Item 1. Business
(a) General development of business
The Futures Dimension Fund (the "Partnership") is a limited partnership organized on January 31, 1986, pursuant to a Limited Partnership Agreement (the "Limited Partnership Agreement") and under the Uniform Limited Partnership Act of the State of Illinois, and funded through an offering of Limited Partnership Assignee Units (the "Units"). On July 31, 1987, the Partnership elected to be governed under the Illinois Revised Uniform Limited Partnership Act. Each Unit represents the assignment of one unit of limited partnership interest in the Partnership. Limited Partners and holders of Limited Partnership Assignee Units are collectively referred to herein as "Unitholders." The Partnership engages in speculative trading of futures and forward contracts under the direction of multiple trading advisors.
The public offering resulted in the sale of 1,001,410 Units and trading began on June 18, 1986. The offering was registered under the Securities Act of 1933, as amended, and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling Agent") acted as the selling agent.
Heinold Asset Management, Inc., a Delaware corporation, is the General Partner of the Partnership (the "General Partner") and performs various administrative services for the Partnership. The General Partner was organized in 1982 to serve as the general partner and pool operator for public and private commodity pools sponsored by Heinold Commodities, Inc. The General Partner is a wholly owned subsidiary of Geldermann, Inc., an Illinois corporation ("Geldermann"). Until December 12, 1994, Geldermann was an independent operating subsidiary of ConAgra, Inc., a Delaware corporation with headquarters in Omaha, Nebraska. On that date, Geldermann was acquired by E. D. & F. Man International Inc. (formerly known as E. D. & F. Man International Futures Inc.), a New York corporation with headquarters in New York, New York.
Until June 1, 1995, Geldermann acted as the Partnership's futures commission merchant or commodity broker. On that date, E.D. & F. Man International, Inc. (the "Commodity Broker") replaced Geldermann as the Partnership's commodity broker. The General Partner and the Commodity Broker perform various services related to the Partnership's Limited Partnership Agreement and customer agreement with the Commodity Broker. References to the "Commodity Broker" refer to Geldermann, Inc. for the period prior to June 1, 1995 and to E.D. & F. Man International Inc. for the period on and after June 1, 1995.
The General Partner invested $987,000 in the Partnership at the outset of trading; after reflecting redemptions of $500,159, $271,597, $71,116, $330,991 and $83,490 on September 1, 1987, July 1, 1988, October 1, 1988, September 1, 1991 and September 30, 1994, respectively, this investment was worth $99,770 as of December 31, 1995.
Under the terms of the Customer Agreement, the Partnership will not pay brokerage commissions on the basis of the number of trades made on its behalf, but will instead pay the Commodity Broker a monthly brokerage fee of 0.8333% of the Partnership's month-end Net Assets, as defined, (a 10% annual rate).
From inception until March 1, 1994, the Partnership's trading manager was Commodities Corporation (U.S.A.) N.V. (the "Initial Trading Manager"), a corporation formed under the laws of the Netherlands Antilles in June 1983, and a wholly-owned subsidiary of Commodities Corporation, originally a Delaware corporation formed in 1969 and reincorporated under the laws of the Cayman Islands in 1980. Neither Commodities Corporation nor the Initial Trading Manager is affiliated with the General Partner, the Commodity Broker or the Selling Agent. The Initial Trading Manager provided futures and forward trading advice to the Partnership pursuant to a management contract which was terminated, upon the resignation of the Initial Trading Manager, effective March 1, 1994.
Pursuant to a trading manager agreement with the Partnership (the "Management Agreement"), the General Partner assumed the duties of the trading manager of the Partnership effective March 1, 1994 (the "Trading Manager"). Under the terms of the Management Agreement, the Trading Manager's duties include, among other things, selecting, hiring, monitoring and replacing trading advisors, allocating and reallocating assets among the trading advisors and terminating and engaging additional or replacement trading advisors.
