10-K 1 asf10k1208.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the year ended 12-31-2008 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 333-53111 ATLAS FUTURES FUND, LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Delaware 51-0380494 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 505 Brookfield Drive, Dover, DE 19901 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (800) 331-1532 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Seq 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] (Do not check if a smaller reporting company) Smaller reporting company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.: Not Applicable. There is no market for the Units of partnership interests and none is expected to develop. The Registrant is a commodity pool. The Units are registered to permit the initial sale of Units at month end net asset value. Documents Incorporated by Reference Audited Financial Statements for Registrant filed with the United States Securities and Exchange Commission for the years ended December 31, 1998 through 2007 at Registration Nos. 333-61217, 333-53111 and 333-59976. Registration Statement on Form S-1 and all amendments thereto filed with the United States Securities and Exchange Commission at Registration Nos. 333- 61217 and 333-59976 are incorporated by reference to Parts I, II, III, and IV. PART I Item 1. Business On September 3, 1999, the registration statement filed by Atlas Futures Fund, L. P., (the "Fund") with the Securities and Exchange Commission (the "SEC"), which incorporated the disclosure document filed with the Commodity Futures Trading Commission (the "CFTC") was declared effective. Offers and sales of the Fund's limited partnership interests (the "Units") at the initial price of $1,000 per Unit commenced on that date to residents of the states selected by the General Partner. On October 15, 1999, the Fund had sold in excess of the $700,000 in face amount of Units, the amount required to break escrow and deliver the sales proceeds to the Fund accounts to permit it to commence the speculative trading of commodity futures. Trading commenced on November 18, 1999. On May 1, 2001, the Registrant registered $8,000,000 in additional Units. Units are currently offered and sold at the net asset value per Unit ("NAV") determined after addition of profits and deduction of losses, expenses, and reserves, at the close on the last business day of each month. See the financial statements for the total value of the Fund and the NAV as of the date of the statements. By its post effective amendment to its registration statement on Form S-1 filed June 24, 2008, the Fund updated its prospectus to (i) include up-to-date performance and financials, (ii) provide notice that, effective April 1, 2008, the Fund would have the right to diversify its cash equity for trading from being solely on deposit with clearing brokers to deposits at the brokers as well as in the name of the Fund outside of the clearing brokers in short term Treasury Bills and/or cash management funds holding only U.S. Treasuries, and (iii) provide notice that also, effective April 1, 2008, brokerage commissions that were currently charged as a percentage of assets on deposit with the clearing broker would be charged upon the assets intended to be used as equity for trading regardless of where they are deposited and what short-term investment is utilized. The trades for the Fund are selected and placed with the futures commission merchant ("FCM"), i.e., clearing broker, for the account of the Fund by one or more CTAs selected by the General Partner of the Fund. Since the inception of trading through February 1, 2005, the Fund account was traded by a single CTA, Clarke Capital Management, Inc. 116 W. 2nd Street, Hinsdale, Illinois 60521 (630) 323-5913. As of February 1, 2005, NuWave Investment Company, 1099 Mount Kemble Avenue, Morristown, New Jersey 07960, Telephone: (973) 425-9192, Fax: (973) 425-9190, E-mail: info@NuWavecorp.com was added as a CTA. As of October 1, 2007, NuWave was removed as CTA. The books and records of the trades placed by the CTA in the Fund's trading account are kept and are available for inspection by the Limited Partners at the office of the corporate General Partner, 5914 N. 300 West, Fremont, IN 46737. Clarke is not paid a management fee of the equity assigned to it to manage, but is paid an incentive fee of twenty-five percent (25%) of New Net Profit that it generates, as that term is defined in the Limited Partnership Agreement which governs the operation of the Fund, payable quarterly. The Fund Limited Partnership Agreement is included as Exhibit A to the prospectus delivered to the prospective investors and filed as part of the Registration Statement. The Limited Partnership Agreement defines the terms of operation of the Fund and is incorporated herein by reference. None of the purchasers of Limited Partnership Units ("Limited Partners") has a voice in the management of the Fund or ownership in the General Partner or the trading advisor. Reports of the NAV are sent to the Partners within twenty days following the end of each month. Ashley Capital Management, Inc., the corporate General Partner and Commodity Pool Operator, is paid monthly fixed brokerage commissions of eleven twelfths of one percent (11/12%) of the total value of the funds available for trading in the Fund's accounts at the FCM [eleven percent (11%) per year], from which it pays seven percent (7%) of the eleven percent (11%) to Futures Investment Company as introducing broker, which in turn pays all clearing costs, including pit brokerage fees, which includes floor brokerage, NFA and exchange fees for trades. The FCM is selected by the General Partner and holds the Fund's trading equity and places the trades as directed by the CTA pursuant to a power of attorney and advisory agreement granted by the Fund. The CTA agreements are terminable at the will of the parties. 2 The sale of Units is regulated by Securities Act of 1933 and the Commodity Exchange Act. Once the Units are issued, the operation of the Fund is subject to regulation pursuant to the Securities and Exchange Act of 1934 and the Commodity Exchange Act. The U.S. Securities and Exchange Commission and the Securities Commissions and securities acts of the several States where its Units are offered and sold have jurisdiction over the operation of the Fund. The National Futures Association has jurisdiction over the operation of the General Partner and the Commodity Trading Advisors. This regulatory structure is not intended, nor does it, protect investors from the risks inherent in the trading of futures and options. The Registrant will continue to offer Units for sale to the public via its fully amended and restated prospectus dated August 13, 2008 (the "Prospectus"), as it may be amended in the future, until the balance of un- issued registered securities, $1,164,400, as of December 31, 2008, is sold or the offering terminates as permitted or required by the terms of the Limited Partnership Agreement. Item 1A. Risk Factors The trading of futures, options on futures and other commodities related investments is highly speculative and risky. You should make an investment in the Fund only after consulting with independent, qualified sources of investment and tax advice and only if your financial condition will permit you to bear the risk of a total loss of your investment. You should consider an investment in the Units only as a long-term investment. Moreover, to evaluate the risks of this investment properly, you must familiarize yourself with the relevant terms and concepts relating to commodities trading and the regulation of commodities trading, which are discussed