Attached files
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the year ended 12-31-2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-53111
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 51-0380494
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
505 Brookfield Drive, Dover, DE 19901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 331-1532
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec 232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes [ ] No [
] N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec 229.405 of this chapter) 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. [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [X] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).
Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently
completed second fiscal quarter.: Not Applicable. There is no market for the
Units of partnership interests and none is expected to develop. The
Registrant is a commodity pool. The Units are registered to permit the
initial sale of Units at month end net asset value.
Documents Incorporated by Reference
Audited Financial Statements for Registrant filed with the United States
Securities and Exchange Commission for the years ended December 31, 1998
through 2009 at Registration Nos. 333-61217, 333-53111 and 333-59976.
Registration Statement on Form S-1 and all amendments thereto filed with the
United States Securities and Exchange Commission at Registration Nos. 333-
61217, 333-59976 and 333-170235 are incorporated by reference to Parts I, II,
III, and IV.
PART I
Item 1. Business
On September 3, 1999, the registration statement filed by Atlas Futures Fund,
L. P., (the 'Fund') with the Securities and Exchange Commission (the 'SEC'),
which incorporated the disclosure document filed with the Commodity Futures
Trading Commission (the 'CFTC') was declared effective. Offers and sales of
the Fund's limited partnership interests (the 'Units') at the initial price of
$1,000 per Unit commenced on that date to residents of the states selected by
the General Partner. On October 15, 1999, the Fund had sold in excess of the
$700,000 in face amount of Units, the amount required to break escrow and
deliver the sales proceeds to the Fund accounts to permit it to commence the
speculative trading of commodity futures. Trading commenced on November 18,
1999. On May 1, 2001, the Registrant registered $8,000,000 in additional
Units. Units are offered and sold at the net asset value per Unit ('NAV')
determined after addition of profits and deduction of losses, expenses, and
reserves, at the close on the last business day of each month. See the
financial statements for the total value of the Fund and the NAV as of the
date of the statements.
The trades for the Fund are selected and placed with the futures commission
merchant ('FCM'), i.e., clearing broker, for the account of the Fund by one or
more CTAs selected by the General Partner of the Fund. Since the inception of
trading through February 1, 2005, the Fund account was traded by a single CTA,
Clarke Capital Management, Inc. 116 W. 2nd Street, Hinsdale, Illinois 60521
(630) 323-5913. As of February 1, 2005, NuWave Investment Company, 1099 Mount
Kemble Avenue, Morristown, New Jersey 07960, Telephone: (973) 425-9192, Fax:
(973) 425-9190, E-mail: info@NuWavecorp.com was added as a CTA. As of October
1, 2007, NuWave was removed as CTA. The books and records of the trades
placed by the CTA in the Fund's trading account are kept and are available for
inspection by the Limited Partners at the office of the corporate General
Partner, 5914 N. 300 West, Fremont, IN 46737. Clarke is not paid a management
fee of the equity assigned to it to manage, but is paid an incentive fee of
twenty-five percent (25%) of New Net Profit that it generates, as that term is
defined in the Limited Partnership Agreement which governs the operation of
the Fund, payable quarterly. The Fund Limited Partnership Agreement is
included as Exhibit A to the prospectus delivered to the prospective investors
and filed as part of the Registration Statement. The Limited Partnership
Agreement defines the terms of operation of the Fund and is incorporated
herein by reference. None of the purchasers of Limited Partnership Units
('Limited Partners') has a voice in the management of the Fund or ownership in
the General Partner or the trading advisor. Reports of the NAV are sent to
the Partners within twenty days following the end of each month.
Ashley Capital Management, Inc., the corporate General Partner and Commodity
Pool Operator, is paid monthly fixed brokerage commissions of eleven twelfths
of one percent (11/12%) of the total value of the funds available for trading
in the Fund's accounts at the FCM [eleven percent (11%) per year], from which
it pays seven percent (7%) of the eleven percent (11%) to Futures Investment
Company as introducing broker, which in turn pays all clearing costs,
including pit brokerage fees, which includes floor brokerage, NFA and exchange
fees for trades. The FCM is selected by the General Partner and holds a
portion of the Fund's trading equity and places the trades as directed by the
CTA pursuant to a power of attorney and advisory agreement granted by the
Fund. The CTA agreements are terminable at the will of the parties.
The sale of Units is regulated by Securities Act of 1933 and the Commodity
Exchange Act. Once the Units are issued, the operation of the Fund is subject
to regulation pursuant to the Securities and Exchange Act of 1934 and the
Commodity Exchange Act. The U.S. Securities and Exchange Commission and the
Securities Commissions and securities acts of the several States where its
Units are offered and sold have jurisdiction over the operation of the Fund.
The National Futures Association has jurisdiction over the operation of the
General Partner and the Commodity Trading Advisors. This regulatory structure
is not intended, nor does it, protect investors from the risks inherent in the
trading of futures and options.
2
On October 29, 2010, the Registrant filed a registration statement to register
$10,000,000 in Units which, upon effectiveness, will be used to offer such
Units for sale to the public under similar terms to the previous offering;
however, there will be compensation to the affiliated selling agent, Futures
Investment Company, of an up front selling commission of 1% calculated on the
gross subscription amount in addition to $2,000 paid by the Fund for legal
fees associated with the review of the offering by the Financial Industry
Regulatory Authority ("FINRA"). until Such offering will continue until the
total dollar amount of Units is sold, or the offering terminates as permitted
or required by the terms of the Limited Partnership Agreement and the rules
and regulations of the SEC.
Item 1A. Risk Factors
The trading of futures, options on futures and other commodities related
investments is highly speculative and risky. You should make an investment in
the Fund only after consulting with independent, qualified sources of
investment and tax advice and only if your financial condition will permit you
to bear the risk of a total loss of your investment. You should consider an
investment in the Units only as a long-term investment. Moreover, to evaluate
the risks of this investment properly, you must familiarize yourself with the
relevant terms and concepts relating to commodities trading and the regulation
of commodities trading, which are discussed in the Risk Factors section of the
Prospectus, which is incorporated herein by reference.
You should carefully consider all the information we have included or
incorporated by reference in this Form 10-K and our subsequent periodic
filings with the SEC. In particular, you should carefully consider the risk
factors described above and read the risks and uncertainties as set forth in
the 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' Section of this Form 10-K. Any of the heretofore mentioned
risks and uncertainties could materially adversely affect the Fund, its
trading activities, operating results, financial condition and Net Asset Value
and therefore could negatively impact the value of your investment. You should
not invest in the Units unless you can afford to lose all of your investment.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The general partner has sole authority to determine the percentage of Fund
assets that will be held on deposit with the futures commission merchant
(FCM), used for other investments, and held in bank accounts to pay current
obligations. As of December 31, 2010, the Fund maintained approximately: 44%
of its assets in a Treasury Direct Account maintained with the United States
Department of the Treasury, 45% at the futures commission merchant (FCM) to be
available for trading by the trading advisor, and 9% in a cash management fund
that invests only in U.S. Treasurys and has high liquidity. All such accounts
are held in the name of the partnership and not commingled with those of any
other entity. Approximately 2% of the previous month's net assets are
retained in the Fund's bank accounts to pay expenses and redemptions.
Throughout the periods covered by this report, the FCM was MF Global Inc. (see
Subsequent Events, below), which is a member of the National Futures
Association and registered with the Commodity Futures Trading Commission
pursuant to the Commodity Exchange Act as a FCM. The trading of futures,
options on futures and other commodities is highly speculative and the Fund
has an unlimited risk of loss, including the pledge of all of its assets to
the FCM to secure the losses on the trades made on its behalf by the commodity
trading advisor or advisors selected, from time to time, by the General
Partner.
Subsequent Events: Effective February 10, 2011, the trades selected by the
Fund's trading advisor, Clarke Capital Management, Inc., began to be cleared
by Vision Financial Markets LLC. Trades continue to be introduced by Futures
Investment Company. No further trades will be placed through MF Global Inc.
All trading decisions continue to be made by Clarke and this change will not
have any impact on its trading decisions.
3
Item 3. Legal Proceedings
There have been no legal proceedings against the Fund, its General Partner,
the CTA, the IB or any of their Affiliates, directors or officers. The FCM,
MF Global Inc. ('MFG'), (MFG was formerly known as Man Financial Inc. ('MFI')
until the change of name to MFG was effected on July 19, 2007), has had the
following described reportable events, none of which, in the opinion of the
FCM, is material to the performance of the FCM on behalf of the Fund's account
(see Subsequent Events at the end of this section):
In May 2006, MFI was sued by the Receiver for Philadelphia Alternate Asset
Fund ('PAAF') and associated entities for common law negligence, common law
fraud, violations of the Commodity Exchange Act and RICO violations (the
'Litigation'). In December 2007, without admitting any liability of any party
to the Litigation to any other party to the Litigation, the Litigation was
settled with MFI agreeing to pay $69 million, plus $6 million of legal
expenses, to the Receiver, in exchange for releases from all applicable
parties and the dismissal of the Litigation with prejudice. In a related
action, MFI settled a CFTC administrative proceeding (In the Matter of MF
Global, f/k/a Man Financial Inc., and Thomas Gilmartin) brought by the CFTC
against MFI and one of its employees for failure to supervise and
recordkeeping violations. Without admitting or denying the allegations, MFI
agreed to pay a civil monetary penalty of $2 million and accept a cease and
desist order.