The Partnership's assets were initially allocated among nine different Trading Advisors (the "Initial Trading Advisors"), selected by the General Partner on the recommendation of the Initial Trading Manager. One of the Initial Trading Advisors, I.C.S.C., Inc., ceased trading on behalf of the Partnership during 1987 and the Partnership added a new trading advisor, Tiverton Trading Incorporated, on November 1, 1987. Until March 1, 1994, five trading advisors traded on behalf of the Partnership: Blenheim Investments, Inc.; Knightsbridge Capital Management; Mark J. Walsh & Co.; Princeton Paris Research Corporation; and Reynwood Trading Corporation. The Initial Trading Manager terminated the Advisory Agreements with the above-referenced trading advisors effective February 28, 1994.
Heinold Asset Management, Inc., the Trading Manager, retained ARA Portfolio Management Company ("ARA"), LaSalle Portfolio Management, Inc.("LaSalle"), Sunrise Capital Management Inc. ("Sunrise") and Welton Investment Systems Corporation ("Welton"), effective March 7, 1994, March 8, 1994, March 7, 1994 and March 1, 1994, respectively, to act as the trading advisors for the Partnership. On June 6, 1994, Parthenon Futures Management, Inc. ("Parthenon") and Michael Tym, Jr. ("Tym") were retained as trading advisors for the Partnership. The Advisory Agreement with Welton was terminated on September 15, 1994 and Lawless Commodities, Inc. ("Lawless") was retained as a trading advisor effective January 24, 1995.
On February 28, 1995, the Trading Manager terminated the Advisory Agreements with ARA, LaSalle, Sunrise, Parthenon and Lawless. On March 10, 1995, the Trading Manager retained Sabre Fund Management Limited ("Sabre"), Telesis Management, Inc. ("Telesis"), Gandon Fund Management, Ltd. ("Gandon") and First October Trading Company, Inc. ("First October") to trade on behalf of the Partnership. The Advisory Agreements with Sabre and First October were terminated on July 31, 1995 and September 30, 1995, respectively. The Advisory Agreements with Telesis, Tym and Gandon were terminated on October 31, 1995.
On November 1, 1995, the Trading Manager entered into Management Contracts with Hyman, Beck & Company, Inc., Marathon Capital Growth Partners, L.L.C., RXR, Inc. and Willowbridge Associates, Inc. These four trading advisors are collectively referred to herein as the "Trading Advisors."
The Initial Trading Manager, which itself did not direct any trading on behalf of the Partnership, advised the General Partner on the selection of the Initial Trading Advisors and, among other things, monitored the performance of the trading advisors and consulted with the General Partner in reviewing certain aspects of the Trading Advisors' performance through February 28, 1994. The Initial Trading Manager was responsible for providing satisfactory replacement trading advisors throughout the term of the management contract, should a replacement be required. The Trading Advisors are each allocated a percentage of the Partnership's assets for trading. The General Partner intends at all times to retain multiple trading advisors for the Partnership that, collectively, will trade a diverse group of futures and forward contracts pursuant to a mixture of systematic and discretionary trading approaches and technical and fundamental analyses.
The Initial Trading Manager purchased 500 Units prior to the time the Partnership commenced trading, which it agreed not to redeem so long as it acted as the Initial Trading Manager. These Units, valued at $84,720, were redeemed on March 1, 1994.
Prior to March 1, 1994, the Partnership paid the Initial Trading Manager: (i) a monthly management fee of 1/2 of 1% of the month-end Net Assets (as defined in the Limited Partnership Agreement, subject to certain adjustments) of the Partnership; and (ii) a quarterly incentive fee of 20% of New Appreciation, as defined in the management contract, as of the end of each calendar quarter. The Partnership paid no fees to the trading advisors, who were compensated solely by the Initial Trading Manager.
