Review the program documentation. This will often include both a Disclosure Document and an Advisory Agreement. Many of these documents can be

Transcription

1 Account Setup ALTAVRA To setup your managed futures account: Review the program documentation. This will often include both a Disclosure Document and an Advisory Agreement. Many of these documents can be downloaded at forms.altavra.com or requested via at clientservices@altavra.com. Establish an account at the Futures Commission Merchant (FCM). An account can be setup online at open.altavra.com. Account forms can be downloaded at forms.altavra.com or requested via at clientservices@altavra.com. Complete the forms relevant to the investment that you have chosen. Most managed accounts require both an Advisory Agreement and a Trading Authorization Form. If you are not sure which forms are required for your particular account, please clientservices@altavra.com, or call (international ). Submit completed forms. Please scan and the completed forms to clientservices@altavra.com or fax to If you have any questions, please visit ALTAVRA.com, clientservices@altavra.com, or call Managed Futures CTA Database Access To access the database: 1. Request a free access key at altavra.com. - The access key will be automatically generated and sent immediately to your address. 2. After you receive your access key, you can access the database at login.altavra.com. *There is no fee to access the database. This is not a trial access. The access key does not expire. THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS CAN BE SUBSTANTIAL. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ADDITIONAL DISCLOSURE ALTAVRA.CO/RISK. ALTAVRA ALTAVRA.COM

2 DISCLOSURE DOCUMENT OF HARBOR FINANCIAL, LLC Registered with the Commodity Futures Trading Commission as a Commodity Trading Advisor & Commodity Pool Operator Member of National Futures Association 1919 Arlington Place, Madison, WI Client Services Telephone: (770) Client Services Facsimile: (770) cta@harborfinancialllc.com OFFERING VOLTAGE Balanced Program VOLTAGE Aggressive Program THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. THE DELIVERY OF THIS DISCLOSURE DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE SHOWN ABOVE. The information and opinions contained herein are subject to change or revision subsequent to the date of this Disclosure Document. No person is authorized by Harbor Financial, LLC, to give any information or to make any representations not contained in this Disclosure Document. The delivery of this Disclosure Document does not imply that the information contained herein is correct as of any time subsequent to the date set forth above. The effective date of this Disclosure Document is July 30, 2014 This Disclosure Document is considered outdated after July 30, 2015

3 RISK DISCLOSURE STATEMENT THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING: IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS. IF YOU PURCHASE OR SELL A COMMODITY FUTURES CONTRACT OR SELL A COMMODITY OPTION OR ENGAGE IN OFF-EXCHANGE FOREIGN CURRENCY TRADING, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS OR SECURITY DEPOSIT AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT. UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A LIMIT MOVE. THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A STOP-LOSS OR STOP-LIMIT ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. A SPREAD POSITION MAY NOT BE LESS RISKY THAN A SIMPLE LONG OR SHORT POSITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY INTEREST TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS, AT PAGE 14, A COMPLETE DESCRIPTION OF EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY INTEREST MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND COMMODITY INTEREST TRADING BEFORE YOU TRADE, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGE 7. THIS COMMODITY TRADING ADVISOR IS PROHIBITED BY LAW FROM ACCEPTING FUNDS IN THE TRADING ADVISOR S NAME FROM A CLIENT FOR TRADING COMMODITY INTERESTS. YOU MUST PLACE ALL FUNDS FOR TRADING IN THIS TRADING PROGRAM DIRECTLY WITH A FUTURES COMMISSION MERCHANT OR RETAIL FOREIGN EXCHANGE DEALER, AS APPLICABLE. July 30, 2014 i

4 TABLE OF CONTENTS RISK DISCLOSURE STATEMENT...i INTRODUCTION... 1 THE COMMODITY TRADING ADVISOR... 1 BUSINESS BACKGROUND OF TRADING PRINCIPAL... 1 ADVISOR S TRADING PROGRAMS... 2 VOLTAGE BALANCED... 2 VOLTAGE AGGRESSIVE... 3 DISCLOSURES FOR PARTIALLY FUNDED ACCOUNTS... 5 BROKERAGE ARRANGEMENTS... 6 LITIGATION... 6 PRINCIPAL RISK FACTORS... 7 HOW TO OPEN AN ACCOUNT PRIVACY NOTICE DISCLOSURE FOR SELF-DIRECTED IRA ACCOUNTS ADDITIONS/WITHDRAWALS TO EXISTING ACCOUNTS; ESTABLISHING ACCOUNTS IN A NEW PROGRAM ADVISOR S FEES Management Fee Incentive Fee CONFLICTS OF INTEREST THE TRADING ADVISOR S PERFORMANCE RECORD Client Performance Capsule I-A Client Performance Capsule I-B Client Performance Capsule II ACKNOWLEDGEMENT OF RECEIPT OF DISCLOSURE DOCUMENT LIMITED POWER OF ATTORNEY AUTHORIZATION TO PAY FEES HARBOR FINANCIAL, LLC ARBITRATION AGREEMENT ADVISORY AGREEMENT NOTIONAL FUNDS AGREEMENT HARBOR FINANCIAL NEW ACCOUNT QUESTIONNAIRE HARBOR FINANCIAL NEW ACCOUNT BYLAW 1101 QUESTIONNAIRE ii

5 INTRODUCTION Harbor Financial, LLC ( the Advisor ), is an asset manager that specializes in managing institutional and individual capital to qualified investors. In September 2011, the Advisor registered their office in Wisconsin as a foreign limited liability company in order to conduct business from Wisconsin. Through its proprietary trading programs, Harbor Financial, LLC, engages in a program of premium collection, by trading options on stock index futures traded on the Chicago Mercantile Exchange. Given that speculative trading in commodity futures and options on futures interests presents the risk of substantial losses, only persons with high incomes and the ability to absorb such losses should consider participating in the Advisor s trading programs. This Disclosure Document describes the trading management services offered by the Advisor, its trading programs, the fees involved, and the risks associated therewith. THE COMMODITY TRADING ADVISOR Harbor Financial, LLC is a Georgia Limited Liability Company formed under the laws of the State of Georgia on October 5, The Advisor's primary business is to provide capital appreciation to institutional and retail client accounts by managing their accounts pursuant to the Advisor's proprietary trading programs. The Advisor became registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission ("CFTC") on September 6, Between October 2005 and December 2005, the Advisor s sole activities were researching and testing trading strategies and forming Harbor Assets, LLC, a commodity pool once operated by the Advisor in its capacity as a commodity pool operator. From September 2006 through February 2014, the Advisor was also registered as a commodity pool operator and operated one commodity pool, Harbor Assets, LLC. In December 2005, the Advisor began to actively manage the trading of Harbor Assets, LLC s proprietary capital. Continuing to manage the trading account of Harbor Assets, LLC, in September 2006, the Advisor registered with the CFTC as CTA and CPO in preparation to accept non-proprietary capital. Effective August 31, 2013, Harbor Assets, LLC suspended trading and the commodity pool assets were transferred into a regulated mutual fund operated and managed by a separate commodity pool operator. Harbor Assets, LLC is no longer operating. The Advisor is owned by Mr. Edward Walczak [NFA ID: ] and Ms. Susan Walczak [NFA ID: ]; however, Mr. Walczak controls the Advisor and is its sole trading principal. Mr. Walczak became an Associated Person, a Principal and an Associate Member of National Futures Association ("NFA") on September 6, 2006 [NFA ID ]. The Advisor is not registered as an investment advisor with the SEC as it is exempt from such registration. All business records are kept at the Advisor s principal place of business. The offices of the Advisor are located at 1919 Arlington Place, Madison, WI The telephone number of the Advisor is (770) ; the fax number is (770) ; and the is cta@harborfinancialllc.com. The past performance for the Advisor is located on page 18. BUSINESS BACKGROUND OF TRADING PRINCIPAL Edward S. Walczak is the founder of the Company and the Managing Member of the Manager, Harbor Financial, LLC. Mr. Walczak has over twenty-five (25) years of business management experience in operations and supply chain management, including six (6) years of experience in commodities trading for his own account. Currently, Mr. Walczak is a listed principal and registered associated person of Harbor Financial, LLC since September Mr. Walczak is also a listed principal, registered associated person and branch office manager of Catalyst Capital Advisors, LLC, a registered commodity pool operator and NFA Member since August Catalyst Capital Advisors, LLC is also a Securities and Exchange Commission registered investment adviser. Prior to starting the Company in October 2005, Mr. Walczak served as Vice President for Operations at Acuity Specialty Products, a chemical manufacturer, in Atlanta, Georgia from July 1999 through August Later, he served as a Consultant for Acuity Specialty Products from August 2005 through December At Acuity he was responsible for specialty chemical purchasing, manufacturing, engineering, and logistics. 1

