Cordova Capital Management, Inc.

Transcription

1 THIS DOCUMENT IS INTENDED FOR THE EXCLUSIVE USE OF NAME: DOCUMENT# [This Document is Current as of February 29, 2012] Glendale Ave. Sparks, NV Phone: (775) NFA ID # Presents: ( Cordova Program ) $250,000 minimum initial investment required *Accounts may be traded notionally; see pages 11 through 13 for more details. PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT. TO BE ELIGIBLE TO INVEST IN THIS PROGRAM YOU MUST BE CONSIDERED A QUALFIED ELIGIBLE PARTICIPANT UNDER THE TERMS AND CONDITIONS DEFINED BY THE COMMODITY FUTURES TRADING COMMISSIONS COMMODITY EXCHANGE ACT REGULATION 4.7. FOR A FULL EXPLANATION OF WHAT IS REQUIRED TO BE AN ELIGIBLE PERSON UNDER THE ACT PLEASE CONTACT CORDOVA CAPITAL MANAGEMENT, INC. DIRECTLY. CORDOVA CAPITAL MANAGEMENT, INC. BEGAN OFFERING THIS PROGRAM TO PROSPECTIVE CLIENTS IN SEPTEMBER OF ALL INFORMATION CONTAINED WITHIN THIS DOCUMENT IS CURRENT TO THE BEST OF CORDOVA CAPITAL MANAGEMENT, INC. S KNOWLEDGE AS OF: FEBRUARY 29, 2012 Page 1 of 26

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 OFFERING MEMORANDUM CONTAINS, AT PAGES 15 THROUGH 18, 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 OFFERING MEMORANDUM AND COMMODITY INTEREST TRADING BEFORE YOU TRADE, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 8 THROUGH 13. Page 2 of 26

3 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 3 of 26

4 Table of Contents Section Page(s) Introduction 5 Business Background Principals and Trade Managers 6 Financial Companies Used by Cordova Capital Management 7 Principal Risk Factors 8-9 Risks Specific to this Strategy The Trading Program 14 Fees and Costs Conflicts of Interest Litigation History 20 Performance of the CTA 21 Proprietary Performance Acknowledgement of Receipt 25 Page 4 of 26

5 Introduction to. General CTA Business Information: Glendale Ave. Sparks, NV Phone: (775) NFA ID # Principal(s) and Employee(s): Jon Thomas Cordova: Managing Member and Principal *For more details regarding the principals of., see page 6 Page 5 of 26

6 Business Background of. s Employees. ( Cordova ) Cordova was originally formed as a Nevada corporation on April 7 th of 2006 by Jon Thomas Cordova ( Mr. Cordova ). The company was originally formed to conduct trading research and to develop a proprietary trading record. Accordingly, Cordova has never been used for any other business purpose outside of commodities and futures research and trading since its inception. On April 17 th of 2011 Mr. Cordova decided Cordova would apply for and become a CFTC Registrant as well as an NFA Member.. officially became a CFTC Registrant on May 16 th, 2011 and was granted NFA Membership approval on the same day allowing the business to legally operate as a Commodity Trading Advisor ( CTA ). Cordova is currently a CFTC Registrant and is listed as NFA Member (#429734). At this time Jon Thomas Cordova is the only individual at the firm with authority to trade on your behalf. He is also Cordova s sole registrant at this time. Mr. Cordova was listed as a Principal of the business on May 16 th, 2011 and was registered as an Associated Person on the same day under NFA ID # To review Cordova s trading performance record please see the performance section of this document on pages Jon Thomas Cordova Mr. Cordova is the Trader, Managing Member, and Principal of Cordova, which he founded on April 7 th, 2006, and has been registered as an Associated Person and Principal since May 16, The firm has worked on trading research and proprietary trading from its inception. Mr. Cordova was a Senior Associate for Stark & Associates, a commercial real estate company, from January 2005 through October 2006, where he was responsible for leasing and selling commercial real estate. After leaving Stark & Associates, Mr. Cordova was an Outsource Project Manager for Juniper Networks, Inc. from November 2006 through April 2008, where he managed outsourced support operations in Utah and India. From the period of May 2008 through June 2009, Mr. Cordova was a Senior Program Manager for Data Domain, Inc., where he managed programs, projects, and processes for its Global Service Operations. Since July 2009 through the present time, Mr. Cordova has been a Senior Analyst for EMC Corp in its Global Sales Operations organization, providing analysis and support to field sales via Salesforce.com. Mr. Cordova is a graduate of the University of Nevada, Reno, with a Bachelor of Science in Electrical Engineering. To review Mr. Cordova s trading record please see the performance section of this document on pages Page 6 of 26

