of the federal income tax consequences of
an interest in the Partnership may not be the same for all taxpayers. There can
be no assurance that the Partnership's tax return will not be audited by the
IRS or that no adjustments to the return will be made as a result of such
audits. If an audit results in adjustment, Limited Partners may be required to
file amended returns and their returns may be audited. Accordingly, prospective
investors are urged to consult their own tax advisers with specific reference
to their own tax situation under federal law and the provisions of applicable
state, local, and foreign laws before subscribing for Units.
STATE AND LOCAL INCOME TAX ASPECTS
In addition to the federal income tax consequences described under "FEDERAL
INCOME TAX ASPECTS," the Partnership and the Limited Partners may be subject to
various state and local taxes. A Limited Partner's distributive share of the
realized profits of the Partnership may be required to be included in
determining such Partner's reportable income for state or local tax purposes.
For example, Delaware, under whose law the Partnership is formed, does not
impose an income tax on the Partnership with respect to its
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income, but does impose an income tax on (i) each Partner who is a resident of
Delaware and (ii) each Partner who is not a resident of Delaware based upon
such Partner's share of any income derived from the Partnership's activities
having sources within Delaware.
State and local taxation of gains and losses from the Partnership may not
reflect recent changes made to income tax law, and hence may be inconsistent
with the federal income tax treatment of such gains and losses. Furthermore,
state and local taxation of gains and losses from Section 1256 contracts may be
inconsistent with the treatment of such gains and losses for federal income tax
purposes. Accordingly, prospective investors should consult with their own tax
advisers concerning the applicability of state and local taxes to an investment
in the Partnership.
The General Partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that the Partnership should not be liable for New York City
unincorporated business tax. Limited Partners who are nonresidents of New York
State should not be liable for New York State personal income tax on their
income from the Partnership. Likewise, Limited Partners who are nonresidents of
New York City should not be liable for New York City earnings tax on their
income from the Partnership. Limited Partners who are New York City residents
may be subject to New York City personal income tax on their income from the
Partnership. Because the Partnership conducts its business in the State and
City of New York, corporate Limited Partners may be subject to the New York
State franchise tax and the New York City general corporation tax by reason of
their investment in the Partnership, unless certain exceptions apply. However,
under recently-issued regulations, the Partnership may qualify as a "portfolio
investment partnership" if it meets an annual gross income test, in which case
non-New York corporate Limited Partners not otherwise subject to New York State
franchise tax might not be subject to such tax solely by reason of their
investment in the Partnership. No ruling from the New York State Department of
Taxation and Finance or the New York City Department of Finance has been, or
will be, requested regarding such matters.
LIMITED PARTNERS MUST CONSULT THEIR OWN ADVISERS REGARDING THE POSSIBLE
APPLICABILITY OF STATE, LOCAL, OR MUNICIPAL TAXES TO AN INVESTMENT IN THE
PARTNERSHIP.
POTENTIAL ADVANTAGES OF AN INVESTMENT IN THE PARTNERSHIP
An investment in the Partnership is speculative and involves risks. See
"PRINCIPAL RISK FACTORS." However, such an investment offers the following
potential advantages.
Market Diversification. An investor who is not prepared to spend substantial
time trading various commodity interest contracts individually nevertheless may
participate in the commodity markets through an investment in the Partnership,
thereby obtaining diversification from investments in stocks, bonds, and real
estate. The Trading Advisor believes, on the basis of past experience, that the
profit potential of the Partnership does not depend upon favorable general
economic conditions, and that the Partnership is as likely to be profitable
during periods of declining markets as at any other time; conversely the
Partnership may be unprofitable (as well as profitable) during periods of
generally favorable economic conditions.
Commodity Interest Contract Diversification. The Trading Advisor generally
trades between 5 and 30 types of commodity interest contracts, but may trade a
greater or lesser number of contracts from time to time. The Partnership is
designed to afford investors a convenient vehicle for participating in a
diverse range of world markets and positions within each market. Each Limited
Partner obtains greater diversification in commodity interest contracts traded
than would be possible trading individually, unless substantially more than the
required minimum investment of $1,000 were committed to the commodities
markets. See "THE TRADING ADVISOR."
Limited Liability. Unlike an individual who invests directly in commodity
interest contracts, a Limited Partner cannot be subjected individually to
margin calls and cannot lose more than the amount of his
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unredeemed capital contribution and undistributed profits, if any, and under
certain limited circumstances amounts received by such Limited Partner as
distributions and redemptions and interest thereon. See "THE COMMODITIES
MARKETS," "THE LIMITED PARTNERSHIP AGREEMENT--NATURE OF THE PARTNERSHIP," and
"TRANSFERS AND REDEMPTIONS."
Professional Trading Management. Trading decisions for the Partnership are
made by TIC. See "THE TRADING ADVISOR." The Trading Advisor's trading program
is not available for investments as small as the required minimum investment in
the Partnership. In addition, the rates for management and incentive fees
payable by the Partnership are approximately one-half the rates normally
charged to other customer accounts managed by the Trading Advisor and its
affiliates. The actual performance record of the Partnership is described under
"PERFORMANCE RECORD OF THE PARTNERSHIP. No assurance is given that the
Partnership will not incur substantial losses in the future.
Interest Income. A portion of the Partnership's assets is deposited and
maintained in cash with the Partnership's Clearing Brokers and with BPL. At the
direction of the General Partner, such brokers and dealers invest such assets
in United States Treasury bills, or periodically credit all or a portion of the
Partnership's assets with interest at a rate approximately equivalent to the
prevailing Treasury bill rate, or do a combination of both. The balance of the
Partnership's assets normally is held either in United States Treasury bills or
notes at a Federal Reserve Bank or Clearing Broker or in other short-term
investments, including interest-bearing accounts at banks, certificates of
deposit, and commercial paper. The General Partner endeavors to earn interest
on all of the Partnership's assets, although balances denominated in certain
foreign currencies do not earn interest. See "INVESTMENT PROGRAM AND USE OF
PROCEEDS."
Brokerage Commissions. The Partnership pays to its Clearing Brokers brokerage
commissions and other transaction fees at rates which are competitive with
rates charged to large funds and other institutional traders. Such rates are
generally lower than could be obtained by an individual investor unless
substantially more than the minimum investment of $1,000 was deposited with
such investor's broker. See "DESCRIPTION OF CHARGES TO THE PARTNERSHIP" and
"BROKERAGE ARRANGEMENTS."
Administrative Convenience. The Partnership is structured to provide Limited
Partners with numerous services designed to alleviate the administrative
details involved in engaging directly in commodity interest contract trading,
and provides monthly and annual financial reports showing, among other things,
the Net Asset Value of a Unit, trading profits or losses, and expenses. See
"THE LIMITED PARTNERSHIP AGREEMENT."
AUDITORS
The independent public accounting firm retained by the Partnership and the
General Partner is Arthur Andersen LLP, 1345 Avenue of the Americas, New York,
New York 10105.
LEGAL MATTERS
Legal matters in connection with the Units have been passed upon for the
Partnership and the General Partner by Cadwalader, Wickersham & Taft, 100
Maiden Lane, New York, New York 10038. Cadwalader, Wickersham & Taft also
serves as regular legal counsel for the General Partner, and advises the
General Partner with respect to its responsibilities as general partner of, and
with respect to matters pertaining to, the Partnership. Cadwalader, Wickersham
& Taft also serves as regular legal counsel to the Trading Advisor, BPL, and
the affiliates of the foregoing.
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ADDITIONAL INFORMATION
This Prospectus does not contain all of the information set forth in the
Registration Statement and the Exhibits relating thereto that have been filed
with the Securities and Exchange Commission (the "SEC") in Washington, D.C. For
further information pertaining to the Partnership and the Units offered hereby,
reference is hereby made to the Registration Statement, including the Exhibits
filed as part thereof. The Registration Statement and Exhibits as well as all
reports, proxy, and information statements and any other information filed by
or with respect to the Partnership are on file at the offices of the SEC, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at its regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and may be
examined, without charge, at the offices of the SEC and at the regional offices
described above, and copies may be obtained of all or part thereof from the SEC
upon payment of the prescribed fees.
GLOSSARY
CERTAIN TERMS AND DEFINITIONS
Knowledge of various terms and concepts relating to commodity interest
contract trading and this offering is necessary for a prospective investor to
determine whether to invest in the Partnership.
"affiliate"--an affiliate of a person means (i) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly owning, controlling, or holding with power to vote 10% or more of
the outstanding voting securities of such person; (ii) any partnership,
corporation, association, or other legal entity 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held with power to vote by such person; (iii) any natural person, partnership,
corporation, association, or other legal entity directly or indirectly
controlling, controlled by, or under common control with, such person; or (iv)
any officer, director, or partner of such person.
"break-even point"--the profit that the Partnership must realize in the first
year of a participant's investment to equal all fees and expenses, such that
the participant will recoup its initial investment.
"brokerage commissions"--the fee charged by a broker or dealer for executing
a trade in a commodity interest contract trading account of a customer. The
Clearing Brokers charge the Partnership brokerage commissions at roundturn
rates of between $9.14 and $21.14 for futures and option trades on United
States exchanges (such rates include all transaction costs in connection with
trading activities, including floor brokerage, exchange, clearing,
clearinghouse, and NFA fees). For trades effected on exchanges and markets
located outside of the United States, the rates charged per transaction are
generally higher than the rates for transactions on United States exchanges.
"call option"--an option which gives the buyer the right, but not the
obligation, to take a long position in the underlying futures contract or
physical commodity related to such option.
"churning"--engaging in excessive trading with respect to a commodity
interest contract trading account for the purpose of generating brokerage
commissions.
"commodity exchange"--a centralized market facility for trading futures
contracts and options thereon relating to specified commodities.
"commodity pool operator"--any person engaged in a business which is of the
nature of an investment trust, syndicate, or similar form of enterprise and
who, in connection therewith, solicits, accepts, or receives from others funds,
securities, or property, either directly or through capital contributions, the
sale of stock,
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other forms of securities, or otherwise, for the purpose of trading futures
contracts and options thereon on commodity exchanges.
"commodity trading advisor"--any person who for compensation engages in the
business of advising others, either directly or indirectly, as to the value of
or the advisability of trading futures contracts or options thereon.
"daily price fluctuation limits"--limits imposed by commodity exchanges on
the amount of fluctuation in futures and option contract prices during a single
trading day (or part thereof).
"forward contract"--a contractual right to purchase or sell a specified
quantity and type of a commodity at a specified date and place in the future at
a specified price. It is distinguished from a futures contract in that it is
not traded on an exchange and it contains terms and conditions specifically
negotiated by the parties.
"futures commission merchant"--a firm engaged in soliciting or accepting
orders for the purchase or sale of futures contracts and options thereon on
commodity exchanges and that in connection with such solicitation or acceptance
of orders accepts any money, securities, or property (or extends credit in lieu
thereof) to margin, guarantee, or secure any trades or contracts that result
therefrom.
"futures contract"--a standardized contract made on a commodity exchange
which calls for the future delivery of a specified quantity and type of a
commodity at a specified price, time, and place.
"halfturn commission"--with respect to option contracts, a halfturn
commission is charged for the establishment of a position and another halfturn
commission is charged for the liquidation of such position.
"limit order"--an order to execute a trade at a specified price or better. As
contrasted with a stop order, a limit order does not become a market order when
the limit price is reached.
"long position"--when a trader purchases a commodity interest contract in the
relevant market.
"margin"--good faith deposits with a broker to ensure fulfillment of a
purchase or sale of a futures contract or, under certain circumstances, an
option contract.
"market order"--an order to execute a trade at the prevailing price as soon
as possible.
"Net Assets"--the total assets of the Partnership (including but not limited
to all cash and cash equivalents (valued at cost), accrued interest and
amortization of original issue discount, and the market value of all open
commodity interest contract positions and all other assets of the Partnership)
less the total liabilities of the Partnership (including but not limited to
legal, accounting, and auditing fees, organizational and offering expenses,
brokerage commissions and fees and other transaction costs, management fees and
incentive fees, and extraordinary expenses, whether incurred or accrued),
determined in accordance with the principles specified in the Limited
Partnership Agreement or, where no principle is specified, in accordance with
U.S. generally accepted accounting principles consistently applied under the
accrual basis of accounting. The market value of a commodity interest contract
traded on a United States exchange or market means the settlement price on the
exchange or market on which the particular commodity interest contract is
traded by the Partnership on the day with respect to which Net Assets is
determined; provided, however, that if a commodity interest contract could not
have been liquidated on such day due to the operation of daily price
fluctuation limits or other rules of the exchange or market upon which that
contract was traded or otherwise, the settlement price on the first subsequent
day on which the commodity interest contract could have been liquidated is the
market value of such contract for such day. The market value of a forward
contract, a futures contract traded on a foreign exchange or market, a swap
contract, or other off-exchange contract, instrument, or transaction (including
but not limited to an over-the-counter commodity option) means its market value
as determined by the General Partner on a basis consistently applied.
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"Net Asset Value per Unit"--the Net Assets allocated to capital accounts
represented by Units of Limited Partnership Interest divided by the number of
such Units outstanding on the date of calculation.
"option"--an option on a futures contract or a physical commodity gives the
buyer of the option the right, but not the obligation, to take a position at a
specified price in the related underlying futures contract or commodity.
"organizational and offering expenses"--costs incurred in the organization of
the Partnership and the offering of Units, including legal, accounting and
auditing fees, printing costs, filing fees, escrow agent fees, sales and
marketing costs, and other related expenses.
"principal"--when referring to a person that is a principal of a particular
entity, means: (i) any person having the power to exercise a controlling
influence over the activities of the entity; (ii) any holder or beneficial
owner of ten percent or more of any class of outstanding interest in the
entity; and (iii) any person who has contributed ten percent or more of the
capital of the entity.
"put option"--an option which gives the buyer the right, but not the
obligation, to take a short position in the underlying futures contract or
physical commodity related to such option.
"pyramiding"--using unrealized profits on existing positions in a given
commodity interest contract due to favorable price movements as margin
specifically to buy or sell additional positions in the same or a related
commodity interest contract.
"realized profit or loss"--the profit or loss which is recognized after an
open position is closed out at the current settlement price.
"roundturn commission"--commodity brokerage commissions for trades on
exchanges which are generally paid on the completion or liquidation of a trade
and which cover both the initial purchase (or sale) of a commodity interest
contract and the subsequent offsetting sale (or purchase) of such contract.
"settlement price"--the closing price for futures or option contracts in a
particular commodity established by the exchange or clearinghouse after the
close of each day's trading.
"short position"--when a trader sells a commodity interest contract in the
relevant market.
"speculative position limits"--limits established by the CFTC and United
States commodity exchanges on the maximum net long or short speculative
positions which a person or group of persons may hold, own, or control in
certain commodity interest contracts.
"spot contract"--a cash market transaction in which the buyer and seller
agree to the immediate purchase and sale of a specific amount of a commodity,
usually with a two-day settlement date.
"stop order"--an order given to a broker to execute a trade in a commodity
interest contract when the contract price reaches the specified stop order
price. Stop orders become market orders when the stop price is reached.
"Trading Profits"--net trading profits (realized and unrealized) attributable
solely to commodity interest contract trading by the Trading Advisor as of the
end of a calendar quarter, increased by any decline in Net Asset Value on
redeemed Units and decreased by certain expenses allocable to the Partnership's
assets, with such profits and items of increase and decrease determined from
the end of the last calendar quarter in which an incentive fee was earned by
the Trading Advisor to the end of the calendar quarter as of which such
incentive fee calculation is being made. Trading Profits do not include any
interest income earned by the Partnership on its assets.
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"transaction fees and costs"--brokerage commissions, floor brokerage fees,
exchange fees, clearing fees, clearinghouse fees, exchange, regulatory, and
self-regulatory (including NFA) fees, give-up fees, transfer fees, dealer fees,
mark-ups, custodial fees, delivery, insurance, and storage costs, and other
fees, charges, expenses, and costs associated with the trading of commodity
interest contracts.
"unrealized profit or loss"--the profit or loss which could be realized on an
open position if it were closed out at the current settlement price or market
value.
BLUE SKY GLOSSARY
Prospective investors should be aware of the following definitions, reprinted
verbatim from the "Guidelines for Registration of Commodity Pool Programs"
adopted by the North American Securities Administrators Association, Inc., as
revised in September 1993 (the "Guidelines"), which Guidelines are applied by
certain state securities administrators in reviewing public offerings of
"commodity pools" (such as the Partnership). For ease of reference, each of
these definitions is followed by the comparable defined terms used in the
Limited Partnership Agreement or this Prospectus, in brackets.
"Affiliate"--an Affiliate of the General Partner means (a) any natural
person, partnership, corporation, association, or other legal entity directly
or indirectly owning, controlling, or holding with power to vote 10% or more of
the outstanding voting securities of the General Partner; (b) any natural
person, partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by the General Partner; (c) any natural
person, partnership, corporation, association, or other legal entity directly
or indirectly controlling, controlled by, or under common control with the
General Partner; or (d) any officer or director of the General Partner.
["Affiliate"--Page A-30]
"Capital Contributions"--the total investment in a Program by a Participant
or by all Participants, as the case may be. ["Unit of General Partnership
Interest"--Page A-4; "Unit of Limited Partnership"--Pages A-3 and A-5]
"Commodity Broker"--any person who engages in the business of effecting
transactions in Commodity Contracts for the account of others or for his own
account. ["brokers"--Page A-17; "Clearing Broker"--Page 50; "BPL"--Page 61]
"Commodity Contract"--a contract or option thereon providing for the delivery
or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point. ["commodity interest
contracts"--Pages A-2 and 2; "futures contracts"--Page 61; "spot and forward
contracts"--Page 62; "swap transaction"--Page 13; "option"--Page 64]
"Net Assets"--the total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net Assets
shall include any unrealized profits or losses on open positions, and any fee
or expense including Net Asset fees accruing to the Program. ["Net Assets" and
"Net Asset Value per Unit"--Pages A-11-A-12]
"Net Worth"--the excess of total assets over total liabilities as determined
by generally accepted accounting principles. Net Worth shall be determined
exclusive of home, home furnishings, and automobiles. ["net worth,"--as regards
subscribers' investment requirements, is referenced on Pages 1, B-3 and D-1; as
regards the General Partner's net worth requirement, Page A-4]
"Participant"--the holder of a Program Interest. ["General Partner," "Limited
Partners," "Partners"--Page A-1]
"Person"--any natural Person, partnership, corporation, association, or other
legal entity. [No comparable term]
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"Program"--a limited partnership, joint venture, corporation, trust, or other
entity formed and operated for the purpose of investing in Commodity Contracts.
["Partnership"--Page A-1]
"Pyramiding"--a method of using all or part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities. ["Pyramiding"--Page A-18]
"Sponsor"--any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the
Organizational Expenses of the Program, the general partner(s), and any other
Person who regularly performs or selects the Person who performs services for
the Program. Sponsor does not include wholly independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services rendered in connection with the offering of the Units.
The term "Sponsor" shall be deemed to include its Affiliates. ["General
Partner"--Page A-1; "Trading Advisor"--Page 44]
"Valuation Date"--the date as of which the Net Assets of the Program are
determined. [No comparable term. For purposes of determining allocations to the
capital accounts, Net Assets and Net Asset Value per Unit are determined as of
the last day of each calendar month--Page A-8. For purposes of redemptions, Net
Assets and Net Asset Value per Unit are determined as of the last day of each
calendar quarter--Page A-25. For purposes of subscriptions, Net Assets and Net
Asset Value per Unit are determined as of the first day of each calendar
quarter--Page A-4]
91
<PAGE>
I affirm that, to the best of my knowledge and belief, the information contained
in the attached financial statements of Tudor Fund For Employees L.P. for the
years ended December 31, 1995 and 1994, is accurate and complete.
/s/ Mark F. Dalton
--------------------
Mark F. Dalton
President & Chief Operating Officer
Second Management Company, Inc.
General Partner
/s/ Patrick A. Keenan
----------------------
Patrick A. Keenan
Vice President & Chief Financial Officer
Second Management Company, Inc.
General Partner
February 12, 1996
F-1
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
----------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1995 AND 1994
--------------------------------
TOGETHER WITH AUDITORS' REPORT
------------------------------
F-2
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
-----------------------------------------
To the Partners of Tudor Fund For Employees L.P.:
We have audited the accompanying statements of financial condition of Tudor Fund
For Employees L.P. (a Delaware limited partnership) as of December 31, 1995 and
1994, and the related statements of operations and changes in partners' capital
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tudor Fund For Employees L.P.
as of December 31, 1995 and 1994, and the results of its operations for the
years then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 12, 1996
F-3
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
------ --------------------------
Cash $2,986,405 $2,042,560
U.S. Government obligations -- 787,885
Equity in commodity trading accounts:
Cash 1,349,843 409,469
U.S. Government Obligations 4,845,289 4,110,681
Net unrealized gain on open commodity 142,353 28,292
interests
--------------------------
Total equity 6,337,485 4,548,442
Organizational Costs -- 5,000
--------------------------
Total assets $9,323,890 $7,383,887
==========================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Pending partner additions $ 718,024 $ 468,798
Redemptions payable 392,382 161,442
Incentive fee payable 42,095 --
Management fee payable 13,636 1,473
Payable to general partner -- 5,833
Accrued professional fees and other 44,360 34,831
----------------------
Total liabilities 1,210,497 672,377
----------------------
PARTNERS' CAPITAL:
Limited Partners, 10,000 units
authorized and 2,190.191 and
2,409.778 units outstanding as of
December 31, 1995 and 1994 6,272,162 5,297,977
General Partner, 642.943 units
outstanding as of
December 31, 1995 and 1994 1,841,231 1,413,533
----------------------
Total partners' capital 8,113,393 6,711,510
----------------------
Total liabilities and partners' $9,323,890 $7,383,887
capital
=======================
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
-------------------------
REVENUES:
Net realized trading gain $2,134,865 $ 856,023
Change in net unrealized trading gain 113,562 (102,245)
(loss)
Interest income 409,148 274,503
-------------------------
Total revenues 2,657,575 1,028,281
-------------------------
EXPENSES:
Brokerage commissions and fees 158,461 187,625
Management fee 155,378 150,566
Incentive fee 194,603 66,867
Amortization expense 5,000 10,000
Professional fees and other 95,409 87,751
Total expenses 608,851 502,809
-------------------------
Net income $2,048,724 $ 525,472
=========================
Limited Partners' Net income $1,621,026 $ 394,814
General Partner's Net income 427,698 130,658
-------------------------
Net income $2,048,724 $ 525,472
=========================
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIMITED PARTNERS GENERAL PARTNER TOTAL NET ASSET VALUE
UNITS CAPITAL UNITS CAPITAL CAPITAL PER UNIT
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Partners' Capital, January 1, 1994 2,379.394 $ 4,894,911 1,595.791 $ 3,282,875 $8,177,786 $2,057.21
Net income --- 394,814 --- 130,658 525,472
Capital contributions 781.172 1,615,000 --- --- 1,615,000
Redemptions (750.788) (1,606,748) (952.848) (2,000,000) (3,606,748)
---------------------------------------------------------------------------------
Partners' Capital, December 31, 1994 2,409.778 5,297,977 642.943 1,413,533 6,711,510 $2,198.53
---------------------------------------------------------------------------------
Net income --- 1,621,026 --- 427,698 2,048,724
TIC 401(k) Plan unit adjustment (a) 0.674 --- --- --- ---
Capital contributions 489.296 1,197,007 --- --- 1,197,007
Redemptions (709.557) (1,843,848) --- --- (1,843,848)
---------------------------------------------------------------------------------
Partners' Capital, December 31, 1995(b) 2,190.191 $ 6,272,162 642.943 $ 1,841,231 $ 8,113,393 $2,863.75
=================================================================================
</TABLE>
(a) (See Note 3-Capital Accounts)
(b) (See Note 4-Redemption of Units)
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) Organization and Business:
--------------------------
Tudor Fund For Employees L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act on November 22, 1989, and
commenced trading operations on July 2, 1990. Second Management Company,
Inc. (the "General Partner") is the general partner for the Partnership.
Ownership of limited partnership units is restricted to employees of Tudor
Investment Corporation ("TIC") and its affiliates.
The objective of the Partnership is to realize capital appreciation through
speculative trading of commodity futures, forward and option contracts and
other commodity interests ("commodity interests"). The Partnership will
terminate on December 31, 2010 or at an earlier date if certain conditions
occur as outlined in the Limited Partnership Agreement.
Duties of the General Partner
------------------------------
The General Partner acts as the commodity pool operator for the Partnership
and is responsible for the selection and monitoring of the commodity
trading advisors and the commodity brokers used by the Partnership. The
General Partner is also responsible for the performance of all
administrative services necessary to the Partnership's operations.
(2) Summary of Significant Accounting Policies:
--------------------------------------------
Revenue Recognition
--------------------
Commodity interests are recorded on the trade date at the transacted
contract price and are valued at market.
Brokerage Commissions and Fees
-------------------------------
These expenses represent all brokerage commissions, exchange, National
Futures Association and other fees incurred in connection with the
execution of commodity interests trades. Commissions and fees associated
with open trades at the end of the period are accrued on a round-turn
basis.
Incentive Fee
--------------
The Partnership pays TIC, an affiliate of the General Partner, as trading
advisor, an incentive fee equal to 12% of the Net Trading Profits (as
defined by the Limited Partnership Agreement) earned as of the end of each
fiscal quarter of the Partnership. Effective August 1, 1995, TIC has
waived its right to receive incentive fees attributable to units held at
the beginning of each month by the Tudor Investment Corporation 401(k)
Savings and Profit Sharing Plan (the "TIC 401(k) Plan").
F-7
<PAGE>
Management Fee
---------------
The Partnership also pays TIC, for the performance of its duties, a monthly
management fee equal to 1/6 of 1% (2% per annum) of the Partnership's net
assets. Effective August 1, 1995, TIC waived its right to receive
management fees attributable to units held at the beginning of each month
by the TIC 401(k) Plan.
Organizational and Offering Costs
---------------------------------
The General Partner paid all of the offering ($128,220) and organizational
($55,000) costs incurred with the start up of the Partnership and the
initial offering of units. The General Partner was reimbursed by the
Partnership for offering expenses of $106,728 over the first 12 months of
its operations and was being reimbursed for organizational expenses of
approximately $48,200 since inception (July 1990) through June 1995.
Foreign Currency Translation
----------------------------
Assets and liabilities denominated in foreign currencies are translated at
year-end exchange rates. Gains and losses resulting from foreign currency
transactions are calculated using daily exchange rates and are included in
the accompanying statements of operations.
U.S. Government Obligations
----------------------------
The Partnership invests varying amounts of its assets in U.S. Treasury
bills. A portion of such bills are held in commodity trading accounts and
are used to fulfill initial margin requirements. U.S. Treasury bills, with
varying maturities through October 1996, are valued in the statements of
financial condition at original cost plus accrued discount, which
approximates the market value. These bills have a face value of $5,000,000
(cost $4,782,246 and $4,856,283) at December 31, 1995 and 1994.
Use of Estimates
----------------
Certain estimates, as determined by the General Partner, were used in the
preparation of these financial statements.
(3) Capital Accounts:
------------------
Each partner, including the General Partner, has a capital account with an
initial balance equal to the amount such partner paid for its units. The
Partnership's net assets are determined monthly, and any increase or
decrease from the end of the preceding month is added to or subtracted from
the capital accounts of the partners based on the ratio that the balance of
each capital account bears in relation to the balance of all capital
accounts as of the beginning of the month. The number of units held by the
TIC 401(k) Plan will be restated as necessary for management and incentive
fees attributable to units held at the beginning of each month by the TIC
401(k) Plan to equate the per unit value of the TIC 401(k) Plan's capital
account with the Partnership's per unit value.
F-8
<PAGE>
(4) Redemption of Units:
----------------------
At each quarter end, units are redeemable at the discretion of the limited
partner. Redemption of units in $1,000 increments and full redemption of
all units are made at 100% of the net asset value per unit effective as of
the last business day of any quarter as defined in the Limited Partnership
Agreement. Partial redemptions of units which would reduce the net asset
value of a limited partner's unredeemed units to less than the minimum
investment then required of new limited partners or such partner's initial
investment, whichever is less, will be honored only to the extent of such
limitation.
(5) Income Taxes:
--------------
No provision for income taxes has been made in the accompanying financial
statements. Partners are responsible for reporting income or loss based
upon their respective share of revenue and expenses of the Partnership.
(6) Related Party Transactions:
----------------------------
The General Partner, due to its relationship with its affiliates and
certain other parties, may enter into certain related party transactions.
Bellwether Partners Inc. ("BPI"), a Delaware corporation and an affiliate
of the General Partner, is the Partnership's primary forward contract
counterparty and receives commissions on foreign exchange forward and
commodity forward contracts. The Partnership typically has on deposit with
BPI, as collateral for forward contracts, up to 20% of the Partnership's
net assets. During 1995 and 1994, the Partnership paid commissions of
$44,921 and $48,631 to BPI and received $45,659 and $22,681 in interest
income for the amounts on deposit with BPI. At December 31, 1995 and 1994,
the amount on deposit with BPI was $1,251,171 and $433,676 (including
$29,090 and $46,895 in unrealized gains). Effective August 1, 1995, BPI
ceased charging commissions for transacting the Partnership's foreign
exchange forward and commodity forward contracts.
Bellwether Futures Corporation, a New York "S" corporation qualified to do
business in Illinois and an affiliate of the General Partner, receives
give-up fees as compensation for managing the execution of treasury bond
futures by floor brokers on the Chicago Board of Trade.
TIC, an affiliate of the General Partner, receives incentive and management
fees as compensation for acting as trading advisor (see Note (2) above).
F-9
<PAGE>
(7) Financial Instruments with Off-Balance Sheet Market Risk and Concentration
--------------------------------------------------------------------------
of Credit Risk:
---------------
The Partnership is a party to financial instruments with elements of off-
balance sheet credit and market risk in excess of the amounts recognized in
the statements of financial condition through its trading of financial
futures, forwards, swaps and exchange traded and negotiated over-the-
counter options.
Exchange traded futures and option contracts are marked to market daily,
with variations in value settled on a daily basis with the exchange upon
which they are traded and with the futures commission merchant through
which the commodity futures and options are executed. The Partnership has
not taken or made physical delivery on futures contracts. The forwards are
generally settled with the counterparty two days after the trade. At
December 31, 1995 and 1994, the Partnership held financial instruments with
the following approximate aggregate notional values (in millions):
1995 1994
---------------
Exchange Traded Contracts:
- -------------------------
Interest Rate Futures and Option
Contracts
- ---------------------------------
Domestic $ 2.4 $55.9
Foreign 5.2 ---
Foreign Exchange Contracts
- --------------------------
Financial Futures Contracts .4 1.2
Forward Currency Contracts 4.8 17.1
Equity Index Futures
- --------------------
Domestic 6.2 .9
Foreign 1.9 ---
Over-the-Counter Contracts:
- --------------------------
Forward Currency Contracts 4.9 ---
----------------
Total $25.8 $75.1
================
As of December 31, 1995 and 1994, there were no swaps outstanding. Notional
amounts of these financial instruments are indicative only of the volume of
activity and should not be used as a measure of market and credit risk. The
various financial instruments held at December 31, 1995 and 1994 mature through
the following dates:
1995 1994
------------------------
Interest Rate Futures and Option March 1996 June 1995
Contracts
Foreign Exchange Contracts March 1996 March 1995
Equity Index Futures March 1996 March 1995
Over-the-Counter Contracts January 5, 1996 ---
F-10
<PAGE>
The following table summarizes the year-end and the average assets and
liabilities resulting from unrealized gains and losses on derivative
instruments included in the statement of financial condition based on month-
end balances (in thousands):
<TABLE>
<CAPTION>
Exchange Traded Contracts: Assets Liabilities
- ------------------------- 1995 Average 1995 Average
Interest Rate Contracts --------------------- -------------------
- -----------------------
<S> <C> <C> <C> <C>
Domestic $ --- $ 8 $ 20 $10
Foreign 17 6 --- ---
Foreign Exchange Contracts 28 22 --- 16
- --------------------------
Equity Index Futures
- --------------------
Domestic --- 4 --- 15
Foreign --- 28 6 7
Over-the-Counter Contracts:
- --------------------------
Forward Currency Contracts 72 30 --- 12
--------------------------------------------
Total $ 117 $98 $ 26 $60
============================================
</TABLE>
Net trading gains and losses from strategies that use a variety of derivative
financial instruments are recorded in the statements of operations. The
following table summarizes the components (in thousands) of trading gains and
losses, net of commissions and fees, for the years ended December 31, 1995 and
1994:
1995 1994
----------------------------
Interest Rate Futures and Option Contracts
- ------------------------------------------
Domestic $ (48) $ 267
Foreign 18 1,160
Foreign Exchange Contracts 1,077 23
- --------------------------
Equity Index Futures
- --------------------
Domestic (266) (158)
Foreign 865 (301)
Over-the-Counter Contracts 414 (280)
- --------------------------
Non-Derivative Financial Instruments 29 (145)
- ------------------------------------
-------------- -------------
Total $2,089 $ 566
========= ===========
F-11
<PAGE>
In general, exchange traded futures and option contracts possess low credit
risk as most exchanges act as principal to a futures commission merchant
("FCM") on all commodity transactions. Furthermore, most global exchanges
require FCM's to segregate client funds to insure ample customer protection
in the event of an FCMs default. The Partnership monitors the
creditworthiness of its FCMs and counterparties and, when deemed necessary,
reduces its exposure to these FCMs and counterparties. The Partnership's
exposure to credit risk associated with the non-performance of these FCMs
and counterparties in fulfilling contractual obligations can be directly
impacted by volatile financial markets. A substantial portion of the
Partnership's open financial futures positions were transacted with major
international FCMs. BPI is the Partnership's primary forward contract
counterparty (see Note (6) above). Notwithstanding the risk monitoring and
credit review performed by the Partnership with respect to its FCMs and
counterparties, including BPI, there always is a risk of non-performance.
Generally, financial contracts can be closed out at the discretion of the
trading advisor. An illiquid or closed market, however, could prevent the
closeout of positions.
F-12
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF FINANCIAL CONDITION
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
-----------------------------
ASSETS
------
Cash $4,408,609 $2,986,405
Equity in commodity trading accounts:
Due From Broker 1,928,352 1,349,843
U.S. Government obligations 4,840,102 4,845,289
Net unrealized gain on open commodity
interests 273,035 142,353
---------------------------
Total equity 7,041,489 6,337,485
---------------------------
Total assets $11,450,098 $9,323,890
===========================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Pending Partner Additions $1,080,068 $718,024
Redemptions payable 381,026 392,382
Incentive fee payable 131,741 42,095
Management fee payable 32,025 13,636
Accrued professional fees and other 49,920 44,360
---------------------------
Total liabilities 1,674,780 1,210,497
---------------------------
PARTNERS' CAPITAL:
Limited Partners, 10,000 units authorized and
2,389.736 and 2,190.191 outstanding at March
31, 1996 and December 31, 1995 7,702,900 6,272,162
General Partner, 642.943 units outstanding at
March 31, 1996 and December 31,1995 2,072,418 1,841,231
---------------------------
Total partners' capital 9,775,318 8,113,393
---------------------------
Total liabilities and partners'
capital $11,450,098 $9,323,890
---------------------------
The accompanying notes are an integral part of these statements.
F-13
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
MARCH 31, MARCH 31,
1996 1995
REVENUES:
Net realized trading gains $1,116,079 $1,362,547
Change in net unrealized trading gains 130,428 272,498
Interest income 118,595 89,368
Total revenues 1,365,102 1,724,413
--------------------------
EXPENSES:
Brokerage commissions and fees 40,416 63,042
Incentive fees 131,741 152,508
Management fees 47,961 38,917
Professional fees and other 24,730 18,000
Amortization expense ---- 2,500
Total expenses 244,848 274,967
--------------------------
Net income $1,120,254 $1,449,446
==========================
Limited Partners' Net Income 889,067 1,153,299
General Partner's Net Income 231,187 296,147
--------------------------
$1,120,254 $1,449,446
==========================
Change in Net Asset Value Per Unit $359.58 $460.62
==========================
Average Net Income Per Unit $358.15 $457.66
==========================
The accompanying notes are an integral part of these statements.
F-14
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD ENDED MARCH 31, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Limited Partners General Partner
------------------------------------- ----------------------------------
Units Capital Units Capital
------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Partners' Capital, January 1, 1995 2,409.778 $ 5,297,977 642.943 $ 1,413,533
Net income - 1,621,026 - 427,698
TIC 401(k) Plan unit adjustment (a) 0.674 - - -
Capital contributions 489.296 1,197,007 - -
Redemptions (709.557) (1,843,848) - -
---------- ------------------- -------- ------------------
Partners' Capital, December 31, 1995 (b) 2,190.191 6,272,162 642.943 1,841,231
---------- ------------------- --------- ------------------
Net income - 889,067 - 231,187
TIC 401(k) Plan unit adjustment (a) 2.005 - - -
Capital contributions 315.749 922,696 - -
Redemptions (118.209) (381,025) - -
---------- ------------------- -------- ------------------
Partners' Capital, March 31, 1996 (b) 2,389.736 $ 7,702,900 642.943 $ 2,072,418
========== ================== ======== =================
<CAPTION>
Total Net Asset Value
Capital Per Unit
------------------------------------
<S> <C> <C>
Partners' Capital, January 1, 1995 $ 6,711,510 $ 2,198.53
Net income 2,048,724
TIC 401(k) Plan unit adjustment (a) -
Capital contributions 1,197,007
Redemptions (1,843,848)
--------------
Partners' Capital, December 31, 1995 (b) 8,113,393 2,863.75
------------------
Net income 1,120,254
TIC 401(k) Plan unit adjustment (a) -
Capital contributions 922,696
Redemptions (381,025)
------------------
Partners' Capital, March 31, 1996 (b) $ 9,775,318 $3,223.33
==================
</TABLE>
(a) (See Note 3-Capital Accounts)
(b) (See Note 4 -Redemption of Units)
The accompanying notes are an integral part of these statements.
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) ORGANIZATION
-------------
Tudor Fund For Employees L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act (the "Act") on November
22, 1989, and commenced trading operations on July 2, 1990. Second
Management Company, Inc., a Delaware corporation ("SMI"), was the general
partner for the Partnership during the quarter ended March 31, 1996 and
owned approximately 643 units of general partnership interest. Ownership of
limited partnership units is restricted to employees of Tudor Investment
Corporation ("TIC") and its affiliates and certain employee benefit plans.
Effective April 4, 1996, SMI was merged into Second Management LLC, a
Delaware limited liability company (together with SMI , the "General
Partner").
The objective of the Partnership is to realize capital appreciation through
speculative trading of commodity futures, forward, and option contracts and
other commodity interests ("commodity interests"). The Partnership will
terminate on December 31, 2010 or at an earlier date if certain conditions
occur as outlined in its Limited Partnership Agreement.
DUTIES OF THE GENERAL PARTNER
-------------------------------
The General Partner acts as the commodity pool operator for the Partnership
and is responsible for the selection and monitoring of the commodity
trading advisor and the commodity brokers used by the Partnership. The
General Partner is also responsible for the performance of all
administrative services necessary to the Partnership's operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------
ACCOUNTING POLICY
-----------------
The financial statements presented have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and, in
the opinion of management of the General Partner, include all adjustments
necessary for a fair statement of each period presented.
REVENUE RECOGNITION
---------------------
Commodity interests are recorded on the trade date at the transacted
contract price and valued at market.
BROKERAGE COMMISSIONS AND FEES
--------------------------------
These expenses represent all brokerage commissions, exchange, National
Futures Association and other fees incurred in connection with the
execution of commodity interest trades. Commissions and fees associated
with open commodity interests at the end of the period are accrued on a
round-turn basis.
F-16
<PAGE>
INCENTIVE FEE
-------------
The Partnership pays TIC, as trading advisor, an incentive fee equal to 12%
of the Trading Profits (as defined by the Limited Partnership Agreement)
earned as of the end of each fiscal quarter of the Partnership. Effective
August 1, 1995, TIC has waived its right to receive incentive fees
attributable to units held at the beginning of each month by the Tudor
Investment Corporation 401(k) Savings and Profit Sharing Plan (the "TIC
401(k) Plan").
MANAGEMENT FEE
--------------
The Partnership also pays TIC, for the performance of its duties, a monthly
management fee equal to 1/6 of 1% (2% per annum) of the Partnership's net
assets. Effective August 1, 1995, TIC has waived its right to receive
management fees attributable to units held at the beginning of each month
by the TIC 401(k) plan.
ORGANIZATIONAL AND OFFERING COSTS
----------------------------------
The General Partner paid all of the offering and organizational costs
incurred in connection with the start up of the Partnership and the initial
offering of units. The General Partner was reimbursed by the Partnership
for offering expenses of $106,728 over the first 12 months of its
operations and was reimbursed for organizational expenses of $48,200 from
commencement of trading operations (July 1990) through June 1995.
FOREIGN CURRENCY TRANSLATION
----------------------------
Assets and liabilities denominated in foreign currencies are translated at
month-end exchange rates. Gains and losses resulting from foreign currency
transactions are calculated using daily exchange rates and are included in
the accompanying statements of operations.
U.S. GOVERNMENT OBLIGATIONS
---------------------------
The Partnership invests a varying amount of its assets in U.S. Treasury
bills. A portion of such bills is held in commodity trading accounts and
used to fulfill initial margin requirements. U.S. Treasury bills, with
varying maturities through October 1996, are valued in the statements of
financial condition at original cost plus accrued discount which
approximates the market value. These bills had a face value of $5,000,000
(cost $4,751,711 and $4,782,246) at March 31, 1996 and December 31, 1995.
