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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, 1997
Commission file number 33-49716
Jefferson Futures Reserve I, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3782502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
161 Maiden Lane 010006-2778
4th Floor (Zip code)
New York, N.Y.
(Address of principal executive offices)
Registrant's telephone number, including area code: (212)843-2000.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Units of Limited
Partnership Interest
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 such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
--- ---
Registrant is a limited partnership and thus has no voting stock held by
non-affiliates or otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
(1) A portion of the Prospectus dated October 27, 1992, included within
the registration Statement on Form S-1 (File No. 33-49716) effective October
27, 1992 incorporated by reference into Parts I, II, III, and IV.
(2) A portion of the Partnership's Annual Report to Limited Partners for
the fiscal year ended December 31, 1997 (the "1997 Annual Report to Limited
Partners") are incorporated by reference into Part II and Part IV.
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PART I
Item 1. Business
(a) Jefferson Futures Reserve I, L.P. (the "Fund", the "Partnership", the
"Registrant) a limited partnership that was organized on August 14, 1991,
commenced trading on May 5, 1993. The business of the Fund is the speculative
trading of commodity interests. The General Partner for the Fund Advanced
Futures Strategies, Inc. (the "General Partner"). Lamborn Securities, Inc.
("Lamborn") will act as the selling agent for the Fund. There were changes made
during 1997 that affected asset allocation to the Trading Advisors. One of the
Fund's Trading Advisors were dismissed( Crow Trading, Inc.), while a new
trading advisor was added as of April 1, 1997. ("TrendLogic Associates, Inc.)
Willowbridge Associates, Inc. remains from the previous year. In addition, the
allocation of the trading assets to Willowbridge Associates was decreased. The
commodity broker for the Fund is Fimat Futures U.S.A., Inc. (The "Broker").
The Fund will terminate on December 31, 2011, or upon any occurrence that
would require dissolution as specified in the Funds prospectus.
The Fund will pay a flat fixed-rate commission fee of .75 of 1% (9%
annually) of the Partnerships Net Assets (before deducting for management and
incentive fees) to the Broker as of the end of each month. The Broker will
then pay all executions costs connected with the clearing the Partnerships
account, including all NFA, exchange, floor brokerage, give-up, clearing, and
other fees. The Broker may then remit to the Selling Agent a potion of such
brokerage fee.
The Fund incurs ongoing legal, accounting, administrative, and other
miscellaneous costs.
The Fund has no Employees.
The fund does not engage in operations in any foreign countries other than
trading on foreign exchanges.
The Partnership terminated its management agreement with Crow Trading as
of March 31, 1997. The Partnership entered into a management agreement with
Trendlogic Associates, Inc. as of April 1, 1997. Willowbridge Associates,
Inc.'s management agreement remains in place from the previous year. Pursuant
to the terms of such agreement, the Fund, via the General Partner, pays the
Advisors a monthly management fee on
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all Net Allocated Assets (as defined in the Fund's Prospectus), in the
respective Advisor's trading account ranging from 0 - 2.5% annually. The Fund
pays the Advisors a quarterly incentive fee ranging from 10 - 17.5% of Trading
Profits (as defined in the Prospectus), if any, achieved on the Net Allocated
Assets in the respective Advisor's account as of such fiscal quarter. Trading
Profits (Loss), as defined, are equal to the net of gains and losses realized
during such fiscal quarter from transactions initiated by the Advisors, plus or
minus the net change during such fiscal quarter in unrealized gains or losses
from transactions initiated by such advisor, less the allocated portion of
fixed brokerage commission fees paid or accrued), minus any accumulated Trading
Loss relating to periods prior to such fiscal quarter (adjusted as provided
below for redemptions and distributions allocated to the Advisors during such
fiscal quarter) incurred by the Advisor since the quarter end as of which an
incentive fee was previously paid to the Advisor or, if no incentive fee has
ever been paid to the Advisor, from the inception of trading. The Cumulative
Trading Loss (CTL), if any, shall be reduced as of each month-end in which
distributions, redemptions, or reallocations from the Advisor are deemed to
have occurred. For purposes hereof, redemptions are deemed to have occurred on
the applicable Redemption Date (as defined in the Limited Partnership
Agreement) and distributions and redemptions are deemed to have occurred as of
the month-end in which such distributions were payable or such reallocations
were effected. The Fund's final prospectus dated October 27, 1992 contains a
more detailed description of the fee calculations.
The Trading Advisors and the General Partner are required to be registered
under regulations of the CFTC and the NFA, a commodity industry self-regulatory
organization. The Commodity Broker is required to be registered with the CFTC
and the NFA as a Future Commission Merchant and is subject to certain financial
and other requirements in order to maintain its registration.
Item 2. Properties.
The Fund does not own or lease any real property. The General Partner uses
its offices to perform administrative services for the Fund at no cost to the
Fund.
Item 3. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to which
the Fund or the General Partner is a party or to which any of its assets are
subject.
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Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fiscal year ended December 31, 1997
to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders
Matters.
