As Filed with the Securities and Exchange Commission on April 15, 2009
Registration No. 333-119635
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 9
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
6221 Delaware 20-0069251
(Primary SIC Number) (State of organization) (IRS EIN)
505 Brookfield Drive
Dover, Delaware 19901
Telephone: (800) 331-1532
(address and telephone number of registrant's principal executive offices)
Mr. Michael Pacult
c/o White Oak Financial Services, Inc.
5914 N. 300 West
Fremont, Indiana 46737
Telephone: (260) 833-1306; Facsimile (260) 833-4411
(Name, address and telephone number of agent for service of process)
Copies to:
William S. Scott, Esquire
The Scott Law Firm, P. A.
36 NW 6th Ave, Suite 409
Miami, FL 33128
Telephone (305) 796-3176; Facsimile (305) 961-9949
wscott@wscottlaw.com
If any of the securities being offered on the Form are to be offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. 0
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. 0
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. 0
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. 0
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission acting
pursuant to said section 8(a), may determine.
<page>Part I - Disclosure Document
Providence Select Fund, Limited Partnership
Amended and Fully Restated Prospectus to Offer
$50,000,000 (50,000 Units) Maximum in Units of Limited Partnership Interest
To Be Sold at the Net Asset Value per Unit Computed At the End of Each Month
During the Offering
The Offering
The Fund is a registered commodity pool that trades in the speculative trade
of U.S. and international futures, options on futures and forward contracts in
a diversified portfolio that includes currencies, interest rates, energy,
metals and commodities in both U.S. and global markets. An independent
trading advisor is employed with the primary objective of the Fund
appreciating in value over time. An investment in the Fund may provide
valuable diversification to a traditional portfolio of stocks and bonds.
Two general partners, White Oak Financial Services, Inc. and Mr. Michael
Pacult, have the authority to manage the Fund. We refer to them collectively
as "the general partner." The general partner is authorized by the
partnership agreement to use its sole judgment to employ, establish the terms
of employment, and terminate commodity trading advisors and futures commission
merchants.
This is a best efforts offering. The underwriters are not required to sell any
specific number or dollar amount of securities but will use their best efforts
to sell the securities offered. New limited partners will be admitted and
limited partnership interests will be sold on the first business day of each
month at a price that will be the month-end net asset value of the partnership
divided by the number of outstanding partnership interests. Net asset value is
calculated and partnership interests are issued on a monthly basis.
All subscriptions received will be placed in a depository account maintained
by the general partner at Star Financial Bank, Angola, IN until we accept
them. The general partner has sole and absolute discretion to terminate the
offering for any reason.
You must purchase at least $25,000 in partnership interests, though the
general partner may reduce this to no less than $5,000. You have the right to
rescind your subscription for five business days after it is submitted. There
is a redemption fee for partners admitted subsequent to the date of this
prospectus of 4% during the first three months of investment, 3% the second
three months, 2% the third three months, 1% the fourth three months, and none
if the redemption is made in the thirteenth month or thereafter. There will be
no selling commission, however, the selling agents will receive a continuing
service fee for the partnership interests sold by them of either (i) 4% of the
initial investment the first year and, beginning the thirteenth month, for so
long as the investment remains in the Fund, 1/3% monthly based on the net
asset value of the investment, or (ii) 1/3% monthly based on the net asset
value of the investment for so long as it remains in the Fund. The general
partner reserves the right to issue additional partnership interests at the
close of business each month to reduce the annual continuing service fee. See
Summary, Subscription Procedure.
The Risks - These securities are highly speculative. Before you decide
whether to invest, read this entire prospectus carefully and consider risks
below and the complete description of "Risks you face" beginning on page 6.
* The Fund business is the speculative trading in futures, commodity
options and unregulated currency contracts selected by registered commodity
trading advisors.
* This investment involves a high degree of risk. You should purchase
these securities only if you can afford a complete loss of your investment.
* The Fund is new and has limited operating history.
* Trading profits and interest income must be generated to offset
substantial expenses. To receive your investment back during the first twelve
months, the Fund must generate a return of at most 30.04% at the current net
asset value and 14.25% should we sell the maximum.
* Transfer of your partnership interests will be restricted and subject to
general partner approval. No public market for the partnership interests
exists and none is expected to develop.
* Although you will not receive distributions, you must pay annual Federal
and State income taxes on your share of any profits earned, if any.
* We must pay the following fees: 25% incentive fee on new net profits to
the trader; 7% annual fixed brokerage commissions to the corporate general
partner; 4% continuing service fee to the selling agents; and, annual
operating costs of $95,000.
* This partnership will not make distributions. To receive a return on
your investment, you must use our redemption procedure, which is subject to
restrictions.
* The general partner and affiliates have conflicts of interest with
regard to the management of this partnership including, but not limited to,
the individual general partner is the sole principal of the corporate general
partner and a 50% owner of the principal selling agent.
* Commodity trading is highly leveraged. A small change in the market
price of a contract can produce adverse consequences to the value of the Fund.
Investors are required to make representations and warranties relating to
their suitability in connection with this investment. Each investor is
encouraged to discuss the investment with his/her individual financial, legal
and tax adviser.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any State securities commission or agency, nor have
any of them confirmed or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense. The
Fund is not a registered mutual fund under the Investment Company Act of 1940.
This prospectus is in two parts: a disclosure document and a statement of
additional information. These parts are bound together, and both contain
important information.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
A maximum of $50,000,000 in units of limited partnership interest may be sold,
of which $3,888,370 has already been sold, as of January 31, 2009. The Fund
has commenced trading. The balance of proceeds to the Fund, $46,111,630, is
offered at the Net Asset Value at the end of the month in which the
subscription is received on the terms provided in this prospectus to also be
used to trade and operate the Fund.
FUTURES INVESTMENT COMPANY
5914 N. 300 West, Fremont, Indiana 46737 * (260) 833-1306
Best Efforts Principal Selling Agent
_________, 2009
<page>
Commodity Futures Trading Commission
Risk Disclosure Statement
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT,
AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE
SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGE 18 AND A
STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 14.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY
TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU
DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS
DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF
THIS INVESTMENT, AT PAGE 6.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR
OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES,
INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO
REGULATIONS THAT OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS
PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO
COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN
NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE
EFFECTED.
------------------------------------
This prospectus does not include all of the information or exhibits in the
Fund's registration statement. You can read and copy the entire registration
statement at the public reference facilities maintained by the Securities and
Exchange Commission in Washington, D.C.
The Fund files monthly, quarterly and annual reports with the SEC. You can
read and copy these reports at the sec public reference facilities in
Washington, D.C. Please call the SEC at (800) SEC-0300 for further
information.
The Fund's filings are posted at the SEC website at http://www.sec.gov.
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Suitability Standards
You should only invest a limited amount of the risk portion of your total
portfolio and should not invest more than you can afford to lose.
To invest the minimum $25,000 in this partnership, you must have either:
* a net worth of at least $250,000, exclusive of home, furnishings and
automobiles, or
* an annual gross income of at least $70,000 and a net worth, similarly
calculated of at least $70,000.
Residents of the following States must meet the specific requirements set
forth below. Net worth, is in all cases, to be calculated exclusive of home,
furnishings and automobiles. You may not invest more than 10% of your net
worth, exclusive of home, furnishings and automobiles, in the Fund. No
entity, including ERISA plans, should invest more than 10% of its liquid net
worth (readily marketable securities) in the Fund.
1. Alaska-Net worth of at least $250,000 or a net worth of at least $70,000
and annual taxable income of at least $70,000.
2. California-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
3. Iowa-Net worth of at least $500,000 or a net worth of at least $250,000
and an annual taxable income of at least $100,000.
4. Kansas-Net worth of at least $250,000 or a net worth of at least $70,000
and an annual gross income of at least $70,000. It is recommended by the
Office of the Kansas Securities Commissioner that Kansas investors not invest,
in the aggregate, more than 10% of their liquid net worth in this and similar
direct participation investments. Liquid net worth is defined as that portion
of net worth which consists of cash, cash equivalents and readily marketable
securities.
5. Maine-Net worth of at least $250,000 or a net worth of at least $70,000
and an annual taxable income of at least $70,000.
6. Massachusetts-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
7. Mississippi-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
8. Missouri-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
9. Nebraska-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
10. New Hampshire-Net worth of at least $250,000 or a net worth of at least
$125,000 and an annual taxable income of at least $70,000.
11. North Carolina-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
12. Pennsylvania-Net worth of at least $250,000 or a net worth of at least
$70,000 and an annual income of at least $70,000. Because the minimum closing
amount is less than 1/10th of the maximum offering size, Pennsylvania
investors are cautioned to carefully evaluate the program's ability to fully
accomplish its stated objectives and to inquire as to the current dollar
volume of program subscriptions.
13. South Carolina-Net worth of at least $250,000 or a net income in the
preceding year some portion of which was subject to maximum Federal and State
income tax.
14. South Dakota-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
15. Texas-Net worth of at least $250,000 or a net worth of at least $70,000
and annual taxable income of at least $70,000.
In the case of sales to fiduciary accounts, the net worth and income standards
may be met by the beneficiary, the fiduciary account, or, if the donor or
grantor is the fiduciary, by the donor or grantor who supplies the funds to
purchase the partnership interests.
The foregoing suitability standards are regulatory minimums only. Merely
because you meet such requirements does not necessarily mean that a high risk,
speculative and illiquid investment such as one in the Fund is, in fact,
suitable for you.
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Table of Contents
Commodity Futures Trading Commission i
Risk Disclosure Statement i
Suitability Standards ii
Table of Contents iii
Summary of the Offering 1
The Fund 1
Description of Securities Offered for Sale 1
Plan For Sale of Partnership Interests 1
Subscription Procedure 1
Will You Benefit From An Investment In The Fund? 1
Business Objectives 2
Summary Risk Factors 2
Charges To The Fund 3
Use Of Proceeds 3
Selection Of Commodity Trading Advisors And Allocation Of Equity 3
Federal Income Tax Aspects 3
Redemptions 3
Diagram of Partnership Structure & Commissions Providence Select Fund, Limited
Partnership 5
The Risks You Face 6
The corporate general partner of this Fund has limited experience. 6
We must pay substantial fees, charges and expenses regardless of profitability
which must be recovered before you can receive a return on your investment.
6
You may not transfer your partnership interests and must rely on our
redemption procedures to receive your investment back. 6
Your right of redemption is limited. 6
The Fund depends upon the individual general partner, and his absence could
cause the Fund to cease operations. 6
General partner and commodity trading advisor will serve other businesses and
may not have adequate time to devote to the Fund. 6
There are conflicts of interest in the Fund structure that may limit our
profits. 7
You will be taxed on profits though you will not receive distributions. 7
You will have to pay taxes on profits in a current year which may be lost in
future years. 7
If the general partner selects new trading advisors, they may not be as
profitable as those replaced and the new advisors will not be responsible for
recouping any previous losses. 7
The general partner may change the commodity trading advisor and its
allocation of equity to or among advisors without prior notice to you. 7
You will not participate in management and may not contest the business
decisions of the general partner. 7
Broad investment guidelines. 7
Commodity futures trading is speculative and highly risky. 7
As a result of leverage, small changes in the price of the Fund's positions
may result in major losses. 8
The general partner does not control the trading advisor or its methods and
may not be able to prevent large losses. 8
Illiquid markets could make it impossible for the Fund's advisors to realize
profits or limit losses. 8
Changes in trading equity may adversely affect Fund performance. 8
Denomination of Fund Assets at the FCM in Foreign Currencies 8
The general partner may change the currency denomination in which the Fund
assets are held at the futures commission merchant (e.g., U.S. Dollars, Euros,
British Pound, Yen, etc.). Although the assets will be physically held by the
merchant selected by the general partner in a United States account, they will
be subject to currency rate fluctuations, which may work to the benefit or
detriment of fund assets. 8
Failure of commodity broker or banks could result in loss of assets. 8
When trading in foreign exchanges, if the creditworthiness of the other
parties or the foreign currency is not maintained, we may lose the entire
value of our positions in those markets. 9
Option trading is highly risky and requires less equity to secure a trade,
thus providing greater potential for loss. 9
Position Limits May Limit Profitability and Changes Thereof Can Produce
Dramatic Price Swings. 9
We may not be able to compete with others with greater resources which could
cause loss of Fund investment. 9
Resignation of the individual general partner may cause taxation as a
corporation. 9
The offering of units has not been subject to independent review. 10
You will not have the protections provided by the Investment Company Act of
1940. 10
Investment in this Fund may subject you to the inconvenience of an IRS audit.
10
General partner may settle IRS claim without your approval, whether or not it
is in your best interest. 10
You may be subject to back taxes and penalties. 10
The general partner may cause riskier trading by raising the incentive fee to
27% without prior notice to you. 10
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Conflicts Of Interest 10
General partner, the commodity trading advisor, the futures commission
merchant, the selling agents and their principals may preferentially trade for
themselves and others. 10
Possible retention of voting control by the general partner may limit your
ability to control issues. 10
Partnership fees may be higher than they would be if they were negotiated.
11
Individual general partner and spouse may receive continuing compensation for
partnership interests they sell. 11
General partner may select trading advisor to capitalize on incentive fee
11
Commodity trading advisor may engage in high risk trading to generate fees.
11
The individual general partner has sole control over the time he will allocate
to the management of the Fund. 11
No Resolution Of Conflicts Procedures 11
Interests Of Named Experts And Counsel 12
Management's Discussion And Analysis 12
The Fund 12
The General Partners 12
Experience 12
Authority 12
Analysis of Critical Accounting Policies 12
Partnership Books and Records 13
The Commodity Trading Advisor 13
Executive Compensation 13
The Advisory Contracts 13
Business Objective And Expenses 13
Explanatory Notes: 14
Securities Offered 15
Management's Discussion 15
Description of Intended Operations 15
Risk Control 16
Trading Risks 16
Fiduciary Responsibility and Remedies 16
Indemnification 17
Provisions of Limited Partnership Agreement 17
Provisions of Law 17
Provisions of Federal and State Securities Laws 17
Provisions of the Securities Act of 1933 and NASAA Guidelines 17
Provisions of the Clearing Agreement 17
Other Indemnification Provisions 17
Relationship With The Futures Commission Merchant And The General Partner
18
Fixed Commissions are Competitive 18
Relationship With The Commodity Trading Advisor 18
The Commodity Trading Advisor Will Trade For Other Accounts 18
Non-Disclosure Of The Commodity Trading Advisor's Methods 18
Charges To The Fund 18
Compensation Of General Partner 18
Compensation Of The Commodity Trading Advisor 18
Restrictions on Management Fees 19
Compensation of Futures Commission Merchant 19
Compensation of Selling Agents 19
Miscellaneous Fees To Futures Commission Merchant 20
Rights of General Partner 20
Other Expenses 20
Charges To The Fund 20
Potential Advantages 21
Equity Management 21
Investment Diversification 21
Limited Liability 21
Administrative Convenience 21
Access To The Commodity Trading Advisor 21
Use Of Proceeds 21
Determination Of The Offering Price 22
The General Partner 22
Identification 22
The Individual General Partner 22
No Ownership In Commodity Trading Advisor And Futures Commission Merchant
23
Ownership in the Partnership 23
Trading By The General Partner 23
Limited Prior Performance of this Fund and Regulatory Notice 23
Trading Management 24
No Affiliation With Commodity Trading Advisor 24
Rights of the General Partner With Respect To Commodity Trading Advisor
Selection And Allocation Of Equity 24
Performance of Other Partnerships Managed by the General Partner 25
Performance Record Of Atlas Futures Fund, Limited Partnership 26
Performance Record Of Bromwell Financial Fund, Limited Partnership 26
The Commodity Trading Advisor 27
Clarke Capital Management, Inc. 27
Business Background 27
Trading Program Description 28
Advisor Performance 29
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The Futures Commission Merchant 44
Federal Income Tax Aspects 45
Scope Of Tax Presentation 45
No Legal Opinion As To Certain Material Tax Aspects 46
Partnership Tax Status 46
No IRS Ruling 46
Tax Opinion 46
Passive Loss And Unrelated Business Income Taxes Rules 47
Basis Loss Limitation 47
At-Risk Limitation 47
Income And Losses From Passive Activities 47
Allocation Of Profits And Losses 47
Taxation Of Futures And Forward Transactions 48
Section 988 Foreign Currency Transactions 48
Capital Gain And Loss Provisions 49
Business For Profit 49
Self-Employment Income And Tax 49
Alternative Minimum Tax 49
Interest Related To Tax Exempt Obligations 49
Not A Tax Shelter 49
Taxation Of Foreign Partners 49
Partnership Entity-Audit Provisions-Penalties 50
Employee Benefit, Retirement Plans And IRA's 50
The Limited Partnership Agreement 50
Formation Of The Fund 50
Units of Partnership Interests 51
Management Of Partnership Affairs 51
General Prohibitions 51
Additional Offerings 51
Partnership Accounting, Reports, And Distributions 51
Federal Tax Allocations 52
Transfer Of Partnership Interests Only With Consent Of The General Partner
52
Termination Of The Fund 52
Meetings 52
Redemptions 52
Plan For Sale Of Partnership Interests 53
No FINRA Limitation on Sales Commissions and Disclosure of Wholesaling Fees
53
No Sales to Discretionary Accounts 53
The Selling Agent 53
Depository Account & Offering Price 53
Subscription Procedure 54
Subscription Amounts 54
Revocation and Acceptance of Subscription 54
Investor Suitability 54
Investor Warranties 55
Legal Matters 55
Litigation And Claims 55
Legal Opinion 55
Experts 55
Financial Statements
A. Providence Select Fund, Limited Partnership
Audited Financial Statements for the years ended 2008, 2007, and 2006
B. White Oak Financial Services, Inc.
Audited Financial Statements for the years ended 2008, 2007, and 2006
[The balance of this page has been intentionally left blank.]
v
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Summary of the Offering
This summary is to assist your understanding of the offer. To be certain you
have a full understanding of the risks of this investment, you must carefully
review the entire document, including the exhibits.
The Fund
The Providence Select Fund, LP allows you to participate in alternative or
non-traditional investments, namely the U.S. and international futures,
forward and swap markets. Specifically, the Fund trades in a portfolio that
includes financial futures and forwards, which are instruments designed to
hedge or speculate on changes in interest rates, currency exchange rates or
stock index values. It can also participate in agricultural commodities,
commodities in general, like metals and energy products, options on futures,
and the futures markets domestically and globally. The general partner uses
its discretion to employ advisors that look to manage risk and volatility.
The individual general partner has provided advisory services for individual
managed accounts for 27 years similar to the services he is providing for the
Fund, and he has developed and refined his approach to evaluating professional
advisors over that period. The performance data required to be disclosed for
the most recent five calendar years of the advisor selected is included.
The Fund is a Delaware limited partnership organized on May 16, 2003, with its
main business office at 505 Brookfield Drive, Dover, DE 19901, (800) 331-1532.
Its books and records are kept at the offices of the corporate general
partner, 5914 N. 300 West, Fremont, IN 46737. The Fund is operated pursuant
to a limited partnership agreement which is included as Exhibit A and is
managed and controlled by White Oak Financial Services, Inc., a Delaware
corporation, and Michael Pacult, who are collectively referred to as the
general partner. The main business office and phone of the individual and
corporate general partners are 5914 N. 300 West, Fremont, IN 46737, (260) 833-
1306.
The general partner employs independent professional trading managers called
commodity trading advisors to select trades for the Fund.
Description of Securities Offered for Sale
By our previous prospectus, we sold a total of $3,888,370 of partnership
interests. As of the effective date of this prospectus, we are offering by
this prospectus the balance of $46,111,630 in value of partnership interests
to bring the total offered since the commencement of sales to $50,000,000. The
remaining interests will be sold at the month end net asset value per
partnership interest, which reflects trading profits, losses and expenses.
Plan for Sale of Partnership Interests
All sales will be made through broker dealers that will use their best
efforts, which means they will try, but not guarantee, to sell the partnership
interests.
All subscriptions accepted by the general partner will be placed in a
depository account maintained at Star Financial Bank, Angola, IN until
accepted by the general partner. Interest accrued on your subscription amount
will be used to buy additional partnership interests for you.
This offering will continue until the maximum of $50,000,000 is sold. The
general partner may terminate this offering at any time.
Subscription Procedure
To purchase partnership interests, you must (i) complete and execute a
subscription agreement (Exhibit D), and deliver your executed subscription
documents and check for your investment, which should be made payable to
"Special Account for the exclusive benefit of the customers of Providence
Select Fund, LP," (ii) make representations and warranties in the Subscription
Agreement related to your suitability to purchase the partnership interests,
(iii) grant a Power of Attorney to the general partner to take all actions
necessary to admit you as a limited partner to the Fund, (iv) and pay for at
least $25,000 in partnership interests, though the general partner may reduce
this amount to not less than $5,000. Units will be charged a 4% continuing
service fee.
And you must also have the minimum net worth and income provided in the State
of your residence, if it is listed, at the front of this prospectus or, one of
the following: (i) a minimum net worth, exclusive of your home, home
furnishings and automobiles, of $250,000, or (ii) a minimum annual gross
income of $70,000 and a minimum net worth of $70,000, both exclusive of your
home, home furnishings and automobiles.
These suitability standards are, in each case, regulatory minimums only, and
merely because you meet such standards do not mean that an investment in the
partnership interests is suitable for you. You may not invest more than 10% of
your net worth, exclusive of home, furnishings and automobiles, in the Fund.
Will You Benefit From An Investment In The Fund?
You may benefit from an investment in the Fund if you want to diversify your
portfolio from traditional stock, bond and real estate investments and if you
have money available that you can afford to lose without adverse consequences
to your ability to support your family and your lifestyle. The purchase of
Fund partnership interests presents the opportunity to invest in futures
markets which are typically not represented in most investors' portfolios and
which, through long or short positions, offer the opportunity to profit from
rising or falling markets.
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However, if you cannot afford the risk of losing your entire investment in
this partnership, you should not purchase these partnership interests.
The Fund has the potential to help diversify traditional securities
portfolios. A diverse portfolio consisting of assets that perform in an
unrelated manner, or non-correlated assets, has the potential to increase
overall return and reduce the volatility (a primary measure of risk) of a
portfolio. As a risk transfer activity, futures, forward and swap trading has
no inherent correlation with any other investment. However, non-correlation
will not provide any diversification advantages unless the non-correlated
assets are outperforming other portfolio assets, and there is no guarantee
that the Fund will outperform other sectors of an investor's portfolio or not
produce losses. The Fund's profitability also depends on the success of the
trading techniques. If the Fund is unprofitable, then it will not increase
the return on an investor's portfolio or achieve its diversification
objectives.
Investors in the Fund get the advantage of limited liability in highly
leveraged trading.
Business Objectives
We are organized to be a commodity pool to engage in the speculative trading
of futures and forward contracts, which are instruments designed to permit
producers to hedge or investors to speculate in various interest rates,
commodities, currencies, stock indices and other financial instruments. We
also trade options on futures and forward contracts, which give the purchaser
the right to acquire or sell a given contract at a specified time at a
specified price, and other financial instruments.
We cannot guarantee that we will meet our objectives or avoid substantial
losses.
Summary Risk Factors
Investment in the partnership interests is speculative, illiquid, and highly
risky. You should purchase partnership interests only if you can afford to
lose your entire investment. For a complete description of the risks of an
investment in the Fund, see the Risk Factors section beginning on page 6.
Our business is the speculative trading in futures and forward contracts, and
options on those contracts, selected by registered commodity trading advisors.
This trading is highly leveraged and takes place in very volatile markets.
You could lose all or a substantial amount of your investment in the Fund.
The Fund has limited operating and performance history to serve as the basis
for evaluating an investment in the Fund. However, the track record of the
commodity trading advisor discloses the trading program to be used for this
Fund that gives an indication of future results; however, past results are no
guarantee of future results. In addition, the general partner may invest the
offering proceeds in a different program run by a separate advisor without
prior notification to the partners.
This partnership pays substantial fixed management fees and commission costs.
There is no guarantee that you will receive a return on your investment. To
return an initial investment at the current (as of January 31, 2009) net asset
value per partnership interest of $785.87 after the first year of operation,
we must earn a profit of 28.45%, or $223.61 per partnership interest based on
our current net asset value during the subsequent twelve months , and we must
earn a profit of 12.38% should we sell the maximum during the next twelve
months and our net asset value be $50,000,000. To return an initial
investment of $785.87 during the first year of operation, we must earn a
profit of at most 30.04% at our current net asset value and 14.25% should we
sell the maximum.
Transfer of your partnership interests will be restricted and there are
limitations on your right of redemption to surrender your partnership
interests in return for their value. No public market for the partnership
interests exists and none is expected to develop.
This partnership will not make distributions. To receive a return on your
investment, you must use our redemption procedure. The redemption price will
be the net asset value of the partnership interests you hold at the end of the
month in which you provide the general partner with no fewer than ten days
prior written notice of your request to redeem.
Although you will not receive distributions, you must pay Federal and State
income taxes on your share of the profits, if any, earned by this partnership
for the year in which they are earned.
The general partner and affiliates have conflicts of interest with regard to
the management of this partnership. Specifically (i) the general partner's
fees and principal selling agent's continuing service fees have not been
negotiated at arm's length, (ii) the individual general partner is the sole
principal of the corporate general partner and an affiliate of the principal
selling agent, and (iii) the general partner, the commodity trading advisor
and their principals may preferentially trade for the own accounts or for
others.
2
<page>
Commodity trading is highly leveraged. A small change in the market price of
a contract can produce adverse consequences to the value of the Fund.
The general partner may at any time and it its sole discretion select and
allocate all or a portion of the Fund's assets to commodity trading advisors
other than Clarke Capital Management, Inc., and investors in the Fund must
rely on the ability of the general partner to select such additional advisors.
The incentive nature of the compensation to be paid to the corporate general
partner and the commodity trading advisor may encourage riskier or more
speculative positions than would otherwise be assumed.
The Fund will not provide any benefit of diversification of your overall
portfolio unless it is profitable, and that may not occur.
Charges to the Fund
The Fund's charges are substantial and must be offset by trading gains and
interest income in order to avoid depletion of the Fund's assets.
Entity Nature of Service Amount of Compensation
The general partner
(White Oak Financial Services, Inc. and Mr. Michael Pacult) Manages the Fund;
negotiates and pays trading costs; assumes credit risk of the partnership to
the futures commission merchant White Oak receives a fixed brokerage
commission of 7% of equity allocated to trading to clear trades and retains
the difference between the 7% and the round turn commissions paid to the
futures commission merchant. [$1,750] +
The commodity trading advisor
(Clarke Capital Management, Inc.)
Selects and enters trades for the Fund
25% quarterly incentive fee on new net profits it generates.
The futures commission merchant
(MF Global Inc.)
Accepts trades from the advisor, clears the trades; hold the Fund's
trading equity The corporate general partner pays the futures commission
merchant the per round turn commissions.
The selling agents
(Futures Investment Company, a Financial Industry Regulatory Authority
registered broker/dealer, principal selling agent and additional selling
agents it appoints)
Solicits and services investment in the Fund
The Fund pays the selling agents either (i) a 4% continuing service fee of the
initial investment for the first year of the investment and, beginning the
thirteenth month, 1/3% monthly based on the net asset value of the investment
for so long as the investment remains in the Fund, or (ii) 1/3% monthly based
on the net asset value of the investment for so long as the investment remains
in the Fund. [$1,000] +
Lawyers, Accountants and Others
(The Scott Law Firm, P. A. Jordan, Patke & Associates, Ltd., CPA and other
accountants) Initial and continuing legal, audit and accounting work
$274,716 in offering and organizational expenses were reimbursed by the
Fund to the general partner and are being amortized over 24 months until
March, 2010. [$4,159, $137] + Annual operating costs of $50,000 in audit and
accounting, $14,000 in legal, $17,000 in regulatory, and $14,000 in
miscellaneous, such as Blue Sky and printing. [$1,438, $138] +
+ Each $25,000 investment pays this amount per year for this particular
charge. When the charge is not based on a percentage, but rather a fixed
amount, we have computed that expense upon an assumed net asset value of the
current net asset value of $1,651,463 as of January 31, 2009 and the offering
maximum of $50,000,000, respectively. "Net assets" or "net asset value" means
the total assets, including all cash and cash equivalents (valued at cost plus
accrued interest and earned discount), less total liabilities, of the
partnership (each determined on the basis of generally accepted accounting
principles, consistently applied under the accrual method of accounting or as
required by applicable laws, regulations and rules including those of any
authorized self regulatory organization).
3
<page>
Use of Proceeds
After the twelfth month of operation following the commencement of business,
on March 4, 2008, the Fund reimbursed the general partner for all offering and
organizational expenses incurred prior to the commencement of business, which
totaled $274,716, and are being amortized on a straight line basis over 24
months at $11,446 per month. Offering expenses incurred after the
commencement of business, if any, are paid by the Fund as incurred, and are
included in the annual estimated operating costs of $95,000. Any partner in
the Fund during this twenty four month period will be exposed to this per
month charge on a pro rata basis. The general partner has applied all of the
Fund assets toward trading commodities and cash reserves, including
investments in U.S. Treasuries and in cash management funds that invest in
only U.S. Treasuries.
Selection of Commodity Trading Advisors and Allocation of Equity
The general partner has selected Clarke Capital Management, Inc. to serve as
commodity trading advisor of the Fund. The trading advisor is responsible for
making trades, and neither the general partner nor you will have notice or the
opportunity to approve the trades made. The advisor trades its Alpha program
for the Fund. The program uses multiple non-correlated technical strategies
to trade financial and commodity futures contracts. The advisor makes short
sales, with unlimited risk of loss, on behalf of the Fund. The general
partner, without prior notice to you, may terminate or add trading advisors,
or change the amount of equity allocated to any or all advisors.
Federal Income Tax Aspects
In the opinion of The Scott Law Firm, P.A., counsel to the general partner,
the Fund is classified as a partnership and will not be considered a publicly-
traded partnership taxable as a corporation for Federal income tax purposes.
As such, whether or not the Fund has distributed any cash to the limited
partners, each limited partner must report his or her allocable share of items
of income, gain, loss and deduction of the Fund and is individually liable for
income tax on such share. The Fund invests in futures and other commodity
contracts, gain or loss on which will, depending on the contracts traded,
constitute a mixture of ordinary income or loss, and/or capital gain or loss.
Trading losses of the Fund, which will generally constitute capital losses,
may only be available to offset a limited amount of interest income allocated
to the limited partners. Although the Fund treats the brokerage fees and
performance fees paid as ordinary expenses, such expenses may be subject to
restrictions on deductibility for federal income tax purposes or be treated as
non-deductible, syndication costs by the Internal Revenue Service.
Redemptions
You may request the general partner to accept the surrender of your
partnership interests for cash through our redemption procedures. The general
partner will try to comply with all redemption requests, but may not be able
to do so because of insufficient liquid assets or reserve for contingent
claims. There is a redemption fee for partners admitted subsequent to the
date of this prospectus of 4% during the first three months of investment, 3%
the second three months, 2% the third three months, 1% the fourth three months
and none for redemptions made in the thirteenth month or thereafter. See, The
Limited Partnership Agreement, Redemptions.
[The balance of this page has been intentionally left blank.]
4
<page>
Diagram of Partnership Structure & Commissions
Providence Select Fund, Limited Partnership
Please see the previous table under Charges to the Fund for a description of
the parties and expenses.
<table>
<s> <c> <c>
Investor (you)
|
|
Principal Selling Agent
Futures Investment Company*
|
|
Limited Partners--------General Partner and---------------------Commodity Trading Advisor
Investors (you) Commodity Pool Operator Clarke Capital Management, Inc.
White Oak Financial Services, Inc. |
and Michael P. Pacult |
| |
| |
Futures Commission Merchant---------------------
MF Global Inc
|
|
Futures Market
</table>
Mr. Pacult is a 50% owner of Futures Investment Company, the principal
selling agent and is also 100% owner of White Oak Financial Services, Inc.
5
<page>
The Risks You Face
Investment in the partnership interests is speculative, illiquid, and highly
risky. You should purchase partnership interests only if you can afford to
lose your entire investment. All of the following risks, except payment of
fixed expenses, are present without regard to the amount of partnership
interests sold.
The corporate general partner of this Fund has limited experience.
The corporate general partner has not previously operated a commodity pool
prior to the commencement of business of the Fund or engaged in any other
business. However, the individual general partner has been a commodity pool
operator for five years and has 27 years experience explaining managed futures
and selecting trading advisors for investors.
We must pay substantial fees, charges and expenses regardless of profitability
which must be recovered before you can receive a return on your investment.
We must pay our fees, charges and expenses before you will realize a profit.
They are (i) fixed brokerage commissions to cover the cost of trades of 7%
annually of the equity allocated to trading (ii) a 4% annual continuing
service fee, paid as described in Charges to the Partnership, to the selling
agents, (iii) yearly operating expenses estimated at $95,000, including
charges for legal, accounting, regulatory, printing, telephone, postage, and
office supplies, and (iv) extra-ordinary expenses such as claims and defense
of claims from brokers, partners, and other parties.
The incentive fees of 25% to the commodity trading advisor are accrued monthly
but paid on a quarterly basis. The Fund may increase the incentive fee paid
to the trading advisor to 27% provided there is no management fee.
Conversely, the Fund may charge a management fee to either the commodity
trading advisor or general partner to a total of 6% if the total incentive
fees are decreased to 15%. The Fund may be subject to substantial incentive
fees in the initial quarters of operation of the Fund that will not be
refunded, even if we experience subsequent losses that produce a net loss for
that year. See Charges to the Fund.
You may not transfer your partnership interests and must rely on our
redemption procedures to receive your investment back.
You can assign or transfer your partnership interests with the consent of the
general partner, which will be granted only in limited circumstances. See
The Limited Partnership Agreement, Transfer Of Units Only With Consent Of The
General Partner and the Limited Partnership Agreement (Exhibit A).
Therefore, you must rely on our redemption procedures to receive your initial
investment adjusted to reflect profits, payment of expenses, and losses. See
The Limited Partnership Agreement, Redemptions.
Your right of redemption is limited.
Our redemption procedures provide (i) the redemption amount will be the net
asset value of the partnership interests as calculated at the end of the month
in which the redemption request is received, (ii) you must submit your
redemption request in a form acceptable to the general partner no fewer than
ten days prior to the withdrawal date (iii) it must be approved by the general
partner, and (iv) it may not be granted if we do not have enough liquid
assets.
Subject to the foregoing limitations, the general partner intends to grant all
redemption requests received no fewer than ten days prior to the last business
day of the month and will pay those requests within twenty days after the last
business day of the month in which the redemption request was received.
Intervening circumstances may prevent the redemption of partnership interests
before they are significantly devalued. See The Limited Partnership
Agreement, Exhibit A, Redemptions.
Further, substantial redemption requests could adversely affect us by the
liquidation of positions too rapidly or on unfavorable terms which prevent us
from satisfaction of all redemption requests, or the reduction of our
available trading equity at a time when we have an opportunity to earn
substantial profit.
The Fund depends upon the individual general partner, and his absence could
cause the Fund to cease operations.
You will be relying entirely on the ability of the general partners to select
and monitor the commodity trading advisor selected for the Fund. The
individual general partner is also the sole director and officer of the
corporate general partner. If he becomes unable to perform his duties, the
Fund could be required to cease operations and trading until a replacement for
him is found.
General partner and commodity trading advisor will serve other businesses and
may not have adequate time to devote to the Fund.
The individual general partner currently manages other commodity pools and
both general partners expect to manage additional pools in the future. Such
other pools may also use this pool's general partner to negotiate better terms
for clearing and other services. The commodity trading advisor currently
manages other commodity accounts and may manage new accounts, including
personal accounts and other commodity pools. Although the commodity trading
advisor intends to use similar trading methods for all accounts it manages
pursuant to a given program, it may vary those methods. Accordingly, there is
no guarantee that our trading results will be similar to or better than the
trading advisor's other accounts. Our business could be adversely affected by
the failure of either the individual general partner, who is also the sole
director of the corporate general partner, or the trading advisor to devote
sufficient time to the Fund affairs. See Risk Factors, Trading Management,
and The Commodity Trading Advisors.
6
<page>
There are conflicts of interest in the Fund structure that may limit our
profits.
Before investing in this partnership, you must consider the actual and
potential conflicts of interest that exist in our structure and operation.
Specifically, the individual general partner is also a principal of Futures
Investment Company, the principal selling agent. Therefore, the individual
general partner will probably not replace Futures Investment Company as the
principal selling agent because it may retain a portion of the 4% annual
continuing service fee on sales made by associated persons it employs.
In addition, because the principal selling agent is affiliated with the
general partner, no independent due diligence of this offering will be
conducted in regard to interests it sells. The general partner retains a
portion of the 7% fixed annual fee for brokerage commissions and, therefore,
is unlikely to resign. See Risk Factors, Conflicts of Interest, and the
Limited Partnership Agreement (Exhibit A).
You will be taxed on profits though you will not receive distributions.
We do not intend to make cash distributions from profits. Regardless of
whether distributions are made, if we realize profits for a fiscal year, you
must report that income on your tax returns.
You will have to pay taxes on profits in a current year which may be lost in
future years.
We might sustain losses that offset our profits after the end of the year. We
do not intend to make distributions, so you must receive a redemption pursuant
to our redemption procedures to receive a return of your investment. And,
losses after any year-end could require you to pay taxes on any prior year's
income from principal. See Federal Income Tax Aspects and The Limited
Partnership Agreement (Exhibit A).
If the general partner selects new trading advisors, they may not be as
profitable as those replaced and the new advisors will not be responsible for
recouping any previous losses.
We rely upon a commodity trading advisor to generate profits pursuant to an
Advisory Contract and Power of Attorney (Exhibit F). A trading advisor may
terminate its relationship with the Fund at any time. If this happens, or if
the trading advisor becomes unable to serve us for any other reason, the
general partner would have to find one or more alternate trading advisors. We
cannot guarantee that any alternate trading advisors will trade as profitably
as the original trading advisor, or that they will be retained on terms that
are as favorable. Also, any new trading advisors will not be obligated to
recoup losses, if any, incurred by the prior trading advisor before they are
paid incentive fees on new net profits they generates.
The general partner may change the commodity trading advisor and its
allocation of equity to or among advisors without prior notice to you.
Without prior notice to you, the general partner may change the commodity
trading advisor and the amount of equity to trade at any time, for any reason.
You will not participate in management and may not contest the business
decisions of the general partner.
You may not manage or conduct our business in any way. If you did, you would
be deemed a general partner, which is not allowed by the Limited Partnership
Agreement (Exhibit A). Accordingly, you are bound by the business decisions
of the general partner.
Broad investment guidelines.
We have no policies restricting the manner in which the general partner may
allocate the Fund's assets to trading advisors or the manner in which the
Fund's trading advisor may invest for the Fund, other than those described in
"Summary of the Offering -- Business Objectives", "Trading Management", and
"The Commodity Trading Advisor". The General Partner has broad discretion in
allocating the Fund's assets to trading advisors and the trading advisor has
sole discretion in investing the Fund's assets, including the particular
trading strategies and the amount of leverage to be used. The Fund's assets
may be less diversified than they would be if allocated differently or managed
by other advisors and/or may be invested in instruments that differ
significantly from instruments you might select if you were managing your own
trading.
Commodity futures trading is speculative and highly risky.
Commodity futures, forward, and option contracts have a high risk of loss and
are highly volatile. Specifically (i) price movements are influenced by such
unpredictable variables as: changes in supply and demand; weather;
agricultural trade, fiscal, monetary and exchange control programs and
policies of governments; national and international political and economic
events; and, changes in interest rates, governments, exchanges, and other
market authorities that intervene to influence prices, (ii) even if the
analysis of the fundamental conditions by a commodity trading advisor is
correct, prices still may not react as predicted, (iii) analysis by the use of
a computer program to measure price, historical price averages, momentum and
other technical factors deemed important by the commodity trading advisor may
also fail to predict price direction, (iv) it is possible for most of our open
positions to be unprofitable at the same time (v) price changes may reach a
limit upon which trading rules require a suspension of trading for a specified
period of time. It is possible for these limits to be reached in the same
direction for successive days. This may prevent us from exiting a position,
and when the market reopens, we could suffer a substantial loss on the
position, (vi) losses are not limited to the margin allocated to hold the
position and may exceed the total equity in our account, for which, the
general partner is responsible, and (vii) short positions, which have
unlimited risk of loss, will be taken on our behalf by the trading advisor.
7
<page>
As a result of leverage, small changes in the price of the Fund's positions
may result in major losses.
A small amount of money relative to the value of the contract traded, called
margin, must be deposited to place and hold a trade. The margin amount is
typically between 5% and 15% of the value of the contract traded. However,
from time to time, the percentage of assets committed as margin may be
substantially more, or less, than such range. This permits a large percentage
gain or loss relative to the margin deposit. For example, if at the time of
purchase, 10% of the futures contract price is deposited as margin, a 10%
decrease in the position's value will cause a loss of all the equity allocated
to the trade, which could equal the entire value of the account. The losses
could be substantially more than the margin deposited and the total value of
the account. Also, the trading advisor is solely responsible for its trades
and will not be limited in the amount of leverage it may employ.
The general partner does not control the trading advisor or its methods and
may not be able to prevent large losses.
The commodity trading advisor enters trades on our behalf directly with the
futures commission merchant. The general partner does not know the trades
before they are made, nor does it know the trading advisor's methods, the
number of contracts bought or sold, or the margin required. The trading
advisor will not notify the general partner of any modifications, additions or
deletions to its trading methods and money management principles. We may
suddenly suffer large losses before the general partner knows remedial action
must be taken.
Illiquid markets could make it impossible for the Fund's advisors to realize
profits or limit losses.
It is not always possible to execute a buy or sell order. Such lack of
liquidity can be caused by a lack of interest in the contract caused by market
conditions which produce no persons willing to buy or sell, or the suspension
of trading which may occur because the price limit for a contract has been
reached.
Most United States commodity exchanges limit price movement in a single
direction by rules referred to as price limits. Once these limits have been
reached, no trades may be executed at prices beyond the limits for a specified
amount of time, usually until the next trading day. However, given sufficient
price movement the following day, price limits may be imposed again.
Accordingly, price limits may be in effect for protracted time periods. No
trading may be made in the direction of the price movement while the limit is
in place. The frequency of the imposition of price limits or the length of
time they will be in effect cannot be predicted. This causes a lack of
liquidity and exposure to substantial losses. These losses could exceed the
total equity in our account, for which the general partner is responsible.
Changes in trading equity may adversely affect Fund performance.
Commodity trading advisors often are unable to adjust to changes in the amount
of money they manage. This is because (i) the larger amount of equity under
management requires larger trades to be made, which may be more difficult to
execute (ii) there are legal limits called position limits upon the number of
positions that may be taken on a particular commodity, and (iii) it may be
more difficult to scale in positions, which is when a trading advisor takes
positions at different prices at different times and then allocates those
positions on a ratable basis when a change in its allocated equity occurs.
See Appendix I for the full definitions of position limits and scale in
positions.
The commodity trading advisor may not limit the total equity it accepts and
may suffer losses that cause a withdrawal of the equity it manages. A
commodity trading advisor's rate of return tends to decrease as the amount of
equity under management increases.
Denomination of Fund Assets at the Futures Commission Merchant in Foreign
Currencies
The general partner may change the currency denomination in which the Fund
assets are held at the futures commission merchant (e.g., U.S. Dollars, Euros,
British Pound, Yen, etc.). Although the assets will be physically held by the
merchant selected by the general partner in a United States account, they will
be subject to currency rate fluctuations, which may work to the benefit or
detriment of fund assets.
Failure of commodity broker or banks could result in loss of assets.
If the futures commission merchant or other entities with which our money is
on deposit becomes bankrupt, we might only recover some, if any, of the equity
in our account. As of the date of this prospectus, the deposits in our bank
accounts will be insured for only $250,000 and payment on insured deposits may
be delayed. As of April 1, 2008, the General Partner began to use its best
efforts to put Fund equity not used for margin in accounts not maintained by
or accessible by the futures commission merchant. This includes U.S.
Treasuries held at the U.S. Treasury and investments in cash management funds
that invest in only U.S. Treasuries, all held in the name of the Fund.
8
<page>
When trading in foreign exchanges, if the creditworthiness of the other
parties or the foreign currency is not maintained, we may lose the entire
value of our positions in those markets.
Trading commodities involves entering a contract, or option to contract, for
the delivery of goods or money at a future date. The value of the contract or
option depends directly upon the creditworthiness of the parties and the value
of the item traded. The general partner has the authority to grant the right
to the commodity trading advisor to trade commodities on United States
commodity exchanges, foreign commodity exchanges, the inter-bank currency
markets, the physical commodity cash markets and any other markets the general
partner, in its sole judgment, deems appropriate. The commodity exchange
contracts and options traded on United States exchanges are guaranteed by the
members' credit. Contracts and options upon foreign commodity exchanges and
the inter-bank currency markets are usually not regulated by specific laws and
are backed only by the parties to the contracts. It is possible for a price
movement or a devaluation of a particular foreign currency to be large enough
to destroy the creditworthiness or value of the contracts and options issued
by a particular party or government, or all of the contracts and options of an
entire market. In either of those situations, we could lose the entire value
of a position with little recourse to regain any of its value.
Option trading is highly risky and requires less equity to secure a trade,
thus providing greater potential for loss.
Currently, the CTA selected to trade for the Fund does not trade options,
neither puts nor calls. However, it reserves the right to do so in the
future, and the general partner reserves the right to select additional or
replacement CTA's that trade options. After a position is taken, a liquid
market may not exist for any particular commodity option or at any particular
time. In an illiquid market, we may not be able to buy or sell to offset, or
liquidate, the positions we have taken.
Option trading allows us to trade with less equity on deposit. Accordingly,
the risk of loss of the entire account is great in the case of selling option
premium because selling options exposes the Fund to unlimited risk of loss;
however the risk of loss to you is limited to the amount of your investment.
Position Limits May Limit Profitability and Changes Thereof Can Produce
Dramatic Price Swings.
The Commodity Futures Trading Commission and the United States commodity
exchanges have established limits referred to as Speculative Position Limits
or Position Limits. These are different from the price limits described
before. They are limits on the maximum net long or net short futures or
options positions which any person or group of persons may own, hold, or
control in futures contracts. The positions taken among all commodity
accounts owned, controlled or managed by a trading advisor and its principals
are combined for position limit purposes. Thus, a trading advisor may not be
able to hold sufficient positions for us to maximize the return on a
particular trade because it may be taking similar positions for others. A
material change in the position limits of one or more futures markets could
cause a large liquidation of or large addition to positions in such markets,
which could cause dramatic price swings.
We may not be able to compete with others with greater resources which could
cause loss of Fund investment.
Commodity futures trading is highly competitive. We compete with others who
may have greater experience more extensive information about developments
affecting the futures markets, more sophisticated means of analyzing and
interpreting the futures markets, and greater financial resources.
Those with greater experience and financial resources have a better chance at
trading profitably. For instance, we will not maintain a warehouse to take
delivery of commodities and will not have a large capital base to allow us to
hold positions through bad times.
Resignation of the individual general partner may cause taxation as a
corporation.
Any general partner wishing to voluntarily withdraw from the Fund must give
120 days prior written notice to the limited partners. When the sole general
partner of a partnership is a corporation, the tax rules require conditions to
be met to allow the Fund to be taxed as a partnership and not as a
corporation. To be taxed as a partnership requires that two or more of the
following tests be met, decentralized management, unlimited liability, limited
transferability of shares, and limited continuation of existence.
Our tax status has not been confirmed by an IRS ruling. No such ruling has
been or will be requested on our behalf. If we are taxed as a corporation for
Federal income tax purposes in any taxable year(s), our income or loss would
not be passed through to you, we would be taxed at corporate rates, all or a
portion of any distributions made to you would be taxed to you as dividend
income, and the amount of such distributions would not be deductible by us in
computing our taxable income. See Federal Income Tax Aspects.
9
<page>
The offering of units has not been subject to independent review.
Purchasing partnership interests does not create an Individual Retirement
Account, commonly called an IRA, and the creation and administration of an IRA
are solely your responsibility. The assets of a retirement account should be
carefully diversified and you should only allocate high risk capital to this
partnership. If you invest a significant portion of your retirement plan or
IRA assets in this partnership, you could be exposing that portion to
significant loss. The general partner will not advise you in any manner on an
investment in this partnership, including matters of diversification, prudence
and liquidity. Accordingly, you must rely upon the experience of qualified
investment counsel you select.
You will not have the protections provided by the Investment Company Act of
1940.
Stock investment companies and investment advisors must be registered under
the Investment Company Act of 1940, as amended. Because the business of the
Fund, the corporate general partner, the individual general partner and the
commodity trading advisor involves only the trade of commodities, none of them
is required, nor does any of them intend, to be registered under the
Investment Company Act of 1940 or any similar State law. Therefore, you are
not protected by any such legislation.
Investment in this Fund may subject you to the inconvenience of an IRS audit.
If our return is audited, the IRS may make adjustments to our reported items.
If an audit results in an adjustment, you may be required to file amended
returns, may be subject to a separate IRS audit, and required to pay back
taxes, plus penalty and interest.
General partner may settle IRS claim without your approval, whether or not it
is in your best interest.
The corporate general partner is named tax matters partner. This grants it
the power to settle any IRS claim on your behalf if you hold 1% or less
interest in this partnership and do not timely object to the tax matters
partner's authority, after notice. Such settlement may not necessarily be in
your best interest. See Federal Income Tax Aspects.
You may be subject to back taxes and penalties.
The Fund tax counsel has delivered an opinion to the general partner that this
partnership, as presently operated by the general partner, will be taxed as a
partnership and not as a corporation. This opinion does not include the tax
treatment of expenses to prepare the prospectus and selling expenses because
they have to be allocated between expenses attendant to formation and ordinary
business expenses by the general partner. In addition, commodity trading
advisor fees are combined with employee business expenses and other expenses
of producing income. The aggregate of such expenses is deductible only if
such amount exceeds 2% of the taxpayer's adjusted gross income. The general
partner believes that our operations qualify as a trade or business.
The general partner may cause riskier trading by raising the incentive fee to
27% without prior notice to you.
The general partner has reserved the right to raise, without prior notice to
you, the total incentive fee between the trading advisor and the general
partner to a maximum of 27% provided the total management fees charged by the
commodity trading advisor and general partner are 0%. If this occurs, the
trading advisor may engage in riskier trades, with the encouragement of the
general partner, because their fees would be tied exclusively to the
performance of the trading program.
Conflicts Of Interest
There are present and potential future conflicts of interest in our structure
and operation you should consider before you purchase partnership interests.
The general partner will use this notice of conflicts as a defense against any
claim or other proceeding made against the corporate general partner, the
individual general partner, the commodity trading advisor, the futures
commission merchant, the principal selling agent or any principal or
affiliate, agent or employee of any of them.
General partner, the commodity trading advisor, the futures commission
merchant, the selling agents and their principals may preferentially trade for
themselves and others.
Because the general partner, the commodity trading advisor, the futures
commission merchant, the selling agents and their principals and affiliates
may trade for themselves and others, conflicts of interest may exist or be
created in the future. For example, if any of them trade for their own
account, you will not have access to their trading records. They could take
their positions prior to the entry of positions they know will be placed for
the partnership, although, they have stated they will not do so.
Possible retention of voting control by the general partner may limit your
ability to control issues.
The general partner, its principal and its affiliates may purchase an
unlimited amount of partnership interests. These persons include the
individual general partner, who is also a principal of Futures Investment
Company, the principal selling agent. It is possible that they could purchase
enough partnership interests to retain voting control. They could then vote,
individually or as a block, to create a conflict with your best interests.
Such voting control may limit the limited partners' ability to achieve a
majority vote on such issues as, amendment of the Limited Partnership
Agreement, change in our basic investment policy, dissolution of this
partnership, or the sale or distribution of our assets. However, neither
general partner may vote, directly or indirectly, on the issue of their
removal.
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Partnership fees may be higher than they would be if they were negotiated.
The fixed annual brokerage commission to the corporate general partner has not
been negotiated at arm's length, although they are less than the presumptive
fair and reasonable limits provided by the guidelines of the North American
Securities Administrators Association. The general partner (i) accepts the
credit risk of the Fund to the futures commission merchant, (ii) maintains the
day to day contact with the selling agents and the commodity trading advisor,
(iii) reviews the daily positions and margin requirements of the Fund, (iv)
pays the futures commission merchant' charges, (v) pays the continuing service
fees to the selling agents for communicating with investors and maintaining
investment in the partnership.
