As Filed with the Securities and Exchange Commission on August 11, 1998
Registration No. ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE
[State of organization]
6289 51-0380494
(Primary SIC Number) (I.R.S. EIN)
5916 N. 300 West
Fremont, Indiana 46737
Telephone: (219) 833-1306
(address and telephone number of registrant's principal executive offices)
Ms. Shira Del Pacult
5916 N. 300 West
Fremont, Indiana 46737
Telephone: (219) 833-1306; Facsimile (219) 833-4411
(Name, address and telephone number of agent for service of process)
Copies to:
William Sumner Scott, Esquire
The Scott Law Firm, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546; Facsimile (954) 964-1548
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 offered on the Form are to be offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Class Amount being Maximum Offering Maximum Aggregate Amount of
of Securities Being Registered:(1) Price Per Unit: (2) Offering Price: Registration Fee:
Registered:
<S> <C> <C> <C> <C>
Limited Partnership 7,000 $1,000 $7,000,000 $2,065.00
Interests ("Units")
</TABLE>
(1) This amount is based upon the number of Units to be initially offered.
The exact number of Units issued will vary because of the issuance of
additional Units for interest earned during the Escrow period.
(2) Initial offering price per Unit prior to the sale of the Minimum; after
sale of Minimum, trading will commence and the sales price per Unit will
fluctuate each month to reflect expenses and additions and subtractions
for trading results.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission acting pursuant to said
section 8(a), may determine.
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Units Of Limited Partnership Interest
MINIMUM 700 Units ($700,000)
$1,000 per Unit until Minimum is Sold
and, thereafter, at Month End Net Unit Value(1)
Atlas Futures Fund, Limited Partnership (the "Partnership") is a Delaware
limited partnership formed January 12, 1998 which is managed by Ashley Capital
Management, Inc., a Delaware corporation, its general partner (the "General
Partner"). The Partnership is organized to be a commodity pool to engage in
the speculative trading of futures, commodity options and forward contracts on
currencies, interest rates, energy and agriculture products, metals, and stock
indices. The Partnership Agreement attached as Exhibit A grants full
management control to the General Partner including the right, without notice
to the Limited Partners, to employ, terminate, and change the equity assigned
to independent trading managers ("Commodity Trading Advisors") to select
trades. If subscriptions for Seven Hundred (700) Units ($700,000), (the
"Minimum") have not been received and accepted by the General Partner within
one year (the "Initial Offering Period") from the effective date of this
prospectus (the "Prospectus"), this offering will terminate and all amounts
paid by subscribers will be returned in the manner provided in the
subscriber's Subscription Agreement. A prospectus to disclose all material
information will be delivered to each subscriber either at or before the time
of confirmation of the investment in the Units.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 10 OF THE PROSPECTUS.
Futures, commodity option, and forward trading are speculative, volatile and
involve a high degree of risk. The investors could lose all, or substantially
all, of their investment.
The Partnership has substantial fixed management fees and commission costs
which must be paid without regard to the profits earned by the Partnership.
If only the Minimum is sold, the General Partner estimates the Partnership
must generate a 25.7% return on investment during its first twelve months of
trading to offset expenses and approximately 30.4% to offset both expenses and
redemption charges due on Units redeemed as of the twelfth month after they
are issued. If both expenses and redemption charges are not offset, investors
will not receive any return on their investment. See "Charges to the
Partnership".
The transferability of the Units is restricted and there are limitations on
investors' rights to surrender the Units to the Partnership for their Net Unit
Value (the "Redemption Rights"). No public market for the Units exists and
none is expected to develop. See "No Right To Transfer Units Limited Ability
To Realize Return On Investment", and "The Limited Partnership Agreement,
Redemptions".
The Partnership does not expect to make distributions. Limited Partners must
rely on their limited right of transfer and redemption to realize a return on
their investment. See "No Right To Transfer Units - Limited Ability To
Realize Return On Investment", and "The Limited Partnership Agreement,
Redemptions".
The General Partner and its principal and affiliates have conflicts of
interest in regard to the management of the Partnership for the benefit of the
investors. See "Conflicts of Interest".
Investors will be taxed upon the profits, if any, earned upon their investment
in the Partnership without the right to receive a distribution of any such
profits. See "Certain Federal Income Tax Aspects".
The General Partner has no experience in the management of commodity pools.
See "Risk Factors" and "The General Partner".
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON 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 OR AGENCY, NOR HAVE
ANY OF THEM CONFIRMED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Initial Price to Sales Proceeds to
Public(1) Commissions(2) Partnership(3)
<S> <C> <C> <C>
Per Limited
Partnership Unit $1,000 $60 $940
Total Minimum(4) $700,000 $42,000 $658,000
Total Maximum $7,000,000 $420,000 $6,580,000
</TABLE>
See Notes on page i
FUTURES INVESTMENT COMPANY
5916 N. 300 West - Fremont, Indiana 46737
Telephone: (219) 833-1306
<PAGE>
NOTES:
(1) Units are initially offered for sale at a fixed value of One Thousand
Dollars ($1,000) per Unit, which amount was arbitrarily established by the
General Partner. The amount was not based on past or expected earnings and
does not represent that the Units have or will have a market value of or could
be resold or Redeemed at that price. When the General Partner has received
and accepted subscriptions for a face amount, excluding commissions, of six
hundred fifty-eight thousand dollars ($658,000), (the "Minimum"), the
Partnership will commence trading operations. Until the 700 Units required to
reach the Minimum are sold, all cash and subscription documents will be held
in a separate escrow account (the "Escrow Account") in the name of the
Partnership at Star Financial Bank, 2004 N. Wayne St., Angola, IN 46703 (the
"Escrow Agent"). Any Units which remain unsold at the time the Minimum is
reached may be offered for sale, from time to time, in the discretion of the
General Partner, at a price equal to the Net Unit Value, as of the effective
date of the purchase, which shall be the close of business on the last day of
the month of acceptance of the Subscription Agreement. Net Unit Value is a
reflection of the per Unit value of the Partnership and is calculated after
the end of each month to reflect the results from trading after payment of
expenses and fees. No escrow will be utilized for Units sold after the sale
of the Minimum and the commencement of trading operations.
The Units are being offered through Futures Investment Company, 5916 N. 300
West, Fremont, Indiana 46737 (219) 833-1306, (the "Selling Agent" or "FIC"), a
National Association of Securities Dealers, Inc. ("NASD") registered broker-
dealer, on a "best efforts" basis.
(2) See "Plan of Distribution, The Selling Agreement" for information
relating to indemnification arrangements with respect to the Selling Agent and
any Additional Sellers. Selling commissions of six percent (6%) of the
subscription price, subject to waiver at the sole discretion of the General
Partner, will be paid to the Selling Agent from the proceeds of subscriptions
without regard to the amount invested. The Selling Agent will retain or
distribute the sales commissions to the registered representatives of all of
the dealers, including the principal and Affiliates of the General Partner who
sold the Units.
(3) Proceeds to the Partnership are calculated before deduction of Offering
Expenses, estimated to be a total of $47,000, payable to the General Partner
upon the Initial Closing, when the Minimum offering amount has been raised and
Escrow funds are released to the Partnership. An additional $5,000 in
organizational expenses will be amortized on a straight line method and paid
to the General Partner over the first 60 months of the Partnership's
operation. Upon admission of subsequent Partners to the Partnership, a charge
will be made to such newly admitted Partners equal to their pro-rata share of
the Offering Expenses which will be credited to the Capital Accounts of the
prior admitted Partners, in which the initial balance will be the amount the
Partner paid for the Partner's Units, to reimburse them for the Offering
Expenses they advanced.
(4) Seven Hundred (700) Units ($700,000 less sales commissions of $42,000)
(the "Minimum") must be sold before any money will be made paid to the Selling
Agent or cash and documents from any of the subscriptions received and
deposited to the Escrow Account will be delivered to the Partnership. Once
the Minimum is sold, the balance, up to a maximum of 7,000 Units ($7,000,000)
will be sold, until they are either all sold or the General Partner elects to
terminate this offering. There has been no promise by the Selling Agent, or
any other person, to purchase any Units or any other form of firm underwriting
commitment to assure the sale of the Units. The General Partner or the
Selling Agent may engage additional registered broker dealers (the "Additional
Sellers") to sell Units.
The General Partner may accept or reject subscriptions within five (5)
business days of receipt. If a subscription is rejected or if subscriptions
for at least seven hundred (700) Units are not accepted during the Initial
Offering Period of one year, or any extended Offering Period, all
subscriptions will be returned to prospective subscribers as soon as
practicable.
At the time trading commences, interest earned on subscriptions held in escrow
will be deposited in the Partnership's account and subscriber's will receive
additional Units at the rate of $1,000 per Unit (rounded in the case of
fractional Units to three decimal points) pro rata equal to the interest
earned on their subscriptions, taking into account both the length of time and
amount deposited to the Escrow Account. Subscribers whose subscriptions are
rejected will be refunded their entire subscription payments together with the
interest earned, if any, thereon. Cash from subscriptions held in the Escrow
Account will be invested in short-term investments which meet applicable
regulatory requirements such as United States Treasury Bills or other
comparable interest-bearing instruments which are expected to be liquid,
substantially risk-less instruments, with correspondingly low yields.
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<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS
YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO
AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT
PAGE 49 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT
IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 41.
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, AT PAGE 10.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN
FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE
UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET,
MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION
TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY
AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY
AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS
FOR THE POOL MAY BE EFFECTED.
[The balance of this page has been intentionally left blank]
ii
<PAGE>
NOTICE TO RESIDENTS OF ALL STATES
UNTIL 90 DAYS AFTER THE DATE HEREOF, ALL DEALERS EFFECTING TRANSACTIONS IN THE
UNITS, 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 OR BEST EFFORTS SELLERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE SELLING AND
ADDITIONAL SELLERS MUST ALSO DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS
ISSUED BY THE PARTNERSHIP.
NO DEALER, SALESMAN, OFFICER, EMPLOYEE OR AGENT OF THE PARTNERSHIP OR THE
GENERAL PARTNER AND OR ANY OTHER PERSON HAS BEEN AUTHORIZED, IN CONNECTION
WITH THIS OFFERING, TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP, THE GENERAL PARTNER, THE SELLING AGENTS, OR ANY
OTHER PERSON CONNECTED WITH THIS OFFERING. THIS PROSPECTUS SPEAKS AS OF THE
DATE OF ITS ISSUANCE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP
SINCE THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY UNITS BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION, OR PURCHASE IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION REQUIRE THAT NO
COMMODITY POOL OPERATOR MAY SOLICIT, ACCEPT OR RECEIVE FUNDS, SECURITIES OR
OTHER PROPERTY FROM A PROSPECTIVE PARTICIPANT IN A COMMODITY POOL WITHOUT
FIRST DELIVERING A DISCLOSURE DOCUMENT (THIS "PROSPECTUS") TO SUCH PROSPECTIVE
PARTICIPANT. THE GENERAL PARTNER MUST FURNISH ALL PARTNERS ANNUAL AND MONTHLY
REPORTS COMPLYING WITH COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND
NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS. THE ANNUAL REPORTS WILL
CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY REPORTS UNAUDITED, FINANCIAL
INFORMATION IN REGARD TO THE OPERATION OF THE PARTNERSHIP AND ITS GENERAL
PARTNER
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC") REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH
HEREIN: ATLAS FUTURES FUND, LIMITED PARTNERSHIP, IS NOT A MUTUAL FUND AND IS
NOT SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940.
CONSEQUENTLY, INVESTORS WILL NOT HAVE THE BENEFIT OF THE PROTECTIVE PROVISIONS
OF SUCH LEGISLATION.
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF
THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. INVESTORS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. ACCORDINGLY, THE UNITS MAY BE
SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH
THE TERMS OF THE LIMITED PARTNERSHIP AGREEMENT, INCLUDING THE CONSENT OF THE
GENERAL PARTNER, AND ONLY IF SUCH UNITS ARE SUBSEQUENTLY REGISTERED OR, IN THE
OPINION OF COUNSEL FOR THE COMPANY, SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS. THE SUBSCRIPTION AGREEMENT AND
THE CERTIFICATE FOR UNITS, IF ANY, WILL HAVE A LEGEND TO DISCLOSE THAT THE
UNITS ARE RESTRICTED FROM SALE OR OTHER TRANSFER WITHOUT PRIOR REGISTRATION OR
OTHER LEGAL JUSTIFICATION. NO PUBLIC MARKET EXISTS OR IS EXPECTED TO DEVELOP
FOR THE UNITS AND, CONSEQUENTLY, PROSPECTIVE INVESTORS WHO DESIRE LIQUIDITY
SHOULD NOT PURCHASE THE UNITS. EACH INVESTOR (PURCHASER OF UNITS) MUST MEET
THE FOLLOWING SUITABILITY STANDARDS: (i) AN INVESTOR MUST HAVE (A) HAD AN
ANNUAL GROSS INCOME IN EXCESS OF $45,000 IN THE LAST CALENDAR YEAR AND
REASONABLY EXPECTS TO HAVE GROSS INCOME IN EXCESS OF
iii
<PAGE>
$45,000 FOR THE CURRENT YEAR TOGETHER WITH A NET WORTH, EXCLUSIVE OF PRINCIPAL
RESIDENCE, HOME FURNISHINGS, AND AUTOMOBILE OF $45,000; OR (B) THE INVESTOR
HAS A NET WORTH (EXCLUSIVE OF PRINCIPAL RESIDENCE, HOME FURNISHINGS AND
AUTOMOBILE) IN EXCESS OF $150,000; AND (ii) THE INVESTOR IS REPRESENTED BY A
PURCHASER REPRESENTATIVE OR OTHERWISE DEMONSTRATES TO THE GENERAL PARTNER
SUFFICIENT KNOWLEDGE TO ACCEPT THE RISKS OF THIS INVESTMENT. A GENERAL
PARTNERSHIP OR OTHER ENTITY MAKING INVESTMENT MUST MEET THE FINANCIAL
SUITABILITY REQUIREMENTS PRESCRIBED FOR NATURAL PERSONS. A QUALIFIED PENSION,
PROFIT-SHARING OR KEOGH EMPLOYEE PLAN, THE FIDUCIARY FOR SUCH PLAN, OR THE
DONOR OF ANY SUCH PLAN WHO DIRECTLY OR INDIRECTLY SUPPLIES THE FUNDS TO
PURCHASE AN INTEREST (THE "UNITS") IN THE PARTNERSHIP MUST MEET THE MINIMUM
FINANCIAL SUITABILITY STANDARDS. "ACCREDITED INVESTORS", AS THAT TERM IS
DEFINED UNDER REGULATION D OF THE ACT, WHO MEET THE NET INCOME TEST IN (i)
ABOVE, ARE DEEMED TO HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL BUSINESS
MATTERS AS TO BE CAPABLE OF EVALUATING THE MERITS AND RISKS OF THE PROPOSED
INVESTMENT AND, AT THE TIME OF INVESTING, CAN AFFORD A COMPLETE LOSS.
THE ACT AND THE SECURITIES LAWS OF CERTAIN STATES GRANT PURCHASERS OF
SECURITIES SOLD, EITHER IN VIOLATION OF THE REGISTRATION OR QUALIFICATION
PROVISIONS OF SUCH LAWS OR WITHIN CERTAIN TIME LIMITATIONS, THE RIGHT TO
RESCIND THEIR PURCHASE OF SUCH SECURITIES AND TO RECEIVE BACK THEIR
CONSIDERATION PAID, PLUS INTEREST. THE GENERAL PARTNER EITHER INTENDS TO
REGISTER THE UNITS FOR SALE OR BELIEVES THAT THE OFFERING DESCRIBED IN THIS
PROSPECTUS IS NOT REQUIRED TO BE REGISTERED OR QUALIFIED. MANY OF THESE LAWS
WHICH GRANT THE RIGHT OF RESCISSION ALSO PROVIDE THAT SUITS FOR SUCH
VIOLATIONS MUST BE BROUGHT WITHIN A SPECIFIED TIME, USUALLY ONE YEAR FROM
DISCOVERY OF FACTS CONSTITUTING SUCH VIOLATION. SHOULD ANY INVESTOR INSTITUTE
AN ACTION ON THE THEORY THAT THE OFFERING CONDUCTED AS DESCRIBED HEREIN WAS
REQUIRED TO BE REGISTERED OR QUALIFIED, THE PARTNERSHIP WILL CONTEND THAT THE
CONTENTS OF THIS PROSPECTUS PROVIDED NOTICE OF SUFFICIENT FACTS TO COMMENCE
THE TIME FROM WHICH AN ACTION FOR RESCISSION SHOULD HAVE BEEN BROUGHT. ALSO,
SHOULD ANY INVESTOR CONTEND THE OFFER WAS NOT QUALIFIED FOR PRESENTATION OR
THE INVESTOR NOT SUITABLE TO MAKE SUCH INVESTMENT, THE GENERAL PARTNER WILL
PLEAD RELIANCE UPON THE INFORMATION SUPPLIED BY THE INVESTOR IN THE
SUBSCRIPTION DOCUMENTS. INVESTORS ARE TO COMPLETE ALL DOCUMENTS BEFORE
SIGNING. NEITHER THE INFORMATION CONTAINED HEREIN, NOR ANY PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT COMMUNICATION SHOULD BE CONSTRUED BY THE
PROSPECTIVE INVESTOR AS LEGAL OR TAX ADVICE FOR THAT INVESTOR. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS OWN LEGAL AND TAX ADVISORS TO
ASCERTAIN THE MERITS AND RISKS DESCRIBED HEREIN PRIOR TO SUBSCRIBING TO
PURCHASE UNITS IN THE PARTNERSHIP PURSUANT TO THIS OFFERING.
VARIOUS SPECIFIC STATE NOTICES
NOTICE TO CALIFORNIA INVESTORS
CALIFORNIA RESIDENTS ARE REQUIRED TO HAVE A LIQUID NET WORTH OF $100,000 AND
ANNUAL INCOME OF $50,000 TO BE ABLE TO PURCHASE PARTNERSHIP INTERESTS IN THIS
COMMODITY POOL. THE TRANSFER OF THE LIMITED PARTNERSHIP INTERESTS OFFERED AND
SOLD PURSUANT TO THIS OFFERING CAN NOT BE RESOLD OR TRANSFERRED WITHOUT
PERMISSION OF THE GENERAL PARTNER AND FULFILLMENT OF OTHER TERMS AND
CONDITIONS CONTAINED IN THE PARTNERSHIP AGREEMENT. ACCORDINGLY, (a) THE
LIMITED PARTNERSHIP, AS ISSUER OF A SECURITY UPON WHICH A RESTRICTION ON
TRANSFER HAS BEEN IMPOSED MUST CAUSE A COPY OF RULE 260.141.11 TO BE DELIVERED
TO EACH ISSUEE OR TRANSFEREE OF SUCH SECURITY AT THE TIME THE CERTIFICATE
EVIDENCING THE SECURITY IS DELIVERED TO THE ISSUEE OR TRANSFEREE; AND, (b) IT
IS UNLAWFUL FOR THE HOLDER OF ANY SUCH SECURITY TO CONSUMMATE A SALE OR
TRANSFER OF SUCH SECURITY, OR ANY INTEREST THEREIN, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER (UNTIL THIS CONDITION IS REMOVED PURSUANT TO
SECTION 260.141.12 OF THESE RULES), EXCEPT AS PROVIDED IN THE CODE. THE
CERTIFICATES, WHETHER UPON INITIAL ISSUANCE
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OR UPON ANY TRANSFER, SHALL BEAR ON THEIR FACE, IN CAPITAL LETTERS OF 10-POINT
SIZE, AS FOLLOWS: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES".
NOTICE TO IDAHO INVESTORS
INVESTORS WHO ARE RESIDENTS OF IDAHO ARE REQUIRED TO HAVE A NET WORTH OF
$100,000 OR NET WORTH OF $50,000 AND ANNUAL INCOME OF $50,000 TO BE ELIGIBLE
TO INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN THIS COMMODITY POOL.
NOTICE TO MICHIGAN INVESTORS
INVESTORS WHO ARE RESIDENTS OF MICHIGAN ARE REQUIRED TO HAVE A NET WORTH OF
$225,000 OR NET WORTH OF $60,000 AND TAXABLE ANNUAL INCOME OF $60,000 TO BE
ELIGIBLE TO INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN A COMMODITY
POOL. NET WORTH IN ALL CASES MUST BE CALCULATED EXCLUSIVE OF HOME, HOME
FURNISHINGS AND AUTOMOBILES. IN ADDITION, NO MORE THAN TEN PERCENT (10%) OF
THE INVESTOR'S NET WORTH MAY BE INVESTED IN THIS LIMITED PARTNERSHIP.
NOTICE TO OREGON INVESTORS
INVESTORS WHO ARE RESIDENTS OF OREGON ARE REQUIRED TO HAVE A NET WORTH OF
$225,000 OR NET WORTH OF $60,000 AND ANNUAL INCOME OF $60,000 TO BE ELIGIBLE
TO INVEST IN THIS OFFERING OF PARTNERSHIP INTERESTS IN THIS COMMODITY POOL.
NOTICE TO FOREIGN INVESTORS
THE SECURITIES HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION AND SEVERAL SELECTED STATES. HOWEVER, THE SECURITIES MAY
NOT BE OFFERED, SOLD, RENOUNCED OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE
UNITED STATES OF AMERICA, ITS TERRITORIES, POSSESSIONS, AND ALL AREAS SUBJECT
TO ITS JURISDICTION ("UNITED STATES" OR IN CANADA (COLLECTIVELY, "NORTH
AMERICA"), OR TO OR FOR THE BENEFIT OF ANY PERSON WHO IS A NATIONAL CITIZEN OR
A RESIDENT OR NORMALLY A RESIDENT THEREOF, THE ESTATES OF SUCH A PERSON OR ANY
CORPORATION OR OTHER ENTITY CREATED OR ORGANIZED UNDER ANY LAW OF THE UNITED
STATES OR CANADA OR ANY POLITICAL SUBDIVISION THEREOF (COLLECTIVELY REFERRED
TO AS "NORTH AMERICAN PERSONS") UNLESS (i) THE SECURITIES ARE DULY REGISTERED
UNDER THE APPLICABLE STATE ACT, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER
THE APPLICABLE STATE ACT AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO
SUCH EFFECT REASONABLY SATISFACTORY TO IT, OR (iii) SUCH SECURITIES ARE SOLD
ON FOREIGN EXCHANGE IN ACCORDANCE WITH PROCEDURES APPROVED BY SUCH FOREIGN
STOCK EXCHANGE.
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v
<PAGE>
TABLE OF CONTENTS
COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT ii
NOTICE TO RESIDENTS OF ALL STATES iii
VARIOUS SPECIFIC STATE NOTICES iv
NOTICE TO CALIFORNIA INVESTORS iv
NOTICE TO IDAHO INVESTORS v
NOTICE TO MICHIGAN INVESTORS v
NOTICE TO OREGON INVESTORS v
NOTICE TO FOREIGN INVESTORS v
PARTNERSHIP AND GENERAL PARTNER IDENTIFICATION 1
SUMMARY OF THE OFFERING 1
RISK FACTORS 2
CONFLICTS OF INTEREST 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 5
Business Objective and Expenses 5
Securities Offered 5
CHARGES TO THE PARTNERSHIP 5
Compensation of the General Partner 6
Management and Incentive Fees 6
Charges to the Partnership 6
USE OF PROCEEDS 7
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 8
FEDERAL INCOME TAX ASPECTS 8
No Legal Opinion As To Certain Material Tax Aspects 8
REDEMPTIONS 9
PLAN OF DISTRIBUTION 9
SUBSCRIPTION PROCEDURE 9
RISK FACTORS 10
NO PRIOR OPERATION EXPERIENCE OF THE GENERAL PARTNER 10
THE PARTNERSHIP WILL PAY SUBSTANTIAL CHARGES - INVESTORS HAVE LIMITED
OPPORTUNITY TO REALIZE RETURN ON INVESTMENT 10
NO RIGHT TO TRANSFER UNITS - LIMITED ABILITY TO REALIZE RETURN ON
INVESTMENT 11
INVESTORS MUST RELY UPON THEIR LIMITED RIGHT OF TRANSFER AND REDEMPTION
RIGHTS TO REALIZE A RETURN ON THEIR INVESTMENT 12
RELIANCE ON THE PRINCIPAL OF THE GENERAL PARTNER COULD BE RESTRICTIVE TO
PARTNERSHIP ACTIVITIES 12
GENERAL PARTNER AND CTAs TO SERVE OTHER COMPETING BUSINESSES 12
PARTNERSHIP HAS NO OPERATING HISTORY 12
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE 13
LIMITED PARTNERS WILL BE TAXED ON PROFITS NOT DISTRIBUTED 13
PRESENT TRADE SELECTION METHODS SUBJECT TO SUDDEN ADVERSE CHANGE 13
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT 13
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE - UNITS MAY NOT BE
REDEEMABLE BEFORE SUBSTANTIAL DEVALUATION OF NET UNIT VALUE 13
LOW SECURITY DEPOSIT IN RELATION TO PRICE MOVEMENT 14
TRADE SELECTION MADE WITHOUT NOTICE TO PARTNERSHIP - PARTNERSHIP MAY
BECOME DEVALUED BEFORE GENERAL PARTNER IS ABLE TO TAKE REMEDIAL ACTION 14
PARTNERSHIP COULD LOSE SUBSTANTIAL ASSETS DUE TO LACK OF MARKET LIQUIDITY 14
INCREASED TRADING EQUITY TO CTAs MAY ADVERSELY AFFECT THEIR PERFORMANCE 14
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MINIMUM AMOUNT OF EQUITY MAY BE INSUFFICIENT FOR PROFITABLE OPERATION 15
PARTNERSHIP WILL NOT BE COMPENSATED IF PARTNERSHIP ACTIVITY RESULTS IN
LOWER COMMISSIONS FOR OTHER ACCOUNTS 15
FAILURE OF COMMODITY BROKERS OR BANKS COULD RESULT IN LOSS OF ASSETS 15
COUNTERPARTY CREDITWORTHINESS MUST BE RELIED UPON IN FOREIGN MARKETS 15
TRADING ON FOREIGN EXCHANGES INHERENTLY RISKIER THAN U.S. MARKETS 16
TRADING FORWARD CURRENCY CONTRACTS ARE NOT SUBJECT TO U.S. REGULATION
AND ARE INHERENTLY RISKY 16
OPTIONS TRADING PUTS MORE PARTNERSHIP CAPITAL AT RISK 16
POSITION LIMITS MAY AFFECT PROFIT POTENTIAL 16
COMPETITION IS INTENSE 16
NO ASSURANCE THAT UNITS NECESSARY TO COMMENCE BUSINESS WILL BE SOLD -
INVESTORS MAY LOSE USE OF INVESTMENT CAPITAL 17
COMMENCEMENT OF BUSINESS MAY OCCUR AT SUBOPTIMAL TIME FOR MAXIMIZING
PROFITS 17
CHANGES IN THE SIZE OF THE PARTNERSHIP MAY ADVERSELY AFFECT CTAs' ABILITY
TO TRADE PROFITABLY 18
FAILURE TO MAINTAIN NET WORTH OF THE GENERAL PARTNER MAY RESULT IN
SUSPENSION OF TRADING AND SUSTAINED LOSSES 18
INABILITY TO MAINTAIN NET WORTH OF GENERAL PARTNER COULD RESULT IN
POSSIBILITY OF TAXATION AS A CORPORATION 18
GENERAL PARTNER NOT TO ADVISE INVESTORS - INCLUDING RETIREMENT PLAN AND
IRA PARTICIPANTS 19
INVESTORS NOT PROTECTED BY THE INVESTMENT COMPANY ACT OF 1940 19
POSSIBILITY OF AUDIT - PARTNERS MAY BE SUBJECT TO AUDIT AND PENALTIES 19
GENERAL PARTNER MAY SETTLE IRS CLAIM NOT IN THE BEST INTEREST OF THE
PARTNERS 19
POSSIBLE ADVERSE DETERMINATION BY THE IRS - PARTNERS MAY BE SUBJECT TO
BACK TAXES AND PENALTIES 19
CONFLICTS OF INTEREST 19
GENERAL PARTNER, THE CTAs, AND THEIR PRINCIPALS MAY PREFERENTIALLY
MANAGE EQUITY FOR THEMSELVES AND OTHERS 20
POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER MAY LIMIT
PARTNERS' ABILITY TO CONTROL CERTAIN ISSUES 20
GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF
PARTNERSHIP 20
FEES AND CHARGES TO THE PARTNERSHIP NOT NEGOTIATED AND MAY DISCOURAGE
PROFITABLE TRADING 20
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE 21
GENERAL PARTNER TO DISCOURAGE REDEMPTIONS 21
CTAs MAY ENGAGE IN HIGH RISK TRADING TO GENERATE INCENTIVE FEES 21
IB AFFILIATED WITH THE GENERAL PARTNER WILL RETAIN A SHARE OF THE
COMMISSIONS AND IS NOT LIKELY TO BE REPLACED 21
NO RESOLUTION OF CONFLICTS PROCEDURES 22
INTERESTS OF NAMED EXPERTS AND COUNSEL 22
THE PARTNERSHIP AND FUTURES INVESTMENT COMPANY SHARE THE SAME ADDRESS 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 22
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS 22
THE COMMODITY TRADING ADVISORS 23
THE ADVISORY CONTRACTS AND POWERS OF ATTORNEY 23
BUSINESS OBJECTIVE AND EXPENSES 23
EXPENSES PER UNIT FOR THE FIRST 12-MONTH PERIOD OF OPERATIONS 24
SECURITIES OFFERED 25
MANAGEMENT'S DISCUSSION 26
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER 26
INDEMNIFICATION 27
RELATIONSHIP WITH THE FCM AND THE IB 28
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RELATIONSHIP WITH THE CTAs 28
RISK CONTROL 28
CHARGES TO THE PARTNERSHIP 29
COMPENSATION OF GENERAL PARTNER 29
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTAs 29
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER 30
ALLOCATION OF COMMISSIONS 30
OTHER EXPENSES 31
CHARGES TO THE PARTNERSHIP 31
INVESTOR SUITABILITY 32
POTENTIAL ADVANTAGES 32
EQUITY MANAGEMENT 32
INVESTMENT DIVERSIFICATION 32
LIMITED LIABILITY 32
ADMINISTRATIVE CONVENIENCE 33
ACCESS TO THE CTAs 33
USE OF PROCEEDS 33
DETERMINATION OF THE OFFERING PRICE 34
NO MARKET AND LIMITATION OF RIGHT OF TRANSFER 34
THE GENERAL PARTNER 34
IDENTIFICATION 34
THE PRINCIPAL AND OFFICER OF THE GENERAL PARTNER 34
TRADING BY THE GENERAL PARTNER; INTEREST IN THE POOL 35
NO PRIOR PERFORMANCE AND REGULATORY NOTICE 35
TRADING MANAGEMENT 35
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 35
THE ADVISORY CONTRACTS 35
FREQUENCY OF CTA AND EQUITY REALLOCATIONS 36
THE COMMODITY TRADING ADVISORS 36
MICHAEL J. FRISCHMEYER 36
BUSINESS BACKGROUND 36
DESCRIPTION OF TRADING PROGRAM 37
PERFORMANCE RECORD OF THE CTA 38
Managed Account Program, Regular Fee Schedule 39
Managed Account Program, Regular Fee Schedule-Regular Fee Restricted
Accounts Only 40
Managed Account Program, Frischmeyer Fund, L.P. Fee Schedule 41
Financial Futures Managed Account Program 42
Managed Account Program, Iowa Commodities Fee Schedule 43
COMMODITECH, INC. 44
BUSINESS BACKGROUND 44
DESCRIPTION OF TRADING PROGRAM 44
PERFORMANCE RECORD OF THE CTA 45
Commoditech, Inc. - Program A 45
ROSENBERY CAPITAL MANAGEMENT, INC. 46
BUSINESS BACKGROUND 46
DESCRIPTION OF TRADING PROGRAM 47
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PERFORMANCE RECORD OF THE CTA 49
Rosenbery Capital Management, Inc. - Progenitor 49
J.A.H. RESEARCH AND TRADING 50
DESCRIPTION OF TRADING PROGRAM 50
Program I 50
Program II 51
BUSINESS BACKGROUND 51
PERFORMANCE RECORD OF THE CTA 51
J.A.H Research and Trading - Program I - Capsule Performance of Accounts 51
J.A.H Research and Trading - Program II - Capsule Performance of Accounts 52
C&M TRADERS, INC. 53
BUSINESS BACKGROUND 54
DESCRIPTION OF TRADING PROGRAM 54
PERFORMANCE RECORD OF THE CTA 54
C&M Traders, Inc. - Live Cattle - Composite 55
PERFORMANCE RECORD OF FREMONT FUND, LIMITED PARTNERSHIP 56
THE FUTURES COMMISSION MERCHANTS 57
FEDERAL INCOME TAX ASPECTS 57
SCOPE OF TAX PRESENTATION 57
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS 58
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER 58
NO IRS RULING 58
TAX OPINION 59
PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES 59
BASIS LOSS LIMITATION 59
AT-RISK LIMITATION 60
INCOME AND LOSSES FROM PASSIVE ACTIVITIES 60
ALLOCATION OF PROFITS AND LOSSES 60
TAXATION OF FUTURES AND FORWARD TRANSACTIONS 60
SECTION 988 FOREIGN CURRENCY TRANSACTIONS 61
CAPITAL GAIN AND LOSS PROVISIONS 61
BUSINESS FOR PROFIT 61
SELF-EMPLOYMENT INCOME AND TAX 61
INDIVIDUAL ALTERNATIVE MINIMUM TAX 61
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS 61
NOT A TAX SHELTER 62
TAXATION OF FOREIGN PARTNERS 62
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES 62
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S 62
THE LIMITED PARTNERSHIP AGREEMENT 63
FORMATION OF THE PARTNERSHIP 63
UNITS 63
MANAGEMENT OF PARTNERSHIP AFFAIRS 63
ADDITIONAL OFFERINGS 63
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS 63
FEDERAL TAX ALLOCATIONS 64
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER 64
TERMINATION OF THE PARTNERSHIP 64
MEETINGS 64
REDEMPTIONS 64
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PLAN OF DISTRIBUTION 65
SUBSCRIPTION PROCEDURE 65
LEGAL MATTERS 66
LITIGATION AND CLAIMS 66
LEGAL OPINION 66
EXPERTS 67
ADDITIONAL INFORMATION 67
FINANCIAL STATEMENTS
A. ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Balance Sheet as of April 30, 1998
Notes to Statement of Financial Condition
B. ASHLEY CAPITAL MANAGEMENT, INC.
Balance Sheet and Income Statement as of April 30, 1998
Notes to Statement of Financial Condition
APPENDIX I - COMMODITY TERMS AND DEFINITIONS; STATE REGULATORY GLOSSARY
APPENDIX II - SUPPLEMENTAL PERFORMANCE INFORMATION FOR C&M TRADERS, INC.
EXHIBIT A - LIMITED PARTNERSHIP AGREEMENT
EXHIBIT B - REQUEST FOR REDEMPTION
EXHIBIT C - SUITABILITY INFORMATION
EXHIBIT D - SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
EXHIBIT E - ESCROW AGREEMENT
EXHIBIT F - INVESTMENT ADVISORY CONTRACT - MICHAEL J. FRISCHMEYER
EXHIBIT G - INVESTMENT ADVISORY CONTRACT - COMMODITECH, INC.
EXHIBIT H - INVESTMENT ADVISORY CONTRACT - ROSENBERY CAPITAL MANAGEMENT, INC.
EXHIBIT I - INVESTMENT ADVISORY CONTRACT - J.A.H. Research and Trading
EXHIBIT J - INVESTMENT ADVISORY CONTRACT - C&M Traders, Inc.
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PARTNERSHIP AND GENERAL PARTNER IDENTIFICATION
Atlas Futures Fund, Limited Partnership (the "Partnership") is a Delaware
limited partnership. Its main business office is 5916 N. 300 West, Fremont,
Indiana (219) 833-1306. It is managed by Ashley Capital Management, Inc., a
Delaware corporation, its general partner (the "General Partner"), with its
main business office at c/o Corporate Systems, Inc. 101 North Fairfield Drive,
Dover, DE 19901 (302) 697-2139. The Partnership is organized to be a
commodity pool to engage in the speculative trading of futures, commodity
options and forward contracts on currencies, interest rates, energy and
agriculture products, metals, and stock indices. The Partnership Agreement
attached as Exhibit A grants full management control to the General Partner
including the right to employ independent trading managers ("Commodity Trading
Advisors") to select trades. The other Exhibits and Appendices listed in the
Index are included as part of this bound prospectus. The objective of the
Partnership is substantial capital appreciation with controlled volatility.
There can be no assurance that the Partnership will achieve its objectives or
avoid substantial losses.
The General Partner has no prior experience in the management of a commodity
pool, however, the principal of the General Partner, Ms. Shira Pacult, has
been engaged in supervision of individual managed commodity accounts for over
16 years and is the principal of both another public commodity pool, Fremont
Fund, Limited Partnership and a privately offered commodity pool, Auburn Fund,
Limited Partnership. See "Description of the General Partner". The
Partnership hereby offers to sell $7,000,000 of units of limited partnership
interest (the "Units") under the terms and conditions described herein. The
Units are initially offered at a value arbitrarily established by the General
Partner at One Thousand Dollars ($1,000) per Unit, with a minimum purchase,
per investor, of 25 Units ($25,000); provided, however, the General Partner,
in its sole discretion, may permit the purchase by an investor of less than 25
but more than 5 Units. Funds with respect to subscriptions received prior to
the commencement of trading operations by the Partnership (and not rejected by
the General Partner) will be deposited and held in a separate escrow account
(the "Escrow Account") in the name of the Partnership at Star Financial Bank,
2004 N. Wayne St., Angola, IN 46703 (the "Escrow Agent"). If subscriptions
for Seven Hundred (700) Units ($700,000), (the "Minimum Units") have not been
received and accepted by the General Partner within one year (the "Initial
Offering Period") from the effective date of this prospectus (the
"Prospectus"), this offering will terminate and all amounts paid by
subscribers, plus interest and without deduction for any commissions, fees or
costs will be promptly returned in the manner provided in the subscriber's
Subscription Agreement. If the General Partner receives and accepts
subscriptions for at least the Minimum Units prior to the close of the Initial
Offering Period, the money on deposit in the escrow account will be
transferred to the Partnership's account, with each Limited Partner account
credited with its pro rata share of the interested earned upon the escrow
account. The Partnership will commence trading operations and, thereafter,
Units may be offered for sale, from time to time, in the sole discretion of
the General Partner, at the Net Unit Value computed as of the end of the month
in which the subscription agreement was received. Net Unit Value is the per
Unit value of the Partnership's Net Assets computed as of the end of each
month, after additions for trading profits, if any, and deductions for trading
losses, expenses, fees and reserves. If the Minimum Units are sold, this
offering shall continue until the earlier of (i) such time as all of the Units
offered hereby have been sold, or (ii) such earlier time as the offering is
terminated by the General Partner, in its sole discretion.
The transferability of Units is subject to the approval of the General Partner
and no trading or market for the Units now exists or is expected to develop on
any exchange or over the counter market. Consequently, Units should be
purchased for long-term investment only. There also can be no assurance that
any or all of the Minimum Units or any additional Units will be sold.
SUMMARY OF THE OFFERING
The following summary is qualified, in its entirety, by the more detailed
information appearing elsewhere in this Prospectus, in the Exhibits, and other
documents identified herein. Reference to subsections in this Prospectus are
in quotation marks. Terms with the initial letter capitalized are defined in
the Glossary in Appendix I to this Prospectus.
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RISK FACTORS
An investment in the Partnership is speculative and involves substantial
risks. See "Description of Charges", "Risk Factors", "Conflicts of Interest",
and Exhibit A.
The Partnership will be relying upon the General Partner to conduct the main
business of the Partnership's affairs. The Limited Partners will not
participate in the management of the Partnership, and the General Partner will
have absolute discretion over the selection of the CTAs, the allocation of
assets, and the commencement and cessation of trading. In that regard, the
General Partner has no experience as a commodity pool operator and in
conducting such business. The principal of the General Partner is, however,
the principal of a company which serves as the General Partner of two other
commodity pools.
The Limited Partners will have a limited opportunity to realize a return on
their investment. This is due to the substantial fees, commissions, and
repayment of offering costs to which the Partnership will be subject, which
amount to $153,000 during the first year of operation, if the Minimum of
$700,000 is raised. The Partnership must earn income of $304.20 per Unit
during the first year to permit an investor to redeem a Unit at the original
offering price of $1,000. The Partnership does not expect to make
distributions, and if it does, those distributions may be subject to being
recalled if the Partnership becomes insolvent. Accordingly, the Limited
Partners must rely upon their limited rights of transfer and redemption to
realize a return on their investment. The Limited Partners will also be
subject to redemption fees during the first two years of operation and there
are restrictions upon the transfer and redemption procedures.
Both the General Partner and the CTAs it selects to trade for the Partnership
may serve other businesses with competing interests. See "Conflicts of
Interest". As the principal of the General Partner, Ms. Shira Del Pacult, is
also a principal of the Introducing Broker, which receives fixed commissions
for payment of brokerage commissions, it would be in Ms. Pacult's interest to
select CTAs who minimize the number of trades at the expense of the
Partnership. The General Partner is also required by federal law to maintain
a minimum net worth. If the minimum is not maintained, the Partnership would
be forced to suspend trading, in which case it could experience significant
losses.
The CTAs expect to conduct trades for both themselves and other clients, in
addition to the Partnership. It would be possible for a CTA to experience
limitations on the number of positions it may take, therefore not maximizing
the profit potential, as a result of taking the same position with several
clients' funds. It would also be possible for a CTA preferentially to
liquidate positions in one account, while the others sustain significant
losses.
Futures, commodity options, and forward contract trading are speculative and
volatile, and are thus inherently risky. In addition, only a fraction of the
commodity contract value is required as a security deposit. Should a trade
perform poorly, the Partnership is at risk of a demand for money to cover the
balance of the transaction. Such a demand could deplete the Partnership of
all its assets. The CTAs expect to sell option contracts, which often
requires less security deposit. There are also limits placed upon (i) the
total number of positions a trader may take; (ii) the total number of
positions that may be taken by all traders in a given market as a whole; and
(iii) the amount of change in price a given commodity may fluctuate in a given
day. Such limits may restrict the profit potential of the Partnership. In
addition, it is possible that a trader may not be able to liquidate a position
due to successive daily changes in the price of a commodity reaching their
maximum limit. There is no guarantee that Partners will be able to redeem
Units before substantial losses are incurred through trading.
The CTAs also expect to trade on foreign markets, which are not regulated by
the United States and are thus inherently riskier to trade than U.S. markets.
Specifically, there would be little recourse to recover trading assets lost as
a result of the collapse of a foreign government of private institution. The
trades will also be denominated in the foreign location particular to the
location of the trade, and are thus adversely affected by inflation and
currency fluctuation. The CTAs may also trade forward currency contracts not
subject to U.S. regulation, in
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which there are no limitations on daily price moves or on the number of
positions available to be taken. The Partnership's assets are at greater risk
by the CTAs taking positions on such foreign markets.
There are also risks inherent to operation of the Partnership, including the
intense competition in commodity futures trading, the lack of experience of
the General Partner, the right of the CTAs to resign without notice, and the
fact that trades are executed without notice to the Partnership. The
Partnership will be competing with others who may have greater financial and
analytical resources at their disposal. Additionally, the General Partner has
no experience as a commodity pool operator, though the principal of the
General Partner is the principal of a company which serves as the General
Partner of two other commodity pools. The CTAs assigned by the General
Partner have complete discretion over the execution of trades, and as a
result, the Partnership may experience substantial losses before the General
Partner is able to take remedial action. The Partnership will also be relying
upon the solvency of the commodity brokers and banks which will hold a
substantial portion of the Partnership's assets. A failure of one of these
entities could result in unrecoverable loss to the Partnership's assets.
There are several risks to investors due to the amount of capital raised
through this offering, the timing of the commencement of business, and the
amount of Partnership assets. There is no assurance that the Minimum of
$700,000 will be raised through this offering. If it is not, investors will
be fully refunded their subscription amount with interest, but will have lost
the ability to invest their money during the escrow period. If the Minimum is
raised, it may be at an inopportune time to maximize or realize trading
profits. Increases or decreases in the amount of trading equity assigned to
the CTAs may also adversely affect their performance and cause the Partnership
to suffer losses.
There are significant tax issues which present risks to investors. The
Limited Partners will be subject to taxes on profits not distributed. The
Partnership is currently not taxed as a corporation, but should the IRS rule
to the contrary because a limited partner has taken management, the
Partnership and its Partners may be subject to higher taxes on profits, as
well as possible back taxes, interest, penalties, and an audit. The General
Partner also has the power to settle IRS claims on behalf of certain Limited
Partners when such settlement may not be in their best interest.
Conflicts of Interest
Significant potential and actual conflicts of interest may arise, including:
(i) The principal of the General Partner, Ms. Shira Del Pacult, the General
Partner, and the CTAs have the right to manage other commodity pools and/or
accounts. They may also engage in trading for their own accounts without
making those records available for inspection. It is possible for these
persons to trade other accounts preferentially over the Partnership.
Additionally, a CTA is limited in the number of simultaneous positions it may
take, and may therefore favor accounts which offer greater financial
incentives.
(ii) The General Partner, its principal, Ms. Shira Del Pacult, and their
Affiliates may, once the Minimum is sold, purchase enough Units in the
Partnership to retain voting control. This may limit the ability of the
Limited Partners to achieve a majority vote on such issues as amendment of the
Limited Partnership Agreement, change in the basic investment policy of the
Partnership, dissolution of the Partnership, or the sale or distribution of
the Partnership's assets. The General Partner is not allowed to vote on the
issue of its own removal, but it is not likely to voluntarily remove itself as
it receives a fixed management fee of 3%.
(iii) An Affiliate of the General Partner will receive the difference between
the fixed commissions and the actual round-turn commissions paid from the
Partnership's trading activities, creating a disincentive for the General
Partner to replace the IB which is Affiliated with it even if such replacement
may be in the best interest of the Partnership.
(iv) A 9% fixed commission will be paid to the Introducing Broker (the "IB")
Affiliated with the General Partner in lieu of round-turn brokerage
commissions which has not been negotiated at arm's length, nor has the 3%
management fee paid to the General Partner. It is not likely that the General
Partner would remove itself or the IB even if it were in the best interest of
the Partnership.
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(v) The Selling Agent is Affiliated with the principal of the General
Partner and, therefore, no independent due diligence of the offering will be
conducted for the protection of the investors. The General Partner has taken
steps to insure that the Partnership equity is held in segregated accounts at
the banks and futures commission merchant selected and has otherwise assured
the Selling Agent that all money on deposit is in the name of and for the
beneficial use of the Partnership.
(vi) The General Partner selects the trading advisors for the Partnership
and the trading advisors determine the frequency of trading, resulting in a
conflict of interest of the General Partner between it selecting trading
advisors who will trade to maximize profits rather than to minimize the number
of trades; i.e., it is in the best interest of the General Partner to reduce
the frequency of trading to maximize the difference between the fixed
commission and the share of the fixed commission, after payment of the round-
turn commissions, the IB Affiliated with it will receive.
(vii) The General Partner has an incentive to discourage redemptions because
the IB Affiliated with the General Partner receives a portion of the fixed
commissions based on the Net Asset Value (the total assets of the Partnership
minus commissions, fees, and other charges) of the Partnership assigned to be
traded.
(viii) The CTAs are compensated based on a percentage of the of the profits
they generate and thus may have an incentive to engage in ill-advised trades.
(iv) It is extremely difficult, if not impossible, for the General Partner
to assure that these and future potential conflicts will not result in adverse
consequences to the Partnership or the Limited Partners. The General Partner
has not established formal procedures, and none are expected to be established
in the future, to resolve potential conflicts of interest which may arise.
See "Conflicts of Interest" and "Risk Factors". The following is a diagram of
the Partnership structure and summary of commissions received. See "Charges
to the Partnership".
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Business Objective and Expenses
The Partnership will engage in the speculative trading of domestic and foreign
commodity futures contracts and options at the direction of the independent
commodity trading advisors (the "CTAs") it selects. See "Risk Factors",
"Conflicts of Interest", "Use of Proceeds", "General Partner", "Commodity
Trading Advisors", Appendix I and Exhibit A. See, "Experts" and the Financial
Statements. The Partnership was organized in January 1998 and, except for the
preparation of this Prospectus and the preparation to engage in the commodity
trading business, has not yet engaged in business. The principal objective
will be to generate increased capital. There can be no assurance that the
Partnership can achieve this objective. Distributions of profits, if any,
will be made at the sole discretion of the General Partner. The Partnership
is subject to substantial charges, regardless of whether profits are earned.
If there are no claims, the Partnership must earn approximately a 30.4% return
on equity if the Minimum is sold, or a 23.2% return on equity if the Maximum
is sold to permit the investor to Redeem a Unit at the sales price of $1,000
at the end of the first year of operation. In addition, Partners will be
required to pay Federal, state and local taxes upon income, if any, in the
year earned by the Partnership, although there will be no expectations of
distributions of income during that, or any other, year. Accordingly, the
purchase of Units in the Partnership is intended to be a long-term investment.
Neither the General Partner nor any other person has made any promise or
guarantee that the Partnership will be profitable or otherwise meet its
objectives.
Securities Offered
Atlas Futures Fund, Limited Partnership (the "Partnership") will offer and
sell Limited Partnership interests in the Partnership which will have pro rata
rights to profit and losses with all other owners equal to the Capital they
have contributed. The Limited Partners will not be exposed to payment of
debts of the Partnership in excess of their subscription amount; provided,
however, in the event the Limited Partners were to receive distributions which
represent a return of Capital, such distributions, in the event of insolvency
of the Partnership, would have to be returned to pay Partnership debts. In
addition, these limited partners will have no voice in the day to day
management of the Partnership. They will have the right to vote on
Partnership matters such as the replacement of the General Partner. These
Limited Partnership interests are included in the definition of units (the
"Units") which are offered for sale for One Thousand Dollars ($l,000) per
Unit. This sales price per Unit was arbitrarily set by the General Partner
without regard to expected earnings and does not represent present or
projected market or Redemption value. Funds with respect to subscriptions
received prior to the commencement of trading operations by the Partnership
(and not rejected by the General Partner) will be deposited and held in a
separate escrow account (the "Escrow Account") in the name of the Partnership
at Star Financial Bank, 2004 N. Wayne St., Angola, IN 46703 (the "Escrow
Agent"). If the General Partner has not accepted subscriptions for the 700
Units (the "Minimum") before the lapse of one year from the date of this
Prospectus, (the "Initial Offering Period"), this offering will terminate and
all documents and amounts deposited to the Escrow Account by subscribers will
be returned, plus interest and without deduction for any commissions, fees or
costs. Upon the sale of the Minimum, the Partnership will commence trading.
The remaining 6,300 Units will be offered for sale at the Net Unit Value as of
the close of trading on the effective date of such purchase, which will be the
close on the last business day of the month in which the General Partner
accepts a duly executed Subscription Agreement and capital contribution from
the subscriber. No escrow will be utilized for Units sold after the sale of
the Minimum. All subscriptions are irrevocable and subscription payments,
after the statutory withdrawal period, if any, which are accepted by the
General Partner, and either deposited in the Escrow Account or in the
Partnership account, may not be withdrawn by subscribers. Although a maximum
of $7,000,000 of Units are offered hereby, the Limited Partnership Agreement
authorizes the General Partner to sell additional Units and there is,
therefore, no maximum aggregate number or contribution for Units which may be
offered or sold by the Partnership by future offerings. There cannot be any
assurance that the Minimum Units or any additional Units will be sold and the
General Partner is authorized, in its sole discretion, to terminate this, or
any future, offering of Units.
CHARGES TO THE PARTNERSHIP
This prospectus discloses all compensation, fees, profits and other benefits
(including reimbursement of out-of-pocket expenses) which the General Partner
and its affiliates will earn in connection with the offering.
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Compensation of the General Partner
The Partnership will pay a fixed amount for brokerage commissions of nine
percent (9%) per year, payable monthly upon the assets assigned by the General
Partner for trading to Futures Investment Company, the introducing broker,
(the "IB"), affiliated with the principal of the General Partner, for
introducing trades through Vision Limited Partnership, the futures commission
merchant (the "FCM"). See "The Futures Commission Merchant". The IB will pay
all round-turn brokerage commissions, pit brokerage and other clearing
expenses to the FCM, which will act in the normal capacity as a futures
commission merchant and will hold the equity assigned by the General Partner
for trading and will clear the trades entered by the CTAs pursuant to the
power of attorney granted by the General Partner to the CTAs to trade on
behalf of the Partnership. The past history of the frequency of trades by the
CTAs has been at the rate of approximately 255 round turns per month for
every million dollars ($1,000,000) of equity under management. In the
unlikely event the CTAs trade 765 round turns for every million dollars
($1,000,000) in any month, the General Partner has the right, but not the
obligation, to suspend trading until the commencement of the next month. This
suspension of trading is to limit the exposure to loss to the General Partner
to a defined amount determined by the maximum number of round turn commissions
the IB will pay to the FCM during any one month. Trading will automatically
resume the following month subject to the same maximum of 765 trades for that
and any future month. From the 9% paid by the Partnership, the IB will pay
six percent (6%) per year to the broker dealers and other duly licensed
entities, pro-rated to the value of Units sold, who have facilitated the sale
of Units, as trailing commissions, in exchange for services provided to the
investors and the Partnership to communicate results to the investors and
other similar assistance.
Management and Incentive Fees
The Partnership will pay a management fee to the General Partner at the annual
rate of three percent (3%) of equity in the Partnership payable at the end of
each month (1/4 of 1%) and a management fee to the CTAs of three percent (3%)
per year, payable at the rate of one-quarter of one percent (1/4 of 1%) of the
equity allocated to each CTA to trade at the close of each month, which are
held in the trading account assigned to them at the futures commission
merchant or merchants. The Partnership will also pay to the General Partner
an allocation of profit, earned in the accounts assigned to each CTA, of
fifteen percent (15%) of the New Net Profit for each CTA. New Net Profit is
calculated for each quarterly period that the net value of the trading equity
for a CTA as of the end of each quarterly period for each account exceeds the
highest previous quarterly net value of the trading equity in that account for
that CTA. The General Partner will be responsible for payment of all
incentive fees to the CTAs. It will be possible for one of the CTAs to
produce New Net Profit in the account assigned to him and be paid an incentive
fee while the other CTA or CTAs produce losses which cause the Partnership to
suffer a net loss for the quarter or the year. The Partnership also will be
obligated to bear certain other periodic operating, fixed, and extra-ordinary
expenses of the Partnership including, but not limited to, legal and
accounting fees, defense and payment of claims, trading and office expenses,
and sales charges. See "Description of Charges to the Partnership".
Charges to the Partnership
The following table includes all charges to the Partnership.
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<TABLE>
* Charges to the Partnership
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
Entity Form of Compensation Amount of Compensation
General Partner
Management fee 3% management fee of Net Asset Value
Reimbursement of Offering Expenses Reimbursement of Offering
Expenses upon the Initial Closing
Reimbursement of Organizational Expenses Reimbursement of Organizational Expenses
amortized over 60 months
Selling Agents Sales Commission subject to waiver at the A one time charge of 6% of Gross Selling
sole discretion of the General Partner Price of Units for Selling Commissions
Trailing Commission Trailing Commissions of 6%, paid annually,
from the 9% fixed commissions paid to the
Introducing Broker
Introducing Fixed Commissions 9% of assets assigned by General Partner for
Broker Affiliated trading, less costs to trade to FCM and less
with the General 6% trailing commissions paid to Selling
Partner Agents which will include persons Affiliated
with the General Partner Futures Commission
Merchant
Round-turn commissions paid from the fixed Brokerage Commissions negotiated with the
commissions paid by the Partnership Introducing Broker;
Reimbursement of delivery, insurance, Reimbursement by the Partnership of actual
storage and any other charges incidental to payments to third parties in connection
trading and paid to third Parties with Partnership trading
Commodity Trading Advisors Fixed Management Fee 3% per year of the trading equity assigned to
each CTA
Incentive Fee 15% of the New Net Profits of the account for
each quarterly period that the net value of
the trading equity at the end of such
quarterly period for a CTA exceeds the
highest previous quarterly net value of the
trading equity for that CTA.
Third Parties Legal, accounting fees, and other actual Estimated at $23,000 for each year after
expenses necessary to the operation of the the first ($18,000 for accounting and
Partnership, and all claims and other $5,000 for legal). Claims and other costs
extraordinary expenses of the Partnership. can not be estimated and will be paid as
incurred.
</TABLE>
See "Charges to the Partnership".
Use of Proceeds
The gross sales price, less 6% sales commissions (i.e., the net proceeds of
the offering, together with the General Partner's capital contribution) will
be used in the Partnership's business of speculative, high risk trading of
commodity futures contracts, inter-bank forward currency contracts, and
options upon those contracts. Additionally, the gross proceeds will be used
to reimburse the General Partner for the Offering Expenses of $47,000 upon the
Initial Closing (break of Escrow). Upon admission of subsequent Partners to
the Partnership, a charge will be made to such newly admitted Partners equal
to their pro-rata share of the Offering Expenses which will be credited to the
value of the Units of the prior admitted Partners to reimburse them for the
Offering Expenses they advanced. No limitations have been placed by the
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General Partner upon the positions or types of contracts which may be traded
by the CTAs who will trade for the Partnership. The General Partner has
complete authority pursuant to the Partnership Agreement to determine, from
time to time, the amount of equity deposited with the FCM and how much is used
for other investments and on deposit in bank accounts. Upon the sale of the
Minimum, the General Partner expects to deposit 3% of the prior month-end Net
Asset Value to a regular checking account in the name of the Partnership to
pay current expenses and Redemptions for the next month and the balance to be
deposited with the FCM to be available for trading. From 5% to 40% of the Net
Asset Value on deposit with the FCM is expected to be committed to margin to
hold positions taken by the CTAs for the account of the Partnership.
The General Partner will purchase Units to permit it to maintain not less than
a one percent (1%) interest in the income, losses, gains, deductions and
credits of the Partnership. In addition, the General Partner may purchase
additional Units for the same price established, from time to time, pursuant
to the terms of this Offer, without payment of sales commissions.
Selection of Commodity Trading Advisors and Allocation of Equity
The General Partner is solely responsible for the selection of the CTAs and
the allocation of equity to the CTAs it selects. The General Partner has
entered in advisory contract with independent commodity trading advisors to
direct all trading with the commodity broker, Vision Limited Partnership, (the
"Futures Commission Merchant"). The Partnership will rely, pursuant to the
Advisory Agreements and Powers of Attorney attached as Exhibits F, G H, I and
J, upon Michael J. Frischmeyer ("Frischmeyer"), Commoditech, Inc.
("Commoditech") and Rosenbery Capital Management, Inc. ("Rosenbery"), J.A.H.
Research and Trading ("JAH"), and C&M Traders, Inc. ("C&M"), the Commodity
Trading Advisors selected by the General Partner to trade the equity of the
Partnership and to implement the trading methods and strategies. Upon the
sale of the Minimum, the General Partner intends to assign 50% of total
trading equity to Frischmeyer, 20% to Commoditech 20% to Rosenbery, 5% to JAH
and 5% to C&M. See Exhibits F, G H, I and J. The General Partner intends to
allocate substantially all of the Partnership's net assets as trading equity
to the existing CTAs in the percentages disclosed. No additional CTAs are
contemplated to be added due to the sale of only the Minimum or the Maximum;
provided however, that the General Partner may, in its sole discretion and
without notice to the Limited Partners, terminate any existing CTA, select
additional CTAs, or change the allocation of equity among the CTAs. None of
the CTAs currently selected are affiliates of the General Partner, or its
principal, nor will the General Partner serve as CTA or select any other CTAs
to trade for the Partnership which are affiliates of it or its principal. See
"The Commodity Trading Advisors" for a summary of the CTAs' performance
information.
Federal Income Tax Aspects
Partners must pay tax on any profits during the year earned by the Partnership
even though no distributions may have been made during that year. The
Partnership pays no income tax and prospective investors must recognize that
the actual performance records set forth in this Prospectus do not reflect the
taxes payable by investors on their investment. Partners will be taxed on
interest income earned by the Partnership even though trading produces losses
in excess of such interest income. The Partnership's fiscal year for
financial reporting and for tax purposes will be the calendar year. The
General Partner expects to delegate to Mr. James Hepner, certified public
accountant, the responsibility for the preparation of the Partnership's Form
K-1's which is the Internal Revenue Service form which reports the taxable
income and loss to each individual Partner and which are included in the
Partnership's tax return. The General Partner has or will make certain
elections on behalf of the Partnership and has been appointed "tax matters
partner" in the Limited Partnership Agreement to determine the Partnership's
response to an audit and to bind certain Limited Partners to the terms of any
settlement. Such settlement may not necessarily be in the best interest of
such Limited Partners. The General Partner intends not to treat any part of
the incentive profit sharing, brokerage commissions and other ordinary expenses
of the Partnership as "investment advisory fees". A change in such treatment
could result in the Partners recognizing taxable income despite having
incurred a financial loss. No legal opinion will be requested by the
Partnership in regard to any tax matter which involves the determination by
the IRS of the facts related to the operation of the Partnership or as to any
other matter which may be subject to Internal Revenue Service interpretation
or adjustment upon audit.
No Legal Opinion As To Certain Material Tax Aspects
No legal opinion will be requested by the Partnership in regard to any State
income tax issue. In addition, tax counsel to the Partnership can not opine
upon any Federal income tax issue which involves a determination by the IRS of
the facts related to the operation of the Partnership or as to any other
matter which may be subject to Internal Revenue Service
8
<PAGE>
interpretation or adjustment upon audit. For example, commodity trading
adviser fees are aggregated with employee business expenses and other expenses
of producing income and the aggregate of such expenses is deductible only to
the extent such amount exceeds 2% of the taxpayer's adjusted gross income.
The Federal income tax deductibility of these expenses depends upon factual
determinations related to the operation of the Partnership by the General
Partner. Accordingly, investors are encouraged to seek independent tax
Counsel with regard to these matters. See "Federal Income Tax Aspects".
Redemptions
No Partner may redeem or liquidate any Units until six (6) months after the
investment in the Partnership. A Limited Partner may thereafter request the
Partnership, subject to payment of fees, if applicable, and other conditions,
to redeem Units held by such Limited Partner at the Net Unit Value, adjusted
to reflect certain reserves and contingencies, as determined at the end of the
applicable monthly period. Redemption shall be after all liabilities,
contingent, accrued, and reserved, in amounts determined by the General
Partner have been deducted and there remains property of the Partnership
sufficient to pay the Net Unit Value. A Limited Partner desiring to have
Units redeemed must provide written notice to the General Partner by 12:00
noon on the tenth calendar day immediately preceding the last business day of
the month in which the Units are requested to be redeemed.
Under certain circumstances, the General Partner may honor requests for
Redemption only in part and/or suspend Redemptions or delay payment of
Redemptions These circumstances include, but are not limited to, the
inability to liquidate positions as of such Redemption date or default or
delay in payments due the Partnership from banks, brokers, or other persons.
The Partnership may in turn delay payment to Partners requesting Redemption of
Units of the proportionate part of the Net Unit Value represented by the sums
which are the subject of such delay or default. The General Partner, in its
sole discretion may, upon notice to the Partners, declare additional
Redemption dates and may cause the Partnership to redeem fractions of Units
and, prior to registration of Units for public sale, redeem Units held by
Partners who do not hold the required minimum amount of Units established,
from time to time, by the General Partner.
Redemption of Units shall be charged a redemption fee, payable to the
Partnership, to be applied first to pay organization costs and, thereafter, to
the benefit of the other Partners in proportion to their Capital accounts,
equal to four percent (4%) for all Redemptions effective during the first six
(6) months after commencement of trading. Thereafter, there will be a
reduction of one percent (1%) for each six (6) months the investment in the
Units remained invested in the Fund after the initial six months; i.e., 7-12
months a Redemption fee of 3%, 12-18 months 2%, 18-24 months 1%, and,
thereafter, no redemption fee. The principal of the General Partner may
withdraw from the Partnership at the time the Minimum number of Units are sold
without payment of a Redemption fee.
See the Limited Partnership Agreement, Exhibit A, and "The Limited Partnership
Agreement, Redemptions". Distributions will be made from the Partnership only
in the sole discretion of the General Partner and no such distributions are
expected to be made.
Plan of Distribution
The Units are being offered and sold through Futures Investment Company
("FIC"), the Affiliated IB of the principal of the general partner, and other
broker dealers it, or those the General Partner may select, on a best efforts
basis. The selling commission will be six percent (6%) of the gross
subscription for all Units sold and be subject to waiver at the sole
discretion of the General Partner. See "Subscription Procedure" and "Plan of
Distribution". FIC is registered as a broker dealer with the SEC and is a
member of the National Association of Securities Dealers, Inc. (the "NASD").
Subscription Procedure
The minimum investment per subscriber in the Partnership is $25,000. The
General Partner may, in its sole discretion, agree to accept investments from
a subscriber of less than $25,000; provided, however, no such subscription
shall be less than $5,000. All investments are subject to compliance with the
minimum suitability standards established by the state of residence of the
investor. Unless higher amounts are otherwise specified for residents of a
particular state, an investor must have at least either (i) a minimum net
worth (determined exclusive of home, home furnishings, and automobiles) of
$150,000, or (ii) a minimum annual gross income of $45,000 and a minimum net
worth of $45,000 (once again determined exclusive of home, home furnishings
and automobiles). In the case of sales to fiduciary accounts, the net worth
and income standards may be met by the beneficiary, the fiduciary account, or
by the donor or grantor who directly or indirectly supplies the funds to
purchase the Units, if the donor or grantor is the fiduciary. In order to
purchase
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<PAGE>
Units, an investor must complete, execute, and deliver to the General Partner,
a Subscription Agreement, see Exhibit "D".
RISK FACTORS
Investment in the Units is speculative, involves a high degree of risk, and is
suitable only for persons who have no need for liquidity in their investment
and who can also afford to lose their entire investment in the Partnership.
In addition to the Risk Disclosure Statements at the beginning and in the
Summary of this Prospectus, investors should carefully consider the following
risks and the conflicts of interests before subscribing for Units. All of
these risks and conflicts are present, in different degrees, and without
regard to whether the Minimum or the maximum number of Units are sold.
NO PRIOR OPERATION EXPERIENCE OF THE GENERAL PARTNER
The General Partner of this Partnership is a recently formed Delaware
corporation which has not previously operated a commodity pool or engaged in
any other business. However, both Frischmeyer and Commoditech, to whom 50%
and 20% of the trading equity will be allocated, respectively, have been
trading since 1981 and 1992, respectively. See "The Commodity Trading
Advisors". In addition, the principal of the General Partner is the principal
of the general partner of both another public commodity pool, Fremont Fund,
Limited Partnership and a privately offered commodity pool, Auburn Fund,
Limited Partnership, and has over fifteen years of experience selecting
commodity trading advisors to manage individual investor accounts and
describing how individual managed futures accounts work to individual
investors. See "No Prior Performance".
THE PARTNERSHIP WILL PAY SUBSTANTIAL CHARGES - INVESTORS HAVE LIMITED
OPPORTUNITY TO REALIZE RETURN ON INVESTMENT
The Partnership is obligated to pay fixed brokerage commissions of nine
percent (9%) per year, payable monthly upon the assets assigned by the General
Partner for trading, a management fee to the General Partner of three percent
(3%) of Net Asset Value, payable monthly, and a management fee on the equity
assigned to the CTAs of 3%, payable monthly, plus
10
<PAGE>
$23,000 per year, ($5,000 in legal expense and $18,000 in accounting and audit
charges), together with Offering Expenses estimated to be $47,000 and
Organizational Expenses of $5,000, amortized on a straight line method over
the first 60 months of the Partnership's operation. The General Partner has
advanced the Offering Expenses but will be reimbursed for such expenses from
the gross proceeds of the Offering from the break of Escrow at the time of the
Initial Closing. Upon admission of subsequent Partners to the Partnership, a
charge will be made to such newly admitted Partners equal to their pro rata
share of the Offering Expenses which will be credited to the Capital Accounts
of the prior admitted Partners to reimburse them for the Offering Expenses
they advanced. The Partnership expects to earn interest income. The
Partnership must earn income of $304.20 per Unit during the first year to
permit an investor to redeem a Unit at the original offering price of $1,000.