7 Financial Companies Affiliated With and Utilized by. Clients may select the Futures Commission Merchant ( FCM ) at which to maintain their accounts and an Introducing Broker ( IB ) through which they will introduce their accounts to Cordova Capital Management, Inc. However, not all brokerage firms can execute trades in all markets, which may have a material effect on overall performance. Accordingly, Cordova reserves the right to disapprove any FCM or IB chosen by the client. Such disapproval will generally be based on the past performance, execution capabilities, product limitations and commission structure of the FCM or IB. Generally, commission and other transaction based fees (including give-up fees of $1 to $3 per round turn) should not exceed $20 per round-turn.. does not currently utilize an introducing broker; however, the firm does utilize the services of ADM Investor Services, Inc ( ADMIS ) for all execution and reconciliation, regardless of which FCM your account may clear through and whether or not another IB has introduced your account to Cordova. If your account clears through an FCM other than ADMIS, you will generally be charged a give-up fee which will add to your respective trading costs. Additionally, if a client selects an FCM other than ADMIS the brokerage commissions they are charged may be higher (or lower) than those charged by ADMIS and negotiated by Cordova. See the Fees and Costs Section of this document on pages 15 through 18. Should you choose to utilize ADMIS as your clearing firm they are registered with the CFTC and listed as an NFA member under ID #360. They maintain their offices and can be contacted using the following information: ADM Investor Services, Inc 144 W. Jackson Blvd Suite 1600 Chicago, IL Phone: (312) NFA ID#360 Page 7 of 26

8 Principal Risk Factors of Trading Prospective investors should consider the following risks before deciding to invest with Cordova Capital Management, Inc. The risk factors below are not intended to include all possible risks of investing in commodities and futures, nor are the summaries intended to provide complete description of the risks that are included. There is a high degree of risk associated with trading in commodity and financial futures and any such investment decision should be made only after careful consideration of the risks associated with such a transaction. No person should consider trading more than they can comfortably afford to lose. There is no assurance that Cordova s investments will be successful or that any of the company s trading objectives will be attained. Prospective investors who would like more details about any risk factor should contact Jon Thomas Cordova directly via the contact information provided on the first page of this document. Market Risk Volatility Risks The futures markets are speculative, prices are volatile, and market movements are difficult to predict. Supply and demand for futures contracts can change rapidly and are affected by a variety of factors, including interest rates, merger activities, and general trends in the overall economy or particular industrial, agricultural, or other economic sectors. Government actions, especially those of the US Federal Reserve Board and other central banks can have a profound effect on global interest rates, which affect the price of futures contracts. In addition, a variety of other factors that are inherently difficult to predict such as domestic and international political developments, governmental trade and fiscal policies, patterns of trade, environmental disasters, war and or other military conflict can also have significant effects on the markets.. may have only limited ability to vary its investment strategy in response to changing investment conditions. No assurance can be given as to when or whether adverse events might occur that could cause significant and immediate loss in value to your account. Even in the absence of such events, trading futures contracts can quickly lead to large losses. Such trading losses could sharply reduce the value of your account and your ability to continue trading in the market. Prices of futures contracts are highly volatile; Cordova will trade in these markets on a purely speculative basis. No assurance can be given that the speculative trading conducted on behalf of your account will result in profitable trades for your account or that your account will not incur substantial or unrecoverable losses. Liquidity Risks Most futures contracts are subject to daily price limitations, which mean that the exchanges a commodity is traded on have prohibited the trading of futures contracts if the price fluctuates by a certain amount. If this occurs, it may be impossible to liquidate a position. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences in markets in which. may decide to trade your account and hold positions at the time of such an occurrence may prevent Cordova from promptly liquidating unfavorable positions and subject you to substantial losses. Daily limits may reduce liquidity, but they do not limit ultimate losses; as such, limits apply only on a day-to-day basis. In addition, even if contract prices have not moved the daily limit, Cordova may not be able to execute trades at favorable prices if there is only light trading in the contracts being held for your account. Page 8 of 26

