As Filed with the Securities and Exchange Commission on April 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. 3
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 24.6% return on investment during its first twelve months
of trading to offset expenses and approximately 28.6% 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 CTA and the allocation of equity to the
existing and any future CTAs at any time, for any reason, without prior
notice to the Limited Partners.
* The General Partner, 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 and its principal have limited 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) 833-130
The date of this Prospectus is April 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 General Partner's principal and Affiliates 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, of 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 28 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT
IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 23.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGE 10.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY
BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
[The balance of this page has been intentionally left blank]
ii
<PAGE>
NOTICE TO RESIDENTS OF ALL STATES
UNTIL 90 DAYS AFTER THE DATE HEREOF, ALL DEALERS EFFECTING TRANSACTIONS IN THE
UNITS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS OR BEST EFFORTS SELLERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE SELLING AND
ADDITIONAL SELLERS MUST ALSO DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS
ISSUED BY THE PARTNERSHIP.
NO DEALER, SALESMAN, OFFICER, EMPLOYEE OR AGENT OF THE PARTNERSHIP OR THE
GENERAL PARTNER AND OR ANY OTHER PERSON HAS BEEN AUTHORIZED, IN CONNECTION
WITH THIS OFFERING, TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP, THE GENERAL PARTNER, THE SELLING AGENTS, OR ANY
OTHER PERSON CONNECTED WITH THIS OFFERING. THIS PROSPECTUS SPEAKS AS OF THE
DATE OF ITS ISSUANCE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP
SINCE THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY UNITS BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION, OR PURCHASE IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION REQUIRE THAT NO
COMMODITY POOL OPERATOR MAY SOLICIT, ACCEPT OR RECEIVE FUNDS, SECURITIES OR
OTHER PROPERTY FROM A PROSPECTIVE PARTICIPANT IN A COMMODITY POOL WITHOUT
FIRST DELIVERING A DISCLOSURE DOCUMENT (THIS "PROSPECTUS") TO SUCH PROSPECTIVE
PARTICIPANT. THE GENERAL PARTNER MUST FURNISH ALL PARTNERS ANNUAL AND MONTHLY
REPORTS COMPLYING WITH COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND
NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS. THE ANNUAL REPORTS WILL
CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY REPORTS UNAUDITED, FINANCIAL
INFORMATION IN REGARD TO THE OPERATION OF THE PARTNERSHIP AND ITS GENERAL
PARTNER
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC") REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH
HEREIN: ATLAS FUTURES FUND, LIMITED PARTNERSHIP, IS NOT A MUTUAL FUND AND IS
NOT SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940.
CONSEQUENTLY, INVESTORS WILL NOT HAVE THE BENEFIT OF THE PROTECTIVE PROVISIONS
OF SUCH LEGISLATION.
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF
THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. INVESTORS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. ACCORDINGLY, THE UNITS MAY BE SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH THE
TERMS OF THE LIMITED PARTNERSHIP AGREEMENT, INCLUDING THE CONSENT OF THE
GENERAL PARTNER, AND ONLY IF SUCH UNITS ARE SUBSEQUENTLY REGISTERED OR, IN THE
OPINION OF COUNSEL FOR THE COMPANY, SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS. THE SUBSCRIPTION AGREEMENT AND
THE CERTIFICATE FOR UNITS, IF ANY, WILL HAVE A LEGEND TO DISCLOSE THAT THE
UNITS ARE RESTRICTED FROM SALE OR OTHER TRANSFER WITHOUT PRIOR REGISTRATION OR
OTHER LEGAL JUSTIFICATION. NO PUBLIC MARKET EXISTS OR IS EXPECTED TO DEVELOP
FOR THE UNITS AND, CONSEQUENTLY, PROSPECTIVE INVESTORS WHO DESIRE LIQUIDITY
SHOULD NOT PURCHASE THE UNITS. EACH INVESTOR (PURCHASER OF UNITS) MUST MEET
THE FOLLOWING SUITABILITY STANDARDS: (i) AN INVESTOR MUST HAVE (A) HAD AN
ANNUAL GROSS INCOME IN EXCESS OF $45,000 IN THE LAST CALENDAR YEAR AND
REASONABLY
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
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
DIAGRAM OF PARTNERSHIP STRUCTURE & COMMISSIONS ATLAS FUTURES FUND, LIMITED
PARTNERSHIP 5
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 FOR SALE OF UNITS 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 CTA TO SERVE OTHER COMPETING BUSINESSES 12
PARTNERSHIP HAS NO OPERATING HISTORY 12
THE OTHER PARTNERSHIP OF THE PRINCIPAL OF 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 CTA AND ITS ALLOCATION OF EQUITY WITHOUT NOTICE 13
LIMITED PARTNERS WILL NOT PARTICIPATE IN MANAGEMENT 13
COMMODITY FUTURES TRADING IS SPECULATIVE AND VOLATILE - UNITS MAY NOT BE
REDEEMABLE BEFORE SUBSTANTIAL DEVALUATION OF NET UNIT VALUE 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 CTA 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
NO RESTRICTIONS ON FOREIGN TRADING PUTS PARTNERSHIP EQUITY AT GREATER RISK 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 CTA's 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 18
CONFLICTS OF INTEREST 19
GENERAL PARTNER, THE CTA, 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 19
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
THE PARTNERSHIP MAY ENGAGE MULTIPLE CTAs 20
GENERAL PARTNER MAY DISCOURAGE REDEMPTIONS 21
CTA 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 21
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS 21
THE COMMODITY TRADING ADVISOR 22
THE ADVISORY CONTRACT AND POWER 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 CTA 27
RISK CONTROL 27
CHARGES TO THE PARTNERSHIP 28
COMPENSATION OF GENERAL PARTNER 28
MANAGEMENT FEE AND INCENTIVE FEES TO THE CTA 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 CTA 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 CONTRACT 34
FREQUENCY OF CTA AND EQUITY REALLOCATIONS 34
THE COMMODITY TRADING ADVISOR 35
PERFORMANCE RECORD OF FREMONT FUND, LIMITED PARTNERSHIP 39
THE FUTURES COMMISSION MERCHANT 40
FEDERAL INCOME TAX ASPECTS 40
SCOPE OF TAX PRESENTATION 40
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS 41
PARTNERSHIP TAX STATUS AND NET WORTH OF THE GENERAL PARTNER 41
NO IRS RULING 42
TAX OPINION 42
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PASSIVE LOSS AND UNRELATED BUSINESS INCOME TAXES RULES 42
BASIS LOSS LIMITATION 43
AT-RISK LIMITATION 43
INCOME AND LOSSES FROM PASSIVE ACTIVITIES 43
ALLOCATION OF PROFITS AND LOSSES 43
TAXATION OF FUTURES AND FORWARD TRANSACTIONS 43
SECTION 988 FOREIGN CURRENCY TRANSACTIONS 44
CAPITAL GAIN AND LOSS PROVISIONS 44
BUSINESS FOR PROFIT 44
SELF-EMPLOYMENT INCOME AND TAX 44
INDIVIDUAL ALTERNATIVE MINIMUM TAX 44
INTEREST RELATED TO TAX EXEMPT OBLIGATIONS 45
NOT A TAX SHELTER 45
TAXATION OF FOREIGN PARTNERS 45
PARTNERSHIP ENTITY-AUDIT PROVISIONS-PENALTIES 45
EMPLOYEE BENEFIT, RETIREMENT PLANS AND IRA'S 45
THE LIMITED PARTNERSHIP AGREEMENT 46
FORMATION OF THE PARTNERSHIP 46
UNITS 46
MANAGEMENT OF PARTNERSHIP AFFAIRS 46
ADDITIONAL OFFERINGS 46
PARTNERSHIP ACCOUNTING, REPORTS, AND DISTRIBUTIONS 46
FEDERAL TAX ALLOCATIONS 47
TRANSFER OF UNITS ONLY WITH CONSENT OF THE GENERAL PARTNER 47
TERMINATION OF THE PARTNERSHIP 47
MEETINGS 47
REDEMPTIONS 47
PLAN FOR SALE OF UNITS 48
SUBSCRIPTION PROCEDURE 49
LEGAL MATTERS 49
LITIGATION AND CLAIMS 49
LEGAL OPINION 50
EXPERTS 50
ADDITIONAL INFORMATION 50
FINANCIAL STATEMENTS
A. ATLAS FUTURES FUND, LIMITED PARTNERSHIP
Balance Sheet and Income Statement as of and December 31, 1998
Notes to Statement of Financial Condition
B. ASHLEY CAPITAL MANAGEMENT, INC.
Balance Sheet and Income Statement as of and December 31, 1998
Notes to Statement of Financial Condition
APPENDIX I - COMMODITY TERMS AND DEFINITIONS; STATE REGULATORY GLOSSARY
EXHIBIT A - LIMITED PARTNERSHIP AGREEMENT
EXHIBIT B - REQUEST FOR REDEMPTION
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EXHIBIT C - SUITABILITY INFORMATION
EXHIBIT D - SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
EXHIBIT E - ESCROW AGREEMENT
EXHIBIT F - INVESTMENT ADVISORY CONTRACT - CLARKE CAPITAL MANAGEMENT, INC.
[The balance of this page has been intentionally left blank]
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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, P.O. Box
C, Fremont, Indiana 46737 (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
18 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 reduce this amount to no less than the regulatory
minimum of $5,000 in Units required to be purchased by every investor. 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, escrow fees or other 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
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absolute discretion over the selection of the CTAs, the allocation of
assets, and the commencement and cessation of trading. In that regard,
the General Partner has no experience as a commodity pool operator and
in conducting such business. The principal of the General Partner is,
however, the principal of a company which serves as the General Partner
of two other commodity pools. If this Partnership fails to 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 $139,000 during the first year of operation, if
the Minimum of $700,000 is raised. The Partnership must earn income of
$285.71 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 CTA and the allocation of equity among the CTAs should
additional CTAs be selected, 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 may be forced to suspend trading and
suffer adverse tax consequences, in which case it would be expected to
experience significant losses.
The CTA expects to conduct trades for both itself and other clients, in
addition to the Partnership. It is possible for the 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 is also possible for the CTA
preferentially to liquidate positions in one account, while other
accounts 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 CTA expects 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 the CTA 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 CTA also expects 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 CTA 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 CTA 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 CTA to resign without notice, and
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the fact that trades are executed without notice to the Partnership.
The Partnership will be competing with others who may have greater
financial and analytical resources at their disposal. Additionally, the
General Partner has no experience as a commodity pool operator, though
the principal of the General Partner is the principal of a company which
serves as the General Partner of two other commodity pools. The CTA
assigned by the General Partner has 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 CTA may also
adversely affect its 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 CTA has 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, the 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 1%.
(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 1% 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 the 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, if the
General Partner decided to engage multiple CTAs, 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 CTA is compensated based on a percentage of the profits it
generates and thus may have an incentive to engage in ill-advised
trades. In addition, each CTA will trade independently of any others
selected to trade for the Partnership in the future. Thus, those 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 has been 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 Advisor (the "CTA") it has selected. See "Risk Factors",
"Conflicts of Interest", "Use of Proceeds", "General Partner", "Commodity
Trading Advisor", 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 28.57%
return on equity if the Minimum is sold, or a 20.86% return on equity if the
Maximum is sold to permit the investor to Redeem a Unit at the sales price of
$1,000 at the end of the first year of operation. In addition, Partners will
be required to pay Federal, state and local taxes upon income, if any, in the
year earned by the Partnership, although there will be no expectations of
distributions of income during that, or any other, year. Accordingly, the
purchase of Units in the Partnership is intended to be a long-term investment.
Neither the General Partner nor any other person has made any promise or
guarantee that the Partnership will be profitable or otherwise meet its
objectives.
* Securities Offered
Atlas Futures Fund, Limited Partnership (the "Partnership") will offer and
sell Limited Partnership interests in the Partnership which will have pro rata
rights to profit and losses with all other owners equal to their Capital
Contribution. The Limited Partners will not be exposed to payment of debts of
the Partnership in excess of their subscription amount; provided, however, in
the event the Limited Partners were to receive distributions which represent a
return of Capital, such distributions, in the event of insolvency of the
Partnership, would have to be returned to pay Partnership debts. In addition,
these limited partners will have no voice in the day to day management of the
Partnership. They will have the right to vote on Partnership matters such as
the replacement of the General Partner. These Limited Partnership interests
are included in the definition of units (the "Units") which are offered for
sale for One Thousand Dollars ($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 limit
to Capital Contributions 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"),
Affiliated with the principal of the General Partner, for introducing trades
through Refco, Inc., the futures commission merchant (the "FCM"). See "The
Futures Commission Merchant", "Management's Discussion and Analysis of
Financial Condition, Relationship
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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 CTA pursuant to the power of attorney granted
by the General Partner to the CTA 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 one percent (1%) of equity in the Partnership payable at the end of
each month (1/12 of 1%) (see "Charges to the Partnership, Compensation of the
General Partner") and a management fee to the CTA 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 the CTA to trade at the close of each month, which is held
in the trading account assigned to it at the futures commission merchant or
merchants (see "Charges to the Partnership, Management Fee and Incentive Fees
to the CTA"). The Partnership will also pay to the General Partner an
allocation of profit, earned in the account assigned to the CTA, of twenty
percent (20%) of the New Net Profit. 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. North
American Securities Administrators Association ("NASAA") Guidelines provide
that the total management fees based upon the size of the Partnership account
not exceed 6% of Net Assets and incentive fees based upon profits earned not
exceed 15% of New Net Profits; provided, however, for each 1% reduction in
management fees below 6%, the incentive fees may be increased by 2%. The
General Partner has reserved the right to raise, without prior notification to
the Partners, the current incentive fee to a maximum of 30%, provided that the
management fees are correspondingly lowered to 0%. The General Partner will
be responsible for payment of all incentive fees to the CTA. If the General
Partner engages multiple CTAs, it will be possible for one of the CTAs to
produce New Net Profit in the account assigned to it 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, cost of 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.
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<TABLE>
* Charges to the Partnership
<CAPTION>
Entity Form of Compensation Amount of Compensation
<S> <C> <C>
Entity Form of Compensation Amount of Compensation
General Partner
(Ashley Capital Management fee 1% 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
(Revco, Inc.) 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
(Clarke Capital the CTA
Management, Inc.)
Incentive Fee 20% of the New Net Profits of the account for
each quarterly period that the net value of
the trading equity at the end of such
quarterly period for a CTA exceeds the
highest previous quarterly net value of the
trading equity for that CTA.
Third Parties Legal, accounting fees, and other actual Estimated at $23,000 for each year after
(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>
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 CTA 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. The balance will 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 CTA 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 an independent Commodity Trading Advisor to
direct all trading with the commodity broker, Refco, Inc., (the "Futures
Commission Merchant"). The Partnership will rely, pursuant to the Advisory
Agreement and Power of Attorney attached as Exhibit F, upon Clarke Capital
Management, Inc. The General Partner intends to allocate substantially all of
the Partnership's net assets as trading equity to the CTA. 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 the existing
CTA, select additional CTAs, or change the allocation of equity among the
CTAs, should additional CTAs be engaged. 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
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<PAGE>
profitability of the previous CTA. If the Partnership engages multiple CTAs,
(i) as each CTA would 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; and, (ii) as incentive fees are paid
with respect to the individual performance of each CTA, it would be possible
for the Partnership to experience a net loss and be required to pay out
incentive fees. The CTA is not an Affiliate 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 Advisor" for a summary of the CTA's 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 advisor fees are
aggregated with employee business expenses and other expenses of producing
income and the aggregate of such expenses is deductible only to the extent
such amount exceeds 2% of the taxpayer's adjusted gross income. The Federal
income tax deductibility of these expenses depends upon factual determinations
related to the operation of the Partnership by the General Partner.
Accordingly, investors are encouraged to seek independent tax counsel with
regard to these matters. See "Federal Income Tax Aspects".
* Redemptions
No Partner may redeem or liquidate any Units until six (6) months after the
investment in the Partnership. A Limited Partner may thereafter request the
Partnership, subject to payment of fees, if applicable, and other conditions,
to redeem Units held by such Limited Partner at the Net Unit Value, adjusted
to reflect certain reserves and contingencies, as determined at the end of the
applicable monthly period. Redemption shall be after all liabilities,
contingent, accrued, and reserved, in amounts determined by the General
Partner have been deducted and there remains property of the Partnership
sufficient to pay the Net Unit Value. A Limited Partner desiring to have
Units redeemed must provide written notice to the General Partner by 12:00
noon on the tenth calendar day immediately preceding the last business day of
the month in which the Units are requested to be redeemed.
Under certain circumstances, the General Partner may honor requests for
Redemption only in part and/or suspend Redemptions or delay payment of
Redemptions. These circumstances include, but are not limited to, the
inability to liquidate positions as of such Redemption date or default or
delay in payments due the Partnership from banks, brokers, or other persons.
The Partnership may in turn delay payment to Partners requesting Redemption of
Units of the proportionate part of the Net Unit Value represented by the sums
which are the subject of such delay or default. The General Partner, in its
sole discretion may, upon notice to the Partners, declare additional
Redemption dates and may cause the Partnership to
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<PAGE>
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 for Sale of Units
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; however,
the General Partner may, in its sole discretion, agree to reduce this amount
to no less than the regulatory minimum of $5,000 in Units required to be
purchased by each subscriber. All investments are subject to compliance with
the minimum suitability standards established by the General Partner and the
state of residence of the investor. Unless higher amounts are otherwise
specified, 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 (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, Clarke, the sole CTA, has been trading since
December, 1993. See "The Commodity Trading Advisor". 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 eighteen 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".
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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 one percent
(1%) of Net Asset Value, payable monthly, and a management fee on the equity
assigned to the 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 $285.71 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 CTA, 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 $139,000.00 if the Minimum ($700,000)
is raised, or $958,000.00 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 $114,000.00 assuming gross capital of $700,000, or
$933,000.00 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 $22,440 would be paid in
incentive fees if the Minimum were raised, and $ 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 CTA 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 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,
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<PAGE>
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 is 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 CTA 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"). As such, 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 $700,000 to the General
Partner to be repaid on January 12, 2019. The General Partner intends to use
its best efforts to satisfy the IRS requirements necessary to cause the
Partnership to be taxed as a partnership and not as a corporation. 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 either assume
the risk of serious adverse tax consequences or be forced to cease operations
and trading.
GENERAL PARTNER AND CTA TO SERVE OTHER COMPETING BUSINESSES
The General Partner and its principal expect to manage additional pools in the
future which may use the CTA (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 as the Partnership. The CTA
currently manages other commodity accounts and may manage new or additional
deposits to existing accounts, including personal accounts and other commodity
pools. Although the 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 the CTA. See "Risk Factors", "Trading Management",
and "The Commodity Trading Advisor".
PARTNERSHIP HAS NO OPERATING HISTORY
As a newly formed commodity pool, the Partnership has no operating history,
and therefore no history of generating profits. There is no way to predict
the performance of the Partnership. Additionally, the General Partner has no
prior experience as a commodity pool operator, though the principal of the
General Partner is the principal of both another public commodity pool,
Fremont Fund, Limited Partnership and a privately offered commodity pool,
Auburn Fund, Limited Partnership. See "Description of the General Partner";
and, "No Prior Operation Experience of the General Partner" in this section.
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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 Agreement and Power of
Attorney attached as Exhibit F, upon Clarke, the sole CTA, for the
implementation of trading methods and strategies. The Advisory Agreement
provides that either the General Partner, or the 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 the 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 the 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 CTA AND ITS ALLOCATION OF EQUITY WITHOUT NOTICE
The General Partner may change the CTAs and the amount of equity allocated to
it 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.
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.
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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 the
CTA 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 CTA 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 CTA 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 CTA to compile the track record disclosed in this Prospectus which
was the basis for the selection of the CTA 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 CTA 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 CTA. It
is possible for the Partnership to experience sudden and large losses before
the General Partner becomes aware of the need to take remedial action.
PARTNERSHIP COULD LOSE SUBSTANTIAL ASSETS DUE TO LACK OF MARKET LIQUIDITY
It is not always possible to execute a buy or sell order, due to market
illiquidity. Such illiquidity can be caused by a lack of open interest in the
contract, market conditions which produce no persons willing to take a
particular side of a trade, or it may be the result of factors like the
suspension of trading because of "daily price limits". Most United States
commodity exchanges limit movement in a single direction in one trading day by
rules referred to as "daily price limits". These limits provide that no
trades may be executed at prices beyond the daily limits. Once the price of a
futures contract for a particular commodity has increased or decreased by an
amount equal to the daily limit, positions in the commodity can be neither
taken nor liquidated unless traders are willing to effect trades at or within
the limit. Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading. Similar future
occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject it to substantial losses which could exceed
the equity on deposit ("margins") for such trades. The inability to liquidate
positions could frustrate the trading plan of the CTA and cause losses to the
Partnership in excess of the money invested.