On February 20, 2007, MFI settled a CFTC administrative proceeding (In the
Matter of Steven M. Camp and Man Financial Inc., CFTC Docket No. 07-04) in
which MFI was alleged to have failed to supervise one of its former associated
persons ('AP') who was charged with fraudulently soliciting customers to open
accounts at MFI. The CFTC alleged that the former AP misrepresented the
profitability of a web-based trading system and of a purported trading system
to be traded by a commodity trading advisor. Without admitting or denying the
allegation, MFI agreed to pay restitution to customers amounting to
$196,900.44 and a civil monetary penalty of $120,000. MFI also agreed to a
cease and desist order and to strengthen its supervisory system for overseeing
sales solicitations by employees in connection with accounts to be traded
under letters of direction in favor of third party system providers.
On March 6, 2008, and thereafter, 5 virtually identical proposed class action
securities suits were filed against MFG's parent, MF Global Ltd. (now, MF
Global Holdings Ltd.) ('MF Global'), certain of its officers and directors,
and Man Group plc. These suits have now been consolidated into a single
action. The complaints seek to hold defendants liable under Secs. 11, 12 and
15 of the Securities Act of 1933 by alleging that the registration statement
and prospectus issued in connection with MF Global's initial public offering
in July 2007 were materially false and misleading to the extent that
representations were made regarding MF Global's risk management policies,
procedures and systems. The allegations are based upon MF Global's disclosure
of $141.5 million in trading losses incurred in a single day by an AP in his
personal trading account ('Trading Incident'), which losses MFG was
responsible to pay as an exchange clearing member. The consolidated cases
have been dismissed on a motion to dismiss by defendants. Plaintiffs have
appealed. In January 2011, the parties reached a preliminary agreement to
settle whereby MF Global will contribute $2.5 million to an overall settlement
amount of $90 million. The preliminary settlement will be subject to Court
review and final approval.
On December 17, 2009, MFG settled a CFTC administrative proceeding in
connection with the Trading Incident and three other matters without admitting
or denying any allegations and accepting a charge of failing to supervise (In
the Matter of MF Global Inc. CFTC Docket No. 10-03). The three additional
matters that were settled involved allegations that MF Global failed to
implement procedures to ensure proper transmissions of price information for
certain options that were sent to a customer, specifically that the price
indications reflected a consensus taken on [a particular] time and date and
were derived from different sources in the market place; failed to diligently
supervise the proper and accurate preparation of trading cards and failed to
maintain appropriate written authorization to conduct trades for a certain
customer. Under the Commission's order, MFG agreed to pay an aggregate civil
monetary penalty of $10 million (which it had previously accrued) and agreed
to a cease and desist order. In addition, MFG agreed to specific undertakings
related to its supervisory practices and procedures and MFG agreed that it
would engage an independent outside firm to review and assess the
implementation of the undertakings and certain recommendations that MFG
previously accepted. At the same time, MFG, without admitting or denying the
allegations made by the CME, settled a CME disciplinary action relating to the
Trading Incident by paying a fine of $495,000.
4
On August 28, 2009, Bank of Montreal ('BMO') instituted suit against MFG and
its former broker, Joseph Saab ('Saab') (as well as a firm named Optionable,
Inc. and five of its principals or employees), in the United States District
Court for the Southern District of New York. In its complaint, BMO asserts
various claims against all defendants for their alleged misrepresentation of
price quotes to BMO's Market Risk Department ('MRD') as independent quotes
when defendants knew, or should have known, that David Lee ('Lee'), BMO's
trader, created the quotes which, in circular fashion, were passed on to BMO
through MFG's broker, thereby enabling Lee substantially to overvalue his book
at BMO. BMO further alleges that MFG and Saab knew that Lee was fraudulently
misrepresenting prices in his options natural gas book and aided and abetted
his ability to do so by MFG's actions in sending price indications to the BMO
MRD, and substantially assisted Lee's breach of his fiduciary duties to BMO as
its employee. The Complaint seeks to hold all defendants jointly and
severally liable and, although it does not specify an exact damage claim, it
claims CAD 680.0 million (approximately $635.9 million) as a pre-tax loss for
BMO in its natural gas trading, claims that it would not have paid brokerage
commissions to MFG (and Optionable), would not have continued Lee and his
supervisor as employees at substantial salaries and bonuses, and would not
have incurred substantial legal costs and expenses to deal with the Lee
mispricing. MFG has made a motion to dismiss, which was denied.
In or about October 2003, MFI uncovered an apparent fraudulent scheme
conducted by third parties unrelated to MFI that may have victimized a number
of its clients. CCPM, a German Introducing Broker, introduced to MFI all the
clients that may have been victimized. An agent of CCPM, Michael Woertche
(and his asssociates), apparently engaged in a Ponzi scheme in which allegedly
unauthorized transfers from and trading in accounts maintained at MFI were
utilized to siphon money out of these accounts, on some occasions shortly
after they were established. MFI was involved in two arbitration proceedings
relating to these CCPM introduced accounts. The first arbitration involved
claims made by two claimants before a NFA panel. The second arbitration
involves claims made by four claimants before a FINRA panel. The claims in
both arbitrations are based on allegations that MFI and an employee assisted
CCPM in engaging in, or recklessly or negligently failed to prevent,
unauthorized transfers from, and trading in, accounts maintained by MFI.
Damages sought in the NFA arbitration proceeding were approximately $1,700,000
in compensatory damages, unspecified punitive damages and attorney's fees in
addition to the rescission of certain deposit agreements. The NFA arbitration
was settled for $200,000 as to one claimant and a net of $240,000 as to the
second claimant during fiscal 2008. Damages sought in the FINRA proceeding
were approximately $6,000,000 in compensatory damages and $12,000,000 in
punitive damages. During the year ended March 31, 2009, the FINRA arbitration
was settled for an aggregate of $800,000.
The Liquidation Trustee ('Trustee') for Sentinel Management Group, Inc.
('Sentinel') sued MFG in June 2009 on the theory that MFG's withdrawal of
$50.2 million within 90 days of the filing of Sentinel's bankruptcy petition
on August 17, 2007 is a voidable preference under Section 547 of the
Bankruptcy Code and, therefore, recoverable by the Trustee, along with
interest and costs.
In May 2009, investors in a venture set up by Nicholas Cosmo ('Cosmo') sued
Bank of America and MFG, among others, in the United States District Court for
the Eastern District of New York, alleging that MFG, among others, aided and
abetted Cosmo and related entities in a Ponzi scheme in which investors lost
$400 million. MFG has made a motion to dismiss which was granted and cannot be
appealed by plaintiffs until the conclusion of the case against the Bank of
America.
In December 2010, the Court-appointed receiver for Joseph Forte, L.P., ('Forte
Partnership') filed a complaint in the United States District Court for the
Eastern District of Pennsylvania, alleging that MFG was negligent in the
handling of a futures account the Forte Partnership maintained at MFG. The
Complaint alleges that as a result of MFG's negligence, Joseph Forte ('Forte')
was able to operate a Ponzi scheme in which he misappropriated at least
$25,000,000 from limited partners in the Forte Partnership. The Complaint
seeks damages 'in excess of $150,000.' MFG has not been served with the
complaint.
5
In the late spring of 2009, MFG was sued in Oklahoma State Court by customers
who were substantial investors with Mark Trimble ('Trimble') and/or
Phidippides Capital Management ('Phidippides'). Trimble and Phidippides may
have been engaged in a Ponzi scheme. Plaintiffs allege that MFG 'materially
aided and abetted' Trimble's and Phidippides' violations of the anti-fraud
provisions of the Oklahoma securities laws and they are seeking damages 'in
excess of' $10,000 each. MFG made a motion to dismiss which was granted by the
court. Plaintiffs have appealed.
In the late spring of 2009, MFG was sued in Oklahoma State Court by customers
who were substantial investors with Mark Trimble ('Trimble') and/or
Phidippides Capital Management ('Phidippides'). Trimble and Phidippides may
have been engaged in a Ponzi scheme. Plaintiffs allege that MFG 'materially
aided and abetted' Trimble's and Phidippides' violations of the anti-fraud
provisions of the Oklahoma securities laws and they are seeking damages 'in
excess of' $10,000 each. MFG made a motion to dismiss which was granted by the
court. Plaintiffs have appealed.
On August 4, 2010, MFG was added as a defendant to a consolidated class action
complaint filed against Moore Capital Management and related entities in the
United States District Court for the Southern District of New York alleging
claims of manipulation and aiding and abetting manipulation, in violation of
the Commodity Exchange Act. Specifically, the complaint alleges that, between
October 25, 2007 and June 6, 2008, Moore Capital directed MFG, as its
executing broker, to enter 'large' market on close orders (at or near the time
of the close) for platinum and palladium futures contracts, which allegedly
caused artificially inflated prices. On August 10, 2010, MFG was added as a
defendant to a related class action complaint filed against the Moore'related
entities on behalf of a class of plaintiffs who traded the physical platinum
and palladium in the relevant time frame, which alleges price fixing under the
Sherman Act and violations of the civil Racketeer Influenced and Corrupt
Organizations Act. On September 30, 2010 plaintiffs filed an amended
consolidated class action complaint that includes all of the allegations and
claims identified above on behalf of subclasses of traders of futures
contracts of platinum and palladium and physical platinum and palladium.
Plaintiffs' claimed damages have not been quantified. This matter is in its
earliest stages.
