UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-21584
F-1000 FUTURES FUND L.P., SERIES VIII
(Exact name of registrant as specified in its charter)
New York 13-3653624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act: 100,000 Units
of Limited
Partnership
Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [ ]
<PAGE>
PART I
Item 1. Business.
(a) General development of business. F-1000 Futures Fund L.P., Series VIII
(the "Partnership") is a limited partnership organized on January 16, 1992 under
the Partnership Law of the State of New York to engage in speculative trading of
a diversified portfolio of commodity interests, including futures contracts,
options and forward contracts. The commodity interests that are traded by the
Partnership are volatile and involve a high degree of market risk. The
Partnership maintains a portion of its assets in interest payments stripped from
U.S. Treasury Bonds under the Treasury's STRIPS program ("Zero Coupons") which
payments are due November 15, 1998. The Partnership uses the Zero Coupons and
its other assets to margin its commodities account.
A total of 100,000 Units of Limited Partnership Interest in the
Partnership (the "Units") were offered to the public. A Registration Statement
on Form S-1 relating to the public offering of 100,000 Units became effective on
April 29, 1992. Between April 29, 1992 and August 17, 1992, 35,615 Units were
sold to the public at $1,000 per Unit. Proceeds of the offering along with the
General Partner's contribution of $383,000 were held in escrow until August 18,
1992 at which time an aggregate of $35,998,000 was turned over to the
Partnership and the Partnership commenced trading operations. Redemptions of
Units for the year ended December 31, 1996 are reported in the Statement of
Partners Capital on page F-5 under "Item 8. Financial Statements and
Supplementary
2
<PAGE>
Data." The General Partner has agreed to make additional capital contributions,
if necessary, so that its General partnership interest will be the greater of
(i) 1% of the limited partner's contributions to the Partnership or (ii)
$25,000. The Partnership will be liquidated at the end of the month in which the
Zero Coupons purchased by the Partnership come due, or upon the earlier
occurrence of certain other circumstances set forth in the Limited Partnership
Agreement.
The Partnership's trading of futures contracts on commodities is done on
United States commodities exchanges and foreign commodity exchanges. It engages
in such trading through a commodity brokerage account maintained with its
commodity broker, Smith Barney Inc. ("SB")
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. SB is an affiliate of the General
Partner.
Under the Limited Partnership Agreement, the General Partner administers
the business and affairs of the Partnership. At December 31, 1996, the General
Partner, on behalf of the Partnership, has entered into Management Agreements
(the "Management Agreements") with Chesapeake Capital Corporation, TrendLogic
Associates, Inc. and Willowbridge Associates Inc.(collectively, the "Advisors"),
who make all commodity trading decisions for the Partnership. The Advisors are
not affiliated with the General Partner nor SB and are not responsible for the
organization or operation of the Partnership. EMC Capital
3
<PAGE>
Management was terminated as an Advisor effective June 30, 1996. The General
Partner added TrendLogic Associates, Inc. as an Advisor effective July 1, 1996.
Pursuant to the terms of the Management Agreements, the Partnership is
obligated to pay each Advisor: (i) a monthly management fee equal to 1/6 of 1%
of the Net Assets of the Partnership allocated to each Advisor as of the end of
each month (2% per year); and (ii) an incentive fee payable quarterly, equal to
20% of the New Trading Profits earned by each Advisor for the Partnership.
The Customer Agreement (the "Customer Agreement") provides that the
Partnership pays SB a monthly brokerage fee equal to .71% of month-end Net
Assets allocated to the Advisors (8.5% per year) in lieu of brokerage
commissions on a per trade basis. The Partnership pays for National Futures
Association fees, exchange and clearing fees, give-up and user fees and floor
brokerage fees. Brokerage fees will be paid for the life of the Partnership,
although the rate at which such fees are paid may be changed. The Customer
Agreement between the Partnership and SB gives the Partnership the legal right
to net unrealized gains and losses.
All of the Partnership's assets are deposited in the Partnership's account
at SB. The Partnership maintains a portion of these assets in Zero Coupons and a
portion in cash. The Partnership's cash is deposited by SB in segregated bank
accounts as required by Commodity Futures Trading Commission regulations.
4
<PAGE>
In addition, SB will pay the Partnership interest on 75% of the average
daily equity maintained in cash in its accounts during each month at a 30-day
U.S. Treasury bill rate determined weekly by SB based on the average
non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from
the date on which such weekly rate is determined. The Customer Agreement may be
terminated upon notice by either party.
Smith Barney Holdings, Inc. has agreed to contribute up to $100,000,000 to
the Partnership's capital without recourse to the Partnership, the General
Partner or SB to enable the Partnership to meet its margin obligations to SB. As
a result of the agreement, the Partnership should not have to liquidate its Zero
Coupons prior to their due date except to fund redemptions, and investors who
remain limited partners until dissolution of the Partnership should receive an
amount at least equal to their initial investment. The General Partner will
provide a copy of Smith Barney Holdings, Inc.'s annual report as filed with the
SEC to any limited partner requesting it.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
interests. The Partnership does not engage in sales of goods or services. The
Partnership's net income (loss) from operations for the years ended December 31,
1996, 1995, 1994, 1993 and for the period from August 18, 1992 (commencement of
trading operations) to December 31, 1992 is set forth under "Item 6. Select
Financial Data." The Partnership capital as of
5
<PAGE>
December 31, 1996 was $15,925,812.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through (xii) - Not applicable.
(xiii) - The Partnership has no employees.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales. The Partnership does not engage in
sales of goods or services, and therefore this item is not
applicable.
Item 2. Properties.
The Partnership does not own or lease any properties. The General
Partner operates out of facilities provided by its affiliate, SB.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnership is a
party or to which any of its assets is subject. No material legal proceedings
affecting the Partnership were terminated during the fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to the security holders for a vote
during the last fiscal year covered by this report.
6
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Security
Holder Matters.
(a) Market Information. The Partnership has issued
no stock. There is no established public trading
market for the Units of Limited Partnership
Interest.
(b) Holders. The number of holders of Units of
Partnership Interest as of December 31, 1996 was 756.
(c) Distribution. The Partnership did not declare a
distribution in 1996.
7
<PAGE>
Item 6. Select Financial Data. Realized and unrealized trading gains (losses),
realized and unrealized appreciation (depreciation) on Zero Coupons, interest
income, net income (loss) and increase (decrease) in net asset value per Unit
for the years ended December 31, 1996, 1995, 1994, 1993 and for the period from
August 18, 1992 (commencement of trading operations) to December 31, 1992 and
total assets as of December 31, 1996, 1995, 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net realized and unrealized
trading gains (losses) net of
brokerage commissions and clearing
fees of $504,970 $635,930, $967,483,
$1,498,948 and $471,548,
respectively $ 122,595 $ 372,021 $(2,090,228) $ 4,409,607 $ (926,982)
Realized and unrealized
appreciation (depreciation)
on Zero Coupons (270,687) 1,312,676 (2,197,474) 1,570,090 (343,600)
Interest income 925,854 1,153,752 1,434,878 1,819,249 654,513
------------ ------------ ------------ ------------ -----------
$ 777,762 $ 2,838,449 $(2,852,824) $ 7,798,946 $ (616,513)
============ ============ ============ ============ ============
Net Income (loss) $ 577,126 $ 2,463,121 $(3,421,065) $ 6,587,537 $ (839,872)
============ ============ ============ ============ ============
Increase (decrease) in net
asset value per Unit $46.33 $132.21 $(121.03) $184.88 $(23.33)
======= ======== ========= ======== ========
Total assets $16,599,151 $20,175,279 $23,495,014 $39,585,000 $36,031,316
============ ============ ============ ============ ===========
</TABLE>
8
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Liquidity. The Partnership does not engage in sales of goods or
services. Its only assets are its equity in its commodity futures trading
account, consisting of cash and cash equivalents, Zero Coupons, net unrealized
appreciation (depreciation) on open futures contracts, commodity options and
interest receivable. Because of the low margin deposits normally required in
commodity futures trading, relatively small price movements may result in
substantial losses to the Partnership. Such substantial losses could lead to a
material decrease in liquidity. To minimize this risk, the Partnership follows
certain policies including:
(1) Partnership funds are invested only in commodity contracts which
are traded in sufficient volume to permit, in the opinion of the Advisors, ease
of taking and liquidating positions.
(2)The Partnership diversifies its positions among various commodities.
(3) No Advisor initiates additional positions in any commodity if such
additional positions would result in aggregate positions for all commodities
requiring a margin of more than 66-2/3% of the Partnership's net assets
allocated to the Advisor.
(4) The Partnership may occasionally accept delivery of a commodity.
Unless such delivery is disposed of promptly by retendering the warehouse
receipt representing the delivery to the appropriate
9
<PAGE>
clearing house, the physical commodity position is fully hedged.
(5) The Partnership does not employ the trading technique commonly known
as "pyramiding", in which the speculator uses unrealized profits on existing
positions in the same or related commodities.
(6) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities.
(7) The Advisors may, from time to time, employ trading strategies such
as spreads or straddles on behalf of the Partnership. The term "spread" or
"straddle" describes a commodity futures trading strategy involving the
simultaneous buying and selling of futures contracts on the same commodity but
involving different delivery dates or markets and in which the trader expects to
earn a profit from a widening or narrowing of the difference between the prices
of the two contracts.
