FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 incorporation (I.R.S. Employer
or organization) Identification No.)
505 Brookfield Drive, Dover, DE 19901
(Address of principal executive offices, including zip code)
(800) 331-1532
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ] Not Applicable.
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
definition 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] 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]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) f the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ] Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Not Applicable.
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Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
The reviewed financial statements for the Registrant for the nine months ended
September 30, 2010 are attached hereto at page F-1 and made a part hereof.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General Information
During the past quarter and in the future, Registrant, did and will, pursuant
to the terms of the Limited Partnership Agreement, engage in the business of
speculative and high risk trading of commodity futures and options markets
through the services of one or more commodity trading advisors it selects.
Description of Fund Business
The Fund grants the commodity trading advisors a power of attorney that is
terminable at the will of either party to trade the equity assigned by the
Fund. Clarke Capital Management, Inc. was granted a power of attorney by the
Fund and served as a trading advisor for the Fund since the Fund's inception.
From February 1, 2005 through the end of September, 2007, the Fund also
engaged NuWave Investment Corp as a trading advisor. Clarke traded
approximately 80% of the Fund's equity made available for trading and NuWave
traded the other 20%. During the last week of September, 2007, the General
Partner advised NuWave that, effective October 1, 2007, it would terminate the
Advisory Agreement and Power of Attorney and requested that NuWave liquidate
all positions it had open on behalf of the Fund as of the last business day of
September, 2007, or as soon as practical thereafter. The management and
incentive fees paid to NuWave are, accordingly, no longer paid. Clarke
Capital Management, Inc. remains the sole trading advisor to the Fund. The
commodity trading advisors selected to trade for the Fund have discretion to
select the trades and do not disclose the methods they use to make those
determinations in their disclosure documents or to the Fund or general
partner. There is no promise or expectation of a fixed return to the
partners. The partners must look solely to trading profits for a return their
investment as the interest income is expected to be less than the fixed
expenses to operate the Fund.
Assets
The general partner has sole authority to determine the percentage of our
assets that will be held on deposit with the futures commission merchant, used
for other investments, and held in bank accounts to pay current obligations.
As of the date of this Report, the partnership maintains approximately 44% of
its assets in a Treasury Direct Account maintained with the United States
Department of the Treasury, and 9% in a cash management fund that invests in
U.S. Treasuries and has high liquidity. Funds maintained with the Department
of Treasury and any cash management fund are held in the name of the
partnership and not commingled with those of any other entity. The general
partner maintains approximately 45% of our net assets with the futures
commission merchant ("FCM") for margin for trading by the trading advisor.
About 2% of the previous month's net assets are retained in our bank accounts
to pay expenses and redemptions. The Fund assets at the FCM consist of cash
used as margin to secure futures (formerly called commodity) trades entered on
its behalf by the commodity trading advisors it selects. The Fund deposits
its cash with one or more FCM's (brokers) that hold and allocate the cash to
use as margin to secure the trades made. The futures held in the Fund
accounts are valued at the market price on the close of business each day by
the FCM that holds the Fund equity made available for trading.
The Capital accounts of the Partners are immediately responsible for all
profit and losses incurred by trading and payment and accrual of the expenses
of offering partnership interests for sale and the operation of the
partnership. During the periods of this Report, the fixed costs of operation
of the Fund include continuing offering costs, fixed brokerage commissions of
11%, and accounting, legal and other operating fees that must be paid before
the limited partners may earn a profit on their investment.
The Fund has not in the past and does not intend in the future to borrow from
third parties. Its trades are entered pursuant to a margin agreement with the
futures commission merchant which obligates the fund to the actual loss,
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if any, without reference or limit by the amount of cash posted to secure the
trade. The limited partners are not personally liable for the debts of the
Fund, including any trading losses. Upon effectiveness of an S-1 registration
statement to be filed with the SEC in the near future, the Registrant will
offer registered Units for sale to the public via its prospectus until the
maximum in face amount of Units are sold. As of the date of this Report,
$14,205,185 has been sold pursuant to a previous registration statement and,
upon redemption by the holder, will not be resold. See the Subsequent Events
footnote at the end of this section
An Investment in the Fund Depends upon Redemption of Fund Units
The Fund Units are not traded and they have no market value. Liquidity of an
investment in the Fund depends upon the credit worthiness of the exchanges,
brokers, and third parties of off exchange traded futures that hold Fund
equity or have a lien against Fund assets for payment of debts incurred.