The individual general partner is the principal of the corporate general
partner and a principal and 50% owner of Futures Investment Company, the
principal selling agent. He has a conflict of interest because he receives
compensation from the fixed brokerage commissions paid to the corporate
general partner and the continuing service fee paid to the principal selling
agent, Futures Investment Company. From the fixed brokerage commissions paid
to the corporate general partner, the general partner must pay round turn
brokerage commissions to the futures commission merchant. The corporate
general partner will keep any remaining portion of the fixed brokerage
commission. The continuing service fee is paid by the partnership to the
selling agents for payment, as they determine, to the associated persons who
sold partnership interests to the other partners and you. The individual
general partner will be paid a portion of the continuing service fee paid to
Futures Investment Company, the principal selling agent, for interests it
sells.
Individual general partner and spouse may receive continuing compensation for
partnership interests they sell.
The individual general partner and his spouse are both 50% owners and
registered representative of Futures Investment Company. As such, they may
receive a portion of the 4% annual continuing service fee for their work to
retain investment in the Fund through service of the partnership interest they
sell, if any.
General partner may select trading advisor to capitalize on incentive fee
The corporate general partner receives an incentive fee on new net profits.
It may select a trading advisor and accept an inordinately high exposure to
risk to attempt to achieve profits to be paid the incentive fee.
Commodity trading advisor may engage in high risk trading to generate fees.
As a general rule, the greater the risk assumed, the greater the potential for
profit. Because the commodity trading advisor receives an incentive fee, it
might select trades that are too risky for us.
The individual general partner has sole control over the time he will allocate
to the management of the Fund.
The individual general partner is responsible for managing this partnership
along with three other public and one private commodity pool, and for
performing other investor relations services as a principal and associated
person of Futures Investment Company.
The individual general partner has also reserved the right to trade for his
own account and to form and manage other commodity pools and ventures in the
future. He is solely responsible for the allocation of his time to the
management of this partnership as well as the other projects he currently
manages and will manage in the future. He manages his time, in part, by the
delegation of many of the tasks, such as trade selection and preparation of
financial reports and offering documentation, to independent commodity trading
advisors, accountants, and attorneys. He believes he presently has and will,
in the future, have sufficient time to devote to the affairs of the Fund.
No Resolution of Conflicts Procedures
The general partner has not and will not establish formal procedures to
resolve potential conflicts of interest. These future potential conflicts may
adversely affect both you and us. However, in all dealings affecting this
partnership, the general partner has a fiduciary responsibility to all of the
Fund's investors to exercise good faith and fairness.
The previous risk factors and conflicts of interest are complete as of the
date of this prospectus, however, additional risks and conflicts may occur
which are not presently foreseen by the general partner. You may not construe
this prospectus as legal or tax advice. Before making an investment in this
partnership, you should read this entire prospectus, including the Limited
Partnership Agreement (Exhibit A) and the subscription agreement. You should
also consult with your personal legal, tax, and other professional advisors.
See Investor Suitability.
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Interests of Named Experts and Counsel
The general partner has employed The Scott Law Firm, P.A., a Florida
professional corporation, to prepare this prospectus, provide tax advice and
opine upon the legality of issuing the partnership interests. Neither the law
firm, its principal, any accountant, nor any other expert hired by the Fund to
give advice on the preparation of this offering document has been hired on a
contingent fee basis, except that the law firm has agreed to a sliding scale
fixed fee based upon the number of units sold at each closing. The general
partner believes no conflict of interest is created by this fee arrangement
and that it is in the partners' best interests. The foregoing persons do not
have any present or future expectation of interest in the general partner, the
selling agent, the commodity trading advisor, or the futures commission
merchant.
Management's Discussion and Analysis
The Fund
Providence Select Fund, Limited Partnership is a Delaware limited partnership
organized on May 16, 2003, and maintains its main business office at 505
Brookfield Drive, Dover, DE 19901, (800) 331-1532. It is qualified to be a
commodity pool to engage in the speculative trading of futures, commodity
options and forward contracts on currencies, interest rates, energy and
agriculture products, metals, and stock indices. See page 25 for the
performance record of the Fund.
Our business objective is to let our invested capital appreciate while
controlling losses; however, there can be no assurance that we will meet this
objective.
The Fund is managed by its general partners. The Fund does not have officers
or employees, which is why there is no report of executive compensation in
this prospectus.
We operate pursuant to the terms of the limited partnership agreement attached
as Exhibit A, which grants full management control to the general partner
including, the right to employ independent trading managers called commodity
trading advisors. The agreement will terminate at 11:59 p.m. on May 16, 2024,
or upon an event causing an earlier termination.
Except for the limited partnership agreement, the Fund may not enter any
contract with the general partner or commodity trading advisors that is
greater than one year in duration. However, all such contracts may provide
for automatic annual renewal and be terminable at anytime without penalty upon
sixty days, or less, written notice by the either party to the contract.
The General Partners
The corporate general partner is White Oak Financial Services, Inc., a
Delaware corporation incorporated on April 21, 2003. It was registered as a
commodity pool operator on May 14, 2003 and maintains its main business office
at 5914 N. 300 West, P.O. Box C, Fremont, IN 46737, (260) 833-1306.
The individual general partner is Michael Pacult, who was registered as a
commodity pool operator on July 28, 2003 and maintains his main business
office at 5914 N. 300 West, P.O. Box C, Fremont, IN 46737, (260) 833-1306.
The individual and corporate general partners and the Fund will comply with
all applicable registration and other requirements under the Commodity
Exchange Act, as amended.
Experience
The corporate general partner has not previously operated a commodity pool or
engaged in any other business. The individual general partner's background
and experience can be found on page 22. The past performance of the other
funds that the individual general partner manages can be found at pages 26 and
27.
Authority
The individual general partner is the sole shareholder, director, principal
and officer of the corporate general partner. Although the signature of either
the individual or corporate general partner may bind this partnership, the
individual general partner is the sole decision maker for this partnership.
He also is the sole decision maker for three other publicly traded commodity
pools and one privately held commodity pool.
The general partner is authorized to take all actions necessary to manage the
affairs of the Fund. See Article II of the Limited Partnership Agreement,
attached as Exhibit A.
Analysis of Critical Accounting Policies
The Fund's critical accounting policies are set forth in the financial
statements in this prospectus prepared in accordance with U.S. generally
accepted accounting principles, which require the use of certain accounting
policies that affect the amounts reported in these financial statements,
including the following: The contracts the Fund trades are accounted for on a
trade-date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded as "change in unrealized
profit/loss" for open (unrealized) contracts, and recorded as "realized
profit/loss" when open positions are closed out; the sum of these amounts
constitutes the Fund's trading revenues. Earned interest income revenue, as
well as management fee, incentive fee, and brokerage fee expenses of the
partnerships are recorded on an accrual basis. The general partner believes
that all relevant accounting assumptions and policies have been considered.
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Partnership Books and Records
Our books and records will be maintained for six years at the office of the
corporate general partner, 5914 N. 300 West, Fremont, IN 46737. You may
access our books and records related to the partnership and your account by
visiting the corporate general partner's office at a mutually convenient time
and you may have copies made at a reasonable charge per page. The corporate
general partner serves as tax partner for the Fund. The CPA firm of Jordan,
Patke & Associates, Ltd., 300 Village Green Drive Ste 210, Lincolnshire, IL
60069 conducts our annual audit and the annual audit of the corporate general
partner, and prepares our tax returns and sends the IRS Form K-1s to the
partners.
The Commodity Trading Advisor
To conduct trading on our behalf, the general partner has selected an
independent commodity trading advisor, Clarke Capital Management, Inc.
Without prior notice to you, the general partner has sole discretion to employ
additional trading advisors, terminate any trading advisor, and change the
amount of equity any advisor may trade. However, the general partner will
give you notice of any change in trading advisors within seven days of such
change. Such notice will include a description of your right to redemption.
No change in trading advisors will constitute a material change to the limited
partnership agreement or the structure of our operation. All trading advisors
employed to trade for the Fund will be registered with the Commodity Futures
Trading Commission and will have at least three years of experience as a
trading advisor.
Executive Compensation
The corporate general partner, as an independent contractor, is compensated to
manage the pool. It receives a portion of the 7% fixed brokerage commissions.
Also, as a 50% owner of Futures Investment Company, Mr. Pacult, the individual
general partner, may receive a portion of the 4% annual continuing service fee
paid to Futures Investment Company for sales made by associated persons it
employs.
The Advisory Contracts
The authority granted to the trading advisor is expressed in the advisory
contract and power of attorney granted by the Fund to the trading advisor, and
the futures commission merchant. See Exhibit F.
This agreement provides the trading advisor with a revocable power of
attorney, which gives it sole authority to determine the markets to be traded,
the location of those markets, the size of the position to be taken in each
market, and the timing of entry and exit in a market.
The advisory contract and power of attorney may be terminated, at any time,
upon notice by either the Fund or the trading advisor to the other and to the
futures commission merchant.
Business Objective and Expenses
Our objective is to achieve the potentially high rates of return that are
possible through the speculative trading of futures, commodity options and
forward contracts. We do not expect to engage in any other business.
The general partner organized this partnership to be a commodity pool, as that
term is defined in the Commodity Exchange Act. It employs independent
commodity trading advisors to trade for us.
The general partner has allocated substantially all of our net assets to the
selected trading advisor to conduct this trading. The trading advisor
typically allocates between 10% and 40% of the trading equity assigned to it
as a deposit, or margin, to secure the trading positions it selects. However,
from time to time, the percentage of assets committed as margin may be
substantially more, or less, than such range. The right to increase the
amount of equity utilized for margin is at the discretion of the commodity
trading advisor and under certain market conditions, this range could be
substantially higher.
Although we do not expect to make distributions, you will nevertheless be
required to pay yearly Federal, State and local taxes upon income, if any,
earned by this partnership.
There can be no assurance that we will achieve our business objectives, be
able to pay the substantial commissions, fees and other costs to do business,
or avoid substantial trading losses. See Charges to the Fund.
Below is a chart explaining the expenses we expect to incur during the next
two twelve month periods of operation. All interest income is paid to the
Fund. During the periods of the below chart, we assume the value of each unit
of partnership interest will remain constant at the current price, as of
January 31, 2009, of $785.87, and that the investment commenced the first
business day of January, 2009.
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Expenses Per Unit of Partnership Interest
For The Next Two 12-Month Periods Of Operations
<table>
<s> <c> <c> <c>
1st - 12th Months 13th - 24th Months
Based Upon Current Based Upon Maximum Based Upon Maximum
Net Asset Value Units Sold Units Sold
Actual Units in the Fund and Value (1) 2,101.45 Units
($1,651,463)
Units to be Sold Pursuant to this Prospectus (1) 63,624 Units 63,624 Units
($50,000,000) ($50,000,000)
Selling Price per Unit (2) $785.87 $ 785.87 $ 785.87
Offering Expenses (3) 65.36 2.16 0.23
Operating Expenses (4) 40.45 4.32 4.32
Continuing Compensation (5) 31.43 31.43 31.43
Trading Advisor's Incentive Fee (6) 33.72 8.89 8.41
Brokerage Commissions and Trading Fees (7) 55.01 55.01 55.01
Interest Income (8) (2.36) (2.36) (2.36)
Trading Income Required to Redeem one Unit at
Initial Value after first twelve month period
and second twelve month period (9) $ 223.61 $ 99.45 $ 97.04
Income as a % of Selling Price Per Unit with
0% redemption fee after first twelve month
period and second twelve month period (10) 28.45%* 12.38% 12.35%
Redemption in the first twelve months (10):
Redemption during first 3 months: Income as
a % of Selling Price Per Unit
with 4% redemption fee (11) 11.89% 8.22% N/A
Redemption during second 3 months: Income as
a % of Selling Price Per Unit
with 3% redemption fee (12) 17.41% 9.51% N/A
Redemption during third 3 months: Income as
a % of Selling Price Per Unit
with 2% redemption fee (13) 24.52% 12.67% N/A
Redemption during fourth 3 months: Income as
a % of Selling Price Per Unit
with 1% redemption fee (14) 30.04% 14.25% N/A
</table>
* If the net asset value of the Fund and/or the net asset value per unit
substantially increase, the break even percentage will be substantially
reduced.
Explanatory Notes:
(1) Your investment will be held in a depository account until you are
admitted to the Fund as a limited partner. The partnership has currently
registered on Form S-1, filed with the U.S. Securities and Exchange
Commission, a maximum of $50,000,000 of partnership interests to be sold. The
general partner may register additional partnership interests, from time to
time.
(2) You will purchase partnership interests at the partnership's month end net
asset value per unit.
(3) After the twelfth month of operation following the commencement of
business, on March 4, 2008, the Fund reimbursed the general partner for all
offering and organizational expenses incurred prior to the commencement of
business, which totaled $274,716, and are being amortized on a straight line
basis over 24 months at $11,446 per month through February, 2010. Accordingly,
for the second 12 months of an investment, only one month of amortized
expenses would be charged.
(4) At the current net asset value, the partnership incurs yearly operating
expenses, including ongoing offering expenses, of approximately $50,000 for
audit and accounting, $14,000 for legal, $17,000 for regulatory and $14,000
for miscellaneous costs. For the maximum, we have assumed operating expenses
of $275,000.
(5) The Fund pays a continuing service fee to the selling agents for the
partnership interests sold by them of either (i) 4% of the initial investment
the first year and, beginning the thirteenth month, for so long as the
investment remains in the Fund, 1/3% monthly based on the net asset value of
the investment, or (ii) for so long as the investment remains in the Fund,
1/3% monthly based on the net asset value of the investment.
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(6) The trading advisor receives a 25% quarterly incentive fee on new net
profits, which means the amount of income earned from trading, less losses,
round turn brokerage commissions and fees, and excluding interest income.
(7) Brokerage commissions and trading fees are fixed by the general partner at
7/12% monthly, 7% annually, of our equity allocated to trading. The general
partner earns a daily prorated share of these commissions and may withdraw
earned commissions during the month.
(8) For purposes of this calculation, we have assumed that 100% of the
partnership equity will earn interest at the current cash market interest rate
assumption of 0.30% annually.
(9) This computation assumes there will be no claims or other extra-ordinary
expenses.
(10) There is a redemption fee of 4% during the first three months of
investment, 3% the second three months, 2% the third three months and 1% the
fourth three months. There is no redemption fee for redemptions made in the
thirteenth month of investment or thereafter. You will be permitted to
withdraw your subscriptions for five business days after submission to the
general partner for acceptance.
(11) Assumes redemption request is made during the first three months of
investment, incurring a 4% redemption fee. Charges and interest have been
calculated as of the last day of the third month of investment.
(12) Assumes redemption request is made during the second three months of
investment, incurring a 3% redemption fee. Charges and interest have been
calculated as of the last day of the sixth month of investment.
(13) Assumes redemption request is made during the third three months of
investment, incurring a 2% redemption fee. Charges and interest have been
calculated as of the last day of the ninth month of investment.
(14) Assumes redemption request is made during the fourth three months of
investment, incurring a 1% redemption fee. Charges and interest have been
calculated as of the last day of the twelfth month of investment.
The break-even numbers in the above table are our best estimates only.
Securities Offered
We, Providence Select Fund, Limited Partnership will offer and sell limited
partnership interests in this partnership at the month end net asset value per
partnership interest of the Fund. See Determination Of The Offering Price.
You, the Investor, will have pro rata rights to profit and losses which will
vary with your investment amount and the right to vote on partnership matters
such as the replacement of the general partner. See The Limited Partnership
agreement attached as Exhibit A. You will not be responsible for our debts in
excess of your investment amount, unless (i) we become insolvent and you
receive distributions which represent a return on your investment, in which,
under certain circumstances, you would have to return to us to pay our debts,
or (ii) you acquire any interest in the corporate general partner, or (iii)
you manage this partnership. See Plan For Sale of Partnership Interests and
Subscription Requirements.
Your subscription agreement and check (i) must be approved by the general
partner before you will become a partner and will be either rejected within
five business days of receipt or accepted on the close of business on the last
day of the month in which your subscription was received, (ii) becomes
irrevocable and may not be withdrawn after five business days after
submission; unless, a longer statutory withdrawal period applies to you, and
(iii) will be deposited and held in a segregated depository account until you
are admitted into the Fund.
There cannot be any assurance that additional partnership interests will be
sold. The general partner is authorized, in its sole discretion, to terminate
this or any future offering of partnership interests.
Management's Discussion
This is a continuation of the offering of our partnership interests. We may
conduct future offerings after the close of this offering, raise money only
through offerings, such as this one, and do not intend to borrow any money.
We must pay expenses to qualify and sell our partnership interests, such as
fees for the preparation of this prospectus, sales literature, and web site
promotion, as well as other expenses. We allocate substantially all our net
assets to trading and other investments, except those assets used to pay
operating expenses and reserves for redemptions and contingencies. All our
business is conducted through the general partner.
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Description of Intended Operations
The general partner has selected MF Global Inc. as the unaffiliated futures
commission merchant. The general partner has deposited its funds to the
futures commission merchant to hold as security for the trades selected by the
commodity trading advisor. The futures commission merchant has been directed
to send the general partner, before the open of business each day, a computer
or fax report that describes the positions held, the margin allocated, and the
profit or loss on the positions from the date the positions were taken
Risk Control
The general partner reviews the daily transmissions provided by the futures
commission merchant and makes appropriate adjustments to the allocation of
trading equity. Based upon the amount of available trading equity, the
trading advisor has sole discretion to make specific trades, determine the
number of positions taken, and decide the timing of entry and departure from
each trade made.
The general partner uses its best efforts to monitor the daily value of the
Fund, which it provisionally calculates from the daily information provided by
the futures commission merchant, and will make such information available to
limited partners upon request. However, the accountant calculates the
partnership's net asset value per investor unit after the close of business on
the last day of each month. If the net asset value per unit falls to less
than 50% of the greater of the original $1000 selling price less commissions
and other charges, or such higher value earned through trading, then the
general partner will (i) immediately suspend all trading, (ii) provide you
with immediate notice of the reduction in net unit value, and (iii) give you
the opportunity, for 15 days after the date of such notice, to redeem your
partnership interests according to the provisions of Article IX, Sections 9.5
and 9.6 of the Limited Partnership Agreement. No trading shall commence until
after the lapse of such fifteen-day period. See Exhibit A attached.
Trading Risks
Most United States commodity exchanges limit daily fluctuations in commodity
futures contracts prices by regulations referred to as daily price fluctuation
limits or daily limits. Once the price of a futures contract has reached the
daily limit for that day, positions in that contract can neither be taken nor
liquidated. Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading.
Such an occurrence could prevent us from promptly liquidating unfavorable
positions and subject us to substantial losses. These losses could exceed the
margin initially required to make the trade. In addition, even if commodity
futures prices have not moved the daily limit, we may not be able to execute
futures trades at favorable prices. This may be caused by light trading in
such contracts or by a sudden and substantial price move in a futures or
forward contract. These limitations on liquidity are inherent in our proposed
commodity futures trading operations. Otherwise, our assets are expected to
be highly liquid.
Except for payment of offering and other expenses, the general partner is
unaware of any anticipated known demands, commitments or required capital
expenditures, material trends, favorable or unfavorable, which will affect our
capital resources, or trends or uncertainties that will have a material effect
on operations.
Each United States commodity exchange, with the approval of the Commodity
Futures Trading Commission and the futures commission merchant, establishes
minimum margin requirements for each traded contract. The futures commission
merchant will require the margin assigned to each account to be on deposit
before a trade will be accepted. The futures commission merchant may increase
the margin requirements above these minimums for any or all contracts for its
customers. Because we generally use a small percentage of assets for margin,
we do not believe that any increase in margin requirements will materially
affect our proposed operations. However, it is possible for an increase in
margin applicable to the trades the advisor selects for us to force us to
liquidate positions because we cannot meet the additional margin requirements.
Management cannot predict whether the value of our partnership interests will
increase or decrease. Inflation is not projected to be a significant factor
in our operations, except to the extent inflation influences futures prices.
Fiduciary Responsibility and Remedies
You have legal rights under Delaware partnership and applicable Federal and
State securities laws. In all dealings affecting this partnership, the
general partner has a fiduciary responsibility to you and all other partners
to exercise good faith and fairness. No contract shall permit the general
partner to contract away its fiduciary obligation under common law. The
limited partnership agreement conforms to the Uniform Limited Partnership Act
for the State of Delaware in regard to the definition of the fiduciary duties
of the general partner.
If the general partner acts in good faith and exercises its best judgment, it
will not be liable merely because we lost money or otherwise did not meet our
business objectives. There are substantial and inherent conflicts of interest
in the Fund's structure which are disclosed in the prospectus. The general
partner intends to raise the disclosures made in this prospectus and the
representations you make in the subscription agreement as a defense in any
proceeding brought which seeks relief based on the existence of such conflicts
of interest. See Conflicts of Interest.
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In the event that you form the belief that the general partner has violated
its fiduciary duty, you may seek relief individually or on behalf of the
partnership under applicable laws, including the partnership laws of Delaware
and the Federal commodity laws, to recover damages from or require an
accounting by the general partner. You also have the right, subject to
applicable contractual, procedural and jurisdictional requirements, to bring
partnership class actions in Federal court to enforce your rights and the
rights of the other limited partners under the Federal and State securities
laws and the rules and regulations under those laws. Losses suffered by you
as a result of a breach of the securities laws related to sale of your
investment to you may be recovered from the general partner should the breach
of those laws been caused by the general partner. The responsibility of a
general partner to you and other partners is a changing area of the law. If
you have questions concerning the responsibilities of the general partner, you
should consult your legal counsel. The performance of the general partner for
the operation of the partnership and its fiduciary duty are governed by the
limited partnership agreement attached as Exhibit A.
Indemnification
Provisions of Limited Partnership Agreement
The limited partnership agreement protects the general partner from being
responsible or accountable for any act or omission, for which you, other
limited partners or the Fund itself may claim it is liable, provided that the
general partner determined such act or omission was within the scope of its
authority and in the best interest of this partnership, and such action or
failure to act does not constitute misconduct or a breach of the Federal or
State securities laws related to the sale of partnership interests.
Specifically, if the general partner has acted within the scope of its
authority and is being assessed a demand, claim or lawsuit by a partner or
other entity, the Fund will defend, indemnify and hold the general partner
harmless from and against any loss, liability, damage, cost or expense,
including attorneys' and accountants' fees and expenses incurred in defense of
any demands, claims or lawsuits which were actually and reasonably incurred
and arising from any act, omission, activity or conduct undertaken by or on
behalf of the Fund.
Provisions of Law
According to applicable law, indemnification of the general partner is payable
only if the general partner determined, in good faith, that the act, omission
or conduct that gave rise to the claim for indemnification was in the best
interest of the Fund and the act, omission or activity that was the basis for
such loss, liability, damage, cost or expense was not the result of negligence
or misconduct by the general partner, and such indemnification or agreement to
hold harmless is recoverable only out of the assets of the Fund and not from
the partners, individually.
Provisions of Federal and State Securities Laws
This offering is made pursuant to Federal and State securities laws. If any
indemnification of the general partner arises out of an alleged violation of
such laws, it is subject to the following legal conditions.
Those conditions require that no indemnification may be made in respect of any
losses, liabilities or expenses arising from or out of an alleged violation of
Federal or State securities laws unless there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the general partner or other particular indemnitee, or such
claim has been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the general partner or other particular indemnitee, or a
court of competent jurisdiction approves a settlement of the claims against
the general partner or other agent of the Fund and finds that indemnification
of the settlement and related costs should be made, provided, before seeking
such approval, the general partner or other indemnitee must apprise the court
of the position held by regulatory agencies against such indemnification.
These agencies are the Securities and Exchange Commission and the securities
administrator of the State or States in which the plaintiffs claim they were
offered or sold partnership interests.
Provisions of the Securities Act of 1933 and NASAA Guidelines
The Securities and Exchange Commission and the various State administrators
believe that indemnification for liabilities arising under the Securities Act
of 1933 are unenforceable because such indemnification is against public
policy as expressed in the Securities Act of 1933 and the North American
Securities Administrators Association, Inc. commodity pool guidelines.
Provisions of the Clearing Agreement
We clear trades through an unaffiliated futures commission merchant, MF Global
Inc. According to the clearing agreement that governs trades entered, we must
indemnify MF Global for any reasonable outside and in-house attorney's fees
incurred by it arising from any failure to perform our duties under the
clearing agreement.
Other Indemnification Provisions
The general partner has indemnified the selling agent, Futures Investment
Company, and expects to indemnify any other selling agents it selects that
there are no misstatements or omissions of material facts in this prospectus.
17
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Relationship with the Futures Commission Merchant and the General Partner
The corporate general partner supervises the relationship with the futures
commission merchant, including the negotiation of the round turn commission
rates incurred through trading via the commodity trading advisor, and review
of the daily reports.
The general partner has engaged MF Global Inc. to act as the futures
commission merchant to open and close the trades selected by the trading
advisor for the Fund account.
Fixed Commissions are Competitive
The annual fixed commission that we pay to clear our trades is less than the
presumptive fair and reasonable limit provided by the guidelines of the North
American Securities Administrators Association. The general partner has the
right to select any substitute or additional selling agents, introducing
brokers or futures commission merchants at any time, for any reason. However,
the general partner is unlikely to dismiss the current principal selling agent
because of its affiliation with the individual general partner.
Either general partner or any other commodity pool operated by them may obtain
commission rates to clear trades that are more favorable to their accounts
than the brokerage commissions the general partner charges us.
Relationship with the Commodity Trading Advisor
The Commodity Trading Advisor Will Trade for Other Accounts
The commodity trading advisor trades for its own accounts and for others on a
discretionary basis. It may use trading methods, policies and strategies for
others that differ from those used for us. Consequently, such accounts may
have different trading results from ours.
Because the trading advisor trades for itself and others, it is possible for
it to take positions ahead of or opposite to the positions taken for us. This
would present a potential conflict of interest. See Appendix I for Taking
Positions Ahead of the Fund.
Pursuant to Commodity Futures Trading Commission Regulation 421.03, the
trading advisor will use the average price system for those futures and
options contracts where its use is authorized, when trades taken on behalf of
both the Fund and the trading advisor's other accounts are identical, and the
prices of such trades are different. See Appendix I for the definition of
Average Price System.
The commodity trading advisor has also informed the general partner that when
the average price system is not available, trades will be filled in order
based on the numerical account numbers, with the lowest price allocated to the
lowest account number and in numerical matching sequence, thereafter.
Non-Disclosure of the Commodity Trading Advisor's Methods
We have provided a general description of the commodity trading advisor's
methods and strategies under The Commodity Trading Advisor, Description of
Trading Program. However, the specific details of its trading methods are
proprietary and complex in nature and will not be disclosed to us or you. No
notice will be given to you of any changes the trading advisor may make in its
trading methods. See Risk Factors, No Notice of Trades or Trading Method.
Charges to the Fund
As an investor in this partnership, you will pay your pro rata share of the
cost of our formation and operation. These charges are described in narrative
form and in the chart that follows this narrative. In this prospectus, we
have disclosed all compensation, fees, profits and other benefits, including
reimbursement of out-of-pocket expenses, which the general partner and its
affiliates will earn in connection with this offering. Some of these charges
were not negotiated at arm's length, but rather were determined by the general
partner.
Compensation of General Partner
The partnership pays the corporate general partner, White Oak Financial
Services, Inc., fixed annual brokerage commissions of 7% of the equity
allocated to trading, regardless of where it is held, from which it must pay
the futures commission merchant the cost of the trades entered by the
commodity trading advisor. The corporate general partner retains the
difference, if any, between the fixed brokerage commissions and the clearing
costs and fees paid to the futures commission merchant. The general partner
earns a daily prorated share of these commissions and may withdraw earned
commissions during the month.
Compensation of the Commodity Trading Advisor
Clarke Capital Management, Inc., the commodity trading advisor, has been
allocated equity to trade from funds that have been deposited in an account
with the futures commission merchant, investments in U.S. Treasuries held at
the U.S. Treasury, and investments in cash management funds that invest only
in U.S. Treasuries, all held only in the name of the Fund.
The partnership pays the commodity trading advisor an incentive fee equal to
25% of the new net profit it produces. If the Fund has multiple trading
advisors, it would be possible for one advisor to earn an incentive fee while
the Fund as a whole lost money because of the poor trading performance of
another advisor.
18
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New net profit:
* is calculated to determine how much a trading advisor has increased our
net assets through trading alone
* is based upon the net value of the equity assigned to the trading
advisor to trade
* is calculated after the payment of brokerage fees and the management fee
to the trading advisor
* is calculated monthly but paid quarterly
* only occurs when any losses in previous quarters have been offset by new
profits regardless of whether:
* the general partner has changed the trading advisor's compensation, or
* the Fund and trading advisor have entered a new contract
* is adjusted to eliminate the effects of:
* any new subscriptions for partnership interests
* redemptions by partners
* any interest income paid to the partnership, and
* any other income earned on our assets that are not related to trading
activity, regardless of whether such assets are held separately or in a margin
account.
The following hypothetical table illustrates the quarterly incentive fee that
would be earned by the trading advisor based on the new net income, as
calculated above.
Qtr Net Income CTA (25%)
1 $1,000 $250
2 (200) 0
3 1,000 200
4 600 150
Restrictions on Management Fees
It is possible that some of the States in which we wish to sell partnership
interests will require that we apply the North American Securities
Administrators Association Guidelines for commodity pools. These guidelines
provide that (i) the total management fees, including that of the general
partner and the commodity trading advisors, may not exceed 6% of our net
assets, and (ii) incentive fees based upon profits earned may not exceed 15%
of new net profits.
As permitted by the guidelines, without prior notice to you, the general
partner has reserved the right to raise the current total incentive fee to a
maximum of 27%, provided the total management fees are correspondingly kept at
0%. However, the general partner will notify you of any change in fees within
seven business days. This prospectus discloses the maximum management and
incentive fees payable by the Fund; however, the general partner intends to
charge actual fees in such a manner that are permitted by the guidelines by
either lowering the management fee or the incentive fee. If the management
fees and incentive fees were charged in a manner not in accordance with these
guidelines, we could not offer or sell this partnership's interests to
residents of States that apply these guidelines to this offering.
Compensation of Futures Commission Merchant
The Fund pays the corporate general partner annual fixed brokerage commissions
of 7% of the pool's net assets, paid at 7/12% monthly, to cover all clearing
costs, including the pit brokerage fees, National Futures Association fees,
and exchange fees. The general partner is responsible for all payments to the
futures commission merchant and retains the difference between the 7%
brokerage commission paid to it by the Fund and the payments it makes to the
futures commission merchant for trades.
Compensation of Selling Agents
The Fund pays a continuing service fee to the selling agents for the
partnership interests sold by them of either (i) 4% of the initial investment
the first year and, beginning the thirteenth month, for so long as the
investment remains in the Fund, 1/3% monthly based on the net asset value of
the investment, or (ii) for so long as the investment remains in the Fund,
1/3% monthly based on the net asset value of the investment.
The recipients of the continuing service fee are responsible for maintaining
investment in this partnership. This must be done to spread the potential
risk of losses over a large number of investors to protect our ability to
continue in business, and allow the long-term trading strategies of the
commodity trading advisor to be profitable so additional investments can be
solicited.
The Fund pays continuing service fees to the persons responsible for selling
the partnership interests to (i) maintain continuous contact with the partners
to whom they sold interests in the Fund, (ii) review of the monthly statement
to be aware of the Fund results to discuss with the investors, (iii) explain
changes in trading advisors and results from operations, (iv) answer questions
regarding the Fund, and (v) work to retain investment in the Fund.
The general partner reserves the right to issue additional partnership
interests at the close of business each month to reduce the annual continuing
service fee per investor.
19
<page>
Miscellaneous Fees to Futures Commission Merchant
The partnership will reimburse the futures commission merchant for all
delivery, insurance, storage or other charges incidental to trading and paid
to third parties. The general partner has instructed the trading advisor to
avoid these charges and, therefore, no significant charges of this nature are
anticipated.
Rights of General Partner
Without prior notification to you, the general partner has reserved the right
to (i) add a general partner management fee, (ii) increase or lower the CTA
incentive fee or management fee, (iii) change the futures commission merchant,
(iv) change the commodity trading advisor, (v) add an introducing broker, (vi)
have the Fund pay a round turn brokerage commission as opposed to a fixed
percentage, at any time, with or without a change in circumstances; provided,
however, such brokerage commissions are presumed reasonable if they do not
exceed 80% of the published retail rate, excluding pit brokerage fees of the
futures commission merchant plus pit brokerage fees, or 14% annually,
including pit brokerage fees, of the average net assets related to trading
activity. Prior to any material change in brokerage commissions, you will be
notified and be provided with a right of redemption.
Other Expenses
The partnership must pay legal and accounting fees, as well as other expenses
and claims. For each year of normal operations, based on the current net
asset value, the partnership must pay yearly operating costs of approximately
$95,000, which includes $50,000 for accounting and audit, $14,000 for legal
services, $17,000 for regulatory and $14,000 for miscellaneous costs. The
partnership must also pay customary and routine administrative expenses, and
other direct expenses.
After the twelfth month of operation following the commencement of business,
on March 4, 2008, the partnership reimbursed the general partner for direct
expenses, such as (i) the cost to prepare and file periodic amendments and
restatements of the registration statement, prospectus, and financial
statements, (ii) web site promotion used in connection with the solicitation
and sale of partnership interests, (iii) audit fees, (iv) delivery charges,
(v) statement preparation and mailing costs, (vi) telephone toll charges, and
(vii) postage. However, the partnership now pays such expenses as incurred,
which are included in the annual estimated operating costs of $95,000.
Charges to the Fund
The following table includes all charges to the Fund.
Entity Form of Compensation Amount of Compensation
General Partner
(White Oak Financial Services, Inc. and Michael Pacult) Fixed Brokerage
Commission
White Oak receives 7% of equity allocated to trading annually to
clear trades and retains the difference between the 7% and the round turn
commissions paid to the futures commission merchant. [$1,750] +
Selling Agents
(Futures Investment Company, a Financial Industry Regulatory Authority
registered broker/dealer, principal selling agent and additional selling
agents it appoints)
Continuing Service Fee The Fund pays the selling
agents either (i) a 4% continuing service fee for the initial investment the
first year and, beginning in the 13th month, 1/3% monthly, based on the net
asset value of the investment for so long as the investment remains in the
Fund, or (ii) 1/3% monthly based on the net asset value of the investment for
so long as the investment remains in the Fund. [$1,000] +
Futures Commission Merchant
(MF Global Inc.)
Round-turn commissions The corporate general partner pays
the futures commission merchant the round turn brokerage commissions.
Reimbursement of delivery, insurance, storage and any other charges
incidental to trading and paid to third parties Reimbursement by the Fund of
actual payments to third parties in connection with Fund trading
Commodity Trading Advisor
(Clarke Capital Management, Inc.)
Incentive Fee
25% of the quarterly new net profits it generates
20
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Lawyers, Accountants and Others
(The Scott Law Firm, P. A. Jordan, Patke & Associates, Ltd., CPA and other
accountants)
Legal, accounting, audit and other actual expenses necessary
to the operation of the Fund, and all claims and other extraordinary expenses
of the Fund. Claims and other costs cannot be estimated and will be paid or
reserved as incurred. $274,716 in offering and organizational expenses were
reimbursed by the Fund to the general partner and are being amortized over 24
months until March, 2010. [$4,159, $137] + Annual operating costs of $50,000
in audit and accounting, $14,000 in legal, $17,000 in regulatory and $14,000
in miscellaneous, such as Blue Sky and printing. [$1,438, $138] +
+ Each $25,000 investment pays this amount per year for this particular
charge. When the charge is not based on a percentage, but rather a fixed
amount, we have computed that expense upon an assumed net asset value of the
current net asset value of $1,651,4633,288,378 as of January 31, 2009 and the
offering maximum of $50,000,000, respectively.
Potential Advantages
Commodity trading is speculative and involves a high degree of risk. See Risk
Factors. However, your investment in this partnership will offer the
following potential advantages:
Equity Management
We offer the opportunity for you to place equity with registered commodity
trading advisors who have demonstrated an ability to trade profitably in the
judgment of the general partner, and have that equity allocated to the trading
advisors in a manner that is intended by the general partner to optimize
future profit potential.
The individual general partner has over twenty-seven years of experience in
selecting commodity trading advisors to manage individual investor accounts
and describing to investors how managed futures accounts work.
We expect this experience to benefit us in the quality of trading advisors
selected and in the explanation to prospective investors of our operation and
the attendant risks of investment.
Investment Diversification
If you are not prepared to spend substantial time trading various commodity
contracts or options, you may participate in these markets through a $25,000
investment in the Fund, thereby obtaining diversification from other
investments you may have in stocks, bonds and real estate.
Limited Liability
In the opinion of our legal counsel, The Scott Law Firm, P.A., you will not be
subject to margin calls and cannot lose more than your original investment
amount plus, in the event of bankruptcy, distributed profits made within 90
days, provided the Fund's structure is maintained by the general partner, and
no limited partner participates in any phase of our management other than to
vote as a limited partner pursuant to the terms of the partnership agreement.
See the Limited Partnership Agreement (Exhibit A).
Administrative Convenience
We are structured to provide you with services that alleviate the
administrative details involved in trading commodities contracts directly,
including providing monthly and annual financial reports showing, among other
things, the value of each unit of partnership interest, trading profits or
losses, and expenses. We also prepare a Form K-1 to assist in your tax
reporting relating to your investment in this partnership.
Access to the Commodity Trading Advisor
An investment in the Fund provides access to the commodity trading advisor and
the portfolio diversification provided by that commodity trading advisor.
Use of Proceeds
After the twelfth month of operation following the commencement of business,
on March 4, 2008, the Fund reimbursed the general partner for all offering and
organizational expenses incurred prior to the commencement of business, which
totaled $274,716, and are being amortized on a straight line basis over 24
months at $11,446 per month. Offering expenses incurred after the
commencement of business, if any, are paid by the Fund as incurred, and are
included in the annual estimated operating costs of $95,000. Any partner in
the Fund during this twenty four month period will be exposed to this per
month charge on a pro rata basis.
The general partner has applied all of the Fund assets toward trading futures
and toward cash reserves. The management, brokerage commission and continuing
service fees identified under Charges to the Fund are paid by the Fund.
Incentive fees are paid at the end of each quarter.
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
and as reserves.
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The Fund maintains approximately 64% of its assets in a Treasury Direct
Account maintained with the United States Department of the Treasury. It also
retains the right to invest in cash management funds that invest in U.S.
Treasuries and have high liquidity. Specifically, the Fund may invest in the
Capital Preservation Fund managed by American Century Investments, 4500 Main
Street, Kansas City, MO 64111. Funds maintained with the Department of
Treasury and any cash management funds are in the name of the Fund and not
commingled with those of any other entity. The Fund maintains approximately
33% of our net assets in segregation with the futures commission merchant for
trading by the trading advisor. Approximately 3% of the previous month's net
assets may be retained in our bank accounts to pay expenses and redemptions.
We use only cash and cash equivalents, such as United States Treasury Bills,
to satisfy margin requirements. All entities that will hold or trade our
assets will be based in the United States and will be subject to United States
regulations.
Approximately 10% to 40% of our assets are normally committed as margin for
commodity futures contracts. However, from time to time, the percentage of
assets committed as margin may be substantially more, or less, than such
range. All interest income is used for the Fund's benefit. To estimate
interest income earned upon our deposits, the general partner has assumed that
we will receive 0.30% interest on our deposits.
The futures commission merchant, government agency or commodity exchange could
increase margins applicable to us to hold trading positions at any time. And,
margin is merely a security deposit and has no bearing on the profit or loss
potential for any positions taken.
Determination of the Offering Price
The general partner initially established the amount of units to be offered at
fifty million dollars ($50,000,000) and set the value of each unit of
partnership interest for sale at one thousand dollars ($l,000). Since the
Fund commenced business on March 2, 2007, it offers partnership interests at
their net unit value, or the price per unit equal to our net assets, after
payment and accrual for all expenses and reserves, divided by the number of
outstanding units of partnership interests. This amount is calculated after
the close of business on the last business day of the month in which the
general partner accepts a duly executed subscription agreement and payment
from a future partner. Such future partner will be admitted as a partner on
the open of business on the first day of business of the following month.
The General Partner
Identification
Two general partners, White Oak Financial Services, Inc. and Mr. Michael
Pacult, manage us. See Management's Discussion and Analysis of Financial
Condition, The General Partners.
The purpose of a corporate general partner is to provide continuous
partnership operations in the unlikely event that the individual general
partner is unable to perform. If the individual general partner were unable
to also serve as the president of the corporate general partner, its corporate
duties as general partner would continue to operate pursuant to its By-Laws,
and another individual general partner would be selected pursuant to the
Limited Partnership Agreement.
Financial statements for the corporate general partner for the period ended
December 31, 2007, 2006 and 2005 are included in this prospectus. The
individual general partner's net worth of 3.7 million dollars consists
primarily of real estate that is not readily marketable. However, it is
sufficient to maintain compliance with the North American Securities
Administrators Association guidelines for commodity pools. This will allow
the partnership interests to be sold in States that apply those guidelines.
For so long as the Fund is registered to sell its securities or is seeking to
become registered to sell its securities in a state which requires the general
partner to maintain a minimum net worth, and for so long as there remains a
partner from such state that has not redeemed all its partnership interests, a
general partner will meet the sponsor net worth requirements of the North
American Securities Administrators Association guidelines for commodity pools.
Also, see Experts.
You will not acquire or otherwise have any interest in the corporate general
partner, or any entity other than Providence, by purchasing the partnership
interests offered by this prospectus.
The Individual General Partner
Mr. Pacult, age 64, is the individual general partner and the sole
shareholder, director, principal, and officer of the corporate general
partner. He is also a principal, officer, director and 50% shareholder of
Futures Investment Company, the principal selling agent.
Mr. Pacult grew up in Detroit, MI and went to high school at Howe Military
School in Howe, IN. In 1969 he received a B.A. Degree from the University of
California, Berkeley, where he majored in English and Zoology. Prior to
moving to Chicago in 1980 to become involved in the futures industry, he was a
part owner and Senior Vice President of a California real estate development
company.
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In 1983, Mr. Pacult and his spouse, as 50% owners, established Futures
Investment Company, an Illinois corporation, to sell futures investments
managed by independent commodity trading advisors to retail clients. From
inception to present, he has been a director and president of Futures
Investment Company. It serves as the principal selling agent of partnership
interests and has been a registered introducing broker since February 3, 1987.
In addition to the partnership interests offered pursuant to this prospectus,
Futures Investment Company offers for sale, on a best efforts basis,
securities of other issuers and engages in other broker-dealer activities.
Mr. Pacult's affiliations with other commodity pools and commodity pool
operators are under Performance of Other Partnerships Managed by the General
Partner on page 25. His duties with respect to those entities are to make
all of the decisions and supervise all of the actions they take.
Mr. Pacult's business background for the past five years is as follows:
<table>
<s> <c> <c> <c> <c>
Employed Registered Registered
From To As Principal As Associated Person Employer Name & Address / Position Held and Type of Business
1983 Present 02/3/87 2/3/87 Futures Investment Company, 5914 N. 300 West, Fremont, IN 46737
President, Director and 50% Owner of Broker-Dealer/Introducing Broker
9/03 Present 09/10/03 1/07/04 Ashley Capital Management, Inc., 5914 N. 300 West, Fremont, IN 46737
President, Director and Owner of Commodity Pool Operator*
8/03 Present 08/21/03 8/21/03 Belmont Capital Management, Inc., 5914 N. 300 West, Fremont, IN 46737
President, Director and Owner of Commodity Pool Operator
04/03 Present 05/14/03 5/14/03 White Oak Financial Services, Inc., 5914 N. 300 West, Fremont, IN 46737
President, Director and Owner of Commodity Pool Operator*
10/04 Present 06/10/05 7/5/05 TriView Capital Management, Inc., 5914 N. 300 West, Fremont, IN 46737
President, Director and Owner of Commodity Pool Operator*
05/05 Present 05/16/05 6/1/05 Evergreen Capital Management, Inc., 5914 N. 300 West, Fremont, IN 46737
President, Director and Owner of Commodity Pool Operator
05/99 Present N/A N/A Tree King, Inc., 5914 N. 300 West, Fremont, IN 46737
President of Landscaping Business
</table>
* Ashley, TriView and White Oak are also registered commodity trading
advisors; however, they have not conducted any business in this capacity.
No Ownership in Commodity Trading Advisor and Futures Commission Merchant
Neither the individual general partner, nor any of his affiliates, has any
ownership in the commodity trading advisor or the futures commission merchant.
Mr. Pacult's spouse will have no ownership or role in the management of the
Fund or the corporate general partner.
Ownership in the Partnership
As of January 31, 2009, the individual general partner does not have an
interest in the partnership and the corporate general partner maintains a
$31,206.90 interest in the partnership. Neither has any other investment in
the partnership. Neither the trading advisor nor any of its principals has
any interest in the partnership.
Trading By the General Partner
Either general partner may, from time to time, trade commodity interests for
their own accounts. The results and other records of any such trading
activities will not be made available to you. Neither general partner will
knowingly take positions ahead of identical positions taken by the Fund.
Limited Prior Performance of this Fund and Regulatory Notice
THIS POOL ONLY RECENTLY COMMENCED TRADING AND HAS A LIMITED PERFORMANCE
HISTORY
The regulations of the Commodity Futures Trading Commission and the National
Futures Association prohibit any representation by a person registered with
the Commodity Futures Trading Commission or by any member of the National
Futures Association, respectively, that such registration or membership in any
respect indicates that the Commodity Futures Trading Commission or the
National Futures Association, as the case may be, has approved or endorsed
such person or such person's trading programs or objectives. The
registrations and memberships described in this prospectus must not be
considered as constituting any such approval or endorsement. Likewise, no
commodity or securities exchange, nor the Securities and Exchange Commission,
nor any other regulatory agency has given or will give any such approval or
endorsement.
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Trading Management
No Affiliation with Commodity Trading Advisor
The trading advisor is not affiliated with either general partner. In its
capacity as commodity pool operator, the general partner may consult with the
trading advisor with regard to money management and trading strategy issues,
but the general partner will not serve as a trading advisor or select any
other trading advisors to trade that are affiliated with either general
partner. See The Commodity Trading Advisor for a summary of the trading
advisor's performance information.
Rights of the General Partner With Respect To Commodity Trading Advisor
Selection and Allocation of Equity
The general partner believes that a trading advisor should be retained on a
medium to long-term basis and should be allowed to implement fully its trading
strategy. However, the general partner may, in its sole discretion and
without notice to you terminate any current or future trading advisor, select
additional trading advisors, or change the allocation of equity to any trading
advisor.
The general partner periodically reviews our performance to determine if a
current trading advisor should be changed or if others should be added. In
doing so, the general partner may use computer generated correlation analysis
or other types of automated review procedures to evaluate trading advisors.
If a trading advisor is replaced, the new trading advisor will receive
incentive fees independent of the previous trading advisor's performance.
The general partner reserves the right to consult with and offer suggestions
to the trading advisor with regard to money management and trading strategy
issues.
As the general partner may receive an incentive fee and may engage more than
one trading advisor, the following may possibly occur (i) we may pay an
incentive fee to one trading advisor which is trading profitably while the
other trading advisor produces losses which cause us to be unprofitable
overall, (ii) the general partner may receive an incentive fee because the
Fund is profitable overall, though one or more trading advisors are trading at
a loss, or (iii) as the trading advisors trade independently, they may compete
for similar positions or take positions opposite each other, which may limit
our profitability.
Performance Record of the Fund
The following capsule shows our past performance for the period from inception
of trading in March 2, 2007, through January 31, 2009. From inception to June
3, 2008, NuWave Investment Corp. was the sole trading advisor to the Fund.
Since then, Clarke Capital Management has traded its Alpha program on behalf
of the Fund.
24
<page>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Providence Select Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2009 2008 2007
January (3.59) 1.90 N/A
February 5.97 N/A
March 1.16 0.86
April (10.24) 0.58
May (8.46) (0.74)
June 8.91**** 2.05
July (8.56) (4.21)
August 3.71 (15.62)
September (6.35) 1.92
October 7.16 2.14
November 2.12 2.05
December (4.96) 2.34
Year-to-Date (3.59) (9.71) (9.70)
Name of Pool: Providence Select Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Principal Protected: No
Date of Inception of trading: March 2, 2007
Aggregate Gross Capital Subscriptions: $3,888,370
Net Asset Value of the pool: $1,651,463 on total units outstanding: 2,101.45
Net Asset Value Per Unit: $785.87
Largest Monthly Draw-Down**: 8-07 / 15.62%
Worst Peak-to-Valley Draw-Down***: 7-07 to 9-08 / 23.70%
* Rate of Return
is computed by dividing net performance by beginning net asset value for the
period. For those months when additions or withdrawals exceed ten percent of
beginning net assets, the Time-Weighting of Additions and Withdrawals method
is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
**** Performance of Clarke Capital Management, Inc., the current trading
advisor, commences.
Performance of Other Partnerships Managed by the General Partner
Within the last ten years, the individual general partner of the Fund, Michael
Pacult, has managed four other commodity pools, one of which, Strategic
Opportunities Fund, LLC, is privately offered and commenced business in July,
2005. Mr. Pacult is the sole principal of Evergreen Capital Management, Inc.,
the corporate general partner of Strategic Opportunities Fund, LLC. The other
three pools are publicly offered: Atlas Futures Fund, LP, Bromwell Financial
Fund, LP and TriView Global Fund, LLC. Atlas and Bromwell have commenced
trading, however, TriView became effective November 3, 2005 but has not yet
commenced trading. The Fund's corporate general partner has not managed any
other commodity pools. As of August, 2003, Mr. Pacult became an individual
general partner and sole principal of the corporate general partner of both
Atlas and Bromwell, but is no longer an individual general partner of
Bromwell. Mr. Pacult has been the individual managing member and principal of
the corporate managing member of TriView since inception. As of January 31,
2009, the total amount of money raised for Atlas and Bromwell was $16,503,684
and the total number of investors in both pools was 217. There are not yet
any investors in TriView nor has any money been raised for it. In November,
2003, the two trading advisors for Bromwell were replaced because they were
unprofitable. As of January 12, 2005, the new trading advisor, Fall River
Capital, LLC had not been profitable and the general partner of Bromwell
suspended the offering and trading, and caused substantially all of the
partners to redeem their accounts in Bromwell. Bromwell is currently
undergoing reorganization with new terms and a new commodity trading advisor.
Atlas, however, has been profitable since inception and its offering is
ongoing.
25
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Performance Record of Atlas Futures Fund, Limited Partnership
The individual general partner of the Fund serves as an individual general
partner and as the principal of a corporate general partner, Ashley Capital
Management, Inc., both of which manage another commodity pool called Atlas
Futures Fund, Limited Partnership. Atlas Futures Fund, LP was declared
effective by the Securities and Exchange Commission on September 3, 1999. It
commenced trading on October 15, 1999. Clarke Capital Management, Inc. is
currently the sole trading advisor for Atlas Futures Fund, Limited
Partnership.
Atlas Futures Fund pays various expenses in relation its operation including a
quarterly incentive fee of 25% to Clarke on its new net profits; and, a
monthly brokerage commission of 11/12%, or 11% annually, to its corporate
general partner and introducing broker.
The following capsule shows the past performance of Atlas Futures Fund, LP for
the period from the year 2004 through January 31, 2009. You will receive no
interest in Atlas Futures Fund or any other entity except Providence by your
purchase of partnership interests in Providence Select Fund offered by this
prospectus.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Atlas Futures Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2009 (Jan) 2008 2007 2006 2005 2004
- -3.00 29.46 19.65 3.94 22.91 56.04
Name of Pool: Atlas Futures Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Principal Protected: No
Date of Inception of trading: October 4, 1999
Aggregate Gross Capital Subscriptions: $13,978,622
Net Asset Value of the pool: $21,931,885 on total units outstanding: 5,242.86
Net Asset Value Per Unit: $5,242.86
Largest Monthly Draw-Down**: 2-06/9.11%
Worst Peak-to-Valley Draw-Down***: 2-06 to 3-06 / -12.17%
* Rate of Return
is computed by dividing net performance by beginning net asset value for the
period. For those months when additions or withdrawals exceed ten percent of
beginning net assets, the Time-Weighting of Additions and Withdrawals method
is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
Performance Record of Bromwell Financial Fund, Limited Partnership
The individual general partner of the Fund serves as the principal of a
corporate general partner, Belmont Capital Management, Inc., which manages
another commodity pool called Bromwell Financial Fund, Limited Partnership.
Bromwell was declared effective by the Securities and Exchange Commission on
March 16, 2000 and commenced business on July 11, 2000.