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INCREASED TRADING EQUITY TO CTA 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 CTA has not agreed to limit the amount of additional equity
that it may manage, and it contemplates 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 CTA
is allocated trading equity upon the sale of the Minimum or upon the sale of
additional Units, its 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 CTA 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 CTA 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 CTA selected will engage in trading of
commodities on United States Commodity Exchanges, foreign commodity exchanges,
and the inter-bank currency markets. The commodity exchange contracts and
options traded on United States Exchanges are subject to regulation pursuant
to the Commodity Exchange Act and are guaranteed by the credit of the members.
Contracts and options upon foreign commodity exchanges and the inter-bank
currency markets are usually not regulated by specific laws and are backed
only by the parties to the contracts. It is possible for a price movement in
a particular contract or option to be large enough to destroy the
creditworthiness of the contracts and options issued by a particular party or
all of the contracts and options of an entire market. In that situation, the
CTA could lose the entire value of a position with little recourse to regain
any of its value. The CTA expects to manage this risk by trading a widely
diversified portfolio of futures markets.
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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 its 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 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 equity 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 CTA who will trade for the Partnership. All
commodity accounts owned, controlled or managed by the CTA and the advisor's
principals will be combined for position limit purposes, to the extent they
may be applicable. Thus, the 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. If the General Partner engages multiple CTAs, each CTA will
trade independently of the others, and the CTAs may compete for similar
positions or take positions opposite each other, which may limit the
profitability of the Partnership.
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COMPETITION IS INTENSE
Commodity futures trading is highly competitive. The Partnership will be
competing with others who may have greater experience, more extensive
information about and access to developments affecting the futures markets,
more sophisticated means of analyzing and interpreting the futures markets,
and greater financial resources. The greater the experience and financial
resources, the better chance an investor has to trade commodities at a profit.
The Partnership will be limited by trading without the advantages of a
warehouse to take delivery of commodities or a large capital base to hold
positions during a period when prices do not perform as expected.
NO ASSURANCE THAT UNITS NECESSARY TO COMMENCE BUSINESS WILL BE SOLD - INVESTORS
MAY LOSE USE OF INVESTMENT CAPITAL
Futures Investment Company and other broker dealers selected, if any, have no
obligation to purchase Units or otherwise support the price of the Units. The
broker dealer selling agreements obligate the broker dealers to use their best
efforts only. See "Subscription Procedure and Plan of Distribution". If the
Minimum is not sold within one year, investors will be promptly refunded the
amount of their investment plus interest; however, they will lose the use of
that investment capital during the period between the date of the investment
to the lapse of the offering period.
COMMENCEMENT OF BUSINESS MAY OCCUR AT SUBOPTIMAL TIME FOR MAXIMIZING PROFITS
Upon the sale of the Minimum, the Partnership will encounter a start-up period
during which it will incur certain risks relating to the initial assignment of
equity to the CTA and investment by the CTA 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 CTA divides the equity assigned to it
into uniform dollar amounts to trade. For example, Clarke uses its best
efforts to trade every $50,000 in the Global Basic Program the same. In other
words, the Trading Matrix for Clarke in that program is $50,000. No assurance
can be given that the CTA's procedures for moving to a Fully-Committed
Position within its allocated equity will be successful. For example, the 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 its grain trade is completed
for its 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 CTA's 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 CTA's
trading equity could have an adverse effect on its trading, The 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 CTA will be
able to recover from such changes in trading equity. See also "Risk Factors,
Increased Trading Equity to CTA May Adversely Affect Their Performance", and
"The Limited Partnership Agreement, Redemptions".
FAILURE TO MAINTAIN NET WORTH OF THE GENERAL PARTNER MAY RESULT IN SUSPENSION
OF TRADING AND SUSTAINED LOSSES
The state securities administrators have established guidelines applicable to
the sale of interests in commodity pool limited partnerships. Among those
guidelines is the requirement that the Net Worth of a sole corporate general
partner be equal to five percent (5%) of the amount of the offering; provided,
however, such Net Worth is never to be less than $50,000 nor is it required to
be more than $1,000,000. The General Partner intends to use its best efforts
to maintain its Net Worth in compliance with these guidelines. There can be
no assurance, however, that the General Partner can maintain its Net Worth in
conformity with these requirements. The reduction in Net Worth to below these
limits will cause a suspension in trading to either permit the General Partner
to restore its Net Worth or to liquidate the Partnership. If trading is
suspended, there is no guarantee that the CTA will be able to liquidate its
positions without sustaining losses, or that it will be able to
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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
Advisor 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 and who does not timely
object to the exercise of such authority, after notice. Such settlement may
not necessarily be in the best interest of the individual limited partner.
See "Federal Income Tax Aspects".
POSSIBLE ADVERSE DETERMINATION BY THE IRS - PARTNERS MAY BE SUBJECT TO BACK
TAXES AND PENALTIES
The General Partner has obtained the opinion of The Scott Law Firm, P.A. that
the Partnership, as it is intended to be operated by the General Partner, will
be taxed as a Partnership and not as an association taxable as a corporation.
The Law
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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 advisor 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 CTA, any Principal of the CTA, 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 CTA, 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 CTA 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 CTA, 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 CTA will be effecting
trades for its 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 CTA 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 CTA may
have financial incentives to favor other accounts over the Partnership. In
the event the General Partner, its principal, or the 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 CTA also intends to trade for its
own accounts. Any trading for their personal accounts by the General Partner,
the 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 CTA responsible for the
management of the Partnership.
POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER MAY LIMIT PARTNERS'
ABILITY TO CONTROL CERTAIN ISSUES
There is no limit upon the number of Units in the Partnership the General
Partner and its principal and Affiliates may purchase, and it is possible,
though unlikely, that the General Partner and its Affiliates could purchase
sufficient Units in the Fund to retain voting control. It will be possible
for them to vote, individually or as a block, to create a conflict with
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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 1% 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 one percent (1%) 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 CTA. 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 20% 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 CTA 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.
THE PARTNERSHIP MAY ENGAGE MULTIPLE CTAs
The General Partner has sole and absolute discretion over the selection of the
CTAs and may appoint additional CTAs in the future. If so, each CTA will
trade independently of the others, and 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 would be
possible for the Partnership to experience a net loss and be required to pay
out incentive fees.
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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.
CTA 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 CTA is compensated by the General Partner based on 20% of
the New Net Profit of the Partnership, it is possible that the CTA will select
trades which are otherwise too risky for the Partnership to assume to earn the
20% 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, its
General Partner, the Selling Agent, the CTA, 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, P.O. Box C, Fremont, IN 46737. It is
possible, though unlikely, that mail correspondence, files, or other materials
belonging to or intended for the Partnership could become intermixed with like
items belonging to or intended for FIC. To prevent this from occurring,
strictly separate mail receipt and files will be maintained for both entities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
THE PARTNERSHIP - GENERAL PARTNER - BOOKS AND RECORDS
Atlas Futures Fund, Limited Partnership, (the "Partnership"), was organized
under the Delaware Uniform Limited Partnership Act as of January 12, 1998.
The principal office of the Partnership is located at 5916 N. 300 West,
Fremont, IN 46737. Its telephone number is (219) 833-1306 and facsimile
number is (219) 833-4411. The Partnership will
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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 the CTA 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 eighteen 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 ADVISOR
The General Partner has initially selected one independent Commodity Trading
Advisor ("CTA"), Clarke Capital Management, Inc. ("Clarke"), to conduct
trading on behalf of the Partnership. The General Partner has provided the
CTA with a revocable power of attorney pursuant to the terms of an advisory
contract between the Partnership and the CTA to trade the account or accounts
of the Partnership assigned by the General Partner to the CTA 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 CTA.
THE ADVISORY CONTRACT AND POWER OF ATTORNEY
The General Partner will assign a substantial portion of the Partnership
assets to the CTA it selects to trade. The terms of this assignment of assets
is governed by Advisory Contract and Power of Attorney signed by the CTA. See
Exhibit F. The Advisory Contract and Power of Attorney granted by the
Partnership to the CTA is terminable upon immediate notice by either party to
the other. Accordingly, neither party can rely upon the continuation of the
Advisory Contract and Power of Attorney. Should the Partnership prove to be
profitable it is unlikely the General Partner will terminate the Power of
Attorney granted to the CTA responsible for the production of those profits.
BUSINESS OBJECTIVE AND EXPENSES
The General Partner organized the Partnership to be a commodity pool, as that
term is defined under the Commodity Exchange Act, to trade exchange listed
futures and options contracts and non-listed forward contracts and options to
produce profits to the investors in the Partnership. The General Partner is
authorized to do any and all things on behalf of the Partnership incident
thereto or connected therewith. See Article II of the Limited Partnership
Agreement, attached as Exhibit A. The plan of operation is for the General
Partner to employ independent investment management to conduct this trading.
The Partnership is not expected to engage in any other business. The
objective of the Partnership is to achieve the potentially high rates of
return which are possible through speculative trading in the contracts and in
the markets identified in "The Commodity Trading Advisor". The General
Partner intends to allocate substantially all of the Partnership's Net Assets
to conduct this trading with the CTA. The CTA has advised that it intends to
allocate between 20% and 30% of the trading equity assigned to it to trade to
margin and secure the trading positions it selects. 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.
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In that regard, the Partnership is subject to substantial fixed charges. The
General Partner will be paid a management fee of one percent (1%) of the Net
Assets of the Partnership; in addition, the CTA will be paid a three percent
(3%) management fee upon the equity assigned to it, and the Partnership will
pay 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 28.57%, 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
12345678901234567890123456789012345678901234567890123456789012345678901234567890
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 10.00 10.00
Trading Advisor's Management Fees (3) 30.00 30.00
Trading Advisor's Incentive Fees on New Net Profits (4) 57.14 41.72
Brokerage Commissions and Trading Fees (5) 90.00 90.00
Redemption Fee (6) 30.00 30.00
Less Interest Income (7) (60.00) (60.00)
Amount of Trading Income Required to Redeem
Unit at Selling Price (8) $ 285.71 $ 208.58
Percentage of Initial Selling Price per Unit 28.57% 20.86%
Explanatory Notes:
(1) Investors will initially purchase Units at $1,000 per Unit. After the
commencement of trading, Units will be purchased at the Partnership's month-
end Net Unit Value. A 6% sales commission will be deducted from each
subscription.
(2) The Partnership will reimburse the General Partner for Offering Expenses,
estimated to be a total of $47,000, from the gross proceeds of the offering at
the time of the break of Escrow for the sale of the Minimum. The Partnership
will also reimburse the General Partner for $5,000 in Organizational Expenses
to be amortized on a straight line method over the first 60 months of the
Partnership's operation. Upon admission of subsequent Partners to the
Partnership, a charge will be made to such newly admitted Partners equal to
their pro-rata share of the Offering Expenses which will be credited to the
Capital Accounts of the prior admitted Partners to reimburse them for the
Offering Expenses they advanced. Offering and Organizational Expenses
includes all Offering Expenses of $47,000 and one fifth ($1,000, or 12 months'
worth) of the Organizational Expenses. The Partnership's actual accounting,
auditing, legal and other operating expenses will be borne by the Partnership
and are included in the $47,000 in Offering Expenses.
(3) The Partnership's CTA will be paid a total monthly management fee of 1/4
of 1% of the trading equity allocated to it.
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(4) The CTA will receive an incentive fee of 20% of New Net Profits each
quarter earned upon the trading equity assigned to it to trade. The $57.14 of
incentive fees shown above is equal to 20% of total trading income of $285.71
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 CTA.
(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 CTA to trade.
(6) The Redemption Fee of 3% 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) 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.
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 Net Assets of the Partnership will be paid
to the Partners in their pro rata share determined by the amount of Capital
Contributions of each Partner, including the General Partner. The current
rate of interest income expected is approximately 6% per year. The General
Partner estimates that 20% to 30% of total Net Assets 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 CTA selected are
identified in "The Commodity Trading Advisor".
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 their Capital
Contribution, but Limited Partners will have limited obligations to pay the
debts of the Partnership in excess of their Capital Contributions 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 on their investment, such
distributions, in the event of insolvency of the Partnership, would have to be
returned to pay Partnership debts. In addition, these interests will have no
voice in the day to day management of the Partnership. They will have the
right to vote on Partnership matters such as the replacement of the General
Partner. See the Partnership Agreement attached as Exhibit A.
These Limited Partnership interests are defined as the units (the "Units")
which are offered for sale for One Thousand Dollars ($l,000) per Unit. This
sales price per Unit was arbitrarily set by the General Partner without regard
to expected earnings and does not represent present or projected market or
Redemption value. Funds with respect to subscriptions received prior to the
commencement of trading operations by the Partnership (and not rejected by the
General Partner) will be deposited and held in a separate escrow account (the
"Escrow Account") in the name of the Partnership at Star Financial Bank, 2004
N. Wayne St., Angola, IN 46703 (the "Escrow Agent"). If the General Partner
has not accepted subscriptions for the 700 Units (the "Minimum") before the
lapse of one year from the date of this Prospectus, (the "Initial Offering
Period"), this offering will terminate and all documents and amounts deposited
to the Escrow Account by subscribers will be returned, plus interest and
without deduction for any commissions, fees or costs. Upon the sale of the
Minimum, the Partnership will commence trading. The remaining 6,300 Units
will be offered for sale at a price per Unit equal to the Net
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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 of Units or Capital
Contributions 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 office equipment and fees for the preparation of
this Prospectus as well as other expenditures to qualify the Units for sale.
The Partnership expects to allocate all of its Net Assets 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 Refco, Inc. to serve as
the futures commission merchant (the "FCM") to hold the funds allocated to the
Commodity Trading Advisor 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 CTA, will make appropriate adjustments to the allocation of
trading equity; provided, however, only the CTA will make specific trades and
determine the number of positions taken and the timing of entry and departure
from the markets based upon the amount of equity available to trade.
Most United States commodity exchanges limit fluctuations in commodity futures
contracts prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits". Once the price of a futures
contract has reached the daily limit for that day, positions in that contract
can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Similar occurrences could prevent the Partnership from
promptly liquidating unfavorable positions and subject the Partnership to
substantial losses which could exceed the margin initially committed to such
trades. In addition, even if commodity futures prices have not moved the
daily limit, the Partnership may not be able to execute futures trades at
favorable prices, if little trading in such contracts is taking place or the
price move in a futures or forward contract is both sudden and substantial.
Other than these limitations on liquidity, which are inherent in the
Partnership's proposed commodity futures trading operations, the Partnership's
assets are expected to be highly liquid.
Once the Minimum is sold and the Partnership commences operations, except for
payment of offering and other expenses of the Partnership, the General Partner
is unaware of any (i) anticipated known demands, commitments or required
capital expenditures; (ii) material trends, favorable or unfavorable, which
will effect its capital resources; or (iii) trends or uncertainties that will
have a material effect on operations. From time to time, certain regulatory
agencies have proposed increased margin requirements on commodity futures
contracts. Because the Partnership generally will use a small percentage of
assets for margin, the Partnership does not believe that any increase in
margin requirements, as proposed, will have a material effect on the
Partnership's proposed operations. Management cannot predict whether the
Partnership's Net Unit Value will increase or decrease. Inflation is not
projected to be a significant factor in the Partnership's operations, except
to the extent inflation influences futures prices.
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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, the Introducing Broker or 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, (ii) such claim has been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the General Partner or other
particular indemnitee, or (iii) a court of competent jurisdiction approves a
settlement of the claims against the General Partner or other particular
indemnitee and finds that indemnification of the settlement and related costs
should be made, provided, before seeking such approval, the General Partner or
other indemnitee must apprise the court of the position against such
indemnification held by the SEC and the securities administrator of the state
or states in which the plaintiffs claim they were offered or sold Units in
regard to indemnification for securities laws violations. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to the General Partner pursuant to the indemnification provisions
in the Limited Partnership Agreement, or otherwise, the General Partner has
been advised that, in the opinion of the SEC and the various state
administrators, such indemnification is against public policy as expressed in
the Securities Act of 1933 and the North American Securities Administrators
Association, Inc. commodity pool guidelines and is, therefore, unenforceable.
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The clearing agreement to clear the trades made between the Partnership and
Refco, Inc. provides for indemnification from the Partnership to Refco, Inc.,
including reasonable outside and in-house attorney's fees, incurred by Refco,
Inc. 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 broker dealer and introducing broker (the "IB") to the Partnership to
sell Units, supervise regulatory compliance, and supervise the relationship
with the futures commission merchant (the "FCM"), including the negotiation of
the round turn commission rates incurred through trading via the CTA. 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 Refco, Inc. 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 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. It is possible for the General Partner and any other
commodity pools to obtain rates to clear trades 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 $10.00 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 CTA
The Commodity Trading Advisor will be effecting trades for its own accounts
and for others on a discretionary basis. It 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 CTA 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
CTA and where prices are different, the CTA has 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 Advisor has also informed the General Partner
that where the Average Price System is not available, trades will be filled
(both purchases and sales) in order based on the numerical account numbers,
with the lowest price (on both purchases and sales) allocated to the lowest
account number and in numerical matching sequence, thereafter.
The past, present, and future trading methods to be utilized by the CTA are
proprietary in nature and will not be disclosed to the Partners. No notice
will be given by the CTA of any changes it may make in its 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 CTA 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
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<PAGE>
percentage of equity used for margin and losses, if any. The General Partner
will use its best efforts to monitor the daily Net Unit Value, and 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 one percent (1%)
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 twenty
percent (20%) on the trading account assigned to the CTA, which will be paid
directly to it. 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 CTA
In addition to the management fee to the General Partner and the 9% fixed
commission, the Partnership will pay a management fee to the CTA 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 allocated to it to trade, computed and paid from said account to the
CTA. 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 account assigned
to the CTA of twenty percent (20%) of the New Net Profit in that account. The
General Partner will be responsible for payment of all incentive fees to the
CTA. 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 the CTA, as of the close of business on the
last business day of each month, determined before accrual of any incentive
fee payable to the CTA, shall be used to compute the management and incentive
fees to the 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 Net Assets, interest or other income earned on Partnership
assets during the month which are not directly assigned to the CTA to trade
and are not related to such trading activity, 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 the CTA within ten (10) business days
after the close of the applicable accounting period. If the 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 the CTA and will be
charged against the net value of the CTA's assigned trading equity of any
succeeding quarterly period. No incentive fee will be payable to the CTA
until such losses have been offset by New Net Profits in such succeeding
quarters. If additional CTAs are engaged by the General Partner to trade for
the Partnership, 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
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<PAGE>
Clarke of $2,000, $8,000, ($4,000), ($3,000), $2,000, and $8,000, then the
incentive fee at the rate of twenty percent (20%) payable to it would be,
respectively, $400, $1,600, $0, $0, $0, and $600.
North American Securities Administrators Association ("NASAA") Guidelines
provide that the total management fees based upon the size of the Partnership
account not exceed 6% of Net Assets and incentive fees based upon profits
earned not exceed 15% of New Net Profits; provided, however, for each 1%
reduction in management fees below 6%, the incentive fees may be increased by
2%. The General Partner has reserved the right to raise, without prior
notification to the Partners, the current incentive fee to a maximum of 30%,
provided the management fees are correspondingly lowered to 0%.
FEES TO FUTURES COMMISSION MERCHANT AND INTRODUCING BROKER
The futures commission merchant for the Partnership is Refco, Inc. (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 CTA has been at the rate of
approximately 80 round turns per month for every million dollars ($1,000,000)
under management. In the unlikely event any of the Commodity Trading Advisor
effects round-turns of 240 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 240 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 CTA trades at a rate of three times its 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 CTA for managed accounts and to other pools and, to some degree, the
value of similar services provided by other clearing firms to 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 CTA 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.
<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 1% 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
(Revco, Inc.) 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
(Clarke Capital the CTA
Management, Inc.)
Incentive Fee 20% of the New Net Profits of the account for
each quarterly period that the net value of
the trading equity at the end of such
quarterly period for a CTA exceeds the
highest previous quarterly net value of the
trading equity for that CTA.
Third Parties Legal, accounting fees, and other actual Estimated at $23,000 for each year after
(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>
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<PAGE>
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 a
professional CTA who has demonstrated, in the judgment of the General Partner,
an ability to trade profitably and to have that equity allocated to the CTA 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 eighteen 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, as well as in 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 CTA
The CTA selected by the General Partner require a minimum account size
substantially greater than the $25,000 minimum investment in the Partnership;
e.g., Clarke requires a minimum investment of $50,000 to $1,000,000, depending
on the investment program. Accordingly, investors have access to the CTA for
a smaller investment, at substantially the same cost, than is available by a
direct investment in a managed account with the 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 CTA 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 CTA. 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 Net Assets of the Partnership, the General
Partner has estimated that between 20% and 40% of the Net Assets 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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<PAGE>
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
December 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 42, 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, P.O. Box C, Fremont, Indiana, 46737, with clearing agreements with
Refco, Inc., Vision Limited Partnership, and ABN AMRO Incorporated. The
Partnership intends to clear its trades through Refco, Inc. 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 eighteen years of
personal experience in the review of disclosure documents of CTAs and the sale
of individual managed accounts. The Partnership will rely, pursuant to the
Advisory Agreement and Power of Attorney attached as Exhibit F, upon Clarke
Capital Management, Inc., the CTA selected by the General Partner to trade the
equity of the Partnership and to implement the trading methods and strategies.
