Amendment to Registration of Securities (General Form) — Form 10 Filing Table of Contents
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‘10-12G/A’ — Amendment to Registration of Securities (General Form)
Securities to be
registered pursuant to Section 12(b) of the Act:
NONE
Securities to be
registered pursuant to Section 12(g) of the
Act:
Limited Partnership
Interests
(Title of
Class)
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company
(Check one):
Large
accelerated filer [_]
Accelerated
filer [_]
Non-accelerated
filer [_]
Smaller
reporting company [X]
Item
13: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial
statements required by this item, including unaudited financial statements for
the quarter ending March 31, 2007, the report of McGladrey & Pullen, LLP for
the fiscal year ended December 31, 2006, and the report of Salvatore Albanese
& Co. for the fiscal years ended December 31, 2005 and 2004 are included
herewith following the Index to Financial Statements and are incorporated by
reference into this Item 13.
The
supplementary financial information specified in Item 302 of Regulation S-K is
not applicable.
Item
15: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial
Statements
The financial statements required by
this Item are included herewith, beginning following the Index to Financial
Statements appearing after the signature page hereof, and are incorporated into
this Item 15.
(b) Exhibits
The following documents (unless
otherwise indicated) are filed herewith and made part of this registration
statement.
Exhibit
Designation
Description
*3.1
Certificate
of Formation of AIS Futures Fund IV L.P.
+4.2
Fourth
Amended and Restated Limited Partnership Agreement of AIS Futures Fund IV
L.P., dated as of March 1, 2008
++10.1
Customer
Agreement between Calyon Financial Inc. and AIS Futures Fund IV
L.P.
*16.1
Letter
re: Change in Certifying Accountant
_____________________
*This exhibit is
incorporated by reference to the exhibit of the same number and description
filed with the Partnership’s Registration Statement (File No. 000-52599) filed
on April 30, 2007 on Form 10 under the Securities Exchange Act of
1934.
+This exhibit is
incorporated by reference to the exhibit of the same number and description
filed with the Partnership’s Current Report (File No. 000-52599) filed on March5, 2008 on Form 8-K under the Securities Exchange Act of
1934.
++This exhibit is
incorporated by reference to the exhibit of the same number and description
filed with the Partnership’s Registration Statement (File No. 000-52599) filed
on April 30, 2007 on Form 10 under the Securities Exchange Act of
1934. As of January 2, 2008, Calyon Financial Inc. was renamed
Newedge Financial Inc. The existing Customer Agreement remains in
effect, but under the new name.
SIGNATURES
Pursuant to the requirements of Section
12 of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A. General
Description of the Partnership
AIS
Futures Fund IV L.P. (the Partnership) is a Delaware limited partnership, which
operates as a commodity investment pool. The Partnership engages in
the speculative trading of futures contracts and options on futures
contracts. The Partnership is subject to the regulations of the
Commodity Futures Trading Commission, an agency of the United States (U.S.)
government which regulates most aspects of the commodity futures industry; rules
of the National Futures Association, an industry self-regulatory organization;
and the requirements of commodity exchanges and Futures Commission Merchants
(brokers) through which the Partnership trades.
The
limited partnership agreement provides, among other things, that the Partnership
shall dissolve no later than December 31, 2026.
B. Method
of Reporting
The
Partnership’s financial statements are presented in accordance with accounting
principles generally accepted in the United States of America, which require the
use of certain estimates made by the Partnership’s management. Actual
results could differ from those estimates.
Futures
and options on futures are recorded on trade date and reflected at fair value,
based on quoted market prices. Gains or losses are realized when
contracts are liquidated. Net unrealized gains or losses on open
contracts (the difference between contract trade price and quoted market price)
are reflected in the statement of financial condition. Any change in
net unrealized gain or loss from the preceding period is reported in the
statement of operations. Brokerage commissions include other trading
fees and are charged to expense when contracts are opened.
D. Securities
United
States government securities are stated at cost plus accrued interest, which
approximates fair value.
E. Income
Taxes
The
Partnership prepares calendar year U.S. and applicable state information tax
returns and reports to the partners their allocable shares of the Partnership’s
income, expenses and trading gains or losses. No provision for income
taxes has been made in these financial statements
as each partner is individually responsible for reporting income or loss based
on its respective share of the Partnership’s income and expenses as reporting
for income tax purposes.
F-6
AIS FUTURES FUND IV
L.P.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) (Unaudited)
_______________
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. Capital
Accounts
The
Partnership offers two Series of Units. The Series A Units are
available to all qualified investors, subject to applicable conditions and
restrictions. The Series B Units are available for sale to the
General Partner and its principals. The Partnership does not report
net asset value per unit, as each investors net asset value per unit may vary
due to timing of subscriptions and redemptions and applicability of the General
Profit Share allocation based on each Limited Partner’s capital account balances
rather than the Partnership as a whole. The Partnership accounts for
subscriptions, allocations and redemptions on a per partner capital account
basis. Income or loss, prior to the General Partner Profit Share
allocation, is allocated pro rata to the capital accounts of all
partners. The General Partner Profit Share allocation applicable to
each Limited Partner is allocated to the General Partner’s capital account from
the Limited Partner’s capital account at the end of each calendar year or upon
redemption by a Limited Partner. For interim accounting periods, the
General Partner Profit Share allocation is accrued, based on defined New Trading
Profit to date, and is reflected as a liability of the Partnership in the
statement of financial condition.
G. Redemptions
Limited
Partners may require the Partnership to redeem some or all of their capital upon
ten days prior written notice. Partner redemptions are recorded on
their effective date, which is generally the last day of the month.
H. Statement
of Cash Flows
The
Partnership has elected not to provide statements of cash flows as permitted by
Statement of Financial Accounting Standards No. 102, “Statements of Cash Flows –
Exemption of Certain Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale.”
I. Recently
Issued Accounting Pronouncements
In July
2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48 (FIN 48) entitled “Accounting For Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.” FIN 48 prescribes the
minimum recognition threshold a tax position must meet in connection with
accounting for uncertainties in income tax positions taken or expected to be
taken by an entity before being measured and recognized in the financial
statements. Adoption of FIN 48 was required for the fiscal year
beginning January 1, 2007. The adoption of FIN 48 did not have a
material effect on the Partnership’s financial statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (FAS 157). FAS 157 defines fair value,
establishes a framework for measuring fair value in accounting principles
generally accepted in the United States of America, and expands disclosures
about fair value measurements. While FAS 157 does not require any new
fair value measurements, for some entities, the application of FAS 157 may
change current practice.