9 Leverage and Margin Risks A futures position can be established with margin that typically ranges between 1% and 5% of the total value of the futures contract. Thus, a small movement in the price of the underlying commodity asset can result in a substantial price movement relative to the margin deposit and may result in immediate and substantial losses to your account. Although the use of leverage can substantially improve the return on invested capital, it may also increase any losses which your account may experience, and it is possible that your account could lose most, all, or even more than your initial capital deposit due to the effects of leverage combined with price volatility. Position Limit Risks The CFTC and the commodity exchanges have established limits on the maximum net long or net short futures positions which any person or group of persons acting together may hold or control. Any commodity accounts owned or managed by. or its principals must be combined with your account when calculating position limit purposes. Cordova Capital Management, Inc. believes that the current limits will not adversely affect your trading; however it is possible that Cordova s trading decisions may have to be modified and positions managed by Cordova may have to be liquidated in order to avoid exceeding such limits if they are reached. Counter Party Risks You will be trading through a Futures Commission Merchant ( FCM ) which means your account will carry a certain level of counter party credit risk. Specifically, it is possible that you may be unable to recover assets held at the FCM, even assets directly traceable to your account from the FCM in the event of an insolvency or bankruptcy of the commodity broker. Although FCMs are required to segregate customer funds pursuant to the United States Commodity Exchange Act ( CEA ), in the unlikely event of the commodity broker s insolvency or bankruptcy, there is no equivalent of the Securities Investors Protection Corporation ( SIPC ) or Federal Deposit Insurance Corporation ( FDIC ) as is commonly applicable in the case of securities broker dealer or banking insolvencies. Substantial Risk of Capital Loss The risk of leveraged trading and the requirement to make additional margin deposits are generally within defined limits. However, these risks can never be eliminated entirely. Moreover, one side of a balanced position may decline in value, requiring additional margin deposits in connection with the financing of a position prior to a market move in the offsetting position. The markets in which Cordova Capital Management, Inc. acquires (or disposes of) positions could move in such fashion for extended periods of time or to a significant degree. Should this occur your account could incur substantial losses. Risk-Reducing Orders The use of certain trading techniques to reduce risk, specifically the placement of "stop loss" and take profit orders which are intended to limit losses or collect gains at pre-determined pricing levels, may not always be effective. Market conditions may make it difficult if not impossible to execute such orders during periods of extreme market volatility or low liquidity. Accordingly, any strategy using such trading techniques may be just as risky as a strategy using simple "long" or "short" positions. There is no way for. or your FCM to guarantee that any type of risk reducing trade will provide protection against adverse price movements. There is also no way to guarantee that a stop loss or take profit order will be filled at the market price requested and desired for your account. Page 9 of 26

10 Risks Specifically Related to Trading with. Compensation Risks As. is compensated through the entitlement of a performance allocation it may cause the manager of the program to take greater risks with your account. This possibility exists as both the manager of the program and Cordova are compensated primarily through performance fees. Since a performance allocation is based on both the unrealized and realized gains in your account, it is possible that the manager could earn a performance allocation based on positions that were profitable at the end of a quarter, but which may not be profitable when later liquidated. Trading is Unpredictable Depending on market volatility Cordova s trading activities may involve substantial position turnover in your account which would correspond to high transactional costs. In addition, trading decisions will be made solely on the techniques and strategies of. There can be no assurance that the decisions made by Cordova will produce profits or not generate losses. There is also no limit on the amount of assets that. may invest in any particular position or strategy. Accordingly, a loss in any single position or strategy could materially reduce the value of client accounts. Key Man Risk. is dependent on the services and skills of its sole principal Jon Thomas Cordova. The loss of Mr. Cordova s skills or services may make it difficult if not impossible for Cordova to continue to manage your account. Such a setback may result in large losses should Cordova be unable to attend to any open positions which may be in your account. Strategy Risk Risks specific to the trading strategy offered within this document generally revolve around the possibility that the market or markets being traded will not trend. From time to time it is possible that there may be periods without identifiable entry and exit price points. Accordingly, the trading methodologies, which depend largely upon visible trends, are likely to not be profitable if there are no identifiable trends of the kind it seeks to follow. Another risk to the trading strategy is that the markets traded and position size per market will increase relative to the progressive increase of the Risk-Per-Trade parameters being offered. To learn more about these Risk-Per-Trade parameters please review the information available on page 14 of this document. Capital Levels As the amount of monies under the direction of. increases over time, Cordova may determine it necessary and/or appropriate to invest in other types of instruments or employ a different or additional trading strategy. The effect of such an undertaking cannot at this time be predicted and may result in material changes to the risk factors immediately and currently apparent to. Electronic Trading. will be executing your trades through an electronic trading platform and order routing system, and/or a staffed 24 hour trading desk, offered by ADMIS. Trading in this fashion differs from traditional open outcry pit trading in that it poses electronic and technological trading risks. Specifically, as a result of trading electronically it is possible for Cordova to encounter system related issues and or system failures when attempting to execute orders for your account. In addition your Page 10 of 26