The Partnership must pay variable operating expenses such as incentive fees to
the CTAs, telephone, postage, and office supplies, and extra-ordinary
expenses, such as claims and defense of claims from brokers, Partners, and
other parties. The Partnership expects to pay $153,000 if the Minimum
($700,000) is raised, or $1,098,000 if the Maximum ($7,000,000) is raised, in
commissions, fees and expenses during the first year of operation. In
subsequent years, the Partnership will be subject to commissions, fees and
operating expenses of $129,000 assuming gross capital of $700,000, or
$1,073,000 assuming gross capital of $7,000,000. These estimates do not
include incentive fees and other variable or unestimatable expenses. Also,
because the incentive fees will be determined on a quarterly, rather than on
an annual basis, and will be paid to the CTAs when profitable without regard
to total income or loss of the Partnership during the period, the Partnership
may be subject to substantial incentive fees in any given twelve (12)
consecutive month period despite total losses which produce a decline in the
Partnerships Net Assets for any such period. See "Description of Charges to
the Partnership". The above charges may make it difficult for investors to
redeem their Units at a price equal to or above the purchase price.
NO RIGHT TO TRANSFER UNITS - LIMITED ABILITY TO REALIZE RETURN ON INVESTMENT
Units cannot be assigned, transferred or otherwise encumbered except upon
certain condition, including the consent of the General Partner as set forth
in the Limited Partnership Agreement, which also imposes certain conditions
and restrictions on the ability of a transferee of a Unit to become a
substituted Limited Partner. In no event may an assignment be made or
permitted until after two years from the date of purchase of such assigned or
transferred Units(s) by said Partner; and, provided, further, that full Units
must be assigned and the assignor, if he is not assigning all of his Units,
must retain more than five Units. Any such assignment shall be subject to all
applicable securities, commodity, and tax laws and the regulations promulgated
under each such law. The General Partner shall review any proposed assignment
and shall withhold its consent in the event it determines, in its sole
discretion, that such assignment could have an adverse effect on the business
activities or the legal or tax status of the Partnership, including
jeopardizing the status of or causing a termination of the Partnership for
Federal income tax purposes or affecting characterizations or treatment of
income or loss. See "The Limited Partnership Agreement, No Right to Transfer
Without Consent of General Partner" and Exhibit A, "The Limited Partnership
Agreement", Article VIII which provides that no transfer of Units may be made
without the written approval of the General Partner. See Article VI,
paragraph 6.1 and 6.2, of the Limited Partnership Agreement attached as
Exhibit A.
Restrictions and conditions are also imposed upon a Partner's right and
ability to cause the Partnership to redeem and liquidate the Partner's Units,
including approval by the General Partner and certain liquidity conditions.
Redemptions may also be honored only in part and/or delayed and/or suspended
in certain circumstances. These circumstances include, but are not limited to,
the inability to liquidate positions as of such Redemption date or default or
delay in payments due the Partnership from banks, brokers, or other persons.
The Partnership may in turn delay payment to Partners requesting Redemption of
Units of the proportionate part of the Net Unit Value represented by the sums
which are the subject of such delay or default. Redemption of Units shall be
charged a redemption fee, payable to the Partnership, to be applied first to
pay organization costs and, thereafter, to the benefit of the other Partners
in proportion to their Capital accounts, equal to four percent (4%) for all
Redemptions effective during the first six (6) months after commencement of
trading. Thereafter, there will be a reduction of one percent (1%) for each
six (6) months the investment in the Units remained invested in the Fund after
the initial six months. The General Partner may withdraw from the Partnership
at the time the Minimum number of Units are sold without payment of a
Redemption fee. See "The Limited Partnership Agreement, Redemptions".
Further, substantial Redemptions of Units could require the Partnership to
liquidate positions more rapidly than otherwise desirable in order to raise
the necessary cash to fund the Redemptions, and, at the same time, cause a
smaller equity base for the Partnership. The absence of buyers or sellers in
the market could also make it difficult or impossible to liquidate positions
in this circumstance on favorable terms, and may result in further losses to
the Partnership which decrease the Net Unit Value of the remaining outstanding
Units.
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INVESTORS MUST RELY UPON THEIR LIMITED RIGHT OF TRANSFER AND REDEMPTION RIGHTS
TO REALIZE A RETURN ON THEIR INVESTMENT
Since there is no assurance that the Partnership will distribute to the
Partners any profits the Partnership may experience, the Partners will have to
depend on their limited and restricted transfer and Redemption rights to
realize their investment in the Units. See "The Limited Partnership
Agreement, Redemptions".
RELIANCE ON THE PRINCIPAL OF THE GENERAL PARTNER COULD BE RESTRICTIVE TO
PARTNERSHIP ACTIVITIES
Limited Partners will be relying entirely on the ability of the General
Partner to select and to monitor the commodity trading activity of the
Partnership, including the CTAs and any additional or substituted trading
advisors that may be retained in the future. Ms. Pacult is the sole principal
and officer of the General Partner, is a principal of the IB and the Selling
Agent, and the Partnership currently has no employees and, therefore, no
report of executive compensation is made in this Prospectus. If Ms. Pacult
were to become incapacitated or otherwise rendered incapable of performing her
duties as principal of the General Partner, the Partnership would have to
cease operations and trading until a replacement could be found. In addition,
the General Partner must maintain sufficient net worth to make this offering
pursuant to the rules and regulations of certain State Securities
Administrators (the "NASAA Guidelines") and to maintain the tax status of the
Partnership pursuant to the Rules and Regulations of the Federal Internal
Revenue Service ("IRS Requirements"). To accomplish those results, the
General Partner has entered into a Subordinated Loan Agreement dated February
1, 1998, with Ms. Pacult whereby Ms. Pacult has agreed to loan up to $100,000
to the General Partner to be repaid on January 12, 2019, or at such time as
the General Partner has sufficient net worth to comply with NASAA Guidelines
and IRS Requirements. In the event of Ms. Pacult's incapacity to supply the
loan, the Partnership could be unable to secure a similar loan from another
source and would have to cease operations and trading.
GENERAL PARTNER AND CTAs TO SERVE OTHER COMPETING BUSINESSES
The General Partner and its principal expect to manage additional pools in the
future which may use one or more of the CTAs (and, thus, similar trading
methods as the Partnership) and also use the IB that is Affiliated with the
principal of the General Partner to enable them to negotiate better terms for
clearing and other services provided, which may produce better results for
such other pools. See "Responsibility of the General Partner". The principal
of the General Partner is also the principal of the general partner of both
another public commodity pool, Fremont Fund, Limited Partnership, and a
privately offered commodity pool, Auburn Fund, Limited Partnership, which use
the same IB and one of the CTAs (Frischmeyer) as the Partnership. Each CTA
currently manages other commodity accounts and may manage new or additional
deposits to existing accounts, including personal accounts and other commodity
pools. Although each CTA intends to use similar trading methods for the
Partnership and all other discretionary accounts it manages, it may vary the
trading method applicable to the Partnership from that used for other managed
accounts. No assurance is given that results of the Partnership's trading
will be similar to that of any other accounts which are now, or in the future,
concurrently managed by any CTA. See "Risk Factors", "Trading Management",
and "The Commodity Trading Advisors".
PARTNERSHIP HAS NO OPERATING HISTORY
As a newly formed commodity pool, the Partnership has no operating history,
and therefore no history of generating profits. There is no way to predict
the performance of the Partnership. Additionally, the General Partner has no
prior experience as a commodity pool operator, though the principal of the
General Partner is the principal of both another public commodity pool,
Fremont Fund, Limited Partnership and a privately offered commodity pool,
Auburn Fund, Limited Partnership. See "Description of the General Partner";
and, "No Prior Operation Experience of the General Partner" in this section.
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<PAGE>
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE
Certain actual and potential conflicts of interest do exist in the structure
and operation of the Partnership which must be considered by investors before
they purchase Units in the Partnership. Specifically, the principal of the
General Partner is also a principal of Futures Investment Company ("FIC"), the
IB and Selling Agent. It would therefore be unlikely for the General Partner
to replace FIC as the IB as it receives 9% in fixed commissions from the
Partnership to pay round-turn brokerage commissions and trailing commissions.
It would also be unlikely for the General Partner to dismiss FIC as the
Selling Agent as it receives 6% trailing commissions from the IB. In
addition, due to the Selling Agent's affiliation with the principal of the
General Partner, no independent due diligence of the offering will be
conducted for the protection of the investors. See "Risk Factors", "Conflicts
of Interest", and the Limited Partnership Agreement attached as Exhibit A to
this Prospectus.
LIMITED PARTNERS WILL BE TAXED ON PROFITS NOT DISTRIBUTED
The Partnership is not required to make any cash distributions from profits
and the principal objective of the Partnership is to increase capital, not
create cash flow. If the Partnership realizes profits for a fiscal year, such
profits will be taxable to the Partners in accordance with their distributive
share whether or not the profits have been distributed. Distributions to
Limited Partners may not equal taxes payable by Partners with respect to
Partnership profit. Also, the Partnership might sustain losses offsetting
such profit after the end of the year, so a Partner might never receive a
distribution in an amount equal to the distributive share of the Partnership's
prior year's taxable income. See "Federal Income Tax Aspects" and Exhibit A,
the Limited Partnership Agreement.
PRESENT TRADE SELECTION METHODS SUBJECT TO SUDDEN ADVERSE CHANGE
The Partnership will rely, pursuant to the Advisory Agreements and Powers of
Attorney attached as Exhibits F, G H, I and J upon Frischmeyer, Commoditech,
Rosenbery, JAH and C&M, the CTAs, for the implementation of trading methods
and strategies. The Advisory Agreements provide that either the General
Partner, or any CTA, may terminate the relationship for any reason without
notice to the other or the Limited Partners, and under these circumstances,
the General Partner has absolute discretion to choose alternate CTAs. If the
services of any CTA becomes unavailable, for any reason, the General Partner
will select one or more other trading advisors to trade for the Partnership.
No assurance is provided that any other substitute traders or methods will
perform profitably or will be retained on as favorable terms as the replaced
CTA.
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT
Limited Partners will not participate in the management of the Partnership or
in the conduct of its business. To the extent that a Limited Partner would
attempt to become involved or identified with the management of the
Partnership, such Limited Partner could be deemed a General Partner of the
Partnership. No such right is conferred upon any Limited Partner by the
Partnership Agreement. See Exhibit A, the Limited Partnership Agreement.
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE - UNITS MAY NOT BE
REDEEMABLE BEFORE SUBSTANTIAL DEVALUATION OF NET UNIT VALUE
Commodity futures, forward, and option contract prices are highly volatile.
Price movements are influenced by changes in supply and demand; weather;
agricultural trade, fiscal, monetary and exchange control programs and
policies of governments; national and international political and economic
events; and, changes in interest rates. In addition, governments, exchanges,
and other market authorities intervene to influence prices. In addition,
notwithstanding that the analysis of the fundamental conditions by the
Partnership's trader is correct, prices still may not react as predicted. It
is also possible for most of the Partnership's open positions to move against
it at the same time. These negative events may occur in connection with
changes in price which reach the daily limit beyond which no further trading
is permitted until the following day. It is possible for daily limits to be
reached in the same direction for successive days. Should this occur and one
of the CTAs has taken a position on behalf of the Partnership which is adverse
to the daily move in a particular
13
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commodity, the Partnership may not be able to exit the position. And when the
market reopens, the position could cause a substantial loss to the
Partnership. The loss could exceed not only the amount allocated for margin
to establish and hold the position but also more than the total amount of
equity in the account. Redemption only occurs at the end of the month and is
based upon the Net Unit Value at that time. Investors could be prevented from
being able to redeem the Units before significant devaluation occurs. See
"The Limited Partnership Agreement, Redemptions".
LOW SECURITY DEPOSIT IN RELATION TO PRICE MOVEMENT
The small amount of money to be deposited ("margins") to hold or short a
contract relative to its value (typically between 3% and 20% of the value)
permit a large percentage gain or loss relative to the size of a commodity
account. A small price movement in the value of the contract bought or sold
is expected to result in a substantial percentage gain or loss of equity to
the Partnership. For example, if at the time of purchase, five percent (5%)
of the price of the futures contract is deposited as margin, a five percent
(5%) decrease in the value of the position will cause a loss of all of the
equity allocated to the trade, which could equal all of the value of the
account. In addition, the amount of margin assigned to a trade by the FCM is
only a security deposit to hold the position. The loss on a position could be
substantially more than the margin deposited and the value of the account.
TRADE SELECTION MADE WITHOUT NOTICE TO PARTNERSHIP - PARTNERSHIP MAY BECOME
DEVALUED BEFORE GENERAL PARTNER IS ABLE TO TAKE REMEDIAL ACTION
The CTAs will enter trades on behalf of the Partnership directly with the FCM
without the prior knowledge or approval of the General Partner of the methods
used by the CTAs to select the trades, the number of contracts, or the margin
required. In addition, the General Partner does not know the prior methods
used by the CTAs to compile the track record disclosed in this Prospectus
which was the basis for the selection of the CTAs by the General Partner to
trade for the Partnership. Nor does the General Partner know how many times,
if any, the trading methods of the CTAs have been changed in the past. The
General Partner will not be notified of any modifications, additions or
deletions to the trading methods and money management principles utilized by
the CTAs. It is possible for the Partnership to experience sudden and large
losses before the General Partner becomes aware of the need to take remedial
action.
PARTNERSHIP COULD LOSE SUBSTANTIAL ASSETS DUE TO LACK OF MARKET LIQUIDITY
It is not always possible to execute a buy or sell order, due to market
illiquidity. Such illiquidity can be caused by a lack of open interest in the
contract, market conditions which produce no persons willing to take a
particular side of a trade, or it may be the result of factors like the
suspension of trading because of "daily price limits". Most United States
commodity exchanges limit movement in a single direction in one trading day by
rules referred to as "daily price limits". These limits provide that no
trades may be executed at prices beyond the daily limits. Once the price of a
futures contract for a particular commodity has increased or decreased by an
amount equal to the daily limit, positions in the commodity can be neither
taken nor liquidated unless traders are willing to effect trades at or within
the limit. Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading. Similar future
occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject it to substantial losses which could exceed
the equity on deposit ("margins") for such trades. The inability to liquidate
positions could frustrate the trading plan of the CTAs and cause losses to the
Partnership in excess of the money invested.
INCREASED TRADING EQUITY TO CTAs MAY ADVERSELY AFFECT THEIR PERFORMANCE
Commodity trading advisors often are unable to adjust to a change in the size
of the money they have under management. This is caused by numerous factors
including, but not limited to, the difficulty of executing substantially
larger trades made necessary by the larger amount of equity under management,
by the restrictive effect of limits imposed by the CFTC on the number of
positions that may be taken on certain commodities (Position Limits), or by a
diminishment of the opportunity to Scale in Positions, or taking positions at
different prices at different times and allocating those positions on a
ratable basis, when available equity is reduced. See the definitions section,
Appendix I, for the full definitions of Position Limits and Scale in
Positions. The CTAs have not agreed to limit the amount of additional equity
that they may manage, and they contemplate managing (and in all likelihood
will manage) additional equity. Increased equity generally results in a
larger demand for the same futures contract position among the accounts
managed by a commodity trading advisor. CTA performance suffers when the
total equity available for the CTA to trade increases to a level the market
selected will not permit absorption of a position at the time the CTA selects.
The Minimum/Maximum of
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the Fund is not expected to be the problem. When the CTAs are allocated
trading equity upon the sale of the Minimum or upon the sale of additional
Units, their performance may unexpectedly suffer. Furthermore, a considerable
number of analysts believe that a trading advisor's rate of return tends to
decrease as the amount of equity under management increases.
MINIMUM AMOUNT OF EQUITY MAY BE INSUFFICIENT FOR PROFITABLE OPERATION
The Partnership will commence trading upon the sale of seven hundred (700)
Units. The General Partner has caused the Partnership to accept the risks of
trading and payment of Offering Expenses prior to the sale of the total
offering. The General Partner believes $700,000 is sufficient equity for the
Partnership to break escrow, pay selling expenses, be obligated to pay
Offering Expenses, and commence trading.
PARTNERSHIP WILL NOT BE COMPENSATED IF PARTNERSHIP ACTIVITY RESULTS IN LOWER
COMMISSIONS FOR OTHER ACCOUNTS
The General Partner, and its principal, have not made agreements with or on
behalf of the Partnerships with third parties for the purpose of benefit,
directly or indirectly, to either of them; however, the maintenance of the
Partnership's Assets with the Partnership's FCM is expected to increase
trading activities which may enable the IB Affiliated with the principal of
the General Partner to negotiate a lower payment to the FCM for clearing the
trades of other accounts, including partnerships, presently in existence or
established in the future by the General Partner, its principal, or other
customers of the IB Affiliated with the principal of the General Partner, or
its principals, and their Affiliates.
FAILURE OF COMMODITY BROKERS OR BANKS COULD RESULT IN LOSS OF ASSETS
If the FCM engaged by the Partnership to execute trades were to become
bankrupt, it is possible that the Partnership would be able to recover none or
only a small portion of its assets held by such FCM. In addition, those funds
deposited in the Partnership's account at a U.S. bank will be insured only up
to $100,000 under existing Federal regulations. All insured deposits are
subject to delays in payment and amounts on deposit in a single bank in excess
of $100,000 would be subject to the risk of total loss.
COUNTERPARTY CREDITWORTHINESS MUST BE RELIED UPON IN FOREIGN MARKETS
The trading of commodities involves the entry of a contract or option to
contract for the delivery of goods or money at a future date. The value of
the contract or option is directly dependent upon the creditworthiness of the
other party to the contract. The CTAs selected will engage in trading of
commodities on United States Commodity Exchanges, foreign commodity exchanges,
and the inter-bank currency markets. The commodity exchange contracts and
options traded on United States Exchanges are subject to regulation pursuant
to the Commodity Exchange Act and are guaranteed by the credit of the members.
Contracts and options upon foreign commodity exchanges and the inter-bank
currency markets are usually not regulated by specific laws and are backed
only by the parties to the contracts. It is possible for a price movement in
a particular contract or option to be large enough to destroy the
creditworthiness of the contracts and options issued by a particular party or
all of the contracts and options of an entire market. In that situation, the
CTA could lose
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the entire value of a position with little recourse to regain any of its
value. The CTAs expect to manage this risk by trading a widely diversified
portfolio of futures markets.
TRADING ON FOREIGN EXCHANGES INHERENTLY RISKIER THAN U.S. MARKETS
The Partnership may trade in futures, forward and option contracts on
exchanges located outside the United States where CFTC regulations do not
apply, and trading on such exchanges may be subject to greater risks than
trading on United States exchanges. The trades will be denominated in the
foreign currency at the location of the trade. Accordingly, in addition to
the price fluctuation of the position taken, the rate of inflation or other
currency related factor may adversely affect the price. Thus, a trader is at
greater risk to losing the value of a trade on foreign exchanges than on US
exchanges, and may lose a significant portion of his allocated equity for
trading.
INVESTORS COULD INCUR SUBSTANTIAL LOSSES FROM THE PARTNERSHIP TRADING ON
FOREIGN EXCHANGES TO WHICH THEY WOULD NOT HAVE BEEN SUBJECT HAD IT LIMITED THE
TRADING OF ITS CTAs ON BEHALF OF THE PARTNERSHIP TO U.S. MARKETS.
TRADING FORWARD CURRENCY CONTRACTS ARE NOT SUBJECT TO U.S. REGULATION AND ARE
INHERENTLY RISKY
The forward contracts are negotiated by the parties rather than by the open
out-cry method used on United States exchanges. The Partnership may
experience credit limitations and other disadvantages during negotiations that
may compromise its ability to maximize profits. There are no limitations on
daily price moves or position limits in forward contracts, although the
principals with which the Partnership may deal in the forward markets may
limit the positions available to the Partnership as a consequence of credit
considerations. Accordingly, the Partnership is exposed to significant loss
without the protective stops of the U.S. regulated markets.
OPTIONS TRADING PUTS MORE PARTNERSHIP CAPITAL AT RISK
The Partnership may engage in the trading of options (both puts and calls).
No assurance can be given that a liquid market will exist for any particular
commodity option or at any particular time after a position is taken. If
there is insufficient liquidity in the option market at the time, the
Partnership may not be able to buy or sell to offset (liquidate) the positions
taken. Options trading allows the trade to be put in place with less equity
on deposit to secure the risk of loss. And, therefore, the investor is
exposed to the loss of a greater percentage of equity allocated to the trade
because of the increased number of positions which can be held as contrasted
with futures or physical positions. In the commodities markets the investor
puts at risk more capital at risk than the amount committed to margin. The
CTA may become subject to a margin call, or the request for the CTA to put
more money in its account by the futures commission merchant to cover the
losses sustained in a trade. In this situation, the overall performance of
the Partnership may suffer due to the money lost on the trade and the possible
need for additional capital to cover the margin call.
POSITION LIMITS MAY AFFECT PROFIT POTENTIAL
The CFTC and the United States commodity exchanges have established limits
referred to as "Speculative Position Limits" or "Position Limits" (these are
different from "daily limits" described above) on the maximum net long or net
short futures or options positions which any person or group of persons may
own, hold, or control in futures contracts, except position limits do not
presently apply to certain currency futures contracts. No limitations have
been placed by the General Partner upon the positions or types of contracts
which may be traded by the CTAs who will trade for the Partnership. All
commodity accounts owned, controlled or managed by a CTA and the advisor's
principals will be combined for position limit purposes, to the extent they
may be applicable. Thus, a CTA may not be able to hold sufficient positions
for the Partnership to maximize the return on a particular trade on behalf of
the Partnership due to similar positions taken for other accounts or entities,
and the performance of the Partnership may not be as great as it could
otherwise be.
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COMPETITION IS INTENSE
Commodity futures trading is highly competitive. The Partnership will be
competing with others who may have greater experience, more extensive
information about and access to developments affecting the futures markets,
more sophisticated means of analyzing and interpreting the futures markets,
and greater financial resources. The greater the experience and financial
resources, the better chance an investor has to trade commodities at a profit.
The Partnership will be limited by trading without the advantages of a
warehouse to take delivery of commodities or a large capital base to hold
positions during a period when prices do not perform as expected.
NO ASSURANCE THAT UNITS NECESSARY TO COMMENCE BUSINESS WILL BE SOLD -
INVESTORS MAY LOSE USE OF INVESTMENT CAPITAL
Futures Investment Company and other broker dealers selected, if any, have no
obligation to purchase Units or otherwise support the price of the Units. The
broker dealer selling agreements obligate the broker dealers to use their best
efforts only. See "Subscription Procedure and Plan of Distribution". If the
Minimum is not sold within one year, investors will be promptly refunded the
amount of their investment plus interest; however, they will lose the use of
that investment capital during the period between the date of the investment
to the lapse of the offering period.
COMMENCEMENT OF BUSINESS MAY OCCUR AT SUBOPTIMAL TIME FOR MAXIMIZING PROFITS
Upon the sale of the Minimum, the Partnership will encounter a start-up period
during which it will incur certain risks relating to the initial assignment of
equity to the CTAs and investment by the CTAs of its assigned trading equity
in commodity trading positions. The Partnership may commence trading
operations at a difficult time, such as after sustained moves in the
commodities markets, which result in significant initial losses. Moreover,
the start-up period also represents special risk in that the level of
diversification of the Partnership's portfolio may be lower than in a Fully-
Committed portfolio, where the objective percentage of equity is placed at
risk or the CTA reaches the limit in number of positions. The CTAs divide the
equity assigned to them into uniform dollar amounts to trade. For example,
Mr. Frischmeyer uses his best efforts to trade every $40,000 the same. In
other words, the Trading Matrix for Mr. Frischmeyer is $40,000. No assurance
can be given that the CTAs' procedures for moving to a Fully-Committed
Position within its allocated equity will be successful. For example, a CTA
may have determined that the grains are in short supply and have taken a
position in February while the Partnership is not ready to break escrow until
May. The entry into the grains in May could be too late to experience the
gains required to assume the risk of taking the position and the CTA may elect
to defer taking a fully invested position until his grain trade is completed
for his other accounts. See the Definitions in Appendix I for the full
definitions of Trading Matrix and Fully Committed Position.
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CHANGES IN THE SIZE OF THE PARTNERSHIP MAY ADVERSELY AFFECT CTAs' ABILITY TO
TRADE PROFITABLY
Similar to the effects of the commencement of business discussed in the
previous risk factor, any substantial increase or decrease in the CTAs'
trading equity could have an adverse effect on their trading, A CTA may be
unable to adjust to and properly diversify a sudden increase in trading equity
to be consistent with its Trading Matrix or trading strategy. A sudden
decrease in equity due to Redemptions may cause the CTA liquidate a position
before experiencing a profit, or the CTA may preferentially liquidate
positions to experience as little loss as possible in such a way that results
in an undiversified portfolio. There is no guarantee that the CTAs will be
able to recover from such changes in trading equity. See also "Risk Factors,
Increased Trading Equity to CTAs May Adversely Affect Their Performance", and
"The Limited Partnership Agreement, Redemptions".
FAILURE TO MAINTAIN NET WORTH OF THE GENERAL PARTNER MAY RESULT IN SUSPENSION
OF TRADING AND SUSTAINED LOSSES
The state securities administrators have established guidelines applicable to
the sale of interests in commodity pool limited partnerships. Among those
guidelines is the requirement that the Net Worth of a sole corporate general
partner be equal to five percent (5%) of the amount of the offering; provided,
however, such Net Worth is never to be less than $50,000 nor is it required to
be more than $1,000,000. The General Partner intends to use its best efforts
to maintain its Net Worth in compliance with these guidelines. There can be
no assurance, however, that the General Partner can maintain its Net Worth in
conformity with these requirements. The reduction in Net Worth to below these
limits will cause a suspension in trading to either permit the General Partner
to restore its Net Worth or to liquidate the Partnership. If trading is
suspended, there is no guarantee that the CTAs will be able to liquidate their
positions without sustaining losses, or that they will be able to trade
profitably if trading resumes. Any successful claims against the General
Partner are expected to be limited in amount of recovery to the amount of Net
Worth maintained by the General Partner.
INABILITY TO MAINTAIN NET WORTH OF GENERAL PARTNER COULD RESULT IN POSSIBILITY
OF TAXATION AS A CORPORATION
When a sole general partner is a corporation, as is the case in this
Partnership, IRS Requirements include a "significant" Net Worth test as one of
the elements examined to determine if a partnership will be taxed as a
partnership rather than as an association taxed as a corporation. The General
Partner, to qualify for the safe harbor ("Safe Harbor") definition of
"significant" Net Worth is required to maintain a net worth of fifteen percent
(15%) of the first $2,500,000 of capital contributions to all such
partnerships or $250,000, whichever is less, and, ten percent (10%) of all
capital contributions in excess of $2,500,000. The General Partner intends to
use its best efforts to utilize this Safe Harbor or otherwise to satisfy the
IRS requirements necessary to cause the Partnership to be taxed as a
partnership and not as a corporation. The tax status of the Partnership has
not been confirmed by a ruling from the IRS. No such ruling has been or will
be requested on behalf of the Partnership. If the Partnership should be taxed
as a corporation for Federal income tax purposes in any taxable year or years,
(i) income or loss of the Partnership would not be passed through to the
Partners; and, (ii) the Partnership would be subject to tax on its income at
the rate of tax applicable to corporations; and, (iii) all or a portion of
distributions, if any, made to Partners would be taxed to the Partners as
dividend income; and, (iv) the amount of such distributions would not be
deductible by the Partnership in computing its taxable income. See the
"Federal Income Tax Aspects" section of this Prospectus.
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GENERAL PARTNER NOT TO ADVISE INVESTORS - INCLUDING RETIREMENT PLAN AND IRA
PARTICIPANTS
The purchase of a Unit does not itself create an IRA and the creation and
administration of an IRA are solely the responsibility of the investor. A
retirement account should carefully consider the diversification of the
retirement assets and one should not place more of those assets in this
Partnership than the investor determines is prudent to allocate to highly
speculative, high risk investments, such as the Partnership. If the investor
invested a significant portion of the assets of their retirement plan or IRA
assets in the Partnership, they could be exposing that portion to the
possibility of significant loss. The General Partner does not undertake to
advise investors in any manner (including diversification, prudence and
liquidity) with respect to investment in the Partnership for any investor,
including retirement accounts. Accordingly, investors must rely upon the
experience of qualified investment counsel.
INVESTORS NOT PROTECTED BY THE INVESTMENT COMPANY ACT OF 1940
The Partnership, the General Partner, Ms. Pacult, and the Commodity Trading
Advisors are not required nor do they intend to be registered under the
Investment Company Act of 1940, as amended (or any similar state law) as
either an investment company or investment advisor. Investors, therefore, are
not accorded the protective measures provided by any such legislation.
POSSIBILITY OF AUDIT - PARTNERS MAY BE SUBJECT TO AUDIT AND PENALTIES
Historically, partnerships have had a higher percentage of returns audited by
the IRS than other forms of business entities. In the event of any such audit
of the Partnership's return, there can be no assurance that adjustments to the
reported items will not be made. If an audit results in an adjustment,
Partners may be required to file amended returns, may be subject to a separate
audit, and may be required to pay back taxes, plus penalty and interest.
GENERAL PARTNER MAY SETTLE IRS CLAIM NOT IN THE BEST INTEREST OF THE PARTNERS
The General Partner is named "tax matters partner" and has been granted the
power to settle any claim from the IRS on behalf of each Limited Partner who
holds one percent (1%) or less in the Partnership, who does not timely object
to the exercise of such authority, after notice. Such settlement may not
necessarily be in the best interest of the individual limited partner. See
"Federal Income Tax Aspects".
POSSIBLE ADVERSE DETERMINATION BY THE IRS - PARTNERS MAY BE SUBJECT TO BACK
TAXES AND PENALTIES
The General Partner has obtained the opinion of The Scott Law Firm, P.A. that
the Partnership, as it is intended to be operated by the General Partner, will
be taxed as a Partnership and not as an association taxable as a corporation.
The Law Firm is not able to opine upon the tax treatment of certain Offering
and operating Expenses as the determination depends upon questions of fact to
be resolved by the General Partner on behalf of the Partnership. For example,
commodity trading adviser fees are aggregated with employee business expenses
and other expenses of producing income and the aggregate of such expenses is
deductible only to the extent such amount exceeds 2% of the taxpayer's
adjusted gross income. It is the General Partner's position that the
Partnership's intended operations will qualify as a trade or business. If
this position is sustained, the brokerage commissions and performance fees
will be deductible as ordinary and necessary business expenses. In the event
of an adverse determination by the IRS, these expenses would be added back to
the income earned by the Partnership and the Form K-1 submitted to each
Partner revised upward to reflect this additional income. Were this event to
occur, it is likely that the reporting year adjustment would be after the
individual tax returns were filed by the Partners. The Partners would be
required to file amended returns and pay interest and penalty, if any, related
to the increase in tax assessed upon the increase in reportable income. Such
increase in reportable income would not result in an increase in the Net Unit
Value of the Units owned by the Partners. Syndication costs to organize the
Partnership and Offering Expenses will not be deductible or amortizable by the
Partnership or its Partners.
CONFLICTS OF INTEREST
Significant actual and potential conflicts of interest exist in the structure
and operation of the Partnership. The General Partner has used its best
efforts to identify and describe all potential conflicts of interest which may
be present under this heading and elsewhere in this Prospectus and the
Exhibits attached hereto. Prospective investors should consider that the
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General Partner intends to assert that Partners have, by subscribing to the
Partnership, consented to the existence of such potential conflicts of
interest as are described in this Prospectus and the Exhibits, in the event of
any claim or other proceeding against the General Partner, any principal of
the General Partner, the CTAs, any Principal of the CTAs, the Partnership's
FCM, or any principal of the FCM, the Partnership's IB or any principal or any
Affiliate of any of them alleging that such conflicts violated any duty owed
by any of them to said subscriber. Specifically, the Selling Agent is
Affiliated with the principal of the General Partner and, therefore, no
independent due diligence of the Partnership or the General Partner will be
made by a National Association of Securities Dealers, Inc. member.
GENERAL PARTNER, THE CTAs, AND THEIR PRINCIPALS MAY PREFERENTIALLY MANAGE
EQUITY FOR THEMSELVES AND OTHERS
The right of both Ms. Shira Del Pacult, the principal of the General Partner,
and the General Partner to manage and the actual management by the CTAs of
accounts they or their Affiliates own or control and other commodity accounts
and pools presents the potential for conflicts of interest. There is no
limitation upon the right of Ms. Pacult, the General Partner, the CTAs, or any
of their Affiliates to engage in trading commodities for their own account.
It is possible for these persons to take their positions in their personal
accounts prior to the orders they know they are going to place for the money
they manage for others. The General Partner will obtain representations from
all of these persons and their Affiliates that no such prior orders will be
entered for their personal accounts. The Partnership's CTAs will be effecting
trades for their own accounts and for others (including other commodity pools
in competition with this Pool) on a discretionary basis. It is possible that
positions taken by the CTAs for other accounts may be taken ahead of or
opposite positions taken on behalf of the Partnership. The General Partner
and its principal, should they form other commodity pools, and the CTAs may
have financial incentives to favor other accounts over the Partnership. In
the event the General Partner, its principal, or any CTA, or any of their
principals trade for their own account, such trading records shall not be made
available for inspection. The General Partner does not presently intend to
engage in trading for its own account; however, the principal of the General
Partner does trade for her own account. The CTAs also intend to trade for
their own accounts. Any trading for their personal accounts by the General
Partner, any commodity trading advisor selected to trade for the Partnership
or any of their principals could present a conflict of interest in regard to
position limits (i.e., a trader may legally only take a set number of
positions in all of its accounts combined), timing of the taking of positions,
or other similar conflicts. The result to the Partnership would be a
reduction in the potential for profit should the entry or exit of positions be
at unfavorable prices by virtue of position limits or entry of other trades in
front of the Partnership trades by the General Partner or CTAs responsible for
the management of the Partnership.
POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER MAY LIMIT
PARTNERS' ABILITY TO CONTROL CERTAIN ISSUES
There is no limit upon the number of Units in the Partnership the General
Partner and its principal and Affiliates may purchase, and it is possible,
though unlikely, that the General Partner and its Affiliates could purchase
sufficient Units in the Fund to retain voting control. It will be possible
for them to vote, individually or as a block, to create a conflict with the
best interests of the Partnership. Such voting control may limit the ability
of the Limited Partners to achieve a majority vote on such issues as amendment
of the Limited Partnership Agreement, change in the basic investment policy of
the Partnership, dissolution of the Partnership or the sale or distribution of
the Partnership's assets. However, since the General Partner is not entitled
to vote on questions related to its removal, that possibility does not present
a conflict of interests to the partnership.
GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF PARTNERSHIP
The General Partner's financial interest in the operation of the Partnership
in the form of the 3% management fee, creates a disincentive for it to
voluntarily replace itself, even if such replacement would be in the best
interest of the Partnership.
FEES AND CHARGES TO THE PARTNERSHIP NOT NEGOTIATED AND MAY DISCOURAGE
PROFITABLE TRADING
The three percent (3%) management fee to the General Partner and the amount of
the fixed commission of nine percent (9%) per year in lieu of round-turn
brokerage commissions, payable to the IB that is Affiliated with the principal
of the General Partner, have not been negotiated at arm's length. The General
Partner has a conflict of interest between its
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responsibility to manage the Partnership for the benefit of the Limited
Partners and the General Partner's interest in receiving the management fee
and the IB Affiliated with the principal of the General Partner receiving the
difference between the fixed commission charged the Partnership and the actual
transaction costs incurred by the FCM as a result of the frequency of trades
entered by the CTAs. See "Charges to the Partnership". The General Partner
will select the CTAs to manage the Partnership assets and the CTAs determine
the frequency of trading. Because the IB Affiliated with the General Partner
will receive the difference between the brokerage commissions and other costs
which will be paid on behalf of the Partnership and the fixed commission, the
General Partner's best interests are served if it selects trading advisors
which will trade the Partnership's equity assigned to them in a way to
minimize the frequency of trades to maximize the difference between the fixed
commission and the round-turn commissions and other costs to trade charged by
the FCM; i.e., it is in the best interest of the General Partner to reduce the
frequency of trading rather than concentrate on the expected profitability of
the CTAs without regard to frequency of trades. This conflict is offset by
the fact the General Partner does not select any of the trades and the CTAs is
paid an incentive of 15% of New Net Profits, or those Profits for each
quarterly period that the net value of the trading equity at the end of such
quarterly period for a CTA exceeds the highest previous quarterly net value of
the trading equity for that CTA. The arrangements between the General Partner
and the Partnership with respect to the payment of the commissions are
consistent in cost with arrangements other comparable commodity pools have
made to clear their trades. The General Partner has, however, assumed the
risk of frequency of trading, up to a maximum of three times the normal rate
by the CTAs and has assumed all liability for the payment of trailing
commissions.
CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE
Certain actual and potential conflicts of interest do exist in the structure
and operation of the Partnership which must be considered by investors before
they purchase Units in the Partnership. See "Risk Factors", "Conflicts of
Interest", and the Limited Partnership Agreement attached as Exhibit A to the
Prospectus. Specifically, the principal of the General Partner is also a
principal of Futures Investment Company ("FIC"), the IB and Selling Agent. It
would therefore be unlikely for the General Partner to replace FIC as the IB
as it receives 9% in fixed commissions from the Partnership to pay round-turn
brokerage commissions and trailing commissions. It would also be unlikely for
the General Partner to dismiss FIC as the Selling Agent as it receives 6%
trailing commissions from the IB. In addition, due to the Selling Agent's
affiliation with the principal of the General Partner, no independent due
diligence of the offering will be conducted for the protection of the
investors. The General Partner has taken steps to insure that the Partnership
equity is held in segregated accounts at the banks and futures commission
merchant selected and has otherwise assured the Selling Agent that all money
on deposit is in the name of and for the beneficial use of the Partnership.
GENERAL PARTNER TO DISCOURAGE REDEMPTIONS
The General Partner has an incentive to withhold distributions and to
discourage Redemption because the General Partner receives compensation based
on the Net Asset Value of the Partnership.
CTAs MAY ENGAGE IN HIGH RISK TRADING TO GENERATE INCENTIVE FEES
As a general rule, the greater the risk assumed, the greater the potential for
profit. Because the CTAs are compensated by the General Partner based on 15%
of the New Net Profit of the Partnership, it is possible that the CTAs will
select trades which are otherwise too risky for the Partnership to assume to
earn the 15% incentive fee on the profit should that ill-advised speculative
trade prove to be profitable.
IB AFFILIATED WITH THE GENERAL PARTNER WILL RETAIN A SHARE OF THE COMMISSIONS
AND IS NOT LIKELY TO BE REPLACED
The Partnership will pay a fixed brokerage commission of 9% per year, payable
monthly upon the assets assigned by the General Partner for trading to Futures
Investment Company, an introducing broker Affiliated with the General Partner.
Futures Investment Company will retain so much of the fixed brokerage
commission as remains after payment of the round turn brokerage commissions to
the Futures Commission Merchant and the 6% per year trailing commissions to
the associated persons who service the Partners' accounts in the Partnership.
Because the principal of the General Partner, Ms. Shira Pacult, is also a
principal in the IB and the Selling Agent, there is a likelihood that the
Partnership will continue to retain the IB even though other IB's may be
available to provide better service to the Partners and their accounts.
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NO RESOLUTION OF CONFLICTS PROCEDURES
As is typical in many futures partnerships, the General Partner has not
established formal procedures, and none are expected to be established in the
future, to resolve the potential conflicts of interest which may arise. It
will be extremely difficult, if not impossible, for the General Partner to
assure that these and future potential conflicts will not, in fact, result in
adverse consequences to the Partnership or the Limited Partners. The
foregoing list of risk factors and conflicts of interest is complete as of the
date of this Prospectus, however, additional risks and conflicts may occur
which are not presently foreseen by the General Partner. Investors are not to
construe this Prospectus as legal or tax advice. Before determining whether
to invest in the Units, potential investors should read this entire
Prospectus, including the Limited Partnership Agreement attached as Exhibit A
and the subscription agreement, and consult with their own personal legal,
tax, and other professional advisors as to the legal, tax, and economic
aspects of a purchase of Units and the suitability of such purchase for them.
See "Investor Suitability".
INTERESTS OF NAMED EXPERTS AND COUNSEL
The General Partner has employed The Scott Law Firm, P.A. to prepare this
Prospectus, provide certain tax advice and opine upon the legality of the
issuance of the Units. Neither the Law Firm, nor its principal, nor any
accountant or other expert employed by the General Partner to render advice in
connection with the preparation of the Prospectus or any documents attendant
thereto, have been retained on a contingent fee basis nor do they have any
present interest or future expectation of ownership in the Partnership or its
General Partner or the Underwriter or the CTAs or the IB or the FCM.
The Partnership and Futures Investment Company Share the Same Address
Both the Partnership and the Introducing Broker/Selling Agent, FIC currently
are located at 5916 N. 300 West, Fremont, IN 46737. It is possible, though
unlikely, that mail correspondence, files, or other materials belonging to or
intended for the Partnership could become intermixed with like items belonging
to or intended for FIC. To prevent this from occurring, strictly separate
mail receipt and files will be maintained for both entities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS
Atlas Futures Fund, Limited Partnership, (the "Partnership"), was organized
under the Delaware Uniform Limited Partnership Act as of January 12, 1998.
The principal office of the Partnership is located at 5916 N. 300 West,
Fremont, IN 46737. Its telephone number is (219) 833-1306 and facsimile
number is (219) 833-4411. The Partnership will terminate at 11:59 p.m. on
January 12, 2019, or upon an event causing an earlier termination as set forth
in the Limited Partnership Agreement. See Exhibit A - "Termination of the
Partnership".
The Partnership is managed by its General Partner, Ashley Capital Management,
Inc., a Delaware corporation, incorporated on October 15, 1996 (the "General
Partner" and "Commodity Pool Operator"). The Partnership will not have
officers or employees and, therefore, there is no report of executive
compensation in this Prospectus. The General Partner's principal office is
c/o Corporate Systems Inc., 101 North Fairfield Drive, Dover, Kent County, DE
19901. Ms. Shira Del Pacult is the sole principal, shareholder, director, and
officer of the General Partner and has no ownership in any of the CTAs or the
selling broker dealer. Mr. Michael Pacult, Ms. Pacult's husband, will have no
ownership or role in the management of the General Partner, but will be an
associated person, officer and fifty percent shareholder in the Affiliated
Introducing Broker and Selling Agent, Futures Investment Company, which will
be paid the fixed brokerage commissions by the Partnership. Mr. Pacult is
expected to sell Units in the Partnership. The principal of the General
Partner has over fifteen years of experience in the sale of commodity pool
interests for other pool operators and the management of individual managed
commodity accounts, and is the principal of the general partner of both
another public commodity pool, Fremont Fund, Limited Partnership and a
privately offered commodity pool, Auburn Fund, Limited Partnership.
The books and records for the Partnership will be maintained for six years at
5916 N. 300 West, P. O. Box C, Fremont, Indiana 46737. A duplicate set of the
books will be maintained by Mr. James Hepner, Certified Public Accountant,
1824 N. Normandy, Chicago, IL 60635, (773) 804-0074. Mr. Hepner will also
prepare the Form K-1s for the Partnership. The General Partner will serve as
tax partner for the Partnership. Frank L. Sassetti, & Co., 6611 West North
Avenue, Oak Park, IL 60302 will conduct the annual audit of the Partnership
and its General Partner and also prepare the Partnership tax returns.
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THE COMMODITY TRADING ADVISORS
The General Partner has initially selected five independent commodity trading
advisors ("CTAs") to conduct trading on behalf of the Partnership. They are
Michael J. Frischmeyer, who is to receive 50% of the assets assigned by the
General Partner to trade, Commoditech, Inc., which is to receive 20% of such
assets, and Rosenbery Capital Management, Inc., which is to receive 20% of
such assets, J.A.H. Research and Trading, which is to receive 5% of such
assets, and C&M Traders, Inc., which is to receive the remaining 5% of such
assets. The General Partner has provided the CTAs with a revocable power of
attorney pursuant to the terms of an advisory contract between the Partnership
and the CTAs to trade the account or accounts of the Partnership assigned by
the General Partner to the CTAs to trade. The markets to be traded, the
location of those markets, the size of the position to be taken in each
market, the timing of entry and exit in a market are within the sole judgment
of the CTAs.
THE ADVISORY CONTRACTS AND POWERS OF ATTORNEY
The General Partner will assign a portion of the Partnership assets to the
CTAs it selects to trade. The terms of this assignment of assets is governed
by Advisory Contracts and Powers of Attorney signed with each CTA. See
Exhibits F, G H, I and J. The Advisory Contracts and Powers of Attorney
granted by the Partnership to the CTAs is terminable upon immediate notice by
either party to the other. Accordingly, neither party can rely upon the
continuation of the Advisory Contracts and Powers of Attorney. Should the
Partnership prove to be profitable it is unlikely the General Partner will
terminate the Powers of Attorney granted to the CTAs responsible for the
production of those profits.
BUSINESS OBJECTIVE AND EXPENSES
The General Partner organized the Partnership to be a commodity pool, as that
term is defined under the Commodity Exchange Act, to trade exchange listed
futures and options contracts and non-listed forward contracts and options to
produce profits to the investors in the Partnership. The General Partner is
authorized to do any and all things on behalf of the Partnership incident
thereto or connected therewith. See Article II of the Limited Partnership
Agreement, attached as Exhibit A. The plan of operation is for the General
Partner to employ independent investment management to conduct this trading.
The Partnership is not expected to engage in any other business. The objective
of the Partnership is to achieve the potentially high rates of return which are
possible through speculative trading in the contracts and in the markets
identified in "The Commodity Trading Advisors". The General Partner intends
to allocate substantially all of the Partnership Capital to conduct this
trading with the CTAs identified in "The Commodity Trading Advisors". The
CTAs have advised that they intend to allocate between 20% and 30% of the
Capital assigned to them to trade to margin and secure the trading positions
they select. There can be no assurance that the Partnership will achieve its
business objectives, be able to pay the costs to do business, or avoid
substantial trading losses.
In that regard, the Partnership is subject to substantial fixed charges. The
General Partner will be paid a management fee of three percent (3%) of the Net
Assets of the Partnership; in addition, the CTAs will be paid a three percent
(3%) management fee upon the equity assigned to them, and the Partnership will
pay fixed brokerage commissions of nine percent (9%) of assets assigned by the
General Partner for trading to the IB. Accordingly, to redeem a Unit at the
original face value at the end of the first twelve months of trading and avoid
a loss, the Partnership will need to generate, annually, interest income and
gross trading profits of 30.4%, which includes the fixed costs of
administration, which are estimated by the General Partner to be approximately
$23,000 per year, ($5,000 for legal fees and $18,000 for accounting and audit
fees), Offering Expenses estimated to be $47,000, and Organizational Expenses
of $5,000, amortized on a straight line method over 60 months. The General
Partner has advanced the Offering Expenses but will be reimbursed for such
expenses from the gross proceeds of the Offering from the break of Escrow at
the time of the Initial Closing. Upon admission of subsequent Partners to the
Partnership, a charge will be made to such newly admitted Partners equal to
their pro-rata share of the Offering Expenses which will be credited to the
Capital Accounts of the prior admitted Partners to reimburse them for the
Offering Expenses they advanced.
Below is a chart setting forth expenses during the first twelve full months of
the Partnership's operations. All interest income will be paid to the
Partnership. The chart below assumes that the Partnership's Unit value
remains at $1,000 during the first 12 months of the Partnership's operations.
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Expenses per Unit
for the First 12-Month Period of Operations
Minimum Maximum
Gross Units Sold $ 700,000.00 $7,000,000.00
Selling Price per Unit (1) $ 1,000.00 $ 1,000.00
Selling Commission (1) $ 60.00 $ 60.00
Offering and Organizational Expenses (2) 68.57 6.86
General Partner's Management Fee 30.00 30.00
Trading Advisors' Management Fees (3) 30.00 30.00
Trading Advisors' Incentive Fees on
New Net Profits (4) 45.63 34.74
Brokerage Commissions and Trading Fees (5) 90.00 90.00
Redemption Fee (6) 40.00 40.00
Less Interest Income (7) (60.00) (60.00)
Amount of Trading Income Required for the
Partnership's Net Unit Value (Redemption
Value) at the End of One Year to Equal the
Selling Price per Unit (8) $ 304.20 $ 231.60
Percentage of Initial Selling Price per Unit 30.4% 23.2%
Explanatory Notes:
(1) Investors will initially purchase Units at $1,000 per Unit. After the
commencement of trading, Units will be purchased at the Partnership's month-
end Net Unit Value. A 6% sales commission will be deducted from each
subscription.
(2) The Partnership will reimburse the General Partner for Offering Expenses,
estimated to be a total of $47,000, from the gross proceeds of the offering at
the time of the break of Escrow for the sale of the Minimum. The Partnership
will also reimburse the General Partner for $5,000 in Organizational Expenses
to be amortized on a straight line method over the first 60 months of the
Partnership's operation. Upon admission of subsequent Partners to the
Partnership, a charge will be made to such newly admitted Partners equal to
their pro-rata share of the Offering Expenses which will be credited to the
Capital Accounts of the prior admitted Partners to reimburse them for the
Offering Expenses they advanced. Offering and Organizational Expenses
includes all Offering Expenses of $47,000 and one fifth ($1,000, or 12 months'
worth) of the Organizational Expenses. The Partnership's actual accounting,
auditing, legal and other operating expenses will be borne by the Partnership.
and are included in the $47,000 in Offering Expenses.
(3) The Partnership's CTAs will be paid a total monthly management fee of 1/4
of 1% of the trading equity allocated to them.
(4) Each CTA will receive an incentive fee of 15% of New Net Profits each
quarter earned upon the trading equity assigned to him to trade. The $45.63
of incentive fees shown above is equal to 15% of total trading income of
$304.20 adjusted to earn sufficient income to return the original $1,000 to
the investor upon Redemption at the end of the first year without computation
of incentive fee upon the interest earned or the incentive fee to be paid and
without reduction for brokerage commissions and after payment of management
fees to the General Partner and the CTAs.
(5) Brokerage commissions and trading fees are fixed at 9% of assets assigned
by the General Partner for trading. For purposes of this calculation, the
assumption is that all equity will be made available to the CTAs to trade.
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(6) The Redemption Fee of 4% is computed upon the assumed $1,000 value of the
Redemption at the end of the first year.
(7) The Partnership will earn interest on margin deposits with its Futures
Commission Merchant and Bank Deposits. Based on current interest rates,
interest income is estimated at 6% of the Net Assets of the Partnership.
(8) This computation assumes there will be no claims or extra-ordinary
expenses during the first year.
THE ABOVE PRESENTATION DOES NOT CONSTITUTE REPRESENTATION BY THE PARTNERSHIP
AS TO THE ACTUAL OPERATING EXPENSES OR INTEREST INCOME OF THE PARTNERSHIP.
THERE CAN BE NO ASSURANCE THAT THE EXPENSES TO BE INCURRED BY THE PARTNERSHIP
WILL NOT EXCEED THE AMOUNTS AS PROJECTED OR THAT THERE WILL BE NO OTHER
EXPENSES.
In addition, Partners will be required to pay Federal, state and local taxes
upon income, if any, in the year earned by the Partnership, although there
will be no expectations of distributions of income during that, or any other,
year. Accordingly, the purchase of Units in the Partnership is intended to be
a long-term investment. Neither the General Partner nor any other person has
made any promise or guarantee that the Partnership will be profitable or
otherwise meet its objectives. The General Partner has made no guarantee that
the Partnership will break even or produce any other rate of return per year.
All interest income earned upon the Capital of the Partnership will be paid to
the Partners in their pro rata share determined by the amount of Capital each
Partner, including the General Partner, has contributed to the Partnership.
The current rate of interest income expected is 6% per year. The General
Partner estimates that 20% to 30% of total Capital, as that term is defined in
Exhibit A, will be used for margin purposes each year. The specific futures
contracts to be traded, the exchanges and forward markets, and the trading
methods of the CTAs selected are identified in "The Commodity Trading
Advisors".
SECURITIES OFFERED
Atlas Futures Fund, Limited Partnership (the "Partnership") will offer and
sell Limited Partnership interests in the Partnership which will have pro rata
rights to profit and losses with all other owners equal to the Capital they
have contributed but Limited Partners will have limited obligations to pay the
debts of the Partnership in excess of their contribution to Capital plus their
undistributed profits, less losses. The Limited Partners will not be exposed
to payment of debts of the Partnership in excess of their Capital
contributions; provided, however, in the event the Limited Partners were to
receive distributions which represent a return of Capital, such distributions,
in the event of insolvency of the Partnership, would have to be returned to
pay Partnership debts. In addition, these interests will have no voice in the
day to day management of the Partnership. They will have the right to vote on
Partnership matters such as the replacement of the General Partner. See the
Partnership Agreement attached as Exhibit A.
These Limited Partnership interests are defined as the units (the "Units")
which are offered for sale for One Thousand Dollars ($l,000) per Unit. This
sales price per Unit was arbitrarily set by the General Partner without regard
to expected earnings and does not represent present or projected market or
Redemption value. Funds with respect to subscriptions received prior to the
commencement of trading operations by the Partnership (and not rejected by the
General Partner) will be deposited and held in a separate escrow account (the
"Escrow Account") in the name of the Partnership at Star Financial Bank, 2004
N. Wayne St., Angola, IN 46703 (the "Escrow Agent"). If the General Partner
has not accepted subscriptions for the 700 Units (the "Minimum") before the
lapse of one year from the date of this Prospectus, (the "Initial Offering
Period"), this offering will terminate and all documents and amounts deposited
to the Escrow Account by subscribers will be returned, plus interest and
without deduction for any commissions, fees or costs. Upon the sale of the
Minimum, the Partnership will commence trading. The remaining 6,300 Units
will be offered for sale at a price per Unit equal to the Net Unit Value as of
the close of trading on the effective date of such purchase, which will be the
close on the last business day of the month in which the General Partner
accepts a duly executed Subscription Agreement and capital contribution from
the subscriber. No escrow will be utilized for Units sold after the sale of
the Minimum. All subscriptions are irrevocable and subscription payments,
after the statutory withdrawal period, if any, which are accepted by the
General Partner, and either deposited in the Escrow Account or in the
Partnership account, may not be withdrawn by subscribers. Although a maximum
of $7,000,000 of Units are offered hereby, the Limited Partnership Agreement
authorizes the General Partner to sell additional Units and there is,
therefore, no maximum aggregate number or contribution for Units which may be
offered or sold by the Partnership. There cannot be any
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assurance that the Minimum Units or any additional Units will be sold and the
General Partner is authorized, in its sole discretion, to terminate this, or
any future, offering of Units.
MANAGEMENT'S DISCUSSION
This is the first offering of the Partnership's Limited Partnership Interests
(the "Units"). The Limited Partnership Agreement permits future offerings of
Units after the close of this offering. The Partnership has not commenced
operations and none will commence until after the sale of 700 Units, $700,000
in face amount, before commissions, (the "Minimum") are sold and the Escrow is
terminated. The Partnership has no prior operating history and, therefore,
there is no discussion of results of operations.
The Partnership will raise capital only through the sale of Units offered
pursuant to this and future offerings, if any, and does not intend to raise
money for any purpose through borrowing. The Partnership will make certain
capital expenditures, such as for the preparation of this Prospectus and other
expenditures to qualify the Units for sale, and for office equipment, and
expects to allocate all of its capital not used to pay those capital and
operating expenses to trading and other investments. There is no report of
executive compensation in this Prospectus as the Partnership will not have any
directors, officers or employees; furthermore, the Partnership will conduct
all of its business through the General Partner.
The General Partner has authorized the IB to select Vision Limited Partnership
to serve as the futures commission merchant (the "FCM") to hold the funds
allocated to the Commodity Trading Advisors to trade. On a daily basis, the
FCM will transmit a computer run or facsimile transmission to the General
Partner which will depict the positions held, the margin allocated and the
profit or loss on the positions from the date the positions were taken. The
General Partner will review these transmissions and based upon that review
will determine and, with the advice of the CTAs, will make appropriate
adjustments to the allocation of trading equity; provided, however, only the
CTAs will make specific trades and determine the number of positions taken and
the timing of entry and departure from the markets based upon the amount of
equity available to trade.
Most United States commodity exchanges limit fluctuations in commodity futures
contracts prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits". Once the price of a futures
contract has reached the daily limit for that day, positions in that contract
can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Similar occurrences could prevent the Partnership from
promptly liquidating unfavorable positions and subject the Partnership to
substantial losses which could exceed the margin initially committed to such
trades. In addition, even if commodity futures prices have not moved the
daily limit, the Partnership may not be able to execute futures trades at
favorable prices, if little trading in such contracts is taking place or the
price move in a futures or forward contract is both sudden and substantial.
Other than these limitations on liquidity, which are inherent in the
Partnership's proposed commodity futures trading operations, the Partnership's
assets are expected to be highly liquid.
Once the Minimum is sold and the Partnership commences operations, except for
payment of offering and other expenses of the Partnership, the General Partner
is unaware of any (i) anticipated known demands, commitments or required
capital expenditures; (ii) material trends, favorable or unfavorable, which
will effect its capital resources; or (iii) trends or uncertainties that will
have a material effect on operations. From time to time, certain regulatory
agencies have proposed increased margin requirements on commodity futures
contracts. Because the Partnership generally will use a small percentage of
assets for margin, the Partnership does not believe that any increase in
margin requirements, as proposed, will have a material effect on the
Partnership's proposed operations. Management cannot predict whether the
Partnership's Net Unit Value will increase or decrease. Inflation is not
projected to be a significant factor in the Partnership's operations, except
to the extent inflation influences futures' prices.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER
The General Partner has a fiduciary responsibility to the Limited Partners to
exercise good faith and fairness in all dealings affecting the Partnership.
In the event that a Limited Partner believes the General Partner has violated
such fiduciary duty to the Limited Partners, a Limited Partner may seek legal
relief for such Limited Partner or on behalf of the Partnership under
applicable laws, including Delaware partnership and applicable Federal and
state securities laws, to recover damages from or require an accounting by the
General Partner. The Partnership Agreement conforms with the
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Uniform Limited Partnership Act for the State of Delaware in regard to the
definition of the fiduciary duties of the General Partner.
In addition, Partners are afforded certain rights to institute reparations
proceedings under the Commodity Exchange Act for violations of such Act or of
any rule, regulation or order of the CFTC by the General Partner, the CTAs
selected and the Introducing Broker and the Futures Commission Merchant. For
example, excessive trading of the Partnership's account may constitute a
violation of such Act. A Limited Partner may also institute legal proceedings
in court for excessive trading and may have a right to institute legal
proceedings in court for certain violations of applicable laws, including the
Commodity Exchange Act or rules, regulations or orders of the CFTC. The
General Partner will have certain defenses to claims that it is liable merely
because the Partnership lost money or otherwise did not meet its business
objectives. For example, the General Partner will not be liable for actions
taken in good faith and exercise of its best business judgment.
Also, the responsibility of a general partner to other partners is a changing
area of the law and Limited Partners who have questions concerning the
responsibilities of the General Partner should, from time to time, consult
their own legal counsel.
INDEMNIFICATION
The Limited Partnership Agreement provides that the General Partner shall not
be liable, responsible or accountable in damages or otherwise to the
Partnership or any of the Limited Partners for any act or omission performed
or omitted by the General Partner and which the General Partner determines, in
good faith, to be within the scope of authority and in the best interest of
the Partnership, except when such action or failure to act constitutes willful
misconduct or a breach of the Federal or state securities laws related to the
sale of Units. The Partnership shall defend, indemnify and hold the General
Partner harmless from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in defense
of any demands, claims or lawsuits) actually and reasonably incurred and
arising from any act, omission, activity or conduct undertaken by or on behalf
of the Partnership and within the scope of authority granted the General
Partner by the Limited Partnership Agreement, including, without limitation,
any demands, claims or lawsuits initiated by another Partner. Applicable law
provides that such indemnity shall be payable only if the General Partner (a)
determined, in good faith, that the act, omission or conduct giving rise to
the claim for indemnification was in the best interests of the Partnership,
and (b) the act, omission or activity that was the basis for such loss,
liability, damage, cost or expense was not the result of negligence or
misconduct, and (c) such liability or loss was not the result of negligence or
misconduct by the General Partner, and (d) such indemnification or agreement
to hold harmless is recoverable only out of the assets of the Partnership and
not from the Partners, individually.
In addition, the indemnification of the General Partner in respect of any
losses, liability or expenses arising from or out of an alleged violation of
any Federal or state securities laws are subject to certain legal conditions.
Those conditions presently are that no indemnification may be made in respect
of any losses, liabilities or expenses arising from or out of an alleged
violation of Federal or state securities laws unless (i) there has been a
successful adjudication on the merits of each count involving alleged
securities law violations as to the General Partner or other particular
indemnitee, or (ii) such claim has been dismissed with prejudice on the merits
by a court of competent jurisdiction as to the General Partner or other
particular indemnitee, or (iii) a court of competent jurisdiction approves a
settlement of the claims against the General Partner or other particular
indemnitee and finds that indemnification of the settlement and related costs
should be made, provided, before seeking such approval, the General Partner or
other indemnitee must apprise the court of the position against such
indemnification held by the SEC and the securities administrator of the state
or states in which the plaintiffs claim they were offered or sold Units in
regard to indemnification for securities laws violations. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to the General Partner pursuant to the indemnification provisions
in the Limited Partnership Agreement, or otherwise, the General Partner has
been advised that, in the opinion of the SEC and the various state
administrators, such indemnification is against public policy as expressed in
the Securities Act of 1933 and the North American Securities Administrators
Association, Inc. commodity pool guidelines and is, therefore, unenforceable.
The clearing agreement to clear the trades made between the Partnership and
Vision Limited Partnership, at paragraph 20, provides for indemnification from
the Partnership to Vision Limited Partnership, including reasonable outside
and in-house attorney's fees, incurred by Vision Limited Partnership arising
out of any failure of the Partnership to perform its duties under the clearing
agreement.
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The General Partner has indemnified the Managing Dealer, Futures Investment
Company, and the other Selling Agents that there are no misstatements or
omissions of material facts in this Prospectus.
RELATIONSHIP WITH THE FCM AND THE IB
The General Partner has initially engaged Futures Investment Company as the
sole introducing broker (the "IB") to the Partnership. Ms. Pacult, the
President and sole stockholder of the General Partner, is also a stockholder,
director and officer of the IB. Accordingly, the General Partner is
Affiliated with the IB. The IB has engaged Vision Limited Partnership to act
as the sole futures commission merchant, (the "FCM") for the Partnership.
The General Partner believes the rates to be charged to the Partnership by the
IB for fixed commissions are competitive. In that regard, the General Partner
is obligated by the NASAA guidelines to obtain the best commission rates
available to the Partnership. Accordingly, the General Partner is free to
select any substitute or additional futures commission merchants or
introducing brokers at any time, for any reason, although it has a conflict in
regard to the IB because of the Affiliation with the principal of the General
Partner. The FCM and the IB may act for any other commodity pool for which
the General Partner or Ms. Pacult, individually, as the case may be, will act,
in the future, as general partner. Ms. Pacult is already the principal of the
general partner of both another public commodity pool, Fremont Fund, Limited
Partnership and a privately offered commodity pool, Auburn Fund, Limited
Partnership. It is possible for the General Partner and any other commodity
pools to obtain rates from the IB that are more favorable to such other
accounts than the fixed commissions in lieu of round-turn commissions charged
by the IB to the Partnership.
The FCM has tentatively established the per round-turn commission rate to be
paid by the IB for trades made by the Partnership at $11.00 per round-turn for
US markets plus US floor brokerage fees of $2.50 and Exchange and NFA fees of
$1.10 for Chicago markets and $2.70 for New York Markets. An additional $2.50
to $12.50 per round-turn will be charged for foreign markets plus Globex fees
which are expected to range from $5.20 to $15.20 per round-turn. All of these
costs will be paid by FIC from the 9% per year fixed commissions paid by the
Partnership. Additionally, FIC will cover any such costs should they exceed
the fixed commission. The FCM will credit the Partnership with interest at
the prevailing rate on 100% of the available balances maintained in the
Partnership accounts.
RELATIONSHIP WITH THE CTAs
The Commodity Trading Advisors will be effecting trades for their own accounts
and for others on a discretionary basis. They may employ trading methods,
policies and strategies for others which differ from those employed for the
Partnership and, as a consequence, such accounts may have trading results
which are different (which could be better or worse) from those experienced by
the Partnership. A potential conflict of interest arises in such cases in
that it is possible that positions taken by the CTAs may be taken ahead of or
opposite positions taken on behalf of the Partnership. See definitions in
Appendix I for "Taking Positions Ahead of the Partnership". Where in any case
trades are identical with respect to the Partnership and other accounts of the
CTAs and where prices are different, the CTAs have informed the General
Partner that, pursuant to CFTC Regulation 421.03, such Commodity Trading
Advisor will utilize the "Average Price System" for those futures and options
contracts where its use is authorized. See definitions in Appendix I for
"Average Price System". The Commodity Trading Advisors have also informed the
General Partner that where the Average Price System is not available, trades
will be filled (both purchases and sales) in order based on the numerical
account numbers, with the lowest price (on both purchases and sales) allocated
to the lowest account number and in numerical matching sequence, thereafter.
The past, present, and future trading methods to be utilized by the CTAs are
proprietary in nature and will not be disclosed to the Partners. No notice
will be given by the CTAs of any changes they may make in their trading
methods to the Partners. See "Risk Factors, No Notice of Trades or Trading
Method".
RISK CONTROL
The General Partner has obtained the commitment from the FCM that a report, as
of the close of each business day, of the equity used for margin to hold the
trades selected by the CTAs will be sent to the General Partner by overnight
facsimile or computer transmission before the opening of trading on the next
business day to permit the General Partner to review the percentage of equity
used for margin and losses, if any. In the event the Net Unit Value falls to
less than fifty percent (50%) of the Net Unit Value established by the greater
of the initial offering price of one thousand dollars ($1,000), less
commissions and other charges, or such higher value earned after payment of the
incentive fee for the addition of
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profits, the General Partner shall immediately suspend all trading, provide
immediate notice as provided in the Partnership Agreement to all Partners of
the reduction in Net Unit Value and afford all Partners the opportunity, for
fifteen (15) days after the date of such notice, to Redeem their Units in
accordance with the provisions of Article IX, Sections 9.5 and 9.6. No
trading shall commence until after such fifteen day period. See Exhibit
A attached.
CHARGES TO THE PARTNERSHIP
Investors in the Partnership will pay the cost of operation of the
Partnership. These charges are described in narrative form and in the chart
which follows this narrative. This prospectus discloses all compensation,
fees, profits and other benefits (including reimbursement of out-of-pocket
expenses) which the General Partner and its affiliates will earn in connection
with the offering. Most of the charges to the Partnership were not the result
of arm-length bargaining but rather were determined by the General Partner,
its principal and their affiliates.
COMPENSATION OF GENERAL PARTNER
The General Partner will be paid an annual management fee of three percent
(3%) of the Net Asset Value of the Partnership payable at the end of each
month (1/4 of 1%).
The General Partner will receive an allocation of New Net Profit of fifteen
percent (15%) on the trading accounts assigned to the CTAs, which will be paid
directly to them. New Net Profits, as used herein, means the increase, if
any, in the net value of the trading equity of a CTA due to trading activity
at the end of each respective quarterly period over the net value of the
trading equity at the end of the highest previous quarterly period.
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTAs
In addition to the management fee to the General Partner and the 9% fixed
commission, the Partnership will pay a management fee to the CTAs at the
annual rate of three percent (3%), payable at the rate of one-fourth of one
percent (1/4 of 1%) per month of the equity on deposit at the future
commission merchant or merchants allocated to them to trade, computed and paid
from said accounts to the CTAs. The Partnership also will be obligated to
bear certain other periodic operating, fixed, and extra-ordinary expenses of
the Partnership including, but not limited to, legal and accounting fees,
defense and payment of claims, trading and office expenses, and sales charges.
The Partnership will also pay to the General Partner an allocation of profit
earned in the accounts assigned to each CTA of fifteen percent (15%) of the
New Net Profit for each CTA which produced a New Net Profit. The General
Partner will be responsible for payment of all incentive fees to the CTAs.
New Net Profits, as used herein, means the increase, if any, in the net value
of the trading equity for a CTA due to trading activity at the end of each
respective quarterly period over the net value of the trading equity for that
CTA at the end of the highest previous quarterly period. The net value of the
trading equity assigned to each CTA, as of the close of business on the last
business day of each month, determined before accrual of any incentive fee
payable to a CTA, shall be used to compute the management and incentive fees
to each CTA. The calculation of New Net Profits shall be adjusted to
eliminate the effect thereon resulting from new subscriptions for Units
received, if any, or Redemptions made, if any, during the month, and shall be
decreased by any Capital, interest or other income earned on Partnership
assets during the month which are not directly assigned to the CTAs to trade
and are not related to such trading activity and regardless of whether such
assets are held separately or in a margin account. These fees shall be
payable by the Partnership, as to the management fee, or by the General
Partner, as to the incentive fee, to each CTA within ten (10) business days
after the close of the applicable accounting period. If a CTA should make
trades which incur a net loss during any quarter, such loss will be carried
forward for purposes of calculating the incentive fee to that CTA and will be
charged against the net value of the CTA's assigned trading equity of any
succeeding quarterly period. No incentive fee will be payable to a CTA until
such losses have been offset by New Net Profits in such succeeding quarters.