Bromwell paid various expenses in relation its operation including (i) a
monthly management fee of 1/12%, or 1% annually, to its trading advisor, (ii)
a quarterly incentive fee to the trading advisor of 20% on new net profits it
generates, (iii) a quarterly incentive fee of 5% to the corporate general
partner on all new net profits of the partnership, (iv) a monthly brokerage
commission of 1/3%, or 4% annually, to the corporate general partner, (v) a
monthly continuing service fee to the selling agents of 1/3%, or 4% annually,
adjusted month to month to reflect profit and loss, for so long as the
investment remains in the partnership.
The following capsule shows the past performance of Bromwell Financial Fund,
LP for the period from the year 2004 through January 12, 2005, which is the
date the Fund suspended trading. You will receive no interest in Bromwell
Financial Fund or any other entity except Providence by your purchase of
partnership interests in Providence Select Fund offered by this prospectus.
26
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PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Bromwell Financial Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2005 (Jan 1 - Jan 12) 2004
(14.54) (9.37)
Name of Pool: Bromwell Financial Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisors: Fall River Capital, LLC
Principal Protected: No
Date of Inception of trading: July 3, 2000
Aggregate Gross Capital Subscriptions: $2,525,062
Net Asset Value of the pool: $1,135 on total units outstanding: 2.57
Net Asset Value Per Unit: $441.64
Largest Monthly Draw-Down**: 1-05/14.54%
Worst Peak-to-Valley Draw-Down***: 3-04 to 1-05/28.45%
* Rate of Return
is computed by dividing net performance by beginning net asset value for the
period. For those months when additions or withdrawals exceed ten percent of
beginning net assets, the Time-Weighting of Additions and Withdrawals method
is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net asset
value.
The Commodity Trading Advisor
Clarke Capital Management, Inc.
Clarke Capital Management, Inc. ("CCM") was incorporated in September 1993 in
Illinois for the purpose of acting as a commodity trading advisor. It became
a member of the National Futures Association and was registered as a commodity
trading advisor with the Commodity Futures Trading Commission on October 25,
1993. It became registered as a commodity pool operator on October 4, 2004,
though it subsequently withdrew its commodity pool operator registration on
October 24, 2007. The business office and telephone numbers are 116 W. Second
Street, Hinsdale, Illinois 60521, (630) 323-5913 Fax: (630) 323-5919,
operations@clarkecap.com, www.clarkecapital.com.
Business Background
The business background of CCM and its principals for at least five (5) years
is as follows:
Michael Clarke is president and owner of CCM, and has been a registered
principal and associated person of CCM since October 25, 1993. Mr. Clarke's
employment history is the following: The period 2/83 through 2/85 was spent as
an independent contractor trading equities and options for Rice, Naegele &
Associates of Chicago, a firm involved in private speculation. From 2/85
through 3/89, Mr. Clarke as an independent contractor traded equities and
options in a firm account of Shatkin Investment Corp., then a clearing member
of the Chicago Board Options Exchange. From 3/89 to 11/89, Mr. Clarke as an
independent contractor traded equities and options in a firm account of
French-American Securities, a private investment company based in Chicago.
From 11/89 to December 9, 1993, Mr. Clarke was self-employed, developing
methods to trade futures and other commodity interests and trading various
personal accounts.
James Andersen is currently Vice President of CCM with the primary
responsibility for its operations. Mr. Andersen has been an associated person
of CCM since August 25, 2003 and has been a registered principal since January
24, 2007. Mr. Andersen has had an extensive career in commodities and options
beginning in the early 1990's. From November 1991 to January 2001, Mr.
Andersen was employed by Nesbitt-Burns bank, more specifically, a Chicago-
based branch group of options market makers on the CBOT floor. Mr. Andersen
performed various clerical-type duties in addition to being an options market
maker during this period. His experience includes the development of
specialized option market-maker software, back-office procedures, and was
involved in futures organizational operations for the firm. From January 2001
to October 2002, Mr. Andersen traded bond futures and options (for his own
account) on his own behalf. From October 2002 to present, he has been employed
by CCM as Director of Operations before being named VP. He also has extensive
prior experience in sales and fund raising. Mr. Andersen holds a Series III
Commodities Broker's license and has served on the Board of Directors of C-
Line Products, Inc. (a polyurethane manufacture) since 1999.
27
<page>
David G. Wesolowicz has served as Chief Financial Officer and Chief Compliance
Officer for CCM since August, 2004. Mr. Wesolowicz has been an associated
person of CCM since September 3, 2004 and a registered principal since January
24, 2007. He graduated cum laude from Michigan State University in August,
1976 with a bachelor's degree in Accounting and became a Certified Public
Accountant in November, 1976. He was employed as a CPA from September, 1976 to
April, 1981 for Coopers & Lybrand (n/k/a PriceWaterhouseCoopers) and Beatrice
Foods. From April, 1981 to January, 1990, he traded both options and futures
for his own account as a member of the Chicago Board Options Exchange and the
Chicago Board of Trade and was a member of several exchange committees. From
January, 1990 to May, 1990, Mr. Wesolowicz was involved in self-directed
research of financial markets. From May, 1990 to August, 2004, Mr. Wesolowicz
was president of DDJ Brokerage Corporation Inc. D/B/A Essex Trading Group,
Ltd. and its affiliate, Essex Trading Company, Ltd., a leader in the research
and development of trading systems and techniques. Essex Trading Company,
Ltd. was a registered commodity trading advisor from October 8, 1985 to
December 3, 2003 and Mr. Wesolowicz was an associated person and listed
principal of it from June 12, 1990 to December 3, 2003. DDJ Brokerage
Corporation was a registered commodity trading advisor from November 25, 1992
until February 20, 2004 and registered as an introducing broker from November
7, 1989 to December 30, 1992 and from April 19, 1996 to February 7, 1999. Mr.
Wesolowicz was an associated person and listed principal of DDJ Brokerage
Corporation from June 1, 1990 until February 20, 2004.
Any one or any combination of the three principals may direct the trades CCM
enters on behalf of the Fund. There have never been any administrative,
civil, or criminal proceedings against Clarke Capital Management, Inc. or any
of its principals. The past performance of the CTA and its principals begins
on page 31 of this prospectus.
Trading Program Description
The Fund may trade any and all regulated commodity interests. The Alpha
Program that will be traded by Clarke on behalf of the Fund trades
approximately 40 futures markets globally, including but not limited to the
financials, metals, currencies, softs, meats, grains, and energy sectors. At
its discretion, Clarke may change the percentage allocation to each sector and
change the individual markets traded.
The following description of the general nature of Clarke's trading methods is
taken directly from Clarke's disclosure document. Neither the Fund nor the
General Partner has independently verified the following description and the
opinions expressed therein are solely those of the Advisor:
The exact nature of Clarke's trading strategy is proprietary and confidential.
The following description is of necessity general and is not intended to be
all-inclusive.
Although the programs traded by Clarke differ in certain respects, they share
a number of common elements. Under all programs, Clarke's trading strategy is
strictly technical in nature. No fundamental analysis is used. The strategy
was developed from analysis of patterns of actual price movements, and is not
based on analysis of supply and demand factors, general economic factors, or
world events. Clarke has conducted analysis of these price patterns to
determine procedures for initiating and liquidating positions in the markets
in which it trades.
The general trading strategy of all Clarke programs is trend following. Most,
but not all, trade initiations and liquidations are in the direction of the
trend. Clarke employs techniques that utilize a number of trading models
acting independently. Each model generates it own entry and exit signals and
trades both sides of the market (long and short). With minor differences only
for long or short positions, a particular model trades all markets with the
same rules and parameters, regardless of the program. 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 time-frame focus and testing has been
done in order to select only those models that have good performance
characteristics across a wide range of conditions and complementary
performance with all other models in a program.
In addition to all the markets followed for client accounts in all of its
programs, Clarke follows several additional markets which consist of illiquid
domestic and foreign markets and markets otherwise deemed unsuitable for
client programs. The principal of Clarke currently trades several personal
accounts. These accounts are traded under the same programs offered to
clients. Although currently not the case, Clarke or its principals may trade
other models or commodities than those offered to clients in order to test the
viability of incorporating them into programs for clients or for other
reasons.
Analysis and research into improved trading systems and strategies is an
ongoing process at Clarke. It may be determined that modifications to one or
more of the trading models would improve its performance or the performance of
one of the programs as a whole. Additionally, new models may be added or
existing ones removed from any of the programs. Clarke may also decide to add
or remove one or more commodities eligible for trading for a program or model.
Because Clarke's methods are proprietary and confidential, managed account
clients will not be informed with respect to such changes in Clarke's trading
methods.
28
<page>
At Clarke risk management is given high priority. If possible within existing
market conditions, Clarke's trading systems perform under the constraints of
its risk management system. For all programs this system estimates the amount
of risk in each market, group of related markets, and for the overall
portfolio.
The risk is calculated daily for each model on all open positions. Each open
position has an adverse reaction point at which Clarke exits the position
immediately or as soon as possible. The distance to this point provides the
dollars at risk for each open position. The dollars at risk for a market are
then summed for each model in a way to determine the net open dollar risk.
This is compared to the Current Account Equity, which is the Base Equity (Any
equity the client deposits in the account minus any equity the client has
withdrawn from the account plus any notional funds agreed to by the client),
plus realized and unrealized profits, interest received, minus commissions and
fees. When this risk percentage approaches risk control limits, no new
positions or smaller size position are taken. Within a program similar
techniques are used to control risk in related markets and in the portfolio as
a whole.
All models used by all the programs have an overriding filter to prevent
initiating positions when the level of risk in the initiated position would be
at an abnormally high level.
Advisor Performance
The following information describes the composite actual performances of all
customer accounts managed by Clarke Capital Management, Inc. ("Clarke" or
"CCM") for the last 5 years.
The following information, including the narrative, has not been audited and
is presented as provided by Clarke to the Fund.
The Advisor currently offers many different programs. The program to be
utilized by the Fund (Alpha Program) is presented first on page 31, although
it is enumerated "performance capsule #9" in the Clarke disclosure document.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
CCM presents the performance of its programs in capsule form. The Worldwide
program is presented in Performance Capsule # 1, the Global Basic program in
Performance Capsule #2, the Global Magnum program in Performance Capsule #3,
the Orion program in capsule #4 and the Millennium program in capsule #5. The
performance history of the FXF Plus program is presented in capsule #6. The
performance history of the Jupiter program is presented in capsule #7. The
performance history of the Omega program is presented in Performance Capsule
#8. The performance history of the Alpha Program as used in the Atlas Futures
Fund L.P. is presented in capsule #9. The performance history of the MJC
Aggressive Multi-Sector Fund L.P. is presented in capsule #10. The Performance
history of the Omega Program is presented in capsule #11. The performance of
the CCM Performance Funds is presented in Capsules #12 and #13. All
information in the performance capsules, unless otherwise indicated, is as of
January 31, 2009.
"Liquidation and restart" privileges are available to all Clarke Capital
clients. Clients issuing "liquidation and restart" orders are excluded from
the calculation of composite monthly performance for that month (with the
exception of the Jupiter program in January, 2007. See footnote in the Jupiter
Performance Capsule for further details). This is done in order to best
reflect the performance of the majority of clients who do not use this
feature. All clients in the Alpha and Omega programs, however, do make
extensive use of the "liquidate and restart" privilege. The results shown for
the Alpha and Omega programs therefore include the effects of "liquidation and
restart" orders since to not include them would result in the Alpha and Omega
programs having no reportable performance for various months.
The information presented in Performance Capsules 1 through 13 is presented on
a pro-forma basis in that the percentage rate of return displayed is
calculated using an annual management fee of 1.8% and an incentive fee of 25%.
Brokerage fees and all other charges are included in all calculations as
actually charged. The performance data in Performance Capsules #6 (FXF-Plus)
and #8 (Jupiter) are based solely on those accounts that pay fees. Accounts of
Mr. Clarke invested in these funds do not pay fees and are excluded from the
presentation.
The following are the fees used in constructing the presentations of all
Performance Capsules except for capsule #9:
(1) 1.8% per annum management fee. This is calculated on a monthly basis at
a rate of 0.15% of the Gross Ending Equity for the month and deducted
quarterly.
(2) 25% trading advisor incentive fee. This is calculated and deducted
quarterly as a percentage of the Gross Trading Performance Plus Interest
("GTPPI") minus any Carryforward Loss.
The fees deducted from capsule #9 are 0% management fee and 25% incentive fee.
29
<page>
The results set forth in the following Performance Capsules, beginning on page
31, are not necessarily indicative of the results which may be achieved in the
future, due in part to the fact that past performance does not guarantee
future results. It should also be noted that the risk assumed for all programs
offered by CCM and, consequently, the potential for profit for a particular
account, will vary from other accounts at any given time due to, among other
factors, the size of the given account, market conditions, and the percentage
gained or lost to date in that account. Also, because CCM has modified and
will continue to modify its trading methods, the results shown in these tables
do not necessarily reflect the precise trading methods that will be used for
any account.
[The balance of this page has been intentionally left blank.]
30
<page>
PERFORMANCE CAPSULE # 9
Name of program: Alpha Program
Commodity trading advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: April 17, 2000
Current number of accounts 3
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $30,500,000
Assets traded pursuant to program (nominal): $30,500,000
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January -2.05 -7.67 8.17 1.81 -4.02 -5.08
February 26.01 -3.64 -10.14 4.56 11.26
March -2.08 -0.38 -4.07 17.98 3.09
April 16.28 2.39 15.85 -3.24 -0.90
May -1.62 -2.17 1.67 7.57 15.08
June 9.42 6.12 -5.11 -4.01 -2.42
July -7.18 -2.34 -7.60 -2.14 4.15
August 5.26 -0.77 1.39 8.03 7.18
September -4.96 19.31 11.03 0.67 4.12
October 6.96 4.05 0.23 -2.98 10.75
November 4.52 7.39 -0.52 6.49 7.09
December -4.66 -0.50 2.27 -1.45 -6.56
Year -2.05 41.14 41.89 4.04 28.19 56.06
Worst monthly percentage draw-down: February 2006 (10.14)%
Worst peak-to-valley draw-down: January 2006 to March 2006 (13.80)%
Rates of return include periodic liquidations (by all participating clients in
the program) that may enhance performance.
Drawdown is defined as losses experienced by the pool over a specified period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program. As of June 5, 2008, the Fund uses the
Advisor's Alpha program as seen here. The Advisor's performance is not
necessarily indicative of the performance of the Fund because operating and
other expenses of the Fund would diminish the above stated advisor
performance. The foregoing performance results shown represent the historical
performance results of the Advisor's program from January 2004 until January
31, 2009 selected to trade on behalf of the Fund. The Fund began trading
March, 2007. Those results are shown on page 24.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
31
<page>
PERFORMANCE CAPSULE # 1
Name of program: Worldwide Program
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: January 12, 1996
Current number of accounts: 36
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program: (actual): $12,441,083
Assets traded pursuant to program: (nominal account size): $18,759,645
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January -4.22 4.88 -0.46 -3.72 -1.83 0.03
February 12.24 -1.77 -1.99 -0.18 6.82
March 5.85 -2.33 3.64 -4.26 4.88
April -7.57 3.69 18.95 -1.06 -9.11
May 5.42 1.40 2.62 7.40 1.31
June 3.22 3.61 -5.39 0.13 -3.48
July -12.34 6.48 -6.76 -5.47 0.12
August 3.96 -3.57 -3.03 -1.80 -2.37
September 9.15 30.57 -3.76 -3.32 4.73
October 11.53 0.59 -3.75 -1.48 0.89
November 9.46 2.61 6.56 1.40 6.15
December 7.04 -0.12 -8.05 0.09 -4.29
YEAR -4.22 62.89 43.77 -7.31 -10.43 4.53
Worst monthly percentage draw-down: July 2008 (12.34)%
Worst peak-to-valley draw-down: March 2004-Mar 2007 (26.05)%
Percentage rates of return in this capsule prior to May 2004 are calculated
using the Fully Funded Subset Method except for the following periods:
February 1998 through June 1998, May 2003, and May 2003 through July 2003
where the percentage rate of return is calculated using the Nominal Account
Size Basis. From May 2004 on, percentage rate of return are calculated using
the "Nominal Account Size Basis" method. In the Fully Funded subset method,
rates of return are based solely on those accounts which at its inception
contain an amount of actual funds equal to its Nominal Account Size. In both
cases the rate is calculated for any period by dividing the Net Performance
for the period by the Beginning Equity plus any time-weighted additions minus
any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value. Accounts
closed since inception, include those accounts that switched to other programs
of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
32
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PERFORMANCE CAPSULE # 2
Name of program: Global Basic Program
Commodity Trading Advisor: Clarke Capital Mgt., Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: February 12, 1996
Current number of accounts: 187
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $20,974,178
Assets traded pursuant to program (nominal account size): $25,084,601
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January 1.11 8.02 1.52 -1.92 -5.17 -9.30
February 12.54 1.18 -0.97 0.66 20.51
March 12.05 -0.66 -7.09 -1.56 2.42
April -3.46 -2.12 2.67 4.17 1.14
May -0.71 -0.76 0.36 21.05 6.74
June -2.37 -1.52 -2.82 4.15 -7.65
July -1.19 -0.59 -1.59 1.23 -0.93
August 30.08 -0.28 -1.09 0.29 2.36
September 4.26 13.75 -8.95 -0.88 -3.02
October -0.26 -12.34 -2.86 -0.28 0.61
November 4.02 17.95 17.35 1.62 2.67
December 1.51 19.09 -13.08 -1.88 1.33
YEAR 1.11 79.90 35.54 -20.63 23.49 14.90
Worst monthly percentage draw-down: December 2006 (13.01)%
Worst peak-to-valley draw-down: November 2005 to October 2007 (24.77)%
Percentage rates of return in this capsule are calculated using the Fully
Funded Subset Method except for the following periods: December 2003 and Apr
2004, where the percentage rate of return is calculated using the "Nominal
Account Size Basis" method. Ongoing from May 1, 2004 percentage rates of
return are calculated using the "Nominal Account Size Basis" method. In the
Fully Funded subset method, rates of return are based solely on those accounts
which at its inception contain an amount of actual funds equal to its Nominal
Account Size. In both cases the rate is calculated for any period by dividing
the Net Performance for the period by the Beginning Equity plus any
timeweighted additions minus any time-weighted withdrawals made during the
period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance. Drawdown is defined as losses experienced by an account over a
specified period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
33
<page>
PERFORMANCE CAPSULE # 3
Name of program: Global Magnum Program
Commodity Trading Advisor: Clarke Capital Mgt., Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: August 2, 1997
Current number of accounts (02/07): 127
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $28,329,070
Assets traded pursuant to program (nominal account size): $35,778,905
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January 0.42 5.77 4.66 -6.18 -5.20 -4.99
February 8.46 -0.46 -4.64 5.14 9.40
March 8.43 -1.24 -0.75 1.66 6.86
April -1.84 -6.06 10.19 0.49 3.20
May -0.47 -0.33 6.69 13.95 1.40
June -0.61 -0.94 -4.02 0.52 -7.05
July 0.61 0.52 -3.46 -1.17 -0.80
August 13.99 -0.14 -1.85 -4.59 -0.86
September 1.53 24.46 -6.05 -2.44 -0.07
October 0.00 -11.06 -2.68 -0.21 6.53
November 2.67 7.86 5.84 3.76 0.48
December 1.36 9.50 -7.82 -1.08 -5.20
YEAR 0.42 46.38 25.22 -15.30 9.91 7.75
Worst monthly percentage draw-down: October 2007 (11.06)%
Worst peak-to-valley draw-down: June 2005 to June 2007 (23.84)%
Percentage rates of return in this capsule are calculated using the Fully
Funded Subset Method except for the following periods: May 1999, April 2000,
April 2002 and October 2002, where the percentage rate of return is calculated
using the "Nominal Account Size Basis" method. Ongoing from May 1, 2004
percentage rates of return are calculated using the "Nominal Account Size
Basis" method. In the Fully Funded subset method, rates of return are based
solely on those accounts which at its inception contain an amount of actual
funds equal to its Nominal Account Size. In both cases the rate is calculated
for any period by dividing the Net Performance for the period by the Beginning
Equity plus any time-weighted additions minus any time-weighted withdrawals
made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period. Peak-to-Valley drawdown is defined as a decline in month-end net
asset value due to losses during any period in which the initial month-end net
asset value is not equaled or exceeded by a subsequent month-end net asset
value. Accounts closed since inception, include those accounts that switched
to other programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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34
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PERFORMANCE CAPSULE # 4
Name of program: Orion Program
Commodity Trading Advisor: Clarke Capital Mgt., Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: July 23, 1999
Current number of accounts: 22
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $6,068,300
Assets traded pursuant to program (nominal account size): $6,507,442
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January -1.66 7.01 1.57 0.24 -1.18 -1.64
February 8.48 0.68 -0.87 3.18 3.59
March 8.27 0.73 1.88 -2.32 1.65
April -0.64 0.60 2.24 -1.15 -2.40
May -1.93 1.06 -1.11 2.08 3.46
June 3.53 0.57 -5.74 1.18 -2.59
July -2.85 -0.40 -1.48 2.47 -0.38
August 3.58 -1.29 4.19 1.72 -0.93
September -0.41 8.89 3.25 -1.80 -1.44
October 2.50 0.67 1.20 1.02 0.77
November 6.08 0.79 1.77 2.83 2.25
December 5.18 6.47 -2.48 -0.96 -5.93
YEAR -1.66 45.31 21.81 2.71 7.09 -3.94
Worst monthly percentage draw-down: December, 2004 (5.93)%
Worst peak-to-valley draw-down: May, 2004 to April, 2005 (9.58)%
Percentage rates of return in this capsule are calculated using the Fully
Funded Subset Method except for the following periods: July 2000 and July 2001
through December 2003, where the percentage rate of return is calculated using
"Nominal Account Size Basis" method. Ongoing from May 1, 2004 percentage rates
of return are calculated using the "Nominal Account Size Basis" method. In the
Fully Funded subset method, rates of return are based solely on those accounts
which at its inception contain an amount of actual funds equal to its Nominal
Account Size. In both cases the rate is calculated for any period by dividing
the Net Performance for the period by the Beginning Equity plus any time-
weighted additions minus any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
35
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PERFORMANCE CAPSULE # 5
Name of program: Millennium Program
Commodity trading advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: January 25, 1998
Current number of accounts: 42
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $45,003,138
Assets traded pursuant to program (nominal account size): $77,705,490
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January -5.18 5.94 2.45 -3.71 -6.53 -4.74
February 27.36 -8.62 -3.54 -4.64 6.96
March 12.76 -3.14 0.64 3.24 1.96
April 6.76 -0.78 20.25 -1.83 -7.36
May 11.93 -2.96 2.15 10.75 8.06
June -0.81 3.94 -3.62 0.32 -7.55
July -16.44 1.42 -10.47 -10.71 6.80
August 3.90 -7.16 -2.38 12.22 -8.91
September 5.01 19.36 8.92 -13.50 11.60
October 10.80 7.95 -1.37 -4.02 1.97
November 4.96 2.97 4.41 5.76 9.39
December 2.22 1.28 1.04 -2.02 -5.11
YEAR -5.18 95.42 14.81 9.69 -13.49 10.49
Worst monthly percentage draw-down: July 2008 (16.44)%
Worst peak-to-valley draw-down: Nov 2004 to Feb 2006 (23.75)%
Percentage rate of return in this capsule is calculated using the Fully Funded
Subset Method through April 2004. Ongoing from May 1, 2004, percentage rates
of return are calculated using the "Nominal Account Size Basis" method. In
this method the rates of return are based solely on those accounts which at
its inception contain an amount of actual funds equal to its Nominal Account
Size. The rate is calculated for any period by dividing the Net Performance
for the period by the Beginning Equity plus any time-weighted additions minus
any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period. Peak-to-Valley drawdown is defined as a decline in month-end net asset
value due to losses during any period in which the initial month-end net asset
value is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
36
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PERFORMANCE CAPSULE # 6
Name of program: FXF-Plus Program
Commodity Trading Advisor: Clarke Capital Mgt., Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: May 13, 2004
Current number of accounts: 9
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $7,659,273
Assets traded pursuant to program (nominal account size): $9,780,737
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005 2004
January -8.09 12.65 5.96 -2.08 -12.35
February 2.00 -7.00 -2.13 2.57
March 13.38 -2.68 3.78 -2.10
April -19.15 7.89 6.72 4.08
May -4.47 6.76 -1.55 10.18 -10.32
June 3.72 0.13 -6.47 12.80 -5.44
July -13.64 -9.69 -6.74 -1.60 -15.98
August 9.49 -0.71 4.24 -5.14 3.91
September -0.02 11.27 -0.62 15.98 -0.48
October 26.30 8.67 3.64 -8.76 3.99
November 13.24 -5.33 5.71 7.40 33.10
December 13.34 -8.11 -7.34 6.23 1.56
YEAR -8.09 59.95 4.32 -4.14 28.30 3.57
Worst monthly percentage draw-down: April 2008 (19.15)%
Worst peak-to-valley draw-down: March 2008 to July 2008 (30.81)%
Percentage rates of return in this capsule are calculated using the "Nominal
Account Size Basis" method. The rate is calculated for any period by dividing
the Net Performance for the period by the Beginning Equity plus any time-
weighted additions minus any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
37
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PERFORMANCE CAPSULE # 7
Name of program: Jupiter Program
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: May 1, 2005
Current number of accounts: 3
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $10,326,826
Assets traded pursuant to program (nominal account size): $16,687,099
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007 2006 2005
January -3.77 8.24 8.98 -2.43
February 16.32 -2.88 -4.89
March 5.90 -1.98 0.91
April -4.03 5.75 11.38
May 7.67 4.65 0.89 8.08
June 2.12 -3.07 -6.85 5.33
July -14.44 -0.66 -10.59 -3.09
August 2.90 -5.12 -0.16 5.37
September 5.53 13.57 4.74 3.70
October 22.09 12.58 5.43 -6.11
November 6.98 -4.81 4.70 10.75
December 5.44 0.61 0.04 -1.25
YEAR -3.77 80.00 28.46 1.21 23.78
Worst monthly percentage draw-down: July 2008 (14.44)%
Worst peak-to-valley draw-down: May 2006 - August 2006 (16.85)%
Percentage rates of return in this capsule are calculated using the "Nominal
Account Size Basis" method. The rate is calculated for any period by dividing
the Net Performance for the period by the Beginning Equity plus any time-
weighted additions minus any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
Liquidation and Restart reporting practices - "Liquidation and restart"
privileges are available to all Clarke Capital clients. Clients issuing
"liquidation and restart" orders have historically been excluded from the
calculation of composite monthly performance for that month in Clarke Capital
programs. This is done in order to best reflect the performance of the
majority of clients who do not use this feature. However, from time to time,
the Jupiter program may have any or all client(s) issue a liquidation and
restart order. The results shown for the Jupiter program for these months
therefore include the effects of "liquidation and restart" order since to not
include them may result in the Jupiter program having no reportable
performance for those months.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
38
<page>
PERFORMANCE CAPSULE # 8
Name of program: Omega Program
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: January 2, 2007
Current number of accounts: 6
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $4,905,731
Assets traded pursuant to program
(nominal account size): $4,905,731
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2009 2008 2007
January -2.36 -7.46 -7.33*
February 40.25 -3.58
March -6.38 -0.82
April 22.05 2.29
May -1.20 0.64
June 7.00 3.97
July -13.36 -2.19
August 4.96 -1.62
September -2.05 -0.06
October 13.25 8.84
November 2.81 5.44
December -3.10 -1.00
YEAR -2.36 57.55 3.63
Worst monthly percentage draw-down: July 2008 (13.36)
Worst peak-to-valley draw-down: June 2008 to July 2008 (13.36)%
Rates of return include periodic liquidations (by all participating clients in
the program) that may enhance performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
*The Omega program began trading in January, 2007. The Omega program's trading
models and the markets traded are the same as the Alpha program's (see Capsule
11) trading models and markets traded. However, the sole difference between
the two programs is that the discretionary "liquidate and restart" decisions
in the Omega program are made solely by CCM, whereas the "liquidate and
restart" decisions in the Alpha program are made in consultation with the
Alpha program's sole client. The Omega program (4 units or $900,000 minimum
account size) is available as a managed account, whereas the Alpha program is
offered as part of a Fund with a lower minimum account size.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
39
<page>
PERFORMANCE CAPSULE # 10
Name of pool: MJC Aggressive Multi-Sector Fund, L.P.
Type of pool: Privately offered to accredited investors
Commodity trading advisor: Clarke Capital Management, Inc.
Inception of trading: July 1995
Current net asset value: $25,400,000
Worst monthly percentage draw-down: July 2008 (18.36)%
Worst peak-to-valley draw-down: November, 2004 to August, 2006 (23.84)%
MONTH
Percentage rate of return
(Compounded on a monthly basis)
2009 2008 2007 2006 2005 2004
January -4.70 11.20 4.07 -1.56 -4.70 -5.40
February 33.14 -9.65 -2.22 -5.60 10.10
March 6.53 -3.85 0.17 0.30 0.40
April 6.45 1.10 9.52 -0.80 -4.70
May 10.84 -2.36 2.76 7.60 6.20
June -0.39 5.89 -4.74 1.10 -6.70
July -18.36 2.30 -12.0 -6.50 7.80
August 2.58 -8.86 -2.52 5.80 -8.50
September 8.42 19.87 8.80 -7.90 8.50
October 13.52 11.66 -0.44 -1.90 1.80
November 4.49 1.73 4.64 3.40 8.00
December 2.52 2.07 1.46 -1.20 -3.40
YEAR -4.70 104.67 22.46 1.97 -11.09 12.24
Percentage rate of return in this capsule is calculated using only those
accounts which are paying fees. The General Partner and the Mr. Clarke both
have accounts in this fund, and do not pay fees.
Drawdown is defined as losses experienced by the pool over a specified period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
40
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PERFORMANCE CAPSULE # 11
(CLOSED)
Name of program: Energy Only Program
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began managing client accounts: December 9, 1993
Date CTA began trading this program: April 6, 2005
Current number of accounts: 0
Assets under management (actual): $193,907,598
Assets under management (nominal account size): $253,409,651
Assets traded pursuant to program (actual): $0
Assets traded pursuant to program (nominal account size): $0
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2006 2005
January -0.62
February -3.94
March -4.44
April -3.33
May -1.22
June -5.36
July -3.70
August 30.06
September 0.93
October -3.05
November 2.85
December -5.66
YEAR -8.84 7.48
Worst monthly percentage draw-down: December 2005 (5.66)%
Worst peak-to-valley draw-down: Sep 05- Mar 06 (14.26)%
Percentage rates of return in this capsule are calculated using the "Nominal
Account Size Basis" method. The rate is calculated for any period by dividing
the Net Performance for the period by the Beginning Equity plus any time-
weighted additions minus any time-weighted withdrawals made during the period.
Percentage rate of return and all other presentations in this capsule have
been adjusted and are presented on a pro-forma basis in that all incentive and
management fees as described for this Program in this document have been
included in these calculations, i.e. rates of return and other presentations
have been calculated after all fees have been subtracted from Gross Trading
Performance.
Drawdown is defined as losses experienced by an account over a specified
period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
Accounts closed since inception, include those accounts that switched to other
programs of CCM.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
41
<page>
PERFORMANCE CAPSULE # 12
(CLOSED)
Name of program: CCM Performance Fund - Millennium
Type of pool: Privately offered to accredited investors
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began trading this program: May, 2005
Aggregate gross capital subscriptions: $2,475,000
Assets traded pursuant to program (actual): $0
Worst monthly percentage draw-down: July, 2006 (-10.64%)
Worst peak-to-valley draw-down: May, 2006 to July, 2006 (-13.76%)
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2006 2005
January -1.56
February -1.94
March 0.67
April 9.63
May 2.79 2.67
June -3.48 -0.27
July -10.64 -3.60
August 4.97
September -5.73
October -1.70
November 2.92
December -1.30
YEAR -5.56 -2.38
Drawdown is defined as losses experienced by the pool over a specified period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
[The balance of this page has been intentionally left blank.]
42
<page>
PERFORMANCE CAPSULE # 13
(CLOSED)
Name of program: CCM Performance Fund - Millennium Aggressive
Type of pool: Privately offered to accredited investors
Commodity Trading Advisor: Clarke Capital Management, Inc.
Date CTA began trading this program: May, 2005
Assets traded pursuant to program (actual): $0
Aggregate gross capital subscriptions: $3,200,000
Worst monthly percentage draw-down: July, 2006 (-17.22%)
Worst peak-to-valley draw-down: May, 2006 to August, 2006 (-25.29%)
MONTH
Percentage rate of return
(Compounded on a Monthly basis)
2006 2005
January -2.77
February -2.72
March 0.79
April 15.50
May 3.81 4.65
June -6.28 -0.84
July -17.22 -4.97
August -3.76 8.55
September 12.76 -8.54
October -2.69
November 4.41
December -2.31
YEAR -3.77 -2.74
Drawdown is defined as losses experienced by the pool over a specified period.
Peak-to-Valley drawdown is defined as a decline in month-end net asset value
due to losses during any period in which the initial month-end net asset value
is not equaled or exceeded by a subsequent month-end net asset value.
A purchase of limited partnership interests pursuant to this offering does not
include any interest in this program.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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43
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The Futures Commission Merchant
The general partner has selected an unaffiliated futures commission merchant,
MF Global Inc ("MFG") to hold, supervise and control approximately 33% of our
equity, that which is used for trading by the commodity trading advisor. MFG,
formerly known as Man Financial Inc ("MFI"), is a registered futures
commission merchant and commodity pool operator pursuant to the Commodity
Exchange Act, as amended, and is a member of the National Futures Association
in such capacities. The change of name was effected on July 19, 2007. MFG is
a member of all major U.S. futures 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. As required by law, the general
partner will provide notice to you within 21 days of any change in futures
commission merchant.
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 prospectus, 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 Memorandum 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 accepted a cease and
desist order. MFI has informed the Managing Member, the Trading Advisor and
the Selling Agent that the settlements referenced above will not materially
affect MFG or its ability to perform as a clearing broker.
On February 20, 2007, MFI also 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 Sec 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,
which losses MFG was responsible to pay as an exchange clearing member.
In connection with the incident involving the trading losses referenced above,
the CFTC issued a formal order of investigation naming MFG and the AP. The
CFTC, in coordination with the Chicago Mercantile Exchange ("CME"), has been
collecting documentation and taking depositions of MFG employees. This
investigation is ongoing and it is not yet certain what actions the CFTC
and/or the CME might take. MF Global has established an accrual of $10.0
million to cover potential CFTC civil monetary penalties in this matter and
the two CFTC matters referred to below. This is MF Global's best estimate at
this time and there is no assurance that the $10.0 million accrual will be
sufficient for these purposes or that the CFTC will not require remedial
measures. No accrual has been made for the CME matter.
In May 2007, MFG and two of its employees received what is commonly referred
to as a "Wells notice" from the staff of the Division of Enforcement of the
CFTC. The notice relates to two trades MFG executed in 2004 for a customer and
reported to NYMEX. The notice indicates that the Division of Enforcement is
considering recommending to the CFTC that a civil proceeding be commenced
against MFG and the two employees, in which the CFTC would assert that MFG and
the two employees violated Section 9(a)(4) of the Commodity Exchange Act,
which generally prohibits any person from willfully making any false,
fictitious, or fraudulent statements or representations, or making or using
any false writing or document knowing the same to contain any false,
44
<page>
fictitious, or fraudulent statement to a board of trade. The Division of
Enforcement staff contends that MFG and the individuals presented or
participated in the submission of information to NYMEX that falsely
represented the dates on which the trades in question occurred. MFG and the
individuals dispute these contentions. It is not yet certain what action the
CFTC will take, but see the reference to a $10.0 million accrual above.
Additionally, MF Global is currently cooperating in an investigation conducted
by a New York County Grand Jury in conjunction with the U.S. Attorney's Office
in the Southern District of New York, with which the CFTC and the SEC are also
involved. The investigation centers around trading by a market making energy
trader at Bank of Montreal (BMO) who allegedly mismarked his book. An MFG
broker did business with the BMO trader, and used bid and offer prices for
forward OTC trades the BMO trader sent to him as a basis for prices which the
MFG broker disseminated to MFG's customers, including BMO, as price
indications that reflected a consensus. MFG has been told that neither MFG nor
the broker is a target of the Grand Jury investigation. In connection with
this investigation, MFG has been served by the CFTC with a Wells notice in
anticipation of civil charges against the broker under the anti-fraud
provisions of CFTC Regulation 33.10 and MFG with derivative liability for the
broker's actions. It is not yet certain what action the CFTC may take against
MFG or the broker, but see the reference to a $10.0 million accrual above.
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. The Fund has no involvement in the claims against the futures
commission merchant described above. The futures commission merchant has
assured the Fund that none of the above events will interfere with its ability
to perform its duties on behalf of the Fund.
The futures commission merchant acts only as a clearing broker for the Fund
and, as such, is paid commissions for executing and clearing trades. It has
not passed upon the adequacy or accuracy of this prospectus. The futures
commission merchant will not act in any supervisory capacity with respect to
the general partner nor participate in the management of the general partner
or the Fund. Therefore, prospective investors should not rely on the futures
commission merchant's agreements to clear trades for the Fund or for any other
reason related to it in deciding whether or not to purchase interests in the
Fund.
Federal Income Tax Aspects
Scope of Tax Presentation
This presentation is based on:
* the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder which were in effect as of the effective
date of this prospectus and
* the express intent of the general partner to:
* operate the Fund as authorized and limited by the limited partnership
agreement, and
* cause us to invest only our equity capital and not to borrow money to
operate the Fund, and
* the belief by the general partner that no less than ninety percent of
the income generated by us will be from interest income and the trade of
commodities.
Any change in the Internal Revenue Code or deviation from the above intentions
of operation could alter this presentation and also have adverse tax
consequences on this partnership and you. For instance, if we were taxed as a
corporation, we would pay tax and you would have to pay a second tax. In
addition, if we were taxed as a corporation, none of the deductions for
expenses would pass through to your tax return.
Any adjustment made to our return by our auditors or the IRS will flow through
to your return and could result in a separate audit of your individual return.
If the IRS audits us or you, significant factual questions may arise which, if
challenged by the IRS, might only be resolved at considerable legal and
accounting expense. We will report our income for tax and book purposes under
the accrual method of accounting and our tax year will be the calendar year.
During taxable years in which little or no profit is generated from trading
activities, you may still have interest income that will be taxed to you as
ordinary income.
Subject to the above scope of presentation and assumption, following is the
opinion of The Scott Law Firm, P.A. that summarizes the material Federal
income tax consequences to individual investors in the partnership.
This discussion is not intended as a substitute for careful planning by you
after you consider your tax circumstances; particularly, since the income tax
consequences of an investment in the Fund will not be the same for all
taxpayers. Accordingly, you are urged to consult your tax advisors with
specific reference to your tax situation.
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All matters upon which we have obtained an opinion of tax counsel are
discussed under the caption Tax Opinion below. Said opinion is based and
conditioned upon factual representations made by the general partner on behalf
of the Fund and assumptions that those facts will be applicable to the Fund
continuously during its operation.
No Legal Opinion as To Certain Material Tax Aspects
We will not request a legal opinion in regard to any State income tax issue.
In addition, our tax counsel cannot opine upon (i) any matter that concerns
the tax consequences to any specific partner of investment in the Fund based
on that partner's tax circumstances, (ii) any Federal income tax issue that
involves a determination by the IRS of the facts related to our operation, or
(iii) any other matter that may be subject to IRS interpretation or adjustment
upon audit.
For an example of an item that could be subject to determination by the IRS,
commodity trading advisor fees are aggregated with employee business expenses
and other expenses of producing income, and the aggregate of such expenses is
deductible only to the extent such amount exceeds 2% of the your adjusted
gross income. The Federal income tax deductibility of these expenses depends
upon factual determinations related to our operation by the general partner.
Partnership Tax Status
The Internal Revenue Code, at Section 7701, and the regulations promulgated
thereunder, provides the criteria used cannot be present if a partnership is
to be taxed as a partnership and not as a corporation. A partnership must
have two or more of the following characteristics: (i) decentralized
management, (ii) unlimited liability of the partners, (iii) limited
transferability of partnership interests, and (iv) limited continuation of
existence.
The limited partnership agreement obligates the general partner to operate the
Fund in a manner so that it will be taxed as a partnership and not as a
corporation.
If we were taxed as a corporation, (i) we would pay taxes at the corporate
rates upon our income and gains, (ii) items of deduction and losses would be
deductible only by us and not by you, (iii) tax credits would be available
only to us and not to you, and (iv) all or a part of any distributions we make
to you could be taxable as dividend income and would not be deductible by us
in computing our taxable income. This would substantially increase the total
amount of taxes paid on your investment income and potentially limit your
expense deductions.
Historically, the right of redemption, similar to your right to redeem your
partnership interests, renders a pool, such as ours, to be deemed a publicly
traded partnership, taxed as a corporation. However, the Revenue Act of 1987
provides an exception. The exception requires 90% or more of our gross income
to be derived from interest and the trade of commodities. Provided the
principal activity of the Fund is buying and selling commodities, income may
include interest, dividends, and income from the trade or holding of futures,
options or forward contracts on commodities. The general partner intends to
limit the principal business activity and sources of income so that this
exception will apply to us. In addition, the general partner has placed
restrictions upon the right of redemption. See The Limited Partnership
Agreement, Redemptions and Exhibit A, Right of Redemption.
No IRS Ruling
We have not applied for a ruling from the Internal Revenue Service regarding
our status as a partnership or with regard to any other tax aspect, nor do we
intend to seek a ruling. In the absence of a ruling, there can be no
assurance that the IRS will not attempt to take a position adverse to the Fund
and the opinions expressed in this prospectus.
Tax Opinion
The general partner believes, in reliance upon opinion of legal counsel, that
this prospectus accurately summarizes all material Federal tax matters related
to the Fund. In the opinion of The Scott Law Firm, P.A., tax counsel to the
Fund, based upon the facts stated in the certificate of intended operation of
the partnership supplied by the general partner, (i) we will be treated as a
partnership for Federal income tax purposes, (ii) the allocations of profits
and losses made when partners redeem their partnership interests will be
upheld for Federal income tax purposes, (iii) based upon our contemplated
trading activities, the IRS will consider us as conducting a trade or
business; and, as a result, the ordinary and necessary business expenses we
incur while conducting our commodity futures trading business will not be
subject to limitation under Section 67 or Section 68 of the Internal Revenue
Code (iv) the profit share will be respected as a distributive share of our
income allocable to Providence Select Fund, Limited Partnership; and (v) the
contracts we trade, as described in this prospectus, will satisfy the
commodities trading safe harbor as described in section 864(b) of the Internal
Revenue Code.
Such opinion is based on the Internal Revenue Code as of the effective date of
this prospectus and a review of the Limited Partnership Agreement, and is
conditioned upon the following representations of facts by the general
partner:
* at all times, we will be operated in accordance with the Delaware
Uniform Limited Partnership Act and the Limited Partnership Agreement attached
hereto as Exhibit A
* for our first two years of operation, the aggregate deductions claimed
by the partners as their distributive shares of our net losses will not exceed
the equity capital invested in the Fund
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* no creditor who makes us a loan, including margin accounts, will have or
acquire, as a result of making the loan, any direct or indirect interest in
our capital, profits or property, other than as a secured creditor
* the general partner will at all times actively direct the affairs of the
Fund
* interests in the Fund:
* will be transferable or redeemed only upon approval of the general
partner
* will not be traded on an established securities market, and
* will not be readily tradable on a secondary market or the substantial
equivalent thereof
* we will not be registered under the Investment Advisor's Act of 1940;
and
* over 90% of our earned income will be qualifying income as that term is
defined in the Revenue Act of 1987.
The Scott Law Firm, P.A. is not able to opine upon the tax treatment of
expenses because that determination depends upon questions of fact to be
resolved by the general partner on behalf of the Fund.
In addition, commodity trading advisor fees are aggregated with employee
business expenses and other expenses of producing income, and the aggregate of
such expenses is deductible only to the extent such amount exceeds 2% of your
adjusted gross income. It is the general partner's position that our intended
operations will qualify as a trade or business. If this position is
sustained, the brokerage commissions and performance fees will be deductible
as ordinary and necessary business expenses. Syndication costs to organize
the Fund and offering expenses are subject to limitations upon deduction
imposed by the Internal Revenue Code.
Any change in the representations of the general partner or the operative
facts will prevent you and us from relying upon the legal opinion from The
Scott Law Firm, P.A.
Passive Loss and Unrelated Business Income Taxes Rules
In addition to the imposition of a corporate level tax on publicly traded
partnerships, special rules apply to partnerships in regard to the application
of the passive loss and unrelated business income tax rules. In Notice 88-75
issued on June 17, 1988, the IRS provided guidance as to partnership
operation. The general partner intends to use its best efforts to cause us to
comply with the applicable provisions of these guidelines. In the event our
expenses were deemed not to qualify as deductions from trading profits, your
total taxes would increase while your distributions would remain the same.
Basis Loss Limitation
Generally, the basis of your interest in the Fund for tax purposes is equal to
(i) the cost decreased, but not below zero, by your share of any partnership
losses and distributions, and (ii) increased by your share of any partnership
income.
You may not deduct losses in excess of the adjusted basis for your interest in
the Fund at the end of the Fund year in which such losses occurred. However,
you may carry forward any excess to such time, if ever, as the basis for the
interest in the Fund is sufficient to absorb the loss. Upon the sale or
liquidation of your interest in the Fund, you will recognize a gain or loss
for Federal income tax purposes equal to the difference between the amount you
realize in the transaction and the basis for your interest in the Fund at the
time of such sale. For individuals, capital losses would offset capital gains
on a dollar for dollar basis, with any excess capital losses subject to a
$3,000 annual limitation. Accordingly, it is possible for you to sustain a
loss from our operation that will not be allowed as a deduction for tax
purposes or will be limited to a $3,000 annual limitation.
At-Risk Limitation
If you borrow money to invest in the Fund, there are at risk limitations that
will apply to you. Section 465 of the Internal Revenue Code provides that the
amount of any loss allowable for any year to be included in your personal tax
return is limited to the amount paid for the partnership interests, or tax
basis, of the amount at risk. Losses already claimed may be subject to
recapture if the amount at risk is reduced as a result of (i) cash
distributions from the activity, (ii) deduction of losses from the activity,
(iii) changes in the status of indebtedness from recourse to non-recourse,
(iv) the commencement of a guarantee, or (v) other events that affect your
risk of loss. You should consider the at risk provisions in arranging debt
financing for purchasing a partnership interest.
Income and Losses from Passive Activities
Internal Revenue Code Section 469 limits the deductibility of what are called
passive losses from business activities in which the taxpayer does not
materially participate. Under temporary Treasury regulations, (i) the trading
of personal property, such as futures contracts, will not be treated as a
passive activity, (ii) partnership gains allocable to you will not be
available to offset passive losses from sources outside the Fund, and (iii)
partnership losses will not be subject to limitation under the passive loss
rules.
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Allocation of Profits and Losses
The allocation of profits, losses, deductions and credits contained in the
Limited Partnership Agreement will be recognized for tax purposes only if the
allocations have substantial economic effect. While the general partner
believes that the Limited Partnership Agreement either meets the requirements
or satisfies a substitute capital account equivalency test, the Limited
Partnership Agreement does not meet a third requirement, that a partner must
make a capital contribution to the Fund equal to any deficit in its capital
account. Accordingly, under the regulations and the Limited Partnership
Agreement, losses would not be allocable to you in excess of your capital
contribution plus properly allocated profits less any prior distributions.
The general partner intends to allocate income and losses in accordance with
the Limited Partnership Agreement that it believes complies with applicable
Internal Revenue Code Section 704. However, no assurances can be given that
the IRS will not attempt to change any allocation that is made among partners
admitted on different dates, which could adversely affect the amount of
taxable income to one partner as opposed to another partner.
Taxation of Futures and Forward Transactions
The commodity trading advisors selected to trade for us are expected to trade
primarily in contracts that are treated under Section 1256 of the Code. 1256
Contracts are any regulated futures contract, foreign currency contract, non-
equity option, or dealer equity option.
A regulated futures contract is a futures contract:
* if it is traded on or subject to the rules of:
* a national securities exchange which is registered with the Securities
and Exchange Commission,
* a domestic board of trade designated as a contract market by the
Commodity Futures Trading Commission or any other board of trade, exchange or
other market designated by the Secretary of Treasury, and
* which is marked-to-market to determine the amount of margin that must be
deposited or may be withdrawn. Marked-to-market means that the position is
taken in the account on day one at that price. Each day the position is held,
it is valued for account purposes at the price of the contract on the close of
that day.
A foreign currency contract is negotiated between banks and accepted for trade
among banks and private investors. The Fund is expected to purchase or sell
these contracts to speculate on the value of foreign currency as contrasted
with the U. S. dollar. These contracts are exempt from the Commodity Exchange
Act and are excluded from marked-to-market treatment.
A non-equity option means an option which is treated on a qualified board or
exchange and the value of which is not determined directly or indirectly by
reference to any stock, group of stocks, or stock index unless there is in
effect a designation by the Commodity Futures Trading Commission of a contract
market for a contract bond or such group of stocks or stock index.
A dealer equity option means, with respect to an options dealer, only a listed
option which is an equity option, is purchased or granted by such options
dealer in the normal course of his activity of dealing in options, and is
listed on the qualified board or exchange on which such options dealer is
registered.
All Section 1256 contracts will be marked-to-market upon the closing of every
contract, including closing by taking an offsetting position or by making or
taking delivery, by exercise or being exercised, by assignment or being
assigned; or by lapse or otherwise. Also, all open Section 1256 contracts
held by us at our fiscal year-end will be treated as sold for their fair
market value on the last business day of such taxable year. This will result
in all unrealized gains and losses being recognized for Federal income tax
purposes for the taxable year. As a consequence, you may have tax liability
relating to unrealized partnership profits in open positions at year-end.
Sixty percent of any gain or loss from a Section 1256 contract will be treated
as long-term capital gain or loss, and 40% as short-term capital gain or loss,
regardless of the actual holding period of the individual contracts. The
character of a your distributive share of profits or losses of the Fund from
Section 1256 contracts will thus be 60% long-term capital gain or loss and 40%
short-term capital gain or loss. Your distributive share of such gain or loss
for a taxable year will be combined with your other items of capital gain or
loss for such year in computing your Federal income tax liability. The
Internal Revenue Code contains rules designed to eliminate the tax benefits
flowing to high-income taxpayers from the graduated tax rate schedule and from
the personal and dependency exemptions. The effect of these rules is to tax a
portion of a high-income taxpayer's income at a marginal tax rate of 35%.
Most long-term capital gains after May 6, 2003 are subject to a maximum tax
rate of 15%. A limited partner, other than a corporation, estate or trust,
may elect to carry-back any net Section 1256 contract losses to each of the
three preceding years. The marked-to-market rules do not apply to interests
in personal property of a nature that are actively traded other than Section
1256 contracts.
Section 988 Foreign Currency Transactions
A Section 988 transaction is defined as the entering or acquiring of any
forward contract, futures contract, option or similar financial instrument if
the amount to be received or to be paid by reason of a transaction is
denominated in a nonfunctional currency or is determined by reference to one
or more nonfunctional currencies. If the Section 988 transaction results in a
gain or loss, it is considered to be a foreign currency gain or loss to the
extent it does not exceed gain or loss realized by reason of changes in
exchange rates.
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Capital Gain and Loss Provisions
If short-term capital gains exceed long-term capital losses, the net capital
gain will be taxed at the same rates as ordinary income. Subject to an annual
limitation of $3,000, you may deduct the excess of capital losses over capital
gains against ordinary income. Excess capital losses that are not used to
reduce ordinary income in a particular taxable year may be carried forward to,
and treated as capital losses incurred in, future years.
Business for Profit
Internal Revenue Code Section 183 sets forth the general rule that no
deduction is allowable to an individual for an activity not engaged in for
profit. These are activities other than those constituting a trade or
business or engaged in for the production or collection of income or for the
management, conservation, or maintenance of property held for the production
of income. The determination of whether an activity is engaged in for profit
is based on all facts and circumstances, and no single factor is
determinative. The general partner believes that by employing independent
commodity trading advisors with strong track records of production of profits,
it is more likely than not, that our activity will be considered an activity
engaged for profit.
Self-Employment Income and Tax
Section 1402 of the Internal Revenue Code provides that an individual's net
earnings from self-employment shall not include the distributive share of
income or loss from any trade or business carried on by a partnership of which
he is a limited partner. Therefore, you should not consider that the ordinary
income from the Fund constitutes net earnings from self-employment for
purposes of either the Social Security Act or the Internal Revenue Code.