The General Partner intends to allocate substantially all of the Partnership's
net assets as trading equity to the CTA.. No additional CTAs are contemplated
to be added due to the sale of only the Minimum or the Maximum; provided
however, the General Partner may, in its sole discretion and without notice to
the Limited Partners, terminate the existing CTA, select additional CTAs, or
change the allocation of equity among any additional CTAs. The CTA is not an
Affiliate 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
Advisor" for a summary of the CTA's performance information.
The General Partner will periodically review the performance of the
Partnership to determine if the CTA 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 possible allocation of trading assets over multiple CTAs should
additional CTAs be engaged by the General Partner, it would be possible for
one of the CTAs to produce New Net Profit in the account assigned to it 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 such
CTAs would 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 CONTRACT
For the purpose of directing and effecting trades, the Partnership has entered
an advisory contract and granted a Power of Attorney to the CTA to trade. The
CTA has sole discretion, in the account so assigned, to determine the
commodity futures trades made by the Partnership. The Partnership is bound by
the directions of the CTA given to the FCM under the Power of Attorney. The
Power of Attorney are subject to termination by either the General Partner or
the CTA upon written notice to the other and to the FCM. If the Power of
Attorney is terminated, the General Partner will seek and retain a new CTA or
CTAs. See Exhibit F.
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 its
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 the existing and any future CTAs will
be made, the General Partner will retain the flexibility to replace CTAs or to
reallocate the Partnership's assets among CTAs based upon its sole judgment
and experience. From time to time, the General Partner may engage in
reallocations of assets or add or replace CTAs on a frequent basis. Due to
the possibility of allocation of trading assets over multiple CTAs, it would
be possible for one of the CTAs to produce New Net Profit in the account
assigned to it and be
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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 A
PRIVATE COMMODITY POOL, THE FORMER HAVING COMMENCED TRADING IN NOVEMBER OF
1996, AND THE LATTER HAVING COMMENCED TRADING IN APRIL, 1998. COMMODITY
TRADING ADVISORS FOR THIS POOL MAY SERVE AS COMMODITY TRADING ADVISORS FOR
OTHER POOLS AS WELL AS TRADE INDIVIDUAL MANAGED ACCOUNTS. THIS POOL HAS NOT
COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
THE COMMODITY TRADING ADVISOR
CLARKE CAPITAL MANAGEMENT, INC.
Clarke Capital Management, Inc. ("AIM"), an Illinois corporation, is the
Commodity Trading Advisors (the "CTA" or "CCM"), and its Main Business Office
and main business telephone are: 216 S. Vine Street, Hinsdale, Illinois
60521; (630) 323-5913. 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 and its principal for at least five (5)
years is as follows:
Mr. Clarke spent the period of 2/83 through 2/85 as an independent contractor
trading equities and options for Rice, Naegele & Associates of Chicago, a firm
involved in private speculation. From 2/85 through 3/89, Mr. Clarke as an
independent contractor traded equities and options in a firm account of Shatkin
Investment Corp., then a clearing member of the Chicago Board Options Exchange.
From 3/89 to 11/89, Mr. Clarke as an independent contractor, traded equities
and options in a firm account of French-American Securities, a private
investment company based in Chicago. From 11/89 to December 9, 1993, Mr.
Clarke was self-employed; developing methods to trade futures and other
commodity interests and trading various personal accounts. As of December 9,
1993, Mr. Clarke has been employed as an Associated Person and principal of
Clarke Capital Management, Inc., a registered Commodity Trading Advisor.
Clarke Capital Management, Inc. was incorporated in September 1993 for the
purpose of acting as a Commodity Trading Advisor. CCM was registered with the
Commodity Futures Trading Commission on October 25, 1993. Required performance
disclosure of CCM is located below under "Performance Record of the CTA".
There have never been any administrative, civil, or criminal proceedings
against Clarke Capital Management, Inc. or Mr. Clarke.
DESCRIPTION OF TRADING PROGRAM
The exact nature of CCM's trading strategy is proprietary and confidential. The
following description is of necessity general and is not intended to be all-
inclusive.
Although the five programs offered by CCM differ in certain respects, they
share a number of common elements. Under all five Programs, CCM's trading
strategy is strictly technical in nature. No fundamental analysis is used. The
strategy was developed from analysis of patterns of actual price movements, and
is not based on analysis of supply and demand factors, general economic
factors, or world events. CCM has conducted analysis of these price patterns to
determine procedures for initiating and liquidating positions in the markets in
which it trades.
The general trading strategy of all five CCM Programs is trend following. Most,
but not all, trade initiations and liquidations are in the direction of the
trend. CCM employs techniques that utilize a number of trading models acting
independently. Each model generates it own entry and exit signals and trades
both sides of the market (long and short). With minor differences only for long
or short positions, a particular model trades all markets with the same rules
and parameters, regardless of the program. CCM reserves the right to make
adjustments in the exact entry or exit price a model uses from program to
program in order to attempt to reduce the impact of slippage from large block
orders being executed at the same price. The models vary from
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intermediate through long-term to very long-term in time-frame focus and
testing has been done in order to select only those models that have good
performance characteristics across a wide range of conditions and complementary
performance with all other models in a program. None of the models has been
custom tailored to any individual market or group of markets.
PERFORMANCE RECORD OF THE CTA
The information presented in Performance Capsules 1 through 5 is presented on a
pro-forma basis in that the percentage rate of return displayed is calculated
using an annual management fee of 1.8% and an incentive fee of 25%. Brokerage
fees and all other charges are included in all calculations as actually
charged. The performance data in Performance Capsules #6 and #7 are based
solely on those accounts that pay fees. Accounts of the General Partner and of
Mr. Clarke invested in these funds do not pay fees and are excluded from the
presentation.
The following are the fees used in constructing the presentations of
Performance Capsules 1 through 5:
(1) 1.8% per annum management fee. This is calculated on a monthly basis at a
rate of .15% of the Gross Ending Equity for the month and deducted quarterly.
(2) 25% trading advisor incentive fee. This is calculated and deducted
quarterly as a percentage of the Gross Trading Performance Plus Interest
("GTPPI") minus any Carryforward Loss.
The fees deducted from capsule #6 are 0% management fee and 25% incentive fee.
Accounting fees of 0.25% are also deducted. The fees deducted from capsule #7
are 2% administration and management fees and 25% incentive fees.
Clarke Capital Management, Inc. - Domestic Diversified Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - Domestic Diversified Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998 1997 1996 1995 1994 1993
(Jan - Feb)
9.7 15.86 13.76 13.84 18.76 3.51 (0.01)
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Name of Trading Program: Domestic Diversified Program
Inception of Client Account Trading: December, 1993
Inception of Trading Pursuant to Program: December, 1993
Accounts Under Management: 1
Total Assets Managed by CTA (Actual Value): $61,799,581
Total Assets Managed by CTA (Notional Value): $73,839,092
Total Assets Traded Pursuant to Program (Actual Value): $106,612
Total Assets Traded Pursuant to Program (Nominal Value): $181,763
Worst Monthly Percentage Draw-down**: 4-98/12.09%
Worst Peak-to-Valley % Draw-down***: 2-97 to 4-98/22.14%
Number of Accounts Closed with Profit: 17
Number of Accounts Closed with Loss: 4
* 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.
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Clarke Capital Management, Inc. - Worldwide Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - Worldwide Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998 1997 1996
(Jan - Feb)
6.43 33.09 24.65 44.53
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Name of Trading Program: Worldwide Program
Inception of Client Account Trading: December, 1993
Inception of Trading Pursuant to Program: January, 1996
Accounts Under Management: 50
Total Assets Managed by CTA (Actual Value): $61,799,581
Total Assets Managed by CTA (Notional Value): $73,839,092
Total Assets Traded Pursuant to Program (Actual Value): $18,787,226
Total Assets Traded Pursuant to Program (Nominal Value): $23,560,227
Worst Monthly Percentage Draw-down**: 12-96/8.48%
Worst Peak-to-Valley % Draw-down***: 2-98 to 4-98/8.53%
Number of Accounts Closed with Profit: 6
Number of Accounts Closed with Loss: 1
* 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.
Clarke Capital Management, Inc. - Global Basic Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - Global Basic Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998 1997 1996
(Jan - Feb)
0.33 42.04 52.22 152.52
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Name of Trading Program: Global Basic Program
Inception of Client Account Trading: December, 1993
Inception of Trading Pursuant to Program: February, 1996
Accounts Under Management: 111
Total Assets Managed by CTA (Actual Value): $61,799,581
Total Assets Managed by CTA (Notional Value): $73,839,092
Total Assets Traded Pursuant to Program (Actual Value): $6,794,649
Total Assets Traded Pursuant to Program (Nominal Value): $7,335,402
Worst Monthly Percentage Draw-down**: 12-96/15.76%
Worst Peak-to-Valley % Draw-down***: 2-98 to 4-98/22.20%
Number of Accounts Closed with Profit: 55
Number of Accounts Closed with Loss: 13
* 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.
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Clarke Capital Management, Inc. - Global Magnum Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - Global Magnum Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998 1997
(Jan - Feb)
2.20 44.74 25.18
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Name of Trading Program: Global Magnum Program
Inception of Client Account Trading: December, 1993
Inception of Trading Pursuant to Program: August, 1997
Accounts Under Management: 66
Total Assets Managed by CTA (Actual Value): $61,799,581
Total Assets Managed by CTA (Notional Value): $73,839,092
Total Assets Traded Pursuant to Program (Actual Value): $7,702,892
Total Assets Traded Pursuant to Program (Nominal Value): $10,081,295
Worst Monthly Percentage Draw-down**: 10-97/9.62%
Worst Peak-to-Valley % Draw-down***: 2-98 to 4-98/17.68%
Number of Accounts Closed with Profit: 16
Number of Accounts Closed with Loss: 4
* 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.
Clarke Capital Management, Inc. - Millennium Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - Millennium Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998
(Jan - Feb)
(0.24) 37.29
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Name of Trading Program: Millennium Program
Inception of Client Account Trading: December, 1993
Inception of Trading Pursuant to Program: January, 1998
Accounts Under Management: 8
Total Assets Managed by CTA (Actual Value): $61,799,581
Total Assets Managed by CTA (Notional Value): $73,839,092
Total Assets Traded Pursuant to Program (Actual Value): $16,189,009
Total Assets Traded Pursuant to Program (Nominal Value): $20,461,162
Worst Monthly Percentage Draw-down**: 4-98/12.68%
Worst Peak-to-Valley % Draw-down***: 2-98 to 4-98/21.38%
Number of Accounts Closed with Profit: 1
Number of Accounts Closed with Loss: 1
* 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.
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Clarke Capital Management, Inc. - MJC Aggressive Multi-Sector Fund, L.P.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Clarke Capital Management, Inc. - MJC Aggressive Multi-Sector Fund, L.P.
Percentage Rate of Return
(Computed on a compounded monthly basis)*
1999 1998 1997 1996 1995
(Jan - Feb)
0.13 61.99 51.89 108.64 17.54
Name of Pool: MJC Aggressive Multi-Sector Fund, L.P.
Type of Pool: Privately offered to accredited investors
Inception of Trading: July, 1995
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Aggregate Gross Subscriptions: $5,772,265
Current Net Asset Value: $11,251,342
Worst Monthly Percentage Draw-down**: 12-96/11.07%
Worst Peak-to-Valley % Draw-down***: 2-98 to 4-98/11.20%
* 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.
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 Bell Fundamental Futures, L.L.C.
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 1% per month, 12% 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 February 28, 1999.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Fremont Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
Month 1999 1998 1997 1996
January (1.49) (1.48) (1.79) N/A
February 6.74 (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 5.15 (11.35) (12.21) (6.69)
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Name of Pool: Fremont Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of CTA: Bell Fundamental Futures, L.L.C.
Principal Protected: No
Date of Inception of trading: November, 1996
Net Asset Value of the pool: $568,177 on total Units outstanding: 791.6
NAV Per Unit: $718
Largest Monthly Draw-Down**: 12-96/8.83%
Worst Peak-to-Valley Draw-Down***: 11-96 to 6-98/32.5%
* 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.
THE FUTURES COMMISSION MERCHANT
Refco, Inc. ("Refco") located at One World Financial Center, Tower A, Suite
2300, 200 Liberty Street, New York, NY 10281, is the futures Commission
Merchant for the Partnership. The following disclosures are provided
regarding Refco.
As one of the world's largest registered futures commission merchants, Refco,
Inc. maintains memberships on all principal U.S. and international exchanges.
In terms of client volume, Refco is one of largest members of the Chicago
Board of Trade (CBOT), Chicago Mercantile Exchange (CME), as well as the LIFFE
(London International Financial Futures Exchange), the LME (London Metal
Exchange), the MATIF (Marche a Terme International de France), and the SIMEX
(Singapore International Monetary Exchange).
Refco has a preeminent market position in the most actively traded contracts,
which include U.S. treasury bonds, eurodollars, stock indices, currencies,
agricultural products and energy.
Refco does not have a proprietary trading division. Its global execution and
clearing capabilities have enabled it to command a significant worldwide
market share of client business in futures and options transactions. Refco's
client base includes a broad range of financial institutions, corporations,
businesses, governments, fund managers, mutual funds and pension funds
throughout the world. As Refco's strategy indicates, institutional and
corporate clients seek well-capitalized, globally-oriented brokerage firms.
Refco provides its clients with timely and comprehensive market information on
a daily basis.
See disclosures as to litigation during the past 5 years regarding Refco 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 December 31, 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
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Partnership will report its income for tax and book purposes under the accrual
method of accounting and its tax year will be the calendar year, or such other
period as is required under section 706(b) of the Code. During taxable years
in which little or no profit is generated from trading activities, a Limited
Partner may still have interest income which will be taxed as ordinary income.
THIS DISCUSSION ASSUMES THAT THE INVESTOR IS AN INDIVIDUAL AND IS NOT INTENDED
AS A SUBSTITUTE FOR CAREFUL PLANNING, PARTICULARLY, SINCE CERTAIN OF THE
INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP WILL NOT BE THE
SAME FOR ALL TAXPAYERS. ALL MATTERS UPON WHICH THE PARTNERSHIP HAS OBTAINED
AN OPINION OF TAX COUNSEL ARE DISCUSSED UNDER THE CAPTION "TAX OPINION" BELOW.
ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
WITH SPECIFIC REFERENCE TO THEIR TAX SITUATION.
NO LEGAL OPINION AS TO CERTAIN MATERIAL TAX ASPECTS
No legal opinion will be requested by the Partnership in regard 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 advisor 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 the
"safe harbor" requirements or otherwise to satisfy the IRS requirements
necessary to cause the Partnership to be taxed as a partnership and not as a
corporation.
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".
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NO IRS RULING
THE PARTNERSHIP HAS NOT APPLIED FOR A RULING FROM THE INTERNAL REVENUE SERVICE
(THE "IRS") REGARDING ITS STATUS AS A PARTNERSHIP OR WITH REGARD TO ANY OTHER
TAX ASPECT, NOR DOES THE PARTNERSHIP INTEND TO SEEK A RULING. IN THE ABSENCE
OF A RULING, THERE CAN BE NO ASSURANCE THAT THE IRS WILL NOT ATTEMPT TO TAKE A
POSITION ADVERSE TO THE PARTNERSHIP.
TAX OPINION
The Partnership has obtained an opinion, which is not binding upon the IRS or
the Courts, from The Scott Law Firm, P.A., that the Partnership will be
taxable as a partnership and not as a corporation. 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 Partners 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, 1998, 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
advisor 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,
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1988 (the "Notice"), the IRS provided guidance as to the operation of the
Partnership. The General Partner intends to cause the Partnership to comply
with the applicable provisions of these guidelines. In the event the Expenses
of the Partnership were deemed not to qualify as deductions from trading
profits, if any, the total taxes paid by the Partners would increase while the
distributions to them would remain the same.
BASIS LOSS LIMITATION
Generally, the "basis" of a Partner's interest in the Partnership for tax
purposes is equal to the cost decreased, but not below zero, by the Partner's
share of any Partnership losses and distributions and increased by the
Partner's share of any Partnership income. A Partner may not deduct losses in
excess of the adjusted basis for the interest in the Partnership at the end of
the partnership year in which such losses occurred, but may carry forward any
excess to such time, if ever, as the basis for the interest in the Partnership
is sufficient to absorb the loss. Upon the sale or liquidation of a Partner's
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 Capital Contribution to the Partnership equal to any deficit in its
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
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liability relating to unrealized Partnership profits in open positions at
year-end. Sixty percent (60%) of any gain or loss from a Section 1256
contract will be treated as long-term, and forty percent (40%) as short-term,
capital gain or loss (the "60/40 Rule"), regardless of the actual holding
period of the individual contracts. The character of a Partner's distributive
share of profits or losses of the Partnership from Section 1256 contracts will
thus be 60% long-term capital gain or loss and 40% short-term capital gain or
loss. Each partner's distributive share of such gain or loss for a taxable
year will be combined with its other items of capital gain or loss for such
year in computing its Federal income tax liability. The Code contains certain
rules designed to eliminate the tax benefits flowing to high-income taxpayers
from the graduated tax rate schedule and from the personal and dependency
exemptions. The effect of these rules is to tax a portion of a high-income
taxpayer's income at a marginal tax rate of 39.6%. However, long-term capital
gains are now subject to a maximum tax rate of 28%. Subject to certain
limitations, a Limited Partner, other than a corporation, estate or trust, may
elect to carry-back any net Section 1256 contract losses to each of the three
preceding years. The marked-to-market rules do not apply 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.
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INTEREST RELATED TO TAX EXEMPT OBLIGATIONS
Section 265(a)(2) of the Code will disallow any deduction for interest on
indebtedness of a taxpayer incurred or continued to purchase or carry
obligations the interest on which is wholly exempt from tax. The IRS
announced in Revenue Procedure 72-18 that the proscribed purpose will be
deemed to exist with respect to indebtedness incurred to finance a "portfolio
investment". The Revenue Procedure further states that a limited partnership
interest will be regarded as a "portfolio investment", unless rebutted by
other evidence. Therefore, in the case of a Limited Partner owning tax-exempt
obligations, the IRS might take the position that any interest expense
incurred by him to purchase or carry Units should be viewed as incurred by him
to continue carrying tax exempt obligations and that such Limited Partner
should not be allowed to deduct all or a portion of the interest on any such
loans.
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. 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.
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ACCORDINGLY, THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR
HER ATTORNEY AS TO THE PROPRIETY OF SUCH AN INVESTMENT IN LIGHT OF
CIRCUMSTANCES OF THE PARTICULAR PLAN.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF EMPLOYEE BENEFIT PLANS IS NOT A
REPRESENTATION BY GENERAL PARTNER OR ANY OTHER PARTY THAT THIS INVESTMENT
MEETS ALL LEGAL REQUIREMENTS OR IS APPROPRIATE WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR 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 Capital
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
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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
Net Assets will be made solely at the discretion of the General Partner. On a
monthly basis the General Partner will cause to be reported to the Partners,
the following information: the Net Unit Value as of the end of the month and
as of the end of the previous month, and the percentage change in Net Unit
Value between the two months; the amount of distributions during the month;
the aggregate fixed commission in lieu of round-turn brokerage commissions,
other fees, administrative expenses, and reserves for claims and other extra-
ordinary expenses incurred or accrued by the Partnership during the month;
and, such other information as the CFTC may, by regulation, require. Partners
or their duly authorized representatives may, after adequate notice, inspect
the 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 Advisor, 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,
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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 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 FOR SALE OF UNITS
The Units are being offered and sold through Futures Investment Company
("FIC"), 5916 N. 300 West, P.O. Box C, 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.
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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 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 not less than the
regulatory minimum of $5,000 in Units required to be purchased by every
investor; 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 "CPO"), the principal
of the General Partner, Ms. Pacult, the Commodity Trading Advisor, 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.
Neither Refco, Inc. ("Refco") or any of its principals have been the subject
of any administrative, civil, or criminal action, whether pending, on appeal,
or concluded, within the preceding five years that Refco would deem material
for purposes of Part 4 of the Regulations of the Commodity Futures Trading
Commission ("CFTC") except as follows.
On December 20, 1994, Refco settled a CFTC administrative proceeding (In the
Matter of Refco, Inc., CFTC Docket No. 95-2) in which Refco was alleged to
have violated certain financial reporting, record keeping and segregation
provision of the Commodity Exchange Act and CFTC regulations as a result of
some reporting and investment practices of Refco during 1990 and 1991.