11 trades may be materially affected by a failure of Cordova s computer hardware or through a failure or loss of our Internet connectivity to ADMIS.. relies primarily on the continued availability of connectivity to ADMIS in order to execute trades on your behalf. It is also possible that ADMIS may experience technical difficulties beyond the control of Cordova which may affect your account. Cordova s use of electronic trading systems, in certain instances, may also limit your ability to pursue damages for system failures and trading delays related to technological problems. Allocations and Blocked Orders. may place futures trades for some accounts that it manages, as well as for the accounts of the principals of Cordova, as bunched orders or block orders, in which trades for all accounts are placed for execution together, and then are allocated to individual accounts when the order has been completed or at the end of the trading day. This process improves the efficiency of trade placement, and is intended to provide better pricing and execution of orders for all accounts. Although this is generally the case,. does not currently require clients to utilize a specific FCM to clear trades. Although Cordova will provide each client s FCM with allocated fills pursuant to its allocation methodology, similar pricing across multiple FCMs and allocation distributions cannot be guaranteed and may cause trading performance to differ across client accounts. To aid in transparency Cordova Capital Management, Inc. will make available to any client upon request the general nature of the allocation methodology Cordova utilizes. Give Up and Clearing Risks Clients of. may generally select the Futures Commission Merchant ( FCM ) at which to maintain their accounts and an Introducing Broker ( IB ) through which they will introduce their accounts to Cordova. However, not all brokerage firms can execute trades in all markets, which may have a material effect on overall performance, and Cordova reserves the right to disapprove any FCM or IB chosen by the client. Such disapproval will generally be based on the past performance, execution capabilities, product limitations and commission structure of the FCM or IB. Generally, commission and other transaction based fees (including give-up fees of $1 to $3) should not exceed $20 per round-turn. Uncertainty Concerning Future Regulatory Changes In addition to possible changes in the regulation of the futures markets, other regulatory changes could have a material and adverse effect on the prospects for profitability within this strategy. The U.S. securities and commodities markets are subject to ongoing and substantial regulatory changes, and it is impossible to predict what statutory, administrative or exchange-imposed restrictions may become applicable in the future. Particularly in light of the general turmoil that has engulfed the financial markets over the past several years, Congress, the Treasury Department, the SEC and the CFTC among others, have or are considering measures, including but not limited to, bans and limits on speculative trading that could limit or negate the ability to trade profitably. Partially Funded and/or Notional Funding Risks You should request Cordova Capital Management to advise you of the amount of cash or other assets, in other words, the level of actual funds which should be deposited to the advisor's trading program for your account to be considered fully-funded". This is the amount upon which Cordova Capital Management will determine the number of contracts traded in your account and should be an amount sufficient to make it unlikely that any further cash deposits would be required from you over the course of your participation in the. It is important to recognize that the account size you have agreed to in writing (the actual, notional, and/or nominal account size) is not the maximum possible loss that your account may experience in the course of your trading within this program. Page 11 of 26

12 You should consult the account statements received from your FCM in order to determine the actual activity in your account, including but not limited to your profits, losses, and current available cash balance on a regular basis. 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, losses, fees and commissions measured in dollars will be the same as those for a fully-funded account of the same nominal account size, they will be greater than those for such a fully-funded account when expressed as a percentage of actual funds. 2) You may receive more frequent and larger margin calls with a partially funded account. 3) The amount of losses and gains in your account will be amplified by the specific level of funding utilized within your trading account. 4) Draw-downs will be greater when expressed as a percentage of actual funds than when expressed as a percentage of nominal account size for partially-funded accounts. 5) The nominal size of your account will increase by depositing additional actual funds with your FCM, or by increasing the amount of notional funds within your account. 6) The nominal account size of your account will decrease as a result of a withdrawal of actual funds on deposit with your FCM, or by reducing the amount of notional funds within your account. 7) The nominal account size of your account will increase proportionately by the amount of profits generated through trading and decrease by the amount of losses accumulated through trading. Clients considering opening a notionally funded account with Cordova Capital Management should be certain that they fully understand the consequences of the increased leverage inherent in this type of trading. They should carefully consider the risk return profile of their desired notional funding level before deciding to open such an account. Clients are urged to compare the trading profile of a notionally funded account against that of a fully-funded account. It is imperative for clients to recognize that due to increased leverage notionally funded accounts will experience greater percentage losses as well as greater percentage gains, in terms of actual funds, than if a similar account were fully-funded. The table on the following page attempts to illustrate the impact that partially funding your account has on your rate of return. The table presents a generic matrix representing potential rates of return relative to various notional account funding levels. This table should be used to evaluate the affects that partial account funding can have on your account s trading performance. It is important to recognize that this table should be used as a reference point only and that any actual gains or losses which occur in a notionally funded client account should be calculated independently on an account-by-account basis. Please also be aware that your account can only be considered fully-funded if you have deposited a minimum of $125,000 (actual) US dollars into the program. $250,000 dollars is the amount upon which Cordova Capital Management will determine the number of contracts traded in your account; accordingly, minimum actual funding for this program will be 50% of the account s fully-funded or nominal value. This ratio should be sufficient to make it unlikely that any further cash deposits would be required from you during your participation within the program. Cordova Capital Management strongly recommends that clients fund their accounts as fully-funded accounts. Cordova will consider a client's desire to open a notionally funded account on a case-by-case basis. Additionally, clients who desire to trade a notional account will also be required to file with Cordova a Notionally Funded Account Agreement to be provided separately from this document. For more information on how Cordova will calculate fees and performance on notionally funded accounts please see pages 15 through 18. Page 12 of 26