Because incentive fees are calculated separately for each CTA, it is possible
that one or more CTAs may receive incentive fees, though the Partnership
experiences a net loss due to trading losses created by the remaining CTA(s).
In no event may a modification of the compensation to be paid to the CTA
result in an incentive fee exceeding the above amount and any new contract
with the CTA must carry forward all losses attributable to the CTA. For
example, if in successive quarters the Partnership performance yields New Net
Profits from trading activity of the funds on deposit with the FCM assigned to
Frischmeyer of
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$2,000, $8,000, ($4,000), ($3,000), $2,000, and $8,000, then the incentive fee
at the rate of fifteen percent (15%) payable to him would be, respectively,
$300, $1,200, $0, $0, $0, and $450.
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER
The futures commission merchant for the Partnership is Vision Limited
Partnership (the "FCM"). The Partnership will pay a fixed commission of nine
percent (9%) per year, payable monthly upon the assets assigned by the General
Partner for trading to Futures Investment Company (the "IB") for introducing
trades through the FCM. See "The Futures Commission Merchant". The IB, will
pay to the FCM all clearing costs, including the pit brokerage fees, which
shall include floor brokerage, NFA fees and exchange fees. The IB will pay
six percent (6%) of the fixed commissions as trailing commissions to the
Broker/Dealers and introducing brokers who are qualified to provide services
to the investors. See "Charges to the Partnership, Allocation of
Commissions".
The IB will pay the remaining 3% to the FCM for clearing charges. The past
history of the frequency of Trades by the CTAs have been at the rate of
approximately 255 round turns per month for every million dollars
($1,000,000) under management. In the unlikely event the Commodity Trading
Advisors effects round-turns of 765 or more for every million dollars
($1,000,000) in any month, the CPO has the right, but not the obligation, to
suspend trading until the commencement of the next month. This suspension of
trading is to limit the exposure to loss to the IB to a defined amount
determined by the maximum number of round turns the General Partner will pay
to complete in any one month. Trading will automatically resume the following
month subject to the same maximum of 765 trades for that and any future month.
The General Partner has reserved the right to change the IB, FCM, the fixed
commission rate or to have the Partnership pay a per round-turn brokerage
commission, at any time in the future, with or without a change in
circumstances; provided, however, the brokerage commissions so charged can not
exceed (i) 80% of the published retail rate of the IB and other similar
introducing brokers, plus Pit Brokerage Fees, or (ii) 14% annually of the
average Net Assets excluding the Partnership assets not directly related to
trading activity; this 14% shall include Pit Brokerage Fees. In addition, to
protect against excessive trading, the General Partner has the right, but not
the obligation, to suspend all trading by the Partnership during any month in
which the CTAs collectively trade at a rate of three times their normal
frequency. See "Fiduciary Responsibility of the General Partner". The
Partnership will also reimburse the FCM for all delivery, insurance, storage
or other charges incidental to trading and paid to third parties. The General
Partner does not anticipate significant charges of this nature. The fixed
commission to be paid by the Partnership is fair and reasonable to the
Partnership. This is an area of judgment which depends upon the value of
similar services provided by the same CTAs for managed accounts and to other
pools and, to some degree, the value of similar services by other public
commodity pools, and this is not a matter upon which securities counsel will
express an opinion.
ALLOCATION OF COMMISSIONS
The General Partner, either directly or indirectly, controls the allocation of
the fixed commissions and the allocation may change, from time to time,
without the knowledge or consent of the Partners. The commodity brokerage
commissions are to be allocated as follows: The Partnership will pay the IB,
Affiliated with the General Partner, a fixed brokerage commission rate of nine
percent (9%) per year, payable monthly upon the assets assigned by the General
Partner for trading. The IB will negotiate a round-turn commission rate per
trade with the FCM. The difference between the 9% fixed commission rate and
the per round turn commission negotiated, less trailing commissions paid to
the persons who sold Units in the Partnership, will be retained by the IB
Affiliated with the General Partner. If the trading commissions exceed the 9%
less the trailing commissions, FIC will cover the difference. The IB will pay
its associated persons and individual employee-broker (associated persons) of
Futures Investment Company and the other broker dealers, through whom Units
are sold. Such persons will include, but not be limited to, the principal of
the General Partner and the husband of the principal of the General Partner,
who is an associated person of the IB which is Affiliated with the principal
of the General Partner.
The IB will pay six percent (6%) per year of the fixed commission to the
Broker Dealer and Associated Persons of the IB and other duly licensed
entities and persons, which may include the principal of the General Partner
or other principals of the IB Affiliated with it, pro rated to the value of
Units sold, who have facilitated the sale of Units, as trailing commissions in
exchange for services provided to the investors and the Partnership. It is
important that investment in the Partnership be maintained to permit
diversification of risk over a large number of investors and to allow the
long-term trading strategies of the CTAs to produce the opportunity for
investment in the Partnership. To accomplish these objectives will require a
continuous relationship with the Limited Partners to be aware of their
investment objectives and changes in circumstances, if any. Neither the
General Partner nor the IB have the staff or the time to maintain this
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continuous contact and awareness. The IB will pay the trailing commissions to
the Brokers for payment to the persons who made the sale of the Units as
compensation for the effort required to maintain this continuous contact and
awareness during the time the Limited Partner holds the Units. In addition
the Brokers will communicate explanations of changes in operation methods,
such as a changes in CTAs and results from operations, answer questions
regarding the Partnership, and are expected to work to retain investment in
the Partnership.
OTHER EXPENSES
The Partnership is obligated to pay legal and accounting fees, other expenses
and claims. The General Partner projects the Offering Expenses of this
offering to be $47,000 in addition to Organizational Expenses of $5,000
amortized on a straight line method over 60 months (see Appendix I, Offering
Expenses and Organizational Expenses), and legal and accounting costs of
approximately $23,000 ($18,000 for accounting and audit and $5,000 for legal)
to be charged annually after the first year. In addition to management fees,
incentive fees, brokerage commissions, and the actual cost of legal and audit
services provided by third parties, the Partnership Agreement provides that
all customary and routine administrative expenses and other direct expenses of
the Partnership, will be paid by the Partnership. The General Partner will be
reimbursed by the Partnership for direct expenses (such as delivery charges,
statement preparation and mailing costs, telephone toll charges, and postage).
CHARGES TO THE PARTNERSHIP
The following table includes all charges to the Partnership.
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<TABLE>
* Charges to the Partnership
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
Entity Form of Compensation Amount of Compensation
General Partner
Management fee 3% management fee of Net Asset Value
Reimbursement of Offering Expenses Reimbursement of Offering
Expenses upon the Initial Closing
Reimbursement of Organizational Expenses Reimbursement of Organizational Expenses
amortized over 60 months
Selling Agents Sales Commission subject to waiver at the A one time charge of 6% of Gross Selling
sole discretion of the General Partner Price of Units for Selling Commissions
Trailing Commission Trailing Commissions of 6%, paid annually,
from the 9% fixed commissions paid to the
Introducing Broker
Introducing Fixed Commissions 9% of assets assigned by General Partner for
Broker Affiliated trading, less costs to trade to FCM and less
with the General 6% trailing commissions paid to Selling
Partner Agents which will include persons Affiliated
with the General Partner Futures Commission
Merchant
Round-turn commissions paid from the fixed Brokerage Commissions negotiated with the
commissions paid by the Partnership Introducing Broker;
Reimbursement of delivery, insurance, Reimbursement by the Partnership of actual
storage and any other charges incidental to payments to third parties in connection
trading and paid to third Parties with Partnership trading
Commodity Trading Advisors Fixed Management Fee 3% per year of the trading equity assigned to
each CTA
Incentive Fee 15% of the New Net Profits of the account for
each quarterly period that the net value of
the trading equity at the end of such
quarterly period for a CTA exceeds the
highest previous quarterly net value of the
trading equity for that CTA.
Third Parties Legal, accounting fees, and other actual Estimated at $23,000 for each year after
expenses necessary to the operation of the the first ($18,000 for accounting and
Partnership, and all claims and other $5,000 for legal). Claims and other costs
extraordinary expenses of the Partnership. can not be estimated and will be paid as
incurred.
</TABLE>
INVESTOR SUITABILITY
An investment in the Partnership is suitable only for a limited amount of the
risk portion of an investor's total portfolio and no one should invest more in
the Partnership than he or she can afford to lose. Investors contemplating
even the Minimum investment in the Partnership of $25,000 must have (i) a net
worth of at least $150,000 (exclusive of home, furnishings and automobiles),
or (ii) an annual gross income of at least $45,000 and a net worth (as
calculated above) of at least $45,000. NO INVESTOR MAY INVEST MORE THAN 10%
OF SUCH INVESTOR'S NET WORTH IN THE PARTNERSHIP. THE FOREGOING STANDARD AND
THE ADDITIONAL STANDARDS APPLICABLE TO RESIDENTS OF CERTAIN STATES AS SET
FORTH IN THIS PROSPECTUS AND THE SUBSCRIPTION DOCUMENTS ARE REGULATORY
MINIMUMS ONLY.
POTENTIAL ADVANTAGES
Although commodity trading is speculative and involves a high degree of risk
(see "Risk Factors"), an investment in the Partnership will offer the
following potential advantages:
EQUITY MANAGEMENT
The Partnership offers the opportunity for investors to place equity with
professional CTAs who have demonstrated, in the judgment of the General
Partner, an ability to trade profitably and to have that equity allocated to
the CTAs in a manner which is intended by the General Partner to optimize the
potential for profit in the future. The principal of the General Partner is
the principal of the general partner of both another public commodity pool,
Fremont Fund, Limited Partnership and a privately offered commodity pool,
Auburn Fund, Limited Partnership, and has over fifteen years of experience
selecting commodity trading advisors to manage individual investor accounts
and describing how individual managed futures accounts work to individual
investors. This experience is expected to benefit the Partnership in the
quality of commodity trading advisors selected and the explanation of the
operation of the Partnership and the attendant risks of investment in the
Partnership to prospective investors.
INVESTMENT DIVERSIFICATION
An investor who is not prepared to spend substantial time trading various
commodity contracts or options may participate in these markets through an
investment in the Partnership (with a minimum investment of only $25,000),
thereby obtaining diversification from investments in stocks, bonds and real
estate.
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LIMITED LIABILITY
A Limited Partner in the Partnership will not be subject to margin calls and
cannot lose more than the amount of the Limited Partner's unredeemed capital
contribution, the Limited Partner's share of undistributed profits, if any,
and, under certain circumstances, any prior distributions and/or amounts
received upon Redemption of Units and interest thereon; provided, however, the
Limited Partner must not participate in the management of the Partnership. In
the opinion of legal counsel to the Partnership, subject to the maintenance of
the Partnership structure by the General Partner and no affiliation by the
Limited Partner with any phase of management of the Partnership, there are no
circumstances, including bankruptcy of the Partnership, which will subject the
personal assets of a Limited Partner to the debts of the Partnership. See the
Limited Partnership Agreement attached as Exhibit A.
ADMINISTRATIVE CONVENIENCE
The Partnership is structured so as to provide Limited Partners with certain
services designed to alleviate the administrative details involved in engaging
directly in commodities contract trading, including providing monthly and
annual financial reports (showing, among other things, the Net Unit Value,
trading profits or losses and expenses), and all tax information relating
Limited Partner's interest in the Partnership.
ACCESS TO THE CTAs
The CTAs selected by the General Partner require a minimum account size
substantially greater than the $25,000 minimum investment in the Partnership;
e.g., Frischmeyer requires a minimum investment of $40,000. Accordingly,
investors have access to the CTAs for a smaller investment, at substantially
the same cost, than is available by a direct investment in a managed account
with any particular CTA.
USE OF PROCEEDS
At the time of the sale of the Units, the only deduction prior to the delivery
of the funds to the Partnership in furtherance of its business will be the six
percent (6%) selling commission. After commencement of trading, the trades
will be entered by the CTAs and the FCM will charge the Partnership account
the per round turn commission in effect, from time to time. At the end of
each month, the actual management fees and fixed commissions identified in
this Prospectus, less the per round turn commissions already paid, will be
deducted from the Partnership accounts. The General Partner will determine,
in its sole judgment, from time to time, the percentage of the Partnership's
Net Asset Value that will be on deposit with the FCM and how much will be used
for other investments and held in bank accounts to pay current obligations.
Other than the approximately three percent (3%) of the previous month end Net
Asset Value the General Partner expects to be retained in the Partnership's
bank accounts as a reserve to pay Partnership Expenses, and other similar
current payments, the General Partner expects to deposit the Net Asset Value
including the proceeds from interest and trading profits, in the commodity
account with the FCM to be used by the Partnership to engage in the
speculative trading of commodity futures contracts and options under the
direction of the CTAs. The Partnership will use only cash and cash
equivalents, such as United States Treasury Bills to satisfy margin
requirements. All FCMs, CTAs, money market, other cash investment accounts,
and banks selected by the General Partner to hold or trade assets of the
Partnership will be based in the United States and be subject to United States
regulations. The trades of the Partnership will be cleared by the FCM. The
General Partner believes that between twenty percent (20%) to forty percent
(40%) of the Partnership's assets will normally be committed as margin for
commodity futures contracts but, from time to time, the percentage of assets
committed as margin may be substantially more, or less, than such range. For
purposes of the estimate of the amount of interest income to be earned upon
the Capital of the Partnership, the General Partner has estimated that between
20% and 40% of the Capital will be used for margin upon trades and that the
rate of interest to be paid on the available balances will be approximately
6%. The FCM may increase margins applicable to the Partnership at any time.
The General Partner has advanced the Offering Expenses but will be reimbursed
for such expenses from the gross proceeds of the Offering from the break of
Escrow at the time of the Initial Closing. Upon admission of subsequent
Partners to the Partnership, a charge will be made to such newly admitted
Partners equal to their pro-rata share of the Offering Expenses which will be
credited to the Capital Accounts of the prior admitted Partners to reimburse
them for the Offering Expenses they advanced.
In the event the General Partner does not sell a minimum of $700,000 in
Partnership Units (the "Minimum") during the first one year of this Offering,
the Escrow Agent will return all money deposited to the Escrow Account to the
investors
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<PAGE>
together with their pro rata share of the interest earned without any
deduction for fees or other costs promptly following the lapse of such
Offering period.
DETERMINATION OF THE OFFERING PRICE
The Units are currently offered for sale for One Thousand Dollars ($l,000) per
Unit, which amount was arbitrarily set by the General Partner. The amount was
not based on expected earnings and is not a representation that the Units have
or will have a market value of or could be resold or redeemed at that price.
After trading operations have commenced, any remaining Units that are offered
for sale shall be offered at a price per Unit equal to the Net Assets of the
Partnership divided by the number of outstanding Units, or Net Unit Value, as
of the close of business on the effective date of such purchase, which will be
the last business day of the month in which the General Partner accepts a duly
executed Subscription Agreement and the required applicable subscription
amount from the subscriber. All sales will be subject to a sales commission
of 6%, subject to waiver at the sole discretion of the General Partner, to be
deducted from the proceeds prior to the issuance of Units.
NO MARKET AND LIMITATION OF RIGHT OF TRANSFER
None of the Units sold will be traded on any United States Market or any other
Market. To the Contrary, before any transfer of Units may be made, the
General Partner must grant its written approval. See "The Limited Partnership
Agreement, Transfer of Units Only With Consent of the General Partner", "Plan
of Distribution" and Partnership Agreement attached as Exhibit A. The
Partners will have the right of Redemption. See "The Limited Partnership
Agreement, Redemption".
THE GENERAL PARTNER
IDENTIFICATION
The General Partner of the Partnership, Ashley Capital Management, Inc., a
Delaware corporation, c/o Corporate Systems, Inc. 101 N. Fairfield Drive,
Dover, DE 19901 was incorporated on October 15, 1996, and it has not
previously operated a commodity pool, though its principal, Shira Del Pacult,
is the principal of Pacult Asset Management, Inc., a registered commodity pool
operator which is the general partner of both another public commodity pool,
Fremont Fund, Limited Partnership and a privately offered commodity pool,
Auburn Fund, Limited Partnership. It was registered as a commodity pool
operator on January 15, 1998. The balance sheet of the General Partner as of
January 31, 1998, and an Income Statement, Statement of Cash Flows and
Statement of Changes in Stockholders' Equity are attached hereto. See
"Experts". The General Partner has expended effort to permit the Partnership
to be available for this Offering but has not yet engaged in the business of
management of trading on behalf of the Partnership or any other business
activities. Purchasers of Units in the Partnership will not acquire or
otherwise have any interest in the General Partner.
THE PRINCIPAL AND OFFICER OF THE GENERAL PARTNER
Ms. Shira Del Pacult, age 41, is the sole shareholder, director, principal,
and officer of the General Partner, and is a principal and registered
representative of Futures Investment Company, the Selling Agent, of which her
husband is also a principal. She graduated Phi Beta Kappa from the University
of California, at Berkeley, in 1979. From 1980 to 1981, she was employed by a
real estate developer in Sonoma County, California, as an administrative
assistant. From 1981 - 1983 she was employed by Heinold Commodities, Inc.,
Chicago, IL, to assist in the development of the Commodities Options
Department. She became a senior account executive at Heinold and was a member
of the President's Council, a select group appointed to advise the firm on all
matters of business practice. In 1983, Ms. Pacult and her husband established
Futures Investment Company, an Illinois corporation, to sell futures
investments managed by independent commodity trading advisors to retail
clients. Presently, Futures Investment Company is located at 5916 N. 300
West, Fremont, Indiana, 46737, with clearing agreements with Vision Limited
Partnership, and The Chicago Corporation. The Partnership intends to clear
its trades through Vision Limited Partnership. Ms. Pacult is a member of the
National Association of Introducing Brokers, and is an affiliated person and
registered representative of Futures Investment Company, which is a member of
the National Futures Association and the National Association of Securities
Dealers, Inc. In addition to the Units offered pursuant to this Prospectus,
FIC offers for sale, on a best efforts basis, securities of other issuers and
engages in other broker-dealer activities. Ms. Pacult is also the principal
of Pacult Asset Management, Inc., a registered commodity pool operator which
is the general partner of both another public commodity pool, Fremont Fund,
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<PAGE>
Limited Partnership and a privately offered commodity pool, Auburn Fund,
Limited Partnership. Ms. Pacult intends to devote adequate time to handle
properly the responsibilities of the General Partner; however, Ms. Pacult will
provide less than her full time to the business affairs of the Partnership.
Ms. Pacult and her husband, Michael, are included in the book Master Brokers:
Interviews with Top Futures Brokers by John Walsh, ISBN 0-915513-61-7.
TRADING BY THE GENERAL PARTNER; INTEREST IN THE POOL
The General Partner and its principal, may, from time to time, trade commodity
interests for their own accounts. The records of any such trading activities
will not be made available to Limited Partners. As stated earlier, the
General Partner will not knowingly take positions on its own behalf which
would be ahead of identical positions taken on behalf of the Partnership.
Once the Minimum is sold, the General Partner may purchase and hold Units.
NO PRIOR PERFORMANCE AND REGULATORY NOTICE
THIS POOL HAS NOT BEGUN TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE REGULATIONS OF THE CFTC AND NFA PROHIBIT ANY REPRESENTATION BY A PERSON
REGISTERED WITH THE CFTC OR BY ANY MEMBER OF THE NFA, RESPECTIVELY, 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
TRADING PROGRAMS OR OBJECTIVES. THE REGISTRATIONS AND MEMBERSHIPS DESCRIBED
IN THIS PROSPECTUS 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.
TRADING MANAGEMENT
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY
The General Partner will select Commodity Trading Advisors for the Partnership
by utilizing the best judgment of its principal and her sixteen year personal
experience in the review of disclosure documents of CTAs. The Partnership
will rely, pursuant to the Advisory Agreements and Powers of Attorney attached
as Exhibits F, G H, I and J, upon Michael J. Frischmeyer, Commoditech, Inc.
and Rosenbery Capital Management, Inc., J.A.H. Research and Trading, and C&M
Traders, Inc., the CTAs selected by the General Partner to trade the equity of
the Partnership and to implement the trading methods and strategies. The
General Partner intends to allocate substantially all of the Partnership's net
assets as trading equity to the existing CTAs in the percentages disclosed.
No additional CTAs are contemplated to be added due to the sale of only the
Minimum or the Maximum; provided however, that the General Partner may, in its
sole discretion and without notice to the Limited Partners, terminate any
existing CTA, select additional CTAs, or change the allocation of equity among
the CTAs. None of the CTAs currently selected are affiliates of the General
Partner, or its principal, nor will the General Partner serve as CTA or select
any other CTAs to trade for the Partnership which are affiliates of it or its
principal. See "The Commodity Trading Advisors" for a summary of the CTAs'
performance information.
The General Partner will periodically review the performance of the
Partnership to determine if the CTAs selected to trade for the Partnership
should be changed or if other CTAs should be added. Due to the allocation of
trading assets over multiple CTAs, it is possible for one of the CTAs to
produce New Net Profit in the account assigned to him and be paid an incentive
fee while the other CTA or CTAs produce losses which cause the Partnership to
suffer a net loss for the Quarter or the year. From time to time, the General
Partner may use computer generated correlation analysis or other types of
automated review procedures to evaluate CTAs.
THE ADVISORY CONTRACTS
For the purpose of directing and effecting trades, the Partnership has entered
advisory contracts and granted Powers of Attorney to the CTAs to trade. The
CTAs have sole discretion, in the accounts so assigned, to determine the
commodity futures trades made by the Partnership. The Partnership is bound by
the directions of the CTAs given to the FCM under
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<PAGE>
the Powers of Attorney. The Powers of Attorney are subject to termination by
either the General Partner or the respective CTAs upon written notice to the
other and to the FCM. If the Powers of Attorney are terminated, the General
Partner will undertake to manage the trading or will seek and retain a new CTA
or CTAs. See Exhibits F, G H, I and J.
FREQUENCY OF CTA AND EQUITY REALLOCATIONS
The General Partner believes that a CTA should be retained on a medium to
long-term basis and should be given the opportunity to implement fully his
trading strategy or program. While it is not anticipated that frequent
changes will be made to the number of CTAs advising the Partnership or that
frequent reallocations of assets among existing CTAs will be made, the General
Partner will retain the flexibility to replace CTAs or to reallocate the
Partnership's assets among CTAs based upon its sole judgment and experience.
From time to time, the General Partner may engage in reallocations of assets
or add or replace CTAs on a frequent basis. Due to the allocation of trading
assets over multiple CTAs, it is possible for one of the CTAs to produce New
Net Profit in the account assigned to him and be paid an incentive fee while
the other CTA or CTAs produce losses which cause the Partnership to suffer a
net loss for the Quarter or the year.
THE PRINCIPAL OF THE GENERAL PARTNER IS THE PRINCIPAL OF THE GENERAL PARTNER
OF ONE OTHER COMMODITY POOL WHICH COMMENCED TRADING IN NOVEMBER OF 1996, AND
ONE OF THE COMMODITY TRADING ADVISORS FOR THIS POOL, MICHAEL J. FRISCHMEYER,
HAS SERVED AS THE COMMODITY POOL OPERATOR FOR TWO OTHER COMMODITY POOLS AND
HAS TRADED BOTH OTHER COMMODITY POOLS AND INDIVIDUAL MANAGED ACCOUNTS. THIS
POOL HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE COMMODITY TRADING ADVISORS
MICHAEL J. FRISCHMEYER
Michael J. Frischmeyer is one of the Commodity Trading Advisors (collectively
above called the "CTAs" and in this section called the "CTA"). The CTA
conducts the business of the trading program described in this Disclosure
Document as a sole proprietorship, and his Main Business Office and main
business telephone are: 1422 Central Avenue, P.O. Box 898, Fort Dodge, Iowa
50501; (515) 955-3800; and, Facsimile: (515) 955-1444. The books and records
of the CTA will be kept and made available for inspection at the Main Business
Office.
BUSINESS BACKGROUND
The business background of the CTA for at least five (5) years is as follows:
The CTA, Mr. Frischmeyer, was born in 1953. He graduated from Iowa State
University, Ames, Iowa, in 1976 with a Bachelor of Science degree in
agricultural business. From March of 1976 to November of 1979, Mr.
Frischmeyer was an account executive in the commodity brokerage business of
Stark Brokerage, Inc., Fort Dodge, Iowa. In November of 1979, he joined the
newly organized North Iowa Commodities, now known as Iowa Commodities, Ltd.
He is currently Vice President and owner of approximately 21% of the total
outstanding stock of Iowa Commodities, Ltd. and is registered with the CFTC
and the NFA as an associated person of Iowa Commodities, Ltd. (since 1984).
Iowa Commodities, Ltd. serves as an introducing broker for various traders,
and is registered as an introducing broker with the CFTC (though the NFA) and
a member of the Chicago Board of Trade.
Mr. Frischmeyer is registered with the CFTC and the NFA as a commodity trading
advisor (since October 12, 1984), and, as a commodity pool operator (since
April, 1987). He directs the trading for discretionary accounts for
individuals and entities and devotes substantially all of his time to the
futures and options trading business. Mr. Frischmeyer serves as both the
commodity pool operator and commodity trading advisor for two commodity pools
and also advises other commodity pool operators and other traders and managers
with respect to trading strategies including his role as the sole CTA for
Fremont Fund, Limited Partnership, a publicly offered commodity pool in which
Ms. Pacult, the principal of the General Partner for this pool also serves as
the principal of the general partner. See "Performance Record of Fremont
Fund, Limited Partnership".
Mr. Frischmeyer was affiliated with R.G. Dickinson and Company, based in Des
Moines, Iowa, as registered representative from January, 1986 through
December, 1991. R.G. Dickinson is a securities broker-dealer. Mr.
Frischmeyer became a registered representative with Broker-Dealer Financial
Services, Inc., based in Des Moines, Iowa on January 1, 1992. Mr. Frischmeyer
terminated his association with Broker-Dealer Financial Services Corporation
on
36
<PAGE>
December 31, 1994, and became a registered representative of Investment
Guidance, Inc., effective January 1, 1995. Investment Guidance, Inc. is
registered as a fully-disclosed broker-dealer with the Securities and Exchange
Commission and member of the National Association of Securities Dealers, Inc.
It serves as the underwriter for certain limited partnership commodity pool
offerings, in addition to offering general brokerage services to the public.
Additionally, please see "Performance of the CTA", below, for a detailed
performance history of Mr. Frischmeyer.
DESCRIPTION OF TRADING PROGRAM
The types of futures contracts and options which the CTA may trade for the
Partnership include, without limitation, all domestic and foreign currency
futures contracts and all domestic and foreign commodities, currencies and
provisions, and options therefore, as are usually dealt in on exchanges or in
the interbank foreign currency forward markets.
The CTA's trading has been active in the soybean complex (beans, oil and
meal), corn, wheat, cattle (live and feeder), live hog and pork belly
contracts and interest rate futures (long-term treasury bonds, Eurodollars and
others). The CTA's trading has also been active in foreign currencies and in
stock index futures and options and in precious metals (primarily gold and
silver) futures, as well as in futures and options on foreign futures and
options exchanges.
The futures and options traded by the CTA, including the trades to be made for
the Partnership, will be traded on regulated exchanges located in the United
States and in non-United States jurisdictions, including England, France,
Spain, Germany, Canada, Australia, Japan and Singapore. No business will in
any event be conducted which is forbidden by or will be contrary to any
applicable law (whether laws of the United States or a foreign jurisdiction)
or any lawful rules and regulations as are established by the regulated
exchanges (whether United States exchanges or foreign exchanges) upon which
futures or options are traded for the Partnership. Prospective clients should
be aware, however, that trading on foreign exchanges will not be subject to
the regulations of the Commodity Futures Trading Commission (the "CFTC") and
may involve greater risks than trading on exchanges located in the United
States. In addition, the CTA will be effecting certain trades through the
"GLOBEX" system, Project A and other systems, which are electronic order-entry
and matching systems for futures and options. See "Risk Factors".
The CTA contemplates trading the contracts identified on the following Futures
Exchanges for the Partnership, although other exchanges may be used and other
types of contracts or interests may be traded:
FOREIGN FUTURES EXCHANGES: Deutsche Terminborse - DAX Index; London
International Financial Futures Exchange (LIFFE) - 3-Month Sterling, 3-Month
EuroDeutscheMark, 3-Month EuroLira, 3-Month EuroSwissFranc, German Bond,
British Gilt, Italian Government Bond (BTP), FT-SE 100 Index; Marche A Terme
Internationale de France (MATIF) - 3-Month PIBOR, French Notional Bond, CAC 40
Index; Mercado de Futuros Y Opciones (MEFF) - 3-Month MIBOR, Spanish Notional
Bond; Montreal Stock Exchange - 3-Month Canadian Bankers Acceptance, Canadian
Government Bond; Sydney Futures Exchange - 3-Month Australian Bills, 10 Year
Australian Bonds; Tokyo International Financial Futures Exchange (TIFFE) -
EuroYen; Tokyo Stock Exchange - Japanese 10 Year Bond; Singapore International
Financial Futures Exchange (SIMEX) - EuroDollars, Nikkei, Japanese 10 Year
Bond.
UNITED STATES FUTURES EXCHANGES: Chicago Board of Trade (CBOT) - Corn,
Soybeans, Soybean Meal, Soybean Oil, Wheat, Treasury (10 year) Notes, Treasury
Bonds, Municipal Bond Index; Chicago Mercantile Exchange (CME) - Live Cattle,
Feeder Cattle, Live Hogs, Pork Bellies; International Monetary Market (IMM) a
division of the CME - Australian Dollar, Canadian Dollar, Deutsche Mark,
French Franc, Japanese Yen, Swiss Franc, Eurodollars, British Pound, Mexican
Peso; Index and Options Market (IOM) a division of the CME - S & P 500 Index,
S & P Midcap 400 Index; New York Futures Exchange (NYFE) - NYSE Composite;
Financial Instruments Exchange (FINEX) - U.S. Dollar Index, British Sterling-
Deutsche Mark, Deutsche Mark-Yen, Deutsche Mark-French Franc, Deutsche Mark-
Italian Lira; Commodity Exchange, Inc. (COMEX) - Gold, Silver; Kansas City
Board of Trade (KCBT) - Hard Red Winter Wheat, Value Line Index.
The following description of the CTA's trading systems, methods and strategies
is not intended to be exhaustive. In addition, the trading methods, systems
and principles utilized by the CTA are proprietary and confidential and the
following descriptions are general in nature. Further, in preparing the
following discussion, the CTA may have chosen to refer to or emphasize only
specific aspects of his trading systems, methods and strategies. Prospective
clients should also be aware that there are numerous trading systems, methods
and strategies utilized in the various futures and options
37
<PAGE>
contexts and that the following discussion only addresses those systems,
methods and strategies utilized by the CTA. Prospective clients will be
unable to compare the CTA's systems, methods and strategies with any other
trading systems, methods and strategies that are or may be utilized by other
traders or commodity trading advisors or trading managers.
The CTA will rely on his subjective judgment and discretion in the trading of
Partnership accounts. The intent of such subjective judgment and discretion
is to enhance returns and/or lower risks; however, there can be no assurances
that such actions will be successful. One example of such subjective judgment
or discretion may be determining the appropriate level of aggressiveness
during periods of unusual uncertainty.
In certain trades, the CTA will be utilizing a practice known as "Exchange for
Physicals" ("EFP"). EFP is a practice whereby positions in certain futures
contracts may be initiated or liquidated by first executing the transaction in
the appropriate cash market and then arbitraging the position into the futures
market (simultaneously buying the cash position and selling the futures
position, or vice versa). Although it is not anticipated to occur, if the
CTA's ability to engage in such transactions were to be restricted by the CFTC
or other applicable authority, the current trading techniques employed by the
CTA may be impaired to the detriment of clients of the CTA.
PERFORMANCE RECORD OF THE CTA
The performance capsules set forth below are presented on a composite basis.
While there may be differences in the specific trades made in each account,
the trading program and strategies employed for accounts traded in Mr.
Frischmeyer's Managed Account Program, Iowa Commodities Fee Schedule and in
his Managed Account Program, Regular Fee Schedule are the same, and Mr.
Frischmeyer does not believe there are substantial differences between the
trading systems, money management policies or fee structures, or any other
significant differences among the accounts comprising the respective
composites which would make the use of a composite inappropriate. As much as
possible, Mr. Frischmeyer attempts to trade all managed accounts
proportionately the same. For example, if one account is twice the size of
another, it will trade twice the number of contracts so that the two accounts
would generate a similar rate of return.
When reviewing the CTA's performance record, prospective clients should also
be aware, however, that composite performance results tend to create an
"averaging effect" on the performance of the accounts. Further, prospective
clients should recognize that different accounts can have and have had varying
investment results, even though they have been traded according to the same
general trading approach. The reasons for this include numerous material
differences between accounts, including the following:
1. The timing of the deposit of equity and the total period during which each
account was traded.
2. The relative sizes of the accounts, which influences the number of
interests and the number of contracts in each interest traded by accounts, as
well as the diversification of the account and the design and execution of the
CTA's methods. For instance, in the example given above, the larger account
might not be exactly twice the size of the smaller account. The CTA may, from
time to time, determine that certain trades may entail greater than ordinary
risks, which may cause him to also determine that all accounts should trade a
smaller than usual number of contracts. As a result, in some circumstances
larger accounts may trade a reduced number of contracts in such trades and the
small accounts may not participate in such trades.
3. The trading approach used-although all accounts may be traded in
accordance with the same general trading approach, such approach can and does
change periodically as a result of research and development by the CTA.
4. Split fills. When entering an order to buy or sell futures or options,
the CTA will block his managed accounts (group them together) so that multiple
accounts can be filled on one order. If fills occur at more than one price, a
small difference in performance can result. In such instances (except where
the Average Price System is applicable, described in the Sections entitled
"Description of Trading Program" and "Conflicts of Interest"), the fills are
arbitrarily allocated so that the highest prices (whether buys or sells) are
successively allocated to the numerically highest account numbers.
5. Incomplete fills. Occasionally, a blocked order can be partially, but not
completely filled at the price specified on the order. In such an instance,
the CTA attempts to allocate one contract to each account, regardless of
account size, and
38
<PAGE>
then allocate the remaining fills in proportion to account capitalization, but
some discrepancies may be unavoidable. See "Conflicts of Interest" above.
6. The size and time of payment of brokerage commissions and fees paid by the
accounts.
7. The size and time and payment of administrative costs paid by the
accounts.
8. The size and time and payment of interest income earned by the accounts.
9. The market condition in which accounts are traded, which in part
determines the quality of trade executions.
10. The allocation of orders to open or close positions.
Thus, the results of individual accounts, as a result of differences in the
above factors, may experience better or worse than the composite performance
results shown.
Managed Account Program, Regular Fee Schedule
The following capsule shows the past performance of Mr. Frischmeyer's Managed
Account Program, Regular Fee Schedule since the inception of the Managed
Account Program, Regular Fee Schedule and year-to-date (through My 31, 1998).
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Managed Account Program, Regular Fee Schedule
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
January (0.02) (2.36) (2.56) 1.45 N/A
February (0.51) (1.79) (1.22) (5.86) N/A
March (0.79) (1.79) (5.11) (2.88) 0.19
April (3.95) (3.17) 14.71 (7.88) (3.40)
May (5.77) (0.94) (8.46) (6.24) 0.58
June (0.91) (10.26) (3.09) (6.47)
July (3.28) 2.21 2.55 11.36
August (1.15) (7.38) 9.58 5.38
September (3.76) (7.53) 19.83 (0.55)
October (0.11) 2.35 4.18 1.65
November (1.51) (0.47) (3.01) (1.62)
December (0.66) (3.40) 12.87 (1.53)
Year (10.68) (19.50) (25.86) 19.24 4.64
<FN>
Name of Commodity Trading Advisor: Michael J. Frischmeyer
Name of Trading Program: Managed Account Program, Regular Fee Schedule
("Regular Program")
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Being Traded Pursuant To The Regular Program:
March 1, 1994
Number of Accounts Directed Pursuant To The Regular Program: 206
Total Assets Under Management of Mr. Frischmeyer: $24,994,287
Total Assets Traded Pursuant To The Regular Program: $15,958,421
Largest Monthly Draw-Down: 6-96/10.26% of client funds
39
<PAGE>
Worst Peak-to-Valley Draw-Down***: 12-95 to 5-98/71.75% of net asset value
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or
withdrawals exceed ten percent of beginning net assets, the Time-
Weighting of Additions and Withdrawals method is used to compute rates
of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-
end net asset value is not equaled or exceeded by a subsequent month-end
net asset value.
</TABLE>
As indicated above, the performance capsule is a composite consisting of 198
accounts, comprised of 130 at $40,000, 49 at $80,000, 7 at $120,000, 11 at
$160,000, and 1 at $200,000. As also indicated above, Mr. Frischmeyer's
Managed Account Program, Regular Fee Schedule began in March of 1994. One
hundred twenty-three (123) such accounts were opened in 1994, one hundred
thirty-two (132) such accounts were opened in 1995, two hundred thirty (230)
were opened in 1996, fifty-six (56) were opened in 1997, and nine (9) were
opened in 1998 (as of May 31, 1998). Three (3) of such accounts were closed
in 1994, all of which were profitable. Forty-three (43) such accounts were
closed in 1995, of which 29 were profitable, and 14 of which were
unprofitable. Fifty-two (52) such accounts were closed in 1996, of which 22
were profitable, 30 of which were unprofitable, and 20 of which were closed
for purposes of transferring to the accounts to another futures commission
merchant. The CTA continued as the commodity trading advisor for all such 20
accounts. One hundred eighty (180) such accounts were closed in 1997, 17 of
which were profitable, and 163 of which were unprofitable. Eighty-four (84)
such accounts were closed in 1998 (as of May 31, 1998), 1 of which was
profitable and 83 of which were unprofitable.
The composite performance records of the CTA's Managed Account Program,
Regular Fee Schedule do not include certain limited accounts (5 as of May 31,
1998) which are traded in the Managed Account Program, Regular Fee Schedule,
but which have not and will not, with the client's agreement, make any trades
in any contracts, options or other interests in any grains, oil seeds or
livestock which are otherwise made by the other accounts traded in the CTA's
Managed Account Program, Regular Fee Schedule. Those accounts are
collectively referred to in this Prospectus as the "Regular Fee Schedule-
Regular Fee Restricted Accounts Only". Although the Regular Fee Restricted
Accounts are charged the same fees by the CTA as the other accounts traded in
the CTA's Managed Account Program, Regular Fee Schedule, the CTA believes
including the Regular Fee Schedule-Regular Fee Restricted Accounts Only
Accounts in his composite performance records for his Managed Account Program,
Regular Fee Schedule is inappropriate because the Regular Fee Schedule-Regular
Fee Restricted Accounts Only Schedule Accounts do not trade in any contracts,
options or other interest in any grains, oil seeds or livestock. As indicated
above, the Regular Fee Schedule-Regular Fee Restricted Accounts Only Accounts
were therefore also excluded from the composite performance records for the
CTA's Managed Account Program, Regular Fee Schedule.
Managed Account Program, Regular Fee Schedule-Regular Fee Restricted Accounts
Only
The following capsule shows the past performance of Regular Fee Schedule-
Regular Fee Restricted Accounts Only since the inception of trading of the
first Regular Fee Schedule-Regular Fee Restricted Accounts Only Account (in
November, 1995) and year-to-date (through May 31, 1998). PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Managed Account Program, Regular Fee Schedule -
Regular Fee Restricted Accounts Only
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Year-to-date Nov - Dec
1998 1997 1996 1995
<S> <C> <C> <C>
2.71 (10.06) (18.40) (2.12)
<FN>
Name of Pool: Managed Account Program, Regular Fee Schedule-Regular Fee
Restricted Accounts Only
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
40
<PAGE>
Date When Client Funds Began Traded Pursuant To The Restricted Program:
November 27, 1995
Number of Accounts Directed Pursuant To The Restricted Program: 5
Total Assets Under Management of Mr. Frischmeyer: $24,994,287
Total Assets Traded Pursuant To The Regular Program: $174,823
Largest Monthly Draw-Down**: 7-96/7.84% of client funds
Worst Peak-to-Valley Draw-Down***: 7-96 to 12-97/25.99% of net asset value
* Rate of return is computed by dividing the net performance by the sum of
the beginning net asset value and net additions, capital withdrawals and
redemptions.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-
end net asset value is not equaled or exceeded by a subsequent month-end
net asset value.
</TABLE>
The above performance capsule is a composite of five (5) Regular Fee Schedule-
Regular Fee Restricted Accounts Only Accounts. One (1) such Account was
opened in 1995, twelve (12) such Accounts were opened in 1996, and no such
Accounts were opened in either 1997 or 1998 (as of May 31, 1998). Three (3)
such Accounts were closed in 1996, all of which were unprofitable as of the
date they were closed. Four (4) such Accounts were closed in 1997, all of
which were unprofitable as of the date they were closed. One (1) such Account
was closed in 1998 (as of May 31, 1998), which was unprofitable as of the date
it was closed.
The CTA has reserved the right, in his discretion, to negotiate and accept a
different fee schedule for any particular account or accounts to be traded
under his trading program, i.e., the CTA's Managed Account Program, Regular
Fee Schedule. One account traded under the CTA's Managed Account Program,
Regular Fee Schedule for which the CTA has agreed to a different fee schedule
is Frischmeyer Fund, L.P., which is an Iowa limited partnership operating as a
commodity pool. As of May 31, 1998, Frischmeyer Fund, L.P. had net assets of
approximately $1,235,718. Given the size of Frischmeyer Fund, L.P., the CTA
has agreed to receive a one percent (1%) annual management fee from
Frischmeyer Fund, L.P. based upon the total equity of Frischmeyer Fund, L.P.'s
account, rather than the four percent (4%) annual management fee based upon
the incremental trading level of the account as is generally charged to
accounts traded in the CTA's Managed Account Program, Regular Fee Schedule.
(The fees charged Frischmeyer Fund, L.P. by the CTA are otherwise the same as
those normally charged by the CTA to accounts traded in the CTA's Managed
Account Program, Regular Fee Schedule.). The CTA has determined that the
difference in the management fees charged to Frischmeyer Fund, L.P. makes the
inclusion of Frischmeyer Fund, L.P. in the composite performance records of
the CTA's Managed Account Program, Regular Fee Schedule inappropriate. The
following paragraph therefore sets forth a separate performance capsule for
Frischmeyer Fund, L.P.
Managed Account Program, Frischmeyer Fund, L.P. Fee Schedule
Frischmeyer Fund, L.P. is a single advisor pool that does not have a guarantee
feature. The following capsule shows the past performance of Frischmeyer
Fund, L.P. since the inception of trading by Frischmeyer Fund, L.P. and year-
to-date (through May 31, 1998). The CTA has no authority to, and no offering
of any interests in Frischmeyer Fund, L.P. is made by this Prospectus. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Managed Account Program, Frischmeyer Fund, L.P. Fee Schedule
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Year-to-date Feb - Dec
1998 1997 1996 1995
<S> <C> <C> <C>
(9.79) (14.25) 12.69 (6.62)
<FN>
Name of Pool: Frischmeyer Fund, L.P.
Type of Pool: Publicly offered, but currently closed to new investors
41
<PAGE>
Date of Inception of Trading: March 15, 1995
Aggregate Gross Capital Subscriptions to the Pool: $2,658,017
Pool's Net Asset Value: $1,235,718
Largest Monthly Draw-Down**: 12-95/19.44% of net asset value
Worst Peak-to-Valley Draw-Down***: 10-95 to12-95/10.78% of net asset value
* Rate of return is computed by dividing the net performance by the sum of
the beginning net asset value and net additions, capital withdrawals and
redemptions.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-
end net asset value is not equaled or exceeded by a subsequent month-end
net asset value.
</TABLE>
Financial Futures Managed Account Program
The following capsule shows the past performance of Financial futures Managed
Account Program since the inception of trading of the first Financial futures
Managed Account Program (in June, 1997) and year-to-date (through May 31,
1998). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Financial Futures Managed Account Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Year-to-Date June - Dec
1998 1997
<S> <C>
(1.37)**** (9.36)****
<FN>
Name of Pool: Financial Futures Managed Account Program
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Traded Pursuant To The Financial Futures program:
June, 1997
Number of Accounts Directed Pursuant To The Restricted Program: 1
Total Assets Under Management of Mr. Frischmeyer: $24,997,287
Total Assets Traded Pursuant To The Regular Program: $56,635
Largest Monthly Draw-Down**: 8-97/3.45% of client funds
Worst Peak-to-Valley Draw-Down***: 6-97 to 5-98/5.86% of net asset value
* Rate of return is computed by dividing the net performance by the sum of
the beginning net asset value and net additions, capital withdrawals and
redemptions.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-
end net asset value is not equaled or exceeded by a subsequent month-end
net asset value.
**** The rates of return for 1995 and 1996 were affected by a
misappropriation in 1995 of certain assets of Frischmeyer Fund, L.P. by
its prior general partner and by the recovery of those assets by
Frischmeyer Fund, L.P. in 1996. Mr. Frischmeyer was not involved in any
way with the referenced events.
</TABLE>
The above performance capsule is a composite of one (1) Financial Futures
Managed Account Program Account. Four (4) such Accounts were opened in 1997,
and no such Accounts were opened in 1998 (as of May 31, 1998). Three (3) such
42
<PAGE>
Account was closed in 1997, all of which were unprofitable as of the date they
were closed. No such Accounts were closed in 1998 (as of May 31, 1998).
Managed Account Program, Iowa Commodities Fee Schedule
The following capsule shows the past performance of Mr. Frischmeyer's Managed
Account Program, Iowa Commodities Fee Schedule for the most recent five
calendar years and year-to-date (through May 31, 1998), as well as since
inception through 1992. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF
FUTURE RESULTS.
<TABLE>
Managed Account Program, Iowa Commodities Fee Schedule
Percentage Rate of Return
For the Most Recent Five Calendar Years and Year-to-Date
(Computed on a compounded monthly basis)*
<CAPTION>
Year-to-Date
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
(8.13) (17.89) (20.14) 42.34 9.71 166.90
</TABLE>
<TABLE>
Managed Account Program, Iowa Commodities Fee Schedule
Percentage Rate of Return
Since Inception Through December, 1992
(Computed on a compounded monthly basis)*
<CAPTION>
1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
21.19 (4.96) (6.73) 54.84 86.89 100.09 (35.78) (4.62) 229.34 100.69 0.86 (25.34)
<FN>
Name of Commodity Trading Advisor: Michael J. Frischmeyer
Name of Trading Program: Managed Account Program, Iowa Commodities Fee
Schedule ("ICL Program")
Date Commodity Trading Advisor Began Trading Client Accounts: March 1, 1976
Date When Client Funds Began Being Traded Pursuant To The ICL Program:
January 1, 1981
Number of Accounts Directed Pursuant To The ICL Program: 59
Total Assets Under Management of Mr. Frischmeyer: $24,994,287
Total Assets Traded Pursuant To The ICL Program: $7,743,513
Largest Monthly Draw-Down**: 8-93/35.47% of client funds
Worst Peak-to-Valley Draw-Down***: 4-96 to 5-98/75.75% of net asset value
* Rate of Return is computed by dividing the net trading results by
beginning net asset value for the period.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-
end net asset value is not equaled or exceeded by a subsequent month-end
net asset value.
</TABLE>
No accounts in Mr. Frischmeyer's Managed Account Program, Iowa Commodities Fee
Schedule were opened in 1998 (as of May 31, 1998). Four (4) such accounts
were opened in 1997. Eight (8) such accounts were opened in 1996, six (6)
such accounts were opened in 1995, and twenty-one (21) such accounts were
opened in 1994. Eight (8) such accounts were opened in 1993, and one (1) such
account was opened in 1992, being a commodity pool which was created as a
vehicle for existing managed accounts of less than $30,000 to permit
participation in trades that would be unsuitable for a small account. In the
course of consolidating those accounts, twenty-four (24) managed accounts were
closed. The historical performance of each of those accounts was comparable
to that shown in the composite performance record. The lifetime performance
of such accounts is dependent upon when each account was opened.
43
<PAGE>
One account in Mr. Frischmeyer's Managed Account Program, Iowa Commodities Fee
Schedule was closed in 1992, one other was closed in 1993, three were closed
in 1994, five such accounts were closed in 1995, no such accounts were closed
in 1996, four such accounts were closed in 1997, and four such accounts were
closed in 1998 (as of May 31, 1998). The account closed in 1992 had been
traded for ten quarters from April, 1990 through September, 1992 and was
unprofitable (as were all of Mr. Frischmeyer's managed accounts during that
period). The account closed in 1993 was transferred to Mr. Frischmeyer in
1989, had been profitable, and was closed due to the dissolution of the
partnership which owned the account. Of the three closed in 1994, one was
opened in 1989 and was profitable, one was opened in 1990 and was profitable
(closed for estate planning), and one was opened in 1976 and was closed due to
a death. Of the five closed in 1995, one was opened in 1981 and was
profitable, one was opened in 1984 and was profitable, and three were opened
in 1994 and were unprofitable. Two of the accounts which were closed in 1995
were closed pursuant to reorganizations by the client, and resulted in two new
accounts being opened in 1995.
COMMODITECH, INC.
Commoditech, Inc., a Missouri corporation, is one of the Commodity Trading
Advisors (collectively above called the "CTAs" and in this section called the
"CTA"),and its Main Business Office and main business telephone are: 4299,
Rock Island Road, Arnold, Missouri 63010; (314) 464-5457; and, Facsimile:
(314) 467-1906. The books and records of the CTA will be kept and made
available for inspection at the Main Business Office.
BUSINESS BACKGROUND
The business background of the CTA for at least five (5) years is as follows:
Commoditech, Inc. (the "CTA") was registered with the Commodity Futures
Trading Commission ("CFTC") as a Commodity Trading Advisor in August 1990 and
is a member in good standing of the National Futures Association ("NFA").
Such registration and membership, however, in no way implies that the CFTC or
the NFA has reviewed or approved the accuracy of the information contained in
the CTA's application for registration or that the CTA has qualifications to
provide the advisory services described herein. The CTA is a Missouri
corporation organized in 1990 to serve as a commodity trading advisor.
The sole principal of the CTA is Barry T. Johnson. Mr. Johnson obtained a
B.S. degree in chemical engineering from Iowa State University in 1970. Since
1969 he has been employed by Union Carbide (1969), Monsanto Company (1970 to
1980) and by the Allis-Chalmers Corporation (1980 to 1990) in various
engineering and management positions. His experience includes that of being
the Plant Manager of a $150 million coal gasification plant and of holding the
position of President of the Allis-Chalmers subsidiary which owned the plant.
His most recent position, from 1990 to the present, has been as President of
Commoditech, Inc.
Mr. Johnson, born in 1948, was raised on a farm in Iowa, where he first became
interested in commodity markets. In 1984, he combined his technical education
and experience with his market interest and began to develop a computer-based
trading system. In January 1988, after years of research and development, he
began trading his own account to gain actual trading experience while
continuing to test and develop the trading system.
The CTA began trading its first client account in January 1992. The
performance section of this document sets forth the actual, entire results of
the CTA's managed accounts on the basis of monthly reporting periods.
Additionally, please see "Performance of the CTA", below, for a detailed
performance history of Mr. Johnson.
DESCRIPTION OF TRADING PROGRAM
The trading method developed and employed by the CTA seeks substantial capital
appreciation through speculative trading in commodity futures contracts, as
defined and permitted by the CFTC, including, without limitation, futures
contracts in agricultural products, metals, financial instruments, foreign
currencies and stock indices, traded on commodity exchanges located in the
United States. No assurance is given that this objective can be met.
Commodity traders generally rely on either technical or fundamental analysis,
or a combination thereof, in making trading decisions and attempting to
identify price trends. Fundamental analysis looks at the external factors
that affect the supply and demand of a particular commodity in order to
predict futures prices. As an example, some of the fundamental
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<PAGE>
factors that affect the supply of a commodity (e.g., silver) include mining
production, industrial reclamation, and strikes affecting the production and
distribution of the commodity. The demand for silver consists of industrial
production, manufacturing and world consumption, and is a product of many
things, including general world economic conditions, as well as the cost of
silver in relation to the cost of competing products such as gold and
platinum.
Technical analysis is not based on the anticipated supply and demand of the
cash (actual) commodity; instead, it is based on the theory that a study of
the markets themselves will provide a means of anticipating futures prices.
Technical analysis of the markets generally will include a study of the actual
daily, weekly and monthly price fluctuations, volume variations and changes in
open interest, utilizing charts or computers for analysis of these items.
The CTA uses a computer-based technical system for trading commodity futures
contracts. On a daily basis, his self-developed trading system ("the System")
calculates certain key parameters from current market data. The System
produces "trading signals" if these calculated parameters are within
predefined limits. For example, one of the key parameters is "trend-rate"
which is calculated from moving-average price data over an 18 week period.
Some of the other parameters include "price volatility" and certain
mathematically-defined "price patterns".
The acceptable limits of the System's key parameters are constants which are
applied consistently to all of the markets traded. This is made possible by
calculating each of the key parameters as a ratio to the specific market's
price volatility. As a result, markets as diverse as coffee and the
eurodollar can be traded using the same parameter limits. The CTA believes
that standardizing the key parameters in this way and setting their acceptable
limits as constants which are applied consistently to all of the markets is
important in achieving acceptable repeatability of performance results.
The System seeks to identify market conditions that favor price trending, and
trading positions are taken only in the direction of the calculated 18-week
price trend. Specific trading decisions are based on the theory that when the
market price of a commodity reaches a threshold price (as calculated by the
System), then there is a favorable probability that the market price will
continue in that direction for the near term. Consequently, trades for both
entering and exiting the market are normally made using "stop-orders" located
at these calculated threshold prices. For example, in an upward-trending
market, a long position may be taken at a set increment above a recent market
low using a buy-stop order. The offsetting sell-stop order then follows at a
set increment below the subsequent market high until it is executed, or until
the position is otherwise closed out by the CTA on a market order.
Conversely, in a downward-trending market, a short market position may be
taken by selling at a set increment below a recent market high.
As the trading methods and strategies of this trading program are proprietary
and confidential, the above discussion is necessarily of a general nature.
The risk management strategy employed by any commodities trader is equally
important to the foregoing discussion of commodity and price selection. There
is a wide distribution of results on individual trades. The worst trades are
experienced when the market reverses direction immediately after opening a
position and then continues in the unfavorable direction until the stop-loss
order is executed. The best trades are experienced when the market makes a
significant price move in the favorable direction before reversing course and
executing the closeout stop order. Normal statistical variations are such
that, at times, there will be a series of losing trades. The level of risk
taken on individual trades must therefore be established to balance long-term
rate of return with short-term loss containment. The amount of intended risk
on any individual trade is a function of the location of the stop-order price,
which is set by the trading system, and the number of contracts traded. The
CTA determines the number of contracts such that the intended risk is within
both the CTA's and the Client's risk tolerance. Typically, the risk level on
individual trades ranges from 3% to 7% of the account's net asset value.
The CTA trades a diversified mix of commodities which includes the British
pound, Deutschemark, Yen, U.S. dollar index, Canadian dollar, Australian
dollar, eurodollar, T-bills, Treasury bonds, sugar, crude oil, copper, coffee,
cotton, natural gas, orange juice, and others. Trading activity is typically
in the range of two to six independent trades per month, although this varies
widely depending on market conditions.
45
<PAGE>
PERFORMANCE RECORD OF THE CTA
Commoditech, Inc. - Program A
The following capsule shows the past performance of the Commoditech, Inc. -
Program A since the inception of trading of the first Account (in January,
1992) and year-to-date (through May 31, 1998). PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Commoditech, Inc. - Program A
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
January (3.08) 25.33 10.67 (17.68) (6.44) (5.58)
February (4.03) 12.06 (11.95) 1.52 0.18 (7.95)
March 8.06 (0.41) (3.13) 19.98 7.96 (1.37)
April (2.70) 5.00 15.40 3.87 10.84 3.26
May (4.32) 0.67 (3.81) 6.17 17.57 3.38
June 0.35 (8.89) 6.40 21.75 4.25
July 18.42 0.57 (5.67) (1.33) (4.01)
August (6.33) (2.25) 0.94 (15.04) (4.00)
September 4.82 (3.95) 1.24 1.84 (0.33)
October (15.82) 12.99 2.34 (7.07) 7.00
November 13.21 7.85 13.35 14.49 (17.66)
December (7.54) (12.76) 8.92 (7.60) 1.89
Totals (6.43) 52.00 (4.17) 43.30 34.74 (21.34)
<FN>
Name of Commodity Trading Advisor: Commoditech, Inc.
Name of Trading Program: Program A
Acceptance Date of First Client Account: January 1992
Date CTA began trading client funds pursuant to Program A: January 1992
Number of client accounts using this trading program: 78
Total Assets managed under all trading programs of the CTA: $2,850,000
Total Assets managed under this trading program: $2,850,000
Worst Monthly Percentage Draw-down**: 11-93/21.49%
Worst Peak-to-Valley % Draw-down***: 6-94 to 1-95/38.89%
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net
asset value.
</TABLE>
ROSENBERY CAPITAL MANAGEMENT, INC.
Rosenbery Capital Management, Inc., an Illinois corporation, is one of the
Commodity Trading Advisors (collectively above called the "CTAs" and in this
section called the "CTA"), and its Main Business Office and main business
telephone are: 5445 N. Sheridan Rd. Suite 2706, Chicago, IL 60640; (773) 271-
7971; and, Facsimile: (773) 271-8371. The books and records of the CTA will
be kept and made available for inspection at the Main Business Office.
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<PAGE>
BUSINESS BACKGROUND
The business background of the CTA for at least five (5) years is as follows:
Rosenbery Capital Management, Inc., a Subchapter S Corporation chartered in
the State of Illinois, manages individual commodity trading accounts.
Rosenbery Capital Management, Inc. is a Commodity Trading Advisor (CTA)
registered with the Commodities Futures Trading Com-mission (CFTC) since
February 21, 1997 and a member of the National Futures Association (NFA) since
February 21, 1997.
Employing a proprietary technical trading program designed to overcome
limitations common to small account management, Rosenbery Capital Management,
Inc. seeks the maximization of long-term asset appreciation relative to risk
for accounts of $10,000 and multiples thereof. The program entails the buying
and selling of U.S. Treasury 10-year Treasury Note futures contracts, 30-year
Treasury Bond futures contracts and 30-year Treasury Bond option contracts.
Futures positions may be long or short, while option positions may be long
only. The trading of these contracts are executed only through domestic U.S.
exchanges.
Eric Rosenbery is the sole principal of Rosenbery Capital Management Inc. and
is solely responsible for all trading and operational decision-making. Mr.
Rosenbery has been the controlling principal since the inception of Rosenbery
Capital Management, Inc.
In 1977, Eric Rosenbery received a Bachelor of Sciences degree in Physics from
the University of Illinois at Champaign-Urbana. Upon graduation, Mr.
Rosenbery was hired by the Borg-Warner Corporation as a Product Engineer for
the Brummer line of automotive components. When Brummer was purchased in 1983
by Echlin Inc., Mr. Rosenbery relocated with the product line to the Echlin
manufacturing facilities in McHenry, Illinois as a condition of the product
line's sale and was named Chief Engineer of Echlin's newly-created Brummer
Division. In addition to engineering and supervisory duties, Mr. Rosenbery
was responsible for the on-site re-qualification of the Brummer OEM product
line at Ford Motor Company's European manufacturing facilities in Basildon,
England and Cologne, Germany. Mr. Rosenbery also served as the engineering
liaison to Echlin's European sales representatives located in Hamburg,
Germany.
In 1985, Mr. Rosenbery began research into technical trading methods. By
1987, Mr. Rosenbery was trading sector mutual funds full-time for his own
account and formed Oracle Weekly Publications, Inc., which later became
Rosenbery Capital Management, Inc. In 1990, Mr. Rosenbery began trading
commodity futures and concentrated his research efforts on 10-year Treasury
Notes and 30-year Treasury Bonds. On July 6, 1994, Mr. Rosenbery implemented
Progenitor I, his first system devoted solely to capital market interest
rates. Further development led to the implementation on Jan 2, 1996 of
Progenitor II, which greatly increased the already-profitable performance of
Progenitor I. On February 21, 1997, Mr. Rosenbery was granted registration as
an Associated Person of Rosenbery Capital Management, Inc. and was admitted as
an NFA Associate Member.
Additionally, please see "Performance of the CTA", below, for a detailed
performance history of Mr. Rosenbery.
DESCRIPTION OF TRADING PROGRAM
PROPRIETARY INDICATORS. It is the CTA's belief that a successful indicator
must be self-generated and outside the public domain. Axiomatically, any
truly predictive indicator can have only a briefly successful public life.
Once publicly known, the indicator would be treated by the market as new
information. In the same way that prices are discounted upon the release of
new information, such as a government report, the indicator would likewise
cause a similar price discounting. In addition to the narrowed window of
opportunity, this indicator would ultimately lose its effectiveness by
measuring its own discounted prices. Compounding this failure, attempts at
modifying the indicator back to life would de-couple the indicator from its
original philosophical basis and possibly lead to reverse-logic contrarian
interpretations. Having tested numerous indicators, the CTA has found none
sufficient to consistently offset transaction costs. The CTA therefore
employs only proprietary indicators of his own design.
PRICE THEORY. It is the CTA's belief that a non-random component exists
within commodity prices and that price movement can be forecasted through
mathematical analysis. Confirmatory to this belief, the CTA has identified
four primary market mechanisms that account for much of the non-random
behavior. Because commodities are traded by people, prices will be affected
by market psychology and occasionally dominate normal supply and demand
concerns until they are eventually corrected. Classical price theory
addresses the linear interaction between supply and demand but
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<PAGE>
doesn't address the non-linear interaction between the rational and the semi-
rational. Markets react not only to supply and demand, but also to their own
reaction to supply and demand, all the while leaving numerous telltale
"fingerprints" on prices. Normally dismissed as noise or selectively
attributed to affirmative market fundamentals, the imbedded non-linear
information in seemingly mundane prices can aid in forecasting which way a
seemingly quiet market will eventually break. Through repeated human
iterations, this positively-reinforced market feedback may evolve into range-
bound "cyclical" markets, break-out into "trending" markets or climax in a
panic. Each of these market types are of limited duration and often dissolve
shortly after being identified. By being on-board at the start, with minimal
lag time, these market inefficiencies can be efficiently exploited. Further,
knowing the mechanisms that caused these market inefficiencies can aid in
forecasting the market's eventual discounting back to equilibrium.
SYSTEM DESIGN. Imbedded non-linear price information must be extracted and
converted into a usable linear form because the act of trading, in itself, is
linear. For example, a trader establishes a bullish position because his
sentiment level reaches a specific threshold for bullish action. A trader
does not, however, establish a bullish position because he reaches an
undefined level of bearishness. A linear indicator generates signals that are
directly proportional to the expected market outcome. In addition to its
inherent rational logic, linear indicators can be combined to create a more
powerful linear composite indicator. Here, strong sentiment in one direction
will overrule weak sentiment in another direction by a quantifiable amount and
render a more accurate forecast. Compounding this increase in accuracy, the
random noise component of each indicator is largely canceled-out. This
enhanced performance is extremely important because profits begin only after
transaction costs are met. This enhanced composite indicator, more powerful
than the sum of its parts, forms the heart of the CTA's trading system. This
forecasting power is measured as a signal-to-noise ratio, which when
implemented into a completed program, translates into the reward-to-risk ratio
of actual trading. The degree of complexity in this system is well-beyond the
scope of conventional fundamental analysis and owes its feasibility to the
power of today's computers. Fully objective and mechanical, the system
generates unambiguous buy and sell signals, allowing the CTA to concentrate on
market monitoring and accurate order placement.
THE SYSTEM. The system is based upon rationally-derived algorithms of market
mechanisms coupled to specific aspects of trader mass-behavior. At the core
of the system are four independent and quantitative indicator modules that
each describe a particular market mechanism. Each reacts with opposing biases
to price movement, thereby largely hulling-out random price noise when
combined. The result is a highly distilled composite with a high signal-to-
noise ratio. Acting upon the composite is a trade shell program that
generates the actual buy and sell signals. If the composite is strongly
positive, a buy signal is generated. If the composite is strongly negative, a
sell signal is generated. When the composite reverses polarity, positions are
exited. The system is in the market 72% of the time on average. A trade-
saving filter consisting of robust short-term indicators is used to protect
against "whip-saw" price action and control the frequency of trades in a cost-
effective manner. Entries and exits are allowed only when confirmed by the
filter and result in trade durations of 8 calendar days on average. In
addition to lowering overall transaction costs, the lowered trading frequency
minimizes the likelihood human error in program execution that is common to
active trading.
EXECUTION. The system derives its trading decisions primarily from daily
settlement prices. Of all daily prices, the settlement price offers the
truest insight into the state of the market. By closely monitoring prices
during the final minutes of trading, the system generates buy or sell commands
that are typically executed via market-on-close (MOC) orders. This eliminates
the lag time of waiting until the next day's opening. Although one may
question the propriety of acting on a price that technically hasn't occurred
yet, the system usually generates buy and sell price ranges that are widely
separated and rarely affected by moves occurring in the minutes between order
placement and the market's close. Further, because of the system's trade-
saving features, there is less than a 20% likelihood of any trade activity
occurring on any given trading day. Adding to the benefit of end-of-day
trading, markets are usually the most liquid at the close and result in a
published price from which order fill quality can be definitively monitored.
ACCOUNT SIZE, COMPOSITION AND OPTIONS. (This disclosure statement is not
meant to offer an exhaustive description of options and describes only their
generalized characteristics. Because the program allows the holding of only
long options purchased at a premium, all subsequent use of the terms "option",
"call" and "put" shall be taken to mean "long option", "long call" and "long
put", respectively) Account size is measured in terms of "units". One unit
consists of one 10-year Treasury Note or 30-year Treasury Bond futures
contract, augmented at the CTA's discretion by the purchase of one 30-year
Treasury Bond call and/or put contract. To definitively cap risk exposure,
the CTA may substitute an additional option contract in lieu of the futures
contract. An account controls one unit for every $10,000 account balance,
rounded to the nearest $10,000. For example, an account with a balance of
between $15,000 (inclusive) and $25,000 will control two units. Upon
initiation of each new trading position, the CTA determines the appropriate
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<PAGE>
unit quantity for the account and places the forthcoming trades in the
specified contract quantities. Typically, an account is increased by one unit
for each $10,000 net profit (less applicable fees) and is decreased by one
unit for each $10,000 net loss. It is advised that the account balance be
maintained above $5,000 to reduce the likelihood of margin calls.
PERFORMANCE RECORD OF THE CTA
Rosenbery Capital Management, Inc. manages accounts that trade solely in
capital market interest rate futures and options in unit blocks of $10,000.
The trading system used was developed entirely by the CTA. Pursuant to the
use of this specific product for the management of trading accounts, the CTA
thoroughly researched the accuracy of the system's buy and sell signals within
his own personal trading account. Implemented on July 6, 1994 and still in
use, the system encompasses over 21/2 years of proprietary trading, leading to
its use for managed accounts. The system has been slightly modified through
use, but has remained the same since January, 1996. On December 23, 1996, the
Rosenbery Capital Management, Inc. began trading on behalf of clients as a
registered CTA under the trading program "Progenitor". The following
performance capsule reflects the results of such trading.
Rosenbery Capital Management, Inc. - Progenitor
The following capsule shows the past performance of the Rosenbery Capital
Management, Inc. - Progenitor since the inception of trading of the first
Account (in December 23, 1996) and year-to-date (through May 31, 1998).
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Rosenbery Capital Management, Inc. - Progenitor
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997 1996
<S> <C> <C> <C>
January (15.0) 25.5 N/A
February 0.3 (14.8) N/A
March (10.8) 22.2 N/A
April 5.2 (19.7) N/A
May (8.2) (6.0) N/A
June 6.3 N/A
July 1.9 N/A
August (1.1) N/A
September (3.8) N/A
October 33.7 N/A
November 3.1 N/A
December 6.6 5.5
Year (26.6) 49.2 5.5
<FN>
Name of Commodity Trading Advisor: Rosenbery Capital Management, Inc.