Without any hearing on the merits of the CFTC allegations and without
admitting any of the allegations, Refco settled the matter and agreed to
payment of $1.25 million civil penalty, entry of a cease and desist order, and
appointment of an independent consultant to review Refco's financial manual.
On January 23, 1996, Refco settled a CFTC administrative proceeding (In the
Matter of Refco, Inc., CFTC Docket No. 96-2) in which Refco was alleged to
have violated certain segregation and supervision requirements and prior cease
and desist orders. The CFTC allegations concerned Refco's consolidated
margining of certain German accounts which were maintained at Refco from 1989
through April 1992. Refco simply executed and cleared transactions for these
accounts in accordance with client instructions; Refco had no role in raising
funds from investors or in the trading decision for these accounts. Refco had
received what it considered appropriate authorization from the controlling
shareholder of the accounts' promoters to margin the accounts and transfer
funds between and among the accounts on a consolidated basis. The CFTC
maintained that Refco should not have relied upon such authorizations for the
final consolidation of the
49
<PAGE>
accounts. Without admitting any of the CFTC allegations or findings, Refco
settled the proceeding and agreed to payment of a $925,000 civil penalty,
entry of a cease and desist order, and implementation of certain internal
controls and procedures.
Refco does not believe that either of the foregoing matters are material to
the clearing and execution services it will render to the Partnership.
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 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, P.O. Box C, 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
50
<PAGE>
experience and trading history of the CTA; the General Partner and the
commodity brokers and their respective officers, directors and Affiliates; the
advisory agreement between the Partnership and the CTA; the Customer
Agreements between the Partnership and the Commodity Brokers for the
Partnership; the Disclosure Document of the CTA; 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 CTA and by the
confidentiality of certain personal information relating to investors.
[The balance of this page has been intentionally left blank]
51
<PAGE>
*******************************************************************************
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
FOR THE PERIOD JANUARY 12, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
(With Auditors' Report Thereon)
GENERAL PARTNER:
Ashley Capital Management, Inc.
% Corporate Systems, Inc.
101 North Fairfield Drive
Dover, Kent County, Delaware 19901
<PAGE>
FRANK L. SASSETTI & CO.
CERTIFIED PUBLIC ACCOUNTANTS
To The Partners
Atlas Futures Fund, Limited Partnership
(a development stage enterprise)
Dover, Kent County, Delaware
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of ATLAS FUTURES FUND,
LIMITED PARTNERSHIP (a development stage enterprise) as of December 31, 1998,
and the related statements of operations, partners' equity and cash flows for
the period from January 12, 1998 (inception) to December 31, 1998. 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 (a development stage enterprise) as of December 31,
1998, and the results of its operations and its cash flows for the period
from January 12, 1998 (inception) to December 31, 1998, in conformity with
generally accepted accounting principles.
March 18, 1999
Oak Park, Illinois
F-1
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Cash $ 1,359
Offering expenses - estimated (Note 1) 49,200
Organization costs - estimated (Note 1) 2,800
-------
$53,359
=======
LIABILITIES AND PARTNERS' EQUITY
Liabilities -
Due to general partner $51,712
-------
Partners' Capital -
Limited partners (1 unit)
Initial capital contribution 1,000
Deficit accumulated during development stage (177)
General partner (1 unit)
Initial capital contribution 1,000
Deficit accumulated during development stage (176)
--------
Total Partners' Capital 1,647
--------
$53,359
========
The accompanying notes are an integral part
of the financial statements.
F-2
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
JANUARY 18, 1998 (INCEPTION)
TO DECEMBER 31, 1998
REVENUES $
-------
Total Revenues -------
EXPENSES
Bank charges 103
Shipping expenses 250
-------
Total Expenses 353
-------
NET LOSS $ (353)
=======
NET LOSS -
Limited partnership unit $ (177)
=======
General partnership unit $ (176)
=======
The accompanying notes are an integral part
of the financial statements.
F-3
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF PARTNERS' EQUITY
JANUARY 18, 1998 (INCEPTION)
TO DECEMBER 31, 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 -
January 18, 1998
to December 31,
1998 (177) (176) (353)
------- ----- ------- ----- ------- -----
Balance -
December 31, 1998 $ 823 1 $ 824 1 $1,647 2
======= ===== ======= ===== ======= =====
Value per unit at
December 31, 1998 $823.50
=======
Total partnership
units at
December 31, 1998 2
=======
The accompanying notes are an integral part
of the financial statements.
F-4
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
JANUARY 18, 1998 (INCEPTION)
TO DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (353)
Adjustments to reconcile net loss to net
cash used in operating activities --------
Net Cash Used In
Operating Activities (353)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs paid (288)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Initial partner contributions 2,000
--------
NET INCREASE IN CASH 1,359
CASH -
Beginning of period --------
End of period $ 1,359
========
NON-CASH INVESTING ACTIVITIES
Organization and syndication costs incurred
and paid by affiliate - estimated $ 51,712
========
The accompanying notes are an integral part
of the financial statements.
F-5
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Atlas Futures Fund, Limited Partnership (the Fund) was formed
January 12, 1998 under the laws of the State of Delaware. 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.
The Partnership is in the development stage and its efforts
through December 31, 1998 have been principally devoted to organizational
activities.
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.
F-6
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 as of December 31, 1998.
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.
F-7
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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.
F-8
<PAGE>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 each CTA to trade will be paid to each CTA and 3% of
equity to the Fund's General Partner.
* An incentive fee of 15% of "new trading profits" will be
paid to each CTA. "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.
F-9
<PAGE>
*******************************************************************************
ASHLEY CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements -
Balance Sheet 2
Statement of Income and Accumulated Deficit 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>
Frank L. Sassetti & Co.
To The Shareholders
Ashley Capital Management, Inc.
Dover, Kent County, Delaware
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of ASHLEY CAPITAL
MANAGEMENT, INC. as of December 31, 1998, and the related statements of
income and accumulated deficit and cash flows for the year 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 December 31, 1998, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
March 19, 1999
Oak Park, Illinois
/s/ Frank L. Sassetti & Co.
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
F-1
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 2,945
Due from Atlas Futures Fund (Note 2) 51,712
-------
Total Current Assets 54,657
-------
INVESTMENTS (Note 3) 824
-------
$55,481
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Accrued interest payable $ 263
Due to affiliate (Note 2) 51,712
-------
Total Current Liabilities 51,975
-------
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 (1,494)
-------
Total Stockholder's Equity (494)
-------
$55,481
=======
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.
F-2
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1998
REVENUES $
-------
EXPENSES
Bank charges 87
Professional fees 968
Interest expense 263
-------
Total Expenses 1,318
-------
LOSS BEFORE EQUITY (LOSS) IN LIMITED PARTNERSHIP (1,318)
EQUITY (LOSS) IN LIMITED PARTNERSHIP (176)
-------
NET (LOSS) (1,494)
ACCUMULATED DEFICIT
Beginning of period -------
End of period $(1,494)
=======
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.
F-3
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,494)
Adjustments to reconcile net loss to net cash
used in by operating activities -
Loss in limited partnership 176
Changes in operating assets and liabilities -
Increase in accrued interest payable 263
Net Cash Used in
Operating Activities (1,055)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment interest in limited partnership (1,000)
Net Cash Used in
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 2,945
CASH -
Beginning of period
End of period $ 2,945
NON-CASH INVESTING AND FINANCING ACTIVITIES -
Organization and syndication costs incurred
and paid by affiliate $51,712
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.
F-4
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Ashley Capital Management, Inc. (the Company) was formed on
October 15, 1996 under the laws of the State of Delaware 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 - The Company has no cash equivalents. Net
cash provided by operating activities includes no cash payment for interest
nor income taxes for the year ended December 31, 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.
Purchase of units in the partnership will not
acquire or otherwise have any interest
in this Company.
F-5
<PAGE>
ASHLEY CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. CORPORATE AFFILIATION - CONTINUED
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 $51,712 as of the balance sheet date. These funds
are not collateralized and bear no interest.
3. INVESTMENTS
The Company purchased an interest as the general partner in
a limited partnership (a development stage enterprise) with an initial
investment of $1,000. The investment is being accounted for under the equity
method and lost $176 during the year.
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.
F-6
<PAGE>
*******************************************************************************
APPENDIX I
COMMODITY TERMS AND DEFINITIONS
Identification of the parties and knowledge of various terms and concepts
relating to trading in futures and forward contracts and this offering are
necessary for a potential investor to identify the risks of investment in the
Fund.
"1256 Contract". See "Taxation - Section 1256 Contract".
"Additional Sellers". See definition of "Selling Agent".
"Affiliated IB". The IB is Affiliated with the principal of the General
Partner. The IB has no affiliation with the Partnership. Also see definition
of "IB".
"Associated Persons". The persons registered pursuant to the Commodity
Exchange Act with the FCM, the Selling Agent, Additional Sellers, or the IB
who are eligible to service the Partnership, the Partners and to receive
Trailing Commissions.
"Average Price System". The method approved by the CFTC to permit the CTA to
place positions sold or purchased in a block to the numerous accounts managed
by the CTA. See "The Commodity Trading Advisor" 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 Advisor" or "CTA". Clarke Capital Management, Inc., 216 S.
Vine Street, Hinsdale, Illinois 60521. A person or entity which renders
advice about commodities or about the trading of commodities, as part of a
regular business, for profit. Particularly, those who will be responsible for
the analysis and placement of trades for the Partnership.
"Daily Price Limit". The maximum permitted movement in a single direction
(imposed by an exchange and approved by the CFTC) in the price of a commodity
futures contract for a given commodity that can occur on a commodity exchange
on a given day in relation to the previous day's settlement price, which is
subject to change, from time to time, by the exchange (with CFTC approval).
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"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 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, P.O. Box C, 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, P.O. Box C, Fremont, IN 46737, which will introduce
the trades to the FCM for a fixed commission of 9% of equity on deposit at the
FCM allocated by the General Partner to trade. The principal of the General
Partner, Ms. Shira Del Pacult is also one of the principals of the IB, with
her husband.
"Introduction of Trades". The term used to describe the function performed by
the broker which handles the relationship between the Partnership and the
Futures Commission Merchant. See the definition of "IB".
"Limited Partner". Persons admitted without management authority pursuant to
the Partnership Agreement.
"Margin". A good faith deposit with a broker to assure fulfillment of the
terms of a Futures Contract.
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"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.
"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
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$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, P.O. Box C, 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, P.O. Box C, 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 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.
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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 $50,000 in every Global Basic Program account is traded the
same by Clarke. This is Clarke's trading matrix. Some other Commodity
Trading Advisors have different trading matrix for different sized accounts.
For example, they may trade all accounts over one million in size differently
than accounts under one million.
"Unit". The term used to describe the ownership of both the General and
Limited Partner interests in the Partnership.
"Unrealized Profit Or Loss". The profit or loss which would be realized on an
open position if it were closed at the current settlement price or the most
recent appropriate quotation as supplied by the broker or bank through which
the transaction is effected.
"Underwriter". See "Selling Agent".
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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 to,
total underwriting and brokerage discounts and commissions (including fees of
the underwriter's attorneys), expenses
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for printing, engraving, mailing, salaries of employees while engaged in sales
activity, charges of transfer agents, registrars, trustees, escrow holders,
depositories, experts, expenses of qualification of the sale of its Program
Interest under Federal and state law, including taxes and fees, accountants'
and attorneys' fees.
Participant-The holder of a Program Interest. A Partner in the Fund.
Person-Any natural Person, partnership, corporation, association or other
legal entity.
Pit Brokerage Fee-Pit Brokerage Fee shall include floor brokerage, clearing
fees, National Futures Association fees, and exchange fees. These fees will
be paid by the Introducing Broker from the fixed commissions.
Program-A limited partnership, joint venture, corporation, trust or other
entity formed and operated for the purpose of investing in Commodity
Contracts. The Fund.
Program Broker-A Commodity Broker that effects trades in Commodity Contracts
for the account of a Program. See the "The Futures Commission Merchant" and
"Introducing Broker".
Program Interest-A limited partnership interest or other security
representing ownership in a program. The "Units" in the Fund. See Exhibit A,
the Limited Partnership Agreement.
Pyramiding-A method of using all or a part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
Sponsor-Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the
Organizational Expenses of the Program, and the general partner(s) and any
other Person who regularly performs or selects the Persons who perform
services for the Program. Sponsor does not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in connection with the
offering of the Units. The term "Sponsor" shall be deemed to include its
Affiliates.
Valuation Date-The date as of which the Net Assets of the Program are
determined. For the Fund, this will be after the close of business on the
last business day of each month.
Valuation Period-A regular period of time between Valuation Dates. For the
Fund, this will be the close of business for each calendar month and each
calendar year.
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EXHIBIT A TO ATLAS FUTURES FUND DISCLOSURE DOCUMENT
AGREEMENT OF LIMITED PARTNERSHIP OF
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT, (the "Agreement") dated the 1st day of
February, 1998, by and among Ashley Capital Management, Incorporated, a
Delaware corporation, as managing general partner (hereinafter referred to as
the "General Partner"), and those who are admitted as partners, (hereinafter
referred to as either "Limited Partners" or "Other General Partners"), pursuant
to the terms of this Agreement, (the General Partner, any Other General
Partners, and the Limited Partners are hereinafter collectively referred to as
the "Partners").
WITNESSETH:
IN CONSIDERATION of good and valuable consideration, the receipt of which is
hereby acknowledged, the General Partner and the initial Limited Partner
entered into and formed a limited partnership (hereinafter called either the
"Partnership" or the "Fund") pursuant and subject to the Delaware Uniform
Limited Partnership Act (the "Act"), as follows:
ARTICLE I
Definitions and Risk Disclosure Statement
Certain terms used in this Agreement shall have the special meaning designated
below:
1.1 The term AFFILIATE means (1) any person controlled by or under common
control with another person, (2) a person owning or controlling 10% or more
of the outstanding voting securities of such other person, (3) any officer
or director of such other person, and (4) if such other person is an
officer or director, any other company for which such person acts as an
officer or director.
1.2 When referring to the capital of the Partnership:
(a) the term CAPITAL shall mean cash invested in the Partnership by any
Partner and placed at risk for the business of the Partnership;
(b) the term CAPITAL CONTRIBUTION shall mean, with respect to any Partner,
the sum of all Capital contributed to the Partnership pursuant to
Article I;
(c) the term CAPITAL SUBSCRIPTION shall mean the amount set forth opposite
the name of such Partner in the schedule of Partners, which amount
shall be the purchase price, less sales commissions, if any, to be paid
or paid by such Partner for the Unit or Units in the Partnership
purchased by such Partner;
(d) the term INITIAL CAPITAL shall mean the sum of all Capital
Subscriptions received by the General Partner prior to commencement of
trading;
(e) the term NET ASSETS OR NET ASSET VALUE means the total assets,
including all cash and cash equivalents (valued at cost plus accrued
interest and earned discount), less total liabilities, of the
Partnership (each determined on the basis of generally accepted
accounting principles, consistently applied under the accrual method
of accounting or as required by applicable laws, regulations and rules
including those of any authorized self regulatory organization),
specifically:
(i) Net Asset Value includes any unrealized profit or loss on open
security and commodity positions subject to reserves for loss
established, from time to time, by the General Partner;
(ii) All open stock, option, and commodity positions are calculated on
the then current market value, which shall be based upon the
settlement price for that particular position on the date with
respect to which Net Asset Value is being determined; provided,
however, that if a position could not be liquidated on such day
due to the operation of the daily limits or other rules of the
exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position
could be liquidated shall be the basis for determining the market
value of such position for such day. As used herein, "settlement
price" includes, but is not limited to: (1) in the case of a
futures contract, the settlement price on the commodity exchange
on which such futures contract is traded; and (2) in the case of a
foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price
and the highest bid price, at the close of business on the day Net
Asset Value is being determined, established by the bank or broker
through which such forward contract was acquired or is then
currently traded;
(iii) Brokerage commissions to close security and commodity positions,
if charged on a round-turn basis, are accrued in full at the time
the position is initiated (i.e., on a round-turn basis) as a
liability of the Partnership;
(iv) Interest earned on all Partnership accounts is accrued at least
monthly;
(v) The amount of any distribution made by the Partnership is a
liability of the Partnership from the day when the distribution is
declared by the General Partner or as provided in this Agreement
and the amount of any redemption is a liability of the Partnership
as of the valuation date; and
(vi) Syndication Costs incurred in organizing and all present and
future costs to increase or maintain the qualification of the
Units available for sale and the cost to present the initial and
future offering of Units for sale shall be capitalized when
incurred and amortized and paid from Capital or Monthly Profit as
required by applicable law.
(f) the term PROFIT (LOSS) ATTRIBUTABLE TO UNITS means the product of A)
the number of Units divided into B) an amount equal to the Net Profit
(Loss) determined as follows: (1) the net of profits and losses
realized on all trades closed out, plus (2) the net of any unrealized
profits and losses an open positions as of the end of the period, less
(3) the net of any unrealized profits and losses on open positions as
of the end of the preceding period, minus, (4) the Expenses
attributable to Units. Profit (Loss) shall include interest earned on
Partnership assets, realized and unrealized capital gains or losses on
U.S. Treasury bills, and other securities;
(g) the term MANAGEMENT FEE shall mean up to six percent (6%) annually of
the Net Assets of the Partnership computed on the close of business on
the last day of each month and payable to the General Partner or
independent Commodity Trading Advisor, or both, without regard to the
income or loss of the Partnership for that period; presently, the
General Partner and Commodity Trading Advisor receive one sixth (1/6)
and one half (1/2), respectively, of the maximum Management Fee (1% to
the General Partner and 3% to the CTA of the Net Assets of the
Partnership);
(h) the term INCENTIVE FEE means a percentage of the profits accrued and
paid to the General Partner, or its Affiliates, of up to fifteen
percent (15%) annually of New Net Profit earned from inception of
trading, through the date of the computation, based upon total Capital
of the Partnership. The General Partner has reserved the right to both
reduce the Incentive Fee below fifteen percent (15%) and increase the
Incentive Fee to a maximum of thirty percent (30%), provided that in
such case the Management Fee is correspondingly lowered to 0%;
presently, the Incentive Fee paid to the General Partner is twenty
percent (20%), which is paid by the General Partner to the CTA;
(i) the term GROSS PROFIT OR LOSS means the income or loss from all
sources, including interest income and profit and loss from non-trading
activities, if any.
(j) the term NEW NET PROFIT OR LOSS means the amount of income earned from
trading, less the trading losses and brokerage commissions and fees
paid to clear the trades which are incurred or accrued during the then
current accounting period; and,
(k) the term NET GAINS means net profit from all sources.
(l) the term UNIT shall mean a partnership interest in the Partnership
requiring an initial Capital Contribution of one thousand dollars
($1,000), less a sales commission, or the Net Asset Value of the
initial Unit, as adjusted to reflect increases and decreases caused by
receipt, accrual, and payment of profit, Expenses, losses, bonuses, and
fees, from time to time.
1.3 When referring to costs and expenses of the Partnership to be allocated
and charged pursuant to this Agreement:
(a) the term EXPENSES shall mean costs allocated, incurred, paid, accrued,
or reserved, including the fixed commissions payable to the Introducing
Broker of nine percent (9%) of the total equity placed under management
with the Commodity Trading Advisor, which are, in the opinion of the
General Partner, required, necessary or desirable to establish, manage,
continue and promote the business of the Partnership including, but not
limited to, all deferred organization costs, brokerage commissions, and
all management and incentive fees payable to the General Partner or to
independent investment and Commodity Trading Advisor by the Partnership
as negotiated and determined by the General Partner on behalf of the
Partnership on a basis consistently applied in accordance with
generally accepted accounting principals under the accrual method of
accounting or as required by applicable laws, regulations and rules
including those of any authorized self regulatory organization with
proper jurisdiction over the business of the Partnership; provided,
however, Expenses shall not include salaries, rent, travel, expenses
and other items of General Partner overhead and, provided, further,
management fees, advisory fees and all other fees, except for
incentive fees and commodity brokerage commissions, the actual cost of
legal and audit services and extraordinary expenses, shall not exceed
one half of one percent of Net Assets per month (not to exceed six
percent annually). If necessary, the General Partner shall reimburse
the Partnership no less frequently than quarterly, for the amount by
which such aggregate fees and expenses exceed the limitations provided
by NASAA Guideline IVC.1. During the period for which reimbursement
is made up to an amount not exceeding the aggregate compensation
received by the General Partner, including direct or indirect
participations in commodity brokerage commissions charged to the
Partnership. In addition, if reimbursement is required or ordinary
expenses are incurred, the General Partner shall include in the
Partnership's next regular report to the auditors a discussion of the
circumstances or events which resulted in the reimbursement or
extraordinary expenses;
(b) the term NET UNIT VALUE shall mean the Net Asset Value divided, from
time to time, by the total number of Units outstanding;
(c) the term OFFERING PERIOD means the period of time established by the
General Partner after the Partnership begins to offer to sell Units at
the Net Asset Value per Unit; and,
(d) the term SYNDICATION COSTS shall mean the promotion and syndication
costs of the Partnership and the costs of the offering of Units, and to
establish the initial business relationships on behalf of the
Partnership, including all legal and printing costs to prepare the
Disclosure Documents, registrations and filing fees, contract
negotiation, and travel incurred which are deemed necessary or
desirable by the General Partner to form the Partnership, be ready to
engage in business, and to sell the Units.