(3) CAPITAL ACCOUNTS
----------------
Each partner, including the General Partner, has a capital account with an
initial balance equal to the amount such partner paid for its units. The
Partnership's net assets are determined monthly, and any increase or
decrease from the end of the preceding month is added to or subtracted from
the capital accounts of the partner based on the ratio that each capital
account bears to all capital accounts as of the beginning of the month. The
number of units held by the TIC 401(k) Plan will be restated as necessary
for management and incentive fees attributable to units held at the
beginning of each month by the TIC 401(k) Plan to equate the per unit value
of the TIC 401(k) Plan's capital account with the Partnership's per unit
value.
F-17
<PAGE>
(4) REDEMPTION OF UNITS
-------------------
At each quarter-end, units are redeemable at the discretion of the limited
partner. Redemption of units in $1,000 increments or a full redemption of
all units are made at 100% of the net asset value per unit effective as of
the last business day of any quarter as defined in the Limited Partnership
Agreement. However, monthly redemptions have been required in the case of
employee resignations. Partial redemptions of units which would reduce the
net asset value of a limited partner's unredeemed units to less than the
minimum investment then required of new limited partners or such partner's
initial investment, whichever is less, will be honored only to the extent
of such limitation.
(5) INCOME TAXES
------------
No provision for income taxes has been made in the accompanying financial
statements. Partners are responsible for reporting income or loss based
upon their respective shares of revenue and expenses of the Partnership.
(6) RELATED PARTY TRANSACTIONS
--------------------------
The General Partner, due to its relationship with its affiliates and
certain other parties, may enter into certain related party transactions.
Bellwether Partners LLC ("BPL"), a Delaware limited liability company and
an affiliate of the General Partner, is the Partnership's spot and forward
contract counterparty and receives commissions on foreign exchange forward
and commodity forward contracts. The Partnership typically has on deposit
with BPL, as collateral for forward contract transactions, no more than 20%
of the Partnership's net assets. Effective August 1, 1995, BPL ceased
receiving commissions for transacting the Partnership's foreign exchange
forward and commodity contracts.
Bellwether Futures LLC, a Delaware limited liability company and an
affiliate of the General Partner, receives give-up fees as compensation for
managing the execution of treasury bond futures by floor brokers on the
Chicago Board of Trade.
TIC, an affiliate of the General Partner, receives incentive and management
fees as compensation for acting as the Partnership's trading advisor (see
Note 2).
(7) FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND CONCENTRATION OF
----------------------------------------------------------------------
CREDIT RISK
-----------
The Partnership is a party to financial instruments with elements of off-
balance sheet credit and market risk in excess of the amount recognized in
the statements of financial condition through its trading of financial
futures, forwards, swaps and exchange traded and negotiated over-the-
counter option contracts.
F-18
<PAGE>
Exchange traded futures contracts are marked to market daily, with
variations in value settled on a daily basis with the exchange upon which
they are traded and with the futures commission merchant through which the
commodity futures and options are executed. The Partnership has not taken
or made physical delivery on futures contracts. The forward contracts are
generally settled with the counterparty at least two business days after
the trade.
At March 31, 1996 and December 31, 1995, the Partnership held financial
instruments with the following approximate aggregate notional value (in
millions):
March December
1996 1995
------------------
Exchange Traded Contracts:
- -------------------------
Interest Rate Futures and Option
Contracts
- --------------------------------
Domestic $16.8 $ 2.4
Foreign 6.0 5.2
Foreign Exchange Contracts
- --------------------------
Financial Futures Contracts 2.7 .4
Forward Currency Contracts 19.3 4.8
Equity Index Futures
- --------------------
Domestic --- 6.2
Foreign 2.9 1.9
Over-the Counter Contracts:
- --------------------------
Forward Currency Contracts 8.3 4.9
------------------
Total $56.0 $25.8
==================
As of March 31, 1996 and December 31, 1995, there were no swaps outstanding.
Notional amounts of these financial instruments are indicative only of the
volume of activity and should not be used as a measure of market and credit
risk. The various financial instruments held at March 31, 1996 and December
31, 1995 mature through, or matured on, the following dates:
March 1996 December 1995
--------------------------------
Interest Rate Futures and Option June 1996 March 1996
Contracts
Foreign Exchange Contracts June 1996 March 1996
Equity Index Futures June 1996 March 1996
Over-the Counter Contracts April 4, 1996 January 5, 1996
F-19
<PAGE>
The following table summarizes the quarter-end and the average assets and
liabilities resulting from unrealized gains and losses on derivative
instruments included in the statement of financial condition based on month-
end balances (in thousands):
Assets Liabilities
1996 Average 1996 Average
------------------- ------------------
Exchange Traded Contracts:
- -------------------------
Interest Rate Contracts
- -----------------------
Domestic $110 $ 71 $ --- $ 7
Foreign 26 8 --- 2
Foreign Exchange Contracts 55 62 4 2
- --------------------------
Equity Index Futures
- --------------------
Domestic --- 3 --- ---
Foreign 90 202 --- ---
Over-the-Counter Contracts:
- --------------------------
Forward Currency Contracts --- --- 19 15
-----------------------------------------
Total $281 $346 $23 $26
=========================================
Net trading gains and losses from strategies that use a variety of derivative
financial instruments are recorded in the statements of operations. The
following table summarizes the components (in thousands) of trading gains and
losses, net of commissions and fees, for the three months ended March 31, 1996
and 1995:
1996 1995
------------------
Interest Rate Futures and Option
Contracts
- --------------------------------
Domestic $ 167 $ (219)
Foreign 93 (26)
Foreign Exchange Contracts 539 1,019
- --------------------------
Equity Index Futures
- --------------------
Domestic (117) (65)
Foreign 602 871
Over-the-Counter Contracts (72) (72)
- --------------------------
Non-Financial Derivative Instruments (6) 64
- ------------------------------------
-------------------
Total $1,206 $1,572
===================
F-20
<PAGE>
In general, exchange traded futures and option contracts possess low credit
risk as most exchanges act as principal to a futures commission merchant
("FCM") on all commodity transactions. Furthermore, most global exchanges
require FCMs to segregate client funds to insure ample customer protection
in the event of an FCM's default. The Partnership monitors the
creditworthiness of its FCMs and counterparties and, when deemed necessary,
reduces its exposure to these FCMs and counterparties. The Partnership's
exposure to credit risk associated with the non-performance of these FCMs
and counterparties in fulfilling contractual obligations can be directly
impacted by volatile financial markets. A substantial portion of the
Partnership's open financial futures positions were transacted with major
international FCMs. BPL is the Partnership's spot and forward contract
counterparty (see Note (6) above). Notwithstanding the risk monitoring and
credit review performed by the Partnership with respect to its FCMs and
counterparties, including BPL, there always is a risk of non-performance.
The Partnership's exposure to credit risk associated with the non-
performance of these counterparties in fulfilling contractual obligations
can be directly impacted by volatile financial markets.
Generally, financial contracts can be closed out at the discretion of the
trading advisor. However, an illiquid market could prevent the closeout of
positions.
F-21
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
-------------------------------
FINANCIAL STATEMENTS
---------------------
AS OF DECEMBER 31, 1995 AND 1994
--------------------------------
TOGETHER WITH AUDITORS' REPORT
------------------------------
F-22
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Second Management Company, Inc.:
We have audited the accompanying statements of financial condition of Second
Management Company, Inc. (a Delaware corporation) as of December 31, 1995 and
1994, and the related statements of operations, changes in shareholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Second Management Company, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/Arthur Andersen LLP
New York, New York
February 12, 1996
F-23
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
1995 1994
-----------------------------
ASSETS
-------
Cash $ 20,223 $ 9,784
Investment in limited partnership 1,841,229 1,413,530
Receivable from affiliate 2,283,000 2,422,000
Other assets 5,425 5,830
-----------------------------
Total assets $ 4,149,877 $3,851,144
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES:
Payable to affiliate $ 4,182 $ 7,568
-----------------------------
Total liabilities 4,182 7,568
-----------------------------
SHAREHOLDERS' EQUITY:
Common stock - $0.01 par value,
1,000,000 shares
authorized and issued 10,000 10,000
Retained earnings 4,412,111 3,870,966
Less: Treasury stock, at cost (71,588 (276,416) (37,390)
and 10,000 shares)
-----------------------------
Total shareholders' equity 4,145,695 3,843,576
-----------------------------
Total liabilities and
shareholders' equity $4,149,877 $3,851,144
=============================
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
------------------------
REVENUES:
Increase in fair value of limited $ 427,699 $130,637
partnership
Interest 208,543 122,208
------------------------
Total revenues 636,242 252,845
------------------------
EXPENSES:
Professional fees 82,874 85,521
Other expenses 11,459 25,646
------------------------
Total expenses 94,333 111,167
------------------------
Net income $541,909 $ 141,678
========================
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock in
Common Stock Treasury Retained
----------------------------------- ----------------------------------
Shares Amount Shares Amount Earnings
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 1,000,000 $ 10,000 -- $ -- $3,729,288
Net income -- -- -- -- 141,678
Treasury stock acquired -- -- 10,000 (37,390) --
-------------- -------------- -------------- -------------- --------------
Balance, December 31, 1994 1,000,000 10,000 10,000 (37,390) 3,870,966
Net income -- -- -- -- 541,909
Treasury stock acquired -- -- 64,886 (251,758) --
Treasury stock reissued -- -- (714) 2,757 21
Options exercised -- -- (2,584) 9,975 (785)
-------------- -------------- -------------- -------------- --------------
Balance, December 31, 1995 1,000,000 $ 10,000 71,588 $ (276,416) $4,412,111
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Total
Shareholders'
Equity
---------------
<S> <C>
Balance, January 1, 1994 $ 3,739,288
Net income 141,678
Treasury stock acquired (37,390)
------------
Balance, December 31, 1994 3,843,576
Net income 541,909
Treasury stock acquired (251,758)
Treasury stock reissued 2,778
Options exercised 9,190
---------------
Balance, December 31, 1995 $ 4,145,695
==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 541,909 $ 141,678
Non-cash item included in net income:
Increase in fair value of limited (427,699) (130,637)
partnership
(Increase) decrease in operating assets:
Receivable from affiliate 139,000 (2,422,000)
Other assets 405 11,942
-------------------------
Net (increase) decrease in operating 139,405 (2,410,058)
assets
-------------------------
Increase (decrease) in operating
liabilities:
Payable to affiliate (3,386) 4,509
-------------------------
Net increase (decrease) in operating (3,386) 4,509
liabilities
-------------------------
Net cash provided by (used in) 250,229 (2,394,508)
operating activities
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of units in limited -- 2,000,000
partnership
-------------------------
Net cash provided by investing -- 2,000,000
activities
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock (251,758) (37,390)
Reissuance of treasury stock 2,778 --
Exercise of options 9,190 --
-------------------------
Net cash used in financing activities (239,790) (37,390)
-------------------------
Net increase (decrease) in cash 10,439 (431,898)
Cash, beginning of the year 9,784 441,682
-------------------------
Cash, end of the year $ 20,223 $ 9,784
=========================
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
SECOND MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) ORGANIZATION AND BUSINESS:
--------------------------
Second Management Company, Inc. (the "Company"), a Delaware corporation,
was incorporated in June 1986. The Company is registered as a Commodity
Pool Operator. The Company serves as the general partner of the Tudor Fund
For Employees L.P. ("Employee Fund"). The Employee Fund was formed to
engage in speculative trading of commodity interests, including futures and
forward contracts and options on futures and forward contracts. Another
affiliate of the Company, Tudor Investment Corporation ("TIC"), functions
as the Commodity Trading Advisor for the Employee Fund.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Investment In Limited Partnership
---------------------------------
The investment in the Employee Fund is carried in the accompanying
statements of financial condition at fair value based upon the net asset
value of the Employee Fund as determined by the Company in its role as
general partner.
Use of Estimates
----------------
Certain estimates, as determined by management, were used in the
preparation of these financial statements.
(3) INVESTMENT IN LIMITED PARTNERSHIP:
----------------------------------
As of December 31, 1995 and 1994, the Company owned 643 general partnership
units valued at $1,841,229 and $1,413,530 which represents approximately
23% and 21% of the total net assets of the Employee Fund, respectively.
The Company participates in the profits and losses of the Employee Fund on
a pro-rata (unit for unit) basis with all limited partners. TIC, as the
Commodity Trading Advisor for the Employee Fund, receives a 12% incentive
fee on new trading profits determined quarterly and a 2% management fee per
annum.
The Employee Fund is a party to financial instruments with elements of off-
balance sheet credit and market risk in excess of the amounts recognized in
the statements of financial condition through its trading of financial
futures, forwards and options contracts. Risk to the Employee Fund arises
from the possible adverse changes in the market value of such interests and
the potential inability of counterparties to perform under the terms of
their respective contracts. The risk to the Company, with reference to its
general partnership interest in the Employee Fund, may exceed its
investment in this partnership. In management's opinion, the settlement of
these transactions will not have a material adverse effect on the financial
condition of the Company.
F-28
<PAGE>
- 2 -
(4) RELATED PARTY TRANSACTIONS:
---------------------------
From time to time, the Company has advanced funds to affiliates, including
TIC, Tudor Global Trading, Inc., Tudor Arbitrage Partners, L.P., Tudor
Proprietary Trading, L.L.C. and Bellwether Futures Corporation, in varying
amounts and for various periods at market rates of interest. During the
years ended December 31, 1995 and 1994, the Company received $208,543 and
$115,671, respectively, of interest income from affiliates.
(5) PROFESSIONAL FEES:
------------------
These expenses represent ongoing operational and administrative expenses
such as legal, audit and accounting fees.
(6) STOCK OPTION PLAN:
------------------
The Company granted 5,625 options, 10,000 options and 51,743 options, on
January 1, 1993, August 1, 1993, and January 1, 1995, respectively. These
options were granted to certain officers and key employees to purchase
identical percentage interests of shares and partnership units of the
Company and certain of its affiliates (the "Tudor Group Entities"). These
options were exercisable at the fair value of the stock and partnership
units at the date of grant. The difference between fair value at grant date
and exercise date has been recorded as compensation expense by the Tudor
Group Entities to which the participants primarily devote their services.
Of the 5,625 options granted on January 1, 1993, 3,812 options were
outstanding at December 31, 1994. Of the 10,000 options granted on August
1, 1993, all were outstanding at December 31, 1994.
In connection with the reorganization of the Tudor Group Entities which
took effect with the commencement of business in 1996 (see Note 8), all
outstanding options as of December 13, 1995 (11,228 granted during 1993 and
51,743 granted during 1995) were cancelled and the holders of such options
received an amount equal to the difference between the current fair value
of the stock or partnership units and the value of such stock or units at
the date of grant. That amount has been recorded as compensation expense by
the respective Tudor Group Entities to which the participants primarily
devote their services.
(7) INCOME TAXES:
-------------
The Company has elected "S" Corporation tax status pursuant to Section 1362
of the Internal Revenue Code of 1986, as amended. Accordingly, the Company
is not liable for federal income tax. The Company is liable for state and
local income taxes in certain jurisdictions. Such taxes are included as
other expenses in the accompanying statements of operations.
F-29
<PAGE>
- 3 -
(8) SUBSEQUENT EVENT:
-----------------
Upon the commencement of business in 1996, certain affiliates of the
Company will be reorganized. Certain affiliates will be converted from "S"
corporations to newly-formed limited liability companies whose membership
interests will be contributed to Tudor Group Holdings LLC ("TGH"), a newly-
formed Delaware limited liability company. In April 1996, in conjunction
with the reorganization, the shareholders of the Company intend to change
the legal form of organization of the Company from an "S" corporation to a
limited liability company. The membership interests in TGH will be held by
the shareholders of the Company in substantially the same proportions that
such shareholders hold shares of the Company at December 31, 1995.
Following the reorganization, TGH will hold a 99% membership interest in
each of the newly-formed limited liability companies, including Second
Management LLC, the successor to the Company.
The shareholders of the Company do not expect this reorganization to
materially affect the conduct of the Company's business or the Company's
financial condition. The individual controlling persons, principals,
officers, and employees of the Company are expected to remain the same.
F-30
<PAGE>
SECOND MANAGEMENT LLC
STATEMENT OF FINANCIAL CONDITION
APRIL 4, 1996
ASSETS
------
Cash $ 15,532
Investment in limited partnership 2,116,241
Receivable from affiliate 2,330,972
------------
Total assets $ 4,462,745
============
LIABILITIES AND MEMBERS' CAPITAL
- --------------------------------
LIABILITIES:
Accounts payable $ --
------------
Total liabilities --
------------
MEMBERS' CAPITAL:
Total members' capital 4,462,745
------------
Total liabilities and $ 4,462,745
members' capital
============
F-31
<PAGE>
SECOND MANAGEMENT COMPANY LLC
NOTES TO FINANCIAL STATEMENTS
APRIL 4, 1996
(Unaudited)
(1) ORGANIZATION AND BUSINESS:
--------------------------
SECOND MANAGEMENT LLC (the "Company"), a Delaware limited liability company
organized April 4, 1996, commenced operations on April 4, 1996 pursuant to
the reorganization discussed in Note 4. The company is registered as a
Commodity Pool Operator. The company serves as the general partner of the
Tudor Fund For Employees L.P. ("The Employee Fund"). The Employee Fund was
formed to engage in speculative trading of commodity interests, including
futures and forward contracts and options on futures and forward contracts.
Another affiliate of the Company, Tudor Investment Corporation ("TIC"),
functions as the Commodity Trading Advisor for the Employee Fund.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Investment In Limited Partnership
---------------------------------
The investment in the Employee Fund is carried in the accompanying
statements of financial condition at fair value based upon the net asset
value of the Employee Fund as determined by the Company in its role as
general partner.
Use of Estimates
----------------
Certain estimates, as determined by management, were used in the
preparation of these financial statements.
(3) INVESTMENT IN LIMITED PARTNERSHIP:
----------------------------------
As of April 4, 1996 the Company owned 643 general partnership units valued
at $2,116,241 which represents approximately 20% of the total net assets of
the Employee Fund.
The Company participates in the profits and losses of the Employee Fund on
a pro-rata (unit for unit) basis with all limited partners. TIC, as the
Commodity Trading Advisor for the Employee Fund, receives a 12% incentive
fee on new trading profits determined quarterly and a 2% management fee per
annum.
The Employee Fund is a party to financial instruments with elements of off-
balance sheet credit and market risk in excess of the amounts recognized in
the statements of financial condition through its trading of financial
futures, forwards and options contracts. Risk to the Employee Fund arises
from the possible adverse changes in the market value of such interests and
the potential inability of counterparties to perform under the terms of
their respective contracts. The risk to the Company, with reference to its
general partnership interest in the Employee Fund, may exceed its
investment in this partnership. In management's opinion, the settlement of
these transactions will not have a material adverse effect on the financial
condition of the Company.
F-32
<PAGE>
(4) REORGANIZATION:
---------------
Prior to the commencement of business on April 4, 1996, the Company's
"predecessor", Second Management Company, Inc. ("SMCI"), was merged into
the Company. In connection with such merger, the shareholders of SMCI
contributed their shares of SMCI to a limited liability company which,
following such contribution held, and continues to hold a 99% membership
interest in the Company. The membership interests in such limited
liability company are held by the former shareholders of SMCI in
substantially the same proportions as their former share holdings in SMCI.
The Company does not expect its reorganization to materially affect the
conduct of the Company's business or the Company's financial condition.
The individual controlling persons, principals and officers of the Company
are substantially the same as the controlling persons, principals and
officers of SMCI.
F-33
<PAGE>
EXHIBIT A
TUDOR FUND FOR EMPLOYEES L.P.
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
DATED AS OF MAY 22, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Name; Formation.......................................................... A-1
2. Offices.................................................................. A-2
3. Business................................................................. A-2
4. Term; Dissolution........................................................ A-3
(a) Term............................................................... A-3
(b) Dissolution........................................................ A-3
5. Fiscal Year.............................................................. A-3
6. General Partner's Net Worth.............................................. A-4
7. Capital Contributions.................................................... A-4
8. Allocation of Profits and Losses; Accounting; Related Matters............ A-8
(a) Capital Accounts................................................... A-8
(b) Monthly Allocations................................................ A-8
(c) Allocation of Profit and Loss for Federal Income Tax Purposes...... A-9
(d) Definitions; Accounting............................................ A-11
(e) Expenses and Limitations Thereof................................... A-12
(f) Limited Liability of Limited Partners.............................. A-13
(g) Lender as Partner.................................................. A-15
(h) Return of Limited Partners' Capital Contributions.................. A-15
(i) Distributions...................................................... A-15
(j) General Partner as Limited Partner................................. A-15
9. Management............................................................... A-15
(a) Management of Partnership.......................................... A-15
(b) Trading Policies................................................... A-18
(c) Additional Obligations and Responsibilities of General Partner..... A-19
10. Audits; Reports to Limited Partners...................................... A-22
11. Transfer and Redemption of Units......................................... A-23
(a) Transfer........................................................... A-23
(b) Redemption......................................................... A-25
12. Mandatory Redemption..................................................... A-26
13. Admission of Additional Partners......................................... A-27
14. Special Power of Attorney................................................ A-27
15. Withdrawal of Partners................................................... A-28
(a) Withdrawal of General Partner...................................... A-28
(b) Withdrawal of Limited Partners..................................... A-28
16. No Personal Liability for Return of Capital.............................. A-29
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
17. Standard of Liability; Indemnification................................... A-29
(a) Standard of Liability.......................................... A-29
(b) Indemnification by Partnership................................. A-29
(c) Affiliate...................................................... A-31
(d) Indemnification by Partners.................................... A-31
18. Amendments; Meetings; Voting............................................. A-31
(a) Amendments and Actions With Consent of General Partner......... A-31
(b) List of Partners; Meetings..................................... A-32
(c) Amendments and Actions Without Consent of General Partner...... A-32
(d) Actions Without Meeting........................................ A-33
(e) Amendments to Certificate of Limited Partnership............... A-33
19. Governing Law............................................................ A-33
20. Miscellaneous............................................................ A-34
(a) Priority Among Limited Partners................................ A-34
(b) Notices........................................................ A-34
(c) Binding Effect................................................. A-34
(d) Captions....................................................... A-34
Annex A -- Request for Redemption................................................... A-36
</TABLE>
iii
<PAGE>
TUDOR FUND FOR EMPLOYEES L.P.
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
This Second Amended and Restated Limited Partnership Agreement (this
"Agreement") of TUDOR FUND FOR EMPLOYEES L.P. (the "Partnership") made as of May
22, 1996 by and among Second Management LLC, a Delaware limited liability
company (the "General Partner"), and the other parties who have heretofore
executed or who shall hereafter execute this Agreement (whether in counterpart,
by separate instrument, or otherwise) and who have heretofore been admitted or
who shall be hereafter admitted to the Partnership as limited partners in
accordance with the provisions hereof, and whose names and addresses have
heretofore or shall hereafter, upon such admission, be added to the books and
records of the Partnership (collectively, including any Plan Investor Partners
(as defined in Section 7), the "Limited Partners"; the General Partner and the
Limited Partners may be referred to herein individually as a "Partner", and
collectively as the "Partners");
W I T N E S S E T H:
WHEREAS, the Partnership has heretofore been formed as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act (the
"Partnership Act") for the purpose of speculative trading in commodity interest
contracts (as defined in Section 3) pursuant to a Limited Partnership Agreement
dated as of November 22, 1989 as amended and restated as of July 1, 1995 (the
"Prior Limited Partnership Agreement");
WHEREAS, the General Partner continues to desire to make an investment
vehicle available to (i) persons who are employees of the General Partner, any
of its present or future affiliated entities, or their successors or assigns,
(ii) such entities themselves, and (iii) such other individuals and entities as
the General Partner in its sole discretion may determine; and
WHEREAS, the Partners desire to amend and restate the Prior Limited
Partnership Agreement in its entirety as set forth herein;
NOW, THEREFORE, the parties hereto do hereby agree as follows.
1. NAME; FORMATION.
The parties heretofore formed and have operated, and hereby agree to
continue, the Partnership as a limited partnership under and pursuant to the
Partnership Act. The name of the Partnership shall remain TUDOR FUND FOR
EMPLOYEES L.P. or such other name, to the extent permitted by the Partnership
Act, as the General Partner shall hereafter designate
A-1
<PAGE>
in writing to the Limited Partners. The General Partner heretofore executed and
filed in the Office of the Secretary of State of the State of Delaware a
Certificate of Limited Partnership (the "Certificate of Limited Partnership") in
accordance with the Partnership Act, and shall execute, file, record, and
publish as appropriate such amendments to this Agreement, the Certificate of
Limited Partnership, assumed name certificates, and other documents as shall be
necessary or advisable as determined by the General Partner to comply with the
law of any jurisdiction. Each Limited Partner shall furnish to the General
Partner a power of attorney and such additional information as is required from
such Partner to complete such documents, and shall execute and cooperate in the
filing, recording, or publishing of such documents at the request of the General
Partner.
2. OFFICES.
The principal office of the Partnership is One Liberty Plaza, 51st
Floor, New York, New York 10006, or such other place as the General Partner may
in its sole discretion designate from time to time.
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, and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, or such other
registered office or agent or address as the General Partner may in its sole
discretion designate from time to time.
3. BUSINESS.
The Partnership's business and purpose is to engage in any lawful act
or activity for which a limited partnership may be organized under the
Partnership Act, including without limitation primarily to trade, buy, sell
(including to sell short), spread, swap, acquire, hold, dispose of, and deal in,
commodities, currencies, futures contracts, forward contracts, foreign exchange
commitments, currency exchanges, money market instruments, debt obligations and
other instruments issued or guaranteed by sovereigns, governments, and
supranationals and their bodies, agencies, instrumentalities, authorities, and
similar issuers, bonds, debentures, notes, bills, commercial paper, repurchase
and reverse repurchase agreements, standby purchase and sale agreements,
financial instruments, investment contracts, investment agreements, certificates
of interest, securities interests, securities of and interests in other
corporations, companies, partnerships, trusts, and other entities and vehicles,
swaps, swaptions, caps, floors, straddles, and collars, derivative and hybrid
transactions and instruments (however designated), options on and in respect of
any of the foregoing, and rights and interests in respect of, pertaining to, and
in connection with, any of the foregoing, on or off exchanges and markets, in
publicly offered and private placement transactions, on spot, current, future,
forward, and when-issued start, delivery, settlement, and optional commitment
bases, on secured and unsecured bases, and on margin, collateral, and partial
and full payment bases (herein referred to collectively as "commodity interest
contracts"). The objective of the
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Partnership's business is and shall be appreciation of its assets through
speculative trading of commodity interest contracts.
4. TERM; DISSOLUTION.
(a) TERM. The term of the Partnership commenced on November 22, 1989
upon the filing of the Certificate of Limited Partnership in the Office of the
Secretary of State of the State of Delaware pursuant to the Partnership Act, and
shall end upon the first to occur of the following: (i) December 31, 2010; (ii)
the receipt by the General Partner of a notice setting forth an election to
dissolve the Partnership at a specified time by Limited Partners owning more
than 50% of the Units of Limited Partnership Interest in the Partnership ("Units
of Limited Partnership Interest" or "Units") then owned by Limited Partners,
which notice shall be delivered to the General Partner at least 90 days prior to
the effective date of such dissolution; (iii) the withdrawal, insolvency,
termination, dissolution, or liquidation of the General Partner and of any
successor entity thereof, unless the business of the Partnership shall be
continued by any new, remaining, or successor general partner(s) in accordance
with Sections 15(a) and 18; (iv) the Partners terminate the Partnership in
accordance with Section 18; (v) a decline in the Net Asset Value of a Unit (as
defined in Section 8(d)(ii)) as of the end of any calendar month to less than
$500; (vi) a decline in the Partnership's aggregate Net Assets (as defined in
Section 8(d)(i)) as of the end of any calendar month to less than $125,000;
(vii) a determination by the General Partner in its sole discretion either that
the Partnership's assets in relation to its operating expenses make it
unreasonable or imprudent to continue the business of the Partnership, or that
the General Partner no longer desires to make available the Partnership to, or
to operate the Partnership for, the persons permitted to become Limited Partners
pursuant to this Agreement; (viii) upon the enactment of any law or the adoption
of any rule, regulation, policy, or guideline by any regulatory authority having
jurisdiction over the Partnership which shall make it unlawful, unreasonable, or
imprudent in the sole discretion of the General Partner for the principal
business of the Partnership to be continued; or (ix) the occurrence of any event
requiring termination of the Partnership.
(b) DISSOLUTION. Upon the occurrence of an event causing the
termination of the Partnership, the Partnership shall terminate and be
dissolved. Dissolution, payment of creditors, and distribution of the
Partnership's Net Assets shall be effected as soon as practicable in accordance
with the Partnership Act, except that the General Partner and each Limited
Partner (and any assignee) shall share in the Net Assets of the Partnership pro
rata in accordance with such Partner's respective capital account less any
amount owing by such Partner (or assignee) to the Partnership.
Nothing contained in this Agreement shall impair, restrict, or limit
the rights and powers of the Partners under the Partnership Act or the law of
any other jurisdiction in which the Partnership shall be conducting business to
reform and reconstitute themselves as a limited partnership either under terms
identical to those set forth herein or any other terms which they shall deem
appropriate following the dissolution of the Partnership.
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5. FISCAL YEAR.
The fiscal year of the Partnership begins on January 1st of each year
and ends on the following December 31st of such year.
6. GENERAL PARTNER'S NET WORTH.
So long as it shall remain the sole general partner of the
Partnership, the General Partner shall maintain at all times its "Net Worth" at
an amount not less than 10% of the total contributions to the Partnership by all
Partners. For the purposes of this Section 6, Net Worth shall be calculated in
accordance with United States generally accepted accounting principles applied
on a consistent basis, except as specified otherwise in this Section 6, with all
current assets based on their then current market values. Interests owned by
the General Partner in the Partnership, notes and accounts receivable from and
payable to any partnership in which the General Partner has an interest,
interests owned by the General Partner in any other partnership, secured or
unsecured notes of creditworthy obligors (including notes receivable from the
General Partner's "affiliates", as such term is defined in Regulation S-X of the
rules and regulations of the Securities and Exchange Commission (the "SEC")),
and letters of credit shall be included as assets in calculating Net Worth, and
liabilities subordinated to the claims of general creditors shall be included in
calculating Net Worth.
The General Partner shall not be a general partner of any limited
partnership other than the Partnership unless, at all times when it shall be the
sole general partner of the Partnership and the general partner of any such
other limited partnership, its Net Worth shall be at least equal to the Net
Worth required by the preceding paragraph.
The requirements of the preceding two paragraphs may be modified by
the General Partner at its sole option and without notice to or consent of the
Limited Partners, provided that the General Partner shall first obtain a written
opinion of legal counsel that such proposed modification shall not adversely
affect the classification of the Partnership as a partnership for federal income
tax purposes, shall not adversely affect the status of the Limited Partners as
limited partners under the Partnership Act, and shall not violate any applicable
state securities or Blue Sky law or any rules, regulations, guidelines, or
statements of policy promulgated or applied thereunder.
7. CAPITAL CONTRIBUTIONS.
The General Partner heretofore contributed $1,000 in cash to the
capital of the Partnership, and the Partnership issued to the General Partner
one Unit of General Partnership Interest in the Partnership ("Unit of General
Partnership Interest"). The net asset value of a Unit of General Partnership
Interest has at all times been and shall at all times be equivalent to the Net
Asset Value of a Unit of Limited Partnership Interest. At the Initial Closing
(as defined below in this Section 7), the General Partner contributed to the
Partnership such additional amount of cash as was necessary to make the General
Partner's aggregate capital contribution equal to the greater of (a) $200,000 or
(b) the sum of (i) the lesser of $100,000 or 3% of the first $10,000,000 in
aggregate capital contributions to the Partnership by all
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Partners and (ii) 1% of the aggregate capital contributions to the Partnership
by all Partners in excess of $10,000,000. In return for such additional capital
contribution, the Partnership issued to the General Partner additional Units of
General Partnership Interest, each of which had an initial net asset value
equivalent to the initial Net Asset Value of a Unit of Limited Partnership
Interest. As may be required as additional Limited Partners are admitted to the
Partnership at Periodic Closings (as defined below in this Section 7) or
otherwise, the General Partner shall at all times maintain its interest in the
Partnership at no less than the amount required above. However, the General
Partner may maintain its interest in the Partnership at less than the amount
required above so long as it shall first obtain a written opinion of legal
counsel that such proposed action shall not adversely affect the classification
of the Partnership as a partnership for federal income tax purposes, shall not
adversely affect the status of the Limited Partners as limited partners under
the Partnership Act, and shall not violate any applicable state securities or
Blue Sky law or any rules, regulations, guidelines, or statements of policy
promulgated or applied thereunder. Notwithstanding the foregoing, the General
Partner, in its sole discretion, may withdraw any excess above its required
interest in the Partnership without notice to or approval by the Limited
Partners. In addition, the General Partner, in its sole discretion, may
contribute any greater amounts to the Partnership for which the Partnership
shall issue to the General Partner additional Units of General Partnership
Interest based upon the Net Asset Value of a Unit of Limited Partnership
Interest at the time of such contribution.
Interests in the Partnership, other than the Units of General
Partnership Interest issuable to the General Partner, are Units of Limited
Partnership Interest, or Units. The initial Limited Partner heretofore
contributed $1,000 in cash to the capital of the Partnership, and the
Partnership issued to the initial Limited Partner one Unit. At the Initial
Closing, the initial Limited Partner redeemed his one Unit and received $1,000
therefor (without interest), withdrew from the Partnership, and had no further
rights or obligations as a Limited Partner except to the extent he has otherwise
subscribed for Units. The remaining Partners consented to the withdrawal of the
initial Limited Partner.
The General Partner, on behalf of the Partnership, has heretofore
entered and may in the future enter into a selling agreement (a "Selling
Agreement") with one or more brokers, dealers, or banks, whether or not
affiliated with the General Partner or any of its Affiliates (as defined in
Section 17(c)) (each a "Selling Agent"), as described in the Prospectus (as
defined below in this Section 7). Pursuant to a Selling Agreement, a Selling
Agent may select such additional selling agents ("Additional Selling Agents") as
the Selling Agent in its sole discretion may determine. In accordance with the
terms of a Selling Agreement and the Prospectus, the Partnership, through a
Selling Agent and any Additional Selling Agents, shall offer Units and fractions
of Units (to the fourth decimal place) for sale solely and exclusively to (i)
persons who are employees of the General Partner, Tudor Investment Corporation,
a Delaware corporation and an Affiliate of the General Partner ("TIC"), any of
their present and future affiliated entities, and their successors and assigns,
(ii) the General Partner, TIC, any of their present and future affiliated
entities, and their successors and assigns, and (iii) such other individuals and
entities as the General Partner in its sole discretion may determine, all as
provided in this Agreement and in the Prospectus.
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At an initial closing held on July 2, 1990 (the "Initial Closing"),
the Partnership issued and sold 421 Units at a price equal to $1,000 per Unit to
each subscriber whose subscription was accepted by the General Partner ($421,000
in the aggregate).
The Partnership, through the Selling Agents and any Additional Selling
Agents, continues (in the sole discretion of the General Partner) to offer for
sale Units and fractions of Units (to the fourth decimal place) at prices per
Unit, in such minimum amounts, for such periods of time, and on such terms and
conditions as the General Partner determines in its sole discretion. The
continuing offering of Units shall continue until the maximum number of
registered Units (including any newly-registered Units or any Units offered and
sold pursuant to exemptions from the registration or qualification requirements
of applicable securities laws) shall have been sold, unless the General Partner
in its sole discretion shall sooner withdraw or otherwise discontinue the
continuing offering. The Partnership generally issues and sells Units at
closings ("Periodic Closings") held as of the first day of each calendar
quarter. Notwithstanding the foregoing, the General Partner may hold Periodic
Closings at such other times as it shall determine in its sole discretion. The
initial Periodic Closing during the continuing offering was held as of August 1,
1990. At each Periodic Closing, the Partnership issues and sells Units to each
subscriber whose subscription is accepted by the General Partner at a price per
Unit determined by the General Partner in its sole discretion; provided,
however, that the sale price per Unit shall not at any time be less than 100% of
the Net Asset Value of a Unit as of the date of the applicable Periodic Closing
at which such Unit is sold.
At any time and from time to time, Units may be subscribed for, in the
sole discretion of the General Partner, by corporate pension and profit sharing
plans, 401(k) plans, Keogh plans for self-employed individuals (including
partners), simplified employee pension plans, individual retirement accounts,
and other employee benefit plans, whether or not maintained in the United States
and whether or not subject to the Internal Revenue Code of 1986 as amended (the
"Code") or the Employee Retirement Income Security Act of 1974 as amended ("Plan
Investors"), including without limitation Plan Investors owned, sponsored by, or
affiliated with the General Partner, TIC, any of their present or future
affiliated entities, or their successors or assigns. The General Partner shall
only accept subscriptions for Units from Plan Investors to the extent that the
value of each such subscription, when aggregated with the capital accounts and
subscriptions for Units of all other Plan Investors, shall be less than 25% of
the aggregate value of all outstanding Units after giving effect to such
subscriptions, and if such subscriptions shall be otherwise timely submitted
with good funds and in the proper form as described in this Agreement, the
Prospectus, and any subscription documentation. Plan Investors whose
subscriptions are accepted by the General Partner shall become Limited Partners
and "Plan Investor Partners" upon their admission to the Partnership.
At any time and from time to time, Units may be subscribed for by the
General Partner, its present and future affiliated entities, and its successors
and assigns. Subscriptions for Units by such persons or any other person shall
not preclude them from receiving compensation from the Partnership for services
rendered by them in their respective capacities as other than Limited Partners.
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All subscriptions for Units shall be irrevocable. The General Partner
may in its sole discretion reject any subscription in whole or in part at any
time prior to the acceptance thereof. No subscriber for Units shall become a
Limited Partner until the General Partner shall accept such subscriber's
subscription at a Periodic Closing, shall execute this Agreement on behalf of
such subscriber pursuant to the power of attorney in Section 14, and shall make
an entry in the books and records of the Partnership reflecting that such
subscriber has been admitted as a Limited Partner. Accepted subscribers shall
be deemed Limited Partners at such time as their admission shall be reflected in
the books and records of the Partnership.
In connection with the Partnership's offering of Units as described in
the "Prospectus" (which term shall mean the Partnership's prospectus and
disclosure document and amendments and supplements thereto, including those
constituting a part of the Partnership's registration statements under the
Securities Act of 1933 as amended (the "Securities Act"), relating to the
offering of Units or any other or subsequent prospectus and disclosure document
used from time to time in the offering of Units, the General Partner, on behalf
of the Partnership, shall: (a) cause to be filed (i) one or more registration
statements and such amendments thereto as the General Partner shall deem
advisable or as may be required by applicable law, rules, or regulations with
the Securities and Exchange Commission (the "SEC") and the National Association
of Securities Dealers, Inc. (the "NASD") for the registration and public
offering of Units in the United States of America and other jurisdictions, and
(ii) one or more Prospectuses included in such registration statements and
amendments and supplements thereto with the Commodity Futures Trading Commission
(the "CFTC") and the National Futures Association (the "NFA"); (b) qualify Units
for sale under the securities or Blue Sky laws of such states of the United
States of America or other jurisdictions as the General Partner shall in its
sole discretion deem advisable; (c) make other arrangements for the offering and
sale of Units as the General Partner shall in its sole discretion deem necessary
or appropriate, including but not limited to engaging Selling Agents and
Additional Selling Agents for Units on such terms as the General Partner may
determine in its sole discretion and agree upon with such agents, and effecting
the offering and sale of Units pursuant to exemptions from the registration or
qualification requirements of applicable securities laws; and (d) take such
action with respect to the matters described in clauses (a), (b), and (c) of
this paragraph as the General Partner shall deem advisable or necessary.
All Units subscribed for shall be issued subject to the collection of
good funds. If at any time good funds representing payment for Units shall not
be made available to the Partnership because a subscriber shall have provided a
bad check or draft, other uncollectible item, or otherwise, the General Partner
shall cancel the Units issued to such subscriber represented by such item, and
the subscriber's name shall be removed as a Limited Partner from the books and
records of the Partnership. Any losses or profits sustained by the Partnership
in connection with the Partnership's business allocable to such canceled Units
shall be deemed an increase or decrease in Net Assets and allocated among the
remaining Partners as described in Section 8. Each Limited Partner shall
reimburse the Partnership for any expense and loss (including any trading loss)
incurred in connection with the issuance and cancellation of any Units issued to
such Partner.
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Capital contributions to the Partnership shall be made upon execution,
acknowledgment, and delivery of documents in form and substance satisfactory to
the General Partner in its sole discretion.
No additional contributions of capital shall be required of any
Limited Partner during the term of the Partnership. The aggregate of all
capital contributions shall be available to the Partnership to carry on its
business, and no interest shall be paid by the Partnership on any such
contribution.
The General Partner is authorized, in its sole discretion at any time
and from time to time, to terminate and discontinue any offering of Units, in
whole or in part or in respect of any particular jurisdiction.
8. ALLOCATION OF PROFITS AND LOSSES; ACCOUNTING; RELATED MATTERS.
(a) CAPITAL ACCOUNTS. A capital account shall be established for each
Partner. The initial balance of each Partner's capital account shall be the
amount of his initial capital contribution to the Partnership.