The Partnership is party to financial instruments with off- balance
sheet risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
include forwards, futures and options, whose value is based upon an underlying
asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash flows, or to purchase or sell other financial
instruments at specified terms at specified future dates. Each of these
instruments is subject to various risks similar to those
10
<PAGE>
relating to the underlying financial instruments including market and credit
risk. The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership is
subject. (See also Item 8. Financial Statement and Supplementary Data., for
further information on financial instrument risk included in the notes to
financial statements.)
Other than the risks inherent in commodity futures trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in or which are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way. The
Limited Partnership Agreement provides that the General Partner may, at its
discretion, cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following: (i) December 31, 2012;
(ii) at the end of the month in which the Zero Coupons purchased by the
Partnership come due (November 1998); (iii) the vote to dissolve the Partnership
by Limited Partners owning more than 50% of the Units; (iv) assignment by the
General Partner of all of its interest in the Partnership or withdrawal,
removal, bankruptcy or any other event that causes the General Partner to cease
to be a general partner under the New York Revised Limited Partnership Act
unless the Partnership is continued as described in the Limited Partnership
Agreement; (v) the Partnership is required to register under the Investment
Company Act of 1940 and the
11
<PAGE>
General Partner determines that dissolution is therefore in the Partnership's
best interest; or (vi) the occurrence of any event which shall make it unlawful
for the existence of the Partnership to be continued.
(b) Capital resources. (i) The Partnership has made no material
commitments for capital expenditures.
(ii) The Partnership's capital consists of the capital contributions of
the partners as increased or decreased by gains or losses on commodity futures
trading and by expenses, interest income, redemptions of Units and distributions
of profits, if any. Gains or losses on commodity futures trading cannot be
predicted. Market moves in commodities are dependent upon fundamental and
technical factors which the Partnership's Advisors may or may not be able to
identify. Partnership expenses consist of, among other things, commissions,
management fees and incentive fees. The level of these expenses is dependent
upon the level of trading and the ability of the Advisors to identify and take
advantage of price movements in the commodity markets, in addition to the level
of Net Assets maintained. Furthermore, the Partnership will receive no payment
on its Zero Coupons until their due date. However, the Partnership will accrue
interest on the Zero Coupons and Limited Partners will be required to report as
interest income on their U.S. tax returns in each year their pro rata share of
the accrued interest on the Zero Coupons even though no interest will be paid
prior to their due date. In addition, the amount of interest income payable by
SB is dependent upon interest rates over which the Partnership has no control.
12
<PAGE>
No forecast can be made as to the level of redemptions in any given
period. Beginning with the fiscal quarter ending at least six months after
trading commenced, a Limited Partner may cause all of his Units to be redeemed
by the Partnership at the Net Asset Value thereof as of the last day of a fiscal
quarter (the "redemption date") on fifteen days' written notice to the General
Partner.
A redemption fee equal to 4% of Net Asset Value per Unit was charged to
each Limited Partner requesting redemption on March 31, 1993, the first possible
redemption date; a redemption fee equal to 3% of Net Asset Value per Unit was
charged to each Limited Partner requesting redemption on June 30, 1993, the
second possible redemption date; a redemption fee equal to 2% of Net Asset Value
per Unit was charged to each Limited Partner requesting redemption on September
30, 1993, the third possible redemption date; and a redemption fee equal to 1%
of Net Asset Value per Unit was charged to each Limited Partner requesting
redemption on December 31, 1993, the fourth possible redemption date.
Thereafter, no redemption fee will be charged.
Redemptions fees no longer apply.
There were 2,603 Units of Limited Partnership Interest redeemed in the
year ended December 31, 1996 at a value of $3,024,424. There were 4,489 Units of
Limited Partnership Interest redeemed in the year ended December 31, 1995 at a
value of $5,035,074 and the General Partner redeemed of 209 Unit equivalents
totaling $245,101. For the year ending December 31, 1994, 9,267 Units of Limited
Partnership interest were redeemed totaling $9,807,828.
For each Unit redeemed and not offset by a purchase, the
13
<PAGE>
Partnership liquidates $1,000 (principal amount) of Zero Coupons and will
continue to liquidate $1,000 (principal amount) of Zero Coupons per Unit
redeemed. These liquidations will be at market value which will be less than the
amount payable on their due date. Moreover, it is possible that the market value
of the Zero Coupons could be less than their purchase price plus the original
issue discount amortized to date.
(c) Results of operations. For the year ended December 31, 1996, the net
asset value per unit increased 4.0% from $1,172.73 to $1,219.06. For the year
ended December 31, 1995, the net asset value per unit increased 12.7% from
$1,040.52 to $1,172.73. For the year ended December 31, 1994, the net asset
value per unit decreased 10.4% from $1,161.55 to $1,040.52.
The Partnership experienced net trading gains of $627,565 before
commissions and expenses for the year ended December 31, 1996. These gains were
recognized in the trading of currencies, energy, precious metals and interest
rate commodity futures. These gains were partially offset in losses incurred
while trading indices and agricultural futures contracts. The Partnership
experienced a realized gain of $7,582 on Zero Coupons liquidated in conjunction
with the redemption of Units for the year ended December 31, 1996 and unrealized
depreciation on Zero Coupons of $278,269 during 1996.
The Partnership experienced net trading gains of $1,007,951 before
commissions and expenses for the period ended December 31, 1995. Realized
trading gains of $1,554,665 were recognized in the trading of currencies,
energy, indices and interest rate commodity futures. These gains were partially
offset in losses incurred while
14
<PAGE>
trading precious metals and agricultural futures contracts. The Partnership
experienced a realized loss of $13,019 on Zero Coupons liquidated in conjunction
with the redemption of Units for the year ended December 31, 1995 and unrealized
appreciation on Zero Coupons of $1,325,695 during 1995.
The Partnership experienced net trading losses of $1,122,745 before
commissions and expenses for the year ended December 31, 1994. Realized trading
losses of $1,007,385 were attributable to losses incurred in the trading of
interest rates, metals, stock indices and energy commodity futures. However,
these realized trading losses were partially offset by realized gains
experienced in the trading of foreign currencies and agricultural commodity
futures. The Partnership experienced a realized loss of $225,218 on Zero Coupons
liquidated in conjunction with the redemption of Units for the year ended
December 31, 1994 and unrealized depreciation on Zero Coupons of $1,972,256
during 1994.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify those price trends correctly. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to identify them,
the Partnership expects to increase capital through operations.
15
<PAGE>
Item 8. Financial Statements and Supplementary Data.
F-1000 FUTURES FUND L.P., SERIES VIII
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1996 and 1995. F-3
Statement of Income and Expenses for
the year ended December 31, 1996, 1995
and 1994. F-4
Statement of Partners' Capital for the
year ended December 31, 1996, 1995 and
1994. F-5
Notes to Financial Statements. F-6 - F-12
F-1
Continued
<PAGE>
Report of Independent Accountants
To the Partners of
F-1000 Futures Fund L.P. Series VIII:
We have audited the accompanying statements of financial condition of F-1000
FUTURES FUND L.P. SERIES Vlll (a New York Limited Partnership) as of December
31, 1996 and 1995, and the related statements of income and expenses and of
partners' capital for the years ended December 31, 1996, 1995 and 1994. These
financial statements are the responsibility of the management of the General
Partner. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management of the General Partner, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of F-1000 Futures Fund L.P. Series
VIII as of December 31, 1996 and 1995, and the results of its operations for the
years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 28, 1997
F-2
<PAGE>
F-1000 Futures Fund L.P. Series VIII
Statement of Financial Condition
December 31, 1996 and 1995
Assets: 1996 1995
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3c) $ 4,303,482 $ 4,875,415
Net unrealized appreciation
on open futures contracts 118,727 548,938
Zero Coupons, $13,064,000 and
$15,667,000 principal amount,
in 1996 and 1995, respectively,
due November 15, 1998, at
market value (amortized cost
$11,657,073 and $13,152,838 in
1996 and 1995, respectively) 11,724,026 13,498,060
Commodity options owned, at
market value (cost $39,587) 31,136
----------- -----------
16,177,371 18,922,413
Receivable from SB on sale
of Zero Coupons 407,583 1,235,765
Interest receivable 14,197 17,101
----------- -----------
$16,599,151 $20,175,279
=========== ===========
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 40,458 $ 47,283
Management fees 9,450 11,045
Incentive fees 25,715 24,878
Other 42,022 36,095
Commodity options written, at
market value (premiums received $5,140) 2,241
Redemptions payable 553,453 1,682,868
----------- -----------
673,339 1,802,169
----------- -----------
Partners' capital (Notes 1, 5 and 7):
General Partner, 175 Unit
equivalents outstanding in 1996
and 1995, respectively 213,336 205,228
Limited Partners, 12,889 and 15,492
Units of Limited Partnership
Interest outstanding in 1996
and 1995, respectively 15,712,476 18,167,882
----------- -----------
15,925,812 18,373,110
----------- -----------
$16,599,151 $20,175,279
=========== ===========
See notes to financial statements.