Those parties must honor their obligations to the Fund for the Fund to be able
to obtain the return of its cash from the futures commission merchant that
holds the Fund account.
The commodity trading advisors select the markets and the off exchange
instruments to be traded. The General Partner selects the futures commission
merchants to hold the Fund assets. Both the commodity trading advisors and
the general partner believe all parties who hold Fund assets or are otherwise
obligated to pay value to the Fund are credit worthy. Margin is an amount to
secure the entry of a trade and is not a limit of the profit or loss to be
gained from the trade. The general partner currently allocates nearly 100% of
the Fund equity to be used as margin to enter trades. Although it is
customary for the commodity trading advisors to use 40% or less of the equity
available as margin, there is no limit imposed by the Fund upon the amount of
equity the advisors may commit to margin. It is possible for the Fund to
suffer losses in excess of the margin it posts to secure the trades made.
To have the purchase price or appreciation, if any, of the Units paid to them,
partners must use the redemption feature of the Partnership. Distributions,
although possible in the sole discretion of the general partner, are not
expected to be made. There is no current market for the Units sold, none is
expected to develop and the limited partnership agreement limits the ability
of a partner to transfer the Units.
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 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. The CTAs selected are responsible for the selection of
trades. As evidenced by the increase in per unit value disclosed below, the
Fund's CTAs have been successful overall. See the Registration Statement,
incorporated by reference herein, for an explanation of the operation of the
Fund.
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, the years 2000 through
2009, and the nine months ended September 30, 2010 reflect the absorption of
these costs by the Fund.
The Fund's realized and unrealized trading gains (losses) before commissions
were $749,314 [$343.62 per Unit] and $(2,014,022) [$(513.61) Unit] for the
nine months ended September 30, 2010 and September 30, 2009, respectively.
The Fund's results after payment and accrual of expenses for the nine months
ended September 30, 2010 and September 30, 2009 were (losses) of $(331,390)
[$5.19 per Unit] and $(3,788,952) [$(957.25) Unit], respectively. The net
asset value ("NAV") per Unit as of September 30, 2010, was $4,088.43, an
decrease of 8.07% from the September 30, 2009 NAV per Unit of $4,447.51. The
decrease includes the intervening quarters of 2009 and 2010.
The above described performance was primarily due to the trading of Clarke
Capital Management, currently the sole commodity trading advisor that trades
for the Fund via its proprietary method, with the balance of the income from
interest earned on deposits. If a large 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. Past performance is not
necessarily indicative of future results.
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Registrant's average net assets during the nine months ended September 30,
2010 were approximately $11,902,322, a decrease of 39.90% over average net
assets during the nine months ended September 30, 2009 of $19,803,040 The
decrease includes decreases made during the intervening quarters of 2010 and
2009. The decreases in average net assets during the comparative nine month
periods were primarily due to the effects of investment returns generated by
the commodity trading advisor. Net additions (withdrawals) for the nine
months ended September 30, 2010 and September 30, 2009 were $(3,416,194) and
$(2,305,533), respectively.
Interest income is earned on the Fund's assets, through investment in short
term cash instruments. Interest income to the Fund varies monthly according to
interest rates, trading performance, subscriptions and redemptions. Interest
income for the nine months ended September 30, 2010 was $8,287 a 60.35%
decrease over the interest income for the nine months ended September 30, 2009
of $20,903. The decrease in interest income for the comparative nine month
periods was primarily due to significantly reduced short term interest rates
and reduced investments in Treasury bills.
Brokerage commissions of 11% 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. Commissions for the nine
months ended September 30, 2010 were $993,401, a 40.47% decrease over the
commissions for the nine months ended September 30, 2009 of $1,668,737. The
decrease in commissions for the comparative nine month periods was primarily
due to decreased average net asset levels.