13 By using the table below you should determine how your funding level will affect your account s return profile before selecting an appropriate notional funding amount. Actual Rate of Return Rates of Return Based On Various Funding Levels 50.00% 50.00% 66.67% 75.00% % % % % 40.00% 40.00% 53.33% 60.00% 80.00% % % % 30.00% 30.00% 40.00% 45.00% 60.00% 75.00% 90.00% % 25.00% 25.00% 33.33% 37.50% 50.00% 62.50% 75.00% % 20.00% 20.00% 26.67% 30.00% 40.00% 50.00% 60.00% % 15.00% 15.00% 20.00% 22.50% 30.00% 37.50% 45.00% 75.00% 10.00% 10.00% 13.33% 15.00% 20.00% 25.00% 30.00% 50.00% 5.00% 5.00% 6.67% 7.50% 10.00% 12.50% 15.00% 25.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% -5.00% -5.00% -6.67% -7.50% % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % 75.00% 66.67% 50.00% 40.00% 33.33% 20.00% Level Of Funding THE FOREGOING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANTION OF ALL RISKS ASSOCIATED WITH COMMODITIES TRADING OR YOUR OPENING OF AN ACCOUNT WITH CORDOVA CAPITAL MANAGEMENT, INC. PROSPECTIVE INVESTORS SHOULD READ CORDOVA CAPITAL MANAGEMENT, INC. S OFFERING MEMORANDUM IN ITS ENTIRETY AND CONSULT WITH AN INDEPENDENT INVESTMENT, TAX, AND LEGAL ADVISOR(S) BEFORE DETERMINING WHETHER TO INVEST WITHIN THE PROGRAM. Page 13 of 26

14 The overall goal of the trading program offered in this document is to achieve account appreciation through the use of an on exchange futures investment strategy. Accordingly, Cordova employs discretion in applying different Risk-Per-Trade parameters within the program. Risk-Per-Trade is defined as the amount of initial (minimum) dollar risk as a percent of the fully-funded or nominal account value that will be applied to each position or trade for client accounts. As an example, if the fully-funded or nominal account value is $100,000, a Risk-Per-Trade parameter of 1% would mean that each position or trade for the account would be subject to an initial (minimum) $1,000 USD worth of risk. Based on this definition, Cordova will apply (at its discretion) a Risk-Per-Trade parameter ranging from.75% to 1.50% Among the aforementioned risk profiles there is no material difference in how trade decisions are made. The only exception will be that the markets traded and the position size per market will increase/decrease relative to the increase/decrease of the Risk-Per-Trade parameter selected for your account, and relative to the increased/decreased daily marked-to-market nominal value of the account. The following information is intended to accurately present the trading methodologies and trading strategy in plain English. After reviewing this information, if you have any questions about the trading methodologies and/or strategy please feel free to contact. at any time. Cordova Method The trading method and strategy described in this document involves a classic trend following approach. This approach was learned by Mr. Cordova from an original member of Ed Seykota s Trading Tribe, and Mr. Cordova still maintains a close association with this original member. In general, the approach involves using various price channel indicators and moving average indicators to determine when a market may be trending. These indicators are developed by taking note of a market s highest high and lowest low over a period of time. This measurement also provides useful insights into market volatility. For example, narrow price channels show low volatility while wider price channels reflect higher volatility. Accordingly, price channels attempt to identify possible market opportunities to initiate both long and short positions. The strategy offered in this document utilizes these basic and tried principals combined with a variety of proprietary and discretionary trading and risk management techniques in an attempt to generate positive returns. Position Management The program s positions may be held for a day, days, weeks, or even months depending on how a particular market may be trading and aligned with the program s indicators at any given time. Back testing the methodologies and strategies against 10 years worth of market data in U.S. markets has led Mr. Cordova to trade the program with a proprietary account, the results of which are shown on page 21 through 24. Any adjustment to the program will only be done after extensive back testing has been performed. The unique program parameters and position controls will not be disclosed as they are proprietary to the program and critical to its success. Additionally, markets traded and position size per market will increase relative to the progressive increase of the Risk-Per-Trade parameter. Risk Management Price stops are used for market entry and market exit with a profit or a loss. The placement of contingent orders for your account, stop-loss or stop-limit will not necessarily limit losses in fast, gapping, or locked markets. However, resting orders of this type are a valuable way to protect against adverse market movements. Please also keep in mind that your overall program risk will increase relative to the progressive increase of the Risk-Per-Trade parameter selected for your account. Page 14 of 26