6 Mr. Walczak graduated from Middlebury College in 1977 with a B.A. in Physics and Economics, and he received his M.B.A. from Harvard University in After college, Mr. Walczak spent four years in the U.S. Army Corps of Engineers, where he was promoted to Captain upon completion of his assignment and awarded the Army Commendation Medal for outstanding performance. After receiving his M.B.A., Mr. Walczak worked for General Foods Corporation from July 1983 through September While with General Foods, Mr. Walczak served as a production supervisor, maintenance manager, and an engineering manager for a powdered beverage production and packaging facility. Mr. Walczak joined Metropolitan Life Insurance Co., an insurance company, as a Management Trainee from September 1986 through August While with Metropolitan Life, Mr. Walczak served as a Financial Advisor and Sales Representative selling insurance and other financial products to individuals and small businesses. Mr. Walczak joined J and J Snack Foods Corporation from August 1987 through April While with J and J Foods Corporation, Mr. Walczak was a plant manager for a snack foods (pretzels and frozen novelty items) production and distribution facility. After leaving J and J Foods Corporation, Mr. Walczak joined Brach and Brock Confections, a food manufacturer, where his positions included Vice President for Supply Chain, Vice President for Purchasing, and Vice President for Engineering. In addition to responsibility for company-wide sales forecasting, production planning, purchasing, warehousing, traffic, and customer service, Mr. Walczak was responsible for the company's commodity hedging operation from May 1990 through June 1999 both directly supervising and at different times personally trading futures contracts and options on futures. Trading corn and cocoa futures for Brach and Brock, Mr. Walczak gained the expertise in derivative instruments that he used to develop and perfect his premium collection strategies. He has successfully employed these strategies trading in his personal accounts since 2000 and in Harbor Assets, LLC, a commodity pool since its inception in December 2005 through August Starting in September 2013, Mr. Walczak began to manage the account of Catalyst Hedged Futures Strategy Fund operated by Catalyst Capital Advisors, LLC. ADVISOR S TRADING PROGRAMS The Advisor seeks to achieve capital appreciation by trading options and option spreads on stock index futures traded on the Chicago Mercantile Exchange. This is achieved through the Advisor s current trading programs: (i) Voltage Balanced and (ii) Voltage Aggressive. VOLTAGE BALANCED An options spread consists of the simultaneous sale and purchase of options of different exercise prices and/or expiration months. By trading options and options spreads, the Advisor seeks to profit in three ways: (1) Premium collection - this technique yields profits as sold options value declines over time. Profit is captured when sold options are repurchased at a reduced value, or when they expire worthless, allowing retention of the original sales proceeds; (2) Volatility Trading market prices of options are dependent on observed and anticipated volatility of the underlying stock indexes. According to his trading system the advisor may enter options positions designed to profit from either an increase or a decrease in stock index volatility; and (3) Trend following under certain conditions, the Advisor may enter options spreads which will profit from an established price trend. Central to the success of this strategy is the Advisor s ability to predict the range of market movement over time frames ranging from thirty (30) to ninety (90) days. However, in general, the strategy does not depend on a prediction of equity market direction, and is designed to produce returns which are not correlated with equity market returns. The Advisor uses an extensive historical database of stock index price movement to assist him in determining high probability exercise prices at which to sell option spreads. In addition, seasonal and technical analyses are employed to further optimize trade entries. Technical analysis includes the study of price, volume, momentum and other measures, as well as recurring price patterns and measures of investor sentiment. The Advisor regularly evaluates market volatility and other technical behavior and adapts the strategy s entry, adjustment, and position sizing criteria to current market conditions. The Advisor places a strong focus on risk management intended to provide consistency of returns and to mitigate the extent of the losses that may occur. Although the Advisor s strategy is narrowly focused, trades are entered into on a continuous basis across different exercise prices and expiration months for diversification purposes. Once trades are entered, the Advisor employs strict risk management procedures that are triggered by total portfolio exposure rather than individual position value. Supported by sophisticated options analysis software and many years of options 2

7 trading experience, the Advisor determines the correct portfolio adjustment, when necessary. The Advisor will not be engaging in the purchase and sale of futures contracts for speculative purposes. From time to time, the Advisor may purchase or sell futures contracts as a hedging mechanism against open option positions depending on market volatility and based on the Advisor s professional judgment. Also, from time to time, a client may be assigned a futures position from an open option position and therefore, the Advisor will need to manage the futures position based on its professional judgment. However, the program deployed by the Advisor is primarily an option program as discussed throughout this disclosure document. Despite the Advisor s strong risk management focus and the procedures outlined above there is no guarantee that substantial losses can be prevented in the face of unanticipated market conditions. The Advisor has the right to employ any form or method of technical analysis that it deems appropriate and as well as exercise discretion whether to follow any trading signals or parameters generated by its technical trading strategies. The technical trading strategies and systems utilized may be significantly revised from time to time as a result of ongoing research and development that may devise new trading strategies and systems as well as test current technical strategies and systems. Neither the trading strategies used by the Advisor for the Advisor nor the Advisor s performance will necessarily be parallel to or be the same as the trading strategies used by the Advisor for any other account or account traded by the Advisor. The Advisor is offering participation in the Voltage Balanced program with an initial trading level of $40,000 and in increments equal to $40,000. There is currently no maximum amount to participate in the Voltage Balanced trading program. The Advisor will execute trades for Client accounts based solely on the current size for the account. Specifically, the Advisor will manage the account based on a nominal trading level in increments of $40,000. For example, if a Client deposits $40,000, the account will be viewed as a $40,000 account at all times unless the account reaches the next trading level in the increment of $40,000. Therefore, if the account appreciates to $80,000 based on profits or additions, the Advisor will then view and trade the account at a $80,000 level. However, before it reaches the next $40,000 level, the Advisor will manage the account at a $40,000 level. To further clarify this trading approach, if the Client s account increases or decreases in value from trading profits or losses, the Advisor will continue to trade the account based on the agreed upon trading level until the client reaches a higher or lower level which is determined in increments of $40,000. For example, assume a Client realizes profits of $20,000 on a $80,000 account. The Advisor will continue to consider the account as an $80,000 account until the account reaches $120,000 in value. Should Clients realize the next trading level based on trading profits or losses, the Advisor will automatically increase or decrease the trading level. In this case, a Client would not need to notify the Advisor in writing to trade the account at the next trading level. Alteration of the trading level will be established on month-end liquidating account value regardless of open positions. In the event a Client would add or subtract funds from their trading account, the Advisor will only adjust the nominal trading level upon written instructions provided by the Client. Furthermore, it should be noted that in the event the liquidating account value falls below the actual trading level size (i.e., actual liquidating account value is $35,000 and the trading level remains at $40,000), the Advisor will be considered to have created Notional Funds for the Client (in the example, $5,000). For further information on Notional Funds, please refer to Notionally Funded Accounts under Principal Risk Factors. VOLTAGE AGGRESSIVE The Voltage Aggressive program uses the same options strategy, the same trades and the same risk management techniques as the Voltage Balanced program and the commodity pool being operated by the Advisor in its capacity as a commodity pool operator. The Voltage Balanced program trades in units or levels of $40,000 while the Voltage Aggressive program trades in units of $25,000. In addition, the Voltage Aggressive Program requires a minimum starting balance of $50,000. The Voltage Balanced and the Voltage Aggressive programs use a scale in technique to enter trades. Specifically, positions are entered in several trades over a period of days or weeks rather than all at once in a single trade. Because the standard trading allocation for the contracts traded by the Advisor is one contract per $40,000 for the Voltage Balance, trading in units of $25,000 under the Voltage Aggressive program requires the Advisor to round up fractional contracts. This means an account in the Voltage Aggressive program will on average be more highly leveraged than one in the Voltage Balanced program, although the degree of leverage will change during the scale in trading process. For example: In the Voltage Balanced program, a certain type of trade calls for a total position of 3 contracts 3