F-3
<PAGE>
F-1000 Futures Fund L.P. Series VIII
Statement of Income and Expenses
for the years ended December 31, 1996,
1995 and 1994
1996 1995 1994
Income:
Net gains (losses) on trading
of commodity interests:
Realized gains (losses) on
closed positions $ 1,063,328 $ 1,554,665 $(1,007,385)
Change in unrealized gains/
losses on open positions (435,763) (546,714) (115,360)
----------- ----------- -----------
627,565 1,007,951 (1,122,745)
Less, Brokerage commissions
and clearing fees ($12,918,
$18,795 and $29,957,
respectively) (Note 3c) (504,970) (635,930) (967,483)
----------- ----------- -----------
Net realized and unrealized
gains (losses) 122,595 372,021 (2,090,228)
Unrealized appreciation
(depreciation) on Zero
Coupons (278,269) 1,325,695 (1,972,256)
Gain (loss) on sale of Zero
Coupons 7,582 (13,019) (225,218)
Interest income (Notes 2c
and 3c) 925,854 1,153,752 1,434,878
----------- ----------- -----------
777,762 2,838,449 (2,852,824)
----------- ----------- -----------
Expenses:
Management fees (Note 3b) 109,682 135,502 203,370
Incentive fees (Note 3b) 31,791 172,726 64,479
Other expenses 59,163 67,100 65,536
Organization expense (Note 6) 234,856
----------- ----------- -----------
200,636 375,328 568,241
----------- ----------- -----------
Net income (loss) $ 577,126 $ 2,463,121 $(3,421,065)
=========== =========== ===========
Net income (loss) per Unit of
Limited Partnership Interest
and General Partner Unit
equivalent (Notes 1 and 7) $ 46.33 $ 132.21 $ (121.03)
=========== =========== ===========
See notes to financial statements.
F-4
<PAGE>
F-1000 Futures Fund L.P. Series VIII
Statement of Partners' Capital
for the years ended December 31, 1996,
1995 and 1994
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 33,973,022 $ 446,035 $ 34,419,057
Net loss (3,374,590) (46,475) (3,421,065)
Redemption of 9,267
Units of Limited
Partnership Interest (9,807,828) (9,807,828)
------------ ------------ ------------
Partners' capital at
December 31, 1994 20,790,604 399,560 21,190,164
Net Income 2,412,352 50,769 2,463,121
Redemption of 4,489
Units of Limited
Partnership Interest
and General Partner
redemption representing
209 Unit equivalents (5,035,074) (245,101) (5,280,175)
------------ ------------ ------------
Partners' capital at
December 31, 1995 18,167,882 205,228 18,373,110
Net income 569,018 8,108 577,126
Redemption of 2,603
Units of Limited
Partnership Interest (3,024,424) (3,024,424)
------------ ------------ ------------
Partners' capital at
December 31, 1996 $ 15,712,476 $ 213,336 $ 15,925,812
============ ============ ============
See notes to financial statements.
F-5
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
1. Partnership Organization:
F-1000 Futures Fund L.P., Series VIII (the "Partnership") is a limited
partnership which was organized on January 16, 1992 under the partnership
laws of the State of New York to engage in the speculative trading of a
diversified portfolio of commodity interests, including futures contracts,
options and forward contracts. The commodity interests that are traded by the
Partnership are volatile and involve a high degree of market risk. The
Partnership maintains a portion of its assets in interest payments stripped
from U.S. Treasury Bonds under the Treasury's STRIPS program which payments
are due approximately six years from the date trading commenced ("Zero
Coupons").
Between April 29, 1992 and August 17, 1992, 35,615 Units of Limited
Partnership Interest ("Units") were publicly sold at $1,000 per Unit. The
proceeds of the offering were held in an escrow account until August 18,
1992, at which time they were turned over to the Partnership for trading. The
Partnership was authorized to sell 100,000 Units during the public offering
period.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate
of the General Partner, acts as commodity broker for the Partnership (see
Note 3b). The General Partner and each limited partner share in the profits
and losses of the Partnership in proportion to the amount of partnership
interest owned by each except that no limited partner shall be liable for
obligations of the Partnership in excess of his initial capital contribution
and profits, if any, net of distributions.
The Partnership will be liquidated at the end of the month in which the Zero
Coupons purchased by the Partnership come due (November, 1998), or upon the
earlier occurrence of certain other circumstances set forth in the Limited
Partnership Agreement.
F-6
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
2. Accounting Policies
a.All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The
commodity interests are recorded on trade date and open contracts are
recorded in the statement of financial condition at market value for those
commodity interests for which market quotations are readily available or at
fair value on the last business day of the year. Investments in commodity
interests denominated in foreign currency are translated into U.S. dollars
at the exchange rates prevailing on the last business day of the year.
Realized gain (loss) and changes in unrealized values on commodity
interests are recognized in the period in which the contract is closed or
the changes occur and are included in net gains (losses) on trading of
commodity interests.
b.Income taxes have not been provided as each partner is individually liable
for the taxes, if any, on his share of the Partnership's income and
expenses.
c.The original issue discount on the Zero Coupons is being amortized over
their life using the interest method and is included in interest income.
d.Zero Coupons are recorded in the statement of financial condition at market
value. Realized gain (loss) on the sale of Zero Coupons is determined on
the amortized cost basis at the time of sale.
e.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 at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
3. Agreements
a.Limited Partnership Agreement:
The Limited Partnership Agreement provides that the General Partner shall
manage the business of the Partnership and may select one or more trading
advisors to direct all trading for the Partnership.
F-7
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
b.Management Agreements:
The General Partner, on behalf of the Partnership, has entered into
Management Agreements with Chesapeake Capital Corporation, Trendlogic
Associates, Inc., and Willowbridge Associates Inc. (collectively, as the
"Advisors"). The Advisors are not affiliated with the General Partner or SB
and are not responsible for the organization or operation of the
Partnership. The Partnership will pay each Advisor a monthly management fee
equal to 1/6 of 1 % (2% per year) of the Net Assets allocated to the
Advisor as of the end of the month. In addition, the Partnership will pay
each Advisor an incentive fee, payable quarterly, equal to 20% of the New
Trading Profits earned by each Advisor for the Partnership. EMC Capital
Management was terminated as an Advisor effective June 30, 1996. The
General Partner has added Trendlogic Associates, Inc. as an Advisor
effective July 1, 1996.
c.Customer Agreement:
The Partnership has entered into a Customer Agreement, which was assigned
to SB, which provides that the Partnership will pay SB a monthly brokerage
fee equal to .71% (8.5% per year) of month-end Net Assets allocated to the
Advisors, as defined, in lieu of brokerage commissions on a per trade
basis. The Partnership will pay for National Futures Association ("NFA")
fees, exchange and clearing fees, user, give-up and floor brokerage fees.
SB will pay a portion of its brokerage fees to its Financial Consultants
who have sold Units. All of the Partnership's assets are deposited in the
Partnership's account at SB. The Partnership maintains a portion of these
assets in Zero Coupons and a portion in cash. The Partnership's cash is
deposited by SB in segregated bank accounts as required by Commodity
Futures Trading Commission regulations. At December 31, 1996 and 1995, the
amount of cash held for margin requirements was $470,341 and $832,683,
respectively. SB has agreed to pay the Partnership interest on 75% of the
average daily equity maintained in cash in its account during each month at
the rate of the average noncompetitive yield of 13-week U.S. Treasury Bills
as determined at the weekly auctions thereof during the month. The Customer
Agreement between the Partnership and SB gives the Partnership the legal
right to net unrealized gains and losses. The Customer Agreement may be
terminated upon notice by either party.
F-8
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
4. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety
of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
All of the commodity interests owned by the Partnership are held for trading
purposes. The fair value of these commodity interests, including options
thereon, at December 31, 1996 and 1995 was $147,622 and $548,938,
respectively, and the average fair value during the years then ended, based
on monthly calculation, was $342,399 and $400,478, respectively.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner; however, beginning with the fiscal quarter ended at least
six months after trading commenced, a limited partner may cause all of his
Units to be redeemed by the Partnership at the Net Asset Value thereof as of
the last day of any calendar quarter (the "redemption date") on 15 days
written notice to the General Partner. Redemption fees equal to 4%, 3%, 2%
and 1% of Net Asset Value per Unit redeemed will be charged to any limited
partner who redeems his Units on the first (March 31, 1993), second (June 30,
1993), third (September 30, 1993) or fourth (December 31, 1993) possible
redemption date, respectively. Thereafter, no redemption fee will be charged.
Redemptions of partial Units or of less than all the Units owned by a limited
partner are not permitted except at the sole discretion of the General
Partner.
6. Organization and Offering Costs:
Offering and organization expenses of $540,773 relating to the issuance and
marketing of the Units offered to the public were paid by SB's predecessor.
The Partnership has reimbursed SB for all such expenses from the interest
earned on funds held in its account beginning with the second month of
trading. The Partnership was charged interest at the prime rate on the unpaid
organization expense balance. During 1994 the Partnership was charged
$234,856 in organization expense, which included interest expense of $7,872.