15 Fees and Costs Associated with Trading This Program As compensation for. s trading and risk management services a monthly management fee and quarterly incentive fee may be charged to your account. Cordova reserves the right to structure each account to meet specific client needs; however the following is a general representation of how accounts will be treated within the program. Cordova shall reserve the right to waive or reduce fee obligations for any client or account without notification to other clients or accounts. At the end of any applicable period. will calculate any incentive or management fees due from your account. After this calculation is made, a notice will be provided to ADMIS or your respective FCM of fees due to Cordova. Then any monies owed will be debited directly from your account at your FCM. Also, unless otherwise agreed to in writing all fractional dollar amounts for any fee payable to. will be rounded to the nearest dollar up or down. The following is a comprehensive listing of the types of fees you are likely to incur while trading the : Brokerage and Trading Fees In order to trade in the futures and commodities market you will be required to pay a certain amount of brokerage and commission fees. As Cordova will not require you to utilize a specific FCM you will be required to negotiate your own commission rates. Additionally, you also will likely be required to pay a give up fee. This give up fee may range between $1 and $3 and be paid in addition to any commissions you may owe on a per trade basis should you determine to utilize a broker outside of ADMIS. To trade with. through ADMIS according to the methodologies described within this document you will be responsible for the following brokerage commissions and fees. Cordova expects that you will be required to pay a total brokerage fee on your account between $10.00 and $15.00 per round turn futures transaction. The represented rate range is inclusive of all exchange clearing fees, regulatory fees, and brokerage commissions. Typically, if you open a $250,000 dollar account ($250,000 the minimum investment), Cordova anticipates trading between 12 and 25 contracts per month. Due to the nature of the trading program,. cannot estimate how many contracts will be traded on a specific per day basis. This is especially true as the trading strategy will likely require positions in your account to be held overnight. Therefore it is reasonable to estimate that typical commissions due from your account during any given month will range roughly between $ and $ Cordova will not receive compensation either directly or indirectly on a transactional basis for any activity in your account and the fees collected from your account will be distributed accordingly to either ADMIS or your specific clearing FCM as you have determined. Management Fee. will charge a monthly management fee of 1/12 th of 2% of the Gross Ending Equity of the client's account unless specified otherwise in writing by Jon Thomas Cordova. In assessing the value of your account Cordova will rely on the clearing brokerage statements and other reports received from either ADMIS or your specific FCM. Page 15 of 26

16 Gross Ending Equity is defined as the Beginning Equity plus any Additions minus any Withdrawals plus Gross Trading Performance and Interest, minus any fees or charges other than those listed under Brokerage and Trading Fees section above. 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.. will not be responsible for creating or validating the accuracy of the reports provided by either ADMIS or the FCM that you have judgmentally chosen. Should you determine to use an FCM other than ADMIS you will also be responsible for ensuring your individual trade statements are made available to Cordova. As a result Cordova shall not incur any liability for any determination made, or other action taken or omitted, in good faith, relative to valuing your account for reasons of determining your monthly management fee. Incentive Fees. will require each account to pay a quarterly incentive fee based on the profitability of Cordova s trading for that account. This fee will be 20% of Net New Trading Profits unless specified otherwise in writing by Mr. Cordova. In this context, Net New Trading Profits will be defined as the excess, if any, of cumulative net profits at the end of a quarterly period over the highest prior period value reached during the lifetime of your account. For the purposes of cumulative net profits, any trading losses from prior periods must be recouped and a new high profit must be achieved before further incentive fees will be payable. Within the incentive fee calculation profits shall include both realized and unrealized gains as well as interest received on your account assets. In the event trading profits for a period are negative, a "Carry Forward Loss" will be applied to the beginning of the next quarterly incentive period. To the extent any funds are withdrawn from your account, any withdrawal attributed to those funds shall be excluded from the Carry Forward Loss. Under this scenario,. will not be entitled to incentive fees unless trading profits for an ensuing period exceed all applicable carry forward losses. The incentive fee calculation includes unrealized appreciation or loss on open positions. As a result it is possible that unrealized appreciation that causes an incentive fee, in part, to be paid may never be realized in your account. For example, if at the end of a quarterly period your account had unrealized profit on open positions, Cordova may receive an incentive fee based on such unrealized gains. Following such a payment, those open positions might, due to adverse market conditions, be closed out at no profit or even a loss. Nevertheless if a client s account incurs such a loss after an incentive fee has been paid, such fess will not be rebated and Cordova will retain the collected fee. However, in subsequent months no further incentive fee will be paid unless your account value once again has net new trading profits. Sample Performance Fee Calculation The following are general representations and definitions related to how Cordova will calculate performance fees on your account:. will rely on the opening account balance of your account as presented by your FCM to determine the beginning Net Asset Value ( NAV ) for the period in which net new performance is to be calculated. Net Asset Value in this context shall mean the value of all cash, interest, trading profits (realized and unrealized) and any and all other positive cash balances less all withdrawals, fees, realized and unrealized trading losses, and any and all negative cash balances as presented and calculated on your monthly brokerage statement provided by ADMIS or your specific FCM for your individual account. Page 16 of 26