8 per $40,000 unit. According to the Advisor s scale-in technique, the Advisor enters this position in three trades of one contact each over a period of time as market conditions dictate. For each $25,000 unit under the Voltage Aggressive program, this allocation would be a total position of contracts. Because the Advisor is unable to trade fractional contracts, the Advisor rounds up to 2 contracts per $25,000 unit under the Voltage Aggressive program. The scale in process proceeds as follows: On the first trade, an account in the Voltage Balanced program will receive one contract per $40,000 unit. The Voltage Aggressive account should technically receive.625 contracts (a half contract ) per $25,000 unit; however, the Advisor will need to round up to a full 1 contract per $25,000. On the second trade, a Voltage Balanced account would receive one additional contract per $40,000 unit. The Voltage Aggressive account is due a second.625 contract, however, has already received most of that allocation due to rounding in the first trade. So the Voltage Aggressive account will skip this second trade. Finally, in the third scale-in trade, the Voltage Balanced account will receive a third contract. The Voltage Aggressive account is due a third.625 contract. Once again, the Advisor must round up to trade and therefore, the Voltage Aggressive account would receive another contract for a total of 2 contracts. To further this example, please refer to the following table to understand the process and leverage factor: VOLTAGE BALANCED ($40,000 (1 Unit of $40,000)) VOLTAGE AGGRESSIVE ($50,000 (2 Units of $25,000) Trade 1: 1 Contract 2 Contracts 1.6 X Trade 2: 1 Contract No Trade 0.80 X Trade 3: 1 Contract 2 Contracts 1.07 X LEVERAGE FACTOR (Aggressive vs. Balanced) In summary, the Voltage Aggressive program will trade the same strategy as the Voltage Balanced program with a generally higher leverage factor. The higher leverage is not constant but varies between.8 and 1.6 or 80% and 160% leverage during the life of a given trading position. The Advisor is offering participation in the Voltage Aggressive program with an initial trading level of $50,000 and in increments equal to $25,000. There is currently no maximum amount to participate in the Voltage Aggressive trading program. The Advisor will execute trades for Client accounts based solely on the current size for the account. Specifically, the Advisor will manage the account based on a nominal trading level in increments of $25,000. For example, if a Client deposits $50,000, the account will be viewed as a $50,000 account at all times unless the account reaches the next trading level in the increment of $25,000. Therefore, if the account appreciates to $75,000 based on profits or additions, the Advisor will then view and trade the account at a $75,000 level. However, before it reaches the next $25,000 level, the Advisor will manage the account at a $50,000 level. To further clarify this trading approach, if the Client s account increases or decreases in value from trading profits or losses, the Advisor will continue to trade the account based on the agreed upon trading level until the client reaches a higher or lower level which is determined in increments of $25,000. For example, assume a Client realizes profits of $10,000 on a $50,000 account. The Advisor will continue to consider the account as a $50,000 account until the account reaches $75,000 in value. Should Clients realize the next trading level based on trading profits or losses, the Advisor will automatically increase or decrease the trading level. In this case, a Client would not need to notify the Advisor in writing to trade the account at the next trading level. Alteration of the trading level will be established on month-end liquidating account value regardless of open positions. In the event a Client would add or subtract funds from their trading account, the Advisor will only adjust the nominal trading level upon written instructions provided by the Client. Furthermore, it should be noted that in the event the liquidating account value falls below the actual trading level size (i.e., actual liquidating account value is $45,000 and the trading level remains at $50,000), the Advisor will be considered to have created Notional Funds for the Client (in the example, $5,000). For further information on Notional Funds, please refer to Notionally Funded Accounts under Principal Risk Factors. Equity in a client s account in one program will not be considered as equity in another account for the client under a different program. Equity in each account will stand on its own in each program. Furthermore, clients will not be permitted to use equity in one account under one of the Advisor s programs as notional or committed funds in another account under a another program offered by the Advisor. The performance experienced by any client in either program may differ from the performance of other clients and any composites for the programs compiled by the Advisor. These differences may be caused by one, or a combination, of the following factors: (1) the timing of the client's investment in the trading program(s); (2) the amount of funds contributed or withdrawn by the client; (3) differences in fees charged to client accounts; (4) differences in the 4

9 brokerage commissions charged by the FCM(s); (5) the liquidity of the futures contract traded may not be sufficient to allow an order to be placed with a sufficient number of contracts to ensure that every customer account will participate in every trade the Advisor makes for its managed accounts; (6) split fills received on block orders placed by the Advisor; and (7) limitations on trading parameters imposed by certain clients, such as restrictions on the types of Commodity Futures Interest traded or stop-loss provisions. As a result of these differences, the Advisor may compile different composite capsules to present fairly, in all material respects, its performance results. DISCLOSURES FOR PARTIALLY FUNDED ACCOUNTS The Advisor permits accounts with notional funds. Clients should be aware that trading with notional funding increases leverage, which has the effect of magnifying gains or losses, when calculated as a percentage of the actual cash in an account. Realized gains and losses in an account are always applied to the cash balance in the account by the FCM, not to notional equity. Generally, the amount of notional equity in an account can only be increased or reduced upon written instructions from the client. Special Performance Disclosure for Notionally Funded Accounts: All clients should request the Advisor to advise them of the amount of actual cash deposited in the margin account, plus funds committed pursuant to the Letter of Commitment provided within this document, which should be deposited to the Advisor's trading program(s) for the account to be considered "Fully-Funded". This is the amount upon which the Advisor will determine the number of contracts traded in their account and should be an amount sufficient to make it unlikely that any further cash deposits would be required from them over the course of their participation in the Advisor's program. You are reminded that the account size you have agreed to in writing (the "nominal" account size) is not the maximum possible loss that your account may experience. You should review the account statements received from your FCM in order to determine the actual activity in your account, including profits, losses and current cash equity balance. To the extent that the equity in your account is at any time less than the nominal account size you should be aware of the following: 1. Although your gains and losses, fees and commissions measured in dollars will be the same, they will be greater when expressed as a percentage of the actual account equity (excluding committed funds) shown in the account. 2. You may receive more frequent and larger margin calls. 3. The disclosures which accompany the performance table may be used to convert the rates-of-return ( ROR s ) in the performance table to the corresponding ROR s for particular partial funding levels. Notional Funding Performance Matrix: The following matrix is intended to enable a prospective client to convert any indicated Fully-Funded Rate of Return to an equivalent Rate of Return at the various funding levels of the Advisor s Program. ACTUAL RATE OF RETURN (1) Notes: RATES OF RETURN BASED ON VARIOUS FUNDING LEVELS (3) 20.00% 20.00% 40.00% 66.66% % 10.00% 10.00% 20.00% 33.33% % 1.00% 1.00% 2.00% 3.33% 10.00% 0.00% 0.00% 0.00% 0.00% 0.00% % % % % % % % % % % % 50.00% 30.00% 10.00% LEVEL OF FUNDING (2) 5