1.4 The terms DISCLOSURE DOCUMENT, MEMORANDUM, OFFERING CIRCULAR, PROSPECTUS
and REGISTRATION STATEMENT shall mean the document or documents, together
with the exhibits and any subsequent continuations thereof, which describes
this Partnership to persons selected by the General Partner including, but
not limited to, potential purchasers of Units, or the Partners or to any
government or self regulatory agency or to persons selected by the General
Partner to participate in the affairs or provide services to the
Partnership.
1.5 When referring to this Agreement and the Partners of the Partnership:
(a) the term ACT shall refer to the partnership act of Delaware.
(b) the term AGREEMENT refers to this Partnership agreement;
(c) the term GENERAL PARTNER shall refer to Ashley Capital Management,
Incorporated, c/o Corporate Systems, Inc., 101 North Fairfield Drive,
Dover, DE 19901 (302) 697-2139;
(d) the term LIMITED PARTNER shall refer to any party listed on the
Schedule of Limited Partners attached to this Agreement as Attachment
I, as amended, from time to time, pursuant to Article VI hereof;
e) the term MAJORITY IN INTEREST shall refer to that number of Partners
who collectively hold over 50% of all of the outstanding Units held by
all Partners in the Partnership; provided, however, the Units held by
the General Partner cannot be considered to determine a MAJORITY IN
INTEREST or otherwise vote or consent regarding the question of
removal of the General Partner or other matters specifically expressed
in Article V, Section 5.3. In addition, see the rights and duties of
the General Partner in Article IV and of the Limited Partners in
Articles V;
f) the term OTHER GENERAL PARTNER refers to any General Partner other than
Ashley Capital Management, Incorporated; and
g) the term PARTNERS refers to the General Partner, any Other General
Partner, and the Limited Partners, collectively.
1.6 RISK DISCLOSURE STATEMENT.
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS
GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE
POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE PARTNERSHIP'S
DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE
CHARGED THIS POOL AT PAGE 21 AND A STATEMENT OF THE PERCENTAGE RETURN
NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL
INVESTMENT, AT PAGE 16.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL.
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU
SHOULD CAREFULLY STUDY THIS AGREEMENT AS WELL AS THE PARTNERSHIP'S
DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS
OF THIS INVESTMENT, AT PAGE 6.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO
THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY
AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF
REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE
TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
ARTICLE II
Partnership Organization and Purpose
2.1 PARTNERSHIP NAME AND LOCATION OF BOOKS AND RECORDS. The name of the
Partnership, as filed with the state of Delaware, shall be Atlas Futures
Fund, Limited Partnership. The address where the books and records of the
Partnership will be maintained for inspection by the Partners is c/o
Futures Investment Company, 5916 N. 300 West, Fremont, IN 46737 (219) 833-
1306 or such other address as the General Partner shall, from time to time,
determine.
2.2 PARTNERSHIP AFFILIATES.
(a) POOL OPERATOR NAME AND PRINCIPALS. The General Partner shall serve as
the commodity pool operator for the Partnership. Shira Del Pacult is
the sole principal of the General Partner and is solely responsible for
the business decisions of the Partnership, including, but not limited
to, selection of the Commodity Trading Advisors (the "CTAs").
THIS POOL HAS NOT BEGUN TRADING AND DOES NOT HAVE ANY PERFORMANCE
HISTORY.
THE REGULATIONS OF THE CFTC AND NFA PROHIBIT ANY REPRESENTATION BY A
PERSON REGISTERED WITH THE CFTC OR BY ANY MEMBER OF THE NFA,
RESPECTIVELY, THAT SUCH REGISTRATION OR MEMBERSHIP IN ANY RESPECT
INDICATES THAT THE CFTC OR THE NFA, AS THE CASE MAY BE, HAS APPROVED OR
ENDORSED SUCH PERSON OR SUCH PERSON'S TRADING PROGRAMS OR OBJECTIVES.
THE REGISTRATIONS AND MEMBERSHIPS DESCRIBED IN THIS PROSPECTUS MUST NOT
BE CONSIDERED AS CONSTITUTING ANY SUCH APPROVAL OR ENDORSEMENT.
LIKEWISE, NO COMMODITY EXCHANGE HAS GIVEN OR WILL GIVE ANY SUCH
APPROVAL OR ENDORSEMENT.
The General Partner has no prior experience in the management of a
commodity pool, however, Ms. Pacult, has been engaged in supervision of
individual managed commodity accounts for over 16 years and is the
principal of both another public commodity pool, Fremont Fund, Limited
Partnership and a privately offered commodity pool, Auburn Fund,
Limited Partnership, which is being offered simultaneously with this
Partnership. See "Performance of Fremont Fund, Limited Partnership" in
the Partnership's Prospectus.
(b) COMMODITY TRADING ADVISOR NAMES AND PRINCIPALS. The General Partner
has initially selected one independent CTA to trade the assets of the
Partnership, Clarke Capital Management, Inc. The CTA's performance
record and business background are disclosed in the Partnership's
Prospectus under "Trading Management". The CTA will have no ownership
in the Partnership and its compensation is described in 4.6(f). The
CTA 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 CTA to select the trades, the number of
contracts, or the margin required. 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 CTA for the account of the Partnership.
(c) INTRODUCING BROKER AND FUTURES COMMISSION MERCHANT NAMES AND
PRINCIPALS. Futures Investment Company, 5916 N. 300 West, P.O. Box C,
Fremont, IN 46737 (219) 833-1306 will server as the Introducing Broker
("IB") for the Partnership and will be paid a fixed amount for
brokerage commissions of nine percent (9%) per year, payable monthly by
the Partnership, for introducing trades through Vision Limited
Partnership, the futures commission merchant (the "FCM"). The IB will
pay the round-turn brokerage commissions, pit brokerage and other
clearing expenses to the FCM, which will act in the normal capacity as
a futures commission merchant and will hold the equity assigned by the
General Partner for trading and will clear the trades entered by the
CTA pursuant to the power of attorney granted by the General Partner to
the CTA to trade on behalf of the Partnership.
2.3 MATERIAL ADMINISTRATIVE AND/OR CIVIL ACTIONS. There have been no material
administrative, civil or criminal actions against the General Partner (who
is the Commodity Pool Operator), the principal of the General Partner, Ms.
Pacult, the Commodity Trading Advisor, the Introducing Broker, and selling
broker or any principal or any Affiliate of any of them, pending, on
appeal, or concluded, threatened or otherwise known to them, within the
five (5) years preceding the date of this PPM and there have been no such
actions against the Futures Commission Merchants, except as follows:
(a) Neither Refco, Inc. ("Refco") or any of its principals have been the
subject of any administrative, civil, or criminal action, whether
pending, on appeal, or concluded, within the preceding five years that
Refco would deem material for purposes of Part 4 of the Regulations of
the Commodity Futures Trading Commission ("CFTC") except as follows.
(b) On December 20, 1994, Refco settled a CFTC administrative proceeding
(In the Matter of Refco, Inc., CFTC Docket No. 95-2) in which Refco was
alleged to have violated certain financial reporting, record keeping
and segregation provision of the Commodity Exchange Act and CFTC
regulations as a result of some reporting and investment practices of
Refco during 1990 and 1991. Without any hearing on the merits of the
CFTC allegations and without admitting any of the allegations, Refco
settled the matter and agreed to payment of $1.25 million civil
penalty, entry of a cease and desist order, and appointment of an
independent consultant to review Refco's financial manual.
(c) On January 23, 1996, Refco settled a CFTC administrative proceeding (In
the Matter of Refco, Inc., CFTC Docket No. 96-2) in which Refco was
alleged to have violated certain segregation and supervision
requirements and prior cease and desist orders. The CFTC allegations
concerned Refco's consolidated margining of certain German accounts
which were maintained at Refco from 1989 through April 1992. Refco
simply executed and cleared transactions for these accounts in
accordance with client instructions; Refco had no role in raising
funds from investors or in the trading decision for these accounts.
Refco had received what it considered appropriate authorization from
the controlling shareholder of the accountants' promoters to margin the
accounts and transfer funds between and among the accounts on a
consolidated basis. The CFTC maintained that Refco should not have
relied upon such authorizations for the final consolidation of the
accounts. Without admitting any of the CFTC allegations or findings,
Refco settled the proceeding and agreed to payment of a $925,000 civil
penalty, entry of a cease and desist order, and implementation of
certain internal controls and procedures.
(d) Refco does not believe that any of the foregoing matters are material
to the clearing and execution services that it will render.
2.4 CHARACTER OF THE BUSINESS. The Partnership's business purpose is to
increase Capital through the speculative and hedge trading of futures and
options on futures. The General Partner is authorized to do any and all
things on behalf of the Partnership incident thereto or connected therewith
including, but not limited to:
(a) trade, buy, sell or otherwise acquire, hold or dispose of all forms of
investments (including tangibles and intangibles, foreign currencies,
mortgage-backed securities, money market instruments, stock and futures
options, and any other securities or items which are now, or may
hereafter be, the subject of barter or stock or futures trading),
commodity futures, and forward contracts and any rights pertaining
thereto. The Partnership shall carry on the foregoing activities
through the exercise of judgment by its General Partner and/or the
Investment and/or Commodity Trading Advisors and consultants and
brokers selected by the General Partner. The General Partner may serve
as an investment or trading advisor to the Partnership for management
fees, incentive fee, reimbursement of costs and other remuneration at
the same rates charged either by independent third parties for similar
services to other partnerships or by the General Partner to others for
the same service.
(b) invest and trade, on margin or otherwise, in capital stocks, bonds,
debentures, trust receipts and other obligations, instruments or
evidences of indebtedness, gold, silver, cattle, corn, wheat, soybeans,
or any other asset for which a trading market is maintained or
otherwise paid for by cash or otherwise including, but not limited to,
the right to sell short and to cover such short sales.
(c) possess, sell, exchange, discount, transfer, mortgage, pledge, deal in,
maintain multiple accounts for, and to exercise all rights, powers,
privileges and other rights, incidental to ownership of the assets held
by the Partnership.
(d) borrow or raise monies and, from time to time without limit as to
amount, to issue, accept, endorse and execute promissory notes, draft
bills of exchange, warrants, bonds, debentures and other negotiable or
non-negotiable instruments and evidences of indebtedness, and to secure
the payment of any thereof and the interest thereon by mortgage or
pledge, conveyance or assignment in trust of the whole or any part of
the property of the Partnership, whether at the time owned or
thereafter acquired, and to sell, pledge of otherwise dispose of such
instruments issued by the Partnership for its purposes; form and own
one or more corporations to engage in such businesses as the General
Partner shall deem advisable.
(e) lend any of its properties or funds, either with or without security in
furtherance of the objects and purposes of the Partnership as the
General Partner shall deem advisable and consent.
(f) rent or own and maintain one or more offices staffed as the General
Partner shall determine and to do such other acts attendant thereto as
may be necessary or desirable.
(g) waive the sales commission to acquire investment Capital as the General
Partner, in its sole discretion, may determine.
(h) enter into, make and perform all contracts, surety and guarantees as
may be necessary or advisable or incidental to the carrying out of the
foregoing objects and purposes.
2.5 ADDRESS OF PARTNERS. The General Partner's address is listed in paragraph
1.5(a) hereof and the Limited Partners addresses are on record at the
office of the General Partner to the Partnership.
2.6 TERM OF PARTNERSHIP. The term of the Partnership shall commence on the
date of this Agreement and shall continue until dissolved or terminated
pursuant to Article IX.
2.7 REGISTRATION. The General Partner, on behalf of the Partnership, shall
have the authority, but not the obligation, to cause a Registration
statement to be filed, and such amendments thereto as the General Partner
deems advisable, with the appropriate Federal and state regulatory
agencies, including the United States Securities and Exchange Commission
and the commission of securities for registration under the securities laws
of the various states and any other jurisdiction desirable or proper to the
sale of Units to qualify for public offerings. Each of the Limited
Partners hereby confirm and ratify all action taken and things done by the
General Partner with respect to such filings and public offerings. The
General Partner may make such other arrangements for the sale of Units,
including the private placement of Units, as it deems appropriate.
ARTICLE III
Capital Contributions and Allocation of Profits and Losses
3.1 CAPITAL CONTRIBUTIONS OF LIMITED PARTNERS.
(a) Each Limited Partner has delivered to the Partnership an executed
Subscription which has been accepted by the General Partner on behalf
of the Partnership, an Amended Certificate of Limited Partnership, and
a check in the amount of his Capital Subscription. The Partnership
shall use the funds thus contributed solely to pay, sales commissions,
Expenses, Organization Costs and to otherwise make the payments
required to be made by the Partnership to engage in active trading and
to pay the management fees, if any, and, from profits, the incentive
fees and distributions to Partners Capital Accounts.
(b) Until such time as the General Partner elects to qualify the
Partnership Units for public sale, the General Partner will establish,
from time to time, the minimum amount which each Limited Partner will
be required to contribute to Capital of the Partnership. Upon receipt
of notice from the General Partner of such minimum (which will be
equally applicable to all Limited Partners), each Limited Partner will
be required to contribute sufficient Capital to equal or exceed such
minimum or will withdraw and have his Units redeemed as a Limited
Partner pursuant to Article IX, Section 9.4. The failure to contribute
such Capital within ten days after receipt of said notice from the
General Partner shall be a request for redemption by the Limited
Partner. Upon election by the General Partner and qualification of the
Partnership Units for public sale, there will be no further right of
the General Partner to give notice of an increase in the minimum amount
which all Limited Partners will be required to contribute to Capital of
the Partnership other than as provided in Article VIII. Except for the
increase in the minimum amount which all Limited Partners, in the sole
discretion of the General Partner, shall be required to contribute to
Capital or suffer redemption and amendments required by Article VIII,
there will be no required contribution or assessments of the Limited
Partners.
3.2 CAPITAL CONTRIBUTIONS OF GENERAL PARTNER.
(a) The General Partner has not made and shall not be required to make any
capital contribution to the Partnership except for purchases which are
required by law. Currently, the General Partner is required by the
applicable securities and tax laws to purchase (i) one percent (1%) or
(ii) $25,000 of the total Capital paid in by the Limited Partners,
which ever is greater.
(b) The General Partner and the initial Limited Partner have contributed in
excess of $1,000 to the Partnership. Immediately prior to the time the
Partnership commences trading and as may be required, thereafter, as
the result of the admission of additional Limited Partners, the General
Partner shall make such additional contribution to its capital or to
the Partnership so as to be certain that the General Partner has
sufficient Capital at risk to prevent the Partnership from loss of that
element of the Partnership test imposed by the Federal Internal Revenue
Code and the Regulations promulgated thereunder to permit the
Partnership to be taxed as a partnership and not as a corporation. The
General Partner shall not reduce its Capital nor shall it make any
assignment or transfer of its interest or withdrawal of its
contribution while it is the General Partner which would reduce its
percentage interest in the Partnership to less than its percentage
interest at the time the Partnership commences trading. The General
Partner may withdraw any excess above the required percentage without
notice to the Limited Partners.
(c) Partnership interests shall be evidenced by Units. The General
Partner, on behalf of the Partnership, may, in accordance with
applicable law and the Offering Memorandum of the Partnership, issue
Units to persons desiring to become Limited Partners. For each Unit
purchased during the initial Offering Period, a Partner shall
contribute one thousand dollars ($1,000), less the sales commission, to
the Capital of the Partnership. Thereafter, a Partner shall contribute
an amount equal to the Net Asset Value of a Unit, plus the sales
commission, if any, on the valuation date following acceptance of the
purchase. The General Partner and Affiliates of the General Partner
may purchase Limited Partnership Units with the same rights as other
Limited Partners.
(d) All subscriptions for Units made pursuant to the offering of the Units
must be on the form provided with the Prospectus. No more than 7,000
Units (the "Maximum") will be sold and a minimum number of Units must
be sold as follows:
(i) If subscriptions for at least 700 Units at an initial Net Asset
Value per Unit of $1,000 have been accepted (the "Minimum") by the
General Partner within the initial Offering Period of up to one year
from the commencement of the offering of sale of Units, including
the Units subscribed for by the General Partner, the General Partner
may, pursuant to Paragraph 12, execute, acknowledge, swear to, file
and record on behalf of the Partnership and each Limited Partner an
amended Limited Partnership Agreement, cause such subscriptions to
be transferred from the escrow agent, First American State Bank,
1207 Central Avenue, Fort Dodge, IA 50501, to the Partnership's
trading account and cause the Partnership to pay its organization
costs pursuant to the agreements negotiated by the General Partner
and, thereafter, the aggregate of all contributions to the
Partnership shall be available to the Partnership to carry on its
business; or
(ii) If the General Partner has not received and accepted subscriptions
for the Minimum Units prior to the close of the Minimum Units
Offering Period, the offering of the Units shall terminate and all
amounts paid by subscribers for Units shall be returned in the
manner provided in the Prospectus. All Units subscribed for shall
be issued to the collection of good funds, and any Units issued to a
Subscriber who has not provided collectible funds (whether in the
form of a bad check or draft, or otherwise) shall be canceled.
3.3 ALLOCATION OF PROFITS AND LOSSES
(a) A distribution account shall be established for each Partner which
shall include, as the initial balance thereof, each Partners' initial
contribution to the Partnership expressed in total dollars and Units
purchased. As of the close of business each month, allocations shall
be made as follows:
(i) The Incentive Fee. The incentive fee upon New Net Profit at the
rate of twenty percent (20%), or such other rate as may be
established pursuant to 1.2(h), shall be paid quarterly to the CTA
but allocated to the Partners monthly.
(ii) The Profit (Loss) Attributable to Units shall be added to
(subtracted from) the distribution accounts of the Partners. Items
of income, gain or loss, accrued and paid Expenses shall be added to
(subtracted from) the distribution account of each Partner in
accordance with the ratio that such distribution account bears to
the sum of all of the Partners' distribution accounts.
(iii) The amount of any cash distributions to a Partner during such
month and any amount paid upon Redemption of Units as of the end of
such month shall be subtracted from the distribution account of such
Partner.
(iv) The distribution account of any Unit which was redeemed shall be
reduced by the Redemption Charge per Unit multiplied by the number
of Units which were redeemed by the Partner represented by such
distribution account. The Redemption Charge, if any, shall be first
used to defray expenses and any excess treated as interest earned by
the Fund.
ARTICLE IV
Rights and Obligations of the General Partner
4.1 GENERAL. The General Partner shall have full, exclusive and complete
discretion in the management and control of the affairs of the Partnership
to the best of its ability and shall use its best efforts to carry out the
purposes of the Partnership set forth in Article II. In connection
therewith, it shall have all powers of a general partner under the Act,
including, without limitation, the power to:
(a) enter into, execute and maintain contracts, agreements and any or all
other instruments, and to do and perform all such things, as may be
required or desirable in furtherance of Partnership purposes or
necessary or appropriate to the conduct of Partnership activities
including, but not limited to, contracts with third parties for:
(i) brokerage services on behalf of the Partnership (which brokerage
services may be performed by the General Partner or an Affiliate of
the General Partner), specifically, Futures Investment Company, or
any successor to its business, an Affiliated introducing broker of
the General Partner may clear the trades and pay trailing
commissions to its associated persons, including Affiliates of the
General Partner and the General Partner, in consideration of the
payment of nine percent (9%) of the total equity placed with the
Commodity Trading Advisor or advisors it selects, will cause and pay
for the trades to be cleared through one or more futures commission
merchants selected by the General Partner;
(ii) trading advisory services relating to the purchase and sale of all
stocks, options, commodity futures contracts, commodity options and
contracts for forward delivery of foreign currencies on behalf of
the Partnership (which advisory services may be performed by the
General Partner or an Affiliate of the General Partner); and
(iii) rent, salaries, computer, accounting, legal and other services
attendant to the maintenance of the Fund.
(b) open and maintain bank accounts on behalf of the Partnership with
banks and money market funds.
(c) deposit, withdraw, pay, retain and distribute the Partnership's funds
in any manner consistent with the provisions of this Agreement.
(d) supervise the preparation and filing of all documentation required by
law including, but not limited to, Registration Statements to be filed
with Federal and state agencies.
(e) pay or authorize the payment of distributions to the Partners and pay
Expenses of the Partnership.
