As Filed with the Securities and Exchange Commission on January 29, 1999
Registration No. 333-61217
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMENDMENT NO. 2
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".
If the Partnership does not outperform Fremont Fund, LP, the other public
commodity pool of which the principal of the General Partner is the principal
of its general partner, investors in the Partnership will not receive a return
on their investment during the first two years of operation.
The General Partner may change the CTAs and the allocation of equity to the
CTAs at any time, for any reason, without prior notice to the Limited Partners.
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".
There are no limits or policies with respect to the amount or nature of the
Partnership's trading on foreign exchanges, which puts Partnership equity at
greater risk than if trading on foreign exchanges were prohibited or limited.
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
Date of this Prospectus is January 29, 1999
<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 42.
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 23.
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
iii
<PAGE>
EXPECTS TO HAVE GROSS INCOME IN EXCESS OF $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 OR UPON ANY TRANSFER, SHALL BEAR
ON THEIR FACE, IN CAPITAL LETTERS OF 10-POINT SIZE, AS
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<PAGE>
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
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 1
CONFLICTS OF INTEREST 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 6
Business Objective and Expenses 6
Securities Offered 6
CHARGES TO THE PARTNERSHIP 6
Management and Incentive Fees 7
Charges to the Partnership 7
USE OF PROCEEDS 8
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 8
FEDERAL INCOME TAX ASPECTS 9
No Legal Opinion As To Certain Material Tax Aspects 9
REDEMPTIONS 9
PLAN OF DISTRIBUTION 10
SUBSCRIPTION PROCEDURE 10
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 11
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 13
THE OTHER PARTNERSHIPOF THE GENERAL PARTNER, FREMONT FUND, LP,
HAS NOT BEEN PROFITABLE 13
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
GENERAL PARTNER MAY CHANGE CTAs AND THEIR ALLOCATION OF EQUITY WITHOUT
NOTICE 13
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT 14
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE - UNITS MAY NOT BE
REDEEMABLE BEFORE SUBSTANTIAL DEVALUATION OF NET UNIT VALUE 14
LOW SECURITY DEPOSIT IN RELATION TO PRICE MOVEMENT 14
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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 15
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 17
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 17
FAILURE TO MAINTAIN NET WORTH OF THE GENERAL PARTNER MAY RESULT IN
SUSPENSION OF TRADING AND SUSTAINED LOSSES 17
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 18
INVESTORS NOT PROTECTED BY THE INVESTMENT COMPANY ACT OF 1940 18
POSSIBILITY OF AUDIT - PARTNERS MAY BE SUBJECT TO AUDIT AND PENALTIES 18
GENERAL PARTNER MAY SETTLE IRS CLAIM NOT IN THE BEST INTEREST OF THE
PARTNERS 18
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 19
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 20
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 21
INTERESTS OF NAMED EXPERTS AND COUNSEL 21
THE PARTNERSHIP AND FUTURES INVESTMENT COMPANY SHARE THE SAME ADDRESS 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 22
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS 22
THE COMMODITY TRADING ADVISORS 22
THE ADVISORY CONTRACTS AND POWERS OF ATTORNEY 22
BUSINESS OBJECTIVE AND EXPENSES 22
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EXPENSES PER UNIT FOR THE FIRST 12-MONTH PERIOD OF OPERATIONS 23
SECURITIES OFFERED 24
MANAGEMENT'S DISCUSSION 25
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER 26
INDEMNIFICATION 26
RELATIONSHIP WITH THE FCM AND THE IB 27
RELATIONSHIP WITH THE CTAs 27
RISK CONTROL 28
CHARGES TO THE PARTNERSHIP 28
COMPENSATION OF GENERAL PARTNER 28
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTAs 28
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER 29
ALLOCATION OF COMMISSIONS 29
OTHER EXPENSES 30
CHARGES TO THE PARTNERSHIP 30
INVESTOR SUITABILITY 31
POTENTIAL ADVANTAGES 31
EQUITY MANAGEMENT 31
INVESTMENT DIVERSIFICATION 31
LIMITED LIABILITY 31
ADMINISTRATIVE CONVENIENCE 32
ACCESS TO THE CTAs 32
USE OF PROCEEDS 32
DETERMINATION OF THE OFFERING PRICE 32
NO MARKET AND LIMITATION OF RIGHT OF TRANSFER 33
THE GENERAL PARTNER 33
IDENTIFICATION 33
THE PRINCIPAL AND OFFICER OF THE GENERAL PARTNER 33
TRADING BY THE GENERAL PARTNER; INTEREST IN THE POOL 33
NO PRIOR PERFORMANCE AND REGULATORY NOTICE 34
TRADING MANAGEMENT 34
SELECTION OF COMMODITY TRADING ADVISORS AND ALLOCATION OF EQUITY 34
THE ADVISORY CONTRACTS 34
FREQUENCY OF CTA AND EQUITY REALLOCATIONS 34
THE COMMODITY TRADING ADVISORS 35
ANSBACHER INVESTMENT MANAGEMENT, INC. 35
BUSINESS BACKGROUND 35
DESCRIPTION OF TRADING PROGRAM 36
PERFORMANCE RECORD OF THE CTA 36
COMMODITECH, INC. 38
BUSINESS BACKGROUND 38
DESCRIPTION OF TRADING PROGRAM 39
PERFORMANCE RECORD OF THE CTA 40
ROSENBERY CAPITAL MANAGEMENT, INC. 41
BUSINESS BACKGROUND 41
DESCRIPTION OF TRADING PROGRAM 41
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PERFORMANCE RECORD OF THE CTA 43