in the Risk Factors section of the Prospectus, which is incorporated herein by reference. You should carefully consider all the information we have included or incorporated by reference in this Form 10-K and our subsequent periodic filings with the SEC. In particular, you should carefully consider the risk factors described above and read the risks and uncertainties as set forth in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" Section of this Form 10-K. Any of the heretofore mentioned risks and uncertainties could materially adversely affect the Fund, its trading activities, operating results, financial condition and Net Asset Value and therefore could negatively impact the value of your investment. You should not invest in the Units unless you can afford to lose all of your investment. Item 1B. Unresolved Staff Comments None. Item 2. Properties The general partner has sole authority to determine the percentage of Fund assets that will be held on deposit with the futures commission merchant (FCM), used for other investments, and held in bank accounts to pay current obligations. The Fund maintains approximately 61% of its assets in a Treasury Direct Account maintained with the United States Department of the Treasury, and it also retains the right to invest in cash management funds that invest in U.S. Treasuries and have high liquidity. Funds maintained with the Department of Treasury and any cash management funds are in the name of the partnership and not commingled with those of any other entity. The general partner maintains approximately 38% of our net assets with the futures commission merchant for margin for trading by the trading advisor. Approximately 1% of the previous month's net assets are retained in the Fund's bank accounts to pay expenses and redemptions. MF Global Inc. is registered with the National Futures Association pursuant to the Commodity Exchange Act as a FCM. The trading of futures, options on futures and other commodities is highly speculative and the Fund has an unlimited risk of loss, including the pledge of all of its assets to the FCM to secure the losses on the trades made on its behalf by the commodity trading advisor or advisors selected, from time to time, by the General Partner. 3 Item 3. Legal Proceedings There have been no legal proceedings against the Fund, its General Partner, the CTA, the IB or any of their Affiliates, directors or officers. The FCM, MF Global Inc. ("MFG"), (MFG was formerly known as Man Financial Inc. ("MFI") until the change of name to MFG was effected on July 19, 2007), has had the following described reportable events, none of which, in the opinion of the FCM, is material to the performance of the FCM on behalf of the Fund's account: MF Global Inc. ("MFG") is registered under the Commodity Exchange Act, as amended, as a futures commission merchant and a commodity pool operator, and is a member of the National Futures Association in such capacities. In addition, MFG is registered with the Financial Industry Regulatory Authority as a broker-dealer. MFG was formerly known as Man Financial Inc. ("MFI") until the change of name to MFG was effected on July 19, 2007. MFG is a member of all major U.S. futures exchanges and most major U.S. securities exchanges. MFG's main office is located at 717 Fifth Avenue, 9th Floor, New York, New York 10022-8101. MFG's telephone number at such location is (212) 589-6200. At any given time, MFG is involved in numerous legal actions and administrative proceedings, which in the aggregate, are not, as of the date of this report, expected to have a material effect upon its condition, financial or otherwise, or to the services it will render to the Fund. There have been no administrative, civil or criminal proceedings pending, on appeal or concluded against MFG or its principals within the five years preceding the date of this 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 Fund, General Partner and the Trading Advisor 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, four virtually identical proposed class action securities suits were filed against MF Global Ltd., certain of its officers and directors, and Man Group plc. The complaints allege that the registration statement and prospectus issued in connection with MF Global Ltd.'s initial public offering in July 2007, were materially false and misleading to the extent that representations were made regarding the company's risk management policies, procedures and systems. The allegations are based upon the company's disclosure of $141.5 million in trading losses incurred in a single day by an associated person in his personal trading account, which losses the company was responsible to pay as an exchange clearing member. 4 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, 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. Item 4. Submission of Matters to a Vote of Security Holders Michael P. Pacult, individually and as the principal of the corporate General Partner, makes all day to day decisions regarding the operation of the Fund. The Limited Partners have not exercised any right to vote their Units and there have been no matters which would cause the Fund to conduct a vote of the Partners. The rights of the Limited Partners, including their voting rights, are defined in the Limited Partnership Agreement. Briefly stated, their voting rights are limited to the selection of the General Partner, amendments to the Limited Partnership Agreement, and other similar decisions. PART II Item 5. Market for Registrant's Limited Partnership Units, Related Stockholder Matters and Issuer Purchases of Equity Securities The Fund desires to be taxed as a partnership and not as a corporation. In furtherance of this objective, the Limited Partnership Agreement, subject to certain exceptions upon the death of a Limited Partner, requires all Limited Partners to obtain the approval of the General Partner prior to the transfer of any Units of partnership interest. Accordingly, there is no trading market for the Fund Units and none is likely to develop. The Limited Partners must rely upon the right of Redemption provided in the Limited Partnership Agreement to liquidate their interest. The Fund has fewer than 300 holders of its securities. Limited Partners are required to represent to the issuer that they are able to understand and accept the risks of investment in a commodity pool for which no market of interests will develop and that the right of redemption will be the sole expected method of withdrawal of equity from the Fund. The General Partner has sole discretion in determining what distributions, if any, the Fund will make to the Partners. The Fund has not made any distributions as of the date hereof. The Fund has no securities authorized for issuance under equity compensation plans. See the Limited Partnership Agreement attached as Exhibit A to the Registration Statement, incorporated herein by reference, for a complete explanation of the limitations upon transfer and right of redemption provided to Partners. 5 Item 6. Selected Financial Data The Fund is not required to pay dividends or otherwise make distributions and none are expected. The Limited Partners must rely upon their right of redemption to obtain their return of equity after consideration of profits, if any, and losses from the Fund. See the Registration Statement, incorporated herein by reference, for a complete explanation of the allocation of profits and losses to a Limited Partner's capital account. Following is a summary of certain financial information for the Registrant for the period from January 1, 2004 to December 31, 2008. Years Ended December 31, 2008 2007 2006 2005 2004 Performance per unit (3) Net unit value, beginning of the year $4,175.12 $3,489.87 $3,357.08 $2,731.41 $1,750.45 Net realized and unrealized gain (loss) on commodity transactions 2,355.63 1,365.97 505.12 1,206.19 1,573.93 Investment and other income 64.59 151.43 139.17 80.59 27.57 Expenses (1) (1,190.58) (832.15) (511.50) (661.11) (620.54) Net increase for the year 1,229.64 685.25 132.79 625.67 980.96 Net unit value at the end of the year $5,404.76 $4,175.12 $3,489.87 $3,357.08 $2,731.41 Net assets at the end of the year ($000) $22,691 $18,637 $17,015 $16,842 $11,791 Total return (1) 29.45 % 19.64 % 3.94 % 22.91 % 56.04 % Number of units outstanding at the end of the year 4,198.35 4,463.75 4,875.48 5,016.79 4,316.80 Ratio to average net assets Investment and other income (3) 1.30 % 4.14 % 4.22 % 2.57 % 1.23 % Expenses (2) (24.03)% (22.47)% (4.36)% (10.19)% (17.91)%
