EDUARDO FRID Registered Commodity Trading Advisor

Transcription

1 DISCLOSURE DOCUMENT EDUARDO FRID Registered Commodity Trading Advisor Presents: Strategy Offered Minimum Initial Investment Required EF X* $10,000 EF Xi $100,000** *EF X was formally known as the EF Speculative Index and Commodity Trading Program until May 31, The strategy offered in this document as EF X is not materially different from the former strategy. ** Smaller investment minimums may be considered on a case by case at the sole discretion of. Main Business Office: Prado Norte 662, Lomas de Chapultepec Mexico DF, Mexico, Telephone: (5255) efrid@effinancialservices.com The date of this Disclosure Document is 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. Page 1

2 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 PAGES 9 THROUGH 10, 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 PAGES 5 THROUGH 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. Page 2

3 TABLE OF CONTENTS Introduction 4 Advisor s Background Futures Commission Merchant/Introducing Broker Conflicts of Interest Principal Risk Factors Trading Programs and Strategies Management Fees.. 9 Performance Fees 9-10 Performance History Commodity Advisory Agreement EF X Commodity Advisory Agreement EF Xi Acknowledgement of Receipt of Disclosure Document..17 Limited Power of Attorney...18 Fee Payment Authorization.19 Privacy Policy Page 3

4 INTRODUCTION (Advisor), sole proprietor, is registered with the Commodity Futures Trading Commission (CFTC) as a Commodity Trading Advisor (CTA) and a registered member with the National Futures Association (NFA). has his principal place of business at Prado Norte 662, Lomas de Chapultepec, Mexico DF, Mexico, which is the location at which its books and records are kept and available for review. The phone number is (5255) ADVISOR S BACKGROUND Mr. has been interested and involved in the Equities and Futures market since the early 1990 s. From August 1990 until December of 1995 he pursued a degree from the National Autonomous University of Mexico within Industrial Design. During this time he read a great deal about the financial markets as well as business and began his own small company. In January of 1993 until December of 1999 Frid launched Cactus Design where he was responsible for designing different industrial projects for his clients. During this same time period beginning in January 1995, he began trading Stocks and Futures for his own account to experiment with different trading ideas and techniques. Also during this time he became engrossed in understanding technical analysis and attempting to utilize it properly. Then In January 2000 Mr. Frid felt he had become so proficient in technical trading that he began offering to teach others how to trade as a sole proprietor, a service he continues to offer presently. At this time he began working with clients under the name EF Financial Services and was based out of Mexico City, MX. Mr. Frid s role at EF Financial Services is to act as its head trading instructor. While running the trading school from July 2004 through July 2006 Frid also opened and managed a restaurant in Mexico City El Burrito Caliente. At the restaurant Mr. Frid was responsible for the day to day operations as well as setting the menu and the company s overall profitability. After he had sold the restaurant in March of 2009 he passed the Series 3 exam, then in April 2009 Mr. Frid registered with the Commodity Futures Trading Commission (CFTC) and later that same month he became a member of the National Futures Association ( NFA ) as a sole-proprietor Commodity Trading Advisor (CTA). After this, during May of 2009, to keep his instructional trading company separate from his CTA business, Frid changed the name by which his instructional company was known from EF Financial Services to EF Pro Trading, the name by which it operates currently. After this Mr. Frid started managing futures accounts in June of 2009 for clients as a sole proprietor CTA using the name EF Financial Services, his previous performance results can be found on pages of this document. FUTURES COMMISSION MERCHANT / INTRODUCING BROKER The Advisor requires all clients to maintain their accounts with a CFTC registered Futures Commission Merchant (FCM) and NFA member. The client is free to choose the FCM with which to maintain his or her account, and is also free to select an introducing broker, if any. The Advisor receives only monthly performance fees and in some cases management fees and does not share in brokerage commissions, directly or indirectly in any managed accounts. CONFLICTS OF INTEREST The Advisor may trade commodity futures contracts for his own account. Orders for the aforementioned accounts may or may not be part of a block order. The Advisor s orders could be placed before or after other orders for client accounts and might obtain more favorable order execution. No accounts owned by the Advisor will be deliberately favored by the Advisor over Page 4