Effective March 1, 1994, each Trading Advisor is paid a management and incentive fee by the Partnership at the rates negotiated at arm's-length on behalf of the Partnership by the Trading Manager. At December 31, 1995, each Trading Advisor receives: (i) a monthly management fee equal to 0.167 of 1% (a 2% annual rate) of the month-end Net Assets of the Partnership allocated to the management of the trading advisors; and (ii) a quarterly incentive fee equal to 20% of any new trading profit, as defined in the Advisory Agreement with each of the Trading Advisors, recognized with respect to the assets of the Partnership allocated to each of the
Trading Advisors. The Trading Manager will receive no compensation for its services to the Partnership.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"), futures exchanges and futures trading are subject to regulation by the Commodity Futures Trading Commission (the "CFTC"). The National Futures Association ("NFA"), a "registered futures association" under the Act, is the only non-exchange self-regulatory organization for futures industry professionals. The CFTC has delegated to the NFA responsibility for the registration of "commodity trading advisors," "commodity pool operators," "futures commission merchants," "introducing brokers" and their respective associated persons and "floor brokers." The Act requires "commodity pool operators," such as the General Partner, "commodity trading advisors," such as the Trading Advisors, and commodity brokers or a "futures commission merchant," such as the Commodity Broker, to be registered and to comply with various reporting and record keeping requirements. The General Partner, the Trading Advisors and the Commodity Broker are all members of NFA. The CFTC may suspend a commodity pool operator's or commodity trading advisor's registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the General Partner as a commodity pool operator or any of the Trading Advisors' registration as commodity trading advisors were terminated or suspended, the General Partner and any of the Trading Advisors, respectively, would be unable to continue to manage the business of the Partnership. Should the General Partner's registration be suspended, termination of the Partnership might result.
As members of NFA, the General Partner, the Trading Advisors and the Commodity Broker are subject to NFA standards relating to fair trade practices, financial condition and customer protection. As the self-regulatory body of the futures industry, the NFA promulgates rules governing the conduct of futures industry professionals and disciplines those professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and certain futures exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. The CFTC has adopted a rule requiring all domestic futures exchanges to submit for approval speculative position limits for all futures contracts traded on such exchanges. Many exchanges also limit the changes in futures contract prices that may occur during a single trading day. The Partnership may trade on foreign commodity exchanges which are not subject to regulation by any United States government agency.
(b) Financial information about industry segments
The Partnership's business constitutes only one segment, speculative trading of futures and forward contracts, for financial reporting purposes. The Partnership does not engage in sales of goods and services. The Partnership's revenue, operating results and total assets for each of the five fiscal years in the period ended December 31, 1995 are set forth under "Item 6. Selected Financial Data."
(c) Narrative description of business
(1) See Items 1(a) and (b) above.
(i) through (xii) - not applicable.
(xiii) - the Partnership has no employees.
(d) Financial information about foreign and domestic operations and export sales
The Partnership does not engage in sales of goods or services. See "Item 1(b). Business - Financial information about industry segments."
Item 2.
Item 2. Properties
The Partnership does not own any properties. Under the terms of the Limited Partnership Agreement, the General Partner performs the following services for the Partnership:
(1) Manages the business of the Partnership. Pursuant to this authority, the General Partner, as Trading Manager, has entered into a Management Agreement with the Partnership (under which the Trading Advisors have complete discretion with respect to determination of the Partnership's trading decisions pursuant to the Advisory Agreement between each Trading Advisor and the Partnership) and a Customer Agreement with the Commodity Broker (pursuant to which the Commodity Broker executes all trades on behalf of the Partnership based on the instructions of the Partnership's Trading Advisors).
(2) Maintains the Partnership's books and records, which Unitholders or their duly authorized representatives may inspect during normal business hours for any proper purpose upon reasonable written notice to the General Partner.
(3) Furnishes each Unitholder with a monthly statement describing the performance of the Partnership, which sets forth aggregate management fees, incentive fees, brokerage commissions and other expenses incurred or accrued by the Partnership during the month.
(4) Forwards annual audited financial statements (including a statement of financial condition and statement of operations) to each Unitholder.
(5) Provides to each Unitholder tax information necessary for the preparation of his annual federal income tax return and such other information as the CFTC may by regulation require.
(6) Performs secretarial and other clerical responsibilities and furnishes office space, equipment and supplies as may be necessary for supervising the affairs of the Partnership.
(7) Administers the redemption of Units.
Item 3.