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. For the year ended December 31, 2008 and 2007, investments and other income and expenses and net realized and unrealized gains and losses on commodity transactions are calculated based on a single unit outstanding during the year. (1) Includes brokerage commissions (2) Excludes brokerage commissions for 2005 and prior years (3) 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. 6 The following summarized quarterly financial information presents the results of operations for the quarterly periods during the years ended December 31, 2008 and 2007: 2008 2007 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Investment Gain 3,382,295 6,738,452 (1,762,464) 2,045,462 587,809 1,372,470 1,607,389 2,667,635 Net Income (Loss) 2,049,905 4,447,545 (2,377,701) 1,341,430 4,559 755,629 719,086 1,608,616 Net Income (Loss) per limited partnership unit 456.85 1,012.64 (541.38) 301.53 0.30 159.01 166.66 359.28 Net Income (Loss) per general partnership unit (if any) - - - - - - - - Net asset value per partnership unit at the end of period. 4,631.97 5,644.61 5,103.23 5,404.76 3,490.17 3,649.18 3,815.84 4,175.12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Critical Accounting Policies and Estimates The Fund records all investments at market value in its financial statements, with changes in market value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. In certain circumstances, estimates are involved in determining market value in the absence of an active market closing price (e.g. swap and forward contracts which are traded in the inter-bank market). Capital Resources The Fund will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through resale of Units once issued or borrowing. Due to the nature of the Fund's business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets. Liquidity Most United States commodity exchanges limit fluctuations in commodity futures contracts prices during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits". During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Commodity futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if commodity futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Fund's commodity futures trading operations, the Fund's assets are expected to be highly liquid. The entire offering proceeds will be credited to the Fund's bank and brokerage accounts to engage in trading activities and as reserves for that trading. The Fund meets its margin requirements by depositing U.S. government securities or cash or both with the futures broker and the over-the-counter counterparties. In this way, substantially all (i.e., approximately 99% or more) of the Fund's assets, whether used as margin for trading purposes or as reserves for such trading, can be invested in U.S. government securities and time deposits with U.S. banks. Investors should note that maintenance of the Fund's assets in U.S. government securities and banks does not reduce the risk of loss from trading futures, forward and swap contracts. The Fund receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Fund assets. 7 Approximately 10% to 40% of the Fund's assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder. When combined with the previously described assets committed to margin, a total of up to approximately 40% of the Fund's assets may be deposited with over-the- counter counterparties in order to initiate and maintain forward and swap contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparties. The remaining 60% to 90% of the Fund's assets are normally invested in cash equivalents, such as U.S. Treasury bills, and held by the futures broker or the over-the-counter counterparties. The Fund's assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested with or loaned to the Fund, the General Partner or any affiliated entities. Results of Operations The Fund is subject to ongoing offering and operating expenses; however, profits or losses are primarily generated by the commodity trading advisor by methods that are proprietary to it. These results are not to be construed as an expectation of similar profits in the future. The Limited Partnership Agreement grants solely to the General Partner the right to select the trading advisor or advisors and to otherwise manage the operation of the Fund. The CTAs selected are responsible for the selection of trades. As evidenced by the increase in per unit value disclosed above, the Fund's CTAs have been successful overall. See the Registration Statement, incorporated by reference herein, for an explanation of the operation of the Fund. The initial start-up costs attendant to the sale of Units by use of a prospectus which has been filed with the Securities and Exchange Commission are substantial. The results of the partial year 1999 and the years 2000 through 2008 reflect the absorption of these costs by the Fund. The Fund's realized and unrealized trading gains (losses) before commissions were $10,403,745[$2355.63 per Unit] and $6,235,303[$1365.97per Unit] for the twelve months ended December 31, 2008 and December 31, 2007, respectively. The Fund's results after payment and accrual of expenses for the twelve months ended December 31, 2008 and December 31, 2007 were profits (losses) of $5,461,179[$1229.64 per Unit] and $3,087,890 [$685.25 Unit], respectively. The net asset value ("NAV") per Unit as of December 31, 2008, was $5,404.76, an increase of 29.45% from the December 31, 2007 NAV per Unit of $4,175.12. The above described performance was primarily due to the trading of Clarke Capital Management, currently the sole commodity trading advisor that trades for the Fund via its proprietary method, with the balance of the income from interest earned on deposits. If a large movement occurs in a sector that a trading advisor trades, such as agriculture, financials, metals or softs, it does not necessarily mean that the trading advisor will engage in trades that capture such moves. Accordingly, market movements and conditions are not necessarily correlated with Fund performance. Past performance is not necessarily indicative of future results. Registrant's average net assets during the twelve months ended December 31, 2008 were approximately $21,745,174, an increase of 26.67% over average net assets during the twelve months ended December 31, 2007 of $17,166,665. The increases in average net assets during the comparative twelve month periods were primarily due to the effects of investment returns generated by the commodity trading advisor. Net additions (withdrawals) for the twelve months ended December 31, 2008 and December 31, 2007 were $(1,406,854) and $(1,465,966), respectively. Interest income is earned on the Fund's assets, either through investment in short term cash instruments or through its deposits with the clearing broker. Interest income to the Fund varies monthly according to interest rates, trading performance, subscriptions and redemptions. Interest income for the twelve months ended December 31, 2008 was $282,259, a 60.21% decrease over the interest income for the twelve months ended December 31, 2007 of $710,446. The decrease in interest income for the comparative twelve month periods was primarily due to significantly reduced short term interest rates. 