5 client accounts. With reasonable notice, the trading by the Advisor will be made available for inspection. The Advisor is compensated through the entitlement of a performance fee based on trading performance. As a result this may cause The Advisor to take greater risks with your account to generate larger returns and subsequently further business income. Also you should be aware that performance allocations are based on both the unrealized and realized gains in your account. Therefore it is possible that the manager could earn a performance allocation based on positions that were profitable at the end of a reporting period but which may not be profitable when later liquidated. PRINCIPAL RISK FACTORS In addition to the risks inherent in trading commodity interests pursuant to instructions already provided herein, there exists addition risk factors, including those described below, in connection with a customer participating in the Managed Account Program. Prospective customers should consider all of the risk factors described below and elsewhere in this Disclosure Document before participating in any Program. Commodity Trading is Speculative and Volatile. Commodity interest prices are highly volatile. Price movements for commodity interests are influenced by, among other things: changing supply and demand relationships; weather; agricultural, trade, fiscal, monetary, and exchange control programs and policies of governments; United States and foreign political and economic events and policies; changes in national and international interest rates and rates of inflation; currency devaluations and revaluations; and emotions of the marketplace. None of these factors can be controlled by (Advisor) and no assurance can be given that (Advisor) advice will result in profitable trades for a participating customer or that a customer will not incur substantial losses. Counterparty Default. Commodity exchanges provide centralized market facilities for trading in futures contracts relating to specified commodities. Each of the commodity exchanges in the United States has an associated clearinghouse. Once trades made between members of an exchange have been confirmed, the clearinghouse becomes substituted for the clearing member acting on behalf of each buyer and each seller of contracts traded on the exchange and in effect becomes the other party to the trade. Thereafter, each clearing member firm party to the trade looks only to the clearinghouse for performance. Clearinghouses do not deal with customers, but only with member firms, and the guarantee of performance under open positions provided by the clearinghouse does not run to customers. If a customer s commodity broker becomes bankrupt or insolvent, or otherwise defaults on such broker s obligations to such customer, the customer in question may not receive all amounts owing to such customer in respect of his or her trading, despite the clearinghouse fully discharging all of its obligations. Commodity Trading is Highly Leveraged. The low margin deposits normally required in commodity interest trading (typically 2% to 20% of the value of the contract purchase or sold) permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a contract may result in immediate and substantial losses to the investor. For example, if at the time of purchase 10% of the price of a futures contract is deposited as margin, a 10% decrease in the price of the contract would, if the contract is then closed out, result in a total loss of the margin deposit before any deductions for brokerage commissions. A decrease of more than 10% would result in a loss of more than the total margin deposit. Thus, like other leveraged investments, any trade may result in losses in excess of the amount invested. When the market Page 5

6 value of a particular open position changes to a point where the margin on deposit in a participating customer s account does not satisfy the applicable maintenance margin requirement imposed by the FCM, the customer, and not (Advisor), will receive a margin call from the FCM. If the customer does not satisfy the margin call within a reasonable time (which may be as brief as a few hours) the FCM will close out the customer s position. Commodity Trading May Be Illiquid. Most United States commodity exchanges limit price fluctuations in certain commodity interest prices during a single day by means of daily price fluctuation limits or daily limits. The daily limit, which is set by most exchanges for all but a portion of the expiration month, imposes a floor and a ceiling on the prices at which a trade may be executed, as measured from the last trading day s close. While these limits were put in place to lessen margin exposure, they may have certain negative consequences for a customer s trading. For example, once the price of a particular contract has increased or decreased by an amount equal to the daily limit, thereby producing a limit-up or limit-down market, positions in the contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Contract prices in various commodities have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent Eduardo Frid (Advisor) from promptly liquidating unfavorable positions and subject a participating customer to substantial losses that could exceed the margin initially committed to such trades. Participating Customer s FCM May Fail. Under CFTC regulations, FCM s are required to maintain customer s assets in a segregated account. If a customer s FCM fails to do so, the customer may be subject to risk of loss of funds in the event of its bankruptcy. Even if such funds are properly segregated, the customer may still be subject to a risk of a loss of his funds on deposit with the FCM should another customer of the FCM or the FCM itself fail to satisfy deficiencies in such other customer s accounts. Bankruptcy law applicable to all U.S. futures brokers requires that, in the event of the bankruptcy of such a broker, all property held by the broker, including certain property specifically traceable to the customer, will be returned, transferred or distributed to the broker s customers only to the extent of each customer s prorata share of all property available for distribution to customers. If any futures broker retained by the customer were to become bankrupt, it is possible that the customer would be able to recover none or only a portion of its assets held by such futures broker. Risks Associated with Electronic Trading or Order Routing Systems. Trading through an electronic trading or order routing system exposes you to risks associated with system or component failure. In the event of system or component failure, we may not be able to enter new orders, execute existing orders, modify or cancel orders that were previously entered or determine the status of existing orders. Possible failure may result in duplicate orders, orders being executed that we did not enter, orders being lost in the system and similar events. This could result in financial losses to you. The programs that we use are similar to those used by other financial services firms in the industry and include safeguards against system and component failure. However, given the nature of the electronic trading or order routing systems, there is no guarantee that problems described above will not occur. Frequency of Trading. The strategy employed by (Advisor) can, at times, result in an intra-day-trade. This creates the possibility for high levels of commissions and fees as well as a high commission-to-equity ratio. These commissions and fees could have an impact on the overall performance of the Program. Tax Matters. is not an expert on tax matters and does not provide tax advice. Prospective clients should consult with their own financial advisor on tax questions related to commodity investments. Page 6