EPIC TRADING 44
BUSINESS BACKGROUND 44
DESCRIPTION OF TRADING PROGRAM 44
PERFORMANCE RECORD OF THE CTA 45
PERFORMANCE RECORD OF FREMONT FUND, LIMITED PARTNERSHIP 46
THE FUTURES COMMISSION MERCHANTS 47
FEDERAL INCOME TAX ASPECTS 47
SCOPE OF TAX PRESENTATION 47
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS 48
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER 48
NO IRS RULING 48
TAX OPINION 49
PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES 49
BASIS LOSS LIMITATION 50
AT-RISK LIMITATION 50
INCOME AND LOSSES FROM PASSIVE ACTIVITIES 50
ALLOCATION OF PROFITS AND LOSSES 50
TAXATION OF FUTURES AND FORWARD TRANSACTIONS 50
SECTION 988 FOREIGN CURRENCY TRANSACTIONS 51
CAPITAL GAIN AND LOSS PROVISIONS 51
BUSINESS FOR PROFIT 51
SELF-EMPLOYMENT INCOME AND TAX 51
INDIVIDUAL ALTERNATIVE MINIMUM TAX 51
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS 51
NOT A TAX SHELTER 52
TAXATION OF FOREIGN PARTNERS 52
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES 52
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S 52
THE LIMITED PARTNERSHIP AGREEMENT 53
FORMATION OF THE PARTNERSHIP 53
UNITS 53
MANAGEMENT OF PARTNERSHIP AFFAIRS 53
ADDITIONAL OFFERINGS 53
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS 53
FEDERAL TAX ALLOCATIONS 54
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER 54
TERMINATION OF THE PARTNERSHIP 54
MEETINGS 54
REDEMPTIONS 54
PLAN OF DISTRIBUTION 55
SUBSCRIPTION PROCEDURE 55
LEGAL MATTERS 56
LITIGATION AND CLAIMS 56
LEGAL OPINION 56
EXPERTS 56
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ADDITIONAL INFORMATION 57
FINANCIAL STATEMENTS
A. ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Balance Sheet and Income Statement as of April 30, 1998
Notes to Statement of Financial Condition
Unaudited Balance Sheet and Income Statement as of September 30, 1998
B. ASHLEY CAPITAL MANAGEMENT, INC.
Balance Sheet and Income Statement as of April 30, 1998
Notes to Statement of Financial Condition
Unaudited Balance Sheet and Income Statement as of September 30, 1998
APPENDIX I - COMMODITY TERMS AND DEFINITIONS; STATE REGULATORY GLOSSARY
APPENDIX II - SUPPLEMENTAL PERFORMANCE INFORMATION FOR ANSBACHER INVESTMENT
MANAGEMENT, INC.
APPENDIX III - SUPPLEMENTAL PERFORMANCE INFORMATION FOR EPIC TRADING
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 - ANSBACHER INVESTMENT MANAGEMENT,
INC.
EXHIBIT G - INVESTMENT ADVISORY CONTRACT - COMMODITECH, INC.
EXHIBIT H - INVESTMENT ADVISORY CONTRACT - ROSENBERY CAPITAL MANAGEMENT, INC.
EXHIBIT I - INVESTMENT ADVISORY CONTRACT - EPIC TRADING
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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.
RISK FACTORS
An investment in the Partnership is speculative and involves substantial
risks. See "Charges to the Partnership", "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
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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. If this Partnership does not
outperform Fremont Fund, LP, the other public commodity pool of which the
principal of the General Partner is also the principal of its general partner,
investors in this Partnership will not receive a return on their investment
during the first two years of operation.
* 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 may change the CTAs and the
allocation of equity to the CTAs at any time, for any reason, and without
prior notice to the Limited Partners. 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. There are no limits or policies with respect to the amount or nature
of the Partnership's trading on foreign exchanges, which puts Partnership
equity at greater risk than if trading on foreign exchanges were prohibited or
limited. Specifically, there would be little recourse to recover trading
assets lost as a result of the collapse of a foreign government or private
institution. The trades will also be denominated in the currency particular
to the foreign 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 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
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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.
(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.
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(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) If a CTA is replaced, the new CTA will receive incentive fees based
upon the date of the allocation of equity to that CTA, regardless of the
profitability of the previous CTA. Also, as incentive fees are paid with
respect to the individual performance of each CTA, it is possible for the
Partnership to experience a net loss and be required to pay out incentive
fees.
(viii) 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.
(ix) The CTAs are compensated based on a percentage of the profits they
generate and thus may have an incentive to engage in ill-advised trades. In
addition, each CTA will trade independently of the others. Thus, the CTAs may
compete for similar positions or take positions opposite each other, which may
limit the profitability of the Partnership.
(x) 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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Diagram of Partnership Structure & Commissions
Atlas Futures Fund, Limited Partnership
[Diagram omitted]
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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. 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"),
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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", "Management's Discussion and
Analysis of Financial Condition, Relationship with the FCM and IB", and
"Charges to the Partnership, Fees to Futures Commission Merchant and
Introducing Broker". 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. 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. See "Charges to the
Partnership, Allocation of Commissions".
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%) (see "Charges to the Partnership, Compensation of the
General Partner") 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 (see "Charges to the Partnership, Management Fee and
Incentive Fees to the CTAs"). 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 "Charges to the Partnership, Other Expenses".
Charges to the Partnership
The following table includes all charges to the Partnership.
<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
(Ashley Capital Management fee 3% management fee of Net Asset Value
Management, Inc.)
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 A one time charge of 6% of Gross Selling
(Futures Investment Price of Units for Selling Commissions
Company)
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
(Vision LP) 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
(Ansbacher, each CTA
Commoditech,
Rosenbery, & EPIC Incentive Fee 15% of the New Net Profits of the account for
Trading) 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
(The Scott Law Firm, expenses necessary to the operation of the the first ($18,000 for accounting and
P.A., & Frank L. Sassetti Partnership, and all claims and other $5,000 for legal). Claims and other costs
& Co.) extraordinary expenses of the Partnership. can not be estimated and will be paid as
incurred.
</TABLE>
7
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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. 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
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, and
I, upon
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<PAGE>
Ansbacher Investment Management, Inc. ("Ansbacher"), Commoditech, Inc.
("Commoditech"), Rosenbery Capital Management, Inc. ("Rosenbery"), and EPIC
Trading ("EPIC"), 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 25% of total trading equity to each of the CTAs. See
Exhibits F, G, H, and I. 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. As each
CTA will trade independently of the others, the CTAs may compete for similar
positions or take positions opposite each other, which may limit the
profitability of the Partnership. If a CTA is replaced, the new CTA will
receive incentive fees based upon the date of the allocation of equity to that
CTA, regardless of the profitability of the previous CTA. As incentive fees
are paid with respect to the individual performance of each CTA, it is
possible for the Partnership to experience a net loss and be required to pay
out incentive fees. 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
the 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 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
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<PAGE>
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 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, Commoditech, to which 20% of the trading equity
will be allocated has been trading since 1992.
10
<PAGE>
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. The principal also has over
sixteen years of experience selecting commodity trading advisors to manage
individual investor accounts and describing to individual investors how
individual managed futures accounts are administered. 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 each CTA of 3%, payable monthly, plus an estimated $23,000 per
year in expenses, ($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 $1,028,000 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
$1,004,000 assuming gross capital of $7,000,000. Assuming all Partnership
equity, minus expenses and commissions, is allocated to the CTAs, and assuming
further, a return of 20% per year, an additional $82,050 would be paid in
incentive fees if the Minimum were raised, and $895,800 would be paid if the
Maximum were raised. The Partnership may also be subject to expenses
occurring out of the ordinary course of business, such as legal fees due to
litigation against the Partnership or an entity which it must indemnify, or
other expenses arising from changes in the securities laws. As these charges
are unforeseeable, they cannot be estimated. 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 Partnership's Net Assets for any such
period. See "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
11
<PAGE>
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 and its principal 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.