(b) MONTHLY ALLOCATIONS. As of the close of business (as determined
by the General Partner in its sole discretion) on the last day of each calendar
month during each fiscal year of the Partnership, the following determinations
and allocations shall be made:
(i) the Partnership's Net Assets, before accrual of management
fees and incentive fees payable to any Affiliate of the General Partner since
the next previous determination of Net Assets, shall be determined ("Adjusted
Net Assets");
(ii) any increase or decrease in Adjusted Net Assets as compared
to the next previous determination of Net Assets shall then be credited or
charged to the capital accounts of the Partners in the ratio that the balance of
each Partner's capital account bears to the balance of all Partners' capital
accounts;
(iii) any accrued management fees payable to any Affiliate of
the General Partner and any accrued incentive fees payable to any Affiliate of
the General Partner shall then be charged to the capital accounts of the
Partners other than Plan Investor Partners in the ratio that the balance of each
such Partner's capital account bears to the balance of all Partners' capital
accounts other than Plan Investor Partners' capital accounts;
(iv) the number of Units held by each Plan Investor Partner
shall then be restated to equate the per Unit value of a Plan Investor Partner's
capital account with the per Unit value of the non-Plan Investor Partners'
capital accounts, by increasing the number of Units held by a Plan Investor
Partner by a number of Units equal to (aa) the product of (1) the number of
Units held by all Partners other than the Plan Investor Partners and (2) the
ratio of the balance of such Plan Investor Partner's capital account to the
aggregate balance of all non-
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Plan Investor Partners' capital accounts, divided by (bb) the number of Units
then held by such Plan Investor Partner; and
(v) the amount of any distribution to a Partner, any amount paid to
a Partner on redemption of Units, and any amount paid to the General Partner
upon withdrawal of its interest in the Partnership shall then be charged to that
Partner's capital account.
(c) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As
of the end of each calendar month of the Partnership, the Partnership's
recognized profit and loss shall be allocated among the Partners pursuant to the
following sub-paragraphs for United States federal income tax purposes (with any
allocation of recognized gains or recognized losses consisting of pro rata
shares of each item of capital or ordinary gain or loss).
(i) Any management fees payable to any Affiliate of the General
Partner and any incentive fees payable to any Affiliate of the General Partner
shall be allocated pro rata among the Units of Partners other than the Plan
Investor Partners based on such Units outstanding as of the beginning of the
month in which such items accrued.
(ii) With the exception of items allocated pursuant to subparagraph
(i) above, items of ordinary income (such as interest) and ordinary expense
shall be allocated pro rata among the Units of Partners based on such Units
outstanding as of the beginning of the month in which the items of ordinary
income and ordinary expense accrued.
(iii) Net recognized capital gain or loss from the Partnership's
trading activities shall be allocated as follows.
(aa) For the purpose of allocating the Partnership's net
realized capital gain and loss among the Partners, there shall be
established an allocation account with respect to each
outstanding Unit. The initial balance of each allocation account
shall be the amount paid by the Partner for the Unit. The
initial balance of the allocation account of any Unit created
pursuant to the Unit restatement provision in Section 8(b)(iv)
shall be equal to a pro rata portion of the aggregate allocation
accounts of the other Units owned by the relevant Plan Investor
Partner immediately prior to such Unit restatement, and the
allocation accounts of such pre-existing Units held by such Plan
Investor Partner shall be correspondingly reduced pro rata.
Allocation accounts shall be adjusted as of the end of each month
as follows:
(1) each allocation account shall be increased by the
amount of income and gain which shall have been allocated to
the Partner who holds the Unit pursuant to subparagraph
(c)(ii) above and subparagraph (bb) below;
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(2) each allocation account shall be decreased by the
amount of expense and loss which shall have been allocated
to the Partner who holds the Unit pursuant to subparagraphs
(c)(i) and (c)(ii) above and subparagraph (dd) below and by
the amount of any distribution which shall have been
received by the Partner with respect to the Unit (other than
on redemption of the Unit); and
(3) when a Unit shall be redeemed, the allocation
account with respect to such Unit shall be eliminated.
(bb) Net recognized capital gain realized on or prior to the
date a Partner redeems a Unit shall be allocated to such
redeeming Partner up to the excess, if any, of the amount
received upon redemption of the Unit over the allocation account
attributable to the redeemed Unit. In the event the aggregate
amount of net capital gain available to be allocated pursuant to
this subparagraph (bb) shall be less than the aggregate amount of
capital gain required to be so allocated, (1) the aggregate
amount of available capital gain shall be allocated among all
such Partners in the ratio which each such Partner's excess bears
to the aggregate excess of all such Partners, and (2) each
Partner who has not been allocated the full amount of net
recognized capital gain required to be allocated pursuant to the
first sentence of this subparagraph (bb) shall be allocated,
after any allocations required by the first sentence of this
subparagraph (bb) in respect of Partners who redeem Units on
subsequent redemption dates, net capital gain realized after such
Partner's date of redemption up to the amount of any such
deficiency.
(cc) Net recognized capital gain remaining after the
allocation thereof pursuant to subparagraph (bb) above shall be
allocated next among all Partners whose capital accounts shall be
in excess of their Units' allocation accounts (after the
adjustments in subparagraph (bb) above) in the ratio that each
such Partner's excess shall bear to all such Partners' excesses.
In the event that gain to be allocated pursuant to this
subparagraph (cc) shall be greater than the excess of all such
Partners' capital accounts over all such allocation accounts, the
excess gain shall be allocated among all Partners in the ratio
that each Partner's capital account shall bear to all Partners'
capital accounts.
(dd) Net recognized capital loss realized on or prior to the
date a Partner redeems a Unit shall be allocated to such
redeeming Partner up to the excess, if any, of the allocation
account attributable to the redeemed Unit over the amount which
shall have been received upon redemption of the Unit. In the
event the aggregate amount of net capital loss available to be
allocated pursuant to this subparagraph (dd) shall be
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less than the aggregate amount of net capital loss required to be
so allocated, (1) the aggregate amount of available capital loss
shall be allocated among all such Partners in the ratio which
each such Partner's excess bears to all such Partners' excesses,
and (2) each Partner who has not previously been allocated the
full amount of net recognized capital loss required to be
allocated pursuant to the first sentence of this subparagraph
(dd) shall be allocated, after any allocations required by the
first sentence of this subparagraph (dd) in respect of Partners
who redeem Units on subsequent redemption dates, net capital loss
realized after such Partner's date of redemption up to the amount
of any such deficiency.
(ee) Net recognized capital loss remaining after the
allocation thereof pursuant to subparagraph (dd) above shall be
allocated next among all Partners whose Units' allocation
accounts shall be in excess of their capital accounts (after the
adjustments in subparagraph (dd) above) in the ratio that each
such Partner's excess shall bear to all such Partners' excesses.
In the event that loss to be allocated pursuant to this
subparagraph (ee) shall be greater than the excess of all such
allocation accounts over all such Partners' capital accounts, the
excess loss shall be allocated among all Partners in the ratio
that each Partner's capital account shall bear to all Partners'
capital accounts.
(iv) The tax allocations prescribed by this Section 8(c) shall be made
to each holder of a Unit, whether or not the holder is a substituted Limited
Partner. In the event that a Unit shall have been transferred pursuant to
Section 11(a), the allocations prescribed by this Section 8(c) shall be made
with respect to such Unit without regard to the transfer, except that in the
month of transfer the allocations prescribed by this Section 8(c) shall be
divided between the transferor and the transferee based on the number of
calendar days each held the transferred Unit during such month. For purposes of
this Section 8(c), tax allocations shall be made to the General Partner's Units
of General Partnership Interest on a Unit of Limited Partnership Interest-
equivalent basis.
(v) The allocation of profit and loss for federal income tax purposes
set forth in this Section 8(c) is intended to allocate taxable profits and
losses among Partners generally in the ratio and to the extent that net profit
and net loss shall be allocated to such Partners under Section 8(b), so as to
eliminate to the extent possible any disparity between a Partner's capital
account and his allocation account, consistent with the principles set forth in
Section 704 of the Code and the regulations promulgated thereunder.
(d) DEFINITIONS; ACCOUNTING.
(i) The Partnership's "Net Assets" shall mean the total assets of
the Partnership (including but not limited to all cash and cash equivalents
(valued at cost), accrued interest and amortization of original issue
discount, and the market value of all
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open commodity interest contract positions and all other assets of the
Partnership) less the total liabilities of the Partnership (including but
not limited to legal, accounting, and auditing fees, organizational and
offering expenses, brokerage commissions and fees and other transaction
costs, management fees and incentive fees payable to trading advisors, and
extraordinary expenses, whether incurred or accrued), determined in
accordance with the principles specified in this Section 8(d)(i) or, where
no principle is specified, in accordance with United States generally
accepted accounting principles consistently applied under the accrual basis
of accounting. The market value of a commodity interest contract traded on
a United States exchange or market shall mean the settlement price on the
exchange or market on which such contract is traded by the Partnership on
the day with respect to which Net Assets shall be determined; provided,
however, that if a commodity interest contract could not have been
liquidated on such day due to the operation of daily limits or other rules
of the exchange or market upon which such contract was traded or otherwise,
the settlement price on the first subsequent day on which such contract
could have been liquidated shall be the market value of such contract for
such day. The market value of a forward contract, a futures contract traded
on a foreign exchange or market, a swap contract, or other off-exchange
contract, instrument, or transaction shall mean its market value as
determined by the General Partner in its sole discretion on a basis
consistently applied.
(ii) The "Net Asset Value" of a Unit shall mean the Net Assets
allocated to capital accounts represented by Units of Limited Partnership
Interest divided by the number of such Units outstanding on the date of
calculation; and the "Net Asset Value" of a Unit of General Partnership
Interest shall mean the Net Assets allocated to capital accounts
represented by Units of General Partnership Interest divided by the number
of such Units of General Partnership Interest outstanding at the time of
calculation.
(e) EXPENSES AND LIMITATIONS THEREOF. The General Partner, out of its
own funds, heretofore paid all of the costs incurred in connection with the
organization of the Partnership and the initial offering of Units. Such costs
included all expenses incurred during the initial offering in connection with
and directly and indirectly relating to the formation, qualification, and
registration of the Partnership and the Units, the preparation of any
registration statements and Prospectuses relating to the Partnership and the
Units, and the offering, distribution, and processing of the Units under
applicable federal, state, and foreign law, including but not limited to legal,
accounting, and auditing fees, printing costs, filing fees, escrow fees, sales
and marketing expenses, and other related expenses. The General Partner also
heretofore paid and shall continue to pay the costs of printing and mailing
registration statements, Prospectuses, and reports for solicitation purposes,
and the costs of preparing such registration statements and Prospectuses.
The Partnership heretofore paid and shall continue to pay its ordinary
operating expenses, including expenses for services provided by third parties
(whether or not affiliated with the General Partner or any of its Affiliates)
selected by the General Partner. Such expenses shall include without limitation
management fees and incentive fees, legal,
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accounting, auditing, escrow, recordkeeping, administration, computer, research,
and clerical fees and expenses, expenses incurred in preparing reports and tax
information to Limited Partners and regulatory authorities, expenses of printing
and mailing registration statements, Prospectuses, and reports to Limited
Partners (but not for solicitation purposes), expenses for specialized
administrative services, other printing and duplication expenses, other mailing
costs, and filing fees. The Partnership shall also be obligated to pay any
extraordinary expenses it may incur. The General Partner shall not be reimbursed
by the Partnership for any costs incurred by it relating to office space,
equipment, and staff necessary for the Partnership's operations and
administration of the sale and redemption of Units.
The Partnership shall also pay any taxes and all expenses incurred in
connection with its trading activities, including but not limited to all
margins, option premiums, brokerage, floor, exchange, clearing, clearinghouse,
principal, and NFA commissions and fees, other transaction costs and expenses,
delivery, insurance, and storage expenses, costs of transmission equipment for
trading activities, and related expenses.
Appropriate reserves may, in the sole discretion of the General
Partner, be created, accrued, and charged against the Partnership's assets for
contingent liabilities, if any, as of the date any such contingent liability
becomes known to the General Partner.
If the Partnership shall be deemed to be an entity separately subject
to federal, state, local, or foreign income tax (whether or not such tax shall
be payable or shall have been paid by the Partnership or the General Partner,
although the General Partner shall not be obligated to do so), each Limited
Partner (or assignee, if any) shall be liable for and shall pay to the
Partnership or the General Partner any income taxes due and payable or paid to
such jurisdiction, within ten days after the General Partner's request therefor,
in an amount equal to the ratio by which the number of Units held by each
Limited Partner (or assignee) shall bear to the number of Units held by all
Limited Partners as of the close of business (as determined by the General
Partner in its sole discretion) on the last day of the period for which such tax
shall have been assessed. Alternatively, if the Partnership and/or the General
Partner shall have paid any such tax out of its/their own funds (although the
General Partner shall not be obligated to do so), upon a distribution of funds
to a Limited Partner (or assignee) or a redemption of Units by a Limited Partner
(or assignee), all amounts of such taxes may be deducted from the proceeds from
such distribution or redemption and reimbursed to the Partnership and/or the
General Partner.
(f) LIMITED LIABILITY OF LIMITED PARTNERS. Each Unit, when issued to
a Partner, shall be fully paid and nonassessable. A Limited Partner's capital
contribution shall be subject to the risks of the Partnership's business.
However, except as provided otherwise in this Agreement, the General Partner
shall be liable for all debts, losses, and other obligations of the Partnership
to the extent that the Partnership's assets (which shall include amounts
contributed by Limited Partners and paid out in distributions, redemptions, or
otherwise to them together with interest thereon, but shall not include any
right of contribution from the General Partner except to the extent previously
made by it in accordance with this Agreement) shall be insufficient to discharge
such debts, losses, and other obligations.
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Except as provided otherwise in this Agreement, no Limited Partner
shall be liable for the Partnership's debts, losses, or other obligations in
excess of his unredeemed capital contribution and undistributed profits, if any;
provided, however, that if the Partnership shall be unable to pay its debts,
losses, and other obligations, a Limited Partner may be required to repay to the
Partnership amounts which shall have been paid to him in compliance with the
Partnership Act, other applicable laws, rules, and regulations, and this
Agreement and amounts which shall have been paid to him in violation of the
Partnership Act, other applicable law, rule, or regulation, or this Agreement by
way of redemption, distribution, or otherwise, together with interest thereon
which shall represent a return of capital and which shall be necessary to
discharge the Partnership's liability to creditors who shall have extended
credit to the Partnership during the period in which the capital contribution
shall have been held by the Partnership. The Partnership shall make a claim
against a Limited Partner with respect to amounts of his capital distributed to
him, received by him upon redemption of Units, or otherwise paid to him in
compliance with the Partnership Act, other applicable laws, rules, and
regulations, and this Agreement only within one year following the date that
such payments shall have been made to him or on his behalf (or to the extent
provided otherwise under the Partnership Act or other applicable law, rule, or
regulation) and only if the assets of the Partnership (which shall include
amounts contributed by Limited Partners and paid out in distributions,
redemptions, or otherwise to them together with interest thereon, but shall not
include any right of contribution from the General Partner except to the extent
previously made by it in accordance with this Agreement) shall be insufficient
to discharge the liabilities of the Partnership which shall have arisen prior to
the payment of such amounts. The Partnership shall make a claim against a
Limited Partner with respect to amounts of his capital distributed to him,
received by him upon redemption of Units, or otherwise paid to him in violation
of the Partnership Act, other applicable law, rule, or regulation, or this
Agreement only within six years following the date that such payments shall have
been made to him (or to the extent provided otherwise under the Partnership Act
or other applicable law, rule, or regulation) and only if the assets of the
Partnership (which shall include amounts contributed by Limited Partners and
paid out in distributions, redemptions, or otherwise to them together with
interest thereon, but shall not include any right of contribution of the General
Partner except to the extent previously made by it in accordance with this
Agreement) shall be insufficient to discharge the liabilities of the Partnership
which shall have arisen prior to the payment of such amounts.
In addition to the foregoing, Limited Partners may incur liability,
for which there shall be no limitation thereon: (i) if a Limited Partner fails
to provide good funds as payment for his Units and such Partner's Units shall be
canceled by the Partnership and losses or expenses shall be incurred as a result
thereof as provided in Section 7; (ii) if the Partnership shall be deemed an
entity separately subject to federal, state, local, or foreign taxes, with
Partners bearing such tax liability pro rata in accordance with the respective
capital accounts of the Partners as provided in Section 8(e); (iii) if the
Partnership shall be required to withhold tax on certain income of the
Partnership allocable to a Partner (or assignee thereof) or the Partnership as
provided in Section 9(c); (iv) if a Limited Partner is required to indemnify the
Partnership in accordance with Section 17(d); or (v) if the subscription
documentation
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delivered by a Limited Partner in connection with his purchase of Units shall
contain any misstatements or omissions.
(g) LENDER AS PARTNER. No creditor who shall make a loan to the
Partnership may have or acquire, at any time as a result of making the loan, any
direct or indirect interest in the profits, capital, or property of the
Partnership, other than as a secured creditor or other than as a result of the
exercise of the rights thereof.
(h) RETURN OF LIMITED PARTNERS' CAPITAL CONTRIBUTIONS. Except to the
extent that a Limited Partner shall have the right to withdraw capital through
redemption of Units in accordance with Section 11(b), no Limited Partner shall
have any right to demand the return of his capital contribution and any profits
added thereto except upon termination and dissolution of the Partnership. No
Partner shall be paid interest on any capital contribution to the Partnership or
on such Partner's capital account. In no event shall a Limited Partner be
entitled to demand or receive from the Partnership property other than cash. No
Partner shall have the right to bring an action for partition against the
Partnership.
(i) DISTRIBUTIONS. The General Partner shall have sole discretion in
determining the amount and frequency of distributions (other than on voluntary
redemption of Units), if any, the Partnership shall make to its Partners;
provided, however, that no Partner shall receive a distribution to the extent
that, after giving effect to such distribution, all liabilities of the
Partnership (other than liabilities to Partners on account of their Partnership
interests) shall exceed the fair market value of the Partnership's assets. All
distributions shall be pro rata in accordance with the respective capital
accounts of the Partners.
If, pursuant to applicable law, the Partnership shall have been
required to pay or withhold tax on certain income of the Partnership allocable
to a Limited Partner (or assignee thereof) and the Partnership and/or the
General Partner shall have paid out of its/their own funds such tax in
accordance with Sections 8(e) or 9(c) (although the General Partner shall not be
obligated to do so), upon a distribution to such Limited Partner (or assignee)
all amounts of such taxes may be deducted from the amount of such distribution
and reimbursed to the Partnership and/or the General Partner.
(j) GENERAL PARTNER AS LIMITED PARTNER. The General Partner shall
also be a Limited Partner to the extent that the General Partner purchases Units
of Limited Partnership Interest or purchases or becomes a transferee of all or
any part of the Units held by a Limited Partner, and to such extent shall be
treated in all respects as a Limited Partner and the consent of the Limited
Partners to such transfer to a General Partner shall not be required.
9. MANAGEMENT.
(a) MANAGEMENT OF PARTNERSHIP. Except as provided otherwise in this
Agreement, the General Partner, to the exclusion of the Limited Partners, shall
conduct and manage the business of the Partnership, including without limitation
the investment of the Partnership's assets and the negotiation, execution,
delivery, and performance of agreements
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necessary or desirable to carry out the purposes, business, and objectives of
the Partnership and otherwise effectuate the provisions of this Agreement. No
Limited Partner, in its/his capacity as such, shall have the power to transact
business for, represent, act for, sign for, or bind the General Partner or the
Partnership. Except as provided otherwise in this Agreement, no Limited Partner,
in its/his capacity as such, shall be entitled to any salary, draw, or other
compensation from the Partnership on account of any investment in the
Partnership. Each Limited Partner shall furnish to the General Partner such
information as may be determined by the General Partner to be required or
appropriate for the Partnership to open and maintain accounts with brokerage
firms for the purpose of the Partnership's trading activities.
In addition to and not in limitation of any rights and powers
conferred by law or by this Agreement and except as limited, restricted, or
prohibited by this Agreement, the General Partner shall have and may exercise,
for and on behalf of the Partnership, and the Limited Partners, all powers and
rights necessary, proper, convenient, and advisable to effectuate and carry out
the purposes, business, and objectives of the Partnership, and shall have and
possess the same rights and powers as a general partner in a partnership without
limited partners formed under the law of the State of Delaware.
The General Partner shall have fiduciary responsibility for the
safekeeping of all of the funds and assets of the Partnership, whether or not in
the General Partner's immediate possession or control. Except as provided
otherwise in this Agreement, the General Partner shall neither employ nor permit
another person to employ the Partnership's funds or assets in any manner other
than for the benefit of the Partnership.
The General Partner, for and on behalf of the Partnership, may retain
one or more trading advisors (which may include officers, employees, and
Affiliates of the General Partner or of its Affiliates, or the General Partner
itself) to make trading decisions for the Partnership, and may delegate complete
trading discretion to such advisor or advisors; provided, however, that the
General Partner may override any trading instructions which it in its sole
discretion shall determine to be in violation of any trading policy of the
Partnership or as or to the extent necessary to fund distributions or
redemptions, to effect the allocation or reallocation of the Partnership's
assets among trading advisors if more than one trading advisor shall be retained
by the General Partner, or to pay the Partnership's expenses; and provided
further that the General Partner may make trading decisions at any time at which
a trading advisor for the Partnership shall become incapacitated or unavailable
or some other emergency shall arise as a result of which such advisor shall be
unable or unwilling to act or no trading advisor shall then be retained by the
Partnership and the General Partner shall not have yet retained a successor
trading advisor. Notwithstanding the foregoing, the General Partner may consult
with and receive recommendations from its Affiliates and their employees
regarding the allocation and reallocation of assets among and the retention and
termination of trading advisors for the Partnership; provided, however, that the
General Partner in its sole discretion and judgment shall be responsible for
making all final determinations regarding such matters.
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The General Partner, on behalf of the Partnership, shall be authorized
and directed: (i) to enter into the advisory agreement with TIC described in
the Prospectus and to cause the Partnership to pay TIC the fees described in the
Prospectus and in such advisory agreement; (ii) to modify (including changing
the form and amount of compensation and other arrangements and terms) or
terminate such advisory agreement in its sole discretion in accordance with the
terms of such agreement, and to employ from time to time other trading advisors
for the Partnership (which may include officers, employees, and Affiliates of
the General Partner or of its Affiliates, or the General Partner itself)
pursuant to advisory agreements having such terms and conditions and providing
for such form and amount of compensation as the General Partner in its sole
discretion shall deem to be in the best interests of the Partnership and
consistent with applicable laws, rules, and regulations, which terms may include
provision for the payment of a fixed management fee and/or an incentive fee to
new or replacement trading advisors, and any such incentive fee may be based
upon trading profits which shall be earned by such trading advisors irrespective
of whether such profits shall exceed trading losses which shall have been
previously incurred or shall be concurrently incurred by other trading advisors
or by the Partnership as a whole; (iii) to enter into a customer agreement with
Bellwether Partners LLC, a Delaware limited liability company
and an Affiliate of the General Partner ("BPL"), as described in the
Prospectus; (iv) to enter into customer agreements with such futures commission
merchants, introducing brokers, clearing brokers, floor brokers, foreign
exchange brokers and dealers, broker-dealers, and brokerage firms as described
in the Prospectus; (v) to cause the Partnership to pay BPL and such other
brokers, dealers, and firms the commissions, fees, charges, mark-ups, and other
transaction costs as described in the Prospectus and in the agreements with such
persons or as agreed upon from time to time between the General Partner and
BPL and such other brokers, dealers, and firms; (vi) to modify (including
changing the form and amount of compensation and other arrangements and terms)
and terminate such customer agreements in the sole discretion of the General
Partner in accordance with the terms of such agreements; (vii) to employ from
time to time other futures commission merchants, clearing brokers, introducing
brokers, floor brokers, foreign exchange brokers and dealers, broker-dealers,
and brokerage firms (which may include Affiliates of the General Partner or of
its Affiliates, or the General Partner itself) pursuant to agreements having
such terms and conditions and providing for such term and amount of compensation
as the General Partner in its sole discretion shall deem to be in the best
interests of the Partnership; and (viii) in furtherance of the Partnership's
trading activities, purposes, business, and objectives, to provide guarantees,
indemnities, margin, collateral, undertakings, credit support and enhancement,
and similar assurances to banks, financial institutions, counterparties,
brokers, dealers, customers, and other persons (including but not limited to
BPL, other Affiliates of the General Partner, principals, stockholders,
directors, officers, or employees of the General Partner or any of its
Affiliates, or partnerships, corporations, companies, trusts, or other entities
for which the General Partner or any of its Affiliates acts as general partner,
operator, sponsor, or advisor or otherwise manages or controls ("Interested
Persons")) with regard to obligations incurred by futures commission merchants,
clearing brokers, introducing brokers, floor brokers, foreign exchange brokers
and dealers, broker-dealers, and brokerage firms employed by the Partnership or
its counterparties or agents or employed by other persons (including but not
limited to Interested Persons), and to enter into related agreements
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(including but not limited to contribution, indemnity, margin, collateral,
credit support and enhancement, and other similar agreements with Interested
Persons), it being understood and agreed that, pursuant to such guarantees,
arrangements, and agreements, the Partnership may make and take actual physical
delivery of the items underlying commodity interest contracts, may be subject to
risks of defaults and failures and other risks, and may be liable (primarily,
secondarily, or contingently) for the obligations of other persons (including
but not limited to Interested Persons), provided in each such case that the
General Partner shall first determine in its sole discretion that such
guarantees, arrangements, and agreements may result in better trade execution or
pricing or increased confidentiality with respect to the Partnership's trading
activities or is otherwise beneficial to the Partnership.
The General Partner shall review from time to time, and at least once
a year, the commission rates and other transaction fees charged to the
Partnership. Based upon such review, comparisons to the commission rates and
fees charged by other major futures commission merchants, introducing brokers,
clearing brokers, floor brokers, foreign exchange brokers and dealers, broker-
dealers, and brokerage firms for similar services rendered to accounts the size
and type of the partnership's account, the General Partner's knowledge of the
reasonableness of commission rates generally, the trading volume of the
Partnership, and the circumstances of the Partnership, the General Partner shall
ensure that the rates and fees being charged to the Partnership are reasonable
and competitive in relation to rates and fees charged by other brokers and
dealers for similar services to entities comparable in size and trading activity
to the Partnership.
(b) TRADING POLICIES. The General Partner shall require the
Partnership's trading advisors to follow, and shall monitor their compliance
with, such trading policies as the General Partner may determine in its sole
discretion from time to time, as well as the following trading policies.
(i) The Partnership shall not borrow or lend money to any Partner
or other person, except that the foregoing shall not prohibit: (aa)
depositing margin and collateral with respect to the initiation and
maintenance of commodity interest contract positions; (bb) obtaining and
utilizing lines of credit and settlement and delivery lines for the trading
of forward contracts, currency contracts, swaps, and related contracts and
entering into guarantees, arrangements, and agreements in connection
therewith; or (cc) guaranteeing obligations of any person or entering into
any other arrangement or agreement contemplated by clause (viii) of the
fifth paragraph of Section 9(a).
(ii) The Partnership shall not permit "churning" of its assets.
(iii) The Partnership shall not employ the trading technique
commonly known as "pyramiding", in which the speculator uses unrealized
profits on existing positions in a given commodity interest contract due to
favorable price movement as margin specifically to buy or sell additional
positions in the same or a related commodity interest contract. However,
open trade equity may be taken into account when determining the size of
positions to be taken in all commodity interest contracts,
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and the Partnership may add to existing commodity interest contract
positions in its portfolio provided that such action shall be consistent
with the foregoing restriction.
The General Partner shall not approve any material change in the
foregoing three trading policies without obtaining prior written approval of
Limited Partners owning more than 50% of the Units then owned by Limited
Partners.
(c) ADDITIONAL OBLIGATIONS AND RESPONSIBILITIES OF GENERAL PARTNER.
The General Partner shall take such other actions as it may deem necessary or
desirable in its sole discretion to manage the business of the Partnership,
including but not limited to: (i) entering into, executing, delivering, and
maintaining contracts and agreements, including without limitation account
opening agreements and documents, applications, subscriptions, investment
letters, investment agreements, management agreements, advisory agreements,
powers of attorney, trading and investment authorizations, appointments of
agents, purchase agreements, sale agreements, brokerage and clearing agreements,
margin agreements, escrow agreements, custody agreements, solicitation
agreements, swap agreements, collateral, pledge, and security agreements,
financing statements, assignments, guarantees, indemnities, contribution
agreements, keep-well agreements, credit support and enhancement agreements,
incumbency certificates, confirmations, underwriting and selling agreements,
consulting agreements, letters of liquidation, arbitration agreements, hedging
certifications and agreements, risk disclosure statements, give-up agreements,
disclosure documents, settlement agreements, court, arbitration, and regulatory
authority agreements, applications, certifications, documents, and instruments,
authorizations to close accounts, authorizations to transfer funds, securities,
commodities, currencies, and other property, and any and all other instruments;
(ii) doing and performing all such things as shall be in furtherance of the
Partnership's purposes or necessary or appropriate for the conduct of the
Partnership's business, including without limitation opening, maintaining, and
closing brokerage accounts, clearing accounts, mutual fund accounts, bank
accounts, margin, collateral, and security accounts, escrow accounts, custodial
accounts, and other accounts; (iii) transferring the care and custody of
securities, commodities, currencies, and funds to banks, brokers, dealers,
clearing agencies, custodians, and other depositories and agents pursuant to
bank, brokerage, clearing, safekeeping, custody, escrow, and other arrangements;
(iv) making withdrawals, transfers, payments, and additions of funds,
securities, commodities, currencies, and other property and instruments from and
to said accounts; (v) collecting and receiving confirmation statements,
statements of account, reports, and other communications from brokers, dealers,
counterparties, banks, agents, mutual funds, custodians, and agents; (vi)
making, executing, certifying, signing, endorsing, pledging, hypothecating, and
delivering checks, drafts, notes, acceptances, bills of exchange, deposits,
bills of lading, warehouse receipts, letters of credit, lines of credit, and
negotiable instruments; (vii) depositing, withdrawing, paying, retaining, and
distributing the Partnership's assets in any manner consistent with this
Agreement; (viii) investing and directing the investment and reinvestment of
assets of the Partnership; (ix) paying and authorizing the payment of
distributions to Partners and expenses of the Partnership; and (x) preparing and
filing in a timely manner all reports, filings, and registrations which shall be
required from time to time by applicable legal, governmental, and regulatory
authorities.
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The Partnership's assets are and shall be deposited with such banks,
futures commission merchants, clearing brokers, foreign exchange brokers and
dealers, broker-dealers, brokerage firms, custodians, and/or other depositories
as the General Partner in its sole discretion may determine from time to time,
and such assets shall be used for the Partnership's trading. The General
Partner shall endeavor to place as much of the Partnership's assets as is
practicable in governmental debt securities and other interest-bearing
securities, investments, and accounts for the account of the Partnership or
otherwise arrange for interest and other amounts to be credited to such assets.
The Partnership shall receive all interest income and other amounts earned on
such securities, investments, and accounts.
The General Partner shall make any and all elections on behalf of the
Partnership under the Code and any other applicable federal, state, local, or
foreign tax law as the General Partner shall determine to be in the best
interests of the Partnership. The General Partner shall prepare or cause to be
prepared and shall file on or before the due date (or any extension thereof) any
federal, state, local, or foreign tax returns which shall be required to be
filed by the Partnership. The General Partner shall cause the Partnership to
pay any taxes payable by the Partnership; provided, however, that the General
Partner shall not be required to cause the Partnership to pay any tax so long as
the General Partner or the Partnership shall in good faith and by appropriate
legal proceedings be contesting the validity, applicability, or amount of such
tax without materially endangering any rights or interests of the Partnership.
The General Partner shall be authorized to perform all duties imposed
by Sections 6221 through 6232 of the Code on the General Partner as "tax matters
partner" of the Partnership, including but not limited to: (i) conducting all
audits and other administrative proceedings with respect to Partnership tax
items; (ii) extending the statute of limitations for all Limited Partners with
respect to Partnership tax items; (iii) filing petitions with appropriate
federal courts for review of final Partnership administrative adjustments; and
(iv) entering into a settlement with the Internal Revenue Service on behalf of
and binding upon those Limited Partners having less than a 1% interest in the
Partnership, unless a Limited Partner shall have notified the Internal Revenue
Service and the General Partner that the General Partner shall not act on such
Partner's behalf. The General Partner shall be authorized to retain and
compensate attorneys, accountants, and auditors to assist the General Partner in
carrying out its obligations as tax matters partner.
If, pursuant to applicable law, the Partnership shall be required to
withhold tax on certain income of the Partnership allocable to a Partner (or
assignee thereof), whether or not such tax shall be payable or shall have been
paid by the Partnership or the General Partner (although the General Partner
shall not be obligated to do so), each Limited Partner (or assignee, if any)
shall be liable for and shall pay to the Partnership or the General Partner such
amount of tax, within ten days after the General Partner's request therefor.
Alternatively, if the Partnership and/or the General Partner shall have paid any
such tax out of its/their own funds (although the General Partner shall not be
obligated to do so), upon a distribution of funds to such Partner (or assignee)
or a redemption of Units by such Partner (or assignee), all amounts of such
taxes may be deducted from the proceeds from such distribution or redemption and
reimbursed to the Partnership and/or the General Partner.
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The General Partner shall keep at the principal office of the
Partnership such books and records relating to the business of the Partnership
(including subscription documentation and records necessary to substantiate that
Units were sold to subscribers for whom such securities were suitable at the
time of purchase) as the General Partner deems necessary or advisable in its
sole discretion or as shall be required by applicable regulatory authorities.
To the extent required by CFTC regulations and for any purpose related to a
Limited Partner's interest as a limited partner in the Partnership, such books
and records shall be available to a Limited Partner or his authorized attorney
or agent for inspection and copying during normal business hours of the
Partnership, and upon request the General Partner shall send copies of the same
to any Limited Partner upon payment by him of reasonable reproduction and
distribution costs. A Limited Partner shall give the General Partner at least
24 hours' prior written notice for such inspection and copying by such Partner
or his authorized attorney or agent. Any subscription documentation shall be
retained by the Partnership for not less than six years.
The General Partner shall submit to any state securities or Blue Sky
authority any information required to be filed with such authority, including
without limitation reports and statements required to be distributed to Limited
Partners.
Except as provided or permitted otherwise in this Agreement or with
the approval of the General Partner and in accordance with applicable laws,
rules, and regulations, no person shall receive, directly or indirectly, any
advisory, management, or incentive fee for investment advice furnished to the
Partnership who shall also share or participate in brokerage, floor, exchange,
clearing, clearinghouse, or principal commissions or fees paid by the
Partnership, and no broker or dealer for the Partnership shall pay, directly or
indirectly, rebates or give-ups to the General Partner or any other trading
advisor for the Partnership. Such prohibitions shall not be circumvented by any
reciprocal business arrangements. Assets of the Partnership shall not be
commingled with assets of any other person. The Partnership's deposit of
margin, collateral, and assets with banks, futures commission merchants,
clearing brokers, foreign exchange brokers or dealers, broker-dealers, brokerage
firms, custodians, escrow agents, or other depositories and the segregation of
any such amounts by such persons in accordance with CFTC regulations, and the
Partnership's entry into, and performance under, any guarantee, arrangement, or
other agreement contemplated by clause (viii) of the fifth paragraph of Section
9(a) shall not constitute commingling.
The General Partner shall devote such time and resources to the
Partnership's business and affairs as it in its sole discretion shall deem
necessary or advisable to effectively manage the Partnership. Subject to
Section 6, any Partner or affiliate of any Partner may engage in or possess any
interest in other business ventures of any kind, nature, or description,
independently or with others, whether such ventures are competitive with the
Partnership or otherwise. Neither the Partnership nor any Partners shall have
any rights or obligations by virtue of this Agreement or the partnership
relationship created hereby in or to such other ventures or the income or
profits or losses derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or
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improper, and no Partner shall be required to refrain from any other venture
or disgorge any profits derived from any other venture.
The General Partner may, consistent with applicable laws, rules, and
regulations, engage and compensate, on behalf of the Partnership and from the
Partnership's funds, such persons and entities (including attorneys,
accountants, and auditors, persons and entities affiliated with the General
Partner, and officers, employees, and Affiliates of the General Partner) as the
General Partner in its sole discretion shall deem necessary or advisable for the
conduct and operation of the business of the Partnership.
The General Partner in its sole discretion shall prosecute, defend,
settle, or compromise actions or claims at law or in equity at the Partnership's
expense as may be necessary or proper to enforce or protect the Partnership's
interests. The General Partner shall satisfy any judgment, decree, or decision
of any court or governmental or regulatory authority or any settlement of any
suit or claim prior to judgment or final decision thereon, first out of any
insurance proceeds available therefor, next out of the Partnership's assets, and
thereafter out of the General Partner's assets.
Persons dealing with the General Partner shall not be required to
determine its authority to make any undertaking on behalf of the Partnership,
nor to determine any fact or circumstances bearing upon the existence of its
authority.
10. AUDITS; REPORTS TO LIMITED PARTNERS.
The Partnership's books shall be audited annually by an independent
public accounting firm selected by the General Partner in its sole discretion.
The General Partner shall use its best efforts to cause each Partner to receive:
(a) within 90 days after the close of each fiscal year of the Partnership a
certified annual report containing audited financial statements (including a
statement of income and a statement of financial condition) of the Partnership
for the fiscal year last ended, prepared in accordance with generally accepted
accounting principles applied on a consistent basis and accompanied by a report
of the accounting firm which audited such statements, and such other information
as the CFTC and the NFA from time to time shall require in annual reports; (b)
within 90 days after the close of each fiscal year of the Partnership such tax
information relating to the Partnership as shall be necessary for such Partner
to complete such Partner's federal income tax return; (c) within 30 days after
the close of each calendar month, such financial and other information with
respect to the Partnership as the CFTC and the NFA from time to time shall
require in monthly reports (including without limitation a statement showing the
individual and aggregate amounts of fees, compensation, brokerage commissions
and fees, and other expenses and costs paid by the Partnership); and (d) at such
times as shall be necessary or advisable in the General Partner's sole
discretion, such other information as the CFTC and the NFA from time to time
shall require under the Commodity Exchange Act as amended to be given to
participants in commodity pools.
If any of the following events occurs, notice of such event shall be
mailed to each Limited Partner within seven business days after the occurrence
of such event: (i) any
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amendment to this Agreement which shall have been made in accordance with
Section 18; (ii) a decrease in the Net Asset Value of a Unit to or below 50% of
the Net Asset Value for the fiscal year-end most recently reported to Limited
Partners; (iii) any change in general partners; or (iv) any change in the
Partnership's fiscal year. Such notice shall describe any voting rights of the
Limited Partners as set forth in Section 18.
The approximate Net Asset Value of a Unit shall be determined daily by
the General Partner, and the most recent approximate Net Asset Value shall be
promptly supplied in writing to any Limited Partner after the General Partner
shall have received a written request therefor from such Partner.
11. TRANSFER AND REDEMPTION OF UNITS.
(a) TRANSFER. A Limited Partner may transfer, assign, pledge, or
encumber his Units only as provided in this Section 11(a). A Limited Partner
may transfer, assign, pledge, or encumber his Units solely and exclusively to or
for the benefit of (i) another person who is an employee of the General Partner,
TIC, any of their present or future affiliated entities, or their successors or
assigns, (ii) the General Partner, TIC, any of their present or future
affiliated entities, or their successors or assigns, or (iii) such other person
or entity as the General Partner in its sole discretion may determine. A
Limited Partner may not make a partial transfer, assignment, pledge, or
encumbrance of his Units which would reduce the Net Asset Value of the Units
retained by such Partner (after giving effect to such transfer, assignment,
pledge, or encumbrance) to less than the amount of the minimum investment
required by the Partnership of new Limited Partners at the time of such
transfer, assignment, pledge, or encumbrance, and any proposed partial transfer,
assignment, pledge, or encumbrance, if permitted under this Agreement, shall be
honored only to the extent it complies with such limitation. No transferee,
assignee, pledgee, or secured creditor of Units may become a substituted Limited
Partner unless the General Partner first consents to such substitution in
writing, which consent the General Partner may withhold in its sole discretion.
Notwithstanding the foregoing, the General Partner may in its sole discretion
waive any of the foregoing restrictions and limitations.
Any transfer, assignment, pledge, or encumbrance of Units which shall
be permitted hereunder shall be effective as of the close of business (as
determined by the General Partner its sole discretion) on the last day of the
calendar month in which such transaction shall have occurred; provided, however,
that the Partnership need not recognize any transfer, assignment, pledge, or
encumbrance until the General Partner shall have received at its principal
office at least 30 days' prior written notice of such proposed transaction from
the transferring Limited Partner. Such notice shall be signed by the
transferring Limited Partner and shall set forth the name, residence address,
and social security or taxpayer identification number of the proposed
transferee, assignee, pledgee, or secured creditor, the number of Units that
shall be proposed to be transferred, assigned, pledged, or encumbered, and a
certification that the proposed transferee, assignee, pledgee, or secured
creditor is a person permitted to own and hold Units as provided in the first
paragraph of this Section 11(a). The transferring Limited Partner's signature
shall be guaranteed by a commercial bank which is a member of
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the Federal Deposit Insurance Corporation, a trust company, or a member of
either a United States registered national securities exchange or the NASD,
other than a sole proprietor. The guarantees shall be signed by an authorized
signatory of the bank, trust company, or member firm, and "Signature Guaranteed"
shall appear with the signature. Signature guarantees by savings banks, savings
and loan associations, and notaries public shall not be accepted. Signature
guarantees may be waived by the General Partner in its sole discretion. The
General Partner may request further documentation from entities, executors,
administrators, trustees, or guardians. Prior to the General Partner's actual
receipt at its principal office of the foregoing notice from a Limited Partner,
the General Partner shall be entitled to recognize the exclusive right of the
person registered in the Partnership's books and records as the owner of Units,
and shall not be liable for any actions taken by it in reliance upon the
Partnership's books and records (including transmitting reports, tax
information, and notices as provided under Section 10, reporting tax information
to governmental and regulatory authorities, and making distributions).