F-9
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
7. Net Asset Value Per Unit:
Changes in the net asset value per Unit of Partnership interest for the years
ended December 31, 1996, 1995 and 1994 were as follows:
1996 1995 1994
Net realized and
unrealized gains $ 13.17 $ 20.83 $ (72.80)
(losses)
Net realized and
unrealized gains
(losses) on Zero Coupons (16.97) 69.45 (82.24)
Interest income 64.14 62.25 56.55
Expenses (14.01) (20.32) (22.54)
-------- -------- --------
Increase (decrease)
for year 46.33 132.21 (121.03)
Net asset value per
Unit, beginning of year 1,172.73 1,040.52 1,161.55
--------- --------- ---------
Net asset value per
Unit, end of year $1,219.06 $1,172.73 $1,040.52
========= ========= =========
8. Guarantee:
Smith Barney Holdings Inc. has agreed to contribute up to $100,000,000 to the
Partnership's capital without recourse to the Partnership, the General
Partner or SB to enable the Partnership to meet its margin obligations to SB.
As a result of the agreement, the Partnership should not have to liquidate
its Zero Coupons prior to their due date except to fund redemptions, and
investors who remain limited partners until dissolution of the Partnership
should receive an amount at least equal to their initial investment.
9. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial
instruments include forwards, futures and options, whose value is based upon
an underlying asset, index, or reference rate, and generally represent future
commitments to exchange currencies or cash flows, to purchase or sell other
financial instruments at specific terms at specified future dates, or, in the
case of derivative commodity instruments, to have a reasonable possibility to
be settled in cash or with another financial instrument. These instruments
may be traded on an exchange or over-the-counter ("OTC"). Exchange traded
instruments are standardized and include futures and certain option
contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. Each of these instruments is subject to
various risks similar to those related to the underlying financial
instruments including market and credit risk. In general, the risks
associated with OTC contracts are greater than those associated with exchange
traded instruments because of the greater risk of default by the counterparty
to an OTC contract.
F-10
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including
interest and foreign exchange rate movements and fluctuations in commodity or
security prices. Market risk is directly impacted by the volatility and
liquidity in the markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of a
counterparty to perform according to the terms of a contract. Credit risk
with respect to exchange traded instruments is reduced to the extent that an
exchange or clearing organization acts as a counterparty to the transactions.
The Partnership's risk of loss in the event of counterparty default is
typically limited to the amounts recognized in the statement of financial
condition and not represented by the contract or notional amounts of the
instruments. The Partnership has concentration risk because the sole
counterparty or broker with respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure on
a daily basis through financial, credit and risk management monitoring
systems, and accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership
is subject. These monitoring systems allow the General Partner to
statistically analyze actual trading results with risk adjusted performance
indicators and correlation statistics.In addition, on-line monitoring systems
provide account analysis of futures, forwards and options positions by
sector, margin requirements, gain and loss transactions and collateral
positions.
F-11
<PAGE>
F-1000 Futures Fund L.P.
Series VIII
Notes to Financial Statements
The notional or contractual amounts of these instruments, while not recorded
in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At December 31, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $31,716,400 and $12,438,693, respectively, as detailed
below. All of these instruments mature within one year of December 31, 1996.
However, due to the nature of the Partnership's business, these instruments
may not be held to maturity. At December 31, 1996, the fair value of the
Partnership's derivatives, including options thereon, was $147,622, as
detailed below.
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies
-Exchange Traded Contracts $ 2,659,500 $ 5,111,758 $ 86,059
-OTC Contracts 1,736,161 2,093,094 11,633
Energy 1,081,235 0 13,738
Grains 240,475 218,264 (5,192)
Interest Rate U.S. 7,336,247 15,670 (24,966)
Interest Rate Non-U.S. 15,450,762 3,172,168 13,701
Livestock 304,310 0 4,900
Metals 818,207 1,499,254 32,072
Softs 979,987 154,051 6,860
Indices 1,109,516 174,434 8,817
------------ ------------ ------------
$ 31,716,400 $ 12,438,693 $ 147,622
============ ============ ============
F-12
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
During the last two fiscal years and any subsequent interim period, no
independent accountant who was engaged as the principal accountant to audit the
Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs are
managed by its General Partner, Smith Barney Futures Management Inc. Investment
decisions are made by Chesapeake Capital Corporation, TrendLogic Associates,
Inc. and Willowbridge Associates Inc. (collectively, the "Advisors").
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are managed
by Smith Barney Futures Management Inc., its General Partner, which receives
compensation for its services, as set forth under "Item 1. Business." SB, an
affiliate of the General Partner, is the commodity broker for the Partnership
and receives brokerage commissions for such services, as described under "Item
1. Business." For the year ended December 31, 1996, SB earned $504,970 in
brokerage commissions and clearing fees. The Advisors earned $109,682 in
management fees and $31,791 in incentive fees during 1996.
16
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a). Security ownership of certain beneficial owners. As of March 1,
1997, one beneficial owner who is neither a director nor executive officer of
the General Partner beneficially owns more than five percent (5%) of the
outstanding Units issued by the Registrant as follows:
Amount and
Name and Address Nature of
Title of Beneficial Beneficial Percent of
of Class Owner Ownership Class
Units of Limited Board of Trustees of 5,000 Units 38.3%
Partnership the Policemen &
Interest Firemen Retirement
System of the City of
Detroit
908 City County Bldg.
Detroit, MI 48226
(b). Security ownership of management. Under the terms of the
Limited Partnership Agreement, the Partnership's affairs are managed by the
General Partner. The General Partner owns Units of General partnership interest
equivalent to 175 Units (1.3%) of Limited Partnership Interest as of December
31, 1996.
(c). Changes in control. None.
Item 13. Certain Relationship and Related Transactions.
Smith Barney Inc. and Smith Barney Futures Management Inc. would be
considered promoters for purposes of Item 404(d) of Regulation S- K. The nature
and the amounts of compensation each promoter will receive from the Partnership
are set forth under "Item 1. Business." and "Item 11. Executive Compensation."
17
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) (1) Financial Statements:
Statement of Financial Condition at December 31, 1996, and
1995.
Statement of Income and Expenses for the years ended
December 31, 1996, 1995 and 1994.
Statement of Partners' Capital for the years ended
December 31, 1996, 1995 and 1994.
(2) Financial Statement Schedules: None.
(3) Exhibits:
3.1 - Limited Partnership Agreement (filed as
Exhibit 3.1 to the Registration Statement on
Form S-1 (File No. 33-45422) and incorporated
herein by reference).
3.2 - Certificate of Limited Partnership of the
Partnership as filed in the office of the
County Clerk of New York County on January 16,
1992 (filed as Exhibit 3.2 to the Registration
Statement on Form S-1 (File No. 33-45422) and
incorporated herein by reference).
10.1 - Customer Agreement between the Partnership and
Lehman Brothers Capital Management Corp.
(filed as Exhibit 10.1 to the Registration
Statement on Form S-1 (File No. 33-45422) and
18
<PAGE>
incorporated herein by reference.
10.3 - Escrow Instructions relating to escrow of
subscription funds (filed as Exhibit 10.3 to
the Registration Statement on Form S-1 (File
No. 33-45422) and incorporated herein by
reference).
10.5 - Management Agreement among the Partnership,
the General Partner and Chesapeake Capital
Corporation (filed as Exhibit 10.5 to the
Registration Statement on Form S-1 (File No.
33-45422) and incorporated herein by
reference).
10.6 - Management Agreement among the Partnership,
the General Partner and EMC Capital
Management, Inc. (filed as Exhibit 10.6 to the
Registration Statement on Form S-1 (File No.
33-45422) and incorporated herein by
reference).
10.7 - Management Agreement among the Partnership,
the General Partner and LaSalle Portfolio
Management, Inc. (filed as Exhibit 10.7 to the
Registration Statement on Form S-1 (File No.
33-45422 and incorporated herein by
reference).
19
<PAGE>
10.8 - Management Agreement among the Partnership,
the General Partner and PRAGMA, Inc. (filed as
Exhibit 10.8 to the Registration Statement on
form S-1 (Filed No. 33-45422) and incorporated
herein by reference).
10.9 - Letter dated July 31, 1993 from General
Partner to LaSalle Portfolio Management
extending Management Agreement (filed as
Exhibit 10.9 to Form 10-K for the fiscal year
ended December 31, 1993 and incorporated
herein by reference).
10.10 - Letter dated July 31, 1993 from General
Partner to EMC Capital Management extending
Management Agreement (filed as Exhibit 10.10
to Form 10-K for the fiscal year ended
December 31, 1993 and incorporated herein by
reference).
10.11 - Letter dated July 31, 1993 from General
Partner to Chesapeake Capital Corporation
extending Management Agreement (filed as
Exhibit 10.11 to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated
herein by reference).
20
<PAGE>
10.12 - Letter dated July 31, 1993 from General
Partner to PRAGMA, Inc. extending Management
Agreement (filed as Exhibit 10.12 to Form 10-K
for the fiscal year ended December 31, 1993
and incorporated herein by reference).
10.13 - Letter dated July 29, 1994 from the General
Partner to PRAGMA, Inc. terminating
Management Agreement (previously filed).
10.14 - Management Agreement among the Partnership,
the General Partner and ELM Financial (previously
filed).