Item 3. Legal Proceedings
The General Partner is not aware of any pending legal proceedings to which the Partnership is a party or to which any of its property is subject. In addition, there are no pending legal proceedings involving the General Partner or the Commodity Broker.
In the ordinary course of its business, Geldermann is involved in numerous legal actions, some of which seek substantial damages. In view of the number and diversity of the claims, the number of jurisdictions involved, and the inherent difficulty of predicting the outcome of litigation, Geldermann cannot state what the eventual outcome of these pending claims will be. As a matter of policy, Geldermann vigorously defends civil litigation, reparations or arbitration proceedings pending against it, and in all proceedings currently so pending believes it has defenses which are factually and legally sound. Geldermann is contesting the allegations of each complaint and believes that there are meritorious defenses in most of the lawsuits.
Although the CFTC's staff's interpretation that any matter filed by the CFTC against a registrant is, on its face (even though it has not been litigated), material litigation which has to be disclosed, Geldermann takes exception to this. Notwithstanding the preceding, Geldermann herewith discloses a CFTC Enforcement Action titled In the Matter of Thomas Collins, et al., CFTC Docket No. 94-13.
The Complaint in this case alleges that Geldermann, in 1986, carried and cleared accounts in joint tenancy for a Mid-America local floor trader and/or ten individuals with whom the floor trader maintained a separate joint account with each of the ten individuals. None of the afore-mentioned persons were ever employees of Geldermann. Geldermann's function was only that of clearing broker. Over a period of approximately four years, at the direction of the account holder(s), Geldermann transferred certain positions amongst and between the accounts. It is those transfers that the CFTC is alleging are non-competitive, fictitious transactions. The CFTC's complaint also alleges that Geldermann failed to properly supervise the employees who accepted the transfer instructions from the account holder(s). Geldermann takes exception to the CFTC's allegation and is vigorously defending this litigation.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
There is no trading market for the Units, and none is likely to develop. They are transferable only after written notice has been given to and approved by the General Partner. Units may be redeemed as of the first day of any month after the Partnership commences trading, upon ten days' written notice at their Net Asset Value (as defined in the Limited Partnership Agreement) as of the end of the immediately preceding month, without redemption charge or penalty, as provided in the Limited Partnership Agreement. In the event that all Units for which redemption is requested cannot be redeemed as of any redemption date, Units of limited partners will be redeemed in the order that requests for redemption have been received by the General Partner.
(b) Holders
As of January 1, 1996, there were 365 holders of Units.
(c) Dividends
No distributions or dividends have been made on the Units, and the General Partner has no present intention to make any.
Item 6.
Item 6. Selected Financial Data
The following is a summary of operations and total assets of the Partnership for each of the five fiscal years in the period ended December 31, 1995.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Reference is made to "Item 6. Selected Financial Data" and "Item 8.
Item 8. Financial Statements and Supplementary Data
Financial statements are listed on page F-l of this report.
The supplementary financial information specified by Item 302 of Regulation S-K is not applicable.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers. The Partnership is managed by its General Partner. There are no "significant employees" of the Partnership. Trading decisions for the Partnership are made by the Trading Advisors and monitored by the Trading Manager.
Item 11.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner performs the services described in "Item 2. Properties" herein. The Commodity Broker acts as the Partnership's commodity broker pursuant to the Customer Agreement described in "Item l(a). Business - General development of business."
The General Partner will participate in any appreciation in the net assets of the Partnership in proportion to its investment in it.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
The Partnership knows of no person who owns beneficially more than 5% of the Units.
(b) Security ownership of management
Under the terms of the Limited Partnership Agreement, the Partnership's affairs are managed by the General Partner and the Trading Advisors have discretionary authority over the Partnership's futures and forward trading, which is monitored by the General Partner as Trading Manager. The General Partner owned 611 Unit-equivalents valued at $99,770 as of December 31, 1996, 1.8% of the Partnership's total equity.
(c) Changes in control
None.
Item 13.
Item 13. Certain Relationships and Related Transactions
See "Item 11. Executive Compensation" and "Item 12. Security Ownership of Certain Beneficial Owners and Management."