No transfer, assignment, pledge or encumbrance of Units shall be
permitted unless the General Partner shall be satisfied that such transaction:
(i) shall not involve a transfer, assignment, pledge, or encumbrance to or for
the benefit of a minor or incompetent, or a person who shall be insolvent after
such transaction, or a person who is not permitted to own and hold Units as
provided in the first paragraph of this Section 11(a); (ii) shall not violate
this Section 11(a); (iii) shall not violate the Partnership Act; (iv) shall not
violate the Securities Act, any applicable state securities or Blue Sky laws, or
any applicable foreign laws; (v) shall not adversely affect the classification
of the Partnership as a partnership for federal income tax purposes; or (vi)
shall not adversely affect the status of Limited Partners as limited partners
under the Partnership Act. Any such purported or attempted transfer,
assignment, pledge, or encumbrance in violation of the preceding provisions
shall be null, void, and ineffectual, and need not be recognized by the
Partnership.
A Limited Partner who shall transfer, assign, pledge, or encumber his
Units shall remain liable to the Partnership as provided under the Partnership
Act, regardless of whether his transferee, assignee, pledgee, or creditor shall
become a substituted Limited Partner. Any transferee, assignee, pledgee, or
creditor of Units who shall not have been admitted to the Partnership as a
substituted Limited Partner shall not have any of the rights of a Limited
Partner, except that such person shall receive that share of capital and profits
and shall have that right of redemption to which his transferor, assignor,
pledgor, or debtor shall have been entitled, and shall remain subject to the
other terms of this Agreement binding upon Limited Partners. A Limited Partner
shall bear all costs (including attorneys', accountants', and other fees)
related to a transfer, assignment, pledge, or encumbrance of his Units.
If a transferee, assignee, pledgee, or creditor shall become a
substituted Limited Partner in accordance with this Section 11(a), the General
Partner shall be authorized to execute, file, record, and publish, for and on
behalf of the Partnership and each Partner, such amendments to this Agreement
and the Certificate of Limited Partnership as may be necessary or desirable to
reflect such substitution. No transferee, assignee, pledgee, or creditor shall
become a Limited Partner until the General Partner shall execute this Agreement
on behalf of
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such person pursuant to the power of attorney in Section 14 and shall make an
entry in the books and records of the Partnership reflecting that such person
has been admitted as a Limited Partner. Such person shall be deemed a Limited
Partner at such time as such admission shall be reflected in the books and
records of the Partnership.
(b) REDEMPTION. Except as provided otherwise below in this Section
11(b), a Limited Partner (or any assignee thereof) may withdraw, effective as of
the last day of any calendar quarter, all or a portion of such Partner's
unredeemed capital contribution and undistributed profits, if any, by requiring
the Partnership to redeem all or a portion of such Partner's Units at 100% of
the Net Asset Value thereof, reduced as hereinafter described (such withdrawal
being herein referred to as "Redemption"); provided, however, that (i) a Limited
Partner may only redeem Units (or fractions thereof) in $1,000 increments,
except that other amounts of Units may be redeemed if a Limited Partner is
redeeming his entire interest in the Partnership, and (ii) a Limited Partner may
not make a partial Redemption of his Units which would reduce the Net Asset
Value of the Units retained by such Partner (after giving effect to such
Redemption) to less than the amount of the minimum investment required of new
Limited Partners by the Partnership at the time of such Redemption, and any
request for partial redemption shall be honored only to the extent it complies
with such limitation. Notwithstanding the foregoing, the General Partner may in
its sole discretion waive any of the foregoing restrictions and limitations.
Redemption of a Limited Partner's Units shall be effective as of the
close of business (as determined by the General Partner in its sole discretion)
on the last day of the calendar quarter ending after a Request for Redemption in
proper form has been received by the General Partner ("Redemption Date"),
provided that all liabilities (contingent or otherwise) of the Partnership,
except any liability to Partners on account of their capital contributions,
shall have been paid or there shall remain assets of the Partnership sufficient
to pay them. As used herein, a "Request for Redemption" shall mean a letter in
the form specified by the General Partner, sent by a Limited Partner (or any
assignee thereof) and received by the General Partner at least five business
days prior to the date on which Redemption is to be effective. If the General
Partner shall receive a Request for Redemption on a date less than five business
days prior to the date on which Redemption is to be effective, unless the
General Partner in its sole discretion shall waive the untimeliness of such
Request, such Redemption shall be effective as of the close of business (as
determined by the General Partner in its sole discretion) on the last day of the
calendar quarter that immediately follows the calendar quarter in which the
General Partner received such untimely Request. A Request for Redemption is
annexed hereto as ANNEX A. Additional Requests for Redemption may be obtained
by written request to the General Partner. A Request for Redemption shall be
endorsed by each Partner requesting such redemption, or by such Partner's
assignee.
Upon Redemption, a Limited Partner (or any assignee thereof) shall
receive for each Unit redeemed an amount equal to 100% of the Net Asset Value of
a Unit as of the Redemption Date, less any amount which shall be owed by such
Partner (and his assignee, if any) to the Partnership or the General Partner as
provided below in this paragraph or any amount which shall be owed by such
Partner (and his assignee, if any) to the Partnership in
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accordance with Section 17(d). If, pursuant to applicable law, the Partnership
shall have been required to pay or withhold tax on certain income of the
Partnership allocable to a redeeming Limited Partner (or any assignee thereof),
and the Partnership and/or the General Partner shall have paid out of its/their
own funds such tax in accordance with Sections 8(e) or 9(c) (although the
General Partner shall not be obligated to do so), upon Redemption of Units by
such Limited Partner (or assignee), all amounts of such taxes may be deducted
from the Net Asset Value of such Units and reimbursed to the Partnership and/or
the General Partner.
The right to obtain Redemption shall be contingent upon (i) the
Partnership having assets sufficient to discharge its liabilities on the
Redemption Date, (ii) the timely receipt by the General Partner of a Request for
Redemption as described herein, and (iii) the other terms and conditions set
forth in this Section 11(b). The General Partner shall endeavor to pay
Redemptions within 20 business days after the Redemption Date, except that under
certain circumstances (including but not limited to the inability on the part of
the Partnership to liquidate commodity interest contract positions or the
default or delay in payments which shall be due the Partnership from banks,
brokers, dealers, or other persons), the Partnership may delay payment to
Partners requesting Redemption of Units of the proportionate part of the Net
Asset Value of the Units represented by the sums which shall be the subject of
such default or delay.
The General Partner shall be authorized to execute, file, record, and
publish, on behalf of the Partnership and each Partner, such amendments to this
Agreement and the Certificate of Limited Partnership as may be necessary to
reflect any Redemption.
12. MANDATORY REDEMPTION.
The General Partner may, in its sole discretion at any time and from
time to time, require a Limited Partner (or his assignee if any) to withdraw
entirely from the Partnership or to withdraw a portion of such Limited Partner's
unredeemed capital contribution and undistributed profits, if any, by giving
notice in writing to the Limited Partner (or assignee) thus designated. The
Limited Partner (or assignee) thus designated shall redeem all or a portion of
his Units from the Partnership as specified in such notice as of the last day of
the calendar month specified in such notice, which notice shall be delivered to
the Limited Partner (or assignee) thus designated at least five business days
prior to such month-end. Such Limited Partner (or assignee) shall be deemed to
have redeemed all or a portion of his Units, as the case may be, as of the end
of such month without further action on the part of the Limited Partner (or
assignee). The General Partner is authorized to cancel the appropriate number
of Units issued to the Limited Partner (or assignee) in respect of such
redemption and pay to the Limited Partner (or assignee) an amount equal to the
Net Asset Value of such Units less any amounts specified in Section 11(b).
Without limiting the foregoing or the circumstances under which the
General Partner may require withdrawal of a Limited Partner, the General Partner
intends generally to require the withdrawal of a Limited Partner: (a) who
ceases to be an employee or Affiliate of the General Partner, TIC, any of their
present or future affiliated entities, or their successors
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or assigns; (b) if the value of Units held by Plan Investor Partners equals or
exceeds 25% of the aggregate value of all Units then outstanding; or (c) if
Units may be deemed to constitute assets of Plan Investor Partners.
The General Partner is authorized to execute, file, record, and
publish, for and on behalf of the Partnership and each Partner, such amendments
to this Agreement and the Certificate of Limited Partnership as may be necessary
to reflect any required withdrawal of a Limited Partner.
13. ADMISSION OF ADDITIONAL PARTNERS.
At any time and from time to time in its sole discretion, the General
Partner may admit additional Limited Partners, each of which newly-admitted
Limited Partners shall contribute cash to the capital of the Partnership for
each Unit acquired in the amount determined in accordance with Section 7 (which
amount shall not be less than 100% of the Net Asset Value of the Unit acquired).
At any time and from time to time in its sole discretion, the General Partner
may admit any transferee, assignee, pledgee, or secured creditor of Units as a
substituted Limited Partner in accordance with Section 11(a). Additional
general partners shall not be admitted to the Partnership except as provided in
Section 18; provided, however, that at any time and from time to time in its
sole discretion, the General Partner may admit additional general partners that
are affiliated with the General Partner, TIC, any of their present or future
affiliated entities, or their successors or assigns. No Limited Partner shall
have any preemptive, preferential or other rights with respect to the issuance
of any additional Units.
The General Partner is authorized to execute, file, record, and
publish, on behalf of the Partnership and each Partner, such amendments to this
Agreement and to the Certificate of Limited Partnership as may be necessary to
reflect the admission or substitution of a Partner.
14. SPECIAL POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, hereby
irrevocably constitutes and appoints the General Partner and any successor
general partner, with full power of substitution, as such Partner's true and
lawful agent and attorney-in-fact, in his name, place, and stead, to do all
things necessary: (a) to admit a person as a Limited Partner and to admit other
persons as additional or substituted Limited Partners so long as such admission
or substitution shall be in accordance with this Agreement; (b) to file,
prosecute, defend, settle, or compromise any and all actions at law or in equity
for or on behalf of the Partnership in connection with any claim, demand, or
liability asserted or threatened by or against the Partnership; and (c) to
execute, acknowledge, swear to, deliver, file, record, and publish: (i) this
Agreement, the Certificate of Limited Partnership, and amendments thereto; (ii)
instruments which the General Partner shall deem necessary or appropriate to
reflect any amendment, change, or modification of this Agreement or the
Certificate of Limited Partnership made in accordance with this Agreement; (iii)
certificates of assumed name; and (d) instruments which the General Partner
shall deem necessary or appropriate to qualify or
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maintain the qualifications of the Partnership to do business as a foreign
limited partnership in other jurisdictions.
This Power of Attorney shall be irrevocable and deemed to be a power
coupled with an interest, and shall survive the incapacity, insolvency,
disability, legal incompetency, death, dissolution, liquidation, or termination
of a Limited Partner.
Each Limited Partner shall be bound by any representation made by the
General Partner and by any successor thereto acting in good faith pursuant to
this Power of Attorney. Each Limited Partner hereby waives any and all defenses
which may be available to contest, negate, or disaffirm the action of the
General Partner and any successor thereto taken in good faith under this Power
of Attorney.
Each Limited Partner shall execute a special power of attorney on a
document separate from this Agreement, generally contained in subscription
documentation. In the event of any conflict between this Agreement and any
instruments executed, delivered, or filed by the General Partner and any
successor thereto pursuant to this Power of Attorney, this Agreement shall
control.
The General Partner may exercise this Power of Attorney by listing all
of the Limited Partners executing any agreement, certificate, instrument, or
document with the single signature of the General Partner as attorney-in-fact
for all such Limited Partners.
15. WITHDRAWAL OF PARTNERS.
(a) WITHDRAWAL OF GENERAL PARTNER. The General Partner shall not
withdraw from the Partnership unless it shall have given the Limited Partners at
least 90 days' prior written notice of its intention to withdraw. Subject to
Sections 4 and 18, upon the withdrawal, insolvency, dissolution, liquidation, or
termination of the General Partner, the Partnership shall terminate and dissolve
unless a remaining or new general partner or partners shall have been elected to
continue the business of the Partnership, which any remaining or new general
partner(s) shall have the right to do.
(b) WITHDRAWAL OF LIMITED PARTNERS. The withdrawal, insolvency,
disability, legal incompetency, death, liquidation, termination, or dissolution
of a Limited Partner shall not terminate or dissolve the Partnership, and such
Limited Partner and his estate, custodian, or legal representative shall have no
right to withdraw or value such Limited Partner's interest in the Partnership
except as provided in Section 11. Each Limited Partner (and any assignee or
representative thereof) agrees that, in the event of his death, he waives on
behalf of himself and his estate, and directs the legal representatives of his
estate and any person interested therein to waive, the furnishing of any
inventory, accounting, or appraisal of the assets of the Partnership and any
right to an audit or examination of the books and records of the Partnership.
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16. NO PERSONAL LIABILITY FOR RETURN OF CAPITAL.
Except as provided otherwise in this Agreement, the General Partner
shall not be personally liable for the return or repayment of all or any portion
of the capital or profits of any Partner (or assignee), it being agreed by all
Partners that any such return or repayment of capital or profits made pursuant
to this Agreement shall be made solely from the assets of the Partnership (which
shall include amounts contributed by Limited Partners and paid out in
distributions, redemptions, or otherwise together with interest thereon, but
shall not include any right of contribution from the General Partner except to
the extent previously made by it pursuant to this Agreement).
17. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) STANDARD OF LIABILITY. Neither the General Partner nor any of its
Affiliates (as defined in Section 17(c)) shall be liable, responsible, or
accountable in damages or otherwise to the Partnership or any Partner for any
loss, liability, damage, cost, or expense incurred by the Partnership or such
Partner by reason of any act, omission, activity, or conduct by the General
Partner or any of its Affiliates (either on behalf of the Partnership or in the
furtherance of the interests of the Partnership) in good faith, in a manner
reasonably believed by such person to be within the scope of the authority
granted to such person by this Agreement or by law or by the consent of the
Limited Partners, and in the best interests of the Partnership, provided that
the General Partner's or such Affiliate's act, omission, activity, or conduct
did not constitute negligence, misconduct, or breach of fiduciary duty.
(b) INDEMNIFICATION BY PARTNERSHIP. The Partnership, out of its
assets to the fullest extent permitted by applicable law, shall indemnify,
defend, and hold harmless the General Partner and its Affiliates from and
against any loss, liability, damage, cost, and expense (including attorneys' and
accountants' fees and expenses incurred in defense of any demands, claims and
lawsuits) actually and reasonably incurred by the General Partner or Affiliate
arising from acts, omissions, activities, or conduct concerning the business or
activities undertaken by or on behalf of the Partnership, including without
limitation any demands, claims, or lawsuits initiated by a Limited Partner or
assignee thereof, provided that a court of competent jurisdiction upon entry of
final judgment shall find (or, if no final judgment shall be entered,
independent legal counsel, who shall be other than counsel to the Partnership or
the General Partner or Affiliate, shall in writing opine) that such loss,
liability, damage, cost, or expense did not arise out of an act, omission,
activity, or conduct of the General Partner or Affiliate which constituted
misconduct, negligence, or breach of fiduciary duty and such act, omission,
activity, or conduct was done in good faith, in the reasonable belief that it
was within the scope of the authority granted to the General Partner or
Affiliate by this Agreement or by law or by the consent of the Limited Partners,
and was in the best interests of the Partnership. Notwithstanding the
foregoing, no indemnification of the General Partner or its Affiliates by the
Partnership shall be permitted for any loss, liability, damage, cost, or expense
resulting from liabilities incurred for violation of federal or state securities
laws. The General Partner and its Affiliates shall be indemnified for
settlements and related expenses of lawsuits alleging securities law violations
and for expenses incurred in successfully defending
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such lawsuits, provided that a court, after having been apprised as to the
current position of the SEC and any other applicable state securities or Blue
Sky regulatory authority regarding indemnification for violations of securities
laws, either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made, or (ii) approves indemnification of
litigation costs if a successful defense is made. Notwithstanding the
foregoing, in any action or proceeding brought by a Limited Partner in the right
of the Partnership to which the General Partner or any of its Affiliates is a
party defendant, any such person or entity shall be indemnified only to the
extent and subject to the conditions specified in the Partnership Act.
Expenses incurred in connection with the preparation and presentation
of a defense to any claim, action, suit, or proceeding of the character
described above shall be paid by the Partnership from time to time in advance
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of the General Partner or Affiliate thereof, as applicable, that such
amount shall be repaid by the General Partner or Affiliate to the Partnership if
it shall be ultimately determined that the General Partner or Affiliate shall
not be entitled to indemnification under this Section 17(b), provided that
either (i) the General Partner or Affiliate provides appropriate security for
such undertaking, (ii) the General Partner or Affiliate is insured against
losses arising out of any such advance payments, or (iii) independent legal
counsel, who shall be other than counsel to the Partnership or the General
Partner or Affiliate, shall in writing opine that, based upon a review of
readily available facts (as opposed to a full trial-type inquiry), there is
reason to believe that the General Partner or Affiliate shall be found entitled
to indemnification hereunder. Notwithstanding the foregoing, no such advances
shall be made to the General Partner or its Affiliates when an action shall have
been initiated by a Limited Partner.
Nothing contained in this Section 17(b) shall increase the liability
of any Limited Partner to the Partnership beyond the amount of his unredeemed
capital contribution, undistributed profits if any, and any distributions and
amounts received upon redemption of Units together with interest thereon, as
provided in Section 8(f). All rights to indemnification and payment of
attorneys' and accountants' fees and expenses shall not be affected by the
termination of the Partnership or the withdrawal, insolvency, dissolution,
liquidation, or termination of the General Partner.
The Partnership shall not incur the cost of that portion of any
liability insurance which insures the General Partner and its Affiliates for any
liability as to which the General Partner and its Affiliates are prohibited from
being indemnified hereunder; provided, however, that nothing contained herein
shall preclude the Partnership from purchasing and paying for such types of
insurance, including extended coverage liability and casualty and workers'
compensation, as would be customary for any person owning comparable assets and
engaged in similar business, or from naming the General Partner and its
Affiliates as additional named insured parties thereunder, provided that such
addition does not add to the amount of the premiums payable by the Partnership.
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Nothing contained herein shall constitute a waiver by any Limited
Partner of any right which he may have against any party under federal or state
securities laws.
(c) AFFILIATE. As used in this Agreement, except as provided
otherwise herein, the term "Affiliate" of the General Partner shall mean: (i)
any natural person, partnership, corporation, company, association, or other
legal entity directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of the General Partner;
(ii) any natural person, partnership, corporation, company, association, or
other legal entity 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
General Partner; (iii) any natural person, partnership, corporation, company,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with the General Partner; or (iv) any
officer or director of the General Partner. Notwithstanding the foregoing,
"Affiliate" for the purpose of this Section 17 shall include only those persons
acting on behalf of the General Partner within the scope of the authority of the
General Partner as provided in this Agreement.
(d) INDEMNIFICATION BY PARTNERS. In the event that the Partnership
shall be made a party to any claim, demand, dispute, or litigation or otherwise
shall incur any loss, liability, damage, cost, or expense as a result of or in
connection with any Partner's (or assignee's) obligations or liabilities
unrelated to the Partnership's business, such Partner (or assignees
cumulatively) shall indemnify, defend, hold harmless, and reimburse the
Partnership for such loss, liability, damage, cost, and expense to which the
Partnership shall become subject (including attorneys' and accountants' fees).
18. AMENDMENTS; MEETINGS; VOTING.
(a) AMENDMENTS AND ACTIONS WITH CONSENT OF GENERAL PARTNER. If, at
any time during the term of the Partnership, the General Partner shall deem it
necessary or desirable to amend this Agreement, such amendment shall be
effective only if such amendment shall be approved (in person or by proxy and
embodied in an instrument signed personally or by an attorney-in-fact) by the
General Partner and by Limited Partners owning more than 50% of the Units then
owned by Limited Partners, and only if such amendment shall be made in
accordance with and to the extent permissible under the Partnership Act.
Approval by Limited Partners may be obtained by the General Partner after
written notice to Limited Partners requiring them to respond in the negative
within a specified time or be deemed to have provided their approval. Any
amendment to this Agreement which shall have been approved by the percentage of
outstanding Units prescribed above shall be deemed to have been approved by all
Partners and all outstanding Units of Limited Partnership Interest and Units of
General Partnership Interest.
Notwithstanding the foregoing, the General Partner shall be authorized
to amend this Agreement, without the consent of any Limited Partner, in order:
(i) to change the name of the Partnership; (ii) to clarify any ambiguity; (iii)
to supplement or clarify any inconsistent provisions; (iv) to effect the intent
of the allocation provisions to the maximum
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extent possible in the event of a change in the Code or the interpretations
thereof affecting such allocations; (v) to attempt to ensure that the
Partnership is not taxed as an association taxable as a corporation for federal
income tax purposes; (vi) to attempt to ensure that the Partnership is not
classified as a "publicly traded partnership" for federal income tax purposes;
(vii) to make any other amendment that is not adverse to the Limited Partners;
or (viii) to make any amendment that the General Partner deems advisable or
considers necessary to comply with any applicable law, rule, regulation, policy,
guideline or interpretation, provided that such amendment is not adverse to the
Limited Partners. Any amendment to this Agreement shall be adhered to and have
the same force and effect from and after its effective date as if the same shall
have been originally embodied in and formed a part of this Agreement.
Notwithstanding the foregoing, without the consent of all Partners, no such
amendment to this Agreement shall change or alter the provisions of this
proviso, reduce the capital account of any Partner, or modify the percentage of
profits, losses, or distributions to which any Partner is entitled.
(b) LIST OF PARTNERS; MEETINGS. Any Limited Partner, upon written
request addressed to the General Partner and at such Limited Partner's expense,
shall be entitled to obtain from the General Partner a list of the names and
addresses of record of all Limited Partners and the number of Units owned by
each, provided that such request shall be made in order to allow such Limited
Partner to communicate with other Limited Partners concerning the business of
the Partnership. The General Partner in its discretion may require a Limited
Partner requesting a list of Limited Partners to furnish to the General Partner
an affidavit that the Limited Partner's request shall not be desired for a
purpose which is in the interest of a business or object other than the business
of the Partnership.
Upon the General Partner's receipt of a written request that a meeting
of the Partnership be called to vote upon any matter upon which the Limited
Partners may vote pursuant to this Agreement (which request shall be signed by
Limited Partners owning at least 10% of the Units then owned by Limited
Partners), the General Partner, by written notice to each Limited Partner of
record mailed within 15 days after receipt of such request, shall call a meeting
of the Partnership. Such meeting shall be held at least 30, but not more than
60, days after the mailing of such notice, and such notice shall specify the
date, a reasonable place and time, and the purpose of such meeting.
(c) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF GENERAL PARTNER. Upon
the affirmative vote (in person or by proxy) of Limited Partners owning more
than 50% of the Units then owned by Limited Partners (excluding any Units owned
by the General Partner), the following actions may be taken by the Partnership:
(i) this Agreement may be amended in accordance with and to the extent
permissible under the Partnership Act, provided, however, that, without the
consent of all Partners, no such amendment shall change or alter the provisions
of this proviso, reduce the capital account of any Partner, or modify the
percentage of profits, losses, or distributions to which any Partner shall be
entitled; (ii) the Partnership may be dissolved; (iii) the General Partner may
be removed and a new general partner or partners may be elected to replace the
General Partner; (iv) a new general partner or partners may be elected prior to
the withdrawal of the General
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Partner from the Partnership; (v) any contracts with the General Partner or any
of its Affiliates may be terminated without penalty on 60 days' prior written
notice; and (vi) the sale of all or substantially all of the assets of the
Partnership may be approved; provided, however, that none of the foregoing
actions shall be taken unless legal counsel approved by Limited Partners owning
more than 50% of the Units then owned by Limited Partners shall render a written
opinion to the effect that the action to be taken shall not adversely affect the
status of the Limited Partners as limited partners under the Partnership Act or
the classification of the Partnership as a "partnership" under the federal
income tax laws and is permitted under the Partnership Act (or, in lieu of such
an opinion, a court of competent jurisdiction shall render a final order to such
effects). The term "final order" shall mean an order that is not subject to any
further court proceedings for appeal, review, or modification. Any action which
shall have been approved by the percentage of outstanding Units prescribed above
shall be deemed to have been approved by all Partners and all outstanding Units
of Limited Partnership Interests and Units of General Partnership Interest. Any
amendment to this Agreement shall be adhered to and have the same force and
effect from and after its effective date as if the same shall have been
originally embodied in and formed a part of this Agreement.
(d) ACTIONS WITHOUT MEETING. Notwithstanding contrary provisions of
this Section 18 covering notices to, meetings of, and voting by Limited
Partners, any action required or permitted to be taken by Limited Partners at a
meeting or otherwise may be taken by Limited Partners without a meeting, without
prior notice, and without a vote if a consent in writing setting forth the
action so taken shall be signed by Limited Partners owning Units having not
fewer than the minimum number of votes that would be necessary to authorize or
take such action at a meeting of Limited Partners at which all outstanding Units
shall have been present and voted. Notice of the taking of action by Limited
Partners without a meeting by less than unanimous written consent of Limited
Partners shall be given to those Limited Partners who shall not have consented
in writing without seven business days after the occurrence thereof.
(e) AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP. If an amendment
to this Agreement shall be made pursuant to this Section 18, the General Partner
shall be authorized to execute, file, record, and publish, on behalf of the
Partnership and each Partner, such amendments to the Certificate of Limited
Partnership as shall be necessary or desirable to reflect such amendment.
19. GOVERNING LAW.
THE VALIDITY, CONSTRUCTION, AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY AND IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OF DELAWARE
(EXCLUDING THE LAW THEREOF WHICH REQUIRES THE APPLICATION OF OR REFERENCE TO THE
LAW OF ANY OTHER JURISDICTION).
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20. MISCELLANEOUS.
(a) PRIORITY AMONG LIMITED PARTNERS. Except as provided otherwise in
this Agreement, no Limited Partner shall be entitled to any priority or
preference over any other Limited Partner in regard to the affairs of the
Partnership.
(b) NOTICES. All notices under this Agreement (other than Requests
for Redemption of Units, notices of assignment, transfer, pledge, or encumbrance
of Units, and reports and notices by the General Partner to the Limited
Partners) shall be in writing and shall be effective upon personal delivery or
(if sent by mail, postage prepaid, addressed to the last known address of the
party to whom such notice is to be given) upon the deposit of such notice in the
United States mail. Requests for Redemption of Units and notices of assignment,
transfer, pledge, or encumbrance of Units shall be effective upon timely receipt
by the General Partner at its principal office. Reports and notices by the
General Partner to the Limited Partners shall be in writing and shall be sent by
first-class United States mail to the last known address of each Limited
Partner.
(c) BINDING EFFECT. This Agreement shall inure to the benefit of, and
be binding upon, all of the Partners, their successors, assigns as permitted
herein, custodians, estates, heirs, and legal representatives. For purposes of
determining the rights of any Partner or assignee hereunder, the General Partner
may rely upon the Partnership's books and records as to whom are Partners and
assignees, and all Partners and assignees agree that their rights shall be
determined and they shall be bound thereby, including but not limited to all
rights which they may have under Section 18.
(d) CAPTIONS. Captions in no way define, limit, extend, or describe
the scope of this Agreement nor the effect of any of its provisions.
A-34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
General Partner:
SECOND MANAGEMENT LLC
By: __________________________________
Mark F. Dalton
President and Chief Operating Officer
Existing Limited Partners:
By: SECOND MANAGEMENT LLC
General Partner, as Authorized Agent and
Attorney-in-Fact
By: _______________________________
Mark F. Dalton
President and Chief Operating Officer
Additional Limited Partners:
By: SECOND MANAGEMENT LLC
General Partner, as Authorized Agent and
Attorney-in-Fact
By: _______________________________
Mark F. Dalton
President and Chief Operating Officer
A-35
<PAGE>
ANNEX A
TUDOR FUND FOR EMPLOYEES L.P.
REQUEST FOR REDEMPTION
________________, 19__
(Today's date)
Submitted for Redemption Effective the Calendar Quarter Ending __________, 19__
TUDOR FUND FOR EMPLOYEES L.P.
c/o Second Management LLC,
General Partner
One Liberty Plaza, 51st Floor
New York, New York 10006
Ladies and Gentlemen:
I hereby request Redemption (as defined in and subject to the terms
and conditions of the First Amended and Restated Limited Partnership Agreement
of Tudor Fund For Employees L.P. (the "Partnership")) of (i) if a partial
redemption, the equivalent number of Units of Limited Partnership Interest in
the Partnership representing $____________ [insert dollar amount in $1,000
increments], or (2) if a full redemption, __________ Units [insert number of
Units held] of Limited Partnership Interest in the Partnership, less any amounts
specified below and in Section 11(b) of the First Amended and Restated Limited
Partnership Agreement of the Partnership.
Redemption will be effective as of the close of business (as
determined by the General Partner in its sole discretion) on the last day of the
calendar quarter ending after this Request for Redemption has been received by
the General Partner, provided that this request for Redemption is received by
the General Partner at its principal office at least five business days prior to
the date on which this Redemption is to be effective. I understand that: (i) I
may redeem Units only in $1,000 increments, except that other amounts of Units
may be redeemed if I am redeeming my entire interest in the Partnership; and
(ii) I may not make a partial Redemption of Units which would reduce the Net
Asset Value of the Units retained by me (after giving effect to this Redemption)
to less than $1,000, and any request for partial redemption will be honored only
to the extent it complies with such limitation.
I (either in my individual capacity or as an authorized representative
of an entity if applicable) hereby represent and warrant that I am the true,
lawful, and beneficial owner of the Units (or fractions thereof) to which this
Request for Redemption relates, with full power and authority to request
Redemption of such Units. Such Units are not subject to any pledge or otherwise
encumbered in any fashion.
A-36
<PAGE>
Please remit Redemption proceeds as follows (Check one):
_____ By check payable to the Limited Partner mailed to the following address:
_____________________________________________________________________
_____________________________________________________________________
OR
_____ By wire transfer* to the Limited Partner's bank account as follows:
* It is the General Partner's policy to transfer Redemption
proceeds by wire only for amounts of $3,000 or more.
Bank Name:
City and State:
ABA Number:
For the Account of:
Account Number:
Early payment based on the estimated quarter-end Net Asset Value per Unit (check
one):
_____ Is required by the Limited Partner
_____ Is not required by the Limited Partner
---
SIGNATURE MUST BE IDENTICAL TO NAME IN WHICH UNITS
OF LIMITED PARTNERSHIP INTEREST ARE REGISTERED
Name of Partner: ______________________________
Account Number: ______________________________
For execution by an individual partner For execution by an entity
X X
______________________________ _________________________________
Signature of Limited Partner Signature of authorized officer,
partner, trustee, or custodian
THIS REQUEST FOR REDEMPTION MUST BE EXECUTED BEFORE A NOTARY PUBLIC AND RECEIVED
BY THE GENERAL PARTNER AT ITS PRINCIPAL OFFICE AT LEAST FIVE FULL BUSINESS DAYS
PRIOR TO THE DATE ON WHICH REDEMPTION IS TO BE EFFECTIVE.
A-37
<PAGE>
THIS DOCUMENT MUST BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC
FOR USE BY INDIVIDUAL
STATE OF )
:ss.:
COUNTY OF )
On the _______ day of ______________, 19__, before me personally
appeared _________________________________________________________________, to
me known, who, being by me duly sworn, did depose and say that he/she resides at
______________________________________________________________________________
[Full residence address]; that he/she is the person described in and who
executed the foregoing instrument; and he/she duly acknowledged to me that
he/she executed the same.
-------------------------------------------
Notary Public
My commission expires on ___________________
FOR USE BY TRUSTEE
STATE OF )
:ss.:
COUNTY OF )
On the _______ day of ______________, 19__, before me personally
appeared _____________________________________________________________, to me
known, who, being by me duly sworn, did depose and say that he/she resides at
______________________________________________________________________________
[Full residence address]; that he/she is the person described in and who
executed the foregoing instrument, and he/she duly acknowledged to me that
he/she executed the same as trustee on behalf of
__________________________________________________________________ [Name of
individual or entity].
-------------------------------------------
Notary Public
My commission expires on ___________________
A-38
<PAGE>
EXHIBIT B
TUDOR FUND FOR EMPLOYEES L.P.
SUBSCRIPTION AGREEMENT
AND
POWER OF ATTORNEY
(FOR USE ONLY BY INDIVIDUALS)
These securities may only be purchased and held by persons who are employees of
Second Management LLC (the "General Partner"), any of its present or future
affiliated entities, or their successors or assigns, or by the Tudor Investment
Corporation 401(k) Savings and Profit-Sharing Plan (the "TIC 401(k) Plan").
INSTRUCTIONS - PLEASE READ CAREFULLY
1. Carefully read this document to make sure that you understand it thoroughly
and that it is the appropriate Subscription Agreement for you to use.
2. Using a typewriter or printing in ink, fill in the blanks as directed under
the captions "Subscriber" and "Subscription", and include the appropriate
signature and date under the caption "Signature".
3. Reread this document to make sure that you understand it and that all
necessary blanks are filled in, and return it to Cargill Investor Services,
Inc. (the "Selling Agent"), at One World Financial Center, Tower A, 200
Liberty Street, 22nd Floor, New York, New York 10281, Attention: John D.
Carlin, Vice President.
________________________________________________________________________________
SUBSCRIBER (MUST BE COMPLETED IN FULL)
(a) Full Name (Do Not Use Initials):
----------------------------------------------------------------------
First Middle Last
(b) Social Security Number:_______________________________
(c) Residence Address (P.O. Box Alone Not Acceptable):
----------------------------------------------------------------------
Street
----------------------------------------------------------------------
City State Zip Code
B-1
<PAGE>
(d) Home Telephone Number (____) __________________________
(e) Have you previously subscribed for Units? Yes___ No___
________________________________________________________________________________
SUBSCRIPTION (MUST BE COMPLETED IN FULL)
Pursuant to the accompanying Prospectus dated June __, 1996 (the
"Prospectus"), subscriptions are solicited for Units of Limited Partnership
Interest ("Units") in Tudor Fund For Employees L.P. (the "Partnership"),
including fractions of Units (to the fourth decimal place), on a continuing
basis (the "Continuing Offering") for sale at periodic closings held as of
January 1, April 1, July 1, and October 1 of each year or at such other times as
the General Partner determines in its sole discretion ("Periodic Closings"), at
an offering price per Unit equal to 100% of the Net Asset Value (as defined in
the Prospectus) of a Unit as of the opening of business on the date of the
Periodic Closing at which such Unit is sold.
The minimum subscription is $1,000, and whole Units and fractions of
Units (to the fourth decimal place) may be subscribed for. A subscriber may
subscribe for amounts in excess of the foregoing minimum in increments of
$1,000. All subscriptions for Units are irrevocable. The General Partner in
its sole discretion may reject any subscription in whole or in part at any time
prior to acceptance.
In order to subscribe for Units, a subscriber must deliver to the
Selling Agent: (1) a fully completed, dated, and signed Subscription Agreement
and Power of Attorney; and (2) either (a) a check payable to "UNITED STATES
TRUST COMPANY OF NEW YORK, AS ESCROW AGENT FOR TUDOR FUND FOR EMPLOYEES L.P.",
or (b) a wire transfer of Federal Funds to "CHASE MANHATTAN BANK, NEW YORK, NEW
YORK, ABA NO. 021000021, FOR CREDIT TO UNITED STATES TRUST COMPANY OF NEW YORK,
ACCOUNT NO. 920-1-073195, TUDOR FUND FOR EMPLOYEES L.P., ACCOUNT NO. 098-791-00
REFERENCE: [SUBSCRIBER'S NAME], ATTN: CYNTHIA CHANEY", in either case
representing the full purchase price for such subscription. The Escrow Agent
requires 2 full business days to clear checks drawn on New York City banks, 5
full business days to clear checks drawn on all other banks, and 1 full business
day to clear wire transfers of funds.
The undersigned subscriber hereby irrevocably subscribes for
$_______________ of Units for the Periodic Closing to be held as of the first
day of _____________, 199__ (insert date).
B-2
<PAGE>
________________________________________________________________________________
REPRESENTATIONS AND WARRANTIES
The undersigned subscriber hereby represents and warrants to, and
agrees with, the General Partner and the Partnership as follows.
(1) The address as set forth above under the caption "Subscriber" is
the subscriber's true, correct, and complete residence address, and the
subscriber has no present intention of becoming a resident of any other state or
country. The information provided above under that caption is true, correct,
and complete as of the date of this Subscription Agreement, and if there should
be any change in such information prior to the acceptance of the subscriber's
subscription for Units at a Periodic Closing, the subscriber will immediately
furnish such revised or corrected information to the General Partner.
(2) The subscriber is over 21 years old, is legally competent, and is
permitted by applicable law to execute and deliver this Subscription Agreement
and to purchase Units.
(3) As of the date of this Subscription Agreement, the amount of the
subscriber's subscription for Units, made directly by the subscriber in his/her
individual capacity and/or indirectly by the subscriber through the TIC 401(k)
Plan, when added to the amount of all other subscriptions made by the subscriber
(directly or indirectly) for Units, is and will be 25% or less of the
subscriber's net worth or, if married, the subscriber's joint net worth with
spouse (exclusive of home, furnishings, and automobiles).
(4) The subscriber understands that, during the Continuing Offering,
the number of whole Units and fractions of Units which will be issued to a
subscriber will be determined by dividing the subscription amount tendered by
the subscriber by the Net Asset Value of a Unit as of the date of the applicable
Periodic Closing at which the subscription is accepted. The subscriber
understands that the Net Asset Value of a Unit may increase or decrease
substantially between the date of a subscription and the date of the Periodic
Closing at which the subscription is accepted; consequently, the subscriber may
receive at a Periodic Closing more or fewer Units and/or fractions of Units than
would be received if the Periodic Closing were held on the date of the
subscription.
(5) The subscriber can afford to bear the risks of an investment in
the Partnership, including the risk of losing the entire investment.
(6) The subscriber's subscription is made with the subscriber's own
funds for the subscriber's own account, and not as
B-3
<PAGE>
trustee, custodian, nominee, or agent for, or partner with, any other person.
(7) The subscriber understands that there exist significant actual and
potential conflicts of interest in the structure and operation of the
Partnership, all as described in the Prospectus.
(8) The subscriber understands that Tudor Investment Corporation
("TIC"), an affiliate of the General Partner, serves as the trading advisor for
the Partnership and, except as described otherwise in the Prospectus, receives
management and incentive fees for such services, and that Bellwether Partners
LLC, an affiliate of the General Partner and TIC, serves as counterparty to and
agent for the Partnership in the trading of spot and forward contracts and over-
the-counter options, all as described in the Prospectus.
(9) The subscriber understands that neither the Partnership nor any
investor will pay any selling commissions to the Selling Agent in connection
with subscriptions for Units. However, the General Partner (out of its own
funds) will reimburse the Selling Agent for certain of its out-of-pocket
administrative expenses and may otherwise compensate the Selling Agent for its
selling efforts, to the extent permitted by applicable law.
(10) The subscriber understands that the performance and financial
information included in the Prospectus and in any supplement to the Prospectus
referred to below under the caption "Receipt of Documentation" should be read
only in conjunction with the notes and accompanying text, and that such
information should not be interpreted to mean that the Partnership, the General
Partner, or TIC will have similar results in the future or will realize any
profits whatsoever.
(11) The subscriber understands that Units cannot be redeemed or
transferred, assigned, pledged, or encumbered except as set forth in the Second
Amended and Restated Limited Partnership Agreement of the Partnership as amended
to date, annexed as EXHIBIT A to the Prospectus (the "Limited Partnership
Agreement").
(12) The subscriber is currently an employee of the General Partner or
of an entity affiliated with the General Partner. Upon the termination of the
subscriber's employment for any reason whatsoever (including voluntary
termination) with the General Partner, or any of its affiliated entities, or
their successors or assigns, the subscriber's Units purchased hereby will be
subject to mandatory redemption upon 5 business days' written notice from the
General Partner, all as described in the Prospectus and the Limited Partnership
Agreement.
BY MAKING THE REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN, SUBSCRIBERS
SHOULD BE AWARE THAT THEY HAVE NOT WAIVED ANY RIGHTS OF
B-4
<PAGE>
ACTION WHICH THEY MAY HAVE UNDER APPLICABLE FEDERAL SECURITIES LAW. FEDERAL
SECURITIES LAW PROVIDES THAT ANY SUCH WAIVER WOULD BE UNENFORCEABLE. SUBSCRIBERS
SHOULD BE AWARE, HOWEVER, THAT THE REPRESENTATIONS AND WARRANTIES SET FORTH
HEREIN MAY BE ASSERTED IN THE DEFENSE OF THE PARTNERSHIP OR OTHERS IN ANY
SUBSEQUENT LITIGATION OR OTHER PROCEEDING.
________________________________________________________________________________
ACCEPTANCE OF LIMITED PARTNERSHIP AGREEMENT
The undersigned subscriber hereby agrees that, as of the date that the
subscriber is admitted to the Partnership as a Limited Partner, the subscriber
will be bound by the terms of the Limited Partnership Agreement, as amended to
date and from time to time hereafter in accordance with the terms thereof, as if
the subscriber's signature was actually subscribed thereto.