(f) invest or direct the investment of funds of the Partnership not
involving the purchases or sale of stocks, futures contracts, options,
and contracts for forward delivery of foreign currencies.
(g) purchase, at the expense of the Partnership, liability and other
insurance to protect the Partnership's proprieties and business.
(h) borrow money from banks and other lenders for Partnership purposes,
and may pledge any or all of the Partnership's assets for such loans.
No bank or other lender to which application is made for a loan by
the lender to which application is made for a loan by the General
Partner shall be required to inquire as to the purposes for which such
loan is sought and, as between the Partnership and such bank or other
lender, it shall be conclusively presumed that the proceeds of such
loan are to be and will be used for the purposes authorized under this
Agreement.
(i) confess judgment for and against the Partnership and control any
matters affecting the rights and obligations of the Partnership,
including the employment of attorneys, in the conduct of litigation
and otherwise incur legal expenses and costs of consultation,
settlement of claims, and litigation against or on behalf of the
Partnership.
4.2 LOANS BY GENERAL PARTNER. The General Partner or its Affiliates will be
not be required to advance or loan funds to the Partnership. In the event
the General Partner makes any advance or loan to the Partnership, the
General Partner will not receive interest in excess of its interest
costs, nor will the General Partner receive interest in excess of the
amounts which would be charged the Partnership (without reference to the
General Partner's financial abilities or guarantees) by unrelated banks
on comparable loans for the same purpose and the General Partner shall
not receive points or other financing charges or fees regardless of the
amount.
4.3 TRANSACTION WITH PARTNERSHIP. Notwithstanding anything to the contrary
which may be contained herein, the General Partner shall not:
(a) sell, or otherwise dispose of, any of the Partnership's assets to the
General Partner or its Affiliates.
(b) subject to the provisions regarding and without diminishment of the
right of the General Partner or any Affiliate to compensation for
services provided to the Partnership as set forth in this Agreement,
cause or permit the Partnership to enter into any agreement with the
General Partner or an Affiliate which is not in the best interest of
and for the benefit of the Partnership or which would be in
contravention of the General Partner's fiduciary obligations to the
Partnership or pursuant to which the General Partner or any Affiliate;
(i) would provide or sell any services, equipment, or supplies at other
than rates charged to others; or
(ii) would receive from the Partnership, Units of Partnership interest
in consideration for services rendered.
4.4 OBLIGATIONS OF GENERAL PARTNER. In addition to the obligations provided
by law or this Agreement, the General Partner shall:
(a) Devote such of its time to the business and affairs of the Partnership
as it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Partnership for
the benefit of the Partnership and the Limited Partners.
(b) Execute, file, record and/or publish all certificates, statements and
other documents and do any and all other things as may be appropriate
for the formation , qualification and operation of the Partnership and
for the conduct of its business in all appropriate jurisdictions
including, but not limited to, the compliance, at its expense, with all
laws related to its qualification to serve as the commodity pool
operator of the Fund.
(c) Retain independent public accountants to audit the accounts of the
Partnership.
(d) Employ attorneys to represent the Partnership.
(e) Use its best efforts to maintain the status of the Partnership as a
partnership for United States Federal income tax purposes.
(f) Employ only independent CTAs which are registered pursuant to the
Commodity Exchange Act to conduct trading and to otherwise establish
and monitor the trading policies of the Partnership; and the activities
of the partnership's trading advisor(s) in carrying out those policies.
(g) Review, not less often than annually, the brokerage commission rates
charged to comparable funds to determine that the commission rates paid
by the Partnership are comparable with such other rates.
(h) Have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in the General Partner's
immediate possession or control, and the General Partner will not
employ or permit others to employ such funds or assets in any manner
except for the benefit of the Partnership.
(i) Agree that so long as it remains the sole General Partner of the
Partnership, it will use its best efforts to maintain the Partnership
as a limited partnership as required by all applicable laws including,
but not limited to the requirement of the United States Department of
the Treasury, Internal Revenue Service, for the sole corporate general
partner of a limited partnership to maintain its "Net Worth" (as
defined below) sufficient to establish the sufficient assets test for a
sole corporate general partner to be liable for the debts of the
Partnership. The General Partner is authorized to reach the safe
harbor for that test of an amount equal to no less than (i) the lesser
of $250,000 or 15% of the aggregate capital contributions of any
limited partnerships (including the Partnership, if applicable,) for
which it shall act as general partner and which are capitalized at less
than $2,500,000, and (ii) 10% of the aggregate capital contributions of
any limited partnerships (including the Partnership, if applicable,)
for which it shall act as general partner and which are capitalized at
greater than or equal to $2,500,000 by use of promissory notes (valued
at their fair market value) issued to the General Partner by one or
more of its principals. For the purposes of this subparagraph, "Net
Worth" shall be calculated in accordance with generally accepted
accounting principles, consistently applied, provided that all current
assets shall be based on the lower of cost or the then current market
value. The Units owned by the General Partner in the Partnership and
in other partnerships in which it acts as a general partner shall not
be included in calculating its Net Worth. A letter of credit may be
included. The requirements of this subparagraph (i) may be modified if
the General Partner obtains an opinion of counsel for the Partnership
to effect that a proposed modification will not (1) adversely affect
the classification of the Partnership as a partnership for Federal
income tax purposes; (2) will not adversely affect the status of the
Limited Partners as limited partners under the Act; (3) will not
violate any applicable state securities or Blue Sky law or any rules,
regulations, guidelines or statements of policy promulgated or applied
thereunder including, but not limited to, the net worth required by
Section II.B of the Guidelines for Registration of Commodity Pool
Programs, as adopted in revised form by the North American Securities
Administrators Association, Inc. as are in effect on the date of such
proposed modification. (4) or otherwise adversely affect the Limited
Partners.
(j) Maintain a current list of the name, address, and number of Units owned
by each Limited Partner at the General Partner's principal office.
Such list shall be disclosed to any Partner or their representative at
reasonable times, upon request, either in person or by mail, upon
payment, in advance, of the reasonable cost of reproduction and
mailing. The Partners and their representatives shall be permitted
access to all other records of the Partnership, after adequate notice,
at any reasonable time, at the offices of the Partnership. The
General Partner shall maintain and preserve such records for a period
of not less than six (6)years.
4.5 GENERAL PROHIBITIONS. The Partnership shall not:
(a) borrow from or loan to any person, except that the foregoing is not
intended to prohibit the incurring of any indebtedness to a Partner or
an Affiliate with respect to the offering of Units for sale,
Registration, or initiation and maintenance of the Partnership's
trading positions.
(b) commingle its assets with those of any other person, except to the
extent permitted under the Securities and Exchange Act or the Commodity
Exchange Act and the regulations promulgated under each.
(c) permit rebates or give-ups to be received by the General Partner or any
Affiliate of the General Partner, or permit the General Partner or any
Affiliate of the General Partner to engage in reciprocal business
arrangements which would circumvent the foregoing prohibition;
provided, however, that an Affiliate or the General Partner may provide
goods or services, including brokerage, at a competitive cost to the
Partnership.
(d) engage in the pyramiding of its positions (i.e., the use of unrealized
profits on existing positions to provide margins for additional
positions in the same or a related stock or commodity); provided,
however, that there may be taken into account the Partnership's open
trade equity on existing positions in determining whether to acquire
additional unrelated stock or commodity positions.
(e) margins of all open positions in all stocks and commodities combined
would exceed 250% of the partnership's Net Asset Value at the time such
position would otherwise be initiated.
(f) permit churning of the Partnership's trading account for the purpose of
generating brokerage commissions to any person.
(g) directly or indirectly pay or award any finder's fees, commissions or
other compensation to any persons engaged by a potential limited
partner for independent investment advice as an inducement to such
advisor to advise the potential limited partner to purchase Units in
the Partnership without the knowledge of such potential limited
partner.
(h) No Partnership funds will be held outside the United States. The
Partnership funds committed to trading will be on deposit with and
under the control of a futures commission merchant regulated pursuant
to the Commodity Exchange Act, as may be amended, from time to time.
The funds not committed to trading will be in investments which are
properly registered under the United States securities or other
financial institution regulations.
4.6 FEES AND EXPENSES.
(a) The Partnership shall pay all Organization Costs and offering Expenses
incurred in the creation of the Partnership and sale of Units. The
foregoing expenses may be paid directly by the Partnership or may be
reimbursed by the Partnership to the General Partner or an Affiliate of
the General Partner. Notwithstanding the foregoing, in no event will
reimbursement by the Partnership to the General Partner for
Organization Costs and offering Expenses charged to the Partnership
exceed an amount equal to 15% of the gross proceeds from the sale of
Units. Organization Costs and Offering Expenses shall mean those
Expenses incurred in connection with the formation, qualification and
Registration of the Partnership and in distributing and processing the
Units under applicable Federal and state law, sales commissions, and
any other expenses such as: (i) registration fees, filing fees and
taxes; (ii) the costs of qualifying, printing, amending, supplementing,
mailing and distributing the Registration Statement and Prospectus;
(iii) the costs of qualifying, printing, amending, supplementing,
mailing and distributing sales materials used in connection with the
issuance of the Units; (iv) salaries of officers and employees of the
General Partner and any Affiliate of the General Partner while directly
engaged in distributing and processing the Units and establishing
records therefor; (v) rent, travel, remuneration of personnel,
telegraph, telephone and other expenses in connection with the offering
of the Units; (vi) accounting, auditing, and legal fees incurred in
connection therewith; and (vii) any extraordinary expenses related
thereto. Organization Costs and Offering Expenses do not include
salaries, rent, travel, expenses and other items of General Partner
overhead.
(b) All operating expenses of the Partnership shall be billed directly to
and paid by the Partnership.
(c) The General Partner or any Affiliate of the General Partner may be
reimbursed for the actual costs of any Expense including, but not
limited to, legal, accounting and auditing services used for or by the
Partnership, as well as printing and filing fees and extraordinary
expenses incurred for or by the Partnership; provided, however, the
limitations of contained in Article X - Exoneration and Indemnification
contained in this Agreement will apply to restrict the purchase of
certain insurance coverage and the assumption of the defense of certain
claims.
(d) The General Partner may establish its compensation, from time to time,
for its services; provided, however, such charges shall be no more
than:
(i) A sales commission of up to six percent (6%) to be established, from
time to time, by the General Partner, for sales of Units;
(ii) A management fee of one half of one percent (1/2 of 1%) per month
(6% per year) of the Net Asset Value of the Partnership, computed
and paid to the General Partner and/or non-affiliated independent
investment or trading advisor on the close of business on the last
day of each month;
(iii) An incentive fee, paid quarterly, of up to fifteen percent (15%)
of the first one hundred percent (100%) of New Net Profit, or less
earned upon Capital, and prorated to consider the date of deposit of
such Capital to the Partnership each year. The incentive fee may be
increased up to 30%, provided that the management fee is
correspondingly reduced to 0%. Each trading subaccount established
by the General Partner shall be considered separately for purposes
of incentive fee. The incentive fee will be non-refundable; i.e., in
the event that the Partnership earns substantial New Net Profit
during the first month of any year and, thereafter, suffers losses,
the General Partner will not refund any of the profit incentive fee
paid for the prior month or months. However, the Partnership will
not pay or accrue to the General Partner any further incentive fee
during that year until such time as the New Net Profit, when added
to Net Asset Value, after additions, deductions of Redemptions and
distributions, exceeds the highest Net Asset Value, computed for
that year; i.e., incentive fees will only be earned and paid or
accrued upon New Net Profit for that year; and
(iv) A share of the brokerage commissions paid for trades made by the
Partnership. Such commissions shall not be more than the average
published fixed rate per month or per round-turn charged, from time
to time, to public commodity pools by national brokerage firms for
similar trading size, frequency, and style.
(e) The General Partner is hereby authorized to employ brokers, attorneys,
accountants, consultants, and administrative personnel who may be
Affiliated with the General partner to perform Partnership business at
the expense of the Partnership. The General Partner will advance the
initial offering and organizational expenses, estimated to be $47,000
and $5,000, respectively. The offering expenses will be reimbursed by
the Partnership immediately upon the Initial Closing and the
organizational expenses will be repaid monthly over the first sixty
months of operation by the Partnership at the rate of $1000 per year,
until paid in full. After the first year, the Partnership will be
subject to yearly legal and accounting fees of $18,000 and $5,000,
respectively.
(f) The General Partner is hereby authorized, individually or through an
Affiliate, to employ non-affiliated independent investment and trading
advisors to trade the assets of all or a portion of the Fund to be paid
(i) an annual management fee not to exceed six percent (6%) of the
assigned trading equity when combined with the General Partner's
management fee as described in 1.2(g); and, (ii) an incentive fee of up
to fifteen percent (15%) on New Net Profit earned by such advisor,
which may be increased or decreased as described in 1.2(h). All
incentive fees may be prorated and paid quarterly.
4.7 ACTIVITIES OF PARTNERS.
(a) The General Partner and its Affiliates shall devote to the Partnership
only such time as shall be reasonably required to fulfill their
responsibilities hereunder.
(b) Any Partner may, notwithstanding the existence of this Agreement,
engage in whatever other activities they may choose, whether the same
be competitive with the Partnership or otherwise, without having or
incurring any obligation or conflict of interest in such activities
with the Partnership or to any party hereto. The Partners are
specifically authorized to deal with other partnerships and to acquire
interests in positions and trading without having to offer
participation therein to the Partnership or the other Partners.
Neither this Agreement nor any activities undertaken pursuant hereto
shall prevent any Partner, including the General Partner and its
Affiliates and their officers, directors and employees, from engaging
in the trading contemplated by this Partnership individually, jointly
with others, or as a part of any other association to which any of them
are or may become parties, in the same trades as the Partnership, or
require any of them to permit the Partnership, the General Partner or
any other Partner to participate in any of the foregoing. As a
material part of the consideration for each party's execution hereof,
each Partner hereby waives, relinquishes and renounces any such right
or claim of conflict of interest and participation from any other
Partner.
(c) The General Partner is a corporation which was formed on October 15,
1996, and neither it nor its principals have any prior experience in
the management of a partnership which trades commodity futures or
options, or any other securities. The past and future results of
trading by the principals of the General Partner, both within and
without the partnership, will be confidential and not disclosed to the
other Partners. Such positions taken by the principals may be the same
as or different from any positions taken by the General Partner or any
advisor to the Fund. Nothing in this Section, or elsewhere in the
Partnership Agreement, shall permit the General Partner to violate its
fiduciary or legal obligations to the Partnership.
4.8 CONFLICTS OF INTEREST. Significant actual and potential conflicts of
interest exist in the structure and operation of the Partnership. The
General Partner has used its best efforts to identify and describe all
potential conflicts of interest which may be present under this heading and
elsewhere in the Partnership's Prospectus and the Exhibits attached
thereto. Prospective investors should consider that the General Partner
intends to assert that Partners have, by subscribing to the Partnership,
consented to the existence of such potential conflicts of interest as are
described in this Agreement and the Prospectus and its Exhibits, in the
event of any claim or other proceeding against the General Partner, any
principal of the General Partner, the CTA, any Principal of the CTA, the
Partnership's FCM, or any principal of the FCM, the Partnership's IB or any
principal or any Affiliate of any of them alleging that such conflicts
violated any duty owed by any of them to said subscriber. Specifically,
the Selling Agent is Affiliated with the principal of the General Partner
and, therefore, no independent due diligence of the Partnership or the
General Partner will be made by a National Association of Securities
Dealers, Inc. member.
(a) MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GENERAL
PARTNER, THE CTAs, AND THEIR PRINCIPALS. The right of both Ms. Shira
Del Pacult, the principal of the General Partner, and the General
Partner to manage and the actual management by the CTA 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 CTA,
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 CTA will be effecting trades for its 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 CTA 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 CTA may have financial incentives to favor other accounts over the
Partnership. In the event the General Partner, any of its principal,
or the CTA, or any of their principals trade for their own account,
such trading records shall not be made available for inspection. The
General Partner and its principal do not presently intend to engage in
trading for their own account. The CTA does intend to trade for its
own account. Any trading for their personal accounts by the General
Partner, any Commodity Trading Advisor selected to trade for the
Partnership or any of their principals could present a conflict of
interest in regard to position limits, timing of the taking of
positions or other similar conflicts. The result to the Partnership
would be a reduction in the potential for profit should the entry or
exit of positions be at unfavorable prices by virtue of position limits
or entry of other trades in front of the Partnership trades by the
General Partner or CTA responsible for the management of the
Partnership.
(b) POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER. There is
no limit upon the number of Units in the Partnership the General
Partner and its principal and Affiliates may purchase. It will be
possible for them to vote, individually or as a block, to create a
conflict with the best interests of the Partnership, in regard to the
selection of Commodity Trading Advisors which do not trade frequently
to protect the nine percent (9%) fixed commission paid by the
Partnership to the General Partner.
(c) GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF
PARTNERSHIP. The General Partner's financial interest in the operation
of the Partnership, creates a disincentive for it to voluntarily
replace itself, even if such replacement would be in the best interest
of the Partnership.
(d) FEES AND CHARGES TO THE PARTNERSHIP PAID TO GENERAL PARTNER NOT
NEGOTIATED. The one percent (1%) 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 CTA. See "Charges to the Partnership" in the Partnership's
Prospectus. The General Partner will select the CTAs to manage the
Partnership assets and the CTAs determine the frequency of trading.
Because the IB Affiliated with the General Partner will receive the
difference between the brokerage commissions and other costs which will
be paid on behalf of the Partnership and the fixed commission, the
General Partner's best interests are served if it selects trading
advisors which will trade the Partnership's Net Assets assigned to them
in a way to minimize the frequency of trades to maximize the difference
between the fixed commission and the round-turn commissions and other
costs to trade charged by the FCM; i.e., it is in the best interest of
the General Partner to reduce the frequency of trading rather than
concentrate on the expected profitability of the CTAs without regard to
frequency of trades. This conflict is offset by the fact the General
Partner does not select any of the trades and the CTA is paid an
incentive of 20% of New Net Profits. The arrangements between the
General Partner and the Partnership with respect to the payment of the
commissions are consistent in cost with arrangements other comparable
commodity pools have made to clear their trades. These arrangements
are fair to the Partnership and its investors because the General
Partner has assumed the risk of frequency of trading, up to a maximum
of three times the normal rate by the CTA and has assumed all liability
for the payment of trailing commissions.
(e) CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE. Certain actual and
potential conflicts of interest do exist in the structure and operation
of the Partnership which must be considered by investors before they
purchase Units in the Partnership. See "Risk Factors", and "Conflicts
of Interest" in the Partnership's Prospectus. In addition, the Selling
Agent is Affiliated with the principal of the General Partner and,
therefore, no independent due diligence of the offering will be
conducted for the protection of the investors. The General Partner has
taken steps to insure that the Partnership equity is held in segregated
accounts at the banks and futures commission merchant selected and has
otherwise assured the Selling Agent that all money on deposit is in the
name of and for the beneficial use of the Partnership.
(f) GENERAL PARTNER TO DISCOURAGE REDEMPTIONS. The General Partner has an
incentive to withhold distributions and to discourage Redemption
because the General Partner receives compensation based on the Net
Asset Value of the Partnership assigned to the CTAs to trade.
(g) HIGH RISK TRADING BY THE CTAs TO GENERATE INCENTIVE FEES. As a general
rule, the greater the risk assumed, the greater the potential for
profit. Because the CTA is compensated by the General Partner based on
20% of the New Net Profit of the Partnership, it is possible that the
CTA will select trades which are otherwise too risky for the
Partnership to assume to earn the 20% incentive fee on the profit
should that ill-advised speculative trade prove to be profitable.
(h) IB AFFILIATED WITH THE GENERAL PARTNER TO RETAIN A SHARE OF THE
COMMISSIONS. The Partnership will pay a fixed brokerage commission of
9% per year, payable monthly to Futures Investment Company, an
introducing broker Affiliated with the General Partner. Futures
Investment Company will retain so much of the fixed brokerage
commission as remains after payment of the round turn brokerage
commissions to the Futures Commission Merchant and the 6% per year
trailing commissions to the associated persons who service the
Partners' accounts in the Partnership. Because the principal of the
General Partner, Ms. Shira Pacult, is also a principal in the IB and
the Selling Agent, there is a likelihood that the Partnership will
continue to retain the IB even though other IB's may be available to
provide better service to the Partners and their accounts.
(i) NO RESOLUTION OF CONFLICTS PROCEDURES. As is typical in many futures
partnerships, the General Partner has not established formal
procedures, and none are expected to be established in the future, to
resolve the potential conflicts of interest which may arise. It will
be extremely difficult, if not impossible, for the General Partner to
assure that these and future potential conflicts will not, in fact,
result in adverse consequences to the Partnership or the Limited
Partners. The foregoing list of risk factors and conflicts of interest
is complete as of the date of this Prospectus, however, additional
risks and conflicts may occur which are not presently foreseen by the
General Partner. Investors are not to construe this Prospectus as
legal or tax advice. Before determining to invest in the Units,
potential investors should read this entire Agreement as well as the
Partnership's Prospectus and the subscription agreement, and consult
with their own personal legal, tax, and other professional advisors as
to the legal, tax, and economic aspects of a purchase of Units and the
suitability of such purchase for them. See "Investor Suitability" in
the Partnership's Prospectus.