F-7
AIS FUTURES FUND IV
L.P.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) (Unaudited)
_______________
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The
implementation of FAS 157 is not expected to have a material impact on the
Partnership’s financial statements.
J. Fair
Value
All of
the Partnership’s assets and liabilities are considered financial instruments
and are reflected at fair value, or at carrying amounts that approximate fair
value because of the short maturity of the instruments.
K. Change
in Accounting Principle and Prior Period Restatement
Pursuant
to the provisions of Statement of Financial Accounting Standards No. 150,
“Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity” (FAS 150), redemptions approved by the General Partner
prior to year end with a fixed effective date and fixed amount should be
recorded as redemptions payable as of year end. FAS 150 became
effective for the Partnership during the year ended December 31,2005. The December 31, 2005 financial statements have been restated
to reflect redemptions payable of $481,198, which was previously reported as
partners’ capital.
L. Interim
Financial Statements
The
financial statements included herein were prepared by us without audit according
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America may be omitted pursuant to such rules and regulations.
The financial statements reflect, in the opinion of management, all adjustments
necessary that were of normal and recurring nature and adequate disclosures to
present fairly the financial position and results of operations as of and for
the periods indicated. The results of operations for the three months ended
March 31, 2007 and 2006 are not necessarily indicative of the results to be
expected for the full year or for any other period.
These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the Form 10 previously filed with
the Securities and Exchange Commission.
Note
2.
GENERAL
PARTNER
The
General Partner and commodity trading advisor of the Partnership is AIS Futures
Management LLC, which conducts and manages the business and trading activities
of the Partnership.
The
Second Amended and Restated Limited Partnership Agreement (the “Limited
Partnership Agreement”) provides for the General Partner to receive a monthly
Management Fee equal to 1/12 of 2% (2% annually) of each Series A Limited
Partner’s month-end Net Assets, as defined. The General Partner also
receives a Profit Share allocation equal to 20% of any New Trading Profit, as
defined, attributable to each Series A Limited Partner’s Interest achieved as of
each calendar year-end or upon redemption.
F-8
AIS FUTURES FUND IV
L.P.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) (Unaudited)
_______________
Note
2.
GENERAL PARTNER
(CONTINUED)
During
the three months ended March 31, 2007 and 2006, certain Series A Limited
Partners were charged Management Fees at a rate lower than described above, to
offset the effect of the additional 1.5% per annum Selling Agent Service Fee
described in Note 3. Accordingly, for the three months ended March31, 2007 and 2006, Management Fees were reduced by approximately $43,500 and
$44,500, respectively.
Note
3.
SELLING AGENT
ADMINISTRATIVE AND SERVICE
FEES
Certain
Series A Limited Partners that were solicited by Selling Agents are
charged an Administrative and Service Fee (the “Service Fee” equal to 1/12 of
2.5% (2.5% annually) of each Series A Limited Partner’s month-end Net Assets, as
defined, sold by them which remain outstanding as of each
month-end. The Selling Agents may pass on a portion of the Service
Fee to its investment executives. In the event the Service Fee is no
longer payable to a Selling Agent, the relevant Limited Partner who was
solicited by such Selling Agent will no longer be charged the Service
Fee. For the three months ended March 31, 2007 and 2006, certain
Limited Partners were not subject to the Service Fee.
For
investment executives associated with the sale of Limited Partner Interests in
excess of $500,000, the investment executive’s firm will receive an additional
1.5% per annum Service Fee with respect to such Limited Partner Interests in
excess of $500,000, for the first twelve months following the sale of such
Limited Partner Interests. The additional Service Fee is paid by the
Partnership, however, the General Partner reduces its Management Fee (see Note
2) related to the Limited Partner’s
Interest. Accordingly, this additional Service Fee does
not affect the total fees charged to the Limited Partner.
Note
4.
DEPOSITS WITH
BROKER
The
Partnership deposits funds with its clearing broker subject to Commodity Futures
Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of
U.S. Treasury bills and cash with such broker. Accordingly, assets
used to meet margin and other broker or regulatory requirements are partially
restricted. The Partnership earns interest income on its assets
deposited with the broker.
Note
5.
SUBSCRIPTIONS,
DISTRIBUTIONS AND
REDEMPTIONS
Investments
in the Partnership are made by subscription agreement, subject to acceptance by
the General Partner. A selling commission of up to 2% of the
subscription amount may be deducted from the subscription proceeds and paid to
the
applicable Selling Agent, if any. For the three months ended March31, 2007 and 2006, $0 and $350 in selling commissions were charged to Limited
Partners. Limited Partner additions, as presented in the statement of
changes in partners’ capital (net asset value), are net of such selling
commissions.
The
Partnership is not required to make distributions, but may do so at the sole
discretion of the General Partner. A Limited Partner may request and
receive partial or full redemptions of their capital account as of the close of
business on the last business day of any month, subject to restrictions in the
Limited Partnership Agreement.
F-9
AIS FUTURES FUND IV
L.P.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) (Unaudited)
_______________
Note
6.
TRADING ACTIVITIES AND
RELATED RISKS
The
Partnership engages in the speculative trading of U.S. futures contracts and for
a brief period of time in 2006 traded options on U.S. futures
contracts. The Partnership is exposed to both market risk, the risk
arising from changes in the market value of the contracts, and credit risk, the
risk of failure by another party to perform according to the terms of a
contract.
Purchase
and sale of futures and options on futures contracts requires margin deposits
with the broker. 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. A
customer’s cash and other property (for example, U.S. Treasury bills) deposited
with a broker are considered commingled with all other customer funds subject to
the broker’s segregation requirements. In the event of a broker’s
insolvency, recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less
than total cash and other property deposited.
For
futures and options on futures contracts, risks arise from changes in the market
value of the contracts. Theoretically, the Partnership is exposed to a market
risk equal to the notional contract value of futures contracts purchased and
unlimited liability on such contracts sold short. As both a buyer and
seller of options, the Partnership pays or receives a premium at the outset and
then bears the risk of unfavorable changes in the price of the contract
underlying the option. Written options expose the Partnership to
potentially unlimited liability; for purchased options, the risk of loss is
limited o the premiums paid.
In
addition to market risk, in entering commodity interest contracts, there is a
credit risk that a counterparty will not be able to meet its obligations to the
Partnership. The counterparty for futures and options on futures
contracts traded in the United States and on most non-U.S. futures 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 nonperformance by one
of their members and, as such, should significantly reduce the credit
risk.
The
Partnership maintains its cash in bank deposit accounts that, at times, may
exceed federally insured limits. The Partnership has not experienced
any losses in such accounts. The General Partner believes the
Partnership is not exposed to any significant credit risk on cash.