Pursuant to the Trading Advisory Agreement, the Fund pays a quarterly
incentive fee to each trading advisor that has traded for the Fund. See Note
5 to the financial statements herein for the incentive fees. Trading advisor
incentive fees during the nine months ended September 30, 2010 and September
30, 2009 were $ 0 and $0, respectively. The amounts are directly related to
the trading performance of the trading advisors. Because CTA's earn their
incentive fees independent of each other, during periods when there are
multiple advisors, it is possible for one advisor to earn an incentive fee
even if the other CTA or the Fund overall has negative performance.
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 nine months ended September
30, 2010 and September 30, 2009 were $95,590 and $127,096, respectively. The
decrease over the comparative nine month periods was primarily due to reduced
professional fees from the prior period.
Inflation has had no material impact on the operations or on the financial
condition of the Fund from inception through September 30, 2010.
Subsequent Events: On October 29, 2010, the Fund requested withdrawal of a
previously filed post effective amendment and filed an S-1 registration
statement to register 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 a 1% up front selling commission
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 FINRA.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The business of the Fund is speculative and involves a high degree of risk of
loss. See the Fund's Registration Statement and prospectus contained therein,
incorporated herein, for a full description of the risks attendant to Fund
business.
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Item 4T. 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
There were no changes in the General Partner's internal control over financial
reporting during the quarter ended September 30, 2010 that have materially
affected, or are reasonably likely to materially affect, internal control over
financial reporting applicable to the Fund.
Part II - OTHER INFORMATION
Item 1. 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 disclosed
following described reportable events. Neither the Fund nor the General
Partner is a party to any of these events and they are included in reliance
upon a report supplied by MFG without verification by the General Partner.
MFG has represented to the General Partner that that none of the events it has
reported below will not now, or at any time in the future, interfere with its
performance as the FCM for the Fund's account.
MF Global Inc. ("MFG") is registered under the Commodity Exchange Act, as
amended, as a futures commission merchant and a commodity pool operator, and
is a member of the National Futures Association in such capacities. In
addition, MFG is registered with the Financial Industry Regulatory Authority
as a broker-dealer. MFG was formerly known as Man Financial Inc. ("MFI")
until the change of name to MFG was effected on July 19, 2007. MFG is a
member of all major U.S. futures exchanges and most major U.S. securities
exchanges. MFG's main office is located at 717 Fifth Avenue, 9th Floor, New
York, New York 10022-8101. MFG's telephone number at such location is (212)
589-6200.
At any given time, MFG is involved in numerous legal actions and
administrative proceedings, which in the aggregate, are not, as of the date of
this report, expected to have a material effect upon its condition, financial
or otherwise, or to the services it will render to the Fund. There have been
no administrative, civil or criminal proceedings pending, on appeal or
concluded against MFG or its principals within the five years preceding the
date of this report that MFI would deem material for purposes of Part 4 of the
Regulations of the Commodity Futures Trading Commission, except as follows:
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.
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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. ("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.
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.
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 is pending.
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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 associates), 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.
MFI was named as a co-defendant in an action filed in Florida State Court by
Eagletech Communications Inc. ("Eagletech") and three of its alleged
shareholders against 21 defendants, including banks, broker-dealers and
clearing brokers, as well as "100 John Doe defendants or their nominee
entities". The complaint alleges that the defendants engaged in a criminal
conspiracy designed to manipulate the publicly traded share price of Eagletech
stock. Plaintiffs seek unspecified compensatory and special damages, alleging
that "Man Group PLC d/b/a Man Financial Inc" participated in the conspiracy by
acting as a clearing broker for a broker-dealer that traded in Eagletech
stock. The complaint asserts claims under RICO, the Florida Securities and
Investor Protection Act, the Florida Civil Remedies for Criminal Practices Act
and a related negligence claim. On May 9, 2007, defendants filed a notice
removing the State Court action to the United States District Court for the
Southern District of Florida pursuant to 28 U.S.C. Sec. 1441(a). On October 2,
2007, Plaintiffs filed a first amended complaint in the Federal Court action
asserting additional claims against MFG under Florida common law, including
civil conspiracy, conversion and trespass to chattels. On February 26, 2008,
the financial institution defendants, including MF Global Inc., filed a motion
to dismiss seeking dismissal of all claims asserted in the amended complaint
on the ground that the claims are barred by the Private Securities Litigation
Reform Act ("PSLRA") and preempted by the federal securities laws. On June 27,
2008, the Court partially granted the motion, holding that the federal RICO
claims are barred by the PSLRA and dismissing the RICO claims with prejudice.