7 Stop Loss Orders May Not Limit Loss. It should be noted that stop-loss points are not guaranteed to limit loss to the stop-loss point because in part, they are determined by the Advisor evaluation of historical market volatility and liquidity. Changes in volatility, overnight market movements, slippage in trade execution and exchange price limit changes may lead to losses that are in excess of the stop-loss limit. Trailing stop-loss orders are used in an attempt to protect the account from severe market reversals or reduce the potential of greater loss. Risks Specific To These Strategies Stock Index Futures Trading is Speculative and Can Be Extremely Volatile. A principal risk of stock index futures trading is the volatility (rapid fluctuation) of market prices. Because of the low margin deposits required in futures trading, positions are typically acquired on a leveraged basis with the result that a small movement in the price of a futures contract may result in a large profit or loss to an account. Non-Diversified Portfolio. The EF X may only trade stock index based contracts based on the clients account equity; market concentration may increase the risk of over-concentration in a single market. CONCLUSION In view of the foregoing, a prospective customer in any program managed by the Advisor should carefully consider the highly speculative nature and risks of loss inherent in trading commodity interests. A participating customer should be financially capable of accepting such risks and engaging in such trading. A participating customer should have significant resources beyond any funds which he/she deposits in the commodity trading account(s) to be managed by the Advisor, and such funds should represent risk capital of the customer. TRADING PROGRAMS AND STRATEGIES Futures traders generally rely on fundamental analysis, technical analysis, or a combination of both in attempting to profit from price movements in the futures markets. Fundamental analysis concentrates on factors that affect supply and demand such as seasonal price patterns, political and economic developments, and government reports and policies. In contrast, technical analysis is based on the theory that analyzing price data alone provides sufficient information for predicting the direction of future prices. Technical strategies generally utilize a series of mathematical calculations and/or chart patterns and analysis to monitor market activity from which trading decisions are based. The trading decisions of (Advisor) are based solely on technical analysis, using Support and Resistance levels, Fibonacci Retracements, Daily Pivots, Candlestick Charting Techniques, Prior areas of price reversals, Exponential Moving Averages, Market Internals such as NYSE ADD, TICK and TRIN and the confluence of all this to determine entry and exit prices. (Advisor) trades only in futures contracts traded on established US exchanges. Futures contracts traded may include grains, meats, precious and base metals, interest rates, currencies, energy products, stock indexes, and soft commodities such as coffee, cocoa, sugar and cotton. Market liquidity is the primary factor that will determine what new markets are traded in the future. At this time the Advisor is offering two programs to investors; EF X and EF Xi. Each strategy is similar in trading methodology however EF Xi has been designed for institutional investors. Page 7