Name of Trader: Eric Rosenbery
Name of Trading Program: Progenitor
Inception of Trading by CTA: December 23, 1996
Inception of Trading in Progenitor: December 23, 1996; July 6, 1994
(proprietary)
Progenitor Accounts Under Management: 235
Total Assets managed by CTA: $2,871,775
Worst Monthly Percentage Draw-down**: 4-97/19.7%
Worst Peak-to-Valley % Draw-down***: 1-98 to 5-98/26.6%
Number of Accounts Closed with Profit: 7 since December 23, 1996
Number of Accounts Closed with Loss: 23 since December 23, 1996
49
<PAGE>
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
J.A.H. RESEARCH AND TRADING
James A. Hyerczyk (d.b.a. J.A.H. Research and Trading) is one of the Commodity
Trading Advisors (collectively above called the "CTAs" and in this section
called the "CTA"). The CTA conducts the business of the trading program
described in this Disclosure Document as a sole proprietorship as J.A.H.
Research and Trading, and his Main Business Office and main business telephone
are: 10561 Ridgewood Drive, Palos Park, Illinois 60464, (708) 448-6858,
facsimile (708) 448-0723, e-mail [email protected]. The books and
records of the CTA will be kept and made available for inspection at the Main
Business Office.
DESCRIPTION OF TRADING PROGRAM
J.A.H. RESEARCH AND TRADING offers two separate trading programs for managed
accounts based on the level of capitalization of each client's account.
Accounts with a beginning equity balance which is less than $8,000 are traded
pursuant to the Program II. Accounts with a beginning balance which is
greater than $8,000 are traded pursuant to the Program I. When trading for
the Partnership, the CTA intends to use the Program I strategy, detailed below
under "Program I". The CTA will use the signals generated to trade the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Coffee, Sugar and
Cocoa Exchange, Globex, the Kansas City Board of Trade, the Mid-America
Commodity Exchange, New York Cotton Exchange, and the New York Mercantile
Exchange markets. No other futures markets will be traded for the
Partnership.
Trading Philosophy of the CTA
The trading philosophy of the Advisor was developed over thirteen years of
research and back-testing in the futures industry. The main thrust of the
Advisor's philosophy is that markets adhere to the principles of price, time
and pattern and that the conclusions derived from the research and back-
testing of these principles can be quantified and tested over a period of at
least ten years of historical data to determine the probabilities of its
success.
During the early years of testing the Advisor discovered that many of the
technical indicators and commercially available systems used and written about
in technical manuals simply do not work consistently when tested objectively
by computer. Most programs either focus too much on time or on price and
subsequently ignore the important relationship between the two. In many cases
an indicator or system would have a strongly positive return for a period of a
few weeks or months, followed by many months of draw-down. In addition, he
found that many systems only prove profitable if a particular commodity were
chosen for inclusion in the testing or trading. In other words, one market
which experienced a major trend provided all the profit and all the other
markets continued to provide losses. Unless every market were traded, there
was no assurance that a trader would be fortunate enough to have included the
winning commodity in his or her trading with the particular system. It wasn't
until he began to work with price, time and pattern that the Advisor
consistently found positive results in simulated trading. His conclusion was
that a trader needs the computer generated reports to filter the patterns, but
he also needs the discretionary input in order to allow the system to be more
adaptive to current market conditions.
Program I
The Program I is a proprietary, discretionary, and technical trading system.
The Program attempts to profit from short-term to intermediate trends in the
market. The Program was developed through extensive and on-going back testing
of historical data based on price and time trading theories. The Program
incorporates the use of price, time and pattern recognition. A mechanical
trend indicator as well as geometrical angles are used to show trend, strength
and direction. Various oscillators are also used to provide information on
the market's trend, strength, momentum and
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overbought/oversold conditions. The information obtained from the combination
of the price and time analysis, and the oscillators are the basis of all
trading signals. Each day the CTA analyzes his charts as well as the
oscillators to identify current conditions that may have existed in the past
that have a high probability of generating a successful trade. If conditions
do exist, then at his discretion, the CTA will issue the appropriate buy, sell
or flat signal. Risk management is an important aspect of the J.A.H. Research
and Trading Program. Risk is measured on a trade-by-trade basis. If current
conditions exist that conclude liquidation of a position is necessary, then at
his discretion, the CTA will issue the appropriate signal.
In summary, the Program I will incorporate trades in all United States Futures
and Options Exchanges. The Program is discretionary with signals based on a
combination of price, time, pattern and oscillators. The specific parameters
of the J.A.H. Research and Trading model were developed through extensive and
on-going back-testing of historical data to determine specific entry and exit
points. Risk is measured on a trade-by-trade basis.
Program II
As stated above, the Advisor now offers the Program II to clients investing
less than $8,000. The trading signals utilized by the Advisor in initiating
and liquidating positions for accounts traded pursuant this program are
identical to those employed by the Advisor on behalf of accounts traded
pursuant to the Program I. The only major difference between the between
these programs is that the accounts traded pursuant to the Program II will
trade primarily (though not exclusively) in option contracts and "mini"
futures contracts offered at the Mid-America Commodity Exchange.
Additionally, the Advisor's risk management of accounts traded pursuant to
this program will be adjusted in relation to the size of these accounts. For
instance, the Advisor may enter a stop loss order closer to the initiation
price of an account traded pursuant to this program than he would for an
account traded pursuant to the Program I in order to protect the smaller
balances of these accounts. As with the Program I, risk will measured on a
trade-by-trade basis.
BUSINESS BACKGROUND
The name of the principal and sole-proprietor of J.A.H. RESEARCH AND TRADING
is James A. Hyerczyk. Mr. Hyerczyk became registered as a Commodity Trading
Advisor on August 9, 1989. Mr. Hyerczyk was admitted to membership in the
National Futures Association effective December 28, 1995.
Mr. Hyerczyk began his career in the futures industry in 1983 as an account
executive with Data-Trend Commodities, an Introducing Broker of Chicago Grain.
Throughout his career he has worked in the capacity of Director of Research
for several Introducing Brokers. During this time period Mr. Hyerczyk has
devoted a substantial amount of time researching and analyzing price and time
trading strategies and systems. In May 1989, Mr. Hyerczyk became a sole-
proprietor and formed Gann Research and Trading. This company was a daily
futures advisory service which provided daily and intra-day Gann based support
and resistance data to S&P 500 Stock Index future traders. In December 1992,
Mr. Hyerczyk became an associated person of the staff of Hartfield Management,
a CTA, and publisher of the Hightower Report. At the Hightower Report, Mr.
Hyerczyk was responsible for all areas of technical analysis including daily
commentary, special reports and the Techview Section of the bi-weekly letter.
In 1993, Mr. Hyerczyk registered with the National Futures Association as a
commodity trading advisor doing business as J.A.H. Research and Trading.
His work has been published in Futures Magazine (September 1990) and the
Gann/Elliott Trader Magazine (April 1988). He has also presented seminars for
the Commodities Educational Institute (a Division of Oster Communication) and
has lectured at the World Conference of Cycle-Economics as well as in the
Soviet Union (1991), Guatemala (1995) and Malaysia (1995). Mr. Hyerczyk is
also on the faculty of the Chicago Mercantile Exchange where he teaches a
course called An Introduction to Gann Theory. He is a regular weekly
commentator on the Money Radio Network in Pomona, California. Mr. Hyerczyk
received a BA degree in Business Administration from St. Xavier College in
Chicago in 1982 and a CPA Certificate from the State of Illinois in 1983. In
addition, he received a Masters degree in Financial Markets and Trading from
the Illinois Institute of Technology in 1996. Additionally, please see
"Performance of the CTA", below, for a detailed performance history of Mr.
Hyerczyk.
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PERFORMANCE RECORD OF THE CTA
J.A.H Research and Trading - Program I - Capsule Performance of Accounts
The following capsule shows the past performance of Mr. Hyerczyk's trading as
J.A.H. Research and Trading (Program I) since the inception of J.A.H. Research
and Trading and year-to-date (through May 31, 1998).
<TABLE>
J.A.H. Research and Trading - Program I
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997
<S> <C> <C>
January (1.15) N/A
February (7.67) N/A
March (2.30) (1.89)
April (0.74) (6.79)
May (0.31) 9.46
June (0.20)
July 2.96
August 5.25
September (0.25)
October (3.33)
November (0.28)
December (7.38)
Year (11.76) (3.60)
<FN>
Name of Commodity Trading Advisor: James A. Hyerczyk
Name of Trading Program: J.A.H. Research and Trading
Date Commodity Trading Advisor Began Trading Client Accounts: March, 1997
Date When Client Funds Began Being Traded Pursuant To Program I: March, 1997
Number of Accounts: 326
Total Assets Under Management of Mr. Hyerczyk: $2,268,465
Total Assets Traded Pursuant To Program I: $1,854,722
Largest Monthly Draw-Down** Since Inception and Year-to-Date
(through May 31, 1998): 2-98/7.67% of client funds
Worst Peak-to-Valley Draw-Down*** Since Inception and Year-to-Date
(through May 31, 1998): 9-97 to 5-98/21.50% of net asset value
Number of Accounts Closed with Profit: 1
Number of Accounts Closed with Loss: 190
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
52
<PAGE>
J.A.H Research and Trading - Program II - Capsule Performance of Accounts
The following capsule shows the past performance of Mr. Hyerczyk's trading as
J.A.H. Research and Trading (Program II) since the inception of the Program II
and year-to-date (through May 31, 1998).
<TABLE>
J.A.H. Research and Trading - Program II
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997
<S> <C> <C>
January (1.90) N/A
February (7.70) N/A
March (7.79) N/A
April (3.05) (12.98)
May (2.01) 13.33
June 0.77
July (0.17)
August 2.13
September (0.27)
October 0.65
November (3.18)
December (9.98)
Year (20.68) (11.36)
<FN>
Name of Commodity Trading Advisor: James A. Hyerczyk
Name of Trading Program: J.A.H. Research and Trading
Date Commodity Trading Advisor Began Trading Client Accounts: March, 1997
Date When Client Funds Began Being Traded Pursuant To Program II: April, 1997
Number of Accounts: 141
Total Assets Under Management of Mr. Hyerczyk: $2,268,465
Total Assets Traded Pursuant To Program II: $413,743
Largest Monthly Draw-Down** Since Inception and Year-to-Date
(through May 31, 1998): 4-97/12.98% of client funds
Worst Peak-to-Valley Draw-Down*** Since Inception and Year-to-Date
(through May 31, 1998): 4-97 to 5-98/30.88% of net asset value
Number of Accounts Closed with Profit: 4 since April, 1997
Number of Accounts Closed with Loss: 40 since April, 1997
Number of Accounts Closed with no change: 1 since April, 1997
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
53
<PAGE>
C&M TRADERS, INC.
C&M Traders, Inc., a Florida Corporation is one of the Commodity Trading
Advisors (collectively above called the "CTAs" and in this section called the
"CTA"). Steven Midlarsky was previously registered as a CTA as a sole
proprietorship effective 5/12/95, and transferred his status to C&M effective
July 31, 1995. Steven Midlarsky is currently registered as the principal and
associated person of the CTA. The Main Business Office and main business
telephone of the CTA are: 1001 Yamato Road, Suite 307, Boca Raton, Florida
33487, (561) 995-8626, facsimile (561) 988-0210. The books and records of the
CTA will be kept and made available for inspection at the Main Business
Office.
BUSINESS BACKGROUND
The business background of the CTA for at least five (5) years is as follows:
C&M Traders Inc. was incorporated in March, 1995, by Steven Midlarsky, its
president and principal owner. Mr. Midlarsky was a principal owner of a
wholesale meat distributor, called Crown Meat Company, Inc. from February,
1987 through September, 1991 located in New York City & Secaucus, New Jersey.
From October, 1991 to the present Mr. Midlarsky has been trading cattle for
himself from an office in Boca Raton, Florida. Mr. Midlarsky holds a
Bachelors degree in Science from Tulane University.
Heidi A. Brown, Vice President of C&M Traders, Inc., As Vice President, her
responsibilities include but are not limited to: Investor Relations,
Compliance with Commodity Futures Trading Commission Regulations and National
Futures Association Rules.
Ms. Browns' professional experience includes: Commercial and Residential Real
Estate Sales, and Real Estate Property Management (12/88-7/93). In July,
1993, Brown began her career in managed futures with Hallett Capital
Management, CTA, as an AP before being promoted to Director of Compliance
until February, 1995. In February, 1995, Ms. Brown was recruited by Alaron to
build their first branch office. Once the project was completed in September,
1995, Brown joined C&M Traders, Inc.
Educational Background: Ms. Brown attended University of Kentucky and Florida
Atlantic University, focusing on International Business and Finance.
DESCRIPTION OF TRADING PROGRAM
C&M Traders, Inc. is solely a "fundamental trader". Trading in Meats, mostly
in live cattle as well as lean hogs. By being a "Fundamental trader," C&M
Traders, Inc. carefully analyzes actual market conditions in the present and
how they could effect the future condition of the markets traded. C&M
Traders, Inc. program invests in futures or options on futures contracts that
in the judgment of C&M Traders, Inc., offers special potential. Moreover, in
certain instances C&M may trade short term market price movements depending on
market conditions. There are no limitations to the domestic futures or
options on futures contacts that may be considered for this program. C&M
Traders, Inc. does not offer advice with respect to foreign futures and/ or
options. C&M Traders, Inc., has no other restrictions or limitations on
trading.
It is C&M Traders, Inc. policy to attempt to minimize the differences in
performance between accounts. However, the risk assumed and, consequently,
the potential for profit experienced in a particular account at different
times, or by different accounts at the same time, can vary significantly
according to market conditions, the size of the account, the percentage gained
or lost in the account, and the perceived risk aversion of that account's
owner. For those and other reasons described in the performance record, no
investor should expect the same performance as that of any other account
traded previously, simultaneously, or subsequently by C&M Traders, Inc., or of
the composite presented within.
The exact nature of C&M Traders, Inc., methods are proprietary and
confidential. The decision not to trade a certain position may result at
times in missing price moves and hence profits or losses of great magnitude.
There is no assurance the performance of C&M Traders, Inc. will result in
profitable trading.
PERFORMANCE RECORD OF THE CTA
C&M Traders, Inc. program began with clients money July 1, 1993. Its
performance through October 1997, as presented in the following Capsule
Performance Record is a composite performance of numerous managed accounts.
54
<PAGE>
Since the performance of the program is presented on a composite basis rather
than account by account, each account's performance would differ from the
composite figures shown. The information included in the performance record,
in the opinion of C&M Traders, Inc. is accurate.
The results set forth in the following Capsule Performance Record are not
indicative of the results which may be achieved by C&M Traders, Inc., in the
future, in part because past performance is not necessarily indicative of
future results. Although it is C&M Traders, Inc. policy to attempt to manage
all accounts equally, the risk assumed and, consequently, the potential for
profit experienced by a particular account at different times, and by
different accounts at the same time, may vary significantly according to
market conditions, the size of a given account, the percent gained or lost in
the account, and the perceived risk aversion of the account's owner.
Furthermore, because C&M Traders, Inc., has modified and will continue to
modify its trading methods, the results shown in the Capsule Performance
Record do not necessarily reflect the precise trading methods which will be
used by C&M Traders, Inc., on behalf of any account.
Futures trading performance will also be affected by the increasing amount of
funds directed by C&M Traders, Inc. "Slippage" (the difference between ideal
and actual trade execution prices) will increase with the execution of larger
orders.
For all the above reasons, no investor should expect necessarily the same
performance as that of any other account traded previously, simultaneously, or
subsequently by C&M Traders, Inc., or the Composite presented herein.
The accounts that comprise the Client Capsule Performance Record differ
materially in the following ways: (1) Commissions range from $15.00 to $30.00
per round turn (2) Some accounts earn no interest, while others can earn
interest on a considerable component of the funds in the account. (3) Fees
range from 7 cents to $4.62 per round turn. There are no other material
differences between these accounts.
Proprietary trading began January 1992. Four accounts included in the
Capsule. Three closed profitable. The accounts that comprise the Proprietary
Capsule Performance Record differ materially in the following ways: (1)
Commissions range from $8.50 to $25.00. Otherwise there are no material
differences in the proprietary accounts traded.
C&M Traders, Inc. - Live Cattle - Composite
The following capsule shows the past performance of the C&M Traders, Inc. -
Live Cattle - Composite since the inception of trading of the first Account
(in July, 1993) and year-to-date (through May 31, 1998). PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
C&M Traders, Inc. - Live Cattle - Composite
Percentage Rate of Return
(Computed on a compounded monthly basis)*
Month 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
January 9.80 (11.00) (42.56) 22.47 0.00
February 4.48 (2.30) 46.30 (21.34) 0.00
March 5.30 (30.98) 4.11 45.66 0.00
April 4.12 7.45 (25.99) (19.86) 0.00
May (10.90) 12.13 27.68 3.11 377.50
June (8.70) (2.09) (56.09) 29.87
July (9.62) (3.30) 33.01 (14.40)
August (4.30) 29.04 8.77 98.02
September 9.98 (0.90) 19.87 (19.88)
October (5.40) 3.33 13.88 97.00
November 9.91 2.98 (18.63) 11.34
December (2.03) 2.33 12.13 (15.69)
Totals 12.2 (35.70) 8.99 (8.25) 1131.20
<FN>
55
<PAGE>
Name of Commodity Trading Advisor: C&M Traders, Inc.
Name of Trading Program: Live Cattle
Inception of Trading: July, 1993
Number of client accounts using this trading program: 173
Total Assets managed under all trading programs of the CTA: $18,832,357
Total Assets traded pursuant to Program: $12,610,870
Worst Monthly Percentage Draw-down**: 06-95/56.09%
Worst Peak-to-Valley % Draw-down***: 3-95 to 3-97/74.31%
Number of Accounts Closed w/ Profits Since 7-1-93: 18
Number of Accounts Closed w/ Losses Since 7-1-93: 59
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
Please see Appendix II for the supplemental proprietary trading history for
the CTA.
Performance Record of Fremont Fund, Limited Partnership
In addition to the Partnership, the principal of the CPO is the principal of
another CPO, Pacult Asset Management, Inc., which manages another commodity
pool called Fremont Fund, Limited Partnership. Fremont Fund Limited
Partnership is traded by Michael J. Frischmeyer, one of the CTAs selected for
this Fund, as the sole CTA. No correlation is expected between the
performance of the Fremont Fund and this Partnership because Mr. Frischmeyer
is a CTA for both pools.
Fremont Fund pays various expenses in relation its operation including a
management fee to the CTA and the General Partner of 4% and 2% annually
respectively charged 1/12th monthly, and a quarterly incentive fees of 15% of
all new net profits. In addition, the fund pays _% per month, 9% per year,
for trading.
Fremont Fund, Limited Partnership
The following capsule shows the past performance of Fremont Fund, LP for the
period from inception of trading in November, 1996, through May 31, 1998.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Fremont Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
Month 1998 1997 1996
<S> <C> <C> <C>
January (1.48) (1.79) N/A
February (0.92) 0.71 N/A
March 0.74 (0.91) N/A
April (3.46) (2.13) N/A
May (2.30) (0.66) N/A
June (0.39) N/A
July (0.65) N/A
August (2.57) N/A
September (0.53) N/A
October (0.76) N/A
November (1.09) (8.83)
December (2.13) 2.34
Year (7.24) (12.21) (6.69)
<FN>
56
<PAGE>
Name of Pool: Fremont Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration statement
Number of CTAs: One
Names of CTAs: Michael J. Frischmeyer, EPIC Trading
Principal Protected: No
Date of Inception of trading: November, 1996
Net Asset Value of the pool (as of May 31, 1998): $676,146 on total Units
outstanding: 946.66
NAV Per Unit (as of May 31, 1998): $714
Largest Monthly Draw-Down** For The Regular Program Since Inception and Year-
to-Date (through May 31, 1998): 12-96/8.83% of client funds
Worst Peak-to-Valley Draw-Down*** For The Regular Program Since Inception and
Year-to-Date (through, May 31, 1998): 11-96 to 5-98/24.04% of net asset value
* Rate of return is computed by dividing the net performance by the sum of
the beginning net asset value and net additions, capital withdrawals and
redemptions.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by a pool or account over the specified period
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
THE FUTURES COMMISSION MERCHANTS
Vision Limited Partnership located at One Whitehall Street, 15th floor, New
York, New York, 10004, is the futures Commission Merchant for the Partnership.
The following disclosures are provided regarding Vision Limited Partnership.
In addition, since Vision is a non-clearing FCM, they have established an
omnibus clearing arrangement with Lind-Waldock & Company.
Lind-Waldock is located at 1030 West Van Buren Street, Chicago, IL 60607.
Lind-Waldock is a clearing member of all principal futures exchanges in the
United States.
See disclosures as to litigation during the past 5 years regarding Vision and
Lind-Waldock & Company under "Legal Matters".
FEDERAL INCOME TAX ASPECTS
SCOPE OF TAX PRESENTATION
This presentation is based on the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder (hereinafter collectively
called the "Code") which were in effect as of August 1, 1998, and is based
upon the express intention of the General Partner to cause the Partnership
to invest only its equity capital and not to borrow funds from any source
and the belief that all of the income generated by the Fund will be
"qualifying income" and, therefore, the Fund will not be a publicly-traded
entity.
Any change in the Code or deviation from the intent to invest equity capital
only, could alter this presentation and also present adverse tax consequences
to the Partnership and the Partners, such as taxation as a corporation. This
would result in the payment of tax by the Fund and the payment of a second
tax by the investor rather than only by the investor if the Fund were taxed
as a Partnership. In addition, if the Fund were taxed as a corporation, none
of the deductions for expenses would pass through to the investor's tax return.
Under current IRS guidelines, there exists a substantial possibility that the
partnership's return will be examined. If the partnership is audited,
57
<PAGE>
significant factual questions may arise which, if challenged by the IRS, might
only be resolved at considerable legal and accounting expense to the Partners
and the Partnership. Any adjustment made to the Partnership return will flow
through to the Partners' returns and could result in a separate audit of the
Partners' individual returns. The Partnership will report its income for tax
and book purposes under the accrual method of accounting and its tax year will
be the calendar year, or such other period as is required under section 706(b)
of the Code. During taxable years in which little or no profit is generated
from trading activities, a Limited Partner may still have interest income
which will be taxed as ordinary income.
THIS DISCUSSION ASSUMES THAT THE INVESTOR IS AN INDIVIDUAL AND IS NOT INTENDED
AS A SUBSTITUTE FOR CAREFUL PLANNING, PARTICULARLY, SINCE CERTAIN OF THE
INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP WILL NOT BE THE
SAME FOR ALL TAXPAYERS. ALL MATTERS UPON WHICH THE PARTNERSHIP HAS OBTAINED
AN OPINION OF TAX COUNSEL ARE DISCUSSED UNDER THE CAPTION "TAX OPINION" BELOW.
ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
WITH SPECIFIC REFERENCE TO THEIR TAX SITUATION.
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS
No legal opinion will be requested by the Partnership in regard any State
income tax issue. In addition, tax counsel to the Partnership can not opine
upon any Federal income tax issue which involves a determination by the IRS of
the facts related to the operation of the Partnership or as to any other
matter which may be subject to Internal Revenue Service interpretation or
adjustment upon audit. For example, commodity trading adviser fees are
aggregated with employee business expenses and other expenses of producing
income and the aggregate of such expenses is deductible only to the extent
such amount exceeds 2% of the taxpayer's adjusted gross income. The Federal
income tax deductibility of these expenses depends upon factual determinations
related to the operation of the Partnership by the General Partner. See
"Federal Income Tax Aspects".
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER
If the Partnership were treated as an association or publicly traded
partnership, taxable as a corporation, in any taxable year, the Partnership
would pay taxes at the corporate rates upon its income and gains, items of
deduction and losses would be deductible only by the Partnership and not by
the Partners, tax credits would be available only to the Partnership and not
to the Partners, and all or a part of the distributions to the Partners could
be taxable as dividend income to the Partners and would not be deductible by
the Partnership in computing its taxable income. This would substantially
increase the total amount of taxes the Partnership and it Partners would pay
each year.
The Code, at Section 7701, provides the characteristics of a corporation which
should not be present if a partnership is to be taxed as a partnership. Among
those characteristics is a test for net capital to be met when the partnership
has a sole corporate general partner, such as this Partnership. Among those
requirements are that the General Partner, as such, will maintain a capital
contribution in the Partnership in an amount not less than the greater of (i)
$25,000 or (ii) one percent (1%) of the aggregate Capital Contributions, from
time to time, of all Limited Partners (measured at the time of each respective
investment) and sufficient net worth to enable the creditors of the
Partnership to have a viable entity to hold responsible for Partnership debts.
These tests are contained in Code Section 7701 to maintain its partnership
taxation status. The General Partner will use its best efforts to satisfy
these requirements.
The IRS Code Section 7701 specifically provides a "safe harbor" which permits
limited partnerships to be deemed to have met the net worth test when the
General Partner's Net Worth is equal to (15%) of the first $2,500,000 or
$250,000, whichever is less, and (10%) of all above $2,500,000 exclusive of
the amount invested by the General Partner in this Partnership or any other
partnership. There can be no assurance, however, that the General Partner
can fulfill or maintain its Net Worth to meet this safe harbor test.
Historically, the right of redemption, similar to the right available to
Partners in the Partnership, renders a pool, such as the Partnership, a
publicly traded partnership, taxed as a corporation. However, the Revenue Act
of 1987 (the "1987 Act") Act provides an exception. The exception requires
ninety percent (90%) or more of the partnership's gross income to be
qualifying income. Qualifying income includes interest, dividends, and income
from futures, options or forward contracts on commodities, if the buying and
selling of commodities is a principal activity of the partnership. The
General Partner intends to limit the sources of income so that the exception
will apply to the Partnership. In addition, the General Partner has placed
certain restrictions upon the right of redemption. See Exhibit A, "Right of
Redemption".
58
<PAGE>
NO IRS RULING
THE PARTNERSHIP HAS NOT APPLIED FOR A RULING FROM THE INTERNAL REVENUE SERVICE
(THE "IRS") REGARDING ITS STATUS AS A PARTNERSHIP OR WITH REGARD TO ANY OTHER
TAX ASPECT, NOR DOES THE PARTNERSHIP INTEND TO SEEK A RULING. IN THE ABSENCE
OF A RULING, THERE CAN BE NO ASSURANCE THAT THE IRS WILL NOT ATTEMPT TO TAKE A
POSITION ADVERSE TO THE PARTNERSHIP.
TAX OPINION
The Partnership has obtained an opinion, which is not binding upon the IRS or
the Courts, from The Scott Law Firm, P.A., that the Partnership will be
taxable as a partnership and not as a corporation. Such opinion is based on
the Code as of December 31, 1997, a review of the Limited Partnership
Agreement, and is conditioned upon the following representations of facts by
the General Partner: (a) at all times, the Partnership will be operated in
accordance with the Delaware Uniform Limited Partnership Act and the Limited
Partnership Agreement attached hereto as Exhibit A; (b) the General Partner
will, at all times maintain not less than a one percent (1%) interest in the
income, losses, gains, deductions and credits of the Partnership; (c) the
aggregate deductions to be claimed by the Partners as their distributive
shares of the Partnership net losses for the first two years of operation of
the Partnership will not exceed the amount of equity capital invested in the
Partnership; (d) no creditor who makes a loan to the Partnership, including
margin accounts, will have or acquire, as a result of making the loan, any
direct or indirect interest in the capital, profits or property of the
Partnership, other than as a secured creditor; (e) the General Partner will at
all times actively direct the affairs of the Partnership; (f) the General
Partner will at all times possess substantial assets (exclusive of its
interest in the Partnership or any other limited partnership) which can be
reached by the general creditors of the Partnership within the meaning of
Treasury Regulation Section 301.7701 2(d)(2) or the General Partner otherwise
complies with the tax code general partner requirements imposed upon sole
corporate general partners of limited partnerships; (g) interests in the
Partnership will be transferable only upon approval of the General Partner and
not, otherwise, be (1) traded on an established securities market, or (2)
readily tradable on a secondary market (or the substantial equivalent
thereof); (h) the Partnership will not be registered under the Investment
Advisor's Act of 1940; and, (i) over ninety percent of the income earned by
the Partnership will be Qualifying Income as that term is defined in the 1987
Act.
The Law Firm is not able to opine upon the tax treatment of certain expenses
as the determination depends upon questions of fact to be resolved by the
General Partner on behalf of the Partnership. In addition, commodity trading
adviser fees are aggregated with employee business expenses and other expenses
of producing income and the aggregate of such expenses is deductible only to
the extent such amount exceeds 2% of the taxpayer's adjusted gross income. It
is the General Partner's position that the Partnership's intended operations
will qualify as a trade or business. If this position is sustained, the
brokerage commissions and performance fees will be deductible as ordinary and
necessary business expenses. Syndication costs to organize the Partnership
and Offering Expenses will not be deductible or amortizable by the Partnership
or its Partners.
Any change in these representations or the operative facts will prevent
reliance by the Partnership and the Partners upon the legal opinion from The
Scott Law Firm, P.A.
PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES
In addition to the imposition of a corporate level tax on publicly traded
partnerships, special rules apply to partnerships in regard to the application
of the passive loss and unrelated business income tax rules. In Notice 88-75
issued on June 17, 1988 (the "Notice"), the IRS provided guidance as to the
operation of the Partnership. The General Partner intends to cause the
Partnership to comply with the applicable provisions of these guidelines. In
the event the Expenses of the Partnership were deemed not to qualify as
deductions from trading profits, if any, the total taxes paid by the Partners
would increase while the distributions to them would remain the same.
BASIS LOSS LIMITATION
Generally, the "basis" of a Partner's interest in the Partnership for tax
purposes is equal to the cost decreased, but not below zero, by the Partner's
share of any Partnership losses and distributions and increased by the
Partner's share of any Partnership income. A Partner may not deduct losses in
excess of the adjusted basis for the interest in the Partnership at the end of
the partnership year in which such losses occurred, but may carry forward any
excess to such time, if ever, as the basis for the interest in the Partnership
is sufficient to absorb the loss. Upon the sale or liquidation of a Partner's
59
<PAGE>
interest in the Partnership, the Partner will recognize a gain or loss for
Federal income tax purposes equal to the difference between the amount
realized by such Partner in the transaction and the basis for such Partner's
interest in the Partnership at the time of such sale. For individuals,
capital losses would offset capital gains on a dollar for dollar basis, with
any excess capital losses subject to a $3,000 annual limitation. Accordingly,
it is possible for the Partners to sustain a loss from the operation of the
Partnership which will be not allowed as a deduction for tax purposes or
limited to a $3,000 annual limitation.
AT-RISK LIMITATION
The election by a Partner to borrow the money to invest in the Partnership
carries with it certain at risk limitations. Section 465 of the Code provides
that the amount of any loss allowable for any year to be included in a Limited
Partner's personal tax return is limited to the amount paid for the Units (tax
basis) of the amount "at risk". Losses already claimed may be subject to
recapture if the amount "at risk" is reduced as a result of cash distributions
from the activity, deduction of losses from the activity, changes in the
status of indebtedness from recourse to non-recourse, the commencement of a
guarantee, or other events that affect the taxpayer's risk of loss. Partners
should consider the "at-risk" provisions in arranging debt financing for
purchase of an interest in the Partnership.
INCOME AND LOSSES FROM PASSIVE ACTIVITIES
Code Section 469 limits the deductibility of losses from business activities
in which the taxpayer (limited to individuals, certain estates and trusts,
personal service corporations or closely-held corporations) does not
materially participate ("Passive Losses"). Under temporary Treasury
Regulations, the trading of personal property, such as futures contracts, will
not be treated as a passive activity and Partnership gains allocable to
Limited Partners will not be available to offset passive losses from sources
outside the Partnership and Partnership losses will not be subject to
limitation under the Passive Loss Rules.
ALLOCATION OF PROFITS AND LOSSES
The allocation of profits, losses, deductions and credits contained in the
Limited Partnership Agreement will be recognized for tax purposes only if the
allocations have substantial economic effect. While the General Partner
believes that the Limited Partnership Agreement either meets the requirements
or satisfies a substitute "capital account equivalency" test, the Limited
Partnership Agreement does not meet a third requirement, that a Partner must
make a contribution to the Partnership equal to any deficit in the Capital
account. Accordingly, under the regulations and the Limited Partnership
Agreement, losses would not be allocable to a Partner in excess of the
Partner's capital contribution plus properly allocated profits less any prior
distributions. The General Partner intends to allocate income and losses in
accordance with the Partnership Agreement which it believes complies with
applicable Code Section 704. However, no assurances can be given that the IRS
will not attempt to change any allocation that is made among Partners admitted
on different dates which could adversely effect the amount of taxable income
to one Partner as opposed to another Partner.
TAXATION OF FUTURES AND FORWARD TRANSACTIONS
The CTAs selected by the Partnership are expected to trade primarily in
Section 1256 Contracts as defined in the Code. All Section 1256 contracts
will be marked-to-market upon the closing of every contract (including closing
by taking an offsetting position or by making or taking delivery, by exercise
or being exercised, by assignment or being assigned; or by lapse or otherwise)
and all open Section 1256 contracts held by the Partnership at its fiscal
year-end will be treated as sold for their fair market value on the last
business day of such taxable year. This will result in all unrealized gains
and losses being recognized for Federal income tax purposes for the taxable
year. As a consequence, the Partners may have tax liability relating to
unrealized Partnership profits in open positions at year-end. Sixty percent
(60%) of any gain or loss from a Section 1256 contract will be treated as
long-term, and forty percent (40%) as short-term, capital gain or loss (the
"60/40 Rule"), regardless of the actual holding period of the individual
contracts. The character of a Partner's distributive share of profits or
losses of the Partnership from Section 1256 contracts will thus be 60% long-
term capital gain or loss and 40% short-term capital gain or loss. Each
partner's distributive share of such gain or loss for a taxable year will be
combined with its other items of capital gain or loss for such year in
computing its Federal income tax liability. The Code contains certain rules
designed to eliminate the tax benefits flowing to high-income taxpayers from
the graduated tax rate schedule and from the personal and dependency
exemptions. The effect of these rules is to tax a portion of a high-income
taxpayer's income at a marginal tax rate of 39.6%. However, long-term capital
gains are now subject to a maximum tax rate of 28%. Subject to certain
limitations, a Limited Partner, other than a corporation, estate or trust, may
elect to carry-back any net Section 1256 contract losses to each of the three
preceding years. The marked-to-market rules do not apply
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to interests in personal property of a nature which are actively traded other
than Section 1256 contracts (termed "off-exchange positions").
SECTION 988 FOREIGN CURRENCY TRANSACTIONS
A "Section 988 transaction" is defined as the entering or acquiring of any
forward contract, futures contract, option or similar financial instrument if
the amount to be received or to be paid by reason of a transaction is
denominated in a nonfunctional currency (i.e., other than the dollar) or is
determined by reference to one or more nonfunctional currencies. If the
Section 988 transaction results in a gain or loss, it is considered to be a
foreign currency gain or loss to the extent it does not exceed gain or loss
realized by reason of changes in exchange rates.
CAPITAL GAIN AND LOSS PROVISIONS
If long-term capital gains exceed short-term capital losses, the net capital
gain will be taxed at the same rates as ordinary income. Subject to an annual
limitation of $3,000, the excess of capital losses over capital gains will be
deductible by an individual against ordinary income. Excess capital losses
which are not used to reduce ordinary income in a particular taxable year may
be carried forward to, and treated as capital losses incurred in, future
years.
BUSINESS FOR PROFIT
Code Section 183 sets forth the general rule that no deduction is allowable to
an individual for an activity "not engaged in for profit". These are
activities other than those constituting a trade or business or engaged in for
the production or collection of income or for the management, conservation, or
maintenance of property held for the production of income. The determination
of whether an activity is engaged in for profit is based on all facts and
circumstances, and no single factor is determinative. The General Partner
believes that the employment by the Partnership of independent CTAs with
strong track records of production of profits, it is more likely than not,
that the activity of the Partnership will be considered an activity engaged
for profit.
SELF-EMPLOYMENT INCOME AND TAX
Section 1402 of the Code provides that an individual's net earnings from self-
employment shall not include the distributive share of income or loss from any
trade or business carried on by a partnership of which he is a Limited
Partner. Therefore, a Limited Partner should not consider that the ordinary
income from the Partnership constitutes net earnings from self-employment for
purposes of either the Social Security Act or the Code.
INDIVIDUAL ALTERNATIVE MINIMUM TAX
Non-corporate taxpayers are subject to the alternative minimum tax to the
extent it exceeds their regular tax. For an entity taxable as an estate or
trust, the first $22,500 of "alternative minimum taxable income" is exempt
from the alternative minimum tax, while for an individual it is the first
$33,750 of such income ($45,000 for a joint return; $22,500 for married
taxpayers filing separately). The exemption amounts will be phased out at the
rate of $.25 for each dollar of alternative minimum taxable income in excess
of $150,000 for married taxpayers filing jointly, $112,500 for single
taxpayers, and $75,000 for married taxpayers filing separately, estates and
trusts. Alternative minimum taxable income in excess of the exemption amount,
after any applicable phase-out, will be subject to a two-tiered rate schedule.
Alternative minimum taxable income (net of exemption) up to and including
$175,000 will be taxed at a rate of 26% and alternative minimum taxable income
over $175,000 will be taxed at a 28% rate. Taxpayers liable for the
alternative minimum tax are required to make estimated tax payments.
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS
Section 265(a)(2) of the Code will disallow any deduction for interest on
indebtedness of a taxpayer incurred or continued to purchase or carry
obligations the interest on which is wholly exempt from tax. The IRS
announced in Revenue Procedure 72-18 that the proscribed purpose will be
deemed to exist with respect to indebtedness incurred to finance a "portfolio
investment". The Revenue Procedure further states that a limited partnership
interest will be regarded as a "portfolio investment", unless rebutted by
other evidence. Therefore, in the case of a Limited Partner owning tax-exempt
obligations, the IRS might take the position that any interest expense
incurred by him to purchase or carry Units should be viewed as incurred by him
to continue carrying tax exempt obligations and that such Limited Partner
should not be allowed to deduct all or a portion of the interest on any such
loans.
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NOT A TAX SHELTER
In the opinion of tax counsel, the Partnership does not constitute a tax
shelter, as defined in Code Section 6111(c), since the General Partner intends
to operate the Partnership so that the tax shelter ratio will not exceed two-
to-one at the close of any of the first five years. Accordingly, the General
Partner does not plan to register the Partnership as a tax shelter with the
IRS.
TAXATION OF FOREIGN PARTNERS
An investment in the Partnership should not, by itself, cause a Foreign
Partner to be engaged in a trade or business within the United States. A
foreign person is subject to a 30% withholding tax (unless reduced or exempted
by treaty) on certain types of United States source income which is not
effectively connected with the conduct of a United States trade or business.
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 Partner. If the Partnership is
required to withhold tax on such income of a Foreign 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
Partner.
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES
The Code provides that the tax treatment of items of partnership income, gain,
loss, deduction and credit will be determined at the partnership level in a
single partnership proceeding. The Partnership Agreement has appointed the
General Partner the "Tax Matters Partner" to settle any issue involving any
partner with less than a one percent (1%) profits interest unless such a
partner, upon notice, properly elects not to give such authority to the Tax
Matters Partner. The Tax Matters Partner may seek judicial review for any
adjustment to partnership income, but there will be only one such action for
judicial review to which all partners will be bound. The Code provides that a
partner must report a partnership item consistently with its treatment on the
partnership return, unless the partner specifically identifies the
inconsistency or can show that its treatment of the partnership item on its
return is consistent with a schedule furnished to the partner by the
Partnership. Failure to comply with this requirement may result in penalties
for underpayment of tax and could result in an extended statute of
limitations. The statute of limitations for adjustment of tax with respect to
partnership items will generally be three years from the date of filing the
partnership return.
Code Section 6662 imposes a penalty for a substantial understatement of income
tax equal to 20% of the amount of any underpayment attributable to that
understatement. "Understatement" is defined as meaning the excess of the
correct amount of tax required to be shown on the return over the amount of
tax which is actually shown on the return. A substantial understatement
exists for any taxable year if the amount of the "understatement" for the
taxable year exceeds the greater of (1) 10% of the correct tax, or (2) $5,000
($10,000, in the case of a corporation other than an S corporation or a
personal holding company).
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S
In considering an investment in the Partnership, a fiduciary of an employee
benefit plan covered by the Employee Retirement Income Security Act of 1974
("ERISA") (such as, for example, a qualified pension, profit-sharing or stock
bonus plan, or health and welfare plan), or of an Individual Retirement
Account ("IRA") (collectively "Qualified Plans"), taking into account the
facts and circumstances of such Qualified Plan, should consider applicable
fiduciary standards under ERISA. The General Partner intends to limit the
investment in the Partnership by benefit plan investors to less that 25% of
the total equity invested in the Partnership. Prospective plan investors
should consult their own legal and financial advisors regarding these and
other considerations involved in an investment in the Partnership by a
particular plan.
ACCORDINGLY, THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR
HER ATTORNEY AS TO THE PROPRIETY OF SUCH AN INVESTMENT IN LIGHT OF
CIRCUMSTANCES OF THE PARTICULAR PLAN.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF EMPLOYEE BENEFIT PLANS IS NOT A
REPRESENTATION BY GENERAL PARTNER OR ANY OTHER PARTY THAT THIS INVESTMENT
MEETS ALL LEGAL REQUIREMENTS OR IS APPROPRIATE WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR
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PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH THE ATTORNEY
FOR THE PLAN AS TO THE PROPRIETY OF AN INVESTMENT IN THE PARTNERSHIP.
THE LIMITED PARTNERSHIP AGREEMENT
This Prospectus contains an explanation of some of the more significant terms
of the Limited Partnership Agreement, however, prospective investors are urged
to read the Agreement in its entirety. See Exhibit A.
FORMATION OF THE PARTNERSHIP
The Certificate of Limited Partnership dated January 12, 1998 was filed on
January 12, 1998, pursuant to the Delaware Uniform Limited Partnership Act.
The liability of a Limited Partner for the losses, debts and obligations of
the Partnership is limited to the Limited Partner's Capital Contribution and
share of any undistributed assets of the Partnership, so long as the Limited
Partner complies with Article V of the Limited Partnership Agreement. The
Limited Partnership Agreement provides that the death, incompetency,
withdrawal, insolvency, bankruptcy, termination, liquidation, dissolution or
other legal incapacity of a Limited Partner will not terminate or dissolve the
Partnership, and that the legal representatives of such Limited Partner have
no right to become a substituted Limited Partner solely by reason of such
capacity or to withdraw the Limited Partner's interest except by redemption of
Units.
UNITS
The number of Units held by a Partner will determine the Partner's percentage
interest in the Net Assets of the Partnership, such percentage interest to be
equal to an amount calculated by dividing the number of Units held by the
Partner by the aggregate number of outstanding Units of the Partnership, from
time to time.
MANAGEMENT OF PARTNERSHIP AFFAIRS
Responsibility for managing the Partnership is vested solely in the General
Partner. The Limited Partners will not take part in the business or affairs
of the Partnership nor have any voice in the management or operations of the
Partnership. Any material change in the Limited Partnership Agreement or the
Partnership's structure shall, however, require the prior written approval of
the Limited Partners who collectively hold a majority of the Units of the
Partnership; provided, however, the General Partner may change trading
advisors, change the commodity contracts traded by the Partnership, and change
the diversification of the Partnership's assets among the various types of or
in the positions held in commodity contracts without a vote or other form of
permission from the Limited Partners. The Limited Partners who collectively
hold a majority of the Units of the Partnership may, to the extent permitted
by law, without the concurrence of the General Partner, vote to (i) amend any
term in the Limited Partnership Agreement and, if necessary, the Certificate
of Limited Partnership including, but not limited to, the right to remove the
General Partner and elect a new general partner. The General Partner has no
authority to engage in the actual selection or frequency of trading. Trading
must be done by independent CTAs selected by the General Partner.
ADDITIONAL OFFERINGS
The General Partner may from time to time, in its sole discretion, terminate
any offering of Units, or register additional Units and/or make additional
public or private offerings of Units. No Limited Partner shall have any
preemptive, preferential or other rights with respect to the issuance or sale
of any additional Units. There is no limit upon the amount of contributions
or the maximum number of Units which may be issued, offered, or sold.
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS
Each Partner will have a Capital account, and its initial balance will be the
amount the Partner paid for the Partner's Units. The Net Assets of the
Partnership will be determined monthly, and any increase or decrease from the
end of the preceding month will be added to or subtracted from the accounts of
the Partners in the ratio that each account bears to all accounts.
Distributions from profits or Capital will be made solely at the discretion of
the General Partner. On a monthly basis the General Partner will cause to be
reported to the Partners, the following information: the Net Unit Value as of
the end of the month and as of the end of the previous month, and the
percentage change in Net Unit Value between the two months; the amount of
distributions during the month; the aggregate fixed commission in lieu of
round-turn brokerage commissions, other fees, administrative expenses, and
reserves for claims and other extra-ordinary expenses incurred or accrued by
the Partnership during the month; and, such other information as the CFTC may,
by regulation, require. Partners or their duly authorized representatives
may, after adequate notice, inspect the
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Partnership books and records at any reasonable time, to copy, at their
expense said records related to the Capital Account of said Partner.
FEDERAL TAX ALLOCATIONS
At the end of each fiscal year the Partnership's realized capital gain or loss
and ordinary income or loss will be allocated among the Partners, after having
given effect to the fees of the General Partner and the Commodity Trading
Advisors and each Partner's share of such items are includable in the
Partner's personal income tax return.
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER
A purchaser is admitted to the Partnership and is registered on the records of
the Partnership as the owner of those Units. The registered holder is
entitled to receive all distributions, allocations of losses and withdrawals
or reductions of Capital contributions with respect to such Units, and to vote
on any matters submitted to the Limited Partners for voting. Units are
transferable only with the written consent of the General Partner, whose
consent will be withheld if, among other things, the transfer (i) is requested
prior to two years from the date of purchase of such assigned or transferred
Units(s) by said Partner; (ii) is not for the full Units or if the assignor,
if he is not assigning all of his Units, will not retain more than five Units;
(iii) will violate any applicable laws or governmental rules or regulations,
including without limitation, any applicable Federal or state securities laws
and the limited partnership laws of the State of Delaware; or (iv) will
jeopardize the status of or cause a termination of the Partnership for Federal
income tax purposes or affect characterizations or treatment of income or
loss.
TERMINATION OF THE PARTNERSHIP
The Partnership will terminate at 11:59 p.m. twenty-one years from the date of
the Partnership Agreement; by election of the General Partner, in its sole
discretion, to terminate and dissolve the Partnership; the dissolution, death,
resignation, withdrawal, bankruptcy or insolvency of the General Partner,
unless the Limited Partners unanimously elect to carry on the business and a
new general partner has been substituted; upon the occurrence of an event
specified under the laws of the State of Delaware as one effecting
dissolution; any event which shall make unlawful the continued existence of
the Partnership; or, upon the unanimous vote of the Limited Partners.
MEETINGS
No regular meetings of the Partnership are required to be held, however, a
meeting of the Partners for the purpose of acting upon any matter upon which
the Partners are entitled to vote may be called by the General Partner at any
time and shall be called by the General Partner, no more than 15 days after
receipt by the General Partner, either in person or by certified mail, of a
written request, accompanied by an advance of the costs to send notice of the
meeting to all Partners, for such a meeting which sets forth the purpose
thereof, which is signed by one or more of the Partners who collectively own
10% or more of the then outstanding Units.
REDEMPTIONS
No Partner may redeem or liquidate any Units until six months after the
commencement of trading. Written notice must be received by the General
Partner no later than 12:00 noon on the tenth calendar day immediately
preceding the desired effective date of Redemption which must be as of the
last day of the then current or a future month. The General Partner intends
to use its best efforts to make payment of the Redemption request of the
Partner's pro rata share of the Net Asset Value, as those terms are defined in
Appendix I, within ten days following the effective date. However, investors
should be aware that while the General Partner intends to so honor all proper
Unit Redemption requests, circumstances existing in the Partnership's business
at the time of such Redemption request. Specifically, the lack of sufficient
cash due to the inability to liquidate positions as of the Redemption date or
the accrual for contingent claims may cause the General Partner to suspend or
delay Redemptions or to only partially honor such requests. The General
Partner in its sole discretion may, upon notice to the Partners, declare
additional Redemption dates and may cause the Partnership to redeem fractions
of Units and, prior to registration of Units for public sale, redeem Units
held by Partners who do not hold the required minimum amount of Units
established, from time to time, by the General Partner. A Redemption fee
payable to the Partnership of four percent (4%) of the value of the Redemption
request which is received prior to the nineteenth day of the twelfth month
after the commencement of trading. Thereafter, there will be a reduction in
the Redemption fee of one percent (1%) for each six (6) months the investment
in the Units remained invested in the Partnership after the initial six
months; i.e., a
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redemption during the next 7 to 12 months will be charged a 3% Redemption fee;
13 to 18 months 2%, 19 to 24 months 1% and, thereafter, no Redemption fee will
be charged.
PLAN OF DISTRIBUTION
The Units are being offered and sold through Futures Investment Company
("FIC"), 5916 N. 300 West, Fremont, Indiana 46737, an NASD registered broker
dealer and other broker dealers selected by the General Partner, on a best
efforts basis. Ms. Pacult, the sole shareholder, director, and officer of the
General Partner and her husband, Mr. Michael Pacult, are the sole owners of
FIC. They are also associated persons and registered representatives of FIC
who will earn sales and trailing commissions as a result of the Units they
sell and service. A best efforts basis means there is no requirement that the
General Partner or any broker dealer (sometimes referred to as the
underwriter) to purchase any unsold Units, and no person or entity, including
the General Partner and the broker dealer have any obligation, currently or
are expected at any time in the future, to purchase any unsold Units. In
addition, the General Partner may, in its sole discretion, terminate this
offering of Units at anytime. There will be a selling commission of six
percent (6%), subject to waiver at the sole discretion of the General Partner,
paid to the broker dealers selected, from time to time, to sell Units. FIC,
the broker dealer, is an Illinois corporation which was incorporated on
December 6, 1983. Its registration as a fully disclosed broker dealer with
the NASD became effective on July 28, 1997. The principal business functions
of the broker dealer are currently the offering and trading of securities and
commodities as a CFTC registered introducing broker. It is contemplated that
the broker dealer will participate in the offering of other commodity pools
sponsored by the General Partner or other persons or entities in competition
with the Partnership.
A minimum of 700 Units (the "Minimum") are currently offered for sale at a
fixed value of One Thousand Dollars ($1,000) per Unit, which amount was
arbitrarily established by the General Partner. The amount was not based on
expected earnings and does not represent that the Units have or will have a
market value of or could be resold or redeemed at that price. When the
General Partner has received and accepted subscriptions for the Minimum, the
Partnership will commence trading operations. The remaining 6,300 Units will
be offered at a price per Unit equal to the number of outstanding Units
divided into the Net Asset Value of the Partnership as of the close of
business on the effective date of such purchase, which will be the last
business day of the month in which the General Partner accepts a duly executed
Subscription Agreement and the required applicable subscription amount from
the Partner in question. The General Partner will not grant its permission
for any subscription documents or payments, once accepted, to be withdrawn by
a subscriber. There can be no assurance that the Minimum or any additional
Units will be sold. Funds with respect to subscriptions received and accepted
by the General Partner prior to the sale of the Minimum will be deposited and
held in a separate escrow account in the name of the Partnership at Star
Financial Bank, 2004 N. Wayne St., Angola, IN 46703 (the "Escrow Agent")
pending the General Partner's receipt and acceptance of subscriptions for at
least the Minimum. The Broker Dealer, the Partnership and the Escrow Agent
have entered into an escrow agreement. The Escrow Agent shall receive a fee
for its services which will be paid by the General Partner without a right of
reimbursement from the Partnership. Units purchased by the General Partner,
its principals or any Affiliate shall not be counted in determining whether
the Minimum has been subscribed for and sold. If subscriptions for at least
the Minimum are not received and accepted by the General Partner prior to the
close of one year from the effective date of the Prospectus, this offering
shall terminate and the Escrow Agent is obligated to return all amounts paid
by each subscriber, together with the original subscription documents, within
ten days thereafter, without deduction for fees and costs, together with the
subscriber's pro rata share of interest earned from their deposit to the
Escrow Account.
Upon the sale of the Minimum, the escrowed funds (together with the interest
earned thereon) will be released for use by the Partnership on the first
business day after which the Minimum contingency has been satisfied and this
offering shall continue until the earlier of (i) such time as all of the Units
offered hereby have been sold, or (ii) such time as the offering is terminated
by the General Partner, in its sole discretion. No escrow will be utilized in
regard to the sale of any Units after the sale of the Minimum.
SUBSCRIPTION PROCEDURE
In order to purchase Units, an investor must complete and execute a
Suitability Questionnaire and a Subscription Agreement in the form attached
hereto as Exhibits "C" and "D", and deliver the executed Subscription
Documents to the Sales Agent and, if prior to the sale of the Minimum, all
checks shall be made payable to "Star Financial Bank-Escrow Agent for Atlas
Futures Fund, LP" to be delivered by the Sales Agent to the Escrow Agent within
24 hours after receipt for deposit to the Escrow Account. After the sale of
the Minimum and the termination of the Escrow Account, all Subscription
Documents shall be
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sent by the Sales Agent to the General Partner with a check or money order made
payable to "Atlas Futures Fund, Limited Partnership" for investment in the Fund
effective on the next admission date. Under no circumstances are any sales to
be made for cash or any checks to be made payable to the General Partner or
the Selling Agent or any of their registered representatives or affiliates.
The minimum subscription per investor is $25,000; provided, however, the
General Partner may reduce this minimum investment to $5,000 and investors may
make additional investments above $25,000 in $1,000 increments. All Units
subscribed for shall be recorded on the books of the Partnership subject to
the collection of good funds. Any Units recorded in favor of a Subscriber who
has not provided collectible funds (whether in the form of a bad check or
draft, or otherwise) shall be cancelled.
All subscriptions for Units are irrevocable by subscribers, subject only to
possible rights under applicable Federal and state securities laws. The
General Partner may reject any subscription, in whole or in part, in its sole
discretion. Unless higher amounts are otherwise specified in the Subscription
Agreement for residents of a particular state, an investor must have at least
either (i) a minimum net worth (determined exclusive of home, home furnishings
and automobiles) of $150,000, or (ii) a minimum annual gross income of $45,000
and a minimum net worth of $45,000 (once again determined exclusive of home,
home furnishings and automobiles). In the case of sales to fiduciary
accounts, the net worth and income standards may be met by the beneficiary,
the fiduciary account, or by the donor or grantor who directly or indirectly
supplies the funds to purchase the Units if the donor or grantor is the
fiduciary.
LEGAL MATTERS
LITIGATION AND CLAIMS
There have been no material administrative, civil or criminal actions against
the General Partner (who is the Commodity Pool Operator), the principal of the
General Partner, Ms. Pacult, the Commodity Trading Advisors, the Introducing
Broker, and selling broker or any principal or any Affiliate of any of them,
pending, on appeal, or concluded, threatened or otherwise known to them,
within the five (5) years preceding the date of this PPM and there have been
no such actions against the Futures Commission Merchants, except as follows:
On June 30, 1993, the Eastern Regional Business Conduct Committee issued and
concurrently accepted a full and complete settlement of a two-count complaint
against Vision and Robert Boshnack. The complaint alleged two NFA rule
violations: lack of supervision of Guaranteed IB's and use of deceptive and
misleading promotional material. The matter was completely settled without
Vision admitting or denying any violation, and without any findings of
violations. The settlement included a monetary penalty of $100,000,
undertakings of enhanced compliance procedures, and restriction of Mr.
Boshnack's activity for a one year period.
On December 31, 1997, the Business Conduct Committee of the NFA issued a two
count complaint against Vision Limited Partnership. Count I alleges failure
to supervise and Count II alleges improper handling of one block order.
Vision denies the allegations and intends to vigorously defend the matter.
On July 15, 1992, the Chicago Board of Trade ("CBOT") voted to accept an offer
of settlement by Lind-Waldock concerning alleged violations of CBOT
Regulations 332.08 and 465.01. The charges involved Lind-Waldock's alleged
failure to submit executed orders for clearing and to include an account
designation on an order. In settling this matter for a fine of $7,500, Lind-
Waldock neither admitted nor denied violating the CBOT Regulations.
There is currently no litigation pending or on appeal which, if successfully
pursued by a plaintiff or appellant would have a material effect on the
Partnership or the ability of the FCM or any CTA to serve the Fund.
LEGAL OPINION
The Scott Law Firm, P.A., 5121 Sarazen Drive, Hollywood, FL 33021, serves as
special counsel to the Partnership and the General Partner in regard to the
offering of Units and the preparation of this Prospectus, the legality of the
Units offered, and the classification of the Partnership as a partnership for
tax purposes. In addition, the Firm will advise the Partnership and its
General Partner, from time to time, in regard to the maintenance of the tax
status of the Partnership and the legality of subsequent offers, if any, of
sale of Units to and transfers by investors. The General Partner has granted
the right to The Scott Law Firm, P.A. to employ other law firms to assist in
specific matters which may now, or in the future, relate to the sale of Units
or the operation of the Partnership.
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The Scott Law Firm, P.A. will not provide legal advice to any potential
investors or any Partners other than the General Partner, in regard to this
offering or any other matter. All parties other than the General Partner
should seek investment, legal, and tax advice from counsel of their choice.
EXPERTS
The financial Statements of the Partnership and the General Partner included
in this Prospectus have been audited by Frank L. Sassetti, & Co., 6611 West
North Avenue, Oak Park, IL 60302, as indicated in their reports included with
each such statement. Such financial statements have been included herein and
in any filings to the SEC, CFTC, NFA, and selected state administrators,
relying upon the authority of Frank L. Sassetti, & Co., as experts in
accounting and auditing, in giving said respective reports. The books and
records of the partnership and the General Partner will be audited and the
Partnership tax returns will be prepared by Frank L. Sassetti, & Co. The
accountant who will establish the original books and records for the
Partnership and handle the journal entries, prepare the monthly and annual
statements of account and financial statements, and prepare the Partnership K-
1s, once trading commences, will be Mr. James Hepner, certified public
accountant, 1824 N. Normandy, Chicago, IL 60635. The General Partner will
serve as tax partner for the Partnership. The General Partner is required by
CFTC rules and regulations to send monthly, unaudited, and annual statements
of account and financial statements, audited by an independent certified
public accountant, for the Partnership to each Partner. The unaudited monthly
statements will be sent as soon as practicable after the end of each month and
the audited annual financial statements will be sent within 90 days after the
end of each calendar year.
ADDITIONAL INFORMATION
The Partnership, by its General Partner, has filed a Registration Statement on
Form S-1 with the Securities and Exchange Commission with respect to the
issuance and sale of the limited partnership interests (the "Units") under the
Securities Act of 1933. This Prospectus does not contain all of the
information set forth in the Form S-1 filing and reference is made to said
Form S-1 and the Exhibits thereto (for example, the Selling Agreement, the
Escrow Agreement, and the Customer Agreement). The description contained in
this Prospectus to the exhibits to the Registration Statement are summaries.
For further information regarding the Partnership and the Units offered, the
Prospectus, including the Exhibits and other documents filed and periodic
reports, may be inspected, without charge, and copied at the public reference
facilities of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, D.C. 20549 and at its Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and copies of all or any part of this filing can be obtained by mail from the
Securities and Exchange Commission, at such offices, upon payment of the
prescribed rates. This document and other electronic filings made through the
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system are publicly
available through the Commission's Web site (http://www.sec.gov).
In addition, the books and records for the Partnership will be maintained for
six years at 5916 N. 300 West, Fremont, Indiana 46737 with a duplicate set
maintained at the offices of Mr. James Hepner, Certified Public Accountant, at
1824 N. Normandy, Chicago, IL 60635, (773) 804-0074. Prospective investors
are invited to review any materials available to the General Partner relating
to the Partnership; the operations of the Partnership; this offering; the
commodity experience and trading history of the CTAs; the General Partner and
the commodity brokers and their respective officers, directors and affiliates;
the advisory agreements between the Partnership and the CTAs; the Customer
Agreements between the Partnership and the Commodity Brokers for the
Partnership; the Disclosure Documents of the CTAs; the forms filed with the
NFA for any registered entity or person related to the Partnership; and any
other matters relating to this offering, the operation of the Partnership, or
the laws applicable to the offering or the Partnership. The officer and staff
of the General Partner will answer all reasonable inquiries from prospective
investors relating thereto. All such materials will be made available at any
mutually convenient location at any reasonable hour after reasonable prior
notice. The General Partner will afford prospective investors the opportunity
to obtain any additional information necessary to verify the accuracy of any
representations or information set forth in this Prospectus or any exhibits
attached hereto to the extent that the Partnership or the General Partner
possess such information or can acquire it without unreasonable effort or
expense. Such review is limited only by the proprietary and confidential
nature of the trading systems to be utilized by the CTAs and by the
confidentiality of certain personal information relating to investors.
[The balance of this page has been intentionally left blank]
67
<PAGE>
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ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
PERIOD ENDED APRIL 30, 1998
(With Auditors' Report Thereon)
GENERAL PARTNER:
Ashley Capital Management, Inc.
c/o Corporate Systems, Inc.
101 North Fairfield Drive
Dover, Kent County, Delaware 19901
<PAGE>
To The Partners
Atlas Futures Fund, Limited Partnership
Dover, Kent County, Delaware
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of ATLAS FUTURES FUND,
LIMITED PARTNERSHIP as of April 30, 1998, and the related statements of
operations, partners' equity and cash flows for the initial period 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ATLAS FUTURES
FUND, LIMITED PARTNERSHIP as of April 30, 1998, and the results of its
operations and its cash flows for the initial period then ended, in
conformity with generally accepted accounting principles.
May 20, 1998
Oak Park, Illinois
1
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
BALANCE SHEET
APRIL 30, 1998
ASSETS
Cash $ 1,953
Offering expenses (Note 1) 49,200
Organization costs (Note 1) 2,800
$53,953
LIABILITIES AND PARTNERS' EQUITY
Liabilities -
Due to general partner $52,000
Partners' Capital -
Limited partners (1 unit)
Initial capital contribution 1,000
Deficit accumulated during development stage (24)
General partner (1 unit)
Initial capital contribution 1,000
Deficit accumulated during development stage (23)
Total Partners' Capital 1,953
$53,953
The accompanying notes are an integral part
of the financial statements.
2
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
FOR THE INITIAL PERIOD
ENDED APRIL 30, 1998
REVENUES $
Total Revenues
EXPENSES
Bank charges 47
Total Expenses 47
NET INCOME (LOSS) $ (47)
NET INCOME (LOSS) -
Limited partnership unit $ (24)
General partnership unit $ (23)
The accompanying notes are an integral part
of the financial statements.
3
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF PARTNERS' EQUITY
FOR THE INITIAL PERIOD
ENDED APRIL 30, 1998
Total
Limited Partners General Partners Partners' Equity
Amount Units Amount Units Amount Units
Initial partner
contributions $1,000 1 $1,000 1 $2,000 2
Net loss through
April 30, 1998 (24) (23) (47)
Balance -
April 30, 1998 $ 976 1 $ 977 1 $1,953 2
Value per unit at
April 30, 1998 $976.50
Total partnership
units at
April 30, 1998 2
The accompanying notes are an integral part
of the financial statements.
4
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
FOR THE INITIAL PERIOD
ENDED APRIL 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (47)
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Initial partner contributions 2,000
NET INCREASE IN CASH 1,953
CASH -
Beginning of period
End of period $ 1,953
NON-CASH INVESTING ACTIVITIES
Organization and syndication costs incurred
and paid by affiliate $52,000
The accompanying notes are an integral part
of the financial statements.
5
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Atlas Futures Fund, Limited Partnership (the Fund) was formed
January 12, 1998. The Fund expects to engage in the speculative trading of
futures contracts in commodities. Ashley Capital Management, Inc. is the
General Partner and the commodity pool operator (CPO) of Atlas Futures Fund,
Limited Partnership. The commodity trading advisors (CTAs) are expected to
be Michael J. Frischmeyer, Commoditech, Inc., Rosenbery Capital Management,
Inc., J.A.H. Research and Trading and C & M Traders, Inc., who have the
authority to trade so much of the Fund's equity as is allocated to them by
the General Partner.
Income Taxes - In accordance with the generally accepted method of
presenting partnership financial statements, the financial statements do not
include assets and liabilities of the partners, including their obligation
for income taxes on their distributive shares of the net income of the Fund
or their rights to refunds on its net loss.
Offering Expenses and Organizational Costs - Offering expenses are to
be reimbursed to the General Partner upon the initial closing.
Organizational costs are capitalized and amortized over sixty months on a
straight line method starting when operations begin, payable from profits or
capital subject to a 2% annual capital limitation. All organizational costs
incurred to date have been capitalized and no amortization expense has yet
been charged.
Registering Costs - Costs incurred for the initial filings with
Securities and Exchange Commission, Commodity Futures Trading Commission,
National Futures Association (the "NFA") and the states where the offering is
expected to be made are accumulated, deferred and charged against the gross
proceeds of offering at the initial closing as part of the offering expenses.
Recurring registration costs, if any, will be charged to expense as incurred.
Revenue Recognition - Commodity futures contracts are recorded on the
trade date and are reflected in the balance sheet at the difference between
the original contract amount and the market value on the last business day of
the reporting period.
Market value of commodity futures contracts is based upon
exchange or other applicable market best available closing quotations.
6
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Statement of Cash Flows - For purposes of the Statement of Cash Flows,
the Fund considers only cash and money market funds to be cash equivalents.
Net cash provided by operating activities include no cash payments for
interest or income taxes for the initial period ended April 30, 1998 since
the Fund has no debt nor pays federal income taxes.
2. GENERAL PARTNER DUTIES
The responsibilities of the General Partner, in addition to
directing the trading and investment activity of the Fund, includes executing
and filing all necessary legal documents, statements and certificates of the
Fund, retaining independent public accountants to audit the Fund, employing
attorneys to represent the Fund, reviewing the brokerage commission rates to
determine reasonableness, maintaining the tax status of the Fund as a limited
partnership, maintaining a current list of the names, addresses and numbers
of units owned by each Limited Partner and taking such other actions as
deemed necessary or desirable to manage the business of the Partnership.
3. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement provides, among other things,
that
Capital Account - A capital account shall be established for each
partner. The initial balance of each partner's capital account shall be the
amount of the initial contributions to the partnership.
7
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
3. THE LIMITED PARTNERSHIP AGREEMENT - CONTINUED
Monthly Allocations - Any increase or decrease in the Partnership's net
asset value as of the end of a month shall be credited or charged to the
capital account of each Partner in the ratio that the balance of each account
bears to the total balance of all accounts.
Any distribution from profits or partners' capital will be made
solely at the discretion of the General Partner.
Allocation of Profit and Loss for Federal Income Tax Purposes - As of
the end of each fiscal year, the Partnership's realized capital gain or loss
and ordinary income or loss shall be allocated among the Partners, after
having given effect to the fees of the General Partner and the Commodity
Trading Advisors and each Partner's share of such items are includable in the
Partner's personal income tax return.
Redemption - No partner may redeem or liquidate any units until after
the lapse of six months from the date of the investment. Thereafter, a
Limited Partner may withdraw, subject to certain restrictions, any part or
all of his units from the partnership at the net asset value per unit on the
last day of any month on ten days prior written request to the General
Partner. A redemption fee payable to the partnership of a percentage of the
value of the redemption request is charged during the first 24 months of
investment pursuant to the following schedule:
* 4% if such request is received ten days prior to the last
trading day of the month in which the redemption is to be effective the sixth
month after the date of the investment in the Fund.
* 3% if such request is received during the next seven to
twelve months after the investment.
* 2% if such request is received during the next thirteen to
eighteen months.
* 1% if such request is received during the next nineteen to
twenty-four months.
* 0% thereafter.
8
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
4. FEES
The Fund will be charged the following fees on a
monthly basis as of the commencement of trading.
* A management fee of 3% (annual rate) of the Fund's net
assets allocated to the CTAs to trade will be paid to the CTAs and 3% of
equity to the Fund's General Partner.
* An incentive fee of 15% of "new trading profits" will be
paid to the CTAs. "New trading profits" includes all income earned by a CTA
and expense allocated to his activity. In the event that trading produces a
loss, no incentive fees will be paid and all losses will be carried over to
the following months until profits from trading exceed the loss. It is
possible for one CTA to be paid an incentive fee during a quarter or a year
when the Fund experienced a loss.
* The Fund will pay fixed commissions of 9% (annual rate) of
assets assigned to be traded, payable monthly, to the introducing broker
affiliated with the General Partner. The Affiliated Introducing Broker will
pay the costs to clear the trades to the futures commission merchant and all
PIT Brokerage costs which shall include the NFA and exchange fees.
9
<PAGE>
*******************************************************************************
ASHLEY CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
FOUR MONTHS ENDED APRIL 30, 1998
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
FOUR MONTHS ENDED APRIL 30, 1998
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements -
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
<PAGE>
To The Shareholders
Ashley Capital Management, Inc.