________________________________________________________________________________
POWER OF ATTORNEY
The undersigned subscriber irrevocably constitutes and appoints the
General Partner and any successor general partner, with the power of
substitution, as the subscriber's true and lawful agent and attorney-in-fact, in
the subscriber's name, place, and stead, to do all things necessary: (1) to
admit the subscriber as a limited partner of the Partnership and to admit others
as additional or substituted limited partners to the Partnership so long as such
admission is in accordance with the terms of the Limited Partnership Agreement
or any amendment thereto; (2) to file, prosecute, defend, settle, or compromise
any and all actions at law or in equity for or on behalf of the Partnership in
connection with any claim, demand, or liability asserted or threatened by or
against the Partnership; and (3) to execute, acknowledge, swear to, deliver,
file, record, and publish on the subscriber's behalf (a) the Limited Partnership
Agreement, the Certificate of Limited Partnership of the Partnership, as amended
to date and from time to time hereafter (the "Certificate of Limited
Partnership"), (b) instruments which the General Partner shall deem necessary or
appropriate to reflect any amendment, change, or modification of the Limited
Partnership Agreement or the Certificate of Limited Partnership made in
accordance with the terms of the Limited Partnership Agreement, (c) certificates
of assumed name, and (d) instruments which the General Partner shall deem
necessary or appropriate to qualify or maintain the qualifications of the
Partnership to conduct business as a foreign limited partnership in other
jurisdictions.
This Power of Attorney shall be irrevocable and deemed to be a power
coupled with an interest, and shall survive the incapacity, insolvency,
disability, legal incompetency, death, dissolution, liquidation, or termination
of the subscriber.
The subscriber shall be bound by any representation made by the
General Partner and by any successor thereto acting in good
B-5
<PAGE>
faith pursuant to this Power of Attorney. The subscriber hereby waives any and
all defenses which may be available to contest, negate, or disaffirm the action
of the General Partner and any successor thereto taken in good faith under this
Power of Attorney.
The General Partner may exercise this Power of Attorney by listing all
of the Limited Partners executing any agreement, certificate, instrument, or
document with the single signature of the General Partner as attorney-in-fact
for all such Limited Partners.
________________________________________________________________________________
RECEIPT OF DOCUMENTATION
The regulations of the Commodity Futures Trading Commission require
that the undersigned subscriber be given a copy of the Partnership's Prospectus
as well as certain additional documentation if available. Such additional
documentation includes: (1) a supplement to the Prospectus, which may be given
to the subscriber at any time that additional information is being provided to
subscribers, and which must be given to the subscriber if the Prospectus or any
supplement thereto is dated more than six months prior to the date that the
subscriber first receives the Prospectus or supplement; (2) the most current
monthly account statement for the Partnership, which must be distributed within
30 calendar days after the end of each calendar month; and (3) the most current
annual report for the Partnership, which must be distributed within 90 calendar
days after the end of the Partnership's fiscal year (December 31st). The
subscriber hereby acknowledges receipt of the Partnership's Prospectus and the
additional documentation referred to above, if any.
________________________________________________________________________________
SIGNATURE
X
- ----------------------------------------- ------------------------
(Signature of Subscriber) Date
B-6
<PAGE>
________________________________________________________________________________
NON-UNITED STATES INVESTORS ONLY
Under penalties of perjury, by signature above the subscriber hereby certifies
that the subscriber is not a citizen or resident of the United States.
---
________________________________________________________________________________
Account Executive Use Only (Must Be Completed In Full And, Except For Signature,
Must Be Typed Or Printed In Ink By Account Executive)
The undersigned AE hereby certifies that: (1) the AE has informed the person
named above under the caption "Subscriber" of all pertinent facts relating to
the liquidity and marketability of the Units as set forth in the Prospectus; and
(2) the AE has reasonable grounds to believe (on the basis of information
obtained from the person named above under the caption "Subscriber" concerning
such person's investment objectives, other investments, financial situation and
needs, and any other information known by the AE) that (a) such person is or
will be in a financial position appropriate to enable such person to realize to
a significant extent the benefits described in the Prospectus, (b) such person
has a fair market net worth sufficient to sustain the risks inherent in the
Partnership (including loss of investment and lack of liquidity), and (c) the
Partnership is otherwise a suitable investment for such person.
(a) AE's Signature:________________________________________
(b) Full Name of AE:_______________________________________
(c) Full Name of AE's Firm: Cargill Investor Services, Inc.
(d) Account Code of Subscriber:____________________________
THE AE MUST ENSURE THAT THE DOCUMENTATION REFERRED TO ABOVE UNDER THE CAPTION
"RECEIPT OR DOCUMENTATION" HAS BEEN FURNISHED TO THE PERSON NAMED ABOVE UNDER
THE CAPTION "SUBSCRIBER".
THE AE ALSO MUST ENSURE THAT ALL INFORMATION REQUIRED TO BE PROVIDED UNDER THIS
CAPTION AND UNDER THE CAPTIONS "SUBSCRIBER", "SUBSCRIPTION", AND "SIGNATURE" HAS
BEEN COMPLETED IN FULL AND IS LEGIBLE. AN INCOMPLETE OR ILLEGIBLE SUBSCRIPTION
AGREEMENT AND POWER OF ATTORNEY WILL BE REJECTED AND THE SUBSCRIBER WILL NOT BE
ALLOWED TO BECOME A LIMITED PARTNER.
B-7
<PAGE>
THIS DOCUMENT MUST BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC
FOR USE ONLY BY INDIVIDUALS
STATE OF )
) ss.:
COUNTY OF )
On this _____ day of _______________, 19__, before me personally
appeared __________________________________, to me known, who, being by me duly
sworn, did depose and say that he/she resides at _____________________________
__________________________ [include full residence address]; that he/she is
the person described in and who executed the foregoing instrument; and he/she
duly acknowledged to me that he/she executed the same.
-----------------------------------
Notary Public
My commission expires on __________
B-8
<PAGE>
EXHIBIT C
TUDOR FUND FOR EMPLOYEES L.P.
SUBSCRIPTION AGREEMENT
AND
POWER OF ATTORNEY
(FOR USE ONLY BY THE TUDOR INVESTMENT
CORPORATION 401(k) SAVINGS AND PROFIT-SHARING PLAN)
This Subscription Agreement and Power of Attorney shall only be used by, and
must be executed by, one of the trustees (each a "Trustee") of the Tudor
Investment Corporation 401(k) Savings and Profit-Sharing Plan (the "TIC 401(k)
Plan"). In addition, each plan participant of the TIC 401(k) Plan on whose
behalf this Subscription Agreement and Power of Attorney is being submitted
(each a "Plan Participant") must execute the form of Representations and
Agreements by Plan Participants annexed to the Prospectus as Exhibit D. All
other subscribers must use the form of Subscription Agreement and Power of
Attorney for individuals annexed to the Prospectus as Exhibit B.
INSTRUCTIONS - PLEASE READ CAREFULLY
1. Carefully read this document to make sure that you understand it thoroughly
and that it is the appropriate Subscription Agreement for you to use.
2. Using a typewriter or printing in ink, fill in the blanks as directed under
the caption "Subscription", and include the appropriate signature and date
under the caption "Signature".
3. Reread this document to make sure that you understand it and that all
necessary blanks are filled in, and return it to Cargill Investor Services,
Inc. (the "Selling Agent"), at One World Financial Center, Tower A, 200
Liberty Street, 22nd Floor, New York, New York 10281, Attention: John D.
Carlin, Vice President.
"Subscriber" means the trust under the TIC 401(k) Plan acting through one or
more of its Trustees.
C-1
<PAGE>
________________________________________________________________________________
SUBSCRIBER (MUST BE COMPLETED IN FULL)
1. (a) Full Name of Trust: Tudor Investment Corporation 401(k)
-----------------------------------
Savings and Profit-Sharing Plan.
-------------------------------------------------------
(b) Taxpayer I.D. Number: 13-3841088
---------------------------------
2. (a) Full Names of Trustees: Filomena Di Sisto and
------------------------------
Patrick A. Keenan.
-------------------------------------------------------
(b) Principal Business Address (P.O. Box Alone Not Acceptable):
One Liberty Plaza, 51st Floor
_______________________________________________________
Street
New York New York 10006
_______________________________________________________
City State Zip Code
_______________________________________________________________________________
SUBSCRIPTION (MUST BE COMPLETED IN FULL)
Pursuant to the accompanying Prospectus dated June __, 1996 (the
"Prospectus"), subscriptions are solicited for Units of Limited Partnership
Interest ("Units") in Tudor Fund For Employees L.P. (the "Partnership"),
including fractions of Units (to the fourth decimal place), on a continuing
basis (the "Continuing Offering") for sale at periodic closings held as of
January 1, April 1, July 1, and October 1 of each year or at such other times as
Second Management LLC (the "General Partner") determines in its sole
discretion (the "Periodic Closings"), at an offering price per Unit equal to
100% of the Net Asset Value (as defined in the Prospectus) of a Unit as of the
opening of business on the date of the Periodic Closing at which such Unit is
sold.
The minimum subscription is $1,000, and whole Units and fractions of
Units (to the fourth decimal place) may be subscribed for. A subscriber may
subscribe for amounts in excess of the foregoing minimum in increments of
$1,000. All subscriptions for Units are irrevocable. The General Partner in
its sole discretion may reject any subscription in whole or in part at any time
prior to acceptance.
In order to subscribe for Units, a subscriber must deliver to the
Selling Agent: (1) a fully completed, dated, and signed Subscription Agreement
and Power of Attorney; and (2) either (a) a check payable to "UNITED STATES
TRUST COMPANY OF NEW YORK, AS
C-2
<PAGE>
ESCROW AGENT FOR TUDOR FUND FOR EMPLOYEES L.P.", or (b) a wire transfer of
Federal Funds to "CHASE MANHATTAN BANK, NEW YORK, NEW YORK, ABA NO. 021000021,
FOR CREDIT TO UNITED STATES TRUST COMPANY OF NEW YORK, ACCOUNT NO. 920-1-073195,
TUDOR FUND FOR EMPLOYEES L.P., ACCOUNT NO. 098-791-00, REFERENCE: TUDOR
INVESTMENT CORPORATION 401(K) SAVINGS AND PROFIT-SHARING PLAN, ATTN: CYNTHIA
CHANEY", in either case representing the full purchase price for such
subscription. The Escrow Agent requires 2 full business days to clear checks
drawn on New York City banks, 5 full business days to clear checks drawn on all
other banks, and 1 full business day to clear wire transfers of funds.
Acceptance of a subscription by the TIC 401(k) Plan is in no respect a
representation by the Partnership or the General Partner that this investment
meets all relevant legal requirements with respect to investments by the TIC
401(k) Plan, or that this investment is appropriate for the TIC 401(k) Plan or
any Plan Participant.
The undersigned subscriber hereby irrevocably subscribes for
$_______________ of Units for the Periodic Closing to be held as of the first
day of _____________, 199__ (insert date).
________________________________________________________________________________
REPRESENTATIONS AND WARRANTIES
The undersigned Trustee on behalf of the TIC 401(k) Plan hereby
represents and warrants to, and agrees with, the General Partner and the
Partnership as follows.
(1) The undersigned Trustee understands that, during the Continuing
Offering, the number of whole Units and fractions of Units which will be issued
to the TIC 401(k) Plan will be determined by dividing the subscription amount
tendered by the subscriber by the Net Asset Value of a Unit as of the date of
the applicable Periodic Closing at which the subscription is accepted. The
undersigned Trustee understands that the Net Asset Value of a Unit may increase
or decrease substantially between the date of a subscription and the date of the
Periodic Closing at which the subscription is accepted; consequently, the TIC
401(k) Plan may receive at a Periodic Closing more or fewer Units and/or
fractions of Units than would be received if the Periodic Closing were held on
the date of the subscription.
(2) The undersigned Trustee understands that there exist significant
actual and potential conflicts of interest in the structure and operation of the
Partnership, all as described in the Prospectus.
C-3
<PAGE>
(3) The undersigned Trustee understands that Tudor Investment
Corporation ("TIC"), an affiliate of the General Partner, acts as the trading
advisor for the Partnership and, except as described otherwise in the
Prospectus, receives management and incentive fees for such services, and that
Bellwether Partners LLC, an affiliate of the General Partner and TIC, acts as a
counterparty to and agent for the Partnership in the trading of spot and forward
contracts and over-the-counter options, all as described in the Prospectus.
(4) The undersigned Trustee understands that neither the Partnership
nor any investor will pay any selling commissions to the Selling Agent in
connection with subscriptions for Units. However, the General Partner (out of
its own funds) will reimburse the Selling Agent for certain of its out-of-pocket
administrative expenses and may otherwise compensate the Selling Agent for its
selling efforts, to the extent permitted by applicable law.
(5) The undersigned Trustee understands that the performance and
financial information included in the Prospectus and in any supplement to the
Prospectus referred to below under the caption "Receipt of Documentation" should
be read only in conjunction with the notes and accompanying text, and that such
information should not be interpreted to mean that the Partnership, the General
Partner, or TIC will have similar results in the future or will realize any
profits whatsoever.
(6) The undersigned Trustee understands that Units cannot be redeemed
or transferred, assigned, pledged, or encumbered except as set forth in the
Second Amended and Restated Limited Partnership Agreement of the Partnership as
amended to date, annexed as EXHIBIT A to the Prospectus (the "Limited
Partnership Agreement").
BY MAKING THE REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN, THE UNDERSIGNED
TRUSTEE SHOULD BE AWARE THAT NEITHER HE/SHE NOR THE TIC 401(K) PLAN HAS WAIVED
ANY RIGHTS OF ACTION WHICH EITHER MAY HAVE UNDER APPLICABLE FEDERAL SECURITIES
LAW. FEDERAL SECURITIES LAW PROVIDES THAT ANY SUCH WAIVER WOULD BE
UNENFORCEABLE. THE UNDERSIGNED TRUSTEE SHOULD BE AWARE, HOWEVER, THAT THE
REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN MAY BE ASSERTED IN THE DEFENSE
OF THE PARTNERSHIP OR OTHERS IN ANY SUBSEQUENT LITIGATION OR OTHER PROCEEDING.
C-4
<PAGE>
________________________________________________________________________________
ACCEPTANCE OF LIMITED PARTNERSHIP AGREEMENT
The undersigned Trustee hereby agrees that, as of the date that the
trust account is admitted to the Partnership as a Limited Partner, the Trustees
and the TIC 401(k) Plan will be bound by the terms of the Limited Partnership
Agreement, as amended to date and from time to time hereafter in accordance with
the terms thereof, as if a Trustee's signature was actually subscribed thereto.
________________________________________________________________________________
POWER OF ATTORNEY
The undersigned Trustee irrevocably constitutes and appoints the
General Partner and any successor general partner, with the power of
substitution, as its true and lawful agent and attorney-in-fact, in each of the
undersigned's name, place, and stead, to do all things necessary: (1) to admit
the TIC 401(k) Plan as a limited partner of the Partnership and to admit others
as additional or substituted limited partners to the Partnership so long as such
admission is in accordance with the terms of the Limited Partnership Agreement
or any amendment thereto; (2) to file, prosecute, defend, settle, or compromise
any and all actions at law or in equity for or on behalf of the Partnership in
connection with any claim, demand, or liability asserted or threatened by or
against the Partnership; and (3) and to execute, acknowledge, swear to, deliver,
file, record, and publish on the subscriber's behalf (a) the Limited Partnership
Agreement, the Certificate of Limited Partnership of the Partnership, as amended
to date and from time to time hereafter (the "Certificate of Limited
Partnership"), (b) instruments which the General Partner shall deem necessary or
appropriate to reflect any amendment, change, or modification of the Limited
Partnership Agreement or the Certificate of Limited Partnership made in
accordance with the terms of the Limited Partnership Agreement, (c) certificates
of assumed name, and (d) instruments which the General Partner shall deem
necessary or appropriate to qualify or maintain the qualification of the
Partnership to conduct business as a foreign limited partnership in other
jurisdictions.
This Power of Attorney shall be irrevocable and deemed to be a power
coupled with an interest, and shall survive the incapacity, disability, legal
incompetency, or death of a Trustee or the insolvency, dissolution, liquidation,
or termination of the TIC 401(k) Plan.
C-5
<PAGE>
The Trustees and the TIC 401(k) Plan shall be bound by any
representation made by the General Partner and by any successor thereto acting
in good faith pursuant to this Power of Attorney.
The Trustees and the TIC 401(k) Plan hereby waive any and all defenses
which may be available to contest, negate, or disaffirm the action of the
General Partner and any successor thereto taken in good faith under this Power
of Attorney.
The General Partner may exercise this Power of Attorney by listing all
of the Limited Partners executing any agreement, certificate, instrument, or
document with the single signature of the General Partner as attorney-in-fact
for all such Limited Partners.
C-6
<PAGE>
________________________________________________________________________________
RECEIPT OF DOCUMENTATION
The regulations of the Commodity Futures Trading Commission require
that the undersigned be given a copy of the Partnership's Prospectus as well as
certain additional documentation if available. Such additional documentation
includes: (1) a supplement to the Prospectus, which may be given to the
undersigned at any time that additional information is being provided to
subscribers, and which must be given to the undersigned if the Prospectus or any
supplement thereto is dated more than six months prior to the date that the
undersigned first receives the Prospectus or supplement; (2) the most current
monthly account statement for the Partnership, which must be distributed within
30 calendar days after the end of each calendar month; and (3) the most current
annual report for the Partnership, which must be distributed within 90 calendar
days after the end of the Partnership's fiscal year (December 31st). The
undersigned Trustee hereby acknowledges receipt of the Partnership's Prospectus
and the additional documentation referred to above, if any.
________________________________________________________________________________
SIGNATURE
The undersigned Trustee hereby certifies and warrants the he/she has
full power and authority from and on behalf of the TIC 401(k) Plan to complete,
execute, and deliver this Subscription Agreement and Power of Attorney on its
behalf, and to make the statements, representations, and warranties made
herein, and that an investment in the Partnership is not prohibited by law or by
the governing documents of the TIC 401(k) Plan, and is legally permissible.
Tudor Investment Corporation 401(k) Savings and Profit-Sharing Plan
- -------------------------------------------------------------------
(Type or Print Name of Trust Account)
By: ____________________________________________________________
(Type or Print Name of Trustee)
____________________________________________________________
(Signature of Trustee) Date
C-7
<PAGE>
ACCOUNT EXECUTIVE USE ONLY (MUST BE COMPLETED IN FULL AND, EXCEPT FOR SIGNATURE,
MUST BE TYPED OR PRINTED IN INK BY ACCOUNT EXECUTIVE)
The undersigned AE hereby certifies that: (1) the AE has informed the person
named above under the caption "Subscriber" of all pertinent facts relating to
the liquidity and marketability of the Units as set forth in the Prospectus; and
(2) the AE has reasonable grounds to believe (on the basis of information
obtained from the person named above under the caption "Subscriber" concerning
such person's investment objectives, other investments, financial situation and
needs, and any other information known by the AE) that (a) such person is or
will be in a financial position appropriate to enable such person to realize to
a significant extent the benefits described in the Prospectus, (b) such person
has a fair market net worth sufficient to sustain the risks inherent in the
Partnership (including loss of investment and lack of liquidity), and (c) the
Partnership is otherwise a suitable investment for such person.
(a) AE's Signature: _______________________________________
(b) Full Name of AE: ______________________________________
(c) Full Name of AE's Firm: Cargill Investor Services, Inc.
(d) Account Code of Subscriber: ___________________________
THE AE MUST ENSURE THAT THE DOCUMENTATION REFERRED TO ABOVE UNDER THE CAPTION
"RECEIPT OR DOCUMENTATION" HAS BEEN FURNISHED TO THE PERSON NAMED ABOVE UNDER
THE CAPTION "SUBSCRIBER".
THE AE ALSO MUST ENSURE THAT ALL INFORMATION REQUIRED TO BE PROVIDED UNDER THIS
CAPTION AND UNDER THE CAPTIONS "SUBSCRIBER", "SUBSCRIPTION", AND "SIGNATURE" HAS
BEEN COMPLETED IN FULL AND IS LEGIBLE. AN INCOMPLETE OR ILLEGIBLE SUBSCRIPTION
AGREEMENT AND POWER OF ATTORNEY WILL BE REJECTED AND THE SUBSCRIBER WILL NOT BE
ALLOWED TO BECOME A LIMITED PARTNER.
C-8
<PAGE>
THIS DOCUMENT MUST BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC
FOR USE BY TRUSTEES
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of _______________, 19__, before me personally
appeared __________________________________, to me known, who, being by me duly
sworn, did depose and say that he/she resides at _____________________________
__________________________ [include full residence address]; that he/she is
the Trustee described in and who executed the foregoing instrument for and on
behalf of the Tudor Investment Corporation 401(k) Savings and Profit-Sharing
Plan; he/she duly acknowledged to me that he/she executed the same; and he/she
executed the same by order of and pursuant to authority in the trust instrument
of such trust account.
-----------------------------------
Notary Public
My commission expires
C-9
<PAGE>
EXHIBIT D
REPRESENTATIONS AND AGREEMENTS BY PLAN PARTICIPANTS
In connection with the election by the undersigned plan participant
("Plan Participant") of the Tudor Investment Corporation 401(k) Savings and
Profit-Sharing Plan (the "TIC 401(k) Plan") to make an investment of
contributions by the TIC 401(k) Plan on behalf of the Plan Participant in Tudor
Fund For Employees L.P. (the "Partnership"), the Plan Participant hereby
represents and warrants to, and agrees with, the trustees of the TIC 401(k) Plan
(the "Trustees"), the Partnership, and Second Management LLC (the "General
Partner") as follows.
(1) As of the date hereof and at all times during the calendar year to
which the current Plan Participant's investment election form applies, the
amount of the Plan's investment on behalf of the Plan Participant in Units of
Limited Partnership Interest in the Partnership ("Units"), taking into account
all investments in Units that will be made by the Plan on behalf of the Plan
Participant during such calendar year, when added to the amount of all other
investments in Units made by the Plan on behalf of the Plan Participant or by
the Plan Participant directly and in his/her individual capacity, is and will be
25% or less of the Plan Participant's net worth or, if married, the Plan
Participant's joint net worth with spouse (exclusive of home, furnishings, and
automobiles). The Plan Participant can afford to bear the risks of an
investment in the Partnership, including the risk of losing the entire
investment.
(2) The Plan Participant has received and thoroughly read the
Prospectus dated June __, 1996 (the "Prospectus") relating to the Partnership
and Units.
(3) The Plan Participant understands that there exist significant
actual and potential conflicts of interest in the structure and operation of the
Partnership, all as described in the Prospectus.
(4) The Plan Participant understands that the performance and
financial information included in the Prospectus and in any supplement to the
Prospectus provided to the Plan Participant should be read only in conjunction
with the notes and accompanying text, and that such information should not be
interpreted to mean that the Partnership, the General Partner, or Tudor
Investment Corporation, the trading advisor for the Partnership, will have
similar results in the future or will realize any profits whatsoever.
(5) The Plan Participant understands that, upon termination of the
Plan Participant's employment for any reason whatsoever (including voluntary
termination) with the General Partner, or any of its affiliated entities, or
their successors or assigns, any investment in the Partnership of the Plan
Participant under
D-1
<PAGE>
the TIC 401(k) Plan will be subject to mandatory reallocation to other
investment elections under the TIC 401(k) Plan (as specified by the Plan
Participant) or, if no other investment election is specified, the Merrill Lynch
Retirement Preservation Trust.
X
- ------------------------------------------ -------------------------
(Signature of Plan Participant) Date
D-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Printing................................... $ 40,000
Legal fees and expenses.................... 100,000
Accounting fees and expenses............... 46,500
Escrow Agent fees.......................... 3,500
Blue Sky fees and expenses,
including legal fees..................... 5,000
Miscellaneous.............................. 5,000
--------
Total................................... $200,000
--------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17 of the Second Amended and Restated Limited Partnership
Agreement (a form of which is filed herewith as Exhibit 3.01(c) hereto) provides
for indemnification of Second Management LLC (the General Partner of the
Registrant) and its affiliates by the Registrant, and for indemnification of the
Registrant by the Partners in certain circumstances. Section 8 of the Management
Agreement (a form of which was previously filed as Exhibit 10.03, now Exhibit
10.03(a) hereto) provides for the indemnification of Tudor Investment
Corporation (the Trading Advisor for the Registrant) and its stockholders,
directors, officers, principals, employees, and their respective successors and
assigns in certain circumstances. Section 7 of the Selling Agreement (a form of
which was previously filed as Exhibit 1.01(b) hereto) provides for
indemnification of the Registrant by Cargill Investor Services, Inc. (the
Selling Agent for the Registrant) in certain circumstances, and for
indemnification of the Selling Agent by the Registrant and the General Partner
in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On November 22, 1989, Mark F. Dalton, President and Chief Operating
Officer of the General Partner, purchased one Unit of Limited Partnership
Interest of the Registrant for $1,000 to permit it to be organized as a limited
partnership under the Delaware Revised Uniform
- -------------------------
* The amounts represent an estimate of the specified expenses in connection
with the issuance and distribution of the securities covered by this Post-
Effective Amendment No. 6 during the next 12 months, and do not represent
cumulative expenses to date or any future expenses in respect of the
Registrant or any securities previously issued, or which may in the future
be issued, by the Registrant.
II-1
<PAGE>
Limited Partnership Act. This sale was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of that Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(a) EXHIBITS
Exhibit Description of
Number Document
------- --------------
1.01(a) Form of Selling Agreement among Seventh
Management, Inc., Second Management Company,
Inc. (succeeded by Second Management LLC),
and the Registrant (not in effect).
1.01(b) Form of Selling Agreement among Cargill
Investor Services, Inc., Second Management
Company, Inc. (succeeded by Second
Management LLC), and the Registrant.
3.01(a) Form of Limited Partnership Agreement of the
Registrant.
3.01(b) Form of First Amended and Restated Limited
Partnership Agreement of the Registrant.
3.01(c)** Form of Second Amended and Restated Limited
Partnership Agreement of the Registrant
(included as Exhibit A to the Prospectus).
3.02(a) Certificate of Limited Partnership of the
Registrant.
3.02(b)** Amendment to the Certificate of Limited
Partnership of the Registrant.
5.01** Opinion letter of Cadwalader, Wickersham &
Taft to the Registrant regarding the
legality of Units (including consent).
8.01** Opinion letter of Cadwalader, Wickersham &
Taft to the Registrant regarding certain
federal income tax matters (including
consent).
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
II-2
<PAGE>
Exhibit Description of
Number Document
------- --------------
10.01(a) Forms of Customer Agreement between the
Registrant and each of (i) Morgan Stanley &
Co., Incorporated, (ii) Prudential
Securities Incorporated, and (iii) Shearson
Lehman Brothers Inc. (not in effect).
10.01(b) Forms of Customer Agreement between the
Registrant and each of (i) Daiwa Securities
America, Inc., and (ii) Goldman, Sachs & Co.
10.01(c) Forms of Customer Agreement between the
Registrant and each of (i) Cargill Investor
Services, Inc., and (ii) J.P. Morgan
Futures, Inc.
10.01(d) Form of Customer Agreement between the
Registrant and Salomon Brothers Inc.
10.01(e) Forms of Customer Agreement between the
Registrant and each of (i) BZW Futures, and
(ii) Merrill Lynch Futures Inc.
10.01(f)** Forms of Customer Agreement between the
Registrant and each of (i) Morgan Stanley &
Co. International Limited, (ii) E. D. & F.
Man International Inc., (iii) Lehman
Brothers Inc., (iv) CS First Boston, and (v)
Bear Stearns Securities Corp.
10.02(a) Form of Customer Foreign Exchange Agreement
between the Registrant and Bellwether
Partners Inc. (succeeded by Bellwether
Partners LLC).
10.02(b) Form of Amendment to Customer Foreign
Exchange Agreement between the Registrant
and Bellwether Partners Inc. (succeeded by
Bellwether Partners LLC).
10.02(c) Form of Customer Foreign Exchange Agreement
between the Registrant and Commodities
Corporation (U.S.A.) N.V.
10.02(d) Form of Guarantee by the Registrant in favor
of counterparty of Bellwether Partners Inc.
(succeeded by Bellwether Partners LLC) (not
in effect).
- --------------------------
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
II-3
<PAGE>
Exhibit Description of
Number Document
------- --------------
10.02(e) Form of Contribution Agreement among the
Registrant, Bellwether Partners Inc.
(succeeded by Bellwether Partners LLC),
Tudor Futures Fund, The American Eagle Fund
I L.P., Tudor BVI Futures, Ltd., Tudor G-5
Ltd., Tudor G-5 Unit Trust, and Galloway
Partners, L.P. (not in effect).
10.03(a) Form of Management Agreement among the
Registrant, Second Management Company, Inc.
(succeeded by Second Management LLC), and
Tudor Investment Corporation.
10.03(b) Form of Amendment to Management Agreement
among the Registrant, Second Management
Company, Inc. (succeeded by Second
Management LLC), and Tudor Investment
Corporation.
10.04(a)** Form of Subscription Agreement and Power of
Attorney to be executed by purchasers of
Units who are individuals (included as
Exhibit B to the Prospectus).
10.04(b)** Form of Subscription Agreement and Power of
Attorney to be executed by participants in
the Tudor Investment Corporation 401(k)
Savings and Profit-Sharing Plan (included as
Exhibit C to the Prospectus).
10.04(c)** Form of Representations and Agreements
Letter to be executed by participants in the
Tudor Investment Corporation 401(k) Savings
and Profit-Sharing Plan (included as Exhibit
D to the Prospectus).
10.05(a) Form of Escrow Agreement among the
Registrant, Seventh Management, Inc., and
United States Trust Company of New York.
10.05(b) Form of Amendment to Escrow Agreement among
the Registrant, Cargill Investor Services,
Inc., and United States Trust Company of New
York.
- ------------------------
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
II-4
<PAGE>
23.01** Consent of Independent Public Accountants
for each of (i) the Registrant, and (ii)
Second Management Company, Inc.
(b) FINANCIAL STATEMENTS**
Included in the Prospectus:
Tudor Fund for Employees L.P. (the Registrant)
Report of Independent Public Accountants
Audited Statements of Financial Condition
Notes to Audited Statements of Financial Condition
Unaudited Statement of Financial Condition
Notes to Unaudited Statement of Financial Condition
Second Management Company, Inc. (the General Partner)
Report of Independent Public Accountants
Audited Statements of Financial Condition
Notes to Audited Statements of Financial Condition
Second Management LLC (the General Partner)
Unaudited Statement of Financial Condition
Notes to Unaudited Statement of Financial Condition
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (a) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (b)
to reflect in the Prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; and (c) to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
- --------------------------
**Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
II-5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment No. 6 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 30th day
of May, 1996.
TUDOR FUND FOR EMPLOYEES L.P.
By: SECOND MANAGEMENT LLC
General Partner
By: /s/ Mark F. Dalton
___________________________
Mark F. Dalton
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 6 to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title(s) Date
- --------- -------- ----
Second Management LLC General Partner May 30, 1996
By: /s/ Mark F. Dalton
__________________________
Mark F. Dalton
President and Chief Operating
Officer
/s/ Paul Tudor Jones, II Management Committee Member and May 30, 1996
___________________________ Chairman and Chief Executive
Paul Tudor Jones, II Officer of the General Partner
/s/ Mark F. Dalton Management Committee Member and May 30, 1996
___________________________ President and Chief Operating
Mark F. Dalton Officer of the General Partner
/s/ Patrick A. Keenan Management Committee Member, May 30, 1996
___________________________ Vice President, and Chief
Patrick A. Keenan Financial Officer of the
General Partner
/s/ Andrew S. Paul Management Committee Member, May 30, 1996
___________________________ Vice President, General
Andrew S. Paul Counsel, and Secretary of the
General Partner
/s/ Mark A. Heffernan Management Committee Member of May 30, 1996
___________________________ the General Partner
Mark A. Heffernan
II-7
<PAGE>
EXHIBIT INDEX
Exhibit Description of
Number Document
------- --------------
1.01(a) Form of Selling Agreement among Seventh
Management, Inc., Second Management Company,
Inc. (succeeded by Second Management LLC),
and the Registrant (not in effect).
1.01(b) Form of Selling Agreement among Cargill
Investor Services, Inc., Second Management
Company, Inc. (succeeded by Second
Management LLC), and the Registrant.
3.01(a) Form of Limited Partnership Agreement of the
Registrant.
3.01(b) Form of First Amended and Restated Limited
Partnership Agreement of the Registrant.
3.01(c) ** Form of Second Amended and Restated Limited
Partnership Agreement of the Registrant
(included as Exhibit A to the Prospectus).
3.02(a) Certificate of Limited Partnership of the
Registrant.
3.02(b)** Amendment to the Certificate of Limited
Partnership of the Registrant.
5.01** Opinion letter of Cadwalader, Wickersham &
Taft to the Registrant regarding the
legality of Units (including consent).
8.01** Opinion letter of Cadwalader, Wickersham &
Taft to the Registrant regarding certain
federal income tax matters (including
consent).
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
<PAGE>
Exhibit Description of
Number Document
------- --------------
10.01(a) Forms of Customer Agreement between the
Registrant and each of (i) Morgan Stanley &
Co., Incorporated, (ii) Prudential
Securities Incorporated, and (iii) Shearson
Lehman Brothers Inc. (not in effect).
10.01(b) Forms of Customer Agreement between the
Registrant and each of (i) Daiwa Securities
America, Inc., and (ii) Goldman, Sachs & Co.
10.01(c) Forms of Customer Agreement between the
Registrant and each of (i) Cargill Investor
Services, Inc., and (ii) J.P. Morgan
Futures, Inc.
10.01(d) Form of Customer Agreement between the
Registrant and Salomon Brothers Inc.
10.01(e) Forms of Customer Agreement between the
Registrant and each of (i) BZW Futures, and
(ii) Merrill Lynch Futures Inc.
10.01(f) ** Forms of Customer Agreement between the
Registrant and each of (i) Morgan Stanley &
Co. International Limited, (ii) E. D. & F.
Man International Inc., (iii) Lehman
Brothers Inc., (iv) CS First Boston, and (v)
Bear Stearns Securities Corp.
10.02(a) Form of Customer Foreign Exchange Agreement
between the Registrant and Bellwether
Partners Inc. (succeeded by Bellwether
Partners LLC).
10.02(b) Form of Amendment to Customer Foreign
Exchange Agreement between the Registrant
and Bellwether Partners Inc. (succeeded by
Bellwether Partners LLC).
10.02(c) Form of Customer Foreign Exchange Agreement
between the Registrant and Commodities
Corporation (U.S.A.) N.V.
10.02(d) Form of Guarantee by the Registrant in favor
of counterparty of Bellwether Partners Inc.
(succeeded by Bellwether Partners LLC) (not
in effect).
- --------------------------
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
<PAGE>
Exhibit Description of
Number Document
------- --------------
10.02(e) Form of Contribution Agreement among the
Registrant, Bellwether Partners Inc.
(succeeded by Bellwether Partners LLC),
Tudor Futures Fund, The American Eagle Fund
I L.P., Tudor BVI Futures, Ltd., Tudor G-5
Ltd., Tudor G-5 Unit Trust, and Galloway
Partners, L.P. (not in effect).
10.03(a) Form of Management Agreement among the
Registrant, Second Management Company, Inc.
(succeeded by Second Management LLC), and
Tudor Investment Corporation.
10.03(b) Form of Amendment to Management Agreement
among the Registrant, Second Management
Company, Inc. (succeeded by Second
Management LLC), and Tudor Investment
Corporation.
10.04(a)** Form of Subscription Agreement and Power of
Attorney to be executed by purchasers of
Units who are individuals (included as
Exhibit B to the Prospectus).
10.04(b)** Form of Subscription Agreement and Power of
Attorney to be executed by participants in
the Tudor Investment Corporation 401(k)
Savings and Profit-Sharing Plan (included as
Exhibit C to the Prospectus).
10.04(c)** Form of Representations and Agreements
Letter to be executed by participants in the
Tudor Investment Corporation 401(k) Savings
and Profit-Sharing Plan (included as Exhibit
D to the Prospectus).
10.05(a) Form of Escrow Agreement among the
Registrant, Seventh Management, Inc., and
United States Trust Company of New York.
10.05(b) Form of Amendment to Escrow Agreement among
the Registrant, Cargill Investor Services,
Inc., and United States Trust Company of New
York.
23.01** Consent of Independent Public Accountants
for each of (i) the Registrant, and (ii)
Second Management Company, Inc.
- ------------------------
** Filed herewith. If not filed herewith, Exhibit was previously filed and has
not been amended in any material respect.
<PAGE>
EXHIBIT 3.02(b)
<PAGE>
AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TUDOR FUND FOR EMPLOYEES L.P.
The undersigned, desiring to amend Section 4 of the Certificate of
Limited Partnership (the "Certificate") of Tudor Fund For Employees L.P. (the
"Partnership"), pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act, Title 6 Delaware Code, Subtitle II, Chapter 17, 17-101
et seq. (the "Act"), does hereby certify, pursuant to Section 17-202 of the Act,
that the Certificate shall, and hereby is, amended as follows.
4. General Partner. The name and business and mailing address of the
general partner of the Partnership is: Second Management LLC, One
Liberty Plaza, 51st Floor, New York, New York 10006.
This Amendment was duly executed in accordance with, and is being
filed pursuant to, Section 17-202 of the Act.
IN WITNESS WHEREOF, the undersigned, has executed this Amendment on
the 14th day of May, 1996.
TUDOR FUND FOR EMPLOYEES L.P.
-1-
<PAGE>
By: SECOND MANAGEMENT LLC
General Partner
By:______________________________
Andrew S. Paul
Vice President
-2-
<PAGE>
EXHIBIT 5.01
<PAGE>
May 30, 1996
Tudor Fund For Employees L.P.
c/o Second Management LLC
General Partner
One Liberty Plaza
51st Floor
New York, New York 10006
Dear Sirs:
We have acted as your counsel in connection with the organization of
Tudor Fund For Employees L.P., a Delaware limited partnership (the
"Registrant"), and the preparation and filing with the Securities and Exchange
Commission of Post-Effective Amendment No. 6 to the Registration Statement on
Form S-1, SEC File No. 33-33982 (the "Registration Statement"), relating to the
registration under the Securities Act of 1933 as amended of Units of Limited
Partnership Interest in the Registrant (the "Units"). In such connection, we
have assisted in the preparation of the Second Amended and Restated
Limited Partnership Agreement of the Registrant (the "Limited Partnership
Agreement") and in the preparation and filing with the Secretary of State of the
State of Delaware of the Amended Certificate of Limited Partnership of the
Registrant. In rendering the opinions set forth herein, we have examined such
documents, records, and applicable law as we have deemed necessary or
appropriate for purposes of rendering such opinions.
Based upon the foregoing, we are of the opinion that, upon (1) the
sale of the Units described in the Registration Statement in the manner and on
the terms and conditions set forth therein and (2) the identification of the
purchasers of Units as limited partners in the books and records of the
Registrant, the Units will be validly issued, fully-paid, and non-assessable. We
are also of the opinion that a limited partner's liability for the losses and
obligations of the Registrant solely by reason of such person being a limited
partner of the Registrant will not exceed such limited partner's unredeemed
capital contributions, undistributed profits (if any), and distribution and
redemption amounts received (if any) with interest thereon, all as described in
the Limited Partnership Agreement.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references made to us in the Prospectus
constituting a part of the
<PAGE>
Tudor Fund For Employees L.P. May 30, 1996
Registration Statement under the captions "Principal Risk Factors", "Purchases
by Employee Benefit Plans--ERISA Considerations", "Federal Income Tax Aspects",
"State and Local Income Tax Aspects", and "Legal Matters".
Very truly yours,
<PAGE>
EXHIBIT 8.01
<PAGE>
May 30, 1996
Tudor Fund For Employees L.P.
c/o Second Management LLC
General Partner
One Liberty Plaza
51st Floor
New York, New York 10006
Dear Sirs:
We have acted as your counsel in connection with the preparation and filing
with the Securities and Exchange Commission of Post-Effective Amendment No. 6 to
the Registration Statement on Form S-1, SEC File No. 33-33982 (the "Registration
Statement"), relating to the registration under the Securities Act of 1933 as
amended of Units of Limited Partnership Interest ("Units") in Tudor Fund For
Employees L.P. (the "Partnership"), a limited partnership organized under the
Delaware Revised Uniform Limited Partnership Act.
We have examined such documents and records and have reviewed such
questions of law and fact as we have deemed necessary for purposes of delivering
this opinion letter. Based upon the foregoing, we hereby confirm our opinion,
under the heading "Federal Income Tax Aspects" in the Prospectus constituting a
part of the Registration Statement that the Partnership will be taxed as a
partnership for United States federal income tax purposes. We also confirm that
the text in the Prospectus set forth under the headings "Principal Risk
Factors", "Purchases by Employee Benefit Plans--ERISA Considerations", "Federal
Income Tax Aspects", and "State and Local Income Tax Aspects" correctly
describes the material tax consequences to United States taxpayers who are
individuals of acquiring, owning, and disposing of Units.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement.