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 FIC, the IB, that is Affiliated with
the principal of the General Partner to enable them to negotiate better terms
for clearing and other services. The better terms may produce better results
for individual customers of FIC or any other commodity pools which either FIC
or the General Partner may undertake to manage. 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 three of the CTAs (Ansbacher,
Rosenbery and EPIC) 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".
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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.
THE OTHER PARTNERSHIP OF THE PRINCIPAL OF THE GENERAL PARTNER, FREMONT FUND,
LP, HAS NOT BEEN PROFITABLE
If the Partnership does not outperform Fremont Fund, LP, the other public
commodity pool of which the principal of the General Partner is also the
principal of its general partner, investors in the Partnership will not
receive a return on their investment during the first two years of operation.
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
NFA registered IB and the NASD registered 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% selling
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, and I upon Ansbacher, Commoditech,
Rosenbery and EPIC, 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. In
addition, if a CTA is replaced, the new CTA will receive incentive fees based
upon the date of the allocation of equity to that CTA, regardless of the
profitability of the previous CTA.
GENERAL PARTNER MAY CHANGE CTAs AND THEIR ALLOCATION OF EQUITY WITHOUT NOTICE
The General Partner may change the CTAs and the allocation of equity to the
CTAs at any time, for any reason, and without prior notice to the Limited
Partners. As the principal of the General Partner is also a principal of the
IB which receives a net commission determined by the number of trades made, it
would be possible for her to select a CTA based upon the number of trades the
CTA makes rather than based upon projected profitability.
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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 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
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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, (i) the difficulty of executing substantially
larger trades made necessary by the larger amount of equity under management,
(ii) the restrictive effect of limits imposed by the CFTC on the number of
positions that may be taken on certain commodities (Position Limits), or,
(iii) the diminishment of opportunity to Scale in Positions (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 where the
market selected will not permit the placement of a position at the time the
CTA selects. The Minimum/Maximum of 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. Though the General Partner has used its best judgment to set the
Minimum high enough for the Partnership to trade profitably, the Minimum
amount of gross subscriptions needed to break escrow ($700,000) after
repayment of offering expenses of $52,000 and selling commissions of $42,000,
may be insufficient equity to allow the CTAs to trade profitably. However,
the General Partner's decision was not motivated by a desire to receive
commissions. See `Risk Factors, Increased Trading Equity To CTAs May
Adversely Affect Their Performance'.
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 other principal, 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
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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 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 THE
PARTNERSHIP LIMITED THE TRADING OF ITS CTAs ON BEHALF OF THE PARTNERSHIP TO
U.S. MARKETS.
NO RESTRICTIONS ON FOREIGN TRADING PUTS PARTNERSHIP EQUITY AT GREATER RISK
There are no limits or policies with respect to the amount or nature of the
Partnership's trading on foreign exchanges. This puts the Partnership's
equity and the investor's investment at greater risk than if trading on
foreign exchanges were prohibited or limited.
TRADING FORWARD CURRENCY CONTRACTS ARE NOT SUBJECT TO U.S. REGULATION AND ARE
INHERENTLY RISKY
The forward contracts are negotiated by the parties without CFTC or other
government regulation rather than by the regulated 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
safeguards 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. Additionally, as
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each CTA will trade independently of the others, the CTAs may compete for
similar positions or take positions opposite each other, which may limit the
profitability of the Partnership.
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,
Ansbacher uses its best efforts to trade every $40,000 the same. In other
words, the Trading Matrix for Ansbacher 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.
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
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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.
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".
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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
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.
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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 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 are 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.
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THE PARTNERSHIP WILL ENGAGE MULTIPLE CTAs
The General Partner has sole and absolute discretion over the selection of the
CTAs. As each CTA will trade independently of the others, the CTAs may
compete for similar positions or take positions opposite each other, which may
limit the profitability of the Partnership. If a CTA is replaced, the new CTA
will receive incentive fees based upon the date of the allocation of equity to
that CTA, regardless of the profitability of the previous CTA. As incentive
fees are paid with respect to the individual performance of each CTA, it is
possible for the Partnership to experience a net loss and be required to pay
out incentive fees.
GENERAL PARTNER MAY 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 to Futures Investment Company, an introducing broker Affiliated with
the General Partner, upon the assets assigned by the General Partner for
trading. 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.
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 Selling Agent 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.
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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.
THE COMMODITY TRADING ADVISORS
The General Partner has initially selected four independent commodity trading
advisors ("CTAs") to conduct trading on behalf of the Partnership, each of
which will be assigned 25% of the total trading equity. They are Ansbacher
Investment Management, Inc., Commoditech, Inc., Rosenbery Capital Management,
Inc., and EPIC Trading. 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 by each CTA. See Exhibits
F, G, H, and I. 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.
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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 to the IB fixed brokerage commissions of nine percent (9%) of assets
assigned by the General Partner for trading. 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.
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
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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.
(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 approximately 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.
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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 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.
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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 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,
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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.
The General Partner has indemnified the Managing Dealer, Futures Investment
Company, and expects to indemnify any other Selling Agents it selects 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 to facilitate
negotiations with the futures commission merchant (the "FCM") with respect to
the round turn commission rates incurred through trading via the CTAs. 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 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.
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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 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
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<PAGE>
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
Ansbacher of $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 any of the Commodity Trading Advisors
effects round-turns of 765 or more 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 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.
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
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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 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>
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
Entity Form of Compensation Amount of Compensation
General Partner
(Ashley Capital Management fee 3% management fee of Net Asset Value
Management, Inc.)
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 A one time charge of 6% of Gross Selling
(Futures Investment Price of Units for Selling Commissions
Company)
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
(Vision LP) 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
(Ansbacher, each CTA
Commoditech,
Rosenbery, & EPIC Incentive Fee 15% of the New Net Profits of the account for
Trading) 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
(The Scott Law Firm, expenses necessary to the operation of the the first ($18,000 for accounting and
P.A., & Frank L. Sassetti Partnership, and all claims and other $5,000 for legal). Claims and other costs
& Co.) 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.
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
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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., Ansbacher requires a minimum investment of $250,000. 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 $700,000 in
Partnership Units (the "Minimum") during the first one year of this Offering,
the Escrow Agent will return all money deposited to the Escrow Account to the
investors together with their pro rata share of the interest earned without
any deduction for fees or other costs promptly following the lapse of such
Offering period.
DETERMINATION OF THE OFFERING PRICE
The Units are currently offered for sale for One Thousand Dollars ($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
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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,
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.
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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, and I, upon Ansbacher Investment Management, Inc.,
Commoditech, Inc., Rosenbery Capital Management, Inc., and EPIC Trading, 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 be divided equally among the existing CTAs. 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. If a CTA is replaced, the
new CTA will receive incentive fees based upon the date of the allocation of
equity to that CTA, regardless of the profitability of the previous CTA. 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. As each CTA
will trade independently of the others, the CTAs may compete for similar
positions or take positions opposite each other, which may limit the
profitability of the Partnership. 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 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 seek and retain a
new CTA or CTAs. See Exhibits F, G, H, and I.