The Court declined to exercise supplemental jurisdiction over the state law
claims and remanded those claims to the Florida State Court. On July 25, 2008,
plaintiffs filed a notice of appeal of the Court's June 27, 2008 decision to
the United States Court of Appeals for the Eleventh Circuit but subsequently
withdrew its appeal.
In December 2007, MFG, along with four other futures commission merchants
("FCMs"), were named as defendants in an action filed in the United States
District Court in Corpus Christi, Texas by 47 individuals who were investors
in a commodity pool (RAM I LLC) operated by Renaissance Asset Management LLC.
The complaint alleges that MFG and the other defendants violated the Commodity
Exchange Act and alleges claims of negligence, common law fraud, violation of
a Texas statute relating to securities fraud and breach of fiduciary duty for
allegedly failing to conduct due diligence on the commodity pool operator and
commodity trading advisor, having accepted executed trades directed by the
commodity trading advisor, which was engaged in a fraudulent scheme with
respect to the commodity pool, and having permitted the improper allocation of
trades among accounts. The plaintiffs claim damages of $32.0 million, plus
exemplary damages, from all defendants. All of the FCM defendants moved to
dismiss the complaint for failure to state a claim upon which relief may be
granted. Following an initial pre-trial conference, the court granted
plaintiffs leave to file an amended complaint. On May 9, 2008, plaintiffs
filed an amended complaint in which plaintiffs abandoned all claims except a
claim alleging that the FCM defendants aided and abetted violations of the
Commodity Exchange Act. Plaintiffs now seek $17.0 million in claimed damages
plus exemplary damages from all defendants. MFG filed a motion to dismiss the
amended complaint which was granted by the court and appealed by the
plaintiffs.
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.
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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 is currently pending
before the court.
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.
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.
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.
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
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.
8
<page>
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.
Item 1A. Risk Factors
There have been no material changes from risk factors as previously disclosed
in the Fund's 2009 Form 10-K. The risks of the Fund are (1) described fully
in its prospectus filed with its registration statement on Form S-1, which is
incorporated herein by reference (2) described in summary in Part I of this
Form 10-Q, which is incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities
None
Item 4. (Removed and Reserved)
Not Applicable
Item 5. Other Information
(a) None
(b) None
Item 6. Exhibits
31.1 Certification of Principal Executive Officer and Principal Financial
Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
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-Q for the period
ended September 30, 2010, to be signed on its behalf by the undersigned,
thereunto duly authorized.
Registrant: Atlas Futures Fund, Limited Partnership
By Ashley Capital Management, Incorporated
Its General Partner
By: /s/ Michael Pacult
Mr. Michael Pacult
Sole Director, Sole Shareholder,
President, and Treasurer of the General Partner
Date: November 15, 2010
9
<page>
ATLAS FUTURES FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
QUARTERLY REPORT
September 30, 2010
GENERAL PARTNER:
Ashley Capital Management, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
Index to the Financial Statements
<page>
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Schedule of Investments - Cash and Securities - September 30, 2010 F-4
Schedule of Investments - Futures Contracts - September 30, 2010 F-5
Schedule of Investments - Cash and Securities - December 31, 2009 F-6
Statements of Operations F-7
Statements of Changes in Net Assets F-8
Statements of Cash Flows F-9
Notes to the Financial Statements F-10 - F-16
Affirmation of the Commodity Pool Operator F-17
F-1
<page>
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 reviewed the accompanying statements of assets and liabilities of
Atlas Futures Fund, Limited Partnership, as of September 30, 2010 and the
related statements of operations for the three and nine months ended September
30, 2010 and 2009, and the statements of changes in net assets and cash flows
for the nine months ended September 30, 2010 and 2009. These financial
statements are the responsibility of the Partnership's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America.