10.15 - Management Agreement among the Partnership,
the General Partner and Gill Capital Management
(previously filed).
10.16 - Letter dated March 29, 1994 from General
Partner to LaSalle Portfolio Management
terminating Management Agreement (previously
filed).
10.17 - Letters dated February 26, 1995 from General
Partner to Chesapeake Capital Corporation,
EMC Capital Management, Inc. and Gill Capital
Management extending Management Agreements to
June 30, 1995 (previously filed).
10.18 - Letter Dated January 27, 1995 from General
Partner to ELM Financial terminating Management
Agreement (previously filed).
21
<PAGE>
10.19 - Letter dated June 27, 1995 from General
Partner to Gill Capital Management
terminating Management Agreement (previously
filed).
10.20 - Management Agreement among the Partnership,
the General Partner and Willowbridge
Associates Inc. (previously filed).
10.21 - Letter dated June 30, 1996 from General
Partner to EMC Capital Management terminating
Management Agreement (filed herein).
10.22 - Management Agreement among the Partnership,
the General Partner and TrendLogic Associates
Inc. (filed herein).
(b) Reports on 8-K: None Filed.
22
<PAGE>
Supplemental Information To Be Furnished With Reports Filed Pursuant To
Section 15(d) Of The Act by Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 24th day of March 1997.
F-1000 FUTURES FUND L.P., SERIES VIII
By: Smith Barney Futures Management Inc.
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III
David J. Vogel, Jack H. Lehman III
Director, Principal Executive Chairman and Director
Officer and President
/s/ Michael Schaefer /s/ Daniel A. Dantuono
Michael Schaefer Daniel A. Dantuono
Director Treasurer, Chief Financial
Officer and Director
/s/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr.
Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman
Steve J. Keltz Shelley Ullman
Secretary and Director Director
24
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883573
<NAME> F-1000 Futures Fund L.P., Series VIII
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,303,482
<SECURITIES> 11,873,889
<RECEIVABLES> 421,780
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,599,151
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,599,151
<CURRENT-LIABILITIES> 673,339
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,925,812
<TOTAL-LIABILITY-AND-EQUITY> 16,599,151
<SALES> 0
<TOTAL-REVENUES> 777,762
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 200,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 577,126
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577,126
<EPS-PRIMARY> 46.33
<EPS-DILUTED> 0
</TABLE>
June 26, 1996
EMC Capital Management Inc.
2201 Waukegan Road
Suite West 240
Bannockburn, IL 60015
Attn: Ms. Elizabeth Cheval
RE: F-1000 FUTURES FUND L.P., SERIES VIII
Dear Ms. Cheval:
Smith Barney Futures Management Inc. ("SBFM") has decided to reallocate
away the assets being traded by EMC Capital Management Inc. for the above
fund effective June 30, 1996. By doing so, this will effectively terminate
the management agreement between SBFM, EMC Capital Management Inc. and F-1000
Futures Fund L.P., Series VIII.
Please liquidate your positions in account 258-31105 in an orderly fashion
as soon as possible. If you have any questions, please call me at 212-723-5416.
Very truly yours,
Daniel A. Dantuono
Chief Financial Officer
cc: Richie Collins
Dan McAuliffe
Susan Petrovcik
Shelley Ullman
Dave Vogel
file
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1996 among SMITH BARNEY
FUTURES MANAGEMENT INC., a Delaware corporation ("SBFM"), F-1000 FUTURES FUND
L.P., SERIES VIII, a New York limited partnership (the "Partnership") and
TRENDLOGIC ASSOCIATES, INC., a Delaware corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner of F-1000 FUTURES FUND L.P.,
SERIES VIII, a limited partnership organized for the purpose of speculative
trading of commodity interests, including futures contracts, options and forward
contracts with the objective of achieving substantial capital appreciation; and
WHEREAS, the Limited Partnership Agreement establishing the
Partnership (the "Limited Partnership Agreement") permits SBFM to delegate to
one or more commodity trading advisors SBFM's authority to make trading
decisions for the Partnership; and
WHEREAS, the Advisor is registered as a commodity trading advisor
with the Commodity Futures Trading Commission ("CFTC") and is a member of the
National Futures Association ("NFA"); and
WHEREAS, SBFM is registered as a commodity pool
operator with the CFTC and is a member of the NFA; and
WHEREAS, SBFM and the Advisor wish to enter into this Agreement in
order to set forth the terms and conditions upon which the Advisor will render
and implement advisory services in connection with the conduct by the
Partnership of its commodity trading activities during the term of this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR. (a) Upon the commencement of trading
operations by the Partnership and for the period and on the terms and conditions
of this Agreement, the Advisor shall have sole authority and responsibility, as
one of the Partnership's agents and attorneys-in-fact, for directing the
investment and reinvestment of the assets and funds of the Partnership allocated
to it by the General Partner in commodity interests, including commodity futures
contracts, options and forward contracts. All such trading on behalf of the
Partnership shall be in accordance with the trading strategies and trading
policies set forth in the Offering Memorandum and Disclosure Document dated as
of April 29, 1992, as supplemented (the "Memorandum"), and as such trading
policies may be changed from time to time upon receipt by the Advisor of prior
written notice of such change and pursuant to the trading strategy selected by
SBFM to be utilized by the Advisor in managing the Partnership's assets. SBFM
has initially selected the Advisor's Diversified Program to manage the
Partnership's assets allocated to it. Any open positions or other investments at
the time of receipt of such notice of a change in trading policy shall not be
deemed to violate the changed policy and shall be closed or sold in the ordinary
course of trading. The Advisor may not change the trading policies set forth in
the Memorandum without the prior written consent of the Partnership given by
SBFM. The Advisor makes no representation or warranty that the trading to be
directed by it for the Partnership will be profitable or will not incur losses.
(b) SBFM acknowledges receipt of the Advisor's Disclosure Document
dated January 24, 1996 as filed with the CFTC. All trades made by the Advisor
for the account of the Partnership shall be made through such commodity broker
or brokers as SBFM shall direct, and the Advisor shall have no authority or
responsibility for selecting or supervising any such broker in connection with
the execution, clearance or confirmation of transactions for the Partnership or
for the negotiation of brokerage rates charged therefor. However, the Advisor,
with the prior written permission (by either original or fax copy) of SBFM, may
direct all trades in commodity futures and options to a futures commission
merchant or independent floor broker it chooses for execution with instructions
to give-up the trades to the broker designated by SBFM, provided that the
futures commission merchant or independent floor broker and any give-up or floor
brokerage fees are approved in advance by SBFM. All give-up or similar fees
relating to the foregoing shall be paid by the Partnership after all parties
have executed the relevant give-up agreements (by either original or fax copy).
(c) The initial allocation of the Partnership's assets to the
Advisor will be made to the Advisor's Diversified Program. In the event the
Advisor wishes to use a trading system or methodology other than or in addition
to the system or methodology outlined in the Memorandum in connection with its
trading for the Partnership, either in whole or in part, it may not do so unless
the Advisor gives SBFM prior written notice of its intention to utilize such
different trading system or methodology and SBFM consents thereto in writing. In
addition, the Advisor will provide five days' prior written notice to SBFM of
any change in the trading system or methodology to be utilized for the
Partnership which the Advisor deems material. If the Advisor deems such change
in system or methodology or in markets traded to be material, the changed system
or methodology or markets traded will not be utilized for the Partnership
without the prior written consent of SBFM. In addition, the Advisor will notify
SBFM of any changes to the trading system or methodology that would require a
change in the description of the trading strategy or methods described in the
Memorandum. Further, the Advisor will provide the Partnership with a current
list of all commodity interests to be traded for the Partnership's account and
will not trade any additional commodity interests for such account without
providing notice thereof to SBFM and receiving SBFM's written approval. The
Advisor also agrees to provide SBFM, on a monthly basis, with a written report
of the assets under the Advisor's management together with all other matters
deemed by the Advisor to be material changes to its business not previously
reported to SBFM.
(d) The Advisor agrees to make all material disclosures to the
Partnership regarding itself and its principals as defined in Part 4 of the
CFTC's regulations ("principals"), shareholders, directors, officers and
employees, their trading performance and general trading methods, its customer
accounts (but not the identities of or identifying information with respect to
its customers) and otherwise as are required in the reasonable judgment of SBFM
to be made in any filings required by Federal or state law or NFA rule or order.
Notwithstanding Sections 1(d) and 4(d) of this Agreement, the Advisor is not
required to disclose the actual trading results of proprietary accounts of the
Advisor or its principals unless SBFM reasonably determines that such disclosure
is required in order to fulfill its fiduciary obligations to the Partnership or
the reporting, filing or other obligations imposed on it by Federal or state law
or NFA rule or order. The Partnership and SBFM acknowledge that the trading
advice to be provided by the Advisor is a property right belonging to the
Advisor and that they will keep all such advice confidential. Further, SBFM
agrees to treat as confidential any results of proprietary accounts and/or
proprietary information with respect to trading systems obtained from the
Advisor.
(e) The Advisor understands and agrees that SBFM may designate other
trading advisors for the Partnership and apportion or reapportion to such other
trading advisors the management of an amount of Net Assets (as defined in
Section 3(b) hereof) as it shall determine in its absolute discretion. The
designation of other trading advisors and the apportionment or reapportionment
of Net Assets to any such trading advisors pursuant to this Section 1 shall
neither terminate this Agreement nor modify in any regard the respective rights
and obligations of the parties hereunder.