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
34
<PAGE>
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 ANOTHER GENERAL
PARTNER WHICH SERVES AS THE COMMODITY POOL OPERATOR OF BOTH A PUBLIC AND
PRIVATE COMMODITY POOL, THE FORMER HAVING COMMENCED TRADING IN NOVEMBER OF
1996, AND THE LATTER HAVING COMMENCED TRADING IN MAY, 1998. ONE OF THE
COMMODITY TRADING ADVISORS FOR THIS POOL, EPIC TRADING, HAS SERVED AS A
COMMODITY TRADING ADVISOR FOR THE OTHER TWO COMMODITY POOLS. TWO OTHER
COMMODITY TRADING ADVISORS FOR THIS POOL, ANSBACHER AND ROSENBERY, HAVE SERVED
AS COMMODITY TRADING ADVISORS FOR THE PRIVATE POOL. ALL COMMODITY TRADING
ADVISORS FOR THIS POOL TRADE INDIVIDUAL MANAGED ACCOUNTS. THIS POOL HAS NOT
COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE COMMODITY TRADING ADVISORS
[Michael J. Frischmeyer has been removed as CTA]
ANSBACHER INVESTMENT MANAGEMENT, INC.
Ansbacher Investment Management, Inc. ("AIM"), a New York corporation, is one
of the Commodity Trading Advisors (collectively called the "CTAs" and in this
section called the "CTA" or "AIM"), and its Main Business Office and main
business telephone are: 45 Rockefeller Plaza, 20th Floor, New York, New York
10111; telephone (212) 332-3280. 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:
AIM became registered as a commodity trading advisor and as a commodity pool
operator with the Commodity Futures Trading Commission (the "CFTC") on
December 14, 1995, and is also a member in good standing of the National
Futures Association (the "NFA") in each such capacity. The registration of
AIM with the CFTC and AIM's membership in NFA must not be taken as an
indication that any such agency or self-regulatory body has recommended or
approved AIM or the program offered hereby.
Max G. Ansbacher is the President and principal of AIM and is also the sole
shareholder. Mr. Ansbacher is directly responsible for all trading and money
management decisions made by AIM. From 1975 through January 1996, Mr.
Ansbacher was employed by Bear, Stearns & Co., Inc., a stock brokerage and
registered futures commission merchant, where at the time of his departure, he
was an Associate Director and an Associated Person who regularly managed
futures accounts for a number of his clients on a discretionary basis.
Mr. Ansbacher is the author of The New Options Market, Revised Edition (Walker
& Co., 1975) which was the first book on exchange traded options and became a
best seller on the subject. Mr. Ansbacher is also the author of How to Profit
from the Coming Bull Market published by Prentice-Hall in 1981, and The Stock
Index Market published by Walker & Co. in 1983. Mr. Ansbacher is the creator
of The Ansbacher Index, which is broadcast weekly on CNBC. This index was
created to determine stock market sentiment by analyzing the ratio of the
prices of puts and calls on a stock market index. Mr. Ansbacher has given
lectures on options at over 24 investment conferences throughout the United
States and overseas.
Mr. Ansbacher was graduated from the University of Vermont in 1957, from Yale
University Law School in 1960, and received an advanced law degree from New
York University Law School in 1963.
Mr. Ansbacher is a member of the Board of Directors of The Burden Center for
the Aging, a social services organization for the aged, and is the Chairman of
its Finance Committee. He is also a member of the Board of Directors of The
Fortune
35
<PAGE>
Society, an organization which assists ex-offenders in becoming gainfully
employed citizens, and he serves as both its Treasurer and its Secretary.
Erin Tower is the Executive Vice President of AIM. She is responsible for
macro economic research, for liaison with brokerage firms, and for client
relationships. Before coming to AIM in November 1995, Ms. Tower was employed
by Bear, Stearns & Co., Inc. for nearly sixteen years (from June 1981 to
September 30, 1995) as a Registered Representative and an Associated Person
who handled both stock and futures accounts for a large number of clients,
including individual investors and small institutional investors.
Ms. Tower graduated cum laude from Columbia University and was elected to Phi
Beta Kappa. After graduation she worked for Nikko Securities in New York City
before joining Bear, Stearns & Co., Inc. She is currently an investment
advisor to the Community Church of New York City.
The past performance record of AIM and its principal, Mr. Ansbacher, is set
forth below under "Performance Record of the CTA" and "Supplemental
Performance Information of the CTA", respectively.
AIM and its principal may trade Commodity Interests for their own accounts:
the records of such trading, and any written policies relating to such
trading, will not be made available to Limited Partners for inspection.
DESCRIPTION OF TRADING PROGRAM
The following description of AIM and its trading methods and strategies is
general and is not intended to be exhaustive. Commodity trading methods are
proprietary and complex, so only the most general descriptions are possible;
no attempt has been or could be made to provide a precise description of AIM's
strategy. While AIM believes that the description of AIM's methods and
strategies included herein may be of interest to prospective Clients, such
persons must be aware of the inherent limitations of such description.
The objective of AIM's strategy is to achieve substantial capital appreciation
through the speculative trading of futures contracts, options on futures
contracts (and potentially forward contracts), and other futures-related
interests, which objective entails a comparatively high level of risk. AIM
currently engages in a program of selling or "writing" options (puts and
calls) on stock index futures. However, in the future, AIM may trade a broader
portfolio of options, futures and cash markets (and potentially forward
markets), including agricultural products, metals, currencies, financial
instruments, and stock, financial and economic indices (collectively,
"Commodity Interests"). AIM may trade Commodity Interests on any U.S.
exchange.
AIM uses a systematic approach to trading in that it relies heavily on a
program of selling or "writing" options on stock index futures. AIM may also,
from time to time, purchase options. The implementation of this program, i.e.,
selecting how many puts and how many calls, and which prices and maturities of
each, in turn depends upon both technical and fundamental considerations. The
technical indicators will include the prices of various options, both in
absolute terms in relation to their historic price levels, and in relative
terms comparing the prices of puts to the prices of similar calls. In this
respect, AIM may rely upon the current reading of The Ansbacher Index. The
fundamental considerations include the condition of the stock market, its
trend and its volatility as well as business, political and economic forces
which can influence the stock market.
In addition, AIM may take positions in the futures markets, including stock
index and bond futures, based upon fundamental considerations such as
historical price patterns, or technical considerations such as trend
following. AIM may in the future trade a broader portfolio of Commodity
Interests.
AIM from time to time may change or refine the trading systems employed.
PERFORMANCE RECORD OF THE CTA
The following summary performance information and chart reflects the composite
performance results of all customer accounts which, from May 1994 through
December 31, 1998, granted AIM and Mr. Ansbacher discretion to utilize the
trading strategy described herein. AIM and/or Mr. Ansbacher have traded for
five accounts, one of which was a proprietary commodity pool account, which is
described below under "Supplemental Performance Information of the CTA".