We have previously audited, in accordance with the auditing standards of the
Public Accounting Oversight Board (United States), the statement of assets and
liabilities of Atlas Futures Fund, Limited Partnership as of December 31, 2009
and the related statements of operations, changes in net assets and cash flows
for the year then ended (not presented herein) and in our report dated March
15, 2010, we expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the accompanying statement of
assets and liabilities as of December 31, 2009 is fairly stated, in all
material respects, in relation to the statement of assets and liabilities from
which it has been derived.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
November 10, 2010
300 Village Green Drive, Suite 210 *
Lincolnshire, Illinois 60069 *(847)913-5400
F-2
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
<table>
<s> <c> <c>
September 30, December 31,
2010 2009
(A Review)
Assets
Investments
Equity in broker trading accounts
Cash and cash equivalents at broker $3,564,115 $4,359,494
Net unrealized gain on open futures contracts 1,345,381 -
-
Total equity in broker trading accounts 4,909,496 4,359,494
U.S. Treasury Bills (cost $4,998,104 and $9,997,725) 4,999,726 9,998,497
Cash 1,236,919 120,240
Money market fund 1,041 501,014
Prepaid expenses 2,849 11,395
Total assets 11,150,031 14,990,640
Liabilities
Partner redemptions payable 127,600 168,311
Accrued commissions payable to related parties 39,124 86,485
Other accrued liabilities 19,413 24,366
Total liabilities 186,137 279,162
Net assets $10,963,894 $14,711,478
Analysis of net assets
Limited partners $10,963,894 $14,711,478
General partners - -
Net assets (equivalent to $4,088.43 and $4,083.24 per unit) $10,963,894 $14,711,478
Partnership units outstanding
Limited partners units outstanding 2,681.69 3,602.89
General partners units outstanding - -
Total partnership units outstanding 2,681.69 3,602.89
</table>
The accompanying notes are an integral part of the financial statements.
F-3
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
September 30, 2010
(A Review)
<table>
<s> <c> <c> <c> <c> <c> <c>
Fair Value Percent
Description Maturity Date Cost Face Value Local Currency U.S. Dollars of Net Assets
United States Treasury Bills:
United States Treasury Bill October 14, 2010 $4,998,104 $5,000,000 4,998,104 $4,998,104
Total United States
Treasury Bills $4,998,104 $5,000,000 $4,998,104 45.59%
Cash in trading accounts:
United States Markets 3,534,724 $3,534,724
Total cash in trading accounts denominated in U.S. Dollars 3,534,724 32.24%
Cash denominated in foreign currency:
Euro Dollar Markets - EUR 24,043 32,778
British Pound Markets - GBP 910 1,430
Australian Dollar Markets (4,981) (4,817)
Total cash denominated in foreign currency 29,391 0.27%
Total cash in trading accounts $3,564,115 32.51%
Total cash denominated in U.S. Dollars 3,564,115 32.51%
Money market fund (1,040.55 shares at $1 per share) 1,041 $1,041 0.01%
</table>
The accompanying notes are an integral part of the financial statements.