MFG and an affiliate, MF Global Market Services LLC ('Market Services'), are
currently involved in litigation with a former customer of Market Services,
Morgan Fuel & Heating Co., Inc. ('Morgan Fuel') and its principals, Anthony
Bottini, Jr., Brian Bottini and Mark Bottini (the 'Bottinis'). The litigations
arise out of trading losses incurred by Morgan Fuel in over-the-counter
derivative swap transactions, which were unconditionally guaranteed by the
Bottinis.
On October 6, 2008, Market Services commenced an arbitration against the
Bottinis to recover $8.3 million, which is the amount of the debt owed to
Market Services by Morgan Fuel after the liquidation of the swap transactions.
MF Global Market Services LLC v. Anthony Bottini, Jr., Brian Bottini and Mark
Bottini, FINRA No. 08-03673. Each of the Bottinis executed a guaranty in favor
of Market Services personally and unconditionally guaranteeing payment of the
obligations of Morgan Fuel upon written demand by Market Services. Market
Services asserted a claim of breach of contract based upon the Bottinis'
failure to honor the guarantees.
On October 21, 2008, Morgan Fuel commenced a separate arbitration proceeding
before FINRA against MFG and Market Services. Morgan Fuel claims that MFG and
Market Services caused Morgan Fuel to incur approximately $14.2 million in
trading losses. Morgan Fuel v. MFG and Market Services, FINRA No. 08-03879.
Morgan Fuel seeks recovery of $5.9 million in margin payments that it
allegedly made to Market Services and a declaration that it has no
responsibility to pay Market Services for the remaining $8.3 million in
trading losses because Market Services should not have allowed Morgan Fuel to
enter into, or maintain, the swap transactions. On MFG's motion, the Supreme
Court of the State of New York determined that there was no agreement to
arbitrate such claims. Morgan Fuel appealed and all appeals were denied.
The Bottinis also asserted a third-party claim against Morgan Fuel, which in
turn asserted a fourth-party claim against MFG, Market Services and Steven
Bellino (an MFG employee) in the arbitration proceeding commenced by Market
Services. The Supreme Court of the State of New York denied a motion to stay
the fourth party claim but the denial to stay was reversed. Morgan Fuel filed
a motion to appeal with the New York Court of Appeals which was denied.
On December 12, 2008, MFG settled three CME Group disciplinary actions
involving allegations that on a number of occasions in 2006 and 2007, MFG
employees engaged in impermissible pre-execution communications in connection
with trades executed on the e-cbot electronic trading platform, withheld
customer orders that were executable in the market for the purpose of
soliciting, and brokering contra-orders and crossed orders on the e-cbot
6
trading platform without allowing for the minimum required exposure period
between the entry of the orders. MFG was also charged with failing to properly
supervise its employees in connection with these trades. Without admitting or
denying any wrongdoing, MFG consented to an order of a CME Business Conduct
Committee Panel which found that MFG violated legacy CBOT Rule 504.00 and
Regulations 480.10 and 9B.13 and 9B.13(c) and ordered MFG to pay a $400,000
fine, cease and desist from similar conduct and, in consultation with CME
Market regulation Staff, enhance its training practices and supervisory
procedures regarding electronic trading practices.
MFG acts only as clearing broker for the Fund's futures accounts and as such
is paid commissions for executing and clearing trades. MFG has not passed
upon the adequacy or accuracy of the Fund's prospectus or this report and will
not act in any supervisory capacity with respect to the CPO or the CTA, as the
case may be, nor participate in the management of the CPO or of the Fund or of
the CTA. Therefore, investors should not rely on MFG in deciding whether or
not to participate in the Fund.
The Fund is not aware of any threatened or potential claims or legal
proceedings to which the Fund is a party or to which any of its assets are
subject. MFG has represented to the General Partner that that none of the
events it has reported will not now, or at any time in the future, interfere
with its performance as the FCM for the Fund's account.
Subsequent Events: Effective February 10, 2011, the trades selected by the
Fund's trading advisor, Clarke Capital Management, Inc., began to be cleared
by Vision Financial Markets LLC. No further trades will be placed through MF
Global Inc. There have been no legal proceedings against Vision Financial
Markets LLC or any of its affiliates, directors or officers.
Item 4. (Removed and Reserved)
N/A
PART II
Item 5. Market for Registrant's Limited Partnership Units, Related
Stockholder Matters and Issuer Purchases of Equity Securities
The Fund desires to be taxed as a partnership and not as a corporation. In
furtherance of this objective, the Limited Partnership Agreement, subject to
certain exceptions upon the death of a Limited Partner, requires all Limited
Partners to obtain the approval of the General Partner prior to the transfer
of any Units of partnership interest. Accordingly, there is no trading market
for the Fund Units and none is likely to develop. The Limited Partners must
rely upon the right of Redemption provided in the Limited Partnership
Agreement to liquidate their interest.
The Fund has fewer than 300 holders of its securities. Limited Partners are
required to represent to the issuer that they are able to understand and
accept the risks of investment in a commodity pool for which no market of
interests will develop and that the right of redemption will be the sole
expected method of withdrawal of equity from the Fund. The General Partner
has sole discretion in determining what distributions, if any, the Fund will
make to the Partners. The Fund has not made any distributions as of the date
hereof. The Fund has no securities authorized for issuance under equity
compensation plans. See the Limited Partnership Agreement attached as Exhibit
A to the Registration Statement, incorporated herein by reference, for a
complete explanation of the limitations upon transfer and right of redemption
provided to Partners.
Item 6. Selected Financial Data
The Fund is not required to pay dividends or otherwise make distributions and
none are expected. The Limited Partners must rely upon their right of
redemption to obtain their return of equity after consideration of profits, if
any, and losses from the Fund. See the Registration Statement, incorporated
herein by reference, for a complete explanation of the allocation of profits
and losses to a Limited Partner's capital account.
Following is a summary of certain financial information for the Registrant for
the period from January 1, 2006 to December 31, 2010.
7
For the Years Ended December 31,
2010 2009 2007 2008 2007 2006
Performance per unit (2)
Net unit value, beginning of the year $4,083.24 $5,404.76 $3,489.87 $4,175.12 $3,489.87 $3,357.08
Net realized and unrealized gain (loss) from
investments and foreign currency 609.02 (753.79) 1,365.97 2,355.63 1,365.97 505.12
Investment income 3.26 6.44 151.43 64.59 151.43 139.17
Expenses (1) (464.38) (574.17) (832.15) (1,190.58) (832.15) (511.50)
Net increase (decrease) for the year 147.90 (1,321.52) 685.25 1,229.64 685.25 132.79
Net unit value at the end of the year $4,231.14 $4,083.24 $4,175.12 $5,404.76 $4,175.12 $3,489.87
Net assets at the end of the year ($000) $11,248 $14,711 $18,637 $22,691 $18,637 $17,015
Total return (1) 3.62% (24.45%) 19.64% 29.45% 19.64% 3.94%
Number of units outstanding at the end of
the year 2,658.37 3,602.89 4,463.75 4,198.35 4,463.75 4,875.48
Supplemental Data:
Ratio to average net assets
Investment and other income (2) 0.08% 0.13% 4.14% 1.30% 4.14 % 4.22 %
Expenses (12.09%) (12.02%) (22.47%) (24.03%) (22.47%) (4.36%)
Total return is calculated based on the change in value of a unit during the
period. An individual partner's total return and ratios may vary from the
above total returns and ratios based on the timing of additions and
redemptions.
(1) Includes brokerage commissions
(2) For the years ended December 31, 2010, 2009, 2008 and 2007, investments in
other income and expenses and net realized and unrealized gains and losses on
commodity transactions are calculated based on a single unit outstanding
during the period. For the year ended December 31, 2006, investment and other
income and expenses are calculated using the average number of units
outstanding during the year. Net realized and unrealized gains and losses on
commodity transactions is a balancing amount necessary to reconcile the change
in net unit value.
8
The following summarized quarterly financial information presents the results
of operations for the quarterly periods during the years ended December 31,
2010 and 2009:
2010 2009
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Total Investment Gain -834,258 -38,405 1,621,977 710,299 -999,419 121,517 -1,136,120 -884,422
Net Income (Loss) -1,243,076 -395,012 1,306,698 381,672 -1,646,440 -477,424 -1,665,087 -1,341,912
Net Income (Loss) per limited partnership unit -349.81 -121.83 476.83 142.71 -393.09 -126.62 -437.54 -364.27
Net Income (Loss) per general partnership unit (if any) - - - - - - - -
Net asset value per partnership unit at the end of period. 3,733.43 3,611.60 4,088.43 4,231.14 5,011.67 4,885.05 4,447.51 4,083.24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Critical Accounting Policies and Estimates
The Fund records all investments at market value in its financial statements,
with changes in market value reported as a component of realized and change in
unrealized trading gain (loss) in the Statements of Operations. In certain
circumstances, estimates are involved in determining market value in the
absence of an active market closing price (e.g. swap and forward contracts
which are traded in the inter-bank market).
Capital Resources
The Fund will raise additional capital only through the sale of Units offered
pursuant to the continuing offering, and does not intend to raise any capital
through resale of Units once issued or borrowing. Due to the nature of the
Fund's business, it will make no capital expenditures and will have no capital
assets which are not operating capital or assets.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity futures
contracts prices during a single day by regulations referred to as 'daily
price fluctuation limits' or 'daily limits'. During a single trading day, no
trades may be executed at prices beyond the daily limit. Once the price of a
futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Similar occurrences could prevent the Fund from promptly
liquidating unfavorable positions and subject the Fund to substantial losses
which could exceed the margin initially committed to such trades. In addition,
even if commodity futures prices have not moved the daily limit, the Fund may
not be able to execute futures trades at favorable prices, if little trading
in such contracts is taking place. Other than these limitations on liquidity,
which are inherent in the Fund's commodity futures trading operations, the
Fund's assets are expected to be highly liquid.