The
General Partner has established procedures to actively monitor market risk and
minimize credit risk, although there can be no assurance that it will, in fact,
succeed in doing so. The Limited Partners bear the risk of loss only
to the extent of their respective investments and, in certain specific
circumstances, distributions and redemptions received.
Note
7.
INDEMNIFICATIONS
In the
normal course of business, the Partnership enters into contracts and agreements
that contain a variety of representations and warranties and which provide
general indemnifications. The Partnership’s maximum exposure under
these arrangements is unknown, as this would involve future claims that may be
made against the Partnership that have not yet occurred. The
Partnership expects the risk of any future obligation under these
indemnifications to be remote.
F-10
AIS FUTURES FUND IV
L.P.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) (Unaudited)
_______________
Note
8.
FINANCIAL
HIGHLIGHTS
The
following information presents the financial highlights of the Partnership for
the three months ended March 31, 2007 and 2006. This information has
been derived from information presented in the financial
statements.
Total return for Series A
Limited Partners taken as a whole
Total
return before Profit Share allocation (3)
8.18
%
6.21
%
Profit
Share allocation (3)
(0.92
)%
(0.90
)%
Total
return after Profit Share allocation
7.26
%
5.31
%
Supplemental Data for Series A
Limited Partners
Ratio of expenses to average
net asset value:
Expenses,
excluding Profit Share allocation (2)
4.79
%
4.71
%
Profit
Share allocation (3)
5.69
%
5.74
%
Total
expenses
2.10
%
2.21
%
Net
investment income (1)
(2)
0.12
%
0.16
%
The total returns and ratios are
presented for Series A Limited Partners taken as a whole based on the
Partnership’s standard Management Fee, Service Fee and Profit Share allocation
arrangements. An individual partner’s total returns and ratios may
vary from the above total returns and ratios based on the timing of their
capital additions and redemptions and given potentially different fee
arrangements for a Series A Limited Partner.
The total returns and ratios exclude
the effects of any 2% upfront selling commissions charged by Selling
Agents.
______________
(1)
The
net investment income is comprised of interest income less total expenses,
excluding the General Partner Profit Share
allocation.
(2)
Annualized.
(3)
Not
annualized.
F-11
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Partners
AIS
Futures Fund IV L.P.
Wilton,
Connecticut
We have
audited the accompanying statement of financial condition, including the
condensed schedule of investments, of AIS Futures Fund IV L.P. as of December31, 2006 and the related statements of operations and changes in partners’
capital for the year then ended. 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. 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 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 AIS Futures Fund IV L.P. as of
December 31, 2006, and the results of its operations for the year then ended in
conformity with U.S. generally accepted accounting principles.
We have
audited the accompanying statement of financial condition, including the
condensed schedule of investments, of AIS Futures Fund IV L.P. as of December31, 2005, and the statements of operations and changes in partners’ capital for
the years ended December 31, 2005 and 2004. These financial statements are the
responsibility of the Partnership’s management. Our responsibility to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in
the United States of America. 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, the financial statements referred to above present fairly, in all
material respects, the financial position of AIS Futures Fund IV L.P. as of
December 31, 2005, and the results of its operations for the years ended
December 31, 2005 and 2004, in conformity with accounting principles generally
accepted in the United States of America.
Our
audits were conducted for the purpose of forming an opinion on the 2005 and 2004
basic financial statements taken as a whole. The supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements, but is supplementary information required by
Regulation 4.22(c) under the Commodity Exchange Act. Such information as of
December 31, 2005 and 2004 has been subjected to the auditing procedures applied
in the audit of the 2005 and 2004 basic financial statements taken as a
whole.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A.
General
Description of the Partnership
AIS
Futures Fund IV L.P. (the Partnership) is a Delaware limited partnership, which
operates as a commodity investment pool. The Partnership engages in the
speculative trading of futures contracts and options on futures contracts. The
Partnership is subject to the regulations of the Commodity Futures Trading
Commission, an agency of the United States (U.S.) government which regulates
most aspects of the commodity futures industry; rules of the National Futures
Association, an industry self-regulatory organization; and the requirements of
commodity exchanges and Futures Commission Merchants (brokers) through which the
Partnership trades.
The
limited partnership agreement provides, among other things, that the Partnership
shall dissolve no later than December 31, 2026.
B.
Method
of Reporting
The
Partnership’s financial statements are presented in accordance with accounting
principles generally accepted in the United States of America, which require the
use of certain estimates made by the Partnership’s management. Actual results
could differ from those estimates.
Futures
and options on futures are recorded on trade date and reflected at fair value,
based on quoted market prices. Gains or losses are realized when contracts are
liquidated. Net unrealized gains or losses on open contracts (the difference
between contract trade price and quoted market price) are reflected in the
statement of financial condition. Any change in net unrealized gain or loss from
the preceding period is reported in the statement of operations. Brokerage
commissions include other trading fees and are charged to expense when contracts
are opened.
D.
Securities
United
States government securities are stated at cost plus accrued interest, which
approximates fair value.
E.
Income
Taxes
The
Partnership prepares calendar year U.S. and applicable state information tax
returns and reports to the partners their allocable shares of the Partnership’s
income, expenses and trading gains or losses. No provision for income taxes has
been made in these financial statements as each partner is individually
responsible for reporting income or loss based on its respective share of the
Partnership’s income and expenses as reporting for income tax
purposes.
F-19
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F.
Capital
Accounts
The
Partnership offers two Series of Units. The Series A Units are
available to all qualified investors, subject to applicable conditions and
restrictions. The Series B Units are available for sale to the
General Partner and its principals. The Partnership accounts for
subscriptions, allocations and redemptions on a per partner capital account
basis. Income or loss, prior to the General Partner Profit Share
allocation, is allocated pro rata to the capital accounts of all
partners. The General Partner Profit Share allocation applicable to
each Limited Partner is allocated to the General Partner’s capital account from
the Limited Partner’s capital account at the end of each calendar year or upon
redemption by a Limited Partner.
The
reported net income (loss) per unit and net asset value per unit is determined
based on the fund as a whole. An individual Limited Partner’s net
asset value per unit may vary from what is reported due to the timing of
subscriptions and redemptions and applicability of the General Profit Share
allocation based on each Limited Partner’s capital account balances rather than
the fund as a whole.
G.
Redemptions
Limited
Partners may require the Partnership to redeem some or all of their capital upon
ten days prior written notice. Partner redemptions are recorded on their
effective date, which is generally the last day of the month.
H.
Reclassifications
Certain
amounts in the 2005 financial statements were reclassified to conform with the
2006 presentation.
I.