(j) INTERESTS OF NAMED EXPERTS AND COUNSEL. The General Partner has
employed The Scott Law Firm, P.A. to prepare this Prospectus, provide
certain tax advice and opine upon the legality of the issuance of the
Units. Neither the Law Firm nor its principal, nor any accountant or
other expert employed by the General Partner to render advice in
connection with the preparation of the Prospectus or any documents
attendant thereto, have been retained on a contingent fee basis nor do
they have any present interest or future expectation of ownership in
the Partnership or its General Partner or the Underwriter or the CTAs
or the IB or the FCM.
4.9 LIMITATION OF POWERS. Without concurrence of a Majority in Interest, the
General Partner may not:
(k) Amend this Agreement except for those amendments which do not
adversely affect the rights of the Limited Partners.
(b) Voluntarily withdraw as a General Partner.
(c) Appoint a new General Partner or additional general partners;
provided, however, additional general partners may be appointed
without obtaining the consent of a Majority in Interest if the
addition of such person is necessary to preserve the tax status of the
Partnership as a partnership and not as a corporation; and such
additional general partner has no authority to manage or control the
Partnership and the admission of such additional general partner does
not materially adversely affect the Limited Partners.
(d) Sell all or substantially all of the Partnership assets other than in
the ordinary course of business.
(e) Cause the merger or other reorganization of the Partnership.
(f) Dissolve the Partnership other than because of an event, which by law,
requires such dissolution.
ARTICLE V
Rights and Obligations of Limited Partners
5.1 LIMITATION OF LIABILITY. No Limited Partner shall be personally liable
for any of the debts of the Partnership or any of the losses thereof.
However, the amount committed by him to the Capital of the Partnership and
his interest in Partnership assets shall be subject to liability for
Partnership debts and obligations. Limited Partners may be liable to repay
any wrongful distribution of profits to them and may be liable for
distributions (with interest thereon) considered to be a return of Capital
if necessary to satisfy creditors of the Partnership.
5.2 NO MANAGEMENT RIGHTS. No Limited Partner shall take part in the
management of the business of the Partnership or transact any business for
the Partnership. No Limited Partner, as such, shall have the power to sign
for or to bind the Partnership.
5.3 CERTAIN RIGHTS. Provided the following, does not either (i) subject the
Limited Partners to unlimited liability or (ii) subject the Partnership to
be taxable as a Corporation for purposes of Federal Income tax laws, the
Partners, by a vote of a Majority in Interest, without the necessity for
concurrence by the General Partner, shall have the following rights in
addition to those granted elsewhere in this Agreement:
(a) Amend the Partnership Agreement; provided, however, any amendment which
modifies the compensation or distributions to the General Partner or
which affects the duties of the General Partner requires the consent of
the General Partner.
(b) The General Partner may be removed and a new General Partner elected in
accordance with the terms of this Agreement.
(c) Cancel any contract for services with the General Partner, without
penalty, upon 60 days written notice; provided, however, the maximum
period of any contract between the General Partner and the Partnership
is one year; and, provided further, should any amendment to this
Partnership Agreement attempt to modify the compensation or
distributions to which the General Partner is entitled or which
affects the duties of the General Partner, such amendment will become
effective only upon the consent of the General Partner.
(d) The right to approve, prior to sale, the sale or distribution, outside
the ordinary course of business, of all or substantially all of the
assets of the Partnership.
(e) Dissolve the Partnership.
(f) Any material changes in the Partnership's basic investment policies
identified in Article III including, but not limited to, the
speculation and trade in commodity futures, forward futures contracts,
and options upon those contracts both within and without the United
States or the structure of the Partnership as a limited partnership
requires prior written notification of a meetings which identifies the
purpose of the meeting and the approval by a vote of the Majority in
Interest of the Partners.
5.4 GENERAL PARTNER ACTION WITHOUT LIMITED PARTNER APPROVAL. Notwithstanding
anything in this Agreement, particularly section 5.3, to the contrary, the
General Partner may amend this Agreement without any vote, consent, approval,
authorization or other action of any other Partner and without notice to any
other Partner to:
(a) add to the representations, duties or obligations of the General
Partner or its Affiliates or surrender any right or power granted to
the General Partner or its Affiliates in this Agreement for the
benefit of the Limited Partners;
(b) cure any ambiguity, correct or supplement any provision in this
Agreement which may be inconsistent with any other provision in this
Agreement, or make any other provisions with respect to matters or
questions arising under this Agreement which will not be inconsistent
with the intent of this Agreement;
(c) delete or add any provision of this Agreement required to be so
deleted or added by the staff of the Securities and Exchange
Commission, or by a state securities law administrator or similar such
official, which addition or deletion is deemed by such official to be
for the benefit or protection of the Limited Partner or does not have
a material adverse effect on the Limited Partners generally or the
Partnership;
(d) reflect the withdrawal, expulsion, addition or substitution of
Partners;
(e) reflect the proposal, promulgation or amendment of Regulations under
Code section 704, or otherwise, to preserve the uniformity of interest
in the Partnership issued or sold from time to time, if, in the
opinion of the General Partner, the amendment does not have a material
adverse effect on the Limited Partners generally;
(f) elect for the Partnership to be bound by any successor statute to the
Act, if, in the opinion of the General Partner, the amendment does not
have a material adverse effect on the Limited Partners generally;
(g) conform this Agreement to changes in the Act or interpretations
thereof which, in the exclusive desecration of the General Partner, it
believe appropriate, necessary or desirable, if, in the General
Partner's reasonable opinion, such amendment does not have a
materially adverse effect on the Limited Partners generally or the
Partnership;
(h) change the name of the Partnership;
(i) conform the provisions of this Agreement to any applicable
requirements of Federal of state law which, in the exclusive
discretion of the General Partner, it believes appropriate, necessary
or desirable, if, in the General Partner's reasonable opinion, such
amendment does not have a material adverse effect on the Limited
Partners generally or the Partnership; and
(j) make any change which, in the exclusive discretion of the General
Partner, is advisable to qualify or to continue the qualification of
the Partnership as a limited partnership or a partnership in which the
Limited Partners have limited liability under the laws of any state or
that is necessary or advisable, in the exclusive discretion of the
General Partner, so that the Partnership will not be treated as an
association taxable as a corporation for Federal income tax purposes.
5.5 EXPULSION OF LIMITED PARTNERS. Anything herein to the contrary
notwithstanding,
(a) no Partner, including any corporation, partnership, trust or other
entity may, at any time, have an ownership percentage of ten percent
or more of the aggregate ownership percentages of the Limited
Partners. If, at any time, the General Partner determines that any
Limited Partner has an ownership percentage of ten percent or more,
the Partnership may, in the General Partner's exclusive discretion,
cause a Redemption by that Limited Partner of the number of Units
necessary or advisable to reduce that Limited Partner's ownership
percentage to less than ten percent. The Redemption shall be
effective as of the next Redemption date or such other Redemption
date, at the discretion of the General Partner.
(b) the General Partner has the right, in its sole discretion, to raise
or lower the minimum investment in the Partnership required for the
admission or retention of Units in the Partnership by a Partner. In
the event the General Partner does raise the minimum investment in the
Partnership to an amount in excess of any Partners Capital account,
the Partnership shall provide notice to the Partner of such event and
allow the Partner 30 days to raise the Capital account for that
Partner to such raised amount, or more. In the event the Partner does
not so raise his Capital account to such minimum amount, the Partner
shall be deemed to have elected to withdraw from the Partnership and
all of his Units shall be redeemed at the next redemption date as
provided in this Agreement.
5.6 NOTIFICATION. Notice shall be sent to each Partner within seven business
days from the date of:
(a) any decline in the Net Asset Value Per Unit to less than 50% of the
Net Asset Value on the last Valuation Date;
(b) any material change in contracts with the FCM or CTA including, but
not limited to, any change in CTAs or any modification in connection
with the method of calculating the incentive fee;
(c) any other material change affecting the compensation of the General
Partner, FCM, CTA or any Affiliated party;
5.7 NOTIFICATION CONTENTS.
(a) a material change related to brokerage commissions shall not be made
until notice is given and the Partners, after such notice, have the
opportunity to Redeem pursuant to Article IX;
(b) in addition, in regard to all other changes, the required notification
shall describe the change in detail, include a description of the
Partners' Redemption rights pursuant to Article IX and voting rights
pursuant to this Article V and a description of any material effect
such changes may have on the interests of the Partners.
5.8 EXERCISE OF RIGHTS. Upon receipt of a written request, executed by the
holders of Units aggregating ten percent (10%) or more of the Units, for a
vote upon and to take action with respect to any rights of the Partners
under this Agreement, together with a check for the costs to distribute the
request to all of the Partners, the General Partner shall call a meeting of
all Partners of the Partnership in the time and manner as provided in
Section 8.7 hereof.
5.9 EXAMINATION OF BOOKS AND RECORDS. A Limited Partner shall have the right
to examine the books and records of the Partnership at all reasonable
times, including the right to have such examination conducted at his sole
expense by any reasonable number of representatives. Notwithstanding the
foregoing, the General Partner may keep and withhold the names of the other
Partners, specific trading and other designed information confidential from
the Partners.
ARTICLE VI
Assignment of Limited Partnership Units;
Admission of Limited Partners
6.1 RESTRICTION ON ASSIGNMENT. A Partner may not assign or transfer some or
all of his Units in the Partnership without the written consent of the
General Partner; provided, however, that in no event may an assignment be
made or permitted until after two years from the date of purchase of such
assigned or transferred Units(s) by said Partner; and, provided, further,
that full Units must be assigned and the assignor, if he is not assigning
all of his Units, will retain more than five Units. Any such assignment
shall be subject to all applicable securities, commodity, and tax laws and
the regulations promulgated under each such law. The General Partner shall
review any proposed assignment and shall withhold its consent in the event
it determines, in its sole discretion, that such assignment could have an
adverse effect on the business activities or the legal or tax status of the
Partnership.
6.2 QUALIFIED PLAN RESTRICTIONS. In no event shall a Partner be entitled to
transfer all or part of a Partnership interest if, under applicable
United States Department of Labor regulations, such transfer would result
in Partnership interests, excluding the interests of the General Partner,
valued at or in excess of twenty-five percent of the value of all
outstanding Partnership interests, excluding the interests of the General
Partner, being held by the following persons or entities:
(a) employee benefit plans (as defined in section 3(3) of the Federal
Employee Treatment Income Security Act of 1974, as amended ("ERISA"),
whether or not such plans are subject to the provisions of Title I of
ERISA,
(b) plans described in section 4975 (e)(1) of the Code, and
(c) entities (such as a common or collective trust funds of a bank) whose
underlying assets include plan assets by reason of a plan's investment
in the entity.
6.3 DOCUMENTATION OF ASSIGNMENT. The General Partner shall furnish to the
assigning Limited partner a proper form to duly effect such assignment.
The General Partner shall not be required to recognize any assignment and
shall not be liable to the assignee for any distributions made to the
assigning Limited Partner until the General Partner has received such form
of assignment, properly executed with signature guaranteed, together with
the Certificate of Ownership originally issued to the Limited Partner (or
an indemnity bond in lieu therefor) and such evidence of authority as the
General Partner may reasonably request and the General Partner shall have
accepted such assignment.
ARTICLE VII
Accounting Records, Reports and Distributions
7.1 DISTRIBUTIONS. Each Partner will have a Capital account, and its initial
balance will be the amount the Partner paid for the Partner's Units. The
Net Assets of the Partnership will be determined monthly, and any increase
or decrease from the end of the preceding month will be added to or
subtracted from the accounts of the Partners in the ratio that each account
bears to all accounts. Distributions from profits or Capital will be made
solely at the discretion of the General Partner.
7.2 BOOKS OF ACCOUNT. Proper books of account shall be kept and there shall
be entered therein all transactions, matters and things relating to the
Partnership's business as required by applicable law and the regulations
promulgated thereunder and as are usually entered into books of account
kept by persons engaged in business of like character. The books of
account shall be kept at the principal office of the General Partner and
each Limited Partner (or any duly constituted agent of a Limited Partner)
shall have, at all times during reasonable business hours, free access,
subject to rules of confidentiality established by the General Partner, the
right to inspect and copy the same. Such books of account shall be kept on
an accrual basis. A Capital account shall be established and maintained
from each Partner, as set forth above.
(a) Each Partner shall be furnished as of the end of each Fiscal Year with
(1) annual financial statements, audited by a certified public
accountant, within 90 days from the end of such year; together with
such other reports (in such detail) as are required to be given to
Partners by applicable law, specifically, annual and periodic reports
will be supplied by the General Partner to the other Partners in
conformance with the provisions of CFTC regulations for Reporting to
Pool Participants, 17 C.F.R. Section 4.22, as amended, from time to
time, and, (2) any other reports or information which the General
Partner, in its sole discretion, determines to be necessary or
appropriate.
(b) Appropriate tax information (adequate to enable each Partner to
complete and file his Federal tax return) shall be delivered to such
Partner no later than January 31 following the end of each Calendar
Year.
7.3 CALCULATION OF NET ASSET VALUE. Net Asset Value shall be calculated daily
and reports delivered to Partners as of the last day of each month by the
20th of the following month. Upon request, the General Partner shall make
available to any Partner the Net Asset Value per Unit.
7.4 MAINTENANCE OF RECORDS. The General Partner shall maintain all records as
required by law including, but not limited to, (1) all books of account
required by paragraph 7.1 of this Article VII; and, (2) a record of the
information obtained to indicate that a Partner meets the applicable
investor suitability standards.
7.5 TAX RETURNS The General Partner shall cause tax returns for the
Partnership to be prepared and timely filed with the appropriate
authorities. The General Partner shall cause the Partnership to pay any
taxes payable by the Partnership; provided, however, that the General
Partner shall not be required to cause the Partnership to pay any tax so
long as the General Partner or the Partnership shall be in good faith and
by appropriate means contesting the applicability, validity or amount
thereof and such contest shall not materially endanger any right or
interest of the Partnership.
7.6 TAX ELECTIONS The General Partner shall from time to time, make such tax
elections or allocations deemed necessary or desirable to carry out the
business of the Partnership or the purposes of this Agreement. The General
Partner shall be authorized to perform all duties imposed by Sections 6221
through 6232 of the Internal Revenue Code on the General Partner as "tax
matters partner" of the Partnership, including, but not limited to, the
following: (i) the power to conduct all audits and other administrative
proceedings with respect to Partnership tax items; (ii) the power to extend
the statute of limitations for all Limited Partners with respect to
Partnership tax items; (iii) the power to file a petition with an
appropriate federal court for a review of a final Partnership
administrative adjustment; and, (iv) a power of attorney on behalf of each
Limited Partner having less than a 1% interest in the Partnership to enter
into a settlement with the Internal Revenue Service on behalf of, and
binding upon, those Limited Partners unless any said Limited Partner shall
have notified the Internal Revenue Service and the General Partner, within
30 days of service of the notice of claim up said Limited Partner, that the
General Partner may not act on such Limited Partner's behalf.
ARTICLE VIII
Amendments of Partnership Agreement
8.1 RESTRICTION ON AMENDMENTS. No amendment to this Agreement shall be
effective or binding upon the partners unless the same shall have been
approved by a Majority in Interest of the Partners; provided, however, the
General Partner may adopt amendments without such approval which are, in
the sole judgment of the General Partner, deemed necessary or desirable to
maintain the business or limited partnership or other favorable tax status
of the Partnership, or permit a Public Offering of the Units, or to
maintain the Partnership and the General Partner and its principals in
compliance with the laws which govern the business, including the
requirements of any self regulatory organization, or to substitute or add
persons as Limited Partners.
8.2 ADMISSION OF ADDITIONAL PARTNERS. At any time, the General Partner may,
in its sole discretion and subject to applicable law, admit additional
Partners. Each newly admitted Partner shall contribute cash equal to the
Net Asset Value Per Unit of the Partnership for each Unit to be acquired.
The terms of any additional offering may be different from the terms of the
initial offering. All expenses of any such additional offering shall be
borne by the either the Partnership or the subscribers thereto, as
determined in the sole discretion of the General Partner. Pursuant to
Article VI, the General Partner may consent to and admit any assignee of
Units as a substituted Partner. There is no maximum aggregate amount of
Units which may be offered and sold by the Partnership or on the amount of
contributions which may be received by the Partnership.
8.3 TERMINATION OF OFFERINGS; ADDITIONAL OFFERINGS. Notwithstanding anything
stated herein to the contrary, the General Partner may from time to time,
in its sole discretion, limit the number of Units to be offered, terminate
any offering of Units, or register additional Units and/or make additional
public or private offerings of Units. No Limited Partner shall have any
preemptive, preferential or other rights with respect to the issuance or
sale of any additional Units. No Limited Partner shall have the right to
consent to the admission of any additional Limited Partners.
8.4 NOTICE OF RESTRICTED TRANSFER. Each certificate of Limited Partnership
shall be subject to and contain the following notice:
THE LIMITED PARTNER MUST DETERMINE IF THE PARTNERSHIP INTERESTS
REPRESENTED BY THIS LIMITED PARTNERSHIP AGREEMENT MAY BE
TRANSFERRED IN ACCORDANCE WITH APPLICABLE FEDERAL AND STATE LAWS
AND REFERENCE MUST BE MADE TO THE OFFERING DOCUMENTATION AND LEGAL
COUNSEL CHOSEN BY THE INVESTOR TO DETERMINE THE RIGHT OF THE
INVESTOR TO RESELL THE UNITS EVIDENCED HEREBY. THESE LIMITED
PARTNERSHIP INTERESTS SHALL NOT BE TRANSFERABLE BY THE REGISTERED
HOLDER EXCEPT BY CONSENT OF THE GENERAL PARTNER AND AS OTHERWISE
PROVIDED IN THE PARTNERSHIP AGREEMENT AND UPON THE ISSUANCE OF A
FAVORABLE OPINION OF COUNSEL FOR THE LIMITED PARTNERSHIP, AND/OR
SUBMISSION TO THE LIMITED PARTNERSHIP OF SUCH OTHER EVIDENCE AS MAY
BE SATISFACTORY TO THE LIMITED PARTNERSHIP, THAT SUCH TRANSFER WILL
NOT BE IN VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER, AND
APPLICABLE STATE SECURITIES LAWS.
8.5 MEETINGS OF PARTNERS. Upon receipt of a written request, together with
the costs to distribute such request to all Partners, executed by Partners
holding ten percent (10%) or more of the Units, for the calling of a
meeting of the Partners or should the General Partner desire a meeting for
any purpose, the General Partner shall, within fifteen (15) days
thereafter, provide written notice, either in person or by certified
mail, after the date of receipt of said notice. Such written notice shall
state the purpose of the meeting, specify a reasonable time, place, and
date, which shall be not less than thirty (30) or more than sixty (60) days
thereafter. An Amendment shall be adopted and binding upon all parties
hereto if a Majority in Interest of the Partners vote for the adoption of
such amendment. Partners may vote in person or by written proxy delivered
to any such meeting. Meetings of Partners may also be held by conference
telephone where all Partners can hear one another.
8.6 RIGHT OF GENERAL PARTNER TO RESIGN. The General Partner may resign or
assign any portion of its interest in the Partnership at anytime to a third
party and become a Limited Partner with respect to the balance of its
interest in the Partnership, if any, if it provides one hundred twenty
(120) days prior written notice to all other Partners of its intention to
resign and states in such notice the name of the intended assignee who is
to become substitute General Partner and the information reasonably
appropriate to enable the Partner to decide whether or not to approve the
substitution or, in the alternative, provide that the partners must elect a
successor general partner. In the event of the voluntary withdrawal by the
General Partner, the General Partner shall pay the legal fees, recording
fees and all other expenses incurred as a result of its withdrawal. Upon
resignation, the General Partner shall be paid the items identified in
Section 8.7 below.
8.7 AMENDMENT INVOLVING SUCCESSOR GENERAL PARTNER. Should a resignation or an
amendment to the Agreement provide for a change in the general partner upon
the conditions provided in this Agreement, the election and admission of a
person or persons as a successor or successors to the General Partner,
shall require the following conditions: the General Partner shall retire
and withdraw as General Partner and the Partnership business shall be
continued by the successor general partner or general partners, and such
amendment shall expressly provide that on or before the effective date of
removal.
(a) The General Partner shall be permitted to Redeem 100% of its Units ten
(10) days prior to the effective date of its removal in cash equal to
the Net Asset Value of such General Partner's interest in the
Partnership.