10 (1) Represents a range in possible rates of return in the Advisor s program. (2) Represents 4 levels of funding. Note that the Advisor will not permit level of funding to fall below 20% (3) Represents rate of return on actual assets in the account for different levels of funding. BROKERAGE ARRANGEMENTS To enter into the Advisor s managed account program, the Advisor requires that a client establish a minimum account of $40,000 for the Voltage Balanced program and $50,000 for the Voltage Aggressive program to fully appreciate the potential in the trading programs. However, the Advisor reserves the right to waive the minimum account size. Should Client s choose to invest less than $40,000 in the Voltage Balanced program or $50,000 in the Voltage Aggressive program, this will likely significantly affect the Advisor s ability to manage the account pursuant to the trading program and therefore, performance in these accounts can be materially different compared to others that invested at least the minimum. To hold money for the account of another, a person must be registered with the CFTC as a futures commission merchant ( FCM ). Accordingly, clients will be required to open an account, or have an account already opened, with an FCM prior to commencing activities with the Advisor. Clients are free to choose any FCM they wish to carry their account. The Advisor does not require prospective clients to use an introducing broker ( IB ), however, a Client may select an IB if they so choose. Prospective clients are responsible for arrangements with the entities they choose to carry or introduce their accounts. Before accepting to manage an account, the Advisor reserves the right to require that commissions charged by an FCM freely selected by the Client not exceed certain levels. The Advisor will not receive any portion of the commissions paid to any FCM or IB and will not benefit directly or indirectly from a client s choice of a particular FCM or IB. Clients should note that some of the Advisor s clients may pay more favorable commissions than other clients. These differences may be due to the size of the account, the FCM used by the Client, the introducing broker used by the client, or the other circumstances allowing for such favorable rates. The Advisor is under no obligation to negotiate lower rates for Clients. The Clients FCM acts only as clearing broker for Client accounts and as such, is paid commissions for executing and clearing trades on behalf of Client Accounts. The FCM chosen by the client has not and will not pass upon the adequacy or accuracy of this Disclosure Document. Additionally, the FCM will not act in any supervisory capacity with respect to the Advisor nor will they participate in the management of the Advisor. Therefore, prospective Clients should not rely on the FCM in deciding whether or not to participate in the Trading Program(s) of the Advisor. A portion of the assets of each Client s account(s) may, at the discretion of the Advisor, be invested in interestbearing obligations, such as United States Treasury bills. Any such obligations will be posted as margin in the futures account to the extent allowed by various exchanges rather than maintained in cash, thus enabling the Client to earn interest on funds being used for trading as well as funds being held in reserve. The FCM for the client's account (the Clearing Broker ) will charge the client commissions, clearing fees, exchange fees, transaction fees, brokerage fees, give-up fees, and NFA fees on each trade placed by the Advisor. These charges will be reflected on confirmations and purchases/sales statements sent to the client. Such charges are negotiated between the client and the clearing broker. A participating client is directly responsible for the payment to his/her clearing broker of all margins, brokerage commissions and transaction fees, option premiums and other transaction costs incurred in connection with transactions effected for such client's account. The Advisor shall not be liable to the client for any errors or omissions committed by any floor broker or any executing broker selected by the Advisor. LITIGATION There has never been any material administrative, civil, or criminal actions, pending or concluded, against the Advisor or any of its principals. 6

11 PRINCIPAL RISK FACTORS In addition to the risks inherent in trading commodity interests pursuant to instructions provided by the Advisor, other risk factors exist, including those described below, in connection with a client participating in the Advisor's managed account program. Prospective clients should consider all of the risk factors described below and elsewhere in this Disclosure Document before participating in the Advisor's program: Commodity Futures Trading is Speculative and Volatile: Commodity futures prices are highly volatile. The Advisor trades a variety of futures and options on futures contracts. Historically, prices for these commodity futures and options contracts were highly volatile at times (i.e. prices either increase or decrease rapidly based upon various occurrences). Price movements of futures and options contracts are influenced by, among other things, government, fiscal and monetary programs and policies, national and international political and economic events, weather conditions, and changes in interest rates. None of these factors can be controlled by the Advisor and no assurance can be given that the Advisor's advice will result in profitable trades for a participating client or that a client will not incur substantial losses. Options Trading: The Advisor trades options on futures contracts. Options on futures contracts are traded on United States exchanges as well as on foreign exchanges. Each such option is a right, purchased for a certain price, to either buy or sell a futures contract or physical commodity during a certain period of time for a pre-established price. Although successful options trading requires many of the same skills required for successful futures trading, the risks involved may be somewhat different. Specific market movements of the commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option is subject to the risk of losing the entire purchase price of the option plus commissions and fees. The writer of an option is subject to the risk of loss resulting from the difference between the premium received for the option and the price of the Investment Instruments underlying the option which the writer must purchase or deliver upon exercise of the option. Therefore, the risk of loss in writing options is unlimited. Commodity Futures Trading is Highly Leveraged: The low margin deposits normally required in commodity futures and options trading permit an extremely high degree of leverage. It should be noted that the higher the leverage, there is an increase in the risk in the account. The Trading Advisor's trading programs generally commit approximately 30% to 60% of the client's funds as margin, however, the amount of funds committed to margin may be higher or lower at times depending on market volatility, liquidity, and margin requirements. The Trading Advisor employs a subjective approach to determine the client's leverage based upon the size of the account and current market conditions. A relatively small price movement in a commodity futures contract may result in immediate loss, in excess of the amount invested, or profit to the investor. Spread Trading: The Advisor seeks to achieve capital appreciation by engaging in a program of premium collection, by selling or writing options (puts and calls) and options spreads on stock index futures traded on the Chicago Mercantile Exchange. The individual "legs" of a spread are subject to early exercise risk. This may remove the protection that certain spread positions may provide. The result of being assigned, either partially or fully, on a leg of a spread position, may result in a margin call or in losses greater than you anticipated when you entered into the position. Furthermore, the transaction costs are charged on each leg of the order. Therefore, the costs associated with spread trading us generally higher than if a spread order was not placed. Commodity Futures Trading May Be Illiquid: Most United States commodity exchanges limit fluctuations in commodity futures contract prices during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits." The Trading Advisor conducts trading on all major exchanges such as the Chicago Board of Trade, Chicago Mercantile Exchange, the New York Mercantile Exchange, and The New York Board of Trade. In the past, futures prices may have reached the daily price limit for any or all of the commodity futures traded by the Trading Advisor. During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased to the limit point, positions in the commodity can be neither taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the client from promptly liquidating unfavorable positions and subject the client to substantial losses, which could exceed the margin initially committed to such trades. Under very unusual circumstances, the client may be required 7