Very truly yours,
<PAGE>
EXHIBIT 10.01 (f)
<PAGE>
MORGAN STANLEY INTERNATIONAL
MORGAN STANLEY SECURITIES LIMITED
TERMS AND CONDITIONS OF DEALING IN
FINANCIAL AND COMMODITY FUTURES AND OPTIONS
1. DEFINITIONS
(A) In these terms and conditions, the following words and phrases shall bear
the following meanings:
"this Agreement" means the agreement comprising these terms and
conditions and any covering letter hereto and any additional documents
accompanying these terms and conditions, each as from time to time
amended and/or supplemented;
"Asset" means currencies, securities, investments, deposits or financial
instruments (including futures or option contracts) or physical assets;
"Broker" means such member of an Exchange and/or Clearing House as is
instructed by MSI to enter into a futures or option contract on an
Exchange and/or clear the same;
"Charges" means the sums payable to MSI in respect of fees charged under
this Agreement;
"Clearing House" means any clearing house providing settlement or
clearing or similar services for, or as part of, an Exchange;
"Client" means the person with whom MSI has entered into this Agreement;
"Client Contract" means a futures or option contract between MSI and the
Client which is matched by a Contract and is identical in its terms
except as to parties;
"Client Money" means all initial and variation Margin, option premiums
and all other sums received from or due to the Client pursuant to this
Agreement which is "Client Money" as defined by Regulation 2.1 of the
Regulations;
"close out" means the entering into of a Contract equal and opposite to a
Contract previously entered into (and each matching a Client Contract) so
as to create a level position in relation to the Assets underlying the
Contracts, or
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in relation to the Contracts themselves and fix the amount of profit or
loss arising from such Contracts (and with respect to the corresponding
Client Contract); and the terms "closed out Contract" and "closing out"
shall be construed accordingly;
"Connected Company" means a subsidiary or holding company (in each case
construed in accordance with Section 736 of the Companies Act 1985 or any
statutory modification or re-enactment thereof) of MSI or a subsidiary of
any such holding company;
"Contract" means a futures or option contract entered into by MSI on an
Exchange or, where sub-Clause 2(B) applies, with or through a Broker;
"Contracted-out Client Money" means all initial and variation Margin,
option premiums and all other sums received from or due to, the Client
pursuant to this Agreement, which sums are not to be treated as "Client
Money" as defined by Regulation 2.1 of the Regulations;
"Exchange" means any exchange, market or association of dealers in any
part of the world on which Assets and/or futures or option contracts are
bought and sold;
"a futures or option contract" means a contract, for future delivery
and/or settlement, to (1) buy or sell an Asset and/or (2) pay or receive
a sum of money by reference to an index or formula;
"LOCH" means London Options Clearing House Limited;
"London Traded Options" means traded options dealt in on The
International Stock Exchange;
"Margin" means the amount of cash (including premiums) as may from time
to time be demanded by MSI from the Client for the purpose of protecting
MSI against any loss or risk of loss on present, future or contemplated
Contracts and/or Client Contracts;
"Margin Account" means an account with such bank or banks as MSI may from
time to time determine designed in such a way as to identify the contents
of such account as being client monies;
"MSI" means Morgan Stanley International and/or, as the context requires,
MSSL, each contracting for itself and, in relation to sub-Clause 2(H),
(I), (K) 8(I), (J), (N), (S) and (T), as trustee for the relevant
Connected Companies, directors, officers and/or employees;
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"MSSL" means Morgan Stanley Securities Limited;
"Open Contract" means a Contract which has not been closed out and which
has not yet matured;
"the Regulations" means The Financial Services (Clients' Money)
Regulations 1987;
"Securities" means such securities, investments and financial instruments
as the Client may, with the agreement of MSI, deposit with, or transfer
to, MSI by way of Margin;
"Taxes" means taxes, duties, imposts and fiscal charges of any nature,
whether of the United Kingdom or elsewhere in the world and whenever
imposed, including value added taxes and stamp and other documentary
taxes;
"The International Stock Exchange" means The International Stock Exchange
of the United Kingdom and the Republic of Ireland;
"Transaction" means the entering into of a Contract, closing out or
effecting delivery and/or settlement of a Contract (which term shall
include exercise or allocation of an option Contract);
"TSA" means The Securities Association.
(B) Words importing the singular shall, where the context permits, include
the plural and vice versa. The expression "person" shall include any
firm, partnership, association of persons and body corporate and any such
persons acting jointly and the personal representatives or successors in
title of any such person. Where the Client comprises two or more persons
the liabilities and obligations hereunder shall be joint and several.
References to "writing" shall include telex, cable, facsimile
transmission and telegram. References to statutory provisions and
regulations shall include any modification or re-enactment or re-making
thereof.
(C) Headings are for convenience only and shall not affect the
interpretation hereof.
2. DEALING
(A) MSI shall be entitled, but not bound, to act on a request from the Client
to carry out a Transaction (whether directly or through a Broker).
Transactions may, where so permitted under the Rules of TSA, be carried
out either on, or in accordance with, the rules of an Exchange which is
not a recognised or designated investment Exchange. Transactions will
not relate to off-Exchange
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futures and options contracts unless the Client has entered into a
supplemental agreement for such business.
(B) MSI may designate a Broker to execute and/or clear futures or option
contracts subject to such conditions as MSI may impose. MSI may
designate a Broker outside the United Kingdom who has agreed with MSI
that:
(1) Client Money received by the Broker in relation to a margined
Transaction will be held in segregated bank account; and
(2) MSI's customer account with it will be credited with Client Money or
collateral provided to the Broker by MSI in respect of margined
Transactions to the value of that Client Money or collateral.
(C) If MSI carries out a Transaction on the request of the Client or pursuant
to Clause 5 below:
(1) a corresponding Client Contract shall come into existence on the
purchase or sale of a Contract or, as the case may be, exercise and
allocation of an option Contract in respect of which the underlying
Asset is a futures Contract and cease to exist on closing out or on
settlement and/or delivery of the Contract; and
(2) the Client shall have the obligations in relation to the Transaction
and the corresponding Client Contract as are herein mentioned.
(D) As soon as practicable after it has carried out a Transaction MSI shall
confirm details of that Transaction to the Client. MSI shall provide to
the Client at agreed intervals a statement of the Client's overall
trading (and Margin) positions with MSI at the then available current
market price.
(E) If MSI shall decline to carry out a Transaction it shall promptly notify
the Client accordingly. MSI shall have no liability for any expense,
loss or damage incurred by the Client by reason of any omission so to
notify the Client otherwise than as a result of the bad faith or wilful
default of MSI and in no event shall MSI have any liability for any
consequential or special damage, whether arising from bad faith, wilful
default, or otherwise.
(F) In respect of every Client Contract, MSI shall have made or placed an
equivalent Contract on the floor of the relevant market for execution or
shall, where sub-Clause 2(B) applies, have entered into an equivalent
Contract with or through a Broker and MSI shall thus have an interest in
the Transaction.
(G) Any contract which MSI acquires as a result of the instructions of the
Client will, unless the position has been closed out, result in the
Client becoming
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liable to MSI in relation to the corresponding Client Contract for actual
delivery of its underlying Asset or payment of the relevant price under,
and subject to, the rules of the relevant Exchange and/or Clearing House.
(H) The relationship between MSI and the Client is as described in this
Agreement. Neither that relationship nor the services MSI provides nor
any other matter will give rise to any fiduciary or equitable duties on
the part of MSI or of any Connected Company which would prevent or hinder
MSI or any Connected Company doing business for or with the Client,
acting as both principal or agent, doing business with Connected
Companies and other investors or generally acting as provided in this
Agreement. MSI and any Connected Company may (without disclosing the
same to the Client) carry out any Transaction for the Client (whether or
not pursuant to a Discretionary Trading Authorisation) or give advice or
make recommendations without being liable to account to the Client for
any profit or gain accruing to MSI or any Connected Company while MSI or
any Connected Company has a relationship, arrangement or interest that is
material in relation to the Transaction, advice or recommendation
concerned. Such relationship, arrangement or interest may include by way
of example (but without limitation):
(1) trading or dealing in futures or option contracts or in any Asset (or
any other asset which does or may form part of such Asset) underlying
any Contract or Client Contract;
(2) acting or having acted or seeking to act as a financial adviser or
lending banker to the issuer (or any of its associated companies) of
the Assets the subject of a Transaction;
(3) sponsoring or having sponsored or underwriting or having underwritten
or otherwise participating or having participated in the Assets the
subject of a Transaction;
(4) receiving or having received payments or other benefits for giving
business to the Broker with which the Client's order is placed;
(5) being or having been an associated company of the issuer (or any of
its associated companies) of the Assets the subject of a Transaction;
and/or
(6) advising or having advised a company in connection with a take-over
bid, merger or acquisition by or for it or an associated company.
MSI may, in its absolute discretion, decline to carry out a Transaction
or to give advice or to make a recommendation to the Client where MSI has
an interest in respect thereof which will or may conflict with that of
the Client.
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(I) Neither MSI nor any Connected Company shall be under any duty to disclose
to the Client any act, matter or thing which comes to the notice of MSI
or any Connected Company or any employee, director or agent of MSI or any
Connected Company in the course of MSI or any Connected Company rendering
similar services to others or in the course of carrying on any other
business whether or not such disclosure would be a breach of duty or
confidence to any other person.
(J) At its discretion, MSI may aggregate a Client's order with an order of a
person unconnected with MSI and/or an order of MSI and/or an order of a
person connected with MSI. Such aggregation may operate on some
occasions to the Client's advantage and on other occasions to his
disadvantage.
(K) MSI, its Connected Companies and each of their directors, officers or
employees may act upon and use research reports and recommendation (or
any conclusions which they may express or the research or analysis on
which they may be based) which they have received or of which they may
have knowledge before the same are provided (if at all) to the Client and
shall not be under any obligation when carrying out Transactions with or
for the Client to take account of any such research reports or
recommendations.
3. CLEARING
(A) MSI shall not be liable to the Client (in respect of the relevant Client
Contract, any matching Contract or otherwise) if the relevant Exchange,
Clearing House and/or Broker has ceased for any reason (including netting
off MSI's positions with it) to recognise the existence of any Contract
or fails to perform or close out any Contract, but the fact that the
relevant Exchange, Clearing House and/or Broker has so ceased or failed
shall not affect the Client's obligations and liabilities hereunder in
respect of Contracts which it has instructed MSI to open and which have
not been closed out or in respect of other obligations or liabilities of
the Client arising therefrom.
(B) If the relevant Exchange and/or Clearing House and/or Broker requires any
alteration in the terms or conditions of any Contract matching a Client
Contract (including the Assets subject to it), MSI may without referring
to the Client take all actions as may, in MSI's absolute discretion, be
necessary, desirable or expedient to comply therewith or as a result
thereof or to avoid or mitigate loss thereunder and all such actions
shall be binding upon the Client and such alteration deemed incorporated
into the corresponding Client Contract.
(C) The Client shall, forthwith upon request by MSI, take such action and
supply to MSI in relation to the corresponding Client Contract such
information in
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relation to the delivery and/or settlement, and/or, if a purchased option
Contract, exercise or allocation, of any Contract which has not been
closed out as MSI may request.
(D) Notwithstanding sub-Clause (C) above, the Client shall promptly take all
action necessary (including the supply of information) to enable due
settlement and/or delivery by MSI in accordance with the rules and
regulations of the relevant Exchange and/or Clearing House and/or
requirements of any Broker, of any Contract which it has instructed MSI
to open and which has not been closed out, at the time such Contract
falls due under its terms to be performed (including, where applicable,
on any nominated delivery day).
(E) (1) Unless MSI shall in its absolute discretion determine otherwise,
equal and opposite Contracts and Client Contracts (closing out being
determined on a "first in, first out" basis, except where MSI exercises
its discretion as aforesaid) will automatically fix the amount of profit
or loss in relation to each other.
(2) Subject to sub-Clause 2(A) and to the rules and regulations of the
relevant Exchange and/or Clearing House and/or requirements of the
relevant Broker and subject to any further requirements notified by MSI
to the Client, the Client may at any time before the date for performance
of a Client Contract request MSI to close out the matching Contract or,
if a purchased option Contract, exercise the same. If such closing out
or exercise results in a sum of money being due to MSI and/or to the
relevant Exchange, Clearing House and/or Broker, MSI shall notify the
Client of that amount, which shall be payable forthwith by the Client to
MSI.
(F) MSI shall (subject to, and only upon compliance by the Client with, its
obligations under sub-Clauses 3(C), (D) and E(2) and subject to sub-
Clauses 3(A), 3(B), 4(C) and 5(B)), upon receipt of any sums and/or
Assets (including documents of title thereto) payable or receivable
pursuant to a Transaction, deliver such sums and/or Assets to the Client
in respect of the corresponding Client Contract, subject to the deduction
of any Charges or Taxes.
(G) In respect of an option Contract matching a Client Contract:
(1) the Client, if a buyer, shall pay to MSI on demand any premium
payable under the rules of the relevant Exchange and/or Clearing
House ("the premium") which sum shall be paid by MSI into the Margin
Account as Margin; and
(2) MSI shall, on receipt from the relevant Exchange, Clearing House
and/or Broker, pay into the Margin Account as Margin, for the account
of the
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Client, any premium payable under the rules of the relevant
Exchange and/or Clearing House, provided that the Client may be
required to pay further Margin in respect of the relevant Contract
and corresponding Client Contract.
(H) Where the relevant Clearing House and/or Broker does not allocate long
Open Contracts at maturity direct to a specific account of MSI or to
short Client Contracts, or vice versa, MSI shall have complete discretion
to allocate the same at random or in a way which seems to it to be most
equitable as between clients, and if dealings on MSI's own account are
involved at the same time, allocation will be to all clients first (on
the above basis) with MSI receiving no allocation until all relevant
Client Contracts have been satisfied.
4. THE MARGIN TRUST ACCOUNT
(A) In respect of all present, future or contemplated Contracts and Client
Contracts, the Client shall pay to MSI upon demand such sums by way of
Margin as MSI may in its absolute discretion from time to time require.
(B) MSI shall as soon as practicable pay or credit (1) all Client Money to a
Margin Account with such Approved Bank (as defined in the Financial
Regulations of TSA and which may be MSI or a Connected Company) as MSI
may from time to time determine and (2) all Contracted-out Client Money
to a Margin Account with such bank as MSI may from time to time determine
(which may be MSI or a Connected Company), in each case denominated in
the currency of the relevant Contract or, if agreed by MSI and the
Client, denominated in another currency. The Client shall bear all risk
and cost in respect of any conversion of currency in a Margin Account,
and any such conversion shall be made by MSI at such market rate or rates
as MSI, in its absolute discretion, deems appropriate.
(C) MSI shall (subject, in the case of Client Money to the terms of the trust
declared under Regulation 2.2(1) of the Regulations from the effective
date thereof) hold all Client Money and all Contracted-out Client Money
in a Margin Account on trust in the following order of priority:
(1) for MSI to the extent of all sums due or which may become due to MSI
or payable by MSI on behalf of the Client under or pursuant to this
Agreement and, thereafter,
(2) for the Client to the extent of any surplus which is, following the
payment of all sums due to or payable by MSI under sub-Clause (1)
above, due to the Client.
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(D) MSI is empowered to withdraw Client Money and Contracted-out Client Money
held in a Margin Account for the purpose set out in Rule 100.05b of the
Financial Regulations of TSA and, in addition, for the purposes of paying
to any Broker and/or Clearing House and/or Exchange and/or other parties
all margins, premiums and other sums on futures and option contracts
demanded or due from MSI in respect of its clients and for the purposes
of Clause 4(H) and, in relation to Contracted-out Client Money, for any
other purposes which MSI considers appropriate.
(E) No interest shall be paid in respect of Client Money or Contracted-out
Client Money. In respect of Client Money this differs from the
provisions of Regulation 2.3 of the Regulations from the effective date
thereof.
(F) Subject, in the case of Client Money, to the terms of Regulation 2.2 of
the Regulations, any loss incurred on any Asset or on default by any
Exchange, Clearing House and/or Broker in respect of Margin paid by MSI
shall be borne by all clients of MSI at the date of such loss pari passu
in proportion to their respective entitlement to monies in the relevant
Margin Account as such date, and MSI shall not be liable for any loss
suffered by the Client as a result of the default by any bank with whom
MSI maintains a Margin Account.
(G) MSI is authorised to hold Client Money in a Margin Account with an
approved Bank outside the United Kingdom (or, in the case of Contracted-
out Client Money, any bank outside the United Kingdom) selected by MSI in
its absolute discretion. Where such Approved Bank refuses to give MSI
acknowledgement of the notice required to be given to it under regulation
100.03 of the Financial Regulations of TSA (notice that monies are trust
monies), such Client Money may not be protected as effectively as if it
were held in a client bank account in the United Kingdom.
(H) MSI shall, in its discretion as to the terms thereof and any rate of
return earned thereon, have power to invest, realise such investment
and/or reinvest any sums standing to the credit of a Margin Account in
any Asset it thinks fit, and whether or not with, through or in a
Connected Company and whether or not by leaving the same on deposit with
any Clearing House and/or any Broker. The limitations on the type of or
method of investment contained in the Trustee Investments Act 1961 shall
not apply.
(I) (1) Sums due to MSI from the Client by way of Margin pursuant to Clause
4(a) may, in the absolute discretion of MSI, be satisfied by way of
deposit or transfer of Securities and the provisions of this sub-
clause 4(1) shall apply to such Securities.
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(2) The Client, as beneficial owner and as continuing security for all
its liabilities and obligations under this Agreement, hereby charges,
free of any adverse interest whatsoever:
(a) by way of first fixed equitable charge, all Securities the
certificates or documents of title to which it has deposited or
may hereafter deposit with MSI (or as MSI may direct) by way of
Margin ("Deposited Securities"); and
(b) by way of first fixed legal charge, all Securities title to which
it has transferred or may hereafter transfer to MSI or as MSI may
direct) by way of margin ("Transferred Securities").
(3) Certificates or documents of title to any Securities may be held (a)
by or on behalf of MSI or any of its associated companies (which
where required by the Rules of TSA, are listed in the relevant
Schedule to the covering letter hereto) (being Connected Companies),
(b) by any of the persons listed in the Schedule hereto (in each case
as such Schedules may be amended from time to time by MSI on giving
notice to the Client) or (c) by any other person permitted under the
Rules of TSA.
(4) The Client shall, upon request by MSI, forthwith execute all such
transfers and other documents as may be necessary to enable MSI or
its nominee (which may be any of the persons specified in sub-Clauses
4(I)(2) or (3) above) to be registered as the owner of, or otherwise
obtain legal title to, Deposited Securities.
(5) MSI shall hold all Securities for the purposes of sub-Clause 4(C) and
(D) and Clause 5 and for such purposes may, without prior notice,
free of any interest of the Client therein:
(a) deposit, charge or pledge the same with or to the order of any
Exchange, Clearing House and/or Broker and on terms that (1)
such Exchange or Clearing House may deal with the same in
accordance with their rules, (2) the Broker may deal with the
same in accordance with such rules and/or any agreement made
with MSI and (3) such Exchange, Clearing House and/or Broker may
enforce such deposit, charge or pledge in satisfaction of all or
any obligations of MSI to such Exchange, Clearing House and/or
Broker; and
(b) register, sell, realise, charge, borrow against or otherwise deal
with the same upon such terms (including as to the consideration
received therefor) as it may in its absolute discretion think fit
(without being responsible for any loss or diminution in price)
and
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any consideration received therefor shall be placed upon
receipt to the credit of the Margin Account.
If Securities are denominated in a different currency from that in
which any relevant cost, damages, loss, liability or expense is
denominated, MSI may convert any amount realised at such rate as it
may reasonably consider appropriate at the relevant time.
(6) The Client undertakes neither to create nor to have outstanding any
security interest whatsoever on or over any of the Securities (except
for the security created hereby).
(7) Subject to MSI being satisfied that all costs, damages, losses,
liabilities and expenses incurred pursuant to this Agreement have been
satisfied, discharged or otherwise released, MSI may re-transfer or,
as the case may be, re-deliver any certificates or documents of title
relating to any relevant Securities to the Client at any time and
shall do so upon request.
(8) Pending such re-transfer or re-delivery MSI shall place any monies
paid to MSI by way of income in respect of Securities, net of any
Taxes payable by MSI (whether by withholding or otherwise) in respect
of such income to the credit of the Margin Account and the Client may
direct MSI as to the exercise of any voting or other rights attached
to or conferred on any Securities which are required to be exercised
by MSI. References in this paragraph to MSI shall include references
to any person specified in sub-Clauses 4(I)(2) or (3) above.
(9) Subject to sub-Clause 4(I) and Clause 5, unless otherwise agreed in
writing, documents of title or documents evidencing title to
Securities shall not be lent by MSI or by any person specified in sub-
Clauses 4(I)(2) or (3) above to any third party and money shall not be
borrowed by MSI or any such person on the Client's behalf against the
security of those documents.
(J) As further security for all obligations of the Client under this
Agreement, MSI shall have the right to retain (and apply as set out below
all of the Client's property at any time held by MSI or any Connected
Company for any purpose, including, but not limited to, property (other
than as aforesaid) held in any other accounts of the Client with MSI or
any Connected Company, irrespective of whether or not MSI has made any
advances in connection with such property, and MSI may, without notice,
transfer and re-transfer from time to time any money or other property
between any such accounts. The Client shall execute such documents and
take such other action as MSI shall reasonably request in order to
perfect MSI's rights with respect to any security referred to in this
sub-Clause (J).
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5. MSI'S RIGHTS
(A) MSI may, at any time without prior notice in its absolute discretion, and
shall if the Client shall fail for five business days to meet a call for
Margin from MSI in respect of a Transaction carried out on an Exchange
which is a recognised or designated investment exchange (unless otherwise
permitted under TSA Rules), take such steps as it may consider necessary
or desirable to comply with or perform, cancel or satisfy any obligations
of MSI to the relevant Exchange, Clearing House and/or Broker in respect
of any Contract or Contracts acquired on the instructions of the Client
or otherwise to protect the position of MSI, including closing out and/or
performing any or all such Open Contracts, and may for such purpose:
(1) buy or sell the Asset underlying any Open Contract in any manner
howsoever and including from itself or any Connected Company; and/or
(2) initiate new long or short positions in order to establish a spread
or straddle; and/or
(3) borrow, buy or sell any currency; and/or
(4) apply any Margin.
to each case so that all sums expended on liabilities incurred by MSI in
excess of any sums held in the Margin Account for the Client shall be
paid by the Client to MSI on demand.
(B) On the exercise of MSI's rights under sub-Clause (A) above:
(1) MSI shall not be obliged to deliver to the Client in respect of any
corresponding Client Contract the underlying Asset (which may be
registered in the name of MSI or its nominee (which may be a
Connected Company) and MSI or such nominee may be the custodian of
the document(s) of title or certificate(s) evidencing title to such
Asset) or any money received or receivable on closing out until all
sums due from and liabilities of the Client to MSI are satisfied or
discharged to the satisfaction of MSI and (a) if such sums and/or
liabilities shall not be satisfied or discharged to the satisfaction
of MSI, MSI may sell or realise the underlying Asset upon such terms
(including as to the consideration received therefor) as it may in
its absolute discretion think fit (without being responsible for any
loss or diminution in price) and any consideration received therefor
shall be placed upon receipt to the credit of the Margin Account, and
(b) any income in respect of such Asset paid
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to MSI net of any Taxes payable by MSI (whether by withholding or
otherwise) in respect of such income shall be placed upon receipt to
the credit of the Margin Account; and
(2) all amounts owing to MSI hereunder shall, if MSI shall so determine,
become immediately payable.
6. FEES
(A) Fees will be payable in respect of each Contract at such rates as MSI
may from time to time notify to the Client and such fees will comprise
either a commission or a mark-up or mark-down on the fee payable by MSI
to any Exchange, Clearing House and/or Broker in respect of the
relevant Transaction and/or such other amounts as may be agreed from
time to time by MSI and the Client. If there is an element of mark-up
or mark-down, this will be shown on the relevant contract note or
confirmation where required by the TSA Rules.
(B) MSI may share its charges with a Connected Company or Companies. If MSI
has shared any charge with any third party who is not a Connected
Company, the particulars of such charges will be available to the
Client on written request.
7. INTRODUCED BUSINESS
(A) MSI may introduce the Client to an overseas Connected Company, and the
Client hereby authorises MSI on its behalf to expressly invite any such
Connected Company to call the Client with a view to such Connected
Company entering into investment transactions from time to time with or
for the Client. If such Connected Company agrees to do so:
(1) the Client shall have a direct relationship solely with such
Connected Company and, in any dispute between, or claim against, the
Client and/or any such Connected Company, the Client shall have no
recourse to MSI;
(2) the Client may place orders with MSI acting on behalf of such
Connected Company for specific transactions to be executed by such
Connected Company. In relation to such transactions, MSI shall act
as agent only for such Connected Company and not as agent for the
Client and nothing done by MSI in connection with any such
transaction shall constitute MSI the agent of the Client.
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(B) In relation to any such investment transaction only the following clauses
of this Agreement shall apply as between MSI and the Client: 1, 2(H),
(I), (K), 8(A), (B), (D), (G)-(N), (O)(2), (P), (S) and 10.
(C) Any such Connected Company will not be an authorised person subject to
the rules and regulations made under the Financial Services Act 1986 for
the protection of investors.
8. GENERAL
(A) Under the rules of the relevant Exchange and/or Clearing House or other
regulatory organisations or applicable laws or regulation MSI may be
required to disclose particulars concerning the Client and the Client's
dealings. MSI is authorised by the Client to make any such disclosure.
(B) (1) Any instructions, notices, demands, confirmations or requests to be
given by the Client or MSI hereunder may be given orally or in
writing to the last address notified, in accordance with this sub-
Clause, by the relevant party to the other. Any confirmation as
referred to in sub-Clause 2(D) above shall be deemed correct and
conclusive and binding upon the Client if not objected to in writing
within the earlier of five days of despatch by MSI or one day of
receipt by the Client. Communications under sub-Clause 2(A) and 8(M)
and any objection pursuant to the preceding sentence of this sub-
Clause shall be deemed received only if actually delivered. All
communications (except under sub-Clauses 2(A) and 8(M)) shall be
deemed to have been received at the time when, in the ordinary
course, they would have been received.
(2) MSI shall be entitled to rely on the instructions of any person who
is or appears to MSI to be a person designated in the attached
Certificate or otherwise authorised by the Client for the purposes if
this Agreement.
(3) MSI shall be entitled to rely on, and shall not be liable for any
actions taken or omitted to be taken in good faith pursuant to, at
instruction, notice, demand or request hereunder (or anything which
purports to be or MSI reasonably believes to be an instruction,
notice, demand or request hereunder) whether or not received in
writing.
(C) The Client shall pay on demand interest on any sums due or owing to MSI
hereunder from the date when the same are due until future settlement (as
well after as before judgment) at the rate of 2 per cent per annum above
the base rate or prime rate (or local equivalent thereof) of the bank at
which MSI (or, if there is more than one such bank, the one determined by
MSI in its absolute discretion) has Margin Account in the relevant
currency.
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(D) (1) The Client warrants that it will obtain, and maintain in effect, in
relation to this Agreement, each Client Contract, matching Contract
and Transaction, all necessary consents or approvals of any
governmental or other regulatory body or authority or Exchange and
that it will comply with the terms of the same and with all applicable
laws, regulations and directives of such bodies and authorities. The
Client shall, forthwith upon demand by MSI, deliver to MSI copies of
all such consents or approvals or such other evidence of the existence
of any such consents or approvals and such evidence of compliance with
such and with any such laws, regulations and directives as MSI may
reasonably require.
(2) The Client shall:
(a) provide to MSI upon demand all such information as may be
required to be filed or disclosed pursuant to the byelaws and
rules of any Exchange, Clearing House or other regulatory
authority or to any applicable law, rule or regulation, in each
case regarding MSI, the Client, any Client Contract, matching
Contract, Transaction or this Agreement.
(b) file (within any applicable time periods) such reports, letters
and other communications as may be required from time to time by
any governmental or other regulatory body or authority or any
Exchange or Clearing House regarding MSI, the Client, any Client
Contract, matching Contract, Transaction or this Agreement; and
(c) send a copy of all such reports referred to in paragraph (b)
above to MSI promptly upon such filing, and MSI may forward copy
of the same to any relevant Broker.
(E) All Client Contracts and all Transactions shall be subject to this
Agreement and (in respect of any Exchange and/or Clearing House of which
MSI is a member) the construction, byelaws, rules and/or regulations of
the relevant Exchange and/or Clearing House and to any applicable laws
(which term shall include the regulations of any governmental or quasi-
governmental agency) whether imposed on the Client or MSI and so that:
(1) in the event of any conflict between (a) this Agreement and (b) any
such constitution, byelaws, rules, regulations and/or laws, the
latter shall prevail; and
(2) MSI shall be entitled to take or omit to take any action it considers
fit or appropriate in order to ensure compliance with the same and
all such actions so taken shall be binding upon the Client.
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(F) All sums expressed to be payable by the Client hereunder are exclusive of
all applicable Taxes. Such Taxes shall be payable to MSI by the Client
at the same time as the sums to which those Taxes relate.
(G) This Agreement shall apply to all Transactions, Client Contracts and
transactions pursuant to clause 7 to the exclusion of any other terms and
conditions which might otherwise apply by virtue of any course of
dealing. This Agreement may be amended and/or supplemented by MSI giving
to the Client written notice thereof (which, in the case of a private
Client, shall take affect seven days after despatch) or by written
agreement between MSI and the Client. By the Client's acceptance of this
Agreement, the Client acknowledges that MSI has not made, and the Client
is not relying upon, any statements, representations, promises or
undertakings whatsoever that are not contained herein.
(H) The Client's rights and obligations under this Agreement and any Contract
and/or Client Contract are not capable of assignment. Any purported
assignment thereof shall be in breach of the Client's obligations
hereunder and shall be invalid.
(I) The Client shall upon demand indemnify and keep indemnified MSI and its
Connected Companies and any of its or their directors, officers or
employees against any cost, expense, damage, loss or liability whatsoever
which may be suffered or incurred by any of them directly or indirectly
(including those incurred to a Broker, Exchange, Clearing House or other
regulatory authority) as a result of, or in connection with, or arising
out of, this Agreement or any Contract acquired or Transaction effected
on the instructions of the Client or in relation to a corresponding
Client Contract or arising out of any act or omission by MSI or by any
such other person permitted hereunder (including in any such case any
costs of enforcing the same).
(J) If any action or proceeding is brought by or against MSI or a Connected
Company by or against a third party in relation to this Agreement or any
Contract acquired or Transaction effected on the instructions of the
Client or in relation to a corresponding Client Contract or arising out
of any act or omission by MSI or any such Connected Company permitted
hereunder, the Client agrees to cooperate to the fullest extent possible
in the defence or prosecution of such action or proceeding.
(K) Time shall be of the essence in relation to all matters arising hereunder
or pursuant hereto.
(L) MSI shall not be liable to the Client for the non-performance of its
obligations hereunder by reason of any cause beyond MSI's reasonable
control, including breakdown or failure of transmission or communication
or computer facilities,
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postal or other strikes or similar industrial action and/or the failure
of any relevant Exchange, Clearing House and/or Broker for any reason to
perform its obligations. In no event shall MSI have any liability for any
consequential or special damage, whether arising from bad faith, wilful
default, fraud or otherwise.
(M) Either party can terminate this Agreement without penalty upon receipt of
notice in writing by the other, provided that such termination shall not
affect:
(1) the rights or liabilities of either party in respect of Contracts and
any corresponding Client Contracts for which an instruction has
already been given by the Client and accepted by MSI or in respect of
which there is an outstanding liability to MSI and shall be without
prejudice to MSI's rights to all Margin and sums in the Margin
Account, and this Agreement shall apply thereto until all such
Contracts have been closed out or settlement and/or delivery effected
and all such liabilities discharged; and
(2) any warranties given by the Client under this Agreement which shall
survive such termination.
(N) Neither MSI nor any of its Connected Companies, nor any of its or their
directors, officers or employees shall have any responsibility or
liability whatsoever, whether in negligence or otherwise, (1) in respect
of any advice or opinion which may be given to the Client concerning or
in pursuance of this Agreement or any Contract, Client Contract or
Transaction, or (2) for any expense, loss or damage suffered by the
Client as a result of MSI carrying out the instructions of the Client or
carrying out or failing to carry out any actions permitted under this
Agreement.
(O) (1) MSI will not carry out any Transaction at the Client's request on
the basis that such request evidences an expectation on the Client's
part that the client is acting as agent for or on behalf of another
and that MSI is to be responsible to the Client's principal as its
direct customer for the execution of such Transaction (or for certain
material aspects of such Transaction) and no Transaction carried out
by MSI will be on the basis that such Transaction is investment
business regulated by TSA with or for the Client as an intermediary
(within the meaning of the Rules of TSA).
(2) Without prejudice to sub-Clause (1) above, the Client undertakes
that if in relation to any Contract and/or Client Contract it is
acting as agent for or on behalf of another, then:
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(a) in doing so, it is expressly authorised by its principal to
instruct MSI in relation to that Contract and/or Client Contract
upon the terms of this Agreement;
(b) its principal will be jointly and severally liable with it to MSI
in respect of all obligations and liabilities to be performed by
the Client pursuant to and in respect of such Contract and/or
Client Contract entered into hereunder or in pursuance hereof;
and
(c) notwithstanding paragraph (b) above, it will nevertheless be
jointly and severally liable to MSI with its principal as if it
were a principal in respect of all such obligations and
liabilities.
(P) MSI will not be bound to act in accordance with the instructions of any
person other than the Client (and shall be entitled to act in accordance
with all instructions given by or purporting to be given by the Client)
and the liabilities of MSI hereunder shall be fully discharged by
performing such in favour of the Client, notwithstanding any instructions
that MSI may receive from the principal of the Client, and any notice
that MSI may receive that the authority of the Client to act on behalf of
its principal has been revoked or varied, and references to the word
"Client" herein shall be construed accordingly.
(Q) Where the Client is a company whose business includes acting as trustee
and MSI is dealing with or for the Client in the Client's capacity as a
trustee of more than one trust, this Agreement shall apply to the Client
in each of such capacities and MSI shall not be required to treat the
Client differently in respect of any capacity.
(R) MSI may use telephone voice recording procedures in connection with
receiving instructions or communications and such voice records will be
accepted by the Client as conclusive evidence of the instructions or
communications recorded.
(S) The rights and remedies, powers and privileges of MSI contained herein
are cumulative and not exclusive of any rights or remedies provided by
law. No failure to exercise or delay in exercising the same shall
operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof. MSI shall in no
circumstances be obliged to close out Contracts or take any other action
in respect of open Contracts acquired on the instruction of the Client,
and, in particular, (subject to sub-Clause 5(A) above) no failure of the
Client to pay Margin when demanded shall be taken to oblige MSI to close
out any relevant Contract to which such Margin is attributable.
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(T) Neither MSI nor any Connected Company shall be responsible to the Client
for the solvency, actions or omissions of any person with whom it or they
deal or transact business or who is appointed by MSI or any Connected
Company in good faith on the Client's behalf or for any loss, theft or
non-delivery of any of the Client's money and/or documents of title to
investments held by a third party, but MSI or such Connected Company, as
the case may be, will make available to the Client, when and to the
extent reasonably so requested, any rights that it may have against any
such person.
9. LONDON TRADED OPTIONS
(A) All Transactions in relation to London Traded Options will be carried out
by MSSL.
(B) The Client hereby confirms that it has received, read, understood,
completed and signed the Letter of Authority which has been supplied to
the Client by MSI in accordance with the requirements of The
International Stock Exchange.
(C) The Client shall make available to MSSL cover or collateral and/or Margin
securing written option contracts in such form and in such amounts and at
such times as shall be demanded by MSSL for deposit with or to the order
of LOCH.
(D) If the Client instructs MSSL to carry out a transaction in relation to
London Traded Options, then in relation to that transaction these Terms
and Conditions shall apply save that:
(1) the words "(and each matching a Client Contract)" and "(and with
respect to the corresponding Client Contract)" shall be deleted from
the definition of "close out" in sub-Clause (A).
(2) sub-Clauses 2(C)(1), (F), 3(H) and 4(I) shall not apply.
(3) in sub-Clauses 3(E)(2), (G), 4(A), 8(H)-(J), 8(M)-(O) references to
"Client Contract" shall be ignored; and
(4) in sub-Clauses 2(C)(2), (G), (H), 3(A)-(C), 3(E)(2), (F), 5(B), 8(D),
(E) and (G) references to "futures or option contracts" and "Client
Contracts" shall be construed as references to "Contracts" and
"corresponding" and "matching" shall be ignored.
(E) The Client hereby agrees to comply with the Rules and Regulations and
Permanent Notices of The International Stock Exchange from time to time
in force and authorises MSSL, in its absolute discretion, to act in
accordance therewith or as permitted thereunder.
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10. GOVERNING LAW
(A) This Agreement and all Client Contracts shall be subject to and construed
in accordance with English law. All disputes shall be subject to the
jurisdiction of the English courts, to which the Client hereby submits.
(B) It is hereby irrevocably agreed that any suit, action, claim or
proceeding (together in this sub-Clause referred to as "Proceedings")
arising out of or in connection with this Agreement or any Client
Contract may be brought in the English courts and any objection that
either MSI or the Client may have now or hereafter to the laying of the
venue of such Proceedings in any such court and any claim that any such
Proceedings have been brought in an inconvenient forum is hereby waived.
(C) To the extent that the Client may be entitled in any jurisdiction to
claim for itself or for its property or assets immunity in respect of its
obligations under this Agreement or any Client Contract from service of
process, jurisdiction, suit, judgment, execution, attachment (whether
before judgment, in aid of execution or otherwise) or legal process or to
the extent that in any such jurisdiction there may be attributed to the
Client or its property or assets such immunity (whether or not claimed),
the Client hereby waives such immunity to the fullest extent permitted by
the laws of such jurisdiction.
I/We hereby agree to the above Terms and Conditions which I/we have read and
understood.
Signed: /s/ Mark F. Dalton
-------------------
Name(s): Mark F. Dalton
--------------
Title: President, Second Management Company, Inc., General Partner
------------------------------------------------------------
Authorised signatory(ies)
for and on behalf of
Tudor Fund For Employees L.P.
- ----------------------------------
Name of Client
Date: 4/12/90
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CUSTOMER AGREEMENT
In consideration of E D F Man International Inc. (the "Company") carrying and
maintaining one or more accounts (the "Account") of the undersigned customer
("Customer"), as broker for the execution, clearance and/or carrying of
transactions for the purchase and sale of futures contracts, commodities,
forward contracts, options on futures contracts, forward contracts and
commodities and similar interests (collectively "Commodities"), the Customer
hereby agrees with the Company as follows:
(1) DEFINITIONS. As used in this Agreement, the following terms shall have the
meanings as indicated:
(a) "Affiliate" shall mean any corporation, partnership, or other organization
which controls, is controlled by, or is under common control with the
Company.
(b) "Exchange" shall mean any contract market, exchange, board of trade or other
market on or subject to the Rules of which transactions are effected under
this Agreement and their respective clearing associations.
(c) Regulations" shall mean any rule, regulation, ruling or order (including
any interpretations thereof) of the Commodity Futures Trading Commission
("CFTC") or any other governmental body (federal, state or local) having
jurisdiction.
(d) "Property" shall mean property of every kind and nature, real and personal,
including without limitation cash in any currency, securities, Commodities,
and any equity in any Account with the Company or any affiliate of the
Company.
(e) "Rules" shall mean any provision of the constitution, charter, by-laws,
rules, regulations, rulings, interpretations and resolutions, as well as any
custom, usage, practice or procedure, of any Exchange or any Self-Regulatory
Organization.
(f) "Self-Regulatory Organization" shall mean any commodity or securities self-
regulatory organization, including without limitation the National Futures
Association, the National Association of Securities Dealers, Inc. and the
Municipal Securities Rule making Board.
(2) APPLICABLE RULES. The Account and each transaction therein shall be subject
to this Agreement, all Regulations, and all Rules of the Exchange where executed
and any Self-Regulatory Organization, as any of the foregoing may be modified
from time to time. Customer agrees that the Company shall not be liable to
Customer for any action taken by the Company to comply with any Rules or
Regulations.
(3) RELATIONSHIP OF PARTIES. Unless the Company indicates otherwise, the
Company is acting solely as broker in any transactions made for the Customer.
The Company shall have no obligations other than to act in accordance with the
instructions of the Customer and to provide the Customer with any information
with respect to any position of the Customer (to the extent explicitly required
by law or by any applicable Rules or Regulations). The Company shall have no
obligation to effect any transaction or (except as directed by the Customer) to
close out any position in any Account.
(4) Trading Recommendations. Customer acknowledges that (a) any trading
recommendations and market or other information communicated to Customer by any
agent or employee of the Company or any affiliate of the Company does not
constitute an offer to sell or the solicitation of an offer to buy any financial
instrument, security, or Commodities; (b) any such recommendations and
information, although based upon information obtained from sources believed by
the Company to be reliable, may be incomplete, may not be verified and may be
changed without notice to Customer; (c) any such recommendations and information
will not serve as the primary basis for Customer's investment or trading
decisions; (d) the Company makes no representation, warranty or guarantee with
respect thereto or with respect to the tax consequences of Customer's
transactions; (e) the Company or one or more of its affiliates (including
employees, officers or directors of any thereof) may have positions in and may
buy or sell Commodities that are the subject of information or recommendations
furnished to Customer, and that the position or transactions of the Company or
any such affiliate may not be consistent with the information or recommendations
furnished to Customer; and (f) the Company has no responsibility for the
recommendation or action of any commodity trading advisor or other party in
connection with Customer's Accounts or any transaction therein, and Customer
retains full responsibility for all trading decisions with respect to such
Accounts.
<PAGE>
(5) COMMISSIONS and Fees. Customer shall pay such brokerage commission rates (at
the rates in effect at time of liquidation) and such other charges as the
Company and Customer shall agree from time to time (whether or not other
customers pay lower commissions or charges) and shall pay any costs or expenses
incurred in connection with transactions in any Account, including without
limitation any taxes, transaction fees, charges, fines, penalties or other
expenses imposed by any Exchange, Self-Regulatory Organization or govenmental
authority. Debit balances in any Account will be charged with interest at a rate
equal to the prime rate as quoted by Chemical Bank from time to time and shall
be paid in full by Customer on demand.
(6) MARGINS AND PREMIUMS. Customer shall at all times pay on demand and
continuously maintain original and variation margin for Customer's Accounts in
such form and amounts as may be required by the Company in its sole discretion,
which requirements may exceed those established by Exchange Rules or for other
clients and may be changed without prior notice to Customer. Once established,
these requirements may apply to existing as well as new positions. Customer
shall also promptly pay the premium required in connection with the purchase of
any options.
(7) SECURITY. (a) As security for the timely payment and performance in full of
all obligations of Customer to the Company or any affiliate of the Company
arising in connection with any Account or transaction effected under this
Agreement, Customer hereby pledges and assigns to the Company and grants the
Company a lien on and security interest in and right of setoff against any and
all of Customer's Property in any Account or otherwise in the custody or control
of the Company or any affiliate of the Company at any time for any purpose
(whether held as margin, for safekeeping or otherwise). Customer will take such
actions and execute and deliver such documents as the Company may reasonably
require from time to time to perfect the lien and security interest granted here
under.