Fremont, Indiana
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of ASHLEY CAPITAL
MANAGEMENT, INC. as of April 30, 1998, and the related statements of income
and retained earnings and cash flows for the four months 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ASHLEY CAPITAL
MANAGEMENT, INC. as of April 30, 1998, and the results of its operations and
its cash flows for the four months then ended, in conformity with generally
accepted accounting principles.
May 18, 1998
Oak Park, Illinois
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
1
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
BALANCE SHEET
APRIL 30, 1998
ASSETS
CURRENT ASSETS
Cash $ 3,910
Due from Atlas Futures Fund (Note 2) 52,000
Prepaid expenses 833
Total Current Assets 56,743
INVESTMENTS (Note 3) 977
$57,720
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 812
Due to affiliate (Note 2) 52,000
Total Current Liabilities 52,812
Long-Term Debt (Note 3) 4,000
STOCKHOLDER'S EQUITY
Capital stock (common 1,500 shares authorized,
no par value; 1,000 issued and outstanding) 1,000
Accumulated deficit (92)
Total Stockholder's Equity 908
$57,720
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements.
2
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
REVENUES $
EXPENSES
Bank charges 69
Total Expenses 69
NET (LOSS) BEFORE EQUITY IN LIMITED PARTNERSHIP (69)
EQUITY IN LIMITED PARTNERSHIP (23)
NET INCOME (LOSS) (92)
ACCUMULATED DEFICIT
Beginning of period
End of period $ (92)
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements.
3
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (92)
Adjustments to reconcile net (loss) to net cash
provided by operating activities -
Equity in limited partnership 23
Changes in operating assets and liabilities -
Increase in accounts payable 812
Net Cash Provided by
Operating Activities 743
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment interest in limited partnership (1,000)
(Increase) in prepaid expenses (833)
Net Cash Used by
Investing Activities (1,833)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock 1,000
Proceeds from long-term debt 4,000
Net Cash Provided by
Financing Activities 5,000
NET INCREASE IN CASH 3,910
CASH -
Beginning of period
End of period $ 3,910
NON-CASH INVESTING AND FINANCING ACTIVITIES -
Organization and syndication costs incurred
and paid by affiliate $52,000
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
The accompanying notes are an integral part
of the financial statements.
4
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Ashley Capital Management, Inc. (the Company) was formed
primarily to act as general partner of the Atlas Futures Fund, Limited
Partnership (the Fund).
The responsibilities of the General Partner, in addition to the
selection of trading advisors and other activity of the Fund, include
executing and filing all necessary legal documents, statements and
certificates of the Fund, retaining independent public accountants to audit
the Fund, employing attorneys to represent the Fund, reviewing the brokerage
commission rates to determine reasonableness, maintaining the tax status of
the Fund as a limited partnership, maintaining a current list of the names,
addresses and numbers of units owned by each Limited Partner and taking such
other actions as deemed necessary or desirable to manage the business of the
Partnership.
Use of Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Statement of Cash Flows - Net cash provided by operating activities
includes no cash payment for interest nor income taxes for the four months
ended April 30, 1998.
2. CORPORATE AFFILIATION
The Company's sole shareholder is also a joint owner of Futures
Investment Company. In addition, the Company is a general partner of Atlas
Futures Fund, a limited partnership.
Also, the Company, in its capacity as general partner, has been
incurring the organization and offering costs of Atlas Futures Fund, which
total an estimated $52,000 as of the balance sheet date. These funds are not
collateralized and bear no interest.
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
5
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
3. INVESTMENTS
The Company purchased an interest as the general partner in a
limited partnership with an initial investment of $1,000. The investment is
being accounted for under the equity method and lost $23 during the period.
4. LONG-TERM DEBT
The Company and its sole shareholder signed a subordinated loan
agreement on October 24, 1996, whereby the Company can borrow up to $500,000
from the shareholder. The loan agreement bears interest at the rate of 12%
per annum and is payable on February 1, 2019; however, under certain
circumstances the borrower may repay the loan earlier. On April 16, 1998,
the Company borrowed $4,000 against this commitment, which will mature
February 1, 2019, in part to fund the expenses of the Company and to advance
proceeds to the limited partnership.
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
6
<PAGE>
*******************************************************************************
APPENDIX I
COMMODITY TERMS AND DEFINITIONS
Identification of the parties and knowledge of various terms and concepts
relating to trading in futures and forward contracts and this offering are
necessary for a potential investor to identify the risks of investment in the
Fund.
"1256 Contract". See "Taxation - Section 1256 Contract".
"Additional Sellers". See definition of "Selling Agent".
"Affiliated IB". The IB is Affiliated with the principal of the General
Partner. The IB has no affiliation with the Partnership. Also see definition
of "IB".
"Associated Persons". The persons registered pursuant to the Commodity
Exchange Act with the FCM, the Selling Agent, Additional Sellers, or the IB
who are eligible to service the Partnership, the Partners and to receive
Trailing Commissions.
"Average Price System". The method approved by the CFTC to permit the CTA to
place positions sold or purchased in a block to the numerous accounts managed
by the CTA. See "The Commodity Trading Advisors" in the main body of the
Prospectus.
"Best Efforts". The term to describe that the party is liable only in the
event they intentionally fail or are grossly negligent in the performance of
the task described.
"Capital" means cash invested in the Partnership by any Partner and placed at
risk for the business of the Partnership.
"CFTC". Commodity Futures Trading Commission, 2033 K Street, Washington,
D.C., 20581. An independent regulatory commission of the United States
government empowered to regulate commodity futures transactions under the
Commodity Exchange Act.
"Commodity". Goods, wares, merchandise, produce, currencies, and stock
indices and in general everything that is bought and sold in commerce. Traded
commodities on U. S. Exchanges are sold according to uniform established grade
standards, in convenient predetermined lots and quantities such as bushels,
pounds or bales, are fungible and, with a few exceptions, are storable over
periods of time.
"Commodity Broker". See definitions of "Futures Commission Merchant" and
"IB".
"Commodity Exchange Act". The statute providing the regulatory scheme for
trading in commodity futures and options contracts in the United States under
the administration of the Commodity Futures Trading Commission which will
provide the opportunity for reparations and other redress for claims.
"Commodity Pool Operator" or "CPO". Ashley Capital Management, Inc., c/o
Corporate Systems, Inc., 101 N. Fairfield Dr., Dover, DE 19901. A person that
raises capital through the sale of interests in an investment trust,
partnership, corporation, syndicate or similar form of enterprise, and uses
that capital to invest either entirely or partially in futures contracts.
"Commodity Trading Advisors" or "CTAs". Michael Frischmeyer, 1422 Central
Avenue, Fort Dodge, IA. 50501; Commoditech, Inc., 4299 Rock Island Road,
Arnold, MO 63010; Rosenbery Capital Management, Inc., 5445 N. Sheridan Rd.,
Suite 2706, Chicago, IL 60640; J.A.H. Research and Trading, 10561 Ridgewood
Drive, Palos Park, Illinois 60464; and, C&M Traders, Inc., 1001 Yamato Road,
Suite 307, Boca Raton, Florida 33487. A person or entity which renders advice
about commodities or about the trading of commodities, as part of a regular
business, for profit. Particularly, those who will be responsible for the
analysis and placement of trades for the Partnership.
"Daily Price Limit". The maximum permitted movement in a single direction
(imposed by an exchange and approved by the CFTC) in the price of a commodity
futures contract for a given commodity that can occur on a commodity exchange
on a given day in relation to the previous day's settlement price, which is
subject to change, from time to time, by the exchange (with CFTC approval).
1
<PAGE>
"Escrow Agent" and "Escrow Account". Star Financial Bank, 2004 N. Wayne St.,
Angola, IN 46703 which was selected by the General Partner and the account
which will hold all the subscription documents and proceeds until such time as
either the Minimum is sold or the offering is terminated prior to the sale of
such Minimum.
"Exchange for Physicals" ("EFP"). EFP is a practice whereby positions in
certain futures contracts may be initiated or liquidated by first executing
the transaction in the appropriate cash market and then arbitraging the
position into the futures market (simultaneously buying the cash position and
selling the futures position, or vice versa).
"Form K-1". The section of the Federal Income Tax Return filed by the
Partnership which identifies the amount of investment in the Partnership, the
gains and losses for the tax year, and the amount of such gains and losses
reportable by a Partner on the Partner's tax return.
"Fully-Committed Position". Each commodity trading advisor has an objective
percentage of equity to be placed at risk. In addition, the CFTC places
limits upon the number of positions a single commodity trading advisor may
have in certain commodities. When either the objective percentage of equity
is placed at risk or the commodity trading advisor reaches the limit in number
of positions, the account or accounts have a fully-committed position.
"Futures Commission Merchant" or "FCM". The Vision Limited Partnership, One
Whitehall Street, 15th floor, New York, New York, 10004. The person that
solicits or accepts orders for the purchase or sale of any commodity for
future delivery subject to the rules of any contract market and in connection
with such solicitation or acceptance of orders, accepts money or other assets
to margin, guarantee, or secure any trades or contracts that result from such
orders for a commission. The IB will be responsible for the negotiation and
payment of the commission to the FCM.
"Futures Contract". A contract providing for (i) 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, or (ii) cash settlement of the change in
the value of the contract. The terms of these contracts are standardized for
each Commodity traded on each exchange and vary only with respect to price and
delivery months. A futures contract should be distinguished from the actual
physical commodity, which is termed a "cash commodity". Trading in futures
contracts involves trading in contracts for future delivery of Commodities and
not the buying and selling of particular physical lots of Commodities. A
contract to buy or sell may be satisfied either by making or taking delivery
of the commodity and payment or acceptance of the entire purchase price
therefor, or by offsetting the contractual obligation with a countervailing
contract on the same exchange prior to delivery.
"Futures Investment Company". The selling agent (the "Selling Agent") and
introducing broker (the "IB"), 5916 N. 300 West, Fremont, IN 46737 which will
introduce the trades to the FCM for a fixed commission of 9% of equity on
deposit at the FCM allocated by the General Partner to trade. The principal
of the General Partner, Ms. Shira Del Pacult is also one of the principals of
the IB, with her husband.
"General Partner". Ashley Capital Management, Inc., c/o Corporate Systems,
Inc., 101 N. Fairfield Dr., Dover, DE 19901. The manager of the Fund.
"Gross Profits". The income or loss from all sources, including interest
income and profit and loss from non-trading activities, if any.
"Initial Closing". When the Minimum offering amount has been raised and
Escrow funds are released to the Partnership for commencement of trading.
"IB" or "Introducing Broker". The introducing broker, Futures Investment
Company, 5916 N. 300 West, Fremont, IN 46737, which will introduce the trades
to the FCM for a fixed commission of 9% of equity on deposit at the FCM
allocated by the General Partner to trade. The principal of the General
Partner, Ms. Shira Del Pacult is also one of the principals of the IB, with
her husband.
"Introduction of Trades". The term used to describe the function performed by
the broker which handles the relationship between the Partnership and the
Futures Commission Merchant. See the definition of "IB".
"Limited Partner". Persons admitted without management authority pursuant to
the Partnership Agreement.
2
<PAGE>
"Margin". A good faith deposit with a broker to assure fulfillment of the
terms of a Futures Contract.
"Margin call". A demand for additional monies to hold positions taken to
maintain a customer's account in compliance with the requirements of a
particular commodity exchange or of an FCM.
"Minimum-Maximum Offering". The amount required to be invested before trading
will commence, $700,000 and the amount which will terminate this offering,
$7,000,000.
"NASD". National Association of Security Dealers, Inc., the self regulatory
organization responsible for the legal and fair operation of broker dealers
such as the Selling Agent.
"Net Assets" or "Net Asset Value" means the total assets, including all cash
and cash equivalents (valued at cost plus accrued interest and earned
discount), less total liabilities, of the Partnership (each determined on the
basis of generally accepted accounting principles, consistently applied under
the accrual method of accounting or as required by applicable laws,
regulations and rules including those of any authorized self regulatory
organization), specifically:
(i) Net Asset Value includes any unrealized profit or loss on open security
and commodity positions subject to reserves for loss established, from time to
time, by the General Partner;
(ii) All open stock, option, and commodity positions are calculated on the
then current market value, which shall be based upon the settlement price for
that particular position on the date with respect to which Net Asset Value is
being determined; provided, however, that if a position could not be
liquidated on such day due to the operation of the daily limits or other rules
of the exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position could be
liquidated shall be the basis for determining the market value of such
position for such day. As used herein, "settlement price" includes, but is
not limited to: (1) in the case of a futures contract, the settlement price
on the commodity exchange on which such futures contract is traded; and (2) in
the case of a foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price and the
highest bid price, at the close of business on the day Net Asset Value is
being determined, established by the bank or broker through which such forward
contract was acquired or is then currently traded;
(iii) Brokerage commissions to close security and commodity positions, if
charged on a round-turn basis, are accrued in full at the time the position is
initiated (i.e., on a round-turn basis) as a liability of the Partnership;
(iv) Interest earned on all Partnership accounts is accrued at least monthly;
(v) The amount of any distribution made by the Partnership is a liability of
the Partnership from the day when the distribution is declared by the General
Partner or as provided in this Agreement and the amount of any redemption is a
liability of the Partnership as of the valuation date; and
(vi) Syndication Costs incurred in organizing and all present and future costs
to increase or maintain the qualification of the Units available for sale and
the cost to present the initial and future offering of Units for sale shall be
capitalized when incurred and amortized and paid from Capital or Monthly
Profit as required by applicable law.
"Net Unit Value". The Net Assets of the Partnership divided by the total
number of Units outstanding.
"Net Gains". The net profit from all sources.
"New Net Profit". The profit in excess of the highest prior level of equity,
before charges and fees, earned by a commodity trading advisor. See
"Description of Charges" and the "Limited Partnership Agreement".
"Net Worth". The excess of total assets over total liabilities as determined
by generally accepted accounting principles. Net Worth for a prospective
investor shall be exclusive of home, home furnishings and automobiles.
3
<PAGE>
"Offering Expenses". The Partnership will reimburse the General Partner for
offering expenses, estimated to be $47,000, from the gross proceeds of the
offering at the time of the break of Escrow for the Initial Closing. For
purposes of limitation, the total Expenses, including the 6% sales
commissions, can not exceed 15% of Capital raised pursuant to the Offering.
Specifically, these expenses include SEC Registration Fee $1,724, NASD Filing
Fee $1,000, Legal Fees $33,700, Accounting $1,500, Blue Sky Expenses $3,000,
Printing $3,000, Miscellaneous $2,076 and Escrow Fees $1,000. The $47,000 in
Offering Expenses includes the first year operating costs. Additionally,
there are $5,000 in Organizational Expenses which will be paid to the General
Partner, amortized on a straight line method over 60 months.
"Organizational Expenses". The General Partner will be reimbursed for certain
Organizational Expense in the amount of $5,000, to be amortized on a straight
line method over the first 60 months of Partnership operation. Specifically,
these include $500 in accounting fees, and $4500 in legal fees.
"Option Contract". An option contract gives the purchaser the right (as
opposed to the obligation) to acquire (call) or sell (put) a given quantity of
a commodity or a futures contract for a specified period of time at a
specified price to the seller of the option contract. The seller has
unlimited risk of loss while the loss to a buyer of an option is limited to
the amount paid ("premium") for the option.
"Partners". The General Partner, all other general partners, and all Limited
Partners in the Partnership.
"Partnership" or ``Limited Partnership" or "Commodity Pool" or "Pool" or
"Fund". The Atlas Futures Fund Limited Partnership, evidenced by Exhibit A to
this Prospectus, 5916 N. 300 West, Fremont, IN (219) 833-1306.
"Position Limits". The CFTC has established maximum positions which can be
taken in some, but not in all commodity markets, to prevent the corner or
control of the price or supply of those commodities. These maximum number of
positions are called Position Limits.
"Principal". Ms. Shira Del Pacult, the principal of the General Partner (who
is also a principal of the IB).
"Round-turn Trade". The initial purchase or sale of a futures or forward
contract and the subsequent offsetting sale or purchase of such contract.
"Redemption". The right of a Partner to tender the Units to the Partnership
for surrender at the Net Unit Value, subject to certain conditions. See the
Limited Partnership Agreement attached as Exhibit A to the Prospectus.
"Selling Agent". The NASD member broker dealer, Futures Investment Company,
5916 N. 300 West, Fremont, IN 46737, selected by the General Partner to offer
the Units for sale. The General Partner and the Selling Agent may select
Additional Selling Agents to also offer Units for sale. See "Plan of
Distribution" in the Prospectus.
"Scale in Positions". Some of the CTAs selected by the General Partner
presently have a large amount of equity under management. In some situations,
the positions desired to be taken on behalf of the Partnership and other
accounts under management will be too large too be executed at one time. The
CTAs intend to take positions at different prices, at different times and
allocate those positions on a ratable basis in accordance with rules
established by the CFTC. This procedure is defined as to "Scale in
Positions". The same definition and rules apply when the CTA elects to exit a
position.
Taxation - "Section 1256 Contract" is defined to mean: (1) any regulated
futures contract ("RFC"); (2) any foreign currency contract; (3) any non-
equity option; and (4) any dealer equity option.
The term RFC means a futures contract whether it 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
Treasury ("a qualified board of exchange") and which is "market-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
4
<PAGE>
foreign currency which is currency in which positions are also entered at
arm's length at a price determined by reference to the price in the interbank
market. (The Secretary of Treasury is authorized to issue regulations
excluding certain currency forward contracts from marked-to-market treatment.)
A "non-equity option" means an option which is treated 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 there is in
effect a designation by the CFTC of a contract market for a contract bond or
such group of stocks or stock index. A "dealer equity option" means, with
respect to an options dealer, only a 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.
With certain exceptions discussed below, the following rules apply to Section
1256 contracts. All Section 1256 contracts will be market-to-market upon the
closing of every contract (including closing by taking an offsetting position
or by making or taking delivery, by exercise or being exercised, by assignment
or being assigned or by lapse or otherwise) and all open Section 1256
contracts held by the Partnership at its fiscal year-end will be treated as
sold for their fair market value on the last business day of such taxable
year. This will result in all unrealized gains and losses being recognized
for Federal income tax purposes for the taxable year. As a consequence, the
Partners may have tax liability relating to unrealized Partnership profits in
open positions at year-end. Sixty percent of any gain or loss from a Section
1256 contract will be treated as long-term, and 40% as short-term, capital
gain or loss (the "60/40 Rule"), regardless of the actual holding period of
the individual contracts. The character of a Partner's distributive share of
profits or losses of the Partnership from Section 1256 contracts will thus be
60% long-term capital gain or loss and 40% short-term capital gain or loss.
Each partner's distributive share of such gain or loss for a taxable year will
be combined with its other items of capital gain or loss for such year in
computing its Federal income tax liability. The Code contains certain rules
designed to eliminate the tax benefits flowing to high-income taxpayers from
the graduated tax rate schedule and from the personal and dependency
exemptions. The effect of these rules is to tax a portion of a high-income
taxpayer's income at a marginal tax rate of 39.6%. However, long-term capital
gains are now subject to a maximum tax rate of 28%.
Subject to certain limitations, a Limited Partner, other than a corporation,
estate or trust, may elect to carryback any net Section 1256 contract losses
to each of the three preceding years. Net Section 1256 contract losses
carried back to prior years may only be used to offset net Section 1256
contract gains, but not against other income. The net loss from Section 1256
contracts will be treated as 60% long-term capital loss and 40% short term
capital loss. To the extent that such losses are not depleted by the
carryback, they can be carried forward under the existing capital loss carry
forward rules and will be treated as 60% long-term capital losses and 40%
short-term capital losses.
During taxable years in which little or no profit is generated from trading
activities, a Limited Partner will, none-the-less, still have interest income.
The marked-to-market rules do not apply to interests in personal property of a
nature which are actively traded other than Section 1256 contracts (termed
"off-exchange positions"). The gains and losses from off-exchange positions
will not be subject to the 60/40 Rule, but will be treated in accordance with
the general holding period rules and taxed at the same rates as ordinary
income, on a dollar for dollar basis. Capital gain or loss with respect to
property other than Section 1256 contracts generally will be long-term only if
such contracts have been held for more than one year. See "Federal Income Tax
Aspects".
"Trailing Commissions". The share of the fixed commissions to be paid to the
individual associated persons who work for the NASD member broker dealers or
the IB who have either sold the Units to the Partners or are providing
services to the General Partner or the other Partners.
"Taking Positions Ahead of the Partnership". The allocation of trades by
other than legally accepted methods by the CTA or other trader which favors
parties who took the position unfairly.
"Trading Matrix". The dollar value used by a commodity trading advisor to
define the number of positions to be taken by the accounts under management.
For example, each $40,000 in every account is traded the same by Mr.
Frischmeyer. This is his trading matrix. Some other commodity trading
advisors have a different trading matrix for different sized accounts. For
example, they may trade all accounts over one million in size differently than
accounts under one million.
"Unit". The term used to describe the ownership of both the General and
Limited Partner interests in the Partnership.
"Unrealized Profit Or Loss". The profit or loss which would be realized on an
open position if it were closed at the current settlement price or the most
recent appropriate quotation as supplied by the broker or bank through which
the transaction is effected.
"Underwriter". See "Selling Agent".
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5
<PAGE>
STATE REGULATORY GLOSSARY
The following definitions are supplied by the state securities
administrators responsible for the review of public futures fund ("commodity
pool") offerings made to residents of their respective states. They belong to
the North American Securities Administrators Association, Inc. which publish
"Guidelines for the Registration of Commodity Pool Programs", such as the
Fund, which contain these definitions. The following definitions are
published from the Guidelines, however, the General Partner has made additions
to, but no deletions from, some of these definitions to make them more
relevant to an investment in the Fund.
Administrator-The official or agency administering the security laws of
a state. This will usually be the State of residence of the Fund or the
domicile of the Broker or Brokerage Firm which makes the offer or the
residence of the potential investor.
Advisor-Any person who, for any consideration, engages in the business
of advising others, either directly or indirectly, as to the value, purchase,
or sale of commodity contracts or commodity options. This definition applies
to the CTAs and, when it provides such advice, to the General Partner.
Affiliate-An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities of such Person; (b) any Person 10% or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote, by such Person; (c) any Person,
directly or indirectly, controlling, controlled by, or under common control of
such Person; (d) any officer, director or partner of such Person; or (e) if
such Person is an officer, director or partner, any Person for which such
Person acts in any such capacity. See "Conflicts". This applies to the fact
that Ms. Shira Del Pacult is the sole shareholder and principal of the General
Partner and also owns 50% of the outstanding voting shares and is a principal
in the Affiliated IB.
Capital Contributions-The total investment in a Program by a Participant
or by all Participants, as the case may be. The purchase price, less sales
commissions, for the Units.
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. See "The Futures Commission Merchant" and "Introducing Broker".
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.
Cross Reference Sheet-A compilation of the Guideline sections,
referenced to the page of the
prospectus, Program agreement, or other exhibits, and justification of any
deviation from the Guidelines.
This sheet is used by the State Administrator to review this Prospectus.
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 Asset Value Per Program Interest-The Net Assets divided by the
number of Program Interests outstanding.
Net Worth-The excess of total assets over total liabilities are
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
New Trading Profits-The excess, if any, of Net Assets at the end of the
period over Net Assets at the end of the highest previous period or Net Assets
at the date trading commences, whichever is higher, and as further adjusted to
eliminate the effect on Net Assets resulting from new Capital Contributions,
redemptions, or capital distributions, if any, made during the period
decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account. See "New Net Profit".
Organizational and Offering Expenses-All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited
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<PAGE>
to, total underwriting and brokerage discounts and commissions (including fees
of the underwriter's attorneys), expenses for printing, engraving, mailing,
salaries of employees while engaged in sales activity, charges of transfer
agents, registrars, trustees, escrow holders, depositories, experts, expenses
of qualification of the sale of its Program Interest under Federal and state
law, including taxes and fees, accountants' and attorneys' fees.
Participant-The holder of a Program Interest. A Partner in the Fund.
Person-Any natural Person, partnership, corporation, association or
other legal entity.
Pit Brokerage Fee-Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees. These
fees will be paid by the Introducing Broker from the fixed commissions.
Program-A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts. The Fund.
Program Broker-A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program. See the "The Futures Commission
Merchant" and "Introducing Broker".
Program Interest-A limited partnership interest or other security
representing ownership in a program. The "Units" in the Fund. See Exhibit A,
the Limited Partnership Agreement.
Pyramiding-A method of using all or a part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
Sponsor-Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the
Organizational Expenses of the Program, and the general partner(s) and any
other Person who regularly performs or selects the Persons who perform
services for the Program. Sponsor does not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in connection with the
offering of the Units. The term "Sponsor" shall be deemed to include its
Affiliates.
Valuation Date-The date as of which the Net Assets of the Program are
determined. For the Fund, this will be after the close of business on the
last business day of each month.
Valuation Period-A regular period of time between Valuation Dates. For
the Fund, this will be the close of business for each calendar month and each
calendar year.
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7
<PAGE>
*******************************************************************************
APPENDIX II
Supplemental Performance Information for C&M Traders, Inc.
Please see "The Commodity Trading Advisors, C&M Traders, Inc." in the main
body of this disclosure document for the business background and description
of the trading program for C&M Traders, Inc.
C&M Traders, Inc. - Live Cattle - Proprietary
The following capsule shows the past performance of the C&M Traders, Inc. -
Live Cattle - Proprietary since the inception of trading of the first Account
(in January, 1992) and year-to-date (through May 31, 1998). PAST PERFORMANCE
IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
C&M Traders, Inc. - Live Cattle - Proprietary
Percentage Rate of Return
(Computed on a compounded monthly basis)*
Month 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
January 21.66 (9.00) (38.66) 25.05 38.61
February 5.20 (0.30) 116.26 (35.10) 2.93
March 3.44 (34.55) 3.18 112.13 (1.90)
April 1.01 20.71 (17.37) (25.02) 12.48
May (16.88) 25.66 (5.46) (3.32) 12.69
June (9.19) 3.80 3.47 (58.62) 21.24
July (13.43) (12.23) 43.17 72.75 (3.72)
August (1.10) 10.26 12.71 69.28
September 19.76 11.84 14.95 (17.34)
October 30.10 35.28 8.90 83.05
November 17.07 2.49 10.98 6.16
December (1.20) 3.52 32.11 (29.21)
Totals 46.26 180.43 87.19 298.58
<FN>
Name of Commodity Trading Advisor: C&M Traders, Inc.
Name of Trading Program: Live Cattle
Inception of Trading: July, 1993
Number of client accounts using this trading program: 6
Total Assets managed by CTA: $18,832,357
Total Assets traded: $6,221,487
Worst Monthly Percentage Draw-down**: 6-95/58.62%
Worst Peak-to-Valley % Draw-down***: 11-92 to 2-93/70.32%
Number of Accounts Closed with Profit: 3 since January, 1992
Number of Accounts Closed with Loss: 0 since January, 1992
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
</TABLE>
<PAGE>
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EXHIBIT A TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
AGREEMENT OF LIMITED PARTNERSHIP OF
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT, (the "Agreement") dated the 1st day of
February, 1998, by and among Ashley Capital Management, Incorporated, a
Delaware corporation, as managing general partner (hereinafter referred to as
the "General Partner"), and those who are admitted as partners, (hereinafter
referred to as either "Limited Partners" or "Other General Partners"),
pursuant to the terms of this Agreement, (the General Partner, any Other
General Partners, and the Limited Partners are hereinafter collectively
referred to as the "Partners").
WITNESSETH:
IN CONSIDERATION of good and valuable consideration, the receipt of which is
hereby acknowledged, the General Partner and the initial Limited Partner
entered into and formed a limited partnership (hereinafter called either the
"Partnership" or the "Fund") pursuant and subject to the Delaware Uniform
Limited Partnership Act (the "Act"), as follows:
ARTICLE I
Definitions and Risk Disclosure Statement
Certain terms used in this Agreement shall have the special meaning
designated below:
1.1 The term AFFILIATE means (1) any person controlled by or under common
control with another person, (2) a person owning or controlling 10% or more
of the outstanding voting securities of such other person, (3) any officer or
director of such other person, and (4) if such other person is an officer or
director, any other company for which such person acts as an officer or
director.
1.2 When referring to the capital of the Partnership:
(a) the term CAPITAL shall mean cash invested in the Partnership by any
Partner and placed at risk for the business of the Partnership;
(b) the term CAPITAL CONTRIBUTION shall mean, with respect to any Partner,
the sum of all Capital contributed to the Partnership pursuant to Article I;
(c) the term CAPITAL SUBSCRIPTION shall mean the amount set forth opposite
the name of such Partner in the schedule of Partners, which amount shall be
the purchase price, less sales commissions, if any, to be paid or paid by
such Partner for the Unit or Units in the Partnership purchased by such
Partner;
(d) the term INITIAL CAPITAL shall mean the sum of all Capital Subscriptions
received by the General Partner prior to commencement of trading;
(e) the term NET ASSETS OR NET ASSET VALUE means the total assets, including
all cash and cash equivalents (valued at cost plus accrued interest and
earned discount), less total liabilities, of the Partnership (each determined
on the basis of generally accepted accounting principles, consistently
applied under the accrual method of accounting or as required by applicable
laws, regulations and rules including those of any authorized self regulatory
organization), specifically:
(i) Net Asset Value includes any unrealized profit or loss on open
security and commodity positions subject to reserves for loss established,
from time to time, by the General Partner;
(ii) All open stock, option, and commodity positions are calculated on
the then current market value, which shall be based upon the settlement price
for that particular position on the date with respect to which Net Asset
Value is being determined; provided, however, that if a position could not be
liquidated on such day due to the operation of the daily limits or other
rules of the exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position could be
liquidated shall be the basis for determining the market value of such
position for such day. As used herein, "settlement price" includes, but is
not limited to: (1) in the case of a futures contract, the settlement price
on the commodity exchange on which such futures contract is traded; and (2)
in the case of a foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price and the
highest bid price, at the close of business on the day Net Asset Value is
being determined, established by the bank or broker through which such
forward contract was acquired or is then currently traded;
(iii) Brokerage commissions to close security and commodity positions, if
charged on a round-turn basis, are accrued in full at the time the position
is initiated (i.e., on a round-turn basis) as a liability of the Partnership;
(iv) Interest earned on all Partnership accounts is accrued at least
monthly;
(v) The amount of any distribution made by the Partnership is a liability
of the Partnership from the day when the distribution is declared by the
General Partner or as provided in this Agreement and the amount of any
redemption is a liability of the Partnership as of the valuation date; and
(vi) Syndication Costs incurred in organizing and all present and future
costs to increase or maintain the qualification of the Units available for
sale and the cost to present the initial and future offering of Units for
sale shall be capitalized when incurred and amortized and paid from Capital
or Monthly Profit as required by applicable law.
(f) the term PROFIT (LOSS) ATTRIBUTABLE TO UNITS means the product of A) the
number of Units divided into B) an amount equal to the Net Profit (Loss)
determined as follows: (1) the net of profits and losses realized on all
trades closed out, plus (2) the net of any unrealized profits and losses an
open positions as of the end of the period, less (3) the net of any
unrealized profits and losses on open positions as of the end of the
preceding period, minus, (4) the Expenses attributable to Units. Profit
(Loss) shall include interest earned on Partnership assets, realized and
unrealized capital gains or losses on U.S. Treasury bills, and other
securities;
(g) the term MANAGEMENT FEE shall mean three percent (3%) of the Net Assets
of the Partnership computed on the close of business on the last day of each
month and payable to the General Partner without regard to the income or loss
of the Partnership for that period;
(h) the term INCENTIVE FEE means a percentage of the profits accrued and paid
to the General Partner, or its Affiliates, of up to fifteen percent (15%) of
New Net Profit earned from inception of trading, through the date of the
computation, based upon total Capital of the Partnership. The General Partner
has the right to both reduce and, subsequently, increase the Incentive Fee to
fifteen percent (15%) and below; presently, the Incentive Fee paid to the
General Partner is paid to the CTA;
(i) the term GROSS PROFIT OR LOSS means the income or loss from all sources,
including interest income and profit and loss from non-trading activities, if
any.
(j) the term NEW NET PROFIT OR LOSS means the amount of income earned from
trading, less the trading losses and brokerage commissions and fees paid to
clear the trades which are incurred or accrued during the then current
accounting period; and,
(k) the term NET GAINS means net profit from all sources.
(l) the term UNIT shall mean a partnership interest in the Partnership
requiring an initial Capital Contribution of one thousand dollars ($1,000),
less a sales commission, or the Net Asset Value of the initial Unit, as
adjusted to reflect increases and decreases caused by receipt, accrual, and
payment of profit, Expenses, losses, bonuses, and fees, from time to time.
1.3 When referring to costs and expenses of the Partnership to be allocated
and charged pursuant to this Agreement:
(a) the term EXPENSES shall mean costs allocated, incurred, paid, accrued, or
reserved, including the fixed commissions payable to the Introducing Broker
of nine percent (9%) of the total equity placed under management with the
commodity trading advisors, which are, in the opinion of the General Partner,
required, necessary or desirable to establish, manage, continue and promote
the business of the Partnership including, but not limited to, all deferred
organization costs, brokerage commissions, and all management and incentive
fees payable to the General Partner or to independent investment and
commodity trading advisors by the Partnership as negotiated and determined by
the General Partner on behalf of the Partnership on a basis consistently
applied in accordance with generally accepted accounting principals under the
accrual method of accounting or as required by applicable laws, regulations
and rules including those of any authorized self regulatory organization with
proper jurisdiction over the business of the Partnership; provided, however,
Expenses shall not include salaries, rent, travel, expenses and other items
of General Partner overhead and, provided, further, management fees, advisory
fees and all other fees, except for incentive fees and commodity brokerage
commissions, the actual cost of legal and audit services and extraordinary
expenses, shall not exceed one half of one percent of Net Assets per month
(not to exceed six percent annually). If necessary, the General Partner
shall reimburse the Partnership no less frequently than quarterly, for the
amount by which such aggregate fees and expenses exceed the limitations
provided by NASAA Guideline IVC.1. During the period for which reimbursement
is made up to an amount not exceeding the aggregate compensation received by
the General Partner, including direct or indirect participations in commodity
brokerage commissions charged to the Partnership. In addition, if
reimbursement is required or ordinary expenses are incurred, the General
Partner shall include in the Partnership's next regular report to the
auditors a discussion of the circumstances or events which resulted in the
reimbursement or extraordinary expenses;
(b) the term NET UNIT VALUE shall mean the Net Asset Value divided, from time
to time, by the total number of Units outstanding;
(c) the term OFFERING PERIOD means the period of time established by the
General Partner after the Partnership begins to offer to sell Units at the
Net Asset Value per Unit; and,
(d) the term SYNDICATION COSTS shall mean the promotion and syndication costs
of the Partnership and the costs of the offering of Units, and to establish
the initial business relationships on behalf of the Partnership, including
all legal and printing costs to prepare the Disclosure Documents,
registrations and filing fees, contract negotiation, and travel incurred
which are deemed necessary or desirable by the General Partner to form the
Partnership, be ready to engage in business, and to sell the Units.
1.4 The terms DISCLOSURE DOCUMENT, MEMORANDUM, OFFERING CIRCULAR, PROSPECTUS
and REGISTRATION STATEMENT shall mean the document or documents, together
with the exhibits and any subsequent continuations thereof, which describes
this Partnership to persons selected by the General Partner including, but
not limited to, potential purchasers of Units, or the Partners or to any
government or self regulatory agency or to persons selected by the General
Partner to participate in the affairs or provide services to the Partnership.
1.5 When referring to this Agreement and the Partners of the Partnership:
(a) the term ACT shall refer to the partnership act of Delaware.
(b) the term AGREEMENT refers to this Partnership agreement;
(c) the term GENERAL PARTNER shall refer to Ashley Capital Management,
Incorporated, c/o Corporate Systems, Inc., 101 North Fairfield Drive, Dover,
DE 19901 (302) 697-2139;
(d) the term LIMITED PARTNER shall refer to any party listed on the Schedule
of Limited Partners attached to this Agreement as Attachment I, as amended,
from time to time, pursuant to Article VI hereof;
(e) the term MAJORITY IN INTEREST shall refer to that number of Partners who
collectively hold over 50% of all of the outstanding Units held by all
Partners in the Partnership; provided, however, the Units held by the General
Partner cannot be considered to determine a MAJORITY IN INTEREST or otherwise
vote or consent regarding the question of removal of the General Partner or
other matters specifically expressed in Article V, Section 5.3. In addition,
see the rights and duties of the General Partner in Article IV and of the
Limited Partners in Articles V;
f) the term OTHER GENERAL PARTNER refers to any General Partner other than
Ashley Capital Management, Incorporated; and
(g) the term PARTNERS refers to the General Partner, any Other General
Partner, and the Limited Partners, collectively.
1.6 RISK DISCLOSURE STATEMENT.
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS
GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE
POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE PARTNERSHIP'S
DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE
CHARGED THIS POOL AT PAGE 21 AND A STATEMENT OF THE PERCENTAGE RETURN
NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL
INVESTMENT, AT PAGE 16.
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 AGREEMENT AS WELL AS THE PARTNERSHIP'S DISCLOSURE DOCUMENT,
INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT
PAGE 6.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY
BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL
MAY BE EFFECTED.
ARTICLE II
Partnership Organization and Purpose
2.1 PARTNERSHIP NAME AND LOCATION OF BOOKS AND RECORDS. The name of the
Partnership, as filed with the state of Delaware, shall be Atlas Futures
Fund, Limited Partnership. The address where the books and records of the
Partnership will be maintained for inspection by the Partners is c/o Futures
Investment Company, 5916 N. 300 West, Fremont, IN 46737 (219) 833-1306 or
such other address as the General Partner shall, from time to time,
determine.
2.2 PARTNERSHIP AFFILIATES.
(a) POOL OPERATOR NAME AND PRINCIPALS. The General Partner shall serve as
the commodity pool operator for the Partnership. Shira Del Pacult is the
sole principal of the General Partner and is solely responsible for the
business decisions of the Partnership, including, but not limited to,
selection of the commodity trading advisors (the "CTAs").
THIS POOL HAS NOT BEGUN TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE REGULATIONS OF THE CFTC AND NFA PROHIBIT ANY REPRESENTATION BY A PERSON
REGISTERED WITH THE CFTC OR BY ANY MEMBER OF THE NFA, RESPECTIVELY, 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
TRADING PROGRAMS OR OBJECTIVES. THE REGISTRATIONS AND MEMBERSHIPS DESCRIBED
IN THIS PROSPECTUS 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.
The General Partner has no prior experience in the management of a commodity
pool, however, Ms. Pacult, has been engaged in supervision of individual
managed commodity accounts for over 16 years and is the principal of both
another public commodity pool, Fremont Fund, Limited Partnership and a
privately offered commodity pool, Auburn Fund, Limited Partnership, which is
being offered simultaneously with this Partnership. See "Performance of
Fremont Fund, Limited Partnership" in the Partnership's Prospectus.
(b) COMMODITY TRADING ADVISOR NAMES AND PRINCIPALS. The General Partner has
initially selected three independent CTAs to trade the assets of the
Partnership. They are: Michael J. Frischmeyer who does business as a sole
proprietorship; Barry T. Johnson, who conducts business as, and is the sole
principal of, Commoditech, Inc.; and, Eric Rosenbery, who conducts business
as, and is the sole principal of, Rosenbery Capital Management, Inc. Their
performance records and business backgrounds are disclosed in the
Partnership's Prospectus under "Trading Management". The CTAs will have no
ownership in the Partnership and their compensation is described in 4.6(f).
The CTAs will enter trades on behalf of the Partnership directly with the FCM
without the prior knowledge or approval of the General Partner of the methods
used by the CTAs to select the trades, the number of contracts, or the margin
required. From 5% to 30% of the Net Asset Value on deposit with the FCM is
expected to be committed to margin to hold positions taken by the CTAs for
the account of the Partnership.
(c) INTRODUCING BROKER AND FUTURES COMMISSION MERCHANT NAMES AND PRINCIPALS.
Futures Investment Company, 5916 N. 300 West, Fremont, IN 46737 (219) 833-
1306 will server as the Introducing Broker ("IB") for the Partnership and
will be paid a fixed amount for brokerage commissions of nine percent (9%)
per year, payable monthly by the Partnership, for introducing trades through
Vision Limited Partnership, the futures commission merchant (the "FCM"). The
IB will pay the round-turn brokerage commissions, pit brokerage and other
clearing expenses to the FCM, which will act in the normal capacity as a
futures commission merchant and will hold the equity assigned by the General
Partner for trading and will clear the trades entered by the CTAs pursuant to
the power of attorney granted by the General Partner to the CTAs to trade on
behalf of the Partnership.
2.3 MATERIAL ADMINISTRATIVE AND/OR CIVIL ACTIONS. There have been no
material administrative, civil or criminal actions against the General
Partner (who is the Commodity Pool Operator), the principal of the General
Partner, Ms. Pacult, the Commodity Trading Advisors, the Introducing Broker,
and selling broker or any principal or any Affiliate of any of them, pending,
on appeal, or concluded, threatened or otherwise known to them, within the
five (5) years preceding the date of this PPM and there have been no such
actions against the Futures Commission Merchants, except as follows:
(a) On June 30, 1993, the Eastern Regional Business Conduct Committee issued
and concurrently accepted a full and complete settlement of a two-count
complaint against Vision Limited Partnership and Robert Boshnack. The
complaint alleged two NFA rule violations: lack of supervision of Guaranteed
IB's and use of deceptive and misleading promotional material. The matter
was completely settled without Vision admitting or denying any violation, and
without any findings of violations. The settlement included a monetary
penalty of $100,000, undertakings of enhanced compliance procedures, and
restriction of Mr. Boshnack's activity for a one year period.
(b) On December 31, 1997, the Business Conduct Committee of the NFA issued a
two count complaint against Vision Limited Partnership. Count I alleges
failure to supervise and Count II alleges improper handling of one block
order. Vision denies the allegations and intends to vigorously defend the
matter.
(c) On July 15, 1992, the Chicago Board of Trade ("CBOT") voted to accept an
offer of settlement by Lind-Waldock concerning alleged violations of CBOT
Regulations 332.08 and 465.01. The charges involved Lind-Waldock's alleged
failure to submit executed orders for clearing and to include an account
designation on an order. In settling this matter for a fine of $7,500, Lind-
Waldock neither admitted nor denied violating the CBOT Regulations.
(d) There is currently no litigation pending or on appeal which, if
successfully pursued by a plaintiff or appellant would have a material effect
on the ability of either FCM to serve the Fund.
2.4 CHARACTER OF THE BUSINESS. The Partnership's business purpose is to
increase Capital through the speculative and hedge trading of futures and
options on futures. The General Partner is authorized to do any and all
things on behalf of the Partnership incident thereto or connected therewith
including, but not limited to:
(a) trade, buy, sell or otherwise acquire, hold or dispose of all forms of
investments (including tangibles and intangibles, foreign currencies,
mortgage-backed securities, money market instruments, stock and futures
options, and any other securities or items which are now, or may hereafter
be, the subject of barter or stock or futures trading), commodity futures,
and forward contracts and any rights pertaining thereto. The Partnership
shall carry on the foregoing activities through the exercise of judgment by
its General Partner and/or the Investment and/or Commodity Trading Advisors
and consultants and brokers selected by the General Partner. The General
Partner may serve as an investment or trading advisor to the Partnership for
management fees, incentive fee, reimbursement of costs and other remuneration
at the same rates charged either by independent third parties for similar
services to other partnerships or by the General Partner to others for the
same service.
(b) invest and trade, on margin or otherwise, in capital stocks, bonds,
debentures, trust receipts and other obligations, instruments or evidences of
indebtedness, gold, silver, cattle, corn, wheat, soybeans, or any other asset
for which a trading market is maintained or otherwise paid for by cash or
otherwise including, but not limited to, the right to sell short and to cover
such short sales.
(c) possess, sell, exchange, discount, transfer, mortgage, pledge, deal in,
maintain multiple accounts for, and to exercise all rights, powers,
privileges and other rights, incidental to ownership of the assets held by
the Partnership.
(d) borrow or raise monies and, from time to time without limit as to amount,
to issue, accept, endorse and execute promissory notes, draft bills of
exchange, warrants, bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the payment of any
thereof and the interest thereon by mortgage or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
Partnership, whether at the time owned or thereafter acquired, and to sell,
pledge of otherwise dispose of such instruments issued by the Partnership for
its purposes; form and own one or more corporations to engage in such
businesses as the General Partner shall deem advisable.
(e) lend any of its properties or funds, either with or without security in
furtherance of the objects and purposes of the Partnership as the General
Partner shall deem advisable and consent.
(f) rent or own and maintain one or more offices staffed as the General
Partner shall determine and to do such other acts attendant thereto as may be
necessary or desirable.
(g) waive the sales commission to acquire investment Capital as the General
Partner, in its sole discretion, may determine.
(h) enter into, make and perform all contracts, surety and guarantees as may
be necessary or advisable or incidental to the carrying out of the foregoing
objects and purposes.
2.5 ADDRESS OF PARTNERS. The General Partner's address is listed in
paragraph 1.5(a) hereof and the Limited Partners addresses are on record at
the office of the General Partner to the Partnership.
2.6 TERM OF PARTNERSHIP. The term of the Partnership shall commence on the
date of this Agreement and shall continue until dissolved or terminated
pursuant to Article IX.
2.7 REGISTRATION. The General Partner, on behalf of the Partnership, shall
have the authority, but not the obligation, to cause a Registration statement
to be filed, and such amendments thereto as the General Partner deems
advisable, with the appropriate Federal and state regulatory agencies,
including the United States Securities and Exchange Commission and the
commission of securities for registration under the securities laws of the
various states and any other jurisdiction desirable or proper to the sale of
Units to qualify for public offerings. Each of the Limited Partners hereby
confirm and ratify all action taken and things done by the General Partner
with respect to such filings and public offerings. The General Partner may
make such other arrangements for the sale of Units, including the private
placement of Units, as it deems appropriate.
ARTICLE III
Capital Contributions and Allocation of Profits and Losses
3.1 CAPITAL CONTRIBUTIONS OF LIMITED PARTNERS.
(a) Each Limited Partner has delivered to the Partnership an executed
Subscription which has been accepted by the General Partner on behalf of the
Partnership, an Amended Certificate of Limited Partnership, and a check in
the amount of his Capital Subscription. The Partnership shall use the funds
thus contributed solely to pay, sales commissions, Expenses, Organization
Costs and to otherwise make the payments required to be made by the
Partnership to engage in active trading and to pay the management fees, if
any, and, from profits, the incentive fees and distributions to Partners
Capital Accounts.
(b) Until such time as the General Partner elects to qualify the Partnership
Units for public sale, the General Partner will establish, from time to time,
the minimum amount which each Limited Partner will be required to contribute
to Capital of the Partnership. Upon receipt of notice from the General
Partner of such minimum (which will be equally applicable to all Limited
Partners), each Limited Partner will be required to contribute sufficient
Capital to equal or exceed such minimum or will withdraw and have his Units
redeemed as a Limited Partner pursuant to Article IX, Section 9.4. The
failure to contribute such Capital within ten days after receipt of said
notice from the General Partner shall be a request for redemption by the
Limited Partner. Upon election by the General Partner and qualification of
the Partnership Units for public sale, there will be no further right of the
General Partner to give notice of an increase in the minimum amount which all
Limited Partners will be required to contribute to Capital of the Partnership
other than as provided in Article VIII. Except for the increase in the
minimum amount which all Limited Partners, in the sole discretion of the
General Partner, shall be required to contribute to Capital or suffer
redemption and amendments required by Article VIII, there will be no required
contribution or assessments of the Limited Partners.
3.2 CAPITAL CONTRIBUTIONS OF GENERAL PARTNER.
(a) The General Partner has not made and shall not be required to make any
capital contribution to the Partnership except for purchases which are
required by law. Currently, the General Partner is required by the
applicable securities and tax laws to purchase (i) one percent (1%) or (ii)
$25,000 of the total Capital paid in by the Limited Partners, which ever is
greater.
(b) The General Partner and the initial Limited Partner have contributed in
excess of $1,000 to the Partnership. Immediately prior to the time the
Partnership commences trading and as may be required, thereafter, as the
result of the admission of additional Limited Partners, the General Partner
shall make such additional contribution to its capital or to the Partnership
so as to be certain that the General Partner has sufficient Capital at risk
to prevent the Partnership from loss of that element of the Partnership test
imposed by the Federal Internal Revenue Code and the Regulations promulgated
thereunder to permit the Partnership to be taxed as a partnership and not as
a corporation. The General Partner shall not reduce its Capital nor shall it
make any assignment or transfer of its interest or withdrawal of its
contribution while it is the General Partner which would reduce its
percentage interest in the Partnership to less than its percentage interest
at the time the Partnership commences trading. The General Partner may
withdraw any excess above the required percentage without notice to the
Limited Partners.
(c) Partnership interests shall be evidenced by Units. The General Partner,
on behalf of the Partnership, may, in accordance with applicable law and the
Offering Memorandum of the Partnership, issue Units to persons desiring to
become Limited Partners. For each Unit purchased during the initial Offering
Period, a Partner shall contribute one thousand dollars ($1,000), less the
sales commission, to the Capital of the Partnership. Thereafter, a Partner
shall contribute an amount equal to the Net Asset Value of a Unit, plus the
sales commission, if any, on the valuation date following acceptance of the
purchase. The General Partner and Affiliates of the General Partner may
purchase Limited Partnership Units with the same rights as other Limited
Partners.
(d) All subscriptions for Units made pursuant to the offering of the Units
must be on the form provided with the Prospectus. No more than 5,000 Units
(the "Maximum") will be sold and a minimum number of Units must be sold as
follows:
(i) If subscriptions for at least 600 Units at an initial Net Asset Value
per Unit of $1,000 have been accepted (the "Minimum") by the General Partner
within the initial Offering Period of up to one year from the commencement of
the offering of sale of Units, including the Units subscribed for by the
General Partner, the General Partner may, pursuant to Paragraph 12, execute,
acknowledge, swear to, file and record on behalf of the Partnership and each
Limited Partner an amended Limited Partnership Agreement, cause such
subscriptions to be transferred from the escrow agent, First American State
Bank, 1207 Central Avenue, Fort Dodge, IA 50501, to the Partnership's trading
account and cause the Partnership to pay its organization costs pursuant to
the agreements negotiated by the General Partner and, thereafter, the
aggregate of all contributions to the Partnership shall be available to the
Partnership to carry on its business; or
(ii) If the General Partner has not received and accepted subscriptions
for the Minimum Units prior to the close of the Minimum Units Offering
Period, the offering of the Units shall terminate and all amounts paid by
subscribers for Units shall be returned in the manner provided in the
Prospectus. All Units subscribed for shall be issued to the collection of
good funds, and any Units issued to a Subscriber who has not provided
collectible funds (whether in the form of a bad check or draft, or otherwise)
shall be canceled.
3.3 ALLOCATION OF PROFITS AND LOSSES
(a) A distribution account shall be established for each Partner which shall
include, as the initial balance thereof, each Partners' initial contribution
to the Partnership expressed in total dollars and Units purchased. As of the
close of business each month, allocations shall be made as follows:
(i) The Incentive Fee. The incentive fee upon New Net Profit at the rate
of up to (15%) shall be paid quarterly to the CTA but allocated to the
Partners monthly.
(ii) The Profit (Loss) Attributable to Units shall be added to
(subtracted from) the distribution accounts of the Partners. Items of
income, gain or loss, accrued and paid Expenses shall be added to (subtracted
from) the distribution account of each Partner in accordance with the ratio
that such distribution account bears to the sum of all of the Partners'
distribution accounts.
(iii) The amount of any cash distributions to a Partner during such month
and any amount paid upon Redemption of Units as of the end of such month
shall be subtracted from the distribution account of such Partner.
(iv) The distribution account of any Unit which was redeemed shall be
reduced by the Redemption Charge per Unit multiplied by the number of Units
which were redeemed by the Partner represented by such distribution account.
The Redemption Charge, if any, shall be first used to defray expenses and any
excess treated as interest earned by the Fund.
ARTICLE IV
Rights and Obligations of the General Partner
4.1 GENERAL. The General Partner shall have full, exclusive and complete
discretion in the management and control of the affairs of the Partnership to
the best of its ability and shall use its best efforts to carry out the
purposes of the Partnership set forth in Article II. In connection
therewith, it shall have all powers of a general partner under the Act,
including, without limitation, the power to:
(a) enter into, execute and maintain contracts, agreements and any or all
other instruments, and to do and perform all such things, as may be required
or desirable in furtherance of Partnership purposes or necessary or
appropriate to the conduct of Partnership activities including, but not
limited to, contracts with third parties for:
(i) brokerage services on behalf of the Partnership (which brokerage
services may be performed by the General Partner or an Affiliate of the
General Partner), specifically, Futures Investment Company, or any successor
to its business, an Affiliated introducing broker of the General Partner may
clear the trades and pay trailing commissions to its associated persons,
including Affiliates of the General Partner and the General Partner, in
consideration of the payment of nine percent (9%) of the total equity placed
with the commodity trading advisor or advisors it selects, will cause and pay
for the trades to be cleared through one or more futures commission merchants
selected by the General Partner;
(ii) trading advisory services relating to the purchase and sale of all
stocks, options, commodity futures contracts, commodity options and contracts
for forward delivery of foreign currencies on behalf of the Partnership
(which advisory services may be performed by the General Partner or an
Affiliate of the General Partner); and
(iii) rent, salaries, computer, accounting, legal and other services
attendant to the maintenance of the Fund.
(b) open and maintain bank accounts on behalf of the Partnership with banks
and money market funds.
(c) deposit, withdraw, pay, retain and distribute the Partnership's funds in
any manner consistent with the provisions of this Agreement.
(d) supervise the preparation and filing of all documentation required by law
including, but not limited to, Registration Statements to be filed with
Federal and state agencies.
(e) pay or authorize the payment of distributions to the Partners and pay
Expenses of the Partnership.
(f) invest or direct the investment of funds of the Partnership not involving
the purchases or sale of stocks, futures contracts, options, and contracts
for forward delivery of foreign currencies.
(g) purchase, at the expense of the Partnership, liability and other
insurance to protect the Partnership's proprieties and business.
(h) borrow money from banks and other lenders for Partnership purposes, and
may pledge any or all of the Partnership's assets for such loans. No bank or
other lender to which application is made for a loan by the lender to which
application is made for a loan by the General Partner shall be required to
inquire as to the purposes for which such loan is sought and, as between the
Partnership and such bank or other lender, it shall be conclusively presumed
that the proceeds of such loan are to be and will be used for the purposes
authorized under this Agreement.
(i) confess judgment for and against the Partnership and control any matters
affecting the rights and obligations of the Partnership, including the
employment of attorneys, in the conduct of litigation and otherwise incur
legal expenses and costs of consultation, settlement of claims, and
litigation against or on behalf of the Partnership.
4.2 LOANS BY GENERAL PARTNER. The General Partner or its Affiliates will be
not be required to advance or loan funds to the Partnership. In the event
the General Partner makes any advance or loan to the Partnership, the General
Partner will not receive interest in excess of its interest costs, nor will
the General Partner receive interest in excess of the amounts which would be
charged the Partnership (without reference to the General Partner's financial
abilities or guarantees) by unrelated banks on comparable loans for the same
purpose and the General Partner shall not receive points or other financing
charges or fees regardless of the amount.
4.3 TRANSACTION WITH PARTNERSHIP. Notwithstanding anything to the contrary
which may be contained herein, the General Partner shall not:
(a) sell, or otherwise dispose of, any of the Partnership's assets to the
General Partner or its Affiliates.
(b) subject to the provisions regarding and without diminishment of the right
of the General Partner or any Affiliate to compensation for services provided
to the Partnership as set forth in this Agreement, cause or permit the
Partnership to enter into any agreement with the General Partner or an
Affiliate which is not in the best interest of and for the benefit of the
Partnership or which would be in contravention of the General Partner's
fiduciary obligations to the Partnership or pursuant to which the General
Partner or any Affiliate;
(i) would provide or sell any services, equipment, or supplies at other
than rates charged to others; or
(ii) would receive from the Partnership, Units of Partnership interest in
consideration for services rendered.
4.4 OBLIGATIONS OF GENERAL PARTNER. In addition to the obligations provided
by law or this Agreement, the General Partner shall:
(a) Devote such of its time to the business and affairs of the Partnership as
it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Partnership for the
benefit of the Partnership and the Limited Partners.
(b) Execute, file, record and/or publish all certificates, statements and
other documents and do any and all other things as may be appropriate for the
formation , qualification and operation of the Partnership and for the
conduct of its business in all appropriate jurisdictions including, but not
limited to, the compliance, at its expense, with all laws related to its
qualification to serve as the commodity pool operator of the Fund.
(c) Retain independent public accountants to audit the accounts of the
Partnership.
(d) Employ attorneys to represent the Partnership.
(e) Use its best efforts to maintain the status of the Partnership as a
partnership for United States Federal income tax purposes.
(f) Employ only independent CTAs which are registered pursuant to the
Commodity Exchange Act to conduct trading and to otherwise establish and
monitor the trading policies of the Partnership; and the activities of the
partnership's trading advisor(s) in carrying out those policies.
(g) Review, not less often than annually, the brokerage commission rates
charged to comparable funds to determine that the commission rates paid by
the Partnership are comparable with such other rates.
(h) Have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in the General Partner's
immediate possession or control, and the General Partner will not employ or
permit others to employ such funds or assets in any manner except for the
benefit of the Partnership.
(i) Agree that so long as it remains the sole General Partner of the
Partnership, it will use its best efforts to maintain the Partnership as a
limited partnership as required by all applicable laws including, but not
limited to the requirement of the United States Department of the Treasury,
Internal Revenue Service, for the sole corporate general partner of a limited
partnership to maintain its "Net Worth" (as defined below) sufficient to
establish the sufficient assets test for a sole corporate general partner to
be liable for the debts of the Partnership. The General Partner is
authorized to reach the safe harbor for that test of an amount equal to no
less than (i) the lesser of $250,000 or 15% of the aggregate capital
contributions of any limited partnerships (including the Partnership, if
applicable,) for which it shall act as general partner and which are
capitalized at less than $2,500,000, and (ii) 10% of the aggregate capital
contributions of any limited partnerships (including the Partnership, if
applicable,) for which it shall act as general partner and which are
capitalized at greater than or equal to $2,500,000 by use of promissory notes
(valued at their fair market value) issued to the General Partner by one or
more of its principals. For the purposes of this subparagraph, "Net Worth"
shall be calculated in accordance with generally accepted accounting
principles, consistently applied, provided that all current assets shall be
based on the lower of cost or the then current market value. The Units owned
by the General Partner in the Partnership and in other partnerships in which
it acts as a general partner shall not be included in calculating its Net
Worth. A letter of credit may be included. The requirements of this
subparagraph (i) may be modified if the General Partner obtains an opinion of
counsel for the Partnership to effect that a proposed modification will not
(1) adversely affect the classification of the Partnership as a partnership
for Federal income tax purposes; (2) will not adversely affect the status of
the Limited Partners as limited partners under the Act; (3) will not violate
any applicable state securities or Blue Sky law or any rules, regulations,
guidelines or statements of policy promulgated or applied thereunder
including, but not limited to, the net worth required by Section II.B of the
Guidelines for Registration of Commodity Pool Programs, as adopted in revised
form by the North American Securities Administrators Association, Inc. as are
in effect on the date of such proposed modification. (4) or otherwise
adversely affect the Limited Partners.
(j) Maintain a current list of the name, address, and number of Units owned
by each Limited Partner at the General Partner's principal office. Such list
shall be disclosed to any Partner or their representative at reasonable
times, upon request, either in person or by mail, upon payment, in advance,
of the reasonable cost of reproduction and mailing. The Partners and their
representatives shall be permitted access to all other records of the
Partnership, after adequate notice, at any reasonable time, at the offices of
the Partnership. The General Partner shall maintain and preserve such
records for a period of not less than six (6)years.
4.5 GENERAL PROHIBITIONS. The Partnership shall not:
(a) borrow from or loan to any person, except that the foregoing is not
intended to prohibit the incurring of any indebtedness to a Partner or an
Affiliate with respect to the offering of Units for sale, Registration, or
initiation and maintenance of the Partnership's trading positions.
(b) commingle its assets with those of any other person, except to the extent
permitted under the Securities and Exchange Act or the Commodity Exchange Act
and the regulations promulgated under each.
(c) permit rebates or give-ups to be received by the General Partner or any
Affiliate of the General Partner, or permit the General Partner or any
Affiliate of the General Partner to engage in reciprocal business
arrangements which would circumvent the foregoing prohibition; provided,
however, that an Affiliate or the General Partner may provide goods or
services, including brokerage, at a competitive cost to the Partnership.
(d) engage in the pyramiding of its positions (i.e., the use of unrealized
profits on existing positions to provide margins for additional positions in
the same or a related stock or commodity); provided, however, that there may
be taken into account the Partnership's open trade equity on existing
positions in determining whether to acquire additional unrelated stock or
commodity positions.
(e) margins of all open positions in all stocks and commodities combined
would exceed 250% of the partnership's Net Asset Value at the time such
position would otherwise be initiated.
(f) permit churning of the Partnership's trading account for the purpose of
generating brokerage commissions to any person.
(g) directly or indirectly pay or award any finder's fees, commissions or
other compensation to any persons engaged by a potential limited partner for
independent investment advice as an inducement to such advisor to advise the
potential limited partner to purchase Units in the Partnership without the
knowledge of such potential limited partner.
(h) No Partnership funds will be held outside the United States. The
Partnership funds committed to trading will be on deposit with and under the
control of a futures commission merchant regulated pursuant to the Commodity
Exchange Act, as may be amended, from time to time. The funds not committed
to trading will be in investments which are properly registered under the
United States securities or other financial institution regulations.
4.6 FEES AND EXPENSES.
(a) The Partnership shall pay all Organization Costs and offering Expenses
incurred in the creation of the Partnership and sale of Units. The foregoing
expenses may be paid directly by the Partnership or may be reimbursed by the
Partnership to the General Partner or an Affiliate of the General Partner.
Notwithstanding the foregoing, in no event will reimbursement by the
Partnership to the General Partner for Organization Costs and offering
Expenses charged to the Partnership exceed an amount equal to 15% of the
gross proceeds from the sale of Units. Organization Costs and Offering
Expenses shall mean those Expenses incurred in connection with the formation,
qualification and Registration of the Partnership and in distributing and
processing the Units under applicable Federal and state law, sales
commissions, and any other expenses such as: (i) registration fees, filing
fees and taxes; (ii) the costs of qualifying, printing, amending,
supplementing, mailing and distributing the Registration Statement and
Prospectus; (iii) the costs of qualifying, printing, amending, supplementing,
mailing and distributing sales materials used in connection with the issuance
of the Units; (iv) salaries of officers and employees of the General Partner
and any Affiliate of the General Partner while directly engaged in
distributing and processing the Units and establishing records therefor; (v)
rent, travel, remuneration of personnel, telegraph, telephone and other
expenses in connection with the offering of the Units; (vi) accounting,
auditing, and legal fees incurred in connection therewith; and (vii) any
extraordinary expenses related thereto. Organization Costs and Offering
Expenses do not include salaries, rent, travel, expenses and other items of
General Partner overhead.
(b) All operating expenses of the Partnership shall be billed directly to and
paid by the Partnership.
(c) The General Partner or any Affiliate of the General Partner may be
reimbursed for the actual costs of any Expense including, but not limited to,
legal, accounting and auditing services used for or by the Partnership, as
well as printing and filing fees and extraordinary expenses incurred for or
by the Partnership; provided, however, the limitations of contained in
Article X - Exoneration and Indemnification contained in this Agreement will
apply to restrict the purchase of certain insurance coverage and the
assumption of the defense of certain claims.
(d) The General Partner may establish its compensation, from time to time,
for its services; provided, however, such charges shall be no more than:
(i) A sales commission of up to six percent (6%) to be established, from
time to time, by the General Partner, for sales of Units;
(ii) A management fee of one quarter of one per-cent (1/4 of 1%) per
month (3% per year) of the Net Asset Value of the Partnership, computed and
paid to the General Partner on the close of business on the last day of each
month;
(iii) An incentive fee of up to fifteen percent (15%) of the first one
hundred percent (100%) of New Net Profit, or less earned upon Capital, and
prorated to consider the date of deposit of such Capital to the Partnership
each year. The incentive fee at the rate of up to fifteen percent (15%) of
New Net Profit will be paid quarterly. Each trading subaccount established by
the General Partner shall be considered separately for purposes of incentive
fee. The incentive fee will be non-refundable; i.e., in the event that the
Partnership earns substantial New Net Profit during the first month of any
year and, thereafter, suffers losses, the General Partner will not refund any
of the profit incentive fee paid for the prior month or months. However, the
Partnership will not pay or accrue to the General Partner any further
incentive fee during that year until such time as the New Net Profit, when
added to Net Asset Value, after additions, deductions of Redemptions and
distributions, exceeds the highest Net Asset Value, computed for that year;
i.e., incentive fees will only be earned and paid or accrued upon New Net
Profit for that year; and
(iv) A share of the brokerage commissions paid for trades made by the
Partnership. Such commissions shall not be more than the average published
fixed rate per month or per round-turn charged, from time to time, to public
commodity pools by national brokerage firms for similar trading size,
frequency, and style.
(e) The General Partner is hereby authorized to employ brokers, attorneys,
accountants, consultants, and administrative personnel who may be Affiliated
with the General partner to perform Partnership business at the expense of
the Partnership. The General Partner will advance the initial organizational
expenses, estimated to be $70,000 for the first year, which will be repaid
payable monthly over the first twenty-four months of operation by the
Partnership at the rate of no more than 2% of Capital and no more than 15% of
New Net Profits per year, until paid in full. After the first year, the
Partnership will be subject to yearly legal and accounting fees of $18,000
and $15,000, respectively.
(f) The General Partner is hereby authorized, individually or through an
Affiliate, to employ non-affiliated independent investment and trading
advisors to all or a portion of the Fund to be paid a management fee of up to
six percent (6%) of the Net Asset Value assigned to such advisor per year and
an incentive fee of up to fifteen percent (15%) on New Net Profit earned by
such advisor. All incentive fees may be prorated and paid quarterly.
4.7 ACTIVITIES OF PARTNERS.
(a) The General Partner and its Affiliates shall devote to the Partnership
only such time as shall be reasonably required to fulfill their
responsibilities hereunder.
(b) Any Partner may, notwithstanding the existence of this Agreement, engage
in whatever other activities they may choose, whether the same be competitive
with the Partnership or otherwise, without having or incurring any obligation
or conflict of interest in such activities with the Partnership or to any
party hereto. The Partners are specifically authorized to deal with other
partnerships and to acquire interests in positions and trading without having
to offer participation therein to the Partnership or the other Partners.
Neither this Agreement nor any activities undertaken pursuant hereto shall
prevent any Partner, including the General Partner and its Affiliates and
their officers, directors and employees, from engaging in the trading
contemplated by this Partnership individually, jointly with others, or as a
part of any other association to which any of them are or may become parties,
in the same trades as the Partnership, or require any of them to permit the
Partnership, the General Partner or any other Partner to participate in any
of the foregoing. As a material part of the consideration for each party's
execution hereof, each Partner hereby waives, relinquishes and renounces any
such right or claim of conflict of interest and participation from any other
Partner.
(c) The General Partner is a corporation which was formed on October 15,
1996, and neither it nor its principals have any prior experience in the
management of a partnership which trades commodity futures or options, or any
other securities. The past and future results of trading by the principals of
the General Partner, both within and without the partnership, will be
confidential and not disclosed to the other Partners. Such positions taken
by the principals may be the same as or different from any positions taken by
the General Partner or any advisor to the Fund. Nothing in this Section, or
elsewhere in the Partnership Agreement, shall permit the General Partner to
violate its fiduciary or legal obligations to the Partnership.
4.8 CONFLICTS OF INTEREST. Significant actual and potential conflicts of
interest exist in the structure and operation of the Partnership. The
General Partner has used its best efforts to identify and describe all
potential conflicts of interest which may be present under this heading and
elsewhere in the Partnership's Prospectus and the Exhibits attached thereto.
Prospective investors should consider that the General Partner intends to
assert that Partners have, by subscribing to the Partnership, consented to
the existence of such potential conflicts of interest as are described in
this Agreement and the Prospectus and its Exhibits, in the event of any claim
or other proceeding against the General Partner, any principal of the General
Partner, the CTAs, any Principal of the CTAs, the Partnership's FCM, or any
principal of the FCM, the Partnership's IB or any principal or any Affiliate
of any of them alleging that such conflicts violated any duty owed by any of
them to said subscriber. Specifically, the Selling Agent is Affiliated with
the principal of the General Partner and, therefore, no independent due
diligence of the Partnership or the General Partner will be made by a
National Association of Securities Dealers, Inc. member.