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
See Index to Financial Statements, infra.
(a)(2) Financial Statement Schedules
All Schedules are omitted for the reason that they are not required, are not applicable, or because equivalent information has been included in the financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K
(3) Articles of Incorporation and By-laws
a. Limited Partnership Agreement dated as of January 31, 1986, and amended as of April 1, 1986.
b. Certificate of Limited Partnership of the Partnership as filed with the Cook County Recorder of Deeds on January 31, 1986.
The above exhibits are incorporated herein by reference from the Partnership's Registration Statement on Form S-1, file no. 33-3514.
(10) Material Contracts
a. Customer Agreement between the Partnership and Geldermann.
b. Management Contract between the Partnership, Commodities Corporation (U.S.A.) N.V. and the Trading Advisors.
c. Assignment Agreement among the Partnership, the General Partner, Heinold Asset Management Service Corporation and each Unitholder.
d. Guarantor and Net Worth undertaking of Commodities Corporation.
The above exhibits are incorporated herein by reference from the Partnership's Registration Statement on Form S-1, file no. 33-3514.
(e) Trading Manager Agreement dated March 1, 1994 between Heinold Asset Management, Inc. and the Partnership.
(f) Advisory Agreement dated March 7, 1994 between ARA Portfolio Management Company, the Trading Manager and the Partnership.
(g) Advisory Agreement dated March 8, 1994 between LaSalle Portfolio Management, Inc., the Trading Manager and the Partnership.
(h) Advisory Agreement dated March 7, 1994 between Sunrise Capital Management Inc., the Trading Manager and the Partnership.
(i) Advisory Agreement dated February 22, 1994 between Welton Investment Systems Corporation, the Trading Manager and the Partnership.
The above exhibits are incorporated herein by reference from the Partnership's report on Form 10-K filed on March 30, 1994.
(j) Advisory Agreement dated June 6, 1994 between Parthenon Futures Management, Inc., the Trading Manager and the Partnership.
(k) Advisory Agreement dated June 6, 1994 between Michael Tym, Jr., the Trading Manager and the Partnership.
(l) Advisory Agreement dated January 24, 1995 between Lawless Commodities, Inc., the Trading Manager and the Partnership.
The above exhibits are incorporated herein by reference from the Partnership's report on Form 10-K filed on March 30, 1995.
(m) Advisory Agreement dated March 10, 1995 between the Partnership and First October Trading Company, Inc.
(n) Advisory Agreement dated March 10, 1995 between the Partnership and Gandon Fund Management, Ltd.
(o) Advisory Agreement dated March 10, 1995 between the Partnership and Telesis Management, Inc.
(p) Advisory Agreement dated March 10, 1995 between the Partnership and Michael Tym, Jr.
(q) Management Contract dated November 1, 1995 between the Partnership and Hyman, Beck & Company, Inc.
(r) Management Contract dated November 1, 1995 between the Partnership and Marathon Capital Growth Partners, L.L.C.
(s) Management Contract dated November 1, 1995 between the Partnership and RXR, Inc.
(t) Management Contract dated November 1, 1995 between the Partnership and Willowbridge Associates Inc.
(27) Financial Data Schedule
The above exhibits are filed herewith.
(b) Reports on Form 8-K
The Partnership did not file a report on Form 8-K during the quarter ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago and State of Illinois on the 28th day of March, 1996.
THE FUTURES DIMENSION FUND
By HEINOLD ASSET MANAGEMENT, INC. General Partner
By /s/ Daniel E. Ragen -------------------------- Daniel E. Ragen President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the General Partner of the Registrant in the capacities and on the date indicated.
(Being the principal executive officer, the principal financial and accounting officer, and a majority of the directors of Heinold Asset Management, Inc.)