F-4
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Futures Contracts
September 30, 2010
(A Review)
<table>
<s> <c> <c> <c> <c> <c>
Fair Value Percent of
Description Expiration Date Contracts Local Currency U.S. Dollars Net Assets
Net unrealized gain (loss) on open futures contracts
United States commodity futures contracts held long:
CBOT CORN December 2010 36 (11,700) $(11,700)
CBOT SOYBEANS November 2010 36 126,450 126,450
CBOT SOYBEANS November 2010 3 8,662 8,662
CBOT SOYBEANS November 2010 6 17,250 17,250
CBOT SOYBEANS November 2010 9 22,837 22,837
CBOT SOYBEANS November 2010 9 24,187 24,187
CBOT SOYBEANS November 2010 9 5,962 5,962
CBT BEAN OIL December 2010 45 9,990 9,990
CBT BEAN OIL December 2010 36 4,536 4,536
CBT TNOTE 10Y December 2010 9 4,641 4,641
CBT TNOTE 10Y December 2010 9 5,203 5,203
CBT TNOTE 10Y December 2010 45 36,563 36,563
CBT TNOTE 10Y December 2010 9 1,266 1,266
CBT TNOTE 5Y December 2010 9 5,063 5,063
CBT TNOTE 5Y December 2010 9 3,656 3,656
CBT TNOTE 5Y December 2010 45 21,445 21,445
CMX GOLD December 2010 9 43,110 43,110
CMX GOLD December 2010 9 36,450 36,450
CMX GOLD December 2010 36 145,080 145,080
ICEUS SUGAR11 March 2011 27 64,411 64,411
ICEUS SUGAR11 March 2011 9 (16,128) (16,128)
NYC COTTON December 2010 18 163,980 163,980
NYC COTTON December 2010 9 83,295 83,295
IMM AUST DLR December 2010 36 160,920 160,920
IMM AUST DLR December 2010 36 169,200 169,200
IMM EURO FX December 2010 45 194,063 194,063
IMM EURO FX December 2010 9 36,563 36,563
Total United States commodity futures contracts held long 1,366,955 12.47%
United States commodity futures contracts held short:
NY NATURAL GAS November 2010 9 4,770 4,770
Total United States commodity futures contracts held short 4,770 0.04%
Euro commodity futures contracts held long:
EURX EUROBOBL December 2010 9 (5,760) (7,853)
EURO E-SCHATZ December 2010 36 (15,120) (20,613)
Total Euro commodity futures contracts held long (28,466) (0.26%)
British Pounds commodity futures contracts held long:
LIF 3M STG IR March 2011 9 225 354
LIF 3M STG IR March 2011 9 - -
LIF 3M STG IR March 2011 45 1,125 1,768
LIF 3M STG IR March 2011 9 - -
Total British Pounds commodity futures contracts held long 2,122 0.02%
Net unrealized gain on open futures contracts $1,345,381 12.27%
</table>
The accompanying notes are an integral part of the financial statements.
F-5
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
December 31, 2009
<table>
<s> <c> <c> <c> <c> <c> <c>
Fair Value Percent
Description Maturity Date Cost Face Value Local Currency U.S. Dollars of Net Assets
United States Treasury Bills:
United States Treasury Bill January 14, 2010 $4,999,115 $5,000,000 4,999,872 $4,999,872
United States Treasury Bill April 1, 2010 4,998,610 5,000,000 4,998,625 4,998,625
Total United States Treasury Bills $9,997,725 $10,000,000 $9,998,497 67.96%
Cash in trading accounts:
United States Markets 4,149,299 $4,149,299
Total cash in trading accounts denominated in U.S. Dollars 4,149,299 28.20%
Cash denominated in foreign currency:
Euro Dollar Markets - EUR 128,214 183,622
British Pound Markets - GBP 16,451 26,573
210,195 1.43%
Total cash denominated in foreign currency
Total cash in trading accounts $4,359,494 29.63%
Money market fund (501,013.80 shares at $1 per share) 501,014 $501,014 3.41%
</table>
The accompanying notes are an integral part of the financial statements.
F-6
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
(A Review)
<table>
<s> <c> <c> <c> <c>
Three Months Ended September 30, Nine Months Ended September 30,
2010 2009 2010 2009
Investment income
Interest income $2,788 $7,126 $8,287 $20,903
Total investment income 2,788 7,126 8,287 20,903
Expenses
Commission expense 283,461 495,197 993,401 1,668,737
Professional fees 29,450 39,300 81,300 115,500
Other operating expenses 5,156 1,596 14,290 11,596
Total expenses 318,067 536,093 1,088,991 1,795,833
Net investment (loss) (315,279) (528,967) (1,080,704) (1,774,930)
Realized and unrealized gain (loss) from investments
and foreign currency
Net realized gain (loss) from:
Investments 329,011 (1,328,936) (594,045) (2,296,616)
Foreign currency transactions 8,336 2,629 (2,022) 32,118
Net realized gain (loss) from investments and
foreign currency transactions 337,347 (1,326,307) (596,067) (2,264,498)
Net unrealized appreciation on investments 1,284,630 190,187 1,345,381 250,476
Net realized and unrealized gain (loss) from
investments and foreign currency 1,621,977 (1,136,120) 749,314 (2,014,022)
Net increase (decrease) in net assets resulting
from operations $1,306,698 $(1,665,087) $(331,390) $(3,788,952)
Net income (loss) per unit (for a single unit
outstanding during the entire period)
Limited partnership unit $476.83 $(437.54) $5.19 $(957.25)
General partnership unit $- $- $- $-
</table>
The accompanying notes are an integral part of the financial statements.