Alternative Minimum Tax
The alternative minimum tax for individuals is imposed on certain high income
persons as a method of collection of tax although income may to sheltered or
otherwise not subject to tax. Alternative minimum taxable income consists of
income deemed taxable without regard to availability of deductions or tax
preferences provided by the tax law. Alternative minimum taxable income may
not be offset by certain deductions, including (in certain circumstances)
interest incurred to purchase or carry interests in partnership such as this
partnership. Taxpayers subject to the alternative minimum tax could be
required to make estimated payments. The extent to which the alternative
minimum tax will be imposed or estimated payments required will depend on the
overall tax situation of each limited partner at the end of each taxable year
and, therefore, this question should be referred to your tax advisor.
Interest Related To Tax Exempt Obligations
Section 265(a)(2) of the Internal Revenue Code will disallow any deduction for
interest on indebtedness of a taxpayer incurred or continued to purchase or
carry obligations the interest on which is wholly exempt from tax. The IRS
announced in Revenue Procedure 72-18 that the proscribed purpose would be
deemed to exist with respect to indebtedness incurred to finance a portfolio
investment. The Revenue Procedure further states that a limited partnership
interest will be regarded as a portfolio investment, unless rebutted by other
evidence. Therefore, if you own tax-exempt obligations, the IRS might take
the position that any interest expense incurred by you to purchase or carry
partnership interests should be viewed as incurred by you to continue carrying
tax exempt obligations, and that you should not be allowed to deduct all or a
portion of the interest on any such loans.
Not a Tax Shelter
In the opinion of tax counsel, we do not constitute a tax shelter, as defined
in Internal Revenue Code Section 6111(c), since the general partner intends to
operate the Fund so that the tax shelter ratio will not exceed two-to-one at
the close of any of the first five years. Accordingly, the general partner
has not registered us as a tax shelter with the IRS.
Taxation of Foreign Partners
An investment in the Fund should not, by itself, cause a foreign partner to be
engaged in a trade or business within the United States. A foreign person is
subject to a 30% withholding tax, unless reduced or exempted by treaty, on
United States source income that is not effectively connected with the conduct
of a United States trade or business. The person having control over the
payment of such income must withhold this tax.
Because we have permitted the trading advisor to trade foreign currency and
other contracts on foreign exchanges or derivative transactions such as energy
or interest rate swaps or forwards, based on current law it is uncertain
whether entering into foreign and derivative transactions may cause us, and
therefore any foreign limited partners, to be treated as engaged in a trade or
business within the United States. However, the Treasury has issued proposed
regulations which, if finalized in their current form, would provide that
foreign limited partners should not be deemed to be engaged in a United States
trade or business solely by virtue of an investment as a limited partner in
the partnership even if the partnership enters into foreign exchange trades of
currency and derivative transactions. These regulations are proposed to be
effective for taxable years beginning 30 days after the date final regulations
are published in the Federal Register. We may elect to apply the final
regulations retroactively once they are finalized. The Scott Law Firm, P. A.
has not opined on the issues related to the withholding by us from
distributions to foreign investors as the determination of how the treat this
issue will be resolved at the end of each taxable year or upon receipt of a
redemption request.
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Accordingly, we may be required to withhold tax on items of such income that
are included in the distributive share of a foreign partner, whether or not
the income was actually distributed. If we are required to withhold tax on
such income of a foreign partner, the general partner may pay such tax out of
the redemption of partnership interests by the foreign partner.
Partnership Entity-Audit Provisions-Penalties
The Internal Revenue Code provides that the tax treatment of items of
partnership income, gain, loss, deduction and credit will be determined at the
Fund level in a single partnership proceeding. The Limited Partnership
Agreement has appointed the corporate general partner as the tax matters
partner to settle any issue involving any partner with less than a 1% profits
interest unless such a partner, upon notice, properly elects not to give such
authority to the tax matters partner. The tax matters partner may seek
judicial review for any adjustment to partnership income, but there will be
only one such action for judicial review to which all partners will be bound.
The Internal Revenue Code provides that a partner must report a partnership
item consistently with its treatment on the Fund return, unless the partner
specifically identifies the inconsistency or can show that its treatment of
the Fund item on its return is consistent with a schedule furnished to the
partner by the Fund. Failure to comply with this requirement may result in
penalties for underpayment of tax and could result in an extended statute of
limitations. The statute of limitations for adjustment of tax with respect to
partnership items will generally be three years from the date of filing the
Fund return.
Internal Revenue Code Section 6662 imposes a penalty for a substantial
understatement of income tax equal to 20% of the amount of any underpayment
attributable to that understatement. Understatement is defined as the excess
of the correct amount of tax required to be shown on the return over the
amount of tax that is actually shown on the return. A substantial
understatement exists for any taxable year if the amount of the understatement
for the taxable year exceeds the greater of (i) 10% of the correct tax, or
(ii) $5,000, or $10,000, in the case of a corporation other than an S
corporation or a personal holding company.
Employee Benefit, Retirement Plans and IRA's
The Employee Retirement Income Security Act of 1974 governs:
* employee benefit plans, such as:
* a qualified pension, profit-sharing or stock bonus plan, or
* a qualified health and welfare plan; and
* individual retirement accounts, commonly called IRAs.
You may not purchase limited partnership interests with the assets of a plan
if we, the general partner, the selling agent, the futures commission
merchant, or any of their affiliates, agents or employees have investment
discretion over such plan, give investment advice with respect to such plan
assets, for a fee, or are an employer maintaining or contributing to such
plan.
Before you invest in us through one of these qualified plans, you should
consult your own legal and financial advisors, and the fiduciary of your plan
should take into account the facts and circumstances of your plan, and
consider applicable fiduciary standards under the above act.
Acceptance of subscriptions on behalf of employee benefit plans is not a
representation by the general partner or any other party that this investment
meets all legal requirements or is appropriate with respect to investments by
any particular plan. The person with investment discretion should consult the
attorney for the plan as to the propriety of an investment in this
partnership.
The Limited Partnership Agreement
This prospectus explains all material terms of the Limited Partnership
Agreement; however, you are urged to read the entire agreement. See Exhibit
A.
Formation of the Fund
Our Certificate of Limited Partnership is dated and was filed on May 16, 2003
pursuant to the Delaware Uniform Limited Partnership Act.
You are not liable for our losses, debts and obligations beyond your
investment amount and your share of any of our undistributed assets, so long
as you do not take part in the management of the business of the Fund or
transact any business for the Fund.
According to the Limited Partnership Agreement, this partnership will not
terminate or dissolve upon any limited partner's death, incompetence,
withdrawal, insolvency, bankruptcy, termination, liquidation, dissolution or
other legal incapacity. Also, the limited partnership agreement allows
successor representatives of such limited partner to redeem their partnership
interests, but third party creditors and trustees may not anticipate
distributions or seek redemption without permission of both the successor
representative and the general partner.
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Units of Partnership Interests
The amount of partnership interests you hold will determine your percentage
interest in our net assets. The percentage interest will be calculated from
time to time by dividing the number of units of partnership interests you hold
by the aggregate number of outstanding units of partnership interests.
Management of Partnership Affairs
Only the general partner may manage this partnership. All of the decisions
will be in the sole judgment of the general partner without any obligation to
provide you with advance notice of the decisions to be made. You will not
take part in the business or affairs of the Fund nor will you have any voice
in its or the general partner's management or operations.
You and the other limited partners have a right to vote and a majority of
those partners who hold outstanding partnership interests must give prior
written approval of any material change in either the Limited Partnership
Agreement or the Fund structure.
Without the limited partners' approval, the general partner may (i) change the
management and incentive fees within the limits described by this prospectus,
(ii) change or add or delete trading advisors, (iii) change or add or delete
introducing brokers, (iv) change or add or delete futures commission
merchants, (v) change the commissions, (vi) redeem and return a limited
partner account, (vii) change the commodity contracts traded, (viii) change
the diversification of our assets among the various types of or in the
positions held in commodity markets, or (ix) change or add legal counsel,
experts, and tax partner to the Fund.
To the extent the law permits, such limited partners who hold a majority of
the partnership interests may vote to amend any term in the Limited
Partnership Agreement and, if necessary, the Certificate of Limited
Partnership without the agreement of the general partner. This includes
removing the general partner and electing a new general partner.
In its capacity as commodity pool operator, the general partner may consult
with the trading advisor with regard to money management and trading strategy
issues, but the general partner will not serve as a trading advisor or select
any other trading advisors to trade that are affiliated with either general
partner.
General Prohibitions
Except for the security posted for commodity trades made in the Fund accounts
on normal margin terms with the clearing broker, we may not borrow from or
loan money or any other assets to any person. However, this shall not apply
to the incurrence of debt to a partner or an affiliate with respect to:
* the offering of partnership interests for sale
* registration, or
* initiation and maintenance of our trading positions.
We may not permit rebates or give-ups to be received by the general partner or
any of its affiliates. Nor may we permit the general partner or any of its
affiliates to engage in reciprocal business arrangements that would circumvent
the foregoing prohibition. However, an affiliate or the general partner may
provide goods or services, including brokerage, at a competitive cost to us.
The general partner or its affiliates are not required to advance or loan
funds to the Fund. If the general partner makes any advance or loan to the
Fund, it will not receive interest in excess of its interest costs, nor will
it receive interest in excess of the amounts that would be charged the Fund by
unrelated banks on comparable loans for the same purpose. The general partner
shall not receive points or other financing charges or fees regardless of the
amount.
Additional Offerings
The general partner has sole discretion to end this or any future offering of
partnership interests, register additional partnership interests, and make
additional public or private offerings of partnership interests.
You will not have any preemptive, preferential or other rights with respect to
the issuance or sale of any additional partnership interests. We have not
limited the amount of capital contributions or the maximum amount of
partnership interests that may be issued, offered or sold.
Partnership Accounting, Reports, and Distributions
You will have a capital account, and its initial balance will be the amount
you paid for your partnership interests. The net assets of this partnership
will be determined monthly, and any change from the previous month will be
passed on to your account in the ratio that your account bears to all
accounts.
The general partner has sole discretion to make distributions from profits or
net assets. You will receive a monthly report containing (i) the net unit
value as of the end of both the current and previous month, (ii) the
percentage change in net unit value between the two months, (iii) the amount
of distributions during the month, (iv) the brokerage commissions, other fees,
administrative expenses, and reserves for claims and other extra-ordinary
expenses incurred or accrued by us during the month, and (v) any other
information required by the rules of the Commodity Futures Trading Commission.
You or your duly authorized representative may inspect our books and records
and any records related to your account, provided you give adequate notice,
you do so at a reasonable time, and you make copies at your expense.
51
<page>
Federal Tax Allocations
At the end of each fiscal year, the Fund, under the supervision of the general
partner and the financial experts selected, will allocate our capital gain or
loss and ordinary income or loss, fees and expenses among the partners in
accordance with the relationship of each capital account to all capital
accounts. You must include your share of such items in your personal income
tax return.
Transfer of Partnership Interests Only With Consent of the General Partner
Once admitted to this partnership and registered on the Fund records as the
owner of partnership interests, you may (i) receive all distributions,
allocations of losses and withdrawals, and reductions of capital
contributions, (ii) vote on any matters submitted to the limited partners for
voting, and (iii) exercise all rights granted to limited partners pursuant to
the limited partnership agreement and pursuant to Delaware law.
You may transfer your partnership interests only with the written consent of
the general partner. The general partner may not approve the transfer if it
(i) is not made for all of your partnership interests or, if you are not
assigning all of your partnership interests, you will retain less than $5,000
of partnership interests, (ii) will violate any applicable laws or
governmental rules or regulations, including without limitation, any
applicable Federal or State securities laws, or the Delaware limited
partnership laws, or (iii) will jeopardize our ability to be taxed as a
partnership and not as a corporation, or (iv) will affect characterizations or
treatment of income or loss.
Termination of the Fund
This partnership will terminate (i) at 11:59 p.m. twenty-one years from the
date of the Limited Partnership Agreement, (ii) by election of the general
partner, with concurrence of a majority vote of the limited partners, to
terminate and dissolve this partnership, (iii) upon the dissolution, death,
resignation, withdrawal, bankruptcy or insolvency of the general partner,
unless the limited partners, by majority vote, elect to carry on the business
and a new general partner has been substituted, (iv) if it does not pay its
annual franchise fee and file its annual report with the State of Delaware,
which will cause it to be dissolved under Delaware law, (v) upon any event
which makes the continued existence of the Fund unlawful, or (vi) upon a
majority vote of the limited partners.
Meetings
We are not required to hold regular meetings, however, partners may call
meetings to vote on certain issues, including (i) amendment of the limited
partnership agreement; provided, however, any amendment which modifies the
compensation or distributions to the general partner or which affects the
duties of the general partner requires its consent, (ii) removal of the
general partner and election of a new general partner, (iii) cancellation of
any contract for services with the general partner, without penalty, upon 60
days written notice; provided, however, the maximum period of any contract
between the general partner and the Fund is one year; and, provided further,
should any amendment to this partnership agreement attempt to modify the
compensation or distributions to which the general partner is entitled or
which affects the duties of the general partner, such amendment will become
effective only upon the consent of the general partner, (iv) the right to
approve, prior to sale, the sale or distribution, outside the ordinary course
of business, of all or substantially all of the assets of the Fund, (v)
dissolution of the Fund, (vi) and change of any of the Fund's basic investment
policies or in the structure of the Fund. See Management of Partnership
Affairs.
The general partner must receive in person or by certified mail a written
request for a meeting. One or more partners who collectively own 10% or more
of the outstanding partnership interests must sign the written request. The
general partner then has 15 days to call the meeting
Redemptions
Redemption allows you to receive your share of the net assets of this
partnership. For partners admitted in or subsequent to August, 2008, there
will be a redemption fee from the time they have been allocated partnerships
interests from their subscription proceeds as follows: 4% during the first
three months, 3% the second three months, 2% the third three months, 1% the
fourth three months and none if redemption is made in the thirteenth month or
thereafter. Partners admitted prior to the date of this prospectus will be
charged a redemption fee as follows: 3% during the first four months, 2% the
second four months, 1% the third four months, and none if redemption is made
in the thirteenth month or thereafter. The general partner must receive
written request, in form acceptable to it, no fewer than ten days prior to the
last day immediately preceding the desired effective date of redemption. The
effective date of redemption must be the last day of the then current or a
future month. The redemption price will be the net asset value of the
partnership interests on the effective date of redemption, which will be the
last day of each month for all redemption requests received and approved for
payment by the general partner. The general partner may lower or waive the
redemption fee at its discretion. If you wish to withdraw your redemption
request, the general partner must receive written notice of such withdrawal
request prior to the last business day of the month in which such request was
submitted to be considered.
52
<page>
The general partner will pay the redemption requests within twenty days
following the effective date; i.e., provided the request was received within
ten days from the last day of the month, the effective date is the close of
business on the last day of the month. However, you should be aware that the
general partner may be unable to timely comply with the request for the sole
reason that there is not enough cash. This may be because the trading advisor
cannot liquidate the positions it has taken or because there are contingent
claims on partnership assets. Redemption requests will be handled in the
order in which they are received, with preference given to requests received
from limited partners, as opposed to a general partner or one of its
affiliates. If redemption requests received from limited partners exceed
funds available, redemptions will be allocated on a prorated basis for the
then current redemption period and paid as a preference in future redemption
periods as cash becomes available.
If the general partner notifies you in writing, it may declare additional
redemption dates or cause the Fund to redeem fractions of units of partnership
interests.
Plan for Sale of Partnership Interests
No FINRA Limitation on Sales Commissions and Disclosure of Wholesaling Fees
This offering is made in compliance with an exemption to Rule 2810 granted in
the discretion of the staff of the Financial Industry Regulatory Authority
("FINRA").
FINRA Rule 2810 includes the continuing service fee as compensation of the
offering. In addition, the general partner may pay up to 1.75% of the net
asset value of investments made through an additional selling agent for so
long as the investment remains in the Fund to persons known as wholesalers who
solicit the additional selling agent agreement. The FINRA's Rules also treat
this up to 1.75% as compensation attendant to the offering. This up to 1.75%,
should the general partner elect to use wholesalers, will be paid entirely
from the brokerage commissions paid by the Fund to the general partner. The
exemption from Rule 2810 will permit the wholesaling and continuing service
fees to be paid for so long as the investment remains in the Fund.
No Sales to Discretionary Accounts
There will be no sales to discretionary accounts without the prior specific
written approval of the customer.
The Selling Agent
We are offering and selling the partnership interests through Futures
Investment Company, an Illinois corporation incorporated on December 6, 1983,
whose address is 5914 N. 300 West, P.O. Box C, Fremont, Indiana 46737. It was
registered as a fully disclosed broker/dealer registered with the Financial
Industry Regulatory Authority on July 24, 1997 and has been appointed the
principal selling agent. It may, with the consent of the general partner,
also select other broker dealers to sell partnership interests. All
partnership interests will be sold on a best efforts basis, which means the
selling agents will try, but not guarantee, to sell the partnership interests.
Currently, Futures Investment Company principally offers securities and
interests in futures. It has and will continue to participate in offerings of
other commodity pools sponsored by the general partner or other persons or
entities in competition with us.
The individual general partner and his spouse own Futures Investment Company.
They are also registered with the National Futures Association as associated
persons and with the Financial Industry Regulatory Authority as registered
representatives of Futures Investment Company. In those capacities, they earn
commissions and continuing service fees on the partnership interests they sell
and service.
Although we are offering a maximum of $50,000,000 in partnership interests
pursuant to this registration statement, the Limited Partnership Agreement
authorizes the general partner to determine the amount of partnership
interests to be sold. If the Fund is to sell any partnership interests in
excess of the $50,000,000, such partnership interests must also be registered
with the Securities and Exchange Commission or sold by private offering
pursuant to applicable exemption from registration.
Depository Account & Offering Price
All subscriptions accepted by the general partner will be placed in a
segregated depository account maintained at Star Financial Bank, Angola, IN
until the investor is admitted as a limited partner at the end of the month.
Interest accrued on your subscription amount will be used to buy additional
partnership interests for you. No funds, while held in the depository
account, will be available to pay debts or claims of the partnership or the
general partner.
If you are investing in the partnership through a custodial account by
transferring funds from a managed account at a futures commission merchant,
your funds may be invested in the partnership on the admission date without
use of the depository account.
The partnership interests are sold at the month end net asset value per
partnership interest of the Fund, which is the net asset value of the
partnership divided by the number of outstanding partnership interests. This
offering will continue until the maximum of $50,000,000 in face amount of
partnership interests is sold. The net asset value of the partnership is
calculated before the open of the markets on the first business day of each
month and limited partners will be admitted and issued partnership interests
as of this date and price. Net asset value is calculated and partnership
interests are issued on a monthly basis. Net asset value takes into
consideration total assets, including all cash and cash equivalents (valued at
cost plus accrued interest and earned discount), less total liabilities, of
the Fund (each determined on the basis of generally accepted accounting
principles, consistently applied under the accrual method of accounting or as
required by applicable laws, regulations and rules including those of any
authorized self regulatory organization). The general partner may terminate
this offering at any time.
53
<page>
Cash from subscriptions held in the depository account will be invested in
short-term investments that meet applicable regulatory requirements. These
include United States Treasury Bills or other comparable interest-bearing
instruments that are liquid, substantially risk-less instruments, with
correspondingly low yields.
There cannot be any assurance that any additional partnership interests will
be sold. The general partner is authorized, in its sole discretion, to
terminate this or any future offering of partnership interests without notice
for any reason.
Subscription Procedure
To purchase partnership interests, you must complete and execute a suitability
questionnaire and a subscription agreement (Exhibit D), and deliver the
executed subscription documents and check to the sales agent.
You should make out the check to "Special Account for the exclusive benefit of
the customers of Providence Select Fund, LP". Your check will then be
deposited to the depository account by noon of the second business day
following receipt by the selling agent.
Under no circumstances should you make payment in cash, or make any checks
payable to the Fund, the general partner, the selling agent, or any of their
registered representatives or affiliates.
Subscription Amounts
You must purchase at least $25,000 in partnership interests; however, the
general partner may at its sole discretion reduce this to not less than the
regulatory minimum of $5,000. You may make additional investments above
$25,000 in $1,000 increments, but you may not invest more than 10% of your net
worth in the Fund. If you have not provided collectible funds, whether in the
form of a bad check or draft, or otherwise, any partnership interests recorded
in our books in your favor shall be cancelled.
Revocation and Acceptance of Subscription
Once you have purchased partnership interests, you may revoke your
subscription within five business days after you send it to us, or longer, if
there are Federal or State securities laws which allow you to do so. After
the lapse of five business days from submission, your subscription will be
irrevocable and, thereafter, you must redeem pursuant to the terms of the
Limited Partnership Agreement. The partnership interests offered to you are
subject to prior sale. The general partner has sole discretion to reject any
subscription, in whole or in part, within five days. If your subscription is
accepted, the general partner will admit you as a partner and send you written
confirmation to disclose the number of partnership interests purchased within
20 days of the close of business for the month in which you were admitted as a
limited partner.
Investor Suitability
See Suitability Standards in Exhibit C and on page ii of this prospectus. The
general partner and the sales agent shall make every reasonable effort to
determine that the purchase of units of partnership interest is a suitable and
appropriate investment for you, on the basis of the information regarding your
financial situation and investment objectives obtained from the suitability
questionnaire and subscription agreement (Exhibit D) signed and delivered by
you in connection with your subscription for units. On the basis of the
information provided by you, the general partner and the sales agent shall
make every reasonable effort to ascertain that you:
(a) meet the minimum income and net worth standards established for the
Fund;
(b) can reasonably benefit from an investment in the Fund based on your
overall investment objectives and portfolio structure;
(c) are able to bear the economic risks of an investment in the Fund based
on your overall financial situation; and
(d) have an understanding of:
(i) the fundamental risks of an investment in the Fund;
(ii) the risk that you may lose your entire investment;
(iii) the restrictions on the liquidity and transferability of the units;
(iv) the background and qualification of the general partner and the Fund's
commodity trading advisor; and
(v) the tax consequences of an investment in the Fund.
Records of the information provided by you in the suitability questionnaire
and subscription agreement (Exhibit D) will be maintained by or on behalf of
the general partner and/or the sales agent for at least six years.
54
<page>
Investor Warranties
When you execute and deliver your Subscription Agreement and Power of
Attorney, you are making representations and warranties to the general
partner, the futures commission merchant and the selling agent including, but
not limited to:
(a) you are of legal age to execute the Subscription Agreement and Power of
Attorney and are legally competent to do so;
(b) you acknowledge that you have received the prospectus, including the
Limited Partnership Agreement, prior to subscribing for partnership interests;
(c) all information you have given to the general partner or that is set
forth in the Subscription Agreement and Power of Attorney submitted by you is
correct and complete as of the date of submission. Also, if there are any
changes in such information prior to acceptance of your subscription, you will
immediately furnish the revised or corrected information to the general
partner
(d) unless (e) or (f) below applies to you, your subscription is made with
your own funds for your own account and not as trustee, custodian or nominee
for another.
(e) the subscription, if made as custodian for a minor, is a gift you have
made to the minor and is not made with the minor's funds; or, if not a gift,
the representations as to net worth and annual income apply only to such
minor.
(f) if you are subscribing in a representative capacity:
* you have full power and authority to purchase the partnership interests
and enter and be bound by the Subscription Agreement and Power of Attorney on
behalf of the entity for which you are purchasing the partnership interests,
and
* such entity has full right and power to purchase the partnership
interests and enter and be bound by the Subscription Agreement and Power of
Attorney and become a limited partner pursuant to the Limited Partnership
Agreement attached as Exhibit A.
The general partner, the futures commission merchant, and the selling agent
may rely upon any of the above representations and warranties as a defense to
any claim made against it.
Legal Matters
Litigation and Claims
Within the past 5 years of the date of this prospectus, there have been no
material administrative, civil or criminal actions against either general
partner, the commodity trading advisors, the selling agent, or any principal
or affiliate of any of them. This includes any actions pending, on appeal,
concluded, threatened, or otherwise known to them. There is litigation
against the futures commission merchant within the past 5 years, which is
disclosed beginning on page 44 of this prospectus.
Legal Opinion
The Scott Law Firm, P.A., 36 NW 6th Ave, Suite 409, Miami, FL 33128,
wscott@wscottlaw.com, is special securities counsel to advise the partnership
and the general partner with respect to the offering of partnership interests,
the preparation of this prospectus, the legality of the partnership interests
offered, and the classification of the Fund as a partnership for tax purposes.
From time to time, the Firm will also advise the Fund regarding the
maintenance of the partnership's tax status, the legality of any subsequent
offers, and the legality of any transfers by partners. The general partner
may add, delete, and change legal counsel to the Fund at any time for any
reason. The general partner has granted the Firm the right to employ other
law firms to help in matters that relate to the sale of partnership interests
or our operation.
The Firm will not give you or any persons affiliated with you legal advice.
You should seek investment, legal, and tax advice from your own legal counsel
and other professionals of your choice.
Experts
The general partner has employed financial experts to perform services for the
Fund. These experts currently are:
Jordan, Patke & Associates, Ltd. is our accounting and auditing expert, and is
responsible for auditing the books and records of both the partnership and the
corporate general partner, as well as preparing the Fund K-1's and our tax
returns.
The corporate general partner serves as our tax partner. The general partner
is required by the rules and regulations of the Commodity Futures Trading
Commission to send you unaudited monthly account statements and annual
financial statements audited by an independent certified public accountant.
The general partner may add, delete and change the experts selected to perform
services for the Fund at any time for any reason.
We will send you the unaudited monthly account statements as soon as
practicable after the end of each month, and will send you the audited annual
financial statements within 90 days after the end of each calendar year.
55
<page>
Additional Information
By our general partner, we have filed a registration statement on Form S-1
with the Securities and Exchange Commission under the Securities Act of 1933
to allow us to issue and sell our limited partnership interests.
This prospectus does not contain all of the information in the Form S-1
filing, for example, the Selling Agreement and the futures commission
merchant's Customer Agreement that established the Fund accounts. The
descriptions in this prospectus of these exhibits are summaries. For further
information regarding the Fund and the partnership interests offered, you may
inspect and copy, without charge, our complete filings, including this
prospectus, the exhibits and periodic reports, at the public reference
facilities of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, D.C. 20549.
Also, the Securities and Exchange Commission offices will send you copies of
all or any part of this filing by mail, upon payment of the prescribed rates.
This prospectus and other electronic filings made through the Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system, including monthly prospectus
supplements reflecting the previous month-end net asset value, are publicly
available through the Commission's Internet site, http://www.sec.gov.
In addition, our books and records will be maintained for six years at the
office of the corporate general partner, 5914 N. 300 West, Fremont, IN 46737.
You are invited to review any materials available to the general partner
relating to this partnership, our operations, this offering, the Advisory
Agreements between us and the commodity trading advisors, the Customer
Agreement between us and the futures commission merchant, the commodity
trading advisor's disclosure document, the forms filed with the National
Futures Association for any registered entity or person related to this
partnership, and any other matters relating to the laws applicable to this
offering or this partnership.
The officer and staff of the general partner will answer all reasonable
inquiries you may have. All the above materials will be made available at any
mutually convenient location at any reasonable hour after reasonable prior
notice.
The general partner will allow you to obtain any additional information from
third parties necessary to verify any representations or information in this
prospectus and its exhibits, assuming the general partner possesses such
information or has a right to acquire it with reasonable effort and expense.
However, your review is limited by the proprietary and confidential nature of
the commodity trading advisor's trading systems and by the confidentiality of
personal information relating to other investors.
[The balance of this page has been intentionally left blank.]
56
<page>
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
ANNUAL REPORT
December 31, 2008
GENERAL PARTNER:
White Oak Financial Services, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
<page>
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Schedule of Investments - Cash and Securities - December 31, 2008 F-4
Schedule of Investments - Cash and Securities - December 31, 2007 F-5
Schedule of Investments - Futures Contracts - December 31, 2007 F-6 - F-7
Statements of Operations F-8
Statements of Changes in Net Assets F-9
Statements of Cash Flows F-10
Notes to the Financial Statements F-11 - F-18
Affirmation of the Commodity Pool Operator F-19
F-1
<page>
Jordan, Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Partners of
Providence Select Fund, Limited Partnership
Dover, Delaware
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Providence Select Fund, Limited
Partnership as of December 31, 2008 and 2007, 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, 2008. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Providence Select Fund,
Limited Partnership as of December 31, 2008 and 2007. 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, 2008 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Jordan, Patke & Associates, Ltd.
Jordan, Patke & Associates, Ltd.
Lincolnshire, Illinois
March 30, 2009
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
December 31, 2008 and 2007
<table>
<s> <c> <c>
2008 2007
Assets
Investments
Equity in broker trading accounts
Cash and cash equivalents at broker $489,774 $3,264,919
Net unrealized gain on open futures contracts - 48,797
Total equity in broker trading accounts 489,774 3,313,716
U.S. Treasury Bills (cost $998,736 and $0) 999,803 -
Cash 11,826 37,476
Interest receivable 12 7,209
Money market fund 166,464 -
Prepaid continuing service fee - 45,650
Total assets 1,667,879 3,404,051
Liabilities
Accrued expenses 18,426 16,959
Due to related parties 10,292 278,658
Accounts payable 2,479 14,887
Accrued incentive and management fees 7,367 18,685
Redemptions payable - 14,278
Total liabilities 38,564 343,467
Net assets $1,629,315 $3,060,584
Analysis of net assets
Limited partners $1,606,139 $3,031,282
General partners 23,176 29,302
Net assets (equivalent to $742.31 and $828.67 per unit) $1,629,315 $3,060,584
Partnership units outstanding
Limited partners units outstanding 2,155.21 3,658.03
General partners units outstanding 39.71 35.36
Total partnership units outstanding 2,194.92 3,693.39
</table>
The accompanying notes are an integral part of the financial statements
F-3
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
December 31, 2008
<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 Bill
Total United States Treasury Bills January 2009 998,736 1,000,000 999,803 $999,803 61.36%
Cash and cash equivalents in trading accounts:
United States Markets 489,774 $489,774 30.06%
Total cash denominated in U.S. Dollars 489,774 30.06%
Total cash and cash equivalents in trading accounts $489,774 30.06%
Money market fund (166,464 shares at $1 per share) 166,464 $166,464 10.22%
</table>
The accompanying notes are an integral part of the financial statements
F-4
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Cash and Securities
December 31, 2007
<table>
<s> <c> <c> <c>
Fair Value Percent
Description Local Currency U.S. Dollars of Net Assets
Cash and cash equivalents in trading accounts:
Cash denominated in U.S. Dollars:
United States Markets 3,184,450 $3,184,450 104.05%
Total cash denominated in U.S. Dollars 3,184,450 104.05%
Total cash and cash equivalents denominated in
U.S. Dollars 3,184,450 97.54%
Cash denominated in foreign currency:
Euro Markets - Euro 19,810 28,869 0.94%
British Pound Markets - GBP 10,607 21,031 0.69%
Australian Dollar Markets - AUD 31,619 27,709 0.91%
Japanese Yen Markets - JPY 320,000 2,860 0.09%
Total cash denominated in foreign currency 80,469 2.63%
Total cash and cash equivalents in trading accounts $3,264,919 106.68%
</table>
The accompanying notes are an integral part of the financial statements
F-5
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Futures Contracts
December 31, 2007
<table>
<s> <c> <c> <c> <c> <c>
Fair Value Percent
Description Expiration Date Contracts Local Currency USD of Net Assets
Net unrealized gain (loss) on open futures contracts
United States commodity futures positions held long:
LME Copper US February 2008 1 (27,569) $(27,569) (0.90)%
LME Aluminum US January 2008 1 (1,459) (1,459) (0.04)%
LME Aluminum US February 2008 2 (5,170) (5,170) (0.17)%
LME Copper US February 2008 1 4,520 4,520 0.15 %
CMX Gold February 2008 2 7,000 7,000 0.23 %
NY Heating Oil February 2008 1 (214) (214) (0.01)%
NYM RBOB Gas February 2008 9 (4,347) (4,347) (0.14)%
CBOT Corn March 2008 3 250 250 0.01 %
CBOT Soybeans March 2008 2 3,625 3,625 0.12 %
CBOT Wheat March 2008 1 (2,013) (2,013) (0.07)%
CBT T Note 10Y March 2008 13 14,750 14,750 0.48 %
CMX Silver March 2008 3 6,575 6,575 0.21 %
IMM Euro FX March 2008 6 (9,406) (9,406) (0.31)%
IMM Euro Dollar September 2008 34 13,700 13,700 0.45 %
Total United States Commodity Futures Positions 242 0.01 %
Australian commodity futures positions held long:
SFE 10Y T Bond March 2008 1 (799) (700) (0.02)%
Total Australian commodity futures positions held long (700) (0.02)%
Euro commodity futures positions held long:
MONEP CAC40 January 2008 8 5,560 8,103 0.26 %
DTB DAX Index March 2008 2 9,000 13,116 0.43 %
EURX E-Bund March 2008 12 (18,810) (27,412) (0.90)%
LIF 3M Euribor September 2008 22 4,100 5,975 0.20 %
Total European commodity futures positions held long (218) (0.01)%
British commodity futures positions held long:
LIF Long Gilt March 2008 6 9,170 18,181 0.59 %
LIF 3M Sterling
Interest Rate September 2008 17 4,250 8,426 0.28 %
Total British commodity futures positions held long 26,607 0.87 %
Total commodity futures positions held long 25,931 0.85 %
United States commodity futures positions held short:
LME Aluminum US February 2008 2 4,345 4,345 0.14 %
LME Copper US February 2008 1 7,424 7,424 0.24 %
LME Aluminum US January 2008 1 3,681 3,681 0.12 %
LME Aluminum US March 2008 3 2,829 2,829 0.09 %
LME Aluminum US March 2008 2 3,145 3,145 0.10 %
LME Aluminum US February 2008 1 12,087 12,087 0.39 %
LME Aluminum US February 2008 2 9,463 9,463 0.31 %
LME Aluminum US March 2008 1 536 536 0.02 %
LME Copper US February 2008 1 (589) (589) (0.02)%
LME Copper US March 2008 1 3,300 3,300 0.11 %
CME Cattle February 2008 9 7,380 7,380 0.24 %
NY Lt Crude February 2008 2 (11,350) (11,350) (0.37)%
NY Natural Gas February 2008 3 (7,130) (7,130) (0.23)%
CSC Sugar March 2008 5 (4,088) (4,088) (0.13)%
EMINI S&P 500 March 2008 1 1,165 1,165 0.04 %
IMM British Pounds March 2008 4 150 150 0.00 %
IMM Canadian Dollars March 2008 2 (4,890) (4,890) (0.16)%
IMM Japanese Yen March 2008 3 (3,113) (3,113) (0.09)%
Total United States commodity futures positions held short 24,345 0.80 %
</table>
The accompanying notes are an integral part of the financial statements
F-6
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Schedule of Investments - Futures Contracts, Continued
December 31, 2007
<table>
<s> <c> <c> <c> <c> <c>
Fair Value Percent
Description Expiration Date Contracts Local Currency USD of Net Assets
Net unrealized gain (loss) on open futures contracts, con't.
Australian commodity futures positions held short:
SFE SPI 200 March 2008 2 (2,700) (2,366) (0.08)%
Total Australian commodity futures positions held short (2,366) (0.08)%
Japanese commodity futures positions held short:
SMX NIKKEI March 2008 2 407,500 3,643 0.12 %
Total Japanese commodity futures positions held short 3,643 0.12 %
British commodity futures positions held short:
NEW FTSE 100 March 2008 1 (1,390) (2,756) 0.09)%
Total British commodity futures positions held short (2,756) (0.09)%
Total commodity futures positions held short 22,866 0.75 %
Net commodity futures positions $48,797 1.60 %
</table>
The accompanying notes are an integral part of the financial statements
F-7
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
2008 2007 2006
Investment income
Interest income $37,951 $68,671 $-
Total investment income 37,951 68,671 -
Expenses
Commission expense to affiliates 172,538 98,761
Commission expense 13,326 7,303 -
Management fees 46,072 44,505 -
Continuing service fee 98,868 60,177 -
Incentive fees 165,453 26,851 -
Professional accounting and legal fees 71,062 142,097 135,992
Other operating and administrative expenses 52,064 7,125 3,536
619,383 386,819 139,528
Net investment (loss) (581,432) (318,148) (139,528)
Realized and unrealized gain (loss) from investments and foreign currency
Net realized gain (loss) from:
Investments 933,252 368,916 -
Foreign currency transactions (511,285) (332,113) -
Net realized gain from investments and foreign currency transactions 421,967 36,803 -
Net increase (decrease) in unrealized appreciation (depreciation) on:
Investments (24,588) 24,588 -
Foreign currency transactions (24,209) 24,209 -
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions (48,797) 48,797 -
Net gain on investments and foreign currency 373,170 85,600 -
Net (decrease) in net assets resulting from operations $(208,262) $(232,548) $(139,528)
Net (loss) per unit (1)
Limited partnership unit (86.36) (121.72) (69,764.00)
General partnership unit (86.36) (121.72) (69,764.00)
</table>
(1) For the years ended December 31, 2008 and 2007, the amount is based
on a single unit outstanding for an entire year. For the year ended
December 31, 2006, the amount is calculated using average units
outstanding.
The accompanying notes are an integral part of the financial statements
F-8
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
Partners' Capital
General Limited Total
Net assets at December 31, 2005 $(61,995) $(61,995) $(123,990)
(Decrease) in net assets from operations:
Net investment (loss) (69,764) (69,764) (139,528)
Net realized (loss) from investments and foreign currency transactions - - -
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions - - -
Net (decrease) in net assets resulting from operations (69,764) (69,764) (139,528)
Subscriptions - - -
Redemptions - - -
Transfers - - -
Offering Costs - - -
Net assets at December 31, 2006 (131,759) (131,759) (263,518)
(Decrease) in net assets from operations:
Net investment (loss) (4,385) (313,763) (318,148)
Net realized gain from investments and foreign currency transactions 507 36,296 36,803
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions 673 48,124 48,797
- - -
Net (decrease) in net assets resulting from operations (3,205) (229,343) (232,548)
Subscriptions 32,050 3,566,311 3,598,361
Redemptions - (41,711) (41,711)
Transfers 1,000 (1,000) -
Offering Costs 131,216 (131,216) -
Net assets at December 31, 2007 29,302 3,031,282 3,060,584
(Decrease) in net assets from operations:
Net investment (loss) (28,270) (553,162) (581,432)
Net realized gain from investments and foreign currency transactions 20,517 401,450 421,967
Net increase (decrease) in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,373) (46,424) (48,797)
(10,126) (198,136) (208,262)
Net (decrease) in net assets resulting from operations
Subscriptions 4,000 261,009 265,009
Redemptions - (1,488,016) (1,488,016)
Transfers - - -
Offering Costs - - -
Net assets at December 31, 2008 $23,176 $1,606,139 $1,629,315
</table>
The accompanying notes are an integral part of the financial statements
F-9
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 2008, 2007 and 2006
<table>
<s> <c> <c> <c>
2008 2007 2006
Cash Flows from Operating Activities
Net (decrease) in net assets resulting from operations $(208,262) $(232,548) $(139,528)
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 (depreciation) on investments 48,797 (48,797) -
(Increase) decrease in interest receivable 7,197 (52,859) -
Decrease in prepaid continuing service fee 45,650 - -
Increase (decrease) in accrued management and incentive fees (11,318)
18,685 -
Increase (decrease) in accounts payable (12,408) 14,887 -
Increase in accrued expenses 1,467 9,883 7,076
Increase (decrease) in due to related parties 5,378 4,914 -
Net cash (used in) operating activities (123,499) (293,044) (132,452)
Cash Flows from Financing Activities
Increase (decrease) in due to related parties (273,744) (16,998) 132,375
Proceeds from sale of units, net of sales commissions 265,009 3,598,361 -
Partner redemptions (1,502,294) (27,433) -
Net cash provided by (used in) financing activities (1,511,029) 3,553,930 132,375
Net increase (decrease) in cash and cash equivalents (1,634,528) 3,260,886 (77)
Cash and cash equivalents at the beginning of the year 3,302,395 304 381
Cash and cash equivalents at the end of the year $1,667,867 $3,302,395 $304
End of period cash and cash equivalents consist of:
Cash and cash equivalents at broker $489,774 $3,264,919 $-
U.S. Treasury Bills 999,803 - -
Cash 11,826 37,476 304
Money market fund 166,464 - -
Total cash and cash equivalents $1,667,867 $3,302,395 $304
</table>
The accompanying notes are an integral part of the financial statements
F-10
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
1. Nature of the Business
Providence Select Fund, Limited Partnership (the Fund) was formed on May 16,
2003 under the Delaware Uniform Limited Partnership Act. The Fund is engaged
in high risk, speculative and hedge trading of futures and forward contracts,
options on futures and forward contracts, and other instruments selected by
registered commodity trading advisors (CTA's). On March 2, 2007, the Fund
commenced business after admission of 46 limited partners, with total
subscriptions of $1,088,370. The maximum offering is $50,000,000. White Oak
Financial Services, Inc. (White Oak) and Michael Pacult are the General
Partners and commodity pool operators (CPO's) of the Fund. From inception
through June 2, 2008, the Fund's CTA was NuWave Investment Corp. From June 2,
2008 forward, the Fund's CTA has been Clarke Capital Management, Inc. The CTA
has the authority to trade as much of the Fund's equity as is allocated to it
by the General Partner. The selling agent is Futures Investment Company (FIC),
which is controlled by Michael Pacult and his wife.
The Partnership was in the development stage prior to March 2, 2007 and its
efforts until then were principally devoted to organizational activities.
2. Significant Accounting Polices
Regulation - The Fund is a registrant (effective September 12, 2005) 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 be 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 will be subject to the
requirements of futures commission merchants and interbank market makers
through which the Fund trades.
Offering Costs and Organizational Expenses - For financial reporting purposes
in conformity with U.S. Generally Accepted Accounting Principles (GAAP), on
the Fund's initial effective date, September 12, 2005, the Fund deducted from
Limited Partners' capital the total initial offering costs of $79,876 as of
that date and began expensing all subsequent offering costs. The commencement
of business was contingent upon the sale of at least $1,030,000 of partnership
interests. Organizational and operating costs are expensed as incurred for
GAAP purposes. For all other purposes, including determining the Net Asset
Value per Unit for subscription and redemption purposes, the Fund capitalized
all offering and organizational costs until after the twelfth month following
the commencement of business. The Fund has agreed to reimburse White Oak and
other affiliated companies for all expenses incurred up to the commencement of
business, which was March 2, 2007, until after the twelfth month following the
commencement of business. On March 4, 2008, during the thirteenth month
following the commencement of business, White Oak and its affiliates were
reimbursed for all such expenses, which totaled $274,715, and which are being
amortized by the Fund on a straight-line basis at $11,446 per month for twenty
four months commencing March 4, 2008. Any partner in the Fund during this
twenty four month period will be exposed to this per month charge on a pro
rata basis.
Consequently, as of December 31, 2008 and 2007, the Net Asset Value and Net
Asset Value per Unit for financial reporting purposes and for all other
purposes are as follows:
<table>
<s> <c> <c> <c> <c>
Balance Per Unit Calculation
December 31, December 31,
2008 2007 2008 2007
Net Asset Value for financial reporting purposes $1,629,315 $3,060,584 $742.31 $828.67
Adjustment for initial offering costs 79,876 79,876 36.39 21.63
Adjustment for other offering costs and organizational expenses 80,000 194,464 36.45 52.65
Net Asset Value for all other purposes $1,789,191 $3,334,924 $815.15 $902.94
Number of units 2,194.92 3,693.39
</table>
Registration Costs - Costs incurred for the initial filings with Securities
and Exchange Commission, National Association of Securities Dealers, Inc. and
the states where the offering is expected to be made are included in the
offering expenses and, accordingly, are accounted for as described above under
"Offering Costs and Organizational Expenses".
F-11
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
2. Significant Accounting Polices, Continued
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 requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Income Taxes - The Fund prepares calendar year U.S. and applicable state tax
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 Financial Accounting
Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48)," to the
Fund and has determined that FIN 48 does not have a material impact on the
Fund's financial statements. The Fund files federal and state tax returns.
The 2005 through 2008 tax years generally remain subject to examination for
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, U.S. Treasury Bills and money market
funds to be cash equivalents. Net cash provided by operating activities
include no cash payments for interest or income taxes for the periods ended
December 31, 2008, 2007 and 2006.
Foreign Currency - Investment securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollar amounts at
the date of valuation. Purchases and sales of investment securities and
income and expense items denominated in foreign currencies are translated into
U.S. dollar amounts on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the fair values of assets and liabilities, other than investments in
securities at fiscal period end, resulting from changes in exchange rates.
Reclassification
Certain amounts in the 2007 financial statements were reclassified to conform
with the 2008 presentation.
Recently Issued Accounting Pronouncements
The Fund adopted the provisions of Statement of Financial Accounting Statement
No. 157 - "Fair Value Measurement", or SFAS 157, as of January 1, 2008. SFAS
157 provides guidance for determining fair value and requires increased
disclosure regarding the inputs to valuation techniques used to measure fair
value. SFAS 157 clarifies the definition of fair value as the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
SFAS No. 157 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 year ended December 31, 2008, 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 reoccurring basis as of
December 31, 2008.
Description Level 1 Level 2 Level 3 Total
U.S. Treasury Bills $- $999,803 $- $999,803
Total $- $999,803 $- $999,803
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to
improve financial reporting about derivate instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand how
those instruments and activities are accounted for; how and why they are used;
and their effects on a Fund's financial position, financial performance, and
cash flows. SFAS 161 is effective for financial statement issued for fiscal
years beginning after November 15, 2008, and interim periods within those
fiscal years. The Fund is currently evaluating the impact that the adoption
of SFAS 161 will have on its financial statement disclosures.
F-12
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
3. General Partner Duties
The responsibilities of the General Partner, in addition to directing the
trading and investment activity of the Fund, including suspending all trading,
includes executing and filing all necessary legal documents, statements and
certificates of the Fund, retaining independent public accountants to audit
the Fund, employing attorneys to represent the Fund, reviewing the brokerage
commission rates to determine reasonableness, maintaining the tax status of
the Fund as a limited partnership, maintaining a current list of the names,
addresses and numbers of units owned by each Limited Partner and taking such
other actions as deemed necessary or desirable to manage the business of the
Partnership.
The Corporate General Partner has contributed $38,050 in cash for deposit to
the capital of the Fund for a General Partnership interest in the Partnership.
If the net unit value of the partnership falls to less than 50% of the greater
of the original $1,000 selling price, less commissions and other charges or
such higher value earned through trading, then the General Partner will
immediately suspend all trading, provide all limited partners with notice of
the reduction in net unit value and give all limited partners the opportunity,
for fifteen days after such notice, to redeem partnership interests. No
trading shall commence until after the lapse of such fifteen day period.
4. The Limited Partnership Agreement
The Limited Partnership Agreement provides, among other things, that-
Capital Account - A capital account shall be established for each partner.
The initial balance of each partner's capital account shall be the amount of
the initial contributions to the partnership.
Monthly Allocations - Any increase or decrease in the Partnership's net asset
value as of the end of a month shall be credited or charged to the capital
account of each Partner in the ratio that the balance of each account bears to
the total balance of all accounts.
Any distribution from profits or partners' capital will be made solely at the
discretion of the General Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Partnership's realized capital gain or loss and ordinary income or loss shall
be allocated among the Partners, after having given effect to the fees 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 after the minimum to commence business has been raised and,
thereafter, 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 - 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. Unless this
requirement is waived, 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. For partners admitted after
July 31, 2008, there will be a redemption fee commencing from the date of
purchase of units of 4% during the first three months, 3% during the second
three months, 2% during the third three months, 1% during the fourth three
months and no redemption fees for redemption requests received in the
thirteenth month or later. For partners admitted prior, there will be a
redemption fee commencing from the date of purchase of units of 3% during the
first four months, 2% during the second four months, 1% during the third four
months and no redemption fees for redemption requests received in the
thirteenth month or later.
F-13
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
5. Fees
Until September 1, 2007, a monthly management fee was paid to the CTA based on
the rate of trading assigned by the CTA and approved by the General Partner of
up to 2.5% (annual rate) of the Fund's net assets allocated to the CTA to
trade. As of September 1, 2007, such management fee was increased to up to
3.25% annually.
The Fund pays the Corporate General Partner a fixed brokerage commission of 6%
on total Fund net assets, from which the Corporate General Partner pays the
round turn commissions to the futures commission merchant.
A quarterly incentive fee of 20% of "new trading profits" is paid to the CTA
and, until September 1, 2007, up to a 3% quarterly incentive fee was paid to
the Corporate General Partner. As of September 1, 2007, the quarterly
incentive fee to the Corporate General Partner was reduced to up to 0.5%.
"New trading profits" includes all income earned by the CTA and expense
allocated to his activity. In the event that trading produces a loss for the
CTA, no incentive fees will be paid and all losses will be carried over to the
following months until profits from trading exceed the loss. It is possible
for the CTA to be paid an incentive fee during a quarter or a year when the
Fund experienced a loss.
The Fund pays the selling agents a 3% continuing service fee based on the
initial investment the first year. Each year thereafter, for so long as the
investment remains in the Fund, the Fund pays this fee at 1/4% monthly based
on the net asset value of the investment.
On June 2, 2008, the Fund changed trading advisors from NuWave to Clarke. The
Fund also made the decision to change the fees as follows:
A 25% quarterly incentive fee of new trading profits is paid to the CTA and no
management fee is paid to it.
Brokerage commissions of 7% annually on total Fund net assets are paid to the
Corporate General Partner, and no incentive fee is paid to it.
A 4% continuing service fee to the selling agents based on the initial
investment the first year. Each year thereafter, for so long as the
investment remains in the Fund, the Fund pays this fee at 1/3% monthly based
on the net asset value of the investment.
The General Partner has reserved the right to change the management fee and
the incentive fee at its sole discretion. The total incentive fees may be
increased to 27% if the management fee is eliminated. The Fund may also
increase the management fees paid to the CTA and general partner to 6% of
total net assets if the total incentive fees are decreased to 15%.
6. Related Party Transactions
Financial Accounting Standards Board Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, 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-14
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
6. Related Party Transactions, Continued
"""Due to related parties"" at December 31, 2008 and December 31, 2007 were
amounts payable to White Oak Financial Services, Inc., Ashley Capital
Management, Inc., Futures Investment Company, and Michael Pacult, president of
Futures Investment Company, White Oak Financial Services, Inc. and Ashley
Capital Management, Inc. The balances result from two types of transactions:
Due to related parties: Due to related parties consist of offering,
organizational and operating costs paid by the related parties on behalf of
the Fund and cash advances. These amounts bear no interest or due dates and
are unsecured. The balances are usually paid back within a year from the
start of trading or when the Fund is financially capable of repaying the
advance.
Commissions: The Fund has an agreement to pay commissions to White Oak
Financial Services, Inc. The related party is 100% owned by Michael Pacult,
the Fund's CPO. Commissions payable to White Oak Financial Service, Inc. at
December 30, 2008 and December 31, 2007 were $10,292 and $4,914, respectively.
"
Incentive fees: Prior to June 2, 2008, White Oak Financial Services, Inc.
received a quarterly incentive fee (see footnote 5) of new trading profits.
There were no incentive fees due at December 31, 2008 and 2007.
Continuing service fee: The Fund pays Futures Investment Company a continuing
service fee. Continuing service fees prepaid to Futures Investment Company
amounted to $0 and $45,650 at December 31, 2008 and December 31, 2007,
respectively.
Commissions and due to related parties included in accrued expenses:
2008 2007
Futures Investment Company $- $86,017
Ashley Capital Management, Inc. - 62,355
Michael Pacult - 46,650
White Oak Financial Services, Inc. 10,292 83,636
Due to related parties $10,292 $278,658
Commissions and fees included in expenses:
2008 2007 2006
White Oak Financial Services, Inc. - commissions $172,538 $98,761 $-
White Oak Financial Services, Inc. - incentive fee $3,761 $2,509 $-
Futures Investment Company -continuing service fee $98,868 $60,177 $-
7. Partnership Unit Transactions
As of December 30, 2008, 2007 and 2006 partnership units were $742.31,
$828.67, and $(131,759) per unit respectively for financial reporting
purposes.