36
<PAGE>
Ansbacher Investment Management, Inc. does not currently offer any trading
strategy or program to clients other than the strategy described herein.
In reviewing the performance of AIM and its principal, Limited Partners should
understand that such performance is calculated on the accrual basis and in
accordance with generally accepted accounting principles and is "net" of all
fees and charges and includes interest income applicable to the accounts
comprising the composite performance record. Furthermore, prior to January 1,
1995 (i.e. following the incorporation of AIM), the accounts described below
were charged brokerage commissions, but not management or incentive fees.
Therefore, the performance figures below have been adjusted on a pro forma
basis in order to take into account the fees and charges which will apply to
Client accounts - a 2% management fee, a 20% incentive fee, estimated
brokerage commissions at $13 per round-turn, and a 4.5% interest rate. While
the pro forma adjustments described above have been made in order to more
accurately reflect the fee structure applicable to Client accounts, the
brokerage commission rate applicable to the accounts described below prior to
January 1, 1996 was substantially higher (up to $85 per round-turn) than
either the pro forma brokerage commission rate or the brokerage commission
rate ($13 per round-turn) estimated to be charged to Client accounts.
Composite performance records are not necessarily indicative of the
performance experienced by any individual client account. The notes following
the performance information below are integral part of such performance and
must be reviewed together with such performance information. PAST PERFORMANCE
IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Mr. Ansbacher has implemented the trading strategy described herein utilizing
his proprietary funds since September 1990, but on a more aggressive basis.
Mr. Ansbacher's proprietary record is set forth below under "Supplemental
Performance Information of the CTA".
Ansbacher Investment Management, Inc. - Composite
The following capsule shows the past performance of Ansbacher Investment
Management, Inc. - Composite since the inception of trading of the first
Account (in May 1994) and year-to-date (through December 31, 1999). PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
Ansbacher Investment Management, Inc. - Composite
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
January 1.51 20.80 2.22 3.25 N/A
February 13.60 (0.75) (3.54) (0.42) N/A
March 8.09 5.02 2.88 1.27 N/A
April 1.87 5.89 1.99 2.93 N/A
May (3.14) 14.17 3.21 0.60 1.70
June 6.42 4.23 6.16 1.81 (2.90)
July (3.64) 11.18 (12.76) 2.28 6.31
August (2.23) (5.89) 5.81 2.75 0.49
September (5.65) 4.16 7.88 (0.22) (1.80)
October (5.91) (13.60) 0.27 3.00 4.33
November 7.57 20.26 12.97 3.19 2.27
December 8.80 7.90 (6.52) 2.06 3.76
Year 27.96 94.93 19.52 24.85 14.69
<FN>
Name of Commodity Trading Advisor: Ansbacher Investment Management, Inc.
Name of Trader: Max G. Ansbacher
Name of Trading Program: Composite
Inception of Client Account Trading: May, 1994
Inception of Trading Pursuant to Offered Program: May, 1994
Accounts Under Management: 42
37
<PAGE>
Total Assets Managed by CTA: $8,558,311
Total Assets Traded Pursuant to Offered Program: $8,558,311
Worst Monthly Percentage Draw-down**: 10-97/33.4%****
Worst Peak-to-Valley % Draw-down***: 10-97/33.4%****
Number of Accounts Closed with Profit: 1
Number of Accounts Closed with Loss: 0
* 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.
**** These largest one month and peak-to-valley drawdowns occurred in one
account which was traded in a particularly aggressive manner at client request.
The average largest one month and peak-to-valley drawdown for all managed
accounts was (13.53%).
</TABLE>
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.
38
<PAGE>
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 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.
39
<PAGE>
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.
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 Decmeber 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 4.42 0.35 (8.89) 6.40 21.75 4.25
July 1.17 18.42 0.57 (5.67) (1.33) (4.01)
August 7.96 (6.33) (2.25) 0.94 (15.04) (4.00)
September 1.00 4.82 (3.95) 1.24 1.84 (0.33)
October (5.89) (15.82) 12.99 2.34 (7.07) 7.00
November 5.13 13.21 7.85 13.35 14.49 (17.66)
December 1.69 (7.54) (12.76) 8.92 (7.60) 1.89
Totals 8.44 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: 79
Total Assets managed under all trading programs of the CTA: $3,400,000
Total Assets managed under this trading program: $3,400,000
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>
40
<PAGE>
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.
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
41
<PAGE>
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 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.
42
<PAGE>
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
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 2.5 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 December 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 6.6 6.3 N/A
July 2.3 1.9 N/A
August 7.4 (1.1) N/A
September 2.8 (3.8) N/A
October 8.3 33.7 N/A
November 9.7 3.1 N/A
December (4.0) 6.6 5.5
Year 1.0 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
43
<PAGE>
Inception of Trading in Progenitor: December 23, 1996; July 6, 1994
(proprietary)
Progenitor Accounts Under Management: 502
Total Assets managed by CTA: $7,888,158
Total Assets Traded Pursuant to the Trading Program: $7,888,158
Worst Monthly Percentage Draw-down**: 5-98/25.9%
Worst Peak-to-Valley % Draw-down***: 1-98 to 5-98/51.1% ****
Number of Accounts Closed with Profit: 46 since December 23, 1996
Number of Accounts Closed with Loss: 46 since December 23, 1996
* 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.
**** Experienced by a single minimally funded account at client request.
The loss was $2,178.55, basis a $4263.65 starting balance. Concurrently, the
composite performance (of all accounts) had monthly and peak-to-valley draw-
downs of 8.2% and 26.6%, respectively.
</TABLE>
EPIC TRADING
EPIC Trading is a registered Commodity Trading Advisor ("collectively above
called the "CTAs" and in this section called the "CTA") organized as a sole
proprietorship with Bradley P. Jordan, Commodity Trading Advisor as principal.
The business office of EPIC Trading is One Whitehall St., Suite 1500, New
York, New York 10004 and the telephone number is (212) 859-0200.
BUSINESS BACKGROUND
The business background of the CTA for at least five (5) years is as follows:
Mr. Jordan first obtained his CFTC license as an Associated Person in 1975
while employed with the Taylor-Grant Division of Rosenthal & Co. In 1976, he
began ten years with Merrill Lynch Futures, Inc. ("Merrill") as a Commodity
Account Executive, Futures Analyst serving institutional clients in grains and
soft commodities as well as speculative accounts primarily in the metals
markets. Mr. Jordan left Merrill in 1986 as the Senior Floor Broker on the New
York Futures Exchange to trade his own account in the NYFE pits. In January
1995, the THESIS Fund, L.P. started trading as an exempt Commodity Pool with
Mr. Jordan as Trading Advisor and 50% Managing Partner. In January, 1997, he
resumed trading for his proprietary account in stock index futures until early
this year. Currently, Mr. Jordan is an associated person of Super Fund
Financial Group, Inc., an NFA member, Commodity Pool Operator and Introducing
Broker guaranteed by Vision Limited Partnership.