F-7
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
(A Review)
<table>
<s> <c> <c> <c> <c>
Nine Months Ended September 30,
2010 2009
Units Net Assets Units Net Assets
Increase (decrease) in net assets from operations
Net investment (loss) $(1,080,704) $(1,774,930)
Net realized (loss) from investments and foreign currency
transactions (596,067) (2,264,498)
Net unrealized appreciation on investments 1,345,381 250,476
Net (decrease) in net assets resulting from operations (331,390) (3,788,952)
Capital contributions from limited partners 10.44 40,361 65.08 345,345
Redemptions by limited partners (931.64) (3,456,555) (531.78) (2,650,878)
Total (decrease) in net assets (921.20) (3,747,584) (466.70) (6,094,485)
Net assets at the beginning of the period 3,602.89 14,711,478 4,198.35 22,691,035
Net assets at the end of the period 2,681.69 $10,963,894 3,731.65 $16,596,550
</table>
The accompanying notes are an integral part of the financial statements.
F-8
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
(A Review)
<table>
<s> <c> <c>
Nine Months Ended September 30,
2010 2009
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations $(331,390) $(3,788,952)
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 (1,345,381) (250,476)
(Increase) decrease in prepaid expenses 8,546 (11,395)
Decrease in interest receivable - 203
(Decrease) in accrued commissions payable to related parties
(47,361) (50,377)
(Decrease) in incentive fees payable - (57,490)
Increase (decrease) in other accrued liabilities (4,953) 17,586
Net cash (used in) operating activities (1,720,539) (4,140,901)
Cash Flows from Financing Activities
Proceeds from sale of units 40,361 345,345
Partner redemptions (3,497,266) (2,548,945)
Net cash (used in) financing activities (3,456,905) (2,203,600)
Net (decrease) in cash and cash equivalents (5,177,444) (6,344,501)
Cash and cash equivalents, beginning of period 14,979,245 22,925,186
Cash and cash equivalents, end of period $9,801,801 $16,580,685
End of period cash and cash equivalents consist of:
Cash and cash equivalents at broker $3,564,115 $1,351,085
Treasury Bills 4,999,726 14,998,405
Cash 1,236,919 230,186
Money market fund 1,041 1,009
Total cash and cash equivalents $9,801,801 $16,580,685
</table>
The accompanying notes are an integral part of the financial statements.
F-9
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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").
Effective July, 2004 the Fund began to sell issuer direct on a best efforts
basis with no sales commissions.
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, Financial Industry Regulatory Authority 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 balance sheet at the difference between
the original contract amount and the market value on the last business day of
the reporting period.
Market value of commodity futures contracts is based upon exchange or
other applicable market best available closing quotations.
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-10
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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 - 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 period ended September
30, 2010 and year ended December 31, 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
September 30, 2010 and December 31, 2009.
<table>
<s> <c> <c> <c> <c>
Fair Value at September 30, 2010
Description Level 1 Level 2 Level 3 Total
Money Market Accounts $1,041 $- $- $1,041
U.S. Treasury Bills - 4,999,726 - 4,999,726
Exchange Traded - Futures Contracts 1,345,381 - - 1,345,381
Total $1,346,422 $4,999,726 $- $6,346,148
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
</table>
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 740-10-25,
"Income Taxes-Overall-Recognition" to the Fund, and has determined that ASC
740-10-25 does not have a material impact on the Fund's financial statements.
The Fund files federal and state tax returns. The 2006 through 2009 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 cash at broker, cash, 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 nine months
ended September 30, 2010 or September 30, 2009.
Reclassifications - Certain prior year amounts were reclassified to
conform to current year presentation.