There is no established public trading market for the Units, nor will one
develop. Units may be transferred or redeemed subject to the condition imposed
by the Agreement of Limited Partnership. As of December 31, 1997 a total of
813 Units were outstanding and held by approximately 99 Unit Holders including
26.0 Units of General Partnership interest.
The General Partner, pursuant to the Limited Partnership Agreement, has
the sole discretion in determining what distributions, if any, the Partnership
will make to its Unit Holders. The General Partner has not made any
distributions as of December 31, 1997.
Item 6. Selected Financial Data.
The following is a summary of operations and total assets of
the Partnership for the years ended December 31, 1997, December 31, 1996,
December 31, 1995, December 31, 1994, and for the period from May 5, 1993
(Inception) through December 31, 1993.
See Following Page For Selected Financial Data.
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JEFFERSON FUTURES RESERVE I. L.P.
SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
REVENUE
Gross realized gains from tra $ (1,065) 198,534 592,008 326,378 (82,990)
Change in unrealized gain/(loss)
from trading 63,253 (69,828) (64,535) (27,192) 162,185
Interest Income 23,888 21,603 0 0 4,418
------------------------------------ -----------------------
Total Revenue $ 86,076 150,309 527,473 299,186 83,613
EXPENSES
Brokerage commissions/fee $ 87,950 114,665 155,762 156,559 99,735
Advisory fees 64,816 45,315 120,790 76,129 39,519
Other administrative expenses 48,000 46,840 41,000 36,000 24,775
------------------------------------ -----------------------
Total Expenses $ 200,766 206,820 317,552 268,688 164,029
------------------------------------ -----------------------
Net income/(Loss) $ (114,690) (56,511) 209,921 30,498 (80,416)
==================================== =======================
TOTAL ASSETS $ 783,601 1,166,477 1,652,303 1,715,818 1,890,748
==================================== =======================
TOTAL LIABILITIES $ 71,089 62,034 109,379 88,327 57,129
PARTNERS CAPITAL
Limited Partner 22,769 1,027,849 1,515,452 1,603,215 1,809,871
General Partner 689,743 26,594 27,472 24,276 23,748
------------------------------------ -----------------------
TOTAL LIABILITIES AND PARTNERS CAPITAL 783,601 1,116,477 1,652,303 1,715,818 1,890,748
==================================== =======================
NUMBER OF OUTSTANDING UNITS 813 1,031 1,460 1,744 2,007
NET ASSET VALUE PER UNIT (ROUNDED) 876 1,023 1,057 934 913
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity
The Partnership's assets are on deposit in separate commodity interest
trading accounts with the Broker and are used by the Partnership as margin to
engage in commodity futures, forward contracts and other commodity interest
trading. The Broker holds such assets in either non-interest bearing bank
accounts or in securities approved by the CFTC for investment of customer
funds. The Partnership's assets held by the Broker may be used as margin
solely for the Partnership's trading. Since the Partnership's sole purpose is
to trade in commodity futures contracts and other commodity interests, it is
expected that the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in commodity futures contracts, forward
contracts and other commodity interests may be illiquid. If the price for a
futures contract for a particular commodity has increased or decreased by an
amount equal to the "daily limit", positions in the commodity can neither be
taken nor liquidated unless traders are willing to effect trades at or within
the limit. Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading. Such market conditions
could prevent the Partnership from promptly liquidating its commodity futures
positions.
There is no limitation on daily price moves in trading forward contracts
on foreign currencies. The markets for some world currencies have low trading
volume and are illiquid, which may prevent the Partnership from trading in
potentially profitable markets or prevent the Partnership from promptly
liquidating unfavorable positions in such markets and subjecting it to
substantial losses.
Either of these market conditions could result in restrictions on
redemptions.
Capital Resources
The purpose of the Fund is to trade commodity interests; as such, the Fund
does not have, nor does it expect to have, any capital assets and has no
material commitments for capital expenditures. The Fund's use of assets is
solely to provide necessary margin or premiums for, and to pay for any losses
incurred in connection with its trading activities.
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Results of Operations
Total assets of the partnership as of December 31, 1997 were $783,601, at
December 31, 1996 were $1,116,477, at December 31, 1995 were $1,652,303, at
December 31, 1994 they were $1,715,818 and as of December 31, 1993 they were
$1,890,748. The Fund permits units to be redeemed after the first six months
of operation of the Fund, with a redemption charge of 4% for any withdrawals
from 6-9 months. The other redemption fees will be 3%, 2%, 1%, and 0%, for
redemptions occurring 10-12 months, 13-15 months, 16-18 months, and after 18
months, respectively. For the period of October 5, 1993 (Six months after
inception) through December 31, 1993, there were total redemptions of $79,877.
During the year ended December 31, 1994 total redemptions were $236,626, during
1995 redemptions totaled $294,488, during 1996 redemptions totaled $431,970.
and during 1997 redemptions totaled $227,241.
As of December 31, 1997, the Net Asset Value per Unit was $876, a loss of
14.38%. At December 31, 1996, the Net Asset Value per Unit was approximately
$1,023, a loss of 3.2% over the prior years N.A.V. As of December 31, 1995, the
Net Asset Value per Unit was approximately $1,057, a gain of 13.2% over the
prior years N.A.V. At December 31, 1994, the Net Asset Value per Unit was
approximately $934, which reflects a net gain of 2.3% for the year ended
December 31, 1994. As of December 31, 1993, the Net Asset Value per Unit was
approximately $913, which reflects a net loss of 8.66% for the period of May 5,
1993 (Inception) through December 31, 1993.