8 EF X Trading Strategy: EF X is a short term proprietary trading strategy based on pure technical analysis. It primarily focuses on three simple setups: Continuation of the Trend, Possible Change of the Trend, and Sideways Pricing Activity. The last of these set ups evaluates certain market conditions in an attempt to determine when it might be best to stay out of the market and on the sidelines until a new possible trend might develop. Through these methodologies the EF X strategy works to combine Multiple Charting Periods based on market activity and Fibonacci numbers rather than exclusively relying on time. Doing this is EF X s attempt to eliminate noise within price charts which is produced by inactivity in the markets. EF X also utilizes different Exponential Moving Averages as indicators on various charts to signal and identify potential trends. Here the longer period will be the Main Trend and shorter periods will be used to look for retracements in pricing. This creates what we call Price Average Compression which occurs at the Confluence of the Main Trend. When combining these proprietary factors, at the manager s discretion a position is taken when it is believed there will be a period of trend continuation. In doing so the manager will attempt to follow a Main Trend and its corrections until price activity and Exponential Moving Averages begin trading horizontally. When a trend begins to compress it should occur in shorter and shorter periods providing signs that market exhaustion might be at hand. Such signs may possibly signal the end of the current trend allowing for EF X to potentially benefit. By identifying when a potential correction might take place the manager should be able to exit the trade or make adjustment to stops in a favorable manner. When market exhaustion starts to appear over longer periods this will be seen as a signal that the Main Trend might be ending. Accordingly such a change could also signal a possible change of the trend altering the EF X s view of the initial Main Trend. Usually within EF X positions will be held for a day or less up to several days depending on the lifetime of the signal. The strategy however tends to mainly focus on intraday activity. Risk Management. EF X will attempt to use stop losses targeting 1% to 2.5% of the account value depending on many factors such as market volatility, Average True Range, and Contract Size. Please keep in mind however that although we will be using stop losses there is no guarantee they will be executed in a timely fashion. Accordingly there is no way to ensure losses will not occur, however we believe using stops is one of the best risk management tools available to the strategy. Conversely if the market moves in favor of the positions established by the EF X, the manger may adjust stops to a Break Even level in an attempt to further reduce risk on any specific position. Markets Traded. EF X only trades the most liquid US electronic futures markets, focusing 95% on Stock Index Futures like Emini S&P500, Emini S&P400, Emini Nasdaq100, Emini DJIA, and Emini Russell2000, and the other 5% on Currency Futures like EUR/USD, GBP/USD, USD/JPY, Grains like Corn, Wheat, Soybeans, Financials like 10 Year US Treasury Notes, 30 year US Bonds, Energy like Emini Light Sweet Crude, and Metals like Emini Gold. Minimum Account Size. The required minimum account size for this strategy is $10, USD. No notional funding will be accepted. EF Xi Trading Strategy: EF Xi aimed at institutions and high net worth investors and uses the same approach and proprietary strategy as the EF X program above. EF Xi will focus on longer trading periods thereby reducing trading frequency. Given the minimum account size this program reduces leverage and is also able to take multiple positions in different markets at the same time whereas EF X cannot do so. Page 8

9 Risk Management. EF Xi will attempt to use stop losses targeting 1% to 2.5% of the account value depending on many factors such as market volatility, Average True Range, and Contract Size. Please keep in mind however that although we will be using stop losses there is no guarantee they will be executed in a timely fashion. Accordingly there is no way to ensure losses will not occur, however we believe using stops is one of the best risk management tools available to the strategy. Conversely if the market moves in favor of the positions established by the EF X, the manger may adjust stops to a Break Even level in an attempt to further reduce risk on any specific position. Markets Traded. EF Xi only trades the most liquid US electronic futures markets, focusing on Stock Index Futures like Emini S&P500, Emini S&P400, Emini Nasdaq100, Emini DJIA, and Emini Russell2000, on Currency Futures like EUR/USD, GBP/USD, USD/JPY, Grains like Corn, Wheat, Soybeans, Financials like 10 Year US Treasury Notes, 30 year US Bonds, Energy like Emini Light Sweet Crude, and Metals like Emini Gold. Minimum Account Size. The required minimum account size for this strategy is 100,000 USD. No notional funding will be accepted; smaller investment minimums may be considered on a case by case basis at the sole discretion of. ADVISORY FEES Management Fee. EF X As of the date of this document The Advisor will not charge accounts trading EF X a monthly management fee. EF Xi Accounts electing to participate in EF Xi will be required to pay a monthly management fee of 1/12 th of 2% of the Nominal Account Value of the account unless specified otherwise in writing by. In assessing the value of your account the Advisor will rely on account brokerage statements and other reports received from your specific FCM. Nominal Account Value will be recognized as the total of Gross Ending Equity plus any withdrawals made during the month. The Advisor s management fee will be charged whether or not trading has been profitable and will be pro-rated accordingly based upon a clients respective deposit date. Gross ending equity will be defined as the Beginning Equity plus any Additions minus any Withdrawals plus gross trading performance and interest minus any fees or charges other than Brokerage and Trading Fees; a type of this fee would include any wire transfer costs or other transactional fees. Gross trading performance and interest is defined as the sum of the realized and unrealized trading profits plus any interest credited to the account during the period. Performance Fee. EF X A monthly Performance Fee of 25% of New Net Profits will be assessed when participating in the EF X variant of the strategy. EF Xi Accounts trading the EF Xi variant of the strategy will be assessed a monthly Performance Fee of 20% of New Net Profits. All fees will be payable to the advisor by all accounts trading the respective strategies unless otherwise specified in writing by. Page 9