F-11
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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 nine months ended September 30, 2010 and
2009.
The General Partner reserves the right to change the fee structure at
its sole discretion.
F-12
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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:
<table>
<s> <c> <c>
Commissions included in expense:
For The Nine Months Ended September 30,
2010 2009
Corporate General Partner $362,064 $606,225
Futures Investment Company 607,025 984,038
Total related party expenses $969,089 $1,590,263
Commissions included in accrued expenses:
September 30, December 31,
2010 2009
Corporate General Partner $23,746 $51,924
Futures Investment Company 15,378 34,561
Total accrued commissions payable to
related parties $39,124 $86,485
</table>
ASC 460, Guarantees, identifies certain disclosures to be made by a
guarantor in its financial statements about its obligations under certain
guarantees that it has issued. 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-13
<page>
Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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 September 30, 2010 and December 31, 2009 were
$9,801,801 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 $68,780,207 and $0 on long positions at September 30, 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
September 30, 2010 and December 31, 2009 were $1,345,381 and $0 respectively.
Open contracts generally mature within three months of September 30,
2010. The latest maturity for open futures contracts is in March 2011.
However the Fund intends to close all contracts prior to maturity.
F-14
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Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
7. Trading Activities and Related Risks - Continued
The following tables disclose the fair values of derivative and hedging
activities in the Statement of Assets and Liabilities and the Statement of
Operations.
Derivative Instruments
Statement of Assets and Liabilities
<table>
<s> <c> <c> <c> <c> <c>
Asset Derivatives Liability Derivatives
at September 30, 2010 at September 30, 2010
Statement of Assets and Liabilities Location Fair Value Fair Value Net
Derivatives not designated as hedge Commodity contracts Net unrealized gain (loss) on open futures
instruments under ASC 815 contracts $1,401,675 $(56,294) $1,345,381
Asset Derivatives Liability Derivatives
at December 31, at December 31,
Statement of Assets and Liabilities Location 2009 Fair Value 2009 Fair Value Net
Derivatives not designated as hedge Commodity contracts Net unrealized gain (loss) on open $- $- $-
instruments under ASC 815 futures contracts
Derivative Instruments
Statement of Operations
Three Nine
months ended months ended
Line Item in the Statement of Operations September 30, 2010 September 30, 2010
Derivatives not designated as hedge Commodity contracts Net realized (loss) from investments
instruments under ASC 815 and foreign currency transactions $337,347 $(596,067)
Derivatives not designated as hedge
instruments under ASC 815 Commodity contracts Net unrealized appreciation from investments $1,284,630 $1,345,381
</table>
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-15
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Atlas Futures Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
September 30, 2010
(A Review)
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
On October 29, 2010, the Fund filed an S-1 registration statement to
register 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
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 FINRA.
12. Financial Highlights
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<s> <c> <c> <c> <c>
Three Months Ended September 30, Nine Months Ended September 30,
2010 2009 2010 2009
Performance per unit (1)
Net unit value, beginning of the period $3,611.60 $4,885.05 $4,083.24 $5,404.76
Net realized and unrealized (loss) on
commodity transactions 588.71 (298.13) 343.62 (513.61)
Investment and other income 0.98 1.88 2.64 5.25
Expenses (112.86) (141.29) (341.07) (448.89)
Net (decrease) for the period 476.83 (437.54) 5.19 (957.25)
Net unit value at the end of the period $4,088.43 $4,447.51 $4,088.43 $4,447.51
Net assets at the end of the period ($000) $10,964 $16,597 $10,964 $16,597
Total return (2) 13.20% (8.96%) 0.13% (17.71%)
Number of units outstanding at the end of the period 2,681.69 3,731.65 2,681.69 3,731.65
Supplemental Data:
Ratio to average net assets
Investment and other income (3) 0.12% 0.16% 0.09% 0.14 %
Expenses (3) (12.16%) (12.16%) (12.20%) (12.09%)
</table>
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) Investments and 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.
(2) Not annualized
(3) Annualized
F-16
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Atlas Futures Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
For the Nine Months Ended September 30, 2010 and 2009
*****************************************************************************
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
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