In 1997, the partnership had a net loss of $114,690, with the Advisors
having a combined trading loss of $25,762. In 1996, the partnership had a net
loss of $56,511, with the Advisors having a combined trading gain of $14,041
for the same period. In 1995, the partnership had a net gain of $209,921, with
the Advisors having a combined trading gain of $371,711 for the same period.
The partnership had a net gain for the year ended December 31, 1994 of $30,498.
For the same period, the Advisors had a combined trading gain of $142,627.
The partnership had a net loss for the period ending December 31, 1993 of
$80,416. For the same period, the Advisors had a combined trading gain of
$20,450.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is attached hereto.
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The information required by this item is attached hereto.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Fund has no directors or executive officers, as it is managed by the
General Partner. There are no "significant employees" of the fund.
The Funds General Partner is Advanced Futures Strategies,
Inc., a Delaware corporation incorporated on August 1, 1991. The General
Partner has been registered with the CFTC as a Commodity Pool Operator and
Commodity Trading Advisor since October 29, 1991, and is also an NFA member.
In July 1994, Mr George D.F. Lamborn acquired all the shares of the
General Partner that he did not previously own. Mr. Lamborn has been a
majority shareholder of the General Partner since inception. There were no
material changes in the General Partner's management or activities.
The only principals of the General Partner are as follows:
George D.F. Lamborn is the President and sole principal shareholder of the
General Partner. Since December 1990, Mr. Lamborn has also served as the
President, Director and sole shareholder of Lamborn Asset Management Inc.,
("LAMI") and introducing broker guaranteed by the Broker and the parent company
of Lamborn Securities Inc. ("LSI"), the Selling Agent and an introducing broker
guaranteed by the Broker, and of Lamborn Commodity Pool Management, Inc., a
Commodity Pool Operator. Mr. Lamborn has also served in various industry
positions, including serving as President of the Futures Industry Association,
as a co-founder and Director of NFA, on several CFTC and Exchange Advisory
Committees, as well as serving as Chairman for the Coffee, Sugar & Cocoa
Exchange and the CSC Clearing Corporation. From August 1989 through December
1990, He was Chairman for Balfour Maclaine Futures, Inc., a futures commission
merchant. From 1985 through August, 1989, he served as a Senior Vice
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Chairman of Donaldson, Lufkin & Jenrette Futures, Inc. From 1981 to 1983, he
was Co-Chairman of Refco International. He previously held the positions of
Senior Managing Director at Shearson American Express and President of
Donaldson, Lufkin & Jenrette Futures. Mr. Lamborn attended Brown University.
Phillip L. Fondren, is the Vice-President and Secretary of the General
Partner. In 1975 he joined Shearson Hayden Stone and managed its Metals
Department until 1983. It was under his guidance that it developed its bullion
trading business and became an international bullion dealer. In 1983 he became
Executive Vice President of Commodity Services of Shearson Lehman Brothers. In
1987 Mr. Fondren joined Thompson McKinnon Securities, Inc. and developed its
foreign exchange, metals, and energy business. In 1989 he joined the Balfour
Maclaine Corporation to establish its foreign exchange and bullion business.
He was also responsible for managing its Portfolio Management business. From
December 1990 to December 1991, he was the President of Balfours' futures
brokerage company. In February, 1992, Mr. Fondren started his own firm, Altra
Management Services, Inc., a consulting business which provides
services in the foreign exchange and managed futures industries.
Item 11. Executive Compensation.
The Fund has no officers or directors. the General Partner or the Broker
performs the services for the Fund as described in the Prospectus.
The General Partner may receive an incentive fee from the Fund in the
amount of the difference between 20% of the Net Increase in Net Asset Value
and the actual incentive fees accrued and paid to the Advisors for trading
gains which are calculated on their allocated portion of the Fund assets.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Partnership has no directors or officers: the Limited Partnership
Agreement delegates all management of the Partnership's affairs to the General
Partner. The registrant does not know of any arrangement the operation of
which may at a subsequent date result in a change in control of the registrant.
As of December 31, 1997, the General Partner owned 26 units of General Partner
Interest valued at $22,769. As of December 31, 1996, the following persons were
known to the registrant to be beneficial owners of more than 5% of the Units
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<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature Percent of
Class Of Beneficial Owner of Beneficial Ownership Class
- -------- ------------------- ----------------------- ----------
<S> <C> <C> <C>
Limited Dr. Arthur S. Carson $ 177,772 25.78%
Partner- 3225 169th Street
ship Flushing, NY 11358
Unit
</TABLE>
Item 13. Certain Relationships and Related Transactions.
Except as described in the Prospectus and Items 11 and 12 above, there are no
relationships or related transaction which are required to be described herein
other than as described below.