(f) SBFM may, from time to time, in its absolute discretion, select
additional trading advisors and reapportion funds among the trading advisors for
the Partnership as it deems appropriate. SBFM shall use its best efforts to make
reapportionments, if any, as of the first day of a month. The Advisor agrees
that it may be called upon at any time promptly to liquidate positions in SBFM's
sole discretion so that SBFM may reallocate the Partnership's assets, meet
margin calls on the Partnership's account, fund redemptions, or for any other
reason, except that SBFM will not require the liquidation of specific positions
by the Advisor. SBFM will use its best efforts to give two days' prior notice to
the Advisor of any reallocations or liquidations.
(g) The Advisor will not be liable for trading losses in the
Partnership's account including losses caused by errors; provided, however, that
(i) the Advisor will be liable to the Partnership with respect to losses
incurred due to errors committed or caused by it or any of its principals or
employees in communicating improper trading instructions or orders to any broker
on behalf of the Partnership and (ii) the Advisor will be liable to the
Partnership with respect to losses incurred due to errors committed or caused by
any executing broker (other than any SBFM affiliate) selected by the Advisor,
(it also being understood that SBFM, with the assistance of the Advisor, will
first attempt to recover such losses from the executing broker). The Advisor
will not be responsible for losses caused by circumstances outside the Advisor's
control.
2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the Advisor
shall be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Partnership in any way and shall not be deemed an agent, promoter or sponsor of
the Partnership, SBFM, or any other trading advisor. The Advisor shall not be
responsible to the Partnership, the General Partner, any trading advisor or any
limited partners for any acts or omissions of any other trading advisor no
longer acting as an advisor to the Partnership.
3. COMPENSATION. (a) In consideration of and as compensation for all
of the services to be rendered by the Advisor to the Partnership under this
Agreement, the Partnership shall pay the Advisor (i) an incentive fee payable
quarterly equal to 20% of New Trading Profits (as such term is defined below)
earned by the Advisor for the Partnership and (ii) a monthly fee for
professional management services equal to 1/6 of 1% (2% per year) of the
month-end Net Assets of the Partnership allocated to the Advisor.
(b) "Net Assets" shall have the meaning set forth in Paragraph
7(d)(1) of the Limited Partnership Agreement dated as of January 30, 1992 and
without regard to further amendments thereto, provided that in determining the
Net Assets of the Partnership on any date, no adjustment shall be made to
reflect any distributions, redemptions or incentive fees payable as of the date
of such determination.
(c) "New Trading Profits" shall mean the excess, if any, of Net
Assets managed by the Advisor at the end of the fiscal period over Net Assets
managed by the Advisor at the end of the highest previous fiscal period or Net
Assets allocated to the Advisor 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, reallocations or capital
distributions, if any, made during the fiscal period decreased by interest or
other income, not directly related to trading activity, earned on the
Partnership's assets during the fiscal period, whether the assets are held
separately or in margin accounts. Ongoing expenses will be attributed to the
Advisor based on the Advisor's proportionate share of Net Assets. Ongoing
expenses above will not include expenses of litigation not involving the
activities of the Advisor on behalf of the Partnership. Ongoing expenses include
offering and organizational expenses of the Partnership. The first incentive fee
shall be paid as of September 30, 1996, which fee shall be based on New Trading
Profits earned from the commencement of trading operations by the Advisor
through the September 30, 1996. Interest income earned, if any, will not be
taken into account in computing New Trading Profits earned by the Advisor. If
Net Assets allocated to the Advisor are reduced due to redemptions,
distributions or reallocations (net of additions), there will be a corresponding
proportional reduction in the related loss carryforward amount that must be
recouped before the Advisor is eligible to receive another incentive fee.
(d) Quarterly incentive fees and monthly management fees shall be
paid within twenty (20) business days following the end of the period, as the
case may be, for which such fee is payable. In the event of the termination of
this Agreement as of any date which shall not be the end of a fiscal quarter or
a calendar month, as the case may be, the quarterly incentive fee shall be
computed as if the effective date of termination were the last day of the then
current quarter and the monthly management fee shall be prorated to the
effective date of termination. If, during any month, the Partnership does not
conduct business operations or the Advisor is unable to provide the services
contemplated herein for more than two successive business days, the monthly
management fee shall be prorated by the ratio which the number of business days
during which SBFM conducted the Partnership's business operations or utilized
the Advisor's services bears in the month to the total number of business days
in such month.
(e) The provisions of this Paragraph 3 shall survive the termination
of this Agreement.
4. RIGHT TO ENGAGE IN OTHER ACTIVITIES. (a) The services provided by
the Advisor hereunder are not to be deemed exclusive. SBFM on its own behalf and
on behalf of the Partnership acknowledges that, subject to the terms of this
Agreement, the Advisor and its officers, directors, employees and
shareholder(s), may render advisory, consulting and management services to other
clients and accounts. The Advisor and its officers, directors, employees and
shareholder(s) shall be free to trade for their own accounts and to advise other
investors and manage other commodity accounts during the term of this Agreement
and to use the same information, computer programs and trading strategies,
programs or formulas which they obtain, produce or utilize in the performance of
services to SBFM for the Partnership. However, the Advisor represents, warrants
and agrees that it believes the rendering of such consulting, advisory and
management services to other accounts and entities will not require any material
change in the Advisor's basic trading strategies and will not affect the
capacity of the Advisor to continue to render services to SBFM for the
Partnership of the quality and nature contemplated by this Agreement.
(b) If, at any time during the term of this Agreement, the Advisor
is required to aggregate the Partnership's commodity positions with the
positions of any other person for purposes of applying CFTC- or exchange-imposed
speculative position limits, the Advisor agrees that it will promptly notify
SBFM if the Partnership's positions are included in an aggregate amount which
exceeds the applicable speculative position limit. The Advisor agrees that, if
its trading recommendations are altered because of the application of any
speculative position limits, it will not modify the trading instructions with
respect to the Partnership's account in such manner as to affect the Partnership
substantially disproportionately as compared with the Advisor's other accounts.
The Advisor further represents, warrants and agrees that under no circumstances
will it knowingly or deliberately use trading strategies or methods for the
Partnership that are inferior to strategies or methods employed for any other
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account in any manner,
it being acknowledged, however, that different trading strategies or methods may
be utilized for differing sizes of accounts, accounts with different trading
policies, accounts experiencing differing inflows or outflows of equity,
accounts which commence trading at different times, accounts which have
different portfolios or different fiscal years, accounts utilizing different
executing brokers and accounts with other differences, and that such differences
may cause divergent trading results.
(c) It is acknowledged that the Advisor and/or its officers,
employees, directors and shareholder(s) presently act, and it is agreed that
they may continue to act, as advisor for other accounts managed by them, and may
continue to receive compensation with respect to services for such accounts in
amounts which may be more or less than the amounts received from the
Partnership.
(d) The Advisor agrees that it shall make such information available
to SBFM respecting the performance of the Partnership's account as compared to
the performance of other accounts managed by the Advisor or its principals as
shall be reasonably requested by SBFM. The Advisor presently believes and
represents that existing speculative position limits will not materially
adversely affect its ability to manage the Partnership's account given the
potential size of the Partnership's account and the Advisor's and its
principals' current accounts and all proposed accounts for which they have
contracted to act as trading manager.
5. TERM. (a) This Agreement shall continue in effect until June 30,
1997. SBFM may, in its sole discretion, renew this Agreement for additional
one-year periods upon notice to the Advisor not less than 30 days prior to the
expiration of the previous period. At any time during the term of this
Agreement, SBFM may terminate this Agreement at any month-end upon 30 days'
notice to the Advisor. At any time during the term of this Agreement, SBFM may
elect to immediately terminate this Agreement upon 30 days' notice to the
Advisor if (i) the Net Asset Value per Unit shall decline as of the close of
business on any day to $400 or less; (ii) the Net Assets allocated to the
Advisor (adjusted for redemptions, distributions, withdrawals or reallocations,
if any) decline by 50% or more as of the end of a trading day from such Net
Assets' previous highest value; (iii) limited partners owning at least 50% of
the outstanding Units shall vote to require SBFM to terminate this Agreement;
(iv) the Advisor fails to comply with the terms of this Agreement; (v) SBFM, in
good faith, reasonably determines that the performance of the Advisor has been
such that SBFM's fiduciary duties to the Partnership require SBFM to terminate
this Agreement; or (vi) SBFM reasonably believes that the application of
speculative position limits will substantially affect the performance of the
Partnership. At any time during the term of this Agreement, SBFM may elect
immediately to terminate this Agreement if (i) the Advisor merges, consolidates
with another entity, sells a substantial portion of its assets, or becomes
bankrupt or insolvent, except as provided in Section 10 hereof, (ii) J. Richard
Semels dies, becomes incapacitated, leaves the employ of the Advisor, ceases to
control the Advisor or is otherwise not managing the trading programs or systems
of the Advisor, or (iii) the Advisor's registration as a commodity trading
advisor with the CFTC or its membership in the NFA or any other regulatory
authority, is terminated or suspended. This Agreement will immediately terminate
upon dissolution of the Partnership or upon cessation of trading prior to
dissolution.