9
The entire offering proceeds will be credited to the Fund's bank and brokerage
accounts to engage in trading activities and as reserves for that trading. The
Fund meets its margin requirements by depositing U.S. government securities or
cash or both with the futures broker and the over-the-counter counterparties.
In this way, substantially all (i.e., approximately 99% or more) of the Fund's
assets, whether used as margin for trading purposes or as reserves for such
trading, can be invested in U.S. government securities and time deposits with
U.S. banks. Investors should note that maintenance of the Fund's assets in
U.S. government securities and banks does not reduce the risk of loss from
trading futures, forward and swap contracts. The Fund receives all interest
earned on its assets. No other person shall receive any interest or other
economic benefits from the deposit of Fund assets.
Approximately 10% to 40% of the Fund's assets normally are committed as
required margin for futures contracts and held by the futures broker, although
the amount committed may vary significantly. Such assets are maintained in the
form of cash or U.S. Treasury bills in segregated accounts with the futures
broker pursuant to the Commodity Exchange Act and regulations thereunder. When
combined with the previously described assets committed to margin, a total of
up to approximately 40% of the Fund's assets may be deposited with over-the-
counter counterparties in order to initiate and maintain forward and swap
contracts. Such assets are not held in segregation or otherwise regulated
under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in
U.S. government securities or short-term time deposits with U.S.-regulated
bank affiliates of the over-the-counter counterparties. The remaining 60% to
90% of the Fund's assets are normally invested in cash equivalents, such as
U.S. Treasury bills, and held by the futures broker or the over-the-counter
counterparties.
The Fund's assets are not and will not be, directly or indirectly, commingled
with the property of any other person in violation of law or invested with or
loaned to the Fund, the General Partner or any affiliated entities.
Results of Operations
The Fund is subject to ongoing offering and operating expenses; however,
profits or losses are primarily generated by the commodity trading advisor by
methods that are proprietary to it. These results are not to be construed as
an expectation of similar profits in the future.
The initial start-up costs attendant to the sale of Units by use of a
prospectus which has been filed with the Securities and Exchange Commission
are substantial. The results of the partial year 1999 and the years 2000
through 2010 reflect the absorption of these costs by the Fund. See the
Registration Statements, incorporated by reference herein, for an explanation
of the operation of the Fund.
Registrant's average net assets during the years ended December 31, 2008, 2009
and 2010 were approximately $21,745,173 , $18,779,313 and $11,737,287 ,
respectively. The decrease in average net assets of 13.64% from 2008 to 2009
was due to operational (losses) in 2009 of $(5,130,863) and redemptions of
$(3,194,039) [offset partially by capital contributions of $345,345]. The
decrease in average net assets of 37.50% from 2009 to 2010 was primarily due
to redemptions of $(3,554,185) [offset partially by $40,361 in capital
contributions and $50,282 in operational profits].
The Fund is charged fixed brokerage commissions of 11%, which are calculated
on the Fund's total trading equity as of the beginning of each month and,
therefore, vary according to monthly trading performance, subscriptions and
redemptions. The same factors that contribute to increases or decreases in
average net assets, therefore, contribute to changes in brokerage commissions
paid.
The Limited Partnership Agreement grants solely to the General Partner the
right to select the trading advisor or advisors and to otherwise manage the
operation of the Fund. Clarke Capital Management, Inc. was responsible for
the selection of all trades during the three year period covered by this
report. Most of the operational profits and losses are directly due to the
trading activity of Clarke, though interest income also contributes. As
evidenced by the increase in net unit value since inception, from $1,000 in
October, 1999 to $4,231 as of December 31, 2010, the Clarke has been
successful overall. Over the three year period covered by this report, net
unit value changed from $4,175 as of the beginning of 2008, to $5,405 as of
December 31, 2008, to $4,083 as of December 31, 2009 to $4,231 as of December
31, 2010. Returns for the years ended December 31 2008, 2009 and 2010 of
29.45%, (24.45)% and 3.62% in 2010 resulted in a net increase of 1.34% in net
asset value over the three year period. This corresponds to results after
payment and accrual of expenses for the twelve months ended December 31, 2008,
2009 and 2010 of profits (losses) of $5,461,179 [1,226.64 per Unit],
$(5,130,863) [$(1,321.52) per Unit] and $50,282 [$147.90 per Unit],
respectively. Past performance is not necessarily indicative of future
results, however.
10
The above described performance was primarily due to the trading of Clarke,
which trades for the Fund via its proprietary methods. The general trading
strategy of all of Clarke's programs is trend following. Most, but not all,
trade initiations and liquidations are in the direction of the trend. All
Clarke programs employ techniques that utilize a number of trading models
acting independently. Each model generates its own entry and exit signals and
trades both sides of the market (long and short). With minor differences only
for long or short positions, a particular model trades all markets with the
same rules and parameters, regardless of the program. Clarke reserves the
right to make adjustments in the exact entry or exit price a model uses for
any program or pool, or to delay entry or exit on any order, in order to
attempt to reduce the impact of slippage from large block orders being
executed at the same or similar prices. The models vary from intermediate
through long-term to very long-term in timeframe focus and testing has been
done in order to select only those models that have good performance
characteristics across a wide range of conditions and complementary
performance with all other models in a program.
Clarke trades its Alpha program for the Fund, which trades approximately 37
domestic and international commodity interests utilizing twelve models with a
medium-to-long time frame, risk control and profit-taking characteristics.
Twelve of these commodity interests are either long or short interest rate
contracts, reflecting interest rates in Europe, the US, Canada, Japan and
Australia. The balance of commodity interests traded include currencies,
grains, softs, metals, meats and fuels, both foreign and domestic. These
models have been selected for their ability as a group to provide a high
return for the amount of exposure or time that a position is held. It should
be noted that there will be times when there is significant correlation
between markets within a market sector or between market sectors, possibly in
an adverse direction to positions held in the client's account. This factor
alone, although there are others, will lead to periods of extreme volatility
and possibly very large drawdowns in Fund equity. The Alpha program will, at
times, have a significantly higher margin to equity ratio than other Clarke
programs, and at other times will trade very lightly due to the selectivity of
its models.
If a large price movement occurs in a sector that a trading advisor trades,
such as agriculture, financials, metals or softs, it does not necessarily mean
that the trading advisor will engage in trades that capture such moves.
Accordingly, market movements and conditions are not necessarily correlated
with Fund performance. As always, past performance is not necessarily
indicative of future results. Notwithstanding these caveats, commencing with
the second quarter of 2011, Clarke will provide to the Fund an analysis of
sector by sector trades, which the Fund will summarize in subsequent quarterly
and annual reports filed with the SEC.
Pursuant to the Trading Advisory Agreement, the Fund pays a quarterly
incentive fee to Clarke on new net profits, or those profits achieved on a per
unit basis above the advisor's previous high water mark. See Note 5 to the
financial statements herein for the current incentive fees. As a result of
trading profits earned for the Fund in the first two quarters in 2008, Clarke
was paid total incentive fees of $2,562,761. Because Clarke has not recouped
trading losses incurred since then, it has not been paid an incentive fee in
the intervening quarters covered by this report.
Operating expenses include accounting, audit, tax, and legal fees, as well as
regulatory costs and printing and postage costs related to reports sent to
limited partners. Operating expenses during the years ended December 31, 2008,
2009 and 2010 were $187,552, $149,138 and $124,263, respectively. The
decrease over the comparative years from 2008 to 2010 is primarily due to
reduction in state registration costs and the fact that accounting costs
fluctuate with Fund net assets, which trended lower. As a percentage of net
asset value, operational expenses during the years ended December 31, 2008,
2009 and 2010 were 0.83%, 1.01% and 1.10%, respectively.
The balance of the Fund's income that does not derive from the trading
activity of Clarke comes from interest income, the rate of which tracks that
of the 13 week T-Bill. Interest income is earned on the Fund's assets, either
through investment in short-term securities or through its deposits with the
clearing broker. The amount of interest income to the Fund varies monthly
according to the prevailing short term interest rates themselves and the net
assets of the Fund, which fluctuate with Fund performance, subscriptions and
redemptions. The 13 week T-Bill rate trended lower over the three year period
covered by this report, and was on average 1.33% for the year ended December
31, 2008, 0.14% for the year ended December 31, 2009 and 0.13% for the year
ended December 31, 2010. As a percentage of net assets, interest income to
the Fund correspondingly trended lower over the same three years ended
December 31, 2008, 2009 and 2010, at 1.24%, 0.17% and 0.09%, respectively.
11
The impact of inflation with respect to the operations or on the financial
condition of the Fund is limited to its effect on interest income, inasmuch as
short term interest rate policy set by the Federal Reserve's Federal Open
Market Committee ("FOMC") is, in part, influenced by price inflation measures.
Beginning with the September 18, 2007 meeting, the FOMC began lowering the
overnight Federal Funds Target Rate from 5.25% to reach an eventual 0.00% to
0.25% target range set on December 16, 2008, where it has been kept since.