8 Brokerage commissions of 11% are calculated on the Fund's total trading equity as of the beginning of each month and therefore, vary according to monthly trading performance, subscriptions and redemptions. Commissions for the twelve months ended December 31, 2008 were $2,474,512, a 31.08% increase over the commissions for the twelve months ended December 31, 2007 of $1,887,822. The increase in commissions for the comparative twelve month periods was primarily due to increased average net asset levels. Pursuant to the Trading Advisory Agreement, the Fund paid a management fee to a trading advisor that no longer trades for the Fund, which was calculated on the net asset value of the equity allocated to it to trade as of the end of each month, and therefore, was affected by monthly trading performance, subscriptions and redemptions. See Note 5 to the financial statements herein for the historical management fee amounts. The trading advisor was removed as of October 1, 2007; accordingly, there were no management fees paid for the twelve months ended December 31, 2008. Management fees for the twelve months ended December 31, 2007 were $63,946. Pursuant to the Trading Advisory Agreement, the Fund pays a quarterly incentive fee to each trading advisor that has traded for the Fund. See Note 5 to the financial statements herein for the current and historical incentive fees. Trading advisor incentive fees during the twelve months ended December 31, 2008 and December 31, 2007 were $2,562,761and $1,687,737, respectively. The amounts are directly related to the trading performance of the trading advisors. Because CTA's earn their incentive fees independent of each other, during periods when there are multiple advisors, it is possible for one advisor to earn an incentive fee even if the other CTA or the Fund overall has negative performance. Operating expenses include accounting, audit, tax, and legal fees, as well as regulatory costs and printing and postage costs related to reports sent to limited partners. Operating expenses during the twelve months ended December 31, 2008 and December 31, 2007 were $187,552 and $218,354, respectively. The decrease over the comparative twelve month periods was primarily due to changes in accountants that were in progress during the prior period. Inflation has had no material impact on the operations or on the financial condition of the Fund from inception through December 31, 2008. Off-Balance Sheet Risk The term "off-balance sheet risk" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund trades in futures, forward and swap contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if the Fund's trading advisor was unable to offset futures interests positions of the Fund, the Fund could lose all of its assets and the Limited Partners would realize a 100% loss. The Fund, the General Partner and the CTAs minimize market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 40%. In addition to market risk, in entering into futures, forward and swap contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions. 9 In the case of forward and swap contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. The CTAs trade for the Fund only with those counterparties which they believe to be creditworthy. All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The securities of the Fund are not traded and no market for the Fund securities is expected to develop. The Fund is engaged in the speculative trading of futures and options on futures. The risks are fully explained in the Fund prospectus delivered to each prospective partner prior to their investment. Item 8. Financial Statements and Supplementary Data. The Fund financial statements as of December 31, 2008 were audited by Jordan, Patke & Associates, Ltd., 300 Village Green Drive Ste 210, Lincolnshire, IL 60069, and are provided in this Report beginning on page F-1. The supplementary financial information specified by Item 302 of Regulation S-K is included in Item 6. Selected Financial Data in this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A(T). Controls and Procedures. Disclosure Controls and Procedures The Registrant has adopted procedures in connection with the operation of its business including, but not limited to, the review of account statements sent to the General Partner before the open of business each day that disclose the positions held overnight in the Fund accounts, the margin to hold those positions, and the amount of profit or loss on each position, and the net balance of equity available in each account. The Fund brokerage account statements and financial books and records accounts are prepared by an independent CPA Firm and then are reviewed each quarter and audited each year by a different independent CPA firm. The General Partner of the Fund, under the actions of its sole principal, Michael Pacult, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the end of the period covered by this Report. Based on their evaluation, Mr. Pacult has concluded that these disclosure controls and procedures are effective. Changes in Internal Control over Financial Reporting Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to evaluate annually the effectiveness of its internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of its internal control over financial reporting in all annual reports. There were no changes in the General Partner's internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting applicable to the Fund. Management's Annual Report on Internal Control over Financial Reporting The General Partner is responsible for establishing and maintaining adequate internal control over the Fund's financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, a company's principal executive and principal financial officers and effected by a company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The General Partner's internal control over financial reporting includes those policies and procedures that: 10 * pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Fund's assets; * provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Fund's financial statements in accordance with generally accepted accounting principles, and that the Fund's receipts and expenditures are being made only in accordance with authorizations of the General Partner's management and directors; and * provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Fund's assets that could have a material effect on the Fund's financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Fund securities are not publicly traded so that there can be no insider trading or leaks of confidential information to the public. All Fund money is on deposit either with a bank or a futures commission merchant. See Subsequent Events in Item 1 of this Report. There is an audit trail produced by both. A certified public accountant prepares the monthly financial statements. The Fund units are sold during the month at a net asset value to be determined as of the close of business on the last day of trading each month. No information related to the value of the units during the month is available to the Fund sales force or the prospects. All quarterly financial statements are reviewed by an independent certified public accountant who audits the Fund financial statements at the end of each calendar year. The Fund maintains