Statement
of Cash Flows
The
Partnership has elected not to provide statements of cash flows as permitted by
Statement of Financial Accounting Standards No. 102, “Statements of Cash Flows -
Exemption of Certain Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale.”
F-20
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
J.
Recently
Issued Accounting Pronouncements
In July
2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48 (FIN 48) entitled “Accounting For Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.” FIN 48 prescribes the minimum
recognition threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an entity
before being measured and recognized in the financial statements. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006. The
implementation of FIN 48 is not expected to have a material impact on the
Partnership’s financial statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (FAS 157). FAS 157 defines fair value,
establishes a framework for measuring fair value in accounting principles
generally accepted in the United States of America, and expands disclosures
about fair value measurements. While FAS 157 does not require any new fair value
measurements, for some entities, the application of FAS 157 may change current
practice.
FAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The
implementation of FAS 157 is not expected to have a material impact on the
Partnership’s financial statements.
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”),
“Considering the Effects of Prior Year Misstatements When Quantifying
Misstatements in Current Year Financial Statements”, providing guidance on
quantifying financial statement misstatement and implementation (e.g.,
restatement or cumulative effect to assets, liabilities and retained earnings)
when first applying this guidance. SAB 108 is effective for the Partnership for
the year ending December 31, 2006. The adoption of SAB 108 did not have a
material effect on the Partnership’s financial statements.
K.
Fair
Value
All of
the Partnership’s assets and liabilities are considered financial instruments
and are reflected at fair value, or at carrying amounts that approximate fair
value because of the short maturity of the instruments.
L.
Change
in Accounting Principle and Prior Period
Restatement
Pursuant
to the provisions of Statement of Financial Accounting Standards No. 150,
“Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity” (FAS 150), redemptions approved by the General Partner
prior to year end with a fixed effective date and fixed amount should be
recorded as redemptions payable as of year end. FAS 150 became effective for the
Partnership during the year ended December 31, 2005. The December 31, 2005
financial statements have been restated to reflect redemptions payable of
$481,198, which was previously reported as partners’ capital.
F-21
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
2.
GENERAL
PARTNER
The
General Partner and commodity trading advisor of the Partnership is AIS Futures
Management LLC, which conducts and manages the business and trading activities
of the Partnership.
The
Second Amended and Restated Limited Partnership Agreement (the “Limited
Partnership Agreement”) provides for the General Partner to receive a monthly
Management Fee equal to 1/12 of 2% (2% annually) of each Series A Limited
Partner’s month-end Net Assets, as defined. The General Partner also receives a
Profit Share allocation equal to 20% of any New Trading Profit, as defined,
attributable to each Series A Limited Partner’s Interest achieved as of each
calendar year-end or upon redemption.
During
2006 and 2005, certain Series A Limited Partners were charged Management Fees at
a rate lower than described above, to offset the effect of the additional 1.5%
per annum Selling Agent Service Fee described in Note 3. Accordingly, for the
years ended December 31, 2006 and 2005, Management Fees were reduced by
approximately $195,000 and $63,000, respectively.
Note
3.
SELLING AGENT
ADMINISTRATIVE AND SERVICE
FEES
Certain
Series A Limited Partners that were solicited by Selling Agents are charged an
Administrative and Service Fee (the “Service Fee” equal to 1/12 of 2.5% (2.5%
annually)) of each Series A Limited Partner’s month-end Net Assets, as defined,
sold by them which remain outstanding as of each month-end. The Selling Agents
may pass on a portion of the Service Fee to its investment executives. In the
event the Service Fee is no longer payable to a Selling Agent, the relevant
Limited Partner who was solicited by such Selling Agent will no longer be
charged the Service Fee. For the year ended December 31, 2006, certain Limited
Partners were not subject to the Service Fee. For the year ended December 31,2005, all Limited Partners were subject to the Service Fee.
For
investment executives associated with the sale of Limited Partner Interests in
excess of $500,000, the investment executive’s firm will receive an additional
1.5% per annum Service Fee with respect to such Limited Partner Interests in
excess of $500,000, for the first twelve months following the sale of such
Limited Partner Interests. Effectively, the additional Service Fee is paid by
the General Partner, not the Limited Partner, through a reduced Management Fee,
as discussed in Note 2.
Note
4.
DEPOSITS WITH
BROKER
The
Partnership deposits funds with its clearing broker subject to Commodity Futures
Trading Commission regulations and various exchange and broker requirements.
Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash
with such broker. Accordingly, assets used to meet margin and other broker or
regulatory requirements are partially restricted. The Partnership earns interest
income on its assets deposited with the broker.
F-22
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
5.
SUBSCRIPTIONS,
DISTRIBUTIONS AND
REDEMPTIONS
Investments
in the Partnership are made by subscription agreement, subject to acceptance by
the General Partner. A selling commission of up to 2% of the subscription amount
may be deducted from the subscription proceeds and paid to the applicable
Selling Agent, if any. For the years ended December 31, 2006 and 2005, $1,350
and $0 in selling commissions were charged to Limited Partners. Limited Partner
additions, as presented in the statement of changes in partners’ capital (net
asset value), are net of such selling commissions.
The
Partnership is not required to make distributions, but may do so at the sole
discretion of the General Partner. A Limited Partner may request and receive
partial or full redemptions of their capital account as of the close of business
on the last business day of any month, subject to restrictions in the Limited
Partnership Agreement.
Note
6.
TRADING ACTIVITIES AND
RELATED RISKS
The
Partnership engages in the speculative trading of U.S. futures contracts and for
a brief period of time in 2006 traded options on U.S. futures contracts. The
Partnership is exposed to both market risk, the risk arising from changes in the
market value of the contracts, and credit risk, the risk of failure by another
party to perform according to the terms of a contract.
Purchase
and sale of futures and options on futures contracts requires margin deposits
with the broker. 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. A customer’s
cash and other property (for example, U.S. Treasury bills) deposited with a
broker are considered commingled with all other customer funds subject to the
broker’s segregation requirements. In the event of a broker’s insolvency,
recovery may be limited to a pro rata share of segregated funds available. It is
possible that the recovered amount could be less than total cash and other
property deposited.
For
futures and options on futures contracts, risks arise from changes in the market
value of the contracts. Theoretically, the Partnership is exposed to a market
risk equal to the notional contract value of futures contracts purchased and
unlimited liability on such contracts sold short. As both a buyer and seller of
options, the Partnership pays or receives a premium at the outset and then bears
the risk of unfavorable changes in the price of the contract underlying the
option. Written options expose the Partnership to potentially unlimited
liability; for purchased options, the risk of loss is limited to the premiums
paid.