This has put significant downward pressure on 13 week T-Bill rates, which is
closely correlated to the Federal Funds rate, and is the approximate rate at
which the Fund receives interest income. Accordingly, inflation has not had a
direct material impact with respect to the Fund's operations or financial
condition, but decreased reported inflation levels over the three years
covered by this report have been concurrent with an accommodative FOMC policy,
which has in turn been concurrent with low interest income.
Off-Balance Sheet Risk
The term 'off-balance sheet risk' refers to an unrecorded potential liability
that, even though it does not appear on the balance sheet, may result in
future obligation or loss. The Fund trades in futures, forward and swap
contracts and is therefore a party to financial instruments with elements of
off-balance sheet market and credit risk. In entering into these contracts
there exists a risk to the Fund, market risk, that such contracts may be
significantly influenced by market conditions, such as interest rate
volatility, resulting in such contracts being less valuable. If the markets
should move against all of the futures interests positions of the Fund at the
same time, and if the Fund's trading advisor was unable to offset futures
interests positions of the Fund, the Fund could lose all of its assets and the
Limited Partners would realize a 100% loss. The Fund, the General Partner and
the CTAs minimize market risk through real-time monitoring of open positions,
diversification of the portfolio and maintenance of a margin-to-equity ratio
that rarely exceeds 40%.
In addition to market risk, in entering into futures, forward and swap
contracts there is a credit risk that a counterparty will not be able to meet
its obligations to the Fund. The counterparty for futures contracts traded in
the United States and on most foreign exchanges is the clearinghouse
associated with such exchange. In general, clearinghouses are backed by the
corporate members of the clearinghouse who are required to share any financial
burden resulting from the non-performance by one of their members and, as
such, should significantly reduce this credit risk. In cases where the
clearinghouse is not backed by the clearing members, like some foreign
exchanges, it is normally backed by a consortium of banks or other financial
institutions.
In the case of forward and swap contracts, which are traded on the interbank
market rather than on exchanges, the counterparty is generally a single bank
or other financial institution, rather than a group of financial institutions;
thus there may be a greater counterparty credit risk. The CTAs trade for the
Fund only with those counterparties which they believe to be creditworthy. All
positions of the Fund are valued each day on a mark-to-market basis. There can
be no assurance that any clearing member, clearinghouse or other counterparty
will be able to meet its obligations to the Fund.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The securities of the Fund are not traded and no market for the Fund
securities is expected to develop. The Fund is engaged in the speculative
trading of futures and options on futures. The risks are fully explained in
the Fund prospectus delivered to each prospective partner prior to their
investment.
Item 8. Financial Statements and Supplementary Data.
The Fund financial statements as of December 31, 2010 were audited by Patke &
Associates, Ltd., 300 Village Green Drive Ste 210, Lincolnshire, IL 60069, and
are provided in this Report beginning on page F-1. The supplementary
financial information specified by Item 302 of Regulation S-K is included in
Item 6. Selected Financial Data in this Report.
12
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Registrant has adopted procedures in connection with the operation of its
business including, but not limited to, the review of account statements sent
to the General Partner before the open of business each day that disclose the
positions held overnight in the Fund accounts, the margin to hold those
positions, and the amount of profit or loss on each position, and the net
balance of equity available in each account. The Fund brokerage account
statements and financial books and records accounts are prepared by an
independent CPA Firm and then are reviewed each quarter and audited each year
by a different independent CPA firm.
The General Partner of the Fund, under the actions of its sole principal,
Michael Pacult, has evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the
end of the period covered by this Report. Based on their evaluation, Mr.
Pacult has concluded that these disclosure controls and procedures are
effective.
Changes in Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to
evaluate annually the effectiveness of its internal controls over financial
reporting as of the end of each fiscal year, and to include a management
report assessing the effectiveness of its internal control over financial
reporting in all annual reports. There were no changes in the General
Partner's internal control over financial reporting during the quarter ended
December 31, 2010 that have materially affected, or are reasonably likely to
materially affect, internal control over financial reporting applicable to the
Fund.
Management's Annual Report on Internal Control over Financial Reporting
The General Partner is responsible for establishing and maintaining adequate
internal control over the Fund's financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act as a process designed by, or under the supervision of,
a company's principal executive and principal financial officers and effected
by a company's board of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The General Partner's internal
control over financial reporting includes those policies and procedures that:
* pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the Fund's
assets;
* provide reasonable assurance that transactions are recorded as necessary
to permit preparation of the Fund's financial statements in accordance with
generally accepted accounting principles, and that the Fund's receipts and
expenditures are being made only in accordance with authorizations of the
General Partner's management and directors; and
* provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Fund's assets that could
have a material effect on the Fund's financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
13
The Fund securities are not publicly traded so that there can be no insider
trading or leaks of confidential information to the public. All Fund money is
on deposit either with a bank or a futures commission merchant. See
Subsequent Events in Item 1 of this Report. There is an audit trail produced
by both. A certified public accountant prepares the monthly financial
statements. The Fund units are sold during the month at a net asset value to
be determined as of the close of business on the last day of trading each
month. No information related to the value of the units during the month is
available to the Fund sales force or the prospects. All quarterly financial
statements are reviewed by an independent certified public accountant who
audits the Fund financial statements at the end of each calendar year. The
Fund maintains its subscription agreements and other records for six years.
The management of the General Partner assessed the effectiveness of its
internal control over financial reporting with respect to the Fund as of
December 31, 2010. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control ' Integrated Framework. Based on its assessment,
management has concluded that, as of December 31, 2010, the General Partner's
internal control over financial reporting with respect to the Fund is
effective based on those criteria.
Item 9B. Other Information.
None.
Part III
Item 10. Directors and Executive Officers and Corporate Governance
The Fund is a Delaware Limited Partnership which acts through its corporate
and individual general partner. Accordingly, the Registrant has no Directors
or Executive Officers.
The General Partners of the Registrant are Ashley Capital Management,
Incorporated, a Delaware corporation, and Mr. Michael P. Pacult. The General
Partners are both registered with the National Futures Association as
commodity pool operators pursuant to the Commodity Exchange Act, and Mr.
Pacult, age 66, is the sole shareholder, director, registered principal and
executive officer of the corporate General Partner. The background and
qualifications of Mr. Pacult are disclosed in the Registration Statement,
incorporated herein by reference.
There has never been a material administrative, civil or criminal action
brought against the Fund, the General Partner or any of its directors,
executive officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To
the best of the Fund's knowledge, no such forms have been or are required to
be filed.
Audit Committee Financial Expert
Mr. Pacult, in his capacity as the sole principal for the General Partner of
the Fund, has determined that he qualifies as an 'audit committee financial
expert' in accordance with the applicable rules and regulations of the
Securities and Exchange Commission. He is not independent of management.
Code of Ethics
The Fund General Partner is registered with the National Futures Association
as a Commodity Pool Operator and its President, Michael P. Pacult is
registered as its principal. Both the Fund and the General Partner are
subject to Federal Commodity Exchange Act and audit for compliance and the
rules of good practice of the Commodity Futures Trading Commission and the
industry self regulatory organization, the National Futures Association.
Having said that, neither the Commodity Futures Trading Commission nor the
National Futures Association is responsible for the quality of the Fund
disclosures or its operation, as those functions are exclusively the
responsibility of the Fund and its General Partner.
14
Item 11. Executive Compensation.
Although there are no executives of the Fund, the corporate General Partner is
paid compensation that the Fund has elected to disclose on this Form 10-K.
The Fund pays its corporate General Partner fixed brokerage commissions of
eleven percent (11%) per year, payable monthly, from which it pays its
affiliated introducing broker, Futures Investment Company, seven percent (7%)
of the eleven percent (11%) to cover the cost of the trades entered by the
CTA. The corporate General Partner retains the difference between the seven
percent (7%) it pays to the introducing broker and the eleven percent (11%) it
is paid.
All compensation is disclosed in the Registration Statement, which is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
(a) The following Partners owned more than five percent (5%) of the total
equity of the Fund as of December 31, 2010:
Name Percent Ownership
None N/A
(b) As of December 31, 2010, neither the individual nor corporate General
Partner owned any Units of Limited Partnership Interests.
(c) The Limited Partnership Agreement governs the terms upon which control of
the Fund may change. No change in ownership of the Units will, alone,
determine the location of control. The Limited Partners must have 120 days
advance notice and the opportunity to redeem prior to any change in the
control from the General Partner to another general partner. Control of the
management of the Fund may never vest in one or more Limited Partners.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters. The General
Partner has sole discretion over the selection of trading advisors. Ashley
Capital Management, Inc., the corporate General Partner, is paid a fixed
commission for trades and, therefore, both General Partners have a potential
conflict in the selection of a trading advisor who makes few trades rather
than produces profits for the Fund. This conflict and others are fully
disclosed in the Registration Statement, which is incorporated herein by
reference.
Item 14. Principal Accountant Fees and Services.
Only fees to the Principal Accountant, or Auditor, and not fees for other
accounting, are required to be disclosed in this section.
(1) Audit Fees
The fees and costs paid to Patke and Associates, Ltd. for the audit of the
Fund's annual financial statements, for review of financial statements
included in the Fund's Forms 10-Q and other services normally provided in
connection with regulatory filing or engagements (i.e., consents related to
SEC registration statements) for the years ended December 31, 2010 and 2009
were $20,090 and $25,127, respectively.