12 to accept or make delivery of the underlying commodity if the position could not be liquidated prior to its expiration date. Start-Up Period for New Accounts and Additions to Existing Accounts: Each new client account will experience a start-up period during which it will incur certain risks relating to the initial investment of its assets. For example, a client may establish his account with the Advisor at an unpropitious time, such as after sustained moves in the commodity markets, which may result in significant initial losses. Moreover, clients should be aware that the Advisor does not rebalance commodity interest positions across all accounts as a result of additions of assets to existing accounts or in connection with account openings or closings, in the event that the Advisor has reached its speculative position limit in a particular futures contract, it is not obligated to liquidate positions in other accounts in order to establish an initial position in such contract for new accounts (or to increase positions for existing accounts that have added assets). Such start up times can range from 30 to 90 days and therefore, performance for a new account will not necessarily correlate with the Advisor s composite performance. No assurance can be given that the Advisor s procedures for moving to a fully committed portfolio will be successful. Minimum Trading Levels: The Advisor is offering participation in its trading program(s) with an initial trading level of $40,000 for the Voltage Balanced program and in increments equal to $40,000 and an initial trading level of $50,000 for the Voltage Aggressive program an in increments of $25,000. There is currently no maximum amount to participate in the trading programs. The Advisor will execute trades for Client accounts based solely on the current size for the account. At times, the Advisor will be approached by a client or an introducing broker with an offer to open an account below the required minimum account size. The Advisor strongly suggests against establishing a managed account with the Advisor at levels below the minimum account size. Should a client or an introducing broker for its clients still want to enter into an Advisory Agreement with the Advisor at levels below the minimum account size, the Advisor reserves the right to consider the account and for reasons evaluated by the Advisor, the Advisor may enter into the relationship the client. However, the client and the introducing broker should be aware that the performance in the account will not necessarily correlate with the Advisor s composite performance of accounts for the program that have met the minimum investment requirements. Furthermore, the smaller funded accounts will experience more volatility in their accounts as the Advisor will not be able to fully follow its trading programs like it does for the larger accounts. The client takes its own risk with establishing accounts below the minimum account size and the Advisor assumes no responsibility for losses in the smaller accounts that might exceed the performance in the larger accounts. Futures Trading and Options on Futures Trading are Non-Correlated to other Asset Classes: Generally, assets invested in futures and options on futures accounts have been non-correlated to the performance of other investment asset classes such as bonds and commodities. As a result of this non-correlation, a futures and options on futures account managed by the Advisor should not be expected to automatically profit during unfavorable periods or vice-versa. The futures markets are fundamentally different from other markets, therefore, making any comparisons inherently limited. Notionally Funded Accounts: The Advisor permits the use of "Notional Funds" in a client's account. Notional Funds are funds not actually held in the account, but which have been "promised" by a client, generally in writing, to the trading activity of the account. The total amount of notional funds and actual funds in a client's account are considered the "Nominal Account" size which the Advisor will base its trading decisions. Therefore, Notional funding allows a client to trade the account at a level higher than the cash actually held in the account. Notional equity creates additional leverage in an account relative to the cash in such account. This additional leverage results in a proportionally greater risk of loss (and opportunity for gain). While the possibility of losing all the cash in an account is present in all accounts, accounts that contain notional equity have a proportionately greater risk of loss. For example, in an account which is funded with only 50% cash (and, therefore, has 50% notional equity), a loss of 10% of the client's account total value (based on both cash and notional equity) will equal a loss of 20% of the actual cash in the account. Additionally, a client who funds his account with notional equity may receive more frequent and larger margin calls. If a Client promises Notional Funds to a trading program when the account is established and subsequently pursuant to a written agreement, the Client's monthly management fee will be calculated on the "Nominal Trading Level" as defined in this Disclosure Document. As a result, a Client s management fee as a percent of actual funds will be higher. The management fee as a percent of actual funds may be determined by dividing the management fee computed on assets under management by the actual funds in the account. For example, using an annual management 8

13 fee rate of 2%, an account which is funded with $25,000 in actual funds and 50% with notional funds (e.g., $25,000), for a total nominal trading level of $50,000 in the Voltage Aggressive program, the Client will be charged a management fee of $1,000 on an annual basis ($50,000 X 2%). As a result, the management fee as a percent of actual funds is 4% ($1,000/$25,000). Speculative Nature of Commodity Trading: Commodity contracts, unlike many securities, do not pay any dividends or interest. Profits can be made in commodity trading only by selling a contract at a higher price than that at which it was bought or by buying a contract at a lower price than at which it was sold. Stop Orders: The Advisor may use "Stop Loss" or "Stop Limit" orders. A prospective customer should be aware that placing such orders will not necessarily limit your losses to the intended amounts since market conditions may make it impossible to execute such orders. A Participating Client's Futures Commission Merchant May Fail: Under the Trading Advisor's trading program, client funds will be held by futures commission merchants ("FCM s") located in the United States. As such, rules and regulations of foreign jurisdictions would not apply. Under CFTC Regulations, the FCM freely chosen by the client, is required to maintain client funds in a segregated account. If the FCM fails to do so, the client may be subject to a risk of loss of funds on deposit in the event of bankruptcy. In addition, under certain circumstances, such as the inability of another customer's account satisfying a margin call, the client may be subject to a risk of loss of its funds on deposit with the FCM, even if such funds are properly segregated. In the case of any such bankruptcy or customer loss, the client might recover, even in respect of property specifically traceable to the client, only on a pro-rata share of all property available to all of the FCM's customers. Services of the Advisor s Principals: The Advisor is dependent on the investment services of Mr. Walczak, the Advisor s sole trading principal. If the services of Mr. Walczak were not available, or were interrupted, the continued ability of the Advisor to render services to clients might be subject to uncertainty, and such services of the Advisor could be terminated completely. The Advisor has one other principal. Although the Advisor s programs would more than likely stop if Mr. Walczak became incapacitated, in the Advisor s opinion, having an additional principal would mitigate the possible immediate risk of the Advisor s ability to liquidate positions or take care of the ongoing affairs of the Advisor if Mr. Walczak s services were unavailable for a short period of time. Electronic Order Entry: Although the Advisor presently does not place trades via electronic means, many FCMs and exchanges are moving towards greater use of electronic trading platforms and therefore, the Advisor may place trades via electric order platforms for its Trading Program. In such instances, trading through an electronic trading or order routing system exposes you to risks associated with system or component failure. The risk exists that a trade may not be placed, a trade may be placed at a later time than originally desired, or a trade may not be able to be cancelled due to market volatility and volume, quote delays, system and software errors, internet traffic, or outages. System or component failure may also result in loss of orders or order priority. These occurrences, which are beyond the Advisor s control, could result in losses to a client s account. Some contracts offered on an electronic trading system may be traded electronically and through open outcry during the same trading hours. Exchanges offering an electronic trading or order routing system and listing the contract may have adopted rules to limit their liability, the liability of futures brokers and software and communication system vendors and the amount that may be collected for system failures and delays. These limitations of liability provisions vary among the exchanges. Positions held overnight purposely or unintentionally: For positions held overnight or longer, or for positions intended to be day trades that must be or are held overnight, there is a higher margin requirement than for day trading. These higher margins will commit a greater amount of your equity to the trade, and could affect the degree to which the trading portfolio can be diversified. It is anticipated that no more than 75% of the customer s equity will be committed to overnight positions. Lack of Diversification in Trading Program: In the Advisor s Trading Program, trades are generally executed in S&P 500 options. Therefore, the Advisors Trading Program s performance is entirely dependent upon fluctuations in the prices of the S&P stock index and the Advisor s ability to assess and profit from such changes. Since the Advisor s Trading Program is not typically diversified into other commodity futures and options on futures Interests, 9