its subscription agreements and other records for six years. The management of the General Partner assessed the effectiveness of its internal control over financial reporting with respect to the Fund as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on its assessment, management has concluded that, as of December 31, 2008, the General Partner's internal control over financial reporting with respect to the Fund is effective based on those criteria. This Report does not include an attestation report of the Fund's registered public accounting regarding control over financial reporting. The General Partner's report was not subject to attestation by the Fund's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report. Item 9B. Other Information. None. Part III Item 10. Directors and Executive Officers and Corporate Governance The Fund is a Delaware Limited Partnership which acts through its corporate and individual general partner. Accordingly, the Registrant has no Directors or Executive Officers. The General Partners of the Registrant are Ashley Capital Management, Incorporated, a Delaware corporation, and Mr. Michael P. Pacult. The General Partners are both registered with the National Futures Association as commodity pool operators pursuant to the Commodity Exchange Act, and Mr. Pacult, age 64, is the sole shareholder, director, registered principal and executive officer of the corporate General Partner. The background and qualifications of Mr. Pacult are disclosed in the Registration Statement, incorporated herein by reference. There has never been a material administrative, civil or criminal action brought against the Fund, the General Partner or any of its directors, executive officers, promoters or control persons. 11 No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To the best of the Fund's knowledge, no such forms have been or are required to be filed. Audit Committee Financial Expert Mr. Pacult, in his capacity as the sole principal for the General Partner of the Fund, has determined that he qualifies as an "audit committee financial expert" in accordance with the applicable rules and regulations of the Securities and Exchange Commission. He is not independent of management. Code of Ethics The Fund General Partner is registered with the National Futures Association as a Commodity Pool Operator and its President, Michael P. Pacult is registered as its principal. Both the Fund and the General Partner are subject to Federal Commodity Exchange Act and audit for compliance and the rules of good practice of the Commodity Futures Trading Commission and the industry self regulatory organization, the National Futures Association. Having said that, neither the Commodity Futures Trading Commission nor the National Futures Association are responsible for the quality of the Fund disclosures or its operation, those functions are exclusively the responsibility of the Fund and its General Partner. Item 11. Executive Compensation. Although there are no executives of the Fund, the corporate General Partner is paid compensation that the Fund has elected to disclose on this Form 10-K. The Fund pays its corporate General Partner fixed brokerage commissions of eleven percent (11%) per year, payable monthly, from which it pays its affiliated introducing broker, Futures Investment Company, seven percent (7%) of the eleven percent (11%) to cover the cost of the trades entered by the CTA. The corporate General Partner retains the difference between the seven percent (7%) it pays to the introducing broker and the eleven percent (11%) it is paid. All compensation is disclosed in the Registration Statement, which is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. (a) The following Partners owned more than five percent (5%) of the total equity of the Fund as of December 31, 2008: Name Percent Ownership None N/A (b) As of December 31, 2008, neither the individual nor corporate General Partner owned any Units of Limited Partnership Interests. (c) The Limited Partnership Agreement governs the terms upon which control of the Fund may change. No change in ownership of the Units will, alone, determine the location of control. The Limited Partners must have 120 days advance notice and the opportunity to redeem prior to any change in the control from the General Partner to another general partner. Control of the management of the Fund may never vest in one or more Limited Partners. Item 13. Certain Relationships and Related Transactions, and Director Independence. See Item 11, Executive Compensation and Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The General Partner has sole discretion over the selection of trading advisors. Ashley Capital Management, Inc., the corporate General Partner, is paid a fixed commission for trades and, therefore, both General Partners have a potential conflict in the selection of a trading advisor who makes few trades rather than produces profits for the Fund. This conflict and others are fully disclosed in the Registration Statement, which is incorporated herein by reference. 12 Item 14. Principal Accountant Fees and Services. Only fees to the Principal Accountant, or Auditor, and not fees for other accounting, are required to be disclosed in this section. (1) Audit Fees The fees and costs paid to Jordan, Patke and Associates, Ltd. for the audit of the Fund's annual financial statements, for review of financial statements included in the Fund's Forms 10-Q and other services normally provided in connection with regulatory filing or engagements (i.e., consents related to SEC registration statements) for the years ended December 31, 2008 and 2007 were $16,535 and $30,290, respectively. (2) Audit Related Fees None (3) Tax Fees The aggregate fees paid to Jordan, Patke and Associates, Ltd. for tax compliance services including tax compliance, tax advice, and tax planning for the years ended December 31, 2008 and 2007 were $5,500 and $5,750, respectively. (4) All Other Fees None (5) The Board of Directors of Ashley Capital Management, Inc., General Partner of the Fund, approved all of the services described above. The Board of Directors has determined that the payments made to its independent certified public accountants for these services are compatible with maintaining such auditors' independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms. (6) Close to 100% of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time permanent employees. However, all work performed was supervised by a full-time permanent employee. Part IV Item 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this report: 1. All Financial Statements The Financial Statements begin on page F-1 of this report. 2. Financial Statement Schedules required to be filed by Item 8 of this form, and by paragraph (b) below. Not applicable, not required, or included in the Financial Statements. 3. List of those Exhibits required by Item 601 of Regulation S-K (Sec 229.601 of this chapter) and by paragraph (b) below. Incorporated by reference from the Fund's Registration Statement on Form S-1, and all amendments at file Nos. 333-61217 and 333-59976 previously filed with the Securities and Exchange Commission. 13 31.1 Certification of CEO and CFO pursuant to Section 302 32.2 Certification of CEO and CFO pursuant to Section 906 (b) Exhibits required by Item 601 of Regulation S-K (Sec 229.601 of this chapter). See response to 15(a)(3), above. (c) Financial statements required by Regulation S-X (17 CFR 210) which are excluded from the annual report to shareholders by Rule 14a-3(b) including (1) separate financial statements of subsidiaries not consolidated and fifty percent or less owned persons; (2) separate financial statements of affiliates whose securities are pledged as collateral; and (3) schedules. None. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K for the period ended December 31, 2008, to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: Atlas Futures Fund, Limited Partnership By Ashley Capital Management, Inc. Its General Partner Date: March 30, 2009 By: /s/ Michael Pacult Mr. Michael P. Pacult Sole Director, Sole Shareholder President and Treasurer 14 ATLAS FUTURES FUND, LIMITED PARTNERSHIP (A Delaware Limited Partnership) ANNUAL REPORT December 31, 2008 GENERAL PARTNER: Ashley Capital Management, Inc. % Corporate Systems, Inc. 505 Brookfield Drive Dover, Kent County, Delaware 19901 Index to the Financial Statements Page Report of Independent Registered Public Accounting Firm F-2 Statements of Assets and Liabilities F-3 Schedule of Investments - Cash and Securities - December 31, 2008 F-4 Schedule of Investments - Cash and Securities - December 31, 2007 F-5 Statements of Operations F-6 Statements of Changes in Net Assets F-7 Statements of Cash Flows F-8 Notes to Financial Statements F-9 - F-16 Affirmation of the Commodity Pool Operator F-17 F-1 Jordan, Patke & Associates, Ltd. Certified Public Accountants Report of Independent Registered Public Accounting Firm To the Partners of Atlas Futures Fund, Limited Partnership Dover, Delaware We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of Atlas Futures 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 Atlas Futures 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 are 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 13, 2009 300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069 Phone: (847) 913-5400 * Fax: (847) 913-5435 F-2 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Statements of Assets and Liabilities December 31, 2008 and 2007 2008 2007 Assets Investments Equity in broker trading accounts Cash and cash equivalents at broker $7,826,204 $19,285,953 Total equity in broker trading accounts 7,826,204 19,285,953 U.S. Treasury Bills (cost $14,977,729 and $0) 14,997,985 - Cash 99,988 47,167 Money market fund 1,009 - Interest receivable 203 44,109 Total assets 22,925,389 19,377,229 Liabilities Partner redemptions payable 1,027 53,817 Accrued commissions payable to related parties 151,937 7,344 Incentive fees payable 57,490 657,278 Other accrued liabilities 23,900 22,080 Total liabilities 234,354 740,519 Net assets $22,691,035 $18,636,710 Analysis of net assets Limited partners $22,691,035 $18,636,710 General partners - Net assets (equivalent to $5,404.76 and $4,175.12 per unit) $22,691,035 $18,636,710 Partnership units outstanding Limited partners units outstanding 4,198.35 4,463.75 General partners units outstanding - - Total partnership units outstanding 4,198.35 4,463.75
The accompanying notes are an integral part of the financial statements F-3 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Schedule of Investments - Cash and Securities December 31, 2008 Fair Value Percent Description Maturity Date Cost Face Value Local Currency U.S. Dollars of Net Assets United States Treasury Bills: United States Treasury Bill January 2, 2009 $4,985,944 $5,000,000 5,000,000 $5,000,000 United States Treasury Bill January 15, 2009 4,993,681 5,000,000 4,999,017 4,999,017 United States Treasury Bill February 19, 2009 4,998,104 5,000,000 4,998,968 4,998,968 Total United States Treasury Bills $14,977,729 $15,000,000 $14,997,985 66.10% Cash and cash equivalents in trading accounts: United States Markets 7,826,204 $7,826,204 Total cash and cash equivalents in trading accounts denominated in U.S. Dollars 7,826,204 34.49% Total cash and cash equivalents in trading accounts $7,826,204 34.49% Money market fund (1,009.26 shares at $1 per share) 1,009 $1,009 0.00%
The accompanying notes are an integral part of the financial statements F-4 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Schedule of Investments - Cash and Securities December 31, 2007 Fair Value Percent Description Maturity Date Face Value Local Currency U.S. Dollars of Net Assets Cash and cash equivalents in trading accounts: Cash denominated in U.S. Dollars: United States Markets 19,246,172 $19,246,172 103.27% Total cash denominated in U.S. Dollars 19,246,172 103.27% Total cash and cash equivalents denominated in U.S. Dollars 19,246,172 103.27% Cash denominated in foreign currency: Australian Dollar Markets - AUD 45,394 39,781 0.21% Total cash denominated in foreign currency 39,781 0.21% Total cash and cash equivalents $19,285,953 103.48%
The accompanying notes are an integral part of the financial statements F-5 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Statements of Operations For the Years Ended December 31, 2008, 2007 and 2006 2008 2007 2006 Investment income Interest income $282,259 $710,446 $692,736 Total investment income 282,259 710,446 692,736 Expenses Commission expense 2,474,512 1,887,822 1,829,489 Management fees - 63,946 53,217 Incentive fees 2,562,761 1,687,737 543,763 Professional accounting and legal fees 150,500 203,992 111,210 Other operating and administrative expenses 37,052 14,362 8,421 Total expenses 5,224,825 3,857,859 2,546,100 Net investment (loss) (4,942,566) (3,147,413) (1,853,364) Realized and unrealized gain (loss) from investments and foreign currency Net realized gain (loss) from: Investments 11,614,138 7,053,695 1,201,655 Foreign currency transactions (1,210,393) 1,115,290 (420,557) Net realized gain from investments and foreign currency transactions 10,403,745 8,168,985 781,098 Net unrealized appreciation (depreciation) on: Investments - (1,344,852) 1,137,767 Foreign currency transactions - (588,830) 542,898 Net unrealized appreciation (depreciation) on investments and foreign currency transactions - (1,933,682) 1,680,665 Net realized and unrealized income from investments and foreign currency transactions 10,403,745 6,235,303 2,461,763 Net increase in net assets resulting from operations $5,461,179 $3,087,890 $608,399 Net income per unit (1) Limited partnership unit $1,229.36 $685.25 $122.22 General partnership unit $- $- $-
(1) For the year 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-6 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Statements of Changes in Net Assets For the Years Ended December 31, 2008, 2007 and 2006 2008 2007 2006 Increase (decrease) in net assets from operations Net investment (loss) $(4,942,566) $(3,147,413) $(1,853,364) Net realized gain from investments and foreign currency transactions 10,403,745 8,168,985 781,098 Net unrealized appreciation (depreciation) on investments and foreign currency transactions - (1,933,682) 1,680,665 Net increase in net assets resulting from operations 5,461,179 3,087,890 608,399 Capital contributions from limited partners 411,613 281,915 869,489 Redemptions by limited partners (1,818,467) (1,747,881) (1,304,883) Total increase in net assets 4,054,325 1,621,924 173,005 Net assets at the beginning of the year 18,636,710 17,014,786 16,841,781 Net assets at the end of the year $22,691,035 $18,636,710 $17,014,786