(2) Audit Related Fees
None
15
(3) Tax Fees
The aggregate fees paid to Patke and Associates, Ltd. for tax compliance
services including tax compliance, tax advice, and tax planning for the years
ended December 31, 2010 and 2009 were $5,500 and $5,000, respectively.
(4) All Other Fees
None
(5) The Board of Directors of Ashley Capital Management, Inc., General
Partner of the Fund, approved all of the services described above. The Board
of Directors has determined that the payments made to its independent
certified public accountants for these services are compatible with
maintaining such auditors' independence. The Board of Directors explicitly
pre-approves all audit and non-audit services and all engagement fees and
terms.
(6) Close to 100% of the hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year were attributed to work performed by persons other than the
principal accountant's full-time permanent employees. However, all work
performed was supervised by a full-time permanent employee.
Part IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. All Financial Statements
The Financial Statements begin on page F-1 of this report.
2. Financial Statement Schedules required to be filed by Item 8 of this form,
and by paragraph (b) below.
Not applicable, not required, or included in the Financial Statements.
3. List of those Exhibits required by Item 601 of Regulation S-K (Sec 229.601
of this chapter) and by paragraph (b) below.
Incorporated by reference from the Fund's Registration Statement on Form S-1,
and all amendments at file Nos. 333-61217 and 333-59976 previously filed with
the Securities and Exchange Commission.
31.1 Certification of CEO and CFO pursuant to Section 302
32.2 Certification of CEO and CFO pursuant to Section 906
(b) Exhibits required by Item 601 of Regulation S-K (Sec 229.601 of this
chapter).
See response to 15(a)(3), above.
(c) Financial statements required by Regulation S-X (17 CFR 210) which are
excluded from the annual report to shareholders by Rule 14a-3(b) including (1)
separate financial statements of subsidiaries not consolidated and fifty
percent or less owned persons; (2) separate financial statements of affiliates
whose securities are pledged as collateral; and (3) schedules.
None.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K for the
period ended December 31, 2010, to be signed on its behalf by the undersigned,
thereunto duly authorized.
Registrant: Atlas Futures Fund, Limited Partnership
By Ashley Capital Management, Inc.
Its General Partner
By: /s/ Michael Pacult
Mr. Michael P. Pacult
Sole Director, Sole Shareholder
President and Treasurer
Date: March 30, 2011
17
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
ANNUAL REPORT
December 31, 2010
GENERAL PARTNER:
Ashley Capital Management, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Condensed Schedule of Investments - December 31, 2010 F-4
Condensed Schedule of Investments - December 31, 2009 F-5
Statements of Operations F-6
Statements of Changes in Net Assets F-7
Statements of Cash Flows F-8
Notes to the Financial Statements F-9 - F-15
Affirmation of the Commodity Pool Operator F-16
F-1
Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Partners of
Atlas Futures Fund, Limited Partnership
Dover, Delaware
We have audited the accompanying statements of assets and liabilities of Atlas
Futures Fund, Limited Partnership (a Delaware limited partnership), including
the condensed schedules of investments, as of December 31, 2010 and 2009, and
the related statements of operations, changes in net assets and cash flows for
each of the three years in the period ended December 31, 2010. 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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion of the effectiveness of the Partnership's internal
control over financial reporting. Accordingly, we do not express such an
opinion. An audit includes, examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, 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 Atlas Futures Fund, Limited
Partnership as of December 31, 2010 and 2009, and the results of its
operations, its changes in net assets and its cash flows for each of the three
years in the period ended December 31, 2010 are in conformity with accounting
principles generally accepted in the United States of America.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
February 24, 2011
300 Village Green Drive, Suite 210 *
Lincolnshire, Illinois 60069 *(847)913-5400
F-2
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
December 31, 2010 and 2009
2010 2009
Assets
Investments
Cash and cash equivalents at broker $4,513,906 $4,359,494
Net unrealized gain on open futures contracts 647,664 -
Total equity in broker trading accounts 5,161,570 4,359,494
U.S. Treasury Bills (cost $4,998,420 and $9,997,725) 4,999,789 9,998,497
Cash 196,788 120,240
Money market fund 1,001,067 501,014
Prepaid expenses 4,124 11,395
Total assets 11,363,338 14,990,640
Liabilities
Partner redemptions payable 64,059 168,311
Accrued commissions payable to related parties 36,291 86,485
Other accrued liabilities 15,052 24,366
Total liabilities 115,402 279,162
Net assets $11,247,936 $14,711,478
Analysis of net assets
Limited partners $11,247,936 $14,711,478
General partners - -
Net assets (equivalent to $4,231.14 and $4,083.24 per unit) $11,247,936 $14,711,478
Partnership units outstanding
Limited partners units outstanding 2,658.37 3,602.89
General partners units outstanding - -
Total partnership units outstanding 2,658.37 3,602.89
The accompanying notes are an integral part of the financial statements.
F-3
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Condensed Schedule of Investments
December 31, 2010
Face Value Fair Value Percent of Net Assets
United States Treasury bills
United States Treasury bills, matures
January 2011 (cost $4,998,420) $5,000,000 $4,999,789 44.45%
Futures contracts
Futures contracts held long
Agriculture $279,103 2.48%
Metals 900 0.01%
Energy 90,000 0.80%
Currency 233,955 2.08%
Total futures contracts held long 603,958 5.37%
Futures contracts held short
Currency 43,706 0.39%
Total futures contracts held short 43,706 0.39%
Net unrealized gain on open futures contracts $647,664 5.76%
The accompanying notes are an integral part of the financial statements.
F-4
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Condensed Schedule of Investments
December 31, 2009
Face Value Fair Value Percent of Net Assets
United States Treasury bills
United States Treasury bills, matures January 2010 $5,000,000 $4,999,872
United States Treasury bills, matures April 2010 5,000,000 4,998,625
Total United States Treasury bills (cost $9,997,725) $9,998,497 67.96%
The accompanying notes are an integral part of the financial statements.
F-5
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
For the Years Ended December 31, 2010, 2009 and 2008
2010 2009 2008
Investment income
Interest income $9,957 $25,287 $282,259
Total investment income 9,957 25,287 282,259
Expenses
Commission expense 1,295,025 2,108,568 2,474,512
Management fees - - -
Incentive fees - - 2,562,761
Professional fees 102,900 135,300 150,500
Other operating expenses 21,363 13,838 37,052
Total expenses 1,419,288 2,257,706 5,224,825
Net investment (loss) (1,409,331) (2,232,419) (4,942,566)
Realized and unrealized gain (loss) from investments and foreign currency
Net realized gain (loss) from:
Investments 814,678 (2,928,481) 10,385,993
Foreign currency transactions (2,729) 30,037 17,752
Net realized gain (loss) from investments and foreign currency transactions 811,949 (2,898,444) 10,403,745
Net unrealized appreciation on investments 647,664 - -
Net realized and unrealized gain (loss) from investments and foreign
currency 1,459,613 (2,898,444) 10,403,745
Net increase (decrease) in net assets resulting from operations $50,282 $(5,130,863) $5,461,179
Net income (loss) per unit (for a single unit outstanding during the entire
year)
Limited partnership unit $147.90 $(1,321.52) $1,229.64
General partnership unit $- $- $-
The accompanying notes are an integral part of the financial statements.
F-6
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
For the Years Ended December 31, 2010, 2009 and 2008
2010 2009 2008
Units Net Assets Units Net Assets Units Net Assets
Increase (decrease) in net assets from operations
Net investment (loss) $(1,409,331) $(2,232,419) $(4,942,566)
Net realized gain (loss) from investments and foreign
currency transactions 811,949 (2,898,444) 10,403,745
Net unrealized appreciation on investments 647,664 - -
Net increase (decrease) in net assets resulting
from operations 50,282 (5,130,863) 5,461,179
Capital contributions from limited partners 10.44 40,361 65.09 345,345 78.15 411,613
Redemptions by limited partners (954.96) (3,554,185) (660.55) (3,194,039) (343.56) (1,818,467)
Total increase (decrease) in net assets (944.52) (3,463,542) (595.46) (7,979,557) (265.41) 4,054,325
Net assets at the beginning of the year 3,602.89 14,711,478 4,198.35 22,691,035 4,463.76 18,636,710
Net assets at the end of the year 2,658.37 $11,247,936 3,602.89 $14,711,478 4,198.35 $22,691,035
The accompanying notes are an integral part of the financial statements.
F-7
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 2010, 2009 and 2008
2010 2009 2008
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations $50,282 $(5,130,863) $5,461,179
Adjustments to reconcile net increase (decrease) in net assets from
operations to net cash provided by (used in) operating activities:
Changes in operating assets and liabilities:
Unrealized (appreciation) on investments (647,664) - -
(Increase) decrease in prepaid expenses 7,271 (11,395) -
Decrease in interest receivable - 203 43,906
Increase (decrease) in accrued commissions payable to
related parties (50,194) (65,452) 144,593
(Decrease) in incentive fees payable - (57,490) (599,788)
Increase (decrease) in other accrued liabilities (9,314) 466 1,820
Net cash provided by (used in) operating activities (649,619) (5,264,531) 5,051,710
Cash Flows from Financing Activities
Proceeds from sale of units 40,361 345,345 411,613
Partner redemptions (3,658,437) (3,026,755) (1,871,257)
Net cash (used in) financing activities (3,618,076) (2,681,410) (1,459,644)
Net increase (decrease) in cash and cash equivalents (4,267,695) (7,945,941) 3,592,066
Cash and cash equivalents, beginning of year 14,979,245 22,925,186 19,333,120
Cash and cash equivalents, end of year $10,711,550 $14,979,245 $22,925,186
End of period cash and cash equivalents consist of:
Cash at broker $4,513,906 $4,359,494 $7,826,204
Treasury bills 4,999,789 9,998,497 14,997,985
Cash 196,788 120,240 99,988
Money market fund 1,001,067 501,014 1,009
Total cash and cash equivalents $10,711,550 $14,979,245 $22,925,186
The accompanying notes are an integral part of the financial statements.