(a) MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GENERAL
PARTNER, THE CTAs, AND THEIR PRINCIPALS. The right of both Ms. Shira Del
Pacult, the principal of the General Partner, and the General Partner to
manage and the actual management by the CTAs of accounts they or their
Affiliates own or control and other commodity accounts and pools presents the
potential for conflicts of interest. There is no limitation upon the right
of Ms. Pacult, the General Partner, the CTAs, or any of their Affiliates to
engage in trading commodities for their own account. It is possible for these
persons to take their positions in their personal accounts prior to the
orders they know they are going to place for the money they manage for
others. The General Partner will obtain representations from all of these
persons and their Affiliates that no such prior orders will be entered for
their personal accounts. The Partnership's CTAs will be effecting trades for
his own accounts and for others (including other commodity pools in
competition with this Pool) on a discretionary basis. It is possible that
positions taken by the CTAs for other accounts may be taken ahead of or
opposite positions taken on behalf of the Partnership. The General Partner
and its principal, should they form other commodity pools, and the CTAs may
have financial incentives to favor other accounts over the Partnership. In
the event the General Partner, any of its principal, or any CTA, or any of
their principals trade for their own account, such trading records shall not
be made available for inspection. The General Partner and its principal do
not presently intend to engage in trading for their own account. The CTAs do
intend to trade for their own account. Any trading for their personal
accounts by the General Partner, any commodity trading advisor selected to
trade for the Partnership or any of their principals could present a conflict
of interest in regard to position limits, timing of the taking of positions
or other similar conflicts. The result to the Partnership would be a
reduction in the potential for profit should the entry or exit of positions
be at unfavorable prices by virtue of position limits or entry of other
trades in front of the Partnership trades by the General Partner or CTAs
responsible for the management of the Partnership.
(b) POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER. There is no
limit upon the number of Units in the Partnership the General Partner and its
principal and Affiliates may purchase. It will be possible for them to vote,
individually or as a block, to create a conflict with the best interests of
the Partnership, in regard to the selection of commodity trading advisors
which do not trade frequently to protect the nine percent (9%) fixed
commission paid by the Partnership to the General Partner.
(c) GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF PARTNERSHIP.
The General Partner's financial interest in the operation of the Partnership,
creates a disincentive for it to voluntarily replace itself, even if such
replacement would be in the best interest of the Partnership.
(d) FEES AND CHARGES TO THE PARTNERSHIP PAID TO GENERAL PARTNER NOT
NEGOTIATED. The three percent (3%) management fee to the General Partner and
the amount of the fixed commission of nine percent (9%) per year in lieu of
round-turn brokerage commissions, payable to the IB that is Affiliated with
the principal of the General Partner, have not been negotiated at arm's
length. The General Partner has a conflict of interest between its
responsibility to manage the Partnership for the benefit of the Limited
Partners and the General Partner's interest in receiving the management fee
and the IB Affiliated with the principal of the General Partner receiving the
difference between the fixed commission charged the Partnership and the
actual transaction costs incurred by the FCM as a result of the frequency of
trades entered by the CTAs. See "Charges to the Partnership" in the
Partnership's Prospectus. The General Partner will select the CTAs to manage
the Partnership assets and the CTAs determine the frequency of trading.
Because the IB Affiliated with the General Partner will receive the
difference between the brokerage commissions and other costs which will be
paid on behalf of the Partnership and the fixed commission, the General
Partner's best interests are served if it selects trading advisors which will
trade the Partnership's Net Assets assigned to them in a way to minimize the
frequency of trades to maximize the difference between the fixed commission
and the round-turn commissions and other costs to trade charged by the FCM;
i.e., it is in the best interest of the General Partner to reduce the
frequency of trading rather than concentrate on the expected profitability of
the CTAs without regard to frequency of trades. This conflict is offset by
the fact the General Partner does not select any of the trades and the CTAs
is paid an incentive of 15% of New Net Profits. The arrangements between
the General Partner and the Partnership with respect to the payment of the
commissions are consistent in cost with arrangements other comparable
commodity pools have made to clear their trades. These arrangements are fair
to the Partnership and its investors because the General Partner has assumed
the risk of frequency of trading, up to a maximum of three times the normal
rate by the CTAs and has assumed all liability for the payment of trailing
commissions.
(e) CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE. Certain actual and
potential conflicts of interest do exist in the structure and operation of
the Partnership which must be considered by investors before they purchase
Units in the Partnership. See "Risk Factors", and "Conflicts of Interest" in
the Partnership's Prospectus. In addition, the Selling Agent is Affiliated
with the principal of the General Partner and, therefore, no independent due
diligence of the offering will be conducted for the protection of the
investors. The General Partner has taken steps to insure that the
Partnership equity is held in segregated accounts at the banks and futures
commission merchant selected and has otherwise assured the Selling Agent that
all money on deposit is in the name of and for the beneficial use of the
Partnership.
(f) GENERAL PARTNER TO DISCOURAGE REDEMPTIONS. The General Partner has an
incentive to withhold distributions and to discourage Redemption because the
General Partner receives compensation based on the Net Asset Value of the
Partnership assigned to the CTAs to trade.
(g) HIGH RISK TRADING BY THE CTAs TO GENERATE INCENTIVE FEES. As a general
rule, the greater the risk assumed, the greater the potential for profit.
Because the CTAs are compensated by the General Partner based on 15% of the
New Net Profit of the Partnership, it is possible that the CTAs will select
trades which are otherwise too risky for the Partnership to assume to earn
the 15% incentive fee on the profit should that ill-advised speculative trade
prove to be profitable.
(h) IB AFFILIATED WITH THE GENERAL PARTNER TO RETAIN A SHARE OF THE
COMMISSIONS. The Partnership will pay a fixed brokerage commission of 9% per
year, payable monthly to Futures Investment Company, an introducing broker
Affiliated with the General Partner. Futures Investment Company will retain
so much of the fixed brokerage commission as remains after payment of the
round turn brokerage commissions to the Futures Commission Merchant and the
6% per year trailing commissions to the associated persons who service the
Partners' accounts in the Partnership. Because the principal of the General
Partner, Ms. Shira Pacult, is also a principal in the IB and the Selling
Agent, there is a likelihood that the Partnership will continue to retain the
IB even though other IB's may be available to provide better service to the
Partners and their accounts.
(i) NO RESOLUTION OF CONFLICTS PROCEDURES. As is typical in many futures
partnerships, the General Partner has not established formal procedures, and
none are expected to be established in the future, to resolve the potential
conflicts of interest which may arise. It will be extremely difficult, if
not impossible, for the General Partner to assure that these and future
potential conflicts will not, in fact, result in adverse consequences to the
Partnership or the Limited Partners. The foregoing list of risk factors and
conflicts of interest is complete as of the date of this Prospectus, however,
additional risks and conflicts may occur which are not presently foreseen by
the General Partner. Investors are not to construe this Prospectus as legal
or tax advice. Before determining to invest in the Units, potential
investors should read this entire Agreement as well as the Partnership's
Prospectus and the subscription agreement, and consult with their own
personal legal, tax, and other professional advisors as to the legal, tax,
and economic aspects of a purchase of Units and the suitability of such
purchase for them. See "Investor Suitability" in the Partnership's
Prospectus.
(j) INTERESTS OF NAMED EXPERTS AND COUNSEL. The General Partner has employed
The Scott Law Firm, P.A. to prepare this Prospectus, provide certain tax
advice and opine upon the legality of the issuance of the Units. Neither the
Law Firm nor its principal, nor any accountant or other expert employed by
the General Partner to render advice in connection with the preparation of
the Prospectus or any documents attendant thereto, have been retained on a
contingent fee basis nor do they have any present interest or future
expectation of ownership in the Partnership or its General Partner or the
Underwriter or the CTAs or the IB or the FCM.
4.9 LIMITATION OF POWERS. Without concurrence of a Majority in Interest,
the General Partner may not:
(a) Amend this Agreement except for those amendments which do not adversely
affect the rights of the Limited Partners.
(b) Voluntarily withdraw as a General Partner.
(c) Appoint a new General Partner or additional general partners; provided,
however, additional general partners may be appointed without obtaining the
consent of a Majority in Interest if the addition of such person is necessary
to preserve the tax status of the Partnership as a partnership and not as a
corporation; and such additional general partner has no authority to manage
or control the Partnership and the admission of such additional general
partner does not materially adversely affect the Limited Partners.
(d) Sell all or substantially all of the Partnership assets other than in the
ordinary course of business.
(e) Cause the merger or other reorganization of the Partnership.
(f) Dissolve the Partnership other than because of an event, which by law,
requires such dissolution.
ARTICLE V
Rights and Obligations of Limited Partners
5.1 LIMITATION OF LIABILITY. No Limited Partner shall be personally liable
for any of the debts of the Partnership or any of the losses thereof.
However, the amount committed by him to the Capital of the Partnership and
his interest in Partnership assets shall be subject to liability for
Partnership debts and obligations. Limited Partners may be liable to repay
any wrongful distribution of profits to them and may be liable for
distributions (with interest thereon) considered to be a return of Capital if
necessary to satisfy creditors of the Partnership.
5.2 NO MANAGEMENT RIGHTS. No Limited Partner shall take part in the
management of the business of the Partnership or transact any business for
the Partnership. No Limited Partner, as such, shall have the power to sign
for or to bind the Partnership.
5.3 CERTAIN RIGHTS. Provided the following, does not either (i) subject the
Limited Partners to unlimited liability or (ii) subject the Partnership to be
taxable as a Corporation for purposes of Federal Income tax laws, the
Partners, by a vote of a Majority in Interest, without the necessity for
concurrence by the General Partner, shall have the following rights in
addition to those granted elsewhere in this Agreement:
(a) Amend the Partnership Agreement; provided, however, any amendment which
modifies the compensation or distributions to the General Partner or which
affects the duties of the General Partner requires the consent of the General
Partner.
(b) The General Partner may be removed and a new General Partner elected in
accordance with the terms of this Agreement.
(c) Cancel any contract for services with the General Partner, without
penalty, upon 60 days written notice; provided, however, the maximum period
of any contract between the General Partner and the Partnership is one year;
and, provided further, should any amendment to this Partnership Agreement
attempt to modify the compensation or distributions to which the General
Partner is entitled or which affects the duties of the General Partner, such
amendment will become effective only upon the consent of the General Partner.
(d) The right to approve, prior to sale, the sale or distribution, outside
the ordinary course of business, of all or substantially all of the assets of
the Partnership.
(e) Dissolve the Partnership.
(f) Any material changes in the Partnership's basic investment policies
identified in Article III including, but not limited to, the speculation and
trade in commodity futures, forward futures contracts, and options upon those
contracts both within and without the United States or the structure of the
Partnership as a limited partnership requires prior written notification of a
meetings which identifies the purpose of the meeting and the approval by a
vote of the Majority in Interest of the Partners.
5.4 GENERAL PARTNER ACTION WITHOUT LIMITED PARTNER APPROVAL.
Notwithstanding anything in this Agreement, particularly section 5.3, to the
contrary, the General Partner may amend this Agreement without any vote,
consent, approval, authorization or other action of any other Partner and
without notice to any other Partner to:
(a) add to the representations, duties or obligations of the General Partner
or its Affiliates or surrender any right or power granted to the General
Partner or its Affiliates in this Agreement for the benefit of the Limited
Partners;
(b) cure any ambiguity, correct or supplement any provision in this Agreement
which may be inconsistent with any other provision in this Agreement, or make
any other provisions with respect to matters or questions arising under this
Agreement which will not be inconsistent with the intent of this Agreement;
(c) delete or add any provision of this Agreement required to be so deleted
or added by the staff of the Securities and Exchange Commission, or by a
state securities law administrator or similar such official, which addition
or deletion is deemed by such official to be for the benefit or protection of
the Limited Partner or does not have a material adverse effect on the Limited
Partners generally or the Partnership;
(d) reflect the withdrawal, expulsion, addition or substitution of Partners;
(e) reflect the proposal, promulgation or amendment of Regulations under Code
section 704, or otherwise, to preserve the uniformity of interest in the
Partnership issued or sold from time to time, if, in the opinion of the
General Partner, the amendment does not have a material adverse effect on the
Limited Partners generally;
(f) elect for the Partnership to be bound by any successor statute to the
Act, if, in the opinion of the General Partner, the amendment does not have a
material adverse effect on the Limited Partners generally;
(g) conform this Agreement to changes in the Act or interpretations thereof
which, in the exclusive desecration of the General Partner, it believe
appropriate, necessary or desirable, if, in the General Partner's reasonable
opinion, such amendment does not have a materially adverse effect on the
Limited Partners generally or the Partnership;
(h) change the name of the Partnership;
(i) conform the provisions of this Agreement to any applicable requirements
of Federal of state law which, in the exclusive discretion of the General
Partner, it believes appropriate, necessary or desirable, if, in the General
Partner's reasonable opinion, such amendment does not have a material adverse
effect on the Limited Partners generally or the Partnership; and
(j) make any change which, in the exclusive discretion of the General
Partner, is advisable to qualify or to continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or that is
necessary or advisable, in the exclusive discretion of the General Partner,
so that the Partnership will not be treated as an association taxable as a
corporation for Federal income tax purposes.
5.5 EXPULSION OF LIMITED PARTNERS. Anything herein to the contrary
notwithstanding,
(a) no Partner, including any corporation, partnership, trust or other
entity may, at any time, have an ownership percentage of ten percent or more
of the aggregate ownership percentages of the Limited Partners. If, at any
time, the General Partner determines that any Limited Partner has an
ownership percentage of ten percent or more, the Partnership may, in the
General Partner's exclusive discretion, cause a Redemption by that Limited
Partner of the number of Units necessary or advisable to reduce that Limited
Partner's ownership percentage to less than ten percent. The Redemption
shall be effective as of the next Redemption date or such other Redemption
date, at the discretion of the General Partner.
(b) the General Partner has the right, in its sole discretion, to raise or
lower the minimum investment in the Partnership required for the admission or
retention of Units in the Partnership by a Partner. In the event the General
Partner does raise the minimum investment in the Partnership to an amount in
excess of any Partners Capital account, the Partnership shall provide notice
to the Partner of such event and allow the Partner 30 days to raise the
Capital account for that Partner to such raised amount, or more. In the
event the Partner does not so raise his Capital account to such minimum
amount, the Partner shall be deemed to have elected to withdraw from the
Partnership and all of his Units shall be redeemed at the next redemption
date as provided in this Agreement.
5.6 NOTIFICATION. Notice shall be sent to each Partner within seven
business days from the date of:
(a) any decline in the Net Asset Value Per Unit to less than 50% of the Net
Asset Value on the last Valuation Date;
(b) any material change in contracts with the FCM or CTA including, but not
limited to, any change in CTAs or any modification in connection with the
method of calculating the incentive fee;
(c) any other material change affecting the compensation of the General
Partner, FCM, CTA or any Affiliated party;
5.7 NOTIFICATION CONTENTS.
(a) a material change related to brokerage commissions shall not be made
until notice is given and the Partners, after such notice, have the
opportunity to Redeem pursuant to Article IX;
(b) in addition, in regard to all other changes, the required notification
shall describe the change in detail, include a description of the Partners'
Redemption rights pursuant to Article IX and voting rights pursuant to this
Article V and a description of any material effect such changes may have on
the interests of the Partners.
5.8 EXERCISE OF RIGHTS. Upon receipt of a written request, executed by the
holders of Units aggregating ten percent (10%) or more of the Units, for a
vote upon and to take action with respect to any rights of the Partners under
this Agreement, together with a check for the costs to distribute the request
to all of the Partners, the General Partner shall call a meeting of all
Partners of the Partnership in the time and manner as provided in Section 8.7
hereof.
5.9 EXAMINATION OF BOOKS AND RECORDS. A Limited Partner shall have the
right to examine the books and records of the Partnership at all reasonable
times, including the right to have such examination conducted at his sole
expense by any reasonable number of representatives. Notwithstanding the
foregoing, the General Partner may keep and withhold the names of the other
Partners, specific trading and other designed information confidential from
the Partners.
ARTICLE VI
Assignment of Limited Partnership Units;
Admission of Limited Partners
6.1 RESTRICTION ON ASSIGNMENT. A Partner may not assign or transfer some or
all of his Units in the Partnership without the written consent of the
General Partner; provided, however, that in no event may an assignment be
made or permitted until after two years from the date of purchase of such
assigned or transferred Units(s) by said Partner; and, provided, further,
that full Units must be assigned and the assignor, if he is not assigning all
of his Units, will retain more than five Units. Any such assignment shall be
subject to all applicable securities, commodity, and tax laws and the
regulations promulgated under each such law. The General Partner shall
review any proposed assignment and shall withhold its consent in the event it
determines, in its sole discretion, that such assignment could have an
adverse effect on the business activities or the legal or tax status of the
Partnership.
6.2 QUALIFIED PLAN RESTRICTIONS. In no event shall a Partner be entitled to
transfer all or part of a Partnership interest if, under applicable United
States Department of Labor regulations, such transfer would result in
Partnership interests, excluding the interests of the General Partner, valued
at or in excess of twenty-five percent of the value of all outstanding
Partnership interests, excluding the interests of the General Partner, being
held by the following persons or entities:
(a) employee benefit plans (as defined in section 3(3) of the Federal
Employee Treatment Income Security Act of 1974, as amended ("ERISA"), whether
or not such plans are subject to the provisions of Title I of ERISA,
(b) plans described in section 4975 (e)(1) of the Code, and
(c) entities (such as a common or collective trust funds of a bank) whose
underlying assets include plan assets by reason of a plan's investment in the
entity.
6.3 DOCUMENTATION OF ASSIGNMENT. The General Partner shall furnish to the
assigning Limited partner a proper form to duly effect such assignment. The
General Partner shall not be required to recognize any assignment and shall
not be liable to the assignee for any distributions made to the assigning
Limited Partner until the General Partner has received such form of
assignment, properly executed with signature guaranteed, together with the
Certificate of Ownership originally issued to the Limited Partner (or an
indemnity bond in lieu therefor) and such evidence of authority as the
General Partner may reasonably request and the General Partner shall have
accepted such assignment.
ARTICLE VII
Accounting Records, Reports and Distributions
7.1 DISTRIBUTIONS. Each Partner will have a Capital account, and its initial
balance will be the amount the Partner paid for the Partner's Units. The Net
Assets of the Partnership will be determined monthly, and any increase or
decrease from the end of the preceding month will be added to or subtracted
from the accounts of the Partners in the ratio that each account bears to all
accounts. Distributions from profits or Capital will be made solely at the
discretion of the General Partner.
7.2 BOOKS OF ACCOUNT. Proper books of account shall be kept and there shall
be entered therein all transactions, matters and things relating to the
Partnership's business as required by applicable law and the regulations
promulgated thereunder and as are usually entered into books of account kept
by persons engaged in business of like character. The books of account shall
be kept at the principal office of the General Partner and each Limited
Partner (or any duly constituted agent of a Limited Partner) shall have, at
all times during reasonable business hours, free access, subject to rules of
confidentiality established by the General Partner, the right to inspect and
copy the same. Such books of account shall be kept on an accrual basis. A
Capital account shall be established and maintained from each Partner, as set
forth above.
(a) Each Partner shall be furnished as of the end of each Fiscal Year with
(1) annual financial statements, audited by a certified public accountant,
within 90 days from the end of such year; together with such other reports
(in such detail) as are required to be given to Partners by applicable law,
specifically, annual and periodic reports will be supplied by the General
Partner to the other Partners in conformance with the provisions of CFTC
regulations for Reporting to Pool Participants, 17 C.F.R. Section 4.22, as
amended, from time to time, and, (2) any other reports or information which
the General Partner, in its sole discretion, determines to be necessary or
appropriate.
(b) Appropriate tax information (adequate to enable each Partner to complete
and file his Federal tax return) shall be delivered to such Partner no later
than January 31 following the end of each Calendar Year.
7.3 CALCULATION OF NET ASSET VALUE. Net Asset Value shall be calculated
daily and reports delivered to Partners as of the last day of each month by
the 20th of the following month. Upon request, the General Partner shall
make available to any Partner the Net Asset Value per Unit.
7.4 MAINTENANCE OF RECORDS. The General Partner shall maintain all records
as required by law including, but not limited to, (1) all books of account
required by paragraph 7.1 of this Article VII; and, (2) a record of the
information obtained to indicate that a Partner meets the applicable investor
suitability standards.
7.5 TAX RETURNS The General Partner shall cause tax returns for the
Partnership to be prepared and timely filed with the appropriate authorities.
The General Partner shall cause the Partnership to pay any taxes payable by
the Partnership; provided, however, that the General Partner shall not be
required to cause the Partnership to pay any tax so long as the General
Partner or the Partnership shall be in good faith and by appropriate means
contesting the applicability, validity or amount thereof and such contest
shall not materially endanger any right or interest of the Partnership.
7.6 TAX ELECTIONS The General Partner shall from time to time, make such
tax elections or allocations deemed necessary or desirable to carry out the
business of the Partnership or the purposes of this Agreement. The General
Partner shall be authorized to perform all duties imposed by Sections 6221
through 6232 of the Internal Revenue Code on the General Partner as "tax
matters partner" of the Partnership, including, but not limited to, the
following: (i) the power to conduct all audits and other administrative
proceedings with respect to Partnership tax items; (ii) the power to extend
the statute of limitations for all Limited Partners with respect to
Partnership tax items; (iii) the power to file a petition with an appropriate
federal court for a review of a final Partnership administrative adjustment;
and, (iv) a power of attorney on behalf of each Limited Partner having less
than a 1% interest in the Partnership to enter into a settlement with the
Internal Revenue Service on behalf of, and binding upon, those Limited
Partners unless any said Limited Partner shall have notified the Internal
Revenue Service and the General Partner, within 30 days of service of the
notice of claim up said Limited Partner, that the General Partner may not act
on such Limited Partner's behalf.
ARTICLE VIII
Amendments of Partnership Agreement
8.1 RESTRICTION ON AMENDMENTS. No amendment to this Agreement shall be
effective or binding upon the partners unless the same shall have been
approved by a Majority in Interest of the Partners; provided, however, the
General Partner may adopt amendments without such approval which are, in the
sole judgment of the General Partner, deemed necessary or desirable to
maintain the business or limited partnership or other favorable tax status of
the Partnership, or permit a Public Offering of the Units, or to maintain the
Partnership and the General Partner and its principals in compliance with the
laws which govern the business, including the requirements of any self
regulatory organization, or to substitute or add persons as Limited Partners.
8.2 ADMISSION OF ADDITIONAL PARTNERS. At any time, the General Partner may,
in its sole discretion and subject to applicable law, admit additional
Partners. Each newly admitted Partner shall contribute cash equal to the Net
Asset Value Per Unit of the Partnership for each Unit to be acquired. The
terms of any additional offering may be different from the terms of the
initial offering. All expenses of any such additional offering shall be
borne by the either the Partnership or the subscribers thereto, as determined
in the sole discretion of the General Partner. Pursuant to Article VI, the
General Partner may consent to and admit any assignee of Units as a
substituted Partner. There is no maximum aggregate amount of Units which may
be offered and sold by the Partnership or on the amount of contributions
which may be received by the Partnership.
8.3 TERMINATION OF OFFERINGS; ADDITIONAL OFFERINGS. Notwithstanding
anything stated herein to the contrary, the General Partner may from time to
time, in its sole discretion, limit the number of Units to be offered,
terminate any offering of Units, or register additional Units and/or make
additional public or private offerings of Units. No Limited Partner shall
have any preemptive, preferential or other rights with respect to the
issuance or sale of any additional Units. No Limited Partner shall have the
right to consent to the admission of any additional Limited Partners.
8.4 NOTICE OF RESTRICTED TRANSFER. Each certificate of Limited Partnership
shall be subject to and contain the following notice:
THE LIMITEDPARTNER MUST DETERMINE IF THE PARTNERSHIP INTERESTS REPRESENTED BY
THIS LIMITED PARTNERSHIP AGREEMENT MAY BE TRANSFERRED IN ACCORDANCE WITH
APPLICABLE FEDERAL AND STATE LAWS AND REFERENCE MUST BE MADE TO THE OFFERING
DOCUMENTATION AND LEGAL COUNSEL CHOSEN BY THE INVESTOR TO DETERMINE THE RIGHT
OF THE INVESTOR TO RESELL THE UNITS EVIDENCED HEREBY. THESE LIMITED
PARTNERSHIP INTERESTS SHALL NOT BE TRANSFERABLE BY THE REGISTERED HOLDER
EXCEPT BY CONSENT OF THE GENERAL PARTNER AND AS OTHERWISE PROVIDED INTHE
PARTNERSHIP AGREEMENT AND UPON THE ISSUANCE OF A FAVORABLE OPINION OF COUNSEL
FOR THE LIMITED PARTNERSHIP, AND/OR SUBMISSION TO THE LIMITED PARTNERSHIP OF
SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE LIMITED PARTNERSHIP, THAT
SUCH TRANSFER WILL NOT BE IN VIOLATION OF THEUNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER, AND
APPLICABLE STATE SECURITIES LAWS.
8.5 MEETINGS OF PARTNERS. Upon receipt of a written request, together with
the costs to distribute such request to all Partners, executed by Partners
holding ten percent (10%) or more of the Units, for the calling of a meeting
of the Partners or should the General Partner desire a meeting for any
purpose, the General Partner shall, within fifteen (15) days thereafter,
provide written notice, either in person or by certified mail, after the date
of receipt of said notice. Such written notice shall state the purpose of
the meeting, specify a reasonable time, place, and date, which shall be not
less than thirty (30) or more than sixty (60) days thereafter. An Amendment
shall be adopted and binding upon all parties hereto if a Majority in
Interest of the Partners vote for the adoption of such amendment. Partners
may vote in person or by written proxy delivered to any such meeting.
Meetings of Partners may also be held by conference telephone where all
Partners can hear one another.
8.6 RIGHT OF GENERAL PARTNER TO RESIGN. The General Partner may resign or
assign any portion of its interest in the Partnership at anytime to a third
party and become a Limited Partner with respect to the balance of its
interest in the Partnership, if any, if it provides one hundred twenty (120)
days prior written notice to all other Partners of its intention to resign
and states in such notice the name of the intended assignee who is to become
substitute General Partner and the information reasonably appropriate to
enable the Partner to decide whether or not to approve the substitution or,
in the alternative, provide that the partners must elect a successor general
partner. In the event of the voluntary withdrawal by the General Partner,
the General Partner shall pay the legal fees, recording fees and all other
expenses incurred as a result of its withdrawal. Upon resignation, the
General Partner shall be paid the items identified in Section 8.7 below.
8.7 AMENDMENT INVOLVING SUCCESSOR GENERAL PARTNER. Should a resignation or
an amendment to the Agreement provide for a change in the general partner
upon the conditions provided in this Agreement, the election and admission of
a person or persons as a successor or successors to the General Partner,
shall require the following conditions: the General Partner shall retire and
withdraw as General Partner and the Partnership business shall be continued
by the successor general partner or general partners, and such amendment
shall expressly provide that on or before the effective date of removal.
(a) The General Partner shall be permitted to Redeem 100% of its Units ten
(10) days prior to the effective date of its removal in cash equal to the Net
Asset Value of such General Partner's interest in the Partnership.
(b) The Partnership shall pay to the removed General Partner an amount equal
to the Appraised Value of such General Partner's assets to be transferred to
the successor General Partner to enable the successor to continue the
business of the Partnership. The Appraised Value of the withdrawing General
Partner's interest in the Partnership shall equal such General Partner's
interest in the sum of (1) the Expenses advanced by the General Partner to
the Partnership, (2) all cash items, (3) all prepaid expenses and accounts
receivable less a reasonable discount for doubtful accounts, and (4) the net
book value of all other assets, unless the withdrawing General Partner of the
successor General Partner believes that the net book value of an asset does
not fairly represent its fair market value in which event such General
Partner shall cause, at the expense of the Partnership, an independent
appraisal to be made by a person selected by the General Partner with
approval of a Majority in Interest of the Partners to determine its value.
(c) The successor General Partner or Partners shall indemnify the former
General Partner for all future activities of the Fund.
ARTICLE IX
Dissolution, Liquidation and Redemption
9.1 DISSOLUTION. The Partnership shall be dissolved, and shall terminate
and wind-up its affairs, upon the first to occur of the following:
(a) the affirmative vote of a Majority in Interest of the Partners adopting
an amendment to this Agreement providing for the dissolution of the
Partnership;
(b) the sale, exchange, forfeiture or other disposition of all or
substantially all the properties of the Partnership out of the ordinary
course of business;
(c) the resignation of the General Partner after one hundred twenty days
notice to the Partners, of the bankruptcy, insolvency or dissolution, or
failure of the General Partner to maintain sufficient Net Worth to qualify
the Partnership as a partnership for Federal Income Tax purposes or as
required by the NASAA Guidelines in effect at the time the Units were sold,
without a successor, promptly after any such event, but in no event beyond
one hundred twenty (120) days after the effective date of such event;
(d) at 11:59 p.m. on the day which is twenty-one (21) years from the date of
this Agreement; or
(e) any event which legally dissolves the Partnership.
9.2 EFFECT OF LIMITED PARTNER STATUS. The death, legal disability,
bankruptcy, insolvency, dissolution, or withdrawal of any Limited Partner
shall not result in the dissolution or termination of the Partnership, and
such Limited Partner, his estate, custodian or personal representative shall
have no right to withdraw or value such Limited Partner's interest in the
Partnership except as provided in Paragraph 9.3. Each Limited Partner (any
assignee thereof) expressly agrees that the provisions of the Act, as
amended, titled "Powers of Legal Representative or Successor of Deceased,
Incompetent, Dissolved or Terminated Partner", shall not apply to his
interest in the Partnership and expressly waives any rights and benefits
thereunder. Each Limited Partner (and any assignee of such Partner's
interest) expressly agrees that in the event of his death, that he waives on
behalf of himself and his estate, and he directs the legal representative of
his estate and any person interested therein to waive the furnishing of any
inventory, accounting or appraisal of the assets and any right to an audit or
examination of the books of the Partnership. The General Partner may assign,
sell, or otherwise dispose of all or any portion of its shares of common
stock without any legal effect upon the operation of the Partnership and no
Limited Partner may object to any such transfer.
9.3 LIQUIDATION. Upon the termination and dissolution of the Partnership,
the General Partner (or in the event the dissolution is caused by the
dissolution or the cessation to exist as a legal entity of the General
Partner, voluntary withdrawal, bankruptcy or insolvency, such person as the
Majority in Interest of the Partners may select) shall act as liquidating
trustee and shall take full charge of the Partnership assets and liabilities.
Thereafter, the business and affairs of the Partnership shall be wound up and
all assets shall be liquidated as promptly as is consistent with obtaining
the fair value thereof, and the proceeds therefrom shall be applied and
distributed in the following order: (i) to the expenses of liquidation and
termination and to creditors, including the General Partner, in order or
priority as provided by law, and (ii) to the Partners pro rata in accordance
with his or its Capital account, less any amount owed by such Partner to the
Partnership.
9.4 RETURN OF CAPITAL CONTRIBUTION SOLELY OUT OF ASSETS. A Partner shall
look solely to the properties and assets of the Partnership for the return of
his Capital Contribution, and if the properties and assets of the Partnership
remaining after the payment or discharge of the debts and liabilities of the
Partnership are insufficient to return his Capital Contribution, he shall
have no recourse against the General Partner or any other Limited Partner for
that purpose.
9.5 REDEMPTION. A Partner (including any approved assignee who becomes a
Limited Partner) may withdraw any part or all of his Capital Contribution and
undistributed profits, if any, by requiring the Partnership to redeem any or
all of his Units at the Net Asset Value thereof (such withdrawal being herein
referred to as "Redemption"). Redemption shall be effective as of the last
day of the period established, from time to time, by the General Partner for
Redemptions. Such Redemptions shall be no less often than quarterly;
provided, however, Redemption may be deferred until after the lapse of six
months from the date of purchase of the Units.
9.6 REDEMPTION PROCEDURES. Redemption shall be after all liabilities,
contingent, accrued, reserved in amounts determined by the General Partner
have been deducted and there remains property of the Partnership sufficient
to pay the Net Unit Value as defined in Paragraph 1.3(b). As used herein,
"request for Redemption: shall mean a letter mailed or delivered by a Partner
and received by the General Partner at least 10 days in advance of the
effective date for which Redemption is requested. Upon Redemption, a Partner
shall receive, on or before the last day of the following month, an amount
equal to the Net Unit Value per Unit redeemed as of the date for which the
request for Redemption was received, less accrued expenses and any amount
owed by such Partner to the Partnership. Redemption is subject to a
Redemption fee to be paid by the Partners as provided below; provided,
however, no Partner other than the initial Limited Partner, may redeem any
Units until the last day of the sixth month after the commencement of
trading. All Redemption requests shall be subject to the following:
(a) Under special circumstances including, but not limited to, the inability
to liquidate positions as of such Redemption date or default or delay in
payments due the Partnership from banks, brokers, or other persons, the
Partnership may in turn delay payment to Partners requesting Redemption of
Units of the proportionate part of the Net Unit Value represented by the sums
which are the subject of such delay or default.
(b) The General Partner in its sole discretion may, upon notice to the
Partners, declare additional Redemption dates and may cause the Partnership
to redeem fractions of Units and, prior to registration of Units for public
sale, redeem Units held by Partners who do not hold the required minimum
amount of Units established, from time to time, by the General Partner.
(c) Redemption of Units shall be charged a redemption fee, payable to the
Partnership, to be applied first to pay organization costs and, thereafter,
to the benefit of the other Partners in proportion to their Capital accounts,
equal to four percent (4%) for all Redemptions effective during the first six
(6) months after commencement of trading. Thereafter, there will be a
reduction of one percent (1%) for each six (6) months the investment in the
Units remained invested in the Fund after the initial six months; i.e., 7-12
months a Redemption fee of 3%, 12-18 months 2%, 18-24 months 1%, and,
thereafter, no redemption fee. The initial Limited Partner may withdraw from
the Partnership at the time the Minimum number of Units are sold without
payment of a Redemption fee.
9.7 SPECIAL REDEMPTION. In the event the Net Asset Value per Unit falls to
less than fifty percent (50%) of the Net Asset Value established by the
greater of the initial offering price of one thousand dollars ($1,000), less
commissions and other charges, or such higher value earned after payment of
the incentive fee for the addition of profits, the General Partner shall
immediately suspend all trading, provide immediate notice, in accordance with
the terms of this Agreement, to all Partners of the reduction in Net Asset
Value, and afford all Partners the opportunity for fifteen (15) days after
the date of such notice to Redeem their Units in accordance with the
provisions of Section 9.5 and 9.6, above. No trading shall commence until
after such fifteen day period.
ARTICLE X
Nature of Partner's Liabilities for Claims
10.1 PROSECUTION OF CLAIMS. The General Partner shall arrange to prosecute,
defend, settle or compromise actions at law or in equity or with any self
regulatory organizations at the expense of the Partnership as such may be
necessary or desirable to enforce, protect, or maintain Partnership
interests.
10.2 SATISFACTION OF CLAIMS. The General Partner shall satisfy any claims
against, errors asserted, or other liability of the Partnership and any
judgment, decree, decision or settlement, first out of any insurance proceeds
available therefor, next, out of Partnership assets and income, and finally
out of the assets and income of the General Partner.
10.3 GENERAL PARTNER DECISION. The decisions made by the General Partner in
regard to the prosecution or settlement of claims, errors, and other
liabilities, will be final and binding without right of appeal or other legal
action by the other Partners or the Partnership.
10.4 EXONERATION, INDEMNIFICATION, AND NO ANTICIPATION OF PAYMENTS. The
General Partner shall not be liable to the Partnership or the Partners for
any failure to comply with its obligations hereunder except for breach of
fiduciary obligation owed to the partnership or negligence on its part in the
management of Partnership affairs or violation of Federal and state
securities laws in connection with the offering of Units for sale. In
addition:
(a) The General Partner will be indemnified for liabilities and expenses
arising from any threatened, pending or completed action or suit in which it
or any affiliate is a party or is threatened to be made a party by reason of
the fact that it is or was the General Partner of the Partnership (other than
an action by the Partnership or a Partner against the General Partner which
is finally resolved in favor of the Partnership or Partner). The Partnership
will indemnify the General Partner and its affiliates against expenses,
including attorney's fees, judgments and amounts paid in settlement of an
action, suit or proceeding if it has acted in good faith and in a manner it
reasonably believed to be in or not opposed to the best interest of the
Partnership, and provided that its conduct did not constitute negligence,
willful or wanton misconduct or a breach of fiduciary obligations in the
performance of its duty to the Partnership or a violation of the securities
laws. The termination of any action, suit or proceeding by judgment, order
or settlement against the Partnership shall not of itself create a
presumption that the General Partner or any affiliate did not act in good
faith and not in the best interest of the Partnership; provided, however, any
advance of funds to the General Partner to pay such costs and expenses must
be preceded by all of the following: (i) a determination by the General
Partner that, in good faith, the course of conduct which caused the loss or
liability was in the best interests of the Partnership; and, (ii) the General
Partner was acting on behalf of or performing services for the Partnership;
and, (iii) such asserted claim or liability or loss to the claimant was not
the result of negligence or misconduct by the General Partner; and, (iv) such
indemnification or agreement to hold harmless is recoverable only out of the
assets of the Partnership and not from the Partners.
In any threatened, pending or completed action or suit by or in the right of
the Partnership, to which the General Partner or an Affiliate was or is a
party or is threatened to be made a party, involving an alleged cause of
action by a Partner for damages arising from the activities of the General
Partner in the performance of the sale of Units or management of the internal
affairs of the partnership as proscribed by this Agreement or by Federal or
the State of Delaware or any other state laws, the Partnership shall
indemnify such General Partner against expenses, including attorneys' fees
and costs, actually and reasonably incurred by such General Partner or
Affiliate in connection with the defense or settlement of such action or suit
if it acted in good faith and in a manner it reasonably believed to be in or
not opposed to the best interests of the Partnership, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the General Partner shall have been adjudged to be liable for
intentional misconduct, or breach of fiduciary obligations or violation of
securities laws in the performance of its duty to the Partnership unless and
only to the extent that the court or administrative proceeding in which such
action or suit was brought shall determine upon application, that, despite
the adjudication of liability, in view of all circumstances of the case, the
General Partner or Affiliate is reasonably entitled to indemnification for
such expenses as such court shall deem proper; provided, however,
notwithstanding any other provisions of this Agreement, the Partnership shall
advance or pay the General Partner or any of its Affiliates for legal
expenses and other costs incurred as a result of any legal action which
alleges a breach of the Federal or state securities laws only if the
following conditions are satisfied: (i) the legal action relates to acts or
omissions with respect to the performance of duties or services on behalf of
the Partnership; (ii) the legal action is initiated by a third party who is
not a Limited Partner, or the legal action is initiated by a Limited Partner
and an independent arbitration panel, administrative law judge, or court of
competent jurisdiction specifically approves such advancement; and, (iii) the
General Partner or its Affiliates undertake to repay the advanced funds to
the Partnership, together with the applicable legal rate of interest thereon,
in cases which such party is not entitled to indemnification under NASAA
Guideline II.F.
To the extent that a General Partner or an Affiliate has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to above or in defense of any claim, issue or other matter related to the
Partnership or any other Partner or person who applied to be a Partner, the
Partnership shall indemnify such General Partner against the expenses,
including attorneys' fees and costs, actually and reasonably incurred by it
in connection therewith.
(b) The indemnification of a General Partner shall be limited to and
recoverable only out of the assets of the Partnership. Notwithstanding the
foregoing, the Partnership's indemnification of the General Partner shall be
limited to the amount of such loss, liability or damage which is not
otherwise compensated for by insurance carried for the benefit of the
Partnership.
(c) Notwithstanding any provision in this Agreement to the contrary, the
Partnership shall not advance the expenses or pay for any insurance to pay
for the costs of the defense or any liability which is prohibited from being
indemnified pursuant to NASAA Guideline II.F. Specifically, no
indemnification which is the result of negligence or misconduct by the
General Partner or for any allegation of a violation of the Federal or state
securities laws by or against the General Partner, any broker/dealer or any
other party unless there has been a successful adjudication on the merits of
each count involving alleged securities law violation as to the General
Partner or broker/dealer or such other party; or a court of competent
jurisdiction approves a settlement of the claims against the General Partner
or any broker/dealer or any other party and finds, specifically, that the
indemnification of the settlement and related costs should be made after the
court of law has been made aware that the Securities and Exchange Commission
opposes such indemnification and the position of any applicable state
securities regulatory authority where the Partnership Interests were offered
or sold without the compliance with specific conditions upon such
indemnification and the action covered satisfies the provisions of Section
10.4 (a) of this Agreement. Any change in the requirements imposed by the
Securities and Exchange Commission and the state securities administrators in
regard to indemnification shall cause a corresponding change in the right of
the General Partner to indemnification.
(d) The indemnification of the General Partner provided in this Article shall
extend to any employee, agent, attorney, certified public accountant, or
Affiliate of the Partnership and the General Partner.
(e) The Partnership shall indemnify, to the extent of the Partnership assets,
each Partner against any claims of liability asserted against a Partner
solely because he is a Partner in the Partnership.
(f) In the event the Partnership or any Partner is made a party to any claim,
dispute or litigation or otherwise incurs any loss or expense, as a result of
or in connection with any Partner's activities unrelated to the Partnership
business or as a result of an unfounded claim against the Partnership or any
other Partner brought as a result of alleged actions by said Partner, the
Partner which was responsible for the allegations which caused such loss or
expense shall indemnify and reimburse the Partnership and all other Partners
for all loss and expense incurred, including attorneys' fees and costs.
(g) No creditor of a Partner shall have a right to vote Units. Nor may any
Partner or creditor of a Partner anticipate any principal or income from the
Fund prior to the approval of a Redemption Request or the payment of a
distribution from the Fund.
ARTICLE XI
Power of Attorney
11.1 POWER OF ATTORNEY EXECUTED CONCURRENTLY. Concurrent with the written
acceptance and adoption of the provisions of this Agreement, each Partner
shall execute and deliver to the General Partner, a Power of Attorney
(paragraph 5 of the Subscription Agreement). Said Power of Attorney
irrevocably constitutes and appoints the General Partner as a true and lawful
attorney-in-fact and agent for such Partner with full power and authority to
act in his name and on his behalf in the execution, acknowledgment and filing
of documents, which will include, but shall not be limited to, the following:
(a) Any certificates and other instruments, including but not limited to, a
Certificate of Limited partnership and amendments thereto and a certificate
of doing business under an assumed name, which the General Partner deems
appropriate to qualify or continue the Partnership as a limited partnership
in the jurisdictions in which the Partnership may conduct business, so long
as such qualifications and continuations are in accordance with the terms of
this Agreement or any amendment hereto, or which may be required to be filed
by the Partnership or the Partners under the laws of any jurisdiction;
(b) Any other instrument which may be required to be filed by the Partnership
under Federal or any state laws or by any governmental agency or which the
General Partner deems advisable to file; and
(c) Any documents required to effect the continuation of the Partnership, the
admission of the signer of the Power as a Limited Partner or of others as
additional or substituted Partners or Limited Partners, or the dissolution
and termination of the Partnership, provided such continuation, admission,
dissolution or termination is pursuant to the terms of this Agreement.
11.2 EFFECT OF POWER OF ATTORNEY. The Power of Attorney concurrently
granted by each Partner to the General Partner is a special Power of Attorney
coupled with an interest, is irrevocable, and shall survive the death or
legal incapacity of the Partner; and may be exercised by the General Partner
for each Partner by a facsimile signature of one of its officers or by
listing all of the Partners executing any instrument with a single signature
of one of its officers acting as attorney-in-fact for all of them; and shall
survive the delivery of an assignment by a Partner of the whole or any
portion of his interest in the Partnership; except that where the assignee
thereof has been approved by the General Partner for admission to the
Partnership as a substituted partner, the Power of Attorney shall survive the
delivery of such assignment for the sole purpose of enabling the General
Partner to execute, acknowledge and file an instrument necessary to effect
such substitution.
11.3 FURTHER ASSURANCES. Upon request, each Limited Partner agrees to
execute and deliver to the Partnership, within thirty (30) days after receipt
of a written request from the General Partner, a separate form of power of
attorney granting the same powers described above; and such other further
statements of interest, holdings, designations, powers of attorney and other
instruments as the General Partner deems necessary or desirable.
ARTICLE XII
Miscellaneous Provisions
12.1 NOTICES. Notices, requests, reports, payments or other communications
required to be given or made hereunder shall be in writing and shall be
deemed to be delivered when properly addressed and posted by United States
registered or certified mail or delivered by independent courier which
provides an record of receipt, postage or delivery fees prepaid, properly
addressed to the party being given such notice at its last known address.
Addresses shown on the Schedule of Limited Partners records of the
Partnership shall be considered the last known address of each said party
unless the General Partner is otherwise notified in writing.
12.2 NATURE OF INTEREST OF PARTNERS. The interest of each Partner in the
Partnership is personal property. No Partner may anticipate the distribution
or redemption of principal or income from the Partnership and no assignment
to secure the position of a lender to a Partner shall be valid without the
express written consent of the General Partner.
12.3 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed in all respects by the laws of the State of Delaware. All
Partners agree to consent to the jurisdiction and to bring all actions for
claims related to the Partnership and the sale of the Units in the State and
County of the principal office of the Partnership as it is established, from
time to time, by the General Partner. Currently, the principal office of the
Partnership is located in Kent County, Delaware.
12.4 SUCCESSORS IN INTEREST. This Agreement shall be binding on and inure
to the benefit of he parties hereto and, to the extent permitted by this
Agreement, their respective heirs, executors, administrators, personal
representatives, successors and assigns.
12.5 INTEGRATION. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of such parties in connection
herewith. Any amendment or supplement made hereto must be in writing.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. In such event, each counterpart shall constitute an original
and all such counterparts shall constitute one agreement. The addition of
Limited Partners pursuant to the power of attorney granted to the General
Partner shall not be deemed amendments to alter the rights of the other
Partners under this Agreement.
12.7 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal, or unenforceable in any respect in any jurisdiction shall be, as to
such jurisdiction, ineffective to the extent of such invalidity, illegality
or unenforceability. The remaining provisions hereof in such jurisdiction
shall be and remain effective. Any such invalidity, illegality or
unenforceability in any jurisdiction shall not invalidate or in any way
effect the validity, legality or enforceability of such provision or the
remainder of this Agreement in any other jurisdiction.
12.8 WAIVERS. The failure of any Partner to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.9 HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof.
12.10 RIGHTS AND REMEDIES CUMULATIVE. This rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
Partner shall not preclude or waive his right to use addition to any other
rights such Partner may have by law, statute, ordinance or otherwise.
12.11 WAIVER OF RIGHT TO PARTITION. Each of the Partners irrevocably
waives, during the term of the Partnership, any right that it may have to
maintain any action for partition with respect to the property and assets of
the Partnership.
12.12 INTEREST OF CERTAIN SECURED CREDITORS. No creditor who makes
nonrecourse loan to the Partnership shall 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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
General Partner:
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
By: s/ Shira Del Pacult
Shira Del Pacult
President
Initial Limited Partner:
By: s/ Shira Del Pacult
Shira Del Pacult
******************************************************************************
EXHIBIT B TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
REQUEST FOR REDEMPTION
To: Ashley Capital Management, Inc.
General Partner _____________________________
5916 N. 300 West Our Social Security Number or
P. O. Drawer C Taxpayer ID Number
Fremont, IN 46737
Dear General Partner:
The undersigned hereby requests redemption ("Redemption"), as defined
in and subject to all the terms and conditions disclosed in the Offering
Circular (the "Prospectus") delivered to the undersigned at the time of our
purchase of limited partnership interests (the "Units") in Atlas Futures
Fund, Limited Partnership, (the "Fund"), of _______________ Units (insert the
number of Units to be Redeemed). This Redemption request, once approved and
accepted by you as General Partner, will be at the Net Asset Value per Unit,
as described in the Prospectus, as of the close of business at the end of the
current month following such approval.
The undersigned hereby represents and warrants that the undersigned is
the true, lawful and beneficial owner of the Units to which this Request
relates with full power and authority to request Redemption of such Units.
Such Units are not subject to any pledge or otherwise encumbered.
United States Taxable Limited Partners Only - Under penalty of perjury,
the undersigned hereby certifies that the Social Security Number or Taxpayer
ID Number indicated on this Request for Redemption is the undersigned's true,
cared and complete Social Security Number or Taxpayer ID Number and that the
undersigned is not subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code.
Non United States Limited Partners Only - Under penalty of perjury, the
undersigned hereby certifies that (a) the undersigned is not a citizen or
resident of the United States or (b) (in the case of an investor which is not
an individual) the investor is not a United States corporation, partnership,
estate or trust.
SIGNATURE(S) MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
Please forward redemption funds by mail to the undersigned at:
_____________________________________________________________________________
Name Street City, State and Zip Code
Entity Limited Partner Individual Limited Partners(s)
________________________________ _______________________________
(Name of Entity) (Signature of Limited Partner)
By:
________________________________ ________________________________
(Authorized corporate officer, partner, (Signature of Limited Partner)
custodian or trustee)
________________________________
(Title)
******************************************************************************
EXHIBIT C TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for Atlas
Futures Fund Limited Partnership (the "Fund"), each purchaser ("Purchaser") of
Limited Partnership Interests (the "Units") in the Partnership irrevocably
subscribes for Units at a price equal to the Net Asset Value per Unit as of
the end of the month in which the subscription is accepted as described in the
Partnership's Offering Circular dated _______________, 1998, (the
"Prospectus"). The minimum subscription is $25,000; additional Units may be
purchased in multiples of $1,000. Subscriptions must be accompanied by a
check in the full amount of the subscription and made payable to "Star
Financial Bank-Escrow Agent for Atlas Futures Fund, LP". Purchaser is also
delivering to the Selling Agent an executed Subscription Agreement and Power
of Attorney (Exhibit D to the Prospectus). Upon acceptance of Purchaser's
Subscription Agreement and Power of Attorney and subject to the termination of
the Escrow, if it is in effect at the time of the Escrow, Purchaser agrees to
contribute Purchaser's subscription to the Partnership and to be bound by the
terms of the Partnership's Limited Partnership Agreement, attached as Exhibit
A to the Prospectus. Purchaser agrees to reimburse the Partnership and Ashley
Capital Management, Incorporated (the "General Partner") for any expense or
loss incurred as a result of the cancellation of Purchaser's Units due to a
failure of Purchaser to deliver good funds in the amount of the subscription
price. By execution of the Subscription Agreement and Power of Attorney,
Purchaser shall be deemed to have executed the Limited Partnership Agreement.
As an inducement to the General Partner to accept this subscription,
Purchaser (for the Purchaser and, if Purchaser is an entity, on behalf of and
with respect to each of Purchaser's shareholders, partners or beneficiaries),
by executing and delivering Purchaser's Subscription Agreement and Power of
Attorney, represents and warrants to the General Partner, the Commodity Broker
and the Selling Agent who solicited Purchaser's subscription and the Fund, as
follows:
(a) Purchaser is of legal age to execute the Subscription
Agreement and Power of Attorney and is legally competent to do so.
Purchaser acknowledges that Purchaser has received a copy of the
Prospectus, including the Limited Partnership Agreement, prior to
subscribing for Units.
(b) All information that Purchaser has heretofore furnished to
the General Partner or that is set forth in the Subscription Agreement
and Power of Attorney submitted by Purchaser is correct and complete
as of the date of such Subscription Agreement and Power of Attorney,
and if there should be any change in such information prior to
acceptance of Purchaser's subscription, Purchaser will immediately
furnish such revised or corrected information to the General Partner.
(c) Unless (d) or (e) below is applicable, Purchaser's
subscription is made with Purchaser's funds for Purchaser's own
account and not as trustee, custodian or nominee for another.
(d) The subscription, if made as custodian for a minor, is a gift
Purchaser has made to such minor and is not made with such minor's
funds or, if not a gift, the representations as to net worth and
annual income set forth below apply only to such minor.
(e) If Purchaser is subscribing in a representative capacity,
Purchaser has full power and authority to purchase the Units and enter
and be bound by the Subscription Agreement and Power of Attorney on
behalf of the entity for which he is purchasing the Units, and such
entity has full right and power to purchase such Units and enter and
be bound by the Subscription Agreement and Power of Attorney and
become a Limited Partner pursuant to the Limited Partnership Agreement
which is attached to the Prospectus as Exhibit A.
******************************************************************************
EXHIBIT D TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
SUBSCRIPTION INSTRUCTIONS
Any person considering subscribing for Units
should carefully read and review the Prospectus.
The Units are speculative and involve a high degree of risk. No person
may invest more than 10% of his or her liquid net worth (exclusive of home,
furnishings and automobiles) in the Partnership. No entity-and, in
particular, no ERISA plan-may invest more than 10% of its liquid net worth
(readily marketable securities) in the Partnership.
A Subscription Agreement and Power of Attorney Signature Page (the
"Signature Page") is attached to these Subscription Instructions and the
following Subscription Agreement and Power of Attorney. The Signature Page is
the document which you must execute if you wish to subscribe for Units. One
copy of such Signature Page should be retained by you for your records and
the others delivered to your Registered Representative.
FILL IN ALL OF THE INFORMATION ON THE ATTACHED SIGNATURE PAGE, USING
BLACK INK ONLY, AS FOLLOWS
Item 1 - Enter the dollar amount (no cents) of the purchase.
Items 2 - Enter the Social Security Number or Taxpayer ID Number
and check the appropriate box to indicate the type of individual ownership
desired or of the entity that is subscribing. In the case of joint ownership,
either Social Security Number may be used.
The Signature Page is self-explanatory for most ownership types;
however, the following specific instructions are provided for certain of the
ownership types identified on the Signature Page:
Trusts-Enter the trust's name on Line 3 and the trustee's name on Line 4,
followed by "Ttee." If applicable, use Line 7 also for the custodian's name.
Be sure to furnish the Taxpayer ID Number of the trust. Custodian
Under Uniform Gifts to Minors Act-Complete Line 3 with the name of minor
followed by "UGMA." On Line 7, enter the custodian's name followed by
"Custodian." Be sure to furnish the minor's Social Security Number.
Partnership or Corporation-The partnership's or corporation's name is
required on Line 4. Enter a partner's or officer's name on Line 4. Be sure to
furnish the Taxpayer ID Number of the partnership or corporation. A
subscriber who is not an individual must provide a copy of documents
evidencing the authority of such entity to invest in the Partnership.
Item 8 - The investor(s) must execute the Subscription
Agreement and Power of Attorney Signature Page and review the representations
relating to backup withholding tax or non-resident alien status underneath
the signature and telephone number lines in Item 8.
Item 9 - Registered Representative must complete.
The Selling Agent's copy of the Subscription Agreement and Power of Attorney
Signature Page may be required to be retained in the Branch Office.
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934
SUBSCRIPTION AGREEMENT AND
POWER OF ATTORNEY
Ashley Capital Management, Inc.
General Partner ____________________________
5916 N. 300 West Social Security Number or
P. O. Drawer C Taxpayer ID Number
Fremont, IN 46737
Dear General Partner:
1. Subscription For Units. I hereby subscribe for the number of Limited
Partnership Units ("Units") in Atlas Futures Fund, Limited Partnership (the
"Fund") set forth below (minimum $25,000) in the Subscription Agreement and
Power of Attorney Signature Page, at $1000 per Unit as set forth in the
Prospectus (the "Prospectus") of the Partnership dated ____________, 1998. I
have completed and executed a Subscription Agreement and Power of Attorney
Signature Page in the form attached hereto as Exhibit "D", and delivered the
executed Subscription Documents to the Sales Agent and executed a check made
payable to "Star Financial Bank-Escrow Agent for Atlas Futures Fund, LP" to
be delivered by the Sales Agent to the Escrow Agent within 24 hours after
receipt for deposit to the Escrow Account. The General Partner may, in its
sole and absolute discretion, accept or reject this subscription, in whole or
in part. If this subscription is accepted, I understand subscribers will
earn additional Units in lieu of interest earned on the undersigned's
subscription during any period of time, if any, such subscription is held in
escrow. If this subscription is rejected, all funds remitted by the
undersigned will be returned, together with any interest earned from escrow,
if any. All subscriptions once submitted are irrevocable.
2. Representations and Warranties of Subscriber. I have received a copy of
the Prospectus no less than five days prior to the effective date of my
purchase. I understand that by submitting this Subscription Agreement and
Power of Attorney I am making the representations and warranties set forth in
"Exhibit C - Subscription Requirements" contained in the Prospectus,
including, without limitation, representations and warranties relating to my
net worth and annual income.
3. Power of Attorney. In connection with my acceptance of an Interest in the
Partnership, I do hereby irrevocably constitute and appoint the General
Partner, and its successors and assigns, as my true and lawful Attorney-in-
Fact, with full power of substitution, in my name, place and stead, to (i)
file, prosecute, defend, settle or compromise litigation, claims or
arbitration on behalf of the Partnership; and, (ii) make, execute, sign,
acknowledge, swear to, deliver, record and file any documents or instruments
which may be considered necessary or desirable by the General Partner to
carry out fully the provisions of the Limited Partnership Agreement of the
Partnership, which is attached as Exhibit A to the Prospectus, including,
without limitation, the execution of the said Agreement itself and by
effecting all amendments permitted by the terms thereof. The Power of
Attorney granted hereby shall be deemed to be coupled with an interest and
shall be irrevocable and shall survive, and shall not be affected by, my
subsequent death, incapacity, disability, insolvency or dissolution or any
delivery by me of an assignment of the whole or any portion of my interest in
the Partnership.
4. Irrevocability; Governing Law. I hereby acknowledge and agree that I am
not entitled to cancel, terminate or revoke this subscription or any of my
agreements hereunder after the Subscription Agreement and Power of Attorney
have been submitted (and not rejected) and that this subscription and such
agreements shall survive my death or disability. This Subscription Agreement
and Power of Attorney shall be governed by and interpreted in accordance with
the laws of the State of Indiana.
5. Suitability and Acceptance of Risks. In addition to the suitability
requirements set forth in Exhibit C, I represent and warrant to the General
Partner and Selling Agent that (i) I have the capacity of understanding the
fundamental aspects of the Partnership (or, if I do not have such fundamental
understanding, I have so advised the Selling Agent of such fact); and, (ii) I
understand the fundamental risks and possible financial hazards of an
investment in the Partnership (disclosed in the Prospectus and Amendment
under "Risk Factors" identified on the face page, in the Summary, and
described in the Prospectus at page 6), including, but not limited to, the
lack of liquidity of my investment in the Partnership, the management and
control by the General Partner, and the tax consequences of the investment.
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Units of Limited Partnership Interests
Subscription Agreement and Power of Attorney
Signature Page
The investor named below, by execution and delivery of this Subscription
Agreement and Power of Attorney, by payment of the purchase price for Limited
Partnership Interests (the "Units") in Atlas Futures Fund, Limited
Partnership (the "Partnership"), and by enclosing a check payable to "Star
Financial State Bank-Escrow Agent for Atlas Futures Fund, LP", hereby
subscribes for the purchase of Units, at $1,000 per Unit.
The named investor further, by signature below, acknowledges receipt of the
Prospectus of the Partnership dated ___________, 1998 no less than five (5)
days prior to the acceptance of the subscription by the General Partner or
the purchase of Units in the Partnership and that such Prospectus includes
the Partnership's Limited Partnership Agreement, and the Subscription
Requirements and the Subscription Agreement and Power of Attorney set forth
therein, the terms of which govern the investment in the Units being
subscribed for hereby.
By my signature below, I represent that I satisfy the requirements relating
to net worth and annual income as set forth in Exhibit C to the Prospectus.
1) Total $ Amount __________________ (minimum of $25,000, unless lowered to
less than $25,000 but not less than $5,000 by the General Partner; $1,000
minimum for investors making an additional investment)
2) Social Security Number _____-___-_____
Taxpayer ID # _____-___-_____
Taxable Investors (check one):
O Individual Ownership
O Trust other than a Grantor or Revocable Trust
O Joint Tenants with Right of Survivorship
O Estate
O UGMA/UTMA (Minor)
O Tenants in Common
O Community Property
O Partnership
O Corporation
O Grantor or Other Revocable Trust
Non-Taxable Investors (check one):
O IRA
O Profit Sharing
O IRA Rollover
O Defined Benefit
O Pension
O Other (specify)
O SEP
3) Investor's Name _________________________________________________________
4) _________________________________________________________________________
Additional Information (for Estates, Trusts, Partnerships and Corporations)
5) Resident Address of Investor
_________________________________________________________________________
Street (P.O. Box not acceptable) City State Zip Code
6) Mailing Address(if different)
_________________________________________________________________________
Street City State Zip Code
7) Custodian Name and Mailing Address
_________________________________________________________________________
Name Street (P.O. Box not acceptable) City State Zip Code
SIGNATURE(S) - DO NOT SIGN WITHOUT FAMILIARIZING YOURSELF WITH THE
INFORMATION IN THE PROSPECTUS AND AMENDMENT, INCLUDING: (I) THE FUNDAMENTAL
RISKS AND FINANCIAL HAZARDS OF THIS INVESTMENT, INCLUDING THE RISK OF LOSING
YOUR ENTIRE INVESTMENT; (II) THAT THE PARTNERSHIP IS THE FIRST CLIENT ACCOUNT
TO TRADE IN THE ATLAS FUTURES FUND PORTFOLIO; (III) THE PARTNERSHIP'S
SUBSTANTIAL CHARGES; (IV) THE PARTNERSHIP'S HIGHLY LEVERAGED TRADING
ACTIVITIES; (V) THE LACK OF LIQUIDITY OF THE UNITS; (VI) THE EXISTENCE OF
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST IN THE STRUCTURE AND OPERATION OF
THE PARTNERSHIP; (VII) THAT UNITHOLDERS MAY NOT TAKE PART IN THE MANAGEMENT
OF THE PARTNERSHIP; AND (VIII) THE TAX CONSEQUENCES OF THE PARTNERSHIP.
8) INVESTOR(S) MUST SIGN
X_________________________________________________________
Signature of Investor Date Telephone No.
X_________________________________________________________
Signature of Joint Investor (if any) Date
Executing and delivering this Subscription Agreement and Power of Attorney
shall in no respect be deemed to constitute a waiver of any rights under the
Securities Act of 1933 or under the Securities Exchange Act of 1934.
UNITED STATES INVESTORS ONLY
I have checked the following box if I am subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: __.
Under the penalties of perjury, by signature above I hereby certify that the
Social Security Number or Taxpayer ID Number set forth in Item 2 above is my
true, correct and complete Social Security Number of Taxpayer ID Number and
that the information given in the immediately preceding sentence is true,
correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under the penalties of perjury, by signature above, I hereby certify that (a)
I am not a citizen or resident of the United States or (b) (in the case of an
investor which is not an individual) the investor is not a United States
corporation, partnership, estate or trust: __.
9) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts
relating to the: risks; tax consequences; liquidity and marketability;
management; and control of the Managing Owner with respect to an investment
in the Units, as set forth in the Prospectus and Amendment. I have also
informed the investor of the unlikelihood of a public trading market
developing for the Units. I do not have discretionary authority over the
account of the investor.
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments,
financial situation and needs and any other information known by me, that an
investment in the Partnership is suitable for such investor in light of
his/her financial position, net worth and other suitability characteristics.
The Registered Representative MUST sign below in order to substantiate
compliance with Article III, Section 34 of the NASD's Rules of Fair Practice.
X__________________________________________________________
Registered Representative Signature Date
X__________________________________________________________
Office Manager Signature Date
(if required by Selling Agent procedures)
10) REGISTERED REPRESENTATIVE
Name: Shira Del Pacult
Address: 5916 N. 300 West, Fremont, IN 46737
Tel. Number: (219) 833-1306
Registered Representative Number: 334
11) SELLING AGENT
Name: Futures Investment Company
Address: 5916 N. 300 West
Fremont, IN 46737
Tel. Number: (219) 833-1306
<PAGE>
******************************************************************************
EXHIBIT E TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of the ___
day of April, 1998, by and among Star Financial Bank, 2004 N. Wayne St.,
Angola, IN 46703, (the "Escrow Agent"); Futures Investment Company, an
Illinois corporation (the "Underwriter" or "Broker/Dealer"); and, Atlas
Futures Fund, Limited Partnership, a Delaware limited partnership (the
"Partnership") acting by and through Ashley Capital Management, Inc., a
Delaware corporation, its general partner, (the "General Partner").
A. WHEREAS, the Partnership proposes to offer for sale to investors up to
$7,000,000 of units (the "Offering") of limited partnership interest (the
"Securities" or "Units") at an initial offering price of $1,000 per Unit; and
B. WHEREAS, the Underwriter intends to sell, as an National Association of
Securities Dealer, Inc. registered Broker/Dealer, the Securities, as the
Partnership's agent, on a best-efforts, all-or-none basis for 700 Units (the
"Minimum Offering"); and, thereafter, on a best-efforts basis until all
remaining 6,300 Units are sold; or until the Offering is withdrawn or
terminates; and
C. WHEREAS, the Company and the Underwriter desire to establish an escrow
account with the Escrow Agent in which funds received from subscribers will be
deposited pending completion of the sale of the Minimum Offering during the
time it takes to sell the Minimum Offering or the Offering is withdrawn or
terminates, whichever occurs first, (the "Escrow Period"); and, Escrow Agent
desires to serve as escrow agent, all in accordance with the terms and
conditions set forth herein.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree, as follows:
1. Establishment of Escrow Account. On or prior to the date of the
commencement of the Offering, the parties shall establish an interest-bearing
escrow account with the Escrow Agent, which escrow account shall be entitled
the Atlas Futures Fund, Limited Partnership Escrow Account (the "Escrow
Account"). During the Escrow Period, the Underwriter, through its registered
representatives, will instruct subscribers, pursuant to the disclosures made
in the Offering Circular, the Subscription Agreement, and the Broker/Dealer
Selling Agreement, to make checks for subscriptions payable to "Star Financial
Bank-Escrow Agent for Atlas Futures Fund, LP". Any checks received that are
made payable to a party other than the Escrow Agent shall be returned to the
Underwriter.
2. Escrow Period. The escrow period shall begin with the commencement of
the Offering and shall terminate upon the earlier to occur of the following
dates (the "Escrow Period"):
A. the date upon which the Escrow Agent confirms that it has received in
the Escrow Account gross proceeds from the sale of 700 Units of $700,000,
before payment of sales commissions, in collected funds (the "Minimum
Offering");
B. The expiration of nine (9) months from the date of the Offering
Circular, or any extension thereof, utilized by the Partnership in offering
the Securities; or
C. The date upon which a determination is made by the Partnership and the
Underwriter to terminate the Offering prior to the sale of the Minimum
Offering.
Although checks for the Minimum Offering may have been tendered prior to or on
the close of the Escrow Period, in no event will the Escrow Funds be released
to the Partnership until the Minimum Offering is received by the Escrow Agent
in collected funds. For purposes of this Agreement, the term "collected
funds" shall mean all funds received by the Escrow Agent which have cleared
normal banking channels and are in the form of good funds on deposit.
1
<PAGE>
During the Escrow Period, the Partnership and the Underwriter are aware and
they understand that they are not entitled to any funds received into escrow
and no amounts deposited in the Escrow Account shall become the property of
the Partnership, the Underwriter, or any other entity or person, or be subject
to the debts of the Partnership, the Underwriter, or any other entity or
person.
3. Deposits into the Escrow Account. The Partnership and the Underwriter
agree that they shall promptly review the subscription documents to determine
the suitability of the subscriber for admission to the Partnership and reject
or accept and transmit (and in all events by 12:00 noon of the next business
day after receipt by them) all monies received from subscribers for the
payment of Securities to the Escrow Agent for deposit in the Escrow Account
together with a written account of each sale, which account shall set forth,
among other things, the subscriber's name and address, the number of
Securities purchased, the amount paid therefor, and whether the consideration
received was in the form of a check, draft, or money order. All monies so
deposited in the Escrow Account are hereinafter referred to as the "Escrow
Funds".
4. Collection Procedure. The Escrow Agent is hereby authorized to forward
each check, draft, or money order for collection and, upon collection of the
proceeds of such instrument, deposit the collected proceeds in the Escrow
Account. As an alternative, the Escrow Agent may telephone the bank on which
the instrument is drawn to confirm that it has been paid.
Any instrument returned unpaid to the Escrow Agent shall be returned to the
Underwriter. In such cases, the Escrow Agent will promptly notify the
Partnership of such return.