The accompanying notes are an integral part of the financial statements F-7 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Statements of Cash Flows For the Years Ended December 31, 2008, 2007 and 2006 2008 2007 2006 Cash Flows from Operating Activities Net increase in net assets resulting from operations $5,461,179 $3,087,890 $608,399 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 - 1,933,681 (1,682,779) (Increase) decrease in interest receivable 43,906 (44,109) Increase (decrease) in accrued commissions payable 144,593 (669) (7,542) Increase (decrease) in accrued management and incentive fees (599,788) 422,250 50,999 Increase in other payables and accruals 1,820 21,231 (36,279) Net cash provided by (used in) operating activities 5,051,710 5,420,274 (1,067,202) Cash Flows from Financing Activities Proceeds from sale of units, net of sales commissions 411,613 281,915 869,489 Partner redemptions (1,871,257) (1,860,287) (1,255,824) Net cash (used in) financing activities (1,459,644) (1,578,372) (386,335) Net increase (decrease) in cash and cash equivalents 3,592,066 3,841,902 (1,453,537) Cash and cash equivalents, beginning of year 19,333,120 15,491,218 16,944,755 Cash and cash equivalents, end of year $22,925,186 $19,333,120 $15,491,218 End of period cash and cash equivalents consist of: Cash and cash equivalents at broker $7,826,204 $19,285,953 $15,435,188 Treasury Bills 14,997,985 - - Cash 99,988 47,167 56,030 Money market fund 1,009 - - Total cash and cash equivalents $22,925,186 $19,333,120 $15,491,218
The accompanying notes are an integral part of the financial statements F-8 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to Financial Statements 1. Nature of the Business Atlas Futures Fund, Limited Partnership (the "Fund") was formed January 12, 1998 under the laws of the State of Delaware. The Fund is engaged in the speculative trading of futures contracts in commodities, which commenced in October, 1999. Ashley Capital Management, Inc. ("Ashley") and Michael Pacult are the General Partners and the commodity pool operators ("CPO's") of the Fund. As of September 30, 2007, the sole registered commodity trading advisor ("CTA") of the fund was Clarke Capital Management, Inc. ("Clarke"), which has served as CTA since commencement of Fund business. From February 1, 2005 until October 1, 2007, NuWave Investment Corp. ("NuWave") also served as CTA. The CTAs have the authority to trade as much of the Fund's equity as is allocated to them by the General Partner, which is currently estimated to be 99% of total equity. Effective July, 2004 the Fund began to sell issuer direct on a best efforts basis with no sales commissions. The Fund is a registrant with the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933 (the Act). The Fund is subject to the regulations of the SEC and the reporting requirements of the Securities and Exchange Act of 1934. The Fund is also subject to the regulations of the Commodities Futures Trading Commission (CFTC), an agency of the U.S. government which regulates most aspects of the commodity futures industry, the rules of the National Futures Association and the requirements of various commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of futures commission merchants and interbank market makers through which the Fund trades and regulated by commodity exchanges and by exchange markets that may be traded by the advisor. 2. Significant Accounting Policies Registration Costs - Costs incurred for the initial filings with the Securities and Exchange Commission, National Association of Securities Dealers, Inc. and the states where the offering was made were accumulated, deferred and charged against the gross proceeds of offering at the initial closing as part of the offering expense. The Fund remains open to new partners, and incurs costs required to retain the ability to issue new units. Such costs, in addition to the costs of recurring annual and quarterly filings with regulatory agencies are expensed as incurred. Revenue Recognition - Commodity futures contracts are recorded on the trade date and are reflected in the balance sheet at the difference between the original contract amount and the market value on the last business day of the reporting period. Market value of commodity futures contracts is based upon exchange or other applicable market best available closing quotations. Interest income is recognized when it is earned. Use of Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. "Income Taxes - The Fund prepares calendar year U.S and applicable state information tax returns and reports to the partners their allocable shares of the Fund's income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each partner is individually responsible for reporting income or loss based on such partner's respective share of the Fund's income and expenses as reported for income tax purposes. Management has continued to evaluate the application of 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 by the U.S. federal and most state tax authorities. Statement of Cash Flows - For purposes of the Statement of Cash Flows, the Fund considers cash at broker, cash, money market funds and U.S. Treasury Bills to be cash equivalents. Net cash provided by operating activities includes no cash payments for interest or income taxes for the periods ended December 31, 2008 ,2007 and 2006. F-9 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 2. Significant Accounting Policies - Continued 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 have been reclassified to conform with 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 recurring basis as of December 31, 2008. Description Level 1 Level 2 Level 3 US Treasury Bills $ - $14,997,985 $ - Total $ - $14,997,985 $ - F-10 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 2. Significant Accounting Policies- continued 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. 3. General Partner Duties The responsibilities of the General Partner, in addition to directing the trading and investment activity of the Fund, include executing and filing all necessary legal documents, statements and certificates of the Fund, retaining independent public accountants to audit the Fund, employing attorneys to represent the Fund, reviewing the brokerage commission rates to determine reasonableness, maintaining the tax status of the Fund as a limited partnership, maintaining a current list of names, addresses and numbers of units owned by each Limited Partner and taking such other actions as deemed necessary or desirable to manage the business of the Fund. If the daily net unit value of the fund falls to less than 50% of the highest value earned through trading at the close of any month, then the General Partner will immediately suspend all trading, provide all limited partners with notice of the reduction and give all limited partners the opportunity, for fifteen days after such notice, to redeem partnership interests. No trading will commence until after the lapse of the fifteen day period. 4. Limited Partnership Agreement The Limited Partnership Agreement provides, among other things, that: Capital Account - A capital account shall be established for each partner. The initial balance of each partner's capital account shall be the amount of the initial contributions to the Fund. Monthly Allocations - Any increase or decrease in the Fund's net asset value as of the end of a month shall be credited or charged to the capital account of each partner in the ratio that the balance of each account bears to the total balance of all accounts. Any distribution from profits or partners' capital will be made solely at the discretion of the General Partners. 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. F-11 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 4. Limited Partnership Agreement - Continued Subscriptions - Investors must submit subscription agreements and funds at least five business days prior to month end. Subscriptions must be accepted or rejected by the General Partner within five business days. The investor also has five business days to withdraw his subscription. Funds are deposited into an interest bearing subscription account and will be transferred to the Fund's account on the first business day of the month after the subscription is accepted. Interest earned on the subscription funds will accrue to the account of the investor. Redemptions - After holding the investment for a minimum of twelve months, a limited partner may request any or all of his investment be redeemed at the net asset value as of the end of a month. The written request must be received by the General Partner no less than ten days prior to a month end. Redemptions will generally be paid within twenty days of the effective month end. However, in various circumstances due to liquidity, etc. the General Partner may be unable to comply with the request on a timely basis. Effective January 1, 2004, redemption penalties are no longer charged. 