14 Clients will not benefit from price movements in other futures and options on futures interests (except, potentially indirectly, to the extent such price movements influence interest rate markets). Charges to a Client's Account: A Client is obligated to pay brokerage commissions, exchange fees, clearing fees, give-up fees, brokerage fees, NFA fees, and management fees regardless of whether the Client realizes profits. The Advisor's Incentive Fee is based, in part, upon unrealized appreciation in open commodity positions. Such unrealized appreciation may never be realized by a Client. Incentive fees previously paid against such unrealized appreciation would not be refunded. Give Up Brokers: The Advisor s Clients are free to choose an FCM of their choice. The Advisor may use multiple FCM s or floor brokerage operations to execute customers trades. As such, filled trades will be given up to the Clients FCM for clearing purposes. Clients must understand that there can be no guarantee as to any order being filled at the expected or predicted price level. The reasons for that are multiple: lack of market liquidity, limit moves, option markets might be closed during overnight trading; unpredictable acts of terrorism might cause obstacles in transporting or executing the order. The Advisor will choose the Give-up Brokers of its choice. Clients will bear the costs associated with give-up transactions, which are usually $1 up to $3 per round trade. Payment to Third Party Solicitors: The Advisor may pay persons or firms who introduce accounts to it a portion of the fees it receives from such accounts. As a result, persons or firms who introduce a Client s account to the Advisor may have an incentive to do so based upon the payments they will receive from the Advisor and not necessarily on how the Advisor s Trading Program fits into the Client s overall investment objectives. Confidentiality of Client Records: The Advisor may enter into an agreement with an external compliance consulting firm to compile performance data for the Advisor's Trading Program. Although the Advisor retains all client records under strict confidentiality, the Advisor would provide client records (e.g., daily and month end commodity statements generated by the client's FCM) to the external consultants for purposes of compiling performance data in accordance with CFTC and NFA Requirements. In addition, the Advisor may request the Client s FCM to furnish these records to the external service providers in order to maintain compliance with the rules and regulations with respect to performance reporting requirements. At times, the Advisor may be required to furnish complete client records to regulators, legal counsel, courts of competent jurisdiction, or other entities as deemed necessary by the Advisor. The Advisor will obtain reasonable assurance from the external consultants that all Client information will be regarded with the utmost of confidentiality. In addition, Client records will remain confidential to other Clients. No Client will be permitted to review other Clients records. Changes in Trading Approach: No assurance is given that the Advisor's performance will result in successful trading for clients under all or any conditions. The Advisor may alter its trading methods, commodity options and/or futures traded, or money management principles, without prior approval from the clients, if the Advisor determines that such change in policy is in the best interest of clients. The Advisor will however notify all existing clients of any material changes that are made to the trading program within 21 calendar days of such changes. Regulatory Oversight: The futures markets are subject to comprehensive statutes, regulations and margin requirements. In addition, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures and forward transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, various national governments have expressed concern regarding the disruptive effects of speculative trading in the currency markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change on the Advisor is impossible to predict, but could be substantial and adverse. Tax Risks: THE LAWS RELATING TO THE TAXATION OF FUTURES AND OPTIONS ON FUTURES ARE TOO COMPLEX TO BE DEALT WITH IN DETAIL IN THIS DOCUMENT. THE ADVISOR DOES NOT PROVIDE TAX ADVICE. THEREFORE, EACH PROSPECTIVE CLIENT MUST CONSULT AND MUST DEPEND ON HIS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PARTICIPATING IN THE TRADING ADVISOR S PROGRAM. 10

15 HOW TO OPEN AN ACCOUNT In addition to the execution of the Advisor s account documentation, each Client will also be required to execute the various FCM account forms for new customers such as a power-of-attorney, risk disclosure document, authorization to do cross trade transactions, and the FCM customer agreement. Clients should be able to invest funds in the Advisor s Program for a period of at least one year. As with any investment, profits as well as losses in commodity trading can and will occur. The Program is therefore only for those clients who are able to both appreciate and bear the financial risks described in this disclosure document. The Advisor s Voltage Balance Program requires a minimum investment of $40,000 with increases or decreases in trading levels may only be done in increments of $40,000. The Advisor s Voltage Aggressive Program requires a minimum investment of $50,000 with increases or decreases in trading levels may only be done in increments of $25,000. Generally, there is no maximum amount of funds the Advisor can manage for its clients pursuant to the Program. BEFORE SIGNING ANY AGREEMENTS WITH THE ADVISOR, YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND DISCUSS WITH THE ADVISOR THE VARIOUS RISKS WITH TRADING COMMODITY FUTURES AND COMMODITY OPTIONS. Every client must sign and date and return to the Advisor an Acknowledgment of Receipt Disclosure Document. See page 23. Every client must sign and date and return to the Advisor the Limited Power of Attorney. See page 24. Every client must sign and date a return to the Advisor a Fee Payment Authorization. See Page 25. Every client must complete and return to the Advisor the Arbitration Agreement. See page 26. Every client must sign and date and return to the Advisor the original Advisory Agreement. See page 28. Every client must sign and date and return to the Advisor the New Account Questionnaire. See page 33. These documents may not be modified, except in writing, by all relevant parties. Deposit funds directly with the FCM. The minimum initial account size is $40,000 for the Voltage Balance program and additions may be made in increments of $40,000. The minimum initial account size is $50,000 for the Voltage Aggressive program and additions may be made in increments of $25,000. THE ADVISOR IS PROHIBITED FROM ACCEPTING FUNDS DIRECTLY FROM THE CUSTOMER OTHER THAN FOR PAYMENT OF MANAGEMENT AND INCENTIVE FEES. Applications may be mailed to: Harbor Financial, LLC 1919 Arlington Place Madison, WI Should you have questions, you can reach the Advisor at (770) or via facsimile at (770) or by at cta@harborfinancialllc.com PRIVACY NOTICE Your Privacy is Our Priority Harbor Financial, LLC ( the Company ) is committed to safeguarding the personal information that you provide us. This Privacy Policy describes how we handle and protect personal information we collect about individuals, such as you, who apply for or receive our products and services. The provisions of this notice apply to former customers as well as our current customers. Why and How We Collect Personal Information When you apply for or maintain an investment account with the Company in one of our investment products, we collect personal information about you for business purposes, such as evaluating your financial needs, processing your requests and transactions, informing you about products and services that may be of interest to you, and providing customer service. The personal information we collect about you includes: 11

16 information you provide to us on applications and other forms, such as your name, address, date of birth, social security number, occupation, assets, and income; information about your transactions with us and with our affiliates, if any; information we may receive from consumer reporting agencies, such as your credit history and creditworthiness, and other entities not affiliated with the Company if we so choose to gather this information; and information you provide to us to verify your identity, such as a passport or drivers license, or received from other entities not affiliated with the Company. How We Protect Personal Information We limit access to your personal information to those employees who need to know in order to conduct our business, service your account, and help you accomplish your financial objectives, such as providing you with a broad range of products and services. Our employees are required to maintain and protect the confidentiality of your personal information and must follow established procedures to do so. We maintain physical, electronic, and procedural safeguards to protect your personal information. We do not share, lease, rent or sell your name or personal information with or to anyone. Sharing Information with Our Affiliates We do not have affiliated entities. We may have business alliances with selling agents, other NFA Members, wholesalers, and broker dealers that are critical to raising assets for our business products. We may share personal information described above with our alliance for business purposes, such as servicing customer accounts and informing customers about new products and services, and as permitted by applicable law. We do not share any information with these entities if they were not responsible for selling the product to you. The information we share with these third parties business alliances may include the information described above, such as name, address and account information such as account balance in one of our products that they sold to you. We will not share information with them that they will not already have. For example, we will not share with them information such as credit history appearing on a consumer credit report or net worth and income information appearing on applications that they may not have for our products and services. Disclosure to Non-Affiliated Third Parties In order to support the financial products and services we provide to you, we may share the personal information described above with third-party service providers with us, including companies under contract to perform services for us or on our behalf, such as vendors that prepare and mail monthly account statements, auditors, lawyers, and compliance consultants. These companies acting on our behalf are required to keep your personal information confidential. Also, we may disclose personal information with non-affiliated companies and regulatory authorities as permitted or required by applicable law. For example, we may disclose personal information to cooperate with regulatory authorities and law enforcement agencies to comply with subpoenas or other official requests, and as necessary to protect our rights or property. Except as described in this privacy policy, we will not use your personal information for any other purpose unless we describe how such information will be used at the time you disclose it to us or we obtain your permission to do so. Accessing and Revisiting Your Personal Information We endeavor to keep our customer files complete and accurate. We will give you reasonable access to the information we have about you. Most of this information is contained in account statements that you receive from us and applications that you submit to obtain our products and services. We encourage you to review this information and notify us if you believe any information should be corrected or updated. If you have a question or concern about your personal information or this privacy notice, please contact your account representative. 12