The public offering of the Units began on October 27, 1992 and concluded
as of May 4, 1993. Lamborn Securities Inc. acted as the selling agent of the
Units and received commission payments from the Broker totaling $ 77,572 as of
December 1993. There were no new partnership units sold during 1996, 1995 or
1994. In addition, Advanced Computer Strategies, Inc. paid for the
organizational and offering expenses of the Partnership,
totaling $615,000. ACS was partially reimbursed for its payment of such
expenses by the Partnership from a payment of 5% of subscription proceeds and
will receive non-trading income earned on the Partnership's assets, and
redemption penalties charged for early redemption of Units up to a maximum of a
total of 15% of the Fund's subscription proceeds.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(a) (1) and (2)Financial Statements and Financial Statements Schedules.
The Financial Statements and Report of Independent Auditors listed in the
accompanying index are file as part of this annual report.
(3) Exhibits.
*3.01 Limited Partnership Agreement of the Partnership
*3.02 Certificate of Limited Partnership of the Registrant
*3.03 Request for Redemption
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<TABLE>
<S> <C>
*4.01 Specimen of Unit Certificate
*10.01 Form of Customer Agreement and Supplement to Customer Agreement
between Registrant and Brody, White & Company, Inc.
*10.02 Form of Subscription Agreement
*10.03 Form of Escrow Agreement between Registrant and United Missouri
Bank, n.a.
*10.04 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Chang-Crowell Management Corporation.
*10.05 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and G.K. Capital Management, Inc.
*10.06 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Oppenheimer Futures Trading Advisory
Services, Inc.
*10.07 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Intertrade, Inc.
*10.08 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Willowbridge Associates, Inc.
*10.08(a) Form of Amendment No. 1 to the Management Agreement among
Registrant, Advanced Computer Strategies, Inc. and Willowbridge
Associates, Inc.
**10.09 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Witter & Lester, Inc.
***10.10 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Silver Knight Investment Management, Ltd.
****10.11 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and Crow Trading, Inc.
****10.12 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and FX 500 Ltd.
</TABLE>
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<TABLE>
<S> <C>
10.13 Form of Management Agreement among Registrant, Advanced Computer
Strategies, Inc. and TrendLogic Associates, Inc.
**13.01 1993 Annual Report to Limited Partners.
***13.02 1994 Annual Report to Limited Partners.
****13.03 1995 Annual Report to Limited Partners
*****13.04 1996 Annual Report to Limited Partners
13.05 1997 Annual Report to Limited Partners
</TABLE>
* Incorporated by reference from the Partnership's Registration Statement on
Form S-1 (File No. 33-49716).
** Incorporated by reference from the Partnership's 1993 Form 10K
*** Incorporated by reference from the Partnership's 1994 Form 10K
**** Incorporated by reference from the Partnership's 1995 Form 10K
***** Incorporated by reference from the Partnership's 1996 Form 10K
Exhibits 10.13 and 13.05 are filed herewith in.
The registrant has no subsidiaries.
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 27th day of
March 1998.
JEFFERSON FUTURES RESERVE I, L.P.
(Registrant)
----------------------------------
George Lamborn, President
Advance Computer Strategists, Inc.
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 27th day of March 1998.
- -------------------------------------------
George Lamborn, President and Director
Advance Computer Strategists, Inc.
General Partner
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TRENDLOGIC ASSOCIATES, INC.
ONE FAWCETT PLACE
GREENWICH, CONNECTICUT 06830
MANAGED ACCOUNT AGREEMENT
Agreement made and entered into as of this 1st day of April, 1997, by and
between TrendLogic Associates, Inc., a Delaware corporation having offices at
One Fawcett Place, Greenwich, Connecticut 06830 (the "Advisor"), and Jefferson
Futures Reserve I, L.P. (the "Client").
WHEREAS, the Advisor offers advisory services to clients which seek
capital appreciation through trading speculatively in commodities, commodity
futures contracts, commodity options, and forward contracts (collectively,
"Futures Interests"); and
WHEREAS, the Client wishes to engage the Advisor to manage the Account on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements herein contained, the Advisor and the Client hereby
agree as follows:
1. The Client has heretofore opened or shall promptly open a Futures
Interest Trading Account ("Account") at FIMAT, a futures commission merchant or
introducing broker ("Broker") registered under the Commodity Exchange Act, as
amended (the "CE Act"), and a member of the National Futures Association (the
"NFA"). The initial size of the Account to be traded shall be $1,000,000 (the
"Nominal Account size") of which $500,000 is being deposited at the Broker
("Actual Funds"). The Client, in its sole discretion, may withdraw available
funds from the Account at any time. The Client must choose from the following
list which Portfolio is to be traded in the Account (initial one):
(i) x Diversified Portfolio (ii) Financials-Metals Portfolio
--- ---
2. During the term of this Agreement, the Advisor shall have sole
authority and responsibility for managing the Account and directing the
investment and reinvestment of the assets and funds of the Account on behalf of
the Client. The Advisor shall initiate buy, sell or spread orders for or with
respect to Futures Interests with the Broker. Futures Interests may be
purchased and sold on margin, spread or otherwise traded, and assets of the
Account may be invested in United States Government obligations (or obligations
guaranteed by the United States Government). No assurance is given and no
representation is made that the Advisor's trading advice will result in
profitable trades for the Client or that the Client will not incur losses or
that the investment objectives will be achieved. All purchases and sales of
Futures Interests made in furtherance of this Agreement shall be for the
account of and at the risk of the Client, and all expenses of the Account shall
be borne and paid by the Client.