Mr. Jordan lives in Glen Rock, New Jersey with his wife and two sons. He
currently serves as Councilman for the Borough of Glen Rock and in that
capacity is the Chairman of the Division of Revenue and Finance overseeing a
municipal budget of $11,000,000. Mr. Jordan graduated from Cornell University
in 1975.
There have been no material administrative, civil or criminal actions
concluded within the preceding five years against EPIC Trading or Bradley P.
Jordan and no such actions are pending or on appeal.
DESCRIPTION OF TRADING PROGRAM
At the backbone of EPIC Trading is a technically based system utilized to
trade the stock index futures and options markets. A proprietary moving
average program is combined with internal divergence analysis to create
trading strategies. Divergence analysis is used to study the price structure
of underlying equity markets in order to create a long-term trading framework.
A leading indicator moving average projection is then applied to generate
short and intermediate term trades. Various filters have been developed to
maximized results. Standard technical analysis techniques, such as trend line
and pattern formation, are also used to a lesser extent in the trading
program.
44
<PAGE>
The CTA intends to trade primarily Stock Index Futures and Options, however
the CTA may trade any variety of commodity interests that fall in the
categories of Grains, Meats, Metals, Currencies, Financials, Stock Indexes,
Energies, and other items of Food and Fiber. "Commodity Interests" means
contracts on and for physical commodities, currencies, money market
instruments, and items which are now, or may hereinafter be, the subject of
futures contract trading, options' contracts, or physical commodities.
PERFORMANCE RECORD OF THE CTA
Trading in Epic Trading Program commenced on January, 1995 and ceased in
December, 1996, then resumed in April, 1998. During 1997, Mr. Jordan traded
for his own accounts. See Appendix III for the performance summary of his
trading activity.
EPIC Trading Program
The following capsule shows the past performance of EPIC Trading Program since
the inception of trading (in January, 1995) and year-to-date (through October
31, 1998). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
EPIC Trading Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
MONTH 1998 1997 1996 1995
<S> <C> <C> <C> <C>
January N/A N/A 3.88 5.67
February N/A N/A 5.66 6.10
March N/A N/A (0.04) (1.18)
April 6.50 N/A (2.62) (2.90)
May 1.80 N/A 6.57 4.80
June (3.00) N/A 2.35 0.95
July 3.40 N/A 0.99 1.17
August 3.00 N/A 3.70 (0.71)
September 1.50 N/A 2.49 (3.67)
October 2.70 N/A (0.20) 1.73
November N/A 2.97 0.06
December N/A 2.30 (1.73)
Year 16.64 N/A 15.10 26.03
<FN>
Name of the Commodity Trading Advisor: EPIC Trading
Name of the Trading Program: EPIC Trading Program
Date Commodity Trading Advisor Began Trading Client Accounts: January 1, 1995
Date When Client Funds Began Being Traded Pursuant to Trading Program:
January 1, 1995
Number Of Accounts In Trading Program: 88
Total Assets Under Management: $5,329,297
Largest Monthly Draw-Down**: 9-95/3.67%
Worst Peak-to-Valley Draw-Down***: 8-95 to 9-95 / 4.38%
Number of Accounts Closed With Net Profit: 1
Number of Accounts Closed With Net Loss: 0
* 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.
45
<PAGE>
** "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>
[C&M Traders has been removed as 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, EPIC Trading, and Bell
Fundamental Futures, L.L.C. EPIC is also a CTA selected for this Fund. No
correlation is expected between the performance of the Fremont Fund and this
Partnership because EPIC 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 3/4% 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 December 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 (5.39) (0.39) N/A
July 4.21 (0.65) N/A
August 1.78 (2.57) N/A
September 0.07 (0.53) N/A
October 0.26 (0.76) N/A
November (3.52) (1.09) (8.83)
December (1.60) (2.13) 2.34
Year (11.35) (12.21) (6.69)
<FN>
Name of Pool: Fremont Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration statement
Names of CTAs: Michael J. Frischmeyer, EPIC Trading, Bell Fundamental Futures,
L.L.C.
46
<PAGE>
Principal Protected: No
Date of Inception of trading: November, 1996
Net Asset Value of the pool: $621,135 on total
Units outstanding: 910
NAV Per Unit: $683
Largest Monthly Draw-Down** For The Regular Program Since Inception and
Year-to-Date: 12-96/8.83%
Worst Peak-to-Valley Draw-Down*** For The Regular Program Since Inception and
Year-to-Date): 11-96 to 6-98/32.5%
* 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 have 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,
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.
47
<PAGE>
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".
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,
48
<PAGE>
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. The Firm has opined with
respect to all material federal tax consequences as follows: (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")); (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.
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 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 will otherwise comply 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.
49
<PAGE>
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
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
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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 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
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"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.
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.
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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 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
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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 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 will
be assessed towards the value of the Units and will be made payable to the
Partnership in the amount of four percent (4%) of the value of
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the Redemption request which is received prior to the nineteenth day of the
sixth 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 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 Exhibit 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
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Escrow Account. After the sale of the Minimum and the termination of the
Escrow Account, all Subscription Documents shall be 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 Prospectus. The FCM does
have litigation which is unrelated to the Partnership and the effect of which,
if successfully pursued by a plaintiff or appellant, would be too small to
have an effect on the ability of the FCM to serve the Partnership.
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.
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.
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
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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]
57
<PAGE>
*******************************************************************************
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.
/s/ Frank L. Sassetti & Co.
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>
*******************************************************************************
Atlas Futures Fund, Ltd. Partnership
(A Delaware Limited Partnership)
Balance Sheet
as of September 30, 1998
ASSETS
9/30/98
CURRENT ASSETS:
CASH $ 1,359.34
ORGANIZATIONAL COSTS $ 52,000.00
TOTAL ASSETS $ 53,359.34
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
DUE TO ASHLEY CAPITAL
MANAGEMENT, INC. $ 52,000.00
TOTAL CURRENT LIABILITIES $ 52,000.00
CAPITAL
GENERAL PARTNER CAPITAL $ 1,000.00
LIMITED PARTNER CAPITAL $ 1,000.00
NET INCOME (LOSS) ($ 640.66)
TOTAL CAPITAL $ 1,359.34
TOTAL LIABILITIES AND CAPITAL $ 53,359.34
F-1
<PAGE>
Atlas Futures Fund, Ltd. Partnership
(A Delaware Limited Partnership)
Income Statement
as of September 30, 1998
9/30/98
INCOME NONE
EXPENSES
SHIPPING $ 249.75
BANK FEES $ 102.91
LEGAL $ 288.00
TOTAL EXPENSES $ 640.66
NET INCOME (LOSS) ($ 640.66)
F-2
<PAGE>
Atlas Futures Fund, Ltd. Partnership
(A Delaware Limited Partnership)
Statement of Cash Flows
as of September 30, 1998
Cash Balance May 1, 1998 $2,000.00
Receipts: None
Disbursements:
Net loss from operations $ 640.66
Cash Balance September 30, 1998 $1,359.34
F-3
<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.