In
addition to market risk, in entering commodity interest contracts, there is a
credit risk that a counterparty will not be able to meet its obligations to the
Partnership. The counterparty for futures and options on futures contracts
traded in the United States and on most non-U.S. futures 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 nonperformance by one of their members
and, as such, should significantly reduce the credit risk.
The
Partnership maintains its cash in bank deposit accounts that, at times, may
exceed federally insured limits. The Partnership has not experienced any losses
in such accounts. The General Partner believes the Partnership is not exposed to
any significant credit risk on cash.
F-23
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
6.
TRADING ACTIVITIES AND
RELATED RISKS (CONTINUED)
The
General Partner has established procedures to actively monitor market risk and
minimize credit risk, although there can be no assurance that it will, in fact,
succeed in doing so. The Limited Partners bear the risk of loss only to the
extent of their respective investments and, in certain specific circumstances,
distributions and redemptions received.
Note
7.
INDEMNIFICATIONS
In the
normal course of business, the Partnership enters into contracts and agreements
that contain a variety of representations and warranties and which provide
general indemnifications. The Partnership’s maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Partnership that have not yet occurred. The Partnership expects the
risk of any future obligation under these indemnifications to be
remote.
F-24
AIS
FUTURES FUND IV L.P.
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
Note
8.
FINANCIAL
HIGHLIGHTS
The
following information presents the financial highlights of the Partnership for
the years ended December 31, 2006, 2005 and 2004. This information has been
derived from information presented in the financial statements.
2006
2005
2004
Total return for Series A
Limited Partners taken as a whole
Total return
before Profit Share allocation
0.17%
31.78
%
27.82
%
Profit Share
allocation
(0.47)%
(7.18
)%
(6.82
)%
Total
return after Profit Share allocation
(0.30)%
(24.59
)%
21.00
%
Supplemental Data for Series A
Limited Partners
Ratio of expenses to average
net asset value:
Expenses,
excluding Profit Share allocation
4.66
%
4.70
%
4.88
%
Profit Share
allocation
0.32
%
4.02
%
3.21
%
Total
expenses
4.98
%
8.72
%
8.09
%
Net
investment income (loss)1
0.17
%
(1.95
)%
(3.48
)%
The
total returns and ratios are presented for Series A Limited Partners taken as a
whole based on the Partnership’s standard Management Fee, Service Fee and Profit
Share allocation arrangements. An individual partner’s total returns and ratios
may vary from the above total returns and ratios based on the timing of their
capital additions and redemptions and given potentially different fee
arrangements for a Series A Limited Partner.
The
total returns and ratios exclude the effects of any 2% upfront selling
commissions charged by Selling Agents.
--------------------
1
The
net investment income (loss) is comprised of interest income less total
expenses, excluding the General Partner Profit Share
allocation.
F-25
INDEPENDENT AUDITOR’S
REPORT
To the
Members
AIS
Futures Management LLC
We have
audited the accompanying balance sheet of AIS Futures Management LLC as of
December 31, 2006. This financial statement is the responsibility of
the Company’s management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We
conducted our audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the balance
sheet. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our
opinion, the balance sheet referred to above presents fairly, in all material
respects, the financial position of AIS Futures Management LLC as of December31, 2006, in conformity with accounting principles generally accepted in the
United States of America.
Total
property, equipment and leasehold improvements, net
48,716
Security
deposits
$
25,351
Total
other assets
74,067
Total
assets
$
3,028,876
LIABILITIES
Current
liabilities
Accounts
payable
$
74,352
Compensation
payable
126,000
Payable
to profit sharing plan
175,000
Total
current liabilities
375,352
Deferred
rent
15,637
Total
liabilities
390,989
MEMBERS’
EQUITY
Members’
equity
2,637,887
Total
Liabilities and Members’ Equity
$
3,028,876
See
accompanying notes.
F-27
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE
SHEET
_______________
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A. General
Description
AIS
Futures Management LLC (the Company) is a Delaware limited liability company,
which is registered with the Commodity Futures Trading Commission (CFTC) as a
commodity pool operator and a commodity trading advisor. The Company
was formed under the laws of Delaware on April 14, 1997 and shall continue until
December 31, 2047, unless sooner terminated in accordance with the Amended and
Restated Limited Liability Company Agreement (Limited Liability Company
Agreement). The Company offers both retail and institutional
investors investment advisory and portfolio management services, primarily in
commodity interest contracts. The Company also serves as the general
partner and trading advisor of various sponsored funds. The Company
is subject to the regulations of the CFTC, an agency of the United States (U.S.)
government, which regulates most aspects of the commodity futures
industry. The Company is also a member of and subject to the rules of
the National Futures Association (NFA), an industry self-regulatory
organization.
B. Method
of Reporting
The
Company’s balance sheet is presented in accordance with accounting principles
generally accepted in the United States of America, which require the use of
certain estimates made by the Company’s management. Actual results
could differ from those estimates.
C. Cash
and Cash Equivalents
Cash and
cash equivalents includes cash on deposits with banks and an investment in a
money market mutual fund. The Company, at times, may maintain cash
balances with one financial institution in amounts greater then the federally
insured limit of $100,000, or may maintain cash in money market mutual fund
accounts which do not provide any federal or other deposit protection. The
Company’s management believes this to be an acceptable business
risk.
D. Revenue
Recognition
Management
fees accrue monthly based on a percentage of assets under
management. Profit Share allocations may be earned by achieving
defined performance objectives as outlined in agreements with the Company’s
clients. Profit Share allocations are accrued when the conditions of
the applicable profit share allocation agreements are satisfied.
E. Investments
in Sponsored Funds
Investments
in sponsored funds are reported at fair value at the balance sheet date, in
accordance with the equity method. Fair value is the value determined
for each sponsored fund in accordance with such sponsored funds valuation
policies and reported at the time of the Company’s valuation. Generally, the
fair value of the Company’s investment in a sponsored fund equals the underlying
net asset value and represents the amount the Company could reasonably expect to
receive from such sponsored fund if the Company’s investment was redeemed at the
date of valuation.
F-28
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. Property,
Equipment and Leasehold Improvements
Property,
equipment and leasehold improvements are stated at cost. The cost of
property and equipment is depreciated over the estimated useful lives of the
related assets using straight-line methods. Such lives range from 3
to 7 years. The cost of leasehold improvements is amortized over the
lesser of the length of the related leases or the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line
method.
G. Income
Taxes
The
Company prepares calendar year U.S. and applicable state information tax returns
and reports to the Members their allocable shares of the Company’s taxable
income.