17 Beginning NAV shall be the opening balance of your account at the start of the period. This value will be the same value as the ending account balance for your account as calculated on the last day of the prior period by either ADMIS or your designated FCM. The market value of a commodity or futures contract traded on a commodity or futures exchange shall mean the settlement price for the commodity or futures contract on which the particular commodity or futures contract is traded by your account on the close of the day with respect to which the determination is being made. In the event that a commodity or futures contract could not be liquidated on the day of determination due to the implementation of daily trading limits or other rules of the commodity or futures exchange where a particular interest is traded, the settlement price on the first subsequent day by which the commodity or futures contract could be liquidated will become the market value for that commodity or futures contract at the date of determination. The value of cash in hand or on deposit, bills and demand notes and accounts receivable, and prepaid expenses will be their face amounts. Cash dividends and interest accrued and not yet received shall be deemed to be the full amount thereof, unless it is unlikely to be paid or received in full, in which case the value thereof shall be arrived at after making such discounts as may be considered appropriate to reflect the true value thereof. Also in this context, net new profit will be defined as the excess, if any, of cumulative net profits at the end of the monthly period over the highest past monthly period value of cumulative net profits. Cumulative net profits for purposes of calculating net new profit will be cumulative profits or losses in your account. Any trading losses from prior periods must be recouped and a new high profit must be achieved before further incentive fees will be payable. For simplicity. will calculate net period performance using the following basic equation: Beginning Net Asset Value ( NAV )* +/- Additions and Withdrawals +/- Realized Gain or Loss +/- Change in Open Trade Equity from the Prior Period Less Fees (Brokerage & Management Paid or Accrued) Equals Ending Net Asset Value for Incentive Fees Ending Net Asset Value For Incentive Fees Beginning Net Asset Value = Net Performance To obtain an incentive fee value, the agreed upon fee percentage for your specific account will then be multiplied against net performance. *Net Asset Value ( NAV ) in this calculation shall mean the value of all assets less all liabilities as described in the paragraphs above on this page of the document. Determining Net New Performance After calculating Net Performance Cordova will be required to determine the rate of return for your account during the period. To do this the period rate of return for your account will be calculated as follows: Net Performance/Established Nominal Account Funding Level = Period Rate of Return Page 17 of 26

18 . will not be responsible for creating or validating the accuracy of the reports provided by either ADMIS or the FCM that you have judgmentally chosen. Should you determine to use an FCM other than ADMIS you will also be responsible for ensuring your individual trade statements are made available to Cordova. As a result Cordova shall not incur any liability for any determination made, or other action taken or omitted, in good faith, relative to valuing your account for reasons of determining your quarterly incentive fee. Fee Calculation Upon Early Termination or Withdrawal There are no restrictions in place for your account which would stop you from withdrawing funds at any time. However, as an investor within Cordova Program you are asked to pay all generated performance fees and management fees due to Cordova prior to withdrawing funds from either ADMIS or your individually designated FCM. It is recommended, though not required, that you provide Cordova with your intent to exit the program and terminate your relationship with Cordova at least 10 business days prior to requesting funds from your FCM if possible. Should you elect to provide such a notice it should be provided in writing to verify your intentions and to establish an appropriate termination date. Electronic notification or handwritten correspondence is preferable with regard to this notice. Upon receiving such a notice. will begin working with your FCM to ensure that your account is properly closed out and that all positions carried on your behalf are liquidated. At this time Cordova will also determine if any performance or management fees will be due as a result of trading which occurred in your account prior to the termination of your relationship with Cordova and your specific clearing FCM. Page 18 of 26