/s/ Frank L. Sassetti & Co.
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 -
(Increases) in prepaid expenses (833)
Increase in accounts payable 812
Net Cash Provided by
Operating Activities (90)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment interest in limited partnership (1,000)
Net Cash Used by
Investing Activities (1,000)
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>
*******************************************************************************
ASHLEY CAPITAL MANAGEMENT, INC.
Balance Sheet
AS OF SEPTEMBER 30, 1998
September 1998 Total
YTD Actual YTD Actual
ASSETS
Current Assets
CASH-STAR FINANCIAL BANK 3,931.50
DUE FROM ATLAS FUTURES FUND 52,000.00
G.P. INTEREST IN ATLAS FUTURES 1,000.00
-----------
Total Current Assets $ 56,931.50
Fixed Assets
-----------
Total Fixed Assets $ 0.00
Other Assets
-----------
Total Other Assets $ 0.00
-----------
Total Assets $ 56,931.50
===========
LIABILITIES AND CAPITAL
Current Liabilities
SHAREHOLDERS SUBORDINATED LOAN * 4,000.00
ACCTS PAYABLE (ORGANIZ. COSTS) $ 52,000.00
-----------
Total Current Liabilities $ 56,000.00
Total Liabilities $ 56,000.00
Capital
COMMON STOCK $ 1,000.00
Net Income (Loss) (68.50)
-----------
Total Capital $ 931.50
-----------
Total Liabilities and Capital $ 56,931.50
===========
* 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.
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
Income Statement
AS OF SEPTEMBER 30, 1998
September 1998 September 1998
PTD Actual Ratio YTD Actual Ratio
Sales
-------------- --------------
Total Sales $ .00 * $ .00 *
Operating Expenses
BANK CHARGES 18.41 * 86.91 *
LEGAL FEES 468.00 * 468.00 *
-------------- --------------
Net Operating Expenses $ (486.41) * $ (554.91) *
-------------- --------------
Net Income from Operations $ 486.41 * $ 554.91 *
-------------- --------------
Net Income (Loss) $ (486.41) * $ (554.91) *
-------------- --------------
* Indicates a percentage too large to print or not able to be calculated.
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
Statement of Cash Flows
AS OF SEPTEMBER 30, 1998
Cash Balance January 1, 1998 $ 0.00
Receipts:
Common Stock Issuance $1,000.00
Shareholder subordinated loan 4,000.00
Total Receipts $5,000.00
Disbursements:
Investment in Atlas Futures $1,000.00
Net loss from operations 554.91
Total Disbursements $1,554.91
Cash Balance September 30, 1998 $3,445.09
<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". Ansbacher Investment Management,
Inc., 45 Rockefeller Plaza, 20th Floor, New York, New York 10111; Commoditech,
Inc., 4299 Rock Island Road, Arnold, MO 63010; Rosenbery Capital Management,
Inc., 5445 N. Sheridan Rd., Suite 2706, Chicago, IL 60640; and, EPIC Trading,
One Whitehall St., Suite 1500, New York, New York 10004. 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
1
<PAGE>
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).
"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".
2
<PAGE>
"Limited Partner". Persons admitted without management authority pursuant to
the Partnership Agreement.
"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 "Charges
to the Partnership" 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 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
4
<PAGE>
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 Ansbacher.
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.
5
<PAGE>
"Underwriter". See "Selling Agent".
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
6
<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.
[The balance of this page has been intentionally left blank]
7
<PAGE>
APPENDIX II
SUPPLEMENTAL PERFORMANCE INFORMATION FOR
ANSBACHER INVESTMENT MANAGEMENT, INC.
Please see "The Commodity Trading Advisors, Ansbacher Investment Management,
Inc." in the main body of this disclosure document for its business background
and description of its trading program.
The following information describes the actual performance of Mr. Ansbacher's
personal account while an associated person of at registered futures
commission merchant. Such information is presented from the inception of
trading pursuant to such strategy (September 1990) through February 28, 1996,
at which the Mr. Ansbacher transferred his proprietary account to Elizaville
Partners L.P. (the "Fund"), and the Fund commenced trading. This performance
record then tracks Mr. Ansbacher's proprietary investment in the Fund through
February 28, 1997, on a pro form a basis to reflect all fees payable by an
outside investor in the Fund. This account did not include any notional funds.
All performance information is current as of February 28, J997 at which time
customers bad invested over 50% of the capital in the Fund, and it was no
longer considered a proprietary account.
The information presented has not been audited. However, AIM believes that
such information is accurate and fairly presented. The performance information
below is set forth in a summary format. However, a more complete presentation
of Mr. Ansbacher's performance record in respect of his personal account is
available without charge upon request to AIM.
THE RATES OF RETURN EARNED WHEN AN ADVISOR IS MANAGING A LIMITED AMOUNT OF
EQUITY MAY HAVE LITTLE RELATIONSHIP TO THE RATES OF RETURN WHICH SUCH ADVISOR
MAY BE ABLE TO ACHIEVE MANAGING LARGER AMOUNTS OF EQUITY.
THE FOLLOWING FIGURES HAVE BEEN ADJUSTED TO REFLECT THE CHARGES THAT ARE
APPLIED TO THE FUND - A 2 % MANAGEMENT FEE, A 20% INCENTIVE FEE, AND A AN
APPROPRIATE T-BILL INTEREST RATE. THE ACCOUNT DESCRIBED BELOW PAID FEES
MATERIALLY DIFFERENT AND LOWER THAN THOSE TO BE CHARGED TO THE FUND.
COMMODITY INTEREST TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK
THERE CAN BE NO ASSURANCE THAT AIM WILL TRADE PROFITABLY OR AVOID INCURRING
SUBSTANTIAL LOSSES.
In reviewing the performance of AIM and its principal, prospective investors
should understand that such performance is calculated on the accrual basis and
in accordance with generally accepted accounting principles and is "net" of
all fees and charges and includes interest income applicable to the account.