H. Recently
Issued Accounting Pronouncements
In July
2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48 (FIN 48) entitled “Accounting For Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.” FIN 48 prescribes the
minimum recognition threshold a tax position must meet in connection with
accounting for uncertainties in income tax positions taken or expected to be
taken by an entity before being measured and recognized in the financial
statements. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006. The implementation of FIN 48 is not expected
to have a material impact on the Company’s balance sheet.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (FAS 157). FAS 157 defines fair value,
establishes a framework for measuring fair value in accounting principles
generally accepted in the United States of America, and expands disclosures
about fair value measurements. While FAS 157 does not require any new
fair value measurements, for some entities, the application of FAS 157 may
change current practice. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The implementation of FAS 157 is not expected to
have a material impact on the Company’s balance sheet.
Note
2.
RECEIVABLES FROM
SPONSORED FUNDS
During
2006, the Company acted as General Partner and provided trading advisory
services to various sponsored funds. Management fees earned by the
Company range from 0% to 4% annually, based on the various sponsored funds’
month-end net assets. Also, the Company earns annual Profit Share
allocations from sponsored funds that range from 20% to 26% of profits
attributable to certain limited partner’s of the sponsored
funds. Profit shares receivable
at December 31, 2006 are reflected as other receivables in the Company’s balance
sheet.
F-29
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
2.
RECEIVABLES FROM
SPONSORED FUNDS (CONTINUED)
Receivables
from sponsored funds consist of the following as of December 31,2006:
Management
Fees
Other
Receivables
AIS
Futures Fund II L.P. (2X-4X)
$
53,210
$
98,695
AIS
Futures Fund L.P. (3x-6x)
118,143
18,833
AIS
Futures Fund III L.P.
0
344,037
AIS
Futures Fund IV L.P.
72,095
83,935
Total
$
243,448
$
545,500
These
receivables are reported in the Company’s balance sheet at the amount the
Company expects to receive based on the related agreements with the sponsored
funds.
Note
3.
INVESTMENTS IN
SPONSORED FUNDS
Investments
in sponsored funds consist of the following as of December 31,2006:
AIS Futures Fund II L.P.
(2X-4X)
The
Company is the general partner and trading advisor of AIS Futures Fund II L.P.
(2X-4X). The net asset value of this fund is $24,496,424 at December31, 2006.
AIS Futures Fund L.P.
(3x-6x)
The
Company is the general partner and trading advisor of AIS Futures Fund L.P.
(3x-6x). The net asset value of this fund is $62,791,888 at December31, 2006.
AIS Futures Fund III
L.P.
The
Company is the general partner and trading advisor of AIS Futures Fund III
L.P. The net asset value of this fund is $22,739,003 at December 31,2006.
AIS Futures Fund IV
L.P.
The
Company is the general partner and trading advisor of AIS Futures Fund IV
L.P. The net asset value of this fund is $51,744,274 at December 31,2006.
Note
4.
EQUITY IN COMMODITY
BROKER TRADING ACCOUNT
At
December 31, 2006, the equity in the commodity broker trading account
consists of the following:
Futures
contracts and options on futures contracts are recorded on trade date and are
reflected at fair value based on quoted market prices. Gains or
losses are realized when contracts are liquidated. Net unrealized
gains or losses on open contracts (the difference between contract trade price
and quoted market price) are reflected as a component of equity in commodity
broker trading account in the balance sheet.
The
Company’s functional currency is the U.S. dollar; however, it transacts business
in currencies other than the U.S. dollar. Assets and liabilities
denominated in currencies other than the U.S. dollar are translated into U.S.
dollars at the rates in effect at the date of the balance sheet.
The
Company deposits funds with Calyon Financial Inc. to act as commodity broker,
subject to CFTC regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of
cash with the commodity broker. Accordingly, assets used to meet
margin and other broker or regulatory requirements are partially
restricted. The Company earns interest income on its assets deposited
with the commodity broker.
Note
5.
TRADING ACTIVITIES AND
RELATED RISKS
The
Company engages in the speculative trading of U.S. futures contracts and options
on U.S. futures contracts. Additionally, the sponsored funds in which
the Company invests and acts as general partner also engage in the speculative
trading
of U.S. futures contracts and options on U.S. futures contracts. The
Company is exposed to both market risk, the risk arising from changes in the
market value of the contracts, and credit risk, the risk of failure by another
party to perform according to the terms of a contract.
F-31
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
5.
TRADING ACTIVITIES AND
RELATED RISKS (CONTINUED)
Purchase
and sale of futures and options on futures contracts requires margin deposits
with the commodity broker. Additional deposits may be necessary for
any loss on contract value. The Commodity Exchange Act requires a
commodity broker to segregate all customer transactions and assets from such
broker’s proprietary activities. A customer’s cash and other property
(for example, U.S. Treasury bills) deposited with a commodity broker are
considered commingled with all other customer funds subject to the commodity
broker’s segregation requirements. In the event of a commodity
broker’s insolvency, recovery may be limited to a pro rata share of segregated
funds available. It is possible that the recovered amount could be
less than total cash and other property deposited.
For
futures and options on futures contracts, risks arise from changes in the market
value of the contracts. Theoretically, the Company is exposed to a market risk
equal to the notional contract value of futures contracts purchased and
unlimited liability on such contracts sold short. As both a buyer and
seller of options, the Company pays or receives a premium at the outset and then
bears the risk of unfavorable changes in the price of the contract underlying
the option. Written options expose the Company to potentially
unlimited liability, and purchased options expose the Company to a risk of loss
limited to the premiums paid.
In
addition to market risk, in entering futures and options on futures contracts,
there is a credit risk that a counterparty will not be able to meet its
obligations to the Company. The counterparty for futures and options
on futures contracts traded in the United States and on most non-U.S. futures
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 nonperformance
by one of their members and, as such, should significantly reduce the credit
risk.
The
Company has established procedures to actively monitor the market risk of its
own trading activity as well as the trading activity of the sponsored
funds. The Company has also established procedures to minimize its
credit risk and the credit risk of the sponsored funds. There is no
guarantee that the Company will succeed in its objectives of monitoring market
risk and minimizing credit risk.
Note
6.
LEASE
OBLIGATIONS
The
Company leases office facilities under a non-cancelable lease agreement, which
provides for minimum base annual rentals plus a proportionate share of tax,
operating and utility expenses. Related to this lease, the Company
has provided to the
landlord a security deposit in the amount of $24,665. This
lease expires on February 28, 2016. Minimum base annual rentals
through the current lease term are as follows:
Year Ending December
31:
2007
$
131,401
2008
135,309
2009
139,379
2010
143,559
2011
147,870
2012
152,321
2013
156,874
2014
161,597
2015
166,429
2016
27,873
Total
base annual rentals
$
1,362,612
F-32
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
6.