10 Calculation of Performance Fee. Such Performance Fee will be calculated based on that portion of the Net Asset Value at any month-end above the previous highest Net Asset Value attained on any preceding month-end. Additional deposits will not incur in any Performance Fee, only New Net Profits generated by the Advisor. If New Net Profits for a calendar month are negative, it shall constitute a Carry forward Loss for the beginning of the next calendar month. If New Net Profits are negative at the time of withdrawal, then any loss attributed to those withdrawn funds shall be deducted from the Carry forward Loss on a percentage basis. No Performance Fee shall be payable until New Net Profits for the ensuing calendar month exceeds the Carry forward Loss. If New Net Profits are positive at the time of a withdrawal the performance fees accrued that portion of the New Net Profits attributed to the withdrawn funds shall be deemed due and payable at the time. Performance Fees are not refundable even if an account experiences subsequent losses. Definition of New Net Profits New Net Profits is the portion of Net Asset Value at any month-end above the previous highest Net Asset Value attained on any preceding month-end. Definition of Net Asset Value The term Net Asset Value of an account means the net assets in the account (that is, total assets less total liabilities, including interest income and unrealized profits on open commodity interest positions, adjusted for additions and withdrawals). Payment of Fees All fees will be billed by the Advisor directly to the FCM carrying the client s account, and will be paid to the Advisor from the amount on deposit in the account. If a client withdraws from the Program on a date other than the end of a calendar month, performance fees will be calculated and billed as if such termination were at the end of the month, and the client s obligation to pay future fees will terminate. A client is not entitled to a refund of any Performance Fees paid or accrued to the date of such customer s withdrawal. * In the capsule below, at the end of October 2010, due to the severity of the drawdown in the EF X program significant strategy adjustments were necessary. At that time it was determined that the overall market structure of the equity indexes had changed. Specifically it was our belief that many market participants would be forced from the market due to the 2008 credit crisis in conjunction with the growth of automated high frequency trading. This to us meant that emotion would leave the market place and alter trading behaviors. Accordingly at this time we reduced strategy leverage, holding periods of positions, and changed from time based to market activity charts to evaluate the market. At this time we also adjusted risk management controls to be more flexible with regard to more dramatic volatility swings over shorter periods of time. Our trading philosophy and strategy did not change, however our approach to the market s grew quite different as a result of the credit crisis. **On July 10, 2012 Peregrine Financial Group Inc. ( PFG ), a large Futures Commission Merchant, filed for bankruptcy protection and was deemed to be insolvent. The client account performance capsule below was affected by this filing and determination. Specifically, had one client account that was not able to transact normally and was thus not able to be traded pursuant to the strategy offered in this document. The account represented an immaterial portion of the total funds under management. Specifically the account held $ which as of the date of the insolvency made up 0.16% of total assets under management. As of the date of this document the account remains frozen and is not currently aware of when or if these funds will be made available again for trading. Pursuant to NFA guidance regarding the PFG insolvency, although the account traded for nine days during the month of July 2012, has been instructed not to include results for this account during this period. Accordingly the capsule now reflects the absence of this account from the composite. Page 10