If, for any reason, the Partnership elects to reject any subscription for
which the Escrow Agent has already collected funds, the Escrow Agent shall
promptly issue a refund check to the rejected subscriber. If the Partnership
rejects any subscription for which the Escrow Agent has not yet collected
funds but has submitted the subscriber's check for collection, the Escrow
Agent shall promptly issue a check in the amount of the subscriber's check to
the rejected subscriber after the Escrow Agent has cleared such funds. If the
Escrow Agent has not yet submitted a rejected subscriber's check for
collection, the Escrow Agent shall promptly return the subscriber's check
directly to the subscriber.
5. Investment of Escrow Funds. The Escrow Agent may invest the Escrow
Funds only in such accounts or investments as the Partnership may specify by
written notice from a list of investments made available by the Escrow Agent
for such purpose. The Partnership may only specify and the Escrow Agent may
only make available investments in (1) bank accounts, (2) bank money market
accounts, (3) short-term certificates of deposit issued by a bank, or (4)
short-term securities issued or guaranteed by the U.S. Government.
6. Compensation of Escrow Agent. As the Escrow Agent's total compensation
for the performance of its escrow services, Escrow Agent shall receive an
aggregate fee determined by multiplying the total number of checks received
and issued by the Escrow Agent by $15.00 (the "Escrow Agent Fee"). The Escrow
Agent Fee shall be payable by the General Partner in the event the escrow
terminates prior to the sale of the Minimum or by the Partnership at the time
of closing of the sale of the Minimum. within fifteen (15) days after the
close of the Escrow Period. However, neither the Escrow Agent Fee, nor any
indemnification for any damages incurred by the Escrow Agent or any monies
whatsoever shall be paid out of or chargeable to the funds while on deposit in
the Escrow Account.
7. Disbursements from the Escrow Account.
A. Upon the receipt of gross proceeds as provided in 2A above, the Escrow
Agent shall pay the Underwriter commissions of 6% of the gross sales price and
shall remit the balance, including all accrued income, to the Partnership for
deposit to Partnership accounts for use in its business.
B. In the event the Escrow Agent does not receive deposits totaling the
Minimum Offering prior to the termination of the Escrow Period, the Escrow
Agent shall, within 10 business days of the termination of the Escrow Period,
refund to each subscriber the amount received from the subscriber, without
deduction, penalty, or expense to the subscriber, along with each subscriber's
pro-rata share of any interest earned on the Escrow Funds at the rate
established by the Escrow Agent, and the Escrow Agent shall notify the
Partnership and the Underwriter of its distribution of the Escrow Funds. The
purchase money returned to each subscriber shall be free and clear of any and
all claims of the Partnership, the Underwriter, and the Escrow Agent or any of
their creditors.
2
<PAGE>
C. Upon completion of the payments described in either 7A or B above, and
payment of the Escrow Agent Fee as provided in paragraph 6 above, this Escrow
will terminate.
8. Obligations of Escrow Agent. Escrow Agent shall be obligated only for
the performance of such duties as are specifically set forth in this
Agreement, and no additional duties shall be inferred herefrom or implied
hereby. The Escrow Agent may rely and shall be protected in acting or
refraining from acting on any instrument believed by it to be genuine and to
have been signed or presented by the proper party or parties.
9. Controversies. Should any controversy arise among the undersigned with
respect to this Agreement, or with respect to the right to receive all or part
of the Escrow Funds, including accrued interest thereon, Escrow Agent shall
have the right to institute an interpleader action in any court of competent
jurisdiction in Steuben County, IN, to determine the rights of the parties.
Should such an action be instituted, or should Escrow Agent become involved in
litigation in any manner on account of this Agreement or the Escrow Funds (not
involving willful misconduct, fraud, gross negligence or bad faith on the part
of Escrow Agent), the Partnership and its General Partner shall either assume
the defense or pay to Escrow Agent the reasonable attorneys' fees incurred by
Escrow Agent, whichever the Partnership shall elect, together with any other
expenses, losses, costs and damages suffered by Escrow Agent, in connection
with and resulting from such litigation.
10. Limit of Escrow Agent Liability. Escrow Agent shall have no liability
under, or duty to inquire into, the terms and provisions of any other document
or instrument utilized in connection with the Offering, and it is agreed that
the duties of Escrow Agent are purely ministerial in nature, and that Escrow
Agent shall incur no liability whatsoever under this Agreement, except for
acts or omissions of the Escrow Agent involving or constituting willful
misconduct, fraud, gross negligence or bad faith.
11. Resignation. Escrow Agent may, at any time, resign hereunder by giving
written notice of its intent to resign to the other parties hereto, at their
respective addresses set forth below, at least ten (10) days prior to the date
specified for such resignation to take effect, and upon the effective date of
such resignation the Escrow Funds, including all accrued interest, shall be
delivered by Escrow Agent to the person designated in writing by the
Underwriter and the Partnership, whereupon all of Escrow Agent's obligations
hereunder shall cease and terminate (except as hereinafter provided in this
paragraph). If no such person shall have been designated prior to the
effective date of such resignation, all obligations of Escrow Agent hereunder
shall, nevertheless, cease and terminate (except as hereinafter provided in
this paragraph). Escrow Agent's sole responsibility thereafter shall be to
hold the Escrow Funds until such time as the Escrow Agent delivers the Escrow
Funds and accrued interest to a person designated by the Partnership and the
Underwriter or to the person designated by a court of competent jurisdiction.
Notwithstanding the foregoing, nothing in this paragraph releases Escrow Agent
or relieves it of any of its obligations that existed prior to the effective
date of Escrow Agent's resignation, including, without limitation, liability
for willful misconduct, fraud, gross negligence or bad faith.
12. Indemnification. The Underwriter and the Partnership agree to indemnify,
defend and hold Escrow Agent harmless from and against any and all loss,
damage, tax, liability and expense that may be incurred by Escrow Agent and
arising out of or in connection with its acceptance of appointment as escrow
agent hereunder, including reasonable attorneys' fees and other legal costs
and expenses of defending itself against any claim or liability in connection
with its performance hereunder, except in the case of willful misconduct,
fraud, gross negligence or bad faith on the part of Escrow Agent. The
Partnership or the General Partner and not the Underwriter shall each pay of
the cost of any indemnification of the Escrow Agent pursuant to this
Agreement. The provisions of this paragraph shall survive the termination of
this Agreement.
Escrow Agent may consult with and rely on its attorneys with respect to any
dispute not assumed or defended by the Partnership or its General Partner and
the indemnification referred in this paragraph 12 shall include all
reasonable and necessary attorneys' fees of Escrow Agent in connection with
such consultation.
13. Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and deemed given when personally delivered (including
delivery by commercial overnight courier service), or when deposited in the
United States mail, postage prepaid, sent certified or registered, and
addressed as follows:
3
<PAGE>
(a) If to the Partnership and its General Partner to:
Atlas Futures Fund, Limited Partnership, 5916 N. 300 West, Fremont,
IN 46737 with a copy to William S. Scott of The Scott Law Firm,
P.A., 5121 Sarazen Drive, Hollywood, FL 33021.
(b) If to the Underwriter, to:
Futures Investment Company, 5916 N. 300 West, Fremont, IN 46737,
Attn.: Compliance Department
(c) If to the Escrow Agent, to:
Star Financial Bank, 2004 N. Wayne St., Angola, IN 46703, Attn: Mr.
Thad Wright, Vice President
or to such other address or person as hereafter shall be designated in writing
by the party providing notice.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
15. Titles or Captions. The titles or captions of sections and paragraphs in
this Agreement are provided for convenience of reference only and should not
be considered a part hereof for purposes of interpreting or applying this
Agreement, and such titles or captions do not define, limit, extend, explain
or describe the scope or extent of this Agreement or any of its terms or
conditions.
16. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
17. Amendments. No amendment, modification, supplement, termination or
waiver of or to any provision of this Agreement nor consent to any departure
therefrom, shall be effective unless the same shall be in writing and signed
by or on behalf of each of the parties to this Agreement.
18. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns.
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matters hereof and
supersedes all negotiations, preliminary agreements and all prior or
contemporaneous discussions and understandings of the parties hereto in
connection with the subject matters hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ATLAS FUTURES FUND, LIMITED PARTNERSHIP STAR FINANCIAL BANK
By: Ashley Capital Management, Inc.
The General Partner
By: s/ Shira Del Pacult By: s/ Thad Wright
Ms. Shira Del Pacult Thad Wright
President Vice President
FUTURES INVESTMENT COMPANY
By: s/ Shira Del Pacult
Ms. Shira Del Pacult
Vice President
4
<PAGE>
******************************************************************************
EXHIBIT F TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
MICHAEL J. FRISCHMEYER
THIS AGREEMENT is made and entered as of this 1st day of February, 1998
between Atlas Futures Fund, Limited Partnership, (the "Fund") and Michael J.
Frischmeyer, (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Vision Limited
Partnership (the "FCM") account number _______ (the "Account") and the grant
of the power of attorney on the standard form of the FCM to the CTA to permit
the CTA to enter trades for the Fund in the Account, the parties hereto agree
as follows:
1. The Fund shall initially deposit in the Account with the FCM, U.S. funds
in the amount of _____________________ dollars ($_______). Subsequent
deposits and accumulation of profits in the Account, less withdrawals and
losses, shall be subject to this Agreement. At its sole discretion, the Fund
may add or withdraw funds at any time from the Account by written request to
the FCM with a copy to the CTA.
2. CTA will cause futures contracts, and when deemed advisable, options on
futures and forward contracts, to be bought and sold on behalf of the Fund in
the Account. CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. During the term
of this agreement, the Fund agrees that they will not place orders in the
Account without prior written consent of the Adviser.
3. The CTA's services are not rendered exclusively for the Fund and CTA shall
be free to render similar services to others. The General Partner may change
the FCM for the account assigned to the CTA at anytime upon written direction
to the FCM and the CTA and CTA agrees to effect the transfer and sign the
forms necessary to complete such change.
4. The IB shall charge the Fund a fixed commission of 9% of the Net Equity in
the account assigned to the CTA payable at the rate of 3/4% per month. This
payment to the IB will be for all round turns, pit brokerage, exchange, NFA
fees and other clearing expenses arising from the trades placed by the CTA in
the account for domestic trades. This does not include delivery or other
exchange for physicals or trades made on foreign exchanges or forward markets.
Those costs will be at rates to be negotiated by the General Partner with the
IB or other party, as the facts determine, and charged to the Fund.
5. CTA will use its best efforts to obtain an equity run from the FCM before
the opening of business the next trading day. Unless authorized in writing
by the General Partner, the CTA will use only the equity in the Account or
Accounts assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. Fund agrees to execute, from time to time, the Acknowledgment of Receipt
of Disclosure Document from the CTA. By signing, the Fund agrees that it has
received and understands the most recent copy of the Adviser's Risk Disclosure
Document.
7. The Fund agrees to execute the Advisers Managed Account Compensation
Agreement authorizing the CTA to be paid its management fee from the Account.
The CTA will be paid an annual management fee of three percent (3%) of the
equity on deposit in the Account payable on the first of each month computed
upon the equity on deposit on the last day of the preceding month. In
addition, the CTA will be paid an incentive fee of fifteen percent (15%), of
the New Net Profit earned each quarter, which shall not be deducted from the
Account, but will be paid upon submission of an invoice by the CTA to the
General Partner of the Fund.
8. Fund and CTA agree that they have properly executed all the necessary
account forms for opening the Account with the FCM; provided, however, any
disputes will be submitted to arbitration only upon written agreement of the
parties at the time such dispute arises and the terms of this Agreement will
supersede any terms contained in any other agreement between the parties
hereto and, in the event of any conflicts, the terms of this Agreement shall
control. This Agreement will be governed by the laws of the State of Illinois
and any dispute will be resolved by a court of competent jurisdiction located
in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Atlas Futures Fund, Limited Partnership Mr. Michael J. Frischmeyer
By: Ashley Capital Management, Inc.
s/ Shira Del Pacult s/ Michael J. Frischmeyer
Ms. Shira Del Pacult Michael J. Frischmeyer
President
******************************************************************************
EXHIBIT G TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
BARRY T. JOHNSON - Commoditech, Inc.
THIS AGREEMENT is made and entered as of this 1st day of February, 1998
between Atlas Futures Fund, Limited Partnership, (the "Fund") and Commoditech,
Inc., a Missouri corporation, (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Vision Limited
Partnership (the "FCM") account number _______ (the "Account") and the grant
of the power of attorney on the standard form of the FCM to the CTA to permit
the CTA to enter trades for the Fund in the Account, the parties hereto agree
as follows:
1. The Fund shall initially deposit in the Account with the FCM, U.S. funds
in the amount of _____________________ dollars ($_______). Subsequent
deposits and accumulation of profits in the Account, less withdrawals and
losses, shall be subject to this Agreement. At its sole discretion, the Fund
may add or withdraw funds at any time from the Account by written request to
the FCM with a copy to the CTA.
2. CTA will cause futures contracts, and when deemed advisable, options on
futures and forward contracts, to be bought and sold on behalf of the Fund in
the Account. CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. During the term
of this agreement, the Fund agrees that they will not place orders in the
Account without prior written consent of the Adviser.
3. The CTA's services are not rendered exclusively for the Fund and CTA shall
be free to render similar services to others. The General Partner may change
the FCM for the account assigned to the CTA at anytime upon written direction
to the FCM and the CTA and CTA agrees to effect the transfer and sign the
forms necessary to complete such change.
4. The IB shall charge the Fund a fixed commission of 9% of the Net Equity in
the account assigned to the CTA payable at the rate of 3/4% per month. This
payment to the IB will be for all round turns, pit brokerage, exchange, NFA
fees and other clearing expenses arising from the trades placed by the CTA in
the account for domestic trades. This does not include delivery or other
exchange for physicals or trades made on foreign exchanges or forward markets.
Those costs will be at rates to be negotiated by the General Partner with the
IB or other party, as the facts determine, and charged to the Fund.
5. CTA will use its best efforts to obtain an equity run from the FCM before
the opening of business the next trading day. Unless authorized in writing
by the General Partner, the CTA will use only the equity in the Account or
Accounts assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. Fund agrees to execute, from time to time, the Acknowledgment of Receipt
of Disclosure Document from the CTA. By signing, the Fund agrees that it has
received and understands the most recent copy of the Adviser's Risk Disclosure
Document.
7. The Fund agrees to execute the Advisers Managed Account Compensation
Agreement authorizing the CTA to be paid its management fee from the Account.
The CTA will be paid an annual management fee of three percent (3%) of the
equity on deposit in the Account payable on the first of each month computed
upon the equity on deposit on the last day of the preceding month. In
addition, the CTA will be paid an incentive fee of fifteen percent (15%), of
the New Net Profit earned each quarter, which shall not be deducted from the
Account, but will be paid upon submission of an invoice by the CTA to the
General Partner of the Fund.
8. Fund and CTA agree that they have properly executed all the necessary
account forms for opening the Account with the FCM; provided, however, any
disputes will be submitted to arbitration only upon written agreement of the
parties at the time such dispute arises and the terms of this Agreement will
supersede any terms contained in any other agreement between the parties
hereto and, in the event of any conflicts, the terms of this Agreement shall
control. This Agreement will be governed by the laws of the State of Illinois
and any dispute will be resolved by a court of competent jurisdiction located
in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Atlas Futures Fund, Limited Partnership Commoditech, Inc.
By: Ashley Capital Management, Inc.
s/ Shira Del Pacult s/ Barry T. Johnson
Ms. Shira Del Pacult Barry T. Johnson
President President
******************************************************************************
EXHIBIT H TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
ERIC ROSENBERRY - ROSENBERY CAPITAL MANAGEMENT, INC.
THIS AGREEMENT is made and entered as of this 1st day of February, 1998
between Atlas Futures Fund, Limited Partnership, (the "Fund") and Rosenbery
Capital Management, Inc., an Illinois corporation, (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Vision Limited
Partnership (the "FCM") account number _______ (the "Account") and the grant
of the power of attorney on the standard form of the FCM to the CTA to permit
the CTA to enter trades for the Fund in the Account, the parties hereto agree
as follows:
1. The Fund shall initially deposit in the Account with the FCM, U.S. funds
in the amount of _____________________ dollars ($_______). Subsequent
deposits and accumulation of profits in the Account, less withdrawals and
losses, shall be subject to this Agreement. At its sole discretion, the Fund
may add or withdraw funds at any time from the Account by written request to
the FCM with a copy to the CTA.
2. CTA will cause futures contracts, and when deemed advisable, options on
futures and forward contracts, to be bought and sold on behalf of the Fund in
the Account. CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. During the term
of this agreement, the Fund agrees that they will not place orders in the
Account without prior written consent of the Adviser.
3. The CTA's services are not rendered exclusively for the Fund and CTA shall
be free to render similar services to others. The General Partner may change
the FCM for the account assigned to the CTA at anytime upon written direction
to the FCM and the CTA and CTA agrees to effect the transfer and sign the
forms necessary to complete such change.
4. The IB shall charge the Fund a fixed commission of 9% of the Net Equity in
the account assigned to the CTA payable at the rate of 3/4% per month. This
payment to the IB will be for all round turns, pit brokerage, exchange, NFA
fees and other clearing expenses arising from the trades placed by the CTA in
the account for domestic trades. This does not include delivery or other
exchange for physicals or trades made on foreign exchanges or forward markets.
Those costs will be at rates to be negotiated by the General Partner with the
IB or other party, as the facts determine, and charged to the Fund.
5. CTA will use its best efforts to obtain an equity run from the FCM before
the opening of business the next trading day. Unless authorized in writing
by the General Partner, the CTA will use only the equity in the Account or
Accounts assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. Fund agrees to execute, from time to time, the Acknowledgment of Receipt
of Disclosure Document from the CTA. By signing, the Fund agrees that it has
received and understands the most recent copy of the Adviser's Risk Disclosure
Document.
7. The Fund agrees to execute the Advisers Managed Account Compensation
Agreement authorizing the CTA to be paid its management fee from the Account.
The CTA will be paid an annual management fee of three percent (3%) of the
equity on deposit in the Account payable on the first of each month computed
upon the equity on deposit on the last day of the preceding month. In
addition, the CTA will be paid an incentive fee of fifteen percent (15%), of
the New Net Profit earned each quarter, which shall not be deducted from the
Account, but will be paid upon submission of an invoice by the CTA to the
General Partner of the Fund.
8. Fund and CTA agree that they have properly executed all the necessary
account forms for opening the Account with the FCM; provided, however, any
disputes will be submitted to arbitration only upon written agreement of the
parties at the time such dispute arises and the terms of this Agreement will
supersede any terms contained in any other agreement between the parties
hereto and, in the event of any conflicts, the terms of this Agreement shall
control. This Agreement will be governed by the laws of the State of Illinois
and any dispute will be resolved by a court of competent jurisdiction located
in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Atlas Futures Fund, Limited Partnership Rosenbery Capital Management
By: Ashley Capital Management, Inc.
s/ Shira Del Pacult s/ Eric Rosenbery
Ms. Shira Del Pacult Eric Rosenbery
President President
******************************************************************************
EXHIBIT I TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
JAMES A. HYERCZYK (d/b/a J.A.H. RESEARCH AND TRADING)
THIS AGREEMENT is made and entered as of this 28th day of April, 1998 between
Atlas Futures Fund, Limited Partnership, (the "Fund") and J.A.H. Research and
Trading (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Vision Limited
Partnership (the "FCM") account number _______ (the "Account") and the grant
of the power of attorney on the standard form of the FCM to the CTA to permit
the CTA to enter trades for the Fund in the Account, the parties hereto agree
as follows:
1. The Fund shall initially deposit in the Account with the FCM, U.S. funds
in the amount of _____________________ dollars ($_______). Subsequent
deposits and accumulation of profits in the Account, less withdrawals and
losses, shall be subject to this Agreement. At its sole discretion, the Fund
may add or withdraw funds at any time from the Account by written request to
the FCM with a copy to the CTA.
2. CTA will cause futures contracts, and when deemed advisable, options on
futures and forward contracts, to be bought and sold on behalf of the Fund in
the Account. CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. During the term
of this agreement, the Fund agrees that they will not place orders in the
Account without prior written consent of the Adviser.
3. The CTA's services are not rendered exclusively for the Fund and CTA shall
be free to render similar services to others. The General Partner may change
the FCM for the account assigned to the CTA at anytime upon written direction
to the FCM and the CTA and CTA agrees to effect the transfer and sign the
forms necessary to complete such change.
4. The IB shall charge the Fund a fixed commission of 9% of the Net Equity in
the account assigned to the CTA payable at the rate of 3/4% per month. This
payment to the IB will be for all round turns, pit brokerage, exchange, NFA
fees and other clearing expenses arising from the trades placed by the CTA in
the account for domestic trades. This does not include delivery or other
exchange for physicals or trades made on foreign exchanges or forward markets.
Those costs will be at rates to be negotiated by the General Partner with the
IB or other party, as the facts determine, and charged to the Fund.
5. CTA will use its best efforts to obtain an equity run from the FCM before
the opening of business the next trading day. Unless authorized in writing
by the General Partner, the CTA will use only the equity in the Account or
Accounts assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. Fund agrees to execute, from time to time, the Acknowledgment of Receipt
of Disclosure Document from the CTA. By signing, the Fund agrees that it has
received and understands the most recent copy of the Adviser's Risk Disclosure
Document.
7. The Fund agrees to execute the Advisers Managed Account Compensation
Agreement authorizing the CTA to be paid its management fee from the Account.
The CTA will be paid an annual management fee of three percent (3%) of the
equity on deposit in the Account payable on the first of each month computed
upon the equity on deposit on the last day of the preceding month. In
addition, the CTA will be paid an incentive fee of fifteen percent (15%), of
the New Net Profit earned each quarter, which shall not be deducted from the
Account, but will be paid upon submission of an invoice by the CTA to the
General Partner of the Fund.
8. Fund and CTA agree that they have properly executed all the necessary
account forms for opening the Account with the FCM; provided, however, any
disputes will be submitted to arbitration only upon written agreement of the
parties at the time such dispute arises and the terms of this Agreement will
supersede any terms contained in any other agreement between the parties
hereto and, in the event of any conflicts, the terms of this Agreement shall
control. This Agreement will be governed by the laws of the State of Illinois
and any dispute will be resolved by a court of competent jurisdiction located
in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Atlas Futures Fund, Limited Partnership J.A.H. Research and Trading
By: Ashley Capital Management, Inc.
s/ Shira Del Pacult s/ James A. Hyerczyk
Ms. Shira Del Pacult James A. Hyerczyk
President
******************************************************************************
EXHIBIT J TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
STEVEN MIDLARSKY - C&M TRADERS, INC.
THIS AGREEMENT is made and entered as of this 28th day of April, 1998 between
Atlas Futures Fund, Limited Partnership, (the "Fund") and C&M Traders, Inc., a
Florida corporation, (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Vision Limited
Partnership (the "FCM") account number _______ (the "Account") and the grant
of the power of attorney on the standard form of the FCM to the CTA to permit
the CTA to enter trades for the Fund in the Account, the parties hereto agree
as follows:
1. The Fund shall initially deposit in the Account with the FCM, U.S. funds
in the amount of _____________________ dollars ($_______). Subsequent
deposits and accumulation of profits in the Account, less withdrawals and
losses, shall be subject to this Agreement. At its sole discretion, the Fund
may add or withdraw funds at any time from the Account by written request to
the FCM with a copy to the CTA.
2. CTA will cause futures contracts, and when deemed advisable, options on
futures and forward contracts, to be bought and sold on behalf of the Fund in
the Account. CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. During the term
of this agreement, the Fund agrees that they will not place orders in the
Account without prior written consent of the Adviser.
3. The CTA's services are not rendered exclusively for the Fund and CTA shall
be free to render similar services to others. The General Partner may change
the FCM for the account assigned to the CTA at anytime upon written direction
to the FCM and the CTA and CTA agrees to effect the transfer and sign the
forms necessary to complete such change.
4. The IB shall charge the Fund a fixed commission of 9% of the Net Equity in
the account assigned to the CTA payable at the rate of 3/4% per month. This
payment to the IB will be for all round turns, pit brokerage, exchange, NFA
fees and other clearing expenses arising from the trades placed by the CTA in
the account for domestic trades. This does not include delivery or other
exchange for physicals or trades made on foreign exchanges or forward markets.
Those costs will be at rates to be negotiated by the General Partner with the
IB or other party, as the facts determine, and charged to the Fund.
5. CTA will use its best efforts to obtain an equity run from the FCM before
the opening of business the next trading day. Unless authorized in writing
by the General Partner, the CTA will use only the equity in the Account or
Accounts assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. Fund agrees to execute, from time to time, the Acknowledgment of Receipt
of Disclosure Document from the CTA. By signing, the Fund agrees that it has
received and understands the most recent copy of the Adviser's Risk Disclosure
Document.
7. The Fund agrees to execute the Advisers Managed Account Compensation
Agreement authorizing the CTA to be paid its management fee from the Account.
The CTA will be paid an annual management fee of three percent (3%) of the
equity on deposit in the Account payable on the first of each month computed
upon the equity on deposit on the last day of the preceding month. In
addition, the CTA will be paid an incentive fee of fifteen percent (15%), of
the New Net Profit earned each quarter, which shall not be deducted from the
Account, but will be paid upon submission of an invoice by the CTA to the
General Partner of the Fund.
8. Fund and CTA agree that they have properly executed all the necessary
account forms for opening the Account with the FCM; provided, however, any
disputes will be submitted to arbitration only upon written agreement of the
parties at the time such dispute arises and the terms of this Agreement will
supersede any terms contained in any other agreement between the parties
hereto and, in the event of any conflicts, the terms of this Agreement shall
control. This Agreement will be governed by the laws of the State of Illinois
and any dispute will be resolved by a court of competent jurisdiction located
in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Atlas Futures Fund, Limited Partnership C&M Traders, Inc.
By: Ashley Capital Management, Inc.
s/ Shira Del Pacult s/ Steven Midlarsky
Ms. Shira Del Pacult Steven Midlarsky
President President
******************************************************************************
FORM S-1
Registration No.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
(b) The Selling Agreement between Futures Investment Company and the
Registrant contains an indemnification from the General Partner to the
effect that the disclosures in the Prospectus and this Amendment are in
compliance with Rule 10b5 and otherwise true and complete. This
indemnification speaks from the date of the first offering of the Units
through the end of the applicable statute of limitations. The
Partnership has assumed no responsibility for any indemnification to
Futures Investment Company and the General Partner is prohibited by the
Partnership Agreement from receiving indemnification for breach of any
securities laws or for reimbursement for insurance for coverage for any
such claims. See Article X, Section 10.4 (b) and (e).
(d) There are no indemnification agreements which are not contained in the
Limited Partnership Agreement attached as Exhibit A, the Selling
Agreement or the Clearing Agreement.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (unless indicated) are filed herewith and made a part
of this Registration Statement:
(a) Exhibits.
Exhibit
Number Description of Document
(1) - 01 Selling Agreement dated February 1, 1998, among the Partnership, the
General Partner, and Futures Investment Company, the Selling Agent
(2) None
(3) - 01 Articles of Incorporation of the General Partner
(3) - 02 By-Laws of the General Partner
(3) - 03 Board Resolution of General Partner to authorize formation of
Delaware Limited Partnership
(3) - 04 Amended and Restated Agmt. of Limited Partnership of the Registrant
dated February 1, 1998 (included as Exhibit A to the Prospectus)
(3) - 05 Certificate of Limited Partnership, Designation of Registered Agent,
Certificate of Initial Capital filed with the Delaware Secretary of
State, and Delaware Secretary of State acknowledgment of filing of
Certificate of Limited Partnership
(4) - 01 Amended and Restated Agmt. of Limited Partnership of the Registrant
dated February 1, 1998 (included as Exhibit A to the Prospectus)
(5) - 01 Opinion of The Scott Law Firm, P.A. relating to the legality of the
Partnership Units.
(6) Not Applicable
(7) Not Applicable
(8) - 01 Opinion of The Scott Law Firm, P.A. with respect to Federal income tax
consequences.
(9) None
(10) - 01 Form of Advisory Agreements between the Partnership and the CTAs
(included as Exhibits F, G, H, I & J to the Prospectus)
(10) - 02 Form of New Account Agreement between the Partnership and the FCM
(10) - 03 Form of Subscription Agreement and Power of Attorney
(included as Exhibit D to the Prospectus).
(10) - 04 Escrow Agmt. among Escrow Agent, Underwriter, and the Partnership.
(included as Exhibit E to the Prospectus).
(10) - 05 Introducing Broker Clearing Agreement by and between Vision Limited
Partnership as futures commission merchant (the "FCM") and Futures
Investment Company as introducing broker (the "IB")
(11) Not Applicable - start-up business
(12) Not Applicable
(13) Not Required
(14) None
(15) None
(16) Not Applicable
(17) Not Required
(18) Not Required
(19) Not Required
(20) Not Required
(21) None
(22) Not Required
(23) - 01 Consent of Frank L. Sassetti & Co., Certified Public Accountants
(23) - 02 Consent of James Hepner, Certified Public Accountant
(23) - 03 Consent of The Scott Law Firm, P.A.
(23) - 04 Consent of Michael J. Frischmeyer, CTA
(23) - 05 Consent of Commoditech, Inc., CTA
(23) - 06 Consent of Rosenbery Capital Management, Inc., CTA
(23) - 07 Consent of J.A.H. Research and Trading, CTA
(23) - 08 Consent of C&M Traders, Inc., CTA
(23) - 09 Consent of Futures Investment Company, as Selling Agent
(23) - 10 Consent of Futures Investment Company, as Introducing Broker
(23) - 11 Consent of Star Financial Bank, Angola, Indiana, Escrow Agent
(23) - 12 Consent of Vision Limited Partnership
(24) None
(25) None
(26) None
(27) Not Applicable
(28) Not Applicable
(99) - 01 Subordinated Loan Agreement for Equity Capital
(99) - 02 Representative's Agreement between Futures Investment Company and
Shira Del Pacult
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
Item 17. Undertakings.
(a) (1) The undersigned registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) 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, represents a fundamental:
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(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.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus 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.
(c) The General Partner has provided an indemnification to Futures Investment
Company, the best efforts selling agent. The Partnership (issuer) has
not made any indemnification to Futures Investment Company.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the Registrant including, but not limited to, the General Partner
pursuant to the provisions described in Item 14 above, or otherwise, the
Registrant had been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 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 such 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.
******************************************************************************
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the General
Partner of the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fremont in the State of Indiana on this 4th day of May, 1998.
ASHLEY CAPITAL MANAGEMENT, INC. ATLAS FUTURES FUND, LIMITED PARTNERSHIP
BY ASHLEY CAPITAL MANAGEMENT, INC.
GENERAL PARTNER
BY: s/ Shira Del Pacult BY: s/ Shira Del Pacult
MS. SHIRA PACULT MS. SHIRA PACULT
PRESIDENT PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person on behalf of Ashley
Capital Management, Inc., General Partner of the Registrant in the capacities
and on the date indicated.
s/ Shira Del Pacult
MS. SHIRA PACULT
PRESIDENT
Date: May 4, 1998
(Being the principal executive officer, the principal financial and accounting
officer and the sole director of Ashley Capital Management, Inc., General
Partner of the Fund)
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Best Efforts Selling
And Managing Dealer Agreement
THIS AGREEMENT dated this 1st day of February, 1998, by and between Atlas
Futures Fund, Limited Partnership, a Delaware Limited Partnership, (the "Fund"
or Partnership") of 5916 N. 300 West, Fremont, IN 46737 and Ashley Capital
Management, Incorporated, its general partner, (the "General Partner"); and,
Futures Investment Company ("FIC" or "Managing Dealer") of 5916 N. 300 West,
Fremont, IN 46737 and any other selling agents appointed by the General Partner
to serve as additional selling agents ("Additional Selling Agents" or
"Soliciting Dealer"), (FIC and Additional Selling Agents are collectively
referred to as "Sales Agents").
WITNESSETH:
WHEREAS, the Fund was organized under a limited partnership agreement (the
"Limited Partnership Agreement") and a Certificate of Limited Partnership filed
with the Delaware Secretary of State on January 12, 1998, to engage in
speculative trading of futures, options on futures and other commodity
interests described in the Fund's final approved Disclosure Document dated
February 1, 1998 (the "Disclosure Document" or "Prospectus"); and
WHEREAS, the Fund proposes to offer and sell up to $7,000,000 of limited
partnership interests (the "Units") as described in the Prospectus; and
WHEREAS, the Sales Agents desire to promote, solicit, and complete the sale
of the Units to customers identified by them upon the terms and in reliance
upon the representations, warranties and agreements set forth herein; and
WHEREAS, the General Partner desires to compensate the registered
representatives of FIC and the Additional Selling Agents who are also
associated persons, qualified to receive commodity commissions, by the payment
of a percentage of the round turn or fixed commodity commissions based upon a
percentage of equity in lieu of round turn commissions (hereinafter such
payments are called "Trailing Commissions") earned by the General Partner in
consideration of said registered representatives and associated persons
providing service to the Partnership and the investors sold by the Sales Agents
so long as said investors remain Partners in the Fund; and
WHEREAS, the President of the General Partner, individually, and FIC, as
Broker/Dealer, have entered into a separate Agreement to define their
activities related to the marketing and sale of securities and commodity
products by the President of the General Partner as a registered representative
of FIC.
NOW THEREFORE, the parties hereto, intending to be legally bound hereby and
in consideration of the mutual agreements, covenants, representations and
warranties contained herein, agree as follows:
I. Appointment of the Managing Dealer. The Partnership hereby engages the
Managing Dealer to sell Units and to select and recommend Soliciting Dealers to
serve on a non-exclusive, best efforts basis, to solicit and obtain
applications and orders for the purchase of Units in the Fund to investors who
meet the suitability standards established in the Prospectus and by applicable
law upon the terms described in the Prospectus as required by applicable law
and pursuant to this Agreement. The Managing Dealer and every Soliciting
Dealer, will be, at the time of appointment and continuously during the time
of their performance hereunder, members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), and will serve as
independent contractors to the Partnership for the purpose of soliciting
subscriptions for Units on a "best efforts" basis in accordance with the terms
and conditions set forth herein and in the Prospectus.
A. No Market to be Maintained. It is understood that neither the Managing
Dealer nor any Soliciting Dealer shall have any commitment or obligation to
sell the Units or provide a market for the Units, other than to use their
best efforts to attempt to sell such Units. The Partnership may, but is
not obligated, to engage other NASD-member firms to sell Units on terms
substantially the same as the terms hereof; provided, however, in certain
instances, the terms of such engagements with respect to compensation may
provide for the payment of commissions and other fees of less than the
amounts provided to the Managing Dealer.
B. Allocation of Units. The allocation of Units among the Managing Dealer
and any such other Soliciting Dealers shall, subject to the terms and
conditions herein set forth, be made by the Partnership, with approval of
the Managing Dealer, in their sole discretion. The Partnership reserves
the right to notify each Sales Agent by telegram or by other means of the
number of Units reserved for sale for each Sales Agent. Such Units will be
reserved for sale until the time specified in such notification. Sales of
any reserved Units after the time specified in the notification or any
requests for additional Units will be subject to rejection by the
Partnership, in whole or in part.
C. Duties of Sales Agents. The Sales Agents agree to act, subject to a
$7,000,000 maximum upon total sales, including sales commissions, of Units
by the Fund by the General Partner and all Sales Agents or termination as
provided in this Agreement or the Prospectus, as the Sales Agents, to take
the following actions:
1. Comply With Offering Procedures. Managing Dealer agrees to take, and
agrees further to cause the Soliciting Dealers to take, those steps
deemed necessary or desirable by legal counsel to the Partnership to
comply with all laws and procedures applicable to the offering of Units
for sale in the jurisdictions selected by the Partnership and approved by
the Managing Dealer. The Partnership shall provide a legal opinion from
its counsel, in satisfactory form and substance to legal counsel for the
Managing Dealer, to advise the effective date of the Prospectus and to
otherwise support the registration of the securities for sale together
with a legal memorandum to identify the states and other jurisdictions,
if any, in which the securities may be sold (the "Blue Sky Survey").
Sales Agents shall offer the Units for sale in those jurisdictions listed
in said Blue Sky Survey and will use only the sales and advertising
literature specifically supplied and authorized by the General Partner.
Additional copies of the Prospectus will be supplied to Sales Agents in
reasonable quantities upon request. The Partnership will also provide
Sales Agents with reasonable quantities of supplemental literature, if
any, prepared by the Partnership in connection with the offering of the
Units.
2. Suitability Standards. Solicitation and other activities by the
Sales Agents shall be undertaken only in accordance with this Agreement,
the Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the applicable rules and regulations of the SEC, the Blue Sky
Survey and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), including, but not in any way
limited to, Sections 8, 24, 25 and 36 of Article III of the Rules of
Fair Practice. Each Sales Agent will procure information and
documentation from each subscriber solicited by their registered
representatives to demonstrate a reasonable basis to believe that the
sale of Units solicited by it were to a subscriber who, on the basis of
information obtained from the subscriber concerning his investment
objectives, other investments, financial situation and requirements, and
any other information known by the Sales Agent, after due inquiry, is or
will be: (i) in a financial position appropriate to realize to a
significant extent the benefits of the investment described in the
Prospectus; and, (ii) the subscriber has a fair market net worth
sufficient to sustain the risks inherent in the program, including loss
of investment and lack of liquidity which shall be either: (a) a minimum
annual gross income of $45,000 and a net worth (exclusive of home, home
furnishings and automobiles) of $45,000; or (b) a net worth (determined
with the foregoing exclusions) of $150,000; or (c) such other higher
gross income and/or net worth requirements of the state where such
investor resides; and, (iii) the Units are otherwise a suitable
investment for the subscriber. Each Sales Agent shall maintain records
disclosing the basis upon which they determined the suitability of any
persons who purchased Units for a period of six years.
3. Authorized Communication.
(a) Prospectus Review. Managing Dealer hereby affirms that it has
reviewed the draft Prospectus furnished to it and has formed a
reasonable basis to believe that all material facts related to the
Partnership, the offering, and the proposed operation of the
Partnership have been adequately and accurately disclosed and that
such facts are sufficient for it to provide prospective investors with
a basis for evaluating the merits of an investment in the Partnership.
In making the foregoing affirmation, Managing Dealer, for itself and
in the agreements it negotiates with the Soliciting Dealers, may make
reference to descriptions in the Prospectus, other than the
descriptions in the Summary, which are for convenience, only. Sales
Agents agree to maintain files to disclose and preserve the basis upon
which the determination of suitability for investment in the
Partnership was reached as to each subscriber solicited by it for a
period of not less than six years. The basis for determining
suitability may include the Subscription Agreement and Power of Attor-
ney and other certificates submitted by subscribers upon which the
Sales Agents and the Partnership may rely, absent actual knowledge of
or a reason to believe, any information contained in such documents is
inaccurate. Specifically, each Sales Agent has reviewed and will
cause its potential subscribers to review: (i) the Risk Disclosure
Statement; (ii) the items of compensation relating to the Fund set
forth under "Fees, Compensation And Expenses"; (iii) certain tax
aspects of an investment in the Fund set forth under "Summary of
Income Tax Consequences"; (iv) the financial condition and experience
of the General Partner set forth under "General Partner"; and, (v) the
risk factors relating to an investment in the Units set forth under
"Risk Factors".
(b) Each Sales Agent agrees to: (i) deliver to each person who
subscribes for the Units, a Prospectus, as then supplemented or
amended, no less than five days prior to the tender of his
subscription agreement (the "Subscription Agreement"); (ii) comply
promptly with the written request of any person for a copy of the
Prospectus during the period between the effective date of the
Prospectus and the later of the termination of the distribution of
the Units or the expiration of 90 days after the first date upon
which the Units were offered to the public; and, (iii) deliver in
accordance with applicable law or as prescribed by any state
securities administrator to any person a copy of any document
included within the Prospectus.
4. Subscriptions. During the Offering Period, the Sales Agents shall
cause the subscriber to deliver all qualification documentation,
subscriptions for Units, and checks for payment for Units shall be
delivered by the Sales Agents to the General Partner of the Fund for
review and acceptance.
(a) All checks shall be made payable to "First American State Bank-
Escrow Agent for Atlas Futures Fund, LP", (the "Escrow Agent") to be
deposited within 24 hours after receipt by Sales Agents to the Escrow
Account as described in the Prospectus or, after the termination of
the escrow, to "Atlas Futures Fund, Limited Partnership" for
investment in the Fund effective on the next admission date by the
General Partner following the sale of the Minimum or, will be returned
by the General Partner to the subscriber together with an explanation
to the subscriber, with a copy to the Managing Dealer and the
Soliciting Dealer, if applicable, of the reason for the refusal by the
General Partner to accept the subscription on behalf of the
Partnership. The Sales Agents may not accept cash for the sale of
Units. Checks not made payable as described in the Prospectus and
above will be returned to the subscriber.
D. Payments to Managing Dealer. The Managing Dealer will be paid a one time
sales commission of six percent ( 6%) of the gross subscriptions for all
Units sold by the Sales Agents at the time of acceptance of the sale by the
General Partner; provided, however, prior to the sale of the Minimum, checks
for the gross sales price, including commissions, shall be made payable and
deposited to Escrow as provided in the Prospectus. Upon the termination of
the Escrow Agreement, the Managing Dealer will receive a check from the
Escrow Agent in the amount of six percent (6%) of the gross subscriptions
for all Units sold to that point in time. Managing Dealer will be solely
responsible for negotiation of the amount, timing, and payment of the sales
commissions to the Soliciting Dealers. The Partnership and its General
Partner may not, under any circumstances, waive, modify, or otherwise adjust
the sales commission to be paid pursuant to the terms of this Agreement.
E. Payment of Trailing Commissions. The General Partner shall pay a portion
of the fixed commodity commission, after payment of expenses, as Trailing
Commissions to the Sales Agents, including the Affiliated Introducing Broker
of the General Partner, which are qualified to receive such commissions on
terms it shall negotiate with such Sales Agents. The term expenses means
the amounts paid by the General Partner for clearing charges and fees to the
FCM and other Clearing Brokers, the Cash FX Firm, if any, the Exchanges, and
the NFA. The method and the amount of such commissions or fees paid by the
General Partner to the Sales Agents shall be determined solely by
negotiations between the General Partner and the Sales Agents; provided,
however, no change shall be made to permit a retroactive adjustment to
Trailing Commissions previously paid. Any such adjustment in rate of
Trailing Commissions must have equal application to all Sales Agents. Such
fees and charges paid by the Fund to the General Partner are described in
detail in the Prospectus.
F. Continuing Service. In consideration of the payment of Trailing
Commissions related to the trade of commodities by the Partnership to the
employers of the associated persons who are Commodity Futures Trading
Commission registered or otherwise qualified to be paid Trailing
Commissions, such employers and associated persons agree to provide services
to the Fund, investors in the Fund, and the General Partner. Such services
shall include, but are not limited to, (i) preparation of projections of
methods to be used and costs to identify suitable investors to solicit to
buy Units; (ii) establish a promotion budget for delivery of information
regarding the Fund to the registered representatives of the Sales Agents;
(iii) inquiring of the General Partner of the Fund, from time to time, at
the request of an owner of Units to determine the net asset value of a Unit,
the commodity markets traded, the advisors utilized, the Fund performance,
and assisting, at the request of the General Partner, in the transfer and
Redemption of Units sold by the Sales Agents; (iv) provide training and
supervision of personnel to provide service to investors in the Fund; (v)
maintain and distribute current copies of Prospectuses and financial
reports; (vi) provide assistance and review in designing materials to send
to Partners and potential investors and developing methods of making such
materials accessible to Partners and potential investors; and, (vii)
generally, take those steps necessary and desirable to aid in the retention
of investment in the Partnership.
II. Partnership Support to the Sales Effort. The Partnership will provide
sales literature, memorandum, telephone consultations and any other reasonable
services to support the selling efforts of the Sales Agents.
A. Customer Support. The Partnership will provide copies of all
communications required to keep the investors sold by the Sales Agents
informed of the performance of the Partnership and required by law to be
distributed to the purchasers of Units sold by the Sales Agents, including,
but not limited to, the monthly and the annual audited financial statements
for the Partnership. In addition, the Partnership shall provide prompt and
professional courteous response to requests made for information and other
service made directly to the Partnership by investors sold by the Sales
Agents.
B. Customers Protected. The Partnership and its affiliates agree, on a best
efforts basis, to not solicit or do business with any customer or any person
referred to the Partnership by the Sales Agents or by a person sold by the
Sales Agents. If such business is done, knowingly or unknowingly, all sales
commission payable as a result of sales to customers of Sales Agents or
persons referred by customers of Sales Agents will be paid to the Sales
Agents as provided in this Agreement for those Units sold to those accounts.
In the event of a common prospect, the Sales Agent which first obtains a
signed subscription from the customer receives the commission and the right
to future referrals from that customer. The documentation used by the
customer will identify the sales person and control the determination of who
made the sale and, whenever possible, the customer will not be involved in
the dispute. The Partnership will use its best efforts to keep the names of
the customers and prospects of the Sales Agents confidential.
III. Representations by All Parties. Each party hereto represents the
following to the other party to this Agreement.
Legal Compliance. The Parties hereto will use their best efforts to comply
fully with all applicable laws and the rules of the National Association of
Securities Dealers (the "NASD"), the Securities and Exchange Commission (the
"SEC"), and state securities administrators of the several states and various
other jurisdictions applicable to each of them in regard to their activities
under this Agreement which in any way effects the offer and sale of Units.
A. Authority to Act. Each party to this agreement represents to the others
that it is duly organized and validly existing under the laws of the state
of its formation, is a member in good standing of the self regulating
organizations, if any, which regulate the sale of Units, has all the
registrations, licenses and permits required to perform its duties
hereunder, and has the full power and authority to act in its capacity in
the manner contemplated by this Agreement and as described in the
Prospectus. This Agreement has been duly and validly authorized, executed
and delivered on behalf of each party hereto and is a valid and binding
agreement, enforceable in accordance with its terms. Each party has been
afforded the opportunity to be represented by legal counsel of its choice.
B. No Breach of Agreements. The entry of this Agreement will not cause a
default of any other agreement to which any party hereto is a party. No
party to this Agreement is in breach of any agreement to which it is a party
which will be material to its performance under this Agreement nor will any
party during the term of this Agreement be in contravention of or default
under any order, law or regulation binding upon it. The execution and
delivery of this Agreement, consummation of the transactions herein
contemplated and compliance with the terms hereof will not constitute or
result in a default under or contravene any provision by any party of the
limited partnership agreement or any other agreement, order, law or
regulation related to the Fund.
IV. Representations of the Partnership. The Partnership represents and
warrants to the Sales Agents that:
A. All Material Facts Disclosed. The Prospectus contains all material
statements and information required to be included therein by the Securities
Act of 1933 and the Commodity Exchange Act, and the securities laws of the
various states selected by the Partnership in which offers for the sale of
Units will be made, as those laws may be amended, from time to time, during
this offering and the rules and regulations promulgated thereunder; will
conform in all material respects with the requirements of such laws and the
rules and regulations thereunder; and, will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which such statements were made, not misleading;
provided, however, that this representation and warranty shall not apply,
with respect to the Sales Agents, to any statements or omissions in the
Prospectus, or any such amendment or supplement, which supplies the
information and which is in writing and furnished by the Partnership to the
Sales Agents prior to the sale in question.
B. The Units are Valid. The Units, when issued and sold pursuant to the
terms hereof and of the Prospectus, will be validly issued, fully paid and
not subject to call or assessment, and the Partnership will apply the net
proceeds received from the issuance and sale of the Units in the manner set
forth in the Prospectus.
C. Other Agreements Valid. The customer agreement with each clearing broker
and/or foreign exchange clearing firm (the "Brokerage Agreements") and the
Power of Attorney granted to the commodity trading advisor has, to the best
knowledge of the General Partner after due inquiry, been duly and validly
authorized, executed and delivered on behalf of the Fund and the other party
to the agreement, and each is a valid and binding agreement of the Fund in
accordance with its terms, except to the extent that the exculpation and
indemnification provisions of such agreements may be limited by applicable
law or this Agreement.
D. Necessary Authority. The Fund has all necessary governmental, regulatory
and commodity exchange approvals and licenses and has effected all filings
and registrations required to conduct its business and perform its
obligations as described in the Prospectus. The Fund will use its best
efforts to be and remain qualified to offer and sell the Units in those
jurisdictions in which the Units will be offered. The Fund is not and, upon
implementation or consummation of the transactions contemplated by this
Agreement and the limited partnership agreement, will not be an investment
company within the meaning of the Investment Company Act of 1940, as
amended.
V. Representations of the General Partner. The General Partner represents
and warrants to the Sales Agents that:
A. Government Authority. The General Partner has all governmental,
regulatory and other approvals and licenses and has effected all filings and
registrations including, without limitation, registration as a commodity
pool operator under the Commodity Exchange Act, as amended, and membership
in NFA, as a corporation under the laws of the State of Delaware, required
to conduct its business as described in the Prospectus or required to
perform its obligations as described therein or under the limited
partnership agreement, the power of attorney to the CTA, this Agreement and
the Brokerage Agreements, and covenants that it will use its best efforts to
maintain such approvals, licenses, filings, registrations, and memberships
in full force and effect.
B. Contracts and Information Complete. The limited partnership agreement,
the power of attorney, the Brokerage Agreements and this Agreement have each
been duly authorized, executed and delivered by the General Partner, and
each is intended to be a valid and binding agreement of the Partnership and
the General Partner in accordance with its terms. All references and
information concerning the General Partner in the Prospectus supplied by it
are accurate in all material respects and, as to it, the Prospectus does not
contain any misleading or untrue statement of a material fact or omit to
state a material fact which is required to be stated or which is necessary
to prevent the statements therein from being misleading.
C. Compliance with Partnership Requirements. The General Partner will
purchase or subscribe for the Units of General Partnership Interest required
of it as disclosed in the Prospectus and will have a net worth equal to or
in excess of the requirements stated therein upon the offering described in
the Prospectus and upon admission to the Fund of all limited partners who
purchase Units during this Offering Period
D. Fees and Costs Attendant to Partnership Offering. The Partnership will
pay, or cause to be paid, all costs and expenses associated with this
offering of the Partnership's Units, including (i) the preparation, printing
and filing of the Prospectus and all amendments and supplements thereto with
the appropriate Federal and state regulatory agencies and the self
regulatory agencies; (ii) the furnishing to the Sales Agents of copies of
the Prospectus and of other documents required to be furnished, including
costs of shipping and mailing; (iii) fees and disbursements of legal
counsel, accountants, and other experts in connection with the transactions
contemplated by this Agreement; and, (iv) any other organization, escrow,
and offering expenses of the Partnership associated with this Offering
Period. The General Partner may be reimbursed by the Fund to the extent of
any organization and offering expenses it has advanced. Each other party to
this Agreement shall bear all of its own expenses under this Agreement,
including fees and disbursements of its legal counsel, accountants and other
experts.
VI. Representations of the Sales Agents. The Sales Agents represent to the
Partnership and the General Partner as follows:
A. All Material Facts Disclosed. Sales Agents have disclosed all material
statements and information related to the Sales Agents required to be
disclosed to the General Partner by the Securities Act of 1933 and the
Commodity Exchange Act, and any corresponding applicable state law, as
amended, from time to time, and the rules and regulations promulgated
thereunder; and, (i) all information furnished to the Partnership or the
General Partner about the prospects and subscribers to the Partnership by
the Sales Agents will be, to the best of Sales Agents knowledge and belief,
complete, true and correct; and, (ii) all information furnished by the Sales
Agents to prospects and subscribers regarding the Partnership will also be
true and correct and will be in reliance upon and only the information
furnished in the Prospectus, amendments thereto or in writing intended by
the General Partner to be delivered to prospective investors.
B. Agreements Valid. The Sales Agents have the authority to enter into this
Agreement and all other agreements required to perform its obligations
hereunder.
C. Necessary Authority. The Sales Agents have all necessary governmental,
regulatory and other approvals and licenses and has effected all filings and
registrations required to conduct its business and perform its obligations
as described in the Prospectus and this Agreement. The Sales Agents will
use their best efforts to be and remain qualified to offer and sell the
Units in those jurisdictions in which the Partnership and the Sales Agents
agree the Units will be offered. Specifically, each Sales Agent represents
that it is a broker or dealer as defined in Section 3(a)(4) or 3(a)(5) of
the Securities Exchange Act of 1934 ("Exchange Act"); that it is registered
with the Securities and Exchange Commission pursuant to Section 15 of the
Exchange Act; that it is a member of the NASD; that its customers' accounts
are insured by the Securities Investors Protection Corporation ("SIPC");
and that, during the term of this Agreement, it will abide by all of the
rules and regulations of the NASD including, without limitation, the NASD
Rules of Fair Practice. Each Sales Agent agrees to notify the General
Partner immediately in the event of (1) the termination of its coverage by
the SIPC; (2) its expulsion or suspension from the NASD, or (3) its being
found to have violated any applicable Federal or state law, rule or
regulation arising out of its activities as a broker-dealer or in
connection with this Agreement, or which may otherwise affect in any
material way its ability to act in accordance with the terms of this
Agreement. Any Sales Agent's expulsion from the NASD will automatically
terminate this Agreement immediately without notice. Suspension of any
Sales Agent from the NASD for violation of any applicable Federal or state
law, rule or regulation will terminate this Agreement effective immediately
upon written notice by the General Partner of termination to Sales Agent.
D. Use of Discretionary Authority. Sales Agents will not make sales of
Units from a discretionary account over which it or any of its registered
representatives or the affiliates of any of them have control without prior
written approval of the customer in whose name such discretionary account is
maintained.
E. ERISA Assets.
1. Sales Agents understand that the Department of Labor views ERISA as
prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which
the fiduciary's discretionary ERISA assets are invested. To date, the
Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
2. No Sales Agent will perform or provide any duties which would cause
it to be a fiduciary under Section 4975 of the Internal Revenue Code, as
amended. For purposes of that Section, each Sales Agent understands that
any person who exercises any discretionary authority or discretionary
control with respect to any individual retirement account or its assets,
or who renders investment advice for a fee, or has any authority or
responsibility to do so, or has any discretionary authority or
discretionary responsibility in the administration of such an account,
is a fiduciary.
VII. Indemnification and Limits. The parties hereto agree to provide
indemnification upon the following terms and limits:
A. Indemnification from General Partner to Sales Agents. The General
Partner agrees to indemnify and hold harmless the Sales Agents and each
person, if any, who controls the Sales Agents within the meaning of Section
15 of the Securities Act, from and against any and all losses, claims,
damages, liabilities and expenses including, but not limited to, any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted to which, jointly or severally, they, or any of them, may become
subject as a result of any breach of fiduciary duty owed by the General
Partner to the Partnership or under the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the Commodity Exchange Act,
as amended, any other Federal or state statutory or foreign law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses or actions with respect thereto arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; except insofar as any such untrue statement or
omission or alleged untrue statement or omission was made in the Prospectus,
or any amendment or supplement thereto, in reliance upon and in conformity
with information furnished in writing to the Fund expressly for use therein
by the Sales Agent or any other independent third party; provided, however,
in no event shall the General Partner's agreement to indemnify contained
herein inure to the benefit of the Sales Agents or any person controlling
the Sales Agents on account of any losses, claims, damages, liabilities,
expenses or actions arising from the sale of Units to any person by the
Sales Agents if such losses, claims, damages, liabilities, expenses or
actions arise out of or are claimed to be based upon an untrue statement or
omission or alleged untrue statement or omission in a Prospectus if a
subsequent Prospectus or supplemental Prospectus shall correct, prior to the
delivery to the Sales Agents by such person of his subscription, the untrue
statement or omission or the alleged untrue statement or omission which is
the basis of the loss, claim, damage, liability, expense or action for which
indemnification is sought, or a copy of such subsequent Prospectus was not
sent or given to such person simultaneously with or prior to the receipt by
the Sales Agents of such person's subscription. In addition, this
indemnification will not apply to any claims asserted as a result of the
alleged misstatement of fact by any party other than the General Partner, or
any other authorized representative of the Partnership or which was properly
treated by (i) the Prospectus, as amended, from time to time, or (ii)
written material furnished by the General Partner on behalf of the
Partnership for the purpose of delivery to prospects or subscribers.
B. Indemnification from Sales Agents to Other Parties. The Sales Agents
agree to indemnify and hold harmless the General Partner, the Fund, and each
person, if any, who controls either of them within the meaning of Section 15
of the Securities Act, from and against any and all losses, claims, damages,
liabilities and expenses including, but not limited to, any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted to
which, jointly or severally, they, or any of them, may become subject under
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, the Commodity Exchange Act, as amended, any other Federal or
state statutory or foreign law or regulation, at common law or otherwise,
insofar as the losses, claims, damages, liabilities or expenses indemnified
against arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which was made to a prospect or
subscriber to Units by the Sales Agents or either of them; provided,
however, that the obligation of the Sales Agents to indemnify the Fund or
the General Partner, or any person who controls them, hereunder shall be
limited to the total price of the Units sold by the Sales Agent; and,
provided, further, that the final award or court order specifically find the
Sales Agent was guilty of such misrepresentation.
C. Sales Agents Responsible for Payment of Commissions. Provided the
General Partner properly pays the sales or Trailing Commissions to the
Managing Dealer or the Sales Agent which sold the Units, such Managing
Dealer or Sales Agent agrees to indemnify and hold harmless the Fund and the
General Partner from all claims, including attorney fees and costs, from any
person who asserts they are entitled to a portion of the Trailing
Commissions or are entitled to a portion of the Sales Commissions paid to
the Managing Dealer pursuant to a Soliciting Dealer Agreement with the
Partnership.
D. Limits upon Indemnification. The obligation to provide the above
described indemnification's are conditioned upon and subject to the
following limitations:
1. Provide Notice. As condition precedent to indemnification under this
Agreement, a party must, within ten days after receipt of information to
inform it of the existence of a potential claim or the commencement of
any action, suit or proceeding against it for which it will make a claim
for indemnification from another party under this Agreement, provide a
complete description of the claim and give notice to the indemnifying
party of all facts related to such claim including, but not limited to,
sending a copy of all papers served. The failure to provide such timely
notice shall be a waiver of indemnification under this Agreement but such
omission shall not be a waiver of any liability of any person under
common law or statute or any other basis other than under the
indemnification provisions of this Agreement. In case any such action,
suit or proceeding shall be brought against any indemnified party and it
shall have properly notified the indemnifying party of such claim, the
indemnifying party shall be entitled to participate in the defense of
such claim and, if it so elects, individually or jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, other than reasonable
costs of investigation requested by the indemnifying party, subsequently
incurred by such indemnified party in connection with the defense thereof
and shall not be responsible for the quality of the defense or the
outcome of the case.
2. Legal Counsel. The indemnified party shall have the right to employ
its own counsel in any such action in which the indemnifying party has so
assumed the defense, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party has been authorized by the indemnifying
party, (ii) the indemnified party shall have reasonably concluded that
there may be a conflict of interest between the indemnifying party and
the indemnified party in the conduct of the defense of such action (in
which case the indemnifying party shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying party shall not in fact have employed counsel to assume the
defense of such action, in each of which cases, the fees and expenses of
counsel shall be at the expense of the indemnifying party. An
indemnifying party shall not be liable for any settlement of any action
or claim effected without its consent. In the case of (ii) above, the
indemnifying party, or the indemnifying parties, if an indemnified party
shall have a claim for indemnification against more than one indemnifying
party, shall not be liable for the expenses of more than one separate
counsel for the General Partner and the Fund and any person who controls
them within the meaning of Section 15 of the Securities Act.
3. General Partner Liability Limitation. Any exculpation provisions of
the Limited Partnership Agreement shall not relieve the General Partner
from any liability it may have or incur to the Fund under this Agreement,
nor shall the General Partner be entitled to be indemnified by the Fund,
pursuant to any indemnification provisions contained in the Limited
Partnership Agreement or the Brokerage Agreements, against any loss,
liability, damage, cost or expense it may incur under this Agreement.
VIII. Termination. This Agreement may be terminated upon the following terms
and conditions:
A. Without Cause. This Agreement may be terminated without cause by any
party upon forty-five (45) days notice to the other parties.
B. With Cause. Any party may terminate this Agreement at anytime for cause
if the General Partner commits a breach of fiduciary duty owed to the Fund,
any domestic or international event, act or occurrence has materially
disrupted, or in the opinion of the General Partner will, in the immediate
future, materially disrupt the commodities markets; or, any party to this
Agreement breaches a material term of this Agreement including, but not
limited to, fails to cure any law or rule violation attendant to its right
to perform under this Agreement or makes any false statement or omission to
any prospect or subscriber of Units or required to be made under this
Agreement.
C. Payments after Termination. The Partnership will continue to pay Sales
Commissions and Trailing Commissions provided by this Agreement, after
termination of this Agreement, for any reason, for all Units sold by the
Sales Agents during the term of this Agreement; provided, however, to
receive trailing commissions, the Sales Agents must continue to service the
holders of Units after such termination. No such commissions, if any, shall
be paid until after the break of escrow as provided in the Prospectus for
the sale of Units in the Fund.
IX. General Provisions. The following general terms are to apply to this
Agreement.
A. Reference to Prospectus. The Sales Agents acknowledge receipt of a copy
of the draft Prospectus referred to above and, subject to the delivery by
the General Partner of all marked copies, revisions, Amendments and Addenda
thereto, all filings made to the Securities and Exchange Commission,
together with an opinion from counsel for the Partnership that they are
complete and that the Units are available for sale in the states identified
in the Blue Sky Survey (which shall not be an opinion of counsel), the Sales
Agents will distribute the offering in accordance with the instructions of
the Partnership. Terms with the first letter capitalized which are not
defined is this Agreement are defined in the Prospectus.
B. Survival of Representations. The representations contained in this
Agreement made by any party shall survive the issue, sale and payment for
the Units hereunder and the termination of this Agreement as to all Units
which remain in the Partnership. The fact a party may conduct a due
diligence review to determine the accuracy of one or all of the
representations made in this agreement shall not be deemed a waiver or apply
estoppel or otherwise legally affect such representation should at some
later time any such representation be proved untrue.
C. Independent Contractors. The parties hereto, subject to the procedures
established by the Partnership to preserve the legality of the offering and
to assure that all persons solicited will be pre-qualified as suitable to
become investors in the Partnership, shall be free to exercise their
independent judgment as to the performance of their obligations under this
agreement. The parties hereto shall be free to devote whatever time they
choose to any other business of their choice. The Sales Agents are
independent from the General Partner and the Partnership; the relationship
of the Sales Agents with the General Partner and the Partnership are as
independent contractors. The parties agree that in each transaction in the
Units of the Fund and with regard to any services rendered pursuant to this
Agreement: (a) each Sales Agent is acting as agent for the subscriber; (b)
each transaction is initiated solely upon the order of the subscriber; (c)
as between each Sales Agent and its customer, the customer will have full
beneficial ownership of all Units of the Fund; (d) each transaction shall
be for the account of the subscriber and not for the Sales Agent's account;
and (e) each transaction shall be without recourse to Sales Agent provided
that Sales Agent acts in accordance with the terms of this Agreement.
Neither the Managing Dealer nor any other Sales Agent shall have any
authority in any transaction to act as agent for the General Partner or as
agent for the Fund.
D. Successors and Assigns. This Agreement has been and is made solely for
the benefit of the parties hereto to the extent expressed herein, for the
benefit of persons controlling any of such parties hereto and the respective
successors and assigns of such controlling persons, and no other person
shall acquire or have any right under or by virtue of this Agreement. There
may be no assignment of this Agreement.
E. Notices. Any notices under this Agreement shall be given or confirmed in
writing and sent registered or certified mail, postage prepaid, addressed as
to such person at the address in the caption of this Agreement or to such
other address as changed from time to time by either party hereto by written
notice to the other.
F. Entire Agreement. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein.
G. Arbitration. Any controversy or disagreement between the parties to this
Agreement shall be determined by binding arbitration in the City of Ft.
Lauderdale, State of Florida, by a single arbitrator knowledgeable in the
securities or commodities business in accordance with the rules and
regulations as promulgated by the American Arbitration Association and
judgment on any award so made may be entered in any court having
jurisdiction. In the event a party is required to retain legal counsel to
enforce or defend its rights under this Agreement, the loser of any such
dispute agrees to pay all costs including all reasonable attorney fees and
court costs, attendant to the protection of its rights hereunder.
Specifically, and not by way of limitation to the foregoing, should either
party lose an arbitration claim and subsequently file a court action, such
losing party shall pay the legal fees and costs of the party defending the
attempted avoidance of the arbitration award.
H. Applicable Law and Severability. This Agreement shall be governed by the
laws of the State of Florida. If any of the provisions of this Agreement
are held unlawful, void or unenforceable, such event shall not affect the
enforceability of the remaining provisions.
I. Captions. All captions used herein are for convenience only, are not a
portion of this Agreement and are not to be used in construing or
interpreting any aspect of this Agreement.
J. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Fund, the General Partner, and the Sales Agent have
executed this Agreement on the day and year first above written.
Atlas Futures Fund, Limited Partnership Ashley Capital Management, Inc.
By: Ashley Capital Management, Inc.
Its General Partner
By: ___________________________ By: __________________________
Shira Del Pacult Shira Del Pacult
President President
Futures Investment Company
By: ___________________________
Shira Del Pacult
President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/15/1996
960299517 - 2675076
Certificate Of Incorporation
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
A Delaware Stock Corporation
Article I
The name of the corporation is: Ashley Capital Management, Incorporated
Article II
This Corporation is formed to serve as general partner or managing member of
limited partnerships or limited liability companies, and also provide asset
management services; and, also for all other lawful business acts, purposes,
and activities available to a Delaware corporation.
Article III
The method of the election of the Board of Directors will be determined by
the shareholders in the By-Laws of the Corporation. This Corporation may
engage in activity outside the Stae of Delaware for any purpose.
Article IV
The Corporation shall have, and there shall be authorized for issue, one
thousand (1,000) shares of a single class of no par value common stock.
Article V
The Registered Office and Agent of the Corporation shall be Corporate Systems,
Inc., 101 North Fairfield Drive, Dover, Kent County, Delaware 19901 for service
of process and all other matters.
Article VI
The initial incorporator shall be Shira Del Pacult, 2990 W. 120, Fremont,
Indiana 46737.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the state of Delaware, do make, file and record this Certificate and do
certify that the facts herein stated are true, and I have, accordingly,
hereunto set my hand this 15th day of October, 1996.
s/ Shira Del Pacult
Shira Del Pacult
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
BY-LAWS
ARTICLE I
NAME AND LOCATION
Section 1.01. Name. The name of the Corporation is ASHLEY CAPITAL
MANAGEMENT, INCORPORATED.
Section 1.02. Principal Office. The principal office of the
Corporation shall be c/o Corporate Systems Inc., 101 North Fairfield Drive,
Dover, DE 19901. The Corporation may, however, change its principal office,
maintain another office or offices and the business of the corporation may be
transacted at such other place or places in the State of Delaware, or
elsewhere, as the Board of Directors may, from time to time, determine.
ARTICLE II
SHAREHOLDERS
Section 2.01. Annual Meetings. Annual meetings of the shareholders
shall be held on the second Tuesday of April in each year if not a legal
holiday, and if a legal holiday, on the next business day, at 10 o'clock
a.m., at the principal business office of the Corporation, or at such other
date, time and place as may be fixed by the Board of Directors. Written
notice of the annual meeting shall be given at least ten days prior to the
meeting to each shareholder entitled to vote. Any business may be transacted
at the annual meeting without mention of the subjects to be covered in the
notice calling such meeting unless such subjects must be covered by specific
expression in these by-laws or by law.
Section 2.02. Special Meetings. Special meetings of the
shareholders may be called at any time, for the purpose or purposes set forth
in the call, by the President, any member of the Board of Directors, or the
holders of at least one-fifth of all the shares outstanding and entitled to
vote by delivering a written request to the Secretary of the Corporation.
Special meetings shall be held at the registered office of the Corporation or
at such other place as may be fixed by the Board of Directors. Written
notice of special meetings shall be given at least ten days prior to the
meeting to each shareholder entitled to vote. No business may be transacted
at any special meeting other than the purpose or purposes stated in the
notice of meeting.
Section 2.03. Organization. The Chairman of the Board, if one has
been elected and is present, or if not, the President of the Corporation, or
in his absence, the Vice President having the greatest seniority, shall
preside, and the Secretary, or in his absence any Assistant Secretary, shall
take the minutes of all meetings of the Shareholders.
Section 2.04. Quorum. A shareholders' meeting duly called shall
not be organized for the transaction of business unless a quorum is present.