LEASE OBLIGATIONS
(CONTINUED)
The
Company recognizes rent expense under this agreement on a
straight-line basis resulting in a deferred rent liability of $15,637, as of
December 31, 2006.
The
Company has entered into a second lease for office facilities. This
lease expires on December 14, 2007. Minimum base annual rentals
through the lease term are $7,546. The Company has provided to the
landlord a security deposit of $686, relating to this lease.
The
Company has entered into an non-cancelable operating lease agreement for office
equipment, which provides for 48 monthly payments of $812. The
current lease expires on August 30, 2010. Minimum rentals through the
current lease term are $35,728.
Note
7.
PROFIT SHARING
PLAN
The
Company has established a Profit Sharing Plan (the Plan) for the benefit of its
employees. The Company is the Plan administrator and the president of
the Company is the trustee of the Plan. Under terms of the Plan,
employees enter the Plan as a participant on the entry date as of which he or
she satisfies the eligibility requirements. All persons who are
employees of the Company are considered eligible employees for purposes of the
Plan. The Company’s contributions to the Plan are totally
discretionary, including the discretion to forego a contribution for one or more
plan years. For each plan year in which an employee is eligible to
receive a share of any contribution the Company makes to the Plan, an amount is
allocated to the employee’s account in the ratio that their compensation for the
Plan year bears to the total compensation of all eligible participants for the
Plan year. Although the Plan is intended to be permanent, the Company
can amend or terminate the Plan at any time.
Note
8.
INDEMNIFICATIONS
In the
normal course of business, the Company enters into contracts and agreements that
contain a variety of representations and warranties and which provide general
indemnifications. The Company’s maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Company that have not yet occurred. The Company expects
the risk of any future obligation under these indemnifications to be
remote.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A.
General
Description
AIS
Futures Management LLC (the Company) is a Delaware limited liability company,
which is registered with the Commodity Futures Trading Commission (CFTC) as a
commodity pool operator and a commodity trading advisor. The Company
was formed under the laws of Delaware on April 14, 1997 and shall continue until
December 31, 2047, unless sooner terminated in accordance with the Amended and
Restated Limited Liability Company Agreement (Limited Liability Company
Agreement). The Company offers both retail and institutional
investors investment advisory and portfolio management services, primarily in
commodity interest contracts. The Company also serves as the general
partner and trading advisor of various sponsored funds. The Company
is subject to the regulations of the CFTC, an agency of the United States (U.S.)
government, which regulates most aspects of the commodity futures
industry. The Company is also a member of and subject to the rules of
the National Futures Association (NFA), an industry self-regulatory
organization.
B.
Method
of Reporting
The
Company’s balance sheet is presented in accordance with accounting principles
generally accepted in the United States of America, which require the use of
certain estimates made by the Company’s management. Actual results
could differ from those estimates.
C.
Cash
and Cash Equivalents
Cash and
cash equivalents includes cash on deposits with banks and an investment in a
money market mutual fund. The Company, at times, may maintain cash
balances with one financial institution in amounts greater then the federally
insured limit of $100,000, or may maintain cash in money market mutual fund
accounts which do not provide any federal or other deposit protection. The
Company’s management believes this to be an acceptable business
risk.
D.
Revenue
Recognition
Management
fees accrue monthly based on a percentage of assets under
management. Profit Share allocations may be earned by achieving
defined performance objectives as outlined in agreements with the Company’s
clients. Profit Share allocations are accrued when the conditions of
the applicable profit share allocation agreements are satisfied.
E.
Investments
in Sponsored Funds
Investments
in sponsored funds are reported at fair value at the balance sheet date, in
accordance with the equity method. Fair value is the value determined
for each sponsored fund in accordance with such sponsored funds valuation
policies and reported at the time of the Company’s valuation. Generally, the
fair value of the Company’s investment in a sponsored fund equals the underlying
net asset value and represents the amount the Company could reasonably expect to
receive from such sponsored fund if the Company’s investment was redeemed at the
date of valuation.
F-35
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
1.
ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F.
Property,
Equipment and Leasehold
Improvements
Property,
equipment and leasehold improvements are stated at cost. The cost of
property and equipment is depreciated over the estimated useful lives of the
related assets using straight-line methods. Such lives range from 3
to 7 years. The cost of leasehold improvements is amortized over the
lesser of the length of the related leases or the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line
method.
G.
Income
Taxes
The
Company prepares calendar year U.S. and applicable state information tax returns
and reports to the Members their allocable shares of the Company’s taxable
income.
H.
Recently
Issued Accounting Pronouncements
In July
2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48 (FIN 48) entitled “Accounting For Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.” FIN 48 prescribes the
minimum recognition threshold a tax position must meet in connection with
accounting for uncertainties in income tax positions taken or expected to be
taken by an entity before being measured and recognized in the financial
statements. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006. The implementation of FIN 48 is not expected
to have a material impact on the Company’s balance sheet.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (FAS 157). FAS 157 defines fair value,
establishes a framework for measuring fair value in accounting principles
generally accepted in the United States of America, and expands disclosures
about fair value measurements. While FAS 157 does not require any new
fair value measurements, for some entities, the application of FAS 157 may
change current practice. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The implementation of FAS 157 is not expected to
have a material impact on the Company’s balance sheet.
Note
2.
RECEIVABLES FROM
SPONSORED FUNDS
During
the three months ended March 31, 2007, the Company acted as General
Partner and provided trading advisory services to various sponsored
funds. Management fees earned by the Company range from 0% to
4% annually, based on the various sponsored funds’ month-end net
assets. Also, the Company earns annual Profit Share allocations
from sponsored funds that range from 20% to 26% of profits attributable to
certain limited partner’s of the sponsored funds. Profit shares
receivable at March 31, 2007 are reflected as other receivables in the
Company’s balance sheet.
F-36
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
2.
RECEIVABLES FROM
SPONSORED FUNDS (CONTINUED)
Receivables
from sponsored funds consist of the following as of March 31, 2007:
Management
Other
Fees
Receivables
AIS
Futures Fund II L.P. (2X-4X)
$
58,025
$
30,112
AIS
Futures Fund L.P. (3x-6x)
142,207
4,790
AIS
Futures Fund III L.P.
0
22,945
AIS
Futures Fund IV L.P.
82,306
3,551
Total
$
282,538
$
61,398
These
receivables are reported in the Company’s balance sheet at the amount the
Company expects to receive based on the related agreements with the sponsored
funds.
Note
3.
INVESTMENTS IN
SPONSORED FUNDS
Investments
in sponsored funds consist of the following as of March 31, 2007:
AIS Futures Fund II L.P.