Transactions in partnership units were as follows:
<table>
<s> <c> <c> <c> <c> <c> <c>
Units Amount
2008 2007 2006 2008 2007 2006
Limited Partner Units
Subscriptions 299.84 3,705.20 - $261,009 $3,566,311 $-
Redemptions (1,802.66) (47.17) - (1,488,015) (41,711) -
Net (loss) for the year ended - - - (198,136) (229,343) (69,764)
Transfers - (1.00) - - (1,000) -
Offering costs - - - - (131,216) -
Total (1,502.82) 3,657.03 - (1,425,142) 3,163,041 (69,764)
General Partner Units
Subscriptions 4.35 33.36 - 4,000 32,050 -
Redemptions - - - - - -
Net (loss) for the year ended - - - (10,126) (3,205) (69,764)
Transfers - 1.00 - - 1,000 -
Offering costs - - - - 131,216 -
Total 4.35 34.36 - (6,126) 161,061 (69,764)
Total Units
Subscriptions 304.19 3,738.56 - 265,009 3,598,361 -
Redemptions (1,802.66) (47.17) - (1,488,015) (41,711) (139,528)
Net (loss) for the year ended - - - (208,262) (232,548) -
Offering costs - - - - - -
Total (1,498.47) 3,691.39 - $(1,431,268) $3,324,102 $(139,528)
</table>
F-15
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
8. 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 and the futures
commission merchant, establish minimum margin requirements for each traded
contract. The futures commission merchant may increase the margin
requirements above these minimums for any or all contracts. In general, the
amount of required margin should never fall below 10% of the Net Asset Value.
The cash deposited in trading accounts at December 31, 2008 and December 31,
2007 was $489,774. and $3,264,919, respectively, which equals approximately
30.1% and 106.7% of Net Asset Value, respectively.
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 $0
on long positions at December 31, 2008 and $29,248,921 on long positions at
December 31, 2007. 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 (losses) on open commodity futures contracts at
December 31, 2008 were $0. The fund had no open commodity futures contracts at
December 31, 2008.
Open contracts generally mature within three months of December 31, 2008.
The fund had no open commodity futures contracts at December 31, 2008.
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.
F-16
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
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 financial condition 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.
10. 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.
11. 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.
F-17
<page>
Providence Select Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
12. Financial Highlights
<table>
<s> <c> <c> <c> <c> <c>
Years Ended December 31,
2008 2007 2006 2005 2004
Performance per Unit (2)
Net unit value, beginning of year $828.67 $(131,759.00) $(61,995.00) $(6,454.00) $(424.00)
Net realized and unrealized gain (loss) on
commodity transactions 120.48 34.80 - -
Investment and other income 10.77 32.89 - -
Expenses (1) (217.61) (189.41) (69,764.00) (15,603.00) (6,030.00)
Net (decrease) related to operations (86.36) (121.72) (69,764.00) (15,603.00) (6,030.00)
Syndication costs transferred to capital - - - (39,938.00) -
Reallocation of initial offering costs - 132,709.39 - - -
Net increase (decrease) for the year (86.36) 132,587.67 (69,764.00) (55,541.00) (6,030.00)
Net unit value at the end of the year $742.31 $828.67 $(131,759.00) $(61,995.00) $(6,454.00)
Net assets, end of the year ($000) $1,629 $3,061 $(264) $(124) $(13)
Total return (1) (10.42)% (12.81)% (78.79)% (57.08)% (175.34)%
Number of units outstanding at the end
of the year 2,194.92 3,693.39 2.00 2.00 2.00
Ratio to average net assets
Investment and other income (2) 1.00 % 4.76 % 0.00 % 0.00 % 0.00 %
Expenses (16.27)% (22.66)% (78.79)% (57.08)% (175.34)%
</table>
Total return is calculated based on the change in value of a unit during the
year. 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 year ended December 31, 2006 and prior years, 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. For the years ended
December 31, 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.
F-18
<page>
Providence Select Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
*****************************************************************************
To the best of the knowledge and belief of the undersigned, the information
contained in this report is accurate and complete.
/s/ Michael Pacult March 31, 2009
Michael Pacult Date
President, White Oak Financial Services, Inc.
General Partner
Providence Select Fund, Limited Partnership
F-19
<page>
White Oak Financial Services, Inc.
ANNUAL REPORT
December 31, 2008
<page>
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Financial Statements
Balance Sheets F-3
Statements of Income and Retained Earnings F-4
Statements of Cash Flows F-5
Notes to the Financial Statements F-6 - F-8
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-1
<page>
Jordan, Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
White Oak Financial Services, Inc.
Fremont, Indiana
We have audited the accompanying balance sheets of White Oak Financial
Services, Inc. (an S-Corporation) as of December 31, 2008 and 2007, and the
related statements of income and retained earnings and cash flows for the year
ended December 31, 2008 and the period from March 2, 2007 to December 31,
2007. We have also audited the consolidated statements of income and retained
earnings and cash flows of White Oak Financial Services, Inc. and subsidiary
for the period January 1, 2007 through March 1, 2007 and the year ended
December 31, 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of White Oak Financial Services,
Inc. as of December 31, 2008 and 2007, and the results of its operations and
its cash flows for the year ending December 31, 2008 and the period March 2,
2007 through December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of White Oak
Financial Services, Inc. and subsidiary for the periods January 1, 2007
through March 1, 2007 and the year ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Jordan, Patke & Associates, Ltd.
Jordan, Patke & Associates, Ltd.
Lincolnshire, Illinois
April 13, 2009
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
White Oak Financial Services, Inc.
Balance Sheets
December 31, 2008 and 2007
<table>
<s> <c> <c>
2008 2007
Assets
Current assets
Cash $240 $297
Due from related party - 83,636
Investment in partnership, at fair value (cost $38,000 for 2008 23,176 29,302
and $34,000 for 2007)
Commissions receivable 10,292 4,869
Total current assets 33,708 118,104
Liabilities
Current liabilities
Due to stockholder 1,000 70,485
Due to related parties - 40,435
Total current liabilities 1,000 110,920
Stockholder's Equity
Common stock, no par value; 1,500 shares authorized,
1,000 issued and outstanding 1,000 1,000
Retained earnings 31,708 6,184
Total stockholder's equity 32,708 7,184
Total liabilities and stockholder's equity $33,708 $118,104
</table>
The accompanying notes are an integral part of the financial statements.
F-3
<page>
White Oak Financial Services, Inc.
Statements of Income and Retained Earnings
<table>
<s> <c> <c> <c> <c>
Unconsolidated Consolidated
---------------------------------------------- ----------------------------------------------
Period From Period From
March 2, 2007 January 1, 2007
to to
Year Ended December 31, March 1, Year Ended
December 31, 2008 2007 2007 December 31, 2006
Income
Commissions $176,298 $101,224 $- $-
Total income 176,298 101,224 - -
Expenses
Professional, accounting and legal fees - - 21,785 135,991
Selling expenses - 3,842 - -
Other operating and administrative expenses 133 - 447 3,536
Total expenses 133 3,842 22,232 139,527
Net income (loss) 176,165 97,382 (22,232) (139,527)
Retained Earnings
Beginning of period 6,184 (287,749) (265,517) (125,990)
Loss of controlling financial interest in affiliate - 286,256 - -
Stockholder distributions (140,515) (86,500) - -
Comprehensive (loss) (10,126) (3,205) - -
End of period $31,708 $6,184 $(287,749) $(265,517)
</table>
The accompanying notes are an integral part of the financial statements.
F-4
<page>
White Oak Financial Services, Inc.
Statements of Cash Flows
<table>
<s> <c> <c> <c> <c>
Unconsolidated Consolidated
---------------------------------------------- ----------------------------------------------
Period From Period From
March 2, 2007 January 1, 2007
to to
Year Ended December 31, March 1, Year Ended
December 31, 2008 2007 2007 December 31, 2006
Cash Flows from Operating Activities
Net income (loss) $176,165 $97,382 $(22,232) $(139,527)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
(Increase) in commissions receivable (5,423) (4,869) - -
Decrease in prepaid operating costs - - - 16
Increase in accounts payable - - 8,669 7,076
(Decrease) in due to stockholder (69,485) - - -
Net cash provided by (used in) operating activities 101,257 92,513 (13,563) (132,435)
Cash Flows from Investing Activities
Investment in partnership (4,000) (7,000) - -
Net cash (used in) investing activities (4,000) (7,000) - -
Cash Flows from Financing Activities
Stockholder distributions (140,515) (86,500) - -
Increase (decrease) in due to related parties (40,435) - 42,000 132,159
Decrease in due from related parties 83,636
Net cash provided by (used in) financing activities (97,314) (86,500) 42,000 132,159
Net increase (decrease) in cash and cash
equivalents (57) (987) 28,437 (276)
Cash at the beginning of the period 297 1,284 1,589 1,865
Cash at the end of the period $240 $297 $30,026 $1,589
Non-Cash Activities
Investment in partnership through due to stockholder $- $1,000 $- $-
</table>
The accompanying notes are an integral part of the financial statements.
F-5
<page>
White Oak Financial Services, Inc.
Notes to the Financial Statements
1. Nature of the Business
White Oak Financial Services, Inc. (the "General Partner") was formed
primarily to act as General Partner of the Providence Select Fund, LP (the
"Fund"), its 50% owned subsidiary for the year ended December 31, 2006 and the
period from January 1, 2007 to March 1, 2007, collectively referred to as (the
"Company"). The General Partner became registered as a commodity pool
operator by the National Futures Association pursuant to the Commodity
Exchange Act, 7 USC Sec. 1, et seq, (the "CE Act"), on May 14, 2003.
The responsibilities of the General Partner, in addition to the selection of
trading advisors and other 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 the names, addresses and number
of units owned by each member and taking such other actions as deemed
necessary or desirable to manage the business of the Fund and compliance with
the CEAct. The General Partner is liable for the debts of the Fund including,
but not limited to, any losses from trading in the pool account not covered by
equity on deposit.
2. Significant Accounting Policies
Regulation - The Fund is a registrant (effective November 3, 2005) with the
Securities and Exchange Commission (SEC) pursuant to the Securities and
Exchange Act of 1933 (the "33 Act"). The Fund is subject to the regulations
of the SEC and the reporting requirements of the Securities and Exchange Act
of 1934 (the "34 Act). The Fund is 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 and
interbank market makers through which the Fund trades.
The Company was in the development stage and its efforts through March 1,
2007 were principally devoted to organizational activities.
Offering Costs and Organizational Expenses - On the Fund's initial
effective date, September 12, 2005, the Fund deducted from Limited Partners'
capital the total initial offering costs of $79,876 as of that date and began
expensing all subsequent offering costs. Organizational and operating costs
are expensed as incurred for GAAP purposes. For all other purposes, including
determining the Net Asset Value per Unit for the Fund's subscription and
redemption purposes, the Fund will capitalize all offering and organizational
costs until after the twelfth month following the commencement of business, at
which time the costs will be amortized. The commencement of business was
contingent upon the sale of at least $1,030,000 of partnership interests. The
Fund has agreed to reimburse the General Partner and other affiliated
companies for all offering expenses incurred up to commencement of business
after the twelfth month following the commencement of business, which was
March 2, 2007. All costs after March 2, 2007 are being paid directly by the
Fund.
Registration Costs - Costs incurred for the initial filings with Securities
and Exchange Commission, National Association of Securities Dealers, Inc. and
the states where the offering is expected to be made are included in the
offering expenses and, accordingly, are accounted for as described above under
"Offering Costs and Organizational Expenses".
Revenue Recognition - After the commencement of trading by the Fund, which
was March 2, 2007, the General Partner earns fixed brokerage commissions (from
which it will pay commissions to the introducing broker and the futures
commission merchant) and incentive fees on "new trading profits".
The Fund invests in forward contracts, futures and other investments which
are recorded on the trade date and will be reflected in the statement of
operations at the difference between the original contract amount and the
market value on the last business day of the reporting period.
Market value of forward contracts, futures and other investments is based
upon exchange or other applicable closing quotations related to the specific
positions.
Investment in Marketable Securities - The General Partner classifies its
investment in partnership as available for sale. Securities classified as
available for sale are carried in the financial statements at fair value.
Realized gains and losses are included in earnings and unrealized holding
gains and losses are reported as comprehensive income included in the equity
section of the Balance Sheet. Unrealized losses were $10,126 for 2008 and
$3,205 for the period March 2, 2007 through December 31, 2007.
Use of Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United states
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Reclassification - Certain amounts in the 2006 financial statements were
reclassified to conform with 2007 and 2008 presentation.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-6
<page>
White Oak Financial Services, Inc.
Notes to the Financial Statements
2. Significant Accounting Policies, Continued
Principles of Consolidation - In accordance with FIN 46(R), Consolidation of
Variable Interest Entities, the General Partner has consolidated the accounts
of the Company for the period January 1, 2007 to March 1, 2007 and the year
ended December 31, 2006. All significant intercompany accounts and
transactions were eliminated. In addition, the Company had no revenue for
those periods.
On March 2, 2007, the Fund became active thereby eliminating the controlling
interest the Company had in the Fund. Accordingly, after that date, the
financial statements only report the financial results for the General
Partner.
Income tax status - No provision for income taxes has been made in these
financial statements because each stockholder / partner is individually
responsible for reporting income or loss based on the respective share of the
Company's income and expenses as reported for income tax purposes.
Management has continued to evaluate the application of Financial Accounting
Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48)," to the
Company, and has determined that FIN 48 does not have a material impact on the
Company's financial statements. The Company files federal and state tax
returns. The 2005 through 2008 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
Company will consider only money market funds to be cash equivalents. Net
cash used in operating activities includes no cash payments for interest or
income taxes for the years ending December 31, 2008, 2007 and 2006. There
were no cash equivalents as of December 31, 2008 and 2007.
3. Related Party Transactions
Michael Pacult, the General Partner's sole stockholder, made an initial
limited partner capital contribution in the Fund of $1,000 for one partnership
unit. The partnership unit was transferred to the general partner on March 2,
2007.
Due to related parties and due to stockholder at December 31, 2008 and 2007
were amounts payable to Ashley Capital Management, Inc., (an affiliated
company) and to Michael Pacult. The balances result from offering,
organizational and operating costs paid by the related parties on behalf of
the Fund and cash advances. These amounts bear no interest or due dates and
are unsecured. The balances are usually paid back within a year from the
start of trading or when the Fund is financially capable of repaying the
advance.
Starting March 2, 2007, the General Partner is receiving fixed brokerage
commissions and incentive fees from the fund. Brokerage commissions and
incentive fees received for the year ended December 31, 2008 were $176,298 and
for the period March 2, 2007 to December 31, 2007 were $101,224. At December
31, 2008 and 2007 the General Partner was owed commissions of $10,292 and
$4,869, respectively.
At December 31, 2007 the Fund owed the General Partner $83,435 for advances.
4. The Limited Partnership Agreement
The Limited Partnership Agreement of the Fund provides, among other things,
that-
Capital Account - A capital account shall be established for each partner.
The initial balance of each partner's capital account shall be the amount of
the initial contributions to the partnership.
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 after the minimum to commence business has been raised and,
thereafter, 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 - 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. Unless this
requirement is waived, 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. There will be a redemption fee
commencing from the date of purchase of units of 3% during the first four
months, 2% during the second four months, 1% during the third four months and
no redemption fee after the twelfth month.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-7
<page>
White Oak Financial Services, Inc.
Notes to the Financial Statements
5. Fees
The Fund is charged the following fees:
Until September 1, 2007, a monthly management fee was paid to the CTA based
on the rate of trading assigned by the CTA and approved by the General Partner
of up to 2.5% (annual rate) of the Fund's net assets allocated to the CTA to
trade. As of September 1, 2007, such management fee was increased to up to
3.25% annually.
The Fund pays the Corporate General Partner a fixed brokerage commission of
6%, from which the Corporate General Partner will pay the round turn
commissions to the futures commission merchant.
A quarterly incentive fee of 20% of "new trading profits" is paid to the CTA
and, until September 1, 2007, up to a 3% quarterly incentive fee was paid to
the Corporate General Partner. As of September 1, 2007, the quarterly
incentive fee to the Corporate General Partner was reduced to up to 0.5%.
"New trading profits" includes all income earned by a CTA and expense
allocated to his activity. In the event that trading produces a loss for a
CTA, no incentive fees will be paid and all losses will be carried over to the
following months until profits from trading exceed the loss. It is possible
for the CTA to be paid an incentive fee during a quarter or a year when the
Fund experienced a loss.
The Fund pays the selling agents a 3% continuing service fee based on the
initial investment the first year. Each year thereafter, for so long as the
investment remains in the Fund, the Fund pays this fee at 1/4% monthly based
on the net asset value of the investment.
The General Partner has reserved the right to change the management fee and
the incentive fee at its sole discretion. The total incentive fees may be
increased to 27% if the management fee is eliminated. The Fund may also
increase the management fees paid to the CTA's and General Partner to 6% of
total net assets if the total incentive fees are decreased to 15%.
6. Recently Issued Accounting Pronouncements
The General Partner adopted the provisions of Statement of Financial
Accounting Statement No. 157 - "Fair Value Measurement", or SFAS 157, as of
January 1, 2008. SFAS 157 provides guidance for determining fair value and
requires increased disclosure regarding the inputs to valuation techniques
used to measure fair value. SFAS 157 clarifies the definition of fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date.
SFAS No. 157 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 General Partner 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 General Partner'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 year ended December 31, 2008 the General Partner's sole
investment in partnership was valued at fair value using level 2 inputs.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to
improve financial reporting about derivate instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand how
those instruments and activities are accounted for; how and why they are used;
and their effects on a General Partner's financial position, financial
performance, and cash flows. SFAS 161 is effective for financial statement
issued for fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The General Partner is currently evaluating the
impact that the adoption of SFAS 161 will have on its financial statement
disclosures.
7. Concentrations
The General Partner receives all of its net revenues from the Fund.
The Company will maintain all of its cash funds at a local financial
institution. The balance may, at times, exceed Federally insured credit
limits.
8. Guarantees
The corporate and individual general partners are liable for the debts of
the Fund. Specifically, they have provided a written guarantee to the FCM
(Futures Commission Merchant) to provide that they will pay any Fund overdraft
should the Fund default in its payments.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-8
<page>
Part II
Statement of Additional Information
Providence Select Fund, Limited Partnership
This Statement of Additional Information is the second part of a two-part
document and should be read in conjunction with Part I of Providence Select
Fund's disclosure document dated ________, 2009, both of which are combined in
this single prospectus. A free copy of Part I may be requested by writing to
the general partner at 5914 N. 300 West, Fremont, IN 46737.
Table of Contents
Table of Contents 1
Summary of the Fund 3
Checks and Balances 4
Trading Advisor Overview 5
Actual Performance of Alpha Futures Fund, a Separately Offered Fund 6
Correlation Comparison 7
Fund And Offering Details 8
The Opportunity 9
Why Providence Select Fund? 9
Investment Factors 9
Value of Diversification - Managed Futures Industry 10
Managed Futures vs. Stocks During Draw-Downs 12
The Futures, Forward, Option and Swap Markets 13
Advantages of Managed Futures Fund Investments 15
Important Disclosures 16
Appendix I - Commodity Terms And Definitions; State Regulatory Glossary
Appendix II - Privacy Statement
Exhibit A - Limited Partnership Agreement
Exhibit B - Request For Redemption
Exhibit C - Suitability Information
Exhibit D - Subscription Agreement And Power Of Attorney
Exhibit E - Depository Agreement
Exhibit F - Investment Advisory Contract
The date of this Statement of Additional Information is _________, 2009
<page>
Providence Select Fund, LP
* Trading advisor with 16 years experience
* 9 year track record of the CTA's program traded for the Fund
* Low historical correlation to stocks and bonds
* Profit potential (and risk of loss) in both rising and falling markets
* Participation in a wide variety of global markets
* Monthly liquidity
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE OFFERING OF UNITS IN PROVIDENCE SELECT FUND, LP (THE "FUND") CAN ONLY BE
MADE IN CONJUNCTION WITH PART I OF THIS PROSPECTUS, WHICH CONTAINS IMPORTANT
INFORMATION REGARDING CERTAIN RISKS ASSOCIATED WITH THE FUND AND SHOULD BE
READ CAREFULLY AND RETAINED BY ANYONE CONSIDERING INVESTMENT IN THE FUND. THE
UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION, THE COMMODITY FUTURES
TRADING COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK.
SAI 2
<page>
Summary of the Fund
Fund Objectives
Providence Select Fund, L.P. allows investors to participate in a wide range
of markets within a single investment. With access to an array of market
sectors and investment opportunities, an investment in the Fund may encompass
everything from stock index futures to commodity futures. Providence also
provides investors with the potential for above average rates of return, as
well as an important diversification from stocks, bonds and mutual funds
through professionally managed futures investment. Markets traded by the Fund
include global interest rates, foreign currencies, metals, energy products,
global equity indices and agricultural commodities.
Professional Management
The advisor selected by the General Partner to trade on behalf of the Fund is
Clarke Capital Management. Clarke has over 16 years experience in professional
money management, though past performance is not necessarily indicative of
future results. Clarke's performance record appears in Part I of this
prospectus and has demonstrated an overall positive track record in 10 of the
13 programs he has managed in the past five years.
Portfolio Diversification
The ability of futures trading advisors to trade in a market by going either
long or short creates profit potential in both rising and falling markets. The
strategy of the Fund acts independently of economic prosperity, interest rates
or currency stability. Futures trading advisors can perform as well in a bear
market as in a bull market. Of course, where there is profit potential, there
is also risk of loss. The correlation between the performance of managed
futures funds and stocks and bonds has historically been very low. Thus,
managed futures funds provide vital diversification for suitable investors.
Disciplined, Multi-Strategy Trading Approach
The trading program used for the Fund represents a unique blend of strategies
with access to global market sectors. This custom blend, and low correlation
of the Advisor's strategies to each other, creates an opportunity for
investors interested in diversifying their portfolios across multiple sectors
using complimentary trading styles.
Limited Risk
An investor in the Fund has limited liability and is liable for principal and
profits only.
Liquidity
Investors in the Fund can generally withdraw their capital at the net asset
value as of the end of any month, with ten days advance written notice. Please
note, there are redemption charges in the first year.
Administrative Convenience
The Fund's General Partner sends each investor a comprehensive monthly
statement showing the results of the Fund's previous month's trading. The
General Partner provides audited reports for the Fund and a year-end statement
containing a Form K-1 for investor income tax preparation. Investors may call
their financial advisor, or the General Partner, for intra-month updates if
desired.
The General Partner
The Fund's General Partner is White Oak Financial Services, Inc., whose
principal is Mr. Michael Pacult, experienced in the field of managed futures
in the United States since 1980. The General Partner of the Fund encourages
you to read the accompanying prospectus for a more detailed description of the
advantages and risks associated with an investment in the Fund.
Principal Selling Agent
The Fund is offered through select Broker Dealers and Futures Investment
Company, all of which are registered with the Financial Industry Regulatory
Authority. Futures Investment Company, through its affiliate relationship with
White Oak Financial Services, Inc., is the principal selling agent for the
Fund. Futures Investment Company is also a member of SIPC, and registered
with the SEC and CFTC, and is a NFA member.
SAI 3
<page>
Checks and Balances
The following is to advise you of the structure of the Fund's business, which
is a combination of independently functioning and regulated organizations that
provide a system of checks and balances on the accuracy and integrity of one
another and your investment.
Broker: Your broker and his or her Broker/Dealer are regulated by the
Securities and Exchange Commission (SEC), the Financial Industry Regulatory
Authority (FINRA), formerly the National Association of Securities Dealers
(NASD), and the various state securities boards in which they operate.
CPO: The Fund managers are registered pursuant to the US Commodity Exchange
Act in accordance with rules established by the US Commodity Futures Trading
Commission (CFTC) as Commodity Pool Operators (CPOs). The Fund CPOs are
regulated by the National Futures Association (NFA), a CFTC authorized self
regulatory organization. The corporate CPO's financial statements are
audited annually by an independent Certified Public Accounting firm, Jordan
Patke & Associates, Ltd. In addition to auditing the financial statements of
the CPO, Jordan Patke also audits the Fund financial statements.
CTA: The CPO selects one or more independent traders who are registered
pursuant to the US Commodity Exchange Act as Commodity Trading Advisors
(CTAs). The CTA is then granted authority to enter trades utilizing the
amount of money the CPO grants the CTA for that purpose. The CTA is
regulated by the NFA.
FCM: The CTA executes the Fund trades with MF Global Inc., an independent
Futures Commission Merchant (FCM), which is a registered member of various
world-wide futures exchanges. Both the FCM and the US exchanges are regulated
pursuant to the Commodity Exchange Act and are audited by the NFA. All Fund
trades are executed as standardized futures contracts that have complete
transparency.
Assets: All investor funds are pooled and held in the name of the Fund.
Approximately 33% of the Fund assets are held at the FCM as margin for trading
and 1 to 3% is held in a Fund checking account to pay Fund expenses as
necessary. The balances of the assets are held in the Fund's name in T-Bills
in a Treasury Direct account at the US Treasury and at American Century
Investments in its Capital Preservation Fund, which invests only in US
Treasuries.
Statements: At the end of each trading day, the FCM generates an account
statement that shows the day's trading activity, if any, and the Fund's open
market positions, if any, which shows the original date and price of each
commodity contract marked to the market's daily close. This produces a
resulting unrealized profit or loss on each position, as well as the total
value of the Fund account. The CPO, CTA, and independent Fund bookkeeper,
Investor Services, all review the account statements daily.
Bookkeeper: The independent bookkeeper produces a daily and monthly report of
the Fund's Net Asset Value (NAV) per Unit, both of which are immediately
reviewed by the CPO when completed, and compared to the CPO's own records. In
addition to the Fund bookkeeping, the bookkeeper completes the partnership
accounting and sends out the monthly individual investor statements.
Auditor: All of the bookkeeper's activities with respect to the preparation
of the Fund financial statements are reviewed and audited by Jordan Patke &
Associates, Ltd., the Fund's independent CPA, which in turn is subject to the
rules and regulations of the American Institute of Certified Public
Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB).
Legal: The Fund employs independent law firms to work with the bookkeeper and
auditor to produce and update the Fund prospectus and to keep in compliance
and interface with the SEC, FINRA, NFA, CFTC, and various state securities
administrators to submit the required regulatory filings as periodically
required.
Although your investment in futures presents the risk of loss from the trades
made, please be assured that all of us-your broker, the CPO, CTA, FCM,
bookkeeper, auditor, and attorneys -while independent from each other, are
working together in a system of checks and balances to monitor your investment
for performance, accuracy, integrity, and safety to be certain the reports of
earnings and losses to you are accurate and complete.
SAI 4
<page>
Trading Advisor Overview
Fund Advantage
One of the major advantages of the Providence Select Fund, L.P. is that the
Fund allows access to the trading advisor at the substantially lower minimum
investment requirement of $25,000. To invest with this advisor separately,
through an individually managed account, would require a substantially higher
minimum investment.
As of June 2, 2008, the General Partner of the Fund replaced the prior
Advisor with Clarke Capital Management, Inc., which trades its Alpha Program
on behalf of the Fund. The total net asset and incentive fees for the Alpha
program are currently the same as those for Providence. The table below is
a composite performance that would have been achieved if an investment had
been made in the Alpha program in October 1999 and transferred to Providence
as of the month in which the advisor began trading the Alpha program for
Providence, June 2008, and subsequently held to date. To see the entire
actual trading performance of the Fund with the prior advisor, please see
page 26 of Part I of this prospectus. You will acquire no interest in the
Alpha program through a purchase in Providence.
Advisor Program Overview
* Technical, systematic trading program
* Trades a broad and diverse group of domestic and international futures
and currency markets
* Strategy was developed from analysis of patterns of actual price
movements, and is not based on analysis of supply and demand factors, general
economic factors, or world events
* General trading strategy is trend following. Most, but not all, trade
initiations and liquidations are in the direction of the trend.
* Employs techniques that utilize a number of trading models acting
independently
* Each model generates it own entry and exit signals and trades both sides
of the market (long and short)
* With minor differences only for long or short positions, a particular
model trades all markets with the same rules and parameters, regardless of the
program
* Models vary from intermediate through long-term to very long-term in
time-frame focus and testing has been done in order to select only those
models that have good performance characteristics across a wide range of
conditions and complementary performance with all other models in a program
Pro Forma Composite Performance of Alphaand Providence
Oct 1999 - Jan 2009 Total Months: 112
Performance Total Rate of Return 410.51%
Average Annual Rate of Return* 20.49%
Risk Worst Peak-to-Valley Drawdown** -17.86
Average Annual Standard Deviation*** 19.11%
Statistics Sharpe Ratio**** 0.92
* Average annual rate of return is the sum of all annual rate of return
amounts divided by the number of years.
** Worst Peak-to-Valley Drawdown is the greatest cumulative percentage decline
in month end net asset value of the program due to losses sustained by an
account during any period in which the initial month-end net asset value of an
account is not equaled or exceeded by a subsequent month-end net asset value
of the account and includes the time period in which it occurred.
*** Average Annual Standard Deviation shows the annualized performance
volatility by quantifying the amount of dispersion you can expect performances
to fall around the average or mean return.
**** Sharpe Ratio is a risk-adjusted measure used to determine reward per unit
of risk. The higher the ratio, the better the fund's historical risk-adjusted
performance. The measure uses a compounded annual return minus the available
annual risk free rate in 13 week T-Bill returns divided by average annual
standard deviation.
THE ABOVE TABLE WAS PREPARED BY THE FUND. AN INVESTMENT IN PROVIDENCE SELECT
FUND, L.P. INVOLVES SUBSTANTIAL RISK AND MAY RESULT IN THE COMPLETE LOSS OF
PRINCIPAL INVESTED. A PURCHASE OF UNITS IN THE FUND DOES NOT RESULT IN ANY
INTEREST IN THE GENERAL PARTNER, THE TRADING ADVISOR, OR ANY COMMODITY POOL
EXCEPT PROVIDENCE.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING IN
THE FUTURES, FORWARD, OPTION AND SWAP MARKETS IS SPECULATIVE, INVOLVES
SUBSTANTIAL RISK, AND IS NOT SUITABLE FOR ALL INVESTORS.
SAI 5
<page>
Pro Forma Composite Performance of Alpha and Providence
As of June 2, 2008, the General Partner of the Fund replaced the prior Advisor
with Clarke Capital Management, Inc., which trades its Alpha Program on behalf
of the Fund. The total net asset and incentive fees for the Alpha program
are currently the same as those for Providence. To see the entire
actual trading performance of the Fund with the prior advisor, please see page
26 of Part I of this prospectus. You will acquire no interest in the
Alpha program through a purchase in Providence.
Actual Trading Performance of Providence
June 2008 - January 2009
<table>
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. AROR
2009 -3.59 -3.59
2008 8.91 -8.56 3.71 -6.35 7.16 2.12 -4.96 0.60
</table>
Historical Performance of the Alpha Program
October 1999 - May 2008
<table>
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. AROR
2008 -8.64 25.18 -2.99 16.07 -2.10 26.07
2007 5.92 -2.97 -1.58 0.70 -2.15 4.92 -3.51 -5.66 14.88 3.63 6.90 -1.24 19.65
2006 1.76 -9.11 -3.37 13.26 1.40 -4.51 -6.56 1.46 9.05 0.28 (0.81) 3.13 3.94
2005 -4.02 3.77 15.01 -3.60 6.94 -3.01 -1.34 7.56 0.01 -3.85 6.06 -0.86 22.91
2004 -5.08 11.26 3.09 -0.90 15.08 -2.42 4.15 7.18 4.12 10.75 7.09 -6.56 56.04
2003 4.08 21.04 -3.47 2.92 12.60 -5.23 -3.93 -2.37 3.58 -1.95 -8.61 14.78 33.47
2002 -4.86 -5.41 3.42 -5.24 0.00 12.85 5.22 3.32 7.65 -12.94 -5.65 15.99 10.97
2001 -7.36 -4.44 7.62 -4.29 0.86 -2.93 3.91 1.92 -5.98 11.62 4.05 -0.95 -5.70
2000 -2.88 -1.04 -4.46 1.47 12.16 4.95 -7.90 9.72 -0.68 -7.23 8.44 18.97 31.76
1999 -0.66 2.36 -6.45 -4.88
</table>
The graphs below are composite performance that would have been achieved
if an investment had been made in the Alpha program in October 1999 and
transferred to Providence as of the month in which the advisor began
trading the Alpha program for Providence, June 2008, and subsequently held
to date.
Value of Alpha Initial $10,000 Investment / Performance vs. Benchmarks
Alpha: October 1999 - May 2008 Alpha: October 1999 - May 2008
Providence: June 2008 to January 2009 Providence: June 2008 to January 2009
The S&P 500 and NASDAQ 100 indices are unmanaged and are generally
representative of certain portions of the U.S. equity markets. The CISDM CTA
Equal Weighted Index is representative of the average performance of Commodity
Trading Advisors reporting to the CISDM Hedge Fund/CTA Database. These indices
are shown for illustrative purposes only and are not indicative of any fund's
performance. An investor cannot invest directly in an index. Moreover, indices
do not reflect commissions or fees which might be charged to a similar fund
and which might materially affect the performance data presented.
THE ABOVE TABLE AND TWO GRAPHS WERE PREPARED BY THE FUND. AN INVESTMENT IN
PROVIDENCE SELECT FUND, L.P. INVOLVES SUBSTANTIAL RISK AND MAY RESULT IN THE
COMPLETE LOSS OF PRINCIPAL INVESTED. A PURCHASE OF UNITS IN THE FUND DOES
NOT RESULT IN ANY INTEREST IN THE GENERAL PARTNER, THE TRADING ADVISOR, OR ANY
COMMODITY POOL EXCEPT PROVIDENCE.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING IN
THE FUTURES, FORWARD, OPTION AND SWAP MARKETS IS SPECULATIVE, INVOLVES
SUBSTANTIAL RISK, AND IS NOT SUITABLE FOR ALL INVESTORS.
SAI 6
<page>
Correlation Comparison
Performance Through Diversification
The value of diversification can be seen by looking at the correlation
comparison of the Advisor's performance of its Alpha program versus
benchmark stock market and trading advisor indices.
Since inception in October 1999, not only has the trading advisor's Alpha
program outperformed the major indices, but was also not correlated to such
indices. In general, this attribute will allow investors to potentially reduce
the risk and improve the performance in their portfolios through
diversification.
The performance information on this page is composite performance that would
have been achieved if an investment had been made in the Alpha program in
October 1999 and transferred to Providence as of the month in which the
advisor began trading the Alpha program for Providence, June 2008, and
subsequently held to date. The total net asset and incentive fees for the
Alpha program are currently the same as those for Providence. To see the
actual trading performance of the Fund with the prior advisor, please see
page 26 of Part I of this prospectus. You will acquire no interest in the
Alpha program through a purchase in Providence.
Annual Rates of Return of Alpha / Providence, vs. Benchmarks
October 1999 - January 2009
Alpha / S&P 500 NASDAQ 100 CISDM CTA
Providence
1999 -4.88% 14.54% 53.97% -1.97%
2000 31.76% -10.12% -36.83% 10.46%
2001 -5.70% -13.05% -32.65% 4.92%
2002 10.97% -23.36% -37.58% 13.40%
2003 33.47% 26.39% 49.11% 11.07%
2004 56.04% 9.00% 10.45% 3.83%
2005 22.91% 3.01% 1.48% 2.44%
2006 3.94% 13.62% 6.78% 5.67%
2007 19.65% 3.55% 18.67% 11.57%
2008 26.82% -38.50% -40.40% 6.76%
2009 -3.59% -8.57% -2.57% -0.15%
Value of Initial $10,000 Investment in Alpha / Providence vs. Benchmarks
October 1999 - January 2009
<table>
<s> <c> <c> <c>
Total Value Ave. Annual ROR
$10,000 invested October 1999 in Alpha/Providence would be worth $51,051 Alpha/Providence $51,051 20.49%
$10,000 invested October 1999 in S&P 500 would be worth $6,441 S&P 500 $6,441 -2.69%
$10,000 invested October 1999 in NASDAQ would be worth $4,901 NASDAQ 100 $4,901 -1.30%
$10,000 invested October 1999 in CISDM CTA would be worth $21,428 CISDM CTA $21,428 8.57%
</table>
Correlation Comparison
<table>
<s> <c> <c> <c> <c> <c>
October 1999 - January 2009 Total Months: 112 Alpha / Providence S&P 500 NASDAQ 100 CISDM CTA
Performance Total Rate of Return 410.51% -35.59% -50.99 114.23%
Ave. Annual Rate of Return 20.49% -2.69% -1.30% 8.57%
Risk Worst Peak-to-Valley Drawdown* -17.86% -46.70% -81.07 8.75%
Average Annual Standard Deviation** 19.11% 17.37% 32.05% 5.07%
Statistics Sharpe Ratio*** 0.92 -0.33 -0.13 1.10
Correlation to Alpha / Providence 1.00 0.35 0.16 0.37
</table>
* Worst Peak-to-Valley Drawdown is the greatest cumulative percentage decline
in month end net asset value of the program due to losses sustained by an
account during any period in which the initial month-end net asset value of an
account is not equaled or exceeded by a subsequent month-end net asset value
of the account and includes the time period in which it occurred.
** Standard Deviation shows the annualized performance volatility by
quantifying the amount of dispersion you can expect performances to fall
around the average or mean return.
*** Sharpe Ratio is a risk-adjusted measure used to determine reward per unit
of risk. The higher the ratio, the better the fund's historical risk-adjusted
performance. The measure uses a compounded annual return minus the available
annual risk free rate in 13-week T-Bill returns divided by average annual
standard deviation.
THE ABOVE TABLES WERE PREPARED BY THE FUND. AN INVESTMENT IN PROVIDENCE
SELECT FUND, L.P. INVOLVES SUBSTANTIAL RISK AND MAY RESULT IN THE COMPLETE
LOSS OF PRINCIPAL INVESTED. A PURCHASE OF UNITS IN THE FUND DOES NOT RESULT
IN ANY INTEREST IN THE GENERAL PARTNER, THE TRADING ADVISOR, OR ANY COMMODITY
POOL EXCEPT PROVIDENCE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF
FUTURE RESULTS. TRADING IN THE FUTURES, FORWARD, OPTION AND SWAP MARKETS IS
SPECULATIVE, INVOLVES SUBSTANTIAL RISK, AND IS NOT SUITABLE FOR ALL INVESTORS.
SAI 7
<page>
Fund And Offering Details
The Fund
Investment Goal Medium to Long-Term Capital Appreciation
General Partner White Oak Financial Services, Inc.
Trading Advisors Clarke Capital Management, Inc.
Clearing Broker MF Global Inc.
The Offering
Minimum Investment $25,000
Increment Amount $1,000
Subscription Fee None
Subscription Price Net Asset Value
Subscription Notice Subscriptions Available Monthly with Five Business
Days Notice
Subscription Procedure Subscribers Must Complete, Execute and Deliver to
Their Selling Agents the Subscription Agreement and Power of Attorney
Signature Page attached to this Prospectus as Exhibit D.
Redemption Notice Liquidity Available Monthly with Ten Days Notice
Investor Liability Limited to the Amount of Capital Invested
Investor Suitability Net Worth of $250,000 -or-
Income of $70,000 and Net Worth of $70,000
Plus Specific State Requirements
Please Refer to Part I of the Prospectus
for Additional Information
Fees and Expenses
Continuing Service Fee 4% Annually
General Partner Compensation Fixed Brokerage Commission of 7% Annually
Trading Advisor Compensation Incentive Fee of 25% of New Net Profits
Quarterly
Accounting, Legal & Misc. Estimated $95,000 Annually
Redemption Fee 0-3 Months - 4%; 4-6 Months - 3%;
7-9 Months - 2%; 10-12 Months - 1%;
13 Months and Thereafter - 0%
SAI 8
<page>
The Opportunity
* Professionally managed futures funds offer access to global markets,
along with the potential to profit from rising or falling markets.
* Professionally managed futures funds add an important component to a
diversified growth portfolio.
* In the opinion of the General Partner, Providence Select Fund, L.P.
offers a more simple and effective way to participate in futures through use
of a successful futures trading advisor with a long-term track record, than
with a managed account or through discretionary trading yourself.
How to Subscribe
* After reviewing the Prospectus, please complete and sign the items in
the Subscription Agreement attached as Exhibit D.
* Forward the Subscription Agreement and a check made payable to "Special
account for the exclusive benefit of the customers of Providence Select Fund,
LP" to your broker or investment advisor.
The Fund is open to qualified investors and the current minimum investment is
$25,000. New investments are entered into the Fund at the end of the month in
which they are received and must be received on the 5th business day prior to
the end of the month.
WHY PROVIDENCE SELECT FUND?
WHY A MANAGED FUTURES FUND?
Managed futures investments are intended to generate long-term capital growth
by providing global portfolio diversification. This diversification can be
utilized by investing in the Fund. A primary reason to invest in a managed
futures (alternative investment) product, such as Providence Select Fund, is
to provide a fully diversified portfolio of investments that has the potential
to improve returns while protecting against risk. This is possible because
managed futures (alternative investment) products historically have not been
correlated to traditional markets, such as stocks and bonds.
The Providence Select Fund employs a professional commodity trading advisor,
Clarke Capital Management, Inc., that trades as many as 40 futures markets
worldwide using proprietary trading systems. The trading advisor has
consistently produced positive returns, even during down markets, due to
diversified trades and the ability to spot trends, while insuring strict risk
controls are always in place. Of course, past performance is not necessarily
indicative of future results.
WHY NOW?
The recent fluctuation in world markets has proven that long-only equity
portfolios cannot make money during downward cycles. For continued portfolio
performance, a fund that hedges its trades is the only way to potentially
limit losses and possibly achieve gains in any economic environment.
HISTORICAL NON CORRELATED PERFORMANCE
Historically, managed futures investments have had very little correlation to
the stock and bond markets. While there is no guarantee of positive
performance in a managed futures component of a portfolio, the non-correlation
characteristic of managed futures can improve risk adjusted returns in a
diversified investment portfolio. Having the ability to go long and short
gives managed futures the ability to profit from up or down markets. In other
words, profit or loss in managed future funds is not dependent on economic
cycles.
INVESTMENT FACTORS
THE ADVANTAGES OF NON-CORRELATION AND DIVERSIFICATION OF YOUR PORTFOLIO
The Nobel Prize for Economics in 1990 was awarded to Dr. Harry Markowitz for
demonstrating that the total return can increase, and/or risk can be reduced,
when portfolios have positively performing asset categories that are
essentially non-correlated. Even many seemingly diverse portfolios may
actually be quite correlated. For instance, over time, alternative investment
classes such as real estate and international stocks and bonds may correlate
closely with domestic equities as the global economy expands and contracts.
SAI 9
<page>
Historically, alternative investments such as managed futures funds have had
very little correlation to the stock and bond markets. White Oak Financial
Services, Inc. believes that the performance of the Fund should also exhibit a
substantial degree of non-correlation (not, however, necessarily negative
correlation) with the performance of traditional equity and debt portfolio
components, in part because of the ease of selling futures short. This feature
of futures -- being able to be long or short a futures position with similar
ease - means that profit and loss from futures trading is not dependent upon
economic or geopolitical prosperity or stability.
However, non-correlation will not provide any diversification advantages
unless the non-correlated assets are outperforming other portfolio assets, and
there is no guarantee that the Fund will outperform other sectors of an
investor's portfolio (or not produce losses). Additionally, although adding
managed futures funds to a portfolio may provide diversification, managed
futures funds are not a hedging mechanism and there is no guarantee that
managed futures funds will appreciate during periods of inflation or stock and
bond market declines.
Non-correlated performance should not be confused with negatively correlated
performance. Non-correlation means only that the Fund's performance will
likely have no relation to the performance of equity and debt instruments,
reflecting White Oak's belief that factors that affect equity and debt prices
may affect the Fund differently and that certain factors which affect the
former may not affect the latter. The net asset value per unit may decline or
increase more or less than equity and debt instruments during both rising and
falling markets. White Oak has no expectation that the Fund's performance will
be negatively correlated to the general debt and equity markets, i.e., likely
to be profitable when the latter are unprofitable or vice versa.
VALUE OF DIVERSIFICATION - MANAGED FUTURES INDUSTRY
Money Under Management in Managed Futures
Money Under Management in Managed Futures is updated on a quarterly basis and
is usually ready by month end of the month following the quarter. Money Under
Management during the 3rd quarter 2008 was $227.0 billion.
This chart was prepared by the Fund and shows industry growth since 1980 using
data obtained from Barclay Trading Group, Ltd. See the glossary in Appendix I
of this Statement of Additional Information for information integral to this
chart. This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SAI 10
<page>
MARKET DIVERSIFICATION
The Fund's CTA uses proprietary systems designed to ensure minimal correlation
to traditional investments. The spectrum of traded instruments globally
consists of up to 40 futures markets in both commodity and financial futures.
Fundamental to the Fund's selection of CTAs is low correlation between the
different instruments they trade and high liquidity for order execution.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SAI 11
<page>
HISTORICAL CORRELATION
The chart below shows the historical correlation of the monthly returns of the
NASDAQ Composite Index, Europe, Australasia, Far East (EAFE) Index with the
S&P 500 Index than managed futures investments, as represented by the CISDM
Fund/Pool Qualified Universe Index. This low correlation shows that managed
futures have a tendency to behave somewhat independently from stocks.
Historical Correlation Of Monthly Returns
With The S&P 500 Index
January 1980* - January 2009
* CISDM data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500, NASDAQ composite, and
Europe, Australia, Far East indices are unmanaged and are generally
representative of certain portions of the U.S. and global equity markets. The
Lehman Bros. Govt. Bond Index is unmanaged and generally representative of the
global central government bond market. The CISDM CPO Asset Weighted Index
reflects the dollar-weighted performance of CPOs reporting to the CASAM CISDM
Database. These indices are shown for illustrative purposes only and are not
indicative of any fund's performance. An investor cannot invest directly in an
index. Moreover, indices do not reflect commissions or fees which might be
charged to a similar fund and which might materially affect the performance
data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
RISK PERSPECTIVE
The proper evaluation of any investment must include an assessment of the risk
which must be taken to achieve the prospective return. Another measure of
risk, in addition to standard deviation, is historical worst-case decline, or
largest draw-down. In other words, if you had purchased an investment at a
month-end peak in performance and then subsequently sold at the lowest month-
end price thereafter, the worst-case decline would be the largest percentage
loss experienced. The chart below shows the worst-case cumulative monthly
decline in the Lehman Brothers Government Bond Index, CISDM Fund/Pool
Qualified Universe Index, S&P 500 Index, EAFE Index and NASDAQ Composite Index
since 1980. The CISDM Fund/Pool Qualified Universe Index experienced a smaller
peak to valley decline than three of the other indices. This does not imply
that managed futures are necessarily safer than the benchmarks compared; it is
merely intended to put risk in a historical perspective.
Worst-Case Declines
January 1980* - January 2009
[Amounts In Percents]
* CISDM data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500, NASDAQ composite, and
Europe, Australia, Far East indices are unmanaged and are generally
representative of certain portions of the U.S. and global equity markets. The
Lehman Bros. Govt. Bond Index is unmanaged and generally representative of the
global central government bond market. The CISDM CPO Asset Weighted Index
reflects the dollar-weighted performance of CPOs reporting to the CASAM CISDM
Database. These indices are shown for illustrative purposes only and are not
indicative of any fund's performance. An investor cannot invest directly in an
index. Moreover, indices do not reflect commissions or fees which might be
charged to a similar fund and which might materially affect the performance
data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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MANAGED FUTURES VS. STOCKS DURING DRAW-DOWNS
The following charts show the comparison between the performance of managed
futures and stocks during the five worst declines for each since 1980. These
charts demonstrate the historical non-correlation between these two asset
classes over the stated time periods. The managed futures portion is
represented by the CISDM Fund/Pool Qualified Universe Index and the stocks
portion is represented by the S&P 500 Index.
Managed Futures vs. Stocks During Stock Market Drawdowns.
(January 1980* - January 2009)
Source: Stocks: S&P 500 Index
Managed Futures: CISDM Trading Advisor Qualified Universe Index (MAR)
* CISDM data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500 index is unmanaged and is
generally representative of a certain portion of the U.S. equity markets. The
CISDM Trading Advisor Qualified Universe Index reflects the dollar-weighted
performance of CTAs reporting to the CASAM CISDM Database. These indices are
shown for illustrative purposes only and are not indicative of any fund's
performance. An investor cannot invest directly in an index. Moreover, indices
do not reflect commissions or fees which might be charged to a similar fund
and which might materially affect the performance data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE FUTURES, FORWARD, OPTION AND SWAP MARKETS
FUTURES CONTRACTS
Futures contracts are standardized agreements traded on commodity exchanges
that call for the future delivery of the commodity or financial instrument at
a specified time and place. A futures trader that enters into a contract to
take delivery of the underlying commodity is "long" the contract, or has
"bought" the contract. A trader that is obligated to make delivery is "short"
the contract or has "sold" the contract. Actual delivery on the contract
rarely occurs. Futures traders usually offset (liquidate) their contract
obligations by entering into equal but offsetting futures positions. For
example, a trader who is long one September Treasury bond contract on the
Chicago Board of Trade can offset the obligation by entering into a short
position in a September Treasury bond contract on that exchange. Futures
positions that have not yet been liquidated are known as "open" contracts or
positions.
Futures contracts are traded on a wide variety of commodities, including
agricultural products, metals, energies, livestock products, government
securities, currencies and stock market indices. Options on futures contracts
are also traded on U.S. and foreign commodity exchanges. The Fund concentrates
its futures trading in financial instruments, such as interest rate, foreign
exchange and stock index contracts, and metal and energy contracts.
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FORWARD CONTRACTS
Currencies and other commodities may be purchased or sold for future delivery
or cash settlement through banks or dealers pursuant to forward, option or
swap contracts. Currencies also can be traded pursuant to futures contracts on
organized futures exchanges; however, the Fund will use the dealer market in
foreign exchange contracts for most of the Fund's trading in currencies. Such
dealers will act as "principals" in these transactions and will include their
profit in the price quoted on the contracts. Unlike futures contracts, foreign
exchange contracts are not standardized. In addition, the forward market is
largely unregulated. Forward contracts are not "cleared" or guaranteed by a
third party. There also is no daily settlement of unrealized gains or losses
on open foreign exchange contracts as there is with futures contracts on U.S.
exchanges.
OPTION CONTRACTS
An option on a futures contract or on a physical commodity or currency gives
the buyer of the option the right to take a position of a specified amount at
a specified price in a specific underlying instrument (the "striking,"
"strike" or "exercise price"). The buyer of a "call" option acquires the right
to take a long position (i.e., the obligation to take delivery of a specified
amount at a specified price in a specific underlying instrument). The buyer of
a "put" option acquires the right to take a short position (i.e., the
obligation to make delivery of a specified amount at a specified price in a
specific underlying instrument).
The purchase price of an option is referred to as its "premium." The seller
(or "writer") of an option is obligated to take a position at a specified
price opposite to the option buyer if the option is exercised. Thus, the
seller of a call option must stand ready to sell (take a short position in)
the underlying instrument at the striking price if the buyer should exercise
the option. The seller of a put option, on the other hand, must stand ready to
buy (take a long position in) the underlying instrument at the striking price
if the buyer should exercise the option.
A call option is said to be "in the money" if the striking price is below
current market levels, and "out of the money" if the striking price is above
current market levels. Conversely, a put option is said to be "in the money"
if the striking price is above current market levels, and "out of the money"
if the striking price is below current market levels.
Options have limited lifespans. An option that is out of the money and not
offset by the time it expires becomes worthless. Options usually trade at a
premium above their intrinsic value (i.e., the difference between the market
price for the underlying instrument and the striking price), because the
option trader is speculating on (or hedging against) future movements in the
price of the underlying instrument. As an option nears its expiration date,
the market value and intrinsic value typically move into parity. The
difference between an option's intrinsic value and market value is referred to
as the "time value" of the option.
SWAP TRANSACTIONS
The Fund periodically enters into transactions in the forward or other markets
which could be characterized as swap transactions and which may involve
interest rates, currencies, securities interests, commodities and other items.
A swap transaction is an individually negotiated, non-standardized agreement
between two parties to exchange cash flows measured by different interest
rates, exchange rates, or prices, with payments calculated by reference to a
principal ("notional") amount or quantity. Transactions in these markets
present risks similar to those in the futures, forward and options markets:
(1) the swap markets are generally not regulated by any United States or
foreign governmental authorities;
(2) there are generally no limitations on daily price moves in swap
transactions;
(3) speculative position limits are not applicable to swap transactions,
although the counterparties with which the Fund may deal may limit the size or
duration of positions available as a consequence of credit considerations;
(4) participants in the swap markets are not required to make continuous
markets in swaps contracts; and
(5) the swap markets are "principal markets," in which performance with
respect to a swap contract is the responsibility only of the counterparty with
which the trader has entered into a contract (or its guarantor, if any), and
not of any exchange or clearinghouse. As a result, the Fund will be subject to
the risk of the inability of or refusal to perform with respect to such
contracts on the part of the counterparties with which the Fund trades.