5. Fees The Fund was charged the following fees: A monthly commission of 7% (annual rate) of the Fund's assets on deposit with the futures commission merchant to the Fund's Corporate General Partner. The Corporate General Partner was responsible for payments of brokerage commission and fees to the futures commission merchant. A quarterly incentive fee of 25% of "new net profits" is paid to Clarke. A monthly continuing service fee of 4% (annual rate) of the investment in the Fund (as defined) was paid to the selling agent. NuWave was paid a quarterly incentive fee of 20% of "new net profits" and also received a monthly management fee of 2% (annualized) on the first $2,000,000 in allocated equity and 1% on the allocated equity above $2,000,000. NuWave was allocated $2,000,000 in equity on February 1, 2005. Effective October 1, 2007, NuWave ceased to be a CTA of the Fund. Effective February 6, 2006, the Corporate General Partner began paying 7% of the 11% of received brokerage commissions to FIC for serving as introducing broker to the Fund. Effective December 1, 2006, the Fund changed the monthly management fee to NuWave to a percentage based on the rate of trading assigned by NuWave and approved by the General Partner of up to 3% (annualized) on the first $2,000,000 in allocated equity and up to 2% on the allocated equity above $2,000,000. The incentive fee of 20% remained unchanged during the period over which NuWave served as CTA. Effective October 1, 2007, NuWave Investment Corp. was removed as a commodity trading advisor to the Fund and it ceased earning management and incentive fees. The Corporate General Partner reserves the right to change the fee structure at its sole-discretion. 6. Related Party Transactions The Fund has an agreement to pay commissions and fees to two related parties, Ashley Capital Management, the Fund's General Partner and Futures Investment Company, the introducing broker. These related parties are 100% and 50%, respectively, owned by Michael Pacult, the Fund's individual CPO and president of the corporate CPO. Related party commissions and fees were as follows: F-12 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 6. Related Party Transactions - Continued Commissions and fees included in expense: Year ended December 31, 2008 2007 2006 Ashley Capital Management, Inc. $898,144 $683,623 $747,549 Futures Investment Company 1,423,668 1,049,076 934,678 Total related party expenses $2,321,812 $1,732,699 $1,682,227 Commissions and fees included in accrued expenses: December 31, 2008 2007 Ashley Capital Management, Inc. $79,523 $1,198 Futures Investment Company 72,414 6,146 Total accrued expenses to related parties $151,937 $7,344 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. 7. Partnership Unit Transactions As of December 31, 2008, 2007, and 2006 partnership units were valued at $5,404.76, $4,175.12 and $3,489.87, respectively. Transactions in partnership units were as follows: Units Amount 2008 2007 2006 2008 2007 2006 Limited Partner Units Subscriptions 78.15 75.10 257.31 $411,613 $281,915 $869,489 Redemptions (343.56) (486.83) (398.62) (1,818,467) (1,747,881) (1,304,883) Total (265.41) (411.73) (141.31) (1,406,854) (1,465,966) (435,394) General Partner Units Subscriptions - - - - - - Redemptions - - - - - - Total - - - - - - Total Units Subscriptions 78.15 75.10 257.31 411,613 281,915 869,489 Redemptions (343.56) (486.83) (398.62) (1,818,467) (1,747,881) (1,304,883) Total (265.41) (411.73) (141.31) $(1,406,854) $(1,465,966) $(435,394)
F-13 Atlas Futures 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 $7,826,204 and $19,285,953, respectively, which equals approximately 34.5% and 103.5% of Net Asset Value, respectively. Cash exceeded Net Asset Value because of accrued expenses and partner redemptions at December 31, 2007. Cash payments for these expenses were made prior to the end of the subsequent fiscal quarter. Prior to April, 2007, the fund purchased United States Treasury Bills as a form of margin and the Fund earned interest on this margin. As of April 2007, the Fund benefits from an arrangement with the FCM whereby the FCM pays the Fund the daily Treasury Bill or Libor rate minus 10 basis points on the net liquidity of the Fund. Beginning in the second quarter of 2008, the Fund resumed investing in United States Treasury Bills. 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 and $0 on long positions at December 31, 2008 and December 31, 2007, respectively. However, when the Fund enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at the contract price and then repurchase the contract at prevailing market prices or settle in cash. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes the Fund to unlimited potential risk. Market risk is influenced by a wide variety of factors including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effects among the derivative instruments the Fund holds and the liquidity and inherent volatility of the markets in which the Fund trades. F-14 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 8. Trading Activities and Related Risks - Continued There were no net unrealized gains on open commodity futures contracts at December 31, 2008 and December 31, 2007. Open contracts generally mature within three months of December 31, 2008 The fund has no open 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. 9. 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. 10. 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. F-15 Atlas Futures Fund, Limited Partnership (A Delaware Limited Partnership) Notes to the Financial Statements 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. 12. Financial Highlights Years Ended December 31, 2008 2007 2006 2005 2004 Performance per unit (3) Net unit value, beginning of the year $4,175.12 $3,489.87 $3,357.08 $2,731.41 $1,750.45 Net realized and unrealized gain (loss) on commodity transactions 2,355.63 1,365.97 505.12 1,206.19 1,573.93 Investment and other income 64.59 151.43 139.17 80.59 27.57 Expenses (1) (1,190.58) (832.15) (511.50) (661.11) (620.54) Net increase for the year 1,229.64 685.25 132.79 625.67 980.96 Net unit value at the end of the year $5,404.76 $4,175.12 $3,489.87 $3,357.08 $2,731.41 Net assets at the end of the year ($000) $22,691 $18,637 $17,015 $16,842 $11,791 Total return (1) 29.45 % 19.64 % 3.94 % 22.91 % 56.04 % Number of units outstanding at the end of the year 4,198.35 4,463.75 4,875.48 5,016.79 4,316.80 Ratio to average net assets Investment and other income (3) 1.30 % 4.14 % 4.22 % 2.57 % 1.23 % Expenses (2) (24.03)% (22.47)% (4.36)% (10.19)% (17.91)%
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. For the year ended December 31, 2008 and 2007, investments and other income and expenses and net realized and unrealized gains and losses on commodity transactions are calculated based on a single unit outstanding during the year. (1) Includes brokerage commissions (2) Excludes brokerage commissions for 2005 and prior years (3) 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-16 Atlas Futures 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, Ashley Capital Management, Inc. General Partner Atlas Futures Fund, Limited Partnership F-17