11 PERFORMANCE HISTORY EF X TRADING STRATEGY* Name of CTA: Name of Trading Program: EF X* Inception of Trading by CTA: June 1, 2009 Inception of Trading in Offered Program: June 1, 2009 # of accounts currently traded pursuant to the program: 7 Total nominal assets under management: $173,922 Total nominal assets traded pursuant to the program: $100,465 Largest monthly draw-down: % / October 2010 Worst peak-to-valley draw-down: % / June 2009 October 2010 Number of profitable accounts that have opened and closed: 3 Range of returns experienced by profitable accounts: 1.40% to 9.20% Number of losing accounts that have opened and closed: 16 Range of returns experienced by unprofitable accounts: -0.82% to % *EF X was formally known as the EF Speculative Index and Commodity Trading Program until May 31, The strategy offered in this document as EF X is not materially different from the former strategy. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS Rate of Return Month January -0.11% 0.34% 4.13% 0.93% N/A February 0.65% 2.15% 0.19% 4.82% N/A March -1.04% 1.27% 1.39% -4.50% N/A April 0.57% 1.21% 2.06% -4.46% N/A May -5.81% 1.12% 2.08% 1.98% N/A June 2.06% 0.00% -2.32% 1.42% 0.29% July 0.67% 0.85%** 2.43% 3.30% % August 2.73% 0.70% 0.67% -1.66% -2.33% September 0.40% 0.07% 1.18% % -1.34% October -0.91% -6.78% % 0.00% November 1.87% 0.43% 0.48%* 0.67% December 0.69% -2.29% 2.70% 0.23% Year -0.13% 9.73% 2.74% % % Past performance based on performance fees ranging from 20%-35%. Worst monthly draw-down is simply the trading program s worst monthly percentage ROR. Worst peak-to-valley draw-down is the greatest cumulative percentage decline in month-end net asset value (NAV) due to losses sustained by the accounts during any period in which the initial month-end NAV is not equaled or exceeded by a subsequent month-end NAV. Page 11

12 The monthly Rate of Return is computed by using the "Only Accounts Traded" method. The monthly rates are then compounded to arrive at the annual rate of return. PERFORMANCE HISTORY EF Xi TRADING STRATEGY Name of CTA: Name of Trading Program: EF Xi Inception of Trading by CTA: June 1, 2009 Inception of Trading in Offered Program: August 1, 2012 # of accounts currently traded pursuant to the program: 2 Total nominal assets under management: $173,922 Total nominal assets traded pursuant to the program: $73,457 Largest monthly draw-down: -1.87% / May 2013 Worst peak-to-valley draw-down: -1.87% / April 2013 May 2013 Number of profitable accounts that have opened and closed: 0 Range of returns experienced by profitable accounts: NA Number of losing accounts that have opened and closed: 0 Range of returns experienced by unprofitable accounts: NA PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS Rate of Return Month January -0.60% NA February 1.03% NA March 1.31% NA April 0.02% NA May -1.87% NA June 0.40% NA July 0.24% NA August 0.64% 0.23% September 0.02% 0.00% October 0.15% November 0.04% December 0.17% Year 1.16% 0.59% Past performance based on Management Fees ranging from 0%-2%, and Performance Fees at 20%. Worst monthly draw-down is simply the trading program s worst monthly percentage ROR. Worst peak-to-valley draw-down is the greatest cumulative percentage decline in month-end net asset value (NAV) due to losses sustained by the accounts during any period in which the initial month-end NAV is not equaled or exceeded by a subsequent month-end NAV. The monthly Rate of Return is computed by using the "Only Accounts Traded" method. The monthly rates are then compounded to arrive at the annual rate of return. Page 12