F-8
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
1. Nature of the Business
Atlas Futures Fund, Limited Partnership (the "Fund") was formed January 12,
1998 under the laws of the state of Delaware. The Fund is engaged in the
speculative trading of futures contracts in commodities, which commenced in
October, 1999. Ashley Capital Management, Inc. (the "Corporate General
Partner") and Michael Pacult (the "Individual General Partner" and
collectively the "General Partner") are the General Partners and the commodity
pool operators ("CPO's") of the Fund. The sole registered commodity trading
advisor ("CTA") of the fund is Clarke Capital Management, Inc. ("Clarke").
The Fund has filed an S-1 registration statement to register an additional
$10,000,000 in Units. Upon effectiveness, the Units will be offered and sold
pursuant to a prospectus under similar terms to the previous offering;
however, there will be compensation to the affiliated selling agent, Futures
Investment Company, of an up front selling commission of 1% calculated on the
gross subscription amount in addition to $2,000 paid by the Fund for legal
fees associated with the review of the offering by the Financial Industry
Regulatory Authority ("FINRA").
The Fund is a registrant with the Securities and Exchange Commission ("SEC")
pursuant to the Securities Act of 1933 ("the Act"). The Fund is subject to the
regulations of the SEC and the reporting requirements of the Securities and
Exchange Act of 1934. The Fund is also subject to the regulations of the
Commodities Futures Trading Commission ("CFTC"), an agency of the U.S.
government which regulates most aspects of the commodity futures industry, the
rules of the National Futures Association and the requirements of various
commodity exchanges where the Fund executes transactions. Additionally, the
Fund is subject to the requirements of futures commission merchants ("FCM's")
and interbank market makers through which the Fund trades and regulated by
commodity exchanges and by exchange markets that may be traded by the advisor.
2. Significant Accounting Policies
Registration Costs - Costs incurred for the initial filings with the SEC,
FINRA and the states where the offering was made were accumulated, deferred
and charged against the gross proceeds of offering at the initial closing as
part of the offering expense. The Fund remains open to new partners, and
incurs costs required to retain the ability to issue new units. Such costs,
in addition to the costs of recurring annual and quarterly filings with
regulatory agencies are expensed as incurred.
Revenue Recognition - Commodity futures contracts are recorded on the trade
date and are reflected in the statement of assets and liabilities at the
difference between the original contract amount and the market value on the
last business day of the reporting period.
Market value of commodity futures contracts is based upon exchange or other
applicable market best available closing quotations.
Interest income is recognized when it is earned.
Use of Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America ("GAAP") requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
F-9
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
2. Significant Accounting Policies - Continued
Foreign Currency - The accounting records of the Fund are denominated in
U.S. dollars. Assets and liabilities denominated in currencies other than U.S.
dollars are translated into U.S. dollars at the exchange rates in effect on
the valuation date. Commodity futures contract transactions are translated
into U.S. dollars at the exchange rates on the dates of such transactions. On
the accompanying financial statements, effects of changes in exchange rates
from all transactions denominated in currencies other than U.S. dollars are
disclosed separately.
Fair Value Measurement and Disclosures - Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") 820 establishes a
fair value hierarchy which prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. The fair value hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Fund has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability, including
the Fund?s own assumptions used in determining the fair value of investments.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the
measurement date. As of and for the years ended December 31, 2010 and 2009,
the Fund did not have any Level 3 assets or liabilities.
The following table sets forth by level within the fair value hierarchy the
Fund?s investments accounted for at fair value on a recurring basis as of
December 31, 2010 and December 31, 2009.
Fair Value at December 31, 2010
Description Level 1 Level 2 Level 3 Total
Money Market Accounts $1,001,067 $- $- $1,001,067
U.S. Treasury Bills - 4,999,789 - 4,999,789
Exchange Traded - Futures Contracts 647,664 - - 647,664
Total $1,648,731 $4,999,789 $- $6,648,520
Fair Value at December 31, 2009
Description Level 1 Level 2 Level 3 Total
Money Market Accounts $501,014 $- $- $501,014
U.S. Treasury Bills - 9,998,497 - 9,998,497
Total $501,014 $9,998,497 $- $10,499,511
In January 2010, the FASB issued Accounting Standards Update No. 2010-06
("ASU 2010-06") for improving disclosure about fair value measurements. ASU
2010-06 adds new disclosure requirements about transfers into and out of
Levels 1 and 2 and separate disclosures about purchases, sales, issuances and
settlements in the reconciliation for fair value measurements using
significant unobservable inputs (Level 3). It also clarifies existing
disclosure requirements relating to the levels of disaggregation for fair
value measurement and inputs and valuation techniques used to measure fair
value. As of January 1, 2010, the Fund adopted the provisions of ASU 2010-06
except for disclosures about purchases, sales, issuances and settlements in
the rollforward of activity in Level 3 fair value measurements, which are
effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. The adoption of this guidance did not have
a material impact on the Fund?s financial statements.
Income Taxes - The Fund prepares calendar year U.S. Federal and applicable
state information tax returns and reports to the partners their allocable
shares of the Fund?s income, expenses and trading gains or losses. No
provision for income taxes has been made in the accompanying financial
statements as each partner is individually responsible for reporting income or
loss based on such partner?s respective share of the Fund?s income and
expenses as reported for income tax purposes.
Management has continued to evaluate the application of ASC 740, ?Income
Taxes" to the Fund, and has determined that ASC 740 does not have a material
impact on the Fund?s financial statements. The Fund files federal and state
tax returns. The 2007 through 2010 tax years generally remain subject to
examination by the U.S. federal and most state tax authorities.
Statement of Cash Flows - For purposes of the Statement of Cash Flows, the
Fund considers money market funds and U.S. Treasury Bills to be cash
equivalents. Net cash provided by operating activities includes no cash
payments for interest or income taxes for the years ended December 31, 2010,
2009 and 2008.
Reclassifications - Certain prior year amounts were reclassified to conform
to current year presentation.
F-10
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
3. General Partner Duties
The responsibilities of the General Partner, in addition to directing the
trading and investment activity of the Fund, include executing and filing all
necessary legal documents, statements and certificates of the Fund, retaining
independent public accountants to audit the Fund, employing attorneys to
represent the Fund, reviewing the brokerage commission rates to determine
reasonableness, maintaining the tax status of the Fund as a limited
partnership, maintaining a current list of names, addresses and numbers of
units owned by each limited partner and taking such other actions as deemed
necessary or desirable to manage the business of the Fund.
If the daily net unit value of the Fund falls to less than 50% of the
highest value earned through trading at the close of any month, then the
General Partner will immediately suspend all trading, provide all limited
partners with notice of the reduction and give all limited partners the
opportunity, for fifteen days after such notice, to redeem partnership
interests. No trading will commence until after the lapse of the fifteen day
period.
4. Limited Partnership Agreement
The Limited Partnership Agreement provides, among other things, that:
Capital Account - A capital account shall be established for each partner.
The initial balance of each partner's capital account shall be the amount of
the initial contributions to the Fund.
Monthly Allocations - Any increase or decrease in the Fund's net asset value
as of the end of a month shall be credited or charged to the capital account
of each partner in the ratio that the balance of each account bears to the
total balance of all accounts.
Any distribution from profits or partners' capital will be made solely at
the discretion of the General Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Fund's realized capital gain or loss and ordinary income or loss shall be
allocated among the partners, after having given effect to the fees and
expenses of the Fund.
Subscriptions - Investors must submit subscription agreements and funds at
least five business days prior to month end. Subscriptions must be accepted or
rejected by the General Partner within five business days. The investor also
has five business days to withdraw his subscription. Funds are deposited into
an interest bearing subscription account and will be transferred to the Fund's
account on the first business day of the month after the subscription is
accepted. Interest earned on the subscription funds will accrue to the account
of the investor.
Redemptions - After holding the investment for a minimum of twelve months, a
limited partner may request any or all of his investment be redeemed at the
net asset value as of the end of a month. The written request must be received
by the General Partner no less than ten days prior to a month end. Redemptions
will generally be paid within twenty days of the effective month end. However,
in various circumstances due to liquidity, etc. the General Partner may be
unable to comply with the request on a timely basis.
5. Fees
The Fund charged the following fees:
The Corporate General Partner is entitled to a fixed annual brokerage
commission of 11% of assets on deposit with the FCM for domestic trades plus
actual commissions charged by the FCM for trades made on foreign exchanges and
forward markets, if any. It receives 4% of the commissions and the Fund pays
the introducing broker the remaining 7%.
A quarterly incentive fee of 25% of "new net profits" is paid to Clarke.
There were no incentive fees for the years ended December 31, 2010, 2009 and
2008.
The General Partner reserves the right to change the fee structure at its
sole discretion.