The CFTC has adopted Part 35 to its Rules which provides non-exclusive safe
harbor treatment from regulations under the Commodity Exchange Act as amended
for swap transactions which meet specified criteria, over which the CFTC will
not exercise its jurisdiction and regulate as futures or commodity option
transactions. In addition, on December 21, 2000, the Commodity Futures
Modernization Act of 2000 amended the Commodity Exchange Act so that it does
not apply to any agreement, contract, or transaction in a commodity, other
SAI 14
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than an agricultural commodity (including swap transactions), if the
agreement, contract, or transaction is entered into only between eligible
contract participants (which includes commodity pools meeting certain
capitalization requirements), is subject to individual negotiation by the
parties, and is not executed or traded on a trading facility. It is expected
that the Fund will engage only in swap transactions for which exemptive/safe
harbor relief is available to it under the CFTC policy statements or
regulations, or which are otherwise excluded from the CFTC's jurisdiction. If
the CTA were restricted in its ability to trade in the swap markets, the
activities of the Fund, to the extent that its CTA trades in such markets on
behalf of the Fund, might be materially affected.
REGULATION
The U.S. futures markets are regulated under the Commodity Exchange Act, which
is administered by the CFTC, a Federal agency created in 1974. The CFTC
licenses and regulates commodity exchanges, commodity pool operators,
commodity trading advisors and clearing firms which are referred to in the
futures industry as "futures commission merchants." The Fund is licensed by
the CFTC as a commodity pool operator. Futures professionals are also
regulated by the NFA, a self-regulatory organization for the futures industry
that supervises the dealings between futures professionals and their
customers. If its pertinent CFTC licenses or NFA memberships were to lapse, be
suspended or be revoked, the Fund would be unable to act as the Fund's
commodity pool operator.
The CFTC has adopted disclosure, reporting and recordkeeping requirements for
commodity pool operators and disclosure and recordkeeping requirements for
commodity trading advisors. The reporting rules require pool operators to
furnish to the participants in their pools a monthly statement of account,
showing the pool's income or loss and change in net asset value, and an annual
financial report, audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures markets,
including the emergency power to suspend trading and order trading for
liquidation of existing positions only. The exercise of such powers could
adversely affect the Fund's trading.
The CFTC does not regulate forward contracts. Federal and state banking
authorities also do not regulate forward trading or forward dealers. Trading
in foreign currency forward contracts may be less liquid and the Fund's
trading results may be adversely affected.
MARGIN
The Fund will use margin in its trading. In order to establish and maintain a
futures position, a trader must make a type of good-faith deposit with its
broker, known as "margin," of approximately 2%-10% of contract value. Minimum
margins are established for each futures contract by the exchange on which the
contract is traded. The exchanges alter their margin requirements from time to
time, sometimes significantly. For their protection, futures brokers may
require higher margins from their customers than the exchange minimums. Margin
also is deposited in connection with forward contracts, but is not required by
any applicable regulation.
There are two types of margin. "Initial" margin is the amount a trader is
required to deposit with its broker to open a futures position. The other type
of margin is "maintenance" margin. When the contract value of a trader's
futures position falls below a certain percentage, typically about 75%, of its
value when the trader established the position, the trader is required to
deposit additional margin in an amount equal to the loss in value.
ADVANTAGES OF MANAGED FUTURES FUND INVESTMENTS
Both the futures, forward, option and swap markets and funds investing in
those markets offer many structural advantages that make managed futures an
efficient way to participate in global markets. The Fund believes that this
investment should be considered as a medium to long-term investment and should
not be purchased with the intent to redeem the investment within the first
three years.
PROFIT POTENTIAL
Futures and related contracts can easily be leveraged, which magnifies the
potential profit or loss.
INTEREST CREDIT
Unlike some other alternative investment funds, the Fund does not borrow money
in order to obtain leverage, so the Fund does not incur any interest expense.
Rather, the Fund's margin deposits are maintained in cash and cash
equivalents, such as U.S. Treasury bills.
SAI 15
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GLOBAL DIVERSIFICATION WITHIN A SINGLE INVESTMENT
Futures and related contracts can be traded in many countries, which makes it
possible to diversify risk around the world. This diversification is available
both geographically and across market sectors. For example, an investor can
trade interest rates, stock indices and currencies in several countries around
the world, as well as energy and metals. While the Fund itself trades across a
diverse selection of global markets, an investment in the Fund is not a
substitute for overall portfolio diversification.
ABILITY TO PROFIT OR LOSE IN A RISING OR FALLING MARKET ENVIRONMENT
The Fund can establish short positions and thereby profit from declining
markets as easily as it can establish long positions. This potential to make
or lose money, whether markets are rising or falling around the world, makes
managed futures particularly attractive to sophisticated investors. Of course,
if markets go higher while the Fund has a short position, the Fund will lose
money until the short position is exited and vice versa.
PROFESSIONAL TRADING
White Oak's approach includes the following elements:
- - Disciplined Money Management. The CTA selected by White Oak generally
allocates a portion of portfolio equity to any single market position.
However, no guarantee is provided that losses will be limited to these
percentages.
- - Balanced Risk. The Fund's capital is allocated to as many as 40 markets 24
hours a day. Among the factors considered for determining the portfolio mix
are market volatility, liquidity and trending characteristics.
- - Capital Management. When proprietary risk/reward indicators reach
predetermined levels, the Fund may increase or decrease commitments in certain
markets in an attempt to reduce performance volatility.
- - Multiple Systems. While the Fund's approach is to find emerging trends and
follow them to conclusion, no one system is right all of the time. The CTA
utilizes a multi-system trading strategy on behalf of the Fund that divides
capital among different trading systems in an attempt to reduce performance
volatility and manage risk.
CONVENIENCE
Through the Fund, investors can participate in global markets and
opportunities without needing to master complex trading strategies and monitor
multiple international markets.
LIQUIDITY
In most cases, the underlying markets have sufficient liquidity. Some markets
trade 24 hours a day when global markets are open. While there can be cases
where there may be no buyer or seller for a particular contract, the Fund
tries to select markets for investment based upon, among other things, their
perceived liquidity. However, unexpected market illiquidity has caused major
losses in recent years in such sectors as emerging markets and mortgage-backed
securities. There can be no assurance that the same will not happen to the
Fund at any time or from time to time.
Important Disclosures
Providence Select Fund, LP is a registered commodity pool and is not subject
to the same regulatory requirements as a mutual fund, including mutual fund
requirements to provide certain daily standardized pricing and evaluation
information to investors. The following should be noted:
* The Fund is a speculative investment and involves a high degree of risk.
An investor could lose all of his/her investment.
* An investment in the Fund is not suitable for all investors.
* The Fund may be leveraged and the Fund's performance can be volatile.
* A substantial portion of the Fund's trades may be executed on foreign
exchanges, which could mean higher risk.
* An investment in the Fund may be illiquid (monthly redemptions are
available subject to market disruption) and there are significant restrictions
on transferring interests in the Fund. There is no secondary market for an
investor's investment in the Fund and none is expected to develop.
* The Fund's fees and expenses - which may be substantial regardless of
any positive return - are deducted from profits, and returns to clients will
be net of fees.
* Diversification does not assure a profit or provide a guarantee against
loss in a declining market.
This summary is not a complete list of the risks and other important
disclosures involved in investing in the Fund and is subject to the more
complete disclosures contained in Part I of the Fund's Prospectus, which
should be reviewed carefully.
SAI 16
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Providence Select Fund, L.P.
General Partner:
White Oak Financial Services, Inc.
5914 N. 300 West
P.O. Box C
Fremont, IN 46737
(260) 833-1306
THE OFFERING OF UNITS IN PROVIDENCE SELECT FUND, LP (THE "FUND") CAN ONLY BE
MADE IN CONJUNCTION WITH PART I OF THIS PROSPECTUS, WHICH CONTAINS IMPORTANT
INFORMATION REGARDING CERTAIN RISKS ASSOCIATED WITH THE FUND AND SHOULD BE
READ CAREFULLY AND RETAINED BY ANYONE CONSIDERING INVESTMENT IN THE FUND. THE
UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION, THE COMMODITY FUTURES
TRADING COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK.
SAI 17
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APPENDIX I
Commodity Terms And Definitions
Identification of the parties and knowledge of various terms and concepts
relating to trading in futures and forward contracts and this offering are
necessary for a potential investor to identify the risks of investment in the
Fund.
1256 Contract. See Taxation - Section 1256 Contract.
Additional Sellers. See definition of Selling Agent.
Associated Persons. The persons registered pursuant to the Commodity Exchange
Act with the futures commission merchant, the selling agent, or the additional
sellers, who are eligible to service the Fund, the partners and to receive
continuing service fees.
Average Price System. The method approved by the Commodity Futures Trading
Commission to permit the commodity trading advisor to place positions sold or
purchased in a block to the numerous accounts managed by the advisor. See The
Commodity Trading Advisor in the main body of the prospectus.
Best Efforts. The term to describe that the party is liable only in the event
they intentionally fail or are grossly negligent in the performance of the
task described.
Broker. See definitions of Futures Commission Merchant.
Capital means cash invested in the Fund by any partner and placed at risk for
the business of the Fund.
Commodity Futures trading Commission (CFTC). Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW, Washington, D.C., 20581. An independent regulatory
commission of the United States government empowered to regulate commodity
futures transactions under the Commodity Exchange Act.
Commodity. Goods, wares, merchandise, produce, currencies, and stock indices
that are traded on and off United States and foreign commercial exchanges.
Traded commodities on U. S. Exchanges are sold according to uniform
established grade standards, in convenient predetermined lots and quantities
such as bushels, pounds or bales, are fungible and, with a few exceptions, are
storable over periods of time.
Commodity Broker. See definitions of Futures Commission Merchant.
Commodity Exchange Act. The statute providing the regulatory scheme for
trading in commodity futures and options contracts in the United States under
the administration of the Commodity Futures Trading Commission which will
provide the opportunity for reparations and other redress for claims.
Commodity Pool Operator (CPO). White Oak Financial Services, Inc., 5914 N.
300 West, P. O. Box C, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael
Pacult, 5914 N. 300 West, P.O. Box C, Fremont, IN 46737. A person that raises
capital through the sale of interests in an investment trust, partnership,
corporation, syndicate or similar form of enterprise, and uses that capital to
invest either entirely or partially in futures contracts.
Commodity Trading Advisor (CTA). A person or entity that renders advice about
commodities or about the trading of commodities, as part of a regular
business, for profit. Particularly, those who will be responsible for the
analysis and placement of trades for the Fund.
Continuing Service Fee. A percentage of the Capital of the partnership paid
to the selling agents who will pay their individual associated persons who
work for them who have either sold the partnership interests to the partners
or are providing services to the general partner or the other partners. The
partnership will pay these fees to the principal selling agent, Futures
Investment Company, which will pay a share of these fees to those that sell
the Units.
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Daily Price Limit. The maximum permitted movement in a single direction
(imposed by an exchange and approved by the CFTC) in the price of a commodity
futures contract for a given commodity that can occur on a commodity exchange
on a given day in relation to the previous day's settlement price, which is
subject to change, from time to time, by the exchange (with CFTC approval).
Depository Agent and Depository Account. A segregated account held in the
name of the corporate general partner at Star Financial Bank, 2004 N. Wayne
St., Angola, IN 46703 that will hold subscription proceeds until the
subscription is accepted. If it is rejected, the subscription is returned by
the Bank directly to the subscriber without deduction for any expenses or
fees.
Exchange for Physicals (EFP). A practice whereby positions in futures
contracts may be initiated or liquidated by first executing the transaction in
the appropriate cash market and then arbitraging the position into the futures
market (simultaneously buying the cash position and selling the futures
position, or vice versa).
Fixed Brokerage Commission. The percentage of equity charged to clear the
round turn trades entered for the Fund account at the futures commission
merchant. The entity charging the fixed commission takes the risk that the
number of trades entered will not exceed the costs on a round turn basis in
exchange for the retention in the difference between the round turn costs and
the percentage charged. The percentage is usually expressed at an annual rate
but paid monthly.
Form K-1. The section of the Federal Income Tax Return filed by the Fund
which identifies the amount of investment in the Fund, the gains and losses
for the tax year, and the amount of such gains and losses reportable by a
partner on the partner's tax return.
Fully Committed Position. Each commodity trading advisor has an objective
percentage of equity to be placed at risk. In addition, the CFTC places
limits upon the number of positions a single commodity trading advisor may
have in commodities. When either the objective percentage of equity is placed
at risk or the commodity trading advisor reaches the limit in number of
positions, the account or accounts have a fully committed position.
Futures Commission Merchant (FCM). The person that solicits or accepts orders
for the purchase or sale of any commodity for future delivery subject to the
rules of any contract market and in connection with such solicitation or
acceptance of orders, accepts money or other assets to margin, guarantee, or
secure any trades or contracts that result from such orders for a commission.
The corporate general partner is responsible for the negotiation and payment
of the commission to the futures commission merchant.
Futures Contract. A contract providing for (1) the delivery or receipt at a
future date of a specified amount and grade of a traded Commodity at a
specified price and delivery point, or (2) cash settlement of the change in
the value of the contract. The terms of these contracts are standardized for
each commodity traded on each exchange and vary only with respect to price and
delivery months. A futures contract should be distinguished from the actual
physical commodity, which is termed a cash commodity. Trading in futures
contracts involves trading in contracts for future delivery of commodities and
not the buying and selling of particular physical lots of commodities. A
contract to buy or sell may be satisfied either by making or taking delivery
of the commodity and payment or acceptance of the entire purchase price
therefore, or by offsetting the contractual obligation with a countervailing
contract on the same exchange prior to delivery.
Futures Investment Company. The principal selling agent, 5914 N. 300 West,
P.O. Box C, Fremont, IN 46737 Mr. Michael Pacult, one of the general partners
and the principal of White Oak Financial Services, Inc., the other general
partner, is a 50% shareholder and one of the principals of Futures Investment
Company. His spouse holds the other 50% and is also a principal.
General Partner. White Oak Financial Services, Inc., 5914 N. 300 West, P. O.
Box C, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael Pacult, 5914 N. 300
West, P.O. Box C, Fremont, IN 46737. They manage the fund.
Gross Profits. The income or loss from all sources, including interest income
and profit and loss from non-trading activities, if any.
Initial Closing. When the minimum offering amount has been raised and
depository account funds are released to the Fund for commencement of trading.
Limited Partner. Persons who have invested and admitted as Partners without
management authority pursuant to the Fund agreement.
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Margin. A good faith deposit with a broker to assure fulfillment of the terms
of a futures contract. Does not limit or define the amount of the risk or
loss.
Margin Call. A demand for additional monies to hold positions taken to
maintain a customer's account in compliance with the requirements of a
particular commodity exchange or a futures commission merchant.
Minimum Offering/Maximum Offering. The Minimum is the amount required to be
invested before trading will commence, and the Maximum is the amount the
general partner establishes as the amount that will terminate this offering.
The general partner my elect to register additional partnership interests or
terminate the offering at anytime.
National Association of Securities Dealers (NASD). The self-regulatory
organization responsible for the legal and fair operation of broker dealers,
such as the selling agent and such other matters within the authority granted
to it by the SEC pursuant to the Securities Act of 1933.
National Futures Association (NFA). The self regulatory organization that is
responsible for the legal and fair operation of commodity pool operators, such
as the general partner of the Fund, commodity trading advisors, such as the
trader for the Fund, introducing brokers, futures commission merchants, such
as the clearing broker of the Fund, and such other matters within the
authority granted to it by the CFTC pursuant to the Commodity Exchange Act.
Net Assets or Net Asset Value means the total assets, including all cash and
cash equivalents (valued at cost plus accrued interest and earned discount),
including investments in U.S. Treasuries and in cash management funds that
invest in only U.S. Treasuries, less total liabilities, of the Fund (each
determined on the basis of generally accepted accounting principles,
consistently applied under the accrual method of accounting or as required by
applicable laws, regulations and rules including those of any authorized self
regulatory organization). See Exhibit A, The Limited Partnership Agreement,
1.2(e).
Net Unit Value. The net assets of the Fund divided by the total number of
units of partnership interests outstanding.
Net Gains. The net profit from all sources.
New Net Profit. The amount of income earned from trading, less the trading
losses and brokerage commissions and fees paid to clear the trades which are
incurred or accrued during the then current accounting period. See Charges to
the Fund.
Net Worth. The excess of total assets over total liabilities as determined by
generally accepted accounting principles. Net worth for a prospective
investor shall be exclusive of home, home furnishings and automobiles.
North American Securities Administrators Association, Inc. (NASAA). The
association of securities administrators of the fifty United States that
establish guidelines and procedures for the review of the sale of securities
within their State. NASAA has established guidelines for the review of
commodity pools, such as the Fund.
Offering Expenses. The expenses required to register units with the
Securities and Exchange Commission, including the preparation of the Form S-1
and the filing with various State securities agencies and the printing of a
Prospectus. North American Securities Administrator Association Guidelines
for Commodity Pools define offering and organizational expenses to include
selling commissions and redemption fees as well; and, for purposes of
limitation, the total expenses cannot exceed 15% of capital raised pursuant to
the offering. The offering expenses do not include the first year's
accounting, legal and other operating costs.
Option Contract. An option contract gives the purchaser the right (as opposed
to the obligation) to acquire (call) or sell (put) a given quantity of a
commodity or a futures contract for a specified period of time at a specified
price to the seller of the option contract. The seller has unlimited risk of
loss while the loss to a buyer of an option is limited to the amount paid
(premium) for the option.
Organizational Expenses. The costs to form the partnership and qualify it to
do business that are expensed as incurred.
Partners. All general partners and all limited partners in the Fund.
Partnership or Limited Partnership or Commodity Pool or Pool or Fund. The
Providence Select Fund, Limited Partnership, evidenced by Exhibit A to this
Prospectus, 505 Brookfield Drive, Dover, DE 19901, (800) 331-1532.
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Position Limits. The Commodity Futures Trading Commission has established
maximum positions that can be taken in some, but not in all commodity markets,
to prevent the corner or control of the price or supply of those commodities.
These maximums are is called position limits.
Principal. Mr. Michael Pacult, one of the general partners and the principal
of the corporate general partner. Mr. Pacult is also a principal of the
principal selling agent, Futures Investment Company.
Round-turn Trade. The initial purchase or sale of a futures or forward
contract and the subsequent offsetting sale or purchase of such contract.
Round-turn Commission. The brokerage cost for the open and close of a trade
in a single contract defined by the exchange or other entity as to contract
size and duration of position.
Redemption. The right of a partner to tender its partnership interests to the
Fund for surrender at the net unit value. See the Limited Partnership
Agreement attached as Exhibit A.
Scale in Positions. In some situations, the positions desired to be taken on
behalf of the Fund and other accounts under management will be too large to be
executed at one time. The trading advisor intends to take positions at
different prices, at different times and allocate those positions on a ratable
basis in accordance with rules established by the Commodity Futures Trading
Commission. This procedure is defined as to scale in positions. The same
definition and rules apply when the trading advisor elects to exit a position.
Securities and Exchange Commission (SEC). The United States authority that
regulates the sale of securities to the public, including the Units to be sold
by the Fund pursuant to this prospectus.
Selling Agent. The National Association of Securities Dealers member broker
dealer, Futures Investment Company, 5914 N. 300 West, P.O. Box C, Fremont, IN
46737, and any other selling agents selected by it and the general partner to
offer the partnership interests for sale. See Plan for Sale of Partnership
Interests.
Taxation - Section 1256 Contract is defined to mean: (1) any regulated
futures contract (RFC); (2) any foreign currency contract; (3) any non-equity
option; and (4) any dealer equity option.
RFC means a futures contract whether it is traded on or subject to the rules
of a national securities exchange which is registered with the Securities and
Exchange Commission, a domestic board of trade designated as a contract market
by the Commodity Futures Trading Commission or any other board of trade,
exchange or other market designated by the Secretary of Treasury (a qualified
board of exchange) and which is marked-to-market to determine the amount of
margin which must be deposited or may be withdrawn. A "foreign currency
contract" is a contract which requires delivery of, or the settlement of,
which depends upon the value of foreign currency which is currency in which
positions are also entered at arm's length at a price determined by reference
to the price in the interbank market. (The Secretary of Treasury is authorized
to issue regulations excluding certain currency forward contracts from marked-
to-market treatment.) A non-equity option means an option which is treated on
a qualified board or exchange and the value of which is not determined
directly or indirectly by reference to any stock (or group of stocks) or stock
index unless there is in effect a designation by the Commodity Futures Trading
Commission of a contract market for a contract bond or such group of stocks or
stock index. A dealer equity option means, with respect to an options dealer,
only a listed option which is an equity option, is purchased or granted by
such options dealer in the normal course of his activity of dealing in
options, and is listed on the qualified board or exchange on which such
options dealer is registered. See Federal Income Tax Aspects.
Trading Advisor. See Commodity Trading Advisor.
Taking Positions Ahead of the Fund. The allocation of trades by other than
legally accepted methods by the commodity trading advisor or other trader
which favors parties who took the position unfairly.
Trading Matrix. The dollar value used by a commodity trading advisor to
define the number of positions to be taken by the accounts under management.
Some commodity trading advisors have different trading matrices for different
sized accounts. For example, they may trade all accounts over one million in
size differently than accounts under one million.
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Unit. The term used to describe a general or limited partnership interest in
the Fund that was originally purchased at the initial $1,000 value and once
trading commenced, was sold at the Net Asset Value on the last day of the
month following receipt of the subscription agreement.
Unrealized Profit Or Loss. The profit or loss that would be realized on an
open position if it were closed at the current settlement price or the most
recent appropriate quotation as supplied by the broker or bank through which
the transaction is effected.
Underwriter. This term is not applicable to this offering. All sales of
partnership interests will be on a best efforts basis. The price of the units
will not be guaranteed, supported or underwritten in any way. See Selling
Agent.
State Regulatory Glossary
The following definitions are supplied by the State securities
administrators responsible for the review of public futures fund (commodity
pool) offerings made to residents of their respective States. They belong to
the North American Securities Administrators Association, Inc. that publish
"Guidelines for the Registration of Commodity Pool Programs", such as the
Fund, which contain these definitions. The following definitions are from the
Guidelines; however, the general partner has made additions to, but no
deletions from, some of these definitions to make them more relevant to the
consideration of an investment in the Fund.
Administrator-The official or agency administering the security laws of
a State. This will usually be the State of residence of the Fund or the
domicile of the broker or brokerage firm which makes the offer or the
residence of the potential investor.
Advisor-Any person who, for any consideration, engages in the business
of advising others, either directly or indirectly, as to the value, purchase,
or sale of commodity contracts or commodity options. This definition applies
to the commodity trading advisors and, when it provides such advice, to the
general partner.
Affiliate-An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities of such Person; (b) any Person 10% or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote, by such Person; (c) any Person,
directly or indirectly, controlling, controlled by, or under common control of
such Person; (d) any officer, director or partner of such Person; or (e) if
such Person is an officer, director or partner, any Person for which such
Person acts in any such capacity. See "Conflicts". This applies to the fact
that Mr. Michael Pacult one of the general partners, is the sole shareholder
and principal of the other general partner and also owns 50% of the
outstanding voting shares and is a principal in the affiliated selling agent.
Capital Contributions-The total investment in a Program by a Participant
or by all Participants, as the case may be. The purchase price for the
partnership interests.
Commodity Broker-Any Person who engages in the business of effecting
transactions in commodity contracts for the account of others or for his own
account. See Futures Commission Merchant.
Commodity Contract-A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a
traded commodity at a specified price and delivery point.
Cross Reference Sheet-A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other
exhibits, and justification of any deviation from the Guidelines. This sheet
is used by the State Administrator to review this prospectus.
Net Assets-The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net
Assets shall include any unrealized profits or losses on open positions, and
any fee or expense including Net Asset fees accruing to the Program.
Net Asset Value Per Program Interest-The Net Assets divided by the
number of Program Interests outstanding.
Net Worth-The excess of total assets over total liabilities are
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
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New Trading Profits-The excess, if any, of Net Assets at the end of the
period over Net Assets at the end of the highest previous period or Net Assets
at the date trading commences, whichever is higher, and as further adjusted to
eliminate the effect on Net Assets resulting from new Capital Contributions,
redemptions, or capital distributions, if any, made during the period
decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account. See New Net Profit.
Organizational and Offering Expenses-All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders,
depositories, experts, expenses of qualification of the sale of its Program
Interest under Federal and State law, including taxes and fees, accountants'
and attorneys' fees.
Participant-The holder of a Program Interest. A Partner in the Fund.
Person-Any natural Person, partnership, corporation, association or
other legal entity.
Pit Brokerage Fee-Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees. The
general partner will pay these fees from the fixed brokerage commissions.
Program-A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts. The Fund.
Program Broker-A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program. See the Futures Commission Merchant.
Program Interest-A limited partnership interest or other security
representing ownership in a program. The units in the Fund. See Exhibit A,
the Limited Partnership Agreement.
Pyramiding-A method of using all or a part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
Sponsor-Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the
Organizational Expenses of the Program, and the general partner(s) and any
other Person who regularly performs or selects the Persons who perform
services for the Program. Sponsor does not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in connection with the
offering of the partnership interests. The term Sponsor shall be deemed to
include its Affiliates.
Valuation Date-The date as of which the Net Assets of the Program are
determined. For the Fund, this will be after the close of business on the
last business day of each month.
Valuation Period-A regular period of time between Valuation Dates. For
the Fund, this will be the close of business for each calendar month and each
calendar year.
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APPENDIX II
PRIVACY STATEMENT
PROVIDENCE SELECT FUND, LP
505 Brookfield Drive
Dover, Delaware 19901
Telephone: (800) 331-1532
Providence Select Fund, LP, is committed to safeguarding the confidential
information of its partners. We hold all personal information provided to us
in the strictest confidence. These records include all personal information
that we collect from you. We have never disclosed information to
nonaffiliated third parties, except to our selling agents or as directed by
you or required by law and we do not anticipate any change in these procedures
in the future. If we were to change this disclosure policy, we would not take
such action without your permission.
A full statement of our privacy policy with respect to personal information
about you is as follows:
* We limit employee and independent contractor representatives of ours
access to information in your file to only to those persons who have a
business or professional reason for knowing.
* We limit the delivery of your information to only those nonaffiliated
parties who directly service your account such as selling agents, trustees and
clearing brokers or as directed by you or as required by law. As examples,
Federal regulations permit us to share a limited amount of information about
you with a clearing brokerage firm in order to execute securities transactions
on your behalf and we have implied permission from you to discuss your
financial situation with our selling agents and your accountant or other
professional.
* We use our best efforts to maintain a secure office and computer
environment to ensure that your information is not placed at unreasonable
risk.
* The categories of nonpublic personal information that we collect from a
prospect, partner, client and independent third parties depend upon the scope
of the client engagement. It will include information about your personal
finances, information about your health to the extent that it is needed for
the planning process, information about transactions between you and third
parties, and information from consumer reporting agencies.
* For unaffiliated third parties that require access to your personal
information, including financial service companies, consultants, and auditors,
we also require strict confidentiality in our agreements with them and expect
them to keep this information private. Federal and State regulators also may
review firm records as permitted under law.
* Personally identifiable information about you will be maintained during
the time you are a partner or client, and for the required time thereafter
that such records are required to be maintained by Federal and State
securities laws. After this required period of record retention, all such
information is expected to be destroyed.
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EXHIBIT A TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
AGREEMENT OF LIMITED PARTNERSHIP OF
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
ARTICLE I.
FORMATION, NAME, POWER OF ATTORNEY AND CONSIDERATION
1.1 THIS LIMITED PARTNERSHIP AGREEMENT, (the "LP Agreement") was entered
into on May 16, 2003 and was amended by the First Amendment dated July 29,
2003 and is hereby amended and restated to combine, supersede and fully
restate the LP Agreement as of September 1, 2003 into this single document to
include all of the terms of the LP Agreement and the First Amendment. This
fully restated partnership agreement is to be hereafter referred to as the "LP
Agreement". The LP Agreement, as hereby amended and fully restated, forms and
defines the terms of operation of a limited partnership named PROVIDENCE
SELECT FUND, LIMITED PARTNERSHIP (the "Partnership" or "Fund") among White Oak
Financial Services, Incorporated, a Delaware corporation (the "Corporate GP"),
and Michael Pacult (the "Other GP-Pacult"), collectively called "general
partner", and Michael P. Pacult (the "Initial LP"), as the initial limited
partner. In the event of conflicts between this agreement and either the LP
Agreement of May 16, 2003 or the First Amendment of July 29, 2003, this
Agreement will control. A Certificate of Limited Partnership was filed
pursuant to the Uniform Limited Partnership Act of the State of Delaware, USA,
(the "Act") to form and declare the effective date of the Partnership to be
May 16, 2003. No change is made to the effective date of the Partnership and
all acts previously taken by the general partner are ratified and approved.
1.2 POWER OF ATTORNEY. As a condition precedent to admission to the
Partnership, every Partner will be required to grant a power of attorney to
authorize the Corporate GP to admit that Partner and all future Partners it
chooses to the Partnership and to grant the Corporate GP the authority and
power to take all actions required or deemed necessary to carry out the
purposes of the Partnership. The Other GP-Pacult, by his signature below,
grants the Corporate GP a Power of Attorney and sole authority and power to
take all actions required or deemed necessary to carry out the purposes of the
Partnership.
WITNESSETH:
1.3 IN CONSIDERATION of one thousand dollars ($1,000) paid to the
Partnership by the Corporate GP and the Initial LP and other good and valuable
consideration, this Partnership was formed and henceforth will be operated on
the following terms and conditions:
ARTICLE II
PRINCIPAL OFFICE, REGISTERED AGENT and TAX MATTERS PARTNER
2.1 PRINCIPAL OFFICE. The principal office of the Partnership is: 505
Brookfield Drive, Dover, DE 19901, or such other place as the Corporate GP may
designate, in its sole discretion, from time to time;
2.2 REGISTERED AGENT. The Registered Agent for the Partnership is Corporate
Systems, Inc., 505 Brookfield Dr., Dover, Kent County, DE 19901; and
2.3 TAX MATTERS PARTNER. The Tax Matters Partner for the Partnership is the
Corporate GP, 5914 N. 300 West, P. O. Box C, Fremont, IN 46737.
ARTICLE III
BUSINESS AND PURPOSE OF THE PARTNERSHIP
3.1 BUSINESS PURPOSE. The Partnership's business purpose is to increase
Capital through the high risk, speculative and hedge trading of forward
contracts, futures, options on futures and other investments selected by one
or more managers ("Commodity Trading Advisors or CTAs or other qualified
persons") retained by the Corporate GP on behalf of the Partnership.
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3.2 PARTNERSHIP POWERS. The Partnership, through the Corporate GP, is
authorized to do any and all things incident or connected with or in
furtherance of its business purpose that is authorized pursuant to the Act
including, but not limited to:
(a) admit additional Partners on terms determined solely by the Corporate
GP;
(b) trade, buy, sell or otherwise acquire, hold or dispose of all forms of
investments (including tangibles and intangibles, foreign currencies,
mortgage-backed securities, money market instruments, stock and futures
options, and any other securities or items which are now, or may hereafter be,
the subject of barter or stock or futures trading), commodity futures, and
forward contracts and any rights pertaining thereto;
(c) invest and trade, on margin or otherwise, in capital stocks, bonds,
debentures, trust receipts and other obligations, instruments or evidences of
indebtedness, gold, silver, cattle, corn, wheat, soybeans, or any other asset
for which a trading market is maintained or otherwise paid for by cash or
otherwise including, but not limited to, the right to sell short and to cover
such short sales;
(d) possess, sell, exchange, discount, transfer, mortgage, pledge, deal in,
maintain multiple accounts for, and to exercise all rights, powers, privileges
and other rights, incidental to ownership of the assets held by the
Partnership;
(e) borrow or raise monies and, from time to time without limit as to
amount;
(f) to open margin and other forms of leveraged accounts;
(g) to issue, accept, endorse and execute promissory notes, draft bills of
exchange, warrants, bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the payment of any
thereof and the interest thereon by mortgage or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
Partnership, whether at the time owned or thereafter acquired, and to sell,
pledge of otherwise dispose of such instruments issued by the Partnership for
its purposes; form and own one or more corporations to engage in such
businesses as the Corporate GP shall deem advisable;
(h) lend any of its properties or funds, either with or without security in
furtherance of the objects and purposes of the Partnership as the Corporate GP
shall deem advisable and consent;
(i) rent or own and maintain one or more offices staffed as the Corporate GP
shall determine and to do such other acts attendant thereto as may be
necessary or desirable;
(j) establish or waive the sales commission to acquire investment Capital as
the Corporate GP, in its sole discretion, from time to time, may determine;
and
(k) enter, make and perform all contracts, surety and guarantees as may be
necessary or advisable or incidental to the carrying out of the foregoing
objects and purposes.
3.3 EXERCISE OF POWERS. The Partnership shall carry on its activities
through the exercise of judgment by the Corporate GP and/or the Investment
and/or Commodity Trading Advisors and consultants and brokers selected by the
Corporate GP.
3.4 FEES AND COMMISSIONS TO THE CORPORATE GP. The Corporate GP may charge
the Partnership brokerage commissions but will not serve as an investment or
trading advisor to the Partnership. The Other GP-Pacult shall not receive any
compensation from the Partnership for serving as an Other GP.
3.5 TRADING ADVISOR(S). The Corporate GP shall be solely responsible for the
selection, retention and dismissal, from time to time, of one or more
Commodity Trading Advisor(s) ("CTA"). The CTA or CTAs selected will determine
the markets to be traded, time the purchase and sale (including short sales,
hedge positions, and option purchases and sales) and otherwise manage the
trades made by the Partnership.
3.6 MANAGEMENT. The Partnership's management is as follows:
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(a) POOL OPERATOR NAME AND PRINCIPALS. The Corporate GP and Other GP-Pacult
are identified in the captions of this LP Agreement. They and any other
general partners of the Partnership must qualify as commodity pool operators
pursuant to the Commodity Exchange Act (the "CEAct") as a condition precedent
to, and during, their appointment as GPs pursuant to the terms of this LP
Agreement.
(b) COMMODITY TRADING ADVISOR. The Corporate GP will select one or more
independent CTAs to trade the assets of the Partnership. All CTAs selected
must have a current disclosure document filed and on public record with the
National Futures Association (the "NFA") pursuant to the CEAct. The Corporate
GP will rely upon the track record and other information supplied by the CTA
in its selection of the CTA. The CTA will have no ownership in the
Partnership and its compensation will be subject to the terms of this LP
Agreement and also as described in the Offering Documents that are used to
offer Limited Partnership interests ("Units") for sale to prospective
partners. The CTA will enter trades on behalf of the Partnership directly
with the futures commission merchant ("FCM") without the prior knowledge or
approval by the Corporate GP of the methods used by the CTA to select the
trades, the number of contracts, or the margin required by the FCM for the
Partnership to deposit to enter and hold the positions taken. The Partnership
is expected to use from 10% to 40% of the Net Asset Value on deposit with the
FCM, from time to time, for margin to hold positions taken by the CTA for the
account of the Partnership. Margin is merely security to the FCM for the
positions taken by the Partnership and does not define or otherwise limit the
profit or (loss) that can be incurred from any or all of the positions taken.
It is possible for the Partnership to be required to pay margin calls
(addition deposits to the FCM) to continue to hold positions or to pay
overdrafts created by losses on closed out positions.
(c) INTRODUCING BROKER AND FUTURES COMMISSION MERCHANT. The Corporate GP
may also select an Affiliated or independent Introducing Broker ("IB") to
introduce and service the Partnership account(s) with the Futures Commission
Merchant (the "FCM") and to handle communications with the limited partners
("LPs"). The Corporate GP will be paid fixed brokerage commissions for trades
and will be responsible for payment of all Pit Brokerage and other clearing
expenses and brokerage commission to the IB and the FCM. The FCM will hold
the Partnership equity assigned by the Corporate GP for trading and will
accept and clear the trades entered by the CTA. The trades will be made by
the CTA directly to the FCM pursuant to a power of attorney granted by the
Corporate GP on behalf of the Partnership to authorize the CTA to enter trades
on behalf of the Partnership.
3.7 QUALIFICATION TO SELL UNITS. The Corporate GP, on behalf of the
Partnership, shall have the authority, but not the obligation, to cause the
Partnership Offering Documents and any other documents deemed necessary or
desirable to be filed, and such amendments thereto as the Corporate GP deems
advisable, with the appropriate Federal and state regulatory agencies,
including the United States Securities and Exchange Commission and the
Commodity Futures Trading Commission and the commission of securities under
the securities laws of the various states and any other jurisdiction desirable
or proper to qualify the Units for sale pursuant to public or private
offerings. Each of the Partners hereby acknowledge that the power of attorney
granted to the Corporate GP extends to preparations of such documents, filings
and payment of the attendant fees and further consent, confirm and ratify all
action taken and things done by the Corporate GP with respect to such
preparation, filings and payment of fees attendant to such public and private
offerings. The Corporate GP may make such other arrangements, including sales
outside the United States, for the public and private sale of Units as it, in
its sole judgment, deems appropriate.
ARTICLE IV
TERM, DISSOLUTION, LIQUIDATION AND FISCAL YEAR
4.1 TERM OF PARTNERSHIP. The Partnership shall commence on May 16, 2003,
and shall continue until dissolved or terminated pursuant to the terms of this
Article IV or extended as provided by law.
4.2 DISSOLUTION. The Partnership shall be dissolved and shall terminate and
wind-up its affairs, upon the first to occur of the following:
(a) the affirmative vote of a Majority in Interest of the Partners adopting
an amendment to this Agreement providing for the dissolution of the
Partnership; or
(b) the Redemption by the Partners of substantially all of the Capital of
the Partnership; or
(c) the sale, exchange, forfeiture or other disposition of all or
substantially all the properties of the Partnership out of the ordinary course
of business; or
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(d) the resignation of the Corporate GP after one hundred twenty days notice
to the other Partners, of the bankruptcy, insolvency or dissolution, of the
Partnership General Partners, without a successor, promptly after any such
event, but in no event beyond one hundred twenty (120) days after the
effective date of such event; or
(e) at 11:59 p.m. on the day that is twenty-one (21) years from the first
effective date of this Agreement; or
(f) any event which legally dissolves the Partnership.
4.3 EFFECT OF LIMITED PARTNER STATUS. The death, legal disability,
bankruptcy, insolvency, dissolution, or withdrawal of any Limited Partner
shall not result in the dissolution or termination of the Partnership, and
such Limited Partner, his estate, custodian or personal representative shall
have no right to withdraw or value such Limited Partner's interest in the
Partnership except as provided in Article XIV, Redemption. Each Limited
Partner (any assignee thereof) expressly agrees that the provisions of the
Act, as amended, titled "Powers of Legal Representative or Successor of
Deceased, Incompetent, Dissolved or Terminated Partner", shall not apply to
his interest in the Partnership and expressly waives any rights and benefits
under that provision. Each Limited Partner (and any assignee of such
Partner's interest) expressly agrees that in the event of his death, that he
waives on behalf of himself and his estate, and he directs the legal
representative of his estate and any person interested therein to waive the
furnishing of any inventory, accounting or appraisal of the assets and any
right to an audit or examination of the books of the Partnership.
4.4 EFFECT OF CORPORATE PARTNER TRANSFER OF STOCK. The Corporate GP may
assign, sell, or otherwise dispose of all or any portion of its shares of
common stock without any legal effect upon the operation of the Partnership
and no Limited Partner may object to any such transfer.
4.5 LIQUIDATION. Upon the termination and dissolution of the Partnership,
the Corporate GP (or in the event the dissolution is caused by the dissolution
or the cessation to exist as a legal entity of the Corporate GP, voluntary
withdrawal, bankruptcy or insolvency, such person as the Majority in Interest
of the Partners may select) shall act as liquidating trustee and shall take
full charge of the Partnership assets and liabilities. Thereafter, the
business and affairs of the Partnership shall be wound up and all assets shall
be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds shall be applied and distributed in the following
order: (i) to the expenses of liquidation and termination and to creditors,
including the Corporate GP, in order or priority as provided by law, and (ii)
to the Partners pro rata in accordance with his or its Capital account, less
any amount owed by such Partner to the Partnership.
4.6 RETURN OF CAPITAL CONTRIBUTION SOLELY OUT OF ASSETS. A Partner shall
look solely to the properties and assets of the Partnership for the return of
his Capital Contribution, and if the properties and assets of the Partnership
remaining after the payment or discharge of the debts and liabilities of the
Partnership are insufficient to return his Capital Contribution, he shall have
no recourse against the Corporate GP or any Other GP or any Limited Partner
for that purpose.
4.7 NO PRIORITY. In the event of dissolution or liquidation or other
voluntary or involuntary wind-up of the affairs of the Partnership, no limited
partner shall have priority over any other limited partner in regard to the
return of their Capital contributed to the Partnership.
4.8 FISCAL YEAR. The Corporate GP shall establish the Partnership Fiscal
year, from time to time. The Corporate GP established the initial partial
year to commence on May 16, 2003 and each year, thereafter, to commence on
January 1 and for the initial year and all years, thereafter, to end on
December 31.
ARTICLE V
DEFINITIONS
Certain terms used in this Agreement shall have the following special
meanings:
5.1 The term Affiliate means (1) any person controlled by or under common
control with another person, (2) a person owning or controlling 10% or more of
the outstanding voting securities of such other person, (3) any officer or
director of such other person, and (4) if such other person is an officer or
director, any other company for which such person acts as an officer or
director.
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5.2 When referring to the assets of the Partnership:
(a) the term Capital means cash invested in the Partnership by any Partner
and placed at risk for the business of the Partnership;
(b) the term Capital Contribution means, with respect to any Partner, the
individual deposits made to Capital contributed to the Partnership by a
Partner;
(c) the term Capital Subscription means the amount such Partner agrees to
pay for the Unit or Units in the Partnership subject to acceptance by the
Corporate GP;
(d) the term Initial Capital means the sum of all Capital Subscriptions
received by the Corporate GP prior to commencement of trading;
(e) the term Net Assets or Net Asset Value means the total assets, including
all cash and cash equivalents (valued at cost plus accrued interest and earned
discount), less total liabilities, of the Partnership (each determined on the
basis of generally accepted accounting principles, consistently applied under
the accrual method of accounting or as required by applicable laws,
regulations and rules including those of any authorized self regulatory
organization), specifically:
(i) Net Asset Value includes any unrealized profit or loss on open security
and commodity positions subject to reserves for loss established, from time to
time, by the Corporate GP;
(ii) All open stock, option, and commodity positions are calculated on the
then current market value, which shall be based upon the settlement price for
that particular position on the date with respect to which Net Asset Value is
being determined; provided, however, that if a position could not be
liquidated on such day due to the operation of the daily limits or other rules
of the exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position could be
liquidated shall be the basis for determining the market value of such
position for such day. As used herein, "settlement price" includes, but is
not limited to: (1) in the case of a futures contract, the settlement price
on the commodity exchange on which such futures contract is traded; and (2) in
the case of a foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price and the
highest bid price, at the close of business on the day Net Asset Value is
being determined, established by the bank or broker through which such forward
contract was acquired or is then currently traded;
(iii) Brokerage commissions to close security and commodity positions, if
charged on a round-turn basis, are accrued in full at the time the position is
initiated (i.e., on a round-turn basis) as a liability of the Partnership;
(iv) Management fees are accrued as an expense and paid on the last business
day of each month;
(v) Incentive fees are accrued as an expense of the Partnership and paid on
the last business day of each calendar quarter;
(vi) Interest earned on all Partnership accounts is accrued and paid monthly;
(vii) The amount of any distribution made by the Partnership is a liability of
the Partnership from the day when the distribution is declared by the
Corporate GP or as provided in this Agreement and the amount of any redemption
is a liability of the Partnership upon acceptance by the Corporate GP and not
the date of receipt of the redemption request from any Partner; and
(viii) Syndication Costs incurred in organizing and all present and
future costs to increase or maintain the qualification of the Units available
for sale and the cost to present the initial and future offering of Units for
sale shall be capitalized when incurred and amortized and paid from Capital or
Monthly Profit as required by applicable law.
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(f) The term Valuation Date means the date used to value the Net Assets of
the Partnership selected by the Corporate GP which shall be no less often than
immediately after the close of business on the last business day of each
month;
(g) the terms Profit or (Loss) Attributable to Units means the product of A)
the number of Units divided into B) an amount equal to the Net Profit or
(Loss) determined as follows: (1) the net of profits and losses realized on
all trades closed out, plus (2) the net of any unrealized profits and losses
an open positions as of the end of the period, less (3) the net of any
unrealized profits and losses on open positions as of the end of the preceding
period, minus, (4) the Expenses attributable to Units. Profit and (Loss)
shall include interest earned on all Partnership assets including realized and
unrealized capital gains or losses on U.S. Treasury bills and on any other
securities;
(h) the term Management Fee means up to six percent (6%) annually of the Net
Assets of the Partnership as established, from time to time, by the Corporate
GP computed on the close of business on the last day of each month and payable
to the Corporate GP and upon the Capital assigned to each independent
Commodity Trading Advisor, (the "CTA") or both, without regard to the income
or loss of the Partnership for that period; management fees to the Corporate
GP, should such fee be charged at some time in the future, shall be in
addition to any income earned on its general partner interest in the
Partnership.
(i) the term Incentive Fee means a percentage of the New Net Profits accrued
and paid to the Corporate GP, or its Affiliates, or the CTA, or to both, of up
to a total of fifteen percent (15%) annually of New Net Profit earned from
inception of trading, through the date of the computation as established, from
time to time, by the Corporate GP; the Corporate GP has the right to both
reduce the Incentive Fee below fifteen percent (15%) and to increase the
Incentive Fee to a maximum of twenty-seven percent (27%), provided that in the
case of an increase in Incentive Fee of over fifteen percent (15%) the
Management Fee is correspondingly lowered by one percent (1%) for each two
percent (2%) increase in Incentive Fee; i.e., at the maximum of a twenty-seven
percent (27%) Incentive Fee, the Management Fee would be zero (0%); should the
Corporate GP select multiple CTA's to trade for the Partnership, it is
possible for one CTA to be paid an Incentive Fee while the Partnership suffers
a Net Loss from all trading; in that event, the Corporate GP would be paid no
Incentive Fee; Incentive Fees to the Corporate GP shall be in addition to any
income earned on its general partner interest in the Partnership.
(j) the term Gross Profit or (Loss) means the income or loss from all
sources, including interest income and profit and loss from non-trading
activities, if any.
(k) the term New Net Profit or Loss means the amount of income earned from
inception of trading by the Partnership in the case of the Corporate GP and by
each CTA, less the trading losses and brokerage commissions and fees.; in the
case of multiple CTA's, the New Net Profit or Loss applies to the results
achieved by each CTA without regard to the results achieved by any other CTA
or any non-trading asset or investment;
(l) the term Net Profit or Loss means net profit or loss from all sources.
(m) the term Unit shall mean a partnership interest in the Partnership
requiring an initial Capital Contribution of one thousand dollars ($1,000),
less a sales commission, or the Net Asset Value of the initial Unit, as
adjusted to reflect increases and decreases caused by receipt, accrual, and
payment of profit, Expenses, losses, bonuses, and fees, from time to time.
5.3 When referring to costs and expenses of the Partnership to be allocated
and charged pursuant to this Agreement:
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(a) the term Expenses shall mean costs allocated, incurred, paid, accrued,
or reserved, including the fixed or round turn commissions, which are, in the
opinion of the Corporate GP, required, necessary or desirable to establish,
manage, continue and promote the business of the Partnership including, but
not limited to, all deferred organization costs,
brokerage commissions, and all management and incentive fees payable to the
Corporate GP or to independent investment and Commodity Trading Advisor by the
Partnership as negotiated and determined by the Corporate GP on behalf of the
Partnership on a basis consistently applied in accordance with generally
accepted accounting principals under the accrual method of accounting or as
required by applicable laws, regulations and rules including those of any
authorized self regulatory organization with proper jurisdiction over the
business of the Partnership; provided, however, Expenses shall not include
salaries, rent, travel, expenses and other items of Corporate GP overhead. In
addition, if extraordinary expenses are incurred, the Corporate GP shall
include in the Partnership's next regular report to the auditors a discussion
of the circumstances or events which resulted in the extraordinary expenses;
(b) the term Net Unit Value shall mean the Net Asset Value, divided, from
time to time, by the total number of Units outstanding;
(c) the term Offering Period means the period of time established, from time
to time, by the Corporate GP in which the Partnership will offer Units for
sale at the Net Asset Value and admit new Partners pursuant to the terms of
this LP Agreement; and,
(d) the term Syndication Costs means the promotion and syndication costs of
the Partnership and the costs of the offering of Units, and to establish the
initial business relationships on behalf of the Partnership, including all
legal and printing costs to prepare the Offering Documents, registrations and
filing fees, web design and promotion, contract negotiation, and travel
incurred which are deemed necessary or desirable by the Corporate GP and the
professionals selected, to form the Partnership and become ready to sell Units
and engage in business.
(e) the term Pit Brokerage Fee means floor brokerage, clearing fees,
National Futures Association fees, and exchange fees.
5.4 Offering Documents means the disclosure document, memorandum, offering
circular, prospectus and registration statement, together with the exhibits,
Federal and state forms, and any subsequent continuations thereof, which
describes this Partnership to persons selected by the Corporate GP including,
but not limited to, potential purchasers of Units, or the Partners or to any
government or self regulatory agency or to persons selected by the Corporate
GP to participate in the affairs or provide services to the Partnership.
5.5 When referring to this LP Agreement and the Partners of the Partnership:
(a) the term Act refers to the Uniform Limited Partnership Act of the State
of Delaware, USA, as amended, from time to time.
(b) the term CEAct refers to the United States Commodity Exchange Act, 7 U.
S. C. Sec 1, et seq., as amended, from time to time.
(c) the term LP Agreement refers to this agreement as amended, from time to
time;
(d) The term Commodity Pool Operator refers to the GPs of the Partnership as
that term is defined by the CEAct;
(e) the term CTA refers to Commodity Trading Advisor (sic investment
manager) as that term is defined by the CEAct;
(f) the term Corporate GP refers to White Oak Financial Services,
Incorporated, a Delaware corporation, with its principal office at 5914 N. 300
West, P.O. Box C, Fremont, IN 46737 (260) 833-1306;
(g) the term FCM refers to the Futures Commission Broker or Brokers, as that
term is defined by the CEAct, selected, from time to time, by the Corporate GP
and is the entity or entities that hold the Partnership equity made available
for trading and accept the trades directed to be made by the CTAs;
(h) the term GP refers to all general partners of the Partnership;
(i) the term GP Interest refers to any non-trading Capital contributed to
the Partnership by any GP;
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(j) the term IB refers to the Introducing Broker or Brokers, as that term is
defined by the CEAct, selected, from time to time, by the Corporate GP and is
the entity or entities that are responsible for the Partnership's relationship
with the FCMs and for continuing service to the Partners;
(k) the term Initial LP refers to Michael P. Pacult, a signatory to this LP
Agreement;
(l) the term Additional LP refers to any limited partner other than Michael
P. Pacult admitted to this Partnership pursuant to the terms of this LP
Agreement;
(m) the term Limited Partners refers to the Initial LP and all Additional
LPs in the Partnership;
(n) the term Majority in Interest refers to that number of Partners who
collectively hold over 50% of all of the outstanding Partnership interests
held by all Partners in the Partnership; provided, however, the GP Interests
cannot be considered to determine a Majority in Interest or otherwise vote or
consent on the question of removal of the Corporate GP or any other matters
specifically limited in this LP Agreement. In addition, see the rights,
duties and limitations of the actions that can be taken by the Corporate GP
and the Limited Partners specifically provided in this LP Agreement;
(o) the term Other GP refers to any GP other than White Oak Financial
Services, Incorporated admitted to serve as a general partner of the
Partnership pursuant to the terms of this LP Agreement; and
(p) the term Partners refers to the Corporate GP, all Other GPs, the Initial
LP and all of the Additional LPs.
ARTICLE VI
CAPITAL CONTRIBUTIONS AND USE OF CAPITAL
6.1 CAPITAL CONTRIBUTIONS OF PARTNERS.
(a) Each Additional LP is required to deliver to the Partnership an executed
Subscription Agreement and Power of Attorney for review and acceptance by the
Corporate GP on behalf of the Partnership and a wire transfer or check in the
amount of his Capital Subscription and sales commission, if any, to the
Partnership.