(b) The Advisor may terminate this Agreement by giving not less than
30 days' notice to SBFM (i) in the event that the trading policies of the
Partnership as set forth in the Memorandum are changed in such manner that the
Advisor reasonably believes will adversely affect the performance of its trading
strategies; (ii) after June 30, 1997; or (iii) in the event that the General
Partner or Partnership fails to comply with the terms of this Agreement. The
Advisor may immediately terminate this Agreement if SBFM's registration as a
commodity pool operator or its membership in the NFA is terminated or suspended.
(c) Except as otherwise provided in this Agreement, any termination
of this Agreement in accordance with this Paragraph 5 or Paragraph 1(e) shall be
without penalty or liability to any party, except for any fees due to the
Advisor pursuant to Section 3 hereof.
6. INDEMNIFICATION. (a)(i) In any threatened, pending or completed
action, suit, or proceeding to which the Advisor was or is a party or is
threatened to be made a party arising out of or in connection with this
Agreement or the management of the Partnership's assets by the Advisor or the
offering and sale of units in the Partnership, SBFM shall, subject to
subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the
Advisor against any loss, liability, damage, cost, expense (including, without
limitation, attorneys' and accountants' fees), judgments and amounts paid in
settlement actually and reasonably incurred by it in connection with such
action, suit, or proceeding if the Advisor acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Partnership, and provided that its conduct did not constitute negligence,
intentional misconduct, or a breach of its fiduciary obligations to the
Partnership as a commodity trading advisor, unless and only to the extent that
the court or administrative forum in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Advisor is fairly and reasonably
entitled to indemnity for such expenses which such court or administrative forum
shall deem proper; and further provided that no indemnification shall be
available from the Partnership if such indemnification is prohibited by Section
16 of the Partnership Agreement. The termination of any action, suit or
proceeding by judgment, order or settlement shall not, of itself, create a
presumption that the Advisor did not act in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Partnership.
(ii) Without limiting sub-paragraph (i) above, to the extent that
the Advisor has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subparagraph (i) above, or in defense
of any claim, issue or matter therein, SBFM shall indemnify it against the
expenses (including, without limitation, attorneys' and accountants' fees)
actually and reasonably incurred by it in connection therewith.
(iii) Any indemnification under subparagraph (i) above, unless
ordered by a court or administrative forum, shall be made by SBFM only as
authorized in the specific case and only upon a determination by independent
legal counsel in a written opinion that such indemnification is proper in the
circumstances because the Advisor has met the applicable standard of conduct set
forth in subparagraph (i) above. Such independent legal counsel shall be
selected by SBFM in a timely manner, subject to the Advisor's approval, which
approval shall not be unreasonably withheld. The Advisor will be deemed to have
approved SBFM's selection unless the Advisor notifies SBFM in writing, received
by SBFM within five days of SBFM's telecopying to the Advisor of the notice of
SBFM's selection, that the Advisor does not approve the selection.
(iv) In the event the Advisor is made a party to any claim, dispute
or litigation or otherwise incurs any loss or expense as a result of, or in
connection with, the Partnership's or SBFM's activities or claimed activities
unrelated to the Advisor, SBFM shall indemnify, defend and hold harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.
(v) As used in this Paragraph 6(a), the terms "Advisor" shall
include the Advisor, its principals, officers, directors, stockholders and
employees and the term "SBFM" shall include the Partnership.
(b)(i) The Advisor agrees to indemnify, defend and hold harmless
SBFM, the Partnership and their affiliates against any loss, liability, damage,
cost or expense (including, without limitation, attorneys' and accountants'
fees), judgments and amounts paid in settlement actually and reasonably incurred
by them (A) as a result of the material breach of any material representations
and warranties made by the Advisor in this Agreement, or (B) as a result of any
act or omission of the Advisor relating to the Partnership if there has been a
final judicial or regulatory determination or, in the event of a settlement of
any action or proceeding with the prior written consent of the Advisor, a
written opinion of an arbitrator pursuant to Paragraph 14 hereof, to the effect
that such acts or omissions violated the terms of this Agreement in any material
respect or involved negligence, bad faith, recklessness or intentional
misconduct on the part of the Advisor (except as otherwise provided in Section
1(g)).
(ii) In the event SBFM, the Partnership or any of their affiliates
is made a party to any claim, dispute or litigation or otherwise incurs any loss
or expense as a result of, or in connection with, the activities or claimed
activities of the Advisor or its principals, officers, directors, shareholder(s)
or employees unrelated to SBFM's or the Partnership's business, the Advisor
shall indemnify, defend and hold harmless SBFM, the Partnership or any of their
affiliates against any loss, liability, damage, cost or expense (including,
without limitation, attorneys' and accountants' fees) incurred in connection
therewith.
(iii) J. Richard Semels shall have no liability to the Partnership
or SBFM or any of their respective officers, directors, employees, partners or
affiliates under this Agreement or in connection with the transactions
contemplated by this Agreement except in the case of fraud or willful misconduct
by J.
Richard Semels.
(c) In the event that a person entitled to indemnification under
this Paragraph 6 is made a party to an action, suit or proceeding alleging both
matters for which indemnification can be made hereunder and matters for which
indemnification may not be made hereunder, such person shall be indemnified only
for that portion of the loss, liability, damage, cost or expense incurred in
such action, suit or proceeding which relates to the matters for which
indemnification can be made.
(d) None of the indemnifications contained in this Paragraph 6 shall
be applicable with respect to default judgments, confessions of judgment or
settlements entered into by the party claiming indemnification without the prior
written consent, which shall not be unreasonably withheld, of the party
obligated to indemnify such party.
(e) The provisions of this Paragraph 6 shall survive the termination
of this Agreement.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The Advisor represents and warrants that:
(i) The Advisor's Disclosure Document referred to in Paragraph 1(b)
above (i) is in full compliance with the Commodity Exchange Act and the rules
and regulations promulgated thereunder; and (ii) is accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact which is necessary to make the statements therein not
misleading.
(ii) The information with respect to the Advisor set forth in the
actual performance tables in the Advisor's Disclosure Document is based on all
of the customer accounts managed on a discretionary basis by the Advisor's
principals and/or the Advisor during the period covered by such tables and
required to be disclosed therein.
(iii) The Advisor will be acting as a commodity trading advisor with
respect to the Partnership and not as a securities investment adviser and is
duly registered with the CFTC as a commodity trading advisor, is a member of the
NFA, and is in compliance with such other registration and licensing
requirements as shall be necessary to enable it to perform its obligations
hereunder, and agrees to maintain and renew such registrations and licenses
during the term of this Agreement.
(iv) The Advisor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority to enter into this Agreement and to provide the services required
of it hereunder.
(v) The Advisor will not, by acting as a commodity trading advisor
to the Partnership, breach or cause to be breached any undertaking, agreement,
contract, statute, rule or regulation to which it is a party or by which it is
bound.
(vi) This Agreement has been duly and validly authorized, executed
and delivered by the Advisor and is a valid and binding agreement enforceable in
accordance with its terms.
(vii) At any time during the term of this Agreement that a
prospectus relating to the Units is required to be delivered in connection with
the offer and sale thereof, the Advisor agrees upon the request of SBFM to
provide the Partnership with such information as shall be necessary so that, as
to the Advisor and its principals, such prospectus is accurate.
(b) SBFM represents and warrants for itself and the
Partnership that:
(i) The Memorandum (as from time to time amended or supplemented,
which amendment or supplement is approved by the Advisor as to descriptions of
itself and its actual performance) does not contain any untrue statement of a
material fact or omit to state a material fact which is necessary to make the
statements therein not misleading.
(ii) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to perform its obligations under this Agreement.
(iii) SBFM and the Partnership have the capacity and authority to
enter into this Agreement on behalf of the Partnership.
(iv) This Agreement has been duly and validly authorized, executed
and delivered on SBFM's and the Partnership's behalf and is a valid and binding
agreement of SBFM and the Partnership enforceable in accordance with its terms.
(v) SBFM will not, by acting as General Partner to the Partnership
and the Partnership will not, breach or cause to be breached any undertaking,
agreement, contract, statute, rule or regulation to which it is a party or by
which it is bound which would materially limit or affect the performance of its
duties under this Agreement.
(vi) It is registered as a commodity pool operator and is a member
of the NFA, and it will maintain and renew such registration and membership
during the term of this Agreement.
(vii) The Partnership is a limited partnership duly organized and
validly existing under the laws of the State of New York and has full power and
authority to enter into this Agreement and to perform its obligations under this
Agreement.
8. COVENANTS OF THE ADVISOR, SBFM AND THE
PARTNERSHIP(a) The Advisor agrees as follows:
(i) In connection with its activities on behalf of the Partnership,
the Advisor will comply with all applicable rules and regulations of the CFTC
and/or the commodity exchange on which any particular transaction is executed.
(ii) The Advisor will promptly notify SBFM of the commencement of
any material suit, action or proceeding involving it, whether or not any such
suit, action or proceeding also involves SBFM.