3.(a) The Client hereby appoints the Advisor as its attorney-in-fact with
respect to the Account with exclusive authority to buy, sell (including short
sales), spread or otherwise trade in Futures Interests, including, without
limitation, foreign futures and foreign options, all at such times, in such
amounts and at such prices as the Advisor, in its sole discretion, may
determine. The Advisor shall have full authority to communicate such orders
directly to the Broker, and the Client shall, and it hereby does, authorize the
Broker to accept and execute all such orders.
(b) The Client hereby further appoints the Advisor as its
attorney-in-fact with respect to the Account with exclusive authority to enter
into, in the Client's name, place and stead, such "give-up" agreements as the
Advisor, in its sole discretion, deems necessary or appropriate.
EXHIBIT 10.13
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(c) The powers-of-attorney granted to the Advisor under this Paragraph
3 shall be continuing powers and shall continue in full force and effect unless
and until revoked by the Client by written notice to the Advisor; provided,
however, that any such revocation shall not affect any transaction initiated
prior to the receipt of such notice of revocation.
4. The Advisor's services provided hereunder are not exclusive, and
the Advisor shall be free to render similar services to others and to manage
other clients' accounts and to use the same or other information, trading
programs or formulae and trading strategies which it obtains, produces or
utilizes in the performance of services for the Client. The Advisor and its
shareholders, directors, officers, employees and affiliates (collectively,
"Affiliates") will also be permitted to trade in Futures Interests for their
own accounts, and the Client will not be permitted to inspect the records of
any such trades except to the extent required by applicable law(s). The Client
acknowledges that the advice given by the Adivsor is the confidential property
of the Advisor, and the Client will not disclose the same to third parties
without the prior written consent of the Advisor. Nothing in this Agreement
shall require the Advisor to disclose the details of its trading system.
5.(a) In consideration of and in compensation for the performance of its
services under this Agreement, the Client shall pay the Advisor a monthly
management fee, whether or not the trading for the Account is profitable and
without reduction for current withdrawals or management fees accrued or payable
as of such date, equal to a percentage of the Net Asset Value (as hereinafter
defined) of the Account as of the last day of each month. In addition to the
management fee, the Client shall pay the Advisor a quarterly incentive fee each
calendar quarter (unless otherwise agreed to) equal to a percentage of the
Account's Net New Trading Profits (as hereinafter defined), if any, achieved as
of the last day of each quarter. In the event of the termination of this
Agreement as of any date which shall not be the end of a month, the management
fee shall be prorated to the effective date of termination. In addition, in
the event of the termination of this Agreement as of any date which shall not
be the end of a calendar quarter, the incentive fee shall be computed as if the
effective date of termination were the last day of the then current quarter.
As compensation for the Advisor's services, the Client agrees to the following
advisory fee structure: 1) a monthly management fee of .2083% (insert
fraction) of 1% (approximately 2.5% annually) of the Account's Net Asset Value
(increased; if applicable, to the Nominal Account size), and 2) a quarterly
incentive fee equal to 10% of the Account's Net New Trading Profits.
(b) "Net Asset Value" of the Account shall mean the Account's total
assets including all cash less total liabilities determined in accordance with
generally accepted accounting principles, consistently applied under the
accrual method of accounting, except as set forth below:
(i) Net Asset Value shall include any unrealized profit or loss on
open securities and open Futures Interest positions;
(ii) All open securities and open Futures Interest positions shall be
calculated at their then market value which means, with respect to open Futures
Interest positions, the settlement price as determined by the exchange on which
the transaction is effected or the most recent appropriate quotation as
supplied by the clearing broker or banks through which the transaction is
effected, except that United States Treasury Bills (not futures contracts
therefor) shall be carried at cost plus accrued interest. If there are no
trades on the date of the calculation due to the operation of the daily price
fluctuation limits or due to a closing of the exchange on which the transaction
is executed, the contract will be valued at fair market value as determined by
the Advisor. Interest, if any, shall be accrued at least monthly; and
(iii) Brokerage commissions on open positions shall be considered
accrued in full (i.e., on a "round-turn" basis) as a liability of the Account.
(iv) For purposes of this paragraph, Net Asset Value shall not include
the notional amount that is the difference between the Nominal Account size and
the Actual Funds as described in paragraph 1.
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(c) Net New Trading Profits (for purposes of calculating the
Advisor's incentive fee only) during a quarter shall mean (i) the net of
profits and losses resulting from all trades in Futures Interests closed out
during such quarter, plus (ii) the net of any profits and losses on trades in
Futures Interests open as of the end of such quarter (after deduction for
accrued brokerage commissions), minus (iii) the net of any profits and losses
carried forward on open trades in Futures Interests from the preceding quarter
(after deduction for accrued round-turn brokerage commissions), minus (iv) the
Account's "Carryforward Trading Loss" (as defined in the following sentence),
if any, as of the beginning of a quarter. If the total of items (i) to (iv),
above, is negative at the end of a quarter, such amount (reduced by the trading
loss attributable to amounts withdrawn from the Account, if any) shall be the
"Carryforward Trading Loss" for the next quarter.