(b) The Subscription shall be deposited to the Capital Account for the
Partnership.
(c) Upon the commencement of trading, the Capital Account for the
Partnership shall be allocated to the Limited Partners and shall be expressed
in both United States dollars invested and number of Units held.
(d) A Partner shall contribute $1,000 per Unit prior to the commencement of
trading and, after trading commences, contribute an amount equal to the Net
Asset Value of a Unit calculated as of the end of the last business day of the
month in which the subscription is made, plus the sales commission, if any, on
the Valuation Date. The Corporate GP will have five (5) days from date of
deposit of the subscription amount to review and accept or deny acceptance of
the Partner's subscription. The Additional LP will have five (5) business
days from the date of his subscription to rescind his subscription, after
which time, the subscription will be irrevocable, subject to any applicable
law which may extend the Partner's rescission period.
(e) The Corporate GP has contributed $1,000 in cash for deposit to the
Capital of the Partnership for a non-trading General Partnership interest in
the Partnership. Prior to the commencement of trading, and for so long as the
Partnership is registered to sell its securities or is seeking to become
registered to sell its securities in a state which requires the general
partner to maintain a minimum investment in the Partnership, and for so long
as there remains a partner from such a state that has not redeemed all its
Units, either the Corporate GP, the Other GP - Pacult or any Other GP will
make and maintain a capital contribution to the Partnership equal to the
greater of 1% of all capital contributions to the Partnership or $25,000. In
the event the Partnership determines not to seek registration in states
requiring such minimum investment, or to terminate its registration in such
states and, if there are no extant investments in the Partnership from
partners from such states, the Corporate GP, Other GP-Pacult or Other GP may
reduce or terminate its investment in the Partnership.
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(f) In addition to its deposit to its General Partnership account, the
Corporate GP and its Affiliates and any Other GP may, but are not obligated,
purchase Units with the same rights and obligations as other Limited Partners.
(g) All subscriptions for Units made pursuant to the offering of the Units
must be on the form included in the Offering Documents or otherwise approved
by the Corporate GP and must include the power of attorney to the Corporate
GP.
(h) The Corporate GP maintains an depository account to continuously accept
prospective Partners' subscriptions until the minimum is sold or the end of
the then current month, as applicable, and the Partner is admitted to the
Partnership.
6.2 USE OF CAPITAL ACCOUNTS.
(a) The Partnership shall use the funds subscribed to pay sales commissions,
and its Capital allocated to Units to pay Expenses, Organization Costs and to
otherwise make the payments required to be made by the Partnership to engage
in active trading and to pay the management fees and, from profits, the
incentive fees and allocation of profits and (losses) to Partner's Capital
Accounts.
(b) All interest earned from investments of Capital shall be allocated to
the Partner's in the Partnership; provided, however, the Partnership shall not
be obligated to pay interest on any Capital invested in the Partnership.
ARTICLE VII
ALLOCATION OF PROFITS, (LOSSES) AND TAX ELECTIONS
7.1 CAPITAL ACCOUNTS. A Capital account shall be established for each
Partner. All GP Interests shall be segregated from the LP accounts engaged
in active trading.
7.2 ALLOCATION OF PROFITS AND LOSSES
The Capital account established for each LP shall include, as the initial
balance thereof, each LPs' initial contribution to Capital of the Partnership
expressed in total dollars and Units purchased. As of the close of business
each month, allocations shall be made as follows:
(a) The Incentive Fee. The incentive fees upon New Net Profit at the rate
established, from time to time, by the Corporate GP shall be paid accrued an
allocated to Capital accounts monthly for Redemption, tax and all other
purposes; provided, however, no incentive fee will be earned and paid the
Corporate GP or any CTA unless New Net Profit has been produced for the then
current quarter;
(b) The Profit (Loss) Attributable to Units shall be added to (subtracted
from) the Capital accounts of the Partners. Items of income, gain or loss,
accrued, reserved, and paid Expenses shall be added to (subtracted from) the
Capital account of each Partner in accordance with the ratio that account
bears to the sum of all of the Partners' accounts.
(c) All determinations and elections on behalf of the Partnership for
Federal Income Tax purposes shall be made by the Corporate GP, in its sole
discretion.
ARTICLE VIII
RIGHTS, OBLIGATIONS AND LIMITATIONS UPON THE PARTNERSHIP
8.1 GENERAL PROHIBITIONS. The Partnership shall not:
(a) borrow from or loan to any person, except that the this prohibition will
not prohibit any indebtedness to a Partner or an Affiliate with respect to
the Registration or offering of Units for sale or initiation and maintenance
of margin or collateral or other security to hold the Partnership's trading
positions.
(b) commingle its assets with those of any other person, except to the
extent permitted under the Securities and Exchange Act of 1934 or the CEAct
and the rules and regulations promulgated thereunder.
(c) permit undisclosed rebates or give-ups to be received by the Corporate
GP or any Affiliate of the Corporate GP, or permit the Corporate GP or any
Affiliate of the Corporate GP to engage in reciprocal business arrangements
that would circumvent the foregoing prohibition except that this prohibition
will not prevent the Corporate GP or an Affiliate to provide goods or
services, including brokerage, pursuant to the terms of this LP Agreement.
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(d) engage in the pyramiding of its positions (i.e., the use of unrealized
profits on existing positions to provide margins for additional positions in
the same or a related stock or commodity); provided, however, that there may
be taken into account the Partnership's open trade equity on existing
positions in determining whether to acquire additional unrelated stock or
commodity positions.
(e) permit margins of all open positions in all positions combined that
would exceed 250% of the partnership's Net Asset Value at the time such
position is under consideration to be initiated.
(f) permit churning of the Partnership's trading account for the purpose of
generating brokerage commissions to any person.
(g) directly or indirectly pay or award any finder's fees, commissions or
other compensation to any persons engaged by a potential limited partner for
independent investment advice as an inducement to such advisor to advise the
potential limited partner to purchase Units in the Partnership without the
knowledge of such potential limited partner.
(h) hold any of the Partnership assets outside the United States. The
Partnership funds committed to trading will be on deposit with and under the
control of one or more FCMs and traded by one or more CTAs regulated pursuant
to the CEAct, as may be amended, from time to time. Partnership funds not
used to trade will be held in investments that are bonds or other instruments
of the United States or in cash deposits in regulated United States banks and
other United States financial institutions selected by the Corporate GP.
(i) allow the Corporate GP to directly or indirectly pay or award any
commissions or other compensation to any person, including the Corporate GP,
if they are engaged to sell or give investment advice to a potential Partner;
provided, however, this provision shall not prohibit the payment to a
registered broker-dealer or other properly licensed person a sales commission
or service fee for continuing to service the Partnership accounts.
(j) allow any GP to receive a management fee if it receives, directly or
indirectly, any portion of the brokerage commissions.
(k) allow any CTA, to be paid a management fee if it provides investment
advice to potential investors or is engaged in the sale of investments in the
Partnership or shares or participates, directly or indirectly, in any
commodity brokerage commissions generated by the Partnership.
8.2 FEES AND EXPENSES.
(a) The Partnership shall pay all Organization Costs and offering Expenses
incurred in the creation of the Partnership and sale of Units. The foregoing
expenses may be paid directly by the Partnership or may be reimbursed by the
Partnership to the Corporate GP or an Affiliate of the Corporate GP.
Notwithstanding the foregoing, in no event will reimbursement by the
Partnership to the Corporate GP for Organization Costs and offering Expenses
charged to the Partnership exceed an amount equal to fifteen percent (15%) of
the gross proceeds from the sale of Units. Organization Costs and Offering
Expenses shall mean those Expenses incurred in connection with the formation,
qualification and Registration of the Partnership and in distributing and
processing the Units under applicable Federal and state law, sales
commissions, and any other expenses such as: (i) registration fees, filing
fees and taxes; (ii) the costs of qualifying, printing, amending,
supplementing, mailing and distributing the Registration Statement and
Prospectus; (iii) the costs of qualifying, printing, amending, supplementing,
mailing and distributing sales materials by web design, promotion, and other
means used in connection with the Units; (iv) salaries of officers and
employees of the Corporate GP and any Affiliate of the Corporate GP while
directly engaged in distributing and processing the Units and establishing its
records; (v) rent, travel, remuneration of personnel, telegraph, telephone and
other expenses in connection with the offering of the Units; (vi) accounting,
auditing, and legal fees incurred in connection therewith; and (vii) any
extraordinary expenses related thereto. Organization Costs and Offering
Expenses do not include salaries, rent, travel, expenses and other items of
Corporate GP overhead.
(b) All operating expenses of the Partnership shall be billed directly to
and paid by the Partnership.
(c) The Corporate GP or any Affiliate of the Corporate GP may be reimbursed
for the actual costs of any Expense including, but not limited to, legal,
accounting and auditing services used for or by the Partnership, as well as
printing and filing fees and extraordinary expenses incurred for or by the
Partnership; provided, however, certain limitations contained in this LP
Agreement restrict the Partnership's purchase of certain insurance coverage
and the assumption of the defense of certain claims.
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(d) A management fee of one half of one percent (1/2 of 1%) per month [six
percent (6%) per year] of the Net Asset Value of the Partnership, computed
and paid to the Corporate GP and/or Affiliated or non-affiliated independent
investment or trading advisor on the close of business on the last day of each
month and an incentive fee, paid quarterly, of up to fifteen percent (15%) of
the New Net Profit, or less earned upon Capital, and prorated to consider the
date of deposit of such Capital to the Partnership each year; provided,
however, for each percentage point (1%) of reduction in management fee, the
incentive fee may be increased by two percent (2%); i.e., upon reduction of
the management fee to zero (0), the incentive fee may be increased to twenty-
seven percent (27%); and
(e) Each Partnership trading sub-account established by the Corporate GP and
assigned to a different CTA shall be considered separately for purposes of
incentive fee. The incentive fee will be non-refundable; i.e., in the event
that the Partnership earns substantial New Net Profit during the first quarter
of any year and pays the applicable incentive fee and, thereafter, suffers
losses, the Corporate GP and all CTAs previously paid an incentive fee will
not refund any of the incentive fee paid for the prior quarter or quarters.
However, the Partnership will not pay or accrue to the Corporate GP or any CTA
any further incentive fee until such time as New Net Profit is achieved.
ARTICLE IX
RIGHTS, POWERS, LIMITATIONS AND OBLIGATIONS OF THE GPs
9.1 POWERS TO THE CORPORATE GP. The Corporate GP shall have full, exclusive
and complete discretion in the management and control of the affairs of the
Partnership to the best of its ability and shall use its best efforts to carry
out the purposes of the Partnership set forth in the Agreement. In connection
therewith, it shall have all powers of a Corporate GP under the Act,
including, without limitation, the power to:
(a) enter, execute and maintain contracts, agreements and any or all other
instruments, and to do and perform all such things, as may be required or
desirable in furtherance of Partnership purposes or necessary or appropriate
to the conduct of Partnership activities including, but not limited to,
contracts with third parties for:
(i) brokerage services on behalf of the Partnership (which brokerage
services may be performed by the Corporate GP or an Affiliate of the Corporate
GP), specifically, Futures Investment Company, or any successor to its
business, an Affiliated futures commission merchant of the Corporate GP may
clear the trades and an Affiliated GP, futures commission merchant, or IB may
pay trailing commissions to its associated persons, including Affiliates of
the Corporate GP and the Corporate GP;
(ii) trading advisory services relating to the purchase and sale of all
stocks, options, commodity futures contracts, commodity options and contracts
for forward delivery of foreign currencies on behalf of the Partnership (which
advisory services may be performed by the Corporate GP or an Affiliate of the
Corporate GP); and
(iii) rent, salaries, computer, accounting, legal and other services attendant
to the maintenance of the Partnership.
(b) open and maintain bank accounts on behalf of the Partnership with banks
and money market funds.
(c) deposit, withdraw, pay, retain and distribute the Partnership's funds in
any manner consistent with the provisions of this Agreement.
(d) supervise the preparation and filing of all documentation required by
law including, but not limited to, Registration Statements to be filed with
Federal and state agencies.
(e) pay or authorize the payment of distributions to the Partners and pay
Expenses of the Partnership.
(f) invest or direct the investment of funds of the Partnership not
involving the purchases or sale of stocks, futures contracts, options, and
contracts for forward delivery of foreign currencies.
(g) purchase, at the expense of the Partnership, liability and other
insurance to protect the Partnership's proprieties and business.
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(h) borrow money from banks and other lenders for Partnership purposes, and
may pledge any or all of the Partnership's assets for such loans. No bank or
other lender to which application is made for a loan by the lender to which
application is made for a loan by the Corporate GP shall be required to
inquire as to the purposes for which such loan is sought and, as between the
Partnership and such bank or other lender, it shall be conclusively presumed
that the proceeds of such loan are to be and will be used for the purposes
authorized under this Agreement.
(i) confess judgment for and against the Partnership and control any matters
affecting the rights and obligations of the Partnership, including the
employment of attorneys, in the conduct of litigation and otherwise incur
legal expenses and costs of consultation, settlement of claims, and litigation
against or on behalf of the Partnership.
9.2 LOANS BY GPs. No GP or Affiliates will be required to advance or loan
funds to the Partnership. In the event any GP makes any advance or loan to
the Partnership, the GP will not receive interest in excess of its interest
costs, nor will the GP receive interest in excess of the amounts which would
be charged the Partnership (without reference to the GP's financial abilities
or guarantees) by unrelated banks on comparable loans for the same purpose and
the GP shall not receive points or other financing charges or other loan
related fees regardless of the amount.
9.3 ACTIVITIES OF GPs. Any GP may, notwithstanding the obligations imposed
by this LP Agreement, engage in whatever other activities they may choose,
whether the same be competitive with the Partnership or otherwise, without
having or incurring any obligation or conflict of interest in such activities
with the Partnership or to any party hereto. The GPs are specifically
authorized to deal with other partnerships and to acquire interests in
positions and trading without having to offer participation in those other
entities to the Partnership or the other Partners. Neither this Agreement nor
any activities undertaken pursuant hereto shall prevent any Partner, including
the Corporate GP and its Affiliates and their officers, directors and
employees, from engaging in the trading contemplated by this Partnership,
individually, jointly with others, or as a part of any other association to
which any of them are or may become parties, in the same trades as the
Partnership, or require any of them to permit the Partnership, the Corporate
GP or any other Partner to participate in any of the foregoing. As a material
part of the consideration for each party's admission as a Partner, each
Partner hereby waives, relinquishes and renounces any such right or claim of
conflict of interest and participation in other activities from all other
Partners.
9.4 LIMITED PRIOR EXPERIENCE BY CORPORATE GP. The Corporate GP is a
Delaware corporation that was formed on April 21, 2003, and has only operated
this commodity pool since its inception of trading in March, 2007. The
individual general partner has been operating other commodity pools for over
five years.
9.5 GP TRADES CONFIDENTIAL. The future trading results of the Corporate GP,
any Other GP and their Affiliates and principals will be confidential and not
disclosed to the other Partners. Any GP, their Affiliates and principals may
take positions that are the same or different from positions taken by the
Partnership. Nothing in this Section, or elsewhere in this LP Agreement,
shall permit the any GP, Affiliate, or principal to violate its fiduciary or
legal obligations to the Partnership.
9.6 LIMITATIONS ON EXERCISE OF GP POWERS:
(a) Without diminishment of the right of the Corporate GP or any Affiliate
to compensation for services provided to the Partnership, no GP shall:
(i) sell, or otherwise dispose of, any of the Partnership's assets to the
Corporate GP or its Affiliates;
(ii) allocate any portion of its indirect expenses including, but not limited
to, salaries, rent, travel expenses and such other items generally falling
under the category of Corporate GP overhead expense to the Partnership;
(iii) cause or permit the Partnership to enter any agreement with the
Corporate GP or an Affiliate which is not in the best interest of and for the
benefit of the Partnership or which would be in contravention of the Corporate
GP's fiduciary obligations to the Partnership or pursuant to which the
Corporate GP or any Affiliate:
(A) would provide or sell any services, equipment, or supplies at rates
other than those charged to others; or
(B) would receive from the Partnership, Units of Partnership interest in
consideration for services rendered.
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(b) Compensation to any party, including the Corporate GP and any CTA
selected to trade for the Partnership may not exceed the most stringent
limitations in effect during the period Units are offered for sale imposed by
the North American Securities Administrators Association ("NASAA"). In the
event the compensation exceeds such limitations, the Corporate GP will
promptly reimburse the Partnership for such excess.
(c) Without concurrence of a Majority in Interest or receipt of Redemptions
equal to all or substantially all of the Partnership assets, no GP, including
the Corporate GP, may:
(i) Amend this Agreement except for those amendments that are specifically
authorized by this Agreement or do not adversely affect the rights of the
Limited Partners.
(ii) Voluntarily withdraw as a GP.
(iii) Appoint a substitute Corporate GP or Additional GP or allow any
substitute Corporate GP or Additional GP to resign; provided, however, one or
more Additional GPs may be appointed or may resign without obtaining the
consent of a Majority in Interest if the addition of such person is necessary,
or becomes no longer necessary, to preserve the tax status of the Partnership
as a partnership and not as a corporation or comply with NASAA guidelines or
any other law, regulations or rule or interpretation thereof by any regulator
authorized to qualify the Partnership interests for sale and such additional
GP has no authority to manage or control the Partnership.
(iv) Sell all or substantially all of the Partnership assets other than in
the ordinary course of business.
(v) Cause the merger or other reorganization of the Partnership.
(vi) Dissolve the Partnership other than because of an event, which by law,
requires such dissolution.
9.7 OBLIGATIONS OF CORPORATE GP. The Corporate GP shall:
(a) Devote such of its time to the business and affairs of the Partnership
as it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Partnership for the
benefit of the Partnership and the Limited Partners.
(b) Execute, file, record and/or publish all certificates, statements and
other documents and do any and all other things as may be appropriate for the
formation, qualification and operation of the Partnership and for the conduct
of its business in all appropriate jurisdictions including, but not limited
to, the compliance, at its expense, with all laws related to its qualification
to serve as the commodity pool operator of the Fund.
(c) Use its best efforts to maintain the status of the Partnership as a
partnership for United States Federal income tax purposes.
(d) Employ brokers, attorneys, accountants, consultants, and administrative
personnel who may be Affiliated with the Corporate GP to perform Partnership
business at the expense of the Partnership.
(e) Advance the Organization and initial Offering Expenses subject to
reimbursement by the Partnership for such expenses immediately upon the
Initial Closing and on each subsequent closing subject to any limitations
imposed by law.
(f) Employ only independent CTAs that are registered pursuant to the
Commodity Exchange Act to conduct trading and to otherwise establish and
monitor the trading policies of the Partnership; and the activities of the
partnership's trading advisor(s) in carrying out those policies.
(g) Have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in the Corporate GP's immediate
possession or control, and the Corporate GP will not employ or permit others
to employ such funds or assets in any manner except for the benefit of the
Partnership.
(h) Maintain a current list of the name, address, and number of Units owned
by each Limited Partner at the Corporate GP's principal office. Such list
shall be disclosed to any Partner or their representative at reasonable times,
upon request, either in person or by mail, upon payment, in advance, of the
reasonable cost of reproduction and mailing. The Partners and their
representatives shall be permitted access to all other records of the
Partnership, after adequate notice, at any reasonable time, at the offices of
the Partnership. The Corporate GP shall maintain and preserve such records
for a period of not less than six (6) years from the date they are generated.
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9.8 COMPENSATION TO THE CORPORATE GP. The Corporate GP may establish its
compensation, from time to time, for its services; provided, however, such
charges shall be:
(a) No more than:
(i) A sales commission and/or continuing service fee of up to ten percent
(10%);
(ii) A management fee of one half of one percent (1/2 of 1%) per month [six
percent (6%) per year] of the Net Asset Value of the Partnership, computed
and paid to the Corporate GP and/or non-affiliated independent investment or
trading advisor on the close of business on the last day of each month and an
incentive fee, paid quarterly, of up to fifteen percent (15%) of the New Net
Profit, or less earned upon Capital, and prorated to consider the date of
deposit of such Capital to the Partnership each year; provided, however, for
each percentage point (1%) of reduction in management fee, the incentive fee
may be increased by two percent (2%); i.e., upon reduction of the management
fee to zero (0), the incentive fee may be increased to twenty-seven percent
(27%); and
(iii) Fixed and/or round turn brokerage commissions provided they are
reasonable. Brokerage commissions will be presumed to be reasonable if they
are either eighty percent (80%) of the published retail rate plus Pit
Brokerage Fees or fourteen percent (14%) including Pit Brokerage Fees of the
average annual Net Assets of the Partnership.
(b) Reasonable when compared with similar services to similar partnerships.
ARTICLE X
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
10.1 LIMITATION OF LIABILITY. No Limited Partner shall be personally liable
for any of the debts of the Partnership or any of the losses thereof.
However, the amount committed by him to the Capital of the Partnership and his
interest in Partnership assets shall be subject to liability for Partnership
debts and obligations. Limited Partners may be liable to repay any wrongful
distribution of profits to them and may be liable for distributions (with
interest thereon) considered to be a return of Capital if necessary to satisfy
creditors of the Partnership.
10.2 NO MANAGEMENT RIGHTS. No Limited Partner shall take part in the
management of the business of the Partnership or transact any business for the
Partnership. No Limited Partner, as such, shall have the power to sign for or
to bind the Partnership.
10.3 CERTAIN RIGHTS. Provided the following, does not either (i) subject the
Limited Partners to unlimited liability or (ii) subject the Partnership to be
taxable as a Corporation for purposes of Federal Income tax laws, the
Partners, by a vote of a Majority in Interest, without the necessity for
concurrence by the Corporate GP, the Other GP-Pacult or any other GP, shall
have the following rights in addition to those granted elsewhere in this
Agreement:
(a) Amend the Partnership Agreement; provided, however, any amendment which
modifies the compensation or distributions to the Corporate GP or which
affects the duties of the Corporate GP requires the consent of the Corporate
GP.
(b) The Corporate GP and any Additional GP may be removed and a new
Corporate GP or Additional GP elected in accordance with the terms of this LP
Agreement.
(c) Cancel any contract for services with the Corporate GP or any Additional
GP, without penalty, upon 60 days written notice; provided, however, the
maximum period of any contract between the Corporate GP and any Additional GP
with the Partnership is one year; and, provided further, should any amendment
to this LP Agreement attempt to modify the compensation or distributions to
which the Corporate GP and any Additional GP is entitled or which affects the
duties of the Corporate GP or any Additional GP, such amendment will become
effective only upon the consent of such GP.
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(d) The right to approve, prior to sale, the sale or distribution, outside
the ordinary course of business, of all or substantially all of the assets of
the Partnership.
(e) Dissolve the Partnership.
(f) Any material changes in the Partnership's basic investment policies
including, but not limited to, the speculation and trade in commodity futures,
forward futures contracts, and options upon those contracts both within and
without the United States or the structure of the Partnership as a limited
partnership requires prior written notification of a meeting which identifies
the purpose of the meeting and the approval by a vote of the Majority in
Interest of the Partners.
10.4 CORPORATE GP ACTION WITHOUT LIMITED PARTNER APPROVAL. Notwithstanding
anything in this Agreement to the contrary, the Corporate GP may amend this
Agreement without any vote, consent, approval, authorization or other action
of any other Partner and without notice to any other Partner to:
(a) add to the representations, duties or obligations of the Corporate GP or
its Affiliates or any Additional GP or surrender any right or power granted to
the Corporate GP or its Affiliates or any Additional GP in this LP Agreement
for the benefit of the Limited Partners;
(b) cure any ambiguity, correct or supplement any provision in this
Agreement which may be inconsistent with any other provision in this
Agreement, or make any other provisions with respect to matters or questions
arising under this LP Agreement which will not be inconsistent with the intent
of this LP Agreement;
(c) delete or add any provision of this LP Agreement required to be so
deleted or added by the staff of the Securities and Exchange Commission, or by
a state securities law administrator or similar such official, which addition
or deletion is deemed by such official to be for the benefit or protection of
the Limited Partner or does not have a material adverse effect on the Limited
Partners generally or the Partnership;
(d) reflect the withdrawal, expulsion, addition or substitution of Partners;
(e) reflect the proposal, promulgation or amendment of Regulations under
Code section 704, or otherwise, to preserve the uniformity of interest in the
Partnership issued or sold from time to time, if, in the opinion of the
Corporate GP, the amendment does not have a material adverse effect on the
Limited Partners generally;
(f) elect for the Partnership to be bound by any successor statute to the
Act, if, in the opinion of the Corporate GP, the amendment does not have a
material adverse effect on the Limited Partners generally;
(g) conform this Agreement to changes in the Act or interpretations thereof
which, in the exclusive desecration of the Corporate GP, it believe
appropriate, necessary or desirable, if, in the Corporate GP's reasonable
opinion, such amendment does not have a materially adverse effect on the
Limited Partners generally or the Partnership;
(h) change the name of the Partnership;
(i) conform the provisions of this Agreement to any applicable requirements
of Federal of state law which, in the exclusive discretion of the Corporate
GP, it believes appropriate, necessary or desirable, if, in the Corporate GP's
reasonable opinion, such amendment does not have a material adverse effect on
the Limited Partners generally or the Partnership; and
(j) make any change which, in the exclusive discretion of the Corporate GP,
is advisable to qualify or to continue the qualification of the Partnership as
a limited partnership or a partnership in which the Limited Partners have
limited liability under the laws of any state or that is necessary or
advisable, in the exclusive discretion of the Corporate GP, so that the
Partnership will not be treated as an association taxable as a corporation for
Federal income tax purposes.
10.5 EXPULSION OF LIMITED PARTNERS. Anything herein to the contrary
notwithstanding,
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(a) If, at any time, the Corporate GP determines that any Limited Partner
has an ownership percentage of ten percent (10%) or more, the Partnership, in
the Corporate GP's exclusive discretion, may cause Redemption by that Limited
Partner of the number of Units necessary or advisable to reduce that Limited
Partner's ownership percentage to less than ten percent (10%). The Redemption
shall be effective as of the next Valuation Date or such other Valuation Date,
at the discretion of the Corporate GP.
(b) The Corporate GP has the right, in its sole discretion, to raise or
lower the minimum investment in the Partnership required for the admission or
retention of Units in the Partnership by a Partner; however such minimum
investment may not be lowered below $5,000. In the event the Corporate GP
does raise the minimum investment in the Partnership to an amount in excess of
any Partners Capital account, the Partnership shall provide notice to the
Partner of such event and allow the Partner 30 days to raise the Capital
account for that Partner to such raised amount, or more. In the event the
Partner does not so raise his Capital account to such minimum amount within 30
days, the Partner shall be deemed to have elected to withdraw from the
Partnership and all of his Units shall be Redeemed at the next Redemption date
as provided in this LP Agreement.
(c) Notwithstanding the foregoing, the Corporate GP, at its sole discretion,
may expel any Partner at anytime for any reason, by causing the Redemption of
that Partner's Units as of the next Valuation Date, or such other Valuation
Date as the Corporate GP may determine.
10.6 NOTIFICATION. Notice shall be sent to each Partner within seven
business days from the date of:
(a) any decline in the Net Unit Value to less than 50% of the initial
$1,000 or the highest Net Asset Value, whichever is greater, on the last
Valuation Date;
(b) any material change in contracts with the Corporate GP, any Additional
GP, any FCM, IB or CTA or any of their Affiliates including, but not limited
to, any addition or deletion of CTAs or any modification in connection with
the method of calculating the incentive fees;
(c) any other material change that affects the operation of the Partnership
or is a reportable event to the SEC or CFTC or any State Securities
Administrator or any self regulatory organization.
10.7 NOTIFICATION CONTENTS.
(a) a material change related to brokerage commissions shall not be made
until notice is given and the Partners, after such notice, have had the
opportunity for 30 days to Redeem pursuant to the terms of this LP Agreement;
(b) in addition, in regard to all other changes, the required notification
shall describe the change in detail, include a description of the Partners'
Redemption rights pursuant to the LP Agreement and voting rights, if
applicable, and a description of any material effect such changes may have on
the interests of the Partners.
10.8 EXERCISE OF RIGHTS. Upon receipt of a written request, executed by ten
percent (10%) or more of the holders of Units for a vote upon and to take
action with respect to any rights of the Partners under this LP, the Corporate
GP shall call a meeting of all Partners of the Partnership as provided in
Section 13.5 hereof to vote on the specific matters raised in the request.
10.9 EXAMINATION OF BOOKS AND RECORDS. A Limited Partner shall have the
right to examine the books and records of the Partnership at all reasonable
times, including the right to have such examination conducted at his sole
expense by any reasonable number of representatives. Notwithstanding the
foregoing, the Corporate GP may keep and withhold the names of the other
Partners, specific trading methods used by the CTA, and other designed
confidential and trade secret information from the Partners.
ARTICLE XI
ASSIGNMENT OF LIMITED PARTNERSHIP UNITS;
ADMISSION OF LIMITED PARTNERS
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11.1 RESTRICTION ON ASSIGNMENT. A Partner may not assign or transfer some or
all of his Units in the Partnership without the written consent of the
Corporate GP; provided, however, that in no event may an assignment be made or
permitted until after six months from the date of purchase of such assigned or
transferred Units(s) by said Partner; and, provided, further, that full Units
must be assigned and the assignor, if he is not assigning all of his Units,
will retain more than $5,000 in value of Units in the Partnership. No
transfers may be made where, after the transfer or assignment, either the
transferee/assignee or transferor/assignor would hold less than $5,000 in
value of Units in the Partnership, except transfers or assignments by gift,
inheritance, intrafamily transfers, family dissolutions and transfers to
Affiliates. Any such assignment shall be subject to all applicable
securities, commodity, and tax laws and the regulations promulgated under each
such law. The Corporate GP shall review any proposed assignment and shall
withhold its consent in the event it determines, in its sole discretion, that
such assignment could have an adverse effect on the business activities or the
legal or tax status of the Partnership. If the Corporate GP withholds consent
to a proposed transfer of Units in order to preserve the tax status of the
Partnership, or the characterization or treatment of Partnership income or
loss, the Corporate GP shall provide an opinion of counsel to support the
restriction on the transfer of Units Upon advice of counsel, the Corporate GP
shall eliminate or modify any restrictions on transfer or assignment at such
time as the restriction is no longer in place.
11.2 DOCUMENTATION OF ASSIGNMENT. The Corporate GP shall furnish to the
assigning Limited partner a proper form to duly effect such assignment. The
Corporate GP shall not be required to recognize any assignment and shall not
be liable to the assignee for any distributions made to the assigning Limited
Partner until the Corporate GP has received such form of assignment, properly
executed with signature guaranteed, together with the Certificate of Ownership
originally issued to the Limited Partner (or an indemnity bond in lieu
therefore) and such evidence of authority as the Corporate GP may reasonably
request and the Corporate GP shall have accepted such assignment.
ARTICLE XII
ACCOUNTING RECORDS, REPORTS AND DISTRIBUTIONS
12.1 DISTRIBUTIONS. Each Partner will have a Capital account, and its
initial balance will be the amount the Partner paid for the Partner's Units.
The Net Assets of the Partnership will be determined monthly, and any increase
or decrease from the end of the preceding month will be added to or subtracted
from the accounts of the Partners in the ratio that each account bears to all
accounts. Distributions from profits or Capital will be made solely at the
discretion of the Corporate GP.
12.2 BOOKS OF ACCOUNT. Proper books of account shall be kept and there shall
be entered therein all transactions, matters and things relating to the
Partnership's business as required by applicable law and the regulations
promulgated thereunder and as are usually entered into books of account kept
by persons engaged in business of like character. The books of account shall
be kept at the principal office of the Corporate GP and each Limited Partner
(or any duly constituted agent of a Limited Partner) shall have, at all times
during reasonable business hours, free access, subject to rules of
confidentiality established by the Corporate GP, the right to inspect and copy
the same. Such books of account shall be kept on an accrual basis. A Capital
account shall be established and maintained from each Partner, as set forth
above.
(a) Each Partner shall be furnished as of the end of each Fiscal Year with
(1) annual financial statements, audited by a certified public accountant,
within 90 days from the end of such year; together with such other reports (in
such detail) as are required to be given to Partners by applicable law,
specifically, annual and periodic reports will be supplied by the Corporate GP
to the other Partners in conformance with the provisions of CFTC regulations
for Reporting to Pool Participants, 17 C.F.R. Section 4.22, as amended, from
time to time, and, (2) any other reports or information which the Corporate
GP, in its sole discretion, determines to be necessary or appropriate.
(b) Appropriate tax information (adequate to enable each Partner to complete
and file his Federal tax return) shall be delivered to such Partner no later
than March 31 following the end of each Calendar Year.
12.3 CALCULATION OF NET ASSET VALUE. The GP shall calculate an estimated or
provisional daily Net Asset Value. At the close of each month, the Net Asset
Value for such month shall be calculated and reports delivered to Partners as
of the last day of each month by the 20th of the following month. Upon
request, the Corporate GP shall make available to any Partner the Net Unit
Value.
12.4 MAINTENANCE OF RECORDS. The Corporate GP shall maintain and retain all
records as required by law and/or the NASAA Guidelines including, but not
limited to, (1) all books of account required by this Article; and, (2) a
record of the information obtained to indicate that a Partner meets the
applicable investor suitability standards.
12.5 TAX RETURNS. The Corporate GP shall cause tax returns for the
Partnership to be prepared and timely filed with the appropriate authorities.
The Corporate GP shall cause the Partnership to pay any taxes payable by the
Partnership; provided, however, that the Corporate GP shall not be required to
cause the Partnership to pay any tax so long as the Corporate GP or the
Partnership shall be in good faith and by appropriate means contesting the
applicability, validity or amount thereof and such contest shall not
materially endanger any right or interest of the Partnership.
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12.6 TAX ELECTIONS. The Corporate GP shall from time to time, make such tax
elections or allocations deemed necessary or desirable to carry out the
business of the Partnership or the purposes of this Agreement. The Corporate
GP is authorized by this LP Agreement to perform all duties imposed by
Sections 6221 through 6232 of the Internal Revenue Code on the Corporate GP as
"tax matters partner" of the Partnership, including, but not limited to, the
following: (i) the power to conduct all audits and other administrative
proceedings with respect to Partnership tax items; (ii) the power to extend
the statute of limitations for all Limited Partners with respect to
Partnership tax items; (iii) the power to file a petition with an appropriate
Federal court for a review of a final Partnership administrative adjustment;
and, (iv) a power of attorney to enter a settlement with the Internal Revenue
Service on behalf of, and binding upon, those Limited Partners that hold than
a 1% interest in the Partnership at the time of the settlement unless any said
Limited Partner shall have notified the Internal Revenue Service and the
Corporate GP by certified mail, return receipt requested, served within 30
days of service of the notice upon said Limited Partner of the existence of
the IRS claim against the Partnership by the Corporate GP, that the Corporate
GP is not authorized to act on such Limited Partner's behalf.
ARTICLE XIII
AMENDMENTS
13.1 RESTRICTION ON AMENDMENTS. No amendment to this Agreement shall be
effective or binding upon the Partners unless the same shall have been
approved by a Majority in Interest of the Partners; provided, however, the
Corporate GP may adopt amendments without such approval which are, in the sole
judgment of the Corporate GP, deemed necessary or desirable to maintain the
business or limited partnership or other favorable tax status of the
Partnership, or permit a Public Offering of the Units pursuant to any Federal
or state law, regulation, rule or guideline or to maintain the Partnership and
the Corporate GP and its principals and any Partner in compliance with the
laws, regulations, rules and guidelines which govern or are applicable to the
business, including the requirements of any self regulatory organization, or
to substitute or add or withdraw persons as Limited Partners; provided,
however, no such change may be made to the investment strategy or limited
liability of the Limited Partners.
13.2 ADMISSION OF ADDITIONAL PARTNERS. At any time, the Corporate GP may, in
its sole discretion and subject to applicable law, admit additional Partners.
Each newly admitted Partner must contribute cash equal to the Net Unit Value
of the Partnership for each Unit to be acquired. The terms of any additional
offering may be different from the terms of the initial offering. All
expenses of any such additional offering shall be borne by the either the
Partnership or the subscribers thereto, as determined in the sole discretion
of the Corporate GP. Pursuant to Article VI, the Corporate GP may consent to
and admit any assignee of Units as a substituted Partner. There is no maximum
aggregate amount of Units which may be offered and sold by the Partnership or
on the amount of contributions which may be received by the Partnership.
13.3 TERMINATION OF OFFERINGS; ADDITIONAL OFFERINGS. Notwithstanding
anything stated herein to the contrary, the Corporate GP may from time to
time, in its sole discretion, limit the number of Units to be offered,
terminate any offering of Units, or register additional Units and/or make
additional public or private offerings of Units. No Limited Partner shall
have any preemptive, preferential or other rights with respect to the issuance
or sale of any additional Units. No Limited Partner shall have the right to
consent to the admission of any additional Limited Partners.
13.4 NOTICE OF RESTRICTED TRANSFER. There is no obligation upon the
Partnership to issue certificates of ownership. However, should the Corporate
GP elect to cause the Partnership to issue certificates of ownership, each
certificate of Limited Partnership shall be subject to and contain the
following notice:
THE LIMITED PARTNER MUST DETERMINE IF THE PARTNERSHIP INTERESTS REPRESENTED BY
THIS LIMITED PARTNERSHIP AGREEMENT MAY BE TRANSFERRED IN ACCORDANCE WITH
APPLICABLE FEDERAL AND STATE LAWS AND REFERENCE MUST BE MADE TO THE OFFERING
DOCUMENTATION, LIMITED PARTNERSHIP AGREEMENT, AND LEGAL COUNSEL CHOSEN BY THE
INVESTOR TO DETERMINE THE RIGHT OF THE INVESTOR TO RESELL THE UNITS EVIDENCED
HEREBY. THESE LIMITED PARTNERSHIP INTERESTS SHALL NOT BE TRANSFERABLE BY THE
REGISTERED HOLDER EXCEPT BY CONSENT OF THE CORPORATE GP AND AS OTHERWISE
PROVIDED IN THE PARTNERSHIP AGREEMENT AND UPON THE ISSUANCE OF A FAVORABLE
OPINION OF COUNSEL FOR THE LIMITED PARTNERSHIP, AND/OR SUBMISSION TO THE
LIMITED PARTNERSHIP OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE
LIMITED PARTNERSHIP, THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER, APPLICABLE STATE SECURITIES LAWS. OR CAUSE THE
PARTNERSHIP TO BE TAXED AS A CORPORATION.
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13.5 MEETINGS OF PARTNERS. The Corporate GP may call a meeting for any
purpose at the cost of the Partnership. A meeting of Partners may be also
called by ten percent (10%) of the other Partners by written request that
details the purpose of such meeting. The cost of distribution of the Notice
of Meeting and Request to all Partners of any such meeting will be borne by
the Fund. The Corporate GP shall, within fifteen (15) days thereafter,
provide written notice to all Partners, either in person or by first class,
certified mail, of the purpose of the meeting, specify a reasonable time,
place, and date, which shall be not less than thirty (30) or more than sixty
(60) days, thereafter. An Amendment shall be adopted and binding upon all
parties hereto if a Majority in Interest of the Partners votes for the
adoption of such amendment. Partners may vote in person or by written proxy
delivered to any such meeting. Meetings of Partners may also be held by
conference telephone where all Partners can hear one another.
13.6 RIGHT OF CORPORATE GP TO RESIGN. The Other GP-Pacult may submit his
resignation as Other GP at any time for any reason without consent of the
Corporate GP or any other Partner upon one hundred twenty (120) days prior
written notice to the other Partners. The Corporate GP may resign or assign
any portion of its interest in the Partnership at anytime to a third party and
become a Limited Partner with respect to the balance of its interest in the
Partnership, if any, if it provides one hundred twenty (120) days prior
written notice to all other Partners of its intention to resign and states in
such notice the name of the intended assignee who is to become substitute GP
and the information reasonably appropriate to enable the Partners to decide
whether or not to approve the substitution or, in the alternative, provide
notice that the partners must elect a successor GP. In the event of the
voluntary withdrawal by the Corporate GP, the Corporate GP shall pay the
Partnership's legal fees, recording fees and all other expenses incurred as a
result of its withdrawal. Upon resignation, the Corporate GP shall be paid
the items identified in Section 13.7 below and be relieved of all
responsibility for the future operation of the Partnership.
13.7 AMENDMENT INVOLVING SUCCESSOR CORPORATE GP. Should a resignation or an
amendment to the Agreement provide for a change in the Corporate GP upon the
conditions provided in this Agreement, the election and admission of a person
or persons as a successor or successors to the Corporate GP, shall require the
following conditions: the Corporate GP shall retire and withdraw as Corporate
GP and the Partnership business shall be continued by the successor GP or GPs,
and such amendment shall expressly provide that on or before the effective
date of removal.
(a) The Corporate GP shall be permitted to Redeem 100% of its Units as of
the Valuation Date following its removal or resignation in cash equal to the
Net Asset Value of such Corporate GP's interest in the Partnership.
(b) The Partnership shall pay to the removed or resigned Corporate GP an
amount equal to the Appraised Value of such Corporate GP's assets to be
transferred to the successor GP to enable the successor to continue the
business of the Partnership. The Appraised Value of the withdrawing Corporate
GP's interest in the Partnership shall equal such Corporate GP's interest in
the sum of (1) the Expenses advanced by the Corporate GP to the Partnership,
(2) all cash items, (3) all prepaid expenses and accounts receivable less a
reasonable discount for doubtful accounts, and (4) the Net Book Value of all
other assets, unless the withdrawing Corporate GP or the successor Corporate
GP believes that the net book value of an asset does not fairly represent its
fair market value in which event such Corporate GP shall cause, at its
expense, an independent appraisal to be made by a person selected by a
Majority in Interest of the Partners to determine its value.
(c) The successor Corporate GP and the Partnership shall indemnify the
former Corporate GP for all future activities of the Fund.
ARTICLE XIV
REDEMPTION
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14.1 REDEMPTION. A Partner (including any approved assignee who becomes a
Limited Partner) may request to withdraw any part or all of his Capital
Contribution and undistributed profits, if any, in the Partnership by
submission of a request to the General Partner (such request for withdrawal is
called a "Redemption"). Redemption shall be at the Net Asset Value per Unit
determined at the close of business on the last day of the period established,
from time to time, by the Corporate GP for Redemptions subject to the
limitations provided in 14.2 below. Such Redemptions shall be no less often
than quarterly; provided, however, Redemption may be deferred until after the
lapse of twelve months from the date of initial purchase of the Units and,
provided further, that the Partner maintain an investment in the Partnership
of $5,000 or more.
14.2 REDEMPTION PROCEDURES. Redemption shall be after all liabilities,
contingent, accrued, reserved in amounts determined by the Corporate GP have
been deducted and there remains property of the Partnership sufficient to pay
the Net Unit Value as defined in Paragraph 1.3(b). As used herein, "request
for Redemption" shall mean a letter mailed or delivered by a Partner and
received by the Corporate GP prior to the effective date for which Redemption
is requested. Upon Redemption, a Partner shall receive, on or before the last
day of the following month, an amount equal to the Net Unit Value redeemed as
of the date for which the request for Redemption became effective, less
accrued expenses and any amount owed by such Partner to the Partnership. All
Redemption requests shall be subject to the following:
(a) If redemption requests received from limited partners exceed funds
available, redemptions will be allocated on a prorated basis for the then
current redemption period and paid as a preference in future redemptions
periods as cash becomes available.
(b) The Corporate GP in its sole discretion may, upon notice to the
Partners, declare additional Redemption dates and may cause the Partnership to
redeem fractions of Units and, prior to registration of Units for public sale,
redeem Units held by Partners who do not hold the required minimum amount of
Units established, from time to time, by the Corporate GP.
(c) The general partner may impose a redemption fee during the first year of
investment not to exceed 4%. The amount of any cash distributions and amounts
paid upon Redemption of Units as of the end of such month shall be subtracted
from the Capital account of such Partner.
14.3 SPECIAL REDEMPTION.
(a) In the event the Net Unit Value falls to less than fifty percent (50%)
of the Net Asset Value established by the greater of the initial offering
price of one thousand dollars ($1,000), less commissions and other charges, or
such higher value earned after payment of the incentive fee for the addition
of profits, the Corporate GP shall immediately suspend all trading, provide
immediate notice, in accordance with the terms of this Agreement, to all
Partners of the reduction in Net Asset Value, and afford all Partners the
opportunity for fifteen (15) days after the date of such notice to Redeem
their Units in accordance with the provisions of Section 14.1 and 14.2, above.
No trading shall commence until after such fifteen (15) day period.
(b) Until such time as the Corporate GP elects to qualify the Partnership
Units for public sale, the Corporate GP will establish, from time to time, the
minimum amount that each Limited Partner will be required to contribute to
Capital of the Partnership. Upon receipt of notice from the Corporate GP of
such minimum (which will be equally applicable to all Limited Partners), each
Limited Partner will be required to contribute sufficient Capital to equal or
exceed such minimum, The failure to contribute such Capital within ten days
after receipt of said notice from the Corporate GP shall be deemed a request
by the Limited Partner for redemption of 100% of his interest in the
Partnership and termination as a Partner. Upon election by the Corporate GP
and qualification of the Partnership Units for public sale, there will be no
further right of the Corporate GP to give notice of an increase in the minimum
amount that all Limited Partners will be required to contribute to Capital of
the Partnership. Except for the increase in the minimum amount that all
Limited Partners, in the sole discretion of the Corporate GP, shall be
required to contribute to Capital or suffer redemption, there will be no
required contribution or assessments of the Limited Partners.
ARTICLE XV
NATURE OF PARTNER'S LIABILITIES FOR CLAIMS
15.1 PROSECUTION OF CLAIMS. The Corporate GP shall arrange to prosecute,
defend, settle or compromise actions at law or in equity or with any party at
the expense of the Partnership as such may be necessary or desirable to
enforce, protect, or maintain Partnership interests.
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15.2 SATISFACTION OF CLAIMS. The Corporate GP shall satisfy any claims
against, errors asserted, or other liability of the Partnership and any
judgment, decree, decision or settlement, first out of any insurance proceeds
available therefore, next, out of Partnership assets and income, and finally
out of the assets and income of the Corporate GP and any Other GP.
15.3 CORPORATE GP DECISION. The decisions made by the Corporate GP in regard
to the prosecution or settlement of claims, errors, and other liabilities,
will be final unless contested and put to a vote of Partners pursuant to this
LP Agreement, in which case a vote of a Majority in Interest will determine
the course of action.
15.4 EXONERATION, INDEMNIFICATION, AND NO ANTICIPATION OF PAYMENTS. The GP
shall not be liable to the Partnership or the Partners for any error in
judgment or any mistake of law or fact or any act done in good faith or any
failure to comply with its obligations hereunder except for breach of
fiduciary obligation owed to the Partnership or negligence or wrongful action
on its part in the management of Partnership affairs or violation of Federal
or state securities laws in connection with the offering of Units for sale.
In addition:
(a) The GP will be indemnified for liabilities and expenses arising from any
threatened, pending or completed action or suit in which it or any affiliate
is a party or is threatened to be made a party by reason of the fact that it
is or was the GP of the Partnership (other than an action by the Partnership
or a Partner against the GP which is finally resolved in favor of the
Partnership or Partner). The Partnership will indemnify the GP and its
affiliates against expenses, including attorney's fees, judgments and amounts
paid in settlement of an action, suit or proceeding if it has acted in good
faith and in a manner it reasonably believed to be in or not opposed to the
best interest of the Partnership, and provided that its conduct did not
constitute negligence, misconduct, or a breach of fiduciary obligations in the
performance of its duty to the Partnership or a violation of the securities
laws. The termination of any action, suit or proceeding by judgment, order or
settlement against the Partnership shall not of itself create a presumption
that the GP or any affiliate did not act in good faith and not in the best
interest of the Partnership.
No indemnification shall be available in respect of any allegation of a
violation of the Federal or state securities laws by or against the GP, any
broker/dealer or any other party unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violation as to the GP or broker/dealer or such other party; (ii) a court of
competent jurisdiction approves a settlement of the claims against the GP or
any broker/dealer or any other party and finds, specifically, that the
indemnification of the settlement and related costs should be made after the
court of law has been made aware (x) that the Securities and Exchange
Commission opposes such indemnification and (y) of the position of any
applicable state securities regulatory authority where the Partnership
Interests were offered or sold as to indemnification for violations of
securities laws.
Notwithstanding any provision of this Agreement to the contrary, the
Partnership shall not advance the expenses or pay for any insurance to pay for
the costs of the defense or any liability which is prohibited from being
indemnified pursuant to NASAA Guideline II.F. However, the Partnership may
advance the GP's or any of its Affiliates' legal expenses and other costs
incurred as a result of any legal action which alleges a breach of the Federal
or state securities laws only if the following conditions are satisfied: (i)
the legal action relates to acts or omissions with respect to the performance
of duties or services on behalf of the Partnership; (ii) the legal action is
initiated by a third party who is not a Limited Partner, or the legal action
is initiated by a Limited Partner and an independent arbitration panel,
administrative law judge, or court of competent jurisdiction specifically
approves such advancement; and, (iii) the GP or its Affiliates undertake to
repay the advanced funds to the Partnership, together with the applicable
legal rate of interest thereon, in cases which such party is not entitled to
indemnification under NASAA Guideline II.F.
(b) The indemnification of a GP shall be limited to and recoverable only out
of the assets of the Partnership. Notwithstanding the foregoing, the
Partnership's indemnification of the GP shall be limited to the amount of such
loss, liability or damage which is not otherwise compensated for by insurance
carried for the benefit of the Partnership. Additionally, the Partnership may
not incur the cost of that portion of liability insurance which insures the GP
for any liability as to which the GP is prohibited from being indemnified
under this Agreement.
(c) Any change in the requirements imposed by the Securities and Exchange
Commission and the state securities administrators in regard to
indemnification shall cause a corresponding change in the right of the GP to
indemnification.
(d) The indemnification of the GP provided in this Article shall extend to
any employee, agent, attorney, certified public accountant, or Affiliate of
the Partnership and the GP.
(e) The Partnership shall indemnify, to the extent of the Partnership
assets, each Partner against any claims of liability asserted against a
Partner solely because he is a Partner in the Partnership.
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(f) In the event the Partnership or any Partner is made a party to any
claim, dispute or litigation or otherwise incurs any loss or expense, as a
result of or in connection with any Partner's activities unrelated to the
Partnership business or as a result of an unfounded claim against the
Partnership or any other Partner brought as a result of alleged actions by
said Partner, the Partner which was responsible for the allegations which
caused such loss or expense shall indemnify and reimburse the Partnership and
all other Partners for all loss and expense incurred, including attorneys'
fees and costs.
(g) No creditor of a Partner shall have a right to vote Units. Nor may any
Partner or creditor of a Partner anticipate any principal or income from the
Fund prior to the approval of a Redemption Request or the payment of a
distribution from the Fund.
(h) The GP may rely upon the written opinion of legal counsel selected by
the Partnership as to the taking of any action or refrain from any action on
behalf of the Partnership without incurring any liability to the Partnership
or any Partner.
ARTICLE XVI
CONFLICTS OF INTEREST, HIGH RISK, AND SPECULATIVE INVESTMENT
16.1 CONFLICTS OF INTEREST. Significant actual and potential conflicts of
interest exist in the structure and operation of the Partnership. The
Corporate GP has used its best efforts to identify and describe all existing
and potential conflicts of interest that may be present in this LP Agreement.
The Corporate GP intends to assert that all Partners have, by subscribing to
the Partnership, consented to the existence of such existing and potential
conflicts of interest as are described in this LP Agreement in the event of
any claim or other proceeding by any Partner is brought against the Corporate
GP, and its Principals, any Other GPs and their Principals, any CTAs and their
Principals, any FCMs and their Principals, any IB and their Principals or any
Affiliate of any of them that alleges that such conflicts violated any duty
owed to said Partner.
(a) MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GPs, THE
CTAs, AND THEIR PRINCIPALS. The right of any GP, in any capacity, to manage
and the actual management by the CTA of accounts they or their Affiliates own
or control and other commodity accounts and pools, presents existing and
potential conflicts of interest. There is no limitation upon the right of the
any GP and their principals, the CTA, or any of their Affiliates to engage in
trading commodities for their own account. Having said that, the Corporate GP
will provide and obtain representations from all Other GPs and persons who
perform services for the Partnership and their Affiliates that no prior orders
known in advance to be placed by the Partnership will be entered for their
personal accounts. The Partnership's CTA will be effecting trades for its own
accounts and for others (including other commodity pools in competition with
this Pool) on a discretionary basis. It is possible that positions taken by
the CTA for other accounts may be taken ahead of or opposite positions taken
on behalf of the Partnership. The Corporate GP and any Other GP, should they
form other commodity pools, and the CTA, may have financial incentives to
favor other accounts over the Partnership. In the event the Corporate GP, or
any Other GP or the CTA, or any of their principals trade for their own
account, such trading records shall not be made available for inspection. The
Corporate GP does not presently intend to engage in trading for its own
account; however, the CTA reserves the right to trade for its own account.