(iii) In the placement of orders for the Partnership's account and
for the accounts of any other client, the Advisor will utilize a pre-determined,
systematic, fair and reasonable order entry system, which shall, on an overall
basis, be no less favorable to the Partnership than to any other account managed
by the Advisor. The Advisor acknowledges its obligation to review the
Partnership's positions, prices and equity in the account managed by the Advisor
daily and promptly to notify, in writing, the broker and SBFM and the
Partnership's brokers of (i) any error committed by the Advisor or its
principals or employees; (ii) any trade which the Advisor believes was not
executed in accordance with its instructions; and (iii) any discrepancy with a
value of $10,000 or more (due to differences in the positions, prices or equity
in the account) between its records and the information reported on the
account's daily and monthly broker statements.
(iv) The Advisor will demonstrate to SBFM's satisfaction its ability
to bear its responsibilities arising under this Agreement, by presentation of
supporting documentation (such as financial statements together with a
certification of accuracy or, in certain cases, the individual obligation of the
controlling principal of the Advisor for the Advisor's responsibilities
hereunder) as SBFM may reasonably request. In this connection, Advisor agrees to
execute the Promissory Note attached hereto as Rider A.
(b) SBFM agrees for itself and the Partnership that:
(i) SBFM and the Partnership will comply with all applicable rules
and regulations of the CFTC and/or the commodity exchange on which any
particular transaction is executed.
(ii) SBFM will promptly notify the Advisor of the commencement of
any material suit, action or proceeding involving it or the Partnership, whether
or not such suit, action or proceeding also involves the Advisor.
9. COMPLETE AGREEMENT. This Agreement constitutes the
entire agreement between the parties pertaining to the subject
matter hereof.
10. ASSIGNMENT. This Agreement may not be assigned by any party
without the express written consent of the other parties, except that the
Advisor may incorporate or transfer all of its assets, trading programs or
goodwill to, or merge or consolidate with, any corporation, partnership or sole
proprietorship controlled by J. Richard Semels, and may assign this Agreement to
any such corporation, partnership or sole proprietorship; provided, that said
corporation, partnership or sole proprietorship assumes all rights and
obligations of the Advisor under this Agreement and is entitled to and agrees to
use the trading method and systems of the Advisor for the benefit of the
Partnership.
11. AMENDMENT. This Agreement may not be amended
except by the written consent of the parties.
12. NOTICES. All notices, demands or requests required to be made or
delivered under this Agreement shall be in writing and delivered personally or
by registered or certified mail or expedited courier, return receipt requested,
postage prepaid, to the addresses below or to such other addresses as may be
designated by the party entitled to receive the same by notice similarly given:
If to SBFM:
Smith Barney Futures Management Inc.
390 Greenwich Street
1st Floor
New York, New York 10013
Attention: David J. Vogel
If to the Advisor:
TRENDLOGIC ASSOCIATES, INC.
One Fawcett Place
Greenwich, Connecticut 06830
Attention: Mr. J. Richard Semels
with a copy to:
Perez C. Ehrich, Esq.
Dorsey & Whitney
350 Park Avenue
New York, New York 10022
13. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
14. ARBITRATION. The parties agree that any dispute or controversy
arising out of or relating to this Agreement or the interpretation thereof,
shall be settled by arbitration in accordance with the rules, then in effect, of
the National Futures Association or, if the National Futures Association shall
refuse jurisdiction, then in accordance with the rules, then in effect, of the
American Arbitration Association; provided, however, that the power of the
arbitrator shall be limited to interpreting this Agreement as written and the
arbitrator shall state in writing his reasons for his award. Judgment upon any
award made by the arbitrator may be entered in any court of competent
jurisdiction.
15. NO THIRD PARTY BENEFICIARIES. There are no third
party beneficiaries to this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
SMITH BARNEY
FUTURES MANAGEMENT INC.
By:
David J. Vogel
President and Director
F-1000 FUTURES FUND L.P., SERIES VIII
By: Smith Barney
Futures Management Inc.
(General Partner)
By:
David J. Vogel
President and Director
TRENDLOGIC ASSOCIATES, INC.
By:
J. Richard Semels
Chairman and Chief Executive Officer
<PAGE>
RIDER A
PROMISSORY NOTE
Greenwich, Connecticut
Date: July ___, 1996
FOR VALUE RECEIVED, the undersigned, J. Richard Semels, promises
to pay on demand, to the order of F-1000 Futures Fund L.P., Series VIII (the
"Fund") or Smith Barney Futures Management Inc. ("SBFM") as the Fund or SBFM
shall elect, the sum of One Hundred Thousand Dollars ($100,000). This note shall
be callable by the Fund or SBFM only if and to the extent that TrendLogic
Associates, Inc. ("TrendLogic"), a Delaware corporation, does not have
sufficient assets to fulfill TrendLogic's obligations associated with the
Management Agreement dated June 30, 1996 among SBFM, the Fund and TrendLogic.
--------------------------
J. Richard Semels
<PAGE>
FAX TRANSMISSION
One Citicorp Center 153 East 53rd Street New York, NY 10022-4677
(212) 821-8000
ABC
Date: July 9, 1996 Time: 5:33 PM Total number of
pages (including this page): 15
Fax No. (with country and area code): 203-629-4725
Telephone No. (with country and area code): 203-625-4809
City: Greenwich State: Connecticut Country:
USA
Please include Client/Matter No. below
FROM: Rita M. Molesworth Room No.: 723
Phone No.: 8727
TO: J. Richard Semels
At Dan Dantuono's request, I am transmitting herewith for your review Rider A to
the management agreement among Smith Barney Futures Management Inc., TrendLogic
Associates, Inc. and F-1000 Futures Fund L.P., Series VIII.
Please provide me with any comments at your earliest convenience. You may reach
me at 212-821-8727.
R.M.M.
cc: Daniel A. Dantuono
Emily M. Zeigler, Esq.
Confidentiality Note:
The information contained in this facsimile ("fax") transmission is sent by an
attorney or his/her agent, is intended to be confidential and for the use of
only the individual or entity to which it is addressed. The information may be
protected by attorney/client privilege, work product immunity, or other legal
rules. If the reader of this message is not the intended recipient or agent
responsible for delivering it to the intended recipient, you are hereby notified
that any retention, dissemination, disclosure, distribution, copying, or other
use of this fax is strictly prohibited. If you have received this fax in error,
please notify us immediately by telephone in order to arrange for the
destruction of the fax or its return to us at our expense. THANK YOU.
Attention Recipient:
If Any Problems: Call(212) 821-8911
Receiving Fax Number: (212) 821-8111
Internal Use Only:
Client No.: 079647 Matter No.: 1255 Attorney No.: 09562
Please check here if you want faxed document returned to you instead of
sent to Records Department.
<PAGE>
FAX TRANSMISSION
One Citicorp Center 153 East 53rd Street New York, NY 10022-4677
(212) 821-8000
ABC
Date: July 9, 1996 Time: 5:33 PM Total number of
pages (including this page): 2
Fax No. (with country and area code): 212-723-8985
Telephone No. (with country and area code): 212-723-5416
City: New York State: New York Country: USA
Please include Client/Matter No. below
FROM: Rita M. Molesworth Room No.: 723
Phone No.: 8727
TO: Daniel A. Dantuono
Dear Dan,
I am transmitting for your review Rider A to the TrendLogic management
agreement. This was not sent to TrendLogic with the management agreement today
because we wanted you to review it first. You will note the differences from the
July 3 version: this note would be callable by SBFM or the Fund.
Please call me at 821-8727 to discuss.
Regards,
cc: Emily M. Zeigler
Confidentiality Note:
The information contained in this facsimile ("fax") transmission is sent by an
attorney or his/her agent, is intended to be confidential and for the use of
only the individual or entity to which it is addressed. The information may be
protected by attorney/client privilege, work product immunity, or other legal
rules. If the reader of this message is not the intended recipient or agent
responsible for delivering it to the intended recipient, you are hereby notified
that any retention, dissemination, disclosure, distribution, copying, or other
use of this fax is strictly prohibited. If you have received this fax in error,
please notify us immediately by telephone in order to arrange for the
destruction of the fax or its return to us at our expense. THANK YOU.
Attention Recipient:
If Any Problems: Call(212) 821-8911
Receiving Fax Number: (212) 821-8111
Internal Use Only:
Client No.: 079647 Matter No.: 1255 Attorney No.: 09562
Please check here if you want faxed document returned to you instead of
sent to Records Department.
<PAGE>
Mr. J. Richard Semels
July 9, 1996
Page 1
July 9, 1996
Via Federal Express
Mr. J. Richard Semels
Trendlogic Associates, Inc.
One Fawcett Place
Greenwich, CT 06830
RE: F-1000 Futures Fund L.P., Series VIII
Dear Mr. Semels:
Enclosed for signature please find three execution copies of the management
agreement for the Fund referenced above.
After signing the agreements, please forward them to Dan Dantuono at Smith
Barney. A fully-executed original will be returned to you after Smith Barney
signs.
Should you have any questions regarding this matter, please telephone me at
212-821-8727.
Very truly yours,
Rita M. Molesworth
cc (w/o encl.): Daniel A. Dantuono
Emily M. Zeigler, Esq.