13 COMMODITY ADVISORY AGREEMENT EF X THIS AGREEMENT IS ENTERED INTO BASED UPON THE FOLLOWING REPRESENTATIONS: The Client represents that he/she has speculative capital for the principal purpose of investing in commodity and financial futures contracts and has been informed and is fully cognizant of the high risk associated with such investments. This Agreement is for the EF X TRADING PROGRAM ($10,000 minimum). IT IS MUTUALLY AGREED ON (MM/DD/YYYY): 1. Client shall deposit with (FCM) a minimum of $10, Performance Fee to be charged: 25% monthly. 3. The Advisor will cause futures contracts to be bought and sold short, and will have the exclusively to issue all necessary instructions to facilitate trading of client s account. 4. The Advisor s services are not rendered exclusively for the Client, and the Advisor shall be free to render similar services to others. 5. This Agreement shall remain in effect until terminate by the receipt of written notice of either party to the other. The Advisor or Client may terminate this Agreement for any reason upon such notice. Upon termination of this Agreement, the open positions will be liquidated by the Advisor in an orderly manner at its earliest convenience, but no later than the next business day, assuming market conditions permit such liquidations. 6. The Client may add or withdraw funds to/from the account at any time, 7. The Clients account shall be charged for all commissions and/or expenses arising from the transactions exercised in the administration of the account. 8. The Client agrees to inform the Advisor immediately if he/she is dissatisfied with the Advisor s decisions or actions, or if dissatisfied with the Broker s handling of the account. 9. The Advisor s trading shall be for the account and risk of the Client. The Advisor makes No guarantee that any of his services will result in a profit to the Client. The Client has discussed the risks of futures trading and understands those risks. 10. The Client agrees to execute a limited trading authorization with his/her broker (FCM) authorizing the Advisor to enter orders for futures markets contracts for the Client s account. It is agreed and understood by the Client that the Advisor has no responsibility for the proper execution of orders by the broker. 11. The Client agrees to authorize the broker to make payments from the Client s account to the Advisor in compensation for services set forth in this agreement. 12. The Client acknowledges that he/she has read a copy of the Advisor s DISCLOSURE DOCUMENT including the RISK DISCLOSURE STATEMENT. The Advisor will not be liable to the Client or to others except for reasons of acts constituting willful misconduct or gross negligence as to its duties herein. 13. In the event that any provisions of this agreement shall be deemed invalid for any reason whatsoever, all other conditions and provisions of this Agreement shall, nevertheless, remain in full force and effect. Page 13

14 14. This Agreement constitutes the entire agreement between the parties, and no modifications or amendments of this Agreement shall be binding unless in writing and signed by the participants hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on (MM/DD/YYYY), CTA_ Client (Print Name) (Joint Account Holder Print Name) x (Signature) x (Signature) Street Address City, State, Zip Telephone Page 14

15 COMMODITY ADVISORY AGREEMENT EF Xi THIS AGREEMENT IS ENTERED INTO BASED UPON THE FOLLOWING REPRESENTATIONS: The Client represents that he/she has speculative capital for the principal purpose of investing in commodity and financial futures contracts and has been informed and is fully cognizant of the high risk associated with such investments. This Agreement is for the EF Xi TRADING PROGRAM ($100,000 minimum). IT IS MUTUALLY AGREED ON (MM/DD/YYYY): 1. Client shall deposit with (FCM) a minimum of $100, unless otherwise determined in writing by. 2. Performance Fee to be charged: 20% monthly. Management Fee to be charged: 1/12 th of 2% monthly. 3. The Advisor will cause futures contracts to be bought and sold short, and will have the exclusively to issue all necessary instructions to facilitate trading of client s account. 4. The Advisor s services are not rendered exclusively for the Client, and the Advisor shall be free to render similar services to others. 5. This Agreement shall remain in effect until terminate by the receipt of written notice of either party to the other. The Advisor or Client may terminate this Agreement for any reason upon such notice. Upon termination of this Agreement, the open positions will be liquidated by the Advisor in an orderly manner at its earliest convenience, but no later than the next business day, assuming market conditions permit such liquidations. 6. The Client may add or withdraw funds to/from the account at any time 7. The Clients account shall be charged for all commissions and/or expenses arising from the transactions exercised in the administration of the account. 8. The Client agrees to inform the Advisor immediately if he/she is dissatisfied with the Advisor s decisions or actions, or if dissatisfied with the Broker s handling of the account. 9. The Advisor s trading shall be for the account and risk of the Client. The Advisor makes No guarantee that any of his services will result in a profit to the Client. The Client has discussed the risks of futures trading and understands those risks. 10. The Client agrees to execute a limited trading authorization with his/her broker (FCM) authorizing the Advisor to enter orders for futures markets contracts for the Client s account. It is agreed and understood by the Client that the Advisor has no responsibility for the proper execution of orders by the broker. 11. The Client agrees to authorize the broker to make payments from the Client s account to the Advisor in compensation for services set forth in this agreement. 12. The Client acknowledges that he/she has read a copy of the Advisor s DISCLOSURE DOCUMENT including the RISK DISCLOSURE STATEMENT. The Advisor will not be liable to the Client or to others except for reasons of acts constituting willful misconduct or gross negligence as to its duties herein. Page 15