A quorum shall consist of the holders of 66 2/3% of the shares issued and
outstanding and entitled to notice of and to vote at such meeting except as
otherwise expressly provided by law or by these Articles or by-laws. The
meeting may continue to do business until adjournment, notwithstanding the
withdrawal of such number of shareholders as would leave less than a quorum
in attendance. If a meeting cannot be organized because a quorum has not
attended, those present may adjourn the meeting from time to time to such
time (not more than 30 days after the next previous adjourned meeting) and
place as they may determine, without notice other than by announcement at the
meeting of the time and place of the adjourned meeting; in the case of the
adjournment of any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although entitled to cast less
than a majority of votes entitled to be cast on any matter to be considered
at the meeting, shall nevertheless constitute a quorum for the purpose of
electing directors.
Section 2.05. Meeting by Telephone. One or more of the
shareholders may participate in any annual or special meeting of the
shareholders by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
all others participating in the meeting. Participation in this manner by a
shareholder will be attendance in person for all purposes under these by-
laws.
Section 2.06. Voting. Each shareholder entitled to notice of and to
vote at such meeting shall be entitled to vote in person or by proxy. Unless
another date has been fixed as provided by Section 5.06 of these by-laws as
the record date for the determination of shareholders entitled to notice of
and to vote at such meeting, no person to whom shares of stock have been
transferred on the books of the Corporation within the 10 days preceding the
date of such meeting shall be entitled to notice of or vote in such meeting.
Any actions taken by the shareholders upon any matter shall be valid, only if
at least a majority of the votes cast with respect to any such resolution or
matter are cast in favor thereof, except as otherwise expressly provided by
law or by the then Articles or by-laws of the Corporation.
Section 2.07. Cumulative Voting. In each election of Directors,
every shareholder entitled to vote shall have the right to multiply the
number of shares which he holds of record and which are entitled to vote, by
the total number of Directors to be elected in the same election to determine
the number of votes to which he is entitled in such election, and he may cast
the whole number of such votes for one candidate or he may distribute them
among any two or more candidates. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Section 2.08. Informal Action by Shareholders. Except as otherwise
required by law, any action which may be taken at a meeting of the
shareholders may be taken without a meeting (and without notice), if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of record of 66-2/3% of the outstanding shares entitled
to vote on such matter. Such consent shall be forthwith filed with the
secretary of the Corporation and shall become effective 10 days after the
Secretary has given written notice of such action to each shareholder of
record entitled to vote on such matter; entitled to vote on the matter have
consented to the proposed action, such consent shall be effective upon filing
with the Secretary and the foregoing notice may be dispensed with.
ARTICLE III
DIRECTORS
Section 3.01. Number, Election and Term of Office. The number of
Directors which shall constitute the full Board of Directors shall be fixed
by the Board of Directors but shall be no less than three or, if there are
fewer than three shareholders, the number of shareholders. A full Board of
Directors shall hold office from the time of their election but each Director
shall be responsible from the time he accepts office or attends his first
meeting of the Board. Each Director shall serve until the next annual
meeting of shareholders and thereafter until his successor is duly elected
and qualifies or until his earlier death, resignation or removal.
Section 3.02. Regular Meetings; Notice. Regular meetings of the
Board of Directors shall be held at such time and place as shall be
designated by the Board of Directors from time to time. Notice of such
regular meetings of the Board shall not be required to be given, except as
otherwise expressly required herein or by law. However, whenever the time or
place of regular meetings shall be initially fixed and then changed, written
notice of such action shall be given promptly to each Director not
participating in such action. Any business may be transacted at any regular
meeting.
Section 3.03. Organization. At all meetings of the Board of
Directors, the presence of at least a majority of the Directors at the time
in office shall be necessary and sufficient to constitute a quorum for the
transaction of business. If a quorum is not present at any meeting, the
meeting may be adjourned, from time to time, by a majority of the Directors
present until a quorum as aforesaid shall be present; provided, however, that
notice of the time and place to which such meeting is adjourned shall be
given to any Directors not present either by being sent by telegraph,
facsimile, or given personally or by telephone at least 8 hours prior to the
hour of reconvening. Resolutions of the Board shall be adopted, and any
action of the Board at a meeting upon any matter shall be valid and
effective, with the affirmative vote of at least a majority of the Directors
present at a meeting duly convened. The Chairman of the Board, if one has
been elected and is present, or if not, the President, shall preside at each
meeting of the Board. In the absence of the Chairman and President, the
Directors present shall designate one of their number to preside at the
meeting. The Secretary, or in his absence, any Assistant Secretary, shall
take the minutes at all meetings of the Board of Directors. In the absence
of the Secretary and an Assistant Secretary, the presiding officer shall
designate any person to take the minutes of the meeting.
Section 3.06. Meetings by Telephone. One or more of the Directors
may participate in any regular or special meeting of the Board of Directors
or of a committee of the Board of Directors by means of conference telephone
or similar communications equipment by means of which all person
participating in the meeting are able to hear each other. Participation in a
meeting in this manner by a Director will be considered to be in attendance
in person for all purposes under these by-laws.
Section 3.07. Presumption of Assent. Minutes of each meeting of
the Board shall be made available to each Director at or before the next
succeeding meeting. Each Director shall be presumed to have assented to such
minutes and agreed to the action taken thereat unless his objection thereto
shall be made to the Secretary within two days after such meeting.
Section 3.08. Catastrophe. Notwithstanding any other provisions of
law, the Articles or these by-laws, during any emergency period caused by a
national catastrophe or local disaster, a majority of the surviving members
(or the sole survivor) of the Board of Directors who have not been rendered
incapable of acting because of incapacity or the difficulty of communication
to transportation to the place of meeting shall constitute a quorum for the
sole purpose of electing directors to fill such emergency vacancies, and a
majority of the directors present at such a meeting may act to fill such
vacancies. Directors so elected shall serve until such absent directors are
able to attend meetings or until the shareholders act to elect directors for
such purpose. During such an emergency period, if the Board is unable to or
fails to meet, any action appropriate to the circumstances may be taken by
the officers of the Corporation as may be present and able. Questions as to
the existence of a national catastrophe or local disaster and the number of
surviving members capable of acting shall be conclusively determined at the
time by the Board of Directors or the officers so acting.
Section 3.09. Resignations. Any Director may resign by submitted
to the Chairman of the Board, if one has been elected, or to the President or
the Secretary, his resignation which shall be come effective upon its receipt
by such officer or as otherwise specified therein.
Section 3.10. Committees. Standing or temporary committees may be
appointed from its own number by the Board of Directors from time to time,
and the Board may from time to time invest committees with such power and
authority, subject to such conditions as it may see fit. An Executive
Committee may be appointed by a majority of the full Board, it shall have all
the powers and exercise all the authority of the Board in the management of
the business and affairs of the Corporation except as specially limited by
the Board. The Board may designate one or more Directors as alternate
members of any committee to replace any absent or disqualified member at any
meeting; and in the event of such absence or disqualification, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another
director to act at the meting in the place of any such absent or disqualified
member. Any action taken by any committee shall be subject to alteration or
revocation by the Board of Directors; provided, however, that third parties
shall not be prejudiced by such alteration or revocation.
ARTICLE IV
OFFICERS AND EMPLOYEES
Section 4.01. Executive Office. The Executive Officers of the
Corporation shall be the Chairman of the Board, the President, the Secretary,
the Treasurer, and one or more Vice Presidents, including a Vice President or
General Counsel, Finance and Regulation, and Chief Compliance Officer and
Chief Financial Officer, as the Board may from time to time determine, all of
whom shall be elected by and serve at the pleasure of the Board of Directors.
Any two or more offices may be held by the same person. Each executive
officer shall hold office until the next succeeding annual meeting of the
Board of Directors and thereafter until his successor is duly elected and
qualifies or until his earlier death, resignation or removal.
Section 4.02. Additional Officers; Other Agents and Employees. The
Board of Directors may, from time to time, appoint or hire such additional
officers, assistant officers, agents, employees and independent contractors
as the Board deems advisable; and the Board or the President shall prescribe
their duties, conditions of employment and compensation. Subject to the
power of the Board, the President may employ from time to time such other
agents, employees, and independent contractors as he may deem advisable for
the prompt and orderly transaction of the business of the Corporation, and he
may prescribe their duties and conditions of their employment, fix their
compensation and dismiss them, without prejudice to their contract rights, if
any.
Section 4.03. The Chairman. The Chairman of the Board shall be
elected from among the Directors, shall preside at all meetings of the
shareholders and of the Board, and shall have such other powers and duties as
may be, from time to time, prescribed by the Board.
Section 4.04. The President. The President shall be the chief
executive officer of the Corporation. Subject to the control of the Board of
Directors, the President shall have general policy supervision of and general
management and executive powers over all the property, business operations,
and affairs of the Corporation and shall see that the policies and programs
adopted or approved by the Board are carried out. The President shall
exercise such further powers and duties as from time to time may be
prescribed to these by-laws or by the Board of Directors.
Section 4.05. The Vice President. The Vice Presidents may be given
by resolution of the Board general executive powers, subject to the control
of the President, concerning one or more or all segments of the operations of
the Corporation. The Vice Presidents shall exercise such further powers and
duties as from time to time may be prescribed in these by-laws or by the
board of Directors or by the President. At the request of the President, or
in his absence or disability, the senior Vice President shall exercise all
the powers and duties of the President.
Section 4.06 The Vice President, Finance and Regulation. The
Board of Directors shall annually elect a Vice President, Finance and
Regulation, who shall be an executive officer and who shall be responsible
for maintaining on a current basis the Corporation's status with such
governmental or self-regulatory bodies as the Board of Directors shall cause
the Corporation to register with and who shall insure that the Corporation
complies with all rules and regulations applicable to all governmental and
self-regulatory bodies having jurisdiction over the Corporation.
Section 4.07. The Secretary and Assistant Secretaries. It shall be
the duty of the Secretary (a) to keep or cause to be kept at the registered
office of the Corporation an original or duplicate record of the proceedings
of the shareholders and the Board of Directors and a copy of the Articles and
of the by-laws; (b) to attend to the giving of notices of the Corporation as
may be required by law or these by-laws; (c) to be custodian of the corporate
records and of the seal of the Corporation and see that the seal is affixed
to such documents as may be necessary or advisable; (d) to have charge of and
keep at the registered office of the Corporation, or cause to be kept at the
office of a transfer agent or registered with the State of Delaware, the
stock books of the Corporation and an original or duplicate share registered,
giving the names of the shareholders in alphabetical order and showing their
respective addresses, the number and classes of shares held by each, the
number and date of certificates issued for the shares, and the date of
cancellation of every certificate surrendered for cancellation; and (e) to
exercise all powers and duties incident to the office of Secretary and such
other powers and duties as may be prescribed by the Board of Directors or by
the President form time to time. The Secretary by virtue of his office shall
be an Assistant Treasurer. The Assistant Secretaries shall assist the
Secretary in the performance of his duties and shall also exercise such
further powers and duties as from time to time may be assigned to them by the
Board of Directors, the President or the Secretary. At the direction of the
Secretary or in his absence or disability, an Assistant Secretary shall
perform the duties of the Secretary.
Section 4.08. The Treasurer and Assistant Treasurers. The Treasurer
shall (a) be responsible for the custody and maintenance of the Corporation's
contracts, insurance policies, leases, deeds and other business records; (b)
see that the lists, books, reports, statements, tax returns, certificates and
other documents and records required by law are properly prepared, keep and
filed; (c) be the principal officer in charge of tax and financial matters,
budgeting and accounting of the Corporation; (d) have charge and custody of
and be responsible for the corporate funds, securities and investments; (e)
receive and give receipts for checks, notes, obligations, funds and
securities of the Corporation, and deposit monies and other valuable effects
in the name and to the creditor of the Corporation in such depositories as
shall be designated by the Board of Directors; (f) subject to the provisions
of Section 6.01 of the by-laws, cause to be disbursed the funds of the
Corporation by payment in cash or by checks or drafts upon the authorized
depositories of the Corporation, and cause proper vouchers to be taken and
preserved for such disbursements; (g) render to the President and the Board
of Directors whenever they may require it an account of all his transactions
as Treasurer and reports as to the financial position and operations of the
Corporation; (h) cause to be kept appropriate, complete and accurate books or
records of account of all its business and transactions, and (i) exercise all
powers and duties incident to the office of Treasurer and such other duties
as may be prescribed by the Board of Directors or by the President from time
to time. The Treasurer by virtue of his office shall be an Assistant
Secretary. The Assistant Treasurers shall assist the Treasurer in the
performance of his duties as from time to time may be assigned to them by the
Board of Directors, the President or the Treasurer. At the direction of the
Treasurer or in his absence or disability, an Assistant Treasurer shall
perform the duties of the Treasurer.
Section 4.09. Vacancies. Vacancy in any office or position by
reason of death, resignation, removal, disqualification, disability or other
cause, shall be filled in the manner provided in this Article IV for regular
election or appointment to such office.
Section 4.10. Delegation of Duties. The Board of Directors may in
its discretion delegate from the time being the powers and duties, or any of
them, of any officer to any other person whom it may select.
ARTICLE V
SHARES OF CAPITAL STOCK
Section 5.01. Share Certificates. Every holder of fully-paid
stock of the Corporation shall be entitled to a certificate or certificates,
to be in such form as the Board of Directors may from time to time prescribe,
and signed (in facsimile or otherwise, as permitted to law) by the President
or a Vice President and the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer which shall represent and certify the
number of shares of stock owned by such holder. The Board may authorize the
issuance of certificates for fractional shares or, in lieu thereof, script or
other evidence of ownership, which may (or may not) as determined by the
Board entitle the holder thereof to voting, dividends or other rights of
shareholders.
Section 5.02. Transfer of Shares. Transfers of shares of stock of
the Corporation shall be made on the books of the Corporation, subject to the
restrictions contained in Article X hereof, only upon surrender to the
Corporation of the certificate or certificates for such shares properly
endorsed, by the shareholder or by his assignee, agent or legal
representative, who shall furnish proper evidence of assignment, authority or
legal succession, or by the agent of one of the foregoing thereunto duly
authorized by an instrument duly executed and filed with the Corporation, in
accordance with regular commercial practice.
Section 5.03. Lost, Stolen, Destroyed or Mutilated Certificates.
New certificates for shares of stock may be issued to replace certificates
lost, stolen, destroyed or mutilated upon such conditions as the Board of
Directors may, from time to time, determine.
Section 5.04. Regulations Relating to Shares. The Board of
Directors shall have power and authority to make all such rules and
regulations not inconsistent with these by-laws as it may deem expedient
concerning the issue, transfer and registration of certificates representing
shares of the Corporation.
Section 5.05. Holders of Record. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock of the
Corporation as the holder and owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by
the laws of Delaware.
Section 5.06. Fixing of Record Date. The Board of Directors may
fix a time not less than 10 nor more than 60 days prior to the date of any
meeting of shareholders, or the date fixed for the payment of any dividend or
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares will be made or go into effect, as
a record date for the determination of the shareholders entitled to notice
of, or to vote at, any such meeting, or entitled to receive payment of any
such dividend or distribution, or to receive any such allotment of rights, or
to exercise the rights in respect to any such change, conversion or exchange
of shares. In such case, only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to notice of, or to vote at,
any such meeting, or entitled to receive such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation
after any record date fixed as aforesaid.
Section 5.07. Preemptive Rights. Each holder of any of the shares
of the capital stock of the Corporation shall be entitled to a preemptive
right to purchase or subscribe for (i) any unissued capital stock of any
class; (ii) any additional shares of capital stock of any class to be issued
upon any increase in the authorized capital stock of the Corporation (iii)
any other securities which pursuant to their terms are convertible into
capital stock of any class of the Corporation or which carry with them any
right to purchase capital stock of any class, whether said unissued stock or
other securities shall be issued for cash, property, or any other lawful
consideration.
ARTICLE VI
CORPORATE AUTHORITY
Section 6.01. Notes, Checks, etc. All notes, bonds, drafts,
acceptances, checks, endorsements (other than for deposit), guarantees, and
all evidences of indebtedness of the Corporation whatsoever, shall be signed
by such officers or agents of the Corporation, subject to such requirements
as to countersignature or other conditions, as the Board of Directors from
time to time may determine. Facsimile signatures on checks may be used if
authorized by the Board of Directors.
Section 6.02. Execution of Instruments Generally. Except as
provided in Section 6.01, all deeds, mortgages, contracts and other
instruments requiring execution by the Corporation may be signed by the
President, any Vice President or the Treasurer, and authority to sign any
such contracts or instruments, which may be general or confined to specific
instances, may be conferred by the Board of Directors upon any other person
to persons. Any person having authority to sign on behalf of the Corporation
may delegate from time to time by instrument in writing all or any part o
such authority to any person or persons if authorized so to do by the Board
of Directors.
Section 6.03. Voting Securities Owned by Corporation. Securities
having voting power in any other corporation owned by this Corporation shall
be voted by the President, unless the Board confers authority to vote with
respect thereto, which may be general or confined to specific investments,
upon some other person. Any person authorized to vote securities shall have
the power to appoint proxies with general power of substitution.
Section 6.04. Corporate Seal. The Board of Directors shall
prescribe the form of a suitable corporate seal which shall contain the full
name of the Corporation and the year and state of incorporation.
Section 6.05. Fiscal Year. The fiscal year of the Corporation
shall end on such day as shall be fixed by the Board of Directors.
Section 6.06. Financial Reports to Shareholders. The Board shall
have discretion to determine whether financial reports shall be sent to
shareholders, what such reports shall contain, and whether they shall be
audited or accompanied by the report of an independent or certified public
accountant.
Section 6.07. Banking. The Board shall establish the Corporation's
primary bank and shall also establish accounts with such other banks as may
be convenient to the conduct of the Corporation's business.
ARTICLE VII
CONFLICT OF INTERESTS
Section 7.01. Transaction Valid. No contract or other transaction
between the Corporation and another person shall be invalidated or otherwise
adversely affected by the fact that any one or more shareholders, directors
or officers of the Corporation:
(i) is pecuniarily or otherwise interested in, or is a shareholder,
director, officer, or member of, such other person; or
(ii) is a party to, or is in any other way pecuniarily or otherwise
interested in, the contract or other transaction; or
(iii) is in any way connected with any person pecuniarily or
otherwise interested in such contract or other transaction.
Section 7.02. Full Disclosure. The event of interest described in
Section 7.01 shall be fully disclosed in writing delivered by such interested
person prior to the meeting in the same manner as the notice of the meeting
of the Board of Directors or the shareholders, as the case may be; and in any
action of the shareholders or of the Board of Directors of the Corporation
authorizing or approving any such contract or other transaction, such
interest person or persons shall not vote but any and every shareholder or
director may be counted in determining the existence of a quorum and in
determining the effectiveness of action taken, with like force and effect as
thought he were not so interested, or were not such a shareholder, director,
member or officer, or were not such a party, or were not so connected. Such
director, shareholder or officer shall not be liable to account to the
corporation for any profit realized by him from or through any such contract
or transaction approved or authorized as aforesaid. As used in these by-
laws, the term "person" includes a corporation, partnership, firm;
association or other legal entity and the term: "his" includes references to
both male and females.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE OF DIRECTORS,
OFFICERS AND OTHER PERSONS
Section 8.01. Indemnification. The Corporation shall indemnify to
the fullest extent now or hereafter permitted by law (a) any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
employee or request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, join venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests to the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
(b) any person who was or is a party, or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
join venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense of settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation.
Section 8.02. Good Faith. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
belied to be in, or not opposed to, the best interest of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
Section 8.03. Exclusion. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the court of
common pleas of the county in which the registered office of the Corporation
is located or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court of common
pleas or such other court shall deem proper.
Section 8.04. Mandatory Indemnification. To the extent that a
director, officer, employee or agent of the Corporation has been successful
on the merits or the matter was resolved, settled or compromised, with the
Consent of the disinterested members of the Board of Directors in regard to
any action, suit or proceeding referred to in this Article VIII or in the
prosecution of any claim based upon this Section 8.04, he shall be
indemnified against and reimbursed for expenses (including attorneys' fees
and costs) actually and reasonably incurred.
Section 8.05. Determination of Standard of Conduct. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in this Article VIII. Such determination shall
be made:
(1) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or
(2) If such a quorum is not obtainable, or, even if obtainable a
majority vote of a quorum of disinterest directors so directs, by independent
legal counsel in a written opinion, or
(3) By the shareholders.
Section 8.06. When Indemnification Shall Be Made. Expenses incurred
in defending any suit or proceeding, whether civil, criminal, administrative
or investigative may be paid by the Corporation from time to time in advance
of the final disposition of such action, suit or proceeding as authorized in
the manner provided in this Article VIII upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized by this Article VIII.
Section 8.07. Non-exclusivity. Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any law, these by-laws, agreement approved by the
disinterested Directors, vote of shareholders or disinterested directors,
both as to action in his official capacity, and shall continue to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of his heirs, executors and administrators.
Section 8.08. Insurance. The Corporation shall have power, but not
the obligation, to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have power to indemnify him against such liability under
the provisions of this Article VIII.
ARTICLE IX
AMENDMENTS
Section 9.01. Amendments. These by-laws may be amended, altered,
restated, and repealed, and new by-laws may be adopted, only by a majority of
the Shareholders of the Corporation at any regular or special meeting called
for that purpose.
These by-laws were submitted and approved by the sole shareholder of
the Corporation at a Special Meeting of the Shareholder held on October 24,
1996.
_________________________
Ms. Shira Del Pacult
Sole Shareholder
These by-laws were prepared by:
William Sumner Scott
The Scott Law Firm, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
954-964-1546
Facsimile 954-964-1548
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
FIRST WRITTEN ACTION OF THE BOARD OF DIRECTORS
On the 24th day of October, 1996, Shira Del Pacult, the sole Director
of ASHLEY CAPITAL MANAGEMENT, INCORPORATED (the "Corporation") took the
following actions:
SALE OF STOCK
The Corporation has received a subscription in the amount of $1,000
in full payment for 1,000 shares of no par common stock of the Corporation
and that 1,000 shares of the Corporation's common stock, no par value, should
be issued. The following resolution was adopted:
RESOLVED: That the proper Officers of the Corporation are hereby
authorized and directed to duly execute and deliver unto Shira Del Pacult a
certificate in the form adopted by the Corporation to evidence the issuance
of 1,000 shares of fully paid and non-assessable, no par, common stock of
this Corporation.
ELECTION OF OFFICERS
The following person was nominated and elected as the Officer of the
Corporation to hold the offices designated and to serve until her successor
is chosen and qualified:
President, Chief Executive Officer , Vice President, Regulation
and Finance, Treasurer and Secretary
Shira Del Pacult
INCORPORATION EXPENSES
The following resolution was adopted:
RESOLVED: That the Treasurer be, and he hereby is authorized to pay
all fees and expenses incident to and necessary for the organization of the
Corporation.
SEAL AND RECORD BOOKS
The following resolutions were adopted:
RESOLVED: That the seal, an impression of which is affixed to the
by-laws shall be acquired by the Secretary and such duplicate seals as deemed
appropriate may be maintained by the officers of the Corporation; and
RESOLVED, FURTHER: The Secretary shall establish such minute books
and to otherwise maintain the records of the Corporation.
AUTHORITY TO DO BUSINESS
The following resolution was adopted:
RESOLVED: That for the purpose of authorizing the Corporation to do
business in any Commonwealth, State, territory or dependency of the United
States or any foreign province, state or country, in which it is necessary or
expedient for the Corporation to transact business, the proper officers of
this Corporation are hereby authorized to appoint and substitute all
necessary agents or attorneys for service of process, to designate and change
the location of all necessary certificates, reports, powers of attorney, and
other instruments as may be required by the laws of such commonwealth, state,
territory, dependence, province or country; and whenever it is expedient or
necessary for this Corporation to cease doing business within such
commonwealth, state, territory, dependence, province, or country such
Officers are authorized to do such acts as are necessary to withdraw
therefrom, including, but not limited to, the revocation of any appointment
of agent or attorney for service of process, and filing of certificates,
reports revocation of appointment, or surrender of authority.
BANK ACCOUNTS AND FINANCIAL RECORDS
The following resolutions were adopted:
RESOLVED: That the President together with the Treasurer of this
Corporation, be, and they hereby are, authorized in the name of this
Corporation and on behalf of this Corporation, to (i) open and maintain bank
accounts in such banking institutions as they, shall, from time to time, deem
necessary or appropriate; and (ii) give instructions as to whom the transfer
or withdrawal of funds from any such account shall be made; and (iii) close
any such account of such time as they may determine; and
RESOLVED, FURTHER: That this Corporation does hereby assume full
responsibility for all payments made by any banking institution in good faith
and in reliance upon the facsimile signature of any Officer or employee of
this Corporation authorized by virtue of the foregoing resolution to sign
checks drawn against any bank account of this Corporation; and
RESOLVED, FURTHER: The Treasurer is hereby authorized and directed
to establish and maintain the financial records, engage accountants and
auditors, and file the Federal and state tax returns of the Corporation.
GOVERNMENT PERMITS AND/OR CONSENTS
The following resolution was adopted:
RESOLVED: That the President, the Executive Vice President, or any
Vice President of the Corporation be and each of them hereby is, authorized
to execute and deliver, from time to time, in the name and on behalf of the
Corporation any and all applications, indemnities, guaranties, surety bonds,
and financial statements any such officer deems necessary or desirable to
obtain certificates, licenses, permits or other forms of consent from any
government agency to maintain and operate the Corporation in the normal
course of the Corporation's business activity.
AUTHORITY TO ACT AS GENERAL PARTNER
The following resolutions were adopted:
RESOLVED: That the Corporation be, and hereby is, authorized to
enter into the investment business as a General Partner for Limited
Partnerships and to hire agents, legal counsel and accountants to further
their entry into the investment business; and
RESOLVED, FURTHER: That the Corporation be, and hereby is,
authorized to act as General Partner for the formation of Limited
Partnerships and cause Private Placement Memorandums, Registration Statements
and all other forms of qualification documents necessary to sell interests in
such Limited Partnerships to be filed with the Federal and state authorities
and all other notices and filings and other legal documents to be prepared
and filed accordingly to law to permit the Limited Partnerships to sell
interests and engage in business as contemplated in the respective Limited
Partnership agreements; and
RESOLVED, FURTHER: That all efforts made by the promoters of the
Corporation prior to the incorporation of the Corporation, specifically the
retention of legal counsel and other steps in preparation to form the
Corporation and all other activities to further the business of the
Corporation are hereby ratified and confirmed.
AUTHORITY TO CONDUCT COMMODITY BUSINESS
The following resolutions were adopted:
RESOLVED: Shira Del Pacult, President of the Corporation, shall have
sole authority over the commodity department of the Corporation. Ms. Pacult
will be solely responsible for the management and supervision of the
associated persons, the approval of customers accounts for suitability, and
the implementation of the business plan of the commodity department; and
RESOLVED, FURTHER: The Corporation will report to the CFTC or the
National Futures Association ("NFA"), as required by law, within 20 days, any
change in the management of the commodity department which relates to the
delegation of authority to Ms. Pacult; and
RESOLVED, FURTHER: Ms. Pacult is authorized to file such forms with
the CFTC and the NFA to permit the Corporation to become registered as a
commodity pool operator and to become a member of the NFA and which are
necessary or desirable to permit the Corporation to be engaged in the
business of management of the commodity business as the General Partner of a
commodity pool to be called Atlas Futures Fund, Limited Partnership.
COMMODITY COMPLIANCE
The following resolutions were adopted:
RESOLVED: The Corporation hereby adopts the compliance procedure
documents presented to the Corporation by the Chairman today. The compliance
department of the Corporation shall become familiar with the procedures
described and is authorized to employ such consultants as the President deems
necessary or desirable to assist in the implementation of full and complete
compliance with all actions described; and
RESOLVED, FURTHER: The President is authorized to cause amendments,
from time to time, to the Commodity Compliance Procedures Manual of the
Corporation to reflect changes required or deemed desirable to keep the
Corporation in complete compliance with all applicable laws, regulations, and
rules related to the CFTC regulated business; and
RESOLVED, FURTHER: The officers of the Corporation are hereby
authorized to take all actions required to maintain NFA membership
including, but not limited to, compliance with all rules of the NFA which
will govern the activities of the Corporation as a commodity pool operator.
COMMODITY CLEARING AGREEMENT
The Chairman reported that it was necessary and desirable to enter into a
clearing agreement with Vision, Ltd. to serve as the Futures Commission
Merchant for the Limited Partnership to be formed by the Corporation as
General Partner to be known as the Atlas Futures Fund. The following
resolutions were adopted:
RESOLVED: That the officers of the Corporation are authorized and
directed to enter into a clearing agreement with Vision, Ltd. on behalf of
the limited partnership to be formed under the name Atlas Futures Fund,
Limited Partnership, upon such business terms as evidenced by the officers
signature on such clearing agreement; and
RESOLVED, FURTHER: Ms. Pacult is authorized and directed to deliver
such financial information and take such other steps as she deems necessary
or desirable to permit the Corporation to function as a General Partner of
Atlas Futures Fund, Limited Partnership, and to maintain trading accounts
through Vision, Ltd. as contemplated by the foregoing resolution.
APPOINTMENT OF LAW FIRM
The following resolution was adopted:
RESOLVED: That the Corporation employ The Scott Law Firm, P.A. to
serve as general counsel to the firm pursuant to the terms of the contract
reviewed by the Board today.
APPOINTMENT OF AGENTS
The following resolution was adopted:
RESOLVED: That the Corporation employ Joel M. Friedman, Two
Prudential Plaza, 180 North Stetson Avenue, Suite 850, Chicago, IL 60601-
6712, to serve as tax counsel to the Corporation for the year ended 1996 in
accordance with their engagement letter reviewed by the Board today.
ELECTION AS S CORPORATION
The following resolution was adopted:
RESOLVED: That this Corporation elect to be treated as a "Small
Business Corporation" under Sections 1244 and 1372(a) of the Internal Revenue
Code and the Officers be, and they hereby are, authorized and directed to
execute such election on Form 2553 and deliver the same to the Internal
Revenue Service..
LOAN FROM SHAREHOLDER
The following resolution was adopted:
RESOLVED: That the Corporation borrow up to $500,000 from the
shareholder to be repaid, on demand, with interest at twelve percent per
year.
There being no further business to be considered, the sole Director
of Ashley Capital Management, Inc. executed this Written Action on the date
first above written.
s/ Shira Del Pacult
Ms. Shira Del Pacult
Sole Director
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/12/1998
981013347 - 2849932
Certificate Of Limited Partnership
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
NOW COMES, Ashley Capital Management, Incorporated, a Delaware corporation, as
General Partner, to certify and acknowledge the formation of Atlas Futures Fund,
Limited Partnership, a Delaware Limited Partnership, to be effective upon the
date of this Certificate to evidence said formation witht the Secretary of the
State of Delware.
FIRST: NAME
The name of the Limited Partnership is: Atlas Futures Fund, Limited Partnership
SECOND: REGISTERED AGENT AND REGISTERED OFFICE
Corporate Systems Inc., 101 N. Fairfield Dr., Dover, DE 19901 (Kent County).
THIRD: THE NAME AND ADDRESS OF THE SOLE GENERAL PARTNER
The sole General Partner is: Ashley Capital Management, Incorporated, a
Delaware corporation, 101 N. Fairfield Drive, Dover, Delware 19901.
FOURTH: THE PURPOSE OF THE FUND
The Fund shall act as the vehicle to acquire capital to be traded by one or more
professional commodity trading advisors and for any other purposes the Partners
may legally determine. The Fund shall have initial capital of $2,000. There
will be no other contribution to capital prior to the release of escrow pursuant
to the terms of the escrow agreement established pursuant to the terms of the
offering documents used to sell limited partnership units in the Fund. The
terms of operation of the Fund shall be as stated in the Limited Partnership
Agreement, as may be amended, from time to time, pursuant to its terms, without
amendment to this Certificate.
WHEREFORE, this Certificate of Limited Partnership of Atlas Futures Fund,
Limited Partnership, was signed by the sole General Partner fo the purposes
stated herein on this 12th day of January, 1998.
Ashley Capital Management, Incorporated
By: s/ Shira Del Pacult
Shira Del Pacult
THE SCOTT LAW FIRM, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546
Facsimile (954) 964-1548
August 10, 1998
To: The Board Of Directors
Ashley Capital Management, Inc.
c/o Corporate Systems, Inc.
101 North Fairfield Drive
Dover, Delaware 19901
Dear Board of Directors,
We have acted as your counsel in connection with the organization of Atlas
Futures Fund, Limited Partnership, a Delaware limited partnership (the
"Partnership"), wherein your firm serves as the General Partner and the
preparation of a Registration Statement on Form S-1, expected to be filed with
the Securities and Exchange Commission (the "Registration Statement"),
relating to the registration under the Securities Act of 1933, as amended, of
$7,000,000 of Limited Partnership interest (the "Units") in the Partnership.
Based upon our familiarity with the organization of the Partnership and the
representations made to us by your firm of the methods to be used to operate
the Partnership, we are of the opinion that the Units to be offered for sale
as described in the Registration Statement, when sold in the manner and under
the conditions set forth therein, are duly authorized and will be legally
issued and fully paid and non-assessable. We are also of the opinion that
purchasers of the Units, upon admission to the Partnership by the General
Partner, will become limited partners in the Partnership and that their
liability for the losses and obligations of the Partnership will be limited
to the extent provided by the Indiana Uniform Limited Partnership Act and
the Limited Partnership Agreement of the Partnership.
Very truly yours,
The Scott Law Firm, P.A.
S/ William Sumner Scott
William Sumner Scott
For the Firm
WSS:lf
THE SCOTT LAW FIRM, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546
Facsimile (954) 964-1548
August 10, 1998
Ashley Capital Management, Inc.
General Partner
Atlas Futures Fund, Limited Partnership
5916 N. 300 West
Fremont, Indiana 46737
Re: REGISTRATION STATEMENT ON FORM S-1
Dear General Partner:
We have acted as your counsel in connection with the preparation and
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, of the Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on or about August 11, 1998, (the
"Registration Statement") relating to Units of Limited Partnership Interest
("Units") of Atlas Futures Fund, Limited Partnership (the "Partnership"), a
limited partnership organized under the laws of the state of Delaware.
We have reviewed such data, documents, questions of law and fact
and other matters as we have deemed pertinent for the purpose of this
opinion. Based upon the foregoing, we hereby confirm our opinion expressed
under the caption "Federal Income Tax Aspects" in the Prospectus (the
"Prospectus") constituting a part of the Registration Statement that: (i) the
Partnership will be treated as a partnership for federal income tax purposes
(assuming that substantially all of the gross income of the Partnership will
constitute "qualifying income" within the meaning of section 7704(d) of the
Internal Revenue Code of 1986, as amended)(the "Code")); and (ii) the
allocations of profits and losses made when Unitholders redeem their Units
should be upheld for federal income tax purposes; (iii) based upon the
contemplated trading activities of the Partnership, the Partnership should
be treated as engaged in the conduct of a trade or business for federal
income tax purposes, and, as a result, the ordinary and necessary business
expenses incurred by the Partnership in conducting its commodity futures
trading business should not be subject to limitation under section 67 or
section 68 of the Code; (iv) the Profit Share should be respected as a
distributive share of the Partnership's income allocable to Atlas Futures
Fund, Limited Partnership; and (v) the contracts traded by the Partnership,
as described in the Prospectus, should satisfy the commodities trading safe
harbor as described in section 864(b) of the Code.
We also advise you that in our opinion the description set forth under
the caption "Federal Income Tax Aspects" in the Prospectus correctly describes
(subject to the uncertainties referred to therein) the material aspects of the
United States
<PAGE>
Atlas Futures Fund, Limited partnership
August 10, 1998
Page 2
federal income tax treatment to United States individual investors, as of the
date hereof, of an investment in the Partnership.
This opinion speaks as of the date hereof, and we assume no
obligation to update this opinion as of any future date. This opinion shall
not be used for any purpose without our written consent. We hereby consent
to the filing of this opinion as an Exhibit to the Registration Statement and
to all references to our firm included in or made a part of the Registration
Statement.
Very truly yours,
s/ William S. Scott
William Sumner Scott
For the Firm
The Scott Law Firm, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546
facsimile (954) 964-1548
WSS/lf
CONSENT FRANK L. SASSETTI & CO.
The undersigned, Frank L. Sassetti & Co., Certified Public Accountants, hereby
consents to the use of the audit reports and certifications for the period
ended April 30, 1998, for Atlas Futures Fund, Limited Partnership and Ashley
Capital Management, Inc. in the Form S-1 Registration Statement filed by the
Fund with the U.S. Securities and Exchange Commission and the securities
examiners of the states selected by the General Partner.
The undersigned hereby further consents to inclusion of its name and the other
information under the section "Experts" in the said Registration Statement.
Without further consent of the undersigned, the General Partner will cause
such changes to the Form S-1 as are appropriate in response to the comments of
said Commission and administrators and, thereafter, deliver the Prospectus to
prospective investors with respect to the offering of up to $7,000,000
aggregate amount of limited partnership interest (the "Units") in Atlas
Futures Fund, Limited Partnership.
s/ Robert W. Krone
Robert W. Krone, CPA
Frank L. Sassetti & Co.
6611 West North Avenue
Oak Park, Illinois 60302
(708) 386-1433
Date: August 10, 1998
CONSENT OF JAMES D. HEPNER, CPA
I hereby consent to inclusion of my name under the section "Experts" in the
Form S-1 Registration Statement with respect to the offering of up to
$7,000,000 aggregate amount of limited partnership interests (the "Units")
in Atlas Futures Fund, Limited Partnership to be filed with the Securities and
Exchange Commission and the securities administrators for the states selected
by the General Partner. Without further consent of the undersigned, the
General Partner will cause such changes to the Form S-1 as are appropriate in
response to the comments of said Commission and administrators and, thereafter,
deliver the Prospectus to prospective investors.
s/ James D. Hepner
James D. Hepner
1824 N. Normandy
Chicago, IL 60635
Date: March 10, 1998
CONSENT BY LEGAL AND TAX COUNSEL
The Scott Law Firm, P.A., (the "Undersigned"), hereby consents to being named
as legal and tax counsel in a Form S-1 Registration Statement and the
inclusion of the legal opinions rendered by the Undersigned as Exhibits 5 and
8 thereto filed with the Securities and Exchange Commission by Atlas Futures
Fund, Limited Partnership, in connection with a proposed offering of limited
partnership interests (the "Units") to the public as described in said
Registration Statement.
s/ William S. Scott
William S. Scott
The Scott Law Firm, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546
Facsimile (954) 964-1548
Florida Bar Number #947822
Dated: May 4, 1998
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
Michael J. Frischmeyer
1. Michael J. Frischmeyer, Commodity Trading Advisor, (the "Undersigned" or
"CTA"), hereby consents to being named as CTA in a Registration Statement on
Form S-1 filed with the Securities and Exchange Commission by Atlas Futures
Fund, Limited Partnership, (the "Fund") and to the states selected by the
General Partner of the Fund in connection with the offering and sale of
limited partnership interests (the "Units") to the public as described in said
Prospectus.
2. The Undersigned hereby certifies that he furnished the statements and
information set forth in the offering circular, and that such statements and
information are accurate, complete and fully responsive to the requirement of
disclosure of his background, trading history, and the information required to
be supplied in the Prospectus thereto and do not omit any information required
to be stated therein with respect to him or his trading ability or methods or
risks which are necessary to make the statements and information therein not
misleading.
3. The Undersigned agrees to keep his track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to keep
the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in full
compliance with all laws and regulations applicable to the operation of the
Fund.
s/ Michael J. Frischmeyer
Michael J. Frischmeyer
1422 Central Avenue
P.O. Box 898
Fort Dodge, Iowa 50501
Date: March 6, 1998
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
BY BARRY T. JOHNOSON (COMMODITECH, INC.), CTA
1. Barry T. Johnson as president of Commoditech, Inc., Commodity Trading
Advisor, (the "Undersigned" or "CTA"), hereby consents to being named as CTA
in a Registration Statement on Form S-1 filed with the Securities and Exchange
Commission by Atlas Futures Fund, Limited Partnership, (the "Fund") and to the
states selected by the General Partner of the Fund in connection with the
offering and sale of limited partnership interests (the "Units") to the public
as described in said Prospectus.
2. The Undersigned hereby certifies that he furnished the statements and
information set forth in the offering circular, and that such statements and
information are accurate, complete and fully responsive to the requirement of
disclosure of his background, trading history, and the information required to
be supplied in the Prospectus thereto and do not omit any information required
to be stated therein with respect to him or his trading ability or methods or
risks which are necessary to make the statements and information therein not
misleading.
3. The Undersigned agrees to keep his track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to keep
the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in full
compliance with all laws and regulations applicable to the operation of the
Fund.
s/ Barry T. Johnson
Barry T. Johnson
President
Commoditech, Inc.
4299, Rock Island Road
Arnold, Missouri 63010
Date: March 6, 1998
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
BY ERIC ROSENBERY (ROSENBERY CAPITAL MANAGEMENT, INC.), CTA
1. Eric Rosenbery, as president of Rosenbery Capital Management, Inc.,
Commodity Trading Advisor, (the "Undersigned" or "CTA"), hereby consents to
being named as CTA in a Registration Statement on Form S-1 filed with the
Securities and Exchange Commission by Atlas Futures Fund, Limited Partnership,
(the "Fund") and to the states selected by the General Partner of the Fund in
connection with the offering and sale of limited partnership interests (the
"Units") to the public as described in said Prospectus.
2. The Undersigned hereby certifies that he furnished the statements and
information set forth in the offering circular, and that such statements and
information are accurate, complete and fully responsive to the requirement of
disclosure of his background, trading history, and the information required to
be supplied in the Prospectus thereto and do not omit any information required
to be stated therein with respect to him or his trading ability or methods or
risks which are necessary to make the statements and information therein not
misleading.
3. The Undersigned agrees to keep his track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to keep
the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in full
compliance with all laws and regulations applicable to the operation of the
Fund.
s/ Eric Rosenbery
Eric Rosenbery
President
Rosenbery Capital Mangement, Inc.
5445 N. Sheridan Rd. Suite 2706
Chicago, IL 60640
Date: March 17, 1998
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
James A. Hyerczyk (d/b/a J.A.H. Research and Trading)
1. James A. Hyerczyk (d/b/a J.A.H. Research and Trading), Commodity Trading
Advisor, (the "Undersigned" or "CTA"), hereby consents to being named as CTA
in a Registration Statement on Form S-1 filed with the Securities and Exchange
Commission by Atlas Futures Fund, Limited Partnership, (the "Fund") and to the
states selected by the General Partner of the Fund in connection with the
offering and sale of limited partnership interests (the "Units") to the public
as described in said Prospectus.
2. The Undersigned hereby certifies that he furnished the statements and
information set forth in the offering circular, and that such statements and
information are accurate, complete and fully responsive to the requirement of
disclosure of his background, trading history, and the information required to
be supplied in the Prospectus thereto and do not omit any information required
to be stated therein with respect to him or his trading ability or methods or
risks which are necessary to make the statements and information therein not
misleading.
3. The Undersigned agrees to keep his track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to keep
the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in full
compliance with all laws and regulations applicable to the operation of the
Fund.
s/ James A. Hyerczyk
James A. Hyerczyk
d/b/a J.A.H. Research and Trading
Date: August 10, 1998
CONSENT AND CERTIFICATION
BY COMMODITY TRADING ADVISOR
C&M Traders, Inc.
1. C&M Traders Inc., Commodity Trading Advisor, (the "Undersigned" or
"CTA"), hereby consents to being named as CTA in a Registration Statement on
Form S-1 filed with the Securities and Exchange Commission by Atlas Futures
Fund, Limited Partnership, (the "Fund") and to the states selected by the
General Partner of the Fund in connection with the offering and sale of
limited partnership interests (the "Units") to the public as described in
said Prospectus.
2. The Undersigned hereby certifies that it furnished the statements and
information set forth in the offering circular, and that such statements and
information are accurate, complete and fully responsive to the requirement of
disclosure of its background, trading history, and the information required to
be supplied in the Prospectus thereto and do not omit any information required
to be stated therein with respect to it or its trading ability or methods or
risks which are necessary to make the statements and information therein not
misleading.
3. The Undersigned agrees to keep its track record in accordance with
applicable law and to supply such track record and all other information, in
the form required, to permit the General Partner, from month to month, to keep
the Partners of the Fund properly informed as required by law. The
Undersigned agrees further to take those actions reasonably required by any
regulatory or tax authority to keep the Fund, and its General Partner, in full
compliance with all laws and regulations applicable to the operation of the
Fund.
s/ Steven Midlarsky
Steven Midlarsky
President
C&M Traders, Inc.
Date: August 10, 1998
CONSENT AND CERTIFICATION BY SELLING AGENT
1. Futures Investment Company (the "Undersigned") hereby consents to being
named as Selling Agent in a Form S-1 Registration Statement to be filed with
the Securities and Exchange Commission by Atlas Futures Fund, Limited
Partnership, in connection with a proposed offering of limited partnership
interests (the "Units") to the public as described in said registration
statement.
2. The Undersigned hereby certifies that it furnished the statements and
information set forth in the Prospectus with respect to the Undersigned, its
directors and officers, that such statements and information are accurate,
complete and fully responsive to the requirement of Form S-1 and do not omit
any material information required to be stated therein with respect of any
such persons, or necessary to make the statements and information therein,
with respect to any of them, not misleading.
3. If Preliminary Registration Statements are distributed, the Undersigned
hereby undertakes to keep an accurate and complete record of the name and
address of each person furnished a Registration Statement and, if such
Registration Statement is inaccurate or inadequate, in any material respect,
to furnish a revised or a Registration Statement to all persons to whom the
securities are to be sold at least 48 hours prior to the mailing of any
confirmation of sale to such persons, or to send such a circular to such
persons under circumstances that it would normally be received by them 48
hours prior to their receipt of confirmation of the sale.
FUTURES INVESTMENT COMPANY
By: s/ Michael Pacult
Micael Pacult
President
Date: May 4, 1998
CONSENT AND CERTIFICATION BY INTRODUCING BROKER
1. Futures Investment Company (the "Undersigned") hereby consents to being
named as Introducing Broker in a Form S-1 Registration Statement to be filed
with the Securities and Exchange Commission by Atlas Futures Fund, Limited
Partnership, in connection with a proposed offering of limited partnership
interests (the "Units") to the public as described in said registration
statement.
2. The Undersigned hereby certifies that it furnished the statements and
information set forth in the Prospectus with respect to the Undersigned, its
directors and officers, that such statements and information are accurate,
complete and fully responsive to the requirement of Form S-1 and do not omit
any material information required to be stated therein with respect of any
such persons, or necessary to make the statements and information therein,
with respect to any of them, not misleading.
3. If Preliminary Registration Statements are distributed, the Undersigned
hereby undertakes to keep an accurate and complete record of the name and
address of each person furnished a Registration Statement and, if such
Registration Statement is inaccurate or inadequate, in any material respect,
to furnish a revised or a Registration Statement to all persons to whom the
securities are to be sold at least 48 hours prior to the mailing of any
confirmation of sale to such persons, or to send such a circular to such
persons under circumstances that it would normally be received by them 48
hours prior to their receipt of confirmation of the sale.
FUTURES INVESTMENT COMPANY
By: s/ Michael Pacult
Micael Pacult
President
Date: May 4, 1998
CONSENT AND CERTIFICATION BY ESCROW AGENT
1. Star Financial Bank, 2004 N. Wayne St., Angola, IN 46703, (the
"Undersigned"), hereby consents to being named as Escrow Agent in a Form S-1
Registration Statement to be filed with the Securities and Exchange Commission
by Atlas Futures Fund, Limited Partnership, in connection with a proposed
offering of limited partnership interests (the "Units") to the public as
described in said registration statement.
2. The Undersigned hereby certifies that it furnished the statements and
information set forth in the offering circular with respect to the Undersigned
and that such statements and information are accurate, complete and fully
responsive and do not omit any material information with respect of the Escrow
Agent, the Escrow Account, or the Escrow Agreement, required to be stated
therein or necessary to make the statements and information therein not
misleading.
*
Print Name: ________________________
Print Title: _______________________
Date: __________________, 1998
* Out for signature
CONSENT AND CERTIFICATION
BY FUTURES COMMISSION MERCHANT
1. Howard Rothman, (the "Undersigned") of Vision Limited Partnership, Futures
Commission Merchant, (the "FCM"), first duly authorized by the FCM, hereby
consents to The Chicago Corporation being named as a FCM in a Form S-1
Prospectus filed with the Securities and Exchange Commission by Atlas Futures
Fund, Limited Partnership, (the "Fund") in connection with a proposed offering
of limited partnership interests (the "Units") to the public as described in
said Prospectus.
2. The Undersigned hereby certifies that the statements and information set
forth in the Prospectus with respect to the FCM are accurate, complete and
fully responsive to the requirement of disclosure of the material facts
related to it and the relationship of the FCM with the Fund and such
disclosures do not omit any information required to be stated therein with
respect to the FCM which are necessary to make the statements and information
therein with respect to it, not misleading.
3. The Undersigned agrees to perform the terms of the New Account Forms and to
supply all information required, including, but not limited to, daily trade
confirmation, monthly account statements and daily account runs. The
Undersigned agrees further to take those actions reasonably required of the
FCM by any regulatory or tax authority to keep the FCM and its customers in
full compliance with all laws and regulations applicable to the operation of
the FCM.
s/ Howard Rothman
Print Name: Howard Rothman
Title: President
Vision Limited Partnership
15th Floor
New York, NY 10004
Date: February 9, 1998
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
SUBORDINATED LOAN AGREEMENT
FOR EQUITY CAPITAL
AGREEMENT dated October 24th, 1996, between Ms. Shira Pacult, (the
"Lender") and Ashley Capital Management, Incorporated, a Delaware
corporation,(the "Borrower").
I. THE TERMS OF THE LOAN
In consideration of the loan of up to five hundred thousand and no/100
dollars ($500,000)(the "Payment Obligation"), and subject to the terms and
conditions hereinafter set forth, the Borrower promises to pay to the order of
the Lender, or her assigns, on demand anytime after February 1, 2019, at the
principal office of the Borrower, the amount of Payment Obligation loaned, as
evidenced by the promissory notes in substantially the form attached hereto,
from the Borrower, together with interest thereon payable at the rate of
twelve percent (12%) per annum from the date the Payment Obligation is loaned
to the Borrower, to the date of repayment of such Payment Obligation by the
Borrower to the Lender.
The Borrower may immediately record this loan agreement as an account
receivable and anticipate the loan of the Payment Obligation to the Borrower
from the Lender but the Lender is not obligated to contribute any more than
the maximum amount of the Payment Obligation expressed above in the form of
either a loan or equity contribution to the Borrower.
During the first three (3) years of this Agreement, the Borrower shall
have the right, but not the obligation, to deliver a promissory note, or
notes, in the form attached to this agreement and to otherwise provide notice
to the Lender of the amount of money to be advanced and the name of the bank
where the deposit is to be made for the account of the Borrower. Within ten
days after receipt of such notice, Lender shall deposit the amount evidenced
by the note, up to the maximum provided above, to the designated bank.
The cash proceeds to be paid by Lender to Borrower pursuant to the terms
of this Agreement shall be used and dealt with by the Borrower as a
contribution to equity capital and shall be subject to the risks of the
business of the Borrower which includes, but is not limited to, serving as the
General Partner (sic commodity pool operator) of limited partnerships (sic
pools) whose interests are sold to the public to raise equity to engage in the
business of commodity trading.
The Borrower shall have the right to deposit any cash proceeds of this
Subordinated Loan Agreement in any account or accounts in its own name in any
bank or trust company free from any security interest of the Lender.
The Lender irrevocably agrees that the obligations of the Borrower under
this Agreement with respect to the payment of principal and interest shall be
and are subordinate in right of payment and subject to the prior payments or
provision for payment, in full, of all claims of all other present and future
creditors of the Borrower arising out of any matter occurring from the date of
the loan to the date of repayment.
1
<PAGE>
Upon loan of the amount of the Payment Obligation requested by Lender to
Borrower or after the lapse of three (3) years following the execution of this
Agreement, there shall be no further obligation of the Lender to advance any
additional funds pursuant to the terms of this Agreement; i.e., all obligation
of Lender to loan money to Borrower, pursuant to the terms of this Agreement,
shall expire on October 24, 1999, and all loans made to Borrower to that date
shall be fixed as an obligation of Borrower to be repaid pursuant to the terms
of the Notes.
II. PERMISSIVE REPAYMENTS
At the option of the Borrower, but not at the option of the Lender,
payment of all or any part of the Payment Obligation amount hereof prior to
the maturity date may be made by the Borrower; provided, however, such
prepayment may be made only after receipt of an audit report of the Borrower
conducted by an independent certified public accountant which discloses that
the net capital or equity of the Borrower is above the percentage required to
maintain the Fremont Fund, Limited Partnership, as a partnership, for tax
purposes. The requirement of the audit shall be for the protection of the
limited partners in the Fund and any of them shall have the right to demand,
at their expense, a copy of the audit submitted to support any such repayments
made in advance of the above due date. The Borrower agrees that if its
obligation to pay the Payment Obligation is not made within ten days after the
due date, the Borrower will immediately commence a rapid and orderly complete
liquidation of its' business.
III. LIMITATION ON WITHDRAWAL OF EQUITY CAPITAL AND INDEBITNESS
As long as this subordination loan agreement remains unpaid, the Borrower
will make no distributions in the form of dividends or pay salaries to any
director or officer who is also a shareholder. The Borrower will not make any
other loans or indebitness which is senior to or pari parsu with this
subordinated loan agreement.
IV. SUBORDINATION OF ACCRUED INTEREST PAYABLE
The Lender and the Borrower hereby elect to have all eligible accrued
interest payable, on this loan, considered as additional subordinated capital
for purposes of computing equity. Any Repayments shall be first be allocated
to accrued interest and the balance, if any, to principal.
V. GENERAL
In the event of the appointment of a receiver or trustee of the Borrower
or in the event of its insolvency, liquidation, bankruptcy, assignment for the
benefit of creditors, reorganizations whether or not pursuant to bankruptcy
laws, or any other marshaling of the assets and liabilities of the Borrower,
the Payment Obligation of the Borrower shall mature, and the holder hereof
shall not be entitled to participate or share, ratably or otherwise, in the
distribution of the assets of the Borrower until all claims of all other
present and future creditors of the Borrower, whose claims are senior hereto,
have been fully satisfied. This Agreement shall not be subject to
cancellation by either the Lender or the Borrower, and no payment shall be
2
<PAGE>
made, nor the Agreement terminated, rescinded or modified by mutual consent or
otherwise. The Borrower may not be transfer, sell, assign, pledge, or
otherwise encumber or otherwise dispose of this Agreement, and no lien,
charge, or other encumbrance may be created or permitted to be created
thereon.
The Lender irrevocably agrees that the loan evidenced hereby is not being
made in reliance upon the standing of the Borrower as a member of the National
Futures Association ("NFA") or upon the NFA surveillance of the Borrowers
financial position or its compliance with the by-laws, rules and practices of
the NFA. The Lender is affiliated with the Borrower and either is personally
aware of all material facts or has made such investigation of the facts
attendant to the provision of this loan, including the employment of
independent legal counsel other than The Scott Law Firm, P.A., to confirm the
need for and the reasonableness of the terms of this subordinated loan
agreement. The Lender is not relying upon the NFA to provide any information
concerning or relating to the Borrower and agrees that the NFA and the
Commodity Futures Trading Commission have no responsibility to disclose to the
Lender any information concerning or relating to the Borrower which they may
now, or at any future time, have.
The term "Borrower", as used in this Agreement, shall include the
Borrower, its successors and assigns. The term "Payment Obligation" shall
mean the obligation of the Borrower to repay cash loaned to it pursuant to
this Subordinated Loan Agreement. The provisions of this Agreement shall be
binding upon the Borrower and the Lender, and their respective heirs,
executors, administrators, successors, and assigns. Any controversy arising
out of or relating to this Agreement shall be submitted to and settled by
arbitration pursuant to the by-laws and rules of the American Arbitration
Association. The Borrower and the Lender shall be conclusively bound by such
arbitration. This instrument embodies the entire agreement between the
Borrower and the Lender and no other evidence of such agreement has been or
will be executed. This Agreement shall be deemed to have been made under, and
shall be governed by, the laws of the State of Delaware in all respects.
IN WITNESS WHEREOF, the parties have set their hands and seal as of the date
above.
Borrower: ASHLEY CAPITAL MANAGEMENT, INCORPORATED
By: s/ Shira Del Pacult
Shira Pacult, President
Lender:
s/ Shira Del Pacult
Shira Pacult, Individually
3
<PAGE
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
SUBORDINATED LOAN AGREEMENT
LENDER'S ATTESTATION
It is recommended that you discuss the merits of this investment with an
attorney, accountant or some other person who has knowledge and experience in
financial and business matters, other than those affiliated with the Borrower,
prior to executing this Agreement.
1. I am aware that the funds or securities subject to this Agreement are
not covered by the Securities Investor Protection Act of 1970 or any other
repayment insurance.
3. I understand that I will be furnished financial statements of Ashley
Capital Management, Incorporated, in accordance with the laws and regulations
related to commodity pool operators, as they are required to be delivered to
limited partners of any commodity pool it serves as General Partner.
4. On the date this Agreement was entered into, the Borrower carried funds
or securities for my account in that I am the sole shareholder of the
Borrower.
5. Lender's business relationship to the Borrower is: sole Shareholder,
Director, and sole officer.
Lender:
s/ Shira Del Pacult
Shira Pacult, Individually
4
<PAGE
PROMISSORY NOTE
$_______________ Date:
FOR VALUE RECEIVED, Ashley Capital Management, Incorporated (the "Borrower")
promises to pay to the order of Shira Del Pacult, at 5916 N. 300 West,
Fremont, IN 46734, or at such other place as she or any subsequent holder may
designate in writing to the Undersigned, the principal sum of
_________________($__________), on demand at anytime after February 1, 2019,
with interest at the rate of twelve percent (12%) per year, from the date of
this note to the date of repayment, payable at the time of repayment of the
principal. Prepayments may be made by the Borrower in accordance with the
terms of the loan agreement dated October 24, 1996.
In the event of any default by the Borrower in the payment of principal when
due for ten days after notice of non-payment to the address provided herein,
the unpaid balance of the principal sum of this promissory note shall bear
interest from thirty days from the date of the default at the rate of eighteen
percent (18%) upon the balance due. In case suit or action is instituted to
collect this note, or any portion hereof, the maker and all guarantors promise
to pay such additional sum, as the court may adjudge reasonable, for
attorneys' fees and costs in said proceedings
The Borrower and all other persons who guarantee payment hereof, if any,
severally waive demand, presentment, protest, notice of dishonor or
nonpayment, notice of protest, and any and all lack of diligence or delays in
collection which may occur, and expressly consent and agree to each and any
extension or postponement of time of payment hereof from time to time at or
after maturity or other indulgence and waive all notice thereof. This note is
made and executed under, and is in all respects governed by, the laws of the
State of Delaware.
Ashley Capital Management, Incorporated
___________________________
Shira Del Pacult, President
5
<PAGE>
FUTURES INVESTMENT COMPANY
REPRESENTATIVE'S AGREEMENT
THIS AGREEMENT, made at Fremont, Indiana, this 28th day of July, 1997,
between, FUTURES INVESTMENT COMPANY, hereinafter referred to as FUTURES
INVESTMENT and Shira Del Pacult, its Registered Representative, hereinafter
referred to as "Representative".
In consideration of the mutual covenants herein, the parties hereby agree as
follows:
I. APPOINTMENT Of REPRESENTATIVE
FUTURES INVESTMENT hereby appoints Representative to act as Sales
Representative in connection with the sales of registered and unregistered
securities. At all times you shall act as an independent contractor,
nothing contained in this agreement shall be construed to create the
relationship of employer and employee between you and us. Representative
agrees not to hold himself out as Officer, Director or employee of FUTURES
INVESTMENT. Subject to the terms conditions contained herein, in your
capacity as an independent contractor you shall represent us in soliciting
application for the purchase of securities of any investment company or
other issuer for which we act as dealer or underwriter, and you shall be
free to exercise your own judgment as to the persons whom you will solicit
and the time, place and manner of solicitation. You shall pay your
expenses in connection with your business as a Sales Representative
hereunder.
II. BUSINESS ACTIVITIES OF REPRESENTATIVE.
Representative shall devote his/her best efforts to the performance of this
Agreement. FUTURES INVESTMENT will assist in obtaining the necessary
license and surety bonds for those States which require surety bonds and
the Representative shall bear the cost of these license and bonds
Representative shall not interview prospects or solicit application until
he has secured all licenses required by law and obtained a surety bond
satisfactory to FUTURES INVESTMENT. This Agreement shall terminate upon
cancellation of such bond or non-renewal or cancellation of any license
which Representative is required to have to perform this Agreement.
III. UNDERTAKING BY REPRESENTATIVE
(a) No Violation of FUTURES INVESTMENT's Interests. Neither during the
period of this Agreement nor thereafter shall Representative, (1) use
any information acquired by him/her during the period of this Agreement
in a manner adverse to the interests of FUTURES INVESTMENT or the issuer
of a Security, or (2) do any act to damage the good will of FUTURES
INVESTMENT or such an issuer.
(b) Collections. Representative shall report and remit promptly all
payments for or security to FUTURES INVESTMENT without commingling the
same with his/her own funds.
(c) Branch Office. Representative will act in the capacity of independent
contractor and will not perform any acts which would lead anyone to
believe FUTURES INVESTMENT has a full branch office at any other
location except FUTURES INVESTMENT's home office without written
approval from FUTURES INVESTMENT.
(d) Trafficking or Switching. Representative shall not make any agreement
with any person for repurchase or resale of a Security nor twist or
switch securities of any other company, or twist Insurance policies to
the detriment of the client.
(e) Sales Literature. Representative must obtain the specific written
approval of FUTURES INVESTMENT, before he/she may use any material
concerning a Security, the issuer thereof, or FUTURES INVESTMENT.
(f) Policies of FUTURES INVESTMENT. Representative shall abide by all
rules, regulations and policies of FUTURES INVESTMENT. These policies
will be considered matters of company policy and will be updated,
changed, expanded and deleted, from time to time, as deemed appropriate
and will not alter or supersede this contract.
(g) Authority Limited. Representative shall have no authority to alter or
amend the provisions of a Security nor to incur any, liability on behalf
of FUTURES INVESTMENT or the issuer of a Security.
(h) Compliance with Regulations. Representative agrees to explain fully all
facts pertinent to any security offered to a prospect and to
simultaneously deliver all required and necessary approved offering
documentation in connection therewith. Representative shall not make
false statements, or deliver broker dealer only materials, or
misrepresent or omit to state material facts to any client or
prospective client. Representative shall adhere to and abide by the
rules and regulations of FUTURES INVESTMENT and the rules of fair
practice as prescribed by the NASD and shall comply with all general
rules and regulations promulgated under the Securities Act of 1933 and
the Securities Exchange Act of 1934, as amended, as well as with the
Securities and Exchange Commission Statement of Policy, all Federal
Board regulation and all securities acts and regulations of the states
in which Representative is licensed to transact business. Representative
represents that he/she is completely familiar with such regulations.
(i) Exclusive. Representative agrees that during the term of this Agreement,
he/she will not enter into any sales agency, brokerage or other
agreement with any dealer, or issuer of securities other than FUTURES
INVESTMENT and that he/she will not otherwise, directly or indirectly,
place orders of any kind with any such other person or entity without
the prior express written consent of FUTURES INVESTMENT.
(j) Notification and Approval. Representative will inform FUTURES
INVESTMENT in writing of any other financial planning product which
he/she Intends to sell, or service he/she intends to provide and will
not offer said product or service to the public without the prior
written consent of FUTURES INVESTMENT.
IV. COMMISSION PAYMENTS TO REPRESENTATIVE
Your sole compensation will be commission earned with respect to sale made
by you, but only In accordance with and subject to the applicable
Commission Schedule Issued by FUTURES INVESTMENT and In effect at the time
of the sale. Our Commission Schedules are subject to change from time to
time by us without the approval of Representative. Your commission are
payable as set forth In the Commission Schedule attached and made a part of
this Agreement, subject to receipt by us of full payment for the securities
sold In the case of cash sales, open account sales, or other voluntary
Investment program sales and receipt by us of the full dealer concession
for the securities sold. You may not assign, hypothecate or otherwise
encumber your right to receive commission without our prior written
consent. All expense Incurred by Representative in the solicitation and
sale of investments hereunder shall be borne by the Representative. Neither
FUTURES INVESTMENT nor any Issuer of Investment units shall be liable to
Representative for the payment of commissions or expenses.
V. LOSS AND LIMITATIONS ON THE PAYMENT OF COMMISSIONS.
a) Violation of this Agreement. A breach by Representative of any
provision of this Agreement shall terminate this Agreement and
Representative shall not be entitled to receive any payment which he/she
would otherwise be entitled to receive from FUTURES INVESTMENT.
b) Claims, Controversies and Settlements. In event of any claim of
misrepresentation or the use of unfair or inequitable methods, or lack
of proper registration by Representative in regard to the sale of any
Security for which commission are or become due to Representative, or
failure of Representative to remit any collection, FUTURES INVESTMENT
may withhold to the extent it deems necessary, any commissions or other
amount to which Representative is or may become entitled, pending
disposition or settlement of such matter, and in the event it is
established that representative was guilty of wrong-doing FUTURES
INVESTMENT may retain such withheld amounts and any future amounts
received to pay any such disposition or settlement. FUTURES INVESTMENT
may effect settlement with a Security holder or issuer in accordance
with its business judgment and refund in whole or in part any sum paid
by such a holder. Upon the making of a settlement or refund, whether or
not a claim or misrepresentation was made by a certificate holder or
stockholder, FUTURES INVESTMENT shall be entitle to charge back to
Representative the whole or such proportionate part of the withheld
amounts. Representative may not make any settlement or refund to a
holder or stockholder without the prior written approval of FUTURES
INVESTMENT. As used In this paragraph, settlement includes a
cancellation of Security or any adjustment made with a holder of a
Security To the extent that FUTURES INVESTMENT Incurs expense in excess
of such withholding, Representative shall be responsible for payment
thereof upon written demand by FUTURES INVESTMENT, Including any
expenses In collecting the excess from Representative.
c) Right of Offset. FUTURES INVESTMENT reserves the right to apply any sum
payable by FUTURES INVESTMENT to Representative against any indebtedness
of Representative to FUTURES INVESTMENT or for which FUTURES INVESTMENT
may become liable.
VI. TERMINATION.
Death, Disability or Retirement. This Agreement shall be terminate by
death, inability of Representative to perform duties under this Agreement
due to physical or mental disability or retirement of Representative.
Proof of these occurrences shall be in the form required by FUTURES
INVESTMENT. FUTURES INVESTMENT agrees that should Representative become
unwilling or unable to hold the registration(s) necessary to obtain such
trailing commissions whether through death, disability, or otherwise, that
these commissions will then be paid to her husband, Michael Pacult, who
will then service the clients, subject to his being properly registered
with the necessary regulatory agency(ies). If both Michael and Shira
Pacult should become unwilling or unable to hold the registration(s)
necessary to obtain such trailing commissions whether through death,
disability or otherwise, FUTURES INVESTMENT agrees that these commissions
will then be paid to the person designated by the Pacults or, in case of
death, their heir(s) as designated in the Pacults' testamentary documents,
who will then service these clients, subject to their being properly
registered with the necessary regulatory agency(ies).
(a) Termination by the Parties. This Agreement may be terminated by FUTURES
INVESTMENT without Cause upon thirty (30) days written notice to
Representative and for Cause may be terminated immediately without prior
notice by FUTURES INVESTMENT. This Agreement may be terminated by
Representative upon written notice to FUTURES INVESTMENT. FUTURES
INVESTMENT agrees that all trailing commissions paid to FUTURES
INVESTMENT by the issuer, underwriter, sponsor or other distributor of
direct participation securities as a result of the solicitation and
servicing of clients by Representative will be paid to him/her, less the
percentage to which FUTURES INVESTMENT is entitled pursuant to the
Commission Schedule in effect at the time such commission payments are
made. Should the relationship between FUTURES INVESTMENT and
Representative be terminated by either party for any reason, FUTURES
INVESTMENT consents to the payment of all such commissions to the
broker-dealer designated by him/her and agrees that it will instruct all
issuers, underwriters, sponsors or other distributors of such securities
to transfer all commission payments to the broker-dealer designated by
him/her within five days of such designation and request.
(b) Return of Records. Representative upon termination of this Agreement,
shall return to FUTURES INVESTMENT all supplies, books, video tapes,
cards, Customer records and all other materials and property furnished
to him/her by FUTURES INVESTMENT.
VII. PRIOR AGREEMENTS. This Agreement shall supersede all former Agreement
which have existed between the parties hereto relative to the sale of
securities.
IN WITNESS WHEREOF, the parties have executed this agreement on the date first
above written.
FUTURES INVESTMENT COMPANY SALES REPRESENTATIVE
By: s/ Michael Pacult s/ Shira Del Pacult
Michael Pacult Shira Del Pacult
President