(d) The Client hereby agrees with the Advisor, and hereby so
instructs the Broker that the Broker shall pay the Advisor the management fees
and incentive fees out of the assets of the Account upon receipt of an invoice
from the Advisor addressed to the Client, care of the Broker, setting forth the
management fee and the incentive fee payable to the Advisor for the period to
which the invoice relates without any requirement on the part of the Broker to
review or verify such invoice. The management fee and incentive fee shall be
due and payable on or about the tenth day of the month following the period to
which they relate and in any event shall be paid within five (5) business days
of the date such fees become due and payable.
6. In the event the Advisor or any of its Affiliates incur any
losses, liabilities, damages, costs, expenses (including, without limitation,
attorneys' and accountants' fees and disbursements), judgments and amounts paid
in settlement (collectively, "Indemnification Obligations"), the Client agrees
to indemnify and hold harmless the Advisor and its Affiliates from such
Indemnification Obligations to which the Advisor and its Affiliates may become
subject, insofar as such Indemnification Obligations arise out of or relate to:
(a) the Account; (b) this Agreement; (c) the transactions contemplated
hereunder; or (d) the breach by the Client of any representations, warranties
or covenants contained in this Agreement; provided, however, that such
Indemnification Obligations set forth in clauses (a), (b) and (c) above did not
arise out of acts or omissions constituting fraud or willful, wanton or
reckless misconduct on the part of the person seeking indemnification.
Expenses shall be paid by the Client in advance of the final disposition of
such an action if the indemnified person agrees to reimburse the Client in the
event indemnification is not permitted hereunder. Except as otherwise set
forth herein, the Advisor and its Affiliates shall not be liable to the Client,
its partners or shareholders, if any, or any of its successors or permitted
assigns or any third party except by reason of acts or omissions constituting
fraud or willful, wanton or reckless misconduct on the part of the Advisor and
its Affiliates, it being understood that futures transactions made on behalf of
the Account shall be for the account and risk of the Client, and neither the
Advisor or its Affiliates or their respective principals shall have any
responsibility therefor. The indemnification provided for in this Paragraph 6
shall survive the termination or other expiration of this Agreement.
7. The Client represents and warrants to the Advisor that (a) it has
the capacity and authority to enter into this Agreement; (b) its entering into
this Agreement 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 limit or materially affect the performance of its
duties under this Agreement; (c) it is a qualified eligible client, as defined
in Regulation Section 4.7 under the CE Act; (d) it is aware of the highly
speculative nature of, and risks of loss inherent in, trading Futures Interests
and is financially capable of engaging in such trading; and (e) it has
significant additional resources beyond any funds that are now or may in the
future be deposited in the Account and that all funds in the Account represent
risk capital to the Client. The foregoing representations and warranties shall
be continuing during the term of this Agreement, and if at any time any event
has occurred which would make or tend to make any of the foregoing not true,
the Client will promptly notify the Advisor.
8. The Advisor is an independent contractor and this Agreement shall
not be deemed or construed to establish a joint venture, general partnership or
any other similar relationship between the Advisor and the Client or between
the Advisor and the Broker.
3
<PAGE> 4
9. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, whether written or oral, of the parties in
connection herewith. This Agreement may not be assigned, amended or modified
by any party without the express, prior written consent of the other party.
Any assignment without such consent shall be void. This Agreement shall
be binding upon and inure to the benefit of the parties hereto, their
successors and permitted assigns.
10. This Agreement may be terminated at any time by either party
hereto by giving written notice to the other party, but such notice shall not
affect any of the commitments made for the Account or the Client prior to such
termination. Amounts due to the Advisor shall be deducted from the Account and
paid to the Advisor immediately upon such termination. In the event of the
termination of this Agreement, the Advisor shall not establish any new
positions for the Account and unless otherwise directed by the Client shall
close out all positions and liquidate the Account in an orderly manner as
determined by the Advisor in its sole discretion.
11. All notices required to be delivered under this Agreement shall
be effective only if in writing and delivered personally or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows
(or to such other address as the party entitled to notice shall hereafter
designate in accordance with the terms hereof):
(a) If to the Advisor, to: TrendLogic Associates, Inc., One Fawcett Place,
Greenwich, CT 06830, Attn: President. With a copy to: Dorsey & Whitney LLP,
250 Park Avenue, New York, NY 10177, Attn: Michael F. Griffin, Esq.
(b) If to the Client, to : Advanced Computer Strategies, Inc., G.P. for
--------------------------------------------
Jefferson Futures Reserve I, L.P.
--------------------------------------------
61 Broadway, Suite 1650, New York, NY 10006
--------------------------------------------
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the day and year first above written.
Advanced Computer Strategies, Inc.
G.P. for Jefferson Futures Reserve I, L.P.
TRENDLOGIC ASSOCIATES, INC. ------------------------------------------
(ADVISOR) (CLIENT)
By: By: /s/
---------------------------- ----------------------------
Title: Title: President
------------------------- -------------------------
ACKNOWLEDGMENT OF RECEIPT OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges its receipt of the November 6, 1996,
Disclosure Document of TrendLogic Associates, Inc. and represents and warrants
that it has read and fully understands said document.