16 13. In the event that any provisions of this agreement shall be deemed invalid for any reason whatsoever, all other conditions and provisions of this Agreement shall, nevertheless, remain in full force and effect. 14. This Agreement constitutes the entire agreement between the parties, and no modifications or amendments of this Agreement shall be binding unless in writing and signed by the participants hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on (MM/DD/YYYY), CTA_ Client (Print Name) (Joint Account Holder Print Name) x (Signature) x (Signature) Street Address City, State, Zip Telephone Page 16

17 ACKNOWLEDGEMENT OF RECEIPT OF EDUARDO FRID DISCLOSURE DOCUMENT AND RISK DISCLOSURE STATEMENT Gentlemen: This is to acknowledge that I have received a copy of the, CTA Disclosure Document dated (MM/DD/YYYY) describing the trading program that will be used to manage my account, and have read and understand the Risk Disclosure Statement included in the front of this Disclosure Document, Read and acknowledged by: (Client s Signature) (Date) (Client s Signature) (Date) Page 17

18 LIMITED POWER OF ATTORNEY Clearing Broker (FCM): Gentlemen: I have carefully examined the provisions of the document by which I have given trading authority, in the form of a Limited Power of Attorney to, and fully understand the obligations I have assumed by this document. I understand that the Clearing Broker is in no way responsible for any loss to me by the action of Eduardo Frid and that the Clearing Broker does not, by implication or otherwise, endorse the operating methods of. I further understand that neither the Chicago Board of Trade, the Chicago Mercantile Exchange, nor any other commodity exchange on which orders may be executed for my account(s), has any jurisdiction over a non-member who is not employed by one of its members, and if I give such individual,, authority to exercise any of my rights over my account, I do so at my own risk. (Print Name) (Signature) (Date) (Print Name) (Signature) (Date) Page 18

19 FEE PAYMENT AUTHORIZATION Name of Brokerage: Address: This is authorization to deduct from my account s monthly performance and/or management fee. (Print Name) (Print Name) (Signature) (Signature) Page 19

20 Privacy Notice In the United States of America there are regulations which impose various requirements on a financial institutions treatment of customer information. These regulations require that financial institutions develop privacy policies and disclose these policies to its customers. I, doing business as EF Financial Services ( EFFS ) consider your privacy as one of our utmost concerns. This Privacy Notice outlines our current policies and practices regarding how information about individual customers is collected and used. We will send existing customers an updated Privacy Notice on an annual basis. In order to provide you with individualized service, EF Financial Services collects information about you from your account application and other forms that you may deliver to us. EF Financial Services also collects information about your transactions with us and our affiliates. We use this information to open an account for you, process your requests and transactions and to provide you with additional information about our products and services. In order to service your account and mail correspondence to you, we provide your personal information to other affiliated independent firms that specialize in providing these services. These firms include our clearing firm(s), trade partners, back office firms, and also our printing/mailing vendors. We require these other independent firms to protect the confidentiality of your information and to use the information only for the limited purpose for which the disclosure is made. We do not disclose any nonpublic personal information about our customers to other independent firms, organizations or individuals except in furtherance of our business relationship with you, or as otherwise permitted or required by law. In addition, if you decide at some point to close your EF Financial Services account, we will continue to adhere to the privacy policies and practices described in this notice. We restrict access to nonpublic personal information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with US federal standards to guard your personal information. If you prefer that we limit disclosures of personal information about you, you may notify us via at info@effinancialservices.com or by calling (212) , Monday through Friday, between the hours of 8 a.m. and 5 p.m. Eastern Standard Time. If you determine to opt out of this policy you can instruct us to what extent we are able to disclose your non-public personal information to affiliated third parties. If you have any questions or concerns regarding the privacy of your information at EF Financial Services, or would like to discuss your opt out options please contact us at your earliest convenience. Thank you for your business, EF Financial Services Page 20