F-11
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
6. Related Party Transactions
The Fund pays commissions to the Corporate General Partner and Futures
Investment Company, the introducing broker. These related parties are 100%
and 50%, respectively, owned by Michael Pacult. Related party commissions
were as follows:
Commissions included in expense:
For the Year Ended December 31,
2010 2009 2008
Corporate General Partner $470,434 $766,090 $898,144
Futures Investment Company 792,054 1,251,360 1,423,668
Total related party expenses $1,262,488 $2,017,450 $2,321,812
Commissions included in accrued expenses:
December 31, December 31,
2010 2009
Corporate General Partner $6,173 $51,924
Futures Investment Company 30,118 34,561
Total accrued commissions payable to
related parties $36,291 $86,485
In the normal course of business, the Fund has provided general
indemnifications to the General Partner, its CTA and others when they act, in
good faith, in the best interests of the Fund. The Fund is unable to develop
an estimate for future payments resulting from hypothetical claims, but
expects the risk of having to make any payments under these indemnifications
to be remote.
F-12
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
7. Trading Activities and Related Risks
The Fund is engaged in speculative trading of U.S. and foreign futures
contracts in commodities. The Fund is exposed to both market risk, the risk
arising from changes in market value of the contracts, and credit risk, the
risk of failure by another party to perform according to the terms of a
contract.
A certain portion of cash in trading accounts are pledged as collateral for
commodities trading on margin. Additional deposits may be necessary for any
loss on contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's proprietary
activities.
Each U.S. commodity exchange with the approval of the CFTC establishes
minimum margin requirements for each traded contract. The FCM may increase
the margin requirements above these minimums for any or all contracts. The
Fund maintains cash and cash equivalents to satisfy these margin requirements.
Cash and cash equivalents at December 31, 2010 and December 31, 2009 were
$10,711,550 and $14,979,245, respectively. Based upon the types and amounts of
contracts traded and the amount of liquid assets of the Fund, the General
Partner believes there is minimal risk of not being able to meet its margin
requirement.
Trading in futures contracts involves entering into contractual commitments
to purchase or sell a particular commodity at a specified date and price. The
gross or face amount of the contract, which is typically many times that of
the Fund's net assets being traded, significantly exceeds the Fund's future
cash requirements since the Fund intends to close out its open positions prior
to settlement. As a result, the Fund is generally subject only to the risk of
loss arising from the change in the value of the contracts. The market risk is
limited to the gross or face amount of the contracts held of approximately
$47,695,198 and $0 on long positions at December 31, 2010 and December 31,
2009, respectively. However, when the Fund enters into a contractual
commitment to sell commodities, it must make delivery of the underlying
commodity at the contract price and then repurchase the contract at prevailing
market prices or settle in cash. Since the repurchase price to which a
commodity can rise is unlimited, entering into commitments to sell commodities
exposes the Fund to unlimited potential risk.
Market risk is influenced by a wide variety of factors including government
programs and policies, political and economic events, the level and volatility
of interest rates, foreign currency exchange rates, the diversification
effects among the derivative instruments the Fund holds and the liquidity and
inherent volatility of the markets in which the Fund trades.
The net unrealized gains on open commodity futures contracts at December 31,
2010 and December 31, 2009 were $647,664 and $0 respectively.
Open contracts generally mature within three months of December 31, 2010.
The latest maturity for open futures contracts is in March 2011. However the
Fund intends to close all contracts prior to maturity.
F-13
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
7. Trading Activities and Related Risks - Continued
The following tables disclose the fair values of derivative and hedging
activities in the Statements of Assets and Liabilities and the Statements of
Operations.
Derivative Instruments
Statement of Assets and Liabilities
Asset Derivatives Liability Derivatives
at December31, at December 31,
Statement of Assets and Liabilities Location 2010 Fair Value 2010 Fair Value Net
Derivatives not designated as Futures contracts Net unrealized gain (loss) on open $651,883 $(4,219) $647,664
hedge instruments under ASC 815 futures contracts
Asset Derivatives Liability Derivatives
at December31, at December 31,
Statement of Assets and Liabilities Location 2009 Fair Value 2009 Fair Value Net
Derivatives not designated as Futures contracts Net unrealized gain (loss) on open $- $- $-
hedge instruments under ASC 815 futures contracts
Derivative Instruments
Statement of Operations
For the Years Ended December 31,
Line Item in the Statement of Operations 2010 2009 2008
Derivatives not designated as Futures contracts Net realized gain (loss) from investments $811,949 $(2,898,444) $10,403,745
hedge instruments under ASC 815 and foreign currency transactions
Derivatives not designated as Futures contracts Net unrealized appreciation from $647,664 $- $-
hedge instruments under ASC 815 investments
Credit risk is the possibility that a loss may occur due to the failure of a
counter party to perform according to the terms of a contract.
The Fund has a substantial portion of its assets on deposit with financial
institutions. In the event of a financial institution's insolvency, recovery
of Fund deposits may be limited to account insurance or other protection
afforded deposits.
The Fund has established procedures to actively monitor market risk and
minimize credit risk although there can be no assurance that it will succeed.
The basic market risk control procedures consist of continuously monitoring
open positions, diversification of the portfolio and maintenance of a
desirable margin-to-equity ratio. The Fund seeks to minimize credit risk
primarily by depositing and maintaining its assets at financial institutions
and brokers which it believes to be creditworthy.
8. Financial Instruments with Off-Balance Sheet Credit and Market Risk
All financial 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.
Included in the definition of financial instruments are securities,
restricted securities and derivative financial instruments. Theoretically,
the investments owned by the Fund directly are exposed to a market risk (loss)
equal to the notional value of the financial instruments purchased and
substantial liability on certain financial instruments purchased short.
Generally, financial instruments can be closed. However, if the market is not
liquid, it could prevent the timely close-out of any unfavorable positions or
require the Fund to hold those positions to maturity, regardless of the
changes in their value or the trading advisor?s investment strategies.
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise
from financial instruments exist for groups of counterparties when they have
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions.
9. 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. As the instruments are recognized at fair value, those
changes directly affect reported income.
All investment holdings are recorded in the statement of assets and
liabilities at their net asset value (fair value) at the reporting date.
Financial instruments (including derivatives) used for trading purposes are
recorded in the statement of assets and liabilities at fair value at the
reporting date. Realized and unrealized changes in fair values are recognized
in net investment gain (loss) 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 are equivalent to the aggregate face value of the
derivative financial instruments. Notional amounts do not represent the
amounts exchanged by the parties to derivatives and do not measure the Fund?s
exposure to credit or market risks. The amounts exchanged are based on the
notional amounts and other terms of the derivatives.
F-14
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2010
10. Indemnifications
In the normal course of business, the Fund enters into contracts and
agreements that contain a variety of representations and warranties and which
provide general indemnifications. The Fund?s maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Fund that have not yet occurred. The Fund expects the risk of any
future obligation under these indemnifications to be remote.
11. Subsequent Events
Effective February 10, 2011 the trades selected by Clarke began being
cleared by Vision Financial Markets LLC. Trades continue to be introduced by
Futures Investment Company. No further trades will be placed through MF Global
Inc. All trading decisions continue to be made by Clarke and this change will
not have any impact on its trading decisions.
12. Financial Highlights
For the Years Ended December 31,
2010 2009 2007 2008 2007 2006
Performance per unit (2)
Net unit value, beginning of the year $4,083.24 $5,404.76 $3,489.87 $4,175.12 $3,489.87 $3,357.08
Net realized and unrealized gain (loss) from
investments and foreign currency 609.02 (753.79) 1,365.97 2,355.63 1,365.97 505.12
Investment income 3.26 6.44 151.43 64.59 151.43 139.17
Expenses (1) (464.38) (574.17) (832.15) (1,190.58) (832.15) (511.50)
Net increase (decrease) for the year 147.90 (1,321.52) 685.25 1,229.64 685.25 132.79
Net unit value at the end of the year $4,231.14 $4,083.24 $4,175.12 $5,404.76 $4,175.12 $3,489.87
Net assets at the end of the year ($000) $11,248 $14,711 $18,637 $22,691 $18,637 $17,015
Total return (1) 3.62% (24.45%) 19.64% 29.45% 19.64% 3.94%
Number of units outstanding at the end of
the year 2,658.37 3,602.89 4,463.75 4,198.35 4,463.75 4,875.48
Supplemental Data:
Ratio to average net assets
Investment and other income (2) 0.08% 0.13% 4.14% 1.30% 4.14 % 4.22 %
Expenses (12.09%) (12.02%) (22.47%) (24.03%) (22.47%) (4.36%)
Total return is calculated based on the change in value of a unit during the
period. An individual partner's total return and ratios may vary from the
above total returns and ratios based on the timing of additions and
redemptions.
(1) Includes brokerage commissions
(2) For the years ended December 31, 2010, 2009, 2008 and 2007, investments
in other income and expenses and net realized and unrealized gains and losses
on commodity transactions are calculated based on a single unit outstanding
during the period. For the year ended December 31, 2006, investment and other
income and expenses are calculated using the average number of units
outstanding during the year. Net realized and unrealized gains and losses on
commodity transactions is a balancing amount necessary to reconcile the change
in net unit value.
F-15
Atlas Futures Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
For the Years Ended December 31, 2010, 2009 and 200
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To the best of the knowledge and belief of the undersigned, the information
contained in this report is accurate and complete.
/s/ Michael Pacult
Michael Pacult
President, Ashley Capital Management, Inc.
General Partner
Atlas Futures Fund, Limited Partnership
F-16