Advanced Computer Strategies, Inc.
(CLIENT) G.P. for Jefferson Futures Reserve I, L.P.
------------------------------------------
By: /s/
----------------------------
Title: President
-------------------------
Date: April 1, 1997
-------------------------
4
<PAGE> 1
[LETTERHEAD OF MICHAEL COGLIANESE]
INDEPENDENT AUDITOR'S REPORT
To the partners of Jefferson Futures Reserve I, L.P.
Limited Partnership:
We have audited the accompanying balance sheets of Jefferson Futures Reserve I,
L.P. as of December 31, 1997 and 1996, and the related statements of income and
partners' equity for the years ended December 31, 1997 and 1996. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferson Futures Reserve I,
L.P. at December 31, 1997 and 1996, and the results of its operations and
partners' equity for the years then ended in conformity with generally accepted
accounting principles.
/s/ Michael Coglianese
Michael Coglianese
Certified Public Accountant
Bloomingdale, Illinois
March 17, 1998
EXHIBIT 13.05
<PAGE> 2
JEFFERSON FUTURES RESERVE I, L.P.
A DELAWARE LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash held at bank $ 1,378 1,224
Amount due from brokers 718,496 1,114,779
Open Trade Equity 63,727 474
------------------------
Total Current Assets $ 783,601 1,116,477
========================
LIABILITIES & PARTNERSHIP EQUITY
CURRENT LIABILITIES
Accrued commissions $ 8,273 8,109
Accrued management fees 6,228 2,289
Accrued incentive fees 0 4,762
Accrued expenses 13,662 1,210
Redemptions payable 42,926 45,664
------------------------
Total Liabilities $ 71,089 62,034
PARTNERSHIP EQUITY
General Partner $ 22,769 26,594
Limited Partners 689,743 1,027,849
------------------------
Total Partners' Equity $ 712,512 1,054,443
------------------------
Total Liabilities & Partners' Equity $ 783,601 1,116,477
========================
</TABLE>
See Notes to Financial Statements.
<PAGE> 3
JEFFERSON FUTURES RESERVE I, L.P.
A DELAWARE LIMITED PARTNERSHIP
STATEMENT OF INCOME
Year ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
REVENUE
Gross realized gains from trading $ (1,065) 198,534
Change in unrealized gains/(loss)
from trading 63,253 (69,828)
Interest income 23,888 21,603
-----------------------
Total Revenue $ 86,076 150,309
EXPENSES
Brokerage commissions $ 81,811 107,213
Exchange and NFA fees 6,139 7,452
Management fees 25,129 29,810
Incentive fees 39,687 15,505
Other administrative expenses 48,000 46,840
-----------------------
Total Expenses $ 200,766 206,820
-----------------------
Net Income/(Loss) $(114,690) (56,511)
=======================
</TABLE>
See Notes to Financial Statements.
<PAGE> 4
JEFFERSON FUTURES RESERVE I, L.P.
A DELAWARE LIMITED PARTNERSHIP
STATEMENT OF PARTNERSHIP EQUITY
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Partners' Equity Total
------------------------------------
General Limited
------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Balance December 31, 1995 $ 27,472 1,515,452 1,542,924
Capital Contributions $ 0 0 0
Capital Withdrawals $ 0 (431,970) (431,970)
Net Income (Loss) $ (878) (55,633) (56,511)
------------------------------------
Balance December 31, 1996 $ 26,594 1,027,849 1,054,443
Year ended December 31, 1997
Capital Contributions $ 0 0 0
Capital Withdrawals $ 0 (227,241) (227,241)
Net Income (Loss) $ (3,825) (110,865) (114,690)
------------------------------------
Balance December 31, 1997 $ 22,769 689,743 712,512
====================================
1997 1996
Number of Units Outstanding 813 1,030
NAV Per Unit $ 876 1,057
</TABLE>
See Notes to Financial Statements.
<PAGE> 5
JEFFERSON FUTURES RESERVE I, L.P.
A DELAWARE LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
Note 1.
- -------
Nature of the Business and Significant Accounting Policies
Organization of the Partnership
Jefferson Futures Reserve I, L.P., a Delaware Limited Partnership, was
formed as a limited partnership under the laws of the state of Delaware
for the purpose of engaging in speculative trading of commodities,
futures and options and forward contracts in foreign currencies. The
Partnership began its operations on May 5, 1993 and will continue in
existence until December 31, 2011 or upon earlier occurrence of any
event requiring termination as prescribed in the Limited Partnership
Agreement.
The General Partner is Advanced Computer Strategies, Inc. The General
Partner is registered with the Commodities Futures Trading Commission
(CFTC) as a Commodity Pool Operator and is also a member of National
Futures Association (NFA).
Significant accounting policies:
Open trades market:
The United States commodity futures exchanges employ a "marking
to market" system of accounting for every contract's gain or loss
on a daily basis. Under this system, all futures contracts held
are valued at market, which is the settlement price determined on
the commodity exchanges as of the end of each business day. The
net gain or loss so determined on all contracts held at the close
of the last business day is taken into income for the years ended
December 31, 1997 and 1996.