17 DISCLOSURE FOR SELF-DIRECTED IRA ACCOUNTS For self-directed individual retirement accounts, the portion of the account committed to margin generally will not exceed 50% of the beginning equity of the account for any given period. Further, the Advisor will cease all trading for the account(s) if the account(s) experience a drawdown in excess of 50% of the account s current trading level. The drawdown will be reviewed at the end of each trading day and will not generally be monitored on an intra-day basis. In the event the account is approaching the 50% drawdown benchmark, the Client will be provided with the option to either terminate the account and liquidate all positions and remaining balances, with such liquidation occurring as soon as administratively possible by the Advisor, or continue trading upon written instructions from the Client. Due to the volatile nature of the futures markets, the advisor is unable to guarantee that any drawdown in the account can be limited to 50% of the accounts current trading level. ADDITIONS/WITHDRAWALS TO EXISTING ACCOUNTS; ESTABLISHING ACCOUNTS IN A NEW PROGRAM Additional funds may be added to Client s existing account at any time in increments of $40,000 for the Voltage Balanced program and $25,000 for the Voltage Aggressive program, although the Advisor suggests any increases or decreases in nominal trading levels be made effective as of the first of the month. Withdrawals may be made at any time. The Advisor requests that advanced notice be provided to the Advisor. However, if a Client make a withdrawal that would reduce the assets under management in a Client s account below the minimum account size for the program other than a withdrawal in termination of such account or transfer to an account utilizing one of the Advisor s other programs, if available, or with the prior written consent of the Advisor, the Advisor reserves the right to terminate the Power of Attorney over the account. If a Client expresses an interest in the Advisor to continue trading the account even at trading levels below the minimum trading level for the program, the Client should understand that trading gains or losses in the Client s account can be significantly greater than those in accounts that have met the minimum investment requirement. Furthermore, the Advisor may not be able to trade accounts under the minimum requirement investment amount similarly to those over $100,000 and therefore, the performance in the smaller accounts can be significantly different than the accounts that met the minimum investment requirements. As a result, such accounts may be kept separate from the larger accounts for reporting performance purposes. In the event two capsules are warranted, Clients should not compare the performance between the two capsules because account sizes and costs may be different and as a result, performance may vary. Clients wishing to establish an account trading pursuant to another Trading Program offered by the advisor must sign a new Advisory Agreement. For accounts that are fully funded and have no intention of funding their account with notional funds, these Clients should note that any actual cash additions, which must be made in increments of $40,000 for the Voltage Balanced program and $25,000 in the Voltage Aggressive program to the account, combined with any profits made in the account will increase the Nominal Account Size (which is the trading level used by the Trading Manager to determine which trades to execute). However, since the Advisor trades in increments of $40,000 for the Voltage Balanced program and $25,000 for the Voltage Aggressive program, the Advisor will begin trading the next level once the next program increment is reached. For example, if a Client initially instructed the Advisor to manage the client account as a $100,000 account under the Voltage Aggressive program, the Advisor will continue to manage the account as a $100,000 account regardless of profits and losses until the next $25,000 level is reached. Actual cash withdrawals made from the account as well as any losses incurred in the account will reduce the Nominal Account Size (which is the trading level used by the Trading Manger to determine which trades to execute) once the decrease reaches the next $25,000 increment. In the previous example, if a Client initially instructed the Advisor to manage the client account as a $100,000 account under the Voltage Aggressive program, the Advisor will continue to manage the account as a $100,000 account regardless of losses and withdrawals until the next $25,000 level is reached (i.e., $75,000). Nominal Account Size equals actual cash and cash equivalents plus notional funds. Clients must understand that in situations where the account is being managed at a level greater than the equity in the account, a notional funding situation exists. Therefore, for clients that did not initially fund their account with notional funds and have no intentions to use notional funds in the future, it is likely that their account will be traded with notional funds in the future when loss situations or withdrawal situations occur. For example, if a Client initially instructed the Advisor to manage the client account as a $100,000 account and actually deposited $100,000 under the Voltage Aggressive program, the Advisor will continue to 13

18 manage the account as a $100,000 account regardless of losses and withdrawals. If the client withdraws $5,000 and/or the Advisor s program losses $5,000, the account will still be traded as a $100,000 account although there is less than $100,000 in equity in the account. For accounts that have initially funded their accounts with notional funds, these Clients should note that any actual cash additions or cash withdrawals will not affect the trading level (nominal level) unless the Client informs the Advisor in writing that the trading level is being increased for actual additions or decreased for actual withdrawals. Profits and losses in the account will automatically increase or decrease the nominal trading level once the next increment is reached in the account. For example, if a Client deposits $50,000 in cash in their account and informs the Advisor to manage the account at a $100,000 level in the Balanced Aggressive program, the Advisor is making use of $50,000 actual funds and $50,000 of notional funds. If the Client makes a deposit of $50,000, the Advisor will not automatically consider this $50,000 actual cash addition as an increase in trading level. Rather, this $50,000 in actual funds can be considered as a replacement of the $50,000 in notional funds and therefore the account is still viewed as a $100,000 account. Therefore, it is up to the Client to inform the Advisor as to how to treat funds being deposited when the account has been managed using notional funds. Realized profits and losses in the account will not increase or decrease the nominal trading level unless such profits and losses bring the trading level to the next $40,000 increment in the Voltage Balanced program and $25,000 increment in the Voltage Aggressive program. THE ADVISOR WILL NOT ACCEPT ANY VERBAL INCREASES OR DECREASES IN TRADING LEVELS. The Advisor requests that any withdrawals made from a Client account be made with advanced notice, generally 10 days before the anticipated withdrawal. This will allow the Advisor to liquidate the necessary positions to raise the necessary cash if needed and to do so with minimal about of possible trading losses. If the Client does not provide advance notice, the Client s account could suffer substantial losses. ADVISOR S FEES Specific fees will be discussed with each client before an advisory agreement is entered into. If a client terminates the Advisor s power of attorney at any time prior to the last trading day of the month, then any management fee and/or incentive fee due will be calculated as of the last day the Advisor maintained discretionary authority. The Advisor will not charge an upfront fee upon the opening of client accounts. The Advisor reserves the right to negotiate different fees with different clients. These fee negotiations may take place based on such factors as the type of client, size of the account and other factors deemed relevant by the Advisor. Each account will be subject to fees and commissions payable to the FCM for brokerage, administrative and trading expenses. The Advisor will bill all fees with the billing sent directly to the client s FCM to be paid out of the client s account. Fees will be deducted directly from the client s commodity trading account. The client will be required to sign a Fee Payment Authorization, which will authorize the FCM to deduct from the client s account, and remit directly to the Advisor, payment of the incentive and management fee. The Fee Payment Authorization also requires that the client maintain sufficient funds in the trading account at all times to cover unbilled fees. This includes, but is not limited, to those times when a client terminates the power of attorney prior to month end. The Advisor charges to types of fees as follows: Management Fee: The Advisor charges a monthly management fee of up to 1/12 th of 2% ( %) of "Nominal Trading Level" at the end of each month. "Nominal Trading Level" is defined as the accounts as a Client s requested dollar trading level as indicated in the Advisory Agreement. This amount equals the initial cash deposited into the account plus notional funds. The Nominal Trading Level will decrease or increase one of two ways: (i) pursuant to a written request from the Client or (ii) automatically when the cash in the account increases or decreases based on trading profits and losses or additions and withdrawals in the account and the account reaches the next trading level imposed by the Advisor in this Disclosure Document. Specifically, trading levels are increased or decreased in increments of $40,000 for the Voltage Balanced Program and $25,000 for the Voltage Aggressive program. For example, if a Client deposits $25,000 in cash and instructs the Advisor to manage the account at a $50,000 trading level 14