(b) In the event that:
(i) Customer commences a voluntary case, or an involuntary case is commenced
against the Customer, under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect. or a receiver, liquidation,
trustee, custodian, sequestrator, or other similar official is appointed or
takes possession (before or after the commencement of any such voluntary or
involuntary case) of Customer or any of its property, or Customer is
insolvent, makes a general assignment for the benefit of creditors, or
fails generally to pay debts as they become due, or any similar event shall
occur;
(ii) Customer shall take any corporate or other action to effect a dissolution,
liquidation, reorganization, winding up of its affair or any similar event;
(iii) Customer shall fail or refuse to pay margin or any other sum as and when
due pursuant to this Agreement or shall breach or default in the
performance of any other obligation of Customer under this Agreement;
(iv) the Company determines, in its sole discretion, with or without regard to
market quotations, that any collateral or margins deposited with it to
secure any Account of the Customer is inadequate and Customer shall fail
to pay additional margin or deposit additional collateral upon demand by
Company; or
(v) an attachment is levied against any Account; then and in any such event,
the Company may at its election (but need not) take any one or more of the
following actions (in addition to any other rights or remedies the Company
may have at law, in equity, under this Agreement or otherwise):
(A) sell, exercise, offset or otherwise liquidate any or all securities or
Commodities in any Account;
(B) buy in, offset or otherwise liquidate any or all securities or Commodities
short in any Account;
(C) buy or sell securities or Commodities, or enter into and or liquidate
straddle or spread positions, in order to liquidate or reduce the risk
associated with carrying any securities or Commodities long or short in any
Account;
(D) cancel any outstanding orders, close out any or all outstanding contracts,
close any Account, sell, set off against or otherwise dispose of any
Property of Customer in any Account or in the custody or control of the
Company or any affiliate of the Company (whether held as margin or for
safekeeping or otherwise) and satisfy any obligation Customer may have to
it (either directly or by way of guarantee or sure tyship) out of any such
Property or the proceeds from the sale or other disposition thereof; and
<PAGE>
(E) exercise all rights and remedies of a secured party under the Uniform
Commercial Code and under other applicable law.
Any action referred to herein may be taken without (or following Any) demand for
margin or additional margin, without notice to Customer (or to the successors or
assigns of Customer) of sale or purchase or other notice or advertisement
(except such notice as nay be required by law) whether or not the ownership
interest shall be solely that of Customer or jointly with others (all and each
of which demands, advertisements and/or notices are hereby expressly Waived). In
all cases, a prior demand, call or notice of the time or lace of sale or
purchase shall not be considered a waiver of the company's right to sell or to
buy without demand, call or notice IS herein provided. Any purchase, sale,
offset or liquidation of securities, Commodities or other Property may be made
in any commercially reasonable manner according to the Company's judgment and in
its sole discretion either by direct sale or purchase in the same market and for
delivery in the same month, or in another market or another month, or by spread
or straddle transactions, and nay be made in its sole discretion on any Exchange
or other recognized market or elsewhere it deems appropriate. The Company will
not be liable for any losses incurred or any damages suffered y Customer in
taking any such action, whether or not any such loss or damage is occasioned by
negligence on its part or on the art of any person acting under its
instructions. In the event that the property held and applied by it pursuant to
this Agreement is insufficient for the payment in full of all liabilities of
Customer due to the Company, Customer shall remain liable for and shall promptly
pay the deficit upon demand, together with interest thereon and all costs of
collection (including legal fees and expenses).
(8) Making Delivery; Liquidation Instructions. Customer agrees
to give the Company timely notice immediately if Customer intends to make or
take delivery under a futures contract or to exercise an option contract. If so
requested by the Company, Customer shall satisfy the Company that Customer can
fulfill its obligations to make or take delivery and shall furnish the Company
with property deliverable by Customer under any contract in accordance with the
Company's directions. The Company shall not have any obligation to exercise any
long option contract unless Customer has furnished the Company with timely
exercise instructions and sufficient initial margin with respect to each
underlying futures contract. If the Company sells any property at Customer's
direction and Customer fails for any reason to supply the Company with such
property, the Company may (but shall not be obligated to) borrow or buy for
Customer any property necessary to make such delivery.
(9) Reports of Execution. Customer agrees that reports of execution of orders
sent by the Company to Customer shall be binding and conclusive on Customer
unless, in the case of an oral report, Customer objects at the time the report
is received by Customer or its agent; and in the case of a written report,
Customer objects prior to the opening of trading on the second business day
following the day Customer has received the report. In addition, if after
Customer has placed an order with the Company and has not received a written or
verbal confirmation thereof in accordance with the Company's practice, Customer
immediately shall notify the Company thereof. If Customer fails to notify the
Company as set forth in this section, Customer agrees that Customer conclusively
shall be deemed estopped to object and to have waived any objection to the
Company's execution or failure to execute any transaction. However, nothing
contained in this section shall bind either the Company or Customer with respect
to any transaction or price reported in error.
(10) Handling of Orders. The Company may use, in its sole discretion, such
equipment, methods and procedures in connection with the transmission, handling
and processing of orders from Customer as the Company may deem to be advisable.
The Company, for and on behalf of Customer, is authorized and directed in its
sole discretion to select floor brokers and, on markets where the Company is not
a clearing member, clearing brokers which will act as Customer's broker and
agent in the execution, clearing and/or carrying of transactions for Customer,
which brokers may be affiliates of the Company or may be non-affiliated agents,
and the Company shall be responsible only for using good faith and reasonable
care in the initial selection of such brokers. Unless the Company and Customer
have entered into a separate written agreement for "give-ups", the Company in
its sole discretion, may, but shall not be obligated to, accept from other
brokers contracts executed by such brokers on an Exchange for Customer and
proposed to be given-up to the Company for clearance and/or carrying in the
account.
(11) Communications; Recording AU reports of transactions, statements, notices
and other communications to Customer under this Agreement may be transmitted to
the address, telephone number, or telecopy number, specified by Customer, or to
such other address, telephone number or telecopy number, as the Customer may
thereafter specify by written notice. AU such reports, statements, notices and
other communications shall be deemed delivered when telephoned, or when
delivered in person, or when deposited in the United States mail, or when
received by a transmitting agent for telecopy or other electronic transmission,
whether or not actually received by Customer. Customer consents to the
electronic lecording of any or all telephone conversations with the Company
(without automatic tone warning devices), and the use of same in any action or
proceeding arising out of this Agreement.
<PAGE>
(12) Currency Exchange Rates If any transaction is effected in a foreign
currency, any profit or loss arising as a result of a fluctuation in the
exchange rate affecting such currency will be entirely for the account and risk
of Customer. AU margin deposits shall be made in United States currency, unless
the Company requests any such deposit in the currency of some other country, in
which case such deposit shall be made in such currency. When any position is
liquidated, the Company shall debit or credit the account of Customer in United
States currency at the rate of exchange determined by the Company in its sole
discretion on the basis of the then prevailing money rates for such foreign
currency, unless Customer shall have given the Company specific written
instructions to make such debit or credit in the foreign currency involved.
(13) Funds on Deposit in Non-US. Banking Institutions Funds of Customer trading
on United States contract markets may be held in accounts denominated in a
foreign currency with depositories located outside the United States or its
territories if Customer is domiciled in a foreign country or if the funds are
held in connection with contracts priced and settled in a foreign currency. Such
accounts are subject to the risk that events could occur which would hinder or
prevent the availability of these funds for distribution to Customer. Such
accounts may also be subject to foreign currency exchange rate risks.
Customer authorizes the deposit of funds into such foreign depositories. For
Customer domiciled in the United States, this authorization permits the holding
of funds in regulated accounts offshore only if such funds are used to margin,
guarantee, or secure positions in such contracts or accrue as a result of such
positions.
In order to avoid the possible dilution of other Customer funds, if Customer has
funds held outside the United States, Customer further agrees that its claims
based on such funds will be subordinated in the unlikely event both of the
following conditions are met (I) Customer's futures commission merchant is
placed in receivership or bankruptcy; and (2) there are insufficient funds
available for distribution denominated in the foreign currency as to which
Customer has a claim to satisfy all claims against those funds.
Customer agrees that if both of the conditions listed above occur, Customer's
claims against the Company's assets attributable to funds held overseas in a
particular foreign currency may be satisfied out of segregated customer funds
held in accounts denominated in dollars or other foreign currencies only after
each customer whose funds are held in dollars or in such other foreign
currencies receives its pro rata portion of such funds. It is further agreed
that in no event may Customer whose funds are held overseas receive more than
its pro-rata share of the aggregate pool consisting of funds held in dollars,
funds held in the particular foreign currency, and non-segregated assets of the
Company.
(14) Emergency Actbns In addition to any other rights and remedies the Company
may have under tbis Agreement, any Regulations or any Rules, the Company is
authorized to take such steps as it, in its sole discretion, considers necessary
or appropriate in the event any Exchange, Self-Regulatory Organization or
governmental authority orders emergency or other action, including without
limitation steps to liquidate securities Commodities or other Property carried
in an Account of the Customer or transferring any such securities, Commodities
or other Property of the Customer to another firm.
(15) Position Limits The Company at any time upon notice to customer in its sole
discretion may limit the number of positions which Customer may maintain or
acquire through the Company and may decline to accept any orders or exercise
notices, require that positions in Customer's Accounts be transferred to another
firm and liquidate any such positions not so transferred pon demand. Customer
agrees not to exceed any position limits established by the CFTC or any
Exchange, whether acting alone or with others, and to promptly advise the
Company if Customer is required to file any reports on positions.
(16) Customer Representation, Warranties and Agreements. Customer represents and
warrants to and agrees with the Company that:
(a) Customer has full power and authority to enter into this Agreement and to
engage in the transactions and perform its obligations hereunder and
contemplated hereby; the execution, delivery and performance of this
Agreement by Customer requires no action by or in respect of or filing with
any governmental body, agency or official and does not and will not violate
a Customer's charter or by-laws (or other comparable governing document) or
any law, rule, regulation, judgment, decree, order or agreement to which
Customer or its property is subject or bound; and Customer (i) if a
corporation, is duly organized under the laws of its jurisdiction of
incorporation or (ii) if a partnership, is duly organized pursuant to a
written partnership agreement and the general partner executing this
Agreement is duly authorized to do so under the partnership agreement;
(b) Neither Customer nor (if Customer is other than an individual) any partner,
director, officer or employee of Customer nor any affiliate of Customer is
a partner, officer, director, or employee of a futures commission merchant,
introducing
<PAGE>
broker, Exchange or Self-Regulatory Organization or an employee or
commissioner of the CFTC, except as previously disclosed in writing to the
Company;
(c) Except as disclosed in writing to the Company, (i) customer is not a
commodity trading advisor or a commodity pool operator or is exempt from
registration under the rules of the CFTC and (ii) Customer is acting solely
as principal and no one other than Customer has any interest in any Account
of Customer, and
(d) Customer has furnished true, complete and correct information concerning
the Account and its financial condition, shall advise the Company of any
material change in its financial condition and agrees that the Company may
cause an investigation to be made concerning its credit standing and
reputation;
(17) CFIC Regulations. Customer is aware that CFTC Regulation 1.35(a-2X2)
requires Customer to create, retain and produce upon the request of the CFTC,
the United States Department of Justice and the applicable exchange
documentation of cash transactions underlying exchanges of futures for cash
commodities or exchanges of futures in connection with cash commodity
transactions and, if Customer effects any such exchange of futures, it will
fully comply with Regulation 1.35(a-2X2). If Customer maintains separate
Accounts in which, pursuant to CFTC Rule I .46(d)(6), offsetting positions are
not closed out, Customer understands at, if held open, offsetting long and short
positions in the separate Accounts may result in the charging of additional
margins although offsetting positions will result in no additional market gain
or loss. If a foreign person, Customer acknowledges being informed by the
Company that (i) CFTC Regulation 15.05 designates a futures commission merchant
("FCM") such as the Company, as the agent of foreign brokers, customers of
foreign brokers, and foreign traders for certain purposes, and (ii) CFTC
Regulation 21.03 authorizes the CFTC to request, when unusual market
circumstances exist, certain account information from domestic FCM's as well as
foreign brokers and traders.
(18) Extraordinary Events. Customer Shall have no claim against the Company or
any of its Affiliates for any loss, damage, liability, cost, charge, expense,
penalty, fine or tax caused directly or indirectly by (a) any law, Regulation,
Rule or court order, (b) suspension or termination of trading, (c) war, civil or
labor disturbance, (d) delay or inaccuracy in the transmission or reporting of
orders due to a breakdown or failure of transmission or communication failities,
(e) failure or delay for any reason of any broker selected by the Company on
behalf of Customer to fulfill its obligations or to pay in full amounts owed to
the Company in respect to contracts, (f) failure or delay by any Exchange to
enforce its rules or to pay to the Company any margin due in respect of
customers account, (g) failure or delay by any entity which, consistent with
Regulations, is holding customer segregated funds, securities or other property,
to pay or deliver same to the Company or (h) any other causes beyond the
Company's control.
(19) Indemnification. Customer hereby agrees to pay, indemnify the Company, its
affiliates and their respective shareholders, directors, officers, employees and
agents against, and hold each of the foregoing harmless from, any liability,
cost or expense (including without limitation reasonable legal fees and
expenses, amounts paid in settlement of any claims, interest and any fines or
penalties imposed by any Exchange, Self-Regulatory Organization or governmental
agency) any of them may incur or be subjected to with respect to any Account of
Customer or any transaction or position therein, or as a result of any violation
by Customer of any of its obligations under this agreement Customer shall pay on
demand any cost of collection incurred in collecting any sums owing by Customer
under this Agreement and any cost incurred by any of the foregoing in
successfully defending against any claims asserted by Customer, in each case
including without limitation reasonable legal fees and expenses.
(20) Introducing Broker. Customer understands that a party who introduces a
customer to an FCM or who places orders on behalf of such customer may be deemed
to be the "agent" of that FCM and in such situation, as a matter of law, such
FCM may be liable to such customer for any acts and/or omissions of such party.
Customer expressly agrees to waive any and all claims, rights or causes of
action which Customer has or may have against the Company and its officers
employees and agents arising in whole or in part directly or indirectly, out of
any act or omission of such party.
(21) Automated Trading. The Company, on behalf of Customer, is authorized and
empowered to place orders through one or more elec- tronic automated trading
systems (each a "System") maintained or operated by an Exchange. In
consideration of the Company making one or more Systems, including without
limitation GLOBEX services, available, in whole or in part directly or
indirectly, to Customer, Customer agrees that neither the Company, any Exchange,
the Chicago Mercantile Exchange ("CME"), the Board of Trade of the City of
Chicago ("CBOT"), any other exchange whose products may be traded on the GLOBEX
System, the GLOBEX Joint Venture, L.P. ("JV"), P-M-T Limited Partnership, Ceres
Trading Limited Partnership, GLOBEX Corporation Reuters America Inc., nor any
other entities controlling, controlled by or under common control with such
entities, nor their respective directors, officers or employees, shall be liable
for any losses damages, costs or expenses (including, but not limited to, loss
of profits loss of use, incidental or consequential damages), regardless of the
cause, arising from any fault delay, omission, inaccuracy or termination of
services on any Systems or the inability to enter, alter, cancel or modify
orders, or any other cause in connection with the furnishing, performance,
<PAGE>
maintenance, or use of or capability to use all or any part of a system, the
GLOBEX System, or any JV, CME or CBOT facility or service and Customer agrees
not to assert any claims against any of there foregoing with respect thereto.
The provisions of this section shall apply regardless of whether Customer's
claim arises in contract negligence, tort strict liability, breach of fiduciary
obligation or otherwise.
(22) jurisdiction, Venue, Waiver of Jury Trial In any action or proceeding with
respect to this Agreement which is not subject to arbitration as provided in the
annexed Arbitration Agreement Customer hereby submits and agrees to the
jurisdiction and venue by the federal, state and local courts in the Borough of
Manhattan, City and State of New York, waives any and all objections to personal
jurisdiction and agrees that process may be served on Customer in any such
action or proceeding by United States registered mail directed to the Customer
at the address referred to in section 11 or in accordance with the provision of
any law or fees applicable to the court in which such action or proceedings is
brought with respect to service of process on non-residents. The Customer hereby
waives trial by jury in any such action or proceeding under this Agreement.
(23) Termination. This Agreement may be terminated by either party at any time
by written notice to the other, provided, however that any such termination
shall not affect any transactions theretofore entered into and shall not relieve
either party of any obligations in connection with any debit balance or credit
balance or other liability or obligation accruing prior to such termination.
(24) Miscellaneous. (a) No provisions in this Agreement shall in any respect be
waived or amended, except in writing signed by the party charged with such
waiver or amendment, or by written notice delivered by the Company to Customer.
If after such delivery Customer places an order or gives instructions with
respect to the account no waiver or amendment of this Agreement may be implied
from any course of dealing between the parties.
(b) This Agreement and the documents annexed hereto constitute the entire
agreement between the parties. Customer has not relied on any statements,
representations, or understandings not set forth therein.
(c) This Agreement shall be construed in accordance with the laws of the State
of New York without giving effect to principles of conflicts of law. If any term
or provision of this agreement or the application thereof to any person or
circumstance, shall be held invalid or unenforceable by any court Exchange,
Self-Regulatory Organization, arbitrator or arbitration panel, the remainder of
this Agreement, or the application of such Provision to other persons or
circumstances, shall not be affected thereby.
(d) This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, personal representatives, successors and
assigns. This Agreement shall be continuous and shall cover each and every
account which Customer may open or reopen with the Company and each and every
transaction effected or position carried by the Company with or for Customer.
(e) No waiver of any breach of or default under any provision of this
Agreement shall be deemed to constitute a waiver of a breach of or default under
any other provision of this Agreement or of any other breach of or default under
the same provision. Any failure on the Company's part to exercise any right
privilege or remedy under this Agreement or applicable laws, Regulations or the
Rules of any Exchange or Self-Regulatory Organization, and any waiver by the
Company of the exercise of any such right privilege or remedy at any time or
with respect to any event shall not constitute a waiver of its right to exercise
that or any other right privilege or remedy at any other time or with respect to
any other event and shall not give rise to any right privilege or remedy on the
part of Customer, it being understood that such rights, privileges and remedies
are for the Company's protection. Without limiting the generality of the
foregoing, it is understood that the Company's granting Customer an extension
of time to meet a demand for margin on any occasion or series of occasions shall
not entitle Customer to any other extensions of time with respect to any other
demands for margin on any other occasion.
CUSTOMER NAME: ______________________________________
SIGNATURE: ______________________________________
PRINT NAME TITLE: ______________________________________
DATE: ______________________________________
<PAGE>
CORPORATE COMMODITY CLIENT AGREEMENT
In consideration of your accepting its account and your agreement to act as its
broker and/or dealer, the Undersigned Corporation agrees to the following
with respect to any of its accounts with Lehman Brothers Inc. ("LB" or "Lehman")
for the purchase and sale of commodities, contracts for the future delivery
thereof, commodity options and forward commodity and foreign exchange contracts:
1. All transactions for its accounts shall be subject to the regulations of all
applicable federal, state and self-regulatory agencies, domestic and foreign,
including but not limited to the exchanges and the constitution, rules and
customs, as the same may be constituted from time to time, of the exchange or
market (and their clearing associations, if any) where executed. Actual
deliveries are intended on all transactions. This paragraph is solely for your
protection and your failure to comply with any such constitutions, regulations,
rules and/or customs shall not be a breach of this agreement and shall not
relieve the Corporation of any of its obligations under this agreement. The
Corporation also agrees not to exceed any applicable position limits set by any
government agency as well as limits established by any foreign or domestic
exchanges and boards of trade (hereinafter "exchanges") for its own account,
acting alone or in concert with others, and to promptly advise LB if it is
required to file reports of its commodity positions with the Commodity Futures
Trading Commission (CFTC) or any exchange. The Corporation represents that it is
the sole owner of its accounts and that no person other than you has any
interest therein. The Corporation agrees to notify you of the identity of any
other person who controls the trading of the account, has a financial interest
of 10% or more in the account or the identity of any other account in which the
Corporation has a 10% ownership interest. The Corporation shall maintain its
accounts in accordance with and shall be solely responsible for compliance with
the rules, regulations and/or guidelines issued by any federal, state or
administrative bodies having oversight or regulatory authority over its
activities, and any statutes governing its activities.
2. The word "property" herein means securities of all kinds, monies, options,
commodities, and contracts for the future delivery of, or otherwise relating to,
commodities or securities and all property, including, but not limited to,
property customarily dealt in by brokerage firms.
3. The Corporation understands that you have, at your discretion, the right to
limit positions in its accounts, to decline to accept any orders and to require
that its accounts be transferred to another firm or be closed. The Corporation
understands that if it does not promptly transfer its positions upon your demand
you have the right to liquidate positions in its accounts at your discretion.
The Corporation understands that you act as agent and not as principal for your
customers' commodity futures and commodity options transactions which are
effected on exchanges. Consequently, you do not guarantee the performance of the
obligations of any party to the futures or options contracts purchased and/or
sold by your customers. The Corporation understands you may, and generally do
act as principal in cash, forward and foreign commodity transactions.
4. Any property belonging to the Corporation or in which it has an interest held
by you or any of your subsidiaries or affiliates or carried in any account shall
be subject to a general lien and security interest for the discharge of its
obligations to you, wherever or however arising and without regard to whether or
not you have made advances with respect to such property, and you are hereby
authorized to sell and/or purchase any and all such property without notice to
satisfy such general lien and security interest. The Corporation irrevocably
appoints you as its attorney-in-fact with power of substitution to execute any
documents for the perfection or registration of such general lien and security
interest.
5. The Corporation agrees to maintain such collateral and/or margin as you may
from time to time in your discretion require and to pay immediately on demand
any amount owing with respect to any of its accounts. Against a "short" position
in any commodity contract, prior to the maturity thereof, the Corporation will
give you instructions to cover or furnish you with all necessary delivery
documents, and in default thereof, you may, without demand or notice, cover the
liability in the manner deemed most appropriate by you, or if an order to buy in
such contracts cannot, or should not in your sole judgment, be executed under
prevailing conditions, you may procure the actual commodity and either make
delivery thereof upon any terms or take any other action you deem appropriate.
If it fails to remit delivery documents in a timely manner, the Corporation also
understands that it will be responsible for substantial penalties and late
charges which may be assessed against you or it pursuant to the rules of the
particular exchange.
In the event the Corporation fails to deposit sufficient funds to pay for any
commodities, commodity options, commodity futures contracts, forward commodity
and foreign exchange contracts and/or to satisfy any demands for original and/or
variation margin, or whenever in your discretion you consider it necessary, you
may, without prior demand or notice, when and if you deem appropriate
notwithstanding any rule of any exchange, liquidate the positions in its
account, hedge and/or offset those positions in the cash or other market or
otherwise, sell any property belonging to the Corporation or in which it has an
interest, cancel any open orders for the purchase and sale of any property, and
you may borrow or buy any property required to make delivery against any sales,
including a short sale, effected for it, all at its sole risk. Such sale or
purchase may be public or private and may be made without advertising or notice
to the Corporation and in such manner as you may in your discretion determine,
and no demands, tenders or notices which you make or give shall invalidate its
aforesaid waiver. At any such sale you may purchase the property free of any
right of redemption aNd the Corporation agrees not to make any claim against
you concerning the manner of sale or timing thereof. The proceeds of such
transactions are to be applied to reduce any indebtedness owing to you.
The Corporation acknowledges that it shall be liable for all losses whether or
not the account is liquidated and for any debts and deficiencies in its accounts
including all debts and deficiencies resulting from a liquidation of its
account.
6. The Corporation agrees to pay storage and delivery charges and service fees
charged to its accounts. The Corporation also agrees to pay interest charges
upon its accounts at the prevailing and/or allowable rates according to the laws
of the State of New York, as determined by you at the time of the acceptance of
this agreement in your New York office and thereafter for any advances, loans,
debts, as well as on the amount of variation margin calls until the satisfaction
of such calls where the account uses U.S. Treasury bills for original margin
purposes. The Corporation understands you retain as your own any interest,
increment, profit, gain or benefit, direct or indirect, resulting from or
relating to the investment of funds held in commodity customer segregated
accounts, non-regulated accounts, and foreign futures and foreign options
secured amount accounts.
The Corporation understands that you charge commissions for execution of
transactions which commissions are charged upon each transaction except for
commodity futures transactions, for which commissions are generally charged upon
liquidation. Commission rates shall be those prevailing at the time commissions
are charged. Commission rates may be changed from time to time without notice to
the Corporation and it agrees to be bound thereby.
7. This agreement shall be binding upon the Corporation, its successors and
assigns and in the event of dissolution, liquidation, bankruptcy or any similar
act, you may cancel or complete any open orders for the purchase
1
<PAGE>
or sale of any property; you may place orders for the sale of property which
you may be carrying for it and for which payment has not been made; or buy any
property of which its accounts may be short, or any part thereof, under the same
terms and conditions as hereinabove stated, as though the Corporation was still
in existence, without prior notice to its successors and assigns, and without
prior demand upon any of them.
8. Written confirmation of actual transactions and/or orders, purchase and sales
notices, correction notices and statements of its accounts shall be conclusive
if not objected to in writing within seven days after mailing by you to the
Corporation. In the event the Corporation fails to receive any such
confirmations or notices for its account within ten days from the date of a
transaction in its account, the Corporation agrees to notify you immediately in
writing. Communications mailed to it at the address specified hereon shall,
until you have received notice in writing of a different address, be deemed to
have been personally delivered to it and the undersigned agrees to waive all
claims resulting from failure to receive such communications.
9. The Corporation understands that you are not responsible for any losses
resulting directly or indirectly from any government restriction, exchange
ruling, suspension of trading, actions of independent floor brokers or other
persons beyond your control, war, strike, national disaster or computer hardware
or software malfunction, delay in mails or any other delay or inaccuracy in the
transmission of orders or other information because of a breakdown or failure of
transmission or communication facilities. Commodity information, all price
quotations or trade reports given to it are also subject to change and errors as
well as delays in reporting and the Corporation acknowledges that reliance upon
such information is at its own risk. The Corporation understands that it is
bound to the actual executions of transactions on the exchanges and that you are
not bound by erroneous reports of executions, prices or quantities transmitted
to it.
10. The Corporation understands that you may act as a dealer or broker in the
purchase and sale of gold and silver bullion and other precious and non-ferrous
metals ("metals"), and that you will inform the Corporation of the capacity in
which you are acting on any particular transaction upon its request. If you act
as broker, the Corporation understands that you do not warrant the authenticity
of metals.
In the event the Corporation asks you to store metals rather than to carry them
on an unallocated basis it understands that its metals will be placed in a
depository selected by you and may be commingled with your own metals and those
of other customers. All taxes, postage, shipping, insurance expenses and storage
fees will be the Corporation's responsibility. The Corporation agrees to
promptly pay for the metals purchased and promptly ship conforming metals sold
pursuant to instructions from you.
11. The Corporation acknowledges that you are hereby specifically authorized,
for your account and benefit, from time to time and without notice to it, either
separately or with others, to lend, pledge, repledge, hypothecate or
rehypothecate, either to yourself or to others, any and all property (including
but not limited to metals, warehouse receipts, securities or other negotiable
instruments) held by you in any of its accounts and you shall not at any time be
required to deliver to it such identical property but may fulfill your
obligations by delivery of property of the same kind and amount.
12. If the Corporation initiates a commodity contract on an exchange where such
transaction is effected in a currency other than U.S. dollars, any profit or
loss from a fluctuation in the exchange rate of such currency will be for its
account and risk. Unless the Corporation gives you contrary written instructions
you will debit and credit its account, after such a contract is liquidated, in
U.S. dollars at an exchange rate determined by you in your discretion based on
prevailing money markets. It agrees to make all margin deposits in U.S. dollars
unless you in your discretion require otherwise. Unless the Corporation
instructs you otherwise, monies it deposits with you in currency other than U.S.
dollars and unrealized profits in currencies other than U.S. dollars, are not
intended to margin, guarantee or secure transactions on United States contract
markets.
13. If a provision herein is or becomes inconsistent with any law or regulation
of any government or a regulatory body having jurisdiction, the provision shall
be deemed to be rescinded or modified in accordance with any such law or
regulation. In all other respects, this agreement shall continue and remain in
full force and effect.
Your failure to insist at any time upon strict compliance with this agreement or
with any of its terms or any continued course of such conduct on your part shall
not constitute or be a waiver by you of any of your rights.
14. If the Corporation's account has been introduced to you and is carried by
you only as a clearing broker, the Corporation agrees that you are not
responsible for the conduct of the introducing broker and your sole
responsibilities relate to the execution, clearing and bookkeeping of
transactions in the account.
15. This agreement is governed by the laws of the State of New York without
reference to the conflicts of law provisions thereof. The Corporation agrees
that you may, in your sole discretion, initiate proceedings in the courts of any
jurisdiction in which the Corporation is resident or in which its assets are
situated. In any legal action pemmitted by or against the Corporation, the
Corporation agrees that the United States courts sitting in the State of New
York shall have jurisdiction over it, and that the venue of any such action
shall be the Southern District of New York. The Corporation hereby waives any
objection to such jurisdiction and venue.
16. Any modifications of this agreement must be in writing and accepted by an
authorized officer of LB in writing and no other employee of LB is authorized to
make any representations contrary to the terms of this agreement.
17. CFTC REG. (S)15.05 - DESIGNATION OF LB AS AGENT OF REIGN BROKERS, CUSTOMERS
OF HREIGN BROKERS AND REIGN TRADERS; AND REG. (S)21.03 SELECTED SPECIAL CALLS -
DUTIES OF HREIGN BROKERS, DOMESTIC AND FOREIGN TRADERS, FUTURES COMMISSION
MERCHANTS AND CONTRACT MARKETS.
If the Corporation is a foreign trader or foreign broker it understands that
pursuant to CFTC Regulation 15.05, you are its agent (and in the case of a
foreign broker the agent of its customers) for purposes of accepting delivery
and service of any communications issued by the CFTC with respect to any futures
or options contracts which are or have been maintained in accounts carried
byyou. Service or delivery of any such communication shall constitute valid and
effective service or delivery upon the Corporation (and if it is a foreign
broker, upon its customers). The Corporation understands that said regulation
requires you to transmit the communication promptly to it (or its customer) in a
manner which is reasonable under the circumstances or specified by the CFTC. The
Corporation also understands CFTC Regulation 21.03 requires it to provide to the
CFTC upon special call, market information concerning its options and futures
trading (or its customers') as outlined in the regulation. If the Corporation
fails to respond to the special call, the CFTC may direct the appropriate
contract market and all brokers to prohibit further trades for or on its behalf
(or for its customers) in the contract specified in the call unless such trades
offset existing open contracts. Special calls are made where the information
requested would assist the CFTC in determining whether a threat of market
manipulation, corner, squeeze or other market disorder existed. Under Regulation
21.03(9) if the Corporation believes it is aggrieved by the action taken by the
CFTC it shall have the opportunity for a prompt hearing after the Commission
acts. (The Corporation understands that copies of Reg. (S)15.05 and (S)21.03 are
available from any LB Investment Representative.)
<PAGE>
Acknowledgement of Separate Risk Disclosure Statement and Corporate Commodity
Client Agreement
[ ] BY CHECKING THIS BOX, THE CORPORATION HEREBY ACKNOWLEDGES THAT IT HAS
RECEIVED A SEPARATE RISK DISCLOSURE STATEMENT REQUIRED BY CFTC REGULATION
(S)1.55 PRIOR TO THE OPENING OF THIS ACCOUNT AND UNDERSTANDS IT.
THE CORPORATION AREES TO THE TERMS AND CONDITIONS OF THE "COMMODITY CLIENT
AGREEMENT" AND AUTHORIZES YOU TO OPEN A COMMODITY ACCOUNT IN THE NAME OF SAID
CORPORATION.
Date:_____________________ Signature:________________________________________
Address:_________________________________ Title/Position_____________________
<PAGE>
-----------------
LISTED DERIVATIVES GROUP
FUTURES CUSTOMER AGREEMENT
This Futures Customer Agreement ("Agreement") between CS First Boston and the
customer named below ("Customer") shall govern the purchase and sale by, CS
First Boston of futures contracts and options thereon (collectively,
"Contracts") for the account and risk of Customer through one or more accounts
carried by CS First Boston on behalf and in the name of Customer (collectively,
the "Account").
1. APPLICABLE LAW.
The Account and all transactions and agreements in respect of the Account shall
be subject to all applicable Federal, state, exchange, clearing house and self-
regulatory agency, rules, regulations and interpretations and custom and usage
of the trade. All such rules, regulations, interpretations, custom and usage are
hereinafter collectively referred to as "Applicable Law." (Please refer to
Section 8, paragraph (h) of this Agreement.) Provisions contained in and
remedies provided by this Agreement which are additional to or more expansive
than any provisions contained in or remedies provided by any other agreement
with customer (including, without limitation, provisions or remedies that cover
the same subject matter) shall not be deemed to be in conflict with each other,
and all such provisions and remedies shall be applicable and available.
2. CUSTOMER'S REPRESENTATIONS AND WARRANTIES.
Customer represents and warrants that (a) Customer has full right, power and
authority, to enter into this Agreement, and the person executing this Agreement
on behalf of Customer is authorized to do so; (b) this Agreement is binding on
Customer and enforceable against Customer in accordance with its terms; (c)
Customer may, lawfully establish and open the Account for the purpose of
effecting purchases and sales of Contracts through CS First Boston; (d) Customer
has determined that trading in futures contracts is appropriate for customer, is
prudent in all respects and transactions entered into pursuant to this Agreement
will not violate any applicable law (including any Applicable Law) to which
Customer is subject or any agreement to which Customer is subject or a party;
(e) all information provided by Customer in the Account Application preceding
this Agreement (which Application and the information contained therein hereby
is incorporated into this Agreement) is true and correct and Customer shall
immediately (and in no event later than within one business day) notify CS
First Boston of any change in such information; (f) Customer understands that CS
First Boston acts as agent, and not as principal, in the execution of futures
contracts; (g) except as disclosed in writing to CS First Boston, Customer is
acting solely as principal and not as agent for any other party and no other
customer has any interest in Customer's Account; (h) any trading recommendations
and market or other information communicated to Customer by CS First Boston,
although based upon information obtained from sources believed by CS First
Boston to be reliable, may be incomplete, may not be verified, may be changed
without notice to Customer, and CS First Boston makes no representation,
warranty or guarantee as to the accuracy or completeness of any such information
or recommendation; and (i) Customer expressly, agrees to waive any and all
claims, rights or causes of action which Customer has or may have against CS
First Boston and its officers, employees and/or agents arising in whole or in
part, directly or indirectly, out of any act or ommission of a party who refers
or introduces Customer to CS First Boston or who places orders on behalf of
Customer.
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[LOGO] CS FIRST BOSTON GLOBAL CLEARING ACROSS MARKETS
<PAGE>
-----------------
LISTED DERIVATIVES GROUP
3. PAYMENT OBLIGATIONS OF CUSTOMER.
Customer shall immediately pay CS First Boston upon demand (a) all brokerage
charges, giveup fees, commissions and service fees as CS First Boston may from
time to time charge; (b) all contract market, clearing house, NFA or clearing
member fees or charges or any other regulatory fees and service charges incurred
with respect to each transaction; (c) any tax imposed on such transactions by
any competent taxing authority; (d) the amount of any trading losses in the
Account; (e) any debit balance or deficiency in the Account; (f) any advances
made by CS First Boston to or for the benefit of Customer, (g) any obligation of
Customer to CS First Boston incurred in respect of a trade executed in
connection herewith, (h) interest on any debit balances or deficiencies in the
Account, at the overnight rate customarily charged by CS First Boston, together
with costs and reasonable attorneys' fees incurred in collecting any such debit
balance or deficiency; and (i) any other amounts owed by Customer to CS First
Boston with respect to the Account or any transactions therein.
4. CUSTOMER'S EVENTS OF DEFAULT: CS FIRST BOSTON'S REMEDIES.
(a) Events of Default. As used herein, each of the following shall be deemed an
"Event of Default": (i) the commencement of a case under any Federal or
state bankruptcy, insolvency or reorganization law or other law for the
protection of creditors, or the filing of a petition for the appointment of
a receiver, liquidator, trustee, conservator, or custodian by or against
Customer, an assignment made by Customer for the benefit of creditors, an
admission in writing by Customer that it is insolvent or is unable to pay
its debts when they mature, or the suspension by the Customer of its usual
business or anv material portion thereof; (ii) the issuance of any warrant
or order of attachment against the Account or the levy of a judgment against
the Account; (iii) any representation or warrant, made by Customer was
incorrect or untrue in any material respect when made or repeated or deemed
to have been made or repeated, (iv) if Customer states that it will not
perform any obligation to CS First Boston under this Agreement or in
connection with any trades executed by CS First Boston on Customer's behalf,
(v) if CS First Boston believes that it may be unable to apply, without
delay property that it is holding or expects to receive from Customer
against any obligations to CS First Boston under this Agreement or in
connection with any trades executed by CS First Boston on Customer's behalf,
(vi) if Customer fails upon demand by CS First Boston to satisfy any debit
balance in its account that remains outstanding for one business day or
more, (vii) if Customer is an individual, Customer dies or is judicially
declared incompetent, (viii) if Customer is an employee benefit plan, the
termination of Customer or the filing by Customer of a notice of intent to
terminate with a governmental agency or body, or the receipt of a notice
of intent to terminate Customer from a governmental agency or body, or the
inability of Customer to pay benefits under the relevant employee benefit
plan when due; (ix) the failure by Customer to deposit or maintain margins
as required by CS First Boston with or without a prior demand for such
margin by CS First Boston, to pay required premiums, or to make payments
upon demand as required by Section 3 hereof; or (x) the failure by Customer
to perform, in any material respect, its obligations hereunder.
(b) Remedies. Upon the occurrence of an Event of Default, or in the event
Customer fails to honor a margin request within one business day, or as
short a period of time as CS First Boston shall advise Client, of the
request being made, or in the event CS First Boston, in its sole and
absolute discretion, considers it necessary for its protection, CS First
Boston shall have the right, in addition to any other remedy available to CS
First Boston at law or in equity, and in addition to any other action CS
First Boston may deem appropriate under the
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Listed Derivatives Group
circumstances, to cancel or liquidate at any time deemed appropriate by CS First
Boston any or all open Contracts held in or for the Account, sell any or all of
the securities or other property of Customer held by CS First Boston whether or
not the ownership interest shall be solely Customer's or held jointly with
others and to apply the proceeds thereof to any amounts owed by Customer to CS
First Boston, borrow or buy any options, securities, Contracts or other property
for the Account and immediately cancel any unfilled orders for the purchase or
sale of Contracts for the Account, or take such other or further actions CS
First Boston, in its reasonable discretion, deems necessary or appropriate for
its protection, all without demand for margin and without notice or
advertisement. Any such action may be made at the discretion of CS First
Boston. All purchases or sales pursuant to this Section 4 may be effected in
public or private purchases in whatever manner and with whichever party CS First
Boston deems appropriate and at such price(s) as CS First Boston may deem
satisfactory. In the event CS First Boston's position would not be jeopardized
thereby, CS First Boston will make reasonable efforts under the circumstances to
notify Customer prior to taking any such action, except that Customer agrees
that CS First Boston or the failure to previously enforce any provision of this
Agreement shall have the right to take any, and all action pursuant to this
Section 4 without any notice of default, demand for margin or additional margin,
notice to Customer of sale or purchase, or other notice or advertisement. A
prior demand or margin call of any kind from CS First Boston or prior notice
from CS First Boston or the failure to previously enforce anv provision of this
Agreement shall not be considered a waiver of CS First Boston's right to take
any, action as described herein without notice or demand. In the event CS First
Boston exercises and, remedies available to it under this Agreement, Customer
shall reimburse, compensate, indentify, defend and hold harmless CS First
Boston for any and all costs, losses, penalties, fines, taxes and damages that
CS First Boston may incur, including reasonable attorneys, fees incurred in
connection with the exercise of its remedies and the recovery of any such costs,
losses, penalties, fines, taxes and damages.
5. LIMITATION OF LIABILITY.
CS First Boston shall have no responsibility or liability to Customer hereunder
(i) in connection with the performance or non-performance by any contract
market, clearing house, clearing firm or other third party (including floor
brokers and banks) to CS First Boston of its obligations in respect of any
Contract or other property of Customer, in particular CS First Boston shall not
be liable to Customer if any such third party makes an error in filling orders
or fails to fill an order for Customer; (ii) as a result of any prediction,
recommendation or advice made or given by a representative of CS First Boston
whether or not made or given at the request of Customer; (iii) as a result of CS
First Boston's reliance on any instructions, notices and con-Lmunications that
it believes to be that of an individual authorized to act on behalf of Customer;
(iv) as a result of any delay in the performance or non-performance of any of CS
First Boston's obligations hereunder directly or indirectly caused by the
occurrence of any contingency beyond the control of CS First Boston including,
but not limited to, the unscheduled closure of an exchange or contract market or
delays in the transmission of orders due to breakdowns or failures of
transmission or communication facilities, execution, and/or trading facilities
or other systems (including, without limitation, GLOBEX, ACCESS, or other
electronic trading systems, facilities or services), it being understood that CS
First Boston shall be excused from performance of its obligations hereunder for
such period of time as is reasonably necessary after such occurrence to remedy
the effects therefrom; (v) as a result of any action taken by CS First Boston or
its floor brokers to comply with Applicable law; (vi) as a result of any actions
taken by CS First Boston in connection with the exercise of the available
remedies pursuant to Section 4; or (vii) for any acts or omissions of those
neither employed nor supervised by CS First Boston. CS First Boston shall
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LISTED DERIVATIVES GROUP
not be responsible for any loss, liability, damage or expense except to the
extent that such loss, liability, damage or expense arises from its gross
negligence or willful misconduct. In no event will CS First Boston be liable to
Customer for consequential, incidental or special damages hereunder.