And no representation can be made regarding the trading by any Other GP to be
admitted to the Partnership in the futures. Any trading for their personal
accounts by the Corporate GP, any Other GP, and any Commodity Trading Advisor
selected to trade for the Partnership or any of their principals could present
a conflict of interest in regard to position limits, timing of the taking of
positions or other similar conflicts. The result to the Partnership would be
a reduction in the potential for profit should the entry or exit of positions
be at unfavorable prices by virtue of position limits or entry of other trades
in front of the Partnership trades by any GP or CTA responsible for the
management of the Partnership.
(b) POSSIBLE RETENTION OF VOTING CONTROL BY THE CORPORATE GP. There is no
limit upon the value of interests in the Partnership the Corporate GP and its
principal and Affiliates may purchase. It will be possible for them to vote,
individually or as a block, to create a conflict with the best interests of
the Partnership and the other Partners.
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(c) CORPORATE GP TO REMAIN AGAINST POSSIBLE BEST INTEREST OF PARTNERSHIP.
As the Corporate GP has a financial interest in the operation of the
Partnership in the form of an incentive fee, it is unlikely that the Corporate
GP would voluntarily resign, even if such resignation would be in the best
interest of the Partnership and the other Partners
(d) FEES AND CHARGES TO THE PARTNERSHIP PAID TO CORPORATE GP NOT NEGOTIATED.
The incentive fees, if any, paid to the Corporate GP and the amount of the
fixed brokerage commissions payable to the Corporate GP by the Partnership
have not been negotiated at arm's length. And, the Corporate GP has a
conflict of interest in the definition of the risks to be assumed by the CTA
by virtue of the incentive fee to be paid to the Corporate GP. The Corporate
GP could allow the CTA selected to take trades that are other improvident to
improve the chance of profit rather than protect the best interests of the
Partnership. The arrangements between the Corporate GP and the Partnership
with respect to the payment of the commissions are believed by the Corporate
GP to be fair to the Partnership.
(e) CORPORATE GP COULD WITHHOLD APPROVAL OF REDEMPTIONS. The Corporate GP
has an incentive to withhold distributions and to withhold approval of
Redemptions because the Corporate GP receives an incentive fee on profits that
depend, in part, on the amount of equity available to the trading advisor to
trade.
(f) HIGH RISK TRADING BY THE GP and CTA, or BOTH, TO GENERATE INCENTIVE
FEES. As a general rule, the greater the risk assumed, the greater the
potential for profit. Because the Corporate GP and the CTA are compensated by
the Partnership by an incentive fee based on the New Net Profit earned by the
Partnership it is possible for the Corporate GP to fail to supervise and for
the CTA, independently, to select trades which normally would be too risky for
the Partnership in the attempt to earn the incentive fees.
(g) THE CORPORATE GP TO RETAIN A SHARE OF THE COMMISSIONS. The Partnership
will pay a fixed brokerage commission to the Corporate GP, and retains the
difference between that amount and the round turn commissions it pays to the
FCM. The Corporate GP has an incentive to select CTAs that trade less
frequently to increase the share of profits earned by the Corporate GP from
the commissions charged to the Partnership. This risk is offset by the
payment of an incentive fee based upon the New Net Profit to the Corporate GP.
16.2 NO RESOLUTION OF CONFLICTS PROCEDURES. As is typical in many
partnerships, the Corporate GP has not established formal procedures, and none
are anticipated in the future, to resolve the actual and potential conflicts
of interest that are present the structure of the Partnership or that may
arise in the future. It will be extremely difficult, if not impossible, for
the Corporate GP to assure that these and future potential conflicts will not,
in fact, result in adverse consequences to the Partnership or the LPs. The
foregoing list of risk factors and potential conflicts of interest is complete
as of the date of this Prospectus, however, additional risks and conflicts may
occur which are not presently foreseen by the Corporate GP. Investors are not
to construe the risks identified in this LP Agreement as legal or tax advice.
Before determining to invest in the Units, potential limited partners should
read this entire LP Agreement as well as the Partnership's offering documents
including, but not limited to, the subscription agreement, and consult with
their own personal legal, tax, and other professional advisors as to the
legal, tax, and economic aspects of a purchase of Units and the suitability of
such purchase for them.
16.3 INTERESTS OF NAMED EXPERTS AND COUNSEL. The Corporate GP has or will
employ legal counsel to prepare Offering Documents, provide explanations of
the tax consequences of an investment in the Partnership and opine upon the
legality of the issuance of the Units. No law firm selected nor its
principals, nor any accountant or other expert employed by the Corporate GP to
render advice in connection with the preparation of the Offering Documents or
any other documents attendant thereto, have any present interest or future
expectation of ownership in the Partnership or its Corporate GP or the
Underwriter or the CTAs or the IB or the FCM. A substantial portion of the
legal fees for preparation of the offering documents is contingent upon the
sale of the Minimum and the Maximum of the Units to be offered for sale. All
experts are disclosed in the Partnership's prospectus.
ARTICLE XVII
POWER OF ATTORNEY
17.1 POWER OF ATTORNEY EXECUTED CONCURRENTLY. Concurrent with the written
acceptance and adoption of the provisions of this Agreement, each Partner
shall execute and deliver to the Corporate GP, a Power of Attorney (paragraph
5 of the Subscription Agreement). Said Power of Attorney irrevocably
constitutes and appoints the Corporate GP as a true and lawful attorney-in-
fact and agent for such Partner with full power and authority to act in his
name and on his behalf in the execution, acknowledgment and filing of
documents, which will include, but shall not be limited to, the following:
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(a) Any certificates and other instruments, including but not limited to, a
Certificate of Limited partnership and amendments thereto and a certificate of
doing business under an assumed name, which the Corporate GP deems appropriate
to qualify or continue the Partnership as a limited partnership in the
jurisdictions in which the Partnership may conduct business, so long as such
qualifications and continuations are in accordance with the terms of this
Agreement or any amendment hereto, or which may be required to be filed by the
Partnership or the Partners under the laws of any jurisdiction;
(b) Any other instrument which may be required to be filed by the
Partnership under Federal or any state laws or by any governmental agency or
which the Corporate GP deems advisable to file; and
(c) Any documents required to effect the continuation of the Partnership,
the admission of the signer of the Power as a Limited Partner or of others as
additional or substituted Partners or Limited Partners, or the dissolution and
termination of the Partnership, provided such continuation, admission,
dissolution or termination is pursuant to the terms of this Agreement.
17.2 EFFECT OF POWER OF ATTORNEY. The Power of Attorney concurrently granted
by each Partner to the Corporate GP is a special Power of Attorney coupled
with an interest, is irrevocable, and shall survive the death or legal
incapacity of the Partner; and may be exercised by the Corporate GP for each
Partner by a facsimile signature of one of its officers or by listing all of
the Partners executing any instrument with a single signature of one of its
officers acting as attorney-in-fact for all of them; and shall survive the
delivery of an assignment by a Partner of the whole or any portion of his
interest in the Partnership; except that where the assignee thereof has been
approved by the Corporate GP for admission to the Partnership as a substituted
partner, the Power of Attorney shall survive the delivery of such assignment
for the sole purpose of enabling the Corporate GP to execute, acknowledge and
file an instrument necessary to effect such substitution.
17.3 FURTHER ASSURANCES. Upon request, each Limited Partner agrees to
execute and deliver to the Partnership, within thirty (30) days after receipt
of a written request from the Corporate GP, a separate form of power of
attorney granting the same powers described above; and such other further
statements of interest, holdings, designations, powers of attorney and other
instruments as the Corporate GP deems necessary or desirable.
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
18.1 NOTICES. Notices, requests, reports, payments or other communications
required to be given or made hereunder shall be in writing and shall be deemed
to be delivered when properly addressed and posted by United States registered
or certified mail or delivered by independent courier which provides an record
of receipt, postage or delivery fees prepaid, properly addressed to the party
being given such notice at its last known address. Addresses shown on the
Schedule of Limited Partners records of the Partnership shall be considered
the last known address of each said party unless the Corporate GP is otherwise
notified in writing.
18.2 NATURE OF INTEREST OF PARTNERS. The interest of each Partner in the
Partnership is personal property. No Partner may anticipate the distribution
or redemption of principal or income from the Partnership and no assignment to
secure the position of a lender or any other creditor or trustee appointed for
the benefit of creditors of a Partner shall be valid without the express
written consent of the Corporate GP.
18.3 GOVERNING LAW AND PRESUMPTION OF GOOD FAITH. This Agreement shall be
construed in accordance with and governed in all respects by the laws of the
State of Delaware. All Partners agree to consent to the jurisdiction and to
bring all actions for claims related to the Partnership and the sale of the
Units in the Federal or state courts for the State and County of the principal
office of the Partnership as it is established, from time to time, by the
Corporate GP. Currently, the principal office of the Partnership is located
in Steuben County, Indiana. All actions of the Corporate GP in furtherance of
partnership business are presumed to be in good faith.
18.4 SUCCESSORS IN INTEREST. This Agreement shall be binding on and inure to
the benefit of he parties hereto and, to the extent permitted by this
Agreement, their respective heirs, executors, administrators, personal
representatives, successors and assigns.
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18.5 INTEGRATION. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous written and verbal agreements and the understandings of such
parties in connection herewith. Any amendment or supplement made to this LP
Agreement must be in writing.
18.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. In such event, each counterpart shall constitute an original
and all such counterparts shall constitute one agreement. The addition of
Limited Partners pursuant to the power of attorney granted to the Corporate GP
shall not be deemed amendments to alter the rights of the other Partners under
this Agreement.
18.7 SEVERABILITY. Any provision of this Agreement, which is invalid,
illegal, or unenforceable in any respect in any jurisdiction, shall be, as to
such jurisdiction, ineffective to the extent of such invalidity, illegality or
unenforceability. The remaining provisions hereof in such jurisdiction shall
be and remain effective. Any such invalidity, illegality or unenforceability
in any jurisdiction shall not invalidate or in any way effect the validity,
legality or enforceability of such provision or the remainder of this
Agreement in any other jurisdiction.
18.8 NO WAIVER. The failure of any Partner to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
18.9 HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
18.10 RIGHTS AND REMEDIES CUMULATIVE. This rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
Partner shall not preclude or waive his right to use addition to any other
rights such Partner may have by law, statute, ordinance or otherwise.
18.11 WAIVER OF RIGHT TO PARTITION. Each of the Partners irrevocably waives,
during the term of the Partnership, any right that it may have to maintain any
action for partition with respect to the property and assets of the
Partnership.
18.12 WAIVER OF CREDITORS. No creditor who makes a non-recourse loan to the
Partnership shall have or acquire at any time as a result of making the loan,
any direct or indirect interest in the profits, Capital, or property of the
Partnership other than as a secured creditor.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Corporate GP: Other GP:
WHITE OAK FINANCIAL SERVICES, INCORPORATED
By: _____________________________ By: _____________________________
Michael P. Pacult, President Michael P. Pacult, Other GP
Initial Limited Partner:
By: _____________________________
Michael P. Pacult, Limited Partner
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EXHIBIT B TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
REQUEST FOR REDEMPTION
To: White Oak Financial Services, Inc.
General Partner ____________________________
5914 N. 300 West Our Social Security Number or
P. O. Drawer C Taxpayer ID Number
Fremont, IN 46737
Dear General Partner:
The undersigned hereby requests redemption ("Redemption"), as defined
in and subject to all the terms and conditions disclosed in the Offering
Circular (the "Prospectus") delivered to the undersigned at the time of our
purchase of limited partnership interests (the "Units") in Providence Select
Fund, Limited Partnership, (the "Fund"), of _______________Units (insert the
number of Units to be Redeemed). This Redemption request must be received by
you no later than ten (10) days prior to the last business day of
the month in which the Redemption is to occur. Once this Redemption request
is approved and accepted by you as General Partner, it will be paid at the
Net Asset Value per Unit, as described in the Prospectus, as of the close of
business at the end of the month following such approval. The undersigned
may be charged a redemption fee of no more than 4% if this Redemption request
is made within the first three months of investment, 3% during the second
three months, 2% during the third three months, 1% during the fourth three
months and none if made in the thirteenth month of investment or thereafter.
The undersigned hereby represents and warrants that the undersigned is
the true, lawful and beneficial owner of the Units to which this Request is
made with full power and authority to request Redemption of such Units.
Such Units are not subject to any pledge or otherwise encumbered.
United States Taxable Limited Partners Only - Under penalty of perjury,
the undersigned hereby certifies that the Social Security Number or Taxpayer
ID Number indicated on this Request for Redemption is the undersigned's true,
cared and complete Social Security Number or Taxpayer ID Number and that the
undersigned is not subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code.
Non United States Limited Partners Only - Under penalty of perjury, the
undersigned hereby certifies that (a) the undersigned is not a citizen or
resident of the United States or (b) (in the case of an investor which is not
an individual) the investor is not a United States corporation, partnership,
estate or trust.
SIGNATURE(S) MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
Please forward a fund check for the Redemption proceeds to the undersigned
at:
_____________________________________________________________________________
Name Street City, State and Zip Code
Entity Limited Partner Individual Limited Partners(s)
________________________________ _______________________________
(Name of Entity) (Signature of Limited Partner)
By:
________________________________ ________________________________
(Authorized corporate officer, partner, (Signature of Limited Partner)
custodian or trustee)
________________________________
(Title)
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EXHIBIT C TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for
Providence Select Fund Limited Partnership (the "Fund"), each purchaser
("Purchaser") of Limited Partnership Interests (the "Units") in the
Partnership irrevocably subscribes for Units at a price equal to the Net Asset
Value per Unit as of the end of the month in which the subscription is
accepted as described in the Partnership's Offering Circular dated ________,
2009 (the "Prospectus"). The minimum subscription is $25,000, however, it may
be lowered to not less than $5,000 by the General Partner; additional Units
may be purchased in multiples of $1,000. Subscriptions must be accompanied by
a check in the full amount of the subscription and made payable to "Special
Account for the Exclusive Benefit of the Customers of Providence Select Fund,
LP". Purchaser is also delivering to the Selling Agent an executed
Subscription Agreement and Power of Attorney (Exhibit D to the Prospectus).
Upon acceptance of Purchaser's Subscription Agreement and Power of Attorney,
Purchaser agrees to contribute Purchaser's subscription to the Fund and to be
bound by the terms of the Fund's Limited Partnership Agreement, attached as
Exhibit A to the Prospectus, as amended from time to time pursuant to its
terms. Thereafter, the General Partner will direct the release of the funds
from the depository account on the first business day of the month following
the acceptance of the subscription. Purchaser agrees to reimburse the Fund
and its general partner for any expense or loss, including legal fees and
court costs, incurred as a result of the cancellation of Purchaser's Units due
to a failure of Purchaser to deliver good funds in the amount of the
subscription price. By execution of the Subscription Agreement and Power of
Attorney, pursuant to the terms of the offering, Purchaser shall have executed
the Limited Partnership Agreement.
As an inducement to the General Partner to accept this subscription,
Purchaser (for the Purchaser and, if Purchaser is an entity, on behalf of and
with respect to each of Purchaser's shareholders, partners or beneficiaries),
by executing and delivering Purchaser's Subscription Agreement and Power of
Attorney, represents and warrants to the General Partner, the Commodity Broker
and the Selling Agent who solicited Purchaser's subscription and the Fund, as
follows:
(a) Purchaser is of legal age to execute the Subscription Agreement and
Power of Attorney and is legally competent to do so. Purchaser acknowledges
that Purchaser has received a copy of the Prospectus, including the Limited
Partnership Agreement, prior to subscribing for Units.
(b) All information that Purchaser has heretofore furnished to the General
Partner or that is set forth in the Subscription Agreement and Power of
Attorney submitted by Purchaser is correct and complete as of the date of such
Subscription Agreement and Power of Attorney, and if there should be any
change in such information prior to acceptance of Purchaser's subscription,
Purchaser will immediately furnish such revised or corrected information to
the General Partner.
(c) Unless (d) or (e) below is applicable, Purchaser's subscription is made
with Purchaser's funds for Purchaser's own account and not as trustee,
custodian or nominee for another.
(d) The subscription, if made as custodian for a minor, is a gift Purchaser
has made to such minor and is not made with such minor's funds or, if not a
gift, the representations as to net worth and annual income set forth below
apply only to such minor.
(e) If Purchaser is subscribing in a representative capacity, Purchaser has
full power and authority to purchase the Units and enter and be bound by the
Subscription Agreement and Power of Attorney on behalf of the entity for which
he is purchasing the Units, and such entity has full right and power to
purchase such Units and enter and be bound by the Subscription Agreement and
Power of Attorney and become a Limited Partner pursuant to the Limited
Partnership Agreement which is attached to the Prospectus as Exhibit A.
(f) Purchaser either is not required to be registered with the Commodity
Futures Trading Commission ("CFTC") or to be a member of the National Futures
Association ("NFA") or if required to be so registered is duly registered with
the CFTC and is a member in good standing of the NFA.
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(g) If the undersigned is acting on behalf of an "employee benefit plan," as
defined in and subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or a "plan" as defined in and subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code") (a "Plan"), the
individual signing this Subscription Agreement and Power of Attorney on behalf
of the undersigned hereby further represents and warrants as, or on behalf of,
the Plan responsible for purchasing units (the "Plan Fiduciary") that: (a) the
Plan Fiduciary has considered an investment in the Fund for such plan in light
of the risks relating thereto; (b) the Plan Fiduciary has determined that, in
view of such considerations, the investment in the Fund is consistent with the
Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in
the Fund does not violate and is not otherwise inconsistent with the terms of
any legal document constituting the Plan or any trust agreement thereunder;
(d) the Plan's investment in the Fund has been duly authorized and approved by
all necessary parties; (e) none of the General Partner, the Fund's advisors,
the Fund's cash manager, the Fund's futures brokers, any selling agent, any of
their respective affiliates or any of their respective agents or employees:
(i) has investment discretion with respect to the investment of assets of the
Plan used to purchase units; (ii) has authority or responsibility to or
regularly gives investment advice with respect to the assets of the Plan used
to purchase units for a fee and pursuant to an agreement or understanding that
such advice will serve as a primary basis for investment decisions with
respect to the Plan and that such advice will be based on the particular
investment needs of the Plan; or (iii) is an employer maintaining or
contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to
make, and is responsible for, the decision to invest in the Fund, including
the determination that such investment is consistent with the requirement
imposed by Section 404 of ERISA that Plan investments be diversified so as to
minimize the risks of large losses, (ii) is independent of the General
Partner, the Fund's advisors, the Fund's cash manager, the Fund's futures
brokers, any selling agent, each of their respective affiliates, and (iii) is
qualified to make such investment decision. The undersigned will, at the
request of the General Partner, furnish the General Partner with such
information as the General Partner may reasonably require to establish that
the purchase of the units by the Plan does not violate any provision of ERISA
or the Code, including without limitation, those provisions relating to
"prohibited transactions" by "parties in interest" or "disqualified persons"
as defined therein.
(h) If the undersigned is acting on behalf of a trust (the "Subscriber
Trust"), the individual signing the Subscription Agreement and Power of
Attorney on behalf of the Subscriber Trust hereby further represents and
warrants that an investment in the Trust is permitted under the trust
agreement of the Subscriber Trust, and that the undersigned is authorized to
act on behalf of the Subscriber Trust under the trust agreement thereof.
(i) Purchaser represents and warrants that purchaser has (i) a net worth of at
least $250,000 (exclusive of home, furnishings and automobiles) or (ii) an
annual gross income of at least $70,000 and a net worth (similarly calculated)
of at least $70,000. Residents of the following states must meet the
requirements set forth below (net worth in all cases is exclusive of home,
furnishings and automobiles). In addition, purchaser may not invest more than
10% of his net worth (exclusive of home, furnishings and automobiles) in the
Fund.
State Suitability Requirements
1. Alaska-Net worth of at least $250,000 or a net worth of at least $70,000
and annual taxable income of at least $70,000.
2. California-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
3. Iowa-Net worth of at least $500,000 or a net worth of at least $250,000
and an annual taxable income of at least $100,000.
4. Kansas--Net worth of at least $250,000 or a net worth of at least
$70,000 and an annual gross income of at least $70,000. It is recommended by
the Office of the Kansas Securities Commissioner that Kansas investors not
invest, in the aggregate, more than 10% of their liquid net worth in this and
similar direct participation investments. Liquid net worth is defined as that
portion of net worth which consists of cash, cash equivalents and readily
marketable securities.
5. Maine-Net worth of at least $250,000 or a net worth of at least $70,000
and an annual taxable income of at least $70,000.
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6. Massachusetts-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
7. Mississippi-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
8. Missouri-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
9. Nebraska-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
10. New Hampshire-Net worth of at least $250,000 or a net worth of at least
$125,000 and an annual taxable income of at least $70,000.
11. North Carolina-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
12. Pennsylvania-Net worth of at least $250,000 or a net worth of at least
$70,000 and an annual income of at least $70,000. Because the minimum closing
amount is less than 1/10th of the maximum offering size, Pennsylvania
investors are cautioned to carefully evaluate the program's ability to fully
accomplish its stated objectives and to inquire as to the current dollar
volume of program subscriptions.
13. South Carolina-Net worth of at least $250,000 or a net income in the
preceding year some portion of which was subject to maximum federal and State
income tax.
14. South Dakota-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
15. Texas-Net worth of at least $250,000 or a net worth of at least $70,000
and annual taxable income of at least $70,000.
In the case of sales to fiduciary accounts, the net worth and income standards
may be met by the beneficiary, the fiduciary account, or, if the donor or
grantor is the fiduciary, by the donor or grantor who supplies the funds to
purchase the partnership interests.
The foregoing suitability standards are regulatory minimums only. Merely
because you meet such requirements does not necessarily mean that a high risk,
speculative and illiquid investment such as one in the Fund is, in fact,
suitable for you.
3
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EXHIBIT D TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
SUBSCRIPTION INSTRUCTIONS
Any person considering subscribing for
Units should carefully read and review the Prospectus.
The Units are speculative and involve a high degree of risk. No person
may invest more than 10% of his or her liquid net worth (exclusive of home,
furnishings and automobiles) in the Partnership. No entity-and, in
particular, no ERISA plan-may invest more than 10% of its liquid net worth
(readily marketable securities) in the Partnership. If a purchaser is
allowed to purchase less than $25,000 in Units, then the purchaser must have
a minimum annual gross income of $75,000 and a minimum net worth of $75,000
or, in the alternative, a minimum net worth of $250,000.
A Subscription Agreement and Power of Attorney Signature Page (the
"Signature Page") is attached to these Subscription Instructions and the
following Subscription Agreement and Power of Attorney. The Signature Page is
the document which you must execute if you wish to subscribe for Units. One
copy of such Signature Page should be retained by you for your records and
the others delivered to your Registered Representative.
FILL IN ALL OF THE INFORMATION ON THE ATTACHED SIGNATURE PAGE, USING
BLACK INK ONLY, AS FOLLOWS
Item 1 - Enter the dollar amount of the purchase.
Items 2 - 7 - Enter the Social Security Number or Taxpayer ID
Number and check the appropriate box to indicate the type of individual
ownership desired or of the entity that is subscribing. In the case of joint
ownership, either Social Security Number may be used.
The Signature Page is self-explanatory for most ownership types; however,
the following specific instructions are provided for certain of the ownership
types identified on the Signature Page:
Trusts-Enter the trust's name on Line 3 and the trustee's name on Line 4,
followed by "Ttee." If applicable, use Line 7 also for the custodian's name.
Be sure to furnish the Taxpayer ID Number of the trust.
Custodian Under Uniform Gifts to Minors Act-Complete Line 3 with the name of
minor followed by "UGMA." On Line 7, enter the custodian's name followed by
"Custodian." Be sure to furnish the minor's Social Security Number.
Partnership or Corporation-The partnership's or corporation's name is
required on Line 4. Enter a partner's or officer's name on Line 4. Be sure to
furnish the Taxpayer ID Number of the partnership or corporation. A
subscriber who is not an individual must provide a copy of documents
evidencing the authority of such entity to invest in the Partnership.
Item 8 - The investor(s) must execute the Subscription Agreement
and Power of Attorney Signature Page and review the representations relating
to backup withholding tax or non-resident alien status underneath the
signature and telephone number lines in Item 8.
Item 9 - Registered Representative must complete.
The Selling Agent's copy of the Subscription Agreement and Power of Attorney
Signature Page may be required to be retained in the Branch Office.
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PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934
SUBSCRIPTION AGREEMENT AND
POWER OF ATTORNEY
White Oak Financial Services, Inc.
General Partner ____________________________
5914 N. 300 West, P. O. Drawer C Social Security Number or
Fremont, IN 46737 Taxpayer ID Number
Dear General Partner:
1. Subscription For Units. I hereby subscribe for the number of Limited
Partnership Units ("Units") in Providence Select Fund, Limited Partnership
(the "Fund") set forth below (minimum $25,000) in the Subscription Agreement
and Power of Attorney Signature Page, at a price per Unit as set forth in the
Fund disclosure document dated _______, 2009, (the "Prospectus"). I have
completed and executed a Subscription Agreement and Power of Attorney
Signature Page in the form attached hereto as Exhibit "D", and delivered the
executed Subscription Documents to the Sales Agent and executed a check made
payable to "Special Account for the exlusive benefit of customers
of Providence" to be delivered by the
Sales Agent to the Depository Agent within 24 hours after receipt for deposit
to the Depository Account. The General Partner may, in its sole and absolute
discretion, accept or reject this subscription, in whole or in part. If this
subscription is accepted, I understand subscribers will earn additional Units
in lieu of interest earned on the undersigned's subscription during any
period of time, if any, such subscription is held in the depository account.
If this subscription is rejected, all funds remitted by the undersigned will
be returned, together with any interest earned from the depository account,
if any.
2. Power of Attorney. In connection with my acceptance of an Interest in the
Partnership, I do hereby irrevocably constitute and appoint the General
Partner, and its successors and assigns, as my true and lawful Attorney-in-
Fact, with full power of substitution, in my name, place and stead, to (i)
file, prosecute, defend, settle or compromise litigation, claims or
arbitration on behalf of the Partnership; and, (ii) make, execute, sign,
acknowledge, swear to, deliver, record and file any documents or instruments
which may be considered necessary or desirable by the General Partner to
carry out fully the provisions of the Limited Partnership Agreement of the
Partnership, which is attached as Exhibit A to the Prospectus, including,
without limitation, the execution of the said Agreement itself and by
effecting all amendments permitted by the terms thereof. The Power of
Attorney granted hereby shall be deemed to be coupled with an interest and
shall be irrevocable and shall survive, and shall not be affected by, my
subsequent death, incapacity, disability, insolvency or dissolution or any
delivery by me of an assignment of the whole or any portion of my interest in
the Partnership.
3. Irrevocability; Governing Law. You may revoke your subscription for five
business days after you send it to us (the "Revocation Period"). After the
lapse of five business days from submission, your subscription will be
irrevocable. The Units offered to you are subject to prior sale. I hereby
acknowledge and agree that after the Revocation Period I am not entitled to
cancel, terminate or revoke this subscription or any of my agreements
hereunder and that this subscription and such agreements shall survive my
death or disability. This Subscription Agreement and Power of Attorney shall
be governed by and interpreted in accordance with the laws of the State of
Delaware.
4. Representations and Warranties. By executing the Subscription Agreement
and Power of Attorney, you (for yourself and any co-subscriber, and, if you
are signing on behalf of an entity, on behalf of and with respect to that
entity and its shareholders, partners, beneficiaries or members), represent
and warrant to general partner and the Fund as follows (As used below, the
terms "you and your" refer to you and your co-subscriber, if any, or if you
are signing on behalf of an entity, that entity):
(Please initial each item to provide your acknowledgement or representation)
______1. I have received a copy of the Prospectus dated _______, 2009,
including the Agreement of Limited Partnership.
______2. If an individual subscriber, I am of legal age to execute the
Subscription Agreement and am legally competent to do so.
______3. I satisfy the applicable financial suitability and minimum
investment requirements in the Prospectus and Exhibit C, including the "State
Suitability Requirements" for residents of the state in which I reside that
appear under that caption.
<page>
______4. Unless representation (5) or (6) below is applicable, my
subscription is made with my funds for my own account and not as trustee,
custodian, or nominee for another.
______5. If I am subscribing as a custodian for a minor, either (a) the
subscription is a gift I have made to that minor and is not made with that
minor's funds, in which case the representations as to net worth and annual
income below apply only to myself, acting as custodian, or (b) if the
subscription is not a gift, the representations as to net worth, and annual
income below apply only to that minor.
______6. If I am subscribing as a trustee or custodian of an employee
benefit plan, or of an IRA, at the direction of the beneficiary of that plan
or IRA, all representations in the Subscription Agreement apply only to the
beneficiary of that plan or IRA.
______7 I understand that my investment is not transferable and is illiquid
except for limited redemption provisions, as set forth in the Prospectus and
the Agreement of Limited Partnership.
______8 This investment represents 10% or less of my total net worth.
______9 I believe I have provided for my retirement and the support of those
who are dependent on me without the need for return of my investment in this
Fund.
______10 I have not omitted any information in the documents supplied to my
broker or sales agent that would prevent them from determining my suitability
for this investment.
5. Additional Disclosures:
The trade of futures and options on futures involves substantial risk,
including the loss of your investment.
The general partner and the sales agent shall make every reasonable effort to
determine that the purchase of units of partnership interest is a suitable
and appropriate investment for you, on the basis of the information regarding
your financial situation and investment objectives obtained from the
suitability questionnaire and subscription agreement (Exhibit D) signed and
delivered by you in connection with your subscription for units. On the
basis of the information provided by you, the general partner and the sales
agent shall make every reasonable effort to ascertain that you:
(a) meet the minimum income and net worth standards established for the
Fund;
(b) can reasonably benefit from an investment in the Fund based on your
overall investment objectives and portfolio structure;
(c) are able to bear the economic risks of an investment in the Fund based
on your overall financial situation; and
(d) have an understanding of:
(i) the fundamental risks of an investment in the Fund;
(ii) the risk that you may lose your entire investment;
(iii) the restrictions on the liquidity and transferability of the units;
(iv) the background and qualification of the general partner and the
Fund's commodity trading advisor; and
(v) the tax consequences of an investment in the Fund.
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PROVIDENCE SELECT FUND, LIMITED PARTNERSHIP
Units of Limited Partnership Interests
Subscription Agreement and Power of Attorney
Signature Page
The investor named below, by execution and delivery of this Subscription
Agreement and Power of Attorney, by payment of the purchase price for Limited
Partnership Interests (the "Units") in Providence Select Fund, Limited
Partnership (the "Partnership"), and by either enclosing a check payable to
"Special Account for the exclusive benefit of the customers of Providence",
or by instructing their brokerage
firm to debit their customer securities account in the amount set forth
below, hereby subscribes for the purchase of Units, at a price per Unit as
set forth in the Prospectus. The named investor further, by signature below,
acknowledges (i) receipt of the Prospectus of the Partnership dated _______,
2009; (ii) that such Prospectus includes the Partnership's Limited
Partnership Agreement, the Subscription Requirements, and the Subscription
Agreement and Power of Attorney set forth therein, the terms of which govern
the investment in the Units being subscribed for hereby; (iii) that this
subscription may be revoked within five business days after submission;
and, (iv) after the lapse of five business days from submission, this
subscription will be irrevocable. Investor understands that if the account
is titled "for the benefit of" ("FBO"), that the named entity will custody
the Units, purchase, hold and redeem Units in the investor's account, and
will receive copies of Partnership application forms and statements for
the benefit of the investor. By my signature below, I represent that I
satisfy the requirements relating to net worth and annual income as set forth
in Exhibit C to the Prospectus.
1) Account # ____________________________.
Total $ Amount __________________ (minimum of $25,000, unless lowered to
less than $25,000 but not less than $5,000 by the General Partner; $1,000
minimum for investors making an additional investment)
[ ] Check here if investor's securities account is to be debited.
2) Social Security Number _____-___-_____
Taxpayer ID # _____-___-_____
Taxable Investors (check one):
O Individual Ownership
O Trust other than a Grantor or Revocable Trust
O Joint Tenants with Right of Survivorship
O Estate
O UGMA/UTMA (Minor)
O Tenants in Common
O Community Property
O Partnership
O Corporation
O Grantor or Other Revocable Trust
Non-Taxable Investors (check one):
O IRA
O Profit Sharing
O IRA Rollover
O Defined Benefit
O Pension
O Other (specify)
O SEP
3) Investor's Name _________________________________________________________
4) _________________________________________________________________________
Additional Information (for Estates, Trusts, Partnerships and Corporations)
5) Resident Address of Investor
_________________________________________________________________________
Street (P.O. Box not acceptable) City State Zip Code
6) Mailing Address(if different)
_________________________________________________________________________
Street City State Zip Code
7) Custodian Name and Mailing Address
_________________________________________________________________________
Name Street City State Zip Code
Signature(s) - do not sign without familiarizing yourself with the information
in the Prospectus, including: (i) the fundamental risks and financial hazards
of this investment, including the risk of losing your entire investment; (ii)
the Partnership's substantial charges; (iii) the Partnership's highly
leveraged trading activities; (iv) the lack of liquidity of the Units; (v)
the existence of actual and potential conflicts of interest in the structure
and operation of the Partnership; (vi) that Limited Partners may not take
part in the management of the Partnership; (vii) the tax consequences of
the Partnership; and (viii) the redemption fee of 4% that will be charged
during the first three months of investment, 3% during the second three
months, 2% during the third three months, 1% during the fourth three months
and none thereafter.
8) INVESTOR(S) MUST SIGN
X_________________________________________________________
Signature of Investor Date Telephone No.
X_________________________________________________________
Signature of Joint Investor (if any) Date
Investor must sign individually, or pursuant to a power of attorney;
provided, however, that such power of attorney has not been granted to a
registered representative of a Selling Agent.
Executing and delivering this Subscription Agreement and Power of Attorney
shall in no respect be deemed to constitute a waiver of any rights under the
Securities Act of 1933 or under the Securities Exchange Act of 1934.
UNITED STATES INVESTORS ONLY
I have checked the following box if I am subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: 0.
Under the penalties of perjury, by signature above I hereby certify that the
Social Security Number or Taxpayer ID Number set forth in Item 2 above is my
true, correct and complete Social Security Number of Taxpayer ID Number and
that the information given in the immediately preceding sentence is true,
correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under the penalties of perjury, by signature above, I hereby certify that (a)
I am not a citizen or resident of the United States or (b) (in the case of an
investor which is not an individual) the investor is not a United States
corporation, partnership, estate or trust: 0.
9) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts
relating to the: risks; tax consequences; liquidity and marketability;
management; and control of the Managing Owner with respect to an investment
in the Units, as set forth in the Prospectus. I have also informed the
investor of the unlikelihood of a public trading market developing for the
Units. I do not have discretionary authority over the account of the
investor.
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments,
financial situation and needs and any other information known by me, that an
investment in the Partnership is suitable for such investor in light of
his/her financial position, net worth and other suitability characteristics.
The Registered Representative MUST sign below in order to substantiate
compliance with Article III, Section 34 of the NASD's Rules of Fair Practice.
X__________________________________________________________
Registered Representative Signature Date
X__________________________________________________________
Office Manager Signature Date
(if required by Selling Agent procedures)
10) REGISTERED REPRESENTATIVE
Name:
Selling Agent:
Reg. Rep. No.:
Branch Office:
Address:
City, State, Zip:
Tel. Number:
Facsimile:
Email:
11) PRINCIPAL SELLING AGENT
Futures Investment Company, 5914 N. 300 West, Fremont, IN 46737,
(260) 833-1306
<page>
EXHIBIT E TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
DEPOSITORY AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the ___ day
of December, 2004, is by and among Providence Select Fund, Limited
Partnership, (the "Fund"), White Oak Financial Services, Inc., 5914 N. 300
West, P. O. Box, C, Fremont, IN 46737, (the "General Partner"); Futures
Investment Company, an Illinois corporation, 5914 N. 300 West, P. O. Box, C,
Fremont, IN 46737 (the "Selling Agent"), and Star Financial Bank, 2004 N.
Wayne St., Angola, IN 46703, a bank unaffiliated with the Fund, General
Partner or Selling Agent and otherwise within the definition of Section
3(a)(6) of the 1934 Act (the "Depository").
1. Account Opened. The General Partner establishes and the Depository
accepts and opens an account that will be invested in short term bank
certificates of deposit that comply with SEC Rule 15c2-4 titled
"Special Account for the exclusive benefit of the customers of Providence"
to clear proceeds of sale of limited partnership interests (the "Units") in a
best efforts minimum/maximum offering of the Fund promptly delivered by the
Selling Agent from subscribers at an initial offering price of one thousand
dollars ($1,000) to be held in said bank account subject to the terms of this
Agreement until a total face amount of one million thirty thousand dollars
($1,030,000) of Units (the "Minimum") are sold and, thereafter to continue to
accept proceeds of sale from subscribers sold at the Net Asset Value per Unit
computed after the close of business on the last business day of each month
and transferred to the Fund as of the open on the first business day of each
month. The Selling Agent shall direct all subscribers to make their checks
to "Star Bank for the acct. of Providence." Any instrument not so made out
shall be promptly returned to the subscriber, with notice to the Selling
Agent. The Selling Agent will supply Depository with a list of the
subscribers to identify their name, address and amount of subscription. The
Selling Agent will be solely responsible for the allocation of interest
earned among the subscribers.
2. Sale of Minimum Required. The Selling Agent shall promptly transmit
all checks and wire transfers for the purchase of Units directly to the
Depository. At the time of delivery of the proceeds to the Depository, the
Selling Agent shall provide the Depository with the name and address of the
subscriber for the Units. Should the Minimum not be sold within twelve
months from the effective date of the Offering established by the Securities
and Exchange Commission (the "Offering Period") or should the offering
terminate for any reason prior to the Offering Period, the Depository shall
promptly return the proceeds to each subscriber plus interest as allocated by
the General Partner without deduction for costs or expenses from the amounts
paid to the subscribers, and the Depository shall notify the General Partner
and the Selling Agent of its distribution of the funds. The proceeds
returned to each subscriber shall be free and clear of any and all claims of
the Fund or any of its creditors. The General Partner is solely responsible
for the allocation of the interest earned to the subscribers. Upon the
receipt of deposits that total $1,030,000 to the account before the lapse of
or termination of the Offering Period, the Depository shall deliver the
proceeds plus interest by check or account transfer to the Fund and at the
end of each month thereafter, the Depository shall deliver all proceeds plus
interest by check or account transfer to the Fund. In no event will the
proceeds be released to the Fund until the Minimum is received by the
Depository in collected funds. For purposes of this Agreement, the term
"collected funds" shall mean all funds received by the Depository which have
cleared normal banking channels and are in the form of cash.
3. No Creditor's Rights. The Selling Agent and the General Partner,
individually and on behalf of the Fund agree that they are not entitled to
any funds in the Depository account prior to the sale of the Minimum and no
amounts deposited in the Depository Account shall become the property of or
be subject to the debts of the Selling Agent, General Partner, Fund or any
other entity or person.
4. Collection Procedure. The Depository is hereby authorized to forward
each check for collection and, upon collection of the proceeds of each check,
deposit the collected proceeds in the account. As an alternative, the
Depository may telephone the bank on which the check is drawn to confirm that
the check has been paid. Any check returned unpaid shall be returned by Star
Bank to the subscriber with notice to the Selling Agent. If the Fund rejects
any subscription for which the Depository has already collected funds, the
Depository shall promptly issue
1
<page>
a refund check to the rejected subscriber. If
the General Partner rejects any subscription for which the Depository has not
yet collected funds but has submitted the subscriber's check for collection,
the Depository shall promptly issue a check in the amount of the subscriber's
check to the rejected subscriber after the Depository has cleared such funds.
If the Depository has not yet submitted a rejected subscriber's check for
collection, the Depository shall promptly remit the subscriber's check
directly to the subscriber.
5. Depository Liability Limited. Depository shall have no liability
under, or duty to inquire into, the terms and provisions of any other
document or instrument utilized in connection with the Offering, and it is
agreed that the duties of Depository are purely ministerial in nature, and
that Depository shall incur no liability whatsoever under this Agreement,
except for acts or omissions of the Depository involving or constituting
willful misconduct, fraud, gross negligence or bad faith.
6. Depository May Resign. Depository may, at any time, resign hereunder
by giving written notice of its intent to resign to the other parties hereto,
at their respective addresses set forth above, at least ten (10) days prior
to the date specified for such resignation to take effect, and upon the
effective date of such resignation the proceeds, including all accrued
interest, shall be delivered by Depository to the person designated in
writing by the Selling Agent and the General Partner or a court of competent
jurisdiction, whereupon all of Depository's obligations hereunder shall cease
and terminate. Notwithstanding the foregoing, nothing in this paragraph
releases Depository or relieves it of any of its obligations that existed
prior to the effective date of Depository's resignation including, without
limitation, liability for willful misconduct, fraud, gross negligence or bad
faith. Notwithstanding the foregoing, nothing in this paragraph releases the
Selling Agent or the General Partner of their obligations under the
Securities and Exchange Act including, but not limited to, Rules 15c2-4 and
10b-9.
7. Depository Indemnification. The Selling Agent and the General Partner
agree to indemnify, defend and hold Depository harmless from and against any
and all loss, damage, tax, liability and expense that may be incurred by
Depository and arising out of or in connection with its acceptance of
appointment as depository hereunder, including reasonable attorneys' fees and
other legal costs and expenses of defending itself against any claim or
liability in connection with its performance hereunder, except in the case of
willful misconduct, fraud, gross negligence or bad faith on the part of
Depository. Depository may consult with and rely on its attorneys with
respect to any dispute not assumed or defended by the Selling Agent and the
General Partner and this indemnification shall include all reasonable and
necessary attorneys' fees of Depository in connection with such consultation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WHITE OAK FINANCIAL SERVICES, INC. STAR FINANCIAL BANK
By: ______________________________ By: __________________________
Mr. Michael Pacult Thad Wright
President Vice President
FUTURES INVESTMENT COMPANY PROVIDENCE SELECT FUND, L.P.
By: White Oak Financial Services, Inc.
By: ______________________________ By: ____________________________
Mr. Michael Pacult Mr. Michael Pacult
President President
2
<page>
EXHIBIT F TO PROVIDENCE SELECT FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
Clarke Capital Management, Inc.
THIS AGREEMENT is made and entered as of this 2nd day of June, 2008,
between Providence Select Fund, Limited Partnership, (the "Fund") and Clarke
Capital Management, Inc., an Illinois corporation (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to MF Global, Inc.
(the "FCM") in the name of the Fund (this account and any other accounts,
which may be assigned to the CTA in the future are collectively hereinafter
called the "Account") and the grant of the power of attorney on the standard
form of the FCM to the CTA to permit the CTA to enter trades for the Fund in
the Account and payment of management fees to and the opportunity to earn
incentive fees by the CTA, the parties hereto agree as follows:
1. White Oak Financial Services, Inc., the Fund general partner and
commodity pool operator (the "CPO"), shall determine the amount the Fund shall
initially deposit in the Account with the FCM, or some other registered
futures commission merchant, in U.S. funds equity, which the CTA agrees to
manage pursuant to the terms of this Agreement. Subsequent deposits and
accumulation of profits in the Account, less withdrawals and losses, shall
also be subject to this Agreement. At its sole discretion, the Fund may add
or withdraw funds at any time from the Account by written request to the FCM
with a copy to the CTA.
2. The CTA will cause futures contracts, and when deemed advisable, options
on futures and forward contracts, to be bought and sold on behalf of the Fund
in the Account. The CTA will have the authority to issue all necessary
instructions to the FCM to effect trading for the Fund's Account. All such
transactions shall be for the account and risk of the Fund. The CTA agrees to
use its best efforts to exit all futures trades prior to delivery of any
commodity that requires storage or other costs.
3. The CTA's services are not rendered exclusively for the Fund and the
Fund agrees that the CTA is free to continue to provide and offer similar
services to others. The CPO may change or add another FCM for the Account
assigned to the CTA at any time upon written direction to the FCM and the CTA,
and the FCM and the CTA agree to effect the transfer and sign the forms
necessary to complete such change or addition, provided such transfer does not
conflict with any prior agreements the CTA has with the FCM.
4. The CTA will use its best efforts to obtain an equity run from the FCM
before the opening of business the next trading day. Unless authorized in
writing by the CPO, the CTA will use only the equity in the Account assigned
to the CTA by the CPO for margins to hold the positions taken by the CTA. No
equity in the Account assigned to the CTA will be commingled or margined, for
any purpose, with any other account at the FCM. The CPO, upon written
instruction to the FCM, may terminate, for any reason, the power of attorney
and suspend the trading authority of the CTA to enter trades with the FCM. In
the event of a termination of the power of attorney, the CTA agrees that the
FCM shall accept no further instructions from the CTA but shall place the
Account upon liquidation only to be handled in written instructions from the
CPO to the FCM.
5. The Fund agrees to execute, from time to time, the Acknowledgment of
Receipt of Disclosure Document from the CTA. By signing, the Fund agrees that
it has received and understands and the CTA represents that it has supplied
the most recent copy of the CTA's Risk Disclosure Document. The CTA will
promptly review the Fund offering documents submitted by the Fund to it, from
time to time, and will furnish its consent, in the form requested by the Fund,
to the filing of forms and offering documents with the Federal and State
security and commodity regulators.
6. The Fund will pay the CTA no management fee. The CTA will be paid an
incentive fee of twenty-five percent (25%) of the New Net Profit earned each
calendar quarter. The Fund accountant will calculate the fee subject to
approval by the CTA, and the fee shall not be deducted from the Account, but
will be paid upon submission of an invoice by the CTA to the CPO of the Fund.
Once approved by the CPO, the incentive fee will be paid promptly from the
Fund account selected by the CPO. Interest on cash and cash equivalents such
as T-Bills and money market account shall not be included as profits for
incentive fee purposes.
1
<page>
7. The Fund and the CTA agree that they have or will properly execute all
necessary forms for opening the Account with the FCM; provided, however, any
disputes between the Fund and the CTA will be submitted to arbitration before
a single arbitrator selected by the American Arbitration Association, not the
National Futures Association, and only upon written agreement of the parties
at the time such dispute arises. The terms of this Agreement will supersede,
and in the event of conflicts with any other agreement, the terms of this
Agreement shall control. This Agreement will be governed by the laws of the
State of Illinois and any dispute concerning arbitration will be resolved by a
Federal or State court of competent jurisdiction located in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Providence Select Fund, Limited Partnership Clarke Capital Management, Inc.
By: White Oak Financial Services, Inc.
General Partner and CPO
Michael Pacult Michael J. Clarke
President President
2
<page>
Dealer Prospectus Delivery Obligation
Until one year from the date of this prospectus, all dealers that effect
transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation, if any, to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
[The balance of this page has been intentionally left blank.]
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FORM S-1
Registration No. 333-119635
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
(a) The Selling Agreement between Futures Investment Company and the
Registrant contains an indemnification from the General Partner to the
effect that the disclosures in the Prospectus and this Amendment are in
compliance with Rule 10b5 and otherwise true and complete. This
indemnification speaks from the date of the first offering of the Units
through the end of the applicable statute of limitations. The
Partnership has assumed no responsibility for any indemnification to
Futures Investment Company and the General Partner is prohibited by the
Partnership Agreement from receiving indemnification for breach of any
securities laws or for reimbursement for insurance for coverage for any
such claims. See Section 15.4 of the Partnership Agreement.
(b) There are no indemnification agreements which are not contained in
the Limited Partnership Agreement attached as Exhibit A, the Selling
Agreement or the Clearing Agreement.
(c) The following reflects all expenses in connection with the
issuance and distribution of the securities to be registered, other
than underwriting discounts and commissions:
Expense Cost
Registration fees $ 17,386
Federal taxes 0
States taxes and fees 60,967
Trustees' and transfer agents' fees 0
Costs of printing and engraving 25,185
Legal 91,331
Accounting 102,193
Engineering 0
Additional Offering Expenses 5,560
$ 302,622
Item 15. Recent Sales of Unregistered Securities. None within three
years.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (unless indicated) are filed herewith and made
a part of this Registration Statement:
(a) Exhibits.
Exhibit
Number Description of Document
1.01 Selling Agreement dated August 11, 2004 between the Partnership
and Futures Investment Company, the Selling Agent
2.01 None
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3.01 Articles of Incorporation of the General Partner
3.02 By-Laws of the General Partner
3.03 Board Resolution of General Partner to authorize formation of
Delaware Limited Partnership
3.04 Agreement of Limited Partnership of the Registrant (included as
Exhibit A to the Prospectus)
3.05 Certificate of Limited Partnership of the Registrant
4.01 Agreement of Limited Partnership of the Registrant (included as
Exhibit A to the Prospectus)
5.01 Opinion of The Scott Law Firm, P.A. with respect to the
legality of the Partnership Units
6.01 Not Applicable
7.01 Not Applicable
8.01 Opinion of The Scott Law Firm, P.A. with respect to Federal
income tax consequences
9.01 None
10.01 Form of Advisory Agreement between the Partnership and the
Commodity Trading Advisor (included as Exhibit F to the Prospectus)
10.02 Form of Subscription Agreement and Power of Attorney (included
as Exhibit D to the Prospectus)
10.03 Depository Agreement among Depository, Underwriter, and the
Partnership (included as Exhibit E to the Prospectus)
11.01 Not Applicable - start-up business
12.01 Not Applicable
13.01 Not Required
14.01 None
15.01 None
16.01 Not Applicable
17.01 Not Required
18.01 Not Required
19.01 Not Required
20.01 Not Required
21.01 None
22.01 Not Required
23.01 Consent of Frank L. Sassetti & Co., Certified Public
Accountants
23.02 Consent of The Scott Law Firm, P.A., Legal & Tax Counsel
23.03 Consent of Jordan Patke & Associates Ltd.
24.01 None
25.01 None
26.01 None
27.01 Not Applicable
28.01 Not Applicable
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represents a fundamental: change in the information set forth in the
registration statement;
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(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That the registrant is not a foreign private issuer.
(5) That, for the purpose of determining liability under the
Securities Act of 1933:
(i) Each prospectus filed by the registrant pursuant to Rule
424(b)(3)shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration
statement; and each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date such
form of prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the prospectus.
As provided in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the securities in
the registration statement to which that prospectus relates, and the offering
of such securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such effective date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date; or
(ii) Each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first use.
(6) That, for the purpose of determining liability of the registrant under
the Securities Act of 1933 to any purchaser in the initial distribution of
the securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser:
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(i) Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A, if any pre-effective
amendment was used, and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The General Partner has provided an indemnification to Futures
Investment Company, the best efforts selling agent. The Partnership (issuer)
has not made any indemnification to Futures Investment Company.
Insofar as indemnification for liabilities under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant including, but not limited to, the General Partner pursuant
to the provisions described in Item 14 above, or otherwise, the Registrant
had been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, in the City of
Fremont in the State of Indiana on this 15th day of April, 2009, Mr.
Michael Pacult, the individual general partner of the Registrant, signed this
Registration Statement; and White Oak Financial Services, Inc., the corporate
general partner of the Registrant, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
WHITE OAK FINANCIAL SERVICES, INC. PROVIDENCE SELECT FUND, LP
BY WHITE OAK FINANCIAL SERVICES, INC.
GENERAL PARTNER
By: /s/ Michael Pacult By: /s/ Michael Pacult
MR. MICHAEL PACULT MR. MICHAEL PACULT
PRESIDENT PRESIDENT
PROVIDENCE SELECT FUND, L.P.
BY MR. MICHAEL PACULT
GENERAL PARTNER
By: /s/ Michael Pacult By: /s/ Michael Pacult
MR. MICHAEL PACULT MR. MICHAEL PACULT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person on behalf of White
Oak Financial Services, Inc., General Partner of the Registrant in the
capacities and on the date indicated.
/s/ Michael Pacult
MR. MICHAEL PACULT
PRESIDENT
Date: April 15, 2009
(Being the principal executive officer, the principal financial and
accounting officer and the sole director of White Oak Financial Services,
Inc., General Partner of the Partnership)
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