In 1990, the Financial Accounting Standards Board adopted
Statement Number 105, "Disclosure of Information about Financial
Instruments with Concentrations of Credit Risk", which requires
disclosure of information concerning financial instruments with
off-balance sheet risk and financial instruments with
concentrations of credit risk.
<PAGE> 6
JEFFERSON FUTURES RESERVE I, L.P.
A DELAWARE LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
Jefferson Futures Reserve I, L.P. purchases and sells futures
and option contracts. The Fund is subject to market risk
associated with the changes in the value of the underlying
financial instruments as well as the loss of appreciation and
risk that a counterparty will fail to perform.
Income taxes:
Income taxes are not provided for by the Partnership because
taxable income (loss) of the Partnership is includable in the
income tax returns of the partners.
Statement of Cash Flows:
The Partnership has elected not to provide a statement of cash
flows as permitted by Statement of Financial Accounting Standard
Number 102 "Statement of Cash Flows".
Note 2.
- -------
Net Asset Value Per Unit:
The Unit Value at December 31, 1997 and 1996 was computed by dividing
the Partnership Capital by the number of outstanding units.
Note 3.
- -------
Limited Partnership Agreement:
The Limited Partners and General Partner share in the profits and
losses of the Partnership in proportion to the number of units or unit
equivalents held by each. However, no Limited Partner is liable for
obligations of the Partnership in excess of his capital contribution
and profits, if any, and such other amounts as he may be liable for
pursuant to the Act.
Responsibility for managing the Partnership is vested solely in the
General Partner.
The Partnership bears all expenses incurred in connection with its
trading activities, including commodity brokerage commissions and fees
payable to the Trading Advisor.
<PAGE> 7
JEFFERSON FUTURES RESERVE, L.P.
A DELAWARE LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
Note 4.
- -------
Advisory Agreement:
The Partnership has currently entered into advisory agreements with
two Trading Advisors. These agreements provide for monthly management
fees of up to 2.5% (per annum) on Net Assets allocated to each Advisor
and monthly/quarterly incentive fees ranging from 15% to 17.5% of new
net profits generated by each Advisor.
Note 5.
- -------
Agreement with Related Parties:
The General Partner will receive an incentive fee equal to 20% of the
appreciation in the net asset value of the fund, less the actual
incentive fees paid to the trading advisors. The General Partner and
its affiliates will also receive a portion of the brokerage commissions
charged to the Partnership.
Note 6.
- -------
Other Expenses:
The Partnership will pay all of the Partnership's ongoing expenses such
as legal, accounting, administrative, software, auditing, and
miscellaneous office expenses.
Note 7.
- -------
Derivative Financial Instruments and Fair Value of Financial Instruments.
A derivative financial instrument is a financial agreement whose value
is linked to, or derived from, the performance of an underlying asset.
The underlying asset can be currencies, commodities, interest rates,
stocks, or any combination. Changes in the underlying asset indirectly
affect the value of the derivative. All trading instruments are subject
to market risk the risk that future changes in market conditions may
make an instrument less valuable or more onerous. As the instruments
are recognized at fair market value, those changes directly affect
reported income.
<PAGE> 8
JEFFERSON FUTURES RESERVE, L.P.
A DELAWARE LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
Financial instruments (including derivatives) used for trading purposes
are recorded in the statement of financial condition at fair value at
the reporting date. Realized and unrealized changes in fair values are
recognized in net trading revenue in the period in which the changes
occur. Interest income arising from trading instruments is included in
the statement of operations as part of interest income.
Notional amounts do not represent the amounts exchanged by the parties
to derivatives and do not measure the Partnership's exposure to credit
or market risks. The amounts exchanged are based on the notional
amounts and other terms of the derivatives.
The Partnership engages in the speculative trading of derivative
financial instruments which includes futures contracts. Futures
contracts are commitments to either purchase or sell designated
financial instruments at a future date for a specified price and may be
settled in cash or through delivery. Initial margin requirements are
met in cash or other instruments, and changes in the contract values
are settled daily. The Partnership has funds at the Commodity broker in
segregated accounts as required by the Commodity Exchange Act, as
amended. These funds are used to meet minimum margin requirements for
all of the Partnership's open positions, as set by the exchange upon
which each futures contract is traded. These requirements are adjusted,
as needed, due to daily fluctuations in the values of the underlying
assets.
The Partnership had realized net trading gains from futures for the
year ended 1997 and 1996 of $-1,065 and $198,534 respectively, as
reported in the statement of operations. The Partnership had revenue
from the change in unrealized net trading gains of $63,253 and $-69,828
for the same period.
<TABLE>
<CAPTION>
Unrealized holdings at December 31, 1997 Fair Value Notional Value
---------- --------------
<S> <C> <C>
Futures contracts at a gain $106,055 $1,423,463
Futures contracts at a loss (42,328) 2,545,959
-------- ----------
Total $ 63,727 $3,969,422
======== ==========
</TABLE>
<PAGE> 9
To the best of my knowledge and belief, the information contained in this
document is accurate and complete.
/s/ George Lamborn
- -----------------------------------
George Lamborn, President
Advanced Computer Strategies, Inc.
General Partner and Commodity Pool Operator
Jefferson Futures Reserve, L.P.
A Delaware Limited Partnership