Ansbacher Investment Management, Inc. - Composite
The following capsule shows the past performance of Ansbacher Investment
Management, Inc. - Proprietary since the inception of trading (in September,
1990) and through the date on which such account was closed (February 28,
1997). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
1
<PAGE>
<TABLE>
Ansbacher Investment Management, Inc. - Proprietary
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 17.21 1.55 1.81 7.40 (8.40) (2.03) (11.02) N/A
February 0.64 (6.71) 4.74 (7.80) 12.76 0.24 27.02 N/A
March (10.88) (1.59) 23.25) 6.50 (4.18) 9.59 N/A
April 0.63 3.77 15.56 (12.50) (4.29) 2.55 N/A
May 1.60 0.51 9.28 5.63 10.83 7.33 N/A
June 14.85 0.04 (5.65) 2.51 4.90 (17.38) N/A
July (31.93) 1.40 19.00 (3.83) 7.54 16.89 N/A
August 8.82 5.68 6.77 9.81 (3.74) 9.61 N/A
September 14.12 0.34 (5.83) (8.43) 3.21 (6.06) (0.35)
October 10.05 2.27 2.75 11.14 (3.95) (8.35) 1.56
November 13.68 7.06 (6.32) (5.09) 12.10 (11.85) 21.18
December (10.81) 0.69 11.10 7.84 (0.24) 36.46 (0.01)
Year 17.96 (7.60) 42.55 15.85 14.65 20.16 49.47 22.63
<FN>
Name of Trader: Max G. Ansbacher
Name of Trading Program: Proprietary Account
Inception of Trading: September, 1990
Total Assets Traded Pursuant to Program: N/A
Worst Monthly Percentage Draw-down**: 7-96/31.93%
Worst Peak-to-Valley % Draw-down***: 1-96 to 7-96/31.93%
* 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>
Elizaville Partners, L.P.
As of September 30, 1998, Mr. Ansbacher's interest in the Fund was
approximately 27% of the total of all capital accounts. Prior to June 1, 1997,
Mr. Ansbacher's interest in the Fund exceeded 50% of the Fund's total capital.
Accordingly, CFTC regulations consider the Fund, for the period prior to June
1, 1997 to be a "proprietary" account of AIM. Accordingly, the Fund's
performance record prior to June 1, 1997 should be considered as "supplemental
information".
The performance of the fund is dependent upon the performance of AIM, the sole
trading advisor since the inception of the Fund's operations. AIM's results
are affected by general market conditions as well as numerous other factors.
The following capsule shows the past performance of Elizaville Partners, L.P.
since the inception of trading (in March, 1996) and through the year to date
(September 30, 1998). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
2
<PAGE>
<TABLE>
Elizaville Partners, L.P.
Percentage Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
Month 1998 1997 1996
<S> <C> <C> <C>
January 2.43 17.21+ N/A
February 11.12 0.64+ N/A
March 6.81 5.66+ (10.84)+
April 1.60 2.83+ (0.63)+
May (2.45) 7.17+ 1.60+
June 6.01 3.63 14.85+
July (4.01) 6.41 (31.93)+
August (1.97) (2.22) 8.82+
September (5.92) 1.90 14.12+
October (6.01) 10.05+
November 11.48 13.68+
December 6.22 (10.81)+
Year 13.06 67.94 (2.46)+
<FN>
+ Months during which the Fund represents a "Proprietary Account" of Ansbacher
Investment Management, Inc.
Name of Pool: Elizaville Partners, L.P.
Type of Pool: Single advisor - Privately placed
Name of Commodity Trading Advisor: Ansbacher Investment Management, Inc.
Inception of Client Account Trading: March, 1996
Aggregate Subscriptions: $3,057,491
Current Capitalization: $4,276,384
Worst Monthly Percentage Draw-down**: 7-96/31.93%
Worst Peak-to-Valley % Draw-down***: 7-96/31.93%
Compound Rate of Return since inception: 85.2% (31 months)
* 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>
3
<PAGE>
APPENDIX III
Supplemental Performance Information For Epic Trading
The trading system used was developed entirely by Bradley Jordan ("the
Advisor"). The Advisor thoroughly research the accuracy of the systems buy
and sell signals within his own personal trading account. Implemented in
January of 1997, the system encompassed one year of proprietary trading.
Third party records of these trades are available to clients upon request. All
trades in their entirety were executed with the Advisor fully exposed to real
profits, losses, and trading expenses. Please see "The Commodity Trading
Advisors - EPIC Trading" in the main body of this Prospectus for the Business
Background of EPIC Trading and the Description of the Trading Program.
Proprietary Trading Account
This summary represents the Advisor's best effort to accurately represent the
past risk/reward characteristics of the trading system as they apply the
program offered. Performance is shown as a percent return and adjusted to
include the Advisor's 20% incentive fee on new trading profits and the
difference in commissions. The summary does not reflect the difference in
returns based upon the leverage of the accounts. The leverage ratio between
the proprietary account and an account of the system varies as much as 13 to
1. Therefore, an actual account of the trader who will only be trading one
contract would have experienced significantly lower returns than the
proprietary account. The following capsule performance summary does not
reflect rates of return for actual managed accounts. The following capsule
shows the past performance of the Advisor's Proprietary Trading Account since
the inception of trading (in January, 1997) through the close of trading
(December, 1997). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
<TABLE>
Proprietary Trading Account - % Rate of Return
(Computed on a compounded monthly basis)*
<CAPTION>
MONTH 1997
<S> <C>
January 36.35
February 3.58
March 8.88
April 10.13
May (2.79)
June 18.11
July 13.66
August 5.79
September 1.23
October 3.34
November 6.81
December 4.01
Year 171.00
<FN>
Name of the Commodity Trading Advisor: EPIC Trading
Name of the Trader: Bradley Jordan
Largest Monthly Draw-Down**: 5-97 / 2.79%
Worst Peak-to-Valley Draw-Down***: 5-97 / 2.79% of net assets
* 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>
1
<PAGE>
******************************************************************************
FORM S-1
AMENDMENT NO. 2
Registration No. 333-61217
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 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,
Amendment No. 2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont in the State of Indiana on this 29th
day of January, 1999.
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, Amendment No. 2 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: January 29, 1999
(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)
THE SCOTT LAW FIRM, P.A.
5121 Sarazen Drive
Hollywood, FL 33021
(954) 964-1546
Facsimile (954) 964-1548
January 29, 1999
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
<PAGE>
Atlas Futures Fund, Limited partnership
August 10, 1998
Page 2
to therein) all material aspects of the United States 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 may be
relied upon only by the Partnership and its investors and shall not be used
for any purpose relied upon by any other persons 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 OF 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, Amendment
No. 2.
The undersigned hereby further consents to inclusion of its name and the other
information under the section "Experts" in the Form S-1 Registration Statement,
Amendment No. 2 to be filed with the Securities and Exchange Commission and the
states to be selected by the General Partner.
/s/ Frank L. Sassetti & Co.
Robert W. Krone, CPA
Frank L. Sassetti & Co.
6611 West North Avenue
Oak Park, Illinois 60302
(708) 386-1433
Date: January 29, 1999
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 the Form S-1 Registration Statement, Amendment No.
2 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: January 29, 1999