By /s/ Daniel E. Ragen - ---------------------- Daniel E. Ragen President
THE FUTURES DIMENSION FUND (AN ILLINOIS LIMITED PARTNERSHIP) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994 AND FOR THE THREE YEARS ENDED DECEMBER 31, 1995 AND INDEPENDENT AUDITORS' REPORT
THE FUTURES DIMENSION FUND (AN ILLINOIS LIMITED PARTNERSHIP) PAGE
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS:
Statements of Financial Condition as of December 31, 1995 and 1994
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital for the Years Ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993
Notes to Financial Statements -
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of The Futures Dimension Fund:
We have audited the accompanying statements of financial condition of The Futures Dimension Fund (an Illinois Limited Partnership, the "Partnership") as of December 31, 1995 and 1994, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's General Partner. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of The Futures Dimension Fund as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 9, 1996
THE FUTURES DIMENSION FUND (AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 1995 AND 1994
See notes to financial statements.
THE FUTURES DIMENSION FUND (aN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
See notes to financial statements.
THE FUTURES DIMENSION FUND (aN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
See notes to financial statements.
THE FUTURES DIMENSION FUND (aN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
See notes to financial statements.
THE FUTURES DIMENSION FUND (AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. ORGANIZATION OF THE PARTNERSHIP
The Futures Dimension Fund (the "Partnership") was organized in January 1986, under the Illinois Uniform Limited Partnership Act (the "Act"), for purposes of engaging in speculative trading of primarily futures and forward contracts. Heinold Asset Management, Inc. ("HAMI"), a wholly owned subsidiary of Geldermann, Inc. ("Geldermann"), is the General Partner of the Partnership. On December 12, 1994, the parent of Geldermann, ConAgra, Inc., sold all of the common stock of Geldermann to E.D.& F. Man, International ("Man"). As a result, Geldermann and HAMI are wholly owned by Man.
The Partnership's funds held at Man, previously Geldermann, are in segregated accounts as required by the Commodity Exchange Act, as amended. These funds are used to meet minimum margin requirements for all of the Partnership's open positions, as set by the exchange upon which each futures contract is traded. These requirements are adjusted, as needed, due to daily fluctuations in the values of the underlying positions. If necessary, certain positions may be liquidated to satisfy resulting changes in margin requirements.
The Partnership has a brokerage contract with Man, previously Geldermann, which provides that the Partnership will pay a monthly brokerage fee of 0.8333% (10% annually) of the Partnership's month-end net asset value, plus NFA fees.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Futures and forward contracts are recorded on trade date and are reflected in the accompanying statements of financial condition at market value on the last business day of the reporting period. The difference between the original contract amount and the market value of the futures and forward contracts is reflected as the change in net unrealized appreciation. Market values of futures contracts are based upon exchange settlement prices. Market values of forward contracts are based upon quoted rates provided by major financial institutions.
OPERATING EXPENSES - The Partnership bears all expenses incurred in connection with its activities. These include brokerage commissions, trading manager's management and incentive fees, and periodic legal, auditing, tax return preparation and filing fees. The General Partner bears all other operating expenses.
INCOME TAXES - No provision for federal income taxes has been made in the accompanying financial statements since the net income (loss) of the Partnership is not taxable as such but is includable in the income tax returns of the individual partners.
STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows for each of the three years ended December 31, 1995, cash includes only cash on deposit at financial institutions.
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades both cash and derivative financial instruments. The Company's principal source of revenues by reporting category is as follows:
The Partnership was organized to engage in speculative trading of a diversified portfolio of futures and forward contracts and commodity options. SFAS 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments," defines a derivative as a future, forward, swap or option contract, or other financial instruments with similar characteristics such as caps, floors and collars. Generally, these financial instruments represent future commitments to exchange interest payment streams or currencies or to purchase or to sell other financial instruments at specific terms at specified future dates. Option contracts provide the holder with the right, but not the obligation, to purchase or sell a financial instrument at a specific price before or on an established date. These financial instruments may have market and/or credit risk in excess of amounts recorded in the Statements of Financial Condition.