19 Conflicts of Interest As the sole member of., Mr. Cordova will be the trader on your account and will also be responsible for the overall profitability of the company. As Cordova Capital Management, Inc. is paid on a performance basis through the calculation of your account s net new performance or incentive fee (as described on pages 15 through 18 above), Cordova and its employees also may have an incentive to encourage and increase the monetary participation of your account within the program even if it may not be in the best interest of you as the account holder.. and its principals may trade for their own accounts. The track record for proprietary accounts managed as either the assets of the firm or the assets of an employee of the firm will not be available for inspection by Cordova s clients. In this instance if the manager of such an account places the same or similar orders at or about the same time as customer accounts, all such accounts may compete for the same or similar positions. Depending upon whomever s order is executed first the difference in order timing may result in some accounts receiving better prices than other accounts. This may affect the performance of the trading within your account. In addition, a conflict of interest may exist in rendering certain advice to. clients as a result of greater potential financial benefits which may be available to a Cordova proprietary trading account by not offering such advice. All commodity positions held by accounts directed by Cordova will be required to be aggregated for the purposes of determining the compliance with speculative position limits. As a result it is possible that your account might not be able to enter into or maintain certain positions because such positions when added to the positions of any principally traded account would exceed applicable speculative position limits. If this were to occur and Cordova directed accounts were required to reduce positions as a result of speculative position limits,. may have an incentive to reduce positions within client held accounts prior to removing such positions within its own principally traded account(s). It is possible that. or employees of Cordova may at some point determine to trade personal accounts independently of the trading program offered to you as a client. The records of this type of proprietary trading will also be confidential and not available to you. As a result you should be aware that such employees of. might from time to time have an incentive to take positions within their respective proprietary accounts that are different from or opposite of the positions taken through this trading program and your account. As it is required that you utilize an outside FCM to clear your trades, in other words a firm which is unaffiliated with Cordova, it is possible that brokers at these firms may have financial incentives which are against the best interests of your account. In particular, because the identities of the purchaser and seller of a commodity or futures contract are not disclosed until after a trade has taken place, it is possible that outside brokers could affect transactions for your account in which the other parties to such a transaction are the brokers themselves, other customers of that broker, or any other entity affiliated with that broker which could generate greater potential financial gain. Such persons might also compete with your account in making purchases or sales of commodities or futures contracts without knowing that your account is also bidding on such futures or commodity transactions. Since orders are filled in the order in which they are received by brokers and exchanges, transactions for any such person might be executed when similar trades for your account are not executed or are executed at less favorable prices. However, in entering orders for your account and other customer accounts, including with respect to priorities of order entry and allocations, CFTC regulations prohibit that a futures commission merchant or broker utilize the knowledge of customer s trades for its own or its other customers benefits. Therefore a conflict of interest in this manner exists however is specifically prohibited by the CFTC. Page 19 of 26

20 Outside brokers may share in a percentage of your incentive and/or management fee from time to time. This sharing arrangement between these brokers and Cordova will not add additional costs to your trading in the program. You should however be aware that such arrangements may incentivize these outside brokers to suggest an investment in this program even if it is not in your best interest as their client. Litigation History. As of the date of this document, to the best of the knowledge available to Cordova Capital Management, Inc. and its sole principal, Jon Thomas Cordova, Cordova is not currently involved in and has not been involved in any material litigation during the last 5 years. ADMIS Litigation Statement ADM Investor Services, Inc. ( ADMIS ) is a registered futures commission merchant and is a member of the National Futures Association. Its main office is located at 141 W. Jackson Blvd., Suite 1600A, Chicago, IL In the normal course of its business, ADMIS is involved in various legal actions incidental to its commodities business. None of these actions are expected either individually or in aggregate to have a material adverse impact on ADMIS. Neither ADMIS nor any of its principals have been the subject of any material administrative, civil or criminal actions within the past five years, except the CFTC Order entered on March 26, In this order, the CFTC finds that during 2002 to 2004, ADMIS lacked adequate procedures concerning post execution allocation of bunched orders and that it allowed an account manager to carry out post-execution allocations from one or more days after the day the trades were executed and that it failed to maintain certain records to identify orders subject to post execution allocation. The order imposes a remedial sanction of $200,000 and requires ADMIS to implement enhanced procedures for post execution allocation of trades. NFA s BASIC System To evaluate the litigation history of your specific FCM or Introducing Broker, clients are encouraged to visit NFA s Basic System via for more information. Page 20 of 26