(b) The Partnership shall pay to the removed General Partner an amount
equal to the Appraised Value of such General Partner's assets to be
transferred to the successor General Partner to enable the successor to
continue the business of the Partnership. The Appraised Value of the
withdrawing General Partner's interest in the Partnership shall equal
such General Partner's interest in the sum of (1) the Expenses advanced
by the General Partner to the Partnership, (2) all cash items, (3) all
prepaid expenses and accounts receivable less a reasonable discount for
doubtful accounts, and (4) the net book value of all other assets,
unless the withdrawing General Partner of the successor General Partner
believes that the net book value of an asset does not fairly represent
its fair market value in which event such General Partner shall cause,
at the expense of the Partnership, an independent appraisal to be made
by a person selected by the General Partner with approval of a Majority
in Interest of the Partners to determine its value.
(c) The successor General Partner or Partners shall indemnify the former
General Partner for all future activities of the Fund.
ARTICLE IX
Dissolution, Liquidation and Redemption
9.1 DISSOLUTION. The Partnership shall be dissolved, and shall terminate and
wind-up its affairs, upon the first to occur of the following:
(a) the affirmative vote of a Majority in Interest of the Partners adopting
an amendment to this Agreement providing for the dissolution of the
Partnership;
(b) the sale, exchange, forfeiture or other disposition of all or
substantially all the properties of the Partnership out of the ordinary
course of business;
(c) the resignation of the General Partner after one hundred twenty days
notice to the Partners, of the bankruptcy, insolvency or dissolution,
or failure of the General Partner to maintain sufficient Net Worth to
qualify the Partnership as a partnership for Federal Income Tax
purposes or as required by the NASAA Guidelines in effect at the time
the Units were sold, without a successor, promptly after any such
event, but in no event beyond one hundred twenty (120) days after the
effective date of such event;
(d) at 11:59 p.m. on the day which is twenty-one (21) years from the date
of this Agreement; or
(e) any event which legally dissolves the Partnership.
9.2 EFFECT OF LIMITED PARTNER STATUS. The death, legal disability,
bankruptcy, insolvency, dissolution, or withdrawal of any Limited Partner
shall not result in the dissolution or termination of the Partnership,
and such Limited Partner, his estate, custodian or personal
representative shall have no right to withdraw or value such Limited
Partner's interest in the Partnership except as provided in Paragraph
9.3. Each Limited Partner (any assignee thereof) expressly agrees that
the provisions of the Act, as amended, titled "Powers of Legal
Representative or Successor of Deceased, Incompetent, Dissolved or
Terminated Partner", shall not apply to his interest in the Partnership
and expressly waives any rights and benefits thereunder. Each Limited
Partner (and any assignee of such Partner's interest) expressly agrees
that in the event of his death, that he waives on behalf of himself and
his estate, and he directs the legal representative of his estate and any
person interested therein to waive the furnishing of any inventory,
accounting or appraisal of the assets and any right to an audit or
examination of the books of the Partnership. The General Partner may
assign, sell, or otherwise dispose of all or any portion of its shares of
common stock without any legal effect upon the operation of the
Partnership and no Limited Partner may object to any such transfer.
9.3 LIQUIDATION. Upon the termination and dissolution of the Partnership, the
General Partner (or in the event the dissolution is caused by the
dissolution or the cessation to exist as a legal entity of the General
Partner, voluntary withdrawal, bankruptcy or insolvency, such person as
the Majority in Interest of the Partners may select) shall act as
liquidating trustee and shall take full charge of the Partnership assets
and liabilities. Thereafter, the business and affairs of the Partnership
shall be wound up and all assets shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds
therefrom shall be applied and distributed in the following order: (i)
to the expenses of liquidation and termination and to creditors,
including the General Partner, in order or priority as provided by law,
and (ii) to the Partners pro rata in accordance with his or its Capital
account, less any amount owed by such Partner to the Partnership.
9.4 RETURN OF CAPITAL CONTRIBUTION SOLELY OUT OF ASSETS. A Partner shall look
solely to the properties and assets of the Partnership for the return of
his Capital Contribution, and if the properties and assets of the
Partnership remaining after the payment or discharge of the debts and
liabilities of the Partnership are insufficient to return his Capital
Contribution, he shall have no recourse against the General Partner or any
other Limited Partner for that purpose.
9.5 REDEMPTION. A Partner (including any approved assignee who becomes a
Limited Partner) may withdraw any part or all of his Capital Contribution
and undistributed profits, if any, by requiring the Partnership to redeem
any or all of his Units at the Net Asset Value thereof (such withdrawal
being herein referred to as "Redemption"). Redemption shall be effective
as of the last day of the period established, from time to time, by the
General Partner for Redemptions. Such Redemptions shall be no less often
than quarterly; provided, however, Redemption may be deferred until after
the lapse of six months from the date of purchase of the Units.
9.6 REDEMPTION PROCEDURES. Redemption shall be after all liabilities,
contingent, accrued, reserved in amounts determined by the General Partner
have been deducted and there remains property of the Partnership sufficient
to pay the Net Unit Value as defined in Paragraph 1.3(b). As used herein,
"request for Redemption: shall mean a letter mailed or delivered by a
Partner and received by the General Partner at least 10 days in advance of
the effective date for which Redemption is requested. Upon Redemption, a
Partner shall receive, on or before the last day of the following month,
an amount equal to the Net Unit Value per Unit redeemed as of the date for
which the request for Redemption was received, less accrued expenses and
any amount owed by such Partner to the Partnership. Redemption is subject
to a Redemption fee to be paid by the Partners as provided below; provided,
however, no Partner other than the initial Limited Partner, may redeem any
Units until the last day of the sixth month after the commencement of
trading. All Redemption requests shall be subject to the following:
(a) Under special circumstances including, but not limited to, the
inability to liquidate positions as of such Redemption date or default
or delay in payments due the Partnership from banks, brokers, or other
persons, the Partnership may in turn delay payment to Partners
requesting Redemption of Units of the proportionate part of the Net
Unit Value represented by the sums which are the subject of such delay
or default.
(b) The General Partner in its sole discretion may, upon notice to the
Partners, declare additional Redemption dates and may cause the
Partnership to redeem fractions of Units and, prior to registration of
Units for public sale, redeem Units held by Partners who do not hold
the required minimum amount of Units established, from time to time, by
the General Partner.
(c) Redemption of Units shall be charged a redemption fee, payable to the
Partnership, to be applied first to pay organization costs and,
thereafter, to the benefit of the other Partners in proportion to their
Capital accounts, equal to four percent (4%) for all Redemptions
effective during the first six (6) months after commencement of
trading. Thereafter, there will be a reduction of one percent (1%) for
each six (6) months the investment in the Units remained invested in
the Fund after the initial six months; i.e., 7-12 months a Redemption
fee of 3%, 12-18 months 2%, 18-24 months 1%, and, thereafter, no
redemption fee. The initial Limited Partner may withdraw from the
Partnership at the time the Minimum number of Units are sold without
payment of a Redemption fee.
9.7 SPECIAL REDEMPTION. In the event the Net Asset Value per Unit falls to
less than fifty percent (50%) of the Net Asset Value established by the
greater of the initial offering price of one thousand dollars ($1,000),
less commissions and other charges, or such higher value earned after
payment of the incentive fee for the addition of profits, the General
Partner shall immediately suspend all trading, provide immediate notice, in
accordance with the terms of this Agreement, to all Partners of the
reduction in Net Asset Value, and afford all Partners the opportunity for
fifteen (15) days after the date of such notice to Redeem their Units in
accordance with the provisions of Section 9.5 and 9.6, above. No trading
shall commence until after such fifteen day period.
ARTICLE X
Nature of Partner's Liabilities for Claims
10.1 PROSECUTION OF CLAIMS. The General Partner shall arrange to prosecute,
defend, settle or compromise actions at law or in equity or with any self
regulatory organizations at the expense of the Partnership as such may be
necessary or desirable to enforce, protect, or maintain Partnership
interests.
10.2 SATISFACTION OF CLAIMS. The General Partner shall satisfy any claims
against, errors asserted, or other liability of the Partnership and any
judgment, decree, decision or settlement, first out of any insurance
proceeds available therefor, next, out of Partnership assets and income,
and finally out of the assets and income of the General Partner.
10.3 GENERAL PARTNER DECISION. The decisions made by the General Partner in
regard to the prosecution or settlement of claims, errors, and other
liabilities, will be final and binding without right of appeal or other
legal action by the other Partners or the Partnership.
10.4 EXONERATION, INDEMNIFICATION, AND NO ANTICIPATION OF PAYMENTS. The
General Partner shall not be liable to the Partnership or the Partners for
any failure to comply with its obligations hereunder except for breach of
fiduciary obligation owed to the partnership or negligence on its part in
the management of Partnership affairs or violation of Federal and state
securities laws in connection with the offering of Units for sale. In
addition:
(a) The General Partner will be indemnified for liabilities and expenses
arising from any threatened, pending or completed action or suit in
which it or any affiliate is a party or is threatened to be made a
party by reason of the fact that it is or was the General Partner of
the Partnership (other than an action by the Partnership or a Partner
against the General Partner which is finally resolved in favor of the
Partnership or Partner). The Partnership will indemnify the General
Partner and its affiliates against expenses, including attorney's fees,
judgments and amounts paid in settlement of an action, suit or
proceeding if it has acted in good faith and in a manner it reasonably
believed to be in or not opposed to the best interest of the
Partnership, and provided that its conduct did not constitute
negligence, willful or wanton misconduct or a breach of fiduciary
obligations in the performance of its duty to the Partnership or a
violation of the securities laws. The termination of any action, suit
or proceeding by judgment, order or settlement against the Partnership
shall not of itself create a presumption that the General Partner or
any affiliate did not act in good faith and not in the best interest of
the Partnership; provided, however, any advance of funds to the General
Partner to pay such costs and expenses must be preceded by all of the
following: (i) a determination by the General Partner that, in good
faith, the course of conduct which caused the loss or liability was in
the best interests of the Partnership; and, (ii) the General Partner
was acting on behalf of or performing services for the Partnership;
and, (iii) such asserted claim or liability or loss to the claimant was
not the result of negligence or misconduct by the General Partner; and,
(iv) such indemnification or agreement to hold harmless is recoverable
only out of the assets of the Partnership and not from the Partners.
In any threatened, pending or completed action or suit by or in the
right of the Partnership, to which the General Partner or an Affiliate
was or is a party or is threatened to be made a party, involving an
alleged cause of action by a Partner for damages arising from the
activities of the General Partner in the performance of the sale of
Units or management of the internal affairs of the partnership as
proscribed by this Agreement or by Federal or the State of Delaware or
any other state laws, the Partnership shall indemnify such General
Partner against expenses, including attorneys' fees and costs, actually
and reasonably incurred by such General Partner or Affiliate in
connection with the defense or settlement of such action or suit if it
acted in good faith and in a manner it reasonably believed to be in or
not opposed to the best interests of the Partnership, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which the General Partner shall have been adjudged to be liable
for intentional misconduct, or breach of fiduciary obligations or
violation of securities laws in the performance of its duty to the
Partnership unless and only to the extent that the court or
administrative proceeding in which such action or suit was brought
shall determine upon application, that, despite the adjudication of
liability, in view of all circumstances of the case, the General
Partner or Affiliate is reasonably entitled to indemnification for such
expenses as such court shall deem proper; provided, however,
notwithstanding any other provisions of this Agreement, the Partnership
shall advance or pay the General Partner or any of its Affiliates for
legal expenses and other costs incurred as a result of any legal action
which alleges a breach of the Federal or state securities laws only if
the following conditions are satisfied: (i) the legal action relates
to acts or omissions with respect to the performance of duties or
services on behalf of the Partnership; (ii) the legal action is
initiated by a third party who is not a Limited Partner, or the legal
action is initiated by a Limited Partner and an independent arbitration
panel, administrative law judge, or court of competent jurisdiction
specifically approves such advancement; and, (iii) the General Partner
or its Affiliates undertake to repay the advanced funds to the
Partnership, together with the applicable legal rate of interest
thereon, in cases which such party is not entitled to indemnification
under NASAA Guideline II.F.
To the extent that a General Partner or an Affiliate has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above or in defense of any claim, issue or other
matter related to the Partnership or any other Partner or person who
applied to be a Partner, the Partnership shall indemnify such General
Partner against the expenses, including attorneys' fees and costs,
actually and reasonably incurred by it in connection therewith.
(a) The indemnification of a General Partner shall be limited to and
recoverable only out of the assets of the Partnership. Notwithstanding
the foregoing, the Partnership's indemnification of the General Partner
shall be limited to the amount of such loss, liability or damage which
is not otherwise compensated for by insurance carried for the benefit
of the Partnership.
(b) Notwithstanding any provision in this Agreement to the contrary, the
Partnership shall not advance the expenses or pay for any insurance to
pay for the costs of the defense or any liability which is prohibited
from being indemnified pursuant to NASAA Guideline II.F. Specifically,
no indemnification which is the result of negligence or misconduct by
the General Partner or for any allegation of a violation of the Federal
or state securities laws by or against the General Partner, any
broker/dealer or any other party unless there has been a successful
adjudication on the merits of each count involving alleged securities
law violation as to the General Partner or broker/dealer or such other
party; or a court of competent jurisdiction approves a settlement of
the claims against the General Partner or any broker/dealer or any
other party and finds, specifically, that the indemnification of the
settlement and related costs should be made after the court of law has
been made aware that the Securities and Exchange Commission opposes
such indemnification and the position of any applicable state
securities regulatory authority where the Partnership Interests were
offered or sold without the compliance with specific conditions upon
such indemnification and the action covered satisfies the provisions of
Section 10.4 (a) of this Agreement. Any change in the requirements
imposed by the Securities and Exchange Commission and the state
securities administrators in regard to indemnification shall cause a
corresponding change in the right of the General Partner to
indemnification.
(b) The indemnification of the General Partner provided in this Article
shall extend to any employee, agent, attorney, certified public
accountant, or Affiliate of the Partnership and the General Partner.
(c) The Partnership shall indemnify, to the extent of the Partnership
assets, each Partner against any claims of liability asserted against a
Partner solely because he is a Partner in the Partnership.
(d) In the event the Partnership or any Partner is made a party to any
claim, dispute or litigation or otherwise incurs any loss or expense,
as a result of or in connection with any Partner's activities unrelated
to the Partnership business or as a result of an unfounded claim
against the Partnership or any other Partner brought as a result of
alleged actions by said Partner, the Partner which was responsible for
the allegations which caused such loss or expense shall indemnify and
reimburse the Partnership and all other Partners for all loss and
expense incurred, including attorneys' fees and costs.
(e) No creditor of a Partner shall have a right to vote Units. Nor may any
Partner or creditor of a Partner anticipate any principal or income
from the Fund prior to the approval of a Redemption Request or the
payment of a distribution from the Fund.
ARTICLE XI
Power of Attorney
11.1 POWER OF ATTORNEY EXECUTED CONCURRENTLY. Concurrent with the written
acceptance and adoption of the provisions of this Agreement, each Partner
shall execute and deliver to the General Partner, a Power of Attorney
(paragraph 5 of the Subscription Agreement). Said Power of Attorney
irrevocably constitutes and appoints the General Partner as a true and
lawful attorney-in-fact and agent for such Partner with full power and
authority to act in his name and on his behalf in the execution,
acknowledgment and filing of documents, which will include, but shall not
be limited to, the following:
(a) Any certificates and other instruments, including but not limited to, a
Certificate of Limited partnership and amendments thereto and a
certificate of doing business under an assumed name, which the General
Partner deems appropriate to qualify or continue the Partnership as a
limited partnership in the jurisdictions in which the Partnership may
conduct business, so long as such qualifications and continuations are
in accordance with the terms of this Agreement or any amendment hereto,
or which may be required to be filed by the Partnership or the Partners
under the laws of any jurisdiction;
(b) Any other instrument which may be required to be filed by the
Partnership under Federal or any state laws or by any governmental
agency or which the General Partner deems advisable to file; and
(c) Any documents required to effect the continuation of the Partnership,
the admission of the signer of the Power as a Limited Partner or of
others as additional or substituted Partners or Limited Partners, or
the dissolution and termination of the Partnership, provided such
continuation, admission, dissolution or termination is pursuant to the
terms of this Agreement.
11.2 EFFECT OF POWER OF ATTORNEY. The Power of Attorney concurrently granted
by each Partner to the General Partner is a special Power of Attorney
coupled with an interest, is irrevocable, and shall survive the death or
legal incapacity of the Partner; and may be exercised by the General
Partner for each Partner by a facsimile signature of one of its officers or
by listing all of the Partners executing any instrument with a single
signature of one of its officers acting as attorney-in-fact for all of
them; and shall survive the delivery of an assignment by a Partner of the
whole or any portion of his interest in the Partnership; except that where
the assignee thereof has been approved by the General Partner for admission
to the Partnership as a substituted partner, the Power of Attorney shall
survive the delivery of such assignment for the sole purpose of enabling
the General Partner to execute, acknowledge and file an instrument
necessary to effect such substitution.
11.3 FURTHER ASSURANCES. Upon request, each Limited Partner agrees to execute
and deliver to the Partnership, within thirty (30) days after receipt of a
written request from the General Partner, a separate form of power of
attorney granting the same powers described above; and such other further
statements of interest, holdings, designations, powers of attorney and
other instruments as the General Partner deems necessary or desirable.
ARTICLE XII
Miscellaneous Provisions
12.1 NOTICES. Notices, requests, reports, payments or other communications
required to be given or made hereunder shall be in writing and shall be
deemed to be delivered when properly addressed and posted by United States
registered or certified mail or delivered by independent courier which
provides an record of receipt, postage or delivery fees prepaid, properly
addressed to the party being given such notice at its last known address.
Addresses shown on the Schedule of Limited Partners records of the
Partnership shall be considered the last known address of each said party
unless the General Partner is otherwise notified in writing.
12.2 NATURE OF INTEREST OF PARTNERS. The interest of each Partner in the
Partnership is personal property. No Partner may anticipate the
distribution or redemption of principal or income from the Partnership and
no assignment to secure the position of a lender to a Partner shall be
valid without the express written consent of the General Partner.
12.3 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed in all respects by the laws of the State of Delaware. All
Partners agree to consent to the jurisdiction and to bring all actions for
claims related to the Partnership and the sale of the Units in the State
and County of the principal office of the Partnership as it is established,
from time to time, by the General Partner. Currently, the principal office
of the Partnership is located in Kent County, Delaware.
12.4 SUCCESSORS IN INTEREST. This Agreement shall be binding on and inure to
the benefit of he parties hereto and, to the extent permitted by this
Agreement, their respective heirs, executors, administrators, personal
representatives, successors and assigns.
12.5 INTEGRATION. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings of such parties in
connection herewith. Any amendment or supplement made hereto must be in
writing.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. In such event, each counterpart shall constitute an original
and all such counterparts shall constitute one agreement. The addition of
Limited Partners pursuant to the power of attorney granted to the General
Partner shall not be deemed amendments to alter the rights of the other
Partners under this Agreement.
12.7 SEVERABILITY. Any provision of this Agreement which is invalid, illegal,
or unenforceable in any respect in any jurisdiction shall be, as to such
jurisdiction, ineffective to the extent of such invalidity, illegality or
unenforceability. The remaining provisions hereof in such jurisdiction
shall be and remain effective. Any such invalidity, illegality or
unenforceability in any jurisdiction shall not invalidate or in any way
effect the validity, legality or enforceability of such provision or the
remainder of this Agreement in any other jurisdiction.
12.8 WAIVERS. The failure of any Partner to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.9 HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof.
12.10 RIGHTS AND REMEDIES CUMULATIVE. This rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by
any Partner shall not preclude or waive his right to use addition to any
other rights such Partner may have by law, statute, ordinance or
otherwise.
12.11 WAIVER OF RIGHT TO PARTITION. Each of the Partners irrevocably waives,
during the term of the Partnership, any right that it may have to maintain
any action for partition with respect to the property and assets of the
Partnership.
12.12 INTEREST OF CERTAIN SECURED CREDITORS. No creditor who makes
nonrecourse loan to the Partnership shall have or acquire at any time as a
result of making the loan, any direct or indirect interest in the profits,
Capital, or property of the Partnership other than as a secured creditor.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
General Partner:
ASHLEY CAPITAL MANAGEMENT, INCORPORATED
By: s/ Shira Del Pacult
Shira Del Pacult
President
Initial Limited Partner:
By: s/ Shira Del Pacult
Shira Del Pacult
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FORM S-1
AMENDMENT NO. 3
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. 3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont in the State of Indiana on this 28th
day of April, 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. 3 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: April 28, 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)
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 December 31, 1998, for Atlas Futures Fund, Limited Partnership and Ashley
Capital Management, Inc. in the Form S-1 Registration Statement, Amendment
No. 3.
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. 3 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: April 25, 1999