MARKET RISK - Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the level or volatility of interest rates, foreign currency exchange rates or market values of the underlying financial instruments or commodities may result in changes in the value of the financial instrument in excess of the amounts currently reflected in the Statements of Financial Condition. The Partnership's exposure to market risk is influenced by a number of factors, including the relationships among financial instruments with off-balance sheet risk and between financial instruments with off-balance sheet risk and the Partnership's proprietary commodities, as well as the volatility and liquidity in the markets in which the financial instruments are traded.
FAIR VALUE - The derivative instruments used in the Partnership's trading activities are marked to market daily with the resulting unrealized gains or losses recorded in the Statements of Financial Condition and the related income or loss reflected in revenues derived from these transactions. The fair value of derivative financial instruments held or issued for trading purposes as of December 31, 1995 and the average monthly fair value of the instruments for the fiscal year ended December 31, 1995 are as follows:
4. LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement (the "Agreement") provides for the following:
ALLOCATION OF PROFIT AND LOSS FOR PARTNERSHIP ACCOUNTING PURPOSES - The Limited Partners and the General Partner share in the profits and losses of the Partnership in proportion to the number of units or unit equivalents held by each. However, no Limited Partners are liable for obligations of the Partnership in excess of their capital contribution and profits, if any, and such other amounts for which they may be liable pursuant to the Act.
DISTRIBUTIONS - Distributions (other than redemption of units) are made on a prorata basis at the sole discretion of the General Partner in accordance with the respective capital accounts of the partners. The General Partner has made no distributions from the Partnership to date.
REDEMPTIONS - Limited Partners (or any assignee thereof) may cause any or all of their units to be redeemed as of the first of any month following 10 days' written request for redemption, subject to certain other conditions, as described in the Agreement. Redemption is at net asset value as of month-end.
DISSOLUTION - The Partnership will be dissolved on December 31, 2006 unless preceded by a decline in the Partnership's aggregate net assets to less than $1,000,000 or upon the occurrence of certain future events, as specified in the Agreement.
5. MANAGEMENT AGREEMENT
The Partnership enters into various advisory agreements (the "Advisory Agreements"). As of December 31, 1995, the Partnership's trading advisors are Hyman Beck & Co., Inc., RXR, Inc., Willowbridge Associates, Inc., and Marathon Capital Growth Partners.
Under the terms of the Advisory Agreements, the trading advisors have sole responsibility for determining futures trades for the Partnership. As compensation for these services, each trading advisor receives a monthly management fee equal to .166% (2% annually) of the Partnership's net asset value, as defined, as of the last day of each month and quarterly incentive fees of 20% of "new trading profits," as defined, on their respective share of the Partnership's net asset value. Incentive fees are retained by the trading advisors even when "trading losses," as defined, occur in subsequent quarters; however, no further incentive fees are payable until any such trading losses (other than those attributable to redeemed units) are recouped by the trading advisors.
******
To the best of my knowledge and belief, the information in this statement is accurate and complete.
Heinold Asset Management, Inc. (Pool Operator)
/s/ Robert Ledvora - ---------------------------------------------------- Robert Ledvora Executive Vice-President and Chief Financial Officer
THE FUTURES DIMENSION FUND EXHIBIT INDEX
Exhibits Included Herein - --------------------------
10(m) Advisory Agreement dated March 10, 1995 between the Partnership and First October Trading Company, Inc.
10(n) Advisory Agreement dated March 10, 1995 between the Partnership and Gandon Fund Management, Ltd.
10(o) Advisory Agreement dated March 10, 1995 between the Partnership and Telesis Management, Inc.
10(p) Advisory Agreement dated March 10, 1995 between the Partnership and Michael Tym, Jr.
10(q) Management Contract dated November 1, 1995 between the Partnership and Hyman, Beck & Company, Inc.
10(r) Management Contract dated Nobember 1, 1995 between the Partnership and Marathon Capital Growth Partners, L.L.C.
10(s) Management Contract dated November 1, 1995 between the Partnership and RXR Inc.
10(t) Management Contract dated November 1, 1995 between the Partnership and Willowbridge Associates, Inc.
27 Financial Data Schedule
Exhibits Incorporated Reference - --------------------------------
See pages 13-14 for a list of exhibits incorporated by reference.