6. GENERAL AGREEMENTS. The parties agree that:
(a) CS FIRST BOSTON'S RESPONSIBILITY. CS First Boston is not acting as a
fiduciary, foundation manager, commodity pool operator, commodity trading
advisor or investment advisor in respect of any Account opened by Customer.
CS First Boston shall have no responsibility hereunder for compliance with
any law or regulation governing the conduct of fiduciaries, foundation
managers, commodity pool operators, commodity trading advisors or
investment advisors.
(b) ADVICE. All advice or market information communicated by CS First Boston
with respect to any Account opened by Customer hereunder is incidental to
the conduct of CS First Boston's business as a futures commission
merchant and such advice or information does not constitute an offer to buy
or sell or the solicitation of an offer to buy or sell any contract and
will not serve as the primary basis for any decision by or on behalf of
Customer. CS First Boston shall have no discretionary authority, power or
control over any decisions made by or on behalf of Customer in respect of
the Account, regardless of whether Customer relies on the advice of CS
First Boston in making any such decision. Customer acknowledges that CS
First Boston and its managing directors, officers, employees and affiliates
may take or hold positions in, or advise other customers concerning,
contracts that are the subject of advice from CS First Boston to Customer.
The positions and advice of CS First Boston and its managing directors,
officers, employees and affiliates may be inconsistent with or contrary to
positions of, and the advice given by, CS First Boston to Customer.
(c) RECORDING. CS First Boston, in its sole and absolute discretion, may
record, on tape or otherwise, any telephone conversation between CS First
Boston and Customer involving their respective officers, agents and
employees, and Customer hereby agrees and consents thereto.
(d) ACCEPTANCE OF Orders; POSITION LIMITS.
(i) CS First Boston shall have the right, whenever in its discretion it
deems such action necessary or desirable, to limit the size of open
positions (net or gross) of Customer with respect to the Account at
any time and to refuse acceptance of orders to establish new
positions, whether such refusal, reduction or limitation is required
by, or based on position limits imposed under, Applicable Law. CS
First Boston shall immediately notify Customer of its rejection of any
order. Unless specified by Customer, CS First Boston may designate the
exchange or other markets (including, without limitation, GLOBEX or
ACCESS) on which it will attempt to execute orders to notify CS First
Boston promptly if Customer is required to file such reports, and
(ii) Customer shall comply with all position limit rules and shall file or
cause to be filed all applications or reports required under
Applicable Law with the CFTC or the relevant contract market or
clearing house, and shall provide CS First Boston with a copy of such
applications or reports and such other information as CS First Boston
may reasonably request in connection therewith.
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LISTED DERIVATIVES GROUP
(e) ORIGINAL AND VARIATION MARGIN; PREMIUMS; OTHER CONTRACT Obligations.
Customer shall make, or cause to be made, all applicable original margin,
variation margin, intra-day margin, additional margin and premium payments,
and perform all other obligations attendant to transactions or positions in
such Contracts, as may be required by Applicable Law or by CS First Boston,
in its sole discretion. Requests for margin deposits and/or premium payments
may, at CS First Boston's election, be communicated to Customer orally,
telephonically or in writing. Customer margin deposits and/or premium
payments shall be made by wire transfer to CS First Boston's Customer
Segregated Account and shall be in U.S. dollars unless CS First Boston
specifically requests otherwise. Any outstanding debit balances in the
Customer Accounts shall accrue interest, in accordance with CS First
Boston's usual custom, at a rate permitted by the laws of the State of New
York. Any such interest unpaid at the end of a charge period (such period
being determined by CS First Boston from time to time in its sole
discretion) will be added automatically to the opening balance in such
Customer Accounts for the next charge period.
(f) SECURITY INTEREST AND RIGHTS RESPECTING COLLATERAL. Except to the extent
proscribed by Applicable Law not subject to waiver, all Contracts, cash,
securities, and/or any other property of Customer (either individually or
jointly held with others) whatsoever (collectively, the "Collateral") at any
time held by CS First Boston or its affiliates, or carried by others for the
Account, hereby are pledged to CS First Boston and shall be subject to a
general lien and security interest in CS First Boston's favor to secure any,
indebtedness or other amounts, obligations and/or liabilities at any time
owing from Customer to CS First Boston (collectively, the "Customer's
Liabilities"). Customer hereby grants CS First Boston the right to borrow,
pledge, repledge, hypothecate, rehypothecate, loan or invest any of the
Collateral, including utilizing the Collateral to purchase United States
Government Treasury obligations pursuant to repurchase agreements or reverse
repurchase agreements with any party, in each case without notice to
Customer, and without any obligation to pay or to account to Customer for
any interest, income or benefit that may, be derived therefrom. The rights
of CS First Boston set forth above shall be qualified by any applicable
requirements for segregation of customers'property under Applicable Law.
(g) REPORTS AND Objections. All confirmations, (purchase and sale notices,
correction notices) and account statements (collectively, "Statements")
shall be submitted to Customer and shall be conclusive and binding on
Customer unless Customer notifies CS First Boston of any objection thereto
prior to the opening of trading on the contract market on which such
transaction occurred on the business day following the day on which Customer
receives such Statement; provided, that with respect to monthly Statements,
Customer may notify CS First Boston of any objection thereto within ten
business days after receipt of such monthly Statement, provided the
objection could not have been raised at the time any prior Statement was
received by Customer as provided for above. Any such notice of objection, if
given orally to CS First Boston, shall immediately (and no later than within
one business day) be confirmed in writing by Customer.
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LISTED DERIVATIVES GROUP
(h) DELIVERY PROCEDURES; OPTIONS ALLOCATION PROCEDURES.
(i) CS First Boston shall liquidate any Contract for which an offsetting
order is entered by Customer, unless Customer instructs CS First
Boston not to liquidate such Contract and to maintain the offsetting
Contracts as open positions, provided, that CS FIRST Boston shall not
be obligated to comply with any such instructions given by Customer if
Customer fails to provide CS First Boston with any representations,
documentation or information reasonably requested by CS First Boston
or if, in CS First Boston's reasonable judgment, any failure to
liquidate such offsetting Contracts against each other would result in
a violation of applicable laws.
(ii) Customer will provide CS First Boston with instructions either to
liquidate Contracts previously established by Customer, make or take
delivery under any such Contracts, or exercise options entered into by
Customer, within such time limits as may be specified by CS First
Boston. CS First Boston shall have no responsibility to take any
action on behalf of Customer or positions in the Account unless and
until CS First Boston receives oral or written instructions reasonably
acceptable to CS First Boston indicating the action CS First Boston is
to take, except that CS First Boston may liquidate any or all
Contracts when authorized or required by the exchange or contract
market on which such Contracts were executed. Funds sufficient to take
delivery pursuant to such Contract or deliverable grade commodities to
make delivery pursuant to such Contract must be delivered to CS First
Boston at such time as CS First Boston may require in connection with
any delivery. CS FIRST BOSTON IS SPECIFICALLY AUTHORIZED TO TRANSFER
TO CUSTOMER'S CASH ACCOUNT ON THE SETTLEMENT DAY FOLLOWING A PURCHASE
MADE IN THAT ACCOUNT, EXCESS FUNDS AVAILABLE IN ANY OF CUSTOMER'S
OTHER ACCOUNTS, INCLUDING BUT NOT LIMITED TO ANY FREE BALANCE IN ANY
MARGIN ACCOUNT OR IN ANY NON-REGULATED FUTURES ACCOUNT, SUFFICIENT TO
MAKE FULL PAYMENT OF THIS CASH PURCHASE. CUSTOMER AGREES THAT ANY
DEBIT OCCURRING IN ANY OF CUSTOMER'S ACCOUNTS MAY BE TRANSFERRED BY CS
FIRST BOSTON, AT ITS OPTION, TO CUSTOMER'S MARGIN ACCOUNT.
(iii)Customer shall have sole responsibility to exercise in a proper and
timely manner any right, privilege or obligation of every option in a
Customer Account. Failure to do so could result in substantial loss to
Customer. CS First Boston shall not have any obligation to exercise
any long option contracts unless Customer has furnished CS First
Boston with timely exercise instructions and sufficient initial margin
with respect to each underlying futures contract. CS First Boston
shall not be obligated, except within a reasonable period of time
following receipt of Customer's instruction, to close out any
positions in any Customer Account.
(iv) Short option Contracts may be subject to exercise at any time.
Exercise notices received by CS First Boston from the applicable
contract market with respect to option Contracts sold by Customer may
be allocated to Customer pursuant to a random allocation procedure,
and Customer shall be bound by any such allocation of exercise
notices. In the event of any allocation to Customer, unless CS First
Boston has previously received instructions from Customer, CS First
Boston's sole responsibility shall be to use its best efforts to
notify Customer of such allocation.
(v) If Customer fails to comply with any of the foregoing obligations and
Customer is required to make delivery of any security, commodity or
other property and is unable to deliver same, CS First Boston may, in
its sole and absolute discretion, liquidate any open positions, make
or receive delivery of any commodities, securities or other property,
or exercise or allow the expiration of any options, in
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LISTED DERIVATIVES GROUP
such manner and on such terms as CS First Boston, in its sole and
absolute discretion, deems necessary or appropriate, and Customer shall
indemnify and hold CS First Boston harmless as a result of any action
taken or not taken by CS First Boston in connection therewith or
pursuant to Customer's instructions.
(i) FINANCIAL AND OTHER INFORMATION. Customer shall provide to CS First
Boston such financial information regarding Customer as CS First Boston
may from time to time reasonably request to determine Customer's
financial condition and Customer's ability to perform its obligations
under this Agreement or in connection with any Contracts executed by CS
First Boston on Customer's behalf.. Customer shall notify CS First
Boston immediately (and no later than within one business day) if the
financial condition of Customer changes materially and adversely from
that shown in the most recent financial information theretofore provided
to CS First Boston. An investigation may be conducted pertaining to
Customer's credit standing and business and/or to verify any financial
information furnished to CS First Boston by Customer.
(j) CURRENCY EXCHANGE RISK. If Customer enters into any Contract on an
Exchange on which transactions are effected in a foreign currency, then
Customer shall bear all risk and cost in respect of the conversion of
currencies incident to transactions effected on behalf of Customer
pursuant hereto, including any loss arising as a result of a fluctuation
in the exchange rate affecting such foreign currency.
(k) TRANSACTIONS ON SIMEX. If Customer intends to engage in transactions on
the Singapore International Monetary Exchange Limited ("SIMEX") through
CS First Boston, then Customer agrees that, with respect to transactions
on SIMEX, notwithstanding anything to the contrary herein, (a) the
phrase "(as defined in the Companies Act, Cap 50)" shall be added after
the word "subsidiary" wherever the latter shall appear in this
Agreement, and (b) the phrase "(excluding Saturdays)" shall be added
after the phrase "business days" wherever the latter shall appear in
this Agreement.
7. TERMINATION.
This Agreement may be terminated at any time by Customer or CS First Boston
by written notice to the other. Termination shall not affect any transaction
entered into prior to receipt of such notice and shall not relieve either
party of any obligations in connection with any, debt or credit balance or
other liability or obligation incurred prior to such receipt. In the event of
such notice, Customer shall either close out open positions in the Account or
arrange for such open positions to be transferred to another futures
commission merchant. Upon satisfaction by Customer of all of Customer's
liabilities, CS First Boston shall transfer to another futures commission
merchant all Contracts, if any, then held for the Account, and shall transfer
to Customer or to another futures commission merchant, as Customer may
instruct, all cash, securities and other property held in the Account,
whereupon this Agreement shall terminate.
8. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement is, or at any time
becomes, inconsistent with any present or future law, rule or regulation
of any exchange or other market, sovereign government or regulatory body
thereof, and if any of these authorities have jurisdiction over the
subject matter of this Agreement, the inconsistent provision shall be
deemed superseded or modified to conform with such law, rule or
regulation but in all other respects, this Agreement shall continue and
remain in full force and effect.
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LISTED DERIVATIVES GROUP
(b) BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties and their successors. CS First Boston shall have the
right to transfer or assign this Agreement (and thereby the Account) to any
successor entity or to another properly registered futures commission
merchant in its sole and absolute discretion and without obtaining the
consent of Customer. Customer shall not assign any of its rights or
obligations under this Agreement without the prior written consent of CS
First Boston, and any such attempted assignment without such consent shall
be ineffective.
(c) ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties and supersedes any prior agreements between the parties as to the
subject matter hereof. No provision of this Agreement shall in any respect
be waived, altered, modified, or amended unless such waiver, alteration,
modification or amendment is in writing and signed by the party against
whom such waiver, alteration, modification or amendment is to be enforced.
(d) CURRENCY DENOMINATION. Unless another currency is designated in the
confirmations reporting transactions entered into by Customer, all margin
deposits in connection with such transactions, and a debit or credit in the
Account, shall be stated in United States dollars.
(e) INSTRUCTIONS, NOTICES OR COMMUNICATIONS. Except as specifically otherwise
provided in this Agreement, all instructions, notices or other
communications may be oral or written. All oral instructions, unless custom
and usage of trade dictate otherwise, shall be promptly confirmed in
writing. All written instructions, notices or other communications shall be
addressed as follows:
(i) if to CS First Boston:
CS FIRST BOSTON
5 World Trade Center, 7th Floor
New York, New York 10048
Attention: Futures Department
(ii) if to Customer at the address as indicated on the Futures Account
Application.
(f) RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies arising under this
Agreement as amended and modified from time to time are cumulative and not
exclusive of any rights or remedies which may be available at law or
otherwise.
(g) NO WAIVER. No failure on the part of CS First Boston to exercise, and no
delay in exercising, any contractual right will operate as a waiver thereof,
nor will any single or partial exercise by CS First Boston of any right
preclude any other or future exercise thereof or the exercise of any other
partial right.
(h) GOVERNING LAW. THE INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CHOICE OF LAW.
(i) CONSENT TO JURISDICTION. ANY LITIGATION BETWEEN CS FIRST BOSTON AND CUSTOMER
RELATING TO THIS AGREEMENT OR TRANSACTIONS HEREUNDER SHALL TAKE PLACE IN THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.
CUSTOMER CONSENTS TO THE SERVICE OF PROCESS BY THE MAILING TO CUSTOMER OF
COPIES OF SUCH COURT
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LISTED DERIVATIVES GROUP
FILING BY CERTIFIED MAIL TO THE ADDRESS OF CUSTOMER AS IT APPEARS ON THE BOOKS
AND RECORDS OF CS FIRST BOSTON, SUCH SERVICE TO BE EFFECTIVE TEN DAYS AFTER
MAILING. CUSTOMER HEREBY WAIVES IRREVOCABLY ANY IMMUNITY TO WHICH IT MIGHT
OTHERWISE BE ENTITLED IN ANY ACTION AT LAW, SUIT IN EQUITY OR ANY OTHER
PROCEEDING ARISING OUT OF OR BASED ON THIS AGREEMENT OR ANY TRANSACTION IN
CONNECTION HEREWITH.
(j) WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES. Customer hereby waives a trial by
jury in any action arising out of or relating to this Agreement or any
transaction in connection therewith. Furthermore, no party to this Agreement
will attempt to obtain an award of punitive damages against the other.
(k) CUSTOMER ACKNOWLEDGMENTS.
(i) CUSTOMER HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED AND UNDERSTANDS THE
FOLLOWING DISCLOSURE STATEMENTS PRESCRIBED BY THE CFTC AND FURNISHED
HEREWITH (CHECK WHERE APPLICABLE):
[ ] RISK DISCLOSURE STATEMENT
(CFTC Rule 1.55(b) transcribed in full on pages 1-2 of Booklet 2 - Risk
Disclosure Statements)
[ ] OPTIONS DISCLOSURE STATEMENT
(CFTC Rule 33.7 transcribed in full on pages 3-12 of Booklet 2 - Risk
Disclosure Statements)
[ ] DISCLOSURE STATEMENT FOR NON-CASH MARGIN
(CFTC Rule 190.10 transcribed in full on page 16 of Booklet 2 - Risk
Disclosure Statements)
[ ] FOREIGN FUTURES AND FOREIGN OPTIONS RISK DISCLOSURE STATEMENT
(CFTC Rule 30.6 transcribed in full on pages 1-2 of Booklet 2 - Risk
Disclosure Statements)
(ii) IF CUSTOMER HAS INDICATED ON the FUTURES ACCOUNT APPLICATION THAT ORDERS
PLACED FOR THE ACCOUNT REPRESENT BONA FIDE HEDGING TRANSACTIONS, PLEASE
COMPLETE THE FOLLOWING. You should note that CFTC Regulation (S)190.06
permits you to specify whether, in the unlikely event of CS First
Boston's bankruptcy, you prefer the bankruptcy trustee to liquidate or
transfer to another futures commission merchant all positions in the
Account. Accordingly, Customer hereby elects as follows: (check one)
[ ] LIQUIDATION
[ ] TRANSFER TO ANOTHER FUTURES COMMISSION MERCHANT
IF NEITHER ALTERNATIVE IS CHECKED, CUSTOMER WILL BE DEEMED TO HAVE ELECTED TO
HAVE ALL POSITIONS LIQUIDATED. THIS ELECTION MAY BE CHANGED AT ANY TIME BY
WRITTEN NOTICE.
(iii) CUSTOMER ACKNOWLEDGES THAT UNLESS THIS IS A HEDGE ACCOUNT,
INVESTMENT IN FUTURES AND OPTIONS ON FUTURES CONTRACTS IS SPECULATIVE, INVOLVES
A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS WHO CAN ASSUME THE RISK
OF SUBSTANTIAL LOSSES. CUSTOMER ALSO UNDERSTANDS THAT BECAUSE OF THE LOW MARGIN
NORMALLY REQUIRED IN COMMODITY FUTURES AND ON SHORT POSITIONS IN OPTIONS ON
FUTURES, PRICE CHANGES in FUTURES CONTRACTS MAY RESULT IN SIGNIFICANT LOSSES,
WHICH LOSSES MAY EXCEED THE MARGIN
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LISTED DERIVATIVES GROUP
DEPOSIT. PURCHASERS OF OPTIONS ON FUTURES MAY LOSE THE ENTIRE AMOUNT OF
THE PREMIUM PAID.
IN WITNESS WHEREOF, Customer has executed this Agreement on the date indicated
below.
CORPORATION/PARTNERSHIPS:
By:___________________________________ Date:__________________________
Authorized Officer/General Partner
Name:_________________________________ Title:_________________________
(Print) (Print)
INDIVIDUAL/JOINT ACCOUNT:
By:___________________________________ By:____________________________
Individual Secondary Party (Joint Account)
Date:_____________ Name:_____________ Date:____________ Name:__________
(Print) (Print)
REMINDER: PLEASE BE SURE TO CHECK THE APPROPRIATE BOXES IN SECTIONS 8(K) (I)
AND (II) ABOVE.
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FUTURES CUSTOMER AGREEMENT BEAR STEARNS SECURITIES CORP.
("AGREEMENT") One Metrotech Center North
Brooklyn, NY 11201-3859
ACCOUNT TITLE_____________________________
ACCOUNT NUMBER____________________________
PLEASE READ CAREFULLY
In consideration of Bear, Stearns Securities Corp., its successors and assigns,
("BSSC") acting as Futures Commission Merchant and carrying one or more
commodity futures accounts for the undersigned, ("Customer") its successors and
assigns, and when applicable, in consideration of Bear, Stearns & Co. Inc.
acting as Customer's introducing broker (Bear, Stearns & Co. Inc. and BSSC are
sometimes hereinafter collectively referred to as the "Brokers"), it is agreed
to with respect to all accounts, whether on margin or otherwise, which the
Customer now has or may at any future time have with the Brokers that:
1. AUTHORIZATION TO ACT AS BROKER
Customer authorizes the Brokers to purchase and sell futures contracts and
option contracts thereon ("Contracts") traded on duly registered contract
markets and exchanges located within and outside the United States, off-exchange
transactions where permitted by law, and spot, forward and option contracts
(including over-the-counter foreign currency spot, forward and option contracts)
for Customer's account in accordance with Customer's oral or written
instructions. The Brokers shall rely on any oral or written instructions
received from any person whom the Brokers believe, in good faith, to have been
an authorized person. The Brokers will be fully protected in acting on such
instructions. The Customer hereby waives any claim or defense that any such
instruction was not in writing as may be required by the Statute of Frauds or
any other law, rule, or regulation.
2. SUBJECT TO LAW AND EXCHANGE RULES
All transactions by the Brokers on Customer's behalf shall be subject to the
applicable constitution, by-laws, rules, resolutions, regulations, customs,
usages, rulings, and interpretations of the contract market and its
clearinghouse on which such transactions are executed or cleared by BSSC or its
agents for Customer's accounts, and to all applicable govermnental acts and
statutes (such as the Commodity Exchange Act) and to rules and regulations made
thereunder.
Further, Customer represents that it has reviewed the registration
requirements of the Commodity Futures Trading Commission, the National Futures
Association, and/or such other regulatory bodies applicable to Customer, and
that it is either appropriately registered or is not required to be so
registered.
The Brokers shall not be liable to Customer as a result of any action taken by
the Brokers or their agents to comply with any such constitution, by-laws,
resolutions, regulations, customs, usages, rulings, interpretations, acts, or
statutes.
3. COMMISSIONS, CHARGES AND FEES
Customer, in connection with such transactions, agrees to pay BSSC:
(A) Brokerage and commission charges as agreed upon by the Brokers and Customer
from time to time.
(B) Any charges, fees, fines or penalties imposed on any transaction undertaken
for Customer by the contract market and/or the clearinghouse through which it is
executed and any tax or fee imposed on such transactions by any competent
authority or self-regulatory organization.
(C) Any interest and/or service charges on any Customer deficit balances or any
other amounts due from Customer at the rates customarily charged by BSSC
together with the Brokers' costs and attorney's fees incurred in collecting such
deficit.
(D) Such payments shall be made promptly in Federal funds to BSSC at such
address as BSSC may designate.
4. MARGINS AND PREMIUMS
Customer agrees to maintain such margin, option premium and/or collateral as
BSSC in its sole discretion may require from time to time and will pay on demand
any amounts owing with respect to any of Customer's accounts.
Margin requirements established by BSSC for Customer's accounts may exceed the
margin required of BSSC by a contract market or clearing organization or the
margin required by BSSC of its other customers. BSSC may change margin
requirements for Customer at its sole discretion at any time.
5. DELIVERY OR EXERCISE OF DELIVERY INSTRUCTIONS
In the event that BSSC undertakes to make or take delivery of futures contracts,
exercise options or effect the sale of any property on behalf of Customer,
Customer will provide BSSC with the same at the time, in the manner and under
the terms and conditions necessary for BSSC to effect delivery thereof or to
purchase as required.
(A) Customer will provide BSSC with notice of intention to accept delivery on
long futures contracts at least five business days prior to the last trading day
for the contracts. At that time Customer will also indicate its financial
ability to pay for the contracts and the means and time by which funds will be
made available to BSSC.
(B) If Customer intends to make delivery on a short position, Customer must
notify BSSC at least five business days prior to the intended delivery date or
the last trading day, whichever comes first. At tnat time Customer will also
indicate the location of the commodities to be delivered and will certify to
BSSC that the commodities comply fully with the delivery specifications of the
contract market on which the contracts trade.
(C) BSSC may, from time to time, demand deposits or other assurances of
performance relating to the delivery of commodities which may be beyond those
specified by the contract market on which the contracts are traded. If Customer
fails to so supply BSSC with the same, then BSSC, in addition to any other right
to remedy it may have, is authorized by Customer to, in its sole discretion,
borrow or buy any commodities necessary to make delivery thereof at the sole
risk and expense of Customer.
(D) In the event of cash settlement of a contract, Customer must provide BSSC
with the cash one ( I ) business day before settlement.
6. OPTIONS
If this Agreement applies to options on futures contracts, Customer acknowledges
and agrees that Customer has full responsibility for taking or
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failing to take action to exercise any option contract in Customer's account and
that in no event will the Brokers take action to exercise any option contract in
the Customer's account without instructions from the Customer. Customer further
acknowledges and agrees that such option contract may be subject to automatic
exercise pursuant to applicable law.
Customer understands that exercise notices may be allocated to the Customer's
account pursuant to a random allocation procedure and agrees that the Customer
shall be bound by any allocation of exercise notices to the Customer pursuant
thereto. Customer understands that such notices may be assigned to the account
after the close of trading on the day on which such notices have been assigned
to BSSC. In such event, BSSC's sole responsibility shall be to use its best
efforts to place a telephone call to the Customer at any time before trading
commences on the next day on which such option contracts are traded on the
applicable contract market and, if an authorized representative of the Customer
is present, to inform the authorized representative of the Customer of such
allocation. In the event that BSSC makes such call, but no authorized
representative of the Customer is present, the Brokers shall have no
responsibility to take any action on behalf of the Customer unless BSSC has
previously received from the Customer written instruction acceptable to BSSC
indicating the action BSSC is to take in such event.
7. EXCHANGE FOR PHYSICALS ("EFP")
If this Agreement applies to EFP transactions, the Customer acknowledges
familiarity with all rules and regulations applicable to Customer's EFP
transactions and certifies to the Brokers Customer's possession of all required
records documenting each underlying cash transaction. Customer agrees to produce
such records to the Brokers upon their request. Customer agrees to indemnify and
hold the Brokers harmless from all costs, claims, fines or penalties the Brokers
may incur resulting from an EFP transaction requested by the Customer.
8. HEDGE ACCOUNT
If this is a hedge account, all orders which the Customer gives for the
purchase or sale of futures or options contracts for the Customer's accounts
will represent bona fide hedges in accordance with accepted definitions of hedge
transactions under the Commodity Exchange Act, if applicable, and any amendments
or interpretations thereto which may be made in the future by the Commodity
Futures Trading Commission, any state or self-regulatory organization, or any
court of competent jurisdiction, if applicable. Should orders be placed for the
purchase or sale of contracts which are not hedge transactions, the Customer
will advise the Brokers to that effect.
9. COMMUNICATIONS
Reports, confirmations, statements, notices and any other communication may be
transmitted to Customer at the address designated in this Agreement, or to such
address as Customer may designate in writing to BSSC, Attn: Director, Futures
Operations, 1 Metrotech Center North, Brooklyn, NY 11201-3859. All
communications so sent, whether by mail, messenger, telegraph, or otherwise
shall be deemed transmitted when deposited in the United States mail, or when
received by a transmitting agent, and will be deemed to have been delivered to
Customer personally, whether actually received by Customer or not. All
communications to Bear, Stearns Securities Corp. shall be to its office at One
Metrotech Center North, Brooklyn, New York 11201-3859 or to such other address
as BSSC shall hereafter direct Customer, in writing, to use.
10. CONFIRMATION AND STATEMENTS
A detailed trade confirmation of all transactions for or on Customer's behalf
shall be furnished to Customer. A detailed monthly statement of all transactions
for or on Customer's behalf shall be funished to Customer on a monthly basis.
Confirmations of transactions and orders, correction notices and monthly
statements of account shall be conclusive if not objected to in writing to One
Metrotech Center North, Brooklyn, New York, 11201-3859 within one (1) business
day following the day on which Customer receives the written notice from BSSC;
if a confirmation is reported to Customer orally, it is conclusive unless
objected to at the time of such report. In the event that Customer fails to
receive any such confirmation of transactions and orders, correction notices or
monthly statements of account within five (5) business days from the date of a
transaction, or solely in connection with a monthly statement of account, within
(5) days after the last business day of the preceding month, Customer will
notify BSSC immediately.
In addition to oral notification of objections, Customer must also provide
written notification to BSSC at One Metrotech Center North, Brooklyn, New York
11201-3859, Attn: Director, Futures Operations, or to such other person as BSSC
shall hereafler direct Customer, in writing, to notify. If Customer fails to
give BSSC such notification, Customer will be deemed to have adopted and
ratified the transactions and to have waived any right to have them removed from
the account.
11. CURRENCY FLUCTUATION RISK
In the event that BSSC is directed to enter into any transactions for Customer
which are effected in and/or margin deposits are made in curencies other than in
United States dollars:
(A) Any profits or losses arising as a result of the fluctuation in the exchange
rate affecting such currency will be entirely for the account and risk of the
Customer.
(B) All initial and subsequent deposits for margin purposes shall be made in
United States dollars in such amounts as BSSC, in its sole discretion, may
designate.
(C) Unless otherwise agreed to by the Customer and the Brokers in writing, when
such transaction is established or liquidated, BSSC shall credit or debit the
account in United States Dollars at an exchange rate determined by BSSC. This
rate will be based on the prevailing money market rates available at the time
of the transaction.
12. CUSTOMER ACKNOWLEDGMENTS
Customer acknowledges that:
(A) Any trading recommendations and market or other information communicated to
Customer by the Brokers is incidental to the conduct of the Brokers' business as
Futures Commission Merchants.
(B) Such recommendations and information, although based upon information
obtained from sources believed by the Brokers to be reliable, may be incomplete,
may not be verified, and may be changed without notice to Customer.
(C) The Brokers make no representation, warranty or guarantee as to the accuracy
or completeness of any market or other information or trading recommendation
finished to Customer.
(D) Customer understands that the Brokers, their managing directors, officers,
employees, and/or affiliates may have a position in, may intend to, and may, buy
or sell contracts or instruments that are the subject of contracts, including
contracts which are the subject of information or recommendations furnished to
Customer, and that the position or transactions of the Brokers, their managing
directors, employees, officers and/or affiliates may or may not be consistent
with the recommendations furnished by the Brokers to Customer.
(E) All decisions by the Customer or its agent(s), whether or not utilizing any
advice of the Brokers, their employees and officers, are solely within the power
and discretion of the Customer.
13. LIQUIDATION
In the event that:
(A) Customer commences a voluntary case, or an involuntary case is commenced
against Customer under any applicable bankruptcy, insolvency
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or other similar law now or hereafter in effect, or a receiver, liquidator,
trustee, custodian, sequestrater or other similar official is appointed or takes
possession (before or after the commencement of any such action) of Customer, or
Customer is insolvent, makes any general assignment for the benefit of
creditors, or fails generally to pay debts as they become due, or any similar
event takes place;
(B) Customer takes any corporate action to effect a dissolution, liquidation,
reorganization, winding up of its affairs or any similar event;
(C) Customer fails or refuses to deposit or maintain initial margin and/or
collateral or fails to provide additional or variation margin and/or collateral,
as set forth in Section 4 hereof;
(D) Customer has a breach or default under this Agreement or any other agreement
with a Bear Stearns entity;
(E) BSSC in its sole discretion, determines with or without regard to market
quotations that the collateral or margin deposited with BSSC to secure
Customer's positions is inadequate; or,
(F) The Brokers, in either of their discretion, determine that it is necessary
for their own protection then:
Any and all property belonging to the Customer and held by BSSC or by any of
its affiliates will be subject to a priority lien for the discharge of
Customer's obligation to BSSC. To satisfy this lien, BSSC may close out
Customer's open contracts in whole or in part, sell any or all of Customer's
property held by BSSC and by any of its affiliates, buy any securities or other
property for Customer's account(s) to cover existing short positions, and cancel
any outstanding orders and commitments made by BSSC and/or its affiliates on
behalf of Customer. For the purpose of this Agreement the word "property" means
securities of any kind, monies, options, commodities and contracts for the
future delivery of or otherwise relating to, commodities and securities and all
property customarily dealt in by brokerage firms or pledged to secure an account
Subject to BSSC's and its affiliates' obligations to use best efforts to
obtain a fair and reasonable price, any such sale, purchase, or cancellation may
be made at BSSC's and/or its aff liates' sole discretion on the contract or
other market or through the clearinghouse where such business is then
transacted, at public auction or at private sale, without advertising the same
and without notice to Customer, and without prior tender, demand or call upon
Customer. Customer shall remain liable for and shall pay to BSSC the amount of
any deficiency resulting from any transactions described above.
14. LIMITATIONS OF LIABILITY AND INDEMNIFICATION
BSSC retains the right to limit the number of open positions which Customer may
acquire or maintain at BSSC. BSSC will attempt to execute all orders which it
may, in its sole discretion, choose to accept for the purchase or sale of
contracts, options or other property in accordance with the oral or written
instructions of Customer. However, the Brokers shall not be held liable in any
way for Customer error or for delays in transmission of an order and the Brokers
shall not be liable in any way for delays in execution of any order due to the
breakdown or failure of transmission or communication facilities, or any other
cause beyond the Brokers' control.
Further, neither the Brokers nor their managing directors, officers, employees
and agents shall have any responsibility for compliance by Customer with any law
or regulation governing its conduct.
In the event that the Brokers and/or their affiliates are parties to any
claim, dispute or other litigation or otherwise incur any expense or loss in
connection with Customer's obligations or liabilities arising from Customer's
accounts or this Agreement, Customer shall indemnify and reimburse the Brokers
and/or their affiliates for all loss and expense incurred, including the
Brokers' and/or their affiliates' reasonable attorneys fees.
15. TAPING
The parties hereto agree that any party may electronically record all telephone
conversations among each other and that such recordings among the parties may be
used to establish compliance with this Agreement or in resolving any dispute
under this Agreement.
16. INTRODUCED ACCOUNT
Bear, Stearns & Co. Inc. or another firm may be the introducing broker on this
account. The Introducing Broker's ("IB") account executive(s) are the Customer's
broker(s) for purposes of solicitation and the taking and conveying of orders
for execution. The IB will supervise its employees for compliance with all
applicable rules and regulations in connection with the IB's activities
undertaken in connection with this Agreement. If any of the Customer's
account(s) are carried by any Bear Steams entity as clearing agent for the
Customer, unless such Bear Stearns entity receives from the Customer or another
broker of the Cusstomer prior written notice to the contrary, it may accept from
such other broker, without any inquiry or investigation: (a) orders for the
purchase or sale of securities and other property in the Customer's account(s)
on margin or otherwise and (b) any other instructions concerning the Customer's
account(s) or the property therein. The Customer understands and agrees that
BSSC shall have no responsibility or liability to the Customer for any acts or
omissions of such broker, its officers, employees or agents. The Customer agrees
that the Customer's broker and its employees are third-party beneficiaries of
this Agreement and that the terms and conditions hereof, including the
arbitration provision, if executed, shall be applicable to all matters between
or among the Customer, its agents, the Customer's broker and its employees and
BSSC and its employees.
17. MISCELLANEOUS
Any rights BSSC has under this Agreement for purposes of cross collateralization
and Customer default may be exercised by any of BSSC's affiliates in connection
with assets and positions of Customer with such affiliates whether governed by
agreement or otherwise. As security for the payment of all Customer's
obligations and liabilities to a Bear Steams' entity, each Bear Stearns entity
shall have a continuing priority security interest in all property in which
Customer has an interest held by or through a Bear Stearns entity. Further, in
order to satisfy any outstanding liability or obligation of Customer at a Bear
Stearns entity, such entities may, at any time and without prior notice, use,
apply or transfer any such securities, property, assets or collateral
interchangeably. En the event of a breach or default under this Agreement or any
other agreement Customer may have with any Bear Stearns entity, each Bear
Stearns entity shall have all rights and remedies available to a secured
creditor under any applicable law in addition to the rights and remedies
provided herein.
18. GOVERNING LAW AND JURISDICTION
If any provisions herein are or should become inconsistent with any present or
future law, rule or regulation of any sovereign government or regulatory body
having jurisdiction over the subject matter of this Agreement, such provisions
shall be deemed to be rescinded or modified in accordance with any such law,
rule or regulation. In all other respects this Agreement shall continue and
remain in full force and effect. THIS AGREEMENT AND ITS TERMS SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. With respect to any suit, action or proceedings
("Proceedings") relating to this Agreement, each Party irrevocably (i) submits
to the non-exclusive jurisdiction of the courts of the
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State of New York and the United States District Court located in the Borough of
Manhattan in New York City, and (ii) waives any objection which it may have at
any time to the laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to such Proceedings,
that such court does not have jurisdiction over such Party. Nothing in this
Agreement precludes any Party from bringing Proceedings in any other
jurisdiction nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other jurisdiction.
Each Party irrevocably waives any and all right to trial by jury in any
Proceedings arising out of or relating to this Agreement. Each Party hereby
irrevocably waives, to the fullest extent pemmitted by applicable law, with
respect to itself and its revenues and assets (irrespective of their use or
intended use), all immunity on the grounds of sovereignty or other similar
grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific perfommance or for recovery of property, (iv)
attachment of its assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or assets might
otherwise be entitled in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law, that it will not
claim any such immunity in any Proceedings.
Customer also may have the option of resolving any disputes by arbitration. If
Customer agrees to arbitration, the accompanying Arbitration Agreement must be
acknowledged.
19. BINDING EFFECT
Subject to Section 18 hereof, no provision of this Agreement shall in any
respect be waived, altered, modified, or amended unless such waiver, alteration,
modification, or amendment is committed to in writing and signed by Customer and
a duly authorized official of the Brokers.
This Agreement shall inure to the benefit of the Brokers and their respective
successors or assigns, whether by merger, consolidation or otherwise. This
Agreement shall also be binding on Customer and/or its successors, assigns,
administrators, and other legal representatives whether by merger, consolidation
or other, provided that Customer may not assign this Agreement without the prior
written consent of the Brokers.
The rights and remedies conferred upon the parties hereto shall be cumulative,
and the exercise or waiver of any thereof shall not preclude or inhibit the
exercise of additional rights and remedies.
This Agreement shall continue until signed notice of revocation is received by
or from Customer and in the case of such revocation the Agreement shall continue
effective as to transactions entered into prior thereto, until those positions
are either closed out or transferred.
20. FINANCIAL STATEMENTS
Customer agrees to provide financial statements in certified or audited form to
the Brokers as the Brokers request with this Agreement and to provide annual
updates to those statements. Customer further agrees to furnish such other
infommation relevant to the account as the Brokers may reasonably request.
Customer agrees to promptly notify each of the Brokers in writing should there
be any material change in Customer's financial condition, business or prospects.
21. ERISA/PENSION LIMITATION
It is hereby understood, acknowledged and accepted by the underlying Customer,
Pension Trustee, Trustee and Advisor, if any, that if this is an ERISA or
pension account, the Brokers shall not be deemed to be acting as fiduciaries
---
under the federal ERISA statute or any similar federal, state and/or foreign
statute.
All advice with respect to contracts transmitted to the Customer or its
agents by the Brokers are incidental to the conduct of the Brokers' respective
business as introducing broker and clearing broker and such advice will not
serve as the primary basis for any decision by the Customer. All decisions by
the Customer or its agents, whether or not utilizing any advice of the Brokers,
their employees and officers, are solely within the power and discretion of the
Customer. Any such advice, although based upon infommation from sources the
Brokers believe to be reliable, may be incomplete, may not be verified and may
be changed without notice to the Customer. The Brokers make no representation or
warranty as to the accuracy, completeness, reliability or prudence of any such
advice or information.
22. CPO and CTA REGISTRATION
Customer and Advisor, if any, have reviewed the registration requirements of the
Commodity Exchange Act, the National Futures Association and all applicable
foreign regulations pertinent to commodity pool operators and commodity trading
advisors and each has determined that it is in compliance with such
requirements.
23. INTEREST ON DEBIT BALANCES
Customer agrees to pay interest on any debit balance in its account from the
date such debit is incurred to the date of its payment in full. The rate of
interest charged shall be determined by the Brokers at their sole discretion,
may change from time to time and will appear on Customer's monthly statements.
In no event, however, shall such rate exceed three percent (3%) above the
Brokers' Call Money Rate or the highest rate allowable under New York law. The
Brokers' Call Money Rate is the rate quoted daily by the Brokers at their
offices in New York based upon the broker's call rates posted by various
financial institutions (such as the call money rates published by the Wall
Street Journal and the New York Times) and the rate of interest charged the
Brokers for their own borrowings. Interest shall be computed daily and
calculated on the basis of a 360-day year. Any debit balance which is not paid
at the close of an interest period will be added to the opening balance for the
next interest period. Since the rate of interest charged is related to the
Brokers' Call Money Rate, changes in the Brokers' Call Money Rate will cause
corresponding changes in the rate charged to Customer, which changes will be
made without prior notice to Customer. If Brokers change the rate of interest
charged to Customer for any other reason, Customer will be given at least 30
days' prior written notice thereof.
24 LANGUAGE GOVERNING LAW
THIS AGREEMENT IS EXECUTED IN THE ENGLISH LANGUAGE ONLY, WHICH LANGUAGE SHALL
PREVAIL IN THE EVENT OF ANY CONTROVERSY.
25. EXTRAORDINARY EVENTS
The Brokers shall not be liable for losses caused directly or indirectly by
government restrictions, exchange or market rulings, suspension of trading, war,
strikes or other conditions beyond their control.
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EXHIBIT 23.01
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated February 12, 1996 on the financial statements of Tudor Fund for Employees
L.P. for the year ended December 31, 1995 and to all references to our Firm
included in or made a part of this post effective amendment No. 6 to the
registration statement of Tudor Fund for Employees L.P. filed on Form S-1 with
the Securities and Exchange Commission.
ARTHUR ANDERSEN LLP
New York, New York
May 29, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated February 12, 1996 on the financial statements of Second Management
Company, Inc. for the year ended December 31, 1995 and to all references to our
Firm included in or made a part of this post effective amendment No. 6 to the
registration statement of Tudor Fund for Employees L.P. filed on Form S-1 with
the Securities and Exchange Commission.
ARTHUR ANDERSEN LLP
New York, New York
May 29, 1996