(2X-4X)
The
Company is the general partner and trading advisor of AIS Futures Fund II L.P.
(2X-4X). The net asset value of this fund is $22,980,593 at March 31,2007.
AIS Futures Fund L.P.
(3x-6x)
The
Company is the general partner and trading advisor of AIS Futures Fund L.P.
(3x-6x). The net asset value of this fund is $73,408,910 at March 31,2007.
AIS Futures Fund III
L.P.
The
Company is the general partner and trading advisor of AIS Futures Fund III
L.P. The net asset value of this fund is $22,233,433 at March 31,2007.
AIS Futures Fund IV
L.P.
The
Company is the general partner and trading advisor of AIS Futures Fund IV
L.P. The net asset value of this fund is $58,130,411 at March 31,2007.
Note
4.
EQUITY IN COMMODITY
BROKER TRADING ACCOUNT
At
March 31, 2007, the equity in the commodity broker trading account
consists of the following:
Futures
contracts and options on futures contracts are recorded on trade date and are
reflected at fair value based on quoted market prices. Gains or
losses are realized when contracts are liquidated. Net unrealized
gains or losses on open contracts (the difference between contract trade price
and quoted market price) are reflected as a component of equity in commodity
broker trading account in the balance sheet.
The
Company’s functional currency is the U.S. dollar; however, it transacts business
in currencies other than the U.S. dollar. Assets and liabilities
denominated in currencies other than the U.S. dollar are translated into U.S.
dollars at the rates in effect at the date of the balance sheet.
The
Company deposits funds with Calyon Financial Inc. to act as commodity broker,
subject to CFTC regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of
cash with the commodity broker. Accordingly, assets used to meet
margin and other broker or regulatory requirements are partially
restricted. The Company earns interest income on its assets deposited
with the commodity broker.
Note
5.
TRADING ACTIVITIES AND
RELATED RISKS
The
Company engages in the speculative trading of U.S. futures contracts and
options on U.S. futures contracts. Additionally, the sponsored
funds in which the Company invests and acts as general partner also engage
in the speculative trading of U.S. futures contracts and options on U.S.
futures contracts. The Company is exposed to both market risk,
the risk arising from changes in the market value of the contracts, and
credit risk, the risk of failure by another party to perform according to
the terms of a contract.
F-38
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
5.
TRADING ACTIVITIES AND
RELATED RISKS (CONTINUED)
Purchase
and sale of futures and options on futures contracts requires margin deposits
with the commodity broker. Additional deposits may be necessary for
any loss on contract value. The Commodity Exchange Act requires a
commodity broker to segregate all customer transactions and assets from such
broker’s proprietary activities. A customer’s cash and other property
(for example, U.S. Treasury bills) deposited with a commodity broker are
considered commingled with all other customer funds subject to the commodity
broker’s segregation requirements. In the event of a commodity
broker’s insolvency, recovery may be limited to a pro rata share of segregated
funds available. It is possible that the recovered amount could be
less than total cash and other property deposited.
For
futures and options on futures contracts, risks arise from changes in the market
value of the contracts. Theoretically, the Company is exposed to a market risk
equal to the notional contract value of futures contracts purchased and
unlimited liability on such contracts sold short. As both a buyer and
seller of options, the Company pays or receives a premium at the outset and then
bears the risk of unfavorable changes in the price of the contract underlying
the option. Written options expose the Company to potentially
unlimited liability, and purchased options expose the Company to a risk of loss
limited to the premiums paid.
In
addition to market risk, in entering futures and options on futures contracts,
there is a credit risk that a counterparty will not be able to meet its
obligations to the Company. The counterparty for futures and options
on futures contracts traded in the United States and on most non-U.S. futures
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 nonperformance
by one of their members and, as such, should significantly reduce the credit
risk.
The
Company has established procedures to actively monitor the market risk of its
own trading activity as well as the trading activity of the sponsored
funds. The Company has also established procedures to minimize its
credit risk and the credit risk of the sponsored funds. There is no
guarantee that the Company will succeed in its objectives of monitoring market
risk and minimizing credit risk.
Note
6.
LEASE
OBLIGATIONS
The
Company leases office facilities under a non-cancelable lease agreement, which
provides for minimum base annual rentals plus a proportionate share of tax,
operating and utility expenses. Related to this lease, the Company
has provided to the
landlord a security deposit in the amount of $24,665. This
lease expires on February 28, 2016. Minimum base annual rentals
through the current lease term are as follows:
Year Ending March
31:
2008
$
132,372
2009
136,303
2010
140,413
2011
144,619
2012
148,966
2013
153,448
2014
158,031
2015
162,793
2016
153,300
Total
base annual rentals
$
1,330,245
F-39
AIS FUTURES MANAGEMENT
LLC
NOTES TO BALANCE SHEET
(CONTINUED)
_______________
Note
6.
LEASE OBLIGATIONS
(CONTINUED)
The
Company recognizes rent expense under this agreement on a
straight-line basis resulting in a deferred rent liability of $15,557, as of
March 31, 2007.
The
Company has entered into a second lease for office facilities. This
lease expires on December 14, 2007. Minimum base annual rentals
through the lease term are $5,488. The Company has provided to the
landlord a security deposit of $686, relating to this lease.
The
Company has entered into an non-cancelable operating lease agreement for office
equipment, which provides for 48 monthly payments of $812. The
current lease expires on August 30, 2010. Minimum rentals through the
current lease term are $33,292.
Note
7.
PROFIT SHARING
PLAN
The
Company has established a Profit Sharing Plan (the Plan) for the benefit of its
employees. The Company is the Plan administrator and the president of
the Company is the trustee of the Plan. Under terms of the Plan,
employees enter the Plan as a participant on the entry date as of which he or
she satisfies the eligibility requirements. All persons who are
employees of the Company are considered eligible employees for purposes of the
Plan. The Company’s contributions to the Plan are totally
discretionary, including the discretion to forego a contribution for one or more
plan years. For each plan year in which an employee is eligible to
receive a share of any contribution the Company makes to the Plan, an amount is
allocated to the employee’s account in the ratio that their compensation for the
Plan year bears to the total compensation of all eligible participants for the
Plan year. Although the Plan is intended to be permanent, the Company
can amend or terminate the Plan at any time.
Note
8.
INDEMNIFICATIONS
In the
normal course of business, the Company enters into contracts and agreements that
contain a variety of representations and warranties and which provide general
indemnifications. The Company’s maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Company that have not yet occurred. The Company expects
the risk of any future obligation under these indemnifications to be
remote.
F-40
Dates Referenced Herein and Documents Incorporated by Reference