19 in the Voltage Aggressive program, the Advisor will charge a management fee on $50,000 each month until the trading level in increased or decreased. In this example, the management fee would be $83.33 per month ($50,000 X 1/12 of 2%) each month until the trading level increases or decreases. Management fees are charged regardless of the profitability in the client's account. Any withdrawals or additions made during the month shall be time weighted in order to calculate the management fee. Furthermore, if an account is funded during the first month of trading, the Advisor plans to charge the management fee starting the first day a trade is made and not the day the funds were deposited, if these two events occur on two different dates. In the event a Client promises Notional Funds to the Advisor s trading program pursuant to written instructions, a Client's monthly management fee will be calculated on the Nominal Trading Level (as defined above) at the end of each month. Therefore, if notional funds are contributed by the Client, a Client s management fee as a percent of actual funds will be higher. For example, if a Client deposits $25,000 into the trading account and elects to have the account initially traded at a $50,000 level under the Voltage Aggressive program, the account s nominal trading level for management fee purposes will be $50,000. If the account appreciates by $5,000 based on realized and unrealized profits, the actual funds in the account are at $30,000; the account size for management fee purposes is still $50,000 and the trading level is $50,000 (i.e., the notional assets will in effect now be $20,000). In the event the account had a $5,000 loss based on realized and unrealized losses, the actual funds in the account are at $20,000; the account size for management fee purposes is still $50,000 and the trading level is still at $50,000 (i.e., the notional assets have in effect increased to $30,000). The management fee as a percent of actual funds may be determined by dividing the management fee computed on assets under management by the actual funds in the account. Incentive Fee: The client will pay the Advisor a quarterly incentive fee of up to 25% based on monthly net trading profit. Although the incentive fee is paid quarterly, it is calculated and accrued on a monthly basis. For purposes of calculating the Advisor's incentive fees during a period, trading profits shall mean the cumulative profits (over and above the aggregate of previous period profits as of the end of any period) during the period (after deduction for brokerage fees paid but before deducting the Advisor's incentive fee payable). Trading Profits shall include: (i) the net of profits and losses (i.e. less commissions, clearing and exchange fees, brokerage fees, give-up fees, transaction fees, and NFA fees) resulting from all trades closed out during the period, (ii) the change in unrealized profit or loss on open trades as of the close of the Period, and (iii) the amount of interest and other investment income earned, not necessarily received, during the Period, minus: (i) the change in accrued commissions on open trades as of the close of the period, (ii) accrued management fees for the period, and; (iii) other expenses incurred during the period. If the client has currency in the trading account other than the United States dollar, the account is subject to gains and losses on the change in exchange rates from one month to another. Since the Advisor trades futures and options on futures in the United States, all balances are settled in U.S. dollars. Therefore, the Advisor will not charge an incentive fee on currency gains and losses on foreign currencies should a client desire to contribute currency in the account other than U.S. Dollars. Such increases or decreases in the foreign exchange rate will be treated as an addition or withdrawal from the account. All open futures positions in a client's account are calculated at their fair market value at the end of each business day and at the end of the month. The market value of an open position is determined by the settlement price as determined by the exchange on which the transaction is completed, or the most recent appropriate quotation provided by the futures commission merchant as supplied by the exchange. If any payment is made to the Advisor with respect to trading profits experienced by the account, and the account thereafter incurs a net loss for any subsequent period, the Advisor will retain the amount previously paid with respect to such trading profits. Losses shall be carried forward from the preceding periods and not carried back. If trading profits for a period are negative (thus a trading loss), it shall constitute a "Carry forward Loss" for the beginning of the next period. If a client terminates the Advisor's power of attorney at any time prior to the last trading day of the quarter, then any incentive fee due will be calculated as of the last day the Advisor maintained discretionary authority. If a client withdraws funds from the account at a time when the account has a Carryforward Loss, the Trading Loss that must be recovered before there will be New Net Trading Profits will be reduced. The amount of the reduction will be determined by dividing the value of the account immediately after such withdrawal by the value of the account immediately before such withdrawal and multiplying that fraction by the amount of the unrecovered Trading Loss at the time of the withdrawal. If Trading Losses occur in more than one calendar month in the account without an intervening payment of an incentive fee, and the value of the account is reduced in more than one calendar month because of withdrawals, then the Trading Loss in each such calendar month shall be reduced in accordance with the above formula, and only the reduced amount of Trading Loss will be carried 15

20 forward to offset future Trading Profits. The Advisor currently is offering two programs: The Voltage Balanced Program and the Voltage Aggressive Program. In the event the Client has related accounts across the two programs offered by the Advisor, the Advisor will compute incentive fees on each account and will not offset losses under one program with the gains in another program in order to compute a net fee due to the Advisor. Specifically, each account will be treated on their own for fee purposes. Therefore, if a Client has more than one account or has related accounts managed by the Advisor under different programs, it is possible that the Advisor could collect an incentive fee for the period while the net profits in all accounts owned by the Client on a combined basis result in a net loss. Additionally, in the event a Client closes his or her account while the account had a drawdown (i.e., carry forward loss) and then subsequently opens a new account either in the same program or under a different program offered by the Advisor, the Advisor will not need to recoup any carry forward losses that existed at the time in the prior account that was closed. The Advisor may share a portion of its management fees and incentive fees with third parties in accordance with regulatory standards. CONFLICTS OF INTEREST PROSPECTIVE CLIENTS SHOULD BE AWARE THAT THESE, AND OTHER, POTENTIAL CONFLICTS OF INTERESTS ARE FREQUENTLY INHERENT IN THE POSITION OCCUPIED BY A CTA. THE ADVISOR, HOWEVER, IS OBLIGATED TO TREAT EACH CLIENT WITH FAIRNESS, CONSIDERING THE CLIENT'S BEST INTERESTS. ALL EFFORTS WILL BE MADE TO ASSURE FAIR AND EQUITABLE TREATMENT OF ALL ACCOUNTS. CLIENTS SHOULD BE AWARE THAT NORMAL MARKETPLACE FACTORS MAY CAUSE THE RESULTS OF VARIOUS ACCOUNTS TO DIFFER. The Advisor may trade for its own account. Additionally, some of the Advisor's principals may trade commodities and commodity interests for their own accounts. The trades in these accounts may compete with a client's account for the same or similar positions in the commodity markets. The Advisor expects to manage the commodity accounts of various clients. Neither the trading records of the Advisor nor the principals proprietary accounts will be available for review or inspection. All of these accounts plus the accounts owned or controlled by any affiliates of the advisor will be combined for purposes of speculative position limits (restrictions imposed by U.S. commodity exchanges and the CFTC on the size of the commodity positions that a person may hold or control), so that the number of commodity positions that the Advisor establishes for any one client may be restricted by the number of positions held for these other accounts. Also, these other accounts might compete with a client's account for the same or similar positions in the commodity markets. To the extent that position limits restrict the total number of positions that the Advisor may establish for any one client and those of other accounts, the Advisor will allocate commodity transaction orders equitably between the client's account and such other accounts on a pro-rata basis, if possible. If pro rata allocation is not possible, then the Advisor will rotate the accounts that receive fills. The Advisor and/or principals of the Advisor may receive a fill price and the client may not. The Advisor may have investments in other accounts, which could create an incentive to favor those accounts over any one client's account. Although no such favoritism is intended or expected to occur, there can be no assurance that the performance of the proprietary accounts will be similar to those of a client's account. The Advisor and/or its principals may, at times, test new trading concepts and techniques in their own accounts. As such, trading in these accounts may be more aggressive than client accounts, and trading in these accounts may involve trade s which are opposite to clients' trades. At times, the Advisor will place orders in a fashion generally known as "block orders". With this type of trading method, the Advisor will enter the order for one client along with the orders of other clients. In addition, the Advisor's account and/or the Advisors principals' account or a family member account